Nordic Semiconductor ASA

OSE:NOD

Earnings Call Transcript 2020-Q4

[Svenn-Tore Larsen]

Welcome to Nordic Semiconductor's quarterly presentation for Q4 2020. It's been a great year for 2020 for Nordic. We are accelerating our growth, and we see strong demand across all end user markets. The revenue totaled to $127.1 million last quarter, which is a good quarter for Nordic. It's actually the best quarter we ever had. It's a growth of 52.9% year-on-year and up 6.5% from last quarter. Our margin ended at 52.7%, up 1.1% year-on-year. Our Bluetooth revenue accounted for $97.6 million, is a growth close to 50%; while proprietary revenue ended at 25.3%, is a growth above 55%. Our cellular revenue showed $2.4 million (sic) [ $2.7 million ]. And the gross margin of 52.7% really underlines the fact that our high-margin, high-complexity System-on-Chip really contributed to this growth, and I'll come back to why and how it's contributing. Our order backlog is at new and even higher level. We exited Q3 with $288 million in backlog. We exited Q4 with $492 million, close to $0.5 billion in backlog. It's up 361% year-on-year. And the Bluetooth Low Energy and the multi-protocol solution accounted for 84% of this backlog. And why has it grown so high? It's a shift of our customer mix. We see several major Tier 1 customers contributing with higher volume orders and we also see the plan these orders have a longer order windows. And really, the -- what's happening in the market is the technology shift where more customers are transforming from Bluetooth classic to Bluetooth Low Energy, and this also accounts for top Tier 1 customers. And as said, it was a longer order. I think if you analyze the backlog, it's stretching out more or less through 2021. And there's always reason for that and it's all the documentation, all the articles regarding supply shortage. And it means that customers are securing their deliveries over the year. And I'll come back to that on a later slide. We are fortifying our broad market leadership. It's always been important to Nordic to win the mass of customers and to develop new customers and new segments. We continue to do that, at the same time, we are focusing -- laser focus on our Tier 1 customers also. So we're doing 2 things at the same time. 45% defined in share last quarter, strong numbers, and we will continue to keep this focus going forward. How can I say that? Because we see developer kits continued to grow. Total shipment went up 9% in 2020. And don't forget, these kits are not used 1 times, 2 times. It's basically in the labs of our R&D engineers globally now and it adds up with another 9% in 2020. So totaled, almost 95,000 kits were shipped last year. Cellular IoT, our Thingy:91, our 91 products over LTM, Narrowband IoT, accounted for 12% of this number. I don't think the market generally is 12% of the total customer base out there, but just sees the interest for cellular of Nordic now is developing the cellular IoT market. It's exciting times ahead of us. Every quarter, I talk a little bit about new products. Here is a few products that were launched in Q4. We see module makers now are putting Bluetooth Low Energy and ultra-wideband into 1 module. And that's basically what we see: a lot of applications that ultrawide band and Bluetooth Low Energy pair up. We see another exciting thing here when you look at smart watches. Chinese smart watches are getting more complex, and to do all the calculation they need to do, all the features they need to have, they go for more complex Bluetooth Low Energy chips. More memory, more calculations. What have Nordic preached for years? Complexity. Before Nordic, I remember a company called Intel and still know them, they always talk about this complexity growth. And that's what we did and now we get payback. Come back to why we get payback? We also see customers, infrastructure guys, that are making new ecosystems. They're making systems that support both Bluetooth Low Energy trend and also sometimes proprietary protocols. When these ecosystems are offered to the general public, what you're going to see is that a lot -- thousands of small-, medium-sized accessory customers are going to make products that hook up to these networks. How can they hook up to this network? Being compatible to these new protocols. How are you compatible? You have to have enough memory and you have to have enough compute power. Other parts offer that. I also put a few -- actually 2 here examples of 9160, our LTE product. And I think, excitingly, if you