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United States
SECURITIES AND EXCHANGE COMMISSION
Washington, 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, 2002 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

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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)

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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.    ý

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, 2002 reported on
the Nasdaq Stock Market's National Market, was approximately $729,009,858. 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, 2002, the registrant had outstanding 133,162,755 shares of common stock.

The
Index to Exhibits appears on page 58 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 2003 Annual Meeting of
Stockholders.

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TRIQUINT SEMICONDUCTOR, INC.  2002 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 CONSOLIDATED 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                                     |  | 55  
|ITEM 8.    |  | CONSOLIDATED FINANCIAL STATEMENTS AND CONSOLIDATED SUPPLEMENTARY FINANCIAL DATA                |  | 55  
|ITEM 9.    |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE           |  | 56  
|PART III  
|ITEM 10.   |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                             |  | 57  
|ITEM 11.   |  | EXECUTIVE COMPENSATION                                                                         |  | 57  
|ITEM 12.   |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |  | 57  
|ITEM 13.   |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                 |  | 57  
|ITEM 14.   |  | CONTROLS AND PROCEDURES                                                                        |  | 57  
|PART IV   
|ITEM 15.   |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                                |  | 58  

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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; integration of our acquisitions of Infineon's GaAs business, IBM's wireless phone chipset 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. Markets include wireless phones, infrastructure networks, optical networks, and defense. We provide customers with standard and custom product solutions as well as foundry services. Products are
based on advanced process technologies including gallium arsenide ("GaAs"), indium phosphide ("InP"), silicon germanium ("SiGe"), and surface acoustic wave ("SAW"). Our customers include major
communication companies worldwide.

Our
products are designed on various wafer substrates such as GaAs, SiGe, 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 performance than silicon devices. We sell our products worldwide to end-user customers, including The Boeing Company,

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Ericsson, Kyocera, LG Group, Lucent, Motorola, Inc., Nokia Corporation, Nortel Networks Corporation, 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 we are in the process of opening an assembly facility 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, modulators 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 to 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.

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 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") and be multiplexed to provide data capacity to 80 Gbits/sec or higher per individual fiber. The advent of video communications and multimedia, which combines voice,

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video and data are placing further demands on these systems for even higher transmission rates. This is especially true in the local and end user arenas, which are often referred to as the Metro Ring
and Last Mile, 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, InP and SiGe
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 and SiGe 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.

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 and SiGe 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.

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TriQuint Strategy

We are a global supplier to the communications industry with a focus on media interface applications of RF and optical communications systems. We strive to be a
premier supplier of solutions based on complex materials such as GaAs, SiGe, 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. Our primary
application areas are wireless phones, infrastructure networks, optical networks and defense. Our products are designed on various wafer substrates such as GaAs, SiGe, InP, LiNbO3, LiTaO3 and quartz,
using a variety of technologies including pHEMT, HBT, HFET, MESFET and SAW. We delivered products and services to approximately 400 customers during 2002. In addition, we had 35 customers that each
contributed $1.0 million or more to our revenues in 2002.

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, 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"). Our new products are focused on modules for
both GSM and CDMA wireless phones, WLANs, new SAW filter applications and new applications for optical networks and broadband and microwave equipment.

In
October 2002, we announced the acquisition of a large portion of the optoelectronics business of Agere based in Breinigsville, Pennsylvania. We completed this acquisition in
January 2003. This world class design and manufacturing organization, which has origins back to Bell Laboratories, brings a new
market to our company. The products of this business, along with the customers they serve, are complementary to the products and customers we currently serve. We expect to integrate our organizations
to develop superior integrated products.

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 and Schlumberger Limited.

Markets and Applications

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

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Wireless Phones.This business accounted for approximately 45% of our total revenues in 2002. 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 and GSM/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 contain signal quality similar to wired communication systems, be smaller and lighter, accommodate longer talk time and standby time and contain complex functionality. 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. While the wireless phone market has grown in the past, it has experienced a slowdown since 2001 due to the
overall softness in the economy and other factors.

Our
use of various wafer substrates such as GaAs, SiGe, 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 and power
amplifier products. During 2002, we announced a wide range of new products including HBT power amps, SiGe-based products, SAW-based duplexers and various receiver products for
applications in the wireless phone and wireless local area networking markets. In addition, our SAW-based RF filters introduced in 2000 have gained significant market acceptance and are
now our highest volume product.

Infrastructure Networks.This business accounted for approximately 31% of our total revenues in 2002. 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 the
infrastructure end market to 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 availability of capital equipment budgets. In 2002, demand in the base station market was soft due to reduced capital
spending by network operators.

We
believe we are the leading supplier of SAW filters for both GSM 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 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 the existing TDMA networks. The third is build-out of WCDMA
systems.

We
participate in the satellite communications market in both orbiting payload and ground station uplinks for satellite communication systems. Purchases of equipment by customers in this
market was down

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in 2002 compared to 2001 due to the reduction in satellite launches. We believe that the ground station market will grow as two-way broadband communication products are introduced in
2004. Other broadband products include products for cable and wireless high speed Internet services and wireless distribution of phone, video and interactive cable television services.

Approximately
5% of our total revenues stem from sales of our products through distributors. All of these distributor sales are grouped into the infrastructure networks end market.

Optical Networks.This business accounted for approximately 5% of our total revenues in 2002. The fiber optic network market
grew 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. Fiber optic network demand has occurred for
both the telecommunications and data communications markets. The expansion has been driven by increasing Internet usage, business networking, facsimile exchange and voice traffic, as well as the
ongoing upgrade of existing systems to fiber optic components.

Fiber
optic cables can transmit data at rates exponentially 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, ISDN and ATM. For example, high-performance SONET telecommunications systems can operate at
frequencies of 10 Gb/s or higher. 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. Internet applications,
video communications and multimedia applications continue to place demands on these systems for even higher transmission rates, especially in the Metro Ring environment.

To
fully utilize the benefits of fiber optic cable, the electronic processors and modules in these networks must be able to operate at speeds up 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 optical network standards. We offer a variety of products that include multiplexers and demultiplexers, laser/modulator drivers, photo detectors and transimpedance amplifiers.
We have added significantly to our product offering lineup through our Agere acquisition. We now offer high performance lasers, detectors, modulators, receivers, transceivers, transponders and optical
amplifiers. The optical networks market and demand for our products targeted at these applications have been depressed since 2000 and we expect continued softness through 2003. The Agere acquisition,
however, will position us well to serve this market when it recovers.

Defense.This business accounted for approximately 19% of our total revenues in 2002. 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. 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.

Products

We offer a broad array of RF, analog and mixed-signal integrated circuits, lasers, detectors, optical modulators, transceivers, transponders, optical amplifiers
and SAW filter products to address the needs of our target markets. We utilize high-frequency substrate materials such as GaAs, SiGe and 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

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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 each of our 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, 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.

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 applications in this market including 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, modulators, transceivers, transponders and optical amplifiers. These products support the high-performance telecommunications standards, SONET, SDH, ISDN, ATM and DWDM, and the
data communications standards, Gigabit Ethernet and Fibre Channel.



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,

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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. 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. 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 products, which generally involve varied and complex functions operating at high frequencies, generally 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 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, detectors, modulators and optical amplifiers 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.

Customers

We have a broad customer base of leading systems manufacturers. In 2002, we shipped products or provided manufacturing services to approximately 400
end-user customers and distributors. 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. In 2000, Ericsson accounted for approximately 14% of our revenues, Motorola accounted for 11% of our revenues, Nokia accounted for approximately 13% of our
revenues and Nortel accounted for approximately 12% of our revenues. No other single customer accounted for greater than 10% of our revenues during these periods. This mix of customers may change in
the future, particularly as a result of our acquisition of the Agere optical components business.

Our
sales to customers outside the United States accounted for approximately 56%, 44% and 50% of revenues in 2002, 2001 and 2000, respectively. Sales to customers in Korea represent the
largest portion of our international sales. Customers in Korea accounted for approximately 13% and 12% of our revenues in 2002 and 2001, respectively. Customers in Canada accounted for approximately
14% of revenues in 2000. No other country represented 10% or more of our revenues in any of those periods.

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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, Costa Rica and China.

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 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
February 2003, we also announced our establishment of a facility in Tianjin, China to provide assembly, test, mark, tape and reel support for our products that serve the
worldwide cell phone market. This facility comprises approximately 11,000 square feet and will also provide us with shorter time-to-market, local currency support and after
sales service in support of domestic Chinese communications equipment manufacturers, as well as other original equipment manufacturers.

In
connection with our acquisition of the Agere optical components business, we acquired rights to 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. There are several clean rooms existing within the complex. We are in the
process of scaling and integrating the manufacturing assets, which are currently located across several Agere sites, into specific designated portions of the Breinigsville and Mexico sites. In
addition, some of the acquired assets will be moved to and installed in our Richardson, Texas facility. We expect to complete the asset integration and take ownership of the site by April 1,
2003, which coincides with the completion of most of the transition support services Agere has agreed to provide. We also assumed the long-term lease obligation on a Matamoros, Mexico
facility from Agere. This facility is used to assemble and integrate optical components into higher level assemblies such as transceivers and transponders.

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

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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.

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 integrating these assembly
needs as we evaluate ongoing product offerings. Outside assembly services are contracted to 11 vendors, five of which are located in the U.S. We perform our own tape and reel operations; however, we
have two domestic vendors 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 United States, principally Costa Rica and now Matamoros, Mexico. In 2003, we will
also begin utilizing our newly established assembly and test facility in Tianjin, China. 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

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manufacturing operations. For our integrated circuit manufacturing operations, we currently have approximately 16 fully qualified wafer vendors, at least three of which are located in the United
States, and three fully qualified mask set vendors, all of which are located in the United States. We purchase high-performance, multilayer ceramic packages from approximately three
vendors, one of which is
located outside the United States. We currently purchase plastic packaging from approximately seven suppliers, one of which is 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.

Our
newly acquired optical components group is dependent upon a large number of suppliers for components that make up the bill of materials ("BOMs") for its product offerings such as
transceivers, transponders and optical amplifiers. The success of these products is critical to the overall success of the business. 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. We are focusing on a successful transition in this area as we
integrate that operation into our company.

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 bandpass 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, 2002, we had 34
independent manufacturers' representative firms and four distributors worldwide. Of the independent manufacturers' representative firms, 19 are based in the United States and 15 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. Of the distributors, one is based in the U.S. and
three support our Europe and Pacific Rim business. 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 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, 2002, our backlog was approximately $70.2 million compared to approximately $78.6 million as of December 31, 2001.
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, 2003. 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.

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We
do not have long-term agreements with any of our customers. Customers generally purchase our products pursuant to cancelable short-term purchase orders. Our
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.

Research and Development

Our research and development efforts are directed towards developing integrated circuits, SAW devices and now 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
2002, we had 678 design wins for products and customers across all of our target markets. Since most of our products are proprietary sole-sourced devices, we believe that
these design wins indicate the strength of our engineering resources. In 2002, we announced several new key products and projects, such as our first 4x4 mm SiGe Pas, a foundry relationship with
Philips to develop HBT-based wireless applications, significant product development effort in GSM power amplifiers, switches and filters, and entry into the optoelectronics market through
our purchase of Agere's optical components group.

Our
research, development and engineering expenses in 2002, 2001 and 2000 were approximately $58.6 million, $51.7 million and $39.8 million, respectively. As of
December 31, 2002, approximately 581 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 occur with our new 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. As more of our product offerings

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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 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 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 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 and STMicroelectronics N.V. Our
GaAs-based competitors include companies such as Anadigics Inc., Fujitsu Microelectronics, Inc., Infineon Technologies AG, 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,
Thales, Fujitsu, Murata and Toyocom. Competition could also come from companies developing alternative technologies such as SiGe and InP integrated circuits and digital filtering and direct conversion
devices. Our major competitors across the optical markets include Fujitsu, JDS-Uniphase, Agilent, Bookham Technologies and Nortel.

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. 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, SiGe 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.

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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 the relatively immature 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 our target markets, we have underutilized capacity. 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.

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

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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, 2002, we employed a total of 1,485 persons, including 720 in manufacturing, 40 in quality and reliability, 581 in process, product and
development engineering, 45 in marketing and sales and 99 in finance and administration. As of December 31, 2002, none of our domestic employees were represented by a collective bargaining
agreement. At our German location, approximately 35 of our employees are represented by a collective bargaining agreement. In addition, approximately 100 non-exempt employees of the
optoelectronics business which we acquired from Agere effective January 2, 2003 are represented by a collective bargaining agreement. We consider our relations with employees to be good and we
have not experienced any work stoppage.

Executive Officers

The names, ages and positions of our executive officers as of March 15, 2003 are as follows:

|Name                   |  | Age |  | Current Position(s) with Company                                                  |  | Position Held
Since
|---------------------- |  | --- |  | --------------------------------------------------------------------------------- |  | -------------------
|Steven J. Sharp        |  | 61  |  | Chairman of the Board of Directors                                                |  | 1992               
|Ralph G. Quinsey       |  | 47  |  | President and Chief Executive Officer                                             |  | 2002               
|Raymond A. Link        |  | 48  |  | Vice President, Finance and
Administration, Chief Financial Officer
and Secretary |  | 2001               
|Brian P. Balut         |  | 37  |  | Vice President, Sales and Marketing                                               |  | 2002               
|Thomas V. Cordner      |  | 58  |  | Vice President, TriQuint Texas                                                    |  | 1998               
|Bruce R. Fournier      |  | 46  |  | Vice President, TriQuint Oregon                                                   |  | 1998               
|David N. McQuiddy, Jr. |  | 64  |  | Vice President, TriQuint Texas                                                    |  | 2000               
|J. David Pye           |  | 52  |  | Vice President, TriQuint Oregon                                                   |  | 1996               
|Glen A. Riley          |  | 40  |  | Vice President, TriQuint Optoelectronics                                          |  | 2003               
|Ronald R. Ruebusch     |  | 53  |  | Vice President, TriQuint Oregon                                                   |  | 1996               
|J. Michael Sanna       |  | 50  |  | Vice President, TriQuint Texas                                                    |  | 2002               
|Azhar Waseem           |  | 49  |  | Vice President, Sawtek Inc.                                                       |  | 2002               
|Stephanie J. Welty     |  | 47  |  | 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

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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 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 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.

