Intel said its loss for the third quarter totaled $16.6 billion.
Credit...Anastasiia Sapon for The New York Times

Intel Posts $16.6 Billion Quarterly Loss, Its Biggest Ever

The Silicon Valley chip maker has struggled to turn around its fortunes after missing opportunities and poor execution.

by · NY Times

Intel on Thursday posted the biggest quarterly loss in its 56-year history, as the onetime highflying chip maker struggles to turn itself around.

The Silicon Valley company said its loss for the third quarter totaled $16.6 billion, a result of $15.9 billion in charges to reflect lowered valuations of company assets and a $2.8 billion restructuring charge associated with cutting more than 15,000 workers.

Pat Gelsinger, Intel’s chief executive, had ordered the restructuring in August in response to shrinking profit margins caused by the costs of catching rivals in manufacturing technology and little success in the booming market for artificial intelligence chips, among other factors.

Intel’s share price has plunged 60 percent since Mr. Gelsinger became chief executive in February 2021. At a current market value of less than $100 billion, the longtime semiconductor industry leader has recently been discussed as a candidate for a takeover or a breakup.

“We are acting with urgency to deliver on our priorities,” Mr. Gelsinger said on Thursday during a conference call with analysts. “We need to fight for every inch and execute better than ever before.”

Intel’s total revenue in the period that ended Sept. 30 dropped 6 percent from a year earlier to $13.3 billion, a bigger percentage decline than in the second quarter but above the midpoint of its guidance. Intel projected revenue for the current quarter of $13.3 billion to $14.3 billion, well below the $15.4 billion reported in the year-earlier period.

But the results and quarterly guidance were better than some analysts expected, pushing Intel’s stock up more than 12 percent in after-hours trading.

The company, which makes microprocessor chips that act as electronic brains for most computers, has lately benefited from greater demand for personal computers. But that business declined 7 percent in the third quarter.

Conditions have lately been tougher in data centers, where Intel built a dominant franchise in chips for larger computers called servers. Rivals such as Nvidia and more recently Advanced Micro Devices have seen sharp growth by selling additional chips that are specially designed for A.I. applications, a field where Intel has fallen far behind. Still, in the latest quarter, Intel said, revenue in its data center business rose 9 percent.

Another big drag on Intel’s profit margins is its nascent effort to manufacture chips for other companies, a shift from making only its own chips in its factories. Building that foundry business, as it is called in industry parlance, aided Intel’s efforts to court subsidies from the Biden administration.

Intel has won orders from companies including Amazon, and Mr. Gelsinger said two unnamed “compute-centric” companies had recently agreed to use the foundry’s most advanced production process. Still, the foundry business posted an 8 percent revenue drop in the third quarter, with an operating loss of $5.8 billion.

Four former Intel directors recently urged the company to be split into two parts — one for manufacturing chips, the other for designing them. In an opinion piece in Fortune, the directors argued that customers such as competing chip designers would be reluctant to use Intel’s foundry business unless it was completely independent.

But Craig Barrett, a former Intel chief executive, promptly rejected the idea of splitting the businesses in a separate article. Among other things, he wrote, that separation process would distract management while not greatly changing the appeal of Intel’s foundry service.

Mr. Gelsinger has already announced plans to make Intel’s foundry business an independent subsidiary. He has argued that the time is not right for a complete spinoff, since the foundry needs guaranteed business from Intel’s own chip design operations to fill its factories. Intel already uses Taiwan Semiconductor Manufacturing Company to make some chips it designs and might make more such decisions if it were entirely independent, some analysts said.

Another issue is that the foundry needs to keep investing in costly machines and research and development, money that might be hard to find.

“I don’t think the foundry can stand on its own right now, unless someone is willing to inject a bunch of capital into it to keep it afloat,” said Stacy Rasgon, an analyst at Sanford C. Bernstein.

In the third quarter, one portion of Intel’s $15.9 billion in charges came from write-downs and an accelerating depreciation of assets related to a manufacturing process called Intel 7, reflecting the company’s current view of demand for that technology. Intel’s foundry has focused on marketing more advanced production processes lately. Another major portion of those charges relate to establishing a valuation allowance against U.S. deferred tax assets, the company said.

Explore Our Business and Tech Coverage

Dive deeper into the people, issues and trends shaping the worlds of business and technology.