Q3 2020 Skyworks Solutions Inc Earnings Call
Fiscal year 2020 earnings call.
This call is being recorded.
This time I will turn the call over <unk> Investor Relations for Skyworks. Mr. Host. Please go ahead.
Thank you Ron good afternoon, everyone and welcome to Skyworks third fiscal quarter 2020 conference call.
With me today are Liam Griffin, our President and Chief Executive Officer, Chris Anderson, Our Chief Financial Officer.
Before we begin I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or maybe considered forward looking statements.
Please refer to our earnings press release, and recent have to see filings.
Including around report on form 10-K for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward looking statements made today.
Additionally, the results and guidance, we will discuss includes certain non-GAAP financial measure was consistent with our past practice.
Please refer to our press release within the Investor Relations section of our company website for complete reconciliation to GAAP with that I'll turn the call to Liam.
Thanks, Mitch and welcome everyone.
Before we discuss our Q3 results I want to briefly comment on the cobot 19 pandemic.
Which continues to impact families businesses and markets worldwide.
I'd like to start by recognizing the tireless efforts of our talented skyworks team.
As weve rapidly adopted in responding to a new working environment.
We've implemented rigorous protocols designed to protect the health and safety of our employees along with our valued customers.
And trusted partners.
In parallel we continue to deliver the vital connectivity solutions that people worldwide, our depending upon to navigate the pandemic.
No charge went overview of our third quarter performance.
Skyworks delivered results well above consensus in the June quarter, as our Sky five platform gains traction powering innovation in Fiveg applications.
At the leading smartphone Oems and increasingly across our I O T customers.
For the third quarter, we reported revenue of 737 million nearly 50 million above our guidance.
We achieved gross margin of 50.1%.
Operating margin of 31.3%.
We posted earnings per share of adult 25.
Beating our guidance by 12 cents.
And we generated strong operating cash flow.
Totaling 259 million in the quarter.
[noise] our momentum continues to improve.
Reflecting on our execution across it rapidly evolving business landscape.
Well as the broadening adoption of Fiveg.
A few data points highlight the growth of this critical technology.
Globally Fiveg subscriptions are continuing to grow.
Well, what estimates approaching 3 billion over the next five years.
Fiveg handset demand is accelerating across a diversified set of customers and geography.
In fact in China during the month of June approximately 60% of all smartphones sold were Fiveg enabled.
And a new three G.P.P. standard was also released.
Validating the extension of Fiveg technology into Aiotv, either wax multimedia broadcast and other services.
[noise] clearly fiveg, along with other advanced wireless technologies, such as white by six and enhance GPS or spawning new usage cases, and fortifying the backbone of an expanding connected economy.
During the quarter, we secured key design wins across numerous applications.
From the mobile phone to industrial Aiotv automotive cognitive audio aerospace and defense.
Specifically in mobile.
We are expanding our sky five platform across multiple flagship Fiveg models.
Samsung Motorola.
Oppo vivo and Xiaomi.
In addition, we are populating some of the highest performing fiveg platforms that will be launching later this year.
And I O T. We're enabling 18 piece Tri band gateways, where their wife by six solutions.
Ramping indoor and outdoor access points at Aruba, Juniper and Lexus.
Powering integrated connectivity in Amazon in rings security systems.
Launching voice assistant solutions enmeshed routers at Google.
And we're leveraging our four by four Mimo and why engines in premium sound bars at someone else.
In addition, we delivered new cognitive wireless audio solutions powering the leading gaming headsets.
Now moving to the industrial space.
We are supporting Aiotv platforms at Bosh and Jim also.
And leveraging our G.P.S. circulator and advanced filter solutions at leading aerospace and defense companies.
And in automotive, we're capturing new designs with Sky, five and BMW Ford and other leading manufacturers.
[noise] these wins demonstrate our market leadership.
Underpinned by a diverse and growing set of critical technologies.
Resolving increasingly complex architectures and preparing our customers for the performance gains demanded in Fiveg.
During the pandemic, we have witnessed a sharp inflection in the usage case of our core technology.
Enabling a variety of work from home applications.
Online learning and education.
Median gaming at home fitness safe Tele medicine in a sustainable shift the touchless commerce.
Given this increased demand for high speed data consumption.
Networks are being taxed as never before.
[noise] to illustrate how the pressure on the network is intensifying.
On a typical day in just one second there are 96000 gigabytes of Internet traffic 85000 videos watched on you too.
