Semiconductor manufacturing sector GlobalFoundries expects weaker chip demand to bottom out in the first half of 2023 as it reported better-than-expected results for the third quarter of 2022.
The chip industry is preparing for a slowdown as demand weakens, due to various causes such as rising inflation rates and rising energy costs, but GlobalFoundries seems to believe this will primarily affect activities in the first six months of next year.
“Some of our customers have requested that some of their 2023 deliveries be adjusted slightly downward, particularly with respect to the first half of 2023,” CEO Thomas Caulfield said in his conference opening remarks on the company’s third quarter 2022 results.
Later on a conference call, CFO Dave Reeder gave a more nuanced view, saying, “We think the first half of 2023 is probably the bottom from what we’re hearing. It’s probably more likely than not in the first quarter, but we continue to refine and evaluate this request based on our collaboration with customers.”
This contrasts with some analyst forecasts, which predict that 2023 will be a year of decline for the semiconductor market as a whole, with any recovery starting in 2024.
Gartner vice president for semiconductors and electronics, Richard Gordon, told us last month, “We are already seeing declines in announced capital expenditures as semiconductor companies attempt to cut production.” , adding: “This will slow the addition of new manufacturing capacity as suppliers try to align it with a market recovery beginning in 2024 and accelerating in 2025.”
Gordon said he thinks the GlobalFoundries forecast looks a little bullish and that Gartner only assumes “improving market conditions” for 2H 2023, “But there is a lot of uncertainty about the macro economy that eclipses the outlook right now,” he said today. .
Meanwhile, Caulfield said GlobalFoundries is taking steps now to contain costs and accelerate previously planned productivity initiatives, based on the current macroeconomic environment and discussions with the company’s customers.
Longer term, the company’s picture is rosy, he said, with the number of customers under long-term agreements rising to 38, and the total value of these now just over 27 billion. of dollars. These agreements provide a solid framework for GlobalFoundries and its customers to have balanced and constructive discussions regarding the application, he said.
For the third calendar quarter of 2022, the company reported revenue of $2.1 billion, up 22% year-over-year. For the fourth quarter, he expects revenue to be between $2.05 billion and $2.1 billion, which is effectively stable in terms of growth.
However, GlobalFoundries said it plans to complete the sale of its East Fishkill plant — a former IBM manufacturing plant it acquired in 2014 — to chipmaker Onsemi. As a result, he expects to record a gain in the fourth quarter which will be in the range of 350 to 400 million dollars.
By end market, smart mobile devices accounted for approximately 46% of GlobalFoundries revenue in the third quarter, up approximately 12% year-over-year. Home and industrial IoT market revenue accounted for 19%, a growth of around 83%.
Communications infrastructure and data center products accounted for approximately 18% of revenue in the quarter, up 29% year-over-year, while end-market IT products were down year on year and only accounted for 2% of the company’s total turnover.
Automotive was touted as one of the bright spots, accounting for just 5% of revenue this quarter, but based on current design gains, CFO Reeder said the company expects continued growth of its automotive business in 2023,” and we expect the company to exit 2023 at an annualized run rate of $1 billion.
Wafer revenue accounted for about 90% of the company’s total revenue in the third quarter, and Reeder said the average selling price per wafer was up about 14% year over year. the other, thanks to long-term customer agreements and the continuous improvement of the product range.
Global Foundries shipped approximately 637,000 300mm equivalent wafers during the quarter, an increase of 5% over the same period last year.
Among the products qualified by GlobalFoundries this quarter is a 40nm embedded non-volatile memory product for “one of the industry’s largest automotive microcontroller vendors.” This can now be shipped from the company’s facilities in Dresden and Singapore, establishing a high-volume supply chain for the automotive industry, the company said.
Caulfield said GlobalFoundries also sampled gallium nitride (GaN) power devices for early customers at its factory in Burlington, Vermont, where the company recently received a $30 million grant from the U.S. government. as part of the financing of the commercialization of this technology. ®
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