<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                                   (Mark one)

/X/      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002.

                                       OR

/ /      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                           Commission File No. 0-25662

                                 ANADIGICS, Inc.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

              Delaware                                22-2582106
    --------------------------------     -----------------------------------
    (State or other jurisdiction of      (I.R.S. Employer Identification No.)
    incorporation or organization)


              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 National Market

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. /X/

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

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of June 29, 2002 was approximately $252 million, based upon the
closing sales price of the Registrant's common stock as quoted on the NASDAQ
National Market on such date.

The number of shares outstanding of the Registrant's common stock as of February
21, 2003 was 30,674,033.

Documents incorporated by reference: Definitive proxy statement for the
registrant's 2003 annual meeting of shareholders (Part III).
<PAGE>


                                TABLE OF CONTENTS
                                -----------------
<TABLE>
<CAPTION>

<S>         <C>                                                                     <C>
PART I

Item 1:     Business                                                                  3

Item 2:     Properties                                                               16

Item 3:     Legal Proceedings                                                        17

Item 4:     Submission of Matters to a Vote of Security Holders                      17


PART II

Item 5:     Market for Registrant's Common Equity and Related Stockholder Matters    18

Item 6:     Selected Financial Data                                                  18

Item 7:     Management's Discussion and Analysis of Financial Condition and
            Results of Operations                                                    19

Item 7A:    Quantitative and Qualitative Disclosures About Market Risk               24

Item 8:     Financial Statements and Supplementary Data                              26

Item 9:     Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosure                                                     43


PART III

Item 10:    Directors and Executive Officers of the Registrant                       43

Item 11:    Executive Compensation                                                   43

Item 12:    Security Ownership of Certain Beneficial Owners and Management and
            Related Stockholder Matters                                              43

Item 13:    Certain Relationships and Related Transactions                           43

Item 14:    Controls and Procedures                                                  43


PART IV

Item 15:    Exhibits, Financial Statement Schedules and Reports on Form 8-K          43
</TABLE>


                                       2
<PAGE>

PART 1

ITEM 1. BUSINESS.


Background and Developments

        ANADIGICS, Inc. (the "Company") was 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.

        Our markets weakened substantially during 2001 and remained weak in
2002. With the well-publicized deterioration in the telecommunications industry,
we experienced a substantial decline in demand for our products. The downturn in
broadband demand resulted from a reduction in capital spending by many of our
customers and lower end-consumer demand and was accentuated in 2001 by high
component inventories at many of our customers, including components that we
previously supplied. While demand for our wireless products was substantially
down in 2001 primarily due to lower demand for TDMA products, customer demand
for our wireless products increased in 2002 resulting from greater demand for
our CDMA products. Consequently, our revenues declined from $172.3 million in
2000 to $84.8 million in 2001 and $82.6 million in 2002, and we reported a net
loss of $55.9 million for 2002. As of December 31, 2002, we had an accumulated
deficit of $164.1 million.

Overview

         ANADIGICS, Inc. designs and manufactures radio frequency integrated
circuit (RFIC) solutions for the wireless and broadband communications markets.
Our high frequency RFIC products enable manufacturers of communications
equipment to enhance overall system performance and reduce manufacturing cost
and time to market.

         In the wireless market, we focus on wireless handsets and wireless
infrastructure applications for transmission in the cellular (800 to 900 MHz)
and personal communications systems (PCS) (1800 to 1900 MHz) bands. In the
broadband markets, our focus is on applications for cable subscriber products,
cable infrastructure systems, and fiber optic communications systems. We believe
we have a competitive advantage due to our design, development and applications
expertise, our superior compound semiconductor technologies, our high-volume,
low-cost state-of-the-art manufacturing processes and expertise, and our strong
working relationships with leading original equipment manufacturers (OEMs).

         We design, develop and manufacture 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 quality and reliability of our products results from a
comprehensive design, characterization, qualification, and robust manufacturing
process. In addition to the design team located at our corporate headquarters in
Warren, New Jersey, we operate development centers in Richardson, Texas, Newbury
Park, California and Aalborg, Denmark.

         Our design and applications engineering staff is strategically active
and engaged with customers during all phases of design and production. This
strategy helps our customers streamline their design process and time to market,
achieve cost-effective and manufacturable designs, and ensure a smooth
transition into high-volume production.

         We have two company-owned fabrication facilities ("fabs") - a
state-of-the-art six-inch diameter analog GaAs fab located at our corporate
headquarters in Warren, New Jersey, and a two-inch diameter InP fab located in
Camarillo, California. Our six-inch wafer fab allows us to produce, at a small
incremental cost, more than twice the RF die per wafer compared with the current
industry norm four-inch wafer. We believe our strong manufacturing fabrication
capability, combined with extensive management expertise and innovative product
designs allows us to quickly develop and manufacture products in line with
market and customer requirements.

Industry Background

         Over the last decade, there have been remarkable developments in
electronic communications, as evidenced by the emergence of wireless
communications, Internet services and digital television services. Radio
frequency/microwave and integrated circuit technologies have enabled increases
in communications capacity and significant reductions in systems costs. The
wireless and broadband communications markets are beneficiaries of current
technological trends, including higher frequencies, digital modulation and
higher levels of electronic integration.

         Wireless communications are growing rapidly and replacing landline
telephone services in mature markets and are being built in lieu of landline
services in other emerging markets. Worldwide unit sales by OEMs of cellular/PCS
wireless handsets were approximately 395 million in 2002.



                                       3
<PAGE>

         Broadband markets are also benefiting from technological changes. Cable
television systems are moving from one-way analog signal distribution systems to
interactive digital systems offering increased and new video content, Internet
connection services and telephony. We estimate that approximately 14 million
digital cable television (CATV) set-top boxes were produced in 2002. The
production of cable modems, which allow high-speed Internet access through the
cable network, was approximately 9 million units in 2002. The continued build
out of the cable infrastructure network required a production of approximately
2.5 million line extenders, systems amplifiers and fiber nodes.

         Activity in broadband fiber optic networks is being driven by demand
from Internet and corporate users for high-speed data transfer capability and
the resultant demand for Internet, Local Area Networks (LAN), Metropolitan Area
Networks (MAN), and Storage Area Networks (SAN).

         Given these developments, OEMs are facing the following challenges and
need the following solutions from their suppliers:

         o        Shorter cycle times. In both the wireless and broadband
                  communications markets, manufacturers must bring new
                  subscriber products to market quickly in order to maintain
                  their market position. The development of multi-chip modules,
                  using advanced packaging techniques, and the development of
                  relationships with providers of RF reference designs is
                  imperative;

         o        Need for low-cost products. Wireless handsets, cable set-top
                  boxes and cable modems are increasingly becoming
                  consumer-driven, commodity products. Component suppliers must
                  be cost effective in order for OEMs to stay competitive; and

         o        Stronger supplier relationships. The digital, wireless, cable
                  and fiber optic industries are standards driven. Companies in
                  the communications industry must work very closely with their
                  suppliers in order to develop new products. Companies
                  therefore limit themselves to a small number of suppliers in
                  order to keep their competitive advantages.

The GaAs Advantage

         Through our research and development efforts, we have developed
expertise in producing cost-effective GaAs-based RFICs for high-volume
commercial applications. These circuits offer the performance attributes
required for radio frequency/microwave applications that are not easily
obtainable with silicon-based integrated circuits. GaAs transistors can operate
at frequencies greater than silicon transistors, and therefore can handle the
requirements of radio frequency/microwave applications. GaAs RFICs have a lower
noise figure than silicon-based integrated circuits, providing increased
sensitivity, less distortion and interference and better dynamic range, thereby
enabling systems to handle a wide range of signal strengths. GaAs is a
semi-insulating material that facilitates integration of the passive components
required in radio frequency/microwave applications. Finally, GaAs RFICs used in
transmitter applications are more power-efficient than silicon-based circuits,
allowing for longer battery life or use of smaller batteries.

The InGaP Advantage

         In the industry, there are two predominant commercially-viable types of
HBT process technologies. Earlier generations use either beryllium or carbon
doping in the base layer and Aluminum Gallium Arsenide (AlGaAs) in the emitter
layer. The state-of-the-art for HBT uses carbon doping in the base layer and
Indium Gallium Phosphide (InGaP) in the emitter layer.

         There are several significant advantages to InGaP. One advantage is
stability over a range of temperatures. An InGaP HBT device will experience only
an approximate 10% drop in gain over a range of 0 to 100 degrees Celsius, while
the gain loss in an AlGaAs device approximates 50%. An InGaP device has much
higher reliability than AlGaAs, giving the option to run the device at higher
temperatures. These advantages lead to smaller chip sizes and thus lower cost.
Finally, InGaP allows for more robust manufacturing because the material has the
advantage of a selective etch process not possible with AlGaAs.

         The InGaP advantages of performance, reliability and manufacturability
led to our decision to develop the world's first commercially-viable 6-inch
InGaP HBT process, which was completed in 2000 and complements our GaAs MESFET
technology.

ANADIGICS' Strategy

         Our objective is to be a leading supplier of RFICs for the wireless and
broadband communications markets. The cornerstone of our strategy is to
capitalize on opportunities in the wireless and broadband communications markets
by addressing applications that leverage our RFIC design and manufacturing
expertise and longstanding relationships with leading OEMs in these markets. The
key elements of this strategy include:



                                       4
<PAGE>

         Be First-to-Market with Proprietary Value-Added Products

         We intend to continue to design timely, cost-effective RFIC solutions
for our target markets. In developing prototypes, the combination of an
experienced engineering staff, a "quick-turn" wafer fabrication facility, the
flexibility of using both in-house and contracted product assembly, and a world
class product testing process allow us to develop parts and be ready for
customer evaluation in less than one month. This design efficiency contributes
to customer satisfaction and allows us to improve product designs rapidly for
manufacturing efficiency.

         Capitalize on World Class Manufacturing Capabilities, While Reducing
         Costs

         We will continue to focus on improving manufacturing performance and
customer service, while reducing costs. We believe we can effectively control
the critical phases of the production process in order to realize high
manufacturing yields, product quality and customer satisfaction. Our six-inch
wafer fab has provided increased manufacturing capacities and shorter cycle
times at a lower incremental cost than four-inch wafer fabs.

         Forge Strong Customer Relationships

         We have developed strong working relationships with our customers, many
of whom are leading OEMs in their markets. Because the target markets are
standards-driven, customer relationships are important. These relationships
provide us with product development opportunities and the ability to anticipate
future market needs. The rapid feedback received from our customers during the
product design phase increases the likelihood that our designs will meet our
customers' cost and performance requirements.

         Pursue Strategic Alliances and Investments

         We will continue to pursue strategic alliances and investments to
expand and improve upon our technologies, industry expertise, products and
market share. We expect that these alliances and investments will be
complementary to current activities and will enhance our ability to work with
leading OEMs to develop next generation solutions.

Target Markets and Products

         Wireless Communications

         The wireless communications market is a growing, dynamic market as a
result of increasing demand for:

         o        Portable voice and data communications;
         o        Smaller, lighter handsets offering increased functionality;
         o        Reliable access and voice quality comparable to land lines;
         o        Longer talk-time and standby time; and
         o        Wireless access to the Internet.

         Our RFIC products are used in handsets where small size, multi-band
operation and low power consumption are key features. Currently in the United
States, the two primary digital air interface communications standards are Code
Division Multiple Access (CDMA) and Time Division Multiple Access (TDMA). A
third standard, Global System for Mobile communication (GSM), is the most widely
deployed digital standard in the rest of the world, with a high degree of
deployment in Europe and Asia and increasing deployment in North America. We
currently offer and continue to bring to market an array of products for both
the handset and infrastructure markets for each of these major air interface
standards.

         We have developed single-band/dual-mode, dual-band/tri-mode InGaP HBT
power amplifier (PA) modules for the CDMA and GSM standards. InGaP HBT module
technology offers high efficiency, low power consumption and stability over a
range of temperatures, as well as a lower total solution cost allowing our
customers to build the transmitter section of the wireless handset more easily
and quickly by reducing design complexity and component counts.

         Our principal customers in the wireless market are Sony-Ericsson
("Ericsson"), which accounted for 44%, 25%, and 7% of our total net sales during
2000, 2001, and 2002, respectively, and Kyocera Wireless Corporation, which
accounted for 11% and 35% of our total net sales in 2001 and 2002, respectively.
No other customer in this market accounted for more than 10% of net sales in
2000, 2001 or 2002.

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


                                       5
<PAGE>

<TABLE>
<CAPTION>

<S>                                                        <C>
            Product                                                        Application
            Handset Products

            o  Power Amplifier (PA)                        Used in RF transmit chain of wireless handset to amplify
               monolithic microwave integrated             signal to base station. Consists essentially of GaAs MESFET
               circuits (MMICs)                            PA die in plastic package with metal contacts. Used
                                                           primarily in TDMA handsets

            o  Single-band PA module                       Encapsulates InGaP HBT PA die and certain passive
                                                           components in multi-layer laminate module. Used primarily in
                                                           CDMA handsets

            o  Dual-band PA module                         Encapsulates two InGaP HBT PA die, CMOS bias control chip,
                                                           and certain passive components in multi-layer laminate
                                                           module. Used primarily in GSM handsets

            o  PowerPlexer(TM)                             Encapsulates two InGaP HBT PA die, CMOS, bias control chip,
                                                           antenna switch, coupler, harmonic filter and passives in
                                                           multi-layer laminate module. Used in GSM handsets

            o  RF Switches                                 Used in wireless handsets and other wireless applications to switch
                                                           between receive and transmit modes and multiple frequency bands


          Infrastructure Products

            o  Driver Amplifiers                           Used in cellular base stations in the transmit chain

            o  Gain Blocks                                 Used in cellular base stations in the transmit chain

</TABLE>

         Broadband

         The trends that currently drive product development in the cable
television and cable modem markets are:

         o        Shift to digital cable television with interactive services;

         o        Demand for high speed Internet access; and

         o        Emergence of cable telephony.

         The convergence of these trends, enabled by digital transmission,
creates the need for innovative RFICs for cable television and cable modem
applications.

         Cable television systems, which traditionally delivered one-way analog
television programming, limited to a few entertainment channels, are
increasingly used to deliver a wide array of interactive video and other
services, such as high speed Internet access and telephony. In order to support
these new applications, cable system operators must upgrade both the bandwidth
(i.e., capacity) and quality of the infrastructure and terminal equipment. The
new equipment must also be able to handle digital as well as analog modulated
signals.

         Our cable products are used in CATV set-top boxes, cable modems, and
cable television infrastructure applications. We produce tuner and reverse
amplifier RFICs, as well as line amplifiers and systems amplifiers for
infrastructure applications. The tuner ICs are used in double conversion tuners
to receive analog and digital signals in the 50-860 megahertz frequency band.
Reverse amplifiers are used in cable modems and in certain cable set-top boxes
that require a reverse path for interactivity. These tuner and reverse amplifier
RFICs enable customers to accelerate and simplify their designs, and reduce
manufacturing complexity and costs.



                                       6
<PAGE>

         We have also developed GaAs RFIC line amplifiers to be used in 50-860
megahertz cable television infrastructure equipment, such as line extenders,
distribution amplifiers and system amplifiers. We have recently expanded our
product offerings in this area by introducing line amplifier RFICs that operate
at 24 volts.

         The principal customers in the cable and broadcast markets are
Motorola, Inc., which represented 26%, 32%, and 23% of total net sales in 2000,
2001, and 2002, respectively, and Scientific-Atlanta, Inc., which represented
less than 10% of our total net sales in each of those years. No other customer
in this market accounted for more than 10% of net sales in 2000, 2001 or 2002.

         The following table sets forth information regarding our principal
products in the cable television/cable modems market:

<TABLE>
<CAPTION>

         Product                                                   Application
<S>                                                        <C>
         Subscriber Products:
            o  Upconverters                                Used in set-top box double conversion video tuners and cable
            o  Downconverters                              modem data tuners

            o  Reverse amplifiers                          Used in set-top boxes, cable modems and cable telephony
                                                           to transmit signals from a set-top box upstream to a cable company
                                                           headend for interactive applications


         Infrastructure Products:
            o  Line amplifiers                             Used in cable television systems to distribute signals from cable
                                                           headends to subscribers

            o  Drop amplifiers                             Used in cable television systems to amplify signals at individual
                                                           subscriber homes

</TABLE>

The fiber optic market is being driven by:

         o        Internet data traffic use;

         o        Implementation of corporate local area networks (LAN) and
                  storage area networks (SAN), which require high speed data
                  transfer capability;

         o        Upgrades of existing telecommunication and data communication
                  systems with fiber optic systems; and

         o        Expected build outs to Metropolitan Area Networks (MAN)


         Fiber optic communication systems use low-loss fiber optic cable to
link central office switches with one another and to connect the central office
to the serving area. Most telecommunication networks today are based on
Synchronous Optical Network (SONET) (United States and Japan) or SDH (Europe)
standards, which require high sensitivity, high bandwidth, and wide dynamic
range receivers. Fiber optic data communications systems use either Gigabit
Ethernet or Fibre Channel standards to achieve high-speed data transfer. The
Gigabit Ethernet standard has emerged as the most widely used in LAN
environments, as it addresses the need for short distance, high speed transfers
of large volumes of information. The Fibre Channel and emerging 2x Fibre Channel
standards have become the most widely used in SAN environments.

