TriQuint Semiconductor's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Feb. 5.14 | About: Qorvo, Inc (QRVO)

TriQuint Semiconductor (TQNT) Q4 2013 Earnings Conference Call February 5, 2014 4:30 PM ET

Executives

Grant Brown - Director, Investor Relations

Ralph Quincy - President and CEO

Steve Buhaly - Chief Financial Officer

Analysts

Edward Snyder - Charter Equity

Blayne Curtis - Barclays Capital

Quinn Bolton - Needham & Company LLC

Steve Smigie - Raymond James

Mike Walkley - Canaccord Genuity

Jason Schmidt - Craig-Hallum

Mike Burton - Brean Capital

Vivek Arya - Bank of America Merrill Lynch

JoAnne Feeney - Longbow Research

David Duley - Steelhead Securities

Bill Dezellem - Tieton Capital Management

Operator

Good afternoon. My name is Dafton and I will be your conference operator today. At this time, I would like to welcome everyone to the TriQuint Semiconductor Fourth Quarter and Year-End Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

I will now hand the call over to our host Mr. Grant Brown. Sir you may begin.

Grant Brown

Thanks, Dafton. Good afternoon and welcome to our fourth quarter and fiscal 2013 conference call. I am Grant Brown, Director of Investor Relations. With me today are Ralph Quincy, our President and Chief Executive Officer and Steve Buhaly, our Chief Financial Officer.

During the call, we will make forward-looking statements about TriQuint’s business and projected financial results. Actual results could differ materially from our projections based on various risk factors including those described in the press release we issued earlier today and our reports on Forms 10-K and 10-Q and other filings with the Securities and Exchange Commission. All financial measures presented in today’s call are on a non-GAAP basis. Non-GAAP financial measures report tax on a cash basis and exclude equity compensation charges, entries associated with acquisitions and other specifically identified non-routine items. These non-GAAP measures are provided to enhance understanding of our core operating performance. A full reconciliation of these non-GAAP measures to our GAAP results is in our press release and in the Investors section of our website.

I will now turn the call over to Ralph to provide an overview of the quarter.

Ralph Quincy

Thanks Grant and welcome everyone. I'm happy to report TriQuint delivered strong Q4 and second half results in 2013. During the year, we saw the benefits of improved product mix and ramping demand with premium LTE products in both the handset and infrastructure market. This is a significant product shift for TriQuint that is contributing to improve profitability.

Additionally, in Q4 responding to changes in industry demand, we reduced our overall gas capacity resulting in lower cost and better alignment to market requirements. By refocusing the company at higher value products, reducing unused capacity and tightly managing our overall spending, we saw significantly improved financial results and a seasonally strong second half of 2013 as compared to the first half.

We expect a similar favorable trend in 2014. In fact excluding Q1, we expect gross margin to average 40% for the last three quarters of 2014. In Q1, we're anticipating lower demand from a large mobile customer. We believe this is a short-term inventory correction independent and unrelated to share gains or losses with discussion. In fact, the underlying trend in the market is quite positive and we expect stronger than seasonal demand for most other major customers in Q1 including Samsung, Huawei and ZTE driven by ramping future demand in the roll out of LTE infrastructure in China. We believe this momentum is sustainable and I'm confident in TriQuint's ability to deliver improved results in 2014 and beyond.

Looking forward gross margin is expected to grow approximately 500 basis points from 2013 levels due to increasing handset filter content, strong base station demand and cost reductions in operations.

On today’s call I will summarize our Q4 and full year 2013 results followed by an overview of our major markets and additional color to 2014. Steve will provide a detailed look at Q4 and specific forward-looking guidance. I will then summarize and open the call for questions.

TriQuint’s revenue for Q4 was $267.7 million and EPS of $0.16 both exceeding the midpoint of our prior guidance. During the quarter total revenue grew 7% sequentially and 15% as compared to Q4 of last year. Gross margin was 37.2% and operating expenses were $71.1 million. For the full year 2013 revenue increased 8% to $892.9 million and gross profit was up 16% and improved product mix primarily for mobile devices.

Over the course of 2013 we launched 190 new products, strengthening our strategic position within the RF industry. Mobile Device revenue for the second half of 2013 was a record $371 million and grew 66% compared to the first half.

As discussed on prior calls we’ve been investing in higher value products including discrete filters primarily BAW and TC-SAW, MNPA and integrated PA duplexer modules. These products are designed to support the growing demand for LTE devices. At the same time we’ve been reducing our revenue from lower margin products including commodity power amplifiers and transmit modules. Sales of our high volume products grew 36% in 2013 due to growing demand for premium filters and high performance broadband amplifiers and a 36% growth rate sales of these products is growing much faster than the overall market and a favorable impact on our product and results.

Offsetting this growth revenue from our lower margin amplifiers and transmit modules declines 25% in 2013, which represents a major product transition for the company that has lifted gross profit much faster than revenue in 2013, a trend that we expect will continue in 2014.

In our other markets, defense revenue was up 50% in 2013 compared to 2012 with a record number of new products released, the defense applications during the year. Lastly excluding non-strategic foundry, infrastructure revenue was up 5% in 2013 with base station revenue up 50% on the strength of the TV LTE build up in China.

On the cost side of the equation we reduced gas capacity in Q4 to better align our factory to market demand. To further optimize our gas footprint, we are transitioning our Texas gas scan line from 4-inch to 6-inch to improve yield, throughput and cost. As a reminder on the Texas line primarily supports product we sell infrastructure in defense market.

