Good day, and welcome to the Qorvo Inc. Q3 2020 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Douglas Toledo, Vice President, Investor Relations. Please go ahead.
Thanks very much, John. Hello, everybody, and welcome to Qorvo's fiscal 2023rd quarter earnings conference call. This call will include forward looking statements that involve risk factors that could cause our actual results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statement contained in the earnings release published today as well as the risk factors associated with our business and our annual report on Form 10 ks filed with the SEC because these risk factors may affect our operations and financial results. In today's release and on today's call, we provide both GAAP and non GAAP financial results.
We provide this supplemental information to enable investors to perform additional comparisons of operating results and to analyze financial performance without the impact of certain non cash expenses or other items that may obscure trends in our underlying performance. During our call, our comments and comparisons to income statement items will be based primarily on non GAAP results. For a complete reconciliation of GAAP to non GAAP financial measures, please refer to our earnings release issued earlier today available on our website atqorvo.comunderinvestors. Sitting with me today are Bob Bruggeworth, President and CEO Mark Murphy, Chief Financial Officer James Klein, President of Qorvo's Infrastructure and Defense Products Group Eric Creviston, President of Qorvo's Mobile Products Group as well as other members of Qorvo's management team. And with that, I'll turn the call over to
Bob. Thanks, Doug, and welcome, everyone. Qorvo delivered record EPS in the December quarter, driven by strength in our end markets of 5 gs, WiFi and Defense. I'm especially pleased with how our team is engaging with customers to enable breakthrough products and contribute to multi year technology upgrade cycles. In mobile products, the acceleration of 5 gs is driving demand for Qorvo's high performance and highly integrated solutions.
Carriers are bringing advanced 5 gs services across new frequency spectrum and that's driving greater complexity and handset designs as board space remains constrained. Qorvo is solving that complexity by integrating the industry's broadest portfolio of technologies and advancing the state of the art and functional integration. Looking at December, we enjoyed significant design win traction for our BAW based multiplexers across a range of band combinations, including our hexaplexers and our recently launched micro BAW based quadplexer. These are multiplexers enable advanced carrier aggregation and they are critical to next generation higher data rate applications. We also secured multiple design wins to supply low, mid high and ultra high band solutions for next generation 5 gs smartphones.
These are highly integrated and high performance 4 gs5 gs solutions enabling customers to reduce product footprint, enhance system performance and deliver products to market even faster. Design wins for our ultra high band FEMs were broad based across customers and mated with multiple 5 gs cellular chipsets. Qorvo's solutions deliver highly differentiated performance at higher frequencies as we expand our content in the next wave of 5 gs smartphones. Consistent with what we said last quarter, we continue to expect approximately 300,000,000 5 gs handsets in calendar year 2020, adding approximately $2,000,000,000 to the mobile RF TAM. Turning to IDP, our GaN customer engagements broadened during the December quarter as we ramp GaN high power amplifiers and small signal components at a 3rd major OEM in support of 5 gs massive MIMO deployments.
To support China Mobile's deployment of 5 gs small cells, we ramped our newest BAW filters at a top tier infrastructure OEM. We also introduced breakthrough gas fans addressing the more demanding requirements of 2nd generation 5 gs millimeter wave base stations. In our connectivity business, we enjoyed a rebound in demand driven by Wi Fi 6 and supported by recently released gas and BAW processes. Customer demand for our newest WiFi 6 FEMs was broad based and support a CPE, retail and mobile applications. For the connected home, we began sampling the industry's first radio solution combining ZigBee, Thread and Bluetooth Low Energy SoC with a WiFi 6 fan to enable next generation distributed WiFi networks.
For the connected car, we introduced a complex excuse me, we introduced a complete V2X front end solution featuring our recently released 5.9 gigahertz WiFi coexist BAW filters, which are quickly gaining traction among automotive OEMs and Tier 1 suppliers. Finally, we continue to expand our customer base in the programmable power management end market, shipping power management ICs into data center solid state drives for 2 of the top 3 storage providers. After the quarter closed, we signed definitive agreements to acquire Decawave, a pioneer in ultra wideband solutions for mobile, automotive and IoT applications and Custom Mimic, a leading supplier of high performance gas and GaN mimics for defense and aerospace applications. Adding decawave establishes our position in the emerging market for ultra accurate, ultra secure short range location solutions. Custom Mimics expands our portfolio of high performance gas and GaN solutions for the defense and aerospace industries.
