QUALCOMM's (QCOM) Management Presents at Bank of America Merrill Lynch 2017 Technology Conference … – Seeking Alpha


QUALCOMM Incorporated (NASDAQ:QCOM)

Bank of America Merrill Lynch 2017 Technology Conference

June 07, 2017 04:20 PM ET

Executives

Cristiano Amon – EVP of QUALCOMM Technologies

Analysts

Question-and-Answer Session

Q – Unidentified Analyst

Okay. So it’s a problem to have discussion right after lunch, so I understand where you are. But we do have probably one of the — if you look at my day in the last three, four days and I just told them about before we went on the podium. If you look at my day for the last three, four months. Every single day, every single hour, every single meeting, I have a call on QUALCOMM. And it just a question of how do I answer the question about the Apple litigation in a different way that I didn’t explain a second ago.

But this time we’re not worried, we’ll try to speak about the semiconductor business, a very successful business of QUALCOMM. Cristiano Amon is EVP of QUALCOMM Technologies, President of QUALCOMM’s CDMA Technologies and with no further ado maybe let me start with a very high-level question.

Thank you very much for being here.

Cristiano Amon

Thank you. Thank you. I’ll be happy to be here. Thank you.

Unidentified Analyst

Thank you. So, at the very, very high level, the smartphone market is hardly growing, it’s — most markets are penetrated already and we’re now in a replacement — forever replacement cycle. So, not growing, not declining kind of. Semiconductor market, in terms of the smartphone market, the semiconductor you have a great market share, places where you are not at, probably like, certain parts of Apple, certain parts of Samsung probably you are not going to get also in the future. And you have great positioning in China in emerging market, et cetera.

So it looks like, if I look at the mandated that the board and management had 20 years ago, you achieved most of the goals. Now the question is, going forward the next five years where do you grow from here if the smartphone market is not growing in your market sharing semis is kind of at the very high level we know with not much abilities to grow from here. How do you — where do you take the company in the next five years?

Cristiano Amon

Okay. Well, very good question. What I like to do, I want to go back and challenge a little bit about the view on mobile. But let’s just for now, let’s just assume that the market is mature, its not going to change, and let’s talk about what happens for now. So, one of the things we actually have done, we had I think last year talked about it, and we upgraded our stem [ph]. So, just to give you a little bit of the numbers, so when if you look at our stem today off selling chipsets into the mobile segments, but we said by 2020 would be about $23 billion.

We said that market is going to grow, we can argue if you said mobile is not growing, I think we can argue is it going to grow, 6%, 7% 8%, 10%, but it’s going to have some grow in between like 5% to 10%, we’re more thinking is going to be probably more than 6% to 7%. The stem growth about $11 billion and on top of that we are growing by moving to the side, going into the RF frontend space, so that is another $18 billion of stem. And then I think the last component of that is we have looked into industries, the mobile technology we develop for phones is transforming or changing industries, automotive is a great example of that, Internet of Things is a good example. And we are actually pushing our products into that, that increases another $29 billion of stem.

So, if you believe that, actually mobile is so big of an industry, the smartphone is so big of an industry that the point it became the new consumer electronics industry, it took away the entire portable consumer electronics industry that use to exists in the ’80s and the ’90s from cameras, to music, to video, to gaming, to everything. And that technology platform is so competitive that it is going to go into how car infotainment is going to look like, how machines become smart running OSs and connecting with modems and the Internet of Things. Then we see our stem is increasing regardless of what happens to mobile.

Now, I’ll go back to the mobile example. I think we have been through cycles into this industry, like I work with [indiscernible] my entire professional carrier, and we’ve seen many of those cycles, when I think you get to what else is there, I got to a color display, camera phone, and the place polyphonic ringtones there is nothing else happening. And I think if you believe that you could have changes in use cases and form factor or even a transition with 5G we could create more than a replacement growth rate.

