Intel Discloses $7 Billion Operating Loss in Foundry Business; Company Shares Plummet

By Leira Aquino

Apr 02, 2024 11:59 PM EDT

Semiconductor Manufacturer Intel suffered a significant setback with a hefty $7 billion operating loss reported for its foundry business in fiscal year 2023.
(Photo : Justin Sullivan/Getty Images)

Intel, one of the leading semiconductor manufacturers, faced a substantial setback as the company revealed Tuesday a staggering operating loss of $7 billion for its foundry business in the fiscal year 2023. 

The disclosure came as part of a long-awaited financial report filed with the United States (US) Securities and Exchange Commission (SEC), sending Intel's shares plummeting more than 4% in extended trading on Tuesday.

Intel's Foundry Business Reports Downturn Despite $18.9B in Sales

The foundry business, responsible for semiconductor manufacturing, reported a significant downturn compared to the previous year, Reuters reported

Despite generating $18.9 billion in sales, the division's operating loss widened from a $5.2 billion loss in 2022, marking a challenging period for the tech giant.

This disclosure marks the first time Intel has provided detailed revenue figures solely for its foundry business. 

Traditionally, Intel has been known for both chip design and manufacturing, with other American semiconductor companies like Nvidia and AMD outsourcing their manufacturing needs to Asian foundries like TSMC.

Under the leadership of CEO Patrick Gelsinger, Intel has outlined plans for the company to not only continue manufacturing its own processors but also venture into external foundry services for other companies. 

This strategic shift is crucial for Intel's growth trajectory, especially after securing nearly $20 billion from the Biden administration in funding under the CHIPS and Science Act last month.

The US Department of Commerce has recommended allocating up to $8.5 billion in direct funding through the CHIPS and Science Act to bolster Intel's commercial semiconductor initiatives in Arizona, New Mexico, Ohio, and Oregon. 

The CHIPS Act funding targets the enhancement of US semiconductor manufacturing and research and development, particularly in cutting-edge semiconductor technologies. 

Intel stands out as the sole American company engaged in both designing and manufacturing advanced logic chips.

READ NEXT: Biden Administration Awards Intel Nearly $20 Billion to Boost Domestic Semiconductor Chip Output

Gelsinger Projects Intel's Foundry Business to Break Even by 2027

Despite the grim financial figures, Gelsinger remains optimistic about the future prospects of Intel's foundry business. 

According to CNBC, the CEO stated during an investor call that 2024 would likely mark the peak of operating losses for the chipmaking division, with expectations to break even on an operating basis by around 2027.

Addressing the root causes of the losses, Gelsinger attributed some of the challenges to past decisions, including a delayed adoption of advanced technologies like extreme ultraviolet (EUV) machines. 

However, Intel has now embraced EUV tools, anticipating enhanced cost-effectiveness and competitiveness in the market.

Looking ahead, Intel is committed to significant investments, with plans to allocate approximately $100 billion towards expanding chip factories across four US states. 

These investments, coupled with government funding support, are pivotal for Intel's turnaround strategy and its goal to attract more clients to its chipmaking services.

READ MORE: Decoding CHIPS Act: How Arizona Stands to Benefit from Legislation

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