RF MICRO DEVICES INC, S-3/A, 1999-01-21

RF MICRO DEVICES INC
S-3/A, 1999-01-21
SEMICONDUCTORS & RELATED DEVICES

Previous: RANSON UNIT INVESTMENT TRUSTS SERIES 75, 487, 1999-01-21

Next: CASELLA WASTE SYSTEMS INC, 8-K, 1999-01-21

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 21, 1999

REGISTRATION NO. 333-69501

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 2

FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------

RF MICRO DEVICES, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
NORTH CAROLINA 3674 56-1733461
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

7625 THORNDIKE ROAD
GREENSBORO, NORTH CAROLINA 27409-9421
(336) 664-1233
(Address, including Zip Code, and telephone number, including area code, of
registrant's principal executive offices)

DAVID A. NORBURY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
RF MICRO DEVICES, INC.
7625 THORNDIKE ROAD
GREENSBORO, NORTH CAROLINA 27409-9421
(336) 664-1233
(Name, address, including Zip Code, and telephone number, including area code,
of agent for service)

COPIES TO:

<TABLE>
<S> <C>
JEFFREY C. HOWLAND DAVID SYLVESTER
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC HALE AND DORR LLP
1600 BB&T FINANCIAL CENTER 1455 PENNSYLVANIA AVENUE, N.W.
WINSTON-SALEM, NC 27101 WASHINGTON, D.C. 20004
(336) 721-3516 (202) 942-8400
</TABLE>

---------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to a dividend or interest reinvestment plan, please check the following
box. [ ]

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
- ---------------

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
- ---------------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(1)(2) FEE(3)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value........ 2,587,500 shares $62.75 $162,365,625 $33,470
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes 337,500 shares of Common Stock that may be purchased by the
Underwriters to cover over-allotments, if any.

(2) Estimated solely for purposes of calculating the registration fee with
respect to 287,500 additional shares of Common Stock being registered with
this Amendment No. 2, and based on the average of the high and low prices
for the Company's Common Stock as reported on the Nasdaq National Market on
January 19, 1999 in accordance with Rule 457(c) under the Securities Act of
1933.

(3) Upon the initial filing of the Registration Statement on December 22, 1998,
the Company paid $28,454 of the registration fee for the registration of
2,300,000 shares of Common Stock. Such portion of the registration fee was
calculated based on a Proposed Maximum Offering Price per Share of $44.50,
being the average of the high and low prices for the Company's Common Stock
as reported on the Nasdaq National Market on December 15, 1998, and a
Proposed Maximum Aggregate Offering Price of $102,350,000. Pursuant to Rule
457(a), no additional registration fee is being paid with respect to such
2,300,000 shares.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED JANUARY 20, 1999

2,250,000 Shares

(RF Micro Devices Logo)
Common Stock
------------------

Of the 2,250,000 shares of Common Stock offered, 2,000,000 shares are being sold
by RF Micro Devices, Inc. and 250,000 shares are being sold by TRW Inc. RF Micro
Devices will not receive any of the proceeds from the shares of Common Stock
sold by TRW.

RF Micro Devices Common Stock is traded on The Nasdaq National Market under the
symbol "RFMD." On January 19, 1999, the last reported sale price for the Common
Stock on The Nasdaq National Market was $62.75 per share.

INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" ON PAGE
6.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS PROCEEDS TO
PRICE TO AND RF MICRO PROCEEDS TO
PUBLIC COMMISSIONS DEVICES TRW
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Per Share............................................ $ $ $ $
Total (1)............................................ $ $ $ $
</TABLE>

(1) RF Micro Devices and TRW have granted the Underwriters an option,
exercisable for 30 days from the date of this prospectus, to purchase a
maximum of 337,500 additional shares to cover over-allotments of shares.

Delivery of the shares of Common Stock will be made on or about
, 1999, against payment in immediately available funds.

CREDIT SUISSE FIRST BOSTON
CIBC OPPENHEIMER
HAMBRECHT & QUIST
NATIONSBANC MONTGOMERY SECURITIES LLC
Prospectus dated , 1999
<PAGE> 3

Description of Foldout Facing Front Cover Page

The background of this graphic consists of a centered photograph of a
semiconductor wafer surrounded by a dark background on all sides except for a
lighter-colored area in the lower left quadrant. Printed in this lighter-colored
area is the logo of the Company, which consists of the letters "RF" in large
capitals and a stylized depiction of a radio signal being emitted immediately to
the right, with the words "MICRO DEVICES" in a smaller type stretching across
the length of the logo at the bottom. The words "A WORLD OF WIRELESS PRODUCTS"
appear in two lines in white lettering superimposed across the top of the
graphic. Superimposed on the photograph of the wafer are five smaller inset
photographs, each of which consists of a rectangular colored area with a white
border with the logo of the Company superimposed on the background and a
photograph of one of the Company's radio frequency integrated circuits ("RFIC").
The center of the graphic contains three of these inset photographs. The
photograph to the left shows a black rectangular RFIC, viewed from above, and
bearing the lettering "RFMD RF2302" in white. Immediately above this picture are
the words "3V Linear Gain Control Amplifier". The middle photograph shows a
black rectangular RFIC, viewed from above, and bearing the lettering "RFMD
RF2125" in white. Immediately above this picture are the words "PCS Linear Power
Amplifier" in white. The photograph to the right shows a black rectangular RFIC,
viewed from above, bearing the lettering "RFMD RF2119" in white. Immediately
above this picture are the words "High Efficiency 2V Amplifier" in white. The
bottom third of the graphic contains the remaining two inset photographs. The
photograph to the left shows a black rectangular RFIC, viewed from above,
bearing the lettering "RFMD 2619" in white. Immediately below this picture are
the words "3V CDMA Transit AGC Amplifier" in white. The photograph to the right
shows a black rectangular RFIC, viewed from above, bearing the lettering "RFMD
2608" in white. Immediately below this picture are the words "CDMA/FM
Upconverter" in white.

<PAGE> 4

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY....................... 4
RISK FACTORS............................. 6
USE OF PROCEEDS.......................... 14
DIVIDEND POLICY.......................... 14
PRICE RANGE OF COMMON STOCK.............. 14
CAPITALIZATION........................... 15
DILUTION................................. 15
SELECTED FINANCIAL DATA.................. 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................. 17
</TABLE>

<TABLE>
<CAPTION>
Page
----
<S> <C>
BUSINESS................................. 25
MANAGEMENT............................... 39
PRINCIPAL AND SELLING SHAREHOLDERS....... 41
UNDERWRITING............................. 42
NOTICE TO CANADIAN RESIDENTS............. 43
LEGAL MATTERS............................ 44
EXPERTS.................................. 44
ADDITIONAL INFORMATION................... 44
INDEX TO FINANCIAL STATEMENTS............ F-1
</TABLE>

------------------

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY BE ACCURATE ONLY
ON THE DATE OF THIS DOCUMENT.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents that we have filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), are incorporated in this Prospectus by
reference: (i) our Annual Report on Form 10-K for the fiscal year ended March
28, 1998; (ii) our Quarterly Reports on Form 10-Q for the quarters ended June
27, 1998 and September 26, 1998; (iii) our Current Report on Form 8-K dated
January 11, 1999; (iv) our Definitive Proxy Statement dated June 26, 1998, and
(v) the description of our Common Stock contained in our Registration Statement
on Form 8-A filed under Section 12 of the Exchange Act, including any amendment
or report updating such description.

Each document that we file according to Sections 13(a), 13(c), 14 and 15(d)
of the Exchange Act after the date of this Prospectus and before the termination
of this offering is incorporated by reference into this Prospectus and is a part
of it from the date of filing of the document (all such documents, and the
documents listed above, "Incorporated Documents").

If any statement in this Prospectus is inconsistent with any statement in
any Incorporated Document, the statement in this Prospectus is the statement
that you should consider. Information contained on our Website is not a part of
this Prospectus.

We will provide without charge to each person to whom a copy of this
Prospectus is delivered, including any beneficial owner, upon the written or
oral request of such person, a copy of any or all of the Incorporated Documents,
other than exhibits to such documents unless such exhibits are specifically
incorporated by reference therein. Requests for such copies should be directed
to RF Micro Devices, Inc., 7625 Thorndike Road, Greensboro, North Carolina
27409, Attention: Investor Relations (telephone 336-664-1233). The information
relating to us contained in this Prospectus does not purport to be comprehensive
and should be read together with the information contained in the Incorporated
Documents.

FORWARD-LOOKING STATEMENTS

This Prospectus and the Incorporated Documents contain forward-looking
statements that have been made pursuant to the provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements are not
historical facts, but rather are based on current expectations, estimates and
projections about our industry, our management's beliefs and assumptions made by
our management. Words such as "anticipates," "expects,"

2
<PAGE> 5

"intends," "plans," "believes," "seeks," "estimates" and variations of such
words and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and other factors, some of which are
beyond our control, that are difficult to predict and could cause actual results
to differ materially from those expressed or forecasted in the forward-looking
statements. These risks and uncertainties include those described in "Risk
Factors" and elsewhere in this Prospectus and in the Incorporated Documents. We
caution readers not to place undue reliance on these forward-looking statements,
which reflect our management's view only as of the date of this Prospectus. We
undertake no obligation to update such statements or publicly release the result
of any revisions to these forward-looking statements that we may make to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

RF Micro Devices(R), the RF Micro Devices logo and Optimum Technology
Matching(R) are registered trademarks of the Company. This Prospectus may
contain certain other trademarks and service marks of other parties.

3
<PAGE> 6

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding our Company and the Common Stock being sold in this
offering and our financial statements and accompanying notes that appear
elsewhere in this Prospectus.

COMPANY OVERVIEW

We design, develop, manufacture and market radio frequency integrated
circuits, or RFICs, for rapidly growing wireless communications products and
applications. Our products are included in cellular and PCS phones, cordless
phones, wireless local area networks, wireless local loop handsets, industrial
radios, wireless security systems and remote meter readers. The majority of our
revenue is derived from sales of RFICs designed for cellular and PCS phones.

We offer a broad array of products -- including amplifiers, mixers,
modulators/demodulators and single chip transmitters, receivers and
transceivers -- that represent a substantial majority of the RFICs required in
wireless subscriber equipment. These RFICs perform the transmit and receive
functions that are critical to a phone's performance.

We currently design products using two different kinds of semiconductor
wafer starting material: silicon and gallium arsenide, or GaAs. As a
semiconductor substrate, GaAs generally offers better performance, while silicon
is generally less expensive. Original equipment manufacturers, or OEMs, are
primarily concerned about performance and cost. Designing products using both
substrates allows us to offer our customers products that fulfill their
performance, cost and time-to-market requirements. We call this business
approach Optimum Technology Matching(R).

We design most of our GaAs products using a type of transistor called a
heterojunction bipolar transistor or HBT. We believe that our GaAs HBT RFICs
have the following advantages:

- Linearity: GaAs HBT RFICs exhibit good linearity, which means they
can amplify weak signals with minimal signal distortion. As a result, our
customers can design phones with clearer reception.

- Efficiency: Our GaAs HBT RFICs are efficient, which means they use
less power than competing products to transmit the same signal strength. As
a result, our customers can design phones with improved battery life and
increased talk time.
- Size: Because our GaAs HBT RFICs are small they are relatively
inexpensive to manufacture. As a result, our customers can design small,
low-cost phones.

Because of the importance of design to many of our parts and the strength
of our GaAs HBT technology, we are a single-sourced supplier to many customers.
Our products are purchased by leading OEMs such as Nokia Mobile Phones Ltd., LG
Information & Communications, Ltd., Hyundai Electronics Industries Co. Ltd.,
Samsung Electronics Co., Ltd and Motorola, Inc.

TRW Inc., which is our largest shareholder, has granted us a license (in
exchange for our Common Stock it now owns) to use its GaAs HBT process to design
and manufacture products for commercial wireless applications. TRW manufactured
all of our GaAs HBT products until September 1998. We recently began
manufacturing GaAs HBT products under this license at our new manufacturing
facility, but we will continue to purchase GaAs HBT products from TRW at least
until December 31, 2000. As of September 30, 1998, TRW owned 5.6 million shares
or about 32.6% of our diluted shares. TRW is selling 250,000 shares as a part of
this offering.

We were incorporated as a North Carolina corporation in 1991. Our principal
executive offices are located at 7625 Thorndike Road, Greensboro, North
Carolina, 27409-9421, and our telephone number is (336) 664-1233.

4
<PAGE> 7

THE OFFERING

Common Stock offered by the Company..... 2,000,000 shares

Common Stock offered by TRW............. 250,000 shares

Common Stock to be outstanding after the
offering................................ 19,234,705 shares(1)

Use of proceeds......................... To complete the second phase of the
Company's wafer fabrication
facility and for working capital
and general corporate purposes.
Nasdaq National Market symbol........... RFMD

SUMMARY FINANCIAL DATA(2)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
--------------------------- -----------------
1996 1997 1998 1997 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................... $ 9,515 $28,802 $45,350 $19,393 $54,856
Income (loss) from operations.............................. (5,244) 1,647 (1,405) 1,373 4,876
Net income (loss).......................................... $(5,188) $ 1,652 $ (523) $ 1,990 $ 4,027
Net earnings (loss) per common share, diluted.............. $ (8.87) $ 0.15 $ (0.04) $ 0.12 $ 0.23
Weighted average shares of Common Stock
outstanding, diluted(3).................................. 585 11,215 13,509 15,492 17,200
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
-------------------------
ACTUAL AS ADJUSTED(4)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 16,844 $135,148
Working capital............................................. 35,234 153,538
Total assets................................................ 121,213 239,517
Long-term debt.............................................. 16,700 16,700
Shareholders' equity........................................ 80,851 199,155
</TABLE>

- ---------------

(1) Based on shares outstanding as of December 26, 1998 (assuming no exercise of
options after December 26, 1998). Excludes (i) 2,378,450 shares of Common
Stock reserved for issuance pursuant to the Company's employee benefits
plans, under which options to purchase 1,660,198 shares of Common Stock were
outstanding as of December 26, 1998 and (ii) 41,322 shares of Common Stock
reserved for issuance pursuant to a warrant with an exercise price of $9.00
per share issued in connection with a financing transaction.

(2) The Company uses a 52 or 53 week fiscal year ending on the Saturday closest
to March 31 of each year. Each of the 1996, 1997 and 1998 fiscal years was a
52 week year. The Company's other fiscal quarters end on the Saturday
closest to June 30, September 30 and December 31 of each year. For purposes
of this Prospectus (including the Financial Statements and accompanying
Notes), each fiscal year is described as having ended on March 31 and each
of the first three quarters of each fiscal year is described as having ended
on June 30, September 30 and December 31.
(3) See Note 8 of Notes to Financial Statements for an explanation of the
weighted average shares of Common Stock outstanding used to compute net
earnings (loss) per share.

(4) Reflects the sale of 2,000,000 shares of Common Stock offered by the Company
at an assumed public offering price of $62.75 per share, after deducting the
underwriting discount and estimated offering costs payable by the Company.

RECENT DEVELOPMENTS

On January 19, 1999, we announced results for the third quarter of fiscal
1999. Our revenue for the quarter ending December 31, 1998 was $41.5 million. We
attribute the increased revenue primarily to growth in demand for our GaAs HBT
products, particularly three-volt power amplifiers, and greater than anticipated
wafer availability from our fabrication facility, which has allowed us to
satisfy more of this demand. Unforecasted shipments of a range of silicon and
GaAs HBT products to our Korean customers also contributed to the increased
revenue. We also announced that our gross margin for the third quarter was
35.1%, which is higher than the previous quarter's margin of 31%. The primary
factors contributing to the improved margin were the increased revenue and the
lower costs associated with the four-inch GaAs HBT wafers that we are producing
in our fabrication facility. We also announced that our net income for the
quarter was $5.6 million, or $0.31 per share based on 18.2 million diluted
shares.

On January 11, 1999, we announced that we have expanded our relationship
with IBM to add access to IBM's silicon germanium foundry services. We also
announced that we have begun negotiation of definitive agreements with IBM to
cover this expanding relationship. We cannot be sure, however, that we will
successfully negotiate and enter into these agreements or that we will
successfully further expand our relationship with IBM.

---------------------

Unless otherwise indicated, the information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option.
5
<PAGE> 8

RISK FACTORS

You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones we face. Additional risks and uncertainties not presently known to us
or that we currently deem immaterial may also impair our business operations.

If any of the following risks actually occurs, our business, financial
condition or results of future operations could be materially and adversely
affected. In such case, the trading price of our Common Stock could decline, and
you may lose all or part of your investment.

This Prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
Prospectus.

OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY AND WE MAY NOT BE ABLE TO MAINTAIN
OUR EXISTING GROWTH RATE.

Our revenue, earnings and other operating results have fluctuated
significantly in the past and may fluctuate significantly in the future.
Although we have had significant revenue and earnings growth in recent quarters,
we may not be able to sustain these growth rates. Our future operating results
will depend on many factors, including the following:

- our ability to design, manufacture and deliver our products in a timely
and cost-effective manner;

- our ability to design, manufacture and deliver our products in large
enough volumes to satisfy our customers' requirements;

- the ability of our third party foundries and assemblers to manufacture
and assemble our products in a timely and cost-effective
manner that meets our customers' requirements;

- unexpected poor line, assembly or test yields for our products;

- our ability to expand our production of GaAs HBT wafers at our wafer
fabrication facility;

- demand for our products;

- demand for our customers' products;

- competition; and

- general industry and global economic conditions.

It is likely that our future operating results will be adversely affected
by these or other factors. If our future operating results are below the
expectations of stock market analysts or our investors, our stock price may
decline.

WE DEPEND ON A FEW LARGE CUSTOMERS.

Historically, a substantial portion of our revenue has come from large
purchases by a small number of customers. We expect that trend to continue. For
example, for fiscal 1998 our top five customers accounted for 70% of our total
revenue and for the first six months of fiscal 1999 ended September 30, 1998 our
top five customers accounted for 88% of our total revenue. Accordingly, our
future operating results depend on the success of our largest customers and on
our success in selling large quantities of our products to them.

The identity of our largest customers has varied significantly from year to
year. In the first six months of fiscal 1999, sales to Nokia accounted for 75%
of our revenue. In fiscal 1998, sales to Nokia accounted for 42% and sales to
LGIC accounted for 13% of our revenue. In fiscal 1997, sales to Qualcomm
Incorporated accounted for 32% and sales to Samsung accounted for 23% of our
revenue.

We typically manufacture custom products on an exclusive basis for one
customer for a negotiated period of time. This factor, along with capacity
constraints, makes it difficult for us to diversify our customer base. The
concentration of our revenues with a few large customers makes us particularly
dependent on factors affecting those customers. For example, if demand for their
products decreases, they may stop purchasing our products and our operating
results will suffer. Most of our customers can cease incorporating our products
into their products with little notice to us and with little or no penalty. If
we lose a large customer and fail to add new customers to replace lost revenue,
our operating results will not recover.

6
<PAGE> 9

OUR WAFER FABRICATION FACILITY IS CRITICAL TO OUR BUSINESS.

In June 1998, we completed the first phase of our 64,000 square foot GaAs
HBT wafer fabrication facility located in Greensboro, North Carolina. This
facility is crucial to our strategy of expanding our GaAs HBT manufacturing
capacity in order to meet demand for our GaAs HBT products.

In September 1998, we began commercial shipments of products from our
facility and we expect that production from the facility will gradually increase
throughout the remainder of fiscal 1999 and into fiscal 2000. In order to
increase production at this facility, we must qualify each new RFIC design with
our customers. As parts are brought into production, we must maintain and
improve our line yields, assembly yields and test yields in order to reach our
manufacturing goals. A number of factors will affect the future success of this
facility, including the following:

- our ability to qualify new products in a timely manner;

- demand for our products;

- our production yields;

- our ability to generate revenues in amounts that cover the significant
fixed costs of operating a wafer fabrication facility;

- our limited experience in high volume manufacturing of GaAs HBT products;

- our ability to hire, train and manage qualified production personnel;

- our compliance with applicable environmental and other laws and
regulations; and

- our inability to use all or any significant portion of our facility for
prolonged periods of time for any reason. For example, a recent small
fire at our facility caused by a chemical reaction damaged a piece of
processing equipment. Fortunately, this did not affect our production.

We are currently in the process of the second phase of construction of our
wafer fabrication facility. The second phase involves expansion of wafer
fabrication and starting material production capacity. This phase is budgeted at
about $40 million and includes about 6,000 square foot expansion to our clean
room and the installation of additional production equipment. We intend to fund
substantially all the remaining costs of this phase with the proceeds from this
offering. Our second phase expansion project is currently expected to be
completed between December 1999 and July 2000, depending on demand for our
products. Construction activities like these are subject to a number of risks,
including the following:

- unforeseen environmental or engineering problems;

- unavailability or late delivery of process equipment;

- work stoppages and delays; and

- delays in bringing production equipment on-line.

These and other risks may adversely affect the ultimate cost of this
project and when it is completed.

IF WE EXPERIENCE POOR PRODUCTION YIELDS, OUR OPERATING RESULTS MAY SUFFER.

Our integrated circuit products, especially our GaAs HBT products, are very
complex. Each product has a unique design and each product is fabricated using
semiconductor process technologies that are highly complex. In many cases, the
products are assembled in customized packages. Our customers incorporate our
RFICs into high volume products such as cellular and PCS handsets and they
insist that our products meet their exact specifications for quality,
performance and reliability.

Our products are manufactured on round GaAs or silicon substrates, or
starting material, called wafers. Before our products can be used by our
customers, the wafers must be processed and cut or sawed into individual die.
The die must then be assembled, or packaged, and then the final product must be
tested.

Our manufacturing yield is a combination of:

- line yield, which is the number of usable wafers that result from our
fabrication process;

- assembly yield, which is the number of assembled parts we actually
receive from the packaging house divided by the number of die available
on the wafer; and

7
<PAGE> 10

- test yield, which is the number of assembled parts that pass all
component level testing divided by the total number of parts tested.

Our customers also test our RFICs once they have been assembled into their
products. The number of usable RFICs that result from our production process can
fluctuate as a result of many factors, including the following:

- design errors;

- defects in photomasks used to print circuits on a wafer;

- minute impurities in materials used;

- contamination of the manufacturing
environment;

- equipment failure or variations in the fabrication process;

- losses from broken wafers or other human error; and

- defects in packaging.

Because average selling prices for our products tend to decline over time
and because many of our manufacturing costs are fixed, we are constantly trying
to improve our manufacturing yields. For a given level of sales, when our yields
improve, our gross margins improve and when our yields decrease, our unit costs
are higher, our margins are lower, and our operating results are adversely
affected.

In the past, we have experienced difficulties in achieving acceptable
yields on certain new products, and this has adversely affected our gross
margins and our operating results. For example, during the fourth quarter of
fiscal 1998, we took an unexpected charge of about $4.6 million to cover
defective products that had packaging-related problems. We may experience
similar problems in the future and we cannot predict when they may occur or
their severity. These problems could significantly affect our future operating
results.

OUR OPERATING RESULTS ARE SUBSTANTIALLY DEPENDENT ON DEMAND FOR OUR GaAs HBT
PRODUCTS.

Although we design products using three distinct process technologies, a
substantial portion of our revenue comes from the sale of GaAs HBT products. For
example, for the three months ended September 30, 1998, 89.2% of our revenue
came from the sale of GaAs HBT products. We currently expect that this process
concentration will continue.

Our dependence on GaAs HBT products could ultimately hurt our operating
results in the future. Competitors could enter the market and offer their own
GaAs HBT products, which would adversely affect our selling prices. Also, new
process technologies could be developed that have characteristics that are
superior to GaAs HBT. These and other factors could reduce the demand for GaAs
HBT components or otherwise adversely affect our operating results.

OUR OPERATING RESULTS ARE SUBSTANTIALLY DEPENDENT ON DEVELOPMENT OF NEW
PRODUCTS.

Our future success will depend on our ability to develop new RFIC solutions
for existing and new markets. We must introduce new products in a timely and
cost-effective manner and we must secure production orders from our customers.
The development of new RFICs is a highly complex process, and we have
experienced delays in completing the development and introduction of new
products at times in the past. Our successful product development depends on a
number of factors, including the following:

- the accuracy of our prediction of market requirements and evolving
standards;

- acceptance of our new product designs;

- the availability of qualified RFIC designers;

- our timely completion of product designs; and

- acceptance of our customers' products by the market.

We may not be able to design and introduce new products in a timely or
cost-efficient manner and our new products may fail to meet the requirements of
the market or our customers. In that case, we likely will not reach the expected
level of production orders, which could adversely affect our operating results.
Even when a design win is achieved, our success is not assured. Design wins
require significant expenditures by us and typically precede volume revenues by
six to nine months or more. The actual value of a design win to us will
ultimately depend on the commercial success of our customers' products.

8
<PAGE> 11

WE DEPEND ON TRW FOR GaAs HBT WAFERS AND TECHNOLOGY.

Although we have commenced commercial production of GaAs HBT products at
our own facility, we continue to rely heavily on TRW as a supplier for GaAs HBT
wafers. Before September 1998, all of our GaAs HBT products were fabricated at
TRW's facility. For the three months ended September 30, 1998, $28.0 million of
our revenue came from the sale of GaAs HBT products, but only $4.4 million of
our revenue was attributable to products produced at our facility.

TRW has agreed to supply to us, and we have agreed to buy from TRW, certain
minimum quantities of GaAs HBT wafers. These obligations continue until December
31, 2000. We are currently purchasing quantities of wafers from TRW in excess of
the amounts they are required to supply us. While we currently expect that our
purchases from TRW will decline to the minimum required levels over the
remaining two years of the supply agreement, these levels are significant and we
will continue to rely on TRW as a key supplier of GaAs HBT wafers. If TRW is
unable to manufacture and deliver to us wafers in the quantities we need on a
timely basis, our operating results will be adversely affected.

We depend on our exclusive license from TRW for its GaAs HBT technology. If
the license is terminated or if it were determined that this technology
infringed on a third party's intellectual property rights, our operating results
would be adversely affected. TRW made no representation to us about whether the
licensed technology infringed on the intellectual property rights of anyone
else. Also, TRW has the right to convert our exclusive license to a
non-exclusive license if we fail to meet certain revenue goals. If we fail to
meet these goals, our operating results could be adversely affected.

WE FACE CHALLENGES MANAGING RAPID GROWTH.

We are experiencing a period of significant growth that will continue to
place a great strain on our management and other resources. We have grown from
131 employees on March 31, 1997 to 348 employees on December 1, 1998. To manage
our growth effectively, we must:

- implement and improve operational and financial systems;

- train and manage our employee base; and

- attract qualified people with experience in RF engineering, integrated
circuit design, wafer fabrication, wireless systems and technical marketing and
support.

Competition for these people is intense. We must also manage multiple
relationships with various customers, business partners and other third parties,
such as our foundry and assembly partners. Moreover, we will spend substantial
amounts in connection with our rapid growth and may have additional unexpected
costs. Our systems, procedures or controls may not be adequate to support our
operations and we may not be able to expand quickly enough to exploit potential
market opportunities. Our future operating results will also depend on expanding
sales and marketing, research and development and administrative support. If we
cannot attract qualified people or manage growth effectively, our operating
results will be adversely affected.

WE DEPEND HEAVILY ON OUR RELATIONSHIP WITH NOKIA.

We have agreed in principle with TRW and Nokia to cooperate to develop and
supply Nokia with RFICs manufactured using TRW's GaAs HBT processes. The
arrangement contemplates that we will negotiate separate agreements with Nokia
for each component. Also, we have agreed to give Nokia access to some of our
RFIC technologies and to our GaAs HBT wafer fabrication facility, and Nokia has
agreed to give us rights to bid for and supply Nokia's needs for certain RFICs.

Under the separate agreements resulting from our arrangement with Nokia, we
have developed a number of RFICs and supplied them to Nokia in commercial
quantities. In fiscal 1998, sales to Nokia were about $19 million, or 42% of our
revenue. In the first six months of fiscal 1999, Nokia sales were about $41
million, or 75% of our revenue.

Our arrangement with Nokia and TRW can be ended without penalty by any of
the parties for any reason. The arrangement does not obligate Nokia to purchase
any additional products from us, and we cannot be sure that Nokia will remain a
significant customer or that our relationship will continue. The loss of Nokia
as a customer for any reason will have a material adverse effect on our
operating results.
9
<PAGE> 12

WE HAVE A LIMITED OPERATING HISTORY AND HAVE HAD OPERATING LOSSES.

We were incorporated in 1991 and were in the development stage through the
year ended March 31, 1995. We had net losses totaling about $14.4 million from
the period of inception through fiscal 1996, profits of $1.7 million in fiscal
1997, a net loss of $0.5 million in fiscal 1998 and profits of $4.0 million in
the first half of fiscal 1999. We expect to spend substantial additional amounts
to continue developing our fabrication facility and expanding our operations and
to design and develop new products. Given our history of annual and quarterly
operating losses, our planned expansion, our dependence on other parties and the
difficulty of predicting demand for our products, among other factors, we cannot
be sure that we will sustain profitability.

WE DEPEND HEAVILY ON THIRD PARTIES.

Until September 1998, all of our products were manufactured by other
companies, and we expect to continue to rely heavily on third parties in the
future. We buy a significant portion of our GaAs HBT products from TRW, which we
believe is one of only two suppliers of commercial quantities of GaAs HBT
wafers. We also use two independent foundries to manufacture our silicon-based
products and one independent foundry to manufacture our GaAs MESFET products.
The foundry that supplies our GaAs MESFET products is owned and operated by one
of our competitors. Access to other foundries for GaAs products could be
particularly difficult to obtain.

