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

I'm Joe Moore, Morgan Stanley Semiconductor Research. Very happy to have the CEO of Skyworks, Liam Griffin here. I think it's definitely the first time since I've covered the company, it has been 3 years, but if not it's been a while, but we really appreciate you being here to hear your insights on the company. So maybe we -- before we get into the segments. So if you just give us an update in terms of what you're seeing in the market today and kind of maybe the broad priorities that you have as a company. And then we can get into some of the details.

Yes, sure. Sure. Sounds good. Yes, I think Skyworks, as you know, we are a company that does many, many sectors and many, many customers largely in-house. We do a lot of manufacturing specific to each customer and each account and each application. So we have a different type of mix that you would see. It's not a typical silicon TSMC play. It's really a curated solution, customer by customer, market by market. The majority of the revenue today is typically mobile and wireless technologies. But it isn't just the handset. We do a lot of work in Wi-Fi. We have tremendous assets now in data center. We can talk a little bit about that through some of our acquisitions. But it's also a company that does its best work with the most compelling customers, the most demanding customers. And the ability for us to curate unique solutions has really been an advantage for Skyworks. So we don't have broad semiconductor portfolios that just go across the street and through distribution. It's kind of an account-by-account application by account message. And we work with those companies. And we get better, they get better, and it lifts our company. So that's kind of the high level. Certainly, mobile has been the feature in our business, and I'm proud of what we've done with the mobile business, we continue to grow that. But along the way, we diversified the company substantially. We're heavily in automotive right now. We're in data center. There's all kinds of opportunities that we're seeing in IoT. Adjacent wireless opportunities and Wi-Fi and things like that. So it's a more diversified portfolio, I think sometimes then the Street realizes. But certainly, the wireless element is core to the company.

Yes. Great. So maybe we'll start there in terms of the smartphone business, and we'll start with Android. You've had a couple of tough years, an inventory correction that took a long time to clear out. And it seems like we're hitting bottom there. Can you talk to the trends in the Android market?

Yes. Yes. Good question. So for the Skyworks team, we've always been kind of focusing on the mid- to high tier. And we've done a tremendous amount of work and technology with customers there. And to be honest, we have been a little bit a step back on Android, not because we couldn't do the business that -- but we had better business to do. So we had richer opportunities, more demanding opportunities with not just 1 or 2 customers, but an aggregate suite of opportunities that were just a little bit lower in terms of margin profile for example. So we shied away a little bit on that. But if we look at the business today, we are driving more diversification across mobile, certainly the largest customer in the mid-tier, but we have all the skills and tool sets to hit Android. And that's not just China, by the way. I mean you've got Samsung in there. We have a very strong position with Google, which -- the units there, maybe not so high today, but they're growing. And the content and the technical burden that they want from us to be solved has been really cool. So I think on the Android side, it isn't so much the Oppo, Vivo, Xiaomi play. We can do that all day, but we're also really engaged and thrilled about the opportunities with the Googles and names like that. And Samsung now, of course, has always been a player, and I think they're starting to reignite for us.

Yes. I mean I feel like the Oppo, Vivo opportunity probably just isn't as exciting as people thought a couple of years ago anyway in the sense of they were trying to fill the void that Huawei had left by doing big global phones and they've sort of retreated a little bit more into really good phones that have more discrete elements for certain regions that don't need to be global. And so the opportunity ought to be in the Googles and the Samsungs. And so -- and you talked about having not the presence there and now you do. But what does that mean in practice [ the sense that ] -- because it really is Google and Samsung are the two focus areas. How do you grow content with those guys?

Yes. Yes, absolutely. So interestingly enough, some of the biggest design wins that we have in mobile are in the Android ecosystem, largely because we just talked that. Google, for example, Samsung for example. Some of the other players in China in and out. But we're penetrating those customers, and they really like what they're getting from Skyworks. I mean as I said, we play at the high end. We have incredible technical talent. We have purpose-built talent. It's not off the shelf. And you've probably heard that from us. It's real. We have our own fabs. TC-SAW, Bulk Acoustic Wave, we do these amazing solutions that are very different. It's a different solution for our largest customer to a mid-tier play, and we know how to work through all of that to maximize the margin level, the satisfaction to the customer and really extend the reach. And that's a mobile story, but it's also a WiFi story, and it's a data center story. All of these markets for Skyworks, we take a thoughtful view of the opportunities, and we try to really like sharpen our axe and then we go. That's kind of the way it is. We don't really dabble. We try to figure out how to create opportunities for our customers, how to solve problems, use the assets that we have, curate new assets that we have with a tremendous manufacturing backdrop that, like I said before, that allows us to get really flexible. So it's not a one-stop shop as we address our customers. So a little bit of a different play than the pure silicon guys. But we like the way that's going for Skyworks. And I think there's a lot more opportunity for us to continue to drive share.

