In 2023, Intel’s chip-making division faced substantial headwinds, reporting a significant operating loss of $7 billion, as outlined in a report by Reuters. This figure represented a notable increase from the $5.2 billion loss incurred in the previous year, highlighting the magnitude of the challenges the company faced. Despite generating $18.9 billion in revenue throughout the year, this amount marked a significant decline of 31 percent compared to the $27.49 billion recorded in the preceding year.
The root causes of Intel’s financial struggles can be traced back to past missteps, particularly within its foundry business. CEO Pat Gelsinger acknowledged that Intel’s failure to address these challenges effectively contributed to the mounting losses. One critical misstep was Intel’s decision to outsource approximately 30 percent of its wafer production to rival foundries, including TSMC, a move that further strained its financial performance.
However, amidst these challenges, Gelsinger expressed optimism about Intel’s ability to navigate its way out of the crisis. One key strategic shift involved Intel’s decision to embrace extreme ultraviolet (EUV) lithography technology, which it had previously overlooked. By leveraging EUV tools from Dutch firm ASML, Intel aimed to enhance the cost-effectiveness of its chip manufacturing processes and ultimately drive profitability.
ASML’s EUV technology promised to revolutionize the mass production of computer chips, offering increased efficiency and scalability. This technological advancement was seen as crucial in Intel’s efforts to regain competitiveness in the semiconductor market. Gelsinger articulated his belief that the adoption of EUV tools would play a pivotal role in Intel’s journey towards financial recovery.
In support of its transformation efforts, Intel announced ambitious investment plans, earmarking approximately $100 billion for building or expanding chip foundries across four states. Additionally, the company stood to benefit from up to $8.5 billion in funding from the U.S. government under the CHIPS Act, aimed at revitalizing domestic semiconductor manufacturing.
Despite these strategic initiatives, Intel faced the formidable task of attracting customers to its chip-making services. While securing Microsoft as a foundry customer was a significant win, Intel recognized the need to secure additional partnerships to achieve its long-term financial objectives. Convincing companies to entrust their chip production to Intel would be pivotal in realizing its vision of profitability by 2027.
In summary, Intel embarked on a transformative journey to overcome past setbacks and position itself for future success in the semiconductor industry. Through strategic investments, technological innovation, and government support, Intel aimed to revitalize its chip-making division and reclaim its position as a leading player in the global semiconductor market. While challenges lay ahead, Intel remained steadfast in its commitment to driving innovation and delivering value to its customers and shareholders alike.