UNITED
STATES





SECURITIES
AND EXCHANGE COMMISSION





WASHINGTON,
D.C. 20549





FORM
10-K




/x/ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008.Or/
      /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934.Commission
      File No. 0-25662ANADIGICS,
      Inc.(Exact
      name of registrant as specified in its charter)Delaware
            22-2582106(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)141
      Mt. Bethel Road, Warren, New Jersey
            07059(Address
      of principal executive offices)
            (Zip
      Code)(908)
      668-5000(Registrant's
      telephone number, including area
code)





Securities
registered pursuant to Section 12(b) of the Act: None





Securities
registered pursuant to Section 12(g) of the Act:


Common
Stock, $0.01 par value





The above
securities are registered on the NASDAQ Global Market





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes / / No /X/





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes / / No /X/





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes /X/ No / /





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 in Part III of this Form 10-K or any amendment to this Form 10-K.
/ /





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check
one):


Large
accelerated filer /X/ Accelerated filer / / Non-accelerated filer /
/





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes / / No /X/





The
aggregate market value of the voting common equity held by non-affiliates of the
registrant as of June 28, 2008 was approximately $570 million, based upon the
closing sales price of the registrant’s common equity as quoted on the NASDAQ
Global Market on such date.





The
number of shares outstanding of the registrant's common stock as of February 13,
2009 was 63,174,733 (excluding 113,761 shares held in treasury).





Documents
incorporated by reference: Definitive proxy statement for the registrant’s 2009
annual meeting of shareholders (Part III).











TABLE OF
CONTENTS





PagePART
      IItem
      1:
            Business
            4Item
      1A:
            Risk
      Factors
            12Item
      1B:
            Unresolved
      Staff Comments
            23Item
      2:
            Properties
            23Item
      3:
            Legal
      Proceedings
            23Item
      4:
            Submission
      of Matters to a Vote of Security Holders
            24PART
      IIItem
      5:
            Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
            24Item
      6:
            Selected
      Financial Data
            24Item
      7:
            Management’s
      Discussion and Analysis of Financial Condition and
              Results
      of Operations
            25Item
      7A:
            Quantitative
      and Qualitative Disclosures About Market Risk
            33Item
      8:
            Financial
      Statements and Supplementary Data
            36Item
      9:
            Changes
      in and Disagreements with Accountants on Accounting and
              Financial
      Disclosure
            64Item
      9A:
            Controls
      and Procedures
            64Item
      9B:
            Other
      Information
            67PART
      IIIItem
      10:
            Directors,
      Executive Officers and Corporate Governance
            67Item
      11:
            Executive
      Compensation
            67Item
      12:
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
            67Item
      13:
            Certain
      Relationships and Related Transactions and Director
      Independence
            67Item
      14:
            Principal
      Accounting Fees and Services
            67PART
      IVItem
      15:
            Exhibits,
      Financial Statement Schedules
            67








PART
I





ITEM 1.
BUSINESS.





Overview




ANADIGICS,
Inc. (“we” or the “Company”) is a leading provider of semiconductor solutions in
the growing broadband wireless and wireline communications
markets.  Our products include power amplifiers (PAs), tuner
integrated circuits, active splitters, line amplifiers and other components,
which can be sold individually or packaged as integrated radio frequency (RF)
and front end modules.  We believe that we are well-positioned to
capitalize on the high growth voice, data and video segments of the broadband
wireless and wireline communications markets.  We offer third
generation (3G) products that use the Wideband Code-Division Multiple Access
(W-CDMA) and Enhanced Data Rates for Global System for Mobile Communication
Evolution (EDGE) standards and combinations of W-CDMA and EDGE platforms
(WEDGE), beyond third generation (3.5G) products that use the High Speed Packet
Access (HSPA, inclusive of downlink and uplink) and Evolution Data Optimized
(EVDO) standards, fourth generation (4G) products for Worldwide Interoperability
for Microwave Access (WiMAX), Wireless Fidelity (WiFi) products that use the
802.11 a/b/g and 802.11 n (Multiple Input Multiple Output (MIMO)) standards,
cable television (CATV) cable modem and set-top box products, CATV
infrastructure products and Fiber-To-The-Premises (FTTP) products.




Our business
strategy focuses on developing RF front end solutions and partnering with
industry-leading wireless and wireline chipset providers to incorporate our
solutions into their reference designs.  Our integrated solutions
enable our customers to improve RF performance, power efficiency, reliability,
time-to-market and the integration of chip components into single packages,
while reducing the size, weight and cost of their products.




We were
incorporated in Delaware in 1984. Our corporate headquarters are located at 141
Mt. Bethel Road, Warren, New Jersey 07059, and our telephone number at that
address is 908-668-5000.




We believe
our business will benefit in the long-term from two key factors: (1) fast growth
in the markets for 3G, 3.5G, 4G WiMAX, WiFi and CATV products and (2) an
increased dollar content of our solutions within the products in these end
markets. We believe that the combination of these factors will enable us to
outpace the overall end product unit growth in these broadband wireless and
wireline communications markets.  For example, additional PAs with
higher performance levels and integration are required in 3G and 3.5G wireless
handsets as compared to prior standards.  The complexity of 3G, 3.5G
and 4G designs coupled with our selection in several leading reference designs
allows us to capitalize on the growth in the 3G, 3.5G and 4G markets. In the
WiFi market, our business benefited from both the continued unit growth in the
overall WiFi market as well as the growing adoption of the 802.11 a/b/g
standards and the 802.11 n MIMO standard, which commonly use multiple PAs with
each chipset.  We experienced growth in our CATV set-top box business,
comprised of semiconductor tuners and active splitters, as a result of the
increasing popularity of cable set-top boxes that incorporate enhanced
functionality such as digital video recorders (DVRs) and high definition
television (HDTV) reception.  In addition, we believe that the new
generation of cable modems based on the Data Over Cable Service Interface
Specification 3.0 (DOCSIS-3.0) standard will increase the addressable market for
our semiconductor tuners and upstream amplifiers.  We believe our
infrastructure business will continue to benefit from the adoption of 1 GHz CATV
products, driven by system upgrades from the existing 870 MHz standard in the
U.S., from increased demand in the European and Chinese markets for such CATV
products, and from optical network amplifiers used in FTTP systems such as
Verizon Communication Inc.’s (Verizon) FiOS.




We continue
to focus on leveraging our technological advantages to remain a leading supplier
of innovative semiconductor solutions for broadband wireless and wireline
communications.  We believe our patented InGaP-plus technology, which
combines the bipolar technology of a PA (HBT PA) with the surface device
technology of an RF active switch (pHEMT) on the same die, provides us with a
competitive advantage in the marketplace.  Additionally, we believe
technologies such as High Efficiency at Low Power (HELP-TM, HELP2-TM and
HELP3-TM, collectively HELP) power amplifiers provide our customers a
competitive advantage by enabling their 3G, 3.5G and 4G devices to consume less
battery power and deliver longer talk time than comparable products in their
markets.




Our six-inch
diameter Gallium Arsenide (GaAs) wafer fabrication facility (fab) located at our
corporate headquarters in Warren, New Jersey, has been operational since
1999.  We are actively exploring future sources of additional
manufacturing capacity including pursuing relationships with
foundries.  Unlike traditional CMOS silicon fabs that have short
technology lifecycles and require frequent capital investments, GaAs fabs are
more similar to analog fabs that have long lifecycles and do not become quickly
outdated.  Our six-inch wafer fab allows us to produce more than twice
the RF die per wafer compared with the four-inch wafer fabs still used by some
of our competitors.





Industry
Background




Wireless
3G Market




Growth in the
unit shipments of wireless handsets that are capable of operating in EDGE,
W-CDMA/HSPA, CDMA/EVDO and other 3G and 4G standards is expected to
significantly outpace the growth in the overall market over the next several
years.  According to Allied Business Intelligence (ABI), the number of
wireless modems and handsets manufactured for these new standards is expected to
grow from approximately 520 million units shipped in 2007 to 1,465 million units
by 2012, almost tripling in five years. The manufacturing of wireless handsets
and modems incorporating 3G and 4G technologies is growing considerably faster
than the overall number of wireless handsets and modems manufactured, which ABI
forecasts to grow from 1,169 million units in 2007 to 1,865 million units in
2012, a 60% increase over the same period. As a qualified PA supplier on many
Qualcomm Incorporated (Qualcomm) reference designs for the W-CDMA/HSPA and
CDMA/EVDO platforms, we believe we are well positioned to benefit from the
market transition to 3G and 3.5G technologies.




Traditionally, the
chipset in a wireless handset required one or two power
amplifiers.  As wireless operators gained additional frequency
licenses to deploy 3G and 4G networks, requirements for handsets that can
operate in both the older and newer 3G and 4G bands have multiplied. The result
is an increased demand for multiple power amplifiers in handsets, datacards and
wireless modems to enable roaming between older and newer
networks.  These wireless devices also require PAs with higher power
and better linearity to meet more demanding performance
specifications.





The key
drivers of growth in the wireless handset market are:





·
            Deployment
      of 3G and 3.5G networks and
services.




·
            New
      subscriber additions in emerging
markets.




·
            New
      features and applications to drive replacements in established
      markets.




·
            Convergence
      of voice, data and video services.




The wireless
capabilities of wireless handsets are provided primarily by a semiconductor
chipset.  The key components of a wireless chipset are typically a PA,
transceiver and baseband.  The PA boosts the transmit signal,
providing RF power to enable user roaming and high data
throughput.  As additional features and functionality are incorporated
into wireless handsets to leverage the 3G and 3.5G broadband networks that
enable streaming voice, data and video services, increasing demands are placed
on the wireless handset battery, thereby reducing battery life.  The
high-performance PA is a critical component in the handset because it directly
affects battery life and, consequently, available talk time.  We
believe our differentiated InGaP-plus process and design
technologies such as HELP provide a competitive advantage by enabling us to
provide PAs that consume less battery power and extend talk time.  The
adoption of 3G and 3.5G networks with HSPA standards for voice and multimedia is
a positive catalyst for our 3G and 3.5G products.  3G and 3.5G
networks not only enable data and multimedia applications, but also provide for
a lower cost per subscriber, and as a result are being quickly adopted by
network service providers.




In addition
to wireless handsets and data cards, 3G and 3.5G capabilities are increasingly
being embedded in notebook computers. We are a leading participant in this
market through the use of our power amplifiers in Qualcomm reference designs,
and in embedded wireless modules manufactured by leading providers to this
growing market.





4G
WiMAX Market




The 4G WiMAX
standard continues to gain momentum, as commercial mobile broadband wireless
services that use this technology are now being offered, or are planned for
introduction, in the United States, Korea, Japan, Russia and other locations.
Sprint Nextel Corporation launched its Xohm service in Baltimore, Maryland and a
Sprint-Clearwire joint venture (“Clearwire”) intends to provide nationwide
service in the United States. According to ABI, the worldwide market for
WiMAX-enabled handsets alone is expected to be 4.2 million units in 2009 and to
grow to 59.5 million units in 2013, representing a 94% compound annual growth
rate over that period of time. We currently ship WiMAX PAs for mobile
connectivity to several customers for point-to-point connectivity. We believe
that our relationships with leading WiMAX equipment and chipset vendors have
positioned us to be one of the market-leading providers of WiMAX PAs in the
world.





Wireless
Fidelity (WiFi)




As with
wireless handsets, the wireless capabilities of WiFi, or wireless LAN,
networking products are provided primarily by a semiconductor
chipset.  A WiFi chipset typically contains a PA, radio transceiver
and a digital media access controller.  The PA boosts the transmit
signal, thereby improving the range and data
throughput.  Traditionally, either a single-band or multi-band PA
supported each WiFi chipset depending on the complexity of the
system.  With the advent of the 802.11n standard in 2007, WiFi
products for mobile computing expanded into MIMO architectures which had two
major impacts on the power amplifier space:  (i) For every WiFi
chipset in a MIMO system, as many as three single or multi-band power amplifiers
are required and (ii) with the increase in functionality combined with
requirements for smaller product size, it has become more common for power
amplifiers to be embedded in front end modules (FEM) and front end integrated
circuits (FEIC).




ABI forecasts
that shipments of WiFi-enabled devices will grow from 450 million units in 2008
to over 1.6 billion units in 2013, representing a 29% compounded annual growth
rate over that period of time. ABI further estimates that in 2008 about 47% of
all WiFi integrated circuits shipped conformed to the 802.11n standard, and
forecasts that market share to exceed 95% by 2013. Taking into account the MIMO
technology supported by the 802.11n standard, the growth rate of power amplifier
demand is expected to significantly outpace that of the WiFi chipset during this
time.  We offer a strong portfolio of differentiated products in this
high-growth market and expect to benefit from both the unit growth and increased
PA content in dual-band 802.11n MIMO WiFi systems.




WiFi attach
rates in notebook computers have increased to record numbers and WiFi
functionality is now being embedded in other consumer electronic devices such as
cameras, printers, audio devices, mobile phones and gaming
consoles.  We continue to supply RF front end sockets in
next-generation reference designs from leading WiFi chipset providers for all
applications.





Cable
Set-Top Box and Cable Modem Markets




The markets
for CATV set-top boxes and cable modems are being shaped by several key
trends.  Set-top boxes are incorporating advanced functionality, to
leverage the convergence of voice, data and video services over the broadband
network, such as DVR, HDTV, wireless internet access, interactive services, home
networking and gaming.  These new features are driving demand for both
new and replacement set-top boxes.  As a long-term supplier to Cisco
Systems Inc. (Cisco) and Motorola, Inc., we believe that we are well positioned
to benefit from these trends.  We also believe that the rollouts of
DTV in China and parts of Europe, and Verizon’s FiOS in the U.S., are
contributing to sustained demand for digital set-top boxes.




We also
believe that as the cable modem market transitions to the new DOCSIS 3.0
standard it will provide an additional opportunity for our semiconductor tuners
and upstream amplifiers.  The DOCSIS 3.0 standard uses multiple
channels simultaneously to provide wider bandwidth and higher data throughput
than previous technologies, and we believe that we are well positioned to
support this market opportunity. As of December 2008, we provided the only
upstream amplifier product incorporated into any DOCSIS 3.0 certified cable
modem.





CATV
Infrastructure and FTTP




We are a
leading supplier of 12V and 24V line amplifier radio frequency integrated
circuit (RFIC) amplifiers and drop amplifiers to the CATV infrastructure
market.  This market is experiencing growth globally as a result of
increasing CATV infrastructure bandwidth requirements, the need of cable service
providers to offer converged voice, data and video services over their broadband
networks, and the increased deployment of CATV fiber nodes.  We are
participating in the upgrade in infrastructure bandwidth to 1 GHz through our
collaboration with industry leaders, and as a result of the rollout of digital
cable in China and parts of Europe.  Historically, we have enjoyed
long product life cycles in these markets.  Additionally, we are
providing optical network RF amplifiers in the FTTP market for use in systems
such as Verizon’s FiOS, for which deployments continue throughout the
U.S.





Our
Strategy




Our
objective is to be the leading supplier of RF semiconductor solutions to the
wireless and wireline communications markets.  The key elements of our
strategy include:





·
            Focus on
      the high-growth end markets of broadband wireless and wireline.We
      target the fastest-growing and most sophisticated
      segments of the wireless and wireline communications markets. These
      segments offer the largest growth opportunity and the greatest opportunity
      for semiconductor manufacturers to extract
  value.






·
            Create
      innovative RF patented technology resulting in industry-leading products.Our longstanding reputation of innovation in process technology and
      design has resulted in best-in-class RF products. We consistently provide
      performance advantages that help our customers deliver differentiated
      products to market.






·
            Work
      closely with industry-leading customers and partners.We strive to
      develop close working relationships with industry leaders in the wireless
      and broadband markets. These relationships give us insight into the most
      important specifications for next-generation
  products.





·
            Build
      market share to improve economies of scale. Establishing our
      business as a leading technology enabler for the long-term involves
      responsible investment for future technologies supported by appropriate
      long-term return. Increased volumes are critical to semiconductor
      companies and consistent with long-term viability for our
      business.




·
            Focus
      on improving our financial model.We seek to increase
      our gross margins and profitability by focusing on those products and
      markets where we can achieve a strong market position by deploying our
      technological
      leadership.  We intend to focus on supplying products in the
      following markets for this purpose:  (1) 3G standards CDMA/EVDO,
      W-CDMA/HSPA and UMTS, (2) 4G standards LTE and WiMAX, (3) WiFi standards
      802.11 a/b/g and 802.11 n, (4) CATV set-top boxes and cable modems, and
      (5) CATV and FTTP infrastructure
  amplifiers.




Products




We classify
our revenues based upon the end application of the product in which our
integrated circuits are used.  For the years ended December 31, 2006,
2007 and 2008, wireless accounted for approximately 55%, 56% and 60%
respectively, of our total net sales, while broadband accounted for
approximately 45%,  44% and 40%, respectively, of our total net
sales.





Wireless




Our Wireless
product line includes power amplifier modules for CDMA/EVDO, GSM/EDGE, WCDMA,
HSPA and other wireless technologies for mobile handsets and PC datacards. The
following table sets forth information regarding our principal products in the
wireless mobile handset and datacard market:





Product
            ApplicationHandset
      and Datacard Products
            Many
      handset and datacard platforms require more than one Power Amplifier to
      enable roaming and multiband operation.Power
      Amplifier (PA)
            Used
      in RF transmit chain of wireless handset, PC datacard or embedded module
      to amplify uplink signal to base station.Single-band
      PA Module
            Frequency-optimized
      InGaP PA used in CDMA, WCDMA, and HSPA equipment to enable operation in
      one band.Multi-band
      PA Modules (Dual, quad, penta)
            Multiple
      InGaP PA’s and other components in a single package. Used in multiple
      technologies to enable operation in multiple bands or function in
      multi-mode platforms.HELPTM
      PA Module   (multiple versions)
            ANADIGICS
      proprietary High Efficiency at Low Power PA design reduces average PA
      power consumption by 50-75% in CDMA, W-CDMA, and HSPA
      equipment.ZeroICTM
      PA Module
            Unique
      InGaP PA design for specific Qualcomm CDMA platforms includes switched RF
      path with zero current consumption to conserve battery life at lower power
      levels.Front
      End Module
            Includes
      one or more InGaP PA’s with other RF components such couplers, transmit
      filters, duplexers and antenna switches in a single package for simplified
      RF designs.




Broadband




Our Broadband
product line encompasses video and data telecommunications systems, primarily
consisting of CATV, WiFi, WiMAX and FTTP applications.





The
following table outlines our principal CATV products and their
applications:





Product
            ApplicationCATV
      Set-Top Box and Cable Modem ProductsTuner
      Upconverters and
              Downconverters
            Used
      to perform signal amplification and frequency conversion in
      double-conversion video and data tuners.Active
      Splitters
            Used
      to split an incoming signal to feed multiple tuners.Integrated
      Tuners
            Used
      to integrate tuner upconverters, downconverters and synthesizers in a
      single package.Upstream
      Amplifiers
            Used
      to amplify and control the level of signals in the return
      path.





Product
            ApplicationCATV
      Infrastructure ProductsLine
      Amplifiers
            Used
      to distribute RF signals from headends to subscribers.Drop
      Amplifiers
            Used
      to amplify RF signals at individual subscriber
  locations.Optical
      Network RF Amplifiers
            Used
      to amplify RF signals for FTTP and
FiOS.





The
following table sets forth information regarding our principal products in the
WiFi market:





Product
            ApplicationWiFi
      Products2.4
      GHz (802.11 b/g) PAs and Front-End ICs
            Used
      in wireless network interface cards (NIC), embedded notebook computers
      (mini-PCI) and access point (AP) applications to boost the transmit signal
      for increased range and data throughput.5
      GHz (802.11 a) PAs and Front-End ICs
            Used
      in wireless rich-media applications, such as streaming audio/video, to
      boost the transmit signal for increased range and data
      throughput.Dual
      Band (802.11 a/b/g) PAs and Front-End ICs
            Used
      in wireless network systems that require seamless transition between
      frequencies to mitigate interference and congestion.MIMO
      (802.11n) PAs and Front-End ICs
            Used
      in multimedia applications for higher data throughput and greater WiFi
      coverage.





The
following table sets forth information regarding our principal products in the
WiMAX market:





Product
            ApplicationWiMAX
      ProductsMobile
      WiMAX PAs
            PA
      modules used for mobility applications.Fixed
      Point WiMAX PAs
            PA
      modules used for point-to-point CPE
  applications.





Marketing,
Sales, Distribution and Customer Support




We sell our
products primarily to our direct customers worldwide and have developed close
working relationships with leading companies in the broadband wireless and
wireline communications markets.  Additionally, we selectively use
independent manufacturers’ representatives and distributors to complement our
direct sales and customer support efforts.  Our relationships with our
distributors enable them to maintain local practices regarding inventories and
payment terms while supporting our growth in Asia.  Working with
distributors like World Peace Group, who had a vast sales network, provides us
access to tier-one customers in Asia.  We believe this is critical to
our objective of expanding our customer base, especially as we expand our
product portfolio.




We believe
that the technical nature of our products and markets demands an unwavering
commitment to building and maintaining close relationships with our
customers.  Our sales and marketing staff, which is assisted by our
technical staff and senior management, visit prospective and existing customers
worldwide on a regular basis.  Our design and applications engineering
staff actively communicate with customers during all phases of design and
production.  We have highly specialized field application engineering
teams near our customers in Korea, Taiwan and China, as well as a system
application team in Denmark, which is located near key European handset original
equipment manufacturers (OEM’s) and chipset providers.  We believe
that these contacts are vital to the development of close, long-term working
relationships with our customers, and in obtaining regular forecasts, market
updates and information regarding technical and market trends.




We believe
that reference-design manufacturers in the broadband wireless and wireline
communications markets will continue to play an important role in the future of
these markets.  Therefore, we believe it is essential that we maintain
strong relationships in partnering with these companies to penetrate these
market opportunities.





Process
Technology, Manufacturing, Assembly and Testing




We design,
develop and manufacture RFICs primarily using GaAs compound semiconductor
substrates with various process technologies, Metal Semiconductor Field Effect
Transistors (MESFET), Pseudomorphic High Electron Mobility Transistors (pHEMT),
and Heterojunction Bipolar Transistors (HBT).  Our patented
technology, which utilizes InGaP-plus, combines InGaP HBT and
pHEMT processes on a single substrate, enabling us to integrate the PA function
and the RF active switch function on the same die.





Manufacturing




We fabricate
substantially all of our ICs in our six-inch diameter GaAs wafer fab in Warren,
New Jersey. The Warren fab was first certified as ISO 9001 compliant in December
1993.  Since that time, we have updated our compliance to the ISO
9001:2000 upgrade of this standard.  In 2004, we also received ISO
14001 certification.




As part of
our business plans, we are actively exploring future sources of additional
manufacturing capacity with foundries.





Assembly




Fabricated
GaAs wafers are shipped to contractors in Asia for packaging into standard
plastic lead frame-based packaging or modules.




Since the
processes cannot be easily or economically integrated onto a single die,
multi-chip modules that combine multiple die within a single package have taken
hold, enabling the selection of the optimal process technology for each IC
within the package.  This provides enhanced integration at the
sub-system level.  These solutions generate significant size
reductions in wireless handset component circuitry.




Modules allow
our customers to get their product to market more rapidly at a lower overall end
product cost due largely to the reduced parts count and reduction in required
engineering effort.  We believe we are well positioned to address the
shift toward more complex multi-chip modules because we possess both extensive
process breadth (a key advantage, as modules typically incorporate numerous
process technologies) and a large portfolio of RF expertise (e.g., PAs, switches,
transceivers, filters, and discretes).





Final
Test




After
assembly, packaged ICs are tested prior to shipment to our
customers.  We outsource most of our production RF testing operations,
which are performed near our module assembly contractors in
Asia.  This adds considerable efficiencies to the device manufacturing
process in reducing product cycle times and manufacturing costs and supports our
initiative to reduce manufacturing costs.





Raw
Materials




GaAs wafers,
HBT/pHEMT epitaxial wafers, passive components, other raw materials, and
equipment used in the production of our ICs are available from a limited number
of sources.  See “Risk Factors—Sources for certain components,
materials and equipment are limited, which could result in delays or reductions
in product shipments.”





Research
and Development




We have made
significant investments in our proprietary processes, including product design
and wafer fabrication, which we believe gives us a competitive
advantage.  Research and development expenses were $35.1 million,
$46.5 million and $54.5 million in 2006, 2007 and 2008, respectively. We
continue to focus our research and development on PAs and front end modules for
EDGE, CDMA, EVDO, W-CDMA, HSPA in the wireless handset and infrastructure
markets, and on semiconductor tuners, active splitters, WiFi PAs and Front-End
ICs, WiMAX PAs, CATV infrastructure amplifiers and FTTP amplifiers in the
broadband market.




Our wireless
PA capability has expanded from plastic-packaged GaAs RFIC products to RF
modules incorporating multiple technologies.  This capability is
critical to encapsulating RF intellectual property and know-how into a module
that may be used to shrink the time-to-market for wireless handset
manufacturers.




Module
integration capability required extending our design tools in several
dimensions.  Electromagnetic simulation of laminate substrates to
design embedded passive components and model parasitic effects were added to our
RF design tool set.  In addition, the ability to simulate at the
module level was greatly enhanced through our partnership with a leading
manufacturer of electronic design automation tools.




Additionally,
several silicon CMOS components were developed to support our PA module and
other products.  We do not intend to manufacture this technology
in-house, as we believe there will be adequate external foundry capacity
available.  See “Risk Factors—Sources for certain components,
materials and equipment are limited, which could result in delays or reductions
in product shipments.”





