What changed in this filing

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Item 1. Business

2021-11-24 compared with 2020-11-17 · 44 added, 53 removed, 153 unchanged (39% of the section changed)

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The Company’s highly innovative analog semiconductors are connecting people, places, and things, spanning a number of new and previously unimagined applications within the aerospace, automotive, broadband, cellular infrastructure, connected home, entertainment and gaming, industrial, medical, military, smartphone, tablet, and wearable markets.

Our key customers include Amazon, Apple, Arris, Bose, Cisco, DJI, Ericsson, Foxconn, Garmin, Gemalto (a Thales company), General Electric, Fibocom, Google, Honeywell, Huawei, Itron, Lenovo, LG Electronics, Microsoft, Motorola, Netgear, Northrop Grumman, OPPO, Rockwell Collins, Samsung, Sierra Wireless, Sonos, Technicolor, VIVO, Xiaomi, and ZTE.

Our competitors include Analog Devices, Broadcom, Cirrus Logic, Maxim Integrated Products, Murata Manufacturing, NXP Semiconductors, Qorvo, and Qualcomm.

Our key customers include Amazon, Apple Inc.

(“Apple”), Arris, Bose, Cisco, DJI, Ericsson, Foxconn, Garmin, Gemalto (a Thales company), General Electric, Fibocom, Google, Honeywell, Itron, Lenovo, LG Electronics, Microsoft, Motorola, Netgear, Northrop Grumman, OPPO, Rockwell Collins, Samsung, Sierra Wireless, Sonos, Technicolor, VIVO, Xiaomi, and ZTE.

Our competitors include Analog Devices, Broadcom, Cirrus Logic, Murata Manufacturing, NXP Semiconductors, Qorvo, and Qualcomm.

We operate worldwide with engineering, manufacturing, sales, and service facilities throughout Asia, Europe, and North America.

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Our SEC filings are also available to the public at www.sec.gov.

In August 2018, we acquired Avnera Corporation (“Avnera”) and expanded our leadership in wireless connectivity by adding ultra-low power analog circuits to enable smart interfaces via acoustic signal processing, sensors, and integrated software.

The acquisition of Avnera enables us to capitalize on the rapid proliferation of audio functionality and its convergence with our advanced connectivity solutions.

With our global sales channels, strong customer relationships and operational scale, we are leveraging Avnera’s innovative product portfolio and systems expertise to increase our footprint in automotive, industrial, home automation, enterprise, and high-end consumer markets.

In July 2021, we acquired the Infrastructure and Automotive business of Silicon Laboratories Inc.

(the “Acquisition”).

The Acquisition accelerates our expansion into high-growth market segments, including electric and hybrid vehicles, industrial and motor control, power supply, 5G wireless infrastructure, optical data communication, data center, automotive, smart home, and several other applications.

Industry Background

Wireless connectivity is exploding on a global basis.

The COVID-19 pandemic has underscored the importance of our mission of connecting everyone and everything, all the time.

Work-from-home, remote healthcare, virtual education, and other social distancing trends, driven in part by the pandemic, have propelled an extraordinary need for faster speeds, increased bandwidth and capacity, significantly lower latency, and more reliable and secure wireless connectivity.

5G is dramatically altering the world, creating a market for diverse and transformative applications, and changing how individuals live, work, play, and learn.

Most of the world’s largest economies now have functioning commercial 5G networks, and the world’s leading smartphone manufacturers have released 5G-enabled devices.

The transition from 4G to 5G has just started, and according to a June 2020 Ericsson “Mobility Report,” there are expected to be 2.8 billion mobile 5G subscriptions globally by the end of 2025.

At the same time, connectivity is expanding into an adjacent set of IoT markets.

From smart homes to the smart grid and from industrial to wearables, the number of connected devices is rapidly proliferating.

Wireless connectivity is expanding on a global basis, underscoring the critical nature of our mission of connecting everyone and everything, all the time.

A widening range of use cases is driving an insatiable demand for ubiquitous wireless data across a broad array of applications, including remote work, entertainment, fitness, virtual education and meetings, telemedicine, factory automation, connected cars, mobile internet, cloud gaming, and AR/VR technology.

This results in an extraordinary need for faster speeds, increased bandwidth and capacity, significantly lower latency, and more reliable and secure wireless connectivity.

