GlobalFoundries at Bank of America Global Tech: Navigating Growth and Innovation

On Tuesday, 03 June 2025, GlobalFoundries (NASDAQ:GFS) participated in the Bank of America Global Technology Conference 2025. The company, led by CEO Tim Green, presented a strategic overview emphasizing its focus on specialized technologies and global positioning. While highlighting strong financial performance and future growth in key sectors, the company also addressed challenges related to geopolitical dynamics and supply chain resilience.

Key Takeaways

• GlobalFoundries is focusing on specialized technologies rather than competing on leading-edge nanometer technology.
• The company reported strong financial results in the March quarter, with positive guidance for Q2.
• Automotive, data center, and satellite communications are key growth drivers.
• GlobalFoundries aims to expand gross margins to 30% by the end of the year, with a long-term target of 40%.
• The company is exploring targeted M&A and potential plans to return excess cash to shareholders.

Financial Results

• March Results and Q2 Guidance: The company showed signs of stability and growth, with optimism from customers.
• Automotive Growth: Automotive revenue grew 15% last year, reaching $1.2 billion, with expectations for continued growth due to design wins.
• Data Center Growth: High teens growth is expected this year, driven by technologies like silicon photonics.
• Wafer Pricing: The pricing environment is constructive, focusing on performance rather than commodity pressures.
• Gross Margins: Q1 gross margin was 24%, with an expansion expected in Q2. The company targets a 30% gross margin by year-end and 40% long-term.
• China Revenue: Less than 10% of revenue is directly from China.

Operational Updates

• Global Footprint: Technologies are increasingly available at multiple locations, providing customers with supply chain flexibility.
• Automotive Strategy: All fabs are being made automotive grade capable.
• China Strategy: GlobalFoundries is partnering with local foundries to provide local supply options, tapping into China’s semiconductor import market of $380 billion.
• Capacity and Supply Base: The company has more capacity than current revenue requires, with a global network of 7,000 suppliers.

Future Outlook

• Growth Drivers: Automotive, data center, and satellite communications are expected to drive growth, with significant content growth anticipated in data centers through co-packaged optics.
• Tariff Impact: Limited impact from tariffs on the cost structure.
• Strategic Priorities: Aligning the technology portfolio for maximum flexibility and customer supply chain diversification.
• Capital Management: Targeted M&A is planned to enhance differentiation, with potential shareholder returns later this year.

Q&A Highlights

• Automotive Market: GlobalFoundries expects to outpace the automotive market growth due to increased content and share gains.
• Smart Mobile and IoT: A flattish profile is expected for the year, but longer-term content growth opportunities are anticipated.
• China Strategy: The low direct revenue from China presents growth opportunities, with local partnerships enhancing supply options.

In conclusion, GlobalFoundries is positioning itself for growth through strategic technology focus and global operational alignment. For a detailed discussion, readers are encouraged to refer to the full transcript.

Full transcript - Bank of America Global Technology Conference 2025:

Vivek Arya, Analyst, BofA: Good morning, everyone. Welcome to this session. I’m Vivek Arya from BofA’s semiconductor and semi cap equipment team. I’m really happy that you could join us for the session and really excited to introduce the team from GlobalFoundries, Tim Green, CEO and Sam Franklin, the Senior Vice President of Finance, Operations and Investor Relations. And as usual, I’ll go through a quick fireside format, my questions.

But if you have anything you’d like to bring up, please feel free to raise your hand. But with that, a very warm welcome to you and And Tim, four months into the job, I was hoping that maybe you could introduce yourself, right, to our investor audience and what, you know, brought you to GlobalFoundries and how you’re kind of looking at the strategic direction of the company. Yeah.

Tim Green, CEO, GlobalFoundries: No. Thank you. Great to be here. And as you said, sort of four months since we announced the transition. But for me, it’s more than seven years with the company in different roles on the strategic and financial side and then more recently on the operations side.

So I got the chance to know this company very well, which gave me a lot of conviction about why even if our past is good, our future is even better. Very excited for what’s to come. The last four months, I’ve been on the road. I don’t think my family recognize me anymore, but that’s the negative. The positive is I’ve been spending time with customers, with our teams globally, our partners around the world, and huge level of good support for the future.

