Q1 2023 Globalfoundries Inc Earnings Call

Participants

David W. Reeder; CFO & Senior VP of Finance; GLOBALFOUNDRIES Inc.

Sam Franklin; VP of Capital Markets & IR; GLOBALFOUNDRIES Inc.

Thomas H. Caulfield; President, CEO & Director; GLOBALFOUNDRIES Inc.

Christopher Brett Danely; MD & Analyst; Citigroup Inc., Research Division

Harlan Sur; Senior Analyst; JPMorgan Chase & Co, Research Division

Joseph Lawrence Moore; Executive Director; Morgan Stanley, Research Division

Krish Sankar; MD & Senior Research Analyst; TD Cowen, Research Division

Mark John Lipacis; MD & Senior Equity Research Analyst; Jefferies LLC, Research Division

Mehdi Hosseini; Senior Analyst; Susquehanna Financial Group, LLLP, Research Division

Rajvindra S. Gill; Senior Analyst; Needham & Company, LLC, Research Division

Ross Clark Seymore; MD; Deutsche Bank AG, Research Division

Vivek Arya; MD in Equity Research & Research Analyst; BofA Securities, Research Division

Presentation

Operator

Good day, and thank you for standing by. Welcome to the conference call to review first quarter fiscal year 2023 financial results. (Operator Instructions) 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, Head of Capital Markets and Investor Relations. Please go ahead.

Sam Franklin

Thank you, operator. Good morning, everyone, and welcome to GlobalFoundries' First Quarter 2023 Earnings Call.
On the call with me today are Dr. Thomas Caulfield, CEO; and David Reeder, CFO. A short while ago, we released GF's first 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. The most directly comparable IFRS measures and reconciliation for adjusted non-IFRS measures are available in today's press release and accompanying slides.
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, all by the use of the future tense. 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 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 the risks and uncertainties described in our SEC filings, including the sections under the caption, Risk Factors, in our annual report on Form 20-F filed with the SEC on April 14, 2023.
We'll 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 and first quarter results and also provide second quarter 2023 guidance. We will then open the call for questions. (Operator Instructions)
I'll now turn the call over to Tom for his prepared remarks.

Thomas H. Caulfield

Thank you, Sam, and welcome, everyone, to our first quarter earnings call.
I'm pleased to report Q1 results that are in line with the guidance we provided in February as we continue to deliver resilient financial performance amidst a challenging macroeconomic and cyclical backdrop. Let me start by providing a brief update on the current business environment.
Similar to others in the industry, we believe that semiconductor inventories are coming down more slowly than previously expected and that the rebalancing of demand will extend at least through the second quarter, particularly in end markets such as smart mobile devices, communications infrastructure and data centers as well as the lower end of the consumer and home electronics markets in general.
Based on discussions with our customers prior to our fourth quarter update, we've previously anticipated that the first half of 2023 and likely the first quarter of 2023 would mark the low point in revenue and the peak of the inventory cycle. Based on more recent conversations with customers and our own internal models, we continue to anticipate that the first quarter revenue will represent the low point of our 2023 quarterly revenue and that we'll have quarter-to-quarter modest sequential growth throughout the year.
Though we are expecting continued sequential revenue growth, the return to more normalized inventory and demand levels is forecast to happen more slowly than previously anticipated and will most likely occur later in the year well into the second half of 2023. Despite forecasting slight year-over-year improvements in ASP, or our average selling price per wafer, we are now anticipating that revenue will decline year-over-year in the mid- to high single-digit percentage range. David will comment on this further in his section.
Despite the headwinds in the aforementioned end markets, we continue to see healthy demand in faster-growing segments, such as industrial IoT, aerospace and defense and the automotive markets. Additionally, we are continuing to grow our single source design wins and customers and sign new LTAs. Let me now touch on our results.
In the first quarter, GF revenue declined 5% year-over-year and 12% sequentially, with reduced wafer shipments being partially offset by year-over-year improvements in ASP and mix. Coupled with strong operational execution, this resulted in a resilient adjusted gross margin for the quarter as we continue to proactively manage our costs to help offset the broader industry headwinds. We reported adjusted gross margin of 28.5% in the quarter, and we delivered adjusted earnings per share of $0.52, which were at the high end of our guidance range.
Dave will give more color on our financials in a moment, but let me now provide a brief update on some of our recent customer and partnership activities. Consistent with continuing to build our customer partnership strategy, we added an additional five long-term agreements during the quarter, which added incremental prepayments and access fees of roughly $200 million and revenues of approximately $1.4 billion under these LTAs.
With respect to our differentiated product platforms, we continue to make progress in the first quarter with new GF product qualifications serving our customer needs across communications, infrastructure and data center, automotive as well as smart mobile devices and IoT end markets.
Starting with automotive, we continue to deliver new power management products with expanded voltage handling capabilities on our highly competitive 130 BCDLite product line at automotive grade. This adds additional differentiated feature on our growing automotive product portfolio.
In the communications infrastructure and data center end market, at the most recent Optical Fiber Communications Conference in March, we were pleased to have no less than five of our customers, including Ayar Labs and Ranovus, shared demos of their data center solutions using GF Photonics, specifically our 45CLO technology. Ayar Labs also demonstrated the industry's first 4 terabytes per second optical solution for chip-to-chip connectivity.
For smart mobile devices, we are accelerating the delivery of enhanced features on [ASW]. That's our leading RF silicon on insulator based product line for front-end module components, including an enhanced low-noise amplifier. This technology will be making its way into the next releases of premium tier handsets.
In IoT, we continue to innovate our differentiated technologies, focused on enhanced power efficiency and embedded memory for secure intelligence solutions at the edge. One example of this is our customer, Nordic, the market share leader in Bluetooth low-energy microcontrollers, recently announced their next-generation product series using GlobalFoundries' 22FDX. This is an exciting application of 22FDX as it enables an integrated single-chip solution, delivering more RF range at industry-leading low power efficiency and embedded nonvolatile memory for security.
Finally, continuing our research partnership efforts under GF Labs, we executed and announced a strategic university partnership agreement with Georgia Tech. This agreement spans a broad range of research activities, including their leadership capabilities in advanced packaging, silicon photonics and workforce development initiatives.
To summarize, I am pleased to report resilient financial performance in line with our guidance as our dedicated teams around the world continue to execute on the targets that we set and to deliver to our customers and our stakeholders.
With that, over to you, Dave.

