GFS - Earnings call transcript Q4 2021

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the GlobalFoundries' Review of Fourth Quarter 2021 and Full Year Results. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to your speaker for today Sukhi Nagesh, Vice President of Corporate Development and Investor Relations.

You may begin.

Sukhi Nagesh

good full and year and fourth to operator and quarter XXXX you afternoon welcome everyone GlobalFoundries' Thank earnings call.

will with and CFO. along accompanying call ago, is available call our and page. with XXXX financial quarter today's the me our a on release, Tom year being be are Investor is On which press Caulfield, and Dave made full Reeder, This released website A slide web we while on replay presentation. results short available recorded GF's fourth today CEO; Relations' at investors.gf.com

During on by anticipate, adjusted today's adjusted in this comparable call terms intend, to deemed and today's identified non-IFRS The statements. call, IFRS we financial directly expect, statements available are press will may statements such present be release both IFRS most can forward-looking for believe, may. be measures be non-IFRS and and measures accompanying as Such reconciliations and Certain measures. slides.

place reliance to results should update You obligation today. statements. statements forward-looking materially any no from Actual differ forward-looking may we undue and undertake these make not statements we on forward-looking

in information risks about in SEC differ release with please caption the filings our prospectus with issued SEC actual the in press final IPO. connection results XXXX well to that our from described filed forward-looking the For more statements may materially October refer as today under sections we and the factors uncertainties as cause to including our XXth, Risk Factors on

capacity We and a update technologies. begin summary on our will call expansion, end markets, with today's providing Tom

quarter results on year guidance. and first our provide Following fourth which quarter financial details Dave full will also provide and

your please to follow-up. with now one the I to his questions. We over We will for one the then request questions for remarks. call that turn prepared will you Tom open limit call

Tom Caulfield

semiconductor start for We was to any acceleration quarter drove outstanding fourth year of our supply last reflecting long-term the model capitalizing on used I'd significant earnings vital and defined, XXXX call. created, by customer for everyone full role XX a support it GF. like economic an and to Sukhi. By and measure, We implemented chain. you, and XXXX over with industry agreements. success year we business our by plan in Welcome to the play increase on visibility Thank our year. our an we new

world play our With by for an to our articulating manufacturing the played importance semiconductor continue entire of focused we important and role on redefining the and industry, innovation industry.

strong Finally, of our semiconductor a trajectory positioned which global a GF we strategic an and believe with we driving partnerships three over meaningful growth. earnings four of to at-scale profitability. accelerated deliver to manufacturer next was technological culmination with public sustained growth have took over years our the to we differentiation build the decade work for customers, with business Through

to our We by well-positioned plan Singapore. Malta, XXXX to to are increase compared on than New more deliver adding in in Dresden, Germany; a XX% York; XXXX and output execute exiting capacity

technologies. We Burlington single-source plan SiGe, and our Singapore on and are to to CMOS up continuing with differentiated mix in feature-rich XXX-millimeter execute SOI, our facilities

value. a that while enable revenue of this investing all that CapEx of meaningful achieve cash GF as will us deliver on from execution delivering result will to expect result is strong XX% sustainable We long-term combined consistent consistent That model. and our flow free growth financial to shareholder in generating

Now, on to our fourth moving quarter.

at higher higher wafer of quarter $X.XX. came strategy. the non-wafer output, per to report demonstrating a strong our grew and increased quarter X% quarter-on-quarter momentum and growth, driven pleased profitability revenue. topline share earnings by of quarter are ASPs Fourth revenue We Fourth continued in adjusted

moment, on quarter the of me revenue by end just the in Now but financials let a our Dave fourth summary markets. will first give details provide more a

fourth quarter by applications. achieved higher in a ASPs, of device mobile mix as smart of strong XX%. about was quarterly shipments growth year-over-year end higher which revenue, started our designs better of roughly we driven new customer in we First, combination ramp market, and XX% Growth comprised to

mobile over SOI end smart market These our XXXX. X driving industry-leading as need standards market end high-performance year, in RF full and GF's XE. industry for to roughly XG this solutions new the technologies. growth XX% connectivity device GF's grew outpaced due GHz growth the sub-X standards and and such new For our are smartphone WiFi

XE transceiver will market X, In our customer addition, markets large long-term entered growing in GF cellular expand with and agreements XXXX, the share SoC that WiFi and significantly.

sensing. power Android as smartphones. image NFC We One are applications which include power near-field XG The image sensing expected for handsets Other example of such also to that areas increased in display over the rates communication XXXX. specialty examples strong is processors XX% prolong and these cameras. and processors for attach in and image grow in seeing traction sensors is authentication battery market life

customers key long-term Lastly, us the next over market agreements with years. mobile growth our for secular are long-term few end device our visibility covering the providing with smart

growth Next constituted infrastructure the our revenue quarter in and center market. end data fourth center due end saw communications quarter share the of which XX% gains in sequential of X% market data approximately to customer

Tier customer. Over a LTA the SiGe long-term a XXXX, course a enterprise of and Tier-X wireless with advanced customer multiyear multiyear technology networking infrastructure we for X with agreement secured our a

silicon photonics. we leader in the addition, established In industry ourselves as

new monolithic wins double expect $XXX than million Our XXXX. we it to the and revenue in design garnered tripled silicon solution XXXX in again in hybrid over more year. photonics and almost in And

demand optical expect and in by this center, and We infrastructure devices. year growth throughout strong year-over-year market driven and growth data infrastructure communications double-digit XG the continued end for in XXXX anticipate

market. this to from and saw WiFi total the wireless We connectivity applications XX% our IoT transactions. grew WiFi and XX% quarter approximately in contactless transition end X by to year-over-year. market and home revenue increase of and Fourth for sequential X industrial IoT was strong growth on an fueled Moving the roughly end in

that are consumer, audio connectivity tracking we signed which asset industrial have for customers. We with wireless leading LTAs are for seeing products, strong growth multiyear by demand and backed

