Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Skyworks Solutions Inc (NASDAQ:SWKS)
Q4 2019 Earnings Call
Nov 12, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to Skyworks Solutions Fourth Quarter and Fiscal Year 2019 Earnings Call. This call is being recorded.

At this time, I will turn the call over to Mitch Haws, Investor Relations for Skyworks. Mr. Haws. Please go ahead.

Mitch Haws -- Vice President of Investor Relations

Thank you, Rob. Good afternoon, everyone, and welcome to Skyworks' fourth fiscal quarter and year-end 2019 conference call. With me on the call today are Liam Griffin, our President and Chief Executive Officer; and Kris Sennesael, our Chief Financial Officer.

Before we begin, I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or may be considered forward-looking statements. Please refer to our earnings press release and recent SEC filings, including our Annual Report on Form 10-K, for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward-looking statements made today.

Additionally, the results and guidance we will discuss include non-GAAP financial measures consistent with our prior practice. Please refer to our press release within the Investor Relations section of our Company website for a complete reconciliation to GAAP.

With that, I'll turn the call over to Liam.

Liam K. Griffin -- President and Chief Executive Officer

Thanks Mitch, and welcome everyone. The Skyworks team delivered solid profitability and strong cash flow in Q4 and throughout the fiscal year, demonstrating our technology leadership and the resilience of our business model, despite a challenging end market.

During the fourth fiscal quarter, we grew revenue 8% sequentially, and excluding Huawei, revenue was up 20% sequentially. We produced gross margin of 50.3% and operating margin of 34%. We posted earnings per share of $1.52, ahead of our guidance and up 13% sequentially. And we generated excess operating cash flow totaling $417 million.

For the 2019 fiscal year, we delivered revenue of $3.4 billion, earnings per share of $6.17, and operating cash flow of $1.4 billion. We generated free cash flow of nearly $1 billion, up 16% from the prior year, representing a free cash flow margin of 29%, approaching our model target of 30%. And we returned nearly $1 billion to shareholders through buybacks and dividends.

At a higher level, the 5G upgrade cycle is now fully under way expanding across four continents with over 80 carriers and an expanding set of smartphone and IoT customers. We expect a substantial upgrade cycle as the 5 billion mobile subscribers today migrate from their 3G and 4G devices to 5G creating a significant opportunity for Skyworks. Stakeholders are now seeing the compelling economics that this substantial technology inflection brings with the momentum building into 2020 and beyond.

As we've said in previous calls, 5G is a technology not a product, it offers gigabit speeds, ultra low latency and greatly enhance network capacity, capitalizing a wide set of usage cases, while becoming the universal connector. Although the smartphone will lead the transition to 5G, we see an even more compelling opportunity in new markets and applications including industrial IoT, autonomous transport, smart cities, artificial intelligence and the proliferation of high definition streaming media.

More importantly, highly integrated connectivity engines will play a pivotal role in the deployment of this next generation standard by resolving the daunting analog and RF complexities that challenge the capabilities of existing hardware and networks. Skyworks is squarely at the forefront of this sea change in connectivity. We have a rich heritage in the design and execution of highly integrated and customizable system solutions earning the trust of market leaders as they cross the CASM from 4G to 5G.

Our operational footprint goes far beyond units in scale. It is centered on unique strategic technologies crafted in our own fabs, while creating sustainable competitive advantage. Our technology strength is fortified by world-class performance and scale across a broad array of capabilities. Including TC-SAW and bulk acoustic wave filters, an expanded family of MIMO Solutions and ultra high band and diversity receive modules.

Our highly customized system solutions support a broad set of wireless protocols, including GPS, Wi-Fi, Bluetooth, LoRa, Zigbee and of course 4G and 5G. From our breakthrough Sky1 -- Sky5 unifying platform, our 5G small cell solutions, Skyworks comprehensive approach across both infrastructure and user equipment facilitates powerful high speed end-to-end connectivity.

Now in our mobile business, traction in 5G is accelerating with design wins at leading OEMs, leveraging our broad and growing set of platforms. Our solutions are purpose-built to offer interoperability and customization across all baseband suppliers including Qualcomm, MediaTek, Samsung LSI and high silicon. And with the successful launch and expanding capabilities of our BAW filter portfolio, we are positioned to extend our reach across a broader spectrum of 4G and 5G bands.

Moving to the Internet of Things, we are ramping more than 10 new LTE-based design wins supporting Tier 1 automotive customers. We are powering Sonos' first all in one indoor-outdoor portable smart speakers, delivering LTE powered IoT engines to Sierra Wireless for their industrial and transportation gateways, enabling a range of wearable devices, leveraging our GPS, Wi-Fi and cellular connectivity engines, expanding our reach into high performance audio with the introduction of our cognitive chipsets, and we are executing on the launch of our Wi-Fi 6 platforms, expanding our customer set with leaders including Amazon, Arris, AT&T, Juniper Linksys and Netgear.

