On behalf of Qorvo, I want to welcome everybody to our 2018 Investor Day. I want to express how pleased we are to have all of you here with us today. We've got a full agenda and we're eager to get started. 1st, before get started, I want to remind everybody that the Safe Harbor language that applies to our press releases also applies to today's presentations. So we'll begin the morning with presentations from Bob Breckerwerth, President and CEO followed by James Klein, President of IDP then Case Links, General Manager of Wireless Connectivity.
We'll take a 15 minute break, Then we'll be followed by Eric Creviston, President of Mobile Products Todd Gillenwater, CTO of Mobile Products Steve Grant, Corporate Vice President of Fab Technology and Manufacturing and Mark Murphy, our Chief Financial Officer. We're also joined in the room by Gina Harrison, our Corporate Controller Roger Hall, General Manager of Defense and Aerospace Dave Luscinski, Senior Director of Strategy and Business Development for IDP and Josh Adams in Investor Relations. We are scheduled to conclude the formal presentation at approximately 10:50, giving us plenty of time for Q and A until we conclude at 11:30. And with that,
I am very
pleased to hand the podium over to Bob Breckaworth.
Well, good morning, everyone. I want to thank you for joining us today. Those of you in the room, we appreciate you coming in. Those of you listening online, appreciate you doing that. And those of you listening to a replay, hope you enjoy the show as well.
The team is certainly excited to be here today, and my comments will be relatively brief. But I do want to let you know that much like last year, it is extremely rewarding to be working in this industry that's connecting people, places and things. And when I think about Qorvo, I do think of us like an Internet of Things company. And you're going to hear a lot about that today. Whether it's connecting people cellularly, Wi Fi, ZigBee, Thread, etcetera, we have a place there.
And I've said it before and I'll say it again today, it continues to be a great time to be an RF. So we feel we have a unique position in the market. You're going to hear a lot about our market focus. I'll touch on that in a minute. Also, our premium technology portfolio and our operations excellence, and we're making great progress there.
If I look at the markets that we're focused on, there are 7 markets, 6 in IDP and obviously, 1 is mobile. About 2 years ago, James and the IDP team repositioned their product portfolio to go after the highest growth segments with the products and technologies that we have available to us. And quite honestly, they've put down 2 straight years of over 20% growth. And we'll look for that to continue. And what James and Kees are going to talk about are how we're going to continue that growth as we look forward.
In mobile, since we formed Qorvo, we worked hard to continuously improve the technologies and our process along with our manufacturing to reposition our portfolio into the highest growth, most complex opportunities and we're making great progress there as well. Now when I look at our technologies, we're proud of this. And today, what I want you to listen for are a few key things about each one of these technologies. You're going to hear about SMR BAW from Qorvo and its power handling capabilities and its ability to handle higher frequencies. Pay special attention to that, the ability to handle higher power is one of the requirements that we see emerging inside the handset, not talking about Power Class 2, but the amount of loss after the PA that the PAs have to overcome and its impact on filters.
In SOI, you're going to hear about our proprietary SOI technologies, our 3rd generation and some of the improvements that we've made there and it's truly impressive. In gallium arsenide, you're going to hear about the work that we're doing to improve its performance in higher frequencies along with putting out higher output power and improving efficiency. In gallium nitride, you're going to hear about how gallium nitride helps our customers lower their operating costs and improve their reliability. Great progress in GaN. Envelope tracking.
In envelope tracking, you're going to hear more about the work that we're doing to extend battery life along with improved thermal management. We also believe we're leading in using envelope tracking for the broader bandwidths in 5 gs and also in packaging, the work that we've done to improve our integration capabilities. So from an operational excellence perspective, last year, Eric talked about our world class customer support, particularly our application engineers. That apply to both IDP as well as in mobile. We've improved our R
and D
effectiveness. We continue to scale our organization. Steve will spend time on our clean launch program. We've made tremendous progress in our ability to ramp products on time without defects. Capital efficiency.
We're doing a good job of growing our top line, improving our margins and also improving the amount of our return on our capital. You're going to hear about that today as well. We've also begun our journey on lean. Last year when I got up here, we'd really just begun our lean journey. We're making great progress.
We're very fortunate to have someone by the name of Jamie Finchbaugh, who is a lean renowned expert, who is on my staff and is helping us modify and change our culture. The organization today uses words that quite honestly years ago some of us didn't know. We are holding Kaizen events. We're doing gimbal walks. We're working on A3s.
I'm really proud of how the organization is embracing the lean culture changes that we're making. Very pleased with the organization. So putting it all together, we have the core enabling technologies. We have multiple long term growth drivers. Our markets are behind us.
We're targeting the highest growth opportunities and the most complex opportunities and quite honestly doing a very good job at our production ramps. And you're going to hear how our customers are recognizing us for that. So before I hand the podium over to James, a few words about IDP. IDP is really, as I said earlier, come off a couple of good years. This past year, they grew over 20%.
Gross margins improved. OpEx as a percent came down. Operating margins were about 30% for the year. The 3 years that we've been Qorvo, they've made tremendous progress. Very pleased with that.
In fact, when I was at the IDP sales conference 2 weeks ago, I shared with them that I thought the IDP team and James had a championship year. Also reminded James that I thought when you're a true champion, you find yourself on a Wheaties box. And to be honest, I found 1. So before James comes to the podium, we have a short video.
All around you, Qorvo's IDP is connecting and protecting what matters. New breakthroughs in GaN, Baa and low power wireless technologies are creating more powerful RF and energy efficient are creating more powerful RF and energy efficient chips that are building the
wireless infrastructure needed for a 5 gs world.
This explosive growth enables an incredible cutting edge connected world, including autonomous vehicles that create safer, more efficient transportation, seamless smart home connectivity and scan technologies for the global defense and aerospace community, creating partnerships for commercial applications that build on more than 30 years of R and D experience. Join us, and together, we'll build a more connected and protected world, on the ground, in the air, and all around you.
As you know, Bob, congratulated us for a couple of years. And of course, before he got the sentence out, he said, I'm looking for a 3 peat. And about the
time he got that sentence out, he said, well, maybe you
can do like UCLA and do 6 times in a row. So we certainly have the gauntlet set for the organization. Before I start, there's my views is really at my level only 2 things I can control. I can control the strategy of the organization and I'm going to talk a lot about what our strategy is as we go through the presentation. And then I can establish a team.
And I think in IEP, we have established a world class team. And I want to spend just a couple of seconds to introducing the folks that are here from IEP. Dave Lesinski up here in the front runs strategy and business development for the organization. So if you get a chance, talk to Dave. He's been instrumental in setting the strategy you'll see today and also in identifying and closing some of our acquisition targets over the last couple of years.
Roger Hall is the GM of our high performance systems. He's responsible for our base station activities and also responsible for GaN and all the defense business. So there are a lot of growth activities in Rogers business. And then Case Links is the GM of wireless connectivity. Case is responsible for all the Wi Fi ZigBee, BLE chips that you'll see and also tremendous amount of growth.
So quarter after quarter you've heard about us growing in defense, you've heard about us growing in Wi Fi and IoT and these are the 2 guys that have been responsible for that growth. Now let me talk about the vision of the organization and I think IDP really truly represents this vision of connect and protect. It starts with products that make our home smarter. It's also products that are making our cars smarter. It's products that are connecting the global wireless infrastructure.
And it's also driving that insatiable demand for data. The instabilities around the world are also driving our defense business to continue to grow. But our products also connect and protect in ways you may not have thought about. We supply products to the satellite industry, to companies like Hughes and ViaSat and Harris. These companies are distributing data around the world that really help connect no matter where we are.
We also supply products to the automotive industry that makes it safer for us in our day to day driving including products that are enabling things like autonomous driving vehicles. Now Bob talked about a couple of years ago that we optimized the portfolio in IDP. We did this with a focus on balance of both growth and profitability and we continue to have a very, very good run inside the business. We've experienced several years of greater than 20% growth. And over that same time, we've doubled our profit.
On a go forward basis, our core markets Wi Fi, the connected home, the connected car, the base station market, optical and defense, we see growing at an estimated compound rate of 10% to 15%. These markets also have some very positive underlying growth trends. GaN is continuing at a feverish pace and I'll talk more about that going forward. It's deploying inside the defense, broadband and our cable and base station markets. 5 gs is coming perhaps even quicker than we thought.
We'll talk about trials around the world. I'll show you products and what we're doing to enable those trials. And then IoT is just a vast number of opportunities for us to grow. Today, we focus mostly on opportunities in smart home and in the car. But to be honest, there's more and more opportunities that come up every day that our products are able to support.
Now let me talk a little bit about these underlying markets and how we model the market. We do believe that we've got a very nice foundation for growth as we go through the next 5 years or so. You can see here that if you go through this, it represents that double digit growth that I talked about earlier. And the chart shows significant growth in the base station area. That's driven by the adoption of both GaN and 5 gs.
GaN will come a little early. 5 gs will start to deploy later and I'll talk again about those in future in slides coming up. IoT is really driven by the connected home and the connected car. Both of these markets will drive substantially higher than the average rate that I talked about earlier. We see in optical, I return to what we would call a normal business.
And as most of you know, the optical business has really struggled over the last couple of years. One of the great things is we've been able to grow 20 some like percent with that headwind. We do see optical starting to return. Broadband has been a relatively small market, but been growing at a very steady pace. And then with the adoption of GaN in parallel with many, many of our production programs starting to ramp in defense, we just continue to have very, very strong defense business.
Now I said earlier, I wanted to talk about the strategy of the business. And for me, there's really three things that you test your strategy against. One, does it create a competitive advantage in the market? The second, will it stand the test of time? And the third and probably the only one that matters is does it actually produce the results that you desire?
I think we've been able to hit all three of these. I believe our technology, our partnerships with our customers and the products that we've been able to produce have definitely created a competitive advantage. They've also allowed us to move into new markets and create competitive advantage as well. As far as the test of time, the strategies remain relatively And then does it work? I mean, clearly, as we reposition the portfolio and adopted this process of looking at the strategy, it's definitely worked.
We've had a phenomenal couple of years. So strategy is relatively unchanged and I think it's working very, very well. Now what I'm going to do over the next couple charts is I want to walk you through a little bit of each of details on each one of these topics. When we talk about our partnership with our customers, first of all, very, very impressive list of customers. Some of that is because we're across so many different markets.
A lot of that is because we have so much technology that these customers need. But we've got a great range of customers as well. So it can range anywhere from the very large customers that you see on the chart like Huawei and Northrop Grumman. It can move into smaller customers like Garmin. We can move to very, very established customers like Ericsson and Cisco and also to new very quickly growing customers like Eero and FICOM.
Now why do they come to us? Because we've been able to earn their trust and we've been particularly able to solve their most challenging RF issues. So it could be putting GaN into an advanced defense system at Elta in Israel, very challenging problem and we've done that very early on with them. It could be implementing coexistence filters using BAW into distributed Wi Fi systems or could be partnering with UEI to develop Samsung's next generation of RF remotes. But definitely our customers count on us to solve their most challenging issues.
Now let me talk a little bit about technology. We built IDP in fact Qorvo really on a foundation of the industry's leading semiconductor technologies. Most of these are internal and some of these are outsourced to strategic partners around the world. You see the list there. GaN has been a staple in many of our businesses and continues to drive significant growth.
We've got advanced gas processes as well. They cover everything up to millimeter wave. We're able to use BAW and SAW in many applications and we continue to push BAW to higher power levels and higher frequency levels to meet the applications for IDP. And then we have access to some of the best silicon technologies in the industry that let us do things like reduce power and cost in some of the product sets that we have. We take those world class semiconductors and then we layer on some of the industry's best packaging and assembly and test capability.
We have a very broad range of packaging capability, whether that be over mold. It can be air cavity if it's higher in frequency. It can be Elcore, which is a low cost organic packaging for us and this has particularly been developed for some of our GaN applications. And then we take that packaging capability and we put high speed test and assembly operations around it. Now that's very important because some of the IDP customers demand a significant amount of tests.
And so we have to have capability to do broad testing. As an example, if you look at our optical products, we have a broad variety of tests that have to be created around each product that's delivered. Now in many cases, we've now created a product. We now integrate that. We use multiple technologies integrated into complex modules.
And then a lot of cases, we take firmware and application software and layer that on to develop a full solution for our customers. This is particularly true in our low power systems business and Kaes will talk more about that coming up. Again, all focused around meeting the most difficult challenges of our customers. Let me talk a bit about diversification. And again, I talked earlier about being balanced in growth and profitability.
Now this diversification has really brought us stability and predictability. We've been able to survive the ups and downs of multiple different markets as we went over the last couple of years and deliver consistent results quarter after quarter really due to our diversification. Now we're diversified in many ways. We have over 5,000 active customers and they're all important, but none of them were over 10% of the revenue of IDP. We also have 6,000 active products that cover all of the technologies I talked about earlier.
We believe that's the broadest portfolio in the industry. And then we service 6 different markets. And again, those are balanced in that growth and profitability that I talked about earlier. Now I'll talk more about us continuing to add products. We also continue to access whether there are markets where our technology will play in a broader role.
So let me now go in and talk about products and I want to talk about the concept of market shaping products. These are products that we think create a competitive advantage for Qorvo and really move a market towards the kind of technologies that we have to play. So we call this our product development engine. It really has driven our growth. Last year, we released 122 new products, many that we think changed the game.
We were the 1st in the industry to release 39 gigahertz films. And you can see the quote there that addressing the challenges of the next generation of millimeter wave. So very big challenges in this industry to move up to very high frequencies. Interconnects are challenging. Everything gets much, much smaller.
So we need to be able to integrate our technologies in much smaller package format to make these systems possible. We were also the 1st in the industry to release a multi protocol low power system on a chip and recognize there as the most innovative product in 2017. We continued innovation with the first PA for vehicle to everything automotive connectivity and we increased our ball handling capability power capability is important is it allows us to service these massive MIMO systems that you see starting to proliferate in the base station market. We then moved on to distributed WiFi. And Kaes will talk a lot about distributed WiFi.