David W. Reeder

Thank you, Tom, and welcome to our first quarter earnings call. For the remainder of the call, including guidance, I will reference adjusted metrics, which exclude stock-based compensation and restructuring charges.
Our first quarter results were in line with the financial range we provided in our last quarterly update. First quarter revenue was approximately $1.84 billion, and we shipped approximately [511,000] 300-millimeter equivalent wafers in the quarter, an 18% decrease from the year prior period, driven by reduced wafer shipments, primarily related to mobile and consumer-driven end markets.
ASP increased approximately 12% year-over-year, driven by ramping long-term customer agreements with better pricing as well as continued improvement in product mix. Wafer revenue from our end markets accounted for approximately 87% of total revenue. Non-wafer revenue, which includes revenue from reticles, nonrecurring engineering, expedite fees and other items, accounted for approximately 13% of total revenue for the first quarter, broadly consistent with our expectations.
Let me now provide an update on our revenues by end markets. Smart mobile devices represented approximately 38% of the quarter's total revenue. First quarter revenue declined 29% from the prior year period, principally driven by reduced volumes and the low to mid-tier smartphone segments and a continuation of the well-publicized inventory correction within the broader smart mobile market. This decline was partially offset by higher ASPs, premium tier mix growth and continued content growth in our RF transceiver and audio products, which recorded double-digit growth from the prior year period.
As you've heard from others, inventory levels have remained higher than expected in most of the smart mobile markets during the first quarter as the inventory correction continues to work through the supply chain. We believe that inventory levels will be largely normalized throughout the first half of 2023, and that more historical inventory levels will be achieved by the second half of the year. We continue to focus on growth opportunities in our RF transceiver and WiFi SoC technologies as we see greater value capture from the premium tier smartphone segment by supporting the transition towards more feature-rich handsets.
In the first quarter, revenue for the home and industrial IoT market grew approximately 7% year-over-year, representing approximately 19% of the quarter's total revenue. Year-over-year growth in this end market was primarily driven by our aerospace and defense business, where we continue to ramp to volume our design wins and driven by our wireless technologies that enable the broadening use of digital payments as well as industrial and government-connected devices. We expect increased customer demand for next-generation analog and mixed signal technologies, particularly within the smart card and aerospace and defense end markets, to largely offset the near-term inventory correction and market softness and the more consumer-centric portions of the IoT market.
As Tom discussed, Automotive continues to be a strong growth segment for us. First quarter revenue grew 122% year-over-year, representing approximately 10% of the quarter's total revenue. As discussed in our fourth quarter results, we expect to see a continued ramp across our processing, sensing, connectivity and vehicle infrastructure technologies throughout 2023. We have and will continue to allocate more of our existing capacity as well as add additional capacity to support the continued growth of silicon content within the automotive market.
Next, moving to our communications infrastructure and data center end market. First quarter revenue grew approximately 8% year-over-year and comprised approximately 19% of the quarter's total revenue, which was broadly in line with expectations. Due to the buildup of data center inventory in 2022 and demand softening for enterprise wired infrastructure, we expect to see a decline in revenues for this end market through the first half of 2023, with volumes expected to improve later in the second half of 2023.
Finally, our personal computing end market declined 12% year-over-year in the first quarter and comprised approximately 2% of the quarter's total revenue. PC and notebook demand continues to be soft, and we expect this end market to continue to decline as a percentage of our overall revenue in 2023.
Also in the first quarter, we were awarded and received a tax refund of $152 million by the state of New York related to the significant manufacturing investments we've made in the state. We're proud to have partnered with the state of New York to create tremendous value for the local community.
For the first quarter, we delivered adjusted gross profit of $525 million, which was at the high end of our guided range and translates into approximately 28.5% adjusted gross margin. The roughly 320 basis point year-over-year improvement was driven by higher ASPs and a richer product mix.
Operating expenses for the first quarter represented approximately 11% of total revenue. R&D for the quarter was approximately $105 million and SG&A declined sequentially to $94 million. Total operating expenses were about $199 million as we continue to prudently manage our costs.
We delivered operating profit of $326 million for the quarter, which translates into an approximately 17.7% adjusted operating margin, roughly 330 basis points better than the year ago period and above the high end of our guided range. First quarter net interest and other expense was $13 million, and we incurred a tax expense of $23 million in the quarter. We delivered first quarter adjusted net income of approximately $290 million, an increase of approximately $58 million from the year ago period. As a result, we reported adjusted diluted earnings of $0.52 per share for the quarter.
Let me now provide some key balance sheet and cash flow metrics. Cash flow from operations for the first quarter was $479 million. CapEx for the quarter was $957 million or roughly 52% of revenue. At the end of the first quarter, our combined total of cash, cash equivalents and marketable securities stood at approximately $3.2 billion. We also have a $1 billion revolving credit facility, which remains undrawn.
Before I transition to guidance for the second quarter, I will comment briefly on the outlook for the year. As Tom articulated in his prepared commentary, we believe that the first quarter represents the low point for our revenue in 2023 and that we will grow slightly on a sequential basis quarter-to-quarter to quarter-to-quarter throughout the year.
Although we only guide 1 quarter at a time, our expectation based on our internal models and our discussions with customers, is that the second half of 2023 will signal the normalization of inventory levels and that increased volumes are forecast to occur later in the second half than previously anticipated. Based on updated models, we expect that year-over-year shipment volumes for 2023 will decline in the high single-digit percentage points range, partially offset by modest improvements in ASP and mix, resulting in a 2023 year-over-year revenue decline in the mid- to high single digits.
Next, let me provide you with our outlook for the second quarter. We expect total GF revenue to be between $1.81 billion and $1.85 billion. Of this, we expect non-wafer revenue to be approximately 10% of total revenue. We expect adjusted gross profit to be between $498 million and $527 million. We expect adjusted operating profit to be between $288 million and $327 million. Excluding share-based compensation for the quarter, we expect total OpEx to be between $200 million and $210 million.
At the midpoint of our guidance, we expect share-based compensation to be approximately $45 million, of which roughly $16 million is related to cost of goods sold and approximately $29 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 $20 million and $25 million. We expect adjusted net income to be between $256 million and $299 million, on a fully diluted share count of approximately 558 million shares. We expect adjusted earnings per share for the first quarter to be between $0.46 and $0.54.
For the full year 2023, we continue to expect CapEx to be approximately $2.25 billion.
In summary, strong operational performance and proactive decision-making across our business enabled us to deliver first quarter results broadly in line with the guidance ranges we provided in our fourth quarter earnings update. We are continuing to tackle the challenges presented by the cyclical headwinds impacting our industry and are implementing initiatives to mitigate their impacts on our business as we remain focused on delivering the strategic goals and financial targets set out in our long-term model.
With that, I'll turn the call back over to Tom.

