Qorvo, Inc. (QRVO) Q2 2012 Earnings Report, Transcript and Summary

Robert M. Van Buskirk - Corporate Vice President, President of Multi Market Products Group and Head of New Multi Market Products Group Doug DeLieto - Vice President of Investor Relations Steven E. Creviston - Corporate Vice President and President of Cellular Products Group Robert A. Bruggeworth - Chief Executive Officer, President, Director and Member of Strategic Development Committee Norman Hilgendorf - Vice President of Corporate Development William A. Priddy - Chief Financial Officer, Corporate Vice President of Administration and Secretary

Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division Venkatesh Nathamuni - JP Morgan Chase & Co, Research Division Cody G. Acree - Williams Financial Group, Inc., Research Division Harsh N. Kumar - Morgan Keegan & Company, Inc., Research Division Edward F. Snyder - Charter Equity Research Quinn Bolton - Needham & Company, LLC, Research Division Nathan Johnsen - Pacific Crest Securities, Inc., Research Division Anthony J. Stoss - Craig-Hallum Capital Group LLC, Research Division Dale Pfau - Cantor Fitzgerald & Co., Research Division Ittai Kidron - Oppenheimer & Co. Inc., Research Division Michael A. Burton - Kaufman Bros., L.P., Research Division Parag Agarwal - UBS Investment Bank, Research Division Sujeeva De Silva - ThinkEquity LLC, Research Division Aalok Shah - D.A. Davidson Blayne Curtis - Barclays Capital, Research Division Todd K. Koffman - Raymond James & Associates, Inc., Research Division

Ladies and gentlemen, thank you for standing by. Welcome to the fiscal -- the RF Micro Devices Fiscal 2012 Second Quarter Conference Call. [Operator Instructions] This conference is being recorded today, October 25, 2011. It is now my pleasure to introduce our host for today, Mr. Douglas DeLieto, Vice President, Investor Relations for RFMD. Please go ahead, sir.

Thanks very much, Dianne. Hello, everybody, and welcome to our conference call. At 4:00 p.m. today, we issued a press release. If anyone listening did not receive a copy of the release, please call Samantha Alphonso at the Financial Relations Board at (212) 827-3746. Sam can fax a copy to you and verify that you are on our distribution list. In the meantime, the release is also available on our website, rfmd.com, under the heading Investors. At this time, I want to remind our audience that this call will include forward-looking statements that involve risk factors that could cause our actual results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statements contained in the earnings release published today, as well as our most recent SEC filings for a complete description. In today's release and on today's call, we provide both GAAP and non-GAAP financial measures. We provide this supplemental information to enable investors to perform additional comparisons of operating results, and to analyze financial performance without the impact of certain non-cash expenses for unusual items, that may obscure trends in our underlying performance. During our call, our comments and comparison to income statement items will be based primarily on non-GAAP results. For a complete reconciliation of GAAP to non-GAAP financial measures, please refer to our earnings release issued earlier today, available on our corporate website, rfmd.com, under Investors. In fairness to all listeners, we ask our participants, please limit themselves to one question and to a follow up. Sitting with me today are Bob Bruggeworth, President and CEO; and Dean Priddy, Chief Financial Officer. I'm also joined by Eric Creviston, Norm Hilgendorf, and Bob Van Buskirk, who lead our Cellular Products Group, Multi-Market Products Group and Compound Semiconductor Group, respectively, as well as other members of RFMD's management team. And with that, I'll turn the call over to Bob.

Thanks, Doug, and welcome, everyone. We're pleased to report that RFMD continues to transition very successfully into a highly diversified, growth-oriented supplier of RF components and compound semiconductors. Despite the challenging macro environment, our product and technology leadership, and our sharp focus on operational excellence, are enabling RFMD to deliver broad-based market share gains, revenue growth above expectations, and greatly, improved financial performance. RFMD's September quarterly revenue grew approximately 14% sequentially, well ahead of the growth rate of our underlying markets. We believe this is the beginning of a multiyear product and technology cycle, during which, we will achieve consistent growth, diversification and market share gains. Of note, sales of RFMD's 3G/4G Cellular Products, grew more than 50% sequentially during the September quarter. We supported aggressive new product ramps at Foxconn, HTC, Samsung, Huawei, ZTE, RIM, LG, Motorola and others, and sales of our 3G/4G components, totaled more than 40% of our cellular revenue. We also extended our early leadership in LTE. We captured new design wins in 4G LTE, with our ultra high efficiency 3G/4G PAs, also called our Phenom product family. We ramped new switches and antenna control solutions, in support of leading 4G LTE smartphones. We are also supporting platform integration at multiple LTE baseband suppliers using our next-generation PowerSmart LTE power platform. In China, demand for our components exceeded expectations, not only in 2G, but also in 3G. New product ramps in 3G, included a recently launched Android smartphone from Lenovo, that features MediaTek's latest 3G chipset, and multiple RFMD PAs. Sales of RFMD's 3G entry components for emerging market handsets, doubled sequentially, and we expect sales would double again in the December quarter. Emerging markets, in particular China, represent the next big smartphone market, and RFMD enjoys an extremely strong, early-mover advantage. We have extensive product design resources, located domestically in China, and we have deep relationships with hundreds of domestic brands. In 3G and 4G, RFMD continues to win by solving the increasingly-complex RF challenges, confronting device manufacturers. We are delivering industry-leading products and technologies to the world's leading OEMs, and we believe we are on a path to expand our market share significantly, just as we did in 2G, with our product and technology leadership. Today's overlapping macro trends of mobility, broadband data and energy efficiency, present our industry a significant, long-term growth opportunity, while RFMD's industry-leading products and technologies position us to outpace our industry and deliver market share gains. In the cellular market, we are expanding our customer relationships, and winning additional content at the world's leading smartphone manufacturers. PowerSmart continues to proliferate across our customers smartphone platforms, and we are pleased to announce today, that PowerSmart shipments exceeded an annualized $100 million run way -- run rate during the September quarter, a goal we had originally set for the end of our fiscal year. In SSCPL, our switches, power management ICs and antenna control solutions, continue to grow aggressively. During the quarter, SSCPL revenue nearly doubled for the third consecutive quarter, placing it near $100 million in annualized revenue. The customer list for these solutions include Foxconn, HTC, Samsung, Huawei, ZTE, RIM, LG, Motorola and others. This positions RFMD extremely well, both in terms of product mix and customer exposure, as we are in production today in support of all of the world's leading smartphone manufacturers. This dynamic is similar to our ultra high-efficiency Phenom PAs. Phenom is ramping aggressively across multiple customers and product segments, including smartphones, 3G entry handsets and connected devices. This suggests very strong growth for this product family, for an extended period of time. On the baseband side, our newest design wins set up continued dollar content expansion, in both smartphones and 3G-entry handsets while leveraging our already significant exposure to the industry's leading baseband providers. Today, these include Qualcomm, Intel, ST-Ericsson, MediaTek, Spreadtrum and others. Regarding Qualcomm, we're very pleased to announce that during the September quarter, Qualcomm selected RFMD for multiple power amplifier sockets, in support of their reference design for the 3G entry market. These PA wins are a major milestone for RFMD, not only for the recognition they afford our new products and technology, but for the incremental growth opportunities they layer on in calendar 2012 and beyond. Moving beyond cellular, RFMD's Multi-Market Products Group, is supporting a number of near-term growth drivers, most notably, our high-performance GaN products, our expanding portfolio of WiFi and SmartEnergy front ends and our point-to-point radio chipset for cellular backhaul. There's broad-based demand for RFMD's newest GaN products to next-generation military radar and cable television line amplifier applications. We recently added another significant customer for our GaN baseline amplifiers, and we're on pace to double our GaN revenue in fiscal 2012. In WiFi, our addressable markets encompass a growing list of applications, featuring both single- and dual-band architectures. As performance requirements for these devices become more stringent with the proliferation of smartphones, tablets and automotive applications, the market is increasingly favoring RFMD's high-performance, standalone front end modules. In SmartEnergy, the market continues to expand with strong design activity in North America and Europe. We now have over 10 customers in SmartEnergy, leveraging RFMD's front end strengths. In cellular backhaul, we're enjoying increased customer traction for our point-to-point radio chipset, as cellular operators increasingly demand, mobile broadband data -- increasingly, expand their demand for mobile broadband data to expand their capacity in their cellular networks. During the quarter, we won multiple designs at a top-tier networking and telephone equipment provider, and we anticipate shipments in support of their next-generation point-to-point radio solutions to begin as early as the March quarter. Recently, RFMD announced our Compound Semiconductor Group or CSG to expand upon our strategic initiative, to exploit our compound semiconductor expertise. Within CSG, RFMD is targeting new, high-margin opportunity, in non-RF markets that support our growth and diversification goals, while leveraging existing engineering and manufacturing resources. CSG includes RFMD's Foundry Service business unit, our newly-formed Power Electronics product line and our New Technology Commercialization Center. By calendar 2015, we believe the vertical market served by CSG, will total approximately $1.5 billion. Looking in the December quarter, our 3G/4G product portfolio continues to perform extremely well, and we believe RFMD will once again, be a share gainer in the smartphone market. Overall, we are executing on improving growth and diversification strategy, and we've got an impressive pipeline of products that position us well for calendar year 2012. And with that, I'll turn the call over to Dean.

