Stephen Ferranti - David J. Aldrich - Chairman of the Board and Chief Executive Officer Donald W. Palette - Chief Financial Officer, Principal Accounting Officer and Vice President Liam K. Griffin - President.

Richard E. Schafer - Oppenheimer & Co. Inc., Research Division Craig A. Ellis - B. Riley Caris, Research Division Harsh N. Kumar - Stephens Inc., Research Division Anthony J.

Stoss - Craig-Hallum Capital Group LLC, Research Division Vivek Arya - BofA Merrill Lynch, Research Division Siddharth Sinha - Canaccord Genuity, Research Division Alex Gauna - JMP Securities LLC, Research Division N. Quinn Bolton - Needham & Company, LLC, Research Division Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division Edward F.

Snyder - Charter Equity Research Michael A. Burton - Brean Capital LLC, Research Division Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division JoAnne Feeney - ABR Investment Strategy LLC.

Good afternoon, and welcome to Skyworks Solutions Fourth Quarter Fiscal Year 2014 Earnings Call. This call is being recorded. At this time, I will turn the call over to Stephen Ferranti, Senior Director of Investor Relations for Skyworks. Mr. Ferranti, please go ahead..

Thank you, Marla. Good afternoon, everyone, and welcome to Skyworks' Fourth Fiscal Quarter 2014 Conference Call. Joining me today are Dave Aldrich, Don Palette and Liam Griffin. Dave will begin today's call with a business overview followed by Don's financial review and outlook. We'll then open the lines for your questions.

Please note that our comments today will include statements relating to future results that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially and adversely from those projected, as a result of certain risks and uncertainties, included, but not limited to, those noted in our earnings release and those detailed from time-to-time in our SEC filings.

I'd also like to remind everyone that the results and guidance we will discuss today are from a non-GAAP income statement, consistent with the format we've used in the past. Please refer to our press release within the Investor Relations section of our company website for a complete reconciliation to GAAP.

With that, I'll turn over the call to Dave for his comments on the quarter..

multiple diversity receive module wins at a Tier 1 smartphone manufacturer; analog control ICs for GoPro for action video cameras; connectivity module supporting multiple Smartwatch platforms; custom front end solutions for streaming music platforms at Sonos and other leading wireless speaker providers; a suite of devices supporting Netgear's latest X6 Tri-band Gigabit router; dedicated short range communications, vehicle-to-vehicle solutions for GM's platforms; and finally, custom ASICs for Rockwell Collins' avionics platforms.

Okay, for a more detailed outlook and commentary on the quarter, I'll turn it over to Don..

Thanks, Dave. Thanks for joining for us, everyone. Our revenue for the fourth quarter was $718.2 million. That's up 22% sequentially and 51% year-over-year. Gross profit was $329.6 million or 45.9% of revenue, ahead of the midpoint of our guidance range and up 150 basis points from the year-ago period.

Operating expenses were $93.9 million, consisting of R&D expense $58.2 million and SG&A expense of $35.8 million. Operating income was $235.7 million, translating into a 32.8% operating margin for the fourth quarter. Our cash tax rate was 8.4%, and that's ahead of our prior forecast as a result of fiscal year-end tax adjustments.

Net income was $216.1 million or $1.12 of diluted earnings per share, $0.12 ahead of our original guidance. A $0.04 upside to our preannounced Q4 results consisted of a $0.01 from better-than-expected operating results and $0.03 from the more favorable fourth quarter tax rate.

During the quarter, we also generated $201 million in cash flow from operations; invested $83 million in capital expenditures with depreciation of $30 million; exited the fiscal year with $806 million in cash and no debt; and we repurchased 875,000 shares of our common stock.

Moving to our product mix for the fourth quarter of fiscal 2014, power amplifiers represented 36% of revenue, integrated mobile systems was 39% and broad markets was 25%.

We saw a healthy growth across all product categories with the strongest being integrated mobile systems, which as a reminder, includes our integrated systems portfolio as well as mobile analog products like power management, Wi-Fi and GPS.

It's worth noting that our broad markets product lines, which serve the connected home, networking, media, automotive and medical markets, grew at over 30% over the course of fiscal 2014, and that is significantly outpacing the broader semiconductor industry.

