Q2 2020 Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the Qualcomm second quarter fiscal 2020 earnings conference call.
This time, all participants are any listen only mode. Later, we'll conduct a question and answer session.
I'd like to ask a question. During this time press Star then the number one on your telephone keypad to withdraw your question I start and then number two.
You seem to speakerphone, please pick up your handset for Christian the numbers.
Limit your questions just one question and one follow up.
As a reminder, this conference is being recorded April 29 2020.
That number for today's call. It 8776, Shirelle 65 to <unk> International callers. Please dial 20161 Q southern for one five playback reservation number is 137 00396, I would now like turn the call over to embrace you'll know pets, Italy.
Vice President Investor Relations Mr. Little <unk>. Please go ahead.
Thank you and good afternoon, everyone. Today's call will include prepared remarks by steam on coffee in the cost Buchwald. In addition, Cristiano Amon outs Rogers and Don Rosenberg will join the question answer session.
You can access our earnings release any slide presentation that accompanies this call on Investor Relations website. In addition, this call is being webcast on Qualcomm Dot com and the replay will be available on our website later today.
During the call today, we will use non-GAAP financial measures defining regulation G.
You can find the related reconciliations to GAAP on the website.
We'll also make forward looking statements include projections and estimates of future events business wouldn't see trends or business or financial results.
Two events or results could differ materially from those projected in our forward looking statements.
Please refer to our assay see filings include our most recent 10-K, which contain important factors that could cause actual results to differ materially going forward looking statements.
And now two comments from Qualcomm's, Chief Executive Officer, Steve Moore Golf.
Thank you Murray CEO and good afternoon, everyone. The sudden and dramatic change how we are living today has impacted nearly every citizen on the planet on behalf of 37000 people in the Qualcomm family I would like to extend our best wishes around the world as we collectively manage through this unprecedented times.
The global stay at home orders highlight the critical role that broadband has played in facilitating remote workforce distance learning Entertainment telemedicine communications and many other things.
With billions of people around the world using Qualcomm technology, our mission to invent and commercialize breakthrough wireless technologies like five cheap has been reinforced and amplified.
Over the last three months I have seen countless examples of our resilient and strong culture working together to solve the daily challenges we face.
Our response to the pandemic has been evident in the exceptional execution of our team on all fronts. In Q2, we transitioned to a totally different working environment with the safety of our employees as our highest priority.
As a result of the many operational changes we have made over the last several years, we were able to respond quickly when the work from home orders began in mid March with minimal disruption to our operations importantly, we were able to limit our onsite essential workforce to a very small number and remain on schedule with our product commitment.
From an engineering and operations perspective, we have maintained very high levels of productivity.
We continue to advance the Fiveg roadmap and support customers, while meeting a very complex set of R&D and supply chain requirements.
We have also implemented remote access to labs transition to cloud based collaboration and enable remote device testing without the need for physical access.
We're also able to mitigate the cobot 19 impact to our global supply chain.
Despite the challenging environment. We're in Q2, we estimate the overall handset market was down approximately 21% or Q2 non-GAAP earnings of 88 cents per share was at the midpoint of our guidance range. We gave in early February in the early stages of the pandemic.
Our Q C.T. growth drivers of Fiveg design wins, along with higher share of dollar content are very much intact. As you can see in our revenue Paramus EM and has virtually all our fiveg design wins continued to be powered by our RF front end solutions.
In our licensing business, we have now signed more than 85, five GE license agreements up from 80 license agreements last quarter.
As expected, we recently entered into new long term global patent license agreements with two leading Chinese handset suppliers OPO nvvault to cover Fiveg multimode mobile devices.
Turning to the handset market fiscal Q2, China demand. So a sharp decrease coinciding with cobot 19 restrictions followed by month over month growth as restrictions subsided.
This provides a basis to model rest of world handset demand trends as I mentioned earlier, the overall handset market was down approximately 21% in the March quarter, principally from the China impact in the June quarter, we estimate the overall handset market to be down approximately 30% driven by the impact of shutdowns in there.
Most of the world, while benefiting from the rebound we are seeing in China.
Total demand will depend on the speed of the economic recovery. However, we see no change in our calendar year Twentytwenty Fiveg smartphone forecast.
As we look to the second half of calendar 2020, well there are few regions with minor delays in Fiveg network deployments overall fiveg is progressing as planned and we continued to be well positioned to drive the rapid adoption of Fiveg globally.
In closing.
Welcome isn't a strong position and on track with our industry, leading product roadmap. We continue to add people in key areas and we are executing well with a strong balance sheet.
