Good afternoon, and welcome to Skyworks Solutions Second Quarter Fiscal Year 2020 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, Sheryl. Good afternoon, everyone, and welcome to the Skyworks' 2nd fiscal quarter 2020 conference call. With me on the call today are Liam Griffin, our President and Chief Executive Officer and Chris Senesol, 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, for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward looking statements made today.
Additionally, the results and guidance we will discuss include non GAAP financial measures consistent with past practice. Please refer to our press release within the Investor Relations section of our company website for a complete reconciliation to GAAP. With that, I'll turn the call to Liam.
Thanks, Mitch, and welcome, everyone. Before we begin the overview of the business and our Q2 results, I wanted to provide an update on the COVID-nineteen outbreak impacting individuals, companies, governments and markets across the globe. Our thoughts are with the millions who have suffered the effects of this global pandemic. At Skyworks, we are deeply engaged with our own employees, a team of more than 9,000 deployed across the globe. Since the crisis began, we have taken early and aggressive actions to protect our people.
We've implemented multiple safety protocols, including social distancing, daily temperature testing and heightened sanitation standards. In addition, we initiated rotating shifts at our global manufacturing sites. The implementation of these protective measures has collectively allowed Skyworks to better safeguard employee health, while simultaneously supporting our business and manufacturing sites worldwide. Finally, an update on the temporary suspension of activity in our Mexicali facility. After working in close collaboration with state and local officials in Mexico, we were given permission to resume operations last week.
Assuming no further interruptions, we do not expect the temporary suspension to have a significant impact on our business going forward. Now looking at the Q2 in more detail. We reported revenue of $766,000,000 in line with our revised guidance. We produced gross margin of 50.2% and operating margin of 32.5%. We posted earnings per share of $1.34 and we generated strong operating cash flow, totaling $280,000,000 in the quarter.
Further, our design win momentum reflects our execution across a rapidly evolving business environment, one in which our wireless technologies are playing an essential and critical role. We are enabling markets from telemedicine to emergency response, remote work, online education, real time security, streaming entertainment and safe store to door food delivery. Our mission of connecting everyone and everything all the time has never been more relevant. During this time of social distancing and decreased travel, the technology Skyworks provides have become a primary means of connecting people all over the world. The rollout and adoption of 5 gs and other advanced wireless technologies such as Wi Fi 6 and enhanced GPS have become the pillars in support of the vast connected economy.
Skyworks is proud to play an integral role in making these vital technologies and essential connections a reality. During the March quarter, we expanded our engagement with leading customers, securing key design wins across numerous applications from the mobile phone to wireless infrastructure, IoT, automotive, machine to machine and medical applications. In mobile, we are leveraging our Sky5 platform across multiple flagship 5 gs launches, including Samsung, Oppo, Vivo, Xiaomi and other Tier 1 players and expanding our technology reach across our customized diversity receive platforms with new 5 gs centric solutions driving sharp gains and design win count. In IoT, we are supporting high performance 5 gs and Wi Fi enabled tablets, specifically developed for health, safety and telemedicine applications. Across mobile operators, we are powering 5 gs hotspots with Verizon and AT and T supporting the expanding work from home trend.
We're extending our market leadership in Wi Fi 6 with home and enterprise gateways at Cisco. We're enabling home security applications at Honeywell and ramping remote patient monitoring systems with GE. We're also launching asset tracking and fleet management solutions with Juniper and Blackberry. Moving to the infrastructure space, we're supporting 5 gs massive MIMO and small cell base station deployments across the U. S, Europe and Japan.
And in automotive, we're accelerating connectivity content with leading brands including Volkswagen, Renault, Hyundai and Nissan. These highlights demonstrate our technology leadership, underpinned by a diverse and growing set of critical product categories, resolving increasingly complex architectures and preparing our customers for the performance gains demanded in 5 gs. In these unprecedented times, our existing technologies and connectivity protocols are processing extraordinarily high data traffic. This explosion in data consumption is taxing networks with real time video, high speed processing, streaming content and a long list of critical services, all dependent upon seamless, reliable and ubiquitous connectivity. To illustrate how the pressure on the network capacity is intensifying, Just over the last few months, we've seen visits to Amazon website rise more than 30% year over year, Zoom video conferencing passing a milestone of 300,000,000 daily participants.