For the fiscal year, we produced a total of $773 million in cash flow from operations, with free cash flow of $564 million. That's our second consecutive year with free cash flow yield of nearly 8%. Finally, our return on invested capital was 25% for fiscal 2014. That's over twice our weighted average cost of capital.

During the fourth quarter, we closed the acquisition of Panasonic's Filter Division, paying $148.5 million for a 66% controlling interest with provisions to acquire the remaining 34% roughly 2 years from now. And we've now fully consolidated Panasonic's results in our financial statements.

This venture makes Skyworks the performance leader in TC-SAW, with shipments approaching 100 million units per quarter, broadening our technology portfolio, enriching our systems capabilities and enhancing our financial returns.

Turning to our first quarter 2015 business outlook, we expect revenue to be $770 million, our first quarter over a $3 billion annualized revenue run rate.

We anticipate gross margin of 46.5% for Q1, and expect margins to continue to trend positively over the course of fiscal 2015, as we leverage a higher mix of integrated systems, improve volume utilization and realize the benefits of our joint venture with Panasonic.

As a result, of all these positive factors, we now recommend modeling at 52% drop-through of incremental revenue to the gross profit line for the remainder of fiscal 2015 and beyond. We expect operating expenses to be approximately $94 million, which includes a full quarter of expenses from Panasonic.

Below the line, we anticipate $100,000 in expenses from interest income and other expenses and a cash tax rate around 13.5%. We expect our cash tax rate to remain at these levels for the remainder of our 2015 fiscal year. And as a result, we expect the Q1 EPS of $1.18, using a base of 194 million shares.

As Dave mentioned earlier, we raised our quarterly dividend payment to $0.13 per share. That's an increase of 18% and implies around 1% yield.

Through the combination of our dividend plan and our ongoing share repurchase activity, we've returned roughly $200 million to shareholders over the course of fiscal 2014, representing 35% of our free cash flow.

We continue to view an allocation of roughly 40% of free cash flow as an appropriate balance between internal investment for growth initiatives and shareholder returns. Many of the drivers of a strong 2015 are in place today.

And that gives us a high level of confidence in our growth trajectory over the course of the year, putting us on a clear path towards $5 in annualized EPS. With that, I'll turn the call back over to Dave for his comments on our market trends and growth strategy..

Thank you, Don. Well, by all measures, we delivered a strong fiscal 2014, and that's a testament to the efforts of the entire Skyworks team. We're quite pleased with our financial performance, but I think more importantly, looking ahead, we see our track record of success continuing for the foreseeable future. And our corporate vision is very clear.

We are enabling the global adoption of connectivity in all its forms, and across all applications and end markets. This powerful and secular mega trend is in the early innings, and it's spanning diverse markets like mobile, the connected home, media, computing, security, enterprise and networking across a number of communication protocols.

These include 4G, Wi-Fi, ZigBee, GPS, Bluetooth and others. And as I outlined earlier, we have a threefold strategy in place to capitalize on these positive market trends. Now I'd like to take a moment to delve into each element of our strategy in just a bit more detail. First, harnessing the growth scale of mobile.

Within the mobile device market, the combined impact of band proliferation and the adoption of advanced uplink architectures is causing a rapid shift away from discrete components and towards customized integrated solutions, which sweep in adjacent analog content.

Customers are also increasingly focused on new ways to improve signal quality and download speeds, driving much more complex downlink architectures and creating entirely new growth avenues for us in the receive path.

Now the net result is a rapidly expanding addressable market opportunities for Skyworks, significantly outpacing underlining unit growth with fewer qualified competitors. Second, cultivate the emergent Internet of things opportunity.

We see numerous examples of connectivity expanding into entirely new device categories, including wearable electronics, security, lighting and automation opportunities across the connected home and enterprise. These all provide incremental new growth avenues for Skyworks technology and enhance our diversification.

In fact, market analysts estimate that growth within the Internet of Things market will far exceed that of other connected devices over the next 5 years, some predicting as many as 50 billion connected devices by the year 2020. Third, we're aggressively expanding into new vertical markets.

We're investing heavily to increase our market footprint in traditional analog segments like automotive, like medical and industrial. These are highly attractive markets characterized by longer product life cycles, far fewer competitors and higher margins.

