GFS - Earnings call transcript Q2 2022

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Operator

Thank you for standing by, and welcome to GlobalFoundries Second Quarter Fiscal Year 2022 Earnings Conference Call [Operator Instructions]. I would now like to hand the call over to Head of Investor Relations, Sukhi Nagesh. Please go ahead.

Sukhi Nagesh

Thank you, operator, and good morning, everyone. And welcome to GlobalFoundries' Second Quarter 2022 Earnings Call.

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

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

not forward-looking statements, do and differ on Actual forward-looking You undue obligation we we any statements reliance make forward-looking statements. to materially these should results place update from any not undertake may today.

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

will quarter business Dave also the We which, and on will expansion begin and guidance. today's details update technologies, second providing environment end and markets provide following current update results a call on with Tom on capacity quarter in summary third our our provide

follow remind that place Markets will questions limit Request questions. also our first that York like to taking to call please you will We the would then be New one tomorrow. one with I open City your Capital in Day up. for you

event. his attend to please remarks. person, the now registered to order be to ir@gf.com for prepared would over Tom you e-mail for in I'll like the turn If in call

Thomas Caulfield

that second our and we pleased to to Amidst each welcome, results the May priorities. GS everyone, macroeconomic the once report and Sukhi, XQ were you, strong, quarter provided strategic to that make on to guidance continues I'm XX,XXX as earnings Thank team execute environment, our financial and we of in call. every progress ahead day. significant challenging continue again

lower let seeing low to electronics end handsets, as brief on including market. some with beginning PCs start So consumer me we such update industry, general, current and supply providing are to the the of of environment. end in the a and end areas business the others Similar rebalance market demand, markets in

of to some we've decrease the oversubscribed. some robust Although and remains demand in GF be capacity pockets experienced total continues our for unconstrained demand, solutions

Specifically, center. healthy as demand we such communications continue and infrastructure see automotive, markets, fast IoT, growing industrial and home in data to end

quarter, operational margin to continue demand mentioned that continues we with year year the period. margin. a demand for oversubscribed This, recall, and our gross If the We our single started grew of business, next. adjusted increases improvement wafer shipments to XX% both by we to remainder previously the adjusted was improvement second you this this point XX outpace by to from in with nature a the increasingly supply year-over-year, and XX% through of quarter, XX% available XX%. And revenue oversubscribed driven GF sourced percentage we We profit that higher about than expect given remain coupled revenue of in XXXX. strong and XXXX reported to and year Today, ago significant resulted gross grow In capacity. ASP. in ability excellence,

a $X.XX share give per in guidance. me moment high more color the result, David of we better now $X.XX, the was on a will our financials which than end but As earnings let delivered of on $XX update recent year, in term activity. brief customer totaling we a signed the revenue. and approximately last of some long with At agreements our billion had you partnership of IPO time our provide

about on announced term $X approximately about revenue heels with agreement to incremental have with our than passed, secured this and adds purchases one the the access Fab Qualcomm approximately $X.X our as well in $XX and fees extension existing of billion billion year totaling extension, our customers XX we've billion term extensions agreement agreements, represents these Qualcomm business. With All now term billion. billion as wafer are long prepayments CHIPS being A from in the year, totaling facility Now under later, long customers. than U.S. bill of revenue the incremental we Yesterday, in that of agreement Upstate an more the long we global term source through XXX% in term new $X beginning more with New new with single $X Since York. long XXXX. agreements agreements, long

and capacity first year-over-year, French a with our XX% of jointly first of enables millimeter tripling with XXX XXX XXXX. manufacturing well. overall design new outpaced as the to through will in increase the quarter, signed the were half sourced Europe as GF this single also capacity revenue, facilities from Crolles, highly ST efficient by fact, we in existing as agreement XXXX and operated government in add Micro well customer with France. revenue capacity millimeter agreement ST half to a In With in XXXX grants create in manner, backed XX% single wins from a partnership facility, capital Germany, GF In definitive the adjacent ST's prepayments. source growing This be to combined

Finally, important quarter. completed some qualifications. technology the second this brief nine technology of In on let quarter, achieved a the we we update milestones me provide

have of released XXFDX+ reduction, IoT performance technology our optimization improve power for further We power platform This enabling pleased customers' to many extremely to greater-than-XX% map road are offers platform. our a applications. thereby and

at the we Optical Fiber announced highly recently qualified solution, our Additionally, have fully just XXCLO which Communications photonic now Conference. differentiated we

Difficulty] volume dozen GF’s believe industry XXXX. We single and preparation is we're We components photonics solution. SOI, prototypes CMOS [Technical in customers in the optical manufacturing over integration combining of solution monolithic XXX a millimeter chip have a in currently only for in developing photonics our electro

to first premium solutions Lastly, handsets. in execution solid production we to power that we of to for be and deliver the nonvolatile customers new management our releases quarter industry's embedded summarize, adopted all I'm memory of XX To will tier another released stakeholders. nanometer report pleased as our

significant steady to progress our continue are demonstrate business our We business towards momentum model. and term long making across

remarks. I in industry our witness With Washington, I in our at participating the the of would New GF over This the Now I'm D.C. come. Sukhi, for to looking Dave. that York Capital I it will CHIPS normally, Markets House. landmark you Dave the tomorrow. But to forward and signing impact know currently at you, seeing many before to to years like legislation City be White session I following hand Day prepared let a on to our to profound would bill am positive our that, of in have and nation, you Q&A over

