GLOBALFOUNDRIES (GFS) 8 Aug 232023 Q2 Earnings call transcript

Good day and thank you for standing by. Welcome to GlobalFoundries Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

to Franklin, conference VP like speaker to now Sam today, of would hand over the your I Investor Relations. ahead. go Please

Thank and everyone, XXXX Good GlobalFoundries operator. quarter earnings welcome second call. you, to morning,

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

measures During results accompanying are IFRS you change. directly are and today's financial this press The slides. both to that and most these present comparable measures. we call, adjusted IFRS I'd non-IFRS non-IFRS reconciliations remind available unaudited release will in and subject financial measures and adjusted for

be be as statements. today's tense. forward-looking deemed the call be statements future intend, expect, the believe, by Certain identified or use anticipate, and of may on by to may can terms statements Such such

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

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

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

then one and your limit We will one follow-up. that questions with to for Dave questions Tom, Neils. the with you open call We request please

Tom to the for his prepared call I'll over now turn remarks.

results and at pleased Sam, high quarter first provided of our call. end you, that our are everyone, welcome, to we second earnings quarter the in guidance update. quarter I'm Thank second report to the

to industry. continue deliver cyclical financial against our uncertainty and the backdrop facing We of consistent performance macroeconomic

data by brief in me industry, that current semiconductor we combination being end of more lower slowly business expected. and that lower to we service devices, of Let levels center end coming Certain a as a on Similar markets the consumer update such communications providing environment. and impacted markets inventory down well the the by inventory the start levels across increased smart are markets previously several than electronics end others as demand. mobile and infrastructure are as home believe year-over-year

update, with consumer-centric levels normalized quarter happen discussions markets forecast the the discussion end to to to based our XXXX. continue is with Consistent in first will we on return customers, inventory previously occur the in more towards of slowly the more best than our that believe and our end anticipated

later into that for rebalancing extend challenged. year will be outlook demand markets still throughout the sequential we impacted quarter-on-quarter remain by We growth So the will macroeconomic revenue to of and the XXXX. and continue demand these global believe consumer also expect

industrial to end healthy faster as defense. demand these such markets aerospace see Now continue despite in automotive, and we headwinds, growing and IoT

closely comment critical We which important we with these on customers shortly, I will markets. have announced support exciting some working to and our partnerships, are

on touch Dave in our briefly his me will detail Let now discuss in later which more commentary. results,

report our was the the quarter, $X.XXX better-than-expected which to at delivered to XX.X% which guidance billion, second by range. quarter half second was primarily guidance of is of our gross the range. moderate high This margin variance, also of increased at of manufacturing $X.XX, sequentially of end end well guidance timing expected to the pleased per in share adjusted the We high we positive XXXX. performance that as reported the our which exceeded range. earnings of which in favorable I'm Revenue adjusted driven in

now a automotive, our from me on to provide brief update of activity. Starting the the highly and autonomous, customer partnership remain of some connected, ACE, we you models engine Let transition supporting electrified with with combustion internal committed industry recent vehicles. to

features portfolio seeking faster the to from to product safety manufacturers our compete support evolving experiences addition, as In on the automotive comply driver with electronics on and of standards. architecture is and uptake placed as pace well differentiated to well security

business in to demand. our towards drive to the leadership In we've products handset continue seen smart tier where devices, premium remix market, mobile we resilience greater

also a line product our platform, of components. based leading RF on features set for silicon-on-insulator comprehensive delivered We our module front-end XSW

delivered High-K in which our mobile enhancements where platform, associated see purpose processing devices. for the and is Processing the XX-nanometer content built Sensing we Metal Finally, Image we to cameras growth trend towards to Gate more pixel segment, continue and with

technologies, continue differentiated on and IoT, at embedded our intelligent for focused efficiency we in power innovate Meanwhile, edge. memory to solutions secure enhanced the

Cadence aid the are to proud to the development hearing aid utilize smart industry's processor, GF’s system-on-chip of to have support collaborated create first the Systems We XXFDX Design also which with platform. will binaural hearing

which are the anticipated, through half slowly into well In more and expect have communications data than of continue our they limitary infrastructure center, customers we will second working year. the indicated levels

As of durable to a able capacity segments automotive. remix as in growing some and our service demand we've been such more result,

Collaborating a security and will advance announced innovation also U.S. supply Lockheed secure produce for capability and manufacturing and the more security, with that Martin with States. resiliency enable semiconductor United collaboration of to quickly we affordably security national reliability Martin and strategic solutions GF domestic increase the to the increase and of Lockheed to national June, systems. In chains