Dr. McQuiddy
joined TriQuint in January 2000 as Vice President, Research and Development and in May 2002 he was promoted to Vice President, TriQuint Texas. From
July 1997 to January 2000, Dr. McQuiddy was a Senior Principal Fellow at Raytheon. Dr. McQuiddy joined Texas Instruments in 1968 and served in various capacities until
July 1997. At Texas Instruments, Dr. McQuiddy was responsible for directing internal research and development investments in electro-optics, microwave/millimeter-wave and
micro-electronic technologies. He is an IEEE Fellow and presently serves on the IEEE USA R&D Policy Committee. Dr. McQuiddy received a B.S. degree from Vanderbilt University and a M.S. degree
and a Ph.D. degree in Electrical Engineering from the University of Alabama.

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

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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. In total, he has over 17 years of experience in
the semiconductor industry. Mr. Riley holds a B.S. degree in Electrical Engineering with highest distinction from the University of Maine at Orono.

Mr. Ruebusch
joined TriQuint in May 1996 as Vice President and General Manager, Wireless Communications and in May 2002 was named Vice President, TriQuint Oregon.
From 1993 to May 1996, Mr. Ruebusch was Vice President, Semiconductor Product Development, at Celeritek, Inc., a microwave products company. From 1991 to 1993, Mr. Ruebusch
held management positions at Pacific Monolithics, Inc. (which was acquired by Richardson Electronics, Ltd.). Prior to such time, Mr. Ruebusch spent 13 years in various
positions at Advanced Micro Devices, Inc. and Signetics Corporation (which was acquired by Philips Electronics). Mr. Ruebusch received a B.S. degree in Electrical Engineering, a M.S.
degree in Electrical Engineering and a M.B.A. from the University of Santa Clara.

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 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, 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.

19

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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                        |  | Leased         
|Apopka, Florida                                  |  | Wafer fabrication, engineering, administration, test, technical               |  | 92,100                                   |  | 16                        |  | Owned          
|Apopka, Florida                                  |  | Manufacturing                                                                 |  | 1,400                                    |  |                          |  | Leased         
|Tianjin, China                                   |  | Test and assembly                                                             |  | 11,000                                   |  |                          |  | 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, Tawain                                   |  | Engineering, marketing                                                        |  | 11,000                                   |  |                          |  | Leased         
|Lowell, Massachusetts                            |  | Engineering                                                                   |  | 9,619                                    |  |                          |  | Leased         
|Nashua, New Hampshire                            |  | Engineering                                                                   |  | 4,385                                    |  |                          |  | Leased         
|Breinigsville, Pennsylvania                      |  | Wafer fabrication, engineering, administration, test, technical               |  | 849,000                                  |  | 137                       |  | Leased*        
|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 most of our facilities and some of the properties may exceed our near and
intermediate term needs.

ITEM 3. LEGAL PROCEEDINGS

In February 2003, several nearly identical 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 name as defendants current and former officers of Sawtek and our company. The class action complaints
purportedly are filed on behalf of purchasers of Sawtek's stock between January 2000 and May 23 or May 24, 2001. All of the complaints allege 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. At least one complaint alleges a third cause of action for breach of fiduciary
duty to the shareholders. The complaints do not specify the amount of monetary damages sought. We deny the allegations contained in these complaints and intend to defend against these claims
vigorously.

In
December 2002, we filed a lawsuit against Finisar Corporation in Multnomah County Circuit Court of Oregon. The lawsuit alleges that Finisar failed to pay us for semiconductor
wafers delivered between September 2000 and December 2001. Our complaint seeks payment in the amount of $2,827,627, plus prejudgment and post-judgment interest. In response
to the complaint, Finisar Corporation filed an answer, affirmative defenses and counterclaims alleging that our wafers were defective. Finisar alleges

20

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claims for breach of contract, breach of warranty, negligence, and restitution, seeking damages in the amount of $13,000,000, plus interest. We have filed a reply denying the counterclaim allegations
and intend to vigorously defend against them. The parties are currently engaging in discovery and no trial date has been set.

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 (all prices are adjusted for all stock splits):

High

LowFiscal Year Ended December 31, 20021st Quarter

$
14.00

$
8.902nd Quarter


13.09


5.613rd Quarter


7.75


3.754th Quarter

$
7.53

$
2.55Fiscal Year Ended December 31, 20011st Quarter

$
49.38

$
14.252nd Quarter


32.73


10.253rd Quarter


25.90


14.284th Quarter

$
21.00

$
10.75


The
closing price of our common stock on the Nasdaq National Market on December 31, 2002 was $4.24 per share.

As
of December 31, 2002, there were 133,162,755 shares of common stock outstanding held by approximately 512 stockholders of record. Many stockholders hold their shares in street
name. We believe we have more than 76,000 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 an operating lease and subordinated
convertible debt which contain 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.

22

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ITEM 6. SELECTED CONSOLIDATED 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, 1999 and 1998 of TriQuint and Sawtek, which were audited by KPMG LLP and
Ernst & Young, LLP, respectively. The 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 Consolidated 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 |                                   
|                                                        | Acquisition related costs                    |                                   
|                                                        | Reduction in work force                      |                                   
|                                                        | Special charges                              |                                   
|                                                        |                                              |                                   
|                                                        |                                              | Total operating costs and expenses
|                                                        |                                              |                                   
|                                                        |                                              | Income (loss) from operations     
|Other income (expense), net                             |                                              |                                   
|Impairment of equity investments in private companies   |                                              |                                   
|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 our financial statements and the related notes included elsewhere in this Annual Report
on Form 10-K and the Selected Consolidated Financial Data above. The discussion in this Annual Report on Form 10-K contains both historical information and
forward-looking statements about us. 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; 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; integration of our acquisitions of Infineon's GaAs business, IBM's wireless phone chipset 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.

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 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. We review our estimates, including, but not limited to, those related to our allowance for doubtful accounts, sales returns reserves, inventory reserves, income
tax valuation, warranty reserves, investment impairments, impairments of goodwill and long-lived assets and commitments and contingencies on a regular basis and make adjustments based on
historical experiences and existing and expected future conditions. These evaluations are performed regularly and adjustments are made as information is available. We believe that these estimates are
reasonable; however, actual results could differ from these estimates.

Revenue Recognition

Standard product revenues are recognized upon shipment of product with provisions established for estimated customer and distributor product returns based on our
experiences and/or contractual agreements provided that persuasive evidence of a sales arrangement exists, price is fixed and determinable, title has transferred, collection is reasonably assured and
there are no remaining significant obligations. Generally, we ship products FOB shipping point. We recognize revenues on certain foundry and customer-specific products based on certain design,
manufacturing and other milestones. We recognize revenues on

24

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cost-plus contracts as work is performed. Revenues from customers who have acceptance criteria is not recognized until all acceptance criteria are satisfied.

Accounts Receivable and Allowance for Doubtful Accounts

Our accounts receivable represent those amounts which have been billed to our customers but not yet collected. We establish an allowance for doubtful accounts for
the portion of those accounts which we determine may become uncollectible. If we know of a specific customer's inability to meet its financial obligation to us, we record a specific allowance to
reduce their receivable to an amount which we reasonably believe will be collectible. For all other customers, we estimate the allowance based on the length of time past due, historical experience and
judgement of economic conditions. If the financial condition of our customers were to deteriorate or if economic conditions became worse than our expectations, our established allowance may not be
sufficient and we may be required to provide additional allowances.

Sales Returns and Allowances

We record a sales return reserve for estimated sales returns and allowances. A portion of our reserve is based on the contractual level of returns allowed to our
distributors. This portion is recorded in the same period that the related revenues are recorded. A second portion is based on known quantities of products we expect to receive from specific customers
for reasons we have agreed to which are unrelated to product warranty issues. The third and final portion is a general reserve based on historical
experience and our judgement of expected levels of returns. If actual returns were higher than our estimates, our financial results would be adversely affected to the extent of the additional charges.

Inventories and Excess and Obsolescence Reserves

We state our inventories at the lower of cost or market. We use a standard cost methodology 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, additional inventory reserves may be required and would be reflected in the financial statements in the period the
adjustment is made.

Deferred Taxes

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 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 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 ("SFAS109"), "Accounting for Income Taxes".

Warranty Costs

We accrue for warranty costs 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. If we experience warranty claims in excess of our projections, additional accruals may need to be recorded
which would adversely affect our financial results.

25

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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 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. 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 2002 and 2001 we recorded an impairment
charge of $23,778 and $15,057, respectively, on these investments due to deteriorating financial and market conditions.

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. 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. 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.

Goodwill

We perform goodwill impairment tests at least annually or when events and circumstances warrant. Factors to be considered which would trigger an impairment review
include a significant underperformance of the acquired assets relative to expected historical or projected future operating results, significant changes in the manner of use of the acquired assets or
the strategy for the overall business, significant negative industry or economic trends, significant decline in our stock price for a sustained period, and a decline of our market capitalization below
net book value. In 2002, we recognized an impairment charge related to the assets assigned to the Oregon operating unit. We recorded an impairment loss for the full value of all of our goodwill from
recent acquisitions assigned to the Oregon operating unit.

Commitments and Contingencies

In the ordinary course of business, we may from time to time be involved in legal matters which may represent contingent liabilities or losses for us. We may also
enter into contracts or other agreements representing commitments to third parties. A determination of the amount of reserves required for
these commitments and contingencies, if any, would be a charge against earnings. Any required reserve could change in the future due to new developments or circumstances of each matter. Changes in
required reserves could increase or decrease our earnings in the period the changes are made.

Acquisitions

Merger with Sawtek Inc.

On July 19, 2001, Sawtek Inc. became a wholly owned subsidiary of our Company. 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 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.

26

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All
financial information prior to the merger set forth in our consolidated financial statements and in this Annual Report on Form 10-K has been restated to include
the historical information of Sawtek. Our Consolidated Statements of Operations for the year ended December 31, 2000 was combined with Sawtek's Consolidated Statements of Operations for the
year ended September 30, 2000. Our Consolidated Balance Sheet as of December 31, 2000 was combined with Sawtek's Consolidated Balance Sheet as of September 30, 2000. Sawtek's
results for the quarter ended December 31, 2000 were $20,081, which was recorded as a component of our retained earnings.

Acquisition of Infineon's GaAs Business

On July 1, 2002, we completed the acquisition of Infineon's GaAs Business. 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 ($45.0 million at forward contract rate of $.9000/EUR1.00), of which EUR10.0 million ($9.0 million at forward contract rate of $.9000/EUR1.00)
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. 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 ($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.

In
connection with this acquisition, we 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. We determined the fair value 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. We estimated future cash flows based upon our 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 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 our familiarity with the technology. The estimated cost to complete this IPR&D at the time of acquisition was approximately $900,000. The
associated projects are still in process and on budget.

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

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 the
acquisition. 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

27

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which $5.0 million represents an earnout deposit. Subsequent adjustments contingent upon business volumes could increase the final aggregate purchase price up to $40.0 million.

In
connection with this acquisition, we 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. We
determined the fair value 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. We estimated future cash flows based upon our 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 our familiarity with the technology. The estimated cost to complete this IPR&D at the time of acquisition was approximately $40,000. The associated projects are still
in process and on budget.

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 initially paid $35 million on January 2, 2003 for the acquisition of the business and will pay $5 million on or about
April 1, 2003 for the related facilities. 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 transaction, approximately 340 Agere research and development, process engineering, marketing, product management
and assembly and test employees joined our company. Approximately 215 of these employees are located in Pennsylvania and 125 are located in Matamoros, Mexico. We expect this business will have an
operating loss in 2003.

Through
a transition manufacturing agreement, Agere will supply components for us until on or about April 1, 2003 to ensure seamless service to customers. The majority of these
components will be manufactured in Agere's Breinigsville, Pennsylvania facility, which we will acquire following the transition period. As part of the acquisition, we have also assumed operation of
the back-end assembly and test operations associated with these components at a leased facility in Matamoros, Mexico.

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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               |                                              | 64.4                     |      
|                                 |                                              |                          |      
|                                 | Gross profit                                 |                          | 35.6 
|Operating expenses:              |                                              |                          |      
|                                 | Research, development and engineering        |                          | 21.9 
|                                 | Selling, general and administrative          |                          | 16.0 
|                                 | Impairment of long-lived assets and goodwill |                          | 35.5 
|                                 | Acquisition related costs                    |                          | 3.2  
|                                 | Severance related costs                      |                          | 0.4  
|                                 |                                              |                          |      
|                                 | Total operating expenses                     |                          | 77.0 
|                                 |                                              |                          |      
|                                 | Income (loss) from operations                |                          | (41.4
|Other income (expense), net      |                                              | 1.5                      |      
|Impairment of equity investments |                                              | (8.9                     | )    
|Gain on retirement of debt       |                                              | 2.3                      |      
|                                 |                                              |                          |      
|Other income (expense), net      |                                              | (5.1                     | )    
|                                 |                                              |                          |      
|                                 | Income (loss) before income tax              |                          | (46.5
|Income tax expense (benefit)     |                                              | 12.8                     |      
|                                 |                                              |                          |      
|                                 | Net income (loss)                            |                          | (59.3
|                                 |                                              |                          |      

Comparison of 2002 and 2001

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. 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 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.