I would like to turn the call over to accomplish where he will provide more detail in his prepared remarks. Thank you, Steve and good afternoon, everyone. Prior to addressing our second fiscal quarter results I want to Echo Steve's thoughts and thank our employees customers and suppliers for their commitment and partnership during these extraordinary circumstances.
Our second fiscal quarter results demonstrated strong performance in both QC beyond Q deal despite the challenging economic environment.
Delivered total revenues of $5.2 billion and non-GAAP earnings per share of 88 cents, which was at the midpoint of the guidance range. We provided in February.
Q deal done the word revenues off $1.1 billion NBP margin of 63%, both consistent with the midpoint of our guidance.
We have no entered into new long term global patent license agreements with Allpoint vivo.
Our ability to finalize these five GE multi mode agreements in a challenging environment read rates the strength of our IP portfolio and the relationship with these customers.
In the second fiscal quarter or do you do that spread of coal with 19, we saw a reduction in threeg fourg to fiveg handset shipments of approximately 21% compared to our prior expectations and on a year over year basis.
This decline was based on two factors first pronounced weakness and try nine late January and February followed by a substantial recovery exiting the quarter and second a decline in demand and many other regions globally starting in March.
This negative impact on two deal was partially offset by a benefit related to updates to previous drug the estimates and favorable mix.
Into C.D., we delivered revenues of $4.1 billion MSM shipments of 129 million units and BBP margin of 16%, which was at the midpoint of our guidance.
QC de revenues, and maybe increased by 13% and 39% sequentially.
This reflects the benefit of the first we will fiveg flagship launches increased content from our RF front end chipset solutions and improved gross margins.
In addition, we saw strength in our IP networking products due to increased demand for connectivity in this work from woman marmot.
Consistent with our expectations. Our results included a greater than 50% increase in RF front end revenues on both a sequential any you know what are your basis.
Our total non-GAAP combined RMBS DNA expenses of $1.7 billion was below the low end off our guidance range, including savings in marketing and travel expenses.
With that I'd like to dawn to global three D. for do you five device forecast.
Given the continued uncertainty around the timing of the pace of the resolution of coal would 19, our third fiscal quarter forecast is based on a planning assumption of approximately 30% reduction in handset shipments relative to our broader expectations.
This planning assumption is based on two drivers first China sales for the quarter gradually improves from the exit rate of the March quarter and second although we didn't see a recovery starting in June which is modeled based on the trends we're seeing in China.
Our forecast for the first half of 2020 implies a reduction of approximately 10% to the calendar 2020 dogle device forecast.
However, due to the weiss's and the second half of 2020 will depend on the speed of the economic recovery.
Turning to five do device forecast launches across all regions remain on track.
Why do we expect some minor changes to the launch timing and sell through of sort of devices. Our calendar 2020 estimates remain unchanged at 175 to one of them 25 million units.
Now, let me walk you through our card for second quarter financial guidance.
We currently estimate revenues of $4.4 billion to $5.2 billion and non-GAAP earnings per share of 60 to 80 cents.
This guidance includes a greater than 30 cents, a divorce impact attributable to the reduction in handset shipments due to covert 19.
Given the uncertainty around the time and the scale of the economic recovery, we are providing a wider than normal EPS range for the quarter.
In Q deal, we estimate third fiscal quarter revenues of 752 $950 million, an EBITDA margin of 50% to 56%.
This guidance reflects a normalized run rate of $1 billion to $1.2 billion adjusted for the impact of lower handset shipments due to covert 19.
As a reminder, our third fiscal quarter forecast for Q deal does not include revenues from Wally.
You do see D., we estimated revenues of three born $6 billion to $4.2 billion MSM shipments of 125 to 144 million units and he'd be de margins of 14% to 16%.
Our guidance reflects the latest demand signals from our customers as they contemplate the global impact on device sales and reconcile their supply chains to the lower sell through.
We expect revenue brown with them to decrease sequentially, reflecting the normal seasonal mix shift following the fiveg flagship brands with launches in our second fiscal quarter.
We anticipate code fiscal quarter, non-GAAP, combined R&D and SDN expenses to be approximately flat on a sequential basis.
Returned approximately $2.3 billion to stockholders during the second fiscal quarter, including 705 million in dividends and 1.6 billion in stock repurchases. Additionally, we announced a 5% increase door quarterly dividend to 65 cents per share.
Given the current economic landscape, we have performed scenario planning with a focus on liquidity and we will continue to evaluate our cash flow and capital policy as the situation to walls.
In these challenging times, we're glad to have a strong balance sheet liquidity position and upgrading.
