UNITED
        STATES
 
 SECURITIES
        AND EXCHANGE COMMISSION
 
 WASHINGTON,
        D.C. 20549
 
 FORM
        10-K




/x/ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005.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 incorporation or organization)
            (I.R.S.
                Employer Identification No.)141
                Mt. Bethel Road, Warren, New Jersey
            07059(Address
                of principal executive offices)
            (Zip
                Code)(908)
                668-5000(Registrant's
                telephone number, including area
                code)


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





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


Common
      Stock, $0.01 par value





The
      above
      securities are registered on the NASDAQ National Market





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





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





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





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





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


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





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





The
      aggregate market value of the voting common equity held by non-affiliates of
      the
      registrant as of July 2, 2005 was approximately $67 million, based upon the
      closing sales price of the registrant’s common equity as quoted on the NASDAQ
      National Market on such date.





The
      number of shares outstanding of the registrant's common stock as of February
      15,
      2006 was 36,479,870 (excluding 113,761 shares held in treasury).





Documents
      incorporated by reference: None.





**2**


**TABLE
      OF CONTENTS**





PagePART
                IItem
                1:
            Business
            3Item
                1A:
            Risk
                Factors
            13Item
                1B:
            Unresolved
                Staff Comments
            20Item
                2:
            Properties
            20Item
                3:
            Legal
                Proceedings
            20Item
                4:
            Submission
                of Matters to a Vote of Security Holders
            20PART
                IIItem
                5:
            Market
                for Registrant’s Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity Securities
            21Item
                6:
            Selected
                Financial Data
            21Item
                7:
            Management’s
                Discussion and Analysis of Financial Condition and
              Results
                of Operations
            22Item
                7A:
            Quantitative
                and Qualitative Disclosures About Market Risk
            27Item
                8:
            Financial
                Statements and Supplementary Data
            29Item
                9:
            Changes
                in and Disagreements with Accountants on Accounting and
              Financial
                Disclosure
            47Item
                9A:
            Controls
                and Procedures
            47Item
                9B:
            Other
                Information
            48PART
                IIIItem
                10:
            Directors
                and Executive Officers of the Registrant
            50Item
                11:
            Executive
                Compensation
            52Item
                12:
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            57Item
                13:
            Certain
                Relationships and Related Transactions
            58Item
                14:
            Principal
                Accounting Fees and Services
            59PART
                IVItem
                15:
            Exhibits,
                Financial Statement Schedules
            61





**3**


PART
      I





ITEM
      1.
      BUSINESS.





**Overview**




ANADIGICS,
      Inc. (“we” or the “Company”) is a leading provider of radio frequency integrated
      circuits (RFIC) and radio frequency (RF) front end solutions in the rapidly
      growing wireless handset and broadband communications markets. Our products
      include power amplifiers (PAs), tuner integrated circuits, active splitters
      and
      other components, which can be sold individually or packaged as integrated
      RF
      modules. In the wireless handset market, we focus on RFIC and RF front end
      solutions for wireless handsets operating over various air interface standards.
      In the broadband market, our focus is on applications for Wireless Local Area
      Networking (WLAN) systems, cable set-top boxes, cable television infrastructure
      systems, worldwide interoperability for microwave access (WiMAX) systems and
      fiber-to-the-premises (FTTP) communications systems. Our integrated solutions
      enable our customers to improve RF performance, power efficiency, reliability
      and time-to-market, while reducing the size, weight and cost of their products.
      We have longstanding customer relationships with several of the industry leaders
      in their respective markets, including LG Electronics Inc. (LG Electronics),
      Samsung Electronics Co., Ltd. (Samsung), KYOCERA Corporation (Kyocera) and Research in Motion Limited (RIM) in the wireless
      handset market; INTEL Corporation (Intel) in the WLAN market; and Scientific-Atlanta, Inc. (Scientific
      Atlanta) and Motorola, Inc. (Motorola) in the cable set-top box and cable
      infrastructure markets. Additionally, in the wireless arena, we have been
      included in reference designs of industry leaders such as Qualcomm Incorporated
      (Qualcomm), Texas Instruments Incorporated (Texas Instruments), Broadcom
      Corporation (Broadcom) and Atheros Communications, Inc. (Atheros).




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





**Current
      Trends and Developments**




We
      believe our business is benefiting from two key trends: (1) an increased dollar
      content of our products per wireless handset, set-top box and WLAN chipset,
      and
      (2) strong unit sales growth in our end markets. We believe that the combination
      of these two trends will enable us to outpace the overall end product unit
      growth in the wireless and broadband markets. For example, in the wireless
      handset market, a key trend is the growing adoption of third-generation, or
      3G,
      wireless handsets that require an additional number of PAs with higher
      performance levels and integration. The complexity of 3G designs coupled with
      our selection in the reference designs of one of the leading 3G wireless chipset
      vendors makes it more difficult for our competitors to displace our products
      and
      allows us to capitalize on the growth in 3G. In the WLAN market, our business
      is
      benefiting from both the continued unit growth in the overall WLAN market as
      well as the growing adoption of the 802.11a/b/g standard, which requires two
      PAs
      in the same chipset as compared to one PA, which was required under the prior
      standard. We are experiencing growth in our semiconductor tuner and active
      splitter business as a result of the increasing popularity of cable set-top
      boxes that incorporate enhanced functionality such as DVRs and high definition
      television (HDTV) reception. In addition, we believe that DTV, TV-in-PC
      applications and a new generation of cable modems based on the DOCSIS 3.0
      standard will increase the addressable market for our semiconductor tuners
      and
      active splitters. We believe our CATV infrastructure business will benefit
      from
      the upcoming launch of 1 GHz products from Scientific Atlanta, which we expect
      will drive an upgrade from the existing 870 MHz standard.




We
      continue to focus on leveraging our technological and manufacturing advantages
      to remain a leading supplier of RFICs and RF front end solutions. We believe
      our
      proprietary InGaP- *plus* TM
      technology, which combines the bipolar technology of a PA (HBT PA) with the
      surface device technology of an RF active switch (pHEMT) on the same die,
      provides us with a competitive advantage in the market place. Our primary fab,
      a
      state-of-the-art six-inch diameter GaAs fab located at our corporate
      headquarters in Warren, New Jersey, has been operational since 1999. Unlike
      traditional CMOS silicon fabs that have short technology lifecycles and require
      frequent capital investments, GaAs fabs are more similar to analog fabs that
      have long lifecycles and do not become quickly outdated. We believe that this
      facility will enable us to capitalize on the growing demand for RFICs. Our
      six-inch wafer fab allows us to produce more than twice the RF die per wafer
      compared with the four-inch wafer fabs still used by some of our competitors.
      We
      believe our strong fabrication capability and available capacity, combined
      with
      integrated product design and logistics expertise, allow us to quickly develop
      and manufacture products to meet market and customer requirements.


**4**


**Industry
      Background**




***Wireless
      Handsets***




According
      to International Data Corporation (IDC), worldwide shipments of wireless
      handsets are expected to grow from 707 million units in 2004 to almost 1 billion
      units in 2009. Growth in the shipments of wireless handsets that use the W-CDMA
      and EDGE standards is expected to significantly outpace the growth in the
      overall number of wireless handset shipments in the next several years.
      According to IDC, the number of wireless handsets manufactured to these new
      technological standards are expected to grow from 40.3 million units shipped
      in
      2004 to 480.9 million by 2009, representing a 64.1% compound annual growth
      rate
      as compared to the expected overall compound annual wireless handset growth
      rate
      of 7.1% during the same period.




Traditionally,
      a single PA supported a chipset contained in a wireless handset. However, the
      adoption of 3G technologies has led to wireless handset designs that use
      multiple PAs capable of working with both older frequencies and the newer 3G
      frequencies. These wireless handsets also require PAs with higher power
      performance specifications and levels of integration.





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




•  Deployment
      of 3G networks and services.




•  New
      subscribers in developing countries.




•  Availability
      of new features and functionality driving replacements.




The
      wireless capabilities of wireless handsets are provided primarily by a
      semiconductor chipset. The key components of a wireless chipset are typically
      a
      PA, transceiver and baseband. The PA boosts the transmit signal, thereby
      providing the necessary range and data throughput. As additional features and
      functionality are incorporated into wireless handsets, increasing demands are
      placed on the wireless handset battery, thereby reducing battery life. The
      high-performance PA is a critical component in the chipset as it directly
      impacts battery life and, consequently, available talk time. We believe our
      differentiated process and design technologies such as High Efficiency at Low
      Power (HELPTM) provide a competitive advantage by enabling us to
      provide PAs that consume less battery power and extend talk time. The adoption
      of 3G networks with HSDPA standard for voice and multimedia is a positive
      catalyst for our 3G PAs since we are the primary PA supplier on Qualcomm’s MSM
      SURF reference design, which is a leading design based on the HSDPA standard.
      3G
      networks not only enable data and multimedia applications, but also provide
      for
      a lower cost per subscriber, and as a result are being quickly adopted by
      network service providers.




In
      addition to wireless handsets and data cards, 3G capability is also being
      embedded within notebook computers. We are a leading participant in this market
      through the use of our technologies in the reference design for Sierra Wireless
      Air cards, as well as in the reference designs of other providers in this
      growing market.




