Chip giant Intel is to cut 10,500 jobs, or 10 per cent of its workforce, by mid-2007, the company said late Tuesday.

Intel announced plans for the restructuring following an analysis of the company’s structure and efficiency as it comes under increasing pressure from leading rival AMD.

During the second quarter of this year, the company’s revenues fell 13 per cent year on year to $8bn (£4.2bn) and net income dropped 57 per cent to $900m.

Most job reductions this year will occur in management, marketing and information technology. In 2007, the reductions will be more broadly based, hitting the labour and manufacturing divisions.

By the middle of next year, the company aims to have slimmed its workforce down to 92,000.

Although the severance packages are likely to cost in the region of $200m, the US-based chip shop company expects to generate savings in costs and operating expenses of approximately $2bn in 2007. In 2008 the company expects savings from this restructuring to grow to approximately $3bn annually.