Microsoft Teams platform logging a single day record of 2,700,000,000 minutes. And now with 5 gs just beginning to launch, the average user today is still working with legacy technologies, showing system weakness in this high data demand environment. Clearly, more than ever, always on connectivity is paramount. Skyworks and our partners in the mobile and wireless ecosystems are anticipating and accelerating the development and delivery of much needed cutting edge technologies, led by 5 gs, Wi Fi 6, enhanced GPS and other networking protocols. As Skyworks and the world navigate this challenging environment, our focus will continue to ensure streamlined high speed connectivity, delivering a path for reliable, constant and safe communication, reaching all of our customers and their varied applications.
With that, I will turn the call over to Chris for a discussion of Q2 and our outlook for Q3.
Thanks, Liam. Skyworks revenue for the 2nd fiscal quarter of 2020 was 766,000,000 dollars in line with the March 4 updated outlook, where we reduced our revenue guidance for the COVID-nineteen impact by approximately 45,000,000 At $766,000,000 revenue is down 5% year over year. However, excluding Huawei related revenue in both Q2 fiscal 2019 and fiscal 2020, revenue is up 4% year over year despite the negative impact from COVID-nineteen. Gross profit in the Q2 was $384,000,000 resulting in a gross margin of 50.2%. Operating expenses were $135,000,000 flat year over year as we continue to prudently manage OpEx, while making the necessary investments to accelerate future growth of the business.
We generated $249,000,000 of operating income, translating into an operating margin of 32.5 percent. Other income was 4,500,000 dollars and our effective tax rate was 9.4 percent, driving net income of $230,000,000 or 1 point share. Turning to the balance sheet and cash flow. 2nd fiscal quarter cash flow from operations was $280,000,000 dollars and capital expenditures were $60,000,000 resulting in $220,000,000 of free cash flow on 7 $6,000,000 of revenue, translating into a strong free cash flow margin of 29%. We paid $75,000,000 in dividends and repurchased 3,200,000 shares of our common stock for a total of $284,000,000 During the last 12 months, we have returned 92% of the free cash flow back to the shareholders through a combination of dividends and share buybacks.
We ended the 2nd fiscal quarter with cash and investments of $1,100,000,000 and we have no debt. Now let's move on to our outlook for Q3 of fiscal 2020. Given the supply chain and demand disruptions associated with COVID-nineteen, visibility is limited for the June quarter, resulting in a wider revenue range compared to prior quarters. For the 3rd fiscal quarter of 2020, we anticipate revenue to be between $670,000,000 $710,000,000 We expect gross margin to be approximately 50% and operating expenses flat with Q2 at approximately 135,500,000 dollars Below the line, we anticipate roughly $2,500,000 in other income and a tax rate of 9.5%. We expect our diluted share count to further reduce to approximately 170,000,000 shares.
Accordingly, at the midpoint of the revenue range, we intend to deliver diluted earnings per share of $1.13 Lastly, I would like to highlight that the company declared a cash dividend of $0.44 per share for Q3, and we intend to continue with our share repurchase program. With that, I'll turn the call back over to Liam.
Despite the macro headwinds, Skyworks remains uniquely positioned as a market leader in the most important sectors in technology, capitalizing on our strengths in 5 gs and other advanced wireless protocols. We have made the critical investments in human capital, intellectual property and manufacturing scale to usher in a new era of ubiquitous connectivity. Our relentless focus on solving our customers' most challenging problems positions our partners to win by resolving complexity and advancing user experience. Skyworks' customer first philosophy drives our product roadmaps, where we leverage unique customized system based solutions, purpose built to offer interoperability, unprecedented levels of performance. Powered by the strength of our balance sheet and our cash generation capabilities, we are funding the investments that drive sustainable growth.
Differentiating Skyworks is both the leading technology innovator and a strong provider of consistent cash returns to our shareholders. That concludes our prepared remarks. Operator, let's open the lines for questions. Cheryl?
Vivek, your line is open.
Sorry, I didn't realize. Thanks. Thank you for taking my question. I actually had 2, 1 on the June quarter and then 2nd on the calendar second half expectations. So Liam, on the June quarter, I was hoping you could give us some more color.