We will remain dependent on a small number of independent foundries to
manufacture our products on a timely basis, to achieve acceptable manufacturing
yields and to offer us competitive pricing. If these independent foundries
cannot deliver our products on a timely basis, allocate us sufficient
manufacturing capacity, achieve acceptable yields or offer us competitive
pricing, it would have a material adverse effect on our operating results. We
cannot be sure that we would be able to locate other foundries to make our
products if we lost any of these sources of supply.

We use independent vendors to package all of our integrated circuits. We
have had packaging quality problems with some of these vendors, especially with
GaAs HBT products. We took a non-recurring charge in the last quarter of fiscal
1998 of about $4.6 million to cover product returns and the establishment of
inventory reserves for products with packaging-related problems. During fiscal
1998, we also discovered quality problems with parts packaged by a second vendor
and stopped using that vendor. It is likely we will have more packaging problems
in the future. A delay or reduction in product shipments or unexpected product
returns because of these problems could have an adverse effect on our operating
results.

WE OPERATE IN A VERY COMPETITIVE INDUSTRY.

Competition in the markets for our products is intense. We compete with
several companies primarily engaged in the business of designing, manufacturing
and selling RFICs, as well as suppliers of discrete products such as
transistors, capacitors and resistors. At least one of our competitors has GaAs
HBT technology and other companies are developing new fabrication processes. In
addition, many of our existing and potential customers manufacture or assemble
wireless communications devices and have substantial in-house technological
capabilities. Any of them could develop products that compete with or replace
ours. If one of our large customers decided to design and manufacture integrated
circuits internally, it could have an adverse effect on our operating results.

We expect competition to increase. This could mean lower prices for our
products, reduced demand for our products and a corresponding reduction in our
ability to recover development, engineering and manufacturing costs. Any of
these developments would have an adverse effect on our operating results.

Many of our existing and potential competitors have entrenched market
positions, considerable internal manufacturing capacity, established
intellectual property rights and substantial technological capabilities. Many of
our existing and potential competitors, including Anadigics, Inc., Conexant
Systems, Inc. (a subsidiary of Rockwell International Corp.), Fujitsu Limited,
Hewlett-Packard Company, Hitachi, Ltd., Motorola, NEC Corp., Phillips N.V.,
Raytheon Company, Siemens A.G. and Triquint Semiconductor, Inc., have greater
financial, technical, manufacturing and marketing resources than we do. We
cannot be sure that we will be able to compete successfully with our
competitors.

10
<PAGE> 13

OUR INDUSTRY'S TECHNOLOGY CHANGES RAPIDLY AND WE DEPEND ON DEVELOPMENT AND
GROWTH OF WIRELESS MARKETS.

We depend on the development and growth of markets for wireless
communications products and services, including cellular and PCS telephony,
wireless LANs, wireless security systems and other wireless applications. We
cannot be sure about the rate at which markets for these products will develop
or our ability to produce competitive products for these markets as they
develop.

We supply RFICs almost exclusively for wireless applications. The wireless
markets are characterized by frequent introduction of new products and services
in response to evolving product and process technologies and consumer demand for
greater functionality, lower costs, smaller products and better performance. As
a result, we have experienced and will continue to experience some product
design obsolescence. We expect our customers' demands for improvements in
product performance will increase, which means that we must continue to improve
our product designs and develop new products using new wafer fabrication
technologies.

For example, we are currently developing products that combine one or more
integrated circuits with one or more passive components, such as filters and
resistors, into a stand-alone modular package. This development effort presents
many technical challenges and if we are unsuccessful, our operating results
could be adversely affected.

It is likely that a competing process technology will emerge that permits
the fabrication of integrated circuits that are superior to the RFICs we make
under existing processes. If that happens and we cannot design products using
that technology or develop competitive products, our operating results will be
adversely affected.

WE DEPEND HEAVILY ON KEY PERSONNEL.

Our success depends in part on keeping key technical, marketing, sales and
management personnel. We do not have employment agreements with any of our
employees. We must also continue to attract qualified personnel. The competition
for qualified personnel is intense, and the number of people with experience,
particularly in RF engineering, integrated circuit design, wafer fabrication,
wireless systems and technical marketing and support, is limited. We cannot be
sure that we will be able to attract and retain other skilled personnel in the
future.

WE ARE SUBJECT TO RISKS FROM INTERNATIONAL SALES AND OPERATIONS.

Sales to customers in Korea accounted for about 21.3% of our revenue in
fiscal 1998 and about 12.1% of our revenue in the first half of fiscal 1999. As
a result of the recent economic instability in Asia, sales to our customers in
Korea in fiscal 1999 initially declined. Recently, we have experienced an
increase in orders from customers in Korea. We believe this market remains
unstable and we cannot predict whether that trend will continue or reverse. We
also cannot predict whether the turmoil in Asian economies will spread to other
parts of the world.

Sales to customers located outside the United States accounted for about
24% of our revenue in fiscal 1996, about 42% of our revenue in fiscal 1997,
about 50% of our revenue in fiscal 1998 and about 60% of our revenue in the
first half of fiscal 1999. We expect that revenue from international sales will
continue to be a significant part of our total revenue. International sales are
subject to a variety of risks, including risks arising from currency
fluctuations and restrictions, tariffs, trade barriers, taxes and export license
requirements. Because all of our foreign sales are denominated in U.S. dollars,
our products become less price competitive in countries with currencies that are
low or are declining in value against the U.S. dollar. Also, we cannot be sure
that our international customers will continue to accept orders denominated in
U.S. dollars. If they do not, our reported revenue and earnings will become more
directly subject to foreign exchange fluctuations. See Note 2 of Notes to
Financial Statements.

All but one of our circuit assembly vendors are located in Asia. This
subjects us to regulatory, geopolitical and other risks of conducting business
outside the United States. We do business with our foreign assemblers in U.S.
dollars. Our assembly costs increase in countries with currencies that are
increasing in value against the U.S. dollar. Also, we cannot be sure that our
international assemblers will continue to accept orders denominated in U.S.
dollars. If they do not, our costs will become more directly subject to foreign
exchange fluctuations.

11
<PAGE> 14

WE RELY ON INTELLECTUAL PROPERTY AND COULD FACE CLAIMS OF INFRINGEMENT.

Our success depends in part on our ability to obtain patents, trademarks
and copyrights, maintain trade secret protection and operate our business
without infringing on the proprietary rights of other parties.

Although there are no pending lawsuits against us or notices that we are
infringing anyone's intellectual property rights, we could be notified in the
future that TRW or we are infringing someone's intellectual property rights. We
cannot be sure that we could obtain licenses on commercially reasonable terms or
that litigation would not occur if there were any infringement. If we were
unable to obtain necessary licenses or if litigation arose out of infringement
claims, our operating results could be adversely affected.

In addition to patent and copyright protection, we also rely on trade
secrets, technical know-how and other unpatented proprietary information
relating to our product development and manufacturing activities. We try to
protect this information with confidentiality agreements with our employees and
other parties. We cannot be sure that these agreements will not be breached,
that we would have adequate remedies for any breach or that our trade secrets
and proprietary know-how will not otherwise become known or independently
discovered by others.

WE ARE SUBJECT TO STRINGENT ENVIRONMENTAL REGULATION.

We are subject to a variety of federal, state and local requirements
governing the protection of the environment. These environmental regulations
include those related to the use, storage, handling, discharge and disposal of
toxic or otherwise hazardous materials used in our manufacturing processes.
Because the public is focusing more attention on the environmental impact of the
operations of the semiconductor industry, these requirements may become more
stringent in the future. Failure to comply with environmental laws could subject
us to substantial liability or force us to significantly change our
manufacturing operations. In addition, under some of these laws and regulations,
we could be held financially responsible for remedial measures if our properties
are contaminated, even if we did not cause the contamination.

WE FACE RISKS CONCERNING YEAR 2000 ISSUES.

We have evaluated all of our internal software and current products against
Year 2000 concerns, and we believe that our products and business will not be
substantially affected by the advent of the year 2000 and that we have no
significant exposure to liabilities related to the Year 2000 issue for the
products we have sold.

TRW AND OUR MANAGEMENT ARE CONTROLLING SHAREHOLDERS

After this offering, our directors and executive officers and their
affiliates (including TRW) will beneficially own about 32.9% of the Common
Stock. TRW, our largest shareholder, will beneficially own about 28.3% of the
Common Stock. These shareholders thus can exercise significant influence over
all matters requiring shareholder approval, including the election of directors
and approval of significant corporate transactions.

TRW has agreed to refrain until June 6, 2002 from taking certain actions
affecting control over us. If a third party offers to acquire all of our stock,
however, TRW will have 30 days to make a counterproposal on the same or better
terms and could have the proposal submitted to our shareholders. This right
could discourage a third party from offering to acquire all of our outstanding
shares.

OUR STOCK PRICE IS SUBJECT TO VOLATILITY.

The trading price of our Common Stock could be subject to wide fluctuations
in response to quarterly variations in operating results, adverse business
developments, changes in financial estimates by securities analysts,
announcements of technological innovations, new products by us or our
competitors and other events and factors. Since

12
<PAGE> 15

completion of our public offering in June 1997, our
stock price has fluctuated widely. Between July 16, 1997 and December 29, 1997,
for example, the price of our stock fell from $23.125 to $10.50, and, since
September 30, 1998 the price of our stock increased from $18.125 to $62.75.
Also, the stock market has experienced extreme price and volume fluctuations
based on factors outside our control that have particularly affected the market
prices for many high technology companies. These broad market fluctuations may
materially and adversely affect the market price of our Common Stock.

FUTURE SALES OF SHARES COULD HAVE AN ADVERSE EFFECT ON MARKET PRICE.

If our shareholders sell large amounts of our Common Stock, including
shares issued on the exercise of outstanding options, in the public market after
this offering, the market price of the stock could fall. Sales also might make
it more difficult for us to sell equity or equity-related securities in the
future at a time and price we deem appropriate. After this offering, we will
have outstanding 19,234,705 shares of Common Stock (based upon 17,234,705 shares
outstanding on December 26, 1998), assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options after December 26,
1998. Of these shares, the 2,250,000 shares sold in this offering, together with
10,816,584 of the currently outstanding shares, are freely tradeable. Of the
remaining 6,168,121 shares, 6,101,175 shares, which are held by TRW and our
officers and directors, are subject to Rule 144 of the Securities Act of 1933,
as amended, and may not be sold for 90 days after the date of this prospectus
without the consent of the underwriters of this offering. The remaining 66,946
shares will not become eligible for sale under Rule 144 until March 4, 1999.
These numbers do not include options to purchase 1,660,198 shares of Common
Stock that were outstanding at December 26, 1998.

13
<PAGE> 16

USE OF PROCEEDS

The net proceeds to the Company from its sale of the 2,000,000 shares of
Common Stock are approximately $118.3 million at an assumed public offering
price of $62.75 per share (approximately $136.1 million if the Underwriters'
over-allotment option is exercised in full), after deducting the underwriting
discount and estimated offering expenses payable by the Company.

The Company expects to use approximately $40 million of the net proceeds of
the offering to complete the second phase of its wafer fabrication facility. The
remainder will be used for general corporate purposes, including working
capital. A portion of the net proceeds may also be used to acquire or invest in
complementary businesses. Although the Company from time to time evaluates
potential acquisitions of such businesses and anticipates continuing to make
such evaluations, the Company has no present understandings, commitments or
agreements with respect to any acquisition of another business. Pending such
uses, the proceeds will be invested in short-term interest-bearing securities
and debt instruments in compliance with the Company's investment policy. The
Company will not receive any proceeds from the sale of shares by TRW.

DIVIDEND POLICY

The Company has never paid or declared any cash dividends. The Company
currently expects to retain future earnings, if any, to finance the growth and
development of its business and, therefore, does not anticipate paying cash
dividends in the foreseeable future. Under the terms of its credit facility with
Silicon Valley Bank, the Company is prohibited from paying any dividends or
making any other distributions or payments on account of, or in redemption,
retirement or purchase of, any of its capital stock.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock commenced trading on the Nasdaq National Market
on June 3, 1997 and is traded under the symbol "RFMD." The following table sets
forth the high and low sales prices of the Common Stock as reported by the
Nasdaq National Market.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1997
Second Quarter (from June 3, 1997)........................ $19.13 $14.50
Third Quarter............................................. 23.75 13.75
Fourth Quarter............................................ 19.00 10.13
1998
First Quarter............................................. $16.94 $ 9.75
Second Quarter............................................ 16.38 10.50
Third Quarter............................................. 22.19 10.56
Fourth Quarter............................................ 50.63 14.63
1999
First Quarter (through January 19)........................ $64.50 $44.75
</TABLE>

14
<PAGE> 17

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
September 30, 1998 on an actual basis, and as adjusted to give effect to the
Company's sale of 2,000,000 shares of Common Stock at an assumed public offering
price of $62.75 per share after deducting the underwriting discount and
estimated offering expenses. This table should be read in conjunction with the
consolidated financial statements and related notes thereto included elsewhere
in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Shareholders' equity(1):
Preferred Stock, no par value; 5,000,000 shares
authorized; none issued or outstanding................. $ -- $ --
Common stock, no par value; 50,000,000 shares authorized;
17,192,254 shares actual and 19,192,254 shares, as
adjusted, issued and outstanding....................... 90,255 208,559
Deferred compensation..................................... (195) (195)
Accumulated deficit....................................... (9,209) (9,209)
------- --------
Total shareholders' equity........................ $80,851 $199,155
</TABLE>

- ---------------

(1) Based upon shares outstanding as of September 30, 1998. Excludes (i)
2,420,901 shares of Common Stock reserved for issuance pursuant to the
Company's employee benefit plans, under which options to purchase 1,223,647
shares of Common Stock were outstanding as of September 30, 1998, at a
weighted average exercise price of $7.25 per share and (ii) 41,322 shares of
Common Stock reserved for issuance pursuant to a warrant with an exercise
price of $9.00 per share issued in connection with a financing transaction.

DILUTION

The net tangible book value of the Company as of September 30, 1998 was
$77.667 million or $4.52 per share of Common Stock. Net tangible book value per
share is determined by dividing the net tangible book value of the Company
(total tangible assets less total liabilities) by the number of shares of Common
Stock outstanding. After giving effect to the sale by the Company of 2,000,000
shares of Common Stock offered hereby at an assumed public offering price of
$62.75 per share (and after deduction of the underwriting discount and estimated
offering expenses), the Company's net tangible book value at September 30, 1998
would have been $195.971 million or $10.21 per share. This represents an
immediate increase in net tangible book value to existing shareholders of $5.69
per share and an immediate dilution to new investors of $52.54 per share.

The following table illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Public offering price per share............................. $62.75
Net tangible book value per share as of September 30,
1998................................................... $4.52
Increase in net tangible book value per share attributable
to new investors....................................... 5.69
-----
Net tangible book value per share after offering............ 10.21
------
Dilution per share to new investors......................... $52.54
======
</TABLE>

15
<PAGE> 18

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with
the Company's Financial Statements and related Notes thereto, and with
Management's Discussion and Analysis of Financial Conditions and Results of
Operations included elsewhere in this Prospectus. The financial statement data
for the years ended March 31, 1996, 1997 and 1998 and the six months ended
September 30, 1997 and 1998 are derived from the Company's audited and unaudited
Financial Statements included elsewhere in this Prospectus. Historical results
are not necessarily indicative of results of operations to be expected in the
future, and results for the six months ended September 30, 1998 are not
necessarily indicative of results to be expected for the entire year.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
----------------------------- ------------------
1996 1997 1998 1997 1998
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
Product sales....................... $ 8,212 $27,852 $44,095 $18,617 $54,667
Engineering revenue................. 1,303 950 1,255 776 189
------- ------- ------- ------- -------
Total revenues................. 9,515 28,802 45,350 19,393 54,856
Operating costs and expenses:
Cost of goods sold.................. 7,471 15,826 29,246 9,991 37,293
Research and development............ 4,245 6,178 8,761 4,168 6,000
Marketing and selling............... 1,817 3,760 6,220 2,804 4,696
General and administrative.......... 1,226 1,391 2,528 1,057 1,991
------- ------- ------- ------- -------
Total operating costs and
expenses..................... 14,759 27,155 46,755 18,020 49,980
Income (loss) from operations.......... (5,244) 1,647 (1,405) 1,373 4,876
Other income (expense), net............ 56 114 882 662 (28)
------- ------- ------- ------- -------
Income (loss) before income taxes...... (5,188) 1,761 (523) 2,035 4,848
Income tax expense..................... -- (109) -- (45) (821)
------- ------- ------- ------- -------
Net income (loss)...................... $(5,188) $ 1,652 $ (523) $ 1,990 $ 4,027
======= ======= ======= ======= =======
Net earnings (loss) per share:
Basic............................... $ (8.87) $ 0.59 $ (0.04) $ 0.18 $ 0.25
Diluted............................. $ (8.87) $ 0.15 $ (0.04) $ 0.12 $ 0.23
Shares used in per share calculation:
Basic............................... 585 2,778 13,509 11,151 16,222
Diluted............................. 585 11,215 13,509 15,942 17,200
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
------------------------------ -------------
1996 1997 1998 1998
-------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 6,638 $ 2,330 $16,360 $ 16,844
Working capital............................ 7,912 7,313 34,226 35,234
Total assets............................... 13,192 36,265 93,364 121,213
Long-term debt............................. 153 10,829 12,524 16,700
Shareholders' equity (deficiency).......... (14,357) (9,472) 66,763 80,851
</TABLE>

16
<PAGE> 19

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All statements, trend analysis and other information contained in the
following discussion relative to markets for our products and trends in revenue,
gross margins and anticipated expense levels, as well as other statements
including words such as "anticipate," "believe," "plan," "estimate," "expect"
and "intend" and other similar expressions constitute forward-looking
statements. These forward-looking statements are subject to business and
economic risks and uncertainties, and our actual results of operations may
differ materially from those contained in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in "Risk Factors" as well as other risks and
uncertainties referenced in this Prospectus.

OVERVIEW

We design, develop, manufacture and market proprietary RFICs for wireless
communications applications such as cellular and PCS, cordless telephony,
wireless local area networks, wireless local loop, industrial radios, wireless
security and remote meter reading. We derive revenue from the sale of standard
and custom-designed products and services. To date, a significant portion of our
revenue has been attributable to the sale of RFICs used in cellular and PCS
handsets. We offer a broad array of products -- including amplifiers, mixers and
modulators/demodulators and single chip transmitters, receivers and
transceivers -- that represent a substantial majority of the RFICs required in
wireless subscriber equipment. We design products using three distinct process
technologies: GaAs HBT, GaAs MESFET and silicon bipolar transistor. Sales of
GaAs HBT products represented 81% of our revenue in fiscal 1998 and 89% during
the first half of fiscal 1999. We expect to continue to rely heavily on sales of
GaAs HBT products.

Our gross margin has fluctuated throughout the history of the Company.
Until September 1998 we did not have internal manufacturing capabilities for
GaAs HBT products and thus relied exclusively on purchased wafers to meet
customer demand. The purchase agreements we entered into called for fixed
pricing with annual price declines. Between the June 1997 and the September 1998
quarters, our average selling prices were decreasing based on volume pricing
agreements granted to our largest customer. As a result, our gross margin
decreased.

In the September 1998 quarter, we began commercial shipments from our GaAs
HBT wafer fabrication facility. Internally manufactured products accounted for
$4.4 million of the $31.4 million of total revenue in that quarter. As a result,
we are currently able to manufacture products with lower per unit costs than
products manufactured from wafers that we purchase.

RECENT DEVELOPMENTS

17
<PAGE> 20

RESULTS OF OPERATIONS

The following table shows our statement of operations data expressed as a
percentage of total revenue for the periods indicated:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
----------------------- --------------
1996 1997 1998 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
Cost of goods sold....................... 78.5 54.9 64.5 51.5 68.0
Research and development................. 44.6 21.4 19.3 21.5 10.9
Marketing and sales...................... 19.1 13.1 13.7 14.5 8.6
General and administrative............... 12.9 4.8 5.6 5.4 3.6
----- ----- ----- ----- -----
Total operating costs and
expenses....................... 155.1 94.2 103.1 92.9 91.1
Income (loss) from operations.............. (55.1) 5.8 (3.1) 7.1 8.9
Other income (expense), net................ 0.6 0.3 1.9 3.4 (0.1)
----- ----- ----- ----- -----
Income (loss) before income taxes.......... (54.5) 6.1 (1.2) 10.5 8.8
Income tax expense......................... 0.0 (0.4) 0.0 (0.2) (1.5)
----- ----- ----- ----- -----
Net income (loss).......................... (54.5)% 5.7% (1.2)% 10.3% 7.3%
===== ===== ===== ===== =====
</TABLE>

Six Months Ended September 30, 1997 and 1998

Revenue. Revenue increased 183% from $19.4 million in the first half of
fiscal 1998 to $54.9 million in the first half of fiscal 1999. This increase was
attributable primarily to strong growth in both the GaAs HBT product line (a
219% increase over the first half of fiscal 1998) and the silicon product line
(a 146% increase over the first half of fiscal 1998). Commercial shipments from
our wafer fabrication facility commenced in September 1998 and contributed $4.4
million (or 8%) of total revenue for the six months. Sales to Nokia represented
75.0% of revenue for this period.

International shipments accounted for $33.3 million or 60.7% of revenue in
the first half of fiscal 1999, compared to $10.9 million or 56.2% in the first
half of fiscal 1998. Sales to customers located in Korea totaled $6.4 million in
the first half of fiscal 1999, or 11.7% of revenue, compared to $7.8 million, or
40% of revenue, in the first half of fiscal 1998. Although we experienced an
increase in sales to customers located in Korea in the first half of fiscal
1999, this market remains unstable and we cannot be sure that this trend will
continue or that the economic instability in Asia will not have a material
adverse effect on our operating results.

Gross Profit. In the first half of fiscal 1999, the gross profit margin
decreased to 32.0% compared to 48.5% in the first half of fiscal 1998. During
this period, because we did not have internal manufacturing capability for GaAs
HBT products, we relied almost exclusively on purchased wafers to meet customer
demand. The purchase agreements we entered into called for fixed pricing with
annual price declines. At the same time, our average selling prices were
decreasing based on volume pricing agreements granted to our largest customer.

We have historically experienced significant fluctuations in gross profit
margins. In certain cases, we believe that our gross profit margins have been
significantly affected by low line, assembly and test yields, and we cannot be
sure that future operating results will not be similarly affected. We currently
expect that our gross profit margins should improve as an increasing percentage
of our GaAs HBT products are fabricated at our wafer fabrication facility, where
production costs per wafer are anticipated to be lower. However, we sell
products in intensely competitive markets, and we believe that downward pressure
on average selling prices will continue to occur.

Research and Development. Research and development expenses in the first
half of fiscal 1999 were $6.0 million, compared to $4.2 million in the first
half of fiscal 1998, an increase of 44.0%. This increase was

18
<PAGE> 21

attributable primarily to increased salaries and benefits and recruiting
expenses related to increased headcount and additional spending on mask sets and
outside services for both standard and custom-designed products. Research and
development expenses as a percentage of total revenue decreased to 10.9% in the
first half of fiscal 1999 from 21.5% in the first half of fiscal 1998. We plan
to continue to make substantial investments in research and development and we
expect that such expenses will continue to increase in absolute dollar amounts
in future periods.

Marketing and Selling. Marketing and selling expenses in the first half of
fiscal 1999 were $4.7 million, compared to $2.8 million in the first half of
fiscal 1998, an increase of 67.5%. This increase was attributable primarily to
increased salaries and benefits related to increased headcount and to increased
expenses associated with advertising and commissions. Marketing and selling
expenses as a percentage of revenue in the first half of fiscal 1999 decreased
to 8.6% from 14.5% in the first half of fiscal 1998. We plan to continue to make
substantial investments in marketing and selling and we expect that such
expenses will continue to increase in absolute dollar amounts in future periods.

General and Administrative. General and administrative expenses in the
first half of fiscal 1999 were $2.0 million compared to $1.1 million in the
first half of fiscal 1998, an increase of 88.3%. This increase was attributable
primarily to increased salaries and benefits related to headcount increases, and
to costs associated with being a public company. General and administrative
expenses as a percentage of revenue decreased to 3.6% in the first half of
fiscal 1999 from 5.5% in the first half of fiscal 1998.

Other Income (Expense), Net. Other income (expense), net in the first half
of fiscal 1999 reflected net expenses of $28,000 compared to income of $662,000
in the first half of fiscal 1998. The decrease in other income (expense), net
during this period was attributable to decreased interest income and to
increased interest expense incurred on borrowings related to our wafer
fabrication facility.

Income Tax Expense. Income tax expense in the first half of fiscal 1999
was $821,000, compared to $45,000 in the first half of fiscal 1998. Our
effective tax rate in the first half of fiscal 1999 was 16.9%, which is less
than the combined federal and state statutory rate of approximately 40% due to
the use of net operating loss carryforwards.

Fiscal Years Ended March 31, 1996, 1997 and 1998

Revenue. Revenue increased 57.5% from $28.8 million in fiscal 1997 to
$45.4 million in fiscal 1998. The increase in revenue during the year was
attributable primarily to strong sales growth in GaAs HBT power amplifiers for
cellular and PCS handsets, including shipments of three-volt, high-efficiency
GaAs HBT power amplifiers to Nokia for its latest series of GSM-based handsets.
Engineering revenue was 2.8% of total revenue in fiscal 1998, compared to 3.3%
in fiscal 1997.

In fiscal 1997, our revenue of $28.8 million represented a 202.7% increase
over the fiscal 1996 revenue of $9.5 million. This was the result primarily of
an overall increase in the volume of products shipped to existing and new
customers, particularly in the cellular and PCS markets. Sales of GaAs HBT
products totaled approximately 85% of revenue in fiscal 1997 compared to 58% in
fiscal 1996. Engineering revenue accounted for 3.3% of total revenue in fiscal
1997, compared to 13.7% in fiscal 1996.

In fiscal 1998, GaAs HBT products accounted for 81% of total revenue while
silicon bipolar accounted for 11%, GaAs MESFET accounted for 5% and engineering
revenue accounted for 3%. In fiscal 1997, GaAs HBT products accounted for 85% of
revenue, GaAs MESFET accounted for 7%, silicon accounted for 5%, and engineering
revenue accounted for 3%. The increase in silicon revenue in fiscal 1998 was the
result of a heightened focus on that product type, resulting in greater product
development. International shipments accounted for 50% of revenue in fiscal
1998, compared to 42% in fiscal 1997 and 24% in fiscal 1996.

Gross Profit. Our gross profit margin decreased to 35.5% in fiscal 1998
from 45.1% in fiscal 1997. The decrease was attributable primarily to a one-time
revenue reduction and inventory write-down due to packaging-related product
returns totaling $4.6 million. Absent these packaging problems, the gross profit
margin in fiscal 1998 would have been 42.4%. This is lower than the fiscal 1997
gross profit margin of 45.1% primarily because of lower average unit prices
associated with high volume contracts, fluctuations in test yields
19
<PAGE> 22

for RFICs in the early stages of production and the initial higher costs for
newly developed power amplifier packages.

In fiscal 1997, our gross profit margin increased to 45.1% from 21.5% in
fiscal 1996. The increase was attributable primarily to increased production
volumes, in conjunction with favorable product sales mix and pricing; a
reduction in average wafer costs due primarily to quantity discounts; and
improved manufacturing, assembly and test yields, which reduced scrap and
lowered the per unit cost of goods sold.

Research and Development. Research and development expenses in fiscal year
1998 were $8.8 million, compared to $6.2 million in fiscal 1997, an increase of
41.8%. This increase was attributable primarily to increased salaries and
benefits related to headcount growth and additional spending on small tools and
supplies and other components necessary for prototype assembly. In addition,
amortization and depreciation expenses for equipment leases and purchases
increased. As a percentage of revenue, research and development expenses were
19.3% of total revenue in fiscal 1998 compared to 21.4% in fiscal 1997. We plan
to continue to make substantial investments in research and development, and
expect that such expenses will continue to increase in absolute dollar amounts
in future periods.

In fiscal 1997, research and development expenses were $6.2 million,
compared to $4.2 million in fiscal 1996, an increase of 45.5%. This increase was
primarily attributable primarily to increased salaries and benefits related to
increased headcount, and to additional spending on prototype assembly charges
for both standard and custom-designed products. As a result of revenue growth,
research and development expenses as a percentage of total revenue decreased
from 44.6% in fiscal 1996 to 21.4% in fiscal 1997.

Marketing and Selling. Marketing and selling expenses in fiscal 1998 were
$6.2 million compared to $3.8 million in fiscal 1997, an increase of 65.4%. This
increase was attributable primarily to increased salaries, benefits and
recruiting expenses related to increased headcount and to increased travel and
marketing literature expenses. Marketing and selling expenses as a percentage of
revenue in fiscal 1998 increased to 13.7% from 13.1% in fiscal 1997.

In fiscal 1997, marketing and selling expenses increased 106.9%, from $1.8
million in fiscal 1996 to $3.8 million. The increase was attributable primarily
to increased commissions reflecting the increased sales in fiscal 1997, and, to
a lesser degree, increased salaries and benefits related to increased headcount
and additional spending on promotional activities. Marketing and selling
expenses as a percentage of revenue decreased from 19.1% in fiscal 1996 to 13.1%
in fiscal 1997.

