2023-09-08 11:25:10 ET
Qorvo, Inc. (QRVO)
Goldman Sachs Communacopia + Technology Conference
September 07, 2023 6:45 PM ET
Company Participants
Grant Brown - CFO
Frank Stewart - SVP, President
Conference Call Participants
Toshiya Hari - Goldman Sachs
Presentation
Toshiya Hari
Great. I'd like to get started. Good afternoon, everyone. Thank you so much for coming. I'm Toshiya Hari. I cover the semiconductor space at Goldman Sachs. Very excited to have the team from Qorvo with us this afternoon. We have Grant Brown, Chief Financial Officer; and Frank Stewart, Senior Vice President and President of the Advance Cellular business. I will go through a bunch of questions.
But before that, I will hand the mic over to Grant for opening remarks.
Grant Brown
Great. Thanks, Toshiya. As always, we appreciate the invite. It's a great conference and enjoy being here. Maybe before I begin, I just wanted to remind the audience of our safe harbor language that applies to our earnings calls and press releases, and that also applies to today.
I'd also advise that you review our public filings and the risk factors there. Frank, as you pointed out, leads our Advanced Cellular group, and I know he is excited today to talk about the business, and I'm sure you're excited to ask him some questions. But before we go there, I just wanted to go through some prepared remarks on the other segments. Connectivity and Sensors led by Eric Creviston and then high-performance analog led by Philip Chesley. So I'll go through a few of those remarks and then turn it back for Q&A.
It's been about a year since we announced the new structure. And with it, we've more closely aligned our products and technology offerings with our customers and the end markets. And our customers have continued to recognize Qorvo with design wins and content gains that we're very excited about. As you've seen it in our September guide, and become more evident as we move forward as channel inventory is clear, but we're also excited about growth that we're seeing here in the September quarter, up over 50% and then as well as in fiscal '24, where we expect it to be above fiscal '23.
The new technology is driving that growth and the technology upgrade cycles continue. Qorvo is critical in enabling those advances, whether they're measured in data in or out, battery life, talk time, driving range or any other critical performance metric. Most specifically, we're seeing this across markets in aerospace, defense, automotive, base stations, broadband, connected home data center defense radar coms, power management, smartphones, WiFi 6E and 7 and a number of end markets. Maybe with that, just quickly touching on the segments themselves. In Frank's group within ACG, we expect mid- to high single-digit growth.
Within HPA, we expect double-digit growth. And then within CSG, we're expecting strong double-digit growth. And again, as this materializes over time, we continue to expect gross margins to trend back to 50% and above in operating margins in the 30s.
While we navigate some of the macroeconomic headlines and channel inventories, which we expect in the Android ecosystem, to draw down by the end of the calendar year, we see these as temporary, not structural issues and look to improving financial performance as we go forward.
Hopefully, with that overview, providing some context, we can move on, turn it over for Q&A.
Question-and-Answer Session
Q - Toshiya Hari
Awesome. Yes. Maybe starting off with perhaps a near-term update, if you will. As you mentioned, you guided September quarter revenue to grow more than 50%, very consistent with what you had said, I think, 3, 4 or 5 months ago. What were the key drivers behind the guide how has the quarter tracked so far? And anything to sort of highlight by product type or business or geography?
Grant Brown
Sure. No change just to lead off the response, highlighting what we had said on our last call about $1 billion top line, plus or minus $15 million. That's over 50% sequential growth driven primarily by content wins at our largest customer. Again, not to say that there isn't growth in other areas of the business, but it's the predominant factor there. As we look forward into the year, we expect channel inventories, as I pointed out, to be drawn down over the course of the year.
So we provided some color beyond just the current quarter without explicitly guiding, but that's key in the sense that we've already called the bottom for Android in China as it relates to Qorvo, and that's because of the channel inventories having receded and then our ability to sell into end market demand. So from a unit perspective, not expecting anything heroic in terms of growth are overly ambitious. It's pretty much played out as we've been describing it all year, and we expect that to be how we end the year. So as we return to just shipping to end market demand, it will be a benefit to Qorvo. But generally, playing out largely in line with how we've been calling it.
