TRIQUINT SEMICONDUCTOR INC
10-Q, 2000-08-10
SEMICONDUCTORS & RELATED DEVICES
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   FORM 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                                       of
                      THE SECURITIES EXCHANGE ACT OF 1934

                       FOR THE QUARTER ENDED JULY 1, 2000
                         COMMISSION FILE NUMBER 0-22660

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

                          TRIQUINT SEMICONDUCTOR, INC.
                                  (Registrant)

                     Incorporated in the State of Delaware
                I.R.S. Employer Identification Number 95-3654013
                 2300 NE Brookwood Parkway, Hillsboro, OR 97124
                           Telephone: (503) 615-9000

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

    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                Yes /X/  No / /

    As of July 1, 2000, there were 78,129,386 shares of the registrant's common
stock outstanding.

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<PAGE>
                          TRIQUINT SEMICONDUCTOR, INC.
                                     INDEX

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            NO.
                                                                          --------
<S>        <C>                                                            <C>
PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

           Condensed Consolidated Statements of Operations--Three
           months and six months ended June 30, 2000 and 1999..........          3

           Condensed Consolidated Balance Sheets--June 30, 2000 and
           December 31, 1999...........................................          4

           Condensed Consolidated Statements of Cash Flows--Six months
           ended June 30, 2000 and 1999................................          5

           Notes to Condensed Consolidated Financial Statements........          6

Item 2.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations...................................         10

Item 3.    Qualitative and Quantitative Disclosures about Market and
           Interest Rate Risk..........................................         24

PART II.   OTHER INFORMATION

Item 1.    Legal Proceedings...........................................         25

Item 2.    Changes in Securities.......................................         25

Item 4.    Submission of Matters to a Vote of Security Holders.........         25

Item 6.    Exhibits and Reports on Form 8-K............................         25

SIGNATURES.............................................................         26
</TABLE>

                                       2
<PAGE>
                         PART I--FINANCIAL INFORMATION
                          ITEM 1: FINANCIAL STATEMENTS

                          TRIQUINT SEMICONDUCTOR, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED     SIX MONTHS ENDED
                                                         -------------------   -------------------
                                                         JUNE 30,   JUNE 30,   JUNE 30,   JUNE 30,
                                                           2000       1999       2000       1999
                                                         --------   --------   --------   --------
<S>                                                      <C>        <C>        <C>        <C>
Total revenues.........................................  $70,618    $38,109    $129,872   $71,804
Operating costs and expenses:
  Cost of goods sold...................................   34,193     22,803      65,363    43,754
  Research, development and engineering................    7,429      5,413      14,483    10,007
  Selling, general and administrative..................    7,835      5,766      15,336    10,949
                                                         -------    -------    --------   -------
    Total operating costs and expenses.................   49,457     33,982      95,182    64,710
                                                         -------    -------    --------   -------
    Income from operations.............................   21,161      4,127      34,690     7,094
                                                         -------    -------    --------   -------
Other income (expense):
  Interest income......................................    9,091        835      14,535     1,626
  Interest expense.....................................   (3,962)      (270)     (5,718)     (583)
  Other, net...........................................       19         10         112        57
                                                         -------    -------    --------   -------
    Total other income, net............................    5,148        575       8,929     1,100
                                                         -------    -------    --------   -------
    Income before income taxes.........................   26,309      4,702      43,619     8,194
Income tax expense.....................................    9,866        375      16,358       654
                                                         -------    -------    --------   -------
    Net income.........................................  $16,443    $ 4,327    $ 27,261   $ 7,540
                                                         =======    =======    ========   =======
Per share data:
  Basic................................................  $  0.21    $  0.07    $   0.36   $  0.13
                                                         =======    =======    ========   =======
  Weighted average common shares.......................   77,326     57,780      76,720    57,564
                                                         =======    =======    ========   =======
  Diluted..............................................  $  0.19    $  0.07    $   0.31   $  0.12
  Weighted average common and common equivalent
    shares.............................................   87,853     66,084      87,644    64,428
                                                         =======    =======    ========   =======
</TABLE>

           See notes to Condensed Consolidated Financial Statements.

                                       3
<PAGE>
                          TRIQUINT SEMICONDUCTOR, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS

                                 (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                              JUNE 30,   DECEMBER 31,
                                                                2000       1999(1)
                                                              --------   ------------
<S>                                                           <C>        <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................  $268,132     $ 76,873
  Investments...............................................   276,720      116,465
  Accounts receivable, net..................................    37,403       26,909
  Inventories, net..........................................    25,600       24,676
  Prepaid expenses and other assets.........................     8,881        6,016
                                                              --------     --------
    Total current assets....................................   616,736      250,939
                                                              --------     --------
Property, plant and equipment, net..........................    63,751       38,657
Restricted investments......................................    40,163       40,163
Other noncurrent assets, net................................    23,122       10,182
                                                              --------     --------
    Total assets............................................  $743,772     $339,941
                                                              ========     ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current installments of capital lease and installment note
    obligations.............................................  $  3,356     $  4,320
  Accounts payable and accrued expenses.....................    39,982       28,922
                                                              --------     --------
    Total current liabilities...............................    43,338       33,242
Long-term debt, less current installments...................   348,436        4,783
                                                              --------     --------
    Total liabilities.......................................   391,774       38,025
                                                              --------     --------
Stockholders' equity:
  Common stock..............................................   325,755      302,937
  Retained earnings (accumulated deficit)...................    26,243       (1,021)
                                                              --------     --------
    Total stockholders' equity..............................   351,998      301,916
                                                              --------     --------
    Total liabilities and stockholders' equity..............  $743,772     $339,941
                                                              ========     ========
</TABLE>

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

(1) The information in this column was derived from the Company's audited
    financial statements as of December 31, 1999.

           See notes to Condensed Consolidated Financial Statements.

                                       4
<PAGE>
                          TRIQUINT SEMICONDUCTOR, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                SIX MONTHS ENDED
                                                              --------------------
                                                              JUNE 30,    JUNE 30,
                                                                2000        1999
                                                              ---------   --------
<S>                                                           <C>         <C>
Cash flows from operating activities:
  Net income................................................  $  27,261   $  7,540
  Adjustments to reconcile net income to net cash provided
    by operating activities:
    Depreciation and amortization...........................      4,577      3,653
    Income tax benefit of stock option exercises............     16,358         --
    Gain on disposal of assets..............................        (37)       (12)
    Change in assets and liabilities:
      Accounts receivable...................................    (10,494)    (4,763)
      Inventories...........................................       (924)    (3,105)
      Prepaid expense and other assets......................     (5,376)       328
      Accounts payable and accrued expenses.................     11,060      1,384
                                                              ---------   --------
    NET CASH PROVIDED BY OPERATING ACTIVITIES...............     42,425      5,025

Cash flows from investing activities:
  Purchase of investments...................................   (574,129)   (60,246)
  Sale/Maturity of investments..............................    413,874     59,272
  Capital expenditures......................................    (29,020)      (980)
  Proceeds from sale of assets..............................         37         12
                                                              ---------   --------
    NET CASH USED IN INVESTING ACTIVITIES...................   (189,238)    (1,942)

Cash flows from financing activities:
  Principal payments under capital lease obligations........     (2,311)    (2,446)
  Proceeds from debt........................................    345,000         --
  Debt issuance costs.......................................    (11,080)        --
  Issuance of common stock, net.............................      6,463      2,009
                                                              ---------   --------
    NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES.....    338,072       (437)
    NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....    191,259      2,646
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD....     76,873     14,602
                                                              ---------   --------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD..........  $ 268,132   $ 17,248
                                                              =========   ========
</TABLE>

           See notes to Condensed Consolidated Financial Statements.

                                       5
<PAGE>
                          TRIQUINT SEMICONDUCTOR, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)

1. BASIS OF PRESENTATION

    The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles. However, certain
information or footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed, or omitted, pursuant to the rules and regulations of the Securities
and Exchange Commission. In the opinion of management, the statements include
all adjustments necessary (which are of a normal and recurring nature) for the
fair presentation of the results of the interim periods presented. These
consolidated financial statements should be read in conjunction with the
Company's audited financial statements for the year ended December 31, 1999, as
included in the Company's 1999 Annual Report on Form 10-K.

