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Intel Shares Plummet: Investor Concerns After Financial Disclosure

Intel's stock dropping 4% during extended trading on Tuesday, following the unveiling of much-anticipated financials
April 4, 2024

In a move that sent shockwaves through the tech industry, Intel revealed the long-anticipated financials of its semiconductor manufacturing business, commonly known as the foundry business, in a recent SEC filing. This disclosure, a first of its kind for the company, unveiled a sobering reality: Intel's foundry business reported an operating loss of a staggering $7 billion in 2023, despite generating $18.9 billion in sales. This represents a widening loss compared to the $5.2 billion reported in 2022 on sales of $27.5 billion.

The unveiling of Intel's foundry revenue totals marks a significant departure from its historical reporting practices. Unlike other American semiconductor giants like Nvidia and AMD, which design chips and outsource manufacturing to Asian foundries, Intel has traditionally handled both chip design and manufacturing in-house, reporting final chip sales to investors.

Under the leadership of CEO Patrick Gelsinger, Intel has been advocating for a strategic shift, aiming to establish an external foundry business to manufacture chips for other companies while continuing to produce its own processors. This move is part of Intel's broader strategy to remain competitive and maintain its position as one of the few U.S. companies engaged in cutting-edge semiconductor manufacturing domestically.

The importance of Intel's semiconductor manufacturing capabilities was underscored by its recent success in securing nearly $20 billion in funding through the CHIPS and Science Act. Much of Intel's foundry revenue currently stems from its internal operations, although the chipmaker has restructured its product divisions to account for foundry operations as a separate entity.

Despite the significant losses incurred by its foundry business, Intel remains optimistic about its future prospects. Gelsinger assured investors during a recent call that Intel Foundry is poised to drive substantial earnings growth over time, with expectations that losses will peak in 2024 and eventually reach breakeven by the midpoint between the current quarter and the end of 2030. Intel has already secured significant commitments, including a partnership with Microsoft and $15 billion in booked revenue for its foundry services.

While acknowledging the challenges ahead, including past strategic missteps and delayed adoption of crucial technologies, Intel remains resolute in its commitment to innovation and profitability. As the company navigates through this pivotal period, all eyes will be on its ability to execute its vision and regain investor confidence in the fiercely competitive semiconductor landscape.

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