GLOBALFOUNDRIES (GFS) 7 May 242024 Q1 Earnings call transcript

Good day, and thank you for standing by. Welcome to the GLOBALFOUNDRIES conference call to review the first quarter of fiscal year 2024 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 first speaker today, Sam Franklin, VP of Business Finance and Investor Relations. ahead. go Please

Good Quarter operator. and to welcome Thank Earnings morning, Call. First XXXX GLOBALFOUNDRIES you, everyone,

On with Chief slide John quarter website Hollister, while the at Caulfield, we financial CFO Thomas call ago, with available and me results, today investors.gf.com, which Niels on GF's along presentation. Anderskouv, released Business are Short Dr. Officer. first are our CEO; accompanying today's

recorded, available page. being is and on Investor call will made a This be web our Relations replay

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

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

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

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

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

welcome, period to to earnings manner. call. and challenging believe is in everyone, Sam, our inventory our a cautious quarter of albeit We Thank you, a beginning industry correction, from first emerge very

GF, both efforts GF For guidance locally. exceeded continued employees they the across to in ranges earnings of are The first the that results the quarter support on our I'm long globally our platforms the fourth our call. and technology customers markets positioning and we they pleased in regions the to quarter term where need want where us, over excel, indicated they report

teams in serve. this, thank the move we I inventory all to updates, end end mostly inventory to our rate particularly dollars let our remain world. said XXXX. reduction and are executing I'm of business is absolute to begin challenged, to related proud how partnering of the you channel shout me before across markets customers of that Having declined on with slower some signs our as out plans, So of as to we the they key we and give than conditions anticipated a see markets began well in macroeconomic certain the much and

technology commitment on this macroeconomic across providing and others mind, me let we innovating keep in landscape. persist uncertainties together. our the of resilience XXXX. the our with geopolitical in new to to expect brief and With opportunities many current offerings industry, future confident I'm our teams through a start to update Like and business build winning continue as the we

customers agreements environment and to has customers uncertain some adjust near-term their mobile requirements combination devices, demand elevated signs among The such levels us. the other as of markets seeing volume seeking their we're of of under end such have of end as down IoT to and led customers us some trending Although higher that core inventory in to have smart indicated inventory levels in our automotive. remained inventory our markets levels with

We have has on long-term these our seeking the which John value mutually find further. will to continued or underutilization relationships. outcomes of comment while to resulted collaborate in payments, with safeguard of customers the economic discussions conclusion beneficial restructuring these In closely to some instances,

been for out progress the of first to these that Importantly, discussions with quarter and we constructive new we depletion still very revenue partner inventory the to forward. ways to our dialogue low Based going call, accelerate as quarter-to-quarter together and anticipate will our growth last the through sequential on our the customers as has channel point during continue work find we XXXX set with represent together year. earnings the

John our exceeded on briefly was touch our his in gross reported the range. XX.X% which, which to which billion, in above the guidance guidance $X.XXX Revenue the in quarter, now more of point first results, sequentially discuss We quarter range. non-IFRS again, quarter me will our high Let in of margin commentary. detail later decreased

to We $X.XX, delivered expansion delivered strategic capacity continues am also free range. objectives. per to the exceeded that a preserving fourth report which while disciplined positive our approach capital end which we deployment diluted earnings guidance of quarter share our pleased consecutive of high cash non-IFRS our non-IFRS I flow, of

market today our provide content a in of we delivered update billion long-term a in $X XXXX, of the identify are continuing brief to now on After you expand customers opportunities activity. we our and milestone year of future. with our some partner partnership share for and automotive over to in to the vehicles me recent Let customer revenue, end which and

without microcontrollers and including to silicon platform enablers memory the with the way nonvolatile at XXX applications and navigation comfort key our XX and used are widely technologies. plus, technologies vehicles, content and XXX-nanometer all LP and safety, through to in infotainment technologies FinFET power our powertrain in embedded growth GF for systems XX-nanometer

expect for through this the although ADAS XXX XX BCD controllers moderation we at a expect sensor full wins motor to platforms, applications grow and design trend processor revenue closed key delivering ISP Continuing our image of market quarter, basis. power expand. semiconductor first is our teams automotive on meaningfully year end technology. This demand to in automotive sensor this on and critical still And standards. XXXX, The content continues a year-over-year grade we of period automobiles in

now Turning devices. mobile to smart

in As device I excess across an see as mobile are basis of ecosystem across customers. my down alluded indicators absolute positive inventories dollar to our we introduction, several on beginning are drawing the to smart

inventories Although we remain rate to and pace above normal levels, throughout drawdown expect the of XXXX. the progress

battery platform, with features RF We our traction have for which excellent life. SW front-end our standby X especially RF offerings, low longer currents SOI

smartphone millimeter to XXXX. in reduction XX wave FDX design with technology engaged display makers we're Our ramping driver also has volume connectivity OLED and with wins key ramped for

