Good afternoon, and thank you for attending JP Morgan's 20th annual CES Virtual Technology Forum. My name is Harlan Sur. I'm the semiconductor and semiconductor capital equipment analyst here from the firm. Very pleased to have Liam Griffin, Chairman, President, and Chief Executive Officer of Skyworks. I've asked Liam to start us off by reflecting on 2021 fiscal or calendar year, strong record year for the business, right? On a fiscal 2021 basis, Skyworks delivered 50% growth. On a calendar year basis, it's gonna be up almost 30%. More importantly, discuss the longer-term growth setup for the team as wireless connectivity, complexity, and application penetration continues to grow. Liam, thank you for joining us this afternoon, and let me go ahead and turn it over to you.
Great, Harlan. Thank you for the introduction, and thank you for the JP Morgan team setting this up. As you noted, Skyworks just finished a record year where we grew revenues by more than 50% and large scale. We're talking about a $3.3 billion top line going to $5.1 billion in a fiscal period. Great performance there, and that follows through with earnings per share and margins and other financial measures. But what's really great about it, Harlan, is that, you know, the demand for connectivity in multiple forms continues to grow. I think the space that we're in, and we have competitors and we have peers, this is the market you wanna be in right now. Connectivity is vital. It could be IoT, it can be cellular, it could be Zigbee, it could be GPS.
Underneath all of it is complexity. One of the themes around Skyworks and our business is that, you know, we love complexity. We love the challenges. We have teams of people that have been working in these areas for years and years and years, and really focused on making those technologies grow. And oftentimes, you see within our business, we do it in-house. We do it in our own factories, what I call the labs to fabs environment, where engineers in production commingle to develop products that are purpose-built for end market solutions. It's a great opportunity for our customers to engage with us and an incredible opportunity for our team all the way from production all the way to R&D across the board to lead. We're really excited about it.
The numbers that we talked about here at the open, quite substantial, driving multiple scales of not only EPS, but also margin and also top line. A lot of good stuff there. Tremendous opportunity ahead for us that we haven't yet captured. We're really excited about that. Our broad markets business continues to grow. It's $1.4 billion revenue right now in that portfolio. Again, mobile itself continues to get more complex. We love that. Our ability to execute in these supply chain headwinds has also been unique. Long way to go there, but we really are doing better than peers in terms of how we're managing that in-house and leading the challenges. We're really excited. We're just now moving into our fiscal 2022 year.
Excited about that and excited about the growth that we see ahead.
Great. I guess maybe on that note, given the flare-up of the Omicron variant, has that put any pressure on your internal operations kind of near term?
Well, no, actually, it's certainly a risk. I think everybody in this industry, we've been through it now it seems two, three years, and so we found ways to overcome the obstacles. Again, we're a manufacturer, so we do quite a bit of our work in-house. We're fortunate that we learned quite a bit in 2020 and 2021 to put ourselves in a position to manage some of the headwinds that we're seeing. Now, it's disappointing, I think, for everybody.
Yeah.
I think, again, you know, the early stages of COVID, you know, brought some lessons for us. It changed some of the market opportunities. Having our people fully understand the complexity and navigating operationally is unique. I think we'll continue to do well, but also be very careful and respectful for our employees and do whatever we can to keep safety high.
Perfect. As we head into calendar 2022, and as you mentioned, I mean, wireless and connectivity is pervasive, right? The market tends to always wanna maybe focus more on your smartphone franchise, but your business is much more diversified, and the applications that you're going after are much more diversified, right? 5G smartphone units, yeah, expected to grow 40%, somewhere in the neighborhood of 700 million+ this year. 5G infrastructure deployments expected to increase 20%. Broadband gateway deployments up double digits this year, and auto production is expected to increase 9%. Combined with your content gains and proliferation of connectivity into more applications, it really seems that the team should be set up to drive double digits percentage type of growth profile on revenues this year in both your mobile and your broad markets business.
Help us understand sort of the puts and takes on your revenue growth potential here this year.
Yeah, absolutely. Great question. First of all, you know, in the core mobile side, we see a great deal of complexity driving at higher data rates, more efficient, roaming in different markets. Those mobile devices don't have to be handsets, right? That mobile engine that we develop, our Sky5 engine, for example, is a purpose-built solution that can be brought into an IoT application.
Yep.
In an automotive application, or a high-end handset. Harlan, we also can create unique bundles and unique connections, given our expertise and our ability to make it in-house. If you look at a Sky5 solution that we could bring, it could be different from every customer.
Yeah.
