Intel's Foundry Business Faces $7 Billion Operating Loss Amid Expansion Efforts

Key Points

• Intel's foundry business reported a $7 billion operating loss in 2023, deepening from a $5.2 billion loss the previous year.
• The company plans to invest $100 billion in expanding chip manufacturing capabilities, aiming for break-even margins by 2030.
• Despite the financial challenges, Intel remains optimistic about its foundry business, targeting significant growth and efficiency improvements.

In this news

Intel Corporation (INTC) has disclosed a significant operating loss of $7 billion for its foundry business in 2023, marking a deepening financial challenge from the $5.2 billion loss reported the previous year. This revelation came through a regulatory filing with the U.S. Securities and Exchange Commission, highlighting the struggles of the semiconductor giant's manufacturing arm amidst aggressive expansion plans. Intel's foundry business, which is central to its strategy of becoming a key player in chip manufacturing, has seen a 31% decline in revenue from $63.05 billion the year before to $18.9 billion in 2023.

Despite these financial setbacks, Intel remains committed to its long-term vision for the foundry business. The company has announced ambitious plans to invest $100 billion in building and expanding chip factories across four U.S. states. This investment is part of a broader strategy to attract external clients to its manufacturing services, aiming to achieve break-even operating margins by 2030. Intel targets 40% non-GAAP gross margins and 30% non-GAAP operating margins within the next seven years, with operating losses expected to peak in 2024.

The financial disclosures have led to a decline in Intel's stock price, with shares falling over 4% in extended trading. However, Intel's leadership remains optimistic, with CEO Pat Gelsinger emphasizing the company's transformation and commitment to bringing 'AI Everywhere.' The foundry business, now a separate operating segment, is seen as a critical component of Intel's future growth, especially in the era of artificial intelligence. With an expected lifetime deal value with external customers of more than $15 billion, Intel Foundry aims to become the world's second-largest semiconductor foundry by 2030.