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Semtech Corp (NASDAQ:SMTC)
Q3 2021 Earnings Call
Dec 2, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to Semtech Corporation's Q2 Fiscal Year 2021 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. I would now like to turn the conference over to your host, Mr. Sandy Harrison, Vice President of Investor Relations. Thank you. You may begin.

Sandy Harrison -- Senior Director of Investor Relations

Thank you Devon and welcome to Semtech's conference call to discuss our financial results for the third quarter of fiscal year '21. Speakers for today's call will be Mohan Maheswaran, Semtech's President and Chief Executive Officer; and Emeka Chukwu, our Chief Financial Officer. A press release announcing our unaudited results was issued after the market closed today and is available on our website at semtech.com.

Today's call will include forward-looking statements that include risks and uncertainties that could cause actual results to differ materially from the results anticipated in these statements. For a more detailed discussion of these risks and uncertainties, please review the Safe Harbor statement included in today's press release and in the Other Risk Factors section of our most recent periodic reports filed with the Securities and Exchange Commission. As a reminder, comments made on today's call are current as of today only. Semtech undertakes no obligation to update the information from this call, should facts or circumstances change.

During the call, we will refer to non-GAAP financial measures that are not prepared in accordance with Generally Accepted Accounting Principles. A discussion of why the management team considers such non-GAAP financial measures useful, along with the detailed reconciliations of such non-GAAP measures to the most comparable GAAP financial measures, are included in today's press release. As a reminder, all references to financial results in Mohan's and Emeka's formal presentations on this call will refer to non-GAAP measures unless otherwise noted.

With that, I will turn the call over to Semtech's Chief Financial Officer, Emeka.

Emeka Chukwu -- Executive Vice President and Chief Financial Officer

Thank you, Sandy, and good afternoon everyone. For Q3, fiscal year '21, net sales increased 7% sequentially and 9% over the prior year to $154.1 million, which was at the upper end of our guidance. In Q3, shipments into Asia represented 80% of net sales. North America represented 12% and Europe represented 8%, total direct sales of approximately 18% and sales to distribution of approximately 82% of net sales. Our distribution business remains balanced with 39% of the total POS coming from the infrastructure end market and 30% from the industrial end market and 31% from the high-end consumer end market. Bookings increased strongly over the prior quarter and resulted in a book-to-bill above 1. POS bookings accounted for approximately 25% of shipments during the quarter.

Q3 GAAP gross margin decreased as expected by 40 basis points due to a higher mix of consumer revenue. We expect our Q4 gross margin to be flattish sequentially. Q3 GAAP operating expense increased 4% sequentially due to higher performance-based compensation expense, offset by lower new product expenses. We expect our Q4 GAAP operating expense to increase 4% to 6% sequentially primarily due to it being a 14-week quarter and higher share-based compensation expense driven by a higher stock price. Q3 GAAP other expenses was $1.6 million versus $2.9 million in Q2. The decrease was primarily due to lower foreign exchange losses than those that were recognized in Q2. In Q3, our GAAP tax expense was 7.9% as a result of a favorable regional mix of income and several discrete tax benefits.

In Q4, we expect our tax to range between 10% and 13%. Moving onto the non-GAAP results, which exclude the impact of share-based compensation, amortization of acquired intangibles, acquisition-related and other nonrecurring charges, gross margin was 61.5% and in line with expectation. Our gross margin remains stable with the key driver being end market revenue mix. In Q4, we expect gross margin to remain flattish due to a higher mix of consumer revenue. In fiscal year '22, we expect to see gradual increases to our gross margin as we see an increase in revenue contribution from our higher margin growth drivers of LoRa-enabled 5G Wireless PON datacenter infrastructure platforms.

Our Q3 non-GAAP operating expense increased 6% sequentially on higher compensation expenses offset by lower new product expenses. In Q4, we expect our non-GAAP operating to increase 1% to 4% sequentially primarily due to the generic quarter being a 14-week quarter. For fiscal year '22 consistent with our target, we expect operating expenses to increase at approximately half the rate of revenue growth. In Q3, our non-GAAP tax rate came in at 14.8% and we expect our Q4 and fiscal year '22 tax rates to be in the range of 15% to 17%. In Q3, cash flow from operations decreased to 18% of net sales due to the adverse impact of withholding taxes paid in Q3 related to the Q2 repatriation of cash to the U.S. We repurchased approximately 440,000 shares or $24 million of stock in Q3 and our stock repurchase authorization now stands at approximately $44 million.

We expect to continue to use our cash to opportunistically repurchase our shares, make strategic investments and pay down our debt. In Q3 due to higher net sales and timing of shipments during the quarter, accounts receivable increased 14% sequentially and represented 33 days of sales, which remains well below our target range of 40 to 45 days. Net inventory in absolute dollar terms was approximately flat sequentially while days of inventory decreased by 9 days to 118 days, which remains above our target range of 90 to 100 days. In Q4, we expect our net inventory to increase due to the strong demand that we are seeing and the tightening supply lead times. In summary, we are pleased to deliver Q3 results that were at the upper end of our guidance. We look forward to ending a very challenging year on a strong note and we believe that our strong business fundamentals position us nicely to continue to deliver growth and solid financial results.

I will now hand the call over to Mohan.

Mohan Maheswaran -- President and Chief Executive Officer

Thank you Emeka. Good afternoon, everyone. I will discuss our Q3 fiscal year '21 performance by end market and by product group and then provide our outlook for Q4 of fiscal year '21. In Q3 of fiscal year '21, net revenue increased 7% sequentially and 9% over the prior year to $154.1 million. Stronger demand from the high-end consumer and industrial end markets was offset by softer demand from the infrastructure end market. We posted non-GAAP gross margin of 61.5% and non-GAAP earnings per diluted share of $0.47. In Q3 of fiscal year '21, net revenue from the high-end consumer market increased 43% sequentially and 21% over the prior year and represented 29% of total net revenues. Approximately 19% of high-end consumer revenue was attributable to mobile platforms and approximately 10% was attributable to other consumer systems.

The industrial end market net revenue increased 14% sequentially and 4% over the prior year and represented 32% of total net revenues. Net revenues from the infrastructure end market decreased 13% sequentially and increased 6% over the prior year and represented 39% of total net revenues. I will now discuss the performance of each of our product groups. In Q3 of fiscal year '21 as expected, our Signal Integrity Product Group decreased 14% sequentially and increased 5% over the prior year and represented 40% of total net revenues. In Q3 of fiscal year '21, demand from our datacenter customers softened following the strength experienced in the first half of the year.

