LONDON — The prospects for European owned gallium arsenide (GaAs) device development and production changed significantly this month when RF Micro Devices (Greensboro, N.C.), the world's leading maker of GaAs RFICs, completed the acquisition of Filtronic's compound semiconductors division for £12.5 million (about $25 million).

The deal includes Filtronic's 6-inch GaAs wafer fabrication facility at Newton Aycliffe, England, by far Europe's largest compound semiconductor fab.

The price also includes the millimeterwave and microwave components business units which will be bolted on to RFMD's multi-market products division. The agreement also includes the new owner supplying Filtonic's only remaining point-to-point business * which focuses on transceiver modules and filters for backhaul microwave radios linking mobile basestations *with devices for at least three years.

Jerry Neal, one of the co-founders of RFMD and executive vice president of strategy, revealed to EE Times that instead of being shut, as was threatened for a while last year, the Newton Aycliffe operation would be expanded. RFMD is "postponing" its planned construction of a second six-inch GaAs fab at Greensboro that was to focus on high volume pHEMT and HBT based front-end devices for the cellular and Wireless LAN markets. RFMD announced last September that its plans for expansion would create 300 jobs in Greensboro.

"We will drastically slow down and temporarily halt construction of this fab, and see how the market develops before completing the facility," Neal said. He added: "We see this as a great opportunity for us here in Europe for developing and making both commercial and HF components using pHEMT technology, as well potentially increasing the military business as regulatory permissions permit in the U.K. and other European countries. There is not a great deal of GaAs manufacturing currently in Europe."

The mantle for being the biggest European-controlled GaAs components supplier now passes to United Monolithic Semiconductors, a Franco-German joint venture between Thales of France and EADS Deutschland, two aerospace, satellite and military focused corporations that, not surprisingly, design and make millimeter wave and RF components for these sectors and some parts for automotive applications. The venture has consolidated manufacturing to a plant in Ulm Germany while it maintains development and support functions there and at Orsay in France.

"It is a niche operation and we believe plans to remain targeting the military and sat-comms sectors that also has a strong relationship with Daimler in the automotive industry, and we believe it has revenues from its GaAs operations of between $40 to $50 million annually," Asif Anwar, director of the GaAs and compound semiconductor unit at market research group Strategy Analytics (Milton Keynes, England) told EE Times.

Second in the pecking order now for GaAs wafers is Ommic SA, the French group that focuses on pHEMT devices for wireless communications and optical networks. Last June, Philips Electronics sold its controlling stake in the unit to a French financial group, Financiere Victoire.

"The Filtronic-RFMD deal seems to be a win-win solution for both companies. The American group got a bargain deal and the opportunity to lower its cost structure and increase its GaAs capacity by about 30 percent at a stroke," said Anwar.

"It is a good clean break for Filtronic and its shareholders, but unfortunately, it does represent a sad and major retreat for European capability in the technology."

Filtronic announced in July 2007 it was looking to sell or close down the compound semis unit and the Newton Aycliffe facility, which was originally built in the 1990's by Fujitsu Semiconductor as a DRAM manufacturing plant. "With the current positive outlook for GaAs-based components, notably from the mobile handset and infrastructure business as well as the growing opportunities in wireless LANs, it would have been strange for Filtronic to close the operation. They have a very experienced workforce for designing parts and shutting the fab would have been a real shame," said Anwar.

Filtronic's actions surprised many since only a year earlier, in June 2006, the company said it would pump about £45 million (about $90 million) into expanding pHEMT manufacturing at the plant using part of the $340 million it had raised by selling its wireless infrastructure operations to another U.S. company, Powerwave Technologies.

Anwar said the prospects for GaAs devices are looking healthy for the next few years, with an estimated CAGR of 12 percent between 2006 and 2011, by when the market is expected to be worth $5 billion (see chart).

He added that while there would be a mix of process approaches for cellular handset front-ends, GaAs will dominate this function and would be used in a variety of modules, including PA filter modules and PA switch modules. And he sees huge potential for GaAs in the millimeter-wave markets, including military and satellite communications applications, as well as cellular backhaul, and it would remain the most cost-effective option for high-power, high-frequency applications.

The main players, he adds, will continue to be RFMD, Skyworks, TriQuint, Anadigics and Avago. Some of these , notably TriQuint, offer foundry services in addition to a range of GaAs devices, while a few pure-play foundries are beginning to emerge, led by Taiwanese group WIN Semiconductor.

This story appeared in the EE Times Europe print edition covering March 17 * April 6, 2008. European residents who wish to receive regular copies of EE Times Europe, subscribe here.

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