CEVA Inc (CEVA) 2021 Q3 法說會逐字稿

Good day, and welcome to the CEVA, Inc. Third Quarter 2021 Earnings Conference Call. (Operator Instructions) Please note today's event is being recorded.

I'd now like to turn the conference over to Richard Kingston, Vice President, Market Intelligence, Investor and Public Relations. Please go ahead, sir.

Thank you, Rocco. Good morning, everyone, and welcome to CEVA's Third Quarter 2021 Earnings Conference Call. I'm joined today by Gideon Wertheizer, Chief Executive Officer; and Yaniv Arieli, Chief Financial Officer of CEVA.

Gideon will cover the business aspects and the highlights for the third quarter and provide general qualitative data. Yaniv will then cover the financial results for the third quarter and also provide qualitative data for the fourth quarter and full year 2021.

I will start with the forward-looking statements. Please note that today's discussion contains forward-looking statements that involve risks and uncertainties as well as assumptions that if they materialize or prove incorrect, could cause the results of CEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions. Forward-looking statements include statements regarding demand for and benefits of our technologies, expectations regarding market dynamics, including anticipated growth in the cellular IoT market, beliefs regarding benefits and impacts of the Intrinsix acquisition, including expansion into the aerospace and defense market, and ability to offer integrated IP solutions and enrich security and assurance products and guidance and qualitative data for the fourth quarter and full year 2021.

For information on the factors that could cause a difference in our results, please refer to our filings with the Securities and Exchange Commission. These include the scope and duration of the pandemic, the extent and length of the restrictions associated with the pandemic and the impact on customers, consumer demand and the global economy generally; the ability of CEVA's IPs for smarter connected devices to continue to be strong growth drivers for us; our success in penetrating new markets and maintaining our position in existing markets; the ability of new products incorporating our technologies to achieve market acceptance; the speed and extent of the expansion of the 5G and IoT markets; our ability to execute more base station and IoT license agreements; the effect of intense industry competition and consolidation; global chip market trends, including supply chain issues as a result of COVID-19 and other factors and our ability to successfully integrate Intrinsix into our business. CEVA assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

With that said, I would now like to hand the call over to Gideon.

Thank you, Richard. It is an exciting time for CEVA. The need for and the deployment of our technologies for the digital transformation era have never been more evident. Wireless solutions that we master are the catalysts for the emergence of new smart devices, among which are TWS earbuds and hearing aids, AR glasses, smart watches, smart home products, Industry 4.0 factory automation, telemedicine and more. Our innovative solutions, market reach and strong execution are the drivers for another outstanding quarter of new licensing agreements and royalty progress.

Total revenue for the third quarter of 2021 was a record high of $32.8 million, up 31% year-over-year. The licensing environment continues to be robust and came in at $21.6 million, up 74% year-over-year.

Our Bluebud product targeted for TWS earbud, AR glasses and smartwatch markets and our Wi-Fi solutions, which are ubiquitous across many IoT devices and access point products were key contributors. Also in the quarter, our Intrinsix team executed very well, signing important design agreements with Lockheed Martin, with a major industrial company in the defense space and with an innovative wearable device company in the medical space. In total, we signed 25 IP licensing and NRE agreements, of which, 13 were first-time customers.

Royalty revenue came at $11.2 million in the quarter, down 11% year-over-year. The royalty contribution from our base station and IoT product category was all-time high, driven by secular growth in Bluetooth, computer vision, sensor fusion and cellular IoT markets.

5G base station RAN visibility is lower than normal as the space experiences longer lead time due to supply chain constraint. In total, royalty unit shipment of CEVA base station and IoT-enabled products, were 405 million units in the quarter, up from 200 million units in the third quarter last year. Handset baseband royalties this quarter include the milestone of the first 5G smartphone report we have received of just shy of 3 million units.

These growth drivers were muted by a larger-than-expected decline in 2G royalty revenue. We do not see this decline as a market indicator as the 2G market is still sizable in developing countries, and we have experienced this pattern over the years from time to time in 2G royalties.