We completed our first 6-inch wafers for gas enhanced on this hybrid line in 2013 and we expect 6-inch revenue in this line to begin in Q1 with customer transitions continuing into the 2016 timeframe. As volume migrate from 4-inch to 6-inch for these high-performance products, we expect to see benefit to yield throughput and cost.

For the full year 2013, our gross margin improved 250 basis points, EPS was $0.09, cash flow from operations was $46.7 million and EBITDA was $119.6 million. TriQuint closed the year with no debt and $79 million in cash and investments. Within the mobile devices end market, we continue to see strong demand for our premium filter product both BAW and TC-SAW.

Crowded spectrum combined with worldwide adoption of LTE and carrier aggregation is driving additional band requirement more of the banding filter specifications and WiFi co-existence issues. All these factors reaching more RF content and in the specialized area of premium filters the rate growth is accelerating. We expect the premium filter markets to reach approximately $2 billion in 2016, doubling over last year. In preparation we have invested in filter capacity, doubled our filter R&D team and accelerated the development of filter based products both integrated and discrete.

Our BAW filter were currently being designed in with ramping forecast from multiple customers including Samsung, Huawei, ZTE, LGE, (inaudible) and Sony. Additionally we are seeing good design interaction in Asia for our MMPA family. This traction is with handset customers directly and with chipset partners on reference design platforms.

Switching to our infrastructure and defense markets, combined revenues were up 11% sequentially in Q4. Our asset from non-strategic foundry is essentially behind us, but we’ll remain a drag on year-over-year revenue comparisons, (inaudible) of second half 2014. For reference, revenue from this now discontinued product line was approximately $15.5 million for all of 2013 and is not expected to be material going forward.

But the recent formal launch of TV LTE in China, healthy demand continues for base station and optical products with Chinese carriers estimated to roll out over 400,000 4G base stations by the end of 2014.

TriQuint has strong relationships with equipment suppliers supporting these LTE deployments including Huawei, ZTE, Alcatel-Lucent, Ericsson and others. We are forecasting sustained demand over the next several quarters to support this infrastructure buildup.

Potential revenues grew 15% year-over-year where we benefit from the long standing well funded government program in our ongoing expansion of new products supporting this market. Standout areas of growth within defense include radar and electronic warfare products which experienced year-over-year revenue growth of 19% and 33% respectively.

Looking forward to total company results in 2014, I see continued product mix improvement with solid gross margin gains complemented by tightly managed overall spend. Market trends such smartphone growth, expanding 4G infrastructure, and the dramatic increase in data traffic have aligned customer needs with our high value solutions. As a result, we anticipate significant year-over-year improvement in profitability as favorable same quarter comparisons to each period throughout the year. We are currently forecasting full year revenue growth in the mid single digits with gross profit growing faster due to product mix improvement and cost reductions.

I expect healthy expansion of our high value products somewhat offset by our planned reductions in commodity mobile and non-strategic revenue. Excluding these product transition headwinds, infrastructure and defense market revenue is estimated to be up in the high single digits where mobile revenue is expected to grow approximately 20% including significant growth in discrete filters. For example, revenue from discrete filters is currently forecasted to exceed $200 million in 2014.

Overall, I expect approximately 500 basis points of gross margin improvement on top of the 250 point improvement we saw in 2013. We're currently targeting earnings to increase five to six times compared to our 2013 results on improved product mix and focused cost reductions. Steve will now provide a detailed financial review of the quarter and outline our guidance for the fourth quarter.

Steve Buhaly

Thank you, Ralph. For the fourth quarter of 2013, we generated revenue of $267.7 million. Revenue increased 7% sequentially, led by a strong rebound in network infrastructure and 15% over the fourth quarter of 2012, driven by 26% growth in mobile devices.

Revenue for 2013 was $892.9 million, up 8% from 2012, driven by increases in mobile devices and defense revenue. Our fourth quarter revenue split to end markets was mobile devices 71%, network infrastructure 18%, and defense and aerospace 11%. Please refer to the supplemental data posted on the investors section of our website for a more detailed breakdown of our revenue by end market.

Revenue from Foxconn Technology Group comprised 44% of our total revenue during the fourth quarter and 33% of total revenue for 2013. Foxconn was the only customer with revenues above 10% for the fourth quarter and fiscal year. High volume electronics companies may use multiple subcontractors to build their products, and the mix of firms may vary over time.

Our book-to-bill ratio for the fourth quarter was 0.71. Gross margin for the fourth quarter of 2013 was 37.2%, up 550 basis points than the fourth quarter of 2012. Higher revenue, cost control and improved mix, all contributed.

For the full year, gross margin ended at 33.2%, up from the prior year’s 30.7%. Operating expenses were $71.1 million for the fourth quarter of 2013 and $277.3 million for the full year of 2013. Operating expenses increased $2.5 million sequentially due primarily to growth in engineering expenses.

Net income for the fourth quarter was $26.4 million or $0.16 per diluted share, exceeding our guidance and reflecting strong revenue results. For the full year, net income was $14.5 million or $0.09 per diluted share.

Total cash and investments increased $52.1 million to $79.0 million during the fourth quarter. Cash flow from operations was partially offset by capital expenditures of $9.0 million. Inventory turns for the quarter were up sequentially to 4.2. And days sales outstanding and accounts receivable were 60.2 days due to timing of year-end payments.

During the fourth quarter, the company booked the non-recurring $27.1 million charge, primarily for actions taken to reduce gas capacity and costs. The charge is excluded from our non-GAAP numbers and consisted of about $3.9 million of cash and $23.2 million for asset impairment.

