As Intel Corporation faces global workforce reductions, a bit of uncertainty hangs over the community of Folsom, home to one of the company’s largest campuses. Intel recently announced plans to cut 15% of its workforce, approximately 17,500 employees, across the globe, in an effort to address its financial struggles.
Specific details in regards to where and when such layoffs will occur have not been disclosed, other than the company has said prior to the end of the of the year. The “unkown” raises some concerns across communities that are home to or near Intel facilities, including Folsom, home to one of the companies largest physical properties, one that has already seen is share of cuts over the past year and a half.
As of Wednesday, neither the State of California nor the City of Folsom has received a Worker Adjustment and Retraining Notification (WARN) from Intel. WARN mandates a 60-day notice before large layoffs or plant closures, providing employees and their families time to prepare for potential job losses and seek alternative employment or retraining opportunities.
While no official announcements regarding cuts locally have been made at this time, the City of Folsom is being proactive by bracing for a potential impact. On Wednesday morning, Folsom Times spoke with City of Folsom Communications Director Christine Brainerd on the topic. Brainerd provided a statement on behalf of the City and Choose Folsom regarding the Intel situation and forthcoming reductions that have been announced.
“In light of the recent announcement from Intel regarding the layoff of 15,000 employees globally, we at the City of Folsom and Choose Folsom recognize the potential impact this news may have on our community. While the specific details concerning the number of layoffs affecting Folsom remain uncertain, we extend our deepest sympathies to all those impacted by this decision,” the statement reads.
“The City of Folsom and Choose Folsom are committed to supporting our local workforce during this challenging time. We are confident in our community’s resilience and ability to adapt to changes in the industry,” the statement continues. “As we navigate through this period, we look toward the future with optimism. We believe in the strength and diversification of the tech industry in Folsom, and we are dedicated to fostering an environment that continues to attract and retain a diverse range of tech enterprises.”
Intel, founded in 1968 and headquartered in Santa Clara, is a global leader in semiconductor technology, particularly known for its computer processors. The company has faced increased competition from rivals such as Taiwan Semiconductor Manufacturing Co. (TSMC), AMD, and Nvidia, which have steadily chipped away at Intel’s market share in various sectors. Intel’s Folsom campus, covering 236 acres and housing over 5,000 employees, is a major hub for the company’s office, research, development, and support activities. Despite its size and significance, the Folsom campus has not been immune to Intel’s financial difficulties.
In the past year, Intel made 549 job cuts at the Folsom campus, followed by an additional 235 layoffs, bringing the total to 784 for the year. These layoffs are part of a broader trend within the company. In December 2023, Intel also announced a new round of 311 layoffs at two of its California campuses, including Folsom, bringing the total for the state to 1,700.
Intel CEO Pat Gelsinger emphasized the necessity of these cuts in an email to employees, stating, “Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate. Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low. We need bolder actions to address both – particularly given our financial results and outlook for the second half of 2024, which is tougher than previously expected.”
In his email, Gelsinger acknowledged the difficulty of these decisions. “This is painful news for me to share. I know it will be even more difficult for you to read. This is an incredibly hard day for Intel as we are making some of the most consequential changes in our company’s history,” he wrote. He outlined key priorities for Intel’s turnaround strategy, including reducing operational costs, simplifying the company’s portfolio, eliminating complexity, and reducing capital and other costs. The company also plans to suspend its stock dividend to prioritize investments in the business and drive more sustained profitability.
Intel’s financial challenges have been mounting. The company reported a first-quarter loss of $2.77 billion in 2023, the largest in its history, compared to a first-quarter profit of over $8 billion just a year earlier. The company’s stock has plummeted more than 40% this year, driven by its lagging position in the AI chip market and increased competition. For the third quarter of 2024, Intel expects revenue between $12.5 billion and $13.5 billion, significantly below analysts’ average estimate of $14.35 billion.
The company also forecast an adjusted gross margin of 38%, falling short of market expectations of 45.7%. These figures underscore the financial difficulties Intel faces as it attempts to regain its footing in the competitive semiconductor industry. Despite these challenges, Intel is continuing to invest in key areas, including a $10.5 million expansion at its Folsom campus for data center infrastructure. This investment aims to support the development and testing of prototype chips.
The stock market reacted sharply to Intel’s announcements. Shares of Intel slumped 20% in extended trading following the announcement of the workforce reduction and disappointing financial forecasts, setting the company up to lose more than $24 billion in market value. This drop came after a 7% decline earlier in the day, driven by a conservative forecast from Arm Holdings that impacted the entire U.S. chip sector. While Intel’s stock struggled, AI powerhouses Nvidia and smaller rival AMD saw their shares tick up after hours, highlighting their better positioning in the AI boom compared to Intel.
Intel’s attempts to cut costs are comprehensive. The company has announced its need to reduce operating expenses and capital expenditure by more than $10 billion by 2025, a move it believes is necessary to navigate the competitive landscape. Intel also announced plans to slash capital expenses by 17% in 2025 year-on-year, to $21.5 billion, focusing on capital efficiency and more normalized spending levels.
As Intel moves forward with these significant changes, the City of Folsom is committed to supporting its workforce. The full impact of Intel’s layoffs on Folsom remains to be seen, but should it be significant, the community is prepared to adapt through challenging times, according to the their statement.
“Our focus remains on creating opportunities, encouraging innovation, and ensuring that Folsom remains a hub for technological advancement,” concluded the statement from the city. “We will work collaboratively with local businesses, educational institutions, and community leaders to support affected individuals and drive economic growth.”
© Folsom Times, All Town Media, LLC, Folsom California