Customers




Sales to
Intel Corporation (Intel) and Samsung Electronics Co., Ltd (Samsung) accounted
for 18% and 16%, respectively, of total net sales during 2008. No other customer
accounted for 10% or more of total net sales during 2008.  See “Risk
Factors—We depend on a small number of customers; a loss of or a decrease in
purchases and/or change in purchasing patterns by one of these customers would
materially and adversely affect our revenues and our ability to forecast
revenue.”





Employees




As of
December 31, 2008, we had 657 employees.





Competition




We compete
with U.S. and international semiconductor and integrated circuit manufacturers
of all sizes.  Our key competitors are Avago Technologies Limited,
Microtune, Inc., RF Micro Devices, Inc., SiGe Semiconductor, Inc., Skyworks
Solutions, Inc. and TriQuint Semiconductor, Inc.




Many of our
competitors have significantly greater financial, technical, manufacturing and
marketing resources than we do.  Increased competition could adversely
affect our revenue and profitability through price reductions or reduced demand
for our products.  See “Risk Factors—We face intense competition,
which could result in a decrease in our products’ prices and
sales.”







Patents,
Licenses and Proprietary Rights




It is our
practice to seek U.S. patent and copyright protection on our products and
developments where appropriate and to protect our valuable technology under U.S.
laws affording protection for trade secrets and for semiconductor chip
designs.  We own 65 U.S. patents and have 6 pending U.S. patent
applications.  The U.S. patents were issued between 1991 and 2008 and
will expire between 2010 and 2025.




We rely
primarily upon trade secrets, technical know-how and other unpatented
proprietary information relating to our product development and manufacturing
activities. To protect our trade secrets, technical know-how and other
proprietary information, our employees are required to enter into agreements
providing for maintenance of confidentiality and the assignment of rights to
inventions made by them while in our employ.  We have also entered
into non-disclosure agreements to protect our confidential information delivered
to third parties in conjunction with possible corporate collaborations and for
other purposes.  See “Risk Factors—We may not be successful in
protecting our intellectual property rights or in avoiding claims that we
infringe on the intellectual property rights of others.”





Environmental
Matters




Our
operations are subject to federal, state and local environmental laws,
regulations and ordinances that govern activities or operations that may have
adverse effects on human health or the environment.  These laws,
regulations or ordinances may impose liability for the cost of remediating, and
for certain damages resulting from, sites of past releases of hazardous
materials.  We believe that we currently conduct, and have conducted,
our activities and operations in substantial compliance with applicable
environmental laws and regulations, and that costs arising from existing
environmental laws and regulations will not have a material adverse effect on
our results of operations.  We cannot assure you, however, that such
environmental laws and regulations will not become more stringent in the future
or that we will not incur significant costs in the future in order to comply
with these laws and regulations.  See “Risk Factors—We are subject to
stringent environmental laws and regulations both domestically and
abroad.”




Available
Information




Copies of our
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of
charge through our website (www.anadigics.com) as
soon as reasonably practicable after we electronically file the material with,
or furnish it to, the Securities and Exchange Commission.  All SEC
filings are also available at the SEC’s Web site at www.sec.gov





************************************************************************




ITEM 1A.
RISK FACTORS





CERTAIN
STATEMENTS IN THIS REPORT ARE FORWARD-LOOKING STATEMENTS (AS THAT TERM IS
DEFINED IN THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED) THAT INVOLVE RISKS
AND UNCERTAINTIES. THESE FORWARD-LOOKING STATEMENTS CAN GENERALLY BE IDENTIFIED
AS SUCH BECAUSE THE CONTEXT OF THE STATEMENT WILL INCLUDE WORDS SUCH AS WE
"BELIEVE", "ANTICIPATE", "EXPECT" OR WORDS OF SIMILAR IMPORT. SIMILARLY,
STATEMENTS THAT DESCRIBE OUR FUTURE PLANS, OBJECTIVES, ESTIMATES OR GOALS ARE
FORWARD-LOOKING STATEMENTS. THE CAUTIONARY STATEMENTS MADE IN THIS REPORT SHOULD
BE READ AS BEING APPLICABLE TO ALL RELATED FORWARD-LOOKING STATEMENTS WHEREVER
THEY APPEAR IN THIS REPORT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS
AND DEVELOPMENTS TO BE MATERIALLY DIFFERENT FROM THOSE EXPRESSED OR IMPLIED BY
THE FORWARD-LOOKING STATEMENTS PRESENTED HEREIN INCLUDE THE RISK FACTORS
DISCUSSED BELOW, AS WELL AS THOSE DISCUSSED ELSEWHERE HEREIN.





IN
ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS REPORT, THE FOLLOWING RISK
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE
COMPANY AND IN ANALYZING OUR FORWARD-LOOKING STATEMENTS.





Risks
Related to ANADIGICS





We
have experienced losses in the past, and expect to continue to incur
losses.




We have
incurred substantial operating and net losses in the past.  While we
had positive operating results during calendar year 2007, we had a net loss in
calendar year 2008 as a result of the general economic downturn, market factors
beyond our control and a loss in market share, and we expect to continue to
incur losses in 2009. Additionally, we compete in an industry with limited
visibility into customers’ forecasts beyond just a few quarters. If economic
conditions worsen or there is an abrupt change in our customers’ businesses or
markets, our business, financial condition and results of operations will likely
be materially and adversely affected.





Unfavorable
general economic conditions in the United States or in other major markets could
negatively impact our financial performance.




Unfavorable
general economic conditions, such as a recession or economic slowdown in the
United States or in one or more of our other major markets, could negatively
affect the demand for some of our products. Our customer base includes OEMs that
are reliant on consumer demand. Consumers may seek to reduce discretionary
spending, which can soften demand for our customers’ products and can negatively
affect our financial performance.




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




In calendar
years 2007 and 2008 we increased capacity in our manufacturing facility in order
to attempt to meet customer demands. At present, we are underutilizing this
facility, resulting in excess capacity.  This excess capacity means we
incur increased fixed costs in our products relative to the revenues we
generate.  Because large portions of our manufacturing costs are
relatively fixed, our manufacturing volumes are critical to our operating
results.  If we fail to achieve acceptable manufacturing volumes or
experience product shipment delays, our results of operations could be
harmed.  During periods of decreased demand, our high fixed
manufacturing costs negatively affect our results of operations.  We
base our expense levels in part on our expectations of future orders and these
expense levels are predominantly fixed in the short term.  If we
receive fewer customer orders than expected or if our customers delay or cancel
orders, we may not be able to reduce our manufacturing costs in the short term,
which would have an adverse effect on our results of operations. If we are
unable to improve utilization levels and correctly manage capacity, the
increased expense levels relative to revenue will have an adverse effect on our
business, financial condition and results of operations.





We
depend on a small number of customers; a loss of or a decrease in purchases
and/or change in purchasing patterns by one of these customers could materially
and adversely affect our revenues and our ability to forecast
revenue.




We receive a
significant portion of our revenues from a few significant customers and their
subcontractors.  Sales to Intel and Samsung accounted for 18% and 16%,
respectively, of total net sales during 2008.  Sales to our greater
than 10% customers have exceeded 30% of total net sales in each of the last
three fiscal years.  Our financial condition and results of operations
have been materially and adversely affected in the past by the failure of
anticipated orders to be realized and by deferrals or cancellations of orders as
a result of changes in customer requirements.  If we were to lose any
of our major customers, or if sales to these customers were to decrease
materially, our financial condition and results of operations could be
materially and adversely affected.





We
may not fully realize the benefits from our cost reduction measures and our
plans may have insufficiently addressed market conditions.




In November
2008, we began implementing cost reduction measures, which included
approximately a 15% reduction in our worldwide workforce, and other cost
reduction initiatives.   The measures were adopted with a view
towards eliminating approximately $15 million to $20 million in annual
expenses.   No assurance can be given that the implementation of
the cost reduction plan will generate all of the anticipated cost savings and
other benefits or that future or additional measures are not required. We may
have incorrectly anticipated the extent and term of the market decline and
weakness for our products and services and we may be forced to restructure
further or may incur future operating charges due to poor business
conditions.




We
face risks from failures in our manufacturing processes 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 primarily manufactured
on wafers made of GaAs requiring multiple process steps.  It requires
production in a highly controlled, clean environment.  Minor
impurities, contamination of the clean room environment, errors in any step of
the fabrication process, defects in the masks used to print circuits on a wafer,
defects in equipment or materials, downtime on equipment, human error, or a
number of other factors can cause a substantial interruption in our
manufacturing processes.  Moreover, our manufacturing process is
subject to fluctuations in our demand and fab utilization. In an environment of
increasing manufacturing output and personnel to satisfy increasing demand, we
may incur manufacturing disruptions limiting supply to customers.




Additionally,
our operations may be affected by lengthy or recurring disruptions of operations
at our production facility or those of our subcontractors.  These
disruptions may include electrical power outages, fire, earthquakes, flooding,
international conflicts, war, acts of terrorism, or other natural or man-made
disasters.  Disruptions of our manufacturing operations could cause
significant delays in our shipments unless and until we are able to shift the
manufacturing of such products from an affected facility to another facility or
the disruption is remedied.  Furthermore, many of our customers
require that they qualify a new manufacturing source before they will accept
products from such source.  This qualification process may be
expensive and time consuming.  In the event of such delays, we cannot
assure you that the required alternative capacity, particularly wafer production
capacity, would be available on a timely basis or at all.  Even if
alternative manufacturing capacity or assembly and test capacity is available,
we may not be able to obtain it on favorable terms, which could result in higher
costs and/or a loss of customers.  We may be unable to obtain
sufficient manufacturing capacity to meet demand, either at our own facilities
or through external manufacturing.




Due to the
highly specialized nature of the gallium arsenide integrated circuit
manufacturing process, in the event of a disruption at the Warren, New Jersey
semiconductor wafer fab, alternative gallium arsenide production capacity would
not be readily available from third-party sources.  Any disruptions
could have a material adverse effect on our business, financial condition and
results of operations.




We also
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.





The
variability of our manufacturing yields may affect our gross
margins.




Our
manufacturing yields vary significantly among products, depending on the
complexity of a particular integrated circuit’s design and our experience in
manufacturing that type of integrated circuit.  We have experienced
difficulties in achieving planned yields in the past, particularly in
pre-production and upon initial commencement of full production volumes, which
have adversely affected our gross margins.




Regardless of
the process technology used, the fabrication of integrated circuits is a highly
complex and precise process.  Problems in the fabrication process can
cause a substantial percentage of wafers to be rejected or numerous integrated
circuits on each wafer to be nonfunctional, thereby reducing
yields.  These difficulties can include:





·
            defects
      in masks, which are used to transfer circuit patterns onto our
      wafers;




·
            impurities
      in the materials used;




·
            operator
      errors;




·
            contamination
      of the manufacturing environment;
and




·
            equipment
      failure.




Many of our
manufacturing costs are fixed and average selling prices for our products tend
to decline over time.  Therefore, it is critical for us to increase
the number of shippable integrated circuits per wafer and increase the
production volume of wafers in order to maintain or improve our results of
operations.  Yield decreases can result in substantially higher unit
costs, which could materially and adversely affect our financial condition and
results of operations and have done so in the past.  We cannot assure
you that we will not suffer periodic yield problems, particularly during the
early production of new products or introduction of new process
technologies.  If any new yield problems were to arise or any existing
yield problems were to continue, our financial condition and results of
operations could be materially and adversely affected.





We
face intense competition, which could result in a decrease in our products’
prices and sales.




The markets
for our products are intensely competitive and are characterized by rapid
technological change.  We compete with U.S. and international
semiconductor and integrated circuit (IC) manufacturers of all sizes, some of
whom have significantly greater financial, technical, manufacturing and
marketing resources than we do.  We currently face significant
competition in our markets and expect that intense price and product competition
will continue.  This competition has resulted in, and is expected to
continue to result in, declining average selling prices for our products and
increased challenges in maintaining or increasing market share.  We
believe that the principal competitive factors for suppliers in our markets
include, among others:





·
            time-to-market;




·
            timely
      new product innovation;




·
            product
      quality, reliability and
performance;




·
            product
      price;




·
            features
      available in products;




·
            compliance
      with industry standards;




·
            strategic
      relationships with leading reference design providers and customers;
      and




·
            access
      to and protection of intellectual
property.




Certain of
our competitors may be able to adapt more quickly than we can to new or emerging
technologies and changes in customer requirements or may be able to devote
greater resources to the development, promotion and sale of their products than
we can.




Current and
potential competitors have established, or may in the future establish,
financial or strategic relationships among themselves or with customers,
distributors, reference design providers or other third parties with whom we
have or may in the future have relationships.  If our competitors are
able to strengthen existing, or establish new, relationships with these third
parties they may rapidly acquire market share at our expense, which occurred to
some extent in 2008 when we were unable to fully meet customer demand due to
capacity constraints.  We cannot assure you that we will be able to
compete successfully against current and potential
competitors.  Increased competition could result in pricing pressures,
decreased gross margins and loss of market share and may materially and
adversely affect our financial condition and results of operations.





Our
dependence on foreign semiconductor component suppliers, assembly and test
operations contractors could lead to delays in or reductions of product
shipments.




We do not
assemble or test all of our integrated circuits or multi-chip
modules.  Instead, we provide the integrated circuit die and, in some
cases, packaging and other components to assembly and test vendors located
primarily in Asia.  Our products contain numerous component parts,
substrates and silicon-based products, obtained from external suppliers. The use
of external suppliers involves a number of risks, including the possibility of
material disruptions in the supply of key components and the lack of control
over delivery schedules, capacity constraints, manufacturing yields, quality,
fabrication costs, warranty issues and protection of intellectual property.
Further, we are dependent upon a few foreign semiconductor assembly and test
subcontractors.  If these vendors’ processes vary in reliability or
quality, they could negatively affect our products and, therefore, our results
of operations. If we are unable to obtain sufficient high quality and timely
component parts, assembly or test service, if we experience delays in
transferring or requalifying our production between suppliers, assembly or test
locations or if means of transportation to or from these locations are
interrupted, we would experience increased costs, delays or reductions in
product shipment, and/or reduced product yields, which could materially and
adversely affect our financial condition and results of operations.





Sources
for certain components, materials and equipment are limited, which could result
in delays or reductions in product shipments.




We do not
manufacture any of the starting wafers, packaging or passive components used in
the production of our gallium arsenide integrated circuits.  While we
do not typically rely on a single source of supply for our raw materials, we are
currently dependent on a sole-source supplier for certain epitaxial wafers used
in the gallium arsenide semiconductor manufacturing processes at our
manufacturing facility. If we were to lose this sole source of supply, for any
reason, a material adverse effect on our business could result until an
alternate source is obtained. Packaging and passive components are available
from a limited number of sources. To the extent that we are unable to obtain
these packaging or passive components in the required quantities, as has
occurred from time to time in the past, we could experience delays or reductions
in product shipments, which could materially and adversely affect our financial
condition and results of operations.




We depend on
a limited number of vendors to supply the equipment used in our manufacturing
processes.  When demand for semiconductor manufacturing equipment is
high, lead times for delivery of such equipment can be
substantial.  We cannot assure you that we would not lose potential
sales if required manufacturing equipment is unavailable and, as a result, we
are unable to maintain or increase our production levels.  A delay for
any reason in increasing capacity would limit our ability to increase sales
volumes, which could harm our relationships with customers.





We
will need to keep pace with rapid product and process development and
technological changes as well as product cost reductions to be
competitive.




The markets
for our products are characterized by rapid changes in both product and process
technologies based on the continuous demand for product enhancements, higher
levels of integration, decreased size and reduced power
consumption.  Because the continuous evolution of these technologies
and frequent introduction of new products and enhancements have generally
resulted in short product life cycles for our products, we believe that our
future success will depend, in part, upon our ability to continue to improve the
efficiency of our products and process technologies and rapidly develop new
products and process technologies.  The successful development of our
products is highly complex and depends on numerous factors, including our
ability to anticipate customer and market requirements and changes in technology
and industry standards, our ability to differentiate our products from offerings
of our competitors, and our ability to protect, develop or otherwise obtain
adequate intellectual property for our new products.  If a competing
technology emerges that is, or is perceived to be, superior to our existing
technology and we are unable to develop and/or implement the new technology
successfully or to develop and implement a competitive and economically
acceptable alternative technology, our financial condition and results of
operations could be materially and adversely affected.  This
implementation may require us to modify the manufacturing process for our
products, design new products to more stringent standards, and redesign some
existing products, which may prove difficult for us and result in sub-optimal
manufacturing yields, delays in product deliveries and increased expenses. We
will need to make substantial investments to develop these enhancements and
technologies, and we cannot assure investors that we will have funds available
for these investments or that these enhancements and technologies will be
successful.





Our
gallium arsenide semiconductors may cease to be competitive with silicon
alternatives.




Among our
product portfolio, we manufacture and sell gallium arsenide semiconductor
devices and components, principally PAs and switches, which tend to be more
expensive than their silicon counterparts.  The cost differential is
due to higher costs of raw materials for gallium arsenide and higher unit costs
associated with smaller sized wafers and lower production volumes.  We
expect the cost of producing gallium arsenide devices will continue for the
foreseeable future to exceed the costs of producing their silicon
counterparts.  In addition, silicon semiconductor technologies are
widely-used process technologies for certain integrated circuits and these
technologies continue to improve in performance.  Therefore, to remain
competitive, we must offer gallium arsenide products that provide superior
performance over their silicon-based counterparts.  If we do not
continue to offer products that provide sufficiently superior performance to
justify their higher cost, our financial condition and results of operations
could be materially and adversely affected.  We cannot assure you that
there will continue to be products and markets that require the performance
attributes of gallium arsenide solutions.





The
short life cycles of some of our products may leave us with obsolete or excess
inventories.




The life
cycles of some of our products depend heavily upon the life cycles of the end
products into which our products are designed.  For example, we
estimate that current life cycles for wireless handsets, and in turn our
wireless products, are approximately 9 to 12 months.  Products with
short life cycles require us to manage production and inventory levels
closely.  We cannot assure you that obsolete or excess inventories,
which may result from unanticipated changes in the estimated total demand for
our products and/or the estimated life cycles of the end products into which our
products are designed, will not result in significant charges that will
negatively affect our operating profit and net income.





Our
results of operations can vary significantly due to the cyclical nature of the
semiconductor industry and our end markets.




The
semiconductor industry and our end markets have been cyclical, seasonal and
subject to significant downturns.  In past years, the industry has
experienced periods marked by market weaknesses that created lower order demand,
production overcapacity, high inventory levels, and accelerated declines in
average selling prices for our products.  These factors negatively
affected our financial condition and results of operations during these periods
and may negatively affect our financial condition and results of operations in
the future.




Our results
of operations also may be subject to significant quarterly and annual
fluctuations.  These fluctuations are due to a number of factors, many
of which are beyond our control, including, among others:





·
            changes
      in end-user demand for the products manufactured and sold by our
      customers;




·
            the
      effects of competitive pricing pressures, including decreases in average
      selling prices of our products;




·
            industry
      production capacity levels and fluctuations in industry manufacturing
      yields;




·
            levels
      of inventory in our end markets;




·
            availability
      and cost of products from our
suppliers;




·
            the
      gain or loss of significant
customers;




·
            our
      ability to develop, introduce and market new products and technologies on
      a timely basis;




·
            new
      product and technology introductions by
  competitors;




·
            changes
      in the mix of products produced and
sold;




·
            market
      acceptance of our products and our customers;
  and




·
            intellectual
      property disputes.




As a result,
we may experience substantial period-to-period fluctuations in future operating
results.  Investors should not rely on our results of operations for
any previous period as an indicator of what results may be for any future
period.  Failure of our operating results to meet the expectations of
analysts or investors could materially and adversely affect the price of our
common stock.





Our
products may experience significant declines in unit prices.




In each of
the markets where we compete, prices of established products tend to decline
significantly over time and in some cases rapidly.  Accordingly, in
order to remain competitive, we believe that we must continue to develop product
enhancements and new technologies that will either slow the price declines of
our products or reduce the cost of producing and delivering our
products.  If we fail to do so, our financial condition and results of
operations could be materially and adversely affected.




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




The
fabrication of integrated circuits from substrate materials 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, which we may
experience from time to time. Other defects or failures may also occur in the
future. If such failures or defects occur, we could:




•
            
            lose
      revenues;




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




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




•
            
            experience
      increased product returns or
discounts.





We
face a risk that capital needed for our business will not be available when we
need it.




In the
future, we may need to access sources of financing to fund our
growth.  Taking into consideration our cash balance as of December 31,
2008, including marketable securities of $145.7 million, $119.4 million (82%) of
which is fully guaranteed by the federal government, we believe that our
existing sources of liquidity will be sufficient to fund our research and
development, capital expenditures, working capital requirements, interest and
principal payment obligations under our $38.0 million in outstanding convertible
senior unsecured notes due October 2009 and other financing requirements for at
least the next twelve months.




However,
there is no assurance that the capital required to fund these expenditures will
be available in the future.  Conditions existing in the U.S. capital
markets, as well as the then current condition of our company, will affect our
ability to raise capital, as well as the terms of any financing.  We
may not be able to raise enough capital to meet our capital needs on a timely
basis or at all.  Failure to obtain capital when required could have a
material adverse affect on us.




In addition,
any strategic investments and acquisitions that we may make to help us grow our
business may require additional capital.  We cannot assure you that
the capital required to fund these investments and acquisitions will be
available in the future.





Our
marketable securities’ liquidity and valuation could be affected by disruption
in financial markets.




We maintain
significant investments in financial instruments including corporate debt
obligations, auction rate securities, certificates of deposit and
government-related obligations, which included $6.9 million carrying value of
auction rate securities at December 31, 2008. These investments must be
supported by actively trading financial markets in order to be liquid
investments. Financial markets can temporarily or permanently have an imbalance
of buyers and sellers that can impact valuations and liquidity. Auction rate
markets have experienced imbalances since late 2007 and may continue to be
imbalanced. Such imbalances could negatively impact the fair value of our
investments, requiring a charge against income as occurred in 2007 and 2008, our
access to cash and the liquidity of our marketable securities. We can not assure
you that our marketable securities could be sold for their carrying value or in
our required time frame to support our intermediate term cashflow and liquidity
needs.





Our
success depends on our ability to attract and retain qualified
personnel.




A small
number of key executive officers manage our business.  Their departure
could have a material adverse effect on our operations.  We believe
that our future success will also depend in large part on our continued ability
to attract and retain highly qualified manufacturing personnel, technical sales
and marketing personnel, design and application engineers, as well as senior
management.  We believe that there is, and will continue to be,
intense competition for qualified personnel in the semiconductor industry as the
emerging broadband wireless and wireline communications markets develop, and we
cannot assure you that we will be successful in retaining our key personnel or
in attracting and retaining highly qualified manufacturing personnel, technical
sales and marketing personnel, design and application engineers, as well as
senior management.  The loss of the services of one or more of our key
employees or our inability to attract, retain and motivate qualified personnel
could have a material effect on our ability to operate our business. We do not
presently maintain key-man life insurance for any of our key executive
officers.





We
are subject to risks due to our international customer base and our
subcontracting operations.




Sales to
customers located outside the United States and Canada (based on shipping
addresses and not on the locations of ultimate end users) accounted for 62%, 71%
and 74% of our net sales for the years ended December 31, 2006, 2007 and 2008,
respectively.  We expect that international sales will continue to
represent a significant portion of our net sales.  In addition,
independent third parties located in Asia supply a substantial portion of the
starting wafers and packaging components that we use in the production of
gallium arsenide integrated circuits, and assemble and test nearly all of our
products.




Due to our
reliance on international sales and on foreign suppliers, assemblers and test
houses, we are subject to risks of conducting business outside of the United
States, including primarily those arising from local economic and political
conditions, international health epidemics, natural disasters, restrictive
governmental actions (e.g., exchange controls,
duties, etc.), limitation of protecting intellectual property rights in foreign
jurisdictions and potential acts of terrorism.





We
are subject to stringent environmental laws and regulations both domestically
and abroad.




We are
subject to a variety of federal, state, local and foreign laws and regulations
governing the protection of the environment.  These environmental laws
and regulations include those related to the use, storage, handling, discharge
and disposal of toxic or otherwise hazardous materials used in or resulting from
our manufacturing processes.  Failure to comply with environmental
laws and regulations could subject us to substantial liability or force us to
significantly change our manufacturing operations.  In addition, under
some of these laws and regulations, we could be held financially responsible for
remedial measures if our properties are contaminated, even if we did not cause
the contamination.  Although we are aware of contamination resulting
from historical third-party operations at one of our facilities, a prior owner
of such facility has been performing, and paying for the costs associated with,
remediation of this property pursuant to an agreement with the state
environmental regulatory authority.  However, we cannot assure you
that such prior owner will continue to do so or that we will not incur any
material costs or liabilities associated with compliance with environmental laws
in the future.





We
may not be successful in protecting our intellectual property rights or in
avoiding claims that we infringe on the intellectual property rights of
others.




Our success
depends in part on our ability to obtain patents and
copyrights.  Despite our efforts to protect our intellectual property,
unauthorized third parties may violate our patents or copyrights.  In
addition to intellectual property that we have patented and copyrighted, we also
rely on trade secrets, technical know-how and other non-patented proprietary
information relating to our product development and manufacturing activities,
which we seek to protect, in part, by entering into confidentiality agreements
with our collaborators and employees.  We cannot assure you that these
agreements will not be breached, that we would have adequate remedies for any
breach or that our trade secrets and proprietary know-how will not otherwise
become known or independently discovered by others.




We seek to
operate without infringing on the intellectual property rights of third
parties.  As is typical in the semiconductor industry, we have been
notified, and may be notified in the future, that we may be infringing on
certain patents and/or other intellectual property rights of other
parties.  We cannot assure you that we will not be subject to
litigation to defend our products or processes against claims of patent
infringement or other intellectual property claims.  Any such
litigation could result in substantial costs and diversion of our
resources.  If we infringe on the intellectual property rights of
others, we cannot assure investors that we would be able to obtain any required
licenses on commercially reasonable terms and we may be required to pay
substantial damages, including treble damages, and cease production of our work
product or use of one or more manufacturing processes.  Even if we are
ultimately successful, patent litigation can be time consuming, disruptive to
management and expensive.  If any of the foregoing were to occur, our
financial condition and results of operations could be materially adversely
affected.





