GlobalFoundries plans up to 800 layoffs despite reporting record profits

Record income? Tick. CHIPS Act subsidies coming? Tick. Yet chipmaker tries to make Wall Stret happier still

US contract chipmaker GlobalFoundries plans to lay off as many as 800 employees, proving that job security is not a foregone conclusion for a company that just reported record profits.

The New York-based foundry business confirmed the intention to The Register on Monday, citing a shaky economy despite its expectation that 2022 will be a banner year for the company and its hope to receive chip subsidies from Uncle Sam.

"As part of a recent all-employee meeting, we shared the cost saving actions we are taking across our business in response to the current macroeconomic environment including reducing corporate and manufacturing overhead costs as well as selectively reducing our workforce by less than 800 employees globally before the end of the year," GlobalFoundries said in a statement.

The planned job cuts amount to 5.7 percent of the company's 14,000 employees worldwide, according to Vermont publication VTDigger, which first reported the news.

The layoffs comes after GlobalFoundries CEO Thomas Caufield told investors in early November that the company was planning to reduce operating expenses in response to "macroeconomic uncertainty" in addition to signals of lower demand from some customers in 2023.

"Though it is difficult to take these actions during a year of record output, we believe that taking these actions now enables us to continue to outperform the market regardless of the economic environment," he said in last month's earnings call.

In other words: to keep Wall Street pleased, GlobalFoundries needs to sacrifice a good chunk of jobs.

Caufield delivered these remarks as the chipmaker reported record profits and revenue in the third quarter, which ended on September 30.

"Our revenue grew 22 percent year-over-year, and we delivered record gross, operating, and net profits, making significant progress towards our long-term financial model. We remain on track to deliver a strong year of growth and profitability," Caufield said in a canned statement.

According to VTDigger, GlobalFoundries executives were silent at the recent all-hands meeting in response to multiple questions about why the company couldn't prevent layoffs with its recent profits.

The layoffs are expected to mostly impact non-manufacturing positions such as executives, Caufield told employees at the meeting, VTDigger reported.

GlobalFoundries has been performing so well recently that in September it joined the Philadelphia Stock Exchange Semiconductor Index, which ranks the 30 largest semiconductor companies listed in the US by market capitalization.

The chipmaker, which spun off from AMD in 2009, is also making the cuts as it receives $30 million in federal funding to develop next-generation gallium-nitride-on-silicon technology for a range of applications, including 5G smartphones, RF wireless infrastructure, electric vehicles, and power grids.

The company is hoping, too, that it can get a share of the $52 billion in manufacturing subsidies that were approved by Congress as part of the CHIPS and Science Act.

GlobalFoundries shares the same concerns as many other semiconductor companies about how a withering economy, beset by the COVID-19 pandemic, military conflict, and the US-China trade war, will lower demand. But it gives us great pause when squaring the company's layoff plans with its recent strong performance, combined with it receiving tens of millions in taxpayer money, plus potentially more.

It's also worth noting that the company's situation runs in contrast to Intel, which announced an intent in late October to make layoffs and cut spending by billions of dollars after reporting a 20 percent year-over-year decline in revenue and an 85 percent dip in profits for the third quarter. ®

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