Will the Intel Corporation go bankrupt? The future of Intel is completely up in the air, which is probably why you asked that question to begin with.
So to start with Intel has over $50 billion in debt. $50 billion. That’s a heck of a lot of money that they’ll need to pay back and that they are paying interest on. In 2020 Intel’s debt was only $36 billion. So that’s an increase of $14 billion in about 4 years. Not exactly ideal.
And they’ll need to pay that $50 billion back while also investing in ridiculously expensive fabs. Which probably isn’t actually possible. Fabs these days seem to be costing on the order of $10 billion plus each. So just the addition of a single fab can eat up free cashflow.
“A lot of the problems recently have been caused by the insistence on the foundry business,” Chris Danely, an analyst at Citi Research, told CNBC’s “Money Movers” on Monday. “They’re still losing billions every quarter.”
Meanwhile, Intel’s revenue has dropped from almost $80 billion in 2021 to $54 billion in 2023. That’s a $26 billion loss in revenue… which is impressive in a sad way. AMD on the other hand increased it’s revenue from $16 billion in 2021 to $22 billion in 2023. That’s a $6 billion gain which is impressive considering AMD is just smaller in general compared to Intel.
So we’ve got a loss of revenue and a large debt pile… a combination no business would ever want. All while there’s a need to continue investing significantly in fabs. That makes three ways in which Intel is losing cash.
Intel is not looking good. Bankruptcy sounds like a very real possibility.
What about Intel getting rescued though? The Biden Administration has already given Intel $8 billion in cash through the CHIPS Act, isn’t that enough? No is the answer to that. Intel’s under construction fab in Ohio is going to cost something like $20 billion. So that $8 billion in cash can easily go right back out the door just on that one thing.
The Biden Administration did not give Intel enough financial assistance everything considered. The Biden Administration also shows no interest in helping Intel through the CHIPS Act further. In fact they decreased the amount of money Intel is to get.
Intel needs a fat cash cushion to make the changes necessary to get the company into a healthy state. One they’re not getting. Bankruptcy may be the only way to ditch their debt and reinvent the company.
And the Trump Administration and a Republican Congress may very well allow Intel to go into bankruptcy. Republicans have shown an aversion to both the CHIPS Act and direct funding of businesses in general regardless of how necessary that funding may be. If they didn’t have that aversion, Intel would probably have gotten the money it needs to transform into a new company long ago.
So where does that leave us? We’re left with a company that might not get rescued by the Trump Administration, has a fat debt pile, dropping revenues, and a need for constant and significant investment to remain relevant. Bankruptcy may be down the road for the Intel Corporation.
Forward looking statements are a matter of opinion. Do your own research. Humans and AI make mistakes.