ANADIGICS INC, 424B4, 1997-02-21

ANADIGICS INC
424B4, 1997-02-21
SEMICONDUCTORS & RELATED DEVICES

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<PAGE>
Filed Pursuant to Rule 424(b)(4)
Registration No. 333-20783
2,041,513 SHARES

[LOGO]
ANADIGICS, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-------------------

Of the 2,041,513 shares of Common Stock offered hereby, 1,875,000 shares are
being sold by the Company and 166,513 shares are being sold by the Selling
Stockholders. See "Selling Stockholders". The Company will not receive any of
the proceeds from the sale of the shares being sold by the Selling Stockholders.
The last reported sale price of the Common Stock, which is quoted under the
symbol "ANAD", on the Nasdaq National Market on February 20, 1997 was $31.50 per
share, as adjusted for the three-for-two stock split of the Common Stock by
declaration of a stock dividend on January 30, 1997. See "Prospectus Summary"
and "Price Range of Common Stock".
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------

<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT (1) COMPANY (2) STOCKHOLDERS
------------------ ------------------ ------------------ -------------------
<S> <C> <C> <C> <C>
Per Share........................... $31.50 $1.70 $29.80 $29.80
Total (3)........................... $64,307,659 $3,470,572 $55,875,000 $4,962,087
</TABLE>

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(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting estimated expenses of $400,000 payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional 306,226 shares at the initial public offering price per
share, less the underwriting discount, solely to cover over-allotments. If
such option is exercised in full, the total initial public offering price,
underwriting discount and proceeds to Company will be $73,953,778,
$3,991,156 and $65,000,535, respectively. See "Underwriting".
-------------------

The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York on or about
February 26, 1997, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
OPPENHEIMER & CO., INC.
NEEDHAM & COMPANY, INC.
------------

The date of this Prospectus is February 20, 1997.
<PAGE>
[Graphics of products in which the Company's integrated circuits are used]

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

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME. IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS
AND SELLING GROUP MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL
MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934.
SEE "UNDERWRITING".

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND FINANCIAL STATEMENTS
(INCLUDING THE NOTES THERETO), APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS
OTHERWISE NOTED, THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND REFLECTS THE
THREE-FOR-TWO STOCK SPLIT BY DECLARATION ON JANUARY 30, 1997 OF A STOCK DIVIDEND
OF ONE SHARE OF THE COMPANY'S COMMON STOCK, PAR VALUE $.01 PER SHARE (THE
"COMMON STOCK"), FOR EACH TWO SHARES OF COMMON STOCK OUTSTANDING (THE "STOCK
SPLIT"). THE DIVIDEND IS PAYABLE ON FEBRUARY 20, 1997 TO HOLDERS OF RECORD ON
FEBRUARY 10, 1997.

THE COMPANY

ANADIGICS, Inc. ("ANADIGICS" or the "Company") is a leading supplier of
radio frequency ("RF") and microwave gallium arsenide ("GaAs") integrated
circuits. The Company's products are used to receive and transmit signals in a
variety of high volume communications applications in cellular telephone systems
and personal communication systems ("PCS"), in fiber optic communication systems
and in cable ("CATV") and direct broadcast satellite ("DBS") television systems.
The Company designs, develops and manufactures its integrated circuits in GaAs
semiconductor material that allows the integration of numerous RF/microwave
functions which cannot be easily integrated in silicon-based circuits. The
Company's high frequency integrated circuits can typically replace 30 to 100
discrete components, permitting manufacturers of end products to reduce the size
and weight of their products, increase power efficiency, improve reliability,
reduce manufacturing time and cost and enhance overall system performance.

The Company's objective is to be the leading supplier of high volume GaAs
integrated circuits for RF/microwave receiver and transmitter applications. To
date, the Company has delivered over 60 million GaAs integrated circuits,
including over 21 million in 1996. Unlike some other manufacturers of GaAs
integrated circuits who have focused on low volume applications for industries
such as aerospace and defense, the Company has developed high volume
manufacturing capabilities geared toward achieving higher yields and lower
costs. The Company has made a significant investment in proprietary processes,
including design, wafer fabrication and testing, which the Company believes
gives it a competitive advantage. The Company manufactures integrated circuits
at its existing facility in Warren, New Jersey and is in the process of
constructing a new production facility in order to increase capacity. See
"Business--Manufacturing, Assembly and Testing".

ANADIGICS believes that the market for high frequency integrated circuits
for receiver and transmitter applications will grow significantly as demand for
broadband, high frequency end products grows in the communications, information
and video entertainment markets. The Company believes that it is currently one
of the few sources of RF/microwave GaAs integrated circuits for high volume
communications applications.

In the cellular and PCS market, which according to Kagan World Media grew
(based on the estimated number of subscribers) by over 50% worldwide during the
first eleven months of 1996, the Company's products are used primarily as power
amplifiers in telephone handsets, where they replace more traditional hybrid or
discrete component solutions containing 30 to 50 chip components. The Company's
integrated circuit power amplifiers provide a smaller footprint, lower parts
count and lower power consumption compared to traditional hybrid or discrete
solutions. The Company currently is producing GaAs integrated circuit power
amplifiers for the analog Advanced Mobile Phone Service ("AMPS") and Expanded
Total Access Communication System ("ETACS") standards, and for the newer,
digital Global System Mobile ("GSM"), Time Division Multiple Access ("TDMA") and
Code Division Multiple Access ("CDMA") standards. In addition to power amplifier
integrated circuits for telephone handsets, the Company is also producing
receiver integrated circuits for cellular handsets, base stations and fixed
wireless local loop applications.

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The Company's principal products for fiber optic systems are transimpedance
amplifiers that are used primarily in Synchronous Optical Network ("SONET") and
Synchronous Digital Hierarchy ("SDH") fiber optic transmission at rates from 155
megabits per second ("Mbps") to 2480 Mbps. Increasingly, these products are also
being used in higher bit rate data communication applications. In the cable
television market, the Company's products are used primarily in wide band tuners
for set top converters operating at the older 500 megahertz ("MHz") bandwidth
and the new 800 MHz bandwidth. The new 800 MHz bandwidth provides increased
analog channel capacity, digital cable television capability and internet access
via cable modems. The Company also offers wide band linear amplifier products
operating at frequencies of up to 860 MHz for hybrid fiber/coaxial
infrastructure applications. In the DBS market, the Company's products are used
as down converters primarily in satellite dishes, as well as in set top DBS
tuners. The Company's products are utilized in DBS services using analog
modulation such as BSkyB in Europe, as well as DBS services using digital
modulation such as DirecTV in the United States.

The Company has developed working relationships with leading companies in
each of its target markets. The Company's principal customers include LM
Ericsson AB ("Ericsson"), General Instrument Corp. ("General Instrument"),
Lucent Technologies, Inc. ("Lucent"), Nokia Corp. ("Nokia"), Nortel Ltd.
("Nortel"), Philips Electronics N.V., and Qualcomm Personal Electronics
("Qualcomm PE"), a partnership between Qualcomm, Inc. and Sony Corp. The
Company's five largest customers in each of the past three years together
accounted for 61%, 67% and 60% of net sales for 1994, 1995 and 1996,
respectively. The Company's net sales have grown from $20.2 million in 1992 to
$68.9 million in 1996.

The Company was incorporated in Delaware on April 24, 1984. The executive
offices of the Company are located at 35 Technology Drive, Warren, New Jersey
07059. The Company's telephone number is (908) 668-5000. The Company's Website
is http://www.anadigics.com.

4
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company...... 1,875,000 shares
Common Stock offered by the Selling
Stockholders........................... 166,513 shares
Common Stock to be outstanding after the
Offering............................... 14,481,943 shares(1)
Use of proceeds.......................... The Company will use approximately $50 million
of its net proceeds from this Offering to
purchase capital equipment and make leasehold
improvements and will use the remainder for
general corporate purposes, including working
capital. The Company will receive no proceeds
from the sale of shares of Common Stock by the
Selling Stockholders. See "Use of Proceeds".
Nasdaq National Market symbol............ ANAD
</TABLE>

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(1) Based on shares outstanding as of February 20, 1997. Excludes 2,960,495
shares of Common Stock reserved for issuance under the Company's stock
purchase and stock option plans and warrants outstanding on February 20,
1997, of which 1,628,171 shares of Common Stock are issuable upon exercise
of options and warrants outstanding on February 20, 1997. See
"Capitalization" and Notes 1, 7, 8 and 11 to the Financial Statements.

SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996
--------- --------- --------- ---------- ----------

<CAPTION>
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $ 20,224 $ 29,024 $ 34,832 $ 51,460 $ 68,864
Gross profit....................... 7,613 13,701 16,378 26,465 29,977
Income (loss) from operations...... (803) 2,831 2,653 8,092 9,735
Net income (loss)(1)............... (2,159) 1,936 1,865 7,293 11,991
Net income (loss) per
share(1)(2)...................... $ (11.15) $ 0.28 $ 0.23 $ 0.64 $ 0.93
Common and common equivalent shares
used in computing per share
amounts(2)....................... 193,587 6,940,401 8,260,430 11,374,745 12,907,851
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
--------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED(3)
--------- ---------------
BALANCE SHEET DATA:
Working capital................................................... $ 37,825 $ 43,300
Total assets...................................................... 86,996 142,471
Current maturities of capital lease obligations................... 1,292 1,292
Capital lease obligations, less current portion................... 627 627
Stockholders' equity.............................................. 70,557 126,032
</TABLE>

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(1) Includes recognition of a net deferred tax benefit of approximately $1.2
million (or $0.11 per share) and $3.6 million (or $0.28 per share) in 1995
and 1996, respectively. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations--1996
Compared to 1995--Provision (Benefit) for Income Taxes" and Note 5 to the
Financial Statements.

(2) Common stock equivalents are not included in 1992 as their effect was
anti-dilutive.

(3) Adjusted to reflect the sale by the Company of 1,875,000 shares of Common
Stock offered hereby at the initial public offering price of $31.50 per
share and the application of the estimated net proceeds therefrom. See "Use
of Proceeds".

5
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN
INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY. CERTAIN STATEMENTS IN
THIS PROSPECTUS, SUCH AS STATEMENTS CONCERNING THE DEVELOPMENT OF NEW
COMMUNICATION TECHNOLOGIES AND SERVICES, THE TREND IN COMMUNICATION SYSTEMS
TOWARD HIGHER OPERATING FREQUENCIES, THE EVOLUTION OF COMMUNICATION SYSTEMS FROM
ANALOG TO DIGITAL MODULATION, THE GROWTH OPPORTUNITIES OF CERTAIN MARKETS FOR
THE COMPANY'S PRODUCTS, THE COMPANY'S PLANS WITH RESPECT TO, AMONG OTHER THINGS,
CAPITAL EXPENDITURES, PRODUCTION CAPACITY, REVENUES, EARNINGS, LIQUIDITY AND
CAPITAL RESOURCES, ACCOUNTING AND TAX MATTERS AND REGULATORY MATTERS, AND OTHER
STATEMENTS REGARDING MATTERS THAT ARE NOT HISTORICAL FACTS, ARE FORWARD-LOOKING
STATEMENTS (AS THAT TERM IS DEFINED IN THE SECURITIES ACT OF 1933, AS AMENDED)
THAT INVOLVE RISKS AND UNCERTAINTIES. THESE FORWARD-LOOKING STATEMENTS CAN
GENERALLY BE IDENTIFIED AS SUCH BECAUSE THE CONTEXT OF THE STATEMENT WILL
INCLUDE WORDS SUCH AS THE COMPANY "BELIEVES", "ANTICIPATES", "EXPECTS" OR WORDS
OF SIMILAR IMPORT. SIMILARLY, STATEMENTS THAT DESCRIBE THE COMPANY'S FUTURE
PLANS, OBJECTIVES, ESTIMATES OR GOALS ARE FORWARD-LOOKING STATEMENTS. THE
CAUTIONARY STATEMENTS MADE IN THIS PROSPECTUS SHOULD BE READ AS BEING APPLICABLE
TO ALL RELATED FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR IN THIS
PROSPECTUS. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS AND DEVELOPMENTS
TO BE MATERIALLY DIFFERENT FROM THOSE EXPRESSED OR IMPLIED BY SUCH STATEMENTS
INCLUDE THOSE FACTORS DISCUSSED BELOW, AS WELL AS THOSE DISCUSSED ELSEWHERE
HEREIN.

DEPENDENCE ON A SMALL NUMBER OF CUSTOMERS

The Company receives most of its revenues from a few significant customers.
Sales to the Company's five largest customers in each of the past three years
accounted for 61%, 67% and 60% of net sales in 1994, 1995 and 1996,
respectively. General Instrument, Ericsson, Qualcomm PE, Nokia and Nortel
accounted for 16%, 16%, 12%, 10% and 6% of 1996 net sales, respectively. The
Company's operating results have been materially and adversely affected in the
past by the failure of anticipated orders to be realized and by deferrals or
cancellations of orders as a result of changes in customer requirements. If the
Company were to lose a major customer, or if sales to a major customer were to
decrease materially, the Company's results of operations would be materially and
adversely affected. See "Business--Target Markets and Products".

VARIABILITY OF MANUFACTURING YIELDS

The Company's manufacturing yields vary significantly among products,
depending on the complexity of a particular GaAs integrated circuit's design and
the Company's experience in manufacturing such integrated circuit. Historically,
the Company has experienced difficulties in achieving planned yields on certain
new GaAs integrated circuits, which have adversely affected gross margins.
Although the Company's process technology utilizes standard silicon
semiconductor manufacturing equipment, aggregate production quantities of GaAs
integrated circuits manufactured by the Company and the GaAs integrated circuit
industry in general have been relatively low compared with silicon integrated
circuit production volumes, and the process technology is significantly less
mature than silicon process technologies.

Regardless of the process technology used, the fabrication of integrated
circuits is a highly complex and precise process. Defects in masks, impurities
in the materials used, contamination of the manufacturing environment, equipment
failure and other difficulties in the fabrication process can cause a
substantial percentage of wafers to be rejected or numerous integrated circuits
on each wafer to be nonfunctional, thereby reducing yields.

Because a large portion of the Company's costs of manufacturing are
relatively fixed and average selling prices tend to decline over time,
improvements in the number of shippable integrated circuits per wafer and
increases in the production volume of wafers are critical to maintaining and
improving the

6
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Company's results of operations. Yield decreases can result in substantially
higher unit costs, which could materially and adversely affect operating
results. There can be no assurance that the Company will be able to continue to
improve its yields in the future or that the Company will not suffer periodic
yield problems, particularly during the early production of new products, such
as those experienced by the Company in the third quarter of 1996. In either
case, the Company's results of operations could be materially and adversely
affected. See "Business--Manufacturing, Assembly and Testing".

POSSIBLE DELAYS IN DEVELOPMENT OF PCS OR OTHER NEW MARKETS; UNCERTAINTY OF
ACCEPTANCE OF NEW PRODUCTS

The Company supplies GaAs integrated circuits for mass market applications
related to communication, information and video entertainment systems. The
extent of the Company's success will depend to a considerable extent upon the
continued worldwide growth and increased availability of cellular and other
wireless communications applications and services, in particular PCS. No
assurance can be given regarding the rate at which the markets for such
applications will develop or the Company's ability to produce competitive
products for such applications and systems as they develop. The success of new
product introductions is dependent upon several factors, including timely
completion of new product designs, achievement of acceptable manufacturing
yields and market acceptance. No assurance can be given that the Company's
product and process development efforts will be successful or that its new
products will achieve market acceptance.

POSSIBLE PRODUCTION CAPACITY CONSTRAINTS; POSSIBLE DELAY IN CONSTRUCTION OF NEW
PRODUCTION FACILITY

The Company currently manufactures all of its integrated circuits at its
four-inch wafer fabrication facility located at 35 Technology Drive in Warren,
New Jersey. In October 1996, the Company began conversion from three-inch to
four-inch diameter wafer manufacturing at this facility. The technological and
manufacturing changes associated with these changes may, at least for an initial
period, affect manufacturing yields adversely and could adversely affect
operating results. The Company believes that this facility should be able to
satisfy its production needs through the end of 1997, assuming that the Company
successfully completes planned incremental increases in production and
electrical test capacity at the facility through such date. In addition to the
purchase of equipment, the Company will be required to successfully hire, train
and manage additional production personnel in order to successfully increase
production capacity at this facility. There can be no assurance that the Company
will be able to implement these changes successfully. If the expansion is
delayed for any reason, the Company will be limited in its ability to increase
sales volumes. In addition, a failure to increase production could adversely
affect relationships with customers if the Company does not have sufficient
capacity to satisfy the demand for its products.

The Company has leased an additional manufacturing facility located at 141
Mt. Bethel Road in Warren, New Jersey from United States Land Resources, L.P.
("USLR"), which USLR currently is in the process of refurbishing. The Company
plans to complete the approximately 131,000 square foot facility to create
manufacturing areas, including a 12,000 square foot Class 100 four-inch wafer
fabrication clean room, electrical test areas and office space. The Company
expects to be able to begin occupying the new facility late in the second
quarter or early in the third quarter of 1997. Following the completion of the
physical plant, the Company must install equipment and perform necessary testing
prior to commencing commercial production at the new facility, a process which
the Company anticipates will take at least three months. Accordingly, the
Company believes that the new facility will not begin commercial production
prior to the fourth quarter of 1997.