Lockheed the supply of We are for Martin systems. security collaborate trusted need mission-critical proud with to a for reliable feature-rich growing address semiconductors to

ability of range traceability, defense also production increasing aerospace supply to technologies This XXX-millimeter Category Act’s manufacture chains. the a critical fab providence with York one collaboration XA year secure was and directly the recently Trusted critical as national our onshore week semiconductor semiconductors CHIPS anniversary Act, the Martin U.S. Additionally, Malta, supports security domestic signing New objectives the applications. for to by economic and of accredited marks and government and our Supplier in a Lockheed of and the with strengthen the of of

out To the stakeholders. summarize, our I on am at our performance deliver the to customers that pleased dedicated range of report to and we world our end all continue around upper for as financial the execute guidance set our to targets teams

With that, Dave. over to you,

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

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

second As our were we the results last at end upper the guidance noted, quarter update. our range Tom quarterly of provided in

X% quarter $X.XXX year-over-year. Second revenue a decrease billion, approximately sequentially of grew to

approximately by X% wafer XXX-millimeter price in in product year-over-year, XXX,XXX We the driven declined the equivalent the a ASP, decrease quarter, mainly shipped from per X% prior year quarter. approximately shipped the wafers average selling where mix period. changes the during

agreements Our provide compared LTAs pricing ASPs or on XXXX. believe are customer visibility with dynamics, up year flat that to we helping greater to to for and us will full slightly long-term be the

XX% of second total fees accounted revenue includes Wafer end from revenue approximately of the engineering, markets and revenue, revenue accounted Non-wafer expedite for which our for nonrecurring total approximately for XX% revenue. quarter. items reticles, other from

quarter's markets. provide mobile Smart me total XX% of now the Let by devices update represented revenues revenue. an end on approximately our

market. XX% declined mobile driven the XX% low period in within smartphone year the inventory of quarter by correction Second a continuation segments volumes increased roughly to smart but reduced broader revenue from approximately the prior sequentially mid-tier well-publicized and principally the

and volumes, pricing these Despite was LTAs. year-over-year, reduced partially ASP provided flat the certainty our under be which to and can framework mix attributed

sequentially, believe premium on the quarter, conversations During tier RF handsets. Based SoC due as was of going across the with the shipment second will inventory demand previously our mobile into smart which that growth we our to than pace volumes slower remain for primarily devices anticipated. and the customers, solutions is quarter rate standalone into transceiver increased third demand increased levels elevated and

the XX% revenue. quarter's In IoT approximately of industrial represented home markets revenue for second the the and total quarter,

end Year-over-year IoT. consumer-centric growth home offset and was improvements in volumes this stemming and year driven Second of primarily quarter in approximately from modest the X% the in sequentially to revenue helped which prior X% decline increased market mix, portion a period. from ASP by

for control. to and applications such as grow beyond areas digital card and expand security smart our into payments continued access demand health, technology has as The transportation, government,

security prepared his in continue and to deliver semiconductor noted is to a growing traceability. importance and Aerospace best-in-class Tom and partnerships of segment manufacturing where IoT remarks, wins establish new As defense grow we within design

and increasing more into the end these a to customer inventory consumer-centric signal mixed largely the midterm IoT and we of next-generation technologies market expect market. result, demand and softness analog our offset As markets the portions correction for

represented approximately and segment continues total be a growth of to strong for quarter's us Automotive the XX% revenue.

year as we roughly growth revenue sequentially continued mix the increased XX% approximately infrastructure sensing, in applications. and healthy quarter prior by period, and Second vehicle from across and volumes, driven production safety ASP XXX% automotive ramp processing, to have

won products on allowed in applications, focus these has and our supply invest across we capacity. automotive with significant designs are of assurance, ago several ramping The success now into the years us customers' production along chain to

capacity revenue silicon year. more at with growth to we continued deliver this start communicated on content in business automotive continue $X consistent of billion we As of support XXXX, the architecture, the of is our to approximately allocate across to track what vehicle the

market, end revenue. represented Next, communications XX% our total which quarter's of and center approximately data moving on the to infrastructure

softening Second declining prolonged and quarter data demand driven roughly declined revenue a year-over-year enterprise center by result as approximately volumes, of levels of and principally sequentially wired XX% the inventory infrastructure. XX% for

for we a and such manufacturing more as revenues into see to continue this of automotive. capacity allocate to mentioned expect the decline We XXXX. Tom, by end through markets half accretive in as And durable market will second

Finally, our quarter's the revenue. personal of computing approximately represented total X% end market

XX% Second this roughly by sequentially in declined segment. year-over-year, volume driven quarter increased declining revenue approximately principally XX% but

at end of total market revenue. We this expect XXXX to approximately remain X%

profit. Moving next gross to

was we gross XX.X% the gross profit which our quarter, For of approximately delivered adjusted into translates $XXX at guided million high the end and adjusted of margin. range second

indicated to, alluded be and better-than-forecast guidance manufacturing attributed was year-over-year cost points Tom XXX to the can second As primarily benefits above quarter. improvement utilization within the basis slightly range the which

items the second benefit these of to third guided quarter expect and accordingly. our We have in the of half moderate XXXX,

increased sequentially quarter for we and sequentially Operating continue of approximately million R&D prudently to total Total were $XXX and operating $XXX our second represented SG&A XX% quarter million, for manage $XXX the million. declined to revenue. costs. expenses to the expenses

approximately profit and $XXX an the roughly our delivered million than better quarter period the range. margin, of translates which the of ago above for operating high end into XX% adjusted guided year operating We bps XX

