Q4 2023 GlobalFoundries Inc Earnings Call

Okay.

Operator: Good day, and thank you for standing by. Welcome to the Global Foundries conference call to review the fourth quarter and fiscal year 2023 financial results. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised.

Good day and thank you for standing by welcome to the Globalfoundries Conference call to review the fourth quarter and fiscal year 2023 financial results. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session need to press star one on your telephone you will then hear an automated message advising your hands.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sam Franklin.

To withdraw your question. Please press star one again, please be advised today's conference is being recorded I would now like to hand, the conference over to your speaker today San Franklin. Please go ahead.

Yes.

Sam Franklin: Thank you, operator. Good morning, everyone. And welcome to GlobalFoundries' fourth quarter and full year 2023 earnings call. On the call with me today are Dr. Thomas Caulfield, CEO, Nils Anderskog, Chief Business Officer, along with David Reeder for his final earnings call. And I'm very pleased to welcome to the call John Hollister, who has taken over from Dave as CFO, as announced on December 11th,

Thank you operator, good morning, everyone and welcome to global foundries fourth quarter and full year 2023 earnings call.

On the call with me today adult Dethomas Caufield CEO, Niels I underscore <unk> Chief business Officer, along with David Reed for his final earnings call and I'm very pleased to welcome to the call John Hollister, who is taking over from David CFO as announced on December 11th 2023.

Sam Franklin: A short while ago, we released GF's fourth quarter financial results, which are available on our website at investors.gf.com, along with today's accompanying slide presentation. This call is being recorded, and a replay will be made available on our investor relations web page. During this call, we will present both IFRS and adjusted non-IFRS financial measures.

A short while ago, we released GFS fourth quarter financial results, which are available on our website at investors <unk> Dot com along with today's accompanying slide presentation.

This call is being recorded and a replay will be made available on our investor Relations webpage. During this call we will present, both <unk> and adjusted non <unk> financial measures.

Sam Franklin: The most directly comparable IFRS measures and reconciliations for adjusted non-IFRS measures are available in today's press release and accompanied by... I would remind you that these financial results are unaudited and subject to change. Certain statements on today's call may be deemed to be forward-looking statements. Such statements can be identified by terms such as believe, expect, intend, anticipate, and may or by the use of the future tense.

This directly comparable wife arrest measures and reconciliations for adjusted non resi rest measures are available in today's press release and accompanying slides.

I'd remind you that these financial results are unaudited and subject to change certain statements on todays call maybe deemed to be forward looking statements such statements can be identified by terms such as believe expect intend anticipate and may or by the use of the future tense you should not place undue reliance on forward looking statements actual results may differ materially from these four.

Sam Franklin: You should not place undue reliance on forward-looking statements. Actual results may differ materially from these forward-looking statements, and we do not undertake any obligation to update any forward-looking statements we make. For more information about factors that may cause ACTRA results to differ materially from forward-looking statements, please refer to the press release we issued today, as well as risks and uncertainties described in our SEC filings, including in the sections under the caption, Risk Factors, in our annual report on Form 20-F filed with the SEC on April 14, 2023. We will begin today's call with Tom providing a summary update on the current business environment and technologies, We will then open the call for questions, and Tom, Dave, John, and I request that you please limit your questions to one with one voice. I'll now turn the call over to Tom for his prepared response.

Looking statements and we do not undertake any obligation to update any forward looking statements. We make today for more information about factors that may cause actual results to differ materially from forward looking statements. Please refer to the press release, we issued today as well as risks and uncertainties described in our SEC filings, including in the section under the caption risk factors.

Our annual report on form 20-F filed with the SEC on April 14th 2023.

We will begin today's call with Tom providing a summary update on the current business environment and technologies, following which Dave will provide details on our end markets in the fourth quarter results, while Jon will provide first quarter 2024 guidance. We will then open the call for questions.

Dave Jonathan Hughes, we request that you. Please limit your questions to one with one follow up I'll now turn the call over to Tom for his prepared remarks.

Tom: Thank you, Sam, and welcome, everyone, to our fourth quarter earnings call. 2023 presented a unique set of challenges for the global economy and the broader semiconductor industry. Our customers grappled with elevated inventory levels, weaker demand, and a backdrop of tighter monetary policy.

Thank you Sam and welcome everyone to our fourth quarter earnings call.

2023 presented a unique set of challenges for the global economy, and the broader semiconductor industry.

Our customers grappled with elevated inventory levels weaker demand and a backdrop of tighter monetary policies.

Tom: Although we are starting to see inflationary headwinds moderate, the ongoing high interest rate environment has undoubtedly led to a prolonged and deeper cyclical downturn than was first anticipated by many in our industry. Despite these ongoing challenges, I am pleased to report fourth-quarter results, which exceeded the midpoint of our guidance ranges, thanks to the dedication of our teams around the world. Following a highly successful 2022, I am proud of the resilience, grit, and commitment that GF's employees showed in 2023 against a very challenging and prolonged market backdrop. We diligently managed elevated costs and lower utilization levels to deliver gross margin expansion and revenue, which aligned with the guidance we set out in our first quarter 2023 earnings update. As we discussed during our last earnings call, we have observed elevated inventory levels across our customers in end markets, such as smart mobile devices, comms, infrastructure, and data center, and the lower end of consumer electronics.

So we are starting to see the inflationary headwinds moderate.

Ongoing high injury interest rate environment is undoubtedly lead to a prolonged and deep cyclical downturn and with first anticipated by many in our industry.

Despite these ongoing challenges I am pleased to report fourth quarter results, which exceeded the midpoint of our guidance ranges thanks to the.

Our teams around the world.

Selling a highly successful 2022, I am proud of the resilience grit and commitment that GFS employee showed in 2023 against a very challenging and prolonged market backdrop.

We diligently managed elevated costs and lower utilization levels.

To deliver gross margin expansion and revenue, which aligns with the guidance, we set out in our firm.

First quarter 2023 earnings update.

As we discussed during our last earnings call, we have observed elevated inventory levels across our customers and end markets.

Such as smart mobile devices.

<unk> infrastructure and data center and the lower end of consumer electronics.

We're continuing to collaborate closely with these customers to support the acceleration of the inventory depletion or seeking to preserve the economic value of our long term agreements.

Tom: We're continuing to collaborate closely with these customers to support the acceleration of their inventory depletion while seeking to preserve the economic value of our long-term agreements. We've invested heavily over several years to grow our manufacturing capacity in support of these partnerships, and our customers have responded positively and proactively to achieve mutually beneficial outcomes when making adjustments to their long-term agreements. In some cases, these discussions have resulted in underutilization or restructuring payments, which Dave will comment on further as part of his prepared remarks.

We've invested heavily over several years to grow our manufacturing capacity in support of these partnerships and our customers have responded positively.

Proactively to achieve mutually beneficial outcomes, when making adjustments to their long term agreements.

In some cases these discussions have resulted in under utilization or restructuring payments, which Dave will comment on further as part of his prepared remarks.

Entering 2024, we are beginning to see the rate and pace of inventory levels, improving across certain end markets and customers versus 'twenty two 'twenty three.

Tom: Entering 2024, we are beginning to see the rate and pace of inventory levels improving across certain end markets and customers versus 2023. However, these levels remain elevated across most of the end markets we serve as macroeconomic weakness and geopolitical uncertainties persist. Based on discussions with a broad range of our customers, we expect that inventory reductions will be driven by channels falling down during the first half of 2024, with a return to improved demand dynamics once the macroeconomic landscape has stabilized. More on that to come, but let me first discuss the highlights from our fourth quarter 2023 results, which Dave will comment on further. Revenue in the fourth quarter increased sequentially to $1.854 billion, which was above the midpoint of our November provided guidance range. We reported an adjusted gross margin of 29% for the quarter, which was at the upper end of our guidance range. Included in these results are amounts associated with the successful resolution of adjustments to customers' near-term volume requirements and associated underutilization payments.

However, these levels remain elevated across most of the end markets, we serve as the macroeconomic weakness and geopolitical uncertainties persist.

Based on discussions with a broad range of our customers. We expect that inventory reductions will be driven by channel sell down during the first half of 2024.

With a return to improve demand dynamics once the macroeconomic landscape has stabilized.

More on that to come but let me first discuss the highlights from our fourth quarter 2023 results.

Dave will comment on for <unk>.

Revenue in the fourth quarter increased sequentially to $1 $85 4 billion.

Which was above the midpoint of our November provided guidance range.

We reported adjusted gross margin of 29% for the quarter, which was at the upper end of our guidance range included in these results are amounts associated with the successful resolution of adjustments.

Customers near term volume requirements.

And associated Underutilization payments.

We delivered adjusted diluted earnings per share of <unk> 64.

Which is also at the high end of our guidance range.

I'm also pleased to report that we delivered a third consecutive quarter of positive free cash flow generating $456 million in the fourth quarter.

This highlights the overall progress we have made investing in our capacity over recent years.

Tom: We delivered adjusted diluted earnings per share of 64 cents, which is also the high end of our guidance range. I am also pleased to report that we delivered a third consecutive quarter of positive free cash flow, generating $456 million in the fourth quarter. This highlights the overall progress we have made investing in our capacity over recent years and the resulting reduction of our CapEx profile as we progress through 2023. Let me now provide a brief update on some of our customer and partnership activity in 2023. 2023 was a milestone year for our automotive end market, as we successfully delivered over a billion dollars of revenue, surpassing the expectations we set out on our prior earnings call and growing from $373 million we delivered in 2022.

And the resulting reduction of our Capex profile as we progressed through 2023, let.

Let me now provide a brief update on some of our customer and partnership activity in 2023.

2023 was a milestone year for our automotive end market as we successfully delivered over $1 billion of revenue surpassing the expectations. We set out on our prior earnings call and growing from 373 million we delivered in 2022.

Building from this milestone we continue to expand our automotive product offerings and our customers are ramping multiple design wins in key applications for internal combustion engine models and autonomous connected and electrified vehicles.