General and Administrative. General and administrative expenses in fiscal
1998 were $2.5 million, compared to $1.4 million in fiscal 1997, an increase of
81.7%. This increase was attributable primarily to increased salaries and
benefits related to headcount increases. Also, recruiting and accounting
expenses increased during the year, as we experienced for the first time costs
associated with being a public company. General and administrative expenses as a
percentage of revenue increased to 5.6% in fiscal 1998 from 4.8% in fiscal 1997.

In fiscal 1997, general and administrative expenses increased 13.5% from
$1.2 million in fiscal 1996 to $1.4 million. This increase was attributable
primarily to increased salaries and benefits related to headcount. As a
percentage of revenue, general and administrative expenses decreased from 12.9%
in fiscal 1996 to 4.8% in fiscal 1997. This decrease was attributable primarily
to revenue growth.

Other Income, Net. Other income, net, in fiscal 1998 increased to $882,000
from $114,000 in fiscal 1997. This increase resulted from higher interest income
earned on higher cash balances, due primarily to the investment of proceeds from
our June 1997 initial public offering.

In fiscal 1997, other income, net, increased to $114,000 from $56,000 in
fiscal 1996. This increase was attributable primarily to higher interest income
earned on higher average cash balances in fiscal 1997.

Income Tax Expense

We did not provide for income taxes in fiscal 1998 as a result of the loss
incurred during the year. The effective tax rate in fiscal 1997 was 6.1%, which
is less than the combined federal and state statutory rate of
20
<PAGE> 23

approximately 40% due to the use of net operating loss carryforwards. There was
no provision for income taxes in fiscal 1996 due to the losses incurred during
that year.

QUARTERLY RESULTS OF OPERATIONS

The following table shows unaudited quarterly results of operations in
dollar amounts and as a percentage of revenue for the periods indicated. We have
prepared this information on a basis consistent with our audited financial
statements and included all adjustments that we consider necessary for a fair
presentation of the information for the periods presented. Results of operations
for any fiscal quarter are not necessarily indicative of results for any future
period.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30,
1997 1997 1997 1998 1998 1998
-------- --------- -------- --------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................... $10,235 $ 9,158 $13,323 $12,634 $23,441 $31,415
Operating costs and expenses:
Cost of goods sold............... 5,165 4,826 7,746 11,509 15,603 21,690
Research and development......... 2,069 2,099 2,404 2,189 2,777 3,224
Marketing and selling............ 1,483 1,321 1,525 1,891 2,176 2,520
General and administrative....... 492 565 660 811 868 1,122
------- ------- ------- ------- ------- -------
Total operating costs and
expenses............... 9,209 8,811 12,335 16,400 21,424 28,556
Income (loss) from operations...... 1,026 347 988 (3,766) 2,017 2,859
Other income (expense), net........ 175 487 157 63 156 (183)
------- ------- ------- ------- ------- -------
Income (loss) before income
taxes............................ 1,201 834 1,145 (3,703) 2,173 2,676
Income tax expense................. (26) (18) (20) 64 (500) (321)
------- ------- ------- ------- ------- -------
Net income (loss).................. $ 1,175 $ 816 $ 1,125 $(3,639) $ 1,673 $ 2,355
======= ======= ======= ======= ======= =======
Net earnings (loss) per share:
Basic............................ $ 0.18 $ 0.05 $ 0.07 $ (0.23) $ 0.10 $ 0.14
Diluted.......................... $ 0.08 $ 0.05 $ 0.07 $ (0.22) $ 0.10 $ 0.14
Shares used in per share
calculation:
Basic............................ 6,396 15,919 15,839 16,000 16,065 16,311
Diluted.......................... 14,535 17,350 17,171 17,043 17,066 17,323
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30,
1997 1997 1997 1998 1998 1998
-------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF TOTAL REVENUE:
Revenues........................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
Costs of goods sold.............. 50.5 52.7 58.1 91.1 66.6 69.0
Research and development......... 20.2 22.9 18.0 17.3 11.8 10.3
Marketing and selling............ 14.5 14.4 11.4 15.0 9.3 8.0
General and administrative....... 4.8 6.2 5.0 6.4 3.7 3.6
------- ------- ------- ------- ------- -------
Total operating costs and
expenses.................... 90.0 96.2 92.6 129.8 91.4 90.9
Income (loss) from operations...... 10.0 3.8 7.4 (29.8) 8.6 9.1
Other income (expense), net........ 1.7 5.3 1.2 0.5 0.7 (0.6)
------- ------- ------- ------- ------- -------
Income (loss) before income
taxes............................ 11.7 9.1 8.6 (29.3) 9.3 8.5
Income tax expense................. (0.2) (0.2) (0.1) 0.5 (2.1) (1.0)
------- ------- ------- ------- ------- -------
Net income (loss).................. 11.5% 8.9% 8.5% (28.8)% 7.2% 7.5%
======= ======= ======= ======= ======= =======
</TABLE>

21
<PAGE> 24

During fiscal 1998, our capacity was constrained and quarterly revenues
fluctuated between $9.2 million and $13.3 million. By the first quarter of
fiscal 1999, TRW had completed significant capacity additions at its three-inch
GaAS HBT fab. In addition, we were experiencing strong demand from Nokia and
other customers for GaAs HBT and silicon products. As a result, we were able to
record shipments of $23.4 million in the June 1998 quarter. This represented
86.5% growth over the prior quarter and 129% growth over the same quarter of the
prior year.

In the September 1998 quarter, revenue grew 34.0% to $31.4 million over the
prior quarter. This was attributable to further capacity increases from TRW and
the opening of our own wafer fabrication facility, which enabled us to respond
to increased customer demands. In that quarter, revenue from our GaAs HBT fab
accounted for $4.4 million of total revenue.

International shipments accounted for 62% of revenue for the three months
ended June 30, 1998, compared to 45% for the three months ended June 30, 1997.
Sales to customers located in Korea accounted for approximately $2.6 million or
11.4% of total revenue during the three months ended June 30, 1998. For the
three months ended September 30, 1998 international shipments accounted for 60%
of sales, with sales to customers in Korea accounting for $3.8 million, or 12.1%
of total revenue.

Our gross profit margin decreased steadily over the past six quarters to
31.0% for the three months ended September 30, 1998 from 47.3% for the three
months ended September 30, 1997. During this period we relied almost exclusively
on products manufactured from wafers that were purchased to meet customer
demand. The purchase agreements that we entered into called for fixed pricing
with annual price declines. At the same time our average selling prices were
declining based on volume pricing.

We historically have experienced significant fluctuations in gross profit
margins. We believe that our gross profit margins have, in the past, been
significantly affected by manufacturing, assembly and test yields. In
particular, during the fourth quarter of fiscal 1998, we experienced poor
assembly and test yields, which resulted in a reduction to revenues and a charge
to cost of goods sold. The cumulative effect of these charges reduced gross
profit by $4.6 million.

Research and development expenses have grown steadily from $2.1 million to
$3.2 million over the past six quarters. The increases were attributable
primarily to product development activities and increased headcount. As revenue
has grown, research and development expenses as a percentage of total revenue
have decreased from 22.9% for the three months ended September 30, 1997 to 10.3%
for the three months ended September 30, 1998. We plan to continue to make
substantial investments in research and development and expect that such
expenses will continue to increase in absolute dollar amounts in future periods.

Marketing and selling expenses have grown steadily from $1.3 million to
$2.5 million over the past five quarters. The increases were attributable
primarily to increased salaries and benefits related to increased headcount,
increased advertising expense and increased travel and entertainment expense.
With the exception of the March 1998 quarter, marketing and selling expenses as
a percentage of revenue have decreased steadily from 14.5% to 8.0%. We plan to
continue to make substantial investments in marketing and selling and expect
that such expenses will continue to increase in absolute dollar amounts in
future periods.

General and administrative expenses have grown steadily from $0.5 million
to $1.1 million over the past six quarters. The increases were primarily
attributable to increased salaries and benefits related to headcount increases,
additional recruiting expense and increased legal expense. As revenue has grown
more rapidly over the last two quarters, general and administrative expenses as
a percentage of total revenue have decreased to below 4.0%.

The effective tax rate for the three months ended September 30, 1998 was
12.0%, which is less than the combined federal and state statutory rate of
approximately 40% due to the use of net operating loss carryforwards. We expect
the tax rate will increase to approximately 35% in fiscal 2000.

22
<PAGE> 25

Liquidity and Capital Resources

We have funded our operations to date through sales of equity and debt
securities, bank borrowings, capital equipment leases and revenue from product
sales. We completed our initial public offering in June 1997, and raised
approximately $37.6 million, net of offering expenses. As of September 30, 1998,
we had working capital of approximately $35.2 million, including $16.8 million
in cash and cash equivalents.

Operating activities generated $2.3 million in cash in the first half of
fiscal 1999. This was attributable primarily to net income of $4.0 million and
an increase in accounts payable of $6.9 million, partially offset by an increase
in accounts receivable of $7.9 million and in inventories of $2.0 million. Cash
used by operating activities in the first half of fiscal 1998 was $10.4 million.
This amount was attributable primarily to a $10.2 million increase in
inventories and a $3.2 million increase in accounts receivable. These were
partially offset by net income of $2.0 million and an increase in accounts
payables of $1.3 million.

The $9.0 million of cash used by investing activities in the first half of
fiscal 1999 was related to the purchase of $3.3 million of capital equipment,
primarily for use in our wafer fabrication facility, as well as $5.6 million for
the capitalization of wafer fabrication construction costs. The $14.4 million of
cash used by investing activities in the first half of fiscal 1998 was related
to expenditures associated with the construction of our GaAs HBT wafer
fabrication facility, and to wafer fabrication and general corporate capital
equipment requirements.

The $7.1 million of cash provided by financing activities in the first half
of fiscal 1999 related primarily to the receipt of $10.0 million in proceeds
from the exercise of a warrant held by TRW covering 1,000,000 shares of common
stock, partially offset by $2.9 million in repayments of capital lease
obligations. The $49.6 million of cash provided by financing activities in the
first half of fiscal 1998 related primarily to the issuance of Common Stock in
our initial public offering, totaling $37.6 million, as well as a reduction in
restricted cash of $12.2 million set aside for the purchase of wafer
fabrication-related expenditures.

We maintain a secured credit facility with Silicon Valley Bank that
includes a $5.0 million working capital line of credit and a $10.0 million term
loan line of credit. Borrowings under the working capital revolving credit line
may be made and repaid at any time until July 13, 1999 and bear interest at the
prime rate (as announced by the lender), payable monthly. Borrowings under the
term loan can be made until July 13, 1999 in $2.5 million increments, and are
repayable in 60 monthly installments at the prime rate, with repayments to be
completed by December 31, 2003. At September 30, 1998, there were no outstanding
amounts under either of these facilities. We are required to maintain specified
amounts of net worth and meet certain ratios with regard to liquidity and debt
to equity under this facility.

We currently have eight capital lease facilities with four equipment
financing companies under which we have financed the cost of capital equipment
and leasehold improvements associated with our wafer fabrication facility. We
have financed an aggregate of $23.4 million of leased property under these
facilities. Lease terms range from 36 months to 60 months with effective
interest factors ranging from 8.6% to 11.1%. At September 30, 1998, the minimum
future lease payments under these leases (excluding interest) were $20.6
million.

In connection with the construction of our wafer fabrication facility, in
October 1998 we deposited approximately $3.9 million into an escrow account in
favor of the lessor of the facility in order to secure our payment obligations
under the lease related to the facility. The deposited amounts will be released
to us over time based on an agreed amortization schedule, subject to
acceleration in the event we meet specified financial coverage ratios.

We are currently engaged in construction activities related to the second
phase of our wafer fabrication facility. This phase is budgeted at approximately
$40 million and includes a clean room expansion and installation of additional
production equipment.

We currently have made capital commitments totaling $8.9 million for
construction and equipment associated with the completion of the second phase of
the wafer fabrication facility, all of which is expected to be funded from the
proceeds of this offering.

23
<PAGE> 26

YEAR 2000 ISSUES

We have evaluated all of our internal software and current products against
Year 2000 concerns, and believe that our products and business will not be
substantially affected by the advent of the year 2000 and that we have no
significant exposure to liabilities related to the Year 2000 issue for the
products we have sold. We have also completed a project to upgrade all internal
software and to conduct testing on both our information technology systems and
our other equipment and machinery to further ensure that all aspects of our
business will be Year 2000 compliant. These procedures have not had any material
effect on our customers and have not required any material expenditures or other
material diversion of resources.

We have contacted substantially all parties with which we have material
relationships, including TRW and Nokia and our other material customers and
suppliers, to try to determine their Year 2000 preparedness and to analyze the
risk to us if they have significant business interruptions because of Year 2000
noncompliance. Based on this survey, we believe that these parties either are
substantially Year 2000 compliant or that any noncompliance will not have a
material effect on our operations. We intend to continue analyzing third-party
preparedness and the need for any related contingency planning as we enter into
new third party relationships.

Although we believe our planning efforts are adequate to address our Year
2000 concerns, we cannot be sure that we will not experience negative
consequences and material costs caused by undetected errors or defects in the
technology used in our internal systems, or that the systems of other parties on
which we rely will be made compliant on a timely basis and will not have any
material adverse effect on us. At this time, we are unable to estimate the most
reasonably likely worst-case effects of the arrival of the year 2000 and we do
not have a contingency plan for any unanticipated negative effects. We plan to
analyze reasonably likely worst-case scenarios and the need for contingency
planning once the upgrade and testing of internal systems and the review of
third-party preparedness described above have been completed, and expect to
complete this analysis by June 30, 1999.

We anticipate that total costs related to the Year 2000 issue will be about
$150,000, which has been included in our information technology expense budget.
Of this amount, we have already spent $75,000. To date, there have been no
material deferments of other information technology projects resulting from the
work taking place on our Year 2000 program.

24
<PAGE> 27

BUSINESS

INTRODUCTION

RF Micro Devices, Inc. (the "Company" or "RFMD") designs, develops,
manufactures and markets proprietary radio frequency integrated circuits
("RFICs") for wireless communications applications such as cellular and personal
communication services ("PCS"), cordless telephony, wireless local area networks
("LANs"), wireless local loop ("WLL"), industrial radios, wireless security and
remote meter reading. The Company offers a broad array of products -- including
amplifiers, mixers, modulators/demodulators and single chip transmitters,
receivers and transceivers -- that represent a substantial majority of the RFICs
required in wireless subscriber equipment. The Company designs products using
three distinct process technologies: gallium arsenide heterojunction bipolar
transistor ("GaAs HBT"), silicon bipolar transistor and, to a lesser extent,
gallium arsenide metal semiconductor field effect transistor ("GaAs MESFET").

TRW Inc. ("TRW"), which is the Company's largest shareholder, manufactured
all of the Company's GaAs HBT products until September 1998. TRW has granted the
Company a perpetual non-royalty bearing license to use TRW's GaAs HBT process to
design and manufacture products for commercial wireless applications. The
Company recently began manufacturing its own GaAs HBT products under this
license at its new wafer fabrication facility. The Company's GaAs HBT power
amplifiers and small signal devices have been designed into advanced subscriber
equipment made by leading original equipment manufacturers ("OEMs") such as
Nokia Mobile Phones Ltd. ("Nokia"), LG Information and Communications, Ltd.
("LGIC"), Hyundai Electronics Industries Co. Ltd. ("Hyundai"), Samsung
Electronics Co., Ltd. ("Samsung") and Motorola, Inc. ("Motorola"). Through a
delivery strategy called Optimum Technology Matching(R), the Company also offers
silicon and GaAs MESFET components to complement its GaAs HBT products. Optimum
Technology Matching(R) allows the Company to offer RFIC solutions, on a
component-by-component basis, that best fulfill OEMs' performance, cost and
time-to-market requirements.

INDUSTRY BACKGROUND

The wireless communications industry grew rapidly over the past decade as
cellular, paging, PCS and other emerging wireless communications services became
more widely available and affordable. Technological advances, changes in
telecommunications regulations and the allocation and licensing of additional
radio spectrum have helped cause this growth worldwide. Technological advances
have also led to the development of competing wireless communications services,
and to the development of new and emerging wireless applications, including
second generation digital cordless telephony, wireless LANs, WLL, wireless
security and remote meter reading. As wireless usage grows, wireless service
providers continue to improve the quality and function of the services they
offer and seek to offer greater bandwidth for more capacity.

To expand capacity from first generation cellular communications networks,
certain national governments made available less congested frequency bands for
new wireless communications services. In the United States, the Federal
Communications Commission (the "FCC") allocated and auctioned 10 MHz and 30 MHz
portions of spectrum in the 1850 to 1990 MHz range for PCS, and allocated broad
band spectrum in the 2.4 GHz range for wireless LANs. Capacity and functionality
also are being addressed by the wireless industry's movement from wireless
networks that use analog signal modulation techniques to wireless networks that
use digital signal modulation techniques. As compared to analog technologies,
digital technologies generally provide better signal quality, help the
transmission of both voice and data and improve capacity by allowing the
transmission of more information in a smaller amount of frequency space. These
digital technologies place a premium on linear power amplification, which can
mean higher quality signals.

The wireless communications markets have many different air interface
signal transmission standards in different parts of the world, including digital
standards, such as Global System for Mobile Communications ("GSM"), Time
Division Multiple Access ("TDMA") and Code Division Multiple Access ("CDMA"),
analog standards, such as Advanced Mobile Phone Service ("AMPS") and Total
Access Communications Systems ("TACS"), and certain hybrid standards. For PCS,
the FCC has approved seven different air interface standards. The handsets
designed for each air interface standard generally require unique RF and

25
<PAGE> 28

baseband integrated circuit solutions that must be designed to meet the demands
of subscriber equipment users for greater functionality, smaller and lighter
equipment, longer battery life and better security, all at reduced costs. As a
result of these technical challenges and end user demands, it has become
increasingly difficult for OEMs of subscriber equipment to develop and supply
all the required components in a timely and cost-effective manner. This has
caused some OEMs to rely increasingly on third party value-added technology
providers that have the component and systems level expertise to design and the
production capacity to supply these solutions. In addition, because new entrants
to the wireless subscriber equipment market, such as large consumer electronics
companies, tend to be less vertically integrated than established OEMs, they
must rely even more on third party suppliers. This technology outsourcing trend
is particularly evident in the RF segment of the equipment due to the scarcity
of RFIC engineers and the design complexity of the technology.

RF OVERVIEW

A typical subscriber device for wireless personal communications, such as a
handset, contains digital, baseband and RF components. Digital components
control the overall circuitry and encrypt the voice or other data intended for
transmission and reception, while baseband components are used to process
signals into or from their original electrical form (low frequency analog voice
or data). RF components, such as amplifiers, mixers, attenuators, switches,
modulators, demodulators, oscillators and frequency synthesizers, convert,
switch, process and amplify the high frequency signals that carry the
information to be transmitted or received.

RF technology presents different engineering challenges than standard
semiconductor design. In general, digital and baseband semiconductor design
engineers create standard semiconductor circuit designs by combining "cells"
that previously have been evaluated and characterized. Because cells have
predictable performance, the design engineer can use computers to automate the
design process, which helps accelerate the development of these components. Each
RF component, however, has distinctly different characteristics that influence
overall system performance in complex ways. Instead of having stable inputs and
outputs, the RF circuit characteristics can drift based on process variations,
temperature, power supply and other variables. As a result, performance
characteristics are unique for each device, and the RF engineer must evaluate
and develop new designs on a continuous basis for each system performance level
and air interface standard. In addition to being skilled in semiconductor
circuit design, the RF circuit designer must have a thorough understanding of
signal processing principles, must understand the totality of the system for
which the device is intended and must be able to create designs that function
within the unique parameters of different wireless system architectures. As RF
technology has moved from discrete components to integrated circuit solutions,
the scarcity of engineers with both integrated circuit design and RF expertise
has become more pronounced.

In early wireless communications equipment, individually packaged discrete
components were mounted on circuit boards to form complex circuits used to
transmit and receive RF signals. Size, reliability and cost concerns ultimately
led to a move from discrete devices to silicon-based integrated circuits.
Particularly for the critical power amplifier function, the use of silicon
integrated circuits at cellular and PCS frequencies has been limited because of
decreased operating performance. In particular, at high frequencies silicon
integrated circuits consume more power, have relatively higher noise and
distortion parameters and create excess heat.

Within the last decade, GaAs semiconductor technology has emerged as an
effective alternative or complement to silicon technology in many high
performance RF applications. GaAs has inherent physical properties that allow
electrons to move up to five times faster than in silicon, which permits the
manufacture of GaAs devices that operate at much higher speeds than silicon
devices or at the same speeds with lower power consumption. This is particularly
important in battery powered portable applications such as handsets. Moreover,
the semi-insulating GaAs substrate significantly reduces some of the unwanted
parasitic effects of the conductive silicon substrate that cause its performance
to degrade at high frequencies.

GaAs integrated circuits were first implemented using a type of transistor
known as MESFET. While GaAs MESFET integrated circuits have become accepted for
many high frequency applications, these devices have certain limitations. In
particular, for power amplifiers used in digital systems it is important to have
a linear signal (i.e., one that is not altered or distorted when amplified).
GaAs MESFET devices have difficulty meeting high linearity performance criteria
without sacrificing other performance criteria. In addition, GaAs

26
<PAGE> 29

MESFET power amplifiers generally require both a positive and negative power
supply for power stages, which requires the inclusion of additional components
or circuitry and a corresponding increase in device size and complexity.
Additionally, the lateral structure of GaAs MESFET devices hinders the ability
to shrink the device size to enhance manufacturing yields and reduce costs. A
different type of GaAs transistor known as an HBT, which has been used in
military and space applications over the past decade, emerged recently in
commercial RF applications.

THE RF MICRO DEVICES SOLUTION

The Company is a leading supplier of GaAs HBT RFICs for commercial wireless
applications based on sales. The Company's GaAs HBT products include power
amplifiers and small signal devices that have been designed into advanced
subscriber handsets manufactured by leading OEMs such as Nokia, LGIC, Hyundai,
Samsung and Motorola. In addition to the advantages that GaAs provides over
silicon in terms of speed, efficiency and the ability to operate at high
frequencies, the Company believes that GaAs HBT components offer the following
benefits over GaAs MESFET devices in comparable applications:

- Efficiency. Efficiency is a measure of RF power output as a percentage
of battery power consumed by the device. The Company believes its GaAs
HBT power amplifiers are more efficient and use less power to transmit
the same output power than comparable GaAs MESFET devices. Increased
efficiency can translate into improved battery life and increased talk
time.

- Linearity. Linearity is a measure of the distortion of a signal as a
result of the amplification of the signal. The Company believes GaAs HBT
products have higher breakdown voltages and smaller and more constant
base-collector capacitance than comparable GaAs MESFET devices, which
results in better linearity. Improved linearity can translate into a
higher quality signal, which is important for wireless networks using
digital air interface standards such as TDMA and CDMA.

- Size. GaAs MESFET devices have a lateral or horizontal design structure
while GaAs HBT devices have a more vertical structure. The Company
believes that GaAs HBT circuits can be made smaller than GaAs MESFET
devices, enabling more die per wafer, which can increase manufacturing
yields and translate into reduced costs.

- Complexity. GaAs HBT transistors are bipolar devices that require only a
single polarity power supply, while GaAs MESFET transistors generally
require both a positive and negative power supply, which results in the
need to include a negative voltage generator and other additional
components or circuitry. As a result, GaAs HBT system architectures are
simpler and easier to design, which can translate into reduced component
costs and smaller equipment.

In addition to its expertise in GaAs HBT process technology, the Company's
design engineers, test engineers and marketing personnel are experienced in
designing and delivering RFICs based on silicon bipolar and GaAs MESFET
technologies. As a result, the Company is able to offer a broad array of
standard and custom-designed RF solutions through a delivery strategy called
Optimum Technology Matching(R). Optimum Technology Matching(R) allows the
Company to offer OEM customers RFIC solutions on a component-by-component basis
that best fulfill the OEMs' performance, cost and time-to-market requirements.
Across these three semiconductor technologies, the Company offers more than 126
products with a wide range of applications.

The Company's circuit design staff is continually developing RFIC design
solutions for new and emerging wireless applications. The Company's research and
development activities include not only new circuit designs, but also the
development and refinement of proprietary design tools and models to facilitate
new product development. Moreover, the Company is continually evaluating test RF
circuits under emerging semiconductor process technologies, such as silicon
germanium, to augment its Optimum Technology Matching(R) program and to meet its
customers' future RFIC needs.

27
<PAGE> 30

STRATEGY

The Company's goal is to be the leading worldwide supplier of RFICs for a
broad range of commercial wireless applications. To meet this goal, the Company
has developed a focused strategy. The key elements are:

- Focus on Wireless Markets. Since the Company's formation in 1991, it has
focused its efforts almost exclusively on the design, development,
manufacture and sale of RFICs to participants in the commercial wireless
markets. The Company has developed and sold integrated circuits for a
broad range of applications within these markets, including cellular and
PCS, cordless telephony, industrial radios, wireless LANs, WLL, wireless
security and wireless utility meter reading. The Company's customers
include some of the leading OEMs, including Nokia, LGIC, Hyundai, Samsung
and Motorola.

- Offer a Wide Range of RF Products. The Company offers a full line of
products that include power amplifiers, low noise amplifiers/mixers,
quadrature modulators/demodulators and single chip transceivers. For
cellular and PCS applications, the Company offers products addressing
virtually all of the analog and digital air interface standards. The
Company's design engineering staff has developed proprietary design and
fabrication modeling techniques and tools to enable the Company to
deliver state-of-the-art integrated circuit designs that meet its
customers' stringent technical specifications. Responding to customer
interest, the Company also intends to offer certain RFICs in a "modular"
package that, in addition to one or more Company-designed integrated
circuits, includes passive components, such as filters and resistors,
that are commonly incorporated into end-user devices.

- Expand Manufacturing Capacity. The Company recently completed
construction of an approximately 64,000 square foot fabrication facility
and is now fabricating its own GaAs HBT wafers. This facility became
operational in June 1998, and has been qualified by its major customer
and other current and potential customers. The Company has recently
undertaken a 6,000 square foot expansion to the clean room and the
purchase or lease of additional production equipment. The Company
believes that operating its own GaAs HBT wafer fabrication facility will
improve its ability to respond to customer demand for GaAs HBT products
and will provide it with greater opportunities to enhance product and
process quality and reliability.

- Maintain Diversification in Process Technologies. The Company believes
that it is the only provider of RFICs in commercial volumes that is able
to design products in three distinct process technologies -- GaAs HBT,
GaAs MESFET and silicon. The Company believes that its GaAs HBT expertise
allows it to deliver high efficiency, high performance components such as
linear power amplifiers and low noise amplifiers to the wireless
communications markets. While attempting to leverage its GaAs HBT
capabilities, the Company also intends to expand its line of
silicon-based RFICs and to greatly increase the portion of overall
revenue attributable to sales of silicon products. As a part of this
strategy, in March 1998, the Company entered a multi-year agreement with
International Business Machines Corporation ("IBM") that provides for
expanded development, manufacture and sale of custom RFICs by the Company
using IBM's advanced Blue Logic silicon process technology. The Company
developed more than 50 RFICs using this technology, and in May 1998
released the RFMD Silicon Innovations Designer's Handbook, a catalog
featuring this new generation of silicon-based RFICs. Moreover, the
Company is continually evaluating RF test circuits under emerging
semiconductor process technologies, such as silicon germanium.

- Maintain Balanced Product Mix. The Company strives to maintain a balance
between custom and standard products. Custom-designed products are
usually developed for volume production orders from large OEMs. Custom
products normally are manufactured on an exclusive basis for the
originating customer for an agreed period of time. Once exclusive
production is over, the Company attempts to move custom products quickly
into the standard product category in order to broaden its customer base
and leverage its design and product development expenditures.

28
<PAGE> 31

MARKETS

The Company designs, develops, manufactures and markets its products to
both domestic and international OEMs for commercial applications in the wireless
markets, including cellular and PCS handsets, cordless telephony, industrial
radios, wireless LAN equipment, WLL handsets, wireless security systems and
wireless utility meter reading systems.

Cellular Telephony and Personal Communication Services

In cellular and PCS applications, calls are placed through handheld
subscriber devices by making a connection with a base station via RF channels.
While the initial PCS services are similar to cellular telephony, as PCS becomes
more widely used, it is expected that a subscriber will be able to use a single
small, lightweight handset and a single phone number for all calls in the home,
office or elsewhere with relatively seamless routing.

Cordless Telephony

Cordless telephones are moving from first generation analog phones to
digital cordless phones operating at higher frequencies. These digital cordless
phones typically use spread spectrum modulation to provide improved range and
voice quality, less interference and greater security.

Wireless Local Loop Systems

A WLL system is a fixed location wireless communications system in which
the end user is connected to the local telephone company's central switch via a
wireless connection. WLL systems employ simplified cellular or PCS technology.
The absence of high speed mobility, roaming or intercell handoff requirements
make the infrastructure and operating costs of WLL systems significantly lower
than traditional wired and cellular systems. WLL systems can be rapidly
deployed, even in difficult terrain areas, and are easily scalable.

Wireless Networks

Wireless networking involves the transmission and reception of data such as
e-mail, faxes and computer files by desktop and portable computers via wireless
RF links rather than wired lines. Network coverage ranges from wireless LANs,
which might be found within a business or single building, to metropolitan area
networks, which would be limited to a defined metropolitan or geographic area,
to wide area networks, which connect individuals and work groups over larger
geographic areas.

