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Intel Faces Unprecedented $7B Loss in Chip-Making Sector

Intel revealed widespread operating losses at its foundry business on Tuesday, a blow for the chipmaker as it seeks to regain the technology lead that it lost in recent years in Taiwan Semiconductor Manufacturing.

Intel said its manufacturing sector lost $7 billion in operating income by 2023, up from a $5.2 billion operating loss the year before. For 2023, the unit's revenue is $18.9 billion, down 31% from $27.49 billion the year before.

Intel shares fell 4.3% after filing with the US, following the Securities and Exchange Commission (SEC).

In comments to investors, Chief Executive Officer Pat Gelsinger said 2024 will be a year of significant operating losses for the company's chip manufacturing business and expects it to break even in production around 2027.

Gelsinger said bad decisions have weighed on the foundry business, including one with Dutch company ASML that used ultraviolet (EUV) equipment a year ago even though it could cost more than a million dollars and costs less than older chip machines. They are effective.

Partly as a result of the misstep, Intel outsourced about 30% of the total wafer volume to outside contractors such as TSMC, Gelsinger said. It aims to reduce that to about 20%.

Intel, meanwhile, has turned to the use of EUV devices, which will fully meet manufacturing needs while phasing out older models. “In the post-EUV era, we see that we are now more competitive in terms of price, performance (and) leadership again,” Gelsinger said “And in the pre-EU era, we carried a lot of debt and (were) not competitive.”

Intel plans to spend $100 billion to build or expand chip plants in the US in four countries. Its business transformation programs are based on enticing outside companies to use its services.

As part of that process, Intel told investors it would begin independently reporting its product results, one at a time. The company has invested heavily in its key chipmaking rivals TSMC and Samsung Electronics Co Ltd.

Conclusion: Intel’s $7 billion operating loss is a significant deal for the company. How it responds to these challenges will not only determine its future trajectory but will also significantly impact the global semiconductor industry.