Let me now make a few remarks on our business in the third quarter. The first is our Wi-Fi product line, which has become a strong driver for us in recent quarter. The complexity of Wi-Fi technology rises dramatically when moving to a new generation of the standard. This poses technology challenges that deter a growing number of incumbents or new entrants from developing technology in-house and instead to seek our technology to solidify their time to market.

The recent Wi-Fi 6 and Wi-Fi 6E standards are being rapidly adopted in the latest laptops, smartphone and routers and are expanding to XR headsets such as the recent Metaverse initiative by Meta, formerly Facebook and as well as security cameras. Wi-Fi 6 is also expected to have a fundamental role in autonomous car, where it will be used to upload the terabytes of data collected every day to the cloud where it will be used for AI-based optimization.

CEVA is benefiting from a unique position as the only viable IP suppliers that enable semiconductor companies and OEMs to address the diverse and large market that require Wi-Fi 6 or 6E and upcoming Wi-Fi 7 standard. We have now more than 20 Wi-Fi 6 customers, and our licensing revenue from this space grew 149% compared to the first 9 months last year. We are also seeing good progress in shipped CEVA-based Wi-Fi product, which grew 204% to more than 111 million units versus the first 9 months of last year.

Second, our customer activities have stepped up as we continue to integrate Intrinsix into CEVA. As we noted in prior calls, our growth strategy is driven by, one, Intrinsix experience and customer base in the aerospace and defense market which we believe will enable us to expand into this lucrative space, and, two, our capabilities to offer integrated IP solutions, which combines the CEVA IP portfolio and Intrinsix chip design competencies to broaden our impact and to grow our revenue base with strategic customer design.

The third quarter was extremely successful in concluding sizable agreements in the defense and medical space. We booked an important and sizable agreement with Lockheed Martin for DARPA's SSITH Program. SSITH stands for System Security Interface Through Hardware and Firmware, and aims to revolutionize the way electronic systems are protected against different means of exploitation. As part of the SSITH program, CEVA through our subsidiary Intrinsix is involved in the development of new hardware security architecture and related design tools to protect against entire classes of vulnerabilities exploited through software and not just specific vulnerability instances.

The methodologies being developed as part of this program will enrich our security and assurance IP offering, bringing new levels of protection to connected cars, wireless communication and other industrial markets. Another project that Intrinsix team concluded during the quarter is with a major U.S.-based defense company for advanced node chiplet design. Chiplet technology is a new wave in semiconductor integration with the goal to cost effectively assemble multiple dies or chiplets into 1 small chip package and by such gain time to market and lower entry barrier to key markets. Chiplet technology is already deployed in cloud chips by Intel, Broadcom, AMD and Marvell.

The Intrinsix team with the financial backing of DARPA and its eco-system partners is aiming to drive chiplets to the defense market and further to proliferate them for commercial applications.

And lastly, regarding our activities and market dynamics in cellular IoT. Cellular IoT model is used in a wide variety of verticals, among which our logistics, asset tracking, industrial, agriculture monitoring, parking, payment system, automotive connectivity and more. It is a high volume and fast-growing market, forecasted by ABI to reach to 920 million models by 2026, growing at a 29% compound annual growth rate. A main segment in the cellular IoT space is NB-IoT, capturing approximately 40% of the volume and growing 44% CAGR between 2019 and 2026.

CEVA has strong traction in the Cat 1 and NB-IoT spaces, the 2 standards which dominate the deployments today. During the third quarter, we continued to see strong growth in volume, up 356% compared to the third quarter of last year, and received royalty report for the first time from a new Cellular IoT customer, one of the world's top 10 ranked IC design houses.

Europe also is prioritizing cellular IoT at the back of its large manufacturing base. We have 3 widely known European customers that have designed CEVA technology. The first is Nordic Semi, using CEVA for NB-IoT with dozens of customers. The second, Sequans, is using our PentaG platform for 5G cellular IoT with number of high-profile design wins. The third is an unnamed leading semiconductor who is developing cellular IoT chips, targeting its large industrial and smart meter customer base.

