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NXP Semiconductors NV (NXPI) Q4 2021 Earnings Call Transcript

NXPI Earnings Call - Final Transcript

NXP Semiconductors NV (NASDAQ: NXPI) Q4 2021 earnings call dated Feb. 01, 2022

Corporate Participants:

Jeff Palmer — Senior Vice President of Investor Relations

Kurt Sievers — President and Chief Executive Officer

Bill Betz — Executive Vice President and Chief Financial Officer

Analysts:

Ross Seymore — Deutsche Bank — Analyst

C. J. Muse — Evercore — Analyst

Vivek Arya — Bank of America Securities — Analyst

William Stein — Truist — Analyst

John Pitzer — Credit Suisse — Analyst

Stacy Rasgon — Bernstein — Analyst

Chris Caso — Raymond James — Analyst

Joe Moore — Morgan Stanley — Analyst

Presentation:

Operator

Good day, and thank you for standing by. Welcome to the NXP Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded.

I would now like to hand the conference over to your speaker today, Jeff Palmer, Senior Vice President of Investor Relations. Please go ahead.

Jeff Palmer — Senior Vice President of Investor Relations

Thank you, Catherine, and good morning, everyone. Welcome to the NXP Semiconductors fourth quarter 2021 earnings call. With me on the call today is Kurt Sievers, NXP’s President and CEO; and Bill Betz, our CFO. The call today is being recorded and will be available for replay from our corporate website.

Today’s call will include forward-looking statements that involve risks and uncertainties that can cause NXP’s results to differ materially from management’s current expectations. These risks and uncertainties include, but are not limited to, statements regarding the continued impact of the COVID-19 pandemic on our business, the macroeconomic impact on specific end markets in which we operate, the sale of new and existing products and our expectations for financial results for the first quarter of 2022.

Please be reminded that NXP undertakes no obligation to revise or update publicly any forward-looking statements. For a full disclosure on forward-looking statements, please refer to our press release. Additionally, we will refer to certain non-GAAP financial measures which are driven primarily by discrete events that management does not consider to be directly related to NXP’s underlying core operating performance. Pursuant to Regulation G, NXP has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures in our fourth quarter 2021 earnings press release, which will be furnished to the SEC on Form 8-K and available on NXP’s website in the Investor Relations section at nxp.com.

Before we start the call today, I’d like to highlight NXP will be attending the Morgan Stanley TMT Conference in San Francisco on March 7th and 8th.

Now I’d like to turn the call over to Kurt.

Kurt Sievers — President and Chief Executive Officer

Thank you very much, and good morning, everyone. We really appreciate you all joining our call today. I will review both our quarter four and our full-year 2021 performance, and then I will discuss our guidance for quarter one. Beginning with quarter four, our revenue was $39 million better than the midpoint of our guidance with most end markets stronger-than-planned and with the trends in the communication infrastructure markets more in line with our expectations. Taken together, NXP delivered quarter four revenue of $3.04 billion, an increase of 21% year-over-year.

Non-GAAP operating margin in quarter four was a strong 34.9%, 440 basis points better than the year ago period and about 110 basis points above the midpoint of our guidance. Year-on-year outperformance was largely due to the impact of improved factory utilization and higher revenues. For the full-year, revenue was a record $11.06 billion, an increase of 28% year-over-year. And as 2021 progressed, our customers continue to accelerate orders on NXP. We consistently found ourselves in a situation where robust demand outstripped available supply, even as production levels, both internally and from our supply partners improved across the year.

We do anticipate a continuation of strong demand throughout 2022, likely better than we originally contemplated at our recent Investor Day in November. The full-year non-GAAP operating margin was solid 32.9%, a 700 basis point improvement as a result of improved factory loadings, higher revenue and positive leverage on our operating expenses.

Now let me turn to the specific trends in our focus end markets. In automotive, full-year revenue was $5.49 billion, up 44% year-on-year, a reflection of the strong company specific product drivers we noted at our Investor Day, the step up in contents per vehicle as OEMs prioritized premium vehicles in the limited supply environment, and the accelerated transition towards electric vehicles which have fundamentally higher semiconductor content. For quarter four, automotive revenue was $1.55 billion, up 30% versus the year ago period and slightly better than our guidance.

Moving to Industrial and IoT. Full-year revenue was $2.41 billion, up 31% year-on-year, driven by our solutions offering with a combination of industrial and crossover processors, wireless connectivity, and our analog attach products, all driving the year-on-year growth. For quarter four, industrial and IoT revenue was $661 million, up 29% versus the year ago period and better than our guidance.

In mobile, full-year revenue was $1.41 billion, up 13% year-on-year. During the year, we experienced continued strong adoption of our secure mobile wallet and early ramps of secure ultra wideband solutions, and a good traction for our mobile embedded power solutions. These positive trends were modestly offset by a discontinuation of certain custom analog products. For quarter four, mobile revenue was $374 million, down 9% versus the year ago period and better than our guidance.