And we’ll talk more about that. But I think when we talk about what we’re trying to do as GF, focusing on really the differentiated technologies that we’ve been investing in for now many years, building that deep rich ecosystem and those partnerships with customers. And then lastly, I’m sure we’ll talk more about that, that global footprint that is hard to build, but we have today really resonates. And so I left a lot of meetings with a lot of opportunity to do more, and that’s obviously very good for me as a new CEO in the role.

Vivek Arya, Analyst, BofA: Got it. Excellent. So maybe as a way of kind of level setting, Tim, you know, usually when investors think about the the Foundry ecosystem, the perception is there is the leadingbleeding edge mostly in Taiwan, right, some a little bit in The U. S. And then there is a big kind of lagging edge or mature node ecosystem where there’s a lot of capacity being put up in China.

Where how should help investors put global foundries on this map. Right? Where where do you fit in? What do you differentiate in so we have a better view of, right, how how you can grow in in this market?

Tim Green, CEO, GlobalFoundries: Think what we’re seeing is that the the the singular vector of innovation called the nanometers is no longer the right way to talk about the future of the industry. And I think, for sure, there is a role to play for single digit nanometer technology. You know, what TSMC is doing in that space is fantastic, and obviously, are trying to compete in that space, it’s a challenging market. But we see a lot of other innovation, which is really going to where semiconductors get used today. And so given how broad our end markets are, whether that’s, in the data center, in the satellite, in automotive, in mobile devices, in the Internet of Things, in medical devices, that breadth of kind of market penetration means the features that our customers need are very different.

It’s no longer about the fastest compute. It could be about the lowest power, the best RF connectivity, the best ability to move data quickly at low at low power consumption. And so you’re seeing many, many different ways to innovate. And so for us, I think we fall into neither of those two buckets. We’re gonna fall into something different, which is basically a differentiated provider of technologies for fast growing end markets delivered from that global footprint, which we’ll talk more about, but obviously is increasingly a critical priority for those customers.

Vivek Arya, Analyst, BofA: I see. And you mentioned the global footprint. So how are you aligning the footprint given the, I guess, by the minute evolving nature of, you know, all the geopolitics and and trade and and tariffs?

Tim Green, CEO, GlobalFoundries: I think for those who don’t know the history of GF, GF came together for multiple different companies. We started as AMD in in in Dresden, actually, it was our first fab. AMD, we acquired Chartered Semiconductor in Singapore. We eventually built Greenfield in Malta, New York, too far from us today geographically. And then we bought IBM as business as well, which bought two fabs, one of which we still have today.

And so we’ve got a footprint that grew inorganically, right, and organically a little bit in in New York. And it was very different when it started. And what we’ve been doing over the last several years now is making more and more of the technologies that we innovate in available at more and more locations. And so now the majority of our differentiated technologies are available in two and even in some cases three fabs. And that gives customers something that I think is the buzzword we hear from all of them.

It’s optionality. They don’t know what their future looks like. They don’t know what will happen in terms of trade policy and customer demand, shifts and so on, but they do know they need choice. And when you can do one tape out into two fabs or even three fabs, that gives you that flexibility. And so to have that, you need that global footprint, but more than that, you need the technology cross qualifications to make it possible.

Got it.

Vivek Arya, Analyst, BofA: Makes sense. So you recently had pretty strong results in the March, right, and good guidance for Q2. Maybe walk us through what were the drivers behind the upside in March and how you’re thinking about the current quarter? Yes.

Tim Green, CEO, GlobalFoundries: So we frame 2025 as the year of resumption of growth. And as those who have observed the industry for a longer term have obviously seen the cycle that’s played through from a kind of incredible up cycle in 2021, ’20 ’20 ’2 to a not necessarily deep, but relatively long down cycle in 2023 and 2024. I think we start to see the green shoots of, let’s say, the minimum stability and in many pockets also growth. And we hear optimism from our customers and from other participants in the market. And that’s what we’re seeing in our business.

I think some specific drivers for us that are more GS specific. One, automotive despite the market environment not necessarily being extremely strong, content growth in the car is growing. But I think more importantly, GS growth in the car continues to be strong. We grew 15% last year. We’ll grow meaningfully again this year, even in a flat market.

