So, just given everything that we see going on globally, interest rates, you see what’s going on with the Fed in our own country and going around the world, I think it’s prudent to take a conservative view when we give our outlook, whether it’s the number of units at our largest customer or what’s going to happen to end demand with consumers. We’re just being cautious, but we’re confident we can grow. And I think that’s how I’d leave that.
Srini Pajjuri: Thanks, Bob. If I may have a follow-up on gross margins. Grant, obviously, you’re talking about improving gross margin in the second half of the fiscal year. I guess, how do we go from — I think you’re exiting the fiscal year, maybe in the high 40%s — mid to high 40%s. How do you go from mid to high 40%s to the previous, I guess, peak levels of 52%, 53%? And what’s the plan to — I mean is it a function of revenue or are there any other initiatives that are in place to get us back to that gross margin level?
Grant Brown: Sure. Thanks for the question. So, utilization is obviously critical, and it’s improving. And we’ve spoken quite a bit about it. But maybe just to put that into context, the utilization across our US fabs is actually currently up 20 percentage points versus Q1 a year ago. So, looking at just a simple average across our wafer fabs, the percent utilization went from the 40%s to now the 60%s, and all that hasn’t flowed into the P&L yet. So, we still have meaningful opportunity to improve and reach more optimal levels, call it, in the 80%s or higher across the board. We’ve talked a bit, as a specific example, to our WiFi business in CSG, which is facing the underutilization here in our North Carolina gas line, each of those products is coupled to the fab that was designed and qualified.
And so, we can’t move production overnight. But over time, we can optimize this. So, load balancing across our factory network is always being evaluated, and it’s a potential for opportunity there. But beyond just utilization, we are taking active steps to improve gross margin. If you look at it maybe by business or maybe from a manufacturing perspective, in ACG, specifically, we’re managing our portfolio to better match cost with the product tiering. So, to align Android’s entry tier, our new low, mid, high integrated products are a great example. This is not a single product, but actually a family of products that are better optimized for that segment of the market. In HPA, we expect our high mix, lower volume businesses generally carry higher gross margins to be among our fastest-growing opportunities.
Defense is a good example. I’ve spoken to that, where we expect a strong fiscal second half and for growth to continue well beyond this fiscal year given the budget approvals and the order activity we’re seeing. CSG, I just mentioned the WiFi business, but it’s our highest growth opportunities there are in products that run in high-volume external silicon partners. So, overall, business mix will play a role in margin expansion over time. Those product lines will grow faster and they’ll become a bigger portion of our revenue mix, less susceptible to underutilization, of course, because they’re externally sourced. From an overall manufacturing perspective, we expect to benefit from continued die size reductions, wafer size increases, and we can continue reducing our capital intensity.
We’re continuously looking at factory footprints for opportunities to optimize and consolidate our operations, and you’ve already seen us take steps there such as divesting our Farmers Branch facilities as well as our Beijing and Dezhou facilities. So, we have a lot of opportunity to get there. It’s not simply utilization, but obviously, that’s a big part of it.
Operator: Your next question comes from Thomas O’Malley with Barclays.
Thomas O’Malley: Hey, guys, thanks for taking my questions. So, on the last call, you kind of talked about the shape of the year being very similar year-over-year if look at fiscal year ’24 and fiscal year ’25. With June coming in a bit lighter, could you just update us on how you’re seeing the shape of the year? Does that peak a bit higher in the September, December period just because Q1 was a bit weaker? Any color on what you’re kind of seeing in terms of the shape of the year being similar? Or does that change at all with what we’re looking at in June?
Grant Brown: Sure. It’s similar to fiscal ’24. As I mentioned, we do expect, unlike fiscal ’24, that we’ll have a larger December than September and then down seasonally in March. So, in that regard, it’s slightly different than what we saw in fiscal ’24. But generally speaking, the September, December quarters will be our largest within the fiscal year.
Thomas O’Malley: That’s super helpful. And then just to put a nail in the coffin here, but just on the Android business into the June quarter, so you’re talking about better China, but also you don’t have a flagship launch in the June quarter from another large customer. When you net that out, do you see the ability to grow kind of sequentially into the June quarter? It’s just hard to know the various growth rates. I know you have some idea of size, but any color you could give there on the Android business, just June specifically?
Bob Bruggeworth: June, most likely for — hi, this is Bob. June most likely is going to be flat to up with the Android ecosystem. As you pointed out, we’re coming off a big flagship ramp at our second largest customer with tremendous content. We’re offsetting that with growth outside of them.
Operator: Your next question comes from Christopher Rolland with Susquehanna.
Christopher Rolland: Hey, guys. Yeah, just working through that gross margin thing, we’re talking about like 500 basis points or 600 basis points for September. Is that roughly the magnitude to get to that gross margin expansion we need?
Grant Brown: I think you’re in the right ballpark, Chris. I gave a rough estimate for the year. So, I believe you backed into it properly.
Christopher Rolland: Okay. Great. And I have no other questions. Thanks.
Operator: Your next question comes from Peter Peng with JPMorgan.
Peter Peng: Hey, good afternoon. Thanks for taking my questions. Let me go back to that modest revenue growth. Are you expecting growth across all segments? Or are you expecting some decline in certain segments?
Grant Brown: For the full year, we are expecting growth across all segments.
Peter Peng: Got it. And thanks for that. That’s helpful. And then, I think, last quarter, you talked about smartphone shipments, low single digits, and 5Gs kind of in that 10%-plus range. Has that view changed? And is that — I guess, the full year guidance, is there just more conservatism there? So maybe if you can answer?
Bob Bruggeworth: Yeah. No change in the outlook. We’re still thinking low single digits for the overall market. And like you said, 5G growing greater than 10%.
Operator: Your next question comes from Tim Arcuri with UBS.
Unidentified Analyst: Hi. This is [Aman] (ph) jumping in for Tim. We’re hearing from some of your peers some inventory built at your largest customer in March. Are you seeing a similar trend? And then, how should we think about growth in largest customer as we progress through this year? And do you have visibility in terms of content growth as we look into next calendar year?
Bob Bruggeworth: This is Bob. And what I can tell you is that we don’t see any channel inventory between us and our largest customer. And the reason is pretty straightforward. We ship directly to their manufacturers. So, this has come up maybe a year or so ago, and now come up now, and we don’t see anything like that.
Unidentified Analyst: Thank you.
Operator: That concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.
Bob Bruggeworth: We want to thank everyone for joining us tonight. We appreciate your interest in Qorvo, and we look forward to speaking with you during our Investor Day on June 11 and at upcoming investor events. Thank you, and I hope you have a great evening.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
