Almost a year ago, in late summer 2024, Lip-Bu Tan left his seat on Intel's board of directors in a rage. At the time, his dramatic exit was interpreted as a red flag for the company's continued operation; Tan, one of the semiconductor industry’s top executives - who earlier in this century had taken on another collapsing company, Cadence, doubled its revenue and quadrupled its stock price - was more pessimistic than ever about Intel's fate under then-CEO Pat Gelsinger.
Although he did not provide an explanation for the move, reports began to surface in the international press about his disappointment in not having been able to persuade Gelsinger to overhaul Intel’s organizational culture, which was struggling to adapt to the 21st century. Even after missing out on the smartphone revolution, the automotive sector, and the age of artificial intelligence, Intel still had almost 109,000 employees at the end of last year, and it has been a year since its market cap crossed the $100 billion mark. TSMC, Intel’s larger and more successful competitor in the chip market - the company that manufactures processors for Nvidia, Apple, Amazon and Qualcomm - employs 27,000 fewer employees than Intel, and its market capitalization is approaching $1 trillion.
Last March, Tan stormed back into the company, this time as CEO, and began implementing a dramatic, aggressive series of staff firings. Unusually, the layoffs also reached the production line - Intel’s heart and soul. But will this move succeed in getting the company back on track, or does it signal its decline? We spoke with market executives and company employees to understand the consequences of the layoffs and how Intel found itself in its current position.
Damage to the Israeli fab, too
If you ask Tan, missing a series of technological revolutions was only a symptom of the real problem: a bloated, rigid organizational culture blinded by overconfidence. "Intel suffered, and still suffers, from an inherent problem that will come as a surprise to no one: the sin of arrogance," said former Intel executive VP Dadi Perlmutter on the "Globes" podcast, "HaTzolelet" (The Submarine), a few months ago.
When Tan took up his post, he believed that the company’s real crisis lay in manufacturing. To remain competitive in a rapidly evolving industry, Intel would need to adhere to Moore’s Law-the very principle it invented-and release chips with ever-smaller technologies each year. In reality, however, Intel lost this race nearly a decade ago to rival TSMC, which has consistently outpaced it by producing faster, more advanced chips with circuits as small as three and even two nanometers.
Tan also believed that the cost-cutting plan put forward by former CEO Gelsinger was both too mild and too limited: up to 15% of the workforce-no more than 17,000 employees. While that number may sound substantial, in hindsight it was too little, too late. Tan felt the company needed a major jolt-one that would force it to focus on developing a single product strong enough to lead the market and surpass its Taiwanese rival. By the time he took the helm, Intel’s manufacturing operations-already showing signs of being outdated-were bracing for change. The company was hesitant to lay off factory workers in the US, Israel, and Ireland, and instead continued to remove development engineers from their air-conditioned offices. But just four months ago, Tan made his first bold move: cutting approximately 15% of Intel’s manufacturing workforce, a reduction that could affect as many as 10,000 employees worldwide.
The move also affected hundreds of employees at Intel Israel this month. Just three months ago, the company's global production manager praised the Kiryat Gat fab, saying "Despite the challenges Israel faces, it has not missed its targets, not even once." He also revealed that the factory in Israel was a world-class leader in performance indicators, that it teaches other factories how to achieve these goals and how to implement artificial intelligence processes. This leadership, however, has cost some employees their jobs: It is estimated that several of the automated processes implemented at Kiryat Gat have rendered some people redundant. The Israeli factory also does not meet the company's newest technological standards, as it uses the relatively outdated ten and seven nanometer technology in production.
In addition to the hit to production, the development departments have also been affected. According to internal estimates, about 10% of the workers in this area were laid off at the same time. After years in which Intel was a rock of employment stability, its employees are now talking about a change in concept, especially those who have been employed there for a decade or two. Areas once considered safe from harm at Intel are no longer seen that way. But the layoffs are not viewed as a complete surprise, but rather as a kind of necessary correction. "Intel was not in an innovation state of mind," admits one Kiryat Gat fab employee. "There was a kind of idea that we couldn't be touched. That’s nice, but it's an illusion. The world has changed." Another employee says, "This is not a move to reduce productivity, but to increase efficiency. The factory doesn't produce less, it just produces more with fewer people. Companies like Nvidia are doing a lot more with far fewer employees."
