UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|(Mark One) |                                                                                                                                      
|---------- | -------------------------------------------------------------------------------------------------------------------------------------
|ý          | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2003 or  
|o          | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period
from            to

Commission file number: 000-22660

TRIQUINT SEMICONDUCTOR, INC.(Exact name of registrant as specified in its charter)

|Delaware(State or other jurisdiction of
incorporation or organization)                                    |  | 95-3654013(I.R.S. Employer Identification No.)
|--------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|2300 N.E. Brookwood Parkway
Hillsboro, Oregon(Address of principal executive offices)                     |  | 97124(Zip Code)                               
|Registrant's telephone number, including area code: (503) 615-9000                                       
|Securities registered pursuant to Section 12(b) of the Act: None                                         
|Securities registered pursuant to Section 12(g) of the Act:Common Stock, $.001 par value
(Title of Class)

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

Yes ý    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes ý    No o

The aggregate market value of the voting common stock held by non-affiliates of the registrant, based upon the closing sale price of the common stock on June 30,
2003 reported on the Nasdaq Stock Market's National Market, was approximately $507,128,672. Shares of common stock held by each executive officer and director and by each person who owns 5% or more of
the outstanding common stock have been excluded from this computation. The determination of affiliate status for this purpose is not necessarily a conclusive determination for other purposes. The
registrant does not have any non-voting common equities.

As
of December 31, 2003, the registrant had outstanding 135,403,258 shares of common stock.

The
Index to Exhibits appears on page 44 of this document.

DOCUMENTS INCORPORATED BY REFERENCE

The
registrant has incorporated into Part III of this Form 10-K by reference portions of its Proxy Statement for its 2004 Annual Meeting of Stockholders.



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TRIQUINT SEMICONDUCTOR, INC.  2003 ANNUAL REPORT ON FORM 10-K  TABLE OF CONTENTS

|           |  |                                                                                                |  | Page
|---------- |  | ---------------------------------------------------------------------------------------------- |  | ----
|PART I    
|ITEM 1.    |  | BUSINESS                                                                                       |  | 3   
|ITEM 2.    |  | PROPERTIES                                                                                     |  | 20  
|ITEM 3.    |  | LEGAL PROCEEDINGS                                                                              |  | 20  
|ITEM 4.    |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                            |  | 21  
|PART II   
|ITEM 5.    |  | MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                          |  | 22  
|ITEM 6.    |  | SELECTED FINANCIAL DATA                                                                        |  | 23  
|ITEM 7.    |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS          |  | 24  
|ITEM 7(A). |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                     |  | 57  
|ITEM 8.    |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA                                          |  | 59  
|ITEM 9.    |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE           |  | 60  
|ITEM 9(A). |  | CONTROLS AND PROCEDURES                                                                        |  | 60  
|PART III  
|ITEM 10.   |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                             |  | 61  
|ITEM 11.   |  | EXECUTIVE COMPENSATION                                                                         |  | 61  
|ITEM 12.   |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |  | 61  
|ITEM 13.   |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                 |  | 61  
|ITEM 14.   |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                         |  | 61  
|PART IV   
|ITEM 15.   |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                                |  | 62  
|SIGNATURES |  | 66                                                                                            

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PART I

This Annual Report on Form 10-K, including the sections entitled "Business" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations", contains both historical information and forward-looking statements about TriQuint Semiconductor, Inc. ("TriQuint", "we", "us", "our" or "our
company"). A number of factors affect our operating results and could cause our actual future results to differ materially from any forward-looking results discussed below, including, but not limited
to, those related to operating results; demand for integrated circuits, SAW filters and optoelectronic components and the products into which they are manufactured, including wireless phones; sales to
a limited number of customers; new competitive technologies; growth and diversification of our markets, technologies and product applications; investments in new facilities; startup or integration of
new facilities; equity investments in closely held companies; discontinuation of products or technologies; integration of our acquisitions of Infineon's GaAs business, Agere's optoelectronics business
and integration of any future acquisitions. In some cases, you can identify forward-looking statements by terminology such as "anticipates", "appears", "believes", "continue", "estimates", "expects",
"hope", "intends", "may", "our future success depends", "plans", "potential", "predicts", "reasonably", "seek to continue", "should", thinks", "will" or the negative of these terms or other comparable
terminology. These statements are only predictions. Actual events or results may differ materially. In addition, historical information should not be considered an indicator of future performance.
Factors that could cause or contribute to these differences include, but are not limited to, the risks discussed in the section of this report titled "Factors Affecting Future Operating Results".
These factors may cause our actual results to differ materially from any forward-looking statement.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity,
performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these statements. We are under no duty to update any of the
forward-looking statements after the date of this Annual Report on Form 10-K to conform these statements to actual results. These forward-looking statements are made in reliance
upon the safe harbor provision of The Private Securities Litigation Reform Act of 1995.

ITEM 1. BUSINESS

Overview

We are a leading supplier of high-performance components and modules for communications applications. Our focus is on the specialized expertise,
materials and know-how for radio frequency/intermediate frequency ("RF/IF") and optical applications. We enjoy diversity in our markets, applications, products, technology and customer
base. Our markets include wireless phones, infrastructure networks, optical networks, and defense. We provide customers with standard and custom product solutions as well as foundry services. Our
products are based on advanced process technologies including gallium arsenide ("GaAs"), indium phosphide ("InP"), and surface acoustic wave ("SAW"). Our customers include major communication
companies worldwide.

Our
products are designed on various wafer substrates such as GaAs, InP, lithium niobate ("LiNbO3"), lithium tantalate ("LiTaO3") and quartz, using a variety of device technologies
including Pseudomorphic High Electron Mobility Transistor ("pHEMT"), Metamorphic HEMT ("mHEMT") Heterojunction Bipolar Transistor ("HBT"), Heterostructure Field Effect Transistor ("HFET"), Metal
Semiconductor Field Effect Transistor ("MESFET") and SAW. Using these materials, devices and our proprietary technology, our products can overcome the performance barriers of competing devices in a
variety of applications and offer other key advantages such as steeper selectivity, lower distortion, reduced size and weight and more precise frequency control. For example, GaAs has inherent
physical properties that allow its electrons to move up to five times faster than those of silicon. This higher electron mobility permits the manufacture of GaAs integrated circuits that operate at
higher levels of

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performance
than silicon devices. We sell our products worldwide to such customers as Boeing, Celestica, Ericsson, Kyocera, LG Group, Lucent, Motorola, Inc., Nokia Corporation, Nortel, Northrop
Grumman, Raytheon Company, and Samsung Microelectronics.

In
the United States, we have design and manufacturing facilities in Oregon, Texas, Florida and Pennsylvania and design facilities in New England. We also have production plants in Costa
Rica and Mexico, a design facility in Germany, an application sales support office in Taiwan and a small operation in China. We own and operate our own wafer fabrication and product test facilities
and use our proprietary processes to produce radio frequency ("RF"), analog and mixed-signal components, lasers, detectors, and modules cost-effectively in high volumes. We believe that
control of these manufacturing processes provides us with a reliable source of supply and greater opportunities to enhance quality, reliability and manufacturing efficiency. In addition, control of
our manufacturing process and our combined research and design capabilities assists us in developing new processes and products and in being more responsive to customer requirements. We have also
established a strategic foundry business serving leading communications companies.

We
are incorporated under the laws of the State of Delaware. Our principal executive offices are located at 2300 N.E. Brookwood Parkway, Hillsboro, Oregon 97124 and our telephone number
at that location is (503) 615-9000. Information about the company is also available at our website at www.triquint.com, which includes links free of charge to reports and amendments
to those reports we have filed with the Securities and Exchange Commission ("SEC"). The contents of our website are not incorporated by reference in this Annual Report on Form 10-K.
The public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Industry Background

Market demands for higher levels of performance with reduced cost in electronic communications systems have produced an increasing number of varied, complex
applications. The increased capabilities of these new systems, in turn, are spawning new markets and a further proliferation of new, sophisticated applications. Many of these new applications have
emerged in the wireless communications, telecommunications, data communications and microwave and millimeter wave communications industries.

The
wireless communications industry is constantly changing with the advent of new applications such as digital wireless telephones, personal communication systems ("PCS"), handheld
navigation products based on the global positioning satellite ("GPS") standard, satellite communications, wireless local area networks ("WLANs") and wireless internet. Wireless communications systems
can offer the functional advantages of wired systems without the costly and time-consuming development of an extensive wired infrastructure, which is of particular importance in developing
parts of the world. In addition, many of these new applications require battery-powered portability. The proliferation of some of these new applications has led to increased communication traffic
resulting in congestion of the existing assigned frequency bands. As a consequence, wireless communications are moving to higher, less congested frequency bands and are implementing new, advanced
communication standards. The advantages of wireless communications systems as well as the increasing demand for wireless communications at higher frequencies continue to drive worldwide growth in
existing systems and continue to drive the emergence of new markets and applications.

The
telecommunications industry is encountering increasing demand for higher transmission rates and increased capacity to accommodate traditional voice traffic as well as higher levels
of traffic arising from widely used Internet service applications. Today's advanced telecommunications systems employ high-speed switching networks and fiber optic cable operating in
accordance with high frequency

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standards
such as synchronous optical network ("SONET"), synchronous digital hierarchy ("SDH"), integrated services digital network ("ISDN"), digital subscriber lines ("DSL") and
asynchronous transfer mode ("ATM"). For example, high-performance SONET telecommunications systems can operate at frequencies of 10 gigabits per second ("Gbits/sec") per optical wavelength
and can multiplex 80 wavelengths optically to provide data capacity to 800 Gbits/sec per individual fiber. The advent of video communications and multimedia services, which combine voice, video and
data, are placing further demands on these systems for even higher data transmission capacity. This is especially true in the local and end user arenas, which are often referred to as the Metropolitan
Area Networks ("MANs") and Last Mile Networks, respectively.

The
microwave and millimeter wave communications industry utilizes advanced monolithic microwave integrated circuits ("MMIC") and SAW filter products for aerospace, defense and
commercial applications. Aerospace and defense applications include high power amplifiers, low noise amplifiers, switches and attenuators for use in a variety of advanced systems such as active array
radar, missiles, electronic warfare and space communications systems. Commercial applications for products and services in this frequency range include wireless telephone applications, optical fiber
links and switching networks, millimeter wave ("mmW") radios for point-to-point and point-to-multipoint systems, phased-array radar and satellite links
both on the orbiting payload and for earth station transmitters.

To
address the market demands for higher levels of performance, electronic communications systems manufacturers have relied heavily on advances in high-performance components
and modules such as those we produce. Until recently, the predominant semiconductor technologies used in advanced electronic systems have been silicon-based complementary metal oxide semiconductor
("CMOS"), bipolar complementary metal oxide semiconductor ("BiCMOS") and emitter coupled logic process technologies. In addition, traditional signal processing technologies included lumped element
filters, ceramic filters, and bulk acoustic wave crystal filters, resonators and oscillators. However, today's high-performance electronic systems require performance beyond that
achievable with these technologies.

One
way to improve performance is to combine analog and digital circuitry on the same device. This combination, known as mixed-signal technology, can provide higher levels of integration
(smaller size and increased functionality), reduced power consumption and higher operating frequencies. Higher levels of integration can result in smaller devices with increased functionality.
Notwithstanding the benefits of mixed-signal technology, the performance requirements of certain critical system functions generally cannot be achieved using silicon-based semiconductors or filters,
resonators and oscillators based on traditional technologies. As a result, systems manufacturers are seeking components and modules which can overcome these performance limitations. GaAs and InP
semiconductor technology
has become an effective alternative or complement to silicon solutions in many high-performance applications. The higher electron mobility of GaAs permits GaAs integrated circuits to
operate at higher speeds than silicon devices or at the same speeds with lower power consumption. In addition, SAW technology offers a number of advantages over traditional filter technologies,
including precise frequency control and selectivity, reduced size and weight, high reliability, environmental stability and the ability to pass RF signals with minimal distortion.

In
many new applications, GaAs integrated circuits and SAW filters enable high-performance systems to process signals and information more quickly and more precisely. In
addition, the use of these components in high-performance communications systems can reduce system power requirements and the physical size and weight of the system, important elements in
battery-powered or portable applications. These characteristics, combined with the systems requirements of the communications industry, have led to the use of our components in high volumes to
complement silicon devices in a wide range of commercial and aerospace systems.

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Electronic
communications systems manufacturers, particularly wireless handset manufacturers, are also moving increasingly toward designing integrated radio modules into their phones,
rather than the individual components comprising these modules. By doing this, the handset manufacturers can continue to achieve cost reductions, optimization of design and increasingly smaller size
of their phones while accelerating design cycles and improving time to market. Our high-performance GaAs integrated circuits and our SAW filters, resonators and oscillators comprise some
of the primary components in these radio modules. Because of this, we believe we are well-positioned to continue to support the growth and performance level demands of the electronic
communications system industry.

TriQuint Strategy

We are a global supplier to the communications industry with a focus on media interface applications of RF and optical communications systems. Our mission is,
"Connecting the Digital World to the Global Network", and we accomplish this through a diversified product portfolio. We strive to be a premier supplier of solutions based on complex materials such as
GaAs, InP and other compound semiconductor materials and SAW-based products. The key elements of our strategy include:

Diversification of Business Models, Market Applications, Technologies and Customers.We offer a broad range of standard and
customer-specific products, as well as manufacturing, design and foundry services, which address numerous end-user applications in a variety of communications markets. We provide a
balanced product offering ranging from foundry services to die level products,
packaged components, and integrated modules. Our primary application areas are wireless phones, infrastructure networks, optical networks and defense. Our products are designed on various wafer
substrates such as GaAs, InP, LiNbO3, LiTaO3 and quartz, using a variety of technologies including pHEMT, HBT, HFET, MESFET and SAW. We delivered products and services to approximately 450 customers
during 2003. In addition, we had 28 customers that each contributed $1.0 million or more to our revenues in 2003.

Focusing on RF, Analog and Mixed-Signal Design Excellence.We have made substantial investments in our RF, analog and
mixed-signal circuit design capabilities. Our design teams have specialized expertise to address the needs of each of our target markets. The foundation of our design resources is an extensive library
of digital and analog cells and associated software tools and databases necessary to develop new products rapidly and cost-effectively. We believe that our RF, analog and mixed-signal
design capabilities provide us with a competitive advantage in designing and developing integrated circuits and SAW-based products for standard or customer-specific products in our target
markets.

Targeting High-Growth Markets with High-Performance Solutions.We plan to continue to develop and
produce high-performance RF, optical, analog and mixed-signal electronic components and modules. In 2001, we added SAW filters to our portfolio of high-performance solutions by
merging with Sawtek, which enables us to offer a complete array of RF products for wireless phones. We have also expanded our product portfolio in broadband and microwave applications and added
several products to our optical networking product line through our acquisition of a portion of the optoelectronics business of Agere Systems Inc. ("Agere") in January 2003. Our new
products are focused on modules for both GSM/GPRS/EDGE and CDMA wireless phones, WLANs, new SAW filter applications and new applications for optical networks and broadband and microwave equipment.

Enabling Higher Performance Optical Module Solutions.In January 2003, we acquired a large portion of the
optoelectronics business of Agere based in Breinigsville, Pennsylvania and Matamoros, Mexico. This world class design and manufacturing organization, which has origins back to Bell Laboratories, is
focused on delivering optoelectronic component and module solutions for next generation telecommunications and data communications equipment. Traditionally focused on long haul networks, our
Optoelectronics division is now integrating long haul technology into compact module solutions for metropolitan networks. This will enable higher performance and higher data capacity metropolitan
network equipment to meet the increasing demands of users.

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Capitalizing on Partnerships with Industry Leaders in our Target Markets.We plan to continue to establish and maintain close
working relationships with industry leaders in our target markets. We also intend to establish strategic relationships with companies that provide access to new technologies, products and markets.
These relationships are critical to providing us with insights into future customer requirements, which facilitates the timely development of new products and services to meet the
changing needs of our target markets. Our strategic partnerships include development, manufacturing or foundry relationships with Atmel, Inc., Boeing, Ericsson, Hittite Microwave Corp.,
Infineon Technologies AG, LG Inotek, Lockheed Martin, Philips Semiconductor, Raytheon, Samsung, Schlumberger Limited, and others.

Markets and Applications

We focus on four end markets in the electronic communications system industry: wireless phones, infrastructure networks, optical networks and defense
applications.

Wireless Phones.This business accounted for approximately 41% of our total revenues in 2003. The demand for wireless phones
has evolved over the past several years as a result of increased demand for portable voice and data communication capabilities. Implementation of new standards such as CDMA, 1xRTT, GSM, and GPRS are
taking advantage of all allocated frequency bands around the world and supporting the growing demand for wireless data communications. In addition to portability, there has also been increasing demand
for wireless phones to provide signal quality similar to wired communication systems, be smaller and lighter, accommodate longer talk time and standby time and contain complex functionality such as
digital cameras, color displays, and internet access. In addition, this increase in wireless phone communication traffic has resulted in congestion of the assigned frequency bands, creating capacity
issues for network operators. As a consequence, wireless communications standards are evolving to more efficiently utilize the available spectrum and demand has increased for handsets that work across
multiple standards and frequency bands. Phones of this complexity provide new technical challenges that our products are well suited to address. The wireless phone market grew to industry estimates of
approximately 500 million unit sales in 2003 and industry projections are for approximately 550 million units in 2004. The mobile phone market has experienced growth in each of the past
15 years, except for 2001 due to a slowdown in the overall economy. In 2003, demand for these products strengthened particularly in the second half of the year due to growth in Asia and demand
for new phones with new features, and we expect to see continued strengthening during 2004.

Our
use of various wafer substrates such as GaAs, LiNbO3, LiTaO3 and quartz, and a variety of technologies including pHEMT, HBT, HFET, MESFET and SAW provides us with the ability to
satisfy these market demands. In many wireless phone applications, these substrate materials and devices can provide key performance advantages over silicon, such as higher frequency operation,
improved signal reception and transmission, better signal processing in congested bands and greater power efficiency for longer battery life. Access to these varied technologies enables us to combine
them in applications to optimize both product performance and cost.

We
believe that we provide not only the broadest product offering for the RF front-end portion of wireless phones, but also the capability to integrate many of the functions
into module form. We offer a full range of RF and intermediate frequency ("IF") SAW filters that can be sold independently or integrated into modules along with our various receiver, switch, and power
amplifier
products. During 2003, we introduced many new products for this market, including a family of GSM power amplifier module products.

Infrastructure Networks.This business accounted for approximately 29% of our total revenues in 2003. Infrastructure networks
include a variety of applications and products such as base stations, point-to-point radio, WLANs, satellite communication, cable and other products. The largest portion of

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the
infrastructure end market for us is the base station market. Base stations are necessary to operate wireless phone networks. The demand for base station equipment is related to network
build-out plans of network operators and is highly dependent upon the capital equipment budgets of those operators. In 2003, demand in the base station market was down due to reduced
capital spending by network operators.

We
believe we are the leading supplier of SAW filters for both GSM/GPRS/EDGE and CDMA base stations. As base stations evolve to 2.5G and 3G networks and as the United States evolves from
networks that predominantly use TDMA to networks that predominantly use GSM/GPRS/EDGE and CDMA, we are extending our leadership position as the SAW filter supplier of choice. We believe that our long
relationships with the major base station equipment providers and our design and manufacturing capabilities put us in a unique position to continue to support this market with innovative SAW
solutions.

Looking
forward, we believe there are three major drivers to the base station equipment market. The first is the continued deployment of base stations in China and other emerging markets
such as India. The second is the build-out of GSM/EDGE networks for the United States and Latin America to upgrade and expand existing networks. The third is the build-out of
WCDMA systems.

We
participate in the satellite communications market in both orbiting payload and ground station uplinks for satellite communication systems. Demand in this market was soft in 2003,
consistent with the situation in other communication markets. We believe that the ground station market will grow as home based satellite systems, similar to satellite television, evolve for the
internet. Other broadband products include products for cable and wireless high-speed Internet services and wireless distribution of phone, video and interactive cable television services.
The fastest growing products in this end market are products for WLAN applications. Our sales of products for WLANs nearly doubled in 2003 and we became a leading supplier of foundry services for
GaAs-based power amplifiers for this application.

Approximately
6% of our total revenues stem from sales of our products through distributors. Substantially all of these distributor sales are grouped into the infrastructure networks end
market.

Defense.This business accounted for approximately 16% of our total revenues in 2003. Our largest customers in this market
are defense subcontractors to the U.S. government. The U.S. military uses our products in phased-array radar to identify, track and target aircraft and threats of unknown origin. The capability to
track multiple targets simultaneously is one of the key enhancements found on the new generation of fighters such as the F-22 Raptor and Joint Strike Fighter (JSF). We are teamed with the
prime contractors on both of these programs. Our microwave power amplifiers (PAs) will provide the capability to transmit the microwave power that is at the heart of the radar's operation. These
radars are comprised of large arrays of elements, each with its own PA. This is a very stable business and our products are used in long lead-time, large-scale programs. We do not expect
our revenues to increase materially as a result of any near-term conflicts with foreign nations.

Optical Networks.This business accounted for approximately 14% of our total revenues in 2003. The optical networking market
grew significantly in the late 1990's with increased demand for the transmission and manipulation of large amounts of information at high speeds and with high integrity. In 2001, as a result of
overbuilt capacity, the optical networking market fell sharply. We believe this market has reached its low point and will begin to experience strengthening demand. Fiber optic network demand continues
to occur for both the telecommunications and data communications markets, with the majority of bandwidth demand coming from data communications markets. The overall expansion has been driven by
increasing Internet usage, email, business networking, video conferencing and voice traffic, as well as the ongoing upgrade of existing systems to fiber optics.

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Fiber
optic cables can transmit data at rates far greater than copper lines. A single fiber can cost-effectively replace hundreds or thousands of copper lines. Optical
networks operate in accordance with high frequency standards such as SONET, SDH, Gigabit Ethernet ("GbE"), and FibreChannel ("FC"). For example, high-performance SONET telecommunications
systems can operate at frequencies of 10 Gb/s or higher per wavelength. Dense Wave Division Multiplexing ("DWDM") can then be used to combine 80 or more of these 10 Gb/s signals to be carried down a
single fiber, for a total of 800 Gb/s capacity. During the previously high levels of this market, most capital spending went to long haul/long distance networks. To increase the capacity of these
networks, technologies used in long haul systems will migrate to metropolitan network equipment. An example of this is the trend to using DWDM technology in MANs.

To
fully utilize the benefits of fiber optic cable, the electronic processors and modules in these networks must be able to operate at speeds from 155 Mb/s to 40 Gb/s
cost-effectively and efficiently and still meet established signal quality and data integrity standards. Our optical networking products specifically target the need for these
high-performance, integrated devices and support all major optical network standards such as SONET, SDH, GbE and FC. We offer a variety of products that include multiplexers and
demultiplexers, laser/modulator drivers, photo detectors, transimpedance amplifiers, high performance lasers, electroabsorption modulated lasers ("EMLs"), receivers, transceivers, and transponders.
New product introductions, such as our new family of small
form factor optical transceiver products introduced in 2003, should position us well to participate in the general optical network recovery expected in 2004 and 2005. Our overall revenue in this end
market grew in 2003 through our acquisition of Agere's optoelectronics business.

We
experience seasonal fluctuations in our business primarily in the wireless phone market. Our revenues are historically strongest in the fourth quarter of each year in response to the
holiday selling season. The first quarter of each year is historically the weakest quarter for revenues, due to reduced consumer demand subsequent to the holiday selling season.

Products

We offer a broad array of RF, analog and mixed-signal integrated circuits, lasers, detectors, optical transceivers, transponders, and SAW filter products to
address the needs of our target markets. We utilize high-frequency substrate materials such as GaAs, InP, LiNbO3, LiTaO3 and quartz and high-performance technologies such as
pHEMT, HBT, HFET, MESFET and SAW to design and manufacture products which overcome the performance barriers of silicon devices. Our products offer other key advantages such as steeper selectivity,
lower distortion, higher power and power added efficiency, reduced size and weight and more precise frequency control. We believe efficient manufacturing facilities and processes result in products
that provide our customers a favorable price/performance trade-off. Our broad range of standard and customer-specific integrated circuits, optical components and modules, and SAW filters,
combined with our manufacturing and design services, allow customers to select the specific product solution which best fulfills their technical and time-to-market
requirements.



We offer families of standard products for the following target market application areas. These include:

Wireless Phones.Our products include receivers, power amplifiers, voltage controlled oscillators, switches,
low-loss transversal filters, reflective low-loss filters, duplexers, triplexers, resonator filters and front-end radio modules. These products address the needs of
system designers for low noise, power efficient amplification, low loss switching and efficient and accurate frequency conversion.

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Infrastructure Networks.Our products include bi-directional transversal filters, low-loss
transversal filters, reflective low-loss filters and oscillators. We believe that we are the leading supplier of SAW filters for base stations. Our products support GSM, EDGE, CDMA and 3G
networks. We also provide products that serve as the high data rate backhaul paths for base stations. These include integrated circuits for mmW radios and optical components for optical communication
links. Our products also include high power amplifiers, low noise amplifiers, switches, attenuators and discrete integrated circuits. We support numerous additional applications in this market
including WLAN, radar systems, satellite, point-to-point radios, point-to-multipoint and cable.

Optical Networks.Our products include laser/modulator drivers, photo detectors and transimpedance amplifiers along with
lasers, EMLs, detectors, transceivers, and transponders. For transceiver modules, our products are compliant to industry Multi-Source Agreements ("MSA") such as SFP, SFF, and XFP, and our transponder
modules comply with the 300 pin 10G MSA. These products support the high-performance standards, SONET, SDH, DWDM, GbE and FC.



We offer our customers a variety of product options and services for the development of customer-specific products. Our services include design, wafer
fabrication, test engineering, package engineering, assembly and test. We generally receive revenues from customer-specific products and services at two stages: when the design is developed and
engineered and when we manufacture and deliver the device. We focus the development of our customer-specific products on applications involving volume production requirements. As is typical in the
semiconductor industry, customer-specific products are developed for specific applications. As a result, we expect to generate production revenues only from those customer-specific products that are
subsequently produced in high volume. A substantial portion of our products are designed to address the needs of individual customers. Frequent product introductions by systems manufacturers make our
future success dependent on our ability to select customer-specific development projects which will result in sufficient production volume to enable us to achieve manufacturing efficiencies. Because
customer-specific products are developed for unique applications, we expect that some of our current and future customer-specific products may never be produced in high volume. In addition, in the
event of significant delays in completing designs or our failure to obtain development contracts from customers whose systems achieve and sustain commercial market success, our results of operations
could be materially adversely affected.

Customer-specific
designs are generally implemented by one of two methods. Under the first method, the customer supplies us with detailed performance specifications and we design,
develop and manufacture the integrated circuits. These designs are generated using either our in-house design engineering group or independent third-party design organizations which have
been qualified by us. Under the second method, we supply circuit design and process rules to our customer and the customer's internal engineering staff designs and develops the product, which we then
manufacture.

Design and Process Technology

In order to rapidly develop and cost-effectively introduce new products which address the needs of our customers, we have made substantial investments
in building our capabilities in RF, analog and mixed-signal circuit design, and optical component process technologies. We have developed an extensive library of digital and analog cells and
associated software tools and databases which we use to facilitate the design of our integrated circuits and optical components. We have developed techniques for material design as well. The
advancement of both our electrical and optical components is highly dependent on our ability to quickly and accurately produce the proper material structure to meet the targeted end device
performance. We have also developed and documented process and design rules which allow customers to design proprietary integrated circuits themselves. Mixed-signal and optical products, which
generally involve varied and complex functions operating at high frequencies, generally

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present
the most complex design and testing challenges. We believe that our extensive cell library, device simulation models, optimized mixed-signal process technology and design and test engineering
expertise in high-performance mixed-signal integrated circuits and optical components address these challenges and provide a competitive advantage.