We believe this is a trend that's really taken hold inside the industry. And in a large part, we've been able to enable that industry with the use of our BAW filters integrated into our films. This really allows for maximum use of the Wi Fi bandwidth, allows them to segment the bandwidth and move data more efficiently around your home. And then in GaN, we released a 1.8 kilowatt transistor. It wasn't too many years ago that getting of course, in my career, getting to a watt was a big deal.
When I started, it wasn't too many years ago that getting to 100 watts was a major achievement. And today we're doing 1.8 kilowatts in 1 chip. So amazing advancements. I think you can see if you think about these products that have been released through the year that many of these will really change the way markets are implemented and we think that gives us a significant competitive advantage. Now I talked earlier about the trends.
And we want to spend some time, Casey and I, talking about these underlying trends and how we think they're going to drive growth inside of IDP. And so I'll talk some about GaN. I'll talk some about 5 gs and then Kaes will get it up and give you a broad view of what IoT looks like. So over the last several years, I've been very passionate in talking about the adoption of GaN. I've been projecting over the last several years that GaN would grow somewhere in the 20% to 25% range.
Turns out I was probably wrong. It looks like it's actually going to grow faster than that. And so the projections that you see here in the chart show that that growth rate is actually a little bit over 30%. It's driven by numerous things inside the defense and base station market and very exciting times for those that have this technology. So if you look at why GaN, we've talked about this before, but what's really driving the adoption?
Well, the short answer is it's creating significant customer benefits and value for our customers. And we see very similar value across all the markets that we serve. Those value are things like lower operating costs. So the efficiency of the device has really helped our customers put systems in place that use significantly less power. I'll show you an example coming up of an array an antenna array or a massive MIMO antenna that uses 40% less power than an array implemented with silicon germanium.
But there's other examples like one of our defense customers that was able to save $3,000,000 a year just in fuel cost to be able to operate an array. The difference in efficiency between legacy LD MAS and moving to GaN saved them $3,000,000 a year. Capital cost is also very, very important for our customers. The deployment of new capabilities, whether that be in wireless infrastructure, in defense, they need to drive their capital costs down. You'll see an example coming up again of where array sizes are 20% the size.
So one 5th of the size of a Siggi array. So you can imagine significantly big cost reduction. Another driver is reliability, 100 times the lifetime of conventional technologies, whether that be gas or LD Moss, 100 times. So you think about maintenance and repair and capital replacement cycles, significantly improved as we go through with GaN. And then what's driving most of everything is the ability to drive more data through our systems.
And we can do that with GaN in many, many ways. We can go to antenna concepts like massive MIMO and make those real and I'll talk about those. But we can also go to broader bandwidths and higher frequencies all the way up to 100 gigahertz. Now why are we going to win in GaN? Well, first, we've got a tremendous legacy of innovation, partnered with the DoD for many, many years since 1999, 'ninety eight.
We continue to win significant amounts of funding from the Department of Defense on increasing our capabilities. We've got a broad set of solutions, anywhere from very low frequencies to very high frequencies. And in fact, we release about 60 products a year into GaN. We've been able to scale the technology, 9,000,000 products, not transistors, 9,000,000 products delivered. And we continue to scale to meet the increase in demand that we see from our customers.
And then we've got tremendous market presence. We're the top 3 in all of the markets that we serve with GaN. In fact, we're number 1 in several of them. And then we're trusted foundry by the DoD. So this market presence combined with all the other components we supply in these markets also we think gives us a significant advantage.
Now let me shift to 5 gs. So I've talked a little bit about the base station market when I talked about GaN, and it will definitely be a significant growth driver for base station. The next one that we'll layer on or the next wave is going to be 5 gs. First, we see the below 6 gigahertz and you see it there in black, below 6 gigahertz massive MICE MOS solutions starting to come on board. We're in development now.
And in fact, we began delivering some production orders. And we really expect those systems to start to deploy next year and then certainly continue to ramp as we go forward. In millimeter wave, we're also in development now. In fact, we participate in numerous trials around the world. And we do expect millimeter wave to ramp up also probably about a year or so later.
Now what's what do our customers need to implement 5 gs? I think you guys know why 5 gs is important, but what do our customers need to be able to implement it? Well, first they need to move to new frequency bands. So most of this work is going on between 3 and 6 gigahertz. Those are new bands, they need new products, they need new capabilities.
It's one of the reasons you'll see coming up that we're developing BAW that moves up into these frequencies. And then of course millimeter wave 28, 39 gigahertz. So we've got a broad set of products that support all those new frequency bands. They definitely need smaller form factors and lower cost. And so predominantly true when you get into millimeter wave.
Now what we've been able to do is those words there about technology optimized, that means because we have all this technology available, we don't just have to produce an array that's Sigi. We can use GaAs, GaN, ciggy, all these different technologies to really optimize the solution. And we developed integrated multichannel modules that allow our customers to package these in a much lower cost smaller footprint. And then of course GaN will drive significantly lower power consumption as I talked about earlier. I'm going to show you example of that in the next chart.
So this is an example of 2 active antennas, 2 massive MIMO antennas, however you want to talk about them, both delivering radiated power, IRF, of about 65 dBm. We think that's the requirement that will happen in the future. Both of these elements have very or both of these antennas have very similar capabilities. The one on the left is implemented with Siggi only. It's got 1,000 elements.
That's important because that determines the size and the cost. And you can see the square millimeters, about 4,000 square millimeters. We then took those same requirements and designed a GaN based array. It's not all GaN, it's got GaN power amplifiers on the output, but then it's got Sigi beamformers that are back in the chain. And we've been able to reduce that count down to a little bit under 200, so about a 5th of the element count, a significant reduction in size.
The end result, 40% less power consumption, 94% smaller die area. So for those that think it's cheaper to do it in silicon, 94%. It has to be 94% cheaper in order for the math to work. And then, we believe 80% lower implementation costs. So this is the kind of things that we think again will change the market or shape the market towards our technologies.
Here's some great examples of those kind of products as well. These are the 5 gs FIMs that we talked about earlier released in both 28 and 39 gigahertz. The smaller packages are single channel. The larger packages are dual channel. These are full up films, so transmit, receive and the switching in between.
Today, some of these are actually in production deliveries. Many others are recent released and in the beginning sampling process, but significant interest from our customers. And now let's talk about how we're going to win in 5 gs. Very similar set of circumstances to GaN. We believe we've got innovation here that's going to allow us to win.
We've got all the technologies necessary, whether that be the semiconductor or whether that be in the packaging capability. It's no small feat to package at 39 gigahertz. So I want to make sure I emphasize the challenges at moving from 2 or 3 gigahertz to 39 gigahertz. We've been in the middle of the business for many, many years. It's quite the hurdle.
We've got a broad section of products, many of these integrated to help our customers integrate their products more easily. Significant scale with 150,000,000 base station products shipped per year. And then we're very early in with things like the Olympics. We've been able to demonstrate this technology very early in the process. Strong customer relationships and we've got a leading share in base station small signal.
Those 2 combined we think gives us very good position in the market. And we're seeing that by winning at 3 giga above 3 gigahertz today, whether that be 3 to 6 or millimeter wave. So next, let me introduce Case Link. So Case came to us a few years ago when we acquired Greenpeak. I'm delighted to have him as part of the business.
He's lived through through a very challenging market with Wi Fi in that time and consolidating down to standards. And the great thing is we have him on board to do it again. So we're going to do the same thing as we go into IoT. And so when Kees talks to you about this journey, it's not something he's made up. It's actually something he's lived over the last couple of years.
So we're going to show
a short video and then Kaes is going to talk to you more about IoT.
Ever been sitting on your couch and wish you could microwave a bagel, lower the thermostat and fly a drone without getting off your butt? That my friends is the future of the Internet of Things, otherwise known as your phone is talking to your toaster is talking to Pongo's food dish. But before your pup can have his toast while you get yours, IoT has a little growing to do. Let's get nerdy for a sec. The future of IoT relies on 3 main pillars: consumption, connection and control.
When we say consumption, we don't mean all those burgers you had on Saturday night. We're talking power draw. For IoT to work without being super annoying, sensors need to last a long time. Imagine if you had to replace 37 smoke alarm batteries each year. Exactly.
You need solutions that last a decade battery life, the pyramids of sensors, if you will. Connection right now is a little complicated. It's more of an all steel cage match. Between Wi Fi ZigBee Bluetooth, Bluetooth Low Energy Thread, LTE CAT M, NB IoT and about a 1,000 other protocols, all vying to become the standard. With all these protocols and no clear winner, the only way to be safe is to take a multi stack agnostic approach, which just means technologies that work with any protocol.
But just talking to everything isn't enough. You need control or more importantly, intelligent control. On their own, IoT devices are just things. But when linked through control software on your phone or in the cloud, all these devices work together like a genie or tiny kick ass virtual butler, securing your home, improving your health and triggering a paintball cannon every time your neighbor Gary lets his dog unload in your yard. Come on, what are you feeding that thing?
Now enjoying sweet, sweet retribution from your office, that's control software doing its thing, connecting you to Canon from miles away. IoT technologies are destined to move into everything that we use, from diapers to cities to regional power grids. We're talking smartphones, smart cars, smart keys, smart doors, smart cameras, smart trees. So much smart, you'll be tired of smart things. We're not joking.
That word will get used more than millennials. Trust us. The Internet of Things connects people and their devices to one another in new and powerful ways that that simplify our lives. That means more time for family, friends, and that Kickstarter project in your garage that your boss totally
Good boy, Pongo. Would you Good morning. This is probably the 23rd IoT presentation you will hear today. So bear with me. What I really want to share with you is not so much about IoT, but a little bit more about what we are doing in IoT and how we can make how we think we can make the difference because James said already earlier, what really makes a difference in companies and in particular in IoT companies is the strategy and how you execute.
And we are living in a very interesting time. I will show a little bit more about cars in a minute, but just remember the time that a car was on 4 wheels to bring you freight from place A to place B. A car today is not something to bring you from place A to place B. It is about driver's license. It's about rules.
It's about law and law enforcement. It's about insurance and liabilities. It's about it's a whole world sense. We are still in the Internet, in the Internet of Things in the fairly in the very early stages of what we want to do with the Internet. And I kind of would like to lead you a little bit through our thinking, which starts to pull many of the things that we are dealing with today together actually makes it very exciting.
So I would like to run you somewhat through the rapidly growing market, but also how we're addressing the market because a rapidly growing market can be very chaotic. And what we are seeing today is very chaotic. And I can imagine you can get confused very, very quickly about what is all playing here. In particular, when we talk about all the multiple standards, the multiple standards that are playing in the Internet today probably take care more of confusion than they help to grow the market. So our whole philosophy about the market is not so much like let's pull everything together and do everything for everybody.
It's actually way more what are the winning applications today and tomorrow. Because when we really think about Internet of Things, it's about creating value by being able to make better decisions faster, providing data and providing data at the right moment and at the right place. So we at Qorvo see ourselves very much as facilitator. How can we bring data around in an efficient way at any moment in time that we need it? And when you think about that, you kind of realize that connectivity, but also system level thinking, is very essential in the way we deal with the Internet of Things.
Now you've seen probably many graphs with growth and growth charts. Probably the best takeaway when we look at Internet of Things, we look at a piece of the market that is very much focused on low power. And you have heard already in many of the statements earlier, low power, long battery life is very, very essential for what we are doing. So I'll run you through a few of the key items that you really concentrate on in development. And you probably can relate to your own house.
You can relate to your own activities in your own house to see how these things connect. But like you saw in the video, changing batteries is probably getting as ugly as changing light bulbs. And fortunately, we have now long living light bulbs, and now we get all these devices with batteries that if you don't have to change the battery, then at least you have to recharge the battery, which is equally a nuisance. So from the IoT perspective, we look in the first place at long, long battery life. And actually, we have split the market up in 3 segments.
The first segment is the short range, the second segment is local access and the third segment is wide area access. Actually, when you think about your phone, it's not that strange because in your phone, you have 3 radios. It's a Bluetooth radio for local connectivity. It's Wi Fi for being on the network at home or in a hotspot. Or if you're wondering outdoor, it's the connectivity that you have kind of connected everywhere in the field.
Kind of these 3 radios, we think, are also kind of the precursor to how the IoT will develop in just 3 simple radios: 1 radio focused on very low power connectivity, 1 radio focused on very low power networking and 1 radio focused on, say, outdoor cellular connectivity. The only difference with what you're used to in your phone, in your phone, it's really about high data rates. When we talk about IoT and IoT connectivity, it's in 1st place about long battery life. Actually, it's fairly straightforward, but that's only the beginning. I kind of want to run you a little bit through the history of what we are where we are coming from and where we are going.
And you see this chart in the horizontal axis. You see from 2000 to 2,030. We keep a broad view from the vertical axis. You see data rates. It's amazing.
When you had the first Wi Fi 20 years ago, the data rate was 10 megabits per second. And let me tell you something. When we did our first Wi Fi, we were competing with 3 gs. And I was working at that time for a company called Lucid Technology. And Lucid Technology was all about 3 gs.
And 3 gs was 4 megabit per second. And you know what my boss to me said? He said, 4 megabit per second, that's enough. People don't need any more data rates for a long time. Well, you can a little bit see what happens on this chart, and data rates are going up.
And they have been going up for years years. And our expectation is that the need for data and data will go up. And what we are doing in connectivity and in Wi Fi is very much leveraging data rate going up and the new upcoming standard, Wi Fi.11ax, sort of the Wi Fi equivalent of 5 gs. That's something that we are spending a lot of time on. And the reason I'm talking about Wi Fi dot11ax because we see very nice crossovers between WiFi.11ax and low power connectivity.
So if you see the bottom line here, you see the bottom line is the low power line. Actually, in data communications, you get one or the other. If you get high data rates and you keep the power or sorry, and you keep the range the same, then the battery life goes up. So what you see on the lower line is the line with the long battery line. And on the higher line, that's the line with the IDA rate.
Now we all are familiar with the high data rate, so I'm talking a little bit more about the low power line, which initially started with Bluetooth. You have seen ZigBee emerging. You have seen Thread emerging. And you see the applications that are kind of emerging with this. And still by the day of today, there is no end in the need of applications that want to use these data rates.
