The chip crisis is so strong that Intel will distribute fewer dividends… to invest in its factories

Overcoming a big challenge often requires making major commitments. And Intel has a huge challenge ahead. At the end of October, Pat Gelsinger, the CEO of this company, assured during an interview with The Wall Street Journal that its medium-term strategy in the field of the semiconductor industry involves have the best transistors and the world’s most advanced integration technology in 2025.

The only strategy that can allow it to achieve this requires investing a good part of its resources in research and development, and also setting up new semiconductor plants that are prepared to face the production of integrated circuits using the most advanced lithographs. These are the steps Intel plans to take, but they cost money. A lot of money. And in part these expenses are going to be financed with funds that were initially going to be distributed among its shareholders.

Intel will not find it easy to stand up to TSMC and Samsung

In 2022 both the Taiwanese TSMC and the South Korean Samsung have fully stepped on the accelerator. The former started full-scale semiconductor manufacturing on its 3nm node at the end of December, and the latter launched its first-generation 3nm node at the end of June 2022. Most likely sometime in 2023. We are going to witness a very interesting face-to-face between these two companies, and it is evident that Intel doesn’t want to be left behind.

Intel’s plan has a name: IDM 2.0. The acronym IDM comes from the name in English Integrated Device Manufacturing, which we can translate as ’embedded device manufacturing’, and aims to develop the semiconductor production infrastructure of this company. The two new factories for 20,000 million dollars that it is building in the town of Ocotillo, in Arizona (United States), and the two plants for 17,000 million euros that it will set up in Magdeburg (Germany) are part of this strategy.

In addition, Intel has reached a very important commitment with Europe: during this decade it will invest 80,000 million euros to strengthen its role in the semiconductor industry. The European Union, for its part, will invest 43,000 million dollars to create a European chip ecosystem that is much more ambitious than the current one. In any case, the joint plan that Ursula von der Leyen, the president of the European Commission, and Pat Gelsinger defended almost a year ago seeks to ensure that Europe is made with a quota of 20% of the global semiconductor market in 2030.

As we have just seen, the investments that Intel is undertaking both in the United States and in Europe are very large, and the semiconductor market is not exactly going through its best moment. In fact, Gelsinger and other executives in this sector, including Dave Reeder, who is the chief financial officer of GlobalFoundries, claim to be clearly perceiving a decline in demand for semiconductors that during the first half of 2023 will have an impact tangible impact on the financial health of chipmakers.

This situation has caused Intel to decide to cut the dividends that it had to pay to its shareholders during 2023. And it is an official measure confirmed by the company itself. Of the 6,000 million dollars that he had to distribute this year, he will only deliver 2,000 million. The remaining 4,000 million will be used, according to Pat Gelsinger, to sustain your IDM 2.0 strategy and face the immediate future with more strength in which this company aspires to develop no less than five new lithographic nodes in just four years. There it is.

Cover image: Intel

rmation: Intel