Our Board of Directors has increased our authorization to repurchase stock from the existing balance of $24 million to $75 million. These open market purchases will be made from time-to-time as the company sees fit and there is no commitment to purchase any amount.

Now moving to our outlook, we believe first quarter 2014 revenue will be between $170 and $180 million due to seasonality and a large customers’ inventory correction in the mobile devices market.

Gross margin is expected to be 28% to 30% due to lower revenue and utilization. Operating expenses are expected to decline to $68 million to $70 million. First quarter 2014 net loss per share is expected to be between $0.11 and $0.13. As of today, we are 94% booked, the mid-point of our revenue guidance. Cash is expected to grow about $70 million to about $150 million excluding any share repurchases.

Looking at 2014 as a whole, we expect revenue growth in the mid single-digits as strong growth in premium filters is partially offset by significant reductions in lower margin amplifiers and non-strategic foundry revenue.

Revenue seasonality should be roughly similar to 2013 with about 40% of revenue coming in the first half of the year. Gross margin is expected to grow about 500 basis points from 2013 levels due to these product mix changes and cost reductions in operations.

Operating expenses are expected to decline modestly from 2013. Capital expense maybe in the range of $70 million, down from $87 million in 2013 and well below depreciation expense.

The cash tax rate for 2014 is currently expected to be under $1 million per quarter. We currently believe earnings per share will meet or beat the current analyst consensus of $0.49.

TriQuint will be at the Mobile World Congress in Barcelona the week at February 24. We look forward to meeting many of you there. In addition, I will be presenting at the Raymond James conference on March 4th, in Orlando and at the Morgan Stanley conference in San Francisco, the following day March 5th. Lastly Grant Brown will be attending the Northland’s Capital Markets Technology conference on March 12, in New York. Finally our Q1, 2014 earnings conference call is scheduled for April 23, 2014.

I’ll now turn to Ralph for closing comments prior to welcoming your questions.

Ralph Quincy

Thank you, Steve. Our mobile customers continue to value highly efficient broadband power amplifiers, whether they take the form of MMPAs or integrated PA duplexers. The success of broadband amplifiers which replaced multiple discrete power amplifiers combined with the growth of SOI switches has contributed to gas capacity concerns and PA capability represents a long term and profitable growth opportunity.

It is important to separate the value TriQuint brings to customers with its power amplifier products from utilization concerns in our gas factories. Although power amplifiers face more competitive pressure in our premium filter products, it remains a core area of strength to TriQuint.

Our ability to design and integrate world-class power amplifiers with SAW, TC-SAW and BAW filters sets us apart from much of our competition. It is clear to me that our industry will continue down a path of dense RF integration, the size and performance. While some customers already embrace highly integrated solution, much of the market, including most of China is still in the early stages of transition from discrete to more integrated solutions.

Our strategies to use our strength in premium discrete filters and broadband MMPAs to leverage future integrated opportunities. Recognizing we had excess gas capacity, we have already taken steps to reduce our cost structure and plan on taking further actions to enhance profit, while maintaining our ability to design world class gas power amplifiers. With these actions, excluding Q1, we expect gross margins to average 40% in 2014. Lastly, we are forecasting full year earnings to be five to six times greater than our results in 2013 and we believe further progress is achievable in 2015.

The underlying trends in the RF industry give me a high level of confidence in our strategic positioning. Within mobile devices we are well positioned to capitalize on the move towards LTE with our premium filters and high efficiency broadband power amplifier.

In the infrastructure and defense markets our focus on increased levels of integration has proven successful as we collect incremental margin dollars from high value products based on best-in-class technologies across the entire frequency spectrum.

TriQuint is a leader in a world that has growing demand for wireless devices. We remain committed to innovation, speed and providing customers with next generation RF solutions. TriQuint expects to leverage our efforts for improved financial results in 2014 and beyond.

Dustin, we’d now like to open the call to questions.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes from the line of Edward Snyder.

Edward Snyder - Charter Equity

Well, sorry guys. Thanks for the questions, [several to go]. Ralph you projected discrete filters of $200 million in 2014. What do you expect filters all in would be? And are you talking basically about BAW and TC-SAW for 2014?

Ralph Quincy

So, I'm talking about all filters for 2014. The number I quoted was just discrete filter. When you say all in, are you saying included the filters associated with the integrated devices?

Edward Snyder - Charter Equity

Yes.

Ralph Quincy

Yeah. So…

Edward Snyder - Charter Equity

TriQuint's contribution to the filter world.

Ralph Quincy

Yeah. So, it’s a tough number to comment on, because as you know, we've got the arbitrary signed value to the filter portion of those integrated devices. What I would say that it's a very large number and in the same range as the discrete filters and so, the total revenue.

Edward Snyder - Charter Equity

Total revenues, so something on the order of $400 million to $600 million wouldn’t be unreasonable?

Ralph Quincy

Yeah. I think you're in the ballpark there of probably in the $400 million range.

Edward Snyder - Charter Equity

Okay. And then what was utilization in Texas with the Infrastructure & Defense line before you moved to 6-inch?

Ralph Quincy

Well in total, our utilization in filters particularly SAW, pretty high. In BAW, we're comfortable and of course utilization in gas technologies is lower now. We're still working through capacity and demand. So, we're really not going to quote utilization numbers going forward. But it is low and we'll continue to work on optimizing it.

Edward Snyder - Charter Equity

But the 6-inch was for gas not for filters, right?

Ralph Quincy

So, the 6-inch factory conversion in Texas or the 6-inch….

