GlobalFoundries reported $1.84 billion in revenue for the first quarter of 2023, a figure that beat estimates for the quarter but was otherwise disappointing, as it represented sequential and year-over-year declines and served as a sign that ongoing challenges in the semiconductor sector will continue well into the second half of 2023.
The quarter marked a shift in tone and outlook for a firm that has been able to keep its head above water while other companies in the chip sector have been struggling. While GlobalFoundries, as a provider of wafer and manufacturing capacity to fabless semiconductor companies, like AMD and Qualcomm, and end customers of chips, such as GM, has been able to leverage long-term agreements (LTAs) with customers into revenue stability, it is now being affected by the same fluctuating demand and slow inventory draw-down throughout the supply chain that also is making life difficult for its customers.
That translated into declining revenue for GlobalFoundries in the smart mobile market, where sales fell from $952 million in Q1 2022 to $696 million in Q1 2023. That market is the company’s largest by revenue percentage, at about 38%. Revenue from the personal computing market was down 12% year-over-year to $36 million, carrying on what has become a refrain across the semiconductor industry. Meanwhile, communications and data center segment revenue was up 8% year-over-year to $352 million, but it declined sequentially.
The report sent the company's stock price down almost 7% as of mid-day Tuesday to about $55.74.
GlobalFoundries found more positive trends in the automotive market, where revenue jumped 122% year-over-year to $180 million, and in the home and industrial IoT segment, where sales crept up 7% year-over-year to $344 million in Q1. That brought IoT sales to account for 19% of total revenue for the quarter, about the same as the data center segment. In all, these downward and upward movement amounted to revenue that tracked in line with the guidance the company had provided for Q1.
“I'm pleased to report Q1 results that are in line with the guidance we provided in February as we continue to deliver resilient financial performance amidst a challenging macroeconomic and cyclical backdrop,” said GlobalFoundries CEO Tom Caulfield during the company’s Q1 earnings call.
Then, he got to the not-so-great news. “Similar to others in the industry, we believe that semiconductor inventories are coming down more slowly than previously expected, and that the rebalancing of demand will extend at least through the second quarter, particularly in markets such as smart mobile devices, communications infrastructure and data centers, as well as the lower end of the consumer and home electronics markets in general,” Caulfield said on the call.
He noted that based on recent customer conversations and internal modeling, “we anticipate first quarter revenue representing the low point of our 2023 quarterly revenue, and that we’ll have quarter to quarter modest sequential growth throughout the year. Though we are expecting continued… revenue growth, the return to more normalized inventory and demand levels is forecast to happen more slowly… and will most likely take [until] well into the second half of 2023.”
The ongoing challenges mean that second quarter revenue for GlobalFoundries is expected to land between $1.81 billion and $1.85 billion, down from Q1 and potentially the company’s lowest quarterly revenue total since at least Q4 2021. Wafer shipments also are expected down overall for 2023, though GlobalFoundries executive said the effect of this decline will be somewhat offset by a continued rise in average selling price.
They also said LTAs will continue to buoy the company’s financial performance, and that even with manufacturing capacity utilization down slightly from late last year, the company still expects to allocate more capacity in the quarters to come to the fast-growing automotive sector.