I know it's a little early, visibility is limited. But how have bookings played out so far? If you could give us some color by geography and mobile versus broad markets? And there are some glimmers that China might be recovering. Have you seen that in your business?
Just some more color around what you have seen so far in your June quarter?
Sure, Vivek. Absolutely. Well, we have seen coming through the March period and then moving into April, we are starting to see some improvement in the demand profile. So obviously, we weathered some very bumpy seas here in the early part of the year, the whole industry. But our ability to continue to drive design wins and some of the design wins that we consummated earlier at the end of 2019 started to pick up a bit.
So we were seeing a pretty rough period here coming through the end of March, things have gotten improved, I would say, quite a bit as we've gotten into the 1st month of our June quarter. And we do expect, again, there's some visibility issues out there, but we feel very confident about the range we put out on the June quarter and we feel very good about the bottom end of that range and we certainly feel like there's a potential for us to go much higher.
Got it. And then Liam on the second half, how are you thinking about the seasonal ramps? Because what we have heard from some of your peers in the mobile supply chain is that overall phone volumes are lower, but the 5 gs unit expectations are kind of hanging in there around the $170,000,000 to $200,000,000 unit number for this calendar year. Is that consistent with what you're hearing? Just in general, how should we think about your seasonal ramp going into September, right, which tends to be your strongest sequential growth quarter?
Thank you.
Yes, great question. So a couple of things. We have high conviction and are really happy with the design win position we have going into the second half of the year. It is really about timing, Vivek. It really is.
We think the appetite from the consumer is very, very high. There were supply chain issues earlier in the year for everybody. And I think once those supply chain issues resolve and they are resolving, the consumer then has an opportunity to capture that demand with high end products. So we have very good position with the leading players both in the U. S.
And abroad. And we do believe that the second half calendar year and Q4 for us are going
to be much stronger than
what you see in Q3.
Okay. Thank you.
Your next question comes from Ambrish Srivastava of BMO. Please go ahead. Your line is open.
Hi. Thank you very much. Chris and Liam, I just wanted to get a better sense for your operating plan. How are you modifying it in light of what we're seeing in COVID? And specifically, how should we be thinking about OpEx beyond the quarter, CapEx as well as cap allocation?
Are you going to continue with your share buyback? So just wanted more color on those. And I had a follow-up.
Yes, Mauricio. We are not changing our operating plan. And of course, we're going to continue to drive the top line growth. And as Liam just pointed out, we see a lot of strength especially in or we expect a lot of strength especially in the second half of the calendar year. We are holding our margins above 50%.
And as the business starts growing, we will see back improvements from a gross margin point of view. From an OpEx point of view, as you know, we are running a very lean ship. We will continue to do so. We will continue to manage that. There is some discretionary spending reductions that we are putting in place.
But at the same time, we will continue to make the necessary investments in R and D and sales and marketing to support our customers and to support the growth in the second half there as well. From a capital allocation, very similar. We will continue with our CapEx plan. We will continue to manage that. So where we can see and possibly make some reductions, we will not hesitate to do that.
But keep in mind that most of the CapEx is driven by technology, new technology in filter, with bar filter, very complex assembly and test new technologies. And we will make those investments to support 5 gs ramps and so on. And then last but not least, as we indicated, we will return most of our cash or free cash flow back to the shareholder, combination of our dividend program as well as continue to execute on our share buyback program.
Okay, sounds good. It sounds like you're very confident about these things that you can control in light of what we are seeing. I had a very quick follow-up on the inventory days. Days went up a lot. We were expecting March in absolute dollars to go up.
Is there a risk of subsidence here on the inventories side?
No. So from an inventory point of view, we are running slightly higher than normal. We actually increased inventory in the March quarter with $44,000,000 and days of inventory is now at 155 days, which is slightly higher than normal, but it is by design, right? We have increased our buffer stocks. We have increased even finished goods inventory.
We kept the loading in our factories. Again, it's all in support of this of the ramp in the second half, and we want to make sure we continue to deliver on time to our customer. It actually came in pretty handy. As you know, we had a temporary suspension in our Mexicali factory. We were able to continue to deliver products to our customers.
