Qorvo (QRVO) Q3 2020 Earnings Call Transcript

Qorvo (QRVO 3.86%)
Q3 2020 Earnings Call
Jan 29, 2020, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Qorvo Inc. Q3 2020 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Douglas DeLieto, vice president, investor relations.

Please go ahead.

Douglas DeLieto -- Vice President, Investor Relations

Thanks very much, John. Hello, everybody, and welcome to Qorvo's fiscal 2020 third-quarter earnings conference call. This call will include forward-looking statements that involve risk factors that could cause our actual results to differ materially from management's current expectations. We encourage you to review the safe harbor statement contained in the earnings release published today, as well as the risk factors associated with our business, in our annual report on Form 10-K filed with the SEC because these risk factors may affect our operations and financial results.

In today's release and on today's call, we provide both GAAP and non-GAAP financial results. We provide this supplemental information to enable investors to perform additional comparisons of operating results and to analyze financial performance without the impact of certain noncash expenses or other items that may obscure trends in our underlying performance. During our call, our comments and comparisons to income statement items will be based primarily on non-GAAP results. For a complete reconciliation of GAAP to non-GAAP financial measures, please refer to our earnings release issued earlier today available on our website at qorvo.com under Investors.

Sitting with me today are Bob Bruggeworth, president and CEO; Mark Murphy, chief financial officer; James Klein, president of Qorvo's infrastructure and defense products group; Eric Creviston, president of Qorvo's mobile products group; as well as other members of Qorvo's management team. And with that, I'll turn the call over to Bob.

Bob Bruggeworth -- President and Chief Executive Officer

Thanks, Doug, and welcome, everyone. Qorvo delivered record EPS in the December quarter driven by strength in our end markets of 5G, WiFi and defense. I'm especially pleased with how our team is engaging with customers to enable breakthrough products and contribute to multiyear technology upgrade cycles. In mobile products, the acceleration of 5G is driving demand for Qorvo's high-performance and highly integrated solutions.

Carriers are bringing advanced 5G services across new frequency spectrum, and that's driving greater complexity in handset designs as boards space remains constrained. Qorvo is solving that complexity by integrating the industry's broadest portfolio of technologies and advancing this state-of-the-art and functional integration. Looking at December, we enjoyed significant design win traction for our BAW-based multiplexers across a range of band combinations, including our hexaplexers and our recently launched micro BAW-based quadplexer. These are multiplexers enable advanced carrier aggregation, and they are critical to next-generation higher data rate applications.

We also secured multiple design wins to supply low-, mid-, high and ultrahigh band solutions for next-generation 5G smartphones. These are highly integrated and high-performance 4G, 5G solutions, enabling customers to reduce product footprint, enhance system performance and deliver products to market even faster. Design wins for our ultrahigh band FEMs were broad-based across customers and made it with multiple 5G cellular chipsets. Qorvo solutions deliver highly differentiated performance at higher frequencies as we expand our content in the next wave of 5G smartphones.

Consistent with what we said last quarter, we continue to expect approximately 300 million 5G handsets in calendar year '20, adding approximately $2 billion to the mobile RF TAM. Turning to IDP. Our GaN customer engagements broadened during the December quarter as we ramp GaN high-power amplifiers and small signal components at a third major OEM in support of 5G massive MIMO deployments. To support China Mobile's deployment of 5G small cells, we ramped our newest BAW filters at a top-tier infrastructure OEM.

We also introduced breakthrough GaAs FEMs addressing the more demanding requirements of second-generation 5G millimeter wave base stations. In our connectivity business, we enjoyed a rebound in demand driven by WiFi 6 and supported by our recently released GaAs and BAW processes. Customer demand for our newest WiFi 6 FEMs was broad-based and support a CPE, retail and mobile applications. For the connected home, we began sampling the industry's first radio solution, combining ZigBee, Thread and Bluetooth Low Energy SoC with a WiFi 6 FEM to enable next-generation distributed WiFi networks.

For the connected car, we introduced a complex -- excuse me, we introduced a complete V2X front-end solution, featuring our recently released 5.9 gigahertz WiFi coexist BAW filters, which are quickly gaining traction among automotive OEMs and tier 1 suppliers. Finally, we continue to expand our customer base and the programmable power management end market, shipping power management ICs into data center solid-state drives for two of the top three storage providers. After the quarter closed, we signed definitive agreements to acquire Decawave, a pioneer in ultrawideband solutions for mobile, automotive and IoT applications; and Custom MMIC, a leading supplier of high-performance GaAs and GaN MMICs for defense and aerospace applications. Adding Decawave establishes our position in the emerging market for ultra-accurate, ultra-secure short-range location solutions.

Custom MMIC expands our portfolio of high-performance GaAs and GaN solutions for the defense and aerospace industries. Looking forward, we see both IDP and mobile products growing year over year in the March quarter on the strength of our broad technology portfolio and strong underlying trends in our end markets. And with that, I'll hand the call over to Mark.