So in summary, CEVA is transforming from specialty in DSP core technology to a trusted technology house with a pivotal role in enabling new industries to become connected and smart. Our success is underpinned by our unique strength to combine DSP, AI, software, analog and RF designs into a holistic solution for customer and industry needs. We believe we are at an inflection point to scale our business and strengthen our collaborations with key players across a broadening range of industries.

Finally, we continue to monitor any possible implication of the ongoing supply chain constraint. As commonly acknowledged, the semiconductor supply chain challenges impacts our broad industries in different manner, which may translate to lower visibility.

With that said, we are on track to meet our targets, and we'll continue to work with our customers and partners to mitigate negative impact.

With that said, let me hand over the call to Yaniv for the financials.

Thank you, Gideon. I'll start reviewing our operations and for the third quarter of 2021.

Revenue for the third quarter was up 31% to $32.8 million, our second sequential all-time high as compared to $25 million for the same quarter last year. Revenue breakdown is as follows: licensing, NRE related revenue was approximately $21.6 million an all-time high, reflecting 66% of our total revenue, 74% growth from $12.4 million for the third quarter of 2020 and 39% sequential growth. This is the full first quarter that we recognized NRE revenue, which resulted from our acquisition of Intrinsix back in June.

Royalty revenue was down 11% to $11.2 million, reflecting 34% of our total revenues compared to $12.5 million for the same quarter last year. As Gideon noted, our consistent growth in base station and IoT and the penetration to 5G smartphones is muted by a larger-than-expected decline in 2G royalty revenue.

Quarterly gross margins came in better than expected due to lower allocation of Intrinsix NRE cost from the R&D expense line to their cost of goods expense line. Gross margin was 85% on a GAAP basis and 87% on a non-GAAP basis as compared to our 81% to 82% guidance. Non-GAAP quarterly gross margin excluded approximately $0.2 million of equity-based compensation expense and $0.2 million for the impact of amortization.

Total GAAP operating expenses for the third quarter was over the high end of our guidance at $26.3 million, due to lower allocation of Intrinsix NRE cost from R&D to the cost of goods and for our prior quarter's guidance. Such shifts between these 2 expense lines may happen from time to time and are tied to the actual design services performed in the quarter. OpEx also included an aggregate equity-based compensation expenses of $3.2 million and $1.2 million for the different amortization. Our total non-GAAP OpEx for the third quarter, excluding these items, were $21.9 million over the high end of our guidance due to the same reason I just stated with regards to the GAAP numbers.

GAAP operating profit for the third quarter was $1.7 million, up from $2,000 in the same quarter a year ago. Non-GAAP operating profit was $6.5 million, up 51% from the third quarter of 2020. For the first 9 months of 2021, non-GAAP operating profit was up 69% year-over-year to $15.5 million, illustrating the growing operating leverage we are achieving, while we scale the business.

Tax expenses for the third quarter was approximately $1.8 million, a bit higher than forecasted with strong revenue mix and interest for connectivity products originating in France, which have a higher corporate tax rate.

U.S. GAAP net loss for the quarter was $0.2 million, and diluted loss per share was $0.01 for the third quarter of 2021 as compared to a net loss of $0.7 million and diluted loss per share of $0.03 for the third quarter of 2020.

Non-GAAP net income and diluted EPS for the third quarter '21 were $4.7 million and $0.20, up 29% and 25% year-over-year respectively. Non-GAAP net income and diluted EPS for the third quarter of 2020 were $3.6 million and $0.16 respected. With respect to other related data, Shipped units by CEVA's licensees during the third quarter of 2021 was 438 million units, up 26% from the third quarter of 2020 reported shipments.

Of the 438 million units reported, 33 million units, or 8% were for handset baseband chips. Our base station and IoT product shipments were a record 405 million units, up 29% sequentially and 103% year-over-year.

Of note, Bluetooth was a new record of 291 million units for the quarter and cellular IoT, also reached a new record high of 26 million units.

