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Qorvo Inc (NASDAQ:QRVO)
Q1 2021 Earnings Call
Jul 29, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone. Welcome to the Qorvo Incorporated Q1 2021 Conference Call. [Operator Instructions]

At this time, I'd like to turn the conference over to Mr Douglas DeLieto, Vice President of Investor Relations. Please go ahead, sir.

Douglas DeLieto -- Vice President of Investor Relations

Thanks very much. Hello everybody, and welcome to Qorvo's fiscal 2021 first 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 non-cash 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.

Joining us today from multiple locations 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 hand it over to Bob.

Robert Bruggeworth -- President and Chief Executive Officer

Thanks, Doug, and welcome everyone. Qorvo began our fiscal year with an exceptional first quarter. Quarterly revenue, gross margin and EPS were each well above guidance. IDP returned to robust year-over-year growth and represented a record percentage of total Qorvo revenue. Infrastructure was especially strong. We increased our support for 5G specifically sub-6 gigahertz 5G massive MIMO deployments and we achieved record GaN product revenue.

Also contributing were multi-year defense programs and the continued ramp of WiFi 6. In the smartphone market, demand was more resilient than anticipated and 5G smartphones represented increasing percentage of total units. Looking more closely at 5G, we are in the early stages of a multi-year upgrade cycle supporting growth across both businesses. In Mobile Products, we are benefiting from the need for more and better RF fueled by higher front-end integration and increased complexity. This includes the move to higher frequency, the addition of new band combinations and the adoption of dual transmit architectures to support 5G. Content expansion and increased complexity supporting 5G architectures favor our design expertise and technologies at scale.

We are securing broad based design wins for our most highly integrated low, mid-high and ultra-high band solutions. In some cases supplying customers the entire main path. We are seeing increased demand for our ball based multiplexing solutions across a range of baseband -- across a range of band combinations.

While smartphone units are forecast to be down over 10% year-over-year, RF content expansion in 5G devices of approximately $5 to $7 is mitigating the impact of fewer units. For the year, we continue to expect approximately 250 million 5G smartphones globally. In infrastructure, our opportunities in small signal devices like LNAs are growing in line with the increase in massive MIMO antenna elements, while revenue related to GaN PAs is added content.

Our GaN leadership and infrastructure is build on decades of advanced technology development, commercial experience in other markets and proven ability to scale. Globally, we expect 5G base station deployments to outpace the initial deployments of 4G with over three quarters of a million deployments this calendar year growing to more than a million in 2021. In U.S. and Europe, we see deployments picking up next year adding to this multi-year investment cycle by the carriers. This will drive strength in IDP given our technologies, design capabilities and operational excellence.

In the June quarter Infrastructure revenue was a record and we secured record design wins in support of ongoing 5G base station deployments. We also began sampling GaN amplifiers for upcoming C-band spectrum allocations in United States. It's been over a year now, since we added our programmable power management business and the team is doing a great job of driving growth across diversified markets. During the June quarter, we ramped a programmable power management solution along with a WiFi 6 front-end module for the leading drone manufacturer, enabling longer flight times, greater range and larger payload.

We also ramped shipments of programmable power management and motor control solutions, improving the efficiency of solid-state drives in places like data centers and enabling restless motors used in a range of consumer products. In the future, we see opportunities for our power management technologies, in defense and other markets. We delivered a strong quarter in GaN for the defense market led by radar programs and we signed several long-term agreements with the defense primes, firming up our expectations for double-digit growth in Defense this fiscal year.

We were also awarded design wins for an integrated GaN multi-chip broadband transmit-receive module and a 50-watt GaN power amplifier for defense radar programs. These wins are notable as Qorvo is supplying more integrated solutions into the defense market. In connectivity, we experienced continued strong demand for Wi-Fi 6 products, including front-end modules and BAW filters, driven by work from home trends. We commenced shipments of our integrated ultra-low power multi protocol Zigbee, BLE and Thread IoT solutions supporting one of the largest providers of smart home infrastructure solutions.

We requested an emergency use authorization from the FDA for COVID-19 antibody testing using Qorvo biotechnologies platform. This innovative device features unique sensor technology and is designed to address the needs of medical clinicians for rapid and accurate results. On the same technology platform, we also received initial production orders for our biosensor platform for high sensitivity veterinary point of care applications.

