Forward-Looking Information
This report includes "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to certain disclosures contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These forward-looking statements include, but are not limited to, statements about our plans, objectives, representations and contentions, and are not historical facts and typically are identified by the use of terms such as "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue" and similar words, although some forward-looking statements are expressed differently. You should be aware that the forward-looking statements included herein represent management's current judgment and expectations, but our actual results, events and performance could differ materially from those expressed or implied by forward-looking statements. We do not intend to update any of these forward-looking statements or publicly announce the results of any revisions to these forward-looking statements, other than as is required under the federal securities laws.
The following discussion should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements, including the notes thereto.
We use a 52- or 53-week fiscal year ending on the Saturday closest to March 31 of each year. Fiscal years 2015, 2014 and 2013 were 52-week years. Our other fiscal quarters end on the Saturday closest to June 30, September 30 and December 31 of each year.
On February 22, 2014, RF Micro Devices, Inc. (“RFMD”) entered into an Agreement and Plan of Merger and Reorganization as subsequently amended on July 15, 2014 (the "Merger Agreement"), with TriQuint Semiconductor, Inc. ("TriQuint") providing for the combination of RFMD and TriQuint in a merger of equals (the "Business Combination") under a new holding company named Qorvo, Inc. (the “Company” or “Qorvo”). The transactions contemplated by the Merger Agreement were consummated on January 1, 2015. For financial reporting and accounting purposes, RFMD was the acquirer of TriQuint in the Business Combination. Unless otherwise noted, “we,” “our” or “us” in this report refers to RFMD and its subsidiaries, on a consolidated basis, prior to the closing of the Business Combination and to Qorvo and its subsidiaries, on a consolidated basis, after the closing of the Business Combination.
For more information concerning the Business Combination, see Note 5 of the Notes to the Consolidated Financial Statements set forth in Part II, Item 8 of this report.
ITEM 1. BUSINESS.
Company Overview
We are a leading provider of core technologies and radio frequency (“RF”) solutions for mobile, infrastructure and defense and aerospace applications. We have more than 6,700 global employees dedicated to delivering solutions for everything that connects the world. We have one of the industry's broadest portfolios of RF products and core technologies, and world-class ISO 9001-, ISO 14001- and ISO/TS 16949-certified manufacturing facilities. Our Richardson, Texas facility is a U.S. Department of Defense (“DoD”)-accredited ‘Trusted Source’ (Category 1A) for gallium arsenide (“GaAs"), gallium nitride (“GaN”) and bulk acoustic wave (“BAW”) technologies, products and services. We are a preferred supplier to the world’s leading companies that serve the mobile device, networks infrastructure and defense and aerospace markets. Our design and manufacturing expertise encompasses many semiconductor process technologies, which we source both internally and through external suppliers. We operate worldwide with our design, sales and manufacturing facilities located throughout Asia, Europe and North America. Our primary design and manufacturing facilities are located in North Carolina, Oregon, Texas and Florida, and our primary assembly and test facilities are located in China, Costa Rica and Texas.
RFMD was incorporated in North Carolina in 1991. TriQuint originally was incorporated in California in 1981 and later reincorporated in Delaware in 1997. Qorvo was incorporated in Delaware in 2013 under the name Rocky Holding, Inc., which name was changed in 2014 to Qorvo, Inc. in connection with the Business Combination. We maintain dual principal executive offices, which are located at 7628 Thorndike Road, Greensboro, North Carolina
27409 and at 2300 NE Brookwood Parkway, Hillsboro, Oregon 97124. Our telephone numbers at these locations are (336) 664-1233 and (503) 615-9000, respectively.
Operating Segments
We design, develop, manufacture and market our products to leading U.S. and international original equipment manufacturers (“OEMs”) and original design manufacturers (“ODMs”) in the following operating segments:
In connection with the Business Combination, in the fourth quarter of fiscal 2015 we renamed our Cellular Products Group (CPG) operating segment as MP and our Multi-Market Products Group (MPG) operating segment as IDP. For financial information about the results of our operating segments for each of the last three fiscal years, see Note 16 of the Notes to the Consolidated Financial Statements set forth in Part II, Item 8 of this report.
Industry Overview
Our business is diversified across multiple industries. The cellular handset industry is our largest market and is characterized by large unit volumes, significant product mix shift, high technical barriers to entry and relatively short product lifecycles.
The cellular market is rapidly transitioning to smartphones and tablets based on LTE 4G interface standards to address the ever growing demand for always-on, anywhere connectivity. This demand has accelerated the deployment of advanced 4G networks in developed markets around the world. In addition, many carriers are constantly seeking to improve the speeds of their 4G networks with additional features such as carrier aggregation, while 3G service continues to expand in some global wireless markets outside of North America, Europe, China and Japan. While entry level 2G- and 3G-only handsets are still shipping in significant volumes, these market segments are decreasing as a percentage of total handsets shipped and represent a smaller opportunity in terms of RF dollar content per phone. Internet access, email, social media and the demand for mobile video are driving the demand for smartphones, tablets and other mobile data devices. These devices often contain two to five times more RF content than basic or feature phones. They support multiple air interface standards, require multiple frequency bands for broad geographic coverage, often operate simultaneously with WiFi and Bluetooth and must meet higher performance specifications. For example, 4G smartphones typically have two to three times as many bands as a 3G phone while the RF front end occupies substantially the same area in both phones. With smartphones growing faster than the overall handset market and containing more RF content, we expect our addressable market to grow faster than the overall handset market.