Q4 2020 Qualcomm Inc Earnings Call
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Ladies and gentlemen, thank you for standing by welcome to the Qualcomm fourth quarter and fiscal 2020 earnings conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. If you would like to ask a question. During this time press Star then the number one on your telephone keypad.
If you look to try your question Press Star then the number two if you are using a speakerphone. Please pick up your handset before pressing the numbers. Please limit your questions to one question and one follow up as a reminder, this conference is being recorded November 4th 2020. The playback number for today's call is 877 660.
853, <unk> International callers. Please dial 20161 to 7415 the playback reservation number is 13711766 I would now like to turn the call over to Maria Lopez civilian Vice President of Investor Relations Mr. Lopez Italian. Please go ahead.
Thank you and good afternoon, everyone. Today's call will include prepared remarks by Steve phone calls and the cost of poker Wall. In addition, Cristiano Amon, Alex Rogers and Don Rosenberg will join the question and answer session.
You can access the earnings release any slide presentation that accompanies this call our Investor Relations website.
In addition, this call is being webcast on Qualcomm Dot com and a replay will be available on our website later today.
During the call we will use non-GAAP financial measures as defined in regulation G and you can find the related reconciliations to GAAP on our website.
We will also make forward looking statements, including projections and estimates of future events business or industry trends or business or financial results.
Actual events or results could differ materially from those projected in our forward looking statements. Please refer to <unk> SEC filings, including our most recent 10-K once filed which contain important factors that could cause actual results to differ materially from the forward looking statements.
And now to comments from Qualcomm's, Chief Executive Officer, Steve Martin Cough.
Thank you Maria Seo and good afternoon, everyone fiscal 2020 wasn't extraordinary year, presenting both a unique set of opportunities as well as challenges.
We achieved a number of significant accomplishments, including scaling fiveg devices globally with our partners, while navigating the sudden onset of the global pandemic in March with the safety of our employees as our top priority, we rapidly aligned our operations to a completely different work environment. We.
We were able to limit the number of on site essential workers, while simultaneously executing on product commitments and driving our business forward.
The challenges presented by the COVID-19 pandemic highlight the critical importance of our technology and products.
I want to thank our 41000 Qualcomm team members for their steadfast commitment to our mission of inventing and commercializing breakthrough wireless technologies.
As you can see from our results. The early stages of the Fiveg ramp are well underway with our strategy playing playing out largely as expected.
We delivered Q4, non-GAAP revenues of $6.5 billion and a record non-GAAP earnings of $1.45 per share rep.
Representing year over year growth of 35, and 86% respectively.
Both exceeding the high end of our guidance QC T. revenues of $5 billion were up 38% year over year, it's worth noting that our Q4 Q C. T revenue a near record included only a partial quarter impact from a large U.S. OEM customer.
This strong result demonstrates the breadth of our customer traction.
While our transition from a fourg leader to a Fiveg leader was faced with numerous challenges our employees remain focused throughout.
Since January 2016 confident in our ability to execute on the upcoming Fiveg ramp we spent $30 billion to retire 25% of our shares at an average price of approximately 64 50.
Amplifying the benefits of the organic growth you are seeing today.
As you can see in our results we have successfully commercialized our innovation leadership in our product business through a combination of higher dollar share of content combined with significant fiveg design wins with leading Oems around the world.
Our foundational fiveg innovations unmatched patent portfolio and ecosystem collaborations enable us to drive the industry forward to facilitate the rapid global adoption of Fiveg.
Our continued innovation drive success and stability in our licensing business. All major handset Oems are are under license and we now have over 110 fiveg agreements.
In fiscal 20, our focus on innovation continued at an accelerated pace. Despite COVID-19 challenges.
Year over year invention disclosures were up over 60% and fiveg related invention disclosures more than doubled.
We continue to drive innovation advances in Fiveg through releases, 17, 18, and beyond which will enable the adoption of wireless technology broadly beyond smartphones and into other industries.
We have sustained this focus despite unwarranted legal challenges and we now look forward to continuing our decades long commitment to fundamental transformative innovation.
Over the years, we have built strong portfolios in several key areas that converge with and enable wireless systems and applications, such as multi media security and artificial intelligence.
Our proven ability to invent and commercialize leading technologies is the foundation of how we drive long term value for our stockholders.
The early success of our Fiveg rollout is a great Testament to our strategy of investing well in advance of these large opportunities.
Fiveg represents the single largest opportunity in our history, creating new opportunities to extend our leadership. This will continue to play out over many years as wireless disruption will impact many industries.
As an example, several several years ago, we identified RF as a unique transition opportunity to address many of the technical challenges of delivering a fiveg experience.
