Earnings Call: Q4 2020

Feb 16, 2021

Day, and welcome to the CEVA, Inc. 4th Quarter and Full Year 2020 Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Richard Kingston, Vice President of Market Intelligence, Investor and Public Relations, please go ahead. Thank you, Cole. Good morning, everyone, and welcome to CEVA's Fourth Quarter and Full Year 2020 Earnings Conference Call. I'm joined today by Gideon Wertheiser, Chief Executive Officer and Yaniv Arieli, Chief Financial Officer of CEVA. Gideon will cover the business aspects and the highlights from the 4th quarter and provide general qualitative data. Yaniv will then cover the financial results for the Q4 and also provide qualitative data for the Q1 and the full year 2021. I'll start with the forward looking statements. Please note that today's discussion contains forward looking statements that involve risks and uncertainties as well as assumptions that if they materialize or prove incorrect could cause the results of CEVA to differ materially from those expressed or implied by such forward looking statements and assumptions. Forward looking statements include Guidance and qualitative data for the Q1 and full year 2021 optimism about 5 gs base station RAN deployment in China and relationship with ZTE and the opportunities presented thereby optimism about the continued momentum in our connectivity, Sensing and AI technologies, ramp up from existing WiFi 4 and 5 customers, Optimism that our Bluetooth technologies will allow us to penetrate the high volume smartphone market, our belief for strong licensing revenue in 2021 and potential new licensing engagements and our belief that our royalty growth drivers will more than offset the decline in royalties from the 5 gs smartphone supplier switch. For information on the factors that could cause a difference in our results, Please refer to our filings with the Securities and Exchange Commission. These include the scope and duration of the pandemic, The extent and length of the restrictions associated with the pandemic and the impact on customers, consumer demand and the global Economy generally, the ability of CEVA's IPs for smarter connected devices to continue to be strong growth drivers for us, Our success in penetrating new markets and maintaining our market position in existing markets, the ability of new products Incorporating our technologies to achieve market acceptance, the speed and extent of the expansion of the 5 gs and IoT markets, Our ability to execute more non handset baseband license agreements, the effect of intense industry competition and consolidation And global chip market trends. CEVA assumes no obligation to update any forward looking statements or information, which speak as of their respective dates. And with that said, I would now like to hand the call over to Gideon. Thank you, Richard. Good morning, everyone, and thank you for joining us today. 2020 was an extraordinary year with the COVID-nineteen pandemic accelerating the adoption of new technologies and usage model, while presenting uncertainties and enormous operational challenges worldwide. Notwithstanding the circumstances, CEVA had an exceptional year with all time high Revenue in both licensing and warranties and substantial market expansion in the 5 gs1, Wi Fi 6 And automotive spaces. I will allude to these developments in more detail later in the call. Q4 was another excellent quarter with revenue and EPS significantly ahead of our expectations. But our revenue for the Q4 of 2020 came in at $28,100,000 Our 2nd highest revenue quarterly revenue on record. The licensing environment continued to be healthy A $12,100,000 for the quarter with a good demand for our Wi Fi, Bluetooth and audio DSP product. We signed a record equally 21 year agreements, of which 16 were for connectivity and 5 gs well for smart sensing. 7 of those agreements were with first time customers. Target products for our technology include 5 gs smartphone, TWS earbuds, cellular IoT for asset tracking and wide variety of other IoT devices. Late in the quarter, we signed a comprehensive and signed the license agreement for our connectivity portfolio, which That internalizing the development of Wi Fi and Bluetooth technologies and intend to deploy our connectivity portfolio across all of its 5 gs smartphone, This agreement along with others that we have in our pipeline reinforce our belief for a stronger and another record year in licensing revenue for 2021. Royalty revenue came in at all time record high $16,100,000 up 19% year over year. Seasonal strength across our IoT market and strong shipments 4 gs smartphones were the key drivers to this exciting record. For the Q2 in succession, we reported all time high royalty revenue from our Bluetooth, Wi Fi and Sensor Fusion product. For the full year 2020 revenue came in at record setting of $100,300,000 up 15% from 2019. This marks the first time that CEVA has crossed The $100,000,000 annual revenue threshold, a year ahead of our expectation. Licensing and related revenue had a record year with $52,500,000 up 10% from last year. We continue to expand our customer base with a record of 55 license agreements signed, of which 17 were first time