Qualcomm Inc (QCOM) — Q1 2022 Earnings Call Transcript

Thank you, and good afternoon, everyone. Today's call will include prepared remarks by Cristiano Amon and Akash Palkhiwala. In addition, Alex Rogers will join the question-and-answer session. You can access our earnings release and a slide presentation that accompany this call on our Investor Relations website. In addition, this call is being webcast on Qualcomm.com, and a replay will be available on our website later today. During the call today, we will use non-GAAP financial measures as defined in Regulation G, and you can find the related reconciliations to GAAP on our website. We will also make forward-looking statements, including projections and estimates of future events, business or industry trends or business or financial results. Actual events or results could differ materially from those projected in our forward-looking statements. Please refer to our SEC filings, including our most recent 10-K, which contain important factors that could cause actual results to differ materially from the forward-looking statements. And now to comments from Qualcomm's President and Chief Executive Officer, Cristiano Amon.

Thank you, Mauricio, and good afternoon, everyone. Thanks for joining us today. Based on our performance over the past several quarters and the strong fiscal second quarter guidance, it is clear that our strategy is working. Demand for our products and solutions continues to accelerate, as our one technology roadmap is driving the growth of premium Android smartphones, as well as enabling the connected intelligent edge, which is driving digital transformation for the cloud-connected economy. As you can see from our results today, strong performance in our chipset and licensing business led to record fiscal first quarter revenues of $10.7 billion and record non-GAAP earnings per share of $3.23. Our chipset business had its second consecutive quarter of record performance with revenues of $8.8 billion, EBT of $3.1 billion and EBT margin of 35%. Notably, QCT revenues exceeded those of any fabless semiconductor company. These results demonstrate the continued success of our diversification strategy. In IoT, we continue to see strong momentum, with revenue growth of 41% year-over-year in the first quarter across consumer, edge networking and industrial. In consumer IoT, our early investments, collaboration with Microsoft and the recent acquisition of NUVIA, uniquely position us to drive the PC industry transition to ARM-based computing for next-generation connected laptops. We recently introduced two new platforms, the 8cx Gen 3 and 7c+ Gen 3. And at CES, we highlighted broad support from ecosystem partners, including Acer, ASUS, HP, Lenovo and Microsoft as well as 200 enterprise customers currently testing or deploying Windows on Snapdragon laptops in 2-in-1 devices. We're also seeing strong growth in premium and high-tier Android tablets, further highlighting the convergence of mobile and PC. Notably, we have already doubled the total number of premium tier and/or tablet design wins launched or in the pipeline versus all of fiscal '21. Additionally, as the Metaverse opportunity materializes, we continue to build on our industry leadership position in VR and AR devices with key ecosystem players, including Meta and Microsoft. At CES, we announced a collaboration with Microsoft to expand and accelerate the adoption of augmented reality in both the consumer and enterprise sectors. This partnership includes custom AR chips to enable a new wave of power-efficient, lightweight AR glasses to deliver rich and immersive experiences as well as plans to integrate our Snapdragon Spaces XR developer platform into Microsoft mesh. We're also very pleased that Time Magazine named our Snapdragon XR2 platform as one of the best inventions of 2021. And we're seeing strong support for our VR and AR platforms from virtually all ecosystem providers, OEMs and content creators. In edge networking, we continue to lead in current and next-generation high-performance Wi-Fi 6 and Wi-Fi 6E solutions, which now make up more than 80% of our Wi-Fi access point revenues. Recently, we launched the world's first quad-band Wi-Fi 6E mesh system with NETGEAR, which was rated the best-in-class mesh platform by PC Magazine. Additionally, our Wi-Fi 6 immersive home platforms continue to gain momentum across regions, with significant growth now expanding into China, one of the fastest-growing markets for Wi-Fi 6 for both retail and carrier deployments. 5G as wireless fiber continues to gain scale and expand globally. In addition to our extended range millimeter wave platforms, we recently expanded our portfolio to include 5G fixed wireless access solutions with extended range sub-6, and we're seeing strong traction. In industrial, we're still in the early phases of digital transformation across many industries. And demand for our solutions continues to accelerate. As an example, combined smart utility meter, tracking robotics and retail revenues more than double over the last year. In robotics, specifically, we expect total fiscal '22 product launches using our platforms to increase by over 50% year-over-year, spanning applications from warehouse automation to public safety, delivery services and in-home assistance. The diversity of vertical segments and applications reflects our ability to provide a common platform that integrates advanced computer vision, on-device AI, high performance in low-power computing and industry-leading connectivity technologies. In RF front end, we successfully launched our latest 5G modules, which now include our ultraBAW technology. Our modem-to-antenna strategy is working, enhancing power and performance with average generation of Snapdragon. Notably, virtually all our Snapdragon 8 Gen 1 design wins now include Qualcomm ultraBAW filter technology. Building on our success in handsets, we're seeing traction with our modem-to-antenna solution across automotive and IoT. As examples, we're well positioned to address up to $30 of 5G RF content per vehicle, and we're also intersecting our RF front end roadmap with Wi-Fi 7. In automotive, Qualcomm is becoming the technology partner of choice for the industry, and we're enabling the transition of the automobile to a digital cloud-connected platform. Our innovative Snapdragon digital chassis is an open and scalable cloud-enabled platform for telematics, connectivity, digital cockpit and ADAS, and uniquely positions us as the leading system solution provider for silicon, software, systems and services across multiple domains. As a reminder, General Motors, BMW and now Renault Group are cornerstone customers for our platform, including ADAS. At CES, we announced an addition to our ADAS and autonomy platform, the Snapdragon Ride Vision System, a new modular computer vision solution that combines our Snapdragon Ride SoCs with the next-generation vision perception software from Arriver. It supports the various compute functions needed for enhanced perception around the vehicle, and it scales across applications from entry-tier in-cap front camera to comprehensive front and surround view camera for enhanced autonomy. We expect the Snapdragon Ride Vision System to be available in production in 2024. In handsets, we recently announced our most advanced 5G mobile platform for flagship smartphones, the Snapdragon 8 Gen 1 at our annual Snapdragon Tech Summit. The announcement was viewed by more than 50 million people worldwide. The new Snapdragon 8 Gen 1 leads the way to a new era of premium mobile technology with category-defining enhancements across modern RF, camera, AI, gaming, security and more. Snapdragon 8 Gen 1 is the world's first 5G modem RF solution to reach 10 gigabit download speeds. It's the first to include a commercial 18-bit mobile image sensor and the world's first platform compliant with the Android-ready Secure Element Alliance. We also announced new mobile platforms in every Snapdragon series to address global customer demand across every smartphone tier. In our licensing business, first quarter results reflect a favorable mix in the strength of smartphone shipments. With over 150 5G license agreements, QTL is well positioned for the future, and we continue to expect 5G to have a longer life cycle than prior generations due to its broad application across multiple industries. Lastly, demand remains strong across all of our technologies and continues to exceed supply. Despite ongoing challenges across the global supply chain, our multisourcing and capacity expansion initiatives will provide incremental improvements to our supply throughout the year.

