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27 April 2009


Skyworks’ revenue shrinks 18%, but beats guidance

For its fiscal second-quarter 2009, Skyworks Solutions Inc of Woburn, MA, USA, which manufactures linear products, power amplifiers, front-end modules and radio solutions for handset and infrastructure equipment, has reported revenue of $173m. This is down 14% on $201.7m a year ago and 18% on $210.2m last quarter, but up on forecasts of $168m. Samsung, Sony Ericsson and Motorola were all 10% customers, closely followed by LG and Nokia.

To cut operating expenses by more than $25m on an annualized basis, on 22 January Skyworks implemented a restructuring plan that reduced headcount by 4% (about 150 jobs, mainly in the transceiver development group). This leaves about 3150 staff overall (including 1600 in assembly & test in Mexico). In particular, Skyworks reckons that its fab-lite hybrid manufacturing model (mixing in-house capacity with using foundry suppliers) is beginning to exhibit meaningful financial results, maintaining internal utilization and hence non-GAAP gross margin (level with last quarter’s 40%) on a much broader range of revenues, despite the economic downturn.

Net loss was $4.6m, compared with net income of $22m last quarter and $16.7m a year ago. However, excluding one-time charges (e.g. $19.4m for the restructuring), non-GAAP net income was $20m, down from $27.6m last quarter and $25.3m a year ago. During the quarter, Skyworks generated $22m in positive operating cash flow, and the cash balance rose from $250m to $268m.

“Despite the challenging economic backdrop, Skyworks delivered solid financial results in the second fiscal quarter of 2009 driven by our diversification, scale advantages, fab-lite strategy and improved cost structure,” says president & CEO David J. Aldrich. “Offsetting general market weakness, our performance was highlighted by strength in energy management and smart grid technologies [e.g. smart meters], China 3G base-stations, smart phones and push-to-talk applications,” he adds.

Skyworks captured energy management design wins in support of Itron, Sensus, and Landis and Gear. With utilities, businesses and consumers all demanding enhanced billing efficiency, usage monitoring, and power control to prevent costly burnouts and potentially catastrophic blackouts, market research firm Gartner expects more than 150 million smart meter readers to be installed worldwide in the next five years, creating an incremental semiconductor opportunity of about $2bn by 2012. The recent American Recovery and Reinvestment Act has allocated $4bn for advanced metering projects, adds Skyworks.

Skyworks is also continuing to broaden its analog product catalog business, supporting a wider range of applications including medical, avionics, automotive, broadband, industrial applications. “We believe our results demonstrate that Skyworks is gaining share in the broader analog semiconductor market and is creating a highly differentiated business model,” says Aldrich.

Also during the quarter, Skyworks ramped its suite of infrastructure solutions at telecom network provider Huawei and secured design wins with ZTE, both in support of China’s 3G rollout of 3G technologies as well as 4G base-station solutions. Specifically, Skyworks is delivering mixers, amplifiers and receivers, and is moving from $3 of addressable content per local-area network (LAN) card to more than $20 with some of its more highly integrated solutions.

Skyworks says that it is also gaining momentum across several key smart-phone OEMs, particularly as they seek to integrate more bands and modes, as well as WiFi functionality.

In addition, number-one handset supplier Nokia has recently diversified its supply base to base-band chipset makers with which Skyworks is qualified. These include Qualcomm and Broadcom as well as Infineon Technologies (adopted by Nokia for its EDGE platform, which is currently ramping up). Skyworks’ components are probably in less than 10% of Nokia’s phone currently, but this will grow to at least a third in the next couple of years, reckons Aldrich.

“Although we remain cautious on the macro-economy, Skyworks intends to resume top- and bottom-line growth in the current quarter [fiscal third-quarter 2009] through share gains and participation in new markets,” says Donald W. Palette, VP & chief financial officer. The firm expects June-quarter revenue to be up 5% sequentially (to $182m) and gross margins to be 40-40.5%, driving a return to profitability.

Longer term, while Skyworks currently uses 4-inch GaAs wafers in-house and outsources 6-inch epiwafer processing to the foundries Kopin in Taunton, MA, USA and AWSC in Taiwan (10-15% of wafers), the firm’s in-house 6-inch manufacturing line should come on-stream in early 2010, driving further margin improvement, says Aldrich.

See related items:

Skyworks generates $75m in cash flow despite 10% sales drop

Skyworks lowers quarterly revenue guidance from $240m to $210-215m

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