May 2, 2024 Intel’s expansion into the foundry business as part of its IDM 2.0 strategy has resulted in a staggering $7 billion loss in 2023, adding to the $5 billion lost in the previous year. This disclosure came during a recent webinar with investors and industry analysts, highlighting the financial challenges Intel faces as it attempts to transform its operations and compete with foundry giants like TSMC and Samsung.
IDM 2.0, or Integrated Device Manufacturing 2.0, is a cornerstone of Intel’s strategy to revitalize its manufacturing capabilities. Historically, Intel utilized its fabrication plants exclusively for its own chip production. The shift to offering foundry services to fabless companies marks a significant pivot in Intel’s business model, aimed at capturing a share of the lucrative global foundry market.
The transition has not been without its costs. According to a Reuters summary of the webinar, Intel’s foundry division hemorrhaged $5.2 billion in 2022 before the losses widened to $7 billion in 2023. Intel executives anticipate that these losses will peak in 2024, with hopes of breaking even by 2027.
A significant factor contributing to these financial setbacks has been Intel’s delayed adoption of extreme ultraviolet lithography (EUV) technology. Intel lagged behind its competitors, adopting EUV for its Intel 4 process only in September 2023, four years after rivals like Samsung and TSMC. CEO Pat Gelsinger acknowledged this delay as a strategic misstep but expressed optimism about Intel’s future. He highlighted the company’s efforts to lead in the next technological leap—high numerical aperture (high-NA) lithography. Intel recently announced the assembly of the world’s first high-NA machine at its Oregon facility.
Moreover, Gelsinger revealed that Intel is currently outsourcing up to 30% of its wafers, primarily from TSMC, due to capacity constraints. The transition to EUV lithography is expected to reduce this dependency as Intel aims to decrease outsourced wafers to about 20% in the coming years by phasing out older equipment and modernizing its production lines.
Intel’s move to diversify its manufacturing services through IDM 2.0 reflects a strategic transformation aimed at positioning the company at the forefront of the semiconductor industry. However, the financial path is proving costly, with significant investments required to update technology and expand capacity. As Intel navigates these challenges, the industry watches closely to see if these costly endeavors will eventually translate into a profitable and competitive foundry business.
