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Focus on
Radio Frequency Micro Devices
(NASDAQ:RFMD):
Greensboro, North Carolina
Gallium Arsenide Specialist -
Radio Frequency (RF) Integrated Circuits (RFICs)

... updated January 3, 1999)

Background and History of RF Micro:
RFMD designs, develops, manufactures and markets proprietary radio frequency integrated circuits ("RFICs") for wireless communications applications. Much of its revenues comes from the sale of RFICs used in cellular telephones and PCS handsets, but it offers many other standard and custom products. For the three months ended June 30, 1998, 87% of the Company's revenues was derived from the sale of gallium arsenide heterojunction bipolar transistor ("GaAs HBT") products.

TRW Inc. ("TRW") is the Company's largest shareholder, owning 32.7% of its common. According to the recent 10K, in June 1996, the Company and TRW entered into a broad strategic relationship that included $15 million of equity and debt financing from TRW. The key goal of the Company in entering into this alliance was to enable the Company to construct a four-inch wafer fabrication facility to manufacture products using GaAs HBT technologies developed by TRW and licensed to the Company. Until June 1998, TRW manufactured all of the Company's GaAs HBT products. TRW granted the Company a license to use its GaAs HBT process, and RFMD recently began manufacturing its own GaAs HBT products under this license at its new wafer fabrication facility. The Company's GaAs HBT power amplifiers and small signal devices have been designed into equipment manufactured by OEMs such as Nokia, Hyundai Electronics, Phillips Consumer Communications, Motorola and LG Information and Communications, Ltd.

Recent Business and Financial News
According to the latest
10Q filed in november '98, revenues increased 243% from the same quarter last year, to $31.4 million. The company reported that three-volt GaAs power amps dominated shipments. The GaAs fab received ISO-9001 certification in August and shipments at the end of the quarter exceeded plan, with inventory turns increasing sequentially from the previous quarter from 2.6 to 3.2, despite the addition of the new wafer fab inventories.

Second Quarter Results:

(in millions, except per share data)

2nd Q'r 98
(ending 9/30/98)

2nd Q'r 97
(ending 9/30/97)

Revenues

$31.4

$9.1

Pre-tax Income

2.7

0.8

Taxes

0.3

negl.

Income per share (diluted)

0.14

0.05

Shares Out

17.3

17.3

A change in tax accruals postively impacted earnings for the second quarter, as RFMD tax counsellors recommended allowing for an effective tax rate of only 12% for the remainder of the fiscal year. Future increases in the rate of tax accrual may skew the year-to-year comparison of after-tax income as tax loss carryforwards 'burn off'.

In connection with TRW's investment in the Company, the Company issued to TRW a warrant for the purchase of up to 1,000,000 shares of RFMD common at $10 per share. This warrant was exercised in September 1998, according to a Beneficial Ownership filing at the SEC, where it states: "TRW beneficially owns 5,621,487 shares of Common Stock. The numberof shares of Common Stock beneficially owned by TRW represents 32.7 percent of the 17,170,528 shares of Common Stock outstanding as of September 14, 1998."

Capital Plans and Secondary Offering
RFMD $40 million fab is now making four-inch GaAs HBT wafers using TRW technologies. Production at the facility is expected to increase throughout fiscal 1999. Completion of the second phase, budgeted for $30 million, would transfer additional TRW technology and expand wafer fabrication capacity, but is dependent on raising necessary capital and other factors. On December 22, 1998,
RFMD filed an S-3 announcing its intention to offer 1.75 million shares of common for the company and 250 thousand by TRW, Inc.

Primary Competitors
The recent 10K identifies RFMD's primary competitors as including Anadigics, Fujitsu, Hewlett-Packard, Hitachi, Motorola, NEC, Philips, Raytheon, Rockwell, Siemens and TriQuint.

