Skyworks Solutions, Inc. (SWKS) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to this session. Really delighted to have the team from Skyworks join us and really delighted to have Liam Griffin, the Chief Executive Officer of Skyworks. And what we'll do is we'll go through a few of my questions, but if you have anything you want to bring up, please free to raise your hand or I'll also have some time towards the end for your questions. So welcome to you, Liam.

Great. Thank you, Vivek and appreciate BofA hosting today.

Absolutely.

Looking forward to a nice conversation about [ profits ].

Likewise.

So Liam, maybe just as a start, give us the kind of the state of play. A lot of macro crosscurrents, but what are you really seeing on the ground in terms of the demand outlook?

Yes. Well, I mean, certainly, there's been quite a bit of volatility in the equity markets. But if you look at behind that, there's incredible work being done right now to advance technology and advance connectivity in all of its forms. And the job for us at Skyworks is to continue to delight and thrill with our customers, create solutions that are purpose-built, account by account, application by application. We've invested extensively in core technologies from bulk acoustic wave, to gallium arsenide, TC Saw filtering and the ability to integrate and develop solutions, again, uniquely for each one of our customers and accounts. And another important note is the capital assets that we have over the last several years. We've developed homegrown technologies with our own teams, investing big dollars for the future. And that has been paying incredible dividends. Our customers love to see it. They have a voice and a choice when they work with Skyworks. We craft those solutions in ways that make sense. So that's really, really important. Volatility in the markets today, we all know that's real. I mean there's -- we do the best we can to outperform. Our balance sheet is strong. Our free cash flow is strong. We're investing in technology every day. We've got incredible customers with phenomenal relationships, and we collaborate with those companies to ensure that what we do makes sense. It's what they want. It's not what we want them to buy. It's what they need. And working in that level, I think, is really -- put us in a position to really kind of lead and outperform across not just mobile, but connectivity at large.

Absolutely. So Liam, it's no surprise that the consumer is under a lot of pressure, right, because of inflation and other concerns. We heard that the demand for PCs has started to soften because of various reasons. How do you think about the demand outlook for 5G smartphones as they get into the especially important second half of the year?

Sure. Well, the 5G cycle still is very early. Certainly, the higher-end U.S. consumer, I think, has been able to adopt that technology, but there's a great number of subscribers that haven't yet embraced 5G in emerging markets, in China. And the other thing about 5G is that it's not just a handset technology. So 5G is really -- think of it as a universal connector, the speeds, the latency, the performance. It basically can displace so many other connectivity protocols, wired technologies as well. So we look at the opportunity in a way that just -- we look at the application, we look at the needs of the application, and then address the customer and the opportunity in a way that makes sense. And having said that, we're seeing more and more 5G adoption outside of the classic mobile phone, outside the mobile phone, right? Factory automation, for example. Automotive going forward are going to be -- it's going to be an incredible market. I mean everyone's talking about that. Everybody knows about that but we have to think about the sensors, the connectivity protocols, the reliability. All of that is going to come into play. And I think it's going to be a macro really sustainable, large move for connectivity companies like Skyworks. And those that can invest and those that have their assets and can craft account by account, really, it's going to make a big difference.

Got it. So from a near-term perspective, do you think that Skyworks has decent visibility into right next handful of quarters? Do you expect normal seasonality to play out? Or is it early to talk about?

Yes. I mean we have very good visibility with our customers in collaboration and certainly there's volatility right now in the equity markets. But in terms of the need for the technology and the appetite for growth, we still believe it's there. We just finished the first half of the year, very solid numbers. We were at $3.3 billion in 2019. We endured the pandemic and went to $5.1 billion in 1 year. So there's a lot of powder for us to continue to grow. Of course, there's macro trends out there that we're all dealing with. But we see the need for our technologies. We see our customers asking for our technologies. There's more scrutiny about the protocols and the performance levels, and that's where I think there is going to be somewhat of a have and have not market in some of these areas. We've invested substantially and yet we still have tremendous free cash flow margins. There's a lot of demand that we haven't yet captured in some of these new markets. One of the acquisition that we did with Silicon Labs I&A business is going extremely well, opening up new pads for revenue, creating new customer relationships where we've had some of these wonderful technologies that had never been introduced to big, big accounts. So we're able to take some of that scale and bring it to a much, much higher level. So a lot of really positive things. And as you and I spoke of before, the fundamentals of our company are very solid. Again, strong balance sheet, own our assets, steady performance on the top line and now seeing, despite some of the volatility in the market, the ability to endure and outperform.