    The Company's quarters end on the Saturday nearest the end of the calendar
quarter. For convenience, the Company has indicated that its second quarter
ended on June 30. The Company's fiscal year ends on December 31.

2. STOCK ACTIVITY AND NET INCOME PER SHARE

    On May 11, 2000, the Board of Directors approved a two-for-one forward stock
split of the outstanding common shares that was effected in the form of a stock
dividend paid on July 11, 2000 to stockholders of record as of June 19, 2000. On
December 2, 1999, the Board of Directors approved a two-for-one forward stock
split of the outstanding common shares that was effected in the form of a stock
dividend paid on February 22, 2000 to stockholders of record as of February 1,
2000. On June 10, 1999, the Board of Directors approved a three-for-two forward
stock split of the outstanding common shares that was effected in the form of a
stock dividend paid on July 2, 1999 to stockholders of record as of June 22,
1999. Common share and per share data for all periods presented in the
accompanying financial statements have been adjusted to give effect to these
stock splits effected in the form of stock dividends.

    At a special meeting of stockholders on January 31, 2000, the Company's
stockholders approved an increase in the number of authorized shares of common
stock to 200,000 shares. The increase was effected on February 1, 2000.

    Earnings per share is presented as basic and diluted net income per share.
Basic net income per share is net income available to common shareholders
divided by the weighted-average number of common shares outstanding. Diluted net
income per share is similar to basic except that the denominator includes
potential common shares that, had they been issued, would have had a dilutive
effect.

                                       6
<PAGE>
2. STOCK ACTIVITY AND NET INCOME PER SHARE (CONTINUED)
    The following is a reconciliation of the basic and diluted earnings per
share:

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED
                                                                       JUNE 30, 2000
                                                              -------------------------------
                                                                                    PER SHARE
                                                               INCOME     SHARES     AMOUNT
                                                              --------   --------   ---------
<S>                                                           <C>        <C>        <C>
Basic earnings per share:
  Income available to shareholders..........................  $16,443     77,326      $0.21
                                                                                      =====
Effect of dilutive securities:
  Stock options.............................................       --     10,527
                                                              -------     ------
Diluted earnings per share:
  Income available to shareholders..........................  $16,443     87,853      $0.19
                                                              =======     ======      =====
</TABLE>

<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED
                                                                       JUNE 30, 2000
                                                              -------------------------------
                                                                                    PER SHARE
                                                               INCOME     SHARES     AMOUNT
                                                              --------   --------   ---------
<S>                                                           <C>        <C>        <C>
Basic earnings per share:
  Income available to shareholders..........................  $27,261     76,720      $0.36
                                                                                      =====
Effect of dilutive securities:
  Stock options.............................................       --     10,924
                                                              -------     ------
Diluted earnings per share:
  Income available to shareholders..........................  $27,261     87,644      $0.31
                                                              =======     ======      =====
</TABLE>

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED
                                                                       JUNE 30, 1999
                                                              -------------------------------
                                                                                    PER SHARE
                                                               INCOME     SHARES     AMOUNT
                                                              --------   --------   ---------
<S>                                                           <C>        <C>        <C>
Basic earnings per share:
  Income available to shareholders..........................  $ 4,327     57,780      $ .07
                                                                                      =====
Effect of dilutive securities:
  Stock options.............................................       --      8,304
                                                              -------     ------
Diluted earnings per share:
  Income available to shareholders..........................  $ 4,327     66,084      $ .07
                                                              =======     ======      =====
</TABLE>

<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED
                                                                       JUNE 30, 1999
                                                              -------------------------------
                                                                                    PER SHARE
                                                               INCOME     SHARES     AMOUNT
                                                              --------   --------   ---------
<S>                                                           <C>        <C>        <C>
Basic earnings per share:
  Income available to shareholders..........................  $ 7,540     57,564      $ .13
                                                                                      =====
Effect of dilutive securities:
  Stock options.............................................       --      6,864
                                                              -------     ------
Diluted earnings per share:
  Income available to shareholders..........................  $ 7,540     64,428      $ .12
                                                              =======     ======      =====
</TABLE>

                                       7
<PAGE>
2. STOCK ACTIVITY AND NET INCOME PER SHARE

    The dilutive effect of common equivalent shares outstanding totaling
approximately 183 and 106 shares for the three months and six months ended
June 30, 2000, respectively, and 148 and 256 shares for the three months and six
months ended June 30, 1999, respectively, were not included in the net income
per share calculations, because to do so would have been antidilutive.

3. RESEARCH AND DEVELOPMENT COSTS

    The Company charges research and development costs associated with the
development of new products to expense when incurred. Engineering and design
costs related to revenues on nonrecurring engineering services billed to
customers are classified as cost of goods sold.

4. INCOME TAXES

    The Company accounts for income taxes under the asset and liability method.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases.

    Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
realized.

    The provision for income taxes has been recorded based on the current
estimate of the Company's annual effective tax rate. For periods of income, this
rate differs from the federal statutory rate primarily because of the
utilization of net operating loss carryforwards.

5. INVESTMENTS

    The Company classifies its restricted and unrestricted investments into
available-for-sale and held-to-maturity in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Both categories are comprised of
short and medium-term corporate notes, commercial paper and market auction
preferred stock. As of June 30, 2000, available-for-sale investments totaled
$199 million and held-to-maturity investments totaled $118 million. The carrying
value of both types securities approximates fair value at June 30, 2000 and
December 31, 1999.

6. INVENTORIES

    Inventories, net of reserves of $6,029 and $5,156 as of June 30, 2000 and
December 31, 1999, respectively, are stated at the lower of cost or market and
consist of:

<TABLE>
<CAPTION>
                                                              JUNE 30,    DECEMBER 31,
                                                                2000          1999
                                                              ---------   -------------
<S>                                                           <C>         <C>
Raw Material................................................   $ 4,944       $ 4,425
Work in Progress............................................    17,790        16,078
Finished Goods..............................................     2,866         4,173
                                                               -------       -------
Total Inventories, net......................................   $25,600       $24,676
                                                               =======       =======
</TABLE>

                                       8
<PAGE>
7. DEBT

    In February and March 2000, the Company completed the sale of $345 million
aggregate principal amount of 4% convertible subordinated notes due 2007,
raising approximately $333.9 million net of fees and expenses. The notes are
unsecured obligations, convertible into TriQuint Common Stock at an initial
conversion price of $67.80 per share and subordinated to all of the Company's
present and future senior indebtedness.

8. STOCKHOLDERS' EQUITY

Components of stockholders' equity:

<TABLE>
<CAPTION>
                                                              JUNE 30,    DECEMBER 31,
                                                                2000          1999
                                                              ---------   -------------
<S>                                                           <C>         <C>
Preferred stock, $.001 par value, 5,000 shares authorized...        --            --
Common stock, $.001 par value, 200,000 shares authorized,
  78,129 and 75,688 outstanding, respectively...............        78            76
Additional paid-in capital..................................   325,715       302,861
</TABLE>

9. SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                SIX MONTHS ENDED
                                                              ---------------------
                                                              JUNE 30,    JUNE 30,
                                                                2000        1999
                                                              ---------   ---------
<S>                                                           <C>         <C>
Cash Transactions:
  Cash paid for interest....................................    $351        $591
  Cash paid for income taxes................................       1         170
</TABLE>

10. COMPREHENSIVE INCOME

    The Company has adopted Statement of Financial Accounting Standards ("SFAS")
No. 130, "Reporting Comprehensive Income." There is no difference between net
income and comprehensive income.

11. SEGMENT INFORMATION

    The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company has concluded that it has only
one reportable segment.

12. RECENT ACCOUNTING PRONOUNCEMENT

    See Part I, Item 2, of this Quarterly Report on Form 10-Q for a description
of recent accounting pronouncements.

13. LITIGATION

    See Part II, Item 1, of this Quarterly Report on Form 10-Q for a description
of legal proceedings.