customers. Annual loyalty revenue came in at all time high $47,800,000 up 22% as compared to 2019. Royalty revenue from our base station and IoT Product category grew 72% year over year to $22,300,000 as the momentum for our large and diverse customer base across multiple end markets continues. Royalty revenue from handset declined slightly year over year, down 3% to $25,500,000 Unit shipment of CIGA based product grew 27% year over year to more than 1,300,000,000 units with a record 750,000,000 units from our base station and IoT customers. In perspective, 2020 was a landmark year for Vosiva and its industry. The global pandemic highlighted the impact connectivity had on our lives and acted as a catalyst for rapid change to our digital transformation. This presents a unique set of opportunity for CEVA's differentiated 5 gs1, Wi Fi, TWS earbuds and automotive. Let me take the next few minutes to elaborate On this growth driver and the anchor fiber has already in place in these local markets. 5 gs RUN. 5 gs offers data rate and ubiquitous connectivity. The Fast rollout of 5 gs Networks today is predominantly aimed at smartphone use case. According to Ericsson's most recent mobility report, by the end of 2020, over $1,000,000,000 or 15% of the world population live in 5 gs coverage area. China, in particular, is very advanced with 70% of the global 5 gs connection according to GSM Association. Beyond smartphone, 5 gs Also new growth opportunities in regards to URL LAC and IoT application. This application will be the center of next generation technology deployment in industrial, robotics, AR and autonomous cars. The digital transformation and the new application 5 gs enables present sizable opportunity for CEVA 5 gs RAN Technologies beyond our existing incumbency and baseband. This specifically applies to the growing use of Active Antenna, a new antenna technology that combines arrays of antenna With DSP to process complex algorithms such as massive MIMO and beamforming for more precise steering of the antenna signal, which gains substantial boost in capacity and energy efficiency The emergence of ORAN and VERAN, which aims to transform the telecom industry from relying On proprietary platform on limited number of OEM, with this aggregate network with open interfaces And multitude of merchant ships from incumbents and new suppliers. We think research is expecting Open RAN to account for 58% of the overall RAN CapEx spending by 2026. With our second to none competitive edge in DSP Processor, we are able to empower our existing and upcoming Customers will innovate and quickly expand their market reach with the remote ready unit and address new opportunities in the run space like private network, small cell small cell private wireless access and all that. We are encouraged by the progress ZTE has made in the 5 gs RAN space, growing its share in the global RAN market From 8% to 11% on a year over year basis according to the law and we Expect other customers of ours to go into production in 2021. WiFi. WiFi is deployed in over 5,000,000,000 smartphones and more than 300,000,000 hotspots today. Cisco estimated more than 50% of the global mobile traffic It's offloaded to Wi Fi and this is set to grow to over 70%. AT and T noted that its Network experienced 90% Wi Fi data rollout during the pandemic. The new Wi Fi standard Wi Fi 6 and Wi Fi 6E provides substantially higher data rate up to 9 point WiFi 6 also presents sizable opportunity beyond smartphone and PC through proliferation of Connected IoT devices such as smart home appliance, smart TV, smart speaker, connected cars and wheelers. Our Riviera Marine's Wi Fi 6 IP is at the forefront of the Wi Fi 6 upgrade cycle and the only IP with successive record of accomplishment. We have signed today more than 10 Wi Fi 6 Customer in our existing Wi Fi 4 and Wi Fi 5 customer shipment grew more than 6 phones In 2020, the start of significant expected ramp up. In addition, as I noted earlier, WiFi 6 along with our Bluetooth technologies bring us opportunity to front penetrate the high volume market of smartphone as more OEMs Are looking to internalize wireless connectivity technology as well as SIMS that look to take advantage The TWS earbuds market presents a lucrative opportunity for CEVA due to its size and roadmap. At IDC, by 2020, the TWS segment reached 234,000,000 sets and projected to reach to 400,000,000 sets by 2024, representing a CAGR of 14%. The pandemic has expedited the proliferation of TWS as more people have to work or study from home and require high quality earbuds to ensure good experience. Additionally, Large handset OEMs have recently decided to remove complementary earbuds from new point packages, Paving the way for a large merchant market for PWS. CEIMA already has a strong presence in TWS earbud space with our ResveraEdge Bluetooth IP. Overall, our Bluetooth technology has been adopted by more than 80 semi SN OEMs to date and empower more than 520,000,000 devices in 2020, up 44% year over year. Furthermore, the future TWS IRSA design will progressively seek to add more functionalities while dealing with the challenges of finance space and battery life. Among these Both functionalities are