GlobalFoundries Reports a Drop in Revenue Due to Concentration on Mature Processes

GlobalFoundries recently released its results for the fourth quarter and the full year of 2023, indicating significant changes in demand that led to a reduction in revenue. The company’s clients in the server and mobile segments are gravitating towards more advanced processes that the firm is currently unable to offer, resulting in a dip in its chip manufacturing revenues.

A Look at the Numbers

Specifically, the company reported a 12% decrease in revenue for the fourth quarter, falling to $1.85 billion. Over the previous year, revenue was down 9% to $7.4 billion. On the brighter side, operational profit increased by 5% in the fourth quarter, reaching $303 million. However, net profit dropped sharply by 58% to $278 million. Despite the overall decrease in revenue for the year, the operational profit was only 3% lower at $1.1 billion, while net profit declined 30% to $1.1 billion. Remarkably, the company managed to increase its profit margin from 27.6% to 28.4%.

Factors Influencing Revenue

According to Reuters, continual overstocking following the pandemic negatively affected the company’s revenue last year. In the telecommunications and server components segment, demand began to shift towards more innovative processes that GlobalFoundries does not have. As a result, this firm is losing new orders from certain clients to its competitors. Notably, the company chose not to adopt the 7nm process, citing high capital costs, instead preferring to focus on improving technological processes up to 12nm. Analysts believe that major clients like AMD and Qualcomm are showing more interest in modern lithography, which is damaging GlobalFoundries business.

The Future of GlobalFoundries

Despite some automotive chip manufacturers reporting signs of market saturation, GlobalFoundries remains optimistic about its automotive sector generating revenue growth. Indeed, this sector earned the chip manufacturer over $1 billion in revenue last year and is expected to continue contributing to the company’s profiled revenue this year.

Future Revenue Prospects

For the present quarter, GlobalFoundries expects revenue between $1.5 and $1.54 billion, falling short of the analysts’ estimate of $1.76 billion. Regarding 2024, the company is sticking with its cautious forecast due to the macroeconomic climate and ongoing overstocking. While the firm’s revenue for the previous quarter met analysts’ expectations, the modest forecast for the current period has caused the company’s share price to drop by 4% after the earnings report was published.