***Broadband
      Communications***




In
      the
      broadband area of our business we sell RFICs used in all areas of the customer
      premises, including the home and office. Currently, broadband communications
      signals enter the customer premises over cable infrastructure or FTTP
      communications systems. In the future, we believe that WiMAX will provide an
      additional means for high speed wireless broadband access to the customer
      premises. Once broadband communications are within the customer premises, they
      are transmitted into cable set-top boxes and other WLAN communications devices
      within the customer premises, including personal computers and printers, as
      well
      as other WLAN-enabled devices. Our customers are some of the leaders of the
      broadband communications industry, including Intel, Motorola and Scientific
      Atlanta. We believe the markets for our broadband products are characterized
      by
      fewer competitors, higher barriers to entry and longer design cycles. In
      addition, current trends in these markets are resulting in an increasing number
      of RFICs being included in a single set-top box and in a single WLAN chipset,
      which we believe will allow us to outpace the overall unit growth in the
      broadband market. We believe our customer relationships with industry leaders,
      including Intel, Scientific Atlanta and Motorola, position us to capitalize
      on
      these trends and expand our broadband business.


**5**


*Wireless
        Local Area Networking (WLAN)*


As
      with
      wireless handsets, the wireless capabilities of WLAN networking products are
      provided primarily by a semiconductor chipset. A WLAN chipset typically contains
      a PA, radio transceiver and a digital media access controller. The PA boosts
      the
      transmit signal, thereby improving the range and data throughput. Traditionally,
      a single PA supported each WLAN chipset. Recently, WLAN products have begun
      requiring dual-band designs which incorporate an additional PA.




Over
      the
      past few years, technology based upon the widely adopted 802.11b specification
      has been replaced by the 802.11g specification, which has become the mainstream
      WLAN technology. The industry is now migrating to the dual-band 802.11a/b/g
      standard. Dual band designs which operate at multiple frequencies and require
      two PAs to operate instead of one are expected to have a 103.1% compound annual
      growth rate from 2004 to 2009 according to IDC. We are the primary supplier
      to
      Intel, the leading manufacturer of WLAN chipsets for the notebook computer
      market and expect to benefit from both the unit growth and increased PA content
      in dual-band WLAN chips. The 802.11 Pre-n and 802.11n standards for multimedia
      products, also known as MIMO (Multi Input Multi Output), are expected to have
      a
      233.2% compound annual growth rate from 2004 to 2009 according to IDC. We hold
      a
      strong portfolio of products in this emerging market.




Not
      only
      are notebook computers increasingly being shipped with embedded WLAN
      functionality, but WLAN functionality is now being embedded in other consumer
      electronic devices such as cameras, printers, audio devices, mobile phones
      and
      gaming consoles. We are currently designed into wireless access points and
      printers through Broadcom and “smart” wireless handsets with Atheros, and we are
      actively engaged in discussions to be included in the reference designs of
      other
      leading WLAN chipset providers for these applications.




*Cable
      set-top boxes and other semiconductor tuner markets*




The
      market for set-top boxes is being shaped by several key trends. Set-top boxes
      are incorporating advanced functionality such as DVR, HDTV, wireless internet
      access, interactive services, home networking and gaming. These new features
      are
      driving demand for both new and replacement set-top boxes. According to IDC,
      worldwide shipments of cable set-top boxes with DVR functionality are expected
      to grow at a 26.1% compound annual growth rate from 2004-2009, which is
      significantly higher than the projected growth rate of the overall cable set-top
      box market. As a long-term supplier to Motorola and Scientific Atlanta, we
      are
      well positioned to benefit from this trend. High-end set-top boxes with DVRs
      require multiple semiconductor tuners and an active splitter. As the demand
      for
      this type of high-end set-top box continues to grow, the demand for the
      components we manufacture increases even more rapidly.




We
      believe that DTV, TV-in-PC applications and next-generation cable modems will
      increase the addressable market for semiconductor tuner products. A key driver
      for the growth of the DTV market is the Federal Communications Commission
      mandate which requires that by 2009, all television broadcasts in the U.S.
      must
      use the digital transmission standard. In preparation for this deadline,
      additional mandates require television sets sold in the U.S. to contain DTV
      tuners. The increased popularity of multimedia personal computers is also
      driving the television tuner market. Tuners integrated into personal computers,
      either directly or as part of receiver add-on cards, enable the viewing of
      cable
      or broadcast programming on the personal computer. Our new tuner products
      support both the DTV transition and multimedia personal computer applications.
      We also believe that as the cable modem market transitions to the new DOCSIS
      3.0
      standard it will provide an additional opportunity for our semiconductor tuners
      and other components. The DOCSIS 3.0 standard uses multiple channels
      simultaneously to provide wider bandwidth and higher data throughput and we
      are
      developing new products for this standard.




*Worldwide
      Interoperability for Microwave Access (WiMAX)*




WiMAX
      is
      an emerging wireless standard that provides high-throughput broadband
      connections over long distances. According to IDC, WiMAX chipset shipments
      are
      expected to grow from 15,000 units shipped in 2005 to 10.7 million units shipped
      by 2008. Although the WiMAX market is still in an early stage of development,
      we
      believe there is significant opportunity for future growth and we have formed
      relationships with leading equipment and chipset vendors in this
      market.


**6**


*CATV
      infrastructure and FTTP*




We
      are a
      leading supplier of 12V and 24V line amplifier RFICs, drop amplifiers and
      photodetector diodes to the cable infrastructure market. This market is
      experiencing growth as a result of increasing cable television infrastructure
      bandwidth, the increased deployment of CATV fiber nodes, FTTP, Local Area
      Networks (LAN), Metropolitan Area Networks (MAN) and Storage Area Networks
      (SAN). We are participating in the upgrade in infrastructure bandwidth through
      our collaboration with Scientific Atlanta. Historically, we have enjoyed long
      product life cycles in these markets.




**Our
      Strategy**




Our
      objective
      is to be the leading supplier of RFICs for the wireless and broadband
      communications markets. The key elements of our strategy include:




•  ***Focus
      on gross margin expansion.*** We
      seek to expand our gross margins and profitability by focusing on those
      products and markets where we currently enjoy a leading market position and
      have
      strong technological leadership.
      We intend to focus on supplying products in the following markets for this
      purpose: (1) semiconductor tuners and active splitters for the growing market
      of
      set-top boxes with DVRs and DTV and PC-TV, (2) highly integrated PAs for 3G/EDGE
      wireless handsets, (3) PAs for multi-band WLAN chipsets, and (4) infrastructure
      products for the cable and WiMAX markets. In addition, we believe that our
      gross
      margins will expand to the extent we acheive increased utilization of our
      fab.




•  ***Expand
      existing relationships with industry leaders.*** Because
      only a few wireless chipset providers lead the wireless handset market,
      selection in these companies’ reference designs is critical to driving component
      sales to wireless handset manufacturers. We have been selected in reference
      designs at Qualcomm, Texas Instruments and MediaTek-AEI, Inc. (Medi a Tek),
      three of the leading wireless chipset providers. We believe that expanding
      our
      relationships with these companies will continue to contribute to future growth
      and market share gains.




•  ***Focus
      on tier-one customers.***  Our
      customers include tier-one manufacturers in our target markets,
      including Intel,
      Motorola, Scientific Atlanta, Samsung and LG Electronics. We believe that as
      industry leaders these companies will benefit from the positive trends in their
      respective markets. We intend to continue to focus on building customer
      relationships with these market leaders, as well as to expand our tier-one
      customer base.




•  ***Continue
      to focus on the RF front end.*** In
      the wireless handset and WLAN markets, we intend to remain focused exclusively
      on developing solutions in the RF front end. By remaining focused on the RF
      front end we will leverage our efficient use of research and development
      spending and our high degree of business compatibility with our chipset
      partners.




•  ***Expand
      business in Asia.*** We
      believe that sales to wireless handset manufacturers in Asian markets represent
      a significant growth opportunity for our business. These manufacturers represent
      global tier-one suppliers such as Samsung and LG Electronics, major original
      design manufacturers (ODMs) and leading Asian wireless handset manufacturers
      such as Huawei Technologies Co., Ltd., ZTE Corporation and TCL Communication
      Technology. Not only do these manufacturers export their products to North
      America, South America and Europe, but they also use our products in wireless
      handsets to supply their growing domestic markets. Asian handset manufacturers
      tend to more closely follow the reference designs of leading wireless chipset
      providers. As a result, we intend to leverage our selection in the reference
      designs of Qualcomm, Texas Instruments and MediaTek to further penetrate the
      growing Asian market.




•  ***Pursue
      new growth opportunities and markets.*** We
      intend to selectively expand our product portfolios to take advantage of new
      growth opportunities and markets. For example, in the wireless handset market,
      we recently introduced a PA product for the GSM standard and have successfully
      expanded our share of this market. In the broadband market, we intend to pursue
      future growth areas resulting from the increasing adoption of DTV, the emergence
      of the WiMAX standard and the migration in cable modem technology to DOCSIS
      3.0.
      We have existing customer and other business relationships with companies that
      are leading these market changes. We intend to leverage these relationships
      and
      our existing technology and expertise to grow our business in these
      areas.


**7**


•  ***Leverage
      our RF design, differentiated leading-edge technology and manufacturing
      capabilities.*** We
      intend to use our RF design and manufacturing capabilities to continue to
      develop products with high performance, power efficiency and reliability, while
      reducing their size, weight and cost. We expect to continue to apply our
      proprietary InGaP- *plus* TMtechnology to achieve a high level of integration in our products and
      reduce our costs of production. In addition, we will focus on increasing the
      utilization of our six-inch wafer fab, which allows us to produce more than
      twice the RF die per wafer compared with the four-inch wafer fabs still used
      by
      some of our competitors.




**Products**




We
      classify our revenues based upon the end application of the product in which
      our
      integrated circuits are used. For the years ended December 31, 2003, 2004 and
      2005, wireless handset applications accounted for approximately 55%, 50% and
      49%, respectively, of our total net sales, while broadband applications
      accounted for approximately 45%, 50% and 51%, respectively, of our total net
      sales.