Thomas H. Caulfield

Thanks, Dave. We are proud of GF's 14-year history and specifically the strong progress we have made over the last several years. But the opportunity ahead is even more exciting for GF. In a world that depends on the supply of semiconductors for economic, national and supply chain security, we offer our customers a unique and differentiated value proposition. We achieved this by focusing our innovation on application-specific features, our end markets require and deliver these via deep customer partnerships.
You've heard the story play out as we've continued to achieve significant growth in sectors, such as Automotive and IoT, two of the most exciting growth engines for our industry. What's different about these markets is that innovation required to win is not based on Moore's Law scaling. GF wins in these end markets because we deliver industry-leading power efficiency with our proprietary FDX technology.
We win because we bring world-class RF connectivity across all our technology platforms, allowing for optimized digital and analog content in customer designs. And we win because we add intelligence and security at the edge with a range of world-class embedded memory technologies. The proof is in the numbers. As you heard early on during the call, we are continuing to grow our revenue in these markets, and it's our differentiation that is driving that.
We see secular acceleration of the role of semiconductors in the world. We believe in the criticality of secure manufacturing to deliver products to global markets. And we are committed to continuing to invest in our global talent so that GF can play an increasingly vital role in the future of this industry.
It is in that context that I'm delighted to announce two accomplished leaders who are joining the GF leadership team to help drive our business and our technology leadership and accelerate our financial performance during the next exciting phase of our journey.
Industry veteran, Niels Anderskouv, will be joining us in June as our Chief Business Officer. Niels will own and deliver our product and technology road map, our commercial strategy and our go-to-market execution. Niels comes to us following a 20-plus year career at Texas Instruments, where his last role was as Senior Vice President and Executive Officer, responsible for the company's multibillion-dollar analog power business.
He brings deep expertise in power management, analog and mixed signal technologies and an impeccable track record of driving and delivering financial performance. Our existing product end markets sales and technology teams will report to Niels.
Additionally, Tim Stone will be joining GF in June as our Chief Financial Officer. Tim will build on the strong foundation laid by David Reeder, and we'll focus on accelerating our financial performance, enhancing our investment discipline and continuing to bring transparent communication to all of our stakeholders.
He brings a world-class finance pedigree to GF, including 20 years at Amazon in senior finance roles, including as CFO for the AWS and Devices business. Tim is a seasoned public company CFO, with experience at Ford Motor Company, Snap and most recently as the CFO for a private AI software company. With his breadth of experience and track record of delivering business outcomes in fast-moving technology-enabled industries that GF serves today, Tim brings new and vital perspectives to help guide GF in its next chapter.
David Reeder will be leaving GF after transitioning to Tim Stone over the coming months. Dave has been a true partner to me through our transition to the public markets and has left an indelible imprint on GF and on me personally. On behalf of the entire GF family, I wish Dave the best of success in his next chapter.
Dave, I'll turn it back to you for your final thoughts before we head into Q&A.