Looking forward, we see both IDP and mobile products growing year over year in the March quarter on the strength of our broad technology portfolio and strong underlying trends in our end markets. And with that, I'll hand the call over to Mark.
Thanks, Bob, and good afternoon, everyone. Qorvo's revenue for the Q3 was 869,000,000 dollars 19,000,000 above the midpoint of our guidance and driven by stronger than expected mobile demand. Mobile revenue of $662,000,000 exceeded our expectations on Asia based customer demand including 5 gs solutions. IDP revenue improved sequentially to $207,000,000 on strong defense volumes and remained down year over year due to export restrictions on infrastructure products. We expect IDP revenue to increase again sequentially and return to year over year growth in the March quarter on sustained strength in defense, the ramp of Wi Fi 6 and broader 5 gs infrastructure customer demand.
Non GAAP gross margin in the December quarter was 49.3% with better than expected manufacturing costs and favorable mix effects. Non GAAP operating expenses were $176,000,000 which were at the low end of our guidance range. Non GAAP net income in the December quarter was $221,000,000 and diluted earnings per share was $1.86 $0.19 over the midpoint of our guidance. Cash flow from operations in the December quarter was $301,000,000 and CapEx was $41,000,000 which yielded free cash flow of $260,000,000 Our free cash flow through the 1st 9 months of fiscal 2020 was over $600,000,000 exceeding any prior full fiscal year. We repurchased $125,000,000 of stock in the quarter and completed an opportunistic $200,000,000 add on to our 20.29 unsecured notes issued earlier in the quarter.
During the December quarter, we completed the purchase of the remaining equity in Cavendish Kinetics, an RF Men's Company, further strengthening our technology portfolio for switches, tuners and other products. As Bob mentioned, following the quarter end, we signed definitive agreements to acquire 2 companies that we have been evaluating for extended periods. With both companies, there is excellent strategic alignment and cultural fit. Decawave, a pioneer and leading supplier of ultra wideband solutions, adds to Qorvo's RF technology leadership and opens up access to a large new and rapidly growing wireless market. Custom Mimic, a leader in high performance gas and GaN Mimic solutions for defense and aerospace markets is a bolt on to IDP's core business.
The combined purchase value of these two acquisitions is approximately $500,000,000 which will be funded from existing cash on hand. Our guidance assumes both transactions close in February and the financial impact slightly dilutive to earnings in the near term is reflected in our March guide. Turning to our March quarter outlook, we expect revenue between $800,000,000 $840,000,000 or $820,000,000 at the midpoint. Non GAAP gross margin of approximately 48.5 percent and non GAAP diluted earnings per share of $1.55 at the midpoint of our guidance. Our revenue outlook for the March quarter reflects continued robust mobile 5 gs demand and a return to year over year growth for IEP.
For mobile, we expect March quarter sales to decrease sequentially, but with less than normal seasonality. For IDP, we project March quarter sales to increase on sustained strength in defense, the ramp of Wi Fi 6 and broader 5 gs infrastructure customer demand. While Qorvo's current near term outlook is strong and channels are healthy, trade and other factors, including potential demand and supply chain effects related to the coronavirus concerns, contribute to challenges and uncertainty forecasting the outlook. On gross margin, our March quarter guide of approximately 48.5 percent is down sequentially consistent with comments I made during our last earnings call. Non GAAP operating expenses are projected to increase in the March quarter to approximately $185,000,000 on higher personnel costs including payroll effects and incremental costs associated with acquired businesses.
Net interest expense will increase with our notes add on and a lower cash balance following acquisitions. We expect our March quarter non GAAP tax rate to be approximately 7.5%. On capital expenditures, we project less than $190,000,000 this fiscal year and remain highly disciplined on adding capacity. Our free cash flow forecast for the year is now over $700,000,000 As the December quarter results and our March outlook show, Qorvo is helping customers grow in 5 gs, Wi Fi, defense and other markets by solving their challenges with best in class technology, award winning quality and supply dependability. With that, I'll turn the call back over to John for questions.
Thank
And our first question comes from Karl Ackerman with Cowen and Company.
