SecProbe.io

CORRESP
1
filename1.htm

February 27, 2020

BY EDGAR SUBMISSION

United States Securities and Exchange Commission

Division of Corporate Finance

100 F Street, NE

Washington, DC 20549

Attn: Heather Clark, Office of Manufacturing

Re:                             Skyworks Solutions, Inc.

Form 10-K for the Fiscal Year Ended September 27, 2019

Filed November 14, 2019

File No. 001-05560

Ladies and Gentlemen:

Skyworks Solutions, Inc. (“Skyworks” or the “Company”), submits this letter in response to the comments regarding the above-referenced filing contained in a letter dated January 31, 2020, from the staff (the “Staff”) of the United States Securities and Exchange Commission (the “Commission”), to Kris Sennesael, Chief Financial Officer of Skyworks. The Company’s responses are set forth below and are keyed to the numbering of the comments and headings used in the Staff’s letter. For your reference, the Staff’s comments are reproduced in italics and the Company’s responses are set forth below such comment in standard type.

The Company’s response is as follows:

Form 10-K for the Fiscal Year Ended September 27, 2019

Financial Statements

Notes to Consolidated Financial Statements

15. Segment Information and Concentrations, page 56

1.                                     We note your disclosure that you have a single reportable operating segment. However, we note from your earnings calls and investor presentations, that you tend to discuss the business in terms of several markets, including your mobile business, broad markets, infrastructure markets and automotive. We also note from your website that you currently have a General Manager for each of the mobile solutions and broad market businesses. It also appears that your 2018 acquisition of Avnera expanded your broad markets business. In light of these facts and changes in your business, please tell us how

Skyworks Solutions, Inc. · 5221 California Ave., Irvine, CA 92617

www.skyworksinc.com

United States Securities and Exchange Commission
 February 27, 2020
 Page 2

you have evaluated your business for the existence of additional operating segments under the guidance in
 ASC 280-10-50-1.

As part of your response, please provide us the following information:

·                    Please tell us the role of the CODM and each of the individuals that report to the CODM;

·                    Tell us how often the CODM meets with his/her direct reports, the financial information the CODM reviews to prepare for those meetings, the financial information discussed in those meetings, and who else attends those meetings;

·                    Describe the information regularly provided to both the CODM and the Board of Directors, and how frequently it is prepared;

·                    Please explain to us the responsibilities of each General Manager of the mobile solutions and broad markets businesses, tell us who they report to, and how they are compensated, and;

·                    Tell us the types of financial information available for each of the mobile business and broad markets business, and what costs are allocated or not allocated to each of those businesses.

Response:

Overview

FASB ASC 280-10-50-1 states that “an operating segment is a component of a public entity that has all of the following characteristics:

·                  It engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same public entity).

·                  Its operating results are regularly reviewed by the public entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance.

·                  Its discrete financial information is available.”

The Company has analyzed its operating structure using the guidance provided in ASC 280-10-50 and, for the reasons described below and elaborated on in the remainder of this response, has determined that it has one operating segment and one reportable segment which designs, develops, manufactures, and markets proprietary semiconductor products:

·                  The chief operating decision maker (“CODM”) relies on the Company’s consolidated financial statements for decision-making purposes regarding allocation of the Company’s resources and assessment of the Company’s performance.

·                  The Company’s three business units engage exclusively in developing products to be sold by the Company’s one sales organization. Classifying the Company’s business units as additional operating segments would fail to reflect the volume of resources and services expended by the Company separate from the business units, would require imprecise allocations of such resources and services, and would assume a level of business unit leader independence and authority that is not present within the Company.

United States Securities and Exchange Commission
 February 27, 2020
 Page 3

Description of the Company’s Organizational Structure

The Company develops, manufactures, and sells semiconductor products that facilitate various wireless communication applications. The wireless protocols supported by the Company’s products include cellular, Wi-Fi, Bluetooth®, LoRa®, Thread, and Zigbee®. In August 2018, the Company acquired Avnera Corporation (“Avnera”), which is complementary to the highly integrated analog system-on-chip platforms of the Company.