Interesting to mention, there is a kind of a break, and there's another line coming up a little bit higher. It's a standard that exists already for a while. It's in a millimeter wave. It was called Y gig. It's now adopted in the Wi Fi Alliance.
If you look at where the data rates are going, that could be coming as very interesting technology in the coming years as well that we seriously want to keep an eye on. So put us in perspective on where we are today, it's pretty ugly. I've kind of done my best to try to find as many standards as I could find, and I hope that I don't insult anybody by forgetting one. But you see, again, short range local area and wide area, and you see content, sensor control and proprietary solutions and then all the standards that are playing in that space. Don't worry if you don't comprehend this whole slide in one go.
It's not that important. I'm just trying to indicate how much chaos there is right now and that there is a lot of competition going on in terms of companies that are really pushing their standard to become the dominant standard in the industry. In Qorvo, we have a kind of a view on this because ultimately, we are an RF company. And ultimately, we want to serve all our customers in providing the best RF we can provide. But in the way we see this market evolving is actually probably becoming as simple as your phone.
With the 3 radios, Bluetooth, Wi Fi and LTE, we think that the low power world will probably split up in Bluetooth and ZigBee and in narrowband IoT. I mean, the simple reason is that it is very expensive to kind of keep all these technologies in the air and open standards and communication over the years have shown to be kind of consolidating a few and a limited number of standards. You see that I have there ZigBee and Thread together in one box. Interestingly enough, they both have the same radio. And actually, they are brother and sister, and I have my views on how that will develop.
But frankly speaking, I think you probably don't even have to make a choice. The industry will make a choice for us in the way we have to deal with this. But here you see again the picture. So Bluetooth and Bluetooth Low Energy, Wi Fi and ZigBee and LTE and narrowband IoT or its leases like CAT M or that type of technologies will play in the space in the cellular area. So this is our view in where the market is going, and I would like to kind of play this out a little bit in terms of what does it mean for CorVel.
In CorVel, we are kind of very selective in where we want to play. We realize that being everything to everybody is not necessarily the best return for our shareholders. So we try to be really focused on what where we can win and how we can differentiate things. So interestingly, Bluetooth and ZigBee, the first and the third cons, we are very much focused on Opera low power and very strong connectivity all through your house, all through your area, your local area and have a very long battery life in that space as well. Actually, we are focusing on battery life in that space that exceeds the life of the product because ultimately, we believe that making something maintenance free is the key for all the products in the IoT space.
Because just think about it, if you have 100 devices in your house in a few years from now, If the battery life is a year, you will change 2 batteries every week, and that's no fun to play with.
What we also
see in this space is Wi Fi and LTE and Narrowband IoT. And when we look at these two technologies, that is very much the core space where we started in Qorvo with front ends, where we started with the older portfolio products that you have seen and heard us before, how we differentiate on filtering and how our gold filters are really kind of a key opportunity that we kind of are using. Because what's happening in this space is that we will see more and more radios getting together and getting together in the same area. And the last thing you want is that one radio interferes with another radio because that is really causing trouble. I already promised you I was going to make a little step out into the automotive markets, and I want you to close your eyes for a second and go back 25 years.
If you go back 25 years and you get a call, if you go back 25 years and you get the choice, where would you like your automatic door locking? Would you like it in your car where the doors are very close together? Or would you like it in your house? If you have a choice, where would you prefer? Well, interestingly, most of the people would prefer it in their house, right?
A universal experience is standing at the front door and not knowing whether the back door is locked. Where are we today? This is 25 years ago. We have 25 years central door locking our cars. You cannot even buy a car anymore without central door locking.
So look at your house. Anybody here has central door lock in your house? Don't you think we are living in a very primitive world today? And that's kind of just amazing. So it's very interesting.
We believe that automotive is a sort of precursor of what is going to come and what is going to develop the coming years because we believe it's a very exciting time. And if there is anything primitive today, I have to say the Internet that we are using today is very, very primitive. Let me run you through what we think that the Internet is going through. And actually, this is probably, for many of us, the Internet situation at home. And you probably have one router somewhere, maybe at the front door, maybe behind the TV or maybe in the study.
And you have your family members complaining about range and connectivity because you don't have good connectivity in the backyard or up in the attic or down in the basement, and you're struggling with extenders and all kind of equipment to get this kind of problem resolved. Well, the interesting part is the new standard 11ac and 11ax are really resolving that problem already, And that is called distributed Wi Fi. So you don't go to the store anymore to buy 1 router. You buy 1 router and a set of boxes that you kind of can distribute through your house and that wirelessly connect with the main router at the front door. This is called distributed Wi Fi.
But think about it from a cargo perspective. It's a kind of a green, right? Because instead of 1 router, we have now 4 boxes that wirelessly connect. And at the same time, when we go from 11n to 11ac, we go from 1 by 1 MIMO to 4 by 4 MIMO. So the number of power amplifiers and the number of components that we are selling to router vendors is multiplying not only because the technology is multiplying, but also the number of boxes that are placed in the house are multiplied.
And this all has to do with what people really want in the home. They want to have good coverage. They want to have coverage in the attic. They want to have coverage in the basement. They want to have coverage in the backyard.
And with higher data rates, it's really a struggle to get that coverage. So from that perspective, we really see kind of distributed WiFi as the horse to bet on for the coming years in terms of really focusing on winning the design slot and growing our business. The real thing is to come still because what's happening on top of that is a sort of wireless RF explosion. Today, probably, I mean, and this is an interesting statistic, you probably have in your house maybe 10 WiFi nodes. Now think about it, some PCs, some tablets, some phones, say 10 WiFi nodes.
I remember the days that we were trying to sell the 1st Wi Fi into the 1st computer in the home. I mean, I can tell you it was struggle to get the 1st Wi Fi sold. But nowadays, you probably have 10 Wi Fi nodes in your home. We think that the coming years, the number of devices will probably grow to 100 or beyond that. And all these devices will require RF in one way, shape or form.
And even if you give it a closer look, actually, you will see the home become a sort of telephone with all the different radios that are involved there and that we need to take care of that interference is not kind of disturbing all the signals that are playing a role there. So that is where we see the kind of interesting thing going. There's something else if you really study this picture. You see a little microphone. Remember Alexa?
Kind of a separate microphone in your house that you can ask what the weather is outside. My wife always says, why don't you look out at the window? But nevertheless, I like to ask Alexa what the weather is outside. And she kind of nicely tells me, we think that Alexa will be integrated in every port in every room. So you can talk to the Internet in every room.
So we think that there is a complete wireless explosion, including voice. And look now at every pod. You almost recognize in every product a cell phone because it has Wi Fi, it has Bluetooth, it has ZigBee and it has audio capability. That remote control from Comcast that you're talking in today to kind of order a movie, it's just a start. It's a start of a household that will be completely changing, and it is very exciting.
And you all will be kind of be witnesses of that while that is unrolling in front of your face. So what are we doing in this space in Carrefour? I already warned you earlier, we are not trying to fill all technology for all the people. But with this vision, we see where we really want to focus, where we want to win and what gaps we have, with other words, with whom we want to partner for filling these gaps and working on the next generation. So you see our front end business.
You see our module business, where we are very strong, both in modules for ZigBee and Bluetooth as well as for narrowband IoT. You see our system on chips, in particular, in the low power space because there we have already a lot of integration. You see the firmware and the application software and you see the system because what's very interesting nowadays and there's really a change in my business unit. We are selling systems. We are not selling components anymore.
We are really selling systems how do all these radios work together in a cohesive way and in a way that things really work. So what is this all about? Let me quickly summarize what we are talking about. We are talking in Corvo about superior capacity. So being able to support many, many devices using many different radios at the same time.
At the same time, we talk a lot about a high level of integration. It's very funny because the key word that we are using for this is small is beautiful. My wife if you have kind of a router box in every room, my wife would never like such a big box in every room. Can you make it smaller? The real thing is if you make it smaller, you have seen all these kind of PAs that radiate a lot of heat.
How did it get rid of all the heat if it's so small? So the best way to get rid of heat is not to generate it. And that is where a lot of our technology, whether we talk about PAs or whether we're talking about filtering, is playing a role. So energy efficiency is not only important for 1 battery life, but it is also very important for small products. And believe me, if you go to the store and buy a router, you have the choice between a big router or a small router.
I think what you really will start like is these small routers that really help your connectivity throughout the house. And the last thing, of course, and that is really something that is a really strong point in Corvo with our filtering and our BAW capabilities, that is how do we separate all these radios from each other? How do we avoid that our radio signal gets interfered by the radio signal of the neighbors or it gets interfered by all kinds of other stuff that is out there. So filtering is very, very key in this whole space, and we are really playing a major role there. So summarizing this all for IDP.
We're really kind of working very hard to build a new future where we enable people to make better decisions faster. But you being here, it's really fantastic. So you can be with us and be a witness of what kind of future is unfolding itself and all the great things that we are trying to solve. This is the last thing I want to say. Thank you very much.
We have a break now. So we expect you back in 50 minutes. 9:40, we expect you back in 9:40, yes. And thank you very much for your time.
We're about to get started pretty soon. If everybody can please take their seats, that'd be great. All right. It's my pleasure to introduce Eric Creviston, who is the President of our Mobile Products
Group. Good morning, everyone.
As Bob mentioned in the in his opening remarks, it's very rewarding to work in an industry that's impacting so many people's lives. There's no question that the effect of mobile data connectivity has been profound and it's showing no signs of slowing. As more and more people get connected across the world and as applications are ever increasingly using more and more data and in fact video is driving an awful lot of the data consumption as I'll show you later. It's requiring an exponential increase in mobile data delivery. And as we've talked about many times and we're going to talk about over and over in my presentation that fundamentally requires more and better RF and that's exactly what Qorvo is focused on.
At Qorvo, we've spent the last few years building not only a broad technology portfolio, but a very deep technology portfolio. We now have all the pieces we need to address the fastest growing and most impactful parts of our market. We're very happy today to be sharing with you our plans for how we're going to attack this market. So let's start by talking about the market itself. Today we're serving about a $14,000,000,000 TAM for RF components.
We see that growing to over $20,000,000,000 within the next 4 to 5 years and that's due to 2 primary factors. Clearly, as you all understand, each successive generation requires more RF, so the content goes up in each generation. But also as users upgrade their devices, you're seeing a mix in the overall handsets ports handsets with more RF in each one of these years. So that mix of users affects the total RF TAM substantially. And that's why the RF TAM can grow in dollars significantly even as handset units are flat or even down because of the mix shift and the increase in content generation over generation.
We're showing you here how we're modeling the current legacy platforms of 2 gs, 3 gs and 4 gs declining and being replaced with 2 waves of growth that we see coming. The first which is really upon us right now and what we're working very hard with our customers on is LTE Advanced and LTE Advanced Pro. LTE Advanced Pro getting you to the kind of ultimate performance in LTE It's the gigabit LTE phones which people are announcing and we've been using our parts to demonstrate gigabit LTE for over a year with our leading customers. So that brings 4 before MIMO, 256 QAM, a lot of carrier aggregation, all those things we've talked about, which expand today's RF content in LTE Advanced and Pro. And we've got line of sight to 5 gs.
5 gs is probably the most potential upside that we've seen in the industry because it's the 1st cellular standard that addresses more than just high bandwidth data connectivity. As you know, 5 gs cellular will bring 2 additional modes, 1 low latency high quality standard which will affect autonomous driving, augmented reality and so forth. And then also, as Casey has already covered, a mode of communication, which is very long battery life for IoT sort of applications. So this is very different than previous cellular generations and that it addresses multiple market segments. So there's a wide range of possibilities of how high 5 gs could go.
So it all starts with mobile data. And I've said this every year we've done these things. I always start by saying it starts with mobile data. That is fundamentally what you have to watch for. Look at the Ericsson reports, look at the projections for the demand for mobile data, you'll see every year it continues to get higher.
It's an exponential curve and we don't see that changing. It's being driven more and more not only by applications that where people are sharing video, but also live streaming direct video is driving it. Video in fact is currently growing at 50% a year. The amount of data consumed by video over the mobile Internet is growing at 50% a year and is projected to be 75% of the market within a few years. And that's because as I covered last year up here, the video communication is far richer than static photos or obviously text, right?
If you look at the real world example from last weekend's wedding, you see all those outstretched arms there. They're not just waving hi to Prince Harry. They've got phones. If you zoom in on this picture, they're holding phones up. Some are taking pictures, but I'll bet you a lot of them are live streaming video real time.
That is the way people are communicating these days. And if you can only imagine how much data it takes to service, if you pan out on this and see how many people were in that crowd, it is really a phenomenon. And it's happening all over the world at sports events and so on and so forth. So fundamentally, this demand for mobile data requires more and better RF. To go one layer deeper on why that is, it starts with all these market requirements.
If you want to get more data through the cellular infrastructure, You have to implement a lot of higher complexity RF functions. 4x4 MIMO is where you've got 4 independent transmitted receives on the phone, 4 separate antennas pulling down 4 parallel data links. Each of those data links have 256 QAM modulation, much higher order of modulation than on today's on most of today's handsets allowing more data to go into each of those channels. In addition, more and more carrier aggregation where each of those channels is carrying multiple carriers' worth of data. You put all those together, that's how you get to the gigabit LTE we talked about.
And now there's more bands being added as well going down to 600 megahertz and going up to over 4 gigahertz in ultra high band. So new frequencies, new modulations, much more complex front end architectures, all of that is how we're delivering the mobile data that's required. Now the problem statement is the form factors are getting more challenging. Now you might think the phones are getting bigger, so there should be more area available. First of all, not how that works.
RF never gets more area. They've got so many other things to spend their space on, but it's even worse than that with this industrial design trend of taking the screens out to almost the entire edge of the package. So if you look at this example, the phone on the left is smaller, but it's actually got more area for the RF, especially the antennas because anywhere where there's not screen is where you get to radiate RF power. And there's a lot more black, if you will, in the smaller phone. The larger phone with edge to edge screen, you see there's almost no place to put those antennas despite the fact that the trend I just talked about says we want more antennas.
We want more parallel channels running. We want more frequencies. We need more antennas to cover more range and all of that in a much, much smaller area. That is a massive complicating factor for our customers to deal with while trying to pack in all this RF capability. And then lastly, power levels are going up.
