Intel says past mistakes contributed to its foundry business losing $7 billion last year

[midian182]

In brief: Intel's share price has fallen over 4% in the last few hours following news that its foundry business recorded an operating loss of $7 billion in 2023, almost $2 billion more than the $5.2 billion loss it experienced a year earlier. Revenue was also down year-on-year in 2023, falling 31% from $27.49 billion to $18.9 billion.

Intel CEO Pat Gelsinger warned investors that the worst is yet to come. He expects Intel's chipmaking business to have its worst year of losses in 2024, adding that it won't break even on an operating basis until about 2027.

Gelsinger partly blamed the losses on Intel's past mistakes in this area. One of these was the decision made one year ago to not use ASML's extreme ultraviolet (EUV) machines. While they can cost over $150 million, they are more cost-effective than previous chipmaking equipment. Intel later went back on its decision and invested in the EUV machines, which should help the foundry business' goal to break even in about three years.

"In the post-EUV era, we see that we're very competitive now on price, performance (and) back to leadership," Gelsinger said. "And in the pre-EUV era, we carried a lot of costs and (were) uncompetitive."

Gelsinger added that these mistakes forced Intel to outsource 30% of all its wafer production to other foundries, including current chipmaking rival TSMC. Team Blue's boss said Intel aims to bring that share down to 20%.

The key to making money is for Intel to attract more customers to its foundry business. Microsoft recently struck a $15 billion deal with Intel for IFS to produce custom chips, so it's on the right track. The have shown optimism for the mid to longer term, too...

It was announced last month that Intel would become the biggest beneficiary of the CHIPS Act to date. The White House said Team Blue would be provided with $8.5 billion in direct funding along with $11 billion in low-interest loans and 25% investment tax credit on up to $100 billion of capital investments, which is how much IFS plans to spend on building new chip manufacturing plants in the US and improving its current facilities over the next few years.

This $INTC Foundry slide from yesterday is informative for many reasons.
1/ Honest about the past- @Intel rarely (historically) will show a "-" even when the entire world knows. I take this as a positive cultural shift.
2/ Aspirational about the future- Intel is in it to win it.... https://t.co/sTYXv7Djcr pic.twitter.com/Gv6bA5VJ48

– Patrick Moorhead (@PatrickMoorhead) April 3, 2024

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Intel says past mistakes contributed to its foundry business losing $7 billion last year

 

[Superconductor]

That's really big "mistake" money

 

[Squid Surprise]

In a related completely irrelevant story, AMD admits buying ATI might have been a mistake…

Did anyone think that Intel DIDN’T make mistakes in its foundry business?!?

 

[ThrakazogZ]

That's really big "mistake" money

No worries.....he'll just lay off a couple thousand employees, then the stock (and his bonus) will go right back up.........

 

[erickmendes]

Also why Microsoft is making this deal with Intel? I really didn't get it, as Microsoft hardware bussiness never was relevant, well that's my impressions.

 

[maxxcool7421]

Well to be fair - they’re getting your tax dollars AFTER making these mistakes… sounds like fair recompense: royally screw up then get the government to give you several billion dollars

Boooo

 

[Squid Surprise]

Well to be fair - they’re getting your tax dollars AFTER making these mistakes… sounds like fair recompense: royally screw up then get the government to give you several billion dollars.

 

[redgarl]

Don`t worry, nothing will change.

Intel Fab Business is going to be the last nail in Intel`s coffin.

If they thought AMD a hard competitor, then just imagine TSMC...

 

[ScottSoapbox]

Thank God all those political donations landed them billions in tax-payer money. Otherwise, they might have to pay for their mistakes themselves.

 

[Endymio]

Thank God all those political donations landed them billions in tax-payer money. Otherwise, they might have to pay for their mistakes themselves.

No, this wasn't a case of so-called crony capitalism (which is the exact opposite of actual capitalism, btw). From a strict economics perspective, government intervention in the marketplace -- be it handouts, bailouts, tax credits, subsidies, price floors/ceilings, whatever -- never make sense. But the rationale here was from a national security perspective. At some point in the near future, China's going to take over Taiwan, and then the US will be in the awkward position of having to ask China's permission to make a majority of our own smart weapons. Hopefully these subsidies will prevent that.

 

[maxxcool7421]

No, this wasn't a case of so-called crony capitalism (which is the exact opposite of actual capitalism, btw). From a strict economics perspective, government intervention in the marketplace -- be it handouts, bailouts, tax credits, subsidies, price floors/ceilings, whatever -- never make sense. But the rationale here was from a national security perspective. At some point in the near future, China's going to take over Taiwan, and then the US will be in the awkward position of having to ask China's permission to make a majority of our own smart weapons. Hopefully these subsidies will prevent that.

Except we REQUIRE China for cpu grade silicon and RUSSIA/Ukraine for manufacturing NEON gas for cpus and gpu and other silicon based processors ... so even if we spend trillion $ .. we STILL have to ask china permission to make those same weapon systems


Google > "mining-and-refining-pure-silicon-and-the-incredible-effort-it-takes-to-get-there" <- hackaday article

Google > "silicon production by country statista" <- statista website

Google > "low-on-gas-ukraine-invasion-chokes-supply-of-neon-needed-for-chipmaking" <- arstechnica website

 

[Endymio]

Except we REQUIRE China for cpu grade silicon...and RUSSIA/Ukraine for manufacturing NEON gas ...
Google > "silicon production by country statista" <- statista website

Oops! Yes, China manufactures the bulk of raw silicon, but the semiconductor industry uses only an infinitesimal fraction of world production. There is substantial semi wafer manufacturing capacity in Japan (Shin-Etsu, Sumco), Germany (Siltronic), the US (Silicon Materials), and elsewhere. Furthermore, the production of wafer-grade silicon is orders of magnitude simpler and easier than building and equipping a <7nm fab.

As for neon, that's even less a problem. Ukraine produces the bulk of the world's neon so cheaply simply because most of it comes as a byproduct of their other manufacturing processes (fertilizer and steel). But retooling an air liquefaction plant to produce neon can be done remarkably quickly, especially in a wartime situation, and neon is extraordinarily easy to stockpile regardless. Notice that when the Russian-Ukraine war disrupted the world neon supply, semiconductor manufacturing was barely impacted.