Revenues
are expected to be slightly higher in 2003 compared to 2002 primarily due to increased revenue from recently introduced products for wireless phones, full year impact of revenue
from products associated with our Infineon and IBM acquisitions and the addition of revenues from our optoelectronics business acquired form Agere. These increases in these markets will be offset
somewhat by continued softness in the wireless infrastructure network and optical network markets and declines in average selling prices of certain of our products.

29

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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 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.

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, as we have experienced recently, high fixed wafer fabrication costs have a materially adverse effect on our operating results. We expect gross profit to continue to be affected by
decreased absorption of fixed overhead costs associated with decreased demand and production volume, which will continue to affect our results of operations for as long as demand continues at existing
or lower levels.

Additionally,
we have at various times in the past experienced lower than expected production yields, which have delayed shipments of a given product and adversely affected gross
profits. There can be no assurance that we will be able to maintain acceptable production yields in the future and, to the extent that we do not achieve acceptable production yields, our operating
results would be materially adversely affected.

We
expect our gross profit in 2003 to be lower, as a percentage of revenue, compared to 2002. This decrease will be attributable to a high level of transition costs associated with our
newly acquired optoelectronics business, continued underutilization of our fabrication facilities and a continuing weakening of average selling prices for our products. We believe these adverse
conditions will be partially offset by increased demand for wireless products and the completion of the transfer of the fabrication of the products associated with the business we acquired from
Infineon to our Oregon fabrication facility.

Operating expenses



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 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, including several key products and projects, such as our first 4x4 mm SiGe power amplifiers, 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.

We
are forecasting our research, development and engineering spending in 2003 to be higher compared to 2002. We intend to continue our investment in the technology areas mentioned above
as well as others such as those associated with our further penetration into the optoelectronics market through our

30

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purchase of this business from Agere. We are committed to substantial investments in research, development and engineering and expect these expenses will continue to increase in the future.



Selling, general and administrative expenses include commissions, labor expenses for marketing and administrative personnel, start-up costs for our
recent move to our Richardson facility, costs associated with the acquisition of the Infineon and IBM businesses and other corporate administrative expenses. 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. We expect our selling,
general and administrative costs to increase in 2003 due to the added costs associated with the impact of recent acquisitions.

Impairment of long-lived assets and goodwill

We evaluate long-lived assets for impairment if certain events occur. 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. 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.

We
perform goodwill impairment tests at least annually or when events and circumstances warrant. Factors to be considered which would trigger an impairment review include a significant
underperformance of the acquired assets relative to expected historical or projected future operating results, significant changes in the manner of use of the acquired assets or the strategy for the
overall
business, significant negative industry or economic trends, and a significant decline in our stock price for a sustained period.

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 recent 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.

Acquisition related costs

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. The value of acquired IPR&D was determined through independent appraisal. 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.

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Severance related costs

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. There is no remaining liability for the reduction in workforce for either of the years.

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

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. We evaluate the financial condition of the investee, market conditions and other
factors providing an indication of the fair value of the investments. 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 long-term 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. From time to time, we may repurchase additional notes in the open market.

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.

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Supplemental pro forma net income

Supplemental pro forma net income (loss) is not based on GAAP, but is provided to explain the impact of certain significant items. We believe that this disclosure
is useful to our investors and creditors, as it is a way to explain the impact of certain accounting charges included in our operating results.

|                                                                             |         | Twelve Months Ended |         
|---------------------------------------------------------------------------- | ------- | ------------------- | --------
|
|
|Net loss as reported, (GAAP)                                                 |         | $                   | (158,560
|Adjustments to net loss:                                                     |         |                     |         
|Plus impairment of long-lived assets                                         |         |                     | 54,813  
|Plus impairment of goodwill and certain intangible assets                    |         |                     | 39,927  
|Plus severance related costs                                                 |         |                     | 1,011   
|Plus write off of certain equity investments                                 |         |                     | 23,778  
|Plus acquisition related costs                                               |         |                     | 8,575   
|Plus valuation allowance on deferred tax assets                              |         |                     | 34,241  
|Less gain on retirement of a portion of debt                                 |         |                     | (6,009  
|Less gain on foreign currency hedging                                        |         |                     | (4,570  
|                                                                             |         |                     |         
|Subtotal adjustments                                                         |         |                     | 151,766 
|                                                                             |         |                     |         
|Tax expense on adjustments computed at the effective tax rate for the period |         |                     |        
|                                                                             |         |                     |         
|Pro-forma net income (loss)                                                  |         | $                   | (6,794  
|                                                                             |         |                     |         
|Pro-forma earnings per share                                                 |         |                     |         
|                                                                             | Basic   |                     | $       
|                                                                             |         |                     |         
|                                                                             | Diluted |                     | $       
|                                                                             |         |                     |         
|Earnings per share as reported based on GAAP                                 |         |                     |         
|                                                                             | Basic   |                     | $       
|                                                                             |         |                     |         
|                                                                             | Diluted |                     | $       
|                                                                             |         |                     |         

Comparison of 2001 and 2000

Revenues

Revenues decreased 27.3% to $335.0 million in 2001 from $460.6 million in 2000. The decrease in revenues was due to the reduced sales of wireless
phones, over-capacity of optical networks resulting in lower sales of our components, lower overall demand for base stations as the operators cut back on capital spending and the overall
depressed economy. Domestic and international revenues were $187.6 million and $147.4 million, respectively, in 2001 as compared to $228.8 million and $231.8 million,
respectively, in 2000.

Gross profit

Gross profit decreased 46.8% to $136.4 million in 2001 from $256.6 million in 2000. As a percentage of revenue, gross profit margin decreased to
40.7% in 2001 compared to 55.7% in 2000. This decrease was mainly due to lower factory utilization and, in part, by the reduction in average selling prices of certain SAW filter products.

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Operating expenses



Our research, development and engineering expenses increased 30.0% in 2001 to $51.7 million from $39.8 million in 2000. Research, development and
engineering expenses as a percentage of revenues increased to 15.4% in 2001 from 8.6% in 2000. The increase in research, development and engineering expenses on an absolute dollar basis is primarily
due to costs associated with the development of new products such as the HBT power amplifiers, SiGe-based products, SAW duplexers and various receivers. Additionally, we had engineering
and requalification costs associated with the start up and move to our Richardson facility.



Selling, general and administrative expenses increased 1.6% in 2001 to $46.7 million from $46.0 million in 2000. Selling, general and administrative
expenses as a percentage of revenues increased to 13.9% in 2001 compared to 10.0% in 2000. While our revenues declined in 2001, our selling, general and administrative expenses were essentially
unchanged as these costs are somewhat fixed in the short-term.



Impairment chargelong-lived assets was $76.9 million in 2001, which was a charge relating to the write down of certain equipment
and facilities due to excess capacity. We had no impairment charges in 2000.



Acquisition-related costs were $7.5 million in 2001, attributable to our merger with Sawtek in July 2001. Acquisition-related costs consisted
primarily of investment banker, legal, accounting, regulatory filings and printing fees associated with the merger of Sawtek during the fiscal third quarter. We had no acquisition related costs in
2000.

Other income (expense), net

Other income (expense), net decreased to an income of $7.0 million in 2001 as compared to income of $25.6 million in 2000. This decrease resulted
primarily from decreased interest income due to the reduced interest rates on high-quality short-term securities and an impairment charge of $15.1 million for
investments in privately held technology companies. These investments were in small companies whose valuations declined significantly in 2001 due to the overall decline in private technology company
valuations.

Gain on Retirement of debt

A gain on retirement of debt resulted from our repurchase in 2001 of $48.5 million principal amount of our convertible subordinated notes at the then
current market prices. This purchase resulted in a gain of $9.4 million. We had no similar item in 2000.

Income tax expense (benefit)

In 2001, we recorded an income tax benefit of $14.3 million compared to the income tax expense of $45.8 million recorded in 2000. The income tax
benefit related to the operating loss before tax and extraordinary item recorded in 2001. Our effective tax rate was a 35.4% benefit in 2001 compared to a 23.3% expense in 2000.

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Outlook for 2003

Based upon our forecasts of revenues and operating costs for 2003, we expect to incur a net loss from operations in 2003.

This
forecast is based on our expectation of revenues being slightly higher in 2003 compared to 2002 primarily due to increased revenue from recently introduced products for wireless
phones and the addition of revenues from products associated with our acquisition of businesses from Infineon, IBM and Agere. These increases in revenues will be partially offset, however, by
continued softness in the wireless infrastructure and optical network markets and declines in average selling prices of certain of our products. In addition, we expect higher operating costs in 2003
compared to 2002 due to continued underutilization of our fabrication facilities; increased research and development spending in all of our market application areas including wireless, broadband,
microwave and optoelectronics; and higher selling, general and administrative costs associated with our recent acquisitions.

Liquidity and Capital Resources

As of December 31, 2002, we had cash, cash equivalents and short-term investments of $335.9 million. In addition, we had
$131.1 million of investments in long-term marketable securities, which are investments in high-grade securities that mature after one year but within 24 months.
As of December 31, 2002, working capital declined to $377.1 million from $560.6 million as of December 31, 2001. The decrease in working capital was attributable to the
repurchase of convertible debt, purchases of the Infineon and IBM businesses, purchases of equipment and investments in long-term marketable securities.

For
2002, 2001 and 2000, cash provided by operating activities was $30.5 million, $147.0 million and $167.4 million, respectively. Cash provided by operating
activities for 2002 was mainly due to certain non-cash transactions such as depreciation and amortization; losses due to impairments of long-lived assets and investments; and
establishment of valuation allowance for deferred tax assets, partially offset by gains on retirement of debt and a forward foreign currency contract. For 2001 and 2000, cash provided by operating
activities was primarily due to net income, tax benefit from stock option exercises and depreciation and amortization offset by increases in current assets.

For
2002, 2001 and 2000, cash used in investing activities were $52.4 million, $12.0 million, and $450.6 million, respectively. For 2002, the cash used in investing
activities was due to capital expenditures, purchases of the Infineon and IBM businesses, investments in other companies and purchases of other investments, partially offset by sale/maturity of
marketable securities. For 2001 and 2000, cash used in investing activities was primarily due to purchase of marketable securities and purchase of capital assets offset by sale/maturity of marketable
securities.

For
2002, cash used in financing activities was $13.6 million, which was primarily due to the repurchase of a portion of our convertible subordinated notes and partially offset by
proceeds from issuance of stock. For 2001, cash used by financing activities was $37.0 million and for 2000 cash provided by financing activities was $342.2 million. Cash used in
financing in 2001 was primarily due to the repurchase of a portion of our convertible subordinated note and the purchase of treasury stock, which was offset by proceeds from issuance of common stock
activities. In 2000 cash provided by financing activities was primarily due to the sale of our convertible subordinated notes.

In
August 2000, we 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 to which we contributed $73 million and a lender contributed $14 million. In September 2002, we completed an
$18.5 million improvement to the Richardson, Texas facility, which was financed through the same financial institution-sponsored VIE as part of the original financing agreement. We contributed
$14.5 million and the lender contributed $4.0 million. Of the total amount contributed to the VIE, we are required to collateralize 97% through pledged investment securities and a
participation interest in the VIE which amounts appear on our balance sheet as "Restricted Long-Term Assets" and

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"Other Investment," respectively. As of December 31, 2002, we were in compliance with this requirement. The VIE is not consolidated in our financial statements and we have accounted for the
arrangement as an operating lease. We are required to make lease payments through August 2005 or may purchase the property. If we elect to purchase the property, we will assign the pledged
securities to the lender and incur some incremental closing costs to obtain title to the property. At the end of the lease, we may elect to purchase the property, terminate the lease or renew the
lease for two additional two-year periods. The lease is secured by the value of the property, of which we are subject to a guarantee of at least 75% of its purchase value, as well as the
pledged investment securities. Restrictive covenants are also included in this financing arrangement which require us to maintain (a) a quick ratio of not less than 1.25 to 1.00,
(b) tangible net worth not less than the sum of $433.0 million and (c) a maximum leverage ratio not greater than .50. As of December 31, 2002, we were in compliance with
these restrictive covenants.

In
February and March 2000, we completed a private placement of $345.0 million (net proceeds of $333.9 million) of 4% convertible subordinated notes due 2007. The
notes are unsecured obligations, are initially convertible into our common stock at a conversion price of $67.80 per share and are subordinated to all of our present and future senior indebtedness. To
date, we have repurchased approximately $76.2 million of the 4% convertible subordinated notes due 2007. From time to time, we evaluate opportunities to repurchase additional portions of the
debt and may from time to time repurchase portions of the debt. We have, in prior periods, completed public offerings of our common stock in
order to fund our operating and capital needs. In addition, we have funded our operations to date through other private sales of equity, borrowings, equipment leases and cash flow from operations.

On
July 1, 2002, we completed the acquisition of Infineon's GaAs Business. We added approximately 60 employees as part of the acquisition. 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 intend to fund this additional obligation, if it arises, with cash generated by the acquired business. In conjunction with our purchase of Infineon's GaAs Business, we
entered into an interim supply agreement whereby Infineon is required to sell, and we are required to purchase EUR22,500 ($23,425 at December 31, 2002 exchange rate of $1.0411/EUR1.00) of GaAs
Business products during a one-year period at stipulated prices. The remaining commitment as of December 31, 2002 was EUR13,364 ($13,913 at December 31, 2002 exchange rate of
$1.0411/EUR1.00).

