13 February 2012

TriQuint’s quarterly revenue rises more-than-expected 5%

RF front-end component maker and foundry services provider TriQuint Semiconductor Inc of Hillsboro, OR, USA has reported revenue growth of 2% from 2010’s $878.7m to a record $896.1m in 2011 (the sixth consecutive year of growth). Declines of 4% in Networks and 9% in Defense & Aerospace were offset by Mobile Devices revenue rising 6% (including growth of 20% for 3G/4G). “In 2011, based on our estimates, we believe overall handset units grew about 9%, with much faster growth in smartphone,” says president & CEO Ralph Quinsey.


“In 2011, we expanded our capacity to serve our customers’ rising demand,” says Quinsey. “We were able to grow important submarkets such as 3G and optical, while also expanding our overall capacity footprint,” he adds. “A growing requests from our high-volume customers is assurance of supply and, with our dual-site capability for gallium arsenide now in place [in Oregon and now Texas], we can assure our customers a flexible and continuous supply of product independent of localized disruptions.”

For fourth-quarter 2011, revenue was $227m, down 10% on $253.4m a year ago but up 5% on Q3’s $216m (and above the guidance of $215-225m). Taiwan’s Foxconn Technology Group comprised 41% of total revenue (making 35% for full-year 2011). By end market, the split was: Mobile Devices 71%; Networks 19%; and Defense & Aerospace 10%.

Mobile Devices revenue was $162m, down 12.8% on $185.9m a year ago but up 7% on Q3’s $151.5m. In particular, year-on-year growth for 3G/4G (from 69% of Mobile Devices revenue in Q4/2010 to 80% in Q4/2011) was offset by a drop in revenue for 2G from $23.8m (13% of Mobile Devices revenue) to $7.4m (just 4%), due mainly to declines in legacy CDMA and GSM revenue streams. “We intentionally moved away from these submarkets during the period our capacity was limited,” notes Quinsey.

Networks revenue of $43.3m was flat on Q3’s $43.6m and down 8% on $47.3m a year ago. Macro-economic weakness during the year caused operators to spend cautiously on infrastructure equipment, resulting in lackluster demand (especially in base-stations). In particular, Radio Access (base-station) revenue was flat year-on-year and down 15% sequentially. Nevertheless, although down 5% on $22.6m a year ago, Transport revenue of $21.5m was up 7% on Q3’s $20.1m, with strong growth in optical. Likewise, although down 27% on $10.1m a year ago, Emerging Markets revenue of $7.4m was up 14% on Q3’s $6.6m.

Defense & Aerospace revenue of $21.7m was up 4% on Q3’s $20.8m and up 7% on $20.2m a year ago. During 2011, the firm completed the bulk of supply to the B-2 bomber and F-22 projects and began to ramp up new programs like the F-35 Joint Strike Fighter and EQ-36.

On a non-GAAP basis, gross margin was 31%, down from Q3’s 36.3% and below the forecast 32-34%. This was driven by a less favorable product mix and lower factory utilization (just 69%) as the firm completed long plant capacity additions and reduced inventory (by about $8m). Full-year gross margin was 37.2%, down from 41% in 2010.

Operating expenses were $56.9m, down $1.8m on $58.7m last quarter, due to litigation expenses (related to antitrust and IP claims against Avago Technologies) falling from $4.1m to $2.3m. However, operating expenses for full-year 2011 (including litigation expenses totalling $19.2m) were $244.4m, up from $221m in 2010.

Net income was $13.3m, down from $19m in Q3 and $42.8m a year ago, but at the high end of guidance. Net income for 2011 was $87.3m, down from $137.7m in 2010.

During the quarter, total cash and investments rose by $15.1m, from $147.2m to $162.3m. Cash flow from operations was partially offset by capital expenditure of $32.5m. Full-year CapEx was $192.4m, as TriQuint expanded total capacity by about 40% across its GaAs and surface acoustic wave (SAW) and bulk acoustic wave (BAW) filter lines.

In late Q4, qualification was completed on the new 6-inch GaAs line at the chip fabrication plant in Richardson, Texas (a copy-exact line replicating the firm’s Oregon 6-inch GaAs capabilities on a smaller scale). “The investments we’ve made in increased capacity will allow us to participate in a strong market growth we anticipate over the next few years,” says chief financial officer Steven J. Buhaly. “We expect lower capital expenditures in 2012 [roughly half], and our spending will be largely focused on new capabilities.” Depreciation expense rose to about $17m in Q4 and will rise to about $21m in Q1/2012 as a result of placing the new 6-inch line in service.

For first-quarter 2012, TriQuint expects revenue of $210-220m and gross margin of 30-31% (with improved product mix largely offsetting the additional $5m in costs from the new Texas 6-inch line). Operating expenses are expected to grow to about $62m, due in part to $4.5m of litigation expense.

“We have recently re-engaged in the GSM market with our next-generation high-performance low-cost QUANTUM Tx Module,” says Quinsey. “However, we believe our Mobile Devices TAM [total addressable market] will continue to grow with increased smartphone adoption and increase our content as multiple bands of 3G and 4G [LTE] are added to devices,” he adds.

“Smartphones currently represent about 30% of the market. I expect them to pass 50% in the next few years as they push into the mid- and low-end of the market,” says Quinsey. “This growth is compounded with increased RF content to support the number of frequency bands required in 3G and LTE. There are over 30 frequency bands defined in the standard and each band drives expanded content. Handsets have gone from dual-band voice capability to now include four or five 3G bands and two or three LTE bands plus WiFi. This has significantly expanded the RF dollar content from about $1 to, in some cases, over $10,” he notes.

“Customers must balance size, flexibility and cost for their next-generation 3G and 4G applications,” continues Quinsey. “TriQuint supplies all of the critical products for this market, including RF amplifiers, SAW and BAW filters, switches and WiFi solutions for smartphones. Customers thus continue to see TriQuint as the complete RF solutions innovator instead of simply a point supplier of discrete power amplifiers or filters,” he claims.

Regarding Networks business, Quinsey notes: “We have been very successful with our modulator driver amplifiers supporting the optical market. Based on design wins to date, I anticipate an expanding customer base in 2012”. He adds: “In addition to our success for the 40Gbps product family, I expect more equipment providers will begin offering a 100Gbps solution by the end of 2012. TriQuint is well positioned to enjoy growth at this next generation of communications technology.”

“This surge in network traffic, rapid adoption of smart mobile device, and expanding RF content, are solid and favorable trends for TriQuint,” says Quinsey. “We have made the investments and capacities we prepared to serve this exciting market... We see solid prospects for growth in the second half of the year.”

Regarding Defense & Aerospace business, new programs like the Joint Strike Fighter and EQ-36 ground-based radar system should result in a return to modest growth in 2012 and beyond, believes TriQuint. In addition, the firm has begun shipping production volumes of gallium nitride (GaN) products into a 3-year radar program valued at $25m, and has GaN-based products in production supporting its first communications application with the defense industry. “We remained closely involved in a broad portfolio of contracted R&D programs sponsored predominantly by DARPA, the Air Force Research Lab and the Office of Naval Research,” says Quinsey. “In 2011, these contracts totaled about $15m in revenue and were primarily focused on the development and manufacturing of GaN technologies for future DoD programs. Contract-based revenue is expected to increase in 2012 with additional GaN-related research programs,” he adds.

See related items:

TriQuint’s revenue falls 6% in Q3

TriQuint’s Q2 and Q3 revenue hit by product focus

TriQuint’s quarterly revenue falls 11% to $224.3m

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

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