Turning to Mobile Products, we supported multiple production ramps and benefited broadly from integration trends at multiple customers. Revenue was diversified across categories, including modules integrating PAs, switches BAW and SAW filters as well as antenna-plexer, antenna tuners and specialize RF power management. We were selected by a leading Korea-based smartphone manufacturer to supply a highly integrated high-band solution for this year's flagship smartphone. We are also supplying an innovative antenna-plexer solution that addresses antenna network complexity and optimizes system efficiency for an upcoming foldable smartphone.

Across our customers we are engaged on the most critical 5G challenges and enabling them to introduce innovative new designs, enhanced performance and bring products to market faster. At multiple Android smartphone manufacturers, we captured the complete main path, including low band mid-high band and ultra-high band modules for upcoming 5G smartphone launches. We supported customers across all major chipset providers and notably, began production shipments in support of leading customers using MediaTek's 5G baseband. In ultrawide band we commenced high volume shipments of our UWB solutions, enabling superior accuracy and reliability in contact tracing and social distancing applications for numerous customers globally.

As an example, we are working with KenExone [Phonetic] whose safe zone tag is being used by the NBA and the NFL in their training camps. Qorvo's UWB technology delivers a short burst of energy spread over a large bandwidth to precisely measure the distance between ultrawide enabled devices. We are interacting very closely with the mobile community and we are actively engaged across other applications, including automotive and IoT. In power management, we increased shipments of mobile power management solutions, driven by the adoption of 4G, 5G, dual transmit and the associated complexity it introduces.

Across our markets, Qorvo's advancing a range of best-in-class technology supporting our customers with a broad set of high performance and highly integrated solutions. Our R&D investments and product and technology road maps are aligned closely with our customers and with long-term market drivers. The same can be said for our recent acquisitions. The June quarter marked our first full quarter for Custom MMIC and Decawave in just over a year since acquiring Active-Semi. The integration activities are progressing nicely and the teams are performing extremely well.

Before handing the call over to Mark, I'll briefly address some of the active measures we continue to take in light of COVID-19. Qorvo is operating under enhanced safety protocols to keep our employees and operations safe, while supporting our customers. In addition to social distancing practices, temperature scanning and restrictions on travel and site visits, we conduct rigorous screening and quarantine processes for suspected or confirmed cases. Thanks to these and other efforts, we've experienced no material disruptions in our business or operations.

Our design teams are releasing best-in-class products, our sales and application engineers are designing our solutions into our customers' next-generation products and our factories are operating well. I'm extremely proud of the Qorvo team and thank them for their ongoing efforts. In summary, we're pleased with our financial and operating performance in the June quarter and we are confident in our outlook for September.

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 June our first quarter of fiscal '21 was $787 million, $57 million above the midpoint of our guidance on stronger-than-expected demand in both our mobile products and Infrastructure and Defense Product segments. Mobile products revenue of $468 million exceeded our expectation as handset demand remained more resilient and global supply chain disruptions less impactful than we anticipated at the time of our guide.

In the September quarter, we expect mobile to increase sequentially, driven by new handset launches and increased content due primarily to the adoption of 5G. Infrastructure and Defense Products revenue increased to $319 million over 40% of the company's revenue, as the ongoing build out of 5G networks drove demand and we successfully ramped new GaN products. During the quarter IDP returned to robust year-over-year growth and we expect IDP to sustain healthy double-digit year-over-year growth through the year with strength in 5G, Wi-Fi and defense.

Non-GAAP gross margin in the June quarter was 48.6%, which was 110 basis points over our guidance due to lower than expected manufacturing costs and favorable mix effects. Our efforts to improve the portfolio and drive productivity are yielding favorable results and we expect this progress to continue, as we are forecasting approximately 50% gross margin in the September quarter. Non-GAAP operating expenses in the June quarter were $179 million and lower than expected due in part to spend discipline on discretionary activities.Non-GAAP net income in the June quarter was $175 million and diluted earnings per share of $1.50 was $0.37 above the midpoint of our May guidance.

Cash flow from operations in the June quarter was $214 million and capex was $30 million yielding free cash flow of $184 million. We repurchased $75 million of shares during the quarter. We continue to invest ahead of customer and market needs, while sustaining responsible capital return. During the June quarter, we raised over $300 million through an add-on to our 2029 unsecured notes augmenting the liquidity and further extending the weighted average maturity of our outstanding debt to October of 2027. Our leverage remains low and we have no near-term maturities.

We ended the quarter with $1.1 billion of cash and an untapped $300 million unsecured revolver. With this financial flexibility we can focus on advancing technology, supporting customers and making prudent organic and inorganic investments that support long-term earnings and free cash flow growth. As Bob mentioned, our recent acquisitions have been integrated quickly and are performing well. On ultrawide band we see a wide array of applications emerging with this wireless technology and have significant customer engagement on the design of new products and solutions. We expect this business and our MEMS technology acquisition to contribute meaningfully to Qorvo over time.