Mark Murphy -- Chief Financial Officer

Thanks, Bob, and good afternoon, everyone. Qorvo's revenue for the third quarter was $869 million, $19 million above the midpoint of our guidance and driven by stronger-than-expected mobile demand. Mobile revenue of $662 million exceeded our expectations on Asia-based customer demand, including 5G solutions. IDP revenue improved sequentially to $207 million on strong defense volumes and remained down year over year due to export restrictions on infrastructure products.

We expect IDP revenue to increase again sequentially and return to year-over-year growth in the March quarter on sustained strength in defense, the ramp of WiFi 6 and broader 5G infrastructure customer demand. Non-GAAP gross margin in the December quarter was 49.3% with better-than-expected manufacturing costs and favorable mix effects. Non-GAAP operating expenses were $176 million, which were at the low end of our guidance range. Non-GAAP net income in the December quarter was $221 million, and diluted earnings per share was $1.86, $0.19 over the midpoint of our guidance.

Cash flow from operations in the December quarter was $301 million, and capex was $41 million, which yielded free cash flow of $260 million. Our free cash flow through the first nine months of fiscal '20 was over $600 million, exceeding any prior full fiscal year. We repurchased $125 million of stock in the quarter and completed an opportunistic $200 million add-on to our 2029 unsecured notes issued earlier in the quarter. During the December quarter, we completed a purchase of the remaining equity in Cavendish Kinetics, an RF MEMS company, further strengthening our technology portfolio for switches, tuners and other products.

As Bob mentioned, following the quarter end, we signed definitive agreements to acquire 2 companies that we have been evaluating for extended periods. With both companies, there is excellent strategic alignment and cultural fit. Decawave, a pioneer and leading supplier of ultrawideband solutions, adds to Qorvo's RF technology leadership and opens up access to a large, new and rapidly growing wireless market. Custom MMIC, a leader in high-performance GaAs and GaN MMIC solutions for defense and aerospace markets, is a bolt-on to IDP's core business.

The combined purchase value of these two acquisitions is approximately $500 million, which will be funded from existing cash on hand. Our guidance assumes both transactions close in February, and the financial impact, slightly dilutive to earnings in the near term, is reflected in our March guide. Turning to our March quarter outlook, we expect revenue between $800 million and $840 million or $820 million at the midpoint, non-GAAP gross margin of approximately 48.5% and non-GAAP diluted earnings per share of $1.55 at the midpoint of our guidance. Our revenue outlook for the March quarter reflects continued robust mobile 5G demand and a return to year-over-year growth for IDP.

For mobile, we expect March quarter sales to decrease sequentially but with less-than-normal seasonality. For IDP, we project March quarter sales to increase on sustained strength in defense, the ramp of WiFi 6 and broader 5G infrastructure customer demand. While Qorvo's current near-term outlook is strong and channels are healthy, trade and other factors, including potential demand and supply chain effects related to the coronavirus concerns, contribute to challenges and uncertainty forecasting the outlook. On gross margin, our March quarter guide of approximately 48.5% is down sequentially, consistent with comments I made during our last earnings call.

Non-GAAP operating expenses are projected to increase in the March quarter to approximately $185 million on higher personnel costs, including payroll effects and incremental costs associated with acquired businesses. Net interest expense will increase with our notes add-on and a lower cash balance following acquisitions. We expect our March quarter non-GAAP tax rate to be approximately 7.5%. On capital expenditures, we project less than $190 million this fiscal year and remain highly disciplined on adding capacity.

Our free cash flow forecast for the year is now over $700 million. As the December quarter results and our March outlook show, Qorvo is helping customers grow in 5G, WiFi, defense and other markets by solving their challenges with best-in-class technology, award-winning quality and supply dependability. With that, I'll turn the call back over to John for questions.

Questions & Answers:

Operator

[Operator instructions] And our first question comes from Karl Ackerman with Cowen and Company.

Karl Ackerman -- Cowen and Company -- Analyst

Thank you, gentlemen. I have two questions, if I may. The first question is on margins. So I get the seasonal softness in the March quarter.

But as you finalize the consolidation of your soft fab to Greensboro, your 5G ultra high-band PAD FEM content likely proliferates across the top six mobile OEMs later on this year, and IDP returns to growth in the back half. Why can't operating margins approach 30% by the end of this year?

Mark Murphy -- Chief Financial Officer

Yes. Karl, two -- this is Mark. Two effects on operating margin in the March quarter. One is -- and I'll start with opex..

As I mentioned, opex is going to increase sequentially due to a number of factors, payroll effects and the incremental costs associated with the acquisitions. Moving up to gross margin. Consistent with what I said last quarter, we will see a sequential decline in gross margin, which is typical around seasonal product mix effects. So yes, this is very much in line with what I said last quarter, about 100 basis points or so decrease sequentially.