Toshiya Hari
Got it. And Grant, I guess you sort of touched on this, but I think you mentioned Android channel inventory in the current quarter, declining by about 20% or more than 20% inventory normalizing by the end of the year. That view hasn't changed at all. It's tracking kind of in line with original expectations.
Grant Brown
Yes. No change to our comments on channel inventory as it relates to the Android ecosystem, still expect to be relatively clear. It's not precise and across all customers it is different, different parts, different customers, so it is a bit of a gradual process as we work through that, but largely clear as we look into the March quarter. It's a little different across the rest of the businesses. Some areas are tighter than others than the long pole in the tent there as we've called out, was base station, where we are seeing a bit more channel inventory and a bit slower uptake on the demand side, which is slowing the consumption.
Toshiya Hari
Got it. And I guess that was sort of my next question. On the earnings call, you had talked about some areas outside of Android, where inventory was elevated and perhaps consumption of that or digestion of that could take a little bit longer. Was that primarily base station that you were referring to or other parts of the business, perhaps where inventory is still relatively high?
Grant Brown
Yes, that was the primary factor. There's other areas. If you look at WiFi, there's some consumer-related exposure there. And so it is a similar model as the cellular business. But generally speaking, the base station was the standout item.
Toshiya Hari
Got it. Okay. I definitely do want to ask a couple of questions on how you're thinking about content growth. But before we go there, maybe a question on the smartphone market outlook overall in terms of units. I think the consensus view is the market is mature and it is flattish, plus or minus. I'm curious, through conversations with your customers, any potential technologies, inflections that could drive a big replacement cycle in the smartphones? Or is the consensus view kind of the right view in your mind?
Grant Brown
I'll let Frank answer that.
Frank Stewart
Yes, I can take that one, too. At a high level, we tend to agree that the overall volume, at least in our planning models, we're planning for a relatively flat market over multiple years. This year is actually going to be slightly down versus calendar year '22, but maybe an area for optimism. When you look at the Android market and look at the 5G penetration rate, that's actually an area where we do see nice growth going forward, we expect that we entered this year at about 40% penetration of 5G into that Android space, and we're going to exit the year at about 45%. And then going forward, we expect double-digit increases in the number of 5G phones that -- Android 5G phones that ship each year for the foreseeable future. And that's a big growth opportunity for Qorvo as we go from very little content in a 4G phone to significant dollar content in an Android 5G phone.
Toshiya Hari
Got it. Okay. That's helpful. And then maybe a question on content growth at your largest customer, and I understand we can't get into specifics here. But obviously, as you noted, it's a big growth driver in the near term.
Do you see this as sort of a permanent uplift in content per phone? I guess there's some concerns among the investor base that this could be sort of a onetime thing and there could be a reversal into 2024. How should we think about -- is this a new base that you can build off of? Or could this be sort of a onetime benefit?
Frank Stewart
I can take that as well. So as you said, we always have to be a bit cautious there. But we have clarified that the areas where we're enjoying some nice growth are in areas where we've had multiple generations of wins, items like antenna tuning is an example that we've given in UHB. And we do have some of our BAW capability in the mix of what we've been able to capture there. But it is areas that are known to Qorvo, areas where we've generated and demonstrated multiple generations of success.
Toshiya Hari
Got it. Okay. And then a little bit more broadly, I suppose, how to think about content growth within the context for 5G. Again, I think the general consensus view is we're in the late innings of 5G and therefore, the rate of content growth would decelerate going forward, and therefore, your growth would decelerate. Is that sort of the right view? Or do you see good line of sight into additional technologies that could drive a potential reacceleration in content growth. Within the context of 5G.
Frank Stewart
Right, right. So 2 things. One, I would reiterate on the entry tiers of the market, we do see that 4G to 5G transition being a growth opportunity for us. So don't want to lose track of that. In the premium tier, the highest tiers of 5G, we do see incremental opportunities that are better than a kind of a flat view.