Skyworks participates in these markets by leveraging core analog and mixed signal design capabilities and a broad product catalog. As one example, in the September quarter, AT&T announced that it added more than 0.5 billion connected cars to its network, and predicted that there will be well over 10 million connected cars by the year 2017.

We are winning numerous new content opportunities in the connected automobile today, not only in cellular and local-area connectivity, but also in telematics systems, infotainment, in navigation and climate control, collision avoidance, keyless entry and transponders. And in total, we're addressing well over $20 of content per car.

We see these trends continue -- contributing to above-market growth for us in the foreseeable future. But equally important, we've established a solid track record of converting these strong top line growth trends into superior financial returns.

In closing, we've created a unique business model combining strong consistent top line growth with the financial returns of best-in-class diversified analog company. And as our results show, we're delivering on that vision today. That concludes our prepared remarks. Operator, let's please open the lines for questions..

[Operator Instructions] And our first question will go to line of Rich Schafer with Oppenheimer..

My first question is with front end or with mobile demand up so much of this year, do you guys see any constraints on growth now or as we look into 2015 for Skyworks? And as part of that answer, I'm curious what you're seeing on the pricing front as it relates to tighter supply..

Sure. Well, with respect to our ability to grow and growth constraints, we actually see today an expanding opportunity with our leading customers in smartphones.

We talked a bit about it in the opening remarks, but we see increasing band count, more opportunities to lever our switching, levering now our new filter technologies and just a tremendous demand on the usage of mobile. So that's one side. And then broad markets, as we've outlined, we grew 30% year-over-year.

We have tremendous traction now going in the IoT, early innings there. So we think the combination of our smartphone growth and then emerging markets within IoT and broad market categories will give us a great shot at additional growth into 2015..

Okay.

It doesn't sound like there's any constraints then, you don't see?.

No..

And then my follow-up is just quickly, can you update us on your attach rate with China 4G reference designs? And I don't know if there is any way -- this might be a tough question, but is there any way to quantify sort of your average RF content in some of those local branded China phones?.

Sure. Well, we have fortunately a balanced attack with respect to China. We have great partnerships with the leading global chipset providers. And we also do very well with some of the local brands like MediaTek and Spreadtrum. So we're seeing increasing attach there going from 3 mode to 5 mode phones.

And so what you're seeing is a market that had been leveraged by 2G and low content, maybe $0.50, $0.60, moving to 3G, which is a 2x multiplier for us if not more. And now finally, 4G LTE rolling out and that's been a tremendous catalyst for us.

And not only do we see the band count move up and our traditional amplifier and systems business go up, but we're seeing adjacent content and Wi-Fi power management and GPS, as these phones get richer and richer. So it's really important. And these are early innings for that upgrade cycle.

So that's something we're going to see really play out into '15 and '16 as well..

Next we'll go to the line of Craig Ellis with B. Riley and Company..

Near-term question.

Don, as we look at the guidance for the calendar fourth quarter up 7-ish percent quarter-on-quarter, what are some of the gives and takes as you look at the business across the power amplifier business, the broad market business and the multimode business?.

Okay. Well, thanks this is Dave. Thank you for the question. December is normally a very strong quarter for us, and that's certainly the case this year. We see -- the strength is very broad-based. It's across markets and it's across multiple applications.

We are seeing an uptake of content-rich integrated mobile systems as these architectures get more and more complex. In fact, this was the highest growth segment for us last quarter. And I might add that we're seeing broad market business growth to be healthy in the December quarter and that was 30% up year-over-year last year.

And of course, that's in a market that's up far less than that, perhaps single digits. We also -- I'd like to mention that we have a clearly stated goal to gain content in all flagship models with each successive model generation. And we've been successfully executing with higher and higher dollar content with each success of smartphone application..

And then just a follow-up and it's related to comments in the press release.

In the fourth quarter business highlights, numerous Smartwatch design wins, when would we expect revenues from that category to become material? And when it does, where will we see it? Will it be in the multi-markets group or will it be in another segment?.

Yes, Craig, this is Liam. We are seeing great traction in IoT, it's early innings as we've mentioned before. Some of the design wins we mentioned, for example, the GoPro camera. We have some new applications in automotive and wearable categories like watches.

So a lot of these design wins will be -- some of them we'll be launching in the December quarter, but a lot of these will be 2015 through the year. And we expect to add to that roster, of course..