Industrial Radios

Industrial digital radios are trunked radio networks that transmit voice
communications from one location to another (point-to-point) and from one
location to many locations (point-to-multipoint). Industrial radios are
primarily used by law enforcement officers and in other public safety
applications.

Other Markets

The Company also supplies custom components for other applications in
wireless markets, such as wireless security systems and wireless utility meter
reading systems. The Company is pursuing other emerging wireless markets,
including enhanced two-way paging, wireless monitoring devices, interactive
toys, home networking, keyless entry and wireless handheld devices used for
point-of-sale, bar coding and other applications. The Company also pursues
opportunities to leverage the technological advantages of its RF components by
identifying applications in other markets. For example, the Company has applied
its RF power amplifier design expertise to develop high performance power line
amplifiers for the cable television ("CATV") market and markets various GaAs HBT
and MESFET components for satellite and microwave communications applications.
In addition, certain of its components, such as gain blocks and attenuators, are
used for instruments and in other non-wireless applications.

29
<PAGE> 32

TECHNOLOGY

The Company's products are used to receive and transmit signals in wireless
communications equipment. The majority of current sales are in the cellular and
PCS handset markets.

The following diagram illustrates a simplified digital wireless handset.

(Digital Cellular Diagram)

In the receive mode, a signal strikes the antenna and is applied to a low
noise amplifier ("LNA"). The LNA amplifies the strength of the incoming signal
by a factor of approximately 10 to 1,000 times and applies it to the mixer.
Without distorting the information contained, the mixer transforms the carrier
frequency of the signal from its original high value, termed an RF signal
(869-894 MHz for cellular systems and 1930-1990 MHz for PCS systems), to a lower
frequency (usually at 200 MHz or less) called an "intermediate frequency"
("IF"). The IF amplifier then amplifies this signal further while reducing much
of its amplitude variation before it is applied to the quadrature demodulator
where the digital information is recovered from the signal. This digital
information is supplied to the baseband portion of the handset where it is
processed to recover the original voice or data.

In the transmit mode, voice or other data that the user desires to transmit
is processed into digital information in the baseband section of the handset.
This information is applied to the quadrature modulator, where the digital
information is combined with an intermediate frequency carrier signal. This
modulated IF signal is applied to the upconverter where it is raised to an RF
signal (824-849 MHz for cellular and 1850-1910 MHz for PCS). The linear power
amplifier then amplifies this low strength signal significantly to levels of one
watt or more to allow the signal to cover substantial distances as it leaves the
antenna. The linear power amplifier must produce this high-level signal with a
minimum of distortion, particularly when processing signals employing complex
digital modulation standards such as GSM, TDMA and CDMA.

PRODUCTS AND APPLICATIONS

The Company offers a broad range of standard and custom-designed RFICs.
Custom-designed products are usually developed for volume production orders from
large OEMs. Custom orders are normally manufactured on an exclusive basis for a
negotiated period. Once exclusivity periods expire, the Company attempts to
convert custom products into standard products to broaden its customer base and
leverage its design and product expenditures. At September 30, 1998, the Company
offered 126 products, and 40
30
<PAGE> 33
Description of Graphic in Business Section

This graphic, titled "Simplified digital handset," illustrates the basic
components of the RF section of a typical wireless communications system and the
sequence in which information traveling through such a system is applied to
these components. The bottom right corner contains the words "Baseband Section."
Immediately above is a line formed into a rectangular wave pattern, meant to
depict the passage of digital information. Immediately above this wave pattern
is an arrow pointing to the left, and to the pattern's left in descending order
are the letters "I" and "Q". A line leads to the left from each of these
letters, crossing a vertical dotted line that runs the length of the graphic and
denotes the division between the baseband section, which occupies approximately
one quarter of the graphic, and the RF section, which occupies the remainder of
the graphic. The words "RF Section" appear at the bottom of this latter section
Immediately above is a rectangle of dotted lines with the word "Transmitter" at
the top. Within this rectangle are, from right to left, a rectangle in which the
words "Quadrature Modulator" appear (and the right side of which the lines
extending from the letters "I" and "Q" in the baseband section touch), a
rectangle in which the word "Upconverter" appears and a triangle, pointing to
the left, in which the words "Linear PA" appear. These three shapes are linked
by a line that continues to the left of the triangle, passes through the left
side of the rectangle of dotted lines in which the three shapes are located, and
turns upward, where it reaches a stylized depiction of an antenna emitting a
signal that occupies the upper left corner of the graphic. The word "Antenna"
appears immediately below this depiction. The line continues upward and then
turns to the right, where it crosses into another rectangle of dotted lines.
This rectangle has the word "Receiver" immediately above it and contains three
rectangles that are linked by the line and contain the labels, from left to
right, "LNA/Mixer," "Gain Control IF Amplifier" and "Quadrature Demodulator."
From the right side of the rightmost rectangle, two parallel lines extend
rightward through the right side of the rectangle of dotted lines in which these
three shapes are located and across the vertical dotted line representing the
division between the RF section and the baseband section. Within the baseband
section, the two parallel lines reach another pair of the letters "I" and "Q,"
which are in descending order. To the right of these letters appears another
line formed into a rectangular wave pattern, meant to depict the passage of
digital information. Immediately above this pattern, in the upper right corner
of the graphic, is an arrow pointing to the right.

<PAGE> 34

additional products were in various stages of development. Below is a list of
the Company's current products by category, the semiconductor process technology
used to fabricate such products and the types of OEM devices into which such
products are incorporated.

<TABLE>
<CAPTION>
PRODUCT CATEGORY FABRICATION TECHNOLOGY END USER DEVICE
- -----------------------------------------------------------------------------------------------------------------
SILICON GAAS MESFET GAAS HBT
------- ----------- --------
<S> <C> <C> <C> <C>

Power Amplifiers - Cellular and PCS handsets
[check mark] [check mark] [check mark] - Cordless phones
- Industrial radios
- CATV line amplifiers
- -----------------------------------------------------------------------------------------------------------------
Quadrature - Cellular and PCS handsets
Modulators/ - Cellular and PCS base
Demodulators [check mark] [check mark] [check mark] stations
- Cordless phones
- Wireless LAN cards
- -----------------------------------------------------------------------------------------------------------------
Low Noise - Cellular and PCS handsets
Amplifiers/Mixers [check mark] [check mark] [check mark] - Cordless phones
- Wireless Security
- -----------------------------------------------------------------------------------------------------------------
IF Components - Cellular and PCS handsets
[check mark] - Cordless phones
- Industrial radios
- -----------------------------------------------------------------------------------------------------------------
Gain Blocks - Cellular and PCS handsets
[check mark] [check mark] [check mark] - Cordless phones
- Instruments
- -----------------------------------------------------------------------------------------------------------------
Transmitters, - Wireless meter
Receivers and reading
Transceivers [check mark] - Cordless phones
- Keyless car locks
- Monitoring devices
- Interactive toys
- -----------------------------------------------------------------------------------------------------------------
Attenuators - Cellular and PCS handsets
[check mark] - Cellular PCS base stations
- Instruments
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

Power Amplifiers

Power amplifiers provide signal amplification in the transmitter section of
a wireless system in order to boost a signal through the antenna. Power
amplifiers operate at different frequencies, power levels and air interface
standards and generally are classified either as linear amplifiers, which add a
minimum amount of distortion to the shape of the input signal, or non-linear
amplifiers, which are used in analog devices. Power amplifiers are often the
most critical RF component for a number of reasons. They frequently are the most
expensive component and are difficult to design and implement. In addition,
power amplifiers normally use the greatest amount of battery power in a handset,
which impacts talk time, and they generally dissipate the greatest amount of
heat. The Company's GaAs HBT power amplifiers offer low distortion, small size,
high efficiency, improved linearity and operation from a single polarity power
source.

31
<PAGE> 35

Quadrature Modulators/Demodulators

Quadrature modulators are devices in the transmitter section of a wireless
system that combine digital information with an RF signal by varying the phase
and amplitude of the signal so that the resulting signal can be transmitted.
Quadrature demodulators reverse this process in the receiver section by taking
received RF signals and recovering the embedded digital information for further
processing.

Low Noise Amplifiers/Mixers

A LNA is a device in the receiver section of a wireless system that
receives signals from an antenna at extremely low microvolt levels and amplifies
such signals by a factor of approximately 10 to 1,000 times with the addition of
as little "white noise" as possible. In general, the less noise added by a LNA,
the weaker the signal it can process. LNAs are commonly integrated into circuits
with mixers (also referred to as "down-mixers" or "down converters"), and this
combination generally is referred to as a "receiver front end." Mixers accept
the filtered output from the LNA, which is typically at a high frequency and
difficult to process, and mix it with a local oscillator signal to produce a
lower frequency (IF) signal, which is easier to process.

IF Components

In a typical handset, high frequency RF signals are converted into lower
frequency IF signals by the LNA/Mixer and then to baseband in the receive
functions. In the transmit function, baseband inputs (e.g., voice) are converted
from analog to digital form and processed through the IF range to the higher RF
frequency before transmission through the antenna. RFMD's IF devices include
digitally controlled IF amplifiers, which amplify baseband signals after they
have been converted from analog to digital form, and IF amplifiers with
automatic gain control and received signal strength indicators, which are used
for IF-to-baseband conversion in the receive mode.

Gain Blocks

Gain blocks are simple general purpose amplifiers that boost signals over a
broad frequency range. They are used for amplifier applications whenever noise
is not a concern and whenever a signal's strength has been diminished by
processing through a filter or other component.

Transmitters, Receivers and Transceivers

Single chip transmitters and receivers send and receive wireless signals.
Transceivers are highly integrated circuits that combine transmitters with
receivers into a single device. Because this degree of integration generally
results in some performance compromises, single chip transceivers tend to be
used in cost-sensitive applications where performance is less critical.

Attenuators

An attenuator is a device that reduces the level of an input signal by
controllable amounts. RFMD's attenuators are programmable through use of an
external analog or digital control signal to reduce signals to desired levels
with minimal noise and signal loss when the device is not active. Like gain
blocks, attenuators have many applications both within and outside the wireless
markets.

32
<PAGE> 36

CUSTOMERS

The following list identifies, by market, customers of the Company that
have placed cumulative orders of greater than $50,000 in the 12 months ended
September 30, 1998.

<S> <C> <C> <C> <C>
CELLULAR/PCS HANDSETS CELLULAR/PCS BASE STATIONS OTHER WIRELESS APPLICATIONS
Nokia Mobile Phones Ltd. Ericsson Mobile Tellabs Operations, Inc.
Siemens A.G. Communications (Wireless Local Loop)
Philips N.V. Motorola Inc.
Motorola Inc. Lucent Technologies Lucent Technologies, Inc.
Bosch Telecom, Inc. Powerware Technologies, Inc. SpectraLink Corporation,
LG Information & Communications, Ltd. SCI Systems, Inc. Hexagram, Inc.
NEC Corp. Spectrian Corporation (Cordless Telephones)
Hyundai Electronics Industries Co., Sanmina Corporation
Ltd. Powerwave Technologies, Inc. Motorola Inc.
Sony Electronics, Inc. (Paging; Industrial Radios)
Samsung America Inc. WIRELESS DATA
Internix, Incorporated Lucent Technologies, Inc. Alcatel Network Systems
Hanwha Telecommunications Co., LDT Research In Motion Limited (Point to Point Radio)
Appeal Telecommunications Co. Ltd.
Kyocera America, Inc. Shure Brothers Incorporated
Telson Electronics Co., Ltd. (Wireless Microphones)
Denso Wireless Communications Co., Ltd.
Pan Tech Engineering Corporation Hoshing Telecom Limited
Mitel Corporation (Child Locators)
Marshall Industries
Mattel, Inc.
(Toys)
Digital Security Controls Ltd.
(Wireless Security)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

The Company, TRW and Nokia have agreed in principle to cooperate to develop
and supply Nokia with RFICs that are manufactured using TRW's GaAs HBT
processes. The arrangement contemplates that the Company and Nokia will
negotiate separate agreements to address the development and supply of each
component. Pursuant to the arrangement, the Company has agreed to provide Nokia
with access to certain RFIC technologies and to its GaAs HBT wafer fabrication
facility, and Nokia has agreed to provide the Company with rights to bid for and
supply Nokia's requirements for certain RFICs.

Pursuant to separate agreements resulting from its arrangement with Nokia,
the Company has developed a number of RFICs and supplied them to Nokia in
commercial quantities. For the six months ended September 30, 1998, sales to
Nokia were approximately $41.4 million, representing approximately 75% of the
Company's revenue.

The agreement in principle among the Company, TRW and Nokia can be
terminated without penalty by any of the parties for any reason. This
arrangement does not obligate Nokia to purchase any additional products from the
Company, and there can be no assurance that Nokia will remain a significant
customer of the Company or that this relationship will continue.

SALES AND MARKETING

The Company sells its products worldwide directly to customers as well as
through a network of 18 domestic sales representative firms and 20 foreign sales
representative firms. One sales representative firm, Jittek, accounted for about
11.5% of the Company's revenue during the first six months of fiscal 1999. The
Company selects its domestic and foreign representatives based on technical
skills and sales experience, as well as the presence of complementary product
lines and the customer base served. The Company provides ongoing training to its
representatives to keep them knowledgeable of the Company's products. The
Company maintains an internal marketing organization that is responsible for
developing sales and advertising literature,

33
<PAGE> 37

such as product announcements, catalogs, brochures and magazine articles in
trade and other publications, and preparing technical presentations for industry
conferences.

The Company believes that maintaining a close relationship with customers
and providing customers with ongoing technical support is essential to customer
satisfaction in the wireless communications industry. The Company's Marketing
application staff interacts with customers during all stages of design and
production, provides customers with current product application notes and
engineering data, maintains regular contact with customer engineers and assists
in the resolution of technical problems. The Company assigns to its largest
customers a contract account manager who maintains regular contact with the
customer to determine its product needs and concerns. Members of senior
management also are involved in managing relationships with significant
customers. The Company believes that maintaining close contact with customers
improves their level of satisfaction and enables the Company to anticipate their
future product needs.

MANUFACTURING, PACKAGING AND TESTING

The Company's manufacturing cycle consists of semiconductor wafer
fabrication, assembly and packaging, and final product testing. The Company
recently began manufacturing GaAs HBT products at its new wafer fabrication
facility and also uses independent foundries located in the United States to
manufacture its products. The Company currently uses two independent foundries
to supply its silicon-based product requirements and one independent foundry to
supply its GaAs MESFET devices. The Company purchases a significant portion of
its GaAs HBT wafers from TRW. Although the Company's new wafer fabrication
facility recently became operational, the Company will continue to rely on
independent foundries for the manufacturing of a substantial portion of its
products for the foreseeable future. This reliance involves a number of risks,
including the possibility of material disruptions in the supply of key RFICs and
the lack of control over delivery schedules, manufacturing yields, quality and
fabrication costs.

In June 1998, the Company completed the first phase of an approximately
64,000 square foot fabrication facility adjacent to its primary facility in
Greensboro, North Carolina to fabricate four-inch diameter GaAs HBT wafers using
technologies licensed from TRW. This first phase, at a cost of approximately $40
million, involved construction of the building shell, installation and
certification of an approximately 10,300 square foot clean room and the purchase
or lease and installation of the required fabrication equipment. The Company has
completed the transfer of TRW's manufacturing process and molecular beam
epitaxial ("MBE") process for producing wafer start material. The Company began
shipping commercial quantities of integrated circuits from this facility in
September 1998. The facility has been qualified by the Company's major customer
and other current and potential customers. Production at the facility is
expected to increase throughout fiscal 1999 and fiscal 2000 as additional
customers qualify the Company's fabrication facility and additional components
are manufactured.

The second phase, currently under construction, involves expansion of wafer
fabrication and MBE production capacity. This phase is budgeted at approximately
$40 million and includes an approximately 6,000 square foot expansion to the
clean room and the purchase or lease and installation of additional production
equipment. The completion of the second phase of the fabrication facility is
dependent on a number of factors both within and outside the control of the
Company and is currently scheduled to occur between December 1999 and July 2000,
depending on demand for the Company's products.

The Company maintains an inventory of certain standard products based on
its internal forecasts of expected demand for such products. For custom-designed
products, designs of the Company's products are verified by both the Company and
the customer before orders for production wafers are placed. Upon receipt of
orders from an OEM, the Company schedules production based on order size,
customer delivery requirements, production schedules and other production
considerations.

The Company currently uses five vendors located in Asia and one vendor
located in the United States to package and assemble its products. All of such
vendors are certified to applicable ISO 9000 series specifications, which means
that their operations have in each case been determined by independent examiners
to comply with certain internationally developed quality control standards. The
Company qualifies

34
<PAGE> 38

and monitors assembly contractors based on cost and quality. Such contractors
typically provide the Company with per-unit pricing.

The Company has encountered packaging quality problems with certain of such
vendors, particularly with regard to GaAs products. In particular, the Company
took non-recurring charges in the fourth fiscal quarter ending March 31, 1998 of
approximately $4.6 million to cover product returns and the establishment of
inventory reserves for products with packaging-related problems. The packaging
problem was confined to sales to one of the Company's significant customers
during a clearly identified assembly timeframe and, based on the Company's
failure analyses, was an unexpected result of process changes intended to
improve assembly yields that were initiated by the packaging vendor.
Improvements subsequently coordinated with the Company and implemented by the
vendor have resolved the problem and the parts have been requalified to the
satisfaction of the Company and its customer. In addition, the Company
experienced quality problems with parts packaged by a second vendor during
fiscal 1998 and has since ceased to use such vendor's services. The Company has
taken steps to improve the reliability of packaging quality, including the
recent hiring of a Vice President of Quality, the expansion of its in-house
package testing and qualification line and the employment of additional
packaging engineers to engage in both package testing and the development of new
packaging designs; however, there can be no assurance that the Company will not
experience additional packaging quality problems in the future. The Company
believes that it will have to continue to monitor closely its vendors as
production volumes increase.

STRATEGIC RELATIONSHIP WITH TRW

In June 1996, the Company and TRW entered into a broad strategic
relationship based on several agreements that evidence an investment by TRW in
RFMD, a technology license from TRW to the Company (the "License Agreement") and
a supply arrangement between the parties (the "Supply Agreement"). As a part of
such alliance, TRW provided the Company with $25 million of equity and debt
financing and became a significant shareholder in the Company. The key goal of
the Company in entering into this alliance was to enable the Company to
construct a four-inch wafer fabrication facility to manufacture products using
GaAs HBT technologies developed by TRW and licensed to the Company.

Pursuant to the License Agreement, TRW has granted to the Company fully
paid up, royalty-free, worldwide licenses with respect to certain of TRW's
existing and future GaAs HBT patent rights and MBE process patent rights, with
accompanying know-how and technical information, to design, develop,
manufacture, market, service and repair certain existing products of the Company
and any GaAs HBT product in which the emitter of the GaAs HBT has a width of one
to three microns. Such products must be for commercial wireless communications
applications and operate on signals having a frequency of less than 10 GHz. The
license with respect to the GaAs HBT rights became effective in June 1996, and
the MBE license became effective on June 15, 1998, the date agreed upon by the
Company and TRW as the point at which the Company's wafer fabrication facility
became operational. Subject to TRW's right to use the licensed technology to
fulfill existing contractual obligations and to provide to customers on an
ongoing basis certain specified foundry services, both licenses are exclusive as
to all persons including TRW, but may be made non-exclusive at the option of TRW
if the Company fails to meet certain revenue goals.

TRW also granted non-exclusive licenses to the Company to use certain of
its existing GaAs HBT rights and MBE rights for the development and sale of
certain of the Company's existing products for applications other than
commercial wireless communications or that operate on signals having a frequency
of 10 GHz or more. The License Agreement provides that TRW will offer to the
Company, on the same terms as are offered to third parties, certain future
non-HBT related technologies that it develops for a period of 10 years following
June 15, 1998, which is the date on which the Company's wafer fabrication
facility became operational. The Company has agreed to share with TRW any
modifications or improvements that it makes in the technology or the products
developed therefrom, and to grant TRW a non-exclusive, royalty-free license to
use such modifications or improvements in applications outside the Company's
field of use. The licenses granted pursuant to the License Agreement are granted
without representation or warranty as to validity or noninfringement. Upon any
termination of the License Agreement for default, whether due to the default of
the Company or otherwise, the Company's rights to TRW's technologies would
cease.
35
<PAGE> 39

Under the terms of the Supply Agreement, the Company has agreed to purchase
from TRW, and TRW has agreed to sell to the Company, certain minimum quantities
of three-inch GaAs HBT processed wafers and four-inch GaAs epitaxial wafer
starting material until December 31, 2000. The Company currently is purchasing
from TRW quantities of wafers in excess of the minimum number required to be
delivered by TRW to the Company under the Supply Agreement, but the Company
believes that its purchases from TRW will decline to the minimum quantities of
wafers required to be supplied under such contract.

RESEARCH AND DEVELOPMENT

The Company's research and development efforts are focused primarily on the
development of new integrated circuit products. At September 30, 1998, there
were 80 persons in the Company's research and development organization. The
Company's research and development efforts also are directed at improving
manufacturing processes and yields. The Company does not separately account for
Company-sponsored and customer-sponsored research and development expenses.

In fiscal 1996, 1997 and 1998 and the first half of fiscal 1999, the
Company incurred approximately $4.2 million, $6.2 million, $8.8 million and $6.0
million, respectively, of research and development expenses. The Company does
not separately account for Company-sponsored and customer-sponsored research and
development expenses.

The market for RFICs is characterized by rapid changes in product designs
and the emergence of new semiconductor technologies used to fabricate higher
performance devices. Because the demand of OEMs for continual improvements in
product performance is expected to increase, the Company believes that its
future success depends in part on its ability to design RFICs under emerging
wafer fabrication technologies that meet the cost and performance parameters of
its customers. Moreover, the Company believes it must be able to attract and
retain qualified research and development personnel.

COMPETITION

Competition in the markets for the Company's products is intense. The
Company faces competition from several companies engaged in the business of
designing, manufacturing and selling RFICs, as well as suppliers of discrete
products such as transistors, capacitors and resistors. The Company may face
future competition from companies that have or may develop GaAs HBT or other
fabrication processes. In addition, the Company's current and potential
competitors include OEMs that have or may develop the ability to produce RFICs
or discrete products internally for their own requirements. The Company's
primary competitors include Anadigics, Conexant Systems, Inc. (a subsidiary of
Rockwell International Corp.), Fujitsu, Hewlett-Packard, Hitachi, Motorola, NEC,
Philips, Raytheon, Siemens and TriQuint.

The Company believes that competition within the markets for its products
is driven primarily by the ability to design and deliver high performance and
price competitive products in sufficient quantities and in a timely manner.
Competition is also affected by the quality of customer service and technical
support and the ability to design customized products that address each
customer's particular requirements and cost limitations.

Many of the Company's current and potential competitors have entrenched
market positions, established patents, copyrights, trade names, trademarks and
intellectual property rights and substantial technological capabilities.
Further, many of the Company's competitors have significantly greater financial,
technical, manufacturing and marketing resources than the Company. Increased
competition could adversely affect the

36
<PAGE> 40

Company's revenue and profitability by causing it to reduce prices or by
reducing demand for the Company's products.

INTELLECTUAL PROPERTY

It is the Company's practice to seek U.S. patent and copyright protection
on its products and developments, where appropriate, and to protect its
proprietary technology under U.S. and foreign laws affording protection for
trade secrets and for integrated circuit designs. The Company owns two U.S.
patents for GaAs HBT power amplifiers, both of which were issued in 1997 and
will expire in 2015.

The Company relies primarily upon trade secrets, technical know-how and
other unpatented proprietary information relating to its product development and
manufacturing activities. To protect its trade secrets, technical know-how and
other proprietary information, the Company's employees are required to enter
into agreements providing for maintenance of confidentiality and the assignment
of rights to inventions made by them while in the employ of the Company. The
Company also has entered into non-disclosure agreements to protect its
confidential information delivered to third parties in conjunction with possible
corporate collaborations and for other purposes. However, there can be no
assurance that these types of agreements will effectively prevent unauthorized
disclosure of the Company's confidential information, that these agreements will
not be breached, that the Company would have adequate remedies for any breach or
that the Company's trade secrets and proprietary know-how will not otherwise
become known or independently discovered by others.

While the Company has not been involved in any patent or other intellectual
property rights litigation, there can be no assurance that third parties will
not assert claims against the Company or TRW with respect to existing and future
products. In the event of litigation to determine the validity of any third
party's claims, such litigation could result in significant expense to the
Company, and divert the efforts of the Company's technical and management
personnel, whether or not such litigation is determined in favor of the Company.
The wireless industry is subject to frequent litigation regarding patent and
other intellectual property rights. Leading companies and organizations in the
wireless industry have numerous patents that protect their intellectual property
rights in these areas. In the event of an adverse result of any such litigation,
the Company could be required to expend significant resources to develop
non-infringing technology or to obtain licenses to the technology which is the
subject of the litigation. There can be no assurance that the Company would be
successful in such development or that any such license would be available on
commercially reasonable terms.

BACKLOG

At March 31, 1998, the Company's backlog was approximately $42.8 million,
compared to approximately $19.2 million at the end of fiscal 1997. The Company
includes in its backlog all accepted product purchase orders for which delivery
has been specified within one year. Product orders in the Company's backlog are
subject to changes in delivery schedules or to cancellation at the option of the
purchaser without significant penalty. The Company's backlog may vary
significantly from time to time depending upon the level of capacity available
to satisfy unfilled orders. Accordingly, although useful for scheduling
production, backlog as of any particular date may not be a reliable indicator of
sales for any future period.

EMPLOYEES

At December 1, 1998, the Company had 348 full-time employees. The Company
believes that its future prospects will depend, in part, on its ability to
continue to attract and retain skilled technical, marketing and management
personnel. Competition for such personnel is intense, and the number of persons
with relevant experience, particularly in engineering, software design and
marketing, is limited. None of the Company's employees is represented by a labor
union, and the Company has never experienced any work stoppage. The Company
believes that its employee relations are good.

37
<PAGE> 41

PROPERTIES

The Company's principal administrative facility is located in a building
comprising approximately 25,000 square feet in Greensboro, North Carolina.
Pursuant to the lease agreement under which the Company leases this building,
the Company has exercised an option for an expansion of the facility through the
construction of an adjacent additional building consisting of approximately
34,000 square feet that is expected to be completed in January 1999. The term of
the lease for these facilities will be fifteen years from the date of completion
of this expansion, which is currently expected to occur in early calendar year
1999. The Company also leases real estate adjacent to its principal facility on
which its wafer fabrication facility, consisting currently of approximately
64,000 square feet, has been constructed. The lease for the fabrication facility
has a term expiring in May 2013, with two 10-year renewal options. The Company
has deposited $3.9 million under an escrow arrangement to secure its obligations
under this lease. The Company also leases approximately 17,500 square feet of
commercial space in Greensboro, North Carolina that it uses for office space and
storage. Such facility is leased under three leases that each expire on December
31, 1999. The Company owns 30 acres of land adjacent to its fabrication facility
which it anticipates using for future expansion.

ENVIRONMENTAL MATTERS

By virtue of operating its wafer fabrication facility, the Company is
subject to a variety of extensive and changing federal, state and local
governmental laws, regulations and ordinances related to the use, storage,
discharge and disposal of toxic, volatile or otherwise hazardous chemicals used
in the RFIC manufacturing process. Any failure to comply with such requirements
currently in effect or subsequently adopted could result in the imposition of
fines on the Company, the suspension of production or a cessation of operations.
In addition, such requirements could restrict the Company's ability to expand
its facilities or require the Company to acquire costly equipment or incur other
significant expenses to comply with environmental regulations or clean up
discharges. The Company believes that costs arising from existing environmental
laws will not have a material adverse effect on the Company's financial position
or results of operations. There can be no assurance, however, that the
environmental laws will not become more stringent in the future or that the
Company will not incur significant costs in the future in order to comply with
such laws.

38
<PAGE> 42

MANAGEMENT

The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
David A. Norbury....................... 47 President, Chief Executive Officer and
Director
William J. Pratt....................... 55 Chairman of the Board, Chief Technical
Officer and Director
Powell T. Seymour...................... 55 Vice President of Operations and
Secretary
Jerry D. Neal.......................... 53 Vice President of Sales and Marketing
William A. Priddy, Jr.................. 37 Chief Financial Officer, Vice President
of Administration and Treasurer
Arthur E. Geissberger.................. 45 Vice President of Wafer Fabrication
Operations
Robert C. Fleming...................... 41 Director
Dr. Albert E. Paladino................. 65 Director
Erik H. van der Kaay................... 58 Director
Walter H. Wilkinson, Jr................ 52 Director
Terri D. Zinkiewicz.................... 43 Director
</TABLE>

DAVID A. NORBURY has been President and Chief Executive Officer and a
director of the Company since September 1992. Mr. Norbury was employed as
President and Chief Executive Officer of Polylythics, Inc., a developer of
semiconductor technology based in Santa Clara, California, from August 1989 to
March 1991.

WILLIAM J. PRATT, a founder of the Company, was President of the Company
from February 1991 to September 1992 and has been Chairman and Chief Technical
Officer since September 1992. He has also been a director of the Company since
its inception. Prior to such time, Mr. Pratt was employed for 13 years with
Analog Devices, Inc. ("ADI"), an integrated circuit manufacturer, as Engineering
Manager and General Manager.