The speed and ultra-low latency characteristics inherent in 5G technology are dramatically altering wireless connectivity, creating a market for diverse and transformative applications, and changing how individuals live, work, play, and learn.

Most of the world’s largest economies are implementing commercial 5G networks, and the world’s leading smartphone manufacturers have launched multiple generations of 5G-enabled devices.

Concurrently, connectivity is rapidly expanding into an adjacent set of IoT markets, rapidly proliferating the number of connected devices.

ABI Research IoT Market Tracker forecasts 23 billion IoT connections by 2026.

Skyworks is enabling these opportunities with highly customized system solutions supporting a broad set of wireless protocols including cellular LTE, Wi-Fi, Bluetooth®, LoRa®, Thread and Zigbee®.

In addition, next-generation Wi-Fi 6 products are emerging as the standard offering across enterprise, carrier, and retail segments and are expected to accelerate the deployment of IoT devices.

ABI Research anticipates relatively swift adoption with 1.4 billion Wi-Fi 6E chipset shipments by 2025.

Looking forward, we see significant growth opportunity for our industry and for Skyworks.

The key catalysts for Skyworks will continue to be the insatiable demand for data and the profitable usage model, as each connection becomes more valuable and the world embraces 5G.

We are enabling these opportunities with highly customized solutions supporting a broad set of wireless systems and protocols including cellular, 5G, Wi-Fi ® , GPS, Bluetooth ® , Accutime™, HD-Radio™, LoRa ® , Thread ® , and Zigbee ® .

In addition, next-generation Wi-Fi 6 and 6E products are emerging as the standard offering across enterprise, carrier, and retail segments and are expected to accelerate the deployment of IoT devices.

Looking forward, we see significant growth opportunities for our industry and for Skyworks.

The key catalysts are the increasing demand for wireless data and the profitable usage model, as each connection becomes more valuable and the world embraces 5G and other advanced connectivity technologies.

Solving Connectivity Challenges

We expect that highly integrated semiconductor solutions will play an increasingly pivotal role in the deployment of this next generation standard by resolving the daunting analog and RF complexities that are challenging the capabilities of existing hardware and the supporting network infrastructure.

Meeting these design challenges requires broad competencies including

signal transmission and conditioning, the ability to ensure seamless hand-offs between multiple standards, power management, voltage regulation, battery charging, advanced filtering, and tuning.

Skyworks is at the forefront of this sea change in connectivity, delivering the solutions that will enable the true potential of 5G and the IoT.

Highly integrated semiconductor solutions are playing an increasingly essential and pivotal role in the deployment of next generation standards by resolving the daunting analog and RF complexities that are challenging the capabilities of existing hardware and the supporting network infrastructure.

Delivering on these design challenges requires broad competencies including signal transmission and conditioning, the ability to ensure seamless hand-offs between multiple standards, power management, voltage regulation, battery charging, advanced filtering, and tuning.

We are at the forefront of this new era of connectivity, delivering the solutions that help enable the true potential of 5G and the IoT.

We have a rich heritage in analog systems design and have spent years investing in key technologies and resources.

Our strength is underpinned by world-class performance and scale across a broad array of capabilities that include advanced TC-SAW and BAW filters, an expanded family of MIMO, ultra-high band, and diversity receive modules and expanding into emerging technologies.

From our breakthrough Sky5® unifying platform to our 5G small cell solutions, Skyworks’ approach across both infrastructure and user equipment facilitates powerful, high-speed end-to-end 5G connectivity.

From our breakthrough Sky5 ® unifying platform to our 5G small cell solutions, our approach across both infrastructure and user equipment facilitates powerful, high-speed end-to-end 5G connectivity.

Skyworks' Strategy

Our ambitious vision is to connect everyone and everything, all the time.

To this end, key elements of our strategy include:

Major elements of our strategy include:

Industry-Leading Technology

As the industry migrates to more complex 5G architectures across a multitude of wireless applications, we are well positioned to help mobile device manufacturers handle growing levels of system complexity in the transmit and receive chain.

As the industry migrates to more complex 5G architectures across a multitude of wireless applications, we are well-positioned to help mobile device manufacturers handle growing levels of system complexity across both the transmit and receive chains.