The construction of the new facility entails significant risks, including
possible shortages of materials and skilled labor, unavailability or late
delivery of process equipment, unforeseen environmental or engineering problems,
work stoppages, weather interferences and unanticipated cost increases, any of

7
<PAGE>
which could delay the production start-up at the new facility or increase its
cost. In addition, unexpected changes or concessions required by local, state or
federal regulatory agencies with respect to necessary licenses, land use
permits, site approvals and building permits or delays in the receipt of these
licenses, permits and approvals could involve significant additional costs and
delay the scheduled opening of the facility. There can be no assurance that the
project will be successfully completed within its current budget or on schedule.
The failure by the Company to successfully complete the new facility as
currently budgeted and scheduled could have a material and adverse effect on its
results of operations.

The successful operation of the new facility, once completed, as well as the
Company's overall production operations, will also be subject to numerous risks.
The Company will be required to hire, train and manage production personnel
successfully in order to operate effectively the new facility. The Company does
not have excess production capacity at its 35 Technology Drive facility to
offset any failure of the new facility to meet planned production goals. The
failure of the Company to successfully operate the new facility would have a
material and adverse effect on its results of operations.

The Company will also have to effectively coordinate and manage both
facilities to successfully meet its overall production goals. The Company has no
experience in coordinating and managing full scale production facilities which
are located at different sites. The failure to successfully coordinate and
manage the two sites would adversely affect the Company's overall production and
could have a material and adverse effect on its results of operations. See "Use
of Proceeds" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations".

RAPID PRODUCT AND PROCESS DEVELOPMENT AND RAPID TECHNOLOGICAL CHANGES

The markets for the Company's products are characterized by rapid changes in
both product and process technologies. Because of continual improvements in
these technologies, the Company believes that its future success will depend in
part upon its ability to continue to improve its product and process
technologies and develop new products and process technologies. If a competing
technology develops that is superior to the Company's existing technology and
the Company is unable to implement successfully such technology or to develop a
competitive and economic alternative technology, the Company's operations would
be materially and adversely affected. See "Business--Competition" and
"--Research and Development".

In each of the markets in which the Company competes, prices of established
products tend to decline significantly over time. Accordingly, in order to
remain competitive, the Company believes that it must continue to develop
product enhancements and new technologies that will either slow the price
declines of its products or reduce the cost of producing and delivering its
products. Developing these enhancements and technologies requires investment by
the Company, and there can be no assurance that funds for such investments will
be available or that such enhancements and technologies will be successful.

SIGNIFICANT VARIABILITY OF OPERATING RESULTS

The Company participates in a highly dynamic industry and future results
could be subject to significant volatility, particularly on a quarterly basis.
The Company may experience substantial period-to-period fluctuations in future
operating results due to numerous factors, including general industry and global
economic conditions, the timing and success of new product introductions,
changes in selling prices for the Company's integrated circuits due to
competitive or currency exchange rate pressures, changes in product mix,
availability of raw materials, availability of manufacturing capacity,
fluctuations in manufacturing yields, the size and timing of shipments, market
acceptance of end-user products, the pattern of end-user or customer purchasing
cycles, the processes and technologies used by the Company and its competitors
and seasonality.

8
<PAGE>
The semiconductor industry has been characterized by cyclicality. The
industry has experienced significant economic downturns at various times,
characterized by diminished product demand, accelerated erosion of average
selling prices and production over-capacity. Although the semiconductor industry
in general, and the portion of such industry serving the communications industry
in particular, are currently experiencing a period of increased demand, there
can be no assurance that these conditions will continue.

COMPETITION

The semiconductor industry is intensely competitive and is characterized by
rapid technological change. To date, the Company has competed primarily with
manufacturers of discrete GaAs and silicon semiconductors. The Company expects
increased competition from discrete semiconductor manufacturers, as well as
other GaAs integrated circuit manufacturers, silicon analog integrated circuit
manufacturers and a number of companies which may enter the GaAs integrated
circuit market. In addition, certain of the Company's customers are competitors
of the Company.

Increased competition could result in decreased prices of GaAs integrated
circuits, reduced demand for the Company's products and a reduction in the
Company's ability to recover development engineering costs. Any of these
developments could materially and adversely affect the Company's results of
operations. Most of the Company's current and potential competitors, including
Fujitsu Microelectronics Inc., ITT Corp., Motorola Inc., Raytheon Co. and
Rockwell International Corp., have significantly greater financial, technical,
manufacturing and marketing resources than the Company. There can be no
assurance that the Company will be able to compete successfully with its
existing or new competitors. See "Business--Competition".

RELUCTANCE OF MANUFACTURERS TO ADOPT GAAS COMPONENTS

Silicon semiconductor technologies are the dominant process technologies for
integrated circuits. The Company's prospective customers are typically systems
designers and manufacturers who use such silicon technologies in their existing
systems and who are evaluating GaAs integrated circuits for use in their next
generation systems. Some potential customers may be reluctant to adopt the
Company's GaAs products because of perceived risks relating to GaAs technology
generally. Such perceived risks include the unfamiliarity of designing systems
with GaAs products as compared with silicon products, novel design, unfamiliar
manufacturing processes and uncertainties about the relative cost effectiveness
of GaAs products compared to high performance silicon-based integrated circuits.
In addition, customers may be reluctant to rely on a smaller company such as
ANADIGICS for critical components. There can be no assurance that additional
systems manufacturers will design the Company's products into their respective
systems, that the companies that have utilized the Company's products will
continue to do so in the future or that GaAs integrated circuit technology will
achieve widespread market acceptance. See "Business--Industry Overview" and
"--Competition".

LIMITED SOURCES FOR CERTAIN COMPONENTS, MATERIALS AND EQUIPMENT

The Company does not manufacture any of the blank wafers or packaging
components used in the production of its GaAs integrated circuits. Blank wafers
and packaging components are available from a limited number of sources. The
inability of the Company to obtain these wafers or components in the required
quantities could result in delays or reductions in product shipments which would
materially and adversely affect the Company's operating results. Although the
Company has not to date experienced any significant difficulty in obtaining
wafers or components, no assurance can be given that shortages will not arise in
the future.

The Company is dependent on a limited number of vendors to supply equipment
used in its manufacturing processes. At times of high demand for semiconductor
manufacturing equipment, lead

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<PAGE>
times for delivery of such equipment can be substantial. No assurance can be
given that the Company would not lose potential sales if it were unable to
maintain or increase capacity due to the unavailability of manufacturing
equipment. See "--Possible Production Capacity Constraints; Possible Delay in
Construction of New Production Facility".

DEPENDENCE ON KEY MANAGERIAL AND TECHNICAL PERSONNEL

The Company's success depends in part upon attracting and retaining the
services of its managerial and technical personnel. The Company's expansion
plans will require the Company to hire an increasing number of such personnel.
The competition for qualified personnel is intense. There can be no assurance
that the Company will be able to retain its key managerial and technical
employees or that it will be able to attract, assimilate or retain other
managerial and skilled technical personnel in the future. The Company does not
maintain "key person" life insurance policies on any of its key personnel. See
"Business--Employees" and "Management".

DEPENDENCE ON SEMICONDUCTOR ASSEMBLY CONTRACTORS

The Company does not assemble its integrated circuits; instead it provides
the GaAs integrated circuit dice and, in some cases, packaging components to
various integrated circuit assembly vendors, all of which are located in Asia.
The Company attempts to maintain more than one qualified service supplier for
each assembly process, but at times is unable to achieve this goal because of
minimum volume requirements, service quality issues or other factors. The
Company's inability to obtain sufficient high quality and timely assembly
service, or the loss of any of its current assembly vendors, would result in
delays or reductions in product shipment, and/or reduced product yields that
could materially and adversely affect its results of operations.

INTERNATIONAL SALES AND OPERATIONS

Sales to customers located outside North America (based on shipping
addresses and not on the locations of ultimate end users) accounted for
approximately 80%, 68% and 65% of total net sales for 1994, 1995 and 1996,
respectively. The Company expects that revenues derived from international sales
will continue to represent a significant portion of its total net sales.
International sales are subject to a variety of risks, including those arising
from currency fluctuations and restrictions, tariffs, trade barriers, taxes and
export license requirements. Because all of the Company's foreign sales are
currently denominated in U.S. dollars, the Company's products become less price
competitive in countries with currencies that are low or are declining in value
against the U.S. dollar. In addition, there can be no assurance that the
Company's international customers will continue to accept orders denominated in
U.S. dollars. If such customers do not continue to accept orders denominated in
U.S. dollars, the Company's reported sales and earnings would become more
directly subject to foreign exchange fluctuations.

Substantially all of the Company's blank wafers and packaging components
used in the production of GaAs integrated circuits are supplied by, and
substantially all of the Company's products are assembled by, independent third
parties in Asia. Due to its reliance on such foreign suppliers and assemblers,
the Company is subject to the risks of conducting business outside of the United
States. These risks include unexpected changes in, or impositions of,
legislative or regulatory requirements, delays resulting from difficulty in
obtaining export licenses, tariffs and other trade barriers and restrictions,
and the burdens of complying with a variety of foreign laws and other factors
beyond the Company's control. The Company is also subject to general
geopolitical risks in connection with its international operations, such as
political, social and economic instability, potential hostilities and changes in
diplomatic and trade relationships. Although the Company has not to date
experienced any material adverse effect on its operations as a result of such
regulatory, geopolitical and other factors, there can be no assurance that such
factors will not adversely affect the Company's operations in the future or
require the Company

10
<PAGE>
to modify its current business practices. The Company currently transacts
business with its foreign suppliers and assemblers in U.S. dollars and
consequently the cost of the Company's blank wafers and packaging components, as
well as assembly costs, would increase in countries with currencies that are
increasing in value against the U.S. dollar. In addition, there can be no
assurance that the Company's international suppliers and assemblers will
continue to accept orders denominated in U.S. dollars. If such suppliers and
assemblers do not continue to accept orders denominated in U.S. dollars, the
Company's costs would become more directly subject to foreign exchange
fluctuations.

INTELLECTUAL PROPERTY CLAIMS

The Company's success depends in part on its ability to obtain patents and
copyrights, maintain
trade secret protection and operate without infringing on the proprietary rights
of third parties.

As is typical in the semiconductor industry, the Company may be notified in
the future that it is infringing certain patent and/or other intellectual
property rights of others, although there are no such pending lawsuits against
the Company or unresolved notices that the Company is infringing intellectual
property rights of others. No assurance can be given that in the event of such
infringement, licenses could be obtained on commercially reasonably terms or
that litigation will not occur. The failure to obtain necessary licenses or
other rights or the occurrence of litigation arising out of such claims could
have a material adverse effect on the Company's business.

In addition to patent and copyright protection, the Company also relies on
trade secrets, technical know-how and other unpatented proprietary information
relating to its product development and manufacturing activities which it seeks
to protect, in part, by confidentiality agreements with its collaborators and
employees. There can be no assurance 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. See "Business--Patents, Licenses and
Proprietary Rights".

GOVERNMENT REGULATION OF COMMUNICATIONS INDUSTRY

The sale of products by customers who purchase the Company's GaAs integrated
circuits may be materially and adversely affected by governmental regulatory
policies, the imposition of common carrier tariffs or taxation of
telecommunications services.

ENVIRONMENTAL REGULATIONS

The Company's operations are subject to a variety of extensive and changing
federal, state and local environmental laws, regulations and ordinances that
govern activities or operations that may have adverse effects on human health or
the environment. Such laws, regulations or ordinances may impose liability for
the cost of remediating, and for certain damages resulting from, sites of past
releases of hazardous materials. The Company believes that it currently
conducts, and in the past has conducted, its activities and operations in
substantial compliance with applicable environmental laws, and believes that
costs arising from existing environmental laws will not have a material adverse
effect on the Company's financial condition or results of operations. There can
be no assurance, however, that 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. See "Business--Environmental Matters".

11
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,875,000 shares of
Common Stock being offered by the Company hereby, after deducting the
underwriting discount and estimated offering expenses payable by the Company,
are estimated to be $55,475,000 ($64,601,000 if the Underwriters' over-allotment
option is exercised in full), at the initial public offering price of $31.50 per
share. Of these net proceeds, approximately $50 million is expected to be used
during 1997 for the purchase of capital equipment and to make leasehold
improvements, including the purchase of equipment relating to the Company's new
wafer fabrication and electrical test facility currently being constructed in
Warren, New Jersey, and additional fabrication, testing and research and
development equipment. See "Business-- Manufacturing, Assembly and Testing".
Remaining proceeds will be used for general corporate purposes, including
working capital. Pending such uses, the net proceeds to the Company from this
Offering will be invested in investment-grade, income-producing securities. The
Company will receive no proceeds from the sale of shares of Common Stock by the
Selling Stockholders.

DIVIDEND POLICY

The Company has never paid cash dividends on its capital stock. The
Company's bank credit agreement prohibits the payment of cash dividends without
the consent of the lender thereunder. See Note 6 to the Financial Statements.
The Company currently anticipates that it will retain all available funds for
use in the operation and expansion of its business, and does not anticipate
paying any cash dividends in the foreseeable future.

On January 30, 1997, the Company declared a stock dividend of one share of
Common Stock for each two shares of Common Stock outstanding. The dividend is
payable on February 20, 1997 to holders of record on February 10, 1997.

12
<PAGE>
PRICE RANGE OF COMMON STOCK

ANADIGICS' Common Stock has been quoted on the Nasdaq National Market under
the symbol "ANAD" since the commencement of trading on April 21, 1995 following
the initial public offering of the Common Stock. The following table sets forth
for the periods indicated the high and low sale prices for the Company's Common
Stock.

<TABLE>
<CAPTION>
1997 HIGH(1) LOW(1)
- -------------------------------------------------------- ----------- ---------

<S> <C> <C>
First Quarter (through February 20, 1997)............... $ 37.67 $ 24.50

1996
Fourth Quarter.......................................... $ 27.00 $ 16.33
Third Quarter........................................... 23.50 13.92
Second Quarter.......................................... 20.50 13.92
First Quarter........................................... 15.17 11.83

1995
Fourth Quarter.......................................... $ 18.67 $ 9.92
Third Quarter........................................... 22.33 12.17
Second Quarter (commencing April 21, 1995).............. 16.50 8.83
</TABLE>

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

(1) As adjusted for the Stock Split. See Note 11 to the Financial Statements.

On February 20, 1997, the last reported sale price of the Company's Common
Stock as reported by the Nasdaq National Market was $31.50 per share. As of
January 31, 1997, there were 392 holders of record of the Common Stock.

13
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of
December 31, 1996 (i) on an actual basis and (ii) as adjusted to give effect to
the sale of 1,875,000 shares of Common Stock offered by the Company in this
Offering at the initial public offering price of $31.50 per share, after
deducting the underwriting discount and estimated offering expenses. This table
should be read in conjunction with the Financial Statements and Notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
-----------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
--------- ------------

<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Current maturities of capital lease obligations.................... $ 1,292 $ 1,292
--------- ------------
--------- ------------
Capital lease obligations, less current portion.................... $ 627 $ 627
Stockholders' equity(1)(2):
Preferred Stock, par value $.01 per share, 5,000,000 shares
authorized; none issued and outstanding........................
Common Stock, par value $.01 per share, 34,000,000 shares
authorized; 12,564,678 shares issued and outstanding;
14,439,678 shares issued and outstanding as adjusted........... 126 144
Non-Voting Common Stock, par value $.01 per share, 1,000,000
shares authorized; none issued and outstanding.................
Additional paid-in capital....................................... 98,800 154,257
Accumulated deficit................................................ (28,369) (28,369)
--------- ------------
Total stockholders' equity................................... 70,557 126,032
--------- ------------
Total capitalization............................................... $ 71,184 $ 126,659
--------- ------------
--------- ------------
</TABLE>

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

(1) See Note 11 to the Financial Statements.

(2) Excludes 2,960,495 shares of Common Stock reserved for issuance under the
Company's stock purchase and stock option plans and warrants outstanding on
February 20, 1997, of which 1,628,171 shares of Common Stock are issuable
upon exercise of options and warrants outstanding on February 20, 1997. Also
excludes 42,201 shares of Common Stock which were issued between January 1,
1997 and February 20, 1997 upon exercise of stock options. See Notes 1, 7, 8
and 11 to the Financial Statements.

14
<PAGE>
SELECTED FINANCIAL DATA

The following selected financial data are derived from the Financial
Statements of ANADIGICS which have been audited by Ernst & Young LLP,
independent auditors. See "Experts". The data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements, related Notes and other financial
information included herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996
--------- ---------- ---------- ----------- -----------

<CAPTION>
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $ 20,224 $ 29,024 $ 34,832 $ 51,460 $ 68,864
Cost of sales...................... 12,611 15,323 18,454 24,995 38,887
--------- ---------- ---------- ----------- -----------
Gross profit....................... 7,613 13,701 16,378 26,465 29,977
Research and development........... 5,367 6,699 9,195 11,733 12,036
Selling and administrative
expense.......................... 3,049 4,171 4,530 6,640 8,206
--------- ---------- ---------- ----------- -----------
Operating income (loss)............ (803) 2,831 2,653 8,092 9,735
Interest expense................... 1,456 1,009 831 573 371
Interest income.................... 100 166 343 1,301 1,739
--------- ---------- ---------- ----------- -----------
Income (loss) before income
taxes............................ (2,159) 1,988 2,165 8,820 11,103
Provision (benefit) for
income taxes(1).................. -- 52 300 1,527 (888)
Net income (loss)(1)............... $ (2,159) $ 1,936 $ 1,865 $ 7,293 $ 11,991
--------- ---------- ---------- ----------- -----------
--------- ---------- ---------- ----------- -----------
Net income (loss) per
share(1)(2)...................... $ (11.15) $ 0.28 $ 0.23 $ 0.64 $ 0.93
--------- ---------- ---------- ----------- -----------
--------- ---------- ---------- ----------- -----------
Common and common equivalent shares
used in computing per share
amounts(2)....................... 193,587 6,940,401 8,260,430 11,374,745 12,907,851
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------

<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................. $ 2,453 $ 5,469 $ 11,349 $ 35,953 $ 37,825
Total assets................................ 18,378 21,850 30,885 66,250 86,996
Current maturities of capital lease
obligations............................... 4,240 4,510 3,829 1,718 1,292
Capital lease obligations, less current
portion................................... 4,394 3,475 2,807 1,919 627
Total stockholders' equity.................. 6,275 10,394 20,520 53,823 70,557
</TABLE>

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

(2) Common stock equivalents are not included in 1992 as their effect was
anti-dilutive.

