GLOBALFOUNDRIES Inc. (NASDAQ:GFS) Q4 2023 Earnings Call Transcript

GLOBALFOUNDRIES Inc. (NASDAQ:GFS) Q4 2023 Earnings Call Transcript February 13, 2024

GLOBALFOUNDRIES Inc. beats earnings expectations. Reported EPS is $0.64, expectations were $0.59. GLOBALFOUNDRIES Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day and thank you for standing by. Welcome to 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 speakers’ presentation, there will be a question-and-answer session. [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. Please go ahead.

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; Niels Anderskouv, Chief Business Officer, along with David Reeder, for his final earnings call and I am very pleased to welcome to the call, John Hollister, who was over from David’s CFO as announced on December 11, 2023/ 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.

The most directly comparable IFRS measures and reconciliations 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 or by the use of the future tense. You should not place some due 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 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, following which Dave will provide details on our end markets and fourth quarter results while John will provide first quarter 2024 guidance. We will then open the call for questions with Tom, Dave, John and Neils. 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.

Thomas Caulfield: 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. Although, we are starting to see the inflationary headwinds moderate, the ongoing high interest rate environment has undoubtedly led to a prolonged and deeper cyclical downturn than what’s 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 marketed backdrop.

We diligently managed elevated costs and lower utilization levels to deliver gross margin expansion and revenue, which align 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. 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 have 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. 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 the macroeconomic weakness and geopolitical uncertainties persist. Based on discussions with a broad range of our customers, we expect that inventory reductions we driven by channels 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 2020 results, which Dave will comment on further.

Revenue in the fourth quarter increased sequentially to $1.854 million dollars, 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 to customers’ near term volume requirements and associated under utilization payments. We delivered adjusted diluted earnings per share of $0.64 cents which was also 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 on our capacity over recent years and the resulting reduction of our CapEx profile as we progressed 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 $1 billion of revenue surpassing the expectations we set out on our prior earnings call enduring 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. GF is supporting the development of critical sensing, processing and safety features to the automotive industry, across our most competitive technology platforms at Auto-Grade 1 standards.

These products span the breadth of our portfolio from 12 LP plus, our finFET platform, all the way through our expanded voltage handling capabilities at a 130 and a 180 nanometer technologies. Through these offerings, we believe that GF will play a key role in the long-term transition 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 end market revenue and share, even as the industry goes to a period of demand moderation. Turning now to smart mobile devices, 2023 saw excess build 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 continued to remix our business towards the premier tier of the handset market, where demand levels and average selling prices per wafer have remained resilient. GF’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 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 to the premium tier front end module segment.

We are also providing outstanding connectivity and low power performance on GF’s 22FDX RF millimeter wave technology, which went into volume production that will enable industry-leading 5G millimeter wave capability in premier tier android phones. In IoT, we continue to innovate our differentiated technologies, focused on ultra low power efficiency, and embedded memory for AIBH 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 mix signal technologies. Additionally, our US 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 secured chip manufacturing in the United States across a number of critical applications. 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 manometers, we are actively managing these industry trends and executing opportunities to remake some of our excess capacity to serve this 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 A facility in Malta New York, which will offer even more choice to our customers across multiple end markets and increased utilization opportunities here in the US. Customer partnerships remain a core of our business plan and I am pleased 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 and are closely monitoring for signs of improved demand in Mexico, economic indicators, while our customers actively manage down the inventory levels.

Given these dynamics, there were 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 GF is uniquely positioned as one of the world’s only pure play foundries with capacity to support our customers across Asia, Europe and 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 has 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.

David Reeder : Thank you, Tom, 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 excludes 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. Despite this decline, AFPs for the full year were flat compared to 2022, which aligns with our commentary from prior quarters. Wafer revenues from our end-markets accounted for approximately 88% of total revenue. Non-wafer revenue, which includes revenue from reticles, 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 and 11% decrease from 2022 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 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 and the mid to low tier handset market, partially offset by mix in ASP improvements. 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. 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, ASP 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, 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 automotive, which as Tom outlined has been a key growth segment for us throughout 2023. Fourth quarter revenue represented approximately 17%, Revenue for the quarter increased approximately 5% sequentially and roughly 177% year-over-year principally due to higher ASP and mix dynamics as semiconductor content and features increased 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 end 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 of your basis. 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 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 qualifications. Finally, our personal computing end 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.

