Intel cuts executive salaries as chip glut wipes out profits across industry
US chipmaker Intel Corporation is cutting wages for its workforce days after the company shocked Wall Street with below-expected sales and a forecast loss for the current quarter.
Intel CEO Pat Gelsinger is getting a 25% pay cut, and the rest of his executive team will take a 15% pay cut. But the chipmaker is slashing pay across the company, cutting salaries by 5% even for middle managers. Hourly workers are not affected.
Intel’s decision follows poor fourth-quarter results, in which the company reported a 32% year-over-year decline in quarterly revenue, trailing rival Taiwan Semiconductor Manufacturing Corporation for the first time. The US chipmaker forecast a loss for the first quarter of 2023.
“These changes are intended to have a greater impact on our leaders and 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 said in its latest earnings report that it is targeting $3 billion in cost reductions by the end of the year.
Across the industry
The profits of the entire chip industry will be wiped out due to excess inventories at manufacturers and retailers and falling demand for PCs, smartphones and consumer electronics.
Samsung Electronics on Monday reported quarterly operating profit of $3.5 billion, the lowest since 2014. Samsung’s semiconductor division’s earnings fell 97%.
The following day, Korean chipmaker SK Hynix reported a $1.4 billion operating loss in its most recent quarter, the company’s first since its inception 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 a earnings call. “Inventory is probably at an all-time high.”
Also on Tuesday, Advanced Micro Devices reported quarterly net income of $21 million, down 98% from a year earlier. The company cited its acquisition of semiconductor maker Xilinx for the earnings drop.
However, investors were buoyed by the company’s revenue growth, particularly AMD’s data center business, which grew 42% year over year and offset a 51% decline in revenue at the company’s PC chip division. In comparison, Intel reported declines in both its computer chip and data center businesses in its most recent earnings report.
AMD CEO Lisa Su expressed optimism about the company’s data center business during a conference call with analysts. “We believe we are well positioned in our embedded and data center segments to grow revenue and gain market share in 2023,” she said.
implement salary cuts
Other companies have cut executive salaries in recent weeks. Apple cut CEO Tim Cook’s pay by 40% earlier this month, followed by Goldman Sachs, which imposed a similar 30% pay cut on CEO David Solomon.
Gelsinger’s high executive pay has sparked tensions with the company’s shareholders, who rejected a proposed salary package for Intel’s CEO last May. Gelinger made nearly $180 million in 2021, about 1,700 times more than the average Intel worker at the time.
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