Our
manufacturing strategy is to use high volume process technologies when possible to enable us to provide cost-effective, stable, uniform and repeatable solutions for our
customers. We provide advanced wafer manufacturing processes and we have pursued core process technologies that are cost-effective for RF, analog and mixed-signal electronic applications
as well as for lasers and detectors in the optical component market. As a result, we are able to enjoy the cost advantages associated with standard high volume semiconductor manufacturing practices.
The core process technology in our Oregon wafer fabrication operation employs both implanted and epitaxial structures, 4 micron metal pitch, typically 0.5 or greater micron geometries, involves 10 to
18 mask steps, has a cutoff frequency of up to 21 GHz and is scalable. This scalability facilitates further cost reduction and performance improvement. The process technology employed in our Texas
wafer fabrication operation includes six advanced performance production processes: 0.5 micron gate length MESFET for amplifier applications; 0.15, 0.25 and 0.5 micron gate length pHEMT for high power
and high frequency applications; HBT for high voltage, high linearity and high power density; 0.5 micron gate length HFET for high voltage, high power amplifiers and switches and Vertical
P-I-N diode (VPIN) for signal control devices such as switches, limiters and attenuators. In our Florida wafer fabrication operation, we use manufacturing techniques to produce
our SAW devices that are very similar to those for integrated circuits. Our Pennsylvania optical components wafer fabrication operation uses multi-wafer low pressure Metal Organic Chemical Vapor
Deposition ("MOCVD") growth technologies and low K dielectrics with planar selective area growth of material for high performance Fabry Perot ("FP"), Distributed Feedback ("DFB"), and EML lasers,
along with PIN and Avalanche Photo Diode ("APD") detectors.

Customers

We have a broad customer base of leading systems manufacturers. In 2003, we shipped products or provided manufacturing services to approximately 450
end-user customers and distributors. In 2003, Motorola accounted for approximately 14% of our revenues. In 2002, Motorola accounted for approximately 16% of our revenues and Nokia
accounted for approximately 10% of our revenues. In 2001, Nokia accounted for approximately 15% of our revenues. No other single customer accounted for greater than 10% of our revenues during these
periods.

Our
sales to customers outside the United States accounted for approximately 61%, 56% and 44% of revenues in 2003, 2002 and 2001, respectively. Sales to customers in Korea represent the
largest portion of our international sales in 2003. Customers in Korea accounted for approximately 16%, 13% and 12% of our revenues in 2003, 2002 and 2001, respectively. No other country represented
10% or more of our revenues in any of those periods.

Some
of our sales to overseas customers are made under export licenses that must be obtained from the United States Department of Commerce. Protectionist trade legislation in either the
United States or other countries, such as a change in the current tariff structures, export compliance laws, trade restrictions resulting from war or terrorism, or other trade policies could adversely
affect our ability to sell or to manufacture in international markets. Furthermore, revenues from outside the United States are subject to inherent risks, including the general economic and political
conditions in each country.

Manufacturing

We currently have six manufacturing centers located in Oregon, Texas, Florida, Pennsylvania, Mexico, and Costa Rica.

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Our
executive, administrative, test and technical offices are located in a 254,000 square foot facility in Hillsboro, Oregon on approximately 52 acres. Included in this facility is a
wafer fabrication facility consisting of 76,000 square feet, of which 21,000 is operated as a Class 10 performance clean room.

Our
Texas facility is located in Richardson. It comprises approximately 550,000 square feet, of which 48,000 is a Class 1 performance clean room. We currently operate that clean
room as a Class 10
performance clean room. In July 2002, we successfully moved our manufacturing operations from our former Dallas facility, which we leased from Raytheon under a sublease, solely to the
Richardson facility. We no longer lease any portion of our former Dallas facility.

Our
Florida facility is a wafer fabrication and assembly and test facility located in Apopka. The Apopka wafer fabrication facility includes 16,000 square feet of clean room, of which
2,300 square feet is Class 10 performance clean room.

Our
San Jose, Costa Rica facility is an assembly and test facility for the production of SAW filters. It is a 61,300 square foot facility with over 19,000 square feet of clean room
space, located in the Metro Free Trade Zone. We use our Costa Rica facility to assemble, package, test and ship final product to customers. We began operations at this facility in 1996.

In
connection with our acquisition of the Agere optoelectronics business, we acquired facilities in Breinigsville, Pennsylvania and Matamoros, Mexico. The Breinigsville, Pennsylvania
facility contains approximately 849,000 square feet of manufacturing and office space located on 139 acres. Pennsylvania is the headquarters and wafer fabrication operation for our optoelectronics
business. We intend to reduce capacity at this site, consequently we have listed the Breinigsville facility for sale. We plan to move the Breinigsville wafer fabrication operation to our facility in
Richardson, Texas and the assembly and test operation to our facility in Matamoros, Mexico. The Matamoros, Mexico facility is approximately 80,000 square feet located in a free trade zone and is
responsible for the final assembly and test of both optical component and module products. We are continuing the process of scaling and integrating the manufacturing assets into specific designated
portions of these facilities and will complete the moves over the next one to two years to further improve our manufacturing efficiencies.

The
fabrication of integrated circuits and SAW filter products is highly complex and sensitive to particles and other contaminants and requires production in a highly controlled, clean
environment. Minute impurities, difficulties in the fabrication process or defects in the masks used to print circuits on the wafers can cause a substantial percentage of the wafers to be rejected or
numerous die on each wafer to be nonfunctional. As compared to silicon technology, the less mature stage of the technology of GaAs substrate material leads to somewhat greater difficulty in circuit
design and in controlling parametric variations, thereby yielding fewer good die per wafer. The more brittle nature of GaAs wafers can also lead to higher processing losses than experienced with
silicon wafers. To maximize wafer yield and quality, we test our products in various stages in the fabrication process, maintain continuous reliability monitoring and conduct numerous quality control
inspections throughout the entire production flow. A sustained failure to maintain acceptable yields would have a material adverse effect on our operating results.

We
incur a high level of fixed costs to operate our own manufacturing facilities. These fixed costs consist primarily of facility occupancy costs, investment in manufacturing equipment,
repair, maintenance and depreciation costs related to equipment and fixed labor costs related to manufacturing and process engineering. Our manufacturing yields vary significantly among our products,
depending upon a given product's complexity and our experience in manufacturing it. We have in the past and may in the future experience substantial delays in product shipments due to lower than
expected production yields. In addition, during periods of low demand, high fixed wafer fabrication costs could have a material adverse effect on our operating results.

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For
integrated circuit products made by our Oregon facility, we assemble our products using outside assembly contractors. Our Texas facility is developing packaged products, which will
also be assembled by outside contractors. Our Pennsylvania operation has also used outside contract assembly facilities as well as the facility in Matamoros, Mexico. We are in the process of
consolidating these assembly needs as we evaluate ongoing product offerings. Outside assembly services are contracted to 19 vendors, nine of which are located in the U.S. In addition, we have moved
some of our assembly and test operations to a vendor in Malaysia. We perform some of our own tape and reel operations internally; however, we have four vendors, three of which are located in the U.S.,
qualified for this service should we need to use them. A reduction or interruption in the performance of assembly services by subcontractors or a significant increase in the price charged for such
services could adversely affect our operating results.

Production Outside of the United States

Because of the significant fixed costs associated with the manufacture of our products and components and our industry's history of declining prices, we must
continue to produce and sell our integrated circuits, optical components and SAW components in significant volume, continue to lower manufacturing costs and carefully monitor inventory levels. We
continually evaluate our integrated circuit and SAW components manufacturing processes as well as the desirability of transferring volume production of those products between facilities, including
transfer overseas to countries where labor costs and other manufacturing costs are significantly lower than in the U.S., principally Costa Rica and Matamoros, Mexico. The functional currency for both
our Costa Rican and Mexican subsidiaries is the U.S. dollar since sales and most material cost and equipment are U.S. dollar denominated. The effects of currency fluctuations of the local currencies
are not considered significant and are not hedged.

Frequently,
transfer of production of a product to a different facility requires qualification of such new facility by certain of our customers. There can be no certainty that such
changes and transfers will be implemented on a cost-effective basis without delays or disruption in our production and without adversely affecting our results of operations. Offshore
operations are subject to certain inherent risks, including delays in transportation, changes in governmental policies, tariffs, import/export regulations and fluctuations in currency exchange rates
in addition to geographic limitations on
management controls and reporting. There can be no assurance that the inherent risks of offshore operations will not adversely affect our future operating results.

Raw Materials and Sources of Supply

We generally maintain alternative sources for our principal raw materials to reduce the risk of supply interruptions or price increases. We purchase these
materials on a purchase order basis. The raw materials used are available from several suppliers for our integrated circuit, SAW filter and optical components/modules manufacturing operations. For our
GaAs integrated circuit manufacturing operations, we currently have approximately 23 fully qualified wafer vendors, at least nine of which are located in the United States, and five fully qualified
mask set vendors, all of which are located in the United States. We purchase high-performance, multilayer ceramic packages from two vendors, both of which are located in the United States.
We currently purchase plastic packaging from approximately 15 suppliers, three of which are located in the United States. We also utilize nonqualified vendors for these and other materials for use in
nonproduction research and test activities.

For
our SAW filter manufacturing operations, we use several raw materials, including wafers made from quartz, LiNbO3 or LiTaO3 and ceramic or metal packages. Relatively few companies
produce these piezoelectric wafers and metal and ceramic packages. Our most significant suppliers of ceramic surface mount packages are three companies based in Japan. For our SAW operations, we also
utilize five qualified wafer vendors, three of which are located outside the United States, and two qualified mask set vendors, both of which are domestic companies.

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For
our optical components group, we depend upon a large number of suppliers for raw materials and components that make up the bill of materials ("BOMs") for its product offerings such
as lasers, detectors, transceivers, and transponders. The success of these products is critical to the overall success of the business. For this business, we utilize three qualified wafer vendors and
three qualified ceramic package vendors, all of which are located outside of the U.S.. For mask sets and plastic packages, we have three qualified vendors for each and all are located in the U.S. The
primary risk to our source of supply to manufacture these products is the currently depressed state of the optical network market and its impact on the financial stability of smaller companies.

Our
reliance on a limited number of suppliers for certain raw materials and parts may impair our ability to produce our products on time and achieve acceptable yields. At times in the
past, we have experienced difficulties in obtaining ceramic packages used in the production of certain SAW filters. The acquisition of relatively simple devices, such as capacitors, has been
problematic at times because of the large demand swings that can occur in the cellular handset market for such components. This risk will spread across a larger percentage of our total business as a
greater portion of our revenues
results from our integrated product offerings. In an attempt to minimize this problem, we have qualified multiple sources of supply when possible, negotiated long-term agreements when
possible and intend to maintain a safety stock of raw material inventories of these items.

Marketing, Sales and Distribution

We sell our products through independent manufacturers' representatives, distributors and our direct sales staff. As of December 31, 2003, we had 30
independent manufacturers' representative firms and two distributors worldwide. Of the independent manufacturers' representative firms, 18 are based in the U.S. and 12 are located in Europe, the
Pacific Rim and South America. Our direct sales staff provides sales direction and support to the manufacturers' representatives and distributors. Both of the distributors are based in the U.S. We
have domestic sales management offices in the metropolitan areas of Los Angeles, California; San Diego, California; San Jose, California; Boston, Massachusetts; Portland, Oregon; Chicago, Illinois;
Breinigsville, Pennsylvania; and Raleigh, North Carolina. We have also established foreign sales and marketing offices in Finland, Germany, Japan, Korea, Sweden and Taiwan.

Backlog

As of December 31, 2003, our backlog was approximately $77.0 million compared to approximately $70.2 million as of December 31, 2002.
We include in our backlog all purchase orders and contracts for products requested by the customer for delivery within 12 months. We expect to ship substantially our entire backlog by
December 31, 2004. The backlog is not necessarily indicative of future product sales, and a delay or cancellation of a small number of purchase orders may materially adversely affect us.

We
do not have long-term agreements with any of our customers, except for certain defense-related contracts. Customers generally purchase our products pursuant to cancelable
short-term purchase orders. Our customers have canceled these purchase orders or rescheduled delivery dates in the past, and we expect that these events may also occur in the future. If
there is any work in process at the time of cancellation, the customer may be required to pay customary termination charges. If customers over-order to secure delivery dates and eventually
cancel orders, the customer may be subject to price renegotiations as a result of lower quantity of units taken.

Frequently,
we can ship our standard products from inventory shortly after receipt of an order, referred to as "turns business", and these orders may not be reflected in backlog.
Accordingly, backlog as of any particular date may not necessarily be representative of actual sales for any future period.

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Research and Development

Our research and development efforts are directed towards developing integrated circuits, SAW devices and optoelectronics products. We are also focused on
improvement of our existing products' performance, development of new processes, reductions of manufacturing process costs and improvements in device packaging.

In
2003, we introduced 173 new key products, such as our family of GSM module products, a family of WLAN products, a family of small form factor optical transceiver products, and our new
VSAT 2W power amplifier.

Our
research, development and engineering expenses in 2003, 2002 and 2001 were approximately $65.0 million, $58.5 million and $51.7 million, respectively. As of
December 31, 2003, approximately 702 of our employees were engaged in activities related to process and product research and development. We expect that we will continue to spend substantial
funds on research and development.

We
are continually designing new and improved products to maintain our competitive position. While we have patented a number of aspects of our process technology, the market for our
products is characterized by rapid changes in technologies. Because of continual improvements in these technologies, we believe that our future success will depend on our ability to continue to
improve our products and processes and develop new technologies in order to remain competitive. Additionally, our future success will depend on our ability to develop and introduce new products for
our target markets in a timely manner. The success of new product introductions is dependent upon several factors, including timely completion and introduction of new product designs, achievement of
acceptable fabrication yields and market acceptance. The development of new products by us and their design into customers' systems can take as long as three years, depending upon the complexity of
the device and the application. Accordingly, new product development requires a long-term forecast of market trends and customer needs. Furthermore, the successful introduction of our
ongoing products may be adversely affected by competing products or technologies. In addition, new product introductions frequently depend on our development and implementation of new process
technologies. If we are unable to design, develop, manufacture and market new products successfully, our future operating results will be adversely affected. We cannot assure you that our product and
process development efforts will be successful or that our new products will be available on a timely basis or achieve market acceptance.

As
is characteristic of the integrated circuit and SAW filter component industries, the average selling prices of our products have historically decreased over the products' life cycles
and we expect this pattern to continue. We also expect the same pattern to continue with our optoelectronics products. To offset these decreasing selling prices, we rely primarily on obtaining yield
improvements and corresponding cost reductions in the manufacture of existing products and on introducing new products which incorporate advanced features and can be sold at higher average selling
prices. We also work closely with our suppliers to obtain continual improvement on pricing of key raw materials and components. As more of our product offerings migrate toward integrated assemblies
requiring the acquisition of outside manufactured components, we will have to effectively work with our suppliers to reduce the total cost of the respective BOMs. To the extent that our cost reduction
efforts or new product introductions do not occur in a timely manner or our or our customers' products do not achieve market acceptance, our operating results could be adversely affected.

Competition

The markets for our products are characterized by price competition, rapid technological change, short product life cycles and heightened global competition. Many
of our competitors have significantly greater financial, technical, manufacturing and marketing resources. Due to the increasing requirements

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for
high-speed, high-frequency components, we expect intensified competition from existing integrated circuit and SAW device suppliers, as well as from the entry of new
competitors to our target markets.

For
products in depressed markets, such as for optical components, competition can be even more intense as companies attempt to maximize their revenue to cover as much of their fixed
cost base as possible. There is no guarantee that pricing will stay at a level where we can sell our products on a profitable basis.

For
our integrated circuit devices, we compete with manufacturers of high-performance silicon integrated circuits as well as manufacturers of GaAs and other integrated
circuits. Our silicon-based competitors include companies such as Applied Micro Circuits Corporation, Maxim Integrated Products Inc., Motorola, Philips, Silicon Labs, and STMicroelectronics
N.V. Our GaAs-based competitors include companies such as Anadigics Inc., Fujitsu Microelectronics, Inc., Raytheon, RF Micro Devices, Skyworks Solutions, Inc. and
Vitesse Semiconductor Corp. For our SAW devices our competitors include companies such as CTS Wireless Components, Micro Networks, Phonon, RF Monolithics, Vectron, EPCOS AG, Temex, Fujitsu, Murata and
Panasonic. Competition could also come from companies developing alternative technologies such as silicon germanium ("SiGe") and InP integrated circuits and digital filtering and direct conversion
devices. Our major competitors across the optical markets include Fujitsu/Sumitomo, JDS-Uniphase, Agilent, Finisar, Bookham Technologies and Avanex.

Our
prospective customers are typically systems designers and manufacturers that are considering the use of GaAs integrated circuits, optoelectronics devices, or SAW filters, as the case
may be, for their high-performance systems. Competition is primarily based on performance elements such as speed, complexity and power dissipation, as well as price, product quality and
ability to deliver products in a timely fashion. We believe that we currently compete favorably with respect to these factors. Due to the proprietary nature of our products, competition occurs almost
exclusively at the system design stage. As a result, a design win by our competitors or by us often limits further competition with respect to manufacturing a given design. Some potential customers
may be reluctant to adopt our integrated circuit products because of perceived risks relating to GaAs and other technologies other than silicon, including perceived risks related to manufacturing
costs, novel design and unfamiliar manufacturing processes. In addition, potential customers may have questions about the relative performance advantages of our integrated circuit products compared to
more familiar silicon semiconductors, or concerns about risks associated with reliance on a smaller, less well-capitalized company for a critical component. While our GaAs integrated
circuit products have inherent speed advantages over silicon devices, the speed of products based upon silicon processes is continually improving. Our products are often sole sourced to our customers
and our operating results could be adversely affected if our customers were to develop other sources for our products.

The
production of GaAs integrated circuits has been and continues to be more costly than the production of silicon devices. This cost differential relates primarily to higher costs of
the raw wafer material, lower production yields associated with GaAs technology and higher unit costs associated with lower production volumes. Although we have reduced production costs through
decreasing raw wafer costs, increasing fabrication yields and achieving higher volumes, there can be no assurance that we will be able to continue to decrease production costs. Due to the current
weakness in some of our target markets, we have underutilized capacity in some of our plants. However, we believe that we are well positioned to meet the demands of these markets when they strengthen.
In addition, we believe our costs of producing GaAs integrated circuits will continue to exceed the costs associated with the production of silicon devices. As a result, we must offer devices which
provide superior performance to that of silicon such that the perceived price/performance of our products is competitive with silicon devices. There can be no assurance that we can continue to
identify markets which require performance superior to that offered by silicon solutions or that we will continue to offer products which provide sufficiently superior performance to offset the cost
differentials.

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Intellectual Property Matters

We rely on a combination of patents, copyrights and trade secrets to establish and protect our intellectual property rights. We aggressively seek patents to
protect inventions and technology which are important to our business. We have been awarded numerous patents relating to circuit design, SAW devices, oscillators, packaging technologies and wafer
processing which have various expiration dates, but none earlier than 2005. These include both U.S. and foreign patents. In addition to our own inventions, we have acquired a substantial portfolio of
U.S. and foreign patent applications in the optoelectronics area of technology. These applications are just starting to issue as patents, and will have lives that will extend 20 years from
their respective filing dates. As a result of the rapid changes in technology, the lives of these patents will likely last longer than the economic lives of the technologies they cover. We also have a
number of registered trademarks. There can be no assurance that our pending patent or trademark applications will be allowed or that the issued or pending patents will not be challenged or
circumvented by competitors. We also protect our numerous original mask sets under the copyright laws.

We
also own a substantial body of proprietary techniques and trade secrets. We seek to protect our trade secrets and proprietary technology, in part, through confidentiality agreements
with employees, consultants and other parties. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach or that our trade secrets will
not otherwise become known to or independently developed by others. In addition, the laws of some foreign countries do not offer protection of our proprietary rights to the same extent as the laws of
the United States, which is an increasing concern as more of our assembly production is moved to foreign countries.

Our
involvement in any patent dispute or other intellectual property dispute or action to protect trade secrets and know-how could have a material adverse effect on our
business. Adverse determinations in any litigation could subject us to significant liabilities to third parties, require us to seek licenses from third parties and prevent us from manufacturing and
selling our products. Any of these situations could have a material adverse effect on our business.

Environmental Matters

Federal, state and local regulations impose various environmental controls on the storage, handling, discharge and disposal of chemicals and gases used in our
manufacturing processes. We believe that our activities conform to present environmental regulations. Increasing public attention has, however, been focused on the environmental impact of
semiconductor operations. While we have not experienced any materially adverse effects on our operations from environmental regulations, there can be no assurance that changes in such regulations will
not impose the need for additional capital equipment or other requirements. Any failure by us to adequately restrict the discharge of hazardous substances could subject us to future liabilities or
could cause our manufacturing operations to be suspended.

Employees

As of December 31, 2003, we employed a total of 2,046 persons, including 1,065 in manufacturing, 52 in quality and reliability, 702 in process, product and
development engineering, 76 in marketing and sales and 151 in finance and administration. As of December 31, 2003, none of our domestic employees were represented by a collective bargaining
agreement. At our German operation, approximately 35 of our employees are represented by a collective bargaining agreement. We consider our relations with employees to be good and we have not
experienced any work stoppage.

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Executive Officers

The names, ages and positions of our executive officers as of March 11, 2004 are as follows:

|Name               |  | Age |  | Current Position(s) with Company                                                  |  | Position Held
Since
|------------------ |  | --- |  | --------------------------------------------------------------------------------- |  | -------------------
|Steven J. Sharp    |  | 62  |  | Chairman of the Board of Directors                                                |  | 1992               
|Ralph G. Quinsey   |  | 48  |  | President and Chief Executive Officer                                             |  | 2002               
|Raymond A. Link    |  | 49  |  | Vice President, Finance and Administration, Chief Financial Officer and Secretary |  | 2001               
|Brian P. Balut     |  | 38  |  | Vice President, Sales and Marketing                                               |  | 2002               
|Thomas V. Cordner  |  | 59  |  | Vice President, TriQuint Texas                                                    |  | 1998               
|Bruce R. Fournier  |  | 47  |  | Vice President, TriQuint Oregon                                                   |  | 2002               
|J. David Pye       |  | 53  |  | Vice President, TriQuint Oregon                                                   |  | 2002               
|Glen A. Riley      |  | 41  |  | Vice President, TriQuint Optoelectronics                                          |  | 2003               
|J. Michael Sanna   |  | 51  |  | Vice President, TriQuint Texas                                                    |  | 2002               
|Azhar Waseem       |  | 50  |  | Vice President, Sawtek Inc.                                                       |  | 2002               
|Stephanie J. Welty |  | 48  |  | Vice President, Finance and Assistant Secretary                                   |  | 1999               

Mr. Sharp
joined TriQuint in September 1991 as Director, President and Chief Executive Officer. In May 1992 he became Chairman of TriQuint's Board of Directors. In
July 2002, Mr. Sharp stepped down as President and Chief Executive Officer and remains as Chairman of the Board. Previously, Mr. Sharp was the founder and served as Chief
Executive Officer of Power Integrations, Inc., a semiconductor manufacturing company. Prior to that time, Mr. Sharp was employed for 14 years by Signetics Corporation (since
acquired by Philips Electronics N.V.), a semiconductor manufacturer and for nine years by Texas Instruments, Incorporated, a semiconductor manufacturer. Mr. Sharp also serves as a director of
Power Integrations. He received a B.S. degree in Mechanical Engineering from Southern Methodist University, a M.S. degree in Engineering Science from California Institute of Technology and a M.B.A.
from Stanford University.

Mr. Quinsey
joined TriQuint in July 2002 as President and Chief Executive Officer. From September 1999 to January 2002, Mr. Quinsey was with ON
Semiconductor, a manufacturer of semiconductors for a wide array of applications, as Vice President and General Manager of the Analog Division. Prior to that, Mr. Quinsey was with Motorola, a
manufacturer of semiconductors and communications equipment, from 1979 to September 1999, holding various positions including Vice President and General Manager of the RF/IF Circuits Division,
which developed both silicon and gallium aresnide technologies for wireless phone applications. Mr. Quinsey received a B.S. degree in Electrical Engineering from Marquette University.

Mr. Link
joined TriQuint in July 2001 as Vice President, Finance and Administration, Chief Financial Officer and Secretary as a result of TriQuint's merger with Sawtek.
Mr. Link joined Sawtek in September 1995 as Vice President Finance and Chief Financial Officer and was promoted to Senior Vice President and Chief Financial Officer in
October 1999. From 1987 to September 1995, Mr. Link was
Vice President, Finance and Chief Financial Officer of Hubbard Construction Company, a heavy/highway construction company. From 1980 to 1987, he was with Harris Corporation, a manufacturer of
electronic communication equipment, in various financial capacities. Mr. Link received a B.S. degree from the State University of New York at Buffalo and a M.B.A. from the Wharton School at the
University of Pennsylvania. He is a Certified Public Accountant.

Mr. Balut
joined TriQuint in July 2001 as Vice President, Sales and Marketing, Sawtek Inc. as a result of TriQuint's merger with Sawtek and was promoted to Vice
President, Sales and Marketing of TriQuint in 2002. Mr. Balut joined Sawtek in October 1994 as Sales Manager. He was promoted to Director of Sales and Marketing in November 1996
and to Vice President Sales and Marketing in September 1998 and assumed overall corporate responsibility for this function in July 2002. From 1987

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to
1994, Mr. Balut held various positions in sales, marketing and engineering with REMEC, a manufacturer of electronic components. Mr. Balut received a B.S. degree in Electrical
Engineering from the Massachusetts Institute of Technology and a M.B.A. from Rollins College.

Mr. Cordner
joined TriQuint in January 1998 as Vice President and General Manager, Millimeter Wave Communications as a result of TriQuint's acquisition of Raytheon's MMIC
operations and was promoted to Vice President, TriQuint Texas in May 2002. From July 1997 to January 1998, Mr. Cordner served as Operations Manager for Raytheon, heading
its GaAs MMIC operations. Prior to that time, Mr. Cordner was an employee of Texas Instruments, a semiconductor and communications equipment manufacturer, for 32 years, most recently as
the Operations Manager for its GaAs Operations Group from January 1991 to July 1997. Mr. Cordner received a B.S. degree in Mathematics from the University of Texas at Arlington.

Mr. Fournier
joined TriQuint in June 1987 as Area Sales Manager. Since that time, he has held a variety of positions including National Sales Manager, Wireless Products
from 1991 to 1994, Director of Worldwide Sales from early 1994 to September 1994 and Vice President, Worldwide Sales from September 1994 to June 1998. From June 1998 until
May 2002, Mr. Fournier held the position of Vice President and General Manager, Foundry Services. He currently holds the position of Vice President, TriQuint Oregon. Prior to joining
TriQuint, Mr. Fournier held engineering, sales and marketing management positions with Fairchild Semiconductor, Weitek Corporation and Honeywell, Inc. Mr. Fournier received an
A.S. degree in Electrical Engineering and a B.S. degree in Business Administration from the University of Maine and a M.B.A. from the University of Southern Maine.

Mr. Pye
joined TriQuint in May 1996 as Vice President, Manufacturing and in May 2002 was named Vice President, TriQuint Oregon. From 1983 until 1996, Mr. Pye
was Vice President and General Manager at VLSI Technology, Inc., a semiconductor company, where he served in various capacities. From 1973 to 1983, Mr. Pye served in various roles in
process engineering and process development at Texas Instruments. Mr. Pye received a B.A. degree from Napier College of Science and Technology, Edinburgh, Scotland.

Mr. Riley
joined TriQuint in January 2003 as Vice President and General Manager, TriQuint Optoelectronics. From December 2001 to August 2002, he was President
and CEO of Opticalis, a venture-funded start-up company developing optical communication sub-systems. Prior to that, he spent 6 years with Agere Systems, a semiconductor
and optical component manufacturer, as Vice President of Optical Core Networks, Vice President of Sales for the Asia-Pacific region, and as General Manager of the Storage Products group.
Before Agere, he worked in various management, marketing and sales roles at Philips Semiconductors, AT&T Microelectronics and Texas Instruments. Mr. Riley holds a B.S. degree in Electrical
Engineering from the University of Maine and has completed the General Manager Program at Harvard Business School.

Mr. Sanna
joined TriQuint in January 1998 as Director of Business Development for the Texas operation as a result of TriQuint's acquisition of Raytheon's MMIC operations.
In May 2002 he was promoted to Vice President, TriQuint Texas. From July 1997 to January 1998, Mr. Sanna served as the Wafer Fabrication Operations Manager for Raytheon,
heading its GaAs MMIC manufacturing operations. Prior to that time, Mr. Sanna was an employee of Texas Instruments for 17 years, most recently as the Wafer Fabrication Operations manager
for its GaAs Operations Group from January 1994 to July 1997. Mr. Sanna received B.S. and M.S. degrees in Electrical Engineering from the University of Wisconsin and Southern
Methodist University, respectively, and a Masters Degree in Administrative Studies from Southeastern Oklahoma State University.

Mr. Waseem
joined TriQuint in July 2001 as Vice President, Sawtek Inc. as a result of TriQuint's merger with Sawtek. Mr. Waseem joined Sawtek in
March 1995 as Director of Wafer Fabrication and was promoted to Vice President of Manufacturing in April 1998 and to Vice President of Operations in October 1999. In
May 2002 he was promoted to Vice President, Sawtek, Inc. From 1989 to 1994,

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Mr. Waseem
held various operations and engineering positions with Siliconix, Inc., a microelectronics manufacturer based in Santa Clara, California. From 1986 to 1989, Mr. Waseem
held various engineering positions with General Electric. Mr. Waseem received B.S. and M.S. degrees in Electrical Engineering and a M.B.A., all from the University of Minnesota.