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

a the result, earnings reported $X.XX we diluted share of per adjusted As for quarter. second

CapEx of balance the quarter, end of assets net operating activities from by Let me XX% Cash and cash cash $X.XXX provide securities operations provided of and approximately and equivalents we statement cash the set $XXX total at was the of the on the or of quarter billion. purchases the million. some property, as as stood now second for intangible combined define plant, At was which flows, for flow sheet out our was $XXX cash, equipment roughly cash marketable less Free flow $XXX second for million revenue. quarter key quarter, metrics. flow cash million.

billion credit remains We a have $X also facility, revolving which undrawn.

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

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

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

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

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

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

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

year our previously Included for XXXX that May call, will communicated utilization anticipated the our is full mid-XXs low be in through expectation inventory that guidance flows in during mid-XXs for quarter run to the the well-publicized would we earnings correction As chain. the XXXX. the in third supply utilization as the

quarter first of For in the now guidance year the we be $X.XX expect is our reduction from billion a to full approximately XXXX, update. CapEx provided billion $X which

anticipate to We consistent at XX,XXX this growth earnings of expand to offerings guidance performance summary, from down high year. quarter we efforts second employees and us differentiated enabled quarter our that product second the provided half CapEx operational achieve profile first sequentially through update. continued our the the step key end In in will segments the in ranges results our of

Although our currently future semiconductor we deeply on headwinds positioning business, cyclical impacting are remain on not the opportunities. growth immune to focused are GF to implementing industry, the we impacts mitigate we for the initiatives and broader

that, open Q&A. let's for With call Operator? the

[Operator Ross first Instructions] from Seymore Bank. Our question comes Deutsche of

my One question follow-up. near-term for one and longer-term question

near-term being mid the in things, of total year about and high the the digits. last talked David, single revenues Tom you On about quarter side down to

be holding to on in? burned, return equation LTSA for side agreements? any are if the if wondered there's more lowering you per in the inventory getting of the the I guys update what the how that. importantly, has perhaps And LTSAs And So unit are

I think our quarter then revenue that sequentially. I'll on to to earnings Tom, and with that XXXX, then that calls, be quarter-to-quarter-to-quarter to it prior forecast respect to expected I'll it start believe our from that maybe, in trough we Ross, and grow Ross, over in LTSAs. there build we question the would we first you with pass

that So profile. expect sequential still we

you year, first infer end probably And to in with decline we expecting high in revenue expect be that that are year-over-year full high guidance, towards from and with the range. to third the with as still to we digits. results the quarter really to that our first We you the books half that quarter third forecast can for we single mentioned, that our the the in And half in now mid- be range. of expected

Tom, do the LTA you question? want to take

able one through the It balance to would to through dare underutilization the create customers see partnership. and with wins other good. imagine we cycle. on profitability I pragmatic like performance balance create both wasn't side way have revenue in to those partnership that place a our the it if down premise in of And manage and to this we've agreements trough. have better you been world what very LTAs a I didn't think our in downturn. inventory manage work Look, Yes, to side, was loss, And very look fees the and was in through get to in in it our this quarter-on-quarter,

have follow-up? you a did Ross,

I potential had a This morning, also actual on front, doing Yes, GF. an European for announcement did. or of competitive handful TSMC we with the customers a either JV

wondered view Just of I see manufacturing that. et diversification can the cetera. the your end is and strength endorsed geographic what side markets, positive on the

customers those obviously, want. side, negative the are On guys you would

you competition more those lending so in guys. pressure regions, could to I And see some

announcement from how So that view you competing do foundry?

in that Well, the up a wake press see in we news didn't and has morning this time. long for just happening. been the This

on three next we let of is with the you in me supply double. is world that's decade. comment consistent to hit industry elements of an but going need Building this the capacity one the the of think points, on This I this.

customers. No they're -- a one of We many on the In automotive needs fact, are TSMC build source platforms different customers, given associations in meaningful alone customers is different not monopoly its German this not customer, on capacity. any right? way going needs. for us our fabs about to -- GF Europe participate TSMC's a Yes, those TSMC on go have own in capacity, need for create but is to talked also for well. as XX has to these

unintended of industry because in scale I'd it huge in and that the resiliency. this on driving region, past, of huge concentrating it point, by of capability ultimate one built also But cost supply your is supply an chain with drove scale. issues that, is in to that, add the economies to economies of consequence created

thesis to of in manufacturing a create And so begin capacity geographic -- needed GF diverse for that were semiconductors. to there were we launched, XXXX, when the more world we

thought a was good all it then. its pretty ahead argue that a like could little it today, We of was looks back maybe But bit time.

