GLOBALFOUNDRIES Inc. — 2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing, not a standalone 2022 Q4 report; the filing text does not provide clear quarterly financial results. Amounts are in U.S. dollars unless noted. Financial statements are prepared under IFRS.
Business context
GlobalFoundries manufactures semiconductor wafers and related services for more than 250 customers, operating fabs in the United States, Germany and Singapore. It reported approximately 2.5 million 300mm-equivalent wafer shipments in 2022. Wafer fabrication generated $7.627 billion, about 94% of revenue. The company emphasizes differentiated process technologies, geographic diversification and long-term customer agreements.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Net revenue | $8.108 billion | $6.585 billion |
| Gross profit / gross margin | $2.239 billion / 27.6% | $1.013 billion / 15.4% |
| Operating income (loss) | $1.167 billion | $(60) million |
| Net income (loss) | $1.446 billion | $(254) million |
| Diluted EPS | $2.62 | $(0.49) |
| Operating cash flow | $2.624 billion | $2.839 billion |
| Capital purchases of property, plant and equipment and intangibles | $3.059 billion | $1.767 billion |
| Cash and cash equivalents | $2.352 billion | $2.939 billion |
| Marketable securities | $994 million | None reported |
| Long-term debt | $2.511 billion | $2.013 billion |
Cash and marketable securities totaled $3.346 billion at year-end; the company also reported an undrawn $1.0 billion revolving credit facility. Lease obligations were $345 million. Unconditional purchase commitments totaled $6.361 billion, including $2.774 billion for capital expenditures; $2.732 billion was due within 12 months. No dividend is anticipated in the foreseeable future.
Changes versus 2021
- Revenue rose 23.1%, driven by a 4.1% increase in wafer shipments and a 17% increase in average selling price, which management attributed to better pricing under long-term agreements and improved product mix.
- Gross margin increased 12.2 percentage points to 27.6%, reflecting higher selling prices, product mix and greater fixed-cost absorption from factory utilization.
- Research and development expense was broadly flat at $482 million. Selling, general and administrative expense declined 16.6% to $496 million, partly due to lower employee-related and share-based compensation costs.
- Operating cash flow decreased $215 million. Investing cash outflow increased to $4.058 billion, primarily due to higher capacity-expansion spending and net purchases of marketable securities. Cash declined by $587 million during the year.
- Net income included a $403 million gain on the sale of the East Fishkill business. The sale closed on December 31, 2022; the remaining $236 million of purchase price was received in January 2023.
Outlook, management commentary and risks
- Management said it remained cautious about macroeconomic headwinds in the first half of 2023. Customer inventory correction accelerated in the second half of 2022 and was expected to continue through at least the first half of 2023. The filing provides no specific revenue or earnings guidance.
- Some customers sought lower 2023 demand outlooks and renegotiation of long-term agreements. These agreements represented more than $22 billion of remaining lifetime revenue commitments at year-end, including more than $13 billion for January 2023 through December 2024 and more than $5 billion of advance-payment and capacity-reservation commitments. Commitments do not eliminate customer, production or renegotiation risks.
- Fourth-quarter 2022 restructuring resulted in $94 million of full-year charges. The plan included workforce and leased-workspace reductions and strategic consulting; the company expected to complete the initiative over the following 12 months and cautioned that expected savings may not be achieved.
- Expansion plans include Singapore Module 7H, with production expected to begin in 2023 and eventual additional capacity of approximately 450,000 300mm wafers annually; a Malta expansion; and a jointly operated Crolles, France facility with STMicroelectronics, targeted for full build-out of up to 620,000 wafers annually by 2026. The Crolles project remained subject to regulatory approvals and substantial government funding.
- Major exposures include semiconductor cyclicality and inventory correction, customer concentration, fixed manufacturing costs and utilization, inflation and energy costs, equipment and materials availability, and dependence on a limited number of SOI wafer suppliers. One supplier provided 54% of SOI wafers in 2022.
- IBM litigation continued over agreements connected with the 2015 acquisition of IBM’s Microelectronics division. IBM claimed damages and restitution; GlobalFoundries disputed the claims and intended to defend itself. The company said it did not then anticipate a material impact.
- Mubadala owned approximately 85.7% of shares outstanding, retaining substantial control. The company disclosed economic-substance penalties of $12,500 each in 2022 and 2023 relating to the 2020 financial year, and said remedial steps had been taken or were planned.
Important facts for investors to verify
- Whether customer inventory correction and requested LTA changes affect 2023 volumes, pricing, advance payments or capacity commitments.
- How much of 2022 earnings and margin improvement is sustainable after excluding the $403 million East Fishkill sale gain and considering restructuring and other unusual items.
- Whether cash generation can support planned fab investments, the $6.361 billion purchase commitments and debt service; review the timing and funding terms of expansion projects and grants.
- Progress and cost of Singapore Module 7H, Malta and Crolles, including production ramps, approvals, government support and customer demand.
- Developments in the IBM litigation and any resulting financial exposure.
- Customer and supplier concentration, especially the largest customers and reliance on Soitec for SOI wafers.