And that’s mainly because of share we’re able to gain on the back of previous design wins we have. And we see that continuing with new design wins and new applications in the car. Our franchise today very much around microcontrollers in the future going to new areas like battery management, imaging, image sensing, radar, other areas as the car becomes a more complex set of technologies. And so GS specific drivers are playing out there. I think also worth calling out the data center.

Obviously, no one is surprised by the fact there’s a lot of raw data center demand given that the pace of build out. But probably what they don’t know so much is that in the data center technologies that we manufacture like silicon photonics for pluggable applications today and then future applications like co package optics, but also power applications, silicon germanium playing a critical role in other forms of optical communication. All of that drives incremental data center demand and actually that market is growing very well for us and will grow kind of high teens this year on the back of that. Another market within that area for us is satellite communications. We’ve historically had an active presence in there given our RF franchise.

What we see today is that with the proliferation of satellite connectivity, low earth orbit satellites, you have a lot more reasons to connect and a lot more ability to connect at high bandwidth that has a lot of RF content tied to it. So again, we start to see that pull through in that business. And so on the back of, say, other markets that are relatively flat for the year like mobile, we see these pockets of growth that are quite meaningful and it continue to drive, let’s say, growth for us through the course of the year.

Vivek Arya, Analyst, BofA: I see. I know you are further upstream, but was there any notion of pull in or other behavior that you saw from your customers over the last one or two quarters?

Tim Green, CEO, GlobalFoundries: I’d say less than people talk about and less than we perhaps thought could happen. And we could have thought about push outs on the back of uncertainty of demand, pull ins on the back of kind of getting ahead of regulation. We probably saw less of both of those in the end. And so I’d say for the current quarters limited impact on the current environment.

Vivek Arya, Analyst, BofA: I see. One other thing I remember Tim from the call was wafer pricing was somewhat below the trend line that you guys have established. So how do you think about wafer pricing this year? And what brought it below trend? And what can help it kind of get back to trend?

Tim Green, CEO, GlobalFoundries: I think obviously we report average selling price. So a big factor in that is always the impact of mix on our business. And it can be the case that you ramp a product with a lower ASP but a higher profitability that may be less complex to manufacture and so on. So there’s always a mix dynamic that I think can kind of be mixed up with is there a constructive pricing environment. Look for the technologies we compete in, we still see a pretty constructive pricing environment and largely because the conversation with customers is performance.

Performance time to market, can this application help them win in their market where they compete? And, yes, you have to be competitive, but it’s much less a kind of commodity driven discussion than it might be for other parts of the market. So look, you will see in some technologies slow year on year price declines. You don’t see any significant change of the environment. And I think for more differentiated technologies, actually, you have pretty good pricing power going forward.

Vivek Arya, Analyst, BofA: I see. On the comms and data center, which you mentioned, right, as a key, is there a way to size what GF’s content is is in that, opportunity, right? You mentioned you play an important role in pluggable transceivers. So where exactly do you play? And then as that industry transitions from these optical pluggables to more co packaged optics, how does the direction of your opportunity and content change?

Tim Green, CEO, GlobalFoundries: So I think the way to think about that is, because as you say today, the transition to optics has mostly been in pluggable transceivers and so on. And that’s what’s powering a lot of data centers today. We have a meaningful share there, and we have technologies that play in that space. Of our overall sort of data center business, maybe a third is kind of that overall space of that market segment. I think that the really interesting story is what happens next around the transition to co package.

If you went back two, three years, the industry was a little bit unsure. The industry was saying, well, maybe copper will have a few more generations. I think now the if has become a when. Right? NVIDIA before OFC here in San Francisco a few months ago talked about co package optics really for the first time in a broad way Right.

For scale out applications. We see other companies we’re working with in scale up applications. And so this transition from a device that is, you know, improving versus competent versus one that’s really integrated in the package, that’s the transition point that I think will drive very big content growth for CPO in general. And for sure, for GF, that’s the area we focused on within photonics. It’s a good inflection point for us.

When that’s always a debate about when the ramps really start to happen. I think the industry consensus is really the ’27 is that you start to see significant, let’s say, switches to co package optics. Could some happen earlier, some happen later for sure. Everyone’s architecture is different, but we definitely see much more pull today than we did even six months ago.