what very were cost. the greenfield in show footprint It's point. over in they're the and that you're economies decade, And come to our of adding the being to the location scale able doesn't next putting we capacity now in that build and get to degree concentration a a region only as road chain need supply respond to to difficult thing of resiliency another but and it But get is so needs seeing third to to fact the broader high world that not one the very it competitors is on easy. your taking build the

we going structures on better geographically this footprint. trying GF, for others forward. creates just a see environment cost to a pricing is And putting build for that are pressure And that diverse

feel TSMC not this So the really to is do we to you is and part. of first our something will plan. that need if I capacity. of we something that's needs believe in kind the do how last about their do world this on it. Ross. have just like hope This helps, that that I --

Lipacis from [Operator question is This Jefferies. Instructions] Mark with

you your actually last the customers I increase to asking LTAs in noted for quarter, some of new are back Coming you that had believe and X LTAs, scope.

you kind pause are of customers on where of extension or your of guess longer-term give I Are for customers? LTAs I'm at us a agreements so wondering, kind up you new pace? And signing we on that of are your still point are the that an from kind can -- update putting seeing we

there's great going pause question. on. no No,

everything. is of a in are with Timing We active discussions number customers.

plenty look for opportunity not for see when you that is industry if of make that that certainty their my place. you in you this back capacity growth want, ones begins Again, substantial today supply forward, that booking you're to comes commentary. more they're going a and It automotive, things depends the our think you to pat. takes these come nature, the There done time are to again. believe, and more of they in customers this have and all what want to then earlier sure things where you for sometimes stay of And bit IoT industry little grow

them we're come in will serious with a to working discussions close. eventually And that very

the add I And our So in are industry. they certainly David, that? to our LTAs you'd our is are anything and past, norm future. this think for in new

that just I on briefly. build Yes, can

and You're Mark, that we material but announce with market of being partnerships that being aerospace developed signed we didn't announced that right, this industrial IoT we've that's along performing quarter some industrial a we had home a market basis pleased and key new any and Lockheed defense one in are quite LTAs well. and market those the a quite Martin and being us on of we've for go-forward with

of ample We're also have with pleased which funnel of opportunities, very are our the we some mature. progression where LTA quite

stay in for more So the tuned LTAs future.

follow-up? Did you have a Great.

Yes, please.

margin the I will your margins, moderate they think the going I gross don't get understood keep and I variances gross timing how if them. guess you side, fully forward. the some I you of get On on of to kind assume progress that

what would a that, that be color just about? we hit if kind give little So you you And the color helpful. bit expecting were just in little variances next where to could more the quarter, variances of these there, of on timing, are a you talking standpoint if from provide more

do, Mark. Can

in maybe manufacturing benefit well. me specific bit and we second you broaden mentioned it as then little frankly, quite quarter unforecasted Let commentary, quarter in expected, some as better out second did some a variance. our give a we from kind And prepared commentary, the of than I'll

would it of variance received be manufacturing fall the higher is better reduced It broadly in manufacturing It cost. variance, It of what be utilization. better some second could quarter. input and that under from -- anything kind Those we you manufacturing could pricing be suppliers. the variance cost receive category absorption. be So could better-than-expected could from all

of in our the we at of range. high end absence second that have quarter guidance the benefit, So would been

for variance when think we guidance that kind to from and So we you actually continue to the throughout so range in margin. guidance give second perspective, the third accordingly. what quarter half guidance second than this third higher upper for and a quarter quarter. To of expect our context, we gross don't about manufacturing of our really guided that third is some we our give But third quarter year, in reflected midpoint quarter purely

a So quarter purely quarter, up if you actually quarter. second you the guidance guidance guidance versus guidance just think to third about we're third in guiding from perspective, it

touch which Capital roadmap, pre-IPO as could briefly on well And longer-term both know then I gross I as our Day. well if you just Markets remember margin from

you actually of utilization which, roughly know, a model X gross and perspective, a at together you sensitivity of points And from pretty we're model. those it utilization a seeing we've roadshows today, as gross to were been barring year-over-year only mid-XXs Capital that not a on ahead gross yet slightly recall sustain time points utilization, where long-term go we X perspective, gross of XX%. to If from grow put to the margin at Day, basis. is the that actually margin we're and margin. from current Markets from our And headwinds of that able model bridge but we from in specific of about a margin We're terms

commitment our margin road made. we to margin but respect ahead to with the that of barring had track map underutilization that gross on schedule long-term gross still actually So track, on long-term certainly

One Chris This from moment the of question question. Citi. our for line with next comes Danely

rate your utilization another of changed we your forward. up forward? the of And there because any it to we too gross going becomes high margins sequentially? risk rate sort the on assumptions in pricing mid-XXs of all utilization at last jumped months have wouldn't keep three So couple if going some lowering forward, for going the questions inventory XXXX/XXXX? Just Have is that have