I am, particularly proud of how the team has executed against this opportunity, creating a leadership position in a short period of time in fiscal 20, we delivered $2.4 billion of RF front end revenue up 60% year over year.
Welcome is now one of the largest RF suppliers with design wins across all our premium tier smartphone customers and with a long term roadmap to continue to grow our RF leadership as Fiveg is adopted in other industries.
Our Fiveg design wins continue to be powered by our RF front end solutions, whether they support Fourg sub six millimeter wave or both fiveg bands and whether they are in smartphones or other products such as in Britain embedded modules for Pcs I O T solutions or mobile hotspots.
As we have in RF, we have built beachhead positions in both auto and Io team our scale enables us to make multiple profitable bets in areas, where we expect a tailwind as each of these industry roadmaps adoptive cellular technologies.
As you can see taking place today in automotive, where we have emerged as a strategic technology partner to the automotive industry.
With nearly all the major Oems adopting our products.
Next generation Fiveg Telematic design wins in addition to our Threeg and Fourg design wins solidify our position as a leader in connected cars. We're also extending our mobile RF front end leadership into automotive, where 100% of our next generation Fiveg and a majority of our next generation Fourg Telematics design.
Wins include our automotive qualified RF front end products.
In addition, our digital cockpit solutions now in the third generation enable best in class capabilities across premium mid and entry tier solutions.
Our automotive design win pipeline is now approximately $8 billion up from almost $6.5 billion at the start of the fiscal year, giving us great visibility into meeting the long term revenue targets, we provided at our analyst day last November.
The automotive industry is transforming at an unprecedented rate and we're incredibly well positioned to lead the industry with a long term opportunity to expand our dollar share of content in auto as we have done in smartphones.
Turning to Aiotv, we are extending our IP investments from across the company into our portfolio of connected in non connected products with a broad portfolio of technologies, including connectivity.
Lower power processing and security.
We are also diversified across multiple product areas and industry verticals as we have nearly 13000 customers.
In fiscal 20, we saw better than anticipated performance in Aiotv with strong revenue growth driven largely by demand in networking retail industrial tracking and utilities verticals.
Our high performance Wi Fi solutions continue to drive Wi Fi access point toward record levels.
And looking forward, our Wi Fi continues to evolve our execution on Wi Fi six he has put qualcomm into a leadership position.
We have also brought wearable solutions to our smartphone Oems as well as the broader ecosystem of consumer product companies.
Our inventions technology and roadmap have also enabled us to establish a leadership position in XR.
With over 30 commercial devices, our Snapdragon XR solutions that connect physical and digital spaces are the consumer and enterprise platforms of choice.
We have been driving the cost and performance curve of low power high performance compute since our first launch of the Snapdragon in 2007.
We are also investing in next generation infrastructure and edge compute two areas today that we believe will create significant opportunities in several years.
Our objective is to provide technology differentiation that will enable us to achieve a leadership position.
As the cloud converges with the mobile Internet wireless networks are transforming and becoming becoming virtualized beyond the cost and operational benefits for service providers virtualization is enabling new service provider models, where infrastructure is intersecting with digital services, such as you have seen with rocket and Geo.
Turning to inference with over 10 years of AI R&D and over 1 billion AI capable devices enabled with our technology and fundamental assets such as low power compute process node leadership and signal processing expertise, we are well positioned to extend our smartphone AI leadership into growing APL.
Locations, such as Datacenters edge appliances, and Fiveg infrastructure.
Building on our modem and RF expertise, we recently announced our new Fiveg Rand platform offerings. These platforms will provide foundational technology for high performance infrastructure and will accelerate the cellular ecosystem transition towards Virtualized and interoperable radio access networks, a trend driven by Fiveg.
Our expanded portfolio, which is scalable from macro to micro sites will include integrated support for Fiveg millimeter wave and sub six gigahertz spectrum across all key global bands together with our partners. We are helping to drive the V. ran transition with commercial products expected by calendar year 2023.
In summary, with leading technology and intellectual property, a differentiated product roadmap and Fiveg, we are well positioned for a multi year growth opportunity.
I would now like to turn the call over to a cash.
Right.
Thank you, Steve and good afternoon, everyone Greg.
We're extremely pleased to report another strong quarter to conclude a challenging year in which we remained resilient and achieved several key business milestones.
Our fourth fiscal quarter non-GAAP results came in above the high end of our guidance range for revenue and EPS driven by strong performance in both Q Dl and Q CP.
We delivered non-GAAP revenues of $6.5 billion and record EPS of one dollar and 45 cents with year over year increases of 35% and 86% respectively.
We delivered GAAP revenues of $8.3 billion and EPS of $2.58.
As a reminder, these results include the benefit related to prior periods from our recent licensing and settlement agreements with Wawa.
