Conference Transcript - SWKS 2026-03-02

Joe Moore, Analyst — Morgan Stanley

All right. Great. Everybody, I'm Joe Moore. Happy to have Phil Race from Skyworks. I'm supposed to read real quickly Safe Harbor. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com slash research disclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. So that out of the way. So Phil, it's great to have you here. You were here last year, I think, was your first presentation as the CEO of Skyworks and I was really impressed at the time how candid you were about everything and we talked about Corvo and M&A and all the things that are sort of happening now so I and I appreciate that and I think you sort of talked about having a culture of accountability and not blaming customers for sockets that you lose and things like that and I liked all that so maybe you could just talk about you know that last year just any big overview

Philip Brace, CEO

comments and we'll go into Q&A. Yeah it's been it's been a remarkable year thanks it was about a year ago this is my first uh first conference i i came to as ceo and you kind of look what's happened over the past year and it's kind of been uh it's been amazing i i would say i'm i'm pleased but not satisfied um you know if you look over the past four years i think we've done a good job of continuing to you know do what we say we're going to do i think we've got four consecutive quarters of beaten race so i think i feel good about how we've managed the business how we've done that i think we changed the trajectory of content at our largest customer which was a major overhang uh on the stock i think we've taken some steps to consolidate some of the factories uh in there to help give us some some uh gross margin side i bought in some new leadership uh from that side and then uh you know not not you know not least not which is did certainly the biggest acquisition in the company's history and uh created a very compelling opportunity to create some value so i think it's been a good uh it's been a good uh you know year or so but then you you know you have the overhang of okay who would have thought there would be a war in the middle east who would have thought there would be tariff day who would have thought there'd be memory apocalypse and sass apocalypse and all the other things but you know we're just trying to put one foot in front of the other deliver great products and have i really believe that you know being at the center of wireless technology the world is wireless we're going to build great products with great technology just focus on that and the rest will take care of itself i want to get to the

Joe Moore, Analyst — Morgan Stanley

apocalypses but just from a bigger picture standpoint you know rf as a growth driver there's been a persistent drive to diversify the business for you for skyworks as well yeah but you also feel like rf's a good growth driver it's just customer concentration things like that are a reason to yeah to to think differently can you talk about that do you still believe that there's

Philip Brace, CEO

solid growth in the smartphone space as well as in the yeah i i probably believe it more now than i did a year ago and let me tell you why first you really you really look and you go okay the world is a wireless place the earth will not be covered in data centers and the way that this information is going to get out is going to be wireless and i look at all the technology that we have coming down the pipe that we can see through 2030 not including 6g not including some of the power space not on that and i love the specialist specialized technology we have the combination with Corvo gives us gallium nitride, GAN, which brings a power side, RF side. I mean, I just think we're in a really great spot. And I think we'll just play our cards and drive that out. And I think that's going to be a great spot to be. Great. Well, maybe if we could talk about

Joe Moore, Analyst — Morgan Stanley

the smartphone space in the short term, maybe starting with the memory apocalypse that you mentioned. It seems like so far we're all pretty consistent that there's been some turbulence in China where you guys don't play as much, but Qualcomm highlighted that. Other parts of the market are okay. You know, what's your line of sight there? Do your customers have enough DRAM?

Philip Brace, CEO

Will they have enough DRAM six months from now? Yeah, you know, it's something I think we all still have the scars from the COVID time where we had all these double and triple orderings and things like that. And so I think we are being cautious. We're taking a very close eye on it. I will say, as I mentioned on my earnings call, we have not seen that. You know, certainly our largest customer. If you look at their earnings call and what they did, they actually had very strong unit demand and continue to drive that. We think they're actually gaining share in some of the spots. The CEO of that company is a supply chain individual, so you might imagine they're using that to their advantage. We have not seen it, and even in our broad markets space, we continue to see really strong. Now, is there some scenario that we don't? Yeah, okay, well, we're keeping our inventory low we're watching the book to build carefully we're managing as best we can and so far it's we've we've been okay yeah and and your focus on the premium tier yeah should buffer