And it’s about going to the next cycle, 5G one of the reasons we accelerated 5G exactly just because of that, to try to create a growth cycle that is just faster than our replacement rate market.

Unidentified Analyst

Great, so again going back to just the last part you touched on when you look at the historical position of Qualcomm, the position in 4G, sorry in 2G and 3G and CDMA as a technology and then migration to 4G and 5G, how do you make yourself relevant and what is your position also in markets that are exclusively 4G/5G, no backward compatibility to CDMA. In other words, how is the strength of your position in 4G/5G versus 2G/3G?

Cristiano Amon

Look maybe I’ll go back to a little bit of history because that’s how we’re probably going to build about how we think about ourselves. Of course, we’re working to lead in 5G, that’s what we aspire to do. That’s our objective, we’re investing to be the number in 5G and we’ll have that repeat, it happened in 4G. So if you look as we started early in CDMA, I think the experience we gained with CDMA, even though we started if you remember, when we started in WCDMA on a UMTS there were seven other companies and we started late and I think the ability that we had with the experience CDMA got us there, and we were able to achieve the leadership position in 3G.

So 4G it was clearly about not only being first to 4G, but also have the ability to have multimode and seamless transition between 4G and 3G. And I think when you think about what’s happened with 4G right now and how networks are going to be built, I feel that probably we feel better about our competitive position than it used to be. And I will explain this very simple. The industry right now when you think about 5G, 5G is going to consider the use of FDMA, and 5G is about getting much more spectrum availability and much higher speeds and latency, and the way the network is going to do, 4G will remain and 4G will get upgraded to lower latency. There is a 3GPP feature called ultralow latency that’s going to get upgraded and will upgrade to Gigabit LTE.

On top of that you have two variations of 5G, in the sub 6 gigahertz spectrum, you’re going to provide multiple units of gigabit, let’s say five gigabit for example. And then above that in the millimeter wave you’ve going to have multiple tens of gigabit. And 4G will continue to become very relevant as it gets upgraded to Gigabit LTE lower latency and it will have lower latency as we migrate up and down.

So I’ll argue, if you don’t have leadership in 4G, because 4G is not static, it’s not like what happened with GSM as 3G arrived. If you don’t have leadership in 4G, our ability to continue in 4G, if you don’t have a system capabilities to do multimode devices and if you don’t have the scale to deal with alphabet soup of frequency bands, I think 5G is actually much harder for you to enter the market. So I think for those things, we actually feel confident, but it comes down to execution. So we I think we’re hard at work, but we’re confident we’re going to be in a good position.

Unidentified Analyst

What are the opportunities if we stay with the current business and you go to 4G — 5G, how do you see the opportunities ahead of you within the mobile market?

Cristiano Amon

Okay. In the mobile market, I think we see today two major opportunities. Of course, 5G it continues its virtual cycle of new technologies and upgrades. Of course, every new technology like 5G will come to the premium tier first, so we improve the mix of the product. But the single largest growth opportunity and one that we have been hard at work for number of years is also the ability to increase content in the devices that we have. I think for example — one example of that is we started with about 5% share in the frontend, with the close of the TDK Joint Venture, we moved about 15% share and I think — and that’s share on our platform, just share on our platform. And I think as we develop more technologies just part of our Joint Venture with TDK, I think the opportunity to add content is very high. In particular in China where the market is way more suitable to having a complete platform and a reference design.

Unidentified Analyst

So, I have questions on both; Number one, if you can give us an update — status update on the TDK partnership or efforts; And number two, if you can focus on the Chinese market, you have gained share, you leave the competitors behind, how long can you can continue and do it and what actually drives it, is it price or is it technology?

Cristiano Amon

Okay, excellent question. So let me start with the frontend on TDK, so we did close and TDK was very happy with that. Integration has been actually very fast with the Joint Venture and we have been on a set of milestones on our trajectory. So one of the things that the Joint Venture gave to us was filter technology and the ability with the filter technology also to do a model design technology. Now when we have the Joint Venture in house, we have every single component.

