Intel factory losses widen to US$7bil
NEW YORK: Intel Corp, revealing new details about its manufacturing operations, says that losses have deepened at the chipmaker’s factory network and the business may not reach a break-even point for several years.

Intel Foundry, a new division of the company responsible for manufacturing, had sales of US$18.9bil in 2023, down from US$27.5bil the previous year, the company said.

The operating loss at the new unit widened to US$7bil from US$5.2bil.

Intel shares fell more than 4% in extended trading after disclosing the numbers – bringing their year-to-date drop to 13%.

Intel is giving a more detailed picture of its finances as part of an ambitious turnaround plan by chief executive officer Pat Gelsinger. He’s breaking out the results from the factory network as a step toward having it operate more independently.

The business is seeking to make chips for other companies, and giving it some separation from the rest of Intel is vital to that strategy.

The company’s new timeline and financial targets show the challenges of the effort, which includes investing billions of dollars into new plants.

“We believe this transparency and accountability is needed,” he said during a presentation. “The required transformation is well underway.”

The company expects 2024 to be the peak of its losses and that Intel Foundry will be profitable, on an operating level, “midway between now and the end of 2030.” The chipmaker also named Lorenzo Flores as chief financial officer of the division.

Intel’s push into outsourced chip production – known as the foundry industry – is one of the company’s biggest transformations in its history.

Gelsinger’s comeback effort also includes restoring Intel’s once-unassailable technology edge – something that the chip pioneer lost in the years before he took the reins in 2021.

Intel’s struggles have forced it to outsource the manufacturing of some vital components, Gelsinger revealed in the presentation. It now buys about 30% of its silicon wafers, he said.

But by improving Intel’s technology – using a technique called extreme ultraviolet lithography – the company intends to bring more of this production back in-house, he said.

The CEO repeated his assertion that Intel will restore its technology advantage by next year. Over time, that will improve the capabilities of Intel’s products and make them cheaper to manufacture.

It will also allow the company to win orders from competitors, something that will provide as much as US$15bil in sales by the end of 2030, Gelsinger said.

Intel said there are five such companies committed to using its latest production technique, called 18A. It will become more widely used starting next year and gather momentum after that, the company said.

Taiwan Semiconductor Manufacturing Co (TSMC) currently dominates the foundry market and has eclipsed Intel in overall revenue.

That company had 2023 sales of US$69.4bil and net income of US$26.9bil. Its gross margin – the percentage of sales remaining after deducting the cost of production – was 54%. And its sales are projected to expand 20% in 2024 to US$83.4bil.

Intel’s closest rival in its traditional business is Advanced Micro Devices Inc, which had revenue of US$22.7bil and net income of US$854mil last year. — Bloomberg
Corporate News,IntelFoundryLosses,ChipManufacturing,GelsingerTurnaroundPlan,IntelFabOutsourcing,TSMCDominance,ExtremeUVLithography
Intel Corp, revealing new details about its manufacturing operations, says that losses have deepened at the chipmaker’s factory network and the business may not reach a break-even point for several years.