Intel Foundry to run losses until... what, 2027? 2028?

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Intel shares fell 4% at one point in extended trading on Tuesday after the company revealed long-awaited financials for its semiconductor manufacturing business, commonly called the foundry business, in a SEC filing.

Intel said its foundry business recorded an operating loss of $7 billion in 2023 on sales of $18.9 billion. That’s a wider loss than the $5.2 billion Intel reported in its foundry business in 2022 on $27.5 billion in sales.

This is the first time that Intel has disclosed revenue totals for its foundry business alone.
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Intel said the newly organized Products division, which mainly consists of processors for PCs and servers, reported $11.3 billion in operating income on $47.7 in sales in 2023.

Intel said on Tuesday that it expected its foundry’s losses to peak in 2024 and eventually break-even “midway” between this quarter and the end of 2030. The company previously said that Microsoft would use its foundry services, and that it has $15 billion of revenue for foundry already booked.

“Intel Foundry is going to drive considerable earnings growth for Intel over time. 2024 is the trough for foundry operating losses,” Gelsinger said on a call with investors on Tuesday.

Intel said in a promo video that much of the lack of profitability for its foundry business was due to the “weight of past decisions,” and separately, Gelsinger cited the company’s past “slow” adoption of a technology called EUV, which is used to make the most advanced chips.

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This clarifies why INTC hired their new CFO, Zinsner, from micron which is a very low cost semiconductor manufacturer. Zinsner has put together a plan to significantly reduce Intels manufacturing costs over the next few years. I was expecting most of the improvement in Intels financials to come from newer and more competitive products built on new competitive leading edge Intel processes. It appears we should also see some significant profit upside due to the reduction in manufacturing costs.

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For 2 or 3 decades Intel has been highly efficient (THE leader) as a semiconductor manufacturer. But maybe this was just because they replicated the production of the ~same designs across many FABs (copy exactly) and achieved economies of scale no one else could dream of. Doing lots of short to medium runs of lots of different wafers for lots of customers is a different business.

Mike

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