We believe the demand for higher bandwidth datacenter connectivity remains very strong and our ClearEdge, FiberEdge and Tri-Edge platforms all have significant design-in momentum in 100 gig, 200 gig and 400 gig optical modules being deployed in global cloud and hyperscale datacenters. Design activity for our Tri-Edge PAM4 platform remains strong and we now have customers working on almost two dozen design-ins for use in 100 gig, 200 gig and 100 gig PAM4 optical modules. The lower cost, lower power and lower latency performance enabled by our Tri-Edge analog CDR platform provides a significant advantage over existing DSP solutions. We believe the secular trends that have been driving growth in the datacenter market should continue to drive that datacenter business plan over the next few years.

In Q3 of fiscal year '21 demand from the wireless base station market softened from the prior quarter's record as build-outs in China slowed from first half levels. Global customers are increasingly deploying 25Gig optical modules for front holdings in 5G base stations. As a result, we are seeing increased design-in activity for our high-performance CDR and PMD platforms for 5G wireless base stations globally. We expect 5G infrastructure spending to increase in fiscal year '22 and expect this market to continue to grow for several years. In Q3 of fiscal year '21 revenue from our PON customers was flat with the prior quarter. While demand for our PON platforms has been largely driven by China we are continuing to see a number of new PON initiatives outside of China where PON is used to channel high speed data to the home, enterprise and campus networks.

Semtech remains the leading supplier of 10 gig PON platforms for the ONU and OLT markets and we expect our latest innovative 10 gig products to enable us to further benefit from the global trend toward increased PON deployments. Despite the inherent lumpiness associated with the infrastructure markets we believe the secular trends led by the upgrade of datacenter connectivity and the expansion of 10 gig PON and 5G wireless network capabilities should drive future demand for our optical platforms across all our target infrastructure markets. For Q4 of fiscal year '21, we expect net revenues from our Signal Integrity Product Group to increase driven by all infrastructure segments and a recovering video market.

Moving on to our Protection Products Group; in Q3 of fiscal year '21, net revenue from our Protection Products Group increased 25% sequentially and 3% from the prior year and represented 27% of total net revenues. In Q3 of fiscal year '21, demand from our Korean smartphone customers rebounded strongly from the COVID-related issues that have impacted them in the first half of the year. Demand from our North American smartphone customers also remained solid. We expect our Protection Products Group to continue to benefit from our ongoing diversification strategy. Many of today's high performance systems across all industry sectors are starting to incorporate advanced lithography devices and high-speed interfaces such as USB C, 10 gigabit Ethernet and HDMI 2.1 resulting in the need for Semtech's high performance protection.

We expect these trends to continue and contribute to the long-term growth of our Protection business. In Q4 of fiscal year '21 we are expecting our Protection revenue to increase led by growth from the broad-based industrial and communications markets and stable smartphone demand in what is typically a seasonally weaker quarter. Turning to our Wireless and Sensing Products Group; in Q3 of fiscal year '21 net revenue from our Wireless and Sensing Products Group increased 32% sequentially and 21% over the prior year and represented 33% of total net revenues, resulting in a new quarterly revenue record for our Wireless and Sensing Products Group.

Our LoRa enabled platform continued its steady growth and experienced another record quarterly performance. In Q3 of fiscal year '21 we continue to see excellent progress against the goals for our LoRa metrics we had targeted at the beginning of the year. These include the number of countries with LoRa networks now stands at 99 countries and we expect over 100 countries to have LoRa networks by the end of fiscal year '21. The number of public or private LoRa network operators grew to 148 and we expect 150 LoRa network operators by the end of fiscal year '21. The number of LoRa gateways deployed grew to nearly 1.2 million from the 640,000 gateways at the end of fiscal year '20 and we are expecting the number of gateways deployed to increase to over 1.3 million by the end of fiscal year '21.

The cumulative number of LoRa end nodes deployed increased to 167 million from 135 million at the end of fiscal year '20 and we expect this number to exceed 180 million cumulative end nodes by the end of fiscal year '21. In Q3, we shipped a record number of LoRa devices. Finally, the LoRa opportunity pipeline, which includes both opportunities and leads stands at approximately $500 million with approximately $200 million of leads feeding the future opportunity pipeline. We expect the opportunity pipeline to increase rapidly in fiscal year '22 as we anticipate the inertia associated with the global pandemic to gradually subside. Our opportunity pipeline remains geographically well-balanced with approximately 70% of the opportunities now coming from the Americas and Europe and includes an increasing number of use cases in the smart home, asset tracking, and supply chain logistics markets.

In addition to the record revenue and the continued progress on our LoRa metrics in Q3 we made several important announcements related to our LoRa business. These include Amazon's use of LoRa in their new Sidewalk network, unique capabilities of LoRa extends the range of smart home networks to connect both indoor and outdoor sensors enabling new use cases. These include smart lighting, smarter safety, pet trackers, asset tracking, smart irrigation and many others. The use of LoRa in the smart home segment demonstrates the value and versatility of LoRa in low power LAN and low power WAN segments of the IoT market. We believe that Amazon's use of LoRa in Sidewalk opens up a huge opportunity for Semtech's LoRa-enabled business starting in fiscal year '22.

And Cisco's use of LoRaWAN courts Industrial Asset Vision system for enhanced visibility into physical spaces for IT and operational technology environments. This LoRa-based system is a simple and secure solution for Remote Asset Management equipped with a cloud-based dashboard to monitor and manage the condition of assets and facilities that can be deployed in minutes using a simple QR code. We also announced the availability of our LoRa Edge Tracker Reference Design that includes our new LoRa Cloud Geolocation service. Our LoRa Edge platform is our first LoRa-based software defined radio platform that integrates Wi-Fi and GPS sniffing along with LoRa. We are seeing a significant ramp in new design and activity and believe that LoRa Edge is the ideal platform for asset tracking and asset management use cases and will be the main enabler of our future cloud services revenues.

We believe that the flexibility, long range and low power of LoRa-based networks critical components of any successful low power IoT deployment. With the record Q3 performance and anticipation of a record annual performance and with the exciting smartphone opportunity driven by Amazon as well as numerous new industrial IoT opportunities we continue to expect our LoRa enabled revenues to grow at 40% CAGR over the next five years and to become the de facto standard for the fast emerging LPWAN market. In Q3 of fiscal year '21 net sales from our proximity sensing platforms grew nicely over the prior quarter, helped by the recovery in the smartphone market, along with several new design wins that move to production, and should continue to ramp.

