Intel Corp (INTC.O) on Tuesday disclosed deepening operating losses at its foundry business, a blow to the chipmaker that has lost technology leadership to Taiwan Semiconductor Manufacturing Co. (TSMC, 2330.TW) in recent years.
Intel said its manufacturing segment will report an operating loss of $7 billion in 2023, up from $5.2 billion in the previous year. The segment’s revenue for 2023 is expected to be $18.9 billion, down from $27.49 billion, a 31% drop from the previous year.
Intel shares fell 4.3% after the document was filed with the Securities and Exchange Commission.
In a presentation to investors, CEO Pat Gelsinger said 2024 would be the worst operating loss for the company’s semiconductor manufacturing business, and he expects to break even on an operating basis around 2027.
Gelsinger said the foundry business had been plagued by bad decisions, most notably a decision a year ago to reject extreme ultraviolet (EUV) machines from Netherlands-based ASML (ASML.AS). Those machines can cost more than $150 million, but are more cost-effective than previous semiconductor manufacturing tools.
Those mistakes have led Intel to outsource about 30 percent of its wafers to outside contract manufacturers like TSMC, Gelsinger said, a percentage it wants to reduce to about 20 percent.
Intel has now transitioned to EUV tools, which will meet increasing production needs as older machines are phased out.
“In the post-EUV era, we are very competitive on price, performance, and we are back to leadership,” Gelsinger said. “And in the pre-EUV era, we were spending a lot of money and not competitive.”
Intel plans to spend $100 billion to build or expand semiconductor factories in four U.S. states. The business turnaround plan depends on persuading outside companies to use its manufacturing services.
As part of the plan, Intel told investors it would begin reporting the results of its manufacturing operations as a separate business unit.