Thank you, gentlemen. I have two questions, if I may. First question is on margins. So I get the seasonal softness in the March quarter, but as you finalize the consolidation of your soft fab in Greensboro to Greensboro, your 5 gs ultrahighband pad fem content likely proliferates across the top 6 mobile OEMs later on this year and IDP returns to growth in the back half, why can't operating margins approach 30% by the end of this year?
Yes. Carl, this is Mark. Two effects on operating margins in the March quarter. 1 is, and I'll start with OpEx. As I mentioned, OpEx is going to increase sequentially due to a number of factors, payroll effects and the incremental costs associated with the acquisitions.
Moving up to gross margin, consistent with what I said last quarter, we will see a sequential decline in gross margin, which is typical around seasonal product mix effects. So, yes, this is very much in line with what I said last quarter, about 100 basis point or so decrease sequentially.
Got it. Thank you. And for my follow-up, regarding your March outlook, it seems your base assumptions call for us slightly less seasonal decline at or I guess a seasonal decline at your largest customer, but a sizable uptick at China handset providers and maybe some stability at your Korean customer, given all the design wins you alluded to last quarter and of course earlier today in your prepared comments. 1st, am I thinking about that the right way? 2nd, how should we think about the revenue opportunity from China handsets?
I think for the overall industry, would you endorse content from mainstream handsets advancing from $1 to $2 to like $6 Thank you.
Carl, I'll take the beginning of that. From a perspective of just looking at it year over year, both businesses are returning to growth year over year. That's great to see. Our IDP business sequentially is growing very nicely. So that's also offsetting some of the seasonality.
It's typically flat to up slightly. So that's doing well. And in our mobile business, very pleased with how much we're offsetting year over year the decline that we've seen at Huawei and it's broad based. So we're seeing strength across the customer base, but I'll let Eric add a little more color to the specifics of the customer base that you asked about. Sure.
Yes, as you referenced the 5 gs rollout in China is very much on track and content gains there associated with more bands and wider bands and multiple carrier operation and so forth is leading to an expansion of dollar content as well as units a bit higher than we had originally planned. In terms of dollar content opportunity that you referenced, it's not at all unusual in these 5 gs handsets to see total dollar content in the $10 to $12 range and they tend to buy as much of that as possible from 1 supplier. So we have many handsets in China now where we have $8 to $10 worth of RF content.
Our next question comes from Toshiya Hari with Goldman Sachs.
Hi, guys. Thanks for taking the question and congrats on the strong results. My first one was on IDP. You guys talked about WiFi 6 and comms and defense contributing to growth in the March quarter. Can you kind of help us quantify sort of the magnitude of all 3 on a relative basis?
And if you can speak to sustainability beyond the March quarter for those 3 buckets, that would be helpful. And then I have a quick follow-up.
Yes, this is James. Now the year over year growth will be relatively small, but considering we lost one of our top customers just a few quarters ago, I am really pleased with the efforts of the team to return back to growth so quickly. I think it does demonstrate the underlying strengths of the products that we have in the markets that we serve. Defense, low power wireless and power management will all have double digit year over year growth quarters in March. WiFi, as we've talked about with the ramp of WiFi 6 is returning and it will have a high single digit type growth rate.
And then other markets that we serve, I think, will be a mix of up and downs. Still at the phase of deployments in base station, where we're starting ramps and starting to recover. But with loss of Huawei, we're obviously still significantly off of our all time highs in base station.
Got it. And then my second one is for Mark. In terms of free cash flow, it looks like for the full year, you're thinking free cash flow margins of 22 ish percent based on your Q4 revenue guide and your full year free cash flow commentary, which I think is the highest free cash flow margin since the merger. I guess importantly going forward, do you feel like there's more upside from there? Or is this as good as it gets?
And to the extent you do think there's more upside, what are some of the levers that you can pull to improve margins? And then sort of related to that, as you continue to build cash, how are you thinking about cash usage between organic investments, M and A and shareholder return? Thank you.
Yes. There's a lot in that question, Toshiya. I'll work through it. So yes, we're really pleased with the progress we've made on free cash, and it's been an absolute focus for the company. We've gone from $224,000,000 free cash flow in a year up to we're now forecasting over $700,000,000 in just in a number of years here.
And we reached close to 30%, basically right almost on top of 30% in the Q3 of free cash flow margins. And I think that's an objective we set some time ago for the full year. So we're not going to as you said, we're going to be closer to 22%, but we continue to see the ability to expand free cash flow margins. And nothing has really changed there. I've gone through this in previous calls.
