Chip giant Intel (NASDAQ: INTC) has gone through pains to avoid cutting its dividend as it grapples with plunging demand for its PC and server chips. The company partnered with BlackRock last year to offload some of the capital requirements for its new factories in Arizona; it initiated a plan to reduce costs by as much as $10 billion annually by the end of 2025; and most recently, it cut pay, slashed bonuses, and reduced benefits for many of its employees.

All these steps were necessary given the multiple headwinds facing Intel. After a pandemic-era boom in PC sales, demand has evaporated. Global PC shipments tumbled 28.5% year over year in the fourth quarter of 2022, and a significant decline is almost a guarantee this year. Shipments could be as low as 249 million in 2023, according to a recent analyst estimate, the lowest level in nearly two decades.

This sudden drop in demand has put the whole PC supply chain in a state of oversupply. There are too many components floating around, a situation that's led to outsize reductions in orders. Intel's PC segment recorded a 36% year-over-year decline in sales in the fourth quarter, while rival AMD's PC segment suffered a 51% decline. It may still be months before inventories are back to healthy levels.

Continue reading

Source Fool.com