SKYWORKS SOLUTIONS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND OPERATING RESULTS. (form 10-K)

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes that appear elsewhere in this Annual Report on Form
10-K. In addition to historical information, the following discussion contains
forward-looking statements that are subject to risks and uncertainties. Actual
results may differ substantially and adversely from those referred to herein due
to a number of factors, including, but not limited to, those described below and
in Item 1A "Risk Factors" and elsewhere in this Annual Report on Form 10-K.

PREVIEW

We, together with our consolidated subsidiaries, are empowering the wireless
networking revolution. Our highly innovative analog semiconductors are
connecting people, places, and things spanning a number of new and previously
unimagined applications within the aerospace, automotive, broadband, cellular
infrastructure, connected home, entertainment and gaming, industrial, medical,
military, smartphone, tablet, and wearable markets.

Impact of COVID-19
The COVID-19 pandemic and the resulting economic downturn are affecting business
conditions in our industry. The duration, severity, and future impact of the
pandemic, including as a result of more contagious variants of the virus that
causes COVID-19, continue to be highly uncertain and could still result in
significant disruptions to our business operations, as well as negative impacts
to our financial condition. The semiconductor industry is experiencing various
supply constraints due to the pandemic. While we are working with our global
supply chain partners to mitigate this risk, the duration and extent of the
supply chain disruptions remain uncertain.

RESULTS OF OPERATIONS

Fiscal Years Ended October 1, 2021, October 2, 2020, and September 27, 2019.
The following table sets forth the results of our operations expressed as a
percentage of net revenue. See Part II, Item 7 of our Annual Report on Form 10-K
for the fiscal year ended October 2, 2020, filed with the SEC on November 17,
2020, as amended by Amendment No. 1 to such Annual Report on Form 10-K, filed
with the SEC on January 29, 2021 (the "2020 10-K"), for Management's Discussions
and Analysis of Financial Condition and Results of Operations for the fiscal
year ended September 27, 2019.
                                                  October 1,      October 2,      September 27,
                                                     2021            2020             2019
Net revenue                                          100.0  %        100.0  %           100.0  %
Cost of goods sold                                    50.8            51.9               52.5
Gross profit                                          49.2            48.1               47.5
Operating expenses:
Research and development                              10.3            13.7               12.5
Selling, general, and administrative                   6.3             6.9                5.9
Amortization of intangibles                            0.7             0.4                0.7
Restructuring, impairment, and other charges           0.2             0.4                0.2
Total operating expenses                              17.6            21.5               19.3
Operating income                                      31.6            26.6               28.2
Interest expense                                      (0.3)              -                  -
Other income (expense), net                              -               -                0.3
Income before income taxes                            31.3            26.6               28.5
Provision for income taxes                             2.0             2.3                3.2
Net income                                            29.3  %         24.3  %            25.3  %




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General

During the fiscal year ended October 1, 2021, the following key factors
contributed to our overall results of operations, financial position, and cash
flows:
•Net revenue increased 52.3% to $5,109.1 million, as compared to fiscal 2020.
This increase in revenue was driven primarily by an increase in overall demand
for wireless connectivity products coupled with the onset of technology upgrade
cycles, including for 5G and Wi-Fi 6 solutions. Additionally, our average
content per device for these next-generation solutions increased.
•Our ending cash, cash equivalents, and marketable securities balance increased
4.8% to $1,027.2 million as of October 1, 2021, from $980.0 million as of
October 2, 2020. The increase in cash, cash equivalents, and marketable
securities during fiscal 2021 was primarily due to cash generated from
operations of $1,772.0 million, the borrowing of $1,000.0 million in Term Loans,
$500.0 million of Senior Notes due 2023 (the "2023 Notes"), $500.0 million of
Senior Notes due 2026 (the "2026 Notes"), and $500.0 million of Senior Notes due
2031 (the "2031 Notes" and, together with the 2023 Notes and the 2026 Notes, the
"Notes"), partially offset by payments for acquisitions of $2,751.0 million,
capital expenditures of $637.8 million, dividend payments of $340.6 million,
repayments of Term Loans of $250.0 million, and the repurchase of 1.4 million
shares of common stock for $195.6 million.