Our other recent acquisitions are already accretive. Custom MMIC, a bolt on to our IDP segment exceeded plan in its first full quarter and further strengthens our defense and aerospace franchise. Programmable power management serving customers advanced power management needs is delivering in line with our expectations and is on track to grow revenues, strong double-digits this quarter versus the same period last year.

Turning to our current quarter outlook, we expect revenue between $925 million and $955 million, non-GAAP gross margin of approximately 50% and non-GAAP diluted earnings per share of $1.90 at the midpoint of our guidance. As mentioned in the guidance section of our press release, our fiscal year 2021 is a 53 week fiscal year and our September quarter is a 14 week quarter versus a typical 13 week quarter. Our last 14 week quarter occurred in September of 2015, our fiscal '16, which was the last 53-week fiscal year reported.

Our current quarter revenue outlook reflects the additional week, strong sequential growth in mobile and over 50% year-over-year growth in IDP. In mobile, demand for 5G is adding more complex parts and driving higher content and we forecast revenue in the current quarter to be approximately $640 million. In IDP we project the business to be approximately $300 million in the current quarter, reflecting the timing of base station deployments. We do forecast IDP to sustain strong year-over-year growth through the year as infrastructure demand remains robust and defense, Wi-Fi and power management strengthen.

While there is considerable economic uncertainty associated with the ongoing facts of the pandemic, currently we expect end market demand to support full fiscal year revenue growth for Qorvo. Our September quarter gross margin guide of approximately 50% reflects volume growth and ongoing efforts to improve the quality and efficiency of our business. Specifically, we've invested early and adequately in the technologies that markets need, focused our product portfolio on where we can best serve customers, gained productivity across our operations and reduced our capital intensity. Recognizing that a potential impact to our demand and supply chain remains, given the uncertainty due to the pandemic, we believe our work to minimize inventories and reduce our cost structure will help us sustain approximately 50% gross margin through the balance of the year.

Non-GAAP operating expenses are projected to increase in the September quarter to approximately $207 million due to the additional week in the quarter, higher personnel costs including raises, increased product development activities and the resumption of some discretionary spend. Excluding the additional week, opex to be closer to $196 million for the quarter and we expect opex to remain below that level for the balance of the year.

Other expense will increase to over $20 million driven by the full quarter effect of the net interest charge from debt added in June. We expect our current quarter and full year non-GAAP tax rate to be approximately 8%. We project capital expenditures to remain below $200 million in fiscal '21 and focus on BAW, GaN and other areas, which advance a differentiated position for Qorvo to best serve customer needs. As the June quarter results and our September quarter outlooks show, Qorvo continues to operate well through a challenging period, while serving customers in 5G infrastructure and smartphones, Wi-Fi, IoT, defense and other growth markets. In closing, I'd like to join Bob in thanking Qorvo employees for their efforts during this time.

Now, I'll turn the call back over to the operator for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] We'll hear first today from Gary Mobley with Wells Fargo.

Gary Mobley -- Wells Fargo Securities -- Analyst

Hey, everyone. Thanks for taking my question. Wanted to ask about how that extra week in the September quarter may impact your seasonal expectations for the December quarter if math works out correctly that might be roughly a $60 million impediment to what would normally be a seasonally up December quarter. So maybe if you can help us think about that December quarter?

Mark Murphy -- Chief Financial Officer

Gary, it's Mark. You're right, the effect is about -- it's over $65 million. Adjusted the quarter -- September quarter would be around $873 million or so. And so, even without the additional week it's still a very strong quarter for us. We're up over 10% sequential for that adjusted number and we're going to be just under 10% year-over-year.

Gary Mobley -- Wells Fargo Securities -- Analyst

Okay. As my follow-up, I wanted to ask about sort of the emergence of the mid-tier in 5G in particular in China. And so, maybe if you can just walk us through under scenario where the sub-$600 portion of the smartphone market becomes a leading driver in the second half of the year for 5G mobile handset sales in particular in China, how this plays out for Qorvo?

Steven Eric Creviston -- President of Mobile Products

Sure, this is Eric, I'll be happy to take that. We said previously, and it's still true today that we were seeing this $5 to $7 worth of content adder for any 5G phone and that's holding even as you go into the mid-tier, you're coming off a smaller base of content obviously, but the 5G adder is still roughly the same. So as a percentage it's actually quite a bit more of an increase. And while you might expect that there could be less integrated more discrete implementations to save cost the fact is that most of the band combinations and requirements are the same. And so, the fully integrated solution just offers an awful lot of value for time to market, given all the complexity.