And then on the Oppo, Vivo, Xiaomi, you said you can do that all day, but it's not your primary focus. Is that simply because those guys -- that you can obviously do what they need to do, but the highest margin kind of module capabilities is something that is a little less competitive, a little bit better pricing? And is there opportunity for that to change over time?

Yes. I mean there is an opportunity for it to change because as the markets move and as volumes move and technologies move, we're definitely going to be agile around the opportunity. So the good news for us is we have choices, depending on the profitability and the revenue generation we have some good choices on what we'd like to do. And then there are some tough challenges that we're ambitious about to continue to grow the aperture of the company. The wireless business is great, and we love that, and it's been a framework for us for tremendous cash generation, great capital assets that are already in place now, already in place. We had a big CapEx cycle and that's done. And so there's a lot of really positives that are coming through with that narrative. So there's a lot of choice for us. We're going to have the cash to do whatever we want to do, dividends, buybacks, whatever it may be, acquisitions, are all on the table for us. But day-to-day, our engineers are working on technology and trying to delight the customer. That's really the signature.

Yes. Okay. And then my last question on the China phone side. The Huawei phone, which obviously you're not shipping into because of the export control rules, they have made a 5G phone and there's a certain patriotic enthusiasm for that phone, I guess. Obviously, it doesn't have a direct impact on you, but does that have an impact on your customers if that grows to a bigger number?

Yes. It's not -- it really doesn't impact us because we've navigated through -- I mean look, you guys go back 4 or 5 years ago, we had $500 million of Huawei revenue before the sanctions. And we played right by the book. And we're able to continue to grow the business. Now it would be nice to have that $500 million from that customer? Sure. But we've been able to do the right things and grow the business and diversify. So...

An awful lot of that $500 million went to your biggest customers.

Yes. Well, some of it did. Yes, that's true. That's true. That's true. But yes, so it's always an evolution and an opportunity to do more. I think in some ways, it made us a better company. We're doing a great job in what we call broad markets, which is basically the non-handset portfolio. And it's an aggregation of multiple accounts and multiple technologies and great work with our sales teams and also our technologists to really curate new avenues for revenue. So that's good. And we think, for sure, the opportunity as we go forward is definitely going to be much better. I mean there's no question, there's a little bit of a lull in the mobile ecosystem now. But I think that's going to be short-lived. There's a lot of things we can talk about in this session here about newer technologies and where we think they...

And they do want to. I guess on the more mundane side of it, away from Android, your largest customer, you didn't have the content gains in 2023 that you might have liked. Can you talk about the reasons for that? And then any visibility that you might be able to share on 2024...

Yes. I mean we don't typically get into the details with the largest customer, but it certainly -- I could tell you that our relationship there is outstanding. We've been an incredible partner to the largest customer, and it's been great for us. And the relationship shoulder-to-shoulder is very, very important. And one of the things that we believe in at Skyworks, and I certainly believe in is, what does the customer want to hear? What does the customer want rather than what can I sell you? It's -- if you can follow that honestly, you're going to have a better outcome. And it's not easy. I mean, sometimes you're going to get bad news every once in a while, and you've got to handle that. But what we like to do is like, again, hit those tough, tough problems, hit the fast balls, the things that other peers in our group that can't do. And that's been really important for us. And that has driven more revenue and trust and the aperture for our customers to take risks with us. All of that is really, really important. Yes, we can go quarter-by-quarter all the time. But when we think about the long haul, it's like how are you really engaging with these players? And how do we make their business better by way of our technology.

