Intel Corporation, the U.S.-based semiconductor giant, has disclosed a significant operating loss of $7 billion for its chip-making unit in 2023. This marks a deepening financial challenge for the company as it strives to regain its position at the forefront of the global semiconductor industry, a lead it has ceded in recent years to competitors such as Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics.
The reported operating loss exceeds the $5.2 billion loss from the previous year, signaling escalating costs and competitive pressures. The unit’s revenue also saw a substantial decline, falling 31 percent to $18.9 billion in 2023 from $27.49 billion in 2022.
During an investor presentation, Intel’s Chief Executive Officer, Pat Gelsinger, acknowledged the severity of the situation, forecasting that 2024 would represent the peak of operating losses for the chip-making business. However, he expressed optimism about the future, projecting a return to breakeven on an operating basis by 2027.
Gelsinger attributed the losses to strategic missteps, including a critical decision made a year prior to delay the adoption of extreme ultraviolet (EUV) lithography technology from Dutch company ASML. Despite the high initial cost of over $150 million per EUV machine, these tools offer greater efficiency and cost-effectiveness compared to older chip-making equipment.
"In the post-EUV era, we see that we’re very competitive now on price, performance, and back to leadership," Gelsinger stated, emphasizing Intel’s renewed commitment to technological advancement.
As a result of the earlier miscalculations, Intel outsourced approximately 30 percent of its wafer production to external contract manufacturers, including TSMC, to meet production demands. The company is now integrating EUV technology into its manufacturing processes, expecting to enhance productivity as outdated machinery is retired.
Intel has ambitious plans to revitalize its manufacturing capabilities, announcing a $100 billion investment to build or expand chip factories across four U.S. states. Central to this strategy is attracting external companies to utilize Intel’s manufacturing services, thereby transforming its manufacturing operations into a standalone unit and diversifying its revenue streams.
The firm has been investing heavily to catch up with its primary rivals, TSMC and Samsung Electronics, who have secured a technological edge in recent years. By reporting its manufacturing results as a separate entity, Intel aims to increase transparency and appeal to potential clients considering outsourcing their chip production.
Intel’s disclosure underscores the competitive challenges within the semiconductor industry, especially amid global chip shortages and increasing demand for advanced technologies. The company’s strategic shift and substantial investments reflect its determination to reclaim leadership in a sector that is crucial to global innovation and economic growth.
Reference(s):
Intel discloses $7 billion operating loss for chip-making unit
cgtn.com