15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company was organized in 1984 and initially focused on the development
and manufacture of GaAs integrated circuits for low volume defense and aerospace
applications. In 1988 the Company began shifting its strategy to focus on
RF/microwave communications systems for high volume applications, and began
production for these applications in 1989. The first high volume application for
its technology was in DBS systems. Product sales in 1990 and 1991 were chiefly
DBS television integrated circuits, and fiber optic integrated circuits which
were sold primarily to telecommunication infrastructure manufacturers. In 1992
the Company introduced integrated circuits for cable television and expanded its
DBS product offerings. In late 1994 the Company entered the wireless
communications market with the introduction of cellular telephone integrated
circuits. The Company's net sales have grown from $20.2 million in 1992 to $68.9
million in 1996. To date, the Company has delivered over 60 million GaAs
integrated circuits, including over 21 million in 1996.

RESULTS OF OPERATIONS

The following table sets forth statements of operations data as a percentage
of net sales for the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------------
<S> <C> <C> <C>
1994 1995 1996
----------- ----------- -----------
Net sales...................................................... 100.0% 100.0% 100.0%
Cost of sales.................................................. 53.0 48.6 56.5
----- ----- -----
Gross profit................................................... 47.0 51.4 43.5
Research and development....................................... 26.4 22.8 17.5
Selling and administrative expense............................. 13.0 12.9 11.9
----- ----- -----
Operating income............................................... 7.6 15.7 14.1
Interest expense............................................... 2.4 1.1 0.5
Interest income................................................ 1.0 2.5 2.5
----- ----- -----
Income before income taxes..................................... 6.2 17.1 16.1
Provision (benefit) for income taxes........................... 0.8 2.9 (1.3)
----- ----- -----
Net income..................................................... 5.4% 14.2% 17.4%
----- ----- -----
----- ----- -----
</TABLE>

1996 COMPARED TO 1995

NET SALES. Net sales during 1996 increased 34% to $68.9 million from $51.5
million in 1995. Net sales includes both product sales and engineering service
sales. Net product sales during 1996 increased by 32% to $65.7 million from
$49.7 million during 1995. Sales of integrated circuits for cellular and PCS
applications increased by 62% during 1996 to $24.5 million from $15.1 million in
1995 as a result of higher volumes. During 1996, the Company sold power
amplifier integrated circuits for almost all of the major standards, including
AMPS, DAMPS, ETACS, GSM and CDMA. New products introduced during 1996 for the
digital GSM and CDMA standards accounted for 60% of the cellular and PCS sales.
Sales of integrated circuits for analog standards (AMPS and ETACS) declined
during 1996 as the market shifted to digital standards. Net product sales of
integrated circuits for cable television applications in 1996 increased by 29%
to $13.8 million from $10.7 million in 1995 as demand for integrated circuits
used to produce set top converters increased. Net product sales of integrated
circuits for fiber optic SONET

16
<PAGE>
and ATM telecommunication applications increased 19% during 1996 to $11.6
million from $9.8 million in 1995 as a result of increased unit volume. Net
product sales of integrated circuits for DBS television applications increased
12% during 1996 to $15.8 million from $14.1 million in 1995. Generally, selling
prices for same product sales were lower in 1996 compared to 1995. Engineering
service sales, which reflect customers' contributions to the Company's research
and development efforts, increased by 71% during 1996 to $3.2 million from $1.8
million in 1995.

GROSS MARGIN. Gross margin during 1996 decreased to 43.5% from 51.4% in
1995. The decrease was due in part to significant sales volumes of new cellular
integrated circuits and other new products for which production yields were not
up to desired levels, and generally lower selling prices. Gross margins improved
significantly in the fourth quarter of 1996 to 43.5% from 34.5% in the third
quarter of 1996 as yields improved on the newer products, certain of which
experienced production start-up problems in the third quarter.

RESEARCH AND DEVELOPMENT. Company sponsored research and development
expense increased by 3% during 1996 to $12.0 million from $11.7 million during
1995. As a percentage of sales, these expenses declined to 17.5% during 1996
from 22.8% during 1995. The Company's focus on meeting customer demands for
products in the third and fourth quarters of 1996 temporarily reduced the amount
of engineering resources normally applied to research and development. The
Company expects that research and development expense, as a percentage of sales,
will increase in 1997 compared to 1996.

SELLING AND ADMINISTRATIVE. Selling and administrative expenses increased
by 24% during 1996 to $8.2 million from $6.6 million during 1995. As a
percentage of sales, these expenses declined during 1996 to 11.9% from 12.9%
during 1995. Selling expenses increased by 33% in 1996 due to higher commissions
paid to sales representatives and staffing increases associated with the
expansion of the Company's wireless integrated circuit sales efforts.
Administrative expenses increased by 15% in 1996 due in part to higher
consulting and legal costs.

INTEREST INCOME AND INTEREST EXPENSE. Interest income increased by 34%
during 1996 to $1.7 million from $1.3 million during 1995 as a result of higher
average cash balances. Interest expense decreased by 37% during 1996 to $0.4
million from $0.6 million during 1995 on lower levels of indebtedness.

PROVISION (BENEFIT) FOR INCOME TAXES. The benefit for income taxes during
1996 was $0.9 million, or 8% of pre-tax income. The provision for income taxes
in 1995 was $1.5 million, or 17% of pre-tax income. The benefit for income taxes
in 1996 arose from a reduction in a valuation allowance which had been recorded
prior to 1996 with respect to deferred tax assets (primarily net operating loss
("NOL") carryforwards).

Deferred tax assets of approximately $15.6 million less a valuation
allowance of $10.8 million were recorded as of December 31, 1996. Deferred tax
assets of approximately $17.4 million, less a valuation allowance of $16.2
million, were recorded as of December 31, 1995. At December 31, 1996, the
Company reduced its valuation allowance associated with its deferred tax assets
by $5.2 million based upon the level of historical taxable income and current
projections for future taxable income over the periods in which the deferred tax
assets would be realized. Additionally, the Company considered the expiration of
and limitation on the annual use of the Company's federal NOL carryforwards.
Excluding federal NOLs generated in years prior to 1989, which are severely
restricted and, therefore, are fully reserved, the remaining federal NOL
carryforwards will expire as follows: $0.3 million in 2004, $6.9 million in
2005, $5.0 million in 2006 and $1.0 million in 2007. In assessing the
realizability of deferred tax assets, the Company considered whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets will depend on whether
an ownership change occurred subsequent to January 1989 and prior to April 1995,
the value of the

17
<PAGE>
Company prior to any such change, future generation of taxable income and
prevailing statutory tax rates.

If an ownership change occurred after January 1989 but before April 1995,
the federal NOL carryforwards generated after January 1989 may be subject to
more restrictive limitations on use than would otherwise apply. The Company
believes that no ownership change occurred during that period. However, the
calculations required by the applicable federal income tax regulations are
complex. Accordingly, the provision (benefit) for income taxes in 1994, 1995 and
1996 has been computed as if such a change occurred in mid-1992, the point in
time at which the Company's computations show that it was closest to an
ownership change during the period from January 1989 until April 1995, resulting
in an annual limitation of approximately $1.4 million on the federal NOL
carryforwards generated between 1989 and the middle of 1992. See Note 5 to the
Financial Statements.

As a result of the reduction of the valuation allowance for deferred tax
assets in 1996, the Company expects that the effective tax rate on its earnings
in 1997 will be approximately 36%.

1995 COMPARED TO 1994

NET SALES. Net sales during 1995 increased by 48% to $51.5 from $34.8
million during 1994. Net sales includes both product sales and engineering
service sales. Net product sales during 1995 increased by 44% to $49.7 million
from $34.4 million during 1994. Net product sales of integrated circuits for
cellular telephone applications increased during 1995 to $15.1 million from $1.6
million during 1994. The Company began selling integrated circuits for cellular
telephony in late 1994, and during 1995, the Company sold three power amplifier
integrated circuits for the AMPS, DAMPS, and ETACS cellular standards and one
receiver circuit for the AMPS standard. Net product sales of fiber optic
integrated circuits for SONET and ATM telecommunication applications increased
56% during 1995 to $9.8 million from $6.3 million during 1994 on an 83% increase
in unit volume. Net product sales of integrated circuits for cable television
tuning and transmission applications increased 33% on higher volumes to $10.7
million during 1995 from $8.0 million in 1994. Net product sales of integrated
circuits for DBS television applications declined 24% during 1995 to $14.1
million from $18.5 million in 1994. Engineering service sales, which reflect
customers' contributions to the Company's research and development, increased
during 1995 to $1.8 million from $0.4 million during 1994.

GROSS MARGIN. Gross margin during 1995 increased to 51.4% from 47.0% during
1994. Although selling prices of integrated circuits were generally lower in
1995 than 1994, the Company experienced higher average selling prices in 1995 as
the mix of integrated circuits sold moved toward units with higher selling
prices and manufacturing unit costs declined on higher volumes and improved
productivity. Gross margin declined to 49.1% during the fourth quarter of 1995
from 52.6% in the third quarter of 1995 primarily due to lower selling prices
partially offset by favorable cost leverages on higher unit volumes. Gross
margin was also unfavorably impacted by increased assembly cost associated with
start up of a new assembly contractor for the Company's DBS integrated circuits.

RESEARCH AND DEVELOPMENT. Company sponsored research and development
expense increased 28% during 1995 to $11.7 million from $9.2 million during
1994. As a percentage of sales, these expenses declined to 22.8% during 1995
from 26.4% during 1994. The increase was attributable primarily to increased
research into integrated circuits for cellular and PCS applications.

SELLING AND ADMINISTRATIVE. Selling and administrative expenses increased
47% during 1995 to $6.6 million from $4.5 million during 1994. As a percentage
of sales, these expenses declined slightly during 1995 to 12.9% from 13.0%
during 1994. Selling expenses increased 48%, reflecting in part, a staffing
increase associated with expanding wireless integrated circuit sales, higher
commissions paid to sales representatives, and higher selling and advertising
expenses. Administrative expenses increased 45%, reflecting in part higher
compensation, insurance, and investor relations expenses.

18
<PAGE>
INTEREST INCOME AND INTEREST EXPENSE. Interest income increased to $1.3
million during 1995 from $0.3 million during 1994 on substantially higher
invested cash balances following the Company's initial public offering of common
stock in April 1995. Interest expense decreased to $0.6 million during 1995 from
$0.8 million during 1994 on lower levels of indebtedness.

PROVISION FOR INCOME TAXES. The provision for income taxes during 1995 was
$1.5 million or 17% of pre-tax income. The 1994 provision for income taxes was
$0.3 million or 14% of pre-tax income. The $1.2 million increase in the
provision was primarily due to the increase in pre-tax income of approximately
$6.7 million, net of a reduction of the valuation allowance related to deferred
tax assets of $1.2 million associated with the Company's NOL carryforwards.

SELECTED QUARTERLY OPERATING RESULTS

The following tables present the Company's unaudited results of operations
expressed in dollars and as a percentage of net sales for the eight most
recently ended fiscal quarters. The Company believes that all necessary
adjustments, consisting only of normal recurring adjustments, have been included
in the amounts below to present fairly the selected quarterly information when
read in conjunction with the Financial Statements and Notes thereto included
herein. Results from operations may vary substantially from quarter to quarter;
accordingly, the operating results for a quarter are not necessarily indicative
of results for any subsequent quarter or for the full year. See "Risk
Factors--Significant Variability of Operating Results".
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996
------------ ------------- ------------- ------------- ------------- -------------

<CAPTION>
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net sales........................... $ 10,970 $ 12,465 $ 13,555 $ 14,470 $ 13,574 $ 15,862
Cost of sales....................... 5,440 5,767 6,429 7,359 6,835 8,254
------------ ------------- ------------- ------------- ------------- -------------
Gross profit........................ 5,530 6,698 7,126 7,111 6,739 7,608
Research and development............ 2,729 3,182 2,825 2,997 2,878 3,284
Selling and administrative
expense........................... 1,399 1,658 1,849 1,734 1,968 2,063
------------ ------------- ------------- ------------- ------------- -------------
Operating income.................... 1,402 1,858 2,452 2,380 1,893 2,261
Interest expense.................... 223 184 121 45 105 90
Interest income..................... 86 330 437 448 418 411
------------ ------------- ------------- ------------- ------------- -------------
Income before income taxes.......... 1,265 2,004 2,768 2,783 2,206 2,582
Provision (benefit) for income
taxes............................. 367 581 441 138 441 516
------------ ------------- ------------- ------------- ------------- -------------
Net income.......................... $ 898 $ 1,423 $ 2,327 $ 2,645 $ 1,765 $ 2,066
------------ ------------- ------------- ------------- ------------- -------------
------------ ------------- ------------- ------------- ------------- -------------
Net income per share................ $ 0.10 $ 0.12 $ 0.18 $ 0.21 $ 0.14 $ 0.16
------------ ------------- ------------- ------------- ------------- -------------
------------ ------------- ------------- ------------- ------------- -------------
Common and common equivalent shares
used in computing per share
amounts........................... 8,701,775 11,596,805 12,645,876 12,501,452 12,562,331 12,895,889
------------ ------------- ------------- ------------- ------------- -------------
------------ ------------- ------------- ------------- ------------- -------------

<S> <C> <C>
SEPT. 29, DEC. 31,
1996 1996
------------- -------------

<S> <C> <C>
Net sales........................... $ 17,005 $ 22,423
Cost of sales....................... 11,136 12,662
------------- -------------
Gross profit........................ 5,869 9,761
Research and development............ 2,756 3,118
Selling and administrative
expense........................... 1,619 2,557
------------- -------------
Operating income.................... 1,494 4,086
Interest expense.................... 84 92
Interest income..................... 432 479
------------- -------------
Income before income taxes.......... 1,842 4,473
Provision (benefit) for income
taxes............................. 369 (2,214)
------------- -------------
Net income.......................... $ 1,473 $ 6,687
------------- -------------
------------- -------------
Net income per share................ $ 0.11 $ 0.51
------------- -------------
------------- -------------
Common and common equivalent shares
used in computing per share
amounts........................... 13,045,769 13,121,558
------------- -------------
------------- -------------
</TABLE>

19
<PAGE>
AS A PERCENTAGE OF NET SALES:
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 29,
1995 1995 1995 1995 1996 1996 1996
------------- ----------- ----------- ----------- ------------- ----------- -----------
Net sales...................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................. 49.6 46.3 47.4 50.9 50.4 52.0 65.5
----- ----- ----- ----- ----- ----- -----
Gross profit................... 50.4 53.7 52.6 49.1 49.6 48.0 34.5
Research and development....... 24.9 25.5 20.8 20.7 21.2 20.7 16.2
Selling and administrative
expense...................... 12.8 13.3 13.6 12.0 14.5 13.0 9.5
----- ----- ----- ----- ----- ----- -----
Operating income............... 12.7 14.9 18.2 16.4 13.9 14.3 8.8
Interest expense............... 2.0 1.4 0.9 0.3 0.8 0.6 0.5
Interest income................ 0.8 2.6 3.2 3.1 3.1 2.6 2.5
----- ----- ----- ----- ----- ----- -----
Income before income taxes..... 11.5 16.1 20.5 19.2 16.2 16.3 10.8
Provision (benefit) for income
taxes........................ 3.3 4.7 3.3 0.9 3.2 3.3 2.1
----- ----- ----- ----- ----- ----- -----
Net income..................... 8.2% 11.4% 17.2% 18.3% 13.0% 13.0% 8.7%
----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- -----

<S> <C>
DEC. 31,
1996
-----------
Net sales...................... 100.0%
Cost of sales.................. 56.5
-----
Gross profit................... 43.5
Research and development....... 13.9
Selling and administrative
expense...................... 11.4
-----
Operating income............... 18.2
Interest expense............... 0.4
Interest income................ 2.1
-----
Income before income taxes..... 19.9
Provision (benefit) for income
taxes........................ (9.9)
-----
Net income..................... 29.8%
-----
-----
</TABLE>

The markets for the Company's integrated circuits exhibit seasonal trends or
cyclical sales patterns. Sales of cellular telephone and PCS, cable television
and fiber optic integrated circuits tend to exhibit cyclical fluctuations based
on factors such as capital expenditure cycles of customers and new product
introductions, while DBS integrated circuits exhibit seasonal sales patterns,
with increased sales in the second half of the calendar year as the Company's
customers manufacture products for the holiday season.