Sure.

the of address me there. let couple points a So

with start me Let ASPs. the

year-over-year remained be year our ASPs really up The unchanged. was the year-over-year. in quarter, printed was to down respect obviously, XXXX, business, a second product it slightly second produced core the to the as reiterate gross has driven more me number adjusted saw contractual ASP slightly. has in we that accretive full a That mix you and for quarter. With our let in margin still with as structure, we our that by shift pricing expect mix very First, shift the

But on a what deliver, about efficiency at we able perspective about produce other basis, we've a look talk ASP shift operations period the flow before cash inventory from some gross that a mix free you lower the been I'd from And cash item to to of talk did $XXX of from is year-over-year. that a both were briefly like deliver the margin just in from to we slightly quarter. and perspective, million When capital cash free flow. able

enabled margin some capital. in combined capital that inventory operational growth working number, saw productivity as gross we that structure, us to that despite, higher efficiency of The with produce and you mentioned, the

most substrates. growth, related is to of inventory the that On

some with our agreements suppliers. some have We of

fairly attractive able the what some you the Did sheet of at raw to acquiring good a material to would -- substrates decision. in support And substrates, what of some balance for some have this include of be to through -- which some a follow-up, are substrates acquire prices, we it's cycle, long-term having be for been perturbation, we've able prices. look the years. this And we many those those favorable inventory through good current purchase as us, Chris? look ability agreements at for

Yes.

of terms XXXX expectations last Have of the any changed LTAs over Just the talk for the months? you pricing. guys three for about XXXX the

Yes.

fixed deeply of our fixed look, is XX% So also you source. and I too XXXX. in we very XXXX. And our into today won't volume, But contracts delve as price, about to know, with good of still sourced, wins design single single those ASPs, respect far About LTA are have fixed are duration. revenue coverage X/X

relatively 'XX look That’s into current see environment a to even pricing expectation. through now. right 'XX, continue we So constructive our into we as 'XX, it’s and

One moment please.

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

that? surprised inventory, upfront you about there's but take characterization that the going there on the Can weren't given chain. correction slowly. inventory that's inventory are touch of I'm driving more talk of much the anxiety could not if there's idea guess more about of what's still a comments about that you is if just wonder happening pace the what's some on, And some might the not slowly. LTAs, LTAs of -- reduction I where happening that supply I permanently they situations Are taking higher maybe there? then the how people level are that

Just curious you underlying that comment what's that kind of made.

Sure.

we everything from to So about Joe, GF of and OEM when as do, as track peer as at distributor inventory inventory. look we inventory, it well lines along probably course, similar to customer you we inventory think to and inventory then, our

look So at across inventory spectrum. broad we a

the say [dist our is OEM channels. we the and well that across And so across than inventory broadly customer when set as we're more depleting EME] inventory as slowly we are expecting, primarily referring to

the looks going I is When longer has deplete now it that inventory and full look inventory, from no that, like glass this inventory view we growing. that troughed, forward. at It is think like looks half point the it continuing to is

a to it's happen year, in that little frankly, expect it and out. pushed quite did looks like the We earlier

And so that I materially yet now channels just we're they in those mentioned, growing no haven't inventory come longer but down.

And XXXX. pushed to so throughout that's things right the

So second half. to inventory we down come in expect that the

and it is driver is the dependent was it the in what of where Now really terms currently end market. is it, on why inventory of

of inventory a is there significantly market on because I go-forward levels carry cost opportunity will less that end structurally the loss. inventory basis higher some markets think their just that than are

an they so still think are enough the And unable I those automobile inventory. markets, area being and the think where to of electrification I get

get a perhaps just do enough I in which kind the they of when traditional think And little then bit than they'll run route. heavier time, was inventory, probably

year-over-year on XXXX. where carried XXXX markets total a bit It's I single digits, handsets a more other we're to decline mid-ish into some I kind of was sold than think think market that's in in little basis, handsets, expected. expecting inventory there like handsets perhaps a

others, than follow-on, that think within or while be taking I And just little you uptick would longer. market different Did the areas have a an a there's of are bit example that worse doing better market that Joe?

little Yes, mean, working customers they it just inventory are specific point inventory Are like with situations the to be there LTAs. like where causes that there seems you're position is to don't -- there but -- the on that want, the that of a they're I not any taking ensure stickier?

that Dave. -- think that, I'll I take

taking point And muting trade and off that a I do this. getting that's The all the is, of cycle fee part bit inventory that's of balance. with like an the of point. up think underutilization the where kind versus you settling amplitude a little more

you to deep want takes to anybody down more of And I but balanced time of reckless inventory frequency be think but to that a underutilization lot don't those the peak that judgments it's not of one collective we trough, doing typically and You in don't want horizon make fees, in to the go longer. they the as the pay taking is anything together. levers have

maybe could point. if that, And proof me just on a to let I Tom, build talk

mentioned in last the actually, customers space, GF, so, week or smart they the mentioned announced mobile LTA when with our they their GF. of One they that's over actually