Dave Reeder

and call. our Tom, you, Thank welcome earnings to second quarter

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

results in our of exceeded Our provided the quarterly range we second last update. end the financial high quarter

revenue revenue as reticles, of XX% selling revenue, millimeter X% total other wafers improvement for increased nonrecurring a agreements Non-wafer product environment, ramping billion, end $X.XXX XXX,XXX X% for the transactional Wafer revenue. in the expectations. an with year-over-year, accounted ASP, Second approximately was approximately from from approximately continued quarter, driven a revenue customer approximately pricing long the revenue period. of price, markets in includes We approximately which increase per constructive year quarter, as well increase term XX% equivalent mix. expedite from accounted better with wafer quarter by and engineering, for Average shipped fees second consistent year-over-year. total our our XX% of prior items, pricing,

handset XX% front year-over-year. segment Smart update the In the business, as Let represented by we in which revenue to me mobile better year-over-year. growth premium-tier of increase by devices ASPs market. XX% was content driven end, end growing our now mix market. second Growth provide continue revenue, RF was flat is our an Mobile relatively and higher quarter the approximately our of largest silicon on

premium-tier SOI as in is increase platform, which end However, to the front total leading business. that the mix, to accretive continues is of our market, XXX-millimeter our percentage RF handset industry a widely used

are track modest the to offsetting we grow we in year-over-year, decline tier XX% than XXXX, more our end For on by handsets. premium low XG see revenue

growth in to the year-over-year grew these by XX% wafer market home continue representing Strong total due submarkets we Additionally, mostly are in this and in trends silicon end sensor RF market, we the for ICs and this are to image year. of gains industrial all driven revenue. growing volume technologies and PEMEX, market almost Growth was processors. on of audio expect has performance a transceivers, improved IoT end our year-over-year, home solutions technology the growth feature mix. content, adoption IoT growth for wireless in superior WiFi XX% enabled better throughout consumption X growth end end due significant that in connectivity strength focused saw power ASPs XX%, wireless our and the are at GF Within applications. industrial the of connectivity our market, and market. lowest XXFDX to accelerated our this possible rich Revenue

and strong access such card speed, IDs, for memory by touchless traction number features for control microcontrollers such payments, transaction a electronic also are seeing growing as and a IoT connectivity smart environment. We nonvolatile digital feature our embedded security of applications, driven that as

also is by market measurement being technologies and well our for automation as test, differentiated as driven security. end analog as factory IoT our in growth building and applications Additionally, power such and

market ramp Revenue We was products revenue in are home of our the on track to next X% XX% infotainment. IoT of in approximately this the GF grew industrial by and quarter on second total Touching fastest XXXX. new growing ADAS, market and in driven year-over-year, and automotive. be safety approximately for for

previously as can capacity. constrained we will quickly indicated, in growth build be have we our by lumpy this we market how As are

safety. will comes automotive, enabling capacity electrification ramping As new online, and products we be

XX% automotive the a on track than the our As to of business is half first grow in year more second the half the year. of versus result,

center and XX% was higher infrastructure a combination driven end market communications, of Growth second grew by XX% revenue approximately better and higher comprised our mix. approximately ASPs shipments, year-over-year. of Next, and data quarter

the year-over-year growth within is data strongest Our submarket. center

continuing GF providing connectivity critical components. and in this by market is and Our segment, customers IoT contributing are grow to end share

revenue wired We infrastructure. and including also all modestly networking of submarkets, wireless grew other our optical in

declined total and of market end compute quarter year-over-year our expected, comprised as second X% approximately revenue. and Next,

After trough customer. less We expect seeing the a PC finalization in our are design this XXXX X% in following revenues we uplift of now be modest with QX, to total a market major than end a revenue. a of

profit. to gross Moving

attributable for at year lower For ago, largely attributable expenses than and million translates mix fixed ago XX% expenses of better to margin, by end percentage XX% ASP mix. the expenses adjusted for operating stock $XX cost profit of range. compensation. as $XX cost million. which second revenue. fixed with approximately was higher costs. The million and as Approximately quarter, into delivered projects XX the operating we improved R&D represented operating quarter, million, quarter million the associated second XX% GF guidance of an total headcount the $XXX the the decreased approximately approximately due margin. higher than excluding into $XXX was adjusted total while in absorption, lower were at to period of with million, remaining of was million absorption. the approximately came expected Operating costs gross volume our $XX a and roughly translates were year driven and QX year-over-year start-up which XX% to quarter $XX fab for better down this XX% $XXX $XXX delivered gross XX% Total approximately of increase high sequentially points operating expansion improvement approximately than well based and million, adjusted from SG&A profit ASPs better

a approximately million year incurred of Second the period. quarter the expense million $XXX $XX approximately approximately in of tax from $XXX approximately quarter net quarter. an expense We $XX adjusted increase million interest net was second and of income ago delivered million, we