A dramatic decline in performance
The factory in Kiryat Gat has seen better days. A study commissioned by Intel and conducted last year by Prof. Eugene Kandel's research institute, RISE Israel, shows that the factory peaked in 2019, when the number of employees stood at about 5,000. It since shrunk gradually to 4,000 people in 2023, a figure that was apparently maintained until the current wave of layoffs. The trend coincides with the decline in the factory's sales, which were about $4 billion a year until 2018, and then jumped to $9 billion in 2022. In 2023, sales fell below the $6 billion mark, and according to estimates, the current figure is lower.
The trend, of course, is in line with that of Intel as a whole; because of the company’s technological and commercial crisis, abandonment by customers like Apple and Amazon, and the PC market’s volatility, Intel's performance has declined dramatically over the years. The outset of the pandemic in 2020 had many people buying personal computers and it was a kind of record year for the company, with annual revenue of $78 billion, but this has since fallen to $53 billion last year. Net profit, which was $21 billion at the time, declined, and, in what almost a mirror image, reached a $18.7 loss billion last year. The high gross margins that characterized Intel in its heyday in the 1990s and early 2000s crumbed, from 56% in 2020, to 33% last year.
Accordingly, the number of employees at Intel Israel has also decreased, and Intel Israel is losing its status as a large and stable employer in Israeli high-tech. Between 2014 and 2021, Intel Israel added 4,000 employees to its workforce, thanks in part to its acquisition of Mobileye in 2017. Since then, however, it has dropped to about 9,300 people on the eve of the new wave of layoffs, and is expected to employ fewer than 9,000 after it. "Part of the downward trend stems from the separation from Mobileye last year, but it is also a reflection of the fact that the areas in which Intel is strong, such as personal computers and laptops, are not growing as much as they used to," RISE senior research fellow Dr. Danny Biran, who is also the study's author, tells "Globes."
How much state funding has Intel received?
In the midst of all this, one must ask: what is the state's share? Most international tech giants - Google, Microsoft, Apple, and Nvidia - employ thousands of workers in Israel without receiving direct government grants (though all benefit from reduced corporate tax rates through special arrangements with the Ministry of Finance and the Ministry of the Economy). What sets Intel apart is not only that it owns a manufacturing plant in Israel, but also that it has secured billions of shekels in taxpayer funding to build, maintain, and upgrade it.
To receive the grants, Intel had to prove in advance that it was meeting its construction, recruitment, and employment goals , and it never met with a refusal from the Ministry of Finance. However, as mentioned, for the first time, the company is actively cutting its production activity, for which it has received state grants in the past. In addition, for over a year now, Intel has frozen the completion of one of the two new factories it is building as part of the "Fab 38" complex. It undertook to construct it with a total funding of $25 billion. The first plant is also still under construction, but its launch date is unknown.
How much money has Intel raised in government grants so far? Although this is a public budget, the government has never published the figure; nether has Intel. "Globes" estimates that, so far, Intel has received almost $1.5 billion in grants for the construction and upgrade of the initial chip factory in Kiryat Gat, "Fab 28", and believes it has mostly been paid. The current government has approved another grant of $3.2 billion to Intel to build a new factory ("Fab 38") in two stages. But as long as Intel has not launched even the first phase, the grant will not be transferred to it.
Despite the delays in construction and the layoffs, both the Ministry of Finance and the Israel Investment Authority (IIA) have not yet taken any action, preferring instead to wait for clear answers from the company about its plans. In two weeks, a meeting will be held between Intel's management in Israel and representatives of the Ministry of Finance Budget Division, after which the government hopes to receive clarification about what is happening. However, it is not at all certain that the company’s Israeli representatives will be able to provide answers to hard questions.
Be that as it may, the IIA is not worried: They have signed an agreement for a period of five years, and construction is supposed to be completed by 2029; even if Intel slows down, there is no change in the plans from the authorities' point of view. Moreover, the old factory, which was built with grant funds allocated to the "Fab 28" plant -- where about 200 workers were laid off this week -- ostensibly still meets the targets that the IIA and the Ministry of Finance will review each year until 2038.