As for the balance sheet items. As of the end of September 2021, CEVA's cash, cash equivalent balances, marketable securities and bank deposits were $145 million. Our DSOs for the third quarter were 43 days, a bit higher than the prior quarter, but at our normal level. During the third quarter, we generated $6.4 million from operating activities. Depreciation and amortization was $1.7 million and the purchase of fixed assets was $0.2 million.

At the end of the third quarter, our headcount, including the Intrinsix team, was 485 people, of which 403 are engineers.

Now for the guidance. Our strong top line performance in the first 9 months of 2021 was outstanding and provides us with a strong confidence in our business and strategy going forward. We, therefore, are raising our annual revenue guidance up to a new range of $120 million to $122 million. Our licensing business and our market reach is expanding. We have a good backlog and pipeline for the upcoming quarter. We believe the growth trend in the base station and IoT category, LTE and 5G will persist into the fourth quarter. With the extent that such growth in the fourth quarter being subject to any near-term supply chain constraints.

Specifically for the fourth quarter of 2021, gross margin is expected to be approximately 82% on a GAAP basis and 84% on a non-GAAP basis, excluding an aggregate of $0.3 million for equity-based compensation expense and $0.2 million of amortization.

OpEx for the fourth quarter should be slightly lower than the third quarter. For the fourth quarter, GAAP-based OpEx is expected to be in the range of $25.5 million to $26.5 million. Of the anticipated total operating expense for the fourth quarter of $3.2 million is expected to be attributed to equity-based compensation to $1.2 million to the different amortization. Therefore, our non-GAAP OpEx is expected to be in the range of $21.1 million to $22.1 million.

Net interest income is expected to be approximately $0.3 million. Taxes for the fourth quarter to be approximately 25% on a non-GAAP basis. And share count for the fourth quarter is expected to be around 23.8 million shares.

And Rocco, you can now open the Q&A session.

(Operator Instructions) First question comes from Matt Ramsay at Cowen.

I guess for -- to start off with congratulations on all the progress in the business and the raising of the guidance and all. I just wanted to understand a bit about what happened in the mobile, I guess, baseband or handset units dropping off in such a big way in the results. And Gideon, if you could just walk me through the market dynamics or there particular licensee situation that went on. It was just kind of -- or were there some reclassification of numbers as you guys refocus the company on new growth areas? I'm just trying to get my mind around that one a little bit.

Let me explain it -- let me go through first on the composition of the royalties, the way we see it. So as we discussed, the base station in IoT category is flourishing. And we have almost all the products that are growing when you look year-over-year, significantly computer vision, Bluetooth, cellular IoT sensor fusion. So that's what we planned and aimed and now it's kicking.

Base station and IoT, we -- it's -- last year, we had a very strong quarter. Everybody went out of the lockdown. So that was the first full quarter of coming out of the lockdown. So it's our comparison. But overall, it's moving. We see it also in the design wins that they are getting China Mobile, for example, VPN has got a big chunk there.

Mobile, when you look is -- I would say, generally, it's trending the way we expected. We see LTE growing, the 5G is ripe. I mean the 2G is something that we had in the past. There could be different treatment. I don't think it's a matter of inventory or you don't have inventory in these days. It's more like prioritization. We see many chip companies giving priorities on the allocation that they get to the top tier to high end phones and not to this one. From time to time, we do 2 up because we had -- last quarter was very significant one. So we move things between quarters. So I wouldn't -- the 2G, I don't see it's a market items. I think next quarter is a comeback. That's the reason that we don't change our guidance as a result. So it's nothing to do with the general trend that we see in the mobile, which is as we expected. And the good thing is that now we are in the 5G.

By the way, Matt, when you look at it from a 9-month perspective, smartphones are up year-over-year for us in volume. And the 2G looks better on a 9 months comparison, still lower than last year, but this is due to this Q3 hiccup, and we think it could pick up next quarter.