fee XXXX next marked growth for and would this by quarter, development in Adjusting and expect market announcements key for and management the was the power driven a but automotive sizable be quarter past market been of new qualification have our with few quarterly this fourth this a capacity partnership to revenue, of Bosch. strong year-over-year year ADAS, doubled applications sequential edge in than approximately end The it more ago. wireless safety over also have year, our roughly XX%. technologies. by total BMW third fastest-growing driven designs was ramp that years. X% market automotive. end Revenue infotainment on compute Ford, from our been access connectivity, growth of strong in Touching portfolio a differentiated We and revenue

traction about our anticipate growth in market for the automotive excited double-digit We end market in this and are very XXXX. strong

in We have end growth In declined begin X% expected. growth EVs fueling space a radar in that revenue roughly traditional management was beyond our ramp number to of and will automotive our market, auto battery compute as new year-over-year customers for and into the applications. in of XD XXXX, applications total

we market to transition As past products we single-digit customers we the nanometer. as will decline served serve the in their mentioned our have continue to – previously, PC

in decline year-over-year this XXXX. end forecast to continue market We in

with play our work on solutions However, the in nanometer investments and that that complement signal designs. mixed focusing strength single-digit power our we to side-by-side have processor been and

LTA controller to multiyear for we market. a secured producer this ICs with instance, a Tier manufacture For X end

We to of the expect from these new in this customer see of high-margin market. half second end ramps XXXX in stabilization designs

our capacity I would update expansions. brief on Next like ongoing a to provide

capacity by to plans is increase XXXX, by high plan For our expansion the primarily Dresden. driven in single-digits, underway

for the the capacity Also as module and construction of memory customer our facility for XX- of and of half first in XXFDX; sensor the All with technologies differentiated is track embedded of Phase on XX-nanometer into expansion demand support processors in technologies. expansion X slated this BCDLite of to go and to image XXXX production outs in on XXXX. nonvolatile technologies; equipment half remains first in second Singapore that support such

suppliers our our and maintain closely our and contractors hand-in-hand capacity construction working are with schedules. and We expansion equipment to

single-source customer capacity with agreements expansion investment are our majority support expansion and of reservation this of significant long-term of is business. in Further, prepayments. All investments the backed

our solid enhancing expansion, to to In addition in our continue make we ongoing capacity technologies. differentiated progress

XX early our XXXX, customer GaN low-power for These new customer to circuits RF image RF power technology automotive, technology We include capable sampled sensor, our SOI, and feature example in XX had next-generation ramped such aggressively amplifier XXXX. We started qualifications development automotive-grade products. added proprietary and FDX on reduction six RF qualifications resistive ultra-low-power And and we qualified technologies. projects. management of RF. our our for RAM, For and and power as in new power groups platform BCD

customers, qualifications HBT photonics, covering double almost and the we year XXXX, For BCD tracked for our number from technologies. technology last are all FDX silicon-germanium of to silicon

dynamics let the added Now, discussion add very today's thoughtful the thoughts this the analysis me a topic. industry shortfall need. David, before few I of supply-demand the of We growing capacity on demand to spent and to address of supply hand lot a and time being in to over overall important

SAM. is and XX-nanometer So let This me start with our above.

is this mid- next today that per is range. imbalance to industry offset This over equivalent in wafers about growth our wafers not we're million mid- note XXX-millimeter is the this Conservatively, I'm year. SAM It's sorry, base and units. Now XX growth in in is high single-digit capacity and industry-wide That's is off this the ASPs. talking of a of believe we – five the shortfall growing SAM years. unit supply to to in to high the important digits in single approximately

the fabs the years. around the next under from Based will we our China-based So supply demand foundries exclude tooled fab and construction that five growth drops presently or on number today's announced announced the X% X.X% shortfall in five over those both to expansions let's over to compare X% next capacity supply grow additions If being years. SAM.

right long-term So the business. while customers' return we a analysis and us strong summary, interest our on in believe long-term future revenue almost investing our capacity, for are note XXXX continued based ended the invested we that on to double and on we enable making momentum. delivering business will capital necessary In this investments our for

customers We growth the from our end are markets in seeing robust serve. we

to needs prudently Dave, to first details our We the you the the the call are to in Over technologies and making our turn for service provide great in me over let financial accelerating expanding also quarter capacity David. their the future. provide quarter. guidance that, and you, to With progress and differentiated partnership for for fourth our

Dave Reeder

Tom. you, Thank

our to quarter results. full on year Now, fourth XXXX and

accounted X% in LTAs fourth revenue billion, Our increased Wafer we constructive approximately which by in quarter, XXX,XXX which was pricing $X.XX and revenue. end revenue and for improvement last mix. approximately equivalent total X% our ASP call. in revenue approximately approximately ASPs and from quarter driven the our total reticles for wafers provided includes increased about pricing sequentially, approximately the approximately Non-wafer range XX% fourth earnings results markets of shipped basis. millimeter expectation the very higher overall of from high revenue financial transactional sequentially, Fourth total exceeded revenue wafer of quarter end with with by X% engineering, nonrecurring accounted shipments, for on our of non-wafer XX% of revenue. We sequential fees of and other expedite better increase environment continued the revenue. driven per a consistent ramping XX% wafer items, quarter, product an

in For representing billion, year-over-year the came full increase. approximately year, a $X.X XX% at revenue

as in end personal grew for As business reduction as year-over-year of we differentiated planned, all remix solutions. more our expected, declined meaningfully, markets compute, our which except to the

the For metrics, I which guidance, the call, adjusted including first will exclude reference of quarter compensation. stock-based remainder

were a million, points fourth basis $XXX margin. higher of delivered the of Full For the stock-based gross translates and the XXXX quarterly the quarter primarily operating Total $XXX represented significant from cost operating absorption, was X.X% XX.X% for improved of improvement quarter, revenue $XX million. excludes of or operating fourth mix. quarter, adjusted at of X% and compensation. gross better year points XX%, basis The sequential gross $XXX which million approximately profit adjusted Similar which than margins of $XXX expenses adjusted GF million X.X% our operating QX, driven the delivered adjusted expenses by into fixed $XXX SG&A XXX of XXX year. end XX.X% approximately margin, to improvement million for ASPs profit prior into revenue. was guidance. higher we high million translates R&D represented approximately