Luckily, that situation now has been resolved. While we are building this inventory, there is very few or little risk from an E and O point of view. And despite all of that, we continue to deliver a very strong free cash flow.
Your next question comes from Chris Caso of Raymond James. Please go ahead. Your line is open.
Yes, thank you. For first question, can you break down the revenue from the various segments? And specifically with the broad market business, if you could talk about the near term trends that you're seeing in that business as you go into June?
Yes, Chris. So in the March quarter, mobile was approximately 70% of total revenue, which was down mid teens on a sequential basis, which is somewhat in line with normal seasonality, and it was flat on a year over year basis. Of course, that includes the reduction in Huawei because if I exclude Huawei in Q2 of fiscal 2019 and Q2 of fiscal 2020, the mobile revenue was actually up 9%, almost 10% on a year over year basis, driven by content gains as well as the early 5 gs ramp with our Chinese customers. So our broad markets business was approximately 30% of total revenue in the March quarter. It was down mid single digits sequentially, but we do expect it to be up sequentially in the June quarter, in part driven by the work from home, learn from home trends that results in strength in PC, tablets, wearables, Wi Fi hotspots, the adoption of Wi Fi 6 and other wireless protocols.
Okay, great. Thank you. As a follow-up, perhaps you can give us a little more color on the China business. And in particular, I think it's helpful to separate perhaps some of the production issues some of your customers may have had in the March quarter when some of their facilities shut. And obviously, it would have gotten better from there.
But perhaps what you could to the extent you have visibility in what's happening within demand and how those customers are selling through phones as they get to at least some degree of what's going to be the new normal, particularly within China?
Sure, Chris. Yes. And what we're seeing is that the Chinese accounts actually recovering faster than some of the other players in the U. S. I think they were the first to be hit by the virus and they're the first to come out of it.
So we are benefiting from some of the key brands Oppo, Vivo, Xiaomi, even some new growth now coming up with 5 gs with Samsung. And that portfolio right now is actually it's not quite where it was a year ago, but it's starting to move. The 5 gs penetration is strong and the velocity is picking up. So I think the unit growth is starting to pick up, but the content within the units is really important to us. So we're seeing very meaningful content improvement in 5 gs in China.
And again, we've talked about it before, but you have to have that backward compatibility for 3 gs, 4 gs, Zen 5 gs. So there's a really nice incremental move for us. There's also a great deal of complexity for the customer and our job is to resolve that and lever the integrated solutions like Sky5 to make it really easy for the client. So we are starting to see that and the Chinese brands today are really starting to move. There's still a lot of upside there from our base today, but they are starting to show some real good progress.
Thank you.
Your next question comes from Craig Hettenbach of Morgan Stanley. Please go ahead. Your line is open.
Great. Thank you. Just following up on the broad markets business, any additional context you have in terms of supply versus demand? Certainly, there's been some demand impacts here, but also customers kind of looking to secure supplies. So just curious to how you're seeing that play out in your broad market business?
Sure, Craig. You're right. I mean, there was definitely a period of time and it's still being resolved with some imbalances in supply and demand. There's been quite a bit of demand in broad markets for technologies like right? It's under right?
It's under our watch and our own factory. So we've been able to be more active, more agile in executing to those demands. And a lot of those demands, as Chris mentioned, were driven by new applications, work from home, again, all of the services that are starting to create the opportunity, right, we're seeing today, whether it's stay for home, entertainment, whatever it may be, the technologies that we make, not just 5 gs, but the Wi Fi and GPS are really moving fast. So we're getting to a point where the supply and demand intersection is closing. But we do see a meaningful change in user appetite for the technologies, right?
I think you're going to see more and more folks now truly adopt telemedicine or truly adopt video conferencing, some of these things that were kind of nascent and really hadn't been played out. So we're looking forward to that. And the Wi Fi 6 technologies, as I said, are probably the leader in broad market. But we're also generating new wins with very, very important customers globally that 3 or 4 years ago really weren't on our list, names like GE, names like Honeywell, Raytheon, to continue to really broaden that reach in that side of the market.
Got it. And then just Liam, just for a follow-up for the flagship phones in the back half of year, can you talk about just kind of year to year how you're feeling about kind of the content?
