WARREN, N.J.-- Gallium-arsenide chip supplier Anadigics Inc. today announced its sales will be lower than expected in the second half of 2000 because a major cellular phone maker has postponed orders for GaAs devices due to a fire that stopped IC shipments from Philips Semiconductors earlier this year.
The adjustment in GaAs chip orders by LM Ericsson will create a revenue shortfall of 30-to-35% in the fourth quarter from Anadigics' current target of $51 million in the third quarter, said company managers.
"The outlook for 2001 continues to be strong with anticipated year-over-year growth in excess of 50%," said Bami Bastani, president and CEO of Anadigics. "We expect the inventory corrections to be completed by the end of this year and anticipate a return to double-digit sequential revenue and earnings growth in the first quarter 2001."
Ericsson recently notified Anadigics, along with other suppliers, that it was adjusting inventories for components and parts used in cell phones because of delays in receiving semiconductor products from Philips, which suffered a wafer fab fire in Albuquerque, N.M., last March. The fire, caused by a massive power failure in New Mexico, shut down Philips' 200-mm wafer-processing line inside the plant for more than a month, according to sources. The shutdown resulted in extensive delays in IC shipments to Ericsson.
Earlier this year, Ericsson officials in Sweden cited the Philips fire and plant shutdown while reporting an operating loss in its cellular phone business during the second quarter. But the impact of that fire is now being felt by other suppliers to Ericsson, which decided to adjust its inventory and orders for components in the second half of 2000.
During a conference call with analysts today, Anadigics chief executive Bastani said Ericsson has lowered its projections for cellular-phone shipments from the 60-to-65 million-unit range in 2000 to about 40-to-45 million handsets this year. Bastani told analysts that the magnitude of inventory adjustment and changes to orders was a surprise to Anadigics. He added that the adjustment will be completed by the end of the year and strong sequential growth rates are expected to continue in 2001.
"While our relationship with our No. 1 wireless customer Ericsson remains excellent, we continue to expand our wireless customer base with extensive HBT PA module and MMIC activities and we have realized HBT design wins in 3-volt GSM platforms," Bastani said. "Our broadband cable and fiber business continues to gain market share and add new customers. All of these activities meant to diversify our customer base, expand product content in our target markets, and grow our business are expected to have a positive impact on revenues beginning in 2001."
News of the expected revenue shortfall sent Anadigics' stock prices down by 16% to $25 per share in trading today on the Nasdaq exchange.
Two months ago, Anadigics reported sales of $47.5 million and a net income of $6.6 million in the second quarter, ended July 2. The company's sales had grown 10% sequentially from $43 million in the first quarter of this year.