The proposed $1.6 billion all-stock merger between TriQuint Semiconductor Inc. and RF Micro Devices Inc. is expected to create a wireless component powerhouse capable of providing all of the critical RF building blocks required to simplify handset and equipment design.
TriQuint’s product portfolio consists of RF filters, including surface acoustic wave (SAW), temperature-compensated SAW (TC-SAW), and bulk acoustic wave (BAW) filters for a variety of wireless and network infrastructure applications, as well as switches and amplification products, while RF Micro (Greensboro, N.C.) offers power amplifiers, front-end modules, and other key parts for mobile devices.
RF Micro's RF1101 Antenna Tuning Module, in the Apple iPhone 5, as shown in this Chipworks image. However, according to Reuters, RF Micro counts Samsung as a big customer, whereas TriQuint is a big supplier to Apple. (Image source: Chipworks)
“We believe Triquint’s products and end markets are complementary to RFMD's cellular business,” which accounted for 83% of its 2013 fourth calendar quarter sales of $288.5 million, according to a report to investors from equity research firm JP Morgan, San Francisco.
Mobile, however, is just one of three target areas for the combined company, which also includes the infrastructure and defense sectors.
“By offering an end-to-end RF solution, we will make handset design simpler and more tightly integrated with higher performance. We will also enable the next-generation of communications infrastructure from high-speed 4G LT networks to the optical pass that connects them. Lastly, this merger of equals will scale our service to the defense industry,” according to Robert Bruggeworth, RF Micro’s chief executive, in a conference call with analysts. Bruggeworth will serve as the new entity’s chief executive.
Analysts were generally bullish about the RF Micro/TriQuint deal, reiterating that the merger will improve their scale and operating model and create a robust RF chip line. In the mobile sector, the new entity can “leverage its leading position with the three leading major constituents of the smartphone ecosystem, including Apple, Samsung, and the Chinese smartphone OEM market,” according to a note to investors from equity research firm Canaccord Genuity, Minneapolis.
It will also be well-positioned for long-term growth in the higher-margin defense & aerospace and network infrastructure businesses through its advanced GaN-based and optical product portfolios.
“In our non-mobile business -- we call the infrastructure and defense business -- we do see a very good joining of two businesses and we think we are launching today is a $500 million infrastructure business that is very attractive part of our portfolio," according to Ralph Quinsey, chief executive of TriQuint (Hillsboro, Ore.), who will serve as non-executive chairman of the combined company’s board of directors.
In addition to market synergies, the combined company will also benefit from scale advantages and operating cost efficiencies by sharing existing manufacturing strengths, adjusting their footprint and staffing levels, as well as reducing overlapping company expenses, Quinsey said.
The first year after the deal closes, the combined company will exit the year with $75 million of annualized cost savings, and another $75 million the second year, totaling $150 million, Quinsey said. The deal is expected to close in the second half of 2014.
— Ismini Scouras is a freelance writer for EE Times.