Edward Snyder - Charter Equity

In Texas.

Ralph Quincy

Yeah, the 6-inch conversion in Texas, the utilization there again that factory is quite profitable at its utilization levels. In utilization levels we’re comfortable with those utilization levels as well.

Steve Buhaly

And Ed, the conversions are really for capacity for networks and defense. It’s for efficiency, cost reduction, better quality all of the good attributes for more moderate side of equipment. And we are able to repurpose a bit of the equipment we had in our more recent Texas Instruments line to help the line of producers for networks and defense modernize if you will.

Edward Snyder - Charter Equity

Okay. But clearly it’s gas, right?

Steve Buhaly

It’s gas.

Edward Snyder - Charter Equity

Okay. And then along the filter question I had earlier about total sale for TriQuint and you said about $400 million, how much of that -- it sounds like at least half of that is involved with your integrated devices. Is it fair to say that if you didn’t have a gas fab that you would miss some or all of that revenue?

Ralph Quincy

I think it’s a fair statement to say that our gas capability and particularly our PA amplifier capability is critical to our integrated solutions and our ability to grow that part of the business. Furthermore, I think right now we’re selling a lot of discrete filters and we plan on selling a lot of discrete filters. I view that as the building blocks for future integration.

Edward Snyder - Charter Equity

Okay, good. And that leads to my next question. Several of your competitors, Skyworks and RF Micro particularly look like they’re developing or are developing more integrated or sophisticated transmit modules. Not as ambitious or complex as RF360, but something actually has the chance of working of both technically and then in the business model in terms of customers buying it. Those modules include power amplifiers, filters and switches and kind of hard in bands, TriQuint seems to be relatively uniquely positioned for that at least in that you [brought] all the filters where they’re still going outside for that. Are you developing something or is that something in the plan of record for the next two years, the next year not on the horizon at all, where are you with that?

Ralph Quincy

Well, we absolutely believe in integration for this market. And we have sold as you know, Ed highly integrated devices for some time and we believe that that’s where the market is going. The big part of our growth opportunity in the immediate future is in China and a large portion of that is built on discrete filters.

China has not yet come to even the MMPA generation, more or less the more integrated products beyond that. I think we’ll do well in China in MMPAs. And building those capabilities, we absolutely have a road map for integration down the line.

Edward Snyder - Charter Equity

Okay. And final question, you mentioned -- when you are talking about less of an action on low margin amplifiers, are you talking through [GTX] modules, 3G bands, MMPAs, what’s in your mind a lower margin amplifier?

Ralph Quincy

Primarily 2G and 3G discrete amplifiers in transmit modules.

Edward Snyder - Charter Equity

Okay. So the plan that I will set I guess (inaudible) you are still obviously are focusing on MMPAs, PADs that sort of thing?

Ralph Quincy

That’s correct.

Edward Snyder - Charter Equity

Very good, thanks Ralph.

Ralph Quincy

Thanks Ed.

Operator

Our next question comes from the line of Blayne Curtis.

Blayne Curtis - Barclays Capital

Hey, good afternoon, guys. Steve I was wondering if you could walk me through the mechanics for the gross margin, you talked about 40% really well below that in March. How much is that just trade utilization versus are you changing any of the capacity that you have as far as running it off. Just any color on the mechanics as to how you get to the 40% for the year?

Steve Buhaly

Yeah, so it’s 40% for the year excluding Q1, just to be clear. And so it’s Q2 through Q4, Q2 probably a little bit below, Q3 probably be our best margin period as is typically the case. The margin improvement is coming from obviously a significant swinging product mix away from the somewhat commodity like PAs being replaced by filters, a bit of revenue growth on top of that and some cost reduction.

You might recall that we talked -- maybe you’ve been never to the competitors’ conference. But we mentioned that we had reduced cost in the fourth quarter primarily in our Oregon operations to think about $20 million of cost out, aiding that is depreciation, the remainder mostly cash costs and that's a little bit over 2% improvement in gross margin right there.

Blayne Curtis - Barclays Capital

Okay. And maybe some high level on your guidance, you mentioned obviously the inventory issue with the customer. When you look at the non-mobile segments, are those also down in March or is it really primarily mobile and that one customer?

Ralph Quincy

It’s almost entirely mobile and almost entirely that a large customer within mobile.

Steve Buhaly

Yeah. And I can add a little color on that, Blayne. Most of our mobile customers build on the strength of filters ramps are going to be flat in Q1, base station we think will be up some, at least looking our current forecast, transport multi-market flattish and defense will be seasonally down, typically seasonally down.

Ralph Quincy

And I just have one more comment. At least from today’s standpoint we see an opportunity for some sequential growth of Samsung and between that growth in the lower point of revenue number, we have a good opportunity, pick up a second 10% customer in Q1.

Blayne Curtis - Barclays Capital

Okay. And then maybe another question for you Steve, just on OpEx you said down, obviously you’re bringing the March level down, but if you -- it seems like you have to have the full year down, you have to bring it down some more just any sort of magnitude of how much you are talking about for the full year OpEx?

Ralph Quincy

No, it’s still under review. So I am not going to guide a specific number, but I do expect it to be down. And I think I will leave it at that but we should see a decline again sequentially from Q1 to Q2 in operating expenses.

Blayne Curtis - Barclays Capital

And then just with if you look at you have talked about growing the full year 60-40 mix you said similar seasonality I guess you didn’t see much growth in June, but given the very low level you are seeing in March that that kind of math would imply that June actually grows. Am I kind of doing that right?