So just a little bit of a recap, we have been shipping trackers to PAs, the trackers have very high correlation with the transceivers that are the part of chipset. So we have been — that’s how we’ve build our initial business. Now we have PAs that we’re doing ourselves. We have the filters from the Joint Venture, the models from the Joint Venture, we have tuners and then we are going to do switches as well. So when we think about the progress, not the Joint Venture in itself which is filter and models, but the entire frontend, we — in the first half of the year we sample our GaAs PAs, we started with CMOS, but we move to GaAs. And as you know the CMOS was too low end, was not in our great, I think outcome that we would have thought. But with GaAs, we believe our products now match the performance of the leading providers and we have about five OEMs now designing our GaAs PAs. We are going to see that expending it.

And the next step I think we feel pretty confident by the end of the year, we are going to have very good solutions in the low and the mid-bands. The next step is using our [indiscernible] technology to close the performance gap with [indiscernible] which I think that’s a huge opportunity available for us and one that a lot of a customers are begging for an alternative that can complete with [indiscernible]. And I think for us right now is no longer about a technology challenge, it’s just money and time to get there.

So that’s how we feel about it. One thing I think I wanted to highlight about how do we think about generating growth from that Joint Venture and that frontend. We have been very focused as China, as the channel for the market. I think overtime, there is a lot of the obviously the devices like Apple, Samsung as you recall most of the attention. But I think China, we have built the machine that is working in China for the chipset business, I think the nature of the customers in China, they’re very fast movers, they have a number of designs and they see a lot of value coming with an integrated frontend design. In particular, as environment is changing for them and they’re going to outside China, the numbers bands are increasing, they’ve value that reference design. So as we get to our GaAs PAs and more modules in the second half of this year, we should see us focus on building still in China.

Okay. Your other question is about our position in China in general, and you asked us versus competition, if it’s price or is a technology. I’ll say, the price, its market based price and I think what we see happen with our competitors. As the market become difficult for them, we continue to be very aggressive in pricing. But one thing there has been very good for QCT sense, we decided to really focus on following the SRP and following our view of driving growth from China. We had really redone the entire product portfolio and we actually — I believe, we have cost leadership right now across the Board from 600, 400, 200 peers.

And as we grew our share in China in a highly competitive price market we actually grew profitability. You see profit of QCT started to go backup, as we wanted to go — try to get our long-term profitability. And most of it is actually, a lot of profitability increasing from the China market. I do not think that share is going to go in the direction of us losing share. I will argue that now we’re going to the next step of our China strategy. We recently announce, I don’t know if it was picked up by the media. We now also have Joint Venture with the Chinese [indiscernible], Tatang, Leadcore and JAC.

We have been quite successful in China driving the type of OEM that it’s very competitive what the QUALCOMM business model. And great example of those are Xiaomi, OPPO, VIVO and those OEMs not only grew their position in China, but they also grew into export. You saw what happened in this year in Indian and Southeast Asia, I think those OEMs did very well. But we never got our fair share in what is called the China long tail. Number of reasons for that I can tell, one was obviously, this synergies before licensing business doing to days of the NDRC dispute because when the OEMs are underreporting, of course if they buy for me, you know exactly how much they bought. So I had a little bit of this synergy there.

The second element, that model was like the strong hold of companies like MediaTech and Spectrum at a very low-end. And we did believe we actually now have a competitive cost structure. But as we started to see progress, consistent progress made on by the licensing business. We want to get our fair share in that segment of the market and one things we did, is we did this Joint Venture with Tatang, Leadcore and JAC, and actually it’s going to be ready result with this one we have the datacenter Joint Venture. And I think that’s actually going to allow us to participate more aggressively in that segment. We’re still waiting for the approvals, but in the meantime, the joint venture is able starting today to resell our products. And if we’re successful, we see share going in the positive direction in China.