Lastly, I will move to communication infrastructure and other. Full-year revenue was $1.7.5 billion, up 3% year-over-year. The year-on-year growth was due to a rebound in demand for secure transit tagging and access solutions, as well as solid demand for RF power products for the cellular base station markets, some box [Phonetic] templates by the anticipated moderation in demand for network processing solutions. For quarter four, revenue was $457 million, up 16% year-on-year and in line with our guidance.

In review, 2021 was an excellent year for NXP. We experienced significant design win traction across the entire portfolio, and especially within the areas of our strategic growth drivers. Our priority has been to assure the health and safety of all our employees and it is their engagement and performance which has been truly outstanding. We are extremely proud of their adaptability, dedication and hard work in the face of adversity.

Now before I will turn to our expectations for quarter one, I’d like to offer you some perspective on the coming year. For those who were able to join us at our recent Investor Day in November, you will remember we offered a positive view of 2022, expecting revenue growth near the high end of our 8% to 12% long-term growth target. Now as we enter into early 2022, we are more optimistic about the opportunities in front of us, both in the short term as well as over the intermediate horizon. The demand signals from our customers continue to be very strong, inventories across all end markets appear very lean, and our ability to supply continues to improve. Hence, we anticipate 2022 will be another year of demand-supply imbalance with lead times extending out across almost the entire portfolio and the level and intensity of supply related escalation conversations with our customers remains elevated.

Against this backdrop, we are guiding quarter one revenue at $3.1 billion, up about 21% versus the first quarter of 2021, within the range of up 18% to up 24% year-on-year. And from a sequential perspective, this represents growth of about 2% at the midpoint versus the prior quarter. At the midpoint, we anticipate the following trends in our business. Automotive is expected to be up in the mid 20% range versus quarter one ’21, and flat versus quarter four ’21. Industrial and IoT is expected to be up mid-teens year-on-year and flat versus quarter four ’21. Mobile is expected to be up about 10% year-on-year and up in the low single-digit range versus quarter four ’21. And finally, communication infrastructure and other, is expected to be up in the low 20% range versus the same period of a year ago and up in the low double-digit range on a sequential basis.

In summary, we do continue to see growing customer demand outstripping our improving supply as the inventory across all end markets remains very lean. Customer engagement levels and design win momentum in our strategic focus areas continues to be very positive. This underpins our continued confidence of robust growth through 2022, and we do continue to be very optimistic about the long-term potential of NXP.

Now at this point, I would like to pass the call over to you, Bill, for a review of our financial performance.

Bill Betz — Executive Vice President and Chief Financial Officer

Thank you, Kurt, and good morning to everyone on today’s call. As Kurt has already covered the drivers of the revenue during Q4 and provided our revenue outlook for Q1, I will move to the financial highlights.

Overall, our Q4 financial performance was very good. Revenue was above the midpoint of our guidance range, and both non-GAAP gross profit and non-GAAP operating profit were above the high end of our guidance. I will first provide full-year highlights and then move to the Q4 results. Full-year revenue for 2021 was $11.06 billion, up 28% year-on-year. We generated $6.21 billion in non-GAAP gross profit and reported a non-GAAP gross margin of 56.1%, up 500 basis points year-on-year as a result of increased internal factory utilization, higher revenue levels, and product mix. Total non-GAAP operating expenses were $2.56 billion or 23.2% of the revenue, in line with our long-term model.

Total non-GAAP operating profit was $3.64 billion, up 63% year-on-year. This reflects a non-GAAP operating margin of 32.9%, up 700 basis points year-on-year and consistent with our long-term financial model. Non-GAAP interest expense was $365 million, cash taxes for ongoing operations were $276 million, non-controlling interests of $35 million and stock-based compensation, which is not included in our non-GAAP earnings was $353 million. Full-year cash flow highlights include $3.08 billion in cash flow from operations, $766 million in net capex investments, resulting in $2.31 billion of non-GAAP free cash flow or a solid 21% of revenue. During 2021, we repurchased 20.6 million shares for a total of $4.02 billion and paid cash dividends of $562 million. In total, we returned $4.58 billion to our owners, which was nearly 200% of the total non-GAAP free cash flow generated during the year.

Now moving to the details of Q4. Total revenue was $3.04 billion, up 21% year-on-year and above the midpoint of our guidance range. We generated $1.74 billion in non-GAAP gross profit and reported a non-GAAP gross margin of 57.3%, up 440 basis points year-on-year and above the upper end of our guidance range, driven by improved utilization, higher revenue and product mix. Total non-GAAP operating expenses were $681 million or 22.4%, up $118 [Phonetic] million year-on-year and up $24 million from Q3, in line with the midpoint of our guidance, and again, consistent with our long-term model.

From a total operating profit perspective, non-GAAP operating profit was $1.06 billion and non-GAAP operating margin was 34.9%, up 440 basis points year-on-year, which is above the high-end of our guidance, reflecting solid fall-through in operating leverage on the increased revenue level. Non-GAAP interest expense was $93 million with cash taxes for ongoing operations of $100 million and non-controlling interest was $8 million. Stock-based compensation which is not included in our non-GAAP earnings was $88 million.