noise cancellation for adverse environmental conditions, voice recognition, AI and sensors for activity and health tracking, of which relates to technology that CEVA owns. In the coming weeks, we will officially announce the world's first comprehensive and open platform for TWS device And hear that that we license. We have already started to introduce this high value differentiated IP to lead customers and expect to conclude the 1st license agreement shortly. Automotive, the automotive market represents 9% Yes. Selling into this space requires overcoming the large entry barriers and it commonly takes between 3 to 5 years for semiconductor vendors using new technology to qualify a design at Tier 1 OEM before going into production. With that said, as soon as production starts, The product lifecycle automotive is longer than most other markets, ensuring stable source of revenue and profit and place 1 for CEVA R and D Investment Strategy. In recent years, the automotive industry Has undergone a massive technology transformation driven by adoption of ADAS and electrification. While high performance DSP to process the sensory data captured by cameras, LIDAR, LIDARs and other sensors surrounding the vehicle. Automotive Electrification is gaining momentum As a result of increased emphasis of government to lower CO2 emissions as Battery management system plays a key role in electrical powertrain in charge of keeping high efficiency and longer life of the battery cells. Powertrain vendors and OEMs have recently started to use DSPs along with AI to boost the performance of the battery systems for longer drive per The new DSP enhancement and the collaborative business model that CEVA proposes in the areas of ADAS and powertrain. Our latest SensPro 2 DSP architecture, the world foremost DSP for sensor processing, Provide unified architecture for real time monitoring and AI processing of sensory data extracted from radar, camera, lidar, cellular V2X and variety of environmental sensors. Our CBNA AI toolkit is able to quantize, prune and optimize neural network and speed up neural network inference processing, a crucial requirement for fast response time of the meeting. Discard Technologies and Competency were the drivers for 2 key agreements we signed during 2020 with 2 of the largest automotive semis that plan to use our technology for powertrain and level 2 plus ADAS. We will continue in the coming year to strengthen our relationship with our 2 key customers and seek to engage with other stakeholders capitalizing on core technologies and our growing reputation in automotive. It's also aligned with CEVA's strong focus and commitment to environment improvement technologies and products. Before my closing remarks, we would like to express our concern and sympathies for those affected by our global pandemic. The ongoing situation present us with numerous challenges, We continue to focus on the safety of our employees, customers and suppliers. Our record setting results for the year demonstrate the growth of our technology portfolio. It's resiliency to global events and primarily our employees' focus and devotion to maintain and even As we enter 2021, We look to continue to be at the forefront of the digital transformation and capitalize on our core technologies and customer diversity to grow our market share and maximize our return from growing industries, In particular, 5 gs RUN, Wi Fi, TWS, Earbuds and Automotive, which I discussed earlier. This industry presents multiyear growth opportunity for connectivity, sensing and AI technology, And we are well positioned to take advantage of it. Finally, I would like to take this opportunity to thank All of our employees for their hard work, innovation and fantastic execution. I would like to Again, my thanks to our partner suppliers and last but not least, our investors for their confidence and support. We wish you all healthy, happy and prosperous year, and please stay safe. With that said, I'll now turn the call over to Yaniv, who will outline our financials and guidance. Thank you, Dido. Good morning, everyone. I'll start by reviewing the results of our operations for the Q4 of 2020. Revenue for the Q4 was $28,100,000 down slightly as compared to $28,300,000 the same quarter last year. The revenue breakdown is as follows. ICTM related revenue was approximately 12,100,000 reflecting 43% of total revenue, 8% lower as compared to the Q4 of 2019. Royalty revenue was a record $16,100,000 reflecting 57% of our total revenue, up 19% from $13,500,000 for the same quarter last year and up 28% sequentially. Face station and IoT royalty revenues contributed $6,400,000 in the quarter, up 50% year over year with an all time record royalty contribution from our Bluetooth, WiFi and sensor fusion products. Quarterly gross margin was 91% on GAAP and 92% on non GAAP basis, both higher than expected. Non GAAP quarterly gross margin Approximately $200,000 of equity based compensation expenses and $200,000 for the amortization of other assets associated with EnyaVision Investments. Our total OpEx for the Q4 was $23,200,000 just over the high end of our guidance, mainly due to accrued compensation related benefits and commission