Danish Kapoor
Danish Kapoor

Intel's chip manufacturing arm is on the verge of big losses

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Intel is known as one of the most important players in the semiconductor industry. But recently, the chip manufacturing arm has faced serious financial difficulties. In 2023, this unit of the company posted an operational loss of $7 billion. This represents a significant increase from 2022's $5.2 billion loss. Despite this, Intel generated $18.9 billion in revenue in 2023; but this figure decreased from 27.49 billion, showing a 31 percent decrease compared to the previous year.

Intel CEO Pat Gelsinger stated in his statements to investors that this loss was not completely unexpected. Gelsinger stated that recent financial results are a result of Intel's past mistakes and the difficulties faced by its invention business. Due to these shortages in supply chain and production capacity, the company was forced to outsource approximately 30% of its mold production to rival foundries such as TSMC.

Intel's strategic transformation and investments

However, Intel changed its strategy and invested in using extreme ultraviolet (EUV) machines from Dutch company ASML. The company, which had previously avoided this technology, expects the cost-effectiveness of these vehicles to achieve balance by 2027. ASML also says on its website that its technology makes mass production of computer chips more cost-effective for chip innovators like Intel.

It seems that Intel made the right decision at the time. The company plans to spend about $100 billion to build or expand chip foundries in four U.S. states. It will also receive up to $8.5 billion in funding from the government as part of the new US CHIPS Act. But for everything to go according to plan, Intel needs to convince companies to use its chip manufacturing service. Microsoft recently signed on as a foundry customer, but it seems unclear how much more of the company Intel will need to break even as planned in a few years.

Danish Kapoor