U.S. chipmaker Intel Corporation is cutting pay across its workforce days after the company shocked Wall Street with below-expectations revenue and a forecasted loss for the current quarter.
Intel CEO Pat Gelsinger will receive 25% less pay, and the rest of his executive leadership team will take a 15% pay cut. But the chipmaker is slashing compensation across the company, cutting pay even for mid-level managers by 5%. Hourly workers will not be affected.
Intel’s decision follows poor fourth-quarter earnings, where the company reported a 32% year-on-year decline in quarterly revenue, putting it below rival Taiwan Semiconductor Manufacturing Corporation for the first time. The U.S. chipmaker forecast a loss for the first quarter of 2023.
"These changes are designed to impact our executive population more significantly and will help support the investments and overall workforce needed to accelerate our transformation and achieve our long-term strategy," Intel said in a statement. The company in its latest earnings report said it will target cost cuts of $3 billion by the end of the year.
Across the industry
Profits are getting wiped out across the whole chip industry, due to excess inventories among manufacturers and retailers and a drop in demand for PCs, smartphones and consumer electronics.
Samsung Electronics reported $3.5 billion in quarterly operating profit on Monday, the lowest level since 2014. Profits at Samsung’s semiconductor division fell by 97%.
The following day, Korean chipmaker SK Hynix reported a $1.4 billion operating loss in the most recent quarter, the company’s first since it was formed in 2012.
“The recent drop in memory prices is the largest since the fourth quarter of 2008,” Woohyun Kim, SK Hynix’s chief finance officer, told analysts on an earnings call. “Inventory is probably at an all-time high.”
Also on Tuesday, Advanced Micro Devices reported $21 million in quarterly net income, a 98% year-on-year decline. The company cited its acquisition of semiconductor manufacturing company Xilinx for the decline in profits.
Yet investors were buoyed by the company's sales growth, especially in AMD’s data center business, which grew by 42% year-on-year, offsetting a 51% decline in sales in the company’s PC chip division. By comparison, Intel reported declines in both its computer chip and data center divisions in its most recent earnings report.
AMD CEO Lisa Su was bullish on the company's data center business on a conference call with analysts. "In our embedded and data center segments, we believe we are well positioned to grow revenue and gain share in 2023," she said.
Exec pay cuts
Other companies have cut executive pay in recent weeks. Apple cut the pay of CEO Tim Cook by 40% earlier this month, followed by Goldman Sachs imposing a similar 30% pay cut on CEO David Solomon.
Gelsinger’s high executive pay has caused tensions with the company’s shareholders, who rejected a proposed pay package for the Intel CEO last May. Gelsinger earned almost $180 million in 2021, approximately 1,700 times more than the average Intel worker at the time.
