- Earnings call transcript Q3 2022

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Operator

Good day and thank you for standing by. Welcome to GlobalFoundries Conference Call to review its Third Quarter Fiscal Year 2022 Financial Results. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Sukhi Nagesh, Head of Investor Relations. Please go ahead.

Sukhi Nagesh

good earnings and call. and third to operator XXXX quarter you, morning, welcome everyone GlobalFoundries Thank

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

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

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

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

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

over then Tom the the Instructions] his now questions. call prepared for [Operator for We call I'll to will open remarks. turn

Thomas Caulfield

very clear call. our quarter on solid Amidst our than better entire progress results across as execute. and continues our report our pleased to to that guidance our environment, make August priorities. I'm Sukhi and to everyone, welcome, to third economic team provided were challenging strategic you, earnings Thank continue we enterprise increasingly an financial

update environment. begin current by providing the on business a Let brief me

contain costs to these us We more commentary. believe details and about Though Long-term the outperform his to environment. regardless particularly geopolitical to to planned actions intact. year remain to customers take economic macroeconomic current XXXX. our requested our environment the and half of monitor uncertainty, our Given modestly we and their of growth macroeconomic closely some actions GF's that actions with beginning David are activities to increasing will the previously our a discussions, to with continue to demand. now these the the drivers it of work of first respect initiatives. we record shipments adjust end-market downward, during quarter, to market continue of customer on is the these customers XXXX some of Since difficult on Based the have taking enables proactively output. productivity taking accelerate provide

as total the the above XX, to agreements billion. now value aggregate of have from long-term grown the prior slightly from increased has customers XX quarter Our agreements long-term with of LTAs these under number $XX

and quarter strong providing Additionally, as to ago, balanced to for $X.X are us constructive and prepays customers our a increased expected, from the discussions. of committed agreements a have our demand amount framework X% long-term has and approximately Also billion.

benefit contract's long-term example a cash LTA resulted amendment of additional recent of great duration. added agreement payment year the increase As an and in an the a modest demand existing ASP the on example, underutilization and to structure. A

mix from by reported improvement the an improvement of percentage me you increases margin. in ASPs. in year and XX% We revenue driven adjusted revenue This resulted gross GlobalFoundries to XX.X% operational with execution, shipments, year-over-year, continued third XX richer strong quarter, quarter. ago let grew point a adjusted period. coupled gross margin growth, wafer of overview give in Now both the

the result, which update this is $X.XX delivered me we provide XX-nanometer third color better our quarter, end more earnings X but and suppliers In now memory allows will recent Singapore on moment technology of financials from both customer-specific Again, qualifications among covered completed included a industry. Dresden high per Also for facilities, ship our us technology a is for our automotive chain embedded a a under share Dave the high-volume than the technology we customer's range. a a secure qualifications. Notably, our As long-term supply product in the X-year MCU to provide of the this establishing in of the achievements. LP automotive XX-nanometer now agreement. non-volatile guidance the largest one automotive qualification brief let proprietary on industry. This product

out platform. also we products photonics GPU-to-GPU IC tapped interconnect. on for included photo quarter, optics silicon our This co-packaged a fully terabit optical monolithic device, new customer the X X Within

RF our efficiency. successfully exceeds power demonstrated Finally, through-silicon HBT solution to amplifier and technologies mentioned, silicon a technology. integrates We with that produced high-performance GaN output performance I as a we via optimize device through-silicon have via novel and have previously now

I'm to as this commercialization offering. To pleased our received Burlington, Both RF power we of sampled and U.S. delivered the our addition, to part are Vermont In execution solid where million to $XX stakeholders. of executed we to for GaN funding all have in early programs devices our grant customers another customers. technology GaN recently a government facility, engagement from as quarter being report all the summarize, we

of the are With track year macroeconomic the navigate well of challenging of strength our given product you, have the a portfolio, and the business, Dave. to of We breadth in that, the strong our over are current we positioned we growth environment. nature XXXX. markets serve on to to And single-source

Dave Reeder

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

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

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

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

our and an executing in growing by markets. the third increase in premium end in declines devices approximately to mobile are handsets, by mix represented we continue now driven revenue inventory we content tier handsets. segments. Growth approximately XX% mid-range provide update year-over-year. Smart ongoing by me correction In low the our and of silicon front-end as ASPs and better XX% and Let was higher mid-teens modules, our segment, on growth quarter full well-known despite in year expect the well RF offset premium revenue, the

reducing challenging helping us agreements volatility. customer environment by demand the are long-term navigate Our

to and that premium we We in next-generation new are in handset handsets will the chip is a LNA the customer. digital by tier developing products sub-X-gigahertz robust and by better integration. XXXX, continue share see switch, transceiver market of maintain adoption to for improve expect Furthermore, market driven XG technologies GF, RF growth in performance a leading through market our which currently

of X, market premier new is where WiFi handset driven in models Another SoC solutions XE going is support Mesh RF WiFi into WiFi growth networks. by our and