During the year ended September 27, 2019 (“fiscal year 2019”), the Company maintained three business units:

·                  the Mobile Solutions business unit develops highly integrated and custom cellular radio frequency products for use in mobile devices such as smartphones, tablets, wearables, and automobiles;

·                  the Diversified Analog Solutions business unit develops a wide variety of analog, mobile connectivity products for use in mobile devices such as smartphones, tablets, wearables, and automobiles, as well as for use in other applications in aerospace, broadband, cellular infrastructure, connected home, industrial, medical, and military end markets; and

·                  the Smart Audio business unit develops highly integrated analog system-on-chip products for automotive, industrial, home automation, enterprise, and high-end consumer markets, including smartphones.

The Company does not believe that the business units are separate operating segments.

The Company maintains a horizontal organizational structure, separate from the business units, that engages in process technology development, manufacturing, quality, sourcing and supply chain, sales and marketing, and other operational functions such as finance, legal, human resources, and information technology. Of approximately 9,000 Company employees, less than 1,000 employees are considered to belong to one of the three business units. The employees in the business units are engaged exclusively in product development while all other functions are maintained outside the business units at the Company level.

The Company’s CODM has determined that the Company’s business structure—centralizing all business functions in organizations outside the business units—is designed to maximize efficiency and synergies as a result of the substantial similarities in the Company’s products, end markets, applications, underlying technologies, production methods and processes, suppliers, customers, and sales and distribution channels.

The divisions between the Company’s business units are based primarily on product technology, not on customers, markets, or applications. For example, the Company’s Wi-Fi solutions are designed by engineers in the Diversified Analog Solutions business unit, even though a significant portion of such Wi-Fi solutions sold by the Company are ultimately incorporated into smartphones, which is the primary end market for most products developed by the Mobile Solutions business unit. Revenues, gross profits, and operating profits are not provided to the CODM on a product technology basis.

United States Securities and Exchange Commission
 February 27, 2020
 Page 4

Roles and Responsibilities of the Chief Executive Officer, as CODM

The Company’s CODM is Liam K. Griffin, the Company’s President and Chief Executive Officer. Mr. Griffin is the only member of the Company’s management team who has the authority to make or approve significant operating and strategic decisions (with the consultation of the Company’s Board of Directors (the “Board of Directors”), as appropriate), including, but not limited to, allocating the Company’s resources and assessing the performance of the Company and its employees. He makes such decisions on the basis of the Company’s consolidated financial information, as discussed further below.

More specifically, Mr. Griffin alone retains ultimate decision-making authority over the following resource allocation activities (subject to approval by the Board of Directors in certain cases): capital spending, operating expense spending, headcount plans, merger and acquisition (“M&A”) activities, share repurchase activities, and other financing and capital structure activities.

In addition, Mr. Griffin alone retains ultimate decision-making authority over the following performance assessment activities (subject to approval by the Board of Directors in certain cases): establishment of quarterly, annual, and multi-year targets for consolidated revenue, gross margin, operating margin, net income, cash flow generation, and other internal financial metrics, and establishment of performance targets under the Company’s annual incentive plan (for non-executive employees). Furthermore, the Compensation Committee of the Board of Directors has delegated to Mr. Griffin alone the authority to grant, subject to certain limitations, long-term equity incentive awards to the Company’s non-executive employees, and Mr. Griffin personally reviews and approves every equity incentive award granted to a non-executive employee.

As an example of the CODM’s decision-making authority, during fiscal year 2019, Mr. Griffin recognized that multiple factors, primarily external to the Company, were negatively affecting the Company’s revenue. As a result, Mr. Griffin determined that in order to attain certain financial targets, primarily related to profitability and gross margin, the Company’s operating expenditures needed to be reduced and, accordingly, that the Company would need to implement workforce reductions in order to reduce headcount. Mr. Griffin established the monetary expense reduction targets for all functional groups, including how many positions needed to be eliminated.

