Intel (NASDAQ: INTC) has announced plans to reduce its dividend by two-thirds, from 36.5c to 12.5c per share, in a move to conserve cash. The semiconductor company is preparing for a massive expansion of chipmaking capacity in the United States and has also decided to cut compensation and rewards programs for its executives and staff. These measures are part of a "prudent" capital allocation strategy, reflecting the board's approach to capital allocation to best position the company to create long-term value. The improved financial flexibility will support critical investments needed to execute Intel’s transformation during this period of macroeconomic uncertainty.
Intel aims to cut $3 billion in annual operating costs this year, rising to as much as $10 billion by the end of 2025. Despite extensive support from the Biden administration's CHIPS Act, which aims to reduce the US's dependence on imported high-performance semiconductors, the company is building two new chip plants in the US at a cost of tens of billions of dollars. Currently, the overwhelming majority of high-performance chips are made in Taiwan, a situation that the US government fears is vulnerable to military action by China. As a result, Intel is taking steps to expand domestic chip manufacturing capacity.
The news of the dividend cut led to a 1.2% decline in Intel's stock price in premarket trading on Wednesday, following a 5.6% fall on Tuesday that was driven by fears of higher interest rates and their impact on the broader market, particularly on technology stocks.
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