That is one of the unique attributes of Skyworks. We feel really good about that. We have a great partnership with some of the very best companies on the planet. Specifically in mobile even. You see that those customers are actually doing well. That, that's a great theme for us. We're gonna continue to ride that in developing internal solutions. As I may have said already, complexity is our friend at Skyworks. We wanna do the hard things well, and that continues to move. Now, adjacent to that, the growth in our broad markets portfolio, which includes IoT, and automotive, and infrastructure, has really done well in this last year. We put a lot of energy into this to do it differently.
We know there's strong competitors there, but our style and our approach of really getting under the covers, working with our customer and having crafted purpose-built solutions for those applications. We're making progress in that area. Infrastructure's getting stronger. We did our acquisition with the I&A portfolio from Silicon Labs. Opens up a whole new aperture of opportunities. Not only a product opportunity, an inbound product opportunity, but there's also the corollary of that is the Skyworks sales team and the Skyworks reach and our supply chain prowess to bring that together. There's gonna be some really interesting, unique upsides in that combination, and we're just starting to see that now. We're very, very excited about where that's gonna take us.
Perfect. Maybe starting off with your mobile business. You know, aside from your number one customer in mobile, you've indicated, the team's indicated, you know, you're making progress at Samsung as well as in the Android ecosystem in China, which will drive diversity to your smartphone business, and you're benefiting from the content gains there as well. Can you just share with us your expectations on the team's momentum in the Android smartphone market in this upcoming year?
Yeah, absolutely. You know, obviously we have a great position with some of the leading players in the U.S., but we also do very, very well in APAC. Samsung is a significant player with Skyworks, worked with them for years, and we've been a great partner to their portfolio. They have some very, you know, high complexity, really high-quality products that we're engaged with. That continues to grow. Moving into the broader Android, OPPO, vivo, Xiaomi-
Yeah.
We've had a phenomenal partnership with that portfolio. Going back to what I had said earlier, for us it isn't just solutions, it's engagements, it's partnerships. You know, working with companies like OPPO and vivo are a little different than some other larger players. Oftentimes the human capital matters. The FAEs that we bring to the table.
Yeah.
The flexibility in the architectures that we can bring to the table to our customer. All of that stuff is very unique with Skyworks. We have that approach. It's not a one-stop shop. We go out and try to figure out exactly what the customers want, how to make it better, how to win today's design, but also put ourselves in position to have a multiple year portfolio with some of these leaders. Doing well there. Also doing well with baseband partnerships, names like MediaTek-
Mm-hmm.
Who's a very influential player in Android and in APAC with really strong baseband portfolios that we can match and mate up with and collaborate so that, you know, a baseband from MediaTek and a great solution from Skyworks can go to end markets in Android or others to deliver the best solution. So a lot of flexibility, a lot of resolution of challenge and Skyworks trying to put the best solution in the hands of the customers. That's really the theme that we're working on. Behind that is all the technology and all the hard work.
Yeah.
We do in R&D to set ourselves up to provide those solutions.
As the team continues to drive success in the Android market, you know, first half of the calendar year is typically when the Android ecosystem does tend to be stronger. You know, new Samsung, new Chinese handsets start to ramp. Given the traction, given the growing design win pipeline, the content increases, do you expect over maybe the midterm, longer term, do you expect positive changes to your mobile revenue seasonality profile on a go-forward basis?
Yeah, I do. I think if you think about the Android portfolios today, great position, a lot of opportunity, but the content lift hasn't yet inflected in a way that we expected, right? It's getting better.
Yeah. Right.
The key, and we've seen this for years, right? It's the applications and the usage cases that actually drive. They're the catalyst for the content gains, right? The content gains the way we think about that is complexity. The more demand, the usage cases expansion, the data rates going, all of those challenges create complexity in the device, and our products resolve that complexity. We see that happening more and more. We've also been a partner with companies and just explained to them, you know, what the merits of a high-end solution can be. Incrementally, that may be $3 or $4 in a phone, but the user experience, it's off the scale difference between a lower end and a higher end platform.
As we go through these, in fact, these situations we're in right now, whether it's COVID or some other reason, connectivity and the value that it provides to really make our economies work is vital. We like to be, you know, in the fulcrum of that, and Skyworks has done quite a great job of not only providing our products but also working shoulder to shoulder with our customers, so they have the opportunity to kind of really engage in a better way.
You know, having the vertical integration, you guys clearly were investing in capacity at a time when maybe your competitors weren't, and that's why you guys, I feel like, are in a much better position today. The supply chain impacts do seem to have an impact with, you know, with the Android ecosystem and with some of your competitors, maybe their ability to supply into some of these customers. Number one, have you seen an improvement in supply chain to the Android smartphone players with non-Skyworks components? You know, has this actually opened the door for potential share gains for the Skyworks team?
