Intel’s Chip-Making Business Lost $7 Billion in 2023

Intel delivered devastating news to investors who were hoping for a turnaround at the microprocessor giant: Intel Foundry, its chip-making business unit, lost $7 billion in 2023, much worse than expected, and revenues fell 31 percent year-over-year. The business may not break even until as late as 2030.

The news came as part of an Intel announcement about a new financial reporting structure that it says provides greater transparency, accountability and incentives across its business. Put simply, Intel will now report its core business as if it were fabless and Intel Foundry will be treated as a standalone cost center.

“Intel’s differentiated position as both a world-class semiconductor manufacturer and a fabless technology leader creates significant opportunities to drive long-term sustainable growth across these two complementary businesses,” Intel CEO Pat Gelsinger said. “Implementing this new model marks a key achievement in our IDM 2.0 transformation as we hone our execution engine, stand up the industry’s first and only systems foundry with geographically diverse leading-edge manufacturing capacity, and advance our mission to bring AI Everywhere.”

Intel is scrambling to reinvent itself in the face of a new era in chip-making in which all of its major competitors design chips in-house but use third-party foundries like Taiwan Semiconductor Manufacturing Company (TSMC), Samsung, and Semiconductor Manufacturing International Corporation (SMIC), all of which are based in Asia. Intel’s schtick is that it’s an American company intent on building chips in America (and elsewhere), and it has already received many billions of dollars in subsidies and very low-cost loans from the U.S. government as part of the CHIPS Act as a result.

The problem is that Intel can’t seem to find its footing in a technology world that’s driven more by mobile devices and AI and cloud datacenters than the PC world that Intel still dominates. And as the declines and losses mount, investors and other onlookers understandably worry that the chipmaker won’t survive this transition, taking down hopes for a U.S. semiconductor manufacturing renaissance with it.

Intel, of course, says it’s on track. And that, more specifically, it has a plan for long-term growth and profitability, not just at Intel Foundry, but with the rest of the company as well. Losses at Intel Foundry should peak this year, it says, and Intel expects the business to become the world’s second-largest foundry by 2030. To help get it there, the firm has appointed Lorenzo Flores, formerly the CFO of Xilinx, as the CFO of Intel Foundry. And it has already signed up some major foundry clients, including long-time partner Microsoft.

Whether it can succeed at all remains to be seen. But for now, at least, this feels a little bit like rearranging the deck chairs on the Titanic. Intel needs all the help—and luck—it can muster.