84000, Google searches and 5000 Sky calls.
Now more than ever always on connectivity is paramount.
Creating a compelling market opportunity for Skyworks proven solutions.
Whether its zoom teams face time, Tele medicine, or touch was home delivery that skyworks. Our commitment is to make these connection seamless and efficient.
[noise] looking forward, we are not bounded by handset volumes as our reach continues to expand across the aiotv space, enabling a wide range of industries applications and customers.
All benefiting from the performance and utility of our solutions.
In short our unique technologies have never been more valuable essential and critical.
With an expanding opportunity set.
Emerging in ways that we have never imagined.
With that I will turn the call over to Chris for discussion of Q3, and our Q4 outlook.
Thanks, Liam Skyworks revenue for the third fiscal quarter. This 2020 was 737 million, which is 47 million higher than the midpoint of the guidance coming into Q3.
Revenue was down 4% year over year. However, excluding why we related revenue in both Q3 fiscal 19 and fiscal 20 revenue was up 2.5% year over year, despite the negative impact from corporate 90.
Gross profit in the third quarter was 369 million, resulting in a gross margin of 50.1%.
Operating expenses were 139 million up slightly year over year as we continue to prudently manage opex, while making the necessary investments in research and development to accelerate future growth of our business.
We generated 230 million of operating income translating into an operating margin of 31.3%.
We had 2.3 million of all that expenses, mainly driven by Forex losses, and our effective tax rate was 7.5%.
Driving net income of 211 million or $1.25 cents diluted earnings per share, which is 12 cents above the midpoint of the guidance.
Turning to the balance sheet and cash flow.
Third fiscal quarter cash flow from operations was 259 million.
Capital expenditures were 72 million, resulting in 187 million of free cash flow.
On a trailing 12 month basis I would have free cash flow margin is 32%.
We paid 73 million in dividends and repurchased approximately 670000 shares of our common stock at an average price of $87.42 for a total of 59 million.
During the first three quarters of fiscal pointed 20, we have repurchased 4.6 million shares and during the last 12 months. We have returned 84% of the free cash flow back to the shareholders through a combination of dividends and share buybacks.
We ended the third fiscal quarter with cash and investments of 1.2 billion have you have no depth.
No, let's move onto our outlook for Q4.
We expect double digit sequential revenue and earnings per share growth driven by the strong demand for our market leading solutions.
Specifically, we anticipate revenue to be between 830 and 850 million.
We expect gross margin in the range of 50% to 50.5%.
Operating expenses of approximately 142.5 million.
Below the line, we anticipate roughly 1 million in other income and the tax rate of 9.5%.
We expect our diluted share count to further reduced to approximately 168 million shares accordingly at the midpoint of the revenue range, we expect to deliver diluted earnings per share of one dollar and 51 cents.
Lastly, given our confidence in Skyworks strategic outlook and strong cash flow generation, we announced a 14% race through our quarterly dividends to 50 cents per share.
With that I'll turn the call back over to Liam.
Thanks, Chris.
With Fiveg gaining traction we're now at the cost, but the multiyear upgrade cycle wondering which skyworks is unique uniquely position to outperform.
Our Skype by platform provides tremendous flexibility to our customers purpose built to be payspan agnostic, while powering the most innovative fiveg handsets.
In addition, the same Fiveg solutions are now expanding across industrial and automotive applications.
Yeah, that's complexity intensifies, we are aggressively adding to our enabling technologies.
Ongoing investments in both Tc saw and bulk acoustic wave filtering.
In fact, we just exceeded shipments of 150 million bar enabled modules and we see strong momentum for this technology and both mobile and broad markets.
Our proven ability to advance key connectivity protocols, delivering higher speeds and lower latency across Threeg Fourg and now fiveg.
Positions us well to capitalize on rapidly evolving market opportunities.
Indeed, our mission of connecting everyone and everything all the time has never been more relevant.
Finally, the strength of our balance sheet in cash generation capabilities allow us to accelerate the investments that fuel long term profitable growth, while enabling skyworks to deliver premium returns for our stockholders.
It includes our prepared remarks, let's open the line for questions.
As a reminder to ask a question you will need to press star one in your telephone to withdraw your question press the pound or hash key.
Given time restraints, please limit yourself to one question and one follow up.
Your first question comes from a line of did the Garrido from Bank of Montreal Fair America, Sorry. Your line is open.
Hi, Thank you, Yes bank of America.
