Qorvo, Inc. (QRVO) Earnings Call Transcript & Summary

Good morning. I'm Blayne Curtis. Welcome to our Global Virtual TMT Conference. I'm semiconductor analyst here. Very happy to have -- to kick off the conference, a long-time supporter of the conference, Qorvo. From the company, we have Bob Bruggeworth, CEO. We also have James Klein, he's the President of IDP; as well as Doug DeLieto from IR.

Usually, I'd like to start these things off with a very high-level question, so Bob, obviously, a really robust year across both mobile and IDP. So maybe you could just kind of look back at this year, highlight what was strong? Anything surprised you? And then I know it's early, but maybe you can just talk about next year, what you see is interesting?

Yes. First of all, Blayne, thanks so much for having us back, it has been a pleasure over all the years to be part of your participants in your conference. Sorry, we can't be there in person. But I do want to remind the audience, as always, that the safe harbor language that accompanies our press releases applies to our comments today. So Blayne, as we look at the year, the one thing that I think we all look forward to being a tailwind opposed to a headwind is the COVID virus and its impact on the global economy and our markets. But to your point, one thing that I think the company has done a good job of, I was commenting on the 5G rollout. And we're still very early on in the 5G rollout. That's both for the phones as well as the infrastructure side. And we see that as multiyear. Clearly, that's been a nice driver because of the content expansion in the handset that we've seen, and we expect more content to continue next year and the year after as we continue to add more bands, add more dual transmit and more RF power. So that really is what's driving a lot of our business in the handset, along with, as you know, we made some investments in ultra-wideband, and we see that driving our growth as we look out in several years. So you've got all that going in the handset side. On the infrastructure side, as you know, massive MIMO, which is really important for James' business, where we've got 64-element arrays or 32-element arrays or 16-element arrays. And that has a GaN amplifier plus LNAs and other small signal components. And that's what drove a lot of his business in the infrastructure side this year, primarily in China. And as we look out through the years, that will roll out into the -- to the U.S. and Europe as well as into India. So we see that as a multiyear trend as well. And then WiFi, the WiFi business has been a little stronger because of the work from home, but we're also seeing things like WiFi 6 going into the handset and Wi-Fi 6 proliferating. And I know James would love to talk about a lot of these businesses. So I'll stop there. But as you can see, I'm also excited about them.

It's that's a great transition, and happy to have James and IDP was up over 50% in the first half of the fiscal year. So quite strong. You mentioned the GaN, but it was much broader than that. I was wondering, James, maybe you could dive in a little bit more detail as to what the multiple tailwinds you saw in IDB world?

Yes. Thanks, Blayne. And appreciate the time today. And I agree with Bob, too bad we can't do this in person. Always interesting to do these from the office here in Texas. Still almost dark here, by the way. But let me talk a little bit about the year. We definitely had a great first half. And as you noted, we grew 55% if you compare first half of our fiscal year to the first half of the prior year. And it really was broad-based. Most of our product lines inside IDP contributed to that growth. Base station was particularly strong, but WiFi, low-power wireless, our power management group and defense, all had strong double-digit first half over first half quarters. In fact, they were all up over 25%. So we continue to be very positive about the underlying trends in the business. We've got the rollout of new infrastructure in both 5G and WiFi 6 that's driving. We got the adoption of new technologies. Bob mentioned massive MIMO but -- and GAN, those are both great technologies that we're positioned very well for. And then we -- but after all that, we got great trends. We've certainly got great technology. We still have to win in a competitive market. I think we've got a good recipe to win. We've got very deep customer relationships. We've got a great set of products. We certainly have manufacturing scale to accommodate those kind of technologies that I talked about earlier. So I think in general, I think there's some very good things going on in the market. We're in the early days of significant rollouts.

Great. Yes. I want to drill down on the GaN side. Obviously, China comes in waves, and we saw one big wave. It moderated in the back of the fiscal year for you. Kind of curious as you look next year, obviously, there is a Phase 2 at some point here, if you had any visibility. And then kind of just thinking about 5G as it broadens out beyond China, which was the big driver this year.

Yes. 2020 was the first real significant rollout. And as you mentioned, we saw the majority of those deployments in Asia, and the majority of that was obviously in China. And I think we're at the early stages. We certainly see the number of base stations likely to increase as we go in the next calendar year. I think the mix maybe will change a bit from today's largely urban deployments that happened in 2020, which were largely 64-element arrays. I think as we go into more less dense populated areas, we'll move to more 32-element arrays and maybe more macro base stations moving forward. Timing, I think, and China is still open a bit. Right now, we are at least forecasting that we're going to see that delay a quarter or 2 and probably condense into a shorter period of time similar to what we saw in 2020. So we'll see how that goes. But right now, I think we're -- we still believe we're in the very early stages, and we'll follow a pattern very similar to what happened in 3G and 4G. Now if you look at deployments in the U.S., we talked in the last earnings call of how we have -- we've been talking about for a while, our developments in C-band. We've talked about design wins and the beginning of shipments in, too, C-band deployments in the U.S. So we do believe this will be the first year in the U.S. that will start to be somewhat significant deployments in the U.S. And then Bob mentioned, we see that moving into India and eventually into Europe as well. So I'm anticipating a 4- or 5-year cycle here. And then, of course, we've already begun the discussions on what 6G look like. So in this business, we've got to stay well ahead of technology curve. So we'll be continuing to look at what happens. But yes, I think a nice trend in kind of an early phase of where we see the deployments. And then we'll ebb and flow a bit depending on how the big deployments are actually done around the world.