David W. Reeder

Thanks, Tom. 3 years ago, I joined GlobalFoundries with a singular mission, one that was shared across GF's talented and diverse workforce, to build the world's leading and only geographically diversified, feature-rich semiconductor foundry. We have made tremendous progress towards this goal, and have never been better positioned to serve our customers' increasing demand across multiple markets as a secure geographically diverse partner with best-in-class technology.
With all the progress GF has made, I'm ready to hand over the reins to Tim Stone. I look forward to welcoming him to GF and will continue to support the company as we complete the transition over the coming months.
In closing, I wanted to extend my appreciation to our 13,000 employees around the globe who deliver every day for our customers.
With that, let's open the call for Q&A. Operator?

Question and Answer Session

Operator

(Operator Instructions) And our first question comes from the line of Harlan Sur with JPMorgan.

Harlan Sur

Dave, thanks for all the support and helping the team drive the strong execution profile. And best of luck on future endeavors.

David W. Reeder

Thanks, Harlan.

Harlan Sur

The team's pricing is based on technology differentiation, right, which drives the very high mix of sole-source engagements. And your partnerships are not arm's length, right, but very strategic.
On the flip side, I mean, the supply/demand dynamics in the industry have weakened. Competitors continue to add capacity. You did say that the team is still on track to grow ASPs this year. What about on new business and LTAs that you're winning, LTAs that you're negotiating? What's the ASP trend on the new business?

David W. Reeder

Thanks, Harlan. Look, when I think about our pricing, the first time we talked about pricing for 2023 was on our November call, where we said we thought pricing was going to increase on a year-over-year basis in '23 versus '22. We reiterated that again in February. We delivered it in Q1, and we're kind of reiterating it for the year here in 2023 that we believe that pricing will increase slightly on a year-over-year basis, '23 versus '22.
When we look out in time and we think about the [D] wins that we're winning and the LTAs that we're signing, five of them in the first quarter, another $1.4 billion of LTAs, those LTAs deliver the economic value that GF needs to deliver our long-term financial model. And so I think customers are looking through this kind of near-term perturbation with the inventory in their channel, they're looking out into time.
And they are seeing capacity constraints in the future, particularly in the geographies where they want that capacity and they're hungry for that geographic diversification as well as the technology that you have delivered.
Tom, anything you'd add to that?

Thomas H. Caulfield

Yes. I'd add, this is the bottom of our slowdown, and we sign these kinds of long-term agreements. Our single-source base business, if you look at the design win mix -- for the first quarter, over 90% were single-source business. And our discipline around design wins, we make sure that all new design wins are accretive to our financial model. And that's the way we're driving our business. It's not about all business, it's about accretive business.

Harlan Sur

And then for my follow-up, given the weaker full year revenue outlook, you should still grow your revenues on average like mid-single digits sequentially in Q3 and Q4. You've got the strong ASP profile. So how should we think about the gross margin profile for the remainder of the year? Can the team exit this year at 30% or better gross margins?

David W. Reeder

So Harlan, as you know, we'll guide 1 quarter at a time, but we did want to give you some of that color for the year. That stated, I would like to add a little bit more context. When you think about 2022 -- for the year of 2022, we ran utilization in the very high 90s percent for the entire year, almost 100% for the entire year.
And so when you think about 2023, in the first quarter, we guided that we would run in the mid-80s from a utilization perspective. As you know, every 5 points of utilization is roughly 2 points of gross margin. But yet when you look at what we delivered in Q1 from a gross margin perspective, it was actually very much in line with what we delivered for the year of 2022.
And so we've been able, through good operational performance, improved mix, improved pricing to be able to reset the gross margin baseline for 2023. And so when you think about the full year, Q1 being the lowest quarter for our revenue, we stated that we believe we would guide on a Q-to-Q-to-Q-to-Q basis sequentially throughout the year. I would expect there to be a high correlation of gross margin and revenue.

Operator

And your next question comes from the line of Mark Lipacis with Jefferies.

Mark John Lipacis

Dave, sorry, you're leaving. I really appreciate all the great support that you've given us over here at Jefferies. On the topic of reshoring, which is interesting for many investors, it sounds like your engagement with customers is very high. And I imagine that this is because you guys are providing great technology with a good value.
But I guess I'm wondering, is there a way to quantify or how the trend of reshoring is impacting your engagements? Or are customers telling you that part of your value proposition is the ability to bring the manufacturing back to local markets? Or if you can provide any color on the conversations that you're having with your customers on that topic.

Thomas H. Caulfield

Thanks, Mark. It's an important -- I think the realization of how important it is to first to get a more balanced supply chain. Concentration in very small pockets of the world are not good for geopolitical, geological reasons for a lot of reasons.
So the realization is there. And now it always comes down to execution implementation. I would tell you, a lot more awareness and drive in more sensitive applications, think of aerospace and defense, where supply chains out of China, for example, would be very problematic for those types of applications.
A lot of energy out of the fabless companies in China and Taiwan, their businesses could be shut down if they don't have a global supply chain. So I think what we're seeing is a lot more conversations. Companies trying to plan their next move. I don't think it's realistic for anybody to say, let me take an existing design and report it somewhere else.
That's a lot of reuse of important engineering talent, but thinking about future designs and planning it not only on technology and application space, but who and where it's going to be built. So I would tell you, in net of all of that, this still remains an opportunity for us ahead, very little in the present P&L that you've heard today.