Thanks for taking my question and congratulations limit Chris on the strong results and execution.
Hi, I'm curious what drove the 50 million or so upside in or the quarter in the June quarter, and what's driving this trend in September I asked that because you know a few weeks ago went up your competitors have had mentioned that possibility of delay in one of the flagship Fiveg full.
And so I was wondering if you were impacted by that all by any potential kind of supply. The later on.
Pension related olin's by any Chinese customer, so just give us a sense for.
What be upside or kind of tells us about the Tuesday dense demand on your progress with customers.
Sure well the upside came from a number of fall of opportunities and were able to execute upon all largely the launch the initial launch of fiveg products or much through China, all with some of our partners that we mentioned Samsung Oppo vivo when others. We also had some more nice penetration.
In our Wi Fi portfolio, a wife by six launches.
They were beneficial to us, but there was still you know a great opportunity and and core mobile to grow all we did have to combat some supply chain issues to be fair, but all we started to improve through the quarter with acceleration through the last month of the quarter. That's now propelling us into Q4. So yeah, we're very comfortable with where we are right now.
Thank the team did a good job still navigating the cobot 19 headwinds for sure, but executing well through our factories and delivering what our customers need.
Got it and so my follow up.
You know does so how should we think about then seasonality going into December because I imagine that you know this yet as perhaps more especially because they're not these big Fiveg lands, but you know there has also all the disruptions because couldn't then that the macro headwinds because of corporate so.
How should we think about your December quarter seasonality given all these.
Puts and takes.
Short short now obviously today, we guided our Q4 corner, but as we start to think about December.
Oh, you know based on the traction that were working and that in the and the demand for this fiveg technology, which is still just tremendous.
We think that the December quarter should be strong for us all you know and that'll come across with a number of customers, but we have some really powerful design wins that we've created all we talk a lot about content reach here at Skyworks and I think you're going to see that when you look at some of the new launches that will happen at the end of the year. So we're very well positioned for it.
As we've always talked about complexity as our friend the technology bars high that's exactly what we want to see and we'll be able to demonstrate that through fiveg handsets here in the second half for sure.
Okay. Thank you.
Your next question comes from a line of Toshiya Hari from Goldman Sachs. Your line is open.
Hi, guys.
Thanks for taking the question and congrats on the strong results.
I guess my first question is on broad markets, Chris If you can help out by sort of a sharing what percentage of revenue came from the broad markets business into Porter and I guess more importantly, Liam you talked about a number of businesses within broad markets and kind of the design wins, there, but what were some of the key dry.
<unk> in Q2, and if you were to highlight one or two perhaps and what's yes look into into September and broad markets.
Yes, so we.
I don't locus revenue in the June quarter was approximately 31% of total revenue.
As a result of that broke markets was approximately flat on a sequential basis compared to the March quarter data.
I'm looking forward.
Into the September quarter, we do see an acceleration of the business data and we do expect in the September quarter, I would put markets to be up double digits on a sequential basis.
Yeah, Toshi and just a little bit of color on customers in design wins.
Lot of new all customers brought under our under our umbrella here this last quarter.
More design wins with names like so no saw it did some really good work with 18 Pee on gateways design wins at Honeywell infrastructure designs with Ericsson in Puget Sue So very broad.
Reach a broad markets and then also our audio portfolio is starting to gain some momentum here. We've got some great wins with cognitive audio in some of the gaming platform. So a pretty diverse saw a portfolio and brought this a lot more we can do on the top line, we're gonna be up strong in Q4, and broad markets and other customer roster continues to grow.
Got it.
Thank you for that and then a quick follow up on oddball.
You talked about exceeding the 150 million Mark recently, I think a couple of months ago, you put out a press release.
On passing 100 million.
So you're clearly seeing good momentum there I'm curious what are what are some of the key applications, where you're seeing.
The ramps that your customers and.
Context, I was hoping you could provide a roughly what percentage of your business today is ball I imagine, it's still pretty small at this point, but if you can kind of share how bigger how small at this point ball is that would be helpful. Thank you.
Sure sure well it the way that we look at our technology saw filters, if any kind whether its tc saw our bulk acoustic wave, they're going to be enabling technologies that will go into a system solution like sky five [noise].
So we're addressing that right now there were times, where we were procuring that with third parties or or actually trying to develop solutions with a different technology node to try to compete with by now we have an in house now we haven't within our own factories. It gives us a great deal of flexibility certainly in the cellular world you know our reach extends with bulk acoustic wave.