Do you have to supporting the development of critical sensor processing and safety features to the automotive industry across our most competitive technology platforms at auto grade one standards. These.

These products span the breadth of our portfolio from 12 L. P plus our Finfet platform all the way through our expanded voltage handling capabilities at 130, and 180 nanometer technologies through.

Through these offerings, we believe that Jeff will play a key role in the long term transition of the automotive industry and our customer partnerships are essential to that to.

Tom: Building from this milestone, we continue to expand our automotive product offerings, and our customers are ramping multiple design wins in key applications for internal combustion engine models and autonomous connected and electrified vehicles. GF is supporting the development of critical sensing, processing, and safety features for the automotive industry across our most competitive technology platforms at auto grade one standards. These products span the breadth of our portfolio, from 12 LP+, our FinFET platform, all the way through our expanded voltage handling capabilities at 130 and 180 nanometer technologies.

To that end, we recently extended our long term agreement with Infineon with a focus on 40 nanometer automotive Microcontrollers and power management and connectivity solutions through 'twenty three.

Looking ahead to 2024.

We remain confident in the opportunities to grow our automotive end market revenue and share.

Even as the industry goes through a period of demand moderation.

Turning now to smart mobile devices.

2023 saw excess build and elevated inventory in the channel as macroeconomic uncertainties impacting global consumer demand and reduced handset shipments from the year before.

To partially offset these dynamics, we continue to remix our business towards the premier tier of the handset market.

Demand levels and average selling prices per wafer have remained resilient.

Tom: Through these offerings, we believe that GF will play a key role in the long-term transformation of the automotive industry, and our customer partnerships are central to that. To that end, we recently extended our long-term agreement with Infineon, with a focus on 40 nanometer automotive microcontrollers and power management and connectivity solutions through 2030. Looking ahead to 2024, we remain confident in the opportunities to grow our automotive and market revenue and share, even as the industry goes through a period of demand moderation. Now, turning to smart mobile devices.

GFS high performance RF technologies continue to drive user connectivity in the industry.

The market shows an increasing reliance on <unk> and smart mobile devices, which combined with the explosion of data necessitates more connectivity and improved efficiency.

GFS newest generation.

<unk> Soi platform.

Call. It nine SW that we announced last quarter featured significant reductions in standby current for longer battery life trading products over 10% smaller than the previous generation with more than 20% power efficiency. This.

This is specifically designed to enable our customers to build higher quality longer range connectivity products for the premium tier front end module segment.

Tom: 2023 saw excess bills and elevated inventory in the channel, as macroeconomic uncertainties impacted global consumer demand and reduced handset shipments from the year before. To partially offset these dynamics, we continue to reposition our business towards the premier tier of the handset market, where demand levels and average selling prices per wafer have remained resilient. DF's high-performance RF technologies continue to drive user connectivity in the industry. The market shows an increasing reliance on 5G and smart mobile devices, which combined with the explosion of data necessitates more connectivity and improved efficiency. GF's newest generation RFSOI platform, we call it 9SW, that we announced last quarter features significant reductions in standby currents for longer battery life, creating products over 10% smaller than the previous generations with more than 20% power efficiency. This is specifically designed to enable our customers to build higher quality, longer range connectivity products for the premium tier front end module segment. We are also providing outstanding connectivity and low power performance on GF22FDX RF millimeter wave technology, which went into volume production and will enable industry-leading 5G millimeter wave capability in premier tier Android phones.

We are also providing outstanding connectivity and low power performance <unk> 20 to <unk> RF millimeter wave technology, which went into volume production. They will enable industry, leading <unk> millimeter wave capability and premier tier Android phones.

In Iot, we continue to innovate our differentiated technologies.

<unk>, an ultra low power efficiency and embedded memory for AI at the edge applications.

Although we expect a period of short term inventory correction in this end market consistent with what others have reported requirements for speed security and inference at the edge are all key long term drivers for our next generation analog and mixed signal technologies.

Additionally, our U S manufacturing capacity was a critical factor within the aerospace and defense segment of our Iot end market in 'twenty two 'twenty three we announced key partnerships with both the department of Defense and Lockheed Martin to provide secured chip manufacturing in the United States across a number of critical.

Patients finally, our communications infrastructure and data Center segment continued to show weakness through 2023, partly due to the prolonged channel digestion of wireless and wired infrastructure inventory levels across our customers.

As well as the accelerated node migration of data center and digital centric customers to single digit nanometers.

Actively managing these industry trends and executing opportunities to remix some of our excess capacity to service demand and more durable and growing segments, such as automotive and smart mobile devices.

Tom: In IoT, we continue to innovate our differentiated technologies, focused on ultra-low power efficiency and embedded memory for AI at the Edge applications. Although we expect a period of short-term inventory correction in this end market, consistent with what others have reported, the requirements for speed, security, and inference at the edge are all key long-term drivers for our next generation analog and mixed signal technologies. Additionally, our U.S. manufacturing capacity was a critical factor within the aerospace and defense segment of our IOT end market. In 2023, we announced key partnerships with both the Department of Defense and Lockheed Martin to provide secure chip manufacturing in the United States across a number of critical applications.

We are also diversifying our manufacturing footprint.

Accelerated technology transfers into our fab eight facility in Malta in New York, which will offer even more choice to our customers across multiple end markets and increased utilization opportunities here in the U S.

Customer partnerships remain the core of our business I am pleased to report that approximately two thirds of our revenue in 2023 came from single source agreements with our customers.

In closing we have successfully delivered our fourth quarter gross profit and EPS at the high end of our guidance ranges and rounded out 2023 with results consistent with the commentary we provided in our first quarter 2023 earnings update.

At this point in the year, we remain cautious on the outlook for 2024.

Tom: Finally, our communications infrastructure and data center segment will continue to show weakness through 2023, partly due to the prolonged channel digestion of wireless and wired infrastructure inventory levels across our customers, as well as the accelerated node migration of data center and digital-centric customers to single-digit nanometers. We are actively managing these industry trends and executing opportunities to remake some of our excess capacity to service demand in more durable and growing segments, such as automotive and smart mobile devices. We are also diversifying our manufacturing footprint via accelerated technology transfers into our Fab 8 facility in Malta, New York, which will offer even more choice to our customers across multiple end markets and increase utilization opportunities here in the U.S.

And are closely monitoring for signs of improved demand and macroeconomic indicators, while our customers.

Actually manage down the inventory levels.

Given these dynamics there are several potential outcomes for 2024.

However at this point, we do believe that our quarterly revenue profile will grow sequentially from the guidance, we have provided for the first quarter.

Over the longer term, we continue to see a secular acceleration of the role of semiconductors in the world and <unk> is uniquely positioned as one of the world's only pure play foundry with capacity to support our customers across Asia, Europe and the U S.

Lastly, as we look ahead into 2024 and the aforementioned uncertainties that will certainly influence the outcome of the year for Ges, we are confident in our ability to deliver in the range of two to three times incremental free cash flow versus 2023.

Before I turn the call over to Dave I'd like to thank them again for the tremendous job. He's done in his time at <unk> and extend a warm welcome to John I'm excited by the opportunities ahead and look forward to partnering closely with John as our new CFO as we focus on our financial objectives in 2024 and beyond.

Tom: Customer partnerships remain the core of our business, and I am pleased to report that approximately two-thirds of our revenue in 2023 came from single source agreements with our customers. In closing, we have successfully delivered our fourth quarter gross profit in EPS at the high end of our guidance ranges and rounded out 2023 with results consistent with the commentary we provided in our first quarter 2023 earnings update. At this point in the year, we remain cautious on the outlook for 2024 and are closely monitoring for signs of improved demand and macroeconomic indicators while our customers actively manage down their inventory levels. Given these dynamics, there are several potential outcomes for 2024.

Thank you Tom and welcome everyone to our fourth quarter earnings call for the remainder of the call including guidance other than our revenue cash flow Capex and net interest and other expense, John and I will reference adjusted metrics, which exclude stock based compensation and restructuring charges.

Our fourth quarter results exceeded the midpoint of the guidance ranges, we provided in our last quarterly update fourth quarter revenue grew sequentially to approximately 185 4 billion a decline of 12% year over year.

Tom: However, at this point, we do believe that our quarterly revenue profile will grow sequentially from the guidance we have provided for the first quarter. Over the longer term, we continue to see a secular acceleration of the role of semiconductors in the world, and GF is uniquely positioned as one of the world's only pure play foundries with capacity to support our customers across Asia, Europe, and the US. Lastly, as we look ahead into 2024 and the aforementioned uncertainties that will certainly influence the outcome of the year for GF, we are confident in our ability to deliver in the range of two to three times incremental free cash flow versus 2023. Before I turn the call over to Dave, I'd like to thank him again for the tremendous job he's done in his time at GF and extend a warm welcome to John. I am excited by the opportunities ahead and look forward to partnering closely with John as our new CFO as we focus on our financial objectives in 2024 and beyond. Thank you, Tom.

These results included approximately $79 million of <unk>.

Revenue related to customers' adjustments of their near term contracted volume requirements.

We shipped approximately 552300 millimeter equivalent wafers in the quarter, a 5% decline from the prior year period.

ASP or average selling price per wafer.

Increased approximately 7% year over year, mainly driven by changes in the product mix shift during the quarter. Despite this decline asp's for the full year were flat compared to 2022, which aligns with our commentary from prior quarters.

Wafer revenue from our end markets accounted for approximately 88% of total revenue non wafer revenue, which includes revenue from radicals nonrecurring engineering expedite fees and other items accounted for approximately 12% of total revenue for the fourth quarter consistent with our expectations.

For the full year revenue came in at approximately $7 4 billion down 9% year over year, which is consistent with the outlook. We provided in our first quarter earnings update.

We shipped approximately $2 2 million 300 millimeter equivalent wafers and 11% decrease from 2022.