We are also seeing increased design activity as global RF safety regulations become more stringent as you new 5G based phones emerge. For Q4 of fiscal year '21, we expect net revenues from our Wireless and Sensing Products Group to increase and achieve another quarterly record led by another record performance from our LoRa enabled business. Moving on to new products and design wins; in Q3 of fiscal year '21 we released 12 new products and achieved 3,397 new design wins, which also represented a new quarterly record. While this year has presented its share of unique challenges I believe that our key stakeholders, including our investors, customers, suppliers and employees have all played a critical role in driving the company's growth and success.

We remain committed to considering the impact of key environmental, social and governance factors in our decision-making processes. We're also focused on developing products that will make the planet a smarter, more connected and more sustainable place to live. We view our employees as the company's most important resource and have an established set of core values that hold each of us responsible and accountable for doing the right things for the company and its employees. I am excited about the company's future opportunities. I believe that our vision, our strategy and our focus on providing products for a smarter, more connected planet and our commitment to a more diverse and inclusive workforce should enable the company to continue to be extremely successful.

Now, let me discuss our outlook for the fourth quarter of fiscal year '21. We believe the underlying secular demand for our growth platforms remain solid. Based on very strong bookings and record high stocking backlog entering the quarter, we are currently estimating Q4 net revenues to be between $153 million and $163 million. To attain the midpoint of our guidance range or approximately $158 million we needed net turns orders of approximately 20% at the beginning of Q4. While we have been issued some licenses that allow us to ship to Huawei our guidance assumes no more shipments to Huawei or HiSilicon. We expect our Q4 non-GAAP earnings to be between $0.45 and $0.51 per diluted share.

I will now hand the call back to the operator and Sandy, Emeka and I will be happy to answer any questions. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Rick Schafer with Oppenheimer. Please proceed with your question.

Rick Schafer -- Oppenheimer -- Analyst

Yeah, hi guys, and congrats on a great quarter. Well, I've got a question on based on LoRa. I mean you've gained a lot of momentum there I think after a slow start in 1Q obviously, COVID-related. I mean, do you see continued linear ramp next year, sort of in line with that 40% CAGAR that you just mentioned or could we see a step function in revenues there next year as LoRa sort of starts to hit critical mass or it seems like it's hitting critical mass?

Mohan Maheswaran -- President and Chief Executive Officer

Yeah, I think [Indecipherable] we've always looked at it is that there are certain catalyst that can drive faster growth and that's why we voice projected a 40% CAGR just based on history. And then some of the new use cases that we now know are starting to get real traction, one of which is of course the smart home initiative with the Amazon Sidewalk announcement. Certainly if the pickup is good of that architecture in the network, one would expect a very fast acceleration in sensors and we could see a definitely a step function increase whether that happens in FY '22 -- probably more FY '23 just because it takes time for the gateways, the network, the architecture to kind of get deployed and then sensors be developed.

But I do expect that business alone just on the Amazon Sidewalk business to reach $100 million business in five years. So for sure that's going to be one of the catalysts. And then as I mentioned, the industrial IoT space has been somewhat slow this year because of COVID-related issues, but that's going to pick up. It's just a question of time. A lot of the use cases are about creating smarter planet, about efficiency improvements -- they're about greener initiatives and things like that and so it's just a question of time I think. So, yeah but to answer your question, we do expect some catalyst over the next year or two here with the smart home initiatives.

Rick Schafer -- Oppenheimer -- Analyst

I should have asked just a quick follow-up on that question, but I mean, are there any capacity issues that you guys have there? Actually in the past you kind of planned to catch-up on the LoRa business this year. So is there any capacity -- supply constraints that you're seeing in there or anything?

Mohan Maheswaran -- President and Chief Executive Officer

Well, there are supply constraints across the board. I would say it's definitely a tightening of supply chain as you know across all segments, nothing specific to our LoRa business or anything like that. I just think as Emeka mentioned, we are seeing some lead times on the supply side increase and that is challenging. But generally that means the beginning of an up cycle in the industry in my view and I think that's a good thing for us and for everyone.

Rick Schafer -- Oppenheimer -- Analyst

If I could sneak in a follow-up, I think most LoRa revenues today are still coming from hardware. I'm just curious, when do you sort of expect to start monetizing the services? I know we talked about that in the past that [Indecipherable] royalty opportunity that you see there. Thanks.

Mohan Maheswaran -- President and Chief Executive Officer

Yeah, so the same two elements. One is the IP licensing royalties from our partners [Indecipherable] we do expect next year. We start to see some of that coming in, but also our cloud services. We did announce that this last quarter, our first cloud service using geolocation again, using more edge platform, and this is another area where we're expecting pretty good growth. It will be a slow ramp initially, but the cloud services revenues will be recurring revenues, remember. So again, we're expecting again something between $50 million and $100 million in the next five years on an annual basis and a lot depends on the quality of the geolocation and the other services we bring to the market. But this is our first real initiative and we're very confident and feel very good about the type of customers and the type of use cases and how quickly that could ramp in the future.

Operator

Our next question comes from the line of Quinn Bolton with Needham & Company. Please proceed with your question.

Mohan Maheswaran -- President and Chief Executive Officer

Quinn, you there?

Quinn Bolton -- Needham & Company -- Analyst

Sorry guys, can you hear me now?

Mohan Maheswaran -- President and Chief Executive Officer

Yeah.

Quinn Bolton -- Needham & Company -- Analyst

Okay, great. Sorry about that. I was on mute. Just wanted to follow up on the Sidewalk question; with Amazon now announcing Sidewalk and I believe the fourth generation Echo product including that Sidewalk network in the gateway, have you seen an increase in the end node activity for sensors compatible with Sidewalk and just wondering if you could give us an update on that design activity around Sidewalk more on then node side?

Mohan Maheswaran -- President and Chief Executive Officer

Yeah, it's really just starting, Quinn. Amazon had made the announcement. They haven't yet talked about the sensors that are connected to it. They've talked about what they anticipate they will be, but they haven't yet rolled out the development platforms to enable companies to do that. But that's pretty close I think and it's going to happen very soon. And so my expectation is by mid next year we'll definitely start to see real Sidewalk networks be deployed and sensors being attached and that type of thing.

Quinn Bolton -- Needham & Company -- Analyst

Great. And then a follow-up question just on the 5G front-haul side of the business. It sounds like it was a little softer for you in the October quarter on the -- following the record level in July, but it sounds like you're looking for growth in that business into the January quarter. I guess I'm a little surprised by that because we've heard from other customers that are sorry, other companies that the China 5G build out is sort of going through a pause between the first phase and the second phase, yet you seem to be perhaps bucking that trend. So I'm wondering just if you could talk about what you're seeing in China 5G and maybe the timing of the next round of tenders for base station and front-haul build out? Thank you.