Looking forward our top priority is the health and safety off our employees and the communities in which we operate.
Our business strategy remains unchanged.
We remain confident in the long term growth opportunities, including Fiveg adoption RF front end content capture and the expansion of our technology is going to do some platforms.
Thank you and I'll now turn the call back to myself. Thank you cost operator, we're ready for questions.
Thank you take you up question Press Star then there number one to withdraw your question Press Star Q.
Our using a speakerphone please pick up your hands for pressing the numbers one moment. Please for the first question.
Thank you My first question comes from Mike Walkley with Canaccord. Please proceed.
Great. Thank you congratulations on strong results in a tough environment.
Yeah, Yeah questions more just big picture back in February before you know cobot 19 was seen as expanding more around the globe.
Management indicated they expect it to inflection points based on timing of Fiveg launches.
Just given your ongoing discussions with customers do you still see a jasek inflection point for Fiveg later this year or is it more push maybe exiting the year in into calendar 21. Thank you.
[laughter] My Kai, it's Steven and thank you the ER in terms of overall timing of handset launches I would say in general we're seeing people keep the same slots that they've talked about been a lot of intensity to maintain those schedules.
My guess is you'll see things move around a little bit because of.
Just people dealing with the environment, they're dealing with but but in general I don't think you gonna see big changes in that certainly for us to reiterate our five GE unit call for the year.
I think.
Hopefully that helps you I'll get a sense for how we feel about the second inflection point.
Great. Thanks, Steve just just as my follow on question then yeah, what's your Q2 guidance.
Certainly appears based on your 30% cut on the on the macro that you're you're gaining share on terms of MSM shipments. So strong in terms that base are you seeing maybe with the strength of your portfolio in execution opportunity to gain share as to your plays out. Thank you.
Yeah, I think there's a couple of things I think I think share picture is pretty good.
You know assuming you use the market assumption that we have my guess is you'll probably come to.
You'll probably be surprised on the upside in terms of how we how we look in terms of the though the financials. One key component I think gross margins continues to be a good a good story and would be sequentially as well for us. So I think in general with exception of a big dip in the market. We still like there was a those factors that we're looking.
That.
[noise]. Thank you. Our next question comes from the line of Samik Chatterjee with JP Morgan. Please proceed with your question.
Oh, hi, good money went up so thanks for taking my question. So Oh, it's good to see you do you treating be fiveg volume outlook, Oh, just wondering all with the weaker macro that everyone's expecting or you Oh, what are you seeing in terms of pricing for handsets from the Oems themselves, particularly in China.
Does that markers recovering Oh, if you focus on Fiveg I'd say, it's are you seeing them become more aggressive in terms of pricing and what implications kept that kinda that have on supply chain.
Yeah, Hi summit Guy, it's a gosh, yes, it's clearly to the the Oems are being very aggressive where we had a satellite launches planned before call that and the Oems were able to execute on all those launches in this environment and if you look at some key metrics that came out of China in the month of March 30% bump the devices.
For sold into the channel were Fiveg devices. So that's really much stronger than even we had expected and so we're seeing tremendous traction across deere's across Oems and looking forward to it.
In somebody else's crescendo I just wouldn't <unk> also there's another data point, which is worth reiterating.
71% of all models launched it in China is fiveg that shows that the market is really preparing for fiveg brought penetration across all tiers.
Got it and if I can just follow up on the <unk> shipment outcome. The do you have which is.
Roughly flat quadrant portal, just wanted to understand and that's what agenda imply that you're seeing order trends.
Remained fairly stable low stock improve.
Entering Q. So just wanted to understand index fed just given that even with the kind of drop off in volume. So in terms of central we just kind of guiding to flat quarter on quarter ownership in volumes.
That's right, though we would those a little bit off the seasonality, we typically see a slight bump between the quarters. So we were seeing that as well, but even in this environment to continue to see the strong order pipeline as is very good for us too.
Thank you. Our next question comes from the line of Chris Caso with Raymond James. Please proceed with your question.
Yes. Thank you good afternoon, I I guess the first question is up.
About how you view has changed versus 90 days ago. You mentioned your prepared remarks that 30% reduction it could you walk us through that a bit about <unk>, how you got to that assumption. It sounds like there's a different assumption between China and the rest of the world and as we go into the second half.
Do you are you.
To the extent you have forecast right now expecting some improvement on that as as economies start to open up.
Yeah, Hi, Chris side, it's like ours. So the way we looked at the third fiscal quarter for US is we got a focused on the what we saw in the second fiscal quarter, which was we saw weakness in China. It earlier in the quarter I really starting from late January all the way through February, but a strong recovery exiting.
