u-blox Holding AG (UBXN.SW) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Analyst Day conference call and live webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Thomas Seiler, CEO. Please go ahead, sir.

Welcome, ladies and gentlemen, to this Analyst Day, which we hold online for known reasons. So I'm glad we can run it this way, and I welcome you warmly. We are running quite an extensive schedule and program, together with my colleagues, Roland Jud, the CFO; and Andreas Thiel, the Head of the Product Centers. Also in the call is our Chairman of the Board, Andre Muller. As you can see, we have about 3 hours to grow together. However, we will have a break around 5:00 CET so that not all is in one block, and questions are at the end as already mentioned. I like to make the usual disclaimer about the contents of this presentation and about forward-looking statements. Also, I like to say that we are unable to give any further details about our offer made for the acquisition of the Telit Company. This is for regulatory reasons, according to the U.K. City Code. Good. Now let's start. I'd like first to give an overview highlight to give also an introduction to those who are perhaps the first time with us here to explain what are we doing and basically, why is u-blox core for our customers. Our business is to make positioning and wireless communication technology. We are a provider of such technology to the broad industry, and we do this for a very long time. We have 3 competencies with regard to technology, which is positioning. This means we can locate the source of the information. We use satellite-based signals primarily for achieving this. We are making cellular connectivity to connect and communicate within the cellular network that you very well know from using your hand phone. And finally, we also entertain the short-range radio connectivity, meaning, we can create point-to-point connections with the help of standards that are called Bluetooth or WiFi. We translate the technology into integrated circuits. This is the core. This is where the hardware and the software comes together. This is where a radio and a microprocessor acts together to make wireless signals, transport it to the air, electromagnetic waves precisely. And we put such integrated circuits into modules because a module is set assembly and easy to use, set assembly for our customers. You just connect our antenna and integrate this, such an easy designing and functionality into a final product. And on top of all, we also provide data services to make this functionality much stronger to give lifetime support, to add security. This is what we do for a long time and extend more and more. So we help OEMs to make products connected, connected to the cloud to make it reliably working over very long lifetime of products. We are mainly in industry and automotive applications. We make all, as an established company, the focus on R&D on creating the knowledge of these products and all the relationship with customers. All the rest is outsourced through large manufacturing partners or any other providers of services. So we serve a global market. We are -- have a global footprint. We serve 3 application areas called automotive, industrial and consumer. We serve more than 7,500 customers, and they are distributed about 1/3 each around the globe: in the Americas, EMEA and APAC. We have about 1,200 employees and colleagues that make that all happening, over 70% in R&D. And insofar, we spend decent amounts in R&D to invest into technology and into new solutions for our customers. So we have a value proposition to make to our markets, to our customers. This is absolutely essential to, of course, be successful. It must be the value proposition to markets we are serving. And I mentioned in what markets we are: the industrial, the automotive and some consumer. And in these markets, we have megatrends that drive the need for connectivity forward. It is the theme of the Internet of Things and especially the industrial Internet of Things. It is the topic of autonomous driving for cars. We have, of course, also the seam of changing -- the propulsion of these vehicles to electric. The smart city is a big topic. And finally, the industry is going for the fourth revolution. So these all are reasons why markets are expanding and are even accelerating in this expansion because the number of applications expanding and also the value that is applied to make this connectivity and becoming smart happening. And even with the crisis with the COVID, we have been very solidly positioned in these markets. We have seen that even under such conditions, these trends are persisting, even making growth stronger. So I'd like to explain why wireless is so important. This is perhaps not obvious. But first of all, wireless is important because it delivers really the possibility to make connectivity all over the place for high capillarity. And it is the only technology that allows to connect billions of devices in a reliable but also cost-effective manner. Also, such technology is developing rapidly the possibilities and capabilities but also the robustness and reliability has made strong progress over the years and is still going on strongly. That also tells us how much interest is in this technology. On the other hand, customers are perhaps overwhelmed by such complexity and possibilities. They try to minimize the implementation risk and therefore, look for experts for being quick in the market, and especially on reliable partners they can go with to outsourcing in their product. So this is our role to deliver, to provide superior wireless connectivity and solutions to our customers and especially, to help industry to make their devices smart and connected. Now with this, we'll go specialties wireless. It is, first of all, ideal and easy. It can help to connect between any device. It is in the core solutions that can be applied everywhere. Also, it is self-healing. Unlike a cable when it's cut, it doesn't work anymore. When a wireless connectivity is interrupted, it's self-healing and continues to run. And it is also serviceable, can even be managed over time and expanding in capability. This, of course, highly cost-effective. We know that from everything we worked with us, including the phone, and it has evolved. It is amazing what wireless technology can develop, can create a type of additional functionality it transports and brings into products. In the context of the industrial use case, we have quite specific requirements and especially, we need a very robust connectivity. Obviously, we want to rely on infrastructure and on anything that's final is the backbone of our life. Insofar, we need to reflect such requirements in the design of such connectivity of our products. And customers expect that there is little risk with the technology they implement because they are independent on the reliable functionality, and it is generating, finally, to stream of income. Also, it is a machine type of communication. This means there's no human interaction. So the operating schemes are more complex. But at the same time, they must be very robust. They cannot be disturbed or failed. These are sometimes simple things like switching on and off or battery issues or that you have the chance over the lifetime over 10 years or 20 years to maintain and upgrade the products. And insofar, we need a lot of efforts to make such high robustness. It is a lot -- a big knowledge how to test and to finally be sure that what you have developed is robust products. It applies thousands of tests to achieve this. So this is what we make. This is wireless connectivity that is the heart of our company. And we are here for our customers as a one-stop shop provider of solutions. And why is it important that we do these things together? Because our customers mostly need several of these technologies together. The most obvious is without knowing where the information is coming from is probably not so useful to send information. And therefore, the customers often combine connectivity and positioning. And depending on what you want to connect, you need either the low range or the wide area of connectivity or rather the one for the short distance. So it provides the seamless integration between technologies that customers have fast and easy way to build the complete product that they have also, insofar, a reduced risk, reduced time to market and especially can reduce also the supply risk for get more the components they need. We are quite unique in this market. There's probably no other such providers combined with in the way we do, between the technologies in the form of the products between chips and modules and also combine the services that accompany the products over the lifetime. This is what we have built over a very, very long time since we have started our company. So our innovation is really what leads us since decades. We have done that continuously and have upgraded what we have, solutions for our customers, insofar have finally traded attributes that are really difficult to replicate. First of all, we have very deep knowledge, all built over the long history of the company. We have always focused on making it to value proposal for our customers for markets we know very well, and we are very close with customers. And of course, we have selected also these markets, we cannot do everything. We have always tried to be really innovative in the sense of also going out of the box, looking for new possibilities that are perhaps not so obvious. We also took risk in this and all these risks, you can really be innovative. And that's our culture that you must care for, you must also allow for the fault and the failure. But with that spirit, you can create things that are outstanding. And this is of course in an R&D team that has the broad know-how. So with this, we create products and we are in the market. It makes us quite unique, as I said. And here is the comparison also to what is the competitive landscape. We are a company making the -- a key focus on markets that we know, the industry and the automotive only. We are specialized in making connectivity for the industrial Internet of Things. And because we make modules, we have this deep understanding and we can really show the customers our competence. And this is what makes us the preferred partner they like to depend on. Our competitors, of course, also fall in the market where we are in. This is important. However, they have a different focus. We have here 3 groups of competitors. The top one is -- are the large semiconductor manufacturers. They focus on high-volume products like the smartphone. They have a very broad product offer normally, but they're entirely focused on offering integrated circuits. We also have a group of smaller manufacturers of semiconductors. They, of course, specialize in terms of new technologies, also mostly as an integrated circuit and/or specialized just in few. And finally, because we also make modules, we have both the module makers as our competitors. They are taking chips from either the large or the small semis, put them into modules, use reference designs that you can own and get together with such components and help them to provide heat-graded form of the module. That, of course, helps customers to be quicker, again, as I explained. But they have not so deep knowledge in the -- not access to own the possibilities that the technology offers. Now let us see where we sell these markets I have mentioned. The first one, automotive, where we have a very strong trend of expansion of electronic content in the car because of more automation, more assistance and, of course, also because the propulsion concept is changing, both the internal combustion engine to the electric drive. All that creates the need for more electronic content for more smartness. This is where wireless connectivity also comes into play, as you can see. The examples we show here, a big topic is driver assistance and to start to automate the driving business. Good positioning information, for