Next, we'll go to the line of Harsh Kumar with Stephens..

Looking into the March quarter, can you remind us of seasonality? And are you thinking any differently about seasonality, given the strength in the September and December quarter?.

It's a little early to provide specifics on March. Generally, the March quarter is down sequentially for the industry around 10%. We typically outperform, and that's a combination of our diversification efforts, which don't have the same market seasonality. And we are grabbing more analog content than existing mobile platforms.

And share, in fact, is being consolidated across the industry; not only companies consolidating, but we're continuing to see more opportunities to bundle functionality and gain share through, if you will, industry consolidation around system providers, leaders like ourselves. So we expect March to be seasonal, but we also expect [indiscernible]..

As my follow-on, I was hoping you could parcel out the impact of the extra week in terms of revenue in the September quarter?.

I will start with -- as far as the expenses, that's a good place to start. It was roughly around $2.5 million of expenses that we had. As far as revenue, we don't believe that had any material impact on the numbers because the focus is customer requirements and demands.

And knowing ahead of time what that schedule was going to be, we were able to plan accordingly. So we don't believe it had any material impact from the top line, as far as where we ended up for the quarter..

And next we'll go to the line of Anthony Stoss with Craig-Hallum Capital..

Can you -- the $83 million you spent in CapEx this quarter, can you give us a sense of what your plans are for 2015? Are you missing or unable to land any further designs based on a lack of production? And then, lastly, Dave, I'd love to hear your views on your December guide, if you expect China to be up sequentially..

Yes, Tony, there's absolutely no issue as far as our ability to win share and grow based on having the right capacity. The hybrid model serves us quite well.

When you see us spending CapEx and spending at the level is we have pretty good visibility to volume, and it's our goal to try and to keep that internal/external mix in line so that we get the right incremental margin answer. And that's the goal..

Anthony, with respect to the December quarter in China, we have a great deal of experience in China. So we understand how to handicap that market. We're rather conservative in our guidance. We recognize there's historically been some volatility. But we see -- coming off a strong September quarter in China, we do see some growth in December.

But more importantly, we're -- we believe we're at the beginning of a very early cycle of a very long upgrade cycle, multiyear. And as you know, we're highly diversified. We have a great position with the leading indigenous OEMs. We have an equally strong position with domestic brands, worldwide leaders that ship into China.

And of course, if you look at the market leaders, the chipset providers, we have majority share with, really, the 2 or 3 leaders there. So we're well-positioned. We expect December to be up somewhat, and we think we've been very conservative in our guidance..

And next we'll go to Vivek Arya with Bank of America Merrill Lynch..

And I think you guys have done so well for so long that investors always want more, and they want to know what will take Skyworks to the next level.

And specifically, as part of that, what is the company's M&A strategy to diversify the business away from mobile? So Dave, my question really is do you see enough growth within mobile? And then, what is the M&A strategy? Is that even important to think about now? Because you have been talking about it for some time, but we have not seen any follow-through on that.

So just conceptually, how you think about the company and how you take it to the next level from here?.

Okay. Well, that's a lot of question, but thank you. If I look at '15 and beyond, we see a number of positive dynamics. And we're -- we think, we're very uniquely and strongly positioned. First, we're going to continue to see big content gains in mobile and in connectivity, particularly in 4G and 11ac.

We see a smaller number of competitors, as I said earlier, a lot of industry consolidation and huge advantage from -- to local -- from discrete component providers to system providers because we are very broad in analog and RF domain. Our customer see the benefit of that, and we're obviously able to sweep in more and more content.

And all of these factors, we think, play into future growth. And incidentally what we continue to double down in these vertical markets, we're excited by them. We're seeing growth in far and excess of the market, and all that's organic. But from an M&A standpoint, we did just close the Panasonic acquisition. So we have been active.

We've been very selective, however. So we have -- it's part of our capital allocation strategy that Don mentioned. We have a high hurdle rate for M&A. It needs to be accretive to our EPS, our margins and accelerate diversification. So we're very active, but we're going to be very selective and look for the right deal.

In the meantime, we have very strong organic opportunities..

And Vivek, just to put a color on. I mean, we have spent over $700 million over the last 3 or 4 years on multiple acquisitions. So we have been able to pay cash for those. So we have been active in the market..