The trend towards increasing front-end and analog design challenges in smartphones and other platforms plays directly into our core strengths and positions us to address these challenges.

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Customer Relationships

Given our scale and technology leadership, we are engaged with key original equipment manufacturers (“OEMs”), smartphone providers and baseband reference design partners.

Our customers value our global supply chain, our innovative technology and our system engineering expertise, resulting in deep customer loyalty.

Given our scale and technology leadership, we are engaged with all of the major original equipment manufacturers (“OEMs”), smartphone providers, and baseband reference design partners.

Our customers value the scale of our global supply chain, our innovative technology, and our system engineering expertise, resulting in deep customer loyalty.

We partner with our customers to support their long-term product road maps and are valued as a system solutions provider rather than just a point product vendor.

Diversification

We are diversifying our business in three areas:

our addressed markets, our customer base, and our product offerings.

By leveraging core analog and mixed signal technologies, we are expanding our family of solutions to a set of increasingly diverse end markets and customers.

With the adoption of 5G and the opportunity to enable more applications, we are steadily growing our business beyond just mobile devices (where we support all top-tier manufacturers, including the leading smartphone suppliers and key baseband vendors) into additional high-performance analog markets, including automotive, home and factory automation, infrastructure, aerospace and defense, medical, smart energy, and wireless networking.

We are diversifying our business by expanding our addressable markets and broadening our product portfolio to reach a wider array of global customers.

With the increasing adoption of 5G and the opportunity to enable more applications, we are growing our business beyond mobile devices (where we support all top-tier manufacturers, including the leading smartphone suppliers and key baseband vendors) into additional high-performance analog markets, including automotive, home and factory automation, data center, electric and hybrid vehicles, solar, wireless infrastructure, aerospace and defense, medical, smart energy, and wireless networking.

In these markets we leverage our scale, intellectual property, and worldwide distribution network, which spans over 6,000 customers and over 3,000 analog components.

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Additionally, we continue to drive reductions in product design and manufacturing cycle times and further improve product yields.

The combination of agile, flexible capacity and world-class module manufacturing and scale advantage allows us to achieve low product costs while integrating multiple technologies into highly sophisticated multi-chip modules.

Maintaining a Performance-Driven Culture

We consider our people and corporate culture to be a major competitive advantage and a key driver of our overall strategy.

We create key performance indicators that align employee efforts with corporate strategy and link responsibilities with performance measurement.

We consider our people and corporate culture to be a competitive advantage and a key component of our corporate strategy.

We create key performance indicators that align employee efforts and link responsibilities with performance measurement.

Accountability is paramount, and we compensate our employees through a pay-for-performance methodology.

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Generating Superior Operating Results and Shareholder Returns

We seek to generate financial returns that are comparable to a highly diversified analog semiconductor company.

Given our product volume and overall utilization we strive to achieve a best-in-class return on investment and operating income to reward shareholders.

We believe our manufacturing scale, broad product portfolio, strong profitability, and consistent cash flow generation position us to provide superior results and strong returns to our shareholders.

Our Product Portfolio

Our product portfolio consists of various solutions, including:

Our extensive product portfolio includes:

• Amplifiers:

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circuits that allow a known source of power to be reduced by a predetermined factor (usually expressed as decibels)

• Automotive Tuners and Digital Radios:

tuners, data receivers, and digital radio coprocessors used in automotive infotainment systems

• Circulators/Isolators:

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devices used to measure and control RF power in wireless systems

• Digital Power Isolators:

energy efficient solutions used in industrial control, solar inverters and hybrid/electric automotive drive trains

semiconductor devices that pass current in one direction only

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devices that provide ultra-fine frequency resolution, fast switching speed, and low phase-noise performance

• Timing Devices:

wireless clocks and oscillators used in optical networking, data center and wireless base stations

• Technical Ceramics:

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Our products are sold globally through a direct sales force, electronic component distributors, and independent sales representatives.

Certain distributors have agreements with us which allow for certain sales returns, stock rotations and price protection on certain inventory if we lower the price of those products (see “Critical Accounting Estimates” in Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 2 to Item 8 of this Annual Report on Form 10-K for further detail on revenue reserves).

As is customary in the semiconductor industry, our distributors may also market other products that compete with ours.