example. We have, of course, in-car navigation and entertainment for a long time, the navigation device in the dashboard. We do connect via the [ silicon ] network transport data, sometimes in huge amounts between the car and the network. Also, we provide in-car connectivity, for example, to connect your handheld device to the car. And also, we connect between cars for the topic of V2X connectivity for improving car traffic safety. So the market prediction is indeed promising. You'll see the graph here that for assisted driving, strong growth of content that goes into the car but also for entertainment, the oldest part of the -- in the car is electronic. It has been growing. Then in the industrial side, similar. Many devices become smart, manufacturing is now connected wirelessly. And here, the truck is just an example. It could also be a building or any other piece of infrastructure. You'll find similar reasons why connectivity is in place because you add connectivity of all sorts. It can also be satellite, for example, for cellular. You have, of course, control unit and an automation piece that is in the industrial field. You track and trace, you monitor, you want to have remote control, you want to put in safety and security. And of course, we have various reasons for transporting data. And here also, the prediction is strong growth with regard to either wide area connectivity or short range connectivity as it comes to the car. And finally, in our consumer market, not the biggest for us, but still interesting, and we do it opportunistically. Of course, primarily, we have markets to improve certain navigation tracking, for example, in sports watches. And also certain pieces of connectivity, mostly short range, Bluetooth, WiFi and sometimes in cellular. And this is also here, a market strong expanding because more and more such devices are here for comforting the consumer. After this overview, I switch over to our next chapter. We like to talk a little more about how has business developed in the recent time, especially under these conditions of the COVID crisis and how is the outcome there. So the business, in general, has not have affected us tremendously. We have priorities as before, and we have continued to keep them the same and be consistent in fulfilling. We have, of course, looked for continuation of our operations and keep our employees healthy and safe. We were able to immediately switch to remote working in all regions. And we are glad to say in Asia, most of the pandemic is behind us, and we can meet in person again with customers. This is, of course, helpful, but also we were able to expand to have a more remote sessions with customers by involving also on an international basis, more people to talk to customers. And this has sort of created new team spirit, possibilities to interact and, of course, to propel our business. At the same time, because of a downturn in business, as we have already reported with the half year numbers, we have taken measures to make us more efficient and have made for cost improvements of CHF 15 million in annualized savings. And this, of course, also is a chance to bring the company forward to make it more agile again and also to focus on the most promising activities. So the business impact was in a one way, strong because of interruption in production with our customers. On the other side, with regard to working together with customers, we're serving this, creating new business opportunities, there was no change in the country. It has rather increased as you can see, and have, of course, also looks that we focus on creating new opportunities to be ready should long return and the overall macroeconomics go a lot more buoyant than during the crisis. Fortunately also, we never had any interruption in our supply chain. We were always able to fulfill the demand of our customers and are able to do so also in the future. So and of course, tells us also our customers have continued because there was no paradigm shift. We have still the same megatrends driving us forward and you could say probably to have even started to drive a little more. The industrial customers have looked for driving efficiency and accessing the operations further. They want also to make it more smart and more connected because everybody learned traveling is not always possible. You cannot always access your infrastructure and the products that are in the field. So better make them connected, better look for remote control and maintenance. And with our automotive customers, the expansion has not interrupted. The need for making cars more smart, more automated is strongly continuing. And the trend to electric drive has even expanded as this market growth showed you in Europe share for plug-in hybrid cars has strongly increased. So here, we are insofar really in a good shape. So prices has no impact on what makes our market and also these consumer products. Plus, to make the final point, we see strong demand and especially we observe what we call the high-touch consumer product have also seen strong expansion. And this is visible in our business pipeline. Here, we show you how many new projects with customers we've generated in months. And you can see this curve has taken a stronger slope than the year before. And the main reason is because we are focused on this to really for -- calls these customers, help them to go into new projects. This also calls our customers have probably the same attitude to really look forward and make sure they have product offers to a market that is returning. And third, we have expanded our sales channels. We have looked to make sure we attach with more channels and more contact points to the markets so we can find new business opportunities. Now we can say we have really good signs of recovery. Fortunately, it started in APAC. We had record months in Japan and Korea, mainly thanks to automotive, but also from the industrial side. And this is, of course, a good combination that this, the rebound of the market, we can also profit from accelerated demand. So more in detail for the automotive market. We had, of course, a substantial impact by the production shutdowns in the -- starting from the second quarter. We have seen a recovery now since the third quarter. It started in APAC and has now also created an uptick in EMEA, Americas, especially recently. So the rebound since September is strong. And I mentioned already the strong books we have in Japan and Korea. Unfortunately, during the crisis and during this downturn, we have still counterbalance from new ramp-ups because we have projects in the pipeline from before that went into production. Of course, at a lower level than expected but still, it was plus. Now the outlook looks very promising. The registrations, as I will show you in the next slide, have returned to levels as in 2019. The autonomous driving subject is in here and driving this forward and together with the general increase in content in the car. Here are the graphs that tell us how the car market had a strong decline in the first quarter and has now returned in October to almost levels as seen before. The gray area are 5-year averages. And we are in the same area now, almost in the Americas, for sure in Europe and also in China. Cars have overseeing in averages of previous years. So this creates, of course, solid demand insofar, we can say, the crisis is behind us fortunately. In the industrial sector, as we have reported for the first half year, we had flat development. There was no downturn fortunately. And here, you see some details why it was so. We had in the many applications areas where we are active in, sometimes very strong growth like for [indiscernible], for certain infrastructure applications, for automation, but also for medical and telecom equipment. We only had a downturn in tracking and telematics and altogether, maintain that we had a 0 growth rate here. But that is just a sign of our diversity in the market, how many different applications we are touching and that fortunately, they have different patterns on how they are finally responding to pricing signals, some strongly, but many others just continue to expand because the megatrends are stronger than the macroeconomic impact. Finally, with our consumer market. We have seen some decline in the first half year, mainly the small variables, cameras and watches, but we have also seen that some applications like fitness were positive. They have seen strong growth, obviously. People were staying at home and equip themselves. Now with this lockdown restrictions easing in, we believe this market is going to expand. And indeed, we believe they are also even in more growth because some very specific COVID applications have -- keep emerging and are going into volume. Probably most of them independent on how the crisis is continuing. But all in all, as you can see, the consumer market is relatively small to us. So in the total, they're rather a small impact. So this completes my business update and for how we have seen crisis changing certain patterns in the market. We can really say that the worst is behind us. Now I come to the next chapter. We have published a report about the topic, ESG, environmental, social and corporate governance. I'd like to give you a quick summary and insight because this topic is often one that is on the table where investors like to have insight for how we handle these matters. The topic is not new for us. We are maintaining good programs in these matters for a long time. I will explain. So perhaps, first of all, we can look into how do our products help to improve the society, the needs to be, insofar, sustainable. Our technology does implement many functionalities that otherwise are not achievable to make the world better and insofar as to support all these ESG goals. For example, with short-range radio, we can help to build the infrastructure for the electric cars to charge the batteries and to optimize, of course, the use of energy because information can be easily transported between the devices and the infrastructure. Similarly, we can help to optimize energy consumption to build new sorts of solutions. For example, for street lights that are a different type of device than the old bulb and make a part that was on top of the street. Because here, we can -- light is managed, light is delivered as required. And also it does help to make a reliable infrastructure, is much more easy to maintain as a system. Or in the case of buildings, which are a strong consumer of energy, either for heating or for cooling, of course, these more smart systems with much better controls, such consumption can be reduced and especially brought the consumption growth to best use of the user as a given. We are supporting the sustainability for a long time. We are a member of the United Nations Global Compact since 2012 and have taken initiatives since then, like I've mentioned. And together with the Internet of Things, of course, we can make contribution beyond that we are just as a company, but also that we make and support together with our customers such a sustainable world. We maximize these impacts as much as we can to take responsibility. And of course, we are making sure we do maintain programs on a continued basis. In our report, we give details to what are our activities and also what are the planning for the future. We have identified and prioritized the topics that are most important to us and the stakeholders. And we have aligned them with the 17 different goals of the United Nations Global Compact. As you can see here on the right-hand side, we have basically 5 engagements along the business ethics, for our employees, we take environmental responsibility, we do lots of effort in the supply chain and also for the communities we are adhering to. So this report should give a good insight into how we understand sustainability and how we maintain and bring it forward. With this, I hand over to my colleague Roland Jud, our CFO. He will lead you a little ahead of time through the slides about our financial situation.