complexity need acquire, and low-power is long-term technologies, In performance in connectivity turn continue smart grow. devices data. which communicate the the see number and well sense, need is to to for higher placed to These features process GF drive as continues This increased connected silicon serve. content, which driven to we of and by opportunities drives IoT, the

new interfaces continues of into on enable key the for the power wirelessly also management, which battery-operated platform. broaden. to first more connected AI used will and and translates This FDX quarter, for at IoT as the products win to our wireless connectivity be design we requirements a applications. high-speed efficient XX In number edge functionalities, closed

our to enablement, design of with at IP FDX ecosystem efficiency IoT products range wireless XX possible develop a supports and the improved services customers Our power. wide to design lowest

optimized and XXXX, across for first next-generation half edge are at security drivers and during mixed-signal continue long-term and satellite across However, for our we defense, avionics space Furthermore, and harsh as the applications elevated at our where products. aerospace remain terrestrial to in inventories IoT analog technologies. key addressing to requirements environments, traction the resilient, with speed, such and expect of needs the inference see performance all We and we secure are least and

continued weakness center call. the amidst communications and in the prior sustained quarter migration our of discussed single-digit platforms first Finally, digital-centric which to and node center our infrastructure data earnings data to customers we in nanometer show segment

in quarterly be We expect what the for revenue to XXXX to challenged end this quarter. line first reported expected we with in with remain in have roughly market

demand photonics trend platform, our However, an win is to for power to solutions. that silicon increase ground transition high infrastructure we terminal the our pleased I design through positioned report am bandwidth NSX GF support term, QX using AI end, communication well to expect power over will generative efficient long a conversions, the and the will address delivery communications. To and which satellite XXX that important for

opportunities devices. we we execute continue excess As of service FinFET to to some and segments, remix to smart these more in such as durable ramp capacity our programs, demand automotive mobile

broader a technologies We customers accelerating market in markets transfer such as manufacturing footprint the in X and across York. high of XXFDX, and offer U.S. X to here facility even end into our more XX-nanometer XX-nanometer diversifying the participation. will This diversification choice Fab Malta, ESF voltage are enable New also our multiple our by end

to the U.S. with award York of end, Department and that announcement proposed from million delighted over part New State proposed the Commerce $X.X To in CHIPS billion for $XXX funding its the addition we under are in by program. GF of Act, green to as the Science CHIPS

locations which where semiconductor with add supporting construction state working U.S. critical us excited they while closely customers enable to jobs the be and our our these on very federal us. will We're governments need in grants, and manufacturing to capacity

the teams John. revenue, ranges. To delivered that, as plan, high and guidance EPS, am gross the the to quarter With our you, our summarize, of around profit proud executed world exceeded first all we and I over of they end which

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

and remainder net will stock-based of metrics, compensation other tax the than and including revenue, which expense, other cash the interest reference For non-IFRS flow, and expense call, I exclude charges. restructuring guidance,

of utilization quarter on exceeded from principally a and our XX% earnings low our prior equivalent provided As levels of last decrease to the commentary of update. X% results to decrease quarter, XXX,XXX-millimeter upper We billion, a lower $X.XXX last our the quarterly the the quarter approximately we period. consistent shipped wafers shipments in first delivered the with end We Tom call. noted, due year guidance first year-over-year. ranges in revenue the mid-XXs, in

mainly the the approximately product changes ASP Price Selling driven [ in during or year-over-year, mix shipped ] wafer by per declined Average X% quarter.

believe pricing constructive year expect and We the the be will remain XXXX, we flat to environment for that roughly XXXX. ASPs full will that compared through

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

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

principally shipments decreased as the down draw quarter prior reduced X% First by to revenue inventory. continue year from approximately period customers driven

partially was This premium RF higher and imaging tier decline XG ASPs in applications. by display front-end as offset continued capture and well value and content growth as growth and content slightly mix

half quarter, levels with first industrial half signaling first market the In we revenue for year. our XX% the to our PC through end growth discussed, Tom and legacy the in which from the now XXXX, the markets, this revenue. believe second includes quarter's in customers approximately of inventory of normalize of of As the that revenue home IoT end begin total will market some demand represented

ASP of be and in revenue. growth our First mix for Automotive from the IoT quarter of to consumer-centric and period consumer focus on industrial improvements as XX% recent portions customers XX% represented to total and to segment. volumes quarter's the a were continues shipments revenue in increased elevated channel industrial the well and year us IoT the year-over-year segments years. remains as bringing compared Aerospace in continue which as partially approximately down by Defense decreased in offset prior inventory, key approximately segment our Reduced and

in XX% approximately mix. volumes were which First increased year due at key grew customers, our features architecture ramp as to to quarter designs the period the and revenue ASP content offset higher vehicle partially and across semiconductor continue from reductions in principally by prior

autonomous vehicles. noted, a both Tom expect to in engine XXXX customers and we combustion diverse we as range electrified automotive our applications internal revenue As across automotive of continue growth support in connected