Roles and Responsibilities of the Executives Reporting to the CODM

The list below describes the roles and responsibilities of the ten executives who reported to the CODM as of the end of fiscal year 2019. Although each of the executives acts as an advisor to the CODM with regard to his or her area of responsibility, none of these ten executives has the authority to make operating decisions such as the decisions made by the CODM. Accordingly,after considering ASC 280-10-50-5 through 50-9, the Company has concluded that none of these ten executives is the CODM or part of a group constituting the CODM.

United States Securities and Exchange Commission
 February 27, 2020
 Page 5

Kris Sennesael, Senior Vice President, Chief Financial Officer and Treasurer

Mr. Sennesael has Company-wide responsibility for financial analysis, financial reporting, accounting, treasury, and tax, as well as overseeing the following functions and activities: investor relations, M&A, information technology, and cybersecurity. Mr. Sennesael oversees a staff that supports the finance, accounting, and information technology needs of each of the Company’s business units. Although Mr. Sennesael provides Company-wide consolidated financial information which assists the CODM in the process of making decisions regarding allocation of resources and performance assessment, Mr. Sennesael does not have the authority to make, and does not make, operating decisions such as the decisions made by the CODM.

Carlos S. Bori, Senior Vice President, Sales and Marketing

Mr. Bori has Company-wide responsibility for sales, marketing, and corporate communications activities. Mr. Bori is responsible for attaining worldwide revenue targets established by the CODM, irrespective of business unit performance. Mr. Bori oversees a global sales organization structured to support all of the Company’s product offerings without regard to the business unit by which the products were developed. The Company’s products are primarily sold through a direct sales force globally deployed across all major market regions, with such regional offices creating sales opportunities for each of the Company’s business units with a common set of regional customers. In some market regions, the Company supplements the direct sales effort with independent representatives and distribution partners.

Robert J. Terry, Senior Vice President, General Counsel and Secretary

Mr. Terry has Company-wide responsibility for legal affairs and the Company’s compliance with applicable laws and regulations. Mr. Terry oversees a staff that supports the legal and compliance needs of each of the Company’s business units.

Kari A. Durham, Senior Vice President, Human Resources

Ms. Durham has Company-wide responsibility for talent management and personnel affairs, implementing all headcount and other personnel goals established by the CODM. Ms. Durham oversees a staff that supports the human resources needs of each of the Company’s business units.

Peter L. Gammel, Chief Technology Officer

During fiscal year 2019, Mr. Gammel had Company-wide responsibility for the development of advanced process technologies, supporting each of the Company’s product lines and providing the intellectual property necessary to meet future customer requirements, in line with the strategic roadmap established by the CODM. Effective in November 2019, Mr. Gammel retired from his position as Chief Technology Officer of the Company and concluded his employment with the Company. As discussed below, following Mr. Gammel’s departure, his Company-wide process technology development responsibilities were assumed by Mr. Kasnavi.

United States Securities and Exchange Commission
 February 27, 2020
 Page 6

Steven C. Machuga, Vice President, Worldwide Operations

During fiscal year 2019, Mr. Machuga had Company-wide responsibility for global manufacturing and supply chain management. He was responsible, on a Company-wide basis for all Company products, for achieving all key manufacturing metrics and budgets established by the CODM. Mr. Machuga’s organization—which included more than 70% of the Company’s total employee population—supported the production needs of each of the Company’s business units, with manufacturing infrastructure and supply chain functions centrally managed without regard to the business unit by which the products were developed. Effective in February 2020, Mr. Machuga retired from his position as Vice President, Worldwide Operations and concluded his employment with the Company. As discussed below, Mr. Kasnavi has assumed responsibility for Mr. Machuga’s organization.

Reza Kasnavi, Senior Vice President, Technology and Manufacturing

During fiscal year 2019, Mr. Kasnavi served as Vice President, Central Engineering & Quality, and had Company-wide responsibility for developing processes to drive improvement of the quality of the Company’s products and the efficiency of the Company’s manufacturing. Mr. Kasnavi’s organization—which included more employees than in any one of the three business units—supported the production needs of each of the Company’s business units. Effective in November 2019, Mr. Kasnavi was promoted to Senior Vice President, Technolog