How much has it benefitted Israel?
Although Intel has raised a great deal of money from the state, the Ministry of Finance is still confident that, since its inception, the deal with Intel has had a fiscal benefit. A study conducted by RISE for Intel notes its significant contribution to the Israeli economy. The local fab has exported $86 billion in chips so far. Intel's share of Israeli exports as a single company is so great that it ranges from 3% to 3.5% each year, apart from in 2020, when Israeli exports declined and Intel's exports increased due to the onslaught of pandemic-related PC purchases. The indirect employment multiple in 2023 was four - meaning that for every Intel employee, four additional suppliers and service providers had employment. Young people without matriculation certificates in engineering were trained and hired, and about 80% of them continued to work, earning salaries NIS 6,200 higher than the average engineer's salary.
In addition, Intel is an example of reciprocal procurement with Israeli companies, mainly contractors for building factories, materials purchasing, and production equipment, totaling $25 billion from the launch of operations until the end of 2023. However, due to the freeze in construction of the second phase of the new plant and completion of other projects, many contractors were forced to cut thousands of workers.
"The factory in Kiryat Gat did its job and met Intel's expectations," says Biran. "It’s problem in the manufacturing world has nothing to do with Israel - it’s suffering from the same problems Intel has all over the world, such as the superior level of service of its competitor TSMC, or its less advanced production technologies than that of its Taiwanese rival. Aside from strategic problems, Intel is a very strong player in personal computers and servers, and the Israeli center continues to play an important role within Intel global. The question is not whether the decision was good for Israel, but whether Intel is starting to decrease chip production when there is no one else who can take on its employees."
In the background, it should be mentioned that Nvidia announced the other week that it intended to establish a large development center in the north of Israel at an estimated NIS 2 billion investment, taking on about 5,000 employees, which in the long run will make it a larger employer than Intel. Does this mean that the era of Israeli fabs is over? The answer to this is ostensibly ‘no,’ since Nvidia itself also manufactures via TSMC, but it does so in factories in Taiwan and the United States where it receives benefits under the US CHIPS Act (the Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022). Still, it is impossible to compare the impact of a factory to that of a development center. "There is no doubt that a factory contributes much more to exports and economic growth than a development center," says Biran. "But these things don't necessarily come at the expense of one another. At Intel, they lived side by side."
"The situation at the political level is bleak"
While those at the Ministry of Finance and the Ministry of Economy feel confident that the investment in Intel is not risky, because funding is transferred only after Intel meets its targets, others have criticized the subsidies policy from the outset. A former senior official at one of the government ministries, who is familiar with Intel's investment plans, says, "There’s really no reason for a factory to receive grants. Companies like Tower, Iscar, and Nova have never received government grants. Subsidizing factories is an economic error that many countries have been making since the middle of the last century. If you decide to invest in factories, you should do so with an overall strategy to bring more factories here, and certainly not depend on one factory. There is no strategy - once every few years someone puts a gun to the Ministry of Finance’s head, and they make a specific investment. That's the problem."
"The problem is that there has never been a government entity for technology strategy to advise on formulating policies that can bring factories here," says a former government source. "In the past, they brought in Prof. Itzik Ben-Israel (Isaac Ben-Israel, the former chairman of the Israel Space Agency at the Ministry of Science and Technology) to advise on artificial intelligence issues, but they didn't do much about it. In the important and influential ministries, such as the Prime Minister’s Office, the Ministry of Defense, the Ministry of Justice, and the Ministry of Finance, there is no-one who understands about chips. The Innovation Authority focuses on providing subsidies to companies and a little bit to startups, and that's not enough. The Ministry of Science is actually an arrangement for giving politicians jobs, and the Investment Authority is poor and toothless, distributing $400 million to 100 factories, instead of investing $100 million to bring in four factories."
Dr. Ami Appelbaum, former chairman of the Israel Innovation Authority, who for years served as president of KLA-Tencor Israel and managed the Israeli fab, says: "Companies come to produce and develop in Israel not because of grants or because of the huge tax benefit here, but because of the talent. When KLA wanted to open operations in Singapore and benefit from large subsidies, we couldn't find enough people with the ability to execute and operate the way we do in Israel."