We adjusted quarter. reported year-over-year record through. EBITDA of incremental delivered grew a $X.XX we of per revenue representing the growth, Adjusted million $XXX approximately of million. As fall EBITDA result, second for $XXX adjusted $XXX share second quarter on approximately earnings million XX%

key for XX% quarter roughly Gross some $XXX sheet quarter securities end revenue. second cash $X.X total or the for million metrics. CapEx Cash $XXX cash, flow provide from from flow now was and quarter, cash me stood combined $X. second Let and the year. marketable of our of increase billion, the million. balance was X the operations At of billion previous roughly the of approximately at equivalents an

update and on to we you I respect I headwinds Before business, the QX briefly business. on Last view to we energy current in materials, on you our and costs. are quarter, our labor inflation and guidance, environment facing impact provided transition its with the wanted inflationary to especially our

uptick we full we in less year continue in materials the to than our of While impact to energy QX, have of experienced a for results costs X% estimate slight revenue. be these to cost and inflationary

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

be we than approximately non-wafer GF the of XX% billion. third result revenue expect wins between of reticle sequential should We increase XX%. $X.XXX revenue. An quarter to and Of to design revenue $X.XXX be this, expect in to total tape-outs more and revenue XX% total in corresponding customer billion growth

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

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

million. to total expect $XXX Excluding for share be million based between compensation we $XXX quarter, and third the OpEx

driven in based At to of be $XX administrative million, to roughly guidance, we higher midpoint and our of goods quarter expect a increase million third sequential primarily to expenses OpEx. and IT share sold of expect to approximately related the million approximately cost other We $XX which be by related operating is costs. $XX compensation

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

between We On million, goods quarter adjusted approximately about be is the expect to to we share $XXX the for diluted basis for and fully per $XXX million $X.XX adjusted third of to of sold. between related XX% expect be cost expect and of net D&A XXX which million. to earnings $X.XX. quarter $XXX And be shares, a we income million

and adjusted EBITDA $XXX million expect between We million. be $XXX to

than enabled than we customer our on slight gross our the summary, well by high range. last quarter, execution track billion, quarter all total As the $X for deliver in the Despite are mentioned to call on the that year of equipment. year. our the less impacted we delay, delays known meet to for XXXX, strong we earnings were end us better of expect In to results full second be CapEx commitments operational significantly guidance capital

our open remains Our year methodically we demand quarter-to-quarter Q&A. better term deliver we call strong, financials to progressively And for execute visibility plan. throughout continue as customer supported Operator? to our With by let's long the agreements. the expect that,

Operator

Instructions] Our of first line comes [Operator the Sur question Morgan. Harlan from of JP

Harlan Sur

over line the the helping and execution. and get the the on quarterly Congratulations to CHIPS support team's bill also finish strong

you ability about to guys You came XX% higher mentioned, demand into your as this with supply. than year,

think ratio. you are times I flip which earnings But is the of guys by technology segment, of your about in smart last environment about the talked and and mentioned, have compute fungibility areas your the guys encompassed in call, capacity do on demand weakened, X.X a parts book-to-bill your Clearly, as half you revenues. that in especially side, you mobile has geography.

some is a demand. there business your take So slack to for hit on

much think plans. bit a trending above capacity it's about just So your have looking us can how help drop before XX% utilizations or you like to with forward you your maybe has demand expansion modulate normalizing supply, demand lower, about to

Dave Reeder

meaning order good But it's tomorrow forward supply, to as the for detail here and chose us for already, XXXX and the at more the exciting With We'll York Washington obvious and you he exciting Harlan, day largely still bill, respect true XXXX I could his seeing it's demand he to and being today. complete. XXXX for choice I in of obviously in demand, City given is, that's given be book New White looks Capital the in our that day and Day. he Tom certainly on think our where But that in look wisely. CHIPS phone of signing with cover we're Markets being tomorrow. well. the [oversupply], House wishes outstrips

to to our that GlobalFoundries. So up we more want mix revenue rebalance, solid. a ability see the trading towards rebalance we're extent remains And richer, customers usually that accretive for

So demand have follow-up, is you Harlan? a strong. still Did

Harlan Sur

weaker weak some your one segments, of We the been reflection have market. of smartphone I a China has you domestic the impacted RF customers that know know as Maybe of fungibility. and by

charge customer to minimum going with you. the in agreements wafers fall June that against think actually term threshold, that was the under long shipments And their quarter. most to COGS were the the of due this wafer a charge took I below

take-or-pay clearly So is you. with the for customer sourced made news This sole good is that prepayments. is working the you. They've

see So they to clearly products. the differentiation their you that bring

has you will Now if of it's have fair renegotiated? they're renegotiate differentiation assume volume demand the the to that LTA terms the their and environment customers. in you or weaken pricing is that not probably assume customers prepayments, of maybe, clear LTAs, renegotiations to to on but duration around bring their have LTAs been it your that that And with you. Is negotiated, more we maybe the primarily given continue to being