go to the right is the tiptap. Here, if you are a street singer, you can have this besides you guitar and people can go and pay for your songs. If your local sports club have an event, you can bring this and you can sell all the cakes and waffles you want and you get paid. Easy access to the global net enabled by Nordic 9160. In hospitals, you want to know where people are, having health care and medical real-time monitoring. Getting a product out there with Nordic inside. I thought about multi-protocol System-on-Chips is really enabling the smartphones you're going to see rolling out going forward. And Eve System is just one example of a company that have made an accessory that basically connect to Apple's new Homekit functionality. Again, it used a 52840 and I don't need to tell you why because I've done that through -- earlier in the presentation. But this product support Bluetooth 5, Thread and Zigbee. We've been through a horrible year. We still are in a new year that doesn't look too good, but it could be improved. It's important that we basically treat this coronavirus, do the testing, make it easier to get tested. And Nordic now is inside the first COVID-19 home test kit. It's a 50-minute test. It takes 50 minutes for you to do the test and swab till you know your results. And automatically, it connects to the net, a secure connection. And Ellume expect millions of these -- or tens of millions of these tests throughout the year. And we have a solution for them at Nordic. The 52810, it's a system with high value and relatively low cost. The 53840 is a new product from Nordic. It's the first dual Arm Cortex wireless System-on-Chip. 2 Arm Cortex into 1 chip. It's a large Bluetooth chip, it's high performance, high efficiency and we've made no trade-offs, and we've already go into the market with such a complex chip. But as I said very early in the presentation, I think complexity grows all the time. Adding complexity means adding features. And there will be a lot of feature-rich IoT applications years to come. Segments we haven't played, but good in like audio is now enabled, making even more advanced variables. And I've been speaking about professional lighting previously. This is the chip. Know it's exciting times for the 53 family. We already start getting the signs, and we see preproduction coming on board. Something happened here. You have to help me. Excuse me, there is something here with the presentation. I think the technicians are trying to fix it for us. So while they're fixing it, I could talk about the cellular IoT. I mean what we see is that -- yes, cellular IoT is expanding. And we are now working with a partner called Arkessa, which is leader in virtual SIM. And it really eliminates Nordic's need -- Nordic's customers need to negotiate with individual carriers. It's basically having an extensive European and global lead on LTE, Narrowband IoT. And Arkessa will offer technical support and access for connectivity testing and evaluation. No, there's still something wrong here. So Ericsson, you -- I'm seeing my reference slide, is using the 9160. It's enabling rep with IoT development for our industrial customers. And that's where LTE -- LTM is going to really grow going forward. Well, if you look at this -- the slide, it's basically having temperature, humidity and air quality, air pressure and light sensors. So any industrial customer, which want to do a design, which connects right to the base station could take this reference design and get started. We also see customers doing modules. Avnet Asia is integrating 9160 and the 52840 in the smallest module, combining LTE and Bluetooth and GPS. It's available to customers. Braveridge, a Japanese customer using 9160 for the Sonicboard. And a Dutch company put 9160 into asset tracker. And one of the -- that made a couple of trackers and one of them is actually powered by solar. Cool, it's a total green product. The sun is powering this tag. What else have we done through this quarter? We acquired WiFi, and we have acquired a WiFi team of 80 people. It's an IP company. And we have WiFi IPs now, WiFi 4, 5 and 6. And I think this is what we missed. Now Nordic can make a complete product combined with Bluetooth, WiFi and cellular IoT or any of the combination. This represent a significant expansion of our market. So we have exciting times ahead of us. And now I will hand over to Pål, our CFO, to go through the financials and I'll come back and discuss a little bit about outlook in the end of the presentation. Welcome, Pål.

