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Intel sinks as losses reveal widening gap with rival TSMC

Shares of U.S chipmaker Intel fell 5% after reporting soaring losses at its contract chip-making business Foundry.

The loss was taken as an indication that the company could take years to catch up with the profitability of its rival Taiwan Semiconductor Manufacturing Co (TSMC) by the broader market.

Intel disclosed that the foundry unit posted operating losses of $7 billion in 2023 compared with $5.2 billion in 2022.

Intel is set to lose more than $9 billion in market value if the premarket losses hold.

The company has been spending billions of dollars to return as the dominant maker of cutting-edge chips, a position that it lost to Taiwan Semiconductor Manufacturing Co which is now the world’s biggest contract chipmaker.

Intel plans to spend $100 billion on plants across four states in the United States, in part helped by funding from the U.S. Chips Act.

Intel expects the foundry business to have a gross margin of about 40% by 2030, which would still trail the 53% margin TSMC reported for the fourth quarter of 2023.

The foundry business was hurt by previous missteps, including Intel’s previous decision against using extreme ultraviolet (EUV) machines from Dutch firm ASML. Intel has now switched over to EUV tools.

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