Dave: And welcome everyone to our fourth-quarter earnings call. For the remainder of the call, including guidance, other than revenue, cash flow, CapEx, and net interest and other expense, John and I will reference adjusted metrics, which exclude stock-based compensation and restructuring charges. Our fourth quarter results exceeded the midpoint of the guidance ranges we provided in our last quarterly update. Fourth quarter revenue grew sequentially to approximately $1.854 billion, a decline of 12% year over year. These results included approximately $79 million of revenue related to customers' adjustments of their near-term contracted volume requirements. We shipped approximately 552,300 millimeter equivalent wafers in the quarter, a 5% decline from the prior year period. ASP, or average selling price per wafer, decreased approximately 7% year-over-year, mainly driven by changes in the product mix shipped during the quarter.

And ASP per wafer remained flat year over year.

Let me now provide an update on our revenue by end markets.

For the fourth quarter Smart mobile devices represented approximately 41% of the quarter's total revenue.

Fourth quarter revenue declined approximately 2% sequentially and roughly 7% from the prior year period, principally driven by reduced shipments and elevated customer inventory in the channel.

This decline was partially offset by higher asps.

Premium tier mix growth and continued content growth for our <unk>, RF transceiver and Wi Fi applications.

Full year 2023 revenue for smart mobile devices represented approximately 41% of the year's total revenue full.

Full year revenue declined 19% year over year and reflected similar dynamics to the fourth quarter, namely reduced shipments in the mid to low tier handset market, partially offset by mix and ASP improvements.

As Tom noted in his prepared remarks, we are continuing to execute our strategy to grow content and the premium handset market and have announced several recent additions to our technology platforms to meet this objective.

Dave: Despite this decline, ASPs for the full year were flat compared to 2022, which aligns with our commentary from prior quarters. Wafer revenue from our end markets accounted for approximately 88% of total revenue; non wafer revenue, which includes revenue from radicals, non recurring engineering, expedite fees, and other items, accounted for approximately 12% of total revenue for the fourth quarter, consistent with our expectations. For the full year, revenue came in at approximately $7.4 billion, down 9% year over year, which is consistent with the outlook we provided in our first quarter earnings update. We shipped approximately 2.2 million 300 millimeter equivalent wafers, an 11% decrease from 2022, and ASP per wafer remained flat year over year.

In the fourth quarter revenue for the home and industrial Iot market represented approximately 17% of the quarter's total revenue.

Fourth quarter revenue declined approximately 13% sequentially and 23% year over year, principally driven by lower volumes Asps and mix during the quarter.

Full year home and industrial Iot revenue represented approximately 19% of the year's total revenue.

Full year revenue declined 6% year over year.

As reduced demand in the consumer centric portion of Iot was only partially offset by stable demand across industrial and aerospace and defense applications.

Asps within home and industrial Iot were roughly flat on a year over year basis, which aligns with the commentary provided on our prior earnings calls.

Looking ahead to 2024, and we expect some of our customers in the industrial Iot segment to focus on channel inventory depletion, which remained elevated in the second half of 2023.

Dave: Let me now provide an update on our revenue buy-in markets. For the fourth quarter, smart mobile devices represented approximately 41% of the quarter's total revenue. Fourth quarter revenue declined approximately 2% sequentially and roughly 7% from the prior year period, principally driven by reduced shipments and elevated customer inventory in the channel. This decline was partially offset by higher ASPs, premium tier mix growth, and continued content growth for our 5G RF transceiver and Wi-Fi applications. Full year 2023 revenue for smart mobile devices represented approximately 41% of the year's total revenue. Full year revenue declined 19% year over year and reflected similar dynamics to the fourth quarter, namely reduced shipments in the mid to low tier handset market, partially offset by mix and ASP improvements.

Moving now to automotive, which as Tom outlined has been a key growth segment for us throughout 2023.

Fourth quarter revenue represented approximately 17% of the quarter's total revenue revenue for the quarter increased approximately 5% sequentially and roughly 177% year over year, principally due to higher asps and mix dynamics as semiconductor content and features increase across the vehicle.

Architecture.

Full year automotive revenue represented approximately 14% of the year's total revenue, which is up from just 2% in 2020.

Full year revenue exceeded $1 billion and grew approximately 180% year over year in 2023.

As Tom noted, we expect automotive revenue growth to continue in 2024, as we support our customers across a diverse range of automotive applications and both ice and <unk> vehicles.

Next our communications infrastructure and data center end market, where fourth quarter revenue represented approximately 8% of the quarter's total revenue.

Dave: As Tom noted in his prepared remarks, we are continuing to execute our strategy to grow content in the premium handset market and have announced several recent additions to our technology platforms to meet this objective. And the fourth quarter revenue for the home and industrial IoT market represented approximately 17% of the quarter's total revenue. Fourth quarter revenue declined approximately 13% sequentially and 23% year over year, principally driven by lower volumes, ASP, and mix during the quarter.

Revenue declined approximately 8% sequentially and 63% year over year, primarily due to volume reductions, while asps and mix were slightly down on a year over year basis.

For the full year 2023 communications infrastructure and data center revenue represented approximately 12% of total revenue.

'twenty three revenue declined 39% year over year as a result of reduced volumes as our customers accelerated transition to single digit nanometer technology platforms that Tom outlined in his prepared remarks.

Dave: Full year home and industrial IoT revenue represented approximately 19% of the year's total revenue; full year revenue declined 6% year over year, as reduced demand in the consumer-centric portion of IoT was only partially offset by stable demand across industrial and aerospace and defense applications. ASPs within home and industrial IoT were roughly flat on a year-over-year basis, which aligns with the commentary provided on our prior earnings calls. Looking ahead to 2024, we expect some of our customers in the industrial IoT segment to focus on channel inventory depletion, which remained elevated in the second half of 2023. Moving now to the automotive segment, which, as Tom outlined, has been a key growth segment for us throughout 2023. Fourth quarter revenue represented approximately 17% of the quarter's total revenue.

Looking ahead to 2024, we are proactively focusing on opportunities to remix our capacity to other durable end markets as well as accelerating technology transfers and customer qualifications.

Finally, our personal computing end market represented 5% of total revenue in the fourth quarter.

Revenue in the quarter increased to 127% sequentially, but was down 27% year over year full year PC revenues were approximately 3% of the year's total and revenue declined approximately 30% year over year, driven principally by volumes as Asps and mix were flat to slightly up.

Given the expected decline in PC revenue as a percentage of total revenue starting in Q1 of 2024, we will no longer report PC as a separate end market and will incorporate associated PC revenues into our home and industrial Iot end market.

Moving next to gross profit for the fourth quarter, we delivered gross profit of $537 million, which translates into approximately 29% gross margin.

Dave: Revenue for the quarter increased approximately 5% sequentially and roughly 177% year over year, principally due to higher ASP and mixed dynamics as semiconductor content and features increase across the vehicle architecture. Full year automotive revenue represented approximately 14% of the year's total revenue, which is up from just 2% in 2020. Full year revenue exceeded $1 billion and grew approximately 180% year over year in 2023. As Tom noted, we expect automotive revenue growth to continue in 2024 as we support our customers across a diverse range of automotive applications in both ICE and ACE vehicles. Next, our communications infrastructure and data center and market, where fourth quarter revenue represented approximately 8% of the quarter's total revenue. Revenue declined approximately 8% sequentially and 63% year over year, primarily due to volume reductions, while ASP and mix were slightly down on a year over year basis.

Gross margin was at the high end of the guidance range indicated and as Tom mentioned in his prepared remarks includes revenue associated with the successful resolution of customer volume adjustments.

Looking ahead to the first quarter, we expect discussions on customer volume adjustments to continue and this has been reflected in our first quarter guidance.

For the full year, we delivered gross profit of $2 1 billion.

And gross margin of 29, 1% equating to a 70 basis point uplift from 2022.

Operating expenses for the fourth quarter represented approximately 8% of total revenue R&D for the quarter decreased sequentially to approximately $97 million and SG&A also declined to $57 million.

Total operating expenses were $154 million.

Included in our total operating expenses as the benefit of approximately $46 million related to the advanced manufacturing investment tax credit for 2023 qualifying expenses as we continue to spend on qualifying expenses and capitalized assets in 2024 and beyond we expect to continue to receive.

These benefits through the life of the program.

We delivered operating profit of $383 million for the quarter, which translates into an approximately 27% operating margin roughly 50 basis points higher than the year ago period and above the midpoint of our guided range.

Dave: For the full year 2023, communications, infrastructure, and data center revenue represented approximately 12% of total revenue. 2023 revenue declined 39% year-over-year as a result of reduced volumes as our customers accelerated the transition to single-digit nanometer technology platforms that Tom outlined in his prepared remarks. Looking ahead to 2024, we are proactively focusing on opportunities to remix our capacity to other durable end markets as well as accelerating technology transfers and customer qualification. Finally, our personal computing and market represented 5% of total revenue in the fourth quarter. Revenue in the quarter increased 127% sequentially, but was down 27% year over year. Full year PC revenues were approximately 3% of the year's total, and revenue declined approximately 30% year over year, driven principally by volumes as ASP and mix were flat to slightly up.

For the full year GF delivered operating profit of $1 4 billion, which translates into an 18, 5% operating margin an improvement of roughly 70 basis points year over year.

Fourth quarter net interest and other expense was $4 million and we incurred a tax expense of $23 million in the quarter we.

We delivered fourth quarter net income of approximately $356 million.

Kris of approximately $444 million from the year ago period, principally due to the gain on the sale of our east Fishkill facility to on semi in the fourth quarter of 2022.

As a result, we reported diluted earnings of 64 per share for the fourth quarter.

On a full year basis <unk> delivered net income of approximately $1 3 billion and diluted earnings per share of $2 24.

Let me now provide some key balance sheet and cash flow metrics cash flow for operate from operations for the fourth quarter was $684 million.

