Intel shares fall on $7 billion operating loss in foundry business

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107347912 1702581189848 AP23348659807100

Intel CEO Pat Gelsinger showcased silicon wafers during an event named AI Everywhere in New York on December 14, 2023. Intel’s stock dropped by 4% in extended trading after unveiling the financial details of its semiconductor manufacturing business, known as the foundry business, in an SEC filing.

The foundry business of Intel reported an operating loss of $7 billion in 2023 on sales of $18.9 billion, a larger loss compared to the $5.2 billion loss in 2022 with sales of $27.5 billion. This marks the first time Intel disclosed revenue specifics for its foundry business independently. Historically, Intel both designed and manufactured its chips, whereas other companies like Nvidia and AMD designed their chips and outsourced manufacturing to Asian foundries.

Under CEO Patrick Gelsinger, Intel aims to retain its chip production while venturing into an external foundry business to create chips for other firms. The company secured almost $20 billion in funding last month due to its role as a pioneer in semiconductor manufacturing in the U.S.

Intel stated that most of its foundry revenue currently originates from its internal operations, and it reorganized its Products division to report costs as a “fabless” company that accounts for foundry expenses. The newly organized Products division reported $11.3 billion in operating income on $47.7 billion in sales in 2023.

Intel anticipates its foundry losses to hit a peak in 2024 and achieve breakeven midway between the present quarter and the end of 2030. The company disclosed plans for Microsoft to utilize its foundry services, with $15 billion in foundry revenue already secured. Gelsinger emphasized that Intel Foundry would deliver significant earnings growth for the company over time, believing that 2024 would mark the lowest point for foundry operating losses.

The lack of profitability in Intel’s foundry business was attributed to past decisions, including the slow adoption of EUV technology for crafting advanced chips.

Intel CEO Pat Gelsinger revealed long-awaited financials for the company’s semiconductor manufacturing business, known as the foundry business, in an SEC filing. The foundry business recorded an operating loss of $7 billion in 2023 on sales of $18.9 billion, a wider loss than in 2022. Intel has historically designed and manufactured its own chips, but is now planning to start an external foundry business to make chips for other companies. The company expects its foundry’s losses to peak in 2024 and break even by the end of 2030, with $15 billion in revenue already booked. Gelsinger cited past decisions and slow adoption of technology as reasons for the lack of profitability in the foundry business.

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