Intel Bets on AI to Slash Costs

Globe and Mail

12 hours ago

Semiconductor giant Intel (NASDAQ: INTC) plans to lay off a significant number of employees this summer as new CEO Lip-Bu Tan takes drastic action to reduce costs. Some of those layoffs will reportedly occur in the manufacturing business, even as Intel attempts to sell its foundry services to third-party customers.
Outside its factories, Intel's marketing division appears to be on the chopping block. A report from The Oregonian 's OregonLive.com suggests that the company plans to outsource many of its marketing jobs to Accenture, a major consulting company, and that Accenture will use artificial intelligence to help deliver marketing services. In a note reviewed by the newspaper, the company told employees that any remaining in-house marketing teams would be lean.
According to the note, Intel is betting that Accenture's AI technology can help personalize customer experiences, automate processes, and sift through mountains of information more efficiently than its current marketing teams.
How much money will Intel save?
While we don't know any details about how many marketing employees will be laid off or how much Intel will pay Accenture to outsource marketing services, Intel spends a pretty penny on marketing. The company spent $856 million on advertising, which includes direct marketing, in 2024. That's already down from $950 million in 2023 and $1.2 billion in 2022. The broader marketing, general, and administrative expense category, which includes advertising spending, was $5.5 billion in 2024.
Intel could potentially cut its costs by hundreds of millions of dollars by largely outsourcing its marketing operations. For a company that generated $53 billion in revenue last year, that may not seem like a huge amount. But every bit counts as Intel races to return to growth, return to profitability, and convince investors that it has a viable turnaround plan.
While reducing costs is critical for Intel, relying on a consulting company and AI for marketing could have the unintended consequence of hurting its brand. At the very least, it's an open question whether this plan will improve or diminish the effectiveness of Intel's marketing efforts.
Part of a broader plan
Intel laid off around 15% of its workforce last August, and the next round of layoffs could be similar in size. Some rumors suggest that Intel will slash another 20% from its headcount, or roughly 20,000 employees. Tan is working to remove layers of middle management, which he believes slows the company down.
In a message to employees in April, Tan noted that many teams were eight or more layers deep. Team size had become something to be maximized by many managers at Intel, Tan said. While the exact number of layoffs is still unknown, I think it will likely be a large number.
Intel is reportedly also considering laying off as many as 15% to 20% of its factory workers, who are responsible for manufacturing Intel's chips as well as chips for third-party foundry customers. It's not clear if Intel is changing anything about its foundry roadmap, although dropping some of its first-party products is possible as the company simplifies and streamlines its operations.
Intel's gross margin, which is the percentage of revenue left over after subtracting out direct costs related to manufacturing its products, fell to 32.7% in 2024. That's down nearly 10 percentage points from 2022, and it's far below the 60%+ gross margin the company achieved during much of the 2010s. Winning external foundry customers, which would allow the company to drive more volume through its factories, is a big part of the equation to boost gross margin. But wringing out cost efficiencies is as well.
Through layoffs and cost cutting in its manufacturing business, Intel is aiming to boost gross margin and efficiency. Meanwhile, the reported outsourcing of marketing teams and any other layoffs that will hit the non-manufacturing employees will reduce operating expenses. With demand for its products down significantly over the past few years, Intel needs to get smaller to have any chance at turning itself around.
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