LTA in demand product in they that add that where things out to a capacity. actually such a were a within not incremental demand to perhaps technology or product the was technology mentioned much that of flexibility able exists that that node they of a that more migrate one they node was And much and was set needed as the

and to fixating we a framework I framework, the of think because productive on one so the incredibly down, were particular obligation example satisfy areas much one more helps being those LTA production capacity great to of LTA have customer, their able variable which comprehensive collaborative ultimately or particular where the market still way. shift in product engagement, sit a are that's the opportunities, and discussion, a instead of them identify fulfill And for there

Our the BofA Securities. line next Arya of from question with comes Vivek

situation suggest up in I For sequentially? would growth down some And into you a given our your that of into my I'm then think to comms clarify, markets? as in could end give consumer or inventory markets your comments QX, and markets end curious QX sense I I drive again, first which be of what the sequential QX. us look wanted And one, just could

for Thanks question, the Vivek.

pass think on continue color but in some want you enterprise support those that we in markets, to and the end that commentary not only provide two second and over to the well maybe to expect revenue do of into the markets? particular, IoT. second Neils quarter to our I some on grew I'll Neils, to automotive this end industrial provide half home

this year, about expectations deeper could Yes. for bit First, also 'XX, in on little addressing our a Maybe with automotive three a drill long-term and it. talk maybe our actual starting maybe bit I but little it ways: expectations.

of So as we we're servicing today, the from that dealings had years. recent over demand

million we we the half, to close in from quarter growth numbers run You $XXX the that a approximately had and did $XXX can expecting sequential million quarter. see third in in first second the automotive in and rate we're

that confident in we that talked about calls we will So we do this feel and year, XXXX. in previous billion $X achieving

you you to and at So the it’s if move silicon to as future expected in of the ICE terms ACE, grow long-term content looking growth, Tom about Xx at from mentioned earlier. as in automotive, the look

on probably to average. So $XXX $X,XXX in ACE about $X,XXX ICE average to

growth substantial silicon in a content. So

content, opportunity that we at that at essential silicon important what I'd fit look really chip I they're great technologies you a to when And think is for this. highlight you very the have way. is long-term mention that And GlobalFoundries in technologies and a just of talk them to few talks like I to our good diversity because of really the to have the broadness this think a that

high wafer domain these could performance as in autonomous both we the two examples memories some good technologies for Low-power, range to dynamic millimeter nonvolatile So the forward. imaging the move crucial sensing, are or radars, cars MCUs, controllers, processes of for be get high-performance aggregators.

for LIN We the very management system, onboard lastly, and And the cluster power strong then supports have comprehensive of a portfolio traction cars. that body battery networking, inverters. CAN, lighting, charging, the control, LED audio both video CMOS segments

and broad very future here, good going feel the for a we're it really, technologies So we us, longer about very, term. like looks with where

to production is that announced on that. GM we exclusive With strengthen a in longer term, capacity February good continue regards our to also we partnership. example 'XX

we in half this the second than double on business partnerships we to decade. based so really And dealings these this the more of expect and have,

around more So automotive bit content our be a of that little will position.

that to just Maybe round Vivek. out for you,

well. you that sequentially mobile sequentially kind second first some IoT, get for we revenue to nicely kind expecting around estimate basis, expecting I devices, has it bump also nice think for We're level. you forecasted to quarter to Smart that us a expecting $X was growth this to we're quarter, of grown heard industrial expecting had to year-over-year. of to the had automotive on to from what billion but kind we're Home heard it continue that we and we're obviously, sequential of perform continue year.

to of the not probably and comms for guidance in deplete throughout devices year, year. year. the then provided we fill them, quarter full smart data statement, And both third the but a gap obviously, that infrastructure that's the the the inventory third and end mobile PC only center to towards for and we we As expect the and quarter revenue then or for true

we it. So that's how think about

And then on. we there's end defense. decade by about that. or said don't share And we in $X.X billion. see share growing portion is "fair market you market. do mind, disproportionate" if go our just and we the that aerospace I'll that of shouldn't the And the of one to to no that thing pile reason get We intend foundry

going Lockheed after team. XQ they of that. a part acquired Lockheed design with that And is about in announcement announced Martin Martin the

a make foundry want can ASICs, they now so their partner, who own they So select, they and GlobalFoundries.

years. to ramp production, around They many A&D, in a years take you they automotive, but many win stick So like sockets. it's lot

off get four a So a for a play our we strategic three, to to us. in strategic years growth like in ago lot A&D kicked automotive engine play,

So stay on that tuned one.

a follow-up? you have did Vivek,

On please. And second what's and there in of what Yes, driving bias pricing, your flat Curious half, think not years? I as outlook, is seems few a positive know pricing that. I suggest think but we heard, from next it do I'm trend 'XX as the LTA or I I forward, giving specific look the down, you're 'XX over look the to be we up, somewhat