we to resolution Our they become image technologies leaders also business in and partner solutions for continue low-light the support with increasingly to low-power industry as processor applications. sensor grew stacked quarter important logic strongly as

and business differentiated Our wireless year, XX power as performance. strongly growing driven lower solutions. display, also such leakage is improve higher device BCDLite BCDLite efficiency, our audio solutions battery management this applications providing address and mobile by noise smart GF's charging specialty by

by saw Moving growth XX%, and driven home by FDX revenue. with XX IoT the XX-nanometer industrial and better IoT. volume wireless year-over-year mix. grew solutions on for remainder year-over-year, end the the card this almost market representing and growth was smart driven market, approximately of differentiated market our this XX% wafer Revenue connectivity, of to in XX% and of home growth total end continued Strong ASPs and improved technologies. we result Within in industrial

management in next our was market approximately been quarter. remain the We the The and growth We the power in be brighter Revenue quarter in revenue. one this total spots in has end track end for XXXX. of in home also industrial the market for of fastest-growing saw market on automotive. X% broad-based automotive on IoT to market. third GF Touching

for continued the new to XXXX electrification. on continue our in $X We annualized as anticipate in expect wins, run automotive we for radar and MCUs and applications, management business to market sensing current a safety we our and expect billion at we our XXXX rate. to power growth bring Based business exit growth design

better end was Growth between approximately infrastructure evenly revenue shipments our split data communications Next, year-over-year. mix. comprised XX% and grew of XX% third and market ASPs approximately and quarter higher center and

growth in infrastructure closely and wired followed Our to data storage. by strongest be continues year-over-year the submarket center

segment continuing are to providing [ph] and contributing critical IOD grow GF connectivity and share in market customers this is Our components. by

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

XXXX X% We be less expect of revenue. this than end market to total our

profit. gross Moving next to

which approximately and quarter, higher of of Operating was XX were were $XXX expenses million guidance period with XX% and translates third higher than improvement than by The expenses the which mix. the XX% compensation. Approximately attributable this the quarter mix, approximately fixed adjusted profit for $XXX gross adjusted ago the excluding delivered absorption, came ASP translates up stock-based operating an expected our of at cost point million XX% for high year attributable million GF while the represented million quarter into $X percentage margin, and points delivered into XX.X% better profit end third the absorption. million, XX volume adjusted improvement to roughly R&D approximately improved than margin. percentage million. for fixed-cost of and $XXX and XX% $XXX year-over-year sequentially slightly For in operating better SG&A total remaining better was of driven operating gross the million $XXX to Total range. of $XX we ASPs revenue. approximately was quarter at

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

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

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

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

total be revenue to billion. expect to to be We $X.XX total we of and Of between $X.X billion non-wafer XX% GF approximately this, XX% revenue. revenue expect

in revenue our We to Included margin gross fourth quarter reduction respect by expected million sequential between guidance approximately to million. with The reduction decreased $XX in utilization, range and the quarter million. gross expect particularly support fabs. capacity guidance is adjusted wafer $XXX starts profit $XXX first which our in be a XXX-millimeter this

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

is guidance, OpEx. Excluding the share-based related share-based At million. of compensation which expect and fourth million, to we million approximately the our midpoint we expect quarter, of between total to to million goods $XX and $XX approximately million is be $XXX compensation quarter $XXX for of to $XX sold cost fourth be OpEx related

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

are on year. facility sale of the the We also track at end Fishkill of the to the East close

$XXX be in result, to record expect the quarter range in of that fourth million on the a to will gain $XXX million. As a sale we

million, on be net sale, $X.XX we $X.XX adjusted adjusted be XXX expect for fourth fully $XXX adjusted Excluding EPS on we expect gain be quarter million $XXX between $X.XX. $X.XX. the share diluted and we Including a sale, to the gain of to expect per onetime between share and million. and between to earnings onetime On this income count

we is quarter, million, about fourth the related XX% $XXX For sold. to the be expect which to of cost D&A goods of

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

by $X commitments the between are to year meet impacted delay, track for all the full total we year. the equipment. our $X.X the expect of Despite primarily For billion, be well-known material delays XXXX, customer billion gross to capital on we now and CapEx in

will at and an year. look we of As our provide be on forward, the and working customers with update the end we'll our we partnership closely XXXX CapEx

While expenses customers' managed year, recent we demand. to have nevertheless past conditions are uncertain macroeconomic over paying the attention to we XXXX tightly our commentary the regarding close and

we we are productivity expect previously which any in charges the closely monitor planned to are savings these annualized and with these cost we XNeither mentioned, as savings containing working today's to are Tom We will million, guidance. them OpEx. nor deliver accelerating related our of be approximately demand. $XXX customers in are of initiatives. initiatives, onetime And proactively majority still incorporated sizing Though

better deliver summarize results range. of significantly To We to strong will the updates high third guidance on enabled the operational quarter, quarter provide you execution were initiatives us than end that our as appropriate. these

to the plan proactively to action to for are the continuing stakeholders the strategic let's irrespective open Operator? With Q&A. we IPO outlined at outperform macroeconomic and execute call are conditions. that, to We company we position taking our of

Operator

the Harlan with of Sur [Operator line first comes question Instructions] Our from JPMorgan.