Dave: Given the expected decline in PC revenue as a percentage of total revenue, starting in Q1 of 2024, we will no longer report PC revenue as a separate end market and will incorporate associated PC revenues into our home and industrial IoT end market. Moving next to gross profit. For the fourth quarter, we delivered gross profit of $537 million, which translates into approximately 29% gross margin. Gross margin was at the high end of the guidance range indicated.

For the full year cash flow from operations was $2 1 billion.

Capex for the quarter was $228 million or roughly 12% of revenue.

Full year Capex for 2023 was approximately $1 8 billion or 24% of revenue.

Free cash flow for the quarter, which we define as net cash provided by operating activities less purchases of property plant equipment and intangible assets as set out on the statement of cash flows was $456 million.

Dave: And, as Tom mentioned in his prepared remarks, includes revenue associated with the successful resolution of customer volume adjustments. Looking ahead to the first quarter, we expect discussions on customer volume adjustments to continue, and this has been reflected in our first quarter guidance. For the full year, we delivered gross profit of 2.1 billion and gross margin of 29.1%, equating to a 70 basis point uplift from 2022. Operating expenses for the fourth quarter represented approximately 8% of total revenue. R&D for the quarter decreased sequentially to approximately $97 million, and SG&A also declined to $57 million.

With that I am.

Pleased to report that free cash flow for the full year 2023 was $321 million as Tom noted. This is an important milestone for <unk> and we will look to build on this in 2024, while maintaining our capacity growth objectives.

At the end of the fourth quarter, our combined total of cash cash equivalents and marketable securities stood at a healthy $3 9 billion.

We also have a $1 billion revolving credit facility, which remains undrawn.

To summarize the quarter and the year strong operational execution enabled us to perform well in the face of a challenging cyclical and macroeconomic environment and I would like to personally thank all of GFS employees.

Dedication and commitment to our vision.

With that I'm pleased to turn the call over to John to provide our guidance for the first quarter as I welcome him to the <unk> team.

Dave: Total operating expenses were $154 million. Including our total operating expenses is the benefit of approximately $46 million related to the Advanced Manufacturing Investment Tax Credit for 2023 qualifying expenses. As we continue to spend on qualifying expenses and capitalized assets in 2024 and beyond, we expect to continue to receive these benefits through the life of the program. We delivered operating profit of $383 million for the quarter, which translates into an approximately 20.7% operating margin, roughly 50 basis points higher than the year-ago period, and above the midpoint of our guided range. For the full year, GF delivered operating profit of $1.4 billion, which translates into an 18.5% operating margin, an improvement of roughly 70 basis points year over year. Fourth quarter net interest and other expense was $4 million, and we incurred a tax expense of $23 million in the quarter. We delivered fourth-quarter net income of approximately $356 million, a decrease of approximately $444 million from the year-ago period principally due to the gain on the sale of our East Fishkill facility, the on semi, and the fourth quarter of 2022. As a result, we reported diluted earnings of $0.64 per share for the fourth quarter.

Thank you, Dave and good morning to everyone on the call.

It gives me great pleasure to be taking over as <unk>, new CFO and I would like to Echo Tom's comments in thanking Dave for all he has done for the company.

Manufacturing is at the heart of today's dynamic semiconductor industry and notwithstanding the ongoing inventory dynamics impacting to semiconductor industry I am truly excited about the opportunities ahead for <unk> as we.

Liver elevation and essential chips for our global customers.

Now let me provide you with our outlook for the first quarter of 2024.

We expect total <unk> revenue to be between one five to $1 $5 4 billion.

Of this we expect non wafer revenue to be approximately 11% of total revenue.

We expect gross profit to be between $345 million and $385 million.

We expect operating profit to be between 120 and $180 million.

Excluding share based compensation for the first quarter, we expect total opex to be between $205 million and $225 million.

At the midpoint of our first quarter guidance, we expect share based compensation to be approximately $55 million of which roughly $15 million is related to cost of goods sold and approximately $40 million is related to opex.

We expect net interest and other expense for the quarter to be between $4 million and $12 million and tax expense to be between eight and $20 million.

Dave: On a full year basis, GF delivered net income of approximately $1.3 billion and diluted earnings per share of $2.24. Let me now provide some key balance sheet and cash flow metrics. Cash flow from operations for the fourth quarter was $684 million. For the full year, cash flow from operations was $2.1 billion.

We expect net income to be between 101 hundred $56 million.

On a fully diluted share counts of approximately 561 million shares.

Expect earnings per share for the first quarter to be between 18 and 28.

For the full year 2024, we expect capex to be approximately $700 million, which aligns with our disciplined and demand driven philosophy.

Dave: CapEx for the quarter was $228 million, or roughly 12% of revenue; full year capex for 2023 will be approximately 1.8 billion, or 24% of revenue. Pre-cash flow for the quarter, which we define as net cash provided by operating activities, less purchases of property, plant, equipment, and intangible assets as set out on the statement of cash flows, was $456 million. With that, At the end of the fourth quarter, our combined total of cash, cash equivalents, and marketable securities stood at a healthy $3.9 billion. To summarize the quarter and the year, strong operational execution enabled us to perform well in the face of a challenging cyclical and macroeconomic environment. And I would like to personally thank all of GF's employees for their dedication and commitment to our vision. Thank you, Dave, and good morning to everyone on the call. It gives me great pleasure to be taking over as GF's new CFO, and I would like to echo Tom's comments in thanking Dave for all he has done for the company.

As Tom and Dave have both commented we expect this to provide an opportunity to focus on continued free cash flow generation in 2024.

With that let's open the call for Q&A operator.

Thank you ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone. If your question has been answered or you are seeing with yourself from the queue. Please press star one again, we will pause for a moment, while we compile the Q&A roster.

Sure.

Our first question comes from Harlan sur with Jpmorgan. Your line is open.

Good morning, Thanks for taking my questions. Thank you Dave for the support over the past few years and welcome John to the team.

The weaker March quarter guide does reflect care customer trials right. These customers, though are also saying that even with an improvement in their revenues over the next one to two quarters that their internal utilization and filed with ultra starts may lag revenues due to their high inventory levels. So how do you see the profile of the busy.

Through 2024, and maybe an important consideration and a potential recovery maybe the move of some of your customers away from Ges plus single digit nanometer competitors back filling we mixing some of this lost customer business may be a bit challenging in this environment, putting more pressure.

John: Now, let me provide you with our outlook for the first quarter of 2024. We expect gross profit to be between $345 million and $385 million. Excluding share-based compensation for the first quarter, we expect total OPEX to be between $205 million and $225 million. On a fully diluted share count of approximately 561 million shares, we expect earnings per share for the first quarter to be between 18 and 28 cents.

On multi utilizations, maybe the overall magnitude of the potential revenue recovered just help us understand how all of this shapes the 2020 for a profile for the team.

Hey, good morning, Harlan This is Tom I'll start.

<unk> actually got two questions. The first one.

Let me, let me start on I guess.

The overarching question Youre asking is how does 2024 shape up where do we see happening.

Operator: As Tom and Dave have both commented, we expect this to provide GF an opportunity to focus on continued free cash flow generation in 2024. With that, let's open the call for Q&A. Operator.

Yes.

Can't look at one quarter of this year without first looking back let's consider 2023.

Gm's performance and what I would call like for like.

I'd like semiconductor companies playing in comparable end markets, we play in serving with the same technology.

Operator: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered, or you wish to move yourself from the queue, please press star 11 again.

Ranked ges and the high end of performance that we were down only 9% year on year comparison.

We think a little bit about what we talked about in.

Our fourth quarter earnings call that while we were finally seeing inventory, peaking.

Which is the beginning of a of a good trend, but not anywhere near where you needed to be that forward into 2020.

Tom: We'll pause for a moment while we compile our Q&A roster, and I call it, our fourth quarter, which while we were finally seeing inventory peak. This is the beginning of a good trend, but not anywhere near where you need it to be. We fast forward.

And so we.

Look back now what happened in Q4 2020 to what our customers can start to see meaningful decrease in inventory, especially in areas like smart mobile devices, which is a.

A significant part of.

Our revenues.

Talked about 40% and so what you are you.

Tom: And so what you're seeing now is good that inventory is coming down; we're still at the high end of absolute inventory, and we need that to be. When we talk to our, I think. Universal, they see the first half of 2024 being a period of inventory correction finally working down so that true demand starts to surface with a second half recovery on Strong Consumer Demand. Better work on the explanatory pressure that's driving it.

Are you seeing now.

Is <unk>.

Good that inventory is coming down we're still at the high end of absolute inventory and we need that to be.

Worked out when we talk to our customers.

Universally.

This first half of 2024.

Period of inventory.

Correction finally, working down to that.

Demand start to surface.

Second half recovery.

That would be predicated.

On.

On.

Strong consumer demand.

Better work on ladies.

Please state your question Thats driving.

Tom: So we need to see that start to come into play this year as this immigration down. And look, I think for GS, another testimony to our single source business. Long-Term Agreements, please stand by. This is a pretty deep and long cycle for the industry, and the fact that we managed through it by leveraging our LTAs and our customer relationships dampens some of that amplitude. And so we trade off in dampening that amplitude is maybe a little bit long in the time horizon to come. So the end part for me. We believe this is the low point in the top line for us in Q4 and we will continue to grow revenues for us. And then the second question, you type it through in there on the SIN set moving out.

Interest rates high.

So we need to see that start to come into play this year as this inventory works down and look I think for GFS.

The testimony to our single source business.

Long term agreements we set.

This is a pretty deep and long cycles of the industry factor.

Fact that we managed through leveraging our LTV is our customer relationships, we dampen some of that amplitude.

You trade off indefinitely amplitude is maybe a little bit long in the time horizon to come back.

So.

Part for me is we believe this is the low point in top line for Us in Q4, and we will continue to grow revenue throughout the year.

And then the second question is Tiger two.

Moving there.

Finfet moving out we reported earlier that yet.

