Intel's underwhelming second-quarter 2024 financial results have prompted the company to announce plans to cut 15% of its workforce, approximately 15,000 employees, aiming to save US$10 billion by 2025. This decisive move contrasts sharply with the ongoing labor strikes at Samsung Electronics' semiconductor division, raising questions about how these differing labor-management approaches might affect future competition in the foundry industry.
Intel's CEO, Pat Gelsinger, explained in an internal memo that the restructuring was necessary due to slower-than-expected revenue growth and the company's inability to fully capitalize on trends like artificial intelligence (AI). The company faces a high-cost, low-margin structure, with financial conditions expected to become even more challenging in the latter half of 2024.
After launching its "IDM 2.0" initiative, which focuses on both producing its own products and enhancing advanced foundry capabilities, Intel has seen limited success. Foundry revenues have not increased, and losses have continued to grow.
In the second quarter of 2024, Intel's foundry revenue decreased by US$100 million quarter-over-quarter, with losses increasing by US$300 million. Similarly, Intel's Data Center and AI division remained stagnant at US$3 billion, with operating income down by US$200 million.
When asked about the timing of the restructuring, Gelsinger pointed out that while Intel's 2020 revenue was nearly US$24 billion higher than in 2023, the company's workforce had grown by over 10% during the same period. Faced with a high-cost, low-reward scenario, Intel decided that layoffs were the necessary course of action.
Samsung's situation appears strikingly similar when viewed through Gelsinger's perspective. Samsung's semiconductor and Device Solutions (DS) division saw its revenue drop by 8.6% from 2020 to 2023, with operating profits plunging from a surplus of KRW18.81 trillion (approx. US$137 million) to a loss of KRW14.87 trillion.
Despite this, the number of global semiconductor employees at Samsung grew by 25.8%, from 74,415 in 2020 to 93,639 in 2023, which theoretically should have prompted a significant workforce restructuring.
Industry analysts in South Korea highlight that the ability to flexibly adjust the workforce in response to market changes is one of the key differences between the two companies. Intel's workforce numbers tend to rise and fall in tandem with its performance—a hallmark of the flexible U.S. labor market.
In contrast, Samsung's semiconductor division has continued to grow its workforce regardless of performance, largely due to the rigidity of South Korea's labor market, where implementing cost-saving measures like layoffs is far more challenging.
In 2023, amid massive losses, Samsung faced internal strife over issues such as the distribution of excess profit bonuses (OPI) and wage adjustments. This led to a significant increase in union membership, with the largest union, the National Samsung Union, surpassing 30,000 members. In 2024, the union launched strikes aimed at disrupting semiconductor production, presenting a stark contrast to Intel's approach of announcing layoffs to address its financial challenges.
Industry insiders point out that while Intel has acted out of a sense of crisis, focusing on cost-saving and workforce restructuring, Samsung's semiconductor division is embroiled in intense, unresolved labor disputes. The difference in labor flexibility between the two companies could potentially influence their competitiveness in the foundry market in the future.