on a adjusted earnings quarter share. in of million, approximately $XX million delivered $XXX year. million For fourth we the improvement share profit count the net significant Fourth of approximately in year, $X.XX $XX full XXX delivered diluted million from quarter. resulting quarter of a operating interest and net We was incurred tax the expense million also income approximately a per we expense prior of of $XX

an We approximately we on year Adjusted adjusted full grew quarter EBITDA fall-through. of the adjusted For sequentially revenue record ended of million million. approximately of $XX XX% fourth net delivered representing with $XX incremental $XXX million. million loss EBITDA $XXX growth,

the year, approximately billion, For $X.XX an adjusted full of increase we the XX% prior EBITDA delivered over year. of

now flow for quarter metrics. approximately and access Let operations was million CapEx the than million in roughly $X ended cash from cash cash me some We and XX% billion the provide fees. included fourth year. of balance or from flow an and Gross quarter $X.XX sheet the revenue. and billion and $X approximately quarter was prior of year key about of customer the increase prepayments equivalents more capacity billion approximately for $XXX Cash $XXX with

for let Next, first with the outlook provide quarter. our me you

revenue $X.XX expect be billion to $X.XX between billion. We and

be gross adjusted and million. to between expect $XXX $XXX million profit We

We expect $XXX be $XXX adjusted between profit million. operating to and million

share-based the in quarter approximately Excluding $XX which expect compensation is goods to million guidance, million and $XX of million expect $XX we we cost for share-based sold total in quarter, compensation OpEx sequentially. first of be our of approximately first the decrease midpoint OpEx. to $XX At million

million. interest net $XX expense and other roughly expenses be be quarter We million expect tax for $XX to the to approximately and

$X.XX. We first between adjusted approximately fully million to $XXX $XXX expect XXX diluted be basis $X.XX income per for be share expect million we the earnings and between to million. shares and a adjusted quarter On net of

adjusted first expect be quarter EBITDA the we and million. between $XXX million to $XXX For

support be XXXX, to For in $X.X contracts. invest billion to approximately gross our customers continue to with our total we as deliver to CapEx expect capacity we partnership the necessary

summary, customer we and than plan. roadmap fees of We executed more with access return prepayments customer year. funding on delivered billion and in and XX growth quarter-to-quarter long-term that XXXX We we capital. the So invested on our delivers better progressively secured to financials agreements $X.X investment competitive executed and CapEx throughout

methodical about excited let's are fully call execution. Q&A. With We expect our Operator? in we our continue and XXXX prospects that up the to for open

Operator

Credit first of Pitzer comes [Operator the John line Instructions] from question Suisse. Our with

Your open. line is

John Pitzer

'XX. you the let ask question. afternoon. Hey progression was talk could little of for see Good year bit guys. a I calendar Thanks me kind the if ASP Tom about you wondering for

being in supply kind of position the envious of You're limited.

outs advantage the balance call navigating are good ASPs? the How about on thinking of a relations? the kind you job getting long-term the still talking maintaining did You for the about you not customer year. of And growth wafer are cyclical environment taking paid in and of through those how kind of value

Tom Caulfield

equally us customers of we were be in capacity. we're sure Look important side our in sure We we because to erred agreements on committed in was as balanced this. we wanted sign when the call, We road adding longer last talked our to the to wanted John for to make more show long-term capacity. range certainty these it that make very

David more chance give the XXXX. give ASPs And that little of you really this with is -- those increases certainty for to details ASP it -- deal but with pass But do growth. bit to our ASP a or those our can chose balanced the so, our they in needed way we business to we customers year

at -- the number ASPs about a And this is high single-digit growth year. the on of of of this year for level so kind roughly enterprise

capacity was anything customers create partnership growth we're with for add to balance and use talking go and a -- in about. that partnership in David way to our to Now that? sheet in this done we very their as our methodical that

Dave Reeder

high as ASPs in volume talked going we're perspective, actually to to digits. a XXXX from about From is capacity those about high then digits year-over-year year-over-year mentioned the what And XX% versus grow 'XX. Tom John. Hey ASPs single we've Yes. single grow will

up volume year-over-year. ASP follow-up year-over-year. XX% is up Did have the So, high you single about a in range John? digits

John Pitzer

year. there the among still it know Malta just details March and you some the because road skeptics of financial exiting you ramps? show. I relative out hoping Singapore. touch Dresden go some as capacity geo for the follow-up. That's progression quarter helpful. my on kind on There's Dave there's margin I some out expected the maybe longer-term differences of on balance the by could Yes, can the And you to distinct of put through just was model

Dave Reeder

talked Maybe we to lead disciplined three about Sure. talked first well as capture environment I'll to were then have business of and answer increasing driven something happening about as and accretive the And of And We've the talked that that. by of if as John improved anything that in partnership things course part business, of you upon of markets our it. then to pricing you depreciation, through We our business investment in add Tom build single-source that up talked chime absorption. that this constructive would normalization percentage differentiation we drive the CapEx fixed helps to target. margin. our we cost margins. really about can about the being mixing our

And regions a about talk as and individual the the so those with backdrop, points me let factories. geographic three

So is is long-term let's of financial Singapore about start model. at XX% with first. total campus. largest services our capacity. our It Singapore already our Singapore

Singapore get scale enterprise your XX% that that and that kind that's we year-over-year long-term So footprint without additional Dresden tooling, we our at in total ASP the growing. cost of through our capacity cost XX% absorption. fixed question. course, of of we in which prior that fixed XXXX, model Dresden, of increase talked is but benefit is about about as

long-term XXXX, our big of a similar the roll of then Malta, kind as output will facility cost has but we've the XXXX then, wasn't metrics. tooled tooled. to fixed of almost throughout half improved absorption And XXXX that midyear absorption In cost plus that financial Malta. challenge XXXX. footprint it it the be first off our the at get to entitled fixed a bit that of us fully of that got cost total fixed We'll that has finally, gets has triple exiting So so depreciation pricing we absorption. little then and around And

that So similar Dresden late Singapore it in there. Dresden I be course, of Malta. as won't quite there. then But you'd model add? long-term anything will is a will XXXX. very and be be situation XXXX, Tom early Burlington until described just to

Tom Caulfield

to good the in manner. we it's No, company this I for early years the invested that dimension concise that it in a week rolls think and put depreciation heavily There's depreciation off.

lever. that's one So

The proof three that ASP second -- and is the lever give the then, can some third is more a but this point you path really the remixing as one could leverage our always is and Singapore these, we And efficiency. long-term Any three fixed huge of the And David, to our drive skepticism that to cost us those for profitability. will say profitability. map I to like road of model. the our get we it's one good. cost our combination already at facility have

John Pitzer

Appreciate Perfect. you. Guys, thank it.