Got it. And then, as a follow-up, just a little more short-term question. You've had very good control on the spending side. You're also guiding to the 52% fall-through on the gross margin. Just wondering, Don, how we should think about the OpEx trajectory.

And importantly, your OpEx is among the lowest, right, OpEx as a percentage of sales is among the lowest in the industry.

I assume, you are spending where the spending is required, but how should we think about a business model that can sort of support the growth that you're looking forward to in 2015?.

Yes, we've talked to you about improving the margin drop-through, and that's a result of the focus we have and the things you need to do to expand margins, and that's the spending the CapEx and focus on yields and productivity.

And then, what we're also seeing is we're getting this move from our power amplifiers -- standalone power amplifier business, the integrated mobile systems. That's going to continue to expand our margin. And that's a lot of what you can see.

Plus, we've got a nice bump going forward now with the Filter acquisition and not stacking those margins anymore. So all that's going to continue to grow the margin, which is going to help the model. We will continue to grow OpEx and make investments that we believe are going to add value to shareholders. So we just guided to $94 million.

I would say for modeling, you can add a $1.5 million a quarter is probably a good number. Could it go up a little bit here or there or maybe down? Absolutely. That's just a rule of thumb. But we'll continue to make the investments that we think are going to enable us to grow, to outperform the market. So we're very confident we can do that.

And I think we have a track record of doing that, given our expense profile..

And then, we'll go to line of Sid Sinha with Canaccord Genuity..

A quick question on the Android ecosystem. We’re seeing share shifts from the leading Android OEMs towards the Chinese OEMs.

I just want to see, longer-term these share shifts, what kind of implications they have on Skyworks sales into this market?.

Sure. Well, our position in the market really is operating-system agnostic, so to speak. We certainly, we partner with the leaders and we also partner with a broad set of end customers and chipset partners. So our business in China, as Dave outlined, has been strong. We are very well diversified.

We're also seeing, fortunately, a lot of the China brands move into additional emerging markets like India, like Latin America, which creates a second level. So the operating system environment doesn't change that much in terms of what we offer. We are -- with respect to chipsets, we have a strong position with partners like Qualcomm.

We have a very good position with MediaTek. We're excited about their LTE launches. We have position with more of the true local brands in China like Spreadtrum. So I think we're -- we've got our bases covered with respect to that. And we have quite a bit of revenue in the Android ecosystem as well..

Just as a follow-up, a lot of focus on integrated mobile systems and on the SkyOne family. This portfolio has other products, too, like pads, transmit modules, et cetera.

So within the integrated mobile systems portfolio, what would you say is the fastest-growing component of that business? And would it be fair to assume that pads are still the largest piece of that business?.

Well, I mean, by definition, it really is a systems based portfolio. So there are elements of pads. We also have some very, very interesting devices that don't have any amplifiers in terms of transmit chain. We have diversity of receive technology. We have highly advanced Wi-Fi and GPS technology that are often woven together into system solutions.

The pad portfolio is exciting for us. We've done a lot of innovative things. We are now able to leverage our temp comp assets with Panasonic. I think that's not only helping us win new business, but really, as Don outlined, giving us a bit of room in margins as well. So we're excited about that.

And I think you should expect more and more from us when you look at some of these new bands and frequencies that we've been talking about..

And I'd add, we're seeing a very high attach rate in addition to SkyOne and pads, a very high attach rate with our Wi-Fi solutions with our power management and our lighting and display.

So as I mentioned earlier, we've moved the business kind of from a transmit module into transmit filtering, advanced switching, and then capturing more and more of the overall content.

And by virtue of our system sell and the relationships we have with many of our customers, we're able to sell the entire footprint, increasingly selling the entire footprint..

Next, we'll go to the line of Alex Gauna with JMP Securities..

I'm wondering now that the full year is complete, if you can give us an idea of what you're greater-than-10% customer mix looks like.

And as we roll forward here with the strength in China, are some of these Chinese OEMs getting large enough, such that your customer concentration risk is going down? Or do you think rolling forward here, it roughly remains the same?.

Yes, Alex. I'll just give you the -- I mean, we haven't published it yet, but it's -- there were 2. There'll be 2 top-10% customers for '14, and that's Foxconn and Samsung..