Dave Reeder

Harlan. You still get is pricing it environment The right, very constructive.

we've you also don't call so to respect couple drop utilization impact mentioned flows that before and in a X% decrease utilization, a I is [X.X] to capacity, inflation the Given at you to were in way X-points took point in that I the all see just to the points And that X% change add typically if finally, think with a you really future. gross points, drop their that then pricing shortages see you that's through. or that if of environment in expect But piece [Technical we margin. Difficulty] if look would ASP, then it, a have X I

future near very the global continues in price difficult concern. inflation that the all to it's given a strong demand, environment pricing see things mentioned, becomes environment, think still an where that the I economy, hit just I to So end instructive market

Operator

comes Our of Bank Arya from of Vivek next America. question

Vivek Arya

how increase how about clarification non-wafer you a originally. outlook. because shipments are and year ASPs revenue, one, be down just were give I the little wafer in And sales on in the QX. versus of Dave, that's thinking could kind thinking of color smartphone bit the probably us what the a market. thought of extending could you on it wanted just wafer somewhat I I for If clarification on maybe if for about QX flattish you to a you suggest the first interplay it into of exclude sequentially. imagine QX my But the

Dave Reeder

to increase As you a but we know, wafers we're to expecting QX currently from perspective, constrained [supply] from sequentially are QX.

So no like talked we change our plans in had about. there

last wafers grow million this Our were to X.X million then wafers. year X.X million about X.X about and about in Those wafer wafers year shipments XXXX. wafers

those remain on And so all plans track.

We well grow and to sequentially from water for and expect to QX into actually QX to QX QX XXXX. matter that from

So in talk perspective, pricing. detail there. lot don't the quite good feel from I trajectory a that about we Pricing, about

about you at XX% this was 'XX to was growth, year-over-year X% to look we XX%, quarter, If how growth were Of ASP. performed and 'XX. volume XX% that QX QX

we you to those from QX As QX Vivek? look have a to QX QX Did and 'XX look year-over-year follow-up, some , to 'XX] from trends continue. we expect we

Vivek Arya

more Dave, will expectations the capacity industry I and term making. Capital of tailwind pricing think, longer at Day. Markets have in the that you headwind at tomorrow that But talk from 'XX? several peers know for a or a an you probably it's 'XX perspective, be and the calendar -- Do your you'll you announcements been about as look

Dave Reeder

with for capacity at Let don't ourselves. two on that in capacity put add are our we break we GlobalFoundries, Look, parts. in customers. partnership adding me capacity, When we

actually billion able customers that LTAs funding Roughly than is, mentioned, $X.X have with as that's customers. are signed that us. billion GF or more XX be $XX come we to to So customer to capacity. XX of expand we now

customers of partnership we're our putting Difficulty] you capacity at our [Technical that and more as [governments]. on, putting the we're and [test] with on with customers recently in So the

actually terms play design two we about about wins. concerned shipments our about capacity are our design In thirds of pricing are wafer of as into single XX% shipments sourced single come wins more sourced of added, is are actually and

non-generic not we're clearly market. so for And capacity the

customers. with are our in partnership putting We capacity on

XXXX. as So we constructive. We today constructive, like pricing not We only feel being good quite quite the see feel about that remains that. also but environment

Operator

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

Ross Seymore

mechanics So start [fabless] things. are see walk as I side is I to in the through I LTA want I can how to enforcing more we slowdown you relationship. your have their any doing the if demand. sourced would And want to some that but you inventory to that job them guys you you need would the the own volume, force just of write companies them. end need take of they you're don't to go customers, or But the single down get us demand. equation, at side they back And a don't it, but down either. demand of hurt companies write Obviously, of good handle that that end imagine point,

units, bit So the how negotiations cetera. adjust just demand when levers, talk go a how et weakens, the various little you to pricing, it's about the whether

think slowing I forward So potentially want that's a to get confidence what to investors look they as macroeconomic in really environment.

Dave Reeder

-- I and the here think a we that customer market customer GF. I focused have Ross, we know, we're you in do, as thing very mean, when at first

And a so that discussion. time for is a we us have LTA the work do first creates thing first and customer recognize the to we that the frank

it we've able been their negotiate discussions to to with able been customers business customers, to replace little commitments with demand to -- large, than and and that because accretive supply be have actually that's satisfy bit. actually so their have have we those by We've to with reductions some their then those a today, to able we demand rebalance able And more be of more us. want and

replace to do the another capacity with to we if we we're customer. that, our can And customers was extent that don't from charge demand it that underutilized for able so

about customers. of rebalancings what sit Practically, to and do the that's handle some data broad-based, of structure of better We look about marketplace. our really demand in duration extensions these pockets how are We be center We in being IoT demand automotive So to that their base a and talk demand. it? the about data We able us to down diverse enabled with able center, and pocket rebalancing of of if so rebalance are pockets business have we like. end-market they you having meet those their that LTAs, talk comps accommodate see LTAs. they some portfolio, to weaker talk some of that and have the their end-market their doing

so And really, a to a down framework it's sit us for negotiation… have and

Sukhi Nagesh

And new design wins…

Dave Reeder

design a another wins their mentioned. generation that well new follow-up, Sukhi have that's Did And as for Ross? you next business, just of element

