Good day, and welcome to the Synaptics First Quarter Fiscal Year 2019 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jennifer Jarman. Ma'am, please go ahead.
Thank you, Chelsea. Good afternoon, and thank you for joining us today on Synaptics' Q1 fiscal 2019 conference call. With me on today's call are Rick Bergman, President and CEO and Wajid Ali, CFO. This call is also being broadcast live over the web and can be accessed from the Investor Relations section of the company's website at synaptics.com. A quick reminder that we have posted a supplemental slide presentation on our Investor Relations website.
The supplementary slides have also been furnished as an exhibit to our current report on Form 8 ks filed with the SEC earlier today and add additional color on our financial results. In addition to the company's GAAP results, management will also provide supplementary results on a non GAAP basis, which excludes share based compensation, acquisition related costs and certain other non cash or recurring or non recurring items. Please refer to the press release issued after market close today for a detailed reconciliation of GAAP and non GAAP results. Additionally, we would like to remind you that during the course of this conference call Synaptics will make forward looking statements. Forward looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business.
Although Synaptics believes our estimates and assumptions to be reasonable, they are subject to a number of risks and uncertainties beyond our control and may prove to be inaccurate. Synaptics cautions that actual results may differ materially from any future performance suggested in the company's forward looking statements. We refer you to the company's current and periodic reports filed with the SEC, including the Synaptics Form 10 ks for the fiscal year ended June 30, 2018, for important risk factors that could cause actual results to differ materially from those contained in any forward looking statement. Synaptics expressly disclaims any obligation to update this forward looking information. And with that, I'll now turn the call over to Rick Bergman.
Rick?
Thanks, Jennifer, and I'd like to welcome everyone to today's call. Synaptics kicked off fiscal 2019 with a strong quarter. During the last few earnings calls, we've been talking about our increased emphasis on earnings power as we prioritize the opportunities within our product portfolio, both in leveraging a more diversified platform, including consumer IoT, as well as a corporate wide focus on maximizing profitability. I'm pleased to say that we are exceeding across this strategy, which is evident in our strong operational results for the September quarter. We are at the top end of our guidance range for non GAAP EPS and achieved our goal of returning to year over year earnings growth, which increased 20%.
This was driven by continued strength in non GAAP gross margins, which were up 2 80 basis points year over year and reflect a 5th consecutive quarter of improvement. We expect this trend to continue in fiscal Q2 with at the midpoint seasonal sequential growth to drive projected non GAAP EPS up 26% over the year ago period. We are very excited about a number of areas in our diversified business, including strong take of our chip on film solutions, progress in automotive and growing penetration of our IoT products. The recent resumption of stock repurchase activity underscores our confidence in Synaptics' path moving forward. I will turn the call over to Wajid for a review of our financial results and guidance and then I will return with details on our recent progress.
Thanks, Rick. Synaptics posted solid first quarter results with revenue of $417,600,000 above the midpoint of our guidance range and up 7% sequentially. As reflected in the presentation materials released in advance of this call, revenue from mobile, IoT and PC products was approximately 63%, 21% and 16%, respectively. Revenue from mobile products was down 10% compared with the year ago quarter and up 19% sequentially. Revenue from IoT products was up 46% year over year and down 10% sequentially.
As we discussed last quarter, we have shifted a large portion of our investment dollars from in display fingerprint to consumer IoT to enable stronger growth of IoT over the midterm, which we believe will become more evident towards the end of our fiscal year. Revenue from PC products was up 5% year over year and down 3% sequentially. During the quarter, we had 2 customers above 10% of revenue at 11% 17% respectively. For the September quarter, our GAAP gross margin was 33.7%, which includes $17,000,000 of intangible asset amortization and $900,000 of share based compensation costs. GAAP operating expenses in the September quarter were $135,100,000 which includes share based compensation of $15,800,000 acquisition related costs of $3,600,000 consisting of intangibles amortization and transitory post acquisition compensation program costs, restructuring expenses of 8 point $3,000,000 transaction related costs of $1,200,000 consisting of legal and consulting fees and a credit of $1,700,000 net of legal costs for the final arbitration settlement of a matter associated with the prior acquisition.