Thank you, Thomas. Good afternoon, ladies and gentlemen. In the next 20 minutes, I'd like to give you a short financial update. I will start with a short review of our half year results, followed by some thoughts about capitalization of R&D, revenue development and finally, about our M&A strategy. In the results of the first half year 2020, the impact of COVID is across our [Audio Gap] investment into R&D will enable u-blox to move despite these current headwinds with competitive strength into the future. We have a robust customer project pipeline, which enables us together with in the industrial trends like IoT expansion and the growth in car electronics to come back to EBITDA growth in the future again. Creating such an expanded product offer is only possible thanks to our strong investment into R&D. However, such investment is being balanced against the objective to generate free cash flow. Our R&D intensity is managed against this KPI. And on the right-hand side, you see a graph showing our accumulated R&D investments over the past 15 years. We invested roughly CHF 900 million into innovative core IP. Due to the capitalization of these R&D investments, our balance sheet represents the intrinsic value of u-blox transferred into customer values via our products and our services. So the huge investment into knowledge is reflected in the balance sheet. For our more recent activities as we capitalize R&D according to IFRS, the intention of IFRS with capitalization amortization is, first of all, to align expenses with the revenue streams and make the different kind of business models comparable among each other. That's why we capitalize our R&D in our balance sheet. To avoid an overvaluation of assets, IFRS also requires to do an impairment test every year. And this means that we test the value of the capitalized R&D in the balance sheet against the business plan. And as soon as they do not support investment case anymore, you have to impair it. But impairment does, therefore, not mean that these capitalized R&D are of no value anymore. As most of our IP further creates cash flows, impaired or not, it doesn't matter. So if we do not analyze the impairments occurred in the past, we can group them as set out in the graph on the right-hand side. As you can see, the main impairment belong to reasons where still cash flows are generated. But due to the discounting not sufficient to cover the capitalized assets in the balance sheet and therefore, they are impaired. But the asset is still there and the IP is still there, and we can still create cash flows and create cash. So due to the accounting rules with net present value calculation on impairment and certain development programs happen. Overall, it's pure accounting topic. As I already said, it has no impact on our core KPI free cash flow. In general, we, anyway, take a conservative view in reviewing the items on the balance sheet. And with that said, we can assume that the COVID risk are fully reflected in these impairments. Also on the right-hand side, you see an input for modeling our R&D costs. Roughly 45% of our R&D costs are capitalized during the year. The amortization of lags capitalization by roughly 2 to 3 years and harvesting time or useful life of product is, on average, 9 years. Although this longer lifetime, the amortization period of -- is between 3 and 7 years in our book. So what is the impact of COVID-19 onto our business? After a strong start in 2020, in the second quarter, revenues were declining. We reached the bottom in July, August time frame. And since then, revenue started to increase again through October. The graph on the right-hand side shows the monthly development of bookings, not billings, which are increased already since May, as Thomas mentioned. As the customers hold little inventory, the whole business has become relatively short term. And because of that, it's difficult to do any predictions to the future. Again, because of the U.K. takeover code, we cannot make any more quantitative statements at this point in time. So u-blox has financially solid profile, and we are strongly positioned to withstand the COVID-19 crisis. We have strong gross margin performance, which reflects our specialty products, which tend to demonstrate more traction even during market downturns. Our business is well diversified across geographic regions, markets and products. And in addition, we initiated an OpEx savings program of around CHF 15 million with the aim to increase our efficiency. So u-blox still has a strong balance sheet with a liquidity of roughly CHF 100 million at the end of June 2020. We have a strong IT portfolio where we do not expect any further impairments and also refinancing of one of our bonds of CHF 60 million will be determined in due time. As of all 2020, our net debt-to-EBITDA ratio is 0.3x. We regret not being able to provide you an update on our earnings for the full year 2020. This is due to the U.K. takeover code rules and the recent announcements of possible offer for Telit Communication. We expect to be able to provide you an update on earnings guidance in the near future. In the view of the latest announcement, I want to give you at least some general information about our EU block M&A strategy. M&A has always been a part of our long-term strategy. We successfully closed 16 transactions to date, the last one in March with the acquisition of Thingstream. A possible target must complete our product portfolio and add a service component and must have a strong industrial logic. Otherwise, we don't do it. Also, must the purchase price enable the shareholder value creation based on a conservative synergy calculation. We are only willing to do an acquisition if the valuation is reasonable. And the business model as well as the management and the culture are an ideal fit for u-blox and our company. In which areas do we find such complementary fits, it means that we can do technology acquisitions, acquisitions where we gain economies of scale or could expand our customer footprint and profit from cross-selling or where we could enlarge our recurring revenue model. So with that, we maintain a continuous stream of acquisition opportunities. With that, I have a little bit ahead of time finished my financial update. We will now have a break. Thomas, how long we will take it?

I suggest because we are ahead of time to make 10 minutes break and continue at 5:00 sharp. 10 minutes.

Okay. [Break]