Thank you, Cristiano and good afternoon everyone. We are extremely pleased to report strong results to start our fiscal year. We delivered our second consecutive quarter of record non-GAAP earnings, with revenues of $10.7 billion and non-GAAP EPS of $3.23. These results reflect year-over-year increases of 30% and 49%, respectively, driven by strength across both QCT and QTL. For QCT, this was another record quarter with revenues of $8.8 billion and EBT of $3.1 billion, up 35% and 62%, respectively versus the year-ago quarter. QCT EBT margins of 35% surpassed the end of our guidance range and increased six points versus the year-ago quarter driven by revenue scale and operating leverage. Handset revenues of $6 billion increased 42% year-over-year due to greater than 60% growth in revenues from Snapdragon chipsets for Android devices. RF front-end revenues of $1.1 billion grew 7% versus the year-ago quarter, reflecting the previously mentioned pull-in of demand into the fourth fiscal quarter. Our RF front-end revenues for Android devices grew by greater than 25% versus the year-ago quarter as we continued to see strong traction across all major OEMs. IoT revenues were up 41% year-over-year to $1.5 billion on continued demand for our cloud connected intelligent edge devices. Each of the consumer, edge networking, and industrial categories grew by at least 30% compared to the year-ago quarter. Automotive revenues of $256 million grew 21% year-over-year on the strength of our design wins across our Snapdragon digital chassis. We recorded QTL revenues of $1.8 billion, an increase of 10% year-over-year, and EBT margins of 77%, which was above the midpoint of the guidance. These results reflect a favorable mix and slightly higher handset shipments. Turning to global handsets and our guidance for the second fiscal quarter. For calendar 2021, consistent with the previous guidance, we estimate global 3G, 4G, 5G handsets grew 7% year-over-year, including approximately 535 million 5G handsets. For calendar 2022, there is no change to the forecast provided at our Investor Day with greater than 750 million 5G handsets. For the second fiscal quarter, we are forecasting revenues of $10.2 billion to $11 billion and non-GAAP EPS of $2.80 to $3. In QCT, we expect revenues of $8.7 billion to $9.3 billion and EBT margins of 32% to 34%. At the midpoint, this implies year-over-year revenue growth of 43% and EBT dollar growth of $1.4 billion. For handsets and RF front end, we expect revenues to be in line sequentially as seasonal decline in Apple revenues is offset by continued growth in revenues from Android devices. Within handsets, the increase in Android revenue is driven by the launch of our new Snapdragon premium chipset and additional shipments across high and mid-tiers due to our second sourcing efforts. Additionally, we expect strong year-over-year and sequential growth in our IoT and automotive revenue streams. We estimate QTL revenues of $1.45 billion to $1.65 billion and EBT margins of 70% to 74%. This reflects the normal pre-COVID trends following the strong holiday quarter. We anticipate non-GAAP operating expenses to be up 7% to 9% sequentially on normal seasonality, including calendar year resets for certain employee-related costs. The remaining increase reflects select investments in long-term growth initiatives that we outlined at our Investor Day. Looking forward to the third fiscal quarter, we are forecasting year-over-year non-GAAP EPS growth of greater than 30%. For QCT, this reflects the seasonality following Chinese New Year purchases and the launch of our new Snapdragon premium chipset in the second quarter. We expect the next inflection point in QCT to be in the second half of the calendar year, with the launch of new 5G handsets across several major OEMs. Lastly, we published our annual corporate responsibility and ESG report yesterday, which outlines progress against our company-wide targets, including environmental sustainability, diversity and inclusion, and power efficiency of our Snapdragon products. We are pleased to have been recognized by several organizations, including making the Dow Jones Sustainability Index and Newsweek's most responsible company list for the third consecutive year. Thank you. Back to you, Mauricio.