Thanks, Bob, and good afternoon, everyone. First, a quick reminder that income statement results and comparisons will be non-GAAP. Revenue for the September quarter increased 13.8% sequentially to $243.8 million. Revenue exceeded analyst expectations, as CPG took share in the 3G/4G segment, and our emerging market business rebounded sharply. The sequential strength in CPG, more than offset a double-digit decline in MPG revenue, caused by softness across their end market. Exciting products and technology cycles, including PowerSmart, high-performance switches, antenna control solutions, Phenom and GaN, all contributed nicely to our better-than-consensus revenue performance. Regarding customer diversification, we've never been better positioned, and today, we're growing with the customers, who are also growing. Gross profit was $95.4 million, with gross margin expanding 60 basis points to 39.1%. Operating expenses were $58 million, with G&A of $9.4 million, sales and marketing of $13.2 million and research and development of $35.4 million. Operating income increased nearly 50% sequentially, to $37.4 million, representing an operating margin of 15.3%. Consistent with last quarter -- with last September, noncash share-based compensation expense, which is excluded from non-GAAP results, was approximately $9.8 million, of which approximately $1.5 million was in cost of goods sold. Other expense was $161,000, and non-GAAP taxes were $6.1 million. And net income for the September quarter was $31.1 million, with earnings of $0.11 per diluted share based on 282.7 million shares. Now going to the balance sheet. During the quarter, RFMD repurchased approximately 1.7 million shares of common stock, at an average price of $5.72. Total cash, cash equivalents and short-term investments were $276.6 million. RFMD's inventory was flat at $163.2 million, with inventory turns improving to 3.8. Net PP&E was $208.3 million compared to $214.8 million last quarter. CapEx during the quarter was $7.8 million, with depreciation of $14.5 million and intangible amortization of $4.6 million. We continue to expect fiscal 2012 capital expenditures to be approximately 4% of sales. Return on invested capital was 29.4% for the September quarter. RFMD generated $38.4 million, and cash flow from operations during the quarter, and free cash flow was $30.6 million. Now some comments to assist you on modeling our December financial performance. We currently expect the following: RFMD expects quarterly revenues to increase sequentially to approximately $250 million. RFMD expects CPG revenue to outpace the cellular market, driven by 3G/4G share gains. RFMD expects a sequential decline of approximately 10% in MPG revenue. RFMD expects non-GAAP gross margin to be approximately flat, based on projected revenue mix, and non-GAAP operating expenses to increase sequentially, approximately $1 million, and RFMD expects a non-GAAP tax rate of approximately 16%. Similar to the September quarter, we expect solid execution to help mitigate a challenging environment. RFMD is delivering continued growth and diversification, based on product and technology leadership, and we expect to support to -- and we expect this to support continued improvements in our financial performance. And with that, we'll open your call up -- this call up to questions. Thanks.

[Operator Instructions] Our first question comes from the line of Ittai Kidron from Oppenheimer Funds. Ittai Kidron - Oppenheimer & Co. Inc., Research Division: Dean, I wanted to dig in into MPG a little bit. If I got your comments correctly, you said you had a double-digit quarter-over-quarter decline in September, and now, you're also assuming another 10% decline into the December quarter. So that's a very steep 2-quarter erosion here in the business. Can you give us a little bit more color on what are the verticals within MPG that you're having challenges with? And do you feel that December would represent a bottom on that business before moving forward?

Ittai, I'm going to turn that question over to Norm Hilgendorf, Head of MPG.

This is Norm Hilgendorf. Thanks for the question. Yes, we've been experiencing broad-based softness, really across all of the MPG markets. It just burst across all of our geographies from Asia, Europe and North America. North America's a little bit better than the other regions, but it's really spread across all geographies, and it's also spread across nearly all of the multiple markets that we serve in MPG, with most of the markets declining quarter-over-quarter. Ittai Kidron - Oppenheimer & Co. Inc., Research Division: Do you have any sense on whether this is -- you feel like in December, you'd reach a bottom here? Or do you see further risk to that business?

With regard to this, we really feel like it's largely a macro effect that we're dealing with right now, and so it's really very difficult for us to assess or predict how long that macro effect is going to be driving the business.

And our next question comes from the line of Edward Snyder from Charter Equity Research.

Several questions. You mentioned a challenging environment. I expect that to refer almost exclusive with MPG given your guidance and the comments you just gave there?

That is correct, Ed. We believe that cellular market grew in the September quarter, and it's poised to grow once again in the December quarter. So those comments were more MPG-related.

Okay. And then, can you give us some color on what Nokia was as a percentage of revenue? I know you'd been guiding it for down. Did it hit your expectations? Is it a little bit weaker, little bit stronger? And what do you expect for bottoming? Will it bottom here or we have more to go?