So some people put the label of 5G advanced. But as you go from where we are today, in a typical high-end 5G phone until we get to 6G at the end of the decade, we do see multiple dollar content opportunity additions in a 5G of advanced phone versus we are -- where we are today in transmit, in receive, and satellite bands. There is content coming to a high-end 5G phone versus where we are today.
Toshiya Hari
Things like -- again and more bands and satellite --
Frank Stewart
That's right. So additional MIMO going from sometimes only 2 MIMO pass to 4, there's situations where dual uplink is coming to more geographies in ultrahigh band. Satellite transmission is in the early stages. We see that growing and maturing in capability which has RF content additions for us.
Toshiya Hari
Got it. And Frank, I think you just touched briefly on sort of the 4G to 5G opportunity. I know that's mostly our primarily on the Android side. But maybe expand on that, how should we think about that opportunity set as the installed base continues to transition to 5G.
Frank Stewart
Yes. So if you think about geographically, where we are in the Android space, the United States and China have moved pretty far up the adoption curve, but the rest of the world is pretty far behind. And so when we say Android is still in the 40% to 45% range as you step through India and the rest of Asia and other parts of the world, there is a lot of opportunity to go from 45% where we're going to exit this year and step through multiple years of growth. And so we think that's going to take us all the way into 6G of getting double-digit percentage growth each year until we get to kind of -- start talking about 6G together.
Toshiya Hari
Got it. Okay. And on that point, where does the industry stand on 6G? I know it's way early. But I know the industry -- the conversation picks up pretty early as well.
So any early insight into what the key capabilities can be?
Frank Stewart
So high-level planning model, we're planning for somewhere around the end of the decade, somewhere in the 2030-time frame. And it's still -- there's still a lot of dialogue going of what it could be. Our view is that we're talking about frequency bands that are higher than sub-6 gigahertz today, but maybe more in the 6 to 13 gigahertz range is maybe a real sweet spot of something that could add some real customer value, but also be some really good frequency -- new frequency that can bring to the table that has a lot of capability for bandwidth expansion. So that's our focus. It's kind of in the 6 to 13 gigahertz range.
Toshiya Hari
Got it. Okay. Maybe a question on your China business, maybe for you, Grant. So your China business troughed in the March quarter, but it's still down about 70% from your most recent peak back in the June quarter of '21. Is the weakness in China purely a function of your local OEM customers losing a little bit of market share and maybe some inventory correction?
Or are you starting to run into local competitors that perhaps have a little bit more integrated capability?
Grant Brown
Sure. I'll start, and then, Frank, please jump in. The local Chinese competitors have always been there. So it isn't something that is relatively new for us. The highly integrated modules that we serve today is a differentiated advantage for us in terms of needing to have all of the different components that go into those highly integrated modules and not just the process technologies to make BAW filters, for example, or SAW filters or any of the power amplifiers or other components, but also the modular design capabilities are super important.
The field application engineers to help the customers get those products into their phones and working because RF is a bit unique in that regard. So I'd say that the competitor set have always been there. The dynamics haven't changed. We're still racing to maintain a competitive performance advantage there in order to win business. It's competitive.
But through thick and thin, we've stuck with all of our customers, in fact. And some of the recent news even today, right? I mean, I think our presence in China, it's an opportunity for us because that customer set has always been us. We've always been a trusted supplier, and it's always an opportunity regardless of how mix might shift around. We're relatively balanced across our customer base. So it makes those share shifts much less impactful for us. And I think the technology leadership, the presence and the relationships there have gone a long way for us in maintaining our advantage with them. I don't know, Frank, if there is anything to add.
Frank Stewart
Yes. And I would just add to Grant's point to the contrary, we've actually gained share throughout this year from a design win perspective, and we're excited to finally get through the channel inventory correction that's more visible.