Ralph Quincy

You are on the right track.

Blayne Curtis - Barclays Capital

Okay, thanks guys.

Ralph Quincy

You bet.

Operator

Our next question comes from the line of Quinn Bolton.

Quinn Bolton - Needham & Company LLC

Hi guys. Congratulations on the December numbers. I guess either for Ralph or Steve, on the capacity reduction in the organ fab can you give us some new run rate as to what your capacity is and where it can be thinking about you guys getting good margins? I know you are focused on lot on a premium filters but obviously you have kind of fair amount gas going through your integrated modules and so. Is there some revenue level we should be thinking about where you are getting pretty good utilization of that fab now that you have reduced capacity and will be thrown out pretty good margins?

Ralph Quincy

From a total revenue standpoint the math is we had a change due to mix right, we will use in more of the BAW filters less of the PAs in that mix. And so it’s not as relevant as a computation as it was before. But we are comfortable we would be able to address the revenue expectations for this year without any capacity related CapEx except in our TC SAW line. And on the other side as we’ve talked about in TriQuint's broker year conference. Thank you. We've taken at about $20 million in cost related to excess gas capacity. And we'll see all of that in 2014.

Quinn Bolton - Needham & Company LLC

And just looking at the March quarter on those that $20 million of cost saves, do you get all of that in the March quarter or is it more sort of you get full effect by June and only a partial effect in the March quarter?

Ralph Quincy

We've got the depreciation benefit in the fourth quarter. And we'll get both the depreciation and the cash benefit in the first quarter and going forward from there.

Quinn Bolton - Needham & Company LLC

Okay, great. And then just following up on Ed’s question about the premium filters or the total filter business, it's roughly $400 million in 2014. Can you give us some split, it sounded like a lot of what that's going to be either bar or TC SAW. But is standard SAW a significant portion of that mix, I imagined that SAW is probably a little bit lower margin than TC SAW and BAWs. So just trying to get a sense of what percent of your filter business is sort of lower end in SAW filters?

Steve Buhaly

Primarily BAW, some TC SAW and growing and it’s a new technology that we think has good future value, very little standard SAW. We may incorporate some standard SAW into integrated modules where it makes sense. And then just a cavity around the $400 million, it's a manufacturing numbers so I wouldn't take that to the bank. The $200 million in discrete filters is a solid number. There is a pad revenue on what of that is filter, you put a pretty wide range on that. $400 is an okay number to use, but again just understand the manufacturing number.

Quinn Bolton - Needham & Company LLC

But it sounds like it's mostly the premium filters. And so we should not necessarily think there is a lot of mix within the filter business from say start up to BAW, it sounds like it's already mostly TC SAW and BAW filters.

Steve Buhaly

Yeah. It’s mostly BAW right now. We’ll see TC-SAW grow.

Quinn Bolton - Needham & Company LLC

Great. Okay, thank you.

Operator

Our next question comes from the line of Steve Smigie.

Steve Smigie - Raymond James

Great. Thanks a lot. Sorry if I missed this, but something if you can talk a little bit on the sequential guidance, how much of the guide down sequentially is just seasonality in the customer versus the inventory amount that you mentioned into a question?

Ralph Quincy

Tough question to answer because seasonality is usually an inventory adjustment after the selling season, that’s typical for our industry. So I love those two together. I can say the large majority if not close to all of the seasonality is associated with the large customer that’s making inventory adjustments.

Steve Smigie - Raymond James

Okay. And then can you give me some sense of what the power amplifier mix will look like this year versus last year in terms of the mix that’s the low end stuff?

Ralph Quincy

If I understand your question correctly, qualitatively we’re going to see an increased mix in discrete filters for 2014 as compared to 2013. We saw the same trend 2012 to 2013 and it’s largely due to LTE is now rolling out and handsets are being designed and sold that need these premium filters to operate in 4G networks.

So just in comparison that’s the fastest growing part of our business, everything else will be a smaller percentage. We also believe MMPAs are growing quite rapidly in our mobile business year-over-year, again same trend as last year. And we believe that where we’re going to see the most success or a lot of our success in both the discrete filters and MMPAs is in the China market, because we just see a lot more customers now and chance for us to broaden our customer penetration, adding designing LTE phones. And we have got some of the best products for those solutions.

Steve Smigie - Raymond James

Okay. And then just in terms of getting some more color on your confidence about your growth throughout the year. For the filter numbers that you are talking about is that assuming any share gain within the bond market?

Ralph Quincy

Well, that’s a tough call, because it’s a fast growing market. Those of us who are flying on the (inaudible) end of it really are not fighting over 2% share gains or losses. We are trying to get as much of the growth as possible. So really look more at the growth market and capture as much as we can and trying to track the actual share of fast changing market. The good news is it’s all up.

Steve Buhaly

And I think one of the hot spots, really a new market is a band 41, and WiFi coexists in China. We are getting the lots of the demand and the design opportunities and their conversations with some customers Chinese customers primarily we had a big relationship with before. So it’s -- I didn’t measure the size of that market, it’s just developing now, it’s hard to say, but it is clearly a great growth opportunity.

Steve Smigie - Raymond James

Okay. And in terms of the variance of what might happened over the course of 2014, I would assume at this point pretty much, what wins you already have on the major platforms and then the variation might be just the mount of those platforms sold or is there some other something that could happen within the mix that it might change what (inaudible) through your expectations?