Yes. Okay. I guess maybe this isn't something you can answer. But to the extent that, that customer has an internal baseband road map and which has been pushed out. Is that something -- I mean, I assume that affects the RF content, [ affects ] which socket too has what? Can you -- anything you can do to share what might happen there?

Yes. I mean I can just give you a high level. I mean, we -- for years and years and years, we have to curate and spin derivatives around the highest end of the mobile ecosystem, not the whole entire market. I mean some of the Oppo, Vivo, Xiaomi, you can go 3 or 4 years. But the larger player. It's always going to be, let's raise the bar together, let's raise the bar together. And that's just the same thing. It requires investment in technology. Bulk Acoustic Wave technology is a different variant than what you would see in TC-SAW a Temperature Compensated SAW or pure silicon. So that, to us, we actually -- that level of complexity kind of really gets our engineers fired up. We really do want to solve the hard problems and then certainly drive an outcome for our shareholders. And we're at that all the time. I mean we've brought technologies in-house. It took time. The Bulk Acoustic Wave technology, as we've mentioned now, we've got that going in so many new markets beyond mobile phone. And it's a difficult, difficult thing. You can't pull that off the shelf. You're not going to TSMC to get BAW, it's not going to happen. And the derivatives around the BAW technology that we have now and the technology nodes and performance nodes that we're bringing to market are going to be compelling, and we'll go into multiple solutions. But yes, we have a very heavy -- I wouldn't call it a burden, but it's a very important part of our business is how we create these solutions. The selling and the marketing and all that's great. But really getting behind the challenge, how can we help our customer do better? How can we make a great solution for them. Look at the markets they're in, look at the current consumption budget that they need, look at the economic budget that they have, and we try to work all that together. And that creates multiple tiers of revenue. The big hitters, really, really, really demanding and then you can have your mid-tier folks, and then there's some things in the middle. So the way I see it, and we are much more diversified than what the market sees from us. And I'm not trying to take the words for anybody, but we always hear about how we're not diversified. We are very, very diversified, in technology, our broad markets business, ax handset, wonderful portfolio, automotive, data center, IoT, all of these incredible solutions that we have. Are they $2 billion a year players right now? No, but they're growing. And so I think part of it is almost that the scale of our mobile business, and because that business is very high, the growth rates, they're -- we're growing, but you're not going to drive about 20% CAGR. You don't want a $5 billion revenue plan or something like that. Over time, we can. But the other businesses, what we call broad markets, that's doing really well. And not only are we finding new opportunities and developing new solutions, we have a lot more inbound requests for -- from the customers that we work with. Can you do this guys? Can you -- Skyworks can you do this, we have this problem? We want to get more in automotive. We want to get more in any of these markets that we're talking about. I mean, it's really important. So I think it's one of the unique things about us is our ability to cover broadly across multiple fields, multiple businesses, be very honest, interact with the customer and still have that really deep seated technology moat that we have.

Okay. I want to dig into [indiscernible] a little bit more, but a couple more smartphone things getting away from any individual customers, which I know it gets tricky. Maybe first 5G and then AI. But like on the 5G side, you've had this great content increase over the last several years. 5G is now pushing into lower end phones where presumably there's more cost consciousness. Are there still innovations on the high end of the 5G market that drive overall content higher?

Yes, there are. I mean the technical burden continues to be risen, not in every account. If you look at the larger customers agnostic to anybody here. But the bottom line is if you look at the performance with the largest customer continues to go up at every node and every cycle. And it's not the same. It isn't like -- it's 88-mile per hour pitch and now it's a 90. We're talking about big steps. And we like to be part of that. We'd like to be working with those customers and help them deliver the solutions that they want and also gain more share for them. It's really important. If you -- like I said, if you can hit the fastball at the high end, it's a lot easier to go down. So we learned a lot from those customers. And I think the opportunity broadly across wireless technologies, we still think is really important. And we see multiple solutions throughout the business that the opportunities that we have, opportunities that we should be in. And so we are not demand constrained at all. And it's really on us whatever that market is going to look like, whatever the economy is going to look like. We certainly want to ride above those metrics.