POWELL T. SEYMOUR, a founder of the Company, has been Vice President of
Operations and Secretary of the Company since its inception. Prior to such time,
Mr. Seymour was employed for 11 years with ADI as Manufacturing Engineer and
Manufacturing Engineer Manager. Mr. Seymour served as a director of the Company
from February 1992 to July 1993.

JERRY D. NEAL, a founder of the Company, has been Vice President of Sales
and Marketing of the Company since May 1991. Prior to such time, Mr. Neal was
employed for 10 years with ADI as Marketing Engineer, Marketing Manager and
Business Development Manager. Mr. Neal served as a director of the Company from
February 1992 to July 1993.

WILLIAM A. PRIDDY, JR. was Controller of the Company from December 1991 to
December 1993, became Treasurer in December 1993 and was Vice President of
Finance from December 1994 to July 1997. He became Chief Financial Officer and
Vice President of Administration in July 1997. Prior to joining the Company, Mr.
Priddy was employed for five years with ADI as Financial Analyst, Marketing
Analyst and Marketing Services Manager.

ARTHUR E. GEISSBERGER has been Vice President of Wafer Fabrication
Operations of the Company since July 1996. From February 1991 to July 1996, Mr.
Geissberger was employed with Alpha Industries, Inc., a manufacturer of
microwave and millimeter-wave frequency components and subsystems based in
Methuen, Massachusetts, as GaAs Wafer Fabrication Manager and Manager of Foundry
Operations.

ROBERT C. FLEMING became a director of the Company in November 1993. Mr.
Fleming founded Prism Venture Partners I L.P., a venture capital firm based in
Westwood, Massachusetts, in November 1995 and has

39
<PAGE> 43

been a general partner of that firm since that time. From July 1993 to April
1995, he was a general partner with Norwest Venture Capital, a venture capital
firm based in Wellesley, Massachusetts. From 1989 to June 1993, he was a general
partner of Orien Ventures II L.P., a venture capital firm affiliated with The
Vista Group of Del Mar, California.

DR. ALBERT E. PALADINO became a director of the Company in March 1992. He
has served as the Chairman of Millitech Corporation since 1992. Dr. Paladino has
also served on the Board of Directors of TranSwitch Corporation since its
inception in 1988, and as a partner of Advanced Technology Ventures, a venture
capital investment partnership, since 1981. Before joining Millitech, he held
senior positions with Raytheon Company, GTE Laboratories, the National Institute
of Standards and Technology and the Congressional Office of Technology
Assessment.

ERIK H. VAN DER KAAY became a director of the Company in July 1996. Mr. van
der Kaay has been President and Chief Executive Officer of Datum Inc., a
synchronization products company based in Irvine, California, since April 1998.
He was employed in various capacities, most recently as Executive Vice
President, with Allen Telecom Inc., a telecommunications company based in
Beachwood, Ohio, from August 1992 to March 1998.

WALTER H. WILKINSON, JR. became a director of the Company in March 1992.
Mr. Wilkinson is a general partner of Kitty Hawk Capital, a venture capital firm
based in Charlotte, North Carolina that he founded in 1980.

TERRI D. ZINKIEWICZ became a director of the Company in February 1997. Ms.
Zinkiewicz has been employed with TRW in various capacities during the past 17
years, most recently as Controller of the Space and Electronics Group.

Pursuant to the Company's bylaws, the Board of Directors consists of seven
to nine members, as determined by the Board from time to time. Directors are
elected annually to serve for one-year terms and until their successors are duly
elected and qualified. Executive officers of the Company are elected annually by
the Board of Directors and serve until their successors are elected and
qualified. There are no family relationships among any of the directors or
officers of the Company.

40
<PAGE> 44

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of December 26, 1998, and
as adjusted to reflect the sale of the shares of Common Stock offered hereby
(assuming no exercise of the Underwriters' over-allotment option), by (i) each
person (or group of affiliated persons) who is known by the Company to own
beneficially 5% or more of the Company's Common Stock, (ii) each of the
Company's directors, (iii) each of the Company's current shareholders who is
expected to sell shares in this offering and (iv) all directors and executive
officers as a group. Except as indicated in the footnotes to the table, the
persons named in the table have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by them, subject to
community property laws where applicable.

<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING AFTER OFFERING
---------------------- NUMBER OF ----------------------
NAME OF BENEFICIAL OWNER (1) NUMBER PERCENTAGE SHARES OFFERED NUMBER PERCENTAGE
- ---------------------------- --------- ---------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
TRW Inc.(2).............................. 5,621,487 32.6% 250,000 5,371,487 27.9%
William J. Pratt(3)...................... 356,827 2.1 -- 356,827 1.9
David A. Norbury(4)...................... 122,905 * -- 122,905 *
Walter H. Wilkinson, Jr.(5).............. 64,499 * -- 64,499 *
Dr. Albert E. Paladino(6)................ 55,000 * -- 55,000 *
Erik H. van der Kaay(7).................. 22,669 * -- 22,669 *
Robert C. Fleming(8)..................... 10,300 * -- 10,300 *
Directors and executive officers
as a group (11 persons)(9)............. 936,594 5.4 -- 936,594 4.8
</TABLE>

- ---------------

* Less than 1% of the Company's outstanding Common Stock.

(1) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares beneficially owned by a person
and the percentage ownership of that person, shares of Common Stock subject
to options held by that person that are currently exercisable or exercisable
within 60 days of December 26, 1998 are deemed outstanding. Such shares,
however, are not deemed outstanding for the purposes of computing the
percentage ownership of each other person. Except as indicated in the
footnotes to this table and pursuant to applicable community property laws,
each shareholder named in the table has sole voting and investment power
with respect to the shares set forth opposite such shareholder's name.
Percentage of ownership is based on 17,234,705 shares of Common Stock
outstanding on December 26, 1998. Unless otherwise indicated, the address of
each of the individuals named above is: RF Micro Devices, Inc., 7625
Thorndike Road, Greensboro, North Carolina 27409.

(2) Terri D. Zinkiewicz, who is a director of the Company, is Controller of the
Space and Electronics Group of TRW. Ms. Zinkiewicz does not hold any voting
or investment power over such shares. TRW's address is 1900 Richmond Road,
Cleveland, Ohio 44124.
(3) Includes 49,760 shares of Common Stock issuable upon the exercise of options
granted under the Company's 1992 Stock Option Plan (the "Stock Option
Plan").
(4) Includes 38,480 shares of Common Stock issuable upon the exercise of options
granted under the Stock Option Plan.
(5) Includes 10,000 shares of Common Stock issuable upon the exercise of options
granted under the Nonemployee Directors' Stock Option Plan (the "Directors'
Plan").
(6) Includes 10,000 shares of Common Stock issuable upon the exercise of options
granted under the Directors' Plan.
(7) Includes 10,000 shares of Common Stock issuable upon the exercise of options
granted under the Directors' Plan.
(8) Includes 10,000 shares of Common Stock issuable upon the exercise of options
granted under the Directors' Plan.
(9) Includes (i) 166,906 shares of Common Stock issuable upon the exercise of
options granted under the Stock Option Plan and (ii) 40,000 shares of Common
Stock issuable upon the exercise of options granted under the Directors'
Plan.

41
<PAGE> 45

UNDERWRITING

Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1999 (the "Underwriting Agreement"), the
underwriters named below (the "Underwriters"), for whom Credit Suisse First
Boston Corporation, CIBC Oppenheimer Corp., Hambrecht & Quist LLC and
NationsBanc Montgomery Securities LLC, are acting as representatives (the
"Representatives"), have severally, but not jointly, agreed to purchase from the
Company and TRW the following respective numbers of shares of Common Stock:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ----------
<S> <C>
Credit Suisse First Boston Corporation......................
CIBC Oppenheimer Corp.......................................
Hambrecht & Quist LLC.......................................
NationsBanc Montgomery Securities LLC.......................
----------
Total..................................................
==========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, and that the
Underwriters will be obligated to purchase all of the shares of Common Stock
offered hereby (other than those shares covered by the over-allotment option
described below) if any are purchased. The Underwriting Agreement provides that,
in the event of a default by an Underwriter, in certain circumstances the
purchase commitments of non-defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.

The Company and TRW have granted to the Underwriters an option exercisable
by Credit Suisse First Boston Corporation, expiring at the close of business on
the 30th day after the date of this Prospectus, to purchase up to 337,500
additional shares of Common Stock at the offering price, less underwriting
discounts and commissions, all as set forth on the cover page of this
Prospectus. Such option may be exercised only to cover over-allotments in the
sale of the shares of Common Stock. To the extent that the option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares of Common
Stock as it was obligated to purchase pursuant to the Underwriting Agreement.

The Company and TRW have been advised by the Representatives that the
Underwriters propose to offer the shares of Common Stock to the public initially
at the public offering price set forth on the cover page of this Prospectus and,
through the Representatives, to certain dealers at such price less a concession
of $ per share, and the Underwriters and such dealers may allow a
discount of $ per share on sales to certain other dealers. After the
Offering, the public offering price and concession and discount to dealers may
be changed by the Representatives.

The following table summarizes the compensation to be paid to the
Underwriters by the Company and TRW, and the expenses payable by the Company.

<TABLE>
<CAPTION>
TOTAL
-------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting Discounts and Commissions paid by the
Company................................................
Expenses payable by the Company..........................
Underwriting Discounts and Commissions paid by TRW.......
</TABLE>

The Company and certain of its directors, officers and shareholders
(including TRW) have agreed that they will not offer, sell, contract to sell,
announce their intention to sell, pledge or otherwise dispose of, directly or
indirectly, or, in the case of the Company file with the Securities and Exchange
Commission (the "Commission") a registration statement under the Securities Act
of 1933 (the "Securities Act") relating to any additional shares of the Common
Stock or securities convertible into or exchangeable or exercisable for

42
<PAGE> 46

any shares of the Common Stock, without the prior written consent of Credit
Suisse First Boston Corporation for a period of 90 days after the date of this
Prospectus.

The Company and TRW have each agreed to indemnify the Underwriters against
certain liabilities, including civil liabilities under the Securities Act, or
contribute to payments that the Underwriters may be required to make in respect
thereof.

The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions,
penalty bids and "passive" market making in accordance with Regulation M under
the Securities Exchange Act of 1934 (the "Exchange Act"). Over-allotment
involves syndicate sales in excess of the offering size, which creates a
syndicate short position. Stabilizing transactions permit bids to purchase the
underlying security so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of the shares of
Common Stock in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the
Representatives to reclaim a selling concession from a syndicate member when the
shares of Common Stock originally sold by such syndicate member are purchased in
a syndicate covering transaction to cover syndicate short positions. In
"passive" market making, market makers in the Common Stock who are Underwriters
or prospective Underwriters may, subject to certain limitations, make bids for
or purchases of the Common Stock until the time, if any, at which a stabilizing
bid is made. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the Common Stock to be higher than it would
otherwise be in the absence of such transactions. These transactions may be
effected on The Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company and TRW
prepare and file a prospectus with the securities regulatory authorities in each
province where trades of Common Stock are effected. Accordingly, any resale of
the Common Stock in Canada must be made in accordance with applicable securities
laws which will vary depending on the relevant jurisdiction, and which may
require resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the Common Stock.

REPRESENTATIONS OF PURCHASERS

Each purchaser of Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company, TRW and the dealer from
whom such purchase confirmation is received that (i) such purchaser is entitled
under applicable provincial securities laws to purchase such Common Stock
without the benefit of a prospectus qualified under such securities laws, (ii)
where required by law, such purchaser is purchasing as principal and not as
agent and (iii) such purchaser has reviewed the text above under "Resale
Restrictions".

RIGHTS OF ACTION (ONTARIO PURCHASERS)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or recission or rights of action under
the civil liability provisions of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

All of the issuer's directors and officers as well as the experts named
herein and TRW may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process
43
<PAGE> 47

within Canada upon the issuer or such persons. All or a substantial portion of
the assets of the issuer and such persons may be located outside of Canada and,
as a result, it may not be possible to satisfy a judgment against the issuer or
such persons in Canada or to enforce a judgment obtained in Canadian courts
against such issuer or persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of Common Stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Common Stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from the Company. Only one
such report must be filed in respect of Common Stock acquired on the same date
and under the same prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of Common Stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the Common
Stock in their particular circumstances and with respect to the eligibility of
the Common Stock for investment by the purchaser under relevant Canadian
Legislation.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Womble Carlyle Sandridge & Rice, PLLC, Winston-Salem, North Carolina.
Certain legal matters in connection with this offering will be passed upon for
the Underwriters by Hale and Dorr LLP, Washington, D.C.

EXPERTS

The Financial Statements of the Company at March 31, 1997 and 1998 and for
each of the three years in the period ended March 31, 1998 appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein and are included in reliance on their report as experts in accounting and
auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-3 to register the common stock offered by this Prospectus. You should note
that this Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules to the Registration
Statement. We encourage you to read carefully the Registration Statement and its
exhibits and schedules. Statements made in this Prospectus about any contract or
other document are not necessarily complete and in each instance in which a copy
of such contract is filed with, or incorporated by reference in, the
Registration Statement as an exhibit, reference is made to such copy, and each
such statement shall be deemed qualified in all respects by such reference. We
also file annual, quarterly and special reports, proxy statements and other
information with the Commission. You may inspect and copy such material at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as at the Commission's regional
offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7
World Trade Center, Suite 1300, New York, New York 10048. You may also obtain
copies of such material from the Commission at prescribed rates by wiring to the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549. For further information on the public reference rooms, you may call
the Commission at 1-800-SEC-0330. Our Commission filings are also available to
the public from the Commission's Website at www.sec.gov. The Company's Common
Stock is quoted on the Nasdaq National Market, and reports, proxy statements and
other information concerning the Company also may be inspected at the offices of
Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
44
<PAGE> 48

RF MICRO DEVICES, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-2
Financial Statements
Balance Sheets as of March 31, 1997 and 1998 (Audited) and
September 30, 1998 (Unaudited)......................... F-3
Statements of Operations for the years ended March 31,
1996, 1997 and 1998 (Audited) and for the six months
ended September 30, 1997 and 1998 (Unaudited).......... F-4
Statements of Redeemable Convertible Preferred Stock and
Shareholders' Equity for the years ended March 31,
1996, 1997 and 1998 (Audited) and for the six months
ended September 30, 1997 and 1998 (Unaudited).......... F-5
Statements of Cash Flows for the years ended March 31,
1996, 1997 and 1998 (Audited) and for the six months
ended September 30, 1997 and 1998 (Unaudited).......... F-6
Notes to Financial Statements............................. F-7
</TABLE>

F-1
<PAGE> 49

REPORT OF INDEPENDENT AUDITORS

Board of Directors
RF Micro Devices, Inc.

We have audited the balance sheets of RF Micro Devices, Inc. as of March
31, 1997 and 1998 and the related statements of operations, redeemable
convertible preferred stock and shareholders' equity and cash flows for each of
the three years in the period ended March 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RF Micro Devices, Inc. at
March 31, 1997 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended March 31, 1998, in conformity
with generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

Raleigh, North Carolina
April 24, 1998

F-2
<PAGE> 50

RF MICRO DEVICES, INC.

BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
MARCH 31,
------------------- SEPTEMBER 30,
1997 1998 1998
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,330 $ 16,360 $ 16,844
Accounts receivable, less allowance of $510, $489 and $348
(Note 2)................................................ 2,401 6,993 14,908
Inventories (Note 3)...................................... 9,216 24,869 26,900
Other current assets...................................... 17 81 244
-------- -------- --------
Total current assets............................... 13,964 48,303 58,896
Property and equipment (Note 4):
Land...................................................... -- 1,934 1,934
Machinery and equipment................................... 2,999 19,196 36,523
Furniture, fixtures and improvements...................... 692 1,232 1,550
Computer equipment and software........................... 805 1,454 2,234
Leasehold improvements.................................... -- -- 13,610
-------- -------- --------
4,496 23,816 55,851
Less accumulated depreciation............................. (1,041) (1,966) (2,876)
-------- -------- --------
3,455 21,850 52,975
Construction in progress.................................. 1,233 14,917 3,840
Deposits on equipment..................................... 1,538 4,541 1,139
-------- -------- --------
Total property and equipment....................... 6,226 41,308 57,954
Cash restricted for capital additions....................... 12,358 -- --
Other assets................................................ 515 551 1,179
Technology license (Note 14)................................ 3,202 3,202 3,184
-------- -------- --------
Total assets....................................... $ 36,265 $ 93,364 $121,213
======== ======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable.......................................... $ 5,108 $ 10,273 $ 15,290
Accrued liabilities....................................... 699 754 2,652
Income taxes payable...................................... 49 -- 828
Line of credit (Note 5)................................... 350 -- --
Current maturities of long-term debt (Note 5)............. 178 -- --
Current obligations under capital leases (Note 4)......... 267 3,050 4,645
Deferred revenue.......................................... -- -- 247
-------- -------- --------
Total current liabilities.......................... 6,651 14,077 23,662
Long-term debt, less current maturities (Note 5)............ 117 -- --
Obligations under capital leases, less current maturities
(Note 4).................................................. 411 12,524 16,700
Note and accrued interest payable to shareholder (Note 6)... 10,301 -- --
-------- -------- --------
17,480 26,601 40,362
Redeemable convertible preferred stock (Note 10)............ 28,257 -- --
Shareholders' equity (deficiency):
Preferred stock, no par value; 5,000,000 shares
authorized; no shares issued and outstanding............ -- -- --
Common stock, no par value; 50,000,000 shares authorized;
3,286,010, 16,123,961 and 17,192,254 shares issued and
outstanding, respectively............................... 2,960 80,224 90,255
Additional paid-in capital................................ 550 -- --
Deferred compensation..................................... (269) (225) (195)
Accumulated deficit....................................... (12,713) (13,236) (9,209)
-------- -------- --------
Total shareholders' equity (deficiency)............ (9,472) 66,763 80,851
-------- -------- --------
Total liabilities and shareholders' equity......... $ 36,265 $ 93,364 $121,213
======== ======== ========
</TABLE>

See accompanying notes.

F-3
<PAGE> 51

RF MICRO DEVICES, INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
--------------------------- ------------------
1996 1997 1998 1997 1998
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales................................ $ 8,212 $27,852 $44,095 $18,617 $54,667
Engineering revenue.......................... 1,303 950 1,255 776 189
------- ------- ------- ------- -------
Total revenue.................................. 9,515 28,802 45,350 19,393 54,856
Costs and expenses:
Cost of goods sold........................... 7,471 15,826 29,246 9,991 37,293
Research and development..................... 4,245 6,178 8,761 4,168 6,000
Marketing and selling........................ 1,817 3,760 6,220 2,804 4,696
General and administrative................... 1,226 1,391 2,528 1,057 1,991
------- ------- ------- ------- -------
Total costs and expenses....................... 14,759 27,155 46,755 18,020 49,980
------- ------- ------- ------- -------
Income (loss) from operations.................. (5,244) 1,647 (1,405) 1,373 4,876
Interest expense............................... (81) (399) (184) (139) (324)
Interest income................................ 137 513 1,066 801 296
------- ------- ------- ------- -------
Income (loss) before income taxes.............. (5,188) 1,761 (523) 2,035 4,848
Income tax expense............................. -- (109) -- (45) (821)
------- ------- ------- ------- -------
Net income (loss).............................. $(5,188) $ 1,652 $ (523) $ 1,990 $ 4,027
======= ======= ======= ======= =======
Net earnings (loss) per share:
Basic........................................ $ (8.87) $ 0.59 $ (0.04) $ 0.18 $ 0.25
======= ======= ======= ======= =======
Diluted...................................... $ (8.87) $ 0.15 $ (0.04) $ 0.12 $ 0.23
======= ======= ======= ======= =======
Shares used in per share calculation:
Basic........................................ 585 2,778 13,509 11,151 16,222
======= ======= ======= ======= =======
Diluted...................................... 585 11,215 13,509 15,942 17,200
======= ======= ======= ======= =======
</TABLE>

See accompanying notes.

F-4
<PAGE> 52

RF MICRO DEVICES, INC.

STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
SHAREHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
REDEEMABLE CONVERTIBLE PREFERRED STOCK
--------------------------------------------------------
CLASS A-1 CLASS A-2 CLASS B CLASS C
PREFERRED PREFERRED PREFERRED PREFERRED
STOCK STOCK STOCK STOCK TOTAL
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1995..................................... $ 1,500 $ 1,750 $ 9,075 $ -- $ 12,325
Issuance of Class C preferred stock....................... -- -- -- 11,000 11,000
Net loss.................................................. -- -- -- -- --
------- ------- ------- -------- --------
Balance, March 31, 1996..................................... 1,500 1,750 9,075 11,000 23,325
Issuance of common stock.................................. -- -- -- -- --
Issuance of warrant....................................... -- -- -- -- --
Issuance of Class C preferred stock....................... -- -- -- 4,932 4,932
Deferred compensation related to grant of stock options... -- -- -- -- --
Amortization of deferred compensation..................... -- -- -- -- --
Net income................................................ -- -- -- -- --
------- ------- ------- -------- --------
Balance, March 31, 1997..................................... 1,500 1,750 9,075 15,932 28,257
Conversion of preferred stock............................. (1,500) (1,750) (9,075) (15,932) (28,257)
Conversion of note payable................................ -- -- -- -- --
Initial public offering of common stock................... -- -- -- -- --
Exercise of stock options and warrants.................... -- -- -- -- --
Issuance of common stock.................................. -- -- -- -- --
Amortization of deferred compensation..................... -- -- -- -- --
Net loss.................................................. -- -- -- -- --
------- ------- ------- -------- --------
Balance, March 31, 1998..................................... -- -- -- -- --
Exercise of stock options and warrants.................... -- -- -- -- --
Amortization of deferred compensation..................... -- -- -- -- --
Net income................................................ -- -- -- -- --
------- ------- ------- -------- --------
Balance, September 30, 1998 (Unaudited)..................... $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======== ========
</TABLE>

<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
--------------------------------------------------------------
ADDITIONAL
COMMON PAID-IN DEFERRED ACCUMULATED
STOCK CAPITAL COMPENSATION DEFICIT TOTAL
--------- ---------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1995............................. $ 8 $ -- $ -- $ (9,177) $ (9,169)
Issuance of Class C preferred stock............... -- -- -- -- --
Net loss.......................................... -- -- -- (5,188) (5,188)
------- ----- ----- -------- --------
Balance, March 31, 1996............................. 8 -- -- (14,365) (14,357)
Issuance of common stock.......................... 2,952 -- -- -- 2,952
Issuance of warrant............................... -- 250 -- -- 250
Issuance of Class C preferred stock............... -- -- -- -- --
Deferred compensation related to grant of stock
options......................................... -- 300 (300) -- --
Amortization of deferred compensation............. -- -- 31 -- 31
Net income........................................ -- -- -- 1,652 1,652
------- ----- ----- -------- --------
Balance, March 31, 1997............................. 2,960 550 (269) (12,713) (9,472)
Conversion of preferred stock..................... 28,257 -- -- -- 28,257
Conversion of note payable........................ 10,401 -- -- -- 10,401
Initial public offering of common stock........... 38,172 (550) -- -- 37,622
Exercise of stock options and warrants............ 286 -- -- -- 286
Issuance of common stock.......................... 148 -- -- -- 148
Amortization of deferred compensation............. -- -- 44 -- 44
Net loss.......................................... -- -- -- (523) (523)
------- ----- ----- -------- --------
Balance, March 31, 1998............................. 80,224 -- (225) (13,236) 66,763
Exercise of stock options and warrants............ 10,031 -- -- -- 10,031
Amortization of deferred compensation............. -- -- 30 -- 30
Net income........................................ -- -- -- 4,027 4,027
------- ----- ----- -------- --------
Balance, September 30, 1998 (Unaudited)............. $90,255 $ -- $(195) $ (9,209) $ 80,851
======= ===== ===== ======== ========
</TABLE>

See accompanying notes.

F-5
<PAGE> 53

RF MICRO DEVICES, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
----------------------------- --------------------------------
1996 1997 1998 1997 1998
-------- -------- ------- ------------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss)......................... $ (5,188) $ 1,652 $ (523) $ 1,990 $ 4,027
Adjustments to reconcile net income (loss)
to net cash used in operating
activities:
Depreciation.......................... 245 502 935 391 1,041
Accrued interest converted to
preferred stock.................... 31 -- -- -- --
Gain on disposal of equipment......... -- -- (11) -- --
Amortization of deferred
compensation....................... -- 31 44 -- 30
Changes in operating assets and
liabilities:
Accounts receivable................ (1,947) (102) (4,592) (3,236) (7,915)
Inventories........................ (1,781) (6,202) (15,653) (10,160) (2,031)
Other assets....................... (125) (400) (100) (698) (791)
Accounts payable................... 2,525 1,832 5,165 1,251 6,914
Accrued liabilities................ 48 698 155 136 --
Deferred Revenue................... -- -- -- -- 247
Income tax payable................. -- 49 (49) (42) 828
-------- -------- ------- -------- -------
Net cash used in operating activities..... (6,192) (1,940) (14,629) (10,368) 2,350
Investing activities:
Purchases of property and equipment....... (686) (4,793) (20,020) (14,447) (9,004)
Proceeds from sale of equipment........... -- -- 126 -- --
-------- -------- ------- -------- -------
Net cash used in investing activities..... (686) (4,793) (19,894) (14,447) (9,004)
Financing activities:
Net proceeds from Initial Public
Offering................................ -- -- 37,622 37,622 --
Proceeds from issuance of common stock.... -- -- 148 530 31
Proceeds from exercise of stock options
and warrants............................ -- -- 286 -- 10,000
Proceeds from bridge financing............ 1,500 -- -- -- --
Repayment of capital lease obligations.... (109) (286) (1,215) (133) (2,893)
Proceeds from issuance of redeemable
preferred stock......................... 9,469 4,932 -- -- --
(Decrease) increase in line of credit..... 350 -- (350) (350) --
Proceeds from note payable to
shareholder............................. -- 10,000 -- -- --
Proceeds from long-term debt.............. 128 273 -- -- --
Decrease (increase) in cash restricted for
capital additions....................... -- (12,358) 12,357 12,228 --
Repayments of long-term debt.............. (45) (136) (295) (295) --
-------- -------- ------- -------- -------
Net cash provided by financing
activities.............................. 11,293 2,425 48,553 49,602 7,138
-------- -------- ------- -------- -------
Net increase (decrease) in cash........... 4,415 (4,308) 14,030 24,787 484
Cash and cash equivalents at beginning of
period.................................. 2,223 6,638 2,330 2,330 16,360
-------- -------- ------- -------- -------
Cash and cash equivalents at end of
period.................................. $ 6,638 $ 2,330 $16,360 $ 27,117 $16,844
======== ======== ======= ======== =======
Supplemental disclosure of cash flow
information:
Cash paid during the period for
interest................................ $ 81 $ 134 $ 441 $ 139 $ 1,236
======== ======== ======= ======== =======
Cash paid during the period for income
taxes................................... $ -- $ 60 $ 61 $ -- $ --
======== ======== ======= ======== =======
Noncash investing and financing
activities:
Capital lease obligations incurred for new
equipment............................... $ 139 $ 826 $14,064 $ 905 $ 7,518
======== ======== ======= ======== =======
Conversion of bridge financing notes
payable to preferred stock.............. $ 1,500 $ -- $ -- $ -- $ --
======== ======== ======= ======== =======
</TABLE>

See accompanying notes.
F-6
<PAGE> 54

RF MICRO DEVICES, INC.

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998

1. COMPANY INFORMATION

The Company designs, develops, manufactures and markets proprietary radio
frequency integrated circuits ("RFICs") for wireless applications. These
applications include cellular and PCS handsets and basestations, cordless
telephones, wireless local loop handsets, wireless interactive toys, wireless
security systems, wireless data networks, pagers and remote meter reading
systems.

The Company addresses the various wireless markets by a product delivery
strategy called Optimum Technology Matching(R). This product delivery strategy
utilizes three distinct semiconductor process technologies including gallium
arsenide heterojunction bipolar transistor ("GaAs HBT"), silicon bipolar
transistor, and gallium arsenide metal semiconductor field effect transistor. In
June 1996, the Company and TRW Inc. ("TRW") entered into a license arrangement
whereby the Company was granted a worldwide, perpetual, royalty free license for
commercial wireless applications operating at frequencies less than 10 GHz.

The Company and a third party developer have completed construction of a
high volume GaAs HBT manufacturing facility to address the various markets for
this technology. Currently, the Company projects commercial production from this
facility will begin in the summer of 1998. Until then, the Company will purchase
all of its GaAs HBT parts exclusively from TRW.

In June 1997, the Company completed an initial public offering of no par
value common stock (the "Offering"). The Offering consisted of 3,455,550 shares
offered by the Company and 37,000 shares offered by selling shareholders. The
Offering price was $12 per common share resulting in net offering proceeds of
approximately $37,600,000. Simultaneously with the Offering, the redeemable
convertible preferred stock and the $10 million subordinated convertible note
payable to a shareholder of the Company were automatically converted into
7,954,320 and 1,111,111 shares of common stock, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

UNAUDITED SEPTEMBER 30, 1997 AND 1998 INTERIM FINANCIAL INFORMATION

The statements of operations and cash flows for the six-month periods ended
September 30, 1997 and 1998 and the balance sheet as of September 30, 1998 are
unaudited and reflect all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the financial position, results of operations and cash flows.
All information related to the six-month periods ended September 30, 1997 and
1998 is unaudited.

CASH AND CASH EQUIVALENTS

Cash equivalents consist of demand deposit accounts, money market funds and
temporary, highly liquid investments with original maturities of three months or
less when purchased.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation of property and
equipment is provided using the straight-line method over the estimated useful
lives of the assets, ranging from 3 to 15 years.

