Intel seemingly can’t catch a break, and it’s entirely their own fault.
After appearing to ignore issues with the 13th and 14th Generation Core processors, which reportedly suffered from severe silicon degradation due to elevated operating voltages and AIB board vendors imposing unsafe “unlimited” power limits under the “default” BIOS configuration, Intel is once again trimming their headcount in a desperate bid to maintain relevance and profit.
This comes shortly after the company announced it was halting its chip production facility in Israel, despite receiving a hefty $3 billion grant to construct the facility.
Additionally, despite stealing billions of dollars worth of taxpayer funds through the United States’ “CHIPS Act” to boost DOMESTIC semiconductor production, Intel has opted to purchase TSMC wafers for its upcoming Lunar Lake mobility processors.
Intel reported a $7 billion operating loss back in April after spinning off their semiconductor foundries to acquire partners. Just days later, Intel announced layoffs amidst a restructuring process.
Despite these challenges, Intel continues to act as if they hold a dominate monopoly upon the CPU industry, neglecting to address warranty questions regarding the defective and failing Raptor Lake CPUs.
When The Verge asked if they would issue a recall, Intel responded with a firm “No.”
In February 2023, Intel reduced its dividends by 65% to 12.5 cents, making the “world’s largest chip manufacturer” a less attractive option for long-term investors. The company has struggled to reclaim the performance crown and market share from AMD. Additionally, unresolved degradation issues with Raptor Lake CPUs have killed Intel’s reputation.
Intel’s current CEO, Patrick Gelsinger, who also serves as chairman of the board and primary investor in a company called Gloo, which has faced accusations of targeting vulnerable individuals through data aggregation and misuse of self-reported medical data.
Additionally, Gelsinger partnered Intel with Cyberreason, an Israeli company staffed primarily by former Unit 8200 (Israeli military cybersec) members, the same background as those who gave us BlackCube, Psygroup, and NSO Group’s Pegasus software.
Simply put, the man isn’t to be trusted, and if VMware let him go, Intel should be doing the same.
In a last-ditch effort to regain competitiveness against AMD, Intel has officially cut 15% of its global workforce, nearly 18,000 jobs in total. The chipmaker plans to “resize and refocus” its 116,500-strong workforce in an effort to save $10 billion after a series of failures.
“Clearly market conditions, some were good and some not so good, and you have to adjust the financial envelope appropriately,” Gelsinger said in an interview with the Wall Street Journal. “The AI surge was much more acute than I expected, and you have to adjust to those things.”
Of course, the massive artificial intelligence bubble is entirely to blame for Intel’s financial woes at the moment, not the fact that the company seemingly overextended itself with operating voltages from the 12th Generation “Alder Lake” CPUs to the 13th and 14th generation Raptor Lake.
Intel achieved a significant frequency uplift of over 600MHz between Alder Lake and Raptor Lake on a more mature rendition of their 10nm (Intel 7) process and now we know why.
However, consumers eventually discovered that their CPUs could no longer sustain default core frequencies, leading to constant crashes and blue screens. This caused game developers and server hosts to switch to AMD hardware, exacerbating Intel’s problems.
Initially, Intel ignored the issue, pretending it didn’t exist, and then blamed AIB board vendors. They later attempted to address the problem by requiring AIB partners to implement a “baseline” power limit to restrict the additional current draw for Raptor Lake processors. This measure aimed to mitigate the increased current and, consequently, the higher temperatures that accelerate silicon degradation due to much higher power consumption.
Meanwhile, AMD and NVIDIA are thriving in the AI hardware market. AMD cannot produce enough MI300 units to meet demand, as businesses opt for them as an alternative to NVIDIA hardware, offsetting costs by developing their own software. Intel’s failure to capture this market segment isn’t the primary issue.
Since Gelsinger became CEO on February 15, 2021, Intel’s stock prices have nearly halved from around $57 to just over $29. This decline is not surprising, given the company’s annual revenue has fallen year-on-year since the end of 2021.
Currently, Intel shares have plummeted following this announcement, dropping over 5.5% today alone and nearly 7.5% since this time last week. While Patrick Gelsinger isn’t solely responsible for Intel’s ongoing struggles, their semiconductor sector has faced delays and underwhelming performance since Brian Krzanich’s tenure as CEO.
His overly ambitious 10nm target cost Intel half a decade of Skylake rebrands, giving competitors AMD the opportunity to steal their thunder by offering consumers affordable CPUs with more cores than Intel could manage.
Crucially, AMD also overtook Intel in terms of performance while Intel floundered, rebranding Skylake for the fifth consecutive time. The subsequent failures of Intel’s regressive 11th generation further contributed to the company’s decline.
Regarding dividends, Intel will suspend its 12.5 cents per share payout in the fourth quarter, but will deliver the payout on September 1 for shareholders of record as of August 7, 2024. There is virtually no benefit to holding Intel stocks long-term; the only advantage Intel shares currently offer investors is the opportunity to short the company.
Cutting nearly 18,000 workers globally is a significant move. Despite reporting just a 1% year-over-year drop in revenue for the second quarter, Intel feels the need to trim its workforce to maintain focus on producing financial disappointments, such as their limited range of ARC Alchemist graphics cards.
These cards are the worst and cheapest on the market, with poor performance and compatibility, including a lack of support for older APIs like DirectX 9. However, ARC Alchemist serves as a cheap and viable media encoder while offering consumers a large pool of GDDR6 VRAM at VERY affordable prices.
This large-scale cost-cutting does little to address Intel’s core issues. Their current crop of desktop CPUs struggle with elevated voltages and power limits to maintain unstable frequencies in the pursuit of performance against AMD Ryzen processors. Intel has become a full-time customer of TSMC wafers, using rival silicon for their GPUs and leveraging TSMC’s 3nm process for their Lunar Lake mobile CPUs to maximize efficiency.
The next generation Arrow Lake CPUs, essentially the same architecture as Lunar Lake but produced on Intel’s next-generation silicon, are unlikely to excite consumers following the PR nightmare of Raptor Lake’s degradation and instability. With AMD offering Zen 5 processors at affordable prices and lacking significant competition, Arrow Lake is unlikely to dent AMD’s dominance in the DIY market.
Especially with Intel now facing a potential class action lawsuit over their Raptor Lake CPUs.
Intel had a chance many years ago to break free from their half-decade stagnation by poaching TSMC personnel to boost their own silicon capabilities. That opportunity has passed, and TSMC has firmly established itself as the world leader in silicon production, a position that is unlikely to change.
Job cuts won’t resolve these long-term issues and will merely serve as a temporary fix for short-term financial concerns which may likely involve Intel’s CEO lining his pockets full of gold.