And so, we're seeing just a lot of design activity across the tiers. We brought out our Fusion 20 this year. Absolutely, industry-leading, best-in-class performance, highly integrated full band coverage low-band mid-high and ultra high bands, integrated shielding so the parts are already shielded. You put them down, you don't have any sort of issues with interference. Integrated the LNAs now as well. So when you look at that capability just a few placements to have a complete 5G phone RF section regardless of the tier, it's a very, very compelling offering.

Gary Mobley -- Wells Fargo Securities -- Analyst

Okay, appreciate it. Thanks, guys.

Operator

We'll hear next from Bill Peterson with J.P. Morgan.

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

Yeah, hi. Congratulations on the results and the strong guide. My first question is a follow-up to the question on China and it sounds like you have a lot of the wins that are now across multiple devices for the full main path, but I guess in the past you've had really good content in phones and sometimes the phones don't sell as well. So try to get a feel for the breadth of your design wins maybe in which cases you might just have the mid-high in some cases or other parts, trying to get a feel for the breadth of your design wins here for the phones launching in the back half of the year in China.

Steven Eric Creviston -- President of Mobile Products

Yeah, sure, Bill. This is Eric, again. It's actually quite broad with our Fusion 20 portfolio, we're talking about this year we're engaged with every single 5G baseband. Our parts are universal so they can be used with all the 5G basebands on the market today. We're engaged with every Android customer with this portfolio. In some cases, we are doing maybe just the ultra high-band section or the high-band or low-band but in many cases, we are looking at the full solution. The very same parts are seeing design traction broadly across all 5G Android customers.

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

Okay, thanks for that color. My second question is for James. James, huge upside, I was hoping you could help us understand where the upside came in June and where you see the upside here in September. I presume infrastructure but if you can rank the -- you said defense was strong and some of the others, help us rank where the upside was coming from and expected to come from here in the September quarter?

James Klein -- President of Infrastructure and Defense Products

Yeah. Thanks, Bill. In the first quarter, we continue to have significant ramps in both 5G and in Wi-Fi 6. We supported both of these markets with a really broad set of products including GaN power amplifiers and driver modules, integrated front-end modules, BAW filters and numerous discrete products and we supported a broad set of customers in both of those markets. GaN power amplifiers are great example of one of the ramps, we brought a broad set of products to the market to support 5G, different frequencies, different power levels and supporting different customers and our GaN revenue for the quarter doubled from what it was at the same time last year.

Wi-Fi 6 products were also doing very well in both the retail and set-top box markets and we believe a large part of that is due from work-from-home. So we've seen strength, particularly in the high-end retail space. Defense stayed a good foundation for the business and as we move into Q2, we'll see a similar type story. We'll continue the ramp in Wi-Fi 6, defense will also pick up quite a bit again based on some of those long-term supply agreements that we -- that Bob talked about in his earlier comments. The base station business itself will also be very strong in Q2. We will start to see that come down a bit in Q3 as we finish calendar year '20 deployments and then we expect that to ramp back up as we move into our physical Q4 to support the calendar year '21 deployments.

Operator

We'll move next to Harsh Kumar with Piper Sandler.

Harsh Kumar -- Piper Sandler -- Analyst

Yeah. Hey, guys. Another one for James. James you're very popular today, how come all of a sudden this massive explosion of growth? Did you just have like a series of design wins that kicked in all simultaneously or was it one or two customers that predominantly drove the upside?

James Klein -- President of Infrastructure and Defense Products

Yeah. Well, thanks, Harsh for the popularity. I appreciate it. we -- as I've been saying for the better part of a year as I expected us to return to growth in about a year and I couldn't be more proud of the broad team here of designers and sales teams and the manufacturing folks that really allowed us to recover the business from what was obviously a significant downturn for us about a year ago. So we've been projecting this. I think it's fairly broad-based massive MIMO or 5G roll-outs have been a really positive for us. I talked about in the past that we see content gains of about 10 times on a MIMO base station compared to conventional macro. Now that uplift is because of element count and because also, we now can supply the GaN power amplifiers, where in the past those would have been LDMOS. So we picked up a tremendous amount of content in 5G and that's really helped drive the growth, but we're setting records in our WiFi space as well. With Wi-Fi 6 coming on board over the last couple of quarters, this was our third consecutive quarter of double-digit quarter-over-quarter growth in that part of the market.