Net sales increased in each quarter presented, except for the quarter ended
March 31, 1996. The decline in net sales in the first quarter of 1996 was
primarily due to the seasonal slowdown in sales of integrated circuits for DBS
applications and softness in sales of integrated circuits in the United States
for cellular applications. Gross margin percentages ranged from 53.7% to 49.1%
in 1995 and 49.6% to 34.5% in 1996. The lower gross margins experienced in 1996,
particularly in the third quarter, were due in part to significant sales volumes
of new integrated circuits for cellular applications and other integrated
circuits for which production yields were not up to desired levels, and to
generally lower selling prices. Net sales of integrated circuits for cellular
applications in the fourth quarter of 1996 increased over 100% from the third
quarter of 1996, in substantial part because lower yields hindered the Company's
ability to satisfy customers' orders in the third quarter. Most of the orders
which were not satisfied in the third quarter of 1996 were filled in the fourth
quarter of 1996. Research and development expenses, as a percentage of sales,
decreased during 1996. The Company's focus on meeting customer demands for
products in the third and fourth quarters of 1996 temporarily reduced the amount
of engineering resources normally applied to research and development below the
Company's desired level.

Future quarters' operating results will depend on a number of factors,
including general industry and global economic conditions, the timing and
success of new product introductions, changes in selling prices for the
Company's integrated circuits due to competitive or currency exchange rate
pressures, changes in product mix, availability of raw materials, availability
of manufacturing capacity, fluctuations in manufacturing yields, the size and
timing of shipments, market acceptance of end-user products, the pattern of
end-user or customer purchasing cycles, the processes and technologies used by
the Company and its competitors and seasonality. See "Risk Factors--Significant
Variability of Operating Results".

20
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1996 the Company had $23.1 million of cash and cash
equivalents on hand and $9.0 million in marketable securities. There were no
borrowings outstanding under the Company's credit facilities at December 31,
1996.

The Company's $20.0 million revolving bank credit facility provides for
interest at the bank's base rate minus 50 basis points or, at the Company's
discretion, other market-based rates. The Company also has the option to swap
floating rate for fixed rate loans at the time of draw down. The draw down
period expires on December 31, 1997. Any draw downs may be paid over a term of
up to five years. Its availability is subject to a number of financial
covenants. Under this facility, the payment of dividends, among other things,
requires approval by the bank. Substantially all of the assets of the Company
are pledged as security for the repayment of amounts drawn under this revolving
bank credit facility. The Company also obtained a $10.0 million line of credit
from the same bank. This facility expires on July 1, 1997 and provides for
interest at the bank's base rate minus 75 basis points. Its availability is
subject to the approval by the bank. Substantially all of the assets of the
Company are pledged as security for the repayments of amounts drawn on this bank
line of credit.

Operations generated $16.4 million in cash during 1996 and investing
activities used $2.7 million of cash during 1996. Net sales of marketable
securities generated $13.8 million in cash during 1996. Capital expenditures of
$16.4 million were made during 1996. The capital expended was used to expand the
Company's existing wafer fabrication facility, increase assembly, test and
research and development capacities and to begin construction of the Company's
new 12,000 square foot clean room and other manufacturing facilities at 141 Mt.
Bethel Road. At December 31, 1996 the Company had committed to purchase
approximately $25 million of equipment and leasehold improvements. During 1997
the Company expects to spend approximately $40 million on equipment and
approximately $15 million on leasehold improvements.

Net cash generated by financing activities was $3.0 million during 1996.
Warrants to purchase 313,905 shares of Common Stock were exercised during 1996,
resulting in cash proceeds of $3.6 million.

In 1996, income taxes paid were approximately $1.1 million, while the
benefit for income taxes was approximately $0.9 million.

The Company believes that its sources of capital, including internally
generated funds and $30 million available under existing credit arrangements,
will be adequate to satisfy anticipated capital needs for the next twelve
months. However, the Company may nevertheless elect to finance all or part of
its future capital requirements through additional equity or debt financing.
There can be no assurance that such additional financing would be available on
satisfactory terms.

21
<PAGE>
BUSINESS

ANADIGICS is a leading supplier of RF and microwave GaAs integrated
circuits. The Company's products are used to receive and transmit signals in a
variety of high volume communications applications in cellular telephone systems
and PCS, in fiber optic communication systems and in cable and DBS television
systems. The Company designs, develops and manufactures its integrated circuits
in GaAs semiconductor material that allows the integration of numerous
RF/microwave functions which cannot be easily integrated in silicon-based
circuits. The Company's high frequency integrated circuits can typically replace
30 to 100 discrete components, permitting manufacturers of end products to
reduce the size and weight of their products, increase power efficiency, improve
reliability, reduce manufacturing time and cost and enhance overall system
performance.

The Company's objective is to be the leading supplier of high volume GaAs
integrated circuits for RF/microwave receiver and transmitter applications. To
date, the Company has delivered over 60 million GaAs integrated circuits,
including over 21 million in 1996. Unlike many other manufacturers of GaAs
integrated circuits who have focused on low volume applications for industries
such as aerospace and defense, the Company has developed high volume
manufacturing capabilities geared toward achieving higher yields and lower
costs. The Company has made a significant investment in proprietary processes,
including design, wafer fabrication and testing, which the Company believes
gives it a competitive advantage. The Company manufactures integrated circuits
at its existing facility in Warren, New Jersey and is in the process of
constructing a new production facility in order to increase capacity. See
"--Manufacturing, Assembly and Testing".

In the cellular and PCS market, which according to Kagan World Media grew
(based on the estimated number of subscribers) by over 50% worldwide during the
first eleven months of 1996, the Company's products are used primarily as power
amplifiers in telephone handsets, where they replace more traditional hybrid or
discrete component solutions containing 30 to 50 chip components. The Company's
integrated circuit power amplifiers provide a smaller footprint, lower parts
count and lower power consumption compared to traditional hybrid or discrete
solutions. The Company currently is producing GaAs integrated circuit power
amplifiers for the analog AMPS and ETACS standards, and for the newer, digital
GSM, TDMA and CDMA standards. In addition to power amplifier integrated circuits
for telephone handsets, the Company is also producing receiver integrated
circuits for cellular handsets, base stations and fixed wireless local loop
applications.

The Company's principal products for fiber optic systems are transimpedance
amplifiers that are used primarily in SONET and SDH fiber optic transmission at
rates from 155 Mbps to 2480 Mbps. Increasingly, these products are also being
used in higher bit rate data communication applications. In the cable television
market, the Company's products are used primarily in wide band tuners for set
top converters operating at the older 500 MHz bandwidth and the new 800 MHz
bandwidth. The new 800 MHz bandwidth provides increased analog channel capacity,
digital cable television capability and internet access via cable modems. The
Company also offers wide band linear amplifier products operating at frequencies
of up to 860 MHz for hybrid fiber/coaxial infrastructure applications. In the
DBS market, the Company's products are used as down converters primarily in
satellite dishes, as well as in set top DBS tuners. The Company's products are
utilized in DBS services using analog modulation such as BskyB in Europe, as
well as DBS services using digital modulation such as DirecTV in the United
States.

22
<PAGE>
The Company has developed working relationships with leading companies in
each of its target markets. The Company's principal customers include Ericsson,
General Instrument, Lucent, Nokia, Nortel, Philips Electronics N.V. and Qualcomm
PE. The Company's five largest customers in each of the past three years
together accounted for 61%, 67%, and 60% of net sales for 1994, 1995 and 1996,
respectively. The Company's net sales have grown from $20.2 million in 1992 to
$68.9 million in 1996.

INDUSTRY OVERVIEW

Over the last decade, there has been a continuous trend toward delivering
various forms of electronic information at faster rates and in greater quantity.
New technologies such as wireless, fiber optic and satellite communication have
continued to evolve, providing greater capacity and improved performance at
decreasing cost. Markets for wireless products such as cellular and PCS
telephones continue to grow rapidly and new services such as wireless computing,
cable modems, fixed personal wireless telephones and satellite telephone
services are emerging. Fiber optic technology, capable of transmitting extremely
large bandwidth (or data rates) over long distances without reamplification, is
being used to replace copper, coaxial cable or microwave links for many
applications, including cable television systems. Satellite communications
technology is evolving into a low cost method for distributing information over
wide geographic areas to fixed and mobile users. Satellites are now used to
cost-effectively transmit multiple channels of television to cable headends as
well as directly to the home. Increased availability of multichannel video
services and demand for more portable and more visually rich means of
communication have hastened the development of broadband and mobile
communication services.

Occurring in parallel with the development of new communications
technologies and services is the transition from analog to digital modulation of
sound and video images. Digital modulation, enabled by improved performance of
digital circuitry, provides improved quality, security and increased capacity at
lower costs. The combination of greater bandwidth and digital modulation
facilitates the development of enhanced multimedia communication.

THE TREND TOWARD HIGHER FREQUENCIES

The need to transmit increasing amounts of multimedia information through
wired and wireless communications systems has resulted in the requirements for
both more bandwidth and higher operating frequencies. The new high frequency and
broadband communication systems described above require receivers and
transmitters capable of operating at very high frequencies. For example,
cellular telephones and cellular base stations require receivers and
transmitters operating in frequencies ranging from 800 to 900 MHz, while cable
television systems require broadband receivers operating in frequencies ranging
from 50 to 860 MHz. PCS operates at even higher frequencies, in the 1800 to 2000
MHz range. The high frequency portion of a communication system, sometimes
called the radio frequency or microwave frequency front end, operates as the
"bridge" between the outside world (antenna or cable) and the electronic
components that process the information and, as such, is an important element in
establishing the performance and cost of the system. The RF/microwave front end,
in addition to operating at very high frequencies, must be sensitive, have low
distortion and, in battery operated portable systems, be power efficient.

TRANSITION FROM ANALOG TO DIGITAL MODULATION

Information, whether modulated in analog or digital form, is embedded at the
transmission site in a high frequency analog wave which carries the signal over
the air or through a cable to a receiving station. The same type of RF/microwave
front end is required whether the information is transmitted by means of analog
modulation or digital modulation. As communication systems evolve from analog to
digital modulation, RF/microwave front ends must be able to handle both types of
modulation simultaneously

23
<PAGE>
in order to accommodate both the existing analog user base and the new digital
user base (as in the case of dual mode cellular telephones).

UTILIZATION OF DISCRETE COMPONENTS AND SILICON-BASED INTEGRATED CIRCUITS

Circuits using discrete components such as transistors, diodes, capacitors,
inductors and resistors have been used for most RF/microwave applications
because, until recently, there have been no cost effective integrated circuit
solutions available. Integrated circuits generally offer better reliability and,
by replacing many discrete components with a single integrated circuit, reduced
size and costs. These cost reductions can take the form of simplified
manufacturing processes, more efficient parts management and reduced warranty
expenses.

While silicon-based integrated circuits have replaced discrete components in
most digital electronics and low frequency analog applications, their use has
been limited in RF/microwave applications due to silicon's inability to meet
basic performance requirements at higher frequencies. The highest frequency
silicon integrated circuits are not efficient and have relatively high noise
figures and distortion. In addition, it is very difficult to integrate the
passive components (inductors, capacitors and resistors) on silicon substrates
that are required to complete RF/microwave integrated circuits. Because of these
limitations, silicon integrated circuits operating at higher frequencies have
failed to replace discrete components in most RF/microwave functions, even
though discrete components do not offer an optimal solution for many
RF/microwave applications.

Although GaAs technology offers an alternative means of producing integrated
circuits for high-frequency applications, some manufacturers have been reluctant
to adopt GaAs integrated circuits for use in high volume commercial applications
because of perceived risks relating to GaAs technology in general. Such
perceived risks include the unfamiliarity of designing commercial systems with
GaAs integrated circuits, unfamiliar manufacturing processes and uncertainties
about the cost effectiveness of GaAs integrated circuits.

THE ANADIGICS SOLUTION

Over the past twelve years, the Company, through its research and
development efforts, has developed expertise in producing cost-effective
GaAs-based integrated circuits for high-volume commercial applications which
offer many of the performance attributes required for RF/microwave applications
that are not easily obtainable with silicon-based integrated circuits. GaAs
transistors can operate at frequencies up to three to five times greater than
those possible with silicon and therefore can handle the requirements of
RF/microwave applications. GaAs integrated circuits have a lower noise figure
than silicon-based integrated circuits, providing increased sensitivity,
significantly better linearity, less distortion and interference and better
dynamic range, thereby enabling systems to handle a wide range of signal
strengths. GaAs is a semi-insulating material which facilitates integration of
the passive components required in RF/microwave applications. Finally, GaAs
integrated circuits used in transmitter applications are also more
power-efficient than silicon-based circuits, allowing for longer battery life or
use of smaller batteries.

ANADIGICS' STRATEGY

The Company's objective is to be the leading supplier of high volume GaAs
integrated circuits for RF/microwave receiver and transmitter applications. The
following elements, all of which are interrelated, form the basis of ANADIGICS'
strategy:

FOCUS ON GROWING, HIGH VOLUME MARKETS

ANADIGICS focuses on a few diverse high volume markets--wireless and fiber
optic communications and cable and satellite television receivers--that it
believes will provide both significant growth

24
<PAGE>
opportunities and increasing stability through product and geographic diversity.
Each of the Company's target markets is characterized by a transition to broader
bandwidths, to higher operating frequencies and, in many cases, from analog to
digital modulation, as well as by competing standards (e.g., AMPS, TDMA, CDMA
and GSM in cellular telephony) and communications methods (e.g., cable versus
DBS in television). The Company believes that these market trends offer
opportunities for ANADIGICS integrated circuit solutions that can add value by
lowering costs, improving reliability and reducing the size of customers'
products. Moreover, the Company is capable of providing integrated circuit
solutions for each of the competing communications methods and standards in its
target markets and, as a result, believes that it has positioned itself to
compete effectively regardless of which method or standard ultimately prevails.

LOW COST, HIGH VOLUME MANUFACTURER

ANADIGICS believes that its success depends on its ability to be a low cost
manufacturer for high volume applications. The Company believes that a low cost
manufacturer must control all of the critical phases of production in order to
maintain high manufacturing yields. ANADIGICS uses the same basic manufacturing
processes to produce all of its GaAs integrated circuits, thereby deriving
economies of scale and gaining manufacturing experience applicable across all
product lines. ANADIGICS has been continually improving its manufacturing
process and, since 1989, has delivered over 60 million GaAs integrated circuits,
including over 21 million in 1996. ANADIGICS has also developed high volume
circuit testing systems that permit testing of 100% of its packaged products in
an environment designed to simulate customer usage. Such high speed testing
allows the Company to identify production problems quickly and to maintain the
quality of integrated circuits shipped to the Company's customers on a cost-
effective basis.

RAPID DESIGN CYCLE TIME

ANADIGICS has developed an experienced engineering staff that can rapidly
design cost-effective integrated circuit solutions for its target markets. The
combination of design experience and a "quick-turn" wafer fabrication and
assembly capability allows the Company to develop prototypes that can be ready
for testing in less than one month. This design efficiency contributes to
customer satisfaction and allows the Company to improve rapidly product designs
for manufacturing efficiency.

PARTNER WITH WORLDWIDE INDUSTRY LEADERS

ANADIGICS believes that in order to create products which have the potential
to become industry standards it must develop working relationships with leading
companies in each target market. This strategy provides ANADIGICS with rapid
feedback from customers during the product design process and increases the
likelihood that products will meet customers' cost and performance requirements
for high volume applications. ANADIGICS' working relationships with customers
worldwide have ranged from guaranteed purchase orders to partially or fully
funded development programs, in most cases with a limited exclusivity period
granted to the customer with respect to the developed circuit. Examples of the
Company's strategy to focus on worldwide industry leaders are the development of
cellular telephone power amplifiers and receivers with Ericsson in the United
States and Sweden and the development of cable television converter integrated
circuits with General Instrument in the United States and Taiwan.

TARGET MARKETS AND PRODUCTS

TELECOMMUNICATIONS SYSTEMS

ANADIGICS has developed GaAs integrated circuits for use in both wireless
and fiber optic telecommunications systems. ANADIGICS' GaAs integrated circuits
are used in wireless telephony equipment,

25
<PAGE>
such as cellular and PCS telephone handsets, cellular base stations and fixed
wireless systems, and in fiber optics transmission systems.

WIRELESS COMMUNICATIONS MARKET. The Company believes that the need for
compact, high-efficiency transmitters and sensitive, low power consumption
receivers in the rapidly developing wireless communications market has the
potential to provide numerous opportunities for ANADIGICS.

CELLULAR TELEPHONY. Cellular telephony began service in 1982 and has grown
rapidly in the past 15 years. Worldwide cellular subscribers at November 30,
1996 totaled approximately 133 million, according to Kagan World Media, with
approximately 42 million subscribers resident in the United States and
approximately 35 million in Europe. According to Kagan World Media, subscriber
growth for the cellular and PCS market in the first eleven months of 1996 was
over 50% worldwide.

Cellular telephone systems consist of cellular base stations which are
connected to the public switched telephone network which transmit and receive
telephone signals via radio frequency waves in a 50 MHz bandwidth in the 800-900
MHz frequency range. Using either a portable or mobile telephone, a subscriber
can communicate through a cellular base station and can move seamlessly from one
cell to another. Each caller is connected to a cell through a dedicated wireless
channel.

Until recently all cellular telephony used analog modulation. In the United
States analog modulation uses the AMPS standard while in Europe ETACS is the
predominant analog standard. In the analog mode, system capacity is increased by
increasing the density of cells.

In order to increase capacity at a lower cost, and to improve voice quality
and increase security, digital modulation standards have been developed and are
now beginning to be deployed. In the United States there are two competing
digital standards, which are defined below:

TDMA (IS-136): TIME DIVISION MULTIPLE ACCESS increases capacity by
placing three or more calls in the same channel separated by time.