In the fourth quarter, we saw year over year reduction of approximately 5% and global Threeg Fourg fiveg handset shipments relative to our prior prior planning assumption off a 15% reduction.
The upside was driven by a strong rebound in emerging markets. Following the impact of good 19 on handset demand in previous quarters.
In Q DLT, we delivered revenues of $1.5 billion, an EBITDA margin of 73%.
Both above the high end of our guidance range.
This upside was driven by higher global handset shipments and a favorable OEM mix.
In Q3, D., we delivered strong results with MSM shipments of 162 million units revenues of $5 billion.
Which was above the high end of our guidance range.
We are pleased to report EBITDA margins of 20% achieving the long term target we had provided at our 2019 analyst day.
Q CD revenues, and EBITDA increased 38% and 103% respectively on a year over year basis, driven by strength in handsets RF front end automotive and Aiotv.
RF front end revenues of $852 million were higher than our prior guidance of $750 million, reflecting design traction across major handset Oems.
In automotive, we saw a sequential revenue growth of 36% to $188 million as our telematics connectivity and digital cockpit products benefited from the industrial.
In Aiotv increased demand for connected devices due to the work from home environment drove 21% sequential revenue growth to $926 million.
We're excited about our opportunities in this growing industry segment.
I will now summarize results for fiscal 2020.
Despite the challenging economic environment due to COVID-19, we achieved non-GAAP revenues of $21.7 billion and EPS of $4.19.
Up 12% on 18%, respectively, whereas this fiscal 2019.
In addition, we executed on several key milestones, including the completion of long term license agreements acceleration of Fiveg and RF front end design traction and building a platform for long term growth in automotive and Aiotv.
Turning to Fiveg handsets, we are pleased to see that all major handset Oems have now commercialized fiveg smartphones many.
Many of which are using our modem to antenna system solution, including millimeter wave for select regions.
In total we now have over 700 Fiveg designs announced are in development.
We are maintaining our bias towards the high end of our previous forecast of 175 to 225 million units for calendar 2020 Fiveg handsets.
In calendar 2021, we are forecasting 450 to 555, G. handsets, a year over year growth of 150% at the midpoint.
For our global Threeg Fourg Fiveg handset forecasts, we are using a planning assumption of approximately 5% decline, whereas as calendar 2019 for the December quarter and for calendar 2021.
This estimate is consistent with the impact we saw in the September quarter.
This implies year over year growth of high single digits for total handsets in calendar 2021.
I will now outline our decision to provide enhanced QC de revenue disclosures going forward.
Starting with this quarters results, we are providing revenue breakout by handsets RF front end automotive and Aiotv.
With this change we will not provide MSM guidance, our actuals going forward.
This disclosure will allow tracking of our progress for each of these categories as fiveg expands our growth opportunity outside mobile.
In addition, this change is consistent with the framework, we outlined at our 2019 analyst day.
Please refer decline in Investor Relations web site for additional detail and historical revenue breakout.
Turning to our first fiscal quarter guidance, we are forecasting stronger earnings with revenues of $7.8 billion to $8.6 billion and non-GAAP EPS of $1.95 cents to $2 15 a.
On a year over year increase of 62% and 107% respectively at the midpoint.
In Q Dl, we're estimating revenues of $1.6 billion to $1.8 billion and EBITDA margin of 74% to 78% risk.
Reflecting a sequential increase due to flagship handset launches and holiday seasonality.
In Q3, D., we estimate revenues of $6.2 billion to $6.8 billion up 80% year over year at the midpoint driven by growth across handsets RF front end automotive and deep.
We expect QC PBD margins to be between 25, and 27%, reflecting an EBITDA increase of $1.2 billion was as the year ago period.
Lastly, we anticipate non-GAAP combined R&D and engineering expenses to be up approximately 2% sequentially.
Looking forward to the second fiscal quarter.
Based on the handset assumptions I previously outlined and the seasonal decline after the holidays, we estimate Q Dl revenues to be in the range of $1.3 billion to $1.5 billion.
In Q CD following the launch off a flagship Fiveg handset, we now expect second quarter seasonality to be consistent with Q PL and global handset shipments.
As a reminder, non-GAAP combined R&D and SGN expenses are typically higher in the second fiscal quarter as it includes the normal calendar year resets for certain employee related costs.
For the second half of fiscal 2021, we expect the quarterly profile for both our Q PL and QC de businesses to be consistent with the seasonality of the global handset shipments.
Lastly for each quarter in fiscal 2021, we are forecasting net interest expense of approximately $125 million weighted average shares outstanding of $1.15 billion and a non-GAAP annual effective tax rate of 14%.
Before I finish my prepared remarks, I want to thank our employees for their contribution throughout this unprecedented here.