associated with the higher 2020 revenues. OpEx also included an aggregated equity based compensation expense of approximately $3,400,000 Amortization of acquired intangible assets associated with the acquisition of Hillcrest and Eurovision of 600,000 Our total OpEx for the Q4, excluding these items, were $19,300,000 about $500,000 above the high end of our guidance, this is the same region I just highlighted. U. S. GAAP net income for the quarter was $600,000 and diluted earnings per share were $0.03 compared to net income of 3,100,000 and $0.14 for the Q4 of 2019. Non GAAP net income and diluted EPS for the 4th quarter were $4,700,000 $0.20 respectively, significantly higher than our internal estimates. Note, the 4th quarter 2020 financials increased a $2,000,000 tax expense due to withholding taxes, which cannot be utilized in future years. Other related data. Shipped units by CEVA's licensee during the Q4 of 2020 were a record 484,000,000 units, up 39% sequentially and 35% for the Q4 of 2019 reported shipments. Of the 484,000,000 unit ships, 217,000,000 units or 45% or for handset baseband chips, reflecting a sequential increase of 45% from $149,000,000 units of handset based on chips during the Q3 of last year, an 11% increase from 196,000,000 units shipped a year over a year ago. Our base station IoT product shipment reached a second sequential all time record high of 2 8,000,000 units, up 34% sequentially and up 63% year over year. Of the $268,000,000 unit, Bluetooth was $187,000,000 a new all time quarterly record high. As for the year, our total shipments increased 27% year over year to over 1,300,000,000 units, an outside record high, which equates to approximately 42 CEVA powered devices sold every second in 2020. Annual shipments of handsets were flattish year over year and around 575,000,000 devices. After a slow start of the year, Hence, the shipments from a large China based customer grew significantly in the second half of the year. Base station IoT product royalty revenue continued to grow and reached a new record high of $22,300,000 up from $13,000,000 in 20.19 and $8,900,000 in 2018. In terms of units, base station and IoT Product shipments were up 60% year over year to 750,000,000 devices. Overall, we surpassed the $100,000,000 total revenue milestone for our very first time. This is a significant accomplishment that was achieved as a result of an all time high licensing and royalty revenues that we are proud. As for the balance sheet. As of December 31, 2020, CEVA's cash, cash equivalent balances, marketable securities And bank deposits were $160,000,000 We did not repurchase any shares in Q4 and have approximately 498,000 shares available for repurchase. Our DSOs for the Q4 were 48 days. During the Q4, we generated 6 $800,000 cash from operations, our depreciation and amortization were $1,500,000 and purchase of fixed Assets was 400,000. At the end of the year, our headcount was 404 people, Of which 335 were engineers, slightly higher than a total of 398 people At the end of September, 22 people hire over 3 82 people at the end of 2019. Now for the guidance. We expect 2021 to be another growth year for CEVA as the momentum for our business continues. We are forecasting total revenue to be just over 106 $1,000,000 $1.06 for 2021 with the growth in both royalties and licenses. Specifically, in regards to royalty revenue forecast, we're taking a wait and see approach as the semiconductor industry has experienced extended lead time for chip orders and lean inventories, which we expect to last through the first half of the year. Our licensing business Continues to be solid with growing opportunities in 5 gs, Wi Fi 6, TWS, earbuds and automotive, as Gideon We're targeting another record year for licensing, which will set the stage for additional news streams devoted in years to come. On the royalty front. We're expecting a decline in royalties from a leading Smartphone OEM, who has switched to another baseband supplier for its recent launch 5 gs smartphone line. With that said, we do maintain our presence in its 4 gs smartphones and are still expected to ship volumes this year. We also see continued progress for our China based customer who has recently regained good momentum in low cost smartphone for emerging markets. And we've also recently launched its 1st FEMA powered 5 gs chip in China. In our base station IoT product categories, we expect to continue to outgrow the market we are targeting. Overall, We believe that new royalty growth, Wibrant, will more than offset the decline in royalties from the 5 gs SmartSupplier Switch. On the expense side, We forecast approximately $3,000,000 additional expenses in 2021 versus 2020 as relates to the devaluation of the U. S. Dollar compared to other currencies we use, mainly the shekels and the euros. On the cost of goods, we expect higher non GAAP expenses of approximately $500,000 due to more sensor fusion chip sales and other project expenses. On OpEx, With a strong licensing execution in 2020 and even stronger expectations for 2021, We will continue to support these new customers and reinforce our leadership with disciplined investments in R and D. Overall non GAAP operating increase