The company has spent billions of dollars to return as the dominant maker of cutting-edge chips
03 April 2024 - 17:12
byArsheeya Bajwa
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Intel shares fell nearly 7% on Wednesday, as ballooning losses at its contract chip-making business signalled the company could take years to catch up with the profitability of rival Taiwan Semiconductor Manufacturing.
Disclosing new financials details for its foundry unit late on Tuesday, Intel said the business posted operating losses of $7bn in 2023 compared with $5.2bn in 2022.
“We expected foundry economics to be bad, and they truly are,” said Bernstein analyst Stacy Rasgon. “We likely have several years of substantial headwinds still in front of us.”
Intel is set to lose more than $12bn in market value if the losses hold.
The company has been spending billions of dollars to return as the dominant maker of cutting-edge chips, a position that it lost to Taiwan Semiconductor Manufacturing, which is now the world’s biggest contract chipmaker.
The US chipmaker’s capital investments classified as “construction in progress” totalled $43.4bn up to December 30, 2023, compared with $36.7bn a year earlier.
Intel also plans to spend $100bn on plants across four states in the US, in part helped by funding from the US Chips Act.
CEO Pat Gelsinger said operating losses for its contract chip-making business would peak in 2024 before breaking even by about 2027. It accounted for about 35% of Intel’s total net revenue in 2023.
Intel expects the foundry business to have a gross margin of about 40% by 2030, which would still trail the 53% margin TSMC reported for the fourth quarter of 2023.
At T$625.5bn ($19.52bn) in just the final three months of the 2023, TSMC’s revenue is also much larger than the $18.9bn in sales Intel's foundry unit had in 2023.
“The incumbents’ geographic and talent advantages, as well as their established Rolodex of tier-1 customers, have jolted investor confidence in Intel's foundry prospects,” said Parv Sharma, a senior analyst at research firm Counterpoint.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Intel shares fall on news of operational loss
The company has spent billions of dollars to return as the dominant maker of cutting-edge chips
Intel shares fell nearly 7% on Wednesday, as ballooning losses at its contract chip-making business signalled the company could take years to catch up with the profitability of rival Taiwan Semiconductor Manufacturing.
Disclosing new financials details for its foundry unit late on Tuesday, Intel said the business posted operating losses of $7bn in 2023 compared with $5.2bn in 2022.
“We expected foundry economics to be bad, and they truly are,” said Bernstein analyst Stacy Rasgon. “We likely have several years of substantial headwinds still in front of us.”
Intel is set to lose more than $12bn in market value if the losses hold.
The company has been spending billions of dollars to return as the dominant maker of cutting-edge chips, a position that it lost to Taiwan Semiconductor Manufacturing, which is now the world’s biggest contract chipmaker.
The US chipmaker’s capital investments classified as “construction in progress” totalled $43.4bn up to December 30, 2023, compared with $36.7bn a year earlier.
Intel also plans to spend $100bn on plants across four states in the US, in part helped by funding from the US Chips Act.
CEO Pat Gelsinger said operating losses for its contract chip-making business would peak in 2024 before breaking even by about 2027. It accounted for about 35% of Intel’s total net revenue in 2023.
Intel expects the foundry business to have a gross margin of about 40% by 2030, which would still trail the 53% margin TSMC reported for the fourth quarter of 2023.
At T$625.5bn ($19.52bn) in just the final three months of the 2023, TSMC’s revenue is also much larger than the $18.9bn in sales Intel's foundry unit had in 2023.
“The incumbents’ geographic and talent advantages, as well as their established Rolodex of tier-1 customers, have jolted investor confidence in Intel's foundry prospects,” said Parv Sharma, a senior analyst at research firm Counterpoint.
Reuters
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