The Company is capitalizing the costs of bringing its wafer fabrication
facility to an operational state. The capitalized costs are included in
construction in progress in the accompanying balance sheet. Once the facility is
completed, has been certified by TRW and begins operation these costs will be
amortized over a 15-year period. Equipment used in the wafer fabrication
facility will be depreciated over a 6-year life once the facility commences
operations.

F-7
<PAGE> 55
RF MICRO DEVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

INVENTORIES

Inventories are stated at the lower of cost or market determined using the
average cost method. The Company's business is subject to the risk of
technological and design changes. The Company provides for potentially obsolete
or slow moving inventory based on management's analysis of inventory levels and
future sales forecasts at the end of each accounting period.

ACCOUNTING PERIODS

The Company uses a 52 or 53 week fiscal year ending on the Saturday closest
to March 31 of each year. The years ended March 28, 1996, March 29, 1997 and
March 30, 1998 were 52 week years. The Company's other fiscal quarters end on
the Saturday closest to June 30, September 30 and December 31 of each year. For
purposes of financial statement presentation, each fiscal year is described as
having ended on March 31 and each of the first three quarters of each fiscal
year is described as having ended on June 30, September 30 and December 31.

REVENUE RECOGNITION

Revenue from product sales is recognized when products are shipped. The
Company also enters into engineering agreements with certain customers relating
to the development of customer specific applications. Revenue is recognized for
engineering contracts when contract milestones are met.

The Company's products generally carry a one or two-year warranty against
defects depending on the specific type of product. The Company provides for
estimated warranty costs in the period the related sales are made.

RISKS AND UNCERTAINTIES

Pursuant to the strategic alliance with TRW (Note 14), TRW has granted to
the Company certain licenses to produce certain GaAs HBT products. The Company
is constructing a water fabrication facility and has begun testing the
manufacturing of its own GaAs HBT products covered by such licenses. These
licenses may be terminated by TRW if the fabrication facility is not operational
by December 31, 1998, and made non-exclusive by TRW if the Company does not meet
certain revenue goals. A decision by TRW to terminate the License Agreement, or
to make the licenses non-exclusive would have a material adverse effect on the
Company's operations. Currently, the Company expects to fulfill the requirements
of the license agreement.

Until the Company is able to internally produce GaAs HBT products it will
continue to purchase all such products from TRW. Sales of GaAs HBT products
represented 58%, 85% and 81% of the Company's total revenue in the years ended
March 31, 1996, 1997 and 1998, respectively. Failure by TRW to continue to
supply adequate quantities of product to the Company would have a material
adverse effect on the Company.

The demand for certain of the Company's products has exceeded supply
capacity and consequently, in certain instances, the Company has been unable to
meet requested delivery times and quantity requirements. Continuation of
capacity limitations may cause existing or potential customers to develop other
sources of supply.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. The Company makes estimates for the allowance for doubtful
accounts, inventory reserves and warranty reserves. Actual results could differ
materially from those estimates.

F-8
<PAGE> 56
RF MICRO DEVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

SALES AND ACCOUNTS RECEIVABLE

The Company operates in a single industry and is engaged in the design,
manufacture and sale of integrated circuits. Revenues from significant
customers, those representing 10% or more of total sales for the respective
periods, are summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------- SIX MONTHS ENDED
1996 1997 1998 SEPTEMBER 30, 1998
---- ---- ---- ------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Customer 1..................................... -- -- 42% 75%
Customer 2..................................... -- -- 13 6
Customer 3..................................... 12% -- -- 3
Customer 4..................................... -- 23% -- --
Customer 5..................................... 31 32 -- --
</TABLE>

Additionally, 23%, 67% and 84% of the Company's accounts receivable were
due from these significant customers at March 31, 1997 and 1998 and September
30, 1998, respectively.

Sales to customers by geographic region are summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------- SIX MONTHS ENDED
1996 1997 1998 SEPTEMBER 30, 1998
---- ---- ---- ------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
USA............................................ 76% 58% 50% 40%
Asia........................................... 12 33 24 29
Canada......................................... 10 2 3 2
Europe......................................... 2 7 23 29
</TABLE>

The Company's principal financial instrument subject to potential
concentration of credit risk is accounts receivable which are unsecured. The
Company provides an allowance for doubtful accounts equal to estimated losses
expected to be incurred in the collection of accounts receivable.

RESEARCH AND DEVELOPMENT

The Company charges all research and development costs to expense as
incurred.

NET INCOME (LOSS) PER COMMON SHARE

In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities, and only reflects actual common shares outstanding. Diluted earnings
per share is similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all periods have been presented, and
where appropriate, restated to conform to SFAS 128 requirements.

In addition, in February 1998, the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 98 ("SAB 98"), which revised the guidance
for earnings per share calculations in an IPO. As a result of SAB 98, the
Company restated its 1997 earnings per share of $0.14 as presented in its S-1
registration statement, by excluding the effect of cheap stock, which was
included in the calculation of weighted shares outstanding for the period prior
to the public offering.

F-9
<PAGE> 57
RF MICRO DEVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

INCOME TAXES

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). Under SFAS 109, the liability method is used in accounting for income
taxes and deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of assets and
liabilities.

STOCK-BASED COMPENSATION

The Company accounts for stock options in accordance with APB Opinion No.
25, "Accounting for Stock Issued to Employees." Under APB No. 25, no
compensation expense is recognized for stock options issued to employees at fair
value. For stock options granted at exercise prices below the deemed fair value,
the Company records deferred compensation expense for the difference between the
exercise price of the shares and the deemed fair market value. The deferred
compensation expense is amortized ratably over the vesting period of the related
options.

Statement of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation" ("SFAS 123"), provides an alternative to APB No. 25 in
accounting for stock based compensation issued to employees. SFAS 123 provides
for a fair value based method of accounting for employee stock options and
similar equity instruments. However, companies that continue to account for
stock based compensation arrangements under APB No. 25 are required by SFAS 123
to disclose the pro forma effect on net income (loss) and income (loss) per
share as if the fair value based method prescribed by SFAS 123 had been applied.
The Company has continued to account for stock based compensation using the
provisions of APB 25 and presents the pro forma disclosure requirements of SFAS
123 (see Note 12).

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997, FASB issued Statement No. 130, "Reporting Comprehensive
Income" ("SFAS 130") which is effective for fiscal years beginning after
December 15, 1997. SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in financial statements. The Company
adopted SFAS 130 in the first quarter of fiscal year 1999 and application of the
new rules is not expected to have a material impact on the Company's financial
statements.

In June 1997, the FASB issued Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131") which is
effective for fiscal years beginning after December 15, 1997. SFAS 131 changes
the way public companies report segment information in annual financial
statements and also requires those companies to report selected segment
information in interim financial statements to shareholders. SFAS 131 also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. Application of the new rules is not
expected to have a significant impact on the Company's financial statements.

F-10
<PAGE> 58
RF MICRO DEVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. INVENTORIES

The components of inventories are as follows (in thousands):

<TABLE>
<CAPTION>
MARCH 31,
--------------------
1997 1998 SEPTEMBER 30, 1998
------- ------- ------------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials.............................. $ 2,937 $ 6,356 $ 6,001
Work in process............................ 2,830 7,190 11,734
Finished goods............................. 4,296 14,036 10,971
------- ------- -------
10,063 27,582 28,706
Inventory allowances....................... (847) (2,713) (1,806)
------- ------- -------
Total inventories................ $ 9,216 $24,869 $26,900
======= ======= =======
</TABLE>

4. LEASES

The Company leases certain equipment under capital and operating leases.
The table below depicts leased equipment balances included in property and
equipment (in thousands):

<TABLE>
<CAPTION>
MARCH 31,
------------------
1997 1998 SEPTEMBER 30, 1998
------ ------ ------------------
(UNAUDITED)
<S> <C> <C> <C>
Machinery and equipment...................... $ 763 $1,170 $25,281
Accumulated amortization..................... (375) (249) (400)
------ ------ -------
$ 388 $ 921 $24,881
====== ====== =======
</TABLE>

The lease information shown above at March 31, 1997 and 1998 is for assets
not associated with the new wafer fabrication facility. The lease information at
September 30, 1998 includes assets associated with the new wafer fabrication
facility which were placed in service as of that date. Amortization of equipment
leases for the wafer fabrication facility will commence once the facility
becomes operational.

Capital lease amortization totaling approximately $77,000, $159,000,
$163,000 and $151,000 is included in depreciation expense for the years ended
March 31, 1996, 1997 and 1998 and for the six months ended September 30, 1998,
respectively.

Minimum future lease payments under noncancelable capital and operating
leases as of March 31, 1998 are (in thousands):

<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
<S> <C> <C>
1999........................................................ $ 4,513 $ 3,046
2000........................................................ 4,364 2,608
2001........................................................ 4,159 1,899
2002........................................................ 4,064 1,441
2003........................................................ 2,353 1,439
Thereafter.................................................. -- 10,801
------- -------
Total minimum payments............................ 19,453 $21,234
=======
Less interest............................................... (3,879)
-------
Present value of net minimum payments....................... 15,574
Less current portion........................................ (3,050)
-------
Long-term portion................................. $12,524
=======
</TABLE>

F-11
<PAGE> 59
RF MICRO DEVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Minimum future lease payments under noncancelable capital and operating
leases as of September 30, 1998 are $25.8 million and $19.8 million,
respectively.

Rent expense under operating leases, including building and equipment was
approximately $225,000, $660,000, $2,233,000 and $1,117,000 for the years ended
March 31, 1996, 1997 and 1998 and for the six months ended September 30, 1998,
respectively.

FACILITY CONSTRUCTION AND EQUIPMENT

The Company is committed to leasing from a third party real estate
developer a wafer fabrication facility which is under construction adjacent to
its existing facility. The first of the two phases was completed at March 31,
1998, and the facility began production shipments in September 1998. The second
phase is budgeted at approximately $30 million as of March 31, 1998. The
Company's lease arrangement with the developer is based on total estimated cost
to construct the facility. The term of this operating lease is 15 years with the
option to renew for two separate 10 year periods. Lease payments for the
facility and the related equipment began in September 1997 and January 1998,
respectively. Total future minimum lease payments of approximately $18.0 million
related to the facility operating lease and approximately $18.9 million related
to the equipment capital leases, based on costs incurred to date, are included
in the above table. Additionally, approximately $314,600 of interest expense
related to facility equipment under capital leases was capitalized in the year
ended March 31, 1998. The developer is providing partial construction financing
for the facility. For the remainder of the estimated construction costs, the
Company is obligated to put up cash deposits with the developer to fund the
construction.

In 1997, in connection with a financing commitment related to the
construction of the facility, the Company issued a warrant to purchase 41,322
shares of its common stock at an exercise price of $9.00 per share to an
equipment financing company.

The Company has available lease financing commitments with several finance
companies totaling approximately $7.7 million and $20.0 million at March 31,
1998 and September 30, 1998, respectively.

5. LINE OF CREDIT AND LONG-TERM DEBT

The Company maintains a $10 million revolving working capital line of
credit. The outstanding balance is limited to an amount equal to 80% of eligible
accounts receivable. The line commitment expires on December 18, 1998. At March
31, 1998, there was no outstanding balance on the line of credit. At March 31,
1997 the outstanding balance was $350,000. This line bears interest at the prime
rate and is collateralized by substantially all of the Company's assets. The
agreement contains provisions to allow the Company to utilize the line for
letters of credit and foreign exchange contracts, none of which are outstanding
for any of the periods presented (see Note 15).

The Company also maintains a $5 million equipment line of credit.
Borrowings on this line are converted to term loans, repayable in 48 equal
monthly installments at the time the draw is made. At March 31, 1997, 1998 the
outstanding balance on the equipment line notes was approximately $295,000 and
$0, respectively. These borrowings bear interest at the prime rate plus 0.25%
and are collateralized by substantially all of the Company's assets. The loan
agreements contain restrictions which, among other things, require maintenance
of certain financial ratios, liquidity and net worth and prohibit the payment of
dividends (see Note 15).

6. NOTE PAYABLE TO SHAREHOLDER

The $10,000,000 subordinated convertible note payable to shareholder
bearing interest at 6% converted into 1,111,111 shares of common stock at a
conversion rate of $9.00 per share upon completion of the Company's initial
public offering in June 1997. Accrued interest on this note of $400,822 was
forgiven by the holder and was included in the conversion upon the completion of
this offering.
F-12
<PAGE> 60
RF MICRO DEVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

7. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows (in thousands):

<TABLE>
<CAPTION>
MARCH 31,
------------------ SEPTEMBER 30,
1997 1998 1998
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax liabilities:
Accumulated depreciation......................... $ 110 $ 387 $ 456
Deferred tax assets:
Net operating loss carryforwards................. 1,274 1,672 796
Research and experimental credit carryforwards... 741 1,044 1,500
Research and development costs................... 2,629 1,762 1,347
Allowance for bad debts.......................... 200 93 171
Software costs................................... 109 99 99
Warranty reserve................................. 53 86 86
Inventory valuation.............................. 331 1,109 632
Alternative minimum tax credit carryforwards..... 109 109 109
Other............................................ 73 224 200
------- ------- -------
Total deferred tax assets.......................... 5,519 6,198 4,940
Deferred tax asset valuation allowance........... (5,409) (5,811) (4,484)
------- ------- -------
Net deferred tax assets............................ 110 387 456
------- ------- -------
Net deferred taxes....................... $ -- $ -- $ --
======= ======= =======
</TABLE>

A reconciliation of the provision for income taxes, which consists only of
federal alternative minimum tax in 1997, to income tax expense computed by
applying the statutory federal income tax rate to pre-tax earnings (loss) at
March 31, 1997, 1998 and September 30, 1998 is as follows (in thousands):

<TABLE>
<CAPTION>
MARCH 31,
-----------------------------------------
1997 1998 SEPTEMBER 30, 1998
------------------- ------------------- -------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
------ ---------- ------ ---------- ------ ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Income tax expense at statutory
federal rate................. $ (614) 34% $(177) 34% $1,697 35%
Increase (decrease)resulting
from:
Utilization of net loss
carryforwards............. (614) (34) 177 34 (876) (18)
Alternative minimum tax...... 109 6 -- -- -- --
------ --- ----- --- ------ ---
$ 109 6% $ -- --% $ 821 17%
====== === ===== === ====== ===
</TABLE>

At March 31, 1998 and September 30, 1998, the Company had federal net
operating loss carryforwards of approximately $4,275,000 and $2,040,000,
respectively, and research and experimental credit carryforwards of
approximately $1,044,000 and $1,500,000, respectively, for income tax purposes.
The tax benefits of these items are reflected in the accompanying table of
deferred tax assets and liabilities. If not used, these carryforwards begin to
expire in 2010. State net operating loss carryforwards begin to expire in the
year 2000. U.S. tax rules impose limitations on the use of net operating losses
following certain changes in ownership. If such a change occurs, the limitation
could reduce the amount of these benefits that would be available to offset
future taxable income each year, starting with the year of ownership change.

F-13
<PAGE> 61
RF MICRO DEVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

8. NET INCOME (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted net
income (loss) per share (in thousands, except per share data):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
--------------------------- -----------------
1996 1997 1998 1997 1998
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator for basic and diluted net income (loss)
per share:
Net income (loss)........................... $(5,188) $ 1,652 $ (523) $ 1,990 $ 4,027
Denominator:
Denominator for basic net income (loss) per
share -- weighted average shares............ 585 2,778 13,509 11,151 16,222
Effect of dilutive securities:
Convertible preferred stock................. -- 7,802 -- 3,940 --
Employee stock options...................... -- 635 -- 851 978
------- ------- ------- ------- -------
Denominator for diluted net income (loss) per
share adjusted weighted average shares and
assumed conversions............................ 585 11,215 13,509 15,942 17,200
Basic net income (loss) per share................ $ (8.87) $ 0.59 $ (0.04) $ 0.18 $ 0.25
Diluted net income (loss) per share.............. $ (8.87) $ 0.15 $ (0.04) $ 0.12 $ 0.23
</TABLE>

9. 401(k) PLAN

Each employee is eligible to participate in the Company's fully qualified
401(k) plan after three months of service. An employee may invest a maximum of
15% of pretax earnings in the plan. Employer contributions to the plan are made
at the discretion of the Company and its Board of Directors. An employee is
fully vested in the employer contribution portion of the plan after completion
of five continuous years of service. The Company contributed $97,602 during the
year ended March 31, 1998. No contributions to the plan were made during 1996 or
1997.

10. REDEEMABLE CONVERTIBLE VOTING PREFERRED STOCK

The Company's 975,000 shares of no par Class A-1 redeemable convertible
preferred stock, 1,034,091 shares of no par Class A-2 redeemable convertible
preferred stock, 3,300,000 shares of no par Class B redeemable convertible
preferred stock, and 2,645,229 shares of no par Class C redeemable convertible
preferred stock automatically converted into 7,954,320 shares of common stock on
a one-for-one basis upon completion of the Company's initial public offering in
June 1997.

11. EMPLOYEE STOCK PURCHASE PLAN

The Company has adopted the Employee Stock Purchase Plan ("ESPP"), which
qualifies as an "employee stock purchase plan" under Section 423 of the Code.
All regular full-time employees of the Company (including officers) and all
other employees who meet the eligibility requirements of the plan, may
participate in the ESPP. An aggregate of 500,000 shares of common stock have
been reserved for offering under the ESPP and are available for purchase
thereunder, subject to anti-dilution adjustments in the event of certain changes
in the capital structure of the Company. The Company makes no cash contributions
to the ESPP, but bears the expenses of its administration.

F-14
<PAGE> 62
RF MICRO DEVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

12. STOCK OPTIONS

1992 STOCK OPTION PLAN

The Company's 1992 Stock Option Plan (the "1992 Option Plan") was adopted
by the shareholders of the Company in February 1992. The 1992 Option Plan
provides for the granting of options to purchase common stock to key employees,
non-employee directors and advisors and consultants in the service of the
Company. The 1992 Option plan permits the granting of both incentive stock
options and nonqualified stock options. The aggregate number of shares of common
stock that may be issued pursuant to options granted under the 1992 Option Plan
may not exceed 1,426,000 shares, subject to adjustment upon occurrence of
certain events affecting the Company's capitalization.

1997 KEY EMPLOYEES' STOCK OPTION PLAN

The Company adopted the 1997 Key Employees' Stock Option Plan (the "1997
Option Plan"), which provides for the grant of options to purchase common stock
to key employees and independent contractors in the service of the Company. The
1997 Option Plan permits the granting of both incentive options and nonqualified
options. The aggregate number of shares of common stock that may be issued
pursuant to options granted under the 1997 Option Plan may not exceed 1,300,000
shares, subject to adjustment in the event of certain events affecting the
Company's capitalization.

DIRECTORS' OPTION PLAN

During 1997, the Company adopted the Directors' Option Plan. Under the
terms of this plan, directors who are not employees of the Company are entitled
to receive options to acquire shares of common stock. An aggregate of 200,000
shares of common stock have been reserved for issuance under this plan, subject
to adjustment for certain events affecting the Company's capitalization. During
the year ended March 31, 1998, the Company issued 40,000 options to eligible
participants under the plan.

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options. The Company has
recorded deferred compensation expense of $300,000 for the difference between
the grant price and the deemed fair value of certain of the Company's common
stock options granted in 1997.

Pro forma information regarding net income (loss) and net income (loss) per
share is required by SFAS 123, and has been determined as if the Company
accounted for its employee stock options under the fair value method of SFAS
123. The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following assumptions for the years
ended March 31, 1997 and 1998 and the six months ended September 30, 1998,
respectively: risk-free interest rates of 6%, 5.66% and 5.66%, no expected
dividends, volatility factors of .70, .877 and .877 and a weighted average
expected life of the options of five years.

F-15
<PAGE> 63
RF MICRO DEVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands except for per share information):

<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
------------------------- SIX MONTHS ENDED
1996 1997 1998 SEPTEMBER 30, 1998
------- ------ ------ ------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net income (loss)............................ $(5,188) $1,652 $ (523) $4,027
Pro forma net income (loss).................. (5,193) 1,608 (876) 3,656
Pro forma basic net income (loss) per
share...................................... (8.88) 0.58 (0.06) 0.23
Pro forma diluted net income (loss) per
share...................................... (8.88) 0.14 (0.06) 0.21
</TABLE>

A summary of the Company's stock option plan activity follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES OPTION PRICES
--------------------------- --------------------------------
AVAILABLE FOR OPTIONS PER SHARE
GRANT OUTSTANDING RANGE TOTAL
------------- ----------- -------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1995...................... 311,084 341,416 $ 0.15 - $.275 $ 60,383
Reserved.......................... -- -- -- --
Granted........................... (255,040) 255,040 0.275 - 0.91 160,675
Exercised......................... -- -- -- --
Canceled.......................... 2,250 (2,250) 0.15 - .275 (525)
Expired........................... -- -- -- --
--------- --------- -------------------- ----------
March 31, 1996...................... 58,294 594,206 $ 0.15 - $.91 220,533
Reserved.......................... 773,500 -- -- --
Granted........................... (463,060) 463,060 0.91 - 9.00 1,944,852
Exercised......................... -- (18,080) 0.15 - 0.275 (2,839)
Canceled.......................... 7,850 (7,850) 0.15 - 0.91 (2,370)
Expired........................... -- -- -- --
--------- --------- -------------------- ----------
March 31, 1997...................... 376,584 1,031,336 $ 0.15 - $9.00 2,160,176
Reserved.......................... 1,300,000 -- -- --
Granted........................... (293,575) 293,575 10.31 - 23.13 3,789,262
Exercised......................... -- (238,052) 0.15 - 6.05 (66,491)
Canceled.......................... 14,720 (14,720) 0.15 - 18.88 (145,101)
Expired........................... -- -- -- --
--------- --------- -------------------- ----------
March 31, 1998...................... 1,397,729 1,072,139 $ 0.15 - $23.13 $5,734,846
Reserved.......................... -- -- -- -- --
Granted........................... (212,875) 212,875 11.13 - 20.31 3,017,837
Exercised......................... -- (48,967) 0.15 - 12.00 (28,538)
Canceled.......................... 12,400 (12,400) 0.15 - 18.75 (59,428)
Expired........................... -- -- -- -- --
--------- --------- -------------------- ----------
September 30, 1998 (Unaudited)...... 1,197,254 1,223,647 $ 0.15 - $23.13 $8,664,717
========= ========= ==================== ==========
</TABLE>

Exercise prices for options outstanding as of March 31, 1998 and September
30, 1998, ranged from $0.15 to $23.13. The weighted average remaining
contractual life of outstanding options is 8.24 years at March 31, 1998. The
weighted average exercise price of outstanding options at March 31, 1998 is
$5.52. At March 31, 1998 and September 30, 1998, options to purchase 252,689 and
277,764 shares of common stock were exercisable, respectively.

F-16
<PAGE> 64
RF MICRO DEVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes in more detail information regarding the
Company's stock options outstanding at March 31, 1998:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS REMAINING OPTIONS
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISABLE
- -------------- ----------- ---------------- -----------
<S> <C> <C> <C>
$ 0.15........................................ 82,601 4.97 years 70,222
0.275....................................... 136,347 6.95 years 59,534
0.91........................................ 171,981 7.83 years 54,881
1.20........................................ 151,400 8.45 years 18,700
6.50........................................ 220,800 8.69 years 44,000
9.00........................................ 26,760 8.87 years 5,352
10.31 - 12.00................................ 172,750 9.56 years --
12.56 - 15.94................................ 60,000 9.79 years --
16.00 - 18.88................................ 36,000 9.41 years --
19.50 - 23.13................................ 13,500 9.32 years --
--------- -------
March 31, 1998................................ 1,072,139 252,689
========= =======
</TABLE>

Subsequent to March 31, 1998, 212,875 options were granted, 48,967 options
were exercised and 12,400 options were cancelled.

13. COMMON STOCK RESERVED FOR FUTURE ISSUANCE

At March 31, 1998 and September 30, 1998, the Company had reserved a total
of 4,200,541 and 3,151,574, respectively, of its authorized 50,000,000 shares of
common stock for future issuance as follows:

<TABLE>
<CAPTION>
MARCH 31, 1998 SEPTEMBER 30, 1998
-------------- ------------------
(UNAUDITED)
<S> <C> <C>
Outstanding stock options.............................. 1,072,139 1,223,647
Possible future issuance under stock option plans...... 1,397,729 1,197,254
Outstanding warrants issued to shareholders............ 1,041,322 41,322
Non-employee directors' option plan.................... 160,000 160,000
Employee stock purchase plan........................... 488,028 488,028
Possible future issuance related to lease agreements... 41,323 41,323
--------- ---------
Total shares reserved........................ 4,200,541 3,151,574
========= =========
</TABLE>

14. RELATED PARTY TRANSACTIONS

In connection with the bridge financing in 1996 which was subsequently
converted to preferred stock, the Company issued to a shareholder warrants that
entitle the holder to purchase 66,946 shares of common stock at exercise prices
ranging from $2.75 to $6.05 per share. These warrants were exercised in March
1998.

On June 6, 1996, the Company entered into a strategic alliance with TRW.
Pursuant to this alliance, the Company sold 826,445 shares of its Class C
preferred stock to TRW for net cash proceeds of $4,931,703.

Additionally, TRW granted to the Company a worldwide right and license to
make, have made, use and sell the products manufactured in the new wafer
fabrication facility currently under construction. This right and license will
become exclusive and perpetual upon completion of the condition discussed below.
In consideration of the license, the Company issued to TRW 2,683,930 shares of
restricted common stock valued at $2,952,323. The common stock is restricted in
that it is non-voting and non-transferable. These restrictions will lapse when
the Company successfully utilizes the TRW technology in its manufacturing
process in the

F-17
<PAGE> 65
RF MICRO DEVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

fabrication facility. If by December 31, 1998, the wafer foundry is not
operational, as defined in the agreement, TRW has the right to revoke the
license and the Company correspondingly has the right to redeem as much as
one-half of the TRW shares, for a nominal amount. At the option of TRW, the
license will become non-exclusive if the Company fails to meet the following
revenue goals, as measured in accordance with generally accepted accounting
principles, following the date on which the Company's wafer fabrication facility
becomes operational: during the first year, $30 million; during the second year,
$65 million; and during the third year, $125 million (see Note 15).

In connection with the licensing agreement, the Company issued a warrant to
TRW to purchase up to 1,000,000 shares of the Company's common stock at an
exercise price of $10.00 per share. The exercise price is subject to adjustment
in the event of certain changes, as defined by the agreement, affecting the
Company's capitalization. The TRW warrant first becomes exercisable on the date
that the Company's wafer facility becomes operational and thereafter must be
exercised before the first to occur or (i) the second anniversary of such date
and (ii) 90 days after the Company has provided notice to TRW that the current
market price of the Company's common stock is, and has been for at least 20
consecutive days, greater than $12.00 per share. If the Company's wafer facility
does not become operational by December 31, 1998, the warrant will terminate in
full. A value of $250,000 has been recorded for this warrant (see Note 15).

The restricted common stock and the related warrant have an aggregate value
of $3,202,323 which represents the cost of the Company's right to use the
technology and, accordingly, a related intangible asset has been recorded on the
Company's balance sheet. Amortization of this intangible asset will commence
when the wafer fabrication facility becomes operational and will be provided
using the straight-line method over a 15-year estimated useful life. Should the
technology license be revoked or made nonexclusive under the circumstances
described above, a resulting charge to income would be recorded to recognize
impairment, if any, of its value.

The Company has agreed to purchase from TRW, through the year 2000, certain
minimum quantities of wafers and wafer starting material used in its production
of RFIC's. The estimated minimum annual purchases are $35.0 million, $23.9
million, and $14.9 million in calendar years 1998, 1999 and 2000 respectively.

15. SUPPLEMENTARY UNAUDITED INFORMATION

In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities" ("SOP 98-5"), which is effective for financial
statements for fiscal years beginning after December 15, 1998. SOP 98-5 broadly
defines start-up activities and requires that start-up costs capitalized prior
to adoption of SOP 98-5 be written off as a cumulative effect of an accounting
change and that any future start-up costs be expensed as incurred. The Company
is required to adopt SOP 98-5 on or before April 1, 1999, and application is not
expected to have a significant impact on the Company's financial results of
operations.

In June 1998, the Company's wafer fabrication facility became operational
and accordingly, the restrictions on the common stock issued to TRW lapsed 30
days later. Additionally, TRW's right to revoke the license as described in Note
14 terminated since the wafer foundry became operational prior to December 31,
1998.

Upon the wafer fabrication facility becoming operational, the TRW warrant
described in Note 14 became exercisable and in September 1998, TRW exercised the
warrant and purchased 1,000,000 shares of the Company's common stock for $10.00
per share, resulting in proceeds to the Company of $10.0 million.

On July 14, 1998 the Company's credit agreements were amended and currently
provide for a $5.0 million working capital revolving line of credit and a $10.0
million term loan line of credit. Borrowings under

F-18
<PAGE> 66
RF MICRO DEVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

the working capital revolving credit line may be made and repaid at any time
until July 13, 1999 and bear interest at the prime rate (as announced by the
lender), payable monthly. Borrowings under the term loan can be made until July
13, 1999 in $2.5 million increments, and are repayable in 60 monthly
installments at the prime rate, with repayments to be completed by December 31,
2003. At September 30, 1998, there were no outstanding amounts under either of
these facilities.