Yes. And then on the AI phone, we were talking about this a bit in the hall. I mean, can you -- this seems like, obviously, a pretty big initiative from all of your customers. How do you think about that opportunity? You look at -- I mean, Samsung Galaxy S24 is being build as kind of the first AI phone, but a lot of those are still cloud-based features. How much do you see those features coming locally onto the phone. And what does that mean for Skyworks?

Yes. Yes. No, it's a great question. So the way that we think about it now and it's everyone -- there's lots of different ideas on what AI will do and bring to the mobile market or some of the other markets, adjacent markets. So the way we look at it is we all have our phone in our pockets, right, whether it's Cupertino or whether it's Samsung, whatever. We can't be without this, okay? So we kind of know that. So the consumer's used to consuming that data on a handheld device. When you look at AI, and this is our view, the technical burden in AI is going to overcome a typical smartphone. The typical smartphone today is not ready for this. We can use it, but it's not ready. The compute power, typically -- and again, there's probably people in here that can argue this. The technical burden with AI is going to demand a whole different set of technologies in the handheld device that are not there. They're just not there. We can talk about a few little neat things that people call AI, but to get true AI to deliver the kind of compute technology that you have, right? You have much more action. You have -- you need to have nearly 0 latency. It's a much, much more difficult problem to solve. Typically, it's with servers, and they don't have to worry about power. So the thing about wireless is you're sipping the energy on your smartphone today. But when you start to put an AI burden on this thing, the compute power, it's not there. So we really believe that AI, and this isn't just a story of the week here, the AI algorithms and the compute power, that's not on the phone today but needs to be, is going to be a really, really big opportunity for companies like Skyworks. And because we really have been around that industry for so long, and we have lots of technologies, and we have the ability to make them in-house. We can curate very, very unique solutions. I think it's going to be a compelling opportunity for us. And I think we're uniquely positioned, I really do.

And how much movement do you see on this from your biggest customers? And presumably, a lot of this enthusiasm just grew in the last 12 months or so. So there's probably a couple of year lead time. But like when you start talking about doing localized AI inference on a device like this, do you see that movement happening now that people are starting to design those phones?

Yes. Yes. And they have to because the last thing you want to do is like come up with a great AI phone and you can't get the compute power. You can't get the current consumption that you need because it's going to generate a lot more compute and power that it's going to slow down your phone, number one, you're going to have to add additional nodes as well to create speed and just a lot there. So it's a -- I think one of the most important cycles that we see in a handheld device, it's obviously going to be more than just handsets and here in servers as well in other markets. But the important thing is kind of the simple thought is today's smartphone is not equipped to do the kind of algorithmic work that you would do in a typical AI environment. Typically, it would be on the PC or in the data center. You can't carry that around. You're not going to be able to do that. So -- but the market is going to drive this towards a form factor that is well received by the consumer, right? So they want to have the AI speed and compute but they also want to have the flexibility and the mobility of a handheld device. I think that's going to be really tough. The good news is that's opportunity. That's opportunity.

I mean it seems like the counterpoint to all of this would be a really good 5G connection means that I can still do this stuff in the cloud and have the heavy compute heavy lifting there. I found that the idea of having it locally on the phone resonates a lot more with people in places like China because they don't want all the data to be typically in the cloud. So how do you think about those trade-offs? And when you look at the S24 and it does look like most of those features are supported by -- and they might still be really good because they might drive unit volume and they might drive an upgrade, but it doesn't seem like it's driving that new hardware that you're talking about. How -- what does it take to get that into the phone and to provide value to the consumer?

Yes, it's one of those situations where you have the headline of AI and then what it means to each one of these companies, right? Obviously, the highest grade companies are going to go first. And they're going to lead. And the technical know-how, the scale, the quality is going to really matter. It's going to really matter because the last thing we want to do is you create this AI buzz and it just doesn't work. It's flat. And maybe the technical burden actually just isn't good enough. But we can't get through that hurdle because there's so much data back and forth and it's not being consumed in the right way. It's not efficient, and then it's a bust. I don't think that's going to happen. But again, go to the fundamentals you've got compute power and your smartphone right now is that, let's say, it's level X. If you want to move that up into a true generative AI application, it's going to be here. And I think that's elementary. I think it's really easy to kind of think about that. But from the technology perspective, the physical device portion hasn't been built. So we're going to have to take the smartphone that we have today. And it's going to go through an entire overhaul and uplifting of performance. And along the way, it may change. I mean, certain nodes may be more important than others. But from the handset perspective, it's going to be untethered. You're going to be walking around with something that is powered and current consumption is really important. And you can see the compute. You just look at what people are doing in servers, I mean, it's the same kind of thing. But they're rack and stack and there's unlimited power, it's plugged-in, a whole different thing. So you start to move to...