We're pursuing a model and investing in a way to achieve stronger and more sustainable free cash flow generation over time. And that comes from investing in the right technologies of which you see some of that in the acquisitions we announced today. It's selecting the right products and having a rigorous portfolio management process, which we've executed on. It's driving productivity and operations and sourcing. And I can't say enough about the job the ops team is doing in meeting customer quality expectations and on time delivery and doing it efficiently.
And then the ops alignment with the business is as good as it's ever been in the company. So, seeing great things there. And then, finally, we're just focused on reducing capital intensity. And all those factors have helped with margin expansion. On gross margin specifically, there's room to run we believe.
We're still not at the utilization levels that we had hoped this year. The infrastructure market softness has impacted us in a couple of areas in the network, particularly Texas Gas Scan and Oregon. We in the Q4 or in the December quarter, we had period costs in Florida. As I think Carl mentioned, those do drop off in March, but we still have some period costs associated with Farmers Branch and some small period costs elsewhere. And then over time, we expect IDP to improve as a percent of the overall mix.
And I've talked about portfolio management and operations productivity and so forth. So I believe in the ability of our business to grow the top line. We have a number of levers to expand margins. We're focused on spending capital only when we need to and then driving free cash flow growth, which allows us to make prudent investments either for accretion or on technology. Finally, you asked about capital allocation basically.
The last 12 months, we've generated $754,000,000 of free cash flow. We've repurchased $689,000,000 of shares, so over 90% return to shareholders. And then over this time, we've also completed the purchase of 2 companies over $500,000,000 That's not including the 2 we announced today. So we'll continue to again drive free cash flow growth and then look for investments that make sense for Qorvo. We've said technology investments for both mobile and IDP and then bolt ons for IDP is typically how we look at things.
And then what depending on our leverage and other factors, we'll return cash to shareholders.
And our next question comes from Harsh Kumar with Piper Sandler.
Yes. Hey, guys. Congratulations. Fantastic Congratulations on that cash flow number. I know you guys have been focused on that.
I had I want to put you on a spot here, Bob. You had a pretty strong mobile March guide. And you're also basically saying pretty good strength in 5 gs, pretty good design win traction. I take that to be that this strength in March, the better than seasonal strength in March is not going to come at the expense of the rest of the year. Historically, June, September, December have all been much better quarters.
Could you just maybe to the best that you can, I know it's a tough one, but best you can provide us some color?
Yes. Maybe, Harsh, this is Mark. Maybe I'll step in and we're going to provide more information on FY 2021 at the next earnings call. As it relates to June, June, we're not going to provide detailed guidance in that quarter either, but I think maybe this is a time to talk about risk to the June quarter. Now we feel good about the March quarter, this coronavirus concerns and first our thoughts are with those affected in the region.
But we've been revisiting our outlook based on those concerns. We're comfortable with our forecast and feel that we've adjusted for what we perceive now as some risk. But we've been keeping a close eye on the situation, including extensive checks on the supply chain. To date, we've seen no material impact to our supply chain or what demand signals. However, the situation is evolving.
So we've reflected some added risk, as I mentioned, to our March guide, including, as you'll notice, a wider range of outcomes. So to your question, likewise, we're thinking about potential effects into the June quarter. And even though our channels are lean, we are concerned about how this plays out because we just don't know. As it stands now, we would estimate the June quarter to be between $750,000,000 to $800,000,000 of revenue. But again, it's early.
There's a lot of uncertainty around that. We'll provide a more detailed update at a later date and a fiscal year 2021 view on our next earnings call.
That's fair. We appreciate the color that you gave. As a follow-up, the strength in China that you guys are seeing, maybe one for Bob or Eric. What kind of customers is that coming from? Is that coming from the Tier 2s or is that also to some extent coming from Huawei at this point?
Right. Yes, it's primarily throughout Asia, so Korea and China as well, where relatively high end 5 gs handsets are still entering the channel for now. We're beginning to also see our large customers in China, so Vivo, Oppo, Xiaomi, for example, bringing 5 gs further down into the portfolio with some of the handsets that will be launching in the March quarter.
Our next question comes from Bill Peterson with JPMorgan.
Yes. Thanks for letting me ask a question and great job on the results and guide. Maybe first one for Eric. And going back to your Analyst Day from a year and a half, I guess maybe closer to 2 years ago, you talked about some unique advantage of your BAW relative to other filter technologies, F BAW and so forth. You've been discussing ultra high band wins, N79 in particular.