Sure, sure. Well, as I said, we've got some pretty important players launching 5 gs. And the 5 gs story is all about incremental content, also incremental complexity. And I think it will be revealed that our solutions fared very, very well and our content opportunity was meaningful and we executed on that. So some of that stuff hasn't hit the market yet, but we know we're winning and where we're headed and it's a positive move.
We'll start to see that into Q4 and into our fiscal Q1, which would be the December quarter. So Q4, September through December, you're going to see a lot of that traction launch.
Your next question comes from Blayne Curtis of Barclays. Please go ahead. Your line is open.
Hey, thanks for taking my question.
Liam, just curious, you went through your own factory shutdown, but the handset OEMs went through that issue in Q1. You had enough quarter. It's hard to disseminate because you're obviously, I think, coming off a very low level and maybe gaining some share. But I'm just kind curious your perspective on an Android market. Was there any inventory that was built in Q1?
And does that rectify itself in Q2 with this guidance?
Yes. I think it feels like we're normalizing right now, Blaine, and starting to get to a point where there's real acceleration in supply chain. As you noted, throughout this period, getting from February to now, there's been a tremendous amount of supply chain breakdowns everywhere. We're fortunate that we have our own facilities and we can manage our house pretty well, but it's very challenging for the overall industry with some locations and some factories just not being able to get employees, right, for obvious reasons, for health reasons. But I feel like that's starting to abate now and we're seeing more improvement.
If you look at the Android cycle, we have really good print position with MediaTek as an example and they've been a real strong feeder for Asia and other emerging markets. Also we're seeing some really good things as I mentioned with the Oppo, Vivo, Xiaomi names as we go forward. And the supply chains today again are getting cleaned up pretty quickly specifically in China and other Asian markets. So we feel like that could pick up. And it's another thing that the overall theme here is that we've got a great technology in 5 gs globally, the industry.
And the consumer has not had a chance to get there, right? We had supply chain issues. We had some shocks, supply chain shocks in some cases where the technology wasn't there. We have people staying at home. They're not going to the stores.
This is all going to abate and the demand and the consumption for the technology is going to be there. And I think wireless in this period of time that we've all been dealing with here stay at home period, we recognize that the wireless devices that we have really are the bread and butter of our communication, our ability to work, our ability to communicate with family. It's really important. And I think the appetite for the technology is going to only increase. And the opportunity for companies like Skyworks, we're happy to play a role in advancing those technologies into the future.
Thanks. And I just want
to ask you on your BAW efforts and Qualcomm has been very vocal about their confidence in their SAW technology. You saw this Broadcom asset, I guess, hopefully not get sold. Can you point out anything that in terms of what you're shipping today for BAW? And then as you look out in the back half of next year, in terms of shipping into mid high band module, module? Where do you see that for Skyworks down the road?
Sure. The story is getting better and better, Blaine, with respect to BOSS. So we have some meaningful design wins that have been shipping, but the quantity of the device count now is going way up. So we're broadening the set of customers. And then some of the very strategic customers, the volumes and units there are picking up.
So, we actually I'm going to give you a highlight real stat here. We crossed 100,000,000 units of BAW enabled devices about 2 weeks ago since we launched the BAW technology. So we're really pleased at the launch. It's taken a little time, but we're accelerating. We have opportunities across the board with new customers.
We have design wins with strategic customers today and we're going to continue to advance that technology. And all that stuff is being done in house with our engineering teams, our fabs, our IP and just driving a technology solution that customers really want.
Your next question comes from Edward Snyder of Charter Equity Research. Please go ahead. Your line is open.
Thank you very much. Liam, you mentioned the sharp gain in DRx modules content or design wins based on 5 gs content. Is any of that due to finally getting a transmit function in the DRX modules to support MIMO or CA or diversity? Or is it still all on the receive side? And are you in production on a BAW duplexer yet?
Yes, I mean, it's a great question. So the DRX category, as you know, has really been an incredible performer in mobile device, capitalizing on downlink. And there's so many variants, Ed, for us. We have a really wide portfolio in that technology and we are starting to see greater usage across the board. There's so many different versions whether it's a DRX, DSM, ultra high band, mid band, you can go across the board and we're able to play in each one of those categories.