Toshiya Hari
Got it. I guess on that point, I don't expect you guys to give specific guidance for 2024, but how should we think about sort of the rate of recovery in China. Obviously, we don't expect your China business to approach past peak levels because in hindsight, you and the industry was probably overshipping relative to true consumption. But how should we think about that given that your competitive position has improved, if anything.
Grant Brown
Sure. Through this year, as I commented, we don't have high aspirations for a large rebound, and that's been consistent as we went through the year. There was some early uptick in post COVID zero. We saw in the sell-through numbers, and we tempered expectations, and I think that was the right thing to do. It's settled in.
It's stable. But beyond that, I think, as Frank pointed out earlier, the real driver is going to be that penetration of 5G, and that's the most impactful for Qorvo, less so than the absolute units. Really those 5G units is where the opportunity enters our SAM, and that's where we have the dollar content. I don't know, Frank, if you have a view, maybe beyond '24. We haven't commented specifically.
Frank Stewart
Yes, exactly. No. It's well said. Maybe the only other thing to add is our engagement is deep with all of these customers, and we have the luxury of talking about architecture and designs 2, 3, sometimes is 4 years out. So it just shows the depth of our relationship with all of them.
Toshiya Hari
Got it. Okay. That's helpful. Maybe shifting gears a little bit. And Grant, you sort of kicked us off with this, but we're still kind of getting accustomed to the new structure of the company. I was hoping you could walk us through some of the key drivers for the 2 other businesses. I know Frank is here. But CSG and HPA, as you think about the business over the next couple of years, maybe talk about some of the key drivers there, whether it be application or technology.
Grant Brown
Yes, sure. Let me take them each. So within CSG, the primary revenue today is WiFi. As I mentioned, there's a customer or a consumer flavor to that, which we expect to recover as some of that inventory subsides and demand returns. And so that would be the very near-term driver.
Beyond that, there's the UWB opportunity that we have, and that's really exciting. We've commented in gaining traction with auto customers. And beyond that, there's quite a number of different applications, whether it's location awareness or within the auto, it's within access points. And at CES, we even had a demo where we were showing people who was helping navigate them around the booths and with a high degree of accuracy. So that's a really exciting area for us.
There's smart home applications there. Beyond that, there's also the sensors that we have that are currently multi-use. They could be in a number of different form factors. So those are growth areas, nascent but real opportunities. Within HPA, it's a collection of quite a number of different businesses.
Each one is a bit fragmented in the end markets, which presents us with some opportunities. So right now, the defense and aerospace area is a particular note as a growth driver. On the other side of the coin is the base station market, which is a little bit slower given some of the rollouts there. And then there's a number of businesses like broadband, very stable. The DOCSIS 4.0 upgrade is a key driver for that business.
As you look at the power businesses, we're seeing a lot of activity on the power management side. And so quite a number of different drivers. They all fit that theme of technology upgrades and Qorvo's portfolio aligning with those upgrades provides a lot of growth opportunity as we look forward. And we've talked quite a bit about the mobile side already in the content there.
Toshiya Hari
And I guess, maybe I should have asked this question before my prior one. But just for context, at the company level, what percentage of revenue do you derive from coms and front-end, consumer IoT and A&D and so on and so forth to level set.
Grant Brown
Sure. We've not commented specifically on any one of the individual businesses other than to say when we think about -- a lot of those that you mentioned, most of them fit within our HPA group. And within HPA, there's primarily 4 buckets that we've talked about, defense and aerospace is one, base station and other infrastructures is one, power is third and then there's another. So you might think of them as roughly kind of equivalent in size, although some of them are stronger in other periods.
Toshiya Hari
Got it. You touched on ultra-wideband. And you talked about auto and mobile, obviously, as potential drivers. Maybe let's take a step back and talk about the acquisition of Decawave, I think it was February of 2020. How would you sort of rate the performance and particularly relative to your competition since then?
