Nordic Semiconductor ASA

OSE:NOD

Earnings Call Transcript 2021-Q2

[Svenn-Tore Larsen]

Welcome to Nordic Semiconductor quarterly presentation for Q2 2021. Pål Elstad and myself will show you what happened through Q2. Pål will dive into the financials, and I'm going to show a little bit of happenings in Q2 and also a little bit about what's going to happen going forward, the rest of 2021. We had a strong demand in all end user markets. We have a strong demand, and we basically managed the supply. Growth was capped by the wafer supply. The revenue ended at $147.6 million. It was up 67% year-on-year and up 3% quarter-on-quarter. Our gross margin ended at 50.9%, which is 1 point down from year-to-year, up 0.7% quarter-on-quarter. Bluetooth revenue stood for $123 million, 75% growth; proprietary, 17.7 million, 8% growth; and cellular IoT, for the first time, I would say we got meaningful revenue at $4.6 million, was a growth of close to 300%. So all over, I mean, Q2 was a decent quarter. It could have been significant better if there was more wafers available. Our backlog is increasing. End of the quarter, we had $1.253 billion in backlog. That's 6x what we had exiting Q2 2020. And we see increased demand from both Tier 1 customers and actually especially from the broad market. Bluetooth accounted for 91% of this backlog. When we are going to deliver this backlog, it's very much depend on the wafer supply. Currently, the backlog is stretching throughout 2022. What we have to do now as a company is that we need to focus on all customers and ensure we keep them floating, and at the same time, work hard with our vendors to ensure that we can get the wafers that's needed to keep our customers going. So strong growth across all verticals. It was driven both by consumer, but I would say even more on industrial retail customers. We see that there is an ongoing disruption in logistics, asset tracking, smart home, we shall come back to, smart lighting and health care. And in health care, we see a strong growth in diabetes, monetary and treatment. And I think we can call it explosive sort of growth in health care, something that we have talked about for many years, finally, happening. And what we see is, and you have seen this slide if you follow Nordic earlier is the platform providers is really driving the growth. All the new home platforms enables our customers to build new products to hook up to these platforms, and I'll come back to that also. It really see increase in revenue, increase in new products coming out to connect to these hubs. This quarter, we also launched Find My network support from Apple. If you go into Nordic SDK, you see that you can use Find My app, and it basically ensures that everyone can find their devices if they are connected with the Nordic Bluetooth chip. And the important thing here is that you don't need to use the latest and greatest Nordic chip. All our Bluetooth low-energy chip can be equipped with Find My support. We have a couple of customers that we've been going public with. One of them is Belkin's SOUNDFORM wireless earbud is using Nordic Bluetooth Low Energy in their earbuds. Chipolo ONE is an item finder, is also using the Nordic Bluetooth and because -- why? Because it connect to Find My network. We also continued to work on these new platforms and infrastructures. They're a strong contributor to Matter. Matter used to be the Connected Home over IP that's supported by Amazon, Apple, Google and others. And our SDK obviously contained the Matter software. And we see that there is complete reference software there for light bulbs, light switches, door locks, everything in your home, which you want to have connected. And we are working with lots of customers now for products that are going to be launched as soon as the specification are ratified. So it's exciting times for all these initiatives and these ecosystems. You have seen and you read a lot about the specification about solution, but now you're going to see the hardware in the quarters to come containing, obviously, connectivity from Nordic. We have also gone one step further. We are launching what we call the Nordic Partner Program. You can be a design partner or you can be a solution partner. It's something that quite a few semiconductor companies do when they get at a certain size, is the need to have partners that can assist customers in getting the end product to the market as quick as possible. And currently, we have signed up 8 leading IoT companies that are partners with Nordic in this program and more to come. We launched some products that was public in Q2. And if you look left here is Aptar Pharma, which have a smart inhaler. And we said medical equipment will continue to grow, and we now see that some of these analog equipment are moving digital. We also launched a product with Toshiba Bluetooth module with Bluetooth 52811. Stel Life is a health care gateway. If you read this slide, you see it contain both cellular and Bluetooth and that's a trend that we see many places. Braveridge is doing a gas monitoring system containing 9160, our cellular modem. And at the right here, you see SparkFun Electronics. They have made their own development board for fast prototyping of cellular IoT using the Nordic 9160 module. So there is happening quite a bit of support, third-party support, for the Nordic cellular at the moment. If you look at our market share, it's continued around 43% -- I think it was 42% market share this quarter, but it's at the same level. So we are happy with design activity. And important thing here, again, as I said last quarter, is that you see the volume complexity of many of these designs are more advanced than some of the designs we used to have. We see that some of -- actually, one of the Chinese is called Telink is growing and it's growing on relatively low-complexity designs. We are putting our efforts on advanced full feature Bluetooth low-energy designs. But the good thing here is that despite all the issues we have regarding supply chain availability of wafers, customers are designing products because they know that this is a temporary situation and the companies are going to have products when this loosens up. And maybe the slide I'm most proud of. This quarter, we introduced our first PMIC, power management IC. This is a product that is complementary to all our Bluetooth parts. We can use the same customer, the same sales force and more footprint for Nordic on the PCB. This has an extreme small form factor and being Nordic product is always at low power. And obviously, PMICs are used for researchable batteries, wearables, audio, smart home, medical remotes, many other applications. And as I speak, you recognize those segments. It's the same as we are shipping our Bluetooth Low Energy into. So basically, these chips accompany of our Bluetooth chips. Anyone recall how many Bluetooth chips we shipped 2021? No, you don't, but we know it's a couple of hundred million. And we hope that this can be accompanied by each PMIC. We expect some revenue contribution already this year. Actually, we had revenue this quarter. I think we shipped around 11,000 PMIC samples to quite a bit of customers. So this is a new component in the Nordic portfolio. So we are expanding our portfolio, becoming more a complete semiconductor vendor within the connectivity segment. We continue to sell kits. It actually grew by 23% the first half '21. If you see on the cellular, we only shipped 4% of the total kits where cellular was actually due to shortage of accompanying components onto the cellular kit. We hope to -- or we see that we will get an ease in the second half, and we'll be able to catch up the backlog for kits for cellular. We continue to certify new operators. T-Mobile U.S., where this quarter, we see volumes ramping up despite supply constraint. And what we also see is that the cellular modem is a module, and we use third-party components. So we've been a little held back as you saw in Q1 revenue that there's been lack of other components onto the PCB. and we are working continuously to ensure that we have enough components to complete our modules. And here, we see customers now actually using some of our new partners. Telenor is a partner here in Norway. grandcentrix is another partner. And it's good to see that these customers, our partners, are getting up to speed. So I would like to hand over to Pål and go through the financials.