Now I would like to turn to the changes in our cash and debt. Our total debt at the end of Q4 was $10.57 billion, up $979 million sequentially as we issued $2 billion of new notes at very attractive rates with longer durations and retired early the 2022 $1 billion notes with a rate of 3.875%. Our ending cash position was $2.83 billion, up $527 million sequentially due to the cumulative effect of the previous note debt repayment, capital returns, increased capex investments and cash generation during Q4. The resulting net debt was $7.74 billion and we exited the quarter with a trailing month adjusted EBITDA of $4.23 billion. Our ratio of net debt to trailing 12-month adjusted EBITDA at the end of Q4 was 1.8 times, and our 12-month adjusted EBITDA interest coverage was 11.6 times.

Cash flow generation of the business continues to be excellent and our balance sheet continues to be very strong. During Q4, we paid $150 million in cash dividends and repurchased $750 [Phonetic] million of our shares. Subsequent to the end of Q4, between January 1st and January 31 of 2022, we repurchased an additional $400 million of our shares via 10b5-1 program. Additionally, the NXP Board of Directors has authorized an incremental $2 billion in the company’s repurchase capacity, bringing the total new authorization and remaining authorization to $3.35 billion [Phonetic]. Further, the Board has approved a 50% increase in the quarterly cash dividend, bringing the quarterly cash dividend to $84.5 per share. These actions are all aligned with our capital allocation strategy that we continue to execute to.

Turning to working capital metrics. Days of inventory was 83 days, a decrease of two days sequentially, which is below our long-term target. We continue to closely manage our distribution channel with inventory in the channel at 1.5 months, also below our long-term targets. Both metrics reflect the continuation of customer shipments at a robust pace, combined with supply challenges we continue to experience. We anticipate the coming year will be very similar to 2021, where customer demand is in excess of available supply.

Days receivable were 28 days, down three sequentially, and days payable were 87, an increase of four days versus the prior quarter as we continue to increase orders with our suppliers. Taken together, our cash conversion cycle was 24 days, an improvement of nine days versus the prior quarter, reflecting strong customer demand, solid receivables collections and positioning for customer deliveries in future periods. Cash flow from operations was $785 million and net capex was $266 million, resulting in a non-GAAP free cash flow of $519 million.

Turning now to our expectations in the first quarter. As Kurt mentioned, we anticipate Q1 revenue to be about $3.1 billion, plus or minus about $75 million. At the midpoint, this is up 21% year-on-year and 2% sequentially. We expect non-GAAP gross margin to be about 57.3%, plus or minus 50 basis points. Operating expenses are expected to be about $693 million, plus or minus about $10 million. Taken together, we see non-GAAP operating margin to be about 35% at the midpoint. We estimate non-GAAP financial expense to be about $105 million and anticipate cash tax related to ongoing operations to be about $125 million. Non-controlling interest will be about $9 million. For Q1, we suggest for modeling purposes you use an average share count of 266 million shares.

Finally, I have a few closing comments I’d like to make. First, as a housekeeping reminder, we anticipate our cash tax payments will trend towards 15% in 2022 based on the current U.S. tax legislation and laws. As can be seen in our Q1 guidance, we are expecting a slightly lower tax rate in the short-term and anticipate it will increase as we progress through the year.

Secondly, we are investing to support our profitable long-term growth. We currently have about 4 billion of long-term material supply obligations as discussed at the Investor Day. Our capex investments for 2022 will be above the high-end of our long-term capex model. These investments are focused on the combination of assured external foundry wafer supply, expansion of our internal back end capacity and a modest expansion of our internal front-end capabilities. While significant, the investments we are committed to are more than balanced by the robust level of non-cancellable, non-returnable orders from our customers.

In closing, we are very confident in our profitable growth over the intermediate to long-term, especially in the key areas of the accelerate growth drivers as we highlighted during Investor Day. Our gross profit will continue to expand and we have demonstrated solid control over our operating expenses, while consistently investing in those areas, which will enable our long-term growth. Together, this resulted in solid operating profit leverage and robust cash flow generation, and lastly, we have a proven track record of returning all excess free cash flow to our owners via our clear capital return policy.

With that, I’d like to turn it back to the operator for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Ross Seymore with Deutsche Bank. Your line is open.

Ross Seymore — Deutsche Bank — Analyst

Hi, guys. Thanks for letting me ask the question. Congrats on the strong results. I guess, the first question I have is on the full-year commentary. At the analyst meeting, you talked about, I guess at the high-end of your range for about 12%, now you’re saying better than that. What changed? And do you have the supply necessary to grow sequentially through the year to what seems to be something in the mid-teens roughly that you’re guiding to now?