Defense was a good foundation. And we don't talk about it, relatively small business, but our power management business is doing very, very well exceeding our expectations and growing in strong double digits on top of everything else. So I think we've just got a great portfolios, great technologies and the markets of aligned fairly well for us.

Harsh Kumar -- Piper Sandler -- Analyst

Okay. And then for my follow up, a question for Mark or Bob. Margins of 15% truly fantastic to see that and you're actually calling, I think, if I heard it correctly that neighborhood for the rest of the year, correct me if I'm wrong there. But what the -- again the uptake of roughly 140 basis points, how much of that is mix and how much of that is just simply straight-up utilization?

Mark Murphy -- Chief Financial Officer

Yeah. So, Harsh -- yeah. I think, first of all, we're really pleased to hit a milestone, which has been following us for some time. Yeah, and I think, if you go back couple of years we had had a lackluster mobile handset volume period and then we had Huawei and then we had the pandemic. And so there were just a series of headwinds that kept us from that milestone. Took us a bit longer than we thought, but we were confident we were going to get there.

We feel that we're doing the right things and we're going to continue doing these things, investing in the technology, managing our portfolio the right way where we're most valued by customers, driving productivity very hard. And I've got to certainly, complement Paul Fego and his team for just a tremendous job, doing all the things around, cycle time improvement and the wafer expansions and we shut down a facility and seamlessly and die shrinks, I can go on and on. But we're seeing those results and the numbers, so it's real and we're making real progress despite the headwinds we've had.

So -- and then finally, we've reduced capital intensity and you've seen that pretty dramatically for us we're not constrained in growth. We've just been very selective about what we're doing and being smart about how we expand and get more out of the assets that we have. On the walk from Q1 to Q2, it's partly the, we still have some period cost, Harsh, we still have Farmers Branch period costs and we have some idle equipment. So the higher revenue helps us in the sense of those period costs or a smaller percent of higher revenue. So that helps us a bit on the margin. Most of the rest of it is lower manufacturing cost. So my point earlier about, Paul and his team, excellent spend control this higher volume gives us better absorption and the mix is such that we have good absorption.

And then finally, we had very good test yield. As we look from this new forecast. As we look out, rest of the year, our inventories are in a really good spot. We -- our inventory only ticked up a little bit sequentially fourth to first quarter and we -- our terms are sort of historical levels. So they don't look bad I'm never going to say, we're pleased with our inventories, but they're -- they've been managed and the channel is very healthy. So that's important. So that gives us confidence that we're running the operation lean, we have a little bit of flexibility, but there is a healthy tension in our business between trying to keep costs down. And trying to keep inventories low, trying to keep the fabs level loaded, I mean, there is a healthy dynamic that occurs here that which we think we've been playing OK.

So having said all that, if the market holds up and the mix is what we think it will be then -- or favorable we pull -- we have a high degree of confidence in 50% or approximately 50%. If the market softens in the back half or somewhat worse than anticipated on mix, then we would be on the south side of 50%, but we feel good we're in that neighborhood and we intent to stay there and actually expand margins.

Operator

And from Morgan Stanley we'll move to Craig Hettenbach.

Craig M Hettenbach -- Morgan Stanley -- Analyst

Yes, thanks. On the wireless infrastructure front, can you touch maybe on the -- just the competitive landscape? Particularly your positioning within GaN, is that helping, is that market really starts to take off what you're seeing competitively?

James Klein -- President of Infrastructure and Defense Products

Well, I think -- this is James, the dynamic is fairly similar to what we've talked about in prior quarters. Our focus right now is just making sure that we've got best-in-class technology and we continue to innovate and drive technology-improved performance with our GaN and then really focused on scale and driving up our manufacturing capabilities, getting our yields up and I think we proved that in this and again next quarter that we were able to go through a pretty aggressive ramp on these sub-5 gigahertz deployments, sub-6 gigahertz deployments.

So that's been our focus. We'll continue to focus that way. I think on the small signal side, we've got a great set of competitors there as well and we're doing the same thing, we're just continuing to focus on innovation, bringing more highly integrated modules to play, bringing ball filters, as an example, into our mix in the infrastructure side. So I would say competition has been been fairly stable and we're just focused on being able to bring innovative new products to the market ramp them quickly.

Craig M Hettenbach -- Morgan Stanley -- Analyst

Got it. Thanks. And then just a follow-up on the smartphone side as it relates to 5G, can you talk about just what you're seeing from an antenna tuning perspective and how that plays into some of your expectations around content?