Karl Ackerman -- Cowen and Company -- Analyst

Got it. For my follow-up, regarding your March outlook, it seems your base assumptions call for a slightly less seasonal decline at -- or I guess a seasonal decline in your largest customer but a sizable uptick at China handset providers and maybe some stability at your Korean customer, given all the design wins you alluded to last quarter and of course earlier today in your prepared comments. First, am I thinking about that the right way? Second, how should we think about the revenue opportunity from China handsets? I think for the overall industry, would you endorse content for mainstream handsets advancing from $1 to $2 to like $6?

Bob Bruggeworth -- President and Chief Executive Officer

Karl, I'll take the beginning of that. From a perspective of just looking at it year over year, both businesses are returning to growth year over year. That's great to see. IDP business sequentially is growing very nicely.

So that's also offsetting some of the seasonality. It's typically flat to up slightly. So that's doing well. And in our mobile business, very pleased with how much we're offsetting year over year the decline that we've seen at Huawei, and it's broad-based.

So we're seeing strength across the customer base, but I'll let Eric add a little more color to the specifics of the customer base that you asked about.

Eric Creviston -- President, Mobile Products Group

Sure. Yes. As you referenced, the 5G rollout in China is very much on track and content gains there associated with more bands and wider bands and multiple carrier operation and so forth is leading to an expansion of the dollar content, as well as units a bit higher than we had originally planned. In terms of dollar content opportunity that you referenced, it's not at all unusual in these 5G handsets to see total dollar content in the $10 to $12 range, and they tend to buy as much of that as possible from one supplier.

So we have many handsets in China now where we have $8 to $10 worth of RF content.

Operator

Our next question comes from Toshiya Hari with Goldman Sachs.

Toshiya Hari -- Goldman Sachs -- Analyst

Hi, guys. Thanks for taking the question, and congrats on the strong results. My first one was on IDP. You guys talked about WiFi 6 and comms and defense contributing to growth in the March quarter.

Can you kind of help us quantify sort of the magnitude of all three on a relative basis? And if you can speak to sustainability beyond the March quarter for those three buckets, that would be helpful. And then I have a quick follow-up.

James Klein -- President, Infrastructure and Defense Products Group

Yes. This is James. Now the year-over-year growth will be relatively small. But considering we lost one of our top customers just a few quarters ago, I am really pleased with the efforts of the team to return back to growth so quickly.

I think it does demonstrate the underlying strengths of the products that we have and the markets that we serve. Defense, low-power wireless and power management will all have double-digit year-over-year growth quarters in March. WiFi, as we talked about, with the ramp of WiFi 6 is returning, and it'll have a high single-digit type growth rate. And then other markets that we serve, I think, will be a mix of up and downs.

Still at the phase of deployments in base stations where we're starting ramps and starting to recover, but with loss of Huawei, we're obviously still significantly off of our all-time highs in base station.

Toshiya Hari -- Goldman Sachs -- Analyst

Got it. And then my second one is for Mark. In terms of free cash flow, it looks like for the full year, you're thinking free cash flow margins of 22-ish percent based on your Q4 revenue guide and your full-year free cash flow commentary, which I think is the highest free cash flow margin since the merger. I guess, importantly, going forward, do you feel like there's more upside from there? Or is this as good as it gets? And to the extent you do think there's more upside, what are some of the levers that you can pull to improve margins? And then sort of related to that, as you continue to build cash, how are you thinking about cash usage between organic investments, M&A and shareholder return?

Mark Murphy -- Chief Financial Officer

Yes. There's a lot in that question, Toshiya. I'll work through it. So yes, we're really pleased with the progress we've made on free cash, and it's been the absolute focus for the company.

We've gone from $224 million free cash flow in the year up to we're now forecasting over $700 million in just -- in a number of years here. And we reached close to 30% basically -- right almost on top of 30% in the third quarter of free cash flow margins. And I think that's an objective we set some time ago for the full year. So we're not going to -- as you said, we're going to be closer to 22%, but we continue to see the ability to expand free cash flow margins.

And nothing has really changed there. I've gone through this in previous calls. We're pursuing a model and investing in a way to achieve stronger and more sustainable free cash flow generation over time, and that comes from investing in the right technologies of which you see some of that in the acquisitions we announced today. It's selecting the right products and having a rigorous portfolio management process, which we've executed on.

It's driving productivity in operations and sourcing. And I can't say enough about the job the ops team is doing in meeting customer quality expectations and on-time delivery and doing it efficiently. And then the ops alignment with the business is as good as it's ever been in the company, so seeing great things there. And then finally, we're just focused on reducing capital intensity, and all those factors have helped with margin expansion.

On gross margin specifically, yes, there's room to run, we believe. We're still not at the utilization levels that we had hoped this year. The infrastructure market softness has impacted us in a couple of areas in the network, particularly Texas GaAs, GaN in Oregon. In the fourth quarter or in the December quarter, we had period costs in Florida.

