News Article

Filtronic Plans $83 Million GaAs Fab Investment

Compound semiconductor chip maker Filtronic says that it will use the proceeds from the sale of its wireless infrastructure business to fund a huge expansion of GaAs PHEMT switch manufacturing.

The compound semiconductor business in the UK is set to receive a huge boost from the sale of Filtronic's wireless infrastructure unit to Powerwave Technologies.

US-based Powerwave is set to purchase the unit in a cash-and-stock deal valued at around $345 million. Should it get the go-ahead from Filtronic's shareholders and regulatory authorities, the UK company will receive $150 million in cash and 20.7 million Powerwave shares through the deal.

And Filtronic has indicated that much of that cash will be used to expand its GaAs fabrication facility in the north of England. The fab is currently used primarily to manufacture PHEMT switches for RF Micro Devices in the US.

"[The Filtronic board] has committed to a plan to expand the semiconductor facility to give Filtronic the potential to increase the size of this business by up to three times in the coming two years, at an estimated cost of £45 million ($83 million)," said Filtronic in a statement.

The huge increase planned by Filtronic is a response to the burgeoning demand for GaAs-based PHEMT switches that are increasingly finding application in cell-phone handsets, where they are used to switch between frequency bands.

Because advanced handsets increasingly operate in as many as four bands, and future handsets are expected to feature yet more as wireless LAN and WiMAX connectivity becomes standard, the demand for PHEMTs is rising fast.

Filtronic added, "The [compound semiconductor] division is seeing strong long-term market growth for switches based on GaAs PHEMT technology, with the expectation that they will be used in around 80% of handsets produced by 2008."

If the handset market grows as expected over the next three years, that would mean shipment of around one billion handsets featuring at least one PHEMT switch.

With the sale of its infrastructure unit set to be approved in August, Filtronic is already taking steps to ensure that it has enough cash available to fund the ramp-up.

Aside from the expected proceeds of the infrastructure unit sale, the firm has arranged an additional bank facility to free up £15 million until November this year.

While Filtronic is retaining its defense electronics business unit, which also utilizes GaAs technology, it now seems clear that the company's major focus will be to exploit the full potential of its 6 inch wafer fab in Newton Aycliffe and become a giant supplier of GaAs products.

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