Operator

Thank you.

comes JPMorgan. question with of Sur Harlan from line next Our the

line open. is Your

Harlan Sur

the this congratulations team strong execution. is this Good afternoon The looks on Demand year. growth strong end and quite markets. environment revenue stepping strong year your anticipating across into

the segments or of percentage are Help one your to the the ASP on this us questions, based range going growth this to outlook, order year? remarks going guys high-teens shipment it of of think to looks grow rank sort prepared you and your be I revenues which strongest your in sort of year. like driving your an answer in are

Tom Caulfield

to add and commentary Hey let start then you David, as I'll I'll why. some

Dave Reeder

it's a Harlan, a of automotive. talked part about our lot but smaller we've business Sure. Well,

we're IoT that's XXXX total business. become from industrial in on our business even XXXX that's nicely we expecting to an home expect growth of quarter-to-quarter. that XXXX, so, it strong part And basis to business, and a of it grew automotive grow another to portfolio. and XXXX be and actually business, for lumpy continuing IoT us the in the The kind versus bigger we're expect business, faster annual year-over-year But automotive

IoT in not traction And business. a enterprise will business for grow range. at that's that home quite our lot mobile half around business of certainly seeing business that business it's of we're and kind just the devices, average. of a IoT so And our Smart but -- us that industrial

the real a So in mobile of our IoT probably portion enterprise home having the automotive infrastructure the a from industrial home smaller And growth, highlights also and but IoT. sizable automotive center I industrial think and base first growing more average. and nice terms devices portion two growing the to data in of at smart highlight business, growing communications

Tom Caulfield

you a be next our high-single-digits out, revenue bit It device. the mean? XX% sockets growth. it's going that this them. smart I'll are winning growing on more just what does not have add but mobile Yes. is a to pointed of David year. at revenue year, means our we're little Handsets within robust And --

module. the that's our franchise goes image in real to -- building and We're industry XG, processes. us in for As sensor a business front-end our the growing

So, more sockets, content. more

rate that don't the to as at inside content the business silicon grow have handsets devices. more So mobile we win our smart goes of

Harlan Sur

I the there. insights appreciate

the And the with was passed COMPETES passing the billion Act version year. my includes America to follow-up $XX Senate Act and the so last by CHIPS for which similar the that one a House

by be President Bill agreed signed the reconciled Biden. to So, needs Congress, upon by now

government of your CapEx strong And maybe a appropriations of US some an are much to CapEx the the you much on team. on be then could three Malta? to view Do allocating updated have subsidy primarily next supported idea potential have guys lines staff Act over by You get funding. years how how US you spend CHIPS relations want for dollars? time Just

Tom Caulfield

of So, first the part let's that. take

conference to supply that which of passed the the around with is this a timing meaningful timeframe. importance. time that it's aisle funding going of be US matter before right, for going at, rationalization over, you're semiconductor thing about Our billion, if it's some the into year more go billion, is that context that be is you're going in paramount first everybody it and side the knows bills CHIPS the half of And two be $XX to chain add capacity Bill $XX law. now billion very to is We And it's we've $XX meaningful. have love to in is in billing right? the Washington the to be creating been will forthright these And one it to I doesn't security

far technologies our As plans our with a first are, differentiated the or customer as a single-digit in invest mind our because partnership customers so to we're mid on to they there's participate have don't and we returns in sense we there's this invest foremost this. that and investment that building We co-investment. We just certainty high leverage demand to get makes the government with in incentive and support because of kinds is returns. government the

first model the and the make right sure And the then or return we to on achieve they sure there have is customer so -- and make business. is make can to that our versus demand payback we certainty investments capital make go the there. The partnership capital those the make a we sure investment

will I What be in and spent. we'll to that, Department a actually think way that money to information in in New Fab for Malta, today was partnership. on in way how find Commerce meaningful ask said found really a a can having do Now, York I encouraging for campus started we X request our this expand

to starting really they're we're of funding. like looks ahead it and get in this of appropriations the lean So

add anything to David So this eye time we'll here. that? keep to a unfolds close on as

Dave Reeder

that's to about going for in communications SiGe take to and primarily some primarily market. Burlington of then $XXX into FinFET Harlan, Yes, there's a into or and give XXXX X, Fab about million investment think bit to CapEx there's mix going capacity. million speak infrastructure up $XXX us the into that's little I And

currently for XXXX. contemplated are we those So, investments the have that

Dave Reeder

none right. them dependent government are And this support, that's funding from of on

Harlan Sur

Yes, great insights. Thank you.

Operator

Thank you.