Thank you, Akash. Operator, we are now ready for questions.

Thank you for taking my questions, and congratulations on the results. I'd like to start by discussing the strong launch with Android customers that you've experienced in both phones and tablets. You mentioned that you are doubling the pace of launches with Android. As we look beyond the first half of your fiscal year, specifically December and March, how should we view the Android share gains and launches that are already included in the current run rate? How much of this is expected to occur in the remainder of the year beyond the first half? Additionally, could you provide some insight into how we should consider share gains continuing with Android for the rest of the year? I have a follow-up question as well.

Hi, Samik, this is Cristiano. Look, Android is a success story for us. This quarter continues to validate what we said before. OEM shared in shifts in China is benefiting Qualcomm, and we saw significant growth of Qualcomm share within the market as we have this new opportunity. And we've seen that reflected in the growth we've seen in premium and high tiers. So it continues to be a story. It was the highlight of what happened in the handsets within the quarter. Akash outlined 60% year-over-year growth on Android. And I'll shift over to Akash to talk about seasonality.

Yes, Samik, I believe this is something that will continue for us in the future. We are in a very strong position, as the numbers show. Our product portfolio is also quite robust. As we move forward, we expect to keep seeing this benefit in our financials.

Yes, got it. And just for my follow-up, I know you talked about the second source helping in terms of, obviously, in terms of realizing better revenues. But if you can talk about what you're seeing in terms of the cadence of the improvement there. Do you get to where you want to be with supply during the year? Or does it take longer? If you can just give us an update on how you're thinking about supply here?

Sure. So overall, the demand, as Cristiano mentioned in his prepared remarks, is extremely strong across the board. And so we are continuing to see demand outpacing supply. As you rightly mentioned, we had put plans in place very early in the process, anticipating some of these challenges. And you're seeing the benefit of that, right? We have three second sourcing parts, especially in the mid high tiers that are shipping at scale now, and that shows up in our financial performance. And we have additional parts coming up as well. So that's definitely something that's helping us. The second is we're seeing capacity builds from some of our suppliers, and that's playing a role as well. As you look forward, we expect supply to continue to improve gradually through the year, in addition to where we are at now. And this entire picture, obviously, as you'd expect, is factored into our guidance.