And it's a technology that requires very strong, very powerful filtering, the ability to work collectively with potentially LNAs and other technologies and then integrate in a way that works for the customer. So we're doing really well there. And if we do want to continue on the BAW side to advance the technology into higher and higher bands and capture more and more of that pie. And I think we have some important customers and accounts that work with us that collaboratively we're trying to get to that solution together. But along the way, the DRX solutions are gaining a lot of share, a lot of traction.
They're extremely valuable to the customer. It's a high end solution at very fair pricing and allows the customer to get a great end solution. So it's that technology continues to move. The bulk acoustic wave technologies again continue to move up. We've demonstrated some volume now.
But we still have a lot of room to move from here. I mean, but by no means have we captured all the business. There's a lot out there for us to go after.
And then on ultra high band, if I could, the sub 6 bands in China requiring both 77, 79 and Tmohot to use Sprint's band 41 for 5 gs. I mean, we're seeing up to 5 new transmit receive chains being added to some of the high end phones. How many of your customers are putting more of a premium on size? So say favoring your dual band solution versus flexibility on selecting individual bands that was more of the kind of approach that China's take. I'm trying to get a feel for, 1, what solution is being favored?
And 2, are you seeing a lot of people opting for the kind of the full end, high end solutions that would require more integration? Thanks.
Yes. No, it's a great question. So you're right. I mean N77, N79 really important right now in
the 5 gs landscape.
And you're also you hit another point that I didn't make. The integration is so vital. We don't the integration for us isn't just kind of a cool thing to package. It is really about densifying the product. And Chris mentioned some of our capital investments are really around packaging advancements.
We of course are developing filters and trying to raise the bar on frequency with our filtering technology, but you also have to have incredible technology on the packaging side to create that miniaturization. And with more and more technology squeezed in, you've got 3 gs, 4 gs and 5 gs incremental, you've got transmit, you've got receive, it's very, very complex architecturally. So those technologies that we have are critical. And customers do want to integrate it. I mean there's an appetite in some cases for discretes, but that's really moving in the rearview mirror.
And the new technology specifically in 5 gs are going to be around densification, packaging and then bringing all those elements to the customer in an easy, easy form factor.
Your next question comes from Toshiya Hari of Goldman Sachs.
My first one was on your exposure in China. Chris, I think last quarter you guys were kind enough to size your business with the non Huawei, the OBX camp at around 100,000,000 dollars in the December quarter. I'm curious how big those guys were in the March quarter and what the outlook was into June. And related to that, we're getting quite a few headlines related to the U. S.-China trade relationship.
Any of this kind of potentially impact you guys down the line? Then I have a quick follow-up.
Yes. Our China business remains on or about 20% of total revenue, And we definitely see strength with Oppo Vivo Xiaomi as they ramp their 5 gs phones with strong Skyworks content in it. Unfortunately, the business with Huawei remains at a much lower level than it was historically, although we are able to continue to ship under the ban, which is still effective right now.
Got it. And then a quick follow-up on gross margins. I was positively surprised to see gross margins in the quarter essentially come in line with guidance despite lower revenue. And I guess similarly into June, you're guiding to essentially flat gross margins with a reduced revenue outlook. So I guess, I was curious, what were some of the offsets in the March quarter?
Chris, you spoke to maintaining factory loading, so maybe that's the explanation. But were there any positives that sort of materialized in March? And what are some of the potential offsets into June? Thank you.
Yes. No, I mean, we continue to work really hard to improve gross margins. And as I talked about that before, one of the most important things is, of course, is advancing the technology, higher complexity, more value add, new products, especially with 5 gs, Wi Fi 6 that we bring to market. And typically, those higher complex type of products demand a higher gross margin. And so as we bring those new products to market, you will see a boost from that.
Unfortunately, yes, there is some disruption in the supply chain and some inefficiencies as a result of COVID-nineteen. And so that's why we're not at 53% gross margin today. But we hope that once all those disruption gets out of the supply chain and we start ramping the business, we will see some nice further improvements on the gross margins.
Your next question comes from Craig Ellis of B. Riley FBR. Please go ahead. Your line is open.
