The Motley Fool sent a team to Las Vegas last week to cover the major news and trends coming out of CES. At the event, Supernova analyst David Kretzmann was able to spend time chatting with Liam Griffin, CEO of Skyworks Solutions (NASDAQ:SWKS), a company poised to enjoy the surging demand for wireless connectivity.
Watch the interview to find out what lies in store for Skyworks and other industry trends investors should watch closely.
A full transcript follows the video.
David Kretzmann: David Kretzmann here with Motley Fool Supernova, and I'm thrilled to be joined by Liam Griffin, the relatively new CEO of Skyworks Solutions, a multiple recommendation in several of our Motley Fool services. Liam, thank you so much for taking time out of your busy schedule to talk with us.
Liam Griffin: It sounds good, Dave. I really appreciate it.
Kretzmann: Let's just start off with a little bit about your background, how you came to Skyworks, and the highlights of the past year since you became CEO last May.
Griffin: Sure, thank you. I joined Skyworks back in 2002 when we started our company. We rang the bell in the Nasdaq. I think we were a $4 stock and in the middle of the "Can you hear me now?" era. Fifteen years later, I was fortunate, under the guidance of Dave Aldrich, our exec chair, to be given the opportunity to be the CEO. I'm thrilled by the opportunities that the market presents to us today [and] our ability to capture share and drive mobile connectivity. A phenomenal opportunity. I'm really excited about it.
Kretzmann: And something that comes up in Skyworks' press releases and other presentations is the wireless networking revolution. Can you say a few words about what that is and why it's important?
Griffin: That's religion to us. That is religion. If you think about this market today ... if you think about Facebook ... if you think about Amazon. In fact, the leading five S&P companies today (Apple, Alphabet, Amazon, Facebook, Microsoft) are all driven by mobile connectivity, mobile platforms, whether it's client or client to cloud.
If you think about all this and translate that to how it works from bits and bytes, all of that technology runs through mobile solutions invariably produced by Skyworks. So we underpin that tremendous new economy that we see -- a shift from bricks and mortar -- to kind of the clicks and clacks that you see on your keyboard. But it's very powerful and it's still early innings.
Kretzmann: And what would you say Skyworks does that your competitors can't do, or can't do effectively?
Griffin: A great question. So having said all these great things about mobility and the revolution, it's very, very complex and challenging. Our customers are faced with increasing burdens to deliver these higher data rates with more efficient solutions, less consuming of battery.
What we do well is craft individual solutions and configure these customer by customer. We integrate filtering technology, gallium arsenide semiconductors, [and] switches, and integrate these into unique systems that are perfect for each and every customer.
Kretzmann: And for investors who are new to this space, I think a common risk or question that comes up is how a semiconductor company, or a backend technology company, can do something so that they don't become commoditized? What does Skyworks do to ensure that your products don't become commoditized down the road?
Griffin: It is all about performance today. I don't think anyone that uses a smartphone today -- even the latest and greatest technology -- is being dwarfed by the burden for demand, the burden for data. So our job is to be best in class around performance. To provide the greatest connectivity experience available. It's a challenge for our engineers, but ultimately, it's perfect for our customers.
Kretzmann: Over the past year, your broad market segment has made up about 25% of sales. Can you just explain a little bit about what goes into that segment, and what will be the main driver of that segment over the next three to five years?
Griffin: That's a great, great point. It's often misunderstood at Skyworks. We have made our money -- and our bread and butter has been mobile phones -- but ultimately, that connectivity core spans into IoT. We have a Wi-Fi portfolio, a Bluetooth portfolio, a technology called ZigBee for short range. So you'll see these in consumer products. You'll see this in diversified audio. You'll see it in automotive. You'll see it in headsets. You'll see it in your Wi-Fi router. That broad market business has been growing phenomenally. It has a tremendous tail going forward.
Kretzmann: What do you think investors should be watching most closely, in general, with Skyworks over the next three to five years?
Griffin: The way I would look at it is if you're a believer in mobile ... if you're a believer in the internet economy ... if you're going home and browsing your smartphone and you're putting your kids on an iPad and enriching your experience through mobility, then you're a bull on Skyworks. That's what we do. We provide that. We build that wireless pipe. We make it faster and better every day.
Kretzmann: You're someone who's closely tied to the tech space, so a question I want to ask you. What's one piece of technology that Skyworks isn't involved in that really excites you? We're at CES. Is there any certain tech trend or product that really excites you as a consumer? An investor?
Griffin: I think one of the areas that we are entering is the autonomous car. I think that is a phenomenal market. We have a piece today, and our piece will continue to grow as connectivity becomes more and more vital. But I think some of these things that we didn't dream about are going to really come to fruition. We'll play a role. We want a bigger position in those markets and we look forward to the challenge.
Kretzmann: Great. And last question: There are some rumblings about 5G. What does that mean for consumers and when will 5G become something that's applicable to everyday consumers?
Griffin: 5G is absolutely on the horizon. What that's going to do is vastly expand your data pipe, which is going to give you higher speeds and lower latency or refresh time. Applicable for autonomous driving. Important for some of these densified urban environments. We need a high data rate in a small space. 5G is going to be vital for Skyworks. We have the right technology cores. Our teams are working on solutions now. Three to five years it will probably be 20% of our business, if not more.
Kretzmann: And the last question. Looking forward, do you see any particular regions around the world, whether you're talking about domestically here in the U.S., or internationally like Asia, that investors should be watching most closely?
Griffin: We do a phenomenal job and have a phenomenal business in developed markets, and that's important. But if you think about the emerging economies, the smartphone is often the only tool that you have for connectivity. So if you think about the unique value and utility a smartphone brings to some of these emerging countries, it's tremendous. So we think the next two billion subscribers are going to come onboard in emerging markets, adopt this technology, and take it to the next level.
Kretzmann: Awesome. Well, we'll leave it at that. Liam Griffin, thank you so much for taking time to talk with us. We always appreciate it, and we look forward to seeing you next year at CES if not sooner.
Griffin: Sounds good. Thank you, Dave.
Kretzmann: Thank you and Fool on!
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's Board of Directors. LinkedIn is owned by Microsoft. David Kretzmann owns shares of Amazon.com, Facebook, and Skyworks Solutions. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon.com, Apple, Facebook, and Skyworks Solutions. The Motley Fool has the following options: long January 2018 $90 calls on Apple, short January 2018 $95 calls on Apple, and short January 2017 $75 calls on Skyworks Solutions. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.