Tom: We reported earlier that, yep, in these downturns, this is when customers move more quickly, and some of our technology, since that salt nanometer was getting, and many others. Thank you. But that's not the whole story.

<unk>. This is when customers move more quickly and that some of our technology.

12 nanometer was getting.

Displaced by going to a single digit.

But thats not the whole story.

Tom: But first of all, on our We're going to be continuing to develop this platform and building it out like we've done with others, adding better RF capability, and adding embedded memory like resistive RAM. This is a technology that will serve us well, but we've learned in the past about our successes, leveraging our assets is to make sure that our facilities have a range of technologies deployed. Because different end markets react at different times, and one can be up, one can be down, to recall that we announced last year that we're bringing 40 nanometer embedded membranes to our FABE facility as part of our GM, actively ramping up 22 FDX.

First of all on the Finfet technology, we're going to be continuing to develop this platform and building out like we've done others, adding better.

Better RF capability.

Memory like resistant ramp is the technology that will serve us well, but we've learned in the past about our successes yet.

Leveraging our assets just to make sure that our facilities have a range of technologies deployed.

Different end markets react at different times and went to be up when it can be done.

You'll recall that we announced last year.

40 nanometer that is memory.

Our savvy facility as part of our GM.

We are actively.

Ramping up 22, SPX technology savvy to get that diversification, so low single digit nanometer maybe accelerating yes.

Tom: Fab A to get that diversification. So while single-digit nanometer may be accelerating, and some of the food sectors, at the same time, we're accelerating the deployment of bringing you our FAB 8 facility so we can. Perfect.

Some of the Fintech business, we have the same time, we are accelerating the deployment of bringing new technologies to our fab facilities. So we can remix.

Tom: And then as a follow-up, yeah, the team has done a really good job of working with customers against their LTAs and, you know, in return getting payments or fees for resolution of these agreements. But, you know, back in October of last year, one of your large RF customers actually decided to terminate their supplier agreement with GlobalFoundries and pay a $65 million fee, which I assume you're recognizing here in the March quarter So where would the gross margins be in the March quarter without the $65 million fee and other one-time resolution agreements? But I guess more importantly, Tom, like, why would an important customer pay $65 million to terminate their supplier agreement with you, just given all of the technology differentiation that GlobalFoundries brings to the table? Yeah, let me let me answer that in reverse.

Perfect.

My follow up.

The team has done a really good job of working with customers against our LTA.

And return getting payments of fees for resolutions on music agreements, but.

October of last year, one of your large customers actually decided to terminate the supply agreement with Globalfoundries pay a $65 million fee, which I assume you're recognizing here in the March quarter right. So.

Where would the gross margins be in the March quarter without the $65 million fee and one and other one time resolution agreement, but I guess more importantly, Tom like why wouldn't important customer paid $65 million to terminate the supplier agreement with you just given all of the technology differentiation.

The global funds, which brings to the table.

Yes, let me Yeah, let me answer that in reverse I'll do the first part on the customer dynamic and then I'll let.

Tom: I'll do the first part on the customer dynamic, my favorite John Common and Ben Hovland. That's all folks I've got, thanks for watching. Look, you have to think of the termination of an agreement like this: how do we, how do we settle the fact that we put capacity on meeting a customer demand that didn't materialize and how we work. I think termination is more of a technicality of how we move forward.

Steve or John comment on that.

This is Martin.

You have to think of the termination.

That agreement like this is how do we how do we settle the fact that we put capacity made investments to our customer demand that didn't materialize and how we work.

Sure.

Termination is more of a technicality of how we move forward. It doesn't mean that customers not doing business with us going forward.

Tom: It doesn't mean that customers aren't doing business. And as a case in point, we just announced this last quarter, or recently rather, an extension of a long-term agreement with an automotive company, Infiniti. And so I wouldn't necessarily read too much into a termination.

Case in point, we just announced this last quarter.

<unk> rather.

The extension of a long term agreement with an automotive test and finished.

And so I wouldn't necessarily read too much into a termination that's a mechanism by which we work with our customers to make sure we get balance in the supply demand dynamics that are forcing our customers to take.

Tom: That's a mechanism by which we work with our customers to make sure we get a balance in the supply and demand so that it's not forcing our customers to take more wafers than they need. And part of that reconciliation is some underutilization fees that offset the cost of the effort for creating. With that, let me hand it over to Dave to talk about the fourth quarter. Sure. Thanks, Tom. And let me, let me build on a point that you made. You know, the one that you're referencing, Harlan, was from the Smart Mobile.

Sure.

Wafers than they need and part of that reconciliation is the money under utilization fees that offset the costs of the efforts with great success.

Yes.

With that let me hand, it over to you.

David you talked about the fourth quarter.

The impact of that.

Sure. Thanks, Tom and let me, let me build on that point a point that you made.

Sure.

The one that you're referencing Harlan.

With us from the smart mobile space and as you know the inventory and smart mobile devices.

Dave: And as you know, the inventory in smart mobile devices, at least the inventory drawdown has been a really been a moving target for the industry in general. And so I would characterize the termination of that LTA as really being a mechanism such that we don't have to continuously renegotiate that LTA as the volumes are moving around. I would I would really characterize that as.

The inventory drawdown as Ben it really been a moving target for the industry in general and so I would characterize the termination of that LTA as really being a mechanism such that we don't have to continuously renegotiate. The LTA is the volumes are moving around so.

I would really characterize that as kind of a clean clean up activity.

Dave: In terms of the benefit for the fourth quarter, as I mentioned, total LTA termination fees were about $79 million, give or take a little bit, so that's about four points of impact on the quarter. As Tom mentioned, I would reiterate that for our guidance for Q1. You know, sequentially, we are expecting to grow revenue from here. And then, just from a utilization perspective, we're expecting from the fourth quarter to the first quarter to be down a little bit, but then kind of bouncing along the bottom from there. John, anything you'd add? Yeah, David, I just want to double click.

In terms of the benefit for the fourth quarter.

I mentioned <unk>.

Total lta's termination fees were about $79 million give or take a little bit so thats about four points of impact to the quarter.

As Tom mentioned I would reiterate that's where our guidance for Q1.

Sequentially, we are expecting to grow revenue from here and then just from a utilization perspective.

We're expecting from fourth quarter to first quarter to be down a little bit, but then kind of bouncing along the bottom from there John anything you'd add yes, David I just wanted to double click on the point you just made on utilization and how strongly that it's correlated to our gross margin performance as we pointed out in the past every five once utilization is roughly two points of gross margin.

John: Utilization and how strongly that is correlated to our post-market, out in the past every five points. Marginal. Tom's comments on the journey, if you look back. Early 23, late 22, we had.

Going back to Tom's comments on the journey. If you look back to early 'twenty three late 'twenty two.

Alization rates.

Low nineties.

For the first quarter horizon, seeing that down into the low to mid seventies.

John: I still don't know, but there's a lot of it on the horizon. See you later. Great, thank you. One moment for our next... Our next question comes from Vivek Arya with Bank of America. Your line is open. Thank you for taking my questions and best wishes.

You can see about 15% to 20 points split there.

For last year.

Impact on gross margin.

Great. Thank you.

One moment for our next question.

The next question comes from Vivek Arya with Bank of America. Your line is open.

Thank you for taking my questions and best wishes to both Dave and John.

John.

Tom: For my first one, you're guiding Q1 sales down, I think about..., and that starts a process of recovery. Which end markets do you think can start recovering? To Q2. Let me start the second part of that.

For my first one you're guiding Q1 sales down I think about 18% sequentially I was hoping you could give us some.

Color by end market or segment as to how.

You expect those trends and then Tom you suggested that possibly Q1 at the bottom in Q2, but.

The startup process of the company, which end markets do you think can start recovering into Q2.

Good idea.

Yeah, Let me, let me start the second part of that question.

Tom: I think you've seen it from others, given how long and Prolonged the downturn in smart home devices has been. This could be the year where that business starts. You know, given again how much of that revenue and Mark. That's important. We also believe that this year.

I think you've seen it from others that.

Given how how long and prolonged the downturn smart mobile devices this could be a.

Year, where that business starts to pick up.

Given again, how much of that revenue is.

Okay.

End market, that's important Virginia, we also believe that this year.

Tom: Even after we factor in some of the industry signals. We will have meaningful growth in our automotive business, has to do a lot with the broad perspective and broad parts of that market we serve, from sensing to microcontrollers. Cabin Lighting, Entertainment, and independent of it being an Internal Combustion Engine Car or an Electrified Vehicle.

Even after we factor in some of the industry signals, we're seeing we will have meaningful growth in our automotive business.

And this has to do a lot with it.

Rod respectively broad parts of that market, we serve from sensing microcontrollers and cabin lighting infotainment.

And independent of it being.

The internal combustion engine car electrified vehicle alright that content is.

Dave: So I would tell you those are the two end markets that we see as part of the ability. Take two, one is a low, and our top line is in the red. Yeah, I'll take the second part of that question, Vivek. When you think about the first quarter, as you know, we don't guide by end market, but I'll give you a little bit of color and we're expecting automotive to be better than that average you referenced, about 18% down. Automotive will average us out. In other words, it will be better than the average decline. We're expecting smart mobile devices to be better than the average decline. I mentioned that we expect both of those to actually grow on it year over year and certainly be better than that average. Obviously, that implies that the other segments will be down a little bit more than that average. Did you have a follow-up question about that?

It's comparable I would tell you those are the two end markets that we see the ability.

Q1 is a low point.

Yes.

Okay.

Top line revenue growth.

Yes, I'll take I'll take the second part of that question Vivek.

When you think about first quarter as you know, we don't guide by end market, but I'll give you a little bit of color.

We're expecting automotive to be better than that average you referenced about 18% down from Q to Q sequentially Q4 to Q1.

Automotive will average us up in other words, it will be better.

And that average decline, we're expecting smart mobile devices to be better than that average decline.

