But I would say on a ballpark level, Chris, I mean we’re in hundreds of millions of dollars in terms of automotive. So it’s not, relative to the scale of Skyworks, it’s not a significant piece, but on an absolute basis, it’s got some real opportunity to grow and we look forward to that.
Ruben Roy: Thanks, Liam. Thanks for the detail. I guess just a quick follow-up in terms of the CapEx commentary and kind of where you sit from the utilization and capacity perspective. Can you remind us of where you ended up now? Sort of in source to outsource? I guess are you at target there? I guess that means you are at target, but can you remind us of these details around in source to outsourced certification.
Kris Sennesael : Yes, Ruben, as you know, we are a not only a developer of world-class technology, we also manufacture most of that technology in-house, and that’s a key differentiator. That’s how we win at our largest customers being able to secure the supply. As you know, we do all our gallium arsenide power amplifiers in-house. We do all our filters, TC SAW, N BAW, in-house, and we do most of the very complex assembly and packaging and testing in-house. Some parts of the business, like the business we’ve acquired from I&A, and some other parts of the business is being outsourced, but the vast majority is in-house. And again, that’s a key differentiator for us. Having said that, we for many years we have done major investments, expanding our capacity footprint.
Currently, we are focusing more on driving operational efficiencies into that footprint that is creating additional capacity for us. And so going forward the capital intensity will be much lower. You saw last year it was on or above 4% revenue. Going forward we expect it to be in the mid-single digits as a percent to revenue. And so we have a tremendous amount of upside there that will further drive gross margin improvements and stronger free cash flow.
Operator: Our next question comes from Christopher Rolland with Susquehanna.
Matt Myers: Hey guys, this is Matt Myers on for Chris. So you guys have talked historically about 10% annual content increases. So I was curious about how we should think about it from this past cycle. And then again looking into next year, do you think you can grow content another 10 %?
Liam Griffin: Well certainly our ambition is to continue to grow that content and diversify the level of content as well. And I think what you’re going to see from Skyworks and it’s already embedded in some of our numbers is diversification within mobile. So it’s not going to just be one or two products as you know, but the breadth of the technology is right there for us. So we’re going to continue to do that. You’ve already seen us demonstrate very well execution and getting into things like all acoustic wave, very, very tough technology, years and years of work, and then the scale to actually produce. So those are the kind of challenges and opportunities that we like. I know we talked a little bit about automotive already, but markets like that have a tremendous time TAM opportunity for Skyworks and we’re really just scratching the surface there.
So we’re going to take some of that core technology and port it out into multiple applications. So it’s really kind of a fungible asset and look at the pools of opportunity and revenue that we can address. And I think it’s going to be a great journey for us along the way. We’re learning a lot more. Our teams together are executing an outstanding way. And we’re committed to growth and diversification and certainly matching the challenges with our top tier customers.
Matt Myers: Got it, that’s helpful. And then on gross margins, I know you guys have had gross margins hit from lower utilizations, but curious where utilization stand now versus 90 days ago. And where do you expect them to be in the next quarter? I would assume down again, given the gross margin guide down. And how are you guys thinking about your outlook for gross margin into next year?
Kris Sennesael : I mean, the utilization of our factories is stable right now. On one hand, the demand is improving, but on the other hand, we are still further reducing our internal inventory levels. And so that will be played out by the end of December. In addition to that, as we alluded to in the prepared remarks, we have a little bit of a mixed headwind. Now with broad markets temporarily, a little bit softer due to the excess inventory. And that’s why we guided slightly down in the December quarter. Looking ahead, couple quarters, obviously March and June are our seasonally slower quarters in terms of top line. And typically you see a modest reduction of gross margins during those quarters. And then beyond that, you look at the second half of the calendar year, September and December, we will start ramping up again, and you will see gradual improvements of the gross margins.
Operator: Our next question comes from Tim Arcuri with UBS.
Tim Arcuri: Thanks a lot. I had two quick ones. Kris, first of all, can you talk about your largest customer as a percent of revenue in September?
Kris Sennesael : Yes, the largest customer was in September was approximately 68% of total revenue on a full year basis, it was approximately 66% of total revenue. Keep in mind that the vast majority of that is for the smartphone, but we also have great content in every other device that that customer brings to the market.
Tim Arcuri: Thank you for that. And then as a quick one, can you give us a sense, Kris, for what you consider off of this base, what you consider sort of a normal seasonal March would be? I think mobile is usually down 25% in March. Is that a reasonable number off of this base to sort of think about? I know that broad market is kind of all over the place and going through digestion, but I guess I’m just asking about, seasonality in mobile in March?
Kris Sennesael : Yes, so we’re not going to guide to March, but directionally you think about it the right way, right? So, and you were referring just to mobile. This is not total Skyworks revenue, but yes, mobile is down in that 20% -25% sequentially in the March quarter from our top quarter, which is the December quarter. Yes, going normal seasonality.
Operator: Our next question comes from Edward Snyder with Charter Equity Research.
Edward Snyder: Thanks a lot. So, Liam, I mean, you’re underrepresented in Android today. It happened for a while, but given the pricing for many of the modules that sell in Android, especially relative to your largest customer, why shouldn’t we consider gains in the Android as an increased pressure on gross margin? Because I think it’s widely understood that price competition is a bit more and performance is a bit less in the Android chain and it is at your largest customer. So, I’m just kidding. I feel we talk about diversification mobile. That’s it. Then I have a follow-up.
Liam Griffin: Yes. I mean, on the initial question, I agree with you on that. I think, as you know, and you go deep in the technology and you see what we do, and so we’re very, very capable to do more. Quite frankly, the attractiveness of the portfolio at the time was pretty weak. It wasn’t as compelling as some other opportunities, and we deployed our resources in different places successfully. But now, kind of taking a look at the landscape a bit, I think it’s time for us to be a little bit more aggressive. We absolutely have the knowledge and the execution and the scale in our factories to do more. So it’s been more of a choice, rather than a no-go from the customer. The customers won’t sense. So, I think we’re going to do a little bit more work there and get a little bit more aggressive. And I think it’ll be good for the company and our shareholders.
Edward Snyder: Yes, that’s been our impression too. So then if I could, on your largest customer, you had fewer modules than you had last time, and I know that’s not where all content is. Clearly, year-to-year, there’s increases in existing modules. But we’ve done the chared and a lot of it, especially the largest modules, looked to be identical to last year. So one, did you see material increase in content in existing modules? If not two, I’m just trying to get a feel for where your content gains were in the latest round, and mostly to try to get a feel for what’s going to happen in the future, because if you’re kind of giving up a few modules to marauder, marauder mostly, I guess, why wouldn’t that trend persist in the next year? Thanks.