In fiscal 2021, we are focused on delivering revenue growth and operating leverage in line with the financial targets, we outlined at our 2019 analyst day.
We remain focused on executing on our Fiveg roadmap and commercializing breakthrough technologies that will drive growth for many years. Thank.
Thank you I'll now turn the call back Tomorrow.
Thank you cost operator, we are ready for questions.
Thank you Kim a question Press Star then the number one.
John Your question Press Star two if you are using a speakerphone. Please pick up your handset that's more pressing one moment. Please for the first question.
Our first question comes from Mike Walkley with Canaccord Genuity. Please proceed with your question.
Great. Thanks for taking my questions I hope everybody's well on the call.
Just a question on the EBITDA margins very strong and implied guidance for the seasonally strong Q4, but you also highlighted some investment for growth in new areas.
How should we think just about trends in terms of margins for Q T L and Q CDT as you harvest Fiveg investments and in Q TL, perhaps you a lower legal expenses and maybe see some higher margins there. Thank you.
Hi, Mike This is a cash.
Really from a margin perspective, we're extremely happy first of all to deliver the 20% margin in Q3 D. In the September quarter, I mean that that's as we have guided a midpoint of.
18% and we were happy to see us get to that target a quarter sooner than we had anticipated.
As as you saw we are guiding strength going into the December quarter, as well with a with a midpoint that's at 22.
26% and QC D.
As we go forward the one of the things that you have to keep in mind is just the seasonality of the businesses.
If if let me address Q PLM than QC again for Q deal.
Seasonally strong quarter in December given given kind of the handset launches that happen and then overall holiday holiday impact.
As you go beyond that Weve provided a guidance all for the March quarter. So that will give you a second data point and then really between those data points on our actuals for September you'll be able to forecast kind of the rest of the year from a margin perspective, we had given guidance at analyst day and that contemplated.
How our financials would play out in Q deals. So its very consistent with that so we don't really have an update relative to that that guidance point.
For Q3, D. as you think about and does the December quarter guidance again, a very strong quarter seasonally now with the launch off of flagship Fiveg handset with our chip in it.
It drives our December quarter is very strong.
The seasonality of the business changes, though with this launch and what happens is when you look at.
It's different than the last couple of years you almost have to go back three or four years, where typically we saw a decline of 15% in revenues between first quarter and second quarter in QC de just based on seasonality and so we'll be reconciled more good that seasonality going forward from a margin perspective, a strong margin in Q C D.
In first quarter, and then really the margin will change based on the profile of the revenue.
As we move forward.
Thank you.
Thank you. Our next question comes from Samik Chatterjee with Jpmorgan. Please proceed with your question.
Hey, guys. Thanks for taking the question and congrats on the resort is stronger though to just wanted to start off of a couple of questions wanted to start off on the audit conducted which you on smartphones, which you Andy outlined is doing better than you expected.
Based on the visibility you have into the pipeline in fiscal 21, how should we think about EBITDA meeting or even exceeding the targets you outlined for RF on smartphone operating it was about 3.5 billion of revenue ought to do Okay. Misty Oh, if you can just share your thoughts on that and I have a follow.
Yes, hi, somebody gets a cash again.
So I think from a guidance perspective for RF front end as you'll recall at analyst day reset, we expect to be more than 20% share in a in an $18 billion market.
And that Doug It was really for fiscal 22.
We're very happy with the way out on our front end business has played out we are seeing seeing a lot of strength not just in the quarter, we reported and the forward quarter.
But just really in the long term design win pipeline across the board. So we're very optimistic that we will be able to get to get to our target sooner, but really beyond that we are not updating you on our longer term guidance at this point.
As I make this crescendo just one quick comment for you the.
As we increase the number of designs to Sixeighty that trend continues we see fiveg right front end attached to some of those design. So we feel pretty good about the pipeline continue to grow their business.
Got it and if I could just follow up obviously, there's been a lot of changes in the environment to deal with the current restrictions on who always smartphone business, what kind of get a six is impacting that or how should I think about how that is impacting results right. Now is it moving in your kind of view it could be a headwind to industry volume so.
Oh convey those well the ordering more of that kind of helping what are those how should we think about the impact.
Thanks for the question so make this crescendo. So as you know right now we as we don't have a license to.
To sell products to acquire away, we're not selling to Wally the way you should think about this inconsistent weather, we have et cetera, you know on the last earnings call. The while the opportunity creates an expansion of addressable market for acuity.
We feel pretty hedge in in our position given in our very high traction.
Attraction with all the premium and high tier Oems and whether that in the long run it's an opportunity with wawa in the event that we receive a license or if an opportunity for our customers, we actually see that as a net positive in that expansion of Tam for acuity and we expect that to play out as we look at demand.
In the handset towards 2021.
