TriQuint Semiconductor's CEO Discusses Q4 2011 Results - Earnings Call Transcript

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TriQuint Semiconductor (TQNT) Q4 2011 Earnings Call February 8, 2012 5:00 PM ET

Executives

Steven J. Buhaly - Chief Financial Officer, Principal Accounting Officer, Vice President of Finance & Administration and Secretary

Ralph G. Quinsey - Chief Executive Officer, President and Executive Director

Analysts

Edward F. Snyder - Charter Equity Research

Parag Agarwal - UBS Investment Bank, Research Division

Anthony J. Stoss - Craig-Hallum Capital Group LLC, Research Division

Nathan Johnsen - Pacific Crest Securities, Inc., Research Division

Quinn Bolton - Needham & Company, LLC, Research Division

Aalok K. Shah - D.A. Davidson & Co., Research Division

Dale Pfau - Cantor Fitzgerald & Co., Research Division

David A. Duley - Merriman Capital, Inc., Research Division

Thomas A. Sepenzis - Northland Securities Inc., Research Division

Operator

Good afternoon. My name is Kendra, and I will be your conference operator today. At this time, I would like to welcome everyone to the TriQuint Semiconductor Fourth Quarter Earnings Conference Call. [Operator Instructions] I would not like to turn the call over to your host, Mr. Steve Buhaly. Sir, you may begin your conference.

Steven J. Buhaly

Thank you. Good afternoon and welcome to our fourth quarter and fiscal 2011 conference call. With me today is Ralph Quinsey, our President and Chief Executive Officer. During the call, we will make forward-looking statements about TriQuint's business and projected financial results. I’d like to remind you that 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, 10-Q, and other filings with the Securities and Exchange Commission.

All numbers during the call will be presented 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 investor's section of our website.

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

Ralph G. Quinsey

Thanks, Steve, and welcome, everyone. On today's call, I will summarize our Q4 and full year 2011 results followed by an overview of our major markets. Steve will provide a detailed look at Q4 and specific guidance for Q1. I will then summarize and open the call to questions.

TriQuint's revenue for Q4 was $227 million and EPS was $0.08, both at the high-end of our guidance. Gross margin was 31% and operating expenses were $56.9 million, including $2.3 million of legal expenses related to our antitrust and IP claims against Avago. For 2011, revenue grew 2% to $896.1 million with Mobile Devices growing 6%, offsetting a 4% decline in Networks revenue and a 9% decline in Defense and Aerospace. EPS was $0.51 for 2011. TriQuint closed the year with no debt and $163.3 million in cash and investments.

TriQuint delivered our sixth consecutive year of revenue growth in 2011 as we manage through capacity expansions and the impact of economic uncertainty. We were able to grow important submarkets such as 3G and optical, while also expanding our overall capacity footprint. We are involved in one of the most exciting technology trends in the world, wireless data access, and I believe these investments -- the investment that we have made will lead to improved long-term financial results for the company. Additionally, a growing request from our high-volume customers is assurance of supply and with our dual-site capability for GaAs now in place, we can assure our customers a flexible and continuous supply of product independent of localized disruptions.

Turning to our markets. I'm excited about the opportunities ahead for TriQuint. Wireless data remains a compelling opportunity. Smartphones, tablets, e-readers and other consumer devices, all with expanding RF content, are some of the fastest-growing consumer devices. Between 2010 and 2012, smartphones are expected to double in volume from about 300 million units to over 600 million. New users and new applications are creating unprecedented growth in this traffic. This in turn requires more infrastructure equipment supported by TriQuint's products. Lastly, TriQuint continues to lead in advanced technology development as we have begun high-volume shipments of GaN products with the defense industry.

I will now add some color on each market starting with Mobile Devices. Mobile Devices' revenue for Q4 2011 grew 7% sequentially and 6% in 2011 as compared to 2010. We were able to grow our 3G/4G revenue 20% year-over-year. This growth was offset by a decline in 2G revenue, primarily the result of declines in our legacy CDMA and GSM revenue streams. We intentionally moved away from these submarkets. During the period, our capacity was limited. We have recently reengaged in the GSM market with our next-generation high-performance low-cost QUANTUM Tx Module. We believe our Mobile Devices TAM will continue to grow with increased smartphone adoption and increase our content as multiple bands of 3G and 4G also known as LTE, are added to devices.

In 2011, based on our estimates, we believe overall handset units grew approximately 9%, with much faster growth in smartphone. Smartphones currently represent approximately 30% of the market. I expect them to pass 50% in the next few years as they push into the mid and low-end of the market. This growth is compounded with increased RF content to support the number of frequency bands required in 3G and LTE. There are over 30 frequency bands defined in the standard and each band drives expanded content. Handsets have gone from dual-band voice capability to now include 4 or 5 3G bands and 2 or 3 LTE bands plus WiFi. This has significantly expanded the RF dollar content from about $1 to, in some cases, over $10.