Now moving to the infrastructure markets, Skyworks is leveraging its vast capability in gallium arsenide, BAW technology and ceramics to support strategic customers as they deploy their 5G networks. 5G infrastructure requires new technologies and capabilities which drive the need for unique set of complex solutions. For example, massive MIMO increases RF content up to 8 times per base station with new antenna systems utilizing multiple channels and beam steering to deliver gigabit speeds.

As a company, we remain focused on driving diversification across high value markets while our customer set continues to expand, and is now numbered in thousands. In addition, we are gaining momentum in new verticals enabling wins with automotive leaders like Continental, Audi and BMW, along with industrial players including Honeywell, Siemens, GE, Philips and Rockwell.

So in summary, Skyworks has strategic partnerships with the leading smartphone and IoT providers along with the burgeoning set of entirely new customers enabled by the capabilities of 5G. Differentiated system solutions with unmatched levels of integration and performance focused and strategic investments, expanding our product portfolio IP and scale and finally a predictable business model that yields premium profitability and strong cash flow.

The strength of our design win pipeline coupled with our experience across multiple technology generations, position us well to convert these market opportunities into sustainable growth. With that I will turn the call over to Kris for a discussion of our Q4 and fiscal year performance as well as our outlook for Q1.

Kris Sennesael -- Senior Vice President and Chief Financial Officer

Thanks, Liam. Skyworks' revenue for the fourth fiscal quarter of 2019 was $827 million, up 8% sequentially and $2 million above the midpoint of the outlook we provided in August. When excluding the revenue from Huawei, in both the June and September quarters, our revenue increased 20% sequentially. This represents one of the strongest sequential growth rates for Skyworks.

Gross profit in the fourth quarter was $416 million resulting in a gross margin of 50.3% in line with expectations. Operating expenses were $135 million, flattish to the March and June quarters. Going forward, operating expenses will come down as we implemented certain cost reductions during the fourth fiscal quarter.

We generated $281 million of operating income, translating into an operating margin of 34%, up 110 basis points from fiscal Q3. Other income was $3 million and our effective tax rate was 7.7% driving net income of $262 million or $1.52 of diluted earnings per share up 13% sequentially.

Turning to the balance sheet and cash flow. Fourth fiscal quarter cash flow from operations was $417 million and capital expenditures were $84 million resulting in $333 million of free cash flow translating into a free cash flow margin of 40%.

We paid $75 million in dividends and repurchased 1.9 million shares of our common stock for a total of $146 million.

As this is the fourth quarter of fiscal 2019, let's also review our annual results. We generated $3.4 billion of revenue with gross profit of $1.7 billion, resulting in a gross margin of 50.6%. Operating income was $1.2 billion. We have an operating margin of 34.5%. Full-year effective tax rate was 8.5% and net income was $1.1 billion translating into $6.17 of diluted earnings per share.

Cash flow from operations was $1.4 billion, up 8.5% from last year, with capex at $398 million resulting in a strong free cash flow of close to $1 billion and our target free cash flow margin of 30%. We returned $932 million to shareholders in fiscal 2019, just under 100% of our free cash flow with $274 million of dividend payments and $658 million in share buybacks as we repurchased 8.9 million shares throughout the fiscal year.

We ended the fiscal year '19 with cash and investments of $1 billion and we have no debt.

Now let's move on to our outlook for Q1 of fiscal 2020. The initial launch of 5G and gains across a diverse set of high performance mobile solutions matched with solid traction in broad markets are driving accelerated growth into the December quarter. For the first fiscal quarter of 2020, we anticipate revenue to be between $870 million and $890 million, representing sequential growth of 6.5% at the midpoint of the range. We expect gross margin at approximately 50% and operating expenses of approximately $132 million, which is $7 million below Q1 of last year as we continue to manage our operating expense level. Below the line, we anticipate roughly $2.5 million in other income and a tax rate of 9%. We expect our diluted share count to further reduce to approximately 171 million shares. Accordingly, at the midpoint of these ranges, we intend to deliver diluted earnings per share of $1.65.

With that, I'll turn the call back over to Liam.

Liam K. Griffin -- President and Chief Executive Officer

Thanks, Kris. Skyworks continues to deliver consistently solid profitability while generating strong cash flow. Looking ahead, our market-leading solutions are at the forefront of the next major cycle in connectivity. However, unlike the prior 3G and 4G upgrades, which were largely paced by smartphone units, we see 5G as a transformational technology that will impact, disrupt and fuel a connected economy that we have not yet seen or comprehended in our markets today.