         The front end of most fiber optic receivers contains a photodetector
and a transimpedance amplifier (TIA), which are used in both fiber optic
telecommunications and data communications networks. Our GaAs TIAs for the
telecommunications networks are designed to meet the requirements of SONET
systems covering data speeds of OC-3 through OC-192 and for use in Dense
Wavelength Division Multiplexing (DWDM) systems.



                                       7
<PAGE>

         For data communications receivers and transceivers, we sell short
wavelength (850 nanometer) monolithically-integrated metal-semiconductor-metal
photodiode and transimpedance amplifiers (MSM-TIAs) and long wavelength (1300
nanometer) positive-intrinsic-negative photodiodes and transimpedance amplifiers
(PIN TIAs) for the Gigabit Ethernet and Fibre Channel standards.

         The continued LAN/SAN growth is placing new demands on MANs to provide
expanded cost-effective capacity at 2.5 and 10 gigabits per second to meet the
needs of dedicated high-speed Internet users and the requirements for high-speed
communication between private LANs and remote storage. We have introduced 10
Gb/s TIAs and limiting amplifiers for Ethernet and SONET applications. The
demand for MAN solutions is expected to grow over the next four years.

         On April 2, 2001, we acquired all of the capital stock of Telecom
Devices Corp. ("Telcom"), an optoelectronic semiconductor manufacturer of indium
phosphide (InP) based "long wavelength" (1310 and 1550 nanometers) emitter
(light-emitting diode, or LED) and detector (photodiode) products for the
telecommunications and data communications markets. The Telcom division produces
active components used primarily for fiber optic applications in
telecommunications systems, data communications networks, CATV broadcast and
reception, fiber optic test and measurement equipment, and scientific, custom,
and military markets.

         No single customer in the fiber optic market is responsible for more
than 10% of net sales in 2000, 2001, or 2002. The following table sets forth
information regarding our principal products in the fiber optic market:

<TABLE>
<CAPTION>

         Product                                            Application
<S>                                                        <C>
         Fiber Optic Products:
            o  Transimpedance amplifiers                   Used in the receivers or transceivers of a telecom fiber optic
                                                           link to amplify the signal received

            o  Limiting amplifiers                         Used in the receivers or transceivers of a telecom fiber optic
                                                           link to provide a voltage limited output

            o  Metal semiconductor metal                   Used in the transceiver of a datacom fiber optic link to detect
               transimpedance amplifiers                   and amplify short wavelength optical signals
               (MSM-TIA)

            o  Integrated Detector Preamp(IDP)             Used in the transceiver of a datacom fiber optic link to detect
               transimpedance amplifiers                   and amplify long wavelength optical signals
               (PIN-TIA)

            o  Photodiodes                                 Long wavelength detectors for SONET/SDH receivers

            o  Light-Emitting Diodes (LEDs)                Long wavelength emitters

</TABLE>


Marketing, Sales, Distribution and Customer Support

         We primarily sell our products directly to our customers worldwide. We
have developed close working relationships with leading companies in the
broadband and wireless communications markets. Additionally, we selectively use
independent manufacturers' representatives and Richardson Electronics, a
worldwide distributor, to complement our direct sales and customer support
efforts and in 2002 we continued to evaluate, upgrade and expand our sales
representative organization. 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 extraordinary commitment to close relationships with our customers.
The sales and marketing staff, assisted by the technical staff and senior
management, visit prospective and existing customers worldwide on a regular
basis. Additionally, both field and factory sales personnel communicate
regularly with our customers. 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.

         Our design and applications engineering staff is actively involved with
customers during all phases of design and production. We provide our customers
with engineering data and up-to-date product application notes, and communicate
with our customers' engineers on a regular basis to assist in resolving
technical problems on and off site. In most cases the design and applications
engineers obtain prototypes from our customers in order to troubleshoot and
identify potential improvements to the design in parallel with our customers'
efforts. This strategy helps our customers speed up their design process,
achieve cost-effective and manufacturable designs, and ensure a smooth
transition into high-volume production.



                                       8
<PAGE>

         Our policy is to provide our customers with applications engineering
support at our customers' design locations and factories throughout the world,
generally within 48 hours of a customer request. Our sales are made pursuant to
customer purchase orders.

Manufacturing, Assembly and Testing

         Manufacturing

         We fabricate substantially all of our integrated circuits in our
six-inch diameter GaAs wafer fab in Warren, New Jersey and in our two-inch
diameter InP fab in Camarillo, California.

         During 2001 we substantially completed the expansion of our Warren
facility, doubling the footprint to a 19,000 square foot fab, including 10,000
square feet of Class 100 "clean room" space. Based on physical floor space,
weekly production capacity in the Warren facility is approximately 1,600
equivalent six-inch MESFET wafers (adjusting for the additional mask layers, or
processing steps, inherent in HBT production). Based on equipment currently
installed, present weekly capacity is 800 equivalent six-inch MESFET wafers,
although this space can be equipped to expand capacity as market conditions
require. On the basis of equivalent four-inch MESFET wafers, which is the
industry norm, present weekly capacity is 1,800 wafers per week. See "Risk
Factors - We may face constraints on our manufacturing capacity which would
limit our ability to increase sales volumes."

         The InP fab in Camarillo, acquired as part of the Telcom Devices
Corporation transaction in April of 2001, is a 22,000 square foot facility with
4,000 square feet of fab clean room. Production capacity is currently 50 InP
wafers per week per shift.

         Our six-inch diameter InGaP HBT process, including a backside VIA hole
process, was the first in the industry and is the technology platform for our
newer-generation PA module wireless applications and OC-192 fiber Electro
Optical Modulator Drivers (EOMD) and TIAs. The advantages of better performance
over a range of temperatures and higher reliability lead to smaller chip sizes
and thus lower cost. InGaP also allows for more robust manufacturing because the
material has the advantage of a selective etch process not possible with AlGaAs.

         Our wafer processing technologies have been developed for low cost,
high yield, rapid throughput and short cycle-time manufacturing. Our GaAs MESFET
process uses ion implant variations to optimize performance and yield, allowing
us to produce high-linearity, low-noise, receiver integrated circuits or
transmitter integrated circuits with high power and efficiency. MESFET is the
technology platform underlying the majority of our broadband products.

         Our GaAs pHEMT manufacturing process achieves extremely high electron
mobility. Devices manufactured using this process have better sensitivity and
bandwidth than conventional MESFET devices, and offer better stability at higher
frequencies. The pHEMT process is an enabling technology for our wireless switch
products.

         Our Warren manufacturing processes were first certified as ISO 9001
compliant in December 1993. Since then, we have maintained compliance with this
standard.

         Our manufacturing process technology includes our two-inch InP process
in Camarillo. InP applications for discrete active devices are widespread in
communications networking, making it the natural starting place for wholesale
integration of passive devices for a complete system on a chip. As a
semiconductor material, InP can provide all-in-one integrated functionality that
includes light generation, detection, amplification, high-speed modulation and
switching, as well as passive splitting, combining and routing. The same
material can be used to make high-speed modulators, switches, amplifiers and
detectors, or just passive waveguides for interconnecting these diverse devices.

         Assembly

         Fabricated GaAs wafers are shipped to contractors in Asia for packaging
into monolithic microwave integrated circuits (MMICs) or for assembly into
modules.

         The components within mobile phones have become increasingly
integrated, enabling the development of ever smaller, lighter, and more
efficient phones. However, integration in the RF subsystem at the IC level is
considerably more challenging, given that various components require different
manufacturing processes for optimal performance. Typical RF processes include
pHEMT, MESFET, HBT, and RF CMOS. The choice of process for various RFICs is
typically based on a trade-off between performance (often measured by efficiency
and linearity) and cost. In general, the process selection will depend on the
relative weight given to performance versus cost. In low-end phones, cost will
dominate, and less-efficient, less-costly components will be used. On the other
hand, in high-end phones, the weight will shift to better performance.

         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 emerged, enabling the selection of the optimal process technology for each
IC within the package, while providing enhanced integration at the system level.
These solutions generate significant size and weight reductions in handset
component circuitry, while simultaneously increasing the reliability of the
components.


                                       9
<PAGE>

         A number of challenges, outlined below, had to be overcome in the move
from pure MMIC suppliers to fully integrated module manufacturers:

         Design complexity: Within a cellphone, the RF section arguably
         represents the greatest design challenge for engineers. Modules place
         the burden of designing and optimizing RF front-end subsystems on RFIC
         manufacturers. The suppliers must now focus on providing the optimal IC
         process (e.g., InGaP HBT for PAs) and then integrate the technology
         into a well-designed module that also incorporates additional passive
         and control circuitry. The quality of the RF module design will
         ultimately drive the device's performance and manufacturability.

         Increased cost: Modules are substantially more expensive to produce
         than individual IC components. Modules require extensive design and
         engineering expertise, new production processes, and additional
         assembly costs. Many of the necessary components (e.g., discretes and
         passives) must be bought from outside vendors. Consequently, the gross
         margin is generally lower for modules than for discrete RF MMICs.

         Manufacturing challenges: In addition to the increased costs of
         designing modules, achieving sufficient yields on new products can be
         problematic. Since RF modules are a new development in the world of
         cellphone chips, RFIC companies had little or no experience in
         manufacturing them. As a result, gross margins were under pressure as
         we climbed the learning curve. In order to attain high "final test"
         yields, the challenge was, and continues to be, to achieve high yields
         in the fab, in assembly, and in test.

         Despite the challenges, the shift to modules presents us with the
potential for increased sales, based on two factors:

         Modules increase the overall component content that is sold to handset
         OEMs. Owning and controlling as much of the content as possible will be
         a key factor of differentiation among future module participants.

         The ability to gain market share is the second factor. Not all
         MMIC-level RFIC suppliers will successfully make the transition to
         providing modules, causing a consolidation of overall RF suppliers in
         the industry.

         We believe that a module approach (rather than MMIC) results in our
customers getting their product to market more rapidly at a lower overall
end-product cost to our customers due largely to the reduced parts count and
reduction in engineering effort by our customers. We believe ANADIGICS is one of
the best-positioned companies to capitalize on the shift toward 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 components (e.g., PAs, transceivers, filters, and discretes).

         Final Test

         After assembly, packaged integrated circuits are tested prior to
shipment to our customers. Increasingly, these test activities are being
performed by third party contractors in Southeast Asia.

          In early 2002, we announced an agreement with Universal
Communications, Inc. ("UCOMM") for outsourcing a majority of our production RF
testing operations. Under the agreement, the production RF testing operation
will be transferred closer to our module assembly contractors in Southeast Asia,
which will add considerable efficiencies to the device manufacturing process and
further reduce product cycle times and manufacturing costs.

         In line with our procedure of 100% RF testing of all parts before
shipping, the majority of production testing is now performed by UCOMM. This
agreement supports our initiative to reduce manufacturing costs by lowering test
cost per unit.

         See "Risk Factors - We may face constraints on our manufacturing
capacity which would limit our ability to increase sales volumes," "The
manufacturing of our products could be delayed as a result of the outsourcing of
our test operations" and "We depend on foreign semiconductor assembly
contractors and a loss of an assembly contractor could result in delays or
reductions in product shipment."

Raw Materials

         GaAs wafers, InP wafers, HBT/pHEMT epitaxial wafers, passive
components, other raw materials, and equipment used in the production of our
integrated circuits 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."


                                       10
<PAGE>

Research and Development

         We have made significant investments in our proprietary processes,
including product design, wafer fabrication and integrated circuit testing,
which we believe gives us a competitive advantage. Research and development
expenses were $39.8 million, $37.8 million, and $29.7 million in 2000, 2001, and
2002, respectively. InGaP HBT process and circuit development were completed in
2000, complementing our GaAs MESFET technology base. Our research and
development efforts in 2001 were primarily focused on developing high yield, low
cost, high volume production of InGaP HBT integrated circuit products for the
wireless and broadband communications markets. In 2002, development activities
focused on improving performance relative to the size of our CDMA products and
developing products to compete in the GSM market. Our HBT process uses the more
advanced technique of InGaP emitter layers, which gives our products enhanced
temperature stability and increased reliability.

         As of December 31, 2002, we had approximately 120 engineers assigned
primarily to research and development.

         Our wireless power amplifier capability has expanded from
plastic-packaged GaAs RF integrated circuit 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 cellular phone manufacturers. Our RF power amplifier modules
use a multi-layer laminate substrate to combine our proprietary InGaP HBT power
amplifier integrated circuits with custom-designed CMOS controllers and passive
components.

         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 module efforts. We currently do not intend to manufacture in-house with this
technology 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

       We receive most of our revenues from a few significant customers. 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, 2002, we had 454 employees, including five employees
in Denmark who were members of the Danish Engineering Union. We believe our
labor relations to be good and we have never experienced a work stoppage. During
the year, our workforce decreased by 103 employees primarily through
restructurings.

Competition

         Competition in all of the markets for our current products is intense;
competition is on the basis of performance, price and delivery. Competitors in
the wireless market are suppliers of both discrete devices and integrated
circuits, and include Hitachi, Ltd., RF Micro Devices, Inc.,and Skyworks
Solutions, Inc. and certain of our customers who design and fabricate their own
in-house solutions.

         Within the Broadband markets, which include cable and broadcast and
fiber optic markets, our competitors are also primarily manufacturers of both
discrete components and integrated circuits. Our competitors include Analog
Devices, Inc., Applied Micro Circuits Corp., Conexant Systems, Inc., Maxim
Integrated Products, Inc., Microtune, Inc., Phillips Electronics N.V. and
Vitesse Semiconductor Corp., as well as certain of our customers who design and
fabricate their own in-house solutions.

         Many of our competitors have significantly greater financial,
technical, manufacturing and marketing resources. 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. and foreign patent and copyright
protection on our products and developments where appropriate and to protect our
valuable technology under U.S. and foreign laws affording protection for trade
secrets and for semiconductor chip designs. We own 27 U.S. patents and have
pending U.S. patent applications and one pending foreign patent application
filed under the Patent Cooperation Treaty. The U.S. patents were issued between
1988 and 2002 and will expire between 2008 and 2021.



                                       11
<PAGE>

         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
own intellectual property rights or in avoiding claims that we infringed 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
that costs arising from existing environmental laws will not have a material
adverse effect on our results of operations. We cannot assure you, however, that
the environmental laws 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. See "Risk Factors - We are subject to stringent environmental regulation."

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.

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

                                  RISK FACTORS

CERTAIN STATEMENTS IN THIS REPORT ARE FORWARD-LOOKING STATEMENTS (AS THAT TERM
IS DEFINED IN THE SECURITIES ACT OF 1933, AS AMENDED) THAT INVOLVE RISKS AND
UNCERTAINTIES. THESE FORWARD-LOOKING STATEMENTS CAN GENERALLY BE IDENTIFIED AS
SUCH BECAUSE THE CONTEXT OF THE STATEMENT WILL INCLUDE WORDS SUCH AS 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 ANADIGICS, INC. AND IN ANALYZING OUR FORWARD-LOOKING STATEMENTS.

                           Risks Related to ANADIGICS

After we experienced a significant downturn in demand across each of our product
lines in 2001, our revenues declined significantly during 2001 and decreased
marginally in the year ended December 31, 2002, resulting in net losses for each
of the years ended December 31, 2001 and 2002.

         Our markets weakened substantially during 2001 and remained weak in
2002. The market softness results from a reduction in capital spending by many
of our customers and lower end-consumer demand and was accentuated in 2001 by
high component inventories at most of our customers, including components that
we previously supplied. Consequently, our revenues declined from $172.3 million
in 2000 to $84.8 million in 2001 to $82.6 million in 2002. For the year ended
December 31, 2002, we reported a net loss of $55.9 million, including charges
for goodwill impairment, cumulative effect of an accounting change, asset
impairments and restructuring and other charges totaling $30.1 million, as well
as a $12.6 million gain on the repurchase of convertible notes and a $4.3
million tax benefit from tax loss carrybacks. As of December 31, 2002, we had an
accumulated deficit of $164.1 million.


                                       12
<PAGE>

         We cannot accurately predict whether or when demand will strengthen
across our product lines. If we are unable to reverse the recent trend of
revenue declines and net losses, either because the economy does not improve or
because we under-perform, our ability to compete in a very difficult market may
be materially and adversely affected.

Our high fixed costs and low production volumes have adversely affected our
gross margins and profitability.

