The Six Five team discusses GlobalFoundries Q2FY24 earnings.
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Transcript:
Daniel Newman: GlobalFoundries had earnings, Pat, and this is kind of their earnings sort of summed up the quarter. I mean this, let me base this down. I’ve spent a lot of time sort of analyzing all the tech company earnings this quarter, but they beat on the revenue, they beat on the earnings number and then they provided what was just an okay guide. I think they were mixed. I think it was okay on revenue or it was light on earnings or one way or the other there. Hold on, let me pull up my tweet, just to verify which side of the equation that was on, but it was solid.
So yeah, the guide was basically a beat on top and they missed on the bottom. This was kind of the quarter, Pat. It was like Amazon, sort of a little bit soft guidance but had pretty good numbers. Microsoft missed on one thing with its Azure number and you go back through it. It’s like everybody had a pretty good result, but just had something that was imperfect. And in a, I don’t know if everybody remembers Monday from this week, it looked like the world was going to end in the morning. Pat was desperately trying to log onto his E-Trade account and he was trying to move in hordes of cash from his reserves into it to try to buy in what looked like Armageddon. Pat couldn’t neither log in or get the money moved. But the point was, it literally, by the way, TMI, I don’t know. I’m not sharing any more details than that, but it literally did look, I mean, that morning I was ghostly, you were trying to get online. I’m pretty sure I’d never seen you get onto a chatbot hotline to try to- But it was like 24 hours later everything’s fine. That, by the way says everything about how fast this world moves.
Patrick Moorhead: I know.
Daniel Newman: People were comparing it to 1987, like the Black Friday of-
Patrick Moorhead: Vix, Vix was like, Lehman crashed, COVID, right? Oh, and that one day we had 12 hours.
Daniel Newman: It was super, it went from 20 to almost 65. And then it’s already back at under 20 again. There was this carry trade unwinding, it was cast. Anyways, this is not a lot to do, but it was just really funny, because it just goes to show the fragility that we have in our market right now. It is super fragile. Every certain economic report, everything the Fed says. Point is, it’s kind of hard to tell right now how much of these the way market’s reacting to things. But back to GlobalFoundries, I mean look, this is a company that doesn’t get all as much attention in all the chip chat that we’ve got going on. Basically, because what they’re just doing is they’re just busy manufacturing all the chips that surround all the really super cool leading edge stuff that we use in IoT and in comms and in devices and in PCs and in compute.
And it’s just the stuff that we just can’t actually build any of this without, but it’s not three nanometer not, it tends to be everything above 14 and often much higher than that. And that’s what they like to call essential nodes. The press likes to call it lagging or older or legacy nodes, but they continue to do good work under Thomas Caulfield. Thomas has been on Six Five a few times. And by the way, Pat, just a couple segment notes. I mean they had good growth in automotive, which is interesting. We saw Qualcomm had some great automotive growth as well, but Tesla’s numbers weren’t great. So, it’s not exactly sure, but I think it’s all about more content in every vehicle, whether or not we sell, if the production number starts to really grow, that’s going to be even better for these companies.
And then of course, smart handsets are still kind of on the decline, which is interesting, because we keep hearing about this upcoming super boom cycle, which I think you and I both agree is probably more of a ’25 thing than a ’24 thing. But these are important overall. But Pat, it was a good quarter. It’s like they’re stable, steady, strong, important company, but they are really dependent on this smart mobile device. Almost half the revenue comes from that space. And so, when that starts to grow and that starts to boom, there is a very strong opportunity that GlobalFoundries growth will follow with that
Patrick Moorhead: Good stuff, man. I guess some stuff, some adders for me. What I always like to do is look at, is it a company thing? Is it a market thing? Is it somewhere else? And this is clearly a market thing. You had mentioned it, but if you look at most of the chipmakers in the embedded space, they’re not doing well. And it’s really about this massive inventory glut. If you remember, we couldn’t get 12 cent controllers for $250,000 BMWs because you couldn’t ship the radio and then everybody doubled down and went wild over buying. And whether it’s a TI, whether it’s a ON Semiconductor, whether it’s Synaptics going through that glut. And there are even consumer IoT markets that even the demand for those devices has ebbed big time. And in the enterprise the AI budgets have overcome the edge, right? The intelligent edge, call it the industrial IoT. And those went away and interest rates went up and the overall auto market went down.
I think the only autoplay that had an increase was Qualcomm, right? They’re taking share and they’re also in a lot of the newer models with self-driving, but it’s a very tough market. To make a long story longer, GlobalFoundries, they read the market, okay? IoT and comms were down. I mean, comms infrastructure has been in the dumps for a long time. I mean, look at the performance of the key infrastructure players in the telco market. There was this massive surge in 5G, advanced 5G, and then it has stalled a bit as the companies, as the carriers chew through that CapEx.
Automotive was a bright spot in the end at 10% growth, which was great. And just on the smartphone side, GlobalFoundries, it’s not about the AP, it’s about the RF that they’re engaged in. And there have been some machinations there, big time Chinese growth. I don’t believe that they are a big supplier to those RF folks that go into China. Tepid smartphone market now. And your point on AI smartphones, what I said back in January is we would start to see the beginning of it and we saw Apple’s hand in what they do and their stock popped looked pretty good. And you have to have an iPhone 15 max pro max for it to be able to work.
I still believe if Apple hits its dates, which is slipping, it looks like from September to October, we could see the beginning of that. I’m also very bullish on Qualcomm’s new APs coming out, which not only give the boost to Oryon core, but also give a big AI boost as well. So, that’ll be Qualcomm’s second generation of AI smartphones. I think China is going to absolutely devour those chips. Again, I don’t necessarily know how well GlobalFoundries is aligned for that China smartphone pop given their performance here, but we’re going to have to see.
Daniel Newman: Yeah, yeah. I mean look, that’s some good extra bits and dives on that one. By the way, that’s why you watch the show, right? Because we go where the typical coverage never does. We dive into the weeds, we get into the try-
Patrick Moorhead: The thick of it.
Daniel Newman: We get into the thick of it. I mean dude, you just did like a 15-minute diatribe on CXL. You should start writing for a Mantech.
Patrick Moorhead: I mean, I did a little research, but like you, I mean, I’ve been on advisory calls on when CXL Consortium first started. I mean, they were hitting me up for stuff and feedback and I knew all the players who were in there. And I’ve been on standards boards before, and the good, bad and the ugly of how this moves forward. And it’s funny, I go to the hyperscaler friends and they’re like, “CXL, nah.” But no, it just costs too much. Costs too much. But I think we’re going to see it at Meta and AWS.
Daniel Newman: Always can get fixed over time. Costs tend to normalize or even come down. I mean look at what’s happened to compute and memory and storage and everything else. It comes down and it gets more powerful. Anyways, what do they call it? Moorhead’s Law?
Patrick Moorhead: More Law. Yeah, there was a Moore’s law out there.
Daniel Newman: I like that, Moorhead’s Law. We start new laws on this show, everybody. You got to stick with us, it gets better.
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.