]. moving to represented center and our end communications market, on the data approximately quarter's infrastructure [ X% of which Finally, total

in this First quarter in ASP the remarks, remains XX% his declined mix Tom of drivers while revenue approximately key end and prepared roughly market. outlined result by declining and volumes year-over-year a flat as

we continue diversify order allocation manufacturing to will As footprint and to markets with smart our in as premium automotive additional Tom mobile targeted such to noted, capacity allocate the applications.

to next profit. gross Moving

$XX of execution profit end gross was the delivered margin. translates approximately range million the XX.X% alluded Tom margin above and our customer associated into his gross indicated range guidance prepared high Gross exceeded we adjustments. quarter, revenue to first includes which the guidance the in as million, $XXX volume of and in of remarks, For with

quarter Looking our of second the ahead quarter additional guidance XXXX, have reflected in adjustments, been expect to customer second we ranges. volume which

XX% of $XXX $XXX the manufacturing approximately sequentially expenses Operating $XX of to SG&A $XXX and million million. quarter revenue. in increased first and operating expenses to Total million. total quarter to R&D credit the investment and incorporated sequentially for increased advanced represented sequentially increased quarter for tax the million

call, continue to through As assets the to we on expenses discussed in continue on the beyond, and our qualifying XXXX as expect last to U.S. earnings and spend receive of we life we benefits program. these capitalized

approximately delivered for high profit million above operating XXX into which below and margin, translates XX.X% our of We the of end the $XXX guided period. quarter, prior year the operating basis points range

First income incurred was $XX expense a of quarter and million expense million, and the we in net quarter. interest other income tax and $X

approximately from of a decrease We reported year $XXX million, income first of quarter $XXX ago net million period. the

of high earnings diluted guidance share $X.XX per first of reported we end which the for the result, range. a quarter, above was our As

balance operations quarter key flow quarter CapEx $XXX for or million first $XXX was sheet cash the revenue. was provide of some flow me Let for Cash and roughly XX% the from metrics. million. now

we and flow intangible the operating cash plus on of billion. provided the less quarter, set the stood at million. Free cash, was purchases of the grants quarter, first government capital our from as expenditure, flows, equivalents and securities the statement cash activities, by $X.XXX approximately for cash equipment which out total net to as related plant property, cash $XXX of combined proceeds marketable end and assets, define At of

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

of our let the Next, with XXXX. for provide you second me outlook quarter

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

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

OpEx share-based including second and $XXX related to be the Excluding advanced to the million compensation, benefit but investment total between credit million. $XXX we tax the for manufacturing expect quarter,

of goods expect sold midpoint expect $XXX $XXX million we We profit and related roughly of related the our approximately to be million $XX million. is to operating million, $XX guidance, to OpEx. approximately compensation to of million which At be and share-based is between $XX cost

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

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

the the will call, the core utilization our quarter commentary our guidance as first our emerge start our low the some half on earnings mid-XXs to with Consistent end markets of second that ongoing during last to of reflects expectation be in XXXX. from inventory correction

we approximately XXXX, flow cash to year to expect focus expect XXXX. we than to full an opportunity commented generation to provide and GF the on CapEx during our Xx call, last earnings For higher million, continue $XXX X be Tom this free delivering to as

first to we XX,XXX results earnings growth quarter expand fourth enabled employees summary, cyclical and in In the key our from ranges efforts dedication across to in the provided continued high end achieve update. backdrop guidance our navigating offerings us of world challenging quarter the a differentiated segments the their product while our above

in and growth partnering We on and opportunities markets GF Q&A. opportunities. call open winning the that, critical customers for with let's remain to our position focused for With end Operator? long-term them

Instructions]. [Operator

Our comes of first Securities. Arya of the question of from line America Vivek Bank

more and industrial Tom, hoping customers about are that is a of helping it from some to quarter roughly could kind bottoming GF emerge kind at you of What RF a in before quarter the was I before. this seems you downstream your of trends contract. markets. talk

we bottom, that should the sequential looking the kind mentioned seasonal sense way QX Or through of growth give could we a you're from QX I other growing rest the at to could you grow of and mind? assume you hoping year, QX QX, can how there for mix the then in keep was And should you're us are be QX? factors

that. Let is going me around continue we're break the some Give the quarter-on-quarter. yes, context answer us -- grow to to

inventory. dimensions, overall Inventory, start inventory of inventory. first in look with of it then absolute at dollars and let's So the days we two

that's While indicator. amounts important cases, actual down, dollar gotten an and have some worse, of come has in days inventory the

as in get come rolls more and And clearly, inventory dollar amount, closer of the year natural so we'll and this will especially demand. down, more this to on,

level, somewhere macro dollar in amount, a we we're the continues get closer a going to come as as from down macro where to get So long inventory demand, natural to point to topic.

