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RFMD: phone supply chain back in synch

Better-than-expected demand for RF components and a synchronized cell phone handset supply chain have triggered another upward surge in the share price of RF Micro Devices (RFMD).Better-than-expected demand for RF components and a synchronized cell phone handset supply chain have triggered another upward surge in the share price of RF Micro Devices (RFMD)

Presenting to the investor community at the Barclays Capital Wireless and Wireline Conference in May, CEO Bob Bruggeworth said that the III-V chip maker is seeing significant growth in both its cellular and multi-market product groups.

The positive outlook prompted an upgrade from wireless industry specialist Charter Equity Research, and sent RFMD’s share price up nearly 10% to $2.73. Since hitting a 2009 low of $0.76 in early March, the firm’s share value had more than quadrupled by mid-June. Although Bruggeworth still expects the handset market to contract by between 10 and 12% this year, compared with 2008, he stresses that the industry supply chain is now “synchronized”.

In September last year, that synchronicity was disturbed when consumers stopped buying handsets in such large numbers. Within a couple of months, the supply chain had reacted, with demand for components like RFMD’s GaAs power amplifiers plummeting as inventories were cleared.

As a result, RFMD’s factory utilization rate stood at just 25% in the March 2009 quarter, with the company idling its original 4 inch wafer fab and consolidating III-V manufacturing into its two 6 inch fabs. For the quarter ended June this year, utilization is expected to be in the 75% range, indicating that the supply chain is working normally again.

Outside of handsets, Bruggeworth says that apart from a sluggish market for line amplifiers used in cable TV infrastructure, all product lines are witnessing an upturn in demand. He adds that the firm is working on a new type of switch, based on silicon-oninsulator technology. RFMD currently uses a GaAs PHEMT process to make switches.

Efforts to reduce the size of the GaAs die in its products also appear about to come to fruition, with 40 customers now engaged, and the March to June period representing the first full quarter of volume shipments of products using the smaller die.

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