TriQuint's technology and manufacturing expertise creates a rare opportunity to be at the leading edge of this expanding market. Customers must balance size, flexibility and cost for their next generation 3G and 4G applications. TriQuint supplies all of the critical products for this market, including RF amplifiers, SAW and BAW filters, switches and WiFi solutions for smartphones. Customers, in part, thus continue to see TriQuint as the complete RF solutions innovator instead of simply a point supplier of discrete power amplifiers or filters.

Simplifying RF is a strategic focus for TriQuint. We have sold over 500 million PA-Duplexers to date and competitors have followed our lead with similar devices because this was the simple and pragmatic solution. I see 3 trends moving forward: The RF section in smartphones will follow the well-beaten path from discrete components to integrated solutions for size, flexibility and cost. Two, LTE is driving more growth and complexity, content is expanding and duplexing and filtering is one of the next big opportunity. And three, I believe the market will see a significant uptake of PA-Duplexers, transmit modules and hybrid multimode, multiband power amplifiers in 2012 and 2013, all core products for TriQuint that we ship today.

Across the board, customers are interested in size, flexibility and battery life. Phone designers are looking for flexible RF solutions to displace complex, discrete layouts. Additionally, customers want suppliers like TriQuint with redundant supply chain to ensure the uninterrupted support of their high volume lines. Customers are eager to work with innovators because wireless broadband is one of the most exciting and demanding applications on the planet. TriQuint has been and will continue to be a pioneer in this market. You'll clearly see our integration expertise in action when we launch the TRITIUM duo products this year. We have expanded our capacity footprint and are well positioned for renewed growth. We are committed to helping our customers build better products, and I believe this will lead to financial success.

Switching now to our Networks market. Revenue was flat in Q4 compared to Q3 and down 4% in 2011 as compared to 2010. Macroeconomic weakness during the year caused operators to spend cautiously on infrastructure equipment, resulting in lackluster demand particularly in base stations. We categorize our Networks market into 3 submarkets: transport or products that support data transfer between and within city centers; radio access or base station products; and emerging markets, which include multi-market standard products.

Transport revenue grew 7% sequentially in Q4 and 8% for the full year compared to 2010 with strong growth in optical. Radio access revenue was down 15% sequentially and 8% for 2011 as compared to 2010. Our non-foundry radio access revenue was down due to macroeconomic weakness, but somewhat offset by end-of-life demand from one of our foundry customers. Emerging markets grew 14% sequentially.

We have been very successful with our modulator driver amplifiers supporting the optical market. And based on design wins to date, I anticipate an expanding customer base in 2012. In addition to our success of the 40-gigabit product family, I expect more equipment providers will begin offering a 100-gigabit solution by the end of 2012.

TriQuint is well positioned to enjoy growth of this next generation of communications technology. The transition from 10-gigabit to 40-gigabit to 100-gigabit and beyond is based on a simple and predictable technology trend: more data, faster. It is difficult to predict the timing of the market turn, but wireless data traffic continues to increase at a rapid rate, driving the need for investment in infrastructure equipment. We are seeing good traction in the LTE applications and I expect positive trends for TriQuint with any market rebound.

Turning to Defense and Aerospace. Revenue was up 4% sequentially in Q4 and down 9% in 2011 compared to 2010. Overall, this market is characterized by order patterns tied to major program timing. During 2011, we completed the bulk of supply to the B-2 bomber and F-22 projects and begin to ramp up new programs like the F-35 Joint Strike Fighter and EQ-36. Mitigating the risk of reduced DoD spending on new programs, we anticipate increased demand for retrofit radar systems. Our strategic focus in this market remains radar and communications application, and we believe we maintain a technology lead as compared to our competition.

While 2011 was a down revenue year for the Defense and Aerospace market, we believe new programs like the Joint Strike Fighter and EQ-36 ground-based radar system will result in a return to modest growth in 2012 and beyond. I am excited to report we have begun shipping production volumes of GaN products into a 3-year radar program valued at $25 million. We have -- we also had GaN-based products in production supporting our first communications application with the Defense industry.

We remained closely involved in a broad portfolio of contracted research and development program sponsored predominantly by DARPA, the Air Force Research Lab and the Office of Naval Research. In 2011, these contracts totaled approximately $15 million in revenue and were primarily focused on the development and manufacturing of GaN technologies for future DoD programs. Contract-based revenue is expected to increase in 2012 with additional GaN-related research program.