Ralph Quincy

By and large, I think you are correct or several major platforms we have a fairly good idea on our positioning for 2014. There are still platforms that have open opportunities that we’re working in the design pipeline. But by and large we have pretty good visibility as far as where we lead will finish from a design win perspective. And you are right; the variables now are in timing for program launches, which can always change and then just end unit demand from consumers whether a particular platform is successful or not.

Steve Smigie - Raymond James

And you also expressed a little bit of optimism about 2015 and spoke, there you guys are presumably working on platforms at this point, I mean hard in like 2014, but you really got some sense of what technology is being demanded on platforms for next year, is that right?

Ralph Quincy

Yeah. Certainly in mobile, I think you are referencing mobile, certainly we try to look out ahead and get ahead of new platforms and we start working on them early. But also we have got quite of drag on comparisons year-over-year because of non-strategic foundry and then other low margin products shifting out of our revenue stream. We are getting more of that behind us in 2014, which gives me reason to believe that we can see solid growth in 2015.

Steve Smigie - Raymond James

Okay. Thank you.

Operator

Our next question comes from the line of Mike Walkley.

Mike Walkley - Canaccord Genuity

Hey thanks. Just on your product mix in 2014, you’ve talked about the mix of premium versus lower margin, and then when you can gives us kind of the mix, it was in 2013 just so we can better understand the product transition how to model for 2014?

Ralph Quincy

Yeah. In 2013 discrete filters as a percentage of our mobile business, just our mobile business was in the range of 16%, right? And it’s going to go up, it’s going to double.

Mike Walkley - Canaccord Genuity

Okay, great. Thank you. And then Steve, you mentioned that you might have a one 10% -- new 10% customer in 2014 given some of those customers you call out in the call, do you think for full year 2014 that any of these might turn into a 10% customer?

Steve Buhaly

Well that’s a good question. Q1, we are definitely in the game; Q2, but as we get into the back half, it’s going to depend on how significant both the revenue ramp with the customer and the overall company is. So I am going to hold back from speculating. That’s a pretty dynamic item. But we are in the game. We have a healthy book of business and set of opportunities with sense on who would be that potential second top 10 player.

Ralph Quincy

I agree.

Mike Walkley - Canaccord Genuity

Okay, great. And do you think in general just on your major customers, do you think you are -- I know you are going through a production transition, do you think your revenue or your dollar with all your customers grows on a year-over-year basis on the handset side?

Ralph Quincy

I think for our major customers we are seeing growth pretty much across the board. I would direct you largely to China where we just didn’t have a lot of penetration since we backed away from the 2G, 3G waiting for LTE to come. So, I would really look to China and MMPAs and premium filters being the drivers in 2014 with growth in mobile.

Mike Walkley - Canaccord Genuity

Okay, great. Thanks for taking my questions. And I look forward to seeing you at Mobile World Congress.

Ralph Quincy

Great.

Operator

Our next question comes from line of Jason Schmidt.

Jason Schmidt - Craig-Hallum

Hey guys, thanks for taking my questions. Steve, I wonder if you could disclose how much of your current revenue is coming from China.

Steve Buhaly

That’s always a tough question because we sell to the worldwide customers and really got a good visibility to where that product goes. But let me do a little quick checking here. I would say, if I just aggregate Huawei, ZTE and Avnet Asia on in the low double digit say between 10% and 15% and there is plenty of other smaller customers that probably add to that, but I don't have the number handy off hand.

Jason Schmidt - Craig-Hallum

Okay, that helps. And then Ralph, I don't know if you'll be able to answer this based on your previous comments, but what would you estimate your current share as in the premium filter market?

Ralph Quincy

Like I said, we've thrown out numbers in the past that we're -- minority share positions whether it's 20% or 30%. It's just a hard number for us to calculate and it's a fast growing market. And to be quite honest, it's not a zero some grab share market for us, it's a market where if we can get out the products, we can get more revenue. So, we're more focused on just getting more products out.

Jason Schmidt - Craig-Hallum

And how would you describe the pricing environment in that market?

Ralph Quincy

I think our market is competitive across the range of products. We have fewer competitors in the premium filter market and so that tends to work in our favor, but it's still a competitive market.

Jason Schmidt - Craig-Hallum

Alright. Thanks guys.

Operator

Our next question comes from the line of Mike Burton.

Mike Burton - Brean Capital

Hey, thanks guys. I want to follow up on that competition question; we've seen now both (inaudible) talking about using BAW and their products this year. Do you believe that they can do that presumably with the Japanese supplier without (inaudible) IP? and do you suspect that most of that competition will occur in some of the easier bands such as like band 2 versus the WiFi coexist or is it going to be really across the spectrum? Thanks.

Ralph Quincy

Yeah. I have no comment on the IP question because I have not seen the specific examples that might raise that question, so I’ll hold comment until I see something in that regard. I do think that commodity SAW products are more available than some of the premium products. I think it’s a fairly tight group of manufacturers to BAW and TC-SAW. But I agree with you that the commodity SAW products are much more available.

Mike Burton - Brean Capital

Okay. And then, but we haven’t seen any BAW filters coming from the Japanese yet to your knowledge, you haven’t seen in the market?

Ralph Quincy

No, there are some suppliers as one supplier that has a BAW product. Typically the premium suppliers have been TriQuint and Avago.

Mike Burton - Brean Capital

Okay. And then Ralph, we spoke at the Analyst Day that getting a better understanding on the operating margins between the segments, because there is a sense that networks and defense have much higher gross and operating margin profile. If we can get a segmental margin number, can we get a sense of how the OpEx breaks down, is it similar to that 70-30 or 60-40 kind of breakdown or is it the more of a 50-50?

