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Chip supply constraints ‘a continuum’ amid rising demand: GlobalFoundries CEO

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GlobalFoundries CEO Tom Caulfield joins Yahoo Finance Live to discuss the company's latest earnings results and the chip supply shortage.

Video Transcript

AKIKO FUJITA: Well, shares of US chipmaker GlobalFoundries pushing higher in the session today after the company's earnings topped estimates in the fourth quarter. Revenue in the quarter came in at $1.8 billion. That marked a 70% jump from the same period a year ago. 2021 also saw GlobalFoundries announce major collaborations and expansions, including, of course, going public on the NASDAQ back in October. Let's bring in CEO Tom Caulfield, who's joining us this morning. Tom, certainly a very strong quarter for you. Investors seem to like it. Talk to me about the key drivers that you saw.

TOM CAULFIELD: Well, first, thank you for having me on the show. And I have to tell you, I'm just amazed. Our team has been nearly two years through a pandemic, hasn't missed a beat. They deliver each and every quarter for us. And I'd be remiss-- and I say we're proud of our results, but we're even more proud of our team.

BRIAN CHEUNG: Hey, Tom, Brian Cheung here. I mean, tell us a little bit about the big supply chain story, which has really remained a focus through the last few quarters, really. We've heard optimism, but not necessarily assurance from some of the other large chip makers so far that maybe those supply chain issues will alleviate the beginning of this year. What are you seeing on that front? What do you think that you expect this year?

TOM CAULFIELD: Yeah, we have a really interesting position, right? We addressed many end markets, a broad base of customers. I think the conversation always gets stuck as if it's a 1 or a 0. We're either supply constrained or we're fixed, and it's really a continuum. We see-- we're hoping during 2022 that we get better balance.

But there's still a big mismatch between the industry's ability to create capacity, including GF, and the demand we see in front of us. So we're hopeful it'll get a little bit better this year. But I think this is a situation where, for the better part of the next five years, the industry, including Jeff, will be trying to chase more capacity to meet the growing demand of our industry.

AKIKO FUJITA: Yeah, can you elaborate on that a bit more? I mean, we talk so much about the shortage and the supply side issues, but to what extent has demand been accelerating at the same time? What does that ultimately mean about how long it's going to take to balance things out?

TOM CAULFIELD: Yeah, look, I think there's some real great perspective on that. We sit here today as an industry at a half a trillion dollars. It took 50 years to grow this industry to half a trillion dollars. And it depends who you ask, but the range is between the next 8 to 10 years, we're going to double that, become a trillion dollar industry. And that's a five times acceleration. And think of the amount of capital that needs to be deployed to create that type of capacity. What took 50 years now will take 8 to 10 years.

And I think that's the magnitude of what we're dealing with here, this acceleration of our industry that's going to grow five times faster than it did in its history over the coming years ahead. That's the challenge for all of us. That's the challenge for GF to add capacity in a very thoughtful way in partnership with our customers.

BRIAN CHEUNG: So Tom, some of the customers that you have are in the car industry, no surprise. BMW, Ford, I believe, are some of your partners. Tell us a little bit about the demand for chips from the car side of things because what's interesting is there were these reports about Tesla actually cutting out some chips from some of their steering components because they were facing this shortage. How are those kind of negotiations happening between the chip providers and some of these auto companies who really, really need a lot of these chips?

TOM CAULFIELD: Yeah, I think what you're seeing is a couple of pieces here. First is while units of autos is not growing at a terrific rate or a big rate, the amount of semiconductors in content and features being provided in automotive automobiles is growing in high single digits. And that's creating this demand scenario.

The supply piece is just in general, the world needs the pervasive deployment of semiconductors-- auto's no exception on that. I think what you're seeing a little bit different from the automakers is they're going to be a lot more proactive in securing capacity in the future. They don't buy directly from a company like GF. They buy it through a tier one supplier, then a tier two, and then it comes to GF. And we're finding these automakers are interested in sitting down and reserving capacity that they could direct their supply chain to use later on so that they know they have the capacity in place to grow their business.

And that last point you made, what I've heard the same thing, too, is it's better to ship a car, take a feature out, it's modular, and then later on when that chip set's available, you could put the navigation system into the car or whatever feature you took out to be able to ship the car to a customer. I think that's just the symptom of what you're seeing in the chip shortage for the auto industry.

AKIKO FUJITA: All of that points to continued demand for GlobalFoundries. Tom, we'd love to have you back on the show again soon. Tom Caulfield, GlobalFoundries CE--