Thank you. Our next question comes from Matt Ramsay with Cowen. Please proceed with your question.
Yes, thank you very much and good afternoon everybody.
[music].
I caution I guess, maybe this question is for you and and Cristiano partly.
Really appreciate the additional disclosures and Quito ARINC you see rather maybe you could talk about given the magnitude of the upside to the outlook for the December quarter.
Just help us a little bit to break down that upside and the chip business by maybe units and then also RF versus maybe core ASP and units in the modem business. If you could just sort of give us. Some some help there I'm just given the magnitude of the upside and the change in the disclosures just so we can all foot model that at least for this first quarter out of the gate. Thank.
Okay.
Yeah, Hi, Matt.
So let me just kind of quickly run through the disclosure change what we really wanted to do was.
You know over the last couple of years, our business has evolved a bit and so we're seeing a different set of drivers for revenue growth than than units and so it's driven by obviously four to fourg to fiveg transition driving more content.
RF front end and then automotive an Io d., playing a key role in our growth as well and so did the the goal with it was do a.
Give data points that will allow the investors to track our progress in this area and then again, it's very consistent with how we outlined our business is down and at analyst day.
And then that's kind of the core thought process behind it and as you see in the September quarter, we've given a disclosure on on breakdown lot of strength across each of those areas you've seen a strong growth in Io d., which was driven by a demand for connected devices.
And in the home and as as kind of the work from home environment permits, there's just an increasing need for connectivity.
And then we also saw a rebound on the auto side that drove significant strength as we look forward all of those trends are holding for us. So we expect kind of similar strength going into next quarter for each of those areas.
We're obviously not providing a breakdown of our forecast we are providing it on the total QC D level.
But the underlying strength.
Really all those drivers remain on looking forward.
Yeah.
Thank you. Our next question comes from the line of Chris Caso with Raymond James. Please proceed with your question.
Yes. Thank you I guess first question was with regard to Q T cell and I guess the results for.
The September quarter, and the guidance for the December quarter is above what the sort of normal levels that you've referred to before so.
And I guess, what you're talking about for for the March quarter is as well is this sort of a new normal level for.
For the Q tail business going forward you could explain why that's the case and the permanence of of this level of revenue revenue.
Sure.
So Chris as you recall in the March quarter, the market was down approximately 21% because of the impact of covered on the June quarter was 20%.
Our forecast our planning assumption going into the September quarter was down 15% and really what happened is.
We saw a rebound, especially in emerging markets.
Were following a couple quarters of lower demand because of coal with the demand went up and we ended the quarter down approximately 5%. So that was kind of the key driver for our performance in the September quarter and into in addition, we saw stronger OEM mix that helped Q deal a bit as well so thats kind of the data point for our.
Results for the September quarter at $1.5 billion.
Our guy of forward guidance of 1.7 billion midpoint.
For Q deal.
Is really kind of just projecting that same market impact the 5% market impact that we saw year over year in the September quarter projecting it forward into the December quarter, and then into the March quarter and that's the basis for the numbers we have provided.
As you think about kind of the full year forecast for that for Q deal using the September quarter number along with the December quarter in the March quarter guidance, that's a good way to project there.
Got it thank you.
A follow up question is on the the RF front end business and up if you could provide some color now I know that millimeter wave is an important part of that business for you. It sounds something you've talked about a lot.
Could you help us to quantify how much millimeter wave has been contributing to the RF front end business or what's the content increase that that you're anticipating for millimeter wave and then near now that we've seen millimeter wave kind of do what you said in terms of being a must have on flagship handsets, what's the pits.
Tangible for that.
Proliferating around the world to becoming a must have in other geographies.
Yeah, So Chris I'll take the first part of the question and then crescendo can follow up.
Just from a breakdown of technologies across our RF front end revenue base, we're obviously not providing that but you should not really think off our revenue being driven by millimeter wave we have a broad portfolio of technologies Fourg Fiveg is up six and five do millimeter wave and our design traction reflects.
The strength of our portfolio so its really across all those technologies.
Yes so.
This crescendo so first.
First I want to just build on what our cash had said we were even starting to win some fourg content in RF front end as well.
And especially some of the sub six frequencies started to get converted into Fiveg. So we're excited about I think how broad of in diverse is RF front end businesses specific at the millimeter wave it does add a little more content in order to.
It's it's probably would drive it lower or higher.
On our average 1.5 multiplayer if you remember and what we're happy about it its a.
Significant data points that continue to show the potential for growth. In addition of in a requirement for a market such as United States, Japan, You know Docomo launched a minimal way services back in September.
Korea still tracking.
Two lounge.
Service and we have now 130 operators globally investing the millimeter wave and especially as we see price planar devices. As you saw in the United States, becoming very reasonable one millimeter wave that opportunity for attach is going to be a significant tailwind for our business.
