Revenue at Intel's foundry business declined in 2023, leading to a $7 billion operating loss, and CEO Pat Gelsinger says this year could produce even nastier numbers as he revealed a reorg to help the chipmaker behave more like its rivals.

The reorg will see Intel report results from the following segments: Client Computing Group (CCG); Data Center and AI (DCAI); Network and Edge (NEX); Intel Foundry; Altera, an Intel Company (formerly Intel's Programmable Solutions Group); Mobileye; and Other.

Foundry is the only standalone segment. CCG, DCAI, and NEX will be counted as "Intel Products," while Altera, Mobileye, and Other will be classified "All Other."

This matters because Chipzilla has also decided the Foundry segment "will recognize revenues generated from both external Foundry customers and Intel Products, as well as technology development and product manufacturing costs historically allocated to Intel Products."

That means Foundry will charge Intel Products to make stuff, at what Intel has described as "a market-based price." Intel thinks it will also improve margins at Intel Products, in part because the true cost of requests for expedited manufacturing of certain wafers was hidden from product teams. Gelsinger said since Intel made those costs transparent, requests for expedited production fell by 95 percent.

To accompany news of the reorg, Intel delivered a rejigged set of financial filings [PDF] that present its recent results under its new structure.

That filing reveals that Foundry's 2023 revenue of $18.9 billion was well down on the $27.5 billion generated in 2022, while losses measured by operating income slipped from 2022's $5.17 billion to $6.95 billion.

Gelsinger said things could deteriorate further in 2024, which will be Foundry's worst year. But he also predicted profitability in 2027.

Intel shares plunged from $43.94 apiece to finish the day at $42.11, suggesting investors are not keen on this plan.

Foundry will slay, one day

During a webinar on which Gelsinger and chief financial officer David Zinsner explained Intel's adjusted structure, the CEO predicted the Foundry business will turn the corner in 2027 with $15 billion in annual external revenue - plus revenue from Intel Products.

By then, Intel will have reduced the amount of production it outsources to rival foundries from 30 to 20 percent.

That fifth of outsourced production will be needed despite Gelsinger saying Intel is nailing its new production processes.

He told investors the Intel 3 process is ready for high volume manufacturing today, and that Intel's 20A process will debut in 2024. Gelsinger said Intel's 18A process, thought to rival TSMC's most sophisticated efforts, will be "manufacturing ready at the end of the year, and the first Intel designs are in fab and we already have five external customers committed to 18A."

But those customers may have to wait. Gelsinger said most Intel wafers in 2025 - for its own consumption and Foundry customers - will be made on its 3, 7, and 10 processes. In the same year he predicted "a small amount of 18A wafers" will be available, with "a good amount of 18A wafers in 2026."

But he was also bullish that this timeline means Intel will deliver on his turnaround pledge to deliver five new process nodes in four years.

He also teased another process node named 14A that is "already well under way to a complete solution set."

And for those of you thinking your Xeons are looking a bit tired, the CEO said two next-gen server CPUs, codenamed Clearwater Forest and Panther Lake, are already in the fab.

"Intel 3, a big step forward, but more to do," Gelsinger intoned. "18A is there, a bit ahead of competitors in time and delivering on power, performance, area, and major improvements in cost. 14A, the first embrace of high NA [lithography], and we expect to be ahead on time and on all metrics, power, performance, area, and cost across an entire spectrum."

Next stop? Becoming the second-biggest foundry business on the planet by 2030.

In Gelsinger's telling, the hard work to get there has mostly been done. He said Intel has mastered chiplets and extreme ultraviolet lithography, invested capital to give it the capacity it needs to serve all its segments, and trimmed costs.

The creation of Intel Products and Intel Foundry, he said, means the former segment effectively becomes a fabless semiconductor design house, with a cost base typical of such operations.

"So all of this is a proper foundry with a proper fabless business with it," the CEO said.

Which is the model that's dominated the semiconductor industry for years - other than at Intel, which used to claim its integration was its strength.

But after a rotten 15 years in which it mostly missed the mobile market, watched its PC cash cow become less relevant, saw AMD become a serious threat in servers, and now faces a flotilla of competitors touting the Arm and RISC-V architectures, clearly something had to change. ®

https://www.theregister.com//2024/04/03/intel_foundry_losses_reorg/