Intel discloses US$7 billion operating loss for chip-making unit
- Intel said the manufacturing unit had US$7 billion in operating losses for 2023, a steeper loss than the US$5.2 billion in operating losses the year before
- CEO Gelsinger said the foundry business was weighed down by bad decisions, including one a year ago against using EUV machines from Dutch firm ASML
Intel on Tuesday disclosed deepening operating losses for its foundry business, a blow to the chip maker as it tries to regain a technology lead it lost in recent years to Taiwan Semiconductor Manufacturing Co (TSMC).
Intel said its contract manufacturing unit had US$7 billion in operating losses for 2023, a steeper loss than the US$5.2 billion in operating losses the year before. The unit had revenue of US$18.9 billion for 2023, down 31 per cent from US$27.49 billion the year before.
The company's shares were down 4.3 per cent after the documents were filed with the US Securities and Exchange Commission.
During a presentation for investors, Intel chief executive Pat Gelsinger said 2024 would be the year of worst operating losses for the company’s contract chip-making business and that it expects to break even on an operating basis by about 2027.
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Gelsinger said the foundry business was weighed down by bad decisions, including one a year ago against using extreme ultraviolet (EUV) machines from Dutch firm ASML. While those machines can cost more than US$150 million, they are more cost-effective than earlier chip-making tools.
Partially as a result of the missteps, Intel has outsourced about 30 per cent of the total number of wafers to external contract manufacturers such as TSMC, Gelsinger said. It aims to bring that number down to roughly 20 per cent.
Intel has now switched over to using EUV tools, which will cover more production needs as older machines are phased out.
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“In the post EUV era, we see that we’re very competitive now on price, performance (and) back to leadership,” Gelsinger said. “And in the pre-EUV era we carried a lot of costs and (were) uncompetitive.”
Intel plans to spend US$100 billion on building or expanding chip factories in four US states. Its business turnaround plan depends on persuading outside companies to use its contract manufacturing services.
As part of that plan, Intel told investors it would start reporting the results of its manufacturing operations as a stand-alone unit. The company has been investing heavily to catch up to its primary chip-making rivals, TSMC and Samsung Electronics.