CDMA (IS-96): CODE DIVISION MULTIPLE ACCESS increases capacity by coding
voice messages and spreading information over many channels.

Telephones operating on the TDMA standard are also called DAMPS (for digital
AMPS) telephones because they can transmit on either analog AMPS or digital TDMA
signals. DAMPS service began in 1994 and is being adopted by several U.S.
operators, including the AT&T Wireless Cellular unit of AT&T. CDMA telephones,
which are dual mode with AMPS, were introduced in the second half of 1995 and
are currently being offered in parts of the United States and Asia.

The European digital standard, called GSM, which was introduced in 1991, was
developed and standardized by the European Union. According to GSM World Focus
1996, a publication of Mobile Communications International, GSM networks have
begun operations in 86 countries, including several Asian countries. According
to Kagan World Media, GSM subscribers in Europe totalled approximately 9 million
at December 31, 1995 and approximately 19 million at November 30, 1996.

PERSONAL COMMUNICATIONS SERVICES (PCS). In order to provide increased
wireless communication capacity, the European Union and the U.S. Federal
Communications Commission (the "FCC") have opened additional frequency spectrums
in the 1800 MHz to 2000 MHz range for cellular type services. Digital modulation
standards are being used exclusively in these new frequency bands with the
intention of providing new value-added services, such as caller identification
and paging. The European service, referred to as DCS-1800, is GSM-based and
operates in the frequency band from 1700 MHz to 1800 MHz. The service is
referred to as PCS in the United States, where the FCC has allocated 120 MHz of
spectrum in the frequency band from 1800 MHz to 2000 MHz. The FCC has allowed
licensees to choose

26
<PAGE>
among three different digital standards that are not currently compatible. The
three PCS standards and the primary services providers are set forth below:

<TABLE>
<CAPTION>
NAME STANDARD SERVICE PROVIDER
- --------------------- --------------------- ------------------------------------------------------------

<S> <C> <C>
PCS-1900 GSM Omnipoint Corporation,
Sprint Spectrum L.P.,
BellSouth Mobile Systems, Inc.

DAMPS-1900 TDMA AT&T Wireless Services, Inc.

CDMA-1900 CDMA Primeco, Inc., Sprint Corporation
</TABLE>

PCS licenses were auctioned by the FCC in 1995 and 1996. The "A" block and
"B" block of the PCS spectrum were auctioned in 1995, and the "C" block in 1996.
The winners of the "A" and "B" block auctions in 1995 have been building PCS
infrastructure and the first services became operational in 1996. Operators such
as Sprint Spectrum L.P., Omnipoint Corporation, Primeco, Inc. and Sprint
Corporation began offering PCS digital telephone services in the 1800 to 2000
MHz frequency band in selected cities during 1996. The "C" block auction was
held in 1996.

The European DCS-1800 standard began operation in 1994 and, according to
Kagan World Media, had approximately 1.8 million subscribers at November 30,
1996. Japan has developed its own digital standard called Personal Digital
Cellular ("PDC") which is similar to TDMA. PDC has a 1500 MHz band to augment
its cellular band at 900 MHz.

The following table lists the major global standards being used for cellular
and PCS systems:

<TABLE>
<CAPTION>
SERVICE
----------------------------------

<S> <C> <C> <C> <C>
CELLULAR PCS/DCS PREDOMINANT
STANDARD MODULATION 800-900 MHZ 1800-2000 MHZ MARKETS
- ----------- -------------- ----------------- --------------- ---------------------------------------------------

AMPS ANALOG Yes No North America, South America

ETACS ANALOG Yes No Europe, China

GSM DIGITAL Yes Yes Europe, Asia, North America,
South America

TDMA DIGITAL Yes Yes North America, South America

CDMA DIGITAL Yes Yes North America, South America, Korea, Hong Kong,
China

PDC DIGITAL Yes 1500 MHz Japan
</TABLE>

WIRELESS COMMUNICATIONS PRODUCTS. ANADIGICS' products are used in
transmitters and receivers of cellular handsets where small size and low power
consumption are key parameters. The Company offers products for both the
traditional analog cellular market and all the emerging digital and PCS
applications.

POWER AMPLIFIERS. Until recently the power amplifiers in portable cellular
handset transmitters were constructed exclusively with hybrid solutions such as
silicon bipolar transistors and silicon metal oxide semiconductor field effect
transistors ("MOSFET") or with discrete GaAs field effect transistors ("FETs").
Hybrid solutions are relatively inexpensive to manufacture but have low power
efficiency, while more costly GaAs FET power amplifiers have better performance
characteristics. ANADIGICS has developed low cost GaAs integrated circuit power
amplifiers that are smaller than discrete component and hybrid module solutions
and which the Company believes perform as well as GaAs FET discrete solutions.

RECEIVERS. ANADIGICS has developed and initiated production of GaAs
integrated circuit front ends for cellular handset receivers and for use in
wireless local loop applications. The Company has also developed linear receiver
front ends for use in cellular base stations.

27
<PAGE>
The following is a list of some of the Company's cellular telephony and PCS
products currently in production:

<TABLE>
<CAPTION>
PRODUCTION
PRODUCT LINE FREQUENCY STATUS
- ----------------------------------------------------------------------- -------------- -------------------------
<S> <C> <C>
POWER AMPLIFIERS
AMPS................................................................. 800 MHz Produced since 1994
DAMPS................................................................ 800 MHz Produced since 1994
ETACS................................................................ 800 MHz Produced since 1995
GSM.................................................................. 800 MHz Produced since 1996
CDMA................................................................. 1900 MHz Produced since 1996

RECEIVERS/DRIVERS
Wireless Local Loop Receiver......................................... 900 MHz Produced since 1995
AMPS Receiver........................................................ 900 MHz Produced since 1995
Base Station Receiver................................................ 900 MHz Produced since 1996
CDMA Driver.......................................................... 1900 MHz Produced since 1996
</TABLE>

In addition, the Company is in various stages of planning, development or
production start-up for the following products for the cellular telephony and
PCS market: DCS cellular power amplifiers, PDC cellular power amplifiers, PCS
cellular power amplifiers and receivers, 800 MHz/1900 MHz dual mode power
amplifiers and cellular base station receivers and power amplifiers.

The Company's major customers for wireless communications products are
Ericsson, Nokia, Nortel and Qualcomm PE.

FIBER OPTIC MARKET. The capacity of the global telecommunications
infrastructure is currently being upgraded with fiber optic communication
systems in order to handle the demand for increasing amounts of information,
driven in part by the rapid growth of the internet community. High data rate
fiber optic receivers are therefore in increasing demand for telecommunications,
data communications and cable television applications. In order to facilitate
this upgrade process, the United States and Japan have adopted the SONET
standard and Europe has adopted the similar SDH standard for telecommunications
systems.

A fiber optic transmission system uses low loss fiber optic cable to link
central office switches with one another and to connect the central office to
the serving area. Fiber optic transceivers are used as repeaters and at
terminations to send and receive high data rate information. The transceiver
consists of a laser transmitter and a fiber optic receiver. The front end of any
fiber optic receiver contains a detector diode and a transimpedance amplifier
("TIA") which provides current to voltage conversion and low noise signal
amplification. ANADIGICS began producing TIAs in 1989 and currently produces and
sells GaAs integrated circuit TIAs that operate at SONET standards ranging from
52 Mbps to 2480 Mbps. The primary applications of ANADIGICS' TIAs are in
long-haul systems at 2480 Mbps (OC-48) and for fiber in the local loop
applications at 622 Mbps (OC-12) and at 155 Mbps (OC-3). In addition, demand for
ANADIGICS' TIAs emerged in 1996 for other applications, including cable
television distribution, asynchronous transfer mode (ATM) data communication,
and data transmission and related products.

The Company's major customers for fiber optic products include AMP Inc.,
Hewlett-Packard Co., Lucent and Nortel.

28
<PAGE>
FIBER OPTIC PRODUCTS. The following is a list of some of the Company's
products for fiber optic networks currently in production:

<TABLE>
<CAPTION>
PRODUCTION
PRODUCT LINE FREQUENCY STATUS
- ----------------------------------------------------------------------- -------------- -------------------------
<S> <C> <C>
OC-3 TIA............................................................... 155 Mbps Produced since 1990
OC-12 TIAs............................................................. 622 Mbps Produced since 1990
OC-48 TIAs............................................................. 2480 Mbps Produced since 1990
250 Mbps Datacom....................................................... 250 Mbps Produced since 1996
155 Mbps Datacom....................................................... 155 Mbps Produced since 1996
</TABLE>

TELEVISION SYSTEMS

ANADIGICS has developed GaAs integrated circuits for both cable television
and DBS television receivers.

CABLE TELEVISION/MULTIMEDIA MARKET. Cable television is evolving from an
industry that has traditionally delivered multichannel one-way analog television
programming over a coaxial cable system to a multimedia industry delivering up
to 500 channels of interactive video and other services such as telephony,
games, shopping and on-line information in both analog and digital form over a
hybrid fiber optic and coaxial cable system. The large bandwidth available from
cable television systems is now being used in some systems to provide high speed
internet access via cable modems, thereby overcoming the congestion frequently
experienced by users who access the internet by telephone lines. In a
conventional analog cable television system, the programmer's signal is first
scrambled and then transmitted to a C-Band satellite. A cable system "headend"
facility receives television signals from satellites and other sources and
retransmits them to subscribers through a distribution network composed of
coaxial and fiber optic cable and distribution electronics which boost the
signal level. The final component of the cable television system, the subscriber
equipment, is comprised of a "dropwire" and, in some cases, a "drop amplifier"
which extend from the distribution network to the subscriber's home and connect
either directly to the subscriber's television set or to a set-top converter
box. Addressable set-top converter boxes permit the efficient delivery of
premium cable television services, including pay-per-view programming. In the
multimedia environment, the hybrid fiber/coaxial cable ("HFC") distribution
system delivers digitally compressed video to the home, has a return path to the
headend and contains switching functions. In such an environment, the set-top
converter box is essentially a special purpose computer, handling compressed
video and interactive services.

CABLE TELEVISION/MULTIMEDIA PRODUCTS. ANADIGICS' 50-550 MHz upconverter
integrated circuit is capable of receiving an incoming block of up to 80 cable
television channels and enabling selection of a particular desired channel. This
integrated circuit replaces approximately 30 discrete components. In addition,
products made with discrete components typically require manual tuning in the
manufacturing process. Use of GaAs integrated circuits significantly reduces
manual tuning requirements, thereby reducing manufacturing costs and enhancing
reliability.

In response to the requirement for broader bandwidth and the presence of
analog and digital modulation, ANADIGICS has introduced a 50-860 MHz integrated
circuit chip set comprised of an upconverter and downconverter for the tuner
used in analog and digital 50-860 MHz set-top converters and in cable modems.
The Company believes that this chip set meets the performance requirements of
the set-top converter application at a lower cost than alternative discrete
component solutions. The chip set has been designed into tuners by General
Instrument and Komatsu Murata Manufacturing Company, Limited and in cable modems
by Intel Corp., Bay Networks Inc. and 3COM Corp. and is being evaluated by other
tuner manufacturers. Full scale production of the 860 MHz chip set commenced in
the first quarter of 1995.

29
<PAGE>
The Company has also developed a GaAs integrated circuit line amplifier to
be used as a repeater in 50-750 MHz HFC distribution networks. The Company
commenced full scale production of this amplifier in 1996. These integrated
circuits are replacing silicon bipolar hybrid circuits used in this application.
The Company's principal customer for this amplifier is Scientific-Atlanta, Inc.

General Instrument is the Company's principal customer for cable television
set-top products. Since 1989, the Company has had a strategic relationship with
General Instrument for the development of GaAs-based chip sets used in set-top
converters.

The following is a list of some of the Company's products for the cable
television market currently in production:

<TABLE>
<CAPTION>
PRODUCT LINE BANDWIDTH PRODUCTION STATUS
- ----------------------------------------------------------------------- -------------- -------------------------
<S> <C> <C>
SET-TOP CONVERTER PRODUCTS
550 MHz Converter.................................................... 50-550 MHz Produced since 1991
860 MHz Converter Chip Set........................................... 50-860 MHz Produced since 1995

NETWORK PRODUCTS
Drop Amplifier....................................................... 50-860 MHz Produced since 1994
Line Amplifier....................................................... 50-750 MHz Produced since 1995
</TABLE>

DBS MARKET. DBS television is an alternative method to cable television for
delivering multiple channel television programming to the home. In a DBS system,
programming is uplinked to a series of collocated satellites, which then
downlink the programming at Ku-Band (10.7-12.7 GHz) to the satellite dish
antenna with an attached low noise block converter ("LNB") serving the
customer's home. The Ku-Band LNB amplifies and converts the signal to a lower
frequency and sends the signal via coaxial cable to a set-top converter, where
the channel is selected by a broadcast satellite tuner ("BS Tuner") and
displayed on television sets. The retail price of reception systems in the
United States currently start at approximately $200. Subscriber service costs
are evolving and vary by location, but are typically comparable to those for
cable television.

In Europe, the major satellite system, Astra, has six satellites collocated
over Europe. Societe Europeenne des Satellites ("SES") and Hughes Aircraft Co.
("Hughes") have announced plans for an additional Astra launch to occur in 1997.
The newest Astra satellites are delivering compressed digital video, greatly
increasing channel capacity. According to "Cable and Satellite Europe", as of
December 31, 1996 approximately 23 million homes were receiving DBS television
in Europe. This market has developed in the seven years since DBS service was
first inaugurated in Europe in 1989.

In the United States, DirecTV, the first large-scale deployment of digitally
compressed video (and audio) television programming, launched the first high
powered DBS service in June 1994. DirecTV offers 150 channels with a large
variety of additional sports and niche programs and approximately 50
pay-per-view channels. The reception equipment currently being marketed under
RCA, Sony Corp. and other brands consists of an 18-inch satellite dish with a
Ku-Band LNB and a state-of-the-art set-top converter which is specifically
designed for digital video and CD-quality audio reception. In the United States,
Primestar Partners, L.P. and Echostar Satellite Broadcasting Corp. have also
introduced DBS television. According to DBS Digest, as of December 30, 1996
approximately 4.4 million home subscribers are estimated to have been signed up
by DBS providers in the United States. In Latin America, Galaxy, a joint venture
between Hughes Communications, Inc. and three Latin American media companies,
began DBS service to selected areas of Mexico and Central and South America in
the fall of 1996. In addition, NetSat, a joint venture among Globo, News
Corporation and TINTA, launched DBS service in Brazil in the fall of 1996.

DBS PRODUCTS. ANADIGICS designs and manufactures GaAs integrated circuits
for both the LNB and the BS Tuner. GaAs devices are suitable for the LNB
function because of their low noise and broad bandwidth characteristics. This
functionality would typically require 30 to 50 components if implemented

30
<PAGE>
using a discrete component alternative. ANADIGICS' BS Tuner integrated circuit
is used in the set-top converter, which enables selection of a specific
frequency (i.e., a particular channel) within the block of frequencies
downconverted by the outdoor LNB.

ANADIGICS' customers for DBS products include Continental Microwave
Technology, Inc., Grundig Microwave Technology Ltd., Pace Micro Technology plc,
Philips Electronics N.V. and Smile Communications, Inc.

The following is a list of some of the Company's products for the DBS
television market currently in production:

<TABLE>
<CAPTION>
PRODUCTION
PRODUCT LINE REGION FREQUENCY STATUS
- ----------------------------------------------- ------------------ ------------------ -------------------------
<S> <C> <C> <C>
KU-BAND LNB
ASTRA Band................................... Europe 10.7-11.8 GHz Produced since 1989
Universal/ASTRA.............................. Europe, Asia, 10.7-12.75 GHz Produced since 1995
Middle East,
South America,
DirecTV USA 12.2-12.7 GHz Produced since 1995

B.S. TUNER
Universal/ASTRA.............................. Europe, Asia, 950-2050 MHz Produced since 1992
Middle East,
South America
</TABLE>

MARKETING, DISTRIBUTION AND CUSTOMER SUPPORT

The Company sells its products directly to customers worldwide. The Company
also selectively utilizes independent manufacturers' representatives and
distributors to complement its direct sales and customer support efforts.

ANADIGICS believes that the technical nature of its products and markets
demands an extraordinary commitment to close relationships with its customers.
The sales and marketing staff, assisted by the technical staff and senior
management, visit prospective and existing customers worldwide on a regular
basis, and between visits both field and factory sales personnel stay in close
contact with customers. The Company believes that these contacts are vital to
the development of a close long-term working relationship with its customers,
and in obtaining regular forecasts, market updates, and information regarding
technical and market trends.

The ANADIGICS design and applications engineering staff is actively involved
with a customer during all phases of design and production by publishing and
providing the customer with engineering data, up-to-date product application
notes, following up with the customer's engineers on a regular basis, and
assisting in resolving technical problems by working with the customer's
engineers both on and off site. In most cases the design and applications
engineers obtain prototypes from the customer in order to debug and identify
potential improvements to the design in parallel with the customer's effort.
This strategy helps customers speed up the their design process, achieve
cost-effective and manufacturable design, and ensure a smooth transition into
high volume production.

ANADIGICS' policy is to provide its customers with applications engineering
support at its customers' factories throughout the world, generally within 48
hours of a customer request. The Company's sales are typically made pursuant to
customer purchase orders, and such orders may be canceled without significant
penalty.