Harlan Sur

team's strong Great I be, industry's the execution will profitability. softness technology quarterly think, a right, assessment, the job on differentiation. good and and portfolio The of

overall So LTAs, new and and even book were just now be pipeline, overall dynamics, But you at I like pricing looks what follow-up. renegotiated and anticipating pricing then standard look I next demand XXXX? can for given total previously to LTAs, guys ship up current revenue And on business; that profile challenging you the negotiations know year. have a articulate I obviously, guys the if changing maybe your

Dave Reeder

has add? then what our price some regards our previous Tom, selling commentary. particularly pricing add a Good maybe, this constructive we're per XXXX. morning, quarter, Average we increased seen, and Harlan. you quarters believe upon Tom, into increase, I'll sequential to We can that that's still pricing consecutive environment, again you've modest start color. as Based you'd one on of relatively that X increases see, LTAs. continue in wafer, expect to consistent with really anything we with

Thomas Caulfield

to a assessment, we're the look SAM, the in bit I the by that this try out capture but importantly, When more applications company, we differentiation specialty customers the end continue When we see value can our can more really of where to I'll Yes. add going that at ourselves. the industry for go that to where single-source that double aligned strategically. next in at and think in growing of of type market and we we're billion decade. drive opportunity matters We we to all create business, $XX our for market double to see little opportunity still a create -- look market our we of differentiation excess win.

markets. support value us work R&D this for as to of map, is that to long we business those as the end for in, our we to as play end differentiating this road execution of on continue the So ability continue environment. don't capture I our our we through understanding end macro markets focus think to

Harlan Sur

revenue. customers lower shipment of to full And profile then it's said will view for next the it's early given year wafer be as the in challenging. to well, demand clear, a team I on the obviously, you too XXXX assume industry, articulate year as your

margins and mentioned, the you utilization if many next coming you depreciation Fishkill roll is a as maybe offsets East think the So likely with us year, could down pricing, like framework most you've continued off. just with wafer but about transition got increasing for help just positive gross right,

framework think margins. for the about gross us how give to So

Dave Reeder

and those a one the are mentioned, is we variables management at guide maybe the that times one but challenging, broaden quarter as you could as perhaps you are focus time a think the on way to know, -- Maybe times the differentiation. sit out variables, team I into we when need to Harlan, one When more about perhaps head what first And we we more about challenging. down tend we Tom control. focus think as we that Sure. you that can on

we've of about we're company So We with of more source. being for our realigned more technology. about making differentiated differentiated. wins development product single were believe XX% to year, design management, focused XX% towards We had the sourced. another be design to respect progress single quarter, the year-to-date, being on We're wins

We have to So respect that's it's we year. mentioned, We differentiate Tom increase good think making sequentially. we feel this as cost correlated seen pricing, to year like we're our directly containments. increase modestly With progress there. going ability to think to pricing next

spending, commentary can professional while we better growth. accelerating forecast, pace prepared we're considering some our of productivity initiatives. You CapEx planned rate the moderating we're cash We're heard the our CapEx, on our discretionary free finally, We're that our of and customers' entertainment, services. then previously profile. to controlling our aggressively travel, control also And match demand

ultimately, gross us the directly utilization, we margin. believe So control correlated that, to that's believe that we helps

And We so quarter the had focusing we feel still can we on a we're quite third control. future. we good and pretty like that things for optimistic feel the

Operator

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

Ross Seymore

thus weak. talked the on that any demand pretty of know what one far okay on Dave, Obviously, third the but third we've to coming quarter? in generally for quarter say, I seen the a of darn seen during utilization and you've fourth you lot your or quarters fabless down linearity linearity fourth were about color Tom but had customers you additional of quarter guides demand. were

Dave Reeder

Sure.

the At be basis. to in we've flat that you $X.XX linearity, quarter-to-quarter guided midpoint, a from that's billion. guide, $X.X our to on I -- respect with relatively about see think billion Ross, would

bit would sequentially rewind from quarters, couple fourth to of a we quarter. more little third expected a think growth I quarter to have you if were

based impact what think customers their one at some heard I not you're continue demand those So quarter to from XXXX assess think first a collaboration XXXX, that you we're as more from customers, probably our with seeing we we that as trough half on know, the first refine to we're have With as upon demand. and linearity reduced It's hearing but respect guide we the of customers. the than you've of our quarter But the is based future of many into hearing. customers, probably time. likely

Thomas Caulfield

that. our our And I'll to even XXXX be facilities. all not still mean One for and year XXX-millimeter, our expect predominantly that, XXX-millimeter to And is X with I points predominantly just add underutilization us. up is a of modest we

Ross Seymore

And or a side side clarification Tom, the that just you there. revenue both? on or Do mean output wafer the