center. start Now over the let's about quarters. prepared talk In data our roughly as with level infrastructure forward that the and think looks about and end revenue we going GF year. the comms X We'll about to markets, look for of that remarks, of is balance be we talked coming flat like our

we So and home flat. industrial We next to our IoT. have go CID,

The had then that at for end represent in situation about in macro X least There's or opportunity in to for it auto inventory devices. a with have growth And X of QX more to we lot talk us levels smart the and to tied become back growing. mobile back we year. inventory this flat automotive of quarters less for the

think about some ramp. big really for you design that wins was really in year If our us, ramp a GF, to year the were making of started years last

going in have didn't call, we time lot we And this first for in build to previous us, products about the and for right? we talked key that. see of to as quarter, So meaningful our the growth inventory said we channel, those have year still automotive a a is

devices. So last And then there's sequentially as mobile is the is smart quarter-on-quarter. growth automotive we go

coming growth customers -- single season, of that year where But a low this with during is smartphones this have amount premium a heard tier bunch earnings our we disproportionate in handsets the that play. up digits a we of you've see seen and

it, our of percent And sequential our opportunity the XX-plus smart model growth devices, a company. is you think on revenue basis for growth if there's QX, about for our coming in that's where automotive, So from. again

about confidence And growth of and then question how us is the coming really to gives growth point so from being feel revenue write back Will about QX QX the us. Any economies, a low this macro for kind The growth point there much real follow-up again, to be the solid all there. to going be of home or it is to want low questions? will But muted]. be? it we [ is

Yes.

How one maybe shape much here, and QX restructuring And the margins about feeling in all margins effect follow-up, gross some much that how did gross underutilization my margins. then of For the How pricing gross is you from are benefit of QX your payments? outlook? the on given and mix trends. from

if does conceptually should in So the of range, we rest think gross let's say, roughly this QX GF year? shape about grow QX, and the the margins for in how of

you're John, these Yes, I'm going events. sometimes it think to on pass point some timing but I important about in there's of to an

And But let the a around -- gross precision lot I so to timing. do John, around has tight margin want about something precision to you...

This Yes. is John.

formed guidance. favorability was And can the we we of just as of business in outcomes. saw a margins. indicating, Tom gross And on at plan some vary our foundation So of year, QX first beginning the helped timing business had the quarter course, our which that

volume had that our better a We also we there bit So there. anticipated. at did was in comprehend we're guidance. The pleased customer with than outcomes factor that. adjustment The play were

a really Vivek, margin of it's first the two outcome So quarter. with for driving those result factors, gross

of quarter, constructively planned some customer that's we're QX, adjustments address having into ahead. customer there come starting that move various the at customers business dynamics discussions are as to at QX. we're ahead through second our not payment work, volume in settling and conditions And with level to As in look we similar albeit

androids]. our the rule utilization biggest above in a influences QX good every is that points just that margin affecting points thumb. by QX. basis roughly reminder, utilization a single margin for for XXX the gross note guidance Is factor of factory the [ will I X guidance X gross is And of

gross So the time would as of expect can pick one up growth we over would improvement margin expect, here. in as course loadings onward, through

Wolfe Our of next the Chris from Caso of question comes line Research.

your you I guess thought gave first guess Tier on that your of prepared bit for pricing. if remarks, you more today? for comes In have where the the that we have indication of expand little specifically as kind heard been pricing I of would is X little on foundries year. business you're down. pricing new the being utilization be the could a But you're been for where pricing, contracts some the a regarding pricing outside because that some existing question of that has signing aggressive of new signing LTAs you And helping

Yes.

remarks, that in dominated our quarter. with for mix consistent what the particular is what see prepared lot is by you'll our of So ASP a

the we're year-on-year, year-on-year, we a but X%, about I in So What is, one, XX remains normalizing constructive, down anything XX. new all and flat of we means that here. talked say being don't pricing XXXX, to environment -- see think pricing

peer the You heard they competitors earnings environment. from our or that call, same their on see foundries

The our second thing is of is single source revenue a big fraction business.

And so you really service There's true can no do pricing. in elasticity demand. is

price give opportunity. more doesn't more So

mostly environment, to to differentiated believe, pricing, Changes so anything XXXX. would related. mix year-on-year keeps And flat quarter-to-quarter add? add constructive business you the we John, XXXX

would. higher Chris, just I make you would affects to our profit. line. follow-up, conflate and have mean to profitability ASP products necessarily other think account a I because it may words, top gross that Obviously, a ASP it it's absolute Did as doesn't Chris? have point. I higher have wanted Yes, wafer with just not In well. important

revenue do. earlier continue the down. continued gross back your If these that pace margins for on What come I just I volume well. as of during adjustments to comments if and specifically, to gross could into 'XX. into will mean of year, second more does the you margins go presumably, And the half some as come

profile enough some gross in we as an volume margin you year? as and the gives the reduced adjustments, that through happens will to of that utilization, presumably, be Just go the improvement in offset increase

again. John is this Chris,

that that's and dynamics. out. stable are in of So volume of a Yes, are how lieu far and playing in otherwise really a environment been the those customer I modest around shipments side there as is adjustment have what would stable The call for would those economics light put better gross a those flip wafer take and all utilization. it in margin that's to