Welcome back to our Analyst Day presentation. It is now Andreas Thiel speaking. I'm responsible for all the product centers in u-blox, and I will talk now for the rest of the day about what we do in our development teams to move forward u-blox and to bring exciting new technologies to the market. Now we heard already we are in it for the long term. So we are working now since 23-plus years on technology. And that's not only an internal view, but this is also driven by the fact that our customers have a very long-term orientation as well. Industrial and automotive products typically have more 10- and 5-year life cycle. So many of our products good for 10 and more years in the world and are being used by our customers and their customers. That's really why it pays off to invest in core intellectual property because we can reuse it. So whatever we develop here is reused in multiple generations of products. We can continuously improve it and to build a big portfolio. You can imagine like LEGO blocks that we can put together, improve and get better all the time. And it comes then with a low risk because it's not just a single piece that we -- a single big block that we have, but many bits and pieces that we can combine in various forms and can always use to create new products. A bit of glue between all these hardware products that we have in our portfolio and this core IPs, of course, the services that we add on top of it. And we can extract more value even from our IP by -- so combining this into solutions that solve customers' problems. Thomas already mentioned much earlier in the presentation that it's important that our products are robust and performing to specification. So we employ very thorough verification and validation method to ensure customers are happy with our products, and they stay happy for long term. So products are also enjoying long-term support from our end. Last but not least, over the time, we have worked with a lot of technologies, staying always at the edge of technology to make sure we deploy the latest silicon technology, advanced packaging technology, and so will bring energy saving products in very small form factors to the market. To give some figures here, in our organization, we run 15 R&D centers worldwide. We have around 800 engineers in our organization. And the R&D spending per year amounts to about CHF 100 million. So if we want to put it in a little bit of summary, what are the core know-how areas in u-blox today is, on the one hand, the hardware design know-how where we start from analog and digital silicon technology. We can bring that into one piece of silicon. This is the core technology that we replicate to many products on positioning to cellular to short range. And we should never forget a lot of what we provide to the market is software. So about 70% of our R&D cost goes into software, and that allows continuing differentiation of our products. Even when the hardware is fixed, we can still generate a lot of value to our customers by still updating the software part. If we do it like this, so we own the core technology, and we have the ingredients of our products, so under our control. The big advantage of this is that we can derive a larger part of the value chain. So we can deliver more, we can deliver enhanced functionality by combining this, exactly those things that our customers need to solve the problem at hand. We can provide lower cost of ownership by absorbing more functionality. And with adding new services, we can also participate in the service portion of the solutions that we bring to our customers. We have seen in our experience that we can increase our margins over the lifetime of the product because the products stay very long in the field, and we can optimize production costs and enjoy economies of scale as more and more customers use our products. We stay independent from third-party road maps so we can fit our product life cycle that we give to our customers. We can fit that product life cycle to the needs and to the long-term investments that also our customers do. And so also customers are then willing to take a long-term commitment with u-blox because they know we are in control of it, and we can provide that essential lifetime support. Now what is the output of all these activities? If we look at 2020 and the year is not yet over, we were able to announce a couple of exciting products. There is in the cellular product domain, the u-blox R5 platform. This is our first Cat-M chipset that we offer in the form of chipset and modules. So it's targeting the IoT domain. It's really perfect for all robust, stable, long-term solutions in that world of Internet of Things. Another one is in the short range. The JODY-W3. This is more at the high end of the WiFi technology and is targeting the automotive market. So it's -- you heard already before the example of the charging of electrical vehicles. That's one application, but of course, also everything that is connected. We have WiFi inside the car or the outside of the car. Then the latest announcement that we have seen, they came from the positioning product center. So here is the M9 where we bring our auto version for -- mainly for automotive again, telematic applications, applications that also work with inertial sensors to provide ultra-stable and robust position information, for example, for automotive navigation applications. And the other one, a new silicon that we brought out, and we announced just a couple of weeks ago, the u-blox M10 platform, which is targeting quite a different market segment. It's more about the variable sector, small and low-power asset trackers, where we specifically have designed a product for that market and is starting sampling right now. Last but not least, my colleague, Roland Jud already mentioned this last acquisition of Thingstream. This complements our services offer and accelerate as we are so we can add more and more service component. I come to this a bit later on. Now here, an example, I'm coming back to this u-blox M10, the latest addition to our positioning products. Here, we can show how all our ingredients from the R&D side fall into that product. We have here on this slide more the hard facts, so what goes into the silicon, what goes into the hardware product. There is the advanced technology that brings us a smaller chipset, this means also lower costs. We have the higher performance from the signal processing and also our advanced RF and analog design capabilities. We have the power consumption that we have reduced. And so we can also bring higher performance in general to the small and variable devices at a very interesting cost point and with very low energy consumption, allowing for long run times or small batteries, respectively. This hardware product is then embedded into various product form. So you see on the bottom here on that slide that we have the various forms of the product, starting from a very small chip, just a couple of millimeters clear and then going to various forms of modules. But this is not all. We also tap into this product with our services offering, so we can enhance the performance or we can lower the power consumption, depending on what is needed, but there is a seamless integration also with our services offer. So the product does not stand only on itself, but it is also enabling interesting portfolio of total solutions that we can then bring to our customers coming back to this one-stop shopping. It's not only a piece of silicon that the customer has then to figure out how to integrate in his device, but we can already talk about complete solutions and solve an actual problem like where is this device, where is my part that I want to track, or really give the information, high-precision information to a variable device so that people can find out where they are or at what speed they are running or whatever is the information of interest. In the following, I will talk a little bit more about each product center. And I will always start a little bit with a review, how COVID especially impacted that particular product domain and then go over to the growth factors in those markets and what we achieve and plan going forward. So starting with the cellular product center. Here, clearly, what we see is that COVID is accelerating Internet of Things in a lot of areas, starting with a massive increase in moving from cash transactions to touchless, contactless experiences. We see a lot of contactless payment. We see a lot also of remote monitoring and automation generally. Avoiding or trying to avoid it, people have to touch things and still get the information or can exchange the information that they want to exchange. Generally, this also means that more calculation, more computation power is needed at the edge of the Internet of Things. So this drives further growth in sensor networks and connected devices in general. So all in all, very good trend here, and we have seen -- as Thomas already mentioned earlier, we have seen a lot of activity in projects with our customers. We believe this will materialize in the months to come. We will see a lot more in this direction in '21 and beyond. On the other hand, more on the negative side, we have seen that some of our customers have become more cautious with CapEx-intensive investments. So around the globe, maybe with the exception of China, 5G deployments have been slowed down. But nevertheless, this is an intact outlook. It will come just a little bit later, but we will see that coming also. Then just also to mention here, just 2 areas, micromobility. That has been an interesting aspect of the COVID situation because people try to avoid public transportation, so electric bikes, scooters have become more interested and has been a record year for these kind of means of transportation. And obviously, connected health is, of course, high on the score. So to summarize, where are the growth drivers in cellular? There is still -- there is the migration from 4G to 5G. And generally, the migration to cellular from a lot of proprietary technologies. Luckily, in the IoT portfolio, 5G is also for the long term. So our product portfolio is already 5G compatible, so we can already serve on this wave, even though still most of the applications are really in the 4G domain. We also see a higher integration here, so we combine more the cellular and WiFi and Bluetooth with GNSS. So we have products here, the combo modules that we brought to the market where we combine cellular and GNSS, for example. Then security is a growth driver. We see the awareness is rising that, of course, with a massive deployment of Internet of Things infrastructure, security is becoming paramount. And from our services perspective, we can offer here end-to-end solutions that make sure that the data of our customers stays safe and that we can maintain this over the lifetime of such a platform. Recurring revenue in general, I mean, more and more of these cellular connected devices are also being operated in a services model. That helps us also to integrate our services, and it's becoming a business model that is more and more adopted by customers and throughout the industry. So the services model plays very well, upstream and downstream in our value chain. Then last but not least, with time, we see more and more flavors of cellular networks. So we have, on the one hand, networks being driven more by government, so not only by the traditional network operators, but for example, the FirstNet in the United States is a specific network for first responders. So firefighters, police, for example, and other public safety applications. But we also see is more and more, especially under the 5G umbrella, a more and more private networks, for example, in the industrial environment. A couple of products we rolled out here is the SARA-R5. I talked about this already. Our own chipset, also in the form of modules for Cat-M and narrowband IoT applications, embedded deeply with our secure offerings and coming also in combination with the positioning solutions, GNSS inside. The SARA-R42 series, which brings us also still backward compatibility with 2G for some markets where the LTE coverage is not yet that great. And last but not least, narrowband IoT products for just covering the ultra-low data rate, ultra-low power markets. Achievements, especially on our side, we are very proud that we can say that this product is in production. It has been certified with the major network vendors. So it's certified on the regulatory side with the likes of FCC, PTCRB, GCF and so on. So these are all the regulators that make sure that only certified devices transmit in the world. But then also we have operator certifications that ensure that devices work with their networks. And AT&T and Verizon, just to