Joe Moore, Analyst — Morgan Stanley

you to some degree i mean i feel like if we do see builds getting cut it'll be there yeah there

Philip Brace, CEO

was some news in at the you know in in las vegas time right where a lot of the cell phone guys that particularly in the in the emerging markets in china took their builds down by a lot um you look at what our largest customer has done and where we've got other exposure right it's it's in the premium tiers and we've seen we've seen we haven't seen that and does it come back to you in

Joe Moore, Analyst — Morgan Stanley

the sense of the smartphone guys asking you for price concessions to sort of make room for memory

Philip Brace, CEO

no you know for better or worse we negotiate particularly for our largest customers right we negotiate the the pricing yearly i mean that what i joke about that is you know if you're a car manufacturer and the price of the transmission doubles it's hard to ask the spark plug guys to give their spark plugs away for free, right? I mean, that's kind of what you're talking about. There's no chance we could in any way offset any of that. Now, where we do see some of, I'll say, inflationary pressure is on the input cost side, right? Similarly, once we negotiate it, we don't have an opportunity to raise a discount, but it's also difficult for us to pass through. In some ways, I feel really good if you look at our gross margin guidance, because As you can imagine, we've seen inflationary cost pressures, things like gold, things like assembly tests, things like PCB, all the things you read about. We're certainly seeing some of that. I think we've done a good job of working with our supply chain and our partners to kind of balance that. So we've done a pretty good job. So where we see that price pressure is mostly on the input cost side.

Joe Moore, Analyst — Morgan Stanley

With regards to your biggest customer, Apple, you talked on the earnings call about kind of a flattish content in the next round. Can you talk about the puts and takes there? And I know you aspire to get it back to growth, but it seems like stabilization is a good interim step.

Philip Brace, CEO

Yeah, I think that, look, I mean, it's a hyper-competitive market. I would say I am pleased but not satisfied. I think we can do better. You know, I honestly think we can do better. I think there are some things we did well this time. But, you know, I think that there's more upside ahead for us from that if we continue to execute very well. Some of the, you know, investments we made in the R&D space this base a couple years ago and last year, right? I don't think we've seen those fully play out yet. So, but I think that changing the slope of the curve was incredibly important to do that. I think we've done that. And I think that we're trying to, you know, get ourselves, one thing is just to zoom out a little bit. And you look at, you know, our largest customer, just take the biggest one, they've talked about their install base being, you know, two and a half billion units. You pick well north of a billion is mobile handset devices. you kind of do the math of what you think the RF content is there, and think about that as our opportunity pool that gets refreshed every four years, right? And so that's really what we want to do. And then if you look at the combination with Corvo, really what it enables us to do, and it's a little bit counterintuitive, because what it should do, even though we get more business there, we actually, volatility should go down, because the single socket risk goes down. So if you end up having a massive TAM, with some tailwinds behind us in terms of 6G AI enablement and having a large customer's gaining share in the iOS ecosystem, it should

Joe Moore, Analyst — Morgan Stanley

end up in a pretty good spot for us. And how, you know, the post-mortem on what happened before you got here, you lost half of an important socket to Broadcom. Is that sort of the steady state? Is that you sort of share that socket? And is that the normal state of affairs in any areas where you see opportunity for growth or potential for loss? Yeah, good question. I mean, look,

Philip Brace, CEO

it is a so let's i want to be you know to state the obvious right the customers whether it's largest one we have or other customers they're not changing their behavior because of us right they're going to continue to motivate pick those songs so it behooves us to develop competitive products and our customers are constantly going to look for alternatives multiple sources just like we do it's our job to make it super difficult fine if you want to have an alternate product that performs worse or is more power or whatever, then please go ahead and do that, right? It's our job to make it difficult for them to do. But no one should confuse their gravity, right? There's only so many places in the world. If you're a semiconductor company like us and you pick whatever normal number you think for iPhones, 250 million, 270 million or whatever, there's only so many places in the world where you have that kind of tan that ships every single year. And so, right, that gives them a certain amount of just a competitive environment that