On
July 1, 2002, we completed the acquisition of a portion of the assets of IBM's wireless phone chipset business. We added 9 employees as part of the acquisition. At the closing
date, we paid $21.8 million to IBM for the related assets. Subsequent adjustments contingent upon business volumes could increase the final aggregate purchase price up to $40.0 million.
We intend to fund the payment of such additional amounts, if they arise, with cash generated by the acquired 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 initially paid $35 million on January 2, 2003 for the acquisition of the business and will pay $5 million on or about April 1, 2003 for the
related facilities. The transaction includes 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 transaction, approximately 340 Agere research and development, process engineering, marketing, product management and assembly and test
employees will join our Company. Approximately 215 of these employees are located in Pennsylvania and 125 are located in Matamoros, Mexico. Through a transitional manufacturing agreement, Agere will
supply components for us for a short period following the close of the transaction to ensure seamless service to customers. The majority of these components will be manufactured in Agere's
Breinigsville, Pennsylvania facility, which we will acquire following the transition period. As part of the acquisition, we have also assumed operation of the back-end assembly and test
operations associated with these components at a leased facility in Matamoros, Mexico.

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

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board ("FASB") issued FASB Statement No. 143 ("SFAS 143"), Accounting for Asset Retirement
Obligations, which addresses financial accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. SFAS 143 is required to be adopted for fiscal years beginning after June 15, 2002. We adopted
SFAS 143 on January 1, 2003 and it is not expected to have a significant impact on us.

In
June 2002, the FASB issued FASB Statement No. 146 ("SFAS 146"),Accounting for Costs Associated with Exit or Disposal
Activities, which changes the way companies will report the expenses related to restructuring. SFAS 146 is required to be adopted for exit or disposal activities
initiated after December 31, 2002.

In
November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others an interpretation of FASB Statements 5, 57 and 107 and a rescission of FASB Interpretation No. 34, which
elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a
guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and initial
measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002 and the disclosure requirements are effective for financial
statements of interim or annual periods ending after December 15, 2002. We have not yet determined if this will have a significant impact on us.

In
December 2002, the FASB issued FASB Statement No. 148 ("SFAS 148"),Accounting for Stock-Based CompensationTransition and
Disclosureand 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. We do not expect our adoption of this pronouncement to have a significant impact on us.

In
January 2003, the FASB issued Interpretation No. 46,Consolidation of Variable Interest Entities, an interpretation of ARB
No. 51.This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The Interpretation
applies immediately to variable interests in variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31,
2003 and to existing interest in the VIE's after June 15,
2003. We have an interest in a VIE as more fully discussed in "Liquidity and Capital Resources." We have not yet determined the effect the application of this Interpretation will have on our financial
statements.

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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 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, and are currently experiencing,
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. We expect that the current decline in demand for various elements
of the wireless phone, infrastructure network, optical network and defense components, including ours, could last throughout 2003, if not longer. 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.

We depend on the continued growth of communications markets.

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



Recently,
the electronic communications markets have reversed their previous pattern of growth. These markets may not resume historical growth rates. If these markets do not recover and
demand for electronic communications applications continues to decline, our operating results could suffer. In addition, to the extent this economic downturn affects our customers' business, it may
affect their ability to pay us for products we have already shipped to them.

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

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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 some of our products have decreased over the products' lives and we expect them to continue to do so. To offset these
decreases, we rely primarily on achieving yield improvements and other cost reductions for existing products and on introducing new products that can often be sold at higher average selling prices.
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.

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, as we are currently experiencing, 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 continues to decrease from past levels, as we are currently experiencing, 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.

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.

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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.

Increases in our manufacturing capacity may adversely affect our operating results if the current economic downturn continues for an extended period of time.

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, IBM 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 the current economic downturn. If this economic downturn were to continue for an extended period of time, the 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.

On January 2, 2003, we completed of the acquisition of a substantial portion of the optoelectronics business of Agere for $40 million in cash plus
acquisition costs and certain assumed liabilities. We initially paid $35 million on January 2, 2003 for the acquisition of the business and will pay $5 million on or about
April 1, 2003 for the related facilities. The transaction includes the products, technology and some facilities related to Agere's optoelectronics business, which includes active and passive
components, amplifiers, transceivers, transponders and other products.

Our
risks associated with this acquisition include:



41

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We may face challenges with the integration of our acquisition of Infineon's GaAs business and the acquired assets of IBM's wireless phone chipset business and, as a result,
may not realize the expected benefits of those acquisitions.

On July 1, 2002, we completed the acquisition of Infineon's GaAs semiconductor business and a portion of the assets of IBM's wireless phone chipset
business.

The
challenges involved in integrating these businesses include:



We face continuing challenges in integrating Sawtek and, as a result, may not realize the expected benefits of the acquisition of Sawtek.

Integrating the operations, systems and personnel of TriQuint and Sawtek, as with all mergers of companies, is a complex process. Areas in which we are still
working on full integration include:



We
may not fully succeed in addressing these risks or any other problems encountered in connection with the merger. The diversion of the attention of our management and any difficulties
encountered in the process of combining the companies could cause the disruption of, or a loss of momentum in, the activities of our business. We cannot assure you that these remaining integration
issues can be successfully resolved in a timely manner or at all or that any of the anticipated benefits will be realized.

If investors or financial or industry analysts do not think our integration of our acquisitions are 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 are currently undergoing a management transition.

In July 2002, we announced the appointment of Ralph Quinsey as our President and Chief Executive Officer. Steven J. Sharp, our former President and Chief
Executive Officer, who announced his intent to reduce his involvement in the day-to-day management of our company in October 2001, remains our Chairman of the Board. In
addition, we recently announced a corporate reorganization of our company into multiple business units, some of which are managed by two or more Vice Presidents. Our success will depend, in part, on
our ability to execute this management transition and reorganization and on the ability of our executive officers to operate effectively, both independently and as a group. The manner in which the new
management team conducts the business of our company, and the direction in which the new management team moves the business, may differ from the manner and direction in which the former management has
directed our company in the past. If we fail to execute this management transition effectively, our operating results could be negatively affected.

Our operating results may suffer should any issues arise relative to the recently completed transfer of our manufacturing operations from our former leased Dallas facility to
our new Richardson, Texas facility.

We completed our transfer to our new facility in Richardson, Texas in July of 2002. Although the transition appears to have gone smoothly, there is the
possibility that issues could still arise that could adversely impact our ability to produce products that meet the strenuous requirements our customers specify. The transfer of wafer fabrication
processes involves a number of significant risks and uncertainties, including, but not limited to, manufacturing transition, startup or process problems, construction, process qualification, equipment
delays, cost overruns or shortages of equipment or materials, any of which may also adversely affect yields. There could also be additional warranty liability risk due to potential unforeseen issues
related to material manufactured during the transition period. Significant investment was made in making this transfer and we expect the cost of the transfer is nearly complete. We could, however,
still encounter unforeseen difficulties requiring substantial and unplanned expenditures to fully complete the transfer. Any of these risks could adversely impact our operating results.

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, LiNbO3 and SiGe. Our SiGe products are manufactured externally by Atmel, our strategic partner in the development of these products and by IBM. 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:



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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.

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

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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 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 Cost 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 100% exemption from Costa Rican income taxes through 2003, a 75% exemption through 2005
and a 50% exemption 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 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 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.

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

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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 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, transponders and optical amplifiers. 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 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. Our strategic partners, IBM and Atmel, also manufacture all
of our SiGe products. Infineon continues to manufacture our products acquired from them while we transfer the manufacturing processes to our Oregon facility. Infineon will also continue to provide
assembly and test services for an indeterminant period of time after the transfer of the manufacturing processes. 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, SiGe, 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:



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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.

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. Recently, we introduced SiGe components jointly developed and manufactured with Atmel and acquired the SiGe wireless chipset business of IBM. 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 not use our SiGe components because this is a newly introduced process. Systems manufacturers may be reluctant to rely on a technology that is new to us and not widely
understood. Systems manufacturers may also be reluctant to rely on a jointly produced product because future supplies may depend on the continued good relationships with Atmel and IBM. As a result, we
must offer devices that provide superior performance to that of traditional silicon-based devices.

Our
recently acquired optoelectronics business may be negatively impacted if our customers were to move to a non-LiNbO3 modulator product base, or if the customers of this
business refuse to recognize the product qualification status of the acquired product offerings. The very demanding product qualification process in these relatively immature technologies is typically
characterized by long and expensive cycles.

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.

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

Products have been introduced that may have some application in GSM phones, which will impact sales of GSM IF filters for wireless phones. Several companies
recently announced a new product based on a direct conversion concept that could potentially eliminate a SAW IF filter in certain CDMA phones. If these products are successful in the market, it could
reduce or eliminate demand for our IF filters for CDMA phones and our revenues would be harmed if we do not introduce competitive or alternative products. SAW IF filters for wireless phones accounted
for approximately 11% of our revenues in 2002. Any development of a cost-effective and reliable technology that replaces SAW filtering technology or reduces the need for SAW filtering
technology could have a material adverse effect on our business, financial condition and results of operations.

A decline either 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 new to the marketplace and there can be no assurance that emerging markets, such as China and India, will adopt this technology. Our business and
financial results would be adversely impacted if CDMA technology does not continue to gain acceptance.

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.

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, have
incorrectly anticipated our customers' demand for these products or are unable to cost-effectively produce them, our operating results will be adversely affected.

We have substantial indebtedness.

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



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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, SiGe 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), silicon carbide
(SiC) and SiGe to compete with future technologies of our competitors. For example, we have entered into agreements with Atmel and IBM to fabricate portions of our new SiGe products. 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 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, SiGe or SAW product or move to an
alternative technology.

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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, Thales, Fujitsu,
Murata, Toyocom and others. Competition could also come from companies ahead of us in developing alternative technologies such as SiGe and 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:



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.

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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:



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.

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

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



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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 56% of revenues in 2002 and 44% of revenues in 2001. 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.

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.

Recently,
in February 2003, several nearly identical 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 name as defendants current and former officers of Sawtek and our company. The class action complaints
purportedly are filed on behalf of purchasers of Sawtek's stock between January 2000 and May 23 or May 24, 2001. All of the complaints allege 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

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stock price and conceal the downward trend in revenues disclosed in Sawtek's May 23, 2001 press release. At least one complaint alleges a third cause of action for breach of fiduciary duty to
the shareholders. The complaints do not specify the amount of monetary damages sought. We deny the allegations contained in these complaints and intend to defend against these claims vigorously. 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 $14.00
to a low of approximately $2.55 during the 52 weeks ended December 31, 2002. This market volatility, as well as general economic, market or political conditions could reduce the market price of
our common stock in spite of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors, and in response, the market price of
our common stock could decrease significantly.

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

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

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

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

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

Preferred stock.Our certificate of incorporation authorizes our board of directors to issue up to 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.

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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, both restricted and unrestricted, 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. Classified as available-for-sale, 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 operations would be materially impacted by an
immediate 10 percent 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 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, 2002 (in thousands):

Cost

Fair ValueCash and cash equivalents

$
226,226

$
226,226Available-for-sale investments (including unrealized gains of $661)

$
240,153

$
240,814Convertible subordinated notes

$
268,755

$
208,547


Foreign Currency Risk

We are exposed to currency exchange fluctuations, as we sell our products internationally and have operations in Costa Rica, Germany and Mexico. We have also
recently completed the establishment of an operation in 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 that are not denominated in U.S.
dollars. At December 31, 2002, we had no open commitments to purchase foreign currency.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND CONSOLIDATED 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, 2002. The historical unaudited consolidated
supplementary financial data

55

---

for the quarters ended March 31, 2001 and June 30, 2001 and the 2000 quarters has been derived from the historical financial statements of TriQuint and Sawtek. 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 2002         |         | Three months ended 2001
|---------------------------------------------------- | ------------------------------------- | ------------------------------- | ------- | -----------------------
|
|
|Consolidated Statement of Operations Data:           |                                       |                                 |         |                        
|Revenues                                             |                                       | $                               | 72,710  |                        
|Cost of sales                                        |                                       |                                 | 46,096  |                        
|                                                     |                                       |                                 |         |                        
|                                                     | Gross profit                          |                                 |         | 26,614                 
|Operating expenses:                                  |                                       |                                 |         |                        
|                                                     | Research, development and engineering |                                 |         | 16,439                 
|                                                     | Selling, general and administrative   |                                 |         | 11,593                 
|                                                     | Special charges(1)                    |                                 |         | 88,911                 
|                                                     |                                       |                                 |         |                        
|                                                     |                                       | Total operating expenses        |         |                        
|                                                     |                                       |                                 |         |                        
|                                                     |                                       | Income (loss) from operations   |         |                        
|Other income (expense), net                          |                                       |                                 | (460    | )                      
|Impairment of equity investments                     |                                       |                                 | (15,678 | )                      
|Gain on retirement of debt                           |                                       |                                 |        |                        
|                                                     |                                       |                                 |         |                        
|                                                     |                                       | Income (loss) before income tax |         |                        
|Income tax expense (benefit)                         |                                       |                                 | 43,113  |                        
|                                                     |                                       |                                 |         |                        
|                                                     |                                       | Net income (loss)               |         |                        
|                                                     |                                       |                                 |         |                        
|Per share data:                                      |                                       |                                 |         |                        
|Per share net income:                                |                                       |                                 |         |                        
|                                                     | Basic                                 |                                 | $       | (1.13                  
|                                                     |                                       |                                 |         |                        
|                                                     | Diluted                               |                                 | $       | (1.13                  
|                                                     |                                       |                                 |         |                        
|Weighted-average common shares                       |                                       |                                 | 132,733 |                        
|                                                     |                                       |                                 |         |                        
|Weighted-average common and common equivalent shares |                                       |                                 | 132,733 |                        
|                                                     |                                       |                                 |         |                        

---



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

Not applicable.