***Wireless
      Handsets***




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




**Product**
              **Application**Handset
                  ProductsPower
                  Amplifier (PA)
              Used
                  in RF transmit chain of wireless handset to amplify signal to base
                  station.Single-band
                  PA module
              Encapsulates
                  InGaP HBT PA die and certain passive components in multi-layer
                  laminate
                  module. Used primarily in CDMA and W-CDMA handsets.HELPTM
                  PA Module
              High
                  Efficiency at Low Power PA that lowers average power consumption
                  by 50%.
                  Used primarily in CDMA and W-CDMA handsets.Quad-band
                  PA module
              Encapsulates
                  InGaP HBT PA die, CMOS bias control chip, and certain passive components
                  in multi-layer laminate module. Used primarily in GSM and EDGE
                  handsets.PowerPlexerTM
              RF
                  front end module, which encapsulates two InGaP HBT PA die, CMOS,
                  bias and
                  power control chip, antenna switch, coupler, harmonic filter and
                  passives
                  in multi-layer laminate module. Used in GSM handsets.RF
                  Switches
              Used
                  in wireless handsets and other wireless applications to switch
                  between
                  receive and transmit modes and multiple frequency
                  bands.
 Our
        principal
        customers in the wireless handset market include World Peace Group and LG
        Electronics. Of our total net sales in the year ended December 31, 2005,
        World
        Peace Group and LG Electronics accounted for approximately 16% and 11%,
        respectively, while no other customer in this market accounted for 10% or
        more
        of our total net sales during 2005.




***Broadband
      Communications***




The
      Broadband segment of our business encompasses our key markets in video and
      data
      telecommunications systems, primarily consisting of CATV, WLAN, WiMAX and fiber
      optic applications.


**8**


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




**Product**
              **Application****CATV
                  Set-Top Boxes Products**Tuner
                  Upconverters and Downconverters
              Used
                  to perform signal amplification and frequency conversion in
                  double-conversion video and data tuners.Active
                  Splitters
              Used
                  to split an incoming signal to feed multiple tuners.Integrated
                  Tuners
              Used
                  to integrate tuner upconverters, downconverters and synthesizers
                  in a
                  single package.**CATV
                  Infrastructure Products**Line
                  Amplifiers
              Used
                  to distribute RF signals from headends to subscribers.Drop
                  Amplifiers
              Used
                  to amplify RF signals at individual subscriber
                  locations.Photodetector
                  Diodes
              Used
                  to convert from optical to RF
                  signals.




No
      customer in our cable and broadcast markets accounted for 10% or more of our
      total net sales in 2005.




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




Product  **Application**




**WLAN
      Products**





2.4
                GHz PAs
            Used
                in wireless network interface cards (NIC), embedded notebook computers
                (mini-PCI) and access point (AP) applications to boost the transmit
                signal
                for increased range and data
                throughput.





5
                GHz PAs
            Used
                in wireless rich-media applications, such as streaming audio/video,
                to
                boost the transmit signal for increased range and data
                throughput.





Dual
                band PAs
            Used
                in wireless network systems that require seamless transition between
                frequencies to mitigate interference and
                congestion.





MIMO
                PAs
            Used
                in multimedia applications for higher data throughput and greater
                WLAN
                coverage.







For
      the year
      ended December 31, 2005, Intel accounted for approximately 14% of our total
      net
      sales. No other customer in this market accounted for 10% or more of our total
      net sales in 2005.


**9**


**Marketing,
      Sales, Distribution and Customer Support**




We
      primarily sell our products to our direct 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 distributors to complement our direct sales
      and customer support efforts. In certain geographies such as Asia, we
      increasingly use value-added distributors such as Richardson Electronics Ltd.
      (Richardson Electronics), Takachiho Koheki Co., Ltd. and World Peace Group,
      one
      of the largest distribution businesses in Asia. Many of our customers are
      serviced through Richardson Electronics in the United States, Europe and Korea,
      while World Peace Group primarily focuses on China and Taiwan. Our relationship
      with World Peace Group enables us to manage our inventories and payment terms
      in
      China with a single entity. World Peace Group’s vast sales network also provides
      us access to tier-one customers in China. 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 building and maintaining close relationships with
      our customers. Our sales and marketing staff, which is assisted by our technical
      staff and senior management, visit prospective and existing customers worldwide
      on a regular basis. Our design and applications engineering staff actively
      communicate with customers during all phases of design and production. We have
      highly specialized field application engineering teams near our customers in
      Korea, Taiwan and China, as well as a system application team in Denmark, which
      is located near Texas Instruments’ reference design team in Denmark. We believe
      that these contacts are vital to the development of close, long-term working
      relationships with our customers, and in obtaining regular forecasts, market
      updates and information regarding technical and market trends.




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




**Process
      Technology, Manufacturing, Assembly and Testing**




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




***Manufacturing*** ****




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




Our
      Warren facility has a 19,000 square foot fab, including 10,000 square feet
      of
      Class 100 clean room space. At December 31, 2005, our weekly capacity was 575
      equivalent six-inch HBT wafers. We believe that based upon the available clean
      room space in our Warren facility we have the ablility, with the incremental
      addition of capital equipment, to increase the weekly production capacity to
      as
      much as 1,500 equivalent six-inch HBT wafers in response to market
      conditions.




Our
      Warren fab was first certified as ISO 9001 compliant in December 1993. Since
      that time, we have updated our compliance to the ISO 9001:2000 upgrade of this
      standard. In 2004, we also received ISO 14001 certification.




Our
      manufacturing process technology includes our two-inch InP process in Camarillo
      where we have a 2,000 square foot clean room facility, which houses our InP
      detector production. Production capacity is currently seven two-inch-or-less
      InP
      wafers per week, per shift. Our Camarillo facility is ISO 9001:2000
      certified.




***Assembly***




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




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




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


**10**


***Final
      Test***




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




**Raw
      Materials**




GaAs
      wafers, InP wafers, HBT/pHEMT epitaxial wafers, passive components, other raw
      materials, and equipment used in the production of our ICs are available from
      a
      limited number of sources.




**Research
      and Development**




We
      have
      made significant investments in our proprietary processes, including product
      design and wafer fabrication, which we believe gives us a competitive advantage.
      Research and development expenses were $32.1 million, $33.3 million and $29.9
      million in 2003, 2004 and 2005, respectively. We continue to focus our research
      and development on PAs and front end modules for GSM, GPRS, EDGE, CDMA and
      W-CDMA in the wireless market, and on semiconductor tuners, active splitters,
      WLAN, WiMAX, CATV infrastructure and FTTP in the broadband market.




Our
      wireless PA capability has expanded from plastic-packaged GaAs RFIC products
      to
      RF modules incorporating multiple technologies. This capability is critical
      to
      encapsulating RF intellectual property and know-how into a module that may
      be
      used to shrink the time-to-market for wireless handset manufacturers. Our RF
      PA
      modules use a multi-layer laminate substrate to combine our proprietary InGaP
      HBT PA ICs 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 this technology in-house, as we believe
      there will be adequate external foundry capacity available.




**Customers**




We
      receive most of our revenues from a few significant customers. Sales to World
      Peace Group, Intel and LG Electronics accounted for 16%, 14%, and 11%,
      respectively, of total net sales during 2005.




**Employees**




As
      of
      December 31, 2005, we had 439 employees, including 6 employees in Denmark,
      5 of
      whom were members of the Danish Engineering Union. We believe our labor
      relations to be good and we have never experienced a work stoppage.




**Competition**




We
      compete with U.S. and international semiconductor and integrated circuit
      manufacturers of all sizes. Our key competitors in the wireless handset market
      are RF Micro Devices, Inc. and Skyworks Solutions, Inc.




Within
      our broadband market, which includes the cable set-top box, WLAN, WiMAX and
      CATV
      infra-structure markets, our competitors are also primarily manufacturers of
      both discrete components and ICs. Our key competitors are Microsemi Corp.,
      Sirenza Micro Devices and Microtune, Inc., 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 than we do. Increased competition could adversely affect
      our revenue and profitability through price reductions or reduced demand for
      our
      products.


**11**


**Patents,
      Licenses and Proprietary Rights**




It
      is our
      practice to seek U.S. patent and copyright protection on our products and
      developments where appropriate and to protect our valuable technology under
      U.S.
      laws affording protection for trade secrets and for semiconductor chip designs.
      We own 49 U.S. patents and have seventeen pending U.S. patent applications.
      The
      U.S. patents were issued between 1988 and 2006 and will expire between 2006
      and
      2024.




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.




**Environmental
      Matters**




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




**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.anadigic s .com )
      as soon
      as reasonably practicable after we electronically file the material with, or
      furnish it to, the Securities and Exchange Commission.


**12**




ITEM
      1A.
      RISK FACTORS





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





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





**Risks
      Related to ANADIGICS**







***We
      have a history of recent losses, and expect to continue to incur
      losses.***




We
      have
      incurred operating and net losses in each of the three years in the period
      ended
      December 31, 2005, and may continue to incur losses in 2006. Although we
      continue to gain increased market acceptance for certain of our products, we
      cannot assure you as to when or whether we will become profitable
      again.




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




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




•  time-to-market;




•  timely
      new product innovation;




•  product
      quality, reliability and performance;




•  product
      price;




•  features
      available in products;




•  compliance
      with industry standards;




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




•  access
      to
      and protection of intellectual property.




