Despite a loss of $7 billion, Intel CEO Patrick Gelsinger announced that the company is at a historic turning point to regain US supremacy in semiconductor manufacturing.
Earlier this week, Intel reported a loss of $7 billion in 2023 for its chip manufacturing business and forecast a record loss in 2024. However, at an event organized by the Council on Foreign Relations , Mr. Patrick Gelsinger downplayed the number and emphasized that there is only one Western enterprise out of three companies “on the planet” that can produce advanced semiconductors. He believes that “rebuilding the western supply chain” will bring profits in the coming years.
“We expect to break even in the semiconductor business within the time frame to 2027 and then move to profitability,” he said about the company’s plans. Part of the problem, the Intel CEO said, is that they have to invest significant amounts of money to compete with Asian rivals.
Intel’s chip business will lose $7 billion in 2023. Photo: voltaireweb
Last month, US President Joe Biden announced that Intel would receive $19.5 billion in subsidies to build and modernize semiconductor factories in Arizona, New Mexico, Oregon and Ohio. The deal, which Mr Biden hailed as “bringing the future back to America”, marks the largest US investment to date under the Chip and Science Act. The legislation passed in 2022 aims to restore domestic microprocessor production as well as fund advanced technologies such as artificial intelligence.
Washington views America’s reliance on foreign-made chips and China’s growing military influence as national security threats. The revival of Intel’s chipmaking business is linked to maintaining America’s global technology leadership.
Mr. Gelsinger, who previously spent 30 years at Intel in engineering and leadership roles, returned to the company as CEO in 2021. His goal is to catch up with TSMC, the world’s largest chipmaker . He commented that three decades of technology policies from Taiwan (China), South Korea, Japan and mainland China have attracted and strengthened the chip manufacturing industry in Asia.
Incentives at Asian chip hubs include taxes, land grants, R&D credits, university programs and government incentives for companies to invest in TSMC.
Commenting on the 7.4 magnitude earthquake that rocked Taiwan on Wednesday, Mr. Gelsinger said that the natural disaster highlighted the need for supply chains to recover. When more than half of the world’s chips are produced in an area “just 100km from China”, that is “unsustainable”.
Founded in the late 1960s, Intel was initially the world’s leading chip manufacturer. In the 1990s, nearly 40% of the world’s semiconductors were manufactured in the United States. Intel’s supremacy ended in the mid-2010s due to rising costs and fierce foreign competition.
Today, the US produces less than 10% of the world’s chips and has no cutting-edge chips. About 80% of chip manufacturing takes place in Asia, and the most advanced chips are made exclusively by TSMC.
Mr. Gelsinger shared that Intel aims to deploy its latest chip manufacturing technology by 2025 and thanks to export controls imposed by the US government on China, this Asian powerhouse cannot soon narrow the gap.
(Theo SCMP)