So not only power class 2 where the phone is emitting twice as much power for Sprint and in China Mobile in some cases, but also within the handsets because as we deal with all antenna complexity and we pack all these things in, you have additional losses between the power amplifier and the actual antennas and so there's more power being generated inside the RF to overcome those losses. And as Bob hinted at earlier, that makes our SMR BAW in particular very well positioned to help deal with that in addition to of course our state of the art power amplifiers. So it's becoming multidimensional. All of these complexity factors and challenges are building upon each other to make the overall thing exponentially harder to do, which of course is good news for us. So if we look at that TAM growth and peel it back a bit and see how this complexity affects TAM and take it to the product level.
I know this is a bit of a confusing chart. What we're trying to do is take the roughly $14,000,000,000 of today's TAM put that in the black bar at the bottom and then build up how we see this additional TAM growing. And so if you look at LTE Advanced Pro adding 4x4 MIMO and 256 QAM and so forth as I mentioned, that's really affecting the power the pads which are power amplifier, duplex or blocks. These are the working horse the workhorse of the main path of the radio, the transmit and receive. Most of that's being integrated into highly functional pads as we call them.
So there's certainly value being added there. There's also additional multiplexing added as in terms of discrete components to handle some of those modes. And as you go to 4x4 MIMO and more diversity, you get more diversity modules, of course, more content there. And then around the antenna to handle all that complexity I talked about, you'll have antennaplexers, which allow radios to share antennas, Very important when you've got all these radios trying to work in that very tiny space around the edge of the phone, you have to share antennas with antennaplexers. And because that's they're very sensitive to the touch, you use a lot of antenna tuning to make sure the performance isn't compromised.
Going forward to 5 gs, we see that adding about $1,000,000,000 in RF value beginning in 2020, about $1,000,000,000 per year in terms of 5 gs adder and you see it's really a story of more of the same. Some of the multiplexing, in fact, most of what we believe by that time will be integrated into the PAD section. So you see that really outgrowing. DRX or diversity receive continues to grow and antenna complexity, especially with all the new bands 5 gs is bringing, will outgrow most others in terms of rate of growth. Since 5 gs is so important to driving our TAM in the next few years, it's important to understand how we see it rolling out or going to market.
And I think as James indicated, if anything, we're seeing it sooner. It's here today for IDP for sure. Their Sirius base station design is underway. And also for mobile, it's been over a year. It was Mobile World Congress 2017 when we announced the world's first 5 gs RF front end module for mobile.
By now that module has been used in just dozens and dozens of field trials by all of our customers. It's getting a good workout, in terms of proving what 5 gs can do, but we're still in the trial period today. The specifications are released for NSA, which is non standalone in the U. S. That will be the first mode that will be rolled out.
You'll have some trials this year and some models going to market in 2019. It could be handsets, it could be dongles, it could be more like pads, but we'll see some volume in 2019 on non standalone where you still use the LTE backbone with just the 5 gs protocol running the radio on top. And then next year we'll get the full specs for true new radio 5 gs, not standalone, but stand on its own 5 gs. Those specs will be released next year. We'll start trials of those 2019, 2020.
And by late 2020, we expect to see mass volume of true 5 gs new radio. And as you go from 2020 to 2022, of course, you'll see that begin to go and propagate down throughout the tiers to where by the time we get to 2022, we've got true mass production, very mature technology and the majority of the phones beginning to run 5 gs protocols. And when you add 5 gs to the phone, this isn't something you can just bolt on to the side. You can't take a 4 gs phone and add 5 gs by just adding a 5 gs radio to it. It really impacts a great deal of the 4 gs system as well.
So this block diagram is attempting to illustrate the fact that there are some new blocks, the ones that are solid blue, which are running true 5 gs only protocol. They're 5 gs specific content, but also a great deal of the 4 gs content, especially in the pad area is being affected because it now even though it may only be processing LTE, it has to coexist with 5 gs and those other frequency bands. So it has to run cleaner, more linear. As I mentioned, the added complexity, it might have to run more power level in those parts. So 5 gs will affect a great deal of the radio and you really need to co develop all of these blocks together and this we believe is a unique capability of Qorvo since we have every single bit of this block diagram in house.
All right. So how are
we looking at this opportunity? Obviously, it's a great opportunity for Qorvo as well as for our entire industry. We believe that our primary role is to deliver the best RF possible. We invest in a wide range of core enabling technologies. You heard about that from Bob.
You're going to hear a lot more from Todd and also Steve on that. But since we have the capability of doing everything, it's also becoming more and more important that we spend a lot of time on disciplined portfolio management to make sure we're focusing our resources on the areas where we can help the industry and help our customers the most and of course get rewarded the most for it. And a key part of our strategy as well just as it was with IDP is partnering with industry leaders. This includes participating in the 3GPP standards. We help develop the standards for next generation technology as well as our supply chain partners developing new breakthrough technology in both silicon processing as well as in packaging and then of course our customers as well and our go to market partners.
So I want to walk through these briefly. I won't say a lot about technology because you're going to hear this in great detail from Todd next and he certainly is better suited than I am to talk about it. So at the highest level, as you know, Qorvo was formed to do this. When you look at the mobile technology portfolio, Qorvo was built to have all technologies in house and that kind of is where we started. So what have we done since then in the past few years?
We've been working on depth of the portfolio. Successive generations of each of these technologies that get better and better and more differentiated every year. So we have the ability to put each of these parts together and build superior total systems. So here's the exciting part. Once we have all of these in place, we've got proven capability that shows we're as good as anyone in any one of these product categories.
We now have the job of sorting through them and targeting our investments for the areas that are the richest payback for us as well as for our customers to help them get to market. So when we look at this, we kind of stack the product portfolios, the opportunities on two axis. First of all, the growth rate on the X axis, although there is approximately 10% overall CAGR for RF TAM, there are some parts that are growing less than that and other parts that are growing dramatically more than that obviously, right? And then we also look on the y axis of differentiation. Where can we be unique?
Where can we solve the really, really hard problems? What can we do by the fact that we've got all these technologies in house and no one else can do this in a way that really helps our customers build better products, right? That's how we measure differentiation. When we look at this and look at the chart, you can see in blue, these are the areas that we're continuing to focus more and more on. In the lower left in the discrete area, there are certainly some targeted opportunities or certain high value filters, for example, that might still be sold discreetly.
We'll still have opportunistic investments there, but far more of our attention is going towards the right of this chart, which is a highly integrated, highly differentiated part of our portfolio. You see right in the upper middle part there the mid and high band pad. This is an architecture which is being adopted across many tiers of our customers. Obviously, you've seen in the flagship smartphones that are out there already moving heavily towards integrating mid and high band functionality into one placement. And that's because as you look at more carrier aggregation modes, they're more in the mid and high frequencies and you put those all in one package, you can optimize better for much better performance and lower loss in the system.
So it's a natural thing to do. But we see this carrying down into the performance tier as well. Our Phase 6 system which is now released and in production is for our performance tier. It's primarily our China handset customers that are looking to adopt Phase 6 architectures, very similar split. Mid and high band are integrated into one placement with all the filters integrated with PAs and switches, all tightly integrated for high performance.
And then the low band integrated separately. So we think the low band has got opportunities for us for sure. Our TC SAW capability is very, very good. When we look at the market dynamics though, there is about 3 quarters of that market that's concentrated around 1 or 2 customers and 1 or 2 part numbers and 3 or 4 competitors. So we like parts of the market, especially the Phase 6 part where we can sell the low band combined with our mid high to give customers a complete solution.
That's something that's strategic for us. We can differentiate in that total solution and that's something we should participate in. The diversity receive module as well the larger bubble just below mid high band, this is an area where we don't currently participate, but it's a great opportunity for us. Especially as we look forward, it's going to become harder to do, more mid and high bands coming, less loss required and this will call for BAW filters. So when we see the opportunity to bring our BAW technology in and complement our SAW technology in this footprint, that's going to be a great time for us to intersect this market.
We're sampling today, expecting production of late next calendar year. Intended Solutions as you know is a big part of our business today. We've been very strong there for many years. We're a pioneer in many ways around these solutions. And we're going to continue to build on our D portfolio.
Todd will share the differentiation we have in new generations of technology here. There's a massive focus for us to continue to help solve that antenna complexity problem I shared with you. And then emerging ultra high bands. So these are the bands in the 3 to over 4 gigahertz range, a great opportunity for Qorvo of course to exercise our leadership in advanced
technology. Putting it all together,
we've got a broad and deep technology portfolio. We've got a clear portfolio management approach, which allows us to address the most valuable and most challenging parts of the market. We have all the right partnerships to bring these things to market, working with standards bodies, a very elite field application seeing the best in the world scattered close to our customers geographically as a key part of our strategy. And we're putting this together. I believe we're really hitting the ground running this year, hitting on all cylinders and projecting a lot of growth during this year based on this strategy.
So to go deeper now into the technology, which is a key enabling part of it, I want to hand it over to Todd. He's our CTO and VP of Engineering for Mobile Products.
Thank you, Eric. We got to make this thing go. There
we go.
Yes, I don't want to double click one layer down. I go too deep. I think I was given gracefully given 15 minutes. So we could spend 15 minutes on a partial topic up here, but we'll see where we can go. But Corvo has a very extensive and I would say a premier portfolio of technologies.
We either hold a number 1 or number 2 position in each one of these technologies. So we don't just have a broad portfolio of technology. We've got very good technology. The BAW filters, we spent the last few years catching up and we feel like we've closed the gap in the BAW technology. It's something I think we talked about last year.
We made huge strides in our BAW technologies. SOI, we are the leaders in SOI technologies. We develop our own technologies and drive our own technologies internally and this is something that we will maintain leadership on. Gallium arsenide, we're second to none. We've got very good HPT technology and we're extending some of our gas technologies to millimeter wave, some help through James' group.
We're leveraging some of the IDP technology to bring into these millimeter wave potentials for the handsets. Envelope tracking, we're one of the world leaders in envelope tracking. I believe there's 2 of us out there. Very important to manage thermal dissipation in the phones. Very key, you don't want to be running very hot phones.
So, in book tracking is a very key technology moving forward. And I'll go into more detail in a little while. And as Eric mentioned, all these new functionalities, these new standards are all coming to the RF front end. So packaging, being able to package all this new technology into these very small packages, very dense packaging is very important
for us to
solve. So the standards are keep evolving. 4 gs, LTE Advanced, coming to 5 gs, new frequency bands, creating new challenges for the RF. So take for example 600 megahertz and going down to low frequency, but low frequency for a handset is not necessarily a good thing for the handset. It brings a lot of value for you as a user.
But 600 megahertz low frequency means big things. It mean, you want to have a big antenna, you want to have a big WIP antenna, something like this. Remember these antennas we used to make? But you want to have big antennas, you want to have big filters, you have to get creative on how you solve that problem. So you bring in more antenna tuners, you bring in new SAW filter technologies in order to handle the 600 megahertz.
Then you move into the 4x4 MIMO carrier aggregation, that's getting rolled out. It is out today, but it's getting rolled out across the world and that's going to bring more demand for multiplexers. You're going to see a lot more multiplexers, not even in the not just in the pads, you'll see multiplexers move into the diversity modules. Modulation rates are increasing. 256 CAM is something you might see out there, but increasing modulation rates and that's to improve the data rates with the frequency bandwidth you have.
What that drives is for an RF guy is the higher what we call higher peak to average, higher output powers. Again, it drives the importance of envelope tracking to manage the thermal dissipation in the phone. Every time the peak to average increases, envelope tracking can save much more power. And the last standard, of course, that's the buzz. I don't know how many of you went to Barcelona, 5 gs, especially the sub-six gigahertz 5 gs, the new bands, the 3.5 gigahertz, the 4.5 gigahertz is going to be driving some new technology developments, especially in the BAW acoustic area.
We think there's a necessary need for BAW filters in these type of bandwidths. So filter, this is just a snapshot of the frequency spectrum that's available to a handset today. It starts about 600 megahertz and goes up to 6 gigahertz of spectrum here. So it starts in what we call the low band area. Usually, it consists of using SAW and TC SAW filters for these frequency bands of operation.
And about 1.5 gigahertz shifts up to what we feel is a good area for BAW. So typically, we've been using BAW gigahertz and that's what's in most of the phones today. So that's the split. Moving forward, we have these new 5 gs bands rolling out, what we call N78, N77, N79, but these are 3.5 gigahertz bands, 4.5 gigahertz bands. As you notice, the bandwidth is very wide, very wide bandwidth.
Each one of those dots on this chart represents a band, a unique band. If you notice the low bands are all bunched together and the mid bands are all bunched together. When you go up in those 5 gs bands, they're very broad bandwidth and very high frequency. This sets it up to be very nice area for BAW filters to succeed. We are the legend down here.
We're sampling the 5 gs bands today, both the 3.5 gig, 4.5 gig as well as down here we've got 600 megahertz bands. Very large breadth of filters needed for these handsets. Coexistence problems, I want to give you an example of why BAW is needed for 5 gs, sub-six gigahertz 5 gs. Gs. This is a benchmark of what CorVel can do in its BAW technology versus what we call an alternative technology.
BAW does have better insertion loss, but more important than insertion loss, okay, I can live with the insertion loss from a handset. But it allows you to use 5 gs bandwidth to your WiFi. If you notice the chart on the right, the with the other technology, you would not be able to use your Wi Fi. You would it would desensitize your phone. So it allows you to coexist with 5 gigahertz WiFi in this 5 gs band.
This is a good example of coexistence problems we have in the handsets. And BAW is the only technology that can do this. This is the same block diagram that Eric had. I had to have one block diagram. They allowed me once.
But I wanted to take a little different twist on it. I wanted to kind of focus on the two areas, the antennaplexing and the multiplexing and why it's needed, because we think it's very important. As MIMO comes, diversity comes, 5 gs, this is driving the need for more antennas. The antennas could go up to 20 or 30 antennas depending on how crazy they get or you could bring in antennaplexers. These antennaplexers allow you to reduce the number of antennas needed.