And also now recently you're talking about traction with your new micro BAW. I guess can you give us an update on how your BAW is helping you win relative to the competitors, I guess, both in trends as well as new entrants for some of these 5 gs specific bands? And I guess, in terms of other content, you've been talking in the past about and you haven't heard as much about that recently, but how has that been playing out? And I guess how can you meet the demands in that given your portfolio, your BAW portfolio? Thanks.
Right. Yes. Thanks, Bill. The technology roadmap has continued to progress for us since we formed the company. We've really made just a ton of progress in improving the performance of our SMR BAW filters and also our ability to integrate them into modules and also together to make antennaplexers and high level multiplexers and so forth.
So that's maturing and getting more and more competitive every single month. In addition, of course, at the same time, the market's asking for higher performance, more bands are being added, it seems every quarter, wider bandwidths, multichannel operation and so forth. So there's plenty of challenges to be met with the filter technology and it's frankly a pretty target rich environment right now for these opportunities. So I think it's fundamental technology combined really with our ability to integrate it with also very, very good band opportunities, power amplifier efficiency and power levels are very important to accomplish. And then, of course, our leadership in switching technologies and putting all those into high level modules together.
It's very similar to the fundamental trends we've talked about for several quarters now. We're just continuing to march on driving the investments into the core technologies to make it better.
Okay, great. And I guess the next question, I guess, if both you and James can chime in. On the top of the millimeter wave, obviously some of your competitors are talking up millimeter wave opportunities. It appears like you and your closest competitor are really still focused on sub-six. I guess for the mobile side, what can what unique and different solutions could you bring to the market?
What are the key hurdles to address? What are the key base technologies, the power amplifiers, switching filters and so forth? And I guess from James' side, what you spoke to it a little bit early in the prepared remarks, but how do you see the growth of millimeter wave and the impact to his business and some of the unique, I guess, things that he can bring to the market as well?
Yes. So thanks. I'll start. This is Eric. And so the unique strengths that we bring to Millimeter in the mobile side is really leveraging the work that James has done in the infrastructure side and defense applications, developing advanced scaling arsenide processes for millimeter wave operations.
So we've released new commercial versions of those processes and have introduced those to multiple handset manufacturers and platform providers. We're building prototypes to help demonstrate the capability of mobile millimeter wave and showing what could be done in terms of thermal dissipation and power efficiency and battery life and so forth. But at the end of the day, I think the big question is just whether the business model is going to close on it. I think there's a lot of challenges in millimeter wave in a mobile application. By definition, you're moving in a mobile application and the path loss is quite high in millimeter wave.
So we'll see. We're certainly getting lots of demonstrations out there. You're seeing carriers put up millimeter wave in multiple cities and we're going to be participating and helping to validate the market.
And Bill, this is James. And as far as infrastructure is involved, I mean, we're certainly engaged and very similar to what we showed in our Analyst Day almost a couple of years ago about how we see more and more of those systems using gas based front ends, getting away from pure silicon solutions because it's just a much more efficient implementation. But we also are also seeing fixed wireless come on board and the last mile, if you call it, and we've released some products this last quarter to start to address those kind of parts of the market. And again, kind of leading the industry in efficiency based on those gas processes, in particular, some of the smallest gate links that we've released in production. So really high frequency focused type activities.
I also want to add to the BAW question. We talked about how BAW is enabling inside mobile, Eric did, but it's also been a big benefit for us in the Wi Fi market. We've released IFMs in 2.4 gigahertz and we've been sampling those at 5 gigahertz as well. We're also using our new 5 gigahertz processes to release products in the automotive space and into small cells and base station. So we are using our filter technology to really allow us to compete in several different markets and for me particularly in the higher frequencies.
Our next question comes from Timothy Arcuri with UBS.
Hey, this is Seth Gilbert on for Tim. Just I guess a follow-up to one of the earlier questions. June is usually up something like mid single digits quarter over quarter and September is usually up well into the double digits quarter over quarter. So just curious off this much new hire base for March, is this still the right way to think about seasonality as we look out into June and into September? Thanks.