Yeah. You know, quite frankly, it has. The main reason is you get certainty with us. We will tell you exactly where we are. We're making our products in-house. I know you've heard this, but I mean, literally, you know, we have gallium arsenide in Massachusetts. We have gallium arsenide in Thousand Oaks, California. We have a great site in Mexico. We have sites in Japan and in Singapore. These are our factories. These aren't just.
Yeah.
locations. These are Skyworks-owned facilities, and that's where that CapEx came in. The CapEx wouldn't be available if we didn't have the financial muscle to deliver that cash flow. When you think back to what I said at the outset, the $3.3 billion-$5.1 billion, you can't do that overnight. We forecasted, we worked with our customers, we developed the product and put ourselves in the position to do that. Even now, right now, you know, we have a great opportunity on supply chain. The challenges that we have is that last 1%-2% of the bill of material.
Yeah.
that we may not control. You could be, you know, putting everything in a great position, but your customer needs a full finished set, whatever that may mean in each market, right? It's unique. I will tell you that owning your supply chain is a great thing. It's not just about scale, it's also about-
Right.
the ability to bob and weave and drive in ways that you can't do if you're a third party. We've seen that change, and that's won us new business. I can tell you right now there are more companies that we're dealing with today, as a result of the supply chain issues that no one wanted, as a result of COVID, which no one wanted. Skyworks has the resilience to really, you know, mitigate some of those challenges. Again, it comes down to making the investments in your company, and having the financial powder to go big when it comes to capital and it comes to scale.
Let's talk about some of the emerging opportunities. You know, as I mentioned before, obviously the market does tend to focus quite a bit on your smartphone franchise, your leadership smartphone franchise. However, there's all these other opportunities, right? A good example is with the potential faster time to enablement of private and brownfield 5G networking deployments driven by vRAN and Open RAN, right? vRAN and O-RAN architectures could drive faster adoption of wireless broadband connectivity into new areas, right? Like the factory floor, retail warehouses, cloud and enterprise data centers, and into automobiles, right? The Skyworks team, I feel like, is positioned very strongly here because edge applications are gonna be a combination of cellular, but also wireless connectivity technologies like Wi-Fi 6, Zigbee, as you mentioned.
I mean all areas where you guys have RF leadership. When do you expect to see the inflection in cellular, Wi-Fi and other connectivity in these new use cases, and how big is this opportunity from an RF connectivity franchise perspective?
Yeah. Yeah, that's a great question. I mean, one of the simplest ways to think about it is when you look at mobile, right? Mobile phone.
Yeah.
It's really bounded by the population theoretically, right? I mean, everyone maybe has one, maybe they have two, but there's not an infinite number of devices out there. When you go to the real broad markets, when you go into the applications that you just mentioned, we're talking tens of billions of potential connections and nodes. And also, you know, devices that need to be able to work in different environments. Devices that, you know, are they powered? Are they tethered? You know, where is the energy consumption coming from, right? All of that stuff. We're very much in tune with that. Our business outside of mobile, we talked about that at the beginning, we call it broad markets, has been growing extremely fast.
Now we have a big mobile business.
Right.
The other side of our portfolio at $1.4 billion right now and a run rate of clearly double digits is gonna do some remarkable things. Not only are we getting into new markets, we're getting into new customers.
Mm-hmm.
We're dealing with, you know, the best and the brightest in EV. We're involved with companies like Honeywell and NETGEAR and Amazon and Google and Facebook. Names that you wouldn't think would be part of Skyworks ecosystem, but they are. Again, the products that we make, you know, it's pervasive, they're necessary, they're needed, they're essential. As we get deeper and deeper into this engagement and expansion, you know, you see our product line doing better. That's one of the reasons why, you know, we stepped up with the I&A deal because we saw-
Yeah.
Great technology, really strong, but maybe not the scale that we needed to really move the needle. It's a combination of the operational scale, customer engagements that we have already and great technology that we bring forth to really round out that opportunity.
I've got a question from an investor. When does Skyworks see a meaningful design win cycle for the internal BAW in mid to high-band platforms in Android?
Yeah. Great question. You know, the BAW portfolio has really been a strategic move for us. We had been working on this for years and years, and we have incredible solutions today that are in products today with very high performance. We continue to move our needle from mid-band, high band and combinations in between with our own technology as well. We're not fabbing BAW. BAW is done in-house for Skyworks. We can create, you know, exactly what frequencies, what nodes, depending on what bands we need to be in. Today, the top-tier players are all over that. We're doing great, and we have design win opportunities in Android as well. I mean, there's no reason why those opportunities don't fall through.