Technologies, we've got design wins and ultra high band pads, we've got some design wins in other areas and again, it's a 150 million units is great, but there's so much more market share out there for us to go get so it's early innings I'm happy with the team's progress we've invested in the technologies deliberately.
Carefully over the years to be ready for this.
And I think the teams accelerating really what we got a lot of traction with customers lot of interest and that design win pipeline should fortify here over the next six to 12 months.
And your next question comes from the line of Craig Hettenbach from Morgan Stanley. Your line is open.
Yes. Thank you Liam just a follow up on that on Bob can you just talk about you know today kind of positioning within the receipt past first transmit path and maybe how that evolves to you kind of overtime in next few years.
Short break well I mean, the application for BAW can be and many different segments. We can go you HB. We can go mid band high band, we're actually we actually a bar opportunities in our Wi Fi modules as well so there's a lot Elk Grove.
With that we can capture now certainly some segments off or more challenging than others, but when you start to look at Fiveg. You've also you're also dealing in fiveg with a T.D.D. time Division Duplexing [noise].
It does create some unique <unk> unique opportunities for Boston for our technology. So we'll see some growth there.
<unk> technologies that have been in handsets and then new technologies that are fiveg only we can capture with BAW and then we can also deployed the technology and other markets like I said Wi Fi and some other adjacent markets. So it's a great technology to have under our roof. As I said, we've been cultivating it for a long time, we understand the mechanisms we understand why.
Sculptors belong and what frequencies and what spectrum, but saw you should expect more from us and we'll continue to update you.
Got it thanks, and then just as a follow up just since it's been a little while on since you completed the I've never acquisition and broad markets would love to get an update on just how that's performing what being part of Skyworks is has helped in terms of perhaps your scale and reach and just any update there.
Short short great question, well, we had a really exciting odd say six months here without an era and the acceleration of the technology has been incredible Oh, we're seeing some great lift now and products like gaming headsets, all high performance audio we're moving into tech.
Knowledge. He is now that have not only just audio itself, but really the voice synthesizing right thinking thinking about voice as a as a interface.
It's a very very powerful thing looking at what works dealing with what the pandemic and touchless commerce and touches transactions.
Some really good stuff, so having said all that our momentum it has accelerated or you know we don't have be you buy be you.
Okay.
Basically don't report by segment on to use but we have a really strong portfolio all and the I ask business on call Eas and it's been this last quarter was our best quarter. We've had so far and we expect that to continue to grow over the next several quarters, but really good momentum there.
Your next question comes from the line of Blayne Curtis from Barclays. Your line is open.
Hey, guys. Thanks. So my question that's a result.
This is slated to 600 Wally.
Seemed like essence Ethan.
They're going to shift emerging solution and I'm, just kind of curious what you've seen either I think maybe update us I think we're always very small for you is there any opportunities I guess with them and then as we look out.
Maybe the box could gain some share have you seen anything change in terms of positioning one but certainly happen.
Yeah, Planetsoft, it's still a an interesting dynamic off on one hand, the exposure that we haven't really come down quite a bit so as a result with the trade band.
Revenues with with while we have come down or not it's zero, but they have come down we've been able to offset that with more for position here are increasing position with the European players the nokia's ericsson's, even fujitsu one infrastructure most of the why wait business for us on the infrastructure side.
So its but it's been a headwind.
But at the same time, we've been able to do quite well with other players in China.
Oppo vivo gel may all again, we continue on the infrastructure side to diversify with Ericsson Nokia.
And.
I would I would say that the worst is behind US right now with respect to walk away on the certainly where a large customer for us, but it's been slowly coming down and we've been able to offset that with thought design wins in other markets in adjacent spaces. So I think weve, whether that's the warm but had been has been a bit of a headwind, but it's been abating.
Got you and then maybe another question Andrew just curious your perspective on its is actually the market you mentioned, 50% by de I think it's been coming at the expenses or G.
I do think there's some mid ranged from coming later in the year Im just kind of curious as you look to the back half of year. Your perspective on the overall handset market. Obviously by the content is good for you either way, it's kind of curious your perspective as to whether you see this market re accelerating the backdrop.
Yeah, you're right I mean, fiveg is going to be inflection for all segments, obviously at the highest and.
We're going to have the most complex technology and the richest level of content, but if you think about it on a relative basis. Many of the opportunities that we have in China and even at Samsung [noise].