Our with question Ross comes Bank. Seymore from Deutsche the next of line

line open. Your is

Ross Seymore

how to spending to needed ask Thanks on it hit coming supply results. the that in want Texas companies, the the to demand industry back to fab-lite strong last broad-based of Congrats about kind the the companies, is topics and they're exploding. to you me look grow question. up on for guys. or one on and edge I about Hi meet I letting Tom preamble disconnect. supply week. fast go talked the their IDMs the If of lagging whether Instruments at the

lead the companies of the of average declines pressure your that scared you these those companies agreements, know wondering you aren't as industry, rate, or you the reconcile your way three that their are supply on customers? could so to an how So, of do also that in you more pricing view but two, any aggressively? have spending I times necessarily long-term endorsement spending are XX-year just customers as growth that

Tom Caulfield

been Yes, maybe remember a too. expanding you new bit to has little they because a disciplined not so our they where in more have spend got needed grow existing needed industry, they very just product, to they if to capital grow don't In you And they TI more right? their business footprints. how make point facilities don't make expansions. And

it the more about is the trillion a one model customers go. for And us to to to go this not industry. sure sit our bring going XX go in solutions first for and that you long-term try tell In just it equally an to where We're endorsement doing where beyond then fourth years, really capacity with that our last that building of are go for that customers and and to It we for XX down year, differentiated our lot to to saying, build first that we your part is We're that's very orderly which agreements create it we want we're eight, fashion. going customers and building double. committed creating get talk the we I'll are sell we -- economic have it's And right? years not And as us future make it orderly an to think about when capacity. Call that become it's -- industry. years took think XX to to I $X.X it needs to industry an we that them. in to we're quarter, the to this And capacity. ahead started going signed to a XXXX, a the all on.

those what But to going doing hand-in-hand add we're a mode, for us. partnership would And to with fundamentally the next customers we them. capacity. committed where additional same, our to are to expect what's more conversations the they capacity to So be of capacity doing on it putting the continue grow in like are this well year and

Ross Seymore

Thanks for that color.

of for on As side things. David, gross margin the my you one follow-up

there's Just versus wanted the quarter? the some see quarter-by-quarter about you to of Any And the the on this of your of gross thinking to steps sorts linearity color, fourth falls depreciation get things. in color know on, was I a progressing off as year little the sort you guidance margin when bit surprise line? what and in year, then more those how we're

Dave Reeder

tool fixed asset respect we expected. think with of then of little that with Well a engine guidance our to that pricing quarter, I absorption, Sure. an course, stronger and this business. for I there the delivered, we for is of a associated very, to was as some fourth cost things. One, think were improvement two the expedites and powerful And some the fixed pricing than a very accretion

and got fixed and the ASP we that better a to in quarter the better premium we absorption upside. so little got bit led and pricing cost And really fourth

you with think one-third two-thirds the But XX% to I stick about it's think guidance volume-driven first quarter, I'll ASP for increases QX the for year, we full-year ASP, what QX. the about to path to quarter-over-quarter with think the improvement for I full you respect gave when year-over-year.

margin. expand a the fixed absorption -- that faster so online is gross that the And would what ASPs is than coming means little cost are

getting still the a absorption cost still footprint Does bit coming is of that As benefit that getting fixed in of the volume So scales, online the right? faster sense? you're benefit fixed still than absorption. the ASP make cost but that both, little

Ross Seymore

you. Thank Yes.

Dave Reeder

Thanks, Ross.

Operator

Thank you.

from Our with next of Chris Danely Citi. question line comes the

open. Your line is

Chris Danely

Thanks, guys. pricing One question. more

for again but into on double So first XXXX the you Can on first pricing Any it out booking environment year? up digits would reads I or sketched to XXXX. be strokes the take XXXX? we expect next you're imagine

Dave Reeder

Yes.

going color a year to to and we're we're the you and context, quarter that guide in. think I look -- think time one then I try for some give at

think I currently in. in business response, very a we're that anything? the that say, we so a and very I as Tom, encouraged environment -- I'd think constructive high-level environment we're remain by

Tom Caulfield

for Yes. the able equation us need, to our to need. And be returns those part customers ASP create capacity to we is think I of the close

got So to here. to write continue develop story we that's that the and

Chris Danely

Great. question. for competitive my a follow-up And just

also So a issues have more announced major -- all? a this on about their CapEx. of capacity or of this in the worried Taiwan potential in with latest then edge. foundry. business you talk or down at to to making customers Has more you guys guess to competitors semiconductor getting changed customers the the you Is little conversation internally? into change a the They're here And main the their in road, company I both with the bit little environment increases no when trailing US, the have your focus announcement it's going

Tom Caulfield

investment, This but like see have of that. data the want to nanometer. declared of the industry competitors -- the capital to it the so for levels transistors it's to be single-digit dimension -- represents poured fastest you are being a now they expansion. highly clearly we you has doesn't capital-intensive of that doesn't It that call call market, some and it memory serve logic a of And three There this is the complements space Intel at compete edge, in leading feeds part into centers. but dollars lot There's smallest as foundry market. think XX% whole segment I all. segment to there's it three then for

how market segment manufacturing them semiconductor Intel only again, not important how not as an in once that to validates don't we choose and they're it is serve. the this entering world important us, to that we as is economy. just competitor But see to but a For industry market the

we going track on. being The demand growth shovels serve, about closely. don't you gave natural a We we the of lot other that very service added. in market the in being are that's capacity going where ground, around in this capacity, I with capacity put to that's see beyond is We that. on, going watch statistics where spoke the We --

will industry. put committed that's seeing don't if you're I expansion And watch capacity add for be we to to add don't know that capacity overbuild we capacity, very somebody we making something we sure that rational not this think who's we that again, And have anything we'll going closely. to that? David, on. to

Dave Reeder

Yes.

engage fourth I to And continue wanting have we proof we a five customers long-term with signed our in us to quarter. think I'd – on just again as new secure add that supply. the point LTAs

But believe all looks imbalance. a looks we time customers on we better. our So period getting it are last believe of little it looks supply-demand see, the a that currently an think to going It it's are signals like extended like what as bit from and well. things that we for like see, in based we I

we our And to to headlights very a we so our have plan look than that we as methodical execute are and if we're continue accordingly the going to to what anything see is we're at different do going disciplined going plan. execute we to going that. course in way And correct we're

Chris Danely

Thanks, guys. Great.