         Many of our expenses, particularly those relating to capital equipment
and manufacturing overhead, are fixed. Accordingly, reduced demand for our
products causes our fixed production costs to be allocated across reduced
production volumes, which adversely affects our gross margin and profitability.
In the future, improved utilization of our manufacturing capacity will primarily
depend on growth in demand for our wireless products. Our ability to reduce
expenses is further constrained because we must continue to invest in research
and development in order to maintain our competitive position. Lower production
volumes have resulted in depressed gross margin relative to 2000; for the year
ended December 31, 2002, our gross margin was 8.8% of net sales as compared with
48.1% of net sales in the year ended December 31, 2000. We cannot accurately
predict if or when production volumes will increase.

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.

         We receive most of our revenues from a few significant customers and
their subcontractors. Sales to Ericsson and Motorola accounted for 44% and 26%,
respectively, of 2000 net sales. Sales to Motorola, Ericsson and Kyocera
accounted for 32%, 25% and 11%, respectively of net sales during 2001. Sales to
Kyocera and Motorola accounted for 35% and 23%, respectively, of 2002 net sales.
No other customer accounted for greater than 10% of net sales during these
periods. Our operating results have been materially and adversely affected in
the past by the failure of anticipated orders to be realized and by deferrals or
cancellations of orders as a result of changes in customer requirements. If we
were to lose Kyocera, Motorola or another major customer, or if sales to
Kyocera, Motorola or another major customer were to decrease materially, results
of operations would be materially and adversely affected.

         Several of our customers have reduced the lead times that they give us
when they order products from us. While this trend has enabled us to reduce our
inventories, it also restricts our ability to forecast future revenues.

Our results of operations can vary significantly.

         The semiconductor industry has been cyclical and seasonal. The industry
has experienced significant economic downturns, involving diminished product
demand, accelerated erosion of average selling prices and production
over-capacity. Our results of operations have been subject to significant
quarterly fluctuations. 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.

Our announced restructuring may have insufficiently addressed market conditions.

         In 2001 and 2002, we announced restructuring plans in response to a
sharp downturn in our industry. Under our restructuring plans, we have incurred
charges relating to a reduction in our workforce, impairment of certain
manufacturing and research fixed assets, and the consolidation of facilities.
From January 1, 2001 to December 31, 2002, our workforce was reduced by over
30%, primarily through restructuring initiatives. We may have incorrectly
anticipated the extent of the long-term market decline for our products and
services and we may be forced to restructure further or may incur further
operating charges due to poor business conditions.

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

         Rapid changes in both product and process technologies characterize the
markets for our products. Because these technologies are continually evolving,
we believe that our future success will depend, in part, upon our ability to
continue to improve our product and process technologies and develop new
products and process technologies. 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 economic alternative technology, our results of
operations would be materially and adversely affected. We will need to make
substantial investments to develop these enhancements and technologies, and we
cannot assure investors that funds for these investments will be available or
that these enhancements and technologies will be successful.

Our products have experienced rapidly declining unit prices.

         In each of the markets where we compete, prices of established products
tend to decline significantly over time. 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 results of operations and financial condition would be materially and
adversely affected.



                                       13
<PAGE>

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:

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

         o        impurities in the materials used;

         o        contamination of the manufacturing environment; and

         o        equipment failure.

         Many of our manufacturing costs are relatively fixed and average
selling prices for our products tend to decline over time. Therefore, it is
critical for us to improve the number of shippable integrated circuits per wafer
and increase the production volume of wafers in order to maintain and improve
our results of operations. Yield decreases can result in substantially higher
unit costs, which could materially and adversely affect our operating results
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. In either case, our
results of operations and financial condition could be materially and adversely
affected.

We depend on foreign semiconductor assembly contractors and a loss of an
assembly contractor could result in delays or reductions in product shipment.

         We do not assemble our integrated circuits or multi-chip modules.
Instead, we provide the integrated circuit die and, in some cases, packaging and
other components to assembly vendors located primarily in Asia. We maintain one
qualified service supplier for each assembly process. If we are unable to obtain
sufficient high quality and timely assembly service, or if we lose any of our
current assembly vendors, or if means of transportation to our vendors are
interrupted, we would experience delays or reductions in product shipment,
and/or reduced product yields, that could materially and adversely affect our
results of operations and financial condition.

The manufacturing of our products could be delayed as a result of the
outsourcing of our test operations.

         We outsource most of the testing of certain of our products to a
company located in Southeast Asia. The failure of the vendor we selected or
other third parties to maintain our standards of testing or complete the testing
of our products in a timely manner, could subject us to manufacturing delays
which could have a material adverse effect on our results of operations and
financial condition. We also test some of our products internally.

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 cellular and PCS telephone handsets, and
in turn our cellular and PCS products, are approximately 12 to 24 months.
Products with short life cycles require us to manage production and inventory
levels closely. We cannot assure investors 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 affect us beyond the inventory charges that we
took during 2001.

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. Wafers and packaging components are available from a limited number of
sources. If we are unable to obtain these wafers or components in the required
quantities and quality, we could experience delays or reductions in product
shipments, which would materially and adversely affect our results of operations
and financial condition.



                                       14
<PAGE>

           We depend on a limited number of vendors to supply 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 investors 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.

We depend heavily on key personnel.

         Our success depends in part on keeping key technical, marketing, sales
and management personnel. We must also continue to attract qualified personnel.
The competition for qualified personnel is intense, and the number of people
with experience, particularly in radio frequency engineering, integrated circuit
design, and technical marketing and support, is limited. We cannot be sure that
we will be able to attract and retain other skilled personnel in the future.

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

         The semiconductor industry is intensely competitive and is
characterized by rapid technological change. We compete primarily with
manufacturers of discrete gallium arsenide and silicon semiconductors and with
manufacturers of gallium arsenide and silicon integrated circuits. We expect
increased competition from:

         o        other gallium arsenide integrated circuit manufacturers who
                  may replace us as a supplier to an original equipment
                  manufacturer or otherwise dilute our sales to an original
                  equipment manufacturer;

         o        silicon analog integrated circuit manufacturers; and

         o        companies which may penetrate the radio frequency/microwave
                  integrated circuit communications market with other
                  breakthrough technologies.

Increased competition could result in:

         o        decreased prices of our integrated circuits;

         o        reduced demand for our products; and

         o        a reduction in our ability to recover development-engineering
                  costs.

         Any of these developments could materially and adversely affect our
results of operations and financial condition.

         Most of our current and potential competitors, including Hitachi Ltd.,
Maxim Integrated Products Inc., Microtune Inc., Motorola, RF Micro Devices Inc.
and Skyworks Solutions, Inc. have significantly greater financial, technical,
manufacturing and marketing resources than we do. We cannot assure investors
that we will be able to compete successfully with existing or new competitors.

We are subject to stringent environmental regulation.

         We are subject to a variety of federal, state and local requirements
governing the protection of the environment. These environmental 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 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.

Our international sales and operations involve foreign exchange risks.

         Sales to customers located outside North America (based on shipping
addresses and not on the locations of ultimate end users) accounted for 60%, 63%
and 47% of our net sales for the years ended December 31, 2000, 2001 and 2002,
respectively. We expect that revenues derived from 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 nearly
all of our products.

         Due to our reliance on international sales and on foreign suppliers and
assemblers, we are subject to risks of conducting business outside of the United
States, including primarily those arising from currency fluctuations, which
could affect the price of our products and/or the cost of producing them.



                                       15
<PAGE>

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 current
shareholders.

         As part of our strategy, we will selectively pursue acquisitions and
alliances. Our ability to complete acquisitions or alliances is dependent upon,
and may be limited by, the availability of suitable candidates and capital. In
addition, acquisitions and alliances involve risks that could materially
adversely affect our operating results, 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 can not assure investors 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 would be
called upon to satisfy independent of the acquisition price. Future acquisitions
or alliances could result in additional debt, equity, costs and contingent
liabilities, all of which could materially adversely affect our results of
operations and financial condition. Any such additional debt could subject us to
substantial and burdensome covenants and any such equity could be materially
dilutive to existing stockholders. 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 ability to offer our products could be materially
harmed.

We may face constraints on our manufacturing capacity which would limit our
ability to increase sales volumes.

         We believe that our expanded six-inch wafer fabrication facility should
be able to satisfy our forecasted production needs. However, if production
volumes were to increase significantly from expected levels, we might be
required to hire, train and manage additional production personnel in order to
successfully increase production capacity at our facility. We cannot assure
investors that we would be able to implement these changes successfully. A delay
for any reason in increasing capacity would limit our ability to increase sales
volumes. In addition, if we fail to increase production and do not have
sufficient capacity to satisfy the demand for our products, our relationships
with customers could be harmed.

We have incurred, and may continue to incur, unanticipated expenses resulting
from the financial difficulties of the lessor of our principal manufacturing
facility.

         The lessor on the lease for our headquarters building in Warren, New
Jersey is currently the debtor in a bankruptcy proceeding which commenced in
December 2001. During the fourth quarter of 2001, we recognized special charges
relating to this proceeding. No assurance can be given that we will not incur
any additional charges associated with this proceeding.

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

         Our success depends in part on our ability to obtain patents and
copyrights, maintain trade secret protection and operate without infringing on
the proprietary rights of third parties.

         As is typical in the semiconductor industry, we have been notified, and
may be notified in the future, that we may be infringing on certain patent
and/or other intellectual property rights of others. We are currently reviewing
claims from two sources alleging that we are or may be infringing certain
patents. We cannot assure investors that we will not be subject to patent
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 determine that
we have infringed 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.

         In addition to patent and copyright protection, 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 confidentiality agreements with our collaborators and
employees. We cannot assure investors 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.


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, all of which are located in the same
industrial park. 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. Approximately
92,500 square feet of office and laboratory space is leased at 35 Technology
Drive in Warren, New Jersey under a twelve-year lease, which expires on May 1,
2005. Over half of the space at 35 Technology Drive has been sublet in order to
reduce costs. Additionally, we lease an approximately 22,000 square foot
building in Camarillo, California. The lease expires on July 31, 2003; however
the term may be extended up to three times for additional two year periods.


                                       16
<PAGE>

         We also lease approximately 5,400, 5,800, 3,500 and 6,500 square feet
of office space located in Richardson, Texas; Newbury Park, California; Aalborg,
Denmark; and Rehovot, Israel, respectively, under lease agreements with
remaining terms ranging from ten months to four years that can be extended, at
our option. The space in Rehovot, Israel has been sublet in order to reduce
costs.

         The lessor on the lease for our headquarters building in Warren, New
Jersey, is currently the debtor in a bankruptcy proceeding, which commenced in
December 2001. During the fourth quarter of 2001, we recognized special charges
relating to this proceeding. No assurance can be given that we will not incur
any additional charges associated with this proceeding.

ITEM 3. LEGAL PROCEEDINGS.

         The Company is a party to litigation arising out of the operation of
its business. We believe that the ultimate resolution of such litigation should
not have a material adverse effect on our financial condition, results of
operations or liquidity.

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 2002.



                                       17
<PAGE>

                                     PART II

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

         Our $0.01 par value Common Stock, ("Common Stock") has been quoted on
the NASDAQ National 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       LOW
                                                         ---------  ---------

Calendar 2002
Fourth Quarter......................................   $    4.18   $    1.59
Third Quarter.......................................        8.20        2.00
Second Quarter......................................       13.61        6.60
First Quarter.......................................       16.29        9.40

Calendar 2001
Fourth Quarter......................................   $   21.05   $   11.15
Third Quarter.......................................       21.90       10.22
Second Quarter......................................       25.38       10.62
First Quarter.......................................       19.69       10.50


         As of December 31, 2002, there were 30,674,033 shares of Common Stock
outstanding and 328 holders of record of the Common Stock.

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

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, 2002 and 2001 and for the
years ended December 31, 2002, 2001, and 2000 have been derived from our audited
financial statements included herein. The selected consolidated financial data
set forth below as of December 31, 2000, 1999 and 1998 and for the years ended
December 31, 1999 and 1998 have been derived from our audited financial
statements 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.

<TABLE>
<CAPTION>

                                                        YEAR ENDED DECEMBER 31,
                                     ---------------------------------------------------------
                                       1998        1999       2000        2001        2002
                                     ---------  ----------  ---------   ---------   ----------
                                               (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                  <C>        <C>         <C>         <C>          <C>
RESULTS OF OPERATIONS
Net sales..........................  $  86,075  $ 131,159   $ 172,268   $  84,765    $ 82,564
Gross profit (loss)................     19,847     55,339      82,797      (2,932)      7,262
Operating (loss) income............    (19,029)     7,030      16,796     (85,986)    (65,565)
(Loss) income before income taxes..    (16,733)     3,398      28,596     (82,782)    (52,183)
Net (loss) income..................     (9,558)     2,588      18,892    (107,120)    (55,886)

(Loss) earnings per share:
  Basic............................  $   (0.43) $    0.11   $    0.64   $   (3.54)    $ (1.83)
  Diluted .........................  $   (0.43) $    0.10   $    0.60   $   (3.54)    $ (1.83)

</TABLE>

<TABLE>
<CAPTION>


                                                               AT DECEMBER 31,
                                              -----------------------------------------------
                                                1998      1999      2000      2001     2002
                                              --------  --------  --------  -------- --------
                                                               (IN THOUSANDS)
<S>                                           <C>       <C>       <C>      <C>        <C>
BALANCE SHEET DATA:
Total cash and marketable securities........  $ 42,396  $171,751  $166,161 $200,095   $155,518
Working capital.............................    57,123   176,322   179,987  132,062    110,151
Total assets................................   154,098   317,610   352,473  346,914    255,671
Total capital lease obligations.............       412       183       250       94       -
Total debt..................................     5,000     4,000     3,000  100,244     66,700
Total stockholders' equity..................   137,807   276,649   328,832  226,636    171,088

</TABLE>



                                       18
<PAGE>

         We acquired Telcom Devices Corp. on April 2, 2001 and accounted for
that transaction as a purchase. Accordingly, their results of operations are
included in ANADIGICS' consolidated results of operations from the date of
purchase.

         The balance sheet data reflects our issuance of $100 million aggregate
principal amount of senior convertible notes on November 27, 2001 and subsequent
repurchase and retirement of $33.3 million during 2002.

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

OVERVIEW

         We were organized in 1984 and initially focused on the development and
manufacture of GaAs integrated circuits for low-volume defense and aerospace
applications. In 1988 we began shifting our strategy to focus on radio
frequency/microwave communications systems for high-volume applications, and
began production for these applications in 1989. In 1992 we introduced
integrated circuits for the cable television market. In late 1994 we entered the
wireless communications market with the introduction of cellular telephone
integrated circuits. In 2001 we introduced our InGaP HBT power amplifier modules
to the wireless communications market.

         We strive to achieve market advantage through the application of our
radio frequency/microwave design and application knowledge. With our design
expertise we have led the industry with the introduction of innovative products.
Recent examples include 3-volt InGaP HBT Power Amplifiers, IP Telephony Reverse
Path Amplifiers, 24-volt Line Amplifiers, and Universal Reverse Amplifiers, all
of which offer greater levels of product performance and reduce original
equipment manufacturers' production costs.

         We aim to achieve cost advantage through the scale and efficiency of
our manufacturing operations. During 1999 we began production in our six-inch
analog GaAs wafer fabrication facility, which we believe to have been the first
six-inch analog GaAs wafer fabrication facility in our industry. Using a
six-inch wafer allows us to produce, at a small incremental cost, more than
twice the integrated circuit dice per wafer than can be produced from the
industry norm four-inch wafer.

         On April 2, 2001 we acquired Telcom Devices Corp. ("Telcom"), a
manufacturer of indium phosphide based photodiodes for the telecommunications
and data communications markets for cash consideration of approximately $28.0
million. The acquisition was accounted for as a purchase. Accordingly, Telcom's
results of operations are included in ANADIGICS' consolidated results of
operations from the date of purchase.

         Our markets weakened substantially during 2001 and remained weak in
2002. With the well-publicized deterioration in the telecommunications industry,
we experienced a substantial decline in demand from 2000 levels for our
products. The downturn in demand reflected high component inventories at most of
our customers, including components that we previously supplied, a reduction in
capital spending by many of our customers and lower end consumer demand.

         Many of our expenses, particularly those relating to capital equipment
and manufacturing overhead, are fixed. Accordingly, reduced demand for our
products causes our fixed production costs to be allocated across reduced
production volumes, which adversely affects our gross margin and profitability.
Our ability to reduce expenses is further constrained because we must continue
to invest in research and development in order to maintain our competitive
position. Reduced production volumes contributed to a significant decline in our
gross margin and profitability from the levels achieved in 2000.