Grant Brown
Yes. We're really encouraged with what we're seeing in ultra-wideband right now. The customer traction and engagement is extremely high. They're very interested in the solution. And the applications are really exciting, right? So it's something new. It's certainly differentiating in a small set of vendors that are able to play in that space. Where we're seeing a lot of engagements on the software side, it's a rather sticky customer for us when we have to help them with the software, when we have to develop the hardware that works with it.
And then the application, there's often specific pieces of that, that need to get considered when you're developing a full solution. So for us, I think the technology has been excellent.
The team has been phenomenal in developing it and working with the customers. And the traction on the design wins has been great. As we see the volumes come and it pulls through the revenue, I think that will be the sort of next leg there.
Toshiya Hari
Okay. And any sort of context on sort of how big the business is today and how we should be thinking about growth going forward? I know it's still relatively nascent.
Grant Brown
Yes. We haven't commented on the overall size, but again, very encouraged by what we're seeing.
Toshiya Hari
Okay. Got it. I guess similar question on silicon carbide. Again, it's a relatively small percentage of your overall business. But you acquired United Silicon Carbide in November 2021. I guess it's been a couple of years now. How would you, again, rate the performance and any growth expectations that you can share with us?
Grant Brown
Yes. Another really good example of a technology leadership position with our JFET technology there. It has the industry-leading RDS on performance, which is the figure of merit for silicon carbide. We are a smaller player, but where performance matters, we absolutely deliver. So in that sense, very encouraged by the technology. Commercially, also very good in the sense that we've talked about the performance-based earn-out that we paid to the pre-existing shareholders, and that speaks to the performance that we've seen on the revenue side with customers.
Toshiya Hari
Got it. And I guess you mentioned this, but from a scale perspective, you're faced with significantly larger peers. How do you compete in the marketplace? What is your source of differentiation, if you will?
Grant Brown
Sure. I think performance where it matters is really the key for us with those customers. So there are areas where we have strength. If you think of the data center and AI perhaps, and some of the largest builds in the data center are the power builds. And so helping on that front is a big opportunity for Qorvo just as an example. But performance-centric is really our go-to-market strategy.
Toshiya Hari
Okay. All right. Great. We have about 12 minutes left. I'm going to pause here and see if we have any questions from the audience. I'll keep going. Maybe shifting gears a little bit, going on to financials. The gross margin outlook of the company. So you're guiding September to 45.5% at the midpoint. You've also shared that gross margins are likely to decline in December and the March quarter. Off of that base going forward, how should we think about the progression of gross margins? And maybe talk about how to think about utilization rates in your factories?
Grant Brown
Yes, sure. So we haven't commented formally beyond fiscal '24. But if you think about the dynamics in gross margin, there's really 3 primary ones. There's mix, so within the customer base within our own operating segments, there's mix and then there's seasonality with the mix over time based on ramp cycle. So mix is an important driver.
The pre-existing inventory we have. We have high-cost inventory that ran through relatively underloaded fab is carrying high cost, and that needs to work its way through cost of goods sold. So as we work through inventory in the channel and then in our own inventory, we'll see that, that headwind subside. And then the third piece is utilization. So as we start to see the volumes return and the factories are running at higher levels of utilization, that's more of a forward-looking rather than a backward looking on the existing inventory.
That forward-looking piece as utilizations improve will be a benefit and a driver for gross margin. In the pareto of what's preventing us from recording 50% margins, it's almost exclusively the utilization headwind as we've commented on the number of basis points there is significant. And as we regain those, we should be working our way back towards our 50% plus goal.
Toshiya Hari
Okay. And sort of time line-wise for mid- to late calendar '24, is that sort of how we should be thinking about that return to 50% plus or minus? Or any sort of --
Grant Brown
We haven't provided any specific guidance in terms of gross margin trajectory, other than it won't be a step function up. It will be a gradual process as we work through those inventories and as we bring utilization back up in the factories.
Toshiya Hari
Got it. Okay. I guess sort of related to that, you exited the June quarter with elevated inventory and you've talked about your plan to reduce inventory, I believe. How should we think about the pace of inventory digestion, if you will? And what sort of normal going forward as you plan your business and operate your business?