As far as Nokia is concerned, it pretty much played out in the quarter as we expected. They did come down as a percentage of sales, primarily, because of the significant growth that we saw through our new products into all the new customers. As we all know, we're doing quite well in the market. And as far as bottoming goes, that will really determine -- will be determined by their performance in the market. As we commented last quarter, our share there has pretty much bottomed. So we're also waiting the launch of some of the Windows 7 phones, and we've got content in those. So as far as where they end up as a percent of sales with us, it'll be -- it's much dependent on their ability to execute in the market. But the reason they came down, quite honestly Ed, we're being very successful with the new products that we've been introducing to the marketplace.

Yes, leads to my other questions. Windows 7 phones are Qualcomm reference designed, almost straight down the line. Is this -- you've mentioned in your press release that you landed PA slots on the Qualcomm reference design, which my memory is the first-ever, is that correct? You've never been on the reference design before?

I think it was, Ed, maybe 10 years ago. It was with CDMA, let's put it that way. Before wideband CDMA, that's a fair point.

All right, but so in referring to those reference design wins, is it safe to assume, since it's Windows 7, that it's exclusively or the majority Nokia?

Actually, Ed, I'm sorry if I represented the Qualcomm wins being in a Windows 7 phone. The PA wins that we were talking about were for the 3G entry marketplace.

So the PA wins for the Qualcomm references, right?

Correct.

Okay. So the Windows -- you will be on the Windows 7 phones for Nokia but maybe not in the PA slot?

Yes, this is Eric Creviston. Yes. As you know, we have several reference design slots with Qualcomm for switch opportunity. So that is the most direct quick fit -- quick design wins. We're also working, of course, on a lot of power amplifiers that are compatible with the Qualcomm reference designs, which would be potentially, used by Nokia as well.

Right. And then so it's about, if you could refresh my memory, about 12% of revenue would be a fair assessment for what Nokia may settled in this quarter?

They came in a little under 15% of revenue.

Okay. And then in terms of -- I don't know where to start here, your SOI product sounds like it's really tearing it up. Is that primarily, Qualcomm reference design wins are you seeing it adopted all over the place?

The SSC wins, literally all over the place. Across nearly, every baseband manufacturing, across nearly every OEM as well. Certainly, exceeding our expectations now. And that's driven by, really, the high linearity and low loss and high isolation that we're getting with our products. We began referring to antenna control solution, as you might have noticed, which is sort of a subset of the overall switch opportunity. As you began to, again, pump a lot of data through these mobile handsets, what we're finding is that multiple antennas are being used. And as you're trying to get even a single antenna to address many different frequency bands, you'll find the switch contents is specifically, tailored towards handling the antenna control. And so that's been definitely a source of a big uptick as well there.

And so Eric, in the past, you've mentioned how this product was semi-revolutionary for RF Micro. And the industry, in general, in terms of performance, I know we've talked to most of your competitors about what it is and what it does. And it sounds like, certainly, from the wins you've got here, is it actually low-cost linearity or a footprint that is driving this? And is it significantly different than everything else out there? So these wins kind of a precursor to what we can expect for this product in most of the handset designs?

It is based entirely on performance. The application for our switches again, in particular, being close to the antenna, is very high linearity so that you can process simultaneous VoIP and LTE, for example. That's one of the things that's allowed by the high linearity of our control solutions. So at this point in time, there's always a lot of pressure for size in the handsets. So we're constantly driving the size down with new packaging techniques and so forth. But even faster than that, there's a drive to getting more and more frequency bands supported in the handset. And that's driving the switch from 4-throw or a 6-throw that you would have had last year to new designs that are 12-throw or even 14-throw switches right at the antenna interface. And then moving to multiple antennas, you can see applications where you have multiple switches, handling diversity, as well as the trends from the past and all of the signal routing. You need very high linearity, low in loss and high isolation. So it's really performance that's driving that product line.

And if I could touch on PowerSmart, you're well ahead of your guidance in terms of the revenue growth of this product. Can you just give us a quick thumbnail sketch of who's using it at this point? And I think last quarter, almost exclusively, the revenue came out of Samsung. Is that still the case for the report you just published?

So Samsung is still the largest customer for PowerSmart, but we are now shipping full volume production to LG and RIM, as we had forecasted. We're designing into many other handsets as well. We'll be ramping HTC and also Huawei during this fiscal year. And at least, one other handset manufacturer, we expect to ramp as well, during this fiscal year. So we expect to exit the year at least 6 OEMs. We're also happy to say that during this quarter, the December quarter, we're expecting to ramp another version of the PowerSmart family, with a second baseband provider at Samsung. So we'll be broadening out the footprint at Samsung for the converged power amplifier class. And this class -- in this case, for the first ramps, they will be the power amplifier portion, the converged power amplifier, part of PowerSmart. In 2012, we expect to add to that, the power management piece, and another design cycle. And as well, our antenna switches.

Okay. Are you avoiding saying that is, it sounds like ST-Ericsson, based on the power -- the configuration there, or can you mention it?

So at this time, yes, we're not talking about exactly which are the baseband providers we're aligned with.

Okay. And then can you quickly, last question, give us some update and guidance on Phenom, which apparently, is getting a lot of -- certainly, a lot of interest in the handset side of the business. But it hasn't yet to ramp revenues, the same extent that you have with your products.

That's right. Phenom actually, as we've mentioned before, has a much bigger sales funnel, even than PowerSmart. I think that the opportunities there are just vast. In fact, we're working on production ramp-ups in very late-stage design cycles across 4 different baseband manufacturers, for the Phenom product line. We're in production, as you know, with RIM and HTC, those ramped last quarter. And we're now, we're ramping Lenovo this quarter, and several other Chinese manufacturers. So what's interesting for Phenom is that the breadth of the application. So we're talking about everything from the real low-tier, cost-driven 3G-entry market, all the way up to the highest tier smartphones, and even, LTE smartphones, all working on the Phenom product family. So it's really a revolutionary product for us in terms of the scope of application.

I'm sorry, one more question. There's been a lot of feedback over price pressure, and a more aggressive pricing from some of your competitors, especially in China. What's your current guidance on ASP erosion for the year? Are you seeing that pressure at all? And will it -- do you think it's going to increase throughout 2012?

Well, for the cellular side at least, I can speak to that. We think in general, the pricing environment in total, is about as it has been historically. But there's no question that with the share gains that we're now seeing, and what we're projecting over the coming couple of years. We're winning based on performance and product leadership that our tough competitors are clearly noticing that in certain targeted customers and segments. We've had a few cases where competitors would come back and -- they've fallen so far behind the technology, they really have had no choice but to compete on price. And the bottom line is, we're very comfortable with our cost structure. Our new products are not only much better performance, but also, much lower in cost than what we've had in the past. So we still expect we're going to win the business, and we'll let the pricing take care of itself.