Yes. Thanks for taking the question and congrats on the financial performance and Liam on the internal BAW that's a big one for the company given your support there. Yes, you're welcome. What I wanted to do with the first question is just to make sure I'm looking at what you're seeing with integrated mobile correctly over the, say, the 12 to 18 month time period. So we have been shipping Sky5.
We continue to do that and it sounds like broaden our OEM base in the quarter. And so that sets up well for the back half. You've got 5 gs diversity received. And I wasn't clear if you were saying that was going to ship in volume in the second half or really for next year. But in the second half, our 5 gs unit should at least double half on half for industry just given the projections that are out there from some of the big guys.
And then next year, hopefully, we don't have a situation where we lose 10% of our sales days due to a virus crisis. So help me, 1, understand if the timing for some of the new products is somewhat as I outlined in terms of their impact on financials? And what does that mean for next year's growth? Are we solidly back in double digit growth next year for integrated mobile?
Yes, great questions and lots of ways to think about it. So I'll tell you what we see now, Craig, and how it plays out into the future. We really are feeling good about the design consummation that we've made here. And those products a lot of those products have not yet shipped. And you hit a couple of key points.
Sky5, great traction, a lot of room, diversity received, we're delivering that in low band, mid band and high band on the receive side with some great technologies, all of that new. Then we start to get into the broad markets. We're seeing more and more, I mean, Chris touched on some of it, but we're seeing a real nice run up in some of the Wi Fi Technologies, Wi Fi 6. Those are not low end products. Those are very, very high performing data drivers.
And in this work in home environment and some of the new applications that have been stimulated through this are not going to go away. The appetite is there. So when you get to the macro view of how do the numbers come together, it's really about timing. The magnitude of the dollars will be up. We know that and we know we believe that with great conviction.
We're coming off of a low point as well. I mean, this is our pivot Q3 is our pivot quarter. This is our pivot quarter. We're going to be up into the right from here. And it's just about the rate of change, the rate of revenue and the timing.
Right? I mean the world really doesn't care about 90 day quarters. It's just about the actual growth and consummation of the demand. So we feel really good about it. And there's reason for it.
The products are better. The 5 gs technologies are much faster. They're more reliable, better latency. You can move it into IoT. There's just a lot to do.
And unfortunately, this COVID-nineteen thing showed up. No one expected it and it put the brakes on the business. And now we're starting to recover, but we still feel really good about the outcome and where we're headed. Our factories are positioned well. We're in extremely close communication with every one of our customers working hand in hand to consummate and intersects their supply, our demand, their demand, our supply working it together.
So it's a great opportunity for companies like Skyworks, The Shine. We have our own facilities. We develop at a chip level then integrate at a systems level. We can create flexibility for whatever market the customers want to roam in, what their size constraints may be, what their current consumption may be and weave that all together for a solution. But we feel really good about the macro theme here.
It's been delayed unfortunately, but we see that starting to come back by the end of this quarter and certainly into our Q4 in the second half calendar.
That's helpful. And then the follow-up is just on broad markets and one of the comments from your recent remarks and earlier. As you went through some of the applications for which broad markets is seeing good demand and has some runway, whether it be auto or others, one of the things I don't think I've heard previously, but was on today's call was telemedicine. And so the question is, in the world that we're now in, beyond telemedicine, are there other application areas that are coming into the broad markets portfolio as new incremental, Sam, for you? And if so, what would they be?
Thanks, Liam.
Yes. I think the video conferencing dynamic is incredible. I'm sure everybody that's on this call has been using that recently. And even the best technology out there today is still not good enough in my opinion. And I think the appetite for that is really going to create some interesting dynamics for us.
I think that's one really important one. I think service community is going to be a big deal right now. I mean people are you're seeing how the world has evolved. We talked about some stats about whether it's Microsoft Teams or Zoom or stay at home, food delivery. These are things that I don't think they're going to go away.
Even when the COVID-nineteen pandemic is done, I think there's going to be some lasting behavior. And some of that's very good behavior for our business where the consumer is going to rely more and more on wireless technologies and remote technologies to live their life. And whether it's education, whether it's healthcare, whether it's entertainment, all of those services are provided and can be provided through wireless technologies that we bring to market.
Your next question is from Bill Peterson of JPMorgan. Please go ahead. Your line is open.
