10 February 2011

TriQuint grows revenue 7% in Q4, but more-than-seasonal 13% drop expected in Q1

For fourth-quarter 2010, RF front-end product and foundry services provider TriQuint Semiconductor Inc of Hillsboro, OR, USA has reported revenue of $253.4m, up 7% on $237m in Q3 and up 31% on $193.3m a year ago. Foxconn International Holdings Ltd and Samsung Electronics each contributed 10% or more of total revenue.

Fiscal	Q4/2009	Q1/2010	Q2/2010	Q3/2010	Q4/2010
Revenue	$193.3m	$180.8m	$207.5m	$237m	$253.4m

 

Revenue for full-year 2010 was a record $878.7m, up 34% on 2009’s $654.3m. This was led by:

• 33% growth for Mobile Devices (fueled by the rapid adoption of Internet-rich mobile devices such as smartphones and tablets and the expanding RF content required, as well as 3G data driving RF content expansion); and
  
• 54% growth for Networks (led by new products in optical, automotive and emerging markets in combination with the market rebound from a weak 2009).

In addition, in 2010 TriQuint was awarded more than $20m in gallium nitride (GaN) development contracts for next-generation high-performance RF solutions. “Our five-year compound annual revenue growth rate is now at 24%,” summarizes president & CEO Ralph Quinsey.

In Q4/2010, Mobile Devices (71% of total revenue) grew 12% on Q3 and 34% year-on-year. In particular (by air interface standard), 3G/2.5G continued its growth, from 60% of Mobile Devices revenue a year ago and 69% last quarter to 70%. CDMA has fallen from 17% of Mobile Devices revenue a year ago to 8% and GSM has fallen from 10% to just 6% (as TriQuint continues to back away from 2G business), whereas Connectivity has grown from 13% of Mobile Devices revenue to 16%.

Continuing a strong rebound from the low of 2009, Networks (21% of total Q4 revenue) were up 50% on a year ago. In particular, 40Gb/s optical revenue almost tripled (building on the firm’s relationship with China’s Huawei). However, Networks revenue has plateaued since mid-2010, with Q4 flat on Q3.

Defense & Aerospace (8% of total revenue) has fallen 12%, both year-on-year and sequentially from Q3, to $20m (44% from radar, 33% from standard products, and 14% from R&D contracts). However, the drop is due primarily to the timing of major programs (which lead to characteristically lumpy order patterns in this market).

Although up from 38.4% a year ago, non-GAAP gross margin has fallen from 42.3% last quarter to 40.1%, due to weaker Defense and Networks demand (for which gross margins are typically more than 50%) and stronger-than-expected revenue from lower-margin Mobile Devices. Despite this, full-year gross margin still rose sharply from 33% for 2009 to 41% for 2010.

Non-GAAP operating expenses have risen from $56m (23.6% of revenue) last quarter to $58m (22.9% of revenue, down from 26.4% a year ago). Full-year operating expenses for 2010 were $221m (25.2% of revenue, down from 27.2% in 2009).

“In 2010, TriQuint exceeded our non-GAAP targets of 30% gross margin and 15% operating income,” notes Quinsey. “Overall, 2010 was a record year for revenue and earnings.”

Non-GAAP net income for Q4 was $42.8m, up on $22.8m a year ago but down on $44.2m last quarter. Full-year net income more than tripled from $38.2m in 2009 to a record $137.7m in 2010.

During the quarter, cash and investments rose from $187m to $224m, after strong cash flow from operations plus proceeds from stock option exercises (partially offset by high capital expenditure of $42.7m).

Also during the quarter, TriQuint’s complete 3G RF front-end was selected by Samsung for its popular Galaxy Tab and Galaxy S smartphone series. The firm also released a 77GHz chipset portfolio used in Delphi Automotive’s motion detection products, and announced the availability of the first TRIUMF multi-mode power amplifier (MMPA) module. In addition, TriQuint became a key supplier to Europe’s first 100Gb/s optical data link.

Correspondingly, in first-quarter 2011 non-GAAP operating expenses are expected to grow further to about $62m, due mostly to increased R&D spending. However, expenses from litigation with Avago Technologies are also expected to rise from Q4’s $4.2m to $5.6m (before dropping back to about $3.5m in Q2).

For first-quarter 2011, TriQuint expects revenue of $215–225m (up 22% year-on-year but down a slightly more-than-seasonal 13% sequentially). Nevertheless, non-GAAP gross margin should rise slightly to 40–42%, due to a small favorable impact from product mix (with Defense & Aerospace and Networks revenue to be flat, but lower-margin Mobile Devices revenue down 19% due to seasonality plus some allocation hangover).

However, for Networks, order bookings have stepped up in Q1, indicating sequential growth in Q2, while full-year growth is expected to be 15–20%. Meanwhile, Defense & Aerospace revenue is expected to stay at about $20m per quarter for first-half 2011 then grow sequentially in the second half, leading to full-year 2011 Defense & Aerospace revenue being flat to up mid single digits as a percentage on 2010. Full-year Mobile Devices revenue is expected to grow by at least 20%.

“With the world transitioning to a mobile Internet, I expect a strong market and see another solid growth year for TriQuint in 2011,” says Quinsey. For the full year, the firm believes continued robust growth in demand should lead to gross margin of 40–43% and non-GAAP operating margin of at least 20% on revenue growth of about 20%.

The firm has hence planned capacity to exceed that goal. “In 2010 we invested in capacity, and are doing the same in 2011,” Quinsey adds. In particular, the 6-inch wafer line being added at TriQuint’s GaAs fab in Richardson, TX should come online in second-half 2011, while the existing 6-inch GaAs line in Hillsboro is also being expanded. “We have positioned ourselves to maintain an aggressive growth rate for 2011 and beyond,” says Quinsey. According to chief financial officer Steve Buhaly, TriQuint expects to be able to produce $300m of revenue in Q2/2011 and $350m in Q4, as it grows its production capacity by about 40% in 2011.

“TriQuint anticipates the RF market will be strong for years to come,” comments Quinsey. “We remain in the early stages of a communications revolution,” he believes.

See related items:

TriQuint’s Q3 revenue exceeds guidance by nearly 8%

TriQuint grows 14.7% in Q2 after faster-than-expected Networks rebound

TriQuint grows 52% despite dip from last quarter

TriQuint grows a more-than-expected 12% in Q4/09

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