Look, it's Cristiano. I have nothing further to add except that, simply put, we are seeing improvements in supply. Our forward guidance reflects the visibility we have regarding supply. However, we still have more demand than supply. We would ship more if we could.

Yes. Thank you. Good evening. I wanted to ask about the commentary about the June quarter and the second half of the calendar year, your commentary there. Can you give a little more color on that? It's not typical for you to provide color two quarters in advance. So I imagine it's purposeful of why you're doing that. And maybe talk a little bit about the second half of the calendar year. Is that really a function of more supply coming on, allowing you to perhaps balance supply and demand as you get to the second half of the calendar year?

Thank you for the question, Chris. Overall, we're tracking significantly ahead of our expectations for the fiscal year, and we're quite pleased with how everything is developing. This positions us strongly to meet and surpass our long-term targets set for Investor Day. In the first half, we saw impressive performance, and as we enter the third fiscal quarter, we anticipate EPS growth of at least 30%, with potential for even more. Moving into the September quarter, we expect a notable growth surge due to new phone launches from several major OEMs, leading to strong year-over-year growth. Additionally, outside of handsets, we foresee continued robust growth in RF front end, IoT, and automotive sectors in the second half of fiscal 2022. Overall, after a strong second half in fiscal 2021, fiscal 2022 is also shaping up to deliver strong year-over-year growth rates.

That's very helpful. Thanks. In addition to the longer-term goals you presented at the Analyst Day, you also talked about fiscal 2022 guidance for at least 20% EPS growth. Based on what you're saying for June, again, it seems like you're well ahead of that as well. Any commentary update on that fiscal 2022 guidance?

Yes. Chris, that's the right conclusion. We're tracking well ahead of it. We're not updating that number yet. But I think based on the guidance that you have for the second fiscal quarter and third fiscal quarter and the comments I gave on the fourth, what you're drawing is a very reasonable conclusion.

Yes. Thanks, guys. Appreciate the question. I was just taking a look and we've been looking at this for a while, the quarter-on-quarter marginal contribution. So the QCT marginal contribution, if I look at the change in EBT and the change in revenue, I'm calculating 58% there in this quarter. And I know some of that is scaling, but I wonder if there's any way you could maybe at least give us some color on how much of that is the new marginal sales in QCT being higher margin and how much of it is just scaling effect on the revenue? Thanks. And then I have a follow-up.

Rod, just to confirm, your question was about the actuals for the December quarter?

Yes. So Akash, what all I've done is taken the EBT of the December quarter less the EBT of the September quarter and put it over the revenue difference.

Correct. Correct. Great. So I think it's a great story. You're seeing a combination of all three drivers, right? You have revenue scale benefiting us. Gross margin strength quarter-over-quarter also benefiting us. And then operating leverage of the business. So it's a combination of all three. And we're pretty excited that not just gross margin performance was great. When you look at operating margins as well, 35% is really a great benchmark for us. It's the highest margin in a long time for us. So pretty excited about where we are at and where we're going with it.

Great. Thanks. For my follow-up, I wanted to ask you, Cristiano, if you could comment on the recent activity in the high-end Android chip market regarding upcoming competition. I'm curious about your insights on the competitive environment and what you expect to see in the next six to nine months. Thanks.

Happy to do it. Before I answer that question, I want to add something to the previous question that Akash answered. We've been discussing our technology roadmap that scales well, and you can see this in our diversification strategy as we generate more revenue from non-handset business. This expansion allows us to achieve economies of scale, enhances our margins, and I believe this is evident in our numbers. I expect this trend to continue as we leverage our roadmap. Now, regarding your question about competition, we are pleased with our current position. I shared a metric that we usually don't disclose in my prepared remarks. When we launched the new Snapdragon 8 series, we received 50 million views for the launch event, which took place simultaneously in the United States and two locations in China. Snapdragon is becoming the preferred brand for premium-tier Android devices. Our customers no longer envision flagship products without considering the Snapdragon 8 series, which puts us in a very strong position. As our customers move toward the premium tier, we are seeing an increase in our market share. That's why the Android segment is central to our handset business right now. Furthermore, with the shift in OEM share in China, we have numerous opportunities for growth, alongside our competitors. I anticipate that we’ll continue to achieve positive results, and increasingly, our customers will rely on the Snapdragon brand.