Joe Moore, Analyst — Morgan Stanley

exists there right yeah and now you know what the modem is for that customer going forward there's kind of coalescing around the internal modem platform does that help you does that help you both from the standpoint of inertial momentum but also just to sort of have a clear insight into

Philip Brace, CEO

this is the ecosystem that yeah i think that does because i think you know that there's obviously less duplication of effort on both sides uh for that i also you know what i'm excited about as well is that and we really haven't talked about it if you look at having the combination of the the end-to-end signal chain from some of the receivers and transmitters all the way out to the antennas. I think there's some things we can do having access to the entire RF chain that we didn't have before. So I think the clarity on the internal platform is helpful. I also think having the entire RF signal chain is helpful. And we've seen evidence of that, of the benefits of that, at other large customers we have where we have a more complete picture of that. So I'm excited about that that will take you know years to develop right because we've got to get in there we've got to do the innovation we've got to do some of that stuff but you know look that's what i love i love technology where it's hard it's complicated it's difficult it's gritty that's

Joe Moore, Analyst — Morgan Stanley

where i make difference yeah yeah okay and so then you know you talked about coming here a year ago we need to have technology leadership and you know it's not that that broadcom got better than you but they got on par and they and that allowed you to share the socket you know where where do you stand now with regards to that? Are you rebuilding that leadership? Yeah, I feel good about our

Philip Brace, CEO

technology. I feel good about that. And I know I'm going to say something here, which is a little bit counterintuitive. I actually love competing with Broadcom. They're smart. They're aggressive. They've got good technology. And you've got to win having the best products. Great. And they don't cut price. Yeah, let's go. Let's go compete. That's the place I want to go be. And I love that. So let's go do that. Let's suit up and go do that. That's the best place to be. So I feel good competitively. We can do better. I'm happy with where we are. Let's do better.

Joe Moore, Analyst — Morgan Stanley

And the capabilities you have, I mean, I'm not an RF engineer at this point, but you've had this big push into bulk acoustic wave, and you have a lot of the capabilities that they have. You know, you're satisfied with the technologies that you have to fight that battle? I always want to get better.

Philip Brace, CEO

And that's, I mean, that's part of what I, when I look out, I mean, we have visibility into stuff going out until the end of the decade. I'm excited about what we can do. I mean, I get shivers talking to you about it. That's why I just, I believe this is a great place to be. And while everyone's focused on other stuff right now, we're just going to focus on delivering great technology and focus on that.

Joe Moore, Analyst — Morgan Stanley

Maybe we can talk about Android a little bit. And you've said that sort of Apple's probably best positioned to deal with these memory situations. But I think Samsung's pretty well positioned to deal with that as well. Yeah, you would think. You would hope. I know there is a co-op petition between those groups, but they should be able to at least secure enough to build phones. So, you know, how do you feel about your two big Android customers and the opportunities around the Android ecosystem?

Philip Brace, CEO

You know, I do think that, you know, I would say they're different. I mean, one of our large customers, U.S.-based large customers, we've had a very collaborative relationship with them for many years, and they actually value what we do. They are willing to collaborate and work with us and, frankly, pay for the performance and capabilities that we're able to give them, which enables them to differentiate our phones. And, frankly, we feel good about that. And they do things differently in a way that allows us to put some of our best and brightest people on there. So I feel good about that, and I think that some of them are also starting to see that the end point can be a very strategic element for AI, because that's the way that most people are going to access AI. It's going to be through a device like this. And so I think that some of them are viewing it as, and having a really good product there is a competitive advantage, and so I feel good about that.

Joe Moore, Analyst — Morgan Stanley

Can we talk about that a little bit? I mean, this time last year, that was kind of the hot topic was, you know, edge AI, we're going to basically replicate what happens in the cloud on your phone. And that's clearly not the case. And that theme has kind of, the enthusiasm has come down a little bit. But you're absolutely right that the AI happens at the device level, that there have to be edge AI capabilities. You know, is that going to drive content up over time and kind of give us a picture of what you're seeing with regards to that?