name 2, are very important to give us the access to the American market, obviously. Here we see then how we test. These are our 5 products around the world. You see a lot of operators, a lot of the bands, gives you basically -- the small number you see here tells about the frequencies that these devices operate on. So every region has different technical provisions here, so these different radio bands, where these devices work. We have all the operators that we work with. And last but not least, we also have the vendors of the infrastructure in these regions. So you see names like Ericsson or Samsung, also Huawei here and Nokia. This shows how big the effort is to bring such a platform to the world, but we can say that our 5 platform has successfully been tested in all these markets, with all these combinations of vendors and network operators. So we are in a very good shape to roll this out in the years to come. Now for finishing the cellular part, just a few applications here. NetModule is a very nice example of a typical kind of a black box that goes into all kind of mobile applications. So that the -- they are a leading manufacturer of communication products in the telematics and IoT market. And it's a very nice example because it combines 3 products from u-blox. So we see a cellular module that delivers LTE connectivity. We see a GNSS receiver, that gives us a high-performance positioning solution because it also integrates with an inertial measurement unit, so that brings us then also navigation when there is no GPS signal available. And last but not least, the WiFi module to provide the local connectivity, so you can think of it like a hotspot functionality. And as you can see, all in a very robust package design for automotive durability. Another one, completely different area. Medical device company is called Leikr. And this is more or less the same thing, but just in a much smaller form factor. So it's a heart -- for the wrist, and it connects all kind of medical devices that a patient may wear on his body and transfers it again using cellular connectivity to the cloud so that it then can feed into various analysis tools and logging tools from there. So for example, you can think of things like heart rate, but also blood glucose level, even ECGs can be measured, blood pressure. So a lot of details can be used here, and it's basically enabling mobility for patients that otherwise would need to stay in hospital because they need to have some vital functions monitored. Again, another example, because 3 products of u-blox go into this device, short-range module, NINA-B3, which is a Bluetooth module; then again, positioning receiver; and last but not least, the R5 cellular modules. You can see here, again, in many, many cases, the positioning is required. So whenever we talk about IoT, there is always also the component that we want to know where the data is coming from, and it is obviously answered by positioning. Now, where are we going? What are the priorities for the year to come? Obviously, based on the R5 platform, we want to expand our leadership in LTE-M and narrowband IoT, so really bring to the market a long lifetime proposition with a stable and robust product that can be relied upon. We want to stay on track and be on the leading side of the transition of IoT applications into 5G. So we are investing heavily here, and we are bringing our technology forward. We want to create more value to our customers with the definition of combo solutions and the addition of services. And obviously, we are working, as always, on the next generation of our silicon. Coming now to the next product center, positioning. Again, what is the COVID impact here? A lot of applications show really a positive upward trend. You may have heard about drones delivering. For example, now in the discussion, delivering the vaccination to remote areas. But obviously, also again hear quite a substantial market opening up because all over the world, we want to -- people want to avoid touching goods. So that's a robotic approach to delivering goods and, of course, very high in demand and with a lot of interesting applications popping up. Then we talked already about the e-mobility. Of course, e-mobility always involves that you want to know the location, so a natural market here. Then we have also very strong margin in the infrastructure for cellular, mostly where we need timing information. This is a requirement by the networks. And of course, the demand propelled by a lot of work-from-home. Of course, it's driving more networks. It's driving more infrastructure. It's driving for us more applications in this market. We talked about the health and tracking. So battery, long battery life, fitness tracking and health monitoring, and generally, a growing interest in reliable people tracking. And also contact tracing are applications that are popping up. And again, here, of course, also with the side effect that we need security, especially when it comes to personal trackers, so that is a very nice combination with the security proposition that we can deliver from our services side. Last but not least, remote monitoring and automation always, again, here the question, where is the data coming from? Can we rely on the data? So positioning information is essential. Nevertheless, there are also a lot of applications where really the positioning is at the heart of the application. So there, positioning information is essential. And this is especially for everything that moves around autonomously. We have talked a little bit about the autonomous cars, of course, but we should not forget there are a lot of smaller robots that move around maybe in confined areas. But also maybe on the street soon for again delivering parcels without being touched by humans. So that's paving the way to the smart city. But of course, there is also a lot related to this in the industrial 4.0 ecosystem where we may think about robots delivering goods on company premises and so forth. Then I mentioned already the timing solutions, where, again, the positioning technologies are in need because the positioning technology can deliver highly precise timing information around the globe. So it's at the heart of every modern network technology and that's a very solid and stable market. It requires ultra robust and ultra reliable GNSS solutions in the end. And then last but not least, the growth driver, especially for the new M10 product, of course, is a super low power product for all kind of variable applications that demand a very long operation time. And in general, a small form factor for the battery, but also for the product itself. Now when we talk about robots, of course, we don't need to think just about Star Wars and other things, but there are also some very profound things like the robotic lawn mower. It gets more sophisticated every year. And one remarkable innovation that we've seen now with our customer Husqvarna, who is market leader in that area is that we try to get away from that cable that you had to bring into the ground to fence your robot so that it would not leave your lawn. Actually, by using a higher precision on the GNSS side, we are able now to control this lawn mower down to the centimeter level and by that, tell it exactly where it can still grow and where it must stop. And this is, of course, something that makes the life for customers easier, lowers the installation cost and gives us higher productivity and, again, removes also the risk that this fencing cable will be damaged. So all overall, quite an interesting innovation, ensuring, again, how better GNSS technology can enable our customers to bring more value to their customers on stream. Of course, at the very high end of that application, of the autonomous operation, is the autonomous car, where we talk in the first instance of assistant systems. So cars being able to drive for a certain range. But then of course there is the long-term vision of having a fully autonomous car. And there are certain levels of autonomous driving that have been announced. And we are, with our technology, at the heart of this. And this allows us to really enable these applications. We have invested quite a bit into this space, and we will for sure continue to expand our leadership in this area and be a trusted partner to all these automotive OEMs in that area. The second aspect of this is that for all these autonomous and high-precision applications, there is a service component. All these applications need also connectivity to the cloud because they get correction data, they get information about the integrity of the satellite network, which is all going to data channel and the service needed, which opens up also new business opportunity for us and allows us to deliver more to our customers. So the priorities for the positioning products is, of course, expanding the market share with the M10 product for all kind of wearable applications, consumer and tracking in the consumer and tracking domain. We built on -- with this, our economies of scale because these are all high-volume markets. And so the M10 platform allows us also to reduce the cost in other areas because, with that, we are strong customers to our foundries. We -- on the other hand, in the high-precision area, we want to strengthen our leadership in that market. So there's a lot of opportunities there. We want to add also with the service component here, as I already mentioned. And last but not least, build a strong position in that emerging autonomous driving and driver assistance market and trend up in that ADAS Level 3+ platform. So really bringing out cars that can drive autonomously based on u-blox technology. Last of the 3 hardware product centers, so to say, is short range. And I jump into this straight away. So here, again, the COVID impact, on the positive side that we could note, is an area where we have seen very strong growth in fitness equipment. Of course, not in the fitness center that have all been closed, but at home. So a lot of people have built their home gym, and we have seen a lot of business in this area with our key customers. Again, of course, in the health domain, devices like I have shown the Leikr product before, then tracking and tracing applications, especially also related to COVID itself. And another one is, again, the 2-wheelers markets, so Bluetooth connectivity for scooters, for example. The other industry trends remain not so much impacted by COVID, neither positively nor negatively. We have seen the introduction of the latest WiFi standard, WiFi 6, in cars. And this comes very often also in connection with the move to the electric vehicle, where we see this technology also helping with the charging infrastructure and the charging system in general. Then a growing interest in having indoor tracking and tracing solutions as well, where a new Bluetooth technology has been developed and deployed that we can use now here. And then more on the technical side under the hood, a shift towards open operating systems on the software side where we help our customers to integrate products with those platforms. The growth drivers in that area. Bluetooth is massive in the market. There's -- with the latest additions of Bluetooth features to that whole family of standards. We have Bluetooth low energy modules. We have modules with an extended range. We have modules now that support also positioning based on Bluetooth. And we have modules that support more demanding applications where we can support the open operating system ecosystem. So a lot is going on in Bluetooth. A lot of flavors there. We can bring a lot of products to the market. WiFi, I mentioned already, is continuously evolving. We are talking now about WiFi 6, addressing both the industrial and automotive market. This is typically the higher-performing applications where we see high data rates. And typically, applications like access points or, as mentioned already, the charging infrastructure that a car needs to talk to the charging pole. Then another growth driver for us in general is that we have expanded our distribution channels. We are -- have onboarded in 2020 a number of global distributors, which especially -- which goes especially well with our short-range product because this is something where we find a lot of also larger customers through these channels, and where these channels can also provide a lot of solution support to those customers. Cloud connection is a theme that goes to all our product centers. So our customers want to see the devices connected to the cloud, and we try to make this as easy and frictionless as possible. I already mentioned the indoor positioning. So here, we are heavily investing, of course, with our DNA coming from the positioning technology for many, many years. We