Vivek Arya, Analyst, BofA: I see. Does your content change, Tim, if, you know, in this industry transition from 800 gig to 1.6, or that is not a driver of any

Tim Green, CEO, GlobalFoundries: It’s it’s one of several drivers. I think the the bigger driver is really the transition. Think about optics as optics used to connect data center to data center. Right. Then they moved to rack to rack, and now they’re talking about within the rack, those scale up applications.

That’s when you’re talking about not just kind of one to two to four, you’re talking about one to 10 to 100 in terms of content. So the big drivers are the applications rather than the bandwidth requirements. Now the bandwidth requirements are what making it what’s making it very difficult to continue with copper. You just cannot do these things with copper anywhere near the power consumption that you could before. And so I think that’s those two things are playing out, but it’s really the architectural change that makes a bigger difference than, for example, the individual spec of a, you know, transceiver performance.

Vivek Arya, Analyst, BofA: I see. And the other interesting thing, Tim, you mentioned was the SATCOM opportunity. So give us a sense for how big is that today? And is that kind of exposed or levered to the same kind of aerospace, defense spending, you know, environment that we are seeing? So what is it

Tim Green, CEO, GlobalFoundries: being driven by? It’s growing. It’s it’s relatively small today, but we see that as a multiple hundreds of millions of dollars Mhmm. Of future business opportunity for us and ramping pretty quickly. And I think the reason is that there have been really fundamental breakthroughs in the deployment of, I think particularly low earth orbit satellites right now.

Have thousands rather than hundreds that are able to provide internet connectivity. If you’re in rural California or if you’re in rural Africa, you’re going have that access that that the consumers are doing. So that’s why you’re seeing global subscriber growth to these kind of services. If you think about what they have to do, you’re talking about transmitting a signal from a device that sits on your house or your car to a satellite 300 miles above us traveling four times the speed of sound. The amount of kind of precision RF for the, you know, the the the phased arrays and so on that are necessary for that is significant.

And so this is a very big application growth that really wasn’t there before, but it’s an it’s a new use of RF connectivity for a front end module that is much more high performing than, for example, you’d see in a cell phone or another smaller looks shorter range device. And that pulls a lot of content for us.

Vivek Arya, Analyst, BofA: So are you levered to a lot of these Starlink type programs?

Tim Green, CEO, GlobalFoundries: It’s it’s those kind of programs. We have good broad engagement in the ecosystem. And so, yeah, there are plenty out there that are driving that growth. And I think more will come as well.

Sam Franklin, Senior Vice President of Finance, Operations and Investor Relations, GlobalFoundries: And perhaps to pick up on one point to build on Tim’s comment there. You know, for us, a real focus area is how do we see the design win momentum pulling through on the business and where do we see that design win momentum from a product perspective within that end market. And, you know, we talked about this on prior calls as well, but that momentum across the product portfolio into satellite communications has been quite pronounced, whether that’s on our 22 FDX platform going into beamforming devices. That’s an ultra low power product application as well as to Tim’s point on the explosion of RF content within these devices. Our one thirty NSX has seen good design momentum as well.

So it’s it’s not just a narrative for us as it relates to satellite communications. It’s really seeing those proof points pull through within the design wins.

Vivek Arya, Analyst, BofA: I see. And how’s the competitive landscape in that? Is that something like where you are one of five or you’re one of three or, like, how many people can do this?

Tim Green, CEO, GlobalFoundries: You know, I think if I if I zoom on the RF component, obviously, our RF franchise is one of our longest standing one. It predates Right. GF in in in many ways. And so I think in those areas, we’re one of very few, and where I think we’re comfortable able to say we are ahead and we can stay ahead based on that that level of technology. There are obviously others playing in different parts of that each of those architectures.

I think that will continue, but we have a few advantages including that technology. I’d say the other piece of it is this is also a a sector where geography of sourcing matters. Right? Again, some of these devices are for consumer devices, some are also for military applications, and so sourcing matters. It’s not a case of I’ll source it from wherever the lowest cost option is.

Vivek Arya, Analyst, BofA: Got it. And then automotive, you know, GFS has had an interesting journey in that the company continued to grow even when the automotive industry softened, right? So there’s always been this question mark about, well, was it based on a lot of take or pay type contracts? Were there pull ins or other situations? How would you describe what is the utilization of your product with end customers?

So are you going to see growth with the market or your growth is already pretty strong. So how do you see the state of the automotive market right now?