So they provide like what I would say a core selectivity per antenna. So if you look at the N79, the MHP2, new HP-one that could be possibly be 3 antennas or we just do what we call a course selector. So it allows those only those frequencies to pass through that antenna. These antennas are very broad. They don't care.
They'll receive anything. They like to just receive. We need some type to course select steer those signals down first to a course selector and then they go into what we call the pads. And this is what the multiplexers where the multiplexers come in as they do the fine tuning. So they'll come in and they'll separate 2 mid band singles to the receiver.
So the core selector, a fine selector to the receiver. Very important that these 2 coexist in the phone. Number of antennas are increasing, 2 to 4 today, probably going to 7 to 8 as these new capabilities roll out into the phone. Phones from my perspective aren't getting a lot bigger. I'm an RF engineer, maybe I'm jaded a bit, but Eric said they're getting bigger, a little bit.
But the number of antennas, the size of the antennas have to come down in order to fit in the phones. And when the size of the antennas come down, they lose their bandwidth capabilities. So they become much, much more sensitive. So I put a cartoon on the right on the 4 use cases that are typically measured in a phone and kind of shows you what the passband of the antenna does in the different use cases, how the passband moves around and it moves around more quickly as the more sensitive it gets. And what the job of the antenna tuner does is to re center that band pass to make sure it's in the frequency of operation that you want.
SOI, this is an area that we've been investing in for almost probably a decade now. But it's an area that we feel is really key to maintaining leadership for antenna tuners as well as switches. So over the past 5 years, we took a snapshot and we've doubled the more than 2x improvement in figure of merit. Ed will be more than happy to tell you what figure of merit is later today, I'm sure. I won't do it here.
But so 2x figure of merit, but what it really does is it allows you to have 2 thirds of the 2 thirds of the dye the same dye area.
So it's
a huge improvement in SOI technology over the past 5 years. Stepping on to millimeter wave, 5 gs, I wrote this on purpose, 5 gs millimeter wave in mobile devices, Question mark. I think you read the papers, it's coming. It will be here actually last year. But if he comes, I think CorVel is going to be ready.
We've leveraged some of our technology from James' group, James' IDP group and this gives you I'll walk through this in a second, but we feel like gallium arsenide has a significant advantage over silicon or SOI type technologies. What it allows us to do is allows us higher output power per element. We can reduce the size of the array by at least half. So I'm showing the demonstration up here, I'm showing from a 16 element silicon array down to an 8 element gas array or we could even reduce it further. We have interest.
People are interested in maybe looking at maybe a 2 by 2 array. So what this is solving is size of the arrays. You go into a handset. These handsets are very small. Sorry, I don't have a handset.
Very small handset, we're looking at 2 or 3 of these arrays in each one of these handsets. So areas are going to become very premium. So cutting the array sizes down by half or maybe even a fourth is going to be a significant advantage. So that's something we feel gallium arsenide has a significant advantage. Something similar to what James' talk was on gallium nitride.
Now he is much higher power than we are. We're still in the 3 volt battery stuff. We're not plugged into a wall. So, envelope tracking, managing the thermal management in a phone. So we're on a 4th we're developing a 4th generation of envelope tracking.
The first two generations we're in production with today, 1 component carrier, 2 component carrier, envelope tracking. We saw a 25% reduction in power dissipation using those technologies. We're sampling very heavily 3 carrier component carriers, but also dual uplink. So we'll actually add a second uplink. Again, that we're estimating about 25% savings in current with the 3rd generation.
But the big savings we believe to come is going to be in 5 gs. That very high peak to average that I mentioned previously is going to we really see a significant advantage envelope tracking for 5 gs. We expect to be able to cut the current consumption by half by using envelope tracking. It's going to be very, very tough to do. I'll be clear, 100 megahertz bandwidth, it's very tough, but that we think we'll be sampling by end of this year.
So we want to go up a packaging slide to show you a little bit about what the modules look like, some of these integration modules. So we started back in 2010, but I might have been designing stuff back then probably, maybe not. But it's a simple module, had PA switches, power control or power manager chip. Let me tell you guys, this was tough back then. I did it.
I was doing it myself, bond wires. I tell you the thing, it was tough. But the standards have definitely evolved since then. Now we're looking at 100 CA combinations by 2016, adding filtering, switches, PAs, going flip chip, the density significantly increased. And by 2018, CA combinations have doubled again, MIMOs come in.
We've had so much loss in these front ends, we had to add LNAs inside of
the
much density needed, we can't fit it on all the top side. Some of it's going to go on the bottom side of these modules going forward. I think Steve is going to go into that in his presentation. But the density is just increases and keeps increasing these RF front engines. So to summarize, we feel like our premier technology portfolio we have, we feel like we're number 1 or number 2 in all these categories, really positions Clorvo to really win the slots that we select to go after.
So with that, I'll turn it over to Steve Grant, Vice President of Operations.
Good morning.
So, you've heard presentations from my colleagues about all the great technologies and markets and opportunities and I have the dubious distinction to be able to build all this stuff. So it's been a very, very interesting time for me for the last handful of years working in RF because I actually started up in silicon. I started in silicon for a long time and drove technology hard to the smallest nodes that are out there and then made a switch to RF. And these wide devices, old equipment and this is going to be easy and hopefully you're getting a taste of just how complex this stuff really is. And so my talk today, I'm going to be spending some time on talking about the core enabling technologies that we're using.
And I'll show you real things, the real stuff that we're doing and show you real data and hopefully get you excited about the work that's going on. I have a paid political announcement on capital efficiency and how with the technology work that we're doing, they were making great inroads associated with just how much it's costing us to build factories and outfit the stuff we're doing. And then you can have great technology and it doesn't matter at all if you can't deliver it in large volume on time with great quality and great cost. I'm going to kick our end my presentation with some thoughts on that. So this is our roadmap.
And to the credit of the company, we've invested heavily in R and D along the way and that we have a as my friends and partners have already said, we have the broadest technology in industry. And it's a huge strength for us because, what you see today and how parts are partitioned are not what it's going to be like tomorrow. And what we're able to do is to work with our design community, to work with our system architects and really put out there a broad array of parts that they can choose to optimize in the best possible way. And things that we thought would be happening 3 years ago are very different than what's really playing out today. And this is probably the slide or the piece that gives me the greatest pride associated with the work that we've done.
And folks have talked about we're either 1st or second in almost every category up there and we can build anything that we want to. We've made tremendous strides in BAW and that the work has really been done by behind the scene by very capable scientists. We have some of the elite scientists in this area to drive the technology and we were behind. And we've made substantial strides just in our base BAW technologies, but I'm also going to drill into where we're going and why we think we have a foot up as we go into higher and higher frequencies. And Bob, for your folks, I'm sitting here and I'm listening to all these acronyms that we're throwing down everything.
I'm like, gosh, do folks really know this stuff? And can they really digest what we're talking about? And so for BAW, it's really bulk acoustic wave filtering. And simplistically, what that means is that you filter the signals that are coming in through the bulk of the material instead of foresaw, which is surface acoustic wave where it's on top. So the wave actually propagates on the top of the material and that's the difference.
Okay. And for BAW, BAW does great work for about 2 gigahertz and up. You just look at the physics, I'll talk about the physics associated with it. It doesn't do very well at low frequencies, the devices get big, it has loss, all sort of stuff. But for SAW, it's just kind of the opposite place where it stops about 2 gigahertz, you might be able to extend it to 2.8 gigahertz.
There's really a place for both technologies. And some of our competitors have good capability in 1 and the other. But as we've talked about here, when you look at the portfolio of what the parts need and what our customers demanding, it's really broad based. And we have both, and our technology is good. So there, we were very surprised.
This is one of the things I talked about before on where we thought the industry was going and what you needed. And what's turned out is power amplifiers are becoming very, very important to us. We talked about ciggy and cheap silicon as kind of the going forward play for the phones. And what we're finding out is everyone is talking about it's so complicated. You have so many components in the chain from where the power amplifier is sending the signals out, which you need massive power and efficiency to get it out.
So we have done a lot of work both in gas for handsets, but also in GaN. And we really see that this efficiency play getting good linearity of the signal that's starting off and replicating it and the output is super critical for our parks. So we continue to invest heavily in PONFIRE, I have a section on that. Todd hit on control signals also for our control technology for power for envelope tracking. And that for SOI, we've worked heavily with an outside partner, with Todd's architects, with my process folks to build a unique technology, a proprietary technology that we're only using.
Okay, because what if you step away, what we're trying to do is we're trying to drive unique value for our customers and then have a broad range of technologies that we can integrate together. That's the strategy. And we press hard on R and D to always be a step ahead and advance the technology. And what that allows us to do, which Eric hit on, is that we can look at what's out there. We can't do everything.
I wish we could do everything, maybe several years down the road, but we can really go after the really hard, difficult technology challenges and provide value to the customer. And that's our key strategy. Okay. So with that, I want to fill this picture up. Eric talked about Phase 6, architecture for our open market.
And what I hope you can see this, but what it's showing is that on these complex modules, we're putting a lot of components, okay?
And it
changes, changes more bands, everything else. This is for the open market. We also make custom parts for premier handset vendors and the complexity is much higher. So what we're showing here, but this is to scale, okay? So the penny is 18 millimeters, 19 millimeters across and the parts that we're building, these fully integrated parts of 5 or 6 millimeters on the side, okay?
And each one we talk about a soft filter, you can see how small that they really are on this thing. And I think that we just forget about how small the dimensions that we're talking about as we build and we try and integrate this. Remember, you have all the signals being routed at these very high frequencies and they talk to one another. And so there's huge magic associated with how you multiplex the parts on there, the routing associated with the shielding of the routing and the size of the complexity is just phenomenal. It's not going down.
So I'll drill a little bit more into BAW. Talked a lot about BAW, Bulk Acoustic Wave Technology. And this is a road map that I showed last year. And once again, we're making great progress on what we talked about last time. Right now, we're converting from 6 to 8 inches We've been in 8 inches production for about a year.
And this summer, we'll be about 30% or 40% of our products will be on 8 inches We've done great work associated with the matching of our yields, our performance and see no issues associated with really moving forward on this technology. We're lucky we have 2 factories now. A factory in Richardson that's up and running on 8 inches We've qualified a factory in Farmers Branch and have ample capacity really to grow. We're looking at a technology called micro BAW, where we're shrinking the die sizes by paying upon the design and stuff between 20% 40%. Qualification activities are almost done on that.
And that we should have everything done locked up in the Q3, Q3 calendar quarter this year. Great, great benefit for us. We're also spending a lot of time on high frequency, BAW devices and this is getting very hard. So if you look at the physics associated with what you have to do to be able to get these frequencies is to scuba thin down the layers in order to resonate the frequencies that you want to keep and reject the rest. A simple example I give is like a tuning fork.
How you have a tuning fork and it resonates and you hear that sound? Well, if you vary the pitch or the distance between the times and the fork, they get a different sound. As you go up, that pitch in those dimensions have to get much, much smaller. And that's at a macro scale or a micro scale, what we're doing is we're thinning down these layers to extremely thin layers. And my next slide will talk a lot about the interesting things that happen when you have to thin down, to be able to meet the resins of these high frequency signals.
The other thing that I find very fun is that as we shrink these guys and these guys are getting very, very small, what is becoming super expensive real estate in the wafer is actually the distance between the individual filters that are on there, okay? So our filter sizes right now are in the 300 to 400 microns. And when I worked at Intel, the distance between the die that I built on microprocessors was 200 microns. Like that? So there's a lot of science going in associated with how can you go in and make that space between these dyes as small as you possibly can because it's a significant fraction of the wafer.
So we've been investing for a long time on our technologies to really shrink that distance. And there's some really cool stuff that we're doing there. And then the last thing I want to put on here is that it's not stopping. We don't have the luxury of going from node to node, but we look at things associated with 3 d, 3 d stacking, ways that we can move routing and that we're working on something on stacking resonators that we're not done, we're working on it, but it's there. And we'll continue with our scientists really to pursue and to push, continuing this cost and this performance vector.
Okay. So, I want to talk a little bit about SMR. This gets kind of geeky, sorry. SMR and FBAR, okay. And those are 2 ways of producing a bulk acoustic wave filter.
We use a technology called SMR, which is a solid mounted resonator, okay? And how these goofy things work is that, simplicity, you have 2 electrodes or contacts that take the information in and out of a material that really vibrates and gets a signal called a piezoelectric, okay? And the devices that we build have the 2 electrics, they have the piezoelectric and then there's a thing called a Bragg reflector that actually reflects energy back up into the piezoelectric. That's our device, okay? What FR does, very good technology, very similar associated with the electrodes.
They have a piezoelectric in, but they have an air cavity underneath that allows it to resonate. And people have written, you look at the physics, it's a good structure associated with the comp plan that occurred. Now the challenge is that this comes as you go to higher and higher frequency is that the losses that are generating these devices because they're so, so thin starts to be impacted heavily by the electrodes that you're using. And the electrodes have to have 2 things. They They have to be acoustically very good, electrically very good.
And as you thin the layers, it gets super hard to get both. And we've invested a time and energy associated with our electro technology that gets unique. That's one takeaway. Layers are getting super thin. The precision you need and the materials you work and material structures very, very important.
But the second one that's really interesting is heat. And what you're doing right now is we talked about having to pump a lot of energy through these small devices and we're pumping through about a watt. A watt's about the max amount and there's loss that occurs there and it's just like a resistive element and it heats up. This is a big challenge, right? If you don't think about this stuff, right?
This is a big, big challenge for us. Inherently because of our structure has these reflective layers in it, big silicon based, no air, we can get the heat out. Being at the heat out of the thing where there's less conductive pass and we've done simulation associated with industry standard tools and we see a very, very big difference between the inherent capability of an SMR BAW and an F BAW. People are smart. Everyone has scientists.
We just look at the inherent advantage as we see it right now. And we think that we have a really, really good opportunity going forward. So that's nice, right? We're measuring this stuff. This is real data.
This is real data on our part at 5.2 gigahertz. The and how this thing works is I want to show these charts what they mean. So the left one is I want to send a signal through a filter and it says how much loss that I have. And so what you want is to have very, very little loss, you want it to be up. Don't want to lose any energy through it and there's industry standards associated with this.