Mohan Maheswaran -- President and Chief Executive Officer

Yeah, well I think largely your comments are correct, Quinn. I would say that there is anticipation the next year is going to see some good growth and that starts in Q1 and therefore the build for us and the demand for us starts to pick up in Q4 which is what we're seeing. And so, yeah, I think it's just a timing thing. We sell into module manufacturers obviously, module guys selling to the base station guys and so the sum of that dynamic is just timing. But, yeah, we're expecting a pretty strong FY '22. The other thing is not just China. I think that's one of the nice things about actually all of our infrastructure segments now is they're fairly global. We're seeing opportunities in Europe and North American OEMs as well, both on the 5G side and on the PON side as well. So that's encouraging.

Quinn Bolton -- Needham & Company -- Analyst

Great. Thank you.

Operator

Our next question comes from the line of Tore Sandberg with Stifel. Please proceed with your question.

Tore Sandberg -- Stifel -- Analyst

Yes. Congratulations on the results. First question and back to LoRa. Do you have a range update for us for this calendar year, Mohan?

Mohan Maheswaran -- President and Chief Executive Officer

We're still keeping our range, its $85 million to $95 million or it was going to be in that range I think for this year and we're still keeping our 40% CAGR going forward. Obviously a lot depends on the timing of Amazon Sidewalk and some of the higher volume, faster time to market opportunities. But in general, I would say with the exception of kind of COVID-related impact we're seeing pretty good industrial momentum. A lot of new use cases but as we use cases kind of come out, we're seeing adoption across the globe. So I think again the timing of when proof of concepts move to revenue. It's challenging to really comment exactly how it's going to happen, but once they'll start to materialize. And I think as I mentioned COVID, once COVID stops that we start to get some return to normality in terms of manufacturing and industrial IoT. I think that's going to continue to also drive the revenue.

Tore Sandberg -- Stifel -- Analyst

That's very helpful. And you talked about 5G coming back next quarter or I mean this quarter. What about datacenter? How are some of the dynamics been there, because that obviously passed a little bit this last quarter, but are you starting to see that grow again as well?

Mohan Maheswaran -- President and Chief Executive Officer

We are. I wouldn't say it's as positive as the 5G story. I think there's more still inventory there in the channel and then maybe the customers, but we are starting to see that pick up also. And so I expect Q1 the short to be up. Datacenter is probably going to be flattish for Q4 and then I'd say up in the Q1 timeframe, but yeah, positive signs. A lot of design-in activity there.

Tore Sandberg -- Stifel -- Analyst

Great. Lastly, on the PON business, you expect to start to see 10 gig; is that going to be a fiscal '22 event or is it going to be further out than that?

Mohan Maheswaran -- President and Chief Executive Officer

Actually 10 gig PON is doing well already and I think continues to do well and we expect in Q4 to do quite well, this quarter to be quite strong for PON and next year we're also projecting good growth for PON so yeah, infrastructure just continues to make us -- give us good indications that FY '22 is going to be another solid year for our SIP business.

Tore Sandberg -- Stifel -- Analyst

Well, thank you.

Operator

Our next question comes from the line of Craig Ellis with B. Riley. Please proceed with your question.

Craig Ellis -- B. Riley FBR -- Analyst

Yeah, thanks for taking the question. I'll ask one that ties together a few points. So you mentioned that the inventory would be up quarter-on-quarter, and I can see that all the segments are guided up. But Mohan, can you help us with some color on some of the gives and takes across the different segments, which would you expect to be growing more robustly, which are more muted? And then within any of the segments are there any sub segments where you would expect a meaningful deviation to the broader overall segment trend?

Mohan Maheswaran -- President and Chief Executive Officer

Yeah, so as you know, Craig, the first half was extremely weak for consumer. I think we're seeing the second half being quite strong relatively to for consumer and I'd expect that to continue for at least obviously we've seen in Q4, which is typically seasonally down for us. We are seeing very much strong consumer business. So, that I think is going to continue. Then on the infrastructure side, as I mentioned, some softness there, but mostly driven by very strong first half and all the indications are that that most of the infrastructure segments we participate in are going to come back this quarter and certainly grow in Q1. And then on the wireless incentive side for us -- LoRa continues to great and then in the proximity sensing side, I think again that's tied to consumer. We expect that to do quite well in Q4.

On the inventory side, on the supply side, the areas that we're concerned about, obviously, there is a tightening supply chain. Some of the end markets tend to have short lead times typically consumer. So we are taking a little bit more risk in building some internal inventory there. Demand seems to be extremely strong. We're pretty cautious about how we are participating in the market and making sure that we're not over-inventorying anything. Our channel is very light at the moment and my expectation is that -- if we manage it correctly, then I think we should see good consumer growth next year as well. We won't see such a volatile demand coming from there.

Craig Ellis -- B. Riley FBR -- Analyst

Got it. And then turning to LoRa, you mentioned in your prepared remarks, both Amazon and Cisco and I'd like to Cisco's product announcement. It was actually very impressive, very impressive array of products that help create a real nice ecosystem. As you look at fiscal '22 what potential does Cisco have to really drive incremental sales for LoRa or is that just much more of an analog-like business where those would be the kind of classic ballpoint design-ins we would see with industrial versus anything high volume like Amazon?

Mohan Maheswaran -- President and Chief Executive Officer

Yeah, I think from a revenue standpoint, it's more the latter Craig, but the important thing to remember is that, once they have adopted LoRa and they build the infrastructure based on LoRa then that's there forever, right? And it's going to be there for at least the next 10 to 20 years and I think drive, especially the industrial sector drive a ton of opportunity both for additional sensors, but also potential cloud services, potentially new use cases. So there is, that's the excitement we have behind LoRa and LPWAN. We're creating a whole new industry here and that's to me is the thing to take away, not only from the standpoint of getting these Tier 1 customers like Cisco and Amazon involved in driving LoRa and helping us with the ecosystem but what it says about the value that the technology brings to the market and to these customers. So, yes, it's pretty exciting to have both new use cases but also Tier 1 companies really driving it for us.

Craig Ellis -- B. Riley FBR -- Analyst

Indeed, and if I could just two clarifications. I'll throw them out at the same time. One, you talked about rising gross margin in fiscal '22. Can you give us a sense for the magnitude of that increase, for example, could we see gross margins up 100 basis points or so over a four-quarter period? And secondly, I thought I heard you mentioned that fourth quarter was a 14-week quarter and if so, what's included in revenue and expense guidance for the extra week? Thank you.

