Intel Faces $7B Losses In Foundry Business, Aims For Break-Even By 2027

Intel Corporation INTC has disclosed a significant increase in operating losses for its foundry business, a development that has caused a dip in the company’s shares.

What Happened: Intel revealed on Tuesday that its manufacturing unit suffered $7 billion in operating losses for 2023. This marks a substantial increase from the $5.2 billion loss in the previous year. The unit’s revenue for 2023 was $18.9 billion, a 31% drop from the $27.49 billion recorded the year before, reported Reuters.

Intel’s shares fell by 4.3% after the company filed these documents with the U.S. Securities and Exchange Commission (SEC).

During an investor presentation, CEO Pat Gelsinger acknowledged that 2024 would be the year of the worst operating losses for the company’s chipmaking business. He expressed optimism about breaking even on an operating basis by approximately 2027.

See Also: Dogecoin Set to Surge Over 200%, Says Crypto Analyst: ‘It’s Going To Do Something Insane This Cycle’

Gelsinger attributed the foundry business’s struggles to poor decisions, such as the refusal to use extreme ultraviolet (EUV) machines from Dutch firm ASML (ASML) a year ago. He noted that these machines, although expensive, are more cost-effective than earlier chip-making tools.

As a result of these missteps, Intel has outsourced around 30% of its total number of wafers to external contract manufacturers like Taiwan Semiconductor Manufacturing Co (TSMC). The company aims to reduce this number to roughly 20%.

Intel has now shifted to using EUV tools, which will increasingly cover production needs as older machines are phased out. The company plans to spend $100 billion on building or expanding chip factories in four U.S. states, with its business turnaround plan hinging on persuading outside companies to use its manufacturing services.

Why It Matters: Intel’s foundry business has been under scrutiny recently. In February, analysts had indicated that the revenue scale for the business was several years away. The stock had been performing well, but it started to slide after the company outlined a new financial framework for its foundry business in April.

In a strategic move, Taiwanese chipmaker United Microelectronics Corp had also joined hands with Intel to improve its U.S. production capabilities. This move was seen as a critical step in Intel’s efforts to boost its chip production.

Read Next: Elon Musk Says Biden ‘Doesn’t Really Know What’s Going On’ After RFK Jr. Calls President ‘Much Worse Threat’ To Democracy Than Trump: ‘Biden Doesn’t Really Know What’s Going On’

Image via Shutterstock