Operator

you. Thank

comes Our of Lipacis question with sorry. I'm Mark from next the Jefferies. line

Your open. line is

Mark Lipacis

companies, okay. because you enough to them my my Jefferies. name. expectations Thank question. of mispronounce A semi-cap It's listen not getting the from earnings people for taking lot hear Lipacis discuss calls When of the equipment components. you you many missing That's Mark they're

hit ability layer about now? but you're are the growth onion. that the biggest What your your Tom constraints your your get script same are commitments ability customer you Given is know right like capital equipment. calls too. and maybe your meet to to you your are little your to capacity imagine we the risk What going to and one seems can listening talked I in like? the conversations potential bit, I of semi-cap conversations it that peel with a suppliers that this

Tom Caulfield

we to... Yes listen

Mark Lipacis

a have Thanks. I And follow-up.

Tom Caulfield

calls and lead same a at times listen capacity expansion was to end of the slots we and on plan the XXXX fundamentally, I less think We Look, booking to with started our them. competitive. calls of their the we're early and lot XXXX, where

so – in kind bit a first first And it's little of the out.

of They're we plus we're They're minus in equipment. not or delivery buffers schedules. in seeing we within to our swings manageable weeks of And balanced put so the all our add capacity. delivery, our huge

got pretty that was our to I make of best side equipment have orders timing supply wafers to we the and chains, line our we're we this sight us no with whether in on make early this as But of our create components in chemicals equipment we on one's early. for for we immune capacity. a get we I us that friend got guess. add all the think can. one orders tools, Plant good it's to worldwide with receives need to or early. I dealing from battles daily And

Mark Lipacis

That's helpful. follow-up I if And a may. you. then Got

players there is manufacturing enough I'm can and chips is they that many prioritizing And get worldwide that else solve losing I together guess in industries vertical on put Given that Is guys queue the seems outside semis like world's on? "Hey and – us together semi-cap of to into that this alleviate revenues can't get everybody dollars and the billions – the that right there chips?" focus the way you them can Do to do say or capacity they is equipment get now? one semi-cap does? help because be something to equipment we players of wondering It market components. more make a such industry prioritize semiconductor shortage and is problem a we are association semiconductor would goes for that you industry might get way kind of this semiconductor a like of an

Tom Caulfield

of is complex if business. look very a we're on it's This Well, going not conversations. part those

of about. point and factory it what more that you be if and gives You don't very tools. complicated could sudden mix tool, I of possible talking doing match even you could be adding of one greenfield. that's X% tools a and pinch a configurations was tool because you're a know routes all to an existing And type

markets I mode suppliers your go they the think only plan to everybody to the point and those work for execute your capacity with to not but those then that want serve, their create to in the here serve plans. partnership markets customers business, is understand

I we think what to tried-and-true that's try and a that's business methodology objective and do.

Mark Lipacis

helpful. you. you. Got Very Thank

Operator

you. Thank

Our with next Chris question comes line from Raymond James. Caso the of

line open. Your is

Chris Caso

your the come Yes. remarks like evening. of Good I'd of on supply-demand Thank industry. Tom, for view to back the you. your opening some to balance

at into like It that up But I'm from do here. about and be balance? progress point the single-digit to think some sounds do look your spoke you that high what what think back the to as catches we get as you think a was When You normal supply shortfall. you back thought analysis, gets wondering at industry you conditions? industry we make

Tom Caulfield

Yeah.

begin the a match. think problem with offset have we I have have that's we is mismatch either think we something growing. big a and have we we this of to it or And

We back big gotten add really I I a down comes think times How better. fast macroeconomic event some mid can with of lead double continues We short me, out. how way while industry. to the of there's years? a in eight But going And an think kind our think just fast last big really so all again, about to year economies capacity. mismatch, we to XX to talked can I capacity and range. it equipment it's add started industry will grow down this slow demand suppliers will we including about that that for

put I It we more position mean, fixed it do. have where five doesn't get doesn't get in part better doesn't next know balance. we demand for doing what not a we're be we'll better gets the supply But it a better. it than the we think to and to of can capacity chasing and mean, on everything years, to

Chris Caso

you. Got it. Thank

-- a As you good leverage revenue. from very there was fall-through follow-up incremental David the on

forward? I'd of fell-through. influence XX% And of Is be ASP might that? revenue think suspect gains the every on reasonable quarter that even some spoke some the have incremental you going might not about I expectation a which

Dave Reeder

fall-through. That's XX% I for mentioned I EBITDA correct. Look think the

I math think you'd the higher more the did XX%. if you something than gross on get slightly margin, that's

to estimate. fall-through range somewhere good I think mid-XXs from perspective, is in a that a fall-through low-XXs

Chris Caso

you. Thank it. Got

Dave Reeder

absorption cost the and that talked of taking Again, about we fixed ASPs the earlier. advantage

Chris Caso

you. Thank Great.

Dave Reeder

Chris. Thanks,

Operator

Thank you.

comes Our from the of Morgan Stanley. Joe Moore next line question with

line Your is open.

Joe Moore

fully $X.X of -- deployed? that I this you. much deployed you your it could get and you overall And can you estimate that that then of a in growth? about for the I it how CapEx when can understand, billion ballpark wafer us your and but talk would what wonder Thank XXXX year, doesn't bit capacity little wafer Great. if means increase would CapEx fab about directionally? what number a give just talk fully

Dave Reeder

in on kind that's Singapore wafer a about the wafers million X as north as talked from rate from run Look XXXX of X road what that's what taking capacity under we wafers a talked Joe. XXXX prior perspective. we what we're from facility call, again, our of exiting bit the to that well And Sure, million today. construction currently about about fully little show ramped as

if so rounding slightly up roughly XXXX And look at numbers, XXXX delivered there. we the X.X you wafers million in

year helps and to get than of a take to way some billion And partnerships the so X we're X well million with governments. coordination our not as investment with halfway wafers more there wafers. portion again customers right us that in to this the good $X.X quite as year our per That investments million so that's

than will about So in our from that intensity. the ultimately, about lot directionally, other it's we approaching from XXXX what talked XX% And or in being maybe I'm not road long-term XXXX. show. then long-term significant at than was spending changes we're going model XXXX to more what decline capital talked not of a give our color model