And then maybe just to add a quick comment I think for millimeter wave really what has happened is we also plan to women a year ago of how the technology deployment will play out and really everything's happening consistent with what we had outlined and so we're very happy to see that.
Thank you. Our next question comes from Joe Moore with Morgan Stanley. Please proceed with your question.
Great I think the question I get the most it's just the sustainability of handset builds obviously has been very robust.
Seems like Theres some.
Investment to try to take share away from walk away and yet while we still have inventory still shipping. So can you just generally characterize the handset environment any inventory environment that debt, you're and heading into the strongest part of the year.
Yeah, Hi, this is a cash.
So we are we are we are seeing some some minor elevated demand across certain Oems given the uncertainty of the OEM mix, especially in China, and how things play out.
So thats already contemplated in our forecast as as we look forward and our forward commentary as well.
As as we look forward, we expect some uncertain deal or the next next few months, but really when you step back from that and just look at overall design win pipeline and customer traction.
It's really very consistent with the comment Cristiano made earlier, where our technologies in our portfolio are really set up to take benefit.
From it whether whether its Wally who if you're allowed to ship to them or if other Oems pick up that share.
Okay, great. Thank you and then are you guys constrained at all on foundry capacity is there are there any supply constraints that we should be aware of.
Hi, Joe discretion, we're very diversified from a supply standpoint, I think we're probably one of the few companies to have leading no the supply diversity.
We are all seeing demand upside we're driving it.
You know a lot of our supply and I will say, they're probably you're going to see some tightness of supply as sue have to speak of demand, but we feel good about how we look about the year end 2021.
Thank you. Our next question comes from the line of Blayne Curtis with Barclays. Please proceed with your question.
Hi, good afternoon, Thanks to my question.
12 on Joe's question, just kind of curious as you look at the build you're seeing today and then kind of visibility in models I think people have looked at some of the stats from the China market, saying it was already 60% Fiveg I'm kind of just curious with with these build strong goes you're saying now if you any perspective, where we're at and that adoption curve.
With Fiveg are ready and then guys Jive.
Together you know.
Not getting MSM guidance anymore, but I mean are we already pretty close to that kind of run rate for fiveg on a quarterly basis.
I believe this crescendo.
When you think about China market, we're very happy because the price points of Fiveg became very aggressive and would be we saw that even starting in the last quarter and that's driving probably more than 50% you know for all the new Activations and and all of the new phone lounges, where fiveg.
We like that position us a cash outlined and the prior question, we're very well hedged regardless of who wins in the marketplace and we expect that China accelerated transition of Fiveg will lower price points to have an impact on how we're going to see this unfolding in emerging markets as China provided a lot of the handsets for emerging markets as well.
And then also just to add that we are providing an additional data point on the fiveg side on the total size of the market for 2021.
We are forecasting a range of 450 to 550 million devices.
Which really when you look at the year over year basis, that's a 150% growth so extremely strong growth going into it and as we exit or exit the calendar year 2020, we are seeing that.
That velocity going into 21.
Thanks, and then.
Hello, just a really appreciate the segment detail when you look at Iowa, you answered why it's like you have some I'd say I'd be curious to know a little bit more about the history of that segment. It looks like you.
Kind of model it back to the details you gave it's been running around 700 million a quarter. So just trying to put in perspective. The strength you are seeing here and I think about it going forward. Obviously, everybody is seeing a big work from home place, but as you move forward does some of that roll off or has this business been at higher levels prior to any context would be great.
Yes. So if you look at the disclosure we have on our web site, we are providing detail for fiscal 19 on an annual basis and 20 on a quarterly basis and so I think there's enough data there for you to kind of come up with some trends on the business and then and then maybe I'll go back to our analyst day commentary last year.
So are we outlined can grow television forecast for for the R&D segment, and so you could think about it the same way where you'll be able to look at how the Sam grows in and on the the parts of that Sam that we're interested in and how that grows and that'd be a good way of thinking about the long term opportunity.
Hey.
Blaine is Krishna if I could add some qualitative comments as.
As you pointed out there is to us and.
Enterprise transformation of their home its driving a lot of connectivity you also have an accelerated digital transformation, but most importantly, you have fiveg go into other industries. So this business and what it is today is probably a good proxy for a growth business for us as we realize this vision of Fiveg and other industries going for.
Forward.
Thank you. Our next question comes from Ross Seymore with Deutsche Bank. Please proceed with your question.
Hi, guys. Thanks for letting me ask a question and a follow up and congrats on the strong results. The first one is I think everybody appreciates the end market split since you're going to have but before the MSM than the revenue per MSM disappear for good it's great to see that the you've gotten a back above $30 and the revenue premise them side I just wanted to.