Gilder Technology Report Comments on GaAs:

  • Vol II, No. 3 (3/97): The Tetherless Telecosm:
    ..."Tetherlessly transcending most of the limitations of the current PC era, the most common PC will be a digital cellular phone. ... Thus the first PC of the new paradigm will probably have to be CDMA (code division multiple access), built from the bottom up to provide bandwidth on demand, according to TCP-IP standards, at a handful of milliwatts of communications power (see
    GTR, January 1997) ... This up-spectrum bias assures the continued success of companies pressing the frontiers of microwave integrated circuits, low noise amplifiers, power amplifiers, and other devices that function in the gigahertz." - p. 6-7.

    ..."This is the spectronic paradigm ... [which] tends to favor the manufacturers of gallium arsenide, indium phosphide, and silicon germanium devices. ... [T]he current ride of ... gallium arsenide (GaAs) innovators is likely to continue. ... The major long term threat is silicon germanium. [Which] combines much of the manufacturability of silicon with the high frequency operation of gallium arsenide." -- p. 7.
  • Vol. II, No. 7 (7/97): "Strong growth in the wireless and satellite communications industries has raised the fortunes of producers of gallium arsenide (GaAs) radio frequency and digital semiconductors. ... Threatening the ambitions of the GaAs specialists, however, are recent advances in silicon germanium (SiGe) semiconductors now coming to market in commercial products. ... With performance comparable to GaAs, SiGe chips cost one third as much to build since they can be manufactured on traditional silicon lines. ... Given the advantages in cost and performance of the SiGe chips, GaAs is now maturing and has been deleted from our Table of ascendant technologies." -- p. 5.
  • Vol. II, No. 12 (12/97): Telecosm Outlook: 1998 "With SiGe pulling even with GaAs, but at a significant cost advantage, the technology is poised to explode into the RF IC marketplace. ... While SiGe will not supplant existing gallium arsenide designs, the single chip systems of the future will move toward the new process." -- p. 3.

Other voices:

  • "Charles Huang, executive vice president of engineering at gallium arsenide company Anadigics Inc., Warren, NJ, says that silicon germanium still has to prove itself. He expects gallium arsenide products to co-exist with its new rival for years." -- Electronic Business "Silicon Germanium finds the Spotlight" (1/98)

RF Micro Devices is the subject of a message thread on Silicon Investor, and another message thread at Yahoo! Financial. Check there for breaking news and views. See the right side gutter for links.

Do your own research before buying any security.


This focus page will be archived at nnarc-rfmd.html and may be edited in the future. Check in at Net Nuggets from time to time. The information contained herein is believed to come from reliable sources, but no warranty of accuracy is expressed or implied. The author may own shares of this company purchased on the open market and has never received or been offered any compensation from Radio Frequency Micro Devices, its agents or affiliates.

If you have verifiable information about this company, its business plan or competitors, you are invited to share it via email with me.

Doug Simpson
doug.simpson@snet.net
1/3/99

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RF Micro Devices
...Home Page
...
Online Catalog
...
PR Archive
...
Investor News

Investor Relations:
4-year chart
(Ask Research)

RF Micro at Yahoo Finance:
...Profile
...
News
...
Messages
...
Insider Trades

FreeEDGAR:
...10K filed June '98
...
Proxy Stmt July '98
...
10Q filed Nov '98
...
Beneficial Ownership filed Sep '98


Silicon Investor Discussion Thread:
RF Micro Devices (RFMD)

Customers:
...Nokia
...Hyundai
...Phillips
...Motorola
...LGIC

Other GaAs Specialists:
Vitesse (
VTSS)
Triquint (
TQNT)
Anadigics (
ANAD)

SiGe Specialists:
Analog Devices (
ADI)
IBM (
IBM)
Nortel (
NT)
SiGe Microsystems


Background Reading:

Gilder Technology Reports:
State of the Telecosm: Mid-Year Update (9/97)

Motley Fool:
Industry Snapshot of "GaAs Valley"
(10/98)

Electronic Business:
..."
Wireless power amplifiers get the GaAs treatment" (12/96)
..."
GaAs sales heat up" (12/96)
..."GaAs vendors bullish about growth" (12/96)
...
Silicon Germanium finds the Spotlight
(1/98)

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