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




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


**13**


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




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




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




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




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




We
      depend on
      a limited number of vendors to supply the equipment used in our manufacturing
      processes. When demand for semiconductor manufacturing equipment is high, lead
      times for delivery of such equipment can be substantial. We cannot assure you
      that we would not lose potential sales if required manufacturing equipment
      is
      unavailable and, as a result, we are unable to maintain or increase our
      production levels. A delay for any reason in increasing capacity would limit
      our
      ability to increase sales volumes. 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
      depend on a small number of customers; a loss of or a decrease in purchases
      and/or change in purchasing patterns by one of these customers could materially
      and adversely affect our revenues and our ability to forecast
      revenue.***




We
      receive a significant portion of our revenues from a few significant customers
      and their subcontractors. Sales to World Peace Group, Intel and LG Electronics
      accounted for approximately 16%, 14% and 11%, respectively, of our total net
      sales during 2005. Sales to our greater than 10% customers have exceeded
 40% of total net sales in each of the last three fiscal years. Our
      financial condition and results of operations have been materially and adversely
      affected in the past by the failure of anticipated orders to be realized and
      by
      deferrals or cancellations of orders as a result of changes in customer
      requirements. If we were to lose any of our major customers, or if sales to
      these customers were to decrease materially, our financial condition and results
      of operations could be materially and adversely affected.


**14**


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




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




***We
      may face interruptions in our manufacturing
      processes.***




Our
      manufacturing operations are complex and subject to disruption, including for
      causes beyond our control. The fabrication of integrated circuits is an
      extremely complex and precise process consisting of multiple steps. It requires
      production in a highly controlled, clean environment. Minor impurities,
      contamination of the clean room environment, errors in any step of the
      fabrication process, defects in the masks used to print circuits on a wafer,
      defects in equipment or materials, human error, or a number of other factors
      can
      cause a substantial interruption in our manufacturing processes.




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




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




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




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




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




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




•  impurities
      in the materials used;




•  operator
      errors;




•  contamination
      of the manufacturing environment; and




•  equipment
      failure.


**15**


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




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




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




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




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




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




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




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




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




•  levels
      of
      inventory in our end markets;




•  availability
      and cost of products from our suppliers;




•  the
      gain
      or loss of significant customers;




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




•  new
      product and technology introductions by competitors;




•  changes
      in the mix of products produced and sold;




•  market
      acceptance of our products and our customers; and




•  intellectual
      property disputes.




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


**16**


***Decline
      in
      our revenues and the underutilization of our manufacturing capacity have in
      the
      past and may continue to adversely affect our gross margins and
      profitability.***




Our
      manufacturing infrastructure and capacity were designed to address significantly
      higher product demand levels than we have recently experienced and consequently
      we have in the recent past and may in the future continue to underutilize our
      manufacturing capacity. Many of our expenses, particularly those relating to
      capital equipment and manufacturing overhead, are fixed. Accordingly, our fixed
      production costs increase as a percentage of revenues during a period of
      declining revenues, 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. Improved utilization of our manufacturing capacity will depend on
      continued growth in demand for our products.




***Our
      products
      have experienced significant declines in unit prices.***




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




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




In
      the
      future, we may need to access sources of financing to fund our growth. Taking
      into consideration our cash balance as of December 31, 2005, including
      marketable securities of $86.4 million, our $46.7 million in outstanding senior
      convertible unsecured notes due November 2006 and our $38.0 million in
      outstanding senior convertible unsecured notes due October 2009, we believe
      that
      our existing sources of liquidity, together with cash expected to be generated
      from operations, will be sufficient to fund our research and development,
      capital expenditure, working capital and other financing requirements for at
      least the next twelve months.




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




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




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




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




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




Sales
      to
      customers located outside of the United States and Canada (based on shipping
      addresses and not on the locations of ultimate end users) accounted for 49%,
      61%
      and 61% of our net sales for the years ended December 31, 2003, 2004 and 2005,
      respectively. We expect that international sales will continue to represent
      a
      significant portion of our net sales. In addition, independent third parties
      located in Asia supply a substantial portion of the starting wafers and
      packaging components that we use in the production of gallium arsenide
      integrated circuits, and assemble and test nearly all of our
      products.


**17**


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




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




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




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




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




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


**18**


***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.***




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




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




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




•  our
      operating results and prospects;




•  the
      operating results and prospects of our major customers;




•  announcements
      by our competitors;




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




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




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




•  general
      financial and other market conditions; and




•  domestic
      and international economic conditions.




Public
      stock
      markets have recently experienced extreme price and trading volume volatility,
      particularly in the technology sectors of the market. This volatility
      significantly affected and may in the future affect the market prices of
      securities of many technology companies for reasons frequently unrelated to
      or
      disproportionately impacted by the operating performance of these companies.
      These broad market fluctuations may materially and adversely affect the market
      price of our common stock.




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




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


**19**


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




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





ITEM
      1B.
      UNRESOLVED STAFF COMMENTS





Not
      applicable.





ITEM
      2.
      PROPERTIES.





Our
      executive
      offices and primary fabrication facility are located at 141 Mt. Bethel Road,
      Warren, New Jersey 07059. We currently lease space in several buildings in
      Warren, New Jersey, 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. Additionally, we lease an
      approximately 22,000 square foot building in Camarillo, California. The lease
      expires on July 31, 2007; however the term may be extended for an additional
      two-year period. We leased approximately 92,500 square feet of office and
      laboratory space at 35 Technology Drive in Warren, New Jersey under a
      twelve-year lease that expired on May 1, 2005 and we have since vacated the
      premises. Prior to the expiration of the lease we sublet a portion of the space
      to reduce costs, while over half the space remained vacant.




We
      also lease
      approximately 32,000 square feet in aggregate of office space in the following
      locations: Richardson, Texas; Atlanta, Georgia; Aalborg, Denmark; Rehovot,
      Israel; Taipei, Taiwan; Shanghai, China; and South Korea under lease agreements
      with remaining terms ranging from four to twenty months that can be extended,
      at
      our option. The space in Rehovot, Israel has been sublet in order to reduce
      costs.





ITEM
      3.
      LEGAL PROCEEDINGS.




We
      are 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 or results of operation.





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 2005.





**20**


PART
      II





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




Our
      $0.01 par
      value Common Stock, (“Common Stock”) has been quoted on the NASDAQ 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
            
            
            LowCalendar
                2005Fourth
                Quarter
            
            $
            6.30
            
            $
            3.05Third
                Quarter
            
            
            3.55
            
            
            1.70Second
                Quarter
            
            
            1.95
            
            
            1.26First
                Quarter
            
            
            3.80
            
            
            1.43Calendar
                2004Fourth
                Quarter
            
            $
            3.92
            
            $
            2.65Third
                Quarter
            
            
            5.15
            
            
            3.21Second
                Quarter
            
            
            7.04
            
            
            4.17First
                Quarter
            
            
            9.11
            
            
            5.65




As
      of
      December 31, 2005, there were 34,893,077 shares of Common Stock outstanding
      (excluding Treasury) and 627 holders of record of the Common Stock.





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




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





ITEM
      6.
      SELECTED FINANCIAL DATA.




The
      selected
      financial data set forth below should be read in conjunction with Item 7,
      "Management's Discussion and Analysis of Financial Condition and Results of
      Operations", and our financial statements, related notes and other financial
      information included herein. The selected consolidated financial data set forth
      below as of December 31, 2005 and 2004 and for the years ended December 31,
      2005, 2004, and 2003 have been derived from our audited financial statements
      included herein. The selected consolidated financial data set forth below as
      of
      December 31, 2003, 2002 and 2001 and for the years ended December 31, 2002
      and
      2001 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.





2001
            
            
            2002
            
            
            2003
            
            
            2004
            
            
            2005RESULTS
                OF OPERATIONSNet
                sales
            
            $
            84,765
            
            $
            82,564
            
            $
            75,212
            
            $
            91,350
            
            $
            108,281Gross
                (loss) profit
            
            
            (2,932
            )
            
            7,262
            
            
            3,285
            
            
            13,995
            
            
            22,352Operating
                loss
            
            
            (85,986
            )
            
            (65,565
            )
            
            (50,998
            )
            
            (41,822
            )
            
            (28,727
            )Loss
                before income taxes
            
            
            (82,782
            )
            
            (52,183
            )
            
            (51,139
            )
            
            (43,082
            )
            
            (31,233
            )Net
                loss
            
            
            (107,120
            )
            
            (55,886
            )
            
            (50,757
            )
            
            (43,082
            )
            
            (31,233
            )Loss
                per share:Basic
            
            $
            (3.54
            )
            $
            (1.83
            )
            $
            (1.65
            )
            $
            (1.33
            )
            $
            (0.92
            )Diluted
            
            $
            (3.54
            )
            $
            (1.83
            )
            $
            (1.65
            )
            $
            (1.33
            )
            $
            (0.92
            )BALANCE
                SHEET DATA:Total
                cash and marketable securities
            
            $
            200,095
            
            $
            155,518
            
            $
            121,630
            
            $
            104,051
            
            $
            86,357Working
                capital
            
            
            132,062
            
            
            110,151
            
            
            81,100
            
            
            89,517
            
            
            52,007Total
                assets
            
            
            346,914
            
            
            255,671
            
            
            207,898
            
            
            185,895
            
            
            168,273Total
                capital lease obligations
            
            
            94
            
            
            -
            
            
            90
            
            
            18
            
            
            2,032Long-term
                debt, including current portion
            
            
            100,244
            
            
            66,700
            
            
            66,700
            
            
            84,700
            
            
            84,700Total
                stockholders’ equity
            
            
            226,636
            
            
            171,088
            
            
            121,046
            
            
            84,615
            
            
            58,135




**21**





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





OVERVIEW




We
      are a
      leading provider of radio frequency integrated circuits (RFIC) and radio
      frequency (RF) front end solutions in the rapidly growing wireless handset
      and
      broadband communications markets. Our products include power amplifiers (PAs),
      tuner integrated circuits, active splitters and other components, which can
      be
      sold individually or packaged as integrated RF modules. In the wireless handset
      market, we focus on RFIC and RF front end solutions for wireless handsets
      operating over various air interface standards. In the broadband market, our
      focus is on applications for Wireless Local Area Networking (WLAN) systems,
      cable set-top boxes, cable television infrastructure systems, worldwide
      interoperability for microwave access (WiMAX) systems and fiber-to-the-premises
      (FTTP) communications systems. Our integrated solutions enable our customers
      to
      improve RF performance, power efficiency, reliability and time-to-market, while
      reducing the size, weight and cost of their products. We have longstanding
      customer relationships with several of the industry leaders in their respective
      markets, including LG Electronics Inc. (LG Electronics), Samsung Electronics
      Co., Ltd. (Samsung), KYOCERA Corporation (Kyocera) and Research in Motion
      Limited (RIM) in the wireless handset market; INTEL Corporation (Intel) in
      the
      WLAN market; and Scientific-Atlanta, Inc. (Scientific Atlanta) and Motorola,
      Inc. (Motorola) in the cable set-top box and cable infrastructure markets.
      Additionally, in the wireless arena, we have been included in reference designs
      of industry leaders such as Qualcomm Incorporated (Qualcomm), Texas Instruments
      Incorporated (Texas Instruments), Broadcom Corporation (Broadcom) and Atheros
      Communications, Inc. (Atheros).