Ms. Welty
joined TriQuint in 1994. Since September 1999, Ms. Welty has been TriQuint's Vice President, Finance. Ms. Welty served as Accounting Manager from
1994 to 1996 and served as Director of Information Systems from 1996 to September 1999. Prior to joining TriQuint, Ms. Welty held accounting and controller positions at other high
technology firms. Ms. Welty holds a B.S. degree from the University of Washington and she is a Certified Public Accountant.

ITEM 2. PROPERTIES

|Location                                         |  | Purpose                                                                            |  | Approximate
Building Size in
Square Feet |  | Approximate Land
in Acres |  | Leased or Owned
|------------------------------------------------ |  | ---------------------------------------------------------------------------------- |  | ---------------------------------------- |  | ------------------------- |  | ---------------
|Hillsboro, Oregon                                |  | Headquarters, administration, test, technical, wafer fabrication, engineering      |  | 254,000                                  |  | 52                        |  | Owned          
|Richardson, Texas                                |  | Wafer fabrication, engineering, administration, test, technical                    |  | 550,000                                  |  | 16                        |  | Owned          
|Apopka, Florida                                  |  | Wafer fabrication, test and assembly, engineering, administration, test, technical |  | 92,100                                   |  | 15.5                      |  | Owned          
|Tianjin, China                                   |  | Test and assembly                                                                  |  | 10,000                                   |  |                          |  | Leased         
|San Jose, Costa Rica                             |  | Test and assembly                                                                  |  | 61,300                                   |  | 2                         |  | Owned          
|Munich, Germany                                  |  | Engineering, marketing                                                             |  | 21,054                                   |  |                          |  | Leased         
|Seoul, Korea                                     |  | Engineering, marketing                                                             |  | 5,307                                    |  |                          |  | Leased         
|Taipei, Taiwan                                   |  | Engineering, marketing                                                             |  | 11,000                                   |  |                          |  | Leased         
|Lowell, Massachusetts                            |  | Engineering                                                                        |  | 9,141                                    |  |                          |  | Leased         
|Nashua, New Hampshire                            |  | Engineering                                                                        |  | 5,035                                    |  |                          |  | Leased         
|Breinigsville, Pennsylvania                      |  | Wafer fabrication, engineering, administration, marketing                          |  | 849,000                                  |  | 139                       |  | Owned          
|Matamoros, Mexico                                |  | Test and assembly                                                                  |  | 80,000                                   |  |                          |  | Leased         
|Various field offices each less than 1,000 sq ft

We
believe these properties are suitable for our current operations. We are running below capacity in some of our facilities and some of the properties may exceed our near and
intermediate term needs. We have listed the Breinigsville, Pennsylvania property for sale. We plan to move the wafer fabrication
operation of that facility to our facility in Richardson, Texas and the assembly and test operation to our facility in Matamoros, Mexico.

ITEM 3. LEGAL PROCEEDINGS

In February 2003, several nearly identical putative civil class action lawsuits were filed in the United States District Court for the Middle District of
Florida against Sawtek, Inc., our wholly owned

20

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subsidiary
since July 2001. The lawsuits also named as defendants current and former officers of Sawtek and our company. The cases were consolidated into one action, and an amended complaint
was filed in this action on July 21, 2003. The amended class action complaint is purportedly filed on behalf of purchasers of Sawtek's stock between January 2000 and May 24, 2001,
and alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act, as well as Securities and Exchange Commission Rule 10b-5, by making false and
misleading statements and/or omissions to inflate Sawtek's stock price and conceal the downward trend in revenues disclosed in Sawtek's May 23, 2001 press release. The complaint does not
specify the amount of monetary damages sought. Sawtek and the individual defendants filed their motion to dismiss on September 3, 2003, and briefing on the motion was completed on
November 19, 2003. The court heard oral argument on November 21, 2003, and issued an order partially denying the motion to dismiss on December 19, 2003. Specifically, the court
found that the complaint was not barred by the statute of limitations, but reserved ruling on the other aspects of the motion to dismiss. Because the statute of limitations issue is a novel question
of law, the court stayed the proceedings in this case to allow the defendants to file an interlocutory appeal to the Eleventh Circuit Court of Appeals. Defendants duly filed for interlocutory appeal
on January 22, 2004. Because the Court of Appeals is considering the identical issue in another matter, the appeal process has been stayed, pending the Court of Appeals' decision in the other
matter. We deny the allegations contained in the complaint and intend to continue our vigorous defense against these claims.

In
December 2002, we filed a lawsuit against Finisar Corporation in Multnomah County Circuit Court of Oregon. The lawsuit alleged that Finisar failed to pay us for semiconductor wafers
delivered between September 2000 and December 2001. In response to the complaint, Finisar Corporation filed an answer, affirmative defenses and counterclaims alleging that our wafers
were defective. Finisar alleged claims for breach of contract, breach of warranty, negligence, and restitution. In 2003, this matter was settled to the satisfaction of both parties.

In
addition, from time to time we are involved in judicial and administrative proceedings incidental to our business. Although occasional adverse decisions (or settlements) may occur, we
believe that the final disposition of such matters will not have a material adverse effect on our financial position or results of operations.

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

None.

21

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our shares are quoted on the Nasdaq National Market under the symbol "TQNT". The following table sets forth the high and low price per share of our common stock
as reported by the Nasdaq National Market for the periods indicated:

High

LowFiscal Year Ended December 31, 20031st Quarter

$
4.79

$
2.702nd Quarter

$
5.50

$
2.803rd Quarter

$
6.90

$
3.964th Quarter

$
8.74

$
5.57Fiscal Year Ended December 31, 20021st Quarter

$
14.00

$
8.902nd Quarter

$
13.09

$
5.613rd Quarter

$
7.75

$
3.754th Quarter

$
7.53

$
2.55


The
closing price of our common stock on the Nasdaq National Market on December 31, 2003 was $7.07 per share.

As
of December 31, 2003, there were 135,403,258 shares of common stock outstanding held by approximately 543 stockholders of record. Many stockholders hold their shares in street
name. We believe we have more than 73,000 beneficial owners of our common stock.

We
have never declared or paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. We have subordinated convertible debt which
contains restrictive covenants which could limit our ability to pay cash dividends or make stock repurchases. Any future determination to pay cash dividends will also be at the discretion of our Board
of Directors and will be dependent upon our financial condition, results of operations, capital requirements, general business conditions and other such factors as our Board of Directors deems
relevant.

The
information required by this item regarding equity compensation plans is incorporated by reference under the section entitledExecutive Compensation and Other
Matterscontained in our Proxy Statement for our 2004 Annual Meeting of Stockholders.

22

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ITEM 6. SELECTED FINANCIAL DATA

The following is a summary of selected consolidated financial data as of and for each of the five years shown ended December 31. The historical selected
consolidated financial data has been derived from the audited historical financial statements for the years 2000 and 1999 of TriQuint and Sawtek, which were audited by KPMG LLP and Ernst &
Young, LLP, respectively. The 2003, 2002 and 2001 selected consolidated financial data were audited by KPMG LLP. These data should be read in conjunction with Management's Discussion and Analysis of
Financial Conditions and Results of Operations and our consolidated financial statements appearing elsewhere in this document.

TriQuint Semiconductor, Inc.
Selected Financial Data

|                                                        |                                 | YEARS ENDED DECEMBER 31,
|------------------------------------------------------- | ------------------------------- | ------------------------
|
|
|Consolidated Statement of Operations Data:              |                                 |                         
|Revenues                                                |                                 | $                       
|Cost of goods sold                                      |                                 |                         
|                                                        |                                 |                         
|                                                        | Gross profit                    |                         
|Operating expenses:                                     |                                 |                         
|Research, development and engineering                   |                                 |                         
|Selling, general and administrative                     |                                 |                         
|Impairment of long-lived assets and goodwill            |                                 |                         
|Lease termination costs                                 |                                 |                         
|Acquisition related charges                             |                                 |                         
|Reduction in work force                                 |                                 |                         
|                                                        |                                 |                         
|                                                        | Total operating expenses        |                         
|                                                        |                                 |                         
|                                                        | Income (loss) from operations   |                         
|Other income (expense), net                             |                                 |                         
|Impairment chargeinvestments in other companies        |                                 |                         
|Gain on recovery of previously impaired investment      |                                 |                         
|Gain on retirement of debt                              |                                 |                         
|                                                        |                                 |                         
|                                                        | Other income (expense), net     |                         
|                                                        | Income (loss) before income tax |                         
|Income tax expense (benefit)                            |                                 |                         
|                                                        |                                 |                         
|                                                        | Net income (loss)               |                         
|                                                        |                                 |                         
|Per Share Data:                                         |                                 |                         
|Net income (loss):                                      |                                 |                         
|                                                        | Basic                           |                         
|                                                        | Diluted                         |                         
|Weighted-average shares:                                |                                 |                         
|                                                        | Basic                           |                         
|                                                        | Diluted                         |                         
|Consolidated Balance Sheet Data:                        |                                 |                         
|Cash, cash equivalents, short and long-term investments |                                 | $                       
|Accounts receivable, net                                |                                 |                         
|Inventories, net                                        |                                 |                         
|Total assets                                            |                                 |                         
|Working capital                                         |                                 |                         
|Long-term obligations, less current installments        |                                 |                         
|Stockholders' equity                                    |                                 | $                       

23

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with Item 6: Selected Financial Data and Item 8: Financial Statements
and Supplementary Financial Data included in this Annual Report on Form 10-K.

Overview

We are a leading supplier of high-performance components and modules for communications applications. Our focus is on the specialized expertise,
materials and know-how for RF/IF and optical applications. We enjoy diversity in our markets, applications, products, technology and customer base. Our markets include wireless phones,
wireless infrastructure networks, optical networks, and defense. We provide customers with standard and custom product solutions as well as foundry services. Our products are designed on various wafer
substrates such as GaAs, InP, LiNbO3, LiTaO3 and quartz, using a variety of device technologies including pHEMT, mHEMT, HBT, HFET, MESFET and SAW. Using these materials, devices and our proprietary
technology, our products can overcome the performance barriers of competing devices in a variety of applications and offer other key advantages such as steeper selectivity, lower distortion, reduced
size and weight and more precise frequency control. For example, GaAs has inherent physical properties that allow its electrons to move up to five times faster than those of silicon. This higher
electron mobility permits the manufacture of GaAs integrated circuits that operate at higher levels of performance than silicon devices. Our customers include major communication companies worldwide.

Strategy and Industry Considerations

Our business strategy is to provide our customers with high-performance, low-cost solutions to applications in the wireless phone,
wireless infrastructure, optical network, and defense markets. Our goal is to build a strong and sustainable business by applying our core competencies and technologies to a diversified portfolio of
markets within the communications industry. In wireless phones, we provide high performance RF filters, duplexers, receivers, small signal components, power amplifiers, switches, and integrated
passive components. We have also been a
leader in the development of RF front-end modules with the goal of maximizing content and minimizing stacked margins. In wireless infrastructure networks, we are a leading supplier of
active and passive components for RF communications and we are the dominant supplier of SAW filters to base stations. We expect the global number of subscribers to wireless communications to grow from
approximately 1.3 billion in 2002 to approximately 1.7 billion by 2006. In optical networks, we are a leading supplier of laser and detector components and transceiver and transponder
modules. We believe the total available market for these products will grow from approximately $600 million in 2003 to approximately $1.7 billion by 2006. In the defense market, we are a
leading provider of phased array antenna components to the U.S. military. This has been a stable business for us due to the long lead times and long product life cycles.

The
semiconductor industry in general has been subject to slumping demand and excess capacity since 2001. This has been the case for our business as well. Wafer and semiconductor
manufacturing facilities represent a very high level of fixed cost due to investments in plant and equipment, labor costs, and repair and maintenance costs. During periods of low demand, selling
prices also tend to decrease which, when combined with high fixed manufacturing costs, can create a material adverse impact on operating results.

Wireless
phone demand, however, has generally strengthened during 2003, especially during the seasonally higher second half of the year. We believe total global unit shipments for the
whole market will grow by approximately 10%, resulting in projected shipments of 550 million handsets in 2004. We also believe we are positioned for sustained demand in the wireless phone
market for 2004 due to

24

---

continued
demand in China, India and other emerging countries, strong interest in camera phones and color displays worldwide, and increasing acceptance of non-voice applications such as
text messaging. As the handset market expands, we expect this to also create increase demand in the wireless infrastructure market for our base station and point-to-point
components. As with the semiconductor industry, the optical communication industry has also suffered since 2001. As restructuring and consolidation in the optical network market continues, we believe
strengthening long-term market demand will result. Demand for our products in this market grew during 2003 and we expect continued strengthening in 2004. The defense market is stable and
long-term. We are actively engaged with multiple defense industry contractors in the development of next-generation phased array systems. We expect these programs to ramp up
over the 2005-2006 timeframe.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires us to make
certain estimates, judgements and assumptions that affect the reported amounts of assets and liabilities, the 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. Some of our accounting policies require us to make difficult and subjective judgements, often as a result of the need to make estimates of matters that are
inherently uncertain. The following accounting policies involve a critical accounting estimate because they are particularly dependent on estimates and assumptions made by management about matters
that are highly uncertain at the time the accounting estimates are made. In addition, while we have used our best estimates based on facts and circumstances available to us at the time, different
estimates reasonably could have been used in the current period and changes in the accounting estimates we used are reasonably likely to occur from period to period, which may have a material impact
on the presentation of our financial condition and results of operations.

Our
most critical accounting estimates include the valuation of inventory, which impacts gross margin; assessment of recoverability of long-lived assets, which primarily
impacts gross margin when we impair assets or accelerate depreciation; valuation of investments in privately held companies, which impacts net income when we record impairments; assessment of
recoverability of goodwill, which impacts operating expense when we write off goodwill; deferred income tax assets and liabilities, which impacts our tax provision; and reserve for warranty costs,
which impacts gross margin. We also have other policies that we consider to be key accounting policies, such as our policies for revenue recognition, valuation of accounts receivable, reserves for
sales returns and allowances, and reserves for commitments and contingencies; however, these policies either do not meet the definition of critical accounting estimates described above or are not
currently material items in our financial statements. We review our estimates, judgements, and assumptions periodically and reflect the effects of revisions in the period that they are deemed to be
necessary. We believe that these estimates are reasonable; however, actual results could differ from these estimates.

Inventories

We state our inventories at the lower of cost or market. We use a combination of standard cost and moving average cost methodologies to determine our cost basis
for our inventories. This methodology approximates actual cost on a first-in, first-out basis. In addition to costing our inventory at a lower of cost or market valuation, we
also evaluate it each period for excess quantities and obsolescence. This evaluation includes identifying those parts specifically identified as obsolete and reserving for them, analyzing forecasted
demand versus quantities on hand and reserving for the excess, identifying and recording other specific reserves, and estimating and recording a general reserve based on historical experience and our
judgement of economic conditions. If future demand or market conditions are less favorable than our projections and we fail to reduce manufacturing output

25

---

accordingly,
additional inventory reserves may be required and would have a negative impact on our gross margin in the period the adjustment is made.

Long-Lived Assets

We evaluate long-lived assets for impairment of their carrying value when events or circumstances indicate that the carrying value may not be
recoverable. Factors we may consider in deciding when to perform an impairment review include significant negative industry or economic trends, significant changes or planned changes in our use of the
assets, plant closure or production line discontinuance, technological obsolescence, or other changes in circumstances which indicate the carrying value of the assets may not be recoverable. If
impairment appears probable, we evaluate whether the sum of the estimated undiscounted cash flows attributable to the assets in question is less than their carrying value. If this is the case, we
recognize an impairment loss to the extent that carrying value exceeds fair value. Fair value is determined based on market prices or discounted cash flow analysis, depending on the nature of the
asset. The fair value of the asset then becomes the asset's new carrying value, which is depreciated over the remaining useful life of the asset. In 2002 and 2001, we incurred significant impairment
of the carrying values of our long-lived assets and we may incur impairment losses in future periods if factors influencing our estimates change.

Investments in Privately Held Companies

We have made several investments in small, privately held technology companies in which we hold less than 20% of the capital stock or hold notes receivable. We
account for these investments at their cost unless their value has been determined to be other than temporarily impaired, in which case we write the investment down to its impaired value. We review
these investments periodically for impairment and make appropriate reductions in carrying value when an other-than-temporary decline is evident; however, for
non-marketable equity securities, the impairment analysis requires significant judgement. We evaluate the financial condition of the investee, market conditions, and other factors
providing an indication of the fair value of the investments. Adverse changes in market conditions or poor operating results of the investees could result in additional
other-than-temporary losses in future periods. In 2003, 2002, and 2001, we recorded impairment charges of $2.4 million, $23.8 million, and $15.1 million,
respectively, on these investments. In 2003, we also recovered a previously impaired investment, resulting in a gain of $8.5 million.

Income Taxes

We must apply estimates and judgements to determine our provision for income taxes and amounts payable or recoverable in numerous tax jurisdictions around the
world. These estimates and judgements involve interpretations of regulations and are inherently complex. If our estimate of tax liabilities proves to be more or less than the ultimate assessment, a
benefit or expense, respectively, would be recognized in the period the determination is made. In addition, we must also make a judgement as to the realizability of our deferred tax assets, which
arise from temporary differences between the tax and financial statement recognition of revenue and expense. We record a valuation allowance to reduce deferred tax assets when it is more likely than
not that some portion or all of the deferred tax assets may not be realized. We consider future taxable income and prudent and feasible tax planning strategies in determining the need for a valuation
allowance. We evaluate the need for a valuation allowance on a regular basis and adjust as needed. These adjustments have an impact on our financial statements in the periods in which they are
recorded. In 2003 and 2002, we determined that a valuation allowance should be recorded against all of our deferred tax assets based on the criteria of Statement of Financial Accounting Standards
No. 109 ("SFAS 109"), "Accounting for Income Taxes."

26

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Warranty Costs

We sell our products with warranties that they will be free of faulty workmanship or defective materials and that they will conform to our published
specifications or other specifications mutually agreed to with a customer. In some cases, we have also assumed the existing warranties on products previously sold by businesses we have acquired, such
as the Agere optoelectronics business. We estimate the potential liability associated with these warranties based on a combination of factors including historical product return experience, known
product warranty issues with specific customers, and judgement of expected levels of returns based on economic and other factors. An accrual for expected warranty costs results in a charge to the
financial results in the period recorded. This liability can be difficult to estimate and, if we experience warranty claims in excess of our projections, additional accruals may need to be recorded
which would adversely affect our financial results.

2003 Acquisitions

Acquisition of a Portion of Agere's Optoelectronics Business

On January 2, 2003, we completed our acquisition of a substantial portion of the optoelectronics business of Agere for $40 million in cash plus
acquisition costs and certain assumed liabilities. We acquired this business to expand our market and the product offerings of our optical networks business. The transaction included the products,
technology and some facilities related to Agere's optoelectronics business, which includes active and passive components, amplifiers, transceivers, transponders and other optical products. As part of
the acquisition, we have also assumed operation of the back-end assembly and test operations associated with these components and modules at a leased facility in Matamoros, Mexico.

Through
a transition services agreement, Agere provided some business infrastructure services to us for a short period following the close of the transaction to ensure seamless
transition of the business operations. On May 6, 2003, we sold a portion of the assets acquired in this transaction for $6.6 million in cash.

In
connection with this acquisition, we obtained third-party valuations of the assets for purposes of purchase price allocation. Acquired in-process research and development
("IPR&D") assets were expensed at the date of acquisition in accordance with FASB Interpretation No. 4 ("FIN 4"),Applicability of FASB Statement No. 2 to
Business Combinations Accounted for by the Purchase.The value assigned to IPR&D related to research projects for which technological feasibility had not been established and
no future alternative uses existed. The fair value was determined using the income approach, which discounts expected future cash flows from projects under development to their net present value using
a risk adjusted rate. The projects were analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete
development; any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated based upon management's estimates of revenues expected to be
generated upon completion of the projects and the beginning of commercial sales and related operating costs. The projections assume that the technologies will be successful and that the products'
development and commercialization will meet management's time schedule. The discount rate is based on the novelty of the technology, the risks remaining to complete each project, and the extent of our
familiarity with the technology. Accordingly, we expensed $500,000 of IPR&D based on a discount rate of 35% associated with the portion of the Agere optoelectronics business which we acquired, as of
the date of acquisition.

27

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2002 Acquisitions

Acquisition of Infineon's GaAs Business

On July 1, 2002, we completed the acquisition of Infineon's GaAs business. We acquired this business to strengthen our European presence and to expand our
market and product offerings in the wireless communications market, particularly in the GSM standard. We added approximately 60 employees as part of the acquisition. The acquisition was accounted for
as a purchase transaction and the results of operations of this business are included in our consolidated financial statements from the date of acquisition. At the closing date, we paid Infineon
EUR50.0 million, of which EUR10.0 million represented an earnout deposit. Pursuant to the purchase agreement, Infineon may earn up to an additional EUR74.0 million over a
24-month period based upon revenues generated by the acquired business, for an aggregate purchase price of EUR124.0 million. We believe there will be no additional amounts due to
Infineon under this agreement and we expect a return of the deposit. Subsequent to the completion of the acquisition, we also purchased certain fixed assets from Infineon for EUR5.5 million
less EUR1.5 million in funded liabilities acquired. There are also various other guarantees and contingencies which could affect the amount of the final purchase price. We expensed
$2.7 million of IPR&D based on discount rates ranging from 25% to 50% associated with this acquisition at the date of acquisition. In addition, as of December 31, 2002, we wrote off all
goodwill associated with this acquisition.

In
connection with our acquisition of the Infineon GaAs business, we had the right to negotiate the purchase of Infineon's Hi Rel business. On October 1, 2002, the time period
lapsed for us to reach a subsequent agreement as to our additional acquisition of Infineon's Hi Rel business. Since an agreement was not reached, the minimum purchase price of the acquisition has been
adjusted to EUR42 million from EUR45 million.

Acquisition of a Portion of the Assets of IBM's Wireless Phone Chipset Business

Also on July 1, 2002, we completed the acquisition of a portion of the assets of IBM's wireless phone chipset business. We added nine employees as part of
this acquisition. This business was purchased in order to help expand our market and product offerings in the wireless communications industry and to strengthen our capabilities in silicon germanium
process technology. The acquisition was accounted for as a purchase transaction and the results of operations are included in our consolidated financial statements from the date of acquisition. At the
closing date, we paid $21.8 million to IBM for the related assets, of which $5.0 million represented an earnout deposit. We expensed $5.9 million of IPR&D based on a discount rate
of 29% associated with this acquisition as of the date of acquisition. In addition, as of December 31, 2002, we wrote off all goodwill and intangible assets associated with this
acquisition. As of December 31, 2003, IBM had not earned the $5.0 million earnout deposit and the deposit was returned to us.

Subsequent
to this acquisition, we determined that silicon germanium process technology is not as suitable for certain of our products as is GaAs process technology. As a result, we have
discontinued almost all product development using silicon germanium process technology.

2001 Acquisition

Merger with Sawtek Inc.

On July 19, 2001, we acquired Sawtek Inc., which became a wholly owned subsidiary of our company. This acquisition represented a major advance in
our strategy to develop RF wireless phone front-end modules, as well as expanding our product offerings in the wireless infrastructure market. We issued approximately 48.8 million
shares of common stock in exchange for all the outstanding common stock of Sawtek. Additionally, outstanding options to purchase Sawtek common stock were exchanged

28

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for
approximately 2.6 million options to purchase our common stock. The transaction was accounted for as a pooling-of-interests transaction and qualified as a
tax-free exchange of shares.

Assets Held for Sale

We have determined that we will sell the land and buildings associated with our optoelectronics operation in Pennsylvania and excess equipment associated with our
semiconductor manufacturing operations in Texas and Oregon. The Pennsylvania property consists of several buildings comprising approximately 849,000 square feet of space on 139 acres of land. The
buildings contain fab and assembly space, office space, and central services. The excess equipment from our Texas and Oregon operations consists of a variety of equipment used for semiconductor fab
and assembly operations. We are actively marketing these assets and have met the accounting criteria for classifying these assets as
held for sale; accordingly, they are identified on our balance sheet as assets held for sale. The amount of these assets as of December 31, 2003 was $24.4 million.

Results of Operations

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

|                                                   |                                       | Years Ended December 31, |      
|-------------------------------------------------- | ------------------------------------- | ------------------------ | -----
|
|Revenues                                           |                                       | 100.0                    | %    
|Cost of goods sold                                 |                                       | 72.1                     |      
|                                                   |                                       |                          |      
|                                                   | Gross profit                          |                          | 27.9 
|Operating expenses:                                |                                       |                          |      
|                                                   | Research, development and engineering |                          | 20.8 
|Selling, general and administrative                |                                       | 16.5                     |      
|Impairment of long-lived assets and goodwill       |                                       |                         |      
|Lease termination costs                            |                                       | 13.4                     |      
|Acquisition related charges                        |                                       | 0.2                      |      
|Reduction in work force                            |                                       | 0.8                      |      
|                                                   |                                       |                          |      
|                                                   | Total operating expenses              |                          | 51.7 
|                                                   |                                       |                          |      
|                                                   | Loss from operations                  |                          | (23.8
|Other income (expense), net                        |                                       | (2.0                     | )    
|Impairment chargeinvestments in other companies   |                                       | (0.8                     | )    
|Gain on recovery of previously impaired investment |                                       | 2.7                      |      
|Gain on retirement of debt                         |                                       |                         |      
|                                                   |                                       |                          |      
|                                                   | Other income (expense), net           |                          | (0.1 
|                                                   |                                       |                          |      
|Loss before income tax                             |                                       | (23.9                    | )    
|Income tax expense (benefit)                       |                                       | (0.5                     | )    
|                                                   |                                       |                          |      
|                                                   | Net loss                              |                          | (23.4
|                                                   |                                       |                          |      

Comparison of 2003 and 2002

Our operating results improved significantly from a net loss of $158.6 million in 2002 to a net loss of $73.0 million in 2003.

29

---

Our
total operating results were influenced during 2003 primarily by improvements in total revenues from strengthening demand in most of our markets, our introduction of and customer
acceptance of new products, and the addition of the newly acquired optoelectronics business; improvements in gross margin and reductions in operating expenses resulting from our cost reduction efforts
and increased capacity utilization from increased demand; with offsets from losses of our newly acquired optoelectronics business. The optoelectronics business was acquired with more capacity than
necessary to support the size of the business. We have been working to correct for this excess capacity by consolidating operations, selling assets, and streamlining business processes.

Revenues

We derive revenues from the sale of standard and customer-specific products and services. Our revenues also include nonrecurring engineering revenues relating to
the development of customer-specific products. Our markets during these comparative periods included wireless phones; infrastructure networks such as base station, satellite, and
point-to-point; defense and optical networks. Our distribution channels include our direct sales staff, manufacturers' representative firms, and distributors. The majority of
our shipments are made directly to our customers, with shipments to distributors accounting for only approximately 6% of our total revenues in 2003. Our revenues increased 16.8% to
$312.3 million in 2003 from $267.3 million in 2002. Of this increase from 2002 to 2003, $36.5 million was attributable to the optoelectronics business we acquired from Agere in
January 2003. Our revenues in 2003, as compared to 2002, increased for wireless phone and WLAN products, but decreased for other infrastructure network products and decreased slightly for
defense related products. Our revenues by end market were:

% of Total Revenues2003

2002Wireless phones

41
%
45
%Infrastructure networks

29
%
31
%Defense

16
%
19
%Optical networks

14
%
5
%Total

100
%
100
%


On
an absolute dollar basis, our revenues from the wireless phone market increased from 2002 to 2003. This increase was driven by increased end market demand due to new phone subscribers
in Asia, the popularity of new feature-rich phones which include color screens and digital photography, and our new product introductions. The worldwide sales of wireless phones grew by
over 10% to approximately 500 million phones in 2003. Pricing on component parts, such as the products that we sell, declined generally, while our unit shipments increased. For example, we
increased our total shipments of RF SAW filters by nearly 70% in 2003 compared to 2002, while average selling prices for these products declined over 20% over the same time period. We shipped a record
number of SAW filters, began shipments of a new power amplifier module for the GSM market, and have increased sales of a new receiver product for CDMA phones. Our revenue in the wireless phone market
is dominated by sales for CDMA applications, accounting for 84% of our wireless phone revenue, followed by GSM applications at 9% and TDMA at 7% in 2003. This compares to 2002, in which CDMA accounted
for 68%, GSM 9%, and TDMA 23% of total wireless phone revenues. TDMA is an older digital air interface standard that is being phased out. In the fourth quarter of 2003, our sales into TDMA
applications were only 4% of our total wireless phone revenue and we expect this level to further decline over time. We have more sales into CDMA applications as many of our products, such as IF SAW
filters, receivers, duplexers, and triplexers are better suited for CDMA and in some cases are not used in GSM. GSM is the world's largest air interface standard, accounting for over 60% of total

30

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phone
sales and subscribers. Our recent introduction of a family of GSM power amplifier modules is an important element in our strategy to gain additional share in this large market.