         The general slowdown in the industry in which we operate as well as the
overall slowing of the economy has had, and we believe will continue to have, a
negative impact on our net sales, gross margins and other results of operations.
We cannot accurately predict whether or when demand will strengthen across all
product lines. If we are unable to reverse the recent trend of low revenues and
net losses because the economy does not improve or because we under perform, our
ability to compete in a very difficult market may be materially and adversely
affected.

CRITICAL ACCOUNTING POLICIES

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

         Production revenue is recorded when products are shipped to customers
pursuant to a purchase order. We charge customers for the costs of certain
contractually-committed inventories that remain at the end of a product's life.
Cancellation revenue is recognized 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.



                                       19
<PAGE>

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 during the year. The
accrued liability for warranty costs is included in Accrued liabilities in the
consolidated balance sheets.

IMPAIRMENT OF LONG-LIVED ASSETS

         Long-lived assets include fixed assets, long-term investments
(previously included in Other assets), goodwill and other intangible assets. We
regularly review these assets for circumstances 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

         We had significant intangible assets related to goodwill and other
acquired intangibles. Significant judgements are involved in the determination
of the estimated useful lives for our other intangibles and whether the goodwill
or other intangible assets are impaired. In assessing the recoverability of
goodwill and other intangibles, we must make assumptions regarding estimated
future cash flows and other factors to determine the fair value of the
respective assets.

Long-lived assets

         We record impairment losses on long-lived assets used in operations or
expected to be disposed of when events and circumstances indicate that the
undiscounted cash flow estimated to be generated by these assets is less than
the carrying amounts of those assets. Management considers sensitivities to
capacity, utilization and technological developments in making its assumptions.

Long-term investments

         The fair value of long-term investments is dependent on the performance
of the companies in which we have invested, as well as the volatility inherent
in the external markets for these investments. In assessing potential impairment
for these investments, management considers these factors as well as forecasted
financial performance of the investees.

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.

         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.

INVENTORY

         Inventories are valued at the lower of cost or market ("LCM"), using
the first-in, first-out method. In addition to LCM limitations, we reserve
against inventory items for estimated obsolescence or unmarketable inventory.
Our reserve for excess and obsolete inventory is primarily based upon forecasted
short-term demand for the product and any change to the reserve arising from
forecast revisions is reflected in cost of sales in the period the revision is
made.


RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>

                                                                          YEAR ENDED DECEMBER 31,
                                                                    ---------------------------------
                                                                      2000         2001        2002
                                                                    -------      -------      -------
<S>                                                                 <C>          <C>          <C>
Net sales ...................................................        100.0%       100.0%       100.0%
Cost of sales ...............................................         51.9        103.5         91.2
                                                                     -----        -----        -----
Gross profit(loss) ..........................................         48.1         (3.5)         8.8
Research and development expenses ...........................         23.1         44.5         36.0
Selling and administrative expenses .........................         15.2         32.2         25.9
Restructuring and other charges .............................          -            4.4          6.1
Asset impairment charges ....................................          -           12.3         10.5
Goodwill impairment charge ..................................          -            -            9.7
Purchased in-process R&D ....................................          -            4.5          -
                                                                     -----        -----        -----
Operating income (loss) .....................................          9.8       (101.4)       (79.4)
Interest income .............................................          7.0          8.2          7.7
Interest expense ............................................         (0.2)        (0.8)        (6.2)
Impairment of investments ...................................          -           (3.7)        (0.5)
Gain on repurchase of Convertible notes .....................          -            -           15.2
Other income (expense) ......................................          -            -            -
                                                                     -----        -----        -----
Income (loss) before income taxes ...........................         16.6        (97.7)       (63.2)
Provision  for income taxes .................................          5.6         28.7         (5.2)
                                                                     -----        -----        -----
Income (loss) before cumulative effect of accounting
 change .....................................................         11.0       (126.4)       (58.0)
Cumulative effect of accounting change ......................          -            -           (9.7)
                                                                     -----        -----        -----
Net income (loss) ...........................................         11.0%      (126.4%)      (67.7%)
                                                                     =====        =====        =====

</TABLE>



                                       20
<PAGE>

2002 COMPARED TO 2001

         NET SALES. Net sales during 2002 decreased 2.6% to $82.6 million,
compared to $84.8 million for 2001. Improvement in our wireless business was
more than offset by a downturn in demand in the broadband market.

         Specifically, net sales of integrated circuits for cellular and PCS
applications increased 38.6% during 2002 to $44.7 million from $32.3 million in
2001. The increase was due to our penetration into the CDMA power amplifier
module market more than offsetting the decrease in demand for TDMA power
amplifiers.

         Sales during 2002 of integrated circuits for broadband applications
decreased 27.9% to $37.9 million from $52.5 million in 2001. Lower investment by
telecom and cable providers led to declines in demand for our fiber and cable
subscriber parts used primarily in set-top boxes and cable modems. The principal
decrease was observed following the first quarter of 2001 when broadband
revenues were $22.2 million.

         Generally, selling prices for same product sales were lower during 2002
as compared to 2001.

         GROSS MARGIN (LOSS). Gross margin (loss) for 2002 increased to 8.8% of
net sales, compared with (3.5%) of net sales in the prior year. The improvement
in gross margin from the prior year is the result of lower inventory
obsolescence charges (down $8.7 million) and lower warranty related cost. The
aforementioned lower pricing was largely offset by savings related to lower
test, assembly and raw material costs.

         RESEARCH & DEVELOPMENT. Company sponsored research and development
expense decreased 21.2% during 2002 to $29.7 million from $37.8 million during
2001 primarily due to headcount reductions from our restructurings, which more
narrowly focused our fiber-related projects. As a percentage of sales, research
and development expense decreased to 36.0% in 2002 from 44.5% in 2001.

         PURCHASED IN-PROCESS R&D. The Company expensed purchased in-process
research and development costs of $3.8 million as a result of the Telcom
acquisition on April 2, 2001. The charge represented the fair value of certain
acquired research and development projects that were determined to have not
reached technological feasibility and did not have alternative future uses. No
acquisitions or in-process R&D applies for 2002.

         SELLING AND ADMINISTRATIVE. Selling and administrative expenses
decreased 21.6% during 2002 to $21.4 million from $27.3 million in 2001. The
decrease was primarily due to savings from administrative headcount reductions
from our restructurings, the elimination of goodwill amortization and other
expense reductions. As a percentage of sales, selling and administrative
expenses decreased to 25.9% in 2002 from 32.2% in 2001.

         ASSET AND INVESTMENT IMPAIRMENT CHARGES AND RESTRUCTURING AND OTHER
CHARGES. During 2002, we recorded charges of $8.6 million for asset impairments,
$0.4 million for impairment on investments and $5.0 million for restructuring
and other charges. The asset impairment charge related to the write-off of
certain manufacturing and research equipment, leasehold improvements, certain
technology licenses that are no longer used in the ongoing activities of the
business and process technology from the Telcom acquisition following an
evaluation of our carrying value against the related business cash flows. The
charge for impairment on investments was recorded on a private-equity investment
following an evaluation that indicated the carrying value of such investment
exceeded its estimated fair market value. The restructuring and other charges
were for facilities consolidation and for severance and related benefit costs of
workforce reductions. The anticipated annual benefit for lower workforce cost,
rent and depreciation from these charges is expected to approximate $11.2
million. The restructuring and other charges include $1.6 million for severance
and related employee benefits of workforce reductions. The workforce reductions
eliminated approximately 83 positions throughout the Company to whom
approximately $1.4 million of severance benefits were paid through December 31,
2002. During the second quarter, 2002, we identified certain alternative
internal uses for fixed assets previously held for sale ($1.0 million). The
assets, formerly classified in other current assets as held for sale, were
placed into service and depreciation resumed. During 2001, we recorded charges
of $10.4 million for asset impairments, $3.1 million for impairment on
investments and $3.8 million for restructuring and other charges, primarily
severance and related benefits costs of workforce reductions.


                                       21
<PAGE>

         GOODWILL IMPAIRMENT CHARGE. We continued to monitor fiber market
conditions in light of additional job cuts and difficult prospects announced by
several of our end-market customers in 2002. In view of these weaker market
conditions during the third quarter, we evaluated our goodwill and intangible
assets for potential impairment. As a result of that evaluation, we recorded a
goodwill impairment charge of $8.0 million. Also see cumulative effect of
accounting change below.

         INTEREST INCOME. Interest income decreased 9.0% to $6.3 million during
2002 from $6.9 million in 2001. The decrease was due to generally lower interest
rates, despite an increase in average invested funds.

         INTEREST EXPENSE. Interest expense increased to $5.1 million in 2002
from $0.6 million in 2001. The interest applies on our 5% Convertible notes,
issued on November 27, 2001. In September, 2002, we repurchased $33.3 million in
face value of the notes, consequently reducing the outstanding balance to $66.7
million.

         GAIN ON REPURCHASE OF CONVERTIBLE NOTES. During 2002, we repurchased
and retired $33.3 million in principal amount of our 5% Convertible notes for
$20.4 million in cash, inclusive of accrued interest of $0.5 million. We
recognized a gain on the repurchase of $12.6 million after adjusting for accrued
interest and the write-off of a proportionate share of unamortized offering
costs.

         (BENEFIT)PROVISION FOR INCOME TAXES. In December 2002, the Company
received a $4.3 million refund pursuant to a carryback claim under the Job
Creation and Workers Assistance Tax Act of 2002. The refund represents taxes
paid in 1996 and 1997. During 2001, the Company recorded a valuation allowance
of $26.8 million against the carrying value of its deferred tax asset. Since
realization of deferred tax assets is dependent upon the timing and magnitude of
future taxable income prior to the expiration of the deferred tax attributes,
management recorded a full valuation allowance in 2001 and 2002.

         CUMULATIVE EFFECT OF ACCOUNTING CHANGE. Effective January 1, 2002, we
adopted the provisions of Statement of Financial Accounting Standards ("FAS") No
142, "Goodwill and Other Intangible Assets". Under the new rules, goodwill is no
longer subject to amortization but is reviewed for potential impairment, upon
adoption and thereafter annually or upon the occurrence of an impairment
indicator. The annual amortization of goodwill which would have approximated
$2.6 million was no longer required. Other intangible assets continue to be
amortized over their useful lives. As a result of completing the required test,
we recorded a charge for the cumulative effect of the accounting change in the
amount of $8.0 million representing the excess of the carrying value of a
reporting unit as compared to its estimated fair value.

2001 COMPARED TO 2000

         NET SALES. Net sales during 2001 decreased 50.8% to $84.8 million,
compared to $172.3 million for 2000. The decline in net sales is due to the
significant downturn in demand experienced across each of the Company's product
lines. The wireless and broadband markets were soft due to lower end-consumer
demand compounded by high component inventories at most of our customers.

         Specifically, net sales of integrated circuits for cellular and PCS
applications decreased 57.9% during 2001 to $32.3 million from $76.5 million in
2000. The decrease was primarily due to decreased demand for our multi-band,
multi-mode power amplifier integrated circuits used in wireless telephone
handsets.

         Sales of integrated circuits for broadband applications decreased 45.2%
during 2001 to $52.5 million from $95.7 million in 2000. The decrease was
primarily due to decreased demand for cable subscriber parts, such as our
reverse amplifiers and converters, and lower capital spending in the fiber optic
markets. Net sales for 2001 includes $5.5 million of Telcom's sales since its
acquisition on April 2, 2001.

         Generally, selling prices for same product sales were lower during 2001
as compared to 2000.

         GROSS MARGIN (LOSS). Gross margin (loss) for 2001 decreased to (3.5%)
of net sales, compared with 48.1% of net sales in the prior year. The decline in
gross margin results primarily from lower net sales, lower production and
consequent lower absorption of fixed costs which had an impact of approximately
$22 million. Gross margin was also negatively impacted by the start-up and ramp
of HBT modules in the approximate amount of $8 million. In addition to lower
sales and absorption and module start-up impacts, the decline in gross margin
includes an additional $6.9 million of inventory charges in 2001. The decline
was partially offset by the inclusion of Telcom in the 2001 results. The
inventory charge primarily related to excess, slow-moving, and obsolete
inventories.


                                       22
<PAGE>

         RESEARCH AND DEVELOPMENT. Company sponsored research and development
expense decreased 5.1% during 2001 to $37.8 million from $39.8 million during
2000 primarily due to reduced project materials spending. As a percentage of
sales, research and development expense increased to 44.5% in 2001 from 23.1% in
2000.

         PURCHASED IN-PROCESS R&D. The Company expensed purchased in-process
research and development costs of $3.8 million as a result of the Telcom
acquisition on April 2, 2001. The charge represents the fair value of certain
acquired research and development projects that were determined to have not
reached technological feasibility and do not have alternative future uses.

         SELLING AND ADMINISTRATIVE. Selling and administrative expenses
increased 4.1% during 2001 to $27.3 million from $26.2 million in 2000. The
increase was due to the acquisition of Telcom and its related expenses,
including $2.7 million of intangibles amortization and its ongoing cost base
($1.0 million). The increase was offset by a $2.6 million decrease in our
historical cost base, notably in consulting services, commissions, recruiting
and relocation as well as travel and entertainment. As a percentage of sales,
selling and administrative expenses increased to 32.2% in 2001 from 15.2% in
2000.

         ASSET AND INVESTMENT IMPAIRMENT CHARGES AND RESTRUCTURING AND OTHER
CHARGES. During 2001, the Company recorded $10.4 million for asset impairments,
$3.1 million for impairment on investments and $3.8 million for restructuring
and other charges. The asset impairment charge related to the writedown to fair
market value of certain manufacturing and research fixed assets, as they were
surplus to foreseeable operating and research activities. The charge for
impairment of investments was recorded for certain private-equity investments
following an evaluation of the Company's investments which indicated that the
carrying value of such investments exceeded the estimated fair market value. The
restructuring and other charge was for severance and related benefits costs of
workforce reductions as well as certain lease related undertakings. The
workforce reductions eliminated approximately 109 positions throughout the
Company and $1.6 million of benefits were paid through December 31, 2001, with
the remainder paid out in 2002.

         INTEREST INCOME. Interest income decreased 36.0% to $6.9 million during
2001 from $10.8 million during 2000. The decrease was primarily due to lower
balances of cash and marketable securities and generally lower interest rates.

         INTEREST EXPENSE. Interest expense increased 108.7% to $0.6 million
during 2001 from $0.3 million during 2000. The increase was due to the issuance
of our 5% Convertible Senior Notes on November 27, 2001.

         OTHER (EXPENSE) INCOME. During the year ended December 31, 2000 the
Company sold equipment resulting in a $1.3 million gain.

         PROVISION FOR INCOME TAXES. During 2001, the Company recorded a
valuation allowance of $26.8 million against the carrying value of its deferred
tax asset. Since realization of deferred tax assets is dependent upon the timing
and magnitude of future taxable income prior to the expiration of the deferred
tax attributes, management recorded a full valuation allowance in 2001.

LIQUIDITY AND SOURCES OF CAPITAL

         At December 31, 2002 we had $24.3 million of cash and cash equivalents
on hand and $131.2 million in marketable securities. We had $66.7 million of 5%
Convertible notes outstanding as of December 31, 2002.

         Operations required the use of $17.5 million in cash during 2002.
Investing activities, consisting principally of purchases of equipment of $4.9
million partially offset by net sales of marketable securities of $3.5 million,
consumed $1.4 million of cash during 2002. Financing activities, which primarily
consisted of the repurchase of $33.3 million in principal value of our 5%
Convertible notes, required $19.9 million of cash in 2002.

         At December 31, 2002, we had purchase commitments of approximately $1.2
million for equipment, furniture, and leasehold improvements for the first half
of 2003.

         We believe that our existing sources of capital, including internally
generated funds, will be adequate to satisfy operational needs and anticipated
capital needs for the next twelve months and beyond. Our anticipated capital
needs may include acquisitions of complimentary businesses or technologies,
investments in other companies or repurchasing our outstanding debt or equity.
However, 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, 2002:



                                       23
<PAGE>

CONTRACTUAL OBLIGATIONS

<TABLE>
<CAPTION>


                                                     PAYMENTS DUE BY PERIOD (in thousands)
                                    Total     1 year         1 - 3       4 - 5     After 5
                                              And less       years       years     years
<S>                                <C>        <C>            <C>        <C>        <C>
Long term debt                     $66,700    $        -     $     -    $66,700    $     -
Operating leases                    29,916          3,745      5,392      3,184     17,595
Unconditional purchase
         obligations                 1,200          1,200          -          -          -
                                   -------    -----------    -------    -------    -------
Total contractual cash
         obligations               $97,816    $     4,945    $ 5,392    $69,884    $17,595
                                   =======    ===========    =======    =======    =======

</TABLE>

         The Company has an obligation to rent additional space at its
headquarters, if it is constructed by June, 2003. The additional space would
require an annual base rent of $742 thousand, plus escalators and the term would
expire in December 2016. Construction, which is the responsibility of the lessor
has not commenced. We do not believe that the construction requirement can be
met, thereby negating our obligation to rent the space.


IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

         In April 2002, the Financial Accounting Standards Board (FASB) issued
Statement No. 145, Rescission of FASB Statements No. 4, 44 and 62, Amendment of
FASB Statement No. 13 and Technical Corrections (FAS 145). For most companies,
FAS 145 will require gains and losses on extinguishments of debt to be
classified as income or loss from continuing operations rather than as
extraordinary items as previously required under FAS 4. Extraordinary treatment
will be required for certain extinguishments as provided in APB Opinion No. 30.
The statement also amended FAS 13 for certain sales-leaseback and sublease
accounting. During 2002, we early adopted FAS 145 in accordance with the
provisions of the statement. Accordingly, the gain on the repurchase of our
Convertible notes has been included in the loss before income taxes and
cumulative effect of accounting change.


         In June 2001, the FASB issued Statement No. 143, Accounting for Asset
Retirement Obligations (FAS 143). FAS 143 requires that asset retirement
obligations that are identifiable upon acquisition and construction, and during
the operating life of a long-lived asset be recorded as a liability using the
present value of the estimated cash flows. A corresponding amount would be
capitalized as part of the asset's carrying amount and amortized to expense over
the asset's useful life. We will adopt the provisions of FAS 143 effective
January 1, 2003. We do not expect the adoption of this statement to have a
material impact on our financial position, results of operations and cash flows.

         In July 2002, the FASB issued Statement No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (FAS 146) and nullifies EITF Issue
No. 94-3. FAS 146 requires that a liability for a cost associated with an exit
or disposal activity be recognized when the liability is incurred, whereas EITF
No. 94-3 had recognized the liability at the commitment date to an exit plan. We
are required to adopt the provisions of FAS 146 effective for exit or disposal
activities initiated after December 31, 2002. We do not expect the impact of the
adoption of this statement to have a material impact on our financial position,
results of operations and cash flows.

         In November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires the recognition
of certain guarantees as liabilities at fair market value and is effective for
guarantees issued or modified after December 31, 2002. We have adopted the
disclosure requirement of FIN 45 and do not expect the impact of the fair market
value requirement to have a material impact on our financial position, results
of operations and cash flows.

         In December 2002, the FASB issued Statement No. 148, Accounting for
Stock-Based Compensation -- Transition and Disclosure (FAS 148). FAS 148 amends
Statement No. 123, Stock-Based Compensation, (FAS 123) to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, this Statement
amends the disclosure requirements of FAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The disclosure provisions of FAS 148 are effective for
fiscal years ending after December 15, 2002 and have been incorporated into the
accompanying financial statement footnotes.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We are exposed to changes in interest rates primarily from our
investments in certain available-for-sale securities. Our available-for-sale
securities consist primarily of fixed income investments (U.S. Treasury and
Agency securities, commercial paper and corporate bonds). We continually monitor
our exposure to changes in interest rates and credit ratings of issuers with
respect to our available-for-sale securities. Accordingly, we believe that the
effects of changes in interest rates and credit ratings of issuers are limited
and would not have a material impact on our financial condition or results of
operations. However, it is possible that we are at risk if interest rates or
credit ratings of issuers change in an unfavorable direction. The magnitude of
any gain or loss will 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.


                                       24
<PAGE>

         At December 31, 2002, we held marketable securities with an estimated
fair value of $131,175. 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, 2002:


Estimated Principal Amount and Weighted Average Stated             Fair
       Rate by Expected Maturity Value                             Value
-----------------------------------------------------           ---------
(000's)       2003       2004       2005         Total           (000's)
-----------------------------------------------------           ---------
Principal  $72,940    $51,543     $3,000     $127,483           $131,175

Weighted
 Average
 Stated
 Rates        5.66%      4.57%      5.63%        5.22%                   -
-----------------------------------------------------           ---------


         Our Convertible notes 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, 2002,
the fair value of the outstanding Convertible notes, estimated based upon dealer
quotes, was approximately $41.7 million.

         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 purchased 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 current holdings, affecting both future
cash interest streams and future earnings. In addition to investments in
marketable securities, we place some of our cash in money market funds in order
to keep cash available to fund operations and to 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.



                                       25
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Report of Independent Auditors


The Board of Directors and Stockholders
ANADIGICS, Inc.


We have audited the accompanying consolidated balance sheets of ANADIGICS, Inc.
as of December 31, 2002 and 2001, and the related consolidated statements of
operations, comprehensive income (loss), stockholders' equity and cash flows for
each of the three years in the period ended December 31, 2002. Our audits 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 audits.

We conducted our audits in accordance with auditing standards generally accepted
in the 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. as
of December 31, 2002 and 2001, and the consolidated results of their operations,
and their cash flows for each of the three years in the period ended December
31, 2002, in conformity with accounting principles generally accepted in the
United States. 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.

As discussed in Note 3, the Company changed its method of accounting for
goodwill and other intangible assets in 2002.


                                                     /s/ ERNST & YOUNG LLP

MetroPark, New Jersey
January 24, 2003



                                       26
<PAGE>

                                 ANADIGICS, INC.

                           CONSOLIDATED BALANCE SHEETS

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

<TABLE>
<CAPTION>

                                                                                       DECEMBER 31,
                                                                                  ----------------------
                                                                                     2001         2002
                                                                                  ---------    ---------

                                     ASSETS
<S>                                                                               <C>          <C>
Current assets:
  Cash and cash equivalents ...................................................   $  63,102    $  24,343
  Marketable securities .......................................................      55,364       74,038
  Accounts receivable, net of allowance for doubtful accounts of $715
    and $781 in 2001 and 2002, respectively ...................................      10,200        9,016
  Inventories .................................................................      14,661       13,277
  Prepaid expenses and other current assets ...................................       6,635        4,600
                                                                                  ---------    ---------
Total current assets ..........................................................     149,962      125,274

Marketable securities .........................................................      81,629       57,137
Plant and equipment:
  Equipment and furniture .....................................................     127,903      123,328
  Leasehold improvements ......................................................      34,207       37,473
  Projects in process .........................................................      17,702        5,371
                                                                                  ---------    ---------
                                                                                    179,812      166,172
  Less accumulated depreciation and amortization ..............................      89,329       97,572
                                                                                  ---------    ---------
                                                                                     90,483       68,600
Goodwill and other intangibles, less accumulated amortization
  of $2,735 and $22,178 in 2001 and 2002, respectively ........................      19,443            -
Other assets ..................................................................       5,397        4,660
                                                                                  ---------    ---------
                                                                                  $ 346,914    $ 255,671
                                                                                  =========    =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable ............................................................   $   9,115    $   7,434
  Accrued liabilities .........................................................       6,549        4,733
  Accrued restructuring costs .................................................       1,898        2,956
  Current maturities of long-term debt ........................................         244            -
  Current maturities of capital lease obligations .............................          94            -
                                                                                  ---------    ---------
Total current liabilities .....................................................      17,900       15,123

Long-term debt, less current portion ..........................................     100,000       66,700
Other long-term liabilities ...................................................       2,378        2,760

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $0.01 par value, 5,000,000 shares authorized, none
    issued or outstanding
  Common stock, convertible, non-voting, $0.01 par value, 1,000,000
    shares authorized, none issued or outstanding
  Common stock, $0.01 par value, 144,000,000 shares authorized at December 31,
    2001 and 2002, and 30,568,761 and 30,674,033 issued
    and outstanding at December 31, 2001 and 2002, respectively ...............         306          307
  Additional paid-in capital ..................................................     333,860      334,162
  Accumulated deficit .........................................................    (108,238)    (164,124)
  Accumulated other comprehensive income ......................................         708          743
                                                                                  ---------    ---------
Total stockholders' equity ....................................................     226,636      171,088
                                                                                  ---------    ---------
                                                                                  $ 346,914    $ 255,671
                                                                                  =========    =========
</TABLE>


                             See accompanying notes.


                                       27
<PAGE>

                                 ANADIGICS, INC.

      CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

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

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF OPERATIONS                            YEAR ENDED DECEMBER 31,
                                                         ----------------------------------
                                                             2000        2001        2002
                                                         ----------  ----------  ----------
<S>                                                      <C>         <C>         <C>
Net sales............................................... $  172,268  $   84,765  $   82,564
Cost of sales...........................................     89,471      87,697      75,302
                                                         ----------  ----------  ----------
Gross profit (loss).....................................     82,797      (2,932)     7,262
Research and development expenses.......................     39,799      37,764     29,742
Selling and administrative expenses.....................     26,202      27,282     21,400
Restructuring and other charges.........................          -       3,775      5,001
Asset impairment charges................................          -      10,433      8,641
Goodwill impairment charges.............................          -           -      8,043
Purchased in-process R&D................................          -       3,800          -
                                                         ----------  ----------  ----------
                                                             66,001      83,054     72,827
                                                         ----------  ----------  ----------
Operating income (loss).................................     16,796     (85,986)   (65,565)

Interest income.........................................     10,821       6,930       6,309
Interest expense........................................       (300)       (626)     (5,119)
Impairment of investments...............................          -      (3,061)       (390)
Gain on repurchase of Convertible notes.................          -           -      12,581
Other income (expense)..................................      1,279         (39)          1
                                                         ----------  ----------  ----------
Income (loss) before income taxes.......................     28,596     (82,782)    (52,183)
Provision (benefit) for income taxes....................      9,704      24,338      (4,307)
                                                         ----------  ----------  ----------
Income (loss) before cumulative effect of accounting
  change................................................     18,892    (107,120)    (47,876)
Cumulative effect of accounting change..................          -           -      (8,010)
                                                         ----------  ----------  ----------
Net income (loss)....................................... $   18,892  $ (107,120) $  (55,886)
                                                         ==========  ==========  ==========

Net income (loss) per share
Basic
Income (loss) before cumulative effect of accounting
  change................................................ $     0.64  $    (3.54) $    (1.57)
Net income (loss)....................................... $     0.64  $    (3.54) $    (1.83)

Diluted
Income (loss) before cumulative effect of accounting
  change................................................ $     0.60  $    (3.54) $    (1.57)
Net income (loss)....................................... $     0.60  $    (3.54) $    (1.83)

Weighted average common shares outstanding.............. 29,712,879  30,248,476  30,587,032
Weighted average common and dilutive securities
  outstanding........................................... 31,519,889  30,248,476  30,587,032
</TABLE>

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)          YEAR ENDED DECEMBER 31,
                                                          --------------------------------
                                                             2000        2001        2002
                                                          ---------  ----------  ---------
<S>                                                       <C>         <C>        <C>
Net income (loss).......................................  $  18,892   $(107,120) $ (55,886)
Other comprehensive income (loss):
Unrealized gain on marketable securities................        327         560        116
Foreign currency translation adjustment.................         87        (110)       (10)

Reclassification adjustment:
Net realized gain previously included in
  other comprehensive income............................          -         (30)       (71)
                                                          ---------  ----------  ---------
Comprehensive income (loss).............................  $  19,306  $ (106,700) $ (55,851)
                                                          =========  ==========  =========
</TABLE>


                             See accompanying notes.


                                       28
<PAGE>



                                 ANADIGICS, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                        (SHARES AND DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                         ACCUMULATED
                                                          ADDITIONAL                        OTHER             TOTAL
                                       COMMON STOCK        PAID-IN        ACCUMULATED   COMPREHENSIVE      STOCKHOLDERS'
                                  -------------------
                                   SHARES     AMOUNT       CAPITAL          DEFICIT      INCOME (LOSS)        EQUITY
                                  -------     -------     ----------      -----------    -------------      -----------
<S>                               <C>         <C>         <C>             <C>            <C>                <C>
Balance, December 31, 1999..       28,862       $ 289       $296,496        $ (20,010)         $  (126)       $ 276,649
 Stock options exercised....        1,046          10         10,545                                             10,555
 Shares issued under
    employee stock purchase
    plan....................           65           1            893                                                894
 Tax effect of stock
    options exercised.......                                  20,590                                             20,590
 Unrealized gains on market-
    able securities.........                                                                       327              327
 Issuance of common stock
    in public offering, net
    of expenses.............                                     (24)                                               (24)
 Shares issued for warrants
    exercised...............           55                        862                                                862
 Foreign currency translation
    adjustment..............                                                                        87               87
 Net income.................                                                   18,892                            18,892
                                  -------      ------      ---------      -----------      -----------      -----------
Balance, December 31, 2000..       30,028         300        329,362           (1,118)             288          328,832
 Stock options exercised....          420           5          3,036                                              3,041
 Shares issued under
    employee stock purchase
    plan....................          113           1          1,462                                              1,463
 Unrealized gains on market-
    able securities.........                                                                       560              560
 Shares issued for warrants
    exercised...............            8
 Foreign currency translation
    adjustment..............                                                                      (110)            (110)
 Net realized gain  previously
 included in other
    comprehensive income....                                                                       (30)             (30)
 Net loss                                                                    (107,120)                         (107,120)
                                  -------      ------      ---------      -----------      -----------      -----------
Balance, December 31, 2001..       30,569         306        333,860         (108,238)             708          226,636
 Stock options exercised....           17           -            108                                                108
 Shares issued under
    employee stock purchase
    plan....................           88           1            194                                                195
 Unrealized gains on market-
    able securities.........                                                                       116              116
 Foreign currency translation
    adjustment..............                                                                       (10)             (10)
 Net realized gain previously
 included in other
    comprehensive income....                                                                       (71)             (71)
 Net loss                                                                     (55,886)                          (55,886)
                                  -------      ------      ---------     ------------         --------      -----------
Balance, December 31, 2002..       30,674      $  307      $ 334,162     $   (164,124)        $    743      $   171,088
                                  =======      ======      =========     ============         ========      ===========
</TABLE>

                             See accompanying notes.


                                       29
<PAGE>

                                 ANADIGICS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                    YEAR ENDED DECEMBER 31,
                                                                -------------------------------
                                                                   2000       2001       2002
                                                                ---------  ---------  ---------

<S>                                                             <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).............................................  $  18,892  $(107,120) $ (55,886)
Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
  Cumulative effect of accounting change......................          -          -      8,010
  Gain on repurchase of Convertible notes.....................          -          -    (12,581)
  Depreciation................................................     22,069     24,489     19,778
  Amortization................................................        231      3,019      2,247
  Amortization of (discount) premium on marketable securities.       (752)     1,287      2,256
  Impairments of long-lived assets and investments............          -     14,577     17,074
  Purchased in-process R&D....................................          -      3,800          -
  Deferred taxes..............................................      6,178     24,306          -
  Tax benefit realized from stock option transactions.........      3,562          -          -
  (Gain)loss on sale of equipment.............................     (1,279)        39          -
  Provision for litigation settlement.........................     (6,436)         -          -
Changes in operating assets and liabilities:
    Accounts receivable.......................................      3,357     12,847      1,184
    Inventory.................................................    (12,635)     9,601      1,384
    Prepaid expenses and other assets.........................     (3,905)    (3,765)     1,070
    Accounts payable..........................................     (4,916)    (2,256)    (1,681)
    Accrued and other liabilities.............................        377        955       (386)
                                                                ----------  ---------  --------
Net cash provided by (used in) operating activities...........     24,743    (18,221)    (17,531)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of plant and equipment..............................    (43,564)  (16,845)     (4,945)
Purchases of marketable securities............................    (77,381) (157,691)   (104,619)
Proceeds from sales of marketable securities..................     29,271    90,985     108,197
Purchase of Telcom Devices, net of cash  acquired.............          -   (27,927)          -
Proceeds from sale of equipment...............................      1,358        45           2
                                                                ----------  --------- ---------
Net cash used in investing activities.........................    (90,316) (111,433)     (1,365)

CASH FLOWS FROM FINANCING ACTIVITIES
Payments of obligations under capital leases..................       (493)     (404)        (94)
Repayments of long-term debt.................. ...............     (1,000)   (3,385)       (244)
Proceeds from issuance of long-term debt net of offering costs          -    96,925          -
Repurchase of Convertible notes...............................          -         -     (19,828)
Issuances of common stock, net of related expenses............     12,287     4,504         303
                                                                ---------  ---------  --------
Net cash provided by (used in) financing activities...........     10,794    97,640     (19,863)
                                                                ---------  ---------  --------

Net decrease in cash and cash equivalents.....................    (54,779)  (32,014)    (38,759)
Cash and cash equivalents at beginning of period..............    149,895    95,116      63,102
                                                                ---------  --------   ---------
Cash and cash equivalents at end of period....................  $  95,116  $ 63,102   $  24,343
                                                                =========  ========   =========

Supplemental disclosures of cash flow information:
Interest paid.................................................  $     300  $    131   $   4,549
Taxes paid....................................................         46        45         200
Tax benefit of stock options exercised........................     20,590         -           -
Acquisition of equipment under capital lease..................        560       248           -
</TABLE>

                             See accompanying notes.