As I think Karl mentioned, those do drop off in March, but we still have some period costs associated with Farmers Branch and some small period costs elsewhere. And then, yes, over time, we expect IDP to improve as a percent of the overall mix. And I've talked about portfolio management and operations productivity and so forth. So I believe in the ability of our business to grow the top line.

We have a number of levers to expand margins. We're focused on spending capital only when we need to and then driving free cash flow growth which has -- allows us to make prudent investments either for accretion or on technology. Finally, you asked about capital allocation, basically. The last 12 months, we've generated $754 million of free cash flow.

We've repurchased 689 million of shares, so over 90% return to shareholders. And then over this time, we've also completed the purchase of two companies over $500 million. That's not including the two we announced today. So we'll continue to, again, drive free cash flow growth and then look for investments that make sense for Qorvo.

We've said technology investments for both mobile and IDP and then bolt-ons for IDP is typically how we look at things. And then depending on our leverage and other factors, we'll return cash to shareholders.

Operator

And our next question comes from Harsh Kumar with Piper Sandler.

Harsh Kumar -- Piper Sandler -- Analyst

Hey, guys. Congratulations. Congratulations on that cash flow number. I had -- I had to put you on a spot here, Bob.

You had a pretty strong mobile March guide, and you're also basically saying pretty good strength in 5G, pretty good design win traction. I take that to be that the strength in March, the better-than-seasonal strength in March is not going to come at the expense of the rest of the year. Historically, June, September, December have all been much better quarters. Could you just maybe, to the best that you can -- I know it's a tough one, but best you can, provide us some color?

Mark Murphy -- Chief Financial Officer

Maybe -- Harsh, this is Mark. Maybe I'll step in. And we're going to provide more information on the FY '21 at the next earnings call. As it relates to June, we're not going to provide detailed guidance in that quarter either, but I think maybe this is a time to talk about risks of the June quarter.

Now we feel good about the March quarter. Yes, there's coronavirus concerns and -- first, our thoughts are with those affected in the region, but we've been revisiting our outlook based on those concerns. We're comfortable with our forecast and feel that we've adjusted for what we perceive now as some risk. But we've been keeping a close eye in the situation, including extensive checks on the supply chain.

To date, we've seen no material impact for our supply chain or with demand signals. However, the situation is evolving, so we've reflected some added risk, as I mentioned, to our March guide, including, as you'll notice, a wider range of outcomes. So to your question, likewise, we're thinking about potential effects into the June quarter. And even though our channels are lean, we are concerned about how this plays out because we just don't know.

As it stands now, we would estimate the June quarter to be between $750 million to $800 million of revenue. But again, it's early. There's a lot of uncertainty around that. We'll provide a more detailed update at a later date and a fiscal year '21 view on our next earnings call.

Harsh Kumar -- Piper Sandler -- Analyst

That's fair. I appreciate the color that you gave. As a follow-up, the strength in China that you guys are seeing, maybe one for Bob or Eric, what kind of customers is that coming from? Is that coming from the tier 2s? Or is that also, to some extent, coming from Huawei at this point?

Eric Creviston -- President, Mobile Products Group

Right. Yes. It's primarily throughout Asia, so Korea and China as well, where relatively high-end 5G handsets are still entering the channel for now. We're beginning to also see our large customers in China, so Vivo, Oppo, Xiaomi, for example, bringing 5G further down into the portfolio with some of the handsets that'll be launching in the March quarter.

Operator

Our next question comes from Bill Peterson, JP Morgan.

Bill Peterson -- J.P. Morgan -- Analyst

Thanks for letting me ask a question, and great job on the results and guide. Maybe first one for Eric. And going back to your analyst day from one-and-a-half years, I guess closer to two years ago, you talked about some unique advantage of your BAW relative to other filter technologies, so net BAW and so forth. You've been discussing ultrahigh band wins and n79 in particular, and also now recently you're talking about traction with your new micro BAW.

I guess, can you give us an update on how your BAW is helping you win relative to competitors, I guess, both in tranche as well as new entrants for some of these 5G specific bands? And I guess in terms of other content, you've been talking with us about antennaplexing. We haven't heard as much about that recently, but how has that been playing out? And I guess how can you meet the demands in that given your portfolio, your BAW portfolio?

Eric Creviston -- President, Mobile Products Group

Right. Yes. Thanks, Bill. The technology road map has continued to progress for us.

Since we've formed the company, we've really made just a ton of progress in improving the performance of our SMR BAW filters and also our ability to integrate them into modules and, also together, to make antennaplexers and high-level multiplexers and so forth. So that's maturing and getting more and more competitive every single month. In addition, of course, at the same time, the market's asking for higher performance. More bands are being added, it seems, every quarter, wider bandwidths, multichannel operation and so forth.