We
may pursue selective acquisitions and alliances and the management and
integration of additional operations could be expensive and could divert
management time and acquisitions may dilute the ownership of our
stockholders.




Our ability
to complete acquisitions or alliances is dependent upon, and may be limited to,
the availability of suitable candidates and capital.  In addition,
acquisitions and alliances involve risks that could materially adversely affect
our financial condition and results of operations, including the management time
that may be diverted from operations in order to pursue and complete such
transactions and difficulties in integrating and managing the additional
operations and personnel of acquired companies.  We cannot assure you
that we will be able to obtain the capital necessary to consummate acquisitions
or alliances on satisfactory terms, if at all.  Further, any
businesses that we acquire will likely have their own capital needs, which may
be significant, which we could be called upon to satisfy independent of the
acquisition price.  Future acquisitions or alliances could result in
additional debt, costs and contingent liabilities, all of which could materially
adversely affect our financial condition and results of
operations.  Any additional debt could subject us to substantial and
burdensome covenants.  The growth that may result from future
acquisitions or alliances may place significant strains on our resources,
systems and management.  If we are unable to effectively manage such
growth by implementing systems, expanding our infrastructure and hiring,
training and managing employees, our financial condition and results of
operations could be materially adversely affected.  In addition, if we
issue additional shares of our common stock in order to acquire another
business, our stockholders’ interest in us, or the combined company, could be
materially diluted.





We
have had significant volatility in our stock price and it may fluctuate in the
future.  Therefore, you may be unable to sell shares of our common
stock at or above the price you paid for such shares.




The trading
price of our common stock has and may continue to fluctuate
significantly.  Such fluctuations may be influenced by many factors,
including:





·
            our
      operating results and prospects;




·
            the
      operating results and prospects of our major
  customers;




·
            announcements
      by our competitors;




·
            the
      depth and liquidity of the market for our common
  stock;




·
            investor
      perception of us and the industry in which we
  operate;




·
            changes
      in our earnings estimates or buy/sell recommendations by analysts covering
      our stock;




·
            general
      financial and other market conditions;
and




·
            domestic
      and international economic
conditions.




Public stock
markets have experienced extreme price and trading volume volatility,
particularly in the technology sectors of the market.  This volatility
significantly affected and may in the future affect 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 materially and
adversely affect the market price of our common stock.




In addition,
fluctuations in our stock price and our price-to-earnings multiple may have made
our stock attractive to momentum, hedge or day-trading investors who often shift
funds into and out of stocks rapidly, exacerbating price fluctuations in either
direction, particularly when viewed on a quarterly basis.





Certain
provisions in our amended and restated certificate of incorporation, our amended
and restated bylaws and our stockholders’ rights agreement and of Delaware law
could deter, delay or prevent a third party from acquiring us and that could
deprive you of an opportunity to obtain a takeover premium for our common
stock.




Our amended
and restated certificate of incorporation, our amended and restated bylaws and
Delaware law contain provisions that could have the effect of making it more
difficult for a third party to acquire us, or of discouraging a third party from
attempting to acquire control of us.  In addition, we have a
stockholders’ rights agreement that under certain circumstances would
significantly impair the ability of third parties to acquire control of us
without prior approval of our board of directors.




Together, our
amended and restated certificate of incorporation, our amended and restated
by-laws, certain provisions of Delaware law and our stockholders’ rights
agreement may discourage transactions that otherwise could provide for the
payment of a premium over prevailing market prices for our common stock and
could also limit the price that investors may be willing to pay in the future
for our common stock.




We
and certain of our officers and directors are defendants in litigation and the
outcome of these lawsuits may, to the extent not covered by insurance,
negatively affect our financial condition, results of operations and cash
flows.




In late 2008,
two putative class action lawsuitswere filed in the
United States District Court for the District of New Jersey against the Company
and certain of its current and former directors and officers, alleging federal
securities fraud claims and seeking unspecified damages arising out of the
alleged non-disclosure of information concerning, among other things,
manufacturing inefficiencies and customer demand.  The longer of the
class periods alleged in these lawsuits runs from February 12, 2007 through
October 22, 2008.  In early 2009, two shareholders’ derivative
lawsuits were filed in New Jersey Superior Court against the Company, as a
nominal defendant, and certain of its current and former directors, alleging
state law claims and seeking unspecified damages arising out of the same events
at issue in the putative class action lawsuits.  Neither the putative
class action lawsuits nor the shareholders’ derivative lawsuits have yet
advanced beyond the preliminary procedural stages.  (See “Item 3.
Legal Proceedings” for additional details on these cases and related
matters.)




At this time,
we cannot predict the probable outcome of these lawsuits.  The
pendency of these lawsuits, and any others that might subsequently be filed
against us, could divert the attention of management from our business, harm our
reputation and otherwise have a negative effect on our financial condition,
results of operations and cash flows.  Any adverse outcome in any one
of these lawsuits may, to the extent not reimbursed by insurance, have a
negative effect on our financial condition, results of operations and cash
flows.








ITEM 1B.
UNRESOLVED STAFF COMMENTS


Not
applicable.





ITEM 2.
PROPERTIES.




Our executive
offices and primary fabrication facility are located at 141 Mt. Bethel Road,
Warren, New Jersey 07059. We currently lease space in several buildings in
Warren, New Jersey, located within the industrial complex. Approximately 150,000
square feet of manufacturing and office space is occupied in a building located
at 141 Mt. Bethel Road in Warren, New Jersey under a twenty-year lease expiring
on December 31, 2016.  We occupy another 37,500 square feet of office
space in a nearby building under a three-year lease expiring on October 31,
2010.




We also lease
approximately 39,200 square feet in aggregate of office space in the following
locations: Atlanta, Georgia; Tyngsboro, Massachusetts; Richardson, Texas;
Taipei, Taiwan; Aalborg, Denmark; China; and South Korea under lease agreements
with remaining terms ranging from four to thirty six months that can be
extended, at our option.





ITEM 3.
LEGAL PROCEEDINGS.




On or about
November 11, 2008, plaintiff Charlie Attias filed a putative securities class
action lawsuit in the United States District Court for the District of New
Jersey, captioned Charlie
Attias v. Anadigics, Inc., et al., No. 3:08-cv-05572, and, on or about
November 21, 2008, plaintiff Paul Kuznetz filed a related class action lawsuit
in the same court, captioned Paul J. Kuznetz v. Anadigics, Inc.,
et al., No. 3:08-cv-05750 (jointly, the "Class Actions").  The
Complaints in the Class Actions, which were consolidated by an Order of the
District Court dated November 24, 2008, seek unspecified damages for alleged
violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
as well as Rule 10b-5 promulgated thereunder, in connection with alleged
misrepresentations and omissions relating to, among other things, Anadigics's
manufacturing capabilities and the demand for its products.  The
longer of the proposed class periods alleged in the Class Actions runs from
February 12, 2007 through October 22, 2008.  Currently pending before
the District Court are various motions by certain members of the proposed class
seeking appointment as Lead Plaintiff.




On or about
January 14, 2009, a shareholder's derivative lawsuit, captioned Sicari v. Anadigics, Inc., et
al., No. SOM-L-88-09, was filed in the Superior Court of New Jersey, and,
on or about February 2, 2009, a related shareholder's derivative lawsuit,
captioned Moradzadeh v. Anadigics, Inc., et
al., No. SOM-L-198-09, was filed in the same court (jointly, the
"Derivative Lawsuits").  The Derivative Lawsuits seek unspecified
damages for alleged state law claims against certain of the Company's current
and former directors arising out of the matters at issue in the Class
Actions.  The plaintiffs in the Derivative Lawsuits have filed a
motion seeking, among other things, to consolidate their respective
suits.




Because the
Class Actions, which are in a preliminary stage, do not specify alleged monetary
damages, we are unable to reasonably estimate any possible range of loss, if
any, to the Company in connection therewith.




We are also a
party to ordinary course litigation arising out of the operation of our
business. We believe that the ultimate resolution of such ordinary course
litigation should not have a material adverse effect on our consolidated
financial condition or results of operations.





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




No matters
were submitted to a vote of the Company’s security holders during the fourth
quarter of 2008.





PART
II





ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.




Our $0.01 par
value Common Stock, (“Common Stock”) has been quoted on the NASDAQ Global Market
under the symbol "ANAD" since the commencement of trading on April 21, 1995
following our initial public offering of our Common Stock. The following table
sets forth for the periods indicated the high and low sale prices for our Common
Stock.





High
            
            
            LowCalendar
      2008Fourth
      Quarter
            
            $
            2.96
            
            
            $
            1.13Third
      Quarter
            
            
            10.53
            
            
            
            2.88Second
      Quarter
            
            
            13.95
            
            
            
            6.52First
      Quarter
            
            
            11.59
            
            
            
            5.85Calendar
      2007Fourth
      Quarter
            
            $
            19.53
            
            
            $
            9.83Third
      Quarter
            
            
            18.60
            
            
            
            12.80Second
      Quarter
            
            
            14.36
            
            
            
            10.31First
      Quarter
            
            
            13.71
            
            
            
            8.39





As of
December 31, 2008, there were 63,174,583 shares of Common Stock outstanding
(excluding shares held in Treasury) and 765 holders of record of the Common
Stock.




We have never
paid cash dividends on our capital stock. We currently anticipate that we will
retain available funds for use in the operation and expansion of our business,
and do not anticipate paying any cash dividends in the foreseeable
future.




See also “Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters” under Part III, Item 12 of this report.





ITEM 6.
SELECTED FINANCIAL DATA.




The selected
financial data set forth below should be read in conjunction with Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", and our financial statements, related notes and other financial
information included herein. The selected consolidated financial data set forth
below as of December 31, 2007 and 2008 and for the years ended December 31,
2006, 2007, and 2008 have been derived from our audited financial statements
included herein. The selected consolidated financial data set forth below as of
December 31, 2004, 2005 and 2006 and for the years ended December 31, 2004 and
2005 have been derived from our audited financial statements, as adjusted for
discontinued operations, that are not included herein or incorporated by
reference herein. Our historical results are not necessarily indicative of the
results that may be expected for any future period.





(amounts
      in thousands, except for per share amounts)
            
            2004
            
            
            2005
            
            
            2006
            
            
            2007
            
            
            2008RESULTS
      OF OPERATIONSNet
      sales
            
            $
            86,904
            
            
            $
            103,871
            
            
            $
            166,442
            
            
            $
            230,556
            
            
            $
            258,170Gross
      profit
            
            
            13,246
            
            
            
            21,736
            
            
            
            50,231
            
            
            
            78,788
            
            
            
            78,587Operating
      (loss) income from continuing operations
            
            
            (41,352
            )
            
            
            (27,950
            )
            
            
            (8,483
            )
            
            
            2,078
            
            
            
            (38,267
            )(Loss)
      income before income taxes
            
            
            (42,614
            )
            
            
            (30,466
            )
            
            
            (7,870
            )
            
            
            6,916
            
            
            
            (41,872
            )Net
      (loss) income from continuing operations
            
            
            (42,614
            )
            
            
            (30,466
            )
            
            
            (7,870
            )
            
            
            6,916
            
            
            
            (41,872
            )(Loss)
      earnings per share from continuing operations:Basic
            
            $
            (1.32
            )
            
            $
            (0.90
            )
            
            $
            (0.18
            )
            
            $
            0.13
            
            
            $
            (0.70
            )Diluted
            
            $
            (1.32
            )
            
            $
            (0.90
            )
            
            $
            (0.18
            )
            
            $
            0.12
            
            
            $
            (0.70
            )BALANCE
      SHEET DATA:Total
      cash and marketable securities
            
            $
            104,051
            
            
            $
            86,357
            
            
            $
            83,482
            
            
            $
            176,812
            
            
            $
            145,724Total
      assets
            
            
            185,895
            
            
            
            168,273
            
            
            
            182,602
            
            
            
            333,461
            
            
            
            303,777Total
      capital lease obligations
            
            
            18
            
            
            
            2,032
            
            
            
            1,775
            
            
            
            -
            
            
            
            -Current
      portion of long-term debt
            
            
            -
            
            
            
            46,700
            
            
            
            -
            
            
            
            -
            
            
            
            38,000Long-term
      debt
            
            
            84,700
            
            
            
            38,000
            
            
            
            38,000
            
            
            
            38,000
            
            
            
            -Total
      stockholders’ equity
            
            
            84,615
            
            
            
            58,135
            
            
            
            115,760
            
            
            
            250,106
            
            
            
            230,008




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





OVERVIEW




We are a
leading provider of semiconductor solutions in the growing broadband wireless
and wireline communications markets.  Our products include power
amplifiers, tuner integrated circuits, active splitters, line amplifiers and
other components, which can be sold individually or packaged as integrated radio
frequency and front end modules.  We believe that we are
well-positioned to capitalize on the high growth voice, data and video segments
of the broadband wireless and wireline communications markets.  We
offer 3G products that use the W-CDMA, EDGE and WEDGE standards, 3.5G products
that use HSPA and EVDO standards, 4G products for WIMAX systems, WiFi products
that use the 802.11 a/b/g and 802.11 n MIMO standards, CATV cable modem and
set-top box products, CATV infrastructure products and FTTP
products.




Our business
strategy focuses on developing RF front end solutions and partnering with
industry-leading wireless chipset providers to incorporate our solutions into
their reference designs.  Our integrated solutions enable our
customers to improve RF performance, power efficiency, reliability,
time-to-market and the integration of chip components into single packages,
while reducing the size, weight and cost of their products.




We
continue to focus on leveraging our technological advantages to remain a leading
supplier of semiconductor solutions for broadband wireless and wireline
communications.  We believe our patented InGaP-plus technology, which
combines the bipolar technology of a PA (HBT PA) with the surface device
technology of an RF active switch (pHEMT) on the same die, provides us with a
competitive advantage in the marketplace.  For instance, we believe
technologies such as HELP provide our customers a competitive advantage by
enabling their 3G, 3.5G and 4G devices to consume less battery power and deliver
longer talk time than comparable products in their markets.




Our six-inch
diameter GaAs fab located at our corporate headquarters in Warren, New Jersey,
has been operational since 1999.  We are actively exploring future
sources of additional manufacturing capacity including pursuing relationships
with foundries.  Unlike traditional CMOS silicon fabs that have short
technology lifecycles and require frequent capital investments, GaAs fabs are
more similar to analog fabs that have long lifecycles and do not become quickly
outdated.  Our six-inch wafer fab allows us to produce more than twice
the RF die per wafer compared with the four-inch wafer fabs still used by some
of our competitors.




Although we
have achieved annual growth in revenue since 2004, we have experienced a decline
in quarterly revenue in the third and fourth quarters of 2008, which has
resulted from a combination of a reduction in market share with certain
customers and an industry slowdown due to the current macroeconomic
environment.  We expect a sequential revenue decline in the first
quarter 2009.




During the
fourth quarter of 2008, we announced the implementation of a workforce reduction
which eliminated approximately 100 positions. The workforce reduction along with
other cost reduction actions were initiated with a view to achieving annual
savings of approximating $15 million to $20 million which we expect to be
realized in 2009. Additionally, in the fourth quarter, we re-evaluated and
cancelled our previous plans for expanding wafer manufacturing to a facility we
were constructing in China. After evaluating the recoverability of our capital
investment in China, we recorded a $13.0 million impairment charge on that
investment. Additionally, after evaluating and discounting future cashflows
underlying our goodwill and intangible assets associated with our WiFi reporting
unit, we have fully impaired those assets, resulting in impairment charges of
$6.2 million.




We believe
our markets are, and will continue to remain, competitive which could result in
continued quarterly volatility in our net sales. This competition has resulted
in, and is expected over the long-term to continue to result in competitive or
declining average selling prices for our products and increased challenges in
maintaining or increasing market share.




We have only
one reportable segment. For financial information related to such segment and
certain geographic areas, see Note 6 to the accompanying consolidated financial
statements.





CRITICAL
ACCOUNTING POLICIES & SIGNIFICANT ESTIMATES





GENERAL




We believe
the following accounting policies are critical to our business operations and
the understanding of our results of operations. Such accounting policies may
require management to exercise a higher degree of judgment and make estimates
used in the preparation of our consolidated financial statements.





REVENUE
RECOGNITION




Revenue from
product sales is recognized when title to the products is transferred to the
customer, which occurs upon shipment or delivery, depending upon the terms of
the sales order. We sell to certain distributors who are granted limited
contractual rights of return and exchange and certain pre-negotiated individual
product-customer price protection. Revenue from sales of our products to
distributors is recognized, net of allowances, upon shipment of the products to
the distributors. At the time of shipment, title transfers to the distributors
and payment from the distributors is due on our standard commercial terms;
payment terms are not contingent upon resale of the products. Revenue is
appropriately reduced for the portion of shipments subject to return, exchange
or price protection. Allowances for the distributors are recorded upon shipment
and calculated based on the distributors’ indicated intent, historical data,
current economic conditions and contractual terms.  We believe we can
reasonably and reliably estimate allowances for credits to distributors in a
timely manner. We charge customers for the costs of certain
contractually-committed inventories that remain at the end of a product's life.
Such amounts are recognized as cancellation revenue when cash is received. The
value of the inventory related to cancellation revenue may, in some instances,
have been reserved during prior periods in accordance with our inventory
obsolescence policy.





ALLOWANCE
FOR DOUBTFUL ACCOUNTS




We maintain
an allowance for doubtful accounts for estimated losses resulting from our
customers' failure to make payments. If the financial condition of our customers
were to erode, making them unable to make payments, additional allowances may be
required.





WARRANTY
COSTS




We provide
for potential warranty claims by recording a current charge to income. We
estimate potential claims by examining historical returns and other information
deemed critical and provide for an amount which we believe will cover future
warranty obligations for products sold. The liability for warranty costs is
included in accrued liabilities in the consolidated balance sheets.





STOCK-BASED
COMPENSATION




We account
for stock-based compensation costs in accordance with Financial Accounting
Standards Board Statement No. 123R, “Share Based Payment” (FAS 123R), which
requires the measurement and recognition of compensation expense for all
stock-based payment awards made to our employees and directors. Under the fair
value recognition provisions of FAS 123R, stock-based compensation cost is
measured at the grant date based on the fair value of the award and is
recognized as expense over the requisite service period which in most cases is
the vesting period. Determining the fair value of certain awards at the grant
date requires considerable judgment, including estimating expected volatility,
expected term and risk-free interest rate. Our expected volatility has been a
combination of both Company and peer company historical volatility, which at the
time of grant, we deemed reflective of our development as a larger
capitalization company. The expected term of the stock options is based on
several factors including historical observations of employee exercise patterns
and expectations of employee exercise behavior in the future giving
consideration to the contractual terms of the stock-based awards. The risk free
interest rate assumption is based on the yield at the time of grant of a U.S.
Treasury security with an equivalent remaining term. If factors change and we
employ different assumptions, stock-based compensation expense may differ
significantly from what we have recorded in the past.





MARKETABLE
SECURITIES




Available-for-sale
securities are stated at fair value, as determined by quoted market prices or,
as needed, independent valuation models, with unrealized gains and losses
reported in other accumulated comprehensive income or loss. Independent
valuations developed to estimate the fair value of illiquid auction rate
securities (ARS) were determined using a combination of two calculations: (1) a
discounted cash flow model, where the expected cash flows of the ARS are
discounted to the present value using a yield that incorporates compensation for
illiquidity, and (2) a market comparables method, where the ARS are valued based
on indications, from the secondary market, of what discounts buyers demand when
purchasing similar ARS. The valuations include numerous assumptions such as
assessments of the underling structure of each security, expected cash flows,
discount rates, credit ratings, workout periods and overall capital market
liquidity. We review our investments on an ongoing basis for indications of
possible impairment, and if an impairment is identified, we determine whether
the impairment is temporary or other-than-temporary, in which case it is
recorded as a charge to income. Determination of whether the impairment is
temporary or other-than-temporary requires significant judgment. Unrealized
losses are recognized in our consolidated statement of operations when a decline
in fair value is determined to be other than temporary. The primary factors we
consider in classifying the impairment are the extent to which and period of
time that the fair value of each investment has declined below its cost
basis.





INVENTORY




Inventories
are valued at the lower of cost or market ("LCM"), using the first-in, first-out
method. We capitalize production overhead costs to inventory on the basis of
normal capacity of the production facility and in periods of abnormally low
utilization we charge the related expenses as a period cost in the statement of
operations.  In addition to LCM limitations, we reserve against
inventory items for estimated obsolescence or unmarketable inventory. The
reserve for excess and obsolete inventory is primarily based upon forecasted
short-term demand for the product. Once established, these write-downs are
considered permanent adjustments to the cost basis of the excess inventory. If
actual demand and market conditions are less favorable than those projected by
management, additional inventory write-downs may be required.  In the
event we sell inventory that had been covered by a specific inventory reserve,
the sale is recorded at the actual selling price and the related cost of goods
sold at the full inventory cost, net of the reserve.





LONG-LIVED
ASSETS




Long-lived
assets include fixed assets, goodwill and other intangible assets. We regularly
review these assets for indicators of impairment and assess the carrying value
of the assets against market values. When an impairment exists, we record an
expense to the extent that the carrying value exceeds fair market
value.





Goodwill
and intangibles impairment


Goodwill is
required to be tested for impairment at the reporting unit level on an annual
basis to assess whether the fair value of the reporting unit could be below its
carrying value. Our goodwill represents the purchase price in excess of the net
amount assigned to assets acquired and liabilities assumed. The first step of
the two-step impairment test compares the carrying value of the reporting unit
to its fair value calculated using the income approach based on the present
value of estimated future cash flows. The income approach is dependent on a
number of significant management assumptions, including estimates of future
revenue growth, other operating costs and discount rates. If the fair value of
the unit is less than the carrying value of its net assets, we perform step two
of the impairment test. In step two, we allocate the fair value of the reporting
unit to its underlying assets and liabilities as if the reporting unit had been
acquired in a business combination and the fair value of the unit was the price
paid to acquire the reporting unit. Any excess of the fair value of the
reporting unit over the amounts assigned to its assets and liabilities is the
implied fair value of goodwill. During the fourth quarter of 2008, we performed
an impairment test on our WiFi reporting unit in which our step two analysis
resulted in no implied fair value of goodwill and such value was expensed as an
impairment charge in our statement of operations.





Impairment
of long-lived assets


We assess the
impairment of long-lived assets, including intangible assets, whenever events or
changes in circumstances indicate that their carrying value may not be
recoverable. Factors which could trigger an impairment review include the
following: significant changes in the manner of use of the assets; significant
underperformance relative to historical or projected future operating results;
or significant negative industry or economic trends. An impairment occurs when
the future undiscounted cash flows estimated to be generated by those assets are
less than the carrying amount of such assets. Cash flow estimates are based on
historical results adjusted to reflect management’s best estimate of future
market and operating conditions. The net carrying values of assets not
recoverable through future cash flows are reduced to fair value. Estimates of
fair value represent management’s best estimates based on industry trends, and
market rates and transactions. In connection with completing step two of our
goodwill impairment analysis during the fourth quarter of 2008, we assessed the
fair values of our related intangible assets, consisting principally of
assembled workforce related to the WiFi reporting unit and expensed such value
as an impairment charge in the statement of operations.




During the
fourth quarter of 2008, we evaluated our future options with regard to our
investment in constructing a wafer fabrication facility in Kunshan China and
subsequently estimated and evaluated future cashflows associated with this
investment. Such estimates included significant assumptions on possible
recoveries through a sale of the facility, further investment, and a return in
demand for production capacity and discount rate. After evaluating the
discounted cash flows, we fully impaired the investment and charged such amounts
within restructuring and impairment charges in our statement of
operations.




Long-lived
assets held for sale are reported at the lower of cost or fair value less costs
to sell. Management considers sensitivities to capacity, utilization and
technological developments in making its assumptions of fair value.





DEFERRED
TAXES




We record a
valuation allowance to reduce deferred tax assets when it is more likely than
not that some portion of the amount may not be realized. During 2001, we
determined that it was no longer more likely than not that we would be able to
realize all or part of our net deferred tax asset in the future, and an
adjustment to provide a valuation allowance against the deferred tax asset was
charged to income. We continue to maintain a full valuation allowance on our
deferred tax assets.




While we have
considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance, in the event we
were to determine that we would be able to realize our deferred tax assets in
the future, an adjustment to the deferred tax asset would increase income in the
period such determination was made.





RESULTS
OF OPERATIONS




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





2006
            
            
            2007
            
            
            2008Net
      sales
            
            
            100.0
            %
            
            
            100.0
            %
            
            
            100.0
            %Cost
      of sales
            
            
            69.8
            
            
            
            65.8
            
            
            
            69.6Gross
      profit
            
            
            30.2
            
            
            
            34.2
            
            
            
            30.4Research
      and development expense
            
            
            21.1
            
            
            
            20.2
            
            
            
            21.1Selling
      and administrative expenses
            
            
            14.2
            
            
            
            13.1
            
            
            
            15.9Restructuring
      and impairment charges
            
            
            -
            
            
            
            -
            
            
            
            8.2Operating
      (loss) income
            
            
            (5.1
            %)
            
            
            0.9
            %
            
            
            (14.8
            %)Interest
      income
            
            
            3.3
            
            
            
            3.5
            
            
            
            2.0Interest
      expense
            
            
            (2.9
            )
            
            
            (1.1
            )
            
            
            (0.9
            )Other
      income
            
            
            -
            
            
            
            (0.3
            )
            
            
            (2.5
            )(Loss)
      income from continuing operations
            
            
            (4.7
            %)
            
            
            3.0
            %
            
            
            (16.2
            %)Loss
      from discontinued operations
            
            
            (0.6
            %)
            
            
            (0.4
            %)
            
            
            -Net
      (loss) income
            
            
            (5.3
            %)
            
            
            2.6
            %
            
            
            (16.2
            %)





2008
COMPARED TO 2007




NET SALES.
Net sales for the year ended December 31, 2008 increased 12.0% to $258.2
million, compared to net sales for the year ended December 31, 2007 of $230.6
million. The net sales improvement was primarily due to increased demand for
wireless third generation technologies (or 3G), most significantly
WCDMA.