Philip Brace, CEO

When we zoom out, I mean, what we have started to see is, I'll give you an example of what we started to see. We started to see more emphasis on the transmit side versus the receive side. And we've seen that out there. And there's a couple of things happened with that. One is because it turns out the transmit side is really what defines how far away you can get from the tower. Think of that as a speaker and a microphone. The tower itself can have a very large microphone, and you don't need a big speaker to hear the microphone. On the flip side, this can only have so big a microphone, and so the speakers on the received side need to be very sensitive, and the louder you make the microphone, the better you're going to get, and so we see a lot of work. Now, the challenge, of course, is that that produces a lot of current, right? It changes out the battery, so that's why there's a lot of RF coming in there, And some of the technology we have is just amazing. I don't know if some of you remember, like, the double bounce thing, right? That's where the MIMO comes. You remember the trampoline? You were doing the double bounce. Well, there's, like, that kind of technology that exists on the wireless side that goes more than two. And so some of the technology we've seen is on the transmit side, and we think that is not only related to 6G but more upload capability, right? And so we started to see some of that.

Joe Moore, Analyst — Morgan Stanley

And you referenced, you know, I mean, Google is obviously a leader in AI and smaller in phones, but it seems to be doing a lot to bring those features to the phone.

Philip Brace, CEO

Yeah, I actually, you know, I think they've done a really good job. Actually, some of their products are very, very competitive. And I think they're investing there to make sure that Android doesn't get relegated to just the bottom tier. They want to have a Halo device. And I think they're pretty well competitively positioned. If you look at where Gemini is, their relationship with their largest customer, I personally think they're in a pretty good spot. Yeah. A lot of Skyworks content in their phones. A lot of Skyworks content in this. Yes, correct.

Joe Moore, Analyst — Morgan Stanley

Okay, great. So maybe shift gears a little bit, talk about Corvo. You know, what led you to that decision? You've sort of been on a path where you were looking to diversify, but also saying there may be opportunity to grow this way as well. You know, what led you to move in this direction?

Philip Brace, CEO

You know, I'd known Bob since before I took this job. I'd known him for several years. And just standing back without the benefit of actually being inside, I actually thought the companies would be doing well together. It's one of the ideas, you know, when we sat here a year ago, it was already in my brain to do that. And the more I got into it, the more I realized, oh, my gosh, how complementary these products are. Everyone just really focused on the overlap, and there really isn't as much as people think. And I think that I looked at it and go, wow, you know, the combination of these two companies, if you look at together, it builds a $5.5 billion mobile business that should have an improved margin profile, more stability, and opportunity to innovate across the entire signal chain. And then we build a $2.7 billion non-mobile business that gets exposure to areas like defense and brings a GAN technology for both RF GAN and Power GAN. you look at the combination being north of 50 points of gross margin which is a big plus there 30 points operating income growing nicely i think it completely changes the shape of the company and frankly puts us on a different a different trajectory that we can go do do other things and the financial profile of it when we're done is going to be attractive so for me i don't think there's another better move that i could i could have made um you know and i i just i can't wait

Joe Moore, Analyst — Morgan Stanley

to get it done and i mean the cost synergies are pretty clear but on the revenue synergy side You know, it seems like when you get into these, you get all the ARB conversations about, you know, what would make the deal happen or not happen. And I feel like this is actually a good deal whether both companies are gaining content or both companies are losing content. It's still better to sort of put the combination together. But, you know, do you have opportunities then to have higher smartphone content in addition to the broad markets?

Philip Brace, CEO

A hundred percent. And we have not, if you actually look at that, we have, I think I've tried to be, I tend to be a meat and potatoes kind of guy when I mean just say what I'm going to do. and I try and avoid flower stuff. But what we have not underwritten, we haven't really underwritten any significant revenue synergies at all. And shame on us if we aren't able to figure that out. We haven't underwritten any sort of multiple synergies either. Shame on us if we haven't been able to get that with gross margins higher and stability higher. And so, and I think we've laid out, I think we have a high degree of confidence in the synergies we can deliver them. I don't think if you look at how it's split between OPEX and COGS, I mean, none of them seem to me to be aspirational, and so I feel really good about it. You know, regulatory is proceeding as we expected. Shareholder vote was overwhelmingly supportive of it, and I think we're just kind of moving through the pendency period and all the fun that's involved in that.