                                       30
<PAGE>




                                 ANADIGICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    NATURE OF OPERATIONS AND BASIS OF PRESENTATION

         ANADIGICS, Inc. (the "Company") is a leading supplier of radio
frequency ("RF")/microwave integrated circuit solutions for the communications
industry. The Company's products are used to send and receive signals in a
variety of broadband and wireless communications applications. In the broadband
markets, the focus is on applications for cable subscriber products, cable
infrastructure systems, and fiber optic communications systems. In the wireless
market, the Company's efforts are focused on applications for cellular and
personal communication systems ("PCS") handsets.

         The Company designs, develops and manufactures radio frequency
integrated circuit solutions primarily using gallium arsenide ("GaAs")
semiconductor material with either Metal Semiconductor Field Effect Transistor
(MESFET), Pseudomorphic High Electron Mobility Transistor (PHEMT) or
Heterojunction Bipolar Transistor (HBT) process technology. The Company
manufactures its integrated circuits in its six-inch analog GaAs wafer
fabrication facility. GaAs offers certain advantages in RF/microwave
applications including the integration of numerous RF/microwave functions, which
cannot be easily integrated in silicon-based circuits. The Company's high
frequency integrated circuits enable manufacturers of communications equipment
to enhance overall system performance and reduce manufacturing cost and time to
market.

         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.


    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. Accounts receivable from customers are denominated in U.S. dollars.
The Company has not experienced significant losses related to receivables from
individual customers.

         Approximately 70% of the Company's net sales in 2000 were to two
customers, Ericsson and Motorola, who individually accounted for 44% and 26%,
respectively, of net sales. Approximately 69% of the Company's net sales in 2001
were to three customers, Motorola, Ericsson and Kyocera, who individually
accounted for 32%, 25% and 11%, respectively, of net sales. Approximately 58% of
the Company's net sales in 2002 were to two customers, Kyocera and Motorola, who
individually accounted for 35% and 23%, respectively, of net sales. Accounts
receivable from these customers accounted for 76% and 51% of total accounts
receivable at December 31, 2001 and 2002, respectively. Net sales to individual
customers who accounted for 10% or more of the Company's total net sales and
corresponding end application information are as follows:

<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
                             ----------------------------------------------------------------
                              2000   Application    2001    Application     2002  Application
                             ------  -----------   ------   -----------    ------ -----------
<S>                        <C>        <C>           <C>     <C>           <C>      <C>
Largest customer.........  $ 76,193    Wireless    $ 27,387    CATV      $ 29,231  Wireless
Second largest customer..    44,719      CATV        21,401  Wireless      18,666    CATV
Third largest customer         < 10%                  9,620  Wireless      < 10%
</TABLE>

    USE OF ESTIMATES

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Significant estimates that affect the financial statements include, but are not
limited to: recoverability of inventories, useful lives and amortization periods
and recoverability of long-lived assets.


                                       31
<PAGE>


     REVENUE RECOGNITION

         Production revenue is recorded when products are shipped to customers
pursuant to a purchase order. The Company charges customers for the costs of
certain contractually-committed inventories that remain at the end of a
product's life. Cancellation revenue is recognized when cash is received.

     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 accrued liability for warranty costs is included in Accrued
liabilities in the consolidated balance sheets.

     COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE

         All direct internal and external costs incurred in connection with the
application development stage of software for internal use are capitalized. All
other costs associated with internal use software are expensed when incurred.
Amounts capitalized are amortized on a straight-line basis over three years.

    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.

         The cost of equipment acquired under capital leases was $11,627 and
$10,719 at December 31, 2001 and 2002, respectively, and accumulated
amortization was $11,489 and $10,673 at December 31, 2001 and 2002,
respectively. Equipment acquired under a capital lease is amortized over the
useful life of the leased equipment or the life of the lease, whichever is
shorter.

    GOODWILL AND OTHER INTANGIBLES

         Goodwill, process technology and a covenant-not-to-compete were
recorded as part of the Telcom acquisition. Effective January 1, 2002, the
Company adopted the provisions of FASB Statement No. 142, Goodwill and Other
Intangible Assets (FAS 142). Under the new rules, goodwill is no longer subject
to amortization but is reviewed for potential impairment upon adoption and
thereafter annually or upon the occurrence of an impairment indicator. FAS 142
prescribes a two-phase process for impairment testing of goodwill. The first
phase screens for impairment; while the second phase measures the impairment. In
addition, within six months of adopting the new accounting standard, a
transitional impairment test must be completed and any impairment identified
must be reported as a cumulative effect of a change in accounting principle. See
Note 3. Process technology and the covenant continued to be amortized using the
straight-line method over five and two years, respectively. The carrying amount
of the Company's intangibles are reviewed on a regular basis for any signs 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.
Fair value is determined primarily using the anticipated cash flows, discounted
at a rate commensurate with the associated risk.

    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.

    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.

    RESEARCH AND DEVELOPMENT COSTS

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

    IN-PROCESS RESEARCH AND DEVELOPMENT

         In the event of an acquisition, the Company will calculate the fair
value of in-process research and development projects, based upon discounted
cash flows estimated by management of future revenues and expected profitability
of the related technology. The rate used to discount the projected future cash
flows accounts for the time value of money, as well as the risks of realization
of the cash flows. Management will record a charge to earnings where projects
are determined to have not reached technological feasibility and do not have
alternative uses.

    CASH EQUIVALENTS

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

    MARKETABLE SECURITIES

         Available for sale securities are stated at fair value, as determined
by quoted market prices, with unrealized gains and losses reported in other
accumulated comprehensive income or loss. 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.


                                       32
<PAGE>


    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 date. 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.

    STOCK BASED COMPENSATION

         As permitted by FASB Statement No. 123, Accounting for Stock-Based
Compensation (FASB 123), the Company has elected to follow the intrinsic value
method under Accounting Principle Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25) and related interpretations in accounting for its
employee stock option plans. Under APB 25, no compensation expense is recognized
at the time of option grant when the exercise price of the Company's employee
stock options equals the fair market value of the underlying common stock on the
date of grant.

         The following table illustrates the effect on net income (loss) and
earnings (loss) per common share as if the Company had applied the fair value
method to measure stock-based compensation, required under the disclosure
provisions of SFAS No. 123, Accounting for Stock-Based Compensation:

                                                2000        2001        2002
                                             ---------   ---------   ----------
Net income (loss), as reported...............$  18,892   $(107,120)   $ (55,886)
Stock based compensation expense under fair
 value reporting, net of tax.................  (11,875)    (17,084)     (10,863)
                                             ---------   ---------    ---------
Pro forma net income (loss)..................$   7,017   $(124,204)   $ (66,749)
                                             =========   =========    =========
Earnings (loss) per share
Net income, as reported
Basic....................................... $    0.64   $   (3.54)   $   (1.57)
Diluted..................................... $    0.60   $   (3.54)   $   (1.57)

Pro forma
Basic....................................... $    0.24   $   (4.11)   $   (2.18)
Diluted..................................... $    0.22   $   (4.11)   $   (2.18)


     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 net income 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.
For all periods presented, share and per share data has been restated to reflect
a three-for-two stock split, the shares for which were distributed on February
29, 2000 to holders of record on February 10, 2000.

     FAIR VALUE OF FINANCIAL INSTRUMENTS

         The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing parties.

         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, 2002, the fair value of the outstanding notes, estimated based upon
dealer quotes, was approximately $41,688.



                                       33
<PAGE>

    IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

         In April 2002, the Financial Accounting Standards Board (FASB) issued
Statement No. 145, Rescission of FASB Statements No. 4, 44 and 62, Amendment of
FASB Statement No. 13 and Technical Corrections (FAS 145). For most companies,
FAS 145 will require gains and losses on extinguishments of debt to be
classified as income or loss from continuing operations rather than as
extraordinary items as previously required under FAS 4. Extraordinary treatment
will be required for certain extinguishments as provided in APB Opinion No. 30.
The statement also amended FAS 13 for certain sales-leaseback and sublease
accounting. During 2002, the Company early adopted FAS 145 in accordance with
the provisions of the statement. Accordingly, the gain on the repurchase of the
Company's Convertible notes has been included in the loss before income taxes
and cumulative effect of accounting change.


         In June 2001, the FASB issued Statement No. 143, Accounting for Asset
Retirement Obligations (FAS 143). FAS 143 requires that asset retirement
obligations that are identifiable upon acquisition and construction, and during
the operating life of a long-lived asset be recorded as a liability using the
present value of the estimated cash flows. A corresponding amount would be
capitalized as part of the asset's carrying amount and amortized to expense over
the asset's useful life. The Company will adopt the provisions of FAS 143
effective January 1, 2003. The Company does not expect the adoption of this
statement to have a material impact on its financial position, results of
operations and cash flows.

         In July 2002, the FASB issued Statement No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (FAS 146) and nullifies EITF Issue
No. 94-3. FAS 146 requires that a liability for a cost associated with an exit
or disposal activity be recognized when the liability is incurred, whereas EITF
No. 94-3 had recognized the liability at the commitment date to an exit plan.
The Company is required to adopt the provisions of FAS 146 effective for exit or
disposal activities initiated after December 31, 2002. The Company does not
expect the impact of the adoption of this statement to have a material impact on
its financial position, results of operations and cash flows.

         In November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires the recognition
of certain guarantees as liabilities at fair market value and is effective for
guarantees issued or modified after December 31, 2002. The Company has adopted
the disclosure requirement of FIN 45 and does not expect the impact of the fair
market value requirement to have a material impact on its financial position,
results of operations and cash flows.

         In December 2002, the FASB issued Statement No. 148, Accounting for
Stock-Based Compensation -- Transition and Disclosure (FAS 148). FAS 148 amends
Statement No. 123, Stock-Based Compensation,(FAS 123) to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, this Statement
amends the disclosure requirements of FAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The disclosure provisions of FAS 148 are effective for
fiscal years ending after December 15, 2002 and have been incorporated into the
accompanying financial statement footnotes.

   RECLASSIFICATIONS

         Certain prior year amounts have been reclassified to conform to the
current year presentation.


2. ACQUISITION OF TELCOM DEVICES

         On April 2, 2001, ANADIGICS, Inc. acquired Telcom Devices Corp.
("Telcom"), a manufacturer of indium phosphide based photodiodes for the
telecommunications and data communications markets. The acquisition was
accounted for using the purchase method of accounting. The results of operations
of Telcom are included in the Company's consolidated results of operations from
the date of purchase. There are no significant differences between the
accounting policies of ANADIGICS and Telcom.

         The cash consideration paid on April 2, 2001, for 100% of Telcom's
stock was $28,000. In addition, the Company incurred $300 in acquisition-related
costs. The total purchase price of $28,300 was allocated to the assets acquired
and liabilities assumed, based on their fair values (as determined by an
appraisal) as follows:

         Fair value of tangible assets               $5,522
         Fair value of liabilities assumed           (1,369)
         In-process research and development          3,800
         Process technology                           3,400
         Covenant not to compete                        800
         Deferred tax liability                      (1,831)
         Goodwill                                    17,978
                                                    -------
         Total purchase price                       $28,300


                                       34
<PAGE>

         The process technology and covenant not-to-compete were being amortized
using the straight-line method over their estimated useful lives of five and two
years, respectively. The Company recorded a charge of $3,800 representing the
fair value of certain acquired research and development projects relating to 40
GB/s photodiode and autobondable and auto eutectic bonding that were determined
to have not reached technological feasibility and do not have alternative future
uses. The fair value of such projects was determined based on discounted net
cash flows. These cash flows were based on management's estimates of future
revenues and expected profitability of each technology. The rate used to
discount these projected cash flows accounted for the time value of money, as
well as the risks of realization of the cash flows.

         The following unaudited pro-forma consolidated financial information
reflects the results of operations for the twelve months ended December 31, 2001
and 2000, as if the acquisition of Telcom had occurred on December 31, 1999 and
after giving effect to purchase accounting adjustments. The charge for purchased
in-process R&D is not included in the pro-forma results, because it is
non-recurring.

                                                   YEAR ENDED DECEMBER 31
                                                ----------------------------
                                                     2000         2001
                                                  ----------   ----------
Pro-forma revenue.............................    $ 181,177     $  87,245
Pro-forma net income (loss)...................    $  16,393     $(106,313)

Pro-forma net income (loss) per share
         Basic................................    $    0.55     $   (3.51)
         Diluted  ............................    $    0.52     $   (3.51)

         These pro-forma results have been prepared for comparative purposes
only and do not purport to be indicative of what operating results would have
been had the acquisition actually taken place on December 31, 1999. In addition,
these results are not intended to be a projection of future results and do not
reflect any synergies that might be achieved from the combined operations.


3.   INTANGIBLES, GOODWILL, CUMULATIVE EFFECT OF ACCOUNTING CHANGE AND
     ACQUISITION INTANGIBLES' IMPAIRMENT CHARGES

         Effective January 1, 2002, the Company adopted the provisions of FAS
142 and under the new rules, goodwill is no longer subject to amortization but
is reviewed for potential impairment annually or upon the occurrence of an
impairment indicator. The annual amortization of goodwill, which would have
approximated $2,567 was no longer required in 2002. Other intangible assets
continued to be amortized over their useful lives. As a result of completing the
initial required impairment test, the Company recorded a charge for the
cumulative effect of the accounting change in the amount of $8,010 ($0.26 per
share) representing the excess of the carrying value of a reporting unit
(Telcom) as compared to its estimated fair value as of January 1, 2002.

            During the course of 2002, the Company monitored fiber market
conditions in light of job cuts and difficult prospects announced by several of
its end-market customers. In view of these weaker market conditions, the Company
performed several tests of its goodwill and intangible assets for potential
impairment during the year. As a result of those evaluations, the Company
recorded a goodwill impairment charge of $8,043 and an asset impairment charge
for its remaining acquired intangibles of $2,310. The $2,310 was included within
charges for asset impairments as discussed in Note 4 below.

            The following table reflects unaudited adjusted results of
operations of the Company giving effect to FAS 142 as if it were adopted on
January 1, 2001. (The data for the year ended December 31, 2000 is not presented
because the acquisition occurred subsequent to that time):

                                           YEAR ENDED DECEMBER 31,
                                         -------------------------
                                            2001            2002
                                         ----------      ---------

Net loss, as reported                    $ (107,120)     $ (55,886)
Add back: amortization expense                1,925              -
                                         ----------       --------
Net loss, as adjusted                    $ (105,195)     $ (55,886)
                                         ==========      =========

Basic and diluted net loss per share
As reported                              $    (3.54)     $   (1.83)
Add back: amorization expense                  0.06              -
                                         ----------      ---------
Net loss, as adjusted                    $    (3.48)     $   (1.83)
                                         ==========      =========


                                       35
<PAGE>

4. RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES

         During 2002, the Company recorded charges for asset impairments,
impairment on investments and for restructuring and other charges of $8,641,
$390 and $5,001, respectively. The asset impairment charge of $8,641 related to
the write-off of certain manufacturing and research equipment, leasehold
improvements, certain acquired intangibles and certain technology licenses that
are no longer used in the ongoing activities of the business. The charge for
impairment on investments was recorded on a private-equity investment following
an evaluation that indicated the carrying value of such investment exceeded its
estimated fair market value. The restructuring and other charges were for
facilities consolidation costs and for severance and related employee benefit
costs of workforce reductions. The restructuring and other charges include
$1,628 for severance and related benefits of workforce reductions. The workforce
reductions eliminated approximately 83 positions throughout the Company to whom
approximately $1,450 of severance benefits were paid through December 31, 2002.
The restructuring liability at December 31, 2002 of $2,956 is comprised of $178
for workforce reduction costs and the remainder for facilities consolidation
costs.

         During 2002, certain fixed assets identified in the restructuring
activities of 2001 as held for sale ($1,000) were further evaluated against weak
resale markets, and certain alternative internal uses were identified. Following
our evaluation, these assets, formerly classified in other current assets as
held for sale, were placed into service and depreciation resumed.

         In 2001, the Company recorded charges for asset impairment, impairment
of investments and for restructuring and other charges amounting to $10,433,
$3,061 and $3,775, respectively. The asset impairment charge of $10,433 related
to the write-down to fair market value of certain manufacturing and research
fixed assets, as they are surplus to the Company's foreseeable operating levels
and research activities. The charge for impairment of investments was recorded
for certain private-equity investments following an evaluation of the Company's
investments indicated that the carrying value of such investments exceeded the
estimated fair market value. The restructuring and other charge was for
severance and related benefit costs of workforce reductions as well as certain
lease-related undertakings. The workforce reductions eliminated 109 positions
throughout the Company.