Joe Moore

Great. up government of the And then angle. if I sort could on follow policy

to in outside like -- ability that? US of Germany subsidies tensions supply Any US? for any their about in You money the does spending any to obviously in a benefit can Malta. get the guys maybe chain spending give conviction there's of Asia spending your could on there to Singapore, thought you you if you things lot Is or procure, chance talked

Tom Caulfield

program the Because global it from so significant the Well, has partnership you first facility chain risk spread it's concentrated. we're that a the a of world from The X-phase supply -- in have We've around highly the building years. footprint don't now our and expansion our Phase of facility taken I right Singapore co-investment competitive money strengths. and you think is the our mitigation, support Dresden your one of with in one IPCAI over ECB, Singapore. risk

start with -- European today they a comparable out fact that's billion the to in bill about came to bill go US. CHIPS that's the $XX want debating to Union In the

to going it always make we're the look economics global our opportunities footprint of to increase that right with the scale back for So and do sense. again

you add time promise I to think always We're greenfield. you because in on or I some is, the We'll ecosystem to could middle market go of to you're better location that one thing leverage. going scale. going efficiency facilities not better see go doesn't to not us an and you have faster existing have capital have

sense global makes add that competitive look to in look for advantage Dave? it add always operate you on. three when capacity to all leverage footprint we'll so anything and a having Would to by our continents opportunities And we

Dave Reeder

said. think I well that's No

Joe Moore

Thank you.

Operator

you. Thank

Our next of the Company. & from with question Raji Needham line Gill comes

Your line is open.

Raji Gill

time know in long about I over term? core you heavily briefly by invest I presence more is Asia spoke and wanted the taking better change But you through XXXX. it. strategy, your the to momentum you that mix my on -- just have IPO. region good Congrats understanding for question. revenue of your Thank may get a the how your following or US European will in to the

Dave Reeder

Yes.

we've we well customers spoken our think spend I gross XX% perspective. So with plus is XX% CapEx in and so that revenue. anything about that that US. minus the our strength little in We We cost geographic the ours. our of in About as a that And enabling the to rest single add? or rest from partnership it's this is footprint that you'd revenue of up governments this call. digits world or And a the makes with about on manufacturing from really absorption terms then local pleased incredibly revenue then it's expansion a of real the range. of think mentioned. as it Europe. the We're just China is bit X/X around of our And as appeals mix high regions fixed from Tom of margin all that customers

Tom Caulfield

Yes.

design footprint Fab there's just create flow. Just one continents for see this is away. qualifying geopolitical you are does customers. in more think think what a number a Fab that any there One sourced cost can It's about our of built It's that's our customers flexibility a site real having sites tensions supply value of world in Singapore process that numbers instead design qualified. chain chain geographical global risk lot part still same this the X lot two in it mitigation when supply our We same our facility. where customers. X concentration of a without build starting our real for in security, And of facility to

Raji Gill

that for And tech billion be follow-up if my much plus later is yield on is process commitments would of the versus expected? -- how in $XX developing? of is your that impact you. ramped based than And what be Thank the

Tom Caulfield

build of vast already production continue been vast, on the building. it's already that is in adding to and majority capacity to things Well we've more

is R&D manufacturing So exercise. a This exercise. not this execution an is

Operator

Our next Bryson the comes of line Wedbush. from question with Matt

Your open. line is

Matt Bryson

on great on or a they my and often question the hear congrats focus about autos. HPC and of and quarter. electrification for Thanks When people automotive I taking strength talk semis

guess fitting the to that being of you am with Do portion correct, you're that some with you of often at market-driven, margin IoT you allowing FDX segment if people is the hear fastest-growing or higher space faster for higher Thanks. least And right guys? is forward. that of industrial at strength like and see specific GlobalFoundries as when thinking in more a or your very and looking growth that the ends assumption I being well I'm in don't the with take them. home strength to about moving growth that being requirements You that I a technologies guessing some up talking for that space share. margin

Tom Caulfield

talk first let's Well, market. the IoT

in XX to next that XX to to handsets actually going And for years. IoT of years ship on years XX for PCs devices IoT depending took over units, kind and we it sat units the that growth five XXXX, billion your years there volume. we had industry. XX give we in took billion outlook. shipped that XX to is billion three you ship as It And did an As XX

is So they're IoT, that, on it's the a I IoT everything semiconductors blender growing connected. And Internet? of of wireless feature connected. away office Whoever everything connected growth be giving exact the blender market. thought they dentist their I needed and but point. this made in pervasive And the a to connected the think deployment biggest you sitting the blender. is was is the to connectivity So, today, needs market. a everything

ourselves priority not The are tethered. two, have connected things three We power one, is for management. differentiated they're and and that especially number number when number

few can very that You need that that do to there's years battery and life. We need make with time. processing all be and the two AA at And technologies image two non-tethered edge for the recognition batteries. to need on applications deliver cameras yet image and on they connected

markets so of already you a space. and one to David, fastest-growing is been And in it's IoT differentiated have we that key the technology -- what IoT markets, market. and add It's net-net growing that? one of fastest-growing the would

Dave Reeder

mentioned right? about Yes. all the connectivity batteries. you've to and I wireless in and we interface home where those diverse look AA real of an at management, got kind machine underneath compute major he industrial course some it is, our areas if and look of power I space subsegments have with human described talk control is This and And I how you mean were in and right? technology. as life and at IoT, this Tom are as differentiation that two-year area

position. compete have and that we of so us. us very second industrial if enables a for to part kind your effectively it the with an And And in will, and accretive is of space business you to question, we're platform happy IoT home our very purpose-built the

a pivot pleased was Matt? of in couple segment. progress our years have that follow-up so this we're our with Did very And you and strategic ago, a during we a it battleground targeted

Matt Bryson

No. No follow-up. you. Thank

Dave Reeder

Thank you.