So there's plenty of challenges to be met with the filter technology, and it's frankly a pretty target-rich environment right now for these opportunities. So I think it's fundamental technology, combined, really, with our ability to integrate it with also very, very good power amplifiers, for example, in the ultrahigh band opportunities, power amplifier efficiency and power levels are very important to accomplish and then, of course, our leadership in switching technologies and putting all those into high-level modules together. It's very similar to the fundamental trends we've talked about for several quarters now. We're just continuing the march on driving the investments into the core technologies to make it better.

Bill Peterson -- J.P. Morgan -- Analyst

OK, great. And I guess the next question, I guess, both you and James can chime in. On the top of the millimeter waves, obviously, some of your competitors are talking of the millimeter wave opportunities. It appears like you and your closest competitor are really still focused on sub-6.

I guess for the mobile side, what unique and different solutions could you bring into the market? What are the key hurdles to address? What are key base technologies, power amplifiers, switching filters and so forth? And I guess what James has said, what -- you spoke to it a little bit earlier in the prepared remarks, but how do you see the growth of millimeter wave and the impact to his business and some of the unique, I guess, things that he can bring to the market as well?

Eric Creviston -- President, Mobile Products Group

Yes. So thanks. I'll start. This is Eric.

So the unique strengths that we bring to millimeter wave in the mobile side is really leveraging the work that James has done in the infrastructure side and defense applications, developing advanced gallium arsenide processes for millimeter wave operations. So we've released new commercial versions of those processes and have introduced those to multiple handset manufacturers and platform providers. We're building prototypes to help demonstrate the capability of mobile millimeter wave and showing what could be done in terms of thermal dissipation and power efficiency and battery life and so forth. But at the end of the day, I think the big question is just whether the business model is going to close on it.

I think there's a lot of challenges in millimeter wave in a mobile application. By definition, you're moving in a mobile application and the path losses is quite high in millimeter wave. So we'll see. We're certainly getting lots of demonstrations out there.

You're seeing carriers put up a millimeter wave in multiple cities, and we're going to be participating in helping to validate the market.

James Klein -- President, Infrastructure and Defense Products Group

And Bill, this is James. And as far as infrastructure is involved, I mean, we're certainly engaged, very similar to what we showed in our analyst day almost a couple of years ago about how we see more and more of those systems using GaAs-based front ends, getting away from pure silicon solutions because it's just a much more efficient implementation. But we're also seeing fixed wireless come onboard and the last mile, if you call it. And we've released some products just last quarter to start to address those kind of parts of the market, and again, kind of leading the industry in efficiency based on those GaAs processes, in particular, some of the smallest gate links that we've released in production, so really high-frequency focused-type activities.

I also want to add to the BAW question. We talked about how BAW is enabling inside mobile, Eric did, but it's also been a big benefit for us in the WiFi market. We've released iFEMs in the 2.4 gigahertz, and we've been sampling those at five gigahertz as well. We're also using our new five-gigahertz processes to release products in the automotive space and into small cells and base stations.

So we are using our filter technology to really allow us to compete in several different markets and for me particularly in the higher frequencies.

Operator

Our next question comes from Timothy Arcuri with UBS.

Seth Gilbert -- UBS -- Analyst

Hey, this is Seth Gilbert on for Tim. Just as, I guess, a follow-up to one of the earlier questions. June is usually up, something like mid-single digits quarter over quarter, and September is usually around the double digits quarter over quarter. So just curious of this much new higher -- this new higher base for March.

Is this still the right way to think about seasonality as we look out into June and into September?

Mark Murphy -- Chief Financial Officer

Yes. Seth, this is Mark. I reluctantly go to June because of the coronavirus concerns, and I gave a revenue number there. The only thing I would add, just to make sure folks are appreciative of it, we tend to go down from our March to June quarter on gross margins.

So we would see the revenue guide I gave and then we would see a gross margin in the 47 -- somewhere between 47 and the high 47s, low 47s to high 47s. So -- and then we have opex increasing. But beyond that, I'm not going to talk about September. I'm not going to give detail on fiscal '21.

I would just say that we believe we're investing in the right areas with -- and selecting the right products, building our capabilities to support growth in the market. And we expect to grow, and then we're driving for free cash flow generation. And I'll provide more during the next earnings call.

Operator

Our next question comes from Chris Caso with Raymond James.

Chris Caso -- Raymond James -- Analyst

Yes. Thank you. I guess first question is about the content opportunity between the premium tier and the mass tier phones when you transition to 5G. And I guess in the 4G generation, most of the content was in the premium-tier phones.

So that was, if I look at your total content opportunity, that was the largest part of your mix. Does that shift somewhat as you move to 5G because you're moving those mass-tier phones from such a low content to something? How does that change your sort of mix exposure of your total revenue between sort of premium-tier phones and mass-tier phones, obviously realizing mass-tier phones represent more volume?