Got it. Just one quick little follow-up to that and then one more question. I guess the follow-up is, should I take it from the fact that the mobile RAN rate came down as much as it is that sort of the headwind from the Intel modem transition and Cupertino is kind of fully behind you guys in the run rate now. And then my other question is completely unrelated. But Yaniv, on gross margin, you guys came in well above and OpEx was higher, too. I just wonder, you guys brought in Intrinsix. And I think some of the folks there might have been categorized in cost of goods versus OpEx that would have been in your old like core business. I mean, working with the auditors and whatever, is there any kind of change in the allocation there? And how should we think about gross margin going forward?

Sure. So let's start with the first one. Apple is still selling iPhone 11 and FD low-cost type of phones, and it's still out there. We don't know until what and how long it stays. But our report for Q3 was stronger than Q2, for example. So it's still there, it's still contributing. And as long as those phones are shipped, we're getting paid, and that's still a contribution, much lower than in the past, but still a positive contribution for us. That's the common in Apple. It has nothing to do with those -- with that design loss at the Qualcomm.

On the cost of goods, you are right that the business -- the service business, when you have projects and recognized revenues, those expenses are or written at the cost of goods line. What happened in the last quarter that not all the people, the R&D guys were utilized for those deals. Some were still doing R&D per se for Intrinsix and not services. And therefore, we had a -- unlike what we had forecasted originally in the beginning of the quarter of 81% to 82%, just a bigger portion of them kept still and did R&D for -- whether it's security or chiplets or a bunch of other technologies that Intrinsix has today, and we are trying to make an IP business out of that and to combine it with their ongoing services.

So it has nothing to do with auditors whatsoever. This is apparently something that could move from quarter-to-quarter, less in our control. And it more depends on the timing of closing the deal and act to start of an employee or engineer starting to make those design services. And as soon as it does, those costs are recorded in COGS. As long as it is not there, it's in R&D. And that could shift and we had about $1 million shift in our expectations in the third quarter. We think that in the fourth quarter, there'll be more and higher revenues from NRE and therefore, higher expenses in COGS a little bit lower in the R&D line. So that's the shift that could happen from time to time.

Got it. Just to be clear there, Yaniv, so this is just to set the expectations for investors that this could bounce around a little bit on a quarter-by-quarter basis, but it's not really indicative that anything is changing in the business or the accounting. It's just kind of the way that this business could work as you fold in Intrinsix over time.

Yes, that's exactly the case, Matt, nothing to do with accounting, just the ramp-up of the product. And I'm sure that when we are fully ramped up and have many more customers and prospects, we may have less of that effect because most people will be involved directly with customers.

And our next question today comes from Tavy Rosner with Barclays.

Did you break out what the Intrinsix revenue contribution was this quarter? Just trying to get a sense of what organic growth was.

The interest income, you said?

Intrinsix. No?

Intrinsix.

P-- Intrinsix. Right now, we're looking at it as a 1 business model where we started off last quarter for the first time with just1 month. We stated that it's new. But when we bought Intrinsix, it was around the $20 million run rate. We said in the first earnings call there. With the combination and plus minus is that those are the annual run rate. And the idea for us is not to, as Gideon alluded earlier in the prepared remarks, is not just to tackle that market with NRE services, but also with the combination of IP -- integrated IP solution. And those are the things that we're working on. And hopefully, that run rate could increase when we offer more IPs to their existing and new customers in the future.

That's helpful. Yes, no, definitely. And just following up on that, were you about to quantify the opportunity within aerospace and defense?

Well, this is roughly $6 billion market in a year in different chips shipments. And tens of billions of dollars in R&D projects. And the idea for us is to not just to get and to continue and to get larger share in this project, but more to drop in into OIP. And in such a case, you make a combination of IP and services into this one, and that becomes more critical to what we are doing today by licensing of the share of IP. The other approach is to go outside of the defense to large OEMs and to offer them customization of the IP that we have at CEVA. We call it integrated IP solution. It's a more comprehensive solution to the customer, and which -- the benefit for this is higher overall deal size and royalties. And that's exactly what we are doing in this space.