We address this opportunity with a proven culture of success, driven by a talented team, deep customer relationships, strategic investments in global scale, positioning us to succeed at this very important stage of technology inflection while executing the financial discipline to ensure shareholder value.

That concludes our prepared remarks. Operator, let's open the line for questions.

Questions and Answers:

Operator

[Operator Instructions] And your first question comes from the line of Karl Ackerman from Cowen. Your line is open.

Karl Ackerman -- Cowen and Company -- Analyst

Hi, good afternoon gentlemen. Thanks for let me asking a question. I wanted to focus on 5G for a moment. So some of your peers have got at least 200 million 5G phones for next year, I would appreciate how you are thinking about your opportunity for 5G with regard to geography and whether or not we should anticipate the 40% content uplift that you've alluded to from 4G to 5G? Should that be realized over the duration of the ramp or is that recognized more immediately on initial devices? And I have a follow up.

Liam K. Griffin -- President and Chief Executive Officer

Sure, well 5G of course is going to impact multiple markets, multiple customers and the timing of that can be different depending on the geography and the specific OEM. We are 100% engaged with all the leading players. We have a really significant opportunity to gain content, we're rolling that out now. The reach of our portfolio continues to expand and we have some really significant customers that are in production now. We also had some really big customers are going to be launching next year. So we're in great shape, we're demonstrating the capabilities that we've discussed in prior calls. I will tell you that the 5G implementation is incredibly powerful for the consumer, but very challenging for the OEM and our job is to get in there and do to hard work with our customers and deliver the right kind of technology to make their systems work. And that's what we're doing.

Karl Ackerman -- Cowen and Company -- Analyst

I appreciate that. On 5G infrastructure, you referenced some design wins for Massive MIMO and the content being nearly 8 times higher than 4G. Do you see the revenue inflection more of a 2021 event or is that something that can ramp in the back half of 2020? Thank you.

Liam K. Griffin -- President and Chief Executive Officer

Yes, that's a great question. So the infrastructure side of 5G is still a little bit behind schedule. So we are seeing some great adoption with the handset players and they'll be ready to roll, but infrastructure has been a little bit slow. We've made some great progress, specifically with Nokia and with Ericsson. On Nokia's platform, we've got opportunities that are measured in the $10 to $15 per base station, significant opportunity.

We're looking at tenant arrays that are very rich high content complex high margin, it's going to be pivotal to that and they use a lot of unique technologies that we also bring to market, including some ceramic technologies and other filtering technologies as well as our gallium arsenide expertise. So we do have a great hand in the infrastructure side that we're working adjacent to what we see in the mobile phone.

Operator

Your next question comes from the line of Vivek Arya from Bank of America Merrill Lynch. Your line is open.

Vivek Arya -- Bank of America Merrill Lynch -- Analyst

Thanks for taking my question. Liam, for my first one, how are you positioned OpEx and capex-wise when it comes to addressing the 5G market? I think you mentioned some OpEx rightsizing in the quarter, which areas did you rightsize? And just overall and where my question is coming from is that in the past you had one really large customer, but as we come to the 5G opportunity, you will probably need to address a much wider range of customers. I imagine over a much wider range of products. So how are you managing OpEx and capex going into the 5G cycle?

Liam K. Griffin -- President and Chief Executive Officer

Sure, great question. So just to start some of the reductions in OpEx were more around 2G, 3G products and legacy devices and moving R&D resources to higher end platforms like Sky5 and the 5G rollout. So that's one part of it. We are addressing all the customers in working across our market to deliver the right technology, also now when you mentioned capex, one of the things that we do at Skyworks is we craft our technology and build it in-house. We don't -- we very rarely outsource. We do it in-house. We have incredible capabilities to customize a wide range of TC-SAW products -- TC-SAW based products with that filter inside, and also our bulk acoustic wave portfolio.

So the capex that we have is actually strategic technology investments. These are not filters that we could buy in the open market they're filters that we craft and customize and work customer by customer to implement. So it's a very different business dynamic and business model than some of our peers.

Vivek Arya -- Bank of America Merrill Lynch -- Analyst

Got it. And for my follow-up, on gross margins, I think, Kris, you mentioned that it would be approximately 50%. So I'm just curious, is it just mix that's driving them perhaps kind of flat to slightly lower. And then how should we think about the trajectory of gross margins getting into March, which tends to be a seasonally down quarter?

Kris Sennesael -- Senior Vice President and Chief Financial Officer

Yes, Vivek, so first of all, I'm pleased with our gross margin performance in the September quarter at 50.3%, you also have to take into account that we had some serious headwinds with the export ban on Huawei, which was our second largest customer and most of those products were actually manufactured in-house. So that was a serious headwind for us, but I think the Company managed it very well. So we are guiding for December approximately 50%. So we still have some lingering issues there with the Huawei business.