I see. How is China shaping up? So first, from a demand perspective and then we can talk about the supply issues as well. Because whether it is the lockdowns, whether it is the fact that they were very early to adopt 5G, right? But at the same time, there was also the disruption as Huawei left, right? It created a void and many companies tried to fill it, right, with their own strategy. So how is China shaping up from a demand perspective for Skyworks?

Yes. So we've gone through a number of cycles with China. If you go years back, Huawei was substantial for everybody in the industry if you're playing. But over time, that started to unravel and move towards the Oppo, Vivo, Xiaomi players, which I would call mid-tier. But what we're also seeing in China, and you recall that China is a market that develops assembly and test capabilities and is a feeder for some of the most important companies in the planet, right, coming out of China. But then there's also the consumer of China. So you could be in China buying a Huawei phone or buying an Oppo, Vivo phone, but you could also be in China and buying a very, very high-end U.S.-made phone, right, or a U.S. brand. So what we have seen is the appetite for the higher-end U.S.-based brand actually go up. And if you look at the data on that, share gains there, the Oppo, Vivo players are actually kind of falling behind a bit, but they want to catch up, and they're looking for companies like Skyworks, how can we catch up? How can we make our product better, faster? It may not be the highest price, but what can you do to help us, Skyworks, to make it more competitive? And that's what we're able to do. So the Oppo, Vivo, Xiaomi play right now, they need to step up. They need to invest a little bit more to get closer to a mid or higher end play, and we're working with them to do that. And we certainly have the know-how because we're addressing the most compelling, most challenging devices on the planet and still doing very well. So the learning between those markets is really interesting. And for us, some of the smaller players in China have kind of rolled off a little bit, but the mid to the higher tier, we're continuing to gain. So that's kind of our strategy and again, back to the building block approach, having the elements that you need to create the device. It's not going to be the same for everybody, but we have the tool set to create something that's going to work for everybody.

Got it. Do you -- there's been a concern among investors that there is perhaps excess RF component inventory, right, among the Chinese smartphone makers because they are facing not just, right, the macro impact in their own domestic arena. A lot of their export, right, is to Europe, which is also going through a lot of turmoil, as we know. So what's your assessment of that inventory among Chinese smartphone makers today? And can that prevent the industry from having a seasonal Q3?

Yes. It's a bit of a challenge because back to your earlier comments, there's still a supply chain issue. And I think what we've seen is the smaller accounts, the smaller players are going to underperform in a supply chain constrained environment where the larger players have the scale and the capability and a lot of it's in-house to continue to grow. So I think there's a bit of a challenge with the smaller players getting fed. And then you have the players in the middle kind of doing a little bit of both, then you have the players, the higher end that have -- the demand is compelling and that is not going away. So actually, the premium players are doing much better right now than the smaller players, and we're talking smartphones. But then you have the assembly and test often in China and becoming the hub for the world in many cases, not so much for us, but for some of our customers. So you have that headwind too around supply chain. So there's a lot of things happening. We are acutely aware of all of it, by the way. So we're looking at it all the time. It's what we do. But we also understand the nuances and some of the loopholes and some of the strategies that we can do to help our customers do well in the global market.

Got it. So just to kind of nail it down. Do you feel that from an industry perspective, China has been adequately derisked or is it still an evolving situation?