Tim Green, CEO, GlobalFoundries: So I think the drivers of, I’d say, sustained above market growth are and market, I think we can still be bullish on around content increases that everyone reads about and talks about. I think, look, we are still ramping on core platforms like on microcontrollers and 40 nanometer embedded memory technologies that still haven’t reached their peak revenue. And as you know, these are very long cycle. So they take a while to reach peak. They take a while to decline from peak.

And so you’ve still got a way to go in those areas. And those are areas where these are design wins of several years ago, right, ramping through. So good visibility for us as well. We have other next generation MCUs engagements, and those are ongoing and going well. But then a lot of the content growth in the car is also pretty interesting.

And we’ve had a big effort to make all of our fabs automotive grade capable. Many of our technology platforms automotive grade. So we can port an application that could be, for example, an image sensor in a phone while also could go in a car with a higher spec and so on. And so those are easy wins for us to, again, capture that share and grow ahead of the market. So I’d say for auto, pretty good con conviction to grow ahead of the market for for some years to come.

Vivek Arya, Analyst, BofA: Got it. And I think this year expectation were, like, mid teens plus minus, right, growth in automotive.

Sam Franklin, Senior Vice President of Finance, Operations and Investor Relations, GlobalFoundries: We we did about $1,200,000,000 of revenue in automotive last year. That was a 15% growth year over year, and and expectation for all the reasons Tim’s outlined, particularly on the content growth side, is for a similar rate of growth in 2025.

Tim Green, CEO, GlobalFoundries: Right. And I think, again, bit like the satellite sector, automotive being pretty vocal about supply security. And so manufacturing in Europe for the European automotive, the OEMs, the tier ones and then the IDMs, that matters a lot to them. But obviously, here in The U. S, partnerships like the one we announced with GM a couple of years back, these are good examples of how automotive companies think about local sourcing.

Vivek Arya, Analyst, BofA: Got it. And are you also seeing some improvement on the industrial side, like many of the traditional industrial vendors are starting to see? Some have called it an inflection. Are you starting to notice that?

Tim Green, CEO, GlobalFoundries: Yes. Industrial is actually a bit smaller for us. Leave outside kind of aerospace defense, pure kind of industrial, a little bit smaller for us. I think it’s a growth opportunity longer term because a lot of the same dynamics that play through to auto play through to industrial, especially as you get to more complex microcontrollers, more complex sensors that need low power applications that are difficult, for example, for IDMs to do in house. So I think there’s good longer term potential.

I think short term, I think I would measure it more in engagement. We have a lot more people coming to engage on future platforms for a general purpose microcontroller with certain features that we had in the past. So there’s green shoots, let’s say, the overall market. We’re not seeing it today in tactical revenue that much.

Vivek Arya, Analyst, BofA: Got it. One other thing about microcontrollers, Tim, that often comes up is we have vendors such as Texas Instruments, right, who is deploying a lot of capacity in The U. S, right? And in the past, they used to outsource a lot of their embedded products. Now they are saying they will insource a lot of it.

So does that create incremental competition for GF even within The U. S. Market going forward? Look, I

Tim Green, CEO, GlobalFoundries: think every we take every part of the industry as as a relevant consideration. I I think, look, in automotive, not so much as far as we’re seeing, and I think TI strength is very much in general purpose, microcontrollers, and I think they’re doing they’re doing well there. But, again, as those technologies move to more complex process technologies, it’s harder for them to do that in house. Right? So they don’t have a 22 nanometer fully depleted silicon insulator platform.

They don’t have a FinFET platform. And so when you think about what those applications will do today, if they do just a simple control device, that’s one thing. But what about an AI accelerator for a motor control application? That’s a lot harder to do. And again, with that process technology leadership is more important.

So I’d say there’s plenty of opportunity for us to grow.

Vivek Arya, Analyst, BofA: Alright. So one should essentially think of DF as more as a specialized, you know, fab that just happens to do trailing edge, right, geometries as opposed to just a trailing edge.

Tim Green, CEO, GlobalFoundries: And and we don’t compete on the geometries. Right? If you think about it. Right? We we think much more about what does this allow us to do from an application point of view.