And then of course, when you look ahead into March and June, we will go through our normal seasonality. But then in the second half of 2020, as we get back to sequential growth, growth that is fueled by 5G new complex, highly integrated products as well as our broad market business, we will start seeing gross margin improvements all the way up to our target model of 53%.

Operator

And your next question comes from the line of Ambrish Srivastava from BMO. Your line is open.

Jamison Crone -- BMO Capital Markets -- Analyst

Hi guys, this is Jamison calling for Ambrish. So I was hoping that you guys could talk about -- little bit more about 5G and piggybacking on Karl's commentary. We've Qualcomm has talked about 200 million 5G smartphones in 2020 and assuming you are able to get 50% market share and maybe half of the $25 content you've talked about in front-end value, that would imply about $1.3 billion in 5G revenue possible for you guys in 2020. So I was wondering if you guys could talk about the revenue and percentage of mix of 5G in your mobile segment this quarter. And where do you expect revenues and mix to land in 2020 and beyond? Thank you.

Liam K. Griffin -- President and Chief Executive Officer

Yes, we don't -- we're not going to guide mix to 5G but I will tell you that we are at the forefront. As we stated in the prepared remarks, we're at the forefront of this inflection without question. It's difficult to handicap how many units, but I will tell you there is a lot of units coming. There's a lot of complexity on the table, everyone is going to come to market with a different play, but it's a great opportunity for this industry. It really is and what we love about our Company is the flexibility that we have and the tools that we have to put together configurations with every customer.

And let me also say that we are basically technology-agnostic or baseband agnostic, we will sell with a Qualcomm baseband, we'll work with MediaTek platform, we have incredible content there, we'll work with Samsung, LSI, and if conditions change with Huawei we will work with high silicon. So we have the tools and technology. We've been investing in this for years. When we talk about decades of technology, it's real.

We've been through 2G, 3G, 4G, we know how hard it is in 5G but it's a great opportunity. So we're going to -- we're going to see an increasing level of revenue in 5G and it will not just be smartphone, it will be smartphone, it will be IoT, it will be enterprise, it will be factory automation and some incredible new avenues that we haven't even explored yet. So there's a lot coming and the business is ready to go. We've made great investments in capacity and the right technologies, and we're positioned for growth.

Jamison Crone -- BMO Capital Markets -- Analyst

Okay, thanks. And for my follow-up, I was wondering if you could maybe touch on your plan for a millimeter wave solutions, just for your company, given where Qualcomm is with theirs. Any thoughts on the market in terms of ability and revenue for handsets will be appreciated. Thank you.

Liam K. Griffin -- President and Chief Executive Officer

Sure, sure. Yes, well, millimeter wave is an interesting technology, it does can offer some pretty compelling attributes around speed and performance. The challenge with it though it had some technical roadblocks, right? You need to have some very complex beam steering to implement this. There are some line of sight limitations. There are some cost limitations to it and what we're seeing is some of our handset partners are just not ready right now to engage in that technology and opting for sub-6 -- sub 6 gigahertz 5G technologies where the market is pretty rich and the opportunity is pretty rich.

So I think there is a possibility for millimeter wave to play a role in this industry and high capacity environments, SAW sporting events, college campuses where there's a great deal of density, there could be an opportunity for that, but right now, it's kind of still on the cusp of whether the adoption will take place or not. Meanwhile, we are hedging our bets, we're investing in the technology. We do a lot of our work internally as I mentioned with the gallium arsenide and filtering, so we know the roadmap looks like to be a player in millimeter wave, but we're going to -- we're going to take our time as we progress.

Operator

Your next question comes from the line of Blayne Curtis from Barclays. Your line is open.

Blayne Curtis -- Barclays -- Analyst

Hi guys, thanks for taking my question. Just want to go back to the 5G timing you've seen Qorvo and Qualcomm talk about a March uptick, I'm just kind of curious as you put that would comment that some of the infrastructure is taking a little bit more time. I know you don't want to guide March, I;m just kind of curious would you be able to see an uptick, even as early as the March quarter, any comments on the direction there and then the pace of the rest of the year would be helpful.

Liam K. Griffin -- President and Chief Executive Officer

Sure. Yeah, I mean there should really be no difference between the peer group on what the units are going to be, right? So we can all handicap that. I think the issue and the opportunity outlined is what we do, how do we execute, and what kind of content can we gain in this industry, that's kind of more to point for us. So a couple of things. If you look at the company year-over-year, we've got incredible enhancements in our TC-SAW capability and rounding out low band pad in DRx across the board, which is great, but we've also uplifted the technology with bulk acoustic wave. We're already delivering ultra high band solutions right now that are very compelling and our customers love them, we're moving in a mid and high band also with accounts, and then you have just an incredible inflection in infrastructure that we talked about, and then further on , we'll start to see the 5G opportunity really penetrate multi markets, automotive, machine-to-machine applications, so we talked a little bit about that, enterprise, a lot of really cool stuff that we're talking to customers about and some of that may be later into '20 -- late 2020 to '21 but there is a really significant tail on that, but in the meantime, all the companies that you named and all the OEMs that are on the table, we are deeply engaged and we have been for quite a while and feeling really good about where this is moving.