And we are -- you're absolutely -- I think the nature of your question is spot on. We are seeing more diversification as these indigenous OEMs within China -- which we're selling to all, virtually all of them.

As they continue to increase their market share, we're seeing more and more customer diversification, and as we continue to sweep in more content, we're seeing more technology and product diversification within those customers..

Okay. And as a follow-on with regard to the product diversification, you mentioned mobile payments. It caught me by surprise there. I'm kind of wondering what you're attachment is to mobile payments.

And then also, you seem incrementally more upbeat on Bluetooth, ZigBee, Internet of Things, while at the same time, your gross margin profile is looking very strong.

Can you help me understand how defensible you see those Internet of Things applications and what those means to your gross margin profile?.

Well, I think mobile -- I'll tag team this with Liam. I think mobile payments was really just for us an example, kind of the ecosystem and following the money and what's driving more of the need for performance and the need for more investment in mobility, both through the Internet of Things, mobile devices as well as the infrastructure.

So it's just another driver behind -- that validates the economics of having high-performance mobile devices..

Sure, exactly. And I think, as we go forward, Alex, you see things like GPS technology becomes part of mobile payments. But the real theme here is just the richness of content and kind of the user-model changing to the point where a smartphone is a must-have device. It represents an enterprise device. It's a device for e-commerce.

It's a device that fuels many of the social media companies with their advertising dollar. So it's our job to make those products better and faster.

And with our OEMs and our relations with chipset providers, we have very good insight into what the next-generation architectures look like, and fortunately, it dovetails quite well with our R&D investments..

Next, we'll go to Quinn Bolton with Needham & Company..

Dave, just wanted to ask, a very strong second half, I think, driven by broad markets increasing content in some of the major smartphone platforms.

But on the smartphone ramp, as you look at customer forecasts, have you seen any indications that might suggest that the smartphone guys are building the inventory here ahead of year end, and that could come back and cause, perhaps, greater-than-normal seasonality in the March quarter? Or do you think that these guys are selling about as -- they're selling them as fast as they can build them?.

Well, that's a great question. Let me answer it from inventory visibility since we ship to virtually everybody, and we look at the sell-in and sell-through of our distribution partners, contract manufacturers and the like. And it's very lean, very lean in the component channel and in the chipset inventory channel.

So there is no -- at that tactical level there is no evidence at all that anything is being built in excess. We also look at the -- and we constantly look at the inputs we're getting from our customers and try to handicap those to be realistic with sell-through from the carrier. We think we've got that right.

And we do -- when I've mentioned earlier that we model, particularly emerging markets, China specifically, conservatively, that's what I mean. We handicap all those inputs. And then we try to come up with kind of a common denominator that make sense to us, given sell-through at the carrier level, and I think we're going to be fine..

Okay. Great. And then just for Don, you raised incremental gross margin to 52%.

Wondering is that really just a fiscal '15 phenomena as you bring in the Panasonic JV and you no longer have to share the margins? Or is 52%, is that a good level to use beyond fiscal '15?.

No, that's -- we're telling you to model that for your foreseeable future. I don't know how many years you're modeling out. But it's absolutely -- part of it's Panasonic, but also this mix shift.

And it’s also, when you look at more and more systems complexity that's being -- the complexity of the phones, our ability to design and win share with the right systems, all that has accretive margins. So that's really what you're seeing in '15 and beyond. So 52% is the number to use in your models, it's not just a 1-year phenomena..

Yes, it's real simple. Less discrete PAs. More integrated mobile within our mobile business and then, more vertical markets and broad markets which have longer product life cycles and consistently higher margins..

Yes..

And next, we'll go to Vijay Rakesh with Sterne Agee..

I had a question. So you're obviously growing 28% year-over-year, good growth.

But as you look at 2015 with a quantum growth with LTE and receive side integration, what's the dollar content opportunity you see on LTE-Advanced versus LTE?.

Sure. Well, we are seeing -- just to kind of backtrack a bit, as I outlined before, 2G to 3G in China could represent $1.50 incremental for us. When you get into 4G, you have opportunities, whether it's 3 mode 5 mode, to go into the $3 to $4 range. And some of the richer global Tier 1s, those numbers are 2xed.

So we see in a high-volume kind of diversified opportunity in China, which we talked about, lot of good opportunities there. We're getting design wins. We're laying it out with our amplifier technologies, our system technology switching, GPS, all of those devices and technologies we mentioned.