5. 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,
                                          -------------------------------
                                             2000       2001       2002
                                         ---------   ---------  ---------
Wireless.............................    $  76,523   $  32,250  $  44,689
Broadband............................       95,745      52,515     37,875
                                         ---------   ---------  ---------
     Total...........................    $ 172,268   $  84,765  $  82,564
                                         =========   =========  =========

         The Company primarily sells to four geographic regions: Europe, Asia,
U.S.A. and Canada, and Latin America. The geographic region is determined based
on shipping addresses, not on the locations of the ultimate users. Net sales to
each of the four geographic regions are as follows:

                                                YEAR ENDED DECEMBER 31,
                                        ----------------------------------
                                           2000         2001       2002
                                        ---------    ---------  ---------
Europe...............................  $  32,964     $   8,976  $   3,767
Asia.................................     40,464        27,408     31,897
U.S.A and Canada.....................     69,181        30,955     44,193
Latin America........................     29,659        17,426      2,707
                                       ---------     ---------  ---------
      Total..........................  $ 172,268     $  84,765  $  82,564
                                       =========     =========  =========

                                       36
<PAGE>


6. LONG-TERM DEBT

         On November 27, 2001, the Company issued $100,000 aggregate principal
amount of 5% Convertible Senior Notes ("Convertible notes" or "notes") due
November 15, 2006. The notes are convertible into shares of common stock at any
time prior to their maturity or prior redemption by the Company. The notes are
convertible into shares of common stock at a rate of 47.619 shares for each
$1,000 principal amount (convertible at a price of $21.00 per share), subject to
adjustment. Interest is payable semi-annually on May 15 and November 15 of each
year.

         ANADIGICS has the option to redeem all or a portion of the notes at a
redemption price of 102% of the principal amount during the period from November
15, 2004 through November 14, 2005 and at a redemption price of 101% of the
principal amount during the period from November 15, 2005 to November 14, 2006.
In the event of a change in control, as defined, note-holders may require the
Company to repurchase the note at 100% of the principal amount. In the event of
a change in control, the Company, in certain circumstances, may elect to repay
the notes in common stock valued at 95% of the average of the closing prices of
the Company's common stock for the five days immediately preceding and including
the third trading day prior to the repurchase.

         During the third quarter of 2002, the Company repurchased and retired
$33,300 principal amount of the Convertible notes for $20,365 in cash, inclusive
of accrued interest of $537. The Company recognized a gain of $12,581 on the
repurchase after adjusting for accrued interest and the write-off of a
proportionate share of unamortized offering costs. In accordance with the
provisions of FAS 145, the gain on repurchase has been included in the loss
before income taxes and cumulative effect of accounting change.

         Debt issuance costs of $2,998 and $1,643 on December 31, 2001 and 2002,
respectively, consisting principally of underwriters' fees, were included in
other assets and are being amortized over the life of the notes.


7. 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 $3,651, $3,946 and $3,560 in
2000, 2001 and 2002, respectively. Sublease income was zero in 2000 and 2001 and
$406 in 2002. The future minimum lease payments under the noncancelable
operating leases are as follows:

                                                              OPERATING
YEAR                                                           LEASES
----                                                        -----------
2003...................................................      $   3,745
2004...................................................          3,321
2005...................................................          2,071
2006...................................................          1,485
2007...................................................          1,699
Thereafter.............................................         17,595
                                                            ----------
Total minimum lease payments...........................         29,916
Less: contractually-required sublease income...........         (1,898)
                                                            ----------
                                                             $  28,018
                                                            ----------

     The lessor on the lease for the Company's headquarters building in Warren,
New Jersey, is currently the debtor in a bankruptcy proceeding, which commenced
in December 2001. During the fourth quarter of 2001, the Company recognized a
non-recurring charge relating to this proceeding. The Company has an obligation
to rent additional space at its headquarters, if it is constructed by June 2003.
The additional space would require an annual base rent of $742, plus escalators
and the term would expire in December 2016. Construction, which is the
responsibility of the lessor has not commenced. The Company does not expect that
the construction requirement can be met, thereby negating its obligation to rent
the space.

     In addition to the above, at December 31, 2002, the Company had purchase
commitments of approximately $1,200 for equipment, furniture, and leasehold
improvements.

     ANADIGICS is a party to litigation arising out of the operation of our
business. We believe that the ultimate resolution of such litigation should not
have a material adverse effect on our financial condition, results of operations
or liquidity.


                                       37
<PAGE>

8. MARKETABLE SECURITIES

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

                                              Available-for-Sale Securities
                                       -----------------------------------------
                                                      Gross         Estimated
                                                   Unrealized          Fair
                                         Cost        Gains            Value
                                       -----------------------------------------
U.S. Treasury and
  Agency Securities                    $  16,843      $     83     $  16,926
U.S. Corporate Securities                119,419           648       120,067
                                        --------      --------     ---------
 Total at December 31, 2001            $ 136,262      $    731     $ 136,993
                                       =========      ========     =========
U.S. Treasury and
  Agency Securities                    $  23,526      $     66     $  23,592
U.S. Corporate Securities                106,873           710       107,583
                                       ---------      --------     ---------
 Total at December 31, 2002            $ 130,399      $    776     $ 131,175
                                       =========      ========     =========


         The amortized cost and estimated fair value of debt and marketable
equity securities at December 31, 2002, by contractual maturity, are shown
below. Expected maturities may differ from contractual maturities because the
issuers of the securities may have the right to prepay obligations without
prepayment penalties.

                                            Available-for-Sale Securities
                                            -----------------------------
                                                                Estimated
                                                                  Fair
                                              Cost               Value
                                            -----------------------------
Due in one year or less                      $  73,665         $   74,038
Due after one year through three years          56,734             57,137
                                             ---------         ----------
Total                                        $ 130,399         $  131,175
                                             =========         ==========


9. INVENTORIES

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

                                                              DECEMBER 31,
                                                         --------------------
                                                            2001       2002
                                                         ---------  ---------
Raw materials........................................... $   6,095  $   4,316
Work in process.........................................     8,963     10,080
Finished goods..........................................     8,105      6,015
                                                         ---------  ---------
                                                            23,163     20,411
Reserves................................................    (8,502)    (7,134)
                                                         ---------  ---------
         TOTAL.......................................... $  14,661  $  13,277
                                                         =========  =========


10. ACCRUED LIABILITIES

    Accrued liabilities consist of the following:
                                                              DECEMBER 31,
                                                         --------------------
                                                            2001       2002
                                                         ---------  ---------
Accrued compensation.................................... $   3,996  $   2,715
Warranty reserve........................................       960        368
Other...................................................     1,593      1,650
                                                         ---------  ---------
           TOTAL                                         $   6,549  $   4,733
                                                         =========  =========

         Warranty reserve movements in the years ended December 31, 2001 and
2002 for returns were $312 and $333, respectively. The periodic charge (benefit)
for estimated warranty costs were $869 and $(259) in the years ended December
31, 2001 and 2002.


                                       38
<PAGE>

11. INCOME TAXES

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

                                                    YEAR ENDED DECEMBER 31,
                                                 -----------------------------
                                                   2000      2001       2002
                                                 -------   --------   --------
Current provision (benefit): Federal...........  $ 3,223   $     -   $ (4,307)
                             State and foreign.      303         -          -
Deferred provision:          Federal...........    5,263    22,924          -
                             State.............      915     1,414          -

                                                 -------   -------   --------
Total    ....................................    $ 9,704   $24,338   $ (4,307)
                                                 -------   -------   --------

         In December 2002, the Company received a $4,307 refund pursuant to a
carryback claim under the Job Creation and Workers Assistance Tax Act of 2002.
The refund represents taxes paid in 1996 and 1997. During 2001, the Company
recorded a valuation allowance of $26,814 against the carrying value of its
deferred tax asset. 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 recorded 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, 2001 and 2002 are as follows:

                                                               DECEMBER 31,
                                                          --------------------
                                                             2001       2002
                                                          ---------  ---------
Deferred tax balances
  Accruals/reserves.....................................  $   6,713  $   6,458
  Net operating loss carryforwards......................     47,408     53,917
  General business and research and development credits.      3,594      4,634
  Deferred rent expense.................................        910      1,003
  Difference in basis of plant and equipment............       (978)     2,867
  Other.................................................         22         22
  Valuation reserve.....................................    (57,669)   (68,901)
                                                          ---------  ---------
Net deferred tax assets.................................          -          -
                                                          ---------  ---------

         As of December 31, 2002, the Company had net operating loss
carryforwards of approximately $155,000 for both federal and state tax reporting
purposes. The federal carryforward will begin to expire in 2018, and the state
carryforwards will begin to expire in 2005.

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

                                                          YEAR ENDED DECEMBER 31,
                                            ---------------------------------------------------
                                                   2000             2001              2002
                                            ----------------  -----------------  ----------------
<S>                                         <C>        <C>    <C>       <C>      <C>       <C>
Tax at U.S. statutory rate................  $ 10,009   35.0%  $(28,956) (35.0)%  $(18,264) (35.0)%
State and foreign tax expense (benefit),
 net of federal tax effect................       801    2.8     (2,640)  (3.2)     (1,696)  (3.2)
Research and experimentation tax credits..      (892)  (3.1)      (666)  (0.8)       (337)  (0.6)

Valuation allowance, net of carryback....         -      -      56,223   67.9      11,232   21.5
Intangibles amortization and other.......       (214)  (0.8)       377    0.5       4,758    9.1
                                            --------  ------  --------  -----     -------  -----
Provision (benefit) for income taxes......  $  9,704   33.9%  $ 24,338   29.4%   $ (4,307)  (8.2)%
                                            ========  =====   ========  =====    ========  =====
</TABLE>

                                       39
<PAGE>


12. STOCKHOLDERS' EQUITY

         The Company had warrants outstanding, which entitled the holder to
purchase 22,500 shares of common stock at an exercise price of $6.92 per share.
Warrants to purchase 10,000 shares were exercised in 2000. During 2001, the
remaining warrants were exercised via a cashless exercise, which resulted in the
issuance of 7,592 shares of common stock and the surrender of the remaining
warrants. The Company had additional warrants outstanding, which entitled the
holder to purchase 45,000 shares of common stock at exercise prices ranging from
$9.00 to $32.17 per share. During 2000, warrants to purchase all 45,000 shares
were exercised at an average exercise price of $17.65.

         On December 17, 1998, the Company adopted a Shareholders' Rights
Agreement (the "Agreement"). Pursuant to the Agreement, as amended on November
30 2000, 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, 2008, 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.


13. EMPLOYEE BENEFIT PLANS

         In 1995, the Company adopted an employee stock purchase plan ("ESP
Plan") under Section 423 of the Internal Revenue Code. All full-time employees
of ANADIGICS, Inc. and part-time employees, as defined in the ESP Plan, are
eligible to participate in the ESP Plan. An aggregate of 843,750 shares of
common stock are reserved for offering under the ESP Plan. Offerings are made at
the commencement of each calendar year and must be purchased by the end of that
calendar year. In 2000, 64,573 shares of common stock were purchased at a price
of $13.84 per share, pursuant to the terms of the ESP Plan. During 2001, 113,157
shares of common stock were purchased at a price of $12.93 per share, pursuant
to the terms of the ESP Plan. In 2002, 88,493 shares of common stock were
purchased at a price of $2.21 per share, pursuant to the terms of the ESP Plan.

         Employees and outside directors have been granted options to purchase
shares of common stock under stock option plans adopted in 1994, 1995 and 1997.
An aggregate of 489,130, 4,912,500 and 5,100,000 shares of common stock were
reserved for issuance under the 1994 Long-Term Incentive Share and Award Plan,
the 1995 Long-Term Incentive Share Award Plan and the 1997 Long-Term Incentive
and Share Award Plan for Employees (the "Plans"), respectively. The Plans
provide for the granting of stock options, stock appreciation rights, restricted
shares, or other share based awards to eligible employees and directors, as
defined in the Plans. Options granted under the Plans become exercisable in
varying amounts over periods of up to three years. To date, no stock
appreciation rights or restricted shares have been granted under the Plans.

         On May 20, 2002, the Company announced a voluntary stock option
exchange program for eligible employees. Officers and directors were not
eligible for the exchange program. Pursuant to the terms and conditions of the
offer, which expired on June 18, 2002, the Company accepted for cancellation
options to purchase 838,157 shares of common stock having a weighted average
exercise price of $36.90. On December 20, 2002, participating employees were
issued 760,742 options under this program in exchange for the cancelled options.
The new options have an exercise price equal to $2.53, which represents the fair
market value at the date of grant and will fully vest after one year.


                                       40
<PAGE>

         A summary of the Company's stock option activity, and related
information for the years ended December 31, 2000, 2001 and 2002 are as follows:

<TABLE>
<CAPTION>

                                          2000                  2001                 2002
                                    -----------------    ------------------    ----------------
                                             WEIGHTED              WEIGHTED              WEIGHTED
                                    COMMON   AVERAGE     COMMON    AVERAGE     COMMON    AVERAGE
                                    STOCK    EXERCISE     STOCK    EXERCISE    STOCK     EXERCISE
                                    OPTIONS   PRICE      OPTIONS    PRICE      OPTIONS    PRICE
                                    -------  --------    -------   --------    -------   --------
<S>                               <C>       <C>        <C>        <C>         <C>        <C>
Outstanding at beginning of year. 5,657,619 $  15.96   5,841,531  $  18.27    6,283,632  $ 17.52
  Granted........................ 1,612,525    22.66   1,645,608     14.64    2,248,353     3.90
  Exercised......................(1,046,053)   10.14    (420,252)     7.23      (16,773)    6.44
  Forfeited......................  (382,560)   24.81    (783,255)    22.84     (545,021)   21.17
  Cancelled......................         -        -           -         -     (838,157)   36.90
                                 ----------            ---------              ---------
Outstanding at end of year....... 5,841,531    18.27   6,283,632     17.52    7,132,034    10.80
                                 ==========            =========              =========

Exercisable at end of year....... 2,817,185    14.57   3,553,713     16.65    3,903,164    13.69
                                 ==========            =========              =========
</TABLE>

         Stock options outstanding at December 31, 2002 are summarized as
follows:
<TABLE>
<CAPTION>

                  OUTSTANDING  WEIGHTED AVERAGE  WEIGHTED AVERAGE  EXERCISABLE    WEIGHTED AVERAGE
    RANGE OF       OPTIONS AT      REMAINING        EXERCISE            AT            EXERCISE
EXERCISE PRICES   DEC.31, 2002 CONTRACTUAL LIFE      PRICE         DEC.31, 2002        PRICE
---------------- ------------- ----------------- ---------------- -------------- ----------------
<C>                 <C>            <C>              <C>             <C>              <C>
$ 0.38 to $ 4.17     2,650,796      8.83             $    2.90       677,505          $ 3.97
$ 5.33 to $10.63     1,004,562      4.81             $    7.24       997,912          $ 7.24
$10.90 to $13.59     1,164,906      8.48             $   13.23       504,736          $12.97
$13.94 to $16.89     1,266,622      8.12             $   15.63       764,967          $15.65
$17.44 to $76.25     1,045,148      6.45             $   25.70       958,044          $26.11
</TABLE>

         FASB 123 requires pro forma information regarding net income and
earnings per share as if the Company has accounted for its employee stock
options, warrants and shares of common stock purchased by employees in
connection with the ESP Plan ("equity awards") under the fair value method
prescribed by FASB 123. The fair value of these equity awards was estimated at
the date of grant using a Black-Scholes option pricing model with the following
weighted average assumptions for 2000, 2001 and 2002, respectively: risk-free
interest rate of 5.6%, 3.6% and 2.0%; expected volatility of 1.00, 1.10 and
1.08; expected option life of one year from vesting and an expected dividend
yield of 0.0%. The weighted average fair value of options granted during 2000,
2001 and 2002 was $13.99, $9.64 and $2.40, respectively.

         ANADIGICS, Inc. 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 Plan was amended in
2001 and the Company now matches 50% of employee contributions up to 6% of their
gross pay. The Company recorded expense of $741 and $681 for the years ended
December 31, 2001 and 2002, respectively, relating to plan contributions.
Company contributions in 2000 were determined on an annual basis at the
discretion of the Board of Directors. For the year ended December 31, 2000, the
Company recorded expense of $550 relating to plan contributions.


14. EARNINGS PER SHARE

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

                                                 Year ended December 31,
                                          ------------------------------------
                                             2000         2001         2002
                                          -----------  -----------  ----------
Weighted average common shares
  outstanding used to calculate
  basic earnings per share...........      29,712,879   30,248,476   30,587,032

Net effect of dilutive securities -
  based on treasury stock method
  using average market price.........      1,807,010            -*           -*
                                          ----------    ----------   ----------
Weighted average common and dilutive
  securities outstanding used
  to calculate diluted earnings
  per share.........................      31,519,889    30,248,476   30,587,032
                                          ==========    ==========   ==========

*  Any dilution arising from the Company's outstanding stock options or shares
   potentially issuable upon conversion of the Convertible notes are not
   included as their effect is anti-dilutive.