The the return on on on the on the content is significant so you could be looking at platforms that you know in a fourg world maybe offered four to $5 for us in a fiveg, where all the could be eight to 10 or 15, so on a relative basis, there's more without a pop up in some of the mid and.
Lower end platforms and there maybe in the larger ones or not a large ones of course, it can have more units and give you a little bit more dense.
But we've done quite well with populating the China brands, all we're doing much better at Samsung right now because we've set our sights on the high performing technologies, the Fiveg solutions and kind of really step a little bit away from Threeg and Fourg, there and that's worked out great process. It gives us a chance to really demonstrate the technology.
I wish that we bring so we're going to have a nice combination in that area, but saw but I think now it's kind of meshing together and one of the things that we do well as as a supplier assisted to create the right solution for the right customer.
Sky five engine from for one customer maybe very different.
And then what we do with someone in China or somewhere in Korea.
Your next question comes from the line of Chris Caso from Raymond James Your line is open.
Yes. Thank you good evening wanted to give a little more granularity about what you're talking about with regard to sky five and not you know where you're seeing traction on that and given that sky five is a higher end product where.
You'd be competing a little more against Qualcomm modems, where obviously the trying to get their RF. There you know how that's helping you to compete against a against Qualcomm zone RF solution.
Yeah, Chris I think you wanted one of the things to remember it I know you've been following this for long time is that the technology inflections, they've always been a challenge you know to GE to Threeg was years ago, but that was a challenge.
Threeg to Fourg was much harder, but the leap from Fourg to Fiveg is really significant I think anyone in this industry would would agree with that.
So one of the things that you know has allowed us and positioned us to be ready and the precipice of all this is that we've been working on these markets 40 years. This has been our bread and butter working in wireless technologies, cultivating and crafting the right enabling solutions, bringing in our own Tc saw bringing in our bulk acoustic wave leveraging our own.
Let them arsenide, and Boston and like what Craftiness stuff. So when we go when we call. It sky five but that's sky five could have eight to 10 permutations, depending upon the customer need depending upon the base band. So we want to approximately basement agnostic. They can work with Qualcomm the work with Mediatek wherever and that's an important thread for us So I think.
That's what what makes us unique and you know there's some great solutions out there point solutions, but what we like what we've been seeing as our customers want to pick the very very best solutions and create their own architectures and really not just run off of a base plant based made reference design. So.
That's the way we see it we understand the complexity in Fiveg, it's more than just the product itself. It's the it's the people engagement. It's the employee engagement ensuring that the know how that we havent skyworks can transfer over to our customers and put them in position to win.
Thank you.
It for a follow up I guess the question on use of cash and Liam how you're positioned the company over the next few years and you're starting to see the the fruits of the Fiveg cycle. You know it sounds like you guys. It really confident in your ability to generate cash from that how are you going to use that cash and Ah you know sort of position.
On the company beyond this cycle you know this.
Historically run runs a couple of years and what are you thinking after this what what's the sort of longer term plan beyond this by GE cycle.
Yes, so first of all I think we're very well positioned from a balance sheet point of fuel we have $1.2 billion of cash no doubt, we will continue to generate a lot of cash. Despite the fact that we make major investments are advancing the technology.
We will continue to invest in R&D as you can see an hour operating expense level will continue to invest in our factories as well with our.
Our capex, which is running on or about 10% to revenue.
Most of the cash that's being generated as being returned back to the shareholders a combination of our dividend program and.
We've just increased our dividend by 14%.
As well schools us continue to be active from our share buyback.
Program.
But yes, we are continuing to make major investments advancing the technology.
All the levels in our weather.
Power amplifiers, what filter business, Tc saw and more and more sole ball as well as driving duals complex integrated solutions.
Your next question comes from lineup Timothy our current from Yes. Your line is open.
Thanks for the question this success on for Tim.
Wondering if you can give us a little more color on gross margin seems to come in a bit later than we would've expected at these revenue levels, if theres anything additional to call out there.
Yeah first of all I'm pleased to live the gross margin performances in the June quarter, we did 50.1% we guided on or about 50, so we'd be that just by 10 basis point that so we just guided September to be up sequentially into the 50 to 50.5 range, so making some good traction.
Improving the gross margins part of that is of course, driven by a richer mix with more fiveg products.
Into.
I would overall mix, there's a little bit of a headwind as a result of corporate 90, a there is some disruption into supply chain.