And our next question comes from the line of Harsh Kumar from Morgan Keegan. Harsh N. Kumar - Morgan Keegan & Company, Inc., Research Division: I think if I read correctly, your 3G/4G business was up 50% in that range twice, 2 quarters in a row. I'm wondering how should we think of China growing simultaneously? Is China a big part of that growth for you? And also, where do you see that 40% total 3G/4G business going to, let's say, by March 2012, or whatever timeframe you want to give us color on? Thanks. And I have a couple of follow-up, one more follow-up.

I'll go ahead and begin and talk a little bit about the 3G. And I believe it was, actually, our third quarter where we've grown greater than 50% sequentially, so it is very broad-based. And as we look forward, I'll let Eric address that. We're beginning to see some of the 3G expansion come from 3G entry in China. And in a lot of our commentary, the major players in China, Huawei, ZTE, that's already included in that growth rates that we're talking about greater than 50%, but we are very excited about a lot of more the domestic manufacturers, as they migrate from 2G to the 3G entry. And so being -- working with people like Qualcomm and MediaTek, we believe that is what's going to drive a lot of the growth, and expand our dollar content as things move forward, and then layering on also, our switch business. Harsh N. Kumar - Morgan Keegan & Company, Inc., Research Division: And can you give us some idea of where that 40% can go, Bob, in the mid- to long-term?

So as far as the mix between our 3G/4G business, if you will, and 2G? Harsh N. Kumar - Morgan Keegan & Company, Inc., Research Division: Yes.

Yes, I'll let Eric go ahead and talk about our goals.

Yes. So you know that we've, obviously, made significant progress there in getting the cellular product mix now to over 40% 3G. We said by the end of this fiscal year, we're expected to be at 50%. We're very much on track to do that. And from there, I think that we can get it up to the point to where it is exactly the same as the mix in the market where you can get to where approximately, say 3/4 of the business could be 3G/4G-based in the future. So in our goal, of course, is to get our share, the 40% across-the-board. We're there, in 2G today. We're not anywhere near that in 3G/4G. We still have got a lot of room to run, and that's what our product lines are based on doing. Harsh N. Kumar - Morgan Keegan & Company, Inc., Research Division: Got it. And then my follow-up, your guidance, if I listened to your commentary, everything is going great in CPG. I know that MPG is going to be a little bit off. Your guidance looks conservative, seemingly. Maybe you could talk about what is concerning you at this point in time? Or is it just simply that, that you're being cautious again?

Harsh, I think it is safe to say that we're being cautious again. There is concerns out there about the macroeconomic environment. Things are not as strong as what we expected at the beginning of the fiscal year. And as we have the last couple of quarters, we found it very prudent to take a cautious outlook. We do expect the market to grow, and we expect to be a share gainer in our cellular business. Harsh N. Kumar - Morgan Keegan & Company, Inc., Research Division: Fair enough. If I can ask one more for Dean. Dean, I think one quarter ago, you've given us sort of a rough guideline of margins versus revenues. When do you think you maybe -- what revenue point do you need, Dean, in order to get to the 40% or 40%-plus kind of a gross margin number?

Yes. Still not going to rule out this year, to be able to obtain 40%. So I think being more realistic, given the fact that when we gave that particular guidance, our MPG business was trending between 25% and 30%, probably a little closer to 30% of our total revenue. And this past quarter came down below 25%, and is probably trending towards closer to 20% in the December quarter. I think without a bit of help from the MPG markets, achieving the 40% might be a bit more difficult. So I think to be on the safe side, we'll just stick with flattish gross margin at current projected revenue mix. But clearly, the drop off in the MPG business is having about a margin point impact on our total gross margin. So as we see those businesses begin to come back, then you'll also see the gross margin begin to reflect that.

[Operator Instructions] Our next question comes from the line of Mike Burton from Kaufman Bros.

First on the -- for Eric, I think on the Qualcomm reference designs, congratulations there. It sounds like Phenom was successful in getting into those platforms. Can you help us, maybe, give us a sense of the size of that addressable market? Or if you can’t do that, at least maybe you can talk a little bit about the platforms? Are they already shipping for Qualcomm or perhaps, a sense of timing on when that should start to come in for you guys?

Sure, I'll be happy to. First off, I want to clarify that was actually not Phenom-based products. These are some of our -- the family that was the generation before that, called Genesis, and also, some 2G product and some 3G products, sort of pre-Phenom products that got into this reference design. The reference design is actually just being released, and so it is not in production yet. And I think just generally, when you look at the 3G entry market, we're looking at a market that's something on the order of 150 million units this calendar year, and growing at about 40% to 50%, we think, next year. So it's a very large market opportunity, generally with the 3G entry category.

Okay, great. And then, you've talked before about some of the product cycles with PowerSmart, Phenom, SSCG, all having higher than corporate average for gross margins. I was wondering if that -- you could still talk to that? And then also, maybe with this -- on the 3G entry level, how does that impact margin as that begins to ramp?

Yes. First of all, within CPG, what we saw this past quarter was our SSCPL product line and 3G/4G product lines, all having above corporate average gross margins, where margins were a bit below corporate averages within our straight 2G business, particularly, the emerging market business through China and Nokia and Samsung. So balance-wise though, CPG turned in a strong margin performance for the quarter, and expected to do the same thing the next quarter. Really, where we're below corporate average is 2G, as you might expect.

Okay. And then lastly, for me, what percent of sales is China Inc. at this point? And how should we expect that to trend in coming quarters, given kind of the different seasonality in that market?

While Dean's looking that up, just to be clear, when we say China Inc., that excludes ZTE, Huawei. So we're looking at more of the white-box manufacturers.

Yes, exactly. Obviously, outside the Tier 1s.

Outside of Tier 1, okay.

Yes, historically, that's running close to 20% or so of sales, plus or minus a few points. For competitive reasons, so I don't want to give away too much there.

I think what's consistent is, what we said at one of the last conference we spoke at was that China was starting to come back, and we saw that in 2G and 3G entry along with TD-SCDMA.

Our next question comes from the line of Aalok Shah.

A couple of quick questions for me. In terms of Phenom, in terms of housekeeping, you may have already said this, but 10% customers in the quarter besides Nokia, were there any?

Yes. We had 2 10% customers during the quarter.

And you're not going to break them down at this point?

I think -- it's certainly Samsung was a 10% customer as well. And actually, we had a third that was very close, but didn't quite make the grade, maybe next quarter.

Okay. And then Eric, from a high-level, this Galaxy S II platform's been great for you guys, but we saw Galaxy S I kind of be a hindrance to one of your competitors, as it kind of rolled off. How do you guys kind of protect yourself for potential Galaxy S III? And how do you guys think you're positioned now going forward with them?