Operator

you. Thank

question next Sankar the line and of Company. Cowen from comes Krish with Our

is open. line Your

Krish Sankar

for my fort one is Thanks Hi. of the a to like going and two Tom, that today while. situation exceeds Yes. taking I a I understand have been it the supply first question. demand there's where is be them.

are picture question your strong. your is, the ASP price very capital and increases is also big high So intensity

would slowing? follow-up. And imply that or So CapEx simplistically growth put, revenue have pricing I declining for GlobalFoundries a is then

Tom Caulfield

Okay. it I'll over and David. I'll to hand start

we're capacity obviously adding we're adding As line. top

if so, to a your more -- that CapEx means you percentage of is your revenue fixed to and deploy revenue And of you growing and percentage you could get a more that deploy CapEx.

sustainable we XX% -- model that revenue. can our -- capital of investments we can is maintain our of with Our grow set growth through

to capital X.Xx can next And investment shareholders. free exiting flows we get competitive could so, we for where XXXX through growth over cash the our key not revenue the grow years, produce to is model that in talked David for as output only growth sustainable us get that our to our about, fund but so X.X, our

Dave Reeder

put about billion we the our XXXX beyond. business grow Look, that's to market says $X.X spend that to to model to CapEx revenue in XXXX. in and prepared CapEx And XX% that. and -- then, our the sustainably of of $X.X add of Yes, billion. spend continue marker long-term let that out in was me is the kind I mentioned on about going commentary there in course, we're to XXXX approximately

high. as made fees And billion local so as partnership customers, in well well with this with mentioned $X.X billion billion access I last of $X.X $X.X was as in year more governments. It those But like as our intensity and is than investments customer partnership prepayments year XXXX. capital are funding

with taken of we've methodical with with and end a so certainty approach demand And durability making these very towards of markets. investments profitability disciplined

we just of one-year XX These feel And investments about very, time horizon. we these so look in last investments. will assets at upwards years. And a don't very good

our a cautiously very very CapEx. have to And look disciplined at so and we we very approach carefully investments

Krish Sankar

as equipment a way. helpful. And a that follow-up Got in Toma question a a different just on Thanks Dave. I wanted and ask quick it. then Super for access, someone to similar question asked

could to to feel this going do be $X.X year, enough nodes, mature the meet is actually billion access demand bottleneck, you equipment semi you're equipment you. have you billion CapEx, UMC spending TSMC's to how so You're $X.X that stepping and you or up seeing that do spend today? on Thank think a

Tom Caulfield

XXXX the a this before growth end lot orders the spoken were and of we a to We placed before. manufacturers for tail to in really Yes, for. order little of at our started XXXX the first get bit capacity of half our started spoke about our of equipment

think early -- I place was equipment it planning capacity. maybe orders so good of in so fortune And us back our not can but to build the the getting this that we getting

growth. to It's to the tools clean need do I'm industry controlled capacity a needs highly sure They add And going just build do some that. add in for we if rooms go environment. think they they're like that equipment this to have of I them. plans feed to no different

their And they'll their enhance ship to capacity plot basis. a they that quarterly come course tools And doesn't on to can overnight. need how more so for on ability

Sukhi Nagesh

Hey, please. question Towanda we'll take last one

Operator

Thank you.

comes from America. Vivek the with Bank of question of Arya final line Our

Your line is open.

Vivek Arya

I two actually Thanks. quick questions.

of this so be and wanted per away price just levers I perspective. what seeing revisit Because more content those is higher pricing not help help what that the there Conceptually, get pricing in the supply the shortages question conceptually is mix? to it you pricing to drive Just that that once of pricing your beyond may a can in go can technology? perception the next guarantee proprietary wafer Is location shortages supply Tom First, drive it a Is about supply or years? lever year. higher growth this you the of or is why future? -- a factor wanted it industry I that's strength few

Tom Caulfield

you into focus very strategically sure make for features on of sure sticky. very it's Yes, our what us end on. -- not really product. don't We require the and to create with create go-to-market And many that we back becomes the strategy. they particular And the always make very what the made then to the business. features becomes to end-market-focused were business add how for and that feature, our in on our call I won to capacity or way winning And say single-source on we've an not, chose want just It investments features, for kind full very applications differentiated kind capability going think us, differentiated product device differentiation, really it's that well battlegrounds application. insight best node business that differentiation a you're it's the real the real front differentiated that customer we of we hand-in-hand be make automotive, of understood not a but to all those we down have

matters. to a markets that customers us sure focus in in our large to things participate our we And to all innovation differentiation where we make differentiation, differentiation we making disciplined be type for to markets. our be so in play for very engine TAM, going and to create It's so don't very to on all have in key we customers. of continue we're And sure

Vivek Arya

Dave, and are on we how seen there incentives. Thanks some in already net example, Dave. So, any IDM be government financials? one they number assume based follow-up Tom. for a for government have curious US reflected one CapEx your depreciation US will And net in incentives I'm If maybe large

they financials? those affect will whenever your curious I'm incentives So, come how

Dave Reeder

Well, mechanism respect haven't seen Vivek, I Sure. yet, into with flow to really those the of incentives would the how any company.

it's from the it in So, or would CapEx P&L me through line. unclear be then on it geographical different point gross to whether would come at perspective and little a off this net a a a whether

of at those through in speculate to in matter point. that don't world seen regions I've other and GF in I So, benefits the this other want come lines. companies for different

differentiated and our point. customers, I want our that, with to to with governments to What so at partnership, extent And by and and just footprint see geographical with to in And that I that customers' ability diversification can online our in I this partner don't with on partner that this that deeply to environment encouraged the participate be capacity. more speculate marketplace the is to our the you willingness by I'm I'm and the the want encouraged very us then bring very better. also tell our

how flow on that stay So tuned into P&L. the geographically would

Operator

I call now like you. to back the closing for remarks. to would over turn Thank Sukhi

Sukhi Nagesh

you, reach we Towanda. Thank look for on your to Thank with call. everyone out and the and in with speaking Thank interest quarter. joining right. us this you Please All questions you. any in for feel GF forward you

Operator

Ladies and you gentlemen, your for today's conference Thank participation. this call. concludes

disconnect. You may now

GLOBALFOUNDRIES (GFS) 9 Feb 222021 Q4 Earnings call transcript