Intel’s Slide in Stock Value Highlights Gap with Rival TSMC in Foundry Business Loss.

Intel Faces Significant Losses in Contract Chip-Making Business and Drops in Market Value

Intel shares plummeted by 5% before the market opened on Wednesday, following the announcement of significant losses in its contract chip-making business. This news came as Intel released new financial details for its foundry unit, reporting an operating loss of $7 billion in 2024 compared to $5.2 billion in 2023. Analysts like Bernstein’s Stacy Rasgon anticipate several years of challenges ahead for the foundry economics.

Intel has been investing heavily to regain its position as a leading producer of cutting-edge chips after losing ground to Taiwan Semiconductor Manufacturing Co. The company’s capital investments under “construction in progress” amounted to $43.4 billion as of December 31, 2023, up from $36.7 billion the previous year. Additionally, Intel plans to spend $100 billion on plants in the U.S., with assistance from the U.S. Chips Act.

Intel’s CEO, Pat Gelsinger, projected that operating losses for the contract chip-making business would peak in 2024 before breaking even around 2027. This sector represented about 35% of Intel’s total net revenue in 2023. The company aims for the foundry business to achieve a gross margin of approximately 40% by 2030, still behind TSMC’s 53% margin reported in Q4 of 2023. Although Intel’s foundry unit had sales of $18.9 billion in 2023, TSMC’s revenue reached $19.52 billion in the final three months of the same year.

Gelsinger noted that past decisions like not using extreme ultraviolet (EUV) machines from ASML had impacted the foundry business negatively. However, Intel has since transitioned to utilizing EUV tools.

The company’s struggle to stay competitive in this crucial sector highlights the intense competition within it.

Intel shares dropped by more than -5% before trading began on Wednesday after disclosing significant losses at its contract chip-making business.

This news came after Intel announced new financial details for its foundry unit and revealed an operating loss of $7 billion expected for next year compared to a loss of $5

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