The Company began commercial production from the wafer fabrication facility
in September 1998. Capitalized costs previously included in construction in
progress for assets which are in service were reclassified into leasehold
improvements and machinery and equipment, as appropriate, and amortization of
these assets commenced.

F-19
<PAGE> 67

(RF Micro Devices Logo)
<PAGE> 68

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of the Common Stock being registered hereby. All amounts are
estimates except the SEC registration fee and the NASD filing fee.

<TABLE>
<CAPTION>
AMOUNT TO BE PAID BY
REGISTRANT
--------------------
<S> <C>
SEC Registration Fee........................................ $ 33,470
NASD Filing Fee............................................. 16,737
NASDAQ National Market Additional Listing Fee............... 17,500
Printing.................................................... 150,000
Legal Fees and Expenses..................................... 120,000
Accounting Fees and Expenses................................ 75,000
Transfer Agent and Registrar Fees and Expenses.............. 3,250
Miscellaneous............................................... 34,043
--------
Total............................................. $450,000
========
</TABLE>

The Registrant intends to pay all expenses of registration, issuance and
distribution.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Sections 55-8-50 through 55-8-58 of the North Carolina Business Corporation
Act contain specific provisions relating to indemnification of directors and
officers of North Carolina corporations. In general, such sections provide that
(i) a corporation must indemnify a director or officer who is wholly successful
in his or her defense of a proceeding to which such person is a party because of
his or her status as such, unless limited by the articles of incorporation, and
(ii) a corporation may indemnify a director or officers if he or she is not
wholly successful in such defense, if it is determined as provided by statute
that the director or officer meets a certain standard of conduct, provided that
when a director or officer is liable to the corporation or is adjudged liable on
the basis that personal benefit was improperly received by him or her, the
corporation may not indemnify him or her. A director or officer of a corporation
who is a party to a proceeding may also apply to the courts for indemnification,
and the court may order indemnification under certain circumstances set forth in
the statute. A corporation may, in its articles of incorporation or bylaws or by
contract or resolution, provide indemnification in addition to that provided by
statute, subject to certain conditions.

The Registrant's bylaws provide for the indemnification of any director or
officer of the Registrant against liabilities and litigation expenses arising
out of his or her status as such, excluding (i) any liabilities or litigation
expenses relating to activities which were at the time taken known or believed
by such person to be clearly in conflict with the best interest of the
Registrant and (ii) that portion of any liabilities or litigation expenses with
respect to which such person is entitled to receive payment under any insurance
policy.

The Registrant's articles of incorporation provide for the elimination of
the personal liability of each director of the Registrant to the fullest extent
permitted by law.

The Registrant maintains directors' and officers' liability insurance under
which any controlling person, director or officer of the Registrant is insured
or indemnified against certain liabilities which he or she may incur in his or
her capacity as such.

Under the underwriting agreement to be entered into by the Registrant,
certain controlling persons, directors and officers of the Registrant may be
entitled to indemnification by underwriters who participate in the distribution
of securities covered by the Registration Statement against certain liabilities,
including liabilities under the Securities Act.

II-1
<PAGE> 69

ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1 -- Form of Underwriting Agreement
3.1 -- Articles of Incorporation of RF Micro Devices, Inc.*
3.2 -- Bylaws of RF Micro Devices, Inc.*
4.1 -- Specimen Certificate of Common Stock*
4.2 -- Warrant, dated February 25, 1997, for the purchase of up to
41,322 shares of Common Stock*
4.3 -- First Amended and Restated Loan and Security Agreement,
dated July 14, 1998, between RF Micro Devices, Inc. and
Silicon Valley Bank**
The registrant hereby undertakes to furnish to the
Securities and Exchange Commission, upon its request, a copy
of any instrument defining the rights of holders of
long-term debt of the registrant not filed herewith pursuant
to Item 601(b)(4)(iii) of Regulation S-K.
5 -- Opinion of Womble Carlyle Sandridge & Rice, PLLC
10.1 -- 1992 Stock Option Plan of RF Micro Devices, Inc.*
10.2 -- Form of Stock Option Agreement (1992 Stock Option Plan)*
10.3 -- 1997 Key Employees' Stock Option Plan of RF Micro Devices,
Inc.*
10.4 -- Form of Stock Option Agreement (1997 Key Employees' Stock
Option Plan)*
10.5 -- Nonemployee Directors' Stock Option Plan of RF Micro
Devices, Inc.*
10.6 -- Form of Stock Option Agreement (1997 Directors' Stock Option
Plan)*
10.7 -- Securities Purchase Agreement, dated June 6, 1996, between
RF Micro Devices, Inc. and TRW Inc.*
10.8 -- License and Technical Assistance Agreement, dated June 6,
1996, between RF Micro Devices, Inc. and the Electronic
Systems & Technology Division of the Space and Electronics
Group of TRW Inc.*
10.9 -- Supply Agreement, dated June 6, 1996, between RF Micro
Devices, Inc. and TRW Inc.*
10.10 -- Amendment to the Supply Agreement, dated June 6, 1996,
between RF Micro Devices, Inc. and TRW Inc.***
10.11 -- Restricted Stock Agreement, dated June 6, 1996, between RF
Micro Devices, Inc. and TRW Inc.*
10.12 -- Second Amended and Restated Registration Rights Agreement,
dated June 6, 1996, between RF Micro Devices, Inc. and
certain shareholders, as amended*
10.13 -- Lease Agreement, dated October 31, 1995, between RF Micro
Devices, Inc. and Piedmont Land Company, as amended*
10.14 -- Lease Agreement, dated October 9, 1996, between RF Micro
Devices, Inc. and Highwoods/ Forsyth Limited Partnership, as
amended*
10.15 -- Master Equipment Lease Agreement, dated as of December 2,
1996, between Finova Technology Finance, Inc. and RF Micro
Devices, Inc.*
23.1 -- Consent of Womble Carlyle Sandridge & Rice, PLLC (included
in Exhibit 5)
23.2 -- Consent of Ernst & Young LLP
24 -- Power of Attorney (included on the signature page of this
Registration Statement)+
</TABLE>

- ---------------

* Incorporated by reference to the exhibit filed with the registrant's
Registration Statement on Form S-1 (File No. 333-22625).

II-2
<PAGE> 70

** Incorporated by reference to the exhibit filed with the registrant's
Quarterly Report on Form 10-Q for the quarterly period ended September 26,
1998.
*** Incorporated by reference to the exhibit filed with the registrant's Annual
Report on Form 10-K for the fiscal year ended March 28, 1998.

+ Previously filed.

(b) Financial Statement Schedules

Schedule II -- Valuation and Qualifying Accounts, Years Ended March 31,
1996, 1997 and 1998 (Audited) and Six Months Ended September
30, 1998 (Unaudited).

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(1) That for purposes of determining any liability under the
Securities Act, the information omitted from the form of this prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.

(2) That for purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(3) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 15
of this Registration Statement or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933, and will be
governed by the final adjudication of such issue.

(4) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denomination and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.

II-3
<PAGE> 71

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Greensboro, State of North Carolina,
on January 21, 1999.

RF MICRO DEVICES, INC.

By: /s/ DAVID A. NORBURY
------------------------------------
David A. Norbury
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the registration statement has been signed by the following persons on
January 21, 1999 in the capacities indicated.

<TABLE>
<S> <C>
/s/ DAVID A. NORBURY /s/ WILLIAM A. PRIDDY, JR.
- -------------------------------------------- --------------------------------------------
David A. Norbury William A. Priddy, Jr.
President, Chief Executive Officer and Vice President, Chief Financial Officer and
Director (principal executive officer) Treasurer (principal financial and
accounting officer)

/s/ ROBERT C. FLEMING /s/ ERIK H. VAN DER KAAY
- -------------------------------------------- --------------------------------------------
Robert C. Fleming Erik H. van der Kaay
Director Director

/s/ ALBERT E. PALADINO /s/ WILLIAM J. PRATT
- -------------------------------------------- --------------------------------------------
Albert E. Paladino William J. Pratt
Director Director

/s/ WALTER H. WILKINSON, JR. /s/ TERRI D. ZINKIEWICZ
- -------------------------------------------- --------------------------------------------
Walter H. Wilkinson, Jr. Terri D. Zinkiewicz
Director Director
</TABLE>

II-4
<PAGE> 72

REPORT OF INDEPENDENT AUDITORS

Board of Directors
RF Micro Devices, Inc.

We have audited the financial statements of RF Micro Devices, Inc. as of
March 31, 1997 and 1998, and for each of the three years in the period ended
March 31, 1998, and have issued our report thereon dated April 24, 1998
(included elsewhere in the Registration Statement). Our audits also included the
financial statement schedule listed in Item 16(b) of this Registration
Statement. This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the schedule based on our audits.

In our opinion the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

/s/ ERNST & YOUNG LLP

Raleigh, North Carolina
April 24, 1998

II-5
<PAGE> 73

RF MICRO DEVICES, INC.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MARCH 31, 1996, 1997 AND 1998 (AUDITED) AND
SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND DEDUCTIONS BALANCE AT
PERIOD EXPENSES FROM RESERVES END OF PERIOD
------------ ---------- ------------- -------------
<S> <C> <C> <C> <C>
Year ended March 31, 1996
Allowance for doubtful accounts......... -- $ 489 -- 489
Inventory reserve....................... -- 81 -- 81
Warranty reserve........................ -- -- -- --
Year ended March 31, 1997
Allowance for doubtful accounts......... $ 489 21 -- 510
Inventory reserve....................... 81 766 -- 847
Warranty reserve........................ -- 138 -- 138
Year ended March 31, 1998
Allowance for doubtful accounts......... 510 520 $ 541 489
Inventory reserve....................... 847 2,316 450 2,713
Warranty reserve........................ 138 245 163 220
Six months ended September 30, 1998
(Unaudited)
Allowance for doubtful accounts......... 489 218 359 348
Inventory reserve....................... 2,713 1,349 2,256 1,806
Warranty reserve........................ 220 185 -- 405
</TABLE>

II-6

<PAGE> 1

EXHIBIT 1

2,587,500 Shares

RF MICRO DEVICES, INC.

Common Stock, no par value

UNDERWRITING AGREEMENT

January , 1999

CREDIT SUISSE FIRST BOSTON CORPORATION
CIBC OPPENHEIMER CORPORATION
HAMBRECHT & QUIST LLC
NATIONSBANC MONTGOMERY SECURITIES LLC,

As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629

Dear Sirs:

1. Introductory. RF Micro Devices, Inc., a North Carolina corporation
("Company"), proposes to issue and sell 2,000,000 shares of its Common Stock, no
par value ("Securities"), and TRW Inc., an Ohio corporation ("Selling
Shareholder"), proposes to sell 250,000 outstanding shares of the Securities
(such 2,250,000 shares of Securities being hereinafter referred to as the "Firm
Securities"). The Company also proposes to sell to the Underwriters, at the
option of the Underwriters, an aggregate of not more than 300,000 additional
shares of its Securities and the Selling Shareholder also proposes to sell to
the Underwriters, at the option of the Underwriters, not more than 37,500
additional outstanding shares of the Company's Securities, as set forth below
(such 337,500 additional shares being hereinafter referred to as the "Optional
Securities"). The Firm Securities and the Optional Securities are herein
collectively called the "Offered Securities". The Company and the Selling
Shareholder hereby agree with the several Underwriters named in Schedule A
hereto ("Underwriters") as follows:

2. Representations and Warranties of the Company and the Selling
Shareholder. (a) The Company represents and warrants to, and agrees with, the
several Underwriters that:

(i) A registration statement (No. 333-69501) relating to the
Offered Securities, including a form of prospectus, has been filed with
the Securities and Exchange Commission ("Commission") and either (A)
has been declared effective under the Securities Act of 1933 ("Act")
and is not proposed to be amended or (B) is proposed to be amended by
amendment or post-effective amendment. If such registration statement
(the "initial registration statement") has been declared effective,
either (A) an additional registration statement (the "additional
registration statement") relating to the Offered Securities may have
been filed with the Commission

1
<PAGE> 2

pursuant to Rule 462(b) ("Rule 462(b)") under the Act and, if so filed,
has become effective upon filing pursuant to such Rule and the Offered
Securities all have been duly registered under the Act pursuant to the
initial registration statement and, if applicable, the additional
registration statement or (B) such an additional registration statement
is proposed to be filed with the Commission pursuant to Rule 462(b) and
will become effective upon filing pursuant to such Rule and upon such
filing the Offered Securities will all have been duly registered under
the Act pursuant to the initial registration statement and such
additional registration statement. If the Company does not propose to
amend the initial registration statement or if an additional
registration statement has been filed and the Company does not propose
to amend it, and if any post-effective amendment to either such
registration statement has been filed with the Commission prior to the
execution and delivery of this Agreement, the most recent amendment (if
any) to each such registration statement has been declared effective by
the Commission or has become effective upon filing pursuant to Rule
462(c) ("Rule 462(c)") under the Act or, in the case of the additional
registration statement, Rule 462(b). For purposes of this Agreement,
"Effective Time" with respect to the initial registration statement or,
if filed prior to the execution and delivery of this Agreement, the
additional registration statement means (A) if the Company has advised
the Representatives that it does not propose to amend such registration
statement, the date and time as of which such registration statement,
or the most recent post-effective amendment thereto (if any) filed
prior to the execution and delivery of this Agreement, was declared
effective by the Commission or has become effective upon filing
pursuant to Rule 462(c), or (B) if the Company has advised the
Representatives that it proposes to file an amendment or post-effective
amendment to such registration statement, the date and time as of which
such registration statement, as amended by such amendment or
post-effective amendment, as the case may be, is declared effective by
the Commission. If an additional registration statement has not been
filed prior to the execution and delivery of this Agreement but the
Company has advised the Representatives that it proposes to file one,
"Effective Time" with respect to such additional registration statement
means the date and time as of which such registration statement is
filed and becomes effective pursuant to Rule 462(b). "Effective Date"
with respect to the initial registration statement or the additional
registration statement (if any) means the date of the Effective Time
thereof. The initial registration statement, as amended at its
Effective Time, including all material incorporated by reference
therein, including all information contained in the additional
registration statement (if any) and deemed to be a part of the initial
registration statement as of the Effective Time of the additional
registration statement pursuant to the General Instructions of the Form
on which it is filed and including all information (if any) deemed to
be a part of the initial registration statement as of its Effective
Time pursuant to Rule 430A(b) ("Rule 430A(b)") under the Act, is
hereinafter referred to as the "Initial Registration Statement". The
additional registration statement, as amended at its Effective Time,
including the contents of the initial registration statement
incorporated by reference therein and including all information (if
any) deemed to be a part of the additional registration statement as of
its Effective Time pursuant to Rule 430A(b), is hereinafter referred to
as the "Additional Registration Statement". The Initial Registration
Statement and the Additional Registration Statement are hereinafter
referred to collectively as the "Registration Statements" and
individually as a "Registration Statement". The form of prospectus
relating to the Offered Securities, as first filed with the Commission
pursuant to and in accordance with Rule 424(b) ("Rule 424(b)") under
the Act or (if no such filing is required) as included in a
Registration Statement, including all material incorporated by
reference in such prospectus, is hereinafter referred to as the
"Prospectus". No document has been or will be prepared or distributed
in reliance on Rule 434 under the Act.

(ii) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement: (A)
on the Effective Date of the Initial Registration Statement, the
Initial Registration Statement conformed in all respects to the
requirements of the Act and the rules and regulations of the Commission
("Rules and Regulations") and did not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, (B)
on the Effective Date of the Additional Registration Statement (if
any), each Registration Statement conformed or will conform, in all
respects to the requirements of the Act and the Rules and Regulations
and did not include, or will not include, any untrue statement of a
material fact and did not omit, or will not omit, to state any material
fact required to be stated therein or necessary to make the statements
therein not

2
<PAGE> 3

misleading, and (C) on the date of this Agreement, the Initial
Registration Statement and, if the Effective Time of the Additional
Registration Statement is prior to the execution and delivery of this
Agreement, the Additional Registration Statement each conforms, and at
the time of filing of the Prospectus pursuant to Rule 424(b) or (if no
such filing is required) at the Effective Date of the Additional
Registration Statement in which the Prospectus is included, each
Registration Statement and the Prospectus will conform, in all respects
to the requirements of the Act and the Rules and Regulations, and
neither of such documents includes, or will include, any untrue
statement of a material fact or omits, or will omit, to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading. If the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of
this Agreement: on the Effective Date of the Initial Registration
Statement, the Initial Registration Statement and the Prospectus will
conform in all respects to the requirements of the Act and the Rules
and Regulations, neither of such documents will include any untrue
statement of a material fact or will omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and no Additional Registration Statement has
been or will be filed. The two preceding sentences do not apply to
statements in or omissions from a Registration Statement or the
Prospectus based upon written information furnished to the Company by
any Underwriter through the Representatives specifically for use
therein, it being understood and agreed that the only such information
is that described as such in Section 7(c) hereof.

(iii) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the State of
North Carolina, with power and authority (corporate and other) to own
its properties and conduct its business as described in the Prospectus;
and the Company is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business requires
such qualification, except where the failure to so qualify would not
have a material adverse effect on the Company.

(iv) The Company has no subsidiaries, and does not own or
control, directly or indirectly, shares of capital stock of any other
corporation or any interest in any partnership, joint venture, or other
non-corporate entity or enterprise.

(v) The Company's Offered Securities have been duly authorized
for issuance and sale to the Underwriters pursuant to this Agreement,
and when issued and delivered by the Company against payment therefor
in accordance with this Agreement, will be duly and validly issued and
fully paid and nonassessable. All other outstanding shares of capital
stock of the Company have been duly authorized and validly issued, are
fully paid and nonassessable and conform to the description thereof
contained in the Prospectus; and the shareholders of the Company have
no preemptive rights with respect to the Company's Offered Securities.

(vi) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person that would give rise to a valid claim against the Company or any
Underwriter for a brokerage commission, finder's fee or other like
payment in connection with this offering.

(vii) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the
registration covered by the Registration Statement which have not been
waived or complied with in connection with this offering.

(viii) The Offered Securities are listed on Nasdaq's National
Market.

(ix) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required
to be obtained or made by the Company for the consummation of the
transactions contemplated by this Agreement in connection with the sale
of the Offered Securities, except such as have been

3
<PAGE> 4

obtained and made under the Act and such as may be required under state
securities laws and from the National Association of Securities
Dealers, Inc. ("NASD").

(x) The execution, delivery and performance of this Agreement,
and the consummation of the transactions herein contemplated will not
result in a breach or violation of any of the terms and provisions of,
or constitute a default under, any statute, any rule, regulation or
order of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Company or any of its properties,
or any agreement or instrument to which the Company is a party or by
which the Company is bound or to which any of the properties of the
Company is subject, or the charter or by-laws of the Company, except
for such breaches or violations as would not, individually or in the
aggregate, have a material adverse effect on the Company.

(xi) This Agreement has been duly authorized, executed and
delivered by the Company.

(xii) Except as disclosed in the Prospectus, the Company has
good and marketable title to all properties and assets described in the
Prospectus as owned by it, in each case free from liens, encumbrances
and defects that would materially affect the value thereof or
materially interfere with the use made or to be made thereof by it; and
except as disclosed in the Prospectus, the Company holds any leased
real or personal property described in the Prospectus under valid and
enforceable leases with no exceptions that would materially interfere
with the use made or to be made thereof by it.

(xiii) The Company possesses adequate certificates,
authorities or permits issued by appropriate governmental agencies or
bodies necessary to conduct the business now operated by it, except for
those the failure of which to possess would not have a material adverse
effect on the Company and the Company has not received any notice of
proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the
Company, would individually or in the aggregate have a material adverse
effect on the Company.

(xiv) No labor dispute with the employees of the Company
exists or, to the knowledge of the Company, is imminent that might have
a material adverse effect on the Company.

(xv) The Company owns, possesses licenses to, or rights to use
or can acquire on reasonable terms, adequate trademarks, trade names
and other rights to inventions, know-how, patents, copyrights,
confidential information and other intellectual property (collectively,
"intellectual property rights") necessary to conduct the business now
conducted by it as disclosed in the Prospectus, and the Company has not
received any notice of infringement of or conflict with asserted rights
of others with respect to any intellectual property rights that, if
determined adversely to the Company, would individually or in the
aggregate have a material adverse effect on the Company.

(xvi) Except as disclosed in the Prospectus, the Company is
not in violation of any statute, any rule, regulation, decision or
order of any governmental agency or body or any court, domestic or
foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the
environment or human exposure to hazardous or toxic substances
(collectively, "environmental laws"), does not own or operate any real
property contaminated with any substance that is subject to any
environmental laws, is not liable for any off-site disposal or
contamination pursuant to any environmental laws, and is not subject to
any claim relating to any environmental laws, which violation,
contamination, liability or claim would individually or in the
aggregate have a material adverse effect on the Company; and the
Company is not aware of any pending investigation which might lead to
such a claim.

(xvii) Except as disclosed in the Prospectus, there are no
pending actions, suits or proceedings against or affecting the Company
or any of its properties that, if determined adversely to the Company,
would individually or in the aggregate have a material adverse effect
on the Company, or would materially and

4
<PAGE> 5

adversely affect the ability of the Company to perform its obligations
under this Agreement, or which are otherwise material in the context of
the sale of the Offered Securities; and no such actions, suits or
proceedings are to the Company's knowledge, threatened or contemplated.

(xviii) The financial statements included in each Registration
Statement and the Prospectus present fairly the financial position of
the Company as of the dates shown and its results of operations and
cash flows for the periods shown, and such financial statements have
been prepared in conformity with the generally accepted accounting
principles in the United States applied on a consistent basis and the
schedules included in each Registration Statement present fairly the
information required to be stated therein.

(xix) Except as disclosed in the Prospectus, since the date of
the latest audited financial statements included in the Prospectus
there has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of
the Company, and, except as disclosed in or contemplated by the
Prospectus, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital
stock.

(xx) The Company is not and, after giving effect to the
offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the Prospectus, will not be an
"investment company" as defined in the Investment Company Act of 1940.

(b) The Selling Shareholder represents and warrants to, and
agrees with, the several Underwriters that:

(i) The Selling Shareholder has and on each Closing Date
hereinafter mentioned will have valid and unencumbered title to the
Offered Securities to be delivered by the Selling Shareholder on such
Closing Date and full right, power and authority to enter into this
Agreement and to sell, assign, transfer and deliver the Offered
Securities to be delivered by the Selling Shareholder on such Closing
Date hereunder; and upon the delivery of and payment for the Offered
Securities on each Closing Date hereunder the several Underwriters will
acquire valid and unencumbered title to the Offered Securities to be
delivered by the Selling Shareholder on such Closing Date.

(ii) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Selling Shareholder
and any person that would give rise to a valid claim against the
Selling Shareholder or any Underwriter for a brokerage commission,
finder's fee or other like payment in connection with this offering.

3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company and the Selling
Shareholder agree, severally and not jointly, to sell to each Underwriter, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
and the Selling Shareholder, at a purchase price of $ per share, the number of
Firm Securities set forth below the caption "Company" or "Selling Shareholder",
as the case may be, and opposite the name of such Underwriter in Schedule A
hereto.

The Company and the Selling Shareholder will deliver the Firm
Securities to the Representatives for the accounts of the Underwriters, at the
office of Credit Suisse First Boston Corporation ("CSFBC"), Eleven Madison
Avenue, New York, New York, against payment of the purchase price in Federal
(same day) funds by official bank check or checks or wire transfer to an account
at a bank acceptable to CSFBC drawn to the order of the Company in the case of
2,000,000 shares of Firm Securities and the Selling Shareholder in the case of
250,000 shares of Firm Securities, at the office of Womble Carlyle Sandridge &
Rice, PLLC, 200 West Second Street, Winston-Salem, North Carolina, at 9:00 A.M.,
New York time, on January , 1999, or at such other time not later than seven
full business days thereafter as CSFBC and the Company determine, such time
being herein referred to as the "First Closing Date". For

5
<PAGE> 6

purposes of Rule 15c6-1 under the Securities Exchange Act of 1934, the First
Closing Date (if later than the otherwise applicable settlement date) shall be
the settlement date for payment of funds and delivery of securities for all the
Offered Securities sold pursuant to the offering. The certificates for the Firm
Securities so to be delivered will be in definitive form, in such denominations
and registered in such names as CSFBC requests and will be made available for
checking and packaging at the office of CSFBC at least 24 hours prior to the
First Closing Date.

In addition, upon written notice from CSFBC given to the Company and
the Selling Shareholder from time to time not more than 30 days subsequent to
the date of the Prospectus, the Underwriters may purchase all or less than all
of the Optional Securities at the purchase price per Security to be paid for the
Firm Securities. The Company and the Selling Shareholder agree, severally and
not jointly, to sell to the Underwriters the respective number of Optional
Shares obtained by multiplying the number of shares specified in such notice by
a fraction the numerator of which is 300,000 in the case of the Company and
37,500 in the case of the Selling Shareholder and the denominator of which is
the total number of Optional Securities (subject to adjustment by CSFBC to
eliminate fractions), and the Underwriters agree, severally and not jointly, to
purchase such Optional Securities. Such Optional Securities shall be purchased
from the Company and the Selling Shareholder for the account of each Underwriter
in the same proportion as the number of Firm Securities set forth opposite such
Underwriter's name bears to the total number of Firm Securities (subject to
adjustment by CSFBC to eliminate fractions) and may be purchased by the
Underwriters only for the purpose of covering over-allotments made in connection
with the sale of the Firm Securities. No Optional Securities shall be sold or
delivered unless the Firm Securities previously have been, or simultaneously
are, sold and delivered. The right to purchase the Optional Securities or any
portion thereof may be exercised from time to time and to the extent not
previously exercised may be surrendered and terminated at any time upon notice
by CSFBC to the Company and the Selling Shareholder.

Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "Optional Closing Date", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "Closing Date"), shall be determined by CSFBC
but shall be not later than three full business days after written notice of
election to purchase Optional Securities is given. The Company and the Selling
Shareholder will deliver the Optional Securities being purchased on each
Optional Closing Date to the Representatives for the accounts of the several
Underwriters, at the office of CSFBC, Eleven Madison Avenue, New York, New York
against payment of the purchase price therefor in Federal (same day) funds by
official bank check or checks or wire transfer to an account at a bank
acceptable to CSFBC drawn to the orders of the Company and the Selling
Shareholder, at the office of Womble Carlyle Sandridge & Rice, PLLC, 200 West
Second Street, Winston-Salem, North Carolina. The certificates for the Optional
Securities being purchased on each Optional Closing Date will be in definitive
form, in such denominations and registered in such names as CSFBC requests upon
reasonable notice prior to such Optional Closing Date and will be made available
for checking and packaging at the above office of CSFBC at a reasonable time in
advance of such Optional Closing Date.

4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.

5. Certain Agreements of the Company and the Selling Shareholder. The
Company agrees with the several Underwriters and the Selling Shareholder that:

(a) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, the
Company will file the Prospectus with the Commission pursuant to and in
accordance with subparagraph (1) (or, if applicable and if consented to
by CSFBC, subparagraph (4)) of Rule 424(b) not later than the earlier
of (A) the second business day following the execution and delivery of
this Agreement or (B) the fifteenth business day after the Effective
Date of the Initial Registration Statement.

The Company will advise CSFBC promptly of any such filing pursuant to
Rule 424(b). If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement and
an additional

6
<PAGE> 7

registration statement is necessary to register a portion of the
Offered Securities under the Act but the Effective Time thereof has not
occurred as of such execution and delivery, the Company will file the
additional registration statement or, if filed, will file a
post-effective amendment thereto with the Commission pursuant to and in
accordance with Rule 462(b) on or prior to 10:00 P.M., New York time,
on the date of this Agreement or, if earlier, on or prior to the time
the Prospectus is printed and distributed to any Underwriter, or will
make such filing at such later date as shall have been consented to by
CSFBC.

(b) The Company will advise CSFBC promptly of any proposal to
amend or supplement the initial or any additional registration
statement as filed or the related prospectus or the Initial
Registration Statement, the Additional Registration Statement (if any)
or the Prospectus and will not effect such amendment or supplementation
without CSFBC's consent; and the Company will also advise CSFBC
promptly of the effectiveness of each Registration Statement (if its
Effective Time is subsequent to the execution and delivery of this
Agreement) and of any amendment or supplementation of a Registration
Statement or the Prospectus and of the institution by the Commission of
any stop order proceedings in respect of a Registration Statement and
will use its best efforts to prevent the issuance of any such stop
order and to obtain as soon as possible its lifting, if issued.

(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act,
the Company will promptly notify CSFBC of such event and will promptly
prepare and file with the Commission, at its own expense, an amendment
or supplement which will correct such statement or omission or an
amendment which will effect such compliance. Neither CSFBC's consent
to, nor the Underwriters' delivery of, any such amendment or supplement
shall constitute a waiver of any of the conditions set forth in Section
6.

(d) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will make generally
available to its securityholders an earnings statement covering a
period of at least 12 months beginning after the Effective Date of the
Initial Registration Statement (or, if later, the Effective Date of the
Additional Registration Statement) which will satisfy the provisions of
Section 11(a) of the Act. For the purpose of the preceding sentence,
"Availability Date" means the 45th day after the end of the fourth
fiscal quarter following the fiscal quarter that includes such
Effective Date, except that, if such fourth fiscal quarter is the last
quarter of the Company's fiscal year, "Availability Date" means the
90th day after the end of such fourth fiscal quarter.