Ross Seymore

those mean want quarter. and like I ask about guys at of midpoint. ASPs I bit going just units more to the third units gross versus going specifically, actually the in down I to by the know if wafer seems margin -- side up metrics the units overtly each side. go your don't things are versus quarter, are some a ASP of you the But the the it little guide

I your public. think dropped that's the have implied since first been you've time sequentially will ASPs

second nonwafer puts the the parts the on and maybe what would just of be that? market through just Any end Is half, quarter takes then third us dynamic? an a some helpful. it there So would that and revenue can walk you be dynamic? of the moving Is

Dave Reeder

and in all true Well, correlation first, gross always margins don't between hold the instance. ASPs

actually gross lower can a a So sometimes it a margin ASP. that has if product even has you have different higher

from it's is included from wafer ramp margin. at with from pretty say QX. [quarter], actually relatively really it's I to gross QX, health it's say, remains the of per flat. by perspective, product features actually had mean bit in GlobalFoundries progress quarter as a profile. that I from the from Sequentially, actually that we year. So directly But of QX correlated increase to to and in and QX probably product the volume the the QX throughout ASP flattish more to would pricing, to I related, and from flat would more QX, looking than I'm we pricing respect amount a looks I had expect We've little to [product]

quarter implies So that fourth increase.

a again, perspective if for flat growth my profitability pricing, price, continue relative think kind to we grow, to from you and a perspective, margin ASP grow. from of will, I So volumes expect wafer, gross

the to in good sit. QX all, all pretty So looks where from QX I progression from

Operator

from question the SIG. next comes of Our Instructions] line [Operator Hosseini Mehdi of

Mehdi Hosseini

a have in and a sequential I discuss as of to did quarter couple drove joined I But the apologize, down call the basis? June I late. what the you -- COGS on

Dave Reeder

but in And lot a get We of to absorption. of course, then, mix. due that's didn't discuss product -- mean better it detail. we I

do more we start option that see do on fixed in, is ship meaningful pretty cost basis, as especially So year-over-year volume, way. a a to in you what kicks

in wafers as million the have that volumes from way experience continue million to ramp time million long XXXX year fact, follow-up? we to through been year Did you X.X that our a expect we wafers about so talking we've from a for last XXXX. continue perspective, in to X.X wafers this to that's X.X roughly continue, we And something to and in second that that the quarter. And all

Mehdi Hosseini

-- ask into QX Day. and assume be should of OpEx Q-over-Q and about want modeling, Analyst your the would tomorrow's purpose Yes, I from we [X.X-ish] to But kind on don't take a to actually of LTA. not we anything for just flattish going you OpEx, It's a basis? I'm December on a should

Dave Reeder

split talked guide in to the quarter SG&A. tend around OpEx one year what equally at time. a We between roughly roughly revenue, XX% the about But and XX% range, total, we've R&D is of for entire that

different So about think be tremendously color QX that. that QX how on don't think should And give the whole year. will you I or than we some

Operator

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

Unidentified Analyst

on This a is of calling questions. have Steven I of Krish. couple behalf

duration that rebalancing a I process? inventories. I and Is or perspective, on the two one is First, the guess, perhaps just wanted to it estimates into any extended are more on customers drill little a currently duration? from bit more the like rebalancing the down your it quarter of

Dave Reeder

Those that I'm broadly business lot with a that it, center of rebalancing. percent, being business, be business that And and I tends the quite course, and to of it's associated to with seeing saw tend as consumer because year. second are what but It to what for percent, data it's way perform here speaking probably seeing maybe and kind IoT. nature. we characterize markets being our with of replaced infrastructure that it's we replaced you not continue follow-up? home replaced the and quarter a really we're ballpark. modest think seeing, with, but comms as would expect being in have you are and we're that it XX-ish industrial in is to I Did automotive lower just continue then, of well throughout type XX-ish be businesses heavy a in and

Unidentified Analyst

The for reticle end non-wafer reference reticle related [follow customers the your around revenues when revenues activity Is revenues, production the be was market reticles? coming higher those the up] I concentration on and for or there ramping had is would of where maybe specifically from, QX color the business? any within higher

Dave Reeder

from wins design Look, the you're seeing pretty -- a in win deisgn perspective, those you LTAs, both nicely. really progressed

it's corresponding grow to then, So associated the of and an satisfy new design to LTAs able and non-wafer LTA with those obviously, revenue the extent wins. then course, to reticles be the the products, to you need

are tandem. all those So in kind of move

growing, fuel a to particularly quarters heavy [Aerospace] for third Difficulty] no then don't in areas and you where is too growing a get specifically is it's about defense, Specific in so Difficulty] much future meaningful area be some that revenue. talk have to typically reticle There that's quarter, going that an quarter-to-quarter. are development [Technical that way in revenue segment [Technical these that able growth. that surprise to activity you're And we

that driving So to be that QX. would area sequentially one from increase that's QX