I will now turn the call back over to Steve to walk through our financial results for the fourth quarter of 2011 and our guidance for Q1.

Steven J. Buhaly

Thank you, Ralph. For the fourth quarter of 2011, we generated revenue of $227.0 million. Revenue increased 5% sequentially, but was down 10% from the fourth quarter of 2010. Revenue for 2011 was $896.1 million, up 2% from 2010. Mobile Devices market revenue grew 7% sequentially and 6% for 2011 as compared to 2010. Networks market revenue in Q4 was flat sequentially and down 4% for 2011 compared to 2010. Our Defense and Aerospace market revenue was up 4% sequentially and down 9% for 2011 compared to 2010. For the quarter, our revenue split to end markets was: Mobile Devices, 71%; Networks, 19%; and Defense and Aerospace, 10%, representing a 1% increase from Mobile Devices and a 1% decrease for Networks from the third quarter. 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 41% of our total revenue during the fourth quarter, and 35% of total revenue for 2011. Foxconn was our only customer with revenues above 10% for the fourth quarter and fiscal year.

Our book-to-bill ratio for the fourth quarter was 0.95. Gross margin for the fourth quarter of 2011 was 31.0%, down from the third quarter's gross margin of 36.3%. The gross margin decline was largely due to product mix within our businesses and lower utilization in our factories. Utilization declined sequentially as we completed long plant capacity additions and reduced inventory. For the full year, gross margin ended at 37.2%, down from the prior year's 41.0%.

Our operating expenses were $56.9 million for the fourth quarter of 2011 and $244.4 million for the full year of 2011. Operating expenses declined $1.8 million sequentially due to lower litigation expense in the quarter. Litigation expense was $2.3 million in the fourth quarter of 2011 and $19.2 million for the full year. As a result, as a percent of revenue, our operating expenses decreased from 27.2% in the third quarter to 25.0% in Q4 of 2011.

We recorded a negligible tax benefit for the fourth quarter. Net income for the fourth quarter was $13.3 million or $0.08 per diluted share at the high end of our guidance. For the full year, net income was $87.3 million or $0.51 per diluted share.

Total cash and equivalents increased $15.1 million to $162.3 million during the fourth quarter. Cash flow from operations was partially offset by capital expenditures of $32.5 million. Inventory turns for the quarter were up sequentially to 4.1, and our day sales outstanding in accounts receivable decreased to 52 days.

Year-to-date, capital expenditures were $192.4 million as we expanded total capacity approximately 40% across our GaAs, SAW and BAW lines. As expected, we finished qualification of our 6-inch GaAs line at our Texas facility late in the fourth quarter. This is a copy exact line replicating our Oregon 6-inch GaAs capabilities on a smaller scale. The investments we've made in increased capacity will allow us to participate in the strong market growth we anticipate over the next few years. We expect lower capital expenditures in 2012, and our spending will be largely focused on new capabilities. Depreciation expense increased to about $17 million during Q4 and will increase in Q1 of 2012 to about $21 million as a result of placing the new 6-inch line in service. Return on equity was 5.7% for the fourth quarter of 2011 and 9.6% for the full year.

Moving to our outlook. We believe first quarter 2011 revenue will be between $210 million and $220 million. Gross margin is expected to be between 30% and 31%, with improved product mix largely offsetting costs associated with our new Texas 6-inch line. Operating expenses are expected to grow to about $62 million, due in part to $4.5 million of litigation expense. The cash tax rate for 2012 is currently expected to be between 2% and 5%. First quarter 2012 net income per share is expected to be between $0.01 and $0.03. As of today, we are fully booked to the midpoint of our revenue guidance.

During the quarter, we will be participating in a number of investor relations events. On March 6, we'll host our annual Analyst and Investor Day in New York City. Following this, I will be presenting at the Raymond James' annual Institutional Investors Conference in Orlando on March 7. Additional details are available from our investor relations website. Please contact Roger Rowe if you are interested in attending our Analyst and Investor Day. Our Q1 2012 Earnings Conference Call is scheduled for April 25, 2012.

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

Ralph G. Quinsey

Thanks, Steve. We have grown revenue for 6 consecutive years, even through periods of economic weakness and we have expanded our capacity to serve our customers' rising demand. We couldn't ask to be in better field to play as we support one of the mega trends in technology today: ubiquitous, untethered, broadband communications.