Kurt Sievers — President and Chief Executive Officer

Yeah. Hey, good morning, Ross. Thanks for your question. Indeed, the commentary I made is that we have grown optimism that we can grow above the high-end of our long-term growth range, which was 8% to 12%, to above 12%. So indeed. Yes, we do have the supply capability. We are gradually building more supply capability through the year. It’s a — it’s a huge amount of different actions, both in our own back end test and assembly sites in our internal front ends, and mind you that this year we will be running full out with our internal front end factories, while last year we had the winter storm taking capacity away and we had only started to ramp the factories full up during the first and second quarter. So from a year-on-year perspective alone that does give us more supply.

But also with third-party foundry suppliers, and Bill just mentioned our supply commitments and obligations here, the — or purchase from our perspective obligations here, we are growing our supply capabilities. So yes, the supply capability is here. And while we will not guide the full-year, Ross, it was still important I felt to make that comment because the demand situation has continued to be very, very strong, and I’d say continue to be very strong since our Investor Day in November, the — and we see the inventories both our own ones, and I think we talked about the 83 days, we talked about the channel inventory even coming a little bit down, but also at our customers, we think inventories continue to be super lean such that we see that potential of outgrowing the 12% high-end of our long-term growth trajectory.

Ross Seymore — Deutsche Bank — Analyst

Thanks for those details, Kurt. I guess, as my follow-up, just sticking on the revenue line in going a little shorter term for the first quarter, are there any specific dynamics that are keeping automotive and industrial flat sequentially? Is it simply a supply issue? I think that’s the first time, and I don’t know six quarters that those have been flat sequentially. So the dichotomy between auto and industrial flat and the relatively smaller segments growing was a little surprising to me. So any color on those dynamics would be helpful.

Kurt Sievers — President and Chief Executive Officer

Yes, it is actually totally supply regulated. I mean, we have more than enough demand, it is all of a function of supply and maybe here it is worthwhile to note that you all might have seen that in the city of Tianjin in China, there was a controlled movement order, which actually meant factory shutdowns. One of our test and assembly back-end sties is in Tianjin, so we had the factory shutdown there for between one and two weeks. Think about maybe $50 million impact for the first quarter and that is all sitting on industrial and auto, which is another factor which is actually hampering the supply a little bit further than we would have wished into the — into the first quarter.

Mobile, on the other hand side, Ross, you know that the last two quarters we’ve been really struggling with supply in mobile. I think we talked about this consistently in the call. Did start to get better, which actually helps us to start to do much better in mobile. So all of the, say, the movement quarter-on-quarter are much more a function of supply capability rather than demand.

Ross Seymore — Deutsche Bank — Analyst

Thanks, Kurt.

Operator

Thank you. Our next question comes from C. J. Muse with Evercore. Your line is open.

C. J. Muse — Evercore — Analyst

Yeah, good morning, good afternoon. Thank you for taking the question, I guess, first question on gross margins. You’re 70 bps away from the high-end of your target and in your prepared remarks, Bill, you talked about expectations for gross margins to continue to expand. So curious how you’re thinking about upward bias here in ’22? And then moreover, I guess ’23, ’24, as new products that carry higher margins come through the model?

Bill Betz — Executive Vice President and Chief Financial Officer

Hi, CJ. Yes. For the rest of the year, we are not guiding, but our goal was to maintain, I’d say a gross margin in the 57% range with the pluses and minuses we continue to talk about in any given quarter. Kurt just mentioned about the slight impact with Tianjin, which is impacting our margin a little bit in Q1, but that is offset by the higher revenue and volume that we’re experiencing quarter-over-quarter by $60 million. So that kind of keeps it flat there for Q1. As we go forward again, mix will play an important role as we are supply constrained and then over the long, long term as we talked about is really driven by our new product introductions out further.

C. J. Muse — Evercore — Analyst

Very helpful. As my follow-up, I guess Kurt, you talked in your prepared remarks about making real traction with some of the newer products and I know in particular on the S32 domain processor side there’s significant architectural decisions being made today by — by your potential customers. So curious, any update in terms of the traction there? And I guess how to think about, maybe some of these new products in which we should be focused on in terms of driving real incremental growth into ’23, ’24?

Kurt Sievers — President and Chief Executive Officer

Yeah, CJ, absolutely. I think at Investor Day we tried to give a bit more of the deep dive on where we are in this area and it’s indeed especially about what we call the S32 platform, which is a software compatible growing family of products, mainly for the networking infrastructure part of the car, and there is a very rapid and I would also say very forceful re-architecture action in place with all of the OEM customers and one of the big features here is going to be over-the-air updates [Phonetic] including the required security. So to make sure that the — the performance of the car over its lifetime can be upgraded by software updates without changing the hardware. And the way to do this is over-the-air updates and then a very, say both elegant and efficient network architecture inside the car. And the chip which does this over-the-air updates is a gateway chip, and that’s one of the flagship products which we are — which we are ramping, it’s called S — S32G or gateway, and that is ramping with major OEM names through the next — through the next few years. So it’s just — it’s just one nice example. There is obviously more. I’m actually proud to mention because it’s always difficult with OEM names in that particular industry, but I am proud to mention or reflect on the announcement which we did, I think in November, with Ford Motor Company together, where we spoke about the facts that their new F-150, the Bronco, the E-Mach, they will all be using amongst others this this S32G platform for the — for the gateway functionality.

