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Intel Cuts Costs, Impacts Employees

Intel is reportedly cutting costs, affecting their employees’ compensation. Cost-cutting measures include the elimination of quarterly pay bonuses, suspension of annual bonuses and merit-based raises, halving of 401k match from 5% to 2.5%, and pay cuts for all employees based on their grade level. Employees below Principal Engineer, grades 7 to 11, will experience a 5% cut, while VPs will face a 10% reduction and the executive leadership team will take a 15% cut, with Pat Gelsinger taking a 25% reduction.

This decision to prioritize their dividend over employee retention is concerning for the long-term future of the company. High performers may start to look for other opportunities, and the cuts to base pay will decrease morale. Intel has been cutting costs due to their high expenses, but the manner in which they are doing so is questionable.

Intel’s recent cost-cutting measures include the closing of an R&D center in Israel, layoffs, termination of their RISC-V accelerator program, ending development of networking switches, slowing Ohio fab tool orders, and cutting capital expenditures.

Pat Gelsinger, who was previously thought to be leading Intel towards a brighter future, is now seen as being similar to the former CEO who had a background as a CFO at multiple publicly traded companies. This move to cut costs, including fab buildouts, while seeking subsidies from the government and committing to growing the dividend, shows a lack of foresight in the current macroeconomic and competitive landscape. Our financial model predicts that Intel will have negative free cashflow in 2023, even with subsidies from the CHIPS Act in the US and EU.