We
      continue
      to focus on leveraging our technological and manufacturing advantages to remain
      a leading supplier of RFICs and RF front end solutions. We believe our
      proprietary InGaP-plusTM technology, which combines the bipolar
      technology of a PA (HBT PA) with the surface device technology of an RF active
      switch (pHEMT) on the same die, provides us with a competitive advantage in
      the
      market place. Our primary fab, a state-of-the-art six-inch diameter GaAs fab
      located at our corporate headquarters in Warren, New Jersey, has been
      operational since 1999. Unlike traditional CMOS silicon fabs that have short
      technology lifecycles and require frequent capital investments, GaAs fabs are
      more similar to analog fabs that have long lifecycles and do not become quickly
      outdated. We believe that this facility will enable us to capitalize on the
      growing demand for RFICs. Our six-inch wafer fab allows us to produce more
      than
      twice the RF die per wafer compared with the four-inch wafer fabs still used
      by
      some of our competitors. We believe our strong fabrication capability and
      available capacity, combined with integrated product design and logistics
      expertise, allow us to quickly develop and manufacture products to meet market
      and customer requirements.




We
      have fixed
      expenses particularly relating to capital equipment and manufacturing overhead.
      Accordingly, decreases in unit volume throughput result in our fixed production
      costs increasing as a percentage of revenue, which adversely affects our gross
      margin and profitability. We will continue to invest in selected strategic
      research and development programs to maintain our competitive position.




We
      experienced net sales growth in 2004 primarily due to increased demand for
      our
      broadband products, including our WLAN, cable set-top box and cable television
      infrastructure products. We also experienced increased demand for our wireless
      products including our RF modules for wireless handsets. In 2004, the growth
      in
      our wireless market was less than the growth in our broadband
      market.




We
      continued
      to experience net sales growth in 2005 resulting from the increased demand
      for
      our wireless products; particularly our PAs used in wireless handsets and other
      handheld devices. Broadband product net sales growth continued as demand
      increased for our WLAN PAs, and tuner integrated circuits and active splitters
      for our CATV markets.




We
      believe
      our markets are, and will continue to remain, competitive, which could result
      in
      continued quarterly volatility in our net sales and therefore cause continued
      fluctuations in our profitability. As a result of the ongoing market shift
      to
      newer and smaller RF modules, average selling prices may continue to decrease,
      which could adversely affect our gross margin and profitability.




We
      have only
      one reportable segment. For financial information related to such segment and
      certain geographic areas, see Note 5 to the accompanying consolidated financial
      statements.


**22**





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




Revenue
      from
      product sales is recognized when the title, risk and rewards of product
      ownership are transferred to the customer, price and terms are fixed, no
      significant vendor obligation exists and collection of the resulting receivable
      is reasonably assured. We sell to certain distributors who are granted rights
      of
      return and exchange and certain price protection. Revenue is not recognized
      for
      the portion of shipments subject to return, exchange or price protection until
      such rights expire. 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.





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.





LONG-LIVED
      ASSETS




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





*Goodwill
      and
      intangibles impairment*


We
      have
      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.





*Impairment
      of
      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
      flows 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.





DEFERRED
      TAXES




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




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


**23**


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.





ALLOWANCE
      FOR DOUBTFUL ACCOUNTS




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





STOCK-BASED
      COMPENSATION




In
      certain
      instances, accounting principles generally accepted in the United States allow
      for the selection of alternative accounting methods. At December 31, 2005,
      two
      alternative methods for accounting for stock options were available; the
      intrinsic value method and the fair value method. For the years ended December
      31, 2003, 2004 and 2005, we used the intrinsic value method of accounting for
      stock options, and accordingly, no compensation expense was recognized. Under
      the fair value method, the determination of the pro forma amounts involves
      several assumptions, including option term until exercise and future stock
      price
      volatility. If the fair value method were used, basic and diluted loss per
      share
      for fiscal 2003, 2004 and 2005 would have been ($1.91), ($1.62) and ($0.95),
      as
      compared to reported basic and diluted loss per share of ($1.65), ($1.33) and
      ($0.92), respectively. Effective January 1, 2006, we will be required under
      Statement of Financial Accounting Standards (SFAS) 123 (revised 2004),
“Share-Based Payment,” which is a revision of SFAS 123, “Accounting for
      Stock-Based Compensation”, to implement the fair value method and recognize
      compensation expense for stock options granted. See Note 1 to the Consolidated
      Financial Statements.





RESULTS
      OF OPERATIONS




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





2003
            
            
            2004
            
            
            2005Net
                sales
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Cost
                of sales
            
            
            95.6
            
            
            84.7
            
            
            79.4Gross
                profit
            
            
            4.4
            
            
            15.3
            
            
            20.6Research
                and development expense
            
            
            42.7
            
            
            36.5
            
            
            27.6Selling
                and administrative expenses
            
            
            25.8
            
            
            24.6
            
            
            19.6Restructuring
                and other charges
            
            
            1.2
            
            
            -
            
            
            (0.1
            )Purchased
                in-process R & D
            
            
            2.5
            
            
            -
            
            
            -Operating
                loss
            
            
            (67.8
            )
            
            (45.8
            )
            
            (26.5
            )Interest
                income
            
            
            4.4
            
            
            2.4
            
            
            2.3Interest
                expense
            
            
            (5.0
            )
            
            (4.5
            )
            
            (4.6
            )Gain
                on repurchase of Convertible notes
            
            
            -
            
            
            0.4
            
            
            -Other
                income
            
            
            0.4
            
            
            0.3
            
            
            0.0Loss
                before income taxes
            
            
            (68.0
            )
            
            (47.2
            )
            
            (28.8
            )Benefit
                from income taxes
            
            
            (0.5
            )
            
            -
            
            
            -Net
                loss
            
            
            (67.5
            %)
            
            (47.2
            %)
            
            (28.8
            %)





2005
      COMPARED TO 2004




NET
      SALES.
      Net sales in 2005 increased 18.5% to $108.3 million, compared to $91.3 million
      for 2004. The increase in net sales of $17.0 million was primarily due to i)
      an
      increase of $16.4 million in our sales of GSM PA products used in wireless
      handsets, ii) an increase of $8.2 million in our sales of WLAN PAs used in
      the
      network computer market and iii) an increase of $2.4 million in our sales of
      tuner and active splitter products used in the cable set-top box market.
      Partially offsetting these increases were i) a decrease of $5.9 million in
      our
      sales of CDMA PAs and ii) a decrease of $2.3 million in our sales of switch
      products used in wireless handsets. The decline in net sales of CDMA PAs was
      primarily due to a transition in 2005 to lower-priced next generation PA modules
      and declines in average selling prices. The decline in net sales of switch
      products was primarily due to our decision to reduce our research and
      development expenditures in this product line.


**24**


Specifically,
      net sales in 2005 of our wireless products increased 17.1% to $53.2 million
      compared to $45.4 million for 2004. Net sales in 2005 of our broadband products
      increased 19.9% to $55.1 million compared to $46.0 million in 2004.




GROSS
      MARGIN.
      Gross margin for 2005 improved to 20.6% of net sales, compared with 15.3% of
      net
      sales in the prior year. The increase in gross margin from the prior year is
      the
      result of increased sales and production volumes with consequent absorption
      of
      fixed costs. The decrease in our depreciation expense of $4.1 million offset
      declines in average selling prices.




RESEARCH
      & DEVELOPMENT. Company sponsored research and development expenses decreased
      10.2% during 2005 to $29.9 million from $33.3 million during 2004 primarily
      due
      to decreased headcount and related compensation expense.




SELLING
      AND
      ADMINISTRATIVE. Selling and administrative expenses decreased 5.4% during 2005
      to $21.3 million from $22.5 million in 2004. The decrease was primarily due
      to
      decreased headcount, compensation expense and related costs within sales and
      marketing.




RESTRUCTURING
      AND OTHER CHARGES. During 2005, we settled an exit obligation for certain
      redundant leasehold premises resulting in a savings of $0.1 million against
      a
      previously recorded restructuring charge.




Activity
      and
      liability balances related to the restructuring and other charges for the years
      ended December 31, 2004 and 2005 are as follows (in millions):





Lease
                RelatedYear
                ended December 31, 2004:Beginning
                balance
            
            $
            2.0Deductions
            
            
            (1.3
            )December
                31, 2004 restructuring balance
            
            
            0.7Year
                ended December 31, 2005:Deductions
            
            
            (0.6
            )Savings
                on settlement of obligation
            
            
            (0.1
            )December
                31, 2005 restructuring balance
            
            
            -




INTEREST
      INCOME. ****** Interest
      income increased 12% to $2.5 million during 2005 from $2.2 million in 2004.
      The
      increase was due to higher average interest rates.