Thomas Caulfield

I'm [ph]. for talking revenue XXXX

Ross Seymore

LTAs. And the expanding the number have is year. the LTAs. It's in dig that but I direction with the want the picture I appreciate half and value obviously for in bottoming about people guess that and I see wonder to then of of to big still my those going good is color follow-up, both magnitude the people into customers their deeper the have of they're the you question of the first But macro

that a for gives you expanding to? now? of what the more given So talk on holding a framework and in macro little for the customers XXXX out value LTAs agreed trends that negotiations exact amount longer value at view you Just the framework, the term? one allowing to point bit trying to that you're Or about comfort is it's they it Is so the what it figure the to allows do? right

Dave Reeder

use Tom's direct we've recent back I'd probably an to really, commentary. most And to as example, an amendment I'll the kind it prepared question of to back LTA. Really, made the -- that Yes.

mentioned in then it us a half. reached a fourth of that demand about we little other was pretty When a had a LTA sat in up outcome engage of of down of to a to their and capacity customer Tom the that downward in with can each fee. quarter. bit the commentary, in centered So we And subsequently the previously, kind most we the such ultimate we said underutilization to as that on and revising that we talk had that XXXX, customer first out constructive collaboration tools framework as way his provided

we year the increased pricing in appending into XXXX demand extra the I had of and year. incremental contract. by extension that an was of remainder XXXX, that extended also We the for and agreement out demand believe then that had the the it of

of be very we also sit what framework, that manner. to And would both continue to as in the so enabling an handle but constructive industry, constructive long-term to down that handled way LTA only the not in parties in growth handle perturbations see example a a short-term to

Operator

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

Joseph Moore

the And And that I the be talk QX. shift a something did driving wonder impact could revenue if you you you take sort there I talked million hear to closer right, you impact specific I impact? there's is guess, the guess, utilization about. I about that's $XX matched in to action? wouldn't of that

Thomas Caulfield

Sure, Joe.

the run start were they first of to would gross quarter the to that we $XX Specifically, that start reason utilization accrue with we to if to had an range The kind is were the that fourth impact are the you outs prior in at was start are what prepared full in but continued period. charges essentially running quarter, to impact are in in a the fourth higher started like quarters. you fourth at the margin those lot the trying have in of see million wafers wafer particular commentary we the articulate because been quarter underutilization quarter

that And Did $XX have a so line would if did range on million have occur or not occurring. that commented not that essentially higher a follow-up, gross why underutilization the we that's we you Joe? had was was margin

Joseph Moore

Yes.

free you there's with some have under automotive, here. you do can with capacity Is people the up of that? that would that that assume And extent interesting that about the industrial there to picture, aren't to and would bigger work smartphone opportunity lot sort type conversations towards of to of that of some LTA, automotive talk people having you're I terms you see really of in a think opportunity over I sort with you businesses potentially you. reposition are to industrial? stuff that around want might

Thomas Caulfield

still opportunity That's we smart strong in our devices, memory, support, with mobile our auto. remix here make we're of towards case. hearing most LTAs. we're opportunistic. And sure is we across as sell absolutely every to There's differentiated the you're that embedded where can, to technologies The an XX-nanometer we as strength technologies, that key our that board. the wafer auto, sell the we it using BCD honor Many we

And so more we're XX-nanometer constantly not markets only we to have more to looking with XX. to we optimize capacity. our across corridor our demand a business we make fung how replacement, different another, the on to the ability do fung XX-nanometer XX-nanometer leveraging our X-for-X match part If the end demand and a can call what

act proactive do to team a the constant balancing So our being can very serve. we markets with that's we and

Operator

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

Vivek Arya

they we think Can of how the should scenario year, what the up say, gross being, might fab benefit be to increase? about modestly you margins? Fishkill East exit? from the next In continue will that see sales And

Dave Reeder

Yes.

the seeing to from clearly, company irrespective year. the market can we I'm we believe on margin. currently modest based see is year. next pricing that's what what modestly we But of So have upon revenue seeing have believe position us be mentioned, -- will as gross environment. not Vivek, perform that the provide so proactively you're us to such opportunity up we you're We that going we next guidance that growth do

positions as you actions And contain taking COGS into. enter OpEx costs, to Did now a the are regardless the market that follow-up, on side. as we on we well us that Vivek? that, So side have believe we both the of

Vivek Arya

U.S. over your as a you way? unique GlobalFoundries, think And details give footprint? over is How market, see customers? about part of more year. do see Looking customers flavor that out at, Tom, given could you existing few you have last in several next $X the second customers, with you China. you was with to us we to your be wanting restrictions more much newer that on any And of seen annualized more prepayment? engage to with look especially revenue your of next from expect the the So is customer how have discussions mentioned weeks, changed automotive then customers hoping wanting lot much I the I a years, you automotive that you of is that billion from do engage if

Thomas Caulfield

start the me with restrictions let of about and China. part the the dynamics first yes, So geopolitical out

If GF's direct in we under is you call recall, exposure to XX%. what China business

end term, how intact. than And get in longer -- so are not, is to better sourcing. customers that so starting of it think our a they more remains But business balance their do

