GlobalFoundries Inc. shipped fewer chips in the fourth quarter of 2023 than a year earlier, but it nonetheless managed to top both revenue and earnings expectations.

The semiconductor maker reported its financial results for the three months ended Dec. 31 today.

The fastest chips on the market are produced using manufacturing processes in the low single-digit nanometer range. GlobalFoundries, meanwhile, makes chips based on 12-nanometer processes and higher. Such legacy technologies are useful for fabricating a wide range of processors that don’t require newer manufacturing nodes because of cost constraints or technical considerations.

GlobalFoundries’ revenue declined 12% year-over-year, to $1.854 billion in the fourth quarter. Nevertheless, the company managed to surpass the consensus estimate of $1.85 billion by a hair. The sales decline reflects a reduction in chip shipments: GlobalFoundries sold 552,000 wafers’ worth of semiconductors in the fourth quarter, down from 580,000 a year earlier.

The sales decline was partly the result of lower demand from data center operators and telecommunications providers. Such customers accounted for 8% of GlobalFoundries’ fourth-quarter revenue, down from 18% a year earlier. The company makes chips that help power networking devices such as 5G cell towers. 

While GlobalFoundries’ data center and telecommunications business shrank in the fourth quarter, sales to carmakers increased significantly. The auto sector accounted for 17% of GlobalFoundries’ revenue in the final three months of 2023, up from just 5% the same time a year earlier. 

“In the fourth quarter, GF’s dedicated teams across the world delivered financial results that exceeded the mid-point of the guidance ranges we provided in our November earnings release,” said GlobalFoundries Chief Executive Officer Thomas Caulfield. “We continue to position GF to drive foundry innovation and differentiation across essential end-markets and we are especially proud of our Automotive end market revenue growth, with over $1 billion of revenue in 2023.”

During the fourth quarter, GlobalFoundries marked two business milestones that could help accelerate the growth of its auto chip business in the long term.

First, the company received $35 million in U.S. government funding to upgrade its Vermont fab. The facility will receive equipment that can be used to make so-called gallium nitride on silicon chips. Such chips are capable of withstanding higher temperatures and voltages than a standard processor, which makes them well-suited for use in demanding environments such as power grids.

Semiconductors that incorporate gallium nitride are also used in, among other systems, electric cars. The electricity that flows from a vehicle’s battery has to be switched into a lower voltage before it can be routed to other subsystems. In many cases, the component responsible for performing that task is powered by a gallium nitride chip.

The fourth quarter also saw GlobalFoundries extend its manufacturing partnership with Germany-based Infineon Technologies AG, a major chip supplier to the auto sector. The newly extended alliance focuses on the latter company’s AURIX TC3 line of vehicle processors. GlobalFoundries will help Infineon mass produce the chips, which are used to power vehicle safety and partly autonomous driving systems.

Although GlobalFoundries’ revenue is down double digits year-over-year, its top line has stabilized on a sequential basis. The $1.85 billion in sales the company generated during the three months ended Dec. 31 represents a slight increase over the previous quarter. GlobalFoundries also posted small sequential sales improvements in the previous two quarters.

The company’s adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, amounted to $773 million in the last three months of 2023. That’s down from $821 million a year earlier. Nevertheless, GlobalFoundries managed to top the consensus estimate: its adjusted earnings amounted to 64 cents per share, whereas analysts polled by Zacks Estimate projected 59 cents.

GlobalFoundries expects to close the current quarter with sales of $1.5 billion to $1.54 billion. The company estimates its net income will range between $100 million and $156 million. 

Image: GlobalFoundries