Intel on Thursday said it would cut more than 15 percent of its workforce and suspend its dividend starting in the fourth quarter, as the chipmaker pursues a turnaround centered around its loss-making manufacturing business.
It also forecast third-quarter revenue below estimates, grappling with a pullback in spending on traditional data center semiconductors and a focus on artificial intelligence (AI) chips, where it lags rivals.
Intel shares fell 20 percent in extended trade, setting it up to lose more than US$24 billion in market value. The stock had closed down 7 percent on Thursday, in tandem with a plunge in US chip stocks after a conservative forecast from Arm Holdings PLC on Wednesday.
Photo: Ann Wang, Reuters
The results did not rock the broader chip industry. AI powerhouse Nvidia Corp and smaller rival Advanced Micro Devices Inc ticked up after hours, underscoring how well-positioned they were to take advantage of the AI boom.
“I need less people at headquarters, more people in the field, supporting customers,” Intel CEO Pat Gelsinger told Reuters in an interview. On the dividend suspension, he said: “Our objective is to ... pay a competitive dividend over time, but right now, focusing on the balance sheet, deleveraging.”
The layoffs would impact roughly 17,500 people.
Intel, which employed 116,500 people as of June 29, excluding some subsidiaries, said the majority of the job cuts would be completed by the end of the year.
The company also announced it would cut operating expenses and reduce capital expenditure by more than US$10 billion next year, more than it initially planned.
“A US$10 billion cost reduction plan shows that management is willing to take strong and drastic measures to right the ship and fix problems. But we are all asking, ‘is it enough’ and is it a bit of a late reaction considering that CEO Gelsinger has been at the helm for over three years?” Running Point Capital chief investment officer Michael Schulman said.
Scraping dividend might further pressure the shares in the short to medium-term, because it would knock Intel out of any exchange-traded funds, indices and fund strategies that only include dividend payers, Schulman said.
The company had cash and cash equivalents of US$11.29 billion, and total current liabilities of about US$32 billion as of June 29.
Much of Wall Street’s focus has centered around the heavy investments and huge costs incurred by Intel as it builds out its manufacturing capacity in a bid to compete against Taiwan Semiconductor Manufacturing Co (TSMC, 台積電).
Intel’s lagging position in the market for AI chips has sent its shares down more than 40 percent so far this year.
As part of its cost reduction, Intel expects to slash capital expenses by 17 percent next year year-on-year to US$21.5 billion, calculated on the midpoint of a range the chipmaker forecast. It expects these costs to stay roughly flat this year.
“On one hand, Intel is witnessing the erosion of its traditional data center business as chip buyers aggressively migrate towards AI chips. On the other hand, Intel is navigating a challenging and expensive transformation to a foundry model,” Global X research analyst Tejas Dessai said.
Intel adopted extreme ultraviolet (EUV) lithography tools much later than TSMC did, which caused the US chipmaker’s foundry business to lag the Taiwanese manufacturer. The company is working to rectify that. It became the first to assemble one of Dutch chip gear maker ASML Holding NV’s new high-NA EUV lithography tools in April.
Analysts believe Intel’s plan to turn around the foundry business would take years to materialize and expect TSMC to maintain its lead in the coming years.
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
CROSS-STRAIT TENSIONS: The US company could switch orders from TSMC to alternative suppliers, but that would lower chip quality, CEO Jensen Huang said Nvidia Corp CEO Jensen Huang (黃仁勳), whose products have become the hottest commodity in the technology world, on Wednesday said that the scramble for a limited amount of supply has frustrated some customers and raised tensions. “The demand on it is so great, and everyone wants to be first and everyone wants to be most,” he told the audience at a Goldman Sachs Group Inc technology conference in San Francisco. “We probably have more emotional customers today. Deservedly so. It’s tense. We’re trying to do the best we can.” Huang’s company is experiencing strong demand for its latest generation of chips, called
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure
RSS