56

---

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item is included under the captionsElection of Directors, Executive Officers of the
RegistrantandSection 16(a) Beneficial Ownership Reporting Compliancecontained in our Proxy Statement for our 2003
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 Matters
containedin our Proxy Statement for our 2003 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 Management and Equity
Compensation Plan Informationcontained in our Proxy Statement for our 2003 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 2003 Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

(a)  Evaluation
of disclosure controls and procedures. Our chief executive officer and chief financial officer performed an evaluation of our disclosure controls and
procedures as of a date within 90 days prior to the filing of this annual report on Form 10-K. Based on this evaluation, we believe that such controls and procedures
effectively insure that information required to be disclosed in this annual report on Form 10-K is appropriately recorded, processed and reported.

(b)  Changes
in internal controls. There have been no significant changes in our disclosure controls and procedures or in other factors that could significantly affect these
controls subsequent to the date of their evaluation. There were no significant deficiencies or material weaknesses, and therefore there were no corrective actions taken.

57

---



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.

The
report of Ernst and Young LLP including report on consent is included as exhibit 99.1.

(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

|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(15)      |  | Certificate of Correction to Certificate of Incorporation                                                                                                                                                                                                                               
|3.1.3(15)      |  | Certificate of Designation of Series A Participating Preferred Stock                                                                                                                                                                                                                    
|3.1.4(15)      |  | 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(5)         |  | Indenture dated February 24, 2000 between the Registrant and State Street Bank and Trust Company of California, N.A.                                                                                                                                                                    
|10.1           |  | Reserved                                                                                                                                                                                                                                                                                
|10.2(4)        |  | 1987 Stock Incentive Program, as amended, and forms of agreements thereunder                                                                                                                                                                                                            
|10.3           |  | Reserved                                                                                                                                                                                                                                                                                
|10.4(6)        |  | Letter Agreement dated November 22, 1991 between Registrant and Steven J. Sharp                                                                                                                                                                                                         
|10.5           |  | Reserved                                                                                                                                                                                                                                                                                
|10.6           |  | Reserved                                                                                                                                                                                                                                                                                
|10.7           |  | Reserved                                                                                                                                                                                                                                                                                
|10.8(6)        |  | Supply Agreement dated October 11, 1990 by and between DuPont Photomasks, Inc. and Registrant                                                                                                                                                                                           
|10.9(6)        |  | Amended and Restated Exclusive Distributor Agreement dated September 20, 1991, as amended between Registrant and Giga A/S                                                                                                                                                               
|               |  |                                                                                                                                                                                                                                                                                         

58

---

|10.10       |  | Reserved                                                                                                                                                                                                                                                                                                                                                                                                       
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.11       |  | Reserved                                                                                                                                                                                                                                                                                                                                                                                                       
|10.12       |  | Reserved                                                                                                                                                                                                                                                                                                                                                                                                       
|10.13(6)    |  | Asset Purchase Agreement dated August 31, 1993 by and between American Telephone and Telegraph Company ("AT&T") and Registrant                                                                                                                                                                                                                                                                                 
|10.13.2(6*) |  | Joint Development and Technology Transfer Agreement dated August 31, 1993 between AT&T and Registrant                                                                                                                                                                                                                                                                                                          
|10.13.3(6*) |  | Foundry Agreement dated August 31, 1993 between AT&T and Registrant                                                                                                                                                                                                                                                                                                                                            
|10.13.4(6*) |  | Patent License Agreement dated August 31, 1993 between AT&T and Registrant                                                                                                                                                                                                                                                                                                                                     
|10.13.5(6)  |  | Letter Agreement dated August 31, 1993 between AT&T and Registrant                                                                                                                                                                                                                                                                                                                                             
|10.13.6     |  | Reserved                                                                                                                                                                                                                                                                                                                                                                                                       
|10.14(6*)   |  | Agreement dated May 6, 1993 between Comlinear Corporation and Registrant                                                                                                                                                                                                                                                                                                                                       
|10.15(6*)   |  | Agreement of Purchase and Sale for Semiconductor Products between Northern Telecom Canada Limited and Registrant dated July 8, 1993                                                                                                                                                                                                                                                                            
|10.16       |  | Reserved                                                                                                                                                                                                                                                                                                                                                                                                       
|10.16.1     |  | Reserved                                                                                                                                                                                                                                                                                                                                                                                                       
|10.17       |  | Reserved                                                                                                                                                                                                                                                                                                                                                                                                       
|10.18(8)    |  | 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                                                                                                                                                                                                                                                                                   
|10.20(9)    |  | Master Lease Agreement between Registrant and General Electric Capital Corporation dated June 27, 1997 and Equipment Schedules G-1, G-2, and G-3, each dated January 13, 1998                                                                                                                                                                                                                                  
|10.21(9)    |  | Asset Purchase Agreement, dated as of January 8, 1998, by and between Raytheon TI Systems, Inc. and Registrant, and related exhibits                                                                                                                                                                                                                                                                           
|10.22(20)   |  | 1998 Nonstatutory Stock Option Plan and forms of agreement thereunder                                                                                                                                                                                                                                                                                                                                          
|10.23(11)   |  | 1998 Employee Stock Purchase Plan and forms of agreement thereunder                                                                                                                                                                                                                                                                                                                                            
|10.24(12)   |  | Participation Agreement dated as of August 30, 2000 among TriQuint Semiconductor Texas, LP, Registrant, TriQuint Texas General Holding Company, Lease Plan North America, Inc., ABN AMRO Bank N.V. and the other banks and financial institutions that are
listed on the signature pages thereto as participants                                                                                               
|10.24.1(12) |  | Appendix 1 to Participation Agreement, Master Lease and Deed of Trust, Security Agreement and Financing Statement each dated as of August 30, 2000 among TriQuint Semiconductor Texas, LP, Registrant, TriQuint Texas General Holding Company, Lease Plan
North America, Inc., ABN AMRO Bank N.V. and the other banks and financial institutions that are listed on the signature pages thereto as participants
|10.25(12)   |  | Master Lease Agreement dated August 30, 2000 between Lease Plan North America, Inc. and TriQuint Semiconductor Texas, LP for the Richardson Texas facility                                                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                

59

---

|10.25.1(12)  |  | Appendix 1 to Participation Agreement, Master Lease and Deed of Trust, Security Agreement and Financing Statement each dated as of August 30, 2000 among TriQuint Semiconductor Texas, LP, Registrant, TriQuint Texas General Holding Company, Lease Plan
North America, Inc., ABN AMRO Bank N.V. and other banks and financial institutions that are listed on the signature pages thereto as participants
|------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.26(13)    |  | Loan Agreement dated September 28, 2000 between U.S. Bank National Association and Registrant                                                                                                                                                                                                                                                                                                              
|10.27        |  | Reserved                                                                                                                                                                                                                                                                                                                                                                                                   
|10.28        |  | Reserved                                                                                                                                                                                                                                                                                                                                                                                                   
|10.29        |  | Reserved                                                                                                                                                                                                                                                                                                                                                                                                   
|10.30        |  | Reserved                                                                                                                                                                                                                                                                                                                                                                                                   
|10.31        |  | Reserved                                                                                                                                                                                                                                                                                                                                                                                                   
|10.31.1      |  | Reserved                                                                                                                                                                                                                                                                                                                                                                                                   
|10.32        |  | Reserved                                                                                                                                                                                                                                                                                                                                                                                                   
|10.33(10)    |  | Sawtek Inc. Employee Stock Ownership and 401(k) Plan                                                                                                                                                                                                                                                                                                                                                       
|10.34(16)    |  | Sawtek Inc. 2000 Implementation Agreement                                                                                                                                                                                                                                                                                                                                                                  
|10.35(16)    |  | Sawtek Inc. 2000 Modified ESOP Loan Agreement                                                                                                                                                                                                                                                                                                                                                              
|10.36(16)    |  | Sawtek Inc. 2000 Renewed ESOP Note                                                                                                                                                                                                                                                                                                                                                                         
|10.37(16)    |  | Sawtek Inc. Second Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                       
|10.38(16)    |  | Sawtek Inc. Stock Option Plan for Acquired Companies                                                                                                                                                                                                                                                                                                                                                       
|10.39        |  | Reserved                                                                                                                                                                                                                                                                                                                                                                                                   
|10.39.1(17)  |  | Renewal of unsecured $30,000,000 credit line agreement with SunTrust Bank, extending agreement maturity date to January 31, 2002                                                                                                                                                                                                                                                                           
|10.40(18)*   |  | Amended Sale and Transfer Agreement between Infineon Technologies AG, Infineon Technologies North America Corp., Registrant and TriQuint GmbH dated as of April 29, 2002                                                                                                                                                                                                                                   
|10.40.1(18)* |  | Interim Supply Agreement by and between Registrant and Infineon Technologies AG dated July 1, 2002                                                                                                                                                                                                                                                                                                         
|10.40.2(18)* |  | Side Letter to the Interim Supply Agreement dated July 1, 2002                                                                                                                                                                                                                                                                                                                                             
|10.40.3(18)* |  | Cooperation Agreement by and between Registrant and Infineon Technologies AG dated July 1, 2002                                                                                                                                                                                                                                                                                                            
|10.40.4(18)* |  | Transition Services Agreement by and between Registrant and Infineon Technologies AG dated July 1, 2002                                                                                                                                                                                                                                                                                                    
|10.40.5(18)* |  | Basic Supply Agreement Relating to the Supply of Highly Reliable Semiconductor Products and Assignment of Customer Contracts by and between Registrant and Infineon Technologies AG dated July 1, 2002                                                                                                                                                                                                     
|10.40.6(18)* |  | Backend Foundry Agreement by and between Registrant and Infineon Technologies AG dated July 1, 2002                                                                                                                                                                                                                                                                                                        
|             |  |                                                                                                                                                                                                                                                                                                                                                                                                            

60

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|10.40.7(18)* |  | Side Letter to Backend Foundry Agreement dated July 1, 2002                                                                                                                                                                                                
|------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.40.8(18)* |  | Interim Lease Agreement by and between Registrant and Infineon Technologies AG dated July 1, 2002                                                                                                                                                          
|10.41(10)    |  | Letter Agreement dated June 28, 2002 between Registrant and Ralph G. Quinsey                                                                                                                                                                               
|10.42(19)    |  | Asset Purchase Agreement by and between Agere Systems Inc. and Registrant dated as of October 21, 2002                                                                                                                                                     
|10.42.1(19)  |  | Amendment No. 1 to Asset Purchase Agreement by and between Agere Systems Inc. and Registrant dated as of January 2, 2003                                                                                                                                   
|10.42.2(19)  |  | 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(19)  |  | 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(19)  |  | Intellectual Property Agreement by and between Agere Systems Inc. and Registrant dated as of January 2, 2003                                                                                                                                               
|10.43.5(19)  |  | Purchase Agreement by and between Agere Systems Inc. and Registrant dated as of January 2, 2003                                                                                                                                                            
|10.43.6(19)  |  | Transition Services Agreement by and between Agere Systems Inc. and Registrant dated as of January 2, 2003                                                                                                                                                 
|10.43.7(19)  |  | 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        |  | 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                                                                                                                                                                                                                  
|23.2         |  | Consent of Ernst & Young LLP, Independent Certified Public Accountants                                                                                                                                                                                     
|24.1         |  | Power of Attorney (see page 52)                                                                                                                                                                                                                            
|99.1         |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                     
|99.2         |  | Report of Ernst & Young LLP, Independent Certified Public Accountants                                                                                                                                                                                      

---

61

---

62

---

We
filed a Report on Form 8-K (File No. 000-22660) with the Securities and Exchange Commission on May 6, 2002 to announce that we and
Infineon Technologies AG signed a definitive agreement pursuant to which we intended to acquire Infineon's gallium arsenide semiconductor business.

We
filed a Report on Form 8-K (File No. 000-22660) with the Securities and Exchange Commission on July 15, 2002 to disclose the purchase
price and other terms of our agreement to acquire Infineon's gallium arsenide semiconductor business.

We
filed a Report on Form 8-K (File No. 000-22660) with the Securities and Exchange Commission on August 29, 2002 to announce our intended
reduction in force and its expected impact on our operating results for the three months ending September 30, 2002.

We
filed a Report on Form 8-K/A (File No. 000-22660) with the Securities and Exchange Commission on September 13, 2002 to amend the Report on
Form 8-K filed on July 15, 2002. The amendment was filed to disclose the audited financial statements of Infineon's gallium arsenide semiconductor business which we
purchased.

We
filed a Report on Form 8-K (File No. 000-22660) with the Securities and Exchange Commission on January 17, 2003 to disclose the purchase
price and other terms of our agreement to acquire a substantial portion of Agere Systems Inc.'s optoelectronics business

We
filed a Report on Form 8-K/A (File No. 000-22660) 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.

See
Item 14(a)(3) above.

See
Item 14(a)(2) above.