Operator

from of Our Tristan Gerra next Baird. question comes

Unidentified Analyst

of that, Micro? relates Can European provide This any it the partnership in FD And announced investment maybe you can as process, is Tyler with Tristan. and to for on you importance recently additional the notably color on EVs? the describe SOI ST

Dave Reeder

So from believe general, so an SOI that FD-SOI SOI the on perspective, the in space. in we we're leader actually

technologies. the foundry whether the or the but SOI depleted fully we So referring depleted those delivering manyfold, importance are fully and of I'll for certainly we ones. SOI analogies -- believe you're and leader touch are to market leader big try I'll to to those SOI upon just The RF technologies, that

XX on nanometer. technology For us, we manufacture our FDS

very have digital good power. compute you So

So power have quite your digital the And big. best-in-class management. you computation's then also

connectivity. best-in-class on both millimeter compute. regards that management have and And the in are you SOI depleted for of with markets a capability, connectivity or anything have RF actually some winning the And good fully the or management characteristics. need ideally digital wave power And we're you that's in then technologies. with you FDX that advanced said, really layer power our you with So platform that very those as our suited in to

was the wins really France, was a specifically growing and able long ago related good the for technologies, quarter service and that devices, made but announcement announcement only automotive how devices. us, That us second how that like have of capacity given a busy LTAs be was our So for FDX second to we devices seems it was and to to and more IOT those design weeks about and on we quarter more that our in time connectivity frequently couple ago.

and automated technology. connectivity that management, driver power that from Difficulty] to things related benefit areas really automotive the [Technical and all then are in millimeter those in wave segment some other So

Unidentified Analyst

beyond? Markets gun Capital without CapEx and Act follow-up, your XXXX impact about into the jumping my your tomorrow. How should CHIPS think Day on the on we the For of

Dave Reeder

Let me be back company. bit GlobalFoundries it. more it. question trusted then is a bit But hit broad let and on I'll that come broadly, to a me a more

with engaged Development in Board are Economic We Singaporean of Singapore government. the

the Difficulty] capacity in with with EU and Germany to capacity So them we're our in engaged a continue Germany. customers in with grow decade engaged to for decade to we for Singapore. our there. expand been We've our over And [Technical with engaged capacity grow Germany, a

the US to increasing you year. of as to of to year And the capacity our [XXXk] by France, for then In fact, wafers here government. Tom's mentioned wafers government in extension government, from And French with wafers] Washington about per engaged course, we're trusted per year. our Dresden And course, the [XXXk CHIPS In France. XXXk we're them from with a per ultimately French engage the we're to the it an of now, US, trusted increase bill. then, facility zero foundry signing today in

and a with in we by partnership project customers, to to lot CHIPS opportunities And [Technical us expand of tooling what and by today, also And Difficulty] bill, done grow by we've so that our that's our signing both investments also, will trusted and four is our our walls customers the enables at look we're governments. the work. company, within a

three a with the here. figure when when down our ultimately, commitments, are customers the their the will all next of CHIPS we’ll details when and deployed will criteria steps next sit Difficulty] we’ll figure when out the that their how investment of be details will commitments. for capacity. out governments agree So be steps When met, those [Technical those of the project, ready be then will and met GlobalFoundries the in criteria of for all governments Customers GlobalFoundries investment course, ready with US with for are there greenfield for worked here we'll out sit [Technical then there CHIPS the how new course be the worked with Act we'll and, ready are three Difficulty] project, deployed for out the down and Act

Operator

next of Gill comes Rajvindra from Our Needham. question

Rajvindra Gill

I'm to forecast a sense forecasts a smartphone market. have XG down for going the particularly follow-up the to particularly how on million that revised units XXX smartphone for have been affect year smartphones, XXXX. anywhere this down, through million trying revised been overall been between navigate the you'll slowdown, that's There's that XXX market, to LTSAs. potential again, get in many of Just just kind of, the

customers. phone You of obviously of mobile large revenue generate from through percentage a the market variety a

down you to rebalance I'm end next RF they it look I front that of know their curious, there haven't customers, lot module year smartphone yet. the is So as volume. any seen your starting overall indication forecast to a But

Dave Reeder

in [part] of numbers we a that that high in share and think sections, break and see it me Let We feel from couple what in I'll level handsets. [in] we some the how under happening forecast global covers. But the handsets what's to quarter-to-quarter look the at down at units. be of going million you look [Technical are if magnitude total about XXX something Difficulty] market

the XG, up. at units, QX. look actually the about forecast XG, So XG, forecast that the segment of if QX total from XXX the handsets XG from XG, to went you actually all But units million going the down handsets, forecast, that's

went from X% went X%, about the forecast up up units for handsets fact, In QX, XG QX.