Net sales for
the year ended December 31, 2008 for the Company’s wireless products increased
19.9% to $154.7 million compared to net sales for the year ended December 31,
2007 of $129.0 million.  The net sales improvement was primarily due
to increased demand for power amplifiers for 3G applications of $34.7 million or
29.1%, most significantly in WCDMA applications. The growth in 3G was partially
offset by lower net sales in power amplifiers for GSM of $9.1 million or 91.5%,
which resulted from the Company’s shift in market focus to 3G
technologies.




Net sales
for the year ended December 31, 2008 for the Company’s broadband products
increased to $103.5 million or 2.0% compared to net sales for the year ended
December 31, 2007 of $101.5 million.   The net sales improvement
was due to increased demand for integrated circuits used in cable set-top boxes
of $10.2 million or 55.4% partly offset by a decline in cable infrastructure and
WiFi applications of $8.2 million or 9.9%.




GROSS MARGIN.
Gross margin for 2008 declined to 30.4% of net sales, compared with 34.2% of net
sales in the prior year. The decline in gross margin was impacted by $7.1
million in charges principally comprised of production equipment purchase
cancelation charges of $1.9 million, impairment charges on equipment held for
sale of $1.5 million and $3.5 million of inventory reserve charges on dedicated
inventory which is surplus to reduced customer demand. In addition, depreciation
expense increased by $5.4 million, which was partially offset by improvements in
product mix.




RESEARCH
& DEVELOPMENT. Company sponsored research and development expenses increased
17.0% during 2008 to $54.5 million from $46.5 million during 2007. The increase
was primarily due to an expansion and focus in research and development efforts
on new product development, requiring increased staffing and support costs,
including automated design tools. In addition, our purchase of the RF group from
Fairchild Semiconductor on September 5, 2007 which further added to our new
product development capability, impacted the year on year comparison in the
amount of $2.9 million, such amount was primarily comprised of staffing-related
costs.




SELLING AND
ADMINISTRATIVE. Selling and administrative expenses increased 36.2% during 2008
to $41.1 million from $30.2 million in 2007. The increase included $5.7 million
associated with the departure of our former Chief Executive Officer, including
$2.2 million of stock -based compensation upon accelerated vesting of certain
equity awards. The remaining increase was primarily driven by increased staff
and outside advisors costs.




RESTRUCTURING
AND IMPAIRMENT CHARGES. During the fourth quarter of 2008, we implemented a
workforce reduction which eliminated approximately 100 positions resulting in a
restructuring charge of $2.1 million, principally for severance and related
benefits.




During the
fourth quarter of 2008, we evaluated alternatives with regard to our investment
in the construction of a wafer fabrication facility in Kunshan China in light of
surplus industry production capacity, reduced demand experienced by the Company,
as well as the broader macroeconomic environment. We determined that the
carrying amount of the China fabrication building was not recoverable as the
carrying amount was greater than the sum of the undiscounted cash flows expected
from the use and disposition of these assets. As a result of this impairment
analysis, we recorded a full $13.0 million impairment charge in the fourth
quarter of 2008.




Our annual
goodwill impairment test determined that the fair value of the WiFi reporting
unit was less than the carrying value of the net assets of the reporting unit,
and thus we performed step two of the impairment test. Our step two analysis
resulted in no implied fair value of goodwill and therefore, we recognized an
impairment charge of $5.9 million in the fourth quarter of 2008, representing a
write off of the entire amount of our previously recorded goodwill. In
connection with our goodwill impairment analysis, we also assessed the fair
values of our related intangible assets, which carried an unamortized value of
$0.3 million consisting principally of assembled workforce related to the WiFi
reporting unit noting it was similarly impaired and charged the remaining
unamortized carrying value to restructuring and impairment charges.




INTEREST
INCOME. Interest income decreased 34.6% to $5.3 million during 2008 from $8.0
million in 2007. The decrease was primarily due to lower interest rates globally
as we reinvested funds and concentrated our investments in shorter-term vehicles
which carried federal deposit insurance.




INTEREST
EXPENSE. Interest expense was essentially flat at $2.4 million in 2008 compared
to $2.5 million in 2007. The interest expense arises from obligations under our
5% Convertible Senior Notes due in October 2009 (“2009 Notes”).




OTHER
EXPENSE.  Other expense was $6.5 million in 2008 compared to $0.7
million in 2007 and included charges for other than temporary declines in value
on certain auction rate securities (ARS) held by the Company of $6.8 million and
$1.0 million respectively.While interest continues
to be paid currently by all the issuers of these ARS, due to the severity
of the decline in fair value and the duration of time for which these ARS have
been in a loss position, the Company concluded that ARS held at December 31,
2008 experienced an other-than-temporary decline in fair value and recorded
impairment charges of $4.7 million for the year ended December 31, 2008.
Additionally during 2008, a corporate debt ARS position was exchanged for the
underlying 30 year notes. This debt trades in the market with a value of $1.9
million against its face value of $4.0 million. Due to the severity and duration
of the decline, the Company has recorded an impairment of $2.1 million related
to this security.




LOSS FROM
DISCONTINUED OPERATIONS. Loss from discontinued operations was $1.0 million 2007
and included $0.5 million loss on the sale of the majority of the operating
assets of Telcom Devices Inc. upon its sale at the close of the first quarter of
2007.





2007
COMPARED TO 2006




NET SALES.
Net sales for the year ended December 31, 2007 increased 38.5% to $230.6
million, compared to net sales for the year ended December 31, 2006 of $166.4
million. The net sales improvement was primarily due to increased demand for
wireless third generation technologies (or 3G) consisting of CDMA EVDO, EDGE,
WEDGE, and W-CDMA power amplifiers used in wireless handsets and hand-held
devices and increased demand for broadband products such as WiFi power
amplifiers used in wireless personal computer access and RF integrated circuits
used in cable and broadband applications.




Specifically,
net sales for the year ended December 31, 2007 for the Company’s wireless
products increased 41.4% to $129.0 million compared to net sales for the year
ended December 31, 2006 of $91.3 million.  The net sales improvement
was primarily due to increased demand for power amplifiers for 3G applications
of $54.1 million or 85.6%, which was partially offset by lower net sales in
power amplifiers for GSM of $16.4 million or 62.3%, which resulted from the
Company’s shift in market focus to 3G technologies.




Specifically,
net sales for the year ended December 31, 2007 for the Company’s broadband
products increased to $101.5 million or 35.0% compared to net sales for the year
ended December 31, 2006 of $75.2 million.   The net sales
improvement was primarily due to increased demand for power amplifiers for WiFi
applications of $18.7 million or 52.6% and integrated circuits used in cable and
infrastructure applications of $7.6 million or 19.9%.




Geographically, net
sales in Asia increased 67.4% to $153.4 million from $91.6 million in
2006.  The increase was primarily driven by the increased demand for
our WiFi and 3G products.




GROSS MARGIN.
Gross margin for 2007 improved to 34.2% of net sales, compared with 30.2% of net
sales in the prior year. The improvement in gross margin was primarily due to
the product mix of 3G technologies and WiFi applications further supported by
improved cost absorption generated through increased production
volumes.




RESEARCH
& DEVELOPMENT. Company sponsored research and development expenses increased
32.8% during 2007 to $46.5 million from $35.1 million during
2006.  The increase was primarily due to an expansion and focus in
research and development efforts on new product development, which required
increased staffing costs. Additionally, on September 5, 2007 we purchased the RF
group from Fairchild Semiconductor, which included the hiring a staff of 23
employees. Non-cash stock-based compensation expense accounted for an increase
of $2.6 million in 2007 over 2006.




SELLING AND
ADMINISTRATIVE. Selling and administrative expenses increased 27.5% during 2007
to $30.2 million from $23.7 million in 2006. The increase was primarily due to
increased sales and marketing efforts focused on addressing existing and
potential market opportunities in 3G, WiFi and broadband.  Non-cash
stock-based compensation expense accounted for an increase of $2.9 million in
2007 over 2006.




INTEREST
INCOME. Interest income increased 47.9% to $8.0 million during 2007 from $5.4
million in 2006. The increase was primarily due to higher average funds invested
as a result of our underwritten public offering of 8.6 million shares of common
stock in March of 2007 (the “March 2007 Offering”) and higher interest
rates.




INTEREST
EXPENSE. Interest expense decreased to $2.5 million in 2007 from $4.8 million in
2006. In 2007, interest expense arose from obligations under our 5% Convertible
Senior Notes due in 2009 (“2009 Notes”) whereas in 2006 our 5% Convertible
Senior Notes due in 2006 (“2006 Notes”) was also outstanding.  In
November 2006, we repaid the remaining $46.7 million aggregate principal amount
outstanding of our 2006 Notes.




LOSS FROM
DISCONTINUED OPERATIONS. Loss from discontinued operations was $1.0 million
compared with $1.0 million in 2006. The loss from discontinued operations in
2007 included $0.5 million loss on the sale of Telcom upon its sale at the close
of the first quarter of 2007.




OTHER
EXPENSE.  Other expense was $0.7 million in 2007, for which, $1.0
million was recorded for an other than temporary decline in value on certain
auction rate securities held by the Company.   This was partly
offset by gains on foreign currency transactions.





LIQUIDITY
AND SOURCES OF CAPITAL




At December
31, 2008 we had $123.6 million of cash and cash equivalents on hand and $22.2
million in marketable securities. The cash and cash equivalents were primarily
comprised of fully federally-insured accounts and investments. We had $38.0
million aggregate principal amount of our 2009 Notes outstanding as of December
31, 2008.




Operations
generated $27.1 million in cash during 2008, primarily as a result of our
operating results adjusted for non-cash expenses. Changes in operating assets
and liabilities also provided cash as accounts receivable declined consistent
with our revenue decline in the third and fourth
quarters.   Investing activities provided $35.9 million of cash
during 2008, consisting principally of net sales of marketable securities of
$90.2 million, partially offset by purchases of equipment of $54.5 million.
Financing activities provided $2.8 million of cash in 2008, primarily consisting
of proceeds received from employee stock option exercises.




At December
31, 2008, the Company had unconditional purchase obligations of approximately
$3.7 million, of which $2.9 million relates to capital equipment purchase
requirements primarily over the first half of 2009.




By February
19, 2009, we signed termination agreements with our development partner (KSND)
and construction contractor covering further development of our construction of
a wafer fabrication facility in Kunshan China. Those termination agreements
limit obligations for further investment in the facility to those included
within accrued liabilities in our December 31, 2008 financial statements.




We believe that our
existing sources of capital, including our existing cash and marketable
securities, will be adequate to satisfy operational needs, repayment of our
$38.0 million convertible notes and anticipated capital needs for at least the
next twelve months. Our anticipated capital needs may include acquisitions of
complimentary businesses or technologies, investments in other companies or
repurchases of our outstanding debt or equity. Subject to liquidity
considerations of our auction rate securities as discussed more fully in Item
7A, we may elect to finance all or part of our future capital requirements
through additional equity or debt financing. There can be no assurance that such
additional financing would be available on satisfactory
terms.




The table
below summarizes required cash payments as of December 31, 2008:





CONTRACTUAL
      OBLIGATIONS
            
            PAYMENTS
      DUE BY PERIOD (in thousands)Total
            
            
            Less
      than 1 year
            
            
            1 –
      3 years
            
            
            4 -
      5 years
            
            
            After
      5 yearsLong-term
      debt plus the interest payable with respect thereto
            
            $
            39,504
            
            
            $
            39,504
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Operating
      leases
            
            
            17,428
            
            
            
            2,712
            
            
            
            4,318
            
            
            
            4,010
            
            
            
            6,388Unconditional
      purchase obligations
            
            
            3,729
            
            
            
            3,729
            
            
            
            -
            
            
            
            -
            
            
            
            -Total contractual cash
      obligations
            
            $
            60,661
            
            
            $
            45,945
            
            
            $
            4,318
            
            
            $
            4,010
            
            
            $
            6,388





IMPACT OF
RECENTLY ISSUED ACCOUNTING STANDARDS




In September
2006, the FASB issued FASB Statement No. 157, “Fair Value Measurements” (FAS
157) which defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles and expands disclosures about fair
value measurements. FAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007 and interim periods within those
fiscal years. In February 2008, the FASB issued FSP FAS 157-2 “Partial Deferral
of the Effective Date of Statement 157” (FSP 157-2). FSP 157-2 delays the
effective date of FAS 157 for non-financial assets and liabilities that are not
measured or disclosed on a recurring basis to fiscal years beginning after
November 15, 2008. The adoption of this accounting pronouncement did not have a
material effect on our consolidated financial statements for financial assets
and liabilities and any other assets and liabilities carried at fair
value.  We currently do not expect that the adoption of FAS 157
related to non-financial assets or liabilities will have a material impact on
our consolidated financial statements.




FAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date (exit price). FAS 157 classifies the inputs used to measure
fair value into the following hierarchy:





Level
      1
            Unadjusted
      quoted prices in active markets for identical assets or
      liabilitiesLevel
      2
            Unadjusted
      quoted prices in active markets for similar assets or liabilities, or
      unadjusted quoted prices for identical or similar assets or liabilities in
      markets that are not active, or inputs other than quoted prices that are
      observable for the asset or liabilityLevel
      3
            Unobservable
      inputs for the asset or liability




We endeavor
to utilize the best available information in measuring fair value. Financial
assets and liabilities are classified in their entirety based on the lowest
level of input that is significant to the fair value measurement.




In October
2008, the FASB issued FSP 157-3 “Determining Fair Value of a Financial Asset in
a Market That Is Not Active” (FSP 157-3). FSP 157-3 clarified the application of
FAS No. 157 in an inactive market. It demonstrated how the fair value of a
financial asset is determined when the market for that financial asset is
inactive. FSP 157-3 was effective upon issuance, including prior periods for
which financial statements had not been issued and did not have a material
impact on our results of operations or financial position.




In February
2007, the FASB issued FASB Statement No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (FAS 159), which permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. FAS 159 is effective for fiscal years
beginning after November 15, 2007. Since we did not utilize the fair value
option for any allowable items, the adoption of FAS 159 had no impact on the
Company’s results of operations or financial position.




In
June 2007, the FASB’s Emerging Issues Task Force reached a consensus on
EITF Issue No. 07-3, “Accounting for Nonrefundable Advance Payments for
Goods or Services to Be Used in Future Research and Development Activities”
(EITF 07-3) that would require nonrefundable advance payments made by the
Company for future research and development activities to be capitalized and
recognized as an expense as the goods or services are received by the Company.
EITF 07-3 is effective with respect to new arrangements entered into beginning
January 1, 2008. We adopted EITF 07-3 effective January 1, 2008, which did
not have a material impact on its consolidated financial
statements.




In
December 2007, the FASB issued FASB Statement No. 141R, “Business
Combinations” (FAS 141R), which changes how business acquisitions are
accounted.  FAS 141R requires the acquiring entity in a business
combination to recognize all (and only) the assets acquired and liabilities
assumed in the transaction and establishes the acquisition-date fair value as
the measurement objective for all assets acquired and liabilities assumed in a
business combination.  Certain provisions of this standard will, among
other things, impact the determination of acquisition-date fair value of
consideration paid in a business combination (including contingent
consideration); exclude transaction costs from acquisition accounting; and
change accounting practices for acquired contingencies, acquisition-related
restructuring costs, in-process research and development, indemnification
assets, and tax benefits.  FAS 141R is effective for financial statements
issued for fiscal years beginning after December 15, 2008.  The
adoption of FAS141R is expected to change our accounting prospectively for all
business combinations consummated after the effective date.




In
December 2007, the FASB issued FASB Statement No. 160, “Noncontrolling
Interests in Consolidated Financial Statements, an Amendment of ARB No. 51”
(FAS 160), which changes the accounting for and reporting of noncontrolling
interests (formerly known as minority interests) in consolidated financial
statements. It is effective for financial statements issued for fiscal years and
interim periods beginning after December 15, 2008, with early adoption
prohibited. Upon implementation, prior periods will be recast for the changes
required by FAS 160. We currently do not expect that the adoption of this
standard will have a material impact on our consolidated financial
statements.




In March
2008, the FASB issued FASB Statement No. 161, "Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133" (FAS
161).  FAS 161 applies to all derivative instruments and related
hedged items accounted for under FASB Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities".  FAS 161 requires that
objectives for using derivative instruments be disclosed in terms of underlying
risk and accounting designation. The fair value of derivative instruments and
their gains and losses will need to be presented in tabular format in order to
present a more complete picture of the effects of using derivative instruments.
FAS 161 is effective for financial statements issued for fiscal years beginning
after November 15, 2008. We currently do not expect that the adoption of this
standard will have a material impact on the Company’s results of operations or
financial position.




In April
2008, the FASB issued FSP 142-3, “Determination of the Useful Life of Intangible
Assets”, (FSP 142-3). FSP 142-3 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible
Assets”. FSP 142-3 is effective for fiscal years beginning after December 15,
2008. We currently do not expect that the adoption of this standard will have a
material impact on the Company’s results of operations or financial
position.




In May 2008,
the FASB issued FSP Accounting Principles Board 14-1 "Accounting for Convertible
Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial
Cash Settlement)" (FSP APB 14-1). FSP APB 14-1 requires the issuer of certain
convertible debt instruments that may be settled in cash (or other assets) on
conversion to separately account for the liability (debt) and equity (conversion
option) components of the instrument in a manner that reflects the issuer's
non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years
beginning after December 15, 2008 on a retroactive basis. We currently do not
expect that the adoption of this standard will have a material impact on the
Company’s results of operations or financial position.




In June 2008,
the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities” (FSP EITF
03-6-1). FSP EITF 03-6-1 clarified that all outstanding unvested share-based
payment awards that contain rights to nonforfeitable dividends participate in
undistributed earnings with common shareholders. Awards of this nature are
considered participating securities and the two-class method of computing basic
and diluted earnings per share must be applied. FSP EITF 03-6-1 is effective for
fiscal years beginning after December 15, 2008. We have not yet determined the
impact this standard may have on our results of operations or financial
position.




ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




We have
invested the primary portion of our cash and cash equivalents in fully
federally-insured accounts and investments to protect against risks associated
with liquidity and credit quality. Our cash and available-for-sale securities
are exposed to changes in short-term interest rates. Our available-for-sale
securities consist primarily of fixed income investments, including corporate
bonds, certificates of deposit, a government-sponsored enterprise security and
certain auction rate securities discussed more specifically below. We
continually monitor our exposure to changes in interest rates and the credit
ratings of issuers with respect to our available-for-sale securities.
Accordingly, we believe that the effects of changes in interest rates and the
credit ratings of these issuers are limited and would not have a material impact
on our financial condition or results of operations. However, it is possible
that we would be at risk if interest rates or the credit ratings of these
issuers were to change in an unfavorable direction. The magnitude of any gain or
loss would be a function of the difference between the fixed rate of the
financial instrument and the market rate and our financial condition and results
of operations could be materially affected.




At December
31, 2008, we held marketable securities with an estimated fair value of $22.2
million, of which $5.0 million is fully guaranteed by the federal government.
Our primary interest rate exposure results from changes in short-term interest
rates. We do not purchase financial instruments for trading or speculative
purposes. All of our marketable securities are classified as available-for-sale
securities. The following table provides information about our marketable
securities at December 31, 2008:


Estimated
      Principal Amount and Weighted Average Stated Interest Rate by Expected
      Maturity Value
              
              
              Fair
      Value($’s
      000)
              
              2009
              
              
              >
      10 years
              
              
              Total
              
              
              ($’s
      000)Principal
              
              $
              13,315
              
              
              $
              16,600
              
              
              $
              29,915
              
              
              $
              22,172Weighted
      Average Stated Interest Rates
              
              
              3.63
              %
              
              
              3.04
              %
              
              
              3.30
              %
              
              
              -
 The stated
rates of interest expressed in the above table may not approximate the actual
yield of the securities which we currently hold since we have valued some of our
marketable securities at other than face value. Additionally, some of the
securities represented in the above table may be called or redeemed, at the
option of the issuer, prior to their expected due dates. If such early
redemptions occur, we may reinvest the proceeds realized on such calls or
redemptions in marketable securities with stated rates of interest or yields
that are lower than those of our current holdings, which would affect both
future cash interest streams and future earnings. We invest our cash in money
market funds in order to maintain liquidity and access to federal insurance
guarantees on these funds as well as fund operations and hold cash pending
investments in marketable securities. Fluctuations in short term interest rates
will affect the yield on monies invested in such money market funds. Such
fluctuations can have an impact on our future cash interest streams and future
earnings, but the impact of such fluctuations are not expected to be
material.




All of our
investment securities are classified as available-for-sale and therefore
reported on our balance sheet at market value. As of December 31, 2008, our
investments included $6.9 million of auction rate securities (ARS). ARS are debt
instruments with a long-term maturity and with an interest rate that is reset in
short intervals through auctions. During the second half of
2007, certain auction rate debt and preferred securities failed to auction due
to sell orders exceeding buy orders. In February 2008, liquidity issues in the
global credit markets resulted in failures of the auction process for a broader
range of ARS, impacting all of the auction rate preferred equity, state and
municipal and corporate debt securities the Company held.When there is
insufficient demand for the securities at the time of an auction and the auction
is not completed, the interest rates resets to predetermined higher rates
(default rates). While certain issuers
redeemed certain of their ARS during 2008, the market remained constrained by
illiquidity and the lack of free trading.The funds associated with
the remaining failed auctions will not be accessible until a successful auction
occurs, a buyer is found outside of the auction process or an issuer redeems its
security.If the credit ratings of the security issuers deteriorate and
any decline in market value is determined to be other-than-temporary, we would
be required to adjust the carrying value of the investment through an additional
impairment charge. To date, we have not realized any losses on ARS held by the
Company or the notes received in exchange for an ARS, but have recognized
other-than-temporary impairments of $7.8 million.




We may not be
able to access cash by selling auction rate securities for which there is
insufficient demand without the loss of principal until a future auction for
these investments is successful, they are redeemed by their issuer or they
mature. If we are unable to sell these securities in the market or they are not
redeemed, then we may be required to hold them to maturity/perpetuity. We do not
have a need to access these funds for operational purposes for the foreseeable
future. We will continue to monitor and evaluate these investments on an ongoing
basis for impairment or for short term classification. Based on our ability to
access our cash and other short-term investments, our expected operating cash
flows, and our other sources of cash, we do not anticipate that the potential
illiquidity of these investments will affect our ability to execute our current
business plan.




Our 2009
Notes are convertible and bear a fixed rate of interest of 5%. A change in
interest rates on long-term debt is assumed to impact fair value but not
earnings or cash flow because the interest rate is fixed. At December 31, 2008,
the fair value of our outstanding convertible notes, estimated based upon dealer
quotes, was approximately $33.6 million.







ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.







Report
of Independent Registered Public Accounting Firm








The Board
of Directors and Stockholders


ANADIGICS,
Inc.








We have
audited the accompanying consolidated balance sheets of ANADIGICS, Inc. as of
December 31, 2008 and 2007, and the related consolidated statements of
operations, comprehensive (loss) income, stockholders' equity, and cash flows
for each of the two years in the period ended December 31, 2008. Our audit also
included the financial statement schedule listed in the Index at Item 15(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audit.





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





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of ANADIGICS, Inc. at
December 31, 2008 and 2007, and the consolidated results of its operations and
its cash flows for each of the two years in the period ended December 31, 2008,
in conformity with U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.





We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), ANADIGICS, Inc.’s internal control over
financial reporting as of December 31, 2008, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 27, 2009
expressed an unqualified opinion thereon.








/s/ Ernst & Young
LLP








MetroPark,
New Jersey


February
27, 2009

















Report
of Independent Registered Public Accounting Firm




To the
Board of Directors and Stockholders


ANADIGICS,
Inc.




We have
audited the accompanying consolidated statements of operations, comprehensive
loss, stockholders' equity and cash flows of ANADIGICS, Inc. for the year ended
December 31, 2006. Our audit also included the consolidated financial statement
schedule for the year ended December 31, 2006 listed in the Index at Item 15(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedule based on our audit.





We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits 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
audit provides a reasonable basis for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated results of operations and cash flows of
ANADIGICS, Inc. for the year ended December 31, 2006 in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, the related consolidated financial statement schedule for the
year ended December 31, 2006, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.





As
discussed in note 14 to the consolidated financial statements, ANADIGICS, Inc.
adopted Statement of Financial Accounting Standards No. 123(R), “Share-Based
Payment” effective January 1, 2006.











/s/ J.H.
Cohn LLP








Roseland,
New Jersey


February
27, 2007








ANADIGICS,
INC.