C. J. Muse — Evercore — Analyst

Very helpful. Thank you.

Operator

Thank you. Our next question comes from Vivek Arya with Bank of America Securities. Your line is open.

Vivek Arya — Bank of America Securities — Analyst

Thanks for taking my question. I just wanted a clarification first. You identified the material weakness in internal controls in your earnings press release. I was just hoping you could maybe just discuss that issue. How much is any potential impact and how soon can those issues be rectified?

Bill Betz — Executive Vice President and Chief Financial Officer

Hey, Vivek, I’ll take that question. As shared in our EPR as part of our annual year-end audit process, we did identify a potential material weakness associated with our general internal IT controls in the areas of user access, change management and documentation. At this moment, we are very comfortable. There had been no impact on our current or past financial statements. We are actually very pleased with the fixes the teams are implementing, which just take time, and we feel confident that we’ll be able to remediate these internal IT controls in 2022 and ensure the proper monitoring throughout the year. We want to disclose this now for full transparency and we plan to disclose more about the details in our annual 10-K per our normal scheduling in the late February.

Vivek Arya — Bank of America Securities — Analyst

Very good, very helpful, thanks. And for my follow-up. Kurt, if I look at last year, we saw a nearly 40-point delta between auto unit production and your sales. I’m curious, what is the way you think about a more sustainable kind of content delta we should think about, between units and sales over time? And what are you doing to ensure the quality of orders and the utilization of your products so we are not surprised by any excess inventory, right, that might be there at your OEMs or Tier 1s?

Kurt Sievers — President and Chief Executive Officer

Yeah, thanks, Vivek. So first, let me just highlight again that indeed we are not at all concerned about that, that delta between the 44% of our revenue growth and the, the 2.5% I think SAAR growth last year, and that has given the content increases relative to premium vehicle mix changes and electric vehicle acceleration, but also the fact that in 2020 and already earlier in ’19, a lot of inventory in the very, very complex extended supply chain has been hit or has been depleted. And then of course, I definitely see that we also have grown market share. So indeed, for the history, we are not most concerned about this. On the contrary, I continue to be chased on, really on a daily level to ship more product into automotive. It’s still not enough as we, as we speak.

Now the measures to cope with this are; one, a very, very much higher level of transparency, which we not only do with our Tier 1 customers, but also especially with the OEM customers. So we have a lot of direct relationships build up now with the OEMs and gets multi-year forecasts which are very specific by model, by equipment, which gives us a much better view into the future in what is realistic content growth and what not. And in the more shorter-term, of course, we work with the NCNR order concept, which I think Bill had — had in his prepared remarks, which we actually, especially in automotive, not only in automotive, but especially in automotive, which give us a confirmed and non-cancellable or non-reschedulable order pattern for the full calendar year 2022, which is a — which is a hell lot of more stability than we’ve ever had in the past.

From just a directional perspective, Vivek, I do believe the content increase continues to accelerate and probably on the mid-term the two main factors are actually the acceleration of the — of the share of XUVs, so electric and hybrid electric vehicles, which simply have so much more semiconductor content. But also the level 2 plus level 3 autonomy efforts are getting more and more traction again, which is a big deal for us when you think about our position in radar. So we do believe that we will continue to outgrow this market, win share and have at the same time a faster market development given the — given these changes. But with the NCNR orders and our relationships to the OEMs, I think we have a good handle to keep this in good check.

Vivek Arya — Bank of America Securities — Analyst

Thank you, Kurt.

Operator

Thank you. Our next question comes from William Stein with Truist. Your line is open.

William Stein — Truist — Analyst

Thanks. Good morning, everyone. There has been a clear imbalance between supply and demand for the last few quarters, it’s triggering very extended lead times in the last year. I don’t think I’ve heard an update on that condition during during the call or in the press release or presentation. I’m hoping you can update us as to how that’s trended in the most recent quarter, I would imagine given the inventory decline that we times are still quite stretched, any normalization you anticipate for that through this year?

Kurt Sievers — President and Chief Executive Officer

Yeah, so Will, clearly it has not improved. If I think about it from a supply perspective or if I put my — my more positive perspective on this, the demand continues to be very, very strong. So if I — if I look forward into, into Q1 and into the rest of the year, Q1 very clearly and I just want to be very explicit here relative to the guidance, this is completely kept by available supply, so much more demand than what we have in terms of supply.

You mentioned some of the metrics, which we can actually use in order to get a better feel on where this is going. Indeed, our internal inventory has further reduced and I’m — I’m not happy to say that also the channel inventory dropped a little bit to 1.5 months. I mean, we’ve — we’ve been standing now at 1.6 for quite a long time all through last year. And mind you, this compares to a target of 2.4 months to 2.5 months. And that’s also the level we have come from and the loan, that delta is about $500 million. So I do not think that we get out of this imbalance through this calendar year. It might get better in certain spots, but overall in the markets which we are serving. And again, I don’t make comments here about the whole semiconductor industry, but I’ll make a comment about the key markets we are being exposed to. There, I do not see that we totally come out of this imbalance until the end of the year.