Our
infrastructure network products address a variety of application areas, such as base stations, satellite, point-to-point radios, and WLAN. Base station
products comprise our largest proportion of this business, but decreased significantly in 2003 to 25% of network infrastructure revenue from 39% in 2002 due to price declines and continued softness in
this market. WLAN product revenues increased in proportion from 10% of network infrastructure revenue in 2002 to 19% in 2003. This increase was driven by increasing demand for 802.11 standard products
used in many of the new personal computer and laptop computer for wireless access to the internet. We maintain a very high market share for many of the products we supply to the infrastructure network
market. This is a highly competitive market, however, and is characterized by intense pressure on selling prices.

Revenues
from our defense business declined slightly from 2002 to 2003. We believe this was caused by a temporary shift of funding from research and development and long-term
programs toward short-term spending related to conflicts in Iraq and Afghanistan. Our business in this market is very stable and we have a strong position, particularly for phased array
antenna and communications systems.

Products
addressing optical network applications have become a much bigger part of our overall revenues since our acquisition of Agere's optoelectronics business in early 2003, growing
from 5% of our total revenues in 2002 to 14% in 2003. We have introduced a new family of small form factor transceiver products during 2003, which we expect will strengthen revenues from this market
in the
future. Revenues from our legacy optoelectronics products such as multiplexers, demultiplexers, and transimpedence amplifiers have been declining in recent years and that trend continued in 2003.

Domestic
and international revenues were $122.9 million and $189.4 million, respectively, in 2003 as compared to $116.1 million and $151.2 million,
respectively, in 2002. The shift in the proportion of our total revenues from international sources from 56.6% in 2002 to 60.7% in 2003 reflects the increasing demand from countries in Asia, Africa,
and South America, where wireless subscriber penetration rates are cumulatively 20% or less, compared to penetration rates in the U.S. and Europe of approximately 50%, and the need to develop the
wireless infrastructure in these regions.

For
2004, we are projecting our revenues to be in the range of $340 million to $355 million, which is an increase of approximately 9% to 14%. We expect revenues from the
defense market to be relatively flat year to year. We expect increased demand across most of our other markets, however. Our consolidated book-to-bill ratio, which is a
comparison of orders received to products shipped, for 2003 was 1.03 to 1.00 and we expect this positive trend to continue in 2004. We expect this growth to come mainly from increasing demand for
wireless phone products, particularly in China and India, and from new product introductions such as our new GSM module products.

Gross profit

Gross profit is equal to revenues less cost of goods sold. Cost of goods sold includes direct material, labor and overhead expenses and certain production costs
related to nonrecurring engineering revenues. In general, gross profit generated from the sale of customer-specific products and from nonrecurring engineering revenues is typically higher than gross
profit generated from the sale of standard products. Gross profit decreased 8.5% to $87.0 million in 2003 from $95.1 million in 2002. Our gross profit also decreased as measured as a
percentage of revenue, from 35.6% in 2002 to 27.9% in 2003. This decline in our gross profitability was attributable primarily to the following factors: excessive cost structure and an extremely
competitive pricing environment in the optoelectronics business we acquired from Agere in early January 2003, continued underutilization of our Oregon and Texas wafer fabrication plants, and
lower prices for our products for wireless phones and base stations.

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Excluding
the impact of the optoelectronics business we acquired from Agere, our gross profit margin would have been approximately 33.6% for 2003.

The
operation of our own wafer fabrication facilities entails a high degree of fixed costs and requires an adequate volume of production and sales to be profitable. During periods of
decreased demand, such as we have experienced during the last three years, high fixed wafer fabrication costs have a materially adverse effect on our operating results. As of the end of 2003, our
Oregon GaAs fab was operating at only 35% utilization, our Texas fab was operating at less than 30% utilization, and our
optoelectronics manufacturing facility in Pennsylvania is operating at less than 10% of its capacity. Our SAW filter factories were operating at over 80% utilization as of the end of 2003. During
2003, we implemented several measures to reduce our cost and capacity levels to more closely match demand. We reduced ongoing operating expenses by approximately $1.2 million by disposing of
non-strategic elements of the optoelectonics business acquired from Agere, saved approximately $900,000 by transferring the manufacturing associated with the products we acquired from
Infineon to our fab in Oregon, saved approximately $2.0 million by reducing work schedules, and reduced operating expenses by approximately $800,000 by moving the majority of the assembly and
test operations associated with our optoelectronics products in Pennsylvania to our plant in Matamoros, Mexico. Other efforts aimed at improving utilization of our manufacturing facilities included
shipping a record number of 150mm GaAs wafers from our Oregon fab and record yields in our Pennsylvania and Texas fabs. In spite of these improvement efforts, we expect gross profit to continue to be
affected by decreased absorption of fixed overhead costs associated with decreased demand and production volumes.

Most
of the markets in which we operate are highly competitive and characterized by intense price pressure. The average selling prices of many of our products decreased during 2003. Our
strategy for maintaining profitability under these conditions is to maintain tight control of our spending, implementing measures to maintain the proper level of capacity such as those described
above, and continuing to aggressively develop new products.

We
expect our gross profit in 2004, as a percentage of revenue, to be in the range of 32% to 34%. This increase from 2003 will be attributable to increasing demand and production volumes
and the benefit of the cost and capacity reduction efforts we completed during 2003.

Operating expenses

Research, development and engineering

Research, development and engineering expenses include the costs incurred in the design of new products, as well as ongoing product research and development
expenses. Our research, development and engineering expenses increased 11.1% in 2003 to $65.0 million from $58.5 million in 2002. Research, development and engineering expenses as a
percentage of revenues decreased to 20.8% in 2003 from 21.9% in 2002.

The
increase in research, development and engineering expenses on an absolute dollar basis was primarily due to the additional research, development and engineering activities associated
with our
newly acquired businesses from Infineon and Agere and to the ongoing costs associated with our ongoing investment in wireless, broadband, microwave, and optoelectronics products and technologies. We
introduced 173 new products during 2003, including several key products, such as our GSM module products, a family of WLAN products, and a family of small form factor optical transceiver products. As
a percentage of revenue, the decrease from 2002 to 2003 is attributable to the increase in revenue from 2002 to 2003.

We
intend to continue our investment in research, development, and engineering in our market areas of wireless phones, wireless infrastructure, defense, and optical networks. We are
committed to substantial investments in research, development and engineering to continue to improve our product

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offerings,
expand market opportunities, and address the needs of our customers. We expect these expenses will continue at similar levels in the future.

Selling, general and administrative

Selling, general and administrative expenses include commissions, labor expenses for marketing and administrative personnel, and other corporate administrative
expenses. Selling, general and administrative expenses increased 19.9% to $51.4 million in 2003 from $42.9 million in 2002. Selling, general and administrative expenses as a percentage
of revenues increased to 16.5% in 2003 compared to 16.0% in 2002. This spending increase was primarily due to increased selling expenses associated with increased revenues and additional costs
associated with our acquisition of the Infineon and Agere businesses. We expect our selling, general and administrative costs in 2004 to be generally equivalent to those in 2003.

Impairment of long-lived assets and goodwill

We recorded no charges from the impairment of long-lived assets in 2003, however, in 2002 we recorded impairment charges of $94.7 million. The
impairment charge in 2002 was the result of the abandonment of $5.8 million of certain production assets associated with one of our 6-inch wafer productions lines at our Richardson
facility, the writedown of $49.0 million of certain equipment and facilities associated with excess capacity at our Oregon facility and the impairment of $39.9 million of goodwill and
other intangibles associated with our acquisitions of businesses from IBM and Infineon. The businesses acquired from IBM and Infineon were assigned to the Oregon operating unit when purchased. The
determination and recording of an impairment of the value of certain assets associated with the Oregon operating units was an event which also required the
evaluation of the carrying value of goodwill associated with the acquisition of the IBM and Infineon businesses, since these businesses are associated with the Oregon operating unit.

Lease Termination Costs

During 2003, we recorded a charge of $42.0 million for costs associated with the termination of the lease on our wafer fabrication facility located in
Richardson, Texas. Under the original lease agreement sponsored by a financial institution, we were required to make lease payments through August 2005 or purchase the property at that time. In
June 2003, we notified the lender of our intention to terminate the lease and purchase the property. The purchase was completed in July 2003. We incurred no similar costs in 2002 and
have no similar lease agreements in place at December 31, 2003.

Acquisition related charges

During 2003, we recorded a charge of $500,000 for the write-off of acquired IPR&D associated with our acquisition of the Agere optoelectronics
business. During 2002, we recorded a charge of $8.6 million for the write-off of acquired IPR&D and other costs associated with our acquisition of the Infineon and IBM businesses.

Reduction in work force

During 2003, we recorded severance costs of $2.5 million. These costs relate to reductions in our workforce of approximately 80 employees, resulting from
our efforts to align our costs and capacity with our levels of production and revenues. These reductions primarily impacted the workforce of our newly acquired optoelectronics business and our German
engineering and marketing operations. During 2002, we reduced our workforce by approximately 117 employees also as a result of the decreased demand for our products and the underutilization of our
fabrication facilities. We recorded a charge of $1.0 million associated with this reduction in workforce.

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Interest income (expense)

Interest income (expense) increased as an expense to $5.9 million in 2003 compared to an expense of approximately $815,000 in 2002. This change was
attributable to lower interest rates earned on investments and a lower level of cash and short and long-term investments due to our recent capital investments and acquisitions. Interest
rates on short term investment grade securities have continued to decrease over the past 18 months. For example, in 2002 the average commercial paper interest rate was 1.69%. The same average
rate declined in 2003 to 1.11%.

Impairment of investments in privately held companies

We have made several investments in small, privately held technology companies involved in broadband and optical networks in which we hold less than 20% of the
capital stock or hold notes receivable which are convertible into capital stock. We account for these investments using the cost method. We monitor these investments for impairment and make
appropriate reductions in carrying value when an other-than-temporary decline is evident. During 2003 and 2002, we recorded impairment losses of $2.4 million and
$23.8 million, respectively, on these investments. The balance of these investments as of December 31, 2003 was $2.1 million.

Gain on recovery of impaired investment

During 2003, we received a cash settlement on a previously impaired promissory note from one of the privately held investees described above, resulting in a gain
of $8.5 million. We had no similar gain in 2002.

Gain on retirement of debt

A gain on retirement of debt resulted from our repurchase in 2002 of $27.7 million principal amount of our convertible subordinated notes at the then
current market prices that resulted in a gain of $6.0 million. We repurchased no additional debt in 2003 and recorded no similar gain. From time to time, we may repurchase additional notes in
the open market.

Other, net

Other, net in 2003 was a net expense of approximately $325,000. Other, net in 2002 was $4.9 million, resulting primarily from a realized gain of
$4.6 million on a forward currency contract associated with the Infineon acquisition. We had no similar gain in 2003.

Income tax expense (benefit)

In 2003, we recorded an income tax benefit of $1.5 million compared to an income tax expense of $34.2 million recorded in 2002. The income tax
benefit in 2003 was primarily the result of the settlement of certain prior year tax accruals and refunds. The income tax expense in 2002 related to our determination that a valuation allowance should
be recorded against all of our deferred tax assets based on the criteria of SFAS 109 concerning whether it is more likely than not that our deferred tax assets may not be realized. In both 2003
and 2002, we determined that a valuation allowance should be recorded against all of our deferred tax assets based on the criteria of SFAS 109. Taxes to be paid in 2004, if any, will be
dependent on the tax regulations in the different jurisdictions in which we operate.

Comparison of 2002 and 2001

Revenues

Revenues decreased 20.2% to $267.3 million in 2002 from $335.0 million in 2001. The decrease in revenues was due to decreased demand generally
across all of our optical networking components and

34

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semiconductor
products for wireless phones, offset by increased revenues from our SAW filter business, particularly duplexers, RF filters and IF filters for handsets. Domestic and international
revenues were $116.1 million and $151.2 million, respectively, in 2002 as compared to $187.6 million and $147.4 million, respectively, in 2001. Our distribution of revenues
by end market for 2002 was: 45% wireless phones, 31% infrastructure networks, 19% defense, and 5% optical networks. For 2001, the percentage distribution of our revenues by end market was: 35%
wireless phones, 35% infrastructure networks, 12% defense, and 18% optical networks.

Gross profit

Gross profit decreased 30.3% to $95.1 million in 2002 from $136.4 million in 2001. As a percentage of revenue, gross profit margin decreased to
35.6% in 2002 compared to 40.7% in 2001. The decrease in gross profit was attributable to the decreased demand for our products, underutiliziation of our fabrication facilities and generally lower
average selling prices of our wireless phone products due to increased competition and product standardization.

Operating expenses

Research, development and engineering

Our research, development and engineering expenses increased 13.3% in 2002 to $58.5 million from $51.7 million in 2001. Research, development and
engineering expenses as a percentage of revenues increased to 21.9% in 2002 from 15.4% in 2001. The increase in research, development and engineering expenses on an absolute dollar basis was primarily
due to the additional research, development and engineering activities associated with our acquisition of the Infineon and IBM businesses, to the
engineering and requalification costs associated with the start up and move from our Dallas facility to our Richardson facility and to other costs associated with the increased investment in wireless,
broadband and microwave products and technologies. We announced several new products in 2002, a foundry relationship with Philips to develop HBT-based wireless applications, significant
progress in design wins and product development in GSM power amplifiers, switches and filters. As a percentage of revenue, the increase from 2001 to 2002 is attributable to the increased spending as
well as the decrease in revenue.

Selling, general and administrative

Selling, general and administrative expenses decreased 8.2% to $42.9 million in 2002 from $46.7 million in 2001. Selling, general and administrative
expenses as a percentage of revenues increased to 16.0% in 2002 compared to 13.9% in 2001. This spending decrease was predominantly due to the reduced selling expenses associated with reduced revenues
offset by costs for our move to our Richardson facility and additional costs associated with our acquisition of the Infineon and IBM businesses. The increase as a percentage of revenue is a function
of the decrease in revenue from 2001 to 2002.

Impairment of long-lived assets and goodwill

Impairment of long-lived assets and goodwill increased to $94.7 million in 2002 from $76.9 million in 2001. The impairment charge in
2001 was the result of the write down of certain equipment and facilities due to excess capacity associated with the Oregon operating unit. In 2002, the impairment charge was the result of the
abandonment of $5.8 million of certain production assets associated with one of our 6-inch wafer productions lines at our Richardson facility, the writedown of $49.0 million
of certain equipment and facilities associated with excess capacity at our Oregon facility and the impairment of $39.9 million of goodwill and other intangibles associated with our acquisitions
of businesses from IBM and Infineon.

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Acquisition related charges

During 2002, we recorded a charge of $8.6 million for the write-off of acquired IPR&D and other costs associated with our acquisition of the
Infineon and IBM businesses. During 2001, acquisition related costs were $7.5 million and were attributable to the merger with Sawtek in July 2001.
These acquisition related costs consisted primarily of investment banker, legal, accounting, regulatory filing and printing fees.

Reduction in work force

During 2002, we reduced our workforce by approximately 117 employees as a result of the decreased demand for our products and the underutilization of our
fabrication facilities. We recorded a charge of $1.0 million associated with this reduction in workforce. In 2001, we recorded a charge for a similar reduction in workforce in the amount of
$1.1 million.

Interest income (expense)

Interest income (expense) and other decreased to an expense of $.8 million in 2002 as compared to an income of $12.8 million in 2001. This change
was primarily attributable to lower interest rates earned on investments and a lower level of cash and short and long-term investments due to our recent capital investments and
acquisitions and the repurchase of $27.7 million of our convertible subordinated notes in 2002.

Impairment of investments in privately held companies

During 2002 and 2001, we recorded impairment losses of $23.8 million and $15.1 million, respectively, on these investments. As of
December 31, 2002, our remaining book balance of investments in privately held companies was $7.3 million.

Gain on retirement of debt

A gain on retirement of debt resulted from our repurchase in 2002 of $27.7 million principal amount of our convertible subordinated notes at the then
current market prices that resulted in a gain of $6.0 million. In 2001 we repurchased $48.5 million principal amount of our convertible subordinated notes at the then current market
prices and which resulted in a gain of $9.4 million.

Other, net

Other, net in 2002 was $4.9 million compared to an expense of $0.2 million in 2001. The majority of this change resulted from a realized gain of
$4.6 million on a forward currency contract associated with the Infineon acquisition.

Income tax expense (benefit)

In 2002, we recorded income tax expense of $34.2 million compared to an income tax benefit of $14.3 million recorded in 2001. The income tax expense
in 2002 related to our determination that a valuation allowance should be recorded against all of our deferred tax assets based on the criteria of SFAS 109 concerning whether it is more likely
than not that our deferred tax assets may not be realized. In 2001, the income tax benefit related to the operating loss before tax. Our effective tax rate in 2001 was a 35.4% benefit.

Outlook for 2004

We expect revenues to be between $340.0 million and $355.0 million with a gross margin of 32% to 34%. We are projecting our operating income to be
at breakeven or better. We expect to incur net

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interest
expense of approximately $4.0 million to $5.0 million and a net tax expense of approximately $1.0 million. In addition, we expect to spend between $22.0 million
and $28.0 million in capital expenditures during 2004. This forecast is based on our expectation of increased revenues from stronger demand, primarily from the wireless phone and wireless
infrastructure markets; revenue from new products; improved utilization of our factories; and streamlined capacity and cost structures.

Liquidity and Capital Resources

As of December 31, 2003, we had cash, cash equivalents and short-term investments of $302.1 million, down from $335.9 at
December 31, 2002. In addition, we had $98.1 million of investments in long-term marketable securities as of December 31, 2003, which are investments in
high-grade securities that mature after one year but within 42 months; a decrease from
$131.1 million as of December 31, 2002. As of December 31, 2003, long-term liabilities were $277.0 and represented 60.2% of stockholders' equity. As of
December 31, 2002, long-term liabilities were $275.3 million and represented 52.4% of stockholders' equity. Our long-term liabilities as of December 31,
2003 were comprised of $268.8 million of our convertible subordinated notes and $600,000 of long-term accruals associated with our acquisition of the Agere optoelectronics business.
This increase, on a percent of stockholders' equity basis, is the result of the decrease in stockholders' equity from accumulated net losses during 2003. As of December 31, 2003, working
capital increased to $392.1 million from $377.1 million as of December 31, 2002. This increase in working capital was attributable, in large part, to our reclassification of the
land and buildings associated with our optoelectronics operation in Pennsylvania and certain machinery and equipment associated with our Texas and Oregon operations, totaling $24.4 million,
from long-term to current, due to their classification as held for sale. Another primary factor was an increase in inventory of $17.0 million, net of those acquired from Agere, due
to the transfer of the production of the acquired Infineon products to our Oregon fabrication facility and to meet the seasonal fourth quarter increase in demand. These increases were partially offset
by decreases in cash for acquisitions and capital expenditures, as explained further below.

For
2003, cash used in operating activities was $27.8 million. For 2002 and 2001, cash provided by operating activities was $30.5 million and $147.0 million,
respectively. Cash was used by net loss, adjusted for non-cash related items, as well as by increases in current assets and decreases in current liabilities, net of assets and liabilities
acquired from Agere. Inventories increased as described above, due to increased demand for wireless phone products and the transfer of production of Infineon products to our Oregon operation. Our
inventory turns decreased to 3.7 times at the end of 2003 compared to 5.2 times at the end of 2002. Accounts receivable also increased by $7 million from 2002 to 2003, primarily as a result of
increased revenues. Days sales outstanding remained basically flat at 44 days as of the end of 2003 compared to 43 days as of the end of 2002. Accounts payable, net of those acquired
from Agere, decreased by $6.2 million as a result of our overall lowered spending.

For
2003, cash provided by investing activities was $16.1 million. For 2002 and 2001, cash used in investing activities was $52.4 million and $12.0 million,
respectively. The change from cash used in investing activities in 2002 to cash provided by investing activities in 2003 is primarily due to our decrease in acquisitions and investments in other
companies in 2003. In 2002, we spent $90.1 million in cash on the Infineon business, the IBM business, and investments in other companies. In 2003, we spent $40.0 million on the Agere
acquisition and made no further investments in other companies. Capital spending, primarily for production equipment, was $27.9 million in 2003 compared to $24.2 million in 2002.

Cash
provided by financing activities in 2003 was $7.5 million, compared to cash used in financing activities in 2002 and 2001 of $13.6 million and $37.0 million,
respectively. The change from cash used for financing in 2002 to cash provided by financing in 2003 was due to the fact that we repurchased $27.7 principal amount of our 4% convertible subordinated
notes for cash of $21.1 million in 2002 and

37

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made
no similar repurchase in 2003. In 2003, the cash provided by financing activities was sourced from stock issuances from employee stock option and stock purchase plans of $7.8 million.

Recent Transactions Affecting Liquidity

On July 1, 2002, we completed the acquisition of Infineon's GaAs business. At the closing date, we paid Infineon EUR50.0 million, of which
EUR10.0 million represented an earnout deposit. Pursuant to the purchase agreement, Infineon may earn up to an additional EUR74.0 million over a 24-month period based upon
revenues generated by the acquired business, for an aggregate purchase price of EUR124.0 million. We believe there will be no additional amounts due to Infineon under this agreement and we
expect a return of the deposit. In conjunction with our purchase of Infineon's GaAs business, we entered into an interim supply agreement whereby Infineon was required to sell, and we were required to
purchase, EUR22.5 million of GaAs business products during a one-year period at stipulated prices. We have fully satisfied our commitment under this interim supply agreement.

On
July 1, 2002, we completed the acquisition of a portion of the assets of IBM's wireless phone chipset business. We paid $16.8 million, net, to IBM for the related
assets.

On
January 2, 2003, we completed our acquisition of a substantial portion of the optoelectronics business of Agere for $40.0 million in cash plus acquisition costs and
certain assumed liabilities. Through a transitional manufacturing agreement, Agere supplied components for us for a short period following the close of the transaction to ensure seamless service to
customers. Agere also provided some business infrastructure services to us for a short period following the close of the transaction to provide for an uninterrupted transition of the business
operations.

On
July 16, 2003, we terminated the lease on our wafer fabrication facility located in Richardson, Texas and took ownership of the facility. In association with the termination of
this lease, we released the $17.4 million shown on our December 31, 2002 balance sheet as "Restricted long-term assets" to the financial institution sponsoring the lease and
incurred various legal fees associated with the title transfer.

Our
current cash, cash equivalent and short-term investment balances, together with cash anticipated to be generated from operations are currently our principal sources of
liquidity and we believe these will satisfy our projected working capital, capital expenditure, and possible investment needs, at a minimum, through the next 12 months. We expect our needs for
capital expenditures in 2004 to be between $22.0 million and $28.0 million. The principal risks to these sources of liquidity would be capital expenditure or investment needs in excess
of our expectations, in which case we may be required to finance any additional requirements through additional equity offerings, debt financings or credit facilities. We may not be able to obtain
additional financings or credit facilities, or if these funds are available, they may not be available on satisfactory terms.

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Tabular Disclosure of Contractual Obligations

The following table summarizes our scheduled contractual commitments as of December 31, 2003:

|                               |  | Due Date
|------------------------------ |  | --------
|
|
|Convertible subordinated notes |  | $       
|Operating leases               |  |         
|Long-term accruals(1)          |  |         
|Purchase obligations(2)        |  |         
|Other obligations(3)           |  |         
|Total                          |  | $       

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Recent Accounting Pronouncements

In December 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003) ("FIN 46R"), Consolidation of
Variable Interest Entities, which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than
voting rights and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46,Consolidation of Variable Interest
Entities, which was issued in January 2003. We will be required to apply FIN 46R to variable interests in variable interest entities ("VIEs") created after
December 31, 2003. For variable interests in VIEs created before January 1, 2004, FIN 46R will be applied beginning on January 1, 2005. For any VIEs that must be consolidated
under FIN 46R that were created before January 1, 2004, the assets, liabilities, and noncontrolling interests of the VIE initially would be measured at their carrying amounts with any
difference between the net amount added to the balance sheet and any previously recognized interest beign recognized as the cumulative effect of an accounting change. If determining the carrying
amounts is not practicable, fair value at the date FIN 46R first applies may be used to measure the assets, liabilities, and noncontrolling interest of the VIE. We do not currently have any variable
interests in VIEs, but do not expect the application of the Interpretation to have a significant impact on us.

In
June 2002, the FASB issued Statement No. 146 ("SFAS 146"), Accounting for Costs Associated with Exit or Disposal
Activities. SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue
No. 94-3 ("EITF 94-3"), Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity. The provisions of SAFS 146 were effective for exit or disposal activities initiated after December 31, 2002, with early application encouraged. The adoption of
this standard did not have a material effect on our financial position or results of operations.

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In
December 2002, the FASB issued Statement No. 148 ("SFAS 148"),Accounting for Stock-Based CompensationTransition and
Disclosurean Amendment of FASB Statement No. 123, which amends FASB Statement No. 123 ("SFAS 123"),Accounting for
Stock-Based Compensation,to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS 148 is effective for transition alternatives for fiscal years ending after
December 15, 2002, is effective for interim disclosures for periods beginning after December 15, 2002, and is effective for annual disclosures for fiscal years ending after
December 15, 2002. The adoption of this standard did not have a material effect on our financial position or results of operations.

Impact of Inflation

We believe that inflation has not had a material impact on operating costs and expenses.

Factors that May Affect Future Results

An investment in our common stock is extremely risky. This Annual Report on Form 10-K contains forward-looking statements that involve risks
and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our actual results to differ materially from those expressed or implied by such
forward-looking statements. Such statements reflect management's current expectations, assumptions and estimates of future performance and economic conditions. Such statements are made in reliance
upon the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. The following are some of the
factors we believe could cause our actual results to differ materially from expected and historical results. The trading price of our common stock could decline due to any of these risks and you may
lose part or all of your investment. Other factors besides those listed here could also adversely affect us.

Our operating results may fluctuate substantially, which may cause our stock price to fall.

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



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We
expect that our operating results will continue to fluctuate in the future as a result of these and other factors. Any unfavorable changes in these or other factors could cause our
results of operations to suffer as they have in the past. Due to potential fluctuations, we believe that period-to-period comparisons of our results of operations are not
necessarily meaningful and should not be relied upon as indicators of our future performance.

Additionally,
if our operating results are not within the market's expectations, then our stock price may fall. The public stock markets have experienced extreme price and trading volume
volatility, particularly in high technology sectors of the market. This volatility has significantly affected the market prices of securities of many technology companies for reasons frequently
unrelated to or disproportionately impacted by the operating performance of these companies. These broad market fluctuations may adversely affect the market price of our common stock.

Our operating results may suffer due to fluctuations in demand for semiconductors and electronic communications components.

From time to time, the wireless phone, infrastructure network, optical network, and defense markets have experienced significant downturns and wide fluctuations
in product supply and demand, often in connection with, or in anticipation of, maturing product cycles, capital spending cycles and declines in general economic conditions. This cyclical nature of
these markets has led to significant imbalances in demand, inventory levels and production capacity. It has also accelerated the decrease of average selling prices per unit. We have experienced, and
may experience again, periodic fluctuations in our financial results because of these or other industry-wide conditions. For example, if demand for communications applications were to
decrease substantially, demand for the integrated circuits and modules, optical components and modules and SAW filter components in these applications would also decline, which would negatively affect
our operating results. Conversely, we believe that current trends such as wireless phone portability, color screens and digital photo capability, and the development of infrastructure in countries
such as India and China will increase the demand for our products. We do not know, however, if this will lead to a sustained level of increased demand.

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We depend on the continued growth of communications markets.

We derive all of our product revenues from sales of products and services for electronic communication applications. These markets are characterized by the
following:



The
electronic communications markets have recovered some of their previous pattern of growth. These markets may not resume historical growth rates. If this recovery is not sustained and
demand for electronic communications applications declines, our operating results could suffer.

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

Our revenues are at risk if we do not introduce new products and/or decrease costs.