Emeka Chukwu -- Executive Vice President and Chief Financial Officer

So let me take the first one with regards to gross margin. I think, like I said in my prepared remarks, when you think about where we're expecting our revenue growth to come from into next fiscal year, we're expecting our LoRa business to continue to grow very nicely. Datacenter business, I think remains fairly on growth. PON and the 5G wireless also in addition, our industrial and automotive opportunity within our Protection business. So all these business is really very exciting for us because of a higher gross margin that they come with. Is there really something that I can quantify right now? Probably not, but I would expect that to see something in the range of 50 basis point to 100 basis point expansion throughout the year. So, that will be very good. With regards to the Q4 with the 14 weeks -- it's always hard on the revenue side to really to estimate how much of the extra week is contributing to revenues so that I think, of course, it is a country business for us, but it's much easier on the operating expense side. On the operating expense side, I think about 60% of our total operating expenses is sort of tied to time, right? So, things like your salaries, your operating supplies and stuff like that. So if you think about -- if you take 50% of operating expenses some day you linearize it over 14 weeks that will give you a pretty good estimate of what the operating expense impact is.

Craig Ellis -- B. Riley FBR -- Analyst

Very helpful, thank you.

Operator

Our next question comes from the line of Mitch Steves with RBC Capital Markets. Please proceed with your question.

Mitch Steves -- RBC Capital Markets -- Analyst

Hey guys, thanks for taking my question. I just had a quick one, I guess maybe a bigger one -- bigger picture one, just on the strategy for Semtech now. I know before you guys have talked about potentially kind of spinning out the LoRa business being its own entity or potentially selling that piece of the business relative to Semtech Hold. Can you maybe provide us an update on what kind of the view is now given that you've kind of survived kind of this downturn in 2021? I'm sorry, 2019 and 2020 what the plan is for LoRa business or Semtech as a whole relative to that outcome?

Mohan Maheswaran -- President and Chief Executive Officer

Yeah, Mitch. The thought has always being that if LoRa becomes the de facto standard in the industry and we are generating around $100 million of recurring cloud services revenues, then we could start to look at some ideas about how to move that business to a different level. And so that's the thought and I would say we're still probably two, three years away from that. Obviously, every day we get good momentum and new announcements like the Amazon Sidewalk and our LoRa Edge announcement to get closer, but we're not there yet. I think I would say, two, three years still is the timeframe.

Mitch Steves -- RBC Capital Markets -- Analyst

Yeah. And then can you provide us -- so you said cloud service kind of recurring revenue. What's kind of the revenue run rate now relative to kind of just a straight sales you guys are doing?

Mohan Maheswaran -- President and Chief Executive Officer

That's -- it's brand new. So we've just announced our cloud services geolocation service. It's the first one. So it's very --we're just starting to get contracts in place now and things like that. So I would say next year, end of next year would be a good measure for are we on track to do the $100 million in three to five years and what's the pick-up and what's the value that we're bringing. It is dependent on our new platform, the LoRa Edge platform, as I mentioned, and I think we'll start to get some good feeling for that as customers deploy their platform and give us feedback on the value.

Mitch Steves -- RBC Capital Markets -- Analyst

Yeah, I guess just one last one if I could, just to clarify those comments. So what would be kind of the first major customer, major launches you guys would expect, call it in '21 and '22? You're not looking for logos or anything like that, but how should we think about the rollout of that new product or business line?

Mohan Maheswaran -- President and Chief Executive Officer

Well, the way to think about is asset tracking and asset management is really the first target with geolocation. And so obviously, once our customers are testing and they feel that there is value we'll start to talk more about the specific application, but I would think it's in those areas in asset management and asset tracking and tied to use of LoRa Edge indoors and outdoors. That's the beauty about LoRa and the LoRa Edge platform has WiFi sniffing and GPS sniffing. So the concept being you can track an asset from your home, outdoors into a warehouse, into a very manufacturing facility, for example, within buildings, deep indoors or in rural areas and have one platform, which is utilizing and optimizing the battery power consumption effectively. So it's a very nice concept. It's very, I think it's a very unique capability we have, but we have to get it out there and demonstrate the value, right?

Mitch Steves -- RBC Capital Markets -- Analyst

Understood, very helpful, thank you.

Operator

Our next question comes from the line of Scott Searle with ROTH Capital. Please proceed with your question.

Scott Searle -- ROTH Capital Partners -- Analyst

Hey, good afternoon. Thanks for taking my questions. Hey, just a couple of quick clarifications. I missed what you said about the sequential outlook for protection. Just wondering if that was up, down, flat? And while we was in the quarter, I know you were indicating your guidance doesn't reflect any incremental contribution from Huawei, HiSilicon in the fourth quarter. And then I had a couple of follow-ups.

Mohan Maheswaran -- President and Chief Executive Officer

So protection, we're expecting to continue to be up. It was up in Q3 and we expect it to be up in Q4, driven mostly by the consumer space, but also in our industrial, more broader industrial telecommunications, automotive sectors are all doing quite well for us. So we're expecting that to grow in Q4 also. And then on Huawei, Huawei for this quarter we're not expecting much at all. We haven't shipped much and we're not expecting to ship much in Q4, so pretty minimal revenues from Huawei this quarter once -- obviously, we have some licenses as I mentioned on the prepared remarks, but it's fairly modest any revenues that come from that. And it's not clear to us whether Huawei has already built up inventory and so whether they need the material. So we've essentially taken it out of our guidance.

Scott Searle -- ROTH Capital Partners -- Analyst

Great, perfect. And on Wireless and Sensing absolutely huge quarter. Part of that, it sounds like a combination of proximity sensors and LoRa. I was wondering if you could parse that a little bit more, up 32% sequentially. The smartphone market, broadly in general was up about 20% plus I think on a global basis so you're benefiting from that. Was there something in there -- was proximity bigger versus lower, just to kind of get calibrated on that because given the performance of that segment, I would have thought you'd be at the higher end or even above the higher end of the range of $85 million to $95 million for lower this year.

