In a disclosure that underscores Intel’s chip manufacturing woes, the company revealed a deepening $7 billion operating loss for its foundry business in a filing with the U.S. Securities and Exchange Commission (SEC). This significant setback reflects the chipmaker’s challenges in regaining its once-dominant position in cutting-edge chip manufacturing technology.
Mounting Losses and Revenue Decline
Intel’s manufacturing unit reported staggering operating losses of $7 billion for 2023, surpassing the $5.2 billion in losses from the previous year. Furthermore, the unit’s revenue declined by 31% to $18.9 billion in 2023, down from $27.49 billion in 2022.
CEO’s Outlook and Strategic Missteps
During an investor presentation, Intel’s CEO Pat Gelsinger acknowledged that 2024 would be the worst year for operating losses in the company’s chipmaking business. However, he expressed confidence that the foundry unit would break even by around 2027. Gelsinger attributed the unit’s struggles to strategic missteps, including the decision to forgo the use of extreme ultraviolet (EUV) lithography machines from ASML, a costlier but more efficient technology.
Outsourcing and Adoption of EUV Tools
As a result of these missteps, Intel has outsourced approximately 30% of its total wafer production to external contract manufacturers like TSMC. The company aims to reduce this outsourcing to around 20%. Intel has now switched to using EUV tools, which Gelsinger believes will help restore competitiveness and leadership in the “post EUV era.”
Catch-Up Efforts and Future Plans
Intel plans to invest $100 billion in building or expanding chip factories across four U.S. states. The company’s turnaround strategy hinges on persuading external companies to utilize its manufacturing services. To support this effort, Intel has begun reporting the results of its manufacturing operations as a standalone unit, separating it from its overall business operations.