Historically, the average selling prices of our products have decreased over the products' lives and we expect them to continue to do so. To offset these
decreases, we rely primarily on achieving yield improvements and other cost reductions for existing products and on introducing new products that can be manufactured at lower costs. Selling prices for
our SAW products have declined due to competitive pricing pressures and to the use of newer surface mount package devices that are smaller and less expensive than previous generation filters. For
example, we have experienced declines in average selling prices for RF filters for wireless phones due to competitive pressure and filters for base stations due to the use of surface mount packages.
We believe our future success depends, in part, on our timely development and introduction of new products that compete effectively on the basis of price and performance and adequately address
customer requirements. The success of new product and process introductions depends on several factors, including:



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

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Our business will be impacted if systems manufacturers do not use components made of GaAs or other alternative materials we utilize.

Silicon semiconductor technologies are the dominant process technologies for integrated circuits and the performance of silicon integrated circuits continues to
improve. System designers may be reluctant to adopt our products because of:



Systems
manufacturers may not use GaAs components because the production of GaAs integrated circuits has been, and continues to be, more costly than the production of silicon devices.
Systems manufacturers may also be reluctant to rely on a jointly produced product because future supplies may depend on our continued good relationships with those vendors. As a result, we must offer
devices that provide superior performance to that of traditional silicon-based devices.

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

New competitive products and technologies have been announced which could reduce demand for our SAW filter products and our receiver products for wireless phones.

New products have been introduced in the marketplace that use a direct conversion architecture in wireless phones. A direct conversion architecture reduces the
number of components used in the receiver portion of wireless phones. Sales of our SAW IF filter products along with some of our receiver products would be negatively impacted by wireless phone
manufacturers' use of a direct conversion chipset as new phone models are developed. Direct conversion architecture has been available since the mid-1990's for GSM phones and wireless
phone manufacturers are increasing the use of this process in new phones. For 2003, sales of SAW IF filters and receiver products for GSM phones accounted for less than 1% of our total sales. Several
companies have recently introduced a direct conversion chipset for CDMA phones which would impact our future revenues from SAW IF filters and receiver products for CDMA phones. Our revenues from SAW
IF filters for CDMA phones were approximately 7% of our total revenues and sales of receiver and related products for CDMA phones were approximately 10% of our total revenues for 2003. In addition, we
continue to sell products for TDMA wireless phones, which are increasingly migrating to the GSM standard. Our sales of products for TDMA phones were approximately 3% of our total sales for 2003.

Other
filtering technologies including film bulk resonator ("FBAR") and bulk acoustic wave ("BAW") have been introduced and have gained market acceptance in certain applications. This
could have a negative impact on our SAW filter sales in certain applications.

We
are actively pursuing new products such as RF filters, duplexers, power amplifiers, and modules to offset the decline in sales of products affected by direct conversion architecture
and the potential loss of revenues from products for TDMA phones. If we are not successful in introducing competitive or alternative products, our business, financial condition and results of
operation will suffer.

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A decline in the growth of wireless communications or in the continued acceptance of CDMA technology, particularly in emerging markets, would have an adverse impact on us.

Our products for CDMA-based systems, including filters for base stations and receivers and power amplifiers for wireless phones comprise a significant
part of our business. CDMA technology is relatively expensive and there can be no assurance that emerging markets, such as China and India, will continue to adopt this technology. Our business and
financial results would be adversely impacted if CDMA technology does not continue to gain acceptance or if demand does not strengthen.

Our business may be adversely impacted if we fail to successfully introduce new products or to gain our customers' acceptance of those new products.

The markets for electronic communications applications in which we participate are subject to intense competition, rapid technological change, and short product
life cycles. It is critical for companies such as ours to continually and quickly develop new products to meet the changing needs of these markets. If we fail to develop new products to meet our
customers' needs on a timely basis, we will not be able to effectively compete in these markets.

For
example, we announced our intention to develop and market RF front-end modules for wireless phones at cost-effective prices. We will also need to continue to
expand our wireless applications into CDMA and GSM applications. If we fail to design and produce these products in a manner acceptable to our customers or have incorrectly anticipated our customers'
demand for these types of products, our operating results could be harmed.

Our business will be adversely impacted if we do not gain market acceptance of our wireless phone module products or develop effective manufacturing processes to produce them.

Our strategy for wireless phone products depends in large part upon the success of our design and marketing of wireless phone modules. Wireless phone modules
represent the incorporation of some or all of the components of the wireless phone radio into a single product. If we are unable to design these modules in a manner acceptable to our customers or have
incorrectly anticipated our customers' demand for these products, our operating results will be adversely affected. In addition, manufacturing module products represents a departure from our present
component manufacturing business. Production of module products entails different processes, costs, yields, and lead times. If we fail to successfully transition manufacturing resources to produce
these products or are unable to do so cost-effectively, our operating results will be adversely affected.

If we fail to sell a high volume of products, our operating results will be harmed.

Because large portions of our manufacturing costs are relatively fixed, our manufacturing volumes are critical to our operating results. If we fail to achieve
acceptable manufacturing volumes or experience product shipment delays, our results of operations could be harmed. During periods of decreased demand our high fixed manufacturing costs negatively
effect our results of operations. We base our expense levels in part on our expectations of future orders and these expense levels are predominantly fixed in the short-term. However, if
the rate of growth of demand decreases, we will not be able to grow our revenue. If we receive fewer customer orders than expected or if our customers delay or cancel orders, we may not be able to
reduce our manufacturing costs in the short-term and our operating results would be harmed. In addition, we are selling products to an increasing number of our customers on a consignment
basis, which can limit our ability to forecast revenues.

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If we do not sell our customer-specific products in large volumes, our operating results may be harmed.

We manufacture a substantial portion of our products to address the needs of individual customers. Frequent product introductions by systems manufacturers make
our future success dependent on our ability to select development projects, which will result in sufficient volumes to enable us to achieve manufacturing efficiencies. Because customer-specific
products are developed for unique applications, we expect that some of our current and future customer-specific products may never be produced in volume and may impair our ability to cover our fixed
manufacturing costs. Furthermore, if customers
cancel or delay orders for these customer-specific products, our inventory of these products may become unmarketable or obsolete, which would negatively affect our operating results.

In
addition, if we experience delays in completing designs, if we fail to obtain development contracts from customers whose products are successful or if we fail to have our product
designed into the next generation product of existing volume production customers, our revenues could be harmed.

Our excess manufacturing capacity may adversely affect our operating results if currently strengthening demand is not sustained and if we are unable to sell our assets held for
sale.

We have converted our Hillsboro facility from four-inch wafer production to six-inch wafer production and have recently expanded the
capacity of our Texas operations with the transition to the Richardson facility. In addition, we have acquired additional manufacturing facilities and personnel in connection with our recent
acquisition of businesses from Infineon and Agere.

These
increases in capacity will directly relate to significant increases in fixed costs and operating expenses. These increased costs could have an adverse effect on our results of
operations during economic downturns. If the current economic improvement does not continue and if we are unable to successfully sell the land and buildings associated with our optoelectronics
operation in Pennsylvania and excess equipment associated with our semiconductor manufacturing operations in Texas and Oregon, decreased levels of demand and production in conjunction with these
increased expense levels will have an adverse effect on our business, financial condition and results of operations.

We face challenges and risks associated with our acquisition of the optoelectronics business of Agere and, as a result, may not realize the expected benefit of this
acquisition.

In January 2003, we completed the acquisition of a substantial portion of the optoelectronics business of Agere for $40 million in cash plus
acquisition costs and certain assumed liabilities. The transaction included the products, technology and some facilities related to Agere's optoelectronics business, which includes active and passive
components, amplifiers, transceivers, transponders and other optical products.

We
face risks associated with this acquisition such as:



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We face challenges with the integration of our acquisition of Infineon's GaAs business and, as a result, may not realize the expected benefits of this acquisition.

In July 2002, we completed the acquisition of Infineon's GaAs semiconductor business.

The
challenges involved in integrating this business include:



If investors or financial or industry analysts do not think the integration of our acquisitions is proceeding as anticipated or that the benefits of the acquisitions may not be
realized, the market price of our common stock may decline.

The market price of our common stock may decline if:



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We face risks from failures in our manufacturing processes, the maintenance of our fabrication facilities and the processes of our vendors.

The fabrication of integrated circuits, particularly those made of GaAs, is a highly complex and precise process. Our integrated circuits are currently
manufactured on wafers made of GaAs, InP, and LiNbO3. Our SAW filters are currently manufactured primarily on LiNbO3, LiTaO3 and quartz wafers. During manufacturing, each wafer is processed to contain
numerous integrated circuits or SAW filters. We may reject or be unable to sell a substantial percentage of wafers or the components on a given wafer because of:



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

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



We
depend on certain vendors for components, equipment and services. We maintain stringent policies regarding qualification of these vendors. However, if these vendors' processes vary in
reliability or quality, they could negatively affect our products, and thereby, our results of operations.

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We face risks from an increasing proportion of our operations and employees being located outside of the United States.

As we continue to expand our operations, an increasing number of our employees and operations are located in countries other than the United States. The laws and
governance of these countries may differ substantially from that of the United States and may expose us to increased risks of adverse impacts on our operations and results of operations. These risks
could include: loss of protection of proprietary technology, disruption of production processes, interruption of freight channels and delivery schedules, currency exposure, financial institution
failure, government expropriation, labor shortages, and political unrest.

Some of our manufacturing facilities are located in areas prone to natural disasters.

We have a SAW manufacturing and assembly facility located in Apopka, Florida. We also have assembly facilities for SAW products in San Jose, Costa Rica and for
optoelectronics products in Matamoros, Mexico. Hurricanes, tropical storms, flooding, tornadoes, and other natural disasters are common events for the southeastern and Gulf of Mexico regions of the
United States and in Central America. Additionally, mud slides, earthquakes and volcanic eruptions could also affect our Costa Rican and Oregon facilities. Any disruptions from these or other events
would have a material adverse impact on our operations and financial results.

Although
we have manufacturing and assembly capabilities for our Sawtek products in both Apopka and San Jose, we are only capable of fabricating wafers for those products in our Apopka
facility. As a result, any disruption to our Apopka facility would have a material adverse impact on our operations and financial results.

A disruption in our Costa Rican, Mexican or Chinese operations would have an adverse impact on our operating results.

Operating facilities in Costa Rica, Mexico and China presents risks of disruption such as government intervention, currency fluctuations, labor disputes, limited
supplies of labor, power interruption, civil unrest, or war. Any such disruptions could have a material adverse effect on our business, results of operations and financial condition.

Our
Costa Rican operation has been a significant contributor to our operating results in the past. We expect our Costa Rican operations to continue to account for a significant
proportion of our SAW operations in the future, our Chinese operation to serve significant customers, and our Mexican operation to be an important part of our optoelectronics component business. Any
disruption in these operations would have a significant negative impact on our operating results.

We face risks from changes in tax regulations and a change in our Costa Rican subsidiary's favorable tax status would have an adverse impact on our operating results.

We are subject to taxation in many different countries and localities worldwide. In some jurisdictions, we have employed specific business strategies to minimize
our tax exposure. To the extent the tax laws and regulations in these various countries and localities could change, our tax liability in general could increase or our tax saving strategies could be
threatened. Such changes could have a material adverse effect on our operations and financial results.

For
example, our subsidiary in Costa Rica operates in a free trade zone. We expect to receive a 75% exemption from Costa Rican income taxes through 2007. The Costa Rican government
continues to review its policy on granting tax exemptions to companies located in free trade zones and it may change our tax status or minimize our benefit at any time. Any adverse change in the tax
structure for

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our
Costa Rican subsidiary made by the Costa Rican government would have a negative impact on our net income.

Our business may be adversely affected by acts of terrorism or war.

Acts of terrorism or war could interrupt or restrict our business in several ways. We rely extensively on the use of air transportation to move our inventory to
and from our vendors and to ship finished products to our customers. If war or terrorist acts cause air transportation to be grounded or severely interrupted, our business would be similarly adversely
impacted.

In
addition, war or acts of terrorism could cause existing export regulations to be changed, which could limit the extent to which we are allowed to export our products. To the extent
that war or acts of terrorism also reduce customer confidence and create general economic weakness, our business would also be adversely affected.

A widespread outbreak of an infectious disease or illness could negatively affect our marketing, assembly and test, design, or other operations, making it more difficult and
expensive to meet our obligations to our customers and could result in reduced demand from our customers.

A widespread outbreak of an infectious disease or illness could adversely affect our operations as well as demand from our customers. A number of countries in the
Asia/Pacific region have experienced outbreaks of different infectious diseases and illnesses. As a result of these outbreaks, businesses can by shut down temporarily and individuals can become ill or
quarantined.

We
have engineering, marketing, and distribution operations in Korea, Taiwan, and China. In addition, we have subcontract assembly and test operations in Malaysia and Singapore. We also
have customers in these and other countries in the Asia/Pacific region where recent health issues have occurred. If our operations or our subcontractors' operations are curtailed because of these
health issues, it may interrupt our shipments to our customers, which would adversely affect our results of operations. If our customers' businesses are affected by these health issues, it might delay
or reduce their purchases from us, which would also adversely affect our results of operations.

Our operating results could be harmed if we lose access to sole or limited sources of materials, equipment or services.

We currently obtain some components, equipment and services for our products from limited or single sources, such as certain ceramic packages and chemicals. We
purchase these components, equipment, supplies and services on a purchase order basis, do not carry significant inventories and generally do not have long-term supply contracts with these
vendors. Our requirements are relatively small compared to silicon semiconductor manufacturers. Because we often do not account for a
significant part of our vendors' business, we may not have access to sufficient capacity from these vendors in periods of high demand. If we were to change any of our sole or limited source vendors,
we would be required to requalify each new vendor. Requalification could prevent or delay product shipments, which could negatively affect our results of operations.

Our
reliance on a limited number of suppliers for certain raw materials and parts may impair our ability to produce our products on time and in acceptable yields. For example, at times
in the past, we have experienced difficulties in obtaining ceramic packages and lids used in the production of bandpass filters. At other times, the acquisition of relatively simple devices, such as
capacitors, has been problematic because of the large demand swings that can occur in the cellular handset market for such components. Our newly acquired optical components group is dependent upon a
large number of suppliers, some of which are very small companies, for components that make up their integrated product offerings such as transceivers and transponders. The success of these products
is critical to the overall success of our business. The primary risk to our source of supply to manufacture these products

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is
the currently depressed state of the optical network market and its potential impact on smaller vendors in terms of possible bankruptcy or inability to meet delivery schedules. In addition, our
reliance on these vendors may negatively affect our production if the components, equipment or services vary in reliability or quality. If we are unable to obtain timely deliveries of sufficient
quantities of acceptable quality or if the prices increase, our results of operations could be harmed.

Our operating results could be harmed if our subcontractors and partners are unable to fulfill our requirements.

We currently utilize subcontractors for the majority of our integrated circuit and module assemblies. There are certain risks associated with dependence on third
party providers, such as minimal control over delivery scheduling, adequate capacity during demand peaks, warranty issues and protection of intellectual property. Additionally, if these subcontractors
are unable to meet our needs, it could prevent or delay production shipments that could negatively affect our results of operations. If we were to change any of our subcontractors, we would be
required to requalify each new subcontractor, which could also prevent or delay product shipments that could negatively affect our results of operations. In addition, our reliance on these
subcontractors may negatively affect our production if the services vary in reliability or quality. If we are unable to obtain timely service of acceptable quality or if the prices increase, our
results of operations could be harmed.

If our products fail to perform or meet customer requirements, we could incur significant additional costs.

The fabrication of integrated circuits and SAW filters from substrate materials such as GaAs, InP, LiNbO3, LiTaO3 and quartz and the modules containing these
components is a highly complex and precise process. Our customers specify quality, performance and reliability standards that we must meet. If our products do not meet these standards, we may be
required to rework or replace the products. Our products may contain undetected defects or failures that only become evident after we commence volume shipments. We have experienced product quality,
performance or reliability problems from time to time. We are currently experiencing field failures and returns on some components and are collecting data for analysis and evaluation as to the extent
of the problem. Other defects or failures may also occur in the future. If failures or defects occur, we could:



We may face fines or our facilities could be closed if we fail to comply with environmental regulations.

Federal, state and local regulations impose various environmental controls on the storage, handling, discharge and disposal of chemicals and gases used in our
manufacturing process. For our manufacturing facilities, we generally provide our own manufacturing waste treatment and contract for disposal of some materials. We are required to report usage of
environmentally hazardous materials.

The
failure to comply with present or future regulations could result in fines being imposed on us and we could be required to suspend production or cease our operations. These
regulations could require us to acquire significant equipment or to incur substantial other expenses to comply with environmental regulations. Any failure by us to control the use of, or to adequately
restrict the discharge of, hazardous substances could subject us to future liabilities and harm our results of operations.

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We have substantial indebtedness.

We have $268.8 million of indebtedness remaining in the form of our convertible subordinated notes due in 2007. We may incur substantial additional
indebtedness in the future. The level of our indebtedness, among other things, could:



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

We may not be able to pay our debt and other obligations.

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

Customers may delay or cancel orders due to regulatory delays.

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

We must improve our products and processes to remain competitive.

If technologies or standards supported by our or our customers' products become obsolete or fail to gain widespread commercial acceptance, our results of
operations may be materially impacted. Because of continual improvements in semiconductor technology, including those in high-performance silicon technologies such as CMOS, where
substantially more resources are invested than in other technologies such as GaAs or SAW products, we believe that our future success will depend, in part, on our ability to continue to improve our
product and process technologies. We must also develop new technologies in a timely manner. In addition, we must adapt our products and processes to technological changes and to support emerging and
established industry standards. We have and must continue to perform significant research and development into advanced material development such as InP, gallium nitride (GaN), and silicon carbide
(SiC) to compete with future technologies of our competitors. These research and development efforts may not be accepted by our customers, and therefore may not achieve sustained production in the
future. We may not be able to improve our

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existing
products and process technologies, develop new technologies in a timely manner or effectively support industry standards. If we fail to do so, our customers may select another GaAs or SAW
product or move to an alternative technology.

Our results of operations may suffer if we do not compete successfully.

The markets for our products are characterized by price competition, rapid technological change, short product life cycles, and heightened global competition.
Many of our competitors have significantly greater financial, technical, manufacturing and marketing resources. Due to the increasing requirements for high-speed,
high-frequency components, we expect intensified competition from existing integrated circuit and SAW device suppliers, as well as from the entry of new competitors to our target markets
and from the internal operations of some companies producing products similar to ours for their internal requirements. Several key customers in our newly acquired optoelectronics business have either
captive internal suppliers or long-term contractual relationships with suppliers based on factors other than cost and quality.

For
products in depressed markets, such as for optical components and modules, competition can be even more intense as companies attempt to maximize their revenue to cover as much of
their fixed cost base as possible, even if it means selling products at a loss. There is no guarantee that pricing will stay at a level where we can sell our products on a profitable basis.

For
our integrated circuit devices, we compete primarily with both manufacturers of high-performance silicon integrated circuits as well as manufacturers of GaAs integrated
circuits. Our silicon-based competitors include companies such as Applied Micro Circuits Corporation, Maxim Integrated Products Inc., Motorola, Philips, STMicroelectronics N.V and others. Our
GaAs-based competitors include companies such as Anadigics Inc., Fujitsu Microelectronics, Inc., Raytheon, RF Micro Devices, Skyworks Solutions, Inc., Vitesse
Semiconductor Corp and others. For our SAW devices our competitors include companies such as CTS Wireless Components, Micro Networks, Phonon, RF Monolithics, Vectron, EPCOS AG, Temex, Fujitsu, Murata,
Toyocom and others. For our optoelectronics business, competitors include companies such as JDS Uniphase, Bookham, Fujitsu/Sumitomo, Agilent, Finisar, and Avanex. Competition could also come from
companies ahead of us in developing alternative technologies such as InP integrated circuits and digital filtering and direct conversion devices.

Competition
from existing or potential competitors may increase due to a number of factors including, but not limited to, the following:



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Additionally,
manufacturers of high-performance silicon integrated circuits have achieved greater market acceptance of their existing products and technologies in some
applications.

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

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

If we fail to integrate any future acquisitions or successfully invest in privately held companies, our business will be harmed.

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



We
face risks from equity investments in privately held companies, such as:



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We
may not successfully address these risks or any other problems that arise in connection with future acquisitions or equity investments in privately held companies.

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

If we do not hire and retain key employees, our business will suffer.

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

Our business may be harmed if we fail to protect our proprietary technology.

We rely on a combination of patents, trademarks, copyrights, trade secret laws, confidentiality procedures and licensing arrangements to protect our intellectual
property rights. We currently have patents granted and pending in the United States and elsewhere and intend to seek further international and United States patents on our technology. In addition to
our own inventions, we have acquired a substantial portfolio of U.S. and foreign patent applications in the optoelectronics area of technology. These applications are just starting to issue as
patents, and will have lives that will extend 20 years from their respective filing dates. We cannot be certain that patents will be issued from any of our pending applications or that patents
will be issued in all countries where our products can be sold or that any claims allowed from pending applications or will be of sufficient scope or strength to provide meaningful protection or any
commercial advantage. Our competitors may also be able to design around our patents. The laws of some countries in which our products are or may be developed, manufactured or sold, may not protect our
products or intellectual property rights to the same extent as do the laws of the United States, increasing the possibility of piracy of our technology and products. Although we intend to vigorously
defend our intellectual property rights, we may not be able to prevent misappropriation of our technology. Our competitors may also independently develop technologies that are substantially equivalent
or superior to our technology.

Our
involvement in any patent dispute or other intellectual property dispute or action to protect trade secrets and know-how could have a material adverse effect on our
business. Adverse determinations in any litigation could subject us to significant liabilities to third parties, require us to seek licenses from third parties and prevent us from manufacturing and
selling our products. Any of these situations could have a material adverse effect on our business.

Our ability to produce our products may suffer if someone claims we infringe on their intellectual property.

The integrated circuit and SAW device industries are characterized by vigorous protection and pursuit of intellectual property rights or positions, which have
resulted in significant and often protracted and expensive litigation. If it is necessary or desirable, we may seek licenses under such patents or other intellectual property rights. However, we
cannot be certain that licenses will be offered

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or
that we would find the terms of licenses that are offered acceptable or commercially reasonable. Our failure to obtain a license from a third party for technology used by us could cause us to incur
substantial liabilities and to suspend the manufacture of products. Furthermore, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish
the validity of our proprietary rights. Litigation by or against us could result in significant expense and divert the efforts of our technical personnel and management, whether or not the litigation
results in a favorable determination. In the event of an adverse result in any litigation, we could be required to:



We
may be unsuccessful in developing non-infringing products or negotiating licenses upon reasonable terms, or at all. These problems might not be resolved in time to avoid
harming our results of operations. If any third party makes a successful claim against our customers or us and a license is not made available to us on commercially reasonable terms, our business
could be harmed.

Our business may suffer due to risks associated with international sales.

Our sales outside of the United States were 61% of revenues in 2003 and 56% of revenues in 2002. We face inherent risks from these sales, including:



In
addition, due to the technological advantages provided by GaAs integrated circuits in many military applications, the Office of Export Administration of the U.S. Department of
Commerce must license all of our sales outside of North America. We are also required to obtain licenses from that agency for sales of our SAW products to customers in certain countries. If we fail to
obtain these licenses or experience delays in obtaining these licenses in the future, our results of operations could be harmed. Also, because a majority of our foreign sales are denominated in U.S.
dollars, increases in the value of the dollar would increase the price in local currencies of our products and make our products less price competitive.

55

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We may be subject to a securities class action suit if our stock price falls.

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

In
February 2003, several nearly identical putative civil class action lawsuits were filed in the United States District Court for the Middle District of Florida against
Sawtek, Inc., our wholly owned subsidiary since July 2001. The lawsuits also named as defendants current and former officers of Sawtek and our company. The cases were consolidated into
one action, and an amended complaint was filed in this action on July 21, 2003. The amended class action complaint is purportedly filed on behalf of purchasers of Sawtek's stock between
January 2000 and May 24, 2001, and alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act, as well as Securities and Exchange Commission
Rule 10b-5, by making false and misleading statements and/or omissions to inflate Sawtek's stock price and conceal the downward trend in revenues disclosed in Sawtek's
May 23, 2001 press release. The complaint does not specify the amount of monetary damages sought. Sawtek and the individual defendants filed their motion to dismiss on September 3, 2003,
and briefing on the motion was completed on November 19, 2003. The court heard oral argument on November 21, 2003, and issued an order partially denying the motion to dismiss on
December 19, 2003. Specifically, the court found that the complaint was not barred by the statute of limitations, but reserved ruling on the other aspects of the motion to dismiss. Because the
statute of limitations issue is a novel question of law, the court stayed the proceedings in this case to allow the defendants to file an interlocutory appeal to the Eleventh Circuit Court of Appeals.
Defendants duly filed for interlocutory appeal on January 22, 2004. Because the Court of Appeals is considering the identical issue in another matter, the appeal process has been stayed,
pending the Court of Appeals' decision in the other matter. We deny the allegations contained in the complaint and intend to continue our vigorous defense against these claims. This litigation may,
however, require us to spend a substantial amount of time and money and could distract management from our day to day operations. In addition, there can be no assurance as to our success in defending
ourselves against these charges. This and any future securities class action litigation could be expensive and divert our management's attention and harm our business, regardless of its merits.

Our stock will likely be subject to substantial price and volume fluctuations due to a number of factors, many of which are beyond our control and may prevent our stockholders
from reselling our common stock at a profit.

The securities markets have experienced significant price and volume fluctuations and the market prices of the securities of semiconductor companies have been
especially volatile. The market price of our common stock may experience significant fluctuations in the future. For example, our common stock price has fluctuated from a high of approximately $8.74
to a low of approximately $2.70 during the 52 weeks ended December 31, 2003. This market volatility, as well as general economic, market or political conditions could reduce the market price of
our common stock in spite of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors, and in response, the market price of
our common stock could decrease significantly.

56

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Our certificate of incorporation and bylaws include anti-takeover provisions, which may deter or prevent a takeover attempt.

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

Cumulative voting.Our stockholders are entitled to cumulate their votes for directors.

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

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

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

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

ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Cash Equivalents, Short-term and Long-term Investments

Our investments in cash equivalents, short-term investments and long-term investments are classified as
available-for-sale securities and are comprised of highly rated, short and medium-term investments, such as U.S. government agencies, corporate debt securities and
other such low risk investments, in accordance with an investment policy approved by our Board of Directors. All of these investments are held at fair value. Although we manage investments under an
investment policy, economic, market and other events may occur which we cannot control. Although the risks are minimal, fixed rate securities may have their fair value adversely impacted because of
changes in interest rates and credit ratings. Due in part to these factors, our future investment income may fall short of expectations because of changes in interest rates or we may suffer principal
losses if we were to sell securities that have declined in value because of changes in interest rates or issuer credit ratings. We do not hold or issue derivatives, derivative commodity instruments or
other financial instruments for trading speculative purposes. We do not believe that our results of operations would be materially impacted by an immediate 10% change in interest rates.

Debt

Our convertible subordinated notes due 2007 have a fixed interest rate of 4%. Consequently, we do not have significant interest rate cash flow exposure on our
long-term debt. However, the fair value of the convertible subordinated notes is subject to significant fluctuations due to their convertibility into shares of our stock and other market
conditions. The fair value of these convertible subordinated notes is also sensitive to fluctuations in the general level of the U.S. interest rates. We would be exposed to interest rate risk, if we
used additional financing to fund capital expenditures. The interest rate that we

57

---

may
be able to obtain on financings will depend on market conditions at that time and may differ from the rates we have secured in the past.

The
following table shows the fair values of our investments and convertible subordinated notes as of December 31, 2003 (in thousands):

Cost

Fair ValueCash and cash equivalents

$
222,024

$
222,024Available-for-sale investments (including unrealized gains of $102)

$
178,138

$
178,240Convertible subordinated notes

$
268,755

$
255,704


Foreign Currency Risk

We are exposed to currency exchange fluctuations, as we sell our products internationally and have operations in Costa Rica, Germany, Mexico, and China. We manage
the sensitivity of our international sales, purchases of raw materials and equipment and our Costa Rican operations by denominating most transactions in U.S. dollars. We do engage in limited foreign
currency hedging transactions, principally to lock in the cost of purchase commitments and to hedge material cash flows that are not denominated in U.S. dollars, in accordance with a foreign exchange
risk management policy approved by our Board of Directors. We primarily use currency forward contracts for this purpose. This hedging activity will reduce, but may not always entirely eliminate, the
impact of currency exchange movements. As of December 31, 2003, we had $2.0 million open commitments to purchase foreign currency and $13.0 million open commitments to sell
foreign currency.