I the those purpose So mean that's of economics.

are they one offsetting of another. So kind

can of we to the be short that But way. utilization, higher think of can driver. it large You of and the will get it is levels long that

a also, cost Look, higher hold any structural downturn start more and leveraged of of every see opportunity dollar Chris, and for we out. into We've the lot become taken we've as to this have more revenue to And back today. to than of efficient. we get degree we the line dollar a growth, having flow-through

And returns. able we've do to downturn be so the a a company things us a as lot growth this structurally of been better to weathering positioning business is as prolonged

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

job said quarter, December this $XX and the with restructuring team March gross guys the fees. in margin you sort of execution. of the quarter. on customer was quarterly utilization million $XX high Nice million It

XX%. fair? margins like gross looks that Is product about were it So core

quantify, smart is utilization mobile fees half, starts just for on you the which Can in typically especially your And John, are wafer in be And your $XX then this would quarter million, lower is cycle seasonally stronger, customers. right, times, your Fab given million? that said QX. you the second $XX

up quarter, flattish. have utilization staying I would like the but been they're sounds have it in So assumed would June

And that? for you how year? is So why of the the see remainder utilization trending do

Yes, Harlan.

that have in see continuing address it out. that few we're to that items to We'll we Yes, There's how in customer didn't in adjustment plays QX. So level open specify the a of regard. volume

the we see the ramps. the year, As work second of how through half balance we'll

half if Clearly, can we a robust more at. ramp second see

the up. with those global are of additional looking the and As it indicated, But rate Tom in the you really lot of and utilization so drawdown that profit what gross is that come of the and an our higher it's it's otherwise would customers. offset about inventory loadings improvement we're it, those And signs the volume -- the -- see of way just a economy or utilization. up, look to we can from pace is recovery lieu are our around customer really it's one or have adjustments think come again, at been for

be because down revenue natural going will the the goes in one way. As up

through embedded depleted took dynamics technology a It's the diversifying the the multi RFS And fab. some MCU, smart for of SOI us even mix strategy capabilities. you is mainstream right just time and FinFET sort Tom, [indiscernible] maybe XX-nanometer very little around I, and of on can older on in maybe the you this expand in success phase capacity, lines right, mixing programs backfilling technology. phasing out, bit, on in new applications a FinFET fully technologies customers new

of and Yes, to I of this done there's growing because Fab this not up around do think first like. I question we've all, the and thanks I what justice. Harlan, for lot we used topic looks think don't of and watch do mythbuster, show myth my son in a X what diversification

about dimensions of X think diversification. and X it Fab take let's in So

footprint. we we'll for to fab serve to and what then and XX-nanometer platform, talk also the about in with markets portfolio will technology bring diversification GF the customers The being and the end our global that means first there our

we devices. fab. is data comms is think to center. baseload, load data that right, about So end and in the X IoT what in equivalent to And center almost have smartmobile infrastructure The markets, our automotive

the is either up then IoT, X.Xx X And Next other -- is the than more sorry, or combined. which center. markets more X.Xx devices automotive end than smart data mobile load automotive is either I'm the

broad So there's diversification. a

X data Fab that clients on we So center when think moving to of XX-nanometer. represents we in single-digit fraction a what do of nanometer

business that center, data dispel fab struggle. the center fact need we're data going to we means goes to down, So

is plus all any the features our adding mobile other smart X.Xx Now markets. like on diversification, you pointed of XX-nanometer serves combination than we're device out other have you better we said that I said, it more than technology

photonics. We being silicon embedded memory currently high-voltage, automotive, have RF brought XX-nanometer XX XX-nanometer up FDX for SOI, and qualified XX that's

starting play bring This into customers then this for ramping this diversification. the end out qualification full this and to of XXXX tape year, out towards diversification to will in in us year, next year

a location Having we is important? is one than diversification just why a footprint I understand. having think this produce that to global a can you Now point thing. all where And means more need

a it your What accelerated there. we've X in fab make a can most to who's address, making location of sites I large, last in is a diversification. address. a last has demand that and sure call the any done GF had the every global mailing by Because decade years, technology customers' mailing one done, over the be X one served of and our can't and

but great of broad our globally can footprint, it have technologies. So to a It's to source range a global customers locally. and has have

with Singapore this Fab platforms. complete GF the European overlap a we Union technology X have diversification, of lot and in we'll in When journey its with

important for strategic footprint, it's diversification diversified of us as it's fab. full. the for our sure facility clearly, And stays make global fab our a important So value

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

Great.

with automotive little Motors. a partnership guys year you at over So had ago, a a an OEM General

with some you other had that, Before What Ford. really is discussions interesting.

these directly haven't We work like that. some more of OEMs really seen with

Those automotive shortages are behind us.

