Filtronic touts for compound semiconductor suitor
Filtronic has decided that selling its GaAs chip manufacturing business to another company either in the compounds business or a related sector represents the best option for the enterprise.
In his statement accompanying the UK company s latest financial results, chairman John Poulter said that it did not make sense for Filtronic to hold onto the business, given the small size of the parent company, plus the scale of the operation in such a volatile and capital-intensive market.
"Sale to another company in the same or adjacent markets would provide the optimum solution for customers, employees and shareholders," said Poulter.
The division s future has been in question ever since Filtronic was forced to scale back last year s overambitious expansion plans, and was compounded by the recent decision by key client RF Micro Devices to end a large outsourcing contract (see related stories).
In the event that the hoped-for sale of the GaAs business proves unsuccessful, adds Poulter, Filtronic will "pursue other options".
The problem for Filtronic is this - who exactly in the GaAs market needs to expand wafer manufacturing capacity right now?
One potential suitor could be United Monolithic Semiconductors (UMS), the European foundry operation that is a joint venture of the global aerospace and defense giants Thales and EADS.
UMS operates largely as a captive supplier of GaAs- and, more recently, GaN-based electronics for its two parent companies, although it also offers an open foundry service.
According to industry sources, UMS has become capacity-limited in recent months and has had to outsource some of its manufacturing requirements - suggesting that a hook-up between it and Filtronic Compound Semiconductors could be beneficial to both parties.
However, because both operations are closely linked with the military sector in their respective countries, such a deal could be littered with complications.
Filtronic estimates the value of its compound semiconductor business at £17.9 million ($36.8 million).
The latest financials also showed that the cost of last year s misjudged expansion totalled £13.4 million, including cancellation costs.
Filtronic s PHEMT operation in Newton Aycliffe posted sales revenue of £30.3 million for the year that ended May 31, 2007, up nearly 50 percent on the previous financial year.
Not including the costs of the aborted expansion and other exceptional items, that improvement translated to an operating loss of only £1.5 million.
But when those excess costs were factored in, the operating loss shot up to £29 million.
On the positive side, Filtronic says that the compounds business produced a "near-breakeven" result in the second half of fiscal 2007, following cost reductions and an increased focus on higher-margin products.