31
<PAGE>
MANUFACTURING, ASSEMBLY AND TESTING

The Company fabricates integrated circuits on four-inch diameter wafers at
its plant in Warren, New Jersey in an 8,000 square foot, Class 100 cleanroom.
Present production capacity is approximately 26,000 four-inch diameter wafers
per year, and the Company delivered more than 21 million GaAs integrated
circuits during the year ended December 31, 1996.

The Company currently manufactures all of its integrated circuits at its
four-inch wafer fabrication facility located at 35 Technology Drive in Warren,
New Jersey. In October 1996, the Company began conversion from three-inch to
four-inch diameter wafer manufacturing at the facility. The technological and
manufacturing changes associated with these changes may, at least for an initial
period, affect manufacturing yields adversely and could adversely affect
operating results. The Company believes that this facility should be able to
satisfy its production needs through the end of 1997, assuming that the Company
successfully completes planned incremental increases in production and
electrical test capacity at the facility through such date. In addition to the
purchase of equipment, the Company will be required to successfully hire, train
and manage additional production personnel in order to successfully increase
production capacity at this facility. See "Risk Factors--Possible Production
Capacity Constraints; Possible Delay in Construction of New Production
Facility".

The Company plans to complete an approximately 131,000 square foot facility
at 141 Mt. Bethel Road in Warren, New Jersey to create manufacturing areas,
including a 12,000 square foot Class 100 four-inch wafer fabrication clean room,
electrical test areas and office space, to supplement its existing facility. The
Company expects to be able to begin occupying the facility late in the second
quarter or early in the third quarter of 1997. Following the completion of the
physical plant, the Company must install equipment and perform necessary testing
prior to commencing commercial production at the facility, a process which the
Company anticipates will take at least three months. Accordingly, the Company
believes the new facility will not begin commercial production prior to the
fourth quarter of 1997. The Company expects that the new facility as it is
initially being equipped, assuming it becomes fully operational as currently
planned, will enable the Company to approximately double its current production
levels. The new facility will have additional space in which the Company expects
to add more manufacturing capacity in the future. The Company believes that it
could increase its production capacity further if necessary by upgrading its
facilities for the production of six-inch diameter wafers.

ANADIGICS' wafer processing technology has been developed for reliable high
volume manufacturing. The Company has developed a GaAs depletion metal
semiconductor field effect transistor ("D-MESFET") process that it uses to
produce all of its products. By using ion implant variations, the Company can
optimize performance and yield, allowing it to produce, for example, high
linearity, low-noise, receiver integrated circuits or transmitter integrated
circuits with high power and efficiency.

Completed wafers are shipped to contractors in Asia for assembly in
packages. Once assembled by the contractor, packaged integrated circuits are
shipped to the Company's Warren, New Jersey facility for final testing. The
Company believes that its automated test systems give it a significant
competitive advantage and are important to its ability to manufacture high
quality integrated circuits at low cost. ANADIGICS has a staff of test engineers
that designs and builds custom test systems and modifies commercially available
test systems to facilitate rapid testing of its GaAs integrated circuits at high
frequencies. See "Risk Factors--Possible Production Capacity Constraints;
Possible Delay in Construction of New Production Facility" and "--Dependence on
Semiconductor Assembly Contractors".

The Company's design and manufacturing processes were certified as ISO 9001
compliant in December 1993. Since that date, the Company has maintained
compliance with this standard.

RESEARCH AND DEVELOPMENT

The Company's research and development has been focused on developing low
cost, high volume production of GaAs integrated circuit products for the
telecommunication and television industries. Of

32
<PAGE>
the Company's total research and development expenditures incurred during 1996,
approximately 75% and 25% were for the purpose of developing telecommunication
products and television products, respectively. The Company has approximately 55
engineers assigned primarily to research and development. In 1994, 1995 and
1996, the Company expended $9.2 million, $11.7 million and $12.0 million,
respectively, for Company-sponsored research and development and $0.4 million,
$1.8 million and $3.2 million, respectively, for customer sponsored research and
development.

The ability to simulate and model circuits is a critical technology for
analog integrated circuit design, especially at high frequencies. The Company
has developed a set of simulation tools and device models which are custom-fit
to the Company's process and, in many areas the Company believes, exceed the
capability of commercially available computer aided design products. These tools
and models allow the Company to efficiently design products for RF/microwave
front-ends.

RAW MATERIALS

Blank wafers and other raw materials and equipment used in the production of
the Company's GaAs integrated circuits are available from several suppliers. The
Company currently has two qualified blank wafer suppliers, both located in
Japan. Although the Company has not experienced any significant delay in
obtaining wafers or components, no assurances can be given that a shortage will
not arise in the future. See "Risk Factors--Limited Sources for Certain
Components, Materials and Equipment".

COMPETITION

While competition in all of the markets for the Company's current products
is intense, the basis on which the Company competes varies by product.
Competitors in the wireless market are entrenched suppliers of discrete receiver
front-end devices such as Fujitsu Microelectronics Inc., Mitsubishi Electric
Corp., Motorola, Inc., Philips Electronics N.V. and Siemens AG; discrete hybrid
power amplifiers suppliers such as Fujitsu Microelectronics Inc., Hitachi, Ltd.,
Matsushita Electric Industrial Co. Ltd., Mitsubishi Electric Corp. and Philips
Electronics N.V.; and GaAs integrated circuit manufacturers for receiver
front-end or power amplifiers such as Raytheon Co., Rockwell International Inc.
and TriQuint Semiconductor, Inc. The Company competes in the wireless market
generally on the basis of product performance, size and price.

In the fiber optic markets, ANADIGICS competes with other GaAs and silicon
integrated circuit manufacturers, generally on the basis of product performance,
reliability and price. Principal competitors in this market are Analog Devices,
Inc., Philips Electronics N.V., TriQuint Semiconductor, Inc. and Vitesse
Semiconductor Corp. as well as many end-user product manufacturers who design
and fabricate their own systems. In the cable television and DBS markets,
ANADIGICS' integrated circuits compete primarily with manufacturers of discrete
components. In these markets, the Company competes on the basis of price and
product performance, specifically as they relate to the ability of its GaAs
integrated circuits to replace a large number of discrete components. In many
cases, discrete components are designed into the end products, and many
potential customers may therefore be reluctant to adopt the Company's products.
Manufacturers of discrete components include Fujitsu Microelectronics Inc.,
Mitsubishi Electric Corp., NEC Corp., Philips Electronics N.V. and Siemens AG.
Competition from other GaAs integrated circuit manufacturers which include
Raytheon Co. and Fujitsu Microelectronics Inc., has begun to emerge in the DBS
market.

Most of the Company's competitors have significantly greater financial,
technical, manufacturing and marketing resources than the Company. Increased
competition could adversely affect the Company's revenue and profitability by
causing it to reduce prices or by reducing demand for the Company's products.

33
<PAGE>
EMPLOYEES

At December 31, 1996, the Company had approximately 430 employees, none of
whom was a member of a labor union. The Company believes its labor relations to
be good and has never experienced a work stoppage.

PATENTS, LICENSES AND PROPRIETARY RIGHTS

It is the Company's practice to seek U.S. and foreign patent and copyright
protection on its products and developments where appropriate and to protect its
valuable technology under U.S. and foreign laws affording protection for trade
secrets and for semiconductor chip designs. The Company owns nine U.S. patents
and has 11 pending U.S. patent applications and two pending international patent
applications filed under the Patent Cooperation Treaty. The U.S. patents were
issued between 1988 to 1996 and will expire between 2006 to 2014.

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 type 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.

ENVIRONMENTAL MATTERS

The Company's operations are subject to a variety of extensive and changing
federal, state and local environmental laws, regulations and ordinances that
govern activities or operations that may have adverse effects on human health or
the environment. Such laws, regulations or ordinances may impose liability for
the cost of remediating, and for certain damages resulting from, sites of past
releases of hazardous materials. The Company believes that it currently
conducts, and in the past has conducted, its activities and operations in
substantial compliance with applicable environmental laws, and 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.

PROPERTIES

The Company's executive office and research, development and fabrication
facility are located in Warren, New Jersey. The Company currently occupies
approximately 72,000 square feet in the building under a lease expiring on May
1, 2005, the terms of which may be extended for an additional ten year period
and two additional five year periods, and approximately 20,000 square feet of
additional space in the same industrial park under a short-term rental
arrangement. A long-term lease for approximately 131,000 square feet relating to
the Company's new production facility was entered into in 1996 and expires in
2016. The terms of this lease may be extended for an additional ten years. In
the first quarter of 1997, the Company expects to sign an amendment to this
lease for the rental of approximately 35,000 square feet of additional space.
See "Risk Factors--Possible Production Capacity Constraints; Possible Delay in
Construction of New Production Facility".

LEGAL PROCEEDINGS

The Company is not involved in any litigation which is expected to have a
material effect on its financial position.

34
<PAGE>
MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

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

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------- --- -----------------------------------------------------
<S> <C> <C>

Ronald Rosenzweig 59 President, Chief Executive Officer and Director

George Gilbert 61 Executive Vice President, Chief Operating Officer and
Director

Charles Huang 49 Executive Vice President Marketing Research and
Business Development and Director

John F. Lyons 50 Senior Vice President and Chief Financial Officer

Robert Bayruns 39 Vice President Research and Technology

Sheo Khetan 47 Vice President Manufacturing

Javed S. Patel 41 Vice President Sales and Marketing

Phillip Wallace 40 Vice President Product Development

Paul S. Bachow 45 Director

Charles A. Burton 51 Director

David M. Fellows 44 Director

Bruns Grayson 49 Director

Harry T. Rein 52 Director

Lewis Solomon 63 Director
</TABLE>

Mr. Rosenzweig, a co-founder of ANADIGICS in 1985, has served as President,
Chief Executive Officer and a director of the Company since its inception. He
was co-founder of Microwave Semiconductor Corporation ("MSC"), a manufacturer of
microwave silicon and GaAs transistors and amplifiers. He served as President
and CEO of MSC from 1968 to 1983. Mr. Rosenzweig received his B.Ch.E degree from
City College of New York.

Mr. Gilbert, a co-founder of ANADIGICS in 1985, has served as Executive Vice
President, Chief Operating Officer and a director of the Company since its
inception. He was co-founder of MSC with Mr. Rosenzweig and served as Executive
Vice President of Semiconductor Operations of MSC from 1968 to 1983. Mr. Gilbert
has a B.S. in Physics from Georgia Tech.

Dr. Huang, a co-founder of ANADIGICS in 1985, has served as Executive Vice
President and a director of the Company since its inception. He was director of
GaAs research and development and wafer fabrication services at Avantek, Inc.
from 1980 to 1984. Dr. Huang received his Ph.D.E.E. at the University of
California, Berkeley.

Mr. Lyons joined ANADIGICS in 1987 as Director of Finance, was elected a
Vice President in 1989 and currently serves as Senior Vice President and Chief
Financial Officer. Prior to joining the Company, he served as Manager-Finance
Section for General Electric Co.'s ("GE") Power Electronic Semiconductor
Department from 1984 to 1987. Mr. Lyons is a graduate of GE's Financial
Management Program and has a B.A. in Economics from Hamline University.

35
<PAGE>
Mr. Bayruns joined ANADIGICS in 1985 and currently serves as Vice President
Research and Technology. Prior to joining ANADIGICS, Mr. Bayruns was employed by
AT&T Bell Laboratories. Mr. Bayruns received his M.S.E.E. from Rutgers
University.

Mr. Khetan joined ANADIGICS in 1985 and currently serves as Vice President
of Manufacturing. Prior to joining ANADIGICS, Mr. Khetan was at Sprague Solid
State Scientific and, prior to that, at General Instrument. Mr. Khetan received
his Bachelor of Science Degree in Engineering from the Indian Institute of
Technology, a Masters of Science from State University of New York and a Masters
Degree in Business Administration from Temple University.

Mr. Patel joined ANADIGICS in 1986 and currently serves as Vice President of
Sales and Marketing. Prior to joining ANADIGICS, Mr. Patel was employed by Alpha
Industries, Inc. From 1979 to 1984, Mr. Patel was a member of the Technical
Staff of RCA-Astroelectronics. Mr. Patel received his Bachelor of Science Degree
and Masters of Science Degree in Engineering from the University of Kansas and a
Masters Degree in Business Administration from Drexel University.

Mr. Wallace joined ANADIGICS in 1985 and currently serves as Vice President
Product Development. Prior to joining ANADIGICS, Mr. Wallace was at the
Westinghouse R&D Center in Pittsburgh, Pennsylvania, and, prior to that, he was
with MSC. Mr. Wallace received his B.S.E.E. and M.Eng. (Electrical) from Cornell
University.

Mr. Bachow has served as a director of the Company since January 1993. He
has been President of Bachow & Associates, Inc. since its formation in December
1989, and its predecessors, Bachow and Elkin Co., Inc. and Paul S. Bachow
Company from December 1985 to December 1989. Mr. Bachow also acts as President
of the general partner of each of Paul S. Bachow Co-Investment Fund, L.P.,
Bachow Investment Partners III, L.P. and Bachtel Cellular Liquidity, L.P. He has
a B.A. from American University, a J.D. from Rutgers University and a Masters
Degree in tax law from New York University, and is a C.P.A. Mr. Bachow serves as
director of Deb Shops, Inc., a publicly traded company, and several private
companies.

Mr. Burton has served as a director of the Company since 1990. He is
Managing Director of Philadelphia Ventures, Inc., which he joined in 1984. Prior
to 1984 he was a Vice President of CIGNA Corporation. Mr. Burton graduated from
Gettysburg College and received an MBA from the Wharton Graduate School at the
University of Pennsylvania. He is also a director of Membrex, Inc., Microsource,
Inc., Visual Edge Technology, Inc. and several private companies.

Mr. Fellows has served as a director of the Company since September 1994.
Mr. Fellows has served as Senior Vice President of Engineering and Technology at
Continental Cablevision, Inc., a division of US West Media Group, since 1992.
From 1987 until 1992, Mr. Fellows was employed by Scientific Atlanta's
Transmission Systems Business Division, where he served as President. Mr.
Fellows received his Bachelor Degree in Engineering and Applied Physics from
Harvard College and a Masters Degree in Electrical Engineering from Northeastern
University.

Mr. Grayson has served as a director of the Company since 1985. He is
managing General Partner of Calvert Capital Management Co., which manages ABS
Ventures. Before joining Calvert Capital Management Co., Mr. Grayson was an
associate of Adler & Co. and McKinsey & Co. in New York. He is a director of
Cascade Communications Corp. and several private companies. He has a B.A. from
Harvard, an M.A. from Oxford University and a J.D. from the University of
Virginia.

Mr. Rein has served as a director of the Company since 1985. He was a
principal founder of Canaan Partners in 1987 and has served as Managing General
Partner since its inception. From 1979 to 1987, Mr. Rein held various positions
at GE, directing several of GE's lighting businesses as general manager before
becoming President and CEO of GE Venture Capital Corporation. He is a director
of Perceptron, Inc. and several private companies.

36
<PAGE>
Mr. Solomon has served as a director of the Company since September 1994
and, previously, from 1985 to 1989. Mr. Solomon has been Chairman of G&L
Investments since 1990 in addition to serving as a director on the boards of
Microelectronics Packaging Inc., ICTV Inc., Anacomp Inc., Computer Products Inc.
and Terayon Corporation. Prior to joining G&L Investments, Mr. Solomon was an
Executive Vice President with Alan Patricof Associates from 1983 to 1986 and a
Senior Vice President of General Instrument from 1967 to 1983. Mr. Solomon
received a Bachelor Degree in Physics from St. Joseph's College and a Masters
Degree in Industrial Engineering from Temple University.

37
<PAGE>
SELLING STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock at January 27, 1997 by each of the
Selling Stockholders. Except as indicated in the footnotes to the table, the
persons named therein 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 BENEFICIALLY SHARES BENEFICIALLY
<S> <C> <C> <C> <C> <C>
OWNED PRIOR TO OWNED FOLLOWING THE
OFFERING(1) NUMBER OF OFFERING(1)
------------------------------ SHARES TO ------------------------------
NAME NUMBER PERCENTAGE BE SOLD NUMBER PERCENTAGE
- --------------------------------------------------- --------- ------------------- ----------- ----------- -----------------
Century IV Partners, L.P.(2)....................... 31,582 * 31,582 -- --
Commonwealth Venture Partners I, L.P.(2)........... 66,056 * 21,389 44,667 *
J.P. Morgan Capital Corporation.................... 104,346 * 104,346 -- --
Metropolitan Life Insurance Co..................... 8,695 * 8,695 -- --
Pennsylvania Venture Partners(2)................... 501 * 501 -- --
</TABLE>

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

* Less than 1%.

(1) Applicable percentage of ownership prior to consummation of this Offering is
based on 12,564,678 shares of Common Stock outstanding as of January 27,
1997. Applicable percentage of ownership after consummation of this Offering
also includes 1,875,000 shares of Common Stock offered hereby. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission, and includes voting and investment power with respect
to shares. Shares of Common Stock subject to options or warrants currently
exercisable or exercisable within 60 days after January 27, 1997 are deemed
outstanding for computing the percentage ownership of the person holding
such options or warrants, but are not deemed outstanding for computing the
percentage of any other person.

(2) This entity is affiliated with Philadelphia Ventures, Inc. Charles A.
Burton, a director of the Company, is Managing Director of Philadelphia
Ventures, Inc. as well as a General Partner of this entity, and, therefore,
may be deemed to beneficially own such shares of Common Stock. However, Mr.
Burton disclaims beneficial ownership of all such shares except those to
which he has a pecuniary interest, if any.

