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RF Micro switches off Filtronic PHEMT contract

UK GaAs fab Filtronic says that PHEMT production for its number-one customer - RF Micro Devices - will cease in September. As a direct result, Filtronic has put its compounds business up for sale, and is set to cut 115 jobs.

Filtronic says that it has lost its leading GaAs PHEMT switch customer, widely understood to be the giant US power amplifier (PA) manufacturer RF Micro Devices (RFMD).

In response, the UK company will down-size its fab operations with the loss of 115 jobs, while it is now actively looking to sell the compound semiconductor business.

In a brief statement, Filtronic, whose 6 inch facility represents the UK s only major GaAs fab, said: "Our predominant customer has now advised us that its requirement for switches from Filtronic will cease in September because of [its] decision to in-source all production."

"This will result in a substantial reduction in the level of activity for our business. The board has therefore decided to reduce the size of the compound semiconductor business accordingly."

In 2005, Filtronic significantly ramped GaAs PHEMT production after signing a major supply deal with RFMD. However, it had struggled to expand its customer base significantly beyond that, and in recent months it was forced into a costly scaling back of ambitious capacity expansion plans (see related stories).

Speaking with compoundsemiconductor.net recently, Filtronic representatives said that RFMD was the largest of only a handful of customers that it was providing with GaAs PHEMT switches. Merchant production of PHEMTs was said to amount to approximately half of the UK company s revenues.

GaAs wafer production at the firm s Newton Aycliffe facility also supports Filtronic s own broadband point-to-point and defense businesses.

In its most recent financial presentation, Filtronic said that its compound semiconductor business accounted for just over £15 million ($30 million) in revenue in the first half of fiscal year 2007, out of total sales of £35.8 million.

Losing the RFMD account would blow a huge hole in those finances, leaving a major question mark over the future viability of the company.

"The board is considering a full range of possibilities for the ongoing operation, including sale," was Filtronic s ominous-sounding conclusion.

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