The wafer business loss worsens, does Intel have a long way to go? (2024.04.05)

Hello everyone, this week's [Technical Tracking] focuses on analyzing the well-established semiconductor giant undergoing significant transformation - Intel.$Intel(INTC.US)$。

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Intel's wafer foundry business has reported increasing losses, with the company's stock price plummeting over 8% on Wednesday (April 3).

In the financial data submitted to the SEC in 2023, Intel disclosed its updated adjusted business structure, which consists of three main business divisions: Intel Products, Intel Foundry, and others.

Data shows that the foundry division reported an operational loss of $7 billion in 2023, a further decline from the $5.2 billion loss in 2022; foundry revenue also dropped by 30%, to $18.9 billion.

Under the leadership of CEO Patrick Gelsinger, Intel has decided to restructure its foundry business, aiming to become a global leader in this field. This marks one of the most significant transformations in the company's history. However, the widening losses in the foundry business are undoubtedly a major setback for Intel, which is attempting to surpass Taiwan Semiconductor and regain its leading position.

Intel stated that 2024 will be the year of the most severe losses for its wafer foundry business, with expectations to achieve break-even around 2027. The expansion of losses is mainly due to a series of previous decision-making errors, including the failure to adopt the highest-end extreme ultraviolet lithography machines (EUV) developed by ASML Holding in a timely manner. Although the price of EUV machines exceeds $0.15 billion, they are more cost-effective compared to other lithography machines.

However, as the only high-end semiconductor manufacturing company in the United States, Intel has potential support from the U.S. government. Last month, Intel successfully received approximately $20 billion in subsidies provided by the Chips and Science Act.

Currently, Taiwan Semiconductor still leads the wafer foundry industry by a wide margin. Taiwan Semiconductor's revenue in 2023 is approximately $69.4 billion, not only surpassing Intel in revenue scale but also achieving a net income of $26.9 billion. Taiwan Semiconductor's revenue for 2024 is expected to grow by 20%, reaching $83.4 billion.

For Intel, the wafer foundry market has broad prospects, and the company will gradually bid farewell to the most difficult times, with considerable room for imagination in the future.

Technical Analysis

Intel's stock price has fallen for three consecutive days, which may confirm the downward trend, and there is further downside risk in the market.

Trend analysis:

1. Starting from the end of October last year, Intel's stock price initiated an upward trend that lasted until the end of the year, with an increase of over 50%.

2. Entering 2024, the stock price began to adjust, but the adjustment process was somewhat lengthy, with the stock price consolidating within a roughly rectangular range for over 2 months, indicating that both bulls and bears are hesitant, and there is a risk of a downward trend.

3. Following Intel's disclosure of its latest Business structure, which shows a worsening loss in its wafer foundry department, short sellers quickly took action, causing the stock price to fall below the rectangular Range and to experience three consecutive declines, potentially confirming the downward trend.

Indicators interpretation:

• After three consecutive declines in Intel's stock price, the 200-day moving average (MA200) has been breached, indicating that the medium to long-term trend may weaken.

• Volume has remained above the 10-day average for three consecutive days, with prices falling and volume rising, which is an unfavorable signal for the bulls.

• In terms of momentum oscillators, the overall sentiment is negative, for instance, the MACD indicator has a death cross below the zero axis.

From a 4-hour chart perspective, both the RSI and KDJ indicators are in an oversold state, but have not yet released a Buy signal, suggesting that the short-term bottoming process may still need further observation.

Focus direction:

Intel's stock price has currently fallen to a five-month low and is within a descending channel. In the short term, there may be further downside risk.

Investors need to focus on the 200-day moving average, which serves as a bull-bear dividing line in the medium to long term. If the stock price stays below the 200-day moving average for a longer time, the likelihood of a bear market in the future increases.

This content discusses technical analysis; other methods, including Fundamental Analysis, may provide different perspectives. The examples provided are for illustrative purposes only and do not reflect expected results.

All investments involve risks, including the potential loss of principal, and there is no guarantee that any investment strategy will be successful.

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