VALIDITY OF COMMON STOCK

The validity of the Common Stock offered hereby will be passed upon for the
Company by Cahill Gordon & Reindel (a partnership including a professional
corporation), New York, New York and for the Underwriters by Sullivan &
Cromwell, New York, New York.

EXPERTS

The Financial Statements (including the schedule in the Registration
Statement) of ANADIGICS, Inc. at December 31, 1995 and 1996, and for each of the
three years in the period ended December 31, 1996, appearing in this Prospectus
and Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein and
in the Registration Statement, and are included herein in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-3
under the Securities Act with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and such Common Stock, reference is made to the
Registration Statement and the

38
<PAGE>
exhibits and schedules filed as a part thereof. Statements contained in this
Prospectus as to the contents of any contract or any other document referred to
are not necessarily complete, and, in each instance, if such contract or
document is filed as an exhibit, reference is made to the copy of such contract
or document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference to such exhibit.

The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements and other
information with the Commission. Such reports, proxy and information statements
and other information filed by the Company as well as the Registration
Statement, including exhibits, of which this Prospectus is a part may be
inspected and copied at the public reference facilities of the Commission, Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as well
as at the following Regional Offices: 7 World Trade Center, 13th Floor, New
York, New York 10048, and 500 West Madison Street -- Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Commission by
mail at prescribed rates. Requests should be directed to the Commission's Public
Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such materials which have been filed electronically by
the Company may be obtained at the Commission's Website at (http://www.sec.gov).
The Common Stock is quoted on the Nasdaq National Market. Material filed by the
Company can be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents heretofore filed by the Company with the Commission
(File No. 0-25662) pursuant to the Exchange Act are incorporated and made a part
of this Prospectus by reference, except as superseded or modified herein:

1. The Company's Annual Report on Form 10-K for the year ended December
31, 1996;

2. The Company's Current Report on Form 8-K dated January 30, 1997; and

3. The Company's description of the Common Stock in its Registration
Statement on Form 8-A, as amended.

All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the Offering
made hereby shall be deemed to be incorporated by reference in this Prospectus
and shall be part hereof from the date of filing of such documents. Any
statement contained herein or in any document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document that also is or is deemed to be
incorporated by reference herein modified or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

The Company undertakes to provide without charge to each person, including
any beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any document described
herein (not including exhibits to those documents unless such exhibits are
incorporated by reference into the information incorporated into this
Prospectus). Requests for such copies should be directed to ANADIGICS, Inc., 35
Technology Drive, Warren, New Jersey 07059, Attention: Investor Relations, (908)
668-5000.

39
<PAGE>
ANADIGICS, INC.

INDEX TO FINANCIAL STATEMENTS

DECEMBER 31, 1996

CONTENTS

<TABLE>
<S> <C>
Report of Independent Auditors........................................................ F-2

Balance Sheets as of December 31, 1995 and 1996....................................... F-3

Statements of Income for the years ended December 31, 1994, 1995 and 1996............. F-4

Statements of Stockholders' Equity for the years ended December 31, 1994, 1995 and
1996................................................................................ F-5

Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996......... F-6

Notes to Financial Statements......................................................... F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
ANADIGICS, Inc.

We have audited the accompanying balance sheets of ANADIGICS, Inc. as of
December 31, 1995 and 1996, and the related statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. 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 ANADIGICS, Inc. as of December
31, 1995 and 1996, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.

ERNST & YOUNG LLP

Princeton, New Jersey
January 30, 1997

F-2
<PAGE>
ANADIGICS, INC.

BALANCE SHEETS

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------

<CAPTION>
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................ $ 6,394 $ 23,112
Marketable securities................................................ 22,788 9,008
Accounts receivable, net of allowance for doubtful accounts of $482
and $340 in 1995 and 1996, respectively............................ 7,379 10,696
Inventory............................................................ 8,735 8,901
Prepaid expenses and other current assets............................ 981 1,221
Deferred taxes....................................................... 184 699
--------- ---------
Total current assets................................................... 46,461 53,637
Plant and equipment:
Equipment and furniture.............................................. 31,951 46,853
Leasehold improvements............................................... 2,586 3,710
--------- ---------
34,537 50,563
Less accumulated depreciation and amortization....................... 16,060 21,830
--------- ---------
18,477 28,733
Deferred taxes......................................................... 1,032 4,131
Deposits............................................................... 280 495
--------- ---------
$ 66,250 $ 86,996
--------- ---------
--------- ---------
<CAPTION>

LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable..................................................... $ 2,671 $ 7,173
Accrued liabilities.................................................. 4,027 3,671
Income taxes payable................................................. 2,092 3,676
Current maturities of capital lease obligations...................... 1,718 1,292
--------- ---------
Total current liabilities.............................................. 10,508 15,812
Capital lease obligations, less current portion........................ 1,919 627
Commitments............................................................
Stockholders' equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized, none
issued or outstanding..............................................
Common stock, $0.01 par value, 34,000,000 shares authorized,
11,603,936 and 12,564,678 issued and outstanding at December 31,
1995 and 1996, respectively........................................ 116 126
Common stock, convertible, non-voting, $0.01 par value, 1,000,000
shares authorized, 521,672 and no shares issued and outstanding at
December 31, 1995 and 1996, respectively........................... 5
Common stock subscribed.............................................. (3)
Additional paid-in capital........................................... 94,065 98,800
Accumulated deficit.................................................. (40,360) (28,369)
--------- ---------
Total stockholders' equity............................................. 53,823 70,557
--------- ---------
$ 66,250 $ 86,996
--------- ---------
--------- ---------
</TABLE>

See accompanying notes.

F-3
<PAGE>
ANADIGICS, INC.

STATEMENTS OF INCOME

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- ---------- ----------
Net sales............................................... $ 34,832 $ 51,460 $ 68,864
Cost of sales........................................... 18,454 24,995 38,887
--------- ---------- ----------
Gross profit............................................ 16,378 26,465 29,977
Research and development expenses....................... 9,195 11,733 12,036
Selling and administrative expenses..................... 4,530 6,640 8,206
--------- ---------- ----------
13,725 18,373 20,242
--------- ---------- ----------
Operating income........................................ 2,653 8,092 9,735
Interest expense........................................ 831 573 371
Interest income......................................... 343 1,301 1,739
--------- ---------- ----------
Income before income taxes.............................. 2,165 8,820 11,103
Provision (benefit) for income taxes.................... 300 1,527 (888)
--------- ---------- ----------
Net income.............................................. $ 1,865 $ 7,293 $ 11,991
--------- ---------- ----------
--------- ---------- ----------
Net income per share of common stock.................... $ .23 $ .64 $ .93
--------- ---------- ----------
--------- ---------- ----------
Weighted average common and common equivalent shares
outstanding........................................... 8,260,430 11,374,745 12,907,851
--------- ---------- ----------
--------- ---------- ----------
</TABLE>

See accompanying notes.

F-4
<PAGE>
ANADIGICS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON
STOCK,
JUNIOR CONVERTIBLE COMMON ADDITIONAL
PREFERRED PREFERRED COMMON NON- STOCK PAID-IN
STOCK STOCK STOCK VOTING SUBSCRIBED CAPITAL
----------- --------------- ------------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1993...................... $ 880 $ 3 $ 12 $ (38) $ 59,055
Exercise of warrant....... 4 96
Issuance of Preferred
Stock, Series P and Q... 227 7,926
Repayment of employee
receivables............. 6 2
Net income................
----------- --- ----- ----- -----------
Balance, December 31,
1994...................... 1,111 3 12 (32) 67,079
Mandatory conversion of
Preferred Stock to
Common Stock............ (1,111) (3) 63 $ 5 1,046
Issuance of Common Stock
in initial public
offering, net of
expenses................ 35 25,073
Stock options exercised... 5 171
Repayment of employee
receivables............. 29 (10)
Shares issued under
employee stock purchase
plan.................... 1 706
Net income................
----------- --- ----- --- ----- -----------
Balance, December 31,
1995...................... 116 5 (3) 94,065
Exercise of warrants...... 3 3,607
Conversion of non-voting
Common Stock to Common
Stock................... 5 (5)
Stock options exercised... 1 348
Repayment of employee
receivables............. 3
Shares issued under
employee stock purchase
plan.................... 1 780
Net income................
----------- --- ----- --- ----- -----------
Balance, December 31,
1996...................... -- -- $ 126 -- -- $ 98,800
----------- --- ----- --- ----- -----------
----------- --- ----- --- ----- -----------

TOTAL
ACCUMULATED STOCKHOLDERS'
DEFICIT EQUITY
-------------- ---------------
<S> <C> <C>
Balance, December 31,
1993...................... $ (49,518) $ 10,394
Exercise of warrant....... 100
Issuance of Preferred
Stock, Series P and Q... 8,153
Repayment of employee
receivables............. 8
Net income................ 1,865 1,865
-------------- ---------------
Balance, December 31,
1994...................... (47,653) 20,520
Mandatory conversion of
Preferred Stock to
Common Stock............
Issuance of Common Stock
in initial public
offering, net of
expenses................ 25,108
Stock options exercised... 176
Repayment of employee
receivables............. 19
Shares issued under
employee stock purchase
plan.................... 707
Net income................ 7,293 7,293
-------------- ---------------
Balance, December 31,
1995...................... (40,360) 53,823
Exercise of warrants...... 3,610
Conversion of non-voting
Common Stock to Common
Stock...................
Stock options exercised... 349
Repayment of employee
receivables............. 3
Shares issued under
employee stock purchase
plan.................... 781
Net income................ 11,991 11,991
-------------- ---------------
Balance, December 31,
1996...................... $ (28,369) $ 70,557
-------------- ---------------
-------------- ---------------
</TABLE>

See accompanying notes.

F-5
<PAGE>
ANADIGICS, INC.

STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
CASH FLOW FROM OPERATING ACTIVITIES
Net income.................................................... $ 1,865 $ 7,293 $ 11,991
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation................................................ 1,239 2,317 3,865
Amortization................................................ 1,827 2,227 2,323
Changes in operating assets and liabilities:
Accounts receivable....................................... (1,719) (1,515) (3,317)
Inventory................................................. (2,702) (752) (166)
Prepaid expenses and other current assets................. 172 (485) (240)
Deposits.................................................. (53) 180 (215)
Deferred taxes............................................ (1,216) (3,614)
Accounts payable.......................................... 415 1,083 4,502
Income taxes payable...................................... 93 1,993 1,584
Accrued liabilities....................................... 50 1,985 (356)
--------- --------- ---------
Net cash provided by operating activities..................... 1,187 13,110 16,357

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment............................... (5,097) (9,488) (16,444)
Purchase of marketable securities............................. (39,116) (15,453)
Proceeds from sales of marketable securities.................. 16,337 29,233
--------- --------- ---------
Net cash used in investing activities......................... (5,097) (32,267) (2,664)

CASH FLOWS FROM FINANCING ACTIVITIES
Payment of obligations under capital leases................... (1,845) (1,931) (1,718)
Proceeds from notes payable................................... 1,396
Repayment of notes payable and debt........................... (2,394) (3,083)
Repayment of contingent warrant............................... (300)
Exercise of warrants.......................................... 100 3,610
Issuance of common stock...................................... 25,982 1,130
Issuance of preferred stock................................... 8,153
Proceeds of common stock subscribed........................... 8 19 3
--------- --------- ---------
Net cash provided by financing activities..................... 5,188 20,987 3,025
--------- --------- ---------

Net increase in cash and cash equivalents..................... 1,208 1,830 16,718
Cash and cash equivalents at beginning of period.............. 3,356 4,564 6,394
--------- --------- ---------
Cash and cash equivalents at end of period.................... $ 4,564 $ 6,394 $ 23,112
--------- --------- ---------
--------- --------- ---------

Non-cash investing and financing activities:
Acquisition of plant and equipment under financing leases..... $ 1,494 $ 957
Conversion of operating leases to capital leases.............. 1,056
--------- ---------
$ 1,494 $ 2,013
--------- ---------
--------- ---------
Interest paid................................................. $ 825 $ 579 $ 343
--------- --------- ---------
--------- --------- ---------
Taxes paid.................................................... $ 207 $ 750 $ 1,142
--------- --------- ---------
--------- --------- ---------
</TABLE>

See accompanying notes.

F-6
<PAGE>
ANADIGICS, INC.

NOTES TO FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

ANADIGICS, Inc. (the "Company") is a leading supplier of radio frequency
("RF") and microwave frequency gallium arsenide ("GaAs") integrated circuits.
The Company's products are used to receive and transmit signals in a variety of
high volume communications applications in cellular telephone systems and
personal communication systems ("PCS"), in fiber optic communications systems
and in cable ("CATV") and direct broadcast satellite ("DBS") television systems.
The Company designs, develops and manufactures integrated circuits in GaAs
semiconductor material that allows the integration of numerous RF/microwave
functions which cannot be easily integrated in silicon-based circuits. The
Company's high frequency integrated circuits can typically replace 30 to 100
discrete components, permitting manufacturers of end products to reduce the size
and weight of their products, improve reliability, reduce manufacturing time and
cost and enhance system performance.

The financial statements and Notes thereto reflect a three-for-two stock
split by declaration on January 30, 1997 of a stock dividend of one share of
common stock for each two shares of common stock outstanding. See Note 11.

CONCENTRATION OF CREDIT RISK

The Company grants trade credit to its customers which are primarily foreign
manufacturers of DBS television receivers, cable television receivers, and fiber
optic and wireless communication devices. The Company performs continuing credit
evaluations of its customers and generally does not require collateral. The
Company has not experienced significant losses related to receivables from
individual customers.

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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

REVENUE RECOGNITION

Production revenue is recorded when products are shipped to customers.
Revenues under customer-funded research and development contracts, which are
recorded relative to the deliverables and other contractual obligations were
$419 in 1994, $1,863 in 1995, and $3,193 in 1996, and are included in net sales
on the statements of income.

Approximately 44% of the Company's net sales in 1994 were to three
customers, accounting for 21%, 13% and 10% of net sales. Approximately 48% of
the Company's net sales in 1995 were to two customers, accounting for 30% and
18% of net sales; accounts receivable from these customers accounted for 36% of
total accounts receivable at December 31, 1995. Approximately 44% of the
Company's net sales in 1996 were to three customers, accounting for 16%, 16%,
and 12% of net sales;

F-7
<PAGE>
ANADIGICS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
accounts receivable from these customers accounted for 55% of total accounts
receivable at December 31, 1996.

PLANT AND EQUIPMENT

Plant and equipment are stated at cost. Depreciation of plant and equipment
has been provided on the straight-line method over 3-5 years.

The cost of equipment acquired under capital leases was $13,718 and $13,339
at December 31, 1995 and 1996, respectively, and accumulated amortization was
$9,243 and $10,996 at December 31, 1995 and 1996, respectively. Equipment
acquired under capital leases, which contain a bargain purchase option, are
amortized over the useful life of the leased equipment. All other equipment
acquired under capital leases are amortized over the life of the lease.

INCOME TAXES

Deferred income taxes reflect the net effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, principally relating to
net operating loss carryforwards.

RESEARCH AND DEVELOPMENT COSTS

The Company charges all research and development costs associated with the
development of new products to expense when incurred. Engineering and design
costs related to customer-funded research and development contracts are
classified as cost of sales.

CASH EQUIVALENTS

The Company considers as cash equivalents all highly-liquid marketable
securities with an original maturity of three months or less.

MARKETABLE SECURITIES

Marketable securities consist of fixed income investments (U.S. Government
obligations and short-term commercial paper) with maturities of two months to 16
months as of December 31, 1996 which can be readily purchased or sold using
established markets. Management determines the appropriate classification of
debt securities at the time of purchase and reevaluates such designation as of
each balance sheet date. Such securities are classified as available for sale
and, accordingly, are carried at fair value which approximates cost at December
31, 1995 and 1996. The amortized cost of debt securities is adjusted for
amortization of premium and accretion of discounts to maturity. Such
amortization, realized gains and losses, interest and dividends are included in
interest income.

STOCK BASED COMPENSATION

As permitted by FASB Statement No. 123, "Accounting for Stock-Based
Compensation" (FASB 123), the Company has elected to follow Accounting Principal
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and
related interpretations in accounting for its employee stock

F-8
<PAGE>
ANADIGICS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
option plans. Under APB 25, no compensation expense is recognized at the time of
option grant because the exercise price of the Company's employee stock option
equals the fair market value of the underlying common stock on the date of
grant.

NET INCOME PER SHARE

The net income per share of common stock includes common stock equivalents
computed by application of the treasury stock method and is based upon the
weighted average number of common and common equivalent shares outstanding
during each year.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company records impairment losses on long-lived assets used in
operations or expected to be disposed when events and circumstances indicate
that the assets are less than the carrying amounts of those assets.

2. INVENTORIES

Inventories are stated at the lower of cost (first in-first out method) or
market. Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Raw materials.............................................. $ 882 $ 1,278
Work in process............................................ 6,137 6,291
Finished goods............................................. 1,716 1,332
--------- ---------
$ 8,735 $ 8,901
--------- ---------
--------- ---------
</TABLE>

3. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Accrued compensation....................................... $ 2,659 $ 2,516
Warranty reserve........................................... 525 225
Other...................................................... 843 930
--------- ---------
$ 4,027 $ 3,671
--------- ---------
--------- ---------
</TABLE>

F-9
<PAGE>
ANADIGICS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

4. LEASES

The Company leases manufacturing, warehousing and office space under
noncancelable operating leases that expire through 2016. The Company also leases
certain equipment under capital leases that expire through 2000 and under
noncancelable operating leases that expire through 1998. Rent expense was
$1,671, $1,546 and $1,810 in 1994, 1995 and 1996, respectively.