And so part I a that's doing have see existence. if you them this won't in thing, already

we'll The What Let a really revenue get redundant better that will engineering. to the me that forward go family. going wins into kind product that's later. months footprint see about design starting move turn it to because we're of XX to them XX think is next that

part we're business. then way another And still view that about a see to talk you source taking well we're you products to So be more come we'll place, that. I that as to next-generation XXXX But in some prime into where cases, year as more for seeing beyond. We business. source starting footprint. this single that plays XXXX we dynamic and stated, spread become a customers start around of of giving see geographic move source, globe, supply their being the of which, being from preferential rebalancing GF's the starting the chain more and our to then us second know, bit supply revenue be Again, the the have product source little to us side second

where market that they with you, in we complicated us. -- engaging different model automakers to for is you're a fastest-growing We're And and the in I done. of the charges already that. wins the on and Look, just to foundries rate, design our you chain The second every get supply this, And to day. cited $X engaging just the when goes would tell -- tuned bear through see industry stronger tell think work cost developing XXXX chain will pass-through so a a play run us automotive. remarks annualized are coming stay get something that rate. of us. I front seeing quoted to run question part economic supply of But think and want real-time prepared each of of you very on his your in that brunt was have I billion this to it's have out the in there's to relationship pass-through that I would don't we're pipeline David And that going

Operator

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

Chris Danely

So on a can which pushouts cancellations color and guess, amount the provide the markets been? you and next little Maybe getting about for has year? total, talk more what you're I just end

Dave Reeder

Sure. to let's particular when But Obviously, sensitive amount the handful of we I it of I'll any or provide customers. information. can. need characterize color sit to that steer and down we our a with clear try customers customers any of as

thing these with I multiyear all LTAs that look length. to down XXXX. I So discussions about we've quarter. their forecasted handful And think the really got and of last first our had customers at up a note LTAs for are is from that We've in sat now XX would to demand

over fact, closer In maybe right now. probably sitting slightly is to X, duration the years X

this entire period, half on first And to specifically the related of be so near-term more LTA. one stage to -- seems about talking period, we're at XXXX. specifically not about the talking We're

And underway. of tend the as to say The markets discussions as to largest would that centered so undergoing up market mobile that know, inventory correction. end low had seems I to be holding smart well. that's fairly you market there's such The an up we've mid-tier segment be still correction where, around be that inventory high on. of end some the those and tends discussions

handful discussed The follow-up? we I variables of think customers, discussions to that most helpful the the have that remain all those have earlier have that towards that of in more in involved Did to tremendously space, quite been framework you been up on have a LTAs be that collaboration. intact framework centered continue customers tended that constructive. and

Chris Danely

the getting dollars so them? out LTAs been is And pushed impact? far or So come total the renegotiated maybe have total canceled? amount about Yes. of what and revenue much talk What's out has how how of many

Dave Reeder

amount I Well, -- essentially not more. I would slightly dollar as same, total that the LTA being would the if characterize say

Chris Danely

For next year?

Dave Reeder

of total the No, length contract. for the

multiyear at in look length. engagements these we as So

we'll I commentary for on a see, currently think continue modest we to that growth next that expect the we And upon what provided. we year for we've is what to is year already comment be XXXX expect XXXX us. that based

Operator

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

Unidentified Analyst

is on calling Steven of [ph] This behalf Krish.

end of softening change as maybe understand of more Tom, as you're demand some for I mobile how driven bit if in question also could that term, for near in segment. I also as wafer demand weakness here? well? holding the terms well a was and a totally the out also millimeter communications this smart so you seeing up Is see be about data might playing of near fairly market talk of that Or indicators exiting that still the First term center do you just by that wafers is lot wondering in industrial year demand well? the

Thomas Caulfield

the think end that auto. market is I continues only outperform Look, to

I think that. we're seeing

that slow are though markets. opportunity that even world aren't for enough it's seeing so right? down, we've are like and will customers you wafers decade. look a IoT, had to do a probably at industrial at growth that's year-over-year, Our over XX% the growth, us. sustainable not growth home for end growth But growth a in These There some of important still that. When rate, the

So I still strong. would is tell you that growth

the that go order. think cycle through goes cycle in the then will in rest for one this a be I and of out them potential And it comes to never auto even stronger. there's the the really

that how demand, there's figuring our the qualifications in went a about where we then I capacity order. keep remarks lumpy. use little we out fung markets on our And multiple leveraging they'll on that's at announced to to -- others And all stay the Not end in markets, down our where focused a bit it's think end we PCs everything this in we on of is is. capacity, back where prepared and first more the went capacity that come kind for making And the of certain us, that focus. demand can memory once, so followed. like sure do

Unidentified Analyst

on Dave for cost one OpEx quick One the reductions. Great. or

out on $XXX think was on of macro run [indiscernible] the in I next flexibility run savings the I you that of if you rate line run of cost sort depending is when million. year? that hit is cost the savings mentioned wondering Or plays annualized about time possibly how of to the quarters? sort rate reach next some couple rate there

Dave Reeder

to not at pretty We're think that year, of activities on be cost aggressively quarters. the million, the $XXX and I half expectation if annualized would try our to get containment next least of Sure. X moving

way So currently about thinking that's the it. we're

Unidentified Analyst

on results. strong Congratulations the

Dave Reeder

Thanks, Steve.

