Pat Gelsinger: Yeah. Thanks, C.J. I’ll start and ask Dave to jump in. We think about the capital budget with two lenses in mind, right? One is the strategic lens. Am I going to get back to leadership at 20A and 18A? Yes, am I going to make the capital investments required to do that? Absolutely. To some degree, do we scrub those? Could we look hard at those? Where can we save tens or hundreds of millions of dollars on those? Yes, we will. But we’re not going to diminish from the capital required for strategic leadership for the long-term. So strategic capital, largely unchanged. The second bucket, of course, I’ll just call it, capacity capital, right, and adjusting to the near-term ebb and flows of the business requirement. And, obviously, in this macro environment, that’s been adjusted meaningfully downward and we’re finding everywhere we can to squeeze our existing capacity more effectively to be more aggressive in terms of how we work with our equipment suppliers in those areas and doing everything we can to minimize the capital that’s required for capacity driven requirements as well.
And that’s where the larger trade-offs have been. And, of course, in a business as large as ours, we have labs and buildings and everything else. We are scrubbing those like crazy as you would want us to. Dave, what else would you add?
David Zinsner: You took one of mine. Obviously, the OpEx area, yeah, is an area that we’ve really focused on and Pat mentioned the lab piece, which is an area — one of the areas that we have found efficiency. And I guess the last thing is that we have seen our capital offsets be higher than our original expectation. We were planning for probably one-third of what we think we’ll get in 2023 when we announced our smart capital initiative in — at the Analyst Day. So that’s obviously coming in stronger. Of course, Pat already alluded to the fact that a lot of that is — Skip has turned out to be a pretty powerful tool, and this will enable us to do a Skip 2 this year as well, which obviously helps.
John Pitzer: C.J., do you have a follow-up?
C.J. Muse: I do a quick one. And again, I know you don’t want to guide the full year, but as you look at different scenario analysis for 2023, how do you see return to positive free cash flow playing out? Is that something that could come in the second half, or that’s really a 2024 event?
David Zinsner: Well, 2023, we were thinking was a breakeven free cash flow year for us back at the Analyst Day last February. Obviously, in the first half of this year, we’re going to be below that model. But as we look into the back half of the year, we would expect to approach the model in 2023. And of course, 2024 is a bit away from where we are right now, but this is the thing that we spend a lot of time on. I would tell you one thing, if you look at our free cash flow for 2022, we came in roughly around minus $4 billion. If you remember in the quarter before, we forecasted that we would be somewhere between minus $2 billion and minus $4 billion. We were actually assuming a higher level of capital offsets, which is still coming, but pushed into 2023.
And yet we still hit the high end of that range. And the way we did it was through working capital initiatives. So this is a big part of our strategy around managing free cash flow, is more attention to working capital. It’s something that I think in the past may not have been a big focus here, but is a very big focus here. It’s how we — how our shipments are managed in terms of linearity, how we manage payments, how we manage our inventory. The fact that we’re taking underload does affect the gross margins, but it also improves our cash flow, because we’re spending less on variable costs. So these are areas that we think can be pretty beneficial to us and be a tailwind for us in terms of free cash flow as we progress through the year.
John Pitzer: Thanks, C.J. Jonathan, can we have the next question, please.
Operator: Certainly. And our next question comes from the line of Matt Ramsay from Cowen. Your question, please.
Matt Ramsay: Good afternoon, guys. Thank you. Dave, the first question, I get it a lot is, just with the challenges that you just mentioned at C.J.’s question on free cash flow. And I guess, well done to you and your team of extracting as much cash as you did out of working capital in the quarter. But I get questions about the security of the dividend all the time. And maybe that’s a Board-level decision, but maybe you and Pat could address it a bit. Is that the current levels of dividend? Is that sort of a sacrosanct thing at Intel in your current operating plan? Are there discussions around it either way? Don’t shoot the messenger, it’s a question I get a ton. Thanks.
David Zinsner: Yes. Well, obviously, we announced a $0.365 dividend for the first quarter. That was consistent with the last quarter’s dividend. I’d just say the Board, management, we take a very disciplined approach to the capital allocation strategy, and we’re going to remain committed to being very prudent around how we allocate capital for the owners. And we are committed to maintaining a competitive dividend.
John Pitzer: Matt, do you have a follow-up question?