[Pal Elstad, CFO & Executive VP of Finance]

Thank you, Svenn-Tore. I'll now go through the financials for Q2 2021. As Svenn-Tore mentioned, we report yet another record revenue quarter with the growth we saw during 2020 and early 2021 also continues in Q2 2021. So we had a growth of 67%, as Svenn-Tore mentioned. This is -- this growth is really capped by the availability of wafers in the market. So revenues amounted to $147.6 million. This growth we had comes from a broad space of the market, both our large customers to Tier 1 customers are driving the growth. The new technologies, the massive adoption of IoT is driving it. And of course, the broad customer base is also pulling for products from Nordic. During the constrained situation, our focus is on helping customers who experience strong end product end user demand. Bluetooth revenue increased by 75% to $123 million. Proprietary continues the strong growth that we've seen over the last year and was now $17.7 million, slightly down from last quarter, but still a very strong number. But as we've said before, there is a transition from proprietary to Bluetooth in the home PC -- or the PC market. So we continue with our guidance that proprietary will decline over the next coming years. For cellular, as Svenn-Tore mentioned, the first time we have meaningful revenue of $4.6 million. This is a little bit impacted by Q2, which had some supply issues, but $4.6 million is still a good achievement. And it's showing that we now have several projects that are now beginning to really come in to the commercial phase. There's especially one car-tracking product that's driving the revenue in this quarter and that can, together with other tracking products, that have a potential to be good in the next few quarters. It's important for cellular that it will be a little bit bumpy because there is -- it really depends on when large projects come into the commercial phase. Also for cellular IoT, we are depending on a little bit more variables in the whole supply chain, depending on products from other suppliers. So it can be a little bit bumpy going forward. I'm now going to revenue per market. First of all, this slide does not include cellular IoT, it does not include WiFi, it does not include the PMIC products. So at the Capital Markets Day, we're planning later today, we will come up with a new method to show how we report our business and how we show the markets we operate in. As the overall market showed strong numbers, of course, each of these markets will have a positive development year-over-year. But it's important to emphasize what we talked about before that since there is a constraint in the market, how much products that are allocated to the different markets will depend on the availability of wafers. First of all, Consumer Electronics at $51 million, which is around 36% of the total, a little bit down from highs late last year. This market is, of course, driven by PC peripherals, but also gaming is important in this market. Wearables, 13% growth from last year, down 20% quarter-over-quarter. The Wearables was very strong last quarter and got allocated big amounts in Q1. And this reduction quarter-over-quarter is the effect of this change in allocation between quarters. Building and Retail, 120% growth. This is, of course, a market we have been tracking the last few quarters and is showing a very strong number and is now very, very close to becoming -- or not the biggest, but it's very close to Consumer Electronics. This market includes industrial and home automation products such as speakers and smart lighting. In this market, we also include city bikes, electronic shelf labeling and also various tracker solutions. Next, Healthcare, 11% growth from last year, 4% down compared to last quarter. Compared to last quarter, in Healthcare, there's a base of the customers we've been talking about for a long time delivering drug delivery systems, mainly related to diabetes. There's been some bumpy COVID-related products in Healthcare. And then in Q2, these products were less, but we do see the big transition within Healthcare going on. Gross margins. We commented last quarter that we saw a reduction to around 50% gross margin. This reduction came as a result both of product mix. We were selling more products to, amongst others, the health care. And also on the customer mix, we were selling more to larger customers. So we got a reduction to around 50% last quarter. In Q2, we saw a small shift bringing gross margins back to around 51%. It's a mix. Healthcare was less. Healthcare has overweight of more low-value products, so partly the shift will be driven by that. And secondly, Tier 1 customers actually in Q2 have a lower share than in Q1. Not a big difference, but bad enough to have a small impact on gross margins. Going forward, we reiterate the 48% to 50% gross margin target. It's both the