14. COMMITMENT

    On May 24, 2000, the Company announced that it entered into a non-binding
Memorandum of Understanding with Micron Technology, Inc. pursuant to which the
Company will purchase of Micron's Richardson, Texas, wafer fabrication facility.
The purchase is subject to the negotiation and execution of a definitive
purchase agreement. It is currently expected that this transaction will close
sometime within the third quarter of 2000.

                                       9
<PAGE>
                ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

    YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS IN CONJUNCTION WITH
OUR FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO INCLUDED IN THIS REPORT
ON FORM 10-Q. THE DISCUSSION IN THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES. THESE FORWARD-LOOKING STATEMENTS INCLUDE,
AMONG OTHERS, THOSE STATEMENTS INCLUDING THE WORDS "EXPECTS," "ANTICIPATES,"
"INTENDS," "BELIEVES" AND SIMILAR LANGUAGE. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED BELOW. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO
THESE DIFFERENCES INCLUDE, BUT ARE NOT LIMITED, TO THE RISKS DISCUSSED IN THE
SECTION TITLED "FACTORS AFFECTING FUTURE OPERATING RESULTS" BELOW.

    We are a leading supplier of high performance gallium arsenide integrated
circuits for the wireless communications, telecommunications, data
communications and millimeter wave markets. Our products incorporate our
proprietary analog and mixed-signal designs and our advanced gallium arsenide
manufacturing processes to address a broad range of applications and customers.
We sell our products worldwide to end-user customers, including Alcatel,
Ericsson, Hughes, Lucent, Motorola, Nokia, Nortel, Northrop Grumman, QUALCOMM,
and Raytheon.

RESULTS OF OPERATIONS

    The following table sets forth the results of our operations expressed as a
percentage of total revenues. Our historical operating results are not
necessarily indicative of the results for any future period.

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED       SIX MONTHS ENDED
                                                          -----------------------   -------------------
                                                          JUNE 30,       JUNE 30,   JUNE 30,   JUNE 30,
                                                            2000           1999       2000       1999
                                                          --------       --------   --------   --------
<S>                                                       <C>            <C>        <C>        <C>
Total revenues..........................................   100.0%         100.0%     100.0%     100.0%
Operating costs and expenses:
  Cost of goods sold....................................    48.4           59.9       50.3       60.9
  Research, development and engineering.................    10.5           14.2       11.2       13.9
  Selling, general and administrative...................    11.1           15.1       11.8       15.3
                                                          ------         ------     ------     ------
    Total operating costs and expenses..................    70.0           89.2       73.3       90.1
                                                          ------         ------     ------     ------
Income (loss) from operations...........................    30.0           10.8       26.7        9.9
Other income, net.......................................     7.3            1.5        6.9        1.5
                                                          ------         ------     ------     ------
  Income (loss) before income taxes.....................    37.3           12.3       33.6       11.4
Income tax expense......................................    14.0            1.0       12.6        0.9
                                                          ------         ------     ------     ------
Net income (loss).......................................    23.3%          11.3%      21.0%      10.5%
                                                          ======         ======     ======     ======
</TABLE>

TOTAL REVENUES

    We derive revenues from the sale of standard and customer-specific products
and services. Our revenues also include nonrecurring engineering revenues
relating to the development of customer-specific products. Total revenues for
the three and six months ended June 30, 2000 increased 85.3% and 80.9%,
respectively, to $70.6 million and $129.9 million from $38.1 million and
$71.8 million, respectively, for the comparable three and six months ended
June 30, 1999. The increase in total revenues during the three and six months
ended June 30, 2000 reflected increased demand for our products across all
product lines and markets. Domestic revenues for the three and six months ended
June 30, 2000 increased to $39.9 and $67.6 million, respectively, as compared to
$27.3 and $52.0 million, respectively, for the three and six months ended
June 30, 1999. International revenues for the three and six months ended
June 30, 2000

                                       10
<PAGE>
were $30.7 and $62.3 million, respectively, as compared to $10.8 and
$19.8 million, respectively, for the three and six months ended June 30, 1999.

COST OF GOODS SOLD

    Cost of goods sold includes all direct material, labor and overhead expenses
and certain production costs related to nonrecurring engineering revenues. In
general, gross profit generated from the sale of customer-specific products and
from nonrecurring engineering revenues is typically higher than gross profit
generated from the sale of standard products. The factors affecting product mix
include the relative demand in the various markets incorporating our
customer-specific products and standard products, as well as the number of
nonrecurring engineering contracts.

    Cost of goods sold increased to $34.2 million for the three months ended
June 30, 2000 from $22.8 million for the three months ended June 30, 1999. Cost
of goods sold as a percentage of total revenues for the three months ended
June 30, 2000 decreased to 48.4% from 59.9% for the three months ended June 30,
1999. For the six months ended June 30, 2000, costs of gods sold increased to
$65.4 million from $43.8 million for the six months ended June 30, 1999. As a
percentage of total revenues, cost of goods sold for the six months ended
June 30, 2000 decreased to 50.3% from 60.9% for the six months ended June 30,
1999. The increase in absolute dollar value of cost of goods sold was primarily
attributable to the related increase in sales volume. The decrease in cost of
goods sold, as a percentage of revenues was attributable to continuing
improvements in production yields, increased economies of scale associated with
increased sales volumes.

    We have at various times in the past experienced lower than expected
production yields, which have delayed shipments of a given product and adversely
affected gross margins. There can be no assurance that we will be able to
maintain acceptable production yields in the future and, to the extent that we
do not achieve acceptable production yields, our operating results would be
materially adversely affected. The operation of our own leased wafer fabrication
facilities entails a high degree of fixed costs and requires an adequate volume
of production and sales to be profitable. During periods of decreased demand,
high fixed wafer fabrication costs would have a material adverse effect on our
operating results.

RESEARCH, DEVELOPMENT AND ENGINEERING

    Research, development and engineering expenses include the costs incurred in
the design of new products, as well as ongoing product development and research
and development expenses. Our research, development and engineering expenses for
the three and six months ended June 30, 2000 increased to $7.4 million and
$14.5 million, respectively, from $5.4 and $10.0 million, respectively, for the
three and six months ended June 30, 1999. Research, development and engineering
expenses as a percentage of total revenues for the three and six months ended
June 30, 2000 decreased to 10.5% and 11.2% respectively, from 14.2% and 13.9%,
respectively, for the three and six months ended June 30, 1999. The increase in
research, development and engineering expenses on an absolute dollar basis was
primarily due to the addition of new employees and the costs associated with the
development of new products. The decrease in research, development and
engineering expenses as a percentage of total revenues was due to revenues
increasing at a faster rate than research, development and engineering spending.
We are committed to substantial investments in research, development, and
engineering and expect these expenses will continue to increase in absolute
dollars in the future.

SELLING, GENERAL AND ADMINISTRATIVE

    Selling, general and administrative expenses include commissions, labor
expenses for marketing and administrative personnel and other corporate
administrative expenses. Selling, general and administrative expenses for the
three and six months ended June 30, 2000 increased to $7.8 million and
$15.3 million, respectively, from $5.8 million and $10.9 million, respectively,
for the three and six months ended June 30,

                                       11
<PAGE>
1999. Selling, general and administrative expenses as a percentage of total
revenues for the three and six months ended June 30, 2000 were 11.1% and 11.8%,
respectively, compared to 15.1% and 15.3%, respectively, for the three and
months ended June 30, 1999. The increase in selling, general and administrative
expenses on an absolute dollar basis was primarily attributable to increased
costs associated with the on-going development of infrastructure and business
support and increased selling costs associated with the increased sales volume.

OTHER INCOME, NET

    Other income, net includes interest income, interest expense and gains and
losses on assets. Other income, net for the three and six months ended June 30,
2000, increased to $5.1 million and $8.9 million, respectively, from $575,000
and $1.1 million, respectively, for the three and six months ended June 30,
1999. This increase resulted primarily from increased interest income on higher
cash balances due to the proceeds of the Company's July 1999 public offering and
2000 convertible debt offering, but was offset in part by increased interest
expense related to the increase in long-term debt.