Thanks. Congratulations on the results also. I guess question for me on the $10 billion SAM opportunity within Android that you've previously highlighted, how do you think much of that benefiting this first half of the year guidance? And how much further do you think you have to go in penetrating that SAM?

Yes. Mike, this is Akash. What's really happening with the $10 billion SAM opportunity is with the OEM mix change in China, all of our customers, Xiaomi, OPPO, Vivo, Honor, they're all picking up share. And as they pick up share and also go up tier, going into the high and the premium tier, as Cristiano just outlined, it gives us a tremendous opportunity to tap into it. So we've done a lot of it through, obviously, our products being great, but also working on the second sources that we mentioned in our prepared remarks. We still think that there is an opportunity to continue to expand into that SAM going forward.

Right. And just my follow-up question. I think you previously highlighted to start the first half of the year, you've kind of prioritized the strong Android premium tier handsets. And you talked about demand outstripping supply. Is it get to maybe a softer handset quarter in the June quarter? Should we see maybe automotive and IoT start to close that supply-demand balance and those businesses maybe accelerate in terms of a sequential growth trend?

Yes, Mike. That's a decision we certainly make. If we can adjust the supply in certain directions based on market demands, we will take advantage of that. It's something we will definitely pursue as we approach the June quarter.

This is Cristiano. Let me add one thing. We're experiencing demand across all of our product lines, with demand currently exceeding supply. While demand remains strong, we are in a fortunate position. In the handset business, we saw a significant growth rate for Android, with 60% growth in the quarter. As we mentioned in previous quarters, we are prioritizing supply for the Chinese New Year launches. We will continue to see more demand than supply in all of our growth businesses. As we move into the next quarter, you'll see growth in the business and potential growth in non-handset categories. The next key moment for handsets will be during the holiday season in our September quarter. We expect improvements in supply throughout the year, allowing us to sustain growth across all business areas. We're pleased with the way the year is progressing, and our supply situation is reflected in our forward guidance. That said, demand continues to rise, which is a positive development.

Hi, guys. Thanks for taking my questions. First, I wanted to ask about chipset gross margins in the quarter. I know you don't report them. But if I sort of stare at it, I think they probably were up a couple of hundred basis points. And I find that interesting just given the relative strength of handsets versus the adjacencies, which I think do have higher margins. Was that just the Android strength that you talked about that drove that margin in the quarter? And then how should we think about that into March as sort of the mix reverses? But you should have some of the higher margins of the adjacencies actually growing sequentially into March. I mean is there room for more margin expansion as we go into the next quarter?

Yes. Stacy, it's Akash. So it's a combination of, obviously, the adjacent outside non-handsets businesses helping the gross margin. Within handsets, you're seeing the benefit come through, especially as premium and high-tier devices at the high end of Android are being consumed, and we're selling into that market. And as you'll see in the guidance that we gave, we are still continuing to be optimistic with the gross margin picture.

Got it. That's helpful. For my follow-up, I wanted to ask about the buyback. You bought back quite a bit of stock, I believe, in the quarter. And I think at the Analyst Day, you talked about buybacks being only really being anti-dilutive. But it looks like we are seeing share counts come down. I guess how should we be thinking about the buyback going forward given the cash generation? And I noticed this quarter, you didn't guide the share count on a more structural level. It does look like it's down a little lower. Should we be thinking about share count continuing to go down through the year given the capital return that we're seeing?

Stacy, there is no change to the framework we've previously provided regarding buybacks. We are continuing to prioritize anti-dilutive buybacks and will opportunistically consider additional buybacks if possible. What you are observing this quarter reflects part of that strategy, but essentially, our framework remains unchanged.

Hi. I have two questions. The first one is other suppliers of Apple noted that orders for March were strong, but then at least one of them said that the guidance for June is very weak because there's going to be a reversion to the mean. And the question I have is, is there any concentration of QCT handsets that gives you some concerns over any big customer that might be reducing orders that there's any abnormal behavior this quarter that might be reducing orders later on? That's my first question.

Sure. There isn't much to address regarding Apple. Their buying pattern will fluctuate throughout the quarters, but our main focus remains on the Android market. We are not concerned about any specific issues there. Our position is solid, and we see promising design traction moving forward.

The second question is regarding handset revenues, which are currently well above consensus estimates. However, for RF, auto, and IoT, the reported figures were slightly below consensus estimates for the quarter. Could you discuss the performance of these non-handset markets, particularly RF as it relates to handsets? Additionally, could you address seasonality? These are relatively new markets; what should we anticipate regarding seasonality?