And our benchmarks across that wide bandwidth, we're good, And then the other thing we showed on here is even though you go in and you heat it up or cool it down, we still have margin associated because remember the materials are very thin, winter, dumber, still has to work. And the other and the second piece is rejection. What you want is you want all the signals that are outside the area you want to pass through, you want to get rid of it. So what's important is the left and the far right side. And these are prototypes will make it better.
So we're excited. And hopefully, that's coming across associated with the work that we're doing on 5 gs and the technologies that we have. Okay. I want to talk a little bit about power amplifier technology just a little bit. Big deals for us are increasing the power out of our PAs.
It's to make them more linear, so that they replicate the signals very well that are coming in. The other big thing is ruggedness, that as you as there's mismatch in the antenna that it can withstand the feedback to the power amplifier. And as it has been discussed, we have really good technology here. I think and continue to invest heavily with NIC generations that improve both linearity, ruggedness for us. The other piece we're pushing is we're pushing these very, very fast frequencies that Todd talked about for the 28, 32 gigahertz.
And I love James to death. Makes my head hurt associated with how fast he wants to go in. His devices now, they go up to 100 gigahertz per GaN, and the technology is cool. And the message going here is there is investment. We continue to push very, very hard to try and advance our technology portfolio.
And then you got to assemble all
the stuff, you got to
put it all together. And forever, what we've been able to do is to go in there and crunch the devices smaller and smaller and smaller together. And what people have figured out is that it's just not going to scale. So what we're doing right now is we're starting to stack both sides, which is pretty cool technology. And so the sizes for our most complex modules were around 90 millimeter squared and the new things we're looking at about 55 millimeter or 60 millimeter squared.
So technology is hard, customers really value performance, but they also really value size. Okay. I put this one in for Mark, our CFO. And we've been lucky enough that we've invested a lot in factory capacity, but really just want to reinforce that with the technology advancements that we're making, our cost of capital per every die or every wafer boat is going down substantially. So using industry standard tricks to go from the next wafer size.
We talked about 6 to 8. On GaN, we're going 4 to 6. On SAW, we went 4 to 6. So where we can, we'll continue to push that. Big deal for us, right?
So it's you get 1.8 times more die for wafer and it costs you about 30% more to build it. We talked about MicroBaugh. MicroBaugh for the same exact capital build gets us about 20% to 40% pay on the die side. And then I also tried to elaborate on this, see how important the width was between the die and that should give us another 10% to 15%. And we will continue to look at these opportunities to drive down the cost of capital.
So I talked a lot about the technology roadmap and super cool and we're really excited, but it doesn't mean anything if you can build it. And what we've done on this vein is we have fantastic research scientists to help with these very, very creative ideas, but we've gone to the industry. We found people that are professionals at developing technologies, mostly from the silicon industry. We have large teams that take these ideas from our research scientists, call them out, make it manufacturable, rigorous process and then start the manufacturing ramp. So we have a very large development organization just dedicated to get technologies ready.
Very great thing to do. We've also invested heavily in in line monitoring both inspection, automated inspection, electrical piece. But the thing that we've done that's pretty cool that's just like everyone else is doing is, well, leading companies, Samsung, Intel, those folks, so you do a lot of diagnostics of the tools. So you're monitoring everything on the tool so you know if there's changes in pressure or flow rates or anything else. If there's any problems, you turn it off.
But the cool thing that we're doing too is you take all that data of what's coming off the tool, the electrical, the inspection, put it all in a database, and then you run algorithms, you call it AI, deep learning, whatever you want to call it, to find problems. So it's pretty cool and we're just evolving on this thing, but this is the type of environment we wanted. It's we find problems immediately and fix it. The other big thing that we're doing is that before we even launch products, we're stressing the heck out of our products and trying to find defects before it gets to the customer. And the philosophy is we want to find problems.
Let's find them early. Let's beat them up. Let's make sure we can fix them before we go. So once again, nice words. So here's the data.
Data and also some is anecdotal, some is real data, but we're getting a lot of very good feedback from our customers. So Huawei just gave us an award the last 2 weeks as the only RF supplier for their premium or best quality team award. Stuff is working. We're getting scores from our mobile partners. We're first, not all of our partners will allow us to share information.
We're getting great feedback associated with the ones that are willing to share and say that ranked against the other RF manufacturers, this is where you stand, And we do this process called clean launch, which takes all those ingredients that I talked about, put them together, make sure we have a scorecard of how we burn in parts, how we measure yields everything else in order to do it. And we've it's working. And then the chart on your left just shows the results and this is from large very large customer and shows the data rates of the defects per million that we're seeing. Now it's kind of interesting for me, right? So been in this industry for a long time.
Remember, this is the module level defect level. We're like 10 to 50. But remember there's 30 components on it. So we're like one defect per component per million. Can't tell you what it was 30 years ago when I was working in silicon, so huge benefit.
Okay. So that's my talk. Hopefully, what you took away from it is strength of technology portfolio, continuing investment in leading edge technologies, opportunity really to partition and use them in the right places. And then the walkway hopefully on making money is our development cycle, our monitoring systems, our pre launch activities and hopefully satisfying our customers through the utmost. So with that, I'll turn it over to Mark.
Thank
you.
So thanks all of you for joining us today. So just for some introductory comments. Today, we've covered how Qorvo is a leader in the technologies and products that enable wireless connectivity. And with the progress we've made on shaping the portfolio, driving operational excellence and reducing capital intensity, Qorvo is in a great position to serve our markets and profitably grow. So today what I'm going to cover is how this shapes our outlook and our capital allocation.
So these changes that we've made are giving us great confidence that we can achieve the results we've laid out. And nothing has really changed on this slide from last year in the sense that we've committed to deliver above market growth, expand margins and drive free cash flow. Our outlook for growth is positive with strong organic growth leveraging technologies and positions in advanced 4 gs, 5 gs, IoT, Defense. On margins, we've turned the corner on utilization. Productivity programs are yielding real benefits and we are laser focused on portfolio management as you heard today.
In fact, we are on track to the operating margin targets at last year's Investor Day of 33% by fiscal year 2020. Finally, this management team is committed to free cash flow growth through profitable sales growth and lower capital intensity. This time last year, we committed to doubling free cash flow in fiscal year 2018, which we did. In fact, we did better than that. We did 2.5 times from fiscal year 2017 to 2018.
Our free cash flow margin has gone from a low of 7% in fiscal year 2017 to a forecast of over 20% of sales in fiscal year 'nineteen. So we are absolutely making progress. Our growth prospects are excellent. IDP enjoys differentiated technology and compound semiconductors and systems integration, helping provide market leadership in defense, IoT and 5 gs. In mobile, trends of greater RF complexity and integration play to our device design and production capabilities.
And we're seeing this play out in a number of areas where performance is key such as Phase 6 architectures and in the mid and high bands including sub-six gigahertz 5 gs. Our gross margin outlook remains unchanged with a return to over 50% in the second half of this year. We've been there before as you can see from this slide and we expect to be there again soon driven by a mix shift to a more profitable portfolio and as utilization improves from last year's lows. Active portfolio management, which you heard Eric and James talk about, and CapEx discipline, which Steve mentioned, give us confidence that we can expand our gross margin further and you see that in the fiscal year 2020 highlight. Likewise, we continue to improve our OpEx efficiency.
R and D spend is increasing, but importantly it has become focused on our most differentiated products. SG and A is also trending down as a percent of sales as the company continues its lean journey and leverages a single SAP instance, which we completed this year. With our technology breadth and market opportunities, I don't see Qorvo operating at the lowest industry OpEx level. But what I do see is us continuing to better leverage spend as a culture of continuous improvement drives effectiveness and efficiency.
Progress on our operating model
and CapEx discipline is yielding stronger free cash flow. From our low end fiscal year 2017, we've come a long way. In fact, over each of the last two full quarters, we generated more free cash flow than in all of fiscal year 2017. This fiscal year, we expect to generate at least $700,000,000 but are targeting $800,000,000 With growth in the right areas, continued operational discipline and productivity and lower capital intensity, we expect free cash flow growth to continue. The growing cash flows and a strong balance sheet provide us the flexibility to reinvest in our business, selectively acquire where technologies and businesses fit into our objectives and our model, and return cash to shareholders.
In fact, today given our cash flow outlook and strong balance sheet, we announced a new share repurchase authorization of $1,000,000,000 to sustain capital returns to shareholders. Finally, our model remains unchanged and as we're and we're approaching these goals quickly. In fact, we'll soon need to update James model. And mobile actually isn't too far behind. We expect to grow above market through technology leadership and positions in 4 gs, 5 gs, defense, IoT and broader connectivity markets.
We see gross margin above 50% through growth in the right areas, productivity and capital discipline. Our OpEx should continue to trend down without compromising the ability to pursue quality growth. And as I mentioned earlier, we are still targeting operating margin to be around 33% in fiscal year 2020. So thank you all for your time today. And now the rest of the management team will join me as we move to Q and A.
All right. Who would like to volunteer for the first question? I'm looking to my right. Go ahead, Kimberly. Ladies first, sorry, Ed.
Thank Sure. I'm sure Eric would love to answer that. Thank you for staying away from the marquee phones. Eric?
Yes. Yes. Thanks for the question. It's as you said, we are seeing content growth really across all tiers. The content in the mid tier that we'll call it performance tier, last year as we talked about the band 1, 3 quadplexures coming out, that was a bit of a headwind.
But then this year, those are coming back in, which gives us a tailwind again that we had 2 years ago with more carry aggregation driving more quad flexors in those mid tier handsets. And then going forward with Phase 6 integration you're seeing if you saw there, there was 12 BAW filters, 6 solid or 4 solid 8 solid die in that total combination. So a lot more filtering coming in to cover more bands and those are all going to that sort of performance tier, not the flagship tier but that mid tier where there's 100 of millions of units per year being shipped.
Perfect. And Eric, I guess, next one is as well. We saw that slide about the rollout of 5 gs in smartphones and radios and whatnot. And you'll first be on a conjunction with 4 gs and it will be on a standalone basis and then it will move to a standalone basis. When 5 gs does move to standalone basis, will it still be a cumulative effect in terms of you'll still have that 4 gs, 3 gs content that we're seeing now or will it only be 5 gs content?
Yes. That's an excellent question. I should have probably qualified better in my remarks. When we say standalone 5 gs, it just means that the 5 gs radio signal is able to operate on its own network independent of a 4 gs network. The phones themselves still will have backward compatibility.
It just says 4 gs phones today still have 3 gs and 2 gs. The 5 gs phones will still have 4 gs, 3 gs and in some cases still 2 gs even in those handsets. But the 5 gs signal will have its own dedicated network and complete with all of the signaling and all of that. So it's a different protocol that's independent when it's standalone.
Perfect. Thank you.
Thank you. We'll go over here.
Thanks. One for Eric.
There's a
lot of growth in mid tier, but most all of your most of what RF TAM is in the high end and most of your growth in your concentration revenue is in the high end too. Given the bumpy road the
premium phones have had over
the last 3 years or so, And the fact that they're redesigning all those guys are redesigning their front end every year. So they're pouring a ton of and it's
a big bunch of you.
Makes you think that they're going to keep doing that? I know the road map stretched out for years and that's what it looks like. But if you're not selling a lot of these phones and all this investment in the RFID isn't really turning into unit sales, why keep up doing it? Do you expect maybe at least like the Tik Tok, but the details going to stretch out a little bit more? I'll just give James his now so he can think about it.
So the GaN business is rocking. That works really well. You buy your wafers from another wafer supplier. I'm sure some of it comes from Cree. Cree just bought Infineon's RF business, which gives them finally a channel into their end market.
This is kind of repeated my question on the conference call.
I have a little dip
and take here. Given their aspirations now to stay in the game and to actually expand it, why wouldn't they enter the military business, which is where your core gain is? Is that something you're looking at? Is it something you're worried about? And if your supplier starts competing with you head on in your core business, what does that say for the dynamic in terms of getting wafers, etcetera?
And then one for Steve and then I'm done.
All right. So first of all, you're right. A large part of our TAM and growth is in that flagship tier. But there's actually we have a very large business in the performance tier and that's growing dramatically as well right now with the band 1, 3 quads coming in we mentioned also a lot more tuning and antennaplexing coming into that tier as we covered. So there's an awful lot of growth there as well.
But to answer your direct question on the flagship tier, why do they keep doing new radios every year? There is an absolute continuous march to add more data connectivity and higher data rates in these devices. Applications where we provide the ability to get the data in and out, applications are waiting to be developed to take advantage of it. Augmented reality is just right around the corner waiting for better connectivity in these solutions and that can actually generate a lot more handset sales. There will be cycles of major upgrades in handsets based on apps usually, but those apps are dependent upon new hardware and faster data rates in particular.
So we don't see anyone taking their foot off the gas at enabling it.
So Ed for GaN, I mean just like all of our other internal semiconductor process, we have a very robust supply chain. So we don't rely on one supplier. We have multiple suppliers across all the nodes that we have in GaN today. And so somewhat, I mean, we're certainly isolated from any kind of effect that you discussed earlier. As far as the defense market or GaN in general, I think we are set up now for really 3 competitors that have a the full integrated value chain.
They've got the wafer fab integration, packaging and test and the channel to market. We're certainly one of those 3, happen to be one of those 3. And I think we'll get certainly at least our fair share if not more than that in all of those spaces. As far as defense, Cree has been in the defense business in GaN for the long time. I mean since the 90s, I would suspect or early 2000s along with us.
So they've been in that market consistently.
Final question for Steve. 3 years ago, you were launching into a new program at one of your largest customers in TC, Solo and PAD. And you just moved from 6 4 to 6, 6, right? 4 to 6 inches wafers. So can you and now this year, you're about to launch into another big program, this time in BAW out of Richardson instead of Florida.
What were the yields after you awarded the design win, if you go back 2 or 3 years, after you awarded the design win, but before you started production, what were the generally the yields that TC saw as you entered into that program? And how does that contrast to where you are today in Richardson, Texas? Because you're on 6 inches there, you're going to 8 inches Are we looking at anything similar? Thanks.
