Intel Corp. has disclosed concerning details about its manufacturing operations, revealing that losses have deepened at its chipmaker’s factory network and suggesting that the business may not achieve a break-even point for several years.
The company’s new division, Intel Foundry, responsible for manufacturing, reported sales of $18.9 billion in 2023, a significant decline from $27.5 billion the previous year. Concurrently, the operating loss at the new unit widened to $7 billion from $5.2 billion, leading to a more than 4% drop in Intel’s shares during extended trading.
These financial setbacks reflect the challenges facing Intel as it navigates a complex turnaround plan under CEO Pat Gelsinger’s leadership. Gelsinger aims to revitalize the company’s factory network, emphasizing greater independence for the manufacturing division as it seeks to produce chips for other companies.
The transformation effort requires substantial investments, with Intel projecting 2024 to be the peak of its losses and expecting Intel Foundry to achieve profitability midway between 2024 and 2030. As part of this initiative, Lorenzo Flores has been appointed as the chief financial officer of the division.
Intel’s endeavour to venture into outsourced chip production, known as the foundry industry, marks one of its most significant transformations in history. Gelsinger is also focusing on restoring Intel’s technological edge, which it lost in the years preceding his appointment in 2021.
To address its manufacturing challenges, Intel plans to enhance its technology capabilities using extreme ultraviolet lithography, aiming to bring more production in-house. Gelsinger asserts that Intel will regain its technology advantage by next year, leading to improved product capabilities and cost efficiencies.
Despite facing formidable competitors such as Taiwan Semiconductor Manufacturing Co. (TSMC) and Advanced Micro Devices Inc. (AMD), Intel remains determined to regain its leadership position. The company is investing heavily in factory expansion in the US and Europe, supported by government incentives like the Chips and Science Act.
While challenges persist, Intel’s efforts to streamline its manufacturing operations and secure new clients, such as Microsoft Corp., for its foundry business indicate progress in its turnaround journey. With a renewed focus on technology innovation and operational efficiency, Intel aims to reclaim its position as a leading player in the semiconductor industry.