Yes. Sure. So, Tal, as we had said at previous earnings call, December being a strong quarter for the handset business. We definitely prioritized business over some of the other new opportunities. Still great demand in those areas. And as we go forward, you'll see that growth rates ramp in each of those businesses. It's reflected in our guidance. As I said in my prepared remarks, we expect auto and IoT to see strong sequential growth in the second quarter and also a strong year-over-year growth. As you look at the second half of the year, you're going to see the same trend, strong year-over-year growth across the board.

Hi guys. Thanks for letting me ask a few questions. Whether it's Cristiano or Akash, I'm not sure who this is better aligned to, but I wanted to see what your strategy is on the pricing side of the equation. Costs are increasing. Everybody is trying to get more supply. Are you passing along those costs? Is it margin accretive? And how are you using price on the revenue side of things as a tailwind? Should we be assuming that some of the goodness that we're seeing year-over-year is coming from the price side of the equation or not?

Thanks for the question. Here's how you should think about it. One thing that likely sets us apart is our focus on premium and high-tier devices, which are high-value and incorporate a lot of new technology. As a result, we are less affected by increases in semiconductor costs; it's more about the overall value of the platform we provide. The second part of the answer relates to our technology roadmap, which is designed for scalability. By utilizing our technology in research and development to serve more markets, we have achieved greater scale with our application processor in premium Android devices, making Android the central narrative in mobile, rather than the modem. The Snapdragon 800 is a significant aspect of this. Additionally, we are also advancing in processing and connectivity for automotive and IoT markets, which enhances margins. The growth in this business allows us to achieve scale, and these offerings are highly profitable. Both of these factors contribute to the QCT's operating margin of 35%.

Thanks for the color. I guess as my follow-up, one probably for Akash, on the OpEx side of things. It looks like the March quarter is doing what it typically does in your guidance, up seasonally. Any puts and takes for the rest of the year that would be different than your traditional seasonality in that line?

Not really. It will be consistent with our historical seasonality. The one thing to keep in mind is as we close the Veoneer transaction, they'll become a factor in our OpEx trend going forward. But overall, you should expect the trend to be consistent with historical.

Thank you very much. Good afternoon, everyone. Cristiano, much of the discussion here has centered on the supply and demand for your products, including the wafers and other components necessary for manufacturing. However, in many of our conversations in the semiconductor industry, we're hearing about matching and kitting challenges that your customers face when producing devices. Recently, I've noticed an increasing emphasis on Qualcomm potentially leveraging its scale to aid OEM customers in sourcing the remaining components needed to manufacture phones. This could lead to a stronger alignment with reference designs, which would allow you to have greater control over the components involved. I am curious if you see your scale as a competitive advantage and whether this has any implications for the attach rates of RF and other components that could generate additional revenue for Qualcomm in those designs. Thank you.

Thank you for the question. It's a complex topic, so I'll aim to keep it straightforward. For instance, when we discuss the Snapdragon 8 Series Generation 1, we see it as a leading node system-on-chip, and it has many attached components. The transceiver includes a complete front-end attachment and power management IC. Ultimately, when we deliver a chipset solution to our customers, we require capacity across various nodes. As we consider multi-sourcing our products and implementing capacity expansion plans, we ensure that we have enough supply to support both our handset business and growth segments. We've been increasing capacity across different technologies, and for components like power management ICs and transceivers, we collaborate with four or five foundries. The semiconductor supply chain shortage affects all aspects of the industry. On the positive side, our scale has been very beneficial. Two key factors for Qualcomm are the high predictability of our demand, which allows us to make long-term capacity plans and secure commitments from our vendors, and our ability to leverage multi-sourcing. This positions us well to navigate challenges in the supply chain. That said, I want to reiterate that we still experience more demand than supply, even with our satisfaction regarding growth rates, quarterly performance, and management. We recognize the seasonal variations between handsets and growth segments. However, we anticipate improvements in supply as we progress into the second half of 2022.

Very helpful. Thank you for that. Just as a follow-up. On the auto business, you guys presented a very compelling story around ADAS at the Investor Day, but I was a bit surprised by the Ultra Cruise announcement so quickly. Congrats on that. Maybe if you could give a little bit more details behind that relationship with GM and if you have other irons in the fire of similar profile. Thanks.