James Klein -- President of Infrastructure and Defense Products

Sure. We've got, as you know, a lot of presence there all around the antenna structures and with 5G not only because of the higher bandwidths, but also new bands, some coming in on even higher frequencies and the implications of running in dual transmit mode where you're running on multiple bands at the same time, when you put all that together the antenna issues that our customers are struggling with just continue to get exponentially worse every year, especially with 5G.

So we're seeing just a tremendous amount of interaction, we've got absolutely the best team in the world working on these solutions and it's not just the antenna tuning, but also just the routing around all of these advanced antenna structure, so an awful lot like multiplexing in and out what we're calling antenna-plexers. Just a lot of of activity there. And of course, as you know, this is part of the industrial design, so it's not a part of the modem proper, it's done after the fact just getting the phones to market. So it's usually on a very tight time schedule and working with some very unique expertise. But we've got a great team and field and a great team in product design bringing absolutely state-of-the-art solutions to really a very serious problem that our customers have.

Operator

We'll move next to Edward Snyder with Charter Equity Research.

Edward Snyder -- Charter Equity Research -- Analyst

Thanks a lot. Couple of questions. Eric, congratulations on the antenna-plexers. Is this your first production launch of that and why shouldn't we expect margins on that part to be exceptional given it's probably just BAW in the package? And is this driven by the 5G bands being added especially dual transmit which kind of mux of everything in the antenna side of it? And then James, GaN doubling year-over-year, which is surprising, could you help clarify or remind us to you do not have a license to ship GaN directly to Huawei, is that correct? And you do have ZTE as a customer for GaN. And then if I could, Mark, on the 50% gross margin, you said it's productivity efficiency in production, but it would sound like given the modules you're shipping in the module -- into high-end smartphones now that includes just about everything and James increased use of both GaN and BAW that wouldn't mix start becoming a bigger issue in the move to to 50-plus percent gross margin or is it just going to rely on volume for a while? Thanks.

Robert Bruggeworth -- President and Chief Executive Officer

Ed, thanks for your question. Eric, why don't you take part one, James, you can take part two and Mark you'll take part three.

Steven Eric Creviston -- President of Mobile Products

Alright, sounds. This is Eric, Ed and yes, as you pointed out, antenna plexing is relatively new for us. It is a category that's -- it's really as I've just said in the previous answer becoming really critical for our customers and we -- it comes down to really the filter R&D and we've really hitting our stride now in terms of the team getting out the latest technologies and band coverage. We've got very cost effective and very high performance BAW filters across every single band now even going up into the higher frequencies. And so then we develop the capability of multiplexing those into very high order multiplexers is driven by our main path modules and then it's a short step from there into the antenna plexing business, essentially leveraging all of that work to get to multiplexing capability. But it really comes down absolute state of the art in BAW filter process technology. That's what's enabling this and as I said, we've got a lot of experience around the antenna sections of our customers' phones. So we're very well placed to help them there.

Robert Bruggeworth -- President and Chief Executive Officer

Thanks, Eric. James?

James Klein -- President of Infrastructure and Defense Products

Hey, so Ed, so we weren't surprised to see GaN double at all. We've been planning and ramping up for quite some time. And again, I got to go back to really congratulating our team on the work that they've done. But the direct answer to Huawei is no, we don't have a license and our deliveries to Huawei are pretty much not material at this point in time and that's a IDP comment. And we are engaged with virtually all of the rest of the Tier 1s and Tier 2s in the space. I won't talk about what we do with any particular ones, but we do see all of those customers moving toward massive MIMO solutions, all of them are engaged in GaN.

And so, we are as confident as we ever have been that the technology will continue to proliferate, that we will see big content pickups in the space. And that that will not just be a China story but that will continue as 5G proliferates around the rest of the world. So this is a, we think a long-term trend for us over the next four, five years as the as the networks get deployed everywhere in the world.

Mark Murphy -- Chief Financial Officer

To add on gross margin, I hate to single one out as more important than the others because it really does take all this to expand the margins in our view. And so, we've spent a lot of time on productivity and ops and all the programs over the years and great efforts there. It's a critical part of getting there. We've also, as you know, have gone through a lot around rightsizing our footprint and making sure that incremental capex dollars are directed at the right place, so we're getting good return for those.

But to your point specifically on mix, that's why to us it's really about the investments you make in technology and when you make them and how you make them. And we feel like we've put ourselves in a good position to compete where we want to compete and that's where customers will value us the most where we bring the most differentiated products and that's the portfolio management. So we do have -- it's difficult to -- quarter-to-quarter it depends on the comparison quarter and as to how big an effect mix plays from quarter-to-quarter. But over the time here, over the long-term that we've been expanding our margins and we expect to continue to expand our margins, mix is playing an important role.

