GlobalFoundries seesaws in trading debut

Tom Caulfield, GlobalFoundries CEO, joins the Yahoo Finance Live panel as the chip maker goes public on the Nasdaq.

Video transcript

ZACK GUZMAN: Welcome back to Yahoo Finance Live. We are watching shares of GlobalFoundries now open for trading here after pricing shares at the high end of its range at $47 apiece, they opened exactly at that same price level here. Of course, it is the third largest listing that we've seen thus far in the IPO calendar in 2021. A lot of opportunity here as we talked about the chip space in the supply crunch as manufacturers look to flex a move back to the US amidst all the security questions, as a large chunk of those chips are still made in China and other parts of Asia.

And for more on the opportunity here, happy to be welcomed-- or happy to welcome back into the show, rather, the CEO of GlobalFoundries. Tom Caulfield joins us once again. And Tom, thanks for taking the time. Congrats on the debut. I mean, as we're laying it out, as we've discussed before, a lot of attention being paid to this one just because of the opportunity to bring chips back to the US. Talk to me about what investors need to know about GlobalFoundries.

TOM CAULFIELD: Well, first, thanks for having me again, Zack. And I just have to give a shout-out to our 15,000 employees worldwide and what an important day this is for GlobalFoundries. So what does it mean? You know, we have half a trillion dollar industry that over the next 10 years is going to double to a trillion dollar industry. It took 50 years to come here. And semiconductors are becoming more and more pervasive in our lives. And a high concentration, as you note, is in China and in Taiwan. And what GF is going to try to do is continue to leverage our global footprint and create capacity in Singapore, United States, and the European Union.

Let's talk a bit more about that global footprint you have because in many ways, GlobalFoundries for years has been moving in the opposite direction from other chipmakers who've moved towards fabless. You've got the foundries, the manufacturing in place. As you look at where you have the manufacturing, what are some additional places that you think you'd like to expand into? I mean, Singapore certainly makes sense from a positioning standpoint in Asia. But what are some other holes you want to fill?

TOM CAULFIELD: No, I think for us, it's to grow our footprint in the locations we have now. We're geographically diverse. That gives us a head start on that. And for, you know, economics reasons, it's much better to expand the campus you're at. So you'll see us first fill out the floor space we have in our multi New York facility and our Dresden, Germany facility. We're out of floor space in Singapore, so we're actually putting new brick and mortar in place there. And then we'll grow that out with equipment. And you'll see us as we continue to grow this company with manufacturing investments and expansion, we will use those three sites as the core to our expansion plans so that we can get the economies of scale.

ZACK GUZMAN: Yeah, when we talk about not only the opportunity there in terms of stressing, I guess, moving away from China in the chip space that GlobalFoundries presents here for investors to attach itself to, outside of that, you guys also chase kind of not the leading edge, but the lagging edge, and we talk so much about the chip shortage and opportunities beyond, I guess, just the cutting edge technology products. But now everything needs a chip, basically. So talk to me about how you view that strategy and where GlobalFoundries is really going to deliver.

TOM CAULFIELD: Well, first, I have to tell you, I think talking about lagging edge is just such a misnomer. And I think that's what our industry does. Sometimes we label things the wrong way. There's a lot of innovation in all technology nodes of the semiconductor industry. You know, GlobalFoundries is participating in a space we call the pervasive use of semiconductors, say, 12 nanometer and above.

And we do innovation all the time. You know, it's the reason why your mobile phone connections don't drop so frequently. It's the reason you can make secure pay transactions. It's the reason why we can do the electrification of automobiles. And I think the thing about what's happened here, there's been a lot of investment, what you call leading edge, and not enough investment in this pervasive use of semiconductors. And that's where GF is playing, will continue to play, and continue to invest.

AKIKO FUJITA: To that point, you know, you are playing a significant part of your chips going into cars. And we just heard from the president, saying that the goal here is to double the amount of EVs on the cars in the next three years or so. Talk to me about the ramp-up that requires. I mean, we are looking at an incredible transformation that's happening from [INAUDIBLE] cars to EV cars, which, inevitably, will include the chips that you're making. How do you meet that kind of demand?

TOM CAULFIELD: Well, first, it's a great point. It's not only the electrification of automobiles. It's for safety and more assisted driving type of technology, radars and things of that nature. So what is GF doing? In 2021 and 2022, we're investing $6 and 1/2 billion to expand our manufacturing footprint. We're building a new facility in Singapore.

We're filling out our floor space in both our fab 8 facility in upstate New York and our fab 1 facility in Dresden, Germany. And when we're done with that, we'll have added roughly 1.6 X more capacity between-- starting in 2020 and getting to full scale in 2023. Our automotive business is really robust. We did-- we're doing about 3 and 1/2 times more automotive revenue in 2021 than we did in 2020. And that will continue to grow as we continue to leverage the design wins we already have in the auto sector and start to build that manufacturing ramp for our customers.

ZACK GUZMAN: Yeah, lastly, Tom, here, I mean, I guess, you know, we talk so much about being an ideal time for a chip maker when you're dealing with the chip shortage and driving up demand and cost here, or price, I should say. When you talk about the flip side of the equation, right, we haven't talked about profitability or the financials.

In your guys', finally, you showed a $301 million loss to the first six half-- or first six months of the year, versus $534 million last year. I mean, if you build in tax incentives here as well-- and I'm not sure what your thoughts are on those. But if you build that in, what does profitability look like for GlobalFoundries in the future?

TOM CAULFIELD: Well, you know, let's start with the most recent quarter, third quarter. In a filing, you probably saw that we were positive. We were positive net income. We've always had very strong EBITDA. And, you know, we see that continuing to grow as we grow our top line. But I think it's lost in a little of this. You know, we made a strategic pivot of the company in 2018. And we created a financial model that we wanted to go run to. And I would tell you, you know, third quarter being profitable is running about a year and a half to two years ahead of our original plan. And that's the ability of us to really create differentiation for our customers, win that business, and grow our top line.

ZACK GUZMAN: All right, well, here we are on day one. We're seeing shares basically at where they were offered to bigger named investors there at $47 a share in the IPO, the opportunity there now for retail investors to get in as well and trade. Tom Caulfield, the CEO of GlobalFoundries, appreciate you coming back on here to chat with us today. Congrats again on the debut. Be well.