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. Gross margin was at the high end of the guidance range indicated in as Tom and 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 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 to Onsemi in the fourth quarter of 2022. As a result, we reported diluted earnings of $0.64 per share for the fourth quarter. 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. 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. With that, I am very pleased to report that free cash flow for the full year, 2023 was $321 million. As Tom noted, this is an important milestone for GF 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 GF employees for their 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 GF team.

John Hollister: Thank you, Dave, and good morning, to everyone on the call. It gives me great pleasure to be taking over as GS new CFO and I would like to echo Tom’s comments and thanking Dave for all he has done for the company. Manufacturing is at the hearts of today’s dynamic semiconductor industry and notwithstanding the ongoing inventory dynamics impacting the semiconductor industry. I am truly excited about the opportunities ahead for GF as we deliver innovation and essential chips for our global customers. Now let me provide you with our outlook for the first quarter of 2024. We expect total GF revenue to be between $1.5 billion to $1.54 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 million 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 $8 million and $20 million. We expect net income to be between $100 million and $156 million. On a fully diluted share counts of approximately $561 million shares, we expect earnings per share for the first quarter to be between $0.18 and $0.28.

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

Operator: [Operator Instructions] Our first question comes from Harlan Sur with JPMorgan. Your line is open.

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Q&A Session

Harlan Sur : 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 your customer trends these customers also saying that even with an improvement in their revenues over the next one to two quarters that their internal utilizations and foundry request starts may lag revenues due to their high inventory levels. So how do you see the profile of the business through 2024? And maybe an important consideration in a potential recovery, maybe the move of some of your finFET customers away from GF to single-digit, nanometer competitors and backfilling, remixing some of this rough customer business maybe a bit challenging in this environment, putting more pressure on multi utilizations, maybe the overall magnitude of the potential revenue recovery. Just help us understand how all of this shapes to2024 profiles for the team?

Thomas Caulfield : Hey, good morning, Harlan. This is Tom. I’ll start. Very good. You actually got two questions in the first one. But let me start on get the overarching question you’re asking is, how does 2024 shape up? What we see happening? But you have to – you can’t look at one quarter of this year without first looking back. Let’s consider 2023. GF’s performance and when I would call like-for-like and I would call like-for-like semiconductor companies playing in the comparable end markets street play in serving with the same technology, I would rank GF in the high end of performance where we were down 9% year-on-year compared to others. If you think a little bit about what we talked about in our fourth quarter earnings call said while we were finally seeing inventory peaking which is the beginning of a good trend but not anywhere near we needed to be we set forward into 2024.

And so, we look back now what happened in Q4 of 2022, our customers we started to see meaningful increase in inventory especially in areas like smart mobile devices which is a significantly part of our revenues and Dave just talked about is 20%. And so what you are seeing now good that is inventories coming down were still at the high end of absolute inventory and we need that to be worked down. When we talk to our customers, I think universally, they are see in the first half of 2024 to be in the period of inventory corrections finally working downs that true demand is starting to surface with an exception having a curve, but now look, that’s got to be predicated on strong consumer demand and better work on inflationary prices are driving interest rates high.

So we need to see that start to come into play this year as this inventory works down. And look, actually for GF, another testimony to our single sourced business, – agreements we set, this is a pretty deep and long cycle for the industry, the fact that we manage through with leveraging our LTAs and customer relationships, we dampened some of that amplitude into what we trade-off and dampening that, amplitude has taken a little bit long in the time horizon to come back. So, the end part for me is, we believe this the low point in tough line for us in Q4 and we will continue to grow revenue throughout the year. And then that second question is – on the finFET moving up, we reported earlier that, yeah, in these downturns this is when customers move more quickly and some of our technology in a finFET 12 nanometer was getting displaced by going to single-digit nanometer.

With that, it’s not the whole story of our – first of all on our finFET technology we are going to continue to develop this platform in building up like we’ve done that was adding better RFP facility, adding better memory like the assisted RAM is the technology have to service well. What we’ve learned in the past about our success with GF in leveraging our assets is to make sure that our facilities have a range of technologies deployed in that because different end markets react at different times and once could be up and one could be down. If you recall, when we announced last year that we’re bringing 40 nanometer embedded memory to our FAB 8 facility as part of our GM deal. We’re actively ramping up 22 FDX technology in – to get that diversification.