Bob Bruggeworth -- President and Chief Executive Officer

Right. That's an excellent question, really. And I mentioned a little bit ago seeing -- not unusual to see $10 to $12 worth of RF content and sometimes even higher in some of our China-based handsets, which are primarily mass tier. They're at the higher end today, but that's what's driving down into the mass tier as we speak.

And so if you look at kind of percentage increase from 4G to 5G, it's much, much higher than -- it's more like two times in content now. And as we've talked about before, it's not only adding the 5G proper, if you will, content, but also bringing all of the 4G up to higher levels of capability as well in each of those 5G handsets. So to your point, we see content increases in the premium tier, for sure. But as a percentage of the total, they're more on the order of, call it, 20%, 25% of content increase, wherein the mass tier, you're seeing more like a double or even more of content.

So it does tend to mute the mix effect slightly, I would say, as we go into 2020.

Chris Caso -- Raymond James -- Analyst

That's helpful. As a follow-up, you've talked a little bit about ultrawideband. And obviously, you sound like -- you did an acquisition in there. I guess how important is ultrawideband to you in terms of revenues today? And I guess where do you see it going not just within handsets but also opportunities for ultrawideband and IoT-type devices? How significant can that be?

Bob Bruggeworth -- President and Chief Executive Officer

Right. It's another good question. We -- as you probably know, we're the leading supplier of ultrawideband front ends today into the mobile handsets, although it's a relatively small market today, but it's really just emerging. And I think between the fact that it's now beginning to penetrate mobile handsets, we believe it will eventually be absolutely required in every handset.

That, combined with the fact that the connected car consortium has adopted the technology for future keyless entry systems, we think this is really just the very beginning of an inflection point. We are absolutely thrilled to be adding Decawave, a fantastic company, great people, great technology. They've been at this 15 years. It's really truly pioneered, as we said, the technology.

And so we see beyond the automotive and the mobile applications, we think a whole host of both consumer and industrial IoT applications are there as well. So when we look forward by 2024, we're modeling at $2 billion to $4 billion worth of additional TAM. And we think there'll be just a few people positioned to capture it, so pretty exciting.

Operator

And our next question comes from Ed Snyder with Charter Equity Research.

Ed Snyder -- Charter Equity Research -- Analyst

Thanks a lot. Eric, on China, how much of your strength there, I mean, is from, say -- I want to juxtapose the different factors that are affecting China because it's obviously becoming a very big part of your business. But -- so if you could maybe give us some idea of how much of it is coming from 5G content upside versus 5G being pushed into more phones than we expected versus OEMs moving their old 4G Phase 2 designs to module? So 5G content versus units versus the shift to modules in 4G. And if you could, what percentage of your revenue you think you're getting from China at this point? And then, James, it sounds like defense is not only acting as you expected but also leading the charge.

MACOM just announced on the call last night, they're finally getting the GaN on silicon carbide. So I'm trying to get an idea of how sticky are the applications for your GaN-on-SiC in both 5G base stations? And then if you could talk to some degree about how that applies to defense, too. And then I have a follow-up.

Eric Creviston -- President, Mobile Products Group

All right. So regarding the first part of your question, the strength we're seeing throughout China right now is largely driven by 5G content. That's the primary driver. And I think I spoke last quarter about seeing the need for more like dual signaling capability, for example, driving additional switching and antenna work, the -- and then I forgot what -- all three of the categories.

But at the bottom would be the modules in 4G-only handsets. That's probably the least impactful. Right now, the insight is heavily driven by 5G and mostly content more than units.

James Klein -- President, Infrastructure and Defense Products Group

Yes. This is James. I mean, certainly, we believe we've got great technology in -- with our GaN and have been doing very well in the defense market. And we are seeing GaN grow well north of what the market is growing.

And so we also continue to make investments in scale and in reducing our costs, which we think are key enablers to that technology to continue to proliferate. As far as stickiness, I mean, obviously, in defense, that market is characterized, as you know, long cycles in programs. And so I would consider that a very sticky market. In base station, we are seeing the trends go just about like what we've talked about for the last couple of quarters.

We are seeing massive MIMO systems to deploy, and we're also seeing GaN take significant share from LDMOS. And so both of those are great trends for us, and we're capitalizing on those trends. And I think it's a good part of how we've been able to turn the business around fairly quickly.

Ed Snyder -- Charter Equity Research -- Analyst

Excellent. And then for my follow-up, Eric, if I could. Broadcom announced a supply agreement with Apple. I guess it was -- I can't remember, this week or last week.

And I know it's probably more of a frame agreement but they cited $15 billion, etc. Last time they did this, which was some years ago, those ensuing two or three years that followed that agreement were marked by lack of content for Qorvo in there. So how does this change the landscape, or does it at all, in your view irrespective of if they keep the business or not? And what does that do for the mix of your -- not just your BAW, but your revenue? Does it shift more to China in the upcoming 2 years or so? And do you even have any indication of that?