CONSOLIDATED
BALANCE SHEETS


(AMOUNTS
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)





December
      31,2007
            
            
            2008ASSETSCurrent
      assets:Cash
      and cash equivalents
            
            $
            57,786
            
            
            $
            123,552Marketable
      securities
            
            
            103,778
            
            
            
            13,340Accounts
      receivable, net of allowance for doubtful accounts of $924 and $739 at
      2007 and 2008, respectively
            
            
            45,664
            
            
            
            25,384Inventories
            
            
            23,989
            
            
            
            33,578Prepaid
      expenses and other current assets
            
            
            3,277
            
            
            
            3,121Total
      current assets
            
            
            234,494
            
            
            
            198,975Marketable
      securities
            
            
            15,248
            
            
            
            8,832Plant
      and equipmentEquipment
      and furniture
            
            
            165,333
            
            
            
            201,217Leasehold
      improvements
            
            
            38,638
            
            
            
            40,589Projects
      in process
            
            
            23,180
            
            
            
            18,940227,151
            
            
            
            260,746Less
      accumulated depreciation and amortization
            
            
            151,022
            
            
            
            165,07576,129
            
            
            
            95,671Goodwill
      and other intangibles, less accumulated amortization of $536
      at  2007
            
            
            6,524
            
            
            
            -Other
      assets
            
            
            1,066
            
            
            
            299$
            333,461
            
            
            $
            303,777LIABILITIES
      AND STOCKHOLDERS EQUITYCurrent
      liabilities:Accounts
      payable
            
            $
            34,184
            
            
            $
            18,267Accrued
      liabilities
            
            
            7,928
            
            
            
            13,203Accrued
      restructuring costs
            
            
            -
            
            
            
            1,165Convertible
      notes
            
            
            -
            
            
            
            38,000Total
      current liabilities
            
            
            42,112
            
            
            
            70,635Other
      long-term liabilities
            
            
            3,243
            
            
            
            3,134Convertible
      notes
            
            
            38,000
            
            
            
            -Commitments
      and contingenciesStockholders’
      equityPreferred
      stock, $0.01 par value, 5,000 shares authorized, none issued or
      outstandingCommon
      stock, convertible, non-voting, $0.01 par value, 1,000 shares authorized,
      none issued or outstandingCommon
      stock, $0.01 par value, 144,000 shares authorized at December 31, 2007 and
      2008, and 61,292 and 63,424 issued at December 31, 2007 and 2008,
      respectively
            
            
            613
            
            
            
            634Additional
      paid-in capital
            
            
            541,940
            
            
            
            563,468Accumulated
      deficit
            
            
            (292,095
            )
            
            
            (333,967
            )Accumulated
      other comprehensive (loss) income
            
            
            (94
            )
            
            
            131Treasury
      stock at cost: 114 shares
            
            
            (258
            )
            
            
            (258
            )Total
      stockholders’ equity
            
            
            250,106
            
            
            
            230,008$
            333,461
            
            
            $
            303,777







See
accompanying notes.









ANADIGICS,
INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS


(AMOUNTS
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)





YEAR ENDED DECEMBER
      31,2006
            
            
            2007
            
            
            2008Net
      sales
            
            $
            166,442
            
            
            $
            230,556
            
            
            $
            258,170Cost
      of sales
            
            
            116,211
            
            
            
            151,768
            
            
            
            179,583Gross
      profit
            
            
            50,231
            
            
            
            78,788
            
            
            
            78,587Research
      and development expenses
            
            
            35,054
            
            
            
            46,539
            
            
            
            54,452Selling
      and administrative expenses
            
            
            23,660
            
            
            
            30,171
            
            
            
            41,098Restructuring
      and impairment charges
            
            
            -
            
            
            
            -
            
            
            
            21,30458,714
            
            
            
            76,710
            
            
            
            116,854Operating
      (loss) income
            
            
            (8,483
            )
            
            
            2,078
            
            
            
            (38,267
            )Interest
      income
            
            
            5,433
            
            
            
            8,035
            
            
            
            5,254Interest
      expense
            
            
            (4,816
            )
            
            
            (2,463
            )
            
            
            (2,365
            )Other
      expense
            
            
            (4
            )
            
            
            (734
            )
            
            
            (6,494
            )(Loss)
      income from continuing operations
            
            $
            (7,870
            )
            
            $
            6,916
            
            
            $
            (41,872
            )Loss
      from discontinued operations
            
            
            (980
            )
            
            
            (965
            )
            
            
            -Net
      (loss) income
            
            $
            (8,850
            )
            
            $
            5,951
            
            
            $
            (41,872
            )Basic
      (loss) earnings per share:(Loss)
      income from continuing operations
            
            $
            (0.18
            )
            
            $
            0.13
            
            
            $
            (0.70
            )Loss
      from discontinued operations
            
            
            (0.02
            )
            
            
            (0.02
            )
            
            
            -Net
      (loss) income
            
            $
            (0.20
            )
            
            $
            0.11
            
            
            $
            (0.70
            )Diluted
      (loss) earnings per share:(Loss)
      income from continuing operations
            
            $
            (0.18
            )
            
            $
            0.12
            
            
            $
            (0.70
            )Loss
      from discontinued operations
            
            
            (0.02
            )
            
            
            (0.02
            )
            
            
            -Net
      (loss) income
            
            $
            (0.20
            )
            
            $
            0.10
            
            
            $
            (0.70
            )Weighted
      average common shares outstanding used in computing (loss) earnings per
      share:Basic
            
            
            43,814
            
            
            
            55,189
            
            
            
            60,183Diluted
            
            
            43,814
            
            
            
            58,621
            
            
            
            60,183








CONSOLIDATED
STATEMENTS OF COMPREHENSIVE (LOSS) INCOME


(AMOUNTS
IN THOUSANDS)





Year Ended December
      31,2006
            
            
            2007
            
            
            2008Net
      (loss) income
            
            $
            (8,850
            )
            
            $
            5,951
            
            
            $
            (41,872
            )Other
      comprehensive (loss) incomeUnrealized
      gain (loss) on marketable securities
            
            
            207
            
            
            
            (948
            )
            
            
            (1,373
            )Foreign
      currency translation adjustment
            
            
            9
            
            
            
            (8
            )
            
            
            164Reclassification
      adjustment:Net
      recognized loss on marketable securities previously included in other
      comprehensive income
            
            
            -
            
            
            
            962
            
            
            
            1,434Comprehensive
      (loss) income
            
            $
            (8,634
            )
            
            $
            5,957
            
            
            $
            (41,647
            )







See
accompanying notes.







ANADIGICS,
INC.


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY


(AMOUNTS
IN THOUSANDS)




Common
      Stock Shares
            
            
            Common
      Stock Amount
            
            
            Treasury
      Stock Shares
            
            
            Treasury
      Stock Amount
            
            
            Additional
      Paid-In Capital
            
            
            Accumulated
      Deficit
            
            
            Accumulated
      Other Comprehensive Income (loss )
            
            
            Total
      Stockholders’ EquityBalance,
      December 31, 2005
            
            
            35,007
            
            
            $
            350
            
            
            
            (114
            )
            
            $
            (258
            )
            
            $
            347,555
            
            
            $
            (289,196
            )
            
            $
            (316
            )
            
            $
            58,135Stock
      options exercised
            
            
            983
            
            
            
            10
            
            
            
            
            
            
            
            
            
            
            
            3,778
            
            
            
            
            
            
            
            
            
            
            
            3,788Shares
      issued under employee stock purchase plan
            
            
            187
            
            
            
            2
            
            
            
            
            
            
            
            
            
            
            
            1,005
            
            
            
            
            
            
            
            
            
            
            
            1,007Issuance
      of common stock in public offering, net of costs
            
            
            10,446
            
            
            
            104
            
            
            
            
            
            
            
            
            
            
            
            53,006
            
            
            
            
            
            
            
            
            
            
            
            53,110Restricted
      stock grant, net of forfeitures
            
            
            2,577
            
            
            
            26
            
            
            
            
            
            
            
            
            
            
            
            (26
            )
            
            
            
            
            
            
            
            
            
            
            -Amortization
      of stock-based compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            8,354
            
            
            
            
            
            
            
            
            
            
            
            8,354Other
      comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            216
            
            
            
            216Net
      loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (8,850
            )
            
            
            
            
            
            
            (8,850
            )Balance,
      December 31, 2006
            
            
            49,200
            
            
            $
            492
            
            
            
            (114
            )
            
            $
            (258
            )
            
            $
            413,672
            
            
            $
            (298,046
            )
            
            $
            (100
            )
            
            $
            115,760Stock
      options exercised
            
            
            2,135
            
            
            
            22
            
            
            
            
            
            
            
            
            
            
            
            12,217
            
            
            
            
            
            
            
            
            
            
            
            12,239Shares
      issued under employee stock purchase plan
            
            
            236
            
            
            
            2
            
            
            
            
            
            
            
            
            
            
            
            1,872
            
            
            
            
            
            
            
            
            
            
            
            1,874Issuance
      of common stock in public offering, net of costs
            
            
            8,625
            
            
            
            86
            
            
            
            
            
            
            
            
            
            
            
            98,869
            
            
            
            
            
            
            
            
            
            
            
            98,955Restricted
      stock grant, net of forfeitures
            
            
            1,096
            
            
            
            11
            
            
            
            
            
            
            
            
            
            
            
            (11
            )
            
            
            
            
            
            
            
            
            
            
            -Amortization
      of stock-based compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            15,321
            
            
            
            
            
            
            
            
            
            
            
            15,321Other
      comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            6
            
            
            
            6Net
      income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            5,951
            
            
            
            
            
            
            
            5,951Balance,
      December 31, 2007
            
            
            61,292
            
            
            $
            613
            
            
            
            (114
            )
            
            $
            (258
            )
            
            $
            541,940
            
            
            $
            (292,095
            )
            
            $
            (94
            )
            
            $
            250,106Stock
      options exercised
            
            
            384
            
            
            
            4
            
            
            
            
            
            
            
            
            
            
            
            2,596
            
            
            
            
            
            
            
            
            
            
            
            2,600Shares
      issued under employee stock purchase plan
            
            
            183
            
            
            
            2
            
            
            
            
            
            
            
            
            
            
            
            234
            
            
            
            
            
            
            
            
            
            
            
            236Restricted
      stock grant, net of forfeitures
            
            
            1,565
            
            
            
            15
            
            
            
            
            
            
            
            
            
            
            
            (15
            )
            
            
            
            
            
            
            
            
            
            
            -Amortization
      of stock-based compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            18,713
            
            
            
            
            
            
            
            
            
            
            
            18,713Other
      comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            225
            
            
            
            225Net
      loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (41,872
            )
            
            
            
            
            
            
            (41,872
            )Balance,
      December 31, 2008
            
            
            63,424
            
            
            $
            634
            
            
            
            (114
            )
            
            $
            (258
            )
            
            $
            563,468
            
            
            $
            (333,967
            )
            
            $
            131
            
            
            $
            230,008





See
accompanying notes.


















ANADIGICS,
INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(AMOUNTS
IN THOUSANDS)




YEAR ENDED DECEMBER
      31,2006
            
            
            2007
            
            
            2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      (loss) income
            
            $
            (8,850
            )
            
            $
            5,951
            
            
            $
            (41,872
            )Adjustments
      to reconcile net (loss) income to net cash (used in) provided by operating
      activities:Loss
      from discontinued operations
            
            
            980
            
            
            
            965
            
            
            
            -Depreciation
            
            
            7,700
            
            
            
            9,547
            
            
            
            15,984Amortization
            
            
            1,809
            
            
            
            738
            
            
            
            718Stock-based
      compensation
            
            
            8,169
            
            
            
            15,276
            
            
            
            18,713Amortization
      of premium (discount) on marketable securities
            
            
            163
            
            
            
            (550
            )
            
            
            (90
            )Recognized
      marketable securities impairment and other
            
            
            -
            
            
            
            962
            
            
            
            6,807Loss
      (gain) on sale of equipment
            
            
            7
            
            
            
            (9
            )
            
            
            (295
            )Asset
      impairment charges
            
            
            -
            
            
            
            -
            
            
            
            20,634Changes
      in operating assets and liabilities:Accounts
      receivable
            
            
            (9,009
            )
            
            
            (18,957
            )
            
            
            20,280Inventory
            
            
            (4,805
            )
            
            
            (3,770
            )
            
            
            (9,589
            )Prepaid
      expenses and other assets
            
            
            (184
            )
            
            
            (1,233
            )
            
            
            523Accounts
      payable
            
            
            2,542
            
            
            
            5,922
            
            
            
            (11,187
            )Accrued
      and other liabilities
            
            
            957
            
            
            
            1,984
            
            
            
            6,438Net
      cash (used in) provided by operating activities
            
            
            (521
            )
            
            
            16,826
            
            
            
            27,064CASH
      FLOWS FROM INVESTING ACTIVITIESPurchases
      of plant and equipment
            
            
            (13,374
            )
            
            
            (32,506
            )
            
            
            (54,541
            )Purchases
      of marketable securities
            
            
            (227,150
            )
            
            
            (267,357
            )
            
            
            (20,410
            )Proceeds
      from sales and redemptions of marketable securities
            
            
            231,884
            
            
            
            217,709
            
            
            
            110,608Purchase
      of RF group assets
            
            
            -
            
            
            
            (2,415
            )
            
            
            -Proceeds
      from sale of equipment
            
            
            28
            
            
            
            30
            
            
            
            209Proceeds
      from sale of discontinued operations
            
            
            -
            
            
            
            500
            
            
            
            -Net
      cash (used in) provided by investing activities
            
            
            (8,612
            )
            
            
            (84,039
            )
            
            
            35,866CASH
      FLOWS FROM FINANCING ACTIVITIESPayment
      of obligations under capital leases
            
            
            (257
            )
            
            
            (1,775
            )
            
            
            -Repayment
      of Convertible notes
            
            
            (46,700
            )
            
            
            -
            
            
            
            -Issuances
      of common stock, net of related costs
            
            
            57,905
            
            
            
            113,068
            
            
            
            2,836Net
      cash provided by financing activities
            
            
            10,948
            
            
            
            111,293
            
            
            
            2,836Net
      increase in cash and cash equivalents
            
            
            1,815
            
            
            
            44,080
            
            
            
            65,766Cash
      and cash equivalents at beginning of period
            
            
            11,891
            
            
            
            13,706
            
            
            
            57,786Cash
      and cash equivalents at end of period
            
            $
            13,706
            
            
            $
            57,786
            
            
            $
            123,552Supplemental
      disclosures of cash flow information:Interest
      paid
            
            $
            4,370
            
            
            $
            1,997
            
            
            $
            1,900Taxes
      paid
            
            
            37
            
            
            
            28
            
            
            
            52








See
accompanying notes.
















ANADIGICS,
INC.





NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS





(AMOUNTS
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)








1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




NATURE OF
OPERATIONS AND BASIS OF PRESENTATION




ANADIGICS,
Inc (the Company) is a leading provider of semiconductor solutions in the
growing broadband wireless and wireline communications markets.  The
Company’s products include power amplifiers (PAs), tuner integrated circuits,
active splitters, line amplifiers and other components, which can be sold
individually or packaged as integrated radio frequency (RF) and front end
modules.  The Company offers third generation (3G) products that use
the Wideband Code-Division Multiple Access (W-CDMA) and Enhanced Data Rates for
Global System for Mobile Communication Evolution (EDGE) standards, and
combinations of W-CDMA and EDGE platforms (WEDGE), beyond third generation
(3.5G) products that use the High Speed Packet Access (HSPA, inclusive of
downlink and uplink) and Evolution Data Optimized (EVDO) standards, fourth
generation (4G) products for Worldwide Interoperability for Microwave Access
(WiMAX), Wireless Fidelity (WiFi) products that use the 802.11 a/b/g and 802.11
n (Multiple Input Multiple Output (MIMO)) standards, cable television (CATV)
cable modem and set-top box products, CATV infrastructure products and
Fiber-To-The-Premises (FTTP) products.  The Company’s integrated
solutions enable its customers to improve RF performance, power efficiency,
reliability, time-to-market and the integration of chip components into single
packages, while reducing the size, weight and cost of their
products.




The Company
designs, develops and manufactures RF integrated circuits (RFICs) primarily
using Gallium Arsenide (GaAs) compound semiconductor substrates with various
process technologies, Metal Semiconductor Field Effect Transistors (MESFET),
Pseudomorphic High Electron Mobility Transistors (pHEMT), and Heterojunction
Bipolar Transistors (HBT). The Company’s proprietary technology, which utilizes
InGaP-plusTM,
combines InGaP HBT and pHEMT processes on a single substrate, enabling it to
integrate the PA function and the RF active switch function on the same die. The
Company fabricates substantially all of its ICs in its six-inch diameter GaAs
wafer fabrication facility.




The
consolidated financial statements include the accounts of ANADIGICS, Inc. and
its wholly owned subsidiaries. All significant inter-company accounts and
transactions have been eliminated in consolidation.




As more fully
discussed in Note 5, the Company sold the majority of the operating assets of
Telcom Devices Inc, (Telcom, a wholly-owned subsidiary of the Company) on April
2, 2007 and effectively ceased Telcom’s operations. Accordingly, the financial
results, position and cashflow of Telcom have been classified as discontinued
operations in the accompanying financial statements for the applicable
periods.





USE OF
ESTIMATES




The
preparation of financial statements in conformity with US generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the consolidated financial statements and the
accompanying notes. Actual results could differ from those estimates.
Significant estimates that affect the financial statements include, but are not
limited to: allowance for doubtful accounts, recoverability and valuation of
inventories, warranty reserve, valuation of stock-based compensation, reserves
for distributor arrangements and returns, valuation of certain marketable
securities, useful lives and amortization periods and recoverability of
long-lived assets.




CONCENTRATION
OF CREDIT RISK




The Company
grants trade credit to its customers, who are primarily foreign manufacturers of
wireless communication devices, cable and broadcast television receivers and
fiber optic communication devices. The Company performs periodic credit
evaluations of its customers and generally does not require collateral. Sales
and accounts receivable from customers are denominated in U.S. dollars. The
Company has not experienced significant losses related to receivables from these
individual customers.




Net sales to
individual customers and their affiliates who accounted for 10% or more of the
Company’s total net sales and corresponding end application information are as
follows:


YEAR ENDED DECEMBER
      312006
              2007
              2008Customer
      (application)
              
              $
              
              %
              
              $
              
              %
              
              $
              
              %Intel
      (Broadband)
              
              29,827
              
              18
              %
              49,862
              
              22
              %
              45,273
              
              18
              %Samsung
      Electronics (Wireless)
              
              <10
              %
              <10
              %
              30,471
              
              13
              %
              41,486
              
              16
              %Shenzhen
      Huawei Mobile Comm. Tech. (Wireless)
              
              <10
              %
              <10
              %
              23,953
              
              10
              %
              <10
              %
              <10
              %Cisco
      (Broadband)
              
              <10
              %
              <10
              %
              23,378
              
              10
              %
              <10
              %
              <10
              %World
      Peace Group (Wireless & Broadband)
              
              28,175
              
              17
              %
              22,855
              
              10
              %
              <10
              %
              <10
              %LG
      Electronics, Inc. (Wireless)
              
              <10
              
              <10
              %
              22,188
              
              10
              %
              <10
              %
              <10
              %
  Accounts
receivable at December 31, 2007 and 2008 from the greater than 10% customers
accounted for 78% and 17% of total accounts receivable,
respectively.





REVENUE
RECOGNITION




Revenue from
product sales is recognized when title to the products is transferred to the
customer, which occurs upon shipment or delivery, depending upon the terms of
the sales order. The Company sells to certain distributors who are granted
limited contractual rights of return and exchange and certain pre-negotiated
individual product-customer price protection. Revenue from sales of products to
distributors is recognized, net of allowances, upon shipment of the products to
the distributors. At the time of shipment, title transfers to the distributors
and payment from the distributors is due on our standard commercial terms;
payment terms are not contingent upon resale of the products. Revenue is
appropriately reduced for the portion of shipments subject to return, exchange
or price protection. Allowances for the distributors are recorded upon shipment
and calculated based on the distributors’ indicated intent, historical data,
current economic conditions and contractual terms.  The Company
believes it can reasonably and reliably estimate allowances for credits to
distributors in a timely manner. The Company charges customers for the costs of
certain contractually-committed inventories that remain at the end of a
product's life. Such amounts are recognized as cancellation revenue when cash is
received. The value of the inventory related to cancellation revenue may, in
some instances, have been reserved during prior periods in accordance with the
Company’s inventory obsolescence policy. The Company maintains an allowance for
doubtful accounts for estimated losses resulting from customers' failure to make
payments.




ALLOWANCE
FOR DOUBTFUL ACCOUNTS




The Company
establishes an allowance for doubtful accounts for estimated losses resulting
from customers' failure to make payments, based upon historical
experience.





WARRANTY
COSTS




The Company
provides, by a current charge to income, an amount it estimates, by examining
historical returns and other information it deems critical, will be needed to
cover future warranty obligations for products sold during the year. The
liability for warranty costs is included in accrued liabilities in the
consolidated balance sheets.





PLANT AND
EQUIPMENT




Plant and
equipment are stated at cost. Depreciation of plant, furniture and equipment has
been provided on the straight-line method over 3-5 years. During 2007, the
Company began depreciating certain new wafer fabrication equipment over a seven
year useful life. Leasehold improvements are amortized and included in
depreciation over the useful life of the leasehold or the life of the lease,
whichever is shorter.




The cost of
equipment acquired under capital leases was $7,751 and $7,688 at December 31,
2007 and 2008, respectively, and accumulated amortization was $7,734 and $7,688
at December 31, 2007 and 2008, respectively. Equipment acquired under a capital
lease is amortized and included in depreciation over the useful life of the
leased equipment or the life of the lease, whichever is shorter.





GOODWILL
AND OTHER INTANGIBLES




Goodwill,
intellectual property, customer list, covenant-not-to-compete and assembled
workforce were recorded as part of the Company's acquisitions and asset
purchases. Goodwill is not subject to amortization but is reviewed for potential
impairment annually or upon the occurrence of an impairment indicator using a
two-step process. The first step of the two-step impairment test compares the
carrying value of the reporting unit to its fair value calculated using the
income approach based on the present value of estimated future cash flows. If
the fair value of the unit is less than the carrying value of its net assets,
the Company performs step two of the impairment test. In step two, the Company
allocates the fair value of the reporting unit to its underlying assets and
liabilities as if the reporting unit had been acquired in a business combination
and the fair value of the unit was the price paid to acquire the reporting unit.
Any excess of the fair value of the reporting unit over the amounts assigned to
its assets and liabilities is the implied fair value of goodwill. Intellectual
property, customer list, covenant and the assembled workforce have been
amortized using the straight-line method over two to four year lives. The
carrying amount of the Company’s intangibles are reviewed on a regular basis for
indicators of an impairment. The Company determines if the carrying amount is
impaired based on anticipated cash flows. In the event of impairment, a loss is
recognized based on the amount by which the carrying amount exceeds the fair
value of the asset. For each of the reporting units, fair value is determined
primarily using the anticipated cash flows, discounted at a rate commensurate
with the associated risk. See Note 2 for further discussion.





IMPAIRMENT
OF LONG-LIVED ASSETS




Long-lived
assets used in operations are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of the assets might not be
recoverable. For long-lived assets to be held and used, the Company recognizes
an impairment loss only if its carrying amount is not recoverable through its
undiscounted cash flows and measures the impairment loss based on the difference
between the carrying amount and fair value. Long-lived assets held for sale are
reported at the lower of cost or fair value less costs to sell. See Note 2 for
further discussion.





INCOME
TAXES




Deferred
income taxes reflect the net effects of temporary differences between the
carrying amount of assets and liabilities for financial reporting purposes and
the income tax basis of such assets and liabilities. The Company maintains a
full valuation allowance on its deferred tax assets. Accordingly, the Company
has not recorded a benefit or provision for income taxes. The Company recognizes
interest and penalties related to the underpayment of income taxes in income tax
expense. Upon adoption of FIN 48, the Company had no unrecognized tax benefits.
No unrecognized tax benefits, interest or penalties were accrued at December 31,
2007 and 2008. The Company’s U.S. federal net operating losses have occurred
since 1998 and as such, tax years subject to potential tax examination could
apply from that date because carrying-back net operating loss opens the relevant
year to audit.





RESEARCH
AND DEVELOPMENT COSTS




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





CASH
EQUIVALENTS




The Company
considers all highly liquid marketable securities with a maturity of three
months or less when purchased as cash equivalents.




MARKETABLE
SECURITIES




Available for
sale securities are stated at fair value, as determined by quoted market prices
or as needed, independent valuation models, with unrealized gains and losses
reported in other accumulated comprehensive income or loss. Unrealized losses
are reviewed by management and those considered other than temporary are
recorded as a charge to income. The cost of securities sold is based upon the
specific identification method. The amortized cost of debt securities is
adjusted for amortization of premium and accretion of discounts to maturity.
Such amortization, realized gains and losses, interest and dividends are
included in interest income. See Note 9 for a summary of marketable
securities.





INVENTORY




Inventories
are valued at the lower of cost or market ("LCM"), using the first-in, first-out
method. The Company capitalizes production overhead costs to inventory on the
basis of normal capacity of its production facility and in periods of abnormally
low utilization charges the related expenses as a period cost in the statement
of operations.  In addition to LCM limitations, the Company reserves
against inventory items for estimated obsolescence or unmarketable inventory.
The reserve for excess and obsolete inventory is primarily based upon forecasted
short-term demand for the product. Once established, these write-downs are
considered permanent adjustments to the cost basis of the excess inventory. If
actual demand and market conditions are less favorable than those projected by
management, additional inventory write-downs may be required.  In the
event the Company sells inventory that had been covered by a specific inventory
reserve, the sale is recorded at the actual selling price and the related cost
of goods sold at the full inventory cost, net of the reserve.





DEFERRED
RENT




ggregate
rental expense is recognized on a straight-line basis over the lease terms of
operating leases that contain predetermined increases in rentals payable during
the lease term.




FOREIGN
CURRENCY TRANSLATION




The financial
statements of subsidiaries outside of the United States are measured using the
local currency as the functional currency. Assets and liabilities of these
subsidiaries are translated at the rates of exchange at the balance sheet dates.
The resultant translation adjustments are included in other accumulated
comprehensive income or loss. Income and expense items are translated at the
average monthly rates of exchange. Gains and losses from foreign currency
transactions of these subsidiaries are included in the determination of net
income or loss.