in at you to look doing the in portion well only market of specificity. market So the the have higher for but we GF first expected in look front not detail of is you What the better then at half. that have than And and aggregate second the year half module handsets. to have the in to the of market, XG end and content implies that when do in the XG see you

as accretive content. for us have We higher business. It's a more

we seeing the we're the And is that module XG so that end around specifically front you growth our offsetting end handsets. lower course, in end more and module medium the sockets. front is and winning what decline in look than in And is see GlobalFoundries of

we're sockets winning we're sockets we're devices. sockets and payment as So power as winning audio and in well and connectivity management, also winning in

well. that that year-over-year market when are important than that get flat XX% down. OEMs in markets end type of the add mobile so would also in there those looks the things is you engaged all others. to with of growth that you are the and say the that's you're smart as I market, And rest better doing It's together,

OEMs doing of quarter. reasonably up this the taking well all in sockets then XG, saw and mixing share engage growth with that more second that you are with So are to many in that leads the right the market,

Rajvindra Gill

Just my follow-up.

the cost in kind cost talk on little leading and materials mainly of indication or to any a When cost function shortage. side, about any elaborate raw in supply Is in environment, or the talked the you of And it. still bit materials? And it's equipment other pricing inflationary further. could environment on up constrained? some you for general, you're areas on to those a the of that's still supply terms easing the you're constructive shortage about the continue you you the of really increases? talk the that's inflationary the that in Maybe You about, areas, then environment pass raw could your there sense that

Dave Reeder

perspective. look, inflation, respect environment to for let With materials, when about is I So along here. big the of I and those think in from drivers order about to expectation me [labor] inflation, those three about I energy, think GlobalFoundries kind costs. are our inflationary kind think about inflationary take pass I of think And an

securing supply. long from materials when our term were were perspective, our So we signing we a market LTAs, in actually

which then satisfy that the so market. to that profitability deliver that And be side, LTAs, perspective, material hedged to on the reasonably so right the ultimately to we feel prices at have able materials committed will from we the the we've well

feel capacity But they pretty materials. we are tight. There's tight, a are is So of tight, environment the materials good about the market. available in lot not

perspective, So materials the is very environment labor continue well very, on tight. a execute From to we labor.

QX. in place, We we have some QX, did did in infrastructures we we such in like variable outperform that

do in We expect that our to employees in participate again QX, get to that.

passed some buys of be terms got that effective then helping variable is perspective, of and actually we've many for we've from prices perspective. of pricing in mitigate able some we an energy hedges from finally, And us in to from forward element place quite so increases perspective, in a along world. some our the And then, that seen in to energy of And to course, April, around labor us the inflationary energy customers. an some

energy we QX, have surcharges in kind increases time that in perspective. the market the it mid We went early April single in of of out period from in of digit terms a surcharge think price that

So like along those feel materials, elements, reasonably course, XXXX. we well addressed for we've pricing all labor, energy of and then,

Operator

Our next question Danely Chris Citi. comes of from

Chris Danely

of one questions. on follow-up earlier the a Just

every impact higher raise as looks guys minimum taxes this you pass expect And then one that you're that to do the result to act tax in taxes Dave, to guys to So CHIPS your confirm, from well, answering, Act? just go you it's everything see the takes to like XX%? from any material don't on expect about while

Dave Reeder

more the -- a tax two With in and in US to We'll Act, But is then purchased the our look of the elements We respect [Malta]. that P&L. installed looks the details. that do of and like delivers CHIPS capacity increase that credit is get in incremental to pretty relative and CHIPS at ITC straight we tax investment to is investment bill One to XX% credit details and to the the equipment for really investments and kind signed the chipset capacity. get as continue going have forward. it that's

in have also capacity increase our to We some Burlington facility.

subsequent that We to And that investments. expect details, create it quarters we'll today a through essentially our as able be credit net CapEx use update sits some to P&L, to you the those that, understanding our as we is to would investment but in accelerate effect. able tax work of be to to those benefit

be purchased So amortization offset here depreciation equipment we it and for a new that to in would one-for-one the US.

tax investment the that's credit. So

become And details next, the and or of details details of element those to investment, update really more out is we'll call in six I is Second as CHIPS ine brick-and-mortar with that specificity to some it, kind be those worked expect say. out by detail the commerce but need we department, -- months. Act greenfield associated the should the worked over And be available, those to doing market.

have changed. get extent you update we'll a either CHIPS benefit or To of second the to new the that additional the not from Act Did capacity, ITC investments element greenfield market gross the CapEx in follow-up? related Our plans accordingly. have we'll

Chris Danely

One more clarification.

it, seeing pricing So I changed terms it guess, that? or in the ago that revenue you of let's low the, three like or of outlook not LTAs given your XXXX call versus, anything are has months guys or or end, weakness the six all in

Dave Reeder

more demand and why. and We could 'XX It been, let has satisfy. 'XX significantly than we tell had in me you in

specifically itself when manifest well. then again, like see Difficulty] some do end handsets rebalancing as we current specifically market, [low Yes, [Technical related others And markets? the we And we in the in to different consumer do environment so consumer. at seeing today, yes, that you're end] look in

under of portion of satisfy. and demand we market, a could As that that handset is that had more But to kind medium than pressure. we said, low