Blayne Curtis -- Barclays -- Analyst

Thanks. And then maybe just for Kris. Just if you can give us any color on the September quarter [Indecipherable] mobile and broad markets, any perspective into December between those segments in terms of growth?

Kris Sennesael -- Senior Vice President and Chief Financial Officer

Yeah, absolutely. So broad markets in the September quarter was approximately 33% of total revenue. So it's running now well above $1.1 billion in annualized run rate. This was down slightly on a sequential basis, but you have to take into account that we also had Huawei-related revenue in that broad markets business if I exclude Huawei, actually it was up sequentially as well as year-over-year in the mid-single digits. So very pleased with our performance in broad markets. There's multiple drivers there, the Wi-Fi 6 adoption, the 5G opportunity beyond the mobile phone as well as some good traction in our audio play that we have as well.

Liam K. Griffin -- President and Chief Executive Officer

Yeah, well, let me add a couple of other interesting points here. In addition to kind of the run rate opportunities in broad markets, we've really been focused on cost of what I call customer acquisition, going out there and finding new accounts that we can populate with our technology and we've made some really good progress design wins now with Honeywell, design wins with Ford, design wins with Continental, Rockwell, Siemens. We have some other great accounts that we can't talk about yet that are on the cusp. So we're really happy with the ability to run broad markets in a diversified way but also capture significant customers that just haven't been part of the Skyworks family, right? We haven't been selling to these guys and with the technology inflection in 5G and the need for these companies to go to a wireless engine. it's a great chance for us to do our work. So there's some other cool things happening in broad markets that really weren't on the table a year or two ago.

Operator

And your next question comes from the line of Craig Ellis from B Riley FBR. Your line is open.

Craig Ellis -- B. Riley FBR -- Analyst

Yeah, thanks for taking the question and congratulations on the performance, guys. Liam, I wanted to follow up with some of the 5G commentary both prepared and in Q&A. So I think if we look back at 4G, integrated mobile was a business that could consistently be a mid-teens year-on-year grower and and now with 5G, the company has expanded its filter portfolio with BAW, you've got internal filter supply, we've never had that before. In an era of interface transition and you've got it top to bottom. So my question is, as you look at the engagements that exist across your different OEMs, do you feel like you're gaining the line of sight for that segment to not only return to growth but to potentially return to mid-teens double-digit year-on-year growth?

Liam K. Griffin -- President and Chief Executive Officer

Yeah, I think as you know that the opportunity is very, very strong right now and the indications we have with the customers we've been working with are powerful and the complexity is way up and some of the points that you just made about honing our facilities is a big deal. It's a big deal. We could have gone outside to do that and had a lower performing engine. It's not -- but it's not the way we want to go. So there's a lot of complexity right now, there is a customer engagement with us. We're always reaching into our accounts, but they're coming into us too. So it's a difficult transition to make technically. But it has incredible benefits. And so we saw a lot of great action in the last quarter. A lot of action in design wins, lots of discussions, lots of visits to our sites from our leading customers to go in and really kick the tires and some of the things that we're working on, and those customers walking away with content.

So we think this is going to be a very significant. This is a more than a mobile inflection. This is a technology shift that's going to disrupt the markets that we all play in here, right? So I think there's some great stuff going on and we'll start to see more and more customers evolve, classic mobile customers, but then, kind of that second wave in the IoT enterprise etc where there is just a long tail of opportunity. So we feel good about it. I feel that the design win activity in the last six months or so has really accelerated the sampling activity across a whole set of OEMs, also some really good work with baseband partners.

We've done some exceptional work with MediaTek for example transitioning from a strong position in Phase 6 now shipping Phase 7, which is all 5G, launching the higher of the higher frequency bands with BAW. So it's a compelling time right now for Skyworks to execute. We're not opportunity-constrained. It's about getting out there and helping our customers win.

Craig Ellis -- B. Riley FBR -- Analyst

That's really helpful. Kris, the next question is for you and I wanted to follow up on the comments that the gross margins for us could move from current levels up toward the 53% target model. What I wanted to do is break that down and get your help just on identifying what the specific drivers are. So can you just help us understand how we get from first 50% to 51%? Is that all just going to be volume coming back and kind of making up for the loss of Huawei? And then more significantly, I think getting from 51% to 53%, if you could just help us understand how much of that is help from broad markets, Avnera, mix shift within the integrated mobile portfolio from 4G to 5G etc, it would help give us some clarity on how we get to 53%? Thank you.