EARNINGS
PER SHARE




Basic and
diluted earnings per share are calculated in accordance with FASB Statement No.
128, “Earnings Per Share”. Basic earnings per share is computed by dividing
income (loss) from continuing operations and net income (loss) by the weighted
average number of common shares outstanding during the period. Diluted earnings
per share reflects the potential dilution that could occur if stock options and
other commitments to issue common stock were exercised resulting in the issuance
of common stock of the Company. Any dilution arising from the Company's
outstanding stock awards or shares potentially issuable upon conversion of the
convertible notes will not be included where their effect is
anti-dilutive.




FAIR
VALUE OF FINANCIAL INSTRUMENTS




The fair
value of a financial instrument is the amount that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants. The fair value of each of the following instruments approximates
their carrying value because of the short maturity of these instruments: cash
and cash equivalents, accounts receivable, accounts payable and accrued
liabilities. At December 31, 2007 and 2008, the fair value of the Company's
outstanding convertible senior notes, estimated based upon dealer quotes, were
approximately $89,490 and $33,630, respectively compared to their carrying
values of $38,000 and $38,000, respectively.  See Note 9 for a summary
of marketable securities.





STOCK-BASED
COMPENSATION




The Company
has various stock-based compensation plans for employees and directors, which
are described more fully in Note 14. Effective January 1, 2006, the Company
accounts for these plans under Financial Accounting Standards Board (FASB)
Statement No. 123R Share Based Payment (FAS 123R) which requires the measurement
and recognition of compensation expense for all stock-based payment awards made
to its employees and directors. Under the fair value recognition provisions of
FAS 123R, stock-based compensation cost is measured at the grant date based on
the fair value of the award and is recognized as expense over the requisite
service period which in most cases is the vesting period.





IMPACT OF
RECENTLY ISSUED ACCOUNTING STANDARDS




In September
2006, the FASB issued FASB Statement No. 157, “Fair Value Measurements” (FAS
157) which defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles and expands disclosures about fair
value measurements. FAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007 and interim periods within those
fiscal years. In February 2008, the FASB issued FSP FAS 157-2 “Partial Deferral
of the Effective Date of Statement 157” (FSP 157-2). FSP 157-2 delays the
effective date of FAS 157 for non-financial assets and liabilities that are not
measured or disclosed on a recurring basis to fiscal years beginning after
November 15, 2008. The adoption of this accounting pronouncement did not have a
material effect on the Company’s consolidated financial statements for financial
assets and liabilities and any other assets and liabilities carried at fair
value.  The Company currently does not expect that the adoption of FAS
157 related to non-financial assets or liabilities will have a material impact
on our consolidated financial statements.




FAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date (exit price). FAS 157 classifies the inputs used to measure
fair value into the following hierarchy:





Level
      1
            Unadjusted
      quoted prices in active markets for identical assets or
      liabilitiesLevel
      2
            Unadjusted
      quoted prices in active markets for similar assets or liabilities, or
      unadjusted quoted prices for identical or similar assets or liabilities in
      markets that are not active, or inputs other than quoted prices that are
      observable for the asset or liabilityLevel
      3
            Unobservable
      inputs for the asset or liability




The Company
endeavors to utilize the best available information in measuring fair value.
Financial assets and liabilities are classified in their entirety based on the
lowest level of input that is significant to the fair value
measurement.




In October
2008, the FASB issued FSP 157-3 “Determining Fair Value of a Financial Asset in
a Market That Is Not Active” (FSP 157-3). FSP 157-3 clarified the application of
FAS No. 157 in an inactive market. It demonstrated how the fair value of a
financial asset is determined when the market for that financial asset is
inactive. FSP 157-3 was effective upon issuance, including prior periods for
which financial statements had not been issued and did not have a material
impact on the Company’s results of operations or financial
position.




In February
2007, the FASB issued FASB Statement No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (FAS 159), which permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. FAS 159 is effective for fiscal years
beginning after November 15, 2007. Since the Company has not utilized the fair
value option for any allowable items, the adoption of FAS 159 had no impact on
the Company’s results of operations or financial position.




In
June 2007, the FASB’s Emerging Issues Task Force reached a consensus on
EITF Issue No. 07-3, “Accounting for Nonrefundable Advance Payments for
Goods or Services to Be Used in Future Research and Development Activities”
(EITF 07-3) that would require nonrefundable advance payments made by the
Company for future research and development activities to be capitalized and
recognized as an expense as the goods or services are received by the Company.
EITF 07-3 is effective with respect to new arrangements entered into beginning
January 1, 2008. The Company adopted EITF 07-3 effective January 1, 2008,
which did not have a material impact on its consolidated financial
statements.




In
December 2007, the FASB issued FASB Statement No. 141R, “Business
Combinations” (FAS 141R), which changes how business acquisitions are
accounted.  FAS 141R requires the acquiring entity in a business
combination to recognize all (and only) the assets acquired and liabilities
assumed in the transaction and establishes the acquisition-date fair value as
the measurement objective for all assets acquired and liabilities assumed in a
business combination.  Certain provisions of this standard will, among
other things, impact the determination of acquisition-date fair value of
consideration paid in a business combination (including contingent
consideration); exclude transaction costs from acquisition accounting; and
change accounting practices for acquired contingencies, acquisition-related
restructuring costs, in-process research and development, indemnification
assets, and tax benefits.  FAS 141R is effective for financial statements
issued for fiscal years beginning after December 15, 2008.  The
adoption of FAS141R is expected to change the Company’s accounting prospectively
for all business combinations consummated after the effective date.




In
December 2007, the FASB issued FASB Statement No. 160, “Noncontrolling
Interests in Consolidated Financial Statements, an Amendment of ARB No. 51”
(FAS 160), which changes the accounting for and reporting of noncontrolling
interests (formerly known as minority interests) in consolidated financial
statements. It is effective for financial statements issued for fiscal years and
interim periods beginning after December 15, 2008, with early adoption
prohibited. Upon implementation, prior periods will be recast for the changes
required by FAS 160. The Company currently does not expect that the adoption of
this standard will have a material impact on our consolidated financial
statements.




In March
2008, the FASB issued FASB Statement No. 161, "Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133" (FAS
161).  FAS 161 applies to all derivative instruments and related
hedged items accounted for under FASB Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities".  FAS 161 requires that
objectives for using derivative instruments be disclosed in terms of underlying
risk and accounting designation. The fair value of derivative instruments and
their gains and losses will need to be presented in tabular format in order to
present a more complete picture of the effects of using derivative instruments.
FAS 161 is effective for financial statements issued for fiscal years beginning
after November 15, 2008. The Company currently does not expect that the adoption
of this standard will have a material impact on the Company’s results of
operations or financial position.




In April
2008, the FASB issued FSP 142-3, “Determination of the Useful Life of Intangible
Assets”, (FSP 142-3). FSP 142-3 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible
Assets”. FSP 142-3 is effective for fiscal years beginning after December 15,
2008. The Company currently does not expect that the adoption of this standard
will have a material impact on the Company’s results of operations or financial
position.




In May 2008,
the FASB issued FSP Accounting Principles Board 14-1 "Accounting for Convertible
Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial
Cash Settlement)" (FSP APB 14-1). FSP APB 14-1 requires the issuer of certain
convertible debt instruments that may be settled in cash (or other assets) on
conversion to separately account for the liability (debt) and equity (conversion
option) components of the instrument in a manner that reflects the issuer's
non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years
beginning after December 15, 2008 on a retroactive basis. The Company currently
does not expect that the adoption of this standard will have a material impact
on the Company’s results of operations or financial position.




In June 2008,
the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities” (FSP EITF
03-6-1). FSP EITF 03-6-1 clarified that all outstanding unvested share-based
payment awards that contain rights to nonforfeitable dividends participate in
undistributed earnings with common shareholders. Awards of this nature are
considered participating securities and the two-class method of computing basic
and diluted earnings per share must be applied. FSP EITF 03-6-1 is effective for
fiscal years beginning after December 15, 2008. The Company has not yet
determined the impact this standard may have on its results of operations or
financial position.








2.
RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES





RESTRUCTURING


On November
5, 2008, the Company announced the implementation of a workforce reduction which
eliminated approximately 100 positions throughout the Company resulting in a
charge of $2,140, primarily for severance and related benefits of workforce
reductions.





Activity
and liability balances related to the restructuring were as
follows:





Workforce-related
            
            
            Other
            
            
            TotalYear
      ended December 31, 2008
              Restructuring
      expense
            
            $
            2,040
            
            
            $
            100
            
            
            $
            2,140Deductions
            
            
            (975
            )
            
            
            -
            
            
            
            (975
            )December
      31, 2008 balance
            
            $
            1,065
            
            
            $
            100
            
            
            $
            1,165





IMPAIRMENT


China
wafer fabrication facility


During the
fourth quarter of 2008, the Company evaluated alternatives with regard to its
investment in the construction of a wafer fabrication facility in Kunshan China
in light of surplus industry production capacity, reduced demand experienced by
the Company as well as the broader macroeconomic environment. The Company
subsequently estimated and evaluated future cashflows associated with this
investment which included significant assumptions on possible recoveries through
a sale of the facility, further investment and a return in demand for production
capacity and in the event of an impairment, a reasonable discount rate. The
Company determined that the carrying amount of the China fabrication building
was not recoverable as the carrying amount was greater than the sum of the
undiscounted cash flows expected from the use and disposition of these assets.
As a result of this impairment analysis, we recorded a full $12,957 impairment
charge in the fourth quarter of 2008 related to the China fabrication
facility.




By
February 19, 2009, the Company signed agreements to terminate its involvement in
the construction of the wafer fabrication facility in Kunshan China. Those
termination agreements limit obligations for further investment in the facility
to those included within accrued liabilities in our December 31, 2008 financial
statements.




Goodwill
and other intangibles


The Company
performed an evaluation and estimation of future cash flows associated with our
goodwill and intangible assets of its WiFi reporting unit. The impairment test
assessed the fair value of the WiFi reporting unit using the income approach
based on the present value of estimated future cash flows. The Company
determined that the fair value of the WiFi reporting unit was less than the
carrying value of the net assets of the reporting unit due to a loss in market
share with a certain customer and the significant deterioration in the
macroeconomic environment and thus performed step two of the impairment test.
The Company allocated the fair value of the reporting unit to its underlying
assets and liabilities as if the reporting unit had been acquired in a business
combination and the fair value of the WiFi reporting unit was the price paid to
acquire the reporting unit. This step two analysis resulted in no implied fair
value of goodwill and therefore, the Company recognized an impairment charge of
$5,918 in the fourth quarter of 2008, representing a write off of the entire
amount of its previously recorded goodwill. In connection with completing step
two of its goodwill impairment analysis, the Company also assessed the fair
values of the related intangible assets, which carried an unamortized carrying
value of $289 consisting principally of assembled workforce related to the WiFi
reporting unit noting that it was similarly impaired. These impairment charges
were included in restructuring and impairment charges in the statement of
operations.





OTHER
CHARGES


In the second
half of 2008 the Company recorded charges to cost of sales for equipment
purchase cancellations, equipment impairment charges and inventory reserve
charges on dedicated inventory which was determined to be surplus due to reduced
customer demand in the amounts of $1,860, $1,470 and $3,508, respectively. In
addition, the Company recorded charges for certain management separations in the
amount of $6,026. Of the total $12,864 aforementioned charges, $7,135 was
included in cost of sales and $5,729 was included in selling and administrative
expenses. The unpaid balance at December 31, 2008 of $4,422 was included in
accrued liabilities.




The
management separation charge primarily arose from the resignation of our former
Chief Executive Officer in the third quarter of 2008 and included separation
pay, accelerated vesting of equity awards and certain other costs. The equipment
cancellation charges were incurred in the third quarter of 2008, when the
Company cancelled certain manufacturing equipment purchase
obligations.  In the third and fourth quarters of 2008, certain
surplus equipment was identified for sale and adjusted to its fair value. At
December 31, 2008, assets held for sale in the amount of $914 are included in
fixed assets.





3.
INTANGIBLES AND GOODWILL




As of
December 31, 2007 and 2008, the Company's intangible assets consist of the
following:





Gross
      Carrying Amount
            
            
            Accumulated
      AmortizationDecember
      31,
            
            
            December
      31,2007
            
            
            2008
            
            
            2007
            
            
            2008Goodwill
            
            $
            5,918
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Intellectual
      property
            
            
            378
            
            
            
            -
            
            
            
            238
            
            
            
            -Customer
      list
            
            
            240
            
            
            
            -
            
            
            
            240
            
            
            
            -Assembled
      Workforce
            
            
            524
            
            
            
            -
            
            
            
            58
            
            
            
            -$
            7,060
            
            
            $
            -
            
            
            $
            536
            
            
            $
            -




Annual
amortization expense related to intangible assets was calculated over their
estimated useful lives of two to four years and was $115, $97 and $253 in the
years ended December 31, 2006, 2007 and 2008, respectively.




During the
fourth quarter of 2008, the Company recorded an impairment charge associated
with its goodwill and other intangibles. See Note 2 for further
discussion.





4. PURCHASE
OF ASSETS OF RF GROUP




On September
5, 2007, the Company purchased certain assets and assumed certain related
obligations of the radio frequency group of Fairchild Semiconductor (RF group)
in exchange for cash of $2,415, inclusive of transaction costs of $115. The
assets acquired were principally equipment used in researching and developing
RFICs for the broadband wireless communications markets. No products or
manufacturing processes were included as part of the purchase. The RF group
staff of 23 accepted employment with the Company.




Included in
the purchase were fixed assets with an estimated fair market value of $1,723,
non-exclusive rights to certain intellectual property and assembled workforce
valued at approximately $168 and $524, respectively. The fixed assets,
intellectual property and assembled workforce costs were amortized over their
estimated useful lives of 3, 2 and 3 years, respectively.During the fourth quarter
of 2008, the Company recorded an impairment charge equal to the remaining
unamortized value of the intellectual property and assembled workforce
intangibles. See Note 2 for further discussion.





5. DISCONTINUED
OPERATIONS




On April 2,
2007, the Company sold the majority of Telcom’s operating assets to GTRAN
Camarillo, Inc. in exchange for $500 and effectively ceased Telcom’s operations.
As a consequence of the sale, the financial results, position and cashflow of
Telcom have been classified as discontinued operations in the accompanying
financial statements for all periods presented.




Summarized
operating results and loss on sale of discontinued operations in the years ended
December 31, 2006 and 2007 were as follows:





Year
      ended December 31,2006
            
            
            2007Revenue
            
            $
            3,443
            
            
            $
            559Operating
      loss
            
            
            (997
            )
            
            
            (479
            )Interest
      income
            
            
            17
            
            
            
            4Loss
      on sale of discontinued operations
            
            
            -
            
            
            
            (490
            )Loss
      from discontinued operations
            
            $
            (980
            )
            
            $
            (965
            )




The assets
and liabilities of Telcom as of December 31, 2007 were zero.





6.
SEGMENTS




The Company
operates in one segment. Its integrated circuits are primarily manufactured
using common manufacturing facilities located in the same domestic geographic
area. All operating expenses and assets of the Company are combined and reviewed
by the chief operating decision maker on an enterprise-wide basis, resulting in
no additional discrete financial information or reportable segment
information.




The Company
classifies its revenues based upon the end application of the product in which
its integrated circuits are used. Net sales by end application are regularly
reviewed by the chief operating decision maker and are as follows:





Year Ended
      December 31,2006
            
            
            2007
            
            
            2008Wireless
            
            $
            91,275
            
            
            $
            129,044
            
            
            $
            154,678Broadband
            
            
            75,167
            
            
            
            101,512
            
            
            
            103,492Total
            
            $
            166,442
            
            
            $
            230,556
            
            
            $
            258,170




The Company
primarily sells to three geographic regions: Asia, USA and Canada, and Other.
The geographic region is determined based on shipping addresses, not on the
locations of the ultimate users. Net sales to each of the three geographic
regions are as follows:




Year
      Ended December 31,2006
            
            
            2007
            
            
            2008Asia
            
            $
            91,626
            
            
            $
            153,422
            
            
            $
            161,166USA
      and Canada
            
            
            62,741
            
            
            
            66,706
            
            
            
            67,446Other
            
            
            12,075
            
            
            
            10,428
            
            
            
            29,558Total
            
            $
            166,442
            
            
            $
            230,556
            
            
            $
            258,170




7.
CONVERTIBLE NOTES




On September
24, 2004, the Company issued $38,000 aggregate principal amount of 5%
Convertible Senior Notes (2009 Notes) due October 15, 2009. The 2009 Notes are
convertible into shares of the Company’s common stock at any time prior to their
maturity, at an initial conversion rate, subject to adjustment, of 200 shares
for each $1,000 principal amount, which is equivalent to a conversion price of
$5.00 per share (7,600 shares contingently issuable). Pursuant to the indenture,
dated as of September 24, 2004, between the Company and U.S. Bank Trust
Association, as trustee, in the event of a “fundamental change” on or prior to
July 15, 2009, the Company will pay a make whole premium upon the repurchase or
conversion of the 2009 Notes. Subject to certain exceptions, the make whole
premium will be 1% of the principal amount of the 2009 Notes, plus an additional
premium based on the date such “fundamental change” becomes effective and the
price paid per share of the Company’s common stock in the transaction
constituting the “fundamental change”. Interest on the 2009 Notes is payable
semi-annually in arrears on April 15 and October 15 of each year.




On November
15, 2006, the Company repaid the remaining $46,700 outstanding balance of its 5%
Convertible Senior Notes obligation.




Unamortized
debt issuance costs of $807 and $341 at December 31, 2007 and 2008,
respectively, consisting principally of underwriters' fees, were included in
other assets and other current assets, respectively and are being amortized over
the life of the notes.





8.
COMMITMENTS AND CONTINGENCIES




The Company
leases manufacturing, warehousing and office space and manufacturing equipment
under noncancelable operating leases that expire through 2016. Rent expense, net
of sublease income was $2,101, $2,411 and $2,717 in 2006, 2007 and 2008,
respectively. As of December 31, 2008, there were no capital lease obligations
outstanding.  The future minimum lease payments under the
noncancelable operating leases are as follows:





YEAR
            
            Operating
      Leases2009
            
            $
            2,7122010
            
            
            2,3612011
            
            
            1,9572012
            
            
            2,0032013
            
            
            2,007Thereafter
            
            
            6,388Total
      minimum lease payments
            
            $
            17,428




In addition
to the above, at December 31, 2008, the Company had unconditional purchase
obligations of approximately $3,729 of which $2,940 relates to capital equipment
purchase requirements primarily over the first half of
2009.




9.
MARKETABLE SECURITIES




The following
is a summary of available-for-sale securities:





Available-for-Sale
      SecuritiesAmortized
      Cost
            
            
            Gross
      Unrealized Gains
            
            
            Gross
      Unrealized Losses
            
            
            Estimated
      Fair ValueGovernment-Sponsored
      Enterprises Debt Securities
            
            $
            60,812
            
            
            $
            32
            
            
            $
            (23
            )
            
            $
            60,821State
      & Municipal Auction Rate Securities
            
            
            19,290
            
            
            
            -
            
            
            
            -
            
            
            
            19,290Corporate
      Debt Securities – Non-Auction
            
            
            20,805
            
            
            
            3
            
            
            
            (60
            )
            
            
            20,748Corporate
      Debt Securities – Auction Rate
            
            
            6,323
            
            
            
            -
            
            
            
            -
            
            
            
            6,323Preferred
      Equity Securities – Auction Rate
            
            
            11,844
            
            
            
            -
            
            
            
            -
            
            
            
            11,844Total
      at December 31, 2007
            
            $
            119,074
            
            
            $
            35
            
            
            $
            (83
            )
            
            $
            119,026Government-Sponsored
      Enterprises Debt Security
            
            $
            3,000
            
            
            $
            6
            
            
            $
            -
            
            
            $
            3,006Certificates
      of Deposit
            
            
            5,000
            
            
            
            -
            
            
            
            -
            
            
            
            5,000State
      & Municipal Auction Rate Security
            
            
            1,947
            
            
            
            -
            
            
            
            -
            
            
            
            1,947Corporate
      Debt Securities – Non-Auction
            
            
            7,210
            
            
            
            7
            
            
            
            -
            
            
            
            7,217Corporate
      Debt Security – Auction Rate
            
            
            662
            
            
            
            -
            
            
            
            -
            
            
            
            662Preferred
      Equity Securities – Auction Rate
            
            
            4,340
            
            
            
            -
            
            
            
            -
            
            
            
            4,340Total
      at December 31, 2008
            
            $
            22,159
            
            
            $
            13
            
            
            $
            -
            
            
            $
            22,172





AUCTION
RATE SECURITIES




Auction rate
securities (ARS) are generally long-term debt instruments that provided
liquidity through a Dutch auction process that resets the applicable interest
rate at pre-determined calendar intervals, generally every 28 days. The
mechanism generally allowed existing investors to rollover their holdings while
continuing to own their respective securities or liquidating their holdings by
selling their securities at par value. The Company generally invested in these
securities for short periods of time as part of its cash management program.
During the second half of 2007, certain auction rate debt and preferred
securities failed to auction due to sell orders exceeding buy orders. In
February 2008, liquidity issues in the global credit markets resulted in
failures of the auction process for a broader range of ARS, impacting all of the
auction rate preferred equity, state and municipal and corporate debt securities
the Company held. In
the period April to November, 2008 certain issuers redeemed certain of the ARS
held by the Company. The funds associated with the remaining failed auctions
will not be accessible until a successful auction occurs, a buyer is found
outside of the auction process or an issuer redeems its security. Interest on
the ARS is being paid at default rates and has been current.




At December
31, 2008, there was insufficient observable ARS market information available to
determine the fair value of certain of the Company’s investments in ARS. Given
the complexity of ARS investments, the Company obtained the assistance of an
independent valuation firm to assist management in assessing the Level 3 (as
defined in FAS 157) fair value of its ARS portfolio. The third party valuations
developed to estimate the ARS fair value were determined using a combination of
two calculations (1) a discounted cash flow model, where the expected cash flows
of the ARS are discounted to the present using a yield that incorporates
compensation for illiquidity, and (2) a market comparables method, where the ARS
are valued based on indications, from the secondary market, of what discounts
buyers demand when purchasing similar ARS. The valuations include numerous
assumptions such as assessments of the underlying structure of each security,
expected cash flows, discount rates, credit ratings, workout periods, and
overall capital market liquidity. While interest at default rates continues to
be paid currently by all the issuers of these ARS securities, due to the severity of the
decline in fair value and the duration of time for which these ARS securities
have been in a loss position, the Company concluded that ARS securities held at
December 31, 2008 experienced an other-than-temporary decline in fair value and
recorded impairment charges of $4,694 for the year ended December 31,
2008.




During 2008,
a corporate debt ARS position was exchanged for the underlying 30 year notes due
2037. This debt trades in the market and the Company values this security on a
Level 1 basis. The face value of this security is $4,000 and the market value at
December 31, 2008 was $1,884. Due to the severity and duration of the decline,
the Company has recorded an impairment of $2,116 related to this security which
in combination with the impairments discussed above was reported in other
expense.




The majority
of the securities held by the Company are valued on a Level 1
basis.  The table below provides a summary of securities valued using
Level 3 including a reconciliation of the beginning and ending balances by
security type.








($
      in 000’s)
            
            Fair
      Value Measurements Using Significant Unobservable Inputs (Level
      3)
              Year
      ended December 31, 2008State
      & Municipal Security (a)
            
            
            Corporate
      Debt Security (b)
            
            
            Preferred
      Equity Securities
            
            
            TotalClosed-end
      Funds (c )
            
            
            Monoline
      insurers (d)Beginning
      balance December 31, 2007
            
            $
            -
            
            
            $
            2,324
            
            
            $
            -
            
            
            $
            2,344
            
            
            $
            4,668Transfers into Level
    3
            
            
            2,600
            
            
            
            -
            
            
            
            9,475
            
            
            
            -
            
            
            
            12,075Total gains or losses
      realized/unrealizedIncluded in net
    loss
            
            
            (653
            )
            
            
            (1,662
            )
            
            
            (644
            )
            
            
            (1,735
            )
            
            
            (4,694
            )Included in other comprehensive
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Redemptions
            
            
            -
            
            
            
            -
            
            
            
            (5,100
            )
            
            
            -
            
            
            
            (5,100
            )Ending
      Balance December 31, 2008
            
            $
            1,947
            
            
            $
            662
            
            
            $
            3,731
            
            
            $
            609
            
            
            $
            6,949The
      amount of total gains or losses for the period included in (loss) earnings
      attributable to the change in unrealized gains or losses relating to
      assets still held at the reporting date
            
            $
            (653
            )
            
            $
            (1,662
            )
            
            $
            (644
            )
            
            $
            (1,735
            )
            
            $
            (4,694
            )Securities
      held at December 31,2008:Face
      value
            
            $
            2,600
            
            
            $
            2,500
            
            
            $
            4,375
            
            
            $
            3,125
            
            
            $
            12,600Financial
      rating of the issues
            
            AAA
            
            
            
            A3
            
            
            AAA
            
            
            A2
      / BBBWeighted
      average interest rates *
            
            
            0.09
            %
            
            
            4.46
            %
            
            
            1.77
            %
            
            
            3.37
            %
            
            
            2.35
            %Maturity
      date
            
            2045
            
            
            2036
            
            
            
            N/A
            
            
            
            N/A


*
Interest rates are reset every one to three months based on a premium to AA
Commercial Paper, LIBOR or Treasury Bill rates.


(a)
Security represents an interest in pooled student loans that are guaranteed by
the Federal Family Education Loan Program.


(b)
Security issued by a publicly-held insurance company trust, which holds
investments in  U.S. Government obligations, highly rated commercial
paper and money market funds and other investments approved by two credit rating
agencies. The trust is funded by life insurance residuals. If the residuals are
insufficient, the security becomes an obligation of the publicly-held insurance
company.