Well, of course, our key strategy is to win Galaxy S III. But beyond that, I think, it's also important to realize that just the total breadth and diversification of the portfolio now. Our diversification with products and across baseband providers, and also, against product -- across products, is dramatically different than it's ever been in the history of the company. So we have a lot of horses pulling this forward here. And even within Samsung, as I said, we're engaged with literally, all the baseband providers that they're dealing with, and across multiple basebands, now even for the converged PAs. But also for Phenom and for switch products and for 2G and so forth, so we have a large and diversified business, even within Samsung that's been outside of Samsung as well, really dealing with every single phone manufacturer and every baseband provider, and in a growing way. So if you look at our results in Q3, even in Q2, excuse me, the growth was incredibly broad-based for the Cellular Group. It wasn't just Samsung by any means. We had growth across nearly, every customer. We had greater than double digit growth in each of our product lines, so I think the RFMD team did an excellent job of delivering on the product leadership, and executing those product plans, and that's going to continue to grow as we go into next year.

So if I hear that currently, it sounds like we should not be looking at each individual platform at Samsung. You may win some and you may lose some, but overall, the pie is increasing. Is that the way I should think about it?

Sorry, Eric. I was just going to say, our product plans at Samsung, because it includes some of our MPG products as well. Today, we believe we're the #1 supplier to them, and it's our expectations next year, we will be the #1 supplier as well. And I think that's why Eric went through a lot of details about how broad-based we are a supplier to Samsung.

Okay. And then lastly, in terms of Phenom, I mean, when you guys start to ramp up with -- or as we start to ramp up with Qualcomm, I mean, do you guys win -- do you expect to win the entire RF content in those types of phones or is it going to be split? How do you guys view the entire board as we go forward as well for those types of devices?

It varies by customer. We have several customers, which are qualifying, at least 5 bands of Phenom. And then in various handsets, they'll use different combinations of them. In some of the first drafts we've had so far, it's only been in 1 or 2 of the bands in the phones. So it really varies across a lot of the customer base. But as you add on LTE as well, I mean we have the opportunity, certainly, to address 6, 7 bands, all with Phenom types of products in some of the customer handsets.

And Eric, sorry, one more last quick one. In terms of how you view the overall RF market now going forward, we've seen some integration by some of your customers are asking for credit integration. How do you view the overall RF content? Is it still going up? Is there still a content increase story happening here, overall?

There's no question that there is. Yes, we're definitely still seeing it. It is really amazing to look at what our customers are planning and probably, even more amazing, what the baseband providers are planning in terms of coverage as you go through 2012 and 2013. LTE is coming on very, very rapidly. I think it's the first cellular generation change that I can recall where there's been true end-user demand. For the first time, the end users understand why they need all of these data that's being offered, and now, they're demanding it at much higher rates and lower costs and better coverage. So that's pulling, really, a dramatic increase in the number of bands that are in the phones. You still have backward-compatible for 2G and at least, 4 bands or so of 3G. And then you're adding on 1, 2, 3 or 4 bands of LTE on top of that. I mean, real high-volume products are going to have very high band counts over the next couple of years. And combine that, of course, as we said, with the multi-mode progression, and then the switching content, I think it's really going to amaze people how much switching is necessary to make these phones work. And when we talk about antenna control solutions, as well as kind of a growing subset of that, we want to highlight, you're not only using switches to route the signals around within the radio, you have a massive switch that's pulling it altogether at the antenna port, and then a whole new class of components right at the antenna to switch between multiple antennas or to actually tune antennas. And so when you add all this up, it is definitely, still a content-growth story for the RF market.

And our next question comes from the line of Cody Acree from Williams Financial.

Maybe, Eric, following up on that last comment, I guess can you talk about maybe how the importance of the RF blocks, of it coming kind of a more of a critical consideration for the OEMs? And then you're starting to see your partnership and your relationship with the baseband providers starting to be somewhat of a selling point for them to start to use you as an opportunity to gain share?

I believe that is true. I think one of the other things that differentiates RFMD, is our systems capabilities. So in addition to the product and technology leadership, along each of products we've talked about, in 3G and 4G with PAs and switches, we have the power management and the tuning capability, and we have the ability to do the entire RF reference design, and in fact, that's one of our key new initiatives, is that we are actually developing reference designs between the transceiver and the antenna. And I think that the baseband providers are seeing the value in that, and we're able to help influence system-level specifications and component specifications for the RF because of that.

Well, I guess from a high level then, now that you have some real success with PowerSmart from larger OEMs. I guess what's the attitude of potential customers and the baseband providers towards a converged solution? Are you starting to see more movement there as these OEMs driving success?

Yes. I mentioned, I think, in the last quarter's call, that once the S II was really shipping in volume, and people were able to open it up and benchmark it, I mean, it really, I think, opens a lot of people's eyes about what you can do with converged solutions. And as we try to pack all of these different bands and modes in, there is no question that for a large category of devices, size is going to be the primary driver in a lot of cases. And it's really hard to argue with what you can do with converged, especially with our PowerSmart 4G coming up next year, which will be even broader band, pick up a lot of the LTE bands, that currently, we have satellite PAs for. So we're going to have, I think, a real opportunity to help drive size down, while functionality goes up with that product line. So I think, RFMD is very uniquely positioned because we have true product leadership in converged PAs, clearly. We have the world's best performance in the 3G and 4G PAs, and then we also have all the switching capabilities, that is really required to drive LTE forward. So we're really unique and that we can help the baseband provider and the end customers make the right trade-offs, amongst all the different architectures.

And I guess over the last quarter or so, maybe quarter or 2, we started to hear a bit more talk about your competitors to finally realizing maybe the opportunities in this space. I guess what are you seeing competitively when you go out into the bake off, as far as alternatives and what would you expect in the coming quarters?

It's actually not changed at all in the last quarter or 2. It's been pretty consistent, which is -- there are still no other direct competitors for full converged solutions that have power management and power amplifiers integrated. We know that everybody's working on them, generally working with third-party power management providers to try to come up with a combined solution. What people are doing to try to second source of converged PAs, is that they're doing highly-integrated hybrid PAs, which have multiple die in them, and 2G and 3G put into a single pack is just a reasonable substitute for the functionality that we have.

And then lastly, could you give a bit of color? You've given some nice color on the size of PowerSmart and the switches. What about for Phenom? How large is that now?

So it's -- it did grow into the single-digit millions, in the September quarter. It is on a ramp rate, which is slower than PowerSmart as we said, because it is a lot more discrete bits and so forth. But there is no question that it will also exceed the $100 million run rate next year.

And our next question comes from the line of Parag Agarwal from UBS.

[Technical Difficulty]

Our next question comes from the line of Blayne Curtis from Barclays Capital.

Maybe circling back to PowerSmart, you obviously saw -- reached your goal 2 quarters early. I don't know if you're willing to throw anyone out there. But one, kind of curious if you thought that would be additive to your growth in December? And then just a point of clarification, when you talked about ramping new customers for fiscal '12, is that on a different -- are you going to see some diversification on the baseband as well in fiscal '12?

As far as PowerSmart goes, I don't like saying we reached our goal. Our goal is to continue to grow PowerSmart revenues through the next few fiscal years. And as you've commented there and Eric talked a little bit early in the call, of seeing our attach rate grow with the number of baseband manufacturers. We're working with 3 today, and look forward to continuing to work with more. So we haven't "reached our end goal with PowerSmart." We set it out there as a revenue target to help people understand what we believe was going to drive our growth in our cellular business. So as we look forward, we haven't achieved our goal yet. Our goal again is to see the industry, more broadly adopt this, whether it's the baseband manufacturers or the handset providers.