Mohan Maheswaran -- President and Chief Executive Officer

Yeah, they're both doing extremely well, I would say. Obviously, proximity sensing for us has been -- its driven by mostly the smartphone business and so that has obviously done quite well in Q3 and we're expecting stronger proximity sensing in Q4. As I mentioned consumer tends to be weak in Q4, but this year is unique in the sense that the first half was very, very weak. So we're starting to see maybe a bit of that effect kind of playing out here in the Q4 time frame. But with LoRa, it's more consistent. I mean it's just continuous consistent growth and -- with LoRa it's more about how fast the POCs are moving over to revenue, right? So we have plenty of pipeline. I mean, as I mentioned, we have $500 million of pipeline. So it's only a question of how quickly those could move through the pipe to revenue, and that's where something like the Amazon Sidewalk announced I think really starts to help in a way because LoRa is a great technology for industrial. It's clearly proven in utilities already. It's clearly proven itself in some of the asset management and broader kind of industrial use cases. But where we have been hoping somewhat speculating, but now we have real evidence of it since the smartphone use cases and some of the more consumer use cases, which drive growth typically faster. Now, they could be volatile as well. I mean, they can have shorter life cycles as well, but typically they can ramp up fast and so as I said, I don't think we'll start to see it really until mid next year the growth there, but it's coming.

Scott Searle -- ROTH Capital Partners -- Analyst

Got you. If I could Mohan, follow-up on the LoRa front as it relates to Sidewalk, could you talk a little bit about the ecosystem that's built around it right now? Now you got the anchor, right? You got the base station there in effect with the Echo Dot. How is the rest of the ecosystem and design activity around that starting to form? I was wondering if you could update as well on tags? Haven't heard a lot about that late. I know that was out further out on the horizon, but you're starting to talk about cloud and recurring opportunities. What's the latest thoughts on tags?

Mohan Maheswaran -- President and Chief Executive Officer

Yeah, I'm pretty excited about tags but I think it's still early. We still have to get the price points down and we do need something like a Sidewalk network in place for that to become an effective vehicle. With regards to the ecosystem, it's really driven by Amazon. I think we're participating obviously in helping and facilitating but a lot of the momentum is going to be driven by them to directly and I think we'll continue to help drive that process. But when you look at the ecosystem, there is clearly an opportunity for [Technical Issues] who want to connect to a gateway in the home in lighting area, in the tracking area, in the security area and the safety area, irrigation just a whole bunch of sensors. There's clearly opportunity for software companies to partner with Amazon and figure out how to connect with them. There's clearly opportunity for system integrators who want to connect to home-based network opportunities. There's just the whole ecosystem around the smart home I think comes into play quite nicely. And I think we'll start to see that. So that's probably the second half of next year, but as the network and stuff get rolled out and customers and consumers start to deploy Sidewalk networks, I think that's when we really start to see the momentum.

Scott Searle -- ROTH Capital Partners -- Analyst

And lastly if I could, just on in Signal Integrity, PAM4 product line. I think you're starting to see some 100 gig contribution I thought in the third and fourth quarters start to see some initial revenues. I was wondering if you could update us on that front? And then looking forward to the 200 gig, 400 gig I thought that with design activity, which would start to translate into revenue in the first half of fiscal '22. I was wondering if could just update us on those two fronts? Thanks.

Mohan Maheswaran -- President and Chief Executive Officer

Yeah, we're starting to see revenues now. It's small, but we are seeing ClearEdge revenues now, PAM4 revenues and we've got some very good momentum. As I mentioned we have over to two dozen design opportunities that are in play at various stages, some early stage evaluation, some more qualification type of stages. And so that's going to start ramping, and yeah, next year should be a very good year for Tri-Edge I think.

Scott Searle -- ROTH Capital Partners -- Analyst

Thank you.

Operator

Our next question comes from the line of Christopher Rolland with Susquehanna. Please proceed with your question.

Christopher Rolland -- Susquehanna Financial Group -- Analyst

Hey guys, thanks for the question. I think most of the good ones have been asked so I'll just ask two. I guess the first one here on the 5G opportunity; perhaps you can give us [Technical Issues] that it would grow. I think most people are expecting that. But perhaps if you can give us this year the kind of growth rate we should expect in this business for the next couple of years? And then if you could break out perhaps units or ASPs. It sounds like you're moving to 25 gig, so I want to explore that opportunity a little more? Thanks.

Mohan Maheswaran -- President and Chief Executive Officer

Yeah, so the main thing to remember with 5G for us in the optical modules is that with 4G there is typically just a PMD device of some sort. With 5G there'll be a CDR as well as a PMD device. So the opportunity for us in 5G is either ClearEdge CDR and FiberEdge PMD device for 25 gig. If they go to 50 gig links say, Tri-Edge PAM4 and FiberEdge device for 50 gig so ASP does increase for us. In addition, there is more typically with 5G, there's going to be more front links. I think it's been, it goes from 6 to 12 from holdings. So there is significant increase in the number of ports will be going forward so increased content, more ports. But then I think the other thing that's somewhat different for us and for everybody I think in 5G is that historically it's been China and I think, for sure, China will still be the predominant volume driver, but we are starting to see some of the OEMs around the world really take a more aggressive stance and trying to be successful in this market, and at least participate and some of that's geographical dependent on which regions are driving the need to have local suppliers support their 5G infrastructure, but that will also drive opportunity for us. I think for 4G, we have about 30% share of the market, we think we can hold that share at least for 5G and so that's kind of thinking and it should grow double-digits for sure over the next couple of years.

Christopher Rolland -- Susquehanna Financial Group -- Analyst

Excellent. And then also if you could talk about the datacenter opportunity, at least the datacenter end market more broadly there. Intel talked about perhaps demand slowdown. I just wanted to see if you agree with that or not? And then more specifically if you could talk about your optical opportunity there with Tri-Edge -- you mentioned cost versus analog. What is that discount that you get for analog and perhaps discuss how sales are tracking on that side?

Mohan Maheswaran -- President and Chief Executive Officer

Yeah. Well, datacenter had a very strong [Technical Issues] had a record first half, so there was some expectation technology is going to [Technical Issues] and that's really what's happened is still on the annual year-on-year basis so up. And so, and will continue to grow nicely I think next year. So I think we've seen obviously some of the softness in Q3, expect Q4 to probably be flattish versus Q3 and then start to pick up again next year. Much like 5G, I mean the hyperscale datacenter is broad set of global customers. So it's pretty broad range of customers. We are obviously selling to the optical module manufacturers and they're building their modules and shipping into different datacenter customers and we've got good traction as I mentioned there. And we really expect to see production ramps for most of the 200 gig, 400 gig PAM4 modules over the next few quarters here. It's already started, but I think the next few quarters, we'll start to see that and essentially, you can take a 100 gig optical module today that uses our ClearEdge CDRs and essentially replace it with a very similar module that uses our Tri-Edge CDRs and get double the bandwidth for very little incremental cost in the module. And so that's the value we see and then that's what we expect the market to recognize.

Christopher Rolland -- Susquehanna Financial Group -- Analyst

Thank you, guys.

Operator

Our next question comes from the line of Tore Svanberg with Stifel. Please proceed with your question.