80 gigs of embedded DRAM.

Yes. So it's logical to see that the market wants to be a little bit more untethered from that, but you can't have a server in your pocket. So it's an interesting thing. Again, back to what we said at the beginning. We want the tough problems. We want to be able to solve them. We're not a single chain semiconductor player. We're not at TSMC. We have a very, very wide, wide set of technologies that we deploy, depending on the application and the customer, the geography even. And even sometimes we don't really think too much about like aggregating around the pricing points, it's more about the solution and how we get value. But you still can, you can still work with customers to make sure that they get what they need and maybe it may not be a home run solution, but certainly, we can hit the very, very difficult fastball as well.

Great. So transitioning to the broad markets, pretty positive trends there. It looks like you're bottoming out and you've talked about the IoT part of it, in particular, kind of being past the bottom. Can you just talk tactically to the opportunity there, and then we'll get into some of the end market drivers.

Yes, sure. Well, so a couple of things. What is really important from us and I think it's very helpful, is that there's quite a few linkages within the portfolio. So for the most part, we're able to drive outcomes in broad markets, that aren't just singular opportunities, it is a certain product line, and that's it. We have really good kind of cross-pollination within the portfolio. We have a really strong IoT position. Now IoT covers a lot of names and a lot of applications, but we really do have a large set of meaningful opportunities and revenue streams. And if you look back at Sky, I've been at Skyworks for 20 years. If you look back, we really were right down the middle with mobile, and that's great. We did a great job, and we continue to do that. But the proliferation of new protocols, the IoT protocols, the data center protocols. There's so many things that we're doing now. And then also the markets. Like I said, automotive, we weren't in automotive 3 or 4 years ago at all. And now we're in. And the beauty of that is that's coming -- that application that vehicle is a lot different than what we had 5, 10 years ago. There's a lot of tech in there. It's not just drivetrain. I mean, it's real technical solutions that are embedded in there. So getting involved, we have design wins with customers like Tesla and many other automobile companies, really cool stuff there. The business that we acquired from Silicon Labs has been fantastic. It's a very unique portfolio where a large portion of Skyworks is what I would call big game hunting for a lack of a better term, a lot of big, big, big wins, but you've got -- they're big wins, you have to get them. But then you have what we've picked up with the I&A business from Silicon Labs, tremendous diversification. Beginning of that was great. We got diversification. We've got new products. We have our products. We have your products, we're all together. Now after 2 years, we've got an integrated play. So we've co-mingling, great talent and Austin with that group. Skyworks DNA across our portfolios and creating really cool solutions, doing a lot of good work in automotive, for example. Using both of kind of the yin and yang of the company and then also being able to make the stuff in-house, which is also a signature for us. So markets like that are growing with a lot of upside. I mean we we're doing probably like $250 million to $300 million in automotive revenue. That's a drop in the bucket of what we could do. And we've really only been working on that for maybe 3 or 4 years. So there's a lot there. The electrification of the automobile is a theme that we didn't create it's happening, but we can play and we are playing. We're seeing more and more diverse, like I said, IoT portfolios that are growing for us in all kinds of markets, all kinds of markets that create diversification. But usually, those -- even though the markets are different, the core technology that we bring is proven. It's technologies that we know how to use and we can work with our customer to ensure that product and that solution is working the way they want it to work. And they have -- I've give and taken a voice on that as well through it.

Okay. So maybe go a little deeper on a couple of those drivers, and I will open it up for the audience after that if there's questions. But within IoT, I guess the clearest driver is WiFi 6 and WiFi 7. Can you talk about what you're seeing there, progress of WiFi 6 and the timeline for adoption of 7.

