Intel shares fell 5% in early trading on April 3 as losses from custom chip manufacturing signal the company will take years to catch up with profitability at Taiwan Semiconductor Manufacturing Company (TSMC). This was reported by Reuters.
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On April 2, Intel released new financial information about its custom chip manufacturing division. The company reported an operating loss of $7 billion in 2023, compared with $5.2 billion in 2022.
“We expected the economics of making custom chips to be bad, and they really are bad.” . We likely have several more years of significant headwinds ahead of us,” said Bernstein analyst Stacy Rasgon.
If shares continue to fall by the close, Intel will lose more than $9 billion in market value.
The company has spent billions of dollars to reclaim its title as a leading maker of cutting-edge chips. This position has been lost to Taiwan Semiconductor Manufacturing Company (TSMC), which is now the world's largest custom chip manufacturer.
As of December 30, 2023, the US chip manufacturer's capital investments classified as “construction” in progress” were $43.4 billion, compared with $36.7 billion a year earlier.
Intel also plans to spend $100 billion on plants in four US states, partly through funding under US law on chip manufacturing.
CEO Pat Gelsinger said the operating loss from custom chip manufacturing will peak in 2024 before breaking even around 2027. This division accounted for about 35% of Intel's total net revenue in 2023.