(c)
Preferred securities issued by diversified closed-end management investment
companies which are governed by the Investment Company Act of 1940 with regard
to operating standards, antifraud rules, diversification requirements and an
asset coverage requirement for asset backing of 200% of the par value of the
preferred stock issued.


(d)
Preferred securities issued by subsidiaries of two publicly-held debt default
insurers.





CLASSIFICATION




Classification of
marketable securities as current or non-current is dependent upon management’s
intended holding period, the security’s maturity date and liquidity
considerations based on market conditions. If management intends to hold the
securities for longer than one year as of the balance sheet date, they are
classified as non-current. Since these marketable securities are classified as
available-for-sale securities, changes in fair value will flow through other
comprehensive income, with amounts reclassified out of other comprehensive
income into earnings upon sale or other-than-temporary impairment.




Management
has the ability and intent, if necessary, to liquidate certain of its marketable
securities in order to meet the Company’s liquidity needs in the next 12 months.
Expected maturities could differ from contractual maturities because the issuers
of the securities may have the right to prepay obligations without prepayment
penalties. The amortized cost and estimated fair value of marketable debt
securities at December 31, 2008 by contractual maturity are shown
below:





Available-for-Sale
      Debt SecuritiesAmortized
      Cost
            
            
            Estimated
      Fair ValueDue
      in one year or less
            
            $
            13,327
            
            
            $
            13,340Due
      after 10 years
            
            
            4,492
            
            
            
            4,492Total
            
            $
            17,819
            
            
            $
            17,832




10.
INVENTORIES




Inventories
consist of the following:




December
      31,2007
            
            
            2008Raw
      materials
            
            $
            8,915
            
            
            $
            9,537Work
      in progress
            
            
            15,256
            
            
            
            18,062Finished
      goods
            
            
            4,055
            
            
            
            15,00728,226
            
            
            
            42,606Reserves
            
            
            (4,237
            )
            
            
            (9,028
            )Total
            
            $
            23,989
            
            
            $
            33,578





11.
ACCRUED LIABILITIES




Accrued
liabilities consist of the following:





December
      31,2007
            
            
            2008Accrued
      compensation
            
            $
            4,022
            
            
            $
            3,670Warranty
      reserve
            
            
            327
            
            
            
            645Unpaid
      management separation and equipment cancellation charges
            
            
            -
            
            
            
            4,422Other
            
            
            3,579
            
            
            
            4,466$
            7,928
            
            
            $
            13,203




Warranty
reserve movements in the years ended December 31, 2006, 2007 and 2008 for
returns were $726, $541 and $831, respectively. The periodic charges for
estimated warranty costs were $677, $521 and $1,149 in the years ended December
31, 2006, 2007 and 2008, respectively.





12.
INCOME TAXES




The current
and deferred components of income taxes for the years ended December 31, 2006
and 2008 were zero. For the year ended December 31, 2007, the current Federal
and state component of income taxes were $2,083 and $190, respectively which
were fully offset by deferred tax movements including the valuation
allowance.




Deferred tax
assets require a valuation allowance when, in the opinion of management, it is
more likely than not that some portion of the deferred tax assets may not be
realized. Whereas realization of the deferred tax assets is dependent upon the
timing and magnitude of future taxable income prior to the expiration of the
deferred tax attributes, management began recording a full valuation allowance
in 2001. The amount of the deferred tax assets considered realizable, however,
could change if estimates of future taxable income during the carry-forward
period are changed.




Significant
components of the Company’s net deferred taxes as of December 31, 2007 and 2008
are as follows:





December
      31,2007
            
            
            2008Deferred
      tax balancesAccruals/reserves
            
            $
            7,583
            
            
            $
            14,688Net
      operating loss carryforwards
            
            
            103,004
            
            
            
            113,393Research
      and experimentation credits
            
            
            13,199
            
            
            
            14,242Deferred
      rent expense
            
            
            1,186
            
            
            
            1,199Difference
      in basis of plant and equipment
            
            
            3,335
            
            
            
            7,020Valuation
      allowance
            
            
            (128,307
            )
            
            
            (150,542
            )Net
      deferred tax assets
            
            
            -
            
            
            
            -




As of
December 31, 2008, the Company had net operating loss carryforwards of
approximately $344,828 for both federal and state tax reporting purposes. The
federal carryforward will begin to expire in 2019, and the state carryforwards
have begun to expire. A portion of net operating loss carryforwards and tax
credit carryforwards may be subject to an annual limitation regarding their
utilization against taxable income in future periods due to the “change of
ownership” provisions of the Internal Revenue Code and similar state provisions.
A portion of these carryforwards may expire before becoming available to reduce
future income tax liabilities.




At December
31, 2008, $25,149 of the deferred tax asset related to net operating loss
carryforwards and an equivalent amount of deferred tax asset valuation allowance
represented tax benefits associated with the exercise of non-qualified stock
options and restricted stock deduction over book. Such benefit, when realized,
will be credited to additional paid-in capital. Included within the Company’s
net operating loss tax carryforwards at December 31, 2008, the Company has
excess tax benefits, related to stock-based compensation that arose subsequent
to the adoption of FAS 123R of $34,221 ($37,052 at December 31, 2007) which are
not recorded as a deferred tax asset as the amounts would not have resulted in a
reduction in current taxes payable until all other tax attributes currently
available to the Company were utilized. The benefit of these deductions will be
recorded to additional paid-in capital at the time the tax deduction results in
a reduction of current taxes payable.




The earnings
associated with the Company’s investment in its foreign subsidiaries is
considered to be permanently invested and no provision for U.S. federal and
state income taxes on those earnings or translation adjustments have been
provided.




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




Year
      Ended December 31,2006
            
            2007
            
            2008Tax
      at US statutory rate
            
            $
            (3,097
            )
            (35.0
            )%
            
            $
            2,083
            
            35.0
            %
            
            $
            (14,655
            )
            (35.0
            )%Effect
      of permanent items
            
            
            19
            
            0.2
            
            
            
            (28
            )
            (0.5
            )
            
            
            (4,141
            )
            (9.9
            )State
      and foreign tax (benefit), net of federal tax effect
            
            
            (286
            )
            (3.2
            )
            
            
            190
            
            3.2
            
            
            
            (1,745
            )
            (4.2
            )Research
      and experimentation tax credits, net
            
            
            (4,816
            )
            (54.4
            )
            
            
            (2,513
            )
            (42.2
            )
            
            
            (1,043
            )
            (2.5
            )Valuation
      allowance
            
            
            8,892
            
            100.5
            
            
            
            (198
            )
            (3.3
            )
            
            
            22,235
            
            53.1Other
            
            
            (712
            )
            (8.1
            )
            
            
            466
            
            7.8
            
            
            
            (651
            )
            (1.5
            )(Benefit
      from) provision for  income taxes
            
            $
            -
            
            0.0
            %
            
            $
            -
            
            0.0
            %
            
            $
            -
            
            0.0
            %








13.
STOCKHOLDERS' EQUITY




In March
2007, the Company completed an underwritten public offering of 8,625 shares of
common stock at a price of $12.25 which generated net proceeds to the Company of
$98,955. In March 2006, the Company completed an underwritten public offering of
10,446 shares of common stock at a price of $5.50 which generated net proceeds
to the Company of $53,110.




On December
17, 1998, the Company adopted a Shareholders’ Rights Agreement (the Agreement).
Pursuant to the Agreement, as amended on November 30, 2000, and October 2, 2008,
rights were distributed as a dividend at the rate of one right for each share of
ANADIGICS, Inc. common stock, par value $0.01 per share, held by stockholders of
record as of the close of business on December 31, 1998. The rights will expire
on December 17, 2018, unless earlier redeemed or exchanged. Under the Agreement,
each right will entitle the registered holder to buy one one-thousandth of a
share of Series A Junior Participating Preferred Stock at a price of $75.00 per
one one-thousandth of a share, subject to adjustment in accordance with the
Agreement. The rights will become exercisable only if a person or group of
affiliated or associated persons acquires, or obtains the right to acquire,
beneficial ownership of ANADIGICS, Inc. common stock or other voting securities
that have 18% or more of the voting power of the outstanding shares of voting
stock, or upon the commencement or announcement of an intention to make a tender
offer or exchange offer, the consummation of which would result in such person
or group acquiring, or obtaining the right to acquire, beneficial ownership of
18% or more of the voting power of ANADIGICS, Inc. common stock or other voting
securities.





14.
EMPLOYEE BENEFIT PLANS




The Company
accounts for stock-based compensation costs in accordance with FAS 123R, which
requires the measurement and recognition of compensation expense for all
stock-based payment awards made to our employees and directors. Under the fair
value recognition provisions of FAS 123R, stock-based compensation cost is
measured at the grant date based on the fair value of the award and is
recognized as expense over the requisite service period which in most cases is
the vesting period. The Company has adopted FAS 123R using the
modified-prospective transition method, which requires the recognition of
compensation expense over the remaining vesting period for all awards that
remain unvested as of January 1, 2006. The Company adopted the alternative
transition method provided in FASB Staff Position No. FAS 123R–3 “Transition
Election Related to Accounting for the Tax Effects of Share-Based Payment
Awards” for calculating the tax effects of stock-based compensation. The
alternative transition method includes simplified methods to establish the
beginning balance of the additional paid-in-capital pool (APIC pool) related to
the tax effects of employee stock-based compensation, and to determine the
subsequent impact on the APIC pool and consolidated statements of cash flows of
the tax effects of employee stock-based compensation awards that are outstanding
upon adoption of FAS 123R.





Equity
Compensation Plans


The
Company had 4 equity compensation plans under which equity securities are
authorized for issuance to employees and/or directors:


§
            The
      1995 Long-Term Incentive and Share Award Plan for Officers and Directors
      (terminated February 28, 2005)  (1995
  Plan);


§
            The
      1997 Long Term Incentive and Share Award Plan (1997
  Plan);


§
            The
      2005 Long Term Incentive and Share Award Plan (2005 Plan, collectively
      with the 1995 Plan and the 1997 Plan, the Plans);
  and


§
            The
      Employee Stock Purchase Plan (ESP
Plan).




Employees and
outside directors have been granted restricted stock and options to purchase
shares of common stock under stock option plans adopted in 1995, 1997 and 2005.
An aggregate of 4,913, 5,100 and 11,550 shares of common stock were reserved for
issuance under the 1995 Plan, the 1997 Plan and the 2005 Plan, respectively. The
Plans provide for the granting of stock options, stock appreciation rights,
restricted stock shares and units (collectively, restricted stock) and other
share-based awards to eligible employees and directors, as defined in the Plans.
Option grants have terms of ten years and become exercisable in varying amounts
over periods of up to three years. To date, no stock appreciation rights have
been granted under the Plans.




In 1995, the
Company adopted the ESP Plan under Section 423 of the Internal Revenue Code. All
full-time employees of ANADIGICS, Inc. and part-time employees, as defined in
the ESP Plan, are eligible to participate in the ESP Plan. An aggregate of 4,194
shares of common stock were reserved for offering under the ESP Plan. Offerings
are made at the commencement of each calendar year and must be purchased by the
end of that calendar year. Pursuant to the terms of the ESP Plan, shares
purchased and the applicable per share price were 187 ($5.36), 236 ($7.95) and
183 ($1.28) respectively for the years ended December 31, 2006, 2007 and 2008,
respectively.




Under FAS
123R, stock-based compensation expense arises from the amortization of
restricted stock grants, unamortized stock option grants and from the ESP Plan.
Effective with the adoption of FAS 123R, the Company uses the straight-line
basis in calculating stock-based compensation expense.





The table
below summarizes stock-based compensation by source and by financial statement
line item:





For
      years ended December 31,2006
            
            
            2007
            
            
            2008Amortization
      of restricted stock awards
            
            $
            7,754
            
            
            $
            12,319
            
            
            $
            16,613Amortization
      of ESP Plan
            
            
            400
            
            
            
            705
            
            
            
            136Amortization
      of stock option awards
            
            
            200
            
            
            
            2,297
            
            
            
            1,964Total
      stock-based compensation
            
            $
            8,354
            
            
            $
            15,321
            
            
            $
            18,713By
      Financial Statement line itemCost
      of sales
            
            $
            1,777
            
            
            $
            3,409
            
            
            $
            3,074Research
      and development expenses
            
            
            3,271
            
            
            
            5,855
            
            
            
            6,665Selling
      and administrative expenses
            
            
            3,121
            
            
            
            6,012
            
            
            
            9,005Loss
      from discontinued operations
            
            
            185
            
            
            
            45
            
            
            
            -Restructuring
      and impairment charges
            
            
            -
            
            
            
            -
            
            
            
            (31
            )





Restricted
Stock Awards




Commencing in
August 2004, the Company began granting restricted stock shares under the Plans
and in July 2008 began granting restricted stock units (collectively restricted
stock). The value of the restricted stock grants are fixed upon the date of
grant and amortized over the related vesting period of one to three
years.  Restricted stock is subject to forfeiture if employment
terminates prior to vesting. The Company estimates that approximately 2.5% of
its restricted stock grants are forfeited annually (exclusive of LTI’s, as
described below).  The restricted stock shares carry voting and
dividend rights commencing upon grant, whereas restricted stock units do
not.  Neither restricted stock shares nor restricted stock units may
be traded or transferred prior to vesting.  Grant, vest and forfeit
activity and related weighted average (WA) price per share for restricted stock
and for stock options during the period from January 1, 2006 to December 31,
2008 is presented in tabular form below:





Restricted
      Stock Shares
            
            
            Restricted
      Stock Units
            
            
            Stock
      OptionsShares
            
            
            WA
      price per share
            
            
            Units
            
            
            WA
      price per unit
            
            
            Issuable
      upon exercise
            
            
            WA
      exercise priceShares
      outstanding at January 1, 2006
            
            
            1,214
            
            
            $
            2.72
            
            
            
            -
            
            
            
            -
            
            
            
            5,944
            
            
            $
            7.67Granted
            
            
            2,685
            
            
            
            6.90
            
            
            
            -
            
            
            
            -
            
            
            
            994
            
            
            
            8.80Shares
      vested/options exercised
            
            
            (675
            )
            
            
            2.68
            
            
            
            -
            
            
            
            -
            
            
            
            (983
            )
            
            
            3.85Forfeited/expired
            
            
            (86
            )
            
            
            5.46
            
            
            
            -
            
            
            
            -
            
            
            
            (286
            )
            
            
            11.16Balance
      at December 31, 2006
            
            
            3,138
            
            
            $
            6.23
            
            
            
            -
            
            
            
            -
            
            
            
            5,669
            
            
            $
            8.36Granted
            
            
            1,185
            
            
            
            12.40
            
            
            
            -
            
            
            
            -
            
            
            
            182
            
            
            
            11.48Shares
      vested/options exercised
            
            
            (1,916
            )
            
            
            6.07
            
            
            
            -
            
            
            
            -
            
            
            
            (2,135
            )
            
            
            5.73Forfeited/expired
            
            
            (195
            )
            
            
            7.21
            
            
            
            -
            
            
            
            -
            
            
            
            (225
            )
            
            
            15.29Balance
      at December 31, 2007
            
            
            2,212
            
            
            $
            9.61
            
            
            
            -
            
            
            
            -
            
            
            
            3,491
            
            
            $
            9.68Granted
            
            
            1,802
            
            
            
            9.26
            
            
            
            678
            
            
            $
            5.04
            
            
            
            -
            
            
            
            -Shares
      vested/options exercised
            
            
            (1,722
            )
            
            
            9.16
            
            
            
            (31
            )
            
            
            5.88
            
            
            
            (384
            )
            
            
            6.78Forfeited/expired
            
            
            (318
            )
            
            
            12.17
            
            
            
            (36
            )
            
            
            5.89
            
            
            
            (288
            )
            
            
            10.36Balance
      at December 31, 2008
            
            
            1,974
            
            
            $
            9.27
            
            
            
            611
            
            
            $
            4.94
            
            
            
            2,819
            
            
            $
            10.00




Exercisable
options and their related average exercise prices were 4,644 ($8.30), 2,701
($9.77) and 2,514 ($10.05) as of December 31, 2006, 2007 and 2008,
respectively.




Included
within the restricted stock shares granted during year ended December 31, 2008
are 357 shares granted pursuant to long-term incentive awards (LTI) issued to
management contingent upon the Company’s performance using multi-year adjusted
earnings per share and revenue targets measured over a three-year period ending
December 31, 2010.  The number of shares issuable pursuant to the LTI
award can vary upon actual performance to such targets and range from 50% to
150% of the base share award. In August 2008, 27 shares of the 357 LTI shares
were released upon the separation of our former chief executive officer and 96
shares were forfeited. Based upon the performance of the Company to December 31,
2008, no further stock-based compensation for LTI has been
expensed.




The total
fair value of restricted stock vested during the years ended December 31, 2007
and 2008 were $25,023 and $11,457, respectively. The intrinsic value of
exercised options during the years ended December 31, 2006, 2007 and 2008 were
$3,801, $18,120 and $1,775 respectively.








Weighted
      average information as of December 31, 2008Options
      currently exercisableShares issuable upon
      exercise
            
            
            2,514Weighted average exercise
      price
            
            $
            10.05Weighted average remaining
      contractual term
            
            4.0
      yearsWeighted
      average remaining contractual term for outstanding options
            
            4.5
      yearsIntrinsic
      value of exercisable options
            
            $
            -Intrinsic
      value of outstanding options
            
            $
            -Unrecognized
      stock-based compensation costOption plans
            
            $
            1,943Restricted stock
            
            $
            13,462Weighted
      average remaining vest period for option plans
            
            1.0
      yearsWeighted
      average remaining vest period for restricted stock
            
            1.2
      years





Stock
options outstanding at December 31, 2008 are summarized as follows:


Range
      of exercise prices
            
            
            Outstanding
      Options at December 31, 2008
            
            
            Weighted
      average remaining contractual life
            
            
            Weighted
      average exercise price
            
            
            Exercisable
      at December 31, 2008
            
            
            Weighted
      average exercise price$
            1.39
      - $6.88
            
            
            
            440
            
            
            
            4.48
            
            
            $
            3.42
            
            
            
            438
            
            
            $
            3.41$
            7.27
      - $8.79
            
            
            
            757
            
            
            
            3.55
            
            
            $
            7.37
            
            
            
            757
            
            
            $
            7.37$
            8.84
            
            
            
            808
            
            
            
            6.79
            
            
            $
            8.84
            
            
            
            558
            
            
            $
            8.84$
            9.00
      - $53.48
            
            
            
            814
            
            
            
            2.89
            
            
            $
            17.16
            
            
            
            761
            
            
            $
            17.43





Valuation
for ESP Plan and Stock Option Awards




The fair
value of these equity awards was estimated at the date of grant using a
Black-Scholes option pricing model. The weighted average assumptions and fair
values for stock-based compensation grants used for the years ended December 31,
2006, 2007 and 2008 are summarized below:





Year
      ended December 31,2006
            
            
            2007
            
            
            2008Stock
      option awards:Risk-free
      interest rate
            
            
            4.6
            %
            
            
            4.8
            %
            
            
            N/AExpected
      volatility
            
            
            76
            %
            
            
            71
            %
            
            
            N/AAverage
      expected term (in years)
            
            
            4.72
            
            
            
            4.75
            
            
            
            N/AExpected
      dividend yield
            
            
            0.0
            %
            
            
            0.0
            %
            
            
            N/AWeighted
      average fair value of options granted
            
            $
            5.54
            
            
            $
            6.91
            
            
            
            N/AESP
      Plan:Risk-free
      interest rate
            
            
            5.0
            %
            
            
            3.3
            %
            
            
            0.4
            %Expected
      volatility
            
            
            62
            %
            
            
            58
            %
            
            
            112
            %Average
      expected term
            
            
            1
            
            
            
            1
            
            
            
            1Expected
      dividend yield
            
            
            0
            %
            
            
            0
            %
            
            
            0
            %Weighted
      average fair value of purchase option
            
            $
            2.13
            
            
            $
            2.99
            
            
            $
            0.75




The Company
regularly assesses the assumptions used in its option
valuation.  Expected volatility has been a combination of both Company
and peer company historical volatility which at the time of grant we deemed
reflective of our development as a larger capitalization company. The expected
term of the stock options is based on historical observations of employee
exercise patterns combined with expectations of employee exercise behavior in
the future giving consideration to the contractual terms of the stock-based
awards. The risk free interest rate assumption has consistently been based on
the yield at the time of grant of a U.S. Treasury security with an equivalent
remaining term. The Company has never paid cash dividends and does not currently
intend to pay cash dividends and has consistently assumed a 0% dividend
yield.




The Company
also sponsors an Employee Savings and Protection Plan under Section 401(k) of
the Internal Revenue Code which is available to all full-time employees.
Employees can make voluntary contributions up to limitations prescribed by the
Internal Revenue Code. The Company matches 50% of employee contributions up to
6% of their gross pay. The Company recorded expense of $746, $885 and $1,163 for
the years ended December 31, 2006, 2007 and 2008, respectively, relating to plan
contributions.





Grants in
2009





Options


On January
15, 2009, 1,925 stock option awards were granted to employees of the Company at
an exercise price equal to $1.93, which represented the fair market value of the
Company’s common stock at the date of grant. In addition, on February 1, 2009,
the Company granted its new President and Chief Executive Officer 1,200 stock
options at an exercise price of $2.03, which represented the fair market value
of the Company’s common stock at the date of grant.





Restricted
stock units


Through
February 2, 2009, the Company granted an additional 378 restricted stock
units under the 2005 Plan at an average market price equal to $1.95, which
represented the fair market value at the date of grants.





15.
EARNINGS PER SHARE




The
reconciliation of shares used to calculate basic and diluted (loss) earnings per
share consists of the following:





Year ended
      December 31,2006
            
            
            2007
            
            
            2008Weighted
      average common shares for basic (loss) earnings per share
            
            
            43,814
            
            
            
            55,189
            
            
            
            60,183Effect
      of dilutive securities:Stock options (*)
            
            
            -
            
            
            
            1,630
            
            
            
            -Unvested restricted stock
      (*)
            
            
            -
            
            
            
            1,802
            
            
            
            -Adjusted
      weighted average shares for diluted (loss) earnings per
    share
            
            
            43,814
            
            
            
            58,621
            
            
            
            60,183


*
            Incremental
      shares from restricted stock and stock options are computed using the
      treasury stock method.




Dilution
arising from the Company's unvested restricted stock, outstanding stock options
or shares potentially issuable upon conversion of the convertible notes was not
included in the years ended December 31, 2006 and 2008 as their effect was
anti-dilutive. Potential dilution arising from any of the remainder of the
Company's outstanding stock options, unvested restricted shares or units, or
shares potentially issuable upon conversion of the convertible notes are
detailed below. Such potential dilution was excluded as their effect was
anti-dilutive.





Year ended
      December 31,2006
            
            
            2007
            
            
            2008Convertible
      notes
            
            
            7,600
            
            
            
            7,600
            
            
            
            7,600Stock
      options
            
            
            5,669
            
            
            
            1,703
            
            
            
            2,819Unvested
      restricted stock
            
            
            3,138
            
            
            
            204
            
            
            
            2,585





16. OTHER
ACCUMULATED COMPREHENSIVE (LOSS) INCOME




The
components of other accumulated comprehensive (loss) income are as
follows:





For
      year ended December 31,2007
            
            
            2008Unrealized
      (loss) income on marketable securities
            
            $
            (48
            )
            
            $
            13Foreign
      currency translation adjustment
            
            
            (46
            )
            
            
            118Total
            
            $
            (94
            )
            
            $
            131





17. LEGAL
PROCEEDINGS




On or about
November 11, 2008, plaintiff Charlie Attias filed a putative securities class
action lawsuit in the United States District Court for the District of New
Jersey, captioned Charlie
Attias v. Anadigics, Inc., et al., No. 3:08-cv-05572, and, on or about
November 21, 2008, plaintiff Paul Kuznetz filed a related class action lawsuit
in the same court, captioned Paul J. Kuznetz v. Anadigics, Inc.,
et al., No. 3:08-cv-05750 (jointly, the "Class Actions").  The
Complaints in the Class Actions, which were consolidated by an Order of the
District Court dated November 24, 2008, seek unspecified damages for alleged
violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
as well as Rule 10b-5 promulgated thereunder, in connection with alleged
misrepresentations and omissions relating to, among other things, Anadigics's
manufacturing capabilities and the demand for its products.  The
longer of the proposed class periods alleged in the Class Actions runs from
February 12, 2007 through October 22, 2008.  Currently pending before
the District Court are various motions by certain members of the proposed class
seeking appointment as Lead Plaintiff.




On or about
January 14, 2009, a shareholder's derivative lawsuit, captioned Sicari v. Anadigics, Inc., et
al., No. SOM-L-88-09, was filed in the Superior Court of New Jersey, and,
on or about February 2, 2009, a related shareholder's derivative lawsuit,
captioned Moradzadeh v. Anadigics, Inc., et
al., No. SOM-L-198-09, was filed in the same court (jointly, the
"Derivative Lawsuits").  The Derivative Lawsuits seek unspecified
damages for alleged state law claims against certain of the Company's current
and former directors arising out of the matters at issue in the Class
Actions.  The plaintiffs in the Derivative Lawsuits have filed a
motion seeking, among other things, to consolidate their respective
suits.




Because the
Class Actions, which are in a preliminary stage, do not specify alleged monetary
damages, the Company is unable to reasonably estimate any possible range of
loss, if any, to the Company in connection therewith.




The Company
is also a party to ordinary course litigation arising out of the operation of
our business. The Company believes that the ultimate resolution of such ordinary
course litigation should not have a material adverse effect on its consolidated
financial condition or results of operations.




