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3 March 2008


RFMD delays Greensboro fab investment as it completes Filtronic acquisition

The world’s biggest GaAs RFIC maker, RF Micro Devices Inc of Greensboro, NC, USA, has completed its £12.5m acquisition of Filtronic plc’s subsidiary Filtronic Compound Semiconductors Ltd (announced on 20 December 2007), including its 6-inch GaAs wafer fabrication facility in Newton Aycliffe, UK and its millimeter-wave RF semiconductor business.

RFMD expects that the addition of the high-volume fab will significantly reduce its GaAs pHEMT manufacturing costs and provide incremental manufacturing capacity sufficient to support anticipated near-term growth. The firm also expects the addition of Filtronic Compound Semiconductors’ microwave and millimeter-wave component business to strengthen the product portfolio of its Multi-Market Products Group (MPG) and be accretive to its target margin profile for its multi-market business.

“With the acquisition of Filtronic Compound Semiconductors, RFMD significantly benefits in three ways,” reckons RFMD’s president and CEO Bob Bruggeworth. “First, the acquisition significantly lowers our overall GaAs cost structure, which we believe will result in improved margins as calendar year 2008 progresses. Second, RFMD’s GaAs capacity is increased by approximately 30%, giving us the flexibility to capture near-term demand upside and defer future fab-related capital outlays. Finally, we acquire a strong microwave and millimeter-wave business that adds profitable, high-margin revenue to MPG,” he adds. “We look forward to the growth and cost-reduction opportunities this acquisition makes possible.”

*According to a report in The Triad business Journal, RFMD is postponing its $103m construction of a second 6” GaAs wafer fabrication plant in Greensboro (which would employ 300 new staff) and shifting the planned production and jobs to the Newton Aycliffe fab.

The plan to build the second fab was initially announced at the end of last September, to support expected growth in the firm’s Cellular and Multi-Market product groups (focusing on high-volume HBT- and pHEMT-based cellular and WLAN front-end products).

At that time, chief financial officer Dean Priddy said that RFMD planned to reduce its reliance on outsourced GaAs pHEMT switch manufacturing as Fab 2’s capacity came online (having already decided to terminate outsourcing to Filtronic ).

However, since the acquisition, the Filtronic fab presents both the capacity and trained personnel available immediately to meet RFMD’s near-term production demands, making the Greensboro Fab 2 investment unnecessary for now.

Jerry Neal, RFMD’s executive VP for marketing and strategic development, says that the planned Greensboro plant and its jobs (paying $42,000 on average) are not being scrapped. However, the plant will not open this year as planned. Product demand will dictate when the facility is completed, he says.

See related items:

RFMD loss follows dip in China GSM/GPRS demand

Filtronic sells Compound business

Filtronic negotiating sale of compound semiconductors division

Filtronic forecasts return to profit this year, pending sale of Compound Semiconductors division

Filtronic to cut 115 jobs as RFMD decides to cease buying GaAs pHEMT switches in September

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