63

---



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 27, 2003

64

---

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. SHARP(Steven J. Sharp)           |  | Chairman of the Board                                                                                                          |  | March 27, 2003
|/s/RALPH G. QUINSEY(Ralph G. Quinsey)         |  | President and Chief Executive Officer
(Principal Executive Officer)                                                            |  | March 27, 2003
|/s/RAYMOND A. LINK(Raymond A. Link)           |  | Vice President, Finance and Administration,
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer) |  | March 27, 2003
|/s/FRANCISCO ALVAREZ(Francisco Alvarez)       |  | Director                                                                                                                       |  | March 27, 2003
|/s/PAUL A. GARY(Paul A. Gary)                 |  | Director                                                                                                                       |  | March 27, 2003
|/s/CHARLES SCOTT GIBSON(Charles Scott Gibson) |  | Director                                                                                                                       |  | March 27, 2003
|/s/NICOLAS KAUSER(Nicolas Kauser)             |  | Director                                                                                                                       |  | March 27, 2003
|/s/STEVEN P. MILLER(Steven P. Miller)         |  | Director                                                                                                                       |  | March 27, 2003
|/s/WALDEN C. RHINES(Walden C. Rhines)         |  | Director                                                                                                                       |  | March 27, 2003
|/s/EDWARD F. TUCK(Edward F. Tuck)             |  | Director                                                                                                                       |  | March 27, 2003
|/s/WILLIS C. YOUNG(Willis C. Young)           |  | Director                                                                                                                       |  | March 27, 2003

65

---



CERTIFICATIONS

I,
Ralph G. Quinsey, certify that:





Date:
March 27, 2003

| |  |                                                                          
| |  | -------------------------------------------------------------------------
| |  | /s/RALPH G. QUINSEYRalph G. Quinsey
President and Chief Executive Officer

66

---

I,
Raymond A. Link, certify that:





Date:
March 27, 2003

| |  |                                                                                                                    
| |  | -------------------------------------------------------------------------------------------------------------------
| |  | /s/RAYMOND A. LINKRaymond A. Link
Vice President,
Finance and Administration,
Chief Financial Officer and Secretary

67

---



Index to Consolidated Financial Statements

|Independent Auditors' Report                                                               |  | F-2
|------------------------------------------------------------------------------------------ |  | ---
|Consolidated Statements of Operations for the years ended December 31, 2002, 2001 and 2000 |  | F-3
|Consolidated Balance Sheets as of December 31, 2002 and 2001                               |  | F-4
|Consolidated Statements of Stockholders' Equity December 31, 2002, 2001 and 2000           |  | F-5
|Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000 |  | 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, 2002 and 2001, 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, 2002. 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.

The
consolidated statements of operations, stockholders' equity and cash flows of TriQuint Semiconductor, Inc. and subsidiaries for the year ended December 31, 2000, have been restated
to reflect the pooling-of-interests transaction with Sawtek Inc. as described in Note 2 to the consolidated financial statements. We did not audit the 2000
financial statements of Sawtek Inc., which statements reflect total revenues constituting 35% in 2000 of the related consolidated totals. Those statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Sawtek Inc. for the year ended December 31, 2000, is based solely on the report of the
other auditors.

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 and the report of the other auditors provide a reasonable basis for our opinion.

In
our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to in the first paragraph present fairly, in all material respects, the
financial position of TriQuint Semiconductor, Inc. and subsidiaries as of December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the years in
the three-year period ending December 31, 2002 in conformity with accounting principles generally accepted in the United States of America.

/s/
KPMG LLP

Portland,
Oregon
February 11, 2003

F-2

---



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

|                             |                                                  | Years ended December 31,                             |        
|---------------------------- | ------------------------------------------------ | ---------------------------------------------------- | -------
|
|Revenues                     |                                                  | $                                                    | 267,313
|Cost of goods sold           |                                                  |                                                      | 172,197
|                             |                                                  |                                                      |        
|                             | Gross profit                                     |                                                      |        
|Operating expenses:          |                                                  |                                                      |        
|                             | Research, development and engineering            |                                                      |        
|                             | Selling, general and administrative              |                                                      |        
|                             | Impairment of long-lived assets and goodwill     |                                                      |        
|                             | Acquisition related charges                      |                                                      |        
|                             | Reduction in work force                          |                                                      |        
|                             |                                                  |                                                      |        
|                             |                                                  | Total operating expenses                             |        
|                             |                                                  |                                                      |        
|                             |                                                  | Income (loss) from operations                        |        
|                             |                                                  |                                                      |        
|Other income (expense):      |                                                  |                                                      |        
|                             | Interest income                                  |                                                      |        
|                             | Interest expense                                 |                                                      |        
|                             | Impairment chargeinvestments in other companies |                                                      |        
|                             | Gain on retirement of debt                       |                                                      |        
|                             | Other, net                                       |                                                      |        
|                             |                                                  |                                                      |        
|                             |                                                  | Other income (expense), net                          |        
|                             |                                                  |                                                      |        
|                             |                                                  | Income (loss) before income tax                      |        
|Income tax expense (benefit) |                                                  |                                                      | 34,241 
|                             |                                                  |                                                      |        
|                             |                                                  | Net income (loss)                                    |        
|                             |                                                  |                                                      |        
|Per share data:              |                                                  |                                                      |        
|                             | Per share net income (loss):                     |                                                      |        
|                             |                                                  | Basic                                                |        
|                             |                                                  |                                                      |        
|                             |                                                  | Diluted                                              |        
|                             |                                                  |                                                      |        
|                             |                                                  | Weighted-average common shares                       |        
|                             |                                                  |                                                      |        
|                             |                                                  | 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                                                                                                                               |                 |                                           
|                                                     |                                                                                                                                                              |                 |                                           
|                                                     |                                                                                                                                                              |                 | 370,890                                   
|                                                     |                                                                                                                                                              |                 |                                           
|                                                     | Inventories, net:                                                                                                                                            |                 |                                           
|                                                     |                                                                                                                                                              | Raw material    |                                           
|                                                     |                                                                                                                                                              | Work in process |                                           
|                                                     |                                                                                                                                                              | Finished goods  |                                           
|                                                     |                                                                                                                                                              |                 |                                           
|                                                     |                                                                                                                                                              |                 | 36,283                                    
|                                                     |                                                                                                                                                              |                 |                                           
|                                                     | Deferred income taxes                                                                                                                                        |                 |                                           
|                                                     | Other current assets                                                                                                                                         |                 |                                           
|                                                     |                                                                                                                                                              |                 |                                           
|                                                     |                                                                                                                                                              |                 | Total current assets                      
|                                                     |                                                                                                                                                              |                 |                                           
|Long-term investments in marketable securities       |                                                                                                                                                              |                 | 131,127                                   
|Property, plant and equipment, net                   |                                                                                                                                                              |                 | 153,887                                   
|Deferred income taxes                                |                                                                                                                                                              |                 |                                          
|Other investment                                     |                                                                                                                                                              |                 | 88,092                                    
|Restricted long-term assets                          |                                                                                                                                                              |                 | 17,408                                    
|Other non-current assets, net                        |                                                                                                                                                              |                 | 33,358                                    
|                                                     |                                                                                                                                                              |                 |                                           
|                                                     |                                                                                                                                                              |                 | Total assets                              
|                                                     |                                                                                                                                                              |                 |                                           
|Liabilities and Stockholders' Equity                 |                                                                                                                                                              |                 |                                           
|Current liabilities:                                 |                                                                                                                                                              |                 |                                           
|                                                     | Current installments of capital lease obligations                                                                                                            |                 | $                                         
|                                                     | Accounts payable                                                                                                                                             |                 |                                           
|                                                     | Accrued payroll                                                                                                                                              |                 |                                           
|                                                     | Other accrued liabilities                                                                                                                                    |                 |                                           
|                                                     |                                                                                                                                                              |                 |                                           
|                                                     |                                                                                                                                                              |                 | Total current liabilities                 
|Capital lease obligations, less current installments |                                                                                                                                                              |                 |                                          
|Deferred income taxes                                |                                                                                                                                                              |                 | 6,550                                     
|Convertible subordinated notes                       |                                                                                                                                                              |                 | 268,755                                   
|                                                     |                                                                                                                                                              |                 |                                           
|                                                     |                                                                                                                                                              |                 | Total liabilities                         
|                                                     |                                                                                                                                                              |                 |                                           
|Commitments and contingencies                        |                                                                                                                                                              |                 |                                           
|Stockholders' equity:                                |                                                                                                                                                              |                 |                                           
|                                                     | Common stock, $.001 par value. Authorized 600,000,000 shares; 133,162,755 shares and 131,141,213 shares issued and outstanding at December 31, 2002 and 2001 |                 |                                           
|                                                     | Additional paid-in capital                                                                                                                                   |                 |                                           
|                                                     | Accumulated other comprehensive income                                                                                                                       |                 |                                           
|                                                     | Unearned ESOP compensation                                                                                                                                   |                 |                                           
|                                                     | Retained earnings                                                                                                                                            |                 |                                           
|                                                     |                                                                                                                                                              |                 |                                           
|                                                     |                                                                                                                                                              |                 | 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 com-
prehensive
income |   |        |   |   |         |   |  
|-------------------------------------------------- |  | ------------ | - | -------------- | --- |  | -------- | ---------------------------------------- | - | ------ | - | - | ------- | - | -
|
|
|Balance, December 31, 1999                         |  | 124,785,171  |   | $              | 124 |  | (503,667 | )                                        | $ | (2,926 | ) | $ | 377,589 |   | $
|Issuance of common stock under plans               |  | 4,411,628    |   |                | 5   |  | 495,870  |                                          |   | 2,882  |   |   | 13,040  |   |  
|Income tax benefit of stock option exercises       |  |             |   |                |    |  |         |                                          |   |       |   |   | 48,012  |   |  
|Purchase of treasury stock                         |  |             |   |                |    |  | (32,958  | )                                        |   | (1,098 | ) |   |        |   |  
|ESOP allocation                                    |  |             |   |                |    |  |         |                                          |   |       |   |   |        |   |  
|Accumulated other comprehensive income             |  |             |   |                |    |  |         |                                          |   |       |   |   |        |   |  
|Net income                                         |  |             |   |                |    |  |         |                                          |   |       |   |   |        |   |  
|                                                   |  |              |   |                |     |  |          |                                          |   |        |   |   |         |   |  
|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 |   | $
|                                                   |  |              |   |                |     |  |          |                                          |   |        |   |   |         |   |  

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 income (loss)                                                                        |                                                  | $                                       
|                                                   | Adjustments to reconcile net income (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 of assets                           |                                         
|                                                   |                                                                                          | Impairment of long-lived assets and goodwill     |                                         
|                                                   |                                                                                          | Acquired in-process research and development     |                                         
|                                                   |                                                                                          | Gain on retirement of debt                       |                                         
|                                                   |                                                                                          | Realized gain on forward contract                |                                         
|                                                   |                                                                                          | Non-cash compensation expense                    |                                         
|                                                   |                                                                                          | Impairment charge-investments in other companies |                                         
|                                                   |                                                                                          | Deferred income taxes                            |                                         
|                                                   |                                                                                          | ESOP allocation                                  |                                         
|                                                   |                                                                                          | Change in assets and liabilities:                |                                         
|                                                   |                                                                                          |                                                  | Receivables                             
|                                                   |                                                                                          |                                                  | Inventories                             
|                                                   |                                                                                          |                                                  | Other assets                            
|                                                   |                                                                                          |                                                  | Accounts payable and accrued liabilities
|                                                   |                                                                                          |                                                  |                                         
|                                                   |                                                                                          |                                                  |                                         
|                                                   |                                                                                          |                                                  |                                         
|Cash flows from investing activities:              |                                                                                          |                                                  |                                         
|                                                   | Purchase of available-for-sale investments                                               |                                                  |                                         
|                                                   | 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                                       |                                                  |                                         
|                                                   | Infineon acquisition                                                                     |                                                  |                                         
|                                                   | IBM 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                  |                                                  |                                         
|                                                   | Proceeds from (repurchase of) convertible subordinated notes                             |                                                  |                                         
|                                                   | Debt issuance costs                                                                      |                                                  |                                         
|                                                   | Purchase of common stock for treasury                                                    |                                                  |                                         
|                                                   | Issuance of common stock, net                                                            |                                                  |                                         
|                                                   |                                                                                          |                                                  |                                         
|                                                   |                                                                                          |                                                  |                                         
|                                                   |                                                                                          |                                                  |                                         
|                                                   |                                                                                          |                                                  |                                         
|Cash and cash equivalents at beginning of year     |                                                                                          |                                                  | 261,728                                 
|                                                   |                                                                                          |                                                  |                                         
|Cash and cash equivalents at end of year           |                                                                                          | $                                                | 226,226                                 
|                                                   |                                                                                          |                                                  |                                         
|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

Description of the Company

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"), analog and mixed-signal
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, silicon germanium and surface acoustic wave ("SAW").

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts
and transactions are eliminated in consolidation.

Reclassifications

Certain amounts in the December 31, 2001 and 2000 financial statements have been reclassified to conform to the December 31, 2002 presentation.
These reclassifications had no effect on net income or loss or stockholders' equity as previously reported.

Management Estimates

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.

Revenue Recognition

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 distributors are able to return a percentage of shipments within an allotted
time. The Company reserves this amount in full at the time of shipment. Revenue from distributors was $14.3 million, $18.6 million and $35.1 million in 2002, 2001 and

F-7

---

2000, 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.

Product Warranty

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:

2002Beginning balance

$
1,577Accruals


1,388Applications


(806
)Ending balance

$
2,159


Cash Equivalents

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 $226.2 million and $261.7 million at
December 31, 2002 and 2001, respectively.

Investments

Investment securities at December 31, 2002 and 2001 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.

During
2001, the Company reclassified $213.7 million of cash equivalents and short-term investments from held-to-maturity investments to
available-for-sale investments. Unrealized gain, net of tax, on this reclassification was approximately $444. This reclassification was done to provide management with the
flexibility to react more quickly in the changing economic and interest rate environment.

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 date of purchase 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. Held-to-maturity securities were recorded at
amortized cost, adjusted for the amortization or accretion of premiums or discounts. 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

F-8

---

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.

Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company has established an allowance for doubtful accounts of $3,867
and $2,565 at December 31, 2002 and 2001, 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

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 $19,786 and $20,171 at December 31, 2002 and 2001, 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.

Property, Plant and Equipment

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.

F-9

---

Goodwill and Other Intangible Assets

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 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,

2002

2001Intangible assets:Patents, technology and other

$
7,065

$
2,132Debt issuance costs


9,252


9,85116,317


11,983Less:Patents, technology and other amortization


1,238


1,218Debt issuance amortization


4,101


2,795$
10,978

$
7,970


Intangible
assets are included in other non-current assets in the Balance Sheet.

