Akash Palkhiwala: Sure. So, the financial guidance we gave is that the year over — the quarter-over-quarter trend from September quarter to the December quarter in automotive and IoT will be consistent with last year. So if you look at last year, automotive was down, I think, 1% or 2%. And so we’re guiding effectively down 1% or 2% or flat for automotive. We obviously had a very strong quarter in the September quarter. The business traction continues to accelerate for us. The product roadmap is great. As Cristiano outlined in his prepared remarks, the relationship with the customers was very strong as well. So, we continue to be optimistic and we’re well on our way to execute on the financial targets we have given long-term.
From an IoT perspective, again the same guidance that it’s consistent with last year, what the trend we saw between the September December quarter. And really when you think about IoT, we’re seeing some of the same factors that other players in the industry are seeing, some demand weakness coupled with channel inventory. As we look forward, we think our first quarter as the bottom for the year for IoT. We expect to strengthen from that point on, and especially as we get into the second half of the fiscal year, with the environment normalizing, but then also very increasingly strong traction for our products. We think we’ll have a strong second half in IoT.
Ross Seymore: Just wanted to ask a follow-up on the gross margin side of things. Cristiano, you talked about AI at the edge and across a number of different products, whether it’s the PC side, the handset side, etcetera. I just wondered what does that mean to the gross margin within QCT. It seems like it opens up new TAMs on the unit side. Outside of handsets, probably increases the TAM from a dollar content on the handset side. Does that yield upside to gross margin about the same? Just what are the puts and takes as we translate all that to the profitability side?
Akash Palkhiwala: Sure. So, from a shorter term perspective, as you’ll see from our guide, we did we did very well in September quarter, we are guiding in-line for December quarter. I think your question is more of a longer term opportunity of the expansion of our gross margin as we get into these new areas. And we definitely agree that I think as we scale in outside handsets especially in automotive and IoT, we have an opportunity for margin expansion.
Cristiano Amon: You know, Ross, this is Cristiano. Just two things I want to add real quick on the first question and then on this. As, we can scale in markets, for example, such as auto and in certain segments of the IoT, like PCs, XR, those things, they also have the opportunity to give us operating margin efficiency because our R&D is highly leveraged, especially on the computing the connectivity part. So the more that we get scale, we’ll continue to probably be accretive to margins. I want to make a quick comment on your IoT. You should look at the IoT dynamics, not all IoT are created equal. I think we have a lot of things within our IoT. So there’s existing business that are subject to the some of the inventory dynamics, but there are new growth opportunities there.
One of I remind everyone that PC is in there, which is, likely going to be material in fiscal ‘25, if you think about devices with the X Elite or launching towards the second of ‘24, you have XR, which was still in the early phase of that opportunity, it has networking, we have Fiber, we didn’t have it before. So, I think we’re positioned now to expand in networking with Fiber and 5G and Wi Fi-7 is positive. And, you know, it has still an opportunity to move, processing to the edge when IoT next. So, we’re going to be — those are less subject to the some of the cyclical dynamics we’re seeing right now for existing business. Thank you.
Operator: Our next questions are from the line of Christopher Rolland with Susquehanna. Please proceed with your questions.
Christopher Rolland: Thanks for the question, guys. How are you guys thinking about global handset units over your next fiscal year? And then also given your new product launches here, how should we think about Qualcomm ASPs, as we progress for the next fiscal year as well.
Akash Palkhiwala: Chris, it’s Akash. So, as we mentioned on the call, we’ve seen kind of early signs of stabilization in the handset market, including in China. And for calendar 2023, we now expect mid to high single digit versus 2022, which is an improvement from what we had before. As we look at 2024, the recent demand stabilization obviously provides a positive setup as we go into the year. So we are cautiously optimistic on how 2024 plays out. But specifically on 5G units, which is really our target market, we expect high single digit to low double digit growth from 2023 into 2024. So that’s kind of the market that we pursue and we think there’s growth opportunity there going into next year. From an ASP perspective, because of all the factors we discussed earlier in the call with the chips becoming way more capable, especially with GenAI, we think we are on a good trajectory to continue to expand our ASP consistent with the last three year trend.
So if you look at our last three year trend, we’ve added, approximately 10% increase in any tier of chipset every year. And we think as we look forward, we have the opportunity to do that, going forward.
Christopher Rolland: That’s a great update. Thank you. Another question for you quickly. There was some new language in your 10-K around the, European Commission proposing regulations around standard essential patents, potentially devaluing those patents I wasn’t familiar with this. How serious do you think that risk could be? And are there any other meaningful developments in any other geographies? Or are we all kind of status quo?
Alex Rogers: Yes. So thanks for that question. This is Alex. We’ve been tracking these developments in the European Union. There’s actually a, variety of parks to this proposed regulation ranging from wanting more transparency and ownership of SEPs and essentiality of SEPs to, to other issues relating to kind of pre-legal processes and, and other sorts of regulations that would affect the licensing and go to court process. The European Union right now is in what they call a trialogue process. It’s going to take a while to get through, parliament, and the member states are going to weigh in. The commission’s going to weigh in. The European Patent Office is actually opposed to parts of the regulation. Erickson and Nokia, of course, weighing in as well.
So this is going to be a fairly, messy just call it legislative process that will take some number of years to sort out. It’s being followed in other jurisdictions. We’re following it here in the US. The US Patent Trademark Office has weighed in somewhat negatively I think. And it’s being followed in China as well. So this will kind of play out over some years. It’s not that unusual to have a variety of different SEP related, policy initiatives underway in different jurisdictions.
Operator: Our next question is from the line of Chris Caso with Wolfe Research. Please proceed with your questions.
Chris Caso: Yes, thank you. Good evening. The first question is regarding the overall handset demand and understand the comments you made about 5G units going into next year. I guess one part of the question is with the increase that you saw in the China business. How much of that do you believe was associated with just inventory normalization as opposed to actual more end market units. And then what does that mean for QTL, which has also been somewhat depressed because of the lower handset market, what should we expect on that as we go into next year?
