Intel shares saw a four percent decline after it revealed semiconductor manufacturing business financials on Tuesday. The reveal of losses higher than the preceding year in the foundry business led to a fall in stock price in extended trading. CWEB has analyzed the decline and what it could mean for the company.
In an SEC filing, Intel said that its foundry business had an operating loss of $7 billion in 2023, while its sales were $18.9 billion. In 2022, it reported smaller losses in the same business of $5.2 billion on sales valued at $27.5.
Intel manufactures its chips in the US, unlike NVIDIA and AMD, which manufacture their chips in Taiwan and East Asia, mainly in TSMC, leading to lower costs.
CWEB analysts believe that manufacturing in different countries does impact sales. While manufacturing in the US has pluses and minuses in the long term, manufacturing in Taiwan also has its minuses, although it is cheaper in the short run, which is a plus.
Intel is one of the few large companies with its own foundry business in the US. It has secured about $20 billion under CHIPS and Science Act as the Biden administration looks to strengthen manufacturing in the nation.
Intel recently admitted that its slow adoption of a technology called EUV, which is used to make advanced chips, had affected its growth, and the company has taken a course correction. It also said that it has a partnership with Microsoft and that revenue is worth $15 billion for the foundry booked. The company said that it would manufacture chips for other companies.
Taiwan is an island nation that sometimes experiences natural disasters. On April 3, 2024, a massive earthquake, the worst in 25 years, struck the country, killing and destroying thousands. TSMC temporarily evacuated its factory after the island received an earthquake and tsunami warning. Taiwan also has a geopolitical conflict with its much larger neighbor, China.
CWEB thinks that Intel stock is either a hold for the near future or a buy for the long term. The potential for growth and increased revenue for the chip maker will increase as the company begins to manufacture a larger number of chips not only for itself but also for other companies.
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