Vivek Arya, Analyst, BofA: And by then, that

Tim Green, CEO, GlobalFoundries: also goes to where we invest our money in design and IP because we’ve also learned that when you have specialized technologies, you need to help customers get the full value of that technology. That includes building reference designs and building kind of basically a lot of tools to enable that. We spent a lot of time investing in that now so customers can go faster, go cheaper in some cases too, but then get more performance out of technologies. And I think the ’22 FTX is a great example. Right?

There are companies who are using all of the features of that technology for things like body bias, where they can modulate the power consumption for different workloads. That’s not easy to do the first time. But once you build up a set of libraries and capabilities, can do with that than what you couldn’t do with any other platform, which obviously is very sticky for us.

Vivek Arya, Analyst, BofA: Got it. And then finally, on the segment side, smart mobile and IoT, so a lot more consumer exposed and consumer is being subject to a lot of noise, right, and macro issues. So how are you thinking about the market in the back half of the year? And just smart mobile and IoT, right, as a broad category for ’25, can it grow?

Tim Green, CEO, GlobalFoundries: I’d say if kind of put consumer IoT and smart mobile together, you sort of talk about a flattish profile for the year. I think why is that, as you said, consumer demand, not terrible, but equally not super We haven’t yet seen the replacement cycle, right, that we, I think, still may see in the future when your device could do a lot more in terms of edge AI applications. New devices like smart glasses promising, but early. We have we have significant design wins in that space, but I think we’re a year or two out that form factor becoming well adopted, but I’m actually personally very bullish about that. I’d say the short term, like we said,

Vivek Arya, Analyst, BofA: more flat. I still have

Tim Green, CEO, GlobalFoundries: longer term view that the content will grow and the device proliferation will be there. We haven’t seen the last device that we’re going to Right? OpenAI wouldn’t let you believe that. Others wouldn’t let you believe it. Meta wouldn’t let you believe that.

But I think we haven’t yet seen that inflection point where we take the hunk of glass and plastic and replace it with something else.

Vivek Arya, Analyst, BofA: But do you see content growth opportunities in those markets? Yeah. Because you have

Tim Green, CEO, GlobalFoundries: you know, for example, when you you switch to new bands for different RF connectivity, you need to find a way to basically, without more space, connect to more bands with f r three transition. That’s an end of decade type transition, but, again, the work will start to happen at some point. So haptics, audio, there’s still plenty of content growth.

Vivek Arya, Analyst, BofA: Got it. Anything, Tim, you are doing different because of tariffs?

Tim Green, CEO, GlobalFoundries: So, I mean, first of all, paying very close attention, not just to the direct effects, which are relatively easy to measure, but I think it’s making sure that the strategic conversations with customers are kind of well thought through. Because what we’re seeing for sure in the last kind of two months, three months or so is customers are thinking much more about supply strategy. And for them, they’re saying, could I be developing in The US that today perhaps I manufacture somewhere else? For us, if it’s coming out of Taiwan, that’s good news, new business coming to us. But even could it be growing with GF to say, I manufacture that in Singapore today, could I manufacture that also in The US?

I think lining up the technology portfolio to the locations, maximizing the flexibility. Obviously, in a prudent way, you don’t wanna double up everything everywhere all at once with the investment that come with that, but you do enough to make flexibility kind of your your your strength. That’s the big strategic change that we have to keep doing. And to do that, it’s not just conversations with customers. It’s also with big end customers who control a lot more of the demand to say, think three, five years out, what do you need?

Where do you need it? And do you have a strong view? And I think what we’re hearing, you know, and I think you’ll hear more about that in the in the, you in the weeks to come. More and more companies trying to set more strategic view on where they wanna source product, and I think they they have no choice. Right?

The world is too complex for them to say, I’m betting on one path. They need that optionality.

Vivek Arya, Analyst, BofA: I see. But there is nothing in your cost structure that is impacted by the tariff situation.

Tim Green, CEO, GlobalFoundries: Very limited. I mean, are some things that are now tariffed coming to The US. The majority of categories are exempt. There’s a few things that are not exempt. They don’t make a large share of our cost structure.

Obviously, we’ll do our work to swap out something if there’s something we can source from somewhere else. But we’ve had a pretty good supply base globally. We have 7,000 suppliers globally and we work through to think through when and source most efficiently. So I’d say on the cost side, pretty limited so far. Okay.