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We believe the technical and complex nature of our products and markets demand an extraordinary commitment to maintain close ongoing relationships with our customers.

As such, we strive to expand the scope of our customer relationship to include design, engineering, manufacturing, procurement, logistics, and project management.

We also employ a collaborative approach in developing these relationships by combining the support of our design teams, applications engineers, manufacturing personnel, sales and marketing staff, and senior management.

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A small number of OEMs historically has accounted for a significant portion of our net revenue.

In the fiscal years ended October 2, 2020 (“fiscal 2020”), September 27, 2019 (“fiscal 2019”), and September 28, 2018 (“fiscal 2018”), Apple Inc.

(“Apple”), through sales to multiple distributors, contract manufacturers and direct sales for multiple applications including smartphones, tablets, desktop and notebook computers, watches, and other devices, constituted more than ten percent of our net revenue.

In the fiscal years ended October 1, 2021 (“fiscal 2021”), October 2, 2020 (“fiscal 2020”), and September 27, 2019 (“fiscal 2019”), Apple, through sales to multiple distributors and contract manufacturers for multiple applications including smartphones, tablets, desktop and notebook computers, watches, and other devices, constituted more than ten percent of our net revenue.

For further information regarding customer concentrations see Note 15 to Item 8 of this Annual Report on Form 10-K.

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We compete on the basis of time-to-market, new product innovation, quality, performance, price, compliance with industry standards, strategic relationships with customers and baseband vendors, personnel, and protection of our intellectual property.

We participate in highly competitive markets against numerous competitors that may be able to adapt more quickly than we can to new or emerging technologies and changes in

customer requirements, or may be able to devote greater resources to the development, promotion, and sale of their products than we can.

Erosion of average selling prices of established products is typical of the semiconductor industry.

Consistent with trends in the industry, we anticipate that average selling prices for our established products will continue to decline over time.

We mitigate the gross margin impact of declining average selling prices with efforts to increase unit volumes, reduce material costs and lower manufacturing costs of existing products and by introducing new and higher value-added products.

We participate in highly competitive markets against numerous competitors that may be able to adapt more quickly than we can to new or emerging technologies and changes in customer requirements, or may be able to devote greater resources to the development, promotion, and sale of their products than we can.

Research and Development

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However, we have entered into certain supply agreements for the purchase of raw materials or other manufacturing-related services that specify minimum prices and purchase quantity based on our anticipated future requirements.

Such amounts are reviewed and included in our contractual obligations and commitments as required.

Certain of our suppliers consign raw materials to us at our manufacturing facilities to which we take title as needed in our manufacturing process.

We believe we have adequate sources for the supply of raw materials and components for our manufacturing needs with suppliers located around the world.

We have taken strategic action with suppliers located around the world to secure sourcing of the raw materials and components necessary for our manufacturing.

Backlog and Inventory

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We are also subject to import/export controls, tariffs, and other trade-related regulations and restrictions in the countries in which we have operations or otherwise do business.

These controls, tariffs, regulations, and restrictions (including those related

to, or affected by, United States-China relations, as discussed below in Item 1A, Risk Factors) have had, and we believe may continue to have, a material impact on our business, including our ability to sell products and to manufacture or source components.

These controls, tariffs, regulations, and restrictions (including those related to, or affected by, United States-China relations, as discussed below in Item 1A, Risk Factors) have had, and we believe may continue to have, a material impact on our business, including our ability to sell products and to manufacture or source components.

Government regulations are subject to change in the future, and accordingly we are unable to assess the possible effect of compliance with future requirements or whether our compliance with such regulations will materially impact our business, results of operations, or financial condition.

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The highest demand for our products generally occurs in our first fiscal quarter ending in December and the fourth fiscal quarter ending in September.

The lowest demand for our handset products generally occurs in our second fiscal quarter ending in March and the third fiscal quarter ending in June.

Skyworks’ workforce consists of approximately 10,000 employees located around the world, more than 99% of whom are full-time employees.

The lowest demand for our products generally occurs in our second fiscal quarter ending in March and the third fiscal quarter ending in June.

Our workforce consists of approximately 11,000 employees located around the world, more than 99% of whom are full-time employees.

As of October 1, 2021:

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business