Yes. Great question. For our company, it is substantially derisked. From a macro global, I think there's probably a little bit of bumpiness still hanging around. And if you look at our revenue streams, we've kind of mitigated a lot of that potential. We still think China is going to be a growth market. There's no question about it. I think it's been more volatile than normal. And then adding the pandemic situation and COVID situations, which I think is starting to roll over now, but that created a really kind of a wildcard effect that we typically don't see, right? It's not a normal cyclical thing. This is kind of a red herring that comes over the top and really impacted China with walk-downs and the free flow of goods. But we see that abating. We see that abating. And in terms of inventory, I don't really see gluts of inventory at all, at least in the view that we have.

You mean Skyworks specifically, you don't see any -- even your competitors?

We don't see a lot of -- you've got -- we still have many, many customers that are pounding the table for product that just can't get it. It may not just be product from us, but just in general through the supply chain. We see a lot of unmet demand because products are not available. If you can't have -- if you miss 2, 3, 4 parts in a bill of material, that product doesn't ship, whether it's a smartphone, whether it's an infrastructure product, whether it's WiFi. That kind of stuff is still -- it's getting better, but we've had to endure a lot of volatility and mismatching of componentry to deliver finished goods. So a lot of bumpiness there, but it feels like it's starting to get better.

All right. Then maybe, Liam, taking a step back, help us contrast the 4G from -- the 5G from the 4G cycle because what we saw in 4G was number of years where units were accelerating, content was accelerating. And then we went through this 2016 to '19 or '20 period where units started to decline and content started to flatten out, right? And the stocks also behaved that way. Where are we in that 5G cycle? Do you think there is still -- because it seems like units are starting to flatten out, somehow they are certainly not growing at the same pace. You still think there is content growth opportunity in 5G?

Yes, absolutely. I mean this is the pivotal question. When you think about these devices, we don't need to even call them smartphones. People live, breathe, educate, communicate. You cannot take away the value -- the usage case and the value of the device is just exceptional. And it's been in the conversation for 10, 15 years around mobile device. This is a whole different world right now. People are using these technologies to do things that we never thought we could do. Autonomous vehicles, incredible IoT devices, factory automation, the companies like Amazon that are using basically glasses in the factory to do automation. So the human eye can be better, right? And the fact all these great technologies that are coming through that we never expected, but they're all based on core wireless engines, 5G like engines that can take that signal from here to 100 miles away potentially. So they think less about the form factor. Think of 5G as a universal connector that can connect anything and basically take out wireless installations, for example, as new buildings are made in factory automation. There's so many places where high-speed, low latency, high-performing connectivity can be a provider for an application. That's where we're going with it. We don't want to get ourselves caught up in this handheld device, which, by the way, every -- we cannot live without today, right? Don't think so much about the form factor, think about the use cases. And the difference between FY '16 to '20 is there really wasn't a big use case. There really wasn't. It was more just kind of the phone itself and some cool features. But now you're living and breathing on this thing, and it's being used for so many different applications. And the performance levels of 5G versus 4G are substantially higher, and that allows us to get into markets that are far beyond the handheld phone, right? And you're going to see more and more from Skyworks in that area as we move out.

Got it. So your point is that we could still have very strong unit growth also, just TAM growth in units because it's going into many other form factors.

Yes.

But if you focus on the content piece itself, what are the areas of expansion? Because if one were to just do a simple tier down right of flagship device, at least from the outside, it seems like it has every possible 5G band, right? So what other areas of innovation are there in an existing 5G phone?