Yes. Seth, this is Mark. I reluctantly go to June because of the coronavirus concerns and I gave a revenue number there. The only thing I would add just to make sure folks are appreciative of it, we tend to go down from our March to June quarter on gross margin. So we would see the revenue guide I gave and then we would see a gross margin in the 47, somewhere between 47% and the high 47s, low 47s to high 47s.
So and then we have OpEx increasing. But beyond that, I'm not going to talk about September. I'm not going to give detail on fiscal 2021. I would just say that we believe we're investing in the right areas and selecting the right products, building the right capabilities to support growth in the market. And we expect to grow and then we're driving for free cash flow generation.
And I'll provide more during the next earnings call.
Thank you.
Our next question comes from Chris Caso with Raymond James.
Yes, thank you. I guess first question is about the content opportunity between the premium tier and the mass tier phones when you transition to 5 gs. And I guess in the 4 gs generation, most of the content was in the premium tier phones. So that was if I look at your total content opportunity, that was the largest part of your mix. Does that shift somewhat as you move to 5 gs because you're moving those master phones from such low content to something?
How does that change your sort of mix exposure of your total revenue between sort of premium tier phones and mass tier phones, obviously realizing mass tier phones represent more volume?
Right. That's an excellent question really. And I mentioned a little bit ago seeing not unusual to see $10 to $12 worth of RF content and sometimes even higher in some of our China based handsets, which are primarily mass tier. They're at the higher end today, but that's what's driving down into the mass tier as we speak. And so if you look at kind of percentage increase from 4 gs to 5 gs, it's much, much higher there.
It's more like a 2x in content now. And as we've talked about before, it's not only adding the 5 gs proper, if you will, content, but also bringing all the 4 gs up to higher levels of capability as well in each of those 5 gs handsets. So to your point, we see content increases in the premium tier for sure. But as a percentage of the total, they're more on the order of, call it, 20%, 25% of content increase, where in the mass tier you're seeing more like a double or even more of content. So it does tend to mute the mix effect slightly, I would say, as we go into 2020.
Got it. It's helpful. Thank you. As a follow-up, if you could talk a little bit about ultra wideband and obviously you sound like you did an acquisition in there. I guess how important is ultra wideband to you in terms of revenues today?
And I guess, where do you see it going, not just within handsets, but also opportunities for ultra wideband and IoT type devices? How significant can that be?
Right. It's another good question. We as you probably know, we're the leading supplier of ultra wideband front ends today into the mobile handsets, although it's a relatively small market today, but it's really just emerging. And I think between the fact that it's now beginning to penetrate mobile handsets, we believe it will eventually be absolutely required in every handset. That combined with the fact that the Connected Car Consortium has adopted the technology for future keyless entry systems.
We think this is really just the very beginning of an inflection point. We are absolutely thrilled to be adding decawave, a fantastic company, great people, great technology. They've been at this 15 years really truly pioneered as we said the technology. And so we see beyond the automotive and the mobile applications, we think a whole host of both consumer and industrial IoT applications are there as well. So when we look forward by 2024, we're modeling it $2,000,000,000 to $4,000,000,000 worth of additional TAM and we think there'll be just a few people positioned to capture it.
So pretty exciting.
And our next question comes from Ed Snyder with Charter Equity Research.
Great. Thanks a lot. Eric, on China, how much of your strength there, I mean, is from say, I want to juxtapose the different factors that are affecting China because it's obviously becoming a very big part of your business. But so if you could maybe give us some idea of how much of it's coming from 5 gs content upside versus 5 gs being pushed into more phones than we expected versus OEM is moving their old 4 gs Phase 2 designs to modules. So 5 gs content versus units versus the shift to modules in 4 gs.
If you could, what percentage of your revenue do you think you're getting from China at this point? And then James, it sounds like defense is not only acting as you expected, but also leading the charge. MACOM just announced on the call last night, they're finally getting the GaN on silicon carbide. So I'm trying to get an idea of how sticky are the applications for your GaN on SiC in both 5 gs base stations? And then if you could talk to some degree about how that applies to defense too?
And then I have a follow-up. Thanks.
Right. So regarding the first part of your question, the strength we're seeing throughout China right now is largely driven by 5 gs content. That's the primary driver. I think I spoke last quarter about seeing the need for more like dual signaling capability, for example, driving additional switching and antenna work. And then I forgot what all three of the categories, but at the bottom would be the modules in 4 gs only handset.
That's probably the least impactful. Right now, the inside is heavily driven by 5 gs and mostly content more than units.