will be approximately $6,000,000 Half of it, dollars 3,000,000 is attributed to the FX I just stated. Equity based compensation is forecasted to be approximately the same as 2020, around $13,300,000 Annual gross margins are forecasted to be similar to 2020 in the region of 89% on a GAAP basis and 91% on a non GAAP basis. Interest income is forecasted to be slightly lower than 2020 due to the lower interest rate environment around $600,000 per quarter. Tax rate is expected to be higher On an annual basis, due to higher taxes in France for our Riviera Wave business, Bluetooth and WiFi. Approximately 22% of pretax income on a non GAAP basis compares to 2020 level, excluding $3,000,000 of expenses due to withholding taxes, which will could not be utilized in future years. Last, share count for 2021 is expected to be approximately 23,500,000 shares, specifically for the Q1 of 2021. Gross margin is expected to be approximately 89% in GAAP and 91% in non GAAP basis. OpEx for the Q1 is expected to be slightly higher than the Q4 of 2020. Non GAAP OpEx is expected to be in the range of $23,200,000 to $24,200,000 Our anticipated total operating expenses for the Q1 of €3,100,000 is expected to be attributed to equity based Compensation expenses are 0.6 percent through amortization. On the tax, our non GAAP OpEx For the Q1, it's forecasted to be in the range of $19,600,000 to $20,600,000 Net interest income is expected to be about $600,000 Taxes for the Q1, a bit higher than I explained, dollars 500,000 in both GAAP and non GAAP basis. Share count for the Q1 is expected to be around 23,300,000 shares. And our first question today will come from Matt Ramsay with Cowen. Please go ahead. Thank you very much. Good morning, everybody. Congratulations guys on a strong year, which It was challenging from a number of angles, obviously. Gideon, I wanted to start, Over the last few quarters, you've and particularly today, you've talked much more about The evolution of WiFi, from your business both on licensing and what it might mean for future royalties. And I was particularly Interested in the comments you made about some large vendors going internal, or vertically integrated For their connectivity platforms, not just Wi Fi, but other types of connectivity that might bring Home accessories, wireless earbuds, etcetera. Maybe you could talk a little bit more about that, how pervasive you're seeing that across OEMs, What the merchant suppliers of some of those chips are doing, which may also be your customers and just how you're seeing that market evolve and what kind of Royalty contribution are we thinking about for this business in the next 2 or 3 years as it becomes more a material part of your revenue? Thanks. Hi, Matt. I think now when it comes to Wi Fi and Bluetooth and IoT in general, there are 2 aspects to this. 1 is what we call internally IoT. Basically, we make a distinction. I saw other people did the same distinction between IoT and non IoT. Non IoT is basically the PC, the smartphone and the tablets and the IoT is all the other devices that I use with Smart TV, smart home, cars, everything that are all these three categories. In 2020, this was the first time that the non IoT See that the self has the non IoT, meaning that you have more shipment of devices that are not PC, smartphone and others and public and year ago. And by 2020 6,000,000,000 is going to be 30,000,000,000 units. So that's the landscape. That's the opportunities that we are targeting in the what we call the IoT. And for that purpose, we have all the wireless connection. We have 5 gs, we have Wi Fi, we have Bluetooth, And we have cellular IoT or the narrowband IoT. So we cover all these angles and Whoever of this $30,000,000,000 try to build a product and it sets with us in terms of connectivity. Now the second aspect is the smartphone. We smartphone is a big market, well defined market, recently become A little bit fragmented in terms of suppliers' OEM on building. And what we found out is They come to us as part of their internalization that we do when they build the modem and they also talk to us in modem. They come to us and say we need your connectivity technology because we are going to integrate it into our SoC. If we build this SoC, let's integrate Those part are not be dependent on Qualcomm, MediaTek and the other guys that are they dominate the merchant Cheap market. And interestingly enough, it's not just OEM. We are talking with semiconductor players Let's say, when it comes to WiFi, maybe we'll expedite our journey, our entrance into this market and we license technology because of Europe. So it's another angle, which we all the time try to be in the mobile space From different angles, we have the 5 gs, we have vision, we have sound and we have connectivity. So if we Anything that relates to mobile is important to us as well. Thank you. Thank you for the thought there. Much appreciated. I guess a follow on question in a different market. You gave a lot of stats And Yaniv did as well in the prepared script about the progress in the base station market with ZTE and maybe you could give us a little bit of an update on the timing of how you're expecting the rollout to take place