Joe Moore, Analyst — Morgan Stanley

Yeah, on that regulatory side, you know, are there any hurdles remaining? Is China a factor, their approval? You know, your biggest customer seems to be okay with it, which seems good. Just anything you can help us with on that? Yeah, look, I would say that the

Philip Brace, CEO

regulatory process is proceeding as we expected. We're well advised. We're having constructive dialogue with everybody. Semiconductors are a very visible space these days. We've kind of gone from the shadows into the spotlight, so everybody's looking at that. Not unexpected. I don't think there have been any surprises. I don't think anything has changed my view on our ability to get this closed. And we'll continue to work closely with our advisors to get it done.

Joe Moore, Analyst — Morgan Stanley

Okay, great. And so then if you think about this business mix after this deal is closed, what do you think is the optimal mix between smartphone and broad markets? And is diversification away from the biggest customer a priority in the way you think about this?

Philip Brace, CEO

The short answer to that question is yes. We have a problem, and I say that in air quotes, of luxury. We have been working with that largest customer for 20 years. I don't know this to be a fact, but I've got to believe it's true. I don't think anyone has shipped more RF components to them than we have. When you think about how luxurious, think about the challenge we would have if I didn't have that largest customer. We've built fantastic products. We've engaged with them for multiple decades. I think probably certainly in every wireless product that they've probably ever made. Now they've become a huge customer of ours. So how do you make something big look smaller? You put something bigger next beside it. And so I think, you know, we have to continue to grow our non-Headset business, continue to drive the volatility down. I think what we're trying to do is get that volatility down so that we get some more stability there, get our gross margins above 50, and then continue to diversify the business to help bring some more stability and predictability. And I think all of those things will happen. So, yes, we're going to continue to be focused on growing our non-Headset business, and I'm excited about having, you know, a good platform to do it when we close with Corbo.

Joe Moore, Analyst — Morgan Stanley

I mean, I've made this comment to you before, and you probably don't like it, but I feel like it's annoying to have a low multiple because you have high customer concentration. On the other hand, there's opportunity implicit in that. You can buy back stock every year at a low multiple. You can grow earnings that way. You can just grow your earnings for a decade as you did before when you just gained content at that customer year after year after year. Meanwhile, diversification assets are expensive, right, when I look at some of the recent transactions. They've been, for a company like yours, the math would be a little bit more challenging than the Corvo math. So just how do you think about those tradeoffs? I mean, is it, and you're not going to have, I mean, Apple won't be as large a customer at some point, but they'll still be a really large customer. They'll still be the first question I have to ask you. Yeah, of course, for years.

Philip Brace, CEO

Yeah, it's a good question. So first off, I feel really good about our capital structure and our balance sheet to be able to have some flexibility to do that. And I think that historically the company has been a disciplined allocator of capital. Certainly, if you look at even the year that I've been here, we probably returned $800 million to investors via share buybacks and $400 and some million in dividends. But I also think that historically the company's done that. And you could argue that maybe there should have been some more allocation to M&A to help diversify the business, right? And I think that we took one step here with Corvo. and i do think that some of the i can't decide on what the multiple stock will be all i can do is kind of execute and deliver and continue to get and i i do think however that the multiple should improve if history is any guide if we get our gross margin over 50 we drive some more predictability in the business people have belief in the long-term position where we go we're kind of in a you know a more focused industry from that side and and so right i'm optimistic and none of that is baked into the numbers so that's kind of how i look at that but you're right it does you know it does limit i mean i i i've talked to some of my investors before sure i can go off and buy some sort of data center play at 30 times revenue multiple that wouldn't make a darn bit of difference yeah company at the end right and that's a difficult that's a difficult place to

