Intel’s Slide in Stock Value Highlights Gap with Rival TSMC in Foundry Business Loss.

Intel’s shares dropped 5% before the bell on Wednesday, as the company revealed significant losses at its contract chip-making business. This news comes after Intel disclosed new financial details for its foundry unit, reporting operating losses of $7 billion in 2023 compared to $5.2 billion in 2022. Analysts like Bernstein’s Stacy Rasgon anticipate several years of challenges ahead for the foundry economics.

Intel has been investing heavily to reclaim its position as a leading producer of cutting-edge chips after losing ground to Taiwan Semiconductor Manufacturing Co. The U.S. chipmaker’s capital investments under “construction in progress” amounted to $43.4 billion as of December 31, 2023, up from $36.7 billion the previous year. Additionally, Intel plans to spend $100 billion on plants in the U.S., with assistance from the U.S. Chips Act.

Intel’s CEO, Pat Gelsinger, projected that operating losses for the contract chip-making business would peak in 2024 before breaking even around 2027. This sector represented about 35% of Intel’s total net revenue in 2023. The company aims for the foundry business to achieve a gross margin of approximately 40% by 2030, still behind TSMC’s 53% margin reported in Q4 of 2023. Although Intel’s foundry unit had sales of $18.9 billion in 2023, TSMC’s revenue reached $19.52 billion in the final three months of the same year

By Sophia Gonzalez

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