with Nokia As we get into 2021, are we on the precipice of that now? And is that baked into some of the royalty comments for calendar 2021. If there's any comments you could give us about how big that base station opportunity is in the royalty expectation for 2021, that would be really helpful. Thank you. It's a bit delicate to start speaking about Specifically, customer, no doubt that we have the two lines that you mentioned. Ziti is shipping as Ziti Strongly positioned in China and in emerging markets and The momentum, we don't see any reason it will not continue. When it comes to the second customer, let's wait. They are public. They speak What they say, and but as we say in the prepared remarks, We think we are in the they are in the prime time now. It's they have the platform To build this momentum there as well. And I would add, in our forecast for this year, we do take Most of our key customers in production, different timing and different volumes, but we do have that Over the year, partially baked in our expectations and plans. Got it. Thank you. And last one for me. I noticed that the Smartphone units for royalties in the 4th quarter were up year over year, but the revenue and the revenue per unit was down a bit. I I presume that was lower units to Intel and some growth from emerging markets, particularly with Spreadtrum making a bit of a rebound. Is that do I have that right? And what are your expectations for your China based band customer? It sounds like some Increased momentum there globally, is that also baked into your forecast for 2021? Thank you. Thanks, guys. Sure. So yes, there's no doubt that the year started slow, especially for China based customer with COVID and the shutdown and then Some of the Indian market was very slow as they got into the shutdown later in Q2. So it had a big effect on us and on them throughout the year. The second half of the year was strong both from Intel and from Spreadtrum. Obviously, we did not have the new iPhone 12 in Q4, which we did have a year ago, but the rest of the momentum from the other models and the Chinese guys Did push up the units. And on an annual basis, although we did not have 100% of the U. S. OEMs, which we did in 2019, we came in flat in overall units and almost in dollars as well. So At least for this for last year, we did not feel the hit of this change or change in vendors. And As we said, in 2021, we believe that number will decrease a bit. But overall, we will be able to more than offset it from the base station and IoT Thanks guys. Appreciate it. Thank you. And our next question will come from Suji Desilva with ROTH Capital. Please go ahead. Good morning, Gideon. Yneve, congratulations on the progress here. In the maybe Yaniv in the licensing area, can you talk about the new kind of quarterly sustainable range Would be your annual, just to give us a sense of how you think licenses can progress? Yes. I think we hit the new record both in dollars and number of deals, 55 deals. This quarter was very With the 21 deals, but we don't necessarily recognize all of those deals, specifically in Q4. We had a handful of customers, new customers Some of them are start ups, some of them that we were more concerned so we can upfront the payment before we release the technology. We did not recognize every Every one of them, so it's the wrong math to do to take the licensing revenues and divide it by 21. It's a bit of a different number. And with that said, some of these guys that as soon as they pay us, we will deliver and be able to recognize hopefully in Q1. Maybe some will take longer, we'll see, but an excellent pipeline to start the year. Licensing for us right now, looking at Q1, It's strong. So I hope I managed to give you the colors here you asked about. Yes, that's very helpful. And perhaps a bigger picture question on the royalty growth you're having. As we look ahead to calendar 2021, what are 2 of the 3 Royalty growth areas that you're most excited about year over year? Hi Suji. I think that when we say the i18 at large and I said also to Matt answer to Matt as well, The category outside of the mobile and PC, whether it's a Wi Fi, whether it's a Bluetooth, So whether it's a cellularity, we see a big momentum there. I mean, tons of product coming very fast. I mean, we all sort of product. If you go to Asia, I don't think of And I cannot think of any electronic product that doesn't come with connection to the Internet. So that's the excitement and That's what we are going to see a strong impact in the coming year. The other category, of course, is the 5 gs base stations. Here, I think, in China next year this year is going to be And the second customer is coming out as well. What's ahead of us and we don't see We don't we cannot see it now is the in these use cases of 5 gs In the prepared remarks, I mentioned private networks. You have so many manufacturing factories It's going into a private network where they have their own cellular network secured and reliable And the small cells and fixed wireless access. These are all designs that are we see the rollout of this one, but when it's becomes really a mass market, it could be this year, it could be next year. Okay. And then