Our next question today comes from Suji Desilva at ROTH Capital.

Congrats on the progress here and the diversification, certainly. A couple of questions about the base station IoT bucket. Now that Bluetooth is strong. I was curious the non-Bluetooth part of base station IoT. Gideon, what do you think are the best growth opportunities over the next several quarters in that? Because I think it's going to be an increasingly important segment to talk about, the non-Bluetooth base station IoT segment.

So in terms of shipment, there is shipment and there are trends in the market that I can expand on this later. So in terms of shipments, we talked about Wi-Fi. Wi-Fi is growing significantly in terms of units. You see we dramatically -- cellular IoT. That's another angle. Now that Europe is bringing up this one. It's -- and we have 3 customers there. So that's another one, computer vision, which comes together with AI. So these are active projects. And when you look year-over-year, it's a substantial growth, and that's a driver. Now we have excellent product for the TWS market where we see now in the licensing, this is what we call the Bluebud. But we expanded on that on the prepared remark, and we have now, I think, 3 or 4 licensees just in a very short period. And that will be a driver, in my opinion, in the second half of next year.

Okay. And then on Bluetooth, it's just a large part of your units at this point. Is the ASP there relatively static? Or is there an opportunity to uplift the ASP through products as you go forward?

Excellent question, Suji. So the market itself is pretty stable there. It's really volume driven at this point because the price points are obviously at the right place in order to tackle such a huge market and consumer and industrial and gaming and everything that's connected to Bluetooth. Wi-Fi is making its first steps because of the advantages of the bandwidth and the technology has really evolved with audio and others. There, the ASPs are higher than, obviously, the Bluetooth. But the combination of higher ASPs overall for CEVA is either combo chips, and we have seen those Bluetooth and Wi-Fi together these days.

And on top of that, this is what Gideon talked about the TWS, which is adding either audio or audio and sensor fusion and then the royalties really jump up significantly. So we have really enjoyed all the different flavors, I would say, of stand-alone Bluetooth, Bluetooth and Wi-Fi and these other new technologies. And I think that's -- so the 2 new deals for TWS, the first one last quarter and the market is looking very, very hot. It's a nice prospect and achievement for us.

Let me give you just an indication on the size of the market. The Bluetooth overall is about 4 billion units a year. And out of which 1.4 billion units is audio Bluetooth or TWS. And that's exactly where we want to go because we can -- we're in a unique position that we will combine these 2 propositions. That's exactly what we -- the reason that we build these Bluebuds. That we can go to the largest market in the Bluetooth and come out with a higher value. And as such, ASP will be higher.

If I could take in 1 last question. Is the licensing at this run rate, the new level, Yaniv, or how should we think about that?

No, licensing revenues have increased for this product line. It's a new sort of combination of product for us. It's not a DSP per se, it's not Bluetooth. So we are able to charge a premium for that. And I think it also saves money for the OEM or for the chip vendor because they don't need to deal with 2 different suppliers and vendors and chips and technologies, you integrate that into one IC. So it's a win-win for both sides, and the licensing activity has been very active and rounded. If you look at CEVA, overall, for the first time, north of $20 million, $21 plus-million. These are numbers that we have never seen before, the old CEVA, and part of it is Intrinsix. Part of it is the new CEVA, of new markets and new opportunities.

And what we -- another benefit that we see with this licensing is that we get R&D leverage. Because we are talking about 69% on the 9 months -- 69% in operating profit. You saw the royalty is down year-over-year, but when -- but when you look on the operating, you get substantial benefit.

And our next questions today come from Martin Yang at Oppenheimer.

First, I wanted to ask about your traction with customers on Wi-Fi 6? And how -- can you maybe give us more details on how the customers are using Wi-Fi 6? And what are the high-growth end market applications you're seeing for Wi-Fi 6?

Martin, it's Gideon. The way we see it today, Wi-Fi 6 is what is called smart home. Many products, it could be TV, it could be smart speakers, could be security cameras. These are the main drivers of Wi-Fi 6. We start seeing automotive. We start seeing the industrial use cases, but smart home is a big driver.