Network data traffic is exploding with equipment suppliers like Ericsson and Cisco, forecasting a 5 to 10x increase in data traffic in the next 5 years. Mobile conductivity is a must-have capability as consumers move from computers to smartphones, tablets and ultrabooks to access the Internet. This surge in network traffic, rapid adoption of smart mobile device and expanding RF content, are a solid and favorable trend for TriQuint. We have made the investments in capacities as we prepare to serve this exciting market, and we anticipate good financial leverage as we grow. As a leader in integrated RF solutions, we have the products and the capacity to deliver on the opportunities in front of us. We see solid prospects for the second half of the year.

I'd like to open up for questions now, Kendra.

Steven J. Buhaly

Operator, we'd like to open the call to questions.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question is from Edward Snyder.

Edward F. Snyder - Charter Equity Research

Steve, how much of the gross margin in this quarter was mix versus utilization? And if we have -- and as the full extent of capacity hit margins, that is if revenue stays the same and mix stays the same in the next couple of quarters, can we reasonably expect the margins to stay the same? Or is it more to come in terms of adding capacity and the degradation of margins? And then I have one for Ralph.

Steven J. Buhaly

So I'd say roughly 60% was utilization, 40% mix on a ballpark basis. And I'll answer your question a little differently forward-looking. We think there'll be about a 50% fall through to gross margin based on our current mix of products as we grow revenue.

Edward F. Snyder - Charter Equity Research

What I mean is, is the effective utilization all in now? Or are you still bringing on more capacity that could erode margins even if everything else stayed the same?

Steven J. Buhaly

I don't expect -- there will be a little bit, but I don't think there'll be substantial increases.

Edward F. Snyder - Charter Equity Research

Okay. So from here on now, it's just as things flow, we'll see what happens, right?

Steven J. Buhaly

Yes.

Edward F. Snyder - Charter Equity Research

Okay. And then Ralph, how long is the design cycle in 2G in China, the markets we are planning on pushing on pricing? Are you still considering being competitive on pricing? And when can we expect to see the bulk of that impact to your income statement?

Ralph G. Quinsey

Yes. If you're talking specifically with the 2G market, remember, that's a relatively low amount of our business. We’re a small share player. We like to participate in that market because it drives good discipline for low cost. We've got great products with our 4068 net market, and we have introduced that. As you know, the market’s a little soft right now and we're seeing good uptake of our device. It's a good device.

Edward F. Snyder - Charter Equity Research

So I mean, is it in -- are those price-aggressive parts in full production now? So that mix is in the guidance for March? Or do you expect -- I know it's hard to predict how successful everything will be, but where do you -- or is most of the impact still to come?

Ralph G. Quinsey

I would say that we're shipping the product now. It will ramp up some more, but I don't believe that's a material part of our story. It's a...

Steven J. Buhaly

If you really look at our guidance, we expect mix to improve and to largely offset the impact of the additional $5 million of expense coming into our P&L in Q1 from the Texas 6-inch line.

Edward F. Snyder - Charter Equity Research

Yes, okay. And then on the duo, I mean, it looked like it was a fairly compelling part you were sampling last quarter. When can you expect volume production on it, on that part? Or are you in production already?

Ralph G. Quinsey

No change on that. We expect that to be a second half story, and we'll talk more about that at the upcoming Mobile World Congress.

Edward F. Snyder - Charter Equity Research

Okay. And then finally, anymore wins on MMPA? I know you got lined -- I think it was Lenovo initially, any fall through or additional wins on those parts?

Ralph G. Quinsey

Yes. We're shipping that now. We are getting some wins. Notably, we have a design win at Samsung.

Operator

Your next question is from Parag Agarwal.

Parag Agarwal - UBS Investment Bank, Research Division

You indicated that the mix is going to improve in the next quarter. Any color as to what is causing the implement of mix, is it within your handset business? Or is it a growth in the Network business?

Steven J. Buhaly

That's pretty much across the board. I mean, the handset business is 70% of our revenue. So it's clearly an important driver there. But in any portfolio, you have a pretty wide spectrum of products and we just happen to get a fairly unfavorable mix in the fourth quarter. We think that mix comes back to a more typical situation going forward.

Parag Agarwal - UBS Investment Bank, Research Division

Okay. And then on your litigation expense, it was down this quarter. Any particular reason or any update as to the progress on that front because in July you'll go to court so...

Steven J. Buhaly

The reason is not very exciting. It's just a December slowdown for holidays and that kind of thing. And so it's going to rebound a bit in Q1, some money that probably would have been spent in Q4 shows up in Q1 because of the holiday slow down. And we do expect -- we do have a trial scheduled now in Arizona during the third quarter.

Parag Agarwal - UBS Investment Bank, Research Division

Okay. Last question, on LTE, on the handsets, can you provide us any update as to your traction or any design wins?