Mark John Lipacis

Got you. That's helpful. And a follow-up on the auto business, which is more than doubled on a year-over-year basis. You continue -- you expect to see continued ramp here and you're adding capacity. How -- like can you just remind us like how you think about the growth vector? And auto is doubling annually, is this kind of how we should think about this for you guys? Or could you just talk about how you see this business over the next several years?

Thomas H. Caulfield

So I'll go in reverse order. It's all about what you believe. If you believe that the transition from an internal combustion engine to what we call ACE, an autonomous connected electrified vehicle, drive significant content growth of semiconductors in the automotive industry, somewhere between 10% and 15% compounded.
Eventually, that's the rate at which we expect our growth, but because we're starting with new design wins on new models. And off a relatively smaller base, you'll see a higher growth rate like you've seen from us. Think about -- if we go back in 2020, our automotive revenue was less than $100 million. Last year, it was around the $375 million mark.
This year, we still feel that we're going to be bumping our head up on $1 billion, where earlier we were talking about our fourth quarter run rate. So we have high visibility to the types of applications our technology is going into with cars and the types of features to feel very confident that we're not done growing in this space. But doubling on a big basis, a lot harder than doubling on small base, but I firmly believe that we will continue to grow revenue in this market and gaining share more importantly.

Operator

And your next question comes from the line of Vivek Arya with Bank of America Securities.

Vivek Arya

Thanks and best wishes to Dave on his next adventure. He'll be really missed. So first, I wanted to ask, Tom, you mentioned second half '23 to mark a return to some kind of normal trends. Is that based on historical seasonality? Is that based on specific customer orders?
Because your large smartphone customer was talking about the weakness in the smartphone market kind of persisting towards the end of the year. So that's why I'm just curious what is giving you the confidence that the second half could mark a return to some level of seasonal trends?

Thomas H. Caulfield

Well, I think the point was we're starting -- we start to see normalization of inventories in the second half. And as a result, that's why our revenue will have very modest sequential growth. Inventories are coming down. If you look on aggregate, first quarter, we saw, from an industry range, a modest decrease in inventories, and that bodes well for the second half, especially with certain customers are telling us they want to let the inventories come down. They more normalize how they're feeding the channel, they want to get this past us.
And so the real change, I think, is when we came into this year there was a belief that the second half would be a strong recovery. And what we're seeing in the second half is a more muted recovery. That was the point we were trying to make.

David W. Reeder

And if I could just build on that just a little bit in a couple of end markets. So with respect to smart mobile, obviously, that market is a bit more challenged with some of the inventory there as well as some of the handset volumes.
The bright spot for us is that we do play in that premium segment of the market, where we actually not only play in that premium segment, but we also attach more silicon in that premium segment, and that's a segment of the market that's held up a little bit better. We talked a little bit about automotive earlier in the call, so I won't reiterate that point.
But then the other end market or maybe sub-end market that I would talk about is the aerospace and defense business as well as the industrial side and governmental side of the IoT business has also held up quite well. And so while we've seen smartphone general weakness, and we've also seen some of the lower-end consumer-centric weakness, we do have some other businesses that are helping to offset that weakness. And we've been able to reallocate capacity in a very capital-efficient way to those markets that are growing.

Vivek Arya

And my second question is what is the report card on LTAs that were supposed to be executed this year? Because if you go back, let's say, a year, right, and think about the LTAs that were supposed to come through in '23, what has been the actual realization of that? How much has been pushed out or canceled? What I'm trying to get a sense for is how flexible are you guys with the LTAs? And how much can we depend on them to deliver on a certain amount of revenue expectation for a given year?

David W. Reeder

Great. Let me address that one. And then, Tom, maybe you can build on it as well. So from an LTA perspective, the LTAs are actually performing through their stated purpose. And what was that stated purpose? Well, that stated purpose was that they would create a framework for discussion for GlobalFoundries and our customers, such that when there are inflection points in the market that we would sit down in a rational way, in an equal way and have a healthy conversation around the investments that we've made for maybe demand that perhaps isn't materializing the way we originally expected.
And so we all recognized that we're in an environment where there's too much inventory in the channel. And so just continuing to ship more inventory in the channel actually isn't helpful. And so that framework has really come into play where we have sat down with our customers, and we have looked at the entire economic life and value of that contract, and we've worked across the three main elements that we had spoken about previously, I mean, as early as even our road show.
And that was -- we talked to our customers about price. We talked to them about volume. We talked to them about duration, and we also talked to them about future design win opportunities such that we can capture more share of their wallet in the future to preserve, if not enhance the economic value of those LTAs. And so we've been able to deliver on that.
And so as we mentioned last quarter, we had one customer where we had an underutilization fee settlement. That one was fairly well publicized. We do not have any other new settlements to announce, but what we have been able to do with those contracts is work across that framework that I discussed to not only preserve, but also enhance the economic value to GF.
Tom, anything you'd add to that?

Thomas H. Caulfield

I think that was exactly the intent. It was to create partnerships, to go -- to manage the upsides and the downsides together. And the operative term is preserve the overall economic value of the agreement. And a lot of that has to do with new wins and new opportunities and extending the life of these.
And again, back to a quarter that we're all calling the low point for our industry, we still brought in $1.5 billion of new long-term agreements and $200 million of prepay as part of that.

