As a technology reporter with more than 40 years of experience, it is incredible for me to write this.

But can Intel (NASDAQ:INTC) survive?

The world’s once dominant semiconductor industry is now a shadow of its former self. All of this is reflected in the second quarter earnings report, which caused the company to lose 43% of its value in just one month.

The loss of $1.6 billion, or 38 cents per share, is just the headline. Now almost 20,000 employees are facing resignation. The dividend has also been suspended. Shareholders are suing because they were allegedly not informed about how bad the problems were.

The problem is bad

Pat Gelsinger returned to the company where he began his career as CEO in 2021 with the firm intention of transforming Intel not only as a design house but also into a world-class chip foundry.

It doesn’t work. The foundry is not cost competitive with Taiwan Semiconductor (NYSE:TSM). Yields are poor. Chips that were supposed to hit the market in 2025 may not arrive until 2027.

The design house is even worse. PC processor chips are failing. Its Gaudi Graphics Processing Unit (GPU), which was supposed to compete with NVIDIA (NASDAQ:NVDA), no. This chip is not even manufactured by Intel, but by TSMC.

My 20-year-old “I told you so” doesn’t help. Intel has squandered its opportunities in phone chips, modems and memory under a series of marketing and finance chiefs. Gelsinger was Chief Technology Officer (Technical Manager) before joining VMware in 2009, but 12 years is an eternity in technical terms.

Gelsinger’s foundry failures have a political dimension. Intel received $8.5 billion in U.S. government money to build its new foundries in Arizona and Ohio. It also has an investment tax credit of up to 25% on its $100 billion investment and is eligible for $11 billion in government loans. Intel Foundry’s failures are on us and could derail the entire U.S. manufacturing push if Republicans regain control of Washington.

Help!

Nvidia is just one of the companies desperately hoping for Intel’s success. It cannot get all the supplies it needs from TSMC. Intel is now in a race with Samsung (OTCQB:SSNL), which already Apple (NASDAQ:AAPL) to deliver them.

Intel’s efforts are kept afloat by debt. Long-term debt totaled more than $48 billion at the end of June, along with short-term debt of $4.7 billion. Intel had nearly $15 billion in new financing in the second quarter and invested $11.6 billion in capital expenditures. Intel Foundry lost $2.8 billion in the quarter. Intel has also tapped private equity, which owns nearly half of the profits from new foundries.

If you believe that Nvidia or a cloud market leader like Microsoft (NASDAQ:MSFT) is perhaps looking for a bargain, forget it. Intel’s “enterprise value” includes its debt. The purchase price for this mess is not $84 billion. It probably starts at $150 billion. Then you have to keep it running and accept the losses you’ve already factored in.

The problem is what I call “Moore’s Second Law.” It is true that chip density, speed and therefore cost efficiency double as circuit lines move closer together. But with that efficiency comes a doubling of the cost of setting up production. The industry loses the ability to produce what it can design itself. Perhaps this is the true end of Moore’s Law.

The conclusion

Investors sitting on losses may be tempted to invest more money. At the very least, this will reduce their cost basis for the stock.

But there are no guarantees. Even with $10 billion in cost cuts, Gelsinger isn’t promising profits until 2026. Even if Intel does report profits, the AI ​​surge could be over before it really gets going.

Intel is too important to fail. What Gelsinger calls Intel’s “death march” is taking longer than expected, and the U.S. needs it to get the foundry right.

You pay for it with your tax money. But you might want to think twice before pouring new investment money into the pot.

At the time of publication, Dana Blankenhorn held a LONG position in INTC, TSM, AAPL and MSFT. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com Publishing guidelines.

At the time of publication, the editor in charge did not hold any positions (either directly or indirectly) in the securities mentioned in this article.