Ralph Quincy

Yeah. It’s hard to answer because as you alluded to, we don’t manage the business that way, right? I think we manage the business as one segment and we move R&D around a fairly sizeable chunk of R&D is just allocated with the centralized resource and it’s just allocated. So I just don’t want to go out and give you bad numbers as far as how much is being allocated toward this particular project for market segment versus that.

Mike Burton - Brean Capital

Okay. And then lastly, you have a pretty upbeat view on the opportunity for you guys in China. I am just wondering, is that primarily with QRD or are you signaling here that there is a growing relationship with Media Tech? Thanks.

Ralph Quincy

Yeah, great question. In fact we are seeing really good position on multiple chipset partners for some of our premium filter products. In fact for our WiFi coexist filter six out of the six reference design partners that we work with have qualified and placed our products on their reference design. So, I feel pretty good about filter coverage particularly in China and some of our key BAW products.

Mike Burton - Brean Capital

Okay, thanks again guys. See you in Barcelona.

Ralph Quincy

Yeah, see you then.

Operator

Our next question comes from the line of Vivek Arya.

Vivek Arya - Bank of America Merrill Lynch

Thanks for taking my question. So I just wanted to understand the full year revenue growth trends. I think last year your mobile sales grew about 10% and for this year you are guiding, I believe the overall business to a mid single digit growth, both those numbers are below the long term, the 10% to 15% growth that you have stated for the industry. So I am just curious Ralph, how much of your 2014 guidance is sort of reflecting some slowdowns at your high end customers; how much if it is just overall industry slowdowns the pricing concerns or is it that just your mid mix single digit growth guidance is perhaps conservative?

Ralph Quincy

Yeah, I would answer none of the above. The real story for us is a product mix shift. We have high value products that include MMPAs and premium filters that are growing much faster than published market growth rates. And then we have low margin products and non-strategic foundry which we discontinued which we’re trying to ramp down. And so the overall company growth rate is really a reflection of those two forces added together.

If you strip out the products, the 2G and 3G transmit module power amplifiers and strip out the comparison for non-strategic foundry, I think our mobile device business is growing at least 20% and our networks defense revenues combined are probably growing in the high single-digits, which I think both are at or above market growth rate.

Vivek Arya - Bank of America Merrill Lynch

Got it, I understand. Then second thing, I believe you mentioned some excess inventory and when I look at your Q1 guidance that was about $50 million below consensus expectations; is that the extend of excess inventory and do you think that is specific to TriQuint or is that across all the audit products your customer buys or across the supply chain, I’m just trying to understand, why there is such a large difference because of just an inventory adjustment?

Ralph Quincy

Yeah. So when we talk about that, we are talking about lower demand on TriQuint, because our customer is making inventory adjustment. We believe that those have been fairly publicized and communicated. And we think that we are in the same situation as many suppliers in this marketplace.

Vivek Arya - Bank of America Merrill Lynch

Got it. And just one last question, Ralph. When you look at the pricing environment, I understand it’s not uniform across all the products you said, but RFMD had a very impressive call recently and they mentioned a lot of design wins, Skyworks has also mentioned taking share and Avago has always been very positive about the market. I am just curious when does the competition between four very strong and credible suppliers get to a point where there does start to be real price competition or do you think for the next year just sort of in this phase that there is the sizing tide of RF content growth that all of you can benefit? Because I think that’s the question that investors are trying to understand. But how long can an industry survive it for very credible suppliers?

Ralph Quincy

Yeah. Hard for me to speculate over the long range, because this industry really changes dramatically; in the short-term though, each of us have a different focus and a different set of key products and we are really focused on premium filters, integrated devices and we think that’s going to be a big lift for us. We do crossover and compete on MMPAs, but the market is largely discrete amplifiers still. And so the MMPA opportunity is a fairly good growth opportunity for everyone involved at least at this point.

Steve Buhaly

And I think what you are seeing out there is, there are a few areas of overlap across the board such as some of the WiFi power amps and the commodity PAs for 2G and 3G and those are indeed facing a meaningful price erosion. But for in our case where we have a strong position in premium filters, it remains a very healthy business and competition does not consist of four, five, six players, it consist of a couple of significant players and the same might be said at maybe antenna tuning or some other areas where some of our friends in the business operate.

Vivek Arya - Bank of America Merrill Lynch

Okay thanks. And just the last clarification, Steve you might have answered before, but do you mentioned that your growth expectations at your largest customer, are they mostly unit growth or do you think there is content growth also? Thank you.

Steve Buhaly

We haven’t made any comments about it, any specifics or information in that regard.

Vivek Arya - Bank of America Merrill Lynch

Okay. Thank you.

Operator

Our next comes from the line of JoAnne Feeney.

JoAnne Feeney - Longbow Research

Yeah, thanks guys. A follow-up on the last question actually not specific to anyone customer, but generally speaking, where do you think the growth in mobile is going to come from this year? How much of that is unit driven versus dollar content driven? It sounds like you have pretty good visibility to the programs in the [chip one] sockets. So perhaps you can give us a general description of the balance of those two forces for your growth?

Ralph Quincy

Yeah. I don't want to give a rundown on specific customers, but I would direct the analyst entity to the opportunities in China particularly for discrete filters and MMPAs. Now that LTE, TD-LTE has finally arrived and growing out, we think that's just a huge opportunity at all peers in the market, not just at the high end, but at all peers in the market for some of our products for example our WiFi coexist filter.