Yes. Well, I mean, there's a lot of new technologies that are coming in, sensing technologies, filtering. If you look at -- we don't have it in our slides here today, but if you look at what a 4G phone and filtering topologies versus what we see in 5G today, it's night and day. It's night and day, but those features in 5G with all the filtering for mid-band to low band to high band hitting the spectrum right down the middle of the fairway in every combination, that's extremely hard. So if you look at the teardown of what a 5G engine is going to look like, forget about whether it's a handheld or not, the complexity within that device is daunting. And what we do is we play across the entire field. So we're not just saying, okay, we're going to be great at bulk acoustic wave or we're a soft-filter company. It's not that. We have all of the elements. And that's what makes us a great partner. We can go into the mid-tier and provide a solution that works optimally for that account or that customer. We can go into the lower end of the market if we need to. Emerging markets, there's a lot of volume in emerging markets, and it's -- the ASPs can be lower, but the margins can be just fine. And then you can go to the premium brand where they really demand the best-in-class, and we're clearly the leader there. And we're also creating innovation in those areas that take us again further from just traditional 5G. So there's a lot going on. The difference between the last 5 years or so, still a lot of use cases, but we're seeing much more prevalent and impactful use cases today that's -- we just went around a few years ago. So a lot of good stuff there. Another market that is just really growing fast is Wi-Fi and high-end Wi-Fi, Wi-Fi 6, 6E. There's a mini super cycle there, following almost the same curve that you would see in classic mobile from 3G to 4G to 5G. Wi-Fi is becoming an incredible growth story. We have outstanding IP, great technology, leverages a lot of our know-how in classic 5G and mobile and wireless. But the demand for Wi-Fi has really been strong, and there's a lot of room, a lot of room in that market as well. So we're excited about that.

Got it. What kind of content growth trajectory do you think Skyworks is on this year versus last year? Just overall from...

Yes. I would say it's 10% content roughly, could be higher. And then the other thing is pulling those sockets or those devices that are lighter in content today, we want to pull those folks up as well. So we're doing very, very well on the high end. We've always been -- it's much, much better to hit the 100-mile an hour pitch early and then go downhill from there, right? Get it right with the most discerning, most challenging accounts and everything else is downhill. So that's where we are. And we're uplifting a lot of applications that hadn't really embraced 5G or wireless connectivity the way that we do. But with our scale, in our internal assets, we can skew the technology account by account. We know how much bandwidth this application is going to require versus this one, and we can price it and manage it in such a way that it's great for the customer, and it's great for us. So having that flexibility -- it's not cheap. It requires your own capital assets. I mean we put a lot of investment in to make this happen, and that's a really important point when we talk about supply chain volatility. The fact that we were early in investing and bringing to scale very, very high-volume core assets. And I think that's been a real differential -- and that's a differentiator in tech, by the way. And there's not many companies that are doing what we're doing with in terms of capital investment that's targeted specifically for certain areas of technology. So it isn't a foundry plan. It's like we're doing it ourselves.

Got it. Makes sense. Liam, I'm curious to get your thoughts on how do you do the demand planning because with the large flagship customers you have, usually, it's -- the year starts with a lot of excitement that they're going to do a ton of units. And then there is an article in the paper somewhere that, oh, number of units has been revised down by 10%, 20%, and then there's another article in August or September. This is not your first rodeo, right? So how do you kind of plan for that every year just conceptually?

Well, we don't have the financials here, but if we did, you would see a line from here to here with our business, okay? And through that sort, there's going to be many cycles here and there. But if you look at the growth in our business, and it's not a small company. This is a $5.5 billion to $6 billion company. If you look at the CAGR, I mean, it's 13%, 14%. Broad markets right now. We've talked about broad markets is the nonmobile part of our company. Last quarter, we delivered over $500 million in broad markets in the quarter, $500 million. That's a $2 billion run rate. That's bigger than Skyworks 5 years ago, the whole company. So we're not getting the appreciation, so to speak, for that, but it is real. And not only is it real, it's diversified, it's growing, and it's leveraging that asset scale and that technology know-how that we have. So there's not many companies out there that have the infrastructure and the capacity and actually the brick and mortar in developing the technology and then also having the absolute top line growing that level. So it's an interesting -- and that's not like anyone in our peer group in mobile. And oftentimes, the industry sort of gets bundled together, right? But we have our own unique story, and it's tested by customers. That's the way we measure. I mean, it's great. We love -- we want our valuation to be strong. We want all of that to be great, but we want our customers to love our technology. I think that's really the fundamental thing. And that is what drives us, in many cases, to create a new site, a new Cranfield location to develop high-end BAW or TC SAR or some combination that is proprietary that we've learned from. So it's really important for us to do that.