I referenced that we expect both of those two to actually grow on a year over year basis.

Certainly be better than that average declined sequentially, obviously that implies that the other segments will be down a little bit more than that average, which would get you to that down Q to Q about 18% did you have a follow up question Vivek, yes.

Tom: Yes, thank you, Dave. So my follow-up question is just the industry competitive landscape and what it means for the pricing power that GF can have over the longer term because we are starting to see more capacity, or at least more CapEx, in China. We recently saw Intel and UMC announce some kind of partnership, and obviously, there will be no immediate impact, I would imagine, but over the long term, Tom, what does that imply in terms of the industry competitive dynamics at these trailing edge nodes, and what does that really imply for GF's pricing power? There are a lot of different elements to this. Let me start first with Bill Danely.

Yes. Thank you Dave So my follow up question is.

Just the industry competitive landscape and what it means for the pricing power that <unk> can have over the longer term because we are starting to see more capacity at least more capex in China.

Recently, our Intel and UMC announce some kind of.

Our partnership and obviously there is no immediate impact I would imagine but over the long term what does that imply in terms of the industry competitive dynamics at the trailing edge nodes and what does that really imply for GFS pricing power over the next few years.

So.

A lot of different elements of this let me start first with Buildout in China.

Tom: Look, buying a bunch of equipment, the beginning of a very long even to be. And all of these apps are going to help bridge those gaps competitive on, kind of, the base capability of the technology. You need Standard Sales Live.

Buying a bunch of equipment is the beginning of a very long journey.

Even speak.

<unk>.

Kind of base capability of the technology node you need standard sales libraries, Pdk's complex IP foundational IP, having a tools is not the beginning of the business right at the beginning of of the dream of having a business and it's going to take a long time for.

Tom: Case, Complex IT, Foundation. Having a tool is not the beginning of a business, the beginning of a dream, and it's going to take a long time. New Company, take that capacity, the ability to buy tools and convert it into even a basic. In the meantime, GF is not sitting still.

New companies.

Take that capacity the ability to buy tools and convert it into even a base okay.

In the meantime, Jeff is not sitting still we are taking are already well established feature rich platform can continually adding new features to them off the base that we've had for a long time they continually differentiate the VEGF play we've said it over and over again as we want to be single source differentiated business.

Tom: We're taking our already well-established feature-rich platforms and continually adding new features to them off of a base that we've had for a while. They continually... The GF play, we've said it over and over again, is that we want to be single-source differential. Serving a very simple technology is not where we play, and we don't provide much value for it. So for us, it's that capacity, in some ways, not even playing in the segment. The second thing about all that... is that it is concentrated in China. And we're seeing more and more the need for a more resilient global footprint. So putting more concentration on that capacity in China doesn't do anything to solve that, differentiated.

Serving a very simple technology is not where we play and we don't provide much value to our customers.

For us is that capacity.

In some ways that you can play the second.

The second thing about all of that capacity.

It's concentrated in China.

We're seeing more and more.

The need for a more resilient global footprint.

So putting more concentration of that capacity in China. It doesn't do anything to stop that and Thats, what our customers are looking.

It would be differentiated.

Tom: These are some of the features we add to our technology, serving them on our global footprint. Technologies that we can build for them the same product, Orange Wright Attendee. And then the third part of this that I think is the most important, feedback. Resiliency Requirements. Some of our biggest fabs.

As we head towards technology, they're looking for us.

To differentiate it.

Serving our global footprint.

Technologies that we can build for them the same product Singapore.

Singapore in Dresden, and now U S.

And then the third part of this I think is the most interesting.

And the feedback to this Brazil.

Resiliency requirement.

Some of our biggest fabless.

Tom: Cheney's Cut, coming to GS because they want to tap into that, label. Lainey, Worldwide Source to serve the markets so that they can be taken seriously on the world stage, that they will not have supply chain issues. I think that's the envelope around death, death, death. Then I think he pointed out... Intel. I think once again it demonstrates... which GF has the rest of the world.

Chinese customers.

Coming to <unk>, because they want to tap into that resilience because they believe they.

They need worldwide source to serve the markets. So they can be taken seriously on the world stage that they will not have supply chain issues being concentrated.

So I think thats the envelope around.

That investment going in China, and I think you pointed out.

Intel UMC announced.

I think once again demonstrates that.

<unk> has the rest of the world wants to get to in essence geographically diverse footprint.

Tom: Geographically, but certainly, we have the Western World in the U.S. And so that partnership, as I understand it, is off to create a 12-nanometer platform that'll be ready in 2027. GFs are sitting here in 2024, and we're not done innovating on the platform we already have to continue to make it relevant and dynamic for our customers in these very. The other thing about that, I don't understand.

Certainly we have been western World U S.

Jeremy.

And so.

Partnership as I understand it is off to still create a 12 nanometer platform that will be ready.

2020.

GFS sitting here in 2024, and we're not done innovating on the platform, we already have to continue to make it relevant.

Dynamic for our customers in these various anymore.

The other thing about that I don't understand helm.

Tom: In the industry, it already has a lot of stacked margins; serving the same name on the same technology node would work economically, but that's not what we think about. We think about our technology is making sure we. We work closely with our customers to understand the end market requirements and develop technologies that they're working with. Yeah, I think this, John. I'll just quickly add, you know, in light of all the factors Tom mentioned, we see a relatively stable and constructed price, a high percentage of sole source, we talked about two-thirds, as well as the support and visibility that are provided. Yeah, John, I just messed this part along. If you think about it,

And the initiatives already has a lot of stack margins.

Two foundries, serving the same market.

<unk> technology will work.

Honestly, but that's not that's not fair.

I understand.

Think about our technology is making sure we.

We're closely with our customers understanding and market requirements and developed technologies that they're looking for us to grow.

Yes. This is John I'll, just quickly add in light of all the fact as Tom mentioned was relatively stable and constructive pricing environment taking into account the company's differentiation features.

A high percentage of sole source, we talked about two thirds of the business in the prepared commentary as well as the visibility provided by long term agreements overall Electra way.

Are you constructive pricing humor, yes, Jonathan just not that quite a lot of it but if you think about it.

Tom: When you're sold sourced, you can only serve as true demand. You can't use pricing to create more. The bad news is you can't create more demand. The good news is it's your demand for whatever it is in the key, so continue to create winning solutions so you can. And just to remind everybody, you know, 90% of all design. Just one moment for our next question... Our next question comes from Ross Seymour with Deutsche Bank. Your line is open. Okay, so somebody asked a question, and congratulations to both David and John. David, you'll be missed.

When youre sole sources, you can only service to demand you cant use pricing to create more demand for the bad news is you can't create more demand. The good news is that your demand for whatever it is and the key is to continue to create winning solutions. So you can create and within that adjusted.

Just to remind everybody 90% of our design Venezuelan citizens.

Thank you.

One of them before our next question.

Our next question comes from Ross Seymore with Deutsche Bank. Your line is open.

Hey, guys ask a question and congrats to both David and John David you'll be missed.

Ross Clark Seymore: My first question is on the no transition dynamic that you talked about. Can you give us an idea of the percentage of your business that you believe is exposed to that, you know, localized to the common infrastructure and data center segment where you said you're reallocating, or is that a dynamic we should consider in other areas of your business as well? Yeah, look, I think, again, if we're talking over a long period of time, as you know, these transitions don't happen rapidly, I would characterize the portion of the business. And I think the question around FinFET.

My first question is on the node transition dynamic that you talked about can you give us an idea of the percentage of your business that you believe is exposed to that.

Localized to the comm infrastructure and data Center segment, where you said youre reallocating or is the dynamic we should consider in other areas of your business as well.

Yes.

Again, if we were talking over a long period of time as you know these transitions don't happen rapidly.

I'd characterize the portion of the business and I think the question specifically around Finfet.

Tom: It's probably about 20, 25-ish percent of the total business that, over the full life cycle, will migrate out from what is currently manufactured today. That stated, you constantly always have business that's migrating into that node as well. And so really what you're looking at is you're not looking at, you know, the portion of the business today that will migrate; you're looking at, What's the rate and pace of transition for migration out versus the rate and pace of transition for migration in? So while 20-ish to 25-ish percent of the business that we have today on that node will migrate out, just like it has historically, we expect over time for about the same amount And so what you're managing is the in versus the out.

About 20%, 25% of the total business that over the full life cycle will migrate out from what is currently manufactured today on.

That stated you're constantly always had business thats migrating into that node as well and so really what youre looking at is youre not looking at.

Of the portion of the business today that will migrate youre looking at.

The rate and pace of transition for migration out versus the rate and pace of transition for migration in <unk>.

So while 20 ish to 25 ish percent of the business that we have today on that node will migrate out just like it has historically and we expect over time for about the same amount to migrate in and so what youre managing is the end versus the out if that makes sense.

Dave: Did you have a follow-up question? Yeah, I just wanted to get a little bit of an update on the ChIPSAC side of things. You guys have been very clear about the ITC side, especially the benefits of OPEX, but any clarity on how that OPEX side progresses through the year and, perhaps more importantly, any updates on the grant side of the equation? David, why don't you take the... Sure. Well, a couple of things on ITC. As you know, we do have the tax benefits where you get back $25,000. Josh Seymour, as well as Egan Shaw.

Do you have a follow up question Ross.

Yes, I just wanted to get a little bit of an update on the chipset side of things you guys have been very clear about the ITC side, especially the kind of the opex benefits from it but any clarity on how that opex side progressing through the year and perhaps more importantly, any updates on the grant side of the equation.

Yes.

So David why don't you take the ITC part of that and I'll talk to it.

Sure.

Well couple of things on.

ITC is as you know and we did have the tax benefit where you get back 25% essentially of every qualified dollar.

Capacity that you're that you are spending money on to add capacity in United States and.

