GlobalFoundries Q1 forecast falls short as chip inventory clearance persists

GlobalFoundries forecast its first quarter below market estimates on Tuesday, as some customers continue to clear excess chip inventory while others opt for more advanced manufacturing processes which are not provided by the contract chipmaker.

Customers in end markets such as communications infrastructure and data center have been working down existing chip inventory, weighing on demand for GlobalFoundries.

Shares of the company were down 4%.

Analysts said the company is at a disadvantage as customers such as Advanced Micro Devices and smartphone chip giant Qualcomm migrate away from the relatively less advanced nodes, which GlobalFoundries utilizes, to single-digit nodes, which it does not support.

“Our communications infrastructure and data center segment continued to show weakness through 2023. Partly due to … the accelerated node migration of data center and digital-centric customers to single-digit nanometers,” said CEO Thomas Caulfield on a post earnings call.

Various chipmakers in their quarterly earnings have also signaled the beginning of a supply glut in the automotive sector.

But GlobalFoundries said it expects automotive revenue growth to continue in 2024 due to increased semiconductor content across the vehicle architecture.

GlobalFoundries expects its first-quarter revenue to be in the range of $1.50 billion to $1.54 billion, compared with analysts’ average estimate of $1.76 billion, according to LSEG data.

“We remain cautious on the outlook for 2024, and are closely monitoring for signs of improved demand in the macroeconomic indicators while our customers actively manage down their inventory levels,” Caulfield said.

GlobalFoundries expects adjusted profit per share to be in the range of 18 cents to 28 cents in the first quarter, versus analysts’ estimate of 46 cents.

The company’s revenue of $1.85 billion for the fourth quarter was in line with analysts’ expectations, while its adjusted profit per share beat estimates. Reuters