William Stein — Truist — Analyst

That really helps. Thank you. One other, if I can. I’m going to ask the content — automotive content question a little differently. It’s clear and you’ve made a pretty good case that some of this content is a more permanent shift, like the networking architectures and the like. But I think it’s — I think it’s fair to say that some of the growth that we’ve seen in the last year has resulted from favorable mix shift to higher-end models and hiring trends within those models that probably drive a little bit better semi content that’s more profitable for the OEM customers. What should — what would you encourage investors to think about for this trend over the coming year? Does it continue or would it reverse as availability becomes more plentiful? Thank you.

Kurt Sievers — President and Chief Executive Officer

Yeah, so, Bill, I completely confirm what you said. Definitely, last year has seen a spike in content increase due to the mix change to more premium vehicles, absolutely agreed. I think this is going to find the natural balance. As long as overall supply of the semi industry into the auto industry, they’ll continue to be constrained. They will continue to build the more profitable, the premium vehicles, I mean that’s very natural. And as soon as this, this maybe gets over time into a better balance, they will also start to build more of the volume part again. But again, that is not a — I cannot see this as a negative, Will, because they want to build and could sell more cars anyway. I mean, if you look at dealer inventories, in the meantime, not only in the U.S., but also in China, they are troughed at rocking all time lows and it’s getting worse and worse. So, yes, it will change a little, but this is not going to go against, as a negative against our demand because then they simply build more cars as a result.

William Stein — Truist — Analyst

Great. Thank you.

Operator

Our next question comes from John Pitzer with Credit Suisse. Your line is open.

John Pitzer — Credit Suisse — Analyst

Yeah, good morning, guys. Thanks for letting me ask the question. Kurt, I wondered if you could spend a couple minutes just talking about the impact of inflationary pressures on the business right now, both on revenue and on opex, and I know you’ve said historically that you’re not raising pricing above your increase in cost. But I’m trying to get a sense of how much of a tailwind price is to your view that you’ll be above the high-end of that 8% to 12% this year? And conversely, what’s the impact it’s having on opex relative to higher prices?

Kurt Sievers — President and Chief Executive Officer

Well, in general, John, I absolutely want to reconfirm loud and clear that we will not use this current or abuse, I would almost say, this current situation to pet our margins. So we do absolutely stick to the policy I’ve talked about before, which is that, of course, we are passing on the increased input costs and raise price to our customers along with it. That is something we, we had to start doing last year and we have to continue to do through this year. This is a function of the kinds and the type of business we are in, which is, which is the opposite of a commodity business, it’s very application specific, it has I think very specific and long-term customer relations where this is the only way to do it. And trust me, it’s not — it’s not an easy one for us to do this. But, yes, that’s what we do. I mean, the, anyway can’t guide the year going out into Q2, Q3 and Q4. But I can tell you from that for last year, the, the impact of pricing was absolutely minimal to the revenue growth. So don’t think about this being the key factor here. And maybe, Bill, if you want to speak a little bit about the impact on opex.

Bill Betz — Executive Vice President and Chief Financial Officer

Yes, Kur. Hi, John. I’d say we continue to do well here and near our 23% long-term model. As you know, Q4 finished at 22.4% of sales, which was better than our guidance of the 22.7%. We just guided Q1 to be about 22.4%, and this is up, mainly because of the U.S. benefits for and FICA and 401K trying to be higher in the U.S. in Q1. But as you think ahead and this is where you’re going, we mentioned during Investor Day we like to run around 23% with quarters fluctuating a bit, but we do see that we can get additional leverage on the model, especially in the SG&A side.

John Pitzer — Credit Suisse — Analyst

That’s helpful. And then, guys, as my follow-up. Bill, you talked about in your prepared comments capex this year being above target. I’m wondering if you can give us a little bit more granularity as to kind of what number you’re thinking about for the full year? And, Kurt, as he answers that, I’m curious as to what your internal versus external sort of capacity strategy is, especially in the auto business where historically you’ve done more of the front-end internally and especially against some of your peers that are looking to really expand their internal capacity. How confident are you that given the strong growth you expect, especially in orders over the next several years that you can get everything you need from your outsourcing partners?

Kurt Sievers — President and Chief Executive Officer

Yeah, let me, let me maybe get started, John, on the — on the strategy here. We absolutely stick to our hybrid manufacturing strategy. And I also want to highlight it has never been a function of doing this in auto and doing that in industrial and something else in mobile. It’s much more a function of the kind of processing technology. There’s simply anything which is below 90 nanometers we will not do in-house and we see no reason to change this. Honestly speaking, if you, if you look at our results for last year, I think we’ve grown 28.5% year-over-year. We’ve probably grown faster than most of the comparable peers, which might possibly have more of a in-house manufacturing strategy. I think last year the flexibility which we could — which we could apply is actually a fantastic proof point that this — this manufacturing strategy is not wrong.

