Intel Foundry Business Still Bleeding with $7B Operating Loss

Intel on Tuesday reported steep operating losses for its chip manufacturing unit Intel Foundry with a $7 billion loss for 2023 -- adding to the prior year’s loss of $5.2 billion.

The company’s leadership told investors during a call that despite a revenue drop of 31% from previous year -- $18.9 billion for 2023, compared to $27.49 billion in 2022 -- the company would forge ahead with an ambitious foundry plan that will pump $100 billion into chip factories in four US states.

The US is pinning its future semiconductor supply chain hopes on increased domestic semiconductor business. Intel’s American foundry plans helped the company secure nearly $20 billion in CHIPS and Science Act funding. CEO Pat Gelsinger remains optimistic, while telling investors that the company expects more foundry losses in 2024 and that the unit may not break even until 2030.

“Intel Foundry is going to drive considerable earnings growth for Intel over time,” Gelsinger told investors during the call. “2024 is the trough for foundry losses.”

The company had previously reported that Microsoft would use its foundry services and will contribute $15 billion to revenue.

Those assurances did little to assuage investors’ fears. Intel shares fell 5% in trading on Wednesday. Intel still has a long way to go to catch up with semiconductor production leader Taiwan Semiconductor Manufacturing (TSMC). That company’s sales, by comparison, are expected to expand by 20% in 2024 to $83.4 billion.

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Gelsinger said several past missteps contributed to the revenue slide, including the company’s decision not to invest in extreme ultraviolet (EUV) machines from Dutch firm ASML, which would have saved considerable costs long term. Intel now buys about 30% of its silicon wafers, Gelsinger revealed. By improving its EUV capabilities, the company will be able to bring more of that production in-house.

“In the post-EUV era, we see that we’re very competitive now on price, performance [and] back to leadership,” Gelsinger said during the call. “And in the pre-EUV era, we carried a lot of costs and [were] uncompetitive.”

Intel also announced on Tuesday that it would begin reporting the results of its manufacturing operations as a standalone unit. “We believe this transparency and accountability is needed,” Gelsinger told investors.