[Pål Elstad, Chief Financial Officer]

Okay. Thank you, Svenn-Tore. I'll now go through the financials for Q3 -- Q4 2020. As Svenn-Tore mentioned, Nordic has been showing accelerating growth throughout 2020 and especially in Q4 2020. 2020 is actually the highest revenue recorded and is 8% -- 7% higher than Q3 2020, which is $8 million above last quarter. For the first time, we continued for the second year to actually show that the seasonal down in Q4 is sort of disappeared. We now see that Q4 is the strongest quarter. How has this happened? Well, the main reason is, of course, that we do have a strong pull towards the end of the year. And then also we've been able to sort of shift a lot of our customer markets to markets that are not so depending on seasons. So less on consumer and more on industrial, health care, et cetera. The revenue in Q4 was slightly above our guided range. We did have in Q3 report we will have a cap on supplies, but we were able to fulfill that and came out for the quarter slightly above what we guided. For the quarter, Bluetooth revenue amounted to close to $98 million, more or less the same as in Q3, and up 49% compared to last year. Bluetooth share is ow this quarter 76% of total, slightly down from last quarter. This is really explained by the very strong proprietary revenue we had in the quarter. Proprietary was $25.3 million in Q4, which is actually an increase of 55% versus last year. Proprietary has, of course, been driven by the very strong pull to home office equipment that we've been talking about for the last few quarters. However, also in Q4, we saw some very interesting proprietary projects in both fitness-related products and also in gaming. For 2021, Nordic sees stable proprietary demand from PC accessories because some is still moving over to Bluetooth. So we do reiterate our long-term guidance that proprietary will have a slight decline year-over-year. We're now going to talk about revenue per market as overall revenue shows very strong growth both compared to last year and last quarter. The underlying markets will, of course, also show growth. But I want to highlight a few areas. So first, there's 2 areas where we do see the normal seasonal decline. This is Consumer Electronics and Wearables. Consumer Electronics, which is the biggest market with about 40% of the total, had 60% growth compared to last year and just a small decline compared to last quarter. As I mentioned, this market is, of course, driven by the home office product, both proprietary, but also for Bluetooth. And there's -- every quarter, we talk about new opportunities in Consumer Electronics. Gaming is a very important player in this market. Wearables shows a stable trend compared to last year and a 7% decline compared to last quarter. We do have very strong design activity, especially within our high-end products, as Svenn-Tore mentioned earlier in his presentation, then especially in the Chinese market. Then to the 3 sort of segment -- or markets that do show an increase both year-over-year and quarter-over-quarter. Building and Retail revenue increased by more than 60% year-over-year, and now is actually our second biggest market. The increase reflects continued growth both in industrial and home automation applications such as smart lighting, alarm systems, smoke detectors, temperature controls, et cetera. City bikes has also been very popular now in the COVID period. And an important new high-volume sort of technology is the electronic shelf-labeling systems. Health care revenue increased by 113% year-over-year to close to $11 million in Q4. In Health Care, we have the stable base that we've been discussing for several years, which is the drug delivery systems, especially related to diabetes. In Q2 2020, we, for the first time, saw the full effect of COVID-related products. These are a little bumpy or slower in Q3, are then high again in Q4. What's more important with the COVID products, although they do give a good revenue in this quarter, we see that the pandemic has also accelerated the adoption and design of connected health care devices. That's why we believe that Health Care is going to be very important going forward, both COVID-related, but also other products in Health Care. Gross margins came in at a strong 52.7%, up from 51.6% a year ago. Compared to last quarter, we have a slight reduction. However, last quarter did have a positive effect from previous periods. So adjusted for that, we do see an increase in Q4 versus Q3. We've thereby been able to consistently execute at margins above 50%, which is our long-term target. The strong underlying gross margin comes as a result of continued high demand for high-end System-on-Chips and also a favorable customer mix. We expect a slight decline in Q1 2021, mainly due to higher sales to larger customers and also a less