So how do you manage the unit volatility in flagship smartphones? Do you just plan for the most conservative case? If something better happens, happens? Or how do you manage that?

Yes. Yes. I mean it takes a lot of experience. It's not easy. I'll be honest with you. It's not easy. But we've been working in that vein for years. And it has a lot to do with trust, great technology, leading, having capacity, right? Investing in capacity is important. It is not easy. We have really smart people that work on it, and we're all over that. And we actually -- for us, we kind of enjoy it. We enjoy the opportunity to do amazing things that other companies can't do. And you can't underestimate some of the logistics and how you manage your inventory. We know how to do that. But again, it takes time and effort and great partnerships to make it work. We could do everything wonderfully. We think it's great, but if the customer is not happy, it doesn't work. So we try to think that way first. We try to think how do we create amazing things for our customers. And these are the recipes, and this is the toolbox that we can work with you to make your stuff really sing and have in your business, take share in your markets. That's kind of the way we partner. And I think -- we love to be in that kind of environment. We're a really hard charging company. You guys may not see it all the time. But if you were -- have a day at Skyworks and the way we run our business, it's all about our customers, how do we make it better, how do we make it amazing. And we create a lot of wonderful ideas and we collaborate with some incredibly smart people to work with us as we go forward. So that's kind of the cool stuff. The logistics, managing supply chain, yes, I mean that's also really, really important. We have great people that know how to do that and owning our asset base. It is an important skill, but all those elements together. So it's kind of back to what we're saying before. There are a number of companies intact that are fabless and that's a strategy. There's not as many that are doing their own brick-and-mortar stuff. But if they do, it's kind of down the middle of the fairway in one asset class or one technology class. But with Skyworks, it's truly end-to-end, filtering to assembly and test to high skill factories diversified through the globe, a lot of interesting things and putting all those devices together or elements together to create very unique end solutions for the customer. And the supply chain part is very important, and we have a lot of energy on that.

Got it. There's a very large customer, right, in the RF industry, right, that can -- that has the ability to bundle a lot of other components, right, modems and transceivers and then so forth. Do you think that has become a much bigger threat for Skyworks than in the past?

No, it's the same threat. I mean it's -- in fact, I think less of a threat because the complexity right now -- I mean, the modem is the modem. There's one modem in every device and there's not 6, okay? What we're seeing in an advanced 5G and moving to the next nodes, more complexity, more challenge, current consumption budgets that are scaring the engineers customer side, and they're looking for help. How can we -- Skyworks, you guys need to help us. This is different than it was last year. This is a different node. So we actually -- we thrive on that. We thrive on that. We thrive on the challenge, and it inspires our teams to work with our customers. As I said, I know I've said it a lot in this discussion to really learn about it. So there's always been the modem. But like I said, what wraps around the modem, the amount of content that's wrapping around that right now continues to grow and grow and grow. And the reason is because the use cases that I talked about. The use cases in 2022 and 2025 are very different than 2020 or 2016, very different. And we want to do all of that work. We want to integrate all of those use cases. We want to create devices that can do amazing things that we never anticipated, right? We didn't -- so many things that we're doing right now 5 or 10 years ago, we wouldn't even imagine and we're doing those today. So -- and if you look long, autonomous vehicles, I think, is going to be a huge, huge market for Skyworks and some of our other competitors, too, honestly, because it's all about connectivity, but it's truly wireless, right? Latency has to be incredibly fast, just so many daunting challenges to do it right. But it's going to happen. I mean this is 100% going to happen, right? There's so many companies that are investing in it, including us. But adjacent to that, there's other micro cycles that are going on in the industry that require wireless in the technologies. And so we're continuing to work on that. It's our bread and butter. And so having the core assets and the core technology gives us the ability to play in each and every one of those markets as we go forward.

Got it. If I were to kind of push you a little bit on that. So if you look at their growth rates, right, over the last year, they have been 30%, 40%, 50%, so a lot higher, right, than the other players in the industry. So doesn't that mathematically say that they are gaining a lot of share in the market?