So while single-digit nanometer may be accelerating in the some of the FinFET business we had at the same time where accelerating the deployment of bringing new technologies to our FAB 8 facility so we can easily mix that capability.

Harlan Sur : Perfect. And then from a follow-up. Yeah, the team has done a really good job of working with customers against their LTAs and in return getting getting painted or feeds for resolutions on these agreements. But back in October of last year, one of your large RF customers actually decided to terminate their supplier agreement with GlobalFoundries pay a $55 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 would an important customer pay $55 million to terminate the supplier agreement with you just given all of the technology differentiation that GlobalFoundries brings to the table?

Thomas Caulfield: Yeah, let me answer that reverse. I’ll do the first part on that customer dynamic and then I’ll let Dave or John comment on gross margin. Look, we have to take a determination as an agreement like this is how do we set all the fact that we put capacity on big investments to a customer demand as they materialize and how we work with them. I think this termination is more of a technicality of how we follow it. It doesn’t that customers not doing business with us going forward. And that in the case as a point, we just announced this last quarter recently rather, but on the extension of a long-term agreement with an automotive customer in Infineon. And so, I wouldn’t necessarily read too much into a termination.

That the mechanism by which we work with our customers to make sure we get balance in the supply demand dynamics not forcing our customer to pay more wafers than they need as part of that reconciliation if someone underutilization fees that offsets the cost – quick range. With that let me hand it over to Dave to talk about the fourth quarter and tackle that.

David Reeder: Sure, thanks, Tom. And, let me build on a point a point that you made on the one that you’re referencing Harlan was from the smart mobile space. 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. So, I would really characterize that as kind of a cleanup activity. In terms of the benefits for the fourth quarter, as I mentioned, total LTAs termination fees were about $79 million, give or take a little bit. So that’s about four points of impact to the quarter.

As Tom mentioned, I would reiterate that for 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 there. John, anything you’d add?

John Hollister: Yeah, but I just want to double click on the point you just made on utilization and how strongly that has correlated to our first margin performance as we pointed out in the past every five points utilization is roughly two points of gross margin and going back to Tom’s comments on the journey. And if you look back to early ‘23 late ‘22 we had our utilization rates in the highs to low 90s. Now, through the first quarter horizon seeing that down into the low to mid 70s. So you can see about 15 to 20 points split there which accounts for lion share of the impact on gross margin.

Harlan Sur : We will move to our next question. The next question comes from Vivek Arya with Bank of America. Your line is open.

Vivek Arya: Thank you for taking my questions and best wishes to both Dave and John. For my first one, you’re guiding Q1 sales down I think about 18% was 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 and Q2 but start a process of recovery, which end-markets do you think and start recovering into Q2 in that scenario?

Thomas Caulfield: Let me start the second part of that question is, I think you’ve seen it from others that given how long and prolonged in downturn smart mobile devices, this could be a year with that business starts to pick up, and given again that how much of that revenue is in a end-market, that’s important. We also believe that this year 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 a broad perspective and broad parts of that market we serve from sensing to micro controllers, to in-cabinet lighting, entertainment and independent of being internal combustion engine car, or electrified vehicle, right that content is comparable.

Niels Anderskouv : But I would tell you, those are the two end markets that we see as part of the ability say in Q1 as a low point. [Indiscernible] top-line in the revenue.

Thomas Caulfield: Yeah, I’ll take, I’ll take a second part of that question, but when you think about first order, as you 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 flow will average us up. In other words, it’ll be better than that average decline. We’re expecting smart mobile devices to be better than that average decline. I’d reference that we expect both of those to actually grow on a year-over-year basis and certainly be better than that average decline sequentially. Obviously, that implies that the other segments will be down a little bit more than that average which will ultimately get you to that down Q to Q about 18%. Did you have follow up questions on that?

Vivek Arya: 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 at least more CapEx in China. We recently saw Intel and UMC announced some kind of partnership and obviously, there is 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 implies for GF’s pricing power over the few years?