Dave: Thanks so much for joining us. This is a great time. I would love for you to help support the work we are doing on this continued assistance program together with other unique programs, universities, and non-governmental organizations. We have been taking advantage of or a benefit of that since 2023. In fact, in the fourth quarter, what you saw in our prepared commentary was that we had $46 million of benefit that impacted us in a positive way, are those benefits we're pulling back. There's also additional benefit in the CAPEX line that will ultimately be accrued there. So, we expect those benefits to remain through the life of the program and essentially be a like-for-like benefit based upon how much, It's about $ 25, and then the first part or second part. We'll get back to the status of the chips. Look, those discussions are confidential.

So that's that's a benefit that we've been taking advantage of that as kind of above and beyond. These projects that you are submitting into the chips office for for longer term approval.

And we have been taking advantage of our benefit of that for 2023 in fact in the fourth quarter.

What you saw in our prepared commentary plays that so we had $46 million of benefit.

That impacted us in a positive way in the fourth quarter and specifically it was spread through some of the operating expenses line as those expenses are those benefits were flowing back to the lines in which those charges are accrued.

And Thats. There is also additional benefit in the Capex line.

Ultimately, we will be accrued there as well and so.

We expect those benefits to to remain through the life of the program and essentially be a like for like benefit based upon how much money that that we are deploying in the U S. So it's about a 25% benefit.

And then the first part or the second part.

The status of the chipset.

Look.

Those discussions are confidential, but you can imagine that <unk> will play an important role in the <unk>.

Tom: You can imagine that GF will play an important role in U.S. Ambitions to Create More Semiconductor Manufacturing in the U.S. I would ask you, on the timing of these things, to be patient. I know the White House wants to start getting those dollars deployed post-haste. Be patient.

U S ambitions to create more semiconductor manufacturing in the U S.

Ask you on the timing of these things to be patient I know.

The Whitehouse wants to start getting those dollars deployed.

Post haste.

Be patient on that but I think the bigger point.

Tom: But I think the bigger point, Ross, is to remember it's not about just having dollars to build, it's about creating the right business. If you look at what we shipped per revenue in 2022. Sorry, 2023.

To remember, it's not about just having dollars to build centers about creating the right business model.

If you look at what we shipped for revenue in 2022.

Sorry, 2023 we shipped about $2 2 million wafers by the end of this year, we will have to all the investments we've made and will make this year the ability to ship 3 million wafers. That's a fair amount of revenue growth that we already have in hand.

Tom: We shipped about 2.2 million. By the end of this year, we will have, through all the investments we've made and we'll make this year, the ability to shift three minutes, a fair amount of revenue that we already have. Now that capacity has been put in ahead of demand because that's part of what our customers asked us to do in 2022. They looked ahead. None of us saw the fact that we were going to hit a bullseye. And so we're in really good shape to think about in the near term of having the capacity to grow our business while waiting for that demand. When we think about what KIFS funding and the ITC means for our future, we come back to how to... Clarity in Demand, our customers are betting on our capacity; they're betting that we're going to be an arm of their business. Manufacturing. So we look for them in partnership to go We want to do it in durable end markets where differentiation matters. We talked a lot about the automotive industry.

Now that capacity was put on ahead of demand because thats part of what our customers had asked us to do in 2022 as they looked ahead and none of US saw the fact that we're going to hit.

And so we are really good shape to think about the near term of having the capacity to grow our business leading to that demand.

When we think about what chips funding in the ITC means for our future we come back to how do we invest.

Certainty reliability.

The certainty as we see clarity in demand that our customers are getting on on our capacity. We're betting that we're going to be an arm of their many of their business. They are manufacturing model. So we look for them in partnership to go create that capacity. We wanted to do it in durable end markets, where our differentiation matters, we've talked a lot about automotive.

Tom: Smart Mobile Devices and Connectivity really play a role in the story. And then the profitability is really where the economics come in of government subsidies or government co-investments.

Talk about how much of that smart mobile devices and connectivity really plays to our strength and then the profitability is really where the.

The economics come in.

Government subsidies or government co investments I'd, rather call them that close to the economics.

Tom: That closes the economic equation and makes sure that we're competitive not only in the capital deployment to create the economy but also in the capital deployment to create jobs, aligning nicely with our long, successful history in this business. Thank you. One moment for our next question. Our next question comes from Joseph Moore with Morgan Stanley. Your line is open.

And make sure that we're competitive not only in the capital deployment to create these.

Facility to run so I think of these government programs.

Aligning nicely with our long term strategy to grow this business.

Medium to longer term.

Thank you.

One moment for our next question.

Our next question comes from Joseph Moore with Morgan Stanley. Your line is open.

Great. Thank you.

Joseph Moore: Great, thank you. I want to ask you about the smartphone business. You know, your biggest four customers all kind of guided pretty well and all reduced inventory by about 20 days in the fourth quarter collectively. It sounds like they need to do at least that much inventory reduction in Q1. But, you know, it seems like there should be a pretty big snapback from that as we return to consumption, unless there's some factor I'm missing in sourcing, anything like that. So maybe if you could just talk about that demand environment. Yeah, I can go first, Tommy, if you're honest.

Wanted to ask about the smart phone business.

The biggest for customers all kind of guided pretty well.

And all reduced inventory by about 20 days in the fourth quarter collectively.

It sounds like they need to do at least that much inventory reduction in Q1, but.

It seems like there should be a pretty big snap back from that as we returned to consumption unless theres. Some factor I'm missing in sourcing anything like that so maybe if you could just talk to that demand.

That demand environment.

I can go first on if you will.

Dave: Yeah, go ahead. OK. Yeah, so you're correct. I mean, you saw the announcements from Qualcomm and Qualware earlier. And we're starting to see the inventory, which has been burning, burning off and getting to, you know, more normalized levels. So we do expect, you know, the forest to not have, to have, return this year as we move forward. Yeah, okay. He pointed that out in his early comments.

Okay Sir.

So you are correct I mean, you saw the announcements from Qualcomm and global Eylea.

We're starting to see the inventory.

Turning burning off and getting to more normalized levels.

We do expect R&D for us too.

To have to have.

This year.

As we move forward, so, yes, you're exactly right, yes quite a bit.

Tom: The real key is Q1 inventory burn; if it continues at that level and we start to get to normalized levels, we have a really good position there, maybe even a stronger position than we ever had in the premier league here. And now that Tier 2 handsets now want 5G capability, I think it positions us well for, we hope, the inevitable return of 5G. Yeah, we're very pleased with our design. Great, thank you for that. And then, with regard to the follow-up, on the CapEx, I know $700 million is a relatively low number, but can you talk about where that money's going? I assume utilization is low enough.

Earlier commentary here.

The real key is Q1 inventory burn to continue that level at least start to get to normalized levels.

We have really good position, there, maybe even a stronger position than we ever had in the premier.

Tier handset and now that the tier twos.

And thats, not what <unk> capability, I think it positions us well.

Recall, the inevitable return the smart mobile device segment.

We're very pleased with our design wins in both the premium and the tier two.

Great. Thank you for that and then.

With regards to follow up on the Capex.

I know I realized $700 million is a relatively low number but can you talk about where that money is going I assume utilization is low enough.

Dave: You know, what is it that you need to spend money on from here? Yeah, I think when you look at the CapEx for 2024 specifically, and as you know, we've been on a journey to grow our total capacity from about 2 million wafers at the beginning of 21 to about 3 million wafers, which will be essentially at the end of this year. And the 700 really.

What is it that you need to spend money on from here.

Yeah, I think when you look at the Capex for 2024, specifically and.

As you know we've been on.

A journey to grow our total capacity from about 2 million wafers.

At the beginning of 'twenty, one to about 3 million wafers will be essentially at the end of this year and the 700 really.

Dave: 700 million really represents kind of the final completion in terms of tooling that needs to be purchased as well as facilities that need to be added to satisfy some of those longer-term agreements that you've seen us continue to add. So by spending this amount... It will get us to that 3 million wafers. It will also give us some incremental flexibility as we think about migrating some additional capabilities into our U.S. manufacturing center, some of the 40 nanometer capability with embedded memory, some of the fully depleted SOI capabilities, bringing that here to the U.S. So 700 million represents not only the final bill for the completion of 3 million wafers, but it's also the flexibility that's being added and the capacity that's being added, and we call it capability, so that we can give that fungibility of capacity across our FAP network, as well as some R&D investments that we need to create new features. There is a certain level of capex in our business about sustainability. Yeah, until this, John, I'll just add, as far as the shape of the kappa... We do expect that, three, a bit stronger in the.

$700 million really represents kind of.

The final completion in terms of tooling that needs to be purchased as well as facilities that need to be added to satisfy some of those longer term agreements that you've seen us continue to add to the portfolio.

So by spending this amount.

It'll get us to that 3 million wafers, it'll also give us some incremental flexibility as we think about migrating.

Some additional capabilities into our U S manufacturing centers some of the 40 nanometer capability with embedded memory some of that.

Fully depleted soi capability, and bringing that here to the U S. So it'll it'll not only $700 million represents not only the kind of the final bill to the completion of 3 million wafers, but it's also the flexibility that's being added and the capacity that's being added for customers that want domestic manufacturing.

We call it capability tool in creating features.

So that we can give that fungibility of capacity across our network as well as some R&D investments that we need to create new features. So there is a certain level of capex in our business.

It's about sustainability.

Yes, Joe This is John I'll, just add as far as the shape of the Capex in 'twenty four we do expect that to be similar to what we saw in 2023, that's stronger than the first half.

Dave: Great, thank you. One moment for our next question. Our next question comes from Chris Casso with Wolf Research. Your line is open. Yeah, thank you. Good morning.

Second half on Capex.

Great. Thank you.

One moment for our next question.

Our next question comes from Chris Caso with Wolfe Research Your line is open.

Yes. Thank you good morning.