Kris Sennesael -- Senior Vice President and Chief Financial Officer

Yeah, that's a good question. And so as I've answered in the previous question, right? Some of the headwinds of course is the Huawei revenue that -- that almost disappeared and Huawei was running on or about 15% of total revenue. And so that's definitely a headwind, but nevertheless, I think we have been able to keep the margins above the 50%, and looking forward, there are three major blocks to drive margin improvement and the first one and most important one is continue to develop highly integrated complex high value-added type of products to our customers that make their product better, then that make the user experience better, and we do that all the time and 5G is a great opportunity to demonstrate our technology leadership and help improve as a result of that our margins. Of course, in addition to that, we will continue to work our operational cost structure and drive down the cost in our factories and with our suppliers and all of that.

And then last but not least, of course, yes, there is a little bit of a tailwind in terms of mix. Our broad markets business has higher gross margin than our mobile business and our broad market business has been growing and will continue to be growing faster than mobile mobile and so we get a little bit of a tailwind there as well.

Liam K. Griffin -- President and Chief Executive Officer

Yeah, I will add one thing to that comment, I think that if you look at 5G and the complexity of 5G and the types of unique systems and engines that are being deployed, the margins there are going to be higher. I think there's going to be fewer players in the industry that can execute to the level that our customers need to be successful. So I think you've got a case where the 5G inflection and the power of that connection and the value that that's providing is going to translate to better gross margins. So, it's just the way that's going to run, now working it within our factories is going to make it even easier for us, but there is going to be and there should be for us meaningful margin move with the rollout of 5G as we get a higher level of concentration.

Operator

And your next question comes from the line of Craig Hettenbach from Morgan Stanley. Your line is open.

Craig Hettenbach -- Morgan Stanley -- Analyst

Yes, thanks. First question, just Liam, to follow up on the BAW activity, you've seen that mostly in diversity receive at this point and then just how you think about it in the future layering into you mentioned kind of ultra high band pad and things like that?

Liam K. Griffin -- President and Chief Executive Officer

Sure, Craig. Yeah. So we actually right now today have been shipping in high volume on ultra high band pad that includes our BAW device and that's running at about 3.3 gig, Craig. So we're looking at high frequency, high-band devices. We're sampling more than 10 customers with our bulk acoustic wave technology across a broad set of frequencies and spectrum and we've had -- we've had strategic customers come and test our mettle and they like what they see. So we're going to continue to advance in that category, and we will use the filtering technology that's best equipped for the application. We'll continue to use TC-SAW in some areas, we will use bulk acoustic wave in some areas, maybe it will be in diversity receive, maybe will be in transmit chain.

So again, just having the ability to create that unique customization for each and every one of our accounts is important for us. So we've made those investments, and you should expect more from us on the BAW side as the year turns here and we get further into 2020.

Craig Hettenbach -- Morgan Stanley -- Analyst

Got it. And then just a follow-up for Kris. I know you guys have talked about as you in-source filters, the inventory is kind of higher than historic. Just how are you thinking about managing that into what's typically the seasonally weaker March quarter?

Kris Sennesael -- Senior Vice President and Chief Financial Officer

Yes. So I feel comfortable with where we are from an inventory level. Actually, the days of inventory came down 4 days to 135 days and is expected to continue to come down in the December quarter. But looking forward, inventory is going to fluctuate between 120 days to 140 days, 145 days. And again, that is higher than a couple of years ago, mainly driven by our filter manufacturing, right? We continue to expand the capacity, not only in TC-SAW, but now also are having major investments to get bulk acoustic wave capacity into our filter operation and so that is driving the inventories to 120 days to 145 days.

Operator

And your next question comes from the line of Chris Caso from Raymond James. Your line is open.

Chris Caso -- Raymond James -- Analyst

Yes, thank you. First question is on Huawei. And I think last quarter your commentary was that the majority of the restrictions were on the infrastructure products, but yet in the handset products sold to Huawei, you weren't getting demand signals. Could you give bit of an update on where that stands now, how much Huawei is in the guidance right now? And do you expect that to come back at some point going forward from speaking to the handset side?

Kris Sennesael -- Senior Vice President and Chief Financial Officer

Yes, so the Huawei revenue played out exactly in line with our expectations. In the September quarter, we expected approximately $10 million of revenue, and that's what it -- that's what it came in. So looking forward, we believe that Huawei will continue to run at approximately that level, maybe it might be picking up a little bit, but a lot of that will depend on this whole situation with Huawei and the export ban will evolve.