The future minimum lease payments under the noncancelable operating leases
and the present value of the minimum capital lease payments are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR LEASES LEASES
- ------------------------------------------------------- ----------- -----------
<S> <C> <C>
1997................................................... $ 1,417 $ 1,727
1998................................................... 296 1,914
1999................................................... 208 1,976
2000................................................... 196 2,131
2001................................................... 2,177
Thereafter............................................. 26,556
----------- -----------
Total minimum lease payments........................... 2,117 $ 36,481
----------- -----------
-----------
Less amount representing interest...................... 198
-----------
Present value of net minimum lease payments............ $ 1,919
-----------
-----------
</TABLE>

At December 31, 1996, the Company had committed to purchase approximately
$25,000 of equipment and furniture, and leasehold improvements.

5. INCOME TAXES

At December 31, 1996, the Company's federal net operating loss ("NOL") and
general business credit carryforwards of $37,000 (tax effect of $12,600) and
$800, respectively, were subject to limitation due to ownership changes as
defined in Section 382 of the Internal Revenue Code ("Section 382"). In
addition, at December 31, 1996 the Company had a $10,000 NOL carryforward for
state tax purposes.

An ownership change, pursuant to Section 382, occurred in January 1989 as a
result of financing and capital restructuring transactions. Accordingly, the
annual utilization of the Company's pre-change federal NOL and general business
credit carryforwards of approximately $23,800 (tax effect of approximately
$8,100) and $500, respectively, is severely restricted. A valuation allowance of
$8,600 has been provided for all of these federal NOLs and general business
credits as of December 31, 1996.

Another ownership change, pursuant to Section 382, occurred in April 1995 as
a result of the initial public offering of the Company's stock. Accordingly,
utilization of the federal NOL carryforwards and general business credits
generated subsequent to January 1989 is subject to an annual limitation of
$5,100.

If an ownership change occurred subsequent to January 1989 but before April
1995, the federal NOL carryforwards generated after January 1989 may be subject
to more restrictive limitations on use than would otherwise apply. The Company
believes that no ownership change occurred during that

F-10
<PAGE>
ANADIGICS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

5. INCOME TAXES (CONTINUED)
period. However, the calculations required by the applicable federal income tax
regulations are complex. Accordingly, the provision (benefit) for income taxes
in 1994, 1995 and 1996 has been computed as if such a change occurred in
mid-1992, the point in time at which the Company's computations show that it was
closest to an ownership change during the period from January 1989 until April
1995, resulting in an annual limitation of approximately $1,400 on the federal
NOL carryforwards generated between 1989 and the middle of 1992. Federal NOL
carryforwards potentially subject to this limitation at December 31, 1996 were
approximately $13,200, exclusive of the pre-January 1989 carryforward noted
above. These carryforwards will expire as follows: $300 in 2004, $6,900 in 2005,
$5,000 in 2006 and $1,000 in 2007. A valuation allowance of $2,300 has been
recorded against the post-January 1989 federal NOL and general business credits
as of December 31, 1996.

At December 31, 1996, the Company reduced its valuation allowance associated
with its deferred tax assets (primarily federal NOL carryforwards) by $5,200
based upon the level of historical taxable income and current projections for
future taxable income over the periods in which the deferred tax assets would be
realized. Additionally, the Company considered the expiration of and limitation
on the annual use of the Company's federal NOL carryforwards. In assessing the
realizability of deferred tax assets, the Company considered whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets will depend on whether
an ownership change occurred subsequent to January 1989 and prior to April 1995,
the value of the Company prior to any such change, future generation of taxable
income and prevailing statutory tax rates.

The components of the provision (benefit) for income taxes are as follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------------
<S> <C> <C> <C> <C>
1994 1995 1996
----- --------- ---------
Current
provision Federal................... $ 300 $ 2,743 $ 2,726
Deferred benefit Federal................... -- (503) (3,214)
State..................... -- (713) (400)
----- --------- ---------
Total....................................... $ 300 $ 1,527 $ (888)
----- --------- ---------
----- --------- ---------
</TABLE>

The reconciliation of income tax expense computed at the U.S. federal
statutory rate to the provision (benefit) for income taxes is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996
-------------------- -------------------- --------------------
Tax at U.S. statutory rate................ $ 736 34.0% $ 2,999 34.0% $ 3,775 34.0%
Change in federal valuation allowance..... (447) (20.6) (1,288) (14.6) (4,673) (42.1)
General business credit................... (195) (2.2)
Other..................................... 11 0.5 11 0.1 10 0.1
--------- --------- --------- --------- --------- ---------
Provision (benefit) for income taxes...... $ 300 13.9% $ 1,527 17.3% $ (888) (8.0)%
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>

F-11
<PAGE>
ANADIGICS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

5. INCOME TAXES (CONTINUED)
Significant components of the Company's net deferred tax assets are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Current:
Accruals/reserves..................................... $ 1,510 $ 1,610
Net operating loss carryforwards...................... 1,121 592
--------- ---------
2,631 2,202
Valuation allowance for current deferred tax assets..... (2,447) (1,503)
--------- ---------
Net current deferred tax asset.......................... 184 699
Long-term:
Net operating loss carryforwards...................... 13,578 12,584
General business credit............................... 919 1,079
Difference in basis of plant and equipment............ 258 (204)
--------- ---------
14,755 13,459
Valuation allowance for long-term deferred tax assets... (13,723) (9,328)
--------- ---------
Net long-term deferred tax assets....................... 1,032 4,131
--------- ---------
Net deferred tax assets................................. $ 1,216 $ 4,830
--------- ---------
--------- ---------
</TABLE>

6. CREDIT FACILITIES

The Company has a secured $20,000 revolving credit facility and a $10,000
uncommitted bank line of credit.

The $20,000 revolving bank credit facility provides for interest at the
bank's base rate minus 50 basis points or, at the Company's discretion, other
market-based rates. The Company also has the option to swap floating rate for
fixed rate loans at the time of drawdown. The drawdown period expires on
December 31, 1997. Any drawdowns may be paid over a term of up to five years.
Its availability is subject to a number of financial covenants. Under this
facility, the payment of dividends, among other things, requires approval by the
bank. The weighted average interest rate was 7.69% in 1995 and the interest rate
was 7.75% at December 31, 1996. Substantially all assets of the Company are
pledged as security for the repayment of amounts drawn under this credit
facility. On a quarterly basis, the Company pays an annual commitment fee equal
to 0.125% of the daily unused line of credit.

The $10,000 bank line of credit provides for interest at the bank's base
rate minus 75 basis points. Its availability is subject to the approval by the
bank. The interest rate was 7.50% at December 31, 1996. Substantially all assets
of the Company are pledged as security for the repayment of amounts drawn under
this bank line of credit, which expires on July 1, 1997.

As of December 31, 1995 and 1996, there were no borrowings outstanding under
these credit facilities.

F-12
<PAGE>
ANADIGICS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

7. STOCKHOLDERS' EQUITY

During 1996, warrants to purchase 313,905 shares of common stock were
exercised at an exercise price of $11.50 per share. The Company has warrants
outstanding which entitle the holder to purchase 15,000 shares of common stock
at exercise prices ranging from $21.50 to $22.67 per share, of which one warrant
to purchase 7,500 shares of common stock was exercisable at December 31, 1996
and the remaining warrant to purchase 7,500 shares of Common Stock becomes
exercisable on September 6, 1997. The warrants expire in September of 2001 and
2002. In addition, in 1996, 521,672 shares of non-voting common stock were
converted on a one-to-one basis into common stock.

8. EMPLOYEE BENEFIT PLANS

In 1995, the Company adopted an employee stock purchase plan ("ESP Plan")
under Section 423 of the Internal Revenue Code. All full-time employees of the
Company and "part-time" employees, as defined in the ESP Plan, are eligible to
participate in the ESP Plan. An aggregate of 562,500 shares of common stock are
reserved for offering under the ESP Plan. Offerings are made at the commencement
of each calendar year and must be purchased by the end of that calendar year. In
1995, 103,970 shares of common stock were purchased at a price of $6.80 per
share, as determined by the ESP Plan, which approximates fair value. During
1996, 65,501 shares of common stock were purchased at a price of $11.92 per
share, as determined by the ESP Plan, which approximates fair value.

Certain executives and key employees have been granted options to purchase
shares of common stock under stock option plans adopted in 1994 and 1995. An
aggregate of 326,087 and 1,275,000 shares of common stock were reserved for
issuance under the 1994 Long-Term Incentive Share and Award Plan and the 1995
Long-Term Incentive Share Award Plan (the "Plans"), respectively. The Plans
provide for the granting of stock options, stock appreciation rights, restricted
shares, or other share based awards to eligible employees and directors, as
defined in the Plans. Options granted under the Plans become exercisable in
varying amounts over periods of up to three years.

Options to purchase 180 shares of common shares granted under previous plans
are fully exercisable at December 31, 1996.

FASB 123 requires pro forma information regarding net income and earnings
per share as if the Company has accounted for its employee stock options and
warrants granted subsequent to December 31, 1994 and shares of common stock
purchased by employees in connection with the ESP Plan ("equity awards") under
the fair value method of FASB 123. The fair value of these equity awards was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted average assumptions for 1995 and 1996, respectively:
risk-free interest rates of 6.57% and 5.17%; expected volatility of 0.50;
expected option life of one year from vesting and an expected dividend yield of
0.0%.

For purposes of pro forma disclosures, the estimated fair value of the
equity awards is amortized to expense over the options' vesting period. The
Company's pro forma information is as follows:

<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Pro forma net income...................................... $ 6,504 $ 10,555
Pro forma net income per share of common stock............ $ .59 $ .85
</TABLE>

F-13
<PAGE>
ANADIGICS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

8. EMPLOYEE BENEFIT PLANS (CONTINUED)
Because FASB 123 is applicable only to equity awards granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 1997.

A summary of the Company's stock option activity, and related information
for the years ended December 31, 1995 and 1996 follows:

<TABLE>
<CAPTION>
1995 1996
------------------------ ----------------------
<S> <C> <C> <C> <C>
WEIGHTED WEIGHTED
COMMON AVERAGE COMMON AVERAGE
STOCK EXERCISE STOCK EXERCISE
OPTIONS PRICE OPTIONS PRICE
----------- ----------- --------- -----------
Outstanding at beginning of year............... 204,001 $ .57 686,565 $ 6.13
Granted...................................... 524,277 8.28 484,575 14.64
Exercised.................................... (22,939) 4.43 (59,068) 6.14
Forfeited.................................... (18,774) 7.57 (23,851) 13.14
----------- ---------
Outstanding at end of year..................... 686,565 6.13 1,088,221 9.77
----------- ---------
----------- ---------
Exercisable at end of year..................... 262,878 481,426
----------- ---------
----------- ---------
Weighted average fair value of options granted
during the year.............................. $ 2.67 $ 5.50
</TABLE>

Stock options outstanding at December 31, 1996 are summarized as follows:

<TABLE>
<CAPTION>
OUTSTANDING WEIGHTED AVERAGE WEIGHTED AVERAGE
RANGE OF OPTIONS AT REMAINING EXERCISE
EXERCISE PRICES DECEMBER 31, 1996 CONTRACTUAL LIFE PRICE
- ---------------- ------------------- --------------------- -------------------
<S> <C> <C> <C>
$ .15 180 .85 $ .15
$ .57 175,614 7.16 $ .57
$ 8.00 427,077 8.30 $ 8.00
$12.00 to $14.33 452,575 9.14 $ 14.28
$15.67 to $24.83 32,775 9.53 $ 19.77
----------
$ .15 to $24.83 1,088,221 8.51 $ 9.77
----------
----------
</TABLE>

F-14
<PAGE>
ANADIGICS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

9. SEGMENT INFORMATION

The regions to which the Company had sales are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
Europe......................................... $ 15,038 $ 19,069 $ 24,819
Asia........................................... 12,696 15,819 19,836
North America.................................. 7,098 16,572 24,209
</TABLE>

10. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 29, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------

<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales..................... $ 10,970 $ 12,465 $ 13,555 $ 14,470 $ 13,574 $ 15,862 $ 17,005 $ 22,423
Cost of sales................. 5,440 5,767 6,429 7,359 6,835 8,254 11,136 12,662
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Gross profit.................. 5,530 6,698 7,126 7,111 6,739 7,608 5,869 9,761
Research and development...... 2,729 3,182 2,825 2,997 2,878 3,284 2,756 3,118
Selling and administrative
expense..................... 1,399 1,658 1,849 1,734 1,968 2,063 1,619 2,557
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Operating income.............. 1,402 1,858 2,452 2,380 1,893 2,261 1,494 4,086
Interest expense.............. 223 184 121 45 105 90 84 92
Interest income............... 86 330 437 448 418 411 432 479
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Income before income taxes.... 1,265 2,004 2,768 2,783 2,206 2,582 1,842 4,473
Provision (benefit) for income
taxes....................... 367 581 441 138 441 516 369 (2,214)
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Net income.................... $ 898 $ 1,423 $ 2,327 $ 2,645 $ 1,765 $ 2,066 $ 1,473 $ 6,687
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Net income per share.......... $ 0.10 $ 0.12 $ 0.18 $ 0.21 $ 0.14 $ 0.16 $ 0.11 $ 0.51
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
----------- ----------- ----------- --------- ----------- ----------- ----------- ---------
Market price per share of
common stock:
High........................ $ 16.50 $ 22.33 $ 18.67 $ 15.17 $ 20.50 $ 23.50 $ 27.00
Low......................... $ 8.83 $ 12.17 $ 9.92 $ 11.83 $ 13.92 $ 13.92 $ 16.33
</TABLE>

The Company commenced trading on the Nasdaq National Market on April 21,
1995.

11. SUBSEQUENT EVENTS

On January 24, 1997, the Company adopted the 1997 Long Term Incentive and
Share Award Plan for Employees (the "1997 Plan"). The 1997 Plan provides for the
granting of stock options, stock appreciation rights, restricted shares and
other share based awards to eligible employees as defined in the 1997 Plan,
which excludes officers and directors. An aggregate of 1,200,000 shares of
common stock have been reserved for issuance under the 1997 Plan.

F-15
<PAGE>
ANADIGICS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

11. SUBSEQUENT EVENTS (CONTINUED)
On January 30, 1997, the Company declared a stock dividend of one share of
common stock for each two shares of common stock outstanding. The dividend is
payable on February 20, 1997 to holders of record on February 10, 1997.
Accordingly, the financial statements have been retroactively restated to
reflect the three-for-two stock split.

On January 30, 1997, the Company also approved a public offering (the
"Offering") of an additional 1,875,000 shares of common stock (plus an
additional 306,226 shares of common stock that may be issued upon exercise of an
overallotment option by the underwriters). The Company intends to use its net
proceeds from the Offering to purchase capital equipment and make leasehold
improvements and will use the remainder for general corporate purposes,
including working capital.

F-16
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Goldman, Sachs
& Co., Oppenheimer & Co., Inc. and Needham & Company, Inc. are acting as
representatives, has severally agreed to purchase from the Company and the
Selling Stockholders, the respective number of shares of Common Stock set forth
opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
---------------
<S> <C>
Goldman, Sachs & Co. ....................................................... 544,077
Oppenheimer & Co., Inc. .................................................... 544,076
Needham & Company, Inc. .................................................... 544,076
Adams, Harkness & Hill, Inc. ............................................... 136,428
Cowen & Company............................................................. 136,428
Robertson, Stephens & Company LLC .......................................... 136,428
---------------
Total................................................................. 2,041,513
---------------
---------------
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.

The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $.935 per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $.10 per share to certain
brokers and dealers. After the shares of Common Stock are released for sale to
the public, the offering price and other selling terms may from time to time be
varied by the representatives.

The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 306,226
additional shares of Common Stock to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 2,041,513 shares of Common
Stock offered.

The Company, the Selling Stockholders and the executive officers and
directors of the Company have agreed that, during the period beginning from the
date of this Prospectus and continuing to and including the date 90 days after
the date of this Prospectus, they will not offer, sell, contract to sell or
otherwise dispose of any securities of the Company (other than pursuant to stock
purchase and option plans existing, or upon the conversion or exchange of
convertible or exchangeable securities or the exercise of warrants outstanding,
on the date of this Prospectus, or pursuant to certain other limited exceptions)
which are substantially similar to the shares of Common Stock or which are
convertible into or exchangeable for securities which are substantially similar
to the shares of Common Stock, without the prior written consent of the
representatives, except for the shares of Common Stock offered in connection
with the Offering.

The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.

U-1
<PAGE>
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- --------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 12
Dividend Policy....................... 12
Price Range of Common Stock........... 13
Capitalization........................ 14
Selected Financial Data............... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Business.............................. 22
Management............................ 35
Selling Stockholders.................. 38
Validity of Common Stock.............. 38
Experts............................... 38
Additional Information................ 38
Incorporation of Certain Information
by Reference........................ 39
Index to Financial Statements......... F-1
Underwriting.......................... U-1

</TABLE>

2,041,513 SHARES

ANADIGICS, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)

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

[LOGO]

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

GOLDMAN, SACHS & CO.
OPPENHEIMER & CO., INC.
NEEDHAM & COMPANY, INC.
REPRESENTATIVES OF THE UNDERWRITERS

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