Eric Creviston -- President, Mobile Products Group

Well, frankly, it doesn't have any particular impact on our investments today. We're picking our battles, investing in areas where we think the highest probabilities are. It's a target-rich environment right now for integrated modules as well as for discrete components based on BAW technology. As I said, we've got a lot of advancements coming in the BAW technology and well-placed, great relationships across the industry and across all baseband manufacturers and tiers.

So the announcement itself and our understanding of what it includes does not impact our current investment plans.

Operator

Our next question comes from Blayne Curtis with Barclays.

Blayne Curtis -- Barclays Bank -- Analyst

Hey, guys. Thanks. Just curious on the deals. You said it closes in February.

Is there anything you can wrap around that in terms of revenue and opex contribution? And then I have a follow-up.

Mark Murphy -- Chief Financial Officer

Yes. Blayne, we'll provide more. It's not a material amount of revenue, and it's an increase in OpEx. It's all reflected in our guide.

And it's dilutive in the near term.

Blayne Curtis -- Barclays Bank -- Analyst

Got you. And then, Mark, I know this is preliminary guidance for June. I'm just a little confused on the seasonality here. You're seeing all the strength in China.

Usually Apple is not stepping down as much in June. I'm just trying to understand what you're baking in for a sequential decline in June.

Mark Murphy -- Chief Financial Officer

Yes. Blayne, I'm not going to go into any more detail. What we've provided is our best to view given current demand signals and then adjusted for some risk factor and in what is a very uncertain situation at the moment. So doing our best to provide you at least a directional call that far out.

I think the concern as we sit here today is right now, the channel is lean and healthy. The demand signals have not been -- yet been affected. But we do have -- the Chinese New Year will wrap up, and people will take stock of what's going on with his health situation in China and elsewhere. so I think we're just being mindful of that and providing some sort of directional view for you.

But in the June quarter, it's still a story of what you've heard on the call today about 5G-related handset growth, content associated with that growth, continued WiFi growth, defense strength and infrastructure recovery.

Operator

Our next question comes from Craig Hettenbach with Morgan Stanley.

Craig Hettenbach -- Morgan Stanley -- Analyst

Yes. Just first question for Mark, just following up on the acquisitions. I think you said immaterial to revenue, but you said, was it $500 million in terms of total cost for both?

Mark Murphy -- Chief Financial Officer

Yes.

Craig Hettenbach -- Morgan Stanley -- Analyst

Could you maybe just help frame just kind of the opportunity over the next couple of years in terms of how maybe sizing like that business in terms of where you see it potentially going?

Mark Murphy -- Chief Financial Officer

Yes. I mean most of the purchase price is associated with the Decawave acquisition, in fact, over two-thirds of it, so over three-quarters of it. So the -- and that is a technology investment. As Eric said, it's technology for a market that we think is a several billion-dollar market in a number of years.

And that's going to take time to develop, and it's a largely immaterial revenue and dilutive. The smaller acquisition, Custom MMIC, is a defense bolt-on and the -- very easy to integrate, right in James' wheelhouse on defense products, advanced technology defense products. We see in the -- for the part of the March quarter that we haven't integrated, it'll provide about $3 million of revenue in that quarter. And on a full-quarter basis, it'll be roughly $5 million or so for the near term.

And it's accretive immediately.

Operator

Our next question comes from Raji Gill with Needham & Company.

Raji Gill -- Needham and Company -- Analyst

Yes. Thank you. A question on the RF infrastructure market win. When do you expect that to rebound? Any color in terms of what you're seeing with the mobile operators in terms of deploying these base stations across the world? Are there some regions that are starting to catch up, others starting to kind of slow down? Any color there in terms of RF infrastructure will be helpful.

James Klein -- President, Infrastructure and Defense Products Group

OK. Yes, this is James. So we definitely are seeing deployments going predominantly today below six gigahertz, predominantly in China. What's helping us in talking about recovering our businesses, we are seeing massive MIMO continue to take more share, if you want to talk about that, and share of base stations, and that's a big content, big for us, about 10 times of what we would have in fact for a base station.

So that's driving the recovery. I think the absence of Huawei is obviously a challenge for us in the industry because it's about 50% of the share. But as we said in Bob's prepared remarks, we are ramping with our third customer in that space, and I think that will fuel us to recover the business. Deployments, look about on track, a little bit of share mix changes in the last quarter, but it appears that there were somewhere in that 400,000-or-so base stations that were deployed last year.

And it looks like that will grow about 50% this year. So somewhere in that 600,000 base stations deployed. MIMO content will probably go up to maybe 20% last year to 30% or greater this year, so positive trends. I think we heard yesterday about some frequency allocations in the U.S., and we hope that that will also spur development to push forward in the United States.