Liam K. Griffin -- President and Chief Executive Officer

Yes, I mean, Chris, this is really just about being in compliance with the export ban. It's not about share loss or gain. It's about being in compliance, and as Kris said, $10 million was the number for the quarter. Over time, if things change, we could be right back in the saddle with this customer, they were number two customer for us, not long ago. So it's not a keep -- it's not about technology on her end or market share, it's really about staying in compliance with US law at this point. And if things change, we'll be ready to alter.

Chris Caso -- Raymond James -- Analyst

All right. As a follow-up, I guess a follow-up on that and there have been some Investor concerns over other fallout around the trade tensions where perhaps some Chinese customers would seek to be less reliant on US content, perhaps even backsliding into discrete solutions. Could you talk to that, what the customers are telling you? Or is there any evidence where you've got customers that perhaps would like to go away from US content? And as you move into 5G into more -- in a higher complexity, is that even a feasible solution at this point. Can you develop a 5G phone that uses discrete solutions?

Liam K. Griffin -- President and Chief Executive Officer

Yes. So I'll start, I'll get the second part and then I'll go to the other -- the front-end of your question. So I think it's very difficult to deliver the kind of compelling technology that is needed in a 5G device, I really do, I believe that and I think US companies have played a vital role in that area and I think we have this great technology, it's difficult to do it without some of the things that we make here at Skyworks and some other -- some of our other peers.

So that's one. But at the other side here is the Huawei situation is a Huawei situation, there are trade issues in China, we get it, but if you look outside Huawei and you look at Oppo, Vivo and Xiaomi, our business is very strong, very strong and there's a lot of 5G launches going on right now with Skyworks. There were some initial launches where we had a baseband provider in there and there were some content that we didn't win, but that's turning over.

So we see tremendous momentum and what we call the OVX side the Oppo, Vivo, Xiaomi side within China. So that continues to go on and as Kris noted we're playing it down with Huawei, we've got a number now that's conservative, we're going to focus on everybody else and if Huaweri comes back, like I said, that revenue will come back.

Operator

Your next question comes from the line of Edward Snyder from Charter Equity. Your line is open.

Edward Snyder -- Charter Equity -- Analyst

Thanks a lot. Liam, if I could, there's been a lots of ultra high band sub 6 that Qualcomm obviously based on their comments is just going to take it all, they said something like virtually all baseband ([Indecipherable]solutions for 200 something different flash devices. Leaving that aside for now, any comments you want to make on what you're seeing competitive threats on that, but more importantly, it looks like the architectures that are coming out in the next year by [Indecipherable] China Mobile including the 79 bands, is this -- what's your -- can you know on content for the device, [Indecipherable] has been up for a while probably now only about $2 of content. Are you seeing this rise much faster than expected, because you're including these extra bands in this? And do you expect to capture your traditional share, which has been relatively high in that spot for the next year or so? Or are you getting more competition? Then I have a follow-up.

Liam K. Griffin -- President and Chief Executive Officer

Yes, no, that's a great question, Ed. A lot of insights to that. So we are seeing some real good action on the UHP pad run around 33 [Phonetic], 35 [Phonetic]. And so what you've got there is some great opportunity to continue to expand that, that's working out great . We're also looking at a number of other solutions with our China customers and other OEMs. And then the other major catalyst for us in this area is MediaTek and you know these guys really well. We've done a lot of work with MediaTek back to the 2G days and we had a nice position on Phase 6. But when you start to roll into Phase 7, our platform position to MediaTek is really compelling. We've got Sky5, we've got DRx technology, we have UHP opportunities. And there're some incredible new technologies across that platform and we feel really good about that. We could be looking at a $7 or $8 handle on MediaTek chipset attach here in Phase 7. So we're excited about that, and in the meantime , we're continuing to do the work with Oppo, Vivo, Xiaomi despite the baseband provider whoever it may be, if it's MediaTek or not MediaTek, if it's Samsung LSI, we'll work it, it if's Qualcomm, we'll work it. So there's a lot of action going on there, but I would say that the MediaTek transition is going to be quite strong, it hasn't happened yet, but it's headed for the second half of the year, it'd be really compelling driver.

Edward Snyder -- Charter Equity -- Analyst

And then, I'm glad you brought that up because my second question basically. I mean the Chinese OEMs took their toe in Phase 6 last year to the first full module design, and for safety sake, it looked like in the core we took most of the main path, you guys were all over the place and the other sections of it, but it sounds like now they like to the left to really accelerate the deployment of both Phase 6 and Phase 7 sooner before MediaTek gets their 5G out. We certainly saw that in some of the reports coming out on the quarter, big upside in not only number of 5G phones but a number that are using more of these high content modules. You kind of stepped back a little bit last year just because on the transition to this new architecture volumes when for safety and I know you take this some of that back, but outside of say the DRx and all the other areas you guys were in tuners, we saw that, outside of pack at the main path, do you expect to gain back some of the share now that the OEMs are getting comfortable with that design or are we going to see a bifurcation here where you and Qorvo taking nearly all the content in this fall, and it's just going to be bifurcated main path for them and most of everything else for you guys, what's your feeling on that?