foundry if wonder that geographic guys might the their that diversification help I So how those on the to of of you and focus could commitment, kind have you. talk

been within more enabled to capacity have support but to the the they than since still relatively like billion XXXX can really a I bit to into new I is to customers. want background have one. the taka emphasize Neil new a invest LTA on And little feature So take This $X that in foundry general. that maybe our model. remember that LTA Anderskouv. of business key and us I'd is

of lifetime And including prior into So that remaining. you calls $XX approximately XX those of you'll and over the earnings LTAs we of lifetime we've than ones Fast out more end to the calls, earnings entered that had mentioned, from of revenue with just may you XXXX. recall, coming of X/X revenue forward billion these LTAs, recollect

again, a with then And of LTA in a model. with continues the year extension to January of announcement our significant this that very important be business part very, future Infineon

through lenses: a business profitability is of So both both one, greater customers market the to and and a end matter and provided markets have demand; for LTAs number through challenging supply durability our our benefited GF that Number and application demonstrate a of the level the point in two, we we here provide the three, all that they backdrop. certainty visibility serve; to

this, clearly, our relationships the our are customers of so is customers. So to longevity our essential with and

of some pending that remains on a volume near-term fair important adjustments, feature say recent our discussions customers very business of our with the LTAs their model. to So it's

quarter, take I comment example. little and for the current if So here, bit to a those take QX

Clearly, of controllers. we, in entering our given new extension customers working one through But was my of the the less channel. pace by LTA by with inventory the inventory the and that across end again, to announced that in And slowed long-term as of important largest grade our LTAs our QX, XX-nanometer one are their requirements supply fact support the LTAs no markets, of Infineon. is rate as evident has means customers levels automotive the to certain

conversations, have fixed and and on heard our the instances been highly fixed adjusted you on customers finding balanced near-term as So our constructive work common on we volume And outcome price, on highlight have namely call been LTAs, fixed with and couple would duration. the a we these there based features a volume I of that requirements. together today, work where

long-term So to these we've are been preserve that right strike able the the to and in features customers. our this relationship order balance key with flex

So encouraging outlook? responded actually what's these well customers how is Well, to most our have the what's discussions.

mutually our a customer same resilience relationship, to that just primarily was agreed the agreement, in new on long-term week, customers' with instance, but we one that align to demonstrate us. with For the take very And out terminating requirements. the of supplier design example, next

continue is beneficial hearing partner long together to mutual term. over arrangement So you're customers for believe and to today what offers framework us a both we that the the mutually LTA from our us

our the I expect remaining And see to looking LTAs very sell to markets, across key included would end and OEMs. customers also including the forward, very automotive

we to are So assume that end expect supporting. should is I will the terms more reasonable duration what you agreements But it to that markets however, the front. and according the to and of think on see vary

relationships maybe certain And guess supply concerns to helpful. also and picture on tactical obviously concern OEM types is of on bigger to but geographies. do because there's one were the of that reliant follow I those too reason That's up that, Great. sort there's of LTAs

how those think So strategic can be? relationships just you do like

became space, diversification? in sort first just in guess, I'm people about bigger you I discussions the geographic strategic don't place. of reasons with that guys still Are And some of the make sure to to shortage having trying picture people forget you the those of terms

Joe, I think you're hitting on a really important point.

to to of industry. anymore. different One back behaviors. we're such go I world a thing no to There's of learned with want have different thing auto we having there's a not it things other is to that's the different the in some end the that all such There's markets. discussions of semiconductor lot components no And the end as why of kind back is that players, This with macro markets. that --

unique about for they're they These are long-term When to what's agreements. going X XX qualify use supply years. a auto. part, it So to

and with makers fashion. is making certainty we long a because them discussions pricing important visibility on long-term automotive long-term they a they're different for continue having supply really time. started commitments in So for but the continue,

supply that don't we're third design, of durability Since much long. don't want talk a durations future. In flexible. shorter of quicker what and we life and be on just customers LTA we're we they collectively so much for down them to the and level they more design nimble there's their and our duration product have middle, markets sure customers and they is make to certainty be of what mean want can LTAs, sit to finding don't don't a doesn't cycles, do one need have they as the in about the going party It

their they certainty when it. need of like need they still can They all product, that us, have

sure that as we're that of uniqueness want market. make segments And long-term Long-term to industry conditions these all reflect and the of so LTAs terms what long time, markets learning the each an is a certainty. last

product think end getting to we're of of they one out learning how renegotiated you, that's of commitments every want discussions certainty. the with longer But automotive this. I started And term you the all for year. are this be going markets for near-term fast the In auto OEMs. have the the will recognizing the all question have transitions, that And at

I sure same And we're about and make road customers were continue technology conversations Tier with brought to with marketplace, make into and we Xs starting that and think we're doing foremost, need our maps, think this aligning to entrant their so the them. down sure that there's own purposes. into sit are another can also designs. first we to continually the partner And all serving We

an space. comment This building our from essential life of And maybe across about long the cycles. we continued the automotive on part all technology a standpoint. supporting Yes, life just cycle. are can technology strategy is CHIP I Essential is long momentum seeing

a just continues You from of be about came talk heard our XX% in automotive, growth it for us. QX revenue to here and us strong

to something factory by having strategy, that's So I to also that's when supply just to as it to little going U.S. Fab is you integral Tom automotive. about within well, very been space. strategy. a become our bit and we -- our X, the qualify discussed earlier want to what automotive well is strong perceived will have very, we the very for fit OEMs for a that will that back automotive that our Tom nodes a all mention get alluded process And strategy