Net Revenue
                                             Fiscal Years Ended
                         October 1,            October 2,            September 27,
                            2021      Change      2020      Change        2019
(dollars in millions)
Net revenue             $  5,109.1    52.3%   $  3,355.7    (0.6)%  $      3,376.8



We market and sell our products directly to OEMs of communications and
electronics products, third-party original design manufacturers and contract
manufacturers, and indirectly through electronic components distributors. We
generally experience seasonal peaks during our fourth and first fiscal quarters
(which correspond to the second half of the calendar year), primarily as a
result of increased worldwide production of consumer electronics in anticipation
of increased holiday sales, whereas our second and third fiscal quarters are
typically lower and in line with seasonal industry trends.
The increase in net revenue in fiscal 2021, as compared to fiscal 2020, was
driven by an increase in overall demand for wireless connectivity products
coupled with the onset of technology upgrade cycles, including for 5G and Wi-Fi
6 solutions. Additionally, our average content per device for these
next-generation solutions increased.
For information regarding net revenue by geographic region and customer
concentration, see Note 15 to Item 8 of this Annual Report on Form 10-K.

Gross Profit
                                             Fiscal Years Ended
                         October 1,            October 2,            September 27,
                            2021      Change      2020      Change        2019
(dollars in millions)
Gross profit            $ 2,512.4     55.8%   $ 1,612.9      0.6%   $     1,603.8
% of net revenue             49.2  %               48.1  %                   47.5  %



Gross profit represents net revenue less cost of goods sold. Our cost of goods
sold consists primarily of purchased materials, labor, and overhead (including
depreciation and share-based compensation expense) associated with product
manufacturing. As part of our normal course of business, we intend to improve
gross profit with efforts to increase unit volumes, improve manufacturing
efficiencies, lower manufacturing costs of existing products, and by introducing
new and higher value-added products.

The increase in gross profit in fiscal 2021, as compared to fiscal 2020, was
primarily the result of a favorable product mix and higher unit volumes with a
gross profit impact of $950.2 million, partially offset by lower average selling
prices and an increase in amortization of acquisition intangibles, including
inventory step-up, as a result of the Acquisition completed during the period.
Gross profit as a percentage of net revenue is estimated to decrease in fiscal
2022 due to amortization of intangibles acquired during fiscal 2021.
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Research and Development
                                                Fiscal Years Ended
                            October 1,             October 2,             September 27,
                               2021       Change      2020       Change       2019
(dollars in millions)
Research and development   $    532.3     14.7%   $    464.1      9.4%   $      424.1
% of net revenue                 10.4  %                13.8  %                  12.6  %



Research and development expenses consist primarily of direct personnel costs
including share-based compensation expense, costs for pre-production evaluation
and testing of new devices, masks, engineering prototypes, and design tool
costs.

The increase in research and development expense in fiscal 2021, as compared to
fiscal 2020, was primarily related to headcount-related expenses, including
share-based compensation, as a result of our increased investment in developing
new technologies and products.
Selling, General, and Administrative
                                                                       Fiscal Years Ended
                                                October 1,                October 2,                September 27,
                                                   2021        Change        2020        Change         2019
(dollars in millions)
Selling, general, and administrative           $    322.5       39.4%    $    231.4       16.7%    $      198.3
% of net revenue                                      6.3  %                    6.9  %                      5.9  %



Selling, general, and administrative expenses include legal and related costs,
accounting, treasury, human resources, information systems, customer service,
bad debt expense, sales commissions, share-based compensation expense,
advertising, marketing, costs associated with business combinations completed or
contemplated during the period, and other costs.

The increase in selling, general, and administrative expenses in fiscal 2021, as
compared to fiscal 2020, was primarily related to increases in costs associated
with the Acquisition completed during the period and increases in
headcount-related expenses, including share-based compensation.