In the September quarter, we had GAAP net income of $3,800,000 or $0.11 per diluted share. On a non GAAP basis, our September quarter non GAAP gross margin of 38% was at the high end of our guidance range and primarily reflects overall product mix as well as continued supply chain efficiencies. September quarter non GAAP operating expenses were $107,900,000 well within our guidance range. For the Q1, our non GAAP tax rate was 12%. Non GAAP net income for the September quarter was $44,600,000 or $1.24 per diluted share, a 27% year over year increase compared with $35,100,000 or 1 point
2018.
Turning to our balance sheet, we ended the quarter with $263,000,000 of cash, a decline of $38,000,000 from the preceding quarter, which reflects approximately $39,000,000 used to repurchase approximately 862,000 shares during the quarter. We expect to continue to be active on an opportunistic basis with regard to our stock repurchase program. Cash flow from operations was $4,600,000 for the quarter. Receivables at the end of September were $333,000,000 and DSOs were 72 days, reflecting a backend loaded quarter. Inventories were $161,000,000 and inventory turns were $6,400,000 all in line with the company's expectations.
Capital expenditures for the quarter were $6,800,000 and depreciation was $10,000,000 Now I will make a few comments regarding our quarterly outlook. We anticipate revenue for the December quarter to be in the range of $410,000,000 to 440,000,000 dollars We expect the revenue mix for mobile IoT and PC products to be approximately 65%, 20% and 15%, respectively. As you can see, we are executing well and are set to deliver a solid first half financial performance in fiscal 2019. As we look ahead into calendar 'nineteen, I would note like many of our peers and those who follow the industry, we are carefully monitoring the conditions. Regarding overall global consumer demand and the potential impact of trade issues.
I will now provide GAAP outlook data for our December quarter and will follow with non GAAP outlook data. We anticipate stock based compensation charge in the Q2 to be in the range of $17,700,000 to $18,300,000 In addition, December quarter GAAP expenses will include non cash charges of approximately $18,000,000 related to intangibles amortization, of which approximately $15,000,000 will be reflected in cost of sales. Further, as part of our mobile fingerprint restructuring, we anticipate an additional $1,400,000 of restructuring charges. I will now provide non GAAP outlook data for our December quarter. Taking into account our overall revenue mix, we expect non GAAP gross margin in the December quarter to be between 38% and 39%.
We expect non GAAP operating expenses in the December quarter to be in the range of $105,000,000 to 109,000,000 We anticipate our non GAAP long term tax rate for fiscal 2019 to be in the range of 11% to 13%. Non GAAP net income per diluted share for the December quarter is anticipated to be in the range of 1.25 dollars to $1.55 per share. With that, I'll now turn the call back over to Rick.
Thanks, Wajid. Let's jump to some specifics starting with our mobile division, where our investments in smartphone displays are really paying off. Our ClearView OLED display driver technology leveraging flexible chip on film packaging or COF has been widely adopted by several major smartphone OEMs including Huawei for its new Mate 20 Pro featuring WQHD resolution. The Mate 20 Pro is also the 1st smartphone to feature Synaptics' complete system solution, including our discrete COF, ClearView DDICs and our Clearpad Touch Controllers with millions of units of each already shipped. Synaptics continues to lead the industry toward bezel free and brilliantly immersive Infinity displays for both OLED and LCD smartphones with our innovative COF designs, highlighted by over 20 projects already in mass production, including the world's largest OEMs.
Our close partnership with key display manufacturers in China, Japan and Korea are arming global smartphone OEMs with state of the art touch and display technology across all resolutions, whether OLED or LCD panels. We have built a mature COF supply chain to address the rapid trend toward bezel free phones and our early innovations in touch view TDDI and discrete DDICs are enabling the market to flourish with vivid smartphone display showcasing our feature rich technology. Leveraging our strength in TDDI, we also announced an innovative new family of automotive TDDI products and are excited that several display manufacturers have started building panels using our solution for upcoming vehicle launches. Pioneered by Synaptics, our touchscreen automotive TDDI solutions integrate sophisticated touch and display technologies into a single chip, while enabling superior optical performance over conventional touchscreens. Our solution combines a lower BOM and a simplified supply chain with faster and easier integration for display manufacturers, Global Tier 1s and OEMs.
