Intel shares fall after company reveals $7 billion operating loss in foundry business

Intel Shares fell as much as 4% at one point during extended trading Tuesday after the company revealed long-awaited financial results from its semiconductor manufacturing business, often called the foundry business, in a filing with the SEC.

Intel said its foundry business posted an operating loss of $7 billion in 2023 on revenue of $18.9 billion. That’s a bigger loss than the $5.2 billion Intel reported for its foundry business in 2022 on revenue of $25.7 billion.

This is the first time that Intel has revealed the revenue generated by its foundry business. Historically, Intel has both designed its own chips, done its own manufacturing, and reported its final chip sales to investors. Other U.S. semiconductor companies such as Nvidia and AMD design their chips but send them to Asian foundries – often Taiwan’s TSMC – for manufacturing.

Intel proposed to investors, under CEO Patrick Gelsinger, a plan in which it would continue to make its own processors but also create an external foundry business to make chips for other companies. Intel’s role as one of the only U.S. companies manufacturing cutting-edge semiconductors on American soil is a key reason it has secured nearly $20 billion in funding under the CHIPS Act last month.

Much of Intel’s foundry revenue currently comes from its own operations, Intel said Tuesday. Intel also reformulated its product divisions to report costs as if they were a so-called “fabless” company that had to count the foundry as a cost.

Intel said its new Products division, which mainly includes processors for PCs and servers, reported operating profit of $11.3 billion on revenue of $47.7 in 2023.

Intel said Tuesday that it expects losses at its foundry to peak in 2024 and eventually break even “halfway” between this quarter and the end of 2030. Intel has previously said that Microsoft would use its foundry services and would have $15 billion in smelter revenue already reserved.

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

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