Okay. Maybe asking a different way, when you look at your growth for December, in September, you saw multiple new product lines, adding quite a great deal of revenue. When you look at your guidance, do you expect all these ramping products still to grow? And kind of any color on what's kind of driving the December quarter will be helpful?

What we said -- what we believe is going to be driving our growth as we move forward, is our 3G/4G components, which is Phenom, which is the PowerSmart, which is our switches, as well. And we really didn't want to get in the granularity of that.

Got you, okay. And then maybe moving to China. Obviously, if you could maybe parse out where you're see -- where you saw the strength and where you continue to see the strength? Is it an uplift in the market or are you seeing ramps of new designs? If you could maybe give some color as to what are the main factors you're seeing there?

As far as China goes overall, I think there's a couple of different dynamics. As we mentioned earlier about the 3G entry market beginning to take off, clearly, that's a content expansion play, and we do believe we're taking share as a result of that. Also TD-SCDMA, ramping with 3 different baseband manufacturers, we saw very nice growth in the TD, which again, is an expansion in dollar content. And then we also layer on that, we did see the 2G market also firm up a little bit. And again, we talked about that later in the quarter, and then coupled with a lot of the Chinese manufacturers starting to adopt our switches as well.

And our next question comes from the line of Parag Agarwal.

Just wanted to follow up on your comments about the SCDMA. Just wondering what is the rough revenue contribution you are seeing right now? And how do you expect it to ramp going forward? And also if you would, if you could elaborate the competitive situation for that TD-SCDMA?

So I think he wants Eric, a market comment on what we see the TD market and a little bit more about our progress.

Yes, okay. So we've seen -- TD has been growing nicely throughout this year and will continue to grow next year. We think last quarter, it was between 10 million and 15 million units. Our own sales into that category was well into the mid-single-digit millions last quarter. So significant volume for us there already. I wouldn't describe TD as a hockey stick. It's been growing pretty well throughout the year as I said, and I think it's kind of on a, about a 35% to 40% compound growth rate, that's going to continue through next year. So it's already a very sizable market, and we're very well positioned. I think we have content on all the major baseband supplier reference designs and in all the phones that are shipping today.

Okay, perfect. And how about the PowerSmart for 4G LTE, is it the same baseband provider you're working with or is it a different list of providers you are working with?

It's a broader list of providers than what we're shipping with today. We have 4 baseband manufacturers that we're in kind of design alignment with, and system engineering and so forth. And so we expect it to be a very, very nice product for us. The second half of next calendar year is when we expect to be ramping that. And again, our current PowerSmart family is compatible with LTE. So I don't -- I want to make sure that's clear. I mean, the current PowerSmart product works in LTE mode. It's a question of which bands are supported within the integrated module versus having to add further discrete modules to support. The PowerSmart 4G LTE will have a more flexible digital interface, which allows it to hook up to more baseband manufacturers easily, and broader band, and slightly, a higher performance for LTE mode.

And my last question is about the mix between MPG and CPG. Obviously, MPG has declined but your CPG is growing at a really steep rate. So going forward, should we assume the long-term mix being 80-20 or do you think that you can get the mix back to 75-25?

I think longer term, we expect the mix of MPG business to increase. There's no reason to think that the growth rates over the long term, or the markets are somewhere in the 16%, 17% CAGR range. It's just that, I think the current macro environment is what's really impacting the MPG markets, and that's our business.

And our next question comes from the line of Dale Pfau from Cantor Fitzgerald. Dale Pfau - Cantor Fitzgerald & Co., Research Division: Most of my questions have been answered. I just have a couple of minor ones. On MPG, we've seen the softness here. You haven't indicated, you expect any pricing pressure in that arena, even though the demand is down. could you expand on that a little bit?

Yes, sure. Within MPG on the pricing pressure, we're not really seeing anything significantly different from normal price pressure. We're going through some annual negotiations right now, and it's really typical kinds of level, plus with this kind of soft demand, that, that tends to remove a lot of the price pressure as well. Dale Pfau - Cantor Fitzgerald & Co., Research Division: Okay. And then perhaps, on your Cellular Products, have you seen a shift in the competitive landscape? I mean, you've certainly picked up some wins and some design wins. Have you guys -- have you seen more then just one of your competitors fall back technologically?

Maybe that's a better question for Eric since he's more deeply involved in that. But clearly, the system's level of expertise is helping us in the product leadership, but Eric?

It's a challenging question to answer. I think that we're focused on doing the best that we can do, and we're not here to comment about our competitors and what their outlook or technology roadmaps are. Again, I'm just very proud of the team at RFMD and in CPG in particular, what we've been able to bring to the market across, again, many different platforms, and across different customers and baseband providers, just world-class performance. And I think it would be tough for any competitor to keep up with this now. We've got -- really have momentum behind us. And again, this comes from 4 years ago, when we changed our organization and our strategy, and we've carved off a big chunk of R&D resources, and took them out of our product development and put them into this real research and development role, to break world records about size or performance or cost. Those platforms are now coming out, so this is not something you can just create overnight. And so we're not anywhere near done. We're just getting started. Dale Pfau - Cantor Fitzgerald & Co., Research Division: And could you give us a little bit of guidance on your Compound Semiconductor Group? What order of magnitude in terms of revenues are you expecting that group to be this year, Dean?

I think, Dean, if it would be, how about we lot Bob go ahead and talk about it? He's always used to talking on these calls. Why don't you go ahead and join in Bob?

Yes. Most of you are aware that over the years, our mission statement has been clearly, to express as power components and Compound Semiconductors. And in the background, we've been exploring opportunities to exploit our Compound Semiconductor capabilities, and with the announcement of CSG, we decided that it was really time to move from exploration into exploitation. And that's pretty much what we're doing, based on our Compound Semiconductor technology and our manufacturing excellence. And so within CSG right now, we really have 4 segments, if you will. We have a group we call our new Technology Commercialization Center, and their job is to sustainably incubate new opportunities for profitable growth. And they've actually identified a couple of them, I'll mention them in just a moment. We also put our Foundry Services business unit in there. And we're featuring GaN technology, as well as now, with gallium arsenide technology, and also NBDFE [ph] services. And there's been some landscape changes in the Compound Semiconductor foundry landscape, in particular, in North America. So that's given a little boost to our potential for gallium arsenide-based foundries. And then we also had been exploring concentrated photovoltaics for a while or CPV. We've been working with NREL, but now, we're looking for more meaningful participation in that market, and look for hopefully, some announcements there as we move into calendar '12. And then the other area is in what we call power conversion devices, which is a very exciting application of GaN in our non-RF markets. And so you can think of us developing devices there for applications, such as solar inverters and switchable power supplies for telecom and datacom. So pretty excited about it. Your specific question was the revenue this year, it's in the kind of low single-digit millions, and as we continue to work on our strategic plans for this group, we'll be able to talk more publicly about our expectations. Dale Pfau - Cantor Fitzgerald & Co., Research Division: Great. And Dean, one final question. What's your utilization in your GaAs fabs right now?