Unidentified Analyst

You spoke about horizontal expansion going from something you’re doing today, the baseband and [indiscernible] processor to side markets, adjacent markets. Beyond RF and [indiscernible] comment do you — without even getting to the other technologies, but just to understand, do you envision the strategy to continue or do you envision you going after this strategy in the future or is RF kind of the last big market to go after and after that we’ll have to go outside of the mobile market?

Cristiano Amon

I think we’re doing both. We’re going outside the mobile market and so let me divide that answer in two parts. Right, one part is, our effort is definitely a big one and I think we have been executing others, for example, Wifi is a great example of that, and I think we still have room to grow on the Wifi Attach in particular in the premium tier. In addition to Wifi frontend we’ve seen an interesting phenomenon happening right now which exactly we feel pretty good about our Bluetooth business, the one that we acquired from CSR.

I think Apple Airpods really help create a trend for an inbox in a wireless Bluetooth handsets and actually one of the things we’re doing is we’re taking advantage of having the platform to have some unique used cases from the headsets to the phone, so we see that going and let’s say evolution on other attach in the phone PCB.

But the other thing we’re doing is, we’re seeing new markets for exactly the same chipset. And you probably saw some progress recently at Computex, one is PC, so the exact same Snapdragon 800 that an OEM design, you know, it can build now a full PC with Windows 10. So we’re going after the PC market, it is all growth for us and with leverage of R&D.

The other one is we’re trying to get that one into automotive, so Snapdragon 800 for example we won 12 of the top 20 OEMs for infotainment. Some of those take time, they start showing up in the cars, into the ’18 and beyond. I think we are going into besides computing, automotive, we’re going into the Internet of Things, so I think we’re doing all of that.

In the adjacent markets, not mobile, not RF frontend and not Wifi, nothing in the phone PCB, but just other industries, year-over-year from ’16 to ’17 we saw growth of 40%.

Unidentified Analyst

How is the opportunity with IoT, normally the concern is that the dollar content is very small? Do you see opportunities, is it about volume or is it about dollar content?

Cristiano Amon

It’s about both, I think the IoT is a very broad category. So I think it goes from simple connectivity of Bluetooth and Wifi chips to probably you know Snapdragon and full LTE connected camera, so it ranges. It has a bunch of different areas, I’ll say in terms of volume, within both of volume and dollar content we see good opportunities with smart cities [ph], I think that is driving stellar connectivity modules, I think every time you pick up cellular it increases the value for us, both on the licensing side, as a chipset.

The other one that we see an opportunity and that leads to the NXP value is, one easy way to describe it is, you have a lot of processor everywhere already, you don’t have to wait for IoT, so if you think about the electronic you have in machines, you have two types, you have a x86, or you have Microcontroller business.

This scale of cellular, even if you’re thinking about an entry level smartphone like for example Snapdragon 200 that we can enable fordable smartphone in emerging markets. If you look that and you go to a segment of the IoT, there you had a Microcontroller, all of a sudden you can run a high-level OS, you can have an application on top of that, and you can have cellular connectivity, you add value to that segment and you have now this scale of the mobile platform that you go there when you have embedded software, Microcontroller, you can upgrade that to a connector device.

So I think we will see opportunities in multiple tiers. The good thing is that a lot of those opportunities are coming from the mobile influence. And I think that’s how we think about the IoT, it’s going to be probably a very broad category over a long period of time.

Unidentified Analyst

Got it. I want to go back to competitive landscape and speak about Intel. Multiple questions, first how long can you maintain your CDMA leadership and Intel just announced, many announcements, but just announced a onegig CDMA product, do you think that you still have an advantage over those solutions?

Cristiano Amon

I do. I think there is often some misunderstanding in the industry about CDMA. I think there is a lot of markets for example that not necessarily requires a legacy of CDMA. If you look even for example an operator like Verizon has made in many aspects statements, they going to go to vote LTE and LTE plus 3G for roaming.