Edward Snyder -- Charter Equity Research -- Analyst

Thank you.

Operator

We'll hear next from Chris Caso with Raymond James.

Chris Caso -- Raymond James -- Analyst

Yes, thank you. I guess, first question would be, what we should be thinking about with regard to seasonality for the December quarter. And there's a few differences this year with the extra week that you have in the September quarter. In addition, some of your peers have talked about seasonality, the timing differences because of a flagship -- different timing of flagship ramp this year. Qualcomm talked about it on their call this evening and is that a factor for you, we should be thinking about with regard to the December quarter?

Mark Murphy -- Chief Financial Officer

Yeah, Chris, it's Mark. I'll take that and then maybe Jim will provide a bit more color on the year. It's been a tough year for everyone and there remains a lot of uncertainty. So I'll provide some general comments realizing that there's still a lot of risk and we can't be too specific. I would certainly point everybody, as always to the risk factors in our K, which included the pandemic and trade. But on the second quarter, we did put up a very strong guide and we've been very clear that included that extra week for our 53-week fiscal year, because excluding that it's still a very strong guide. As we said, as Gary asked at the beginning, we're over $870 million for the second quarter.

As we look at December, we expect December to be down on an absolute basis, of course, but on an adjusted basis we would expect December to be roughly flat with the September quarter. And I'd say it's a function of a few things, you've got IDP it's going to be over $275 million through the back half each quarter, but it's timing of infrastructure projects. And then in mobile, we'll see this normal seasonal ramp into September and then you'll have a normal March seasonal down tick as we have a plan now. And so where December falls in that is tough to call at this point, but we think it's probably going to be roughly flat for the September quarter adjusted.

As I mentioned, we expect to grow full year. I think as folks are thinking about that, keep in mind we've got one this extra week, I laid out the acquisition impact year-over-year on last quarter's call so you have that. And then we've had this good start to the first half of fiscal '21 and -- but I think given all the uncertainty in the outlook and the broader macro, I think it's prudent to call below 5% year-over-year.

I talked about just kind of filling things out. We've covered gross margin, I've called approximately 50% in the September quarter and then approximately 50% through the back half and again that's going to be above or below that based on the strength of the broader economy, our end markets and the mix of the business.

Chris Caso -- Raymond James -- Analyst

That's very helpful. If I can return to gross margin a bit and just the avoidance of doubt, you're talking about 50% gross margin through the end of the calendar year not the fiscal year, I assume...

Mark Murphy -- Chief Financial Officer

That's a good question, Chris and I'm glad you asked it. I was talking about the fiscal year.

Chris Caso -- Raymond James -- Analyst

Fiscal year, OK. Well, then that leads to another question, which is the elements of strength, which allow the gross margin to stay high in the March quarter despite seasonality. And then does that provide a runway for gross -- for continued gross margin improvement as you go into fiscal '22?

Mark Murphy -- Chief Financial Officer

Listen, we're constantly working, Chris, to expand gross margins and covered it at length in a previous question. It depends on how well the markets hold up of course and our ability to absorb costs of our factories and spend there. We're doing a good job of keeping capex down so our footprint we're very sensitive to that. And then it matters, are we investing in the right technologies, we think we are, we have the right capabilities to develop the most advanced products customers want. And then are we managing the portfolio in a way that we're winning business in the sockets we want to that are going to bring the most value to customers and hopefully with that carry the margins.

Operator

We'll move onto Ambrish Srivastava with BMO.

Ambrish Srivastava -- BMO Capital Markets -- Analyst

Hi, thank you very much. Bob, I had a question on the total 5G units for the year. I thought I heard you say 250 million. That seems to be in the high side, and I haven't seen or Qualcomm said. And so I was wondering, if that is indeed the number you gave us, where are we year-to-date? And so how much is remaining? And I'm assuming the majority of that is -- bulk of that is China. And then for my follow-up for James, IDP is doing really well, good to see it returned back to growth, and you seem pretty confident for the remainder of the year. It would be helpful to stick, please give us a rough break out of what the business looks like today in terms of the end markets or product categories however you choose to delineate within the business? Thank you.