Now going forward, we clearly are intensifying and working on long-term partnerships, also with foundry partners. I mean, as much as I talked earlier about the longer-term nature of our relationship with customers and the better transparency we gain here from a demand perspective, obviously we are doing exactly the same thing on the foundry side in order to make sure this business in good balance. So no change here. There, of course, we are investing and increasing our output capability is in the — on the back end, because there I think currently it’s like 85% or so, which we are doing in-house. We don’t see a reason to change that either. So here we are continuing to expand.

John Pitzer — Credit Suisse — Analyst

And really [Indecipherable] this year.

Kurt Sievers — President and Chief Executive Officer

Excuse me.

Bill Betz — Executive Vice President and Chief Financial Officer

Yeah, let me jump in on the capex [Speech Overlap] Yeah, let me do that.

John Pitzer — Credit Suisse — Analyst

Yes, so go ahead.

Bill Betz — Executive Vice President and Chief Financial Officer

Yes, thank you. Again, if you look at capex, just a quick recap. In 2020, we spent 4.6%, 2021 we spent 6.9%, and you just saw in Q4 we spent 8.8%. So we think that’s going to go up a little bit more for 2021 without giving you the absolute guide, but I think — think maybe another point or so on it related to it.

John Pitzer — Credit Suisse — Analyst

Perfect, guys. Thanks very much.

Bill Betz — Executive Vice President and Chief Financial Officer

Yeah.

Operator

Thank you. Our next question comes from Stacy Rasgon with Bernstein Research. Your line is open.

Stacy Rasgon — Bernstein — Analyst

Hi, guys, thanks for taking my question. I wanted to first ask about the mobile strength in the Q1, and I get what you said on some of the supply constraints in that business that have been there easing a little bit. But is there anything else there around customer pull forward or anything like that. What is actually driving that strength and how do we think about the sustainability of that profile in the Q2 and beyond just given the above seasonal nature of it into Q1?

Kurt Sievers — President and Chief Executive Officer

Yeah, Stacy, it’s — it’s indeed two things. It is demand, and I speak about this in the second and it is obviously supply. We’ve really been held back by supply the last to quarters, so Q3 and Q4 of last year. We clearly had a significant issue here from a supply perspective. By the way not everything resolved, but at least improving into, into Q1. So that’s one element.

The other element is demand, and I mean, I think I can understand why you’re asking. But you know that we are not overly dependent on only one customer, on one mobile customer in that — in that particular segment. So if you think about the mix of our customers, you will appreciate that there is a strong case to be made for demand going into — into the first quarter. And also don’t think about it as a spike, Stacy. This is not just a spike or something, it’s, I think it continues with our strategy of the attach rates of the mobile wallet. I mean, that’s the main factor in there and the more and more growing, early growing part of the — of our secure ultrawideband solutions.

Stacy Rasgon — Bernstein — Analyst

Thank you. My follow-up. I wanted to ask about industrial, particularly in China. What are you seeing there? I mean, they have COVID zero. There were shutdowns, as you mentioned and something, some of the data points in that. Are you seeing any issues, particularly around China, especially for the industrial business?

Kurt Sievers — President and Chief Executive Officer

No, we don’t see it at this stage, Stacy. I mean, I’m reading the same, the same news. Our main concern has impeded China much more about our own production, which, and I’ve said this before, is in the meantime fully up and running again. But that is actually where we see the issue from a demand perspective, which indeed is largely the industrial markets largely served through distribution. We do not see any slowing at all. On the contrary, when you think about the fact that our channel inventory has further dropped unfortunately, you know that a good — a solid portion of that is actually in China. So no, we — we are not concerned here about the demand slowing in industrial China.

Stacy Rasgon — Bernstein — Analyst

Got it. Thank you, guys.

Operator

Thank you. Our next question comes from Chris Caso with Raymond James. Your line is open.

Chris Caso — Raymond James — Analyst

Yes, thank you. Good morning. Kurt, I wonder if you could go through a bit about some of the commitments that you’ve had to make to secure that additional capacity, what is the commitment now to the foundry partners and how has that changed versus prior cycles? And I’m guessing by your comments that you’re feeling is that, that’s backed up by the commitments from your customers to you and how resilient do you think that will be over time as conditions change? And obviously, this seems like this is something different for the industry.

Kurt Sievers — President and Chief Executive Officer

Yeah, thanks, thanks, Chris. Maybe, Bill, you want to speak a little bit first about the, the $4 plus billion purchasing obligations, which we entered into?

Bill Betz — Executive Vice President and Chief Financial Officer

Yes, that was in my prepared remarks. At the moment, we have $4 billion and those are strongly supported by actually greater than our supply commitments, backed by the non-cancellable, nonreturnable orders that we see. So, the demand continues to be strong. Our customers are actually coming to us, and unfortunately we can’t serve them all.