While we're on the topic of automotive, some of you may have seen recent front page coverage of Synaptics in USA Today, where journalists hands on demonstration of our new and exciting fingerprint sensor technology for cars. Cars featuring our fingerprint solution will begin shipping in the 2020 calendar year. Now let's turn to our consumer IoT business. We continue to heavily invest in IoT where we expect our multiple product lines to remain a significant growth engine over the next several years. These include our solutions leveraging our world class audio technology and video technology, whether it be our far field voice technology for digital assistance, our video capabilities for Android based set top boxes or SoC based offerings for high fidelity digital headset accessories in conjunction with new high end smartphones.
Our human interface for IoT requires low power, significant computation and dedicated neural network hardware. So we examined our options in great detail and determined that 22 nanometer is a sweet spot as it provides performance when you need it and low power when you don't. I'm pleased to announce tape out of our first solutions on 22 nanometer, which we are now leveraging for our voice and audio solutions for applications including smart speakers. These products are expected to sample at key customers in the coming weeks. Another exciting way we are leveraging our display technology is with VR.
We recently announced our new ClearView DDIC featuring industry first dual display 2 ks resolution combined with unique foveal transport support for next generation VR headsets. In addition, we launched our new VR Bridge solution, which provides high speed DisplayPort connectivity over tethered USB Type C cables required for a best in class head mounted display user experience. Combined, these solutions bring the necessary high performance visual support for next generation augmented, mixed and virtual reality headsets. On the customer front, we're pleased to announce that our high fidelity digital headset SoCs have been selected by Google for the innovative Pixel USB C earbuds, shipping soon with all new Pixel 3 smartphones. Google also selected Synaptics for its updated USB C to 3.5 millimeter adapter, also shipping with all new Pixel 3 phones.
Google selected Synaptics USB C SoC for its superior low power consumption and playback time, the industry's lowest latency and for its immersive high resolution audio. Synaptics is also recognized as a made for Google partner for its USB C solution and its fluid interoperability with Android products. We also announced our AudioSmart Alexa built in televisions from TCL Corporation. TCL's new TVs with integrated farfield voice provide their customers with a premium user experience and the ability to control the television with their voice through Amazon Alexa. Additionally, we announced 2 new AudioSmart farfield voice solutions for both emerging and legacy set top boxes.
For new set top boxes, Synaptics has fully integrated its far field voice capabilities directly into our latest video smart multimedia processors. And for the millions of existing set top boxes already deployed, users can simply connect via USB, a Synaptics enabled standalone accessory and instantly add a voice assistant to their television services. Furthermore, we have partnered with a few leaders in the development of a comprehensive turnkey platform designed to enable television service providers to quickly deploy cost effective and innovative pay TV services to address the rapidly expanding Android TV market. This turnkey partnership includes Synaptics' market leading multimedia processor SoCs running Eyewedia software and hardware from Tonle, a world class consumer electronics ODM. Industry analysts report that over 70% of operators worldwide are considering Android and there will be over 100,000,000 unit devices shipped by calendar year 2022 with Android TV.
Okay. Let's turn to our PC division where our strong touchpad business continues to command market share leadership and our PC fingerprint business is strong and growing due to our unique solutions and key partnerships. In today's era of heightened sensitivity for personal data privacy and the need to protect corporate data, our fingerprint solutions deliver state of the art security and encryption. Our fingerprint products, along with our ecosystem partners, allow us to deliver the safest computing platforms available on the market today. Our next generation matching sensor fingerprint product is already in mass production with PC peripherals and window based notebook PCs with our solutions expected to ship with the next refresh cycle.
Our leadership in display interface, audio codecs, touchpads and fingerprint security, along with key partnerships with leaders such as Microsoft, AMD, Intel and standards such as Fido continue to define the roadmaps of PC OEMs globally. In summary, we are seeing the growing benefits of a diversified product mix that is better aligning with our strategic priorities, reflecting the increased focus we have implemented as a company to drive stronger operational results. Our investments in clear industry leadership position in overall display with TDDI, COF and now OLED are paying off with deployment of our solutions across multiple Tier 1 customers. Consumer IoT continues to represent a highly attractive growth arena where we are making strong progress in the audio, voice and video areas, while bolstering our product roadmap through the continued enhancements of our solutions and differentiated underlying technologies. The PC market remains a healthy mainstay of our business.