favorable product mix, especially some Health Care products do have lower margins. In the long run, we do guide for a 48% to 50% margin for the short-range business as we have influx of more larger customers into the business. Also, the cellular IoT will increase revenue and thereby impact gross margins on a total level. Now I'm going to jump to the operating model. The numbers on this slide reflects reported numbers. The effects of capitalization of, internally developed R&D and equity is excluded -- or included in these numbers. The strength in Nordic's model can be seen in this -- on the slide with a strong revenue growth of 53%, resulting in an increased operational leverage and an EBITDA margin surpassing the 20% target. Total reported R&D is now at 21.6%, down from 23.5% a year ago. Included in these numbers are $1.7 million of capitalization. Although compared to revenue, the R&D goes downwards, the underlying R&D number has increased from $19.6 million to $27.5 million in total. A large part of this increase is in the cellular business, which goes from $7.6 million to $10.1 million, really reflecting increased activity to commercialize the product. Although we do see the revenue, compared to R&D, goes down, we reiterate our target to at least be at 20%. We believe we need to be there to -- in order to have competitive products out in the markets. In earlier quarters, we did see that SG&A was very low mainly because of less travel, less marketing, exhibitions, et cetera. We do see a pickup in the market, so SG&A costs are increasing. Overall, EBITDA at $26.9 million, up from $12.2 million a year ago. Okay. Cash operating expenses. Cash costs increased 23% year-over-year. This mainly came as a result of more employees in the company. Totally, we have increased the number of people by 7% -- 17% year-over-year. So we are now at 897 people. This does not include the 81 employees that we successfully integrated into the WiFi business as of 31st of December 2020. So from January 1, we are 81 people more.Overall, cash -- salary expenses increased by 27%. The reason that's higher than the number of people is mainly based to equity compensation and bonuses due to the strong results.Other OpEx increased by 9%, so significantly less the growth in number of people. Other OpEx is slightly bulky, mainly because of when tapeouts for new products occur.EBITDA in Q4 2020 was a strong 21.1%, up from 14.7% a year ago, a slight reduction compared to last quarter. However, adjusted for the 1.7% in adjustment in gross margins, it's more or less the same number. Especially the short-range business shows very operational strength with close to the 30% EBITDA margins both in Q3 and in Q4.If we look at the numbers over the last 12 months, reported EBITDA margin is close to 19%; and then for short range, close to 27%. So a good increase quarter-over-quarter.CapEx in the quarter of $5.4 million, so more or less the same as earlier quarters in this year, slightly up from Q3. As Svenn-Tore also mentioned, we are investing quite a lot in production capabilities, so test lines, et cetera. This is important in today's environment with supply constraints that to be -- have all our own equipment to do the final back-end testing in the business. We will continue these investments going into 2021. So the CapEx intensity will be more or less the same in 2021 compared to 2020, around 4% of revenue.Okay. Finally, I'm going to talk about our cash flow. Nordic has a continued and very strong cash flow development, and what we saw in Q3 also continues into Q4. And based on this, we have a very strong cash position. The strong cash position comes as a result of the capital raise we did in Q3, but also operational cash flow of $51 million in Q4. The strong operating cash flow is a result of a very strong cash conversion as net working capital in percentage of revenue is down to below 20%. Last quarter, it was 24%. And historically, it's been closer to 30%. One of the reasons for this reduction is, of course, the inventory levels that are due to the supply issues, lower than they should be. Also, we do see very good payments from our customers. As mentioned, in connection with the private placement, we are working on M&A opportunities. And in Q4, we actually had the first one. So included in the numbers is $13 million net of cash payment for the WiFi business. The group's cash position is, at the end of the quarter, $243 million or close to 3x our last month -- 12 months R&D spending. So we have a very healthy balance sheet to deliver on our next year's programs.Finally, for the year in total, first year -- first time for several years, we have overall net positive cash flow of $40 million, adjusted for financing and business combination, which is very strong.Now I want to hand over to Svenn-Tore to go through the outlook.

