Tech and Science

Intel shares fall after the company reports a $7 billion operating loss in its foundry business

US President Joe Biden tours the Intel Ocotillo Campus in Chandler, Arizona, USA on March 20, 2024.

Kevin Lamarque | Reuters

Intel Shares fell 4% at one point in extended trading on Tuesday after the company announced has released long-awaited financial results for its semiconductor manufacturing business, often referred to as its foundry business, in an SEC filing.

Intel said its foundry business posted an operating loss of $7 billion in 2023 on revenue of $18.9 billion. That’s a bigger loss than the $5.2 billion Intel reported in its foundry business in 2022 on revenue of $25.7 billion.

This is the first time Intel has disclosed revenue from its foundry business. Historically, Intel has both designed and manufactured its chips in-house and reported final chip sales to investors. Other American semiconductor companies like Nvidia and AMD design their chips but send them to Asian foundries – often Taiwan’s TSMC – for manufacturing.

Intel, under CEO Patrick Gelsinger, has presented investors with a plan that includes continuing to make its own processors but also setting up an outside foundry company to make chips for other companies. Intel’s role as one of the few American companies to conduct cutting-edge semiconductor manufacturing on American soil was a key reason the company secured nearly $20 billion in CHIPS Act funding last month.

Much of Intel’s foundry revenue currently comes from its own operations, Intel said Tuesday. Intel has also adjusted its product divisions to report its costs as if it were a so-called “fabless” company that must report manufacturing as a cost.

Intel said its reorganized product division, which consists primarily of processors for PCs and servers, reported operating profit of $11.3 billion on revenue of $47.7 billion in 2023.

Intel said Tuesday that it expects its foundry’s losses to peak in 2024 and eventually break even “midway” between this quarter and the end of 2030. Intel had previously stated that Microsoft would use its foundry services and that the company had $15 billion in foundry sales already booked.

“Intel Foundry will drive significant earnings growth for Intel over time. 2024 is the lowest point for foundry operating losses,” Gelsinger said on a call with investors on Tuesday.

Intel said in a promotional video that much of the lack of profitability in its foundry business was due to the “weight of previous decisions,” and Gelsinger separately pointed to the company’s “slow” adoption of a technology called EUV in the past that it has become accustomed to be they produce the most advanced chips.

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