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Short-term outlook weakens for wireless chips

Investment analyst cuts share price target for RF Micro Devices as demand from Asian phone makers weakens.

Weakening demand for RF modules and chips from cell phone manufacturers in Asia could hit wireless component makers in the short term.

According to investment firm Jefferies and Company, handset designers BenQ/Siemens and Compal will not be needing quite as many components as previously thought.

"Our proprietary channel checks in Asia indicate a short-term weaker outlook for wireless demand," said Jefferies analyst John Lau.

He believes that Greensboro-based GaAs chip manufacturer RF Micro Devices could be hit in the short term, and although he still recommends the stock as a "buy", has reduced the target price from $12 to $10.

RFMD's stock is currently hovering around the $6 mark, after peaking at just over $9 in early summer.

Despite the possible short-term hit that RFMD might take, Lau believes that the company remains best-placed among its competitors to benefit from the generally buoyant wireless industry.

"We project that RFMD s Polaris radio will continue to gain market share from competitors, and [the firm is] well positioned to benefit from the outsourcing trend for wireless handset radios," said the analyst.

RFMD is currently building extra wafer fab capacity in Greensboro to accommodate the continued ramp in demand that it expects to see for GaAs-based products, while its new GaN-based transistors are being switched into volume production for the first time (see related story).

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