So I think in open markets and particularly if you look at Southeast Asia, if you look at Europe, I think we have been competing there not necessarily with CDMA. The way to think about this is, vectors of competition, since you referred Intel, I’ll just say in the modem space, there are multiple vectors of competition. One is, do you have the latest performance, do you have the best power and do you have size and do you have the economics.

So I’ll — if you look at iPhone 7, if you go to the teardowns — public teardowns that was made available, only in the QUALCOMM PCB you can actually put the Japanese silica for the Japan Transport System because we are actually, we’re much smaller, so we occupy last area. We are with process node leadership. So we have one to two process nodes ahead that has a direct correlation with the power modes. And then that one is just feature set and reliability.

If you look on the product that has built for example on the iPhone 7, the feature that has been utilized on the QUALCOMM platform has been brought down to match the second source supplier. So if you believe the consumer’s want more speed, the more features at some point that’s not a viable strategy going forward. And then when you say, okay I checked, you have more features, you have more power, you have better power, you have size, the other thing which is, its mileage.

If you look at some of the statistics they came out, in particularly how you think about Edge coverage and how you think about drop calls, how you think about hands offs, those things, it’s just hours and hours of testing and generation of working with multiple infrastructures, we feel that’s another advantage that we are going to have going forward.

The decision in addition of this is how much do you believe the multiple gigabit speeds in 5G matter and I think we expect it to be ahead of the competition as those new technologies come into play.

Unidentified Analyst

My question is very specific to CDMA, because within Apple, you lost the non-CDMA portion, but you maintain the CDMA, which means you do have something unique there, better than the competition. How long you think you can keep that leadership versus the others on CDMA given that its still representing a weak portion of revenues within Apple, outside of Apple?

Cristiano Amon

So I can’t, of course comment about the next iPhone. But I think definitely you’re going to get your answer there. Because I don’t think the position that we have is only about CDMA. But having said that to your specific question about CDMA. Look the CDMA markets, they have some relevant that is going to take, if you are just thinking about that, if that was the deciding factor. I don’t believe that’s the deciding factor, but if you believe that’s the deciding factor, here’s how we should think about it. In the China market, its mostly an open market. So as an open market in China, you have to provide an all mode solution, because the phone, we talk about all mode over the years.

The phone is carrier agnostics, you buy the phone from — in the open market you can buy whatever sim card you want and China Telecom is going to require CDMA for very long time as it provides coverage particularly in rural areas into their spectrum. If you think about United States market, Sprint rely on CDMA for coverage. In particular, the 1.9 gigahertz, as well as the CDMA from the next tail spectrum they acquired in the 800 megahertz, it’s very high propagation spectrum. That’s going to be there for very long time. And I think the Japan market is, I would argue KDDI is not a CDMA market anymore, they don’t require. They have LTE that covers as big as CDMA. But I think the Japan market has a higher bar of quality and performance that has been very difficult to displaces in Japan.

Unidentified Analyst

835, Snapdragon 835. Can you talk about the launch areas of strength maybe areas of weakness and kind of where it is now?

Cristiano Amon

Okay. So I’ll say with the areas of weakness. I think we wish we had more supply, I think if we had more supply we’d probably ship more than we’re able to and particularly the first half of the year it was not a demand issue. I think it was just we had, I think very successful pick-up and as the ramp on a new profit was not necessarily different and our expectations, we just saw recovery on the Snapdragon 835 that was very positive. And I think we would have suppled more if we had to.

I think we see that normalizing towards the last quarter of this year and as that 10-nanometer more capacity becomes available, we’re probably going to see that becoming even a more prevailing note in our roadmap. Second thing about areas of strength, I think we did see a significant design traction for new use cases. Snapdragon 835 is the only platform for mobile VR/AR, I think everyone that is doing this on a mobile platform, I think Daydream and Tango for Google is using Snapdragon 835 performance, I think it has a gigabit LTE modem, the first gigabit LTE devices have been with Snapdragon and I think some of the device performance and power, in particularly 10 nanometers has been really good, I think excellent reviews that came out on Galax S8 for example based on the 835. I think you know the teams did a very good job making the good use of 10 nanometer for 800 Tier.