product mix and the customer mix effect, but also we will also see some effects of higher costs in the supply chain of the value chain. Now to operating model. The numbers on this slide reflects reported numbers. The effects of capitalization and internally developed R&D and equity compensation we'll come back to when we go to cash OpEx. Despite increased investments, the strength in Nordic's model can be seen now when EBITDA has a good shift upwards to closer to 20% from 18% last year. All KPIs show a positive trend, although the underlying absolute numbers reflects the increased activity level in the business. First, on R&D. Total R&D spending at 21.3%, more or less the same as we had last year and last quarter. However, comparing -- excluding the recently acquired WiFi business, R&D in percentage of sales is actually down to below 20%. And remember, 20% is our target to be a very good R&D developing company. Overall, absolute numbers, total R&D increased from $18.7 million last year to $31.4 million this year. This is partly driven by increased investments in the entire R&D organization, including WiFi, but also PMIC as we talked about before. During last quarter is due to COVID, SG&A has been sort of on the low burn rate, mainly because there's been very little travel and very little exhibitions, conferences going on. So the SG&A in percent of revenue is now below 10%. Cash operating expenses, which is the cash OpEx, excluding our capitalized internally developed R&D and equity compensation, increased by 55% compared to the last -- the same period last year. Compared to last quarter, OpEx is slightly down mainly due to the way we treat vacation pay in Norway and Finland. This increase in salary expenses of 50% comes as a result of continued growth in the business that is required to capture the growth we see in front of us. Number of employees grew by 32%, including the 81 people acquired from Imagination. At the end of the year, we have 1,087 employees. The reason the cash cost increases more than the number of employees is the mix. First of all, we do have a negative FX impact in Q2 last year. The Norwegian kroner was significantly weaker than today. In addition, we have higher bonus accruals in 2021, of course, because 2021 is performing much better than last year. Other OpEx, a large increase of 70% and mainly driven by higher activity in R&D. We had tape-outs of new products. We have also used quite a lot of consultants in this quarter. On the EBITDA, our EBITDA margins in Q2 2021 was a strong 19.8%, very close to the 20% mark we've given, up from 18.1% a year ago; and compared to last quarter, 17.4%. So the increase there is driven by higher gross margins and also slightly less cost per revenue. Adjusting for cellular IoT and WiFi, the short-range business is now showing very close to 30% EBITDA margins. If you look at the last 12 months EBITDA at 20.4%, we're for the second consecutive quarter now above 20% for the short range -- no, for the entire business. On CapEx, we've spent $9.6 million in Q2. This is 6.5% of revenue and significantly higher than the amount guided for in the Q1 presentation. The reason is we've pulled in additional test capacity so that when -- so that in our production we have high flexibility. So when we get in wafers, we can quickly turn them around to end products and then deliver out to customers. And Svenn-Tore has mentioned that several times, it's very important for us to have a high flexibility in the organization because wafers do come in bumpy in today's situation. In addition, we've spent around $2 million in lab equipment mainly for the WiFi -- acquired WiFi business. We're expecting overall CapEx intensity in 2021 to be at the same level as in 2020, so around 4%. A result of that is that CapEx will go down in Q3 and Q4 mainly because we're not planning any more tester purchases. My final slide, cash flow. During Q2, we have had a very strong cash flow of $30 million. Actually, the operating cash flow was $52 million adjusted for capitalization. The improved cash flow comes as a result of strong EBITDA and the positive development in net working capital. So we had a strong inflow of $22 million related to net working capital, mainly driven by strong payments from customers. Customers pay us timely. And then, secondly, we have a record low inventory. That's not a positive thing because now we only have inventory to cover around a quarter's revenue. So we need to get that up when supply normalizes. So we would expect some increase in working capital going forward. I mentioned the high CapEx of $10 million, and we also had the options settlement in Q2 of $11 million. Net-on-net, added $30 million to our balance sheet. So we now have cash of $227 million, which is a very comfortable number, given all the plans and activity we have going forward. Okay, Svenn-Tore, I'll hand over to you.