lastly, on the connectivity go ahead, sorry, I can hear you. What I'm saying is when Go to small set, private, fixed wireless access, speak about volume, speak about the millions of the product. Okay, great. And then lastly on connectivity, Bluetooth very strong over 500,000,000 units last year. What's the expectation for Wi Fi units relative to Bluetooth? Is it an order of magnitude lower with a higher ASP? Or can it approach something like a Bluetooth size Unit market, understanding the Wi Fi TAM would be helpful. So Wi Fi is a growing market for us both for us and overall the world as well, and much more used and adopted these last couple of years than 4 or 5 years ago. When we bought the DRO back in 2014, nobody was using IP for WiFi. It was just merchant ships at the time. And the whole business has completely changed with dozens of deals that we have signed, 6 fold unit growth in 2020. And I would add that to Gideon's list and your first question on some of the exciting opportunities. Wi Fi unit growth in 2021 for sure Needs to climb significantly with just many more products that are out there. Okay. Thanks guys. Thank you, Suji. And our next question will come from Tassie Walsner with Barclays. Please go ahead. Hi, thanks for taking my questions and congratulations on the Strong results. I just wanted to get back to the guidance for 2021. Maybe I didn't hear properly, but with regards to the royalty forecast, you mentioned That you guys are taking a wait and see approach because of some of the slowdown in the semi industry. I guess, do you have a way to normalize that assuming that there is a recovery sooner than How meaningful would it be to your revenue forecast? Hi, Tavy. Good morning. So let me once incorrect you. It's really important that there is no slowdown in the semiconductor industry. The problem is the opposite. There is huge demand in the semiconductor industry all over the place, and this is what causes the inventory issues, So even the long lead time, the foundry are just fully utilized. It's a great problem to have. If you're in the semiconductor space, it's not a great if you're an OEM and you need to get those chips and you need to build those cars and get them out the door. That's what the problem is. So eventually, when there will be enough manufacturing capabilities, but not demand, To fulfill the demand, we should see both our customers shift more for us to recognize more revenues on these royalties. This is what we alluded to. You could see that many companies in the semi space that we reported recently, we don't know. We know we're not the manufacturer. We don't have that crystal ball, but We just see what's going on in the industry, and we have basically exactly what you said, the wait and see approach. Let's see what it comes up. But the last year's Issues of corona and shutdowns and demand, at least how corona the COVID-nineteen started is completely different than Where the market is today and the need for much more digitization, which we talked about and we are seeing all over the place with a lot of new Device is in full production. Great. Thanks for the clarification. Sure. Thank you. And our next question will come from David O'Connor with Exane BNP Paribas. Please go ahead. Great. Good morning. Thanks for taking my questions. 1 or 2 from my side. Maybe firstly, One for you Yaniv, on the base station IoT, what's the assumption there for 2021, you did 72% in 2020 50% in Q4. And is it plus 50%, is that something you can maintain through 2021? And also can you speak maybe just on the assumption around the first half royalty growth versus the second? And I have a follow-up. Thanks. Sure. So we are not breaking down the royalties and licensing this year because it's quite difficult to do and many companies have Stop at all giving guidance or qualitative data. We are trying to help out with the models and to help out with our best understanding of different industries and We did impact our many industries that we play in. So it's really hard to put all that in place. We did take Grow in overall growth. We do believe that we'll be able to grow each one, both of the licensing and the royalty revenue streams for us. We did it's just too hard for at this point of time to understand how this will be divided between the 2. I think we just need to take it 1 quarter at a time and see how things progress. On the oil fields, again, like every year, there's Ups and downs, there's a lot of demand right now. I think seasonality in Q1 in the semi is not going to be like prior years. It could be stronger than in the past. On the other hand, you have less new phones that are introduced usually in the first Quarter and more towards spring. So we stopped when ASC 606 started and we don't report In the rear as we report, we're our customers. We really need to ask all the very long list of customers what they forecast for Q1, and many of them will not Sure. Not with the EU without, unfortunately. So let's take it step by step what it is under our control. And we knew though is the licensing, at least The first part of the backlog is strong. Okay, understood. And then maybe a question for Gideon. The strategic agreement with the