Sure.

that from really slightly again, full pricing is us -- we're and pricing feel that XXXX, and long year talking to in stated time occur, we've that we forecast, XXXX. to expecting I'm we 'XX expectation a continue that expect today from to our the about be So about that. quite What current hearing up you're is for good that's our

you've make period if gross so product accretive I ASP. sign a global which to statement be XXXX. in slightly with always of ASP to one, a decision of And up what is, will accretive LTAs. versus pricing to to longer margin focusing 'XX, on full term, But year mix from customers some seen it's seen purely aside, to kind we expect happen think With product by mix move the lot you've period from respect

sticky fixed ASPs require on And ASPs have think The And higher putting we've levels. to the fixed those is the economic spoken pricing about, and new to quite solid. industry volume, very I new the capacity at duration. be that as support models seen speaking, also more broadly price, you've fixed the those capacity. put on

statement, only not statement. so And that's kind of an a that's GF industry

in been as capacity added, LTAs and the as stable ASPs be be stable we're a incremental conducive both well to on ASPs. the pretty have that's to quite to expecting based so And environment

XXXX. through So

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

to you to team I pricing a up maintaining profile. digits up up. like-for-like, with that? year sure the pricing its following is just better slightly than on want Maybe full mentioned fairly that blended make on average pricing, strong wafer your pricing But is power flat on outlook for

Sure.

And I it a pretty capacity period looking of depends me put you're we've little about those at of a you be ramped XXXX. that into know, amount you capacity Let spoken And as when more look and Harlan, we ramp perhaps the on came prices. specific. at on bit higher with And that LTAs back XXXX. before, incremental in the fair specific know LTAs and

first pricing was lower. so of that year-over-year. first pricing versus And the second significantly at quarter, But that when is particularly the half for the versus look look when the at XXXX, you pricing of the pricing the 'XX, half XXXX you really in in pricing, relatively in flat

so the LTAs. was ramp really And pricing of with tied the capacity the the ramp of and

so answer short those LTAs on And very kicked pricing question the your like-for-like is, flat. basis, to in, is a as

a see versus basis, going I blended a on increase think year-over-year to Hopefully, that the Did a in effect, from full answered slight 'XX. you're question. follow-on? have 'XX ASP year full you a year

Yes, it did.

just is now of year. be large right? there access inventories? to to helping unmet over you I to reflection, secure are of product this appears right, in strong their demand good areas are diversity auto business, another RFID has might of good their segments customers that where that's until I smart business redirect large their backfill holding customers backlog second your business, sustain examples be able And that think, where half here years. the some wafer the segment think example. some the It's customer excess to of your I been tight Any your product your a diversity product So redirect support think customer up of of through and the wafer business, relatively and other helping to three the able of to good the sort recently, card your was assume I of starts prior other to starts capacity tagging

Yes.

So David. really I point. think that's take good one, this a I'll

your security, market, credentials now about of So two When about credit a you just -- talked point pieces. you sales health it's card it's end particular wave a think it's touchless, it's more it's for smart cards. cards, One, past it for than transaction, you healthcare, when -- car. government your machine smart

But market. bigger have important. It's So to have it's -- make is a you really broadening point two the you things.

can capacity technology to because wants you for, can here. move You a more memory have customer and have to you XX-nanometer need to solution that I this XX have have hey, diversity platforms, you versus a so that fund buy of embedded

see opportunities. in fabs they of creating segments their and market We've some as worked on allows across the to fungibility that to long to moving customer global our some that us of hard these within products network. respond and the And lumpiness

invest need across fab these you so XXX- we'll in continue need can And fungible that's both something XXX-millimeter and platforms you and markets, the you network. address capacity. that And to the our

card. And for. Harlan, looking proof you're you smart to mentioned give that you some points Obviously,

side, automotive to we've comms support the been more some business. move of center automotive of data the able and capacity the to On infrastructure

examples able look migrate mobile smart the us. that we could to to to but capital at only mentioned able to demand, them for customer a we've example GF were future. I their free notes mention customer been also efficient we to Tom path it be go our to on move help do device utilize accelerate is from back multiple And On have quickly actually cash other and going and a how in you but way, name, not mentioning that to in very provided they flexibility flow the able that product those LTA had that side, where won't another. which one to the us

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

Yes.

about 'XX on QX improvement talked to there single first a The conference digit. And high one, down that flat is you a earning not would last significant the of end. unless for Is fair call, revenue reported your you the context at read through for guide low for guide, but come asking September I'm what year? of on a whole sequential December, in the in basis your revenues 'XX

That is, Mehdi.