[Svenn-Tore Larsen]

Thank you, Pål. [Operator Instructions] I think listening to Pål's presentation on the numbers, you would understand that Nordic is on long-lasting growth journey. Basically, if you see, we have never grown as steep as now. And obviously, when the wafer supply is opening up, we will continue to have our very strong growth. And it's because of this widespread IoT adoption. Nordic has spoken about this for many years. Other customers -- other companies have also started talking about this in the last couple of years, and now it's finally happened. And we are working hard as possible to ensure that we are getting the supply to keep the total market growth. That's our plan for at the moment. With $1.2 billion in backlog, we need to get wafers. We need to turn these into products so end customer can maintain the penetration of this fast-growing market. And as Pål said, I mean, we spent more than $9 million last -- or this quarter to build up our test park, so we can get wafers anytime and turn them in 7 days into product. We have a solid market position. We are market leader in Bluetooth Low Energy. I will point back to the 43% design market share. We are taking position to take lead in cellular IoT. We are complementing our portfolio with WiFi. We are accelerating the WiFi development. And thirdly, we released PMICs this quarter. PMIC is a good product, which Nordic has made. It's accompanying every design that we do with our Bluetooth Low Energy. Our customers, who know our quality of products, have been, as I said, more than 10,000 parts shipped out sample to customers already. There's customer testing our PMICs today. So the only challenge we have, which we work very closely with our vendors on is to ensure capacity increase on wafers. And we will obviously update you as soon as we have any substantial information about this plan. What we can say today, though, is that the commitments we have for Q3 is giving us ability to guide for $130 million to $150 million. And it's the widest range I showed so far, but it really reflect the fact that we don't know when the wafer comes in. If we get wafers in mid-September, we can turn them to product and revenue this quarter. If it's too delayed, then we have a challenge. We are working very hard and close with our suppliers, and we expect that at least we get the minimum same level throughout the fourth quarter. We obviously work hard to increase work today, minimum the same level. We understand that the capacity might remain tight for at least another year even though TSMC have communicated CapEx of $100 billion over 3 years. But good thing is that also confirm expansions on the technology nodes that our current Bluetooth Low Energy parts are running on. So despite that we are growing strong, we could have had a significant higher growth if the parts were available. So our guidance for Q3, $130 to $150 million. Margin will be more or less in line with what we delivered this quarter. What we need to do this quarter is to look after our customers. It's a tough work for our sales force. We are expanding sales force. We are working closer to each customer and to ensure that we put the parts to the customer that have most use for it at any time. We see that the technology adoption continues. It strengthen our long-term growth potential. And we expect that as soon as the capacity sort of ease up, it will be very positive situation for Nordic and our customers. On the margin side, we expect that we keep, as I said, the same margin. And on the long term, or I would say, we expect the margins for Nordic to stabilize around 48% to 50%. So thank you all for listening into our quarterly presentation, and we very much look forward to see you all again and I hope physical for those who can be in Oslo at the Q3 presentation. And we will very much look forward to have our Capital Markets Day the same day after presentation. And mark your calendars, it will be October 21. Hope to see you all there, and we are open for questions. And Stale, have you got some questions there? Pål?