And lastly, we are laying a solid foundation to prep the next wave of growth by building our product and engagement pipeline in adjacent profitable verticals, including automotive and ARVR. In closing, some of you have asked whether we plan to hold another Analyst Day this year. Instead, we will host an early cocktail reception the day before CES officially opens, adding slightly more content than in previous years to kick off the event. We'll then offer booth tours for covering analysts and investors in the 1st 2 days of the show as usual. We'll share official details in the coming weeks.
With that, we will now turn the call over to the operator to start the Q and A session. Operator?
Yes, sir. And our first question will come from John Bin with KeyBanc.
Hi, thanks for taking my question. If I look at kind of your midpoint of your segment guidance into the December quarter, it looks like you're up 5% on a sequential basis. I would have imagined with kind of the timing of your customer flagship launches and the ramp of your COF products that you would have seen greater seasonality into the December quarter versus historical. I was wondering if you could just comment on timing and maybe reconcile that with your seasonality for the mobile products division into the December quarter? Thank you.
Sure, John. A couple of factors that you have to account for when we look at these patterns. The first one is some of the OEMs, especially since we're actually in the displays and either get mounted on the displays or a chip on film that's part of the panel module manufacturing is we supply parts in advance of the ramp or the announced dates that our customers go out there. So we had a pretty kind of call it robust Q1 for mobile. And it continues into Q2 as you pointed out.
But if you're trying to kind of bridge to some of the announcements and ramps and so on, We have to ship ahead of the curve, so to speak. And then secondly, we didn't talk a lot about it, but we continue to have shortages on some of our TDDI products. Not only do we have to deal with that in Q1, but we're dealing with it in Q2 and then expect it to clear up more as we exit our fiscal Q3. And so those kind of things are balancing out the Q1 and Q2.
Got it. And then just Rick, just a follow-up on TDDI. Maybe can you talk about the progress that you made in the current quarter in terms of procuring additional TDDI wafers? And then how wide is the gap in terms of the supply demand gap? And then as you think about next year with additional competitors coming in and supply starting to ease, do you think you can still grow your TDDI business going into next year as well?
Yes, John. Last call, actually back in early August, we talked about roughly a $50,000,000 gap that we felt that we had. And unfortunately, in our Q1, at the time we talked to you, there wasn't much we can do. We kind of knew what we had coming. And to a certain degree, that's also true for now that our December quarter.
We'll fight for incremental yield and incremental wafers, but commitments have been made. And at this point, we don't expect that to change material. As we move into our fiscal Q3 though, we are seeing again some incremental improvement. And then we're also able to bring on either other sources or different process nodes that's going to be able to help us out in terms of supply. In terms of how we're going to fare and can the business grow across the calendar years for TDDI, I think absolutely.
Yes, it can. We have a very powerful lineup of products, both in full HD as well as we'll be having some other resolution and brand new products that we're introducing that provide incremental features that I don't really want to go into now. And of course, without a doubt, we're seen as the innovator for TDDI. And the other huge trend is chip on film, which is just in some ways beginning. And again, in terms of the technology and our position with the supply chain, as I mentioned in our remarks, we're very well positioned to seize on that industry trend that will really kick in and more in calendar 2019, where today it's kind of a couple of large customers by far the majority of those shipments.
Great. Thank you.
Thank you. And our next question comes from Charlie Anderson with Dougherty and Co.
Yes, thanks for taking my questions. If I just look at the guidance, it looks like on IoT, I'm seeing a decline year over year in the December quarter. So I'm just making sure I got my math right. If you could maybe address what's going on there? And then in terms of Connexion versus Marbella, you've seen any shift in that and maybe the influence on margins, just sort of reconciling the uptick in margins with the mix of business and the influence there?
Thanks.