Kurt Sievers — President and Chief Executive Officer

Yeah, and then adding, adding to this, Chris, on the, on the NCNR, on the auto side. I mean, it is, it is a strong as the contract can be, Chris. We all know how the growth can can flip around, but I — there is solid contracts behind that. So we really, really feel good about it. And I would tell you we have actually, customers who want more, so just no confusion here. It is not that we were hungry for these NCNR orders, is actually the opposite. We cannot cover them all. So we are over oversubscribed here. We can also — we cannot fulfill them all. And customers would love to place them, actually over even longer periods of time. So reaching out into ’23 and ’24, there — we are still seeing how we, how we can best do this. So this dynamic is still going one way only. We don’t see any softening and I — actually I didn’t say it before. But maybe I should just highlight this here. We see absolutely no order cancellation. We see no push outs or no rescheduling of any backlog.

Chris Caso — Raymond James — Analyst

Got it. That’s very helpful. For a follow-on question, and may be we’ll return to pricing. And really kind of two questions on pricing. One is, obviously we’ve seen foundry price increases announced last year. Do you think that is now behind us? Or with the continuing tight supply situation, is there potential for additional input cost increases as we go through the year.?

And then with that, I think there is an investor concern that some of these price increases are transitory because of the strong conditions, and obviously, the input costs you’re passing along to the customers. So what’s your view of the stickiness of these price increases that this is kind of a permanent ratchet up as opposed to some that’s transitory just because of the supply conditions?

Kurt Sievers — President and Chief Executive Officer

Yeah, I actually think, Chris. Unfortunately, there was always a chance for more cost increases. So that this, this can never be totally ruled out. So on your — on the first part of your question, I trust we have a good visibility and also good agreements for this year, but is it — is it truly the end forever, I don’t know, I mean there could always be something.

On the durability of that, I have a very firm view that this is really a reset of the industry. So, no, I do not think that things will go backward. Unfortunately, these are the input cost, nor our, our pricing to our customers. I think the, the four or five quarters now of this, really, really tough supply situation has learned the world a lot more about the value of semiconductors in many critical infrastructure and other applications. So I think the appreciation for this industry and for the kind of product which we, which we do to enable applications and applications has significantly grown at with that hand-in-hand has done a reset of the of the pricing structure. So I don’t think this is going to — is going to go backwards.

Chris Caso — Raymond James — Analyst

Thank you.

Operator

Thank you. And our last question comes from Joe Moore with Morgan Stanley, your line is open.

Joe Moore — Morgan Stanley — Analyst

Great, thank you. You talked about non-cancelable backlog throughout the year. I think that was an automotive comment. Can you talk about your backlog coverage for the other businesses and how far out does that extend? And do you see it, if in the areas like auto as you see it extending out a full year, do you think we continue to get that one year visibility as we move forward? People are still booking out that far.

Kurt Sievers — President and Chief Executive Officer

So, so yeah. First, I talked about automotive, but this is not just a phenomenon in automotive. I would say, with all of our direct customers, this — this NCNR pattern is a big desire because all of our customers consider this as a way to secure supply over a short to medium term period. So it, it ranges well beyond beyond automotive. I should maybe also highlight that the shortages in the industry are at least as that in industrial and other applications as an automotive, it’s just that automotive continues to catch better headlines in the news, but it’s not that the situation is any easier in any of the other segments we are serving.

If you think about the the order visibility, customers want to have it longer, I said — I said, I think earlier, I might have mentioned already that they would love to have NCNR for two years out. So, yes, I’m definitely sure on your question if they want to continue to go with a one-year horizon, they definitely want to, I think actually if we are prepared for it there might be also more cases coming, their people want to have it even lower, so more than a year. And again, think about this commentary really being commentary mainly about automotive and industrial markets with very sticky products, very long life cycles, so it fits the nature of those industries. So I think it’s a learning from our overall industry in order to better deal with the requirements of those markets. I don’t know if this is ever going to be the case in markets like mobile and computing, it might be different there where also the end product cycles are much shorter. So that’s why my commentary is going to be biased to the automotive and industrial side of the house. There, I think it is a big learning out of last year for the — for the entire industry.

Joe Moore — Morgan Stanley — Analyst

Great.

Kurt Sievers — President and Chief Executive Officer

Now, at this point I think, yeah, sure, Joe. I guess, we’ve run out to the — to the end of the call, so I just want to summarize and highlight again. We feel we’ve come off a very strong 2021 with more than 28% revenue growth. Maybe it’s also worthwhile to say that if we look at the revenue growth over 2019, which was the pre-pandemic year, it is still a 25% growth. So ’21 over 2019 is 25% growth. So we feel we are very well on track to our projected 8% to 12% long-term growth targets. And if you look into, more into the near-term into this year, we feel increasingly optimistic, as I said, that we can be above the high-end of that 8% to 12% for the calendar year 2022.

And with that, I would like to thank you all for your attention today and speak to you next. Thank you very much.

Operator

[Operator Closing Remarks]

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