Intel Corporation is reshaping its financial reporting structure to adapt to a foundry operating model, a decisive step aimed at instigating cost discipline, boosting profitability, and delivering value to its shareholders in the rapidly shifting semiconductor landscape.
Financial Transparency Reinvented
Starting from the first quarter of 2024, Intel’s revised reporting framework is set to offer enhanced clarity and transparency regarding the company’s operational divisions and financial performance. The Intel Products segment will encompass Client Computing Group, Data Center and AI, and Network and Edge. Altera, Mobileye, and Other entities will consolidate under the banner All Other. Moreover, a new and distinct segment named Intel Foundry will be introduced.
Bold Financial Goals
Within the Intel Products segment, the company aims to achieve a 60% non-GAAP gross margin and a 40% non-GAAP operating margin by the end of 2030 through improved pricing strategies and enhanced cost competitiveness.
Focus on Foundry Business
The newly established Intel Foundry segment will prioritize foundry technology development, manufacturing, and the supply chain, alongside providing foundry services (formerly known as IFS). This segment will encompass revenues generated from external foundry customers as well as Intel’s proprietary products.
Challenges and Ambitions
In the restructured financial statements, Intel revealed a $7 billion operating loss in 2023 from the Intel Foundry unit, marking a widening from $5.2 billion in 2022. The company foresees the operating losses peaking in 2024 and anticipates reaching breakeven at some juncture between now and 2030.
Striving for Growth
The transition to the new operational model is anticipated to empower Intel Foundry to achieve profitable expansion and unlock untapped value within Intel’s approximately $100 billion in capital assets. Management has ambitiously set the target of becoming the world’s second-largest foundry by 2030 while attaining a 40% non-GAAP gross margin and a 30% non-GAAP operating margin within this segment.
Market Dynamics
Intel’s prominent position as a premier semiconductor manufacturer and a forefront figure in fabless technology positions it favorably to steer advancements across these complementary spheres. Amidst competition in the consumer-PC market, Intel faces challenges from contenders like AMD, bolstered by its Ryzen desktop processor family.
Stock Performance
The stock has shown a 23.8% increase over the previous year compared to a substantial 152.2% growth in the semiconductor industry. AMD, a strong rival of Intel, witnessed an 88.4% surge over the last year, outperforming the industry’s 81.5% growth.