Grant Brown
Sure. We usually think of it in terms of turns. So sort of mid- to high 3s or 4 turns would be pretty normal for us. So its scales versus revenue. It's seasonal as we build inventory for ramps at our largest customer as we are now, you've seen inventory come up. And we would expect over the course of the fiscal year for it to come back down as we sell through some of that inventory. So it's seasonal. But generally speaking, as a rule, it's in the high 3s to 4 turns.
Toshiya Hari
Got it. And on the recent earnings call, you talked about investing in productivity and how this should improve profitability over the medium to long term. Can you expand on that a little bit and how we should be thinking about the time line?
Grant Brown
Sure. I would expect to see more of this activity as we go forward. We are looking at different ways that we can upgrade tool set, some of which just go end of life and you need to upgrade some of which are opportunistic, and looking forward, they have productivity enhancements. So we are looking at the design for those and exactly how we could go forward with that process. An example being some software that we've used for quite some time in the distribution management area and kind of with our customer contracts and pricing and those sorts of things, the tools that are going end of life that we can upgrade.
We're seeing productivity there already. And so it's a, as an example, very encouraging, and we're looking at doing more of that, in some cases, slightly bigger opportunities for us. So really, really encouraging, incorporating all the latest technologies that are out there, including in some cases, software vendors incorporating AI into the tools that we use, even within finance, you're starting to see some of that with an ERP system. So very, very exciting.
Toshiya Hari
And is it possible to quantify the benefits from those investments.
Grant Brown
It is -- internally, yes, we do track to make sure that we're receiving the benefits from an ROI perspective that drives the decision-making. But I would expect some of it is volume related as we see the volume pull-through, you should see the productivity.
Frank Stewart
Got it. Okay. Makes sense. Maybe talk about the Qorvo Biotechnologies business. You've been looking at that business reviewing that business. Any update or thoughts on how to think about that?
Grant Brown
Yes, we've said that we're looking to divest it. We haven't had any comments since the earnings calls. At the moment, nothing new to report, but I hope to have something very soon.
Toshiya Hari
And remind us the drag on profitability at the moment. And to the extent you manage to close something what the benefit would be to your P&L?
Grant Brown
Yes, it's largely an OpEx consideration. So as we're carrying the biotech business, we carry in the OpEx, and that's on the order of single-digit millions per quarter, low single digits.
Toshiya Hari
Got it. I guess in terms of capital allocation priorities going forward, assuming free cash flow recovers from here, you've got volumes hopefully recovering as well. How do you plan to allocate your capital? You've got investments in your own business? Obviously, you've got M&A buybacks. How should we think about the prioritization of those 3 items?
Grant Brown
Sure. For us, it's a classic waterfall approach. We look at working capital first and then CapEx, organic growth, inorganic growth and then you start to look at some of the capital structured decisions like around our debt and equity. So for us, no concerns on working capital and CapEx is over the years, we've been drawing that down and becoming more efficient. So feeling very good there. Organic growth, as we think about our CSG business, we're investing in some of those more nascent businesses. We're investing in large programs within the ACG business within Frank's customers. And then, of course, in HPA, we have a lot of opportunity there, where we're investing in opportunities organically and inorganically. The -- probably near-term piece on the debt side would be our 2024 notes that are coming up next year. So we'll be looking at those as they mature. And then the balance would be returned to shareholders in the form of share repurchase.
Q - Toshiya Hari
And then on your point about CapEx, again, to your point, you brought that down on a pretty sustained basis. I mean to the extent volumes pick up and you're on a recovery path. Should we assume capital intensity to stay relatively at these levels? Or could there be an inflection to the positive side?
Grant Brown
There could certainly be some incremental investment there. We continue to do that. There's the maintenance piece and then there's the capacity piece. So you could see capacity. On the other side of the ledger, however, is just the improvements that we made.
