Good afternoon, and welcome to Skyworks Solutions First Quarter Fiscal Year 2021 Earnings Call. This call is being recorded. At this time, I will turn the call over to Mitch Haws, Investor Relations for Skyworks. Mr. Haws, please go ahead.
Thank you, Rob. Good afternoon, everyone, and welcome to Skyworks' 1st fiscal quarter 2021 conference call. With me today are Liam Griffin, our President and Chief Executive Officer and Chris Senesal, our Chief Financial Officer. Before we begin, I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or may be considered forward looking statements. Please refer to our earnings press release and recent SEC filings, including our annual report on Form 10 ks, The results and guidance we will discuss include non GAAP financial measures consistent with our past practice.
Please refer to our press release within the
Skyworks delivered record quarterly results in the 1st fiscal quarter of 2021, leveraging our expansive technology reach and deep customer engagements spanning both mobile and broad markets. We established new quarterly records for revenue, Operating margin and earnings per share demonstrating both the power of our financial model and unique opportunity to lead the global transition to more advanced wireless communications. Now looking at the quarter in more detail, We delivered revenue of $1,510,000,000 more than $455,000,000 above the midpoint of our guidance. We posted earnings per share of $3.36 exceeding our guidance by $1.30 effectively doubling year over year earnings. We achieved gross margin of 51.1 percent and record operating margin of 41.2 percent.
And we generated strong operating cash flow totaling $485,000,000 in the quarter. As our results demonstrate, the demand for always on connectivity is accelerating and extending into new applications, including telemedicine, high speed video conferencing, remote learning, autonomous transport, Essential services for the infrastructure markets, store to door delivery and touchless commerce. This is a global phenomenon where upgrades of key technologies are increasingly critical in the face of the ongoing pandemic. The investments we've made over the last 2 decades have prepared Skyworks to address these challenges. The mobile and wireless ecosystems will benefit from these dynamics, yet outsized gains will largely accrue to those companies that have invested deeply and core technology and scale.
These gains are being driven by both a growing device count and an expanding content per device, In some cases, doubling or even tripling for Skyworks. We are proud to play an instrumental role in Shaping the fast evolving landscape, collaborating with our partners and customers, leveraging key technologies from TC SAW to high performance bulk filtering, SOI, gallium arsenide and state of the art packaging technologies. Our strong results in Q1 demonstrate our execution around these themes. Specifically in mobile, we accelerated the ramp of our Sky5 portfolio, supporting the next wave of 5 gs launches at Samsung, Oppo, Vivo, Xiaomi and other Tier 1s. In IoT, We capture design wins across a diversified array of new and existing customers.
Specifically, we partnered with ASUS, Delivering the world's 1st WiFi 6E connected home router, we shipped WiFi 6 solutions for access points at top network OEMs, including Cisco, NETGEAR, CenturyLink and Aruba. We captured new wins at Google for their latest Fitbit smartwatch, And we delivered low latency cognitive audio solutions, powering wireless gaming headsets at multiple Tier 1 accounts. In industrial, we ramped Itron's multi standard ISM connectivity solutions for smart cities. In infrastructure, we deployed 5 gs amplifier and receive modules, supporting multiple European base station OEMs. And finally, in automotive, we accelerated shipments of advanced connectivity solutions, supporting the world's premier EV manufacturer.
We leveraged B2X solutions with Volkswagen and Toyota for their enhanced safety systems and partnered with MediaTek for 5 gs reference designs, specifically targeted at automotive applications. Moving forward, We are seeing the confluence of multiple market developments, a significant rise in device complexity, Expansion in wireless spectrum and band count, combined with a technology bar that has never been higher, These trends directly translate to increased opportunity for Skyworks with both new and existing customers. With essential technologies and scale propelling performance gains across a broad set of applications, Our purpose built solutions address all key network protocols spanning 5 gs, Wi Fi, enhanced GPS and Bluetooth. Additionally, we expect the current C band auction to be a catalyst, with new spectrum creating significant content opportunities for our Sky5 While smartphones were the first to embrace 5 gs, the performance gains will power a broad set of use cases, extending into billions of IoT devices. Looking ahead, we see 5 gs as a transformative technology, catalyzing new applications while acting as the universal connector from the home to the car to the factory floor.