Chris Casso: I guess the first question is on gross margins. And, you know, obviously, a lot of moving parts as we go through the year, and, dependent, it'll be dependent on the pace of that recovery. But if you could give us some color on, you know, what the puts and takes are as we look at gross margins as we go through the year, and you did mention that you believed that Q1 would be the revenue bottom. Do you believe that holds for gross margin as well? Yeah, Chris, this is John, you know, similar to the prior comments. Margittrd is very much appreciated.

I guess the first question is on gross margins and obviously a lot of moving parts as we go through the year and dependent there'll be dependent on the pace of that recovery, but if you can give us some color on what the puts and takes are as we look at gross margins as we go through the year and you did mentioned that you believe that <unk>.

One would be the revenue bottom do you believe that holds for gross margin as well.

Yes, Chris this is John.

Similar to the prior comments gross margin is very much influenced by factory utilization. There are other factors that were clearly with mix as well as some of the customer agreement payments and so on but as the business can recover.

John: Factor Utilization, there are other factors that work clearly with MEG, and so on; business can recover. But with that, the rate and pace of that, we'll have to see fraud. Do you have a follow-up?

Both stronger gross numbers, we would expect some improvement in gross margin along with the rate case that will have to see.

The demand environment and the inventory drawdown.

Rates are important variables to that as well.

Chris Casso: Well, thank you. Sure. And then with regard to kind of where things go from here as the recovery progresses, I mean, you talked about having a capacity of 3 million wafers by the end of this year. That's up, you know, kind of 35% or so from what you shipped last year. You know, can you speak to what you expect in terms of cash flow and, you know, the investment that's been made, you know, how you monetize that going forward? And, you know, with some of the new agreements that you're going to sign to make use of that capacity, do you expect the terms and the pricing, you know, of those new agreements to load up that other, you know, load up the rest of the capacity?

Do you have a follow up thank you.

Sure and then with regard to kind of where things go from here as the recovery.

Progresses, I mean, you talked about yard capacity of 3 million wafers by the end of this year that's up.

And a 35% or so from what you shipped last year.

Can you speak to.

What you expect in terms of cash flow.

The investment that's been made.

How you monetize that going forward and with some of the new agreements that youre going to sign to make use of that capacity do you expect the terms and the pricing.

Uh huh.

Of those new agreements that load up that other.

Load up the rest of the capacity.

Chris Casso: Is the impact on that and Global Foundries going to be the same as what we've seen during the last? Yeah, Chris, this is John again. You know, I'm very encouraged by the progress the company has made. Freecast will perform, out for the third consecutive time.

Is the impact on that and global foundry is going to be the same as what we've seen during the last cycle.

Yes, Chris This is John again.

We are encouraged by the progress the company has made.

Free cash flow performance, we had.

Third consecutive.

John: This is a quarter of growth in free cash flow in the fourth quarter, with a strong number of 450 million plus generated in the fourth quarter and, as we continue to progress, the opportunity to build upon and others. Thank you. We're in. The short answer is yes, we think we're very well.

Quarter of growth and free cash flow in the fourth quarter was a strong number of $450 million plus.

Generator in the fourth quarter and as we continue to progress through 2020 before we see the opportunity to build upon that.

<unk> generates free cash flow in the neighborhood of two to three times the annual total.

For 2023 so.

Short answer is yes, we think we're very well positioned to positively influence.

Tom: And let me take a longer term view by going back to what we talked about in the roadshow. We talked about getting our business to scale. Roughly $10 billion, where we could then spend 20% of revenue on cat bags, grow our business with capacity, and at the same time, have sustainable free cash. When we start to think of 3 million waivers, we are converging quickly on our long-term modeling, where we can do both, invest for growth and drive free cash flow.

The company with.

Strong free cash flow generation, Yes, let me, let me take a longer term view going back to what we talked about in our roadshow a couple of years ago.

We've talked about getting our business to scale.

Roughly $10 billion, where we could then spend 20% of revenue on Capex.

So our business with capacity at the same time have sustainable free cash flow when we start to think about.

This 3 million wafers, we are converging quickly on our long term model, where we can do both invest for growth and drive free cash flow and now it becomes not a question of if it's a great place for demand to fill in to take advantage of it.

Tom: Now it becomes not a question of if, but it's its rate and pace for demand to fill in. One final comment to kind of build on that, to address two points that you raised. One, like for like pricing, we continue to see it's very stable. We see everyone in the market, and Raj.

And one final comment to kind of build on that.

The address two points that you raised one like for like pricing, we continue to see as very stable.

We see everyone in the market has been being very rational.

Dave: And then two, from a monetization perspective, we look at the investments that we've made, we look at the flexibility that we are building into all of our manufacturing facilities and the resiliency that we're building into those facilities, and we're quite encouraged by what the outlook could look like. Kevin, we'll take one more question. Sure thing. Our last question comes from Krish Sankar with TD Cowen. Your line is open.

Number one and then two from a monetization perspective.

We look at the investments that we've made we look at the.

The flexibility that we are building into all of our manufacturing facilities and resiliency that we are building into those manufacturing facilities and we're quite encouraged by.

By what the outlook could look like for us in the future when demand normalizes.

Kevin we'll take one more question sure thing.

Yeah.

Our last question comes from Chris Shankar with TD Cowen Your line is open.

Krish Sankar: Yeah, hi, thanks for doing my question, and thanks a lot, Dave, and welcome, John. The first question I had was, I don't know, Tom or Dave, did you speak about how to think about calendar 24 volume and AFP relative to calendar 23? Yeah, so, you know, we didn't specifically talk about pricing for calendar year 2024 versus 23.

Yeah, Hi, Thanks for taking my question.

Dave and welcome John.

First question I had was I don't know Tom or Dave did you think about how to think about calendar 'twenty for volume and ASP relative to calendar 'twenty three.

Yes, so we didn't specifically talk about.

About pricing for calendar year, 2024 versus 23, but I think you can probably infer from our commentary.

Dave: But I think you can probably infer from our commentary that on a like-for-like basis, we expect pricing to be very similar, essentially the same. And so movements that you'll see in ASPs will primarily be driven by the product mix shifting either from one in-market to another or from one to. We're guiding down for the first quarter. And so when you think about total volume for 2024, it's really the rate and pace of the recovery as we continue to draw down inventory. And again, we did mention, and I think you've seen it from our customers, the reporting that's been done there, that they have made some progress on inventory reduction. We're anticipating that they will continue to make progress to reduce some of that inventory here in the first quarter. And so really, the volume will be dependent upon the rate, and I can't wait to talk to you, talk to you, and be brothers with you as long as we live. Thank you very much. Haha, it's really good. Oh wow. It really is.

That on a like for like basis that we expect pricing to be very similar essentially the same and so movements that youll see asps.

We will primarily be driven by the product mix shifting either from one end market to another or from one one customer to another in terms of in terms of volume, obviously on a sequential basis as well as year over year basis.

We're guiding down for the first quarter and so when you think about total volume for 2024, it's really the rate and pace of the recovery.

As we continue to draw down inventory.

Again, we did mention and I think you've seen it from our customers that reporting that's been done there.

Is that they have made some some progress on inventory reduction we're anticipating that they will continue to make progress to reduce some of that inventory here in the first quarter and so really the volume will be dependent upon the rate and pace of the returned to growth as that inventory comes down.

Tom: Haha, we don't need that. Got it, got it. Very helpful, David. And then a big picture question for Tom: you know, when you look at the global electronics demand during the pandemic, it was above the long-term trend. You're talking about a cyclical recovery now, but there's also been some macro weakness in channel destocking and customers going to just-in-time manufacturing. So I'm kind of curious, do you think the cyclical recovery could be below trend, or do you think you're going to have a cyclical recovery like you've seen in the past, where you see a sharp snap? Look, I've been around this industry for a long time, and what I see is it's a little bit of a black box. And the black box is, it responds equally to the stimulation.

Got it got it very helpful. David and then.

Big Picture question for Tom when you look at during the pandemic. The global electronics demand was above long term trend you're talking about a cyclical recovery now, but there's also been some macro retail from channel Destocking Huston was going through just in time manufacturing.

Do you think the cyclical recovery could be below trend or do you think you're going to have cyclical recovery that you've seen in the past where do you see a sharp snapback.

Look I've been around this industry for a long time, but I see us.

It's a little bit of this.

Just a black box and black box is it response equally to the stimulation. So if you'd go really down this industry over over correct. So what happened we found ourselves with excess inventory and then everybody quite inventory down debt.

Tom: So if you go really down, this industry over corrects. So what happened? We found ourselves with excess inventory, and then everybody brought their inventory down to nothing.

Tom: So I think what you're going to see now... The recovery is going to be proportional to how quickly things went down in our industry because in certain end markets, we've seen people, and the end customers, the OEMs, take inventory quite low. And so everybody who predicts the future has a great chance of being wrong. I can just look back and see that our industry has always been predictable in that if it's. It's a steep decline.

So I think what you're going to see now is the recovery is going to be proportionately how quickly things went down in our industry because in certain end markets we've seen people.

And customers the Oems take inventory.

Might look and so everybody who predicts the future has a great chance of being long look back and see our industry has always been.

Predictable in benefits.

Tom: So let's see, if you could hold me to that one at the end. Thanks a lot, Tom. Ladies and gentlemen, this does conclude the Q&A portion of today's conference. I'd like to turn the call back over to Sam for any closing remarks. Thanks Kevin, thanks everyone for joining today and apologies we couldn't get to everyone on the call list. We look forward to seeing many of you at the upcoming conference circuit. Thank you. Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day. Thanks for watching!

It's a steep decline that becomes equal and opposite reaction when it comes back. So let's say you can hold me to that win at the next call.

Thanks, a lot Tom.

Ladies and gentlemen, this does conclude the Q&A portion of today's conference I'd like to turn the call back over to <unk> for any closing remarks.

Thanks, Kevin and thanks, everyone for joining today and apologies, we couldn't get to everyone. In the call list I will look forward to seeing many of you.

Coming conference Circuit.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Okay.

[music] okay.

Okay.