Chief Executive Liam Griffin ticks off the elements that make him confident about Irvine-based chipmaker Skyworks Solutions Inc.’s continued success—5G wireless technology, a broader customer base, plenty of cash and greater market share.
Taken together, they’ll help power the chipmaker (Nasdaq: SWKS) further out of the difficulties caused by the “horrific” coronavirus crisis.
“We have gained market share through this pandemic, as challenging as it’s been,” he told the Business Journal on Aug. 20. “The fundamentals of the company are solid. There’s plenty of room for us to continue to grow.”
It’s an optimistic view from the CEO of the semiconductor company—Orange County’s third-largest public company by market valuation—and a notable change in tune from earlier in the pandemic.
Almost six months ago, Skyworks cut its second-quarter revenue and earnings forecast as the COVID-19 crisis spread across the globe, and in mid-March its stock price fell to half of what it was last week.
Apple Inc. which provided 51% of Skyworks’ net revenue in fiscal 2019, had already warned of the negative impact on results from the coronavirus, because of its large manufacturing presence in China, where the pandemic began.
China represents a key market for Skyworks, though its manufacturing in Asia takes place in Japan and Singapore. Skyworks lists 559,000 square feet of “manufacturing and office space” in Mexico, and 391,000 square feet of manufacturing and office space in the U.S., among various facilities in the U.S., Canada and Asia, according to its latest annual report.
Managing a global workforce this year has been a challenge. “Operationally, it’s been difficult,” Griffin said.
“Early on in the pandemic there were some real issues around factory execution, and health and safety.”
Skyworks has not had any layoffs due to the pandemic.
5G’s First Inning
Griffin emphasizes the importance of developing super-fast 5G wireless communications and says the company has been investing for years in the new technology.
Skyworks develops semiconductors for mobile communications systems, where it sees major market opportunities.
“We’re in the first inning of the opportunity in 5G. It’s going to be a 5- to 10-year cycle,” said Griffin, who has been CEO since 2016.
The 5G leap, just as two examples, will let 50,000 people in a stadium stay connected simultaneously while the technology will also facilitate the “instantaneous response” needed for autonomous cars.
5G is designed to provide high-bandwidth connectivity that can be up to 100 times faster than 4G LTE connections in use these days.
Griffin, who is also the president of Skyworks, points out that the explosion in the use of video is also putting new demands on wireless systems.
“Video is an unbelievable consumer of data and bandwidth,” Griffin said, adding that the company also has GPS technology to track packages as one example.
“We’ve seen a broadening of our customer set. Our customer set is not just the five or 10 global smartphone players. We’re working with companies like Honeywell, Netgear, Amazon, Ring, and Peloton,” he said.
The company lists a broad array of uses for its semiconductors: aerospace, automotive, broadband, cellular infrastructure, connected home, industrial, medical, military, smartphone, tablet and wearable markets.
Chip Demand
Effects of the coronavirus are still being felt on the company’s operations.
Just a little more than a month ago, a Forbes report predicted that the COVID-19 pandemic could curb Skyworks ambitions, noting “lower demand for computing and hardware devices across all markets, which means lower semiconductor demand, and hence lower demand for Skyworks Solutions’ products.”
Skyworks itself said in an SEC filing on July 23 that demand for its product was “negatively impacted” by COVID-19 while U.S. Commerce Department action on Huawei Technologies Co. of China also reduced demand—resulting in decreased revenue in the nine months ended on June 26.
Still, Skyworks reported net revenue of $736.8 million for the third quarter ended June 26, exceeding consensus estimates. The company said it expects revenue for the current three-month period will rise to between $830 million and $850 million, “driven by the strong demand for our market-leading solutions.”
Judging from the share price, Wall Street likes what it sees in Skyworks.
Its shares have risen about 18% since the start of the year and were trading around $142 apiece as of Aug. 25 giving the company a market cap of $23.7 billion.
By comparison, as the pandemic was raging on March 25, its shares were down to $85 apiece with a $14.5 billion market cap.
“Our profitability is strong. We’re over 50% gross margin,” Griffin said, who adds that Skyworks has a “really strong” balance sheet with $1.2 billion in cash.
The company is still growing; Skyworks’ website as of Aug. 26 listed nearly 70 job postings in the U.S. and Mexico, with most of them in engineering and operations.
China Ties
Griffin said Skyworks complies with all the rules and regulations in its business dealings with China.
“There’s always going to be some trade turmoil and it’s been going on with China for a quite a while,” he adds. “We still do business with China, of course. They’re one of the most important markets.
“They have become less relevant now as some of the major players in the U.S. have gained.”
He said the major manufacturing sites for the core semiconductor technology are Newbury Park in Ventura County as well as its former headquarters of Woburn.
About four months ago, Skyworks officially moved its headquarters designation from Massachusetts to Irvine.
While the shift was largely on paper, it also reflects growing importance of the West Coast for the company that originated in the Boston area (see story, this page).
Home Working
Like many companies, Griffin is overseeing the transition to more work-from-home and away from the office.
“It’s not a complete, full work-from-home,” he said. “It’s department-by-department and each individual can make their choice on what they want to do.”
“The stay-at-home, work-from-home, work-from-anywhere economy is probably going to stay with us, in fact could become bigger over time.”
Boston Accent For West Coast Skyworks
Skyworks Solutions Inc. Chief Executive Liam Griffin grew up in Brookline, Mass., not far from the Boston Red Sox famed Fenway Park.
His Boston accent comes back when he’s cheering for the New England Patriots in nearby Foxborough.
Yet the East Coast native moved the chipmaker’s headquarters from the Boston suburb of Woburn to Irvine—a shift that’s largely on paper, but also reflects the company’s center of gravity along the Pacific Coast.
“Our customers are very much centered around Silicon Valley, in Asia, which makes Southern California and Orange County very convenient,” Griffin told the Business Journal on Aug. 20.
“Over the last five years or 10 years, it became increasingly more relevant that our people, our customers, the engagement on the California side was much, much, much stronger,” Griffin said.
He added that he and his family “moved out here about eight or nine years ago” while the movement of employees has already occurred over time.
Griffin was named CEO of the company in 2016, and has been with the company since 2001, when he served as head of sales and marketing.
“The headquarters were de facto Irvine but we had not made an official call. We just hadn’t really put the flag down,” he said.
Griffin, who is also company president, praises Orange County’s work balance, great community and “awesome” talent pool.
Skyworks signaled the shift in a report to the Securities and Exchange Commission on May 8, when the company listed 5260 California Ave. in Irvine as the “address of principal executive offices” whereas it had previously been in suburban Boston.
It leases about 219,000 square feet of design center and office space in Irvine’ UCI Research Park, according to the company latest annual report. That’s nearly double its local presence from a few years ago; it has snapped up some space at the office park previously used by fellow chipmaker Broadcom.
He emphasized the continuing presence on the East Coast. It has 158,000 square feet of manufacturing and office space in Wooburn.
—Kevin Costelloe
