Intel’s chip-production division reported a staggering $7 billion loss in 2023 due to increased competition and high development costs of new tech. Despite this, branches like their data-centric business, including data center and cloud services, observed a 10% increase from the previous year with a revenue of $48 billion.
Intel’s acquisition of companies like Mobileye, a self-driving car tech company, has also proved beneficial. Nevertheless, the profit from these ventures was insufficient to balance the chip-production department’s loss.
To combat this, Intel is set to heavily invest in its chip-production potential, with plans of building two new factories in Europe costing $20 billion. The goal is to regain their chip manufacturing dominance and lessen their reliance on Asian suppliers.
CEO Pat Gelsinger attributed these financial difficulties to past decisions, specifically outsourcing about 30 percent of their wafer production. The high cost of outsourcing, outdated infrastructure, and the absence of advanced technology have strained the company.
Intel’s investment strategy to combat chip-production losses
According to Gelsinger, becoming self-reliant and modern will be crucial for the company’s future success.
Gelsinger’s strategic investment in resources from ASML, a Netherlands-based company, is one such measure. This presents potential for Intel’s production facilities to expand and modernize, and hint at diversifying their business portfolio.
Gelsinger is confident that the use of innovative technology from ASML will help cut costs and move Intel towards a break-even position by 2027. ASML also maintains that their technology could catalyze a cheaper large-scale production of chips and therefore substantial reductions in manufacturing expenses.
Furthermore, Intel plans to invest $100 billion in expanding chip factories across four American states. This initiative, expected to be supported by the U.S. government through the new CHIPS Act, is anticipated to create job opportunities, reduce dependency on overseas supply chains, and foster economic growth.
However, the success of this plan hinges on an increase in the number of companies utilizing Intel’s chip-production services, with the specific number needed for Intel to break even by 2027 yet to be determined.