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

Yes. We have some questions. We have split it up in topics. We can start with the backlog. This is from Christoffer, DNB. Is the duration of the backlog still about 12 months or is it now getting artificially inflated? Just trying to understand how much of the backlog is true demand, and how close to the $1 billion target this backlog puts you?

[Svenn-Tore Larsen]

The backlog is very real, but it stretched out to all 2022. So basically, what we see is that customers are placing orders ahead of time and it's a terrible situation that we can't ship all our backlog at each quarter. But it's also a good thing when you have a long backlog is that at least you can focus on producing exactly the parts that is needed to the market. But long activity is the reason. And obviously, as we get larger customer, higher volume with longer orders, that adds up to this increased backlog. And Christoffer, you're right, we are very close to the $1 billion mark. And in Capital Markets Day, we will talk about what is our next goals and we do that in October.

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

Thank you. We continue on backlog. And we have one question from Arctic, Kristian Spetalen. Could you provide some flavor on the Q2 order intake mix, and for what period the deliveries are due?

[Svenn-Tore Larsen]

If you look at the intake we took in Q2, most of this covered the first half of '22. And obviously, it was a good mix of new projects and existing Tier 1 volumes. But as Pål said, the Tier 1s or the larger customers, the actual revenue part of it was going down 1% or 2%. So it's all the long tail, all these new customers that are connecting to these hubs that basically were contributing most.

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

Thank you. Then we go over to the topic of supply constraints from Rob Sanders, Deutsche Bank. What is your initial view of your 2022 fund reallocation versus 2021 in terms of percentage growth? If I can just continue here, all the fabless companies are saying they are worried after initial discussions with foundries on this topic.

[Svenn-Tore Larsen]

What other customers are worried about I can't comment on. But I'm sure that Nordic will have good growth in '22, and we are working together with our vendors to convert the good to better. I can't comment more at the moment.

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

Thank you. And we continue with Petter Kongslie, Sparebank 1 Markets.Do you expect same wafer availability in fourth quarter as in the third quarter?

[Svenn-Tore Larsen]

It's too early to say because we are just in the beginning of Q3. We are working every day to increase. I know that our partners are doing whatever they can to increase output. So it's -- the best we can do is what we guided on in the slides that we just presented.

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

Thank you. Rob Sanders, Deutsche Bank. Are lead times at distributors at around 52 weeks?

[Svenn-Tore Larsen]

Lead time depends from customer to customer, the importance of project. So having general lead time today doesn't account very much. But it's very good to place the orders early to ensure delivery.

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

Thank you. Then we go over to the topic, cellular, from Christoffer, DNB. You mentioned that you are working with diesel-tracking company in cellular IoT with potential to become a top 10 customer for the company. Can you say anything about what kind of timing we should expect for this to happen?

[Svenn-Tore Larsen]

I didn't put it on the slide, but I can inform you. In June, for the first time, we had a customer from cellular amongst the top 10 customers already in June.

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

Thank you. Then we have a question from Øystein Lodgaard. Should we expect to be lumpy also going forward? Or is it likely to continue to increase in Q3 and Q4? This is about cellular.

[Svenn-Tore Larsen]

Cellular is the most complex product we have because here, we are dependent on getting third-party components onto the module. So we are very -- I mean everybody knows in the industry that substrate is scarce. It's difficult to get some crystals. It's a very hard situation. We have been working heavily with our suppliers to ensure that we get enough products to assemble our modules. And it will be lumpy because of availability of external components.

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

Thank you. We continue on cellular. Christoffer from DNB. Shipments on nRF91-based dev kits seems to be down significantly year-over-year of -- we understand of your numbers -- if we understand your numbers correctly. Can you help us understand why this does not reflect a slowdown in momentum for cellular IoT?

[Svenn-Tore Larsen]

Yes, we can. The reason is basically that we were having less development kits out in the market where a shortage of components we were not able to produce as many kits as possible. So if that ratio have been what it should have been, the question wouldn't have come up. But the fact that we are now going -- volume is starting to be meaningful is that we have had projects ongoing for a long time that now moves to production. And obviously, when we get more than 1 product or 1 customer in production, it sort of leads to that kind of growth.