Robert Bruggeworth -- President and Chief Executive Officer

James, I'm going to take the first part. In my prepared remarks, I did say that we expect 250 million smartphones globally this year consistent with what we said when we reported our March results. We have seen many analysts that also cover the industries bringing their numbers up. We feel pretty good about it. As far as the amount of subscribers to date its tracking in line with our model to potentially even slightly ahead. So we still feel very good about our number of 250 million units this calendar year for 5G and obviously significant growth as we look into the next year. James?

James Klein -- President of Infrastructure and Defense Products

Yeah, typically, I don't want to break it out in great detail, but certainly base station business remains to be about a quarter or so and growing at a pretty rapid pace as we go through year defense is about a quarter. Our IoT business is about a quarter, and then we have various other markets that we serve that represent the rest of the business. Definitely we are growing faster this year in the 5G space around wireless infrastructure so that that will start to take larger and larger part of the business as we go through the year.

Operator

And from Needham & Company we'll move to Raji Gill.

Rajvindra Gill -- Needham & Company -- Analyst

Yes, thanks for taking my questions. Just going back to the great traction in GaN I wonder if you could describe kind of the market toward GaN adoption in China as well as outside of China? The shift from away from LDMOS to again base stations, what's been the traction there? Obviously you're kind of well positioned with the major Chinese base station vendor, what's your positioning or your view on GaN adoption outside of China and your ability to leverage your technology in those markets?

James Klein -- President of Infrastructure and Defense Products

Yeah. Great, great question. Probably the best way to think about GaN adoption today is one very, very broad based really across all of the customer base, all the OEMs are evaluating GaN or implementing GaN in some in some version or the other. What's driving big adoption today is really the 5G deployments that are using massive MIMO antennas. So antenna element counts are significantly up. And for the first time I think last year we saw massive MIMO antenna elements actually become a larger amount of the transceivers then macro and the vast majority of those are using GaN today.

So I think that's what's been driving the adoption is 5G and the shift to massive MIMO, it is definitely broad based in what's going on in China, I would say most of the base stations that are getting deployed with this 5G rollout in China are using GaN, especially those that are in frequencies up around 2.6 or 3.5, which is a good share of what's getting deployed. If you go to the rest of the world, again pretty much every OEM Tier 1s, Tier 2s are in progress of designing GaN solutions into their portfolio. So I do think that this trend will continue. And how many base stations are of what configuration as we go out over the next four or five years. I don't think it's completely clear, but we definitely do see GaN as a continued growth for the business and we do see that 5G -- the MIMO antennas will also continue to adopt at an ever-increasing rate and I think that will hold for the whole world.

Rajvindra Gill -- Needham & Company -- Analyst

Yeah, thanks for that. And just a follow-up on the GaN. So you're -- my understanding is your expertise to kind of low power sub-10 watt wanted to get a sense in terms of your road map to high-power, high wattage and what the competitive landscape exist in those markets? Thank you.

James Klein -- President of Infrastructure and Defense Products

Yeah. Today, we've got products in the base station market that serve both the 8 and 16 watt slot. So I would say that certainly where we've centered our focus today and really because that's where we've seen the biggest part of the market. We also are working on additional technology developments that will really help us compete more heavily in really two aspects in base station, one much higher levels of integration, which we see coming and then also to be able to get into the high power spots in macro. So we are developing those technologies and certainly expect to play in those parts of the market as we continue to expand.

Now from a power perspective, you can tell from our defense related comments over the last few quarters that we definitely have experience in very, very high power. We started in the defense business, we've developed a very high voltage and very high products -- high power products for years. So we understand how to deal with the thermals, how to deal with the high current loads those sort of things. So definitely we will move in that space we want to make sure we were focused on MIMO because we saw that as the biggest content gains in the market.

Operator

And at this time, I'd like to turn things back to management for any closing remarks.

Robert Bruggeworth -- President and Chief Executive Officer

Thank you for joining us on our call tonight. We will be presenting via webcast at upcoming investor conferences and we invite everyone to listen-in. Thanks again and have a good night.

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

Douglas DeLieto -- Vice President of Investor Relations

Robert Bruggeworth -- President and Chief Executive Officer

Mark Murphy -- Chief Financial Officer

Steven Eric Creviston -- President of Mobile Products

James Klein -- President of Infrastructure and Defense Products

Gary Mobley -- Wells Fargo Securities -- Analyst

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

Harsh Kumar -- Piper Sandler -- Analyst

Craig M Hettenbach -- Morgan Stanley -- Analyst

Edward Snyder -- Charter Equity Research -- Analyst

Chris Caso -- Raymond James -- Analyst

Ambrish Srivastava -- BMO Capital Markets -- Analyst

Rajvindra Gill -- Needham & Company -- Analyst

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