                                       41
<PAGE>

15. OTHER ACCUMULATED COMPREHENSIVE INCOME

         The components of other accumulated comprehensive income are as
follows:

                                                  UNREALIZED
                                   FOREIGN       GAIN (LOSS)
                                  CURRENCY      ON AVAILABLE-
                                 TRANSLATION      FOR-SALE
                                 ADJUSTMENTS      SECURITIES       TOTAL
                                 ------------   ------------     ---------
Balance at December 31, 2000.....       $ 87          $  201      $  288
Unrealized gain on available-
   for-sale securities...........          -             560         560
Foreign currency translation
   adjustment....................       (110)              -        (110)
Net gain recognized in other
   comprehensive income..........          -             (30)        (30)
                                 -----------    ------------      ------
Balance at December 31, 2001.....        (23)            731         708
Unrealized gain on available-
   for-sale securities...........          -             116         116
Foreign currency translation
   adjustment....................        (10)              -         (10)
Net gain recognized in other
   comprehensive income..........          -             (71)        (71)
                                 -----------    ------------     -------
Balance at December 31, 2002....        $(33)           $776     $   743
                                 ===========    ============     =======

         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.


16. LEGAL PROCEEDINGS

         The consolidated securities class action, captioned In re ANADIGICS,
Inc. Securities Litigation, No. 98-CV-917 (MLC) (D.N.J.), and shareholder's
derivative lawsuit, captioned Deegan v. Rosenzweig, No. 98-CV-3640 (MLC)
(D.N.J.), became final and was funded in mid-January 2000 pursuant to a final
Order of the United States District Court for the District of New Jersey dated
December 7, 1999. The total settlement payment (including the legal fees and
other costs of administering the settlement) was $11,875, of which approximately
$5,325 was paid on behalf of ANADIGICS, Inc. by the Company's insurers.


17. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>

                                                                QUARTER ENDED
                            -------------------------------------------------------------------------------------------------
                              MARCH 31,    JUNE 30,   SEPT. 29,     DEC. 31,   MARCH 30,     JUNE 29,     SEPT.28,   DEC. 31,
                                2001         2001       2001          2001       2002         2002          2002       2002
                            -----------  -----------  -----------  ---------  -----------  -----------  ----------- ---------
                                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                          <C>          <C>          <C>         <C>          <C>         <C>          <C>          <C>
Net sales..................  $  28,520    $  18,897    $  16,340   $ 21,008     $ 19,521    $  23,021    $  21,288    $ 18,734
Cost of sales..............     21,205       26,235       18,197     22,060       19,005       18,832       21,225      16,240
                            -----------  -----------  -----------  ---------  -----------  -----------  -----------  ---------
Gross profit (loss)........      7,315      (7,338)      (1,857)    (1,052)          516        4,189           63       2,494

Research and development...     10,051       9,972        9,478      8,263         7,578        7,699        7,586       6,879
Selling and administrative
   expense.................      6,640       7,369        6,872      6,401         5,279        5,656        5,463       5,002
Restructuring and other
   charges.................          -         900        1,195      1,680         5,959            -        2,286           -
Asset impairment charges...          -         800        4,506      5,127             -            -        3,087       2,310
Goodwill impairment charge.          -           -            -          -             -            -        8,043           -
Purchased in-process R&D...          -       3,800           -          -             -            -            -            -
                            ----------  ----------   ----------   --------    ----------   ----------   ----------   ---------
Operating loss............      (9,376)    (30,179)     (23,908)   (22,523)     (18,300)      (9,166)      (26,402)    (11,697)
Interest income...........       2,423       1,660        1,515      1,331        1,681        1,735         1,543       1,350
Interest expense..........         (61)        (66)          (9)      (488)      (1,442)      (1,422)       (1,307)       (948)
Impairment on investments.           -           -            -     (3,061)           -            -          (390)          -
Gain on notes repurchase..           -           -            -          -            -            -        12,581           -
Other income (loss).......         (60)         11            3          7            2            -            (5)          4
                           -----------  ----------  -----------  ---------  -----------  -----------    ----------   ---------
Loss before income  taxes.      (7,074)    (28,574)     (22,399)   (24,734)     (18,059)      (8,853)      (13,980)    (11,291)
Provision (benefit)
   for income taxes.......      (2,476)     26,814            -          -            -            -             -      (4,307)
                           -----------  ----------  -----------  ---------  -----------  -----------  ------------   ---------
Loss before cumulative
  effect of accounting
  change.................      (4,598)     (55,388)     (22,399)   (24,734)     (18,059)      (8,853)      (13,980)     (6,984)
                           ----------   ----------  -----------  ---------  -----------  -----------  ------------   ---------
Cumulative effect of
   accounting change....            -            -            -         -        (8,010)          -              -           -
                          -----------   ----------  -----------  ---------  -----------  -----------  ------------   ---------
Net loss................  $    (4,598)  $  (55,388) $   (22,399) $ (24,734) $   (26,069) $    (8,853) $    (13,980)  $  (6,984)
                          ===========   ==========  ===========  =========  ===========  ===========  ============   =========
Basic and diluted loss
  per share
Loss before cumulative
   effect of accounting
   change............... $      (0.15)  $    (1.84) $    (0.74)  $   (0.81) $     (0.59) $     (0.29) $      (0.46)  $   (0.23)
Net loss................ $      (0.15)  $    (1.84) $    (0.74)  $   (0.81) $     (0.85) $     (0.29) $      (0.46)  $   (0.23)
</TABLE>

         The first quarter of 2002 has been adjusted, in accordance with FAS
142, to reflect the cumulative effect of accounting change as of January 1st,
2002.


                                       42
<PAGE>

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

    Not applicable.

                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

    The registrant incorporates by reference herein information to be set forth
in its definitive proxy statement for its 2003 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 2003 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 2003 annual meeting of shareholders
that is responsive to the information required with respect to this Item.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    The registrant incorporates by reference herein information to be set forth
in its definitive proxy statement for its 2003 annual meeting of shareholders
that is responsive to the information required with respect to this Item.

ITEM 14. CONTROLS AND PROCEDURES.

Evaluation of disclosure controls and procedures.

    The management of the Company, including our President and Chief Executive
Officer and Chief Financial Officer, have conducted an evaluation of the
effectiveness of the Company's disclosure controls and procedures (as defined in
Rules 13a-14(c) and 15d-14(c) under the Exchange Act) as of a date (the
"Evaluation Date") within 90 days prior to the filing date of this report. Based
on that evaluation, the President and Chief Executive Officer and Chief
Financial Officer concluded that, as of the Evaluation Date, the Company's
disclosure controls and procedures were effective in ensuring that all material
information relating to the Company, including our consolidated subsidiaries,
required to be filed in our periodic SEC filings has been made known to them in
a timely manner.

Changes in internal controls.

    There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
Evaluation Date, including any corrective actions with regard to significant
deficiencies and material weaknesses.


PART IV

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

(a) 1.   Financial Statements

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

    -    Report of Independent Auditors

    -    Consolidated Balance Sheets - December 31, 2001 and 2002

    -    Consolidated Statements of Operations - Years ended December 31, 2000,
         2001 and 2002



                                       43
<PAGE>

    -    Consolidated Statements of Comprehensive Income (Loss) - Years ended
         December 31, 2000 2001, and 2002

    -    Consolidated Statements of Shareholders' Equity - Years ended December
         31, 2000, 2001, and 2002

    -    Consolidated Statements of Cash Flows - Years ended December 31, 2000,
         2001, and 2002

    -    Notes to Consolidated Financial Statements

(a) 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.

         Exhibit List

(b) Reports on Form 8-K filed during the quarter ended December 31, 2002. None.

(c)

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 Registration Statement on Form S-3 (Registration No.
         333-75040), 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      Indenture, dated as of November 27, 2001, between the Company, as
         Issuer, and State Street Bank & Trust Company, N.A., as Trustee for the
         5% Convertible Senior Notes due November 15, 2006. Filed as an exhibit
         to the Company's Registration Statement on Form S-3 (Registration No.
         333-75040), and incorporated herein by reference.

4.3      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.

4.4      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.

4.5      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 filed on December
         17, 1998, and incorporated herein by reference.

4.6      Amendment No. 1 as of November 20, 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 filed on December 4, 2000.

4.7      Registration Rights Agreement, dated November 27, 2001, between the
         Company, as Issuer, and the Purchasers of the 5% Convertible Senior
         Notes due November 15, 2006. Filed as an Exhibit to the Company's
         Registration Statement on Form S-3 (Registration No. 333-75040), and
         incorporated herein by reference.

4.8      Form of 5% Convertible Senior Note due November 15, 2006 (included in
         Exhibit 4.2).

4.9      Post-effective amendment No. 1 to Form S-3 for 5% Convertible Senior
         Notes due November 15, 2006. Filed on Form POS AM dated November 6,
         2002, 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.


                                       44
<PAGE>

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 incorporated herein by reference.

10.4     Form of Employee Stock Purchase Plan. Filed as an exhibit to the
         Company's Registration Statement on Form S-1 (Registration No. 33-
         89928), and incorporated herein by reference.

10.5     Lease Agreement between Mt. Bethel Corporate Center and the Company
         dated May 1, 1993. Filed as an exhibit to the Company's Registration
         Statement on Form S-1 (Registration No. 33-89928), and incorporated
         herein by reference.

10.6     Lease Agreement between United States Land Resources, 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), and incorporated herein by reference.

10.7     First Amendment, dated as of November 20, 1996, to the Lease agreement
         between United States Land Resources, L.P. and the Company dated as of
         April 26, 1996. Filed as an exhibit to the Company's Annual Report on
         Form 10-K405 dated March 29, 2002, and incorporated herein by
         reference.

10.8     Second Amendment, dated as of September 8, 1997, to the Lease agreement
         between Warren Hi-Tech Center, L.P. (successor in interest to United
         States Land Resources, L.P.) and the Company dated as of April 26,
         1996. Filed as an exhibit to the Company's Annual Report on Form
         10-K405 dated March 29, 2002, and incorporated herein by reference.

10.9     Third Amendment, dated as of December 20, 2000, to the Lease agreement
         between Warren Hi-Tech Center, L.P. (successor in interest to United
         States Land Resources, L.P.) and the Company dated as of April 26,
         1996. Filed as an exhibit to the Company's Annual Report on Form
         10-K405 dated March 29, 2002, and incorporated herein by reference.

10.10    Employment Agreement between the Company and Dr. Bamdad Bastani, dated
         September 17, 1998. Filed as an exhibit to the Company's Quarterly
         Report on Form 10-Q for the quarter ended July 4, 1999, and
         incorporated herein by reference.

10.11    Employment Agreement between the Company and Ronald Rosenzweig, dated
         June 1, 1999. Filed as an exhibit to the Company's Quarterly Report on
         Form 10-Q for the quarter ended July 4, 1999, and incorporated herein
         by reference.

10.12    Amendment No. 1 as of March 15, 2002, to the Employment Agreement dated
         June 1, 1999, between the Company and Ronald Rosenzweig. Filed as an
         exhibit to the Company's Annual Report on Form 10-K405 dated March 29,
         2002, and incorporated herein by reference.

10.13    Employment Agreement between the Company and Thomas Shields, dated July
         25, 2000. Filed as an exhibit to the Company's Annual Report on Form
         10-K405 dated March 29, 2002, and incorporated herein by reference.

10.14    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, and incorporated herein by reference.


*21      Subsidiary Listing


*23.1    Consent of Ernst and Young LLP.

24.1     Power of Attorney (included on the signature page of this Annual report
         on Form 10-K).

*99.1    Certification of Bami Bastani, President and Chief Executive Officer of
         ANADIGICS, Inc., pursuant to 18 U.S.C. Section 1350.

                                       45
<PAGE>

*99.2    Certification of Thomas C. Shields, Senior Vice President and Chief
         Financial Officer of ANADIGICS, Inc., pursuant to 18 U.S.C. Section
         1350.


                                *Filed herewith.


                                       46
<PAGE>


                                   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 3rd day of
March 2003.


                                ANADIGICS, INC.

                                BY:    /s/  Bami Bastani
                                    ------------------------------
                                         Dr. Bami Bastani
                                      CHIEF EXECUTIVE OFFICER
                                           AND PRESIDENT

         KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Bami Bastani and Thomas Shields as
his/her attorney-in-fact and agent, with full power of substitution and
resubstitution, for him/her and in his/her 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/she 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:
<TABLE>
<CAPTION>

             NAME                         TITLE                                            DATE
---------------------------     ---------------------------                         ------------------
<S>                             <C>                                                 <C>
/s/  Bami Bastani               President, Chief Executive Officer and               March 3, 2003
---------------------------     Director (Principal Executive Officer)
Dr. Bami Bastani

/s/  Thomas C. Shields          Senior Vice President and Chief Financial            March 3, 2003
---------------------------     Officer (Principal Financial
Thomas C. Shields               Accounting Officer)

/s/  Ronald Rosenzweig          Chairman of the Board of Directors                   March 3, 2003
---------------------------
Ronald Rosenzweig

/s/  Paul S. Bachow             Director                                             March 3, 2003
---------------------------
Paul S. Bachow

/s/  David Fellows              Director                                             March 3, 2003
---------------------------
David Fellows

/s/  Harry T. Rein              Director                                             March 3, 2003
---------------------------
Harry T. Rein

/s/  Lewis Solomon              Director                                             March 3, 2003
---------------------------
Lewis Solomon

/s/  Dennis F. Strigl           Director                                             March 3, 2003
---------------------------
Dennis F. Strigl
</TABLE>
<PAGE>


                                  CERTIFICATION

I, Bami Bastani, certify that:

1.       I have reviewed this Annual Report on Form 10-K of ANADIGICS, Inc.;

2.       Based upon my knowledge, this Annual Report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this Annual Report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this Annual Report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this Annual Report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         have:

         a)       designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this Annual Report is being prepared;

         b)       evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this Annual Report (the "Evaluation Date");
                  and

         c)       presented in this Annual Report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent functions):

         a)       all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

         b)       any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

6.       The registrant's other certifying officers and I have indicated in this
         annual report whether there were significant changes in internal
         controls or in other factors that could significantly affect internal
         controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.


Date: March 3, 2003

                                                    By:/s/ Bami Bastani
                                                       -------------------------
                                                       Bami Bastani
                                                       President and
                                                       Chief Executive Officer
<PAGE>


                                  CERTIFICATION

I, Thomas Shields, certify that:

1.       I have reviewed this Annual Report on Form 10-K of ANADIGICS, Inc.;

2.       Based upon my knowledge, this Annual Report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this Annual Report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this Annual Report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this Annual Report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         have:

         a)       designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this Annual Report is being prepared;

         b)       evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this Annual Report (the "Evaluation Date");
                  and

         c)       presented in this Annual Report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent functions):

         a)       all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

         b)       any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

6.       The registrant's other certifying officers and I have indicated in this
         annual report whether there were significant changes in internal
         controls or in other factors that could significantly affect internal
         controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.



Date:    March 3, 2003
                                           By:/s/ Thomas C. Shields
                                              --------------------------------
                                              Thomas C. Shields
                                              Senior Vice President
                                              and Chief Financial Officer
<PAGE>


                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>

                                                            ADDITIONS
                                             BALANCE AT     CHARGED TO                 BALANCE AT
                                             BEGINNING      COSTS AND                    END OF
DESCRIPTION                                  OF PERIOD      EXPENSES     DEDUCTIONS      PERIOD
-------------------------------------------  -----------   -----------   ----------     ---------
(DOLLARS IN THOUSANDS)
<S>                                           <C>         <C>          <C>            <C>
Year ended December 31, 2002:
Deducted from asset account:
  Allowance for doubtful accounts............ $    715    $    297     $    (231)(1)   $      781
  Sales return allowance.....................        -           -             - (2)            -
  Reserve for excess and obsolete inventory..    8,502       4,188        (5,556)(3)        7,134
Reserve for warranty claims..................      960        (259)         (333)(4)          368

Year ended December 31, 2001:
Deducted from asset account:
  Allowance for doubtful accounts............ $    275  $       442    $      (2)(1)   $      715
  Sales return allowance.....................      537            -         (537)(2)            -
  Reserve for excess and obsolete inventory..    5,828       12,905      (10,231)(3)        8,502
Reserve for warranty claims..................      403          869         (312)(4)          960

Year ended December 31, 2000:
Deducted from asset account:
  Allowance for doubtful accounts............ $    185    $     173    $     (83)(1)   $      275
  Sales return allowance.....................      300          840         (603)(2)          537
  Reserve for excess and obsolete inventory..    3,136        5,975       (3,283)(3)        5,828
Reserve for warranty claims..................      490          456         (543)(4)          403
</TABLE>


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

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

(2) Sales returns to the allowance account.

(3) Inventory write-offs to the reserve account.

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