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RFMD takes the early lead in EDGE battle

Skyworks says that it will miss its latest revenue target because of capacity constraints, while its rival RF Micro Devices will post higher-than-expected sales thanks to market share gains.

RF Micro Devices (RFMD) appears to have taken market share away from Skyworks Solutions, its key rival in the GaAs industry, as the two companies prepare to file their latest financial results.

Skyworks initially revealed that its revenue would be only $190 million - $4 million less than the low-end of its expectations "“ in the quarter ending September 30. Shares in the Woburn, MA, company dipped by around 20 percent in value after the news.

Then, RFMD followed up with a statement saying that it would exceed its previous sales guidance by a similar margin.

RFMD attributed the increase to both natural market growth and market share gains, while Skyworks blamed its shortfall on a payment to one of its customers and constraints in both materials and manufacturing capacity.

"[There has been] a late-quarter demand shift toward highly-integrated GPRS, EDGE and wideband CDMA front-end modules, which the company was unable to support within the quarter," admitted Skyworks.

RFMD appears to be gaining traction at the highly-integrated level, with its transceiver chipset business set to account for more than 10% of revenue for the first time in the September quarter. The company is also planning an aggressive launch of its new transmit modules, which incorporate a GaAs PHEMT switch (see related story).

GaAs industry analyst Asif Anwar believes that Skyworks has probably been running at full capacity for much of the past two years: "It's perfectly possible that a change in product mix demand requiring an adjustment could cause some delays," he told compoundsemiconductor.net.

Anwar adds that there is currently a battle between the suppliers over the strategic EDGE power amplifier (PA) and transceiver slots. While he believes that Nokia has its own transceiver solution for EDGE, its leading rivals such as Motorola want the component companies to provide complete solutions.

"RFMD has regained some of the lost momentum with its Polaris 2 chipset combined with its PAs, especially at Motorola," said Anwar, who represents Strategy Analytics.

The Motorola theory is backed up by Jon Lau at investment group Jeffries, who believes that RFMD will benefit as the market migrates from GPRS to newer EDGE phones. Skyworks will be impacted as its radios feature in Motorola s older GPRS technology.

However, the battle over EDGE still has a long way to run. "We don't think that there is an overall winner in this slot yet," added Anwar. "Certainly RFMD has an early lead, [but] we believe the Skyworks revenue announcement is a blip and does not convey a weakening position. The battle for EDGE has only just begun!"

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