Investments in Other Companies

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, 2002 and 2001, the book value of investments in privately held companies was $7.3 million and $11.0 million, respectively.

F-10

---

Research and Development Costs

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

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

Advertising Costs

The Company expenses advertising costs as incurred.

Comprehensive Income

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 which are included as a separate component of stockholders' equity until realized.

Net Income (Loss) Per Share

Basic net income (loss) per share is net income (loss) available to common stockholders divided by the weighted-average number of common shares outstanding.
Diluted net income (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. The reconciliation of
shares used to calculate basic and diluted income (loss) per share consisted of the following:

|                                                     |               | Years ended December 31,
|---------------------------------------------------- | ------------- | ------------------------
|
|Weighted-average common shares                       |               | 131,969,397             
|Effect of dilutive securities:                       |               |                         
|                                                     | Stock options |                         
|                                                     |               |                         
|Weighted-average common and common equivalent shares |               | 131,969,397             
|                                                     |               |                         

Common
stock equivalents related to stock options and conversion of convertible subordinated notes totaling 14,997,417, 16,342,181 and 4,734,238 were anti-dilutive and,
therefore, were not included in the diluted net income (loss) per share calculation for 2002, 2001 and 2000, respectively.

Financial Instruments

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 was estimated by discounting the future

F-11

---

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 $208,547 at December 31, 2002 and $214,963 at December 31, 2001.

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.

Income Taxes

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

Foreign Currency Exchange and Remeasurement

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)".

Forward Exchange Contracts

On January 1, 2001, the Company adopted SFAS 133,Accounting for Derivative Instruments and Certain Hedging
Activitiesand SFAS 138,Accounting for Certain Derivative Instruments and Certain Hedging Activity, an Amendment of
SFAS 133.. SFAS 133 and 138 requires recognition of all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair
value through the income statement. The Company has no hedges that qualify under SFAS 133.

From
time to time the Company enters into forward foreign currency exchange contracts to manage its exposure against foreign currency fluctuations. These foreign exchange contracts are
not considered hedges under SFAS 133, and as such are recorded at fair value on the balance sheet with any changes in fair value included in "Other income (expense)". The Company did not have
any foreign currency exchange contracts at December 31, 2002 and 2001.

F-12

---



ESOP Compensation Expense

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.

Stock-Based Compensation

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 ("APB") Opinion No. 25,Accounting for Stock Issued to Employees, 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
SFAS No. 123,Accounting for Stock-Based Compensation, which allows entities to continue to apply the provisions of APB Opinion No. 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 No. 123 had been
applied.

The
Company applies APB Opinion No. 25 in accounting for its plans and, accordingly, 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 No. 148, the Company's net
income (loss) would have been adjusted to the pro forma amounts indicated below (in thousands except per share information):

|                                                                                                                             |                     | 2002 |          | 2001  |   | 2000    |      
|---------------------------------------------------------------------------------------------------------------------------- | ------------------- | ---- | -------- | ----- | - | ------- | -----
|Net income (loss) as reported                                                                                                |                     | $    | (158,560 | )     | $ | (26,211 | )    
|Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards,
net of tax |                     |      | (56,253  | )     |   | (36,642 | )    
|                                                                                                                             |                     |      |          |       |   |         |      
|Pro forma net income (loss)                                                                                                  |                     | $    | (214,813 | )     | $ | (62,853 | )    
|                                                                                                                             |                     |      |          |       |   |         |      
|Earnings per share:                                                                                                          |                     |      |          |       |   |         |      
|                                                                                                                             | Basicas reported   |      | $        | (1.20 | ) | $       | (0.20
|                                                                                                                             | Basicpro forma     |      | $        | (1.63 | ) | $       | (0.48
|                                                                                                                             | Dilutedas reported |      | $        | (1.20 | ) | $       | (0.20
|                                                                                                                             | Dilutedpro forma   |      | $        | (1.63 | ) | $       | (0.48

Impairment of Long-lived Assets and Long-lived Assets to be Disposed of

SFAS No. 144,Accounting for the Impairment or Disposal of Long-lived Assets, 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. Assets to be disposed of would be 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 would be
presented separately in the appropriate asset and liability sections of the balance sheet.

Prior
to the adoption of SFAS No. 144, the Company accounted for long-lived assets in accordance with SFAS No. 121,Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.

Impact of Recently Issued Accounting Pronouncements

In January 2003, the FASB issued Interpretation No. 46,Consolidation of Variable Interest Entities, an interpretation of
ARB No. 51.This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The Interpretation
applies immediately to variable interests in variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31,
2003 and to existing interests in VIE's after June 15, 2003. We have an interest in a VIE as more fully discussed in Note 6. The Company has not yet determined the effect the application
of this Interpretation will have on the Company's financial statements.

2. Business Combinations

Sawtek, Inc.

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.

All
financial information prior to the merger set forth in these consolidated financial statements has been restated to include the historical information of Sawtek.

F-14

---

Below
are selected results of operations for the Company and Sawtek for the periods indicated.

Fiscal years ended2001

2000(in thousands)Revenues:TriQuint

$
240,286

$
300,749Sawtek


94,686


159,841Combined

$
334,972

$
460,590Net Income (loss):TriQuint

$
(40,965
)
$
71,411Sawtek


14,754


79,282Combined

$
(26,211
)
$
150,693


Infineon Technologies AG GaAs Business

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 ($45.0 million at forward contract rate of $.9000/EUR1.00), of which EUR10.0 million ($9.0 million at forward contract rate of $.9000/EUR1.00) 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. 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


Pro
forma results of operations as if this acquisition had closed on January 1, 2002 and for the corresponding period in the preceding year are as follows (in thousands, except
per share amounts):

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

Twelve Months
Ended
December 31,
2001Revenues

$
280,552

$
367,084Net loss


(170,547
)

(51,605
)Loss per sharebasic

$
(1.29
)
$
(0.40
)Loss per sharediluted

$
(1.29
)
$
(0.40
)


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 projections assume that the technologies will be successful and
that the product's development and commercialization will meet management's time schedule. 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 estimated cost to complete this IPR&D at the time of acquisition was approximately $900. The
associated projects are still in process and on budget. As of December 31, 2002, the Company wrote off all goodwill associated with this acquisition (see Note 6).

F-16

---

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 represents an earnout deposit. Subsequent adjustments to the purchase price contingent upon business volumes could
increase the final aggregate purchase price up to $40.0 million. 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.

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.

F-17

---



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 estimated cost to complete this IPR&D at the time of acquisition was approximately $40. The associated projects are still in
process and on budget. As of December 31, 2002, the Company wrote off all goodwill associated with this acquisition (see Note 6).

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, 2002 and 2001 consisted of the following (in thousands):

|                     |                                                                      | Cost |         | Gross
unrealized
holding
gains |   | Gross
unrealized
holding
losses |     | Fair value
|-------------------- | -------------------------------------------------------------------- | ---- | ------- | ------------------------------ | - | ------------------------------- | --- | ----------
|At December 31, 2002 |                                                                      |      |         |                                |   |                                 |     |           
|Available-for-sale:  |                                                                      |      |         |                                |   |                                 |     |           
|                     | U.S. treasury securities and obligations of U.S. government agencies |      | $       | 144,083                        |   | $                               | 482 |           
|                     | Corporate debt securities and other                                  |      |         | 96,070                         |   |                                 | 192 |           
|                     |                                                                      |      |         |                                |   |                                 |     |           
|Total investments    |                                                                      | $    | 240,153 |                                | $ | 674                             |     | $         
|                     |                                                                      |      |         |                                |   |                                 |     |           
|At December 31, 2001 |                                                                      |      |         |                                |   |                                 |     |           
|Available-for-sale:  |                                                                      |      |         |                                |   |                                 |     |           
|                     | U.S. treasury securities and obligations of U.S. government agencies |      | $       | 123,689                        |   | $                               | 155 |           
|                     | Municipal notes and bonds                                            |      |         | 2,119                          |   |                                 |    |           
|                     | Corporate debt securities and other                                  |      |         | 193,537                        |   |                                 | 354 |           
|                     |                                                                      |      |         |                                |   |                                 |     |           
|Total investments    |                                                                      | $    | 319,345 |                                | $ | 509                             |     | $         
|                     |                                                                      |      |         |                                |   |                                 |     |           

F-18

---

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

Cost

Fair valueAt December 31, 2002Due or callable in one year or less

$
109,466

$
109,687Due after one year through 24 months

$
130,687

$
131,127


4. Property, Plant and Equipment

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

December 31,2002

2001Land

$
11,686

$
13,545Buildings


38,440


55,075Leasehold improvements


16,910


1,076Machinery and equipment


181,757


155,427Furniture and fixtures


8,790


5,113Computer equipment and software


18,784


17,563Assets in process


9,348


65,114285,715


312,913Less accumulated depreciation and amortization


131,828


98,511$
153,887

$
214,402


The
Company capitalizes interest costs as a component of construction in progress. For 2001, assets in process included capitalized interest of $448; there was no capitalized interest in
2002.

Depreciation
expense for the years ended December 31, 2002, 2001 and 2000 was $35,502, $28,016 and $21,140, respectively. This includes depreciation expense associated with
equipment leased to another company classified as "Other, net" in the Consolidated Statement of Operations of $71 for the year ended December 31, 2002.

5. Leases

At December 31, 2002 and 2001, the Company had outstanding $341 and $1,939 respectively of capital leases. The interest rates on these capital leases range
from 7.9% to 9.9%. The leases are payable in monthly installments of principal and interest through 2003 and are secured by equipment.

F-19

---

The
Company also leases certain equipment, office and manufacturing space under operating leases that expire at various dates through 2005. The future minimum lease payments under
installment notes and non-cancelable leases as of December 31, 2002 were as follows (in thousands):

Capital
leases

Operating
leasesYears ending:2003

$
348

$
1,7812004





1,8012005





1,8262006





1,8422007





1,858Total

$
348

$
9,108Less: amounts representing interest


(7
)Present value of minimum paymentscurrent

$
341


Amounts
applicable to capital leases, which were included in machinery and equipment, were as follows (in thousands):

December 31,2002

2001Machinery and equipment

$
2,214

$
8,061Less: accumulated amortization


1,993


6,609$
221

$
1,452


Rent
expense under operating leases was $2,168, $11,392 and $14,423 during the years ended December 31, 2002, 2001 and 2000, respectively.

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 is required to collateralize 97% through
pledged investment securities and a participation interest in the VIE which amounts appear on our Consolidated Balance Sheets as "Restricted long-term assets" of $17.4 million and
"Other investment" of $88.1 million, respectively. As of December 31, 2002, the Company was in compliance with this requirement. The VIE is not consolidated in the Company's financial
statements and the Company has accounted for the arrangement as an operating lease. The Company is required to make lease payments through August 2005 or may purchase the property. If the
Company elects to purchase the property, the Company will assign the pledged securities to the lender and incur some incremental closing costs to obtain title to the property. At the end of the lease,
the Company may elect to purchase the property,

F-20

---

terminate the lease or renew the lease for two additional two-year periods. The lease is secured by the value of the property, of which the Company is subject to a guarantee of at least
75% of its purchase value, as well as the pledged investment securities. The Company is subject to restrictive covenants in this financing arrangement which require the Company to maintain
(a) a quick ratio of not less that 1.25 to 1.00, (b) tangible net worth not less than the sum of $433 million and (c) a maximum leverage ratio not greater than 0.50. As of
December 31, 2002, the Company was in compliance with these covenants.

6. Goodwill and Other Acquisition-Related Intangible Assets

In accordance with SFAS No. 142,Goodwill and Other Intangible Assets("SFAS 142"), goodwill is no
longer amortized. The Company is required to perform impairment tests at least annually or when events and circumstances warrant.

Changes
in the carrying amount of goodwill for 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

$
450


In
accordance with FAS 144, the Company determined in the fourth quarter of 2002 that an impairment associated with the Oregon operating unit existed based upon the future
undiscounted cash flows associated with the assets currently in place. The Company recorded an impairment of $9.0 million associated with acquired identifiable intangible assets based upon an
estimate of their fair market value. The fair market value was determined by updating assumptions in the original valuation study based upon the most current projections.

In
accordance with SFAS 142, the Company then completed an assessment to determine if the goodwill assigned to the Oregon operating unit had been impaired. The Company estimated
the fair value of the Oregon operating unit based upon recent acquisition values completed by the Company and others. Based upon the fair value of the Oregon operating unit, an impairment of goodwill
was determined to exist which resulted in an impairment of $31.0 million.

F-21

---

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

|                              |  | December 31, 2002 |       | December 31, 2001
|----------------------------- |  | ----------------- | ----- | -----------------
|
|Patents, trademarks and other |  | $                 | 7,065 |                  
|Acquired workforce(1)         |  |                   |      |                  
|                              |  |                   |       |                  
|Total                         |  | $                 | 7,065 |                  
|                              |  |                   |       |                  

---

Recent
acquisitions by the Company of businesses from IBM and Infineon were assigned to the Oregon operating unit. In accordance with SFAS No. 144, an impairment of certain of the
long-lived assets and identifiable intangible assets of the Oregon operating unit was determined through third-party appraisal. Since the recently acquired businesses are associated with
the Oregon operating unit, the impairment of the long-lived assets and identifiable intangible assets was an event requiring the evaluation of the goodwill associated with those businesses
for impairment in accordance with SFAS No. 142. By applying a present value analysis similar to that prepared for the original purchase price allocation, the Company determined that the
carrying value of the goodwill associated with these acquisitions was fully impaired.

Amortization
expense of other acquisition-related intangible assets was $1,503, $256 and $305 for the twelve months ended December 31, 2002, 2001 and 2000, respectively. The
periods over which the Company amortizes these intangible assets range from three to seven years, depending on the estimated useful life of the intangible asset. In addition, amortization of bond
issuance costs was $1,307, $1,510 and $1,286 in 2002, 2001, and 2000, respectively. This expense is classified as "Interest expense" in the Consolidated Statements of Operations.