Yes. Yes. So as you said, we've had a really good -- almost like a mini cycle that you would see in mobile. And we're seeing that kind of step function cycle to cycle to cycle opportunity for us in WiFi. WiFi 6 had been really strong. WiFi 7, which is just now kind of launching, we have a great position. We have a great position there. And you're also getting -- I'm sure you guys know it, it's not just consumer stuff. I mean there's an enterprise WiFi that you'll see in factories and commercial opportunities. And it's an important technology, and I think it continues to grow and it continues to proliferate into other markets beyond the consumer. We're at a very, very early inning position there. Think about what we did 3G, 4G, 5G, you've got a similar cycle in WiFi. And the thing with WiFi, which is really cool is that it's diversified. So you've got mobile, we love mobile. Love it. We look for our cycles, we're looking for content, and it's kind of this is what you do and then you get the next one. The WiFi portfolio right now is running on its own set of rails. And there's a lot of discovery there. So in mobile, we love it. We know what it is. We know what it looks like. In WiFi, we find applications all the time. We find opportunities, enterprise opportunities, commercial opportunities even things like video, just a lot of interesting end use opportunities that come through with high-grade WiFi technology with WiFi 7 now really lighting a catalyst underneath that portfolio.

Okay. Great. And then automotive, you talked about kind of an embryonic state of that business where you have a lot of opportunity. This is kind of an interesting year because you have -- there's an inventory correction going on in automotive. There's also a lot of negativity suddenly from investors on EV because it's -- and maybe the center of gravity of the EV market has shifted a little bit more to China versus the West. But can you talk about that? And it still seems like the investment in EV hasn't stopped. It seems like that creates a lot of opportunities for you guys. What are you seeing in terms of automotive innovation these days.

Yes. So the interesting part of that is we're relatively big, but we're not that big. So right now, you can still grow this portfolio. When you're at 60% share, it's a different issue. Now you're facing the market. For us, the revenue opportunity in WiFi 7. We already know what we've been doing at WiFi 6. There's a lot more room for us to go. I mean -- and you think about automotive, there's just -- we had been, I would say, underrepresented in that segment. What's helpful for us is automotive has become a tech market to some degree, right? It's been a technical application. It's no longer just the typical vehicle, it's a typical opportunity now with Skyworks where you have these unique solutions that are wireless that are very unique. And with all of the performance grades, the reliability, the testing that we can do at Skyworks to create those solutions. So we've done well in automotive. We're late to that game. It wasn't something that we were doing much with. And there's another case where the Silicon Labs business was small but an important catalyst because they were very driven in that market, and it's been helpful. But we think there's a lot of opportunity there, the electrification of vehicles, that's definitely going to go on, autonomous at some stage, certainly going to happen. And those are the kind of things that are right in the mix of Skyworks technology bench.

Great. So I'll ask one more question on broad markets and then open it up. You mentioned data center a couple of times sort of early-stage opportunities that you might have there. Can you talk about that?

Yes. So we have really good position in the timing applications within data center that really kind of -- think of them, they're like your clock and your data center that sets the nodes, sets the times and keeps the trains on time.

I was engineer for a phase locked loop 25 years ago. So it's been a little while, but...

I was an AT&T and engineered surface acoustic wave, phase locked loop, clock and data recovery, Motorola, all those days. But anyway, but the bottom line is, is that technology is still really important, and it's starting to grow again with definitely harder burdens and more technical hardware to do. And I think -- but it's also kind of a niche market. It's not the same thing that we're doing. It's not an NVIDIA situation. The timing of clock and data recovery is kind of the backroom stuff that has to happen to keep the trains on time and going. So that portfolio is doing really well. We had some core DNA at Skyworks, but then that came also through with the I&A business from Silicon Labs. And what's worked there is when you're a smaller company, you can do certain things. But when you're a bigger company, you can do a lot more. And so for us, we've been able to fund that I&A , we call it the I&A business from Silicon Labs, and fund it. Just take what they've got great technology and drive it. It's already there. So we're able to get it to cast a wider net and a broader reach on some of those portfolios. And it's -- we feel really good about that.

Great. Let me see if we have any questions from the audience. If not, I have a couple more.

We're seeing 5G sort of go into LEO satellites. Is that market open up for you at all? Or is that a different end market that you don't address.