58

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA

See Index to Consolidated Financial Statements, which appears on page F-1.

The
following is the unaudited consolidated supplementary financial data for each of the eight quarters ended December 31, 2003. This quarterly data should be read in conjunction
with Management's Discussion and Analysis of Financial Conditions and Results of Operations and our consolidated financial statements appearing elsewhere in this document.

|                                                     |  | Three months ended 2003 |         | Three months ended 2002 |  
|---------------------------------------------------- |  | ----------------------- | ------- | ----------------------- | -
|
|
|Consolidated Statement of Operations Data:           |  |                         |         |                         |  
|Revenues                                             |  | $                       | 89,008  |                         | $
|Cost of sales                                        |  |                         | 60,091  |                         |  
|                                                     |  |                         |         |                         |  
|Gross profit                                         |  |                         | 28,917  |                         |  
|Operating expenses:                                  |  |                         |         |                         |  
|Research, development and engineering                |  |                         | 14,137  |                         |  
|Selling, general and administrative                  |  |                         | 12,155  |                         |  
|Special charges(1)                                   |  |                         |        |                         |  
|                                                     |  |                         |         |                         |  
|Total operating expenses                             |  |                         | 26,292  |                         |  
|                                                     |  |                         |         |                         |  
|Income (loss) from operations                        |  |                         | 2,625   |                         |  
|Interest income (expense) and other                  |  |                         | (1,845  | )                       |  
|Impairment chargeinvestments in other companies     |  |                         | (2,237  | )                       |  
|Gain on recovery of previously impaired investment   |  |                         | 8,450   |                         |  
|Gain on retirement of debt                           |  |                         |        |                         |  
|                                                     |  |                         |         |                         |  
|Income (loss) before income tax                      |  |                         | 6,993   |                         |  
|Income tax expense (benefit)(2)                      |  |                         | (1,868  | )                       |  
|                                                     |  |                         |         |                         |  
|Net income (loss)                                    |  |                         | 8,861   |                         |  
|                                                     |  |                         |         |                         |  
|Per share data:                                      |  |                         |         |                         |  
|Per share net income:                                |  |                         |         |                         |  
|Basic                                                |  | $                       | 0.07    |                         | $
|                                                     |  |                         |         |                         |  
|Diluted                                              |  | $                       | 0.06    |                         | $
|                                                     |  |                         |         |                         |  
|Weighted-average common
shares                       |  |                         | 134,694 |                         |  
|                                                     |  |                         |         |                         |  
|Weighted-average common and common equivalent shares |  |                         | 140,606 |                         |  
|                                                     |  |                         |         |                         |  

---

59

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9(A). CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.Our management evaluated, with the participation of our chief executive
officer and chief financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act of 1934, as amended) as of the end
of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure
controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission rules and forms.

Changes in internal control over financial reporting.There was no change in our internal control over financial reporting
(as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the period covered by this Annual Report on Form 10-K that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.

60

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item is included under the captionsElection of Directorsand Section 16(a)
Beneficial Ownership Reporting Compliancecontained in our Proxy Statement for our 2004 Annual Meeting of Stockholders, to be filed
with the Securities and Exchange Commission within 120 days of the end of our fiscal year pursuant to General Instructions G(3) of Form 10-K and is incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION

Information required by this item will be included under the captionExecutive Compensation and Other Matterscontained in our Proxy Statement for our 2004 Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information required by this item is included under the captionSecurity Ownership of Certain Beneficial Owners and ManagementandEquity Compensation Plan Informationcontained in our Proxy Statement for our 2004 Annual Meeting of Stockholders and is
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this item is included under the captionCertain Relationships and Related Transactionscontained in our Proxy Statement for our 2004 Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required by this item is included under the captionRatification of Independent Auditorscontained in
our Proxy Statement for our 2004 Annual Meeting of Stockholders and is incorporated herein by reference.

61

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1)Consolidated Financial Statements

The
Consolidated Financial Statements, together with the report thereon of KPMG LLP are included in the beginning on page F-1.

(a)(2) Consolidated Financial Statement Schedule

The
following schedule is filed herewith:

Page No.Schedule II Valuation and Qualifying Accounts

S-1


Schedules
not listed above have been omitted because the information required to be set forth therein is not applicable or is included in the Consolidated Financial Statements or notes
thereto.

(a)(3)Exhibits

|3.1(1)    |  | Certificate of Incorporation of Registrant                                                                                                                                                                                                                                              
|--------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1.1(2)  |  | Certificate of Amendment to Certificate of Incorporation                                                                                                                                                                                                                                
|3.1.2(11) |  | Certificate of Correction to Certificate of Incorporation                                                                                                                                                                                                                               
|3.1.3(11) |  | Certificate of Designation of Series A Participating Preferred Stock                                                                                                                                                                                                                    
|3.1.4(11) |  | Certificate of Amendment to Certificate of Incorporation                                                                                                                                                                                                                                
|3.2(1)    |  | Bylaws of Registrant                                                                                                                                                                                                                                                                    
|4.1(3)    |  | Preferred Shares Rights Agreement, dated as of June 30, 1998 between Registrant and ChaseMellon Shareholder Services, L.L.C, including the Certifcate of Determination, the form of Rights Certificate and the Summary of Rights attached thereto as
Exhibits A, B, and C, respectively.
|4.2(4)    |  | Indenture dated February 24, 2000 between the Registrant and State Street Bank and Trust Company of California, N.A.                                                                                                                                                                    
|10.4(5)   |  | Letter Agreement dated November 22, 1991 between Registrant and Steven J. Sharp                                                                                                                                                                                                         
|10.18(7)  |  | 1996 Stock Incentive Program and forms of agreement thereunder                                                                                                                                                                                                                          
|10.19(1)  |  | Form of Indemnification Agreement executed by Registrant and its officers and directors pursuant to Delaware reincorporation                                                                                                                                                            
|10.22(15) |  | 1998 Nonstatutory Stock Option Plan and forms of agreement thereunder                                                                                                                                                                                                                   
|10.23(9)  |  | 1998 Employee Stock Purchase Plan and forms of agreement thereunder                                                                                                                                                                                                                     
|10.33(8)  |  | Sawtek Inc. Employee Stock Ownership and 401(k) Plan                                                                                                                                                                                                                                    
|10.34(12) |  | Sawtek Inc. 2000 Implementation Agreement                                                                                                                                                                                                                                               
|10.35(12) |  | Sawtek Inc. 2000 Modified ESOP Loan Agreement                                                                                                                                                                                                                                           
|10.36(12) |  | Sawtek Inc. 2000 Renewed ESOP Note                                                                                                                                                                                                                                                      
|10.37(12) |  | Sawtek Inc. Second Stock Option Plan                                                                                                                                                                                                                                                    
|10.38(12) |  | Sawtek Inc. Stock Option Plan for Acquired Companies                                                                                                                                                                                                                                    
|          |  |                                                                                                                                                                                                                                                                                         

62

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|10.40(13)*  |  | Amended Sale and Transfer Agreement between Infineon Technologies AG, Infineon Technologies North America Corp., Registrant and TriQuint GmbH dated as of April 29, 2002                                                                                   
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.41(8)    |  | Letter Agreement dated June 28, 2002 between Registrant and Ralph G. Quinsey                                                                                                                                                                               
|10.42(14)   |  | Asset Purchase Agreement by and between Agere Systems Inc. and Registrant dated as of October 21, 2002                                                                                                                                                     
|10.42.1(14) |  | Amendment No. 1 to Asset Purchase Agreement by and between Agere Systems Inc. and Registrant dated as of January 2, 2003                                                                                                                                   
|10.42.2(14) |  | Assignment and Bill of Sale and Assumption Agreement by and between Agere Systems Inc. and TriQuint Optoelectronics, Inc. dated as of January 2, 2003                                                                                                      
|10.42.3(14) |  | Assignment and Bill of Sale and Assumption Agreement by and between Agere Systems Inc. and TriQuint Technology Holding Co. dated as of January 2, 2003                                                                                                     
|10.43.4(14) |  | Intellectual Property Agreement by and between Agere Systems Inc. and Registrant dated as of January 2, 2003                                                                                                                                               
|10.43.5(14) |  | Purchase Agreement by and between Agere Systems Inc. and Registrant dated as of January 2, 2003                                                                                                                                                            
|10.43.7(14) |  | Equity Purchase Agreement by and among Agere Systems Inc., Agere Systems International, LLC, Registrant, TriQuint International Holding Co., TriQuint International Holding LLC and Agere Systems de Mexico, S. DE R.L. DE C.V. dated as of January 2,
2003
|10.44(16)   |  | Letter Agreement dated November 20, 2002 between Registrant and Raymond A. Link                                                                                                                                                                            
|12.1        |  | Computation of Ratios of Earnings to Fixed Charges                                                                                                                                                                                                         
|21.1        |  | Subsidiaries                                                                                                                                                                                                                                               
|23.1        |  | Consent of KPMG LLP, Independent Auditors                                                                                                                                                                                                                  
|24.1        |  | Power of Attorney (see page 67)                                                                                                                                                                                                                            
|31.1        |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended                                                                                                                          
|31.2        |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended                                                                                                                          
|32          |  | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley act of 2002                                                                                      

---

63

---

64

---

We
filed a Report on Form 8-K/A with the Securities and Exchange Commission on March 17, 2003 to amend the Report on Form 8-K filed on
January 17, 2003. The amendment was filed to disclose the audited financial statements of Agere's optoelectronics business which we purchased.

On
April 24, 2003, we furnished a Current Report on Form 8-K reporting under Item 9 of Form 8-K that on April 24, 2003, we were
issuing a press release and holding a conference call regarding our financial results for the three months ended March 31, 2003.

On
July 24, 2003, we furnished a Current Report on Form 8-K reporting under Item 9 of Form 8-K that on July 24, 2003, we were issuing
a press release and holding a conference call regarding our financial results for the three months ended June 31, 2003.

On
October 23, 2003, we furnished a Current Report on Form 8-K reporting under Item 9 of Form 8-K that on October 23, 2003, we were
issuing a press release and holding a conference call regarding our financial results for the three months ended September 30, 2003.

On
December 18, 2003, we filed a Current Report on Form 8-K with the Securities and Exchange Commission reporting under Item 5 of Form 8-K the resignation of
Steven P. Miller from service as a member of our board of directors.

See
Item 15(a)(3) above.

65

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

| | TRIQUINT SEMICONDUCTOR, INC.
| | ----------------------------
| | By:                         
| | By:                         

Date:
March 11, 2004

66

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POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Ralph G. Quinsey and Raymond A. Link,
jointly and severally, as his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on
Form 10-K and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming
all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been signed on behalf of the registrant by the following persons in the capacities and on the dates
indicated:

|Signature                                   |  | Title                                                                                                                          |  | Date          
|------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------ |  | --------------
|                                            |  |                                                                                                                                |  |               
|/s/STEVEN J. SHARPSteven J. Sharp           |  | Chairman of the Board                                                                                                          |  | March 11, 2004
|/s/RALPH G. QUINSEYRalph G. Quinsey         |  | President and Chief Executive Officer (Principal Executive Officer)                                                            |  | March 11, 2004
|/s/RAYMOND A. LINKRaymond A. Link           |  | Vice President, Finance and Administration, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) |  | March 11, 2004
|/s/FRANCISCO ALVAREZFrancisco Alvarez       |  | Director                                                                                                                       |  | March 11, 2004
|/s/PAUL A. GARYPaul A. Gary                 |  | Director                                                                                                                       |  | March 11, 2004
|/s/CHARLES SCOTT GIBSONCharles Scott Gibson |  | Director                                                                                                                       |  | March 11, 2004
|/s/NICOLAS KAUSERNicolas Kauser             |  | Director                                                                                                                       |  | March 11, 2004
|/s/WALDEN C. RHINESWalden C. Rhines         |  | Director                                                                                                                       |  | March 11, 2004
|/s/EDWARD F. TUCKEdward F. Tuck             |  | Director                                                                                                                       |  | March 11, 2004
|/s/WILLIS C. YOUNGWillis C. Young           |  | Director                                                                                                                       |  | March 11, 2004

67

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|Independent Auditors' Report                                                                |  | F-2
|------------------------------------------------------------------------------------------- |  | ---
|Consolidated Statements of Operations for the years ended December 31, 2003, 2002 and 2001  |  | F-3
|Consolidated Balance Sheets as of December 31, 2003 and 2002                                |  | F-4
|Consolidated Statements of Stockholders' Equity December 31, 2003, 2002 and 2001            |  | F-5
|Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001. |  | F-6
|Notes to Consolidated Financial Statements                                                  |  | F-7

F-1

---



INDEPENDENT AUDITORS' REPORT

The
Board of Directors
TriQuint Semiconductor, Inc.:

We
have audited the accompanying consolidated balance sheets of TriQuint Semiconductor, Inc. and subsidiaries as of December 31, 2003 and 2002, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2003. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of TriQuint
Semiconductor, Inc. and subsidiaries as of December 31, 2003 and 2002, and the consolidated results of their operations and their cash flows for each of the years in the
three-year period ending December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.

/s/
KPMG LLP

Portland,
Oregon
February 4, 2004

F-2

---



TRIQUINT SEMICONDUCTOR, INC.Consolidated Statements of Operations    (In thousands, except share and per share information)

|                             |                                                    | Years ended December 31,                             |        
|---------------------------- | -------------------------------------------------- | ---------------------------------------------------- | -------
|
|Revenues                     |                                                    | $                                                    | 312,272
|Cost of goods sold           |                                                    |                                                      | 225,264
|                             |                                                    |                                                      |        
|                             | Gross profit                                       |                                                      |        
|Operating expenses:          |                                                    |                                                      |        
|                             | Research, development and engineering              |                                                      |        
|                             | Selling, general and administrative                |                                                      |        
|                             | Impairment of long-lived assets and goodwill       |                                                      |        
|                             | Lease termination costs                            |                                                      |        
|                             | Acquisition related charges                        |                                                      |        
|                             | Reduction in work force                            |                                                      |        
|                             |                                                    |                                                      |        
|                             |                                                    | Total operating expenses                             |        
|                             |                                                    |                                                      |        
|                             |                                                    | Loss from operations                                 |        
|                             |                                                    |                                                      |        
|Other income (expense):      |                                                    |                                                      |        
|                             | Interest income                                    |                                                      |        
|                             | Interest expense                                   |                                                      |        
|                             | Impairment chargeinvestments in other companies   |                                                      |        
|                             | Gain on recovery of previously impaired investment |                                                      |        
|                             | Gain on retirement of debt                         |                                                      |        
|                             | Other, net                                         |                                                      |        
|                             |                                                    |                                                      |        
|                             |                                                    | Other income (expense), net                          |        
|                             |                                                    |                                                      |        
|                             |                                                    | Loss before income taxes                             |        
|Income tax expense (benefit) |                                                    |                                                      | (1,544 
|                             |                                                    |                                                      |        
|                             |                                                    | Net loss                                             |        
|                             |                                                    |                                                      |        
|Per share data:              |                                                    |                                                      |        
|                             | Per share net loss:                                |                                                      |        
|                             |                                                    | Basic and diluted                                    |        
|                             |                                                    |                                                      |        
|                             |                                                    | Weighted-average common and common equivalent shares |        
|                             |                                                    |                                                      |        

See
accompanying notes to consolidated financial statements.

F-3

---



TRIQUINT SEMICONDUCTOR, INC.Consolidated Balance Sheets    (In thousands, except share and per share information)

|                                               |                                                                                                                                                              | December 31,    |                                           
|---------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------- | ------------------------------------------
|
|Assets                                         |                                                                                                                                                             
|Current assets:                                |                                                                                                                                                              |                 |                                           
|                                               | Cash and cash equivalents                                                                                                                                    |                 | $                                         
|                                               | Investments in marketable securities                                                                                                                         |                 |                                           
|                                               | Trade accounts receivable, net                                                                                                                               |                 |                                           
|                                               |                                                                                                                                                              |                 |                                           
|                                               |                                                                                                                                                              |                 | 344,041                                   
|                                               |                                                                                                                                                              |                 |                                           
|                                               | Inventories, net:                                                                                                                                            |                 |                                           
|                                               |                                                                                                                                                              | Raw material    |                                           
|                                               |                                                                                                                                                              | Work in process |                                           
|                                               |                                                                                                                                                              | Finished goods  |                                           
|                                               |                                                                                                                                                              |                 |                                           
|                                               |                                                                                                                                                              |                 | 65,286                                    
|                                               |                                                                                                                                                              |                 |                                           
|                                               | Assets held for sale                                                                                                                                         |                 |                                           
|                                               | Other current assets                                                                                                                                         |                 |                                           
|                                               |                                                                                                                                                              |                 |                                           
|                                               |                                                                                                                                                              |                 | Total current assets                      
|                                               |                                                                                                                                                              |                 |                                           
|Long-term investments in marketable securities |                                                                                                                                                              |                 | 98,134                                    
|Property, plant and equipment, net             |                                                                                                                                                              |                 | 221,678                                   
|Other investment                               |                                                                                                                                                              |                 |                                          
|Restricted long-term assets                    |                                                                                                                                                              |                 |                                          
|Other non-current assets, net                  |                                                                                                                                                              |                 | 25,149                                    
|                                               |                                                                                                                                                              |                 |                                           
|                                               |                                                                                                                                                              |                 | Total assets                              
|                                               |                                                                                                                                                              |                 |                                           
|Liabilities and Stockholders' Equity           |                                                                                                                                                             
|Current liabilities:                           |                                                                                                                                                              |                 |                                           
|                                               | Current installments of capital lease obligations                                                                                                            |                 | $                                         
|                                               | Accounts payable                                                                                                                                             |                 |                                           
|                                               | Accrued payroll                                                                                                                                              |                 |                                           
|                                               | Other accrued liabilities                                                                                                                                    |                 |                                           
|                                               |                                                                                                                                                              |                 |                                           
|                                               |                                                                                                                                                              |                 | Total current liabilities                 
|Other long-term liabilities                    |                                                                                                                                                              |                 | 8,207                                     
|Convertible subordinated notes                 |                                                                                                                                                              |                 | 268,755                                   
|                                               |                                                                                                                                                              |                 |                                           
|                                               |                                                                                                                                                              |                 | Total liabilities                         
|                                               |                                                                                                                                                              |                 |                                           
|Commitments and contingencies                  |                                                                                                                                                              |                 |                                           
|Stockholders' equity:                          |                                                                                                                                                              |                 |                                           
|                                               | Common stock, $.001 par value. Authorized 600,000,000 shares; 135,403,258 shares and 133,162,755 shares issued and outstanding at December 31, 2003 and 2002 |                 |                                           
|                                               | Additional paid-in capital                                                                                                                                   |                 |                                           
|                                               | Accumulated other comprehensive income                                                                                                                       |                 |                                           
|                                               | Unearned ESOP compensation                                                                                                                                   |                 |                                           
|                                               | Retained earnings (Accumulated deficit)                                                                                                                      |                 |                                           
|                                               |                                                                                                                                                              |                 |                                           
|                                               |                                                                                                                                                              |                 | Total stockholders' equity                
|                                               |                                                                                                                                                              |                 |                                           
|                                               |                                                                                                                                                              |                 | Total liabilities and stockholders' equity
|                                               |                                                                                                                                                              |                 |                                           

See accompanying notes to consolidated financial statements.

F-4

---



TRIQUINT SEMICONDUCTOR, INC.Consolidated Statements of Stockholders' Equity  (In thousands, except share information)

|                                                   |  | Common stock |   | Treasury stock |     |  |          | Accumulated
other
comprehensive
income |   |        |   | Retained
earnings
(accumulated
deficit) |         |   |  
|-------------------------------------------------- |  | ------------ | - | -------------- | --- |  | -------- | -------------------------------------- | - | ------ | - | --------------------------------------- | ------- | - | -
|
|
|Balance, December 31, 2000                         |  | 129,196,799  |   | $              | 129 |  | (40,755  | )                                      | $ | (1,142 | ) | $                                       | 438,641 |   | $
|Issuance of common stock under plans               |  | 2,250,064    |   |                | 2   |  | 241,293  |                                        |   | 5,577  |   |                                         | 7,893   |   |  
|Income tax benefit of stock option exercises       |  |             |   |                |    |  |         |                                        |   |       |   |                                         | 11,605  |   |  
|Adjustment to conform fiscal year of pooled entity |  | (57          | ) |                |    |  | (25,714  | )                                      |   | (785   | ) |                                         | (626    | ) |  
|Purchase of treasury stock                         |  |             |   |                |    |  | (480,417 | )                                      |   | (9,778 | ) |                                         |        |   |  
|ESOP allocation                                    |  |             |   |                |    |  |         |                                        |   |       |   |                                         |        |   |  
|Retirement of treasury stock                       |  | (305,593     | ) |                |    |  | 305,593  |                                        |   | 6,128  |   |                                         | (6,128  | ) |  
|Accumulated other comprehensive income             |  |             |   |                |    |  |         |                                        |   |       |   |                                         |        |   |  
|Non cash compensation expense                      |  |             |   |                |    |  |         |                                        |   |       |   |                                         | 318     |   |  
|Net loss                                           |  |             |   |                |    |  |         |                                        |   |       |   |                                         |        |   |  
|                                                   |  |              |   |                |     |  |          |                                        |   |        |   |                                         |         |   |  
|Balance, December 31, 2001                         |  | 131,141,213  |   |                | 131 |  |         |                                        |   |       |   |                                         | 451,703 |   |  
|Issuance of common stock under plans               |  | 2,021,542    |   |                | 2   |  |         |                                        |   |       |   |                                         | 9,132   |   |  
|Income tax benefit of stock option exercises       |  |             |   |                |    |  |         |                                        |   |       |   |                                         | (8,074  | ) |  
|ESOP allocation                                    |  |             |   |                |    |  |         |                                        |   |       |   |                                         |        |   |  
|Accumulated other comprehensive income             |  |             |   |                |    |  |         |                                        |   |       |   |                                         |        |   |  
|Net loss                                           |  |             |   |                |    |  |         |                                        |   |       |   |                                         |        |   |  
|                                                   |  |              |   |                |     |  |          |                                        |   |        |   |                                         |         |   |  
|Balance, December 31, 2002                         |  | 133,162,755  |   |                | 133 |  |         |                                        |   |       |   |                                         | 452,761 |   |  
|Issuance of common stock under plans               |  | 2,240,503    |   |                | 2   |  |         |                                        |   |       |   |                                         | 7,832   |   |  
|ESOP allocation                                    |  |             |   |                |    |  |         |                                        |   |       |   |                                         |        |   |  
|Accumulated other comprehensive income             |  |             |   |                |    |  |         |                                        |   |       |   |                                         |        |   |  
|Net loss                                           |  |             |   |                |    |  |         |                                        |   |       |   |                                         |        |   |  
|                                                   |  |              |   |                |     |  |          |                                        |   |        |   |                                         |         |   |  
|Balance, December 31, 2003                         |  | 135,403,258  |   | $              | 135 |  |         |                                        | $ |       |   | $                                       | 460,593 |   | $
|                                                   |  |              |   |                |     |  |          |                                        |   |        |   |                                         |         |   |  

See accompanying notes to consolidated financial statements.

F-5

---



TRIQUINT SEMICONDUCTOR, INC.Consolidated Statements of Cash Flows    (In thousands)

|                                                   |                                                                                 | Years ended December 31,                              |                                         
|-------------------------------------------------- | ------------------------------------------------------------------------------- | ----------------------------------------------------- | ----------------------------------------
|
|Cash flows from operating activities:              |                                                                                 |                                                       |                                         
|                                                   | Net loss                                                                        |                                                       | $                                       
|                                                   | Adjustments to reconcile net loss to net cash provided by operating activities: |                                                       |                                         
|                                                   |                                                                                 | Depreciation and amortization                         |                                         
|                                                   |                                                                                 | Income tax benefit of stock option exercises          |                                         
|                                                   |                                                                                 | Adjustment to conform year end of pooled entity       |                                         
|                                                   |                                                                                 | Loss on sale or disposal of assets                    |                                         
|                                                   |                                                                                 | Impairment on long-lived assets and goodwill          |                                         
|                                                   |                                                                                 | Lease termination costs                               |                                         
|                                                   |                                                                                 | Acquired in-process research and development          |                                         
|                                                   |                                                                                 | Gain on retirement of debt                            |                                         
|                                                   |                                                                                 | Realized gain on forward contract                     |                                         
|                                                   |                                                                                 | Non cash compensation expense                         |                                         
|                                                   |                                                                                 | Gain on recovery of previously impaired investment    |                                         
|                                                   |                                                                                 | Impairment chargeinvestments in other companies      |                                         
|                                                   |                                                                                 | Deferred income taxes                                 |                                         
|                                                   |                                                                                 | ESOP allocation                                       |                                         
|                                                   |                                                                                 | Change in assets and liabilities net of acquisitions: |                                         
|                                                   |                                                                                 |                                                       | Receivables                             
|                                                   |                                                                                 |                                                       | Inventories                             
|                                                   |                                                                                 |                                                       | Prepaid and other assets                
|                                                   |                                                                                 |                                                       | Accounts payable and accrued liabilities
|                                                   |                                                                                 |                                                       |                                         
|                                                   |                                                                                 |                                                       |                                         
|                                                   |                                                                                 |                                                       |                                         
|Cash flows from investing activities:              |                                                                                 |                                                       |                                         
|                                                   | Purchase of available-for-sale investments                                      |                                                       |                                         
|                                                   | Proceeds from note receivable                                                   |                                                       |                                         
|                                                   | Sale of available-for-sale investments                                          |                                                       |                                         
|                                                   | Purchase of held-to-maturity investments                                        |                                                       |                                         
|                                                   | Maturities of held-to-maturity investments                                      |                                                       |                                         
|                                                   | Decrease (increase) in restricted long-term assets                              |                                                       |                                         
|                                                   | Infinion acquisition                                                            |                                                       |                                         
|                                                   | IBM acquisition                                                                 |                                                       |                                         
|                                                   | Agere acquisition                                                               |                                                       |                                         
|                                                   | Capital expenditures                                                            |                                                       |                                         
|                                                   | Investments in other companies                                                  |                                                       |                                         
|                                                   | Purchase of other investments                                                   |                                                       |                                         
|                                                   | Proceeds from sale of assets                                                    |                                                       |                                         
|                                                   |                                                                                 |                                                       |                                         
|                                                   |                                                                                 |                                                       |                                         
|                                                   |                                                                                 |                                                       |                                         
|Cash flows from financing activities:              |                                                                                 |                                                       |                                         
|                                                   | Principal payments under capital lease and installment note obligations         |                                                       |                                         
|                                                   | Repurchase of convertible subordinated notes                                    |                                                       |                                         
|                                                   | Purchase of common stock for treasury                                           |                                                       |                                         
|                                                   | Issuance of common stock, net                                                   |                                                       |                                         
|                                                   |                                                                                 |                                                       |                                         
|                                                   |                                                                                 |                                                       |                                         
|                                                   |                                                                                 |                                                       |                                         
|                                                   |                                                                                 |                                                       |                                         
|Cash and cash equivalents at beginning of year     |                                                                                 |                                                       | 226,226                                 
|                                                   |                                                                                 |                                                       |                                         
|Cash and cash equivalents at end of year           |                                                                                 | $                                                     | 222,024                                 
|                                                   |                                                                                 |                                                       |                                         
|Supplemental disclosures of cash flow information: |                                                                                 |                                                       |                                         
|                                                   | Cash paid for:                                                                  |                                                       |                                         
|                                                   |                                                                                 | Interest                                              |                                         
|                                                   |                                                                                 |                                                       |                                         
|                                                   |                                                                                 | Income taxes                                          |                                         
|                                                   |                                                                                 |                                                       |                                         

See accompanying notes to consolidated financial statements.

F-6

---



TriQuint Semiconductor, Inc.        Notes to Consolidated Financial Statements        (In thousands unless noted otherwise, except share and per share amounts)

1. Summary of Significant Accounting Policies



TriQuint Semiconductor, Inc. (the "Company") is a leading supplier of high-performance components and modules for communications applications.
The Company's products are used in markets such as wireless phones, infrastructure networks, optical networks and defense with a specific focus on radio frequency ("RF") and optical applications. The
Company provides customers with standard and custom product solutions as well as foundry services. Products are based on advanced process technologies including gallium arsenide, indium phosphide and
surface acoustic wave ("SAW").



The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Investments in which the Company does
not exercise significant influence
are recorded at cost (generally less than a 20% interest). The Company has no investments in which it exercises significant influence but which it does not control (generally 20% to 50% ownership
interest). All significant intercompany accounts and transactions are eliminated in consolidation.