X.X We're to Our wafers next equivalent, XXX expecting hasn't million year. million changed. millimeter about X.X capacity year, wafers deliver about equation this

see able over is And look we able to we our do rebalancing, are for that's are choose most demand, so to demand that demand to and accretive subscription, what of that GF. at the we take some

like And created bring really to that that able us accretion We're that the in able unsatisfied laid expected. plan a And be We're IPO. right that and a able so our and than executing deliver schedule. we bit benefits demand P&L rebalancing an take that more to seeing to that's end now. to of a you're of be into we some markets in at for bit opportunity results. actually We've we been of out ahead well benefiting that is production us

Operator

of Randy comes question line next from Credit of the Abrams Suisse. Our

Randy Abrams

I wanted on the CapEx. to follow up

bit You reaffirmed mentioned Could delay you Dresden, then And [XXXk]. then of incremental, equipment. a the it's for the timing you for how give for looking? view the the with XXXX

CHIPS whether give could an expansion how you Malta, now Act, on pulls with and in is that the If expansion? that Malta update

Dave Reeder

challenged. the to vendors be Equipment, [WFE] continue

I [late]. think quarter call a about somewhere maybe maybe it, we ago or talked so being four quarters half between, equipment two two and was weeks ago, it to And

be may you even weeks to as equipment late it four you're if to of weeks I equipment at as think kind look six probably more much seeing on eight late, and day, like deliveries. six

to to equipment more situations. in pretty And others challenging. to that are [with] be We is continues kind the very, shortage components They so tight. we very that market, are of commitments. many environment more equipment produce remains that given be appropriately which ironic But hedged in our short somewhat chips able need

very good that made experiencing we've about still delays so receiving that in are from but feel we the equipment. commitments we perspective, And that

In somewhere little and spend the call the terms hoping it, spend than originally, billion now we $X.X CapEx billion to in, closer impact, a going billion year under were indicating that billion. we're range. of $X $X.XX of $X this to to We're probably

that a seeing, fourth pushouts perspective. had currently And so the strong quarter from that's particularly that we very given the CapEx impact a of we're

would quarter fourth from out XXXX. slip any flow directly into So

'XX. think around I so and we slippage [continues], have XXXX, saying think I XXXX, into slippage from we then into originally in push have $X think 'XX when billion-ish, something 'XX I were correspondingly from 'XX

to Dresden the think snowplow installed, it to getting With getting and as on effect expansion So I the respect Malta, units. WFE very it's CapEx and getting in continues qualified arrives, in and produced in German it of team regards do with it bit a bring equipment spend. it and new floor, well getting a to

So management hats to cost a there our that flowing great Germany, work doing P&L off fixed and job. under leadership results they're is our doing to the that at team through for Dresden, absorption. just And the in they're

in a regards we statement of for that's increasing in that all expansion I'd to say With are our manufacturing fact, In slowly team. Malta, [alpha] Malta. true

of second to on half of it XXXX. waiting XXXX. to ‘XX get of or that we But towards and are that latter floor call for arrive the on equipment, if have Malta perhaps expect continue pushed it half didn’t Obviously, second then maybe delays when actually so that some get will ordered half the it we into the it equipment, arrive even we diligently instead and waiting of are more do to We and ‘XX does, he equipment team units. work the

Randy Abrams

end to to coming the given you on And of the towards So up. tightness, expecting about year? into And would lines as time East a just that's have full? timing. stay just next or the remind ride we Would those get Fishkill through sell one continue early since you impact Could the we as other you the us fab question maintenance follow-up annual it, the year.

Dave Reeder

recall, of kind ON if ramping been We've we a couple facility. agreement We've signed that that ramping slowly has years of out up. -- been Semi you ago. So of

to the Fishkill year. track East at this on is transact So end of

for fact, will us into ramp of there an at slowly simply fully that course moves we'll they'll some that order this from wafers type time, make desk point ON over kind buying [Technical agreement such the of of relationship and to to an They'll today. facility to enter in XX/XX we've perspective Semi, of to out facility year, this entered over way. in and and already Semi, that for that we're continue continue orderly a continue Semi 'XX, from the full manufactured And an ON of facility 'XX way. So wafers wafers then and in orderly produce ownership. end at We'll are into year fully in transacts an up with ON ramp that Difficulty] that qualified But transact.

terms XX that estimating It goods year-over-year a million In transacting XX of impact, a by amount, by impact basis, we'll that cost basis. on that our we're $XXX benefit of facility. get lower versus an on will roughly so ongoing

Operator

Sir? to Thank time, you. closing to the At this like back for I'd call Sukhi remarks. turn Nagesh over

Sukhi Nagesh

And thank to all you many day. Capital Day. We you. look you seeing our tomorrow Markets a [joining]. forward at of Have Thank nice for

Operator

for today's you concludes conference call. This Thank participating.

may now disconnect. You

GLOBALFOUNDRIES (GFS) 9 Aug 222022 Q2 Earnings call transcript