We're talking about...

QUALCOMM, yes.

Well, no, I don't see them as gaining a lot of share. I think they have a strong beachhead in modems. They've had some technology partnerships with some customers. But they've been around. There isn't -- we have respect for the company. They have some excellent technology, again, largely baseband driven. But there hasn't been anything that has taken away our ability to execute and grow. I mean if you look at our numbers right now, we're having -- we've had a really good set of numbers in the last few years. You talked about $3.3 billion to $5.1 billion. We're on a run rate right now to $5.5 billion or higher. We're not guiding, right, but we would expect to be double digit, 10% year-over-year. We did 14% year-over-year in the last quarter. So there isn't anything -- and the company in San Diego is there, right? So that's fine. They're doing fine. But we don't feel like we're being impeded in terms of our opportunity. But I also say that our purview of demand is actually getting wider. It's getting wider because, again, more use cases, more the consumer wants to engage, leveraging wireless technology. We're seeing it happen now, and the pandemic has actually accelerated a lot of that. But they use -- the essential nature of these devices and the connectivity protocols are really going to move. So we've got many cycles across the board. You've got 4G to 5G. 5G still has tremendous room to move. You've got a Wi-Fi cycle that we have great position in and that is scaling quite a bit. We're entering new markets in a meaningful way. And part of this, too, is just scale. If you look at some companies, and I'm not taking a shot at anybody, but making a big deal about design wins and it's $5 million a year. And we don't even -- the thing with Skyworks is we've been big game hunters for years, and it's been great, and we're not going to stop that, but there's still a tremendous amount of opportunity in other markets. The Silicon Labs deal, I talked about it a little bit, it's been great for us because they have a tremendous breadth of diversified technologies but lower scale in terms of volume. But there's no reason why that part that might be 50,000 units a year, there's no reason why it couldn't be 2 million. It's about addressing the right customers. So we're doing a lot of really good work with the key products, key technologies that we at Skyworks core know how to move and know where to take it. And so we're accelerating with that relationship. They have great technology. You take that great technology and you take the relationships that we have and the scale that we have, it's a very powerful combination. So we're just starting -- you're going to start to hear and see more about that. But so far, that has been moving in the right direction. We're really, really excited about it.

Got it. I wanted to revisit the broad markets because I think that's been a very strong success for Skyworks. But how much of that is what you would call exposure to white goods, home electronics, which are seen as "COVID beneficiaries" which might face a slowdown, right, as the economy starts to reopen?

Well, I mean it's diversified across many, many protocols. I wouldn't think the Wi-Fi cycle is one and done kind of thing. I mean the technology -- I'll just say this, when the Wi-Fi goes down in my house, it's calamity, right? So I mean it's really important. But you're seeing more and more value and content in dollars in high-end Wi-Fi. You have enterprise Wi-Fi,, you have consumer level. There's some really high content and complexity in that cycle. So that's becoming another place where you're seeing linear TV fallout and direct to home. You could go 5G direct-to-home. Wi-Fi itself in some of the nodes right now are great, then you just pop in. You can take the so many -- there's so much flexibility. If you look at the demographics, under 30, under 40, that's what they're doing. They're not screwing around with cables. They're not doing contact. They're doing everything wireless. Everything's wireless. So they want to have super fast Wi-Fi technology, pop it up on a screen or 2 or 3 screens, and it's a totally different situation. But that's an opportunity. That wasn't around 3 or 4 years ago. Wi-Fi was okay, it was no big deal. But now the demand for data, for applications, think of the interesting little companies that are popping up like Roblox, kids are on there all-day, sucking down bandwidth, right? All of that stuff is still data-driven and technology-driven and the kind of things that Skyworks can invest in. So there's just a lot there. And it's -- these are shifts that are taking years and years to move, but it's an acceleration. You're just going to see less wires everywhere. It's just connectivity is just changing.