INCOME TAX EXPENSE

    Income tax expense for the three and six months ended June 30, 2000
increased to $9.9 million and $16.4 million, respectively, from $375,000 and
$654,000, respectively, for the three and six months ended June 30, 1999. The
increase in income tax expense is attributable to our increased profitability,
as reflected by the increase in income before income taxes.

    The provision for income taxes has been recorded based on the current
estimate of the Company's annual effective tax rate. For periods of income, this
rate differs from the federal statutory rate primarily because of the
utilization of net operating loss carryforwards.

RECENT ACCOUNTING PRONOUNCEMENTS

    In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative instrument be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS No. 133 also requires that changes in the derivative's fair
value be recognized currently in results of operations unless specific hedge
accounting criteria are met. SFAS No. 133, as amended by SFAS No. 137, is
effective for fiscal years beginning after June 15, 2000. We are evaluating any
possible effect SFAS No. 133 may have on our consolidated financial statements.

    In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions involving Stock Compensation--an interpretation of APB
Opinion No. 25," ("FIN 44"). FIN 44 applies prospectively to new awards,
exchanges of awards in a business combination, modifications to outstanding
awards, and changes in grantee status that occur on or after July 1, 2000,
except for the provisions related to repricings and the definition of an
employee, which apply to awards issued after December 15, 1998. The provisions
related to modifications to fixed stock option awards to add a reload feature
are effective for awards modified after January 12, 2000. We do not expect that
this statement will have a significant impact on our financial condition or
results of operations.

    In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 summarizes certain areas of the Staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. In June 2000, SAB 101B was issued which defers the implementation
date of SAB 101 until October 1, 2000. We do not expect the adoption of SAB 101
will have a material impact on our financial statements.

                                       12
<PAGE>
FACTORS AFFECTING FUTURE OPERATING RESULTS

OUR OPERATING RESULTS MAY FLUCTUATE SUBSTANTIALLY, WHICH MAY CAUSE OUR STOCK
PRICE TO FALL.

    Our quarterly and annual results of operations have varied in the past and
may vary significantly in the future due to a number of factors including, but
not limited to, the following:

    - cancellation or delay of customer orders or shipments;

    - our success in achieving design wins in which our products are designed
      into those of our customers;

    - market acceptance of our products and those of our customers;

    - variability of the life cycles of our customers' products;

    - variations in manufacturing yields;

    - timing of announcements and introduction of new products by us and our
      competitors;

    - changes in the mix of products we sell;

    - declining average sales prices for our products;

    - changes in manufacturing capacity and variations in the utilization of
      that capacity;

    - variations in operating expenses;

    - the long sales cycles associated with our customer-specific products;

    - the timing and level of product and process development costs;

    - the cyclicality of the semiconductor industry;

    - the timing and level of nonrecurring engineering revenues and expenses
      relating to customer-specific products; and

    - significant changes in our and our customers' inventory levels.

    We expect that our operating results will continue to fluctuate in the
future as a result of these and other factors. Any unfavorable changes in these
or other factors could cause our results of operations to suffer as they have in
the past, based upon some of these factors. If our operating results are not
within the market's expectations, then our stock price may fall. For example, in
June 1994, Nortel, formerly Northern Telecom, requested that we delay shipment
of some of our products. Nortel was then our largest customer and the delay,
together with lower than expected orders, materially reduced our revenues and
results of operations in the second quarter and for the remainder of 1994. Due
to potential fluctuations, we believe that period to period comparisons of our
results of operations are not necessarily meaningful and should not be relied
upon as indicators of our future performance.

WE RELY ON A LIMITED NUMBER OF CUSTOMERS FOR A SUBSTANTIAL PART OF OUR REVENUES.

    Sales to a limited number of customers have accounted for a significant
portion of our revenues in each fiscal period. In recent periods, sales to some
of our major customers as a percentage of total revenues have fluctuated due to
delays or failures to place expected orders. In the six months ended June 30,
2000, Ericsson, Nokia and Nortel accounted for approximately 20.3%, 18.5% and
17.5%, respectively, of our total revenues. We expect that sales to a limited
number of customers will continue to account for a substantial portion of our
total revenues in future periods. We do not have long-term agreements with any
of our customers. Customers generally purchase our products pursuant to
cancelable short-term purchase orders. Our results of operations have been
negatively affected in the past by the failure of anticipated orders to
materialize and by delays in or cancellations of orders. If we were to lose a

                                       13
<PAGE>
major customer or if orders by or shipments to a major customer were to
otherwise decrease or be delayed, our results of operations would be harmed.

WE FACE RISKS FROM FAILURES IN OUR MANUFACTURING PROCESSES.

    The fabrication of integrated circuits, particularly those made of gallium
arsenide, is a highly complex and precise process. Our integrated circuits are
manufactured from four-inch round wafers made of gallium arsenide. During
manufacturing, each wafer is processed to contain numerous die, the individual
integrated circuits. We may reject or be unable to sell a substantial percentage
of wafers or the die on a given wafer because of:

    - minute impurities;

    - difficulties in the fabrication process;

    - defects in the masks used to print circuits on a wafer;

    - electrical performance;

    - wafer breakage; or

    - other factors.

    We refer to the proportion of final good integrated circuits that have been
processed, assembled and tested relative to the gross number of integrated
circuits that could be constructed from the raw materials as our manufacturing
yield. Compared to the manufacture of silicon integrated circuits, gallium
arsenide technology is less mature and more difficult to design and manufacture
within specifications in large volume. In addition, the more brittle nature of
gallium arsenide wafers can result in lower manufacturing yields than with
silicon wafers. We have in the past experienced lower than expected
manufacturing yields, which have delayed product shipments and negatively
impacted our results of operations. We may experience difficulty maintaining
acceptable manufacturing yields in the future.

    In addition, the maintenance of our fabrication facilities in Oregon and
Texas are subject to risks, including:

    - the demands of managing and coordinating workflow between two
      geographically separate production facilities;

    - disruption of production in one of our facilities as a result of a
      slowdown or shutdown in our other facility; and

    - higher operating costs from managing two geographically separate
      manufacturing facilities.

IF WE FAIL TO SELL A HIGH VOLUME OF PRODUCTS, OUR OPERATING RESULTS WILL BE
HARMED.

    Because the majority of our manufacturing costs are relatively fixed, our
manufacturing volumes are critical to our operating results. If we fail to
achieve acceptable manufacturing volumes or experience product shipment delays,
our results of operations could be harmed. During periods of decreased demand,
our high fixed manufacturing costs could have a negative effect on our results
of operations. We base our expense levels in part on our expectations of future
orders and these expense levels are predominantly fixed in the short-term. If we
receive fewer customer orders than expected, we may not be able to reduce our
manufacturing costs in the short-term and our operating results would be harmed.

                                       14
<PAGE>
IF WE DO NOT SELL OUR CUSTOMER-SPECIFIC PRODUCTS IN LARGE VOLUMES, OUR OPERATING
RESULTS MAY BE HARMED.

    We manufacture a substantial portion of our products to address the needs of
individual customers. Frequent product introductions by systems manufacturers
make our future success dependent on our ability to select development projects
which will result in sufficient volumes to enable us to achieve manufacturing
efficiencies. Because customer-specific products are developed for unique
applications, we expect that some of our current and future customer specific
products may never be produced in volume and may impair our ability to cover our
fixed manufacturing costs. In addition, if we experience delays in completing
designs or if we fail to obtain development contracts from customers whose
products are successful, our revenues could be harmed.

OUR OPERATING RESULTS COULD BE HARMED IF WE LOSE ACCESS TO SOLE OR LIMITED
SOURCES OF MATERIALS OR SERVICES.