Ralph G. Quinsey

Great question. LTE is a great driver for this business with probably a bunch of bands, over 30 bands defined for different frequencies around the world. We think the important bands are going to be like Band 13, Band 17. And it's all also creating an opportunity for some new class of filters. If you look at diversity filters and coexistence filters, those are opportunities for us, new markets. So I would say that early wins are going to come probably in the Band 13 area, attached to Verizon, maybe Band 17 attached to AT&T.

Operator

Your next question is from Anthony Stoss.

Anthony J. Stoss - Craig-Hallum Capital Group LLC, Research Division

Steve, a couple of quarters ago, you were at 40% gross margin. And wondering if you could share with us, if you're mix stays similar to what it's at now, any sense of what we need on a quarterly revenue number to get back to that 40% gross margin number? And then Ralph, if you wouldn't mind chiming in on kind of just overall reference design activity.

Steven J. Buhaly

Sure. If you run the 50% fall through math on the current mix, you get to a margin at 35% or maybe a hair better at $300 million in revenue. To do better than that, we really need to see some recovery in our Networks business, which is much higher margins and largely, we think it's dependent on the macro economy, and Ralph will probably talk more about that. What was the second part of the question? Or was that my part?

Ralph G. Quinsey

Second part was reference designs and we continue to participate widely with the reference design community, Qualcomm, Intel, STE, Broadcom, et cetera, and benefit from the participation we have with those particular reference designs.

Operator

Your next question is from Nathan Johnsen.

Nathan Johnsen - Pacific Crest Securities, Inc., Research Division

One thing -- I guess to start out with just a clarification. I think last quarter, you guys have been talking about returning the meaningful growth in the mid-part of 2012. And now it sounds likes you guys are talking second half. I was wondering if something has changed? Or maybe I've read too much into that. And then just -- if the second half is really where you guys are looking for growth acceleration, do you expect to continue to be underrepresented on design wins that are being refreshed in kind of the May-June timeframe?

Ralph G. Quinsey

Yes. So Nathan, we think we're being consistent with the last time we spoke where we thought that we're cautious about the first half of the year and preparing ourselves for growth in the second half of the year. We're starting off the year, at least the guidance, we're starting off the year a little bit better than seasonal, so I'm encouraged by that. But again, we think we're being consistent as far as some caution in the first half of the year, and then returning to -- being prepared to return to growth trajectory in the second half.

Nathan Johnsen - Pacific Crest Securities, Inc., Research Division

I guess, given the -- I guess the better-than-seasonal Q1 and kind of the cost stance on first half overall, should we then be expecting potentially worst than seasonal for Q2?

Ralph G. Quinsey

Not making any guidance on Q2 at this point, Nathan.

Nathan Johnsen - Pacific Crest Securities, Inc., Research Division

All right, that's fair. And then, I guess, 2 kind of kind of high level ones. One, a smaller private company had -- that's a CMOS supplier, had announced a design win on the Samsung GALAXY platform. I know CMOS is kind of always been a trailing gallium arsenide in terms of efficiency, et cetera. But given that socket win, I'm wondering what you see as the prospects for CMOS PAs in 2012?

Ralph G. Quinsey

Yes. Certainly, I've seen that announcement and some others. These products typically target lower performance phones because they're lower performance solutions. At least the products we've been able to evaluate that show up in phones, that's been the story. We watch it with interest. I would note that you're going to see lots of announcements as we ramp up for the Mobile World Congress, about a lot of things in this space. But for CMOS PAs, I think it -- as we have said many times in the past, we watch it with interest. Typically, their lower performance solutions targeting lower performance phones.

Steven J. Buhaly

And Nathan, I have to say, I heard it first on your blog.

Nathan Johnsen - Pacific Crest Securities, Inc., Research Division

Well, that's fair. I'm glad you're reading it. And then I guess just one last question from me, just that ACC had talked about really focusing a lot more effort on fewer models. I think you're hearing that from some of the other handset OEMs. I was wondering if you guys are seeing any impact from that, if there's any noticeable difference on either extending design cycles or reduction of fewer models that they concentrate on and how that potentially impacts the competitiveness of going after each socket.

Ralph G. Quinsey

So I would say just up leveling that to the industry is if the industry is going to generate fewer models, those models are going to carry more importance and more volume and you'll see more of a swing up and down with wins and losses. From a product portfolio, we tend to have a relatively concentrated level of products. We've been driving PA-Duplexers, MMPAs, transit modules and then duo, and we think that's a good roadmap going forward.

Operator

Your next question is from Quinn Bolton.