Makes sense. And Liam, Skyworks has a very strong balance sheet, right? You're generating very good cash flows. What is a higher priority for cash, right, given the valuation of where the stock is. Is buybacks a higher priority? Or do you think given that valuations across the industry have come down that it gives you a chance to look at M&A opportunities?

Yes. Yes. Great question. Both are great options. Both are great options. We've been buying back stock, of course. And we certainly look at strategic opportunities as well. Again, we had a recent deal with Silicon Labs. It's turned out to be great. But we have the powder, we have the financial strength. I mean that's one of the things you know about this business. I mean this is a very solid company. We have tremendous powder. EBITDA, we're going to generate $2.4 billion to $2.5 billion of EBITDA this year. And we're trading at 8 to 9x earnings, which is just ridiculous, honestly.

Why do you think that is? What are people missing?

I think people are afraid. I think they're just worried about the industry or worried about the markets, the financials and the balance sheet. And if you look at that, that they're -- even if it's flat, and it's not, it's a rock-solid business, and that's not the same for everybody. I mean, look, you could have the same headwinds and be impacted in different ways. We're raising dividends. We're buying back stock. Our EPS this year is going to be $11 plus. I mean this is -- it is really deeply undervalued right now. And that's our job to turn that around. It's no question.

Got it. Right, you mentioned one of the differentiators for Skyworks is that you own a large part of the manufacturing base. And I think BAW is a place where you have invested a lot. The question I would have there is, if I look at the large flagship phones, right, Broadcom has a ton of BAW capability there. So the incremental investments in BAW, does that push you more towards China, Inc.? Or do you think that there is just going to be a greater need for BAW, right, across the board at every customer?

Yes. So BAW is a higher -- it's at the top of the food chain in filtering, so bulk acoustic wave. It's a very, very difficult filtering topology, not easy to do, and companies can do it in different ways. It is -- it's not a cookie cutter. It's not like a classic semiconductor device that you can just bang out. It's crafted. And everything from the packaging to the lithography, it's a deep dive scientific approach to get there. So the recipe that we use is different than some other companies would use. But it makes the performance levels much higher. It improves the efficiency of the solution because it is a discerning level of filtering where you're really able to block out the noise and provide a pure signal. So as the technologies get higher and higher in complexity, you need filtering that can match that level of complexity. So people don't talk about it that much, but it really is important. It's a key element in delivering that high-speed performance. And you could do it, like we have other filtering apologies. We have temperature compensated SAW, TC-SAW and we have standard SAW, and they can be used as well. But when you get into the more compressed and more difficult spectrum, mid-band spectrum, high-band spectrum, the technology of choice is bulk acoustic wave. There can be different ways that players do it. We have our own way of doing it. And again, crafting it with the solutions that we have already and leveraging the capital and the scale that we already have in-house. So you should see and hear more about that from us. We're already winning business in bulk acoustic wave. It doesn't have to just be in handset. I mean the BAW is applicable for some of the really high-end Wi-Fi solutions as well. So it's another -- like I said earlier, it's another cycle in the technology now. So you get the bulk acoustic wave cycle. You have the applications around the use case on that. Wi-Fi is one, lots of other things, even high-end 5G, 5G plus solutions that require that. Higher spectrum leans into bulk acoustic wave. So there's a lot there. Now some of those technologies we had, but a lot of these are just now really coming to scale and can drive some of the incremental growth from the current levels.

Is the bulk of the -- just a last question, is the bulk of the investment cycle over in BAW? Like can CapEx start to essentially normalize from here? Or you still think you are in a period of extended CapEx?

Yes, I think it's stabilizing. We have -- if you look at our numbers, and we've made quite a bit of investment in the bulk acoustic wave side. So a lot of that now is going out to the market. It's been going to the market, and the CapEx level should mitigate from there. But again, it's about the financial powder. If you don't have that financial powder, you're not going to be able to put those assets in place and curate the right solutions for the customer.

Makes sense. Terrific. Thank you so much, Liam. Always appreciate your time.

Okay. Enjoyed the conversation.

Thanks, everyone.