Logistic costs as well as in our own factories, but Ah I will continue to worked out and I assume that overtime.
Headwind will go away as well and then we will continue as as we grow.
The topline as we continue to execute on our cost reduction actions as we see more and more to fiveg as the overall mix. We will continue to make further improvements on the gross margin towards our target of 53% [noise].
Thanks, and just to follow up I was wondering you get some good color and China excuse me trying to smartphones, which just wondering if you could give us maybe a little more color on kind of revenue kind of trended in June we set of revenue or any other details and kind of what the demand looks like specifically from China going forward. Thank you.
Yes, so China overall, China revenue is approximately 23% or total revenue mostly of that is all people who show me, there's very little why we left and then of course or some other smaller Chinese customers as Liam indicator.
Before Fiveg is really kicking off in China, and so we.
I have great relationship with those customers, but as a big step up in content in those fiveg phones compared to the Fourg phones.
And as a result of that I would revenues of the Chinese players is.
It was up a on a year over year basis and is expected to further accelerate strongly into the September quarter.
Your next question comes from a line of Edward Snyder from Charter equity Research. Your line is open.
Thanks, a lot limb 150 million ball, unable or modules, which is a very good.
All those modules is that all manufactured by Skyworks or do you still source from other suppliers as it makes sense for your.
Manufacturing plant and you know given you discussion to Fiveg. It sounds like a lot of that would be coexist receives I filters, which right. If your power Ali I have you started shipping production shipments yet have bought Duplexers and then I have a fall please.
Sure well the good news added it's all organic under our roof now so we've been working on this for quite a while our team has been doing a great job. We've got some great technologist working not only in the labs, but also in the factories to get this right. So that technology is still early innings 150 million units is great, but you and I, both know that de Sir.
Just a billion units out there to be captured so where were at a long way to go but the technology looks good right now and it's been endorsed by some really important customer. So that's good.
The second part of your question is also true so yeah, we're leveraging not only ball and the transmit side, but the diversity receive technology is equally important and bringing downlink speeds up so we're going to be able to populate both hence all with bulk acoustic wave. So we're really looking forward to executing there and we've got some great traction now.
Now and we're going to be seeking out more customers as we move forward.
But most of that is on the receives I'd give you district.
Right Yeah. It is today, but I think we're going to broaden that reach and start to while also look at the T X chain, Ed and I think we have some design wins, what customers there too, but the lions share of the print today, it's been on the direct side, but we certainly can take that technology.
And drive it and the transmit chain you know, we've got customers that want us there as well all and with our Sky five solution. We can create some really unique highly performing engine that make it very simple for our customer to use and a five key spectrum. So it's going to be on its going to be really important technology for us and as I said you know early indications are strong.
But isn't the case that the transmits coming to you rather than you're going to transmit given you know given what's going on fiveg, especially with China mobile and and the a dual connectivity they're looking at it sounds like transmit starting to children section which is.
Actually make it much easier for you guys to address a kind of a board duplex without trying to go head to head with Avago recordable, yes, you're right on that if thats correct that is correct. So thats going to create another door for us ought to drive technology as well, yeah with with some of the.
Partitioning that we see no spiky solutions. There is some unique opportunities are opening up as well.
Your next question comes from a line of Gary Mobley from Wells Fargo Securities. Your line is open.
Hey, guys.
The risk of being accused of asking you guys. A softball question I went to ask about your relative performance on the on the mobile unit versus the market. So it's my Masters me correct here. He drove 2% you your growth in the first half county, or 20 nets against the backdrop.
Maybe 20% units declined the mobile handset units can you rank order sort of a walk us through how you'd be able to manage so well against a tough market in.
Stickier with respect to share gains in in content growth.
Sure it not that that's a great question. So I'll try to go high level and maybe get a little more detailed as we go through it so I think the underpinning.
Catalyst for growth here, it's the Fiveg inflection, it's really that's the Genesis at US. So what you get there is if you look back 2018 in early 19 everybody's phone was with either to GE threeg or Fourg five bite you just didn't exist right. The technologies will be readied they were almost a market, but they hadn't yet launched so.
The initial stages of Fiveg launch now are starting to show up they showed up in our Q3 and they're going to shops wrong in Q4, and so with that we have known contact known content customizable stuff that we created specifically for Fiveg that will start laying in.
To these platforms and to Fiveg additive.