Unidentified Analyst

You know few years ago, we used to ask Qualcomm about integrated versus discrete solutions on the semis, then we didn’t ask any more, but now if you think about what happened in the last two to three years Samsung’s maintains in certain models, maintained discrete solution, Apple maintained a discrete solution. There’re even discussions Xiaomi said publicly that they may have some parts of the application processor inside.

I want to ask you about the competition in the integrated market. Who, at the high end, if you can even talk about high-end, mid-range, low-end, who is competing with you in the high-end and mid-range in integrated solution and is this still an advantage versus others. Because I know at least Intel does not have an integrated solution.

Cristiano Amon

Okay, actually I think that’s a great question and I want to use this opportunity to clarify, there’s only one non-integrated socket, only one for a modem, in phone space which is the Apple socket, because Apple, does not have modem technology and therefore you have a discrete modem plus on AP. Samsung no longer the case, if you look at other Samsung device that we compete we win a portion of the volume of our platform, the other platform the Samsung offers is integrated as well.

The Xiaomi discrete strategy that you heard in the past, they were experimenting with a lead core, that is part of our joint venture now with Tatung at JAC that were recently announced. So the only socket for discrete modem is Apple, and it’s pretty difficult to compete in the mobile space against integration. For a number of reasons, the usual you know savings that you have on the design you don’t have to duplicate memory; one memory, one the modem, one memory on the AP, the Area Space, but also how you design the modem interface with the applications that makes use of the modem. So that’s how when we look at that, and that leads to an interesting discussion when you think about the future, of some of our competitors.

One of the problems that you know we have in the marketplace today is the high concentration that you have of Apple and Samsung. So if you think about what is the full market for semi, in the phone space you have an Apple modem socket, you have a Samsung if you can design something that is better than their Exynos and you win product cycle by product cycle, and you have China. China requires not only integration, more integration including like the frontend value proposition if you can give the Chinese, they moving boxes very fast, an integrated front end that’s what they want.

So then Samsung is already integrated. So actually, it makes me wonder what’s the expansion for example if you’re not QUALCOMM. We have a modem that we develop across and we have a thin modem for Apple and we have an MSM that we can reuse on Samsung in China. I wonder what’s the economic reliability of doing a thin modem if the only customer you have is second source low price component for Apple supply chain diversity.

Unidentified Analyst

I want to shift to NXP, and can you give us an update on first where it is, the approval process? And second, let’s go back to basics, the rational for the acquisition, the synergies both at the product level and maybe cost level and how do you see it playing out?

Cristiano Amon

Okay, first on the approval. I think we reserve ourselves enough time, I think when we announced the deal for the approvals. I think we’re not sure of regulatory challenges, so we just wonder on that side have been cautious. I think we did get United States approval. I think regulatory team is working to get the other approvals, and I think we feel confident that that’s going to happen within the time window we identified and of course those things as you go through that process, we are going to keep everyone updated and we go to the multiple phases but we see no reason why that will not get approved.

To your second question, the rational for the deal and going back to base. One of the strategies that we took, why following our strategic realignment plan, was to knowing the concentration that you had in mobile to go to the adjacent markets and we picked some industries that we know we could achieve success based on effect of relevant of mobile technology, one of that was automotive the other one was IoT.

As we achieve success in automotive in two pieces, telematics and connecting car and infotainment and we started to build our IoT business, that deal made a lot of sense, because if you look at that business today and I think it just a one of the main vectors. You think of their position in automotive combining QUALCOMM, we have high share in connected telematics, Wifi and infotainment, they have drivetrain, confident and convenient safety, we become the largest semiconductor player in the automotive space and we can build the platform from there.

