Skyworks Solutions (NASDAQ:SWKS) Chief Executive Officer Phil Brace said the company remains confident its proposed merger with Qorvo will close within the calendar year, with the combined business expected to pursue $500 million in cost synergies and expand its reach in mobile, aerospace and defense, data centers and other connectivity markets.
Speaking at the Goldman Sachs Communacopia + Technology Conference, Brace said the companies had cleared the expiration of Hart-Scott-Rodino and U.S. Federal Trade Commission waiting periods without further action. Skyworks also completed debt financing for the transaction. Brace said the companies were now awaiting remaining approvals and were “chomping at the bit” to begin work as a combined organization.
Merger Targets Scale, Diversification and Margin Expansion
The company has outlined $500 million in synergies to be achieved over 24 to 36 months. Brace said operating-expense savings would likely be more front-loaded, while factory consolidation would take longer.
Over the longer term, Skyworks is targeting gross margins of 50% to 55%, operating margins of 30% to 35%, and EBITDA margins of 35% to 40%. Brace said investors should monitor the closing of the deal, progress on expense synergies, factory consolidation, growth in broad markets relative to mobile, mobile-business stability and delivery against the company’s financial targets.
He added that his confidence in achieving the stated synergies has increased since the deal was announced. Both companies have also undertaken what Brace called “pre-synergizing work” intended to allow the combined company to begin operating at an improved run rate following the close.
Technology Portfolio Could Expand Into Defense
Brace said Skyworks had not included revenue synergies in its transaction case, but he sees potential opportunities from bringing together the companies’ engineering teams and product portfolios.
On the handset side, he said Qorvo brings antenna tuning, envelope tracking and power-management integrated circuit technologies that Skyworks does not currently offer. Combining the companies’ RF engineering capabilities could create opportunities to approach the RF front end differently, particularly for customers where Skyworks already supplies the full RF front end.
Brace also highlighted gallium nitride technology as a significant opportunity. Skyworks’ technology currently “caps out” at about 12 GHz, he said, while power and RF GaN could extend capabilities into the 20 GHz to 25 GHz range. That could give the combined company greater exposure to radar and defense applications.
“There’s just a tremendous runway” for cost savings as well as innovation and new capabilities, Brace said.
In aerospace and defense, he said the combination could pair Qorvo’s GaN capabilities with Skyworks’ timing, power and bulk acoustic wave filter technologies. Although integration planning has not yet begun in detail, Brace said the companies may find cross-selling opportunities because defense customers also need timing and power products.
Data Center and Wi-Fi Growth Continue
Brace said Skyworks’ data-center-related businesses are growing at least 50% year over year and are currently supply constrained, with book-to-bill above one. The company’s two principal data-center opportunities are power isolation and timing products.
Its power-isolation technology is designed to protect expensive graphics processing units as data-center power architectures transition from 400 volts toward 800 volts, Brace said. The company also supplies low-jitter timing products used in optical networking transitions from 400 gigabits and 800 gigabits toward 1.6 terabits.
Skyworks’ broad markets business represented about 43% of total revenue in its most recent quarter, according to Brace. About two-thirds of that business consists of strategic growth engines, while the remaining third is more consumer Internet-of-Things-focused and is weighing on growth, he said.
The strategic areas include Wi-Fi, automotive and data centers. Brace said Skyworks is in the “middle innings” of the Wi-Fi 7 transition, estimating the market is around the fifth or sixth inning of a nine-inning cycle. He said Wi-Fi 7 has produced a meaningful double-digit content increase per access point, driven by movement from two bands to three bands and higher power requirements.
Premium Smartphones Remain a Focus
In mobile, Brace said Skyworks’ concentration in premium handsets has helped it avoid some of the turbulence seen elsewhere in the smartphone market. He said the company’s largest customer has gained share in the premium segment and that a larger installed base in the iOS ecosystem supports future device refresh opportunities.
Brace also said Skyworks is seeing rising RF complexity in handsets, including more filters, higher transmit power, additional uplink channels and direct-to-satellite links. He pointed to a previously disclosed multigenerational design win with a large U.S. Android provider, extending through 2030 and potentially into products shipping in 2031, as evidence of the company’s technology position.
Skyworks expects its mobile business to grow at a low- to mid-single-digit rate over time, based on nominal unit growth and content gains offset by average selling price pressure and Android declines. Broad markets are expected to grow at a low-double-digit pace, resulting in overall mid- to high-single-digit growth, Brace said.
The company recently announced a new capital allocation framework that includes $2 billion in new share repurchases and no quarterly dividend going forward. Brace said the board concluded that repurchases would be more accretive, while the company would also consider disciplined, measured acquisitions that could diversify its business and support gross-margin expansion.
About Skyworks Solutions (NASDAQ:SWKS)
Skyworks Solutions, Inc (NASDAQ: SWKS) is a semiconductor company that develops and manufactures analog and mixed-signal products used to connect people, devices and networks. Its portfolio includes radio-frequency (RF) and wireless connectivity components such as amplifiers, attenuators, filters, switches, modulators, front-end modules and integrated solutions.
The company’s products are designed for applications including smartphones and other mobile devices, automotive systems, broadband and wireless infrastructure, industrial equipment, medical devices, smart-home products and the Internet of Things.
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