[Svenn-Tore Larsen]

Thank you, Pål. The technician is working a bit on the slides set here on the PC, but I hope that you are not too affected about the hangup on the PC. So I just want to remind you when we do the outlook here that Nordic is on a long-lasting growth journey. We started to pick up the first wave -- or I would say, the start of IoT. And then we now see that we are moving into, I will call it, a mass IoT adoption. More and more customers are now seeing what connected sensors, what connectivity can do. And obviously, for Nordic, it's important to be in the lead of this connectivity trend.And I would like to come back to an important point here. Let's just find the right slides here. I mean this is not working, but I'll try to find my slides. So it's important that -- to understand that we are a strong and resilient company. The most impressing I have seen in the company the last year through this tough situation we have had is that people are continuing to deliver, sales force are continuing to do the sales and we are expanding our customers. If we analyze our customer base, we see that we get more than 100 new customers in volume production throughout a disaster year around us. I'm extremely proud of the effort the people internally have done.I'd like to say that we've certainly proven resilient. And if you look at how this acceleration in revenue has arose, it basically arose because acceleration in Bluetooth and multi-protocol, 43% growth in 2020 on multi-protocol and Bluetooth. Proprietary revenue driven by all the home offices made us grow 27% and this is leading customers that see this growth in the market. This, as Pål said, was better than expected, but we still see that '21 will contribute with a huge amount of revenue and maybe we can be slightly down. But based on the forecast we get, we're going to get a good proprietary revenue in '21. Bluetooth and multi-protocol will obviously continue to grow. Why am I so sure? We need to look at our backlog. Our backlog is now at $490 million, more than $490 million, is going to be depleted over the coming quarters. And we are extremely solid position. Now when you look at all the design kits we've been sending to the market in cellular IoT, these customers also start producing products in volume throughout this year. And we had a fortunate opportunity to complement our portfolio with the WiFi. Now we can, as I earlier commented, build combo products. So we are in a position that we've never ever been previously, and we have grown our manpower to 1,000 people now. We have people all regions. We have them outside each customer's door. We can give the support the customer demand in this situation we are now. We have FAEs, we have application engineers globally that will help out all our customers to accelerate development because everything is about accelerating time-to-market for our customers. Nordic has to be laser focused on getting customers into production, and that's our main focus now.We also need to be even more focused on the customer now than ever because there has been, in media, a lot of discussion regarding global semiconductor shortage. Yes, there is shortage. It also apply to Nordic, but we knew we will get a lot of new customers in '21. So we placed early orders to ensure that basically we will cover our customers' need. We have been notified of limitation of wafer supplies. But I know with current allocation, we will have at least a 25% increase in production volumes for '21. We're not guiding for the year, but we know we have a 25% minimum production volume increase.We know that, Q1, we could guide for $130 million to $140 million revenue. If we end up in the upper range, it's a doubling of revenue from Q1 '20. And we also see that the largest impact on wafer shortage is expected to be Q2. We will see higher volumes in second half of '21. And the good thing is that semiconductor hubs are stepping up their investment. And TSMC, our partner on wafers, are telling us that they're going to spend $28 billion investment in '21. They believe in semiconductor content growth years to come. And they'll not spend $28 billion to sort of level out for Q2 '21 shortage, they do it because they believe in the growth in the industry. And I believe in growth in the industry is going to be contributed a lot by IoT products and connectivity.And if you go through the Nordic presentation, this is what we've been talking about the last hour. Connectivity is going to take a large part of this capacity extension, and Nordic should be part of this.So as I said, we expect a strong Q1 in a very challenging supply environment. And we also see that risk and uncertainty remain regarding the pandemic. But the most important thing is to see that the adoption of IoT is really happening. And I think the supply capacity is a temporary issue. So if we look ahead of the bump, there is a fantastic situation to be in, being Nordic at the moment.And we see also for Q1, just to guide a bit, is that there will be high volumes of lower-margin System-on-Chip. So we guide down the margin to 50% to 51%, and as I earlier said, a revenue range between USD 130 million and USD 140 million. As I repeat, because I like the number, to meet the upper end is a doubling from Q1 2020.So we have a Q&A session now. [Operator Instructions] So I would like Pål to come back, and we go to questions. And thank you for listening in. And now we take the questions.

