Edward Snyder

Edward Snyder expressed confusion regarding content gains being offset by mix at the largest customer, given expectations for a tailwind, and asked for clarification on why mix would offset gains. He also asked about the utilization improvement for the Osaka filter factory in the second half of the year.

Answer

CEO Philip Brace explained that it's difficult to comment on specific models and launch timings, and the content varies between models, making it hard to predict sales. Therefore, the projection for blended content to be flat is the best current estimate. Regarding factory utilization, he stated that for utilized products, Skyworks is at capacity and demand exceeds supply, but declined to discuss specific factory loadings, noting that gross margin guidance reflects current knowledge of balancing mix, costs, and prices.

Edward Snyder sought clarification on why content gains at the largest customer might be offset by mix, despite expectations for a tailwind in the second half. He also inquired about the expected improvement in utilization for the filter factory in Osaka, Japan, in the second half of the year.

Answer

CEO and President Philip Brace explained that predicting specific model sales and launch timings is difficult, leading to a projection of blended content being flat, as content varies between models. On factory utilization, he stated that products being utilized are at capacity, with demand exceeding supply, but acknowledged pockets of underutilization due to technology changes. He noted that the gross margin guide reflects current knowledge of mix, costs, and prices.

Edward Snyder questioned the strength at Skyworks' largest customer, noting that the mix favors internal solutions, which benefits Skyworks' content on base models. He asked how much of the strength was due to mix versus units, and if the current content strength would provide a good base for increases next year, given that high-end models are discontinued after the first year. He also inquired about the significant increase in accounts receivable and if there were any unusual factors beyond typical launch-related invoicing.

Answer

Phil Brace, CEO and President, stated that forecasting is difficult due to the interplay of unit mix within phones and across generations, but confirmed that the company benefited from both mix and units. He added that it's too early to comment on content direction for next year, acknowledging a highly competitive environment. Philip Carter, Senior Vice President and Chief Financial Officer, clarified that there was nothing unusual in accounts receivable, attributing the increase to the linearity of revenue and timing of collections.

Edward Snyder asked about the mix at Skyworks' largest customer, specifically how much of the observed strength was due to product mix versus unit volumes, and the long-term implications for content as high-end models are discontinued. He also inquired about content direction for next year and the significant increase in accounts receivable (AR).

Answer

Phil Brace, CEO and President of Skyworks, explained that forecasting is complex due to the interplay of unit mix within phones and across generations, but confirmed that Skyworks benefited from both mix and units. He stated that current guidance reflects their best understanding of these factors. Regarding next year's content, Phil Brace indicated it was too early to comment, acknowledging a historical downward trend but expressing a goal to change that slope in a highly competitive environment. Philip Carter, SVP and CFO, clarified that there was 'nothing unusual in AR,' attributing it to the linearity of revenue and timing of collections.

Edward Snyder from Charter Equity Research inquired whether a potential future shift towards an internal modem at Skyworks' largest customer would inherently increase the company's blended content opportunity for the 2026 phone cycle.

Answer

CEO Philip Brace confirmed that, all else being equal, the internal modem platform makes more content available to Skyworks, creating a 'natural tailwind' for the company. However, he cautioned that the final outcome also depends on other variables, such as the specific mix of phone models the customer ships.

Edward Snyder inquired about the content trajectory at Skyworks' largest customer, asking if it would bottom out this year, and questioned if a large new module win would necessitate significant CapEx for filter manufacturing capacity.

Answer

CEO Philip Brace stated that while he couldn't comment on specific customers, long-term trends of increasing RF complexity and potential baseband changes are tailwinds. He and CFO Kris Sennesael affirmed that Skyworks is sufficiently capitalized and has plenty of existing capacity to absorb potential business growth without needing incremental production CapEx.

Edward Snyder asked for clarification on the competitive loss at Skyworks' largest customer, questioning if a key socket was completely lost or is now dual-sourced, and inquired about content opportunities in other areas like WiFi and ultra-high band.

Answer

CFO Kris Sennesael clarified that a key, high-value socket was not lost entirely but has moved from a single-source to a dual-source arrangement, which is a setback. He emphasized that Skyworks remains competitive and is already developing an expanded suite of products for the customer's next-generation phone to support their baseband transition.

Edward Snyder asked about Skyworks' long-term view for regaining and growing content with its largest customer through 2025-2026, the impact of AI on RF front-end content, the revenue percentage from its largest customer, and prospects at Samsung.

