News Article

Christmas Comes Early At Filtronic

The uncertainty over the future of Filtronic's GaAs PHEMT wafer facility in Newton Aycliffe looks to be over, as RF Micro Devices moves to acquire the fab in a £12.5 million deal.

RF Micro Devices (RFMD) has put an end to fears over the future of Filtronic s GaAs fabrication facility, with a definitive agreement to purchase the UK company s compound semiconductor business by February 29, 2008.

The £12.5 million ($24.8 million) cash deal should bring welcome Christmas cheer to the workers at the Newton Aycliffe wafer fab, which was put up for sale earlier this year when RFMD announced plans to end its outsourcing contract with Filtronic (see related stories).

But, with increasing demand for GaAs-based components from 3G cellular handsets and wireless LAN applications, RFMD needs to make sure that it has sufficient capacity in place before it completes another wafer fab in Greensboro towards the end of next year.

Dean Priddy, RFMD s CFO, told that the company is already looking to expand production at Newton Aycliffe: "We re going to turn this thing around, and ramp it up," he said.

Although this expansion will not require any major capital expenditure, it is expected to demand an increased workforce. The operation in the north-east of England currently employs just under 300 people, but Priddy believes that approximately 75 new jobs could be created as part of the volume ramp.

"The plan is to fully utilize the existing equipment base," Priddy said. "But we will be needing more operator talent, technicians and engineers."

"Filtronic has been a good supplier to RFMD and we re comfortable with the current management structure there," continued the CFO.

Despite already being the world s largest manufacturer of GaAs RF components, RFMD clearly felt that owning the additional facility was preferable to merely ramping up its purchase order at Filtronic, and would improve its profit margins compared with the prior outsourcing arrangement.

Priddy estimated that, once fully utilized, the Newton Aycliffe fab would add an extra 20 per cent on top of RFMD s existing wafer production capability.

RFMD will also be offering foundry services following the acquisition, the first time that it has publicly revealed this side of its business strategy. Chief among its initial customers will be Filtronic, which - in a complete role-reversal - RFMD will now supply with PHEMT devices for use in point-to-point wireless communications.

The agreement between the two companies stipulates that this supply deal will run for a minimum of three years.

"We definitely want to grow this [foundry] business," said Priddy.

Initially the fab will concentrate on manufacturing GaAs PHEMTs, although other types of GaAs and perhaps GaN transistors could follow in the longer-term.

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