Intel to cut capital spending and management layers amid trade war challenges

Intel slashes capex and trims workforce under CEO Lip-Bu Tan as U.S.–China trade war reshapes chip industry.

A view of Intel's headquarters in Santa Clara, California, on April 23, 2025. Photo by David Paul Morris/Bloomberg

By Anna Fadiah and Hayu Andini

Intel is set to implement a sweeping restructuring plan that includes cutting capital expenditures and eliminating layers of management, as the U.S. chipmaker struggles to regain momentum under new leadership and amid increasing geopolitical pressures from President Donald Trump’s trade policies.

In its latest earnings report on Thursday, Intel confirmed its decision to reduce capital spending in 2025 by $2 billion, lowering its previous estimate from $20 billion to $18 billion. The company also outlined plans to reduce operational expenses, aiming to save another $500 million by trimming its workforce and restructuring its internal management structure. The announcement follows the appointment of Lip-Bu Tan as chief executive in March, who replaced Pat Gelsinger after a prolonged period of underperformance and strategic drift.

The Intel to cut capital spending decision comes at a time when the semiconductor sector is facing mounting uncertainty. Although semiconductors have largely been spared from direct tariffs so far, they remain under review for national security risks. This raises concerns about potential further restrictions, especially on exports to China—a key market and manufacturing base for many chipmakers.

Intel's weak outlook shakes investor confidence

While Intel exceeded Wall Street expectations for its first-quarter revenue, reporting adjusted earnings of $12.7 billion—flat compared to last year but above the $12.3 billion forecast—it issued a cautious outlook for the next quarter. The company projected revenue between $11.2 billion and $12.4 billion for Q2, well below analysts’ consensus of $12.9 billion. Following the release, Intel shares fell more than 5 percent in after-hours trading.

This earnings report marks the first under the leadership of Tan, a respected semiconductor executive known for his strategic role at Cadence and venture capital firm Walden International. Since assuming his role, Tan has pledged to “streamline the organisation, eliminate management layers and enable faster decision-making”—moves designed to reinvigorate Intel’s sluggish turnaround efforts and help it compete more effectively with rivals such as TSMC and Nvidia.

Bureaucracy under fire, layoffs to begin immediately

In an email to employees on Thursday, Tan underscored the urgency of these changes. He criticized the “unnecessary bureaucracy” that has bogged down the company’s engineering efforts and confirmed that Intel would begin workforce reductions during the current quarter. The job cuts are expected to mirror the 15,000 positions slashed during the second half of 2024 and are part of a broader strategy to make Intel leaner and more agile.

“There is no way around the fact that these critical changes will reduce the size of our workforce,” Tan wrote, noting that the restructuring will be implemented “as quickly as possible” over the coming months. Employees will also face a new return-to-office mandate, requiring four days of on-site work per week by September 1.

Venture arm spinoff scrapped, capex outlook revised

In another key shift, Tan announced that Intel would no longer spin off its venture capital arm, Intel Capital, as previously planned. Instead, the company will focus on monetizing its existing investment portfolio and becoming “more selective” in new investments. The move represents a significant reversal from plans floated in January before Tan’s appointment.

Chief financial officer David Zinsner added that the company’s net capital expenditures for 2025 will range between $8 billion and $11 billion. The broad range reflects the uncertainty surrounding the timing of federal subsidies under the U.S. Chips Act, which remains a major component of Intel’s long-term manufacturing strategy.

AI race and manufacturing setbacks continue to pressure Intel

Despite efforts to diversify and modernize its operations, Intel continues to trail behind competitors in key segments. The company has struggled to keep up with Taiwan Semiconductor Manufacturing Company (TSMC) in cutting-edge chip fabrication and has failed to make significant inroads into the booming market for AI data center chips—where Nvidia remains dominant.

Intel’s foundry business, launched under former CEO Gelsinger, was envisioned as a bold effort to offer manufacturing services to third parties. However, the initiative has faced operational and financial challenges, and investors remain skeptical about its long-term viability.

At present, Tan has not confirmed whether he plans to sell or spin off the lossmaking manufacturing division. Some analysts and shareholders have advocated for such a move to focus the company’s resources more effectively.

Trade war and subsidy uncertainty cast long shadow

Intel’s new direction comes as the Trump administration escalates its trade war with China, introducing sweeping tariffs and reviewing technology exports for national security concerns. While semiconductor components have thus far avoided the heaviest duties, the possibility of additional restrictions continues to disrupt supply chain planning.

Adding to the uncertainty, Trump has criticized the multi-billion-dollar subsidies that Intel and other chipmakers received under President Joe Biden’s administration to reshore semiconductor manufacturing. In January, Intel had secured $2.2 billion out of a total $7.9 billion allocated to the company under the 2022 Chips Act. However, delays in disbursement and the potential rollback of subsidies under Trump’s return to power now cloud the outlook for long-term investment.

Long road ahead for Intel’s recovery

While Intel’s revenue beat provided a temporary morale boost, the company’s deepening net loss—$821 million in Q1 2025, compared to $381 million in the same period last year—highlights the challenges it faces in regaining profitability. Still, the restructuring plans, if executed effectively, could position Intel for a gradual rebound.

Tan’s leadership will be critical in determining whether Intel can navigate a landscape increasingly shaped by geopolitical strife, rapid technological shifts, and intensified competition. For now, the company's message is clear: the time for incremental change is over.

As the Intel to cut capital spending initiative unfolds, industry analysts will closely watch how these changes impact the company’s core operations, innovation pipeline, and investor confidence over the remainder of 2025 and beyond.