Incremental to what you already have so you already have a fourg fall and that has whatever the content you want to call it eight or $9 in print maybe 15, and then you add fiveg as an incremental.
From LNG and on top of the forging and so that's really important so it's you're going to have a device now in fiveg Thats still carries threeg carries fourg and then carry the incremental high complexity.
High performing Fiveg. So that's a big deal and we are still very early in this cycle. This is very early.
Some of the most compelling platforms have not yet launch and we know that they will.
So we have a lot to look forward. There. So that's one of the most important thing can we think about how that growth profile looks we started a few stats that said look over the next five years. We could have 3 billion subscribers are carrying Fiveg technology. You know today that number is really low it's in a couple of hundred million units. So theres really much to do.
You and capturing the opportunity in Fiveg Oh in addition to the handset there's great usage cases now in Aiotv and some of the other markets that we've seen other work from home markets are showing you know a need for much faster technology that could be similar with five to your wife by six so some really interesting themes that are coming in.
Together right now at this time that can propel our business significantly.
Okay. Appreciate that as my follow up question wanted to ask about the emergence of the mid tier price points in China. So trend has been great and the first half the year, perhaps driving 250 million fiveg units in 2020 globally, but I'm curious to know your relative positioning as the mid tier portion of the.
The market, China opens up and <unk>.
And how that compares to where you are positioned at the same sort of price tier in fourg.
Yeah, I mean, so we have had a very good reputation and position you know what the players in China. The Oppo vivo shall my name. So for the most part have done very well it had a great partnership or we've been able to leverage our fourg solutions extremely well and when we get into Fiveg. One of the things that really is unique first.
Got it works is that you know the breadth of our technology and the knowledge base that our team has in developing these solutions, we becoming a really good partner for the China brands to launch. These technologies Fiveg is very difficult I said, it already but having a partnership with skyworks not just on the hardware, but actually on the side the people side to get these price.
Next the marketing and get them to launch.
We've been great at that and it's allowed us to really.
Lineup and be very close to the names that matter. So we think theres a great opportunity in China, It's already it's already happening now, but there's still as I said, if you look at total units globally and we're units could be in five years Theres a huge upside.
Your next question comes from a line of Craig Ellis from B. Riley FBR. Your line is open.
Yes, thanks for taking the question and nice job I mean execution guys. Liam I wanted to go back and just understand Bob module business, a little bit better so.
Looks like.
Shipments were up about 50% in the last quarter were 150 million, but from the press release, it looks like you're shipping by modules and both integrated mobile and broad markets. So can you give us some sense for how that splits out now and is your ramp from onshore significantly over there.
Our next.
Four to six quarters, how does that split play out we've got the huge units and then Craig and mobile, but ultimately I know two units and broad markets will even bigger so how do you see that playing out intermediate two month, yeah. Yeah. No. That's that's good question. So.
Right now for the most part you know, we're probably 80%.
Fiveg mobile with our with our bulk acoustic wave solutions and again those solutions are integrated into Sky. Five all we are seeing a growing opportunity and technologies like Wi Fi were using filtering within our integrated Wi Fi solution creates a great technical performance. So that's an opportunity, but I will say that if you think.
About.
The number of units that we produce just just as a statistic that we said before we manufacture about 8 billion Tc saw filters a year about 8 billion.
Oh, and how far modules were doing great. We did $150 million it couldn't be more than two filters in the device potentially.
But the difference between where we are in technologies like Tc saw and where we are in box, it's incredible up a bit the opportunity that we're gonna have we're still crafting the technology, we're happy with what we've done so far but there's just so much more to go so theres going to be a clear line of sight in mobile because the mobile device print today has been.
All right and if they're sockets that are there right now that we could address as we move into aiotv in some of the broad markets.
It will be a kind of a teachable performance for us we're going to basically try to power somebody solutions that maybe port wireless before maybe they were wire, we try to create technologies that will level unwired them, maybe we do more and Wi Fi.
Leveraging bulk acoustic wave so there's going to be much more individual market specific solutions that will go to the aiotv space.
But then back and mobile, which we know so well have more under the hood with every customer those opportunities we can see directly today and it's and it's on us to go out and capture.
That's really helpful them a follow up question is related to both.
The near term that you're seeing in them longer term. So clearly the business is growing very robustly right now you've got very strong guidance for the September quarter, and you're seeing very good trend seasonally in the December quarter.