Okay. I'll take a crack
at both of those and then maybe if I miss anything Wajid can chime in, especially on the margin question. On the IoT, yes, your math is correct. It will be down a bit from a year ago. We had a very strong kickoff of those 2 acquisitions a year ago, much of it centered around the voice enabled speaker products, where it's brand new in all markets of the world. We're seeing a bit of a, a slowdown in lower shipments this year, trying to understand if these customers are expanding into new geographies, but that's not quite offsetting some lower shipments that we're seeing.
But it is and of course there's broader issues in the consumer market that's well documented over the last few weeks. But still, we're not backing off that particular segment at all. We have a bevy of 22 nanometer IoT products. It was necessary for us to refresh that product line with some new competitive products. We should be in mass production with those 22 nanometer products by the end of the fiscal year.
And we're quite excited because in a lot of cases, we work very closely with the leaders in the industry to help us define those products and give the exact features that they want, leveraging our big lead that we have in voice and video. On the margin side, yes, you're pointing out it's not just a product mix issue of having more IoT content. Again, it's been a big focus within the company. We clearly could recognize what the leverage that it gives us by getting improved margins. So I just met with the leadership team right before this call and said, congratulated them doing a great job over the last few quarters, but our work wasn't done.
We want to do better. As you can tell from our guide in this quarter, we will do better in the current quarter and try to build from there. At the same time, I think we've been also trying to put a little caution in that, at the end of the day, we want to drive the best bottom line profits as well. So we don't want to be handcuffed by any particular gross margin goal over fiscal years or anything of that nature. But I think the team has done a fantastic job getting us where we are today from where we were just a few quarters ago.
Anything else, Wajid?
Yes. So just to drill down a little bit on IoT in terms of the margin question you asked, The mix is actually working favorably for us. So year over year, although revenues are down because of that one particular product segment within the group of products that we purchased, overall margins between the two acquisitions are actually up year over year, both in Q1 and in Q2 of this year. So it has worked favorably for us from a product mix standpoint. Great.
And then just a follow-up, if I may, related. So on the one area of weakness in the smart speakers, Rick, do you know if those had a is there a tariff component that's maybe impacting that? Or are there any market share losses you could address? Or is it just a saturation? Or any more color there would be helpful.
Thank you.
Sure. It's causality is always a challenge to understand. So I would say for the most part, it's consumer market weakness that we're seeing and whether that's directly attributable to tariffs or the other trade war type of things that are going on, it's really hard. I think smarter people can opine on that in terms of macro economic events. But clearly, we have seen a bit of a caution in there, especially in the China markets.
And I guess what I do want to clarify, we are the rest of our IoT product lines are actually doing quite well and we're quite pleased with those product lines. But that particular segment made a big chunk of our IoT business and it's the reality is it's just slower than a year ago.
Got it. Okay. Thanks so much.
All right. Thank you. And our next question will come from Kevin Cassidy with Stifel.
Hi, this is John Donnelly on for Kevin. Thanks for taking my question. For the
chip on film, do you
see that being adopted primarily by the high end of the market or allowing the low and mid tier phones to compete with the high end Infinity displays? And has that changed at all in the kind of the past year after you introduced it?
So I'd say it's definitely the latter. And yes, it has. I would say the momentum is built on chip on film, where initially it was envisioned in the high end phones like the for example, the Huawei phone that we cited in the press release in my remarks is a chip on film solution that's clearly a high end phone. It's OLED. There's another major manufacturer out there that recently launched a phone that for them is in high end, but for the rest of the market it's a higher price point.
But what we're seeing other phones rolling out, clearly, we're getting some OEMs committing to chip on film across the board because they want a certain look and feel for all of their phones. And as close as they can get to Infinity displays, they're going to get to do that. So it's a pretty good value proposition for the customers. And other the OEMs kind of have to work through designing their phones as appropriate and so on. That's why we have a big surge right now, really the bigger part of the marketplace will come in 2019 as it really cascades down into the mid range and even potentially even to the lower end of the market.
Great. Thank you. And then on the TDDI, with it being kind of an industry wide shortage, do you see customers moving to discrete solutions with a limited supply or are they delaying product launches and kind of pushing that revenue later?