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

Year ending December 31, 2003

$
1,467Year ending December 31, 2004


1,518Year ending December 31, 2005


1,363Year ending December 31, 2006


227Year ending December 31, 2007


227Thereafter


575


F-22

---



7. Other Accrued Liabilities

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

December 31,2002

2001Warranty liability

$
2,159

$
1,278Accrued interest payable


3,584


3,953Accrued real estate tax


2,225


1,175Other


9,669


10,378$
17,637

$
16,784


8. 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. Provisional redemption of the notes is allowed at 101.7% of face value prior to March 5,
2003 when the closing price of our common stock exceeds 150% of the conversion price. After March 5, 2003, the notes may be redeemed at rates ranging from 102.3% to 100.6% over the remaining
life of the notes. 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.

9. Income Taxes

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

Years ended December 31,2002

2001

2000Domestic

$
(139,158
)
$
(52,462
)
$
167,968Foreign


14,839


11,919


28,510Total

$
(124,319
)
$
(40,543
)
$
196,478


F-23

---

The
provision (benefit) for income tax (benefit) on income (loss) consisted of (in thousands):

Years ended December 31,2002

2001

2000Current:Federal

$


$
11,946

$
56,362State


600


1,644


6,201Total current


600


13,590


62,563Deferred:Federal


30,617


(24,088
)

(16,686
)State


3,024


(3,834
)

(92
)Total deferred


33,641


(27,922
)

(16,778
)Income tax expense (benefit)

$
34,241

$
(14,332
)
$
45,785


The
effective tax rate differed from the federal statutory income tax rate as follows (in thousands):

Years ended December 31,2002

2001

2000Tax computed at federal statutory rate

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

(2.0
)
(3.8
)
2.8Increase in valuation allowance

69.7

11.7

Non-deductible merger costs



3.3

Foreign sales benefit

(0.8
)
(4.9
)
Reversal of deferred taxes previously provided on earnings of Costa Rican subsidiary





(8.5
)Current benefit of tax exemption of Costa Rican subsidiary

(5.6
)
(8.7
)
(5.1
)Other, including tax credits, tax-exempt interest income and dividend income

1.2

2.0

(0.9
)Effective tax rate

27.5
%
(35.4
)%
23.3
%


F-24

---

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

2002

2001Deferred tax liabilities:Amortization and depreciation

$


$
20,277Other


6,550


5,576Total deferred tax liability


6,550


25,853Deferred tax assets:Amortization and depreciation


16,753


Capitalized research and development expenditures


9,559


10,159Reserves and allowances


9,140


8,533Accrued liabilities


2,750


1,816Net operating loss carryforwards





7,174Research and development and other credits


2,338


2,353Asset impairment


36,001


29,319Impairment of investment in other companies


14,699


5,680Other


2,778


1,795Total deferred tax asset


94,018


66,829Valuation allowance


(94,018
)

(5,856
)Net deferred tax asset/(liability)

$
(6,550
)
$
35,120


The
Company recorded a tax provision of approximately $34.2 million for the year ended December 31, 2002 reflecting a full valuation allowance against its deferred tax
assets. In assessing the realizability of deferred tax assets, SFAS No. 109 requires a more likely than not standard. This ultimate realization of deferred tax assets is dependent upon the
generation of future domestic 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 required that recent historical operating performance and income projections for 2003 weigh heavily
in assessing the realizability of deferred tax assets. The more likely than not assessment was principally based upon the losses generated during 2001, 2002, and losses anticipated in 2003 primarily
as a result of costs associated with the Optoelectronics business acquired January 2, 2003.

The
net change in total valuation allowance for the deferred tax assets for 2002, 2001 and 2000 was an increase of $88,003, $5,856 and $0 respectively.

For
2002, the Company recorded a decrease to additional paid in capital of $8,074 to reverse the benefit of net operating loss carryforwards generated as a result of stock option
transactions. The Company will record benefits to additional paid in capital as they are realized pursuant to SFAS No 109.

F-25

---

For 2001 and 2000, the Company recorded a benefit of stock option exercises as a component of additional paid in capital of $11,605 and $48,012, respectively.

At
December 31, 2002, the Company had approximately $22,894 of net operating loss carryforwards to offset against future income for federal income tax purposes, which expire from
2012 through 2020, and $5,063 for Oregon state income tax purposes, which expire in years 2013 through 2014. As stated above, these losses were generated as a result of stock option transactions;
therefore the associated deferred tax asset has been reversed through a decrease to additional paid-in capital. Accordingly, the tax effect has been properly removed as a component of the deferred tax
reconciliation.

The
Company provided for deferred taxes on the non-repatriated earnings of its subsidiary in Costa Rica prior to fiscal 2000. This subsidiary benefits 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 2001 or 2002. In the event
the Costa Rican subsidiary ever remits these earnings to the U.S. parent, the Company would be subject to U.S. federal and state income taxes. The estimated unrecognized deferred income tax liability
on these unremitted earnings at December 31, 2002 and 2001 is approximately $39,600 and $34,300, respectively.

10. Commitments

The Company has entered into several lease agreements for buildings, office space and equipment (see Note 5). The Company is also subject to legal
proceedings, claims and litigation arising in the ordinary course of business (see Note 17).

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.

F-26

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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 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. At December 31, 2002, the Company did not have any open foreign currency exchange contracts.

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 three operating units: Oregon, 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 2002 and 2001 were as follows: Wireless Phones, 45% and 35%, respectively;
Infrastructure Networks, 31%
and 35%, respectively; Optical Networks, 5% and 18%, respectively; and Defense, 19% and 12%, respectively. The Company did not have historical data for 2000 using the newly defined business markets.
Revenues by business group (as defined by the Company) in 2000, as a percentage of revenues for 2000

F-27

---

were as follows: Wireless Communications, 25%; Telecommunications and Data Communications, 9%; Foundry, 13%; Millimeter Wave Communications, 18% and SAW Filters, 35%.

Revenues
outside of the United States, in thousands, were approximately $151,200, in 2002 of which revenues to Korea were approximately $34,900. In 2001 and 2000, revenues outside of the
United States, in thousands, were approximately $147,500 and $231,800, respectively, of which revenues to Korea were $42,100 in 2001 and revenues to Canada were $66,100 in 2000. 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 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          |  | $                        | 214,001
|Costa Rica             |  |                          | 79,147 
|Transfers/Eliminations |  |                          | (25,835
|                       |  |                          |        
|Consolidated Results   |  | $                        | 267,313
|                       |  |                          |        

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 31,2002

2001

2000Customer A





12
%Customer B

10
%
15
%
13
%Customer C

16
%


11
%Customer D





14
%


Related
receivables from such customers were 23% and 9% of trade accounts receivable at December 31, 2002 and 2001, respectively.

F-28

---



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 $745, $2,226 and $5,592
in 2002, 2001 and 2000, respectively. The Company also has profit share and other benefit plans covering substantially all employees worldwide. The Company made contributions under these plans of
approximately $211, $170 and $147 for 2002, 2001 and 2000, 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 $223, $237 and $251 during 2002, 2001 and 2000, respectively. Allocation to participants' accounts were 887,164 shares, 942,727 shares and 998,292 shares during
2002, 2001 and 2000, respectively. Under an Employee Stock Purchase Plan employees are able to purchase the Company's common stock at 85% of fair market value.

14. Stock Options

Stock Option Plans

Under the 1987 and 1996 Stock Incentive Programs and the 1998 Nonstatutory Stock Option Plan (the "Plans"), the Company has authorized the issuance of 11,386,612,
24,550,000 and 4,000,000 common shares, respectively, of which a total of 7,235,509 shares were available to grant as of December 31, 2002. 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 Plans2002

2001

2000Risk-free interest rate


3.82
%

4.56
%

6.16
%Expected life in years


5.4


5.4


5.0Expected volatility


97
%

94
%

86
%Per share weighted-average fair value

$
5

$
11

$
30


F-29

---

Employee Stock
Purchase Plans2002

2001

2000Risk-free interest rate


2.00
%

3.49
%

6.11
%Expected life in years


0.5


0.5


0.5Expected volatility


95
%

114
%

123
%Per share weighted-average fair value

$
2

$
6

$
37


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

|                                         |           | Number of
shares |            | Weighted-
average
exercise price
|---------------------------------------- | --------- | ---------------- | ---------- | --------------------------------
|Options outstanding at December 31, 1999 |           | 16,149,485       |            | $                               
|Options:                                 |           |                  |            |                                 
|                                         | Granted   |                  | 4,196,537  |                                 
|                                         | Exercised |                  | (3,373,416 | )                               
|                                         | Canceled  |                  | (314,774   | )                               
|                                         |           |                  |            |                                 
|Options outstanding at December 31, 2000 |           | 16,657,832       |            | $                               
|Options:                                 |           |                  |            |                                 
|                                         | Granted   |                  | 4,250,219  |                                 
|                                         | Exercised |                  | (2,060,654 | )                               
|                                         | Canceled  |                  | (1,184,993 | )                               
|                                         |           |                  |            |                                 
|Options outstanding at December 31, 2001 |           | 17,662,404       |            | $                               
|Options:                                 |           |                  |            |                                 
|                                         | Granted   |                  | 4,355,426  |                                 
|                                         | Exercised |                  | (1,128,666 | )                               
|                                         | Canceled  |                  | (1,720,900 | )                               
|                                         |           |                  |            |                                 
|Options outstanding at December 31, 2002 |           | 19,168,264       |            | $                               

F-30

---

The
following table summarizes information concerning stock options outstanding and exercisable at December 31, 2002:

Range of
exercise prices

Number
outstanding
as of
December 31,
2002

Weighted-
average
remaining
contractual
life

Weighted-
average
exercise
price

Number
exercisable
as of
December 31,
2002

Weighted-
average
exercise
price$
0.30 - 2.10

428,531

2.46

$
1.29

428,531

$
1.292.19 - 2.69

1,983,264

5.71


2.69

1,978,591


2.692.79 - 3.89

2,186,183

5.72


3.37

1,892,864


3.353.90 - 6.25

2,686,298

8.50


5.87

598,265


5.266.50 - 9.69

2,258,049

8.64


8.71

479,151


9.359.88 - 11.19

2,655,717

8.51


10.82

707,619


10.6411.31 - 21.13

2,656,268

6.96


18.49

1,565,065


17.9121.28 - 36.50

2,648,480

7.69


32.26

706,781


29.3236.75 - 61.00

1,642,374

7.01


44.44

1,077,418


44.3961.44 - 61.44

23,100

7.95


61.44

12,012


61.4419,168,264

7.32

$
14.94

9,446,297

$
13.20


15. Capital Structure

Preferred Shares Rights Agreement

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:



F-31

---



Additionally
during 2002 and 2001, the Company recorded a charge of $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.

During
2001, the Company recorded an impairment charge of $76,933 associated with certain long-lived assets due to current and projected market conditions. The amount by
which the carrying value of
these assets exceeded fair value was determined through independent appraisal. In addition, the Company recorded a charge of $15,057 during 2001 for a decline in carrying value of certain privately
held investments based on the evaluation of factors such as current equity offerings, projected financial conditions and the decline in market value of similar companies.

17. Litigation

On February 7, 2003, a stockholder class action lawsuit was filed against the Company's wholly-owned subsidiary Sawtek Inc. and certain of its
former executives in the United States District Court for the Middle District of Florida. The Company believes this suit is without merit and intends to vigorously defend itself against the charges.

On
or about December 2, 2002, the Company filed a lawsuit in the amount of approximately $2,827 against Finisar Corporation in Multnomah County Circuit Court of Oregon. The
lawsuit alleges that Finisar has failed to pay the Company for semiconductor wafers delivered between September 2000 and December 2001. Finisar alleges claims for breach of contract,
breach of warranty, negligence, and restitution, seeking damages in the amount of approximately $13,000. The Company denies the counterclaim allegations and intends to vigorously defend itself against
them. The parties are currently engaging in discovery and no trial date has been set.

From
time to time, the Company is involved in judicial and administrative proceedings incidental to the Company's business. Although occasional adverse decisions (or settlements) may
occur, the Company believes that the final disposition of such matters will not have a material adverse effect on its financial position or results of operations.

18. Subsequent Events

On January 3, 2003, the Company completed the acquisition of a substantial portion of the optoelectronics business of Agere Systems Inc. ("Agere")
for $40 million in cash. The transaction includes the

F-32

---

products, technology and some facilities related to Agere's optoelectronics business, which includes active and passive components, amplifiers, transceivers, transponders and other products. This
business will expand the current business of designing and producing integrated circuits for optical networks to designing and producing the optical modules and components that the Company's
integrated circuits go into.

Through
a transitional manufacturing agreement, Agere will supply components for the Company for a short period following the close of the transaction to ensure seamless service to
customers. The majority of these components will be manufactured in Agere's Breinigsville, Pennsylvania facility, which the Company will acquire following the transition period. As part of the
acquisition, the Company assumed operation of the back-end assembly and test operations associated with these components at a leased facility in Matamoros, Mexico.

F-33

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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
|------------------------ | -------------------------------- | ------------------------------ | - | --------------------------------------- |  | ---------- | ------ | ------------------------
|2000                     |                                  |                                |   |                                         |  |            |        |                         
|                         | Allowance for doubtful accounts  |                                | $ | 1,417                                   |  | $          | 731    |                         
|                         | Inventory valuation reserve      |                                |   | 7,265                                   |  |            | 4,689  |                         
|                         | Estimated liability for warranty |                                |   | 1,191                                   |  |            | 690    |                         
|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  |                         

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