Intel has disclosed deepening operating losses for its foundry business, a blow to the chip maker as it tries to regain a technology lead it lost in recent years to TSMC.
Intel said the manufacturing unit had US$7-billion in operating losses for 2023, a steeper loss than the $5.2-billion in operating losses the year before. The unit had revenue of $18.9-billion for 2023, down 31% from $27.5-billion the year before.
Intel shares were down 4.3% after the documents were filed with the US Securities and Exchange Commission.
During a presentation for investors, CEO Pat Gelsinger said 2024 would be the year of the worst operating losses for the company’s chip-making business and that it expects to break even on an operating basis by about 2027.
Gelsinger said the foundry business was weighed down by bad decisions, including one years ago against using extreme ultraviolet (EUV) machines from Dutch firm ASML. While those machines can cost more than $150-million, they are more cost-effective than earlier chip-making tools.
Partially as a result of the missteps, Intel has outsourced about 30% of the total number of wafers to external contract manufacturers such as TSMC, Gelsinger said. It aims to bring that number down to roughly 20%.
Investing heavily
Intel has now switched over to using EUV tools, which will cover more and more production needs as older machines are phased out.
“In the post-EUV era, we see that we’re very competitive now on price and performance…,” Gelsinger said. “And in the pre-EUV era we carried a lot of costs and were uncompetitive.”
Intel plans to spend $100-billion on building or expanding chip factories in four US states. Its business turnaround plan depends on persuading outside companies to use its manufacturing services.
Read: Intel $20-billion chip grant exposes US weakness
As part of that plan, Intel told investors it would start reporting the results of its manufacturing operations as a standalone unit. The company has been investing heavily to catch up to its primary chip-making rivals, TSMC and Samsung Electronics. — Stephen Nellis, Max Cherney and Priyanka G, (c) 2024 Reuters