can make here quite some impact by applying all these algorithms that we know inside-out, also through the domain of short-range technology. Again, some applications here to illustrate what our customers do. Treon is one customer in the remote maintenance area, so this is all about predictive maintenance. Basically, you sort of listen to pumps, here, manufactured by Sulzer. And by seeing what the vibration or noise, how it's changing over time, you can basically predict before a part is going to fail and then send out the maintenance troops to do maintenance there when necessary. This is a typical application in the environment of the industry, also with growing Industry 4.0. There is then the option that we can help our customers to establish these cloud connections. And as it is in this case, very obvious, a maintenance model. It's a model that has a service component, and this allows us to piggyback also on that service component and bring in our service offering. So in this area, we already have -- can say that we had multiple successes with a number of very high-profile companies throughout Europe. In the mobility. Here, electric bikes of course were the shooting star in 2020. Here, we again see that the bikes are going to replace the car, and especially also these days, a good replacement for public transport where you should not sit too close to your neighbor. And we have seen here, on the one hand, the location needs to be known in the cloud. And there, we need the cellular connectivity. And again, an offer how this can be securely transferred to the cloud, but also, we have the local interaction where we need a secure link to enable an unlocking and locking of the bike with a smartphone via Bluetooth. And we handle that in the back end, the connectivity to the cloud through our Thingstream platform. And so we can help a bike manufacturer to bring all these smartness and intelligence into the product to have an offer to the market that really works and provides a frictionless user experience. What are the goals now, priorities going forward in short range. On the automotive side, and especially with WiFi, expand into high-performance applications. Then also follow the next releases in short range. I mentioned in Bluetooth, there's a lot of new standards coming. And obviously, also on the WiFi side, there's a lot of development. Then very exciting for us is the development of indoor positioning technology using short range. And last but not least, adding the service component, especially with offering secure connectivity. This brings me to the last offer, but not least, of our product centers: Services. And this is the latest addition also to our portfolio. But as we have seen over the previous pictures and descriptions, it's like a bracket, it's like an umbrella. It touches all the hardware products that we provide and adds on top of it, if not even it is, then, in the end, the thing that the customer is really facing. Because in the end, many customers demand service, demand a solution to their problem. And the first touch for them is really in the form of the service. And then the next question is, what is the hardware another hood that enables those services. And we have talked about the hardware before now and about the service that integrates them with whatever the customer has in terms of platform or infrastructure, to provide the total solution. So in general, in the market, what we see here is that Internet of Things is, in general, a part of a broader cultural change to optimize in general productivity, also predictability and secure the business and the operative environment across all areas of industry and all types of businesses. So reliable and robust connectivity is critical. As I mentioned, services are in the focus of the business. They are perishable products, you can say, so they deliver a recurring revenue. It's something you get per near, per time and you pay per year. So in this sense, quite a different business compared to our hardware business, where we sell, and then the product is sold, and we have a little touch with the customer after that. But here, this is a sustainable business where we stay in touch with the business of our customers for the lifetime. And we see as a general trend that businesses are increasingly converting to a service-based model. So it's throughout the value chain, from our suppliers to our customers and to the customers of our customers, services are an increasing part of that business model. And this means we must play in that area, and we can also play in this area, and it allows us to expand our business in this direction. Now if we see where services really take us with our customers, the first instances that we have seen, the hardware component of this already is the whole mobility sector, again, where it's all about these mobile devices and how they are then connected to the platforms that manage those mobile things, that display them, that allow booking, for example, of e-bikes. And we can do here a great amount of work to help our customers to make this an easy integration. And obviously, also for connected health, very obvious use case, where it's all about getting the data from the user into those platforms that help in telehealth and other solutions in the medical environment. And here of course absolutely critical to be on the secure side. Really in a good shape because it's all about personal data, it's all about privacy. It's about very sensitive data that we need to make sure is handled very carefully and only reaching those whoever it's intended to be seen. Growth drivers, mentioned service content is increasing in many application segments. And to be able to offer a service, we need the connection to the device. So connectivity is at the heart of our services. We make -- on the one hand, we make the connectivity better by adding a service, but also on the other side, having the connection then allows us to add on top of this. We see also many customers that come from the business side. They know what they want to implement, but they have little experience on the technology. So they need a one-stop shop solution. They need something that works out of the box, and they don't want to create their own technology ecosystem. So they are grateful if we, as a partner, help them to sort it all out and make sure that whatever they want to see in their business platform is connecting to the real world on the edge to the devices that are out in the field, to all the things that form their Internet of things. Then there is an increasing demand to make these things intelligent because you want to have -- to optimize the system to have data transfer only where it's needed and still also have some meaningful operation at the edge when there is no connection or when you don't have the power to connect to the cloud, so then more and more applications also deploy some form of intelligence on the edge. That's something that can also be brought from the cloud to the edge, offering another opportunity for services. And generally, there are high expectations on the availability and lifetime maintenance of such service offers, and the security awareness is becoming very prominent these days. So that's an area where we can really excel. How does it look a little bit more in the detail? What is it all about? So basically, it's all about having a thing in -- somewhere in the world. So on the left side, some sensor that is connected with some wireless device, and it publishes data whenever it has sensed something or whenever it has made an observation or has seen something. It publishes it to the cloud, where we interact with the typical operators of such cloud infrastructure. You may know names like Azure, AWS or IBM Cloud or SAP. And last but not least, it brings then also something to the end user, for example, an e-mail, a text message. And of course, this also goes in the other direction. So for example, from a platform, from a service desk, we can send alert messages to the thing out in the world. So it's all about connecting the physical world to the cloud and back then also to the user. And as you can see here, typically, a lot of players are involved in this ecosystem. It's not so easy to bring that together for each application. And we at u-blox with our Thingstream offer, we make this simple and easy for the customer to have something up and running and then have the insurance that this works for the lifetime and is robust and scalable. Again, 2 examples here. One application from the health space again. So here, the company Bridgit. This is more hub that you have at home, so not wear around your wrist but install at home. And it is really a real-time medical and behavioral home monitor that measures basically what a patient is doing at home. So again, with the goal that patients who would these days normally have to stay at a hospital, can go back to home and can be monitored by the doctors and would be an alert sent to the hospital or to first responders if something is looking not good. And so that is increasing the quality of life. And basically, the backbone of that system is our Thingstream platform where we route all the data through from the home to the hospital and back. And so -- and this is all staying secure and safe. u-blox is not knowing what is in the data. So it's encrypted end-to-end, and we make sure that only those people who have the permission to see and deal with that data get access to that. Then probably the opposite of a health application is a fridge for beer, but still a good example. So this is all about logistics and bringing stuff and helping our customers to optimize the logistics chain. This is really here at logistics which goes to the end customer. This is about InBev. And they are equipping their fridges with connectivity so that, again, a predictive maintenance story. Of course, you want to avoid that fridges break down and then you cannot sell because all the beer is warm. And so there is a high interest to make sure that this cold chain is working and that the customers are satisfied and the high quality is delivered. So this solution allows InBev here to make sure that the customers get the product with the quality that InBev wants to deliver. The priorities in services, as I said, a pretty young product center for us is, of course, expanding the services that we can deliver to our customers, roll out new services as we go. Of course, implement more touch points with the products that we already have. Solving more problems also to the customers that we are talking to. Bring as a commercial goal, of course, the recurring revenue to a double-digit percentage of the overall u-blox revenues to make services really visible. As I said, our customers have a service component in their business. We want to show the same and make -- and also ensure that our solutions are unique and differentiated, especially because we have this tight control of the hardware underneath. Coming to the end of that R&D part, brief summary. All overall, our long-term strategy and focus remains unchanged. The underlying trends propelling the growth of the positioning and wireless technologies in automotive and industrial applications, they will continue. There were some shifts due to COVID, but nothing really changes in the big picture. And so we are very confident that things will come back to normal in '21, and we see these trends continuing. We maintain a leading position in wireless and positioning technology. We are unique because we have all these technologies in one company here. We have the technologies. We have the breadth, from positioning to short-range and to cellular. And we have the service offer on top, but we have also the other axis. We can go from high-level application software down to the silicon and into the single transistor. So in this combination, we represent a very unique company with a very unique portfolio of IP that we can put together to create solutions that build a long-lasting relationship with our customers. The new product platforms that we brought up -- that we brought out in 2020, they are paving the way for our expansion. We have 3 new platforms for positioning in the market. We see strong traction on the -- on our new LTE-M platform. And we are also building a recurring revenue stream based on our services. So we are very well positioned to capitalize on the market recovery as we expect it to come in '21, and where we already see the first signs now in the last quarter of this year. So to sum it up in just 3 simple words here. u-blox is in the right markets. These markets are growing, and they are even accelerating. And we will emerge even stronger after COVID-19. With that, I'm at the end of my presentation, and I will open up the Q&A session.

