Intel’s foundry business revealed a deepening in operating losses, dealing a significant blow to the chipmaker’s efforts to regain its lost technology edge against Taiwan Semiconductor Manufacturing in recent years.
In its latest disclosure to the U.S. Securities and Exchange Commission (SEC), Intel reported an operating loss of $7 billion for its manufacturing unit in 2023, surpassing the $5.2 billion loss from the previous year. Revenue for the unit also saw a notable decline, dropping 31% from $27.49 billion to $18.9 billion in 2023.
Following this announcement, Intel shares experienced a 4.3% decrease.
During an investor presentation, Intel’s Chief Executive Pat Gelsinger acknowledged that 2024 would likely mark the peak year for operating losses in the company’s chipmaking division. However, he expressed optimism about achieving breakeven on an operating basis by around 2027.
Gelsinger attributed the challenges faced by the foundry business to past decisions, including the reluctance to adopt extreme ultraviolet (EUV) machines from Dutch firm ASML. He acknowledged that despite their high initial cost, EUV machines are more cost-effective than previous chip-making tools. Consequently, Intel has outsourced approximately 30% of its total wafer production to external contract manufacturers like TSMC, a figure it aims to reduce to around 20%.
Intel has since transitioned to using EUV tools, which are expected to cover a greater portion of its production needs as older machines are phased out. Gelsinger emphasized that with this transition, Intel is now more competitive in terms of price, performance, and technological leadership.
In a bid to revitalize its business, Intel has committed to investing $100 billion in constructing or expanding chip factories across four U.S. states. The company’s turnaround strategy hinges on attracting external companies to utilize its manufacturing services.
As part of this strategy, Intel intends to report the results of its manufacturing operations as a standalone unit, reflecting its ongoing efforts to catch up with primary chipmaking rivals such as TSMC and Samsung Electronics Co Ltd.