    We currently obtain some components and services for our products from
limited or single sources, such as ceramic packages from Kyocera. We purchase
these components and services on a purchase order basis, do not carry
significant inventories of these components and do not have any long-term supply
contracts with these vendors. Our requirements are relatively small compared to
silicon semiconductor manufacturers. Because we often do not account for a
significant part of our vendors' business, we may not have access to sufficient
capacity from these vendors in periods of high demand. If we were to change any
of our sole or limited source vendors, we would be required to requalify each
new vendor. Requalification could prevent or delay product shipments that could
negatively affect our results of operations. In addition, our reliance on these
vendors may negatively affect our production if the components vary in
reliability or quality. If we are unable to obtain timely deliveries of
sufficient components of acceptable quality or if the prices of components for
which we do not have alternative sources increase, our results of operations
could be harmed.

IF OUR PRODUCTS FAIL TO PERFORM OR MEET CUSTOMER REQUIREMENTS, WE COULD INCUR
SIGNIFICANT ADDITIONAL COSTS.

    The fabrication of gallium arsenide integrated circuits is a highly complex
and precise process. Our customers specify quality, performance and reliability
standards that we must meet. If our products do not meet these standards, we may
be required to rework or replace the products. Gallium arsenide integrated
circuits may contain undetected defects or failures that only become evident
after we commence volume shipments. We have experienced product quality,
performance or reliability problems from time to time. Defects or failures may
occur in the future. If failures or defects occur, we could:

    - lose revenue;

    - incur increased costs such as warranty expense and costs associated with
      customer support;

    - experience delays, cancellations or rescheduling of orders for our
      products; or

    - experience increased product returns or discounts.

OUR OPERATING RESULTS MAY SUFFER IF WE DO NOT EXPAND OUR MANUFACTURING CAPACITY
IN A TIMELY MANNER.

    We plan to increase our capacity by converting our existing Hillsboro,
Oregon facility to accommodate equipment that uses six-inch (150 millimeter)
wafer production. We do not have any experience processing six-inch wafers in
our fabrication facilities. Our inexperience may result in lower volume of
production or higher cost of goods sold. We may be required to redesign our
processes and procedures substantially to accommodate the larger wafers. As a
result, implementing additional capacity for six-inch wafers may take longer
than planned, which could harm our results of operations. If we fail to
successfully transition to

                                       15
<PAGE>
six-inch wafers in a timely manner or our manufacturing yields decline, our
relationships with our customers may be harmed.

    Our facilities have a level of capacity beyond which we cannot cost
effectively produce our products. Although we are not currently approaching
those constraints, we may be unable to further expand our business if we fail to
plan and build sufficient capacity. The process of building, testing and
qualifying a gallium arsenide integrated circuit fabrication facility is time
consuming. We must begin to design and implement additional manufacturing
facilities well in advance of our needs.

WE MAY FACE FINES OR OUR FACILITIES COULD BE CLOSED IF WE FAIL TO COMPLY WITH
ENVIRONMENTAL REGULATIONS.

    Federal, state and local regulations impose various environmental controls
on the storage, handling, discharge and disposal of chemicals and gases used in
our manufacturing process. For our manufacturing facility located in Hillsboro,
Oregon, we provide our own manufacturing waste treatment and contract for
disposal of some materials. We are required by the State of Oregon Department of
Environmental Quality to report usage of environmentally hazardous materials.

    At our Texas facility, we utilize Texas Instruments' industrial wastewater
treatment facilities and services for the pre-treatment and discharge of
wastewater generated by us, pursuant to the Asset Purchase Agreement dated
January 8, 1998. Our wastewater streams are commingled with those of Texas
Instruments and are covered by Texas Instruments' wastewater permit.

    The failure to comply with present or future regulations could result in
fines being imposed on us and we could be required to suspend production or
cease our operations. These regulations could require us to acquire significant
equipment or to incur substantial other expenses to comply with environmental
regulations. We rely to a great extent on Texas Instruments' hazardous waste
disposal system at our Texas facility. Any failure by us, or by Texas
Instruments with respect to our Texas facility, to control the use of, or to
adequately restrict the discharge of, hazardous substances could subject us to
future liabilities and harm our results of operations.

WE DEPEND ON THE CONTINUED GROWTH OF COMMUNICATIONS MARKETS.

    We derive a substantial portion of our product revenues from sales of
products for communication applications. These markets are characterized by the
following:

    - intense competition;

    - rapid technological change; and

    - short product life cycles, especially in the wireless market.

    In addition, although the communications markets have grown rapidly in the
last few years, these markets may not continue to grow or a significant slowdown
in these markets may occur.

    Products for communications applications are often based on industry
standards, which are continually evolving. Our future success will depend, in
part, upon our ability to successfully develop and introduce new products based
on emerging industry standards, which could render our existing products
unmarketable or obsolete. If communications markets evolve to new standards, we
may be unable to successfully design and manufacture new products that address
the needs of our customers or that will meet with substantial market acceptance.

OUR BUSINESS WILL BE IMPACTED IF SYSTEMS MANUFACTURERS DO NOT USE GALLIUM
  ARSENIDE COMPONENTS.

    Silicon semiconductor technologies are the dominant process technologies for
integrated circuits and the performance of silicon integrated circuits continues
to improve. Our prospective customers may be systems designers and manufacturers
who are evaluating such silicon technologies and in particular, silicon

                                       16
<PAGE>
germanium, versus gallium arsenide integrated circuits for use in their next
generation high performance systems. Customers may be reluctant to adopt our
products because of:

    - their unfamiliarity with designing systems with gallium arsenide products;

    - their concerns related to manufacturing costs and yields;

    - their unfamiliarity with design and manufacturing processes; and

    - uncertainties about the relative cost effectiveness of our products
      compared to high performance silicon components.

    Systems manufacturers may not use gallium arsenide components because the
production of gallium arsenide integrated circuits has been and continues to be
more costly than the production of silicon devices. As a result, we must offer
devices that provide superior performance to that of silicon-based devices.

    In addition, customers may be reluctant to rely on a smaller company like us
for critical components. We cannot be certain that additional systems
manufacturers will design our products into their systems, that the companies
that have utilized our products will continue to do so in the future or that
gallium arsenide technology will continue to achieve widespread market
acceptance. If our gallium arsenide products fail to achieve market acceptance,
our results of operations would suffer.

WE INCREASED OUR INDEBTEDNESS SUBSTANTIALLY.

    In February and March 2000, we sold $345.0 million of convertible
subordinated notes in a private placement to qualified institutional buyers. As
a result of the sale of notes, we incurred $345.0 million of additional
indebtedness increasing our ratio of debt to equity (expressed as a percentage)
from approximately 3.0% as of December 31, 1999 to approximately 100.0%, after
giving effect to the sale of the notes. Our other indebtedness is principally
comprised of operating, synthetic and capital leases. We may incur substantial
additional indebtedness in the future. The level of our indebtedness, among
other things, could:

    - make it difficult for us to make payments on the notes and leases;

    - make it difficult for us to obtain any necessary future financing for
      working capital, capital expenditures, debt service requirements or other
      purposes;

    - require us to dedicate a substantial portion of our expected cash flow
      from operations to service our indebtedness, which would reduce the amount
      of our expected cash flow available for other purposes, including working
      capital and capital expenditures;

    - limit our flexibility in planning for, or reacting to changes in, our
      business; and

    - make us more vulnerable in the event of a downturn in our business.

    There can be no assurance that we will be able to meet our debt service
obligations, including our obligation under the notes.

WE MAY NOT BE ABLE TO PAY OUR DEBT AND OTHER OBLIGATIONS.

    If our cash flow is inadequate to meet our obligations, we could face
substantial liquidity problems. If we are unable to generate sufficient cash
flow or otherwise obtain funds necessary to make required payments on the notes,
or our other obligations, we would be in default under the terms thereof.
Default under the indenture would permit the holders of the notes to accelerate
the maturity of the notes and could cause defaults under future indebtedness we
may incur. Any such default could have a material adverse effect on our
business, prospects, financial condition and operating results. In addition, we
can not assure you that we would be able to repay amounts due in respect of the
notes if payment of the notes were to be accelerated following the occurrence of
an event of default as defined in the indenture.

                                       17
<PAGE>
CUSTOMERS MAY DELAY OR CANCEL ORDERS DUE TO REGULATORY DELAYS.