(e) The Company will furnish to each of the Representatives
copies of each Registration Statement (one of which will be signed and
will include all exhibits), each related preliminary prospectus, and,
so long as a prospectus relating to the Offered Securities is required
to be delivered under the Act in connection with sales by any
Underwriter or dealer, the Prospectus and all amendments and
supplements to such documents, in each case in such quantities as CSFBC
requests. The Prospectus shall be so furnished on or prior to 3:00
P.M., New York time, on the business day following the later of the
execution and delivery of this Agreement or the Effective Time of the
Initial Registration Statement. All other such documents shall be so
furnished as soon as available. The Company will pay the expenses of
printing and distributing to the Underwriters all such documents.

(f) The Company will arrange for the qualification of the
Offered Securities for sale under the laws of such jurisdictions as
CSFBC designates and will continue such qualifications in effect so
long as required for the distribution.

7
<PAGE> 8

(g) During the period of five years hereafter, the Company
will furnish to the Representatives and, upon request, to each of the
other Underwriters, as soon as practicable after the end of each fiscal
year, a copy of its annual report to shareholders for such year; and
the Company will furnish to the Representatives (i) as soon as
available, a copy of each report and any definitive proxy statement of
the Company filed with the Commission under the Securities Exchange Act
of 1934 or mailed to shareholders, and (ii) from time to time, such
other information concerning the Company as CSFBC may reasonably
request.

(h) For a period of 90 days after the date of the commencement
of the public offering of the Offered Securities, the Company will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly
or indirectly, or file with the Commission a registration statement
under the Act relating to, any additional shares of its Securities or
securities convertible into or exchangeable or exercisable for any
shares of its Securities, or publicly disclose the intention to make
any such offer, sale, pledge, disposition or filing, without the prior
written consent of CSFBC, except grants of employee stock options or
issuances to employees pursuant to the terms of stock option or stock
purchase plans in effect on the date hereof or issuances of Securities
pursuant to the exercise of such options or options outstanding on the
date hereof.

(i) The Company agrees with the several Underwriters that the
Company will pay all expenses incident to the performance of the
obligations of the Company and the Selling Shareholder, as the case may
be, under this Agreement, for any filing fees and other expenses
(including fees and disbursements of counsel to the Company) in
connection with qualification of the Offered Securities for sale under
the laws of such jurisdictions as CSFBC designates and the printing of
memoranda relating thereto, for the filing fee incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in
connection with, the review by the National Association of Securities
Dealers, Inc. of the Offered Securities, for any travel expenses of the
Company's officers and employees and any other expenses of the Company
in connection with attending or hosting meetings with prospective
purchasers of the Offered Securities, and for expenses incurred in
distributing preliminary prospectuses and the Prospectus (including any
amendments and supplements thereto) to the Underwriters. The Selling
Shareholder agrees with the Underwriters that the Selling Shareholder
will pay for any transfer taxes on the sale by the Selling Shareholder
of the Offered Securities to the Underwriters.

(j) The Selling Shareholder agrees to deliver to CSFBC,
attention: Transactions Advisory Group on or prior to the First Closing
Date a properly completed and executed United States Treasury
Department Form W-9 (or other applicable form or statement specified by
Treasury Department regulations in lieu thereof).

(k) The Selling Shareholder agrees, until 90 days after the
date of the Prospectus, not to offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, any additional shares of
the Securities of the Company or securities convertible into or
exchangeable or exercisable for any shares of Securities, or publicly
disclose the intention to make any such offer, sale, pledge or
disposal, without the prior written consent of CSFBC.

6. Conditions of the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Shareholder herein, to the
accuracy of the statements of Company officers made pursuant to the provisions
hereof, to the performance by the Company and the Selling Shareholder of their
obligations hereunder and to the following additional conditions precedent:

(a) The Representatives shall have received a letter, dated
the date of delivery thereof (which, if the Effective Time of the
Initial Registration Statement is prior to the execution and delivery
of this Agreement, shall be on or prior to the date of this Agreement
or, if the Effective Time of the Initial Registration Statement is
subsequent to the execution and delivery of this Agreement, shall be
prior to the filing of the amendment or post-effective amendment to the
registration statement to be filed shortly prior to such Effective
Time),

8
<PAGE> 9

of Ernst & Young LLP confirming that they are independent public
accountants within the meaning of the Act and the applicable published
Rules and Regulations thereunder and stating to the effect that:

(i) in their opinion the financial statements and
schedules examined by them and included in the Registration
Statements comply as to form in all material respects with the
applicable accounting requirements of the Act and the related
published Rules and Regulations;

(ii) they have performed the procedures specified by
the American Institute of Certified Public Accountants for a
review of interim financial information as described in
Statement of Auditing Standards No. 71, Interim Financial
Information, on the unaudited financial statements included in
the Registration Statements;

(iii) on the basis of the review referred to in
clause (ii) above, a reading of the latest available interim
financial statements of the Company, inquiries of officials of
the Company who have responsibility for financial and
accounting matters and other specified procedures, nothing
came to their attention that caused them to believe that:

(A) the unaudited financial statements
included in the Registration Statements do not comply as to
form in all material respects with the applicable accounting
requirements of the Act and the related published Rules and
Regulations or any material modifications should be made to
such unaudited financial statements for them to be in
conformity with generally accepted accounting principles;

(B) the unaudited revenues, net income and
net income per share amounts for the Company for six-month
periods ended September 30, 1997 and 1998 included in the
Prospectus do not agree with the amounts set forth in the
unaudited financial statements of the Company for those same
periods or were not determined on a basis substantially
consistent with that of the corresponding amounts in the
audited statements of operations of the Company;

(C) at the date of the latest available
balance sheet read by such accountants, or at a subsequent
specified date not more than three business days prior to the
date of this Agreement, there was any change in the capital
stock or any increase in short-term indebtedness or long-term
debt of the Company or, at the date of the latest available
balance sheet read by such accountants, there was any decrease
in net current assets or net assets, as compared with amounts
shown on the latest balance sheet included in the Prospectus;
or

(D) for the period from the closing date of
the latest statement of operations included in the Prospectus
to the date of the latest available statement of operations
read by such accountants there were any decreases, as compared
with the corresponding period of the previous year, in
revenues, income from operations or in the total or per share
amounts of net income;

except in all cases set forth in clauses (C) and (D) above for
changes, increases or decreases which the Prospectus discloses
have occurred or may occur or which are described in such
letter; and

(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other
financial information contained in the Registration Statements
(in each case to the extent that such dollar amounts,
percentages and other financial information are derived from
the general accounting records of the Company or are derived
directly from such records by analysis or computation) with
the results obtained from inquiries, a reading of such general
accounting records and other procedures specified in such
letter and have found such dollar amounts, percentages and

9
<PAGE> 10

other financial information to be in agreement with such
results, except as otherwise specified in such letter.

For purposes of this subsection, (i) if the Effective Time of the
Initial Registration Statements is subsequent to the execution and
delivery of this Agreement, "Registration Statements" shall mean the
initial registration statement as proposed to be amended by the
amendment or post-effective amendment to be filed shortly prior to its
Effective Time, (ii) if the Effective Time of the Initial Registration
Statements is prior to the execution and delivery of this Agreement but
the Effective Time of the Additional Registration Statement is
subsequent to such execution and delivery, "Registration Statements"
shall mean the Initial Registration Statement and the additional
registration statement as proposed to be filed or as proposed to be
amended by the post-effective amendment to be filed shortly prior to
its Effective Time, and (iii) "Prospectus" shall mean the prospectus
included in the Registration Statements. All financial statements and
schedules included in material incorporated by reference into the
Prospectus shall be deemed included in the Registration Statements for
purposes of this subsection.

(b) If the Effective Time of the Initial Registration
Statement is not prior to the execution and delivery of this Agreement,
such Effective Time shall have occurred not later than 10:00 P.M., New
York time, on the date of this Agreement or such later date as shall
have been consented to by CSFBC. If the Effective Time of the
Additional Registration Statement (if any) is not prior to the
execution and delivery of this Agreement, such Effective Time shall
have occurred not later than 10:00 P.M., New York time, on the date of
this Agreement or, if earlier, the time the Prospectus is printed and
distributed to any Underwriter, or shall have occurred at such later
date as shall have been consented to by CSFBC. If the Effective Time of
the Initial Registration Statement is prior to the execution and
delivery of this Agreement, the Prospectus shall have been filed with
the Commission in accordance with the Rules and Regulations and Section
5(a) of this Agreement. Prior to such Closing Date, no stop order
suspending the effectiveness of a Registration Statement shall have
been issued and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Selling Shareholder, the Company
or the Representatives, shall be contemplated by the Commission.

(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any
development or event involving a prospective change, in the condition
(financial or other), business, properties or results of operations of
the Company which, in the judgment of a majority in interest of the
Underwriters including the Representatives, is material and adverse and
makes it impractical or inadvisable to proceed with completion of the
public offering or the sale of and payment for the Offered Securities;
(ii) any downgrading in the rating of any debt securities of the
Company by any "nationally recognized statistical rating organization"
(as defined for purposes of Rule 436(g) under the Act), or any public
announcement that any such organization has under surveillance or
review its rating of any debt securities of the Company (other than an
announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating); (iii) any
suspension or limitation of trading in securities generally on the New
York Stock Exchange, or any setting of minimum prices for trading on
such exchange, or any suspension of trading of any securities of the
Company on any exchange or in the over-the-counter market; (iv) any
banking moratorium declared by U.S. Federal or New York authorities; or
(v) any outbreak or escalation of major hostilities in which the United
States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in the
judgment of a majority in interest of the Underwriters including the
Representatives, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or inadvisable
to proceed with completion of the public offering or the sale of and
payment for the Offered Securities.

(d) The Representatives shall have received an opinion, dated
such Closing Date, of Womble Carlyle Sandridge & Rice, PLLC, counsel
for the Company, to the effect that:

10
<PAGE> 11

(i) The Company is a corporation in existence under
the laws of the State of North Carolina, with the corporate
power to conduct its business as now conducted as described in
the Prospectus.

(ii) The Company's Offered Securities delivered on
such Closing Date have been duly authorized by all necessary
corporate action on the part of the Company, and, when issued
as provided in this Agreement, will be validly issued, fully
paid and nonassessable; all other outstanding shares of the
Common Stock of the Company have been duly authorized by all
necessary corporate action on the part of the Company and are
validly issued, fully paid and nonassessable and conform to
the description thereof contained in the Prospectus; and the
shareholders of the Company have no preemptive rights with
respect to the Offered Securities;

(iii) To such counsel's knowledge, no person has the
right to require the Company to include any securities of the
Company in the securities registered pursuant to the
Registration Statement, except for such rights as have been
duly waived;

(iv) No consent, approval, authorization or other
action by, or filing or registration with, any governmental
authority is required to be obtained or made by the Company
for the consummation of the transactions contemplated by this
Agreement, except such as have been obtained and made under
the Act and such as may be required under state securities
laws and by the NASD;

(v) The execution and delivery of this Agreement and
the consummation by the Company of the transactions provided
for herein;

(A) do not violate any provision of the articles of
incorporation or bylaws of the Company;

(B) do not violate or constitute a breach or default
under any agreement or instrument filed as an exhibit to the
Registration Statement; or

(C) to such counsel's knowledge, do not violate any
applicable law or any judgement or order of any governmental
authority or court that is binding on the Company;

(vi) The Initial Registration Statement was declared
effective under the Act as of the date specified in such
opinion, the Additional Registration Statement (if any) was
filed and became effective under the Act as of the date and
time (if determinable) specified in such opinion, the
Prospectus either was filed with the Commission pursuant to
the subparagraph of Rule 424(b) specified in such opinion on
the date specified therein or was included in the Initial
Registration Statement or the Additional Registration
Statement (as the case may be), and, to the knowledge of such
counsel, no stop order suspending the effectiveness of a
Registration Statement or any part thereof has been issued and
no proceedings for that purpose have been instituted or are
pending or contemplated under the Act;

(vii) The Registration Statement and the Prospectus,
and each amendment or supplement thereto, as of their
respective effective or issue dates (other than the financial
statements and schedules included therein or in exhibits to or
excluded from the Registration Statement, as to which no
opinion need be expressed), complied as to form in all
material respects with the requirements of the Act and the
Rules and Regulations;

(viii) The statements under Item 15 of the
Registration Statement, insofar as such statements constitute
matters of law, summaries of legal matters, the Company's
articles of incorporation or bylaws, documents or legal
proceedings or legal conclusions, have been reviewed by such
counsel and fairly represent and summarize, in all material
respects, the matters referred to herein;

11
<PAGE> 12

(ix) Such counsel do not know of any legal or
governmental proceedings required to be described in a
Registration Statement or the Prospectus which are not
described as required or of any contracts or documents of a
character required to be described in a Registration Statement
or the Prospectus or to be filed as exhibits to a Registration
Statement which are not described and filed as required;

(x) The Company has duly authorized the execution,
delivery and performance of this Agreement by all necessary
corporate action and this Agreement has been duly authorized,
executed and delivered by the Company;

In addition, such counsel shall state that such
counsel has participated in conferences with officers and
representatives of the Company, representatives of the
independent certified public accountants for the Company and
representatives of the Underwriters at which the contents of
the Registration Statement and the Prospectus, and any
supplements or amendments thereto, and related matters were
discussed and, although such counsel is not passing upon and
does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement or the Prospectus (other than as
specified above), and any supplements or amendments thereto,
on the basis of the foregoing, nothing has come to the
attention of such counsel which would lead it to believe that
any Registration Statement, at its respective Effective Date,
contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading or
that the Prospectus, as of its date or at the Closing Date,
contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading (it being understood that
such counsel does not express any belief as to the financial
statements or schedules or other financial or statistical data
derived therefrom included in the Registration Statement or
the Prospectus or any amendments or supplements thereto).

(e) The Representatives shall have received an opinion, dated such
Closing Date, of counsel for the Selling Shareholder to the effect that:

(i) The Selling Shareholder had valid and
unencumbered title to the Offered Securities delivered by the
Selling Shareholder on such Closing Date and had full right,
power and authority to sell, assign, transfer and deliver the
Offered Securities delivered by the Selling Shareholder on
such Closing Date hereunder; and the several Underwriters have
acquired valid and unencumbered title to the Offered
Securities purchased by them from the Selling Shareholders on
such Closing Date hereunder;

(ii) No consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court
is required to be obtained or made by the Selling Shareholder
for the consummation of the transactions contemplated by this
Agreement in connection with the sale of the Offered
Securities sold by the Selling Shareholder, except such as
have been obtained and made under the Act and such as may be
required under state securities laws;

(iii) The execution, delivery and performance of this
Agreement and the consummation of the transactions therein and
herein contemplated will not result in a breach or violation
of any of the terms and provisions of, or constitute a default
under, any statute, any rule, regulation or order of any
governmental agency or body or any court having jurisdiction
over the Selling Shareholder or any of its properties or any
agreement or instrument to which the Selling Shareholder is a
party or by which the Selling Shareholder is bound or to which
any of the properties of the Selling Shareholder is subject,
or the charter or by-laws of the Selling Shareholder; and

12
<PAGE> 13

(iv) This Agreement has been duly authorized,
executed and delivered by the Selling Shareholder.

(f) The Representatives shall have received from Hale and Dorr
LLP, counsel for the Underwriters, such opinion or opinions, dated such
Closing Date, with respect to the incorporation of the Company, the
validity of the Offered Securities delivered on such Closing Date, the
Registration Statements, the Prospectus and other related matters as
the Representatives may require, and the Selling Shareholder and the
Company shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters. In
rendering such opinion, Hale and Dorr LLP may rely as to the
incorporation of the Company and all other matters governed by North
Carolina law upon the opinion of Womble Carlyle Sandridge & Rice, PLLC
referred to above.

(g) The Representatives shall have received a certificate,
dated such Closing Date, of the President or any Vice President and a
principal financial or accounting officer of the Company in which such
officers, to the best of their knowledge after reasonable
investigation, shall state that: the representations and warranties of
the Company in this Agreement are true and correct; the Company has
complied with all agreements and satisfied all conditions on its part
to be performed or satisfied hereunder at or prior to such Closing
Date; no stop order suspending the effectiveness of any Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to the knowledge of such officers, are contemplated by
the Commission; the Additional Registration Statement (if any)
satisfying the requirements of subparagraphs (1) and (3) of Rule 462(b)
was filed pursuant to Rule 462(b), including payment of the applicable
filing fee in accordance with Rule 111(a) or (b) under the Act, prior
to the time the Prospectus was printed and distributed to any
Underwriter; and, subsequent to the date of the most recent financial
statements in the Prospectus, there has been no material adverse
change, nor any development or event involving a prospective material
adverse change, in the condition (financial or other), business,
properties or results of operations of the Company except as set forth
in or contemplated by the Prospectus or as described in such
certificate.

(h) The Representatives shall have received a letter, dated
such Closing Date, of Ernst & Young LLP which meets the requirements of
subsection (a) of this Section, except that the specified date referred
to in such subsection will be a date not more than three business days
prior to such Closing Date for the purposes of this subsection.

The Selling Shareholder and the Company will furnish the Representatives with
such conformed copies of such opinions, certificates, letters and documents as
the Representatives reasonably request. CSFBC may in its sole discretion waive
on behalf of the Underwriters compliance with any conditions to the obligations
of the Underwriters hereunder, whether in respect of an Optional Closing Date or
otherwise.

7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (c) below; and provided, further,
that with respect to any

13
<PAGE> 14

untrue statement or alleged untrue statement in or omission or alleged omission
from any preliminary prospectus, the foregoing indemnity agreement contained in
this subsection (a) shall not inure to the benefit of any Underwriter from whom
the person asserting any losses, claims, damages or liabilities purchased the
Offered Securities concerned, to the extent that a prospectus relating to such
Offered Securities was required to be delivered by such Underwriter under the
Act in connection with such purchase and any such loss, claim, damage or
liability of such Underwriter results from the fact that there was not sent or
given to such person, at or prior to the written confirmation of the sale of
such Offered Securities to such person, a copy of the Prospectus (exclusive of
material incorporated by reference) if the Company had previously furnished
copies thereof to such Underwriter.

(b) The Selling Shareholder will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement,
the Prospectus, or any amendment or supplement thereto, or any related
preliminary prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by the Selling
Shareholder specifically for use therein, and will reimburse each Underwriter
for any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that the
Selling Shareholder will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to the Company by an Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (c) below; provided, further that
the Selling Shareholder shall only be subject to such liability to the extent
that the untrue statement or alleged untrue statement or omission or alleged
omission is based upon written information provided by the Selling Shareholder
or contained in a representation or warranty given by the Selling Shareholder in
this Agreement; provided, further, that with respect to any untrue statement or
alleged untrue statement in or omission or alleged omission from any preliminary
prospectus, the foregoing indemnity agreement contained in this subsection (b)
shall not inure to the benefit of any Underwriter from whom the person asserting
any losses, claims, damages or liabilities purchased the Offered Securities
concerned, to the extent that a prospectus relating to such Offered Securities
was required to be delivered by such Underwriter under the Act in connection
with such purchase and any such loss, claim, damage or liability of such
Underwriter results from the fact that there was not sent or given to such
person, at or prior to the written confirmation of the sale of such Offered
Securities to such person, a copy of the Prospectus (exclusive of material
incorporated by reference) if the Company had previously furnished copies
thereof to such Underwriter; and provided further that the liability under this
subsection of the Selling Shareholder shall be limited to an amount equal to the
aggregate gross proceeds to the Selling Shareholder from the sale of Securities
sold by the Selling Shareholder hereunder.

(c) Each Underwriter will severally and not jointly indemnify and hold
harmless the Company and the Selling Shareholder against any losses, claims,
damages or liabilities to which the Company or the Selling Shareholder may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement, the Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such Underwriter through the Representatives specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Company and the Selling Shareholder in connection with investigating or
defending any such loss, claim, damage,

14
<PAGE> 15

liability or action as such expenses are incurred, it being understood and
agreed that the only such information furnished by any Underwriter consists of
(i) the concession and reallowance figures appearing in the fourth paragraph
under the caption "Underwriting" and (ii) the information contained in the
eighth paragraph under the caption "Underwriting."

(d) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under
subsection (a), (b) or (c) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a), (b) or (c) above, except to the extent the
indemnifying party is prejudiced as a proximate result of such omission. In case
any such action is brought against any indemnified party and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.

(e) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of the losses, claims, damages
or liabilities referred to in subsection (a), (b) or (c) above (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Shareholder on the one hand and the Underwriters on the
other from the offering of the Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Selling Shareholder on
the one hand and the Underwriters on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Shareholder on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company and the Selling Shareholder bear to the total underwriting discounts and
commissions received by the Underwriters. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company, the Selling
Shareholder or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid by an indemnified party as a result of
the losses, claims, damages or liabilities referred to in the first sentence of
this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any action or claim which is the subject of this subsection (e).
Notwithstanding the provisions of this subsection (e), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission and the Selling
Shareholder shall not be required to contribute any amount in excess of the
amount by which the aggregate gross proceeds to the Selling Shareholder from the
sale of Securities sold by the Selling Shareholder hereunder exceeds the amount
of any damages the Selling Shareholder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent

15
<PAGE> 16

misrepresentation. The Underwriters' obligations in this subsection (e) to
contribute are several in proportion to their respective underwriting
obligations and not joint.

(f) The obligations of the Company and the Selling Shareholder under
this Section shall be in addition to any liability which the Company and the
Selling Shareholder may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to the
Selling Shareholder, to each director of the Company, to each officer of the
Company who has signed a Registration Statement and to each person, if any, who
controls the Company or the Selling Shareholder within the meaning of the Act.

8. Default of Underwriters. If any Underwriter or Underwriters default
in their obligations to purchase Offered Securities hereunder on either the
First or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company and the Selling Shareholder for
the purchase of such Offered Securities by other persons, including any of the
Underwriters, but if no such arrangements are made by such Closing Date, the
non-defaulting Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Offered Securities that such
defaulting Underwriters agreed but failed to purchase on such Closing Date. If
any Underwriter or Underwriters so default and the aggregate number of shares of
Offered Securities with respect to which such default or defaults occur exceeds
10% of the total number of shares of Offered Securities that the Underwriters
are obligated to purchase on such Closing Date and arrangements satisfactory to
CSFBC, the Company and the Selling Shareholder for the purchase of such Offered
Securities by other persons are not made within 36 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Shareholder, except as
provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.

9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Selling Shareholder, of the Company or its officers and of the several
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation, or statement as to the
results thereof, made by or on behalf of any Underwriter, the Selling
Shareholder, the Company or any of their respective representatives, officers or
directors or any controlling person, and will survive delivery of and payment
for the Offered Securities. If this Agreement is terminated pursuant to Section
8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company and the Selling Shareholder shall
remain responsible for the expenses to be paid or reimbursed by them pursuant to
Section 5 and the respective obligations of the Company, the Selling
Shareholder, and the Underwriters pursuant to Section 7 shall remain in effect,
and if any Offered Securities have been purchased hereunder the representations
and warranties in Section 2 and all obligations under Section 5 shall also
remain in effect. If the purchase of the Offered Securities by the Underwriters
is not consummated for any reason other than solely because of the termination
of this Agreement pursuant to Section 8 or the occurrence of any event specified
in clause (iii), (iv) or (v) of Section 6(c), the Company and the Selling
Shareholder will, jointly and severally, reimburse the Underwriters for all
out-of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Offered Securities.

10. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representatives c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department - Transactions Advisory Group, or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at 7625 Thorndike Road,

16
<PAGE> 17

Greensboro, North Carolina 27409-9421, Attention: President (with a copy to:
Womble Carlyle Sandridge & Rice, PLLC, 1600 BB&T Financial Center, 27101,
Attention: Jeffrey C. Howland), or, if sent to the Selling Shareholder, will be
mailed, delivered or telegraphed and confirmed to TRW Inc., 1900 Richmond Road,
Lyndhurst, Ohio 44124, Attention: William B. Lawrence, Executive Vice President,
General Counsel and Secretary; provided, however, that any notice to an
Underwriter pursuant to Section 7 will be mailed, delivered or telegraphed and
confirmed to such Underwriter.

11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7, and no other
person will have any right or obligation hereunder.

12. Representation. The Representatives will act for the several
Underwriters in connection with the transactions contemplated by this Agreement,
and any action under this Agreement taken by the Representatives jointly or by
CSFBC will be binding upon all the Underwriters.

13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.

14. Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, without regard to
principles of conflicts of laws.

The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in the City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.

17
<PAGE> 18

If the foregoing is in accordance with the Representatives'
understanding of our agreement, kindly sign and return to the Company one of the
counterparts hereof, whereupon it will become a binding agreement among the
Selling Shareholder, the Company and the several Underwriters in accordance with
its terms.

Very truly yours,

RF MICRO DEVICES, INC.

By:___________________________________
Name:______________________________
Title:_____________________________

TRW INC.

By:___________________________________
Name:______________________________
Title: ____________________________

The foregoing Underwriting Agreement is hereby
confirmed and accepted as of the date first above written.

CREDIT SUISSE FIRST BOSTON CORPORATION
CIBC OPPENHEIMER CORP.
HAMBRECHT & QUIST LLC
NATIONSBANC MONTGOMERY SECURITIES LLC

Acting on behalf of themselves and
as the Representatives of the several
Underwriters.

By CREDIT SUISSE FIRST BOSTON CORPORATION

By:__________________________________________
Name:_____________________________________
Title:____________________________________

18
<PAGE> 19

SCHEDULE A

<TABLE>
<CAPTION>
Number of Firm Securities Total
to Be Sold By Number of
------------------------- Firm Securities
Selling to be
Underwriter Company Shareholder Purchased
----------- ------- ----------- ---------------
<S> <C> <C> <C>
Credit Suisse First Boston Corporation..................
CIBC Oppenheimer Corp.
Hambrecht & Quist LLC
Nationsbanc Montgomery Securities LLC

------- ------- -------
Total..........................................
======= ======= =======

</TABLE>

<PAGE> 1

EXHIBIT 5

[Letterhead of Womble Carlyle Sandridge & Rice, PLLC]

January 21, 1999

RF Micro Devices, Inc.
7625 Thorndike Road
Greensboro, North Carolina 27409-9421

Re: Registration Statement on Form S-3
Relating to 2,587,500 Shares of Common Stock
(File No. 333-69501)

Gentlemen:

We are acting as counsel to RF Micro Devices, Inc. (the "Company") in
connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of 2,587,500 shares of the Company's common stock, no par value
(the "Common Stock"), consisting of up to 2,300,000 shares of Common Stock to be
sold by the Company (the "Primary Shares") and up to 287,500 shares of Common
Stock to be sold by TRW Inc., a shareholder of the Company (the "Secondary
Shares"). We have assisted the Company in the preparation of a Registration
Statement on Form S-3 relating to the Primary Shares and the Secondary Shares,
filed with the Securities and Exchange Commission (the "Commission") on December
22, 1998, Amendment No. 1 thereto, filed with the Commission on January 4, 1999,
and Amendment No. 2 thereto, filed with the Commission on January 21, 1999 (the
"Registration Statement"). We are providing this opinion pursuant to the
requirements of Item 16 of Form S-3 and Item 601(b)(5) of Regulation S-K under
the Act.

We have reviewed the Registration Statement, the articles of
incorporation and bylaws of the Company , each as amended to date, and have
examined the originals, or copies certified or otherwise identified to our
satisfaction, of corporate records of the Company, including minute books of the
Company as furnished to us by the Company, certificates of public officials and
of representatives of the Company, statutes and other instruments and documents,
as a basis for the opinions hereinafter expressed. In rendering this opinion, we
have relied upon certificates of public officials and officers of the Company
with respect to the accuracy of the factual matters contained in such
certificates.

In connection with such review, we have assumed with your permission
(i) the genuineness of all signatures; (ii) the authenticity of all documents
submitted to us as originals and the conformity to original documents of all
documents submitted to us as certified or photostatic copies; and (iii) the
proper issuance and accuracy of certificates of public officials and officers
and agents of the Company.

This opinion is limited to the laws of the State of North Carolina,
excluding local laws of the State of North Carolina (i.e., the statutes and
ordinances, the administrative decisions and the rules and regulations of
counties, towns, municipalities and special political subdivisions of, or
authorities or quasi-governmental bodies constituted under the laws of, the
State of North Carolina and judicial decisions to the extent they deal with any
of the foregoing), and we are expressing no opinion as to the effect of the laws
of any other jurisdiction.

Based on and subject to the foregoing and the qualifications and
limitations set forth below, and having regard for such legal considerations as
we deem relevant, it is our opinion that the Secondary Shares and the Primary
Shares have been duly authorized by all necessary corporate action on the part
of the Company and the Secondary Shares are, and when issued as provided for in
the Registration Statement, the Primary Shares will be validly issued, fully
paid and nonassessable.

We hereby consent to the filing of this opinion with the Commission as
Exhibit 5 to the Registration Statement and to the use of our name in the
Registration Statement under the caption "Legal Matters" in the prospectus
included as a part thereof. In giving this consent, we do not admit that we are
within the category of persons whose consent is required by Section 7 of the Act
or other rules and regulations of the Commission thereunder.

Very truly yours,

/s/ WOMBLE CARLYLE SANDRIDGE & RICE
A Professional Limited Liability Company

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated April 24, 1998, in Amendment No. 2 to the
Registration Statement (Form S-3 No. 333-69501) and related Prospectus of RF
Micro Devices, Inc. for the registration of 2,587,500 shares of its common
stock.

/s/ ERNST & YOUNG LLP

Raleigh, North Carolina

January 21, 1999