In summary, Skyworks is solidifying market leadership as connectivity meaningfully alters The way we live, work, play and educate, not just from home, but from anywhere. Our record performance clearly reflects this dynamic. With that, I will turn the call over to Chris for discussion of Q1 and our outlook for Q2. Thanks, Liam. Skyworks started fiscal 2021 with very strong Q1 results, Delivering
all time record revenue of $1,510,000,000 adding more than $550,000,000 of incremental sequential revenue and exceeding the midpoint of the guidance for Q1 by $455,000,000 Revenue was up 58% sequentially and up 69% year over year, driven by increasing adoption of our mobile with all smartphone OEMs along with record broad market revenue and customer reach. Mobile revenue grew 80% sequentially as well as on a year over year basis, largely driven by widespread content increases as 5 gs phones are ramping with all major smartphone brands worldwide. Broad markets revenue grew to $326,000,000 establishing a new quarterly record. This reflects revenue growth of 35% over Q1 of last year, benefiting from a diverse set of use cases, Supporting work, play, learn from anywhere and the increasing adoption of technologies such as Wi Fi 6 and 6E, along with the continued momentum in our Audio Solutions business. Gross profit in the first quarter was $771,000,000 resulting in a gross margin of 51.1%, up 70 basis points sequentially and up 100 basis points year over year.
Operating expenses were $149,000,000 or 10% of revenue, demonstrating strong leverage in our operating model, while continuing our strategic investments in support of future growth. We generated $622,000,000 of operating income, translating into an all time record operating margin of 41.2%. Other income was $1,000,000 and our effective tax rate was 10%, resulting in net income of 560,000,000 or a net income margin of 37.1 percent. Top line momentum and execution on both gross and operating margins Drove record diluted earnings per share of $3.36 beating the guidance by $1.30 EPS grew 82% sequentially and doubled when compared to Q1 of last year. Turning to the balance sheet and cash flow.
1st fiscal quarter cash flow from operations was $485,000,000 Capital expenditures were $119,000,000 We paid $83,000,000 in dividends, and we spent 196,000,000 To repurchase 1,400,000 shares of our common stock at an average price of approximately $139 per share. Additionally, as noted in our separate press release issued today, Skyworks' Board of Directors has authorized A new $2,000,000,000 stock repurchase program. This new buyback plan reflects our Board's confidence in Skyworks' business model and in management's ability to consistently produce strong free cash flow, allowing us to leverage share repurchases and dividends to generate higher stockholder returns. Now let's move on to our outlook for Q2 of fiscal 2021. We expect the continued and rapid adoption of multiple wireless protocols and expanding use cases to drive strong year over year growth for Skyworks.
Specifically, in the 2nd fiscal quarter of 2021, We anticipate revenue to be between $1,125,000,000 $1,175,000,000 with non GAAP diluted earnings per share of $2.34 at the midpoint of our revenue range. This translates into year over year revenue growth of 50% at the midpoint of the revenue range and year over year non GAAP diluted earnings per share growth of 75%. Gross margin is projected to be in the range of 50.5% to 51%. We expect operating expenses be between $150,000,000 $152,000,000 And below the line, we anticipate roughly $1,000,000 in other income and a tax rate of approximately 10%. We expect our diluted share count to be approximately 166,500,000 shares.
And with that, I will turn the call back over to Liam.
Thanks, Chris. Skyworks started the new fiscal year with record results, Clearly demonstrating the breadth and depth of our business model from Tier 1 mobile to 1,000 of broad market customers. Importantly, the multi year wireless transition is now underway, creating a burgeoning set of new opportunities and use cases. With deep customer engagements underpinned by decades of technology investments and scale, Skyworks is uniquely positioned to lead. Finally, our high levels of profitability and strong cash generation afford us the flexibility to invest and win, while generating consistent returns to our stockholders.
That concludes our prepared remarks. Operator, let's open the lines for questions.
Your first question comes from the line of Karl Ackerman from Cowen and Company. Your line is open.
