The Six Five team discusses GlobalFoundries’ latest earnings.
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Transcript:
Patrick Moorhead: Let’s move forward, I think we’ve squeezed this for about all we can. Let’s move on to the next chip earnings. And that is GlobalFoundries. You know how it is, Dan. I mean, they crushed it. Good guide, beat revenue by 1.38%. They beat expectations on EPS by almost 9%. Pretty giant showing here. Increased revenue by 23%. By the way, this is a great explanation. I explained this to the folks on CNBC Asia last night out of Singapore. I was talking about applied materials and it’s really easy to get sucked into, look at the memory market or storage market collapsing and saying, “Hey, the chip market’s down,” or looking at NVIDIA or Intel’s showing and feeling like that’s the entire market. That’s just not the case, right? We saw from Lattice, and I think what we’re seeing in certain areas, areas like communications and infrastructure. We talked about Kyndryl and Nokia. Automotive and the industrial IOT are all banging.
Yes, smartphones are down. PCs are down fricking big time. Right? But there are certain areas that keep on moving. Heck, all that Cisco networking gear, guess what? Full of chips. Global. Getting back to GlobalFoundries, they are a reflection of many of these growth markets. Where do they grow the most year over year? Big growth in communications and infrastructure. Automotive and industrial designs with smaller declines in what they call smart mobile devices. I was thinking, wait a second, why aren’t they getting hammered in smartphone? It’s not just smartphones. It’s smart devices. And what GlobalFoundries does is they do a lot of the RF that’s behind a communication system. And oh, by the way, that’s a market that didn’t go down like the smartphone market. People shouldn’t confuse smartphones with GlobalFoundries smart mobile devices.
Probably one of the biggest announcements of the quarter, Dan, I think you and I, we may have written about it. I know we tweeted about it, was a tie-up with GM. Car companies used to not have direct relationships with chip-makers or the foundries that they were fabbed in. I think we’ve seen car companies not able to ship a $75,000 car because you can’t get a $1 analog part. And these car companies are wising up. And the latest one is GM who did a long-term agreement to secure capacity in, hey, New York Fab, in upstate New York. First of a kind agreement, which brings some heat here to the US. Hey, good for the country, good for the economy, good for GlobalFoundries.
Daniel Newman: Yeah, it was a strong quarter pat and a very, very good news moment for GlobalFoundries to be able to make that announcement. Having had the chance to speak with them last week ahead of the news, I immediately said they’re, they’re really taking advantage. We did this show last week. Click into our last show if you want our full dive on the GM news. But I basically said it’s in this perfect moment, this perfect inflection for companies to really stand up and say, “Hey, we’re manufacturing here in the US.”
In terms of its earnings, 23% year-on-year, that’s very good. But maybe more importantly, record gross margin and record net income in a market environment that we are in right now, that matters maybe more than revenue. I think a lot of times, for companies that are more established companies, people are looking for, can they put off cash flow? So FCF is the word of the day, are you creating free cash flow? People care about that. You know? The company continues to be ambitious beyond what it’s doing. I believe it made an acquisition of a part of Renesas. Is that how you say it? Renesas on their non-volatile resistive RAM technology. And that’s going to help them in what they’re doing in IOT.
Patrick Moorhead: R-RAM, baby. That’s right.
Daniel Newman: And then they also did get some funding. Not a big deal, but it was announced as part of their earnings release related to advanced innovation and production of Next Generation, GaN Chips, in Vermont. Another place that GlobalFoundries is manufacturing. So well-diversified set of revenues, Pat. I mean you look across end markets, they have six. They are heavily tied to smart mobile, but they are also one of those companies that is manufacturing those really hard. When you and I make references to those 38 cent chips that nobody could get that was stopping entire…I mean they’re part of that edge of the process process. You know? GlobalFoundries has a really important role to play and the company continues to show strong results, making the right partnerships, playing in the right market spaces, and doing well. Again, this week’s Lattice and GlobalFoundries, while semis have been a little bit under pressure, these companies seem to be…what did Jay-Z say? They’re brushing the dirt off their shoulder and they’re just getting on with it.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