[Operator]

[Operator Instructions] As there are no questions at this moment, I will hand it back to the speaker.

[Unknown Executive]

Okay. We have some questions coming in from -- on the webcast. So I start with in from Sparebank 1 from Petter. Supply shortage. I did not fully understand the 25% wafer cap. Assuming you had 0 wafer available going into 2021, you could max deliver 25% year-on-year growth then?

[Svenn-Tore Larsen]

It says a minimum increase of 25%. That's the exact words that we used.

[Pål Elstad, Chief Financial Officer]

For the year as a total.

[Svenn-Tore Larsen]

Yes.

[Unknown Executive]

And this 25% wafer cap, is this related only to Bluetooth? Or is it Bluetooth, cellular and proprietary wafers?

[Svenn-Tore Larsen]

It's basically a mix. It's based on the -- if you look at TSMC's report to the market, it applies most nodes. And Nordic are using all of those nodes that are mentioned in this press releases.

[Unknown Executive]

Another question from Sparebank 1. When were you notified about the shortage? And when will you have a second look at this?

[Svenn-Tore Larsen]

We have a second look every day. This is a matter of having communication. We have a leading supplier. We have a supplier that invests $29 million -- $29 billion into new equipment this year. I mean we are fortunate to have such a good partner. And obviously, what such a partner will do is to sort out the bottleneck as the first step. And when we knew it, it was actually very, very recently. We knew it when we heard or saw the comments in the newspaper start leaking a week ago or less.

[Unknown Executive]

Continue with questions from Sparebank 1. Can the cap be changed in 2021? I guess setting up a new production line for TSMC takes a long time.

[Svenn-Tore Larsen]

I think he guessed right, it is, but it depends where in the process the bottleneck is, as I commented on. And I'm sure that TSMC is a company with high technical skill and will sort out this as soon as is possible in the industry.

[Unknown Executive]

And then the last question from Sparebank 1. What do you mean by the largest impact of wafer shortage are expected in Q2 '21?

[Svenn-Tore Larsen]

I mean that we will get more wafers in the second half of the year. I say that we guide for $130 million to $140 million in Q1. So obviously, it wouldn't impact too much in Q1. And I think we're going to see the impact in -- the maximum impact in Q2. But again, we have been secure a minimum 25% increase in volume. What I say is that we have a extreme high demand. We have to be laser-focused on delivery to our customers, help our customers through this period in the best possible way for the customers and for Nordic.

[Unknown Executive]

Thank you. And then we have a question from Kepler, from Andreas. Can you give us an indication of how much top 10 customers are likely to represent of your '21 revenue?

[Svenn-Tore Larsen]

We -- I have not prepared to do that today, no. But it will be a significant increase, but also been a significant increase in our revenue in '21. So we see that the broad base continued to grow also.

[Unknown Executive]

Thank you. We continue with another question from Andreas, Kepler. Can you expect foundries to increase the price of component production due to the very high utilization?

[Svenn-Tore Larsen]

We see sign of that in the market. And I think that's really -- it's important to understand the relationship and the partnership you have with your customers -- or also customers, but mainly with our vendors. And I don't foresee that we're going to see that situation for Nordic.

[Unknown Executive]

Thank you. Then we have another question from Kepler. In the event that the foundry capacity constrains your volume growth to 25% in '21. Are you able to push the year-on-year revenue growth beyond this through inventories and better mix?

[Svenn-Tore Larsen]

We will come back to that because we guide quarter-by-quarter. So obviously, for Q1, we will continue to grow. And it's driven by mix and -- combination of mix and volume. And we will guide on Q2 when we do -- deliver the Q1 numbers in April.

[Pål Elstad, Chief Financial Officer]

But the large reduction in inventory beyond what we have today, some streamlining you can, of course, do, but not massive.

[Unknown Executive]

Thank you very much. Then we have a question from Christoffer, DNB. What is the product mix in the backlog? And what is the customer concentration in the backlog?