top tier smartphone OEM, is this a new customer for Saver? Or can you give us any more detail as to the geography there and how long and that licensing deal was in the works. Thank you. Yes. It's a new customer for CEVA. It's in Asia, One of the aviation drives. Beyond that, you can do the you can connect the dots, But it's a sizable customer like any branded OEM. Understood. Thank you. And one last one, if I could squeeze 1 in on the open platform you talked about for the TWS earbuds. Can you help us just gauge the level of interest there from customers? And the you did talk about one customer potentially an early adopter there. What is the differentiation of that platform versus either what merchant guys have or what other competitors have? Thank you. Hi, David. I have to apologize. We are going to come out with this product in the coming weeks. I don't want to take the surprise out of our marketing people. The only thing that we say that PWS is a complex technology. You have advanced audio, you have connectivity, You have all sorts of sensors inside. And CEVA is the only company today in the IP space That has all these pieces and the idea is to put them together and the IP package. It's a very unique offering in the IP and we'll discuss Customer about this product, they're all extremely happy about it because the complexity To build a product like the airport is an illness. And now the market, Because of the fact that people are basically looking for merchants product, It's a huge volume and I think people want to go fast into this market, try to differentiate And we can give them the baseline that's having a lot of R and D and risk in a project. That's helpful. Thanks guys and congratulations on the strong results. Thank you, Adi. Thank you, Savyo. And our next question will come from Martin Yang with Oppenheimer. Please go ahead. Hi, Gideon and Yaniv. My first question is on your TWS market, perhaps following up on the Previous analyst, how fast do you see more functionalities getting integrated into those headsets? And maybe can you help us conceptualize The new dollar content or additional dollar content, you will be able to secure once more functions are integrated? Thanks. It's a question that we don't really answer about, if you meant the ASP See in the chip, but the idea is to take our ASP or Bluetooth, which is roughly $0.01 or even below and to By far increase it because the complexity or the comprehensiveness of this technology and much more. And that's the strategy in place, meaning Take advantage of the fact that we have more than 80 customers doing design in with our connectivity technology And they combine it with other technology to give them higher value and higher ASP for us. So a follow-up on that. Can you maybe help us to understand how fast do you think The new functionalities will be implemented in TWS. Are you seeing any Major customers start to integrate more complex functionalities in this year's models or maybe are they start talking about More features for future product roadmaps? Usually, in connectivity, it takes About 1 year design cycle and depending when we do the license, I believe. So After you start seeing the second half of 'twenty, probably the next Christmas season, you'll start to see this product in the market. Got it. My final question is on WiFi 6. Based on your Current customer engagement, what are the new functionalities are you seeing in end product that is realized by Wi Fi 6, which is not available in previous generations of products. Wi Fi 6 is a new Standard for connectivity, Wi Fi 6E is even the latest one. And Our business model is to enable customer to grow fast in the market. And what we see in terms of Customers going into new market is access point, Wi Fi access point and all sorts of IoT devices Starting from DTV, smart speaker, all sorts of earable devices, And if an automotive to do the Wi Fi in the car, in the cabin itself. So those are the customers. These customers are usually customers that are not familiar with connectivity and what they need is somebody TheraGo specialize in providing this total solution compliant with the standard interoperable reservoir device. That's something that we CEVA is the only today IP company that the only go to guy today in the IP space if you are looking for IP. You don't have any other one That is credible and competent as us. That's the reason that we see all this. Got it. Thanks. Thank you. This will conclude our question and answer session. I'd like to turn the conference back over to Kingston, for any closing remarks. Great. Thank you. Thank you all for joining us today and for your continued interest in CEVA. As a reminder, the prepared remarks for this conference call are filed as an exhibit to the current report on Form 8 ks and accessible through the Investors section of our website. With regards to upcoming conferences and events we will be attending, We have the following virtual conferences upcoming: the Susquehanna 10th Annual Technology Conference, March 9 to 11th and the ROTH Virtual Conference from March 15 to 17. Further information on these events and all events that we will The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.