So just to clarify, China was largely 64-element radios. You said some other -- as you move out of the urban areas, it might be 32. As you move globally, do you think -- any view on what the percent of massive MIMO would be or whether other regions would also be deploying massive MIMO radios?

Yes. Our early deployments in the rest of Asia were predominantly 64 elements, some 32 element arrays. Our early deployments in the U.S. will be 64-element arrays. So we certainly see MIMO deploying around the world. Too early to tell what those deployments are going to look like in India and in Europe. But I see somewhat of a relatively similar pattern going as we deploy around the world.

I did want to ask you about UWB. I did a host of a teach-in with NXP. You're the other major player in that market. They highlighted roughly an $800 million TAM by '23. Was curious how you see the opportunity for yourself? And then if you could just talk about the differences in technologies and kind of where you see the best opportunities in UWB?

Thanks, Blayne. And I think we agree with them. I think it's going to be a large market, a very large market in several years. So there's no disagreement there. And for us, if you look out several years, it could be hundreds of millions of dollars. So great opportunity for us. As you know, we acquired Decawave, and then we followed up with 7Hugs to shore that up with the software. So we feel very good about it. Today, what's driving most of our business is the social distancing and tracking so that we have many customers today, thousands of customers that are using this so that you can find out when you come in contact with someone within 6 feet and things like that and then use it for contact tracing. Our technology is being used by the NFL, it was used by the NBA and things like that to at least get it started. So a lot of the industrial applications. Our current targets -- and we're working with several different phone manufacturers. That's our initial thrust is there, and then also into the automotive section. So I think we've got similar approaches. Our ecosystem maybe is a little bit more open, but we both see tremendous opportunity out there. And to remind the audience, we do have the RF front ends in our largest customer being Apple. And so we've been aware of what was coming with ultra-wide band for many years and wanted to leverage that. And that's why we were proactive in acquiring the technology. And as you pointed out, there's only a few players that are out there. So I think there's room for both of us to enjoy a great market with a lot of growth. And we're excited about it. But Blayne, if I could just remind everyone, we're investing heavily in this business today. So it is a little bit dilutive to our business. So -- but we feel real good, like I said, several hundreds of millions of dollars in several years. So thanks.

I do want to ask you a question. It spans to both of you. So I'll figure out which one answers first. But on WiFi, I wanted to ask you, you mentioned WiFi 6. You have WiFi 6E, it adds another frequency to operate in kind of just perspective, I guess, from both of your worlds on that transition.

Yes. Let me start, and I'm going to back it up a bit because we're just in the early stages of WiFi 6. So when we talk about WiFi 6 a little bit, and then we'll move into the opportunity of WiFi 6E. We've had a great couple of quarters, and it appears that, that is going to continue for us for at least through the fiscal year. The strength has been really broad-based across our products, across our customers and across the segments. And that includes both product lines in mobile and IDP. So WiFi 6 is, we're experiencing a very, very nice year. Retail has been particularly strong. We've got traction in the distributed WiFi systems like NETGEARs, Orbi our TP-Links, Archer or Amazon's Eero. Those are big content drivers for us because instead of you having today where you -- maybe a few years ago, you would have bought one router for your house, today, you're buying a pack of 3. And those have had great traction in the market, and we've had great traction inside those platforms. Those -- if you look at now what a 6E do for you, all those systems today are operating in the 2.4 and 5 gigahertz, and we have content again across that. We've got front-end modules. We've got BAW filters, and sometimes those filters are integrated into the modules. 6E adds a whole new frequency band, the whole new content for us as we try to continue to increase throughput through the system. So it now adds the 6 gigahertz range into the space. Where we are with that is our leading customers today are in the early stages, I would say, of developing those platforms. And certainly, we're sampling products and engage with those customers. We think early deployments, sort of the first systems with 6E will deploy next year. But then the big volume rollouts will probably happen in 2022. And again, just like I talked about, where we're looking at 6G, here we are starting today to try to understand what WiFi 7 is going to be and where things are going to go in that as well. But again, a nice driver for the business as a whole and for both Eric and I in our prospective markets, we've been able to do very, very well in WiFi.

And Blayne, just to add a little bit on the mobile side, as James pointed out, they're both doing extremely well. And in the mobile side, we have what we call our IFEMs, which is the actual front end, including the BAW filter, as James pointed out, also coming out with BAW filters for higher frequency. And outside of our largest customer, we're actually doing quite well with the attach rate of our front ends, along with our BAW filters. So nice driver in that business as well.

I do want to ask you, one of the tailwinds for WiFi is this work from home, live from home. It's lasted a lot longer. Obviously, the pandemic is still going on, but I thought everybody would have their equipment. I cover PCs, and it looks like it's going to carry into next year, maybe in an up year. Kind of curious if you're still seeing this tailwind in any kind of perspective as is this people still buying these equipment? Is it like a restocking? Kind of just -- how do you view this whole cycle of this work from home?

Yes. We've got, again, as I talked about, significant strength in our retail business and probably also significant strength in the gateway segment of WiFi. So we definitely see that upgrade pattern going and people definitely buying these retail products. I know for me, I've bought 2 of the 3 that I mentioned earlier. So we -- I've upgraded just so that I can do this today from the house and gotten significant uplift by moving into WiFi 6, just for my personal use. So yes, I would say, Blayne, I agree, it has gone a bit longer than we expected, and it appears as it continues to go, people are continuing to upgrade those systems. That was really the basis of my comment. It seems like this trend is going to continue for at least through our fiscal year, which is through March, I suspect it may continue a bit longer than that as well.