Intel announces a $7 billion operational deficit for its chip-making unit

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Intel announces a $7 billion operational deficit for its chip-making unit
Intel announces a $7 billion operational deficit for its chip-making unit

Intel revealed worsening operating losses for its foundry unit, a setback for the chipmaker as it strives to recapture a technology lead previously lost to Taiwan Semiconductor Manufacturing.

Intel (INTC.O.) opened a new tab and revealed deepening operating losses for its foundry unit on Tuesday, a setback for the chipmaker as it seeks to reclaim a technology lead lost in recent years to Taiwan Semiconductor Manufacturing (2330.TW).

Intel reported $7 billion in operating losses for its manufacturing unit in 2023, up from $5.2 billion the previous year. The unit’s revenue for 2023 was $18.9 billion, down 31% from $27.49 billion the previous year.

Intel shares fell 4.3% after the documents were submitted to the Securities and Exchange Commission in the United States.

During an investor presentation, Chief Executive Pat Gelsinger stated that 2024 would be the year of the company’s largest financial losses for its chipmaking division and that it aims to break even on an operating basis by 2027.

Gelsinger said the foundry sector was bogged down by faulty decisions, including a year ago’s decision not to use extreme ultraviolet (EUV) machines from Dutch firm ASML (ASML.AS). While these machines might cost more than $150 million, they are more cost-effective than previous chip manufacturing tools.

Intel has outsourced approximately 30% of its total number of wafers to external contract manufacturers such as TSMC, Gelsinger noted. It wants to reduce that amount to around 20%.

Intel has now shifted to using EUV tools, which will meet an increasing proportion of manufacturing demands as older equipment is taken out.

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

Intel is to invest $100 billion in the construction or expansion of semiconductor facilities in four US states. Its business turnaround plan is based on convincing foreign corporations to adopt its manufacturing services.

As part of that approach, Intel informed investors that it would begin reporting the results of its manufacturing operations as a separate entity. The company has been investing heavily to catch up with its key chipmaking rivals, TSMC and Samsung Electronics Co. Ltd. (005930.KS).

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