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

on I money guess the and question CHIPS a act there. just

great. of So that's -- But that's I over billion, $X.X that's CapEx. think worth a year's

and money inventory, are a downturn. in we're here all sitting XXs this have getting but rates you and out plenty you're coming of utilization So of the

we So and pricing sort overcapacity is work? all do or not that have like allocate to I of of How problem? capacity going some some sort that how guess of

its with build target. and intention overshoot to supply right nothing diversification we get have empty resiliency companies chain there's worse don't than capacity to get that nothing programs worse And Chris, of factories. the need. and of There's Yes, themselves build to ahead and the ahead than government

And our at when equipment. we'll output. we investments roughly end think -- the I wafers global year footprint, XXX-millimeter a so That's have going forward, million year, the X capacity about of about of our talked this

see that the revenue. could And non-wafer where you ASPs. are math that's can $X see a between to you billion. $X wafers billion, us on $X in And You to year do this gets $X our revenue, billion, billion the we billion and $XX company

of our plenty So current ahead footprint. growth within

to we most can, again, Now when securing invest the your the sure way. the that in it the we to CHIPS with act It's European capacity doing to can we're Act future with chips and so efficient build do proper U.S. funding is and need the in the have what in Union make optionality we capital that we

then we many done, you And but these And way, growth, think to funding to And double. we play. of this come to industry no it that's it that we be if government really will for do efficient partnerships economic it can where ready others X our if it you a years, any back like question, your industry that is happen belief, answer comes need does the X We it's years, and wouldn't for believe there's customers. growth. that that into to need in so most need this.

roughly at ITC covers up CHIPS of XX%. fund project. CHIPS The bill to another the The bill about talk only $X.X billion. will XX% we And a

Sure, lion's of in mix customers. participation you're I'm to need combination, So share worried not comes serve to But our capacity yes. more in like seeing GF these a we about. government about certainly not the putting I'm worried high on sounds investments. than

But with I'm capacity about rest worried the U.S. the Because they'll demand Overshooting not their EU and of industry. plan manufacturers. for true our the adds

those? Just into so insight my the terms hey, to us in we just have that they these pay you And by and say, percentage this it LTAs. you come covered customer all is, gross of revenue if and then and is it on renegotiate, you XXX% us you to money the margin? is and all And of want any 'XX to LTAs the let renegotiate know are And follow-up need machinations contracts. is what adjustments, say, 'XX Can to

John. Yes, is Chris, this

billion. have not total how which in That's is name We time XX-F approximately lifetime we of specific out, identified value we have. filed. that $XX disclosed LTA The that recently called that revenue. is much our

gives coverage that you will. market. life But by vary if end that time got sense the a you of level, cycles product You've the

of I that supply confidence give customers out have look, mean, the and purpose they customer LTAs in they'll to Neils provide manner surety flow economics it. to in the when need spelled volume just to the but the adjustments, these that with may resilient as a fundamental

purpose. really that's the So

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

Couple questions.

year I But exiting transition one first the node the diversifying a versus risk. over on you're about well. The transition Tom, segment. this talked headwind is how comm we away infrastructure would this you characterize that And as I do as time? about in know risk think that from center node it entering happening you what's data and How know, year?

much how Yes, serve the do I the to at market. low that business the for build we want before, back how we we revenue. as I be this it We're pretty technology of bandwidth platforms question that said to through solving our think, power is end And real delivery and challenges. the

back us end this so the market. opportunity And into for that's growth

that love we where While at we focus are revenue that the can of we on. hold line today

to just of I side Do things. not comm mobile guess problem infrastructure as the a similar smart original devices, beyond have the you quick there follow-up, a questions limiting in that? is something

a which do. there's nanometer and it doesn't single-digit element think I what does fundamental to

for you're able that an power pay for goes to used transition premium, those doesn't then a that that difference is transistor. the make applications have a it the cost higher, where application If will transistor transistor per but

a application go so not the wanting single-digit to that real moat around And actually to nanometer creates that. requires

in And is seeing in metric, you're seeing use. it it minimizing so you're the data key center power power

where we moat right, Law, you've So all we'd cost a transistor, is have this if days was of to move. the Moore's the got think per lower old

customers our pay with having that's sit and customers save working Markets from nanometer to have what the and need the to vary single-digit And intent per prevent and transistor. to that's to go need with the are why features platforms area on to we to expressed our more more in products and for the to we Day. pay Now us us continue where service drive innovate an

XX-nanometer. on can ratio much in time. for to the that, maps, add seeing stay it customers XX-nanometer we we're asking same today we've nodes better process performance may FDX. our If seeing they versions on we XX longer. road to new several on continue We're seen our -- us gives early that I of trend a actually you And In the have innovate of to happening

new So essential if think to place businesses. we these cycle you the really so across stay continue X chip life product they of nodes technology sure about continue win in the and put process to lines, it is competitive, the strategy extending about make that

It's I just And biggest and of think devices the example to end XX-nanometer illustrates today, great a optimize we'll exactly and smart that. continue in fit it ROI the mobile being even to market better. make that segment,

comes Our next of of Cantor Fitzgerald. from Muse question the CJ line

I guess first down question on auto, sequentially. XX%

I June quarter what then what I key on Curious product terms think when it as the are And came the should and into the beyond, of subsegment. guess, recovery initially we in in be thinking think drivers focused we you what were a you or little changed there? that than guided. about maybe worse bit in

we're quarterly confident of this to it's think fact that What lot seasonality, those this in attention highly segment that a pay things, duration. very long the don't I is given we for the high XXXX. digits this the that in meaningful only business grow single not will is a but and to growth us in in years, continue mid- a year out to this

our in it order see book, So we the see we and business plans.

$X a before. last over read too in was year especially $XXX much wouldn't year automotive, So quarter million I growing and of billion, given from quarter a into the down year

you a follow-up, have Do CJ?

on Smart type similar mobile. maybe of a of question. I Maybe kind question guess Yes.

mix premium you. to about in you end phones, you talked drivers talked as RF and display for front incremental 'XX. benefit shift which think You about drivers

difficult. that a that challenge inventory that grow calendar is all So business be sufficient think is Or there can 'XX? of you in might

the challenged growth that of Now we grow already in this growth -- we that channel. year coming believe with growth QX a that's handset with we content have we're off was with will inventories can an means area

year. growth this devices So happens, out, bleed GF as Smartmobile growth for we see inventories in handset

Yes.

I faster. dollar-wise believe us that you're of the training us And think a share see having space. that's then handsets a in that, all good on premium we growth story grow that starting larger we growing inventory have to there. in Handsets to growing

that's yes, year. So be do believe going this to for market we a growth us

Julia, we'll last take question. one

Hosseini comes question final Susana of from Group. Mehdi International Our

just follow-ups. communication. there comments Tom, the Yes. believe A revenues that migration throughout double-clicking the I flattish to that expected suggest couple nanometer. are with your year, on the of especially grow to

material like the is, new downstream be been opportunities when do silicon to better What going about are you? that I expect photonics talked to in want understand to have you

we And follow-up in and 'XX then million. John. question should How D&A think $XX one versus OpEx about for

going John, [indiscernible]. in reverse

Mehdi. problem, No Yes. Yes.

amount. CapEx D&A, how We've we that. So consistent. It's see drawn fair roughly down our a

tremendous As growth to remarks, see that we cash we million said in our that, view to Xx is that our $XXX flow holding we year, in we're the free the Xx flow, for about prepared XXXX. which and can the free in is increase enabling estimate generated cash

So that's positive.

the That As into far was advanced SG&A. That credit as coming reminder OpEx, into had related the we large the in just was to a quarter tax about coming That quick that SG&A. investment was fourth $XX a credit. was million a but $XX of OpEx related first about now as in in an onetime in quarter. We've see that uptick to the for in you million QX. that quarter, do QX fourth got benefit normalized credit

question. the the address So data part center let maybe of me

silicon photonics major out, you power seeing So that we're X as center, and the pointed growth in data pictures delivery. is,

adoption that products released space. with starting silicon So in the market and where today maybe I being the at to term as start we you're pluggable photonics, if what is see is

you're design silicon that CPU to there photonics, the photonics maybe within of BAM real of silicon that the GPUs, the NPUs these photonic seeing more in co-packaged on not if also activity just out see but processors between So rack to the we're simply substantial seeing a the lot where silicon and sits is a enable ranks, within and and board. today, for starting to pluggable consideration type you need devices the be able are where for becoming you're main the have to growth future between basically growth

rate. growth a that's big So

night. infrastructure that changes. big something are happens These not Obviously, on

starting that BCD is that and of years materialize, very it So exciting. for our progress a it on expect our probably data power that really initially, you making tape-out. before but Delivery, with some should momentum will the couple take seeing We're delivery Power to good on first early that XX-nanometer we're technology that, see centers. technology front. very

And technology a Honevogane data GaN believe we we'll in both calls, [ as and as we the as previous as know ], the well, you are within again have also center. from XXX-volt major investing well play the

So those are out time. wells of some center data growth in the future areas in

coming we're on the up Thanks, Neils. Julie, O&L]. I think [

concludes now Vice Franklin, back This Business Relations I turn Sam like President session. of remarks. for and closing it to to Finance would the Investor

of Julia. forward you, the over appreciate on many everyone, and the questions you, and joining to of seeing for call speaking Thank next Thank us looking months. today. couple to I you the

does for you program. today's Thank your the participation in This conference. conclude

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