INTEREST
      EXPENSE. Interest expense increased to $5.0 million in 2005 from $4.1 million
      in
      2004. Interest expense arises from obligations under our 5% Convertible Senior
      Notes due in 2006 (“2006 Notes”) and our 5% Convertible Senior Notes due in 2009
      (“2009 Notes”). In September 2004, we repurchased $20.0 million aggregate
      principal amount of our 2006 Notes and consequently reduced the outstanding
      principal balance to $46.7 million, and concurrently issued $38.0 million
      aggregate principal amount of our 2009 Notes.




GAIN
      ON
      REPURCHASE OF CONVERTIBLE NOTES. During 2004, we recognized a gain of $0.3
      million, on the repurchase of $20.0 million aggregate principal amount of our
      2006 Notes, after adjusting for accrued interest and the write-off of a
      proportionate share of unamortized offering costs.




BENEFIT
      FROM
      INCOME TAXES. In 2004 and 2005, the Company received no benefit from income
      taxes and recorded a full valuation allowance for its deferred tax
      balance.




2004
      COMPARED TO 2003




NET
      SALES.
      Net sales during 2004 increased 21.5% to $91.3 million, compared to $75.2
      million for 2003. The net sales improvement was primarily due to an increase
      in
      demand for broadband products, particularly WLAN PAs used in wireless personal
      computer access and RFICs used in both cable subscriber and infrastructure
      applications and the remainder to demand for our GSM PAs used in wireless
      handsets and hand-held devices.




Sales
      during
      2004 of RFICs used for broadband applications increased 36.5% to $46.0 million
      from $33.7 million in 2003. The increase was primarily due to increased volumes
      of our PAs used for WLAN applications and products used for both cable and
      subscriber and infrastructure applications.




Specifically,
      net sales of RFICs used for cellular and PCS applications increased 9.2% during
      2004 to $45.4 million from $41.5 million in 2003. The increase was due to our
      expanded product presence and volumes for our GSM PAs.




Generally,
      selling prices for same product sales were lower during 2004 as compared to
      2003.


**25**


GROSS
      MARGIN.
      Gross margin for 2004 improved to 15.3% of net sales, compared with 4.4% of
      net
      sales in the prior year. The increase in gross margin from the prior year is
      the
      result of the increase in net sales, improved production throughput in our
      facilities, lower depreciation expense and lower product costs.





RESEARCH
      & DEVELOPMENT. Company sponsored research and development expenses increased
      3.8% during 2004 to $33.3 million from $32.1 million during 2003 primarily
      due
      to the incremental year-over-year operating costs of the Company’s acquisitions
      of RF Solutions (RFS) and Tavanza.




PURCHASED
      IN-PROCESS R&D. In 2003, the Company expensed purchased in-process research
      and development costs of $1.9 million resulting from the acquisitions of RFS
      and
      Tavanza. 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 applied in 2004.




SELLING
      AND
      ADMINISTRATIVE. Selling and administrative expenses increased 15.9% during
      2004
      to $22.5 million from $19.4 million in 2003. The increase was primarily due
      to
      increased headcount and sales-related costs associated with our sales expansion
      efforts, including application centers in Taiwan and South Korea.




RESTRUCTURING
      AND OTHER CHARGES. During 2003, we recorded charges of $0.9 million for
      restructuring and other charges related to severance and related employee
      benefits in connection with workforce reductions of approximately 19 operations
      and administrative positions and lease-related costs.




Activity
      and
      liability balances related to the restructuring and other charges for the years
      ended December 31, 2003 and 2004 are as follows (in millions):





Lease
                Related
            
            
            Workforce
                Reductions
            
            
            TotalYear
                ended December 31, 2003Beginning
                balance
            
            $
            2.8
            
            $
            0.2
            
            $
            3.0Restructuring
                and other expenses
            
            
            0.3
            
            
            0.6
            
            
            0.9Deductions
            
            
            (1.1
            )
            
            (0.8
            )
            
            (1.9
            )December
                31, 2003 restructuring balance
            
            
            2.0
            
            
            -
            
            
            2.0Year
                ended December 31, 2004Deductions
            
            
            (1.3
            )
            
            -
            
            
            (1.3
            )December
                31, 2004 restructuring balance
            
            $
            0.7
            
            
            -
            
            $
            0.7




INTEREST
      INCOME. ****** Interest
      income decreased 34.1% to $2.2 million during 2004 from $3.3 million in 2003.
      The decrease was due to lower average invested funds and was compounded by
      lower
      interest rates.




INTEREST
      EXPENSE. Interest expense increased to $4.1 million in 2004 from $3.8 million
      in
      2003. Interest expense arises from our 2006 Notes and our 2009 Notes. In
      September, 2004, we repurchased $20.0 million aggregate principal amount of
      our
      2006 Notes and consequently reduced the outstanding principal balance to $46.7
      million, and concurrently issued $38.0 million aggregate principal amount of
      our
      2009 Notes.




GAIN
      ON
      REPURCHASE OF CONVERTIBLE NOTES. During 2004, we recognized a gain of $0.3
      million, on the repurchase of $20.0 million aggregate principal amount of our
      2006 Notes, after adjusting for accrued interest and the write-off of a
      proportionate share of unamortized offering costs.




BENEFIT
      FROM
      INCOME TAXES. In 2004, the Company received no benefit from income taxes and
      recorded a full valuation allowance for its deferred tax balance.





LIQUIDITY
      AND SOURCES OF CAPITAL




At
      December
      31, 2005 we had $11.9 million of cash and cash equivalents on hand and $74.5
      million in marketable securities. We had $38.0 million aggregate principal
      amount of our 2009 Notes and $46.7 million aggregate principal amount of our
      2006 Notes outstanding as of December 31, 2005.




Operations
      required the use of $16.4 million in cash during 2005. Investing activities
      provided $15.3 million of cash during 2005, consisting principally of net sales
      of marketable securities of $17.5 million, partially offset by purchases of
      equipment of $2.3 million. Financing activities provided $1.9 million of cash
      in
      2005, primarily consisting of proceeds received from employee stock option
      exercises and the Employee Stock Purchase Plan (“ESP Plan”) of $1.2 million and
      $1.0 million, respectively, partially offset by our repurchase of shares of
      common stock for $0.3 million.


**26**


We
      believe that our existing sources of capital, including our existing cash and
      marketable securities, will be adequate to satisfy operational needs and
      anticipated capital needs for the next twelve months including the repayment
      of
      our debt principal obligation due in November of 2006. Our anticipated capital
      needs may include acquisitions of complimentary businesses or technologies,
      investments in other companies or repurchases of our outstanding debt or equity.
      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. Our ability
      to
      pay principal and interest on our $84.7 million in outstanding convertible
      senior unsecured notes, $46.7 million of which are due in November of 2006
      and
      the remainder of which are due in October of 2009, and our other debt and to
      fund our planned capital expenditures depends on our future operating
      performance.




The
      table
      below summarizes required cash payments as of December 31, 2005:





CONTRACTUAL
                OBLIGATIONS
            
            PAYMENTS
                DUE BY PERIOD (in thousands)Total
            
            
            Less
                than 1 year
            
            
            1
                - 3 years
            
            
            4
                - 5 years
            
            
            After
                5 yearsLong-term
                debt, including short term portion plus the interest payable with
                respect
                thereto
            
            $
            93,947
            
            $
            50,643
            
            $
            3,800
            
            $
            39,504
            
            $
            -Operating
                leases
            
            
            21,317
            
            
            1,943
            
            
            3,482
            
            
            3,635
            
            
            12,257Capital
                leases
            
            
            2,525
            
            
            427
            
            
            854
            
            
            854
            
            
            390Unconditional
                purchase obligations
            
            
            4,820
            
            
            4,820
            
            
            -
            
            
            -
            
            
            -Total
                contractual cash obligations
            
            $
            122,609
            
            $
            57,833
            
            $
            8,136
            
            $
            43,993
            
            $
            12,647








IMPACT
      OF
      RECENTLY ISSUED ACCOUNTING STANDARDS




In
      November
      2004, the Financial Accounting Standards Board issued Statement No. 151 (FAS
      151), Inventory Costs, an amendment of ARB No. 43, Chapter 4. FAS 151 clarifies
      that abnormal amounts of idle facility expense, freight, handling costs and
      wasted materials should be recognized as current period charges. In addition,
      FAS 151 requires that allocation of fixed production overhead to inventory
      be
      based on the normal capacity of the production facilities. FAS 151 is effective
      for inventory costs incurred during fiscal years beginning after June 15, 2005.
      The Company currently believes that the adoption of FAS 151 will not have a
      material impact on its consolidated financial statements.




In
      December
      2004, the Financial Accounting Standards Board issued Statement No. 123(R)
      (FAS
      123R), Share-Based Payment, amending FAS 123 and requiring that all share-based
      payments to employees be recognized in the financial statements. Generally,
      the
      approach to accounting for share-based payments in FAS 123R is similar to the
      approach described in FAS 123, however, pro forma footnote disclosure will
      no
      longer be an alternative to financial statement recognition. In April 2005,
      the
      SEC deferred the implementation date of FAS 123R. As a result, the Company
      will
      adopt FAS 123R effective January 1, 2006 rather than the initial implementation
      date of July 1, 2005, using the modified-prospective transition method described
      in FAS 123R. Under this method, the Company is required to recognize
      compensation expense over the remaining vesting period for all awards that
      remain unvested as of January 1, 2006. As permitted by FAS 123, prior to January
      1, 2006, the Company accounted for share-based payments to employees using
      APB
      25's intrinsic value method and, as such, generally recognized no compensation
      cost for employee stock options or its ESP Plan. The Company believes based
      on
      the level of share-based payments previously granted and unvested and ESP Plan
      participation, that the adoption of FAS 123R will not have a material effect
      on
      its consolidated financial position, results of operations or cash flows.
      However, the level of future equity based compensation grants and ESP Plan
      participation could have a material effect on amounts recorded in our
      consolidated statement of operations.  On
      December 22, 2004, the Company authorized an immediate vesting of eligible
      employees’ unvested share options with an exercise price greater than $5.00 per
      share. Directors were not eligible. In total, 1.8 million options with an
      average exercise price of $7.26 immediately vested and have an average remaining
      contractual life of 9.1 years. The unamortized fair value associated with these
      accelerated-vest shares of approximately $2.65 million amortized immediately.
      In
      addition to its employee-retention value, the Company’s decision to accelerate
      the vesting of these “out-of-the-money” options was based upon the accounting of
      such costs moving from disclosure-only in 2004 to being included in the
      Company’s statement of operations in 2005 based upon the Company’s expected
      adoption of FAS 123R prior to its required adoption date being deferred.