Hey, good afternoon, gentlemen, and thank you for letting me ask a question. I guess, with results and an outlook this Strong. The elephant in the room is about sustainability, both in terms of revenue growth, but also profitability. We know that 5 gs handsets will increase this year, but I would really appreciate if you could talk perhaps qualitatively of how you see that outlook for the balance of the year, as well as your view on broad markets too, even what appears to be a multitude of design ramps
Sure, absolutely. Well, a couple of things. The 5 gs cycle really is just beginning, And that's clear. And I think if you listen to Skyworks and what we've been saying, it's all about complexity, it's all about content gains And the culmination of those coming together with a tremendous unit launch in 5 gs, and again, very early in 5 gs. The estimates For unit uptake at 5 gs, if you think about 2020, maybe there were 200, 200,000,000 phones.
Those numbers are going to be more than double going into 'twenty one and they'll continue to You've got almost 7,000,000,000 subscribers in the planet and the percentage that own a 5 gs phone are very, very low. So there's Tremendous upside there in our core business in mobile, and also advanced by great technology execution with our team. So that's one big driver. The second driver that's been bubbling up for a while is our broad market portfolio. We had tremendous gains in our broad market portfolio, 35% year over year With a broad set of customers, names like Nokia, names like Honeywell, names like GE, Bosch, just an entirely new landscape of customers that we've been able to engage with.
And then we talked a lot about usage cases here in the call.
I appreciate that very much. If I could for a follow-up, One of the baseband companies, E and A Asia the other day spoke about how they do not See any evidence of a build of inventory across the channel. Similarly, it's now well known that there remains tightness across the foundry and component supply chain. My question is how are these dynamics driving your discussions on both pricing and volume commitments to your customers? Thank you.
Sure. Yes, great question. I think one of and by the way, you're right about the tightness in supply, some of the challenges operationally. And I would say that The Skyworks team did an incredible job executing in the Q1 period, and I think we'll continue to see that opportunity Extend into the full year. But I will say this, we have made the unique investments in capital and scale.
We have our own 10,000,000,000 unit TC Soft Factory for custom made we have bulk acoustic wave in house. We have our own assembly and test Packaging capabilities that are unique and purpose built for this market. So we were able to avoid some of the real challenges in Supply chain because we've built a lot of this in house in our own factories. But there certainly have been some bumps on the execution side throughout the landscape, technology landscape and the connectivity landscape, but we're starting to see that clear. And fortunately, we're able to execute through that in the December quarter.
And your next question comes from the line of Ambrish Srivastava from BMO. Your line is open.
Hi, thank you, Liam and Chris. I was Fool for a second, I thought I was reading the TI or ADI earnings release with that kind of operating margin. So that's pretty solid guys. But Let me address maybe a baby elephant that's running around, at least in our minds, which is China. So there's been a lot of talk about Overbuild in China, especially in the box complex and how they're trying to take share from Huawei.
So maybe if you could just give us some sense Quantitatively, how big was the China business? And then Qualysh, can you just help us understand what's going on? And then I had a follow-up for Chris.
Sure. Well, we've been a key element, a key supplier for the Oppo, Vivo, Xiaomi ecosystem, And that continues. And we had great results with those accounts this year. There's a lot of opportunity to grow their 5 gs base as well. And that's something that we should be looking forward to throughout the year and it's a multiyear cycle, of course.
But again, one of the things That we continue to say here at Skyworks and it really rings true is our ability to get in and help these customers customize and configure the complexity around 5 gs, Leverage solutions like Sky5 that really integrate a tremendous amount of components and complexity and make it easy for the customer to go to market. So we had some strong uptake there in the China space. We continue to see that looking good. Obviously, there you have a Chinese New Year opportunity here As we get into our new year. So I think there's going to be some good signs of growth, but we have a good position there today.
Think there's just more room to move on units as we go through the year.
What was the growth in China, Liam, Q over Q?
So our China business in The December quarter was up double digits sequentially and of course, very strongly on a year over year basis. And of course, looking into March, we will have stronger than seasonal growth, Double digit growth accelerating our year over year growth with those accounts.