No, it's not so much moving back to discrete. There's just been a tremendous shift beginning at beginning of this calendar year to TDI. So you might see that shift not happen as fast as some of the OEMs would want, which does translate into more discrete shipments at the end of the day. And so I don't think anybody's really delaying phones. They got to be in the marketplace.
So they may not move as quickly to TDDI as we would like, but of course we've got to be part of that solution by getting better supply.
Great. Thank you and congrats on the great results.
Thank you. Thanks.
All right. Our next question will come from Rajvindra Gill with Needham and Company.
Yes. Thanks for taking my question and congrats as well. I joined a little bit late, so apologize if this question was asked. On the guidance for IoT, it indicates that it's going to be down year over year. Just wondering kind of what the reasoning behind that?
Sure. Yes, it was asked earlier. So let's see if I can give the same answer. It was primarily in the smart speaker segment where we saw some weakness. We had really a booming year last year.
We had we were really struggling actually to catch up on a supply perspective a year ago to address tremendous market adoption of some of the solutions out there. And that's tempered a little bit. To a certain degree, is that part of the just overall a bit slower consumer market worldwide. That was kind of the reason I cited is one of the potential issues there. But that doesn't take away our excitement at all from our IoT business.
We have a bunch of new products coming and we're seeing some tremendous momentum in the design win phase that's setting us up for a pretty strong tail end of this fiscal year in terms of getting those solutions into the marketplace.
Okay, great. And again, apologize if this question was asked again. We have a couple of earnings going at the same time. But the OLED ramp, there clearly is an acceleration of OLED screens in China. We've seen that with a competitor in Korea that is seeing significant growth with respect to OLED.
Wanted to get a sense in terms of how much new OLED panel capacity is coming online coming online in calendar 2019 and how you're going to be positioned there as the other kind of major OLED D2DIC
supplier? Yes. It's a great question, Raji. Clearly, we feel good about our first half of our fiscal year. A lot of really good things have happened.
But if you ask me, is there any disappointments in our product line in terms of the results? Really the only thing I could point to is our OLED DDIC shipments weren't as high as we had hoped. Now there are some bright spots. Huawei phone that is in my prior remarks is a WQHD OLED screen manufactured by DOE. That's pushing the state of the art OLED technology.
And so it's great that they are able to get that in mass production and Huawei drives a tremendously high standard in terms of the quality of their phones and so on. So they've proven they can build it. Now they have to not build millions, they need to build tens of millions. And there's other OLED manufacturers right behind them. So I do think finally in calendar 2019, it will be kind of the year of the other OLED manufacturers coming online besides the Korean.
And we feel like we're very well positioned with those other manufacturers and we'll see a pretty substantial ramp throughout the calendar 2019.
And Wajid, on the gross margins, very good improvement on a quarter by quarter, year over year basis with respect to gross margins. How do we think about the margin profile going into fiscal year 2020? Obviously, a lot of it is dependent on mix and that's also that's going to be dependent on IoT. So fluctuations in IoT are going to affect the margin. But can you talk about that as well as other growth drivers of margins in fiscal year '20 going forward?
Sure. So let me start with 'nineteen a little bit and that will help to bridge to 'twenty. And so what's really happening with our margins and we talked about this last quarter as well is that we expected to see continued improvement within our margin model of 35% to 39%, and we were quite confident that we would be able to kind of stay above the midpoint of that range. And the reason for that was, as you pointed out, structurally, the IoT business was part of the mix. But also within mobile, as we move more of the mix away from mobile fingerprint and more into OLED, more into chip on film and we continue to get supply chain efficiencies within our TDDI product line, which allows us to have a little bit firmer pricing that has allowed us to kind of keep the margins at the higher end of the range.
In addition to that, within the PC business, our fingerprint products have been doing quite well and they've been growing sequentially and they're expected to continue to grow into the back half of our fiscal year as TDDI grows as well. So hopefully, we'll be able to keep our margin profile above the midpoint of our range within the back half of the fiscal year. Moving into fiscal 2020, Rick mentioned at the last call, our company wide target, it's actually a company goal, is to find a way to get up to 40%. A lot of it will be dependent on the growth in IoT along with supply chain efficiencies. So that goal has not gone away.