The quarter and then outside China, we saw weakness exiting the quarter and so we use that as the starting point than the our framework for how to model the June quarter wants to do.
I use the exit rates and apply that China recovery model into the rest of the world. So I do think about the June quarter, the 30% decline.
That we're expecting in handsets or it's a combination of China being not as weve given that they had all they've already gone through a substantial recovery and then the rest of the world seemed more weakness.
As you look beyond beyond the third fiscal quarter, it's it's really.
It's uncertain at this point as to how and when the recovery happens, but if you look at the five GE, a number which is a leading indicator for our business feel very comfortable with the full year guidance until we are reiterating the guidance of 175 to 25, and a 25 million units for the calendar year.
Okay understood. Thank you second question is on revenue per M. S M and.
It seemed like that was consistent with what you said previously that seasonally the mix comes down as you go into the June quarter, what about as you go into the second half of the year, you've got some new flagship ramps.
You go to the second half a year and I'd imagine that side, you penetrate some new price points there.
What do you expect the trend to be in revenue for MSM as you go to the second half the calendar year.
Yeah, So fundamentally nothing's changed wasn't the guidance we have previously given you as we go from poor due to five do you feel like there was an opportunity for us on the core chipset DSP side, which you've now seen the evidence off and then on top of that also on the RF front end attach which adds to the SP. In addition to that what we've now.
Scene and a in the March quarter results from you in our June quarter guidance as well as implied a very strong gross margin performance. So come combined the S being squeezed would the gross margins ground, a really kind of delaware's for us on the bottom line and so from a framework perspective as you look at the rest of the around the other Oems.
That framework that's done hold.
Thank you. Our next question comes from the line of Blayne Curtis with Barclays. Please proceed with your question.
Guys FX or a question David if you turn just curious if you're taking a 30% haircut that I thought when you're sledding Q to yell you said the market we'd be down 30%. So if you could just clarify that that'd be helpful. And then I guess the second part of the question you find these two new agreements I think you noted.
In your filing you've seen a headwind with a royalty rate in terms of customers is taking the essential pad. There just curious if that's what these deals are any of you just comment on the body of your patent portfolio are the ones that are just taking essential patents first of.
All your time.
Yeah, Hi, Blaine from a forecast perspective, the way we forecasted cute deal for the June quarter is is with the market reduction of 30%.
We if you'd think about a normal run rate for the Q deal business. It would be in the one to 1.2 billion dollar range mid point of 1.1 billion, a we applied the handset market introduction of 530% to that to get too.
Or a range of mid range with the midpoint of $850 million would do deal. So it's pretty straightforward methodology really reflecting the weakness in market on the revenue guidance.
And Blayne this Alex look hotels in a really good position, we expected to get the up on the vivo license agreements.
Negotiated and signed and we did.
So those are long term worldwide sep agreements covering multimode products.
Those agreements are consistent with the one to 1.2 run rate you know absent a cobot 19.
And so we basically got all of the top Oems, but but Wally you know any major OEM is fully signed up.
So for the next a number of years, we don't have any renewals that you know so it's weighs out.
So I don't see the a sep agreements that we've signed as being subject to headwinds I actually kind of see the opposite way round.
We launched the Fiveg licensing program back in 2017, we've executed really well on it and come to a position where were you know really good position with with one or negotiation with what we still ongoing.
Perfect.
Thank you. Our next question comes from the line of Tal Liani with Bank of America. Please proceed with your question.
Hi, guys.
I have two questions now the first one is.
Pricing MSN pricing it was $23 two quarters ago, then went up to 32 and now you're guiding implied for 29.
So the question is what's the what are the puts and takes here what are the factors that trade driving it up so much from only two quarters ago.
And then the second question is just if you can give some color on your assumptions next quarter, you said that unit. So oh for acute <unk>, you said that unit.
Shipments are assuming it's 30% below your previous guidance what does it mean.
What kind of assumptions do you have for the environments next quarter. Thanks.
I'd call I'm on the revenue Paramus, I'm trend going from our fiscal first quarter. The December quarter to fiscal second quarter. As we had outlined previously that keep the the key drivers there were three factors first is.
The transition from four due to five D, helping us on the chipset pricing side. The core chipset second is RF front, then design traction on top of that along with the five do launches and then third is a typical seasonal mix shift that works in our favor. When you go from the December to the March quarter, because that's when.
Our new premium and Hypure tips come out and several off our Oems launched their new phones.