    The increasing demand for communications products has exerted pressure on
regulatory bodies worldwide to adopt new standards for these products, generally
following extensive investigation of and deliberation over competing
technologies. The delays inherent in the regulatory approval process may in the
future cause the cancellation, postponement or rescheduling of the installation
of communications systems by our customers. These delays have in the past had
and may in the future have a negative effect on our sales and our results of
operations.

OUR REVENUES ARE AT RISK IF WE DO NOT INTRODUCE NEW PRODUCTS AND/OR DECREASE
COSTS.

    Historically, the average selling prices of our products have decreased over
the products' lives, and we expect them to continue to do so. To offset these
decreases, we rely primarily on achieving yield improvements and other cost
reductions for existing products and on introducing new products that can often
be sold at higher average selling prices. We believe our future success depends,
in part, on our timely development and introduction of new products that compete
effectively on the basis of price and performance and adequately address
customer requirements. The success of new product and process introductions
depends on several factors, including:

    - proper selection of products and processes;

    - successful and timely completion of product and process development and
      commercialization;

    - market acceptance of our or our customers' new products;

    - achievement of acceptable manufacturing yields; and

    - our ability to offer new products at competitive prices.

    Our product and process development efforts may not be successful and our
new products or processes may not achieve market acceptance. To the extent that
our cost reductions and new product introductions do not occur in a timely
manner, our results of operations could suffer.

WE MUST IMPROVE OUR PRODUCTS AND PROCESSES TO REMAIN COMPETITIVE.

    If technologies or standards supported by our or our customers' products
become obsolete or fail to gain widespread commercial acceptance, our results of
operations may be materially impacted. Because of continual improvements in
semiconductor technology, including those in high performance silicon where
substantially more resources are invested than in gallium arsenide, we believe
that our future success will depend, in part, on our ability to continue to
improve our product and process technologies. We must also develop new
technologies in a timely manner. In addition, we must adapt our products and
processes to technological changes and to support emerging and established
industry standards. We may not be able to improve our existing products and
process technologies, develop new technologies in a timely manner or effectively
support industry standards. If we fail to do so, our customers may select
another gallium arsenide product or move to an alternative technology.

OUR RESULTS OF OPERATIONS MAY SUFFER IF WE DO NOT COMPETE SUCCESSFULLY.

    The semiconductor industry is intensely competitive and is characterized by
rapid technological change, rapid product obsolescence and price erosion.
Currently, we compete primarily with manufacturers of high-performance silicon
integrated circuits such as Applied Micro Circuits Corporation, Motorola Inc.
and Philips and with manufacturers of gallium arsenide integrated circuits such
as Anadigics Inc., Conexant Systems Inc., Raytheon Company, RF Micro
Devices Inc. and Vitesse Semiconductor Corp. We also face competition from the
internal semiconductor operations of some of our current and potential
customers. We expect increased competition from existing competitors and from a
number of companies that may enter the gallium arsenide integrated circuits
market, as well as future competition from

                                       18
<PAGE>
companies that may offer new or emerging technologies such as silicon germanium.
Most of our current and potential competitors have significantly greater
financial, technical, manufacturing and marketing resources than we do.
Manufacturers of high performance silicon integrated circuits have achieved
greater market acceptance of their existing products and technologies in some
applications.

    We compete with both gallium arsenide and silicon suppliers in the wireless,
data communications and telecommunications markets. In the microwave and
millimeter wave markets, our competition is primarily from a limited number of
gallium arsenide suppliers, which are in the process of expanding their product
offerings to address commercial applications other than aerospace.

    Our prospective customers are typically systems designers and manufacturers
that are considering the use of gallium arsenide integrated circuits for their
high performance systems. Competition is primarily based on performance elements
such as speed, complexity and power dissipation, as well as price, product
quality and ability to deliver products in a timely fashion. Due to the
proprietary nature of our products, competition occurs almost exclusively at the
system design stage. As a result, a design win by us or our competitors
typically limits further competition with respect to manufacturing a given
design.

OUR OPERATING RESULTS MAY SUFFER DUE TO DECLINING DEMAND FOR SEMICONDUCTORS.

    From time to time, the semiconductor industry has experienced significant
downturns and wide fluctuations in product supply and demand. This cyclicality
has led to significant imbalances in demand and production capacity. It has also
accelerated the decrease of average selling prices per unit. We may experience
periodic fluctuations in our future financial results because of these or other
industry-wide conditions.

IF WE FAIL TO INTEGRATE ANY FUTURE ACQUISITIONS, OUR BUSINESS WILL BE HARMED.

    We face risks from any future acquisitions, including the following:

    - we may fail to combine and coordinate the operations and personnel of
      newly acquired companies with our existing business;

    - our ongoing business may be disrupted or receive insufficient management
      attention;

    - we may not cost effectively and rapidly incorporate the technology we
      acquire;

    - we may not be able to recognize the cost savings or other financial
      benefits we anticipated;

    - we may not be able to retain the existing customers of newly acquired
      operations;

    - our corporate culture may clash with that of the acquired businesses; and

    - we may incur unknown liabilities associated with acquired businesses.

    We may not successfully address these risks or any other problems that arise
in connection with future acquisitions.

    We will continue to evaluate strategic opportunities available to us and we
may pursue product, technology or business acquisitions. In addition, in
connection with any future acquisitions, we may issue equity securities that
could dilute the percentage ownership of our existing stockholders, we may incur
additional debt and we may be required to amortize expenses related to goodwill
and other intangible assets that may negatively affect our results of
operations.

WE MUST MANAGE OUR GROWTH.

    Our total number of employees grew to 928 as of June 30, 2000 from 802 as of
December 31, 1999. The resulting growth has placed, and is expected to continue
to place, significant demands on our personnel, management and other resources.
We must continue to improve our operational, financial and management
information systems to keep pace with the growth of our business.

                                       19
<PAGE>
IF WE DO NOT HIRE AND RETAIN KEY EMPLOYEES, OUR BUSINESS WILL SUFFER.

    Our future success depends in large part on the continued service of our key
technical, marketing and management personnel. We also depend on our ability to
continue to identify, attract and retain qualified technical employees,
particularly highly skilled design, process and test engineers involved in the
manufacture and development of our products and processes. We must also recruit
and train employees to manufacture our products without a substantial reduction
in manufacturing yields. There are many other semiconductor companies located in
the communities near our facilities and it may become increasingly difficult for
us to attract and retain those employees. The competition for these employees is
intense, and the loss of key employees could negatively affect us.

OUR BUSINESS MAY BE HARMED IF WE FAIL TO PROTECT OUR PROPRIETARY TECHNOLOGY.

    We rely on a combination of patents, trademarks, copyrights, trade secret
laws, confidentiality procedures and licensing arrangements to protect our
intellectual property rights. We currently have patents granted and pending in
the United States and in foreign countries and intend to seek further
international and United States patents on our technology. We cannot be certain
that patents will be issued from any of our pending applications or that patents
will be issued in all countries where our products can be sold or that any
claims allowed from pending applications or will be of sufficient scope or
strength to provide meaningful protection or any commercial advantage. Our
competitors may also be able to design around our patents. The laws of some
countries in which our products are or may be developed, manufactured or sold,
including various countries in Asia, may not protect our products or
intellectual property rights to the same extent as do the laws of the United
States, increasing the possibility of piracy of our technology and products.
Although we intend to vigorously defend our intellectual property rights, we may
not be able to prevent misappropriation of our technology. Our competitors may
also independently develop technologies that are substantially equivalent or
superior to our technology.

OUR ABILITY TO PRODUCE OUR SEMICONDUCTORS MAY SUFFER IF SOMEONE CLAIMS WE
INFRINGE ON THEIR INTELLECTUAL PROPERTY.