No, we actually have technologies that can do that. It's been a slower launch, so to speak, for satellite technology, but the 5G engines that we have and the 5G core that we have, is absolutely applicable to that. So we do have some design wins there. It's kind of starting to move a little bit slow, but it's starting to finally engage but slowly. And we think that will be definitely an opportunity. We have the technology for it. So it wouldn't require...

Is it different bands or different power requirements from the satellite?

Yes, it's different bands. And yes, there are unique -- there are definitely unique power requirements depending on what you're doing, what the budgets are, technical budgets, what the current consumption budgets are going to be. But it is a market that is getting a lot more attention and a lot more funding. We do have a play on it, and I think there's more we could do more.

What's the logic, I guess, in having potentially more content in an Apple-based modem? Is it just that they may move some of the RF from Qualcomm to others? Or is it more broad than that? Why an Apple modem would be a positive for the RF industry and yourselves included.

Why wouldn't -- okay, I just want to make sure I -- so your question is why would -- give it to me one more time.

Sure. Like it sounds like calendar '23 iPhone 15 was maybe a little disappointing in part because you noted they didn't -- they kept the Qualcomm modem they're going to keep it for 16 unclear on 17, but you're quite hopeful on the content going up a lot more alongside an Apple modem. Why is that? Is that strictly because Apple will move away from RF from Qualcomm or will they move -- just add more content in total?

Yes. No, those are good -- I can't answer all those, unfortunately. But what I would say is -- I don't want to be too controversial about it. But the larger customer definitely prefers the kind of things that we do, honestly. No one really likes to deal with contracts and agreements and this and that, that's not what people want. They want really good product reliable. They want a company that if something goes wrong, you're right on it the next day. We're not into the IP wars. I mean, you got to do what you do. That's a public company. But yes, it's been a little choppy in the last year or so, but it's going to -- it's all going to get resolved. I mean contracts and IP agreements and all that stuff. At the end of the day, the products matter, the satisfaction to the consumer matters a lot, and we'll be fine with it. But those kind of little things are going to happen, and they happen in all industries. But yes, certainly, there's definitely a couple of things that are flipping and flopping there, but nothing that we really can't handle.

I found the discussion around the AI phone, really fascinating. I still am a little confused as to how Skyworks has an opportunity there and where it benefits you. So in my understanding, is it you think that because we have to miniaturize and put so much more compute on the phone that is so technically difficult that a lot of the heavy lifting will remain in the cloud. And therefore, that's why it benefits Skyworks? Or is there other products and technologies that you have that really enable sort of this increase in compute on the phone?

Yes. So I would start with the compute. So what we have today in our phones right now. It's great, do a lot of things. But those devices right now are nowhere near the expectation of an AI application. That's what we're saying. So generative AI, it's very quick. You talk, it comes back, however you want to do it, it's back and forth, back and forth, right? Typically, the way I look at it is, AI would start -- if we didn't have to worry about current consumption or any of that stuff, right? You would say, okay, I'll take a server. Tons of power. I don't care. I can do it, it's plugged in. That's one thing. And you could have tremendous compute power, like an NVIDIA chip or something like that. That's all there. You go to the mid-section of this thing. Now you have to say, okay, how do I find a way to get that level of power onto another smaller device. And you know what that device goes, it goes to the PC. There's a lot of AI in the PC. And I think there's going to be a cycle there, a major cycle. Now you get to mobile. Mobile is the hardest, the hardest because it's untethered. And your compute power, even if you're sitting and plugging that you're driving a lot more current and energy in AI. When you're with your smartphone, you get the burden of that technical drain, you've got compute power that we don't have yet in a smartphone. It's not there. And then you have the opportunity to really drive an outbound solution. So it's not there. So the way we think about it is, foundationally, AI starts with the server, goes to the laptop, goes to the mobile phone. The mobile phone is the hardest part because it's not plugged in. You're not going to carry that around with you every -- you're not going to carry your server around. You're going to be sipping for power. We want that because that's going to create an inflection. It's going to be a movement. It's going to be great for people. I think the technology, the opportunities that will spawn from it will be wonderful and great, but they're going to require something much more powerful than what we have in our phone right now. And so we're looking forward to that.

Great. Well, we're out of time, we wrap it up there. Thank you.

All right. Great. Thank you.