Lossmaking chip units: Intel discloses operating losses: Intel revealed on Tuesday a deepening of operating losses within its foundry business, dealing a setback to the chipmaker's efforts to reclaim a technological edge lost to Taiwan Semiconductor Manufacturing in recent years.

In its disclosure, Intel reported operating losses of $7 billion for its manufacturing unit in 2023, a significant increase from the $5.2 billion loss recorded the previous year. This was coupled with a decline in revenue, which fell by 31 per cent to $18.9 billion in 2023 from $27.49 billion the year prior.

Following the filing of these documents with the US Securities and Exchange Commission (SEC), Intel shares experienced a 4.3 per cent decline.

During an investor presentation, Chief Executive Pat Gelsinger acknowledged that 2024 would likely witness the peak of operating losses for the company's chipmaking division, with an anticipated break-even point on an operating basis projected around 2027.

Gelsinger attributed the challenges faced by the foundry business to past decisions, including a reluctance to adopt extreme ultraviolet (EUV) machines from Dutch firm ASML, which are more cost-effective compared to earlier chip manufacturing tools, despite their higher initial investment.

Acknowledging the impact of these missteps, Intel disclosed that it had outsourced approximately 30 per cent of its total wafer production to external contract manufacturers like TSMC, aiming to reduce this figure to around 20 per cent. The company has transitioned to using EUV tools, which are expected to enhance competitiveness and efficiency in chip production.

Intel outlined plans to invest $100 billion in building or expanding chip factories across four US states, as part of its business turnaround strategy. Central to this plan is the effort to attract external companies to use its manufacturing services.

In line with this strategy, Intel announced its intention to report the results of its manufacturing operations as a separate unit, underlining its commitment to narrowing the gap with primary chipmaking rivals such as TSMC and Samsung Electronics Co Ltd.

(With Reuters inputs)