Intel's Foundry Revelations: A Deep Dive into the Numbers and What It Means for the Chip World

Well, Intel's latest 10-K filing has certainly stirred up some conversation, hasn't it? For those of us keeping a close eye on the semiconductor world, it offered a much-anticipated, albeit complex, look into the workings of their Intel Foundry (IFS) business. It’s not just about the numbers; it’s about understanding the story behind those numbers, and frankly, it's quite a nuanced one.

Now, Aaron Rakers over at Wells Fargo, he's been doing some digging, and his insights really help clarify things. He pointed out something quite critical: while Intel initially reported approximately $952 million in 'foundry revenue' for the full year 2023, a significant chunk of that figure actually came from internal transfers within Intel itself. When you strip that away, the actual external revenue generated by IFS from third-party customers was a much more modest $291 million. That's a pretty substantial difference, wouldn't you say? It really highlights the distinction between manufacturing chips for your own product groups versus serving outside clients, which is, after all, the true test of a standalone foundry.

And speaking of internal accounting, the 10-K also shed light on IFS’s operating loss for 2023, which clocked in at a hefty $7 billion. A number like that can definitely raise eyebrows! However, Rakers explains that a good portion of this loss is tied to how Intel is now recognizing internal revenue – essentially, about $5 billion of what used to be attributed to the foundry group from internal product divisions is now being accounted for differently. So, while the loss is real, it’s heavily influenced by these accounting shifts, painting a somewhat different picture than if it were purely external losses.

Despite these complexities and the significant losses, Intel Foundry remains incredibly ambitious. The company is still forecasting between $15 billion and $20 billion in revenue from external customers by the 2025-2026 timeframe. That’s a bold target, especially considering the current external revenue figures. It certainly suggests Intel is betting big on its ability to attract and retain significant third-party clients in a fiercely competitive market.

What's really interesting here is how this might, perhaps unexpectedly, impact other players in the industry, particularly AMD. Rakers mused that if Intel's external foundry revenue isn't quite ramping up as quickly as some might have initially perceived, it could, theoretically, mean less competition for crucial advanced node capacity at leading foundries like TSMC. And if TSMC has more capacity available, well, that could certainly be an upside for AMD, who relies heavily on TSMC for its cutting-edge chip production. It's a bit of a domino effect, you see, where one company's journey can subtly shift the landscape for another.

Ultimately, Intel's 10-K has given us a clearer, albeit more intricate, view of its foundry aspirations. It’s a journey filled with significant investment, accounting nuances, and ambitious goals. And as always in the dynamic world of semiconductors, every step taken by one giant can create ripples that are felt across the entire ecosystem.