This is James. I mean, certainly, we believe we've got great technology with our GaN and have been doing very well in the defense market. And we are seeing GaN grow well north of what the market is growing. And so we also continue to make investments in scale and in reducing our cost, which we think are key enablers to that technology to continue to proliferate. As far as stickiness, I mean, obviously, in defense that market is characterized as long cycles in programs.
And so I would consider that a very sticky market. In base station, we are seeing the trends go just about like what we've talked about for the last couple of quarters. We are seeing massive MIMO systems deploy and we're also seeing GaN take significant share from LD MOS. And so both of those are great trends for us and we're capitalizing on those trends. And I think it's a good part of how we've been able to turn the business around fairly quickly.
Excellent. And then for
my follow-up, Eric, if I could. Broadcom announced a supply agreement with Apple. I guess it was I can't remember, this week or last week. And I know it's probably more of a frame agreement, but they cited $15,000,000,000 etcetera. Last time they did this, which was some years ago, the ensuing 2 or 3 years that followed that agreement were marked by lack of content for Qorvo in there.
So how does this change the landscape or does it at all in your view irrespective of if they keep the business or not? And what does that do for the mix of your not just your ball, but your revenue? Does it shift more to China in the upcoming 2 years or so or do you even have any indication of that?
Well, frankly it doesn't have any particular impact on our investments today. We're picking our battles, investing in areas where we think the highest win probabilities are. It's a target rich environment right now for integrated modules as well as for discrete components based on BAW technology. As I said, we've got a lot of advancements coming in the raw technology and well placed great relationships across the industry and across all baseband manufacturers and tiers. So the announcement itself and our understanding of what it includes does not impact our current investment plans.
Our next question comes from Blayne Curtis with Barclays.
Hey, guys. Thanks for taking
my question. Just curious on the deals, you said it closes in February. Is there anything you can wrap around that in terms of revenue and OpEx contribution? And then I have a follow-up.
Thanks. Yes. Blayne, we'll provide more. It's not a material amount of revenue, and it's an increase in OpEx. It's all reflected in our guide, and it's dilutive in the near term.
Got you. And then Mark, I know this is preliminary guidance for June. I just got a little confused on the seasonality here. You're seeing all the strength in China. Usually, Apple is not stepping down as much in June.
I'm just trying to understand what you're baking in for a sequential decline in June.
Blaine, I'm not going to go in any more detail. What we've provided is our best view given current demand signals and then adjusted for some risk factor in what is a very uncertain situation at the moment. So doing our best to provide you at least a directional call that far out. I think the concern as we sit here today is right now the channel is lean and healthy. Demand signals have not been yet been affected, but we do have the Chinese New Year will wrap up and people take stock of what's going on with this health situation in China and elsewhere.
So I think we're just being mindful of that and providing some sort of directional view for you. But in the June quarter, it's still a story of what you've heard on the call today about 5 gs related handset growth, content associated with that growth, continued Wi Fi growth, defense strength and infrastructure recovery.
Our next question comes from Craig Hettenbach with Morgan Stanley.
Yes. Just first question from Mark, just following up on the acquisitions. I think you said immaterial to revenue, but you said was it $500,000,000 in terms of total cost for both?
Yes.
Could you maybe just help frame just kind of the opportunity over the next couple of years in terms of how maybe sizing like that business in terms of where you see it potentially going? Yes. I mean most of the purchase price is associated with the Decawave acquisition, in fact over 2 thirds of it. So over 3 quarters of it. So the and that is a technology investment.
As Eric said, it's technology for a market that we think is several $1,000,000,000 market in a number of years and that's going to take time to develop and it's largely immaterial revenue and dilutive. The smaller acquisition Custom Mimic is a defense bolt on and the very easy to integrate right in James' wheelhouse on defense products, advanced technology, defense products. We see in the for the part of the March quarter that we have it integrated, it will provide about $3,000,000 of revenue that quarter. And on a full quarter basis, it will be roughly $5,000,000 or so for the near term and it's accretive immediately.
Our next question comes from Raji Gill with Needham and Company.
Yes, thank you. A question on the RF infrastructure market, when When you expect that to rebound? Any color in terms of what you're seeing with the mobile operators in terms of deploying these base stations across the world? Are there some regions that are starting to catch up? Are they starting to kind of slow down?
