Thomas Caulfield: So there’s a lot of different elements to this. Let me start first that build up in China, look buying a bunch of equipment is the beginning of a very long journey. Even to be competitive on kind of base capability of the technology nodes, you need standard sales libraries, PDKs complex IP, foundational IP. Having a tool is not the beginning of a business it’s the beginning of the dream of having a business, and it’s going to take a long time for new companies to take that capacity, the ability to divide tools and convert it into even a base case technology. In the meantime, GF is not sitting still. We’re taking already well established feature rich platforms and continually adding new features to them, offer a base that we’ve had for a long time, they continually differentiate but the GF play, we’ve said it over and over again is we want to be single source differentiated business.
Serving a very simple technology is not where we play and we don’t provide much value to our customers. So for us, is that capacity is in some ways that even playing the segmental replay. The second thing about all that capacity is it’s concentrated in China. We’ve seen more and more the need for more resilient global footprint. And so putting more concentration of that capacity in China doesn’t do anything to some of that. And that’s what our customers are looking for. And we are going to be differentiated in the features we add to our technology that we’re looking for us differentiated and serving that global footprint, they have the technologies that we can build for them, the same product Singapore and right now in US. And then the third part of this right, because the most interesting is it feeds back to this resiliency requirement.
Some of our biggest fab is Chinese customer coming to GF because they want to test and check if there is any supply line because they believe they need the worldwide source to serve the markets. So they can be taking seriously in the world stage that they will not have supply chain issues being concentrated in that. But in that space, the envelope around that investment going in China. Then I think you pointed out the Intel UMC announcement. I think once again it demonstrates that what GF has the rest of world want to get to and that’s a geographically diverse footprint. But certainly we have been in the Western world in US and in Germany. And so, there that partnership is I understand is off to still create a 12 nanometer platform that’ll be ready in 2027.GF is sitting here in 2024 and we’re not done, innovating on the platform we already have to continue to make it relevant in dynamics for our customers, in these very same way.
The other thing about that, I don’t understand how well, the industry has had already has a lot of stack margins of two foundries serving the same market on the same technology node we are taken on. But that’s not, that’s not true. We’d understand it. But we think about our technology is making sure we work closely with our customers to understand the end market requirements and develop technologies that they’re looking for us to go.
John Hollister: Vivek, it’s John. I’ll just quickly add. In light up all the factors Tom mentioned, see a relatively stable and constructive pricing environment taking into account companies to appreciation features, the high percentage of sole source and talk about two thirds of the business in the prepared commentary, as well as this our principle that are provided a long term agreement. So overall, like-for-like we see a distressed pricing environment.
David Reeder : Hey John, it’s just not to put it long, but if you think about it, when you sole source it, we go into service to demand, you can’t use pricing to create more demand. So the bad is you can’t create more demand. The good news is, it’s your demand for whatever it is and the key is that continue to create winning solutions so you can create more.
Thomas Caulfield: And just to remind everybody, 90% of all design wins are sole sourced. Okay. One more before our next question.
Vivek Arya: Thank you.
Operator: One moment for our next question. The next question comes from Ross Seymore with Deutsche Bank. Your line is open.
Ross Seymore: Hey guys. First Tom, let me ask you a question and congrats to both David and John. David, you’ll be missed. My first question is on the node transition dynamic that you talked about. Can you give us an idea of the percentage of your business that you believe is exposed to that? Is it localized to the common infrastructure and data center segment where you said you are reallocating or is that dynamic we should consider in other areas of your business as well?
Thomas Caulfield: Yeah. Look, I think again, we’re talking over a long period of time. As you know, these transitions don’t have been rapidly I would characterize that the portion of the business and I think the question is specifically around FinFET. It’s probably about 20, 25-ish percent of the total business that over the full life cycle will migrate out from what is currently manufactured today. That stated you constantly always have business that’s migrating into that node is well. And so, really what you’re looking at is you’re not looking at of the portion of the business today that will migrate you’re looking at what’s the rate and pace of transition for migration out versus the rate and pace of transition for migration in.