To dive into looking forward does the 1.5 ex content framework continue or is that $30 largely capturing it and really I guess, what I'm getting at is if you're going to have a 150% increase in your Fiveg units next year is that going to be a tailwind on both the unit and the revenue per MSM side or more so one.
On the other.
Well from from a unit perspective, Ross, it's really kind of the fourg margin a market transitioning over to Fiveg right. So it's less of a unit growth story, it's really a transition between technologies.
And then within five G or did the framework. We do we still think applies so that there is a benefit or on the core chipset side and then does the incremental RF opportunity on top.
But I guess for my follow up I wanted to switch over to the margin side of things.
You talked to cash a little bit about the the opex for the fourth quarter or that the calendar fourth quarter than the calendar first quarter. He said go up a little bit now that you've hit or exceeded your targets, especially on the QC T side for MPT any sort of idea of how we should think for fiscal 21 or calendar 21 about the general trends on the Opex side of the equation.
Yeah. So I mean first of all that and we are very happy to see as.
As revenue has grown we are seeing the leverage operating margin margin leverage show up in our numbers, so happy to see that in the fourth quarter and the first quarter.
As we look forward I think you have data points for both of those quarters first quarter and then we gave us off guidance for the following quarter. It's a it's very reasonable to use those two data points to project forward for the Opex for the year.
The other thing I'll say is just as we look forward as Steve.
Steve outlined in his prepared remarks, there are lots of opportunities we have for.
Areas for growth in the long term all organic opportunities and so we are selectively investing in a few of those consistent with what we said at the analyst day.
Thank you. Our next question comes from the line of Stacy Rasgon with Bernstein Research. Please proceed with your question.
Hi, guys. Thanks for taking my questions. So my first one I wanted to do is a little bit into chipset gross margins I know you don't like actually provide them, but I know last quarter, you gave us a little bit of qualitative color on what to expect.
Gross margin in the current quarter in chips were supposed to come down a little because of mix and I think they did in December quarter is it fair to say that your guidance contemplates gross margins at least flattish sequentially even with.
The slug of revenue.
Coming into the mix changing somewhat.
Is that an accurate statement.
Yes, Stacy from a gross margin perspective, I mean that there really isn't a isn't something that.
That we wanted to highlight on that topic I think what we what we have is very consistent trend and we feel like that that's something that holds going forward.
Got it thank you I'm for my follow up.
I want to ask about the trajectory of the RF business. Obviously, you had a bunch of RF this quarter.
It was all of that RF revenue shift together with the rest of the platform or does some of that or revenue like haptics shipped before you go into modules.
So I guess, what I'm asking is in some of the RFP shipment in Q4 actually going into some of the chip platforms that you're booking revenue for Q1.
Where are they are they are they all coincident with each other.
Yeah. So so just broadly as you think about our business Theres a combination of factors whether there are times when we make the module ourselves and those modules would would timing wise would be aligned with the chip side.
If we are shipping components that go into someone else's module that would be a shift in timing related to it but really all those are really timing comments the fundamental trajectory remains the same.
Thank you. Our next question comes from Mitch Steves with RBC capital markets. Please proceed with your question.
[laughter].
Hey, guys. Thanks for taking my question I, just had one just going back to kind of the Q cici break out here.
So if we look at though the long term Sam I mean, it's kind of low double digits, but then you're you're guiding to significantly higher than that it looks like 21, it's going to be a good years, how do we think about just modeling correctly kind of the four segments. We look out over over the implied sand targets. I mean is there a bogey we should think about in terms of you guys deal outgrow that number.
Or across the board just looking for any sort of detail there would be helpful.
Yeah, I think in terms of kind of longer term modeling of each of the segments. We gave some disclosures at analyst day, we still think those are very relevant metrics onto used to model our businesses.
So when you when you think about RF front end, we gave the disclosure on greater than 20% off an $18 billion Sam.
On the auto side, we had given a pretty specific disclosure on a on our longer term revenue target and so that that should be that should be instructive, and then really Io d., it's really more about what's the what's the growth off the Sam addressable market for US and then what's what are the components.
Within that market that are growing faster that we'll be able to participate.
Understood. Thank you.
Thank you. Our next question comes from Rod Hall with Goldman Sachs. Please proceed with your question.
Yes. Thanks for the question I wanted to start with the supply chain and I know that you know cobot has been ramping up again in certain parts of the world and some participants in the industry have talked about potential for supply chain disruption again and I Wonder if you guys could just talk a little bit about your thoughts on that as your guide.
Since for fiscal Q1, contemplating some disruption or do you believe that.
You know that production is most likely to just continue normally and then I have a follow up.
Yes, hi, there are lots of cash.