Applebaum also believes that Israel has failed to systematically identify and attract companies, because of the absence of a proactive policy. "The situation at the political level is bleak, the Innovation Authority gives companies money only after they come here and focuses on small companies, and the Investment Authority is irrelevant. There is no national strategy, and while we need an investment of at least $5 billion in the development of the artificial intelligence industry, Israel has invested perhaps $50 million."
"Conditions other companies don't have"
And what about the employees? How do you persuade them to stay at a company now known for slashing perks - canceling the car-leasing program, and even scaling back on coffee-break corners? "Intel has a large group of loyal veteran employees who go with it through fire and water, and when there are upheavals, jumping ship is not an option," Eyal Solomon, CEO of high-tech placement company Ethosia, told "Globes." "Intel is conducting a process that is right for it and suitable for the situation it is in. It also recruits juniors - very few companies recruit at this rate today, and it’s a career springboard for them."
"It's hard to say how Intel will retain its staff," says Dadi Perlmutter, "but the key is convincing employees that Intel can turn things around - and quickly. In the meantime, top talent must be offered strong conditions."
An employee who was fired in one of the recent rounds of cuts says, "Even today, Intel gives employees special conditions that other high-tech companies don't have: an annual bonus of two or three salaries that adds tens to hundreds of thousands of shekels a year to their bank accounts (it was cut in half, but still exists); a five-week paid ‘sabbatical’ leave that employees can take advantage of once every seven years; and special grants given to IDF reservists."
According to high-tech companies salary ratings database Levels.fyi, pay at Intel is lower than at Nvidia - a junior hardware engineer at Intel earns an average of NIS 39,000 monthly, which compares with NIS 46,000 at Nvidia. However, the stock-based component at Nvidia is larger: NIS 3,100, which compares with NIS 1,500 at Intel. In engineering, the differences are more pronounced: the pay at Intel is NIS 113,800 monthly, which compares with NIS 165,800 at Nvidia, and the Nvidia stock package is worth 3.5 times that offered by Intel to its engineers.
What makes Intel unique in the industry is its severance packages. In the 2024 round of layoffs, employees were offered up to 19 monthly salaries in exchange for resigning - a bonus that could translate into almost NIS 800,000 for a veteran employee earning NIS 40,000 a month. In the last round of layoffs, the offer dropped to ten salaries, although the average golden parachute for veteran employees over the past year has been eight salaries. Younger workers, on the other hand, received payments ranging from three to four salaries, a decent amount.
In parallel with the layoffs, Intel took a series of steps designed to retain its remaining employees. According to sources, some received significant wage increases. The current feeling among those who remain is twofold: on the one hand, there is a sense that the new management is trying to protect talent. On the other hand, there is growing insecurity, especially among older workers, who fear that if they leave or are fired in the future, they will not be able to find other work. "Many people are afraid to leave what is left of security at Intel," says one source. "We're not young anymore, and if we go now, it's not certain that anyone will hire us. The situation in the market as a whole is not easy."
"You meet people who have been with the company for 25 or 30 years, for whom Intel is not just a job - it's their life," says a former employee of a startup acquired by Intel who was then fired. "These are people who haven't looked for work for a long time."
Kiryat Gat is concerned, too
The layoffs at Intel have not been confined to the factory walls. In Kiryat Gat-a city heavily reliant on the company’s presence-concerns about the future are mounting. For some time, local discussion has centered on the suspension of work on the new factory, a major project whose construction has stalled. Now, the blow to current employees only deepens the uncertainty.
At the same time, Intel is still a major source of income not only for its direct employees, but also for dozens of businesses and suppliers in the city - restaurants that provide food to employees, taxi drivers, and a local shuttle service, Maya Tour, which has served Intel for many years after winning the tender. Local employees say that the impact has not yet been fully felt, but tension hovers in the air.
One way or another, the company's actions have far-reaching effects-on the city, its competitors, and the country as a whole. Will the recent wave of layoffs mark a further step in its decline, or will this move help stabilize the company? Only time will tell.
Published by Globes, Israel business news - en.globes.co.il - on July 27, 2025.
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