When you go from it. So so we we outlined these assumptions on we delivered on those results I'm extremely happy that we were able to do that along with expanding our gross margin percentage.
When you look forward to the June quarter, one of those three factors that I outlined for the March March quarter.
Changes, which is the lot the mix shift towards premium at high deer devices. So are you kind of have a change in that would to reduces your revenue paramus I'm a bit but it's more a function of wood chips are being sold in that quarter, rather than a fundamental change in the business.
We're still continuing to see extremely high revenue per M. S M given our historical trends.
And a strong gross margins on top of it.
And it's 29 these to high Twentys to new environment, we need to get used to going forward going from kind of low twentys still high twentys.
So we're not really kind of guiding this number going forward, but if you go back to the framework that we have a we've given which is a we expect with Fiveg do see an increase of one point fivex from where we've been in the past that would lead lead to a framework where similar to yours.
Yes.
And then on your second question on a on Q D L.
The forecast really is a we're looking at beat a midpoint off our normal revenue guidance range of 1.1 billion and the 30% is what we're seeing in terms of reduction of handsets and so we're applying that to the overall forecast that we had prior to it would not reflect.
Good or was it reflected in the annual guidance up 1.8 billion units that we'd given so ER would do it was roughly flat for the calendar year. So you should think of it does that's reflective off a market that was similar to last year and we're taking a reduction off that.
Thank you. Our next question comes from Ross Seymore with Deutsche Bank. Please proceed with your question.
Hi, guys. Thanks for letting me ask the question I wanted to start out on the Q C.T. side, because she did a great job in Q T. L was kind of saying what the moving parts were in the quarter for June guidance, especially relative to the 30% reduction in units if I take that 30 cents hit <unk> S. That you guys said Kobe didn't.
Is that just on the Q TL side or are there some puts and takes you could walk us through on the Q C.T. side.
As far as the general market weakness might be applying to Qualcomm as well.
Sure sure. So ER Ross, we we outlined a an impact of greater than 30 cents and it's a combination of QC D. N. Q deal. So I think you've got the math on Q deal, that's really digging the 1.1 billion midpoint and comparing it to our guidance midpoint of $850 million the data.
The off 250 is a part of that 30 cents calculation on the QC decide we looked at a couple of data points. One is going to how have the signals change bottoms up from the Oems that we had been receiving over the last the last three or four weeks, what's gonna reflects the weakness, they're seeing and the sell through.
We also looked at our Oems and what they're a sell through has been in certain regions, where we have higher share and it's a combination of those factors that we used to estimate the impact on <unk> QC D.
Got you and I guess as my follow up just going to the Q TL side, one housekeeping item and then then that kind of a bigger picture question on this.
How was it relatively in line with your billion to billion to estimate if the market was 20% weaker in the March quarter, and then any sort of update on the wall wage negotiations now that you successfully got the oppo and vivo side done and then finally anything on the FTC.
Yeah. So on the Q deal side for the March quarter, where there are couple couple of things that went in our favor first is the weakness that we saw the 20% to 21% on the handsets.
If you look at the mix of the regions on that weakness it was more once more so in China and less in other regions. The impact in other regions came later in the quarter and so in terms of how that translates into a mix impact from a dollar perspective is a combination of which do your device has gotten back that and then.
We're told me UBS. So that's that's kind of one key factor the second factor as I said in my prepared remarks was we also had some updates to previous royalty estimates, what's gonna as part of our normal licensing program you see some changes are based on a updated reporting we received from Oems. So we had a little bit up that in the core.
So that helped as well.
So this Alex let me handle the last two parts of the question. So the Walgreens discussions are ongoing and you know we're still working on trying to negotiate a deal and as we've discussed previously.
Both parties have the right to seek a binding arbitration to set new terms for a new deal going forward, but neither party has has decided to do that yet we're still engaged in the negotiation process.
With respect to the FTC look I think the first thing is we have a lot of confidence in in the merits of the appeal, but I think it's also important to go back to a basic touch point and that is the district court decision did not invalidate existing agreements and so before during and after we've signed up centrally.
Every major OEM and many many other Oems.
You know in this context and these agreements are not going to the notion that these parents. If you go away is actually is not a factor because it's never wasn't issue with the discord opinion, where that came out and the licensees continue to honor their agreements. So again I think however, the FTC matter turns out.
That aspect of the decisions not going to change.
Thank you. Our next question comes from Matt Ramsay with Cowen. Please proceed with your question.
Yes. Thank you very much good afternoon, Cristiano I'm going to follow up on I I think a couple of data points. You mentioned earlier just to make sure I got them right. You said, 30% of units in China Fiveg at this point, then and something like 70% of device launches.
