GLOBALFOUNDRIES (GFS) The Citigroup Global TMT Conference summary

Industry and market outlook

• Sequential growth expected in 2024, with the industry believed to be at the bottom of the down cycle and a potential recovery anticipated in 2025, depending on macroeconomic and demand signals.

• Smart mobile devices market expected to be flat or slightly up in 2024, with inventory drawdown improving and strong RF technology positioning.

• Automotive segment tripled revenue in 2023 and is projected for mid to upper single-digit growth in 2024, driven by analog, microcontroller, and supply chain strengths.

• IoT market remains mixed due to high inventory but holds robust long-term potential; inventory clearing could quickly stimulate demand.

• Comms infrastructure and data center business has stabilized, with future growth expected from silicon photonics and gallium nitride technologies.

Financial performance and guidance

• Over $500 million in free cash flow generated in H1 2024, on track for ~$1 billion for the year, a 3x increase over 2023.

• Gross margin has been resilient despite utilization dropping from 90% to low 70s, aided by underutilization payments and cost controls.

• CapEx for 2024 estimated at $700 million, about 10% of revenue, with a stable outlook for 2025.

• Depreciation expected to peak in 2025 and begin rolling off in 2026.

• Debt leverage at about 1x, with no plans to increase unless for significant M&A.

Pricing, competition, and supply chain

• ASPs remain stable, with mix and technology level as primary drivers; average price per wafer is about $3,000.

• Competitive environment is stable, with UMC as the main competitor besides TSMC; new Chinese foundries have minimal impact due to supply chain resilience and qualification requirements.

• Long-term agreements (LTAs) cover $20 billion in remaining contract value, mainly in automotive, with renegotiations occurring as needed for win-win outcomes.

• Underutilization charges recognized in Q2 2024 ($60 million), expected to decrease in H2 and 2025.