Amortization of intangible assets

                                                    Fiscal Years Ended
                               October 1,             October 2,              September 27,
                                  2021       Change      2020       Change        2019
(dollars in millions)
Amortization of intangibles   $     36.0     205.1%  $     11.8     (47.8)%  $       22.6
% of net revenue                     0.7  %                 0.4  %                    0.7  %



The increase in amortization expense for fiscal 2021, as compared to fiscal
2020, was primarily due to additional intangible assets acquired during fiscal
2021. See Note 3 to Item 8 of this Annual Report on Form 10-K for a detailed
discussion of intangible assets acquired. Amortization expense is estimated to
increase in fiscal 2022 due to amortization of intangibles acquired during
fiscal 2021.

Restructuring, depreciation and other charges

                                                                        Fiscal Years Ended
                                                October 1,                  October 2,                September 27,
                                                   2021         Change         2020        Change         2019
(dollars in millions)
Restructuring, impairment, and other charges  $       8.9      (35.5)%    $      13.8      102.9%    $        6.8
% of net revenue                                      0.2  %                      0.4  %                      0.2  %



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Restructuring, impairment and other charges incurred in fiscal 2021 were primarily related to impairment of property, plant and equipment.

Restructuring, depreciation and other charges incurred during fiscal year 2020 were mainly related to the abandonment of an ongoing research and development (“IPR & D”) project previously capitalized.

Interest Expense

                                              Fiscal Years Ended
                         October 1,            October 2,              September 27,
                            2021      Change      2020       Change        2019
(dollars in millions)
Interest expense        $   (13.4)    100.0%  $      -         -%    $         -
% of net revenue             (0.3) %                 -    %                    -     %



The increase in interest expense for fiscal 2021, as compared to fiscal 2020,
was due to the issuance of the Notes in May 2021 and the borrowing of the Term
Loans (as defined below) in July 2021. Interest expense is estimated to increase
in fiscal 2022 as our average borrowings outstanding are expected to be higher
than in fiscal 2021.

Provision for Income Taxes
                                                    Fiscal Years Ended
                               October 1,             October 2,              September 27,
                                  2021       Change      2020       Change        2019
(dollars in millions)
Provision for income taxes    $    100.4     30.6%   $     76.9     (28.4)%  $      107.4
% of net revenue                     2.0  %                 2.3  %                    3.2  %



The annual effective tax rate for fiscal 2021 of 6.3% was less than the United
States federal statutory rate of 21.0% resulting primarily from foreign earnings
taxed at rates lower than the federal statutory rate, a benefit related to a
change in the reserve for uncertain tax positions, a benefit from
foreign-derived intangible income deduction ("FDII"), windfall tax deductions,
research and development credits, and foreign tax credits, partially offset by a
tax on global intangible low-taxed income ("GILTI").

The decrease in the effective tax rate for fiscal year 2021, compared to the effective rate of 11.2% for fiscal year 2020, is mainly explained by the benefits associated with favorable changes in reserves for uncertain tax positions.

During fiscal 2021, we concluded an IRS examination of our federal income tax
returns for fiscal 2015 and 2016. With the conclusion of the audit, we decreased
the reserve for uncertain tax positions, including interest and penalties, which
resulted in the recognition of an income tax benefit of $34.8 million in fiscal
2021. In addition, the statute of limitations expired on the federal income tax
return for fiscal 2017 and, as a result, we decreased the related reserve for
uncertain tax positions of $25.5 million.

The increase in income tax expense in fiscal 2021, as compared to fiscal 2020,
was primarily due to increased income from operations, partially offset by a
decrease in the reserve for uncertain tax positions.

See note 9 in section 8 of this annual report on Form 10-K for additional information regarding income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Below is a summary of our cash flows for the periods indicated:

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                                                                             Fiscal Years Ended
                                                          October 1,            October 2,           September 27,
(in millions)                                                2021                  2020                  2019

Cash and cash equivalents at the start of the period $ 566.7

   $     851.3          $        733.3
Net cash provided by operating activities                    1,772.0              1,204.5                 1,367.4
Net cash used in investing activities                       (3,133.2)              (581.4)                 (336.9)

Net cash provided by (used in) financing activities 1,677.4

        (907.7)                 (912.5)
Cash and cash equivalents at end of period              $      882.9        

$ 566.7 $ 851.3



Cash provided by operating activities:
Cash provided by operating activities consists of net income for the period
adjusted for certain non-cash items and changes in certain operating assets and
liabilities. The $567.5 million increase in cash provided by operating
activities for fiscal 2021, as compared to fiscal 2020, was primarily related to
a $683.5 million increase in net income, partially offset by $170.4 million of
unfavorable changes in working capital, due primarily to an increase in accounts
receivable which resulted from higher revenue during the period.