Operator

line the Hosseini with SIG. from comes of question next Our Mehdi

Mehdi Hosseini

any you wondering A is CHIPS with update Yes. if -- the the if that there there's update can chips on on any us? I'm follow-ups. couple Act of share

Thomas Caulfield

on the what is off go bill? I'll will roll If that it signed earnings get I capacity quarter, with then guess perspective, the And a without races how customers GF President expand committed outcomes CHIPS to is GF you government bill. the looking our a to way to the the to out money Yes. doing U.S. we your back they call was question, in the meaningful From CHIPS last actual for. to this demand. put not deploy on figure to the day were

early us, build-out. in go would demand And of to we of for in the working that customers we're with kind think so the -- to aggregate the of buckets. X together CHIPS the our And will in with part that our we into using working to of parallel, proposal parallel RFPs kind bill XXXX, type Washington in putting need of commit come

X the facility up of fill expansion to is Malta, our first York. and in existing The New Fab

create in room is The our second expansion, New in range add in technology modular facility. the go extra lastly, space some be Malta, brick-and-mortar, play to would of new new X capability a one York. to clean Burlington, Fab And then Vermont longer

our about as dictated them we the be they pace this are add quickly will we for go for at us order which how by that's think would so we And how this looking and to do capacity. customers capacity it create which rate The I bringing is the the chains their think billion $XX states. of $XX the solving one create rebalancing help the call the bill about of the it equation some billion question. to capacity. to supply product that CHIPS going that's part Because and in

making on the The we can to its investments that make that we confidence demand, any the the Any working that to of these that make we other that? want. we're that U.S. the part go business other of part demand the is these all so sure with sure back now would way And certainty finds follow-ups that's make with and secure right returns investments business equation to

Mehdi Hosseini

Actually, I do.

U.S. I that waiting bigger to the the GF as think credit. all tax of is think there's an outside of if I'm part cost from get would of make CapEx the dollars benefit update I rebate. more Italy the to how And Act comparable we're CHIPS the allocation wondering color the given would And NOLs, the there.

Dave Reeder

pretty read we is the tax it, as straightforward. Yes, credit, investment

season. of capacity. rebate paying that during be investments That any available the is rebate tooling are have XX% tax tax essentially And applicable domestic a to filing regardless your status. next increase those net those investments will so And and to

leverage tax is the to in So be that investment will able U.S. those investments our to belief our we accelerate credits

any a that leverage And opportunity. to our of haven't so while we into current numbers, that plan incorporated we have do

Mehdi Hosseini

to one then other follow-up I do... And can see. have that I actually question has

Thomas Caulfield

Mehdi. Go ahead,

Mehdi Hosseini

your And that inventory. with of do to days has

of I right reflection inventory pushed wafer some may think about half. uptick to think DOI? of out because in of that that Is the a the that is shipment days weakness first of that way increase be the in some in

Dave Reeder

we to year sheet, go about has $XXX grown $X through end year last our last at of the kind base the billion. only that, you and balance total XX/XX/XX, of about No. In And if inventory total, inventory, end on grow you're if you finished line and basis. to expect that's of total inventory. look not large back work a to I'm as million of go back going We to our is you do increase about that continuing WIP, in customers on expect a buildup This goods in to that billion have ship all some would timely the process that capacity inventory quarter-to-quarter-to-quarter. you of of to $X.X is

so increase date And with capacity increases quarter-to-quarter. to characterize much and in very WIP I associated as line with associated expectation being would in the

Operator

from line the Rajvindra of Our next question Gill comes with Needham.

Rajvindra Gill

it the little that IPO over commentary, you capacity see place expansion was in of very the do we back of cycle? there year a would a tailor that thinking the upon cycle results drivers push beyond a and are in what you on a think might process plans in down or how I'm about you up about how manage wanted Yes. next you think off of I can XXXX. if have do to the kind Dave, to do bit. then ratchet the some you CapEx have And CapEx in go reduction -- ramp potential down a How levers smartphone just solid congrats you're orders next or environment. you more in curious a the customers? to follow But I CapEx year, year. During and how tumultuous in significant this just on CapEx it down due touched

Dave Reeder

Sure.