But we feel that at least the margin model range that we've got right now will at least continue to hold into fiscal 2020 and we'll try to work it from there.
And last question from me, Rick, just going back to IoT real quick. So the Smart Home is driving demand for voice processing. And last quarter you were ramping with a lot of Android set top boxes as well as far field voice communication for consumer electronics like Amazon, Google. And then you also mentioned that Samsung has selected your DSP for some far field requirements. I wanted to talk about the supply chain in the smart home market.
Is the inventory more in line now? And how we think about smart home over the next several quarters?
In terms of I guess, I'm not sure what you're getting at here, Raji. It's a steady business. It's a little more predictable than our mobile business. So actually being positioned with inventory and supply chain and so on is definitely within our wheelhouse.
Okay. Thank you.
All right. Thank you. And our next question comes from Vijay Rakesh with Mizuho.
Yes. Hi, guys. Good quarter and guide here. I'm just wondering on the chip on film, obviously, a pretty good ramp here with it looks like the iPhone and Huawei and others. As you look at next year, how do you see the chip on film?
How do you see that growth? If you can give us what percent of revenues it should be and if it's accretive to the margins as well? Thanks.
Sure. In terms of the ramp, as I said, in some ways, we have the as you mentioned, we have a couple of the top 3 manufacturers making a pretty substantial volume commitment to chip on film. And so it's a great start, but it's just a quarter or so of volume. And so you can imagine next year the growth rates are going to be pretty astounding as you see a broader commitment. And in one of the earlier questions, it moves more into the mainstream part of the marketplace as well.
And so we continue to work the capacity to make sure we can support all that demand for the company. In terms of margin profile, it's roughly the same as our other mobile products, TDDI type of products.
Got it. And on the IoT side, you mentioned a little bit of last year was pretty good. So this year might be a little bit of a pause. But obviously, I think it probably has a pretty good pipeline in terms of design wins as you look out to next year. Wondering if you can give us some color on how you see that design pipeline and how you see that any thoughts around growth on IoT as you look at next year?
Thanks.
Sure. So as I mentioned, we've made a tremendous commitment to investments. We talked about it as we shifted from like our fingerprint on mobile. We've got to shift to those R and D dollars over to IoT this fiscal year because of the longer term growth prospects that we see in the business. And we continue to be excited as it goes forward.
We had talked about a year over year range of 10%, 15% for the IoT business depending on whether we continue with the acquisitions and so on. And so on the acquisition side, we continue to look for the right type of assets that will complement our product portfolio. But it's a bit of a seller's market, so we're going to be prudent and look at where we can use our capital in the best ways for our shareholders going forward. But no less excitement about IoT. It will be our growth engine for Synaptics moving forward.
Anything to add, Will?
Thanks a lot.
Okay. Thank you. We do have a question from Brett Simpson with Rx Research.
Yes, thanks very much. Rick, I just wanted to get your perspective on the ordering environment right now with consumer. We've been hearing a lot about pull ins ahead of the import duty increases in the U. S. And I just wondered if you saw or if you've had any exposure to products that you're selling into to get assembled or manufactured in China then exported into the U.
S. And just wanted to get your perspective as to whether you think this pull ins and what that might mean for the March quarter as we come off that sort of seasonal stronger period for the consumer markets?
Yes, Brett, I have read about that. Likewise, our shared notes with some of my colleagues in the industry that are seeing that kind of effect. We're not really seeing it. A lot of business, of course, is with smartphones. It seems to not be impacted by that particular phenomenon.
We have one small product line where we've heard a little bit of that. The product line represents a couple percent of our revenue, so no real material impact. So as we look forward to our fiscal Q3, we're expecting more of the usual seasonality that we see across our business, kind of what you saw from Synaptics last year, the 8% to 10% type of decline from our Q2 to our Q3.
At this time, I would like to turn the call back over to management for closing remarks.
Okay. If we had a quick call today, I think that's because our very solid quarter and a very solid look forward as well kind of executing to the plan that we articulated at the beginning of our fiscal year. So thank you for everybody joining and I certainly hope to see everyone at CES. We'll have an exciting show and I look forward to seeing you. Thank you very