But with a larger global Tier 1 we saw -- again, there's a tremendous reach there that we can see. So we see the opportunity to grow share and continue on a growth rate consistent with what we've outlined..

Got it.

And as you look out, where are you adding capacity? And actually the top line is growing so fast, do you still intend to keep capacity flexible there with the foundry?.

Well, part of the reason that we're ramping capacity is based on market demand and our visibility to that demand. Vijay, what we always try to do is we try to balance the hybrid model.

So that when we're adding capacity, again, we're trying to keep that mix between what we outsource and what we manufacture ourselves at the right kind of percentages that gives us the best answer. So that's what you're seeing when we're expanding the capacity..

Next, we'll go to Edward Snyder with Charter Equity Research..

Don, how much revenue is Panasonic in the December guide? Are we talking 10 to 15 or more than that?.

Well, less than that. About $1.5 million..

Okay. Great.

And then, in terms of capacity, how do you feel about your TC-SAW capacity at Panasonic now? How much of the CapEx that you announced would be going into the filter fab versus GaAS? And are you selling the product outside of the company or are you consuming it all internally? And then Dave, is the use of debt off the table for acquisitions or it is something you'd consider?.

I'll start, Ed, with the CapEx question. And while we haven't specifically guided CapEx, again, any CapEx level for 2015 is going to be based on the demand that we see. So we would expect it to probably be at a level similar to '14. And there will be a piece of that, that's tied to CapEx for filter expansion. So it's going to be a part of that.

Very little to date, obviously, we just closed the transaction, but it's going to be a piece of that in Q1 and Q2 of 2015..

Yes. Let me just add to that, to Don's comments. And we see the appetite for our TC technology to be incredible. I mean, we're very pleased with what we've seen so far with this JV. And when we look at designs that will launch this time next year, we fully expect additional TC content and expanding customers..

Liam, is all that appetite inside? Or do you have -- are us selling it on the outside yet and do you plan to?.

Well, for the most part, we're looking at TC as a enabler for some of our system solutions. If opportunities come out, outside of that, that's a potential. But right now we're focused on the higher-end, higher-grade, performance-rich integrated systems..

And just, Ed, as a comment on the revenue. That's why, when you're modeling us going forward, that $1.5 million at that, our contractual requirements are done, and so for the rest of '15, at this point, we are assuming it's all internal. There's no external revenue..

Next, we'll go to Mike Burton with Brean Capital..

First on SkyOne, I was wondering if you could give us some progress on SkyOne.

How many customers like this, where the good competition is? And how big can this integrated approach become as a percent of industry designs or percent of Skyworks revenues? And what kind of impact would that have on Skyworks' growth and operating margin?.

Sure. Well SkyOne, as we exited Q4, we now have 7 platforms in production with SkyOne today. So that number has moved up through the year, and it will continue to grow into 2015. And Mike, as we've talked about in the past, and if you think of SkyOne as a platform approach, it's highly configurable and customizable.

We are seeing an increasing appetite for integrated systems across our customer base. So this type of solution has really worked well.

And again, we think of that flexibility, and our applications and engineering teams work to truly configure a device that works for a specific customer; one-at-a-time has been a real differentiator for us, and we expect it to grow into '15. And back to our last comment, technologies like TC-SAW now will be readily available for us to populate SkyOne.

And I think that, that's been missing link in some cases, and it takes us to the next level of performance. We're excited about that opportunity, which we should see, again, for several years to come..

Okay. And then just on the margins on SkyOne? And then also, you mentioned broad-based strength in both the preliminary September results and now for the December guidance. I believe you generally see an inventory correction at your largest Korean customer.

Can you confirm if both of your 10% customers were up in September, and your outlook for them in December?.

They were both up in September quarter, and we expect an increase in December quarter as well..

Yes, and we've -- as Dave outlined, comments about handicapping the outlook, I mean, that goes for all of our customers. We don't anticipate any impact of inventory connection with any of our lead customers..

Next, we'll go to Steve Smigie with Raymond James..

I was on a couple of calls, so I apologize if I ask something that was asked already. One of the things you mentioned in your press release was, I think, on 802.11ac going to something like 9 streams.