Liam K. Griffin -- President and Chief Executive Officer

Yes, I think, well, I think you've got a lot of that captured, you definitely have an increased opportunity and we are certainly not going to get all of the business, would like to get the lion's share, I think we will, but it's an increased opportunity and in the complexity that you see in these new phones. the Phase 7 devices specifically [Indecipherable] right? It takes the best and the brightest to go out there and execute it, so we're seeing that, but I will tell you that in addition to the traditional stuff that you've seen low band pad and maybe some of the DRx we're starting to move up the mid and high band.

We're starting to move up with mid and high band pads, which could be a really meaningful high potency opportunity for us for content, you mentioned we talked about the UHP that's continuing to gain not just with MediaTek, but with some other accounts. So the apertures widened a bit, but one of the common themes here is complexity, like you said, the number of devices, the number of of hand-offs carrier aggregation, the power consumption and the efficiency required to drive these 5G devices, it's just going to be a game changer in terms of challenge and that's exactly what we want to see. So there's some really good stuff out there. We hope to lead in this market, but it's a great opportunity for the industry as well.

Operator

And our last question comes from the line of Bill Peterson from JPMorgan. Your line is open.

Bill Peterson -- JPMorgan -- Analyst

Yes, hi. Thanks for sneaking me in. I have some questions around the broad markets business. And I guess, first is a follow-up to Blayne's question. Do you anticipate sequential growth in the December quarter. I mean, [Indecipherable] is kind of running at a low level. And then I guess as you think about the fiscal year based off your design win pipeline, you talked about Wi-Fi 6 and some of the other opportunities, how should we think about growth in that can never turn back to double-digit growth as we think about that in this fiscal year?

Kris Sennesael -- Senior Vice President and Chief Financial Officer

Yes, just for the December quarter broad markets normal seasonality is down 8% to 10% We saw that in fiscal '18, we saw that in fiscal '19 and so we expect something similar in the December quarter of fiscal '20, normal seasonality. Having said that, on a full year basis, yes, we do believe that broad markets given all the drivers that we've talked about, it could be back to double-digit year-over-year growth.

Liam K. Griffin -- President and Chief Executive Officer

And recall, if you look at proxy for semis in 2019, you're looking at double-digit declines for most of those markets. So broad markets within our business, we felt they behaved pretty well, grew pretty nicely. But we're going to continue to invest and drive that into 2020.

Bill Peterson -- JPMorgan -- Analyst

Okay, thanks for that color. And I guess just lastly a housekeeping, how should we think about OpEx trajectory throughout the year? Are you bringing it down here in the December quarter? Should we expect that kind of grow somewhat in line as revenues continue to grow and maybe return to year-on-year growth? And then your tax rate, I guess 9% we just assume that for the fiscal year as well.

Kris Sennesael -- Senior Vice President and Chief Financial Officer

Yes, on OpEx we're going to remain disciplined. But at the same time, we're not going to hesitate to make the necessary investments to fuel the growth of the business and make those necessary investments in technology, 5G, broad markets, support of the broad markets. So, yes, over time here in fiscal '20, we will see some modest increases in the OpEx, it's running on or about 16% or so to revenue right now, which I do believe is world-class and we will continue to manage it. And then on the tax rate on a full year basis, on or about 9% is a good number.

Operator

Ladies and gentlemen that concludes today's question-and-answer session. I'll now turn the call back over to Mr. Griffin for any closing remarks.

Liam K. Griffin -- President and Chief Executive Officer

Thank you all for participating on today's call. We look forward to seeing at upcoming investor conferences during the quarter. Thank you.

Operator

[Operator Closing Remarks]

Duration: 48 minutes

Call participants:

Mitch Haws -- Vice President of Investor Relations

Liam K. Griffin -- President and Chief Executive Officer

Kris Sennesael -- Senior Vice President and Chief Financial Officer

Karl Ackerman -- Cowen and Company -- Analyst

Vivek Arya -- Bank of America Merrill Lynch -- Analyst

Jamison Crone -- BMO Capital Markets -- Analyst

Blayne Curtis -- Barclays -- Analyst

Craig Ellis -- B. Riley FBR -- Analyst

Craig Hettenbach -- Morgan Stanley -- Analyst

Chris Caso -- Raymond James -- Analyst

Edward Snyder -- Charter Equity -- Analyst

Bill Peterson -- JPMorgan -- Analyst

More SWKS analysis

All earnings call transcripts

AlphaStreet Logo