Intel, a mega chipmaker and a key player in the computer chig market has now reports that its shares have fell to nearly 4% on Wednesday, 3rd April, 2024.
As it has losses at its contract chip-making business, Financial analysts now state that the company could take years to catch up with the profitability range of a foreign rival that is Taiwan Semiconductor Manufacturing Co or TSMC.
After disclosing new financial details to the public for its foundry unit, a major unit on late Tuesday (EST), the company said the business posted operating losses of $7 billion in 2023 compared with $5.2 billion in 2022. A huge loss for the tech giant for the company is set to lose even more than $12 billion in market value if the losses are kept on hold, the situation is very concerning for the Intel employees.
“We expected foundry economics to be bad, and they truly are,” said Bernstein analyst Stacy Rasgon. “We likely have several years of substantial headwinds still in front of us.”
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The company has been spending billions of dollars to return as the dominant maker of cutting-edge chips, perhaps even too much.Getting bact to a position that it lost to Taiwan Semiconductor Manufacturing Co, a very huge feat, can Intel do it? TSMC is now the world’s biggest contract chipmaker.
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The company also plans to spend $100 billion on plants across four states in the United States, in part helped by funding from the U.S. Chips Act.
CEO Pat Gelsinger who was sworn in as CEO a while back has made statements saying that operating losses for its contract chip-making business would peak in 2024 before breaking even by about 2027. It accounted for about 35% of Intel’s total net revenue in 2023, a huge setback for the chip-making giant.
The Company now fully expects the foundry business to have a gross margin of about 40% by 2030, in an approximately 6 years, which would still beat or maybe catch up with the 53% margin TSMC reported for the fourth quarter of 2023.
At $19.52 billion in just the final three months of 2023, TSMC’s revenue is also much larger than the $18.9 billion in sales Intel’s foundry unit had in 2023.
“The incumbents’ geographic and talent advantages, as well as their established rolodex of tier-1 customers, have jolted investor confidence in Intel’s foundry prospects,” said Parv Sharma, a senior analyst.