So while 20-ish to 25ish percent of the business that we have today on that node will migrate out just like it has historically. We expect over time, for about the same amount to migrate in. And so what you are managing is the in versus the out if that make sense? Did you have a follow-up question, Ross?
Ross Seymore: Yeah, just wanted to get a little bit of an update on the chipset side of things. You guys have been very clear about the ITC side, especially kind of the OpEx benefits from it, but any clarity on how that OpEx side progressing through the year? And perhaps more importantly, any updates on the grand side of the equation?
Thomas Caulfield: Dave, why don’t you take the ITC part of that and I’ll talk the second part.
David Reeder: Sure. Well couple things on ITC is as you know, we do have the tax benefits where you get back 25% essentially of every qualified dollar of capacity that you’re spending money on to add capacity in the United States. And so that’s a benefit that we’ve been taking advantage of that’s kind of above and beyond these projects that you’re submitting into the chips office for a longer term approval. And we have been taking advantage to our benefit of that for 2023. In fact, in the fourth quarter with what you saw in our prepared commentary was that we had $46 million of benefits that impacted us in a positive way in the fourth quarter and specifically it was spread through some of the operating expenses line as those expenses or those benefits were flowing back to the line in which those charges were accrued.
And that’s – there is also additional benefit in the CapEx line that ultimately will be accrued there as well. And so, we expect those benefits to remain through the life of the program and essentially be a like-for-like benefit based upon how much money that we are deploying in the US. So it’s about a 25% benefit.
Thomas Caulfield: And then, the first part or second so that the status of the chipsset. Look, those discussions are confidential. You can imagine that GF will play in what role in the US. ambition is to create more semiconductor manufacturing in US. I would ask you on the timing of these things to be patient. But I know the White House wants to start getting those dollars deployed post takes. So just be patient on that, But I think the bigger point on this is to remember, it’s not about just having dollars to build fast. It’s about creating the right business model. If you look at what we shipped for revenue in2022 0 sorry, 2023 we shipped about 2.2 million wafers. By the end of this year, we will have through all the investments we’ve made and we will make this year the ability to ship 3 million wafers.
That’s a fair amount of revenue growth that we already have in hand. Now that capacity was put on ahead of demand because that’s part of what our customers had asked is to do in 2022 is they looked ahead and none of us saw the fact that we are going ahead of business that existed. And so we’re really good shape. Just think about as the near term of having a capacity to grow our business right is that demand. When we think about what shifts funding and the ITC means for our future, we come back to how do we invest. The investment that’s certainty, to our ability, profitability. The certainty is we see clarity in demand. We have customers of betting on our capacity, a bedding that we’re going to be an arm of their business is their manufacturing arm.
So we look for them in partnership to go create that capacity. We want to do it in durable networks, where it’s differentiation matters, we’ve talked a lot about automotives, we’ve talked about how much of smart mobile device and connectivity to replace our strength. And then the profitability is really where the economics come in of these government necessities or government co investments that we have to call on. That close of the economics plays in the nature of that. We are continuing to not only in the capital deployment – these facilities which we run. So I think off these government programs is lining nicely with our long-term strategy to share grow this business for the medium to longer term.
Ross Seymore: Thank you.
Operator: One moment for our next question. Our next question comes from Joseph Moore with Morgan Stanley. Your line is open.
Joseph Moore : Great. Thank you. I want to ask about the smartphone business. Your biggest four customers, all kind of guided pretty well and all reduced inventory by about 20 days in the fourth quarter collectively. It sounds like they need to do at least that much inventory reduction in Q1. But, it seems like there should be a pretty big snapback from that as we return to consumption, unless there’s some factor I’m missing in sourcing anything like that. So, maybe if you could just talk to that demand and is that demand environment?
Niels Anderskouv : Yes. I can go for this Tom, if you?