Okay. And a quick follow-up for you, Chris, since you are on the line. Just remind us on the capital allocation priorities, good to see the $2,000,000,000 buyback. But just kind of just walk us through Divvy buyback and M and A, and I'm assuming M and A would mostly be in the broad Thank you.
Yes, we're not changing our strategy there. We did have a $2,000,000,000 buyback program in place That had a 2 year life cycle and so that came to an end. And so we are replacing that program We have a new $2,000,000,000 buyback program. And so we will continue to return most of our free cash flow back to the shareholders, Combination of our dividend program and now the new $2,000,000,000 buyback program.
Thanks.
Your next question comes from the line of Timothy Arcuri from UBS. Your line is open.
Hi, thanks. I guess the first question is, the beat was so significant and you guided just in early November. You typically get pretty good visibility from your biggest customers. So I guess my first question is sort of like what drove the big beat? Was it a pull in from your large customers?
Can you just sort of double click on what drove the beat? And then I had a follow-up. Thanks.
Sure. Yes. Well, it was certainly not pull ins, that's for sure. I mean, it was a quarter that So it started a little slow and really accelerated through the period. A tremendous amount of technology execution behind this On the mobile side, but again, in broad markets, we had record 35% year over year.
So it's a combination of Strong 5 gs launches with the most important customers. And within those launches, an Extended reach of technology from Skyworks, the content that we're putting forth right now is significantly more advanced and more impactful than what we've had in prior years. And that comes through our own technology, our fabs, our own investments in R and D and in scale to make that happen. So you had a very strong mobile opportunity and then you had a broad market opportunity in parallel that was leveraging some of the But again, things like Wi Fi moved, GPS, Bluetooth, all the connectivity protocols, the new usage cases popped up, customers that we didn't have before emerged. So it was a combination of multiple factors, but those factors are sustainable.
I mean those customers that we've won are going to stay with us as we go through The next couple of quarters years and we look forward to more opportunity there.
Okay, got it. And then I guess, Chris, Oftentimes, you give us what your largest customer was in terms of revenue in the quarter. I think last December, it was in the low 60s. So I imagine it's probably that or even higher in December, so can you give us that number?
Yes. Revenue with the largest customer in the December quarter was approximately 70% Of total revenue, obviously, it was a great quarter with that large customer that just launched their first 5 gs phones, With very rich Cowork's content inside, we talked about that and we indicated that 9, 12 months ago. In addition to that, we do have some very nice and good content in some of their other products That large customer sales as well. But again, so great execution there with a large customer. But as Liam indicated, the strength In the December quarter was not just with a large customer, all our other customers, all our other segments, every region Was up double digits sequentially and strong double digits on a year over year basis.
Yes. And just to follow-up with Chris, I think it is important to note that the growth With our large customer, it's also accelerating in their new application. So it is not all just about smartphones. A lot of other opportunities there that require the connectivity protocols that we bring to market, which is really great.
Got it. Got it. Yes. Thank you.
Your next question comes from the line of Blayne Curtis from Barclays. Your line is open.
Hey, guys. Thanks for taking
my question and just truly amazing results. Maybe you can just help us a little bit with March. Obviously, Your large customer, that very high number should have some seasonality. Curious your outlook maybe between mobile and broad market. Do you expect broad markets to I guess typically it would be down, but within that outlook for March, do you expect it to be up?
Yes. No, absolutely. So the guide that we provided for March has some seasonality with the large customer as you can expect. But if you look at the revenue in mobile outside of the large customer as well as the revenue in broad markets, It will be up double digits sequentially, which is actually stronger than normal seasonality, a lot stronger than normal And it further accelerates our year over year revenue growth with all those accounts, so the Korean, the Chinese As well as thousands of broad market estimates.
Got you.
And then I want to ask you also,
Well, I guess within broad markets, but it has a mobile play as well. On WiFi 6E, Samsung launched a phone without, I'm assuming you'll see another mobile customer without. And then I guess at some point, you'll see access points. Can you just talk about the content driver for you for WiFi 6E?
Sure. Yes. I mean, we are seeing that rollout now very quickly. A lot of great design wins with key customers today now. So I mean there's a technology pop there, Wayne, when you look at the Wi Fi 6E product.