Operator

Your next question comes from the line of Ross Seymore with Deutsche Bank.

Ross Clark Seymore

David, best of luck. It's sad to see you go. I want to go back to the pricing side of the equation. I know you guys don't guide by wafer units and pricing, but it looks like the first half of this year is on the pricing side going to be up double digits. And you said the full year was going to be slightly up year-over-year.
That seems to imply the second half is going to go down. If that math is correct, is that something to do with mix? Are you having to price more aggressively as part of the negotiations with the LTAs that you just discussed in the last question? Is there any sort of metric that I'm missing in that analysis?

David W. Reeder

Sure, Ross. Obviously, the comparison in the first half are a little bit easier than it compares to the second half of last year. What we've always talked about is we've talked about the pricing would continue to improve as we ramp those LTAs, many of which started ramping in the middle to the last half of 2022.
And so the way we think about pricing is we think pricing at the current levels is very stable, slightly up, and then you're going to bump around a little bit depending on what the mix of your business is. And so when you think about a year-over-year basis, that would lead you to the kind of double -- high single digit, double -- low teens type of growth that you mentioned. And then as you get towards the back half of the year, you look at pricing that's relatively flat depending on exactly what the final mix is.

Ross Clark Seymore

Got it. And then -- from an end market perspective, you said earlier that you reiterated the bumping up against the $1 billion in the automotive side of things. So that's really impressive growth. It seems like that could get you that slight sequential growth in the back half quarters all by itself.
Are there other segments that you expect to continue to go down in the back half? It seemed like you said that inventory should be pretty normalized. So I wouldn't expect them to go up that fast necessarily, but it didn't sound like anything was going to go down. So what's really the offset to the automotive growth?

David W. Reeder

Sure. When you think about the sequential growth in the back half of the year, really, what you're looking at is you're hearing us say -- when we say (inaudible), you're hearing us say, "We feel good about the industrial and the governmental portion of home and industrial IoT."
So that's the A&D as well as the industrial business and IoT. We feel good about automotive. We've taken a more cautious outlook on the low end of consumer as well as the lower end of the handset market. And so that's -- what you've heard us communicate is just the fact that we feel good about those markets on the aforementioned comments and then the other markets, we've just taken a cautious outlook.
And if the inventory normalizes the way we expected, then perhaps we'll do slightly better. If the inventory and the macroeconomic kind of low-end malaise continues, then we'll be in line with what we told you. So we feel like we've positioned ourselves conservatively.

Operator

Your next question comes from the line of Joseph Moore with Morgan Stanley.

Joseph Lawrence Moore

And let me add my thanks to David, and good luck. In terms of the CapEx, you guys maintained this $2.25 billion from last quarter. Your revenue outlook is a little lower for the year. So I wonder if you could just kind of walk us through the trade-offs that you're making. Is that confidence in 2024? And what are the -- just what are the trade-offs between trying to drive more cash flow versus trying to invest in the business?

David W. Reeder

Sure. So first, let me start with -- just by saying that the majority of that CapEx is really related to Fab7H on our campus there in Singapore and really giving us the capability longer term to be able to satisfy some of these LTAs that we're signing today as well as some of those LTAs that we've signed in the past.
Before I just immediately direct your question -- I do -- address your question, I do want to provide a little bit of context. When we talked about our expansion plans, we talked about increasing our wafer capacity from about 2 million wafers in 2020, to about 2.4 million wafers in '21, to about 2.6 million wafers last year, to about 2.8 million wafers this year, to north of 3 million wafers in 2024. And we're actually very much on track to deliver that capacity. In fact, we're on track to deliver that capacity with probably what will be something like $3 billion less CapEx than originally anticipated for that total expansion that I just mentioned.
And so we feel like we have appropriately positioned ourselves for growth in the future, for the business that we're winning, both through LTAs and design wins. We will continue to make trade-offs with regards to free cash flow for the period. In fact, we stated last quarter that we thought we would be free cash flow positive for the year.
I'll reiterate that on this call that we believe will be free cash flow positive for the year. And then as we look to the future, we are very well positioned with capacity for future growth.
Tom, anything you'd add to that?

Thomas H. Caulfield

Yes. Joe, let me do a little (inaudible) here. Average price 3,000, 3 million wafers. We've essentially positioned the facilities -- our factories to give $9 billion plus of revenue for the future without any -- just on the wafer business, not even the non-wafer revenue.
So the capital we've planted is going to allow us to grow and actually respond to the market much more quickly than we were in 2021 when we had to build that capacity. So I think the capital that we've deployed has really positioned the company for the eventual growth, and it will make us a lot more capital efficient as we think about 2023 and 2024 and beyond.

Joseph Lawrence Moore

Great. And then in terms of your overall utilization of your capacity, we continue to hear about from some of the automotive-centric companies that there are some bottlenecks still in terms of specifically nonvolatile memory-oriented MCU processes for automotive, things like that.
I know you've talked about broad fungibility, but are there still any areas where you guys would say, here's a hotspot where if we can add a little bit more of this type of capacity we can grow more?