And

Vivek Arya, Analyst, BofA: in terms of some of your customers are also starting to develop what they call a China for China strategy, right? And because China is the one market that continues to grow, right, for them, they think that it would be more advantageous to partner, right, with foundries that are in China, right, for that strategy. So have you seen that effect as you deal with customers over a multiyear contract basis that they are starting to diversify? So the way we

Tim Green, CEO, GlobalFoundries: think about China, and maybe it’s good to level set kind of where we are starting point, we have pretty low direct revenue to China today. The GF is less than 10%. And so if anything, my framing of China for us as a company is more of an opportunity than a risk given that low base today. But there’s a few sort of, let’s say, points to cover. One is the technologies we’re focusing on and not the technology that China capacity build outs are largely focused on.

Right? China imports about $380,000,000,000 of semiconductors twenty twenty four numbers. The majority is bulk semiconductors, things we wouldn’t necessarily invest on and focus on. So let’s say the direct competition is between that and potentially also chasing a DUV equivalent of a leading edge node and things like that, again, areas that we’re not exposed to. So technology wise, the supply is not matching our supply very much.

A really good first point. But I think the point you make, you raise is a good one about what our non China customers doing, but then also what are China customers doing. So maybe non China customers first. For sure, for those customers who sell our customers, who sell a lot into China, like, take the EV industry as a good example, they want to have a local supply option. What we’ve said publicly we’re doing and we’re in the process of making happen is picking a local foundry partner, enabling specific technologies that already run-in a GF fab today for a portion of that demand to be manufactured in China.

We maintain the customer relationship, the quality. By the way, it’s still one tape out to manufacturing locations. And that’s our way of providing that local sourcing option

Vivek Arya, Analyst, BofA: Right.

Tim Green, CEO, GlobalFoundries: Primarily initially for those foreign, you know, let’s say, non China customers who wanna have a portion manufactured locally. But what we’re learning through that process is that China customers are also looking for the reverse. And so they’re saying, well, listen. I’m a I have local demand. I need a China for China strategy.

But, actually, I also have an export market, you can name, you know, five to 10 Chinese companies with big export ambitions, whether it’s automotive OEM that’s kind of 70% external or even some of the fabless companies in the middle, they wanna export. And so they know to do that. They can’t have a % manufactured locally, and they also like the idea of one tape out, two fabs. Right. And so we’re seeing a very good pickup of China interest in non China, non Taiwan demand.

And this is the interesting inflection point. They started saying non Taiwan demand. It was always, I get it that it can’t be in China, but now they said, listen. Taiwan is not a diversification as far as our end customers are concerned. We need it in Singapore, particularly Singapore benefits a lot.

Guangzhou is four hours from Singapore and four hours from Beijing. So we’re not talking about a very big distance to cover. So we think that upside on China customers is also pretty good. I think for all those reasons, we watch it carefully, but we don’t see a significant downside risk. If anything, we see some good opportunities for GM.

Vivek Arya, Analyst, BofA: Got it. Makes sense. And then on my favorite topic of gross margins, so 24% in Q1, right, expanding in Q2. And then I think you said exiting this year at closer to 30%. So what are the drivers this year?

And then expanding that into your longer term target, right, which have a four handle in gross margins.

Tim Green, CEO, GlobalFoundries: Yeah. And I think it’s a simple set of drivers and we’re starting to see those start to play out this year. I think the obvious one is that we need utilization to pick up. The good news, bad news story, The bad news story is we took a bold decision in the pandemic to invest. You can never perfectly time this.

We therefore have landed with more capacity today than we have revenue to fill it. That’s a bad news, good news story. Good news is we can expand quickly with limited additional CapEx and very limited additional fixed cost. And that’s the important part. Any dollar you bring of revenue means it will flow through at 60%, seventy % depending on the product, maybe even more incremental.

So any new business is incremental to current gross margin. So that footprint makes a big difference. Rollup of depreciation we’ve talked about in earnings, some of that is time based, some of that is driven just by the nature of the footprint, but we’re seeing around a $250,000,000 year on year, 2024 to 2025 decrease in depreciation. And that will continue in a modest way in future as well. And then the last piece of this is product mix and looking for those more accretive products that we’re bringing into the mix.