18.
QUARTERLY FINANCIAL DATA (UNAUDITED)





2007 and
2008 Quarterly Financial Data


The following
table sets forth certain unaudited results of operations for each quarter during
2007 and 2008. The unaudited information has been prepared on the same basis as
the audited consolidated financial statements and includes all adjustments which
management considers necessary for a fair presentation of the financial data
shown. The operating results for any quarter are not necessarily indicative of
the results to be attained for any future period. Basic and diluted (loss)
income per share are computed independently for each of the periods presented.
Accordingly, the sum of the quarterly (loss) income per share may not agree to
the total for the year (in thousands, except for per share data).





Quarter
      Ended2007
            
            
            2008March
      31
            
            
            June
      30
            
            
            Sept.
      29
            
            
            Dec.
      31
            
            
            March
      29
            
            
            June
      28
            
            
            Sept.
      27 (*)
            
            
            Dec.
      31 (*)Net
      sales
            
            $
            49,573
            
            
            $
            53,869
            
            
            $
            59,545
            
            
            $
            67,569
            
            
            $
            74,369
            
            
            $
            80,493
            
            
            $
            58,065
            
            
            $
            45,243Cost
      of sales
            
            
            33,287
            
            
            
            34,963
            
            
            
            39,387
            
            
            
            44,131
            
            
            
            47,764
            
            
            
            50,573
            
            
            
            44,790
            
            
            
            36,456Gross
      profit
            
            
            16,286
            
            
            
            18,906
            
            
            
            20,158
            
            
            
            23,438
            
            
            
            26,605
            
            
            
            29,920
            
            
            
            13,275
            
            
            
            8,787Research
      and development expenses
            
            
            9,738
            
            
            
            11,080
            
            
            
            12,491
            
            
            
            13,230
            
            
            
            14,331
            
            
            
            14,797
            
            
            
            12,931
            
            
            
            12,393Selling
      and administrative expense
            
            
            7,359
            
            
            
            7,482
            
            
            
            7,221
            
            
            
            8,109
            
            
            
            8,880
            
            
            
            9,441
            
            
            
            14,576
            
            
            
            8,201Restructuring
      and impairment charges
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            21,304Operating
      (loss) income
            
            
            (811
            )
            
            
            344
            
            
            
            446
            
            
            
            2,099
            
            
            
            3,394
            
            
            
            5,682
            
            
            
            (14,232
            )
            
            
            (33,111
            )Interest
      income
            
            
            1,240
            
            
            
            2,198
            
            
            
            2,338
            
            
            
            2,259
            
            
            
            1,938
            
            
            
            1,281
            
            
            
            978
            
            
            
            1,057Interest
      expense
            
            
            (625
            )
            
            
            (655
            )
            
            
            (592
            )
            
            
            (591
            )
            
            
            (591
            )
            
            
            (591
            )
            
            
            (592
            )
            
            
            (591
            )Other
      income (expense)
            
            
            -
            
            
            
            -
            
            
            
            173
            
            
            
            (907
            )
            
            
            (812
            )
            
            
            (324
            )
            
            
            (1,622
            )
            
            
            (3,736
            )Income
      (loss) from continuing operations
            
            
            (196
            )
            
            
            1,887
            
            
            
            2,365
            
            
            
            2,860
            
            
            
            3,929
            
            
            
            6,048
            
            
            
            (15,468
            )
            
            
            (36,381
            )Loss
      from discontinued operation
            
            
            (965
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      (loss) income
            
            $
            (1,161
            )
            
            $
            1,887
            
            
            $
            2,365
            
            
            $
            2,860
            
            
            $
            3,929
            
            
            $
            6,048
            
            
            $
            (15,468
            )
            
            $
            (36,381
            )Basic
      (loss) income per share:Continuing
      operations
            
            $
            -
            
            
            $
            0.03
            
            
            $
            0.04
            
            
            $
            0.05
            
            
            $
            0.07
            
            
            $
            0.10
            
            
            $
            (0.26
            )
            
            $
            (0.60
            )Discontinued
      operations
            
            
            (0.02
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      (loss) income
            
            $
            (0.02
            )
            
            $
            0.03
            
            
            $
            0.04
            
            
            $
            0.05
            
            
            $
            0.07
            
            
            $
            0.10
            
            
            $
            (0.26
            )
            
            $
            (0.60
            )Diluted
      (loss) income per share:Continuing
      operations
            
            $
            -
            
            
            $
            0.03
            
            
            $
            0.04
            
            
            $
            0.05
            
            
            $
            0.07
            
            
            $
            0.10
            
            
            $
            (0.26
            )
            
            $
            (0.60
            )Discontinued
      operations
            
            
            (0.02
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      (loss) income
            
            $
            (0.02
            )
            
            $
            0.03
            
            
            $
            0.04
            
            
            $
            0.05
            
            
            $
            0.07
            
            
            $
            0.10
            
            
            $
            (0.26
            )
            
            $
            (0.60
            )




See Note
2 for further discussion.


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




For
information regarding the Company’s change in independent registered public
accounting firm from J.H. Cohn LLP to Ernst & Young LLP during its fiscal
year ended December 31, 2007, please refer to the Company’s current report on
Form 8-K filed with the SEC on June 7, 2007. The Company had no disagreements
during its 2006, 2007 and 2008 fiscal years with its independent auditors
regarding accounting or financial disclosure matters.





ITEM 9A.
CONTROLS AND PROCEDURES.





Conclusion
Regarding the Effectiveness of Disclosure Controls and Procedures




We maintain
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our reports filed with the Securities and Exchange
Commission, or SEC, is recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms, and that such information
is accumulated and communicated to our management, including our Chief Executive
Officer, or CEO, and Chief Financial Officer, or CFO, as appropriate, to allow
timely decisions regarding required disclosure.  As of December 31,
2008, an evaluation was performed under the supervision and with the
participation of our Management, including our CEO and CFO, of the effectiveness
of the design and operation of our disclosure controls and procedures (as
defined in Rules 13a-15(e) under the U.S. Securities Exchange Act of
1934).  Based on that evaluation, our management, including our CEO
and CFO, concluded that our disclosure controls and procedures were effective as
of December 31, 2008.





Management’s
Report on Internal Control Over Financial Reporting




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f). Under the supervision and with the participation of our management,
including our CEO and CFO, we conducted an evaluation of the effectiveness of
our internal control over financial reporting based on the framework of Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Based on that evaluation, our management concluded
that our internal control over financial reporting was effective as of December
31, 2008.




The
effectiveness of our internal control over financial reporting as of December
31, 2008 has been audited by Ernst & Young LLP, an independent registered
public accounting firm, as stated in their report which is included
below.




There was no
change in the Company’s internal control over financial reporting during the
Company’s last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial
reporting.





Inherent
Limitations of Controls




Because of
their inherent limitations, disclosure controls and procedures and internal
control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.











Report of
Independent Registered Public Accounting Firm








To the
Board of Directors and Stockholders


ANADIGICS,
Inc.








We have
audited ANADIGICS, Inc.’s internal control over financial reporting as of
December 31, 2008, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). ANADIGICS, Inc.’s management is responsible for
maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting
included in the accompanying Management’s Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on the
company’s internal control over financial reporting based on our
audit.





We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.





A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.





In our
opinion, ANADIGICS, Inc. maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2008, based on the
COSO criteria.





We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of ANADIGICS,
Inc. as of December 31, 2008 and 2007, and the related consolidated statements
of operations, comprehensive (loss) income, stockholders' equity, and cash flows
for each of the two years in the period ended December 31, 2008 of ANADIGICS
Inc. and our report dated February 27, 2009 expressed an unqualified opinion
thereon.








/s/ Ernst & Young LLP


MetroPark,
New Jersey


February 27,
2009














ITEM 9B. OTHER
INFORMATION





None.





PART
III





ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.




The Company
has adopted a Code of Conduct and Business Ethics that applies to directors,
officers and employees, including the President and Chief Executive Officer, and
Chief Financial Officer and has posted such code on its website at
(www.anadigics.com). Changes to and waivers granted with respect to the
Company’s Code of Conduct and Business Ethics for officers and directors that
are required to be disclosed pursuant to the applicable rules and regulations
will be filed on a current report on Form 8-K and posted on the Company
website.




The
registrant incorporates by reference herein information to be set forth in its
definitive proxy statement for its 2009 annual meeting of shareholders that is
responsive to the information required with respect to this Item.





ITEM 11.
EXECUTIVE COMPENSATION.




The
registrant incorporates by reference herein information to be set forth in its
definitive proxy statement for its 2009 annual meeting of shareholders that is
responsive to the information required with respect to this Item.




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




The
registrant incorporates by reference herein information to be set forth in its
definitive proxy statement for its 2009 annual meeting of shareholders that is
responsive to the information required with respect to this Item.





ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE.




The
registrant incorporates by reference herein information to be set forth in its
definitive proxy statement for its 2009 annual meeting of shareholders that is
responsive to the information required with respect to this Item.





ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES.




The
registrant incorporates by reference herein information to be set forth in its
definitive proxy statement for its 2009 annual meeting of shareholders that is
responsive to the information required with respect to this Item.





PART
IV








ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES.





(a) 1.
Financial Statements





Financial
Statements are included in Item 8, "Financial Statements and Supplementary Data"
as follows:





-
            Reports
      of Independent Registered Public Accounting Firms-
            Consolidated
      Balance Sheets - December 31, 2007 and
2008





-
            Consolidated
      Statements of Operations - Year ended December 31, 2006, 2007 and
      2008-
            Consolidated
      Statements of Comprehensive (Loss) Income - Year ended December 31, 2006,
      2007 and 2008





-
            Consolidated
      Statements of Stockholders’ Equity - Year ended December 31, 2006, 2007
      and 2008-
            Consolidated
      Statements of Cash Flows - Year ended December 31, 2006, 2007 and
      2008





-
            Notes
      to Consolidated Financial
Statements




2.
Financial Statement Schedules





Schedule
II - Valuation and Qualifying Accounts




All other
schedules for which provision is made in the applicable accounting regulation of
the Securities and Exchange Commission are not required under the related
instructions or are inapplicable and therefore have been omitted.





(b)
Exhibit List





2.1
            Stock
      Purchase Agreement dated April 2, 2001, among the Company, Telcom Devices
      Corp. and the sellers named therein. Filed as an exhibit to the Company’s
      Current Report on Form 8-K dated April 6, 2001, and incorporated herein by
      reference.3.1
            Amended
      and Restated Certificate of Incorporation of the Company, together with
      all amendments thereto. Filed as an exhibit to the Company's Registration
      Statement on Form S-3 (Registration No. 333-75040), and incorporated
      herein by reference.3.2
            Amended
      and Restated By-laws of the Company. Filed as an exhibit to the Company's
      current report on Form 8-K dated January 22, 2008, and incorporated herein
      by reference.4.1
            Form
      of Common Stock Certificate. Filed as an exhibit to the Company's
      Registration Statement on Form S-1 (Registration No. 33-89928), and
      incorporated herein by reference.4.2
            Form
      of Registration Rights Agreement. Filed as an exhibit to the Company's
      Registration Statement on Form S-1 (Registration No. 33-89928), and
      incorporated herein by reference.4.3
            Schedule
      to Form of Registration Rights Agreement. Filed as an exhibit to the
      Company's Registration Statement on Form S-1 (Registration No. 333-20783),
      and incorporated herein by reference.4.4
            Rights
      Agreement dated as of December 17, 1998 between the Company and Chase
      Mellon Shareholder Services L.L.C., as Rights Agent. Filed as an exhibit
      to the Company’s Current Report on Form 8-K dated December 17, 1998, and
      incorporated herein by reference.4.5
            Amendment
      No. 1 dated as of November 30, 2000 to the Rights Agreement dated as of
      December 17, 1998 between the Company and Chase Mellon Shareholder
      Services L.L.C., as Rights Agent. Filed as an exhibit to the Company’s
      Current Report on Form 8-K dated December 4, 2000, and incorporated herein
      by reference.4.6
            Indenture,
      dated as September 24, 2004, between the Company, as Issuer, and U.S. Bank
      Trust National Association, as Trustee for the 5% Convertible Senior Notes
      due October 15, 2009. Filed as an exhibit to the Company’s Current Report
      on Form 8-K dated September 28, 2004, and incorporated herein by
      reference.4.7
            Registration
      Rights Agreement, dated September 24, 2004, between the Company, as
      Issuer, and the Purchasers of 5% Convertible Senior Notes due October 15,
      2009. Filed as an exhibit to the Company’s Current Report on Form 8-K
      dated September 28, 2004, and incorporated herein by
      reference.4.8
            Form
      of 5% Convertible Senior Note due October 15, 2009 (included in Exhibit
      4.6).4.9
            Amendment
      No. 2 dated as of October 2, 2008, to the Rights Agreement, dated as of
      December 17, 1998, as amended as of November 30, 2000, between the Company
      and Mellon Investor Services LLC (f/k/a ChaseMellon Shareholder Services,
      L.L.C.).  Filed as an exhibit to the Company’s Form 8-A filed on
      October 2, 2008 and incorporated herein by reference.10.1
            1994
      Long-Term Incentive and Share Award Plan. Filed as an exhibit to the
      Company's Registration Statement on Form S-1 (Registration No. 33-89928),
      and incorporated herein by reference.10.2
            1995
      Long-Term Incentive and Share Award Plan, as amended May 29, 1997 and May
      24, 2000. Filed as an exhibit to the Company’s Current Report on Form S-8
      (Registration No. 333-49632), and incorporated herein by
      reference.10.3
            Employee
      Savings and Protection Plan. Filed as an exhibit to the Company's
      Registration Statement on Form S-1 (Registration No. 33-89928), and as
      incorporated herein by reference.*10.4
            First
      Amendment to Employee Savings and Protection Plan, effective as of May 1,
      200510.5
            Amended
      and Restated Employee Stock Purchase Plan. Filed as an exhibit to the
      Company's Quarterly Report on Form 10-Q filed on May 16, 2008, and
      incorporated herein by reference.10.6
            Lease
      Agreement between United States Land Resources, L.P. (and its successor in
      interest, Warren Hi-Tech Center, L.P.), and the Company dated as of April
      26, 1996. Filed as an exhibit to the Company's Registration Statement on
      Form S-1 (Registration No. 333-20783); as amended in the Company’s Annual
      Report filed on Form 10-K405 dated March 29, 2002; each as incorporated
      herein by reference.10.7
            Employment
      Agreement between the Company and Mario A. Rivas, dated January 15, 2009.
      Filed as an exhibit to the Company’s current report on Form 8-K dated
      January 15, 2009 and incorporated herein by reference.10.8
            Employment
      Agreement between the Company and Ronald Rosenzweig, dated July 3, 2008.
      Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q dated
      August 7, 2008; and incorporated herein by reference.10.9
            Employment
      Agreement between the Company and Thomas C. Shields, dated July 25, 2000.
      Filed as an exhibit to the Company’s Annual Report on Form 10-K405 dated
      March 29, 2002; as amended and filed as an exhibit to the Company’s
      Current Report on Form 8-K dated May 10, 2005; as amended and filed as an
      exhibit to the Company’s Current Report on Form 8-K dated November 7,
      2005; each as incorporated herein by reference.10.10
            Employment
      Agreement between the Company and Charles Huang, dated July 25, 2000.
      Filed as an exhibit to the Company’s Annual Report on Form 10-K405 dated
      March 29, 2002; each as incorporated herein by
  reference.10.11
            Form
      of 1997 Long-Term Incentive and Share Award Plan. Filed as an exhibit to
      the Company’s Annual Report on Form 10-K405 dated February 18, 1997, and
      incorporated herein by reference.10.12
            Amended
      and Restated 2005 Long Term Incentive and Share Award Plan. Filed as an
      exhibit to the Company’s current report on Form 8-K filed on May 16, 2008;
      and incorporated herein by reference.10.13
            Employment
      Agreement between the Company and Ron Michels, dated as of January 27,
      2009.  Filed as an exhibit to the Company’s current report on
      Form 8-K filed on January 30, 2009.10.14
            Employment
      Agreement between the Company and Ali Khatibzadeh, dated as of January 27,
      2009.  Filed as an exhibit to the Company’s current report on
      Form 8-K filed on January 30, 2009.*21
            Subsidiary
      Listing*23.1
            Consent
      of Ernst & Young LLP.*23.2
            Consent
      of J.H. Cohn LLP.24.1
            Power
      of Attorney (included on the signature page of this Annual Report on Form
      10-K).*31.1
            Rule
      13a-14(a)/15d-14(a) Certification of Mario Rivas, President and Chief
      Executive Officer of ANADIGICS, Inc.*31.2
            Rule
      13a-14(a)/15d-14(a) Certification of Thomas C. Shields, Executive Vice
      President and Chief Financial Officer of ANADIGICS,
Inc.*32.1
            Section
      1350 Certification of Mario Rivas, President and Chief Executive Officer
      of ANADIGICS, Inc.*32.2
            Section
      1350 Certification of Thomas C. Shields, Executive Vice President and
      Chief Financial Officer of ANADIGICS, Inc.*
      Filed herewith





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 on the 2nd day of March,
2009.




ANADIGICS,
INC.




BY: /s/
Mario A. Rivas


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


Mario A.
Rivas


CHIEF
EXECUTIVE OFFICER AND PRESIDENT





KNOW ALL
MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints each of Mario A. Rivas and Thomas C. Shields as his
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place, and stead, in any and all capacities, to sign
and file any and all amendments to this Annual Report on Form 10-K, with all
exhibits thereto and hereto, and other documents with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitutes, may lawfully 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 BY THE FOLLOWING PERSONS ON BEHALF OF ANADIGICS, INC. IN THE CAPACITIES
AND ON THE DATES INDICATED:




Name
            Title
            Date/s/
      Mario A. Rivas
            President
      and Chief Executive Officer (Principal Executive Officer)
            March
      2, 2009Mario
      A. Rivas/s/ Thomas C.
      Shields
            Executive
      Vice President and Chief Financial Officer (Principal Financial Accounting
      Officer)
            March
      2, 2009Thomas
      C. Shields/s/
      Gilles Delfassy
            Chairman
      of the Board of Directors
            March
      2, 2009Gilles
      Delfassy/s/
      Paul S. Bachow
            Director
            March
      2, 2009Paul
      S. Bachow/s/
      David Fellows
            Director
            March
      2, 2009David
      Fellows/s/
      Harry T. Rein
            Director
            March
      2, 2009Harry
      T. Rein/s/
      Ronald Rosenzweig
            Vice
      Chairman of the Board of Directors
            March
      2, 2009Ronald
      Rosenzweig/s/
      Lewis Solomon
            Director
            March
      2, 2009Lewis
      Solomon










SCHEDULE
II--VALUATION AND QUALIFYING ACCOUNTS








Description
              (Dollars
      in Thousands)
            
            Balance
      at beginning of period
            
            
            Additions
      charged to costs and expenses
            
            
            Deductions
            
            
            
            
            Balance
      at end of periodYear
      ended December 31, 2008:Deducted
      from asset account:Allowance
      for doubtful accounts
            
            $
            924
            
            
            $
            69
            
            
            $
            (254
            )
            
            (1
            )
            
            $
            739Reserve
      for excess and obsolete inventory
            
            
            4,237
            
            
            
            5,383
            
            
            
            (592
            )
            
            (2
            )
            
            
            9,028Reserve
      for warranty claims
            
            
            327
            
            
            
            1,149
            
            
            
            (831
            )
            
            (3
            )
            
            
            645Year
      ended December 31, 2007:Deducted
      from asset account:Allowance
      for doubtful accounts
            
            $
            923
            
            
            $
            1
            
            
            $
            -
            
            
            (1
            )
            
            $
            924Reserve
      for excess and obsolete inventory
            
            
            3,530
            
            
            
            977
            
            
            
            (270
            )
            
            (2
            )
            
            
            4,237Reserve
      for warranty claims
            
            
            347
            
            
            
            521
            
            
            
            (541
            )
            
            (3
            )
            
            
            327Year
      ended December 31, 2006:Deducted
      from asset account:Allowance
      for doubtful accounts
            
            $
            923
            
            
            $
            -
            
            
            $
            -
            
            
            (1
            )
            
            $
            923Reserve
      for excess and obsolete inventory
            
            
            2,545
            
            
            
            1,808
            
            
            
            (823
            )
            
            (2
            )
            
            
            3,530Reserve
      for warranty claims
            
            
            396
            
            
            
            677
            
            
            
            (726
            )
            
            (3
            )
            
            
            347




(1)
Uncollectible accounts written-off to the allowance account.






(3)
Warranty expenses incurred to the reserve for warranty claims.








EXHIBIT
10.4





FIRST
AMENDMENT TO THE





ANADIGICS,
INC. EMPLOYEE SAVINGS AND PROTECTION PLAN




This
FIRST AMENDMENT to the ANADIGICS, Inc. Employee Savings and Protection Plan is
executed by ANADIGICS, Inc., the Employer.




The
purpose of this Amendment is to change the period of determining Employer
Matching Contributions.




RESOLVED,
that Adoption Agreement Section G(3), Contributions and Allocations - Period of
Determining Matching Contributions, be amended by changing the election of Item
G(3)(f), Matching contributions will be determined based on Elective Deferrals
made during the entire Plan Year (must elect if Participant is required to be
actively employed on last day of Plan Year to receive matching contributions),
to Item G(3)(g), Matching
contributions will be determined based on Elective Deferrals made during each
payroll period.




FURTHER
RESOLVED, that the effective date of this Amendment shall be May 1,
2005.


IN
WITNESS WHEREOF, the Employer has caused this Amendment to be executed this 2nd
day of May, 2005.




ANADIGICS,
Inc.




By:  /s/ John E.
Warren_________




For
the Employer





EXHIBIT
21





Subsidiaries
of ANADIGICS, Inc.





Name
      of Subsidiary
            State
      of Jurisdiction of Incorporation
            %
      OwnedANADIGICS
      (U.K.) Limited
            United
      Kingdom
            100%ANADIGICS,
      Limited
            Israel
            100%ANADIGICS
      Denmark ApS
            Denmark
            100%ANADIGICS
      Acquisition Corp
            Delaware
            100%ANADIGICS
      Holding Corp.
            Delaware
            100%Broadband & Wireless
      Investors, Incorporated
            Delaware
            100%ANADIGICS
      China Corporation
            China
            100%ANADIGICS
      China Holdings Corp.
            Cayman
      Islands
            100%





EXHIBIT
23.1








Consent
of Independent Registered Public Accounting Firm








We
      consent to the incorporation by reference in the following Registration
      Statements:





1.
            Registration
      Statements (Form S-3 Nos. 333-75040, 333-110538, 333-120947, 333-139124
      and 333-141161),


2.
            Registration
      Statements (Form S-8 Nos. 33-91750 and 333-49632) pertaining to the
      ANADIGICS, Inc. Stock Option Plan, 1994 Long-Term Incentive and Share
      Award Plan, 1995 Long-Term Incentive Share Award Plan and Employee Stock
      Purchase Plan,


3.
            Registration
      Statements (Form S-8 Nos. 333-32533 and 333-63836) pertaining to the
      ANADIGICS, Inc. 1997 Long-Term Incentive and Share Award Plan for
      Employees,


4.
            Registration
      Statement (Form S-8 No. 333-125971) pertaining to the ANADIGICS, Inc. 2005
      Long Term Incentive and Share Award Plan and the Amended and Restated
      Employee Stock Purchase Plan,


5.
            Registration
      Statement (Form S-8 No. 333-136280) pertaining to the ANADIGICS, Inc.
      Amended and Restated 2005 Long-Term Incentive and Share Award Plan,
      and


6.
            Registration
      Statement (Form S-8 No. 333-151293) pertaining to the ANADIGICS, Inc.
      Amended and Restated Employee Stock Purchase Plan and the Amended and
      Restated 2005 Long-Term Incentive and Share Award
  Plan;





of our
reports dated February 27, 2009, with respect to the consolidated financial
statements and schedule of ANADIGICS, Inc. and the effectiveness of internal
control over financial reporting of ANADIGICS, Inc. included in this Annual
Report (Form 10-K) of ANADIGICS, Inc. for the year ended December 31,
2008.








/s/ Ernst & Young
LLP








MetroPark,
      New Jersey


February
      27, 2009













EXHIBIT
23.2






CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





We
      consent to the incorporation by reference in the following Registration
      Statements:





1.
            Registration
      Statements (Form S-3 Nos. 333-75040, 333-110538, 333-120947, 333-139124
      and 333-141161),


2.
            Registration
      Statements (Form S-8 Nos. 33-91750 and 333-49632) pertaining to the
      ANADIGICS, Inc. Stock Option Plan, 1994 Long-Term Incentive and Share
      Award Plan, 1995 Long-Term Incentive Share Award Plan and Employee Stock
      Purchase Plan,


3.
            Registration
      Statements (Form S-8 Nos. 333-32533 and 333-63836) pertaining to the
      ANADIGICS, Inc. 1997 Long-Term Incentive and Share Award Plan for
      Employees,


4.
            Registration
      Statement (Form S-8 No. 333-125971) pertaining to the ANADIGICS, Inc. 2005
      Long Term Incentive and Share Award Plan and the Amended and Restated
      Employee Stock Purchase Plan,


5.
            Registration
      Statement (Form S-8 No. 333-136280) pertaining to the ANADIGICS, Inc.
      Amended and Restated 2005 Long-Term Incentive and Share Award Plan,
      and


6.
            Registration
      Statement (Form S-8 No. 333-151293) pertaining to the ANADIGICS, Inc.
      Amended and Restated Employee Stock Purchase Plan and the Amended and
      Restated 2005 Long-Term Incentive and Share Award
  Plan;





of our
report dated February 27, 2007, with respect to the consolidated statements of
operations, comprehensive loss, stockholders’ equity and cash flows of
ANADIGICS, Inc. for the year ended December 31, 2006 and the information for the
year ended December 31, 2006 included in the related financial statement
schedule of ANADIGICS, Inc. included in this Annual Report (Form 10-K) for the
year ended December 31, 2008.














/s/ J.H.
Cohn LLP





Roseland,
New Jersey


February
27, 2009