INTEL LOSS ‘COST OF WINNING BACK U.S. SUPREMACY’

Tech firm’s chief plays down US$7b deficit last year and says chip maker committed to recover lost ground and rebuild Western supply chains

Intel’s chief executive has downplayed the billions of dollars the once-great chip manufacturer lost last year while declaring the company was amid a historical turnaround to reclaim American supremacy to produce the tiny circuits that power modern gadgets.

“I want people who are committed to the strategic journey of rebuilding the most iconic technology company in American history, who is building long-term manufacturing capacity for the digital future that is more critical to every aspect of human life, the national security and the economic engine. That’s who I want as my investor,” veteran engineer Patrick Gelsinger said.

Gelsinger made the remarks at an event organised by the Council on Foreign Relations, a think tank based in New York.

Earlier this week, Intel reported an operating loss of US$7 billion in 2023 for its chip manufacturing business and predicted losses to peak this year. As a result, Intel shares fell by 8 per cent on Wednesday.

Emphasising that there was only one Western firm among the three companies “on the planet” that could make advanced semiconductors, Gelsinger said “rebuilding the Western supply chains of the world” could become profitable in the years to come.

“We expect to break even in that business in the 2027 time frame. And then turn nicely profitable,” he said.

Gelsinger said “part of the problem is we have to significantly overinvest to get back to competitive” against Asian rivals.

Last month, US President Joe Biden said Intel would receive US$19.5 billion in federal help to build and modernise its chip plants in Arizona, New Mexico, Oregon and Ohio. The deal, which Biden hailed as “bringing the future back to America”, marked the largest US investment so far under the Chips and Science Act, the 2022 legislation intended to restore domestic production of microprocessors as well as to finance advanced technologies such as artificial intelligence.

Washington views US reliance on foreign-made chips and China’s rising military and global influence as a national security threat. The revitalisation of Intel’s chip making business has been linked to maintaining the United States’ global tech lead.

Gelsinger, who had previously spent 30 years at Intel in engineering and leadership roles, returned to the company as chief executive in 2021 with a comeback plan that included rebranding its chip making business.

The goal was to catch up with Taiwan Semiconductor Manufacturing Company (TSMC), a leading chip maker that counts Apple and Google among its clients.

On Thursday, he said three decades of defined industrial policy by Taiwan, South Korea, Japan and the mainland had attracted and consolidated the chip manufacturing industry to Asia. He said incentives in Asian chip hubs included tax preferences, land grants, R&D credits, university programmes and a government push for firms to invest in TSMC, Intel’s Taipeibased rival Gelsinger said was “the technology centre of the world”.

Commenting on the 7.4 magnitude earthquake that rocked Taiwan on Wednesday, Gelsinger said the natural disaster “reinforced” the need for “resilience in the supply chains”. He said when more than half the world’s chips were manufactured in one region “just 100km from Chinese soil”, that “is not a sustainable situation for the world”.

Founded in the late 1960s, Intel – one of the original anchors of Silicon Valley – was initially the world’s leading chip manufacturer. In the 1990s, almost 40 per cent of the world’s semiconductors were produced in the US.

Intel’s supremacy had ended by the mid-2010s because of rising costs and foreign competition.

Today, US manufacturers produce less than 10 per cent of the world’s chips and none of the most advanced ones. About 80 per cent of production takes place in Asia, and the most advanced chips are made exclusively by TSMC.

Gelsinger said Intel aimed to deploy its latest chip production technology by 2025 and, thanks to the export controls imposed by the US government on China, the Asian powerhouse could not close the gap any time soon.

We expect to break even in that business in the 2027 time frame. And then turn nicely profitable

PATRICK GELSINGER, INTEL C.E.O.