There's even bulk acoustic wave opportunity within those systems. And the data rates and speed are demonstrably more powerful. You could see that in your Zoom calls or whatever. So Wi Fi is a big driver for us as is WiFi 6. And that's one of the things to think about with Skyworks.
It's really about Connectivity can be 5 gs, connectivity can be Wi Fi 6, Wi Fi 6E, it can be Bluetooth, all those protocols are there. But WiFi 6 and 6E are meaningful, and they are really now the product of choice in the work at home, work from anywhere dynamic. And I think that's an opportunity for continued gains for us and with content and also with adding additional customers.
Your next question comes from the line of Kevin Cassidy from Rosenblatt. Your line is open.
Thanks for taking my questions. And I'll add to the congratulations on the stunning quarter. For your outlook, is there any capacity constraints in your own manufacturing or is You brought inventory down. Is there is that a constrained number?
No. I think right now, we are in good shape From a capacity point of view, in fact, I think we've been able to broaden the aperture a little bit on execution And drive more technologies through our own fabs. So we should be in good shape. I mean, obviously, the December quarter really tested our metal in terms of The execution team did very, very well. We still had to navigate some supply chain hiccups here and there that were outside of our supply chains.
But for the most part, we executed very well. We can take that momentum and the lessons learned through the December quarter to put us in better position
Can you give us a time line for the C band? How does that move into revenue? And what kind of a percentage increase would you expect those handsets with C band
having it? Yes. No, that's a great question. The C band auction now is pretty much commenced. What it does, which is great, is it opens up New spectrum and mid band, so let's call it mid band 1 gig to 6 gig.
There's a lot of opportunity there That had been really kind of tied up pre auction. That will be very beneficial for Skyworks because we have a great portfolio of product In mid band, we have great product in ultra high band and high band as well, but C band is going to be unique here. It's going to be an important piece Of the 5 gs landscape, a very necessary piece going from low to mid to high, kind of the layer cake Approach, if you will, with low band at the bottom, mid band in the middle and then technologies like millimeter wave narrowly at the top. So That C band auction will drive more technology. We will be delivering 5 gs signals through that new spectrum.
It will require Upgrades in our Sky5 platform that we're ready to go on and it will be able to add content.
Okay, great. Thank you.
Your next question comes from the line of Chris Caso from Raymond James. Your line is open.
Yes, thank you. Good evening. I guess the first question is just digging into what was different from your expectations going into the quarter again. And if I guess The question may be a little differently. We had talked about some supply constraints coming into the quarter.
Was the nature of this beat just that you were able to get more supply out the door this quarter than you had expected? And otherwise, When you guided back in September that perhaps more of this would have been pushed into the March quarter, was it that either content or demand from your customers turned out to be better?
Yes, Chris, it really is a lot of there's elements of each comment. So first of all, there was an accelerating demand signal here in the December quarter, which was great. Things were a little bit slower in Q4 period and we started really seeing the wheels turn in the right way in December and that accelerated. That was The December quarter was a quarter that accelerated. It didn't decelerate.
We've had other periods where we had launches that started out great and kind of tailed off. That didn't happen. And so what it did is it put a lot of focus on execution, supply chain execution. And fortunately, and if you look at obviously our filings, we've been spending money Capital and CapEx. And that really isn't just adding lanes of new equipment.
It's actually bringing new technology So it was a combination of supply chain execution largely within Skyworks and we had a couple of hiccups outside. We don't make everything in house, but most of it's So owning our own factories, delivering within our facilities, being efficient there, managing the constraints, But then also bringing that technology up. And we learned a lot in that period. It puts us in a much better position as a company. Lessons learned when the intensity was high, I think are really key for us and will make us a better company as we supply further.
But then some of the other things that Chris mentioned, this was not just the mobile launch. Mobile was great and was the highlight, but we really executed in our broad market. I'm really proud about that. Some of the customer names I already rattled off, but really high quality accounts that were not customers of Skyworks a year ago. And they are today and they will be in the future.
