Intel’s Foundry Business Continues to Suffer from $7 Billion Operating Loss

On Tuesday, Intel reported a significant operating loss for its chip manufacturing unit, Intel Foundry. The company’s foundry recorded a loss of $7 billion in 2023, following the $5.2 billion loss incurred in the previous year. Despite a revenue drop of 31% from the previous year, with $18.9 billion in revenue for 2023 compared to $27.49 billion in 2022, Intel announced plans to 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 helped the company secure nearly $20 billion in CHIPS and Science Act funding. CEO Pat Gelsinger expressed optimism about the future of Intel Foundry, even though he expects more losses in 2024 and anticipates the unit may not break even until 2030. However, these assurances did not prevent a 5% drop in Intel’s shares during trading on Wednesday.

Intel previously reported that Microsoft would use its foundry services and contribute $15 billion to revenue. However, this news did not prevent Intel’s shares from dropping by 5% during trading on Wednesday. The company still has a long way to go to catch up with semiconductor production leader Taiwan Semiconductor Manufacturing (TSMC), which is expected to see sales expand by 20% in 2024 to $83.4 billion.

Gelsinger attributed the revenue slide to past missteps, including a decision not to invest in extreme ultraviolet (EUV) machines from Dutch firm ASML. He shared that Intel now buys about 30% of its silicon wafers and emphasized the importance of improving EUV capabilities to bring more production in-house. By doing so, Intel aims to become more competitive in terms of price, performance, and overall leadership.

Finally, Intel announced it would begin reporting the results of its manufacturing operations as a standalone unit. Gelsinger emphasized the importance of transparency and accountability in this move, highlighting the company’s commitment to addressing past challenges and moving towards a more successful future.

In conclusion, despite significant operating losses for its chip manufacturing unit and declining revenues from semiconductor production leaders like Taiwan Semiconductor Manufacturing (TSMC), Intel remains optimistic about its future prospects through strategic investments into chip factories and improving EUV capabilities within its foundry operations.

However, this shift towards increased domestic semiconductor production will require significant efforts on behalf of both private companies like Intel as well as government initiatives aimed at promoting domestic innovation and investment within this rapidly growing industry.

By Sophia Gonzalez

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