Certain amounts in the December 31, 2002 and 2001 financial statements have been reclassified to conform to the December 31, 2003 presentation.
These reclassifications had no effect on net income or loss or stockholders' equity as previously reported.



The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. The Company reviews its estimates, including, but not limited to, allowance for doubtful accounts, sales returns reserves, inventory
reserves, income tax valuation allowance, warranty reserves, investment impairments, impairments of goodwill and long-lived assets and commitments and contingencies on a regular basis and
makes adjustments based on historical experiences and existing and expected future conditions. These evaluations are performed and adjustments are made as information is available. Management believes
that these estimates are reasonable; however, actual results could differ from these estimates.



Standard product revenues are recognized upon shipment of product with provisions established for estimated customer and distributor product returns based on the
Company's experiences and/or contractual agreements. Generally, the Company ships products FOB shipping point. The Company recognizes revenues on certain foundry and customer-specific products based
on certain design, manufacturing and other milestones. The Company recognizes revenues on cost-plus contracts as work is performed. Revenues from customers who have acceptance criteria are
not recognized until all acceptance criteria are satisfied. The Company has certain distributor agreements by which the

F-7

---

distributors
are able to return a percentage of shipments within an allotted time. The Company reserves this contractual amount in full at the time of shipment. Revenue from distributors was
$17.6 million, $14.3 million and $18.6 million in 2003, 2002 and 2001, respectively. Additionally, the Company records a general reserve based on historical experience and
judgement of expected levels of returns, as well, as the Company becomes aware of potential returns due to warranty or other issues.



The Company estimates a liability for costs to repair or replace products under warranties for one-year and technical support costs when the related
product revenue is recognized.

The
liability for product warranties is calculated based upon historical experience and specific warranty issues.

Product
warranty activity consisted of:

2003

2002Beginning balance

$
2,159

$
1,577Acquisition related


9,300


Accruals


1,321


1,388Applications


(3,487
)

(806
)Ending balance

$
9,293

$
2,159




The Company considers all highly liquid debt and other instruments purchased with an original maturity of three months or less to be cash equivalents. These
investments include obligations of U.S. government agencies, corporate debt securities and money market funds. Cash equivalents were $222.0 million and $226.2 million at
December 31, 2003 and 2002, respectively.



Investment securities at December 31, 2003 and 2002 consisted of U.S. treasury securities and obligations of U.S. government agencies, municipal notes and
bonds, corporate debt securities and other investments. All are available-for-sale.

The
Company's investment policy sets minimum credit quality criteria and maximum maturity limits on its investment to provide for safety of principal, liquidity and a reasonable rate of
return. Investments
for which maturity from the balance sheet date is greater than one year are classified as long-term investments in marketable securities.

Available-for-sale
securities are recorded at fair value, based on current market valuations. Unrealized holding gains and losses, net of the related tax effect,
on available-for-sale securities are excluded from earnings and are reported as a separate component of other comprehensive income until realized. Realized gains and losses are
included in earnings and are derived using the specific identification method for determining the cost of the securities sold. Held-to-maturity securities are recorded at
amortized cost, adjusted for the amortization or accretion of premiums or discounts.

F-8

---





Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company has established an allowance for doubtful accounts of $1,211
and $3,867 at December 31, 2003 and 2002, respectively, which represents the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable. The
Company determines the allowance by performing on-going evaluations of its customers and their ability to make payments. The Company determines the adequacy of the allowance based on
length of time past due, historical experience and judgement of economic conditions. Additionally, the Company has a credit policy that is applied to potential customers. Account balances are charged
off against the allowance after all means of collection have been exhausted and the potential recovery is considered remote. The Company does not have any off-balance sheet credit exposure
related to its customers.



Inventories are stated at the lower of standard cost, which approximates actual cost on a first-in, first-out basis, or market (net
realizable value). Costs include materials, direct labor and overhead. Inventories are shown net of reserves of $16,801 and $19,786 at December 31, 2003 and 2002, respectively. Existing
inventories are evaluated each period for excess quantities and obsolescence. This evaluation includes identifying those parts specifically identified as obsolete and reserving for them, analyzing
forecasted demand versus quantities on hand and reserving for the excess, identifying and recording other specific reserves, and estimating and recording a general reserve based on historical
experience and our judgement of economic conditions. Although management feels that these are appropriate indicators of inventory valuation, these are estimates based on information that is
subjective. If future demand or market conditions are less favorable than the projections, additional inventory reserves may be required and would be reflected in the financial statements in the
period the adjustment is made. In addition, open purchase orders for some materials contain cancellation penalties. As of December 31, 2003, the Company had open purchase orders with potential
penalties totaling $2,600.



Property, plant and equipment is recorded at cost. Machinery and equipment under capital leases is stated at the lower of the present value of the minimum lease
payments at the beginning of the lease term or the fair value of the leased assets at the inception of the lease.

Depreciation
is provided using the straight-line method over the estimated useful lives of the assets, which are as follows: three to seven years for machinery and equipment,
furniture and fixtures and computer equipment and software and 39 years for buildings. Leasehold improvements are amortized over the shorter of the estimated life of the asset or the term of
the related lease, generally three to seven years. Asset lives are reviewed periodically to determine if appropriate and adjustments are made as necessary. Depreciation begins at the time assets are
placed in service. Maintenance and repairs are expensed as incurred.



Goodwill represents the excess of costs over fair value of assets of business acquired. The Company adopted the provisions of SFAS No. 142, Goodwill and
Other Intangible Assets, as of

F-9

---

January 1,
2002. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment
at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible assets with estimable useful lives be amortized over their respective
estimated lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144,Accounting for Impairment or Disposal of
Long-Lived Assets.

Other
intangible assets consists primarily of patents, developed technology and other intangibles with estimable useful lives, ranging from two to 10 years, are amortized on a
straight-line basis over their estimated useful lives and debt issuance costs. The Company performs impairment tests when events and circumstances warrant. Prior to the adoption of SFAS
No. 142, other intangible assets were amortized on a straight-line basis from two to 10 years. The amount of other intangible asset impairment, if any, was measured based on
projected discounted future operating cash flows using a discount rate reflecting the Company's average cost of funds. Financing costs related to the issuance of debt are capitalized as other
noncurrent assets, net and amortized to interest expense
over the term of the related debt using the straight-line method, which approximates the effective interest method.

Intangible
assets consisted of the following (in thousands):

At December 31,2003

2002Intangible assets:Patents, technology and other

$
10,044

$
7,065Debt issuance costs


9,252


9,252$
19,296


16,317Less:Patents, technology and other amortization

$
4,493


1,238Debt issuance amortization


5,335


4,101$
9,468

$
10,978


Intangible
assets are included in other non-current assets in the Consolidated Balance Sheet. See additional discussion of intangible assets in Footnote 6.



The Company has made several investments in small, privately held technology companies. The Company accounts for these investments using the cost method as the
Company does not have significant influence over the companies. The Company monitors these investments for impairment and makes appropriate reductions in carrying value when an
other-than-temporary decline is evident. The Company evaluates the financial condition of the investee, market conditions and other factors providing an indication of the fair
value of the investments. As of December 31, 2003 and 2002, the book value of investments in privately held companies was $2.1 million and $7.3 million, respectively.



The Company charges research and development costs associated with the development of new products to expense when incurred.

F-10

---

Engineering
and design costs related to revenues on nonrecurring engineering services billed to customers are classified as cost of goods sold.



The Company expenses advertising costs as incurred.



The Company has adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income". The objective of
SFAS No. 130 is to report all changes in equity that result from transactions and economic events other than transactions with owners. Accumulated other comprehensive income includes unrealized
holding gains and losses on available-for-sale investments and unrealized gains and losses on cash flow hedges which are included as a separate component of stockholders'
equity until realized. For the years presented, other comprehensive loss approximates net income.



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

Common
stock equivalents related to stock options and conversion of convertible subordinated notes totaling 16,600,243, 14,997,417, and 16,342,181 were anti-dilutive and,
therefore, were not included in the diluted net income (loss) per share calculation for 2003, 2002 and 2001, respectively.



The carrying amount of cash equivalents, investments, trade accounts receivable and accounts payable, accrued payroll and other accrued liabilities approximates
fair value due to the short-term nature of these instruments. The fair value of capital lease obligations at December 31, 2002 was estimated by discounting the future cash flows
using market interest rates and did not differ significantly from that reflected in the accompanying financial statements. The fair market value of the 4% convertible subordinated notes due 2007 was
$255,704 at December 31, 2003 and $208,547 at December 31, 2002.

Fair
value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates are subjective in nature and involve
uncertainties and matters
of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.



Deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting and tax basis of assets and liabilities,
applying enacted statutory tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded when it is more likely than not that all or a portion of
the deferred tax assets will not be realized. The Company considers future taxable income and prudent and feasible tax planning strategies in

F-11

---

determining
the need for a valuation allowance. For 2002 and 2003, the Company determined that a valuation allowance should be recorded against all of its deferred tax assets.



The Company's functional currency for all operations worldwide is the U.S. dollar. For foreign operations with the U.S. dollar as the functional currency,
monetary assets and liabilities are remeasured at the year-end exchange rates. Certain non-monetary assets and liabilities are remeasured using historical rates. Statements of
operations are remeasured at an average exchange rate for the year. Foreign currency gains and losses resulting from remeasurement or settlement of receivables and payables denominated in a currency
other than the functional currency are included in "Other income (expense)".



The Company accounts for derivatives and hedging activities in accordance with FASB Statement No. 133,Accounting for Derivative
Instruments and Certain Hedging Activities ("SFAS 133"),as amended, which requires that all derivative instruments be recorded on the balance sheet at their respective
fair values.

On
the date a derivative contract is entered into, the Company designates the derivative as either a hedge of the fair value of a recognized asset or liability or of an unrecognized firm
commitment (fair value hedge), a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge), a
foreign-currency fair-value or cash-flow hedge (foreign currency hedge), or a hedge or a net investment in a foreign operation. For all hedging relationships the Company
formally documents the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the item, the nature of the risk being hedged,
how the hedging instrument's effectiveness in offsetting the hedged risk will be assessed, and a description of the method of measuring ineffectiveness. This process includes linking all derivatives
that are designated as fair-value, cash-flow, or foreign-currency hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted
transactions. The Company also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in
offsetting changes in fair values or cash flows of hedged items. Changes in the fair-value of a derivative that is highly effective and that is designated and qualifies as a
fair-value hedge, along with the loss or gain on the hedged asset or liability or unrecognized firm committement of the hedged item that is attributable to the hedged risk, are recorded in
earnings. Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash-flow hedge are recorded in other comprehensive income to the
extent that the derivative is effective as a hedge, until earnings are affected by the variability in cash flows of the designated hedged item. Changes in the fair value of derivatives that are highly
effective as hedges and that are designated and qualify foreign-currency hedges are recorded in either earnings or other comprehensive income, depending on whether the hedge transaction is a
fair-value hedge or cash-flow hedge.

As
of December 31, 2003, the Company had forward currency contracts outstanding of $15 million to hedge net balance sheet exposures, of which $13 million were to
sell euros and $2 million to buy euros at varying dates.

F-12

---



The Company accounts for ESOP shares acquired prior to January 1, 1993 in accordance with Statement of Position 76-3, Accounting Practices for Certain
Employee Stock Ownership Plans("SOP 76-3") which requires compensation expense to be measured using the
cost basis of the shares when the shares are committed to be released to employees.



The Company accounts for compensation cost related to employee stock options and other forms of employee stock-based compensation plans other than ESOP in
accordance with the provisions of Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees ("APB 25"), and related
interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. The Company also applies
FASB Statement No. 123,Accounting for Stock-Based Compensation, which allows entities to continue to apply the provisions of APB 25 and provide
pro forma net income and pro forma earnings per share disclosures for employee stock option grants as if the fair-value-based method defined in SFAS 123 had been applied.

The
Company continues to apply the provisions of APB 25 in accounting for its plans. As the fair value was equal to the grant price on the date of grant no compensation cost has been
recognized for its stock based compensation awards in the financial statements. Had the Company determined compensation cost based on the fair value at the date of grant for its stock based
compensation awards under SFAS 123, the Company's net loss would have been adjusted to the pro forma amounts indicated below

|                                                                                                                             |  | 2003 |          | 2002 |   | 2001     |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | ---- | - | -------- | -
|Net income (loss) as reported                                                                                                |  | $    | (72,978  | )    | $ | (158,560 | )
|Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of tax |  |      | (53,559  | )    |   | (56,253  | )
|                                                                                                                             |  |      |          |      |   |          |  
|Pro forma net income (loss)                                                                                                  |  | $    | (126,537 | )    | $ | (214,813 | )
|                                                                                                                             |  |      |          |      |   |          |  
|Earnings per share:                                                                                                          |  |      |          |      |   |          |  
|Basic and dilutedas reported                                                                                                |  | $    | (0.54    | )    | $ | (1.20    | )
|Basic and dilutedpro forma                                                                                                  |  | $    | (0.94    | )    | $ | (1.63    | )



FASB Statement No. 144,Accounting for the Impairment or Disposal of Long-lived Assets
("SFAS 144"), provides a single accounting model for long-lived assets to be disposed of. SFAS No. 144 also changes the criteria for classifying an
asset as held-for-sale, broadens the scope of businesses to be disposed of that qualify for reporting as discontinued operations and changes the timing of recognizing losses on
such operations. The Company adopted SFAS No. 144 on January 1, 2002.

F-13

---

In
accordance with SFAS No. 144, long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an
impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is determined by reference to market prices or through
discounted cash flow analysis, depending on the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs
to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale are presented separately in the appropriate asset and liability sections of the
balance sheet.



In December 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003) ("FIN 46R"), Consolidation of
Variable Interest Entities, which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than
voting rights and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46,Consolidation of Variable Interest
Entities, which was issued in January 2003. The Company will be required to apply FIN 46R to variable interests in variable interest entities ("VIEs") created after
December 31, 2003. For variable interests in VIEs created before January 1, 2004, FIN 46R will be applied beginning on January 1, 2005. For any VIEs that must be consolidated
under FIN 46R that were created before January 1, 2004, the assets, liabilities, and noncontrolling interests of the VIE initially would be measured at their carrying amounts with any
difference between the net amount added to the balance sheet and any previously recognized interest being recognized as the cumulative effect of an accounting change. If determining the carrying
amounts is not practicable, fair value at the date FIN 46R first applies may be used to measure the assets, liabilities, and noncontrolling interest of the VIE. The Company does not currently have any
variable interests in VIEs, but does not expect the application of the Interpretation to have a significant impact on it.

In
June 2002, the FASB issued Statement No. 146 ("SFAS 146"), Accounting for Costs Associated with Exit or Disposal
Activities. SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue
No. 94-3 ("EITF 94-3"), Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity. The provisions of SFAS 146 were effective for exit or disposal activities initiated after December 31, 2002, with early application encouraged. The
adoption of this standard did not have a material effect on the Company's financial position or results of operations.

In
December 2002, the FASB issued Statement No. 148 ("SFAS 148"),Accounting for Stock-Based CompensationTransition and
Disclosurean Amendment of FASB Statement No. 123, which amends FASB Statement No. 123 ("SFAS 123"),Accounting for
Stock-Based Compensation,to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method used on

F-14

---

reported
results. SFAS 148 is effective for transition alternatives for fiscal years ending after December 15, 2002, is effective for interim disclosures for periods beginning after
December 15, 2002, and is effective for annual disclosures for fiscal years ending after December 15, 2002. The adoption of this standard did not have a material effect on the Company's
financial position or results of operations.

2. Business Combinations



On
July 19, 2001, Sawtek, Inc. became a wholly owned subsidiary of the Company. The Company issued approximately 48.8 million shares of common stock in exchange for
all the outstanding common stock of Sawtek. Additionally, outstanding options to purchase Sawtek common stock were exchanged for approximately 2.6 million options to purchase the Company's
common stock. The transaction was accounted for as a pooling-of-interests transaction and qualified as a tax-free exchange of shares.



On July 1, 2002, the Company completed the acquisition of the GaAs Business of Infineon Technologies AG ("Infineon"). The acquisition was accounted for as
a purchase transaction and the results of operations are included in the consolidated financial statements from the date of acquisition. At the closing date, the Company paid Infineon
EUR50.0 million, of which EUR10.0 million represents an earnout deposit. Pursuant to the purchase agreement, Infineon may earn up to an additional EUR74.0 million over a
24-month period based upon revenues generated by the acquired business, for an aggregate purchase price of EUR124.0 million. The Company does not anticipate any additional payments
under this agreement and expects a return of the deposit. Subsequent to the close of the acquisition, certain fixed assets were also purchased for EUR5.5 million less EUR1.5 million in
funded liabilities acquired ($4.0 million at various spot rates). There are also various other guarantees and contingencies which could affect the amount of the final purchase price. On
October 1, 2002, the time period lapsed for the Company to reach a subsequent agreement with Infineon as to the inclusion of Infineon's Hi Rel business in the acquisition of Infineon's GaAs
Business. Since an agreement was not reached, the minimum purchase price of the acquisition was adjusted to EUR42.0 million from EUR45.0 million. The Company acquired this business to
strengthen its European presence and to expand its market and product offerings in the wireless communications industry.

Details
of the purchase price were as follows (in thousands):

Cash paid at closing

$
53,559Acquisition costs


568Less: Earnout deposit


(9,910
)Total purchase price

$
44,217


F-15

---

The
purchase price was allocated to the assets and liabilities based on fair values as follows (in thousands):

Machinery and equipment

$
5,440Identifiable intangibles


13,373Acquired in-process research and development


2,675Goodwill


24,024Liabilities


(1,295
)Allocated purchase price

$
44,217


In
connection with this acquisition, the Company obtained a third-party valuation of the assets for purposes of the purchase price allocation. Acquired in-process research
and development ("IPR&D") assets were expensed at the date of acquisition in accordance with FASB Interpretation No. 4 ("FIN 4"),Applicability of FASB Statement
No. 2 to Business Combinations
Accounted for by the Purchase Method. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future
alternative uses existed. The fair value was determined using the income approach, which discounts expected future cash flows from projects under development to their net present value using a risk
adjusted rate. Each project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development;
any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated based upon management's estimates of revenues expected to be generated
upon completion of the projects and the beginning of commercial sales and related operating costs. The discount rates utilized ranged from 25% to 50% and were based on the novelty of the technology,
the risks remaining to complete each project, and the extent of the Company's familiarity with the technology. The goodwill acquired in this transaction was allocated to the Oregon operating unit. In
addition, as of December 31, 2002, the Company wrote off all goodwill associated with this acquisition.

A Portion of the Assets of IBM's Wireless Phone Chipset Business

On July 1, 2002, the Company completed the acquisition of a portion of the assets of IBM's wireless phone chipset business. The acquisition was accounted
for as a purchase transaction and the results of operations are included in the consolidated financial statements from the date of acquisition. At the closing date, the Company paid
$21.8 million to IBM for the related assets, of which $5.0 million represented an earnout deposit. As of December 31, 2003, the $5.0 million earnout deposit has been
returned to the Company. The Company acquired this business to expand its market and product offerings in the wireless communications industry and to strengthen its capabilities in silicon germanium
process technology.

F-16

---



Details of the purchase price are as follows (in thousands):

Cash paid at closing

$
21,750Acquisition costs


1,661Less: Earnout deposit


(5,000
)Total purchase price

$
18,411


The
purchase price was allocated to the assets and liabilities based on fair values as follows (in thousands):

Machinery and equipment

$
1,959Technology licenses


1,635Acquired in-process research and development


5,900Current technology


1,077Backlog


158Goodwill


7,682Allocated purchase price

$
18,411


In
a transaction related to this acquisition, the Company transferred $1.3 million of the acquired machinery and equipment, $1.0 million of the technology
licenses, $733 of acquired workforce and $11.0 million in cash to a privately held technology company in exchange for a note receivable of $14.0 million.

Pro
forma results of operations have not been presented for this acquisition because its effects were not material on either an individual or aggregate basis.

In
connection with this acquisition, the Company obtained a third-party valuation of the assets for purposes of the purchase price allocation. Acquired IPR&D assets were expensed at the
date of acquisition in accordance with FIN 4. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future alternative uses
existed. The fair value was determined using the income approach, which discounts expected future cash flows from projects under development to their net present value using a risk adjusted rate. Each
project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative
future use or current technological feasibility; and the stage of completion. Future cash flows were estimated based upon management's estimates of revenues expected to be generated upon completion of
the projects and the beginning of commercial sales and related operating costs. The projections assume that the technologies will be successful and that the product's development and commercialization
will meet management's time schedule. The discount rate utilized was 29% and was based on the novelty of the technology, the risks remaining to complete each project, and the extent of the Company's
familiarity with the technology. The goodwill acquired in this transaction was allocated to the Oregon operating unit. In addition, as of December 31, 2002, the Company wrote off all goodwill
associated with this acquisition.



On January 2, 2003, we completed our acquisition of a substantial portion of the Optoelectronics Business of Agere for $40 million in cash plus
acquisition costs and certain assumed liabilities. We

F-17

---

acquired
this business to expand our market and the product offerings of our optical networks business. The transaction included the products, technology and some facilities related to Agere's
Optoelectronics Business, which includes active and passive components, amplifiers, transceivers, transponders and other products. As part of the acquisition, the Company also assumed operation of the
back-end assembly and test operations associated with these components at a leased facility in Matamoros, Mexico.

Details
of the purchase price were as follows (in thousands):

Cash paid at closing

$
40,000Acquisition costs


200Total purchase price

$
40,200


The
purchase price was allocated to the assets and liabilities based on fair values as follows (in thousands):

Inventory

$
12,000Other assets


12,000Property, plant and equipment


36,271Identifiable intangibles


2,178Acquired in-process research and development


500Liabilities


(22,749
)Allocated purchase price

$
40,200


Through
a transition services agreement, Agere provided some business infrastructure services to us for a short period following the close of the transaction to ensure
seamless transition of the business operations. On May 6, 2003, we sold a portion of the assets acquired in this transaction for $6.6 million in cash.

In
connection with this acquisition and the acquisitions made in 2002 and 2001 as described below, we obtained third-party valuations of the assets for purposes of purchase price
allocation. Acquired in-process research and development ("IPR&D") assets were expensed at the date of acquisition in accordance with FASB Interpretation No. 4 ("FIN 4"), Applicability of FASB Statement No. 2 to
Business Combinations Accounted for by the Purchase.The value assigned to IPR&D related to research
projects for which technological feasibility had not been established and no future alternative uses existed. The fair value was determined using the income approach, which discounts expected future
cash flows from projects under development to their net present value using a risk adjusted rate. The projects were analyzed to determine the following: the technological innovations included; the
utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and the stage of completion. Future cash flows
were estimated based upon management's estimates of revenues expected to be generated upon completion of the projects and the beginning of commercial sales and related operating costs. The projections
assume that the technologies will be successful and that the products' development and commercialization will meet management's time schedule. The discount rate is based on the novelty of the
technology, the risks remaining to complete each project, and the extent of our familiarity with the technology. Accordingly, IPR&D of $500,000 based on a discount rate of 35% associated with the

F-18

---

portion
of the Agere Optoelectronics Business which we acquired, was expensed as of the date of acquisition.

The
pro forma amounts shown for the twelve months ended December 31, 2002 reflect adjustments for both the Infineon and Agere acquisitions. The pro forma amounts shown for the
year ended December 31, 2001 reflect adjustment for the Infineon acquisition only.

Pro forma
(Unaudited)Twelve Months
Ended
December 31, 2002

Twelve Months
Ended
December 31, 2001Revenues

$
508,514

$
280,552Net loss


(382,392
)

(170,547
)Loss per sharebasic

$
(2.90
)
$
(1.29
)Loss per sharediluted

$
(2.90
)
$
(1.29
)


3. Short-term and Long-term Investments in Marketable Securities

The cost, gross unrealized holding gains, gross unrealized holding losses and fair values of available-for-sale investments by types and
classes of security at December 31, 2003 and 2002 consisted of the following (in thousands):

|                                                                     |  | Cost |         | Gross
unrealized
holding
gains |   | Gross
unrealized
holding
losses |  | Fair value
|-------------------------------------------------------------------- |  | ---- | ------- | ------------------------------ | - | ------------------------------- |  | ----------
|At December 31, 2003                                                 |  |      |         |                                |   |                                 |  |           
|Available-for-sale:                                                  |  |      |         |                                |   |                                 |  |           
|U.S. treasury securities and obligations of U.S. government agencies |  | $    | 128,280 |                                | $ | 257                             |  | $         
|Corporate debt securities and other                                  |  |      | 49,858  |                                |   | 53                              |  |           
|                                                                     |  |      |         |                                |   |                                 |  |           
|Total investments                                                    |  | $    | 178,138 |                                | $ | 310                             |  | $         
|                                                                     |  |      |         |                                |   |                                 |  |           
|At December 31, 2002                                                 |  |      |         |                                |   |                                 |  |           
|Available-for-sale:                                                  |  |      |         |                                |   |                                 |  |           
|U.S. treasury securities and obligations of U.S. government agencies |  | $    | 144,083 |                                | $ | 482                             |  | $         
|Municipal notes and bonds                                            |  |      |         |                                |   |                                 |  |           
|Corporate debt securities and other                                  |  |      | 96,070  |                                |   | 192                             |  |           
|                                                                     |  |      |         |                                |   |                                 |  |           
|Total investments                                                    |  | $    | 240,153 |                                | $ | 674                             |  | $         
|                                                                     |  |      |         |                                |   |                                 |  |           

Investments
by contractual maturity are as follows (in thousands):

Cost

Fair valueAt December 31, 2003Due or callable in one year or less

$
80,077

$80,106Due after one year through 42 months

$
98,061

$98,134


F-19

---

4. Property, Plant and Equipment

Property, plant and equipment consisted of the following (in thousands):

December 31,2003

2002Land

$
19,691

$
11,686Buildings


89,226


38,440Leasehold improvements


2,014


16,910Machinery and equipment


236,017


181,757Furniture and fixtures


6,972


8,790Computer equipment and software


20,269


18,784Assets in process


6,385


9,348380,574


285,715Less accumulated depreciation and amortization


158,896


131,828$
221,678

$
153,887


Depreciation
expense for the years ended December 31, 2003, 2002, and 2001 was $35,029, $35,502 and $28,016 respectively. This includes depreciation expense associated with
equipment leased to another company classified as "Other, net" in the Consolidated Statement of Operations of $5 and $71 for the years ended December 31, 2003 and 2002, respectively. There was
no similarly classified depreciation expense in 2001.

5. Leases

At December 31, 2003, the Company had no outstanding capital leases. At December 31, 2002, the Company had outstanding $341 of capital leases. The
interest rates on these capital leases ranged from 7.9% to 9.9%. The leases were payable in monthly installments of principal and interest through 2003 and were secured by equipment.

The
Company also leases certain equipment, office and manufacturing space under operating leases that expire at various dates through 2008. The future minimum lease payments under
installment notes and non-cancelable leases as of December 31, 2003 were as follows (in thousands):

Operating
leasesYears ending:December 31, 2004


1,768December 31, 2005


1,783December 31, 2006


1,799December 31, 2007


1,816December 31, 2008


1,712Total

$
8,878


Rent
expense under operating leases was $2,672, $2,168, and $11,392 during the years ended December 31, 2003, 2002 and 2001, respectively.

F-20

---

In
August 2000, the Company acquired a 420,000 square foot wafer fabrication facility located in Richardson, Texas for $87 million. The acquisition was financed by a
variable interest entity ("VIE") sponsored by a financial institution in which the Company contributed $73 million and a lender contributed $14 million. In September 2002, the
Company completed an improvement to the Richardson, Texas facility, of which $18.5 million was financed through the same financial institution-sponsored VIE as part of the original financing
agreement. The Company contributed $14.5 million and the lender contributed $4.0 million. Of the total amount contributed to the VIE, the Company was required to collateralize 97%
through pledged investment securities and a participation interest in the VIE. Under the agreement, the Company was required to make lease payments through August 2005 or purchase the property
at that time. On July 16, 2003, the Company terminated the lease on its wafer fabrication facility located in Richardson, Texas and took ownership of the facility. In association with the
termination of this lease, the Company released the $17.4 million on its balance sheet as "Restricted long-term assets" as of December 31, 2002 to the financial institution
sponsoring the lease and incurred various legal fees associated with the title transfer. In addition, of the $88.1 million shown on the Company's balance sheet as "Other investment" as of
December 31, 2002, representing the Company's previous participation in the VIE financing of the facility, $46.1 million was reclassified as "Property, plant and equipment" and
$42.0 million was recorded as a noncash charge to earnings
during the year ended December 31, 2003 for costs associated with the termination of this lease. This charge is classified as "Lease termination costs" on the Consolidated Statements of
Operations.