Thomas H. Caulfield

Yes. There's never a perfect world. This idea that supply matches demand every day, every month for a year is not there. And there are segments and customers where we are scrambling to find enough capacity in the corridor to make those very specific platforms with the features.
And so we see that, too. We see that we're still in a game of trying to respond to the complete set of customer demand. Notwithstanding that, we still will deliver our full outlook on the automotive business for this year.

Operator

Your next question comes from the line of Raji Gill with Needham & Co.

Rajvindra S. Gill

And best of luck to you, Dave, as well. So just a question on the smart mobile market. That's really one of the main drivers of the weakness. I wonder if you could maybe break it down a little bit more specifically in terms of where you're seeing the softness in terms of technology? Is it more on the -- with the RF front-end module customers? Is it with some of the NFC? Or is this just kind of across the board given kind of the large inventory correction that's occurring in the smartphone industry? Any color on the smart mobile will be helpful.

Thomas H. Caulfield

Maybe Dave, I'll start on this point. So with the industry outlook, last year, double-digit decline in handsets this year at 3% with an inventory climate. So this is the broadest stroke and most heavily weighted is just in unit sales.
As David pointed out before, at least the premium handsets are impacted less than any other handset, and that's where we have high content. In fact, I think our smart mobile -- smart devices -- smart mobile device business is faring better because of some important design wins we had last year that is shipping this year that's offsetting some of this decline.
So it's not any particular element or feature in the handsets, it's just the overall volume. That's a high -- high fraction of the fact that our smart mobile revenue -- smart mobile device revenue was only 38% in Q1 for this year.
David, anything you would add to that?

David W. Reeder

No. Well stated, Tom.

Rajvindra S. Gill

And just for my follow-up regarding pricing, you talked about some of the pricing in the near term. But if you kind of think about long term, there's been discussions around if wafers are made in the U.S. that domestic foundries could charge a premium in terms of pricing. So there's been chatter about that. Is that something that you are debating with customers? Is that a reality, premium pricing for kind of wafers made in the USA?

Thomas H. Caulfield

I would say it this way. What you're hearing about is capacity being put on, capacity drives investments and investments require competitive returns. And so you're seeing -- with the reality of the right economics to go create new capacity on these nodes and how do we do it in the most efficient and economic way?
And the answer is, we have a very disciplined industry environment. Capacity is being put on in partnership. Investments that is being put on with long-term agreements. And what I think that does -- it's really healthy for the industry, and it creates a very constructive environment that -- with through partnerships that the investments that companies make will get healthy and competitive returns.

Operator

And your next question comes from the line of Chris Danely with Citi.

Christopher Brett Danely

Just to get a little more specific in terms of what's going on this year. Can you just talk about how much in aggregate of the LTAs have been pushed out? And then what's been the change? Or how much change in pricing have you had to renegotiate?

David W. Reeder

Sure, Chris. Look, when we think of this year, if you go back to our Capital Markets Day, we thought we were going to essentially be fully utilized this year. Now not all of that was covered with LTAs, but that -- between LTAs and POs, I mean that was our expectation this year.
And as we kind of rolled into the year and we looked at the inventory positions in the channel, and we looked at how the sell-through was going based upon the macroeconomic backdrop that we're in, we recognized with our customers that continuing to build inventory was the wrong decision. So we sat down with those customers, and we started working on the framework of the LTAs to be able to preserve the economic value of those contracts because of the dollars that we had invested in capacity.
And so what I can say I can't speak specifically contract by contract. I can tell you that we did close a contract that we disclosed or maybe they disclosed, but it was broadly talked about where there was an underutilization fee. I do not believe that we're going to have significant underutilization fees that are required throughout the year, and certainly, that's not really factored in a meaningful way, I would say, for our annual forecast for 2023.
We've been working with those customers to take the economic value of those contracts, preserve them as well as to ultimately enhance our value and deliver our long-term model. And so I think that's probably the most that I would add there.
Tom, anything that you would add to that?

Thomas H. Caulfield

Yes, a minor add to that. When you think of single-sourced business, it's not -- if I -- if there's price elasticity, if I low this price, do I get more volume? The volume is the volume and the price is the price. And the question is, how do you go work through an inventory correction like this? It's not -- let's go win share by price elasticity.
That's the value proposition we provide to our customers. We have single-sourced business differentiate. They can differentiate their products, but we can be a better supplier to them in great times and in the inventory correction time.

David W. Reeder

And if I could just add one point. I don't know of a contract that we've amended in which price went down in the LTA amendment. So when the volumes are being decommitted, the conversation isn't about, how do you decrease price to try to stimulate demand when you have too much inventory. So it's usually the going in the other direction. So hopefully, that's a helpful clarification.

Christopher Brett Danely

Very helpful. And for my follow-up, great job on landing Niels. He's got a good reputation. I guess, Tom, can you talk about the genesis of the CBO job? I don't think you guys have had this before. Is this just to sort of manage this downturn that seems a little more longer and serious than expected? Or just talk about why he's coming over and what his specific duties are going to be?

Thomas H. Caulfield

Yes, very good. It has nothing to do with this downturn. It has everything to do about our future. We -- the complexity of our business and the uniqueness of being a foundry requires a tight coupling between understanding the end markets and the specific requirements in end markets. So we need to be as much as an expert as our customers and understanding the future where end markets are going so that we can create product lines, by definition, to meet those end markets and then drive our technology development in an aggressive and accelerated way.
And we need the three of those areas to come together with one executive who can integrate that activity. And so our commercial team, with -- under one (inaudible) with our business unit team under Mike Hogan and our technology development under Gregg Bartlett, altogether will report into Niels to drive that integration, to accelerate our financial and commercial success and performance.

