Intel stock price: Intel falls 7% as loss in foundry business widens gap with rival TSMC
Intel released new financial details about its foundry division late Tuesday, saying the business recorded an operating loss of $7 billion in 2023, compared with $5.2 billion in 2022.
“We expected the foundry economics to be bad, and they are,” said Bernstein analyst Stacy Rasgon. “There will still be significant headwinds ahead of us for several years.”
If the losses continue, Intel is expected to lose more than $12 billion in market value.
The company has been spending billions of dollars to return to being the dominant maker of cutting-edge chips, only to lose that spot to Taiwan Semiconductor Manufacturing Co., now the world’s largest contract chipmaker.
Capital investments by U.S. chipmakers classified as ‘construction in progress’ totaled $43.4 billion as of December 30, 2023, compared to $36.7 billion in the same period last year. Intel also plans to invest $100 billion in factories across four U.S. states, funded by the U.S. Chips Act. CEO Pat Gelsinger said operating losses from the contract chip manufacturing business will peak in 2024 and break even around 2027. This accounted for approximately 35% of Intel’s total net profit in 2023.
Intel expects gross margins for its foundry business to reach about 40% by 2030, which still lags TSMC’s reported margins of 53% for the fourth quarter of 2023.
TSMC’s revenue of T$625.5 billion ($19.52 billion) in the last three months of 2023 is significantly larger than Intel’s foundry division’s revenue of $18.9 billion in 2023.
“The incumbent’s geographic and talent advantages and solid rolodex of Tier 1 customers have shaken investor confidence in Intel’s foundry prospects,” said Parv Sharma, principal analyst at research firm Counterpoint. “Yes,” he said.