So, I would direct analysts there. And then also in China the market is still fairly much in the discrete PA [camp]. And I believe over the course of 2014 and 2015 they’ll be making the transition to MMPAs. And again, I think we are uniquely positioned well for those chipset suppliers in Asia including Media Tek and RF Filters and most specifically with internal supply chipset, supply like high silicon for some of our MMPA product. And so, we will look at China to be a great opportunity for us in 2014.

Steve Buhaly

And JoAnne, I'd just reiterate. Ralph said earlier in the call that in 2013 discrete filters, mostly BAW were about 16% of the mobile devices revenue in that year and we think they are going to at least double. So, you’re going to do the math, you're going to add another $100 million or so of discrete filters. And that's all 4G and a lot of it is in China, but that's all 4G devices coming out with a requirement for a coexist filter or our Band 41 or Band 7 or Band 25 filter content. And so that’s probably the biggest single driver we have going forward.

JoAnne Feeney - Longbow Research

It sounds like you’re getting these filters into more, will be coming out as mid range or lower-end phones. Do you anticipate that a year from now or in next year or this year’s fourth quarter that your customer base will be diversified than it is in this past quarter?

Ralph Quincy

Yes, I do believe. That’s true, JoAnne. And I would say that you’re correct, we’re getting products into more tiers of smartphones.

JoAnne Feeney - Longbow Research

Okay. That’s really helpful. And then on the network side, the talk about China Mobile building out 500,000 LTE base stations, can you remind us of what your dollar content opportunity might look like in those LTE base stations?

Ralph Quincy

I don’t want to give too many specifics, but it’s north of $100 per base station in some platforms. And in other platforms it’s probably in the $50 to $60 per platform.

JoAnne Feeney - Longbow Research

Okay. That’s helpful. Thank you.

Operator

Our next question comes from the line of David Duley.

David Duley - Steelhead Securities

Yeah. Thanks for taking my question. I am a little just curious about you’re talking about these lower-end power amplifiers and transmit modules that you tend to ramp down. How bigger pool of revenue is that at this point and which bucket would I find that in your supplemental data breakout level of your revenue for the quarter?

Ralph Quincy

Tough to breakout, certainly you would find it in anything that’s not -- it’s in the 3G, 4G part of mobile. It’s all there, but it’s spread out. So, let me just reiterate where the value products are, right, value products that we’re building on our discrete filters, MMPAs and PA duplexer. And so, everything else is in that category where overtime we think it’s just more competitive.

David Duley - Steelhead Securities

And how bigger pool of revenue is that?

Ralph Quincy

We really haven’t said that, but it’s sizable. It’s not triple digits, but it’s a sizable number.

David Duley - Steelhead Securities

Okay. And how much -- what will your total capacity look like after you are done adjustments? Could you give us a dollar capacity maybe between BAW and gas? And then why is it that you are lowering your gas capacity when I think you just added that capacity a year or two year ago?

Ralph Quincy

So first of all as far as downsizing our capacity, we are not going to do that. We can tell you that, we think we’re going to have to add some capacity this year in PC-SAW; we’re actually in process of doing that. We think we are comfortable with BAW long-term, we may have to add capacity there, but for the foreseeable future we believe more comfortable, we try to get ahead of that opportunity. And we think that we had two months gas capacity and depending whatever is installed.

So, we have right sized and continue to right size our gas capacity to market demand and we have taken the opportunity to upgrade our gas line, which is 4-inch in Texas to 6-inch line. And Steve pointed out earlier, not so much for capacity, but for improved throughout yield and long-term cost advantages associated with modernizing that line.

David Duley - Steelhead Securities

Okay, final question. Would you ever consider selling BAW filters to one of your direct competitors?

Ralph Quincy

We will consider selling just about anything within interest for shareholder value. Taking it down a little from there, it depends upon the relationships. And if it’s a good opportunity for the company to create a strategic alliance with a competitor, we've done that in the past, we know how to do that. But you got to look at each specific situation to see if it really wants it or not. We think that's the BAW asset is a very, very valuable asset for the company. And so, we don’t take those decisions lightly.

David Duley - Steelhead Securities

All right, that's it from me. Thank you.

Operator

Our final question comes from the line of Bill Dezellem.

Bill Dezellem - Tieton Capital Management

Thank you, group of questions. First of all, I want to continue on the line data was on the floor, which relative to the excess capacity that you have, why not retain the foundry business. Would you please kind of discuss that strategic thought process?

Ralph Quincy

So just to be clear, we offer in the foundry business now. And we focus on strategic customers who we think is good value for our company and the people we work with. The business that we don’t entertain is typically business that we think has no value. So, it depends upon what type of foundry business you’re talking about.

We have taken the position that we don’t believe it is in the best interest of the company to fill up our factories with low margin business. We are going to take the path of aligning our capacities with market demand overtime.

Bill Dezellem - Tieton Capital Management

And then let’s say shift is entirely, if we could please. The reference to 119 new products introduced in 2013, would you please compare that to prior years?

Ralph Quincy

Yeah, in rough numbers, I don’t have the exact numbers in front of me, but it’s probably close to double two years ago and incrementally better last year if I had a guess with the number we probably get in the range of 130 to 140 last year.

Bill Dezellem - Tieton Capital Management

Great, thank you.

Operator

I will now hand the call back to over to Ralph Quincy for closing remarks.

Ralph Quincy

Thank you, Dustin. And I want to send my thanks to all the participants on the call. We look forward to updating you in Barcelona later this month.

Operator

Ladies and gentlemen, thank you for joining us for today’s conference call. We thank you for your participation. You may now disconnect.

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