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27 April 2007


RFMD breaks $1bn annually, but Motorola inventory correction depresses March and June quarters

For its fiscal 2007 (to end-March), RF Micro Devices Inc of Greensboro, NC, USA, which manufactures RF components and modules for mobile communications, has reported record revenue of $1.023bn (up 33% on fiscal 2006) and net income of $83m (up from $16m), reflecting unit volume strength at leading handset makers.

However, fiscal fourth-quarter 2007 revenue was ‘just’ $257.3m, up 13.9% from $225.9m a year ago but down 8.5% from fiscal Q3’s $281m. Net income was $30.1m, compared to a loss of $1.6m a year ago, but down from a profit of $59.3m in Q3.

Following a downturn in orders at Motorola’s handset division and a build-up of excess component inventories, RFMD warned that forecasted unit reductions at “a major customer”, coupled with its high per-unit dollar content at this customer, would significantly impact the firm’s near-term financial results. But in the longer term RFMD believes it will benefit as handset inventories are reduced and as forecasts and shipments increase.

Also, RFMD expects to increase its dollar content at additional customers [in particular Nokia] through sales of complete RF solutions as well as complementary components for cellular front ends and other high-growth markets.

For the June quarter, RFMD forecasts revenue of $215-230m (down 9-16%), due to a sequential decline in POLARIS solution sales, partially offset by increased sales of EDGE and WCDMA power amplifiers and transmit modules, wireless LAN front ends and GaN devices.

“We expect that a significant volume reduction at our lead POLARIS RF solution customer will impact our financial results,” says Dean Priddy, CFO and VP, finance and administration. “We expect the impact to be temporary, however, and our investment plans remain unchanged. New multi-year platform opportunities have been won at our lead POLARIS RF solution customer, and we remain on track to transition another top-tier customer into a higher-dollar-content status in second-half 2007.

RFMD expects modest sequential quarterly revenue growth to resume in the September quarter and to continue through the remainder of 2007, followed by an acceleration of growth in 2008 as existing design wins ramp in multiple markets.

“RF Micro Devices is winning opportunities to grow its dollar content in mobile devices as they increase in complexity and require additional high-performance RF content,” says president and CEO Bob Bruggeworth. He claims that RFMD’s investments in transceivers, pHEMT switches, filters, DC-to-DC converters, integrated shielding, MEMS switches, module assembly, wafer manufacturing and systems-level expertise have positioned the firm to help its customers and channel partners to eliminate complexity, improve performance, reduce costs and speed time to market.

In the June quarter RFMD expects sales of GaAs pHEMT cellular switches to rise sequentially, as well as the product launch of its GaAs pHEMT multi-market low-noise amplifiers (LNAs).

“We are winning follow-on business with our lead POLARIS RF solution customer, and we expect our revenue with this customer will return to growth in the September quarter,” adds Bruggeworth. “Our [next-generation] POLARIS 3 RF solution is on track to ramp in the second half of calendar 2007, which will expand our POLARIS RF solution customer base to include an additional top-tier handset manufacturer.”

Beyond RFMD’s core cellular market, Bruggeworth expects high-margin, diversified revenue growth in fiscal 2008, driven by sales of the firm’s GaN devices, wireless LAN front ends, GPS solutions and multi-market products. In the March quarter RFMD grew sales of wireless LAN front ends for handsets and other applications and expects sequential growth in the June quarter. The firm also experienced increased design activity with leading mobile device makers related to its proprietary GPS technology. RFMD also started shipping gallium nitride devices to a top-tier military supplier, and expects additional shipments and customer orders in the June quarter. “RFMD is aggressively investing in opportunities for diversified growth and evaluating strategic options to bolster revenue and earnings contribution,” says Bruggeworth.

RFMD’s balance sheet was enhanced by its recent $375m convertible note offering, which will help it to both streamline the supply chain in its cellular business and jumpstart its diversification efforts, says Priddy.

* RFMD expands Shanghai facility to include R&D

RF Micro Devices has added a research and development center in its facility in Shanghai's Zhanjiang High-Tech Park.

The new center will expand RFMD's product development capacity to support original design manufacturers (ODMs), original equipment manufacturers (OEMs) and local and international handset makers throughout the Far East. Increasing RFMD's internal design capacity of front-end solutions and transceivers will allow significantly improved design cycle times and reduced manufacturing and shipping costs to customers, the firm says.

“RFMD's continued expansion into the Greater China market demonstrates our focus on supporting the local manufacturers in this territory,” says Greg Thompson, VP of worldwide sales and applications engineering. “This new location will expand our research and development efforts, while strengthening RFMD's operations across Greater China as a complete source for design, manufacturing, supply chain, sales and field applications engineering support.”

With the addition of its new R&D center, RFMD's investment in the Greater China market includes a sales and customer support center in Shenzhen, a module assembly facility and test and tape & reel facility in Beijing, a customer support center in Shanghai, and a sales and customer support center in Taipei, Taiwan. RFMD employs more than 1000 people in the region.

See related items:

Handset shipment growth slows to 10% year-on-year

Inventory build-up trims mobile handset shipment growth to 12% in Q1/2007

RFMD prices $350m private placement; fiscal-year revenue to exceed $1bn, but forecasts slowdown next quarter

RFMD’s quarterly revenue rises 13.8% to a record $281m

RFMD to sell Bluetooth assets for $39m to Qualcomm and collaborate on complementary cellular products