[Svenn-Tore Larsen]

Product mix now started to lean towards high-end SoC multi-protocol products, which are contributing significant more than they did just 2 quarters ago.

[Unknown Executive]

Thank you. Another question from Christoffer, DNB. Are you now ahead of the schedule when it comes to reaching the $1 billion revenue target? The U.S. -- the $1 billion target was before WiFi. Now that the WiFi business is acquired, what -- was this necessary to reach $1 billion?

[Svenn-Tore Larsen]

Obviously, we are much better positioned to reach the $1 billion than ever. Whether we are ahead of schedule or not, I think, is a point we will bring up in our next Capital Markets Day when we go through more of the strategic drivers of the company and what we have achieved through the period from last Capital Markets Day until the one we're going to hold next time.

[Unknown Executive]

Thank you. And the last question from Christoffer, DNB. While you have a minimum growth in supply of 25%, this shouldn't reflect revenue growth. Isn't it fair to assume that these wafers are converted to chipsets with significantly higher average selling prices than you sold for in 2020? In this sense, growth in '21 is, in worst-case scenario, 25%.

[Svenn-Tore Larsen]

I would not object to anything that you asked about. I think it's a good sort of thinking.

[Unknown Executive]

Thank you. Then we have a question from [indiscernible]. How much of the order backlog is related to cellular IoT?

[Svenn-Tore Larsen]

It's -- if you look at cellular IoT and if you look at the backlog of $1 billion, it's a small portion. As I said, it's very much the multi-protocol chips and the volume regarding smart home, and that has significant increase.

[Unknown Executive]

Thank you. And the last question from [indiscernible]. This wafer production -- is wafer production increase of 25% limited to revenue growth of 25%? And how big effect are you expecting for the second quarter?

[Svenn-Tore Larsen]

That was 2 questions. And obviously, as we are commenting on wafer capacity and production capacity, it's a significant delta between revenue growth and production capacity. So that's why we are not mentioning or commenting on Q2 revenue because traditionally and we have agreed to stick to quarterly guidance.

[Unknown Executive]

Thank you. Then we have a question from [ Johan ] [indiscernible]. Your targets for low-power wireless LAN in 2021, when this business will reach larger part of your business VLAN-wide?

[Svenn-Tore Larsen]

We won't have any revenue from WiFi or wireless LAN in '21. We acquired IP and we are going to convert this IP into hardware and combo product with Bluetooth, either Bluetooth or LTE. And we shouldn't expect revenue from WiFi, I would say, at least 2, 3 years.

[Pål Elstad, Chief Financial Officer]

We said 2 to 3 years in the announcement in December.

[Unknown Executive]

Should we...

[Svenn-Tore Larsen]

We can have 1 final question.

[Unknown Executive]

Yes. From Christoffer. Great to see 12% of dev kits coming from cellular IoT. Should we see this as an indicator of future share of revenue from cellular IoT? And what is the typical lead time for this to go from 12% of dev kit to 12% of commercial volumes?

[Svenn-Tore Larsen]

I will say, as we always said, a year to 18 months. I think with LTE, it's sometimes a little more complex. So 2 years' conversion time from a project start until you see revenue. Well, I totally agree with the question. It's an impressive number. It's a lot of customers out there, and there are some very exciting new applications that will change the world based on the Nordic chipset. And what is important is to understand the initiative of leading operators and leading tele equipment manufacturer like Ericsson. When they do, they reference the site for the industrial customers. I mean we have eased the situation now for industrial customers that want to adapt to LTE-M and Narrowband IoT through these reference signs with Ericsson as one of them.

[Unknown Executive]

Thank you. I think we should check if there are anyone waiting in the dial-in.

[Operator]

[Operator Instructions] There are no questions at the moment, so I'll hand it back to the speakers.

[Svenn-Tore Larsen]

Thank you all for listening in and also for good questions, and look forward to see you next time. Thank you.

[Pål Elstad, Chief Financial Officer]

Thank you.