So I'm smiling lots. It's a great question. I'm not going to give you like the specific yield numbers, but the yield numbers on TC saw were 60%, 70% of what they were the 6 inches versus 4. And right now between 6 inches 8 inches it's about the same. So our
In your BAW business now you're about the same yield you were heading in on TCSOL? No. My 6
inch BAW yields and my 8 inch vol yields are identical. Okay.
And so you're saying the TC saw was substantially lower going into that production? That
is correct. That is correct. Thanks. Thanks for the clarification.
We'll go over here.
Thanks. Two questions for Mark and maybe Bob as well. Just on the gross margin, you showed low 50s in Q4 and you look at the implied guidance for fiscal 2020. It kind of sustains that level for the whole year. Two variables, I guess, I'm curious as your visibility this year into the volumes to support those utilizations.
And then just if any perspective on where those ball parts are in terms of yield curve and any timing and milestones to
guarantee that
you can get to those levels?
For this year?
For this year, yes.
Yes. So we are in a large part of our business is the consumer products. So the forecast there can change. But our view right now is solid or we wouldn't give the guidance. And so volumes support the utilization which you see which obviously supports the margin.
And importantly, it's really a utilization and mix profile. So we also see the mix turning more favorable in the back half of the year. As far as operationally, as Steve mentioned, yields are very high in Richardson. It's an excellent fab and a lot of confidence with the customer at the operations of that fab. So we're not as concerned as we are excited about the way things are playing out here.
As you saw Eric's view of where we're spending our investment dollars, where we're spending our capital dollars, it's in that area. And when you see the architecture changes coming, particularly the Phase 6, and which shows that blowing out for the rest of the market that's good for us.
Perfect. Elyse, for the second question, you talked about free cash flow of at least $700,000,000 most likely $800,000,000 Can you kind of just talk about what gets you between the bottom end and the high end of that range? And then you kind of front loaded CapEx last year. You had some benefit here. You're also doing things like the 8 inches and strength.
Can you just talk about not probably not going to guide CapEx for next year,
but just kind of how
you think about supporting this fall ramp seasonally now?
That's a
good question. Just a clarification to your comment. I did not say likely 800. I said at least 700 and targeting 800 I believe. But in any case I know
the number he's giving us. It's 800. That's what he told
us to go to. Nice try. We'll work hard at that.
I know what my goal is. So, but in any case, back to the volumes, it's a number based on a sensitivity around what could happen. There's a lot of complexity in cash flow forecasting obviously because it's a function of some things that are good for your business may actually have us improve free cash and some things that are bad for our business vice versa. So it's a difficult number to forecast. It's going to be a function of do volumes track where we think, do the productivity program yield what we think.
But right now, I'm comfortable with that range. And normally when I give a range, it's a sense of highly comfortable in the low to midpoint and comfortable but less so as you go up. As far as CapEx going forward, I think I've made the comment before that really I don't see certainly a forecast horizon that we look at, which in this case is through fiscal year 2022. I don't see us ever spending at the levels that we did in 2017. I think we spent 18% of sales on CapEx in fiscal year 2017.
Fiscal year 2018, we were down below 10%, I think 9%. This year we'll be at about same level on a dollar basis. And going forward, it will be best we can tell now about that dollar level, maybe even a bit lower. And it's a function of the ability to just be more thoughtful about where we're spending our CapEx dollars. It really gets back to this portfolio management question.
We're not going to build another soft fab for example based on the current plans, but we may choose to expand in BAW when needed. And then that brings up another point about CapEx. It's just the efficiency in which our incremental spend is occurring. So Steve mentioned that the die or the wafer expansions, the die shrinks, various other programs and productivity. A lot of those for example in BAW, most of our capital most of our fixed asset base now is 6 inches We have a lot of room to very efficiently expand there.
And as Steve said, you combine that with the die shrink, the dicing efforts, you're really becoming more efficient.
Thanks. Go over here.
Thanks for the presentation. A couple for on mobile. So for Eric or Todd, as your customers and you are drawing up the 5 gs designs, are you or should we expect the architectures to develop with a discrete 5 gs pad next to say a mid high band pad from you on the 4 gs side? Or do we go towards straight to an integrated module? And where are you positioned?
Rod, do you want to add anything?
Sure. We're seeing requests for, I guess, discrete PAs with possibly filters external, but we're also seeing requests for an integrated type pad where it would sit next to maybe the other pad. So a PA plus filter inside as a pad. So we're seeing a few different requests coming in. Again, people are still architecting the radio still.
They're not locked yet in the industry. So they're keeping their options open as the standards evolve here.
Also, what percent of the phones have moved to 4x4 MIMO already? And what is your outlook for that over the next couple of years? What's your content increase versus a 2 antenna phone? And then Todd's presentation talked about 7 to 8 antennas. What does
that do to your content?
Yes. So, very small percentage of phones today are actually 4x4 in MIMO. It's really just getting started and kind of demonstrating capability at this point. We do see it expanding over the next couple of years, but it'll still be limited to a relatively small portion of the market. It won't go to 100% of the market, for example.
That's your true LTE Advanced Pro. It's the flagship tier of the market. You can model how big that is to get an idea of the penetration. And we don't break out content gains by specific functions like that because it's rare that you would add 4 before MIMO without adding other bands and other things that are complexity around it. So we don't break out value per function to that degree.
Thank you. We'll go over here.
Thank you. Srini Pajjuri from Macquarie. Again, thanks for the presentations. I have a couple of questions on the BOS side. Again, going back to the 5 gs team, I guess one of the reasons we saw so much content increase in 4 gs was the bands were pretty close together and the card band was very narrow.
I just want to understand how 5 gs bands are how do you see them? And if you see the similar situation in terms of the complexity and the 5 gs bands being next to each other in different regions of the world. Because one of the things at least one of your competitors claims that it's mostly TD, it's not FD. And as a result, you don't need BAW filters. You can get away with the TD filter.
And then I've read somewhere that you can actually get away with the CMOS filter. You don't even need a fancy BAW filter. So I want to hear your thoughts on that. And then second question, I'll go ahead and ask it. In terms of the DRx, today most of the DRx modules use soft filters and your focus is on BOS.
I'm just curious what your approach is going to be as you enter the market? Thank you.
Todd, you want
to take the first one? I'll take the second one. Sure.
Yes. I mean they are correct. The 5 gs the new band of 5 gs are TDD. So you don't have a TX and RX on at the same time. That's more like an FTD system.
So the TDD systems, the issue you have with the TDD system at an advantage is coexistence. I think you've looked at my presentation, I talked about coexisting with Wi Fi. Wi Fi is very close, especially the band 79, you have to coexist. But you also see some coexistence issues with some of the other LTE bands and the lower frequencies. So it depends on the coexistence case on how much BAW activity needs to happen.
We expect the BAW to be definitely in 79 and possibly in 78. It's going to depend on how much coverage these phones have. You can make a case that maybe if they're a regional SKU phone that you might not need as much model content as
you could in a world phone.
So that could be some use cases.
But you also do agree 600 megahertz, we will be using a different technology.
Yes, yes, yes. You go to the other end of the spectrum. 5 gs is not just being rolled out in the 3.5 gig, 4.5 gig bands, good point Bob, but it's also coming down to 600 megahertz which requires yet a new TC SAW filter technologies that we've developed. But it's also retrofitting with some of the other LTE band. Sprint's driving the 2.5 gig area to where they're going to start bringing up 5 gs into that band.
So 5 gs is going to go across that whole spectrum over time from 0.6 all the way up to 6 gigahertz.
And maybe one more thing to add to that. That discussion as well as most of the discussion you're referring to is just about the main radio path. It's still ignoring all the antenna complexity out there. So unless you're going to add half a dozen more antennas somewhere for the 5 gs stuff, antennas and the Wi Fi antennas and the GPS antennas and so forth. And so that antennaplexing is certainly the work of BAWK that's able to do that in very low loss fashion.
So that will still come into 5 gs. Now to your second question about the diversity received, similar answer in a way. As more carrier aggregation and more MIMO is coming in, the loss gets higher. And so when you're trying to address these with SAW filters, the loss really adds up quickly. BAW can come in and bring differentiated, especially in the mid and high band, bring much lower loss to the diversity functions.
So the reason we're entering when we are is because we're seeing the complexity and diversity go up to the point that the losses we saw just are no longer tolerable.
Thank you.
Thanks. Chris Caso from Raymond James. Mark, just wanted to dig in a little bit on the 33% operating margin target for next year. Just a little bit of an explanation of what it will take to get there, how much is within your control, how much is the market. And I'm sure you probably don't want to provide revenue guidance for next year at this point, but I assume that requires some level of revenue growth, maybe give us an idea of how aggressive those assumptions might be as you look into next year.
Yes. So Chris, good question. I don't want to go too far into giving granularity about a single number target, which we still believe are on track. But it will be more of the same. It will be investing in the right areas which we think will grow at or above market.
Of course, if the market drops for consumer handset reasons or other things then obviously our volume could drop as well. But we believe we're in products segments that we will be able to grow above market. The mix shift and the sustaining high levels of utilization will help with the gross margin and we should see continued expansion there. And then as we try to make clear on the OpEx side between more efficient R and D spend and just more efficient overhead spend, we're going to continue to get leverage there. So we see we have a clear line of sight.
But in this business, of course, there are always some things out of your control. But hopefully, we've got enough opportunities beyond our own target to offset those.
Just as a follow-up, in some analyst days in the past, you guys have quantified kind of revenue opportunity per device. I wonder if you look into 5 gs, and I guess there's a couple of stages of that non standalone versus standalone, where do those revenue opportunities come in for you? And is there a way for you guys to quantify the dollars of opportunity that you have in front of you when those things hit?
Yes. You're right. Typically, we show the various like an entry handset and a premium and performance and try to show dollar content. The reason we haven't done that this year in particular didn't include 5 gs is because there is much more of a continuum now and it gets really hard to classify which handset goes here versus there. It's starting and also the content per device is part of the story, but the mix between them is another big part of the story.
So that chart kind of has outlived its usefulness maybe. When you look into 5 gs, we show from the TAM $1,000,000,000 of TAM beginning in CY 2020. That's probably your best guide at kind of quantifying how much 5 gs content we see coming. And to give specific guidance of specific handsets, it's obviously going to enter at the high tier. And so we can't look too forward in terms of giving our customers production plans for volume devices.
But calendar 2020 big content 5 gs based on our TAM model.
Right. But let me clarify that. Is it more of kind of gradual up to 2020 and then 2020 is when you'd expect perhaps more of a content step change? Or is it even smoother as you go into 2020?
Yes. You can go back and look at that TAM chart and see it. It really does begin to it's more of a step function change in 2020. There's some in 2019, but it really begins to go much bigger in 2020. We have a full year of phone shipping.
Karl Ackerman from Cowen. Earlier today, you gave a pretty robust outlook on your IoT applications across various standards, while also talking about improving, I think, OpEx discipline. So I'm curious how you prioritize R and D across your IoT portfolio and perhaps where you expect to receive the most design wins over
the next 12 to 24 months?
I'm going to
start and you could finish. So
the first
way is Cytus multi protocol chips. So I mean if you look at what we've done, we've been able to address many, many opportunities with really one R and D effort in products that were released last year. And then I'll let Kaes talk a little bit more about how we pick and choose markets if we want to talk about that in all the verticals in IoT.
Now what you saw in the movie, it gives a little bit of an impression that everything is going to talk with everything else. And that's a kind of a dream that we think over time will be the endpoint. The way the market is going there is by certain verticals that create extra value for consumers or in businesses that kind of pull ahead. We are very strongly positioned at this moment in, for instance, the remote control market. We are looking or we are also kind of positioned well in several other opportunities in the home.
But there are also opportunities outside of the home, more in the industrial space or in the retail space that we are pursuing that essentially leverage the same benefit, getting more data available faster and therefore, can be turned by artificial intelligence in good decision making for business owners, etcetera. And that's the way we look at the market. So over time, we expect convergence. But at this stage, it's really being very selective and winning in the markets that we select.
And we are also very focused on the connected car. So we see significant content capability in a car anywhere from LTE to our S Star's capability. So that's another focus area for IoT for us to make sure we capture that content in the car.
Maybe if I could just add quickly on the cellular IoT. It leverages very, very well all the activity we're doing now. So we're able to reuse for the most part the investments in the handset to go into those cellular IoT markets.
I have a follow-up on May.
I I have a follow-up on May. I guess I had a question for Steve. Steve, you talked at length about improving your BAW capital efficiency and kind of gave a road map across performance and the cost of modules. I was curious if you may quantify the cost savings you expect to achieve as we talked about the shift for microbaw and dicing over the next year or 2?
So I don't want to give a firm number. I'll give you ranges associated with it. The math is easy for 6 inches to 8 inches conversion. That's you can do, and I the number I put out there was about 30% to 35% more for wafer costs in total to do that. The piece on MicroBAS depends upon the design, how much you're able to get.
And that also plays into the loading, but the numbers we're seeing are between 2040 ish type numbers. And then once again, the reduction within is also dependent upon the diets that are there. So you can kind of see and we try to make a range associated with each one of those trying to give you a feel. But I'm to give you an exact number would be just wrong.
Harsh Kumar, Piper Jaffray. Question for Bob. Bob, in the silicon world, we're seeing ASP compression get smaller or lower. You guys are at 3 to 4 or 5 legitimate players in your industry. Can you talk about the ASP trends you guys are seeing, let's say apples to apples or let's say oranges to oranges products in this case?
And how do you and why do you think what will take what will it take for your margins to go up from here just as the silicon guys are seeing them go up because of lower pricing?
Yes. I think first of all Harsh, the good news in our industry is every year they're asking for more. And if you look at the roadmaps, when we just take the example of the pictures of Phase VI, our ASPs are actually, in Eric's business, going up over time because we continue to integrate more and more and add more functions and more features. So that's one thing to keep in mind. The second thing is, as Steve has already pointed out, we've been working hard to drive our costs down through diameter changes and die shrink.
