Intel announced a plan to cut more than 15 per cent of its workforce and suspend its dividend in the fourth quarter in a strategic move to focus on its manufacturing business. This decision will affect approximately 17,500 employees out of the 116,500 that Intel employed as of June 29. The majority of the job cuts are expected to be completed by the end of 2024. The company also forecasted lower third-quarter revenue due to reduced spending on traditional data center semiconductors and a shift towards AI chips, where it is lagging behind competitors.
In response to the news, Intel’s stock plummeted by 20 per cent in extended trading, leading to a significant loss in market value for the company. CEO Pat Gelsinger explained that the company needs to reallocate personnel from headquarters to better support customers and improve field operations. The decision to suspend the dividend is aimed at prioritizing balance sheet health and deleveraging. Additionally, the company plans to cut operating expenses and reduce capital expenditure by more than $10 billion in 2025.
Wall Street analysts have been skeptical of Intel’s ability to turnaround its manufacturing business and compete effectively with industry leaders like TSMC. The company’s struggles in the market for AI chips have led to a decline of over 40 per cent in its stock value this year. Intel’s capital expense reduction plan aims to address these challenges, with a projected 17 per cent reduction in expenses by 2025. The company is also investing in new lithography tools to enhance chip manufacturing capabilities.
Despite these efforts, analysts believe that Intel’s turnaround plan may take years to materialize, and TSMC is likely to maintain its lead in the coming years. The company’s decision to suspend its dividend may impact its short to medium-term stock performance as it could be excluded from certain investment strategies that focus on dividend-paying companies. With Intel focusing on cost-cutting measures and strategic investments in its manufacturing operations, the industry is closely watching to see if these steps will be sufficient to drive the company’s growth and competitiveness in the semiconductor market.