If I have those right, maybe you could talk a little bit about the fiveg carrier subsidies and promotional environment and how aggressive the carriers may be in China, and how you think about.
That kind of aggressive fiveg promotion sort of cascading through the rest of the world markets.
Most of the world turns on Fiveg. Thanks.
Thank you meant for the question. So let me address first one so the data point is.
What we saw if five GE sell in penetration reached 30% in the month of March that is up from 19% in demand for December should can see that the market continue to transition the device it towards fiveg and the other data point, which is in Denman for March of all the phone models launch in China.
Enough, 71% with Fiveg, which shows actually fiveg getting too old to different price points. If you remember last quarter, we saw that with some of our platform with their snapdragon 700, we saw price points at $285, where five devices and I think that order validates the.
The total Oh fiveg units for the year and I think China is going to be driving a lot of the volume in our position is China remains very strong no to your questions about the five do roll out.
What we it's a it's an interesting question I think why are we seeing some delays in places for example, like Europe, where auctions have not yet being completed in all the countries. What do we have seen is a celleration than some other places for example in the United States. Some carriers are actually ahead of schedule into Buildout.
Taken advantage, well, probably less traffic and a <unk> important to note the Japan had launch both fiveg sub six in millimeter wave within the quarter and Korea Telecom announced millimeter wave in Korea before the end of 2020 so.
You know you may have some puts and takes but in general I think the five de story remains intact and if if anything this current environment, probably underscored the importance of connectivity and telecom. Thank you.
Thank you. Our next question comes from Stacy Rasgon with Bernstein Research. Please proceed with your question.
Hi, guys. Thanks for taking my question I wanted to revisit qtr during the quarter. So I know you mentioned you know it was she had some mix benefits as well as catch ups, but I mean units to the market were down 21% year over year I know China units were down relative if you I don't know, 35% you already have you ever take.
30% sequentially I mean, you you'll keeps your revenues were only down 50 million year over year was like 4% I mean that that the catch up or adjustment must have been very sizeable.
Can you give us a an idea of how much that adjustment.
Our catch up payment wise, what was the driver if it was any other coming from oppo and vivo like what would be kitschy all of them in the quarter without talking about that catch up.
Yeah, Hi, Stacy it's like Arash, it's it's a so maybe just just to kind of quickly address the catch up comments the way the Q deal model works on I think you're very familiar with this we as we get reports from licensees or in the past or sometimes we get updates from them in the future as they're going to finish up there.
Accounting of the units and the Sps. So so that usually results in a catch up decided second as though if their audit settlements that would give us catch up as well and then really if we end up finalizing licenses.
I would be a factor also so there is there are several factors that cause it and as you know we've had a couple of these ah in in our history are consistently usually the number smaller so would we don't specifically talk about it under the run rate in each quarter of these factors.
Clearly, we had a larger larger impact this time, but do we know why.
We're not disclosing a the specific number at this point, but did it it is a significant them back then and that's why we clearly highlighted at an outline that.
The the other factor that I I think I've mentioned, not clearly was the fact that never China units than there were significant portion of it wasn't the lower end had an impact as well.
Also this is a handset decline if you look at non handsets, we saw a we estimate somewhere in the 5% to 7% Grange on impact of total units.
So the weighted average impact across the market was smaller than the 21%.
And I guess does that reverse next quarter, then because you're guiding to market, 30% below your expectations, but you only guiding your keeps our revenues like 23% below normal expectations. So is that what's driving that that boosted that you know though.
Hey, Fiveg next is it because I guess, what's what's going on there that that's actually helping revenues relative to other units reporting to you. If you think you got it yeah. That's right Stacy. So that is a there is a factor off that that does or the impact and on non handset devices was his hands that devices.
That's benefiting and that's why it's not down the full 30% or in the say in the third fiscal quarter.
Not one any one timers or anything that we're not we're not expecting that I mean, they as as we kind of real finished the quarter, we might see some benefits, but that really happened says we get updated reporting from licensees and not something we forecast.
Thank you. Our next question comes from Mitch Steves with RBC capital markets. Please proceed with your question.
Hey, guys. Thanks for taking my question I bet combine to into water because it kind of related so.
It's good to hear the China turned back on line and just had a couple of questions related to that so number one is.
How do we know that China got really trying to stockpile little bit inventories ahead of a potential additional U.S. China a relationship are getting worse and then secondly, just any sort of like eyeball or any sort of wealth metric to think about 21 I think the majority of investors are looking out to next year in terms of what the impact is gonna be I mean are there any.