Got it. My second question is on your traction with smart OEMs that are developing their in-house chips, is there any update there? And how have they impacted, do you think they might be developing their own chips in the current environment?

Your line is not that clear. Did you talk about smartphone or smart OEMs -- what's...

Smartphone OEM that have signed the baseband license agreement with you.

Yes. I mean in terms of landscape in the smartphones, it's pretty similar that used to be. So there are the few OEMs that internalize and do development. We are associated with some of them. Some of them are big also. And there are not that many newcomers into the smartphone market. Now we have several other angles into the smartphone and also to the 5G. In terms of smartphone, we are getting into the smartphone to our Wi-Fi and Bluetooth technology because all those smartphone need connectivity. So we have several OEMs that are using our connectivity IP for smartphone and will ship and it's -- for us, it's indifferent, whether you do baseband or you do connectivity, doesn't matter. To some extent, we're getting higher royalties. So that's one approach.

The other approach which I touched in the prepared remarks is what is called cellular IoT. Cellular IoT is everything that relates to 5G that is not handset. So it could be smart meter, it could be fixed wireless access, which is a very big market. It could be a cellular V2X in automotive. This is very -- these are very big markets. And here, the opportunities are much more open, the market is much more fragmented, and the need for a company like us that comes with holistic solution with platform solution, not just component there and that can associate it with services, that's highly valued in this space. And we do get customers on that. I just mentioned 3 just in Europe that are actively working.

(Operator Instructions) Next question from Kevin Cassidy at Rosenblatt Securities.

And congratulations on the strong results. I'm wondering if you have conversations with your customers about the supply tightness for next year. What kind of increase in unit shipments? Have they given you anything like this?

It's Gideon. Kevin, it's kind of a $1 million question. People are completely split about the severity of this crisis. I mean, we just don't know. And just to give you an example, it looks like in the third quarter, only chip for iPhone manufacturing. And mobile android was put aside and people that are -- and it's completely different between nodes, between markets. I mean we for sure, we don't know, but I'm telling you that our customers don't know, different people have different opinions.

So we need to take it step by step, quarter by quarter and moving forward -- backward and see whether -- last year, we were in a better position or worse position. But it's -- the supply chain is there, and it's unknown to almost everybody. Unless you are a big name and you can change -- impact the big foundries.

Okay. And how about visibility into 5G base station deployments? Do you -- are you seeing any of that coming in 2022?

Let me say the driver in the market, the demand is there. I mean, no doubt that the customers, which is the operator are waiting for chips, waiting for systems today. And when you look on a base station, it's not just where we are, the baseband workload. It's a bunch of other chips, some of them are R-wave, some of them are in the antenna side. There are systems, there are materials getting there. It's become complicated. So some of our customers publicly said, it's become challenging, we think we are on track. That's what they all say.

But -- It goes back to your second -- previous question about when the supply chain we can see that we know what's going on. Right now, no, but the good news is that demand is there. Design wins out there, at least from our -- from our customers base standpoint is we need to take it quarter by quarter, try to help them as much as we can and hope for the best.

More or less, we're reading the public data that you guys have access to, we don't have yet any specific or special information about 2022 for many of our base station customers or handset customers in that respect.

Ladies and gentlemen, this concludes the question-and-answer session. I'd like to turn the conference back over to the management team for any final remarks.

Thanks, Rocco, and thank you, everybody, for joining us today and for your continued interest in CEVA. As a reminder, the prepared remarks for this conference call are filed as an exhibit to the current report on Form 8-K and accessible through the Investors section of our website. With regards to upcoming events, we will be participating in the following investor events, the Tenth Annual ROTH Technology Event, November 17 and 18 and the Fifth Annual Wells Fargo TMT Summit, November 30 through December 2 and Barclays Global Technology, Media and Telecommunications Conference December 7 and 8. For further information on these events and all events we will be participating in can be found on the Investors section of our website. Thank you, and goodbye.

Ladies and gentlemen, this concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.