I think that’s more of a longer term story into 2026 and beyond with things like photonics, right, where there’s a lot of different content coming there. But that does play a role in kind of that story, especially to get to that 40% target that we still maintain is very achievable for us. Obviously to get to 40%, you need to start by getting to 30%. And assuming that we continue on the same demand trajectory we have today, we’re confident that in the back half of this year, we’ll get the 30% response.

Vivek Arya, Analyst, BofA: I see. You don’t need any extraordinary recovery in the smart mobile or consumer IoT to get towards those targets. I think

Tim Green, CEO, GlobalFoundries: the ROSAs modest demand increase gets us there. You don’t need a hockey stick profile.

Vivek Arya, Analyst, BofA: Got it. Okay. Makes sense. And then finally on capital management, still strong balance sheet. You guys have been generating very good cash flow.

What do you do with that cash? And at what point do you start doing more buybacks? Or do you think industry consolidation is still on the table?

Tim Green, CEO, GlobalFoundries: Yes. So obviously, we’ve been focusing a lot on free cash flow generation the last couple of years. I mean the fact that free cash flow in 2024 was more than net income tells you a little bit about the quality of the earnings that we have. I think that will continue this year with a good momentum. I think we can continue that flywheel still growing and creating free cash flow.

So that’s a very good position to be in. In terms of use of cash, look, M and A is the first topic people ask us about. I’d say that our M and A will be targeted at increasing differentiation. Right? The three kind of pillars I talked about at the beginning, the more I can bring differentiated technology to market, the more I can win my customers’ business.

And and and again and again and again, our acquisition of Tagore Technologies last year at GAN, small but very good example of kind of adding differentiation to the mix. We’ll do many more of those and they’re small, but that’s why you could do many of them. And they will always be lined up against, does this add differentiation by the way, process technology, design, IP, these kind of areas that can enrich my platform. I may do other partnerships in the ecosystem. Those are less likely to be M and A deals, more likely partnerships that I might do.

Again, that’s all about creating a better environment for my customer. I don’t think on the footprint side, I have a lot of inorganic in my future. I don’t need it. I need organic investment at the right time, at the right pace here in The US and and around the world. Look, think the industry will always speculate on consolidation.

I think at the moment, you don’t see a lot of things moving from speculation to action for good reason. Every company is facing its own set of challenges. The good thing for us is that we have optionality with our balance sheet. We have areas we can invest with very good return for that differentiation. And then look, later on the year, we’ll be more sort of outgoing about what we do with excess cash beyond inorganic opportunities.

I think we’re not at a rip point yet to completely declare a policy there. But given that we will be generating some excess cash going forward, we’ll obviously come with a plan for that.

Vivek Arya, Analyst, BofA: I see. And which final question, Tim, which end market excites you the most? Like, if if you could have a magic wand and say, look. In the next five years, this is what I really want GF to mark. Like, which end market excites you the most right now?

Tim Green, CEO, GlobalFoundries: This is like asking which of my children I like the most with x y. Have to say they’re all really good. I love

Vivek Arya, Analyst, BofA: the one in college. You always have a favorite. Yeah.

Tim Green, CEO, GlobalFoundries: You always have a favorite. Look. I’ll pick two as well. I’ll cheat a little bit. Look.

I think I think the data center is really exciting. It it provides unique challenges. I think we we don’t anticipate we don’t understand that a modern rack uses more power than my house. Right? And the data center is no longer one rack.

It’s many, many racks. And so anything you can do to dent that power consumption, to improve data flow, to improve latency, and these are technologies we’ve worked on. Like I said, we were early, but I’m finally seeing those inflection points. So that for me is is is super exciting. I think the I think the satellite one, I’ll do it too much, but the reason I like it is not just that it’s technological technologically interesting.

Right? They all deploy this RF capability is amazing and and and other applications that support it, but also it does a really good thing for humanity. Right? We can connect people people who previously couldn’t access, you know, technology, couldn’t access the Internet, couldn’t access AI. What an incredible thing to contribute to.

I know our team is excited about that. So Excellent. These are my two choices.

Vivek Arya, Analyst, BofA: Very nice. Both good ones. Great. Thank you so much, Tim.

Tim Green, CEO, GlobalFoundries: Great.

Vivek Arya, Analyst, BofA: Thank you, Sam. Really appreciate it. Thanks, everyone.

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