Quinn Bolton - Needham & Company, LLC, Research Division

Just sort of a longer term question about LTE. First, you talked about the reference partners. I think you said Qualcomm, Broadcom, Intel, ST-Ericsson. I'm wondering if you can make comments as to whether those are -- if you're engaged with any of those on the specific LTEs, Bands 13, 17 or other bands. And then a second related question on LTE, you guys historically have broken out your handset business or Mobile Devices business by 2G and by 3G. Do you see it, at some point either this year or next year, that you add a 4G bucket or any thoughts there? And then I've got one follow-up question.

Ralph G. Quinsey

Well, on the second question, yes, as it becomes an important part of transparency, we'd be happy to break out the business into different categories. As far as any specifics on reference design partners, I'm going to back off on that. We’ll let that rollout and let you see that as it happens. I can only say that we maintain a strong engagement with the reference design players. We have traditionally had a strong engagement. And I would say it is -- it's only getting better as the market continues to -- the number of suppliers that can support these reference design players with the products that they want continues to go down. It's fewer and fewer suppliers that really can support both these large customers and the ref design players, and so our relationships are improving.

Quinn Bolton - Needham & Company, LLC, Research Division

Great. And then just a last follow-up question. Ralph, just any comments on the wireless LAN business that looked like it was down on the December quarter. Is that still sort of the transition from foundry revenue to sort of direct revenue? Or is there something else going on in wireless LAN?

Ralph G. Quinsey

No, that is it. Some product life cycle transitions from foundry, as you said. I think we'll see some seasonality in Q1 for this product category, but coming back in Q2. And I see good strong opportunities in the second half, as you know, because we publish it. We got a fairly strong business, $100 million-plus business in wireless LAN. And it's smartphones right now, but as I'm sure you also realize, Quinn, our wireless LAN is really spreading out to infotainment space and you're seeing it embedded in more applications, games, TVs, et cetera. And then with the advent of 1102 -- I'm sorry, 802.11ac, we're seeing higher data rates, up to 1 gigabit per second. We target higher frequencies, which is right in our sweet spot -- TriQuint's sweet spot of high performance. Higher modulation complexity, again, within the sweet spot of what TriQuint does well. And so I think that is going to be another platform. I'm actually getting more excited about WiFi and wireless LAN as the world realizes that's an important part of the worldwide network and high performance RF is critical for the success, not just any old RF, it’s kind of where we started with WiFi, high-performance RF is really a critical part of that functionality.

Operator

Your next question is from Aalok Shah.

Aalok K. Shah - D.A. Davidson & Co., Research Division

Just a couple of quick clarifications. Steve, I think you mentioned the mix will be better as we go into Q1. Is that mostly Networks-related? Or is it Defense and Networks together? And then secondly, Ralph, you kind of talked a little bit about it. But In terms of what you're seeing out of the PA-Duplexer market versus the MMPA market, can you maybe walk me through what you think the market is looking like in terms of -- do we go shift to MMPA this year and then maybe go switch back to PA-Duplexers next year? And then lastly in terms of that whole space, are you seeing any kind of major wins yet off the Qualcomm 8960 reference platform?

Steven J. Buhaly

Aalok, I'll take the first one. Most of the mix issues were within their respective business units. So it didn't really have a whole lot to do with the revenue mix by market. It was more of the products and there are a lot of them within the various business units. And with that, I'll turn it to Ralph.

Ralph G. Quinsey

Yes, so like I said, I see 3 major trends, and I'll try to add some color to that. First of all, the RF section in smartphones will continue to migrate from discrete products to integrated solutions for size, flexibility and cost. I just think that's an unstoppable trend. Second, LTE, like the expansion in 3G, but I'll layer LTE on top of that, it was driving more growth and even more complexity. And the content is expanding with duplexing and filtering because as you know, the -- every time you add a new band, you absolutely need more duplexing, filtering to support it. And then three, I think you'll see a significant uptake of PA-Duplexers, transmit modules, hybrid MMPAs this year. And the split there is on this very high-banded phones, arguably the smaller part of the market but an important part of the market, I think you'll see them migrate to what is often referred to as a hybrid broadband MMPA. I think this is where you have integrated into a single unit both the data bands and the voice band, both 3G, 4G and 2G, but not necessarily all going through the same amplifier lineup. That's why it's called a hybrid. And the reason it always and go through this a single amplifier or lineup is because we haven't figured out -- the industry hasn't figured how to do that yet and still maintain great performance. The rest of the market, I believe, you're going to see the uptake of more PA-Duplexers, whether it be the single PA-Duplexers, it’s the generation that's very popular today like I said, 0.5 billion sold. We were a leader, much of the world has followed our lead, going to duos to 2 bands into a single package of PA-Duplexers, very good match to low and mid-tier smartphones. And then they'll have paired with them a transmit module. So you'll see this discrete transitioning to on the low-end, some form of integration we believe PA-Duplexers duos paired with the transmit module, and then for the very high-banded phones, all right, these are the -- I mean, I've heard people talk about 23 bands in a phone. That will be a very high-banded phone. And those are going to migrate more to these hybrid MMPAs and then some form of an antenna switch module or antenna duplexer module, something to deal with all of that filtering content and switching content.