Answer

CEO Liam K. Griffin expressed confidence in growing content with their largest customer, citing a strong technology pipeline, manufacturing scale, and a close partnership. He also highlighted significant opportunities with Samsung, driven by next-generation solutions and AI. CFO Kris Sennesael confirmed that the largest customer accounted for approximately 69% of total revenue in the September quarter.

Edward Snyder sought to reconcile Qorvo's flat revenue guidance for its largest customer, given the stated lower share in ultra-high-band but a significant tailwind from ET PMIC content gains and the new high-band PAD win. He questioned if this implies a substantial share loss in ultra-high-band or other unmentioned parts. Additionally, he asked about underutilization charges incurred in the current quarter and anticipated for the future, and whether utilization in BAW/SAW (BOS) has improved or is expected to improve.

Answer

Frank Stewart (Company Representative) reiterated that the high-band PAD win and ET PMIC tailwind, combined with the headwind of lower ultra-high-band share, result in the flat year-over-year revenue expectation for the largest customer, confirming Qorvo is still in ultra-high-band but with reduced share. Grant Brown (CFO) stated that utilization is not where they'd like it to be, but there were no specific underutilization charges in the quarter, crediting the operations team for managing costs effectively amidst factory transitions.

Edward Snyder questioned the flat revenue guidance for the largest customer, given expected lower share in ultra-high-band but a tailwind from ET content and a high-band PAD win. He also asked about underutilization charges and improvements in BAW (BOS) utilization.

Answer

Company Representative Frank Stewart reiterated that the high-band PAD win and ET tailwind are offset by UHB share loss, resulting in the flat year-over-year revenue expectation. He confirmed Qorvo will remain in ultra-high-band with lower share. CFO Grant Brown stated there were no specific underutilization charges in the quarter, but utilization is not where they'd like it to be, and the operations team is managing costs effectively amidst factory transitions.

Edward Snyder questioned the flat year-over-year revenue from the largest customer despite content gain claims and asked about the manufacturing implications of closing the Costa Rica facility. He also probed the assumptions behind the 10% content growth forecast.

Answer

Frank Stewart, President of the Advanced Cellular Group, clarified that the spring phone launch represented good dollar content for Qorvo. CEO Robert Bruggeworth explained the Costa Rica facility performed back-end filter packaging, not module assembly, and its functions will move to Asia. Regarding the 10% growth, Stewart reiterated the gain is achievable within the existing competitive environment, while Bruggeworth declined to comment on future customer architectures.

Edward Snyder of Charter Equity Research sought confirmation that Qorvo's guidance for its largest customer assumes content gains based on existing awards, independent of modem scenarios. He also asked how increased global defense spending might impact the D&A business.

Answer

CEO Bob Bruggeworth confirmed their belief in content gains for the upcoming phone cycle is based on awards already secured. Regarding defense, Bruggeworth and SVP Dave Fullwood explained that the primary growth driver is the technological shift from mechanical to AESA radars, a trend where Qorvo is already deeply integrated. Any increase in defense system spending would therefore directly benefit Qorvo's growth in this area.

Edward Snyder questioned if the December guidance implied an unexpected content shift and asked for elaboration. He then posed a broader strategic question about how Qorvo can navigate a flattening handset market with increasing competition, asking about investments in other areas like defense or potential catalysts like AI-enabled phones.

Answer

CEO Robert Bruggeworth clarified that the main deviation from expectations was the Android business, citing a share loss at a large Android customer and an accelerated market shift to entry-tier, where Qorvo maintains price discipline. Strategically, Bruggeworth stated they are focused on flagship phones and have already shifted R&D investment toward Defense & Aerospace (D&A) and power management, noting the D&A business is now larger than their China Android cellular business. He emphasized growth will come from their largest customer, followed by D&A, Power, and CSG.

Edward Snyder asked about the long-term trend in AI compute, suggesting that the move towards custom ASICs (XPUs) seems to be accelerating, especially given power constraints, and asked if Hock Tan's opinion on this had changed.

Answer

President and CEO Hock Tan confirmed that his view has "flipped" and he now believes there are two distinct markets. He sees large hyperscalers inevitably moving to create their own custom silicon due to economic rationale and the need to control their destiny. Meanwhile, a separate market for merchant silicon will serve the enterprise sector. He agreed the trend toward custom ASICs for hyperscalers is accelerating.