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Intel discloses $7B operating loss for chip-making unit
- Detrytus 3y agoLovely! Another opportunity to buy Intel stocks cheap!
- kmoser 3y ago"Loss" is accountant-speak for "we still made a profit, just less than last year."
- dannypovolotski 3y agoIt's not. Operating loss is when expenses are greater than the revenue.
- wtallis 3y ago"Expenses" and "revenue" are rather fuzzy concepts in this case: Intel's foundry business (as in, Intel manufacturing chips for somebody else) is still mostly aspirational; almost all of the chips they make are Intel chips, and there's a lot of wiggle room for how much of the revenue from selling Intel-branded chips gets assigned to their foundry business vs eg. the Client Computing Group or the Data Center and AI division. If they were reporting Intel Foundry revenue only from outside foundry customers (they're not), then Intel Foundry would never be able to come close to profitability.
- Version467 3y agonot your point at all, but you say almost all of the chips are Intel chips. I was under the impression that literally all of them were Intel chips. Have they started manufacturing chips for others?
- wmf 3y agoIntel has been making a few outside chips on and off for years.
- harry8 3y agoIn a world where inter-company expenses [1] charging out for IP use, accounting & HR services, strategic direction etc. etc. exist, something so simple as expenses being larger than revenue being an accurate economic measurement is wholly unreliable at best. Intel market analysts will be starting with the statement of cash flows and reconstructing how they think it should all look from there using the financial statement footnotes and all their other research & knowledge. [1] Frequently cross-border for tax purposes but there are plenty of non-tax reasons for filling and draining hollow logs.
- getToTheChopin 3y agoThat is not how accounting works. However, it is true that a company can report a loss on it's P&L statement (due to non-cash expenses like impairments / write-downs, reserves) while they in fact did generative positive cash flow in that same period.
- Wytwwww 3y agoBut the company is still profitable on the whole (even if their margins are not great these days) they basically just shifted some of the costs from one department to another
- burcs 3y agoI figured operating losses were to be expected in this field right now, but this part was surprising: "The unit had revenue of $18.9 billion for 2023, down 31% from $27.49 billion the year before." Why would revenue drop so dramatically when chip demand is at an all time high?
- bratao 3y agoI´m an outsider, but most demand in the last months have been GPUs and AI accelerators. And Intel foundries are not making them yet, only the ARC that are not very strong.
- deleted 3y ago[deleted]
- zdw 3y agoArc is fabbed on TSMC N6, per https://en.wikipedia.org/wiki/Intel_Arc https://en.wikipedia.org/wiki/Intel_Arc
- LarsDu88 3y agoIntel Foundries don't make ARC chips. Those are made by TSMC
- moffkalast 3y agoThere's been demand for LLM accelerators since late 2022, but so far only the Groq cards have materialized and those aren't really viable for anyone but high end enterprise datacenter use. Literally nobody's making these things yet, Nvidia gaming GPUs remain the best price to performance option lol. Intel Arc only does compute work through Vulkan which is not exactly comparatively fast yet, so despite being well priced for the VRAM they offer they're not seriously considered.
- ClassyJacket 3y agoSorry if this is a dumb question, but why are operating losses expected? Aren't chips in high demand compared to supply? Couldn't they charge high?
- metadat 3y agoNice of TSMC to be willing to help them out. For money.
- dimask 3y agoNo big deal, it is going to be essentially covered by government (taxpayers'?) money as usual https://techcrunch.com/2024/03/20/white-house-proposes-up-to-8-5b-to-fund-intels-domestic-chip-manufacturing/ https://techcrunch.com/2024/03/20/white-house-proposes-up-to...
- voisin 3y ago> government (taxpayers'?) money The question mark makes me think there is some uncertainty here and I am irrationally upset about the ambiguity. Of course it is taxpayers’ money! What is possibly unclear about the situation?
- deleted 3y ago[deleted]
- foobarian 3y agoHow is it just taxpayers? What about non-tax paying citizens? And what about government revenues from non-tax sources?
- wizzwizz4 3y ago> What is possibly unclear about the situation? While that's how things work at the district or even state level, that's not quite how money works at the federal level. To a first-order approximation, federal government spending is a tax on dollar-holders, with federal tax corresponding roughly to fealty (such service being delivered to dollar-holders). They're decoupled because the US federal government, via the Treasury, is able to create and destroy dollars. The IRS is responsible for collecting taxes, but delivers them to the Treasury for reallocation or destruction. Since money is fungible, only the net change in extant money matters, and they don't actually have to destroy and reprint notes… though in unrelated news, they do also do that. Though, at organisational levels below the central bank… once money has been set aside for the interests of the commons, does it truly still belong to those it was appropriated from? If I give money to a malaria charity, I don't then get to say "hey, spend that money on vaccines instead of nets": it's theirs to allocate as they see fit. If I don't like how a charity organises money, I'll choose a different one: just like how, if you don't like how your local government organises communal resources, you should vote accordingly (which, in theory, works) and otherwise take political action.
- treme 3y agoapparently they attribute the loss to deciding not to purchase EUV earlier from ASML. did they really think they knew better than company that's defining SOTA?