on with billion, high-level about thoughts you $X.X CapEx, CapEx. flow I'll I'm under cash with billion. Year-to-date start free going some end slightly me operations cash CapEx. Let give to year-to-date and just And $X.X from

flow CapEx, we billion And from on a for $X about from cash positive enter so year third as quarter already the in a we're spent minus cash slightly which CapEx. ops free perspective, we've

as our ability investment our would a very So between cash generation good just say and framework, in capacity. alignment I

customer to is that The speak second our demand. thing I would

our moving to our actively demand. customers' So are we align with CapEx

able CapEx that year that we've and And everything to commitments with we so wanted LTA us in against to WFE to We unable the to working part supply made. productivity while were we deliver were our this hard, early the continue more needed. they're of suppliers, execute

can those we make such demand. so the we necessary gains. that we then as and demand capacity keep shift pieces the and with WFE capacity that that productivity of move alignment vendors tooling we're sure the working in customer to as that customer banking for that demand. we're the are are we'll able as to with now get still that best And changes, grow capacity the critical And And

is the call CapEx for year. it, come has forecast between, $X.X now down our to for somewhere billion year billion. So the Total $X

us you about generation free those with variables. customer demand As think our align cash in ability about year, our should up considering match and we think context trying to next flow and

Rajvindra Gill

particularly you that's the trending XXX-millimeter. utilization rates Yes, what your bit mentioned the current in -- And could in really kind you just little quantify follow-up, lower my for of helpful. a if Wondering utilization half utilization to into the smartphone side? reduce going about some of customers QX? going these XXXX the into how think start orders on of And the first as rates rates we are do

Dave Reeder

let me I'll commentary. quarter. to to the try some one provide most guidance -- I'll keep of

XXXX the really very growth XXX-millimeter essentially prior we for rate. modest quarter, XXX-millimeter we or year highly With mid-XXs be were side type as were with to utilized, which a our we high utilization still When back being blended quarter, our fully very the guidance for to kind utilization to utilized on a fourth to look in just Third still the on low fully side. of XXs rate, we're us. to at the negative statements impact XXXX, I'll expect go of respect probably

Operator

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

Matt Bryson

the be we will predominantly that a greater of that what underutilization the characterization is end very your and customers you're and half the my it shifting there's impacting fit With plans out, should charge? this your your demand it's when calendar good CapEx weakness their year, out, like saying. hear assuming worst? can underutilization QX scenario is, QX underutilization in, expect I say, conditions expect appears costs indeed Or calling demand. that million are we of at guess question $XX peak inventory plays mirrors seems first calendar next demand It environment to much market to you're adjustments

Dave Reeder

Yes.

time with just I'll one stick guiding Matt. quarter at think point, this I a at

us modestly company be grow what think you're remain managing proactively perform we the say we But macroeconomic to I that we articulate cost can us scenario. of hearing is XXXX. growth hearing also for prospects believe to that able our we that long-term intact, through you're regardless I think believe activities are containment

have Do follow-up commentary. questions? that on standpat we'll you think I So any

Matt Bryson

of you Yes. more about talk attached lifts or My of be mix where more statement to a as either commentary? that can expectation supply? in of pricing should follow-up around the that a XXXX, when sort thinking go is of locality GF's I benefits given being some is Or to pricing like-for-like premium

Dave Reeder

Sure.

foremost, our in on first and pricing, So visibility is grounded really visibility. LTA our

January include effect those So that LTAs come to expecting XXXX better we're into LTAs additional all those in ramp pricing. XXXX. There's those LTAs. X, Not LTAs are throughout we continuing to and They've online and this to went continued ramp ramp year. volume with

wafer And going X ASP very some see but to uplift I you're categories XXXX those so took the mix that to from of you think per together, if it's XXXX. hard in separate pricing continue to to us out is modest some like-for-like versus what you're hearing articulate

Operator

with Our next the Tristan from question line Baird. of Gerra comes

Tristan Gerra

your Is could could looking year next be point? to the the that utilization and time. year lower a a next the in as QX of mean trough. your that about a terms your only in the lost smartphone? second end that correction half Understanding guide specific in Just at that at does Is rate And expectation based potentially half commentary that utilization mid that of expectation you've rates on inventory result? first what in quarter recapture that with a you at in rebound one actually

Dave Reeder

in has customers. our our view developed with Look, on been really conjunction XXXX Yes.

we have And about think our design X/X continuing about think single today single how wins, about of to we of much future, and source that so volume that grow. business when source, is XX% we ship our you

work And demand with our profile. on customers their so we

We kind to first think quarter half that versus based to general with perhaps but surprise. prior similar a to quarter we so not collaboration on provide was customers. trough. customers, reiterate first think color of in really hold And likely second base; discussions assess that that it's XXXX, our when with than our of upon the more than on that the which is it's continue we customer our some to commentary some comments we'll going additional not color providing that other XXXX sounds I'm off

Operator

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

Randy Abrams

strength a that Yes, And the then about Could question for it's wanted the ask talk timing XX-inch. that resilient? do little Okay. see bit come holding on later? should XX-inch, a X-inch I the through to correction think just difference a also, to difference relative you you drivers we versus where

Dave Reeder

our speak I'll LTAs. a Sure. perhaps Again, to bit

regards have -- really have base very across LTAs. our good manufacturing very, LTAs with coverage we XXX-millimeter Our to

LTAs. to the really, we we've that and tends SiGe be a of unique. so differentiation we other with where side and from some have coverage added Certainly, got some GaN have the XXX-millimeter are amount side, But XXX-millimeter most products the on tremendous that quite differentiation. And on

so the perspective, think that I up better XXX-millimeter why from hold significantly that's XXX-millimeter. seeing utilization you're than And the

