Intel's Foundry Unit Loss Widens, Sees Operating Loss Peaking In 2024; Stock Down

(RTTNews) - Intel Corp. shares were hit by wider operating loss in its chipmaking unit Intel Foundry for fiscal 2023, and the company's warning that the segment's operating losses are expected to peak in 2024.

Intel shares fell more than 4 percent in extended trading on Tuesday on the Nasdaq Stock Exchange, as well as in pre-market activity on Wednesday.

In a filing with the U.S. Securities and Exchange Commission, the company said Intel Foundry, its semiconductor manufacturing business, reported fiscal 2023 operating loss of $6.96 billion, compared to $5.17 billion loss in 2022. The difference mainly reflected $2.10 billion lower product profit driven by lower internal revenue.

Intel Foundry, comprising Foundry Technology Development, Foundry Manufacturing and Supply Chain, and Foundry Services organizations, recorded revenue of $18.91 billion for the year, down from $27.49 billion a year ago.

Internal revenue was $18.0 billion, down $9.1 billion driven by lower intersegment volume, while external revenue was $953 million, up $479 million from 2022, driven by higher packaging revenue.

Further, the newly organized Products division, which mainly consists of processors for PCs and servers, reported $11.34 billion in operating income on revenues of $47.67 in 2023, both lower than last year.

Going ahead, the company said Intel Foundry's operating margin improvement is expected through shifting volume mix to leading-edge extreme ultraviolet nodes.

Intel Foundry expects to drive further operating margin expansion by manufacturing a larger percentage of Intel's products, growing its high-margin advanced packaging business, continuing to expand its external foundry business, and further focusing on capital utilization, cost efficiency and growing scale.

Intel added that it is driving for Intel Foundry to achieve break-even operating margins midway between now and the end of 2030.

Intel Foundry currently has an expected lifetime deal value with external customers of more than $15 billion.

While outlining a new financial reporting structure aligned with foundry operating model for 2024 and beyond, Dave Zinsner, Intel chief financial officer, said, "This model is designed to unlock significant cost savings, operational efficiencies and asset value. As it begins to take hold, we expect to accelerate on our path toward achieving our ambition of 60 percent non-GAAP gross margins and 40 percent non-GAAP operating margins in 2030. Ultimately, improved cost competitiveness will help us deliver process technology, product and foundry leadership while driving significant financial upside for Intel and our owners."

The Biden Administration announced in mid-March that Intel and the U.S. Department of Commerce has signed a non-binding preliminary memorandum of terms (PMT) for up to $8.5 billion in direct funding for commercial semiconductor projects under the CHIPS and Science Act.

The proposed funding would help advance Intel's critical semiconductor manufacturing and research and development projects at its sites in Arizona, New Mexico, Ohio and Oregon.

Intel shares closed Tuesday's regular trading at $43.94, down 1.30 percent. In pre-market activity, the shares are currently trading at $41.88, down 4.7 percent.