    The semiconductor industry is characterized by vigorous protection and
pursuit of intellectual property rights or positions, which have resulted in
significant and often protracted and expensive litigation. If it is necessary or
desirable, we may seek licenses under such patents or other intellectual
property rights. However, we cannot be certain that licenses will be offered or
that we would find the terms of licenses that are offered acceptable or
commercially reasonable. Our failure to obtain a license from a third party for
technology used by us could cause us to incur substantial liabilities and to
suspend the manufacture of products. Furthermore, we may initiate claims or
litigation against third parties for infringement of our proprietary rights or
to establish the validity of our proprietary rights. Litigation by or against us
could result in significant expense and divert the efforts of our technical
personnel and management, whether or not the litigation results in a favorable
determination. In the event of an adverse result in any litigation, we could be
required to:

    - pay substantial damages;

    - indemnify our customers;

    - stop manufacturing, use and sale of the infringing products;

    - expend significant resources to develop non-infringing technology;

    - discontinue the use of certain processes; or

    - obtain licenses to the technology.

    We may be unsuccessful in developing non-infringing products or negotiating
licenses upon reasonable terms, or at all. These problems might not be resolved
in time to avoid harming our results of

                                       20
<PAGE>
operations. If any third party makes a successful claim against our customers or
us and a license is not made available to us on commercially reasonable terms,
our business could be harmed.

    On February 26, 1999, a lawsuit was filed against 88 firms, several of which
are still in litigation, including TriQuint, in the United States District Court
for the District of Arizona. The suit alleges that the defendants, including us,
infringe upon certain patents held by The Lemelson Medical, Education and
Research Foundation, Limited Partnership. Although we believe the suit is
without merit and intend to vigorously defend ourselves against the charges, we
cannot be certain that we will be successful. Moreover, this litigation may
require us to spend a substantial amount of time and money and could distract
management from our day to day operations.

OUR BUSINESS MAY SUFFER DUE TO RISKS ASSOCIATED WITH INTERNATIONAL SALES.

    Our sales outside of the United States were 48.0% of total revenues in the
six months ended June 30, 2000 and 38.4% of total revenues in 1999. We face
inherent risks from these sales, including:

    - imposition of government controls;

    - currency exchange fluctuations;

    - longer payment cycles and difficulties related to the collection of
      receivables from international customers;

    - reduced protection for intellectual property rights in some countries;

    - the impact of recessionary environments in economies outside the United
      States;

    - unfavorable tax consequences;

    - political instability; and

    - tariffs and other trade barriers.

    In addition, due to the technological advantages provided by gallium
arsenide integrated circuits in many military applications, all of our sales
outside of North America must be licensed by the Office of Export Administration
of the U.S. Department of Commerce. If we fail to obtain these licenses or
experience delays in obtaining these licenses in the future, our results of
operations could be harmed. Also, because substantially all of our foreign sales
are denominated in U.S. dollars, increases in the value of the dollar would
increase the price in local currencies of our products and make our products
less price competitive.

WE MAY BE SUBJECT TO A SECURITIES CLASS ACTION SUIT IF OUR STOCK PRICE FALLS.

    Following periods of volatility in the market price of a company's stock,
some stockholders may file a securities class action litigation. For example, in
1994, a stockholder class action lawsuit was filed against us, our underwriters,
and some of our officers, directors and investors, which alleged that we, our
underwriters, and certain of our officers, directors and investors intentionally
misled the investing public regarding our financial prospects. We settled the
action and recorded a special charge of $1.4 million associated with the
settlement of this lawsuit and related legal expenses, net of accruals, in 1998.
Any future securities class action litigation could be expensive and divert our
management's attention and harm our business, regardless of its merits.

                                       21
<PAGE>
OUR STOCK WILL LIKELY BE SUBJECT TO SUBSTANTIAL PRICE AND VOLUME FLUCTUATIONS
DUE TO A NUMBER OF FACTORS, MANY OF WHICH WILL BE BEYOND OUR CONTROL THAT MAY
PREVENT OUR STOCKHOLDERS FROM RESELLING OUR COMMON STOCK AT A PROFIT.

    The securities markets have experienced significant price and volume
fluctuations and the market prices of the securities of semiconductor companies
have been especially volatile. The market price of our common stock may
experience significant fluctuations in the future. For example, our common stock
price has fluctuated from a high of approximately $65.37 to a low of
approximately $9.12 during the 52 weeks ended June 30, 2000. This market
volatility, as well as general economic, market or political conditions, could
reduce the market price of our common stock in spite of our operating
performance. In addition, our operating results could be below the expectations
of public market analysts and investors, and in response, the market price of
our common stock could decrease significantly.

OUR CERTIFICATE OF INCORPORATION AND BYLAWS INCLUDE ANTI-TAKEOVER PROVISIONS,
WHICH MAY DETER OR PREVENT A TAKEOVER ATTEMPT.

    Some provisions of our certificate of incorporation and bylaws and
provisions of Delaware law may deter or prevent a takeover attempt, including a
takeover that might result in a premium over the market price for our common
stock. These provisions include:

    CUMULATIVE VOTING.  Our stockholders are entitled to cumulate their votes
for directors. This may limit the ability of the stockholders to remove a
director other than for cause.

    STOCKHOLDER PROPOSALS AND NOMINATIONS.  Our stockholders must give advance
notice, generally 120 days prior to the relevant meeting, to nominate a
candidate for director or present a proposal to our stockholders at a meeting.
These notice requirements could inhibit a takeover by delaying stockholder
action.

    STOCKHOLDER RIGHTS PLAN.  We may trigger our stockholder rights plan in the
event our board of directors does not agree to an acquisition proposal. The
rights plan may make it more difficult and costly to acquire our company.

    PREFERRED STOCK.  Our certificate of incorporation authorizes our board of
directors to issue up to 5 million shares of preferred stock and to determine
what rights, preferences and privileges such shares have. No action by our
stockholders is necessary before our board of directors can issue the preferred
stock. Our board of directors could use the preferred stock to make it more
difficult and costly to acquire our company.

    DELAWARE ANTI-TAKEOVER STATUTE.  The Delaware anti-takeover law restricts
business combinations with some stockholders once the stockholder acquires 15%
or more of our common stock. The Delaware statute makes it harder for our
company to be acquired without the consent of our board of directors and
management.

LIQUIDITY AND CAPITAL RESOURCES

    On May 24, 2000, the Company announced that it entered into a non-binding
Memorandum of Understanding with Micron Technology, Inc. pursuant to which the
Company will purchase of Micron's Richardson, Texas, wafer fabrication facility.
The purchase is subject to the negotiation and execution of a definitive
purchase agreement. It is currently expected that this transaction will close
sometime within the third quarter of 2000. The expected cost of placing the
facility into use, including the purchase price, will be approximately
$100.0 million, excluding the cost of the production equipment.

    In February and March 2000, we completed a private placement of
$345.0 million (net proceeds of $333.9 million) of 4% convertible subordinated
notes due 2007. The notes are unsecured obligations, are

                                       22
<PAGE>
initially convertible into TriQuint Common Stock at a conversion price of $67.80
per share and subordinated to all of our present and future senior indebtedness.
We also completed public offerings of our common stock in July 1999 and
September 1995, raising approximately $146.6 million and $48.1 million,
respectively, net of offering expenses. In December 1993 and January 1994, we
completed our initial public offering raising approximately $16.7 million, net
of offering expenses. In addition, we have funded our operations to date through
other private sales of equity, borrowings, equipment leases, and cash flow from
operations. As of June 30, 2000, we had working capital of approximately
$573.4 million, including $544.8 million in cash, cash equivalents, and
unrestricted investments.

    In November 1997, we entered into a $1.5 million lease agreement for land
adjacent to our Hillsboro facility. Under the terms of that agreement, USNB
provided loans to Matisse to purchase the land, and Matisse in turn leased it to
us under a renewable one-year lease agreement. The loan from USNB was partially
collateralized by a guarantee from us. In June 2000, we retired this loan and no
longer have any obligation under the agreement.

    In May 1996, we entered into a five year synthetic lease through a
participation agreement with Wolverine Leasing Corp., Matisse Holding Company
and United States National Bank of Oregon ("USNB"). The lease provides for the
construction and occupancy of our headquarters and wafer fabrication facility in
Hillsboro under an operating lease from Wolverine and provides us with an option
to purchase the property or renew our lease for an additional five years. Under
the terms of the agreement, USNB and Matisse made loans to Wolverine, which in
turn advanced the funds to us for the construction of the Hillsboro facility and
other associated costs and expenses. The loan from USNB is collateralized by
investment securities we have pledged. These investment securities are
classified on our balance sheet as restricted investments. In addition,
restrictive covenants in the participation agreement require us to maintain
(a) a total liability to tangible net worth ratio of not more than 1.50 to 1.00,
(b) minimum tangible net worth greater than $50.0 million and (c) more than
$45.0 million of cash and liquid investment securities, including restricted
securities. As of June 30, 2000, we were in compliance with the covenants
described above.