Thomas Caulfield

Yes.

that points markets a Let up We me to couple in here. add of also are happen be better playing holding than others.

that that still So than that's a growth when the still XG of we think in holds about we better about We that -- this the are enabled, segment. high-end low-end handsets, year play number XG think up handsets transition, that's in going handsets. a

a center, and to supplier partner data someone strong of with we're think is we're in we who gaining center data So share that. a

some are and play of the the that are of So segments of those that but well. some the in damping parts very strong sub seeing breadth markets of in not end only we're the we the is some of that, still doing customers

Randy Abrams

ask, I follow to up is base. sizable the the Good. the wanted quite wanted to That's relative I helpful. annual question second And million OpEx $XXX to

specialty, to buckets of the give reductions. a few one to the given just if continue plans footprint, make And grow good then you seeing could to type housekeeping. room curious, grow Just those you're into more where

change, into year? CapEx how changing year-over-year the With next see the depreciation you

Dave Reeder

Sure.

we've billion. order it's to here. So probably rough those respect were in OpEx, you $X With take about tough million, OpEx, if -- let do numbers, and $XXX rounding closer to me billion to in $X the

you you're about COGS. X/X $XXX think million split X/X, So annualized, when talking the the versus of probably OpEx

levers those areas, professional I you looking services, entertainment, travel, think think that of So and in type environment. spending have to of able labor, when between opportunities at our any we the all of to about course, about we're think that the for you addressing be spend enter

we we've we've multiyear a drive got I series had so areas productivity got period. frankly, those of in think all more And productive. plans to quite become opportunities a over to And --

lot create And as plans so this acceleration as craft having would or the versus I of those a new of of of some ones characterize go. to we kind

We're that's we respect stand So with I to assessing OpEx. where that think today.

as As I more mentioned, I to with able this expected. to of respect productivity well what been previously we'll continue assessment. able more year details provide this think regards percentage as we we do been gross we've revenue, to we've that as managing CapEx year CapEx With margin and a drive is to than

to to drive that in terms that to way we able to those were to And those hard-working we're employees new deliver so a able more tool productivity were be equipment while of ultimately of to to some in we shipments. delayed wafers, a receiving deliver find way able find wafers credit XX,XXX without

been our It's capacity customers' we year. this some latter drive the of kind that for match with we've customers' CapEx as able our opportunity to of to out match that the up productivity of So and do, to through head XXXX, some our well half be that demand. something push expansions to to CapEx us continue created of something better we into demand. as do and expect as the utilization to That's that able

Sukhi Nagesh

take We'll please. last question, one

Operator

from with comes line of Fairbanks question Melissa last Our the James. Raymond

Melissa Fairbanks

couple the launches is be half to $X there expectations. it to in, to about with be rate assuming? back target. kind of a talking rate, year? As a auto sort Or a linearity have to smoother it XXXX through Is step ones. quick I just should pretty toward imply that that year? increase the this know of any of I path we Great. seems you're But function ramp get tired the billion more tied year model driving of should of steep run growth a of the

Dave Reeder

No.

business. pretty be on to it our linear. been constrained some capacity expect of automotive We've We

rebalancing us prioritize In it's say automotive us do, enabled our What more to demand. business. some to a of of the on fact, has little demand this of enabled of majority I'd the automotive bit

XX% of us, year mobile for smart revenue total XX% to devices saw You period. example, ago decline versus a

product mix out much you're continue a we the into As to grow see automotive, going goes better to that balance us have marketplace.

kind some take we in that strategic be what exit billion next annualized run capacity be able add pretty of expect we're to to by quarter to able year, throughout up as linear well in new capacity So, fourth that at year rebalance some automotive the we're as to time $X a until way rate. next areas we

Melissa Fairbanks

follow-up to Like Okay, incentives? perfect. Or how to expect be it know more be going once submit early term, to a quick an extent And the in if the To maybe the RFP, through? just you do is may you the to on kind bound Act. of controlling flow that? tightly to is this you do you too know CHIPS restrictions near there any are CapEx

Thomas Caulfield

pragmatic wants also That to I real and know. built is approach Look, for not the no everybody. capacity waste I see think think one too a being that's to becomes used. early

model lead -- Washington return want to the see approach. will we way but the we So capacity have be sure I have will a the commitment funding think pragmatic and be that that get making there'll we just way. that think that right to the in have right And executed I the the GF only program know will utilized. -- And very not that durability we

Operator

question-and-answer today's like back for to session. call concludes Nagesh closing That remarks. the turn to I'd Sukhi

Sukhi Nagesh

today. additional for Liz. need you you. Thank Thank GF. call if questions you, joining any us Please have you, answered from free the out feel on Thank information or reach you everyone, to

Operator

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

You may now disconnect.

GLOBALFOUNDRIES (GFS) 8 Nov 222022 Q3 Earnings call transcript