We're our guidance for the quarter is really constrained by what we can supply and so that's that's really contemplated in our forecast.
Okay, great. Thank your costs and then my follow up was on I wanted to come back to normal wave.
In terms of your preference for doing business. There I know you guys have talked about an interest or willingness any way to sell components and we've seen some of the in there for a lot of the early only to wave is looks like it's that someone else's module.
Assembly process your components, probably but then you do also sell your own module. So I'm just curious.
Which of those two things you prefer I mean is it is it I would think it's preferable to go for the component side of things and let someone else worry about the module, but I don't know if that really is your preference or you know do you have do you have a preference one way or another just wondering how you want to do that business going forward.
Hi, Rob this crescendo look.
We're very happy about the traction were having with millimeter wave I feel the technology itself requires a you know a module because you have to have the RF front end of the transceiver working together side by side.
We're flexible we've been commercializing our silicon within modules as well commercializing our own module. The important is the direction we haven't for customers in general is that when we provide.
A complete solution fully validated from.
From a performance standpoint, and from a scale standpoint, you save them a lot of R&D. So we'll continue to maintain the flexibility for our customers as they see value.
Thank you. Our next question comes from the line of CJ Muse with Evercore. Please proceed with your question.
Yes. Thank you for taking the question I guess for my first question.
And thank you for the disclosure on the sub segments were curious could you provide some help around how we should think about the PBT margins for each of those relative to the overall usage goes list.
I think so huge at this point, we're really talking about the portfolio of businesses within QC D.
As as I am sure you appreciate and then we've discussed this in the past one of the core premises of how we are addressing some of the incremental opportunities and especially also in Io D. is leveraging technology from mobile and ER and so it's really kind of one set of technology and product pools that we are leveraging across and so I think it's better.
To look at a total QC D segment.
On margins.
Okay Thats helpful and then as my follow up.
It was a question earlier and you talked about foundry supply constraints and I guess curious what is the impact.
On the the issues around SMIC.
And I guess, what kind of impact at least on the near term side of things.
Has that had on the pricing that you're getting from foundries, because I believe only TSMC as 28 nanometer capacity available. So we would love to hear your thoughts both from a near term and medium term perspective on sourcing.
Sourcing a you know supply from to the burst leading edge foundries.
Yeah sure TJ. So it's a really for all our foundry strategy is is we're very diversified across across a lot of different foundries and so we have close partnerships with all of them and typically when a from a pricing.
And negotiation perspective, we're we're typically lock for a reasonable period of time, and so really a it I'd say maybe no impact at this point, we were just operating as we would with our supplier partners.
Thank you our final question comes from Timothy Arcuri.
Please proceed with your question.
Thanks, a lot my first question I wanted to see if we could if I could a couple of quick on the QC team mix and I'm. Just wondering if you can give us either in terms of revenue or units, maybe the split between Threeg Fourg and Fiveg because if you look at the China government data about two thirds of the century last month was fiveg and about 50% year to date, but I'm.
Sort of wondering on you know if you don't want to talk about units can you talk about GCP and in total and maybe give us a sense of how much fiveg is TCT today.
Yeah, Tim probably the best way to think about this is really looked at our forecast for total handsets. We are providing a range for fiscal of calendar 2020 at $200 million and then going into next year at a.
At a range of Fourfifty, two 550 million and so I think those are reasonable data points to think about a mix between fourg and fiveg for the market and then you know it data applies.
To our business as you think about individual Oems.
Okay. Okay. Thanks for that and I guess I also wanted to ask about the RF business, it's great that you actually breaking them out now and.
And I'm sort of wondering if you could help us maybe with with what the attach rate looks like because if I just divide the 852 in September by the 162 million and a friend I get about $5 per unit I mean, obviously the holiday straightforward. It my way to look at it because the attach rates not 100%, but maybe can you help us think about what the attach rate is right now.
For the RF business.
Right.
Yeah, as we think about the RF business really does there's tremendous complexity in that business right between which deere off device. It is which OEM, whether it's being designed for a specific geography or multiple geographies between subjects and millimeter wave does.
The Sam addressable market for device changes quite a bit and so.
We've tried to not think of it doesn't attach rate business, rather we think of it as an available addressable market and we tried to maximize our position within that.
Thank you that concludes today's question and answer session Mr. Mollenkopf do you have anything further to add before turning the call.
Yes, just a just a thank you to the employees I think a this quarter probably more than any quarter I can think of really demonstrates the strength of.
Not only that the businesses and the products that we're working on but also I would say the culture of the company and its ability to keep things on track in a very difficult time. So thank you very much for your hard work.
It's great to see the recognition of that in the market and keep it going thanks, a lot but.
Ladies and gentlemen. This concludes today's conference call you may now disconnect disconnect.
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