Intel has announced a further 7,500 job cuts, bringing total planned lay-offs by 2008 to 10,500 - 10 percent of the chip giant's workforce.
The layoffs will happen in stages, with most due to take place this year already announced through Intel's sale of its media and signaling business in August, the cut of 1,000 executives in July, and the sale of its XScale smartphone chip division in June.
More cuts will happen in 2007, when Intel chops jobs in manufacturing and product design, improves equipment use and eliminates other redundancies, the company said.
The total impact will leave Intel with 92,000 people by the middle of 2007, down from the 102,500 it had this summer. The company expects to save $2 billion in 2007, and $3 billion per year beginning in 2008.
The cuts were a dramatic move for a company that holds a commanding 80 percent worldwide market share of PC chips and posted a profit of $885 million in the second quarter. But the company feels it could have made more money, with estimated profits this falling to $9.3 billion from $12.1 billion in 2005.
The problem is slowing growth in the PC market, a loss of share to rival AMD, and Intel's move to preserve its market share by making deep price reductions on its chips. In response, Intel's CEO Paul Otellini told analysts he would "restructure, re-purpose and re-size" the company.
Since then, Otellini has pushed new processors to market faster, resulting in a raft of new chips in recent months, including the "Woodcrest" Xeon 5100 chip for servers in June, "Conroe" Core 2 Duo chip for desktops in July and "Merom" Core 2 Duo chip for notebooks in August. Intel also reached for the high-end server market with the new "Tulsa" Xeon and "Montecito" Itanium chips.
And with an eye to the future, Intel accelerated the launch of its quad-core chips for desktops and servers, pledging to release them in the fourth quarter of 2006 instead of the first half of 2007.
Intel hopes this flood of new products will stop the erosion of its dominant market share. The company manufactured 77.9 percent of all CPUs sold in PCs around the world during the first quarter of 2006, according to Gartner. That number is down from 80.5 percent in 2005 and 81.5 percent in 2004.