Cash used in investing activities:
Cash used in investing activities consists primarily of cash paid for
acquisitions, capital expenditures, purchased intangibles, and marketable
securities, offset by cash received related to the sale or maturity of
marketable securities. The $2,551.8 million increase in cash used in investing
activities for fiscal 2021, as compared to fiscal 2020, was primarily related to
a $2,751.0 million increase in cash paid for acquisitions and a $248.4 million
increase in cash used for capital expenditures, partially offset by $452.8
million cash provided by the net sales of marketable securities.

Cash provided by financing activities:
Cash provided by financing activities consists primarily of proceeds and
payments related to our long-term borrowings and cash transactions related to
equity. The $2,585.1 million increase in cash provided by financing activities
for fiscal 2021, as compared to fiscal 2020, was primarily related to an
increase of $2,488.1 million in long-term debt issued and a decrease of $451.9
million in stock repurchase activity, partially offset by repayments of Term
Loans of $250.0 million, a decrease of $45.5 million in net proceeds from
employee stock option exercises, an increase of $33.6 million in dividend
payments, and an increase of $22.1 million related to the minimum statutory
payroll tax withholdings upon vesting of employee performance and restricted
stock awards.

Liquidity:

Cash, cash equivalents, and marketable securities totaled $1,027.2 million as of
October 1, 2021, representing an increase of $47.3 million from October 2, 2020.
We have outstanding $500.0 million of Notes Due 2023, $500.0 million of Notes
Due 2026, and $500.0 million of Notes Due 2031. We have a term credit agreement
(the "Term Credit Agreement") providing for a $1.0 billion term loan facility
(the "Term Loan Facility"). On July 26, 2021, the Company borrowed $1.0 billion
in aggregate principal amount of term loans (the "Term Loans") under the Term
Loan Facility to finance a portion of the purchase price for the Acquisition and
to pay fees and expenses incurred in connection therewith. During fiscal 2021,
the Company repaid $250.0 million of outstanding borrowings under the Term
Loans. As of October 1, 2021, there were $750.0 million of borrowings
outstanding under the Term Credit Agreement. We have a Revolving Credit
Agreement (the "Revolving Credit Agreement") under which we may borrow up to
$750.0 million for general corporate purposes and working capital needs of the
Company and its subsidiaries. As of October 1, 2021, there were no borrowings
outstanding under the revolving credit facility (the "Revolver"). The Revolving
Credit Agreement expires July 26, 2026.

For a description of contractual obligations, such as taxes, leases, and debt,
see Note 9, Note 11, and Note 17 to Item 8 of this Annual Report on Form 10-K,
respectively.

Based on our historical results of operations, we expect that our cash, cash
equivalents, and marketable securities on hand, and the cash we expect to
generate from operations, and funds from our Revolver, will be sufficient to
fund our short-term and long-term liquidity requirements primarily arising from:
research and development, capital expenditures, potential acquisitions, working
capital, quarterly cash dividend payments (if such dividends are declared by the
Board of Directors), outstanding commitments, and other liquidity requirements
associated with existing operations. However, we cannot be certain that our cash
on hand, cash generated from operations, and funds from our Revolver will be
available in the future to fund all of our capital and operating requirements.
In addition, any future strategic investments and significant acquisitions may
require additional
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liquidity and capital resources. If we are unable to obtain sufficient liquidity or capital to meet our needs on a timely basis and on favorable terms, our business and operations could be materially and adversely affected.

Our invested cash balances consist primarily of highly liquid marketable securities that are available to meet short-term cash needs, including: term deposits, certificates of deposit, money market funds, we Treasury
securities, agency securities, corporate debt securities and commercial paper.