- jauntywundrkind 3y agoIntel & US research labs were where the state of the art was created. We gave it to ASML. They've advanced the state of the art enormously, but it's i.possible to ignore how much is because we helped them. Because we wanted a factory for chip making machines, in a liberal free and democratic part of the world. Because just having vertically-integrated Intel's and AMD's (back when they made their own chips) wasn't enough . I'd love for much more detailed write-ups on these technology transfer, this history. Alas trying to search for Intel + ASML is massively overwhelmed by search engine's rececy bias, filled with what machines Intel is buying. But here's this ASML history write-ups brief description: > The research ASML received from US laboratories was even more valuable than the revenue provided by American firms. In the 1990s, Intel invested heavily in EUV research, subsidizing national labs. Insights developed at Lawrence Livermore and National Sandia laboratories were eventually passed to ASML after Intel realized no American firm could effectively commercialize these findings. https://www.generalist.com/briefing/asml https://www.generalist.com/briefing/asml
- juitpykyk 3y agoHindsight bias. The industry believed 15 years ago that ASML would fail to make EUV work.
- JonChesterfield 3y agoIntel lost the high end. They don't seem to know how to make CPUs or GPUs that outperform their competition. But they do have fabs and could in principle make chips for other companies. What they could do is use the equipment they understand really well to make chips for the military. 45nm or 14nm or whatever. Or for automotive. Loads of stuff is useful without being on the bleeding edge. Instead, they're talking about needing heavy investment in new machines and blaming lack of that for their problems. It's hard to read that as anything other than they're trying to retake the high end crown. Perhaps the motivating defence angle is AI. The US panicking that TSMC makes better GPUs and tech built on that will end their empire. That's something Intel has decades of failing to execute on.
- wmf 3y agoIntel is great at designing chips but being on 7 nm while everyone else is on 4 nm has been holding them back. (I know nm are fake but not fake enough to invalidate my point.)
- JonChesterfield 3y agoThe process misstep was an error. Sticking with monolithic dies well past their EoL was an error. Missing the low power chips for mobile was an error. Everything they've done in discrete GPUs was an error. Intel make really great WiFi chips and C2D and Nehalem were spectacular. Since then they ran a fantastic profit margin. It's not remotely obvious that they're still great at designing chips.
- magicalhippo 3y ago> Sticking with monolithic dies well past their EoL was an error. Recalling how Intel tried to argue their multi-chip approach was better than AMDs single chip approach back in the early multi-core days, I find this one so hilarious. It's like the tables have turned.
- hypercube33 3y agoDidn't Intel exit the HBM market a few years back and now it's soaring? Also Intel is being a dick about their wifi on AMD systems when that's one of their markets honestly - everyone else's wifi chipsets sucks honestly at least under windows so they should really consider partnering with their enemy instead of trying to fight them. One of the coolest Intel products was that NUC with Intel CPU, igpu, HBM and AMD vega.
- LarsDu88 3y agoIt's silly to post a headline of a large operating loss when the unit was literally partitioned off a few months ago. Building fabs is expensive... literally the most cost intensive manufacturing enterprise in the world. Making those investments is the only way to stay competitive, and I'm sure we don't want to live in a world where there's a TSMC monopoly on the high end, and Chinese state run semiconductor fabs on the low end.
- danielmarkbruce 3y agoOperating loss doesn't include capex (some of it will come through via depreciation, but those fabs are depreciated over a long time period). They are burning cash like crazy.
- BenoitP 3y agoYup. This is more of a signal on 1) experience with new EUV processes and 2) cost of labor. That's not taking into account the expensive EUV amortization. A hard truth I've heard in CEO circles is that western middle classes are falling down in terms of purchasing-power; And they will continue to do so until they join Chinese middle classes levels of revenue.
- consp 3y ago> western middle classes are falling down in terms of purchasing-power Do you mean they finally figured that they can just continue the shift of wealth to the few?
- alephnerd 3y agoWhich country's business leadership did you hear that from? I'd be fairly surprised that American disposable purchasing power would fall to around $3-4k USD a year, unless by "middle class" your peers meant the professional class in China (the kind that can afford to splurge on a new iPhone every year, buy a Xiaomi SU7, and send their kids to do a bachelors degree at UCB, UCLA, or UIUC), in which case I wouldn't be too surprised simply because of how much growth was captured by that subset, and salaries for that subset are at France/Germany levels, but those countries also severely underpay professionals tbh. Even professional salaries at employers like Google India or Gojek Engineering in Bangalore, Jakarta, etc can pay German or French level dev salaries, let alone the subset of similar companies in China that can afford to pay around $20-100k USD salaries (depends on the city) > signal on 1) experience with new EUV processes and 2) cost of labor. That's not taking into account the expensive EUV amortization Yep. There's a reason Intel and GlobalFoundaries have the last American owned Fabs - most other players left the industry in the 2010s due to the massive costs, though it's a similar story in China as well which was only solved by the "Big Fund", but a similar Cambrian die off happened in the 2017-20 period which basically only left SMIC (comparable to TSMC or Intel in the early 2010s), Hong Hua (comparable to Tower), and YMTC (comparable PSMC or SK Hynix)
- Ekaros 3y agoSo they failed to charge enough from themselves? Is my take right or wrong?
- ksec 3y agoThis is a nice headline. I just wish their stock falls down a bit so I could pick up some more.
- m3at 3y agoThat's a lot! More than half of the yearly buybacks Intel did in 2018-2020! /s https://www.intc.com/stock-info/dividends-and-buybacks https://www.intc.com/stock-info/dividends-and-buybacks
- flkenosad 3y agoDead company.
- rmbyrro 3y ago> a blow to the chipmaker as it tries to regain a technology lead it lost in recent years to Taiwan Semiconductor Manufacturing Is it a blow, though? I'd expect exactly a big loss if they're investing to regain market leadership. If they're investing well, the higher the loss they can take, the better long term prospects. Am I missing something?