Intel, the American semiconductor giant, is set to eliminate 15,000 jobs as part of an aggressive effort to revitalise its lagging manufacturing operations and catch up in the competitive artificial intelligence (AI) chip market.

The California-based company’s shares plummeted by 20% in after-hours trading in New York to $29.05 following the announcement of a significant cost-cutting strategy and a forecast of lower-than-expected revenue for the current quarter. Intel also revealed it would suspend its dividend payments.

Intel’s workforce reduction, which accounts for 15% of its total employees, is expected to be largely completed by the end of 2024. This move is part of a broader initiative to slash operating expenses and reduce capital expenditure by more than $10 billion by 2025.

Pat Gelsinger, Intel’s chief executive, stated: “I need fewer people at headquarters, more people in the field, supporting customers.”

Investor concerns over Intel’s position in the AI chip race have already resulted in a nearly 40% decline in the company’s share value this year. The company has been grappling with diminished demand for its traditional data centre chips and heightened competition in the personal computer market.

For the upcoming quarter, Intel anticipates revenue between $12.5 billion and $13.5 billion, significantly below analysts’ average estimate of $14.35 billion, according to LSEG data.

Gelsinger commented on the dividend suspension, saying, “Our objective is to reinstate the dividend and ensure it is competitive over time. However, our current focus is on the balance sheet and deleveraging. We believe that deleveraging and capital investments offer greater shareholder returns at this moment than dividend payments.”

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Intel to cut 15,000 jobs in bid to catch up in AI chip race