Thank you. As a follow-up, With the big revenue growth, what can we speak what can we think about margins as we go into next year? And I know that you may have been leaning on some production outsourcing given all the supply constraints and the big ramp that happened this year. With the investments that you're making now, will that allow you to get some more margin leverage on these very large revenue numbers and start to grow the gross margin line as we go into next year?
Yes, Chris, great question. And so first of all, I'm pleased with the fact that we delivered 51.1% gross margin, up seventy Basis points sequentially, up 100 basis points year over year and 35 basis points above the high end of what we guided, right? Despite the fact that, as you pointed out, it was a very tight supply chain environment. And keep in mind, we still have some COVID-nineteen headwinds Out there as well. But as Liam indicated, great execution by the operational team delivering more than $1,500,000,000 in revenue to our customers, Right.
And so as we move forward and as we move, of course, to our seasonal trends here and as some of those headwinds I just talked about will abate over We definitely will see further gross margins improvements here. And maybe just to add there, of course, I mean, we are focused on driving top Line growth and we are focused on driving gross margins improvements all the time. But we also focus on overall profitability and operating margins There as well, very pleased with the delivery of the 41.2% operating margin in the December quarter. Great.
Thank you.
Your next question comes from the line of Edward Snyder from Charter Equity Research. Your line is open.
Thank you. Excellent results, guys. Congratulations. Chris, I'd like to ask if I mean, obviously, you've got a big boost from your largest customers. That results yesterday, your comments on today's call and clearly your revenue lines show that.
But in terms of sustainability, why shouldn't we expect things to actually get materially better? Because if you look at your content, I mean, you had big content increase On the latest model, something like by our own teardown about 20%. But you still have a lot of runway At the Korean and Chinese customers, we've been kind of under earning last year that seems to be coming back. So can you maybe help characterize Revenue growth maybe to 'twenty one, you've got a very strong one with the domestic suppliers, what should we expect For the Koreans in China. Thanks.
Sure. Ed, I'll take this for the first question. And if you have a follow-up, I'll throw it to Chris. Yes. I mean, great question for you there.
I appreciate it. And I think one of the things that you know very well is And the nuances around that technology and really all key elements need to come together. So we were able to put that forward with, of course, our largest customer, but we're also gaining in China with key players, the Oppo, Vivo, Xiaomi's. We've got great attachment with MediaTek as well. It's still so early.
If you look at units in 5 gs versus where they could be in Couple of years, right? You got 6,500,000,000 to 7,000,000,000 mobile subscribers and we're talking about a couple 100,000,000 units of 5 gs phones 2020, it will probably double in 2021, but there's still great opportunity for us at Skyworks. And the other thing that we do well is we are an under the hood We get in there with those customers and help them stitch together the necessary technologies to make it work in 5 gs. When you look at the Oppo Vivo Xiaomi's, I mean that the people support that we provide is very unique. The SkyFi platform is highly integrated and really puts them on a fast Fast time line of market, which is ideal.
We're also seeing our large customer perform extremely well, Extremely well and taking share globally in our view. So there's a lot of positives there and it's sustainable. 5 gs, again, still early innings. We believe this is a multi year thematic cycle for us and others. And then the inflection towards other markets, automotive, IoT, So many other markets that will consume these technologies.
I think it just comes together for a good long term thesis here.
So maybe my follow-up then kind of hits on that issue. I mean, it was only what 18 months ago, 2 years ago that people were fretting about Chinese OEMs replay or Component guys replacing the U. S. Suppliers after the Huawei ban, which seemed ridiculous on its base and is clearly not the case now. Right.
So what I'm trying to I guess the question really is, is that the complexity we've already seen to our largest customers And is now being designed into some of the Chinese phones, require some of these more elaborate modules with all the system design, etcetera. That's also kind of porting into WiFi 6E and almost every wireless solution in the current standard at this point. Are you Seeing is the competitive dynamic changing much at all means you, Qorvo, less to much lesser extent, Avago, because they don't plan a lot of these things. Outside of that group, Are you seeing anybody else or is it the reverse content that they were providing, especially some of the quasi dispute phones is now accruing to you and the other leader?
