Reports surrounding potential large-scale layoffs at Intel have once again thrust the US chipmaking sector into the spotlight, highlighting the urgent need for effective solutions rather than misguided policies that may exacerbate the challenges faced by the industry.
Intel is poised to announce plans this week to cut more than 20 percent of its staff, aiming to eliminate bureaucracy at the struggling chipmaker, Bloomberg reported on Wednesday, citing a person with knowledge of the matter. The cut could exceed 21,000 employees based on its 2024 headcount.
While the chipmaker hasn’t officially confirmed the layoff plans, its ongoing struggles are hardly a secret. Over the years, Intel announced several rounds of job cuts due to financial pressures, market competition and strategic transformation needs. In August 2024, it announced plans to cut 15 percent of its jobs, or about 15,000 positions.
Intel stands as a pivotal representative of the US chip manufacturing industry. The challenges it faces reflect the broader struggles of the American chipmaking sector, exacerbated by misguided policies.
Despite tech giants like Nvidia exceling in chip technology, the US chip manufacturing industry as a whole still faces significant challenges, as evident in Intel’s lagging performance in artificial intelligence (AI) chips. While global competitors raced to dominate AI and 5G, Intel’s delayed strategic shifts in these critical arenas eroded its market leadership, leaving it trailing far behind rivals in key emerging technologies.
What’s worse, US industrial policies, particularly tariff measures, have dealt a severe blow to chipmakers like Intel. By imposing tariffs aimed at encouraging manufacturing to return and protecting domestic industries, the US government has disrupted global supply chain coordination, raising costs for Intel’s raw material procurement and component supplies, and significantly increasing operational expenses.
Also, these tariff hikes have triggered resistance from other countries, further eroding Intel’s international competitiveness. Such short-sighted policies have not only failed to bolster the US chip industry’s competitiveness but also placed it in a more vulnerable position within the global supply chain.
For example, Intel leverages a global network of packaging facilities, including facilities in the US, Malaysia, China and Vietnam, to accomplish that process. This global supply chain layout is based on optimal cost-effectiveness and specialization. However, US tariff policies are attempting to forcibly alter this layout by compelling companies to relocate production back to the US. Such industrial restructuring is not only costly but also hardly to achieve in the short term.
Intel and some other US chipmakers face immense transformational pressure, but the complexity and interconnectedness of the global supply chain make such restructuring plans fraught with challenges. Additionally, other countries are actively developing their own chip industries to reduce dependence on the US, further exacerbating the difficulties of the US chipmaking sector in the global supply chain.
The tariff policies implemented by the Trump administration aim to revitalize US manufacturing through coercing other nations into concessions. However, the reality has been starkly different, with these policies plunging US chip manufacturing into a more precarious situation. High tariffs have made it more challenging for the US to restructure its industrial and supply chains, as other countries are taking necessary measures to safeguard their interests and are not inclined to cater to chipmaking revival efforts by the US.
Intel’s predicament is a concentrated reflection of multiple issues plaguing the US chipmaking industry, including technological innovation, industrial policy, global supply chain layout, talent shortages and market confidence. These issues are intertwined, creating a complex scenario that positions the US chipmaking industry in a perilous competitive landscape globally. Blindly pursuing erroneous policy directions has not only failed to aid the revival of the US chip industry but also left it in a more passive position in the international competition.
The reports of Intel’s layoffs may be just a beginning of the woes facing US chipmaking. If policymakers continue to ignore the realities of globalization and persist in implementing counterproductive trade policies, more companies will follow Intel’s path into operational distress. This will not only deal a heavy blow to the development of US manufacturing but will also have adverse effects on the stability of the global supply chain.