They have a Microcontroller channel which is one of the largest channel, they have over 30,000 customers and as that business gets upgraded to connected smarted [ph] with the whole IoT discussion we have, we can use our technology in that channel and then grow value as IoT grows. So I think that’s a simple rational of the deal on top of that, I think it’s the usual things payment becoming more prevalent of a digital economy, more and more. I think we want to get to the point that today you get a plastic card and you say by the way you can use your phone, we wanted to get to the points that here is your phone for payment by the way you are going to get a plastic card as well.

I think — so you think about more and more synergies on security and in NFC. And I think on the synergy side there is I think QUALCOMM’s scale, when you put together NXP plus QUALCOMM, I think just on the buying side, we can see significant synergies of — and how we manage our supply chain as well as the ability to create a more efficient technology influx coming from the treadmill of mobile going to the NXP channel.

Unidentified Analyst

In terms of approvals, any area where you expect that we are waiting for Chinese approval, Korean approval, Europe approval, any area where you expect more and less fillings to approve or –?

Cristiano Amon

Very difficult to make predictions in this. Given the regulatory environment, I think, hard to say. I would — when you look at the merit of the deal, because we’re not acutely in any area. We’re very complementary we’re not competing in any particular area. We don’t expect problems, but we don’t know, it’s hard to predict.

Unidentified Analyst

Okay. Good. Any questions from the audience. Yes.

Unidentified Analyst

On the RF side, there seems to be the tremendous amount of skepticism about your ability to compete in RF. And I guess, what is different now that [indiscernible]?

Unidentified Analyst

Just repeat the question. He doesn’t have a mic, just repeat the question.

Cristiano Amon

Yes. So the question is, there is a high-level skepticism on RF, the frontend business. What is different at this point, that will give us confidence?

Look, I think we have been carefully with some of our financial projections on this. I think when we started this there has been learning process for QUALCOMM. What I’ll tell you is I think like every new technology that QUALCOMM got in. In some cases, I will use Wifi as a great example, I think we started Wifi organically and I think they are led to the acquisition of [indiscernible]. I think we’ve been through this same learning process in frontend and I think that led to a number of decisions that make us now feel more confident.

For example, it led for us to switch from CMOS to GaAs, it led us to go acquire a filter company to the TDK joint venture. And those things are different, I think we have more maturity and understanding of the market. Specifically, on the product side, I think I’ll give you a few milestones. So one is, we set ourselves a goal, that we needed to GaAs PA performance that needs to be equal or better, in particular in figure of merits than the leading provider, I think we’re there. And we have now five significant PA designs, we’re starting as a single source, pin comparable solution very easy for the OEM to implement. And I think we’re going to go through that process of proving ourselves in the marketplace. Filter, we feel comfortable about it, because TDK has been in a leading position on temperature compensated [indiscernible].

The next milestone is can we get [indiscernible] to be the leading performance, and I think right now, we don’t want to make any announcements or promises that we are there, but we actually have line of sights, what it takes to get there. So what you see us doing is, we’re going to go exactly as I said before. We want to go where we have strength of the channel and that’s where we’re going to focus all of our energy to build a frontend business in China.

China, if you think about what’s happening in China, just look how, who are the OEMs that are driving volume and who are the OEMs, that are actually going outside China at more brands, this is going to be driven for MediaTech mini spec on the transceiver or QUALCOMM expect on the QUALCOMM. I think in China it will be the real test, if we’re there on the technology and the channel. Once we build our strength in China and we get to a [indiscernible] performance that compared with [indiscernible] than I think we’ll be going after some of the premium devices.

We do have one particular global OEM, which we’ll announced at the end of the year, that will be able to win a high band, which will be probably a testimony of getting the technology gap close enough. But I think that’s going to be milestone after milestone, and the approach we’re taking is, we didn’t know what we didn’t know and that’s why you acquisition such as the TDK for the future side.

Unidentified Analyst

Okay, thank you very much. Ran out of time.

Cristiano Amon

Thank you, much appreciate it, thank you.

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