CRITICAL ACCOUNTING ESTIMATES

The discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with generally accepted accounting principles ("GAAP"). The
preparation of these financial statements requires us to make estimates and
judgments in applying our most critical accounting policies that can have a
significant impact on the results we report in our financial statements. The SEC
has defined critical accounting policies as those that are both most important
to the portrayal of our financial condition and results and which require our
most difficult, complex, or subjective judgments or estimates. Based on this
definition, our most critical accounting policies include revenue recognition,
which impacts the recording of net revenue; inventory valuation, which impacts
the cost of goods sold and gross margin; business combinations, which impacts
the fair value of acquired assets and assumed liabilities; and income taxes,
which impacts the income tax provision. These policies and significant judgments
involved are discussed further below. We have other significant accounting
policies that do not generally require subjective estimates or judgments or
would not have a material impact on our results of operations. Our significant
accounting policies are described in Note 2 to Item 8 of this Annual Report on
Form 10-K.

Revenue Recognition. We recognize revenue in accordance with the Financial
Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC")
606 Revenue from Contracts with Customers net of estimated reserves. Our revenue
reserves contain uncertainties because they require management to make
assumptions and to apply judgment to estimate the value of future credits to
customers for product returns, price protection, price adjustments, and stock
rotation for products sold to certain electronic component distributors. We base
these estimates on the expected value method considering all reasonably
available information, including our historical experience and current
expectations, and are reflected in the transaction price when sales are
recorded.

Inventory Valuation. We value our inventory at the lower of cost or net
realizable value. Reserves for excess and obsolete inventory are established on
a quarterly basis and are based on a detailed analysis of aged material,
salability of our inventory, market conditions, and product life cycles. Once
reserves are established, write-downs of inventory are considered permanent
adjustments to the cost basis of inventory. Our reserves contain uncertainties
because the calculation requires management to make assumptions and to apply
judgment regarding historical experience, market conditions, and technological
obsolescence. Changes in actual demand or market conditions could adversely
impact our reserve calculations.

Income Taxes. The application of tax laws and regulations to calculate our tax
liabilities is subject to legal and factual interpretation, judgment, and
uncertainty in a multitude of jurisdictions. Tax laws and regulations themselves
are subject to change as a result of changes in fiscal policy, changes in
legislation, the evolution of regulations, and court rulings. We recognize
potential liabilities for anticipated tax audit issues in the United States and
other tax jurisdictions based on our estimate of whether, and the extent to
which, additional taxes and interest will be due. We record an amount as an
estimate of probable additional income tax liability at the largest amount that
we feel is more likely than not, based upon the technical merits of the
position, to be sustained upon audit by the relevant tax authority.

Business Combinations. We allocate the fair value of the purchase consideration
of a business acquisition to the tangible assets, liabilities, and intangible
assets acquired, including IPR&D, based on their estimated fair values. The
excess of the fair value of purchase consideration over the fair values of these
identifiable assets and liabilities is recorded as goodwill. IPR&D is initially
capitalized at fair value as an intangible asset with an indefinite life and
assessed for impairment thereafter. When an IPR&D project is completed, the
IPR&D is reclassified as an amortizable purchased intangible asset and amortized
over the asset's estimated useful life. Our valuation of acquired assets and
assumed liabilities requires significant estimates, especially with respect to
intangible assets. The valuation of intangible assets, in particular, requires
that we use valuation techniques such as the income approach. The income
approach includes the use of a discounted cash flow model, which includes
discounted cash flow scenarios and requires the following significant estimates:
future expected revenue, expenses, capital expenditures and other costs, and
discount rates. We estimate the fair value based upon assumptions we believe to
be reasonable, but which are inherently uncertain and unpredictable and, as a
result, actual results may differ from estimates. For finite-lived intangible
assets valued during fiscal 2021, a hypothetical change of ten percent to our
valuation estimate would impact amortization of acquisition intangibles by
$106.0 million over a weighted-average amortization period of 4.4 years.
Estimates associated with
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accounting for acquisitions may change as additional information becomes available regarding the assets acquired and the liabilities assumed. Costs related to the acquisition are recognized separately from the business combination and are expensed as they are incurred.

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