Aalok K. Shah - D.A. Davidson & Co., Research Division

Where are you guys with the antenna switch modules? I mean, are you guys shipping a ton of those yet?

Ralph G. Quinsey

So most of our switching content right now, we ship in the form of transmit modules.

Aalok K. Shah - D.A. Davidson & Co., Research Division

And 8960, where are you guys now with that?

Ralph G. Quinsey

Well, I don't want to comment on any specific reference design here. All of our partners are increasingly sensitive about us talking about their businesses on our earnings call. But I can add a lot of color that we're doing quite well with our MMPA, known as our 9023. And we benefit from our position with our reference design partner.

Operator

Your next question is from Dale Pfau.

Dale Pfau - Cantor Fitzgerald & Co., Research Division

Let's talk about infrastructure for a minute. You're mentioning that would nearly get above 35% gross margin, we need to have that market recover. What are your customers telling you? And based upon your positioning and the rollouts out there, does that begin to pick up later this year or is that a 2013 story?

Ralph G. Quinsey

Yes. If you're talking about base station specifically, that has been a down market. I mean, we have done better than our competition because we have had some of that end-of-life foundry business that falls into that category, but many of our competitors have announced double-digit declines. And they attribute it, like we do, to macroeconomic effects. Some suppliers are doing better than others. I think for that market to grow, it's going to be driven by 3G and 4G in the U.S. and in Europe. I think China will play a role, but I think it's likely not going to happen until the second half. India seems a little stalled with regulatory issues, licensing and just managing 3G. And we do see a little longer term deal, really good opportunity in small cell base station amplifiers. We have a unique technology position in the industry, particularly in the infrastructure space. And we think that we can leverage that with good technology and highly integrated MCMs for small cell base station. For TriQuint specifically, just to give a little bit more color, a lot of our product output, our new product launches in 2011, targeted the base station market, probably about over 30 products on a company total in the range of 100. These are building block products, multi-chip modules, VGAs, variable gain amplifiers, linear amplifiers, game blocks, DSAs, LNA filters, et cetera. And we got some good design wins, right? An example is the significant increase on Ericsson's platform product. We’re also doing well with Huawei with a VGA win and some wins at ALU and Andrew. The message being is that we did a lot of the ground work in this market last year, but the market was down. I can't predict when the market's going to turn. If it turns, we should benefit. But if it doesn't turn, I think we'll still do okay.

Dale Pfau - Cantor Fitzgerald & Co., Research Division

And how about the fiber business?

Ralph G. Quinsey

So for the fiber business, that's been on fire for us, one of our faster growing businesses. We participate with the modulator driver amplifiers, primarily for high performance communications, that would be city to city or metro ring type of communication. We participate in 10, 40 and 100-gigabit solutions, but a lot of our growth last year and now is attributed to the 40-gigabit. We try to spread out our offerings to address the rest of the market. I do see an expanding list of customers for our 40-gig products and our 100-gig products. If we -- when we were talking about this a year ago, we were -- had one fairly large customer, Huawei. Now we are seeing expanding customer list, and I do see more customers -- significantly more customers will be tabling 100-gig solutions that we're supplying into by the end of 2012.

Operator

And your next question is from David Duley.

David A. Duley - Merriman Capital, Inc., Research Division

Just a couple of clarification questions. What is your utilization rate now of your factories? And what do you anticipate it being in Q1?

Steven J. Buhaly

We are at 69% in the fourth quarter and it’ll probably in the same ballpark in Q1.

David A. Duley - Merriman Capital, Inc., Research Division

And the CapEx number -- I think you gave a CapEx number for 2011. Do you have one available for 2012?

Steven J. Buhaly

No, because it really depends on how things play out in terms of demand and the mix of demand, which stopped the forecast. But it's going to be significantly down for modeling purposes, call it roughly half.

David A. Duley - Merriman Capital, Inc., Research Division

And just to sum up -- to get gross margin back up to the 39% to 40% range, I think what you said is you need revenue growth and you need the mix of business to get better from the Networking business, so it's a kind of a combination of both.

Steven J. Buhaly

Yes. That's going to happen in 2012. Without that help from our higher margin markets, then we need more revenue growth, and I'd say getting to the 40% range would be a 2013 event. We're very leveraged and we have good capacity. So it's really revenue growth versus time, and then if we can get some help on mix, it'll speed things up.

