Intel discloses $7 billion operating loss for chip-making unit

[Si3Rra_7]

Summary

 

Intel shares fell 4% at one point in extended trading Tuesday after the company revealed long-awaited financials for its semiconductor manufacturing business, commonly called the foundry business, in an SEC filing. Intel said its foundry business recorded an operating loss of $7 billion in 2023 on sales of $18.9 billion. That’s a wider loss than the $5.2 billion Intel reported in its foundry business in 2022 on $27.5 billion in sales.

 

 

Quotes

Quote

    Intel  on Tuesday disclosed deepening operating losses for its foundry business, a blow to the chipmaker as it tries to regain a technology lead it lost in recent years to Taiwan Semiconductor Manufacturing.

Intel said the manufacturing unit had $7 billion in operating losses for 2023, a steeper loss than the $5.2 billion in operating losses the year before. The unit had revenue of $18.9 billion for 2023, down 31% from $27.49 billion the year before.

 

    Intel shares were down 4.3% after the documents were filed with the U.S. Securities and Exchange Commission (SEC).

During a presentation for investors, Chief Executive Pat Gelsinger said 2024 would be the year of worst operating losses for the company's chipmaking business and that it expects to break even on an operating basis by about 2027.
 

    Partially as a result of the missteps, Intel has outsourced about 30% of the total number of wafers to external contract manufacturers such as TSMC, Gelsinger said. It aims to bring that number down to roughly 20%.

 

My thoughts

Bad news for that guy on the WAN show that said he invested all his life savings. Still i think he'll be fine if he hodls long term. 

 

Sources

https://www.reuters.com/technology/intel-discloses-financials-foundry-business-2024-04-02/

https://www.cnbc.com/2024/04/02/intel-shares-fall-after-company-reveals-7-billion-operating-loss-in-foundry-business.html

[porina]

That might explain an investor presentation they did earlier this week. I wrote more about it at link below, although I focused on the tech more than the financials.

 

Without looking at the latest results, they did say they were reorganising how they're reporting foundry results. Before, product design teams ate some of the costs, but now foundry is more separated. Be aware it might not be a like for like comparison. They've been doing a lot to get their fabs up to speed and it isn't cheap. Getting the newer nodes going will save them money so that "loss" today is investing for the future. The more you spend, the more you save. Wait, wrong company  

 

In short, I don't feel this is significant at all as long as it puts them in the right place going forwards.

 

 

[leadeater]

1 hour ago, Si3Rra_7 said:

Bad news for that guy on the WAN show that said he invested all his life savings. Still i think he'll be fine if he hodls long term.

Operating loss really isn't that surprising or against what Intel has been saying. They are investing in a lot of new things and expanding, you have to spend money first before you can make it and jointly customers.

 

People too easily forget, Intel silicon fabrication was the industry benchmark for so long, none of the knowledge and talent has left.

[05032-Mendicant-Bias]

I would have been more surprised if Intel announced profits for their Foundry division. They are investing heavily into catching up with TSMC manufacturing, which is fiendishly expensive, even with the generous USA and EU government handout they have been getting.

 

Intel says the 18A process is on track, which is really great news. Intel is leaving behind the notorious 10nm forever delay.

 

I'm more surprised that the investors have been caught by surprise by the news... Isn't the market supposed to "price in" expected news? That's like... their whole job!

[leadeater]

7 minutes ago, 05032-Mendicant-Bias said:

I'm more surprised that the investors have been caught by surprise by the news... Isn't the market supposed to "price in" expected news? That's like... their whole job!

Financial market analysts don't know their asses from their elbows when it comes to tech, even "tech focused" ones. Intel making a massive loss in the lead up to new technology and products is a huge sign of good potential and that's why I would be recommending to invest because you'll miss the boat otherwise. That is obviously not actual financial advice but if you actually know the sector and the technology developments happening then nobody knows better than yourself. I mean that is exactly how I 3x-5x my money on AMD stock, I knew Zen was coming soon, I knew it was tracking rather well and the only direction the stock was going to go was up. Intel is a little different since it's stock value isn't in the actual gutter heh.

[PaulHubers]

On 4/4/2024 at 8:37 AM, leadeater said:

Financial market analysts don't know their asses from their elbows when it comes to tech, even "tech focused" ones. Intel making a massive loss in the lead up to new technology and products is a huge sign of good potential and that's why I would be recommending to invest because you'll miss the boat otherwise. That is obviously not actual financial advice but if you actually know the sector and the technology developments happening then nobody knows better than yourself. I mean that is exactly how I 3x-5x my money on AMD stock, I knew Zen was coming soon, I knew it was tracking rather well and the only direction the stock was going to go was up. Intel is a little different since it's stock value isn't in the actual gutter heh.

Agreed, financial markets don’t understand anything in regards to tech (usually at least). The fact they were surprised to see these losses and chalk it up to bad management and Intel becoming a failed foundry business is ridiculous. Like you see Intel is spending tons of cap ex on foundry expansion. That cost has to be assigned somewhere, so to say they are doing it wrong because they have losses is just childish.

 

Also if their foundry plans were so bad and miss managed I doubt Microsoft would have signed up with them to fab chips.

[Fasterthannothing]

This is pretty sad because short of a full government bailout of the state side chip manufacturing (which is an awful thought) it doesn't appear a viable option. Which without going too political makes Taiwan chip manufacturing even more vulnerable to outside factors.

[RejZoR]

It's very likely it's just a bad looking number because of restructuring. Also with Intel opening foundries to 3rd parties, that's a huge potential seeing how TSMC is oversaturated, Samsung slightly underwhelming, GloFo seems to almost disappear from mainstream and the rest are small players or very focused like Siemens who mostly make chips for industrial use.

 

People often diss Intel nodes as "bad", but we have to admit they know how to make chips run at stupid high clocks and if that's application even at expense of some power envelope, it's worth using. Would be kinda ironic if Intel made chips for AMD and NVIDIA tho.

 

There is also potential for Qualcomm and Mediatek, at least for lower end chipsets, but potentially even higher end ones. We'll see how all that will roll out in the future.

[Zodiark1593]

1 hour ago, RejZoR said:

It's very likely it's just a bad looking number because of restructuring. Also with Intel opening foundries to 3rd parties, that's a huge potential seeing how TSMC is oversaturated, Samsung slightly underwhelming, GloFo seems to almost disappear from mainstream and the rest are small players or very focused like Siemens who mostly make chips for industrial use.

 

People often diss Intel nodes as "bad", but we have to admit they know how to make chips run at stupid high clocks and if that's application even at expense of some power envelope, it's worth using. Would be kinda ironic if Intel made chips for AMD and NVIDIA tho.

 

There is also potential for Qualcomm and Mediatek, at least for lower end chipsets, but potentially even higher end ones. We'll see how all that will roll out in the future.

Ngl, it still boggles my mind a bit to see that 4.7 GHz number in task manager, coming out of a 28 watt laptop chip (i7-1165G7), and a pretty cheap Dell at that. This was a pretty lofty mark not very long ago, generally reserved for overclocking. 
 

It’s not as though Intel’s process sucks by any means. Rather, the competition has drastically stepped up their game. For the customer, certainly not a bad problem to have. 

[williamcll]

This sounds more like too much money is wasted on paying the management.

[dogwitch]

13 minutes ago, williamcll said:

This sounds more like too much money is wasted on paying the management.

that, cover lost diversion (intel nics)

stock buy back. spending to much money to force oem to use you.

a list of things tbh

[GoStormPlays]

as an investor in amd, I am rejoicing (except I only use Intel CPUs in my machines so I'm split a little)