Sort of or any sort of granularity you can give in terms of where you guys think the recovery is gonna look like even if it's not quantitative.
Thank you.
Well, let me know, we obviously spend a lot of time looking at the sell enough chipsets was is the device sales and kind of matching them and getting a sense of holiday inventory profile is shaping out in China.
Typically you would see a decline in inventory following Chinese new year in the March quarter, and we've actually seen a seen it play out consistent with our expectations and there's been a slight decline in inventory through the process.
Image. This is Steve with respect to fiscal year 21, I would say a the general view within the company is that we need to be prepared for the opportunity that we think lays ahead I mean, if you look at a this out 21.
We think.
You know we think we think we're in a much better position in terms of the economic situation and then the other thing that we've we're definitely getting from the from the market is just this desire to launch.
Fiveg and connectivity me that the the I think there'll be some desire to increase infrastructure and some of the Tele medicine tell a you know the educate from home work from home a will be served through five G. Eight five GE or here in the near term and we need to be prepared for it that's really how we're thinking about 21.
At this point.
So is there no comment just in terms of it being like more of a new shape or anything it sort of like shaped recovery for the smartphones that.
Yeah, we haven't been trying to give a shape other than what we've talked about in terms of our market that at this point <unk> and and as we've talked about internally in terms of the company. We're really trying to make sure that we are prepared to take advantage of of any shape recovery that that that appears and so that's really how were position.
The company and then trying to communicate the best we can in terms of how the market the looks at least over the next quarter.
Thank you. Our next question comes from C.J. Muse Evercore. Please proceed with your question.
Yeah. Good afternoon. Thank you for taking my question I guess first question well I was hoping you could perhaps speak to what you're hearing from your customers in China.
They recover you know what they're seeing what customers a preference are in terms of mix price points.
Perhaps I guess, what signals, you're taking there and then bringing to the rest of the world you know that that kind of Oh underpins. Your your overall kind of a recovery view.
Thanks, David a question. This question look Oh, we have had a lot of engagement I think very frequent I think what lift for customers right now middle and agenda across the globe, but what we've seen it so phones, our continued to launch and there's a cash out line, we kinda be tracking not only sell Lynn.
So low in the market and we see the market you started to recover it that's why we believe China. It can be a very good model or will we expect to see an older markets since their shift in time.
Okay. That's helpful. And then you know based on the attach rate on the Oh from inside it and what do you didn't know in terms of flagship launch filming the back after the year yeah. It does that one and a half times content and the moved its I agree.
We incurred.
What you're saying.
Fiveg and RF front end or is there is there upside there based on what you're seeing on your job trade side.
Okay. So silke kueck <unk> couple updates you know, we we have been tracking it on a number of fiveg designs or in the quarter that now went up we have now 375, five GE devices, a mountain and we repeat continued to repeat for you know they absolutely majority of those who truly.
Them continue, but we'll have our modem to antenna solution with RF front end attach and I think it's got reflected in this quarter that this business is starting to have an inflection for Q3 p. It started to be meaningful we're very happy with the results. So far there for an end and we expect that to continue to your question about the 1.5 matter.
Correct.
That holds remain true for us and and debt <unk>, even as the market scale down from fled shifted the lower tiers like for like in the 700 tiered or 600 to your where even 400 years woo, we'll see that metric of 1.5.
Thank you. Our next question comes from Timothy Arcuri, Yes. Please proceed with your question.
Hi, I guess I had two first on well away a they're really callable ironed out, which you know we have oppo vivo and alcohol side and I guess at the same time, you know, obviously, you actually sort of turning up the heat on why way. So why would they sign now you're sort of one of the more obvious leverage quench that China has an all of that.
So the question there is how long do you want this go on with them and sort of when do you decided just to just you know arbitrate without thanks.
Well this Alex.
Look there you know a number of environmental factors you know some that are you maybe you can views.
In one direction others can be another direction for example, the phase one outcome is is good a good environment for.
For moving toward a negotiated resolution here.
Look we're we're still in this negotiation and so.
We we still.
Looking at this is something that we want to drive to conclusion.
The question of whether or not we have to trigger arbitration is still some months out.
And so we're we're going to keep keep moving with this and see if we can get this thing resolved.
So I don't have an answer for you I'm other than that.
Okay. I guess then the second question is on I believe going over the prior question on this but my question is more on June because in the footnotes. It sounds like there are some catch up payments in June committees to he needs to license fees can you just help us qualified gosh, what they catch ups or in June specifically.
Oh, no near term so I assume that all of the true up today too I can see it will be in German banks.