Raji Gill -- Needham and Company -- Analyst

And on a follow-up, you talked about GaN taking share against LDMOS base station. What's driving that transition? What's the catalyst for that?

James Klein -- President, Infrastructure and Defense Products Group

Yes. Threefold. One is the move to higher frequencies and GaN's performance advantage at higher frequencies, also broader bandwidths associated with 5G. And again, GaN has a better ability to deal with those higher or broader frequency levels.

and then in some cases, just higher output power. But in general, the technology is just very well suited to move in these directions that we've talked about before of higher frequency and broader bandwidths.

Operator

Our next question comes from Srini Pajjuri with SMBC Nikko Securities.

Srini Pajjuri -- SMBC Nikko Securities -- Analyst

Thank you. A couple of clarifications. Mark, maybe you can talk about how many 10% customers you had in the quarter. And also, if you could give us what percent of the mix in mobile was China in the quarter.

Mark Murphy -- Chief Financial Officer

Yes. So we had two 10% customers in the quarter, and I don't break out by region our sales by quarter.

Srini Pajjuri -- SMBC Nikko Securities -- Analyst

Got it. And then is it fair to say that Huawei is still kind of minimal on the mobile side or did it grow in the quarter?

Mark Murphy -- Chief Financial Officer

Yes. Huawei was one of the 10% customers, actually. And it was stronger than we expected, along with the other Asia-based handset producers. I said on the last call that we expected Huawei to be about 5% in the second half.

They were larger than that in the December quarter. So that statement is still correct. It's just that the -- obviously the waiting is not uniform across the second half, so we expect them to be about a 5% customer second half, obviously, the largest portion of that in the December quarter. I think it's important to note here that we're seeing broad-based strength related to 5G across the Asia handset producers and importantly across all chipset producers, and I think the March guide drives home that point.

Operator

And our next question comes from Vivek Arya with Bank of America Securities.

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

Thanks for taking my questions, and congratulations on the strong results. First one, I'm curious what does the shape of the 5G handset rollout look this year? Is it kind of more balanced first half, second half? Is it more 60%, 70% back-half weighted? When I look at the 300 million-or-so show market size, it's much higher than what others are, and that's closer to 200 million. So I'm just curious how you are seeing the 5G rollout, what you have seen so far and what do you think the shape of the year looks like for the market?

Eric Creviston -- President, Mobile Products Group

I would say it's pretty uniform across the year. Obviously, we're getting up to a very strong start. Concerns that Mark had about coronavirus and so forth might impact demand and supply. We'll see how it goes, but I wouldn't have any other more specific comment on profile.

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

And for my follow-up, there have been some concern about the pace of wireless deployments. We heard that from Xilinx and Texas Instruments. I'm curious if you had noticed any of those slowdowns. And I apologize if you answered this already, but what are you baking in for your base station sales going into the March quarter?

James Klein -- President, Infrastructure and Defense Products Group

Yes. I mean what's really been driving our recovery is again massive MIMO. For us, as we get that shift, we get about a 10 times content lift. So I think if we were only in a macro or only looking at a macro view, I would say, yes, we'd see the deployments going slower and the business being slower.

But because of content pickups and on top of us now being able to compete in the power amplifier slot with GaN, I guess that's really what's really fueling maybe a bit difference with us and some of the other folks in the business. Now that said, we are still way off our historical highs from where we had been a year ago or so. So a long way to go before we recover from the restrictions on being able to ship to Huawei, which again I'll restate is about 50% of the market at this point.

Operator

That concludes today's question-and-answer session. At this time, I will turn the conference back to management for any additional or closing remarks.

Douglas DeLieto -- Vice President, Investor Relations

Thanks for joining our call tonight. We hope to see many of you at our upcoming investor events, and we look forward to speaking with you on our fourth-quarter earnings call. Thanks again, and have a good night.

Operator

[Operator signoff]

Duration: 57 minutes

Call participants:

Douglas DeLieto -- Vice President, Investor Relations

Bob Bruggeworth -- President and Chief Executive Officer

Mark Murphy -- Chief Financial Officer

Karl Ackerman -- Cowen and Company -- Analyst

Eric Creviston -- President, Mobile Products Group

Toshiya Hari -- Goldman Sachs -- Analyst

James Klein -- President, Infrastructure and Defense Products Group

Harsh Kumar -- Piper Sandler -- Analyst

Bill Peterson -- J.P. Morgan -- Analyst

Seth Gilbert -- UBS -- Analyst

Chris Caso -- Raymond James -- Analyst

Ed Snyder -- Charter Equity Research -- Analyst

Blayne Curtis -- Barclays Bank -- Analyst

Craig Hettenbach -- Morgan Stanley -- Analyst

Raji Gill -- Needham and Company -- Analyst

Srini Pajjuri -- SMBC Nikko Securities -- Analyst

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

More QRVO analysis

All earnings call transcripts