Intel's wafer foundry business is expected to incur a loss of $7 billion in 2023, with the stock price dropping more than 4% after hours

Intel disclosed for the first time on Tuesday that its wafer foundry business will see an expanded loss in 2023, down 31% year-on-year.

On Tuesday, April 2, Intel disclosed its 2023 financial data in a filing to the SEC. The data showed that the company's total revenue dropped from $57 billion in 2022 to $47.7 billion in 2023.

By segment, revenue from the Data Center and AI division decreased from $16.86 billion in 2022 to $12.64 billion in 2023.

Revenue from Intel's wafer foundry business dropped from $27.5 billion in 2022 to $18.9 billion in 2023. At the same time, the operating loss of this division also expanded, increasing from $5.2 billion in 2022 to $7 billion in 2023.

Analysts pointed out that concerns about Intel's short-term performance decline and the outlook for its wafer foundry business caused its stock price to drop more than 4% after hours, with a cumulative decline of 13% since the beginning of the year.

However, Intel is confident in the long-term profitability improvement of the company. Looking ahead, Intel aims to achieve a 30% adjusted gross margin and a 30% adjusted operating profit margin. By the end of 2030, Intel hopes to reach a 60% non-GAAP gross margin and a 40% adjusted operating margin.

Intel is committed to strategic transformation, entering the wafer foundry business

It is reported that Intel's entry into outsourced chip production (i.e., the wafer foundry industry) is one of the company's largest transformations in history. In response, Intel is taking various measures such as increasing financial transparency and enhancing business independence to support the company's strategic transformation.

Intel CEO Pat Gelsinger emphasized the company's commitment to providing more detailed financial information to increase external transparency, enhance investor and market confidence in Intel. Intel also announced that Lorenzo Flores has been appointed as the Chief Financial Officer of Intel Foundry.

Furthermore, Gelsinger plans to separate the wafer foundry business from the company's other businesses. This move aims to strengthen Intel Foundry's core strategy of providing wafer foundry services to external customers, marking Intel's transition from its traditional business model of designing and selling its own chips.

Despite current challenges, Intel remains optimistic about the long-term profitability of Intel Foundry. The company expects the operating loss of the wafer foundry business to peak in 2024 and plans to achieve breakeven between 2024 and 2030 While actively transforming, Intel faces strong competitors in the semiconductor foundry business such as TSMC, AMD, and NVIDIA.

Currently, TSMC dominates the foundry market, with total revenue surpassing Intel. In 2023, TSMC's total revenue reached $69.4 billion, with a net profit of $26.9 billion and a gross profit margin of 54%. TSMC is also expected to achieve a 20% revenue growth in 2024, reaching $83.4 billion.

Meanwhile, AMD is a major competitor to Intel in its traditional business areas, with total revenue of $22.7 billion in 2023, a net profit of $854 million, and a gross profit margin of 50%. Analysts predict a 14% revenue growth for the company this year.

Furthermore, NVIDIA has rapidly emerged as a leader in the industry. Although its revenue has not yet reached the level of TSMC, its sales doubled last year and are expected to achieve significant growth again this year. NVIDIA also holds an overwhelming leading position in the AI accelerator market