Joe Moore, Analyst — Morgan Stanley

be yeah okay um helpful so so speaking of the broad markets business you've had a good run there eight quarters in a row of growth can you talk about what's driving the strength there is you know combination of industry recovery but also some nice growth drivers can you give us an overview

Philip Brace, CEO

of that yeah the industry recovery you know we some of the products we still i mean we're still having inventory hangover for a while ago that seems to be behind us now i'm you know our big our biggest growth drivers wi-fi wi-fi 7 the migration there continues to be that's probably the biggest the biggest play uh there on that side automotive's been a nice driver for us you know the funny thing is we're on the grand scheme of automotive it's still we're still a small player i mean but we're in the nice spot we're in the vehicle connectivity and vehicle entertainment this kind of stuff independent of combustion engines and where it goes do you do you see yourself having more or less connectivity out in time well probably more and you see it becoming software-defined vehicles and all the other things we're at so that seems to be that seems to be going uh pretty well and then you've got a cut got the industrial data center piece which is which is you know continuing to grow up there as well and then we get the corvo piece you get the defense space, and so I feel good about those. Yeah, I mean, it seems like pretty clear

Joe Moore, Analyst — Morgan Stanley

that the case study of a successful acquisition was the Silicon Labs connectivity business,

Philip Brace, CEO

like you've gotten a lot from that. Yeah, I think that that was good, you know, and I think that that was a good place to be, and I think that, you know, the Corvo, you know, combination will be another good step for us, and, you know, we should be in a different, a dramatically different place. I think, you know, both companies are going to benefit substantially from that.

Joe Moore, Analyst — Morgan Stanley

Can you talk a little bit about the Wi-Fi 7 cycle?

Philip Brace, CEO

You know, where are you in that? How much for growth driver will that be for you? I think we're early innings in that. I think that we're still probably in the third inning of that, I would say, of a nine-inning baseball game. And I think we've got, you know, the demand there seems to be really strong. Improved latency, improved bandwidth, improved power management. I mean, a lot of stuff going on there that I think is going really well. And so that demand seems to be very strong. We've already started work on Wi-Fi 8, so that's why I feel confident that that one is a long-term driver there from that side. And we're seeing both on the CPE side and the industrial side as well, right? So that one seems to be going pretty well.

Joe Moore, Analyst — Morgan Stanley

So the broad markets business, particularly once you integrate the equivalent business at Corvo, you have pretty good growth opportunities. You don't need to do more acquisition to bolster that, but you're willing to if the opportunities are there.

Philip Brace, CEO

Yeah, I think we're going to be disciplined. I mean, look, I think that, you know, we still need to continue to diversify the business, right? Even when we're done with the Corvo situation or Corvo combination, we'll still have, right, more than 50% exposure to the one customer. A disproportionate percentage of that is the handset space. So I do think we're going to continue to emphasize that growth. Now, that growth should, as our broad markets continues to grow, that mix will come down. But I still think we're going to be looking to diversify there as well. I think it's just an important point for us.

Joe Moore, Analyst — Morgan Stanley

Okay, great. And then on some of the financial questions, can you give us an update on the factory optimization initiatives that you've been talking about and kind of where gross margins are going to be down the road with the two combined companies?

Philip Brace, CEO

Yeah, I mean, so we've, you know, certainly both of us have taken some self-help process along the way, right? You've seen us make a decision on our Wuburn facility. Some of the manufacturing decisions take a while to feather into the P&L, right? Because you've got to, you can't just shut them right off. You've got to, I'll say, run them out over time. And so, you know, we certainly think when we look at the gross margin of the combined company, we put out a model there of 50-55, and how do you get there? Well, if you look at the mobile space, you've got mix improvement in the mobile space as Android, which is structurally lower gross margin goes down you're going to be offset by a higher mix within the mobile space then you've got the mix of the broad markets versus mobile the combination should be higher broad markets than mobile so you've got another tailwind there and then you've got some structural things we can do on the cog side with a combination to drive margins there so we feel very comfortable the 50 55 percent range which i think puts us in a different tier of company we had before so yeah i would look at that yeah all right that's great and then can

