GlobalFoundries gives bullish outlook on strong chip demand

SAN FRANCISCO (BLOOMBERG) - GlobalFoundries, the biggest United States-based provider of made-to-order semiconductors, gave a bullish forecast for the current quarter, indicating the rush to get chips continues amid industry-wide shortages.

Sales will be US$1.88 billion ($2.53 billion) to US$1.92 billion in the period ending in March, the Malta, New York-based company said on Tuesday (Feb 8) in a statement. Profit, excluding certain items, will be 21 to 27 US cents a share.

Those predictions compare with analysts' average estimates of US$1.84 billion and 14 US cents a share.

At its results briefing, chief executive Tom Caulfield said the company saw strong demand from its customers across industries, including smart mobile devices, communications infrastructure and automotive.

He added that GlobalFoundries is now “well-positioned to execute our plan to deliver a more than 50 per cent output increase (in) 2023, compared with 2020, by adding capacity at our three facilities in New York, Germany’s Dresden and Singapore”.

GlobalFoundries, majority-owned by the government of Abu Dhabi, began life as a publicly traded company last October. The chipmaker, which is a fraction of the size of market leader Taiwan Semiconductor Manufacturing Co, is trying to carve out a larger slice of the market for outsourced semiconductor production.

The company’s Singapore facility currently contributes to 45 per  cent of its total production capacity and is the largest of its three facilities.

Last year, it invested US$4 billion to add an extra one-third of wafer production capacity to the Singapore operation, bringing its capacity to about 1.5 million wafers per year. 
Mr Caulfield said the first phase of the Singapore expansion “remains on track, with equipment slated to go into that facility in the second half of 2022”. 

Additional production at the expanded facility is expected to commence in the first half of next year. 

“We are working closely and hand-in-hand with our construction and contractors and our equipment suppliers to maintain our capacity expansion schedules,” he said.

Mr Caulfield and his counterparts at other chipmakers are trying to convert the demand spike into long-term commitments from customers with the aim of stabilising their growth and profitability. They also hope to increase capacity by using proposed government incentives to build facilities in the US and Europe.

Investors should have confidence that the industry is going to avoid past cycles of boom followed by gluts if sales double as projected to US$1 trillion in 10 years, Mr Caulfield said in an interview. Current plans for factory expansion still will not keep up with that pace of growth, he said.

Furthermore, GlobalFoundries is only adding capacity when it gets financial commitments from customers who are seeking guaranteed supply. Chipmakers are no longer building plants based on forecasts hoping orders will show up, he said.

GlobalFoundries shares have increased 19 per cent to US$56.05 since October when a slice of the company began trading on the public markets, beating overall gains by chip stocks. They rose about 3.5 per cent in extended trading following the report.

Fourth-quarter revenue jumped 74 per cent to US$1.85 billion. Profit was 18 US cents a share, excluding certain items. Analysts, on average, projected US$1.81 billion and nine US cents, according to data compiled by Bloomberg.