So we've actually got something interesting going on with the businesses today. So from that perspective, we feel pretty good because again, to make room, you heard both Todd and Eric talk about the RF section, they don't give us more space but expect us to put more in And then we have to make room for 5 gs, which is why a lot of these customers are looking at Phase 6 and already saying, geez, I got to make more room. So we're actually getting paid for that integration as well.
And question for James. One of your competitors, may comment specific talks about GaN and silicon revenues this quarter production commercial stuff. I'm curious about your views whether that can be a disrupting technology tangential play?
I mean, we majority of the market is still GaN on silicon carbide. It offers significant advantages that we've talked about in the past with heat removal and therefore better efficiency, better performance. I think that story still holds true. We certainly pay attention to GaN on silicon and it's coming up in some commercial foundries and we'll continue to sort of pay attention to that. And there will be some slots probably in fairly low power levels, where that technology will have a home in play.
But I think the bulk of the high power, if you think about replacing LD MOS will be in silicon carbide at those high power levels.
If I can ask one last one, maybe for Todd. Todd, in terms of this, mid high pad, is this a 5 gs future proof product or will it change all over again once we get to that technology? And then secondly, why was the why did the big architectural change happen? What is it what was it driving for specifically?
Cat, I don't know if I follow the second part of the question. If I can answer the first part, the MHP, at least in the architectures that my system guys have drawn up, we don't see at least for the new radio bands, the 3.5, 4.5 gigahertz really driving much change in the MHB architecture. We think they'll be independent PAS for the most part. So we don't see a lot of overlap there in those 2 pads
for instance.
Okay. Let me clarify the second part of the question. I guess why did the industry or why are the top tier guys trying
to move to the mid high pad? Yes. It has to do with carrier aggregation. I think we've talked about it a bit in the past. But in order for you to have a mid bid 2 mid bands coming in for the CA modes, the filters have to be multiplexed together.
So you have 2 mid bands coming in. The filters have to be hanging off the same node. That's what we call multiplex. So it has to be all integrated in that one pad and that's the mid band. But also the carrier aggregation is from the mid and high bands now to where you have a mid band plus a high band.
So you might have a band 1 which is 2 point whatever is 2.1 gigahertz plus the lower mid bands together like 1.7. So it's a mid high band. So same reason they get multiplex together, the filters do. So the loading is they see each other filter. So it's all to do with the multiplexing of those bands for CA modes.
I don't know if I
Thanks. We'll go over here.
Great. Thanks. Just a question for Eric. A year ago there was a lot of optimism around that mid high band program. It looks well placed in terms of some of the initial traction.
So can you just give us an update on how that's kind of progressing, maybe at a high level in terms of that opportunity set on the Premier side, how it expands? And then the second question would be on how you see the China market, the case for integrated products versus discrete approaches?
Yes. So we couldn't be more happy with the progress we're making on these programs both in the flagship tier. We've got multiple customers sampling now and expect to be in production soon. And then also in that mid tier, if you will, of the performance tier, as I mentioned. So technology is doing great.
Fab is doing a fantastic job. Design teams are executing. Everything is going very, very well there. And that's a lot of our optimism. So then when it comes down to how much penetration, I think the second half of your question is how deep could that go in the portfolio, that's going to be interesting to watch.
We're the first to market with this Phase 6 solution that has all this level of integration. It is more costly for the customer to pay for this integration. But even in that performance tier, our customers, which are mostly our large Chinese OEMs which are by now getting to be quite large in fact in their volumes, they've all got their eye on 5 gs as well. So their motivation is to make 4 gs as small as possible, put it in the corner someplace so they can have options for rolling out different 5 gs and other content they're looking to. So it's going to be a typical price versus volume curve, but we're going to make sure we're getting paid for that integration as we bring it to the market and then we'll see how it penetrates down.
Great. Thanks for all the color. And then just maybe just a follow-up question for Mark, when we think about the buyback announcement today and how you approach cash return versus acquisition opportunities?
I'd like to do both. So we're continuously looking at acquisition opportunities as we've said it many times in the past principally for technology purchases for Eric's business and you can see some of those disclosed. And then both technology and business acquisitions for James' business bolt ons. And Green Peak, you saw a case today that's very been very successful to us in gaining market exposure to important market. On capital returns, we're committed to returning cash to shareholders.
When you look at our cash flow profile and how it's been improving and what we expect going forward and then you look at our balance sheet which has become very conservative, we've certainly got the capacity to do what we want on acquisitions and continuing to return cash to shareholders. So hence the $1,000,000,000 program announced today.
Thank you.
First a quick clarification for Mark. I understand it's just the target, but the 33% op margin target for fiscal 2020, is that a fiscal year target? Or do you just expect a 33% in 1 quarter? That's fiscal year target. Okay, great.
And then 2 for Eric first. Eric, if you look at your TAM, the RF TAM that you put up, it looks like 4 gs content beyond 2019 is relatively flat. All the growth comes from 5 gs. Are you at all worried about a delay in 5 gs and what that might do to the TAM?
Yes. That's a good question. So the way we're measuring that is the 5 gs what we're putting in the 5 gs bucket is the additional value of content for 5 gs. And so if it does push out, a lot of that value will switch back to 4 gs. There'll be even more LTV and Advanced Pro handsets, for example, shipped to replace the ones that are currently slated with 5 gs.
So I think if it does push out, you'll see it replaced with LTE Advanced Pro. Frankly, right now, I mean, it's looking like, if anything, people are trying to pull it in, similar to what James had said. I mean, I think it's not it doesn't seem likely at least right now there'll be much if any delay in 5 gs. It's a question of how quickly we can bring it
to market. We're definitely seeing on the infrastructure side no slowdown. So it would appear that that's the capabilities coming online about how it's been projected across the industry.
Okay. Great.
The 5 gs question I think follow-up to Srini's question. 5 gs bands tend to be fewer in number and much wider in bandwidth. And so I guess if you look at the dollar content for a 5 gs band versus a 4 gs band, do you have higher content in those 5 gs bands that sort of make up for the smaller number of bands you might incorporate in the phone? And if there is greater dollar content, does that come through the PAs that come through the filters? Or does it come through some of the new devices like DRX modules and antenna plusers that you need to support that complexity?
Yes, yes. It's a complex answer unfortunately. I mean that's why we showed the block diagram on my section, which showed that even when you add a 5 gs component here, it actually affects a lot of the other 4 gs stuff too because you have to coexist with each other, right? So the 4 gs stuff can now not interfere with that 5 gs player that's over there. So it's really very, very interrelated.
We don't even look at what that particular 5 gs component itself does. It's part of the entire system. It's more of a complexity rather than a number of
It really is.
Yes, adding that one 5 gs component affects an awful lot of the 4 gs stuff around it. And that's why there is additional 5 gs bump even in the 4 gs content because of that.
Yes. Thank you. Omer?
Thanks so much. David Wong, Wells Fargo. Can you give us a rough idea of the economics behind your mobile growth? Do handset ASPs go up? Do you expect to pick up the unit growth?
Are there other component areas where handset makers can save if they have to pay more on the RF side?
Yes. It's a good question. We're certainly not counting on handset unit growth, not at all. That's not part of our equation. So it is as we talked about the content in each generation is getting higher year over year.
How they afford that is up to them whether they raise their prices or take the cost out elsewhere or take lower margin. I can't answer how the handset guys are going to necessarily deal with that. I will say that we're on average 6 percent to 9% of the volume depending upon the tier. We don't crest 10% of the volume in any handset that I'm aware of. So just to put it in perspective, so we have room to grow before it becomes a terribly pressing issue for the handset provider.
But we think generally handset ASPs as well are going to be going up. We cover this and memory and the fact that they bring more value frankly going forward. Thanks. Thank you.
Ed Snyder, Charles. Just one more round. Eric, most of your growth in
mobile has been in the high end, not
yes, most really actually, really top three customers. You had a little bump with China there. That seems to be shifting now because of the unit volume issues there, but also because China announced in the summer of last year that they want to get into 5 gs, but aren't they pretty far behind? Aren't most of the Chinese phone? They took a big step back 2 years ago.
They didn't even go to advance. So the question is, what does that say about the next 18 months in China? Should we then expect to see a big acceleration both in generically and in your revenue for the mid tier Chinese foam? And what's the competitive dynamic there? Avago tends to avoid that business.
Are they going to come in now because the growth at the top end where they're big is slowing and this is where everything is going to start showing up? And then, Kees, IoT is the buzzword for the day. Everybody is talking about it. It's kind of a tower of babble really. You pointed out a bunch of different technologies.
You said yourself it was confusing. But the curious thing about it is they're not all going to win. You talked about GaN MIMO and all that. Most of the application, if you talk to Verizon, AT and T is in fixed broadband and trying to address or IoT. So you've got a cellular technology trying to push its way into what I would call a portable market, at the same time Wi Fi and everybody else is expanding and going faster.
Doesn't somebody have to lose here? So if we're talking about your business, GaN is going up and you talk about multi node Wi Fi, they can't both win, right? What can you just give us some perspective on who you think is leading and where is that going to go in the big picture? Thanks.
All
right. So starting with China handset dynamics. So as you pointed out China in fact is not planning to adopt a non standalone version. They're going straight to the new radio standalone standard. So that will necessarily put them a year later at kind of bringing 5 gs to market.
I think that was your key point, right? When they do, it's liable to come pretty darn quick when they do bring that to the domestic market. In the meantime, the growth in China is due to the move up higher into the LTE Advanced capability. And then also we are seeing a lot of unit growth in export markets. Content there can vary dramatically as to which markets they're shipping into, but we are seeing the China customer set more and more exporting to various parts of the world, which continue 4 gs type content growth between now and 5 gs.
To be sure that I understand the question, but in general, in the Wi Fi market, we are very much on a front end and filter and gas focused. GaN is more for the infrastructure market, for the outdoor infrastructure market. Was that your question or
Yes, but to the extent that you do MIMO GaN for the infrastructure market, a lot of their targets, Verizon, AT and T, are trying to do fixed broadband applications or IoT in factories. So they're taking that product and they're saying, hey, it isn't going to work for cellular. Let's try to attack the market. The Wi Fi has crushed us in year after year, right? So they're going to go out.
Whether successful or not, that's a whole another question. But people writing checks to you for GaN MIMO to try to take on Wi Fi in the IoT market and Wi Fi going to AX now blazing the trail, they both can't win, right?
I think MIMO has 2 has multiple applications, so right? I think MIMO is also just a significantly more efficient base station antenna. So I don't want you to just think MIMO is just NBIoT. MIMO is because of the gain and the number of elements, it's a more efficient way to transmit power for LTE base station or certainly for a 5 gs base station. So I wouldn't put it all in that category yet.
I'd give it both sides. And then the way I like to think about it is, had a customer tell me the story that if you think about supplying data to the home and then distributing data inside the home and there's sort of a going up and down between those 2. So we work really hard on the infrastructure. And we get all the data to the home and then we can't distribute it. And so things like distributed Wi Fi and AC come along and all of a sudden now we can move it around the house and now the infrastructure has to go up.
And this constant up and down I think is going to continue across the market and play out in the home. And you saw that in Casey's presentation. The infrastructure will significantly upgrade and then will play in the house. Now the great thing about the strategy inside Qorvo is that we play really across all those connections. It doesn't matter.
No matter how the infrastructure gets better for me, base station, optical, cable, we're there. And then when it gets into the house, as we start going to whether it be Y gig or AX, we're going to be there to play as well. So I think it's a very good balanced portfolio.
Final question, I promise. And this is for Todd. Todd, you're going to get out here with one more at least. I don't know, 5, 6, 7 years ago, you're here to talk about 3 gs, mostly an amplifier story. They had diplexers or duplexers because it was at the and then we started moving to 4 gs all those bands showed up and then duplexers became the theme.
Everybody knows that. We talked about BAW and all of that. And now everybody's kind of still talking about that. There's a lot of confusion about, oh, duplexes. And as several people have said, the competitors talked about TD.
Now we're going to 5 gs. It's got TD bands. Doesn't it How does the conversation shift? Filters, as you guys pointed out several presentations, there's a ton of them and there's a whole bunch of new stuff coming up. Is the story shifting from the Duplexer story to I would say coexist and because you're adding a bunch more bands in 5 gs.
They may not be FD bands, but they're too close to everything else. So are we moving into a coexist environment now and an antennaplexer which is basically coexist with the antenna? And more importantly, is the whole amplifier story about to change? Because the 100 megahertz bandwidth is causing all sorts of problems for you guys. So what theme are we going to see more and more of as we move into 5 gs and the shift between 4 gs?
Thanks.
It's a broad question as usual. But no, 5 gs is going to be TDD, but it's going to have to like you mentioned, it's going to have to coexist. And if you look at the even the 4 gs bands in China, they're all TDD bands, but they all require a lot of filtering and that's been around for years. The 2.2 to 2.5 gigahertz scenario, All those bands are TDD bands, but it requires filtering to coexist. So 5 gs, we expect to be something similar from the 3.5 to 4.5 up even up to the Wi Fi area that we expect to have to have filters for coexistence.
So yes, that's the theme for 5 gs. But also 5 gs is getting retrofitted back to all the FTD bands. But even those are going to have to coexist because there's the FTD still going to be in those bands. So there's still going to be lots of filtering required. We don't see that changing as they retrofit those bands because they're going to have to coexist FTD with TDD in the same bands.
So we don't see much of a big change in the filter requirements coming than what they are doing today. Power amplifiers, 100 megahertz, they're tough. To be able to get a power amplifier that can run 100 megahertz bandwidth and be linear, you think of Wi Fi. If we start doing Wi Fi type efficiencies in the handset and build to put out a watt or 2 watts of output power, you're not going to want to use your phones for very long. So that's something we have to solve.
You're going to be running in the single digit type of efficiency at 100 megahertz linearity. So it's going to look like a Wi Fi PA with an APT type of power management system. That's why we have to crack this envelope tracking. And be able to do envelope tracking at 100 megahertz bandwidth with a PA that has to be able to do 100 megahertz is going to be very challenging, but it's something that the industry needs to solve.
Okay. Seeing no more questions, on behalf of the entire Qorvo organization, we certainly appreciate all of you on the room and those online for attending and your interest in Qorvo. And we look forward to updating you throughout the year at future investor events.
Thank you, and have a great day.