Tore Sandberg -- Stifel -- Analyst

Yes, thank you. Just a quick follow-up. Mohan, I think you said that the Sidewalk opportunity alone could be $100 million over the next five years. Is that on chip revenue or is there some royalty or even services revenue in that number as well?

Mohan Maheswaran -- President and Chief Executive Officer

Yeah, I would say it's includes everything Tore, so mostly chip and royalties.

Tore Sandberg -- Stifel -- Analyst

Great. Thank you.

Operator

Our next question comes from the line of Harsh Kumar with Piper Sandler. Please proceed with your question.

Harsh Kumar -- Piper Sandler -- Analyst

Yeah, hey guys. First of all congratulations, solid guide, solid results. We appreciate it. And then I had two questions Mohan. Right before the ban, I think you were pretty opt -- very optimistic on the opportunities in China, with perhaps a new President seek. Can you talk about -- you talked some about 5G, but could you just lay out for us the framework of how Semtech would view the opportunities in China? Should the gates open up for trade again?

Mohan Maheswaran -- President and Chief Executive Officer

Well, we've really been bullish on China. Obviously, we invested in China for the last 15 years and so it's hard to walk away from a region that given so much growth and continues to have some performance going forward. So but I would look at the Huawei situation is a unique situation. Obviously, the ban on Huawei has impacted us significantly, but that's kind of done now and we've been through that. The bigger challenge now is just are we going to see a opportunity to continue to grow in all of our businesses in China or is there going to be this further kind of disaggregation between the U.S. and China, and that's still on the move. And I think that's where we're waiting to see, but for sure any positive relationship improvements, I think is a positive for our business for sure because just because of the success and the momentum and the relationships and all of that we have across all of our segments. But that said we're not counting on it. As I mentioned a lot of these markets like 5G and PON are becoming a little bit more globalized in the sense that other regions are starting to recognize the need to have their own infrastructure players, and they can't depend necessarily on the Chinese manufacturers to support them and be there when they need them and those types of things. So you know it's a little bit of both, but I definitely think if things improve on the relationship front at a government level then for sure that should help our business longer term.

Harsh Kumar -- Piper Sandler -- Analyst

Mohan, so a follow-up on that one and I'll ask my next question as well. Do you see opportunities -- you used to have opportunities I believe for a datacenter business in China. Do you see that perhaps opening up again for you or for some Semtech in China with datacenter? And then secondly, with regards to Amazon Sidewalk and LoRa, I think you were the only supplier of baseband ICs for the gateways that you guys deploy on the infrastructure side. Is that still the case? And will the typical consumer be relying on sort of the Amazon infrastructure that will be laid out in the city or will the consumer have to buy their own sort of gateway, which comes in a Dot or Echo or something else?

Mohan Maheswaran -- President and Chief Executive Officer

So let me answer that first and then we'll go to the datacenter. So I'm on Sidewalk, yeah, for sure there will be connectivity to a gateway, which will be an Echo. So and Amazon obviously will supply the Echo's and so the connectivity will be to the Echo. And then how different Echo's connect with each other and how the roaming is done, that's all going to be driven by Amazon. That's an Amazon decision and so we'll obviously help them with that. But the main thing is getting, it's really targeted within the home, the smart home and the periphery of the home is kind of the initial thinking and then tracking of your pets and things like that outside the home and then connecting different Echo's together and those type of things, I think is the broader vision, right? So we'll see how that plays out. And then on the datacenter side for sure, yeah, all of the Chinese datacenter -- the hyperscale datacenter guys are our partners, customers, potential opportunities for Tri-Edge for sure and we are working with them. We continue to work with them. We don't see any real issues at the moment. I don't think that there will be, but yeah, we have very close relationships and expect to see some good growth there.

Harsh Kumar -- Piper Sandler -- Analyst

Thanks Mohan and thank you, guys.

Operator

Our next question comes from the line of Tristan Gerra with Baird. Please proceed with your question.

Tristan Gerra -- Robert W. Baird -- Analyst

Hi guys. Thanks for letting me in. You've mentioned that Amazon was a 10 to 20 year opportunity. So clearly there is a long-term investment. Could you give us a sense of what's the magnitude of those logical, potential end customer like Amazon? And given those investments is there any incentive for them to eventually use the same technology in other platforms outside of consumer? Amazon for example is also pushing IoT solution in industrial. Is that an opportunity that you see specific to this customer, but elsewhere versus cellular base network? And generally, what's the incentive large customers have to one thing that to LoRa to leverage that into different end markets?

Mohan Maheswaran -- President and Chief Executive Officer

Yeah, Tristan, I think all of the companies we deal with, we mentioned Cisco earlier and Amazon and other companies are starting to understand the value that LoRa brings. It's not -- the value is increased actually when LoRa is combined with other technologies. So when you combine with Bluetooth or WiFi or GPS, as I mentioned on LoRa Edge. One of the reasons why we developed the platform, so that it has WiFi sniffing and GPS sniffing and LoRa on its own has some limitations in the sense that it's not a high-bandwidth connectivity, right? But I think at some these use cases start to get deployed, there's going to be use cases across the board in all segments and industrial is where I think the biggest value, the largest value is for sure because of the very low power and the range. But then when you see the smart home initiative this is really driven through the Sidewalk initiative, it really is going to change the way home automation and smart home is thought about when you start to look at the periphery of your homes and you go into the attic or into the garage or into the basement or into the outdoors into the yard and can then put smart automation around that. That really starts to change that dynamic a little bit. So I think there is a huge opportunity. We'll see -- it's baby steps, as I said, but we have some big hitters that are behind the technology pushing it, right?

Tristan Gerra -- Robert W. Baird -- Analyst

Great. And then just a quick follow-up. So, you've mentioned a bit earlier about lean inventories in the channel and tightness in supply across the board. And you mentioned, nothing specific to LoRa. Are you shipping exactly in line with end demand in LoRa or are you still catching up for what was following supply chain disruptions earlier in the year? Just trying to see if there is any catch up revenue or it's really just linear with end demand?

Mohan Maheswaran -- President and Chief Executive Officer

Yeah, I would say if the question is specifically about LoRa, I think we're shipping to demand. I think it's in good shape. I think there the real question there is in FY '22 if the consumer demand picks up rapidly, then hopefully we'll be able to supply to that and I think we've had -- so we're in fairly good shape. With regard to the rest of the business, demand is extremely strong, bookings have been extremely strong. So we are a little bit cautious, particularly on the consumer side. With regard to making sure we understand how much inventory is being built and trying to maintain some balance there by keeping our channel lean and things like that. So it's hard to know, to be honest with you Tristan exactly, but we'll see it play out. We're expecting a very strong Q4. We're expecting a strong Q1. I think the first half of next year looks like it's going to be strong. Then the question is what does second half look like, right? But we'll see by then.

