CSFB reports on RFMD:
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RF Micro Devices (RFMD-$37-Cap $6.5B-Strong Buy)
RFMD Unveils New Indium Phosphide Process FY01E: $0.43; FY02E: $0.62 FYE: March
· RFMD announced that it is extending its process technology roadmap to include indium phosphide (InP), with initial samples expected in 12 months, and volume production to commence in 18 months.
· Our current model remains unchanged as we do not expect InP-HBT based power amplifiers or broadband related networking products to contribute significant revenue until FY2003. We, however, believe this is continued proof of RFMD’s commitment to raise the process technology bar in order to stay at the forefront of the industry and leverage its RF design expertise.
· RFMD already uses silicon, GaAs, and SiGe in its processes, and decided to use InP instead of InGaP (or other alternatives) because it can provide a performance boost of several magnitudes. While InP will be incrementally more expensive now, we believe engaging high-volume designers (such as those for handset amplifiers) will accelerate the gap reduction. Again, our thesis is that one technology will not dominant but, rather, that successful companies offer the right price/performance mix to meet customers’ needs.
· In addition to high performance RFICs (mainly power amplifiers), RFMD intends to utilize InP for high data rate optical networking ICs (40Gbps+), such as laser drivers, TIAs, CDRs, and MUX/DeMUXs as the higher frequencies achieved with InP enable such high speeds. For wireless applications, RFMD stated that InP-based ICs have exhibited better design characteristics -lower thermals (heat) and
smaller designs -traits that play directly into RFMD’s strategy of integrating RFICs into smaller and more tightly packed modules.
· Although this announcement was expected, we are positive about its longer-term strategic implications for RFMD, and reiterate both our Strong Buy rating and $80 price target. |
