Intel slashes executives’ salary by 25% amid PC market downturn

Intel Corp, the world’s largest semiconductor chip manufacturer by revenue, revealed on Tuesday that it had made broad cuts to its workforce and executive pay. This revelation comes a week after the company issued a lower-than-expected sales forecast driven by a loss of market share to rivals and a PC market downturn.

The reductions will range from 5% base pay for mid-level employees to 25% for Chief Executive Pat Gelsinger. The company’s hourly workforce’s pay will not be cut, said a person familiar with the matter who was not authorized to speak publicly. Addy Burr, Intel spokesperson’s said

“changes are designed to impact our executive population more significantly and will help support the investments and overall workforce.”

Addy Burr, Intel spokesperson

Last week, Intel said its profit margins were plunging as the PC market cooled after several years of growth during the pandemic.

Gelsinger also conceded that Intel has “stumbled” and lost market share to rivals such as Advanced Micro Devices Inc – AMD.O, which reported quarterly sales above Wall Street’s expectations on Tuesday.

According to a source with knowledge of Intel’s pay cuts, Vice President-level personnel would experience 10% pay reductions in addition to the company’s top executives (apart from the CEO) receiving 15% pay reductions. Mid-level staff will also face 5% pay reductions.

The company has also lowered its 401(k) matching program from 5% to 2.5% and suspended merit raises and quarterly performance bonuses, the person said.

Annual performance bonuses based on Intel’s total financial success will continue, although they have been reduced recently, as the source indicated that the business has fallen behind rivals.

Read also: Why Africa’s PC market experienced a historical decline of 37.2% in 2022

More on PC shipment drop and Intel’s cut

According to the preliminary data made available by Gartner, Inc, a statistical organization known for tracking and releasing worldwide quarterly statistics on the personal computer (PC) market since the mid-1990s, worldwide shipments totalled 65.3 million units in the fourth quarter of 2022, a 28.5% decrease from the fourth quarter of 2021.

This marks the largest quarterly shipment decline since Gartner began tracking the market in the mid-1990s. It also revealed that Africa and the EME region witnessed a historical 37% drop in PC shipment in 2022.

Commenting on the decline,  Mikako Kitagawa, Director Analyst at Gartner, noted that the probable cause of the decline was the anticipated projected recession, higher interest rates, and inflation rates.

“The anticipation of a global recession, increased inflation and higher interest rates have had a major impact on its demand. Since many consumers already have relatively new PCs that were purchased during the pandemic, a lack of affordability is superseding any motivation to buy, causing consumer demand to drop to its lowest level in years.” 

Mikako Kitagawa said in highlighting the probable cause

Apart from the PC industry, companies that have laid off their employees have cited persistent inflationary rise, the macroeconomic environment, and the predicted recession as the major cause of the layoffs.

However, it is public knowledge now that the inflation rate in the U.S is experiencing a drop. The U.S. annual inflation rate slowed for a sixth month to 6.5% in December of 2022, the lowest since October of 2021, in line with market forecasts. It follows a 7.1% reading in November.

Also, the average interest rate on the most popular U.S. home loan dropped to its lowest level since September as more evidence inflation is past its peak sent Treasury yields lower, data from the Mortgage Bankers Association (MBA) showed on Wednesday.

Hence, we think that the major reason behind the scepticism and pessimism displayed by Intel is the projection that the PC market is expected to experience a further decline into the year 2024.

“The enterprise PC market is also being impacted by a slowing economy,” added Kitagawa. The demand among enterprises began declining in the third quarter of 2022, but the market has now shifted from softness to deterioration. Enterprise buyers are extending PC lifecycles and delaying purchases, meaning the business market will likely not return to growth until 2024″, Mikako added.

Intel has chosen the next best course of action to mitigate further revenue declines brought on by low sales and a declining industry. It joins other top tech companies like Amazon, Alphabet, and others in accelerating the industry-wide layoffs that have been a defining feature since the Pandemic in 2020.

Read also: Samsung retains top spot for 2022 as global smartphone shipments suffer largest-ever decline in Q4