[Operator Instructions] The first question comes from Andreas Müller from ZKB.

I've got 2 or 3, if I may. First one is the competitive landscape. What has changed actually in Europe in the last 2 or 3 years besides COVID in this landscape? That's the first question. And then it was mentioned that telematics, and thus, the pricing was not really growing in the first half, of course, because of COVID. But has that changed now? And what would be the reason that, if it hasn't changed, why hasn't it changed? Why is -- has the tracking not grown?

Yes. Thank you, Mr. Müller, for your questions. The competitive landscape has probably not so much changed over the last several years. I mean, we have seen the structure between the large and the small semiconductor manufacturers and the volume makers. Such a structure is in place for the many years I mentioned. And I think this is been so far stable, if you want to say so. The question about telematics market development. Of course, sometimes not so clear how our customers behave. We think that in the first instance, probably the investment into such equipment has been halted. However, with the strong growth of Internet dealers and trade, of course, logistics is running at capacity limits and must start to invest into expansion.

Okay. And may I have another one? And can you talk about the length of the order cycles and if that has shortened? Probably yes during the crisis. Is that now normalizing? Or do you have to live with orders on short notice also going forward for a longer term?

Yes. Of course, during the crisis, the cycle changed in the part, that there was an abrupt stop of customers requiring parts. But this has normalized, this attitude. And I would say the order cycle is back to former durations. Of course, rather short because also the cycle times have shortened over the last several years tremendously. And therefore, customers expect to be able to order and be delivered in a short period of time.

The next question comes from Francois Bouvignies from UBS.

I have a couple, if I may. The first one is on your chipset cellular. You have been developing this technology for a while. And now in the presentation, you talk about certification. I was just wondering, could you tell us or give us some flavor of when do you think a significant volume on your cellular chipsets, what -- how we think -- should we think about '21? Since it has been delayed by market development for some time. And if we look at the Telit, a possible offer that you did. And if I compare that to your M&A strategy, the technology acquisition, gain economy of scale, expanding customer footprint or recurring revenue models. I was just wondering, how does it fit with these 4 targets? And if I look at it, it seems that Telit is bringing module connectivity, something you have already. So I would say it's more gain scale and expanding customer footprint. But I was wondering, in the technology part, is there any IP that you don't have that you are looking for in the Telit proposition? I have a couple of others, if I may, after.

Yes. So the chipset we have made for cellular is indeed quite a longer-term development we have made. And we are really proud. We have a very solid platform now that fits the market that it should be so far also high-differentiated to reply to both our customers' seek our solutions. So we asked where can we find volume? We are of course already in this market, these modules that we have made with third-party chipset. And the next step is now to migrate [Audio Gap] and at the same time, we see that category-M is the core technology for most of our industrial customers. It is the right solution for the amounts of data they want to transport and also for applications that are mostly battery-driven. I mean, you mentioned delays that is a time ago when, in the Americas, the network change from the legacy standards to category-M was tremendously delayed. But fortunately, this is behind us for now about 1.5 years. I cannot reply to any questions around the proposed acquisition of Telit, again, because of regulatory rules in the U.K. So I must, of course, move the answer to a later time.

Okay. And -- but the chipset cellular, I mean, is there anything we should think that you will manage to migrate your own chip? Because obviously, the choice is your customer to decide which chipset is inside in term of your module. So what makes you confident that they will choose u-blox instead of a Qualcomm, for example, or any other? Given you have been trying for a long time, what is different now?

But I mean, the customer is not selecting the chipset inside the module. The customer wants a solution that covers his needs. And also, it's a selection of the partner who is the long-term partner to provide the solution. So the decision is more around such questions. And of course, this is a known chipset, we support precisely these needs. We give a much better solution to our handset customers. We guarantee long-term availability. And we have the services on top to maintain such a product over the lifetime.

Okay. That's very clear. And then I have another question on Huawei. I mean, you said in the past that Huawei was part of your -- was a big customers of ours. And since September, I mean, they can't -- semiconductor seems not being able to supply to them. At TSMC for example, the foundry partner, I think is one of your partners as well, that is not able to ship to Huawei anymore. So I was wondering, I mean, do you see any impact then in Q4 from the September? Do you have an impact on your revenues from Huawei as well? Or if not, how do you manage to offset or sell products to Huawei at the moment?

Yes. So that's a question around one specific customer. But as usual, we cannot comment individual business with customers.

Okay. So maybe put a different way. The trade tension that impacted different companies not being able to supply. Is that -- does it have any impact on your business, in Q4 at least, and beyond?

Yes. I cannot make it by quarter, such a statement. But you must imagine that of course the trade tension is affecting the industry across the board in very different extent. So with some customers, we seeing strong impact. With orders, we see no difference.

Okay. And the last one from me is on your acquisition of Thingstream. What is the rough size of revenue, I mean for example, for 2020 full year? And what is the growth rate, revenue growth rate, that you are enjoying from this acquisition at the moment?

Thank you also for this question. So Thingstream was a very important acquisition because it delivered to us a platform to be much quicker and broader implement services. Not only to do connectivity, but as you know, we also offer location services and security services. So it was an excellent accelerator. And Andy has just given you also on the priority sheet what we want to achieve here, that we come to a double-digit revenue in our own savings numbers.

Double-digit million revenue?

Yes. The...

Okay. And the revenue growth?

Yes, we cannot make a statement on growth because we are still an early phase of how these things -- it's still early.

[Operator Instructions] Gentlemen, so far, there are no more questions from the phone -- I'm sorry, we have a last-second registration from Rolf Renders from Helvea.

Thanks for the presentation. That was very interesting. And my main takeaway is that you're actually very confident for next year. And that's based upon what you see in Q4, your strong product pipeline and plenty of growth opportunities. At least that's how I would summarize it. If it's wrong, I'd happily hear that. But can you also say something about the volumes, the average volumes per client, what you have seen?

Purely mathematically, it's probably decreasing. And the simple reason is the number of customers has grown quite strongly, as you also see from the numbers we report, and it's ongoing. So that makes automatically that the average number is dropping. But probably, we should do a fine analyze between more the top-end customers and the bottom end. So of course, we have put the top end, the quantities are increasing.

Yes, that's very relevant, of course. So you split the key clients or partners that make 80% of your revenues. And there, you would say there's a different trend ongoing there than in the broad, long list of other clients.

Yes. I mean it's, again, a base in fact, that our customers are somewhere around 100, 120, the numbers is changing that strongly there -- or the rest of customers that make the 20%, these number's quite expanding.

Okay. Then other question is, given that you cannot say anything about Telit, I will not do that. But -- so let's assume we would not know about Telit, and maybe Telit never happens. How do you plan to address the bond refinancing?

We address it probably at the moment, as we wouldn't to do it anyhow. Simply, we go into market and make then an evaluation, what is the best solution here, depending on market conditions, in the first quarter.

Okay. And then maybe, yes, I probably have to not address it to you, but maybe just to the Board. In your variable and long-term incentive system and the parameter stuff, they are based upon EBIT and EBITDA achievements. Now with the significant impairments, I would expect that to influence that retrospectively, but I don't think it does. So maybe as a general question that's probably to the Board. And maybe that cannot be answered today, I fully accept that. But is that a topic to look at and maybe change? Or what is your view upon that?

Yes. Of course, such questions are the matter of our Combination and Compensation Committee and has at least an annual review cycle, if not more. So this will be on the table of this committee. I like perhaps to add for clarity that our schemes here are, especially for the short-term incentives, both formula-based. So insofar -- or in place for many, many years, they have not been changed. And this is, of course, also the quality of our system that we have the same rules applies to how this incentive scheme works.

The next question comes from Reto Huber from Research Partners.

Actually, I have 2 major questions. One of them is, again, on your services offerings. You elaborated quite a bit on this, this evening. I was wondering, can you talk a bit about what features of the services portfolio that you -- what features do you turn into revenues? And what's the typical customer today that uses them? And then also related to that, what's currently the share of revenues that you earn with services? So this would be the first one, and I have a second major question.

Yes. Mr. Huber, so thanks for this question. I'll give a quick answer and then I hand over to Andy about the functionalities of the features we have and how to make revenue. So in the sense of monetary revenue, which is very small, not significantly at this moment. However, just again, we do such services for more than 10 years or mainly in area of positioning, but they have never been monetized. And this is of course also what we are about to change. The world is now ready for monetization of services. And Andy, perhaps you can quickly say what the Thingstream platform is doing.

Yes, maybe just very quickly in a few words. So the business we inherited from Thingstream, we think probably the biggest part where we have a service business now is all about getting data from the device to the cloud and back. You can imagine this is like a brokerage service. And in the end, our customers, they don't need to care about buying SIM cards or things like this and having an operator subscription. What they get from us is a service sort of charged by the message. So if they have, as in the example, the fridge, who is a customer of ours, and it sends a message every 0.5 hours, they buy from us a package that allows them basically to send thousands such messages a month, and that has a dollar value that they pay for this. And we make sure that these thousand messages per month arrive from the fridge in their cloud system, be it in an SAP or whatever that system is. And we take care of all the things in the middle, so that there is a mobile network operator running this service, that the hardware is working, and so on...

So basically, the -- sorry, the revenue that you generate is dependent upon time. I mean, you bill monthly or weekly or so, and not on the amount of data that you move back and forth.

