By Geoffrey Smith
Investing.com -- Intel (NASDAQ:INTC) said it will cut its dividend by two-thirds in an effort to conserve cash as it prepares for a massive expansion of chipmaking capacity in the U.S.
The semiconductor giant said it will reset its quarterly dividend at 12.5c, down from 36.5c, and will also temporarily cut compensation and rewards programs for its executives and staff as part of a "prudent" capital allocation strategy.
The decision "reflects the board's deliberate approach to capital allocation and is designed to best position the company to create long-term value," Intel said in a statement. "The improved financial flexibility will support the critical investments needed to execute Intel’s transformation during this period of macroeconomic uncertainty."
The company has already said it intends to cut $3 billion in annual operating costs this year, rising to as much as $10B by the end of 2025.
Intel stock fell 1.2% in premarket trading on Wednesday in response to the news. They had fallen by 5.6% on Tuesday as fears of higher interest rates took a toll on the broader market, and on technology stocks in particular.
Intel is building two new chip plants in the U.S., whose costs will run into tens of billions of dollars, despite extensive support from the Biden administration's CHIPS Act. The Act aims to reduce the U.S.'s dependence on imported high-performance semiconductors.
Currently, the overwhelming majority of such chips are made in Taiwan, which the U.S. government fears are vulnerable to military action by China. China views Taiwan as a rebel province and President Xi Jinping has continued a tradition of Chinese leaders seeking to bring it back under Beijing's control.