Yes. Ed, it was even in the prepared remarks, we are seeing a consolidation. I mean, this stuff is It's great technology. It's wonderful. It's amazing for the consumer, but it's really, really hard.
And for those companies that have the ability to invest in scale And technology are going to win, and it's not for everybody. I mean, it's not for everybody. And it's we're not the only game in time. I think we've done a great job of advancing in that area and Developing the technology and we build our stuff in house, which has been strategically advantageous for us. But when you look at China, We provide the perfect recipe.
We can scale. We can provide content. We can provide coaching And flexibility in the architectures and bringing the market in a technology that is just incredible today. So all that comes together. And as you said, The smaller players right now, it's a difficult task.
It's a difficult task. The technology bar is really, really high in 5 gs. So it's not a slogan, right? It's not a techno. It's a really, really high bar to get there.
So I think fewer and fewer companies can do it. Those that can are going to be successful and we want to be part of that. Thank you.
Your next question comes from the line of Harrison Barrett from Herote Research. Your line is open.
Hi, guys. Thanks very much for taking my question.
Sure.
I just wanted to ask about millimeter wave. So what steps, Whether it's partnerships or investments, what steps have you taken towards millimeter wave capability? And from your perspective, how do you see the adoption curve changing over the next couple of years?
Yes. So great. Well, certainly, it has been launched It is available with certain carriers and certain phones. It is still a bit of a challenging technology Today, there's line of sight issues, there's power consumption issues and there's cost issues. So it is early innings 4 millimeter wave.
In time, over time, it's possible that that footprint could expand and millimeter wave become more pervasive in the smartphone. But I'll tell you the interesting thing though is the C band auction here opens up new spectrum that will allow immediate lanes Of transmission back and forth that just haven't been there today that could step up and provide another path for 5 gs. So I think millimeter wave will continue to move on, and it's a great application in certain environments, line of sight environments, Campus environments, large stadiums, things like that would be perfect, but it's a bit more difficult for a broad stream technology. It's quite possible that as we build out 5 gs and the advancements are made, you're going to see that layer cake low band, mid band and then millimeter wave at the top For certain applications. So I think all technologies there can play.
Millimeter wave right now is probably the lowest in terms of introduction And exposure, but I think there's opportunity for it to grow. And we're making investments in millimeter wave as well here at Skyworks to make sure that we're Close to the action and doing what we need to do to support our customers.
Great. And As a follow-up, how should we think about M and A at Skyworks over the next couple of years? Are you guys looking to bolster broad markets further at this stage?
Yes. No, great question. First of all, we love our organic outlook. We love our business. And the markets that we play in have Incredible.
They've been dynamic. They've been challenging, but they've been incredibly rewarding for us. And so what we do though is as we pursue And work with customers, ideas and M and A opportunities come about, right, naturally.
So we continue to have our eyes and ears open
in that front. The
Thanks again.
Your next question comes from the line of Tristan Gerra from Baird. Your line is open.
Hi, good afternoon. In the 3.5 gigahertz pad as we see More bands being added and some of that will come from the new C band opportunity. At which point Over the next few years, you think that module moves from soft heaters to bar heaters and How do you think you're positioned ahead of that transition?
Yes. So if you think about the transition here as we move forward, we have great technology in TC SAW, standard SAW And also ultra high band bulk acoustic wave. So we have the ability to play along that spectrum, that frequency spectrum And capture more and more opportunities. I think where you're going to see probably the most incremental growth on the Skyworks Front is that if you look at the bulk acoustic wave technology. And if you look back at our company a couple of years ago, we talked a little bit about, Bob, but we were honest and we said, look, we just We don't have to scale a couple of years ago.
Now we're shipping 100 of millions of units of bulk acoustic wave, and that technology is purpose built for mid- and high band spectrum. So that is being laid out. You're seeing it now in some of the teardowns or some of the phones that we're working with today That are on the shelves and you'll see further advancement in our bulk acoustic wave technology embedded in new phones as we go out to the next set Of devices in 2021, 2022.
Okay, great. And then as a quick follow-up, How would you characterize inventory level at in the smartphone supply chain, notably in China, As some of the OEMs you've mentioned are basically battling for market share, taking grabs from Huawei.