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

Thank you. Let me go over to the topic of PMICs. Christoffer, DNB. If I heard you correctly, you were saying hundreds of millions of units shipments potential for the new PMIC product. Is it fair to assume this is a significantly lower price point than the Bluetooth part.

[Svenn-Tore Larsen]

You heard me correctly, and it's not fair to assume it is very much cheaper.

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

Thank you. Then we have a question from Johannes Ries. How fast could PMIC accelerate?

[Svenn-Tore Larsen]

Usually we see development time, we have always said 12 to 2 years. We see shorter development time -- 12 months to 2 years. We see shorter development time to less complex the product is. But now we also have this situation where you have a shortage of supply. And development time, I would say, at least a year. So a year to 2, we will see significant -- or I would like to use the same word as I've done with cellular, meaningful revenue.

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

Thank you. Then we go over to revenue, and we have a question from Christoffer, DNB. Can you please give us an update on how much revenue comes from the top 1 and top 10 customers during Q2?

[Svenn-Tore Larsen]

Top 10. 36%, Pål?

[Pal Elstad, CFO & Executive VP of Finance]

No. It's around -- it was slightly ticking above 40% earlier quarters, and now it's just below 40%. Yes. Now on the top 1, 2, 3 customers, we are not giving that...

[Svenn-Tore Larsen]

No. We're not sharing that data. But the important thing is that the top 10 as a total were down compared to previous quarters, which means that the long tail -- the long tail constitute of all the new customers that are connecting to the hubs.

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

Thank you. That was good. And then we have a question from Lars Henrik Bjerke, TDN Direkt. Congratulations on your another stellar quarter.

[Svenn-Tore Larsen]

Thank you.

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

You say your market share based on certification is 43% as of Q2 '21, which is down from Q2, that was at 46%. Should you shed some color on where you see your market share lost? And where -- whether or not you expect this market share to rise, fall or remain in the coming quarters?

[Svenn-Tore Larsen]

That's a complex question, which will take half an hour to discuss. But the most important thing, this is design share or design win market share. We are working now with larger customers, larger accounts and focusing on projects that have higher volumes. So if you look at the total market share for Nordic, I think it's been increasing and will continue to increase in dollar-wise. Obviously, we have a shortage period and there has been some -- customers have been not able to support because of existing customers that already have projects, which we have to support. I hope to see that this is changing throughout next year and that we can be as aggressive on design wins as we've been previously.

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

And we continue with [indiscernible]. In Q2, you gathered wafer volumes from later quarters to cope with the increased demand. You shift some volumes to Q3 also. If so, how much and does this affect later quarters?

[Svenn-Tore Larsen]

As we said in the presentation, we expect a minimum the same amount of wafers to be shipped to Nordic throughout second half of the year. So as we did now in Q2.

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

Thank you. And then we have other questions from Rob Sanders, Deutsche Bank. Are you seeing any designs using Bluetooth classic moving over to BLE. It seems that Bluetooth classic lead time are even longer than Bluetooth Low Energy.

[Svenn-Tore Larsen]

Yes, we've seen that for a long period that customers are changing from classic to BLE.

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

Thank you. And Christoffer from DNB. You say that technology nodes our current Bluetooth parts are running at. Do you expect a move to a lower node to give you more wafer capacity in 2022?

[Svenn-Tore Larsen]

Answer is easy, no. We expect on the long term, it could -- it will do. But for '22, it wouldn't have any effect.

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

And then we have a question from Petter Kongslie, Sparebank 1. Is it possible to say anything about the average selling price on the WiFi products?

[Svenn-Tore Larsen]

We don't have a product out in the market yet. We have estimates of cost. And when we done the first products and get them into the lab, then we will start looking what will be the prices of these products when we have a full cost overview. So the answer is no...

[Pal Elstad, CFO & Executive VP of Finance]

It will be above Bluetooth, of course.

[Svenn-Tore Larsen]

It will be significant about Bluetooth.

[Stale Ytterdal, Senior Vice President of IR & Strategic Sales]

Thank you. That was all the questions.

[Svenn-Tore Larsen]

Thank you to everyone who sent those questions. And again, looking forward to October 21. See you. Bye.