Yeah. So this is really a the the accounts receivables that's outstanding that they're going to a big going forward and so as as a part off our license agreement there isn't a dozen or so there's an alignment with them on and the remaining payments that outstanding and a very near dumb scheduled for them to finish those payment.
Yes.
Thank you. Our next question comes from Christopher Rolland with Susquehanna. Please proceed with your question.
Hey, guys tying into perhaps a earlier question can you talk about your at Chase and sees business or how big It is now a and perhaps changes we've seen in the size of that business since TDK acquisition and growth in 2000.
19, and any expectation for 2020, M. allergies and see business as well.
Yes, hi, Chris So at our analyst day, we had kind of sized or the total a scale up those businesses are when oh for the fiscal year 2019, and then we give a an assumption forecast on how fast the market is gonna grow approximately 8% on and with our dog adult matching or beating.
The market growth and so that does the framework for forecasting those businesses and we were still kinda on track a long along those lines.
In this environment one of the things we've seen is several of our businesses, including Io D. and networking.
They did benefit from the work from home environment, and we've seen a lot of strength in those areas.
Excellent and then just tying in to the RF more specifically are there any conditions or is that even technically possible for situation, which you would break up the various parts within your antenna module and sell them individually for example could you.
I will just the transceiver or is this at all or nothing deal for you guys for for millimeter wave or even even sub six how are you thinking about that.
Hey, Chris It's crescendo. Thanks for the question look we we have been very clear about the technical advantages of the more than two on denim, but you know having said that we we have seen opportunities that we're starting to sell silicon in some of our competitors Ah Ah baseband as well.
And there's a number different open interfaces. So I think you'll see a flexibility from from Qualcomm, but I would still feel strongly that you'll probably get the best performance. When do you actually have an integrated motive to once in a solution.
Thank you. Our next question comes from Brett Simpson with our <unk> Research. Please proceed with your question.
Yes, thanks, very much a question for a cash or can you maybe just help us with the.
Split in the M.S. ends and the March quarter between five June four G. and then just looking into June which you've guided a 125 to 145 million M.S. and again, how does that look between Fiveg fourg, particularly now that they sevensix fiveg starts to ramp up thanks.
Yeah, Hi, Brad so the Soviet reversal floor, so far not disclosed a break down off RMS I'm units I mean, it's it's clearly and important metric for us in terms of five do penetration. So we should think about that is if you look at a kind of the key launches in the premium in the height.
We are we pretty much premium tier every every launch that does happen has used our premium tier chip outside of hallway and so it's really a mix of a premium deal onto them, while im in different regions and that could be one way to get them back into a number for us Oh four or five do you were just worthy.
We will we will keep a as we go forward, we'll look at how we can get additional disclosures. So that I'd gives a sense that gives you guys. Its hands off the traction we haven't fiveg overall very strong design win pipeline across all customers and a and we're seeing demand not just at premium theater, but across a high.
In mid dealers as well for our five do solutions.
Okay. Thanks, Thanks, a caution maybe my follow up for Cristiano.
One millimeter wave I just wanted to get your perspective, given all the changes in the market in the last 90 days I think in the past you talked about you know there's monetary millimeter wave the monthly feature.
For flagship smartphones in the U.S. from any U.S. operators and you would see a Japanese and Korean launch for millimeter wave is is that still on track and then how should we think about millimeter wave in the Grand scheme of your your overall Fiveg volumes. This year, thanks very much.
Hey, Brett Thanks for the question.
Yes, it remains a reality a in as as we have a probably mentioned earlier in some cases, the corn environment had the celebrated the build out of the new millimeter wave market. So it continues to be a requirement for flagships in the United States market, we expect to see millimeter wave come.
Mean down to the Hypure as we're bringing that capability across her chipsets. We saw that he got a lounge in Japan as expected Korea announced that they will provide millimeter wave service Korea Telecom announced it would seem to calendar year and we expect that to continue in 2021, we used.
Currency does go into other markets as well.
Thank you that concludes today's question and answer session that came on coffee you have anything further to add just far joining the call.
Yes. Thank you first of all I just wanted to say a thank you to the employees with Qualcomm. We have we obviously had a very unusual quarter with respect to the work environment and a and even with that a very strong execution I want to thank everyone for their hard work.
Also want to remind everyone that Oh I think the technologies. We're all working on are probably never been more important than they are today. So thank you very much for your hard work and we look forward to taking advantage of everything that we're putting together. So thank you everybody see you next quarter.
Ladies and gentlemen. This concludes today's conference call you may now disconnect.