Joe Moore, Analyst — Morgan Stanley

you talk about the R&D priorities, how much of it will be going towards smartphone versus new

Philip Brace, CEO

markets? Yeah, look, I mean, wireless, I would say wireless is going to continue to be the worst one. And the reason I picked that is, right, there's lots of different applications. The handset's obviously the biggest one, right? But, you know, there's a lot of overlap there in terms of base technology with the Wi-Fi side, with the defense side. So I think that'll continue to be a major, major push there. And frankly, we need to continue to be competitive, right? I mean, And if I, again, I go back to look at the install base of where we are today, both in the iOS side and the Android side, and you look at that, we talked previously about the fact that the refresh rate now of the phones is probably the longest it's ever been. Well, we're starting to see that getting pulled in. Well, that's a huge tailwind for us, too, because at 1.x billion units, if you take a refresh rate of four and a half years and you pull that down to four, just do the math alone, and that's a lot more units that happen. And so I think that we need to continue to be competitive. Like this, we cannot, and we compete with some other giants out there, so we need to continue to be competitive. So that'll be number one. And then number two will be continue to, you know, emphasize the diversity play. I really like that we're picking up some GAN space on the defense side, so both PowerGAN and RFGAN. That's going to be an area of emerging priority for us.

Joe Moore, Analyst — Morgan Stanley

And you mentioned 6G a couple times. I mean, the time frame still a few years out, I think. Can you just talk about, is there a big sea change to RF content, anything, any big opportunities you're looking for?

Philip Brace, CEO

Historically, we've seen, you know, dislocations around some of the G side, and so I'm not sure that this is going to be any different. I would say I think one of the things that we see as potentially different is that during the 5G cycle, I think a lot of the operators, there was just tremendous amounts of capital. I'm not sure. I think there's going to be more requirements put on the end devices this time, which should benefit us as well. But, you know, there's still some emerging work to be done on that side.

Joe Moore, Analyst — Morgan Stanley

I have one more question, and then I'll open it to the audience. Can you talk about the use of cash? I talked about buybacks and things like that, but obviously you have the acquisition now. But you've been in this very strong cash flow environment. How do you think about uses of cash?

Philip Brace, CEO

Yeah, look, I mean, clearly the number one use of cash is to continue to invest in our core business, right? We have got to kind of maintain and grow leadership there. Second, obviously, as respect to capital, we need to continue to invest in the capital that are on our factories. and do those kinds of things. You know, today we have dividend. I would argue the dividend rate is probably high. Now, some would argue that's because our stock price is too low, which I agree with as well. So dividends are obviously something we need to do. Then we'd be doing share buyback and M&A. You know, I think that evidence suggests we're putting a little bit of increased priority on M&A just because I think we need to change the shape of that company. You could argue over the past N years, We've been incredibly disciplined about returning a lot to capital to shareholders, but haven't really changed the shape of the company at all. And so I think the Corva deal is an example of us using a combination of cash and equity to kind of help change the shape of the company. So that's how I think about that.

Joe Moore, Analyst — Morgan Stanley

Great. Thank you. Let me pause there and see if we have questions from the audience. If not, okay, well, maybe we'll close there. Just if any closing remarks, anything you want us to think about with the opportunity with Skyworks in the next...

Philip Brace, CEO

No, thanks. You know, I guess when I look at the combination of Skyworks and Corvo, you know, put together, you have a very significant mobile handset business that should have less volatility, stability through the cycles, less single socket risk, innovation across the signal chain, and be a leader in the RF space, coupled with a very attractive non-handset business that is exposed to nice areas like Wi-Fi, defense, aerospace, base and industrial combination being north of 50 points of gross margin, 30 points operating income, throwing off a nice position of cash and being in a position to continue to grow outside of that. So I'm excited. Great. Well, thank you very much. Great. Thank you.