Yes, still pretty low by historical standards. I don't know if it's as meaningful of a number as it once was, as we are doing more and more of our products on SOI and silicon technologies. But clearly, it's demonstrating once again, that RFMD has a very capital-efficient business model, with very, very small die sizes and unique architectures, that really leverage our gallium arsenide, our wafer fabs and provide for adequate capacity, continue growing the company without investing in wafer fabrication equipment, i.e., our roughly 4% of sales of capital expenditures for the year.

And our next question comes from the line of Ven Nathamuni from JPMorgan. Venkatesh Nathamuni - JP Morgan Chase & Co, Research Division: So a couple of quick ones. One is given the increase in the number of smartphone shipments, certainly beating the secular trend with regards to seasonality, what should you expect for the Q1, calendar Q1? Do you think you'll be a bit muted because of the percentage of smartphone shipments has been increasing, relative to the overall wireless handset shipments?

I think what we're expecting for now just in general, is normal seasonality. I think given the macro environment, it's just a little bit too early to tell what normality's going to be with the seasonal decline, as you pointed out. Clearly, there'll be some offset factored out also by price erosion, but given our product portfolio, we believe that we'll be able to do a little bit better than the market. Venkatesh Nathamuni - JP Morgan Chase & Co, Research Division: Okay, great. And then one question for Dean. Obviously, did a good job of reducing inventory days q-on-q by about 13 days, but it's still above your long-term average. So what is the expectation for inventory days over the next few quarters?

Yes. Our goal is to get back to more historical terms of 5.5 or so, and hopefully, achieve something closer to 6. I think we'll see a steady progression towards that goal over the next few quarters. I don't think it's going to happen overnight. As more and more of our business has become outsourced, and we've got some very marquee ramps in terms of new products, in particular, the SOI type products. We want to make sure that we protect our customers in those ramps. But I do think you're going to see an improvement in inventory turns once again in the December quarter, and that's becoming more of a trend for the company over the next few quarters. Venkatesh Nathamuni - JP Morgan Chase & Co, Research Division: Okay, great. And then one final question for Norm. On the MPG side of the business, can you help us quantify, what is the end demand weakness, as opposed to inventory reductions in the channel that's driving the overall weakness of your business?

So if I can restate the question, are you asking about overall inventory levels with our customers? Venkatesh Nathamuni - JP Morgan Chase & Co, Research Division: That's right, yes. Overall exactly. So how much of it is in demand versus people just reducing inventories?

We think that what we're really seeing is just mostly cautious ordering patterns. We did have a little bit of excess inventory position with a couple of customers late in the last quarter. But those have been worked through, and they're ordering again now. So overall, we think there's just cautious buying patterns.

And our next question comes from the line of Todd Koffman from Raymond James. Todd K. Koffman - Raymond James & Associates, Inc., Research Division: What is the biggest end market of MPG today?

Sure. Today, the largest end market for MPG would be the wireless infrastructure category. That's part of the wireless products business unit, and that -- it's probably on the order of 1/4 of the MPG business overall. Todd K. Koffman - Raymond James & Associates, Inc., Research Division: And separately, just real quick. Someone asked, what did you say the gallium arsenide utilization of your fab is today?

The GaN utilization of the fab is still extremely small. Of the GaAs -- I didn't give the gallium arsenide, didn't give an exact percentage utilization, because again, it's becoming a little less meaningful. But by historical standards, it is pretty low, which suggests it's certainly below the 80% range and...

Consistent with last quarter.

Consistent with last quarter, yes. We might saw pickup just a tad in this previous quarter, but nothing too meaningful.

And our next question comes from the line of Anthony Stoss from Craig-Hallum.

Dean, if I may, what percent of your booked for your December quarter would you expect in the turn side? Then, I have a follow-up for Eric and Bob.

Yes. We take our in-house number plus the customer forecast. We're very well covered for the guidance that we gave. So in other words, we don't need a substantial amount of turns business in order to achieve our guidance.

Okay, great. And then, Eric or Bob, you talked about increasing content. I'm curious how much of that is kind of a global phone approach and any RF -- whatever activity you might want to comment about just on that, more of the handset guys going to global phone approach, especially for LTE? And Bob, I'd love to hear your thoughts on the average content per phone in China.

Well, I'm sorry to disappoint you but I think, Mr. Creviston loves this story. So I think, you're going to hear it from him instead of me. I hope that's acceptable.

That works for me.

Yes, the trends are very similar to what we've been talking about for several quarters now. The global phone, as you called it, is kind of an extreme case of a higher dollar content, where especially, with LTE, you can get RF content within $6 to $8 range. I think more meaningful, probably is the story, even within regional focus in China is a good example of that, where just going from 2G to 3G at all. And some of the 3G entry category, you mainly have 1 band of 3G but in a lot, you've got 2 bands of 3G, and then backward-compatible to multiple 2G bands as well. So that's just to be able to cover multiple regions within a given carrier's coverage. And so you're still seeing dramatic increases there in the RF, if you go from a couple of bands of 2G to adding to 3G the extra switch bands, and the duplexer content, you're still seeing about a multiplier of 2x to 3x of what you had in 2G by itself. So the global phone gets a lot of attention, and there's no question, that's a very high watermark for RF content. But at all tiers in between, I think you're seeing additional bands being brought in. Just to help the carriers kind of amortize their R&D expense for developing these very expensive platforms, across this many of their geographic regions as they can, not necessarily globally, but even within each region.

And our next question comes from the line of Vijay Rakesh from Sterne Agee. Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division: I just want to figure out, on your quarter, when you look at the air standards 2G versus 3G, what is the split now? And where do you think that ends up in 6 months?

So I think we addressed a similar question earlier, which we had said that the 3G/4G content of the cellular business is now over 40% of our sales. We've said that we'll get that to at least half the cellular business by the end of this fiscal year. And longer term, you can see it getting to 3/4 of the cellular business. Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division: Got it. And also, when you look at -- you said you're ramping with 4 baseband guys on the Phenom post [indiscernible], when do you see these ramping or when do you see actual products come out?

So they're already ramping as of today, and will continue to ramp throughout the calendar '12.

And our next question comes from the line of Quinn Bolton from Needham & Company. Quinn Bolton - Needham & Company, LLC, Research Division: Two quick questions. Just first on the outlook for China. China has tended to be a seasonally softer December quarter. You guys seem to be strength is -- are you guys looking for China Inc. to sort of be up quarter-on-quarter? And if so, is that driven by 3G entry? And then and I have a quick follow-up.