Tristan Gerra -- Robert W. Baird -- Analyst

Great color. Thank you very much.

Operator

Our next question comes from the line of Karl Ackerman with Cowen. Please proceed with your question.

Karl Ackerman -- Cowen & Company -- Analyst

Yes, thank you for squeezing me in. Your Signal Integrity business will grow mid teens, at least in fiscal 2021. How do you think about the trajectory of that business entering fiscal 2022 in the context of your longer term [Technical Issues]? I asked because it would seem another healthy year with 10 gig PON is on the come, demand remains healthy for 25 gig and higher gig optical products in Asia. Yet, at the same time proponents of 400 gig PAM4 would argue the second half of 2021 will begin the demise of NRC for short reach application. So just would love to hear your thoughts on that.

Mohan Maheswaran -- President and Chief Executive Officer

While we think 100 gig modules and connectivity will continue for some time, I don't think there will be a demise. It may start to flatten up and for 200 gig and 400 gig PAM4 modules will starts to pick up for sure. But we are hoping to participate in that, of course with Tri-Edge and we see good design and momentum, as I said, so to answer your question we think all the infrastructure segments are going to do quite well next year. Part of that is working from home and all of the COVID-related dynamics that have driven infrastructure investments and the need for more bandwidth and all those things. So yes, SIP our Signal Integrity Product Group, we're expecting pretty good growth next year across the board. And this year has been extremely weak year for video for example as well, so we're expecting FY '22 to see that pick up also that segment. We anticipate that to continue to contribute to the growth next year also.

Karl Ackerman -- Cowen & Company -- Analyst

Understood. Last question if I may, what order trends are you seeing by Asia-based datacenter customers? I ask because your primary peer spoke about that for 25 gig and 100 gig products, again just a double click on the channel inventory commentary. We've kind of heard some mixed commentary, but I'd appreciate your thoughts on how you feel about the situation for optical components, particularly for datacenter, and long haul? Thank you.

Mohan Maheswaran -- President and Chief Executive Officer

For us the channel is pretty, pretty light. It's not, it's certainly in the range we feel comfortable with, demand is very strong as I mentioned, bookings are strong. Indications are Q1, I mentioned that Q4 was going to finish to be a little bit light for datacenter probably flattish, 5G is going to be a little bit stronger. And we expect PON to be stronger in Q4 and then we expect infrastructure segment to do nicely in Q1. So yeah, at this point channel is light. I think relatively and demand continues to be strong and bookings are strong. So we think we're in pretty good shape.

Operator

And our final question comes from the line of Craig Ellis with B. Riley. Please proceed with your question.

Craig Ellis -- B. Riley FBR -- Analyst

Thanks for coming back to me it and getting the end before we wrap up. Mohan, I really appreciate all of the metrics that you gave before and the transparency they provide. But I missed what you said about the opportunity funnel. So one, can you repeat that number? And two, did it change from the last quarter and three when we go through a period that's just dynamic is what we've seen year-to-date where the whole world is just turned upside down with a COVID crisis. How does the company manage its funnel and kind of quality check and resiliency check the items that are in that funnel as we get to the other side now are looking at what should be a global recovery, but can you just walk us through how you're maintaining that bundle and where it stands currently versus prior expectations?

Mohan Maheswaran -- President and Chief Executive Officer

Yes. So, currently, the pipeline is about $500 million. We look at the leads that drive the pipeline. It's about $200 million. So there is no pretty sizable pipeline compared to what I found revenue is and the main area of focus is conversion of those pipeline opportunities to revenue. That's been the key, so kind of key focus for us is how do we make sure and enable that to occur, it's fairly well balanced. As you know, the pipeline has in the funnel about 21% is China and then about 70% is Europe and Americas, which is good because that's the balance of the revenue today. The revenue is about 49% China and 40% Europe and Americas. So we wanted to get that balance more balanced. And if we executed the funnel and turns over to revenue as we expected to in time, then that would be a nice thing to have just more balance. Also lots of use cases. Lots of different use cases. So there's obviously, now a hefty smart home it's also in that funnel, utilities, asset management, smart city and building so fairly well balanced there. This year, obviously has been a tough year for customers to prioritize new initiatives.

And that's been really the difficulty we've had where most of many of our company and customers have been focused on just making sure people are safe, and making sure people have jobs, and those types of things. Putting a priority on a new technology and a new market, new initiative has been challenging, but it's starting to get turned around. And I think as I mentioned with the Amazon Sidewalk initiative that's initially was significantly going to be announced much earlier but was pushed out and now is out there and I think we're going to see more of this type of thing as our customers start to get a handle and countries start to get a handle on the pandemic and the way forward. So my expectation is next year the opportunities will increase rapidly.

Craig Ellis -- B. Riley FBR -- Analyst

Thanks Mohan.

Operator

And with that we reached the end of our question-and-answer session. I would like to turn the floor back over to management for any closing remarks.

Mohan Maheswaran -- President and Chief Executive Officer

Thank you. In closing, we were pleased to deliver another solid quarter and remain encouraged that our strategies for multi-sourcing, our investments in IT, operations and sales infrastructure and systems continue to limit the impact of COVID on our business operations. I want to once again acknowledge all of the talented and committed Semtech employees across all our global locations and thank them and the team for their ongoing efforts. We believe our strategy along with that diversified offering, balance and the market approach and strong customer relationships should enable us to continue to deliver growth. With that we appreciate your combined continued support of Semtech and look forward to updating you all next quarter. Thank you.

Operator

[Operator Closing Remarks]

Duration: 74 minutes

Call participants:

Sandy Harrison -- Senior Director of Investor Relations

Emeka Chukwu -- Executive Vice President and Chief Financial Officer

Mohan Maheswaran -- President and Chief Executive Officer

Rick Schafer -- Oppenheimer -- Analyst

Quinn Bolton -- Needham & Company -- Analyst

Tore Sandberg -- Stifel -- Analyst

Craig Ellis -- B. Riley FBR -- Analyst

Mitch Steves -- RBC Capital Markets -- Analyst

Scott Searle -- ROTH Capital Partners -- Analyst

Christopher Rolland -- Susquehanna Financial Group -- Analyst

Harsh Kumar -- Piper Sandler -- Analyst

Tristan Gerra -- Robert W. Baird -- Analyst

Karl Ackerman -- Cowen & Company -- Analyst

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