US chipmaker Intel, citing "geopolitical and trade tensions", saw its second-quarter business drop in China and overall while announcing a major workforce reduction to reduce operating expenses.

"Our Q2 2024 revenue was unfavorably impacted by the revocation of certain licenses for exports of consumer-related items to a customer in China," the company said in its 10-Q filing Thursday with the US Securities and Exchange Commission.

Among the business risks the company cited in the forward-looking statements section of the report were "macroeconomic conditions and geopolitical tensions and conflicts, including geopolitical and trade tensions between the US and China".

The Silicon Valley company, in Thursday's earnings release, said that it will lay off more than 15 percent of its workforce, which amounts to about 17,500 employees, by year-end and suspend its dividend. Intel's quarterly revenue was? $12.8 billion, down 1 percent year-over-year.

Intel also has been picked to receive billions of dollars in federal government subsidies under the 2022 CHIPS and Science Act — which is aimed at competing with China.

The company has struggled to compete in artificial intelligence, while other US chipmakers Nvidia and AMD have done well. Intel's lagging position in the market for AI chips has contributed to its shares falling more than 40 percent this year, Reuters reported.

"Share loss and structural shift from traditional CPU-centric compute to AI-accelerated continues to weigh on Intel," wrote Oppenheimer analyst Rick Schafer, reported Barron's.

Intel, based in Santa Clara, California, is in the middle of a turnaround plan aimed at developing advanced AI processors and expanding its for-hire manufacturing as it looks to compete with Taiwan Semiconductor Manufacturing Co (TSCM), the? largest contract chipmaker in the world.

"Our revenues have not grown as expected — and we've yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low," CEO Pat Gelsinger said in a memo to staff Thursday.

In July 2023, at the Aspen Security Forum, Gelsinger noted that China represents 25 percent to 30 percent of semiconductor exports.

"If I have 25 percent to 30 percent less market, I need to build less factories," Gelsinger said. "You can't walk away from 25 to 30 percent and the fastest-growing market in the world and expect that you (continue) funding the (R&D) and the manufacturing cycle that we've released."

CFO David Zinsner said on an earnings call Thursday that the chipmaker expects weaker consumer and enterprise spending in the current quarter, especially in China.

Intel shares closed at $21.48 on Friday in Nasdaq trading, down $7.57, or 26 percent.

The White House, in an Aug 9, 2022,? "fact sheet", said that the CHIPS and Science Act would provide $52.7 billion for American semiconductor research, development, manufacturing and workforce development.

In addition to the CHIPS Act, the US also has restricted exports by American tech companies to China.

Export licenses that were revoked in May also hurt Intel's business in China in the second quarter, Zinsner said. Intel warned in May that its sales in China would suffer after Washington revoked some of the export licenses for a customer there.

The New York Federal Reserve, in an April research paper, wrote: "Amid the current US-China technological race, the US has imposed export controls to deny China access to strategic technologies. We document that these measures prompted a broad-based decoupling of US and Chinese supply chains.

"Once their Chinese customers are subject to export controls, US suppliers are more likely to terminate relations with Chinese customers, including those not targeted by export controls," the paper said. "However, we find no evidence of reshoring or friend-shoring.

"As a result of these disruptions, affected suppliers have negative abnormal stock returns, wiping out $130 billion in market capitalization, and experience a drop in bank lending, profitability and employment."

In an opinion piece in the New York Post on Friday, conservative economics commentator Stephen Moore and free market analyst Phil Kerpen wrote: "Intel was one of the biggest beneficiaries of the CHIPS Act, receiving an $8.5 billion grant announced in March, a $25 billion sweetheart tax incentive and likely the lion's share of an $11 billion federal loan program.

"This CHIPS Act was supposed to be the Biden-Harris crowning achievement. A giant job creator," Moore and Kerpen wrote. "Hundreds of billions of government handouts to bring the semiconductor industry back home. Now, it's looking like the Titanic."

On March 20, in an appearance in Chandler, Arizona, US President Joe Biden said: "I'm thrilled to announce the latest public-private partnership and one of the largest investments in semiconductors in the United States ever: the landmark — a new landmark agreement under the CHIPS and Science Act between my administration and Intel for up to $8.5 billion. It's a smart investment.

"And that's being paired with over $100 billion from Intel, including $30 billion in Arizona and $30 billion in Ohio," he said. "It's among the largest private-sector investments ever in the history of Ohio and in Arizona.

The Washington Post reported on Friday, however, that Intel has yet to receive the funds, and a Commerce Department spokesperson declined to say whether Intel's announcement Thursday would affect the grants.

Agencies contributed to this story.