6. Goodwill and Other Acquisition-Related Intangible Assets

Changes in the carrying amount of goodwill for 2003 and 2002 were as follows (in thousands):

Balance as of December 31, 2001

$
Workforce reclassified as goodwill


450Goodwill acquired during the period


31,706Sale of a portion of acquired IBM business


(733
)Impairment of goodwill


(30,973
)Balance as of December 31, 2002

$
450Goodwill acquired during the period


Impairment of goodwill


Balance as of December 31, 2003

$
450


F-21

---

Information
regarding the Company's other acquisition-related intangible assets and goodwill was as follows (in thousands):

|                              |  | December 31, 2003 |        |  |   | December 31, 2002 |  |  
|----------------------------- |  | ----------------- | ------ |  | - | ----------------- |  | -
|
|Patents, trademarks and other |  | $                 | 10,044 |  | $ | 4,493             |  | $
|                              |  |                   |        |  |   |                   |  |  
|Total                         |  | $                 | 10,044 |  | $ | 4,493             |  | $
|                              |  |                   |        |  |   |                   |  |  

Amortization
expense of other acquisition-related intangible assets was $3,254, $1,503 and $256 for the years ended December 31, 2003, 2002 and 2001, respectively. The periods
over which the Company amortizes these intangible assets range from two to 10 years, depending on the estimated useful life of the intangible asset. In addition, amortization of bond issuance costs
was $1,233, $1,307 and $1,510 in 2003, 2002 and 2001 respectively. This expense is classified as "Interest expense" in the Consolidated Statements of Operations. The net asset balances are included in
"Other current assets" in the Consolidated Balance Sheets.

The
estimated future amortization expense of other acquisition-related intangible assets is as follows (in thousands):

Years ending:December 31, 2004

$
2,551December 31, 2005


2,416December 31, 2006


289December 31, 2007


289December 31, 2008


220Thereafter


220


7. Assets Held for Sale

In accordance with SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets("SFAS 144"), the Company has classified the buildings and land associated with its Pennsylvania operations, totaling $22,291, and certain equipment, totaling $2,132 associated with its Texas
operations as assets held for sale. The Company is marketing these assets for sale and expects to sell them within a year.

F-22

---

8. Other Accrued Liabilities

Other accrued liabilities consisted of the following (in thousands):

December 31,2003

2002Warranty liability

$
9,293

$
2,159Accrued interest payable


3,583


3,584Accrued real estate tax


95


2,225Sales return reserve


4,387


1,768Other


11,786


7,901$
29,144

$
17,637


9. Convertible Subordinated Notes

In February and March 2000, the Company completed the sale of $345,000 aggregate principal amount of 4% convertible subordinated notes due 2007, raising
approximately $333,900 net of fees and expenses. The notes are unsecured obligations of the Company and subordinated to all of the Company's present and future senior indebtedness. Interest on the
notes is payable in arrears semiannually on each March 1 and September 1. The notes are convertible, at the option of the holder, at any time prior to redemption or maturity into shares
of the Company's common stock at a conversion price per share of $67.80, subject to certain adjustments. During 2002, the Company repurchased approximately $27,745 of these notes at a cost of $21,137.
The repurchase resulted in a gain on retirement of long term debt of $6,009 which is net of a write down of issuance costs of $599. During 2001, the Company repurchased approximately $48,500 of these
notes at a cost of $39,100, which included a write-down of issuance cost of $1,228. This repurchase resulted in a gain of $9,401.

10. Income Taxes

Domestic and foreign pre-tax income (loss) was as follows:

Years ended December 31,2003

2002

2001Domestic

$
(88,889
)
$
(139,158
)
$
(52,462
)Foreign


14,367


14,839


11,919Total

$
(74,522
)
$
(124,319
)
$
(40,543
)


F-23

---

Income
tax expense (benefit) consisted of:

Years ended December 31,2003

2002

2001Current:Federal

$
741

$
6,063

$
11,946State


(1,916
)

1,087


1,644Foreign


(369
)




Total current


(1,544
)

7,150


13,590Deferred:Federal





24,554


(24,088
)State





2,537


(3,834
)Foreign








Total deferred





27,091


(27,922
)Income tax expense (benefit)

$
(1,544
)
$
34,241

$
(14,332
)


The
effective tax rate differed from the federal statutory income tax rate as follows:

Years ended December 31,2003

2002

2001Tax computed at federal statutory rate

(35.0
)%
(35.0
)%
(35.0
)%State income tax, net of federal effect

(2.0
)
(2.0
)
(3.8
)Increase in valuation allowance

38.1

69.7

11.7Non-deductible merger costs





3.3Foreign sales benefit



(0.8
)
(4.9
)Current benefit of tax exemption of Costa Rican subsidiary

(5.7
)
(5.6
)
(8.7
)Subpart F income

3.0



IRS settlement

2.7



Other, including tax credits, tax-exempt interest income and dividend income

(3.2
)
1.2

2.0Effective tax rate

(2.1
)%
27.5
%
(35.4
)%


F-24

---

The
tax effects of significant items comprising the Company's deferred tax asset and liability were as follows:

2003

2002Deferred tax assets:Amortization and depreciation


27,546


16,753Capitalized research and development expenditures


8,434


9,559Reserves and allowances


4,215


9,140Accrued liabilities


1,430


2,750Asset impairment


27,777


36,001Impairment of investment in other companies


5,463


14,699Inventory


6,839


Other





2,778Net operating loss carryforwards


44,670


Capital loss carryforwards


6,174


Research and development and other credits


2,338


2,338Total deferred tax asset


134,886


94,018Valuation allowance


(134,886
)

(94,018
)Net deferred tax asset/(liability)

$


$



The
Company recorded a tax provision benefit of approximately $1.5 million for the year ended December 31, 2003. The provision does not reflect a benefit for current year
losses due to a full valuation allowance against deferred tax assets. The net change in total valuation allowance for the deferred tax assets for 2003, 2002 and 2001 were increases of $40,868, $88,003
and $5,856 respectively.

In
assessing the realizability of deferred tax assets, SFAS No. 109 establishes a more likely than not standard. If it is determined that it is more likely than not that deferred
tax assets will not be realized, a valuation allowance must be established against the deferred tax assets. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which the associated temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies in making this assessment.

Although
the Company anticipates future sustained profitability, SFAS No. 109 requires that recent historical operating performance and income projections be considered in
assessing the realizability of the deferred tax assets. The more likely than not assessment was principally based upon the losses generated during 2003, 2002 and 2001.

At
December 31, 2003, the Company had approximately $114,560 of net operating loss carryforwards to offset future U.S. taxable income, expiring from 2004 through 2023, $99,565 for
state tax purposes, expiring 2003 through 2023 and $4,962 for foreign tax purposes, which begin to expire in 2007. Additionally, during 2003 the Company generated $16,248 of capital loss carryforward
to offset future capital gains, which will expire in 2008. The Company has placed a full valuation allowance against the tax effect of all net operating and capital loss carryforwards.

F-25

---



For 2003, the Company generated $1,362 of net operating loss carryforwards resulting from stock option transactions, which were offset by a valuation allowance.
The Company will record benefits to additional paid in capital as the net operating losses are realized pursuant to SFAS No 109. Due to the creation of a valuation allowance against deferred tax
assets during 2002, the Company recorded a decrease to additional paid-in capital of $8,074 to reverse the benefit of net operating loss carryforwards generated from stock option
transaction.

During
2003, the Company settled an IRS tax examination relating to the 2000 and 2001 tax years, which resulted in the reduction of net operating loss carryforwards by $2,292 and
$10,105, respectively.

The
Company provided for deferred taxes on the non-repatriated earnings of its subsidiary in Costa Rica prior to fiscal 2000. This subsidiary benefited from a complete
exemption from Costa Rican income taxes through 2003, 75% exemption through 2005, and 50% exemption thereafter through 2007. In 2000, the Company determined that its investment in Costa Rica was
permanent and that its earnings are considered indefinitely reinvested; and, accordingly, no provision for United States federal and state income taxes has been provided for 2003, 2002 or 2001. In the
event the Costa Rican subsidiary remits these earnings to the U.S. parent; the earnings may be subject to U.S. federal and state income taxes. The estimated unrecognized deferred income tax liability
on these unremitted earnings at December 31, 2003 and 2002 is approximately $44,300 and $39,600, respectively.

11. Concentration of Risk



The Company currently obtains some components, equipment and services for their products from limited or single sources. The Company purchases these components,
equipment and services on a purchase order basis, does not carry significant inventories of components and does not have any long-term supply contracts with these vendors. Requirements of
the Company are relatively small compared to silicon semiconductor manufacturers. Access to sufficient capacity from these vendors in periods of high demand may be limited, as the Company often does
not account for a significant part of the vendor's business. If the Company were to change any of its sole or limited source vendors, it would be required to requalify each new vendor. Requalification
could prevent or delay product shipments that could negatively affect its results of operations. In addition, reliance on these vendors may negatively affect the Company's production if the
components, equipment or services vary in reliability or quality. If the Company is unable to obtain timely deliveries of sufficient quantities of acceptable quality or if the prices increase, results
of operations could be harmed.



The Company performs periodic credit evaluations of certain customers and generally does not require collateral; however, in certain circumstances, the Company
may require letters of credit from its customers. All of the Company's customers are in the communications markets.



At times the Company may engage in foreign exchange forward contracts to lock in the cost of foreign currency exposures for the purchase of equipment or raw
materials denominated in foreign

F-26

---

currencies.
While these forward contracts are subject to fluctuations in value from movement in the foreign currency exchange rates, such fluctuations are offset by the change in value of the
underlying exposures being hedged.

The
Company is not a party to leveraged derivatives and does not hold or issue financial instruments for trading purposes. Foreign currency contracts are entered into with major
financial institutions with
investment grade credit ratings, thereby decreasing the risk of credit loss. Gains and losses on instruments that hedge firm commitments are deferred and are included in the basis of the underlying
hedged item.

12. Segment Information

The Company complies with Statement of Financial Accounting Standards No. 131 ("SFAS 131"),Disclosures About Segments of an
Enterprise and Related Information. SFAS 131 establishes standards for the reporting by public business enterprises of information about operating segments, products and
services, geographic areas and major customers. The method for determining what information to report is based on the way that management organizes the segments within the Company for making operating
decisions and assessing financial performance.

The
Company's chief operating decision maker is considered to be the President and Chief Executive Officer (the "CEO"). The Company's CEO evaluates both consolidated and disaggregated
financial information in deciding how to allocate resources and assess performance. The CEO receives certain disaggregated financial information for the Company's four markets: Wireless Phones,
Infrastructure Networks, Optical Networks and Defense, and four operating units: Oregon, Optoelectronics, Texas and Sawtek.

The
Company has aggregated its businesses into a single reportable segment as allowed under SFAS 131 because they have similar long-term economic characteristics,
including average gross margin. In addition, they are similar in regards to (a) nature of products and production processes, (b) type of customers and (c) method used to
distribute products. Accordingly, the Company describes its reportable segment as high-performance components and modules for communications applications. All of the Company's revenues
result from sales in these product lines.

Revenues
by business markets (as defined by the Company in 2002), as a percentage of total revenues for 2003, 2002 and 2001 were as follows: Wireless Phones, 41%, 45% and 35%
respectively; Infrastructure Networks, 29%, 31% and 35% respectively; Optical Networks, 14%, 5% and 18% respectively; and Defense, 16%, 19% and 12% respectively.

Revenues
outside of the United States, in thousands, were approximately $189,000 in 2003 of which revenues to Korea were approximately $49,100. In 2002 and 2001, revenues outside of the
United States, in thousands, were approximately $151,200 and $147,500 respectively, of which revenues to Korea were $34,900 in 2002. There were no other foreign countries to which revenues represented
10% or more of revenues.

Revenues
are reported in the geographic areas where they originate. Transfers from the U.S. to Costa Rica are made on a basis intended to reflect the market price of the products.
Transfers from the U.S. to Costa Rica are accounted for at amounts that are above cost and are consistent with rules

F-27

---

and
regulations of taxing authorities. Such transfers are eliminated in the consolidated financial statements.

Selected
financial information by geographical area is summarized below (in thousands):

|                       |  | Years ended December 31, |        
|---------------------- |  | ------------------------ | -------
|
|
|United States          |  | $                        | 258,515
|Costa Rica             |  |                          | 84,438 
|Transfers/Eliminations |  |                          | (30,681
|                       |  |                          |        
|Consolidated Results   |  | $                        | 312,272
|                       |  |                          |        

To date, substantially all sales have been denominated in U.S. dollars. The functional currency for the Costa Rican operations is the U.S. dollar
as sales, most material cost and equipment are U.S. dollar denominated. The impact of fluctuations of the local Costa Rican currency is not considered significant and is not hedged.

Revenues
for significant customers, those representing approximately 10% or more of total revenues for each period, were as follows:

Years ended December 31,2003

2002

2001Nokia



10
%
15
%Motorola

14
%
16
%



Related
receivables from Motorola customer were 8% and 9% of trade accounts receivable at December 31, 2003 and 2002, respectively.

13. Employee Benefit Plans

The Company has a qualified retirement plan under the provisions of Section 401(k) of the Internal Revenue Code covering substantially all employees in the
United States. Participants in this plan may defer up to the maximum annual amount allowable under IRS regulations. Company contributions to the 401(k) Plan were approximately $733, $745 and $2,226 in
2003, 2002 and 2001. The Company also has profit share and other benefit plans covering substantially all employees worldwide. The Company made contributions under these plans of approximately $180,
$211, and $170 for 2003, 2002 and 2001, respectively.

In
addition, the Company has established a stock ownership plan and stock purchase plan. Under an Employee Stock Ownership Plan for Sawtek employees, the Company made contributions of
approximately $209, $223, and $237 during 2003, 2002 and 2001, respectively. Share allocation to participants' accounts were 831,599, 887,164, and 942,727 during 2003, 2002 and 2001 respectively.
Under an Employee Stock Purchase Plan employees are able to purchase the Company's common stock at 85% of fair market value.

F-28

---

14. Stock Options



Under the 1987 and 1996 Stock Incentive Programs, the 1998 Nonstatutory Stock Option Plan, and the acquired Sawtek Stock Option Plan (the "Plans"), the Company
has authorized the issuance of 11,386,612, 31,050,000, 4,000,000 and 2,602,827 common shares, respectively, of which a total of 8,091,958 shares were available to grant as of December 31, 2003.
The 1987 and 1996 Plans provide for the grant of incentive stock options to officers and other employees of the Company or any parent or
subsidiary. The 1998 Plan provides for the grant of non-qualified stock options to non-officer employees of the Company. Subject to the discretion of the Board of Directors,
options granted under the Plans generally vest and become exercisable at the rate of 28% at the end of the first year, and thereafter at a rate of 2% per month and have a 10 year term.

The
stock plans were amended in 2002 to provide that options granted thereunder must have an exercise price per share no less than 100% of the fair market value of the share price on the
grant date.

With
respect to any participant who owns stock possessing more than 10% of the voting rights of the Company's outstanding capital stock, the exercise price of any incentive stock option
granted must equal at least 110% of the fair market value on the grant date. The terms of all options granted under the Plans may not exceed 10 years. The fair value of each stock based
compensation award is estimated on the date of grant using the Black Scholes option-pricing model assuming no dividend yield and the following weighted-average assumptions for stock based compensation
awards:

Stock Option Plans2003

2002

2001Risk-free interest rate


3.52
%

3.82
%

4.56
%Expected life in years


5.8


5.4


5.4Expected volatility


93
%

97
%

94
%Per share weighted-average fair value

$
3

$
5

$
11


Employee Stock Purchase Plans2003

2002

2001Risk-free interest rate


1.24
%

2.00
%

3.49
%Expected life in years


0.5


0.5


0.5Expected volatility


71
%

95
%

114
%Per share weighted-average fair value

$
2

$
2

$
6


F-29

---

Activity
under the Company's stock option plans was as follows:

Number
of
shares

Weighted-
average
exercise
priceOptions outstanding at December 31, 2000

16,657,832

$
15.98Options:Granted

4,250,219


16.51Exercised

(2,060,654
)

3.59Canceled

(1,184,993
)

23.91Options outstanding at December 31, 2001

17,662,404

$
16.80Options:Granted

4,355,426


6.88Exercised

(1,128,666
)

3.06Canceled

(1,720,900
)

21.87Options outstanding at December 31, 2002

19,168,264

$
14.94Options:Granted

7,265,033


4.14Exercised

(527,920
)

3.03Canceled

(1,648,627
)

11.36Options outstanding at December 31, 2003

24,256,750

$
12.21


The
following table summarizes information concerning stock options outstanding and exercisable at December 31, 2003:

Range of
exercise
prices

Number
outstanding
as of
December 31,
2003

Weighted-
average
remaining
contractual
life

Weighted-
average
exercise
price

Number
exercisable
as of
December 31,
2003

Weighted-
average
exercise
price$
0.59 -   3.04

3,222,206

4.87

$
2.66

2,906,786

$
2.633.05 -   3.42

702,978

5.93


3.27

463,081


3.323.44 -   3.53

2,644,731

9.23


3.52

145,591


3.533.54 -   4.63

1,152,088

5.27


3.95

791,370


3.924.66 -   4.66

2,846,169

9.01


4.66

0


0.004.67 -   7.21

3,174,078

8.12


6.35

1,221,017


6.297.44 - 10.38

2,476,551

7.10


9.85

1,419,825


9.9510.76 - 21.13

3,965,828

6.65


15.86

3,074,073


16.9021.28 - 36.50

2,509,036

6.67


32.18

1,588,748


31.6636.75 - 61.44

1,563,085

6.00


44.74

1,349,591


44.7724,256,750

7.09

$
12.21

12,960,082

$
15.22


F-30

---

15. Capital Structure



On June 30, 1998, the Company adopted a Preferred Shares Rights Agreement (the "Agreement"). Pursuant to the Agreement, rights were distributed as a
dividend at the rate of one right for each share of TriQuint common stock, par value $0.001 per share of the Company held by stockholders of record as of the close of business on July 24, 1998.
The rights will expire on June 29, 2008, unless redeemed or exchanged. Initially, under the Agreement, each right entitled the registered holder to buy one share of preferred stock for $20.83.
On April 5, 2000, the Company approved an amendment to the Agreement to increase the per unit price to $200.00. These prices are reflective of all stock splits. The rights will become
exercisable only if a person or group (other than stockholders currently owning 15% of the Company's common stock) acquires beneficial ownership of 15% or more of the Company's common stock, or
commences a tender offer or exchange offer upon consummation of which such person or group would beneficially own 15% or more of the Company's common stock.

16. Impairments

During 2002, the Company recorded charges of $94,740 for impairment of long-lived assets and goodwill to reduce the carrying value for which market
values were impaired due to current and projected market conditions resulting in excess capacity. These charges were comprised of:



Additionally
during 2003, 2002 and 2001, the Company recorded charges of $2,387, $23,778 and $15,057 related to a decline of the carrying value of certain privately held investments.
These investments were in small companies whose valuations declined significantly based on factors such as current equity offerings, projected financial conditions and decline in market value of
similar companies.

17. Severance Costs

In June 2003, the Company adopted a plan to reduce its operating costs and streamline its available capacity. As part of this plan, the Company determined
that it would terminate approximately

F-31

---

80
employees associated with its optoelectronics business in Breinigsville, Pennsylvania and its design center in Munich, Germany. In June 2003, the Company accrued and recorded as a charge to
earnings $2,633 for expected severance costs. An adjustment to reduce this amount by $160 was recorded in September 2003 to reflect a reduction in the number of employees originally expected to
be impacted. As of December 31, 2003, a liability of $752, included in "Other accrued liabilities" on the Consolidated Balance Sheets, remains for the unpaid portion of the severance costs. In
addition, the Company also assumed accrued severance costs of $1,800 as part of the acquisition of its optoelectronics business from Agere. As of December 31, 2003, a liability of $838,
included in "Other accrued liabilities" on the Consolidated Balance Sheets, remains for the unpaid portion of those severance costs.

18. Litigation

In February 2003, several nearly identical putative civil class action lawsuits were filed in the United States District Court for the Middle District of
Florida against Sawtek, Inc., the Company's wholly owned subsidiary since July 2001. The lawsuits also named as defendants current and former officers of Sawtek and the Company. The
cases were consolidated into one action, and an amended complaint was
filed in this action on July 21, 2003. The amended class action complaint is purportedly filed on behalf of purchasers of Sawtek's stock between January 2000 and May 24, 2001, and
alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act, as well as Securities and Exchange Commission Rule 10b-5, by making false and
misleading statements and/or omissions to inflate Sawtek's stock price and conceal the downward trend in revenues disclosed in Sawtek's May 23, 2001 press release. The complaint does not
specify the amount of monetary damages sought. Sawtek and the individual defendants filed their motion to dismiss on September 3, 2003, and briefing on the motion was completed on
November 19, 2003. The court heard oral argument on November 21, 2003, and issued an order partially denying the motion to dismiss on December 19, 2003. Specifically, the court
found that the complaint was not barred by the statute of limitations, but reserved ruling on the other aspects of the motion to dismiss. Because the statute of limitations issue is a novel question
of law, the court stayed the proceedings in this case to allow the defendants to file an interlocutory appeal to the Eleventh Circuit Court of Appeals. Defendants duly filed for interlocutory appeal
on January 22, 2004. Because the Court of Appeals is considering the identical issue in another matter, the appeal process has been stayed, pending the Court of Appeals' decision in the other
matter. The Company denies the allegations contained in the complaint and intends to continue its vigorous defense against these claims.

In
December 2002, the Company filed a lawsuit against Finisar Corporation in Multnomah County Circuit Court of Oregon. The lawsuit alleged that Finisar failed to pay the Company for
semiconductor wafers delivered between September 2000 and December 2001. In response to the complaint, Finisar Corporation filed an answer, affirmative defenses and counterclaims
alleging that the Company's wafers were defective. Finisar alleged claims for breach of contract, breach of warranty, negligence, and restitution. In 2003, this matter was settled to the satisfaction
of both parties.

F-32

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TRIQUINT SEMICONDUCTOR, INC.  Schedule IIValuation and Qualifying Accounts  (in thousands)

|Years ended December 31, |                                     | Balance at
beginning of
period |   | Additions
charged to costs
and expenses |  | Deductions |        | Balance at
end of period
|------------------------ | ----------------------------------- | ------------------------------ | - | --------------------------------------- |  | ---------- | ------ | ------------------------
|2001                     |                                     |                                |   |                                         |  |            |        |                         
|                         | Allowance for doubtful accounts     |                                | $ | 1,755                                   |  | $          | 854    |                         
|                         | Inventory valuation reserve         |                                |   | 10,645                                  |  |            | 15,898 |                         
|                         | Estimated liability for warranty    |                                |   | 1,265                                   |  |            | 727    |                         
|2002                     |                                     |                                |   |                                         |  |            |        |                         
|                         | Allowance for doubtful accounts     |                                | $ | 2,565                                   |  | $          | 1,424  |                         
|                         | Inventory valuation reserve         |                                |   | 20,171                                  |  |            | 1,349  |                         
|                         | Estimated liability for warranty    |                                |   | 1,577                                   |  |            | 1,388  |                         
|2003                     |                                     |                                |   |                                         |  |            |        |                         
|                         | Allowance for doubtful accounts     |                                | $ | 3,867                                   |  | $          | 755    |                         
|                         | Inventory valuation reserve         |                                | $ | 19,786                                  |  | $          | 6,222  |                         
|                         | Estimated liability for warranty(1) |                                |   | 2,159                                   |  |            | 10,621 |                         

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S-1

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TRIQUINT SEMICONDUCTOR, INC.

EXHIBIT INDEX

|Exhibit
Number |  | Description                                                                                                                                                                                                                                                                               
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1(1)         |  | Certificate of Incorporation of Registrant                                                                                                                                                                                                                                                
|3.1.1(2)       |  | Certificate of Amendment to Certificate of Incorporation                                                                                                                                                                                                                                  
|3.1.2(11)      |  | Certificate of Correction to Certificate of Incorporation                                                                                                                                                                                                                                 
|3.1.3(11)      |  | Certificate of Designation of Series A Participating Preferred Stock                                                                                                                                                                                                                      
|3.1.4(11)      |  | Certificate of Amendment to Certificate of Incorporation                                                                                                                                                                                                                                  
|3.2(1)         |  | Bylaws of Registrant                                                                                                                                                                                                                                                                      
|4.1(3)         |  | Preferred Shares Rights Agreement, dated as of June 30, 1998 between Registrant and ChaseMellon Shareholder Services, L.L.C., including the Certificate of Determination, the form of Rights Certificate and the Summary
of Rights attached thereto as Exhibits A, B, and C, respectively.
|4.2(4)         |  | Indenture dated February 24, 2000 between the Registrant and State Street Bank and Trust Company of California, N.A.                                                                                                                                                                      
|10.4(5)        |  | Letter Agreement dated November 22, 1991 between Registrant and Steven J. Sharp                                                                                                                                                                                                           
|10.18(7)       |  | 1996 Stock Incentive Program and forms of agreement thereunder                                                                                                                                                                                                                            
|10.19(1)       |  | Form of Indemnification Agreement executed by Registrant and its officers and directors pursuant to Delaware reincorporation                                                                                                                                                              
|10.22(15)      |  | 1998 Nonstatutory Stock Option Plan and forms of agreement thereunder                                                                                                                                                                                                                     
|10.23(9)       |  | 1998 Employee Stock Purchase Plan and forms of agreement thereunder                                                                                                                                                                                                                       
|10.33(8)       |  | Sawtek Inc. Employee Stock Ownership and 401(k) Plan                                                                                                                                                                                                                                      
|10.34(12)      |  | Sawtek Inc. 2000 Implementation Agreement                                                                                                                                                                                                                                                 
|10.35(12)      |  | Sawtek Inc. 2000 Modified ESOP Loan Agreement                                                                                                                                                                                                                                             
|10.36(12)      |  | Sawtek Inc. 2000 Renewed ESOP Note                                                                                                                                                                                                                                                        
|10.37(12)      |  | Sawtek Inc. Second Stock Option Plan                                                                                                                                                                                                                                                      
|10.38(12)      |  | Sawtek Inc. Stock Option Plan for Acquired Companies                                                                                                                                                                                                                                      
|10.40(13)*     |  | Amended Sale and Transfer Agreement between Infineon Technologies AG, Infineon Technologies North America Corp., Registrant and TriQuint GmbH dated as of April 29, 2002                                                                                                                  
|10.41(8)       |  | Letter Agreement dated June 28, 2002 between Registrant and Ralph G. Quinsey                                                                                                                                                                                                              
|10.42(14)      |  | Asset Purchase Agreement by and between Agere Systems Inc. and Registrant dated as of October 21, 2002                                                                                                                                                                                    
|10.42.1(14)    |  | Amendment No. 1 to Asset Purchase Agreement by and between Agere Systems Inc. and Registrant dated as of January 2, 2003                                                                                                                                                                  
|10.42.2(14)    |  | Assignment and Bill of Sale and Assumption Agreement by and between Agere Systems Inc. and TriQuint Optoelectronics, Inc. dated as of January 2, 2003                                                                                                                                     
|10.42.3(14)    |  | Assignment and Bill of Sale and Assumption Agreement by and between Agere Systems Inc. and TriQuint Technology Holding Co. dated as of January 2, 2003                                                                                                                                    
|10.43.4(14)    |  | Intellectual Property Agreement by and between Agere Systems Inc. and Registrant dated as of January 2, 2003                                                                                                                                                                              
|10.43.5(14)    |  | Purchase Agreement by and between Agere Systems Inc. and Registrant dated as of January 2, 2003                                                                                                                                                                                           
|10.43.7(14)    |  | Equity Purchase Agreement by and among Agere Systems Inc., Agere Systems International, LLC, Registrant, TriQuint International Holding Co., TriQuint International Holding LLC and Agere Systems de Mexico, S. DE R.L.
DE C.V. dated as of January 2, 2003                               
|10.44(16)      |  | Letter Agreement dated November 20, 2002 between Registrant and Raymond A. Link                                                                                                                                                                                                           
|12.1           |  | Computation of Ratios of Earnings to Fixed Charges                                                                                                                                                                                                                                        
|21.1           |  | Subsidiaries                                                                                                                                                                                                                                                                              
|               |  |                                                                                                                                                                                                                                                                                           

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|23.1 |  | Consent of KPMG LLP, Independent Auditors                                                                                                                            
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|24.1 |  | Power of Attorney (see page 67)                                                                                                                                      
|31.1 |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended                                    
|31.2 |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended                                    
|32   |  | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley act of 2002

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