Yes. China this year actually, hasn't played out in the same pattern it typically does. We actually fell down a couple of quarters in the beginning. But I think as you pointed out, the expansion in dollar content going to 3G entry, coupled with TD-SCDMA, we're being cautious about China. As we've said many times on these calls, it runs hot and cold. We just don't always know when. So I think we're taking a cautious view there, but we are looking for China to be up. Quinn Bolton - Needham & Company, LLC, Research Division: Great. And then just for Eric. In the past, you've talked about trying to add some switch filter modules to support the PowerSmart platform as you start to develop PowerSmart 4G. Is that part of the plan? And if so, when do you think we start to see those switch filter modules that are coming into production?

Yes. It's very much a part of the plan and, if anything, momentum has picked up for that category. We had switch filter modules shipping today. I think the real growth is when we include the duplexer. So you'll see switch duplexer models, very well-suited to go with the converged power amplifiers. So second half of next calendar year, I think, you can look at seeing meaningful revenues from those.

And our next question comes from the line of Suji De Silva from ThinkEquity.

On MPG, this is, at least, I guess 2 quarters of decline into December. If you look back in history, how often does MPG decline more than 2 quarters? I have a feeling that, that segment tends to kind of bottom out after 2, but just curious of the context there?

I really couldn't comment to say how often that happens. I don't have that data right in front of me.

Well, this is Bob Van Buskirk. What we talked about it, I think, going all the way back into the recession, where the CPG business snapped back out of it in the MPG business, which was pretty new to RFMD at that time, grew very steadily for 9 quarters. So based on our recent history, we're a little bit surprised as you can imagine, that we have 2 consecutive quarters, but I would think it is a fair assessment that the MPG markets typically, would not be down 3 quarters.

Okay, that's great. And then a couple of questions perhaps for Eric. On the PowerSmart, your competitors, you said, I think, are partnering to try to bring a product to market for power management, versus you guys having it in house. Can you talk about the challenges they may face or would that be a similar competitive approach?

I think the main challenge is, we've been working on power management for over 7 years. We've got a lot of intellectual property there. There is over 50 patents filed just around the power management part of PowerSmart itself. So we've got quite a -- we believe, at least an intellectual property fortress there. But more important, I think, just the know-how. And whenever you're working with a third party like that, you have to work with the specifications. So you have to define the interface. And to be able to tell the power management guy, what he needs to develop and then try it with their power amplifier, if it doesn't work, then they have to change one or the other. It would be a lot more cumbersome, of course, than what we're able to do internally here, where we can realtime, simulate the entire environment with the whole circuit, and make the right trade-offs between power manager, silicon versus gallium arsenide and the PA and where else in the module. So we've got a lot of handles to turn, and I think that probably is why we were able to get our product to market, that was as ground-breaking as it was. So I sure prefer our approach.

Great color, Eric, and one more question, and perhaps, for you again on LTE. Are we at the point yet where people are thinking about LTE volumes and trying to actually, bring the BOM cost of the RF block down? Or are we still at the point where you can increase content just to get LTE units into the market? I'm curious to hear your thoughts. And how you would enable cost reduction, if that were the goal to get to higher LTE volumes?

Absolutely. So at this point in time, there's always pressure on size, features, performance and so forth. And of course, cost. Right now, I think most of the emphasis is just on implementing LTE and getting good performance and in particular, efficiency. Thermal performance at max power whenever you're using LTE for what it was built for, which is to transmit a bunch of data, you're going to be at a high-power level most of the time, and in the thermal performance in the smartphones, since they are very, very tightly packed in there, has become a key brand [ph] criteria. That's why Phenom, that's where it really shines, that's why it has so much uptake.

So dollar content will be stable to up, at least near-term for LTE?

Yes. There's no question, as we're packing in so many new bands and adding LTE to all of the existing RF that's in there. And again, people tend to count power amplifiers and forget about the fact that there's also a lot more switches in there as well, especially, when you add diversity modes and so forth. So total dollar content, definitely grows with LTE.

And our last question comes from the line of Nathan Johnsen from Pacific Crest Securities.

You guys talked about the expectation for gaining share and overall, handset market in the December quarter. I was just curious what you guys view for the market growth expectations for Q4. And then secondly, just looking at the LTE opportunity in calendar 2012, I'm curious for you guys, if you see that primarily, as an opportunity for Phenom? Or do you expect to see a sole amount of PowerSmart sales associated LTE next year as well?

Eric, why don't you address those?

So regarding the -- sorry, your first part of the question was about the overall share gains that we had versus how much we see the market itself growing, then I'll get to LTE. So first off, we do see the cellular market in units growing mid-single-digit this year, maybe mid- to high single-digits. I think we entered the year, most of us were looking for more like double-digit growth in the handset unit, so there's no question throughout the year that, that's been tempered by our sales, as well as the entire industry, I think, but still, it's up year in units but then, for the RF guys in particular, we definitely see dollar expansion. So we'll see more than that in terms of growth in our actual addressable market. And our plans, of course, are to get to 40% share overall, and that we want to do that by being 40% everywhere, very broadly diverse across tiers and customers. We're at that point or even a little better than that today in 2G. We're at that point or close to it, in at least 1 or 2 of the key customers that we're targeting. But there's no question the opportunity for us is to get there in 3G/4G, and we're nowhere near that today. So we've had a couple of great quarters of gaining share there. From the portfolio we have coming, we believe that we're going to be able to keep this momentum going and get to our 40% goal in the long term. Now regarding LTE itself, we see that as a tremendous opportunity next year, going from less than 20 million real units shipped this calendar year, probably to well over 100 million units next year of LTE. And switch from mainly, data modems to full smartphones and handsets that really, hit the mass market a lot higher. And so we see the opportunity for LTE, you had asked whether it's Phenom or PowerSmart, they both address it for different applications and different reasons. I think right now, we would probably say, they're both going to be addressing LTE. And Phenom, probably, I would guess the higher opportunity next year for LTE sales, but it really is across both platforms. And then, of course, our switches are really front and center. And in effect, a lot of cases that's kind of been the door opener for us in LTE. Our switches are required, in a lot of cases, an -- RFMD switches required to make the LTE solution work, and then we begin to bring our PAs and other solutions selling behind that. So we see really across all 3 of our major growth businesses targeting LTE.

That's really helpful. And then one just quick clarification on the market expectations, what are you looking for, for sequential growth for the market in the December quarter?

So yes, I think we're being fairly conservative this year compared to historical seasonality. We're looking again at something in the mid-single-digit kind of sequential growth in December.

And I'd like to turn it back over to management for any closing remarks.

Thank you very much for joining us tonight. In closing, I'd like to reiterate that our product and technology leadership and our sharp focus on operational excellence are enabling RFMD to deliver broad-based market share gains, revenue growth and greatly improved financial performance. In the December quarter, we believe RFMD will once again, be a share gainer in the smartphone market, and we've got an impressive pipeline of products that position us well for calendar year 2012. We thank you for your interest in RFMD, and we look forward to sharing our progress with you as the quarter unfolds. Thank you and good night.

Ladies and gentlemen, that does conclude the RF Micro Devices Fiscal 2012 Second Quarter Conference Call. If you would like to listen to today's replay, the phone number is 1 (800) 406-7325, conference ID 4478096. Thank you for your participation. You may now disconnect. Have a good day.