Question is this is because we look at the longer term performance of the business before industry ran into trade and entity list and co bid by the SaaS years was a business that could do a billion dollars plus per quarter.
If you look at your.
Your pipeline in your design wins that you know at this point should be extending well into next year, you feel like you're starting to get the visibility for when the business can get back to that.
1 billion a quarter level or is that really going to come viewership through.
Things in the first happens next year. Thanks, Yeah, no. That's it that's a great point and we were there right. We know we know how to play at the one filling in a quarter level.
Paul and certainly the opportunity in front of US I think is is actually much more favorable and conducive to what we do now than it was three years ago.
I say it because these technologies that we've been talking about really difficult Fiveg is hard to do really hard to do you have to have great people with experience, but you also have the technology you have to have the technologies, it's not a fabulous play you've got a crack the stuff. So I think the fact that we're going into an inflection that required daunting technological performance.
From from your factory to your Epay ease right to the customers inflation, that's going to play well for us that's going to play well and we wouldn't be where we are if we didn't put the 20 years of work into this technology years and years at work and now that work is starting to really flow into right direction for so we're looking forward to that and I think over time.
The revenue is going to take care of itself. We just continue to to knock off the design wins, we know the contents been increasing and the other thing is.
Talked about it in the prepared remarks, the use cases around connectivity right now a really important and I don't think this is going to go away. When we hope we clear this pandemic I think there's going to be some lasting behavior.
Around connectivity in wireless performance and it's going to be used by the math. So we really you know that's something that we weren't thinking about a year or two ago, but we're starting to see that now as a new theme around our portfolio and it's something quite positive for Skyworks.
Our last question comes from a line of Karl Ackerman from Cowen Your line is open.
Hey, good afternoon, gentlemen, I. Appreciate you let me ask your question wanted to focus first on just kind of the near term.
What's sort of visibility do you have into orders for the second half.
I asked because well production plant seem extremely strong I think theres. Some some investor consternation that improving production plants may fall on weaker consumer demand of next several quarters I'm into context, just the challenge than it's been seen with Kobe 19, So I guess, how do you handicap that in the context of your inventory.
Depletion and gross margin expectations over the next several quarters.
Yes, so we have very good visibility all into demand right now and.
We don't take that lightly at all I mean, we understand the volatility all that we've all seen with the Covance situation and we continue to see it but we have a very strong backlog position right now with some core technologies.
We have to go ahead and execute all that but it is.
Looking at where we are now and looking at other periods of time, we're in very good position execute through the second half a year.
I'll, let Chris talk a little bit more about inventory.
No I feel very comfortable worthy inventory level is.
Right no.
Given that we just guided a very strong sequential growth into September and we are.
And we expect further strong sequential growth into the December quarter.
We.
We have been level loading our factories.
In order to drive maximum usage of our capital equipment and trying to minimize our capital expenditures and so most of the inventory that we have is based on backlog and foot orders that we have on the books. So that is very little risk for the animal.
And so I feel I feel really good about what we all Truman invented point of view and being able to shut about where customers as the business.
Continue to grow in September and December.
Great and for my follow up if I may.
You are base band agnostic, but I'd love to hear your thoughts on the growing opportunity content opportunity at Mediatek.
That would seem to be a healthy driver for you targeting low to mid tier fiveg handsets over the next year too. Thank you.
Yeah, absolutely I agree immediate tech is one of the key players for US you know in the basement agnostic World. We're doing a lot of good work there we've got to off great performance on a number of their new platforms.
And as you know, they're a great feeder system into China, and even other emerging market. So we've got.
Some of our platforms are six to $8 Mediatek right now there that are growing a we've done a great job with them in Fourg and we're now helping them in fiveg.
We've got not only do we have transmit chain, but we have some really good dereks receive site technology that we talked about <unk> on a different question.
Their volumes are starting to pick up in fiveg. So mediatech they they've been around for awhile, but they are starting to really emerge again as a leader.
In the emerging markets and in China landscape. So now they're supporting a lot of the names that we talked about oppo vivo Xiaomi very often you have that mediatech base band inside those solutions and we have a great alignment with the mediatech basement as well so if they have been a great partner for Austin.
And we see momentum on their end.
Ladies and gentlemen that concludes today's question and answer session I'll now turn the call back over to Mr. Gryphon for any closing remarks.
Thank you all for participating on today's call. We look forward to seeing you at upcoming conferences.
Thank you, ladies and gentlemen that does conclude today's conference call. We thank you for your participation.
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