    The following table presents a summary of the Company's cash flows (IN
THOUSANDS):

<TABLE>
<CAPTION>
                                                                SIX MONTHS ENDED
                                                                    JUNE 30,
                                                              --------------------
                                                                2000        1999
                                                              ---------   --------
<S>                                                           <C>         <C>
Net cash provided by operating activities...................  $  42,425    $5,025
Net cash used in investing activities.......................   (189,238)   (1,942)
Net cash provided by (used in) financing activities.........    338,072      (437)
                                                              ---------    ------
Net increase in cash and cash equivalents...................  $ 191,259    $2,646
                                                              =========    ======
</TABLE>

    The $42.4 million of cash provided by operating activities for the six
months ended June 30, 2000 related primarily to net income of $27.3 million,
depreciation and amortization of $4.6 million, a tax benefit for disqualifying
dispositions of $16.4 million as well as accounts payable and accrued expenses
of $11.1 million. This was offset by increases in accounts receivable of
$10.5 million, inventories of $924,000 and prepaid expense and other assets of
$5.4 million. The $5.0 million of cash provided by operating activities for the
six months ended June 30, 1999 related primarily to net income of $7.5 million
and an increase in accounts payable and accrued expenses of $1.4 million and
depreciation and amortization of $3.7 million. This was offset by increases in
accounts receivable of $4.8 million and inventories of $3.1 million.

    The $189.2 million of cash used in investing activities for the six months
ended June 30, 2000 related to the purchase of $574.1 million of investments and
capital expenditures of $29.0 million, offset in part by the sale/maturity of
$413.9 million of investments. The $1.9 million of cash used in investing
activities for the six months ended June 30, 1999 related to the purchase of
$60.2 million of investments and capital

                                       23
<PAGE>
expenditures of approximately $980,000, but was offset in part by the
sale/maturity of $59.3 million of investments.

    The $338.1 million of cash provided by financing activities for the six
months ended June 30, 2000 related primarily to the net proceeds from debt of
$333.9 million and from the issuance of common stock of $6.5 million. This was
offset in part by payment of principal on capital leases of $2.3 million. The
$437,000 of cash used by financing activities for the six months ended June 30,
1999 related primarily to the payment of principal on capital leases of
$2.4 million and was offset in part by the issuance of common stock of
$2.0 million upon option exercises.

    Cash used for capital expenditures for the six months ended June 30, 2000
was approximately $29.0 million. We anticipate that our capital equipment needs,
including manufacturing and test equipment and computer hardware and software,
will require additional expenditures of approximately $100.5 million, excluding
the purchase of Micron's Richardson, Texas, wafer fabrication facility, during
the next 12 months.

    We believe that our current cash and cash equivalent balances, together with
cash anticipated to be generated from operations and anticipated financing
arrangements, will satisfy our projected working capital and capital expenditure
requirements, at a minimum, through the next 12 months. However, we may be
required to finance any additional requirements through additional equity, debt
financings, or credit facilities. We may not be able to obtain additional
financings or credit facilities, or if these funds are available, they may not
be available on satisfactory terms.

ITEM 3: QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET AND INTEREST RATE
  RISK

    We are exposed to minimal market risks. We manage the sensitivity of our
results of operations to these risks by maintaining a conservative investment
portfolio. Our investments, both restricted and unrestricted, are classified as
available-for-sale and held-to-maturity securities and are comprised solely of
highly rated, short and medium-term investments, such as corporate notes,
commercial paper and market auction preferred stock. We do not hold or issue
derivative, derivative commodity instruments or other financial instruments for
trading purposes. We are exposed to currency exchange fluctuations, as we sell
our products internationally. We manage the sensitivity of our international
sales by denominating all transactions in U.S. dollars.

    We are exposed to interest rate risk, as we use additional financing
periodically to fund capital expenditures. The interest rate that we may be able
to obtain on financings will depend on market conditions at that time and may
differ from the rates we have secured in the past. Sensitivity of results of
operations to market and interest rate risks is managed by maintaining a
conservative investment portfolio.

                                       24
<PAGE>
PART II--OTHER INFORMATION

ITEM 1:  LEGAL PROCEEDINGS.

    On February 26, 1999, a lawsuit was filed against 88 firms, several of which
are still in litigation, including TriQuint, in the United States District Court
for the District of Arizona. The suit alleges that the defendants, including us,
infringe upon certain patents held by The Lemelson Medical, Education and
Research Foundation, Limited Partnership. Although we believe the suit is
without merit and intend to vigorously defend ourselves against the charges, we
cannot be certain that we will be successful. Moreover, this litigation may
require us to spend a substantial amount of time and money and could distract
management from our day to day operations.

ITEM 2:  CHANGES IN SECURITIES.

    None.

ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    On May 24, 2000, the Company held its Annual Meeting of Stockholders for
which it solicited votes by proxy pursuant to proxy solicitation materials first
distributed on or about April 19, 2000. The following is a brief description of
the matters voted on at the meeting and a statement of the number of votes cast
for and against and the number of abstentions. The following shares voted do not
reflect the July stock split.

    Election of Dr. Paul A. Gary, Charles Scott Gibson, Nicolas Kauser,
Dr. Walden C. Rhines, Steven J. Sharp and Edward F. Tuck as directors of the
Company until the next Annual Meeting of Stockholders or until their successors
are elected.

<TABLE>
<CAPTION>
NOMINEE                                                        IN FAVOR    WITHHELD
-------                                                       ----------   --------
<S>                                                           <C>          <C>
Dr. Paul A. Gary............................................  33,598,407    37,292
Charles Scott Gibson........................................  33,576,739    58,960
Nicolas Kauser..............................................  33,596,428    39,271
Dr. Walden C. Rhines........................................  33,598,085    37,614
Steven J. Sharp.............................................  33,593,844    41,855
Edward F. Tuck..............................................  33,597,158    38,541
</TABLE>

2.  The ratification of the appointment of KPMG LLP as independent accountants
    of the Company for the fiscal year ending December 31, 2000:

    FOR: 33,537,849  AGAINST: 64,601  ABSTAIN: 33,249  NON-VOTES: 4,751,440

3.  The amendment of the 1996 Stock Incentive Program to increase the aggregate
    number of shares of the Company's common stock that may be issued thereunder
    by 1,900,000:

    FOR: 20,674,135  AGAINST: 12,874,135  ABSTAIN: 86,814  NON-VOTES: 4,751,440

ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K

    (a) Exhibits

        Exhibit 27.1    Financial Data Schedule

    (b) Reports on Form 8-K

        None.

                                       25
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

<TABLE>
<S>                                            <C>
                                               TriQuint Semiconductor, Inc.

Dated:  August 10, 2000                        /s/ STEVEN J. SHARP
                                               --------------------------------------------
                                               Steven J. Sharp
                                               CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
                                               EXECUTIVE OFFICER (PRINCIPAL EXECUTIVE
                                               OFFICER)

Dated:  August 10, 2000                        /s/ EDSON H. WHITEHURST, JR.
                                               --------------------------------------------
                                               Edson H. Whitehurst, Jr.
                                               VICE PRESIDENT, FINANCE AND ADMINISTRATION,
                                               CHIEF FINANCIAL OFFICER AND SECRETARY
                                               (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
</TABLE>

                                       26
<PAGE>
                          TRIQUINT SEMICONDUCTOR, INC.
                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
                                                                                                SEQUENTIAL
     EXHIBIT NO.                                     DESCRIPTION                                 PAGE NO.
---------------------                                -----------                                -----------
<C>                           <S>                                                               <C>
    27.1                      Financial Data Schedule
</TABLE>

                                       27


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