Intel’s $7 Billion Loss for Chip Manufacturing Unit: Can the Company Recover with its Ambitious Foundry Plan?

Intel’s Foundry Business Reports $7 Billion Operating Loss, Continues to Struggle

In a call with investors, Intel reported significant operating losses for its chip manufacturing unit Intel Foundry. The company’s 2023 losses amounted to $7 billion, following the prior year’s loss of $5.2 billion. Despite a 31% drop in revenue from the previous year, totaling $18.9 billion for 2023 compared to $27.49 billion in 2022, Intel plans to move forward with an ambitious foundry plan that will invest $100 billion into chip factories in four US states.

The US is looking to increase its domestic semiconductor business, and Intel’s American foundry plans have helped the company secure nearly $20 billion in CHIPS and Science Act funding. CEO Pat Gelsinger remains optimistic about the future of Intel Foundry, despite warning investors about anticipated foundry losses in 2024 and mentioning that the unit may not break even until 2030.

Gelsinger assured investors that Intel Foundry would drive significant earnings growth for the company over time, with projections suggesting 2024 as the low point for foundry losses. Despite Microsoft’s commitment to use Intel’s foundry services and contribute $15 billion to revenue, Intel shares fell 5% in trading the following day.

Intel still has a way to go to catch up with semiconductor production leader Taiwan Semiconductor Manufacturing (TSMC), which is expected to see a 20% sales increase in 2024 to $83.4 billion. Gelsinger mentioned that past missteps, like not investing in extreme ultraviolet (EUV) machines from ASML and purchasing only 30% of its silicon wafers from third-party suppliers have contributed to the revenue slide. By improving its EUV capabilities and increasing its control over production processes, Intel aims to bring more production in-house and reduce dependence on external partners like TSMC.

In addition, Intel announced plans to report the results of its manufacturing operations as a separate unit called “Intel Foundry Services”. Gelsinger believes this move towards transparency and accountability is necessary for the company’s future success as it seeks to build trust with investors and stakeholders alike by providing clearer insights into its operations.

Overall, while Intel Foundry still faces significant challenges ahead

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