There's more upside for us on the Android cycle because that portfolio is still a little bit behind the performance curve. Not with us, just in general. If you look at just the last report in China, the leading provider in the last couple of quarters was not an Android play even though
Right.
We were in China, right?
Right.
You know, the leading U.S. company still leads even in China. You know, that is what it is. On the Android side, I think there's more opportunity from baseline today to go stronger in the performance category as we move out. Back to what you said before, you know, the way we think about 5G, for example, it is a universal connector.
Mm-hmm.
That universal connector can be a phone, it could be an IoT device, it could be in an electric vehicle. Those are the types of nodes that the 5G engine can provide and support. Over time, we're gonna have blurred lines on what the market is, but we know that the core is going to be around connectivity, wireless connectivity, you know, and the performance needs, the current consumption needs, the range needs, the size. All these intricate challenges that come about are all great for us because we live and breathe in that world, and we have the nodes and the elements and the operational scale to kind of pivot and play with the best customers out there, and we learn from each other as we go forward.
You know, we're seeing a big adoption of Wi-Fi in everything, but your team has had some nice content gains with the Wi-Fi 6 eFEM, and it looks to be similar for the Wi-Fi 6E eFEM as new spectrum gets added to the standard, right? Can you just remind us of the content gains between going from 802.11ac to Wi-Fi 6 to Wi-Fi 6E? You know, what are the content gains that Skyworks has seen, and where are we in the 6 eFEM, and how do you see the 6E eFEM progressing?
Yeah, yeah. Great question. It actually, you know, you nailed it. The Wi-Fi cycle, you know, the same way we talked about 3G, 4G, 5G.
Yeah.
The Wi-Fi cycle now has been on a tear. It really has, going from, you know, traditional 802.11 to Wi-Fi 6E and Wi-Fi 7 and beyond. That's another parallel universe here that we populate really well. We've had great technology in Wi-Fi with our silicon germanium technologies and other commingled portfolios. That's an in parallel opportunity that we play in very well. Wi-Fi has been one of the big drivers for broad markets. It's another version of that universal connector. You know, we've seen that again as we went through COVID and some of these challenges that we're going through right now, the ability to communicate in different ways. Wi-Fi has been, you know, a major element. The demand in Wi-Fi has gone up. There's an appreciation around that.
You can see it, you know, everywhere you are, whether you're in an airport, whether you're in an enterprise situation. Wherever you may be, the Wi-Fi portfolio continues to grow. I don't think people are still satisfied with the speed, right? Everybody wants it faster. We all do.
Right.
The demand for that.
Mm-hmm.
That leads us into companies that we, you know, hadn't worked with before. You know, looking at the names as we talked about before, you know, look at companies like Ring or look at Microsoft and some of these companies that have been a little bit more consumer-oriented, but now we're playing in with Wi-Fi with really good value and really good revenue growth.
You know, one of the distinguishing characteristics of the leadership in connectivity is you've got very strong partnerships with the guys that design the chips that sit right next to or utilize your RF front end, right? You've got a strong partnership, for example, alongside the number one supplier of Wi-Fi 6 and combo connectivity digital chipset solutions that powers the world's leading smartphones, broadband, residential, commercial gateways. Best in class, right? What's the biggest differentiator that has allowed you to become a strong partner to the number one digital connectivity supplier in the market?
Yeah. The answer to that is because we can pivot, we can drive a solution for each and every account. That's kind of the way we look at it. The difference for us is you're not buying an off-the-shelf solution. You're working with us. We're gonna craft something that you need, and your need is gonna be different than someone else's, to create the best solution, you know, with the highest performance, best range, lowest current consumption, all the key nodes that are required to make these wireless engines work. And because we have the building blocks around it, we can be, you know, really focused and crafty in making that work. A Wi-Fi 6E solution for, you know, a low-end consumer model could be one thing, but now you want an enterprise-grade Wi-Fi, that's another thing.
Yeah.
You may wanna have a solution.
Right.
That has Wi-Fi, Zigbee, you know, Thread, all of these technologies and 5G commingled. We know how to do all that. That's what makes us a great partner. We do it for obviously, to help our customer, but also to formulate a great relationship. It's very helpful with some of the smaller names that don't have, you know, the engineering prowess. They'll come to us and leverage our people skills and our technology and the know-how to put things together. You think about markets like, you know, interesting markets that you wouldn't think about. Washers and dryers or-
Yeah.
