XSD - GlobalFoundries: Profiting From The Supply Crunch

• GlobalFoundries has enjoyed double-digit revenue growth due to high demand amid a low supply of the less advanced chips.
• Comparison with Taiwanese UMC shows that subsidies through the CHIPS act can improve the company's gross margins, with GFS having the ability to add capacity faster than its giant peer.
• On the other hand, higher labor costs could impact operating margins, but these have already been considered in the first quarter 2022 guidance.
• The company also has a small revenue exposure to China, but its factories are positioned appropriately to circumvent geopolitically sensitive Taiwan.
• GFS is a buy due to its cash-generating capability and its low price to cash flow multiple, and its stock could move higher following updates on subsidies.

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