Yes. Hi, good afternoon. Thanks for taking the questions. I guess the first question as it relates to COVID-nineteen impacts, in this case, on the supply chain. It's good to see, obviously, Mexicali coming back, but there's obviously a lot of talk that there could be multiple phases of this virus.
I'm wondering, I guess, what percentage is coming from Mexicality? What are the opportunities or have you considered outsourcing and what are the contingency plans? And I guess how conceivable is it if you did need to bring up a secondary or a third party to manufacture some of your products?
Yes. So Bill, so approximately 70%, 75% of the revenue is being generated out of the back end facility in Mexicali. Now before this whole COVID-nineteen pandemic started, we were already building a more diverse supply chain. And so we have already started to shift part of our supply chain with 3rd party assembly and test houses out there, mostly in Asia. And so that's obviously a trend that we will continue to do so.
Okay. Thanks for that. And I know you guys constantly talk about crafting solutions, working side by side with customers. I guess with a lot of the lockdowns in place globally, how does that impact your design activities? I mean, I presume obviously your second half design wins are well locked and loaded.
But as we think about next year, how are you working with your customers to craft these solutions?
Yes. I mean, we are doing that, but it's not it's been far less off face to face, hand to hand kind of communication, right? So we're not shoulder to shoulder the way we used to be, and we will be again. But in the meantime, we've got really clever engineers with customers that are very smart and we're using the technologies we talked about. We're doing video conferencing, Microsoft Teams, a lot of conference calls, a lot of sharing of PowerPoint and openness as we go through this.
So it is a different dynamic. I think most of us prefer the in person contact, but it's one of the things that may change, right? I think the world may change as a result. There could be more and more distance based communication. And again, that's more of a wireless play.
But in the meantime, we're staying extremely close with our customers. We're taking care of our people. We're being good citizens in that regard, and we're hoping that we can all get through this together and look forward to better days.
Your last question comes from Harsh Kumar of Piper Sandler. Please go ahead. Your line is open.
Yes. Hey, guys. Thanks for squeezing me in. So Liam or Chris, question for you. In the last 6 months, revenues are down roughly, call it, dollars 200,000,000 but your margins are within a band of basically 20, 30 basis points.
So the question is how I mean, what have you guys done here to basically keep your margins up despite the fact that your utilization I assume is down quite a bit, despite the fact that you might have built a little bit of inventory? I'm just curious.
No, Hart. I mean, this is, as I indicated before, a lot of hard work from the team. And there's multiple elements that come into play, right? There is more complex, higher value add products that we bring to the market. That's very important.
We continue to execute well. Secondly, of course, it's driving down the cost in our factories and our third party suppliers, building a very efficient operations. And then, of course, we do have a little bit of a tailwind from a mix point of view as broad markets is growing and has some higher margins compared to the mobile business. As you know, our target model is 53%. If it wasn't for the headwinds that you just indicated, we would have been there already.
But unfortunately, we have to deal with those headwinds and we're dealing with it. And so as I indicated before, in the second half twenty twenty and beyond, when those headwinds become tailwinds, we will see some nice further gross margin improvements.
It's pretty impressive, guys. I just wanted to ask if there was anything going on. And then secondly, we've heard a lot you guys have called out China, particularly the new 5 gs phones, Oppo, Vivo, etcetera, in the last few calls. And I was curious if you guys are actually you think you're actually gaining a lot of share? Or is it just a situation where China as a country is going to 5 gs and you're just getting your fair share there?
No. The way we see it and we have really good intel on this is that we are gaining a lot of share and part of it is the ability to do that integration and make it easy for the customer. So there's a great deal of interest and appetite and demand in China for a 5 gs product. And what we're doing is we're bringing in a highly complex configured customer by customer Sky5 platform, so that those customers don't have to deal with all the complexity and burden of laying out 40, 50 different discrete devices to create a 5 gs engine. We're going to do it for them.
And so that's been really the play for us and it's worked out great. It gives our customers a faster time to market. It lowers their need for engineering burden. We can do that for you. And then we bring it to the market uniquely and differentiate it.
Ladies and gentlemen, that concludes today's question and answer session. I will 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 with you at upcoming events this quarter. Thank you.
Ladies and gentlemen, that does conclude today's conference call. We thank you for your participation.