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Anadigics tipped for success as broadband kicks in

An investment analyst says that GaAs chip maker Anadigics will benefit as the RF wireless component industry trends towards two distinct RF supplier bases.

Anadigics is set to grow its sales and market penetration rapidly as rising demand for broadband wireless technologies combines with an increasingly divided RF semiconductor supply chain.

That s according to John Lau, an investment analyst with Jefferies and Company, a bank that co-managed Anadigics recent offering of stock which raised nearly $100 million.

Lau reckons that a number of industry-wide trends in wireless communications will work out in favor of the Warren, NJ, manufacturer of GaAs-based chips and power amplifier products.

One of those trends is the move towards greater integration of the semiconductor content in wireless handsets as suppliers fall under yet more pressure to reduce costs so that handset vendors can target emerging markets, where phones will be sold much more cheaply.

"The consolidation trend has so far progressed along two lines," explains Lau. "On one hand, baseband chip providers are incorporating radio functionality into digital CMOS. On the other hand, analog RF vendors are consolidating radio components and power amplifiers."

What this means is that some of Anadigics leading competitors, and in particular the likes of Skyworks Solutions and RF Micro Devices, are increasingly focused on complete RF solutions, in a bid to gain higher dollar content in each phone.

Lau believes that this will bring RFMD and Skyworks into direct conflict with baseband chip providers like Texas Instruments and ST Microelectronics, who are increasingly integrating radio functions in their CMOS products.

"RF vendors incorporating radios and power amplifiers may find it difficult to win sockets in low-end/low-cost reference designs," Lau concludes. "Therefore, companies like Anadigics, which focus solely on power amplifiers, should gain share going forward in the low- and mid-range phones."

Lau actually believes that the RF supply chain will branch into two distinct camps: "At one end will be the RF suppliers of complete RF solutions, and at the other [will be] more focused RF suppliers of power amplifiers and switches."

While Anadigics may therefore find it tough to compete against RFMD and Skyworks in future high-end handsets, it should figure strongly in the broadband connectivity market, where increasing volumes of high-specification power amplifiers will be required.

In the broadband sphere, Anadigics has secured key design wins for the emerging WiMAX standard, and is already supplying the likes of Airspan, Samsung and Alvarion, Lau says.

Meanwhile, in the wireless LAN area, Anadigics has a strong relationship with Intel, which it supplies with power amplifiers for the latest 802.11n protocol.

With power consumption becoming the key determining factor in design-win decisions, the high efficiency of products that are made using Anadigics InGaP-plus BiFET process should also give the company an advantage.

Now expecting 136 percent annual growth in unit shipments of 802.11n wireless LAN chipsets, and 245 percent annual growth of WiMAX-enabled customer equipment through 2010, Lau believes that Anadigics will see a strong upturn in sales over 2007 and 2008.

He is predicting 2007 sales to come in at $222 million, which would represent a 31 percent climb on 2006, and a further jump to $265 million the following year.

Anadigics says that it currently has a weekly production capacity of 950 HBT wafer-starts at its 6 inch fab in Warren, but that this could be increased to 1500 wafer starts with additional capital investments to support its manufacturing requirements through 2009.

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