So moving from 6 to 8-inch say, in BAW has been a big impact. The die shrink that we're able to do generation over generation in BAW, for example, has led to much more die per wafer, which helps. And so the effective capacity increases. In fact, so much so that we were able to sell our Farmers Branch facility, which was always and forever our insurance policy in case some of those didn't come to fruition. So seeing a lot of positive trends there as far as manufacturing efficiency. And a credit to the team. I mean these are really tough technical problems to solve on both the production and manufacturing as well as the design and devices. And so we've seen a lot of success there. And again, as volumes return, that becomes much more evident.
Toshiya Hari
Got it. Okay. And then maybe a question on M&A. You guys have been pretty acquisitive over the past several years, relatively small-scale tuck-in bolt-ons. We talked a little bit about UWB and SIC. But as you think about the collection of companies that you've acquired, how would you -- in hindsight, how would you grade them? And kind of remind us what your philosophy is around M&A. What do you look for in a business as you kind of filter through potential acquisitions?
Grant Brown
Sure. I mean in terms of what we look for, we have to be the best owner. We have to bring something to the table that adds value and differentiates us. The businesses that we've acquired, as you pointed out, have a strong technology leadership, and that's something that's attractive to us over time from a margin perspective and from a competitive moat. The types of things that we see in each of the business segments are slightly different in ACG.
There's more of the MEMS or technologies that we've acquired over time, maybe more consolidation type of -- but again, few and far between more mature business, nascent businesses like CSG, in our view, was born from acquisitions. So there's not probably a whole lot to do there incrementally other than organically grow what we've got. And then HPA being a rather fragmented end markets and diverse that could be a real opportunity for us in that front. And we continue. This isn't necessarily new. I mean this has been something that we continue to look at over time and we'll continue to do so.
Toshiya Hari
Great. I guess in the last 2 minutes or so for both you guys, I know you spent quite a bit of time with investors today and you speak with analysts all the time. What do you feel like we collectively underestimate or underappreciate about the Qorvo story specifically or the markets you guys play in?
Grant Brown
Yes. Maybe I'll start, and then, Frank, please weigh in. I mean, I'd say, especially with some of the news even today, right, I think it's probably underappreciated just how broad our customer exposure is on the handset side, especially, right, as I mentioned earlier, the mix shifts really aren't that impactful because we have such a good relationship with all the handset OEMs. Our content in China is very, very good. Our design win activity is very good.
So I think in general, that's typically something that gets missed I'd say that our customer relationships, just expanding on that, is that we have been there through COVID. We haven't left the market. We've continued to invest in those customers. And they invest in us, too. I mean, it works two ways, right? They have to be reviewing our parts and spending money to incorporate our designs into their product. So that's been very collaborative, and we feel very good about that relationship going forward.
Frank Stewart
Yes. Maybe I would just add to Grant's point about our strong position and consistency of a strong position across all the major smartphone customers that's driven by the innovation we continue to do in the cellular space. And maybe 2 product examples real quick as we ramp up. One, to help with this transition from 4G to 5G, we've got a new product that we talked about in our last earnings call where we take all of the content in what we call a mid-high-band pad and all the content we call mid-high-band pad, we integrate all of that into a form factor that reduces Board area by over 40%. And that's targeted to kind of those mid-entry tiers of the market.
And as I said, we think that's going to help that transition for that mid-tier of the market from 4G to 5G. And the other one is in the high end of the market. So the kind of the global 5G space, we're actually taking a mid-high-band pad that we have today adding the extra Rx or DRx content into that same form factor. We end up with an MHB because of all the innovation we're doing in circuit design and die side that's actually smaller than the previous MHB we did before even with that added content inside. And so we continue to innovate at a very heavy level in our cellular market. And we think we're going to see the fruits of that more and more as we go through years. But there's still a lot of innovation in cellular.
Toshiya Hari
That's really fascinating stuff. Thank you so much. Really appreciate the time.
Grant Brown
Yes. Thank you very much.
Toshiya Hari
Thank you so much.
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Qorvo, Inc. (QRVO) Goldman Sachs Communacopia + Technology Conference (Transcript)