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21 February 2008


TriQuint faces dip in Q1 after record 2007

RF front-end product manufacturer and foundry services provider TriQuint Semiconductor Inc of Hillsboro, OR, USA has reported full-year 2007 revenue of $475.8m (up 18% on 2006’s $401.8m, and exceeding its previous record in 2000).

For fourth-quarter 2007, revenue was $128.5m (up 12% on $114.3m a year ago and up 4.5% on Q3’s $122.9m). Revenue came from handsets, 53%; networks, 36%; and military, 11%. By region, revenue came from Asia, 65%; Americas, 26%; and Europe, 9%. For the sixth quarter in a row, Samsung contributed more than 10% of revenue.

By standard, handset revenue comprised: GSM/GPRS, 47%; CDMA, 30%; WCDMA/EDGE/other, 23%. Transmit modules grew 44% (CDMA 10%; GSM 59%). 3G revenue grew 59%. In particular, EDGE product revenue grew five-fold.

In networking markets, wireless LAN revenue was up year-on-year by 143% (driven by demand for laptop connectivity), point-to-point radio product revenue was up 20%, and GPS revenue was up 173%.

Defense-related revenues were roughly flat on a very strong Q4/2006, but up 10% sequentially. For full-year 2007, military revenue rose 7%.

Driven by the fab utilization of 85% in Hillsboro as well as improved yields and favorable product mix (with new products - launched in the last two years - back to about 50% of revenue) , gross margin has grown from 29.4% a year ago and 32.2% last quarter to 36.7%, taking the year to 31.8% (up from 30.8% in 2006).

Net income has risen from $1.9m last quarter to $13.8m, taking full-year 2007 to $23.4m (up from 2006’s $21.8m).

For first-quarter 2008, TriQuint is currently about 89% booked, but expects revenue to drop to $110-115m (relatively flat on $110.6m in Q1/2007) with fab utilization falling towards 70% (leading to gross margin dropping towards 30%). This is due not only to seasonality but also to inventory corrections at specific tier-1 OEM customers (mainly for GSM, GPRS and EDGE- related handsets): over-ordering in Q4 in one case, and a new policy to reduce material on hand in the other case.

However, president and CEO Ralph Quinsey believes that these issues represent neither an impact beyond Q1 nor any general softness in the market. “On the contrary, I expect solid growth in Q2, accelerating in the second half of the year,” says Quinsey. “I expect strong growth to come from our recently announced products and have focused the company on preparing to meet the growing demand," he adds. "I am committed to the successful ramp of these large programs in support of Q2 and beyond. We intend to maintain our spending level in support of these important opportunities.”

“We are continuing to invest on the premise of a very strong 2008, where alternatively we could have backed off,” confirms chief financial officer Steve Buhaly. “We are maintaining our investment levels in the first quarter [compared to Q4/2007’s CapEx of $8.4m] despite relatively disappointing top-line performance.

“TriQuint continues to penetrate the high-volume mobile phone market and expand our leadership position in the military and networks markets,” says Quinsey. “Our handset strategy leverages the broadest technology portfolio in the industry, providing our customers with better performance and lower cost in their applications. As the world transitions from mobile voice to mobile data, TriQuint supplies the market with some of the most highly integrated front-end modules,” he claims . “This is simplifying our customers design effort, yielding faster time to market and reduced board space requirements for the RF section in the phone.”

Due to upgrades from 2G phones, 3G phones are the fastest growing portion of the market, and hence dollar content is increasing. Quinsey expects TriQuint’s 3G business to continue to grow rapidly in 2008.

In addition, the mobile data market (e.g. laptops) is now TriQuint’s second largest RF market. Similarly to handsets, RF content is increasing due to the popularity of new standards that provide greater bandwidth, higher data rates, and better quality of service. The transition to 802.11n is well underway, and TriQuint recently announced a platform representing its strategy to integrate component content (LNAs, PAs, switches, and some filtering) on to a single GaAs die in a 6mm x 4mm module solution for dual-band MIMO. Three of these high-end front-end modules provide a complete RF front-end for the 3/3 MIMO architecture (now shipping to a major chip maker). Executing this product roadmap raises TriQuint’s content in laptops from less than $1 (prior to TriQuint becoming a module integrator) to over $4 (and maybe $5-6). Quinsey expects significant near-term revenue growth, starting to pick up in Q2/2008 and ramping to a peak in Q4 (or may be a year from now).

“Our two largest markets, cellular phones and wireless LAN are growing in unit demand with expanding RF content,” Quinsey says. The strategy of replacing components with highly integrated RF front-end modules across all markets will accelerate in 2008, he continues. The RF space is seeing expansion of demand based on multi-mode, multi-band phones in the transition from 2G to 3G, and the transition from single-band WLAN to multi-band WLAN (802.11n).

So, despite the economic concern in North America, f or full-year 2008 TriQuint expects revenue to grow 18% on 2007 to $540-580m, driven by strong WLAN opportunities in its network business and market share growth in its handset business, and earnings per diluted share of $0.30-0.40. Non-GAAP earnings are expected to be $0.35-0.45, up 43% over 2007.

“I am confident 2008 will be another record revenue year, with solid improvements in margin structure, operating income, and earnings,” says Quinsey. “We have good visibility into several large opportunities ramping in Q2 and beyond."

In 2008, Quinsey foresees growing revenue in the networks and military markets (first with WLAN module integration, then new defense opportunities); solid revenue growth from 3G Quantum and Tritium modules for the handset market (including Quantum II and Tritium III modules, launched in mid-February, expected to ramp in second-half 2008); focused and disciplined R&D spending; expanding product strength, and steady execution of the firm’s roadmap to margin expansion.

“We are adhering to our strategic model where we intend to spend about 25% OpEx as a percent of revenue, and strive to obtain 40% gross margins [at $160-170m quarterly revenue],” adds Buhaly. “I am not sure we’ll quite get there during this year, but we will definitely make progress over 2007.”

“Our target is to get closer to about 95% utilization,” comments Quinsey. Also, TriQuint has the ability to expand the Oregon fab about another 20-25% with some investment. “Based on demand, it’s likely we’ll do that… It’s a relatively small CapEx in the numbers that we have been talking about,” he adds. “Incrementally, this is probably the cheapest capacity we’ll ever buy, because it’s really bottleneck remediation.”

Quinsey adds that TriQuint’s fab in Richardson, TX is fairly large, with very low space and equipment utilization, but it’s already facilitized and is largely staffed with the overall engineering superstructure. This would allow TriQuint to probably more than double its existing capacity relatively inexpensively.

See related items:

TriQuint makes gains, despite cost of Peak Devices acquisition

WIN closing gap to TriQuint in GaAs foundry market

RFMD, Skyworks and Triquint grew GaAs device market share to 55% in 2006

TriQuint acquiring Peak Devices for wide-bandwidth amplifier design

TriQuint reports seventh quarter of growth

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