Intel faces setback as chipmaker reveals deepening losses in factory operations

Intel has witnessed a major decline, marking its worst performance in over two months, following a pessimistic outlook on its factory operations.

According to Bloomberg News, the chip giant disclosed an increase in losses within its new manufacturing division, Intel Foundry.

This could indicate potential hurdles ahead in its turnaround efforts.

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The financial figures revealed that sales had plummeted from $27.5 billion to $18.9 billion in 2023.

Moreover, the operating loss at the new unit increased from $5.2 billion to $7 billion.

After the figures were revealed, Intel's shares tumbled by about 7.3 per cent in New York trading, marking the heaviest intraday drop since January 26.

CEO Pat Gelsinger's ambitious turnaround plan for Intel includes providing a detailed financial breakdown, particularly of the factory network, to facilitate greater operational independence.

This move is vital to the company's strategy of manufacturing chips for other firms.

Gelsinger said that transparency and accountability in driving the transformation forward would be essential.

Addressing the challenges ahead, Gelsinger outlined the company's projection that 2024 would mark the peak of losses for Intel Foundry.

He anticipates the division to achieve profitability midway between the present and the end of 2030.

Lorenzo Flores was appointed as the division's chief financial officer to steer Intel Foundry through this critical phase.

Intel's push into outsourced chip production signifies one of its most significant transformations yet.

Gelsinger reiterated the company's intentions towards reclaiming its technological edge by next year, primarily through advancements like extreme ultraviolet lithography.

These technological enhancements aim to streamline production processes and enhance product capabilities.

This would potentially attract orders from competitors and generate substantial revenue by the end of 2030.

Although Intel continues to faces struggles, Gelsinger remained confident in the company's trajectory, particularly with its latest production technique, 18A.

Intel disclosed commitments from five companies to adopt this technique, with expectations of broader adoption in the coming years.

However, the dominance of Taiwan Semiconductor Manufacturing Co. (TSMC) in the foundry market poses a challenge to Intel's aspirations.

The competitive landscape in the semiconductor industry continues to change, with companies like Advanced Micro Devices Inc. and Nvidia Corp securing their positions.

While Intel embarks on an expansive factory expansion initiative, the financial strain remains clear, even with government incentives like the Chips and Science Act.

Gelsinger's efforts to secure clients for Intel's foundry business have yielded some successes, with Microsoft Corp onboard as a notable customer.

(With inputs from Bloomberg)