Operator

Your next question comes from the line of Mehdi Hosseini with SFG.

Mehdi Hosseini

I have two follow-ups. David, do you have any guide for EBITDA in Q2 and 2023? And I have a follow-up.

David W. Reeder

Sure. Mehdi. EBITDA guide. I would think about EBITDA, on a sequential basis as tracking with the marginal fall-through that you'd see from slight revenue growth. So I think that statement holds true for second quarter as well as the subsequent quarters where we are expecting sequential growth throughout the year, kind of Q-to-Q-to-Q for the remainder of 2023.

Mehdi Hosseini

Got it. And best of luck in your next endeavor. And a question for Tom. I understand there's a lot of insight over the inventory correction, which is nothing new, given the cyclical nature of the industry. But what I wonder to learn from you, maybe it's a good time for you to remind us in a smartphone and electric vehicle and outside of the SOI wafer, what are the -- some of the key products or drivers for increased content, especially as you look into post inventory correction? It would be great if you could remind us of those key growth drivers outside of the core SOI wafers.

Thomas H. Caulfield

It starts with embedded memory for microcontrollers for automotive. It starts with our BiCMOS device technology for higher voltage, if you think of power management, chips with embedded memory for both control and power management.
It's a suite of applications and technologies beyond our RF SOI, which features in the front-end module of phones. And so I said it earlier in my remarks we are the ultimate player in low power on our FDX platform.
We bring a broad range of RF to all our platforms, not just for front-end modules, but for all levels of connectivity, especially in the IoT space. And then the winning play is to create intelligent and secure processing capability by having industry-leading embedded memory in our solutions. And that's what plays to the strength of these end markets.

Mehdi Hosseini

Is there a key milestone or a threshold for increased adoption, specifically electric vehicle? Is this -- or is this just going to be a steady-eddy kind of adoption as electric vehicles prolific, then you will see increased contract? Or is there a milestone that would accelerate that adoption?

Thomas H. Caulfield

So I think if it was just an electrification of cars, you'd start to look for inflection points of how model years come where units of -- internal combustion cars go down and fleets change or brands change their fleet strategy.
But because it's about autonomous and connectivity in the car, it's not just one driver. And we play in a broad range of those applications. I don't think I could pick a particular car model year-on-year has less features in it. In fact, it becomes a standard each year. So think of this as about a transformation of the auto industry, not just to electrification, but to connected cars to autonomous cars, and that's the range of -- and suite of products and applications we...

Sam Franklin

[Bella], we'll take one last question, please.

Operator

All right. And your last question comes from the line of Krish Sankar with Cowen Company.

Krish Sankar

David, thanks for your help, and good luck on the next endeavor. I have two questions, either Tom or David.
Number one, on ASPs, it's nice to see ASPs holding up despite lower volumes. But next year as more double-digit nanometer capacity comes online for the industry, how to think about ASPs into next year? And then I have a follow-up.

David W. Reeder

Sure. When we think about ASPs for 2024, again, I'll kind of point you back to that Capital Markets Day presentation. If you stood back and kind of squinted at that chart, you would see that we had LTAs that covered about 3/4 of the capacity for 2024. And so I would say that a lot of the pricing discussion has already happened. It's already been memorialized, and it's already been signed in a contract.
So then you look to the future and you say, well, what does pricing look like in the future? And when I look at the new design wins and the new LTAs that we're signing, pricing is holding up very, very well. In fact, I'd say pricing is actually delivering -- it's accretive to our long-term financial model that we had put out as we became a public company.
And so it remains a very constructive pricing environment in the future. I recognize that there's more single-digit nanometer capacity that's come online. And even in some regions of the world, more double-digit nanometer capacity that has come online. But as we've always stated, our interest is in differentiated accretive business where we provide and attach a lot of GF technologies. More than 90% of our design wins in Q1 were single-sourced design wins.
We remain kind of around that 2/3 of revenue is single source revenue. And over time, those two numbers will converge. And so we feel quite good about pricing.
Tom, anything you'd add?

Thomas H. Caulfield

Yes, it's back to -- the economics for investment we'll be forced for a much more constructive environment for how we all fund the doubling of this industry over the next decade.

Krish Sankar

Got it. Super helpful. And then just a quick follow-up. Obviously, the auto industrial segment has held up pretty well for you folks and many, many other folks of the industry. Kind of curious, do you worry that, that could be the next shoe to drop or it could moderate as smartphones start getting better and dampen what could be a stronger recovery?

Thomas H. Caulfield

For the horizon that we see in talking to our customers, and the fact that this transition we've been talking about this morning, autonomous connected and electrification cars, see the next decade automotive is a key driver for our industry because we continue to add more and more content to these cars. The key for GF is to make sure that we are developing the technologies that best meet those needs and provide differentiation for our customers.

Operator

And we don't have any further questions at this time. I will now turn the call back over to Sam Franklin.

Sam Franklin

Thank you, Bella, and thank you, everyone, for joining us today. We appreciate the questions. And as always, look forward to seeing many of you on the upcoming conference circuit.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect. Have a good day.