Intel, the semiconductor giant, is undergoing a significant internal restructuring aimed at revitalising its struggling chip-foundry business. Despite optimistic assurances from CEO Pat Gelsinger, who declared this year as ‘the trough,’ the company’s foundry division continues to haemorrhage billions of pounds.
In a recent filing with the United States Securities and Exchange Commission (SEC), Intel disclosed operational losses of a staggering $7 billion in 2023 within its foundry service, marking a substantial deterioration from the previous year’s figures. This revelation underscores the formidable task ahead for Intel in reversing this financial downturn.
During an earnings call, Gelsinger candidly acknowledged one pivotal misstep: Intel’s delayed transition to extreme ultraviolet (EUV) lithography. This belated adaptation placed Intel at a significant disadvantage in comparison to rivals like TSMC and Samsung, who have embraced more advanced manufacturing techniques, including EUV lithography, much earlier.
Historically, Intel’s foundries primarily serviced internal demands, thereby mitigating the imperative for innovation or upkeep of older manufacturing lines. This inward-facing approach contrasts sharply with the strategies of competitors, who actively cater to external clients such as AMD and Nvidia, ensuring a consistent demand for their services.
While Intel Products, the company’s non-foundry division, continues to demonstrate robust performance and healthy operating margins, the foundry arm faces a starkly different reality. CFO David Zinsner revealed that despite revenue declines, Intel Products maintains a commendable operating margin. However, the foundry division’s targets remain far more modest, with ambitions to achieve break-even status by 2027 and modest gross and operating margins of 40% and 30%, respectively, by 2030.
To bolster its foundry business, Intel has embarked on an ambitious multi-process-node plan, earmarking substantial financial aid to adhere to production deadlines and meet chip demand. Gelsinger outlined the roadmap during the earnings call, indicating plans to ramp up Intel 3 in 2025 and 18A in 2026, with the expectation of achieving competitive cost structures by the latter phase.
Transforming Intel Foundry into a formidable competitor akin to TSMC or Samsung presents a formidable challenge. Beyond financial investment, Intel must cultivate an ecosystem of tools, resources, and services comparable to its rivals. Decades of internal focus have left Intel lagging in essential areas, such as documentation standards and accessibility, which are critical for external partnerships and client satisfaction.
As Intel navigates this critical juncture, the company faces mounting pressure to execute its turnaround strategy swiftly and effectively. The semiconductor landscape is evolving rapidly, with competitors advancing at a relentless pace. Intel’s ability to revitalise its foundry division will undoubtedly shape its future trajectory in the fiercely competitive semiconductor market.
In conclusion, while Intel grapples with significant financial losses and internal restructuring, CEO Pat Gelsinger’s strategic vision and the company’s multi-process-node plan offer a glimmer of hope for resurgence. However, achieving parity with industry titans TSMC and Samsung remains an arduous undertaking, necessitating concerted efforts and meticulous execution in the coming years.