You know, looking at, you know, remote cameras and all of the sensing, and that stuff just wasn't around a few years ago. It's getting better and better, but behind the curtain, there's technology. That technology is really driven by, you know, great products, having the ability to weave those connections together and be flexible about the architecture. That's what's allowed us to grow in those areas. Within that, you know, there are still huge opportunities and lanes for us to go through that, you know, we're underrepresented. Automotive, for example. Tremendous opportunity thinking about ADAS and just autonomous driving in general.
Yeah, yeah.
Think about the performance needs that we really need. No, we're not there yet, but think about what we really need. Connectivity has gotta be at its best. Zero latency, super high performance, highly efficient, always on, sensing, turning, all that stuff. We're not there yet, but that's gonna be a huge lift for this industry. Then within this industry, who are the players that have the know-how, the experience? You know, you look at the automotive markets, you know, they wanna go deep into your supply chain.
Yeah.
They wanna go into your factory, and they wanna know.
Right.
Exactly what you're making, where you're making it. You know, there's all kinds of incredible, you know, hurdles to even be a supplier. You take that know-how and you bring. You think about what we actually have in our clean rooms and our factories. You look at these markets that are critical, like auto, it's a great match. Great match. We're starting to move in that direction. We see that happening. Back to what you said earlier, you know, the broadening of connectivity.
Yeah.
Thinking about, you know, whether we call it the metaverse or what, whatever terms we wanna use, this tremendous diversification and expansion of connectivity in all of its forms. We don't wanna be wedded to any one form factor, but we are a company that really does drive, you know, the connectivity solutions in a way that we don't think anyone else can. It comes from the product, but also comes from the people and the know-how and the ability to be trusted as we go forward.
Perfect. I've got another question from an investor. Follow-up to the BAW question. I realize the opportunity is greater on the Android side for BAW. However, seems like Qorvo, your competitor, is taking majority of the share. Why is that the case? You know, why haven't you gotten your fair share of mid to high-band PAMiD design wins, if you have a competitive solution?
Yeah. I mean, we absolutely have a competitive solution. There's no question about that. It's just more about where we're gonna allocate the effort. You know, it's clear that some of the highest performing solutions are underpinned with us. That's a fact.
Yeah.
Working on that channel and making sure that the highest levels of technologies are delivered. From there, it's a lot easier to go downhill. I mean, we're a company, we talk about complexity as our friend, challenge as our friend. We wanna hit the fastball. We don't start slow. In our labs, we work on the hardest things first, and then get those to market ready to go downhill and downstream. If you think about BAW, we're selling BAW, too, engaging in BAW and delivering significant portions of the technology to the most discerning customers in the world. We absolutely can do the same thing in APAC. We can absolutely do the same thing in Android. There's no question about that. It's more about the choice and how we wanna move it forward.
That continues to improve. Even more important, the technology behind it, the true bulk acoustic wave technology that we've developed in-house is incredible. I'm really proud of the team's work there. That's not easy to do, but that filtering play is gonna continue to grow. I think everyone in the space in mobile recognizes that.
Your CapEx to sales ratio in fiscal 2021 was about 12.5%. It's been in that sort of 10%-12% range.
Yeah.
You increased your investment in your manufacturing footprint, you know, smartly so, ahead of the component shortages that some of your other peers succumbed to. What is the team's CapEx strategy going forward?
Yeah. You know, we invest to grow technology. Most of this is important. I'm glad you asked it. When we think about capital, it isn't we have, you know, 100 pick-and-place machines.
Right.
Next year, we're gonna have 120.
Yeah.
It's not like that. We actually think about our manufacturing and our R&D in a unified way. We have a leader in that team that it's commingled. It's operation and technology together. When we're building out our CapEx, it isn't just to make more, it's to actually expand the aperture on the technology side. When we were developing BAW, you know, that's a technology development, but at the same time, we created it so it could scale very quickly. Our financial powder has been outstanding in this company, and underrated, actually. If you think about, you know, where we are with our EPS model, where we're headed, you know, we're at a 15x multiple right now, which is not good, right?
That's something we're gonna work on. A lot of room from there. The point is technology and scale go hand-in-hand. They're not two different companies, not two different businesses. There's one leader in that portfolio to do that. It's been working out really well, and we're gonna continue to follow that curve, and also take in feedback from our customers and having the openness to have that conversation with the best and the brightest to learn and make us a better company.
Great. Well, we're just about out of time. Liam, thank you very much. Great insights from you. We look forward to the strong financial performance from the Skyworks team this upcoming year. Thank you, and thank you for the support.
Great. Thank you, guys, and happy New Year. Take care.
Happy New Year.