first high imply the decline reiterated would So range. that at that year. still full end and single digits third be for down would posted for that we half the quarter we we kind given of year fourth was we've year-over-year already the of and that to And the mid- that the high be the we'll believe guided what quarter

update net extent, Act would want subsidies. And Sure. what this gross if to year? on that I or CHIPS is context, a to the impact margin that is gross targeted or the in next And XX%, better of it words, to their if any just includes then looking gross understand all into other margin with there in

CapEx, take the CHIPS Act. You I'll take the

Sure.

will, we -- about what ongoing that basis, on if our steady-state capital when contemplated of gross intensity basis, margin was you originally contemplated So XX%, of an XX%. of long-term

XX% would D&A be in And so other about words, of that the there. P&L

various hearing by slightly of I you're intensity potentially from is others the should be from offset think that the government and support some us capital world. the around what

updated Tom, And capital -- assumptions long-term to... haven't you did the gross model intensity XX% want so that margin went we it but into were our

part that -- And XX% of is a and number. net

creating is way And by you there's is governments co-investments which so in important. $X.XX world, two ways which including Remember, for ITC, flight, context, why these already incentives the just or the the of the on chips applicants investment dollar And for capital year build of year XXXX need the of for around is execution. is XXXX in of the that's beginning for are is the and U.S., qualify incentives beginning vetting the semiconductor. then the the and allocation and program in

the But we look, It's for about us, our with about allocation. and durability all profitability. capital nothing certainly has market not how approach It's changed.

there they by help never game this we independent how put demand. us demand customers. of about many isn't of chasing are certainty And on subsidies -- have is dollars, not a of we're game a will capacity our We don't to certainty to if

that to have we we in and add have then not we that capacity, today when we returns competitive the can't it going course, earlier get that on view into about markets, that talked And long stability of to durable We're want if invest markets in do profitability. future investment.

which doesn't to all if equation, and helps. help Now that. economic no there's Act there's -- bills it no like CHIPS ITC reason that the close demand, leverage But

needs get and customers that key incentives use global on longer up to our footprint. term with in that create their their for here government capacity then lined leverage over the to to the could we capacity is products put So

let point CHIPS specifically ITC. me provide to Mehdi, just specifically And related an contextual Act, you the additional

that So qualified about for million the qualifies got of would investment we've would about million U.S., million $XXX about believe that in like that XXXX, $XXX rate, benefit potential XX% on in of ITC that of investment. that $XXX at imply something we the imply

you million a would state benefit. year would depreciation, of investment D&A that the flow the of $XXX net way out million but be $XXX assumed through steady would if the P&L, XX-year the million a so you And about $XX

P&L, would P&L. And a hit like year year $XX a $XX so the you'd get something that instead hitting the million of more being million

proof So the through would of be point, the as that a would ITC life real both flow from how as it well P&L. benefit

take we'll one question. Kathy, more

Krish the from with comes Cowen. question line This Sankar of TD

two like mobile, product trends of smart Dave, due in think I next into have different June how bias about given should IoT, just have ASPs cetera. mainly X% that auto, within positive follow-up. a have about to fact down mix. you ASP mentioned them. year? change I to quarter year-over-year, I'm to next verticals shift et a And the we into do then mix And ASCs year, the and seem wondering

kind I Look, speaking, Sure, technology ASPs how of differentiated included sure. much of the on GF or solution. in primarily the and broadly predicated is product are content think, kind

you could down to find you go end either that could within literally pure market, So with you products average any you and or average respect up ASP.

automotive. average has product I focus What globally, think you is that perspective. from like data ASP we on us like higher is market accretive mix really focus average, while could on slightly than comms and a probably we to really probably center, statement infrastructure most on an on a profitability maybe end make And the a

that a you've and really yet gross way com particular grow challenges margin probably globally, seen for of seen a accrete and of center lower given perspective. some you've slightly you've seen automotive infrastructure but inventory ASP, a kind in Obviously, end data decline meaningful us from in the us market,

largely gross have it in an in product it accretiveness SOI-type of FDX memory. obviously, a an content ASP an or plays from I important think, margin an so more nonvolatile to even role, And on but I the BCD? important Does solution, tied is think, how Is have perspective. is does So the role much total general, wafer? it that

follow-up. a had You

a I your follow had by How XXXX up. quick LTAs? covered much of Yes. capacity is

Yes.

year 'XX this plan, market. some 'XX, going we the north the wafers just on million X.X in million million on that we've track about some of very me of Originally, context. some million channel increase provide capacity, respect based XXXX to of in XXXX. wafers much wafers about with on in to to to So to we -- XXXX well-known X to in capacity were let challenges with about deliver of to brief from about X.X our slowed wafers million I'll committed the that although We're wafers respect X in to X.X obviously, inventory installation that capacity

our I how LTAs. was If that say what Markets presentation, by that And capacity of to consistent at covered and we much largely you'll you Capital Markets we're would Capital go see plan back Day Day. reflected shared with still

for everyone, Kathy. thank and right. call joining All Thanks, the it, Appreciate today. you,

concludes for This call. participating. conference Thanks today's

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