Yes, there are different commercial models. We try to keep it as simple and predictable for our customers as possible. And these models that I just described, they are very helpful for our customer because they have a use case. They know this device. I want to see the data that many times. And so they can make the math, and they have a very predictable model to say, "Okay, this will cost me that amount of money." Of course, there are other models. But typically, these, let's say, we are really selling just, let's say, megabytes per month is not working that well because it's less predictable for our customers because they don't know actually how much data is it really going to be. But here, we of course learn with our customers what works well for their business.

Yes. Yes. Sure. Okay. And then I have a second one regarding your Slide 20, where we can see how the number of new projects and customer projects per month and how we can see how they're coming back. Do I understand this correctly? They're mainly coming from the automotive industry, mainly from Asian customers.

Yes. So this graph shows new projects, whereas we were referring to revenues we are making with regards to Asia automotive. So the projects that we show here, the growth of a number of projects is across the board. And you can imagine, because the industrial sector is much bigger than the automotive, by dollars but also by a number of customers, that of course this number is mainly driven from the industrial side.

There are no more questions from the phone.

Can we go over to any other questions that we have into chat?

Yes, there are some. So Mr. [ Mark Ditton ] from [ Frontober ] asked. You presented your end markets with strong revenue growth in automotive. In industrial and consumer, the volume growth rates are in connections. Can you give us some details what you assume as pricing developments in industrial and consumer markets?

I couldn't understand the first word of the question. [ Can the last once more ]?

Okay. So the question is, you have presented your end markets with strong revenue growth in automotive. In industrial and consumer, the volume growth rates are in connections. So can you give us some details what you assume as pricing developments in industrial and consumer markets?

Okay. So it's about how price is here impacting the markets. Respectively, how does that go along with the predicted strong volume? Strong volume comes from the fact that more and more devices are connected and becomes smart. But insofar, we do not see a direct connection between price and volume. So because it's an expansion in horizontal, meaning more and more customers become available. And you see that also by, first of all, strong growth of projects, but also when you look at our number of customers that we communicate every half year, that this is of course insofar just another business of the same type that we already have. And insofar, we do not have a direct connection to price. And also in industrial area, the requirements are quite similar between the various applications. This means also that the sense of what is an average of the price that we can make, how much dollar can we make, they are quite similar.

Thank you. So then, there are -- there is one question from Mr. [indiscernible] from [indiscernible] and Tomas Lehotsky from Credit View AG, who both are asking for details on refinancing of the 2021 bond. Is there any plan to replace with another bond? Or are you also looking at other options of addressing this maturity?

This question about refinancing the bond was already asked before. So again, we make a decision in the first quarter of next year, depending on prevailing market conditions.

Good. Then it's Mr. Henderson from NovAtel is asking, who's the largest competitor in the positioning space?

That really depends how we segment markets. Of course, we have several competitors. At the chip level, we have large semis that we mentioned in our slide deck. They are, of course, the major source of alternatives. At the module level, this is a lot more fragmented. Insofar, we do not see a major competitor there. We are the largest player worldwide by far.

Thank you. So then there are still 2 questions from Mr. [indiscernible] from [indiscernible]. The first one, I think you already addressed already. What is the key motivation of the u-blox Board for the proposed transaction of Telit -- or with Telit?

Yes. Again, as I said, for regulatory reasons, we cannot talk about this proposed transaction.

And the second part of this question is: Could you please give an idea about the time of line of future events with regards to this subject?" So.

Yes. Also here, we cannot make any detailed statement. There is only one regulatory deadline, until which, such a public offering must be presented.

Thank you. Then we still have a question from Michael Inauen from Stifel Europe. Can you comment on the push Quectel make/made/makes into Europe? They seem to win market share with their module business. Do you see that as a major risk?

We see several competitors, as we have shown in our competition slide. It is not always so easy to know market share. It all depends on what data is available. So far, we can, unfortunately, not assess in detail the geographical spread of certain competitors and insofar has no detailed answer here.

Thank you. And then Mr. [ Jonathan Art from Kaufman ] asks several questions. So the first one: When you say APAC is strong, do you mean that EMEA and the Americas are still going to be down in the second half? And which APAC countries are strong? And how much of APAC is China?

Yes. Thank you for this question. So we mentioned already that APAC was the frontrunner, but also that we see a good uptick elsewhere, mainly in Europe and the Americas. And also, you can see in our slides, I mean, where we have seen very good progress is in Japan and Korea. But this is just extraordinary because they have new record numbers, which is of course very nice. Then the extent of our business in China, we report this, by the way, in our -- as a report. But you can count of some 20% to 25%.

Okay. The next question from Mr. [ Art ] is: In the financial discussion, you didn't really give the details of the exact amount of cash operational expense, adjusting for capitalization. Can you share this number for the first half and expectations for second half and overall 2021?

Yes. Of course, we have given such numbers in the course of our half year results in August. So they are published. However, we cannot make any more indications of such numbers, again, because of the regulatory rules around the proposal to an offer for Telit.

And then the next question from Mr. [ Art ] is related to Thingstream. The question is how big is Thingstream? How many employees and customers?

Yes. We have already mentioned that at this time, the service business is not significant to our overall revenue number. You can count on the fact that we have a substantial team to build this service platform. And also, here, we cannot comment on individual customers. We have shown a few examples in our slides, for example, the bicycle or the brewery case.

Thank you. So still, the next question related to Thingstream, I think also being discussed a little bit before is, how does Thingstream price? Does Thingstream resell cellular airtime as well, like the various Sierra Wireless acquisitions? Or is cellular airtime resell a separate service activity?

Yes, that's an important precision I'd like to make. So we are not selling airtime in the strict sense of what this business means. So -- and we are providing either specific data packages that are supporting our products, our hardware; or we are selling connectivity in the sense of data packages, the number of data packages in a certain amount of time, what Andy has just explained.

Thank you. And the last question from Mr. [ Art ] is, how long will it take for your cellular business to transition to using your own chips?

Yes. Interesting question. Of course, our intention is to migrate as quickly as possible. And as far as we can see, the interest in the market is very strong to move to this platform that was made with the intention to serve industrial applications. So we can foresee that within 2 to 3 years, we have probably a majority in our [ pizza ].

Okay. And related to this, what percent of your cellular business is using either 2G, 3G or 4G Cat 3 and above that you won't have chips for? That's another part of the question from Mr. [ Art ].

Yes. It remains a fact that the landscape of cellular standard is broad. And of course, there's a lot of legacy. So we -- as we have long-term, actually, we are maintaining and supporting our customers over a long period of time. That means, of course, such legacy products will still be around for many years. But we have, of course, no intention to invest into such legacy technology. We are focusing for everything that is LTE, the long-term evolution. And -- but Andy has explained, we are of course focusing on what is called 5G, the next releases of standards.

Thank you. So there are 2 questions remaining from Ms. Katie Potts from The Herald in the U.K. So Quectel is quite loudly saying that they are a price leader in cellular models, and they are the largest player worldwide. So even with your own chips, can your cellular business be better than mediocre gross margins?

The aim is precisely to provide extra value to our customers. And of course, it must be a sustainable and important value to our customers. And also, we have, as a response, good pricing and premium prices.

Thank you. So the next question from Ms. Potts is, you haven't spoken about your V2X product very much. How much is this development costing? And will there ever be a market for this product?

We are not making precise statements of how much we invest into individual platforms. The V2X technology is still in an emerging phase. And insofar, it is not easy to predict how this is expanding into the automotive domain. So this is, of course, something we have done out of the box in an innovative attitude. We are confident that the automotive industry will need this standard for the simple reason, car safety is a high concern of this market.

Good. And what I see, the last question from Ms. Potts is, can you provide the growth rates for cellular versus WiFi versus BLE versus GNSS?

Yes. Again, we do communicate certain aspects of our product segmentation. But according to these lines, we gave numbers for chipsets and modules. And I would invite you to revert to these numbers as you shown in our half year results.

Thank you very much, Thomas. So this has been the last question from the chat. I hope we have been able to answer all of your questions.

So then thank you very much to all the attendance. It was a pleasure meeting you here. I hope we gave you useful insights and are of course available to meet on location, hopefully, again, in person. We wish you a very good and healthy time. Goodbye, everyone.

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