Thanks for the question. Automotive is really an incredible opportunity for Qualcomm. We're super excited about everything that is happening in automotive, has happened in a very short period of time. And I think we have something that is very unique. It's separate us from everybody else. So it's not about having a component. It's about creating a digital chassis with capabilities in all domains, from connecting the car to the cloud, telematics, the entire immersive digital cockpit experience and, of course, ADAS and autonomy, plus a service platform. GM is, as we said, a cornerstone customer that is not only looking into the capability of ADAS, and we're super proud of the work with them, on both the Super Cruise and Ultra Cruise, but also the ability to look at the entire chassis. BMW was another one, which we announced towards our Analyst Day. At CES, we announced Renault as an addition to the digital chassis. You should expect that we have a lot of other irons in the fire. Overall, automotive is a good story for Qualcomm. It's something that we can actually take a platform approach and take some of the things we have done in mobile, it's take the technology to scale up and down to every tier of automobile. And I think we're just in the beginning of having more ADAS design wins and having the chassis be recognized as a key platform going forward.

Great. Thank you. I wonder if you could talk about RF for the year, the RF businesses ability to keep pace with handsets overall. And kind of what are the metrics we should look at as millimeter wave rollout kind of more broadly an important factor? Or is it content growth in the sort of next 200 million 5G handsets, just how are you thinking about overall RF for the year?

Sure. Joe, it's Akash. If you go back to what we said at Analyst Day and the target that we set for the RF business, really, no change there, '22 is playing out as we expected. It's on track to position us to achieve the target that we laid out. You should also think of RF as not just handsets. And today, most of the business is handsets, but we're going to have RF opportunities with 5G and automotive, with 5G and IoT, and then WiFi RF as well. So tremendous growth opportunities outside of handsets that's in front of us. On millimeter wave, the guidance that we gave at Analyst Day did not have any heroic assumptions of growth of millimeter wave globally. We think of that as an upside opportunity.

Yes, thanks very much. I have a question for Cristiano. You talked a lot about Android strength this year. But I guess on China smartphones, we've seen some volatility in sort of sell-in versus sell-through last quarter. Is this sort of typical kind of buildup ahead of Chinese New Year that we should expect? And I guess when you look at new product launches in China, last year, we didn't get any new premium Android launches in the June quarter. Nothing meaningful from Chinese customers. So I'm just keen to get your perspective around demand from Chinese customers in the March and June quarters as things look a little bit more volatile than we'd expect?

No, it's a great question. As we've discussed on this call, when we look at our handset Android revenue and the growth we're experiencing in Android, we are seeing significant growth right now. We noted a 60% year-over-year growth in Android, along with sequential growth due to the Chinese New Year. Our focus is more on the premium and high-tier segments. The next key moment will be the holiday season, which is reflected in our guidance. We continue to observe strong demand in the market. Because we are more concentrated in the premium and high tiers, we have experienced less impact from the fluctuations affecting the mid and low tiers of handsets.

Thanks, Cristiano. I'd like to follow up on Windows and ARM. You have been at the forefront of this area for the last few years. Could you discuss your goals for market share? How do you envision the ARM platform and Windows ecosystem performing over the next couple of years, especially considering the NUVIA asset and the McKenna project? Any insights on your market share ambitions would help us understand your perspective on this opportunity. Thank you.

Great question. Let's discuss both the short term and the midterm. We have been clear and consistent with our vision. For Qualcomm, it's inevitable that a significant portion of the PC market will shift towards the connected ARM platform. This shift is already visible with Apple and its devices. The use cases for PCs are evolving, particularly for laptops, focusing on features like cameras, connectivity, multimedia, and 5G streaming, including gaming. Therefore, we firmly believe that a substantial segment of the market will transition to an ARM architecture. Among industry players, we are the best positioned to lead this transition within the Windows ecosystem, which is evident in our long-term partnership with Microsoft and our acquisition of NUVIA. In the short term, as we prepare for Windows 11, this is the moment when the ARM ecosystem will fully support 32-bit and 64-bit applications, along with Android apps coming to Windows. Our new 8cx Gen 3 partner has devices currently being tested in 200 large enterprises. This marks a significant advancement, and we will continue collaborating with our partners through this transition. Every OEM we engage with, particularly in the Windows PC sector, recognizes that there will be space for ARM-based laptops, and that's precisely what Qualcomm is focusing on.

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