Any color there in terms of RF infrastructure would be helpful.
Okay. This is James. So we definitely are seeing deployments gone predominantly today below 6 gigahertz, predominantly in China. What's helping us and talking about recovering our business is we are seeing massive MIMO continue to take more share, if you want to talk about that share of base stations. And that's a big content update for us about 10x of what we would have at macro base station.
So that's driving the recovery. I think the absence of Huawei is obviously a challenge for us in the industry because it's about 50% of the share. But as we said in Bob's prepared remarks, we are ramping with our 3rd customer in that space. I think that will fuel us to recover the business. Deployments look about on track, a little bit of share mix changes in the last quarter, but it appears that there were somewhere in that 400,000 or so base stations that were deployed last year.
And it looks like that will grow about 50% this year, so somewhere in that 600,000 base stations deployed. MIMO content will probably go up from maybe 20% last year to 30% or greater this year. So positive trends. I think we heard yesterday about some frequency allocations in the U. S.
And we hope that that will also spur development to push forward in the United States.
And on a follow-up, you talked about GaN taking share against the LDMOS base station. What's driving that transition? What's the catalyst for that?
Yes, threefold. 1 is the move to higher frequencies and GaN's performance advantage at higher frequencies, also broader bandwidths associated with 5 gs. And again, GaN has a better ability to deal with those higher or broader frequency levels. And then in some cases, just higher output power. But in general, the technology is just very well suited to move in these directions that we've talked about before of higher frequency and broader bandwidths.
Our next question comes from Srini Pajjuri with SMBC Nikko Securities.
Thank you. A couple of clarifications. Mark, maybe you can talk about how many 10% customers you had in the quarter? And also, if you could give us what percent of the mix in mobile was China in the quarter?
Yes. So we had 2 10% customers in the quarter. And I don't break out by region our sales by quarter.
Got it. And then is it fair to say that Huawei is still kind of minimal on the mobile side? Or did it grow in the quarter?
Yes. Huawei was one of the 10% customers actually, and it was stronger than we expected, along with the other Asia based handset producers. I said on the last call that we expected Huawei to be about 5% in the second half. They were larger than that in the December quarter. So that statement is still correct.
It's just that the obviously the weighting is not uniform across the second half. So we expect them to be about a 5% customer second half, obviously, the largest portion of that in the December quarter. I think it's important to note here that we're seeing broad based strength related to 5 gs across the Asia handset producers and importantly across all chipset producers. And I think the March guide drives home that point.
And our next question comes from Vivek Arya with Bank of America Securities.
Thanks for taking my questions and congratulations on the strong results. First one, I'm curious what does the shape of the 5 gs handset rollout look this year? Is it kind of more balanced first half, second half? Is it more 60%, 70% backup weighted? When I look at the 300,000,000 or so market size, it's much higher than what others have.
That's closer to 200,000,000 dollars So I'm just curious how you are seeing the 5 gs rollout, what you have seen so far and what you think the shape of the year looks like for the market? Yes.
I would say it's pretty uniform across the year. Obviously, we're getting out to a very strong start. Concerns Mark had about coronavirus and so forth might impact demand and supply. We'll see how it goes, but I wouldn't have any other more specific comment on profile.
And for my follow-up, there has been some concern about the pace of wireless deployments. We heard that from Xilinx and Texas Instruments. I'm curious if you noticed any of those slowdowns and I apologize if you answered this already, but what are you baking in for your base station sales going into the March quarter? Thank
you. Yes. I mean, what's really been driving our recovery is again massive MIMO. For us, as we get that shift, we get about a 10x content lift. So I think if we were only in macro or only look at a macro view, I would say, yes, we would see the deployments going slower and the business being slower.
But because of content pickups, on top of us now being able to compete in the power amplifier slot with GaN, I think that's what's really fueling maybe a bit difference with us and some of the other folks in the business. Now that said, we are still way off our historical highs from where we had been a year ago or so. So a long way to go before we recover from the restrictions on being able to ship to Huawei, which again I'll restate as about 50% of the market at this point.
That concludes today's question and answer session. At this time, I will turn the conference back to management for any additional or closing remarks.
Thanks for joining our call tonight. We hope to see many of you at our upcoming investor events and we look forward to speaking with you on our Q4 earnings call. Thanks again and have a good night.
This concludes today's call. Thank you for your participation. You may now disconnect.