And I was hoping you could lay out for us what that opportunity looks like in terms of dollar content, in the same way that you might say from a 3G phone to 4G, you're doubling dollar content.

How many of the routers you've shipped to so far are sort of older lower stream count? How many are higher? And what's that sort of jump there?.

multiple in/multiple out. So actually you can triple or 6x or 9x the number of streams. So there are devices today that we've noted, design wins that have just launched into production that are now available in some of the retail stores that have Skyworks content that can go to $6 to $8. It's a big part of our story now in Wi-Fi.

These are solid margin, above-corporate-average accretive margin parts. And the 11ac access point market is still in its infancy, so that's an upgrade cycle that will go on for years. We're going to benefit from that..

Perfect. And then, as I look at pricing in the industry, obviously you're talking about much better margins here, and even some of your competitors are looking at much better margins. As I look at pricing, can you talk a little bit about what that might have looked like historically, as you had more intense competition.

Was it -- you'd see 10% annual price declines? And how that looks as we move more to a SkyOne solution, where it seems like that would be more of just a custom win versus any really price competition?.

Yes. I can give you that. Historically, we run usually anywhere from 7% to 8% on an annual basis. And I think -- I'll let Liam talk to the systems. It's certainly going to be below that on the integrated systems piece..

Yes -- no, absolutely. I mean, I think, clearly, moving to these integrated solutions, they are not replaceable and they're not commodities. I mean, they're far from it. And I think customers value not only the device itself, but our ability to architect these solutions, uniquely wrap it up with technical support, just a complete sale and engagement.

And I think we've seen our ASPs benefit from this..

And Steve, to your point, the one thing is that, when you talk about competitors' margins and the increase we just guided to and the increase increment, it just points to a much healthier overall market dynamic that you're seeing..

Next, we'll go to JoAnne Feeney with ABR Investment Strategy..

Just one more follow-up question, really, on that pricing issue. As you go to integrated, you're replacing discrete parts.

Does the combined trade-off leave you with higher content? Or is it more that you may sacrifice a bit of content, but you have a much stronger position because those are harder to replace? How do you see that moving forward as the industry has become more consolidated?.

Well, thank you. The way to think about it is that if you look at the band count, if you look at these complex switching architectures and so on, what we're able to do is we're able to consistently add more content. So our ASP per phone in each successive model over the last few years, and projected in the next few years, is going up.

But we're providing a lot more functionality. So the play for Skyworks is that we see fewer competitors competing for components because our customers aren't sourcing their architectures that way. They're looking for a system.

So we were able to, first, facilitate more bands, more complexity, more switch arms and so on, get more dollar content while providing a great deal more value to the customer. And then, as we're architecting the system in the transmit side, we move to the receive side. We sweep in Wi-Fi.

We sweep in lighting and display, buck-boost type power management devices, and the entire performance of the system becomes highly dependent on Skyworks and the overall system becomes very sticky to the customer..

Great, that's helpful. And then that's leading into the follow-up question. So clearly, winning a lot of analog parts in the smartphone or in wireless equipment.

Can you separate out and describe your strategy and your opportunity right now, your size of opportunity for analog beyond those things connected to mobility, whether it's on the equipment side or on the device side? And what your strategy is going forward to that perhaps diversify in that direction?.

Sure, JoAnne. Yes, I mean, we do have our growing analog portfolio in markets like infrastructure. Okay. So we're seeing a rollout, specifically in China right now, with Huawei and LTE building out the wireless infrastructure ecosystem that's supporting all this data that we been talking about. So that's one market.

We're looking at markets and now have design wins in automotive. We think that's a real attractive market for Skyworks. We have a lot of technology that's applicable and we're starting to win. We have a little bit of business in military and avionics, and so those are markets that we're going to continue to pursue.

And the benefit for us is that core analog technology is scalable. It doesn't require a whole reinventing of the wheel for us to participate, and we're starting to see more and more leverage with what we've already done and what we've learned in our traditional markets and bringing that to the next level of verticals..

Ladies and gentlemen, that does conclude today's question-and-answer session. I'll now turn the call back over to Mr. Aldrich for any closing comments..

Well, thank you very much, everyone, for participating today. And I look forward to seeing you at upcoming conferences..

Ladies and gentlemen, that does conclude today's conference call. We thank you for your participation..