Yes. Inventories are still at a record low level, both internally at Skyworks, But also in the supply chain and in the distribution channel, keep in mind that there still has been somewhat of a demand Supply unbalance, although that is improving as we now move into the March quarter. But given all of that, the inventory in the channel is extremely low.
Great. Thank you.
And our final question comes from the line of Craig Ellis from B. Riley Securities. Your line is open.
Yes. Thanks for taking the question and congratulations on the tremendous revenue strength
and
getting Gross margins, yes, getting gross margins back up to 51% first time in the quarter is nice to see. Liam, the question I wanted to ask, I typically wouldn't ask it this early in the year, but it really seems to be vague given the strength of the business in the December quarter and in the March quarter. As we look ahead at the calendar year, I think we typically think that seasonally the business would be down a few percent in the calendar second quarter just given The pause between first half builds and second half builds, but you did mention earlier the doubling in 5 gs smartphone units and Ongoing content gains and you and Chris both touched on the secular dynamics in broad markets. And so the question is in part Just how are you thinking about the gives and takes as we look towards the middle of the year? And then given the strength we're seeing to start the year, Can we still expect to see the typical type of seasonality we would expect in the second half of the year?
Are we just starting So robustly that for whatever reason, linearity would be flatter?
Yes, yes. That's a great set of questions here, I think what we're seeing now is, again, great adoption right out of the gate with our 5 gs portfolio. We're Thrilled to see that early innings, so there's a lot to do. And then in parallel, these broad market opportunities are really scaling right now. We talked a lot about Wi Fi 6.
We've got Bluetooth, we've got GPS and we're in platforms that are just proliferate even with our largest customer that the amount of Revenue derived in non phone devices or non cellular devices is incredible, and that's a new area for us to see. So that's continuing to advance. And broad markets, again, 35% year over year, incredible numbers. And we're just really and that's a market that There's so much share that we haven't captured. It's compelling to continue to make those investments in people and in technology to grow that.
And then the mobile business will continue to do very, very well. If you look at where we see the market, we continue to see New content opportunities that we chase and invariably win. We've got a China position now that I think is going to inflect Higher as the content there on a relative basis is still lower than it is in other markets, so there's a great opportunity to move. And then the expansion of use cases, so it's Customers and use cases that we just haven't seen, some of that came through the pandemic, a difficult period of time, and some of that We're technologies that just emerge. You think about Zoom, you think about Peloton, store to door delivery to your house, touchless payments, all of this stuff is Not going to go away.
It's not going to go away, but it's also going to be powered by connectivity. It's going to be connected by the kind of things that we offer. Again, whether it's Wi Fi, whether it's 5 gs, whether it's Bluetooth, I mean, so there's a parallel market here that is building and creating Unique momentum. I'm incredibly excited about the 35% broad market number in a period of time that typically was all about mobile. So we're really demonstrating the ability to create diversification, but still in many cases use common technology cores That run through our factories.
That's really helpful. It's pretty amazing to think that by late this year, Those two businesses could be annualizing at $5,000,000,000 $1,500,000,000 each. So my follow-up really is for you and Chris on the share buyback. So Nice to see the $2,000,000,000 buyback. The question is this, with $700,000,000 remaining on the existing buyback, can you just give us some color On why now with the new authorization and what was it that dictated the $2,000,000,000 was the right amount versus say $1,000,000,000 or
$1,500,000,000 or $1,500,000,000
2.5 to 3. Yes, it's very simple. The time expired on the prior authorization. It's a $2,000,000,000 program for 2 years. So that previous plan was put in place in January 2019 and expired in January 2021.
And so we are putting in place a new $2,000,000,000 program covering the next 2 years.
Really helpful. Thanks so much, guys.
Thanks, Frank.
Ladies and gentlemen, that concludes today's question and answer session. I'll now turn the call back over to Mr. Griffin for any closing remarks.
Thank you all for participating on today's call. We look forward to talking to you at upcoming investor conferences during the quarter. Thank you.
Ladies and gentlemen, that does conclude today's conference call. We thank you for your participation.