David A. Duley - Merriman Capital, Inc., Research Division

Okay. And Ralph, one for you. As far as the content goes in these smartphones, it seems like when we go from these discrete parts to an integrated part, we have a lot less dollar content. And I know there's more bands coming with LTE, but could you just talk about some of the additions and subtractions here to the total dollar content?

Ralph G. Quinsey

Yes. And it gets very complex, and I know there's been quite a bit of discussion on it. But in short, the RF expansion is outpacing the integration and ASP reduction. And again, we can work through a variety of models, but this is a significant expansion of content. And for TriQuint at least, filtering is a big part of that because as you know, we've talked a lot about these high-banded phones using broadband data amplifiers to cover multiple bands. You still need multiple filters to cover those bands. Those are fundamentally unintegrateable because by definition, their designed to a particular frequency band. And so we see that as an expanding opportunity. And add upon that the complexity of WiFi and LTE on top of 3G, this new category of coexistence filters is a good opportunity for us. And so net-net, we see a growing market.

David A. Duley - Merriman Capital, Inc., Research Division

Would it still grow outside the filter piece when you just kind of look at the power amplifiers?

Ralph G. Quinsey

We believe the GaAs market is still growing. Recently, Strategy Analytics also published a report in the last week or so that also says that the GaAs market continues to grow at its traditional rate.

Operator

[Operator Instructions] We have a follow-up question from Quinn Bolton.

Quinn Bolton - Needham & Company, LLC, Research Division

Any thoughts on what you're trying to do with the internal inventory levels in Q1? Will you be loading the fabs at a lower rate to try and reduce some inventory again in the first quarter?

Steven J. Buhaly

We took about $8 million off in Q4. And my guess is inventory will be flat to down a couple of million in Q1.

Operator

Your next question is from Tom Sepenzis.

Thomas A. Sepenzis - Northland Securities Inc., Research Division

Ralph, on the last call, you were talking about the new fab being -- well, a lot of it being pointed at getting more involved in the Android market. And I was wondering if you could just talk for a second from a high level in terms of when we might expect to see some design wins there and how the progress is going with that?

Ralph G. Quinsey

Right. We definitely are targeting an expansion or I guess, I should say a broadening of our customer base. We feel like that we are highly -- high concentration, customer concentration in Mobile Devices, we want to broaden that, somewhat hampered by the fact that the market seems to be concentrating on fewer customers being successful. I'm glad that we are involved with some of the successful customers, and we benefit from that. Our 6-inch factory in Texas, what that gives us is a footprint. And when I say that we made a fairly significant cash investment, but it creates a footprint that we can, for a relatively smaller amounts of money, continue to incrementally expand that capacity. So it gives us a footprint to grow. We're still -- we're one of the top 3 players in the world probably tied for #2 right now. But we're still only about 12% share of the market. So we’re in a growing market, we got lots of headroom in share. We did hit a wall because we've been growing for the last 6 years on capacity. We're now positioned, now we can continue that growth path and Texas is part of that. The other part that Texas gives us, since it's a copy exact factory with our high volume Oregon line, is parts can move back and forth very easily and allows us more flexibility unloading, and also gives great comfort to large customers. Virtually all the successful large customers on the planet these days, they're very concerned about assurance of supply and local disruptions, and so now we have that right capability that we can offer them.

Operator

And you have a follow-up question from Jonathan -- Nathan Johnsen.

Nathan Johnsen - Pacific Crest Securities, Inc., Research Division

Steve, this one for you. Just on the tax rate, clearly quite a bit lower than, I think, what you'd initially been thinking about for 2012. Is that just simply a function of kind of where the trajectory of the business has gone? Or are you guys kind of found a tax strategy that allows that to be a more permanent benefit?

Steven J. Buhaly

No. Lower earnings in 2011 than I had originally anticipated caused our NOLs to last longer, and thus, reducing the cash rate in 2012. We are working on that tax planning strategy, but that has no effect or no real effect in 2012.

Nathan Johnsen - Pacific Crest Securities, Inc., Research Division

Okay. But I guess for modeling purposes for -- I realize it's long ways off of 2013, kind of thinking back to that 15% to 20% make sense or...

Steven J. Buhaly

Yes, probably. I haven't modeled it very carefully myself. I would guess more in the 10% to 15% range for the full year. But I haven't done my homework there yet. So take it for what it's worth.

Operator

And there are no further questions at this time.

Ralph G. Quinsey

Okay, Kendra, thank you. And I want to thank all of our participants this evening. I look forward to seeing many of you at our Investor Day in New York coming up early next month. Thank you.

Operator

This concludes today's conference call. You may now disconnect.

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