How Intel’s internal foundry model is causing ‘problems’ for the company

Intel is reportedly facing a class action lawsuit that alleges the company of misrepresenting the financial results of its foundry. The lawsuit filed by class action attorneys' firm Levi & Korsinsky has also asked Intel's investors to join the class action suit against the US-based chipmaker.
According to the latest lawsuit (seen by Tom’s Hardware), the chip giant has allegedly failed to disclose losses generated by its manufacturing division properly when it reported its results in January 2023.

The complaint alleges that Intel's Foundry Services' growth and profitability were misrepresented. As per the lawsuit, the results included significant losses and declining product profits in 2023. This resulted in misleadingly positive statements about the company's business and Intel’s internal foundry strategy which formed the basis of the class action lawsuit.

In the first quarter (Q1) of 2024, Intel adopted its 'internal foundry' model, under which its product divisions and external clients were made to buy manufacturing and packaging services from Intel Foundry, which is an independent division within the company.

Before Q1 2024, Intel did not report the results of its manufacturing division separately. Instead, the company only published the results of its Intel Foundry Services unit that sold manufacturing services to external customers.
This required the company to revise its financial results of the past years which weren’t up to the mark. The news that Intel Foundry lost a staggering $7 billion in 2023 also affected the company's stock prices.
Investor concerns grew further when it became clear that Intel outsources a significant portion (around 30%) of its chip production to TSMC and other companies.
Moreover, Intel's Q1 2024 earnings report revealed continued losses for Intel Foundry, with $2.5 billion lost on $4.4 billion in revenue.
As a result of these revelations, Intel's total stock value shrunk by about one-third in 2024 alone.