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, including corporate bonds, commercial
      paper and Federal, state, municipal, and agency securities. We
      continually monitor our exposure to changes in interest rates and the credit
      ratings of issuers with respect to our available-for-sale securities.
      Accordingly, we believe that the effects of changes in interest rates and the
      credit ratings of these issuers are limited and would not have a material impact
      on our financial condition or results of operations. However, it is possible
      that we would be at risk if interest rates or the credit ratings of these
      issuers were to change in an unfavorable direction. The magnitude of any gain
      or
      loss would be a function of the difference between the fixed rate of the
      financial instrument and the market rate and our financial condition and results
      of operations could be materially affected.


**27**


At
      December
      31, 2005, we held marketable securities with an estimated fair value of $74.5
      million. 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, 2005:





Estimated
                Principal Amount and Weighted Average Stated Rate by Expected Maturity
                Value
            
            Fair
                Value($’s
                000)
            
            
            2006
            
            
            2007
            
            
            2008
            
            
            Total
            
            
            ($’s
                000)Principal
            
            $
            69,504
            
            $
            4,100
            
            
            -
            
            $
            73,604
            
            $
            74,466Weighted
                Average Stated Rates
            
            
            4.47
            %
            
            5.07
            %
            
            -
            
            
            4.51
            %
            
            -


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 our current holdings, which would affect both
      future cash interest streams and future earnings. In addition to investments
      in
      marketable securities, we invest 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.


Each
        of our
        2006 Notes and 2009 Notes are convertible notes that 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, 2005, the fair value of our outstanding convertible
        notes, estimated based upon dealer quotes, was approximately $93.7 million.





**28**




ITEM
      8.
      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.




Report
      of
      Independent Registered Public Accounting Firm








To
      the
      Board of Directors and Stockholders


ANADIGICS,
      Inc.








We
      have
      audited the accompanying consolidated balance sheet of ANADIGICS, Inc. as of
      December 31, 2005, and the related consolidated statements of operations,
      comprehensive loss, stockholders' equity and cash flows for the year then ended.
      Our audit also included the consolidated financial statement schedule for the
      year ended December 31, 2005 listed in the Index at Item 15(a). These
      consolidated financial statements and schedule are the responsibility of the
      Company's management. Our responsibility is to express an opinion on these
      consolidated financial statements and schedule based on our audit.





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





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the consolidated financial position of ANADIGICS, Inc. as
      of
      December 31, 2005, and their consolidated results of operations and cash flows
      for the year then ended, in conformity with accounting principles generally
      accepted in the United States of America. Also, in our opinion, the related
      consolidated financial statement schedule for the year ended December 31, 2005,
      when considered in relation to the basic consolidated financial statements
      taken
      as a whole, presents fairly, in all material respects, the information set
      forth
      therein.





We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the effectiveness of ANADIGICS, Inc.'s internal
      control over financial reporting as of December 31, 2005, based on criteria
      established in "Internal Control Integrated Framework" issued by the Committee
      of Sponsoring Organizations of the Treadway Commission and our report
      dated February 27, 2006 expressed
      an unqualified opinion thereon.











/s/
      J.H.
      Cohn LLP








Roseland,
      New Jersey


February
      27, 2006


**29**





Report
      of
      Independent Registered Public Accounting Firm





The
      Board
      of Directors and Stockholders


ANADIGICS,
      Inc.





We
      have
      audited the accompanying consolidated balance sheet of ANADIGICS, Inc. as of
      December 31, 2004, and the related consolidated statements of operations,
      comprehensive loss, stockholders’ equity, and cash flows for each of the two
      years in the period ended December 31, 2004. Our audits also included the
      information for each of the two years in the period ended December 31, 2004
      included in 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 the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audits provide a
        reasonable basis for our opinion.


In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the consolidated financial position of ANADIGICS, Inc. as
      of
      December 31, 2004, and the consolidated results of its operations and its cash
      flows for each of the two years in the period ended December 31, 2004 in
      conformity with U.S. generally accepted accounting principles. Also, in our
      opinion, the information for each of the two years in the period ended December
      31, 2004 in 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.












/s/
      ERNST
& YOUNG LLP











MetroPark,
      New Jersey


March
      2,
      2005





**30**




ANADIGICS,
      INC.


CONSOLIDATED
      BALANCE SHEETS


(AMOUNTS
      IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)








December
                31,2004
            
            
            2005ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            11,171
            
            $
            11,891Marketable
                securities
            
            
            63,615
            
            
            70,364Accounts
                receivable, net of allowance for doubtful accounts of $988 and $1,060
                in
                2004 and 2005, respectively
            
            
            10,770
            
            
            18,755Inventories
            
            
            14,436
            
            
            16,009Prepaid
                expenses and other current assets
            
            
            3,073
            
            
            2,188Total
                current assets
            
            
            103,065
            
            
            119,207Marketable
                securities
            
            
            29,265
            
            
            4,102Plant
                and equipmentEquipment
                and furniture
            
            
            132,864
            
            
            133,262Leasehold
                improvements
            
            
            38,774
            
            
            38,748Projects
                in process
            
            
            1,341
            
            
            1,617172,979
            
            
            173,627Less
                accumulated depreciation and amortization
            
            
            129,941
            
            
            137,32043,038
            
            
            36,307Goodwill
                and other intangibles, less accumulated amortization of $258 and
                $498 in
                2004 and 2005, respectively
            
            
            6,297
            
            
            6,044Other
                assets
            
            
            4,230
            
            
            2,613$
            185,895
            
            $
            168,273LIABILITIES
                AND STOCKHOLDERS EQUITYCurrent
                liabilities:Accounts
                payable
            
            $
            8,021
            
            $
            15,519Accrued
                liabilities
            
            
            4,783
            
            
            4,672Accrued
                restructuring costs
            
            
            726
            
            
            40Current
                maturities of long-term debt
            
            
            -
            
            
            46,700Current
                maturities of capital lease obligations
            
            
            18
            
            
            269Total
                current liabilities
            
            
            13,548
            
            
            67,200Other
                long-term liabilities
            
            
            3,032
            
            
            3,175Long-term
                debt, less current portion
            
            
            84,700
            
            
            38,000Capital
                lease obligations, less current portion
            
            
            -
            
            
            1,763Commitments
                and contingenciesStockholders’
                equityPreferred
                stock, $0.01 par value, 5,000 shares authorized, none issued or
                outstandingCommon
                stock, convertible, non-voting, $0.01 par value, 1,000 shares authorized,
                none issued or outstandingCommon
                stock, $0.01 par value, 144,000 shares authorized at December 31,
                2004 and
                2005, and 33,072 and 35,007 issued at December 31, 2004 and 2005,
                respectively
            
            
            331
            
            
            350Additional
                paid-in capital
            
            
            343,594
            
            
            348,992Deferred
                compensation
            
            
            (861
            )
            
            (1,437
            )Accumulated
                deficit
            
            
            (257,963
            )
            
            (289,196
            )Accumulated
                other comprehensive loss
            
            
            (486
            )
            
            (316
            )Treasury
                stock at cost: 114 shares
            
            
            -
            
            
            (258
            )Total
                stockholders’ equity
            
            
            84,615
            
            
            58,135$
            185,895
            
            $
            168,273







See
      accompanying notes.


**31**





ANADIGICS,
      INC.


CONSOLIDATED
      STATEMENTS OF OPERATIONS


(AMOUNTS
      IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)





YEAR
                ENDED DECEMBER 31,2003
            
            
            2004
            
            
            2005Net
                sales
            
            $
            75,212
            
            $
            91,350
            
            $
            108,281Cost
                of sales
            
            
            71,927
            
            
            77,355
            
            
            85,929Gross
                profit
            
            
            3,285
            
            
            13,995
            
            
            22,352Research
                and development expenses
            
            
            32,075
            
            
            33,306
            
            
            29,906Selling
                and administrative expenses
            
            
            19,420
            
            
            22,511
            
            
            21,293Restructuring
                and other charges
            
            
            925
            
            
            -
            
            
            (120
            )Purchased
                in-process R&D
            
            
            1,863
            
            
            -
            
            
            -54,283
            
            
            55,817
            
            
            51,079Operating
                loss
            
            
            (50,998
            )
            
            (41,822
            )
            
            (28,727
            )Interest
                income
            
            
            3,344
            
            
            2,203
            
            
            2,473Interest
                expense
            
            
            (3,761
            )
            
            (4,085
            )
            
            (4,997
            )Gain
                on repurchase of Convertible notes
            
            
            -
            
            
            327
            
            
            -Other
                income
            
            
            276
            
            
            295
            
            
            18Loss
                before income taxes
            
            
            (51,139
            )
            
            (43,082
            )
            
            (31,233
            )Benefit
                from income taxes
            
            
            (382
            )
            
            -
            
            
            -Net
                loss
            
            $
            (50,757
            )
            $
            (43,082
            )
            $
            (31,233
            )Basic
                and diluted loss per share
            
            $
            (1.65
            )
            $
            (1.33
            )
            $
            (0.92
            )Weighted
                average basic and diluted common shares outstanding
            
            
            30,717
            
            
            32,413
            
            
            34,012




CONSOLIDATED
      STATEMENTS OF COMPREHENSIVE LOSS


(AMOUNTS
      IN THOUSANDS)





Year
                Ended December 31,2003
            
            
            2004
            
            
            2005Net
                loss
            
            $
            (50,757
            )
            $
            (43,082
            )
            $
            (31,233
            )Other
                comprehensive income (loss)Unrealized
                (loss) gain on marketable securities
            
            
            (666
            )
            
            (617
            )
            
            242Foreign
                currency translation adjustment
            
            
            46
            
            
            12
            
            
            (72
            )Reclassification
                adjustment:Net
                realized loss (gain) previously included in other comprehensive
                income
            
            
            15
            
            
            (19
            )
            
            -Comprehensive
                loss
            
            $
            (51,362
            )
            $
            (43,706
            )
            $
            (31,063
            )







See
      accompanying notes.




**32**





ANADIGICS,
      INC.


CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY


(AMOUNTS
      IN THOUSANDS)




Common
                Stock Shares
            
            
            Common
                Stock Amount
            
            
            Treasury
                Stock Shares
            
            
            Treasury
                Stock Amount
            
            
            Additional
                Paid-In Capital
            
            
            Deferred
                Compensation
            
            
            Accumulated
                Deficit
            
            
            Accumulated
                Other Comprehensive Income (loss
            )
            
            Total
                Stockholders’ EquityBalance,
                December 31, 2002
            
            
            30,674
            
            $
            307
            
            
            -
            
            $
            -
            
            $
            334,162
            
            $
            -
            
            $
            (164,124
            )
            $
            743
            
            $
            171,088Stock
                options exercised
            
            
            23
            
            
            -
            
            
            
            
            
            
            
            
            67
            
            
            
            
            
            
            
            
            
            
            
            67Shares
                issued under employee stock purchase plan
            
            
            529
            
            
            5
            
            
            
            
            
            
            
            
            1,222
            
            
            
            
            
            
            
            
            
            
            
            1,227Unrealized
                loss on marketable securities
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (666
            )
            
            (666
            )Foreign
                currency translation adjustment
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            46
            
            
            46Net
                realized loss, previously included in other comprehensive
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            15
            
            
            15Stock-based
                compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            26
            
            
            
            
            
            
            
            
            
            
            
            26Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (50,757
            )
            
            
            
            
            (50,757
            )Balance,
                December 31, 2003
            
            
            31,226
            
            
            312
            
            
            -
            
            
            -
            
            
            335,477
            
            
            -
            
            
            (214,881
            )
            
            138
            
            
            121,046Stock
                options exercised
            
            
            536
            
            
            5
            
            
            
            
            
            
            
            
            1,355
            
            
            
            
            
            
            
            
            
            
            
            1,360Shares
                issued under employee stock purchase plan
            
            
            182
            
            
            2
            
            
            
            
            
            
            
            
            561
            
            
            
            
            
            
            
            
            
            
            
            563Shares
                issued as contingent acquisition consideration
            
            
            747
            
            
            8
            
            
            
            
            
            
            
            
            4,640
            
            
            
            
            
            
            
            
            
            
            
            4,648Restricted
                stock grant
            
            
            403
            
            
            4
            
            
            
            
            
            
            
            
            1,613
            
            $
            (1,617
            )
            
            
            
            
            
            
            
            -Restricted
                stock forfeitures
            
            
            (22
            )
            
            -
            
            
            
            
            
            
            
            
            (87
            )
            
            87
            
            
            
            
            
            
            
            
            -Amortization
                of restricted stock
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            669
            
            
            
            
            
            
            
            
            669Unrealized
                loss on marketable securities
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (617
            )
            
            (617
            )Foreign
                currency translation adjustment
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            12
            
            
            12Net
                realized gain, previously included in other comprehensive
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (19
            )
            
            (19
            )Stock-based
                compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            35
            
            
            
            
            
            
            
            
            
            
            
            35Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (43,082
            )
            
            
            
            
            (43,082
            )Balance,
                December 31, 2004
            
            
            33,072
            
            
            331
            
            
            -
            
            
            -
            
            
            343,594
            
            
            (861
            )
            
            (257,963
            )
            
            (486
            )
            
            84,615Stock
                options exercised
            
            
            417
            
            
            4
            
            
            
            
            
            
            
            
            1,160
            
            
            
            
            
            
            
            
            
            
            
            1,164Shares
                issued under employee stock purchase plan
            
            
            328
            
            
            3
            
            
            
            
            
            
            
            
            1,025
            
            
            
            
            
            
            
            
            
            
            
            1,028Restricted
                stock grant
            
            
            1,304
            
            
            13
            
            
            
            
            
            
            
            
            3,547
            
            
            (3,560
            )
            
            
            
            
            
            
            
            -Restricted
                stock forfeitures
            
            
            (114
            )
            
            (1
            )
            
            
            
            
            
            
            
            (334
            )
            
            335
            
            
            
            
            
            
            
            
            -Amortization
                of restricted stock
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,649
            
            
            
            
            
            
            
            
            2,649Unrealized
                gain on marketable securities
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            242
            
            
            242Foreign
                currency translation adjustment
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (72
            )
            
            (72
            )Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (31,233
            )
            
            
            
            
            (31,233
            )Treasury
                share purchase
            
            
            
            
            
            
            
            
            (114
            )
            
            (258
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            (258
            )Balance,
                December 31, 2005
            
            
            35,007
            
            $
            350
            
            
            (114
            )
            $
            (258
            )
            $
            348,992
            
            $
            (1,437
            )
            $
            (289,196
            )
            $
            (316
            )
            $
            58,135




See
      accompanying notes.


**33**


ANADIGICS,
      INC.





CONSOLIDATED
      STATEMENTS OF CASH FLOWS





(AMOUNTS
      IN THOUSANDS)




YEAR
                ENDED DECEMBER 31,2003
            
            
            2004
            
            
            2005CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                loss
            
            $
            (50,757
            )
            $
            (43,082
            )
            $
            (31,233
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Gain
                on repurchase of Convertible notes
            
            
            -
            
            
            (327
            )
            
            -Depreciation
            
            
            18,481
            
            
            15,282
            
            
            10,921Amortization
            
            
            1,173
            
            
            1,483
            
            
            1,703Stock
                based compensation
            
            
            26
            
            
            704
            
            
            2,649Amortization
                of premium on marketable securities
            
            
            2,432
            
            
            2,090
            
            
            1,189Purchased
                in-process R&D
            
            
            1,863
            
            
            -
            
            
            -Loss
                (gain) on sale of equipment
            
            
            20
            
            
            15
            
            
            (1
            )Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (2,906
            )
            
            1,304
            
            
            (7,985
            )Inventory
            
            
            2,957
            
            
            (4,115
            )
            
            (1,573
            )Prepaid
                expenses and other assets
            
            
            1,234
            
            
            361
            
            
            1,101Accounts
                payable
            
            
            1,730
            
            
            (1,476
            )
            
            7,498Accrued
                and other liabilities
            
            
            146
            
            
            (1,892
            )
            
            (701
            )Net
                cash used in operating activities
            
            
            (23,601
            )
            
            (29,653
            )
            
            (16,432
            )CASH
                FLOWS FROM INVESTING ACTIVITIESPurchases
                of plant and equipment
            
            
            (4,178
            )
            
            (3,427
            )
            
            (2,262
            )Purchases
                of marketable securities
            
            
            (97,605
            )
            
            (51,128
            )
            
            (64,098
            )Proceeds
                from sales of marketable securities
            
            
            122,577
            
            
            58,627
            
            
            81,565Business
                acquisitions
            
            
            (4,217
            )
            
            (55
            )
            
            -Proceeds
                from sale of equipment
            
            
            -
            
            
            130
            
            
            53Net
                cash provided by investing activities
            
            
            16,577
            
            
            4,147
            
            
            15,258CASH
                FLOWS FROM FINANCING ACTIVITIESPayment
                of obligations under capital leases
            
            
            (88
            )
            
            (66
            )
            
            (40
            )Proceeds
                from issuance of long-term debt net of offering costs
            
            
            -
            
            
            35,695
            
            
            -Repurchase
                of Convertible notes
            
            
            -
            
            
            (19,400
            )
            
            -Issuances
                of common stock, net of related expenses
            
            
            1,294
            
            
            1,923
            
            
            2,192Repurchase
                of common stock into treasury
            
            
            -
            
            
            -
            
            
            (258
            )Net
                cash provided by financing activities
            
            
            1,206
            
            
            18,152
            
            
            1,894Net
                (decrease) increase in cash and cash equivalents
            
            
            (5,818
            )
            
            (7,354
            )
            
            720Cash
                and cash equivalents at beginning of period
            
            
            24,343
            
            
            18,525
            
            
            11,171Cash
                and cash equivalents at end of period
            
            $
            18,525
            
            $
            11,171
            
            $
            11,891Supplemental
                disclosures of cash flow information:Interest
                paid
            
            $
            3,335
            
            $
            3,193
            
            $
            4,346Taxes
                paid
            
            
            -
            
            
            117
            
            
            82Acquisition
                of equipment under capital leases
            
            
            -
            
            
            -
            
            
            2,055




















See
      accompanying notes.







**34**





ANADIGICS,
      INC.





NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS





(AMOUNTS
      IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)








1.
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




NATURE
      OF
      OPERATIONS AND BASIS OF PRESENTATION




We
      are a
      leading provider of radio frequency integrated circuits (RFIC) and radio
      frequency (RF) front end solutions in the rapidly growing wireless handset
      and
      broadