GlobalFoundries has reported strong earnings for Q2 2022, with its revenue increasing 23% YoY to $1.99 billion. Focus on optimizing and prioritizing wafer capacity for end-market applications helped GlobalFoundries post a solid Q2 2022.

Ramping up of activities in development for the past few years, expanding manufacturing locations across the globe and long-term agreements with customers will enable GlobalFoundries to increase its market share and margins in the future.

Q2 highlights:

• Net revenue was $1.99 billion, an increase of 23% YoY driven by the rise in average selling price (ASP) and wafer shipments.
• ASP per wafer increased around 16% YoY driven by the ramping up of long-term customer agreements with better pricing, constructive transactional pricing environments, and continued improvement in product mix.
• Wafer shipments increased 6% YoY at 630 units (300 mm equivalent in kilo units).
• Adjusted gross margin stood at 28%, a 12% increase YoY driven by better fixed cost absorption, higher ASP and improved mix.
• Total gross capex for the full year of 2022 will be less than $4 billion due to delays in delivery of wafer fab equipment.
• In H1 2022, 65% of the total wafer shipments and 90% of design wins were single-sourced.
• Single-source revenue in H1 2022 outpaced overall revenue, growing 37% YoY.
• 2022 and 2023 capacity has been oversubscribed.
• With revenue totalling $27 billion and prepayments and access fees totalling about $3.6 billion, 36 customers were covered under long-term agreements (LTAs).
• Secured approximately $6-billion incremental new LTAs with customers since the beginning of the year with all these agreements being 100% single-source business.
• Shipments of 2.6 million wafers are expected for 2022.
• Strong guidance of $2.035 billion-$2.065 billion (20% YoY) provided for Q3 2022.

Segment-wise details:

• Smart mobile devices
  • Smart mobile devices revenue grew 14% YoY. This growth was primarily driven by higher ASPs and growing silicon content in the premium-tier handset market.
  • Increased adoption of the RF SOI platform, widely used in the premium-tier handset market, as a percentage of the total front-end mix further helped growth in this segment.
• Home and industrial IoT
  • Strong YoY growth of 72% driven by 40% wafer volume growth due to the accelerated adoption of wireless connectivity solution, 22nm FDX technology, for Wi-Fi 6 applications.
  • Strong traction for IoT microcontrollers featuring embedded non-volatile memory and differentiated power and analog technologies will enable this segment to become the fastest growing market in 2022.
• Automotive
  • Automotive revenue grew around 34% YoY, driven by the ramp-up of new products in ADAS and infotainment.
• Communications infrastructure and data center
  • 50% YoY growth driven by a combination of higher shipments, higher ASPs and a better mix with the data center sub-market delivering the strongest YoY growth.
• Personal computing
  • The segment declined 38% YoY due to the repositioning of focus on higher nodes. However, compared to Q1 2022, there was a modest uplift in revenues following the finalization of a design with a major PC vendor.

Source: GlobalFoundries Earnings, Counterpoint Research

Development in the quarter

• STMicroelectronics and GlobalFoundries will advance the FD-SOI ecosystem with a new 300mm manufacturing facility in France.
  • The new jointly operated high-volume manufacturing facility will support a broad range of technologies including GF’s market-leading FDX technology for automotive, industrial, IoT and communication infrastructure applications.
• Announced GF Connex portfolio based on RF silicon-on-insulator (SOI), FDX, silicon-germanium (SiGe) and fin field-effect transistor (FinFET) platforms, the industry’s most comprehensive and advanced portfolio of feature-rich radio frequency (RF) technology solutions for next-generation wireless connectivity.
• Announced a strategic agreement to supply innovative solutions through SiGe process technology platforms for Motorola Solutions’ radios which are widely used by public safety, critical infrastructure and enterprise organizations across the world.
• Unveiled GF Labs to accelerate technology innovation in extending differentiated semiconductor technology and broadening the company’s portfolio of feature-rich and enablement solutions.
• Announced an extension of LTA with Qualcomm to secure US supply through 2028. The agreement specifically extends collaboration in FinFET for 5G transceivers, Wi-Fi, automotive and IoT connectivity.
• Earlier, in 2021, a subsidiary of Qualcomm Technologies was one of GF's first customers to secure 22nm FDX capacity at GF's Dresden facility with an LTA. The LTA with Qualcomm represents more than $7 billion in global revenue through 2028.

GlobalFoundries’ framework for realizing future growth

Differentiated specialty semiconductor manufacturing capabilities, which find extensive applications in power management, RFFE, Wi-Fi, computing, IoT and automotive, will be the major drivers for GlobalFoundries’ growth.

Source: GlobalFoundries Capital Markets Day, Counterpoint Research

Global Foundries has repositioned its strategy in enabling and accelerating customer growth in the future with:

• Platform solutions addressing secular growth markets in smart mobile devices, IoT, automotive, communication infrastructure and data centers.
• Focus on innovation beyond transistor size through purpose-built technologies for:
  • Optimizing digital processing and application-specific features through
    • Feature-rich CMOS technology – used for power management, high-voltage and embedded memory.
    • FinFET technology – used for high-performance and power-efficient SoC devices.
  • Low power and performance with superior connectivity through
    • FDX (Fully depleted SOI) for enabling high-performance and low-power applications.
    • RF SOI (RF Silicon-on-Insulator) for low-power, low-noise, low-latency and high-frequency applications.
    • SiPh (Silicon Photonics) for higher data rates with greater power efficiency.
    • SiGe (Silicon Germanium) technologies connectivity used in power amplifiers and very high-frequency applications.
  • Innovation beyond silicon through wide band gap GaN technologies for high-efficiency power conversion.
• Partnerships with the broad and deep customer base through LTA with a focus on certainty, durability and profitability.
• Expanding global manufacturing footprint focused on supply security, diversity and sustainability through:
  • Economies of scale through modular expansion at existing sites in global footprint, with over 50% capacity increase by 2025.
  • Supply chain security through dual-technology qualification.
  • 25% GHG emission reduction by 2030.
• Resilient business model with strong earnings growth visibility.
  • 8-12% long-term revenue growth
  • ~40% long-term gross margin percentage driven by mix, scale and productivity
  • Disciplined investment strategy with capex at ~20% of revenue

Key takeaways

• Adoption of an LTA framework will be the key to mitigating any demand-supply imbalances and enabling GlobalFoundries to increase its market share and profit.
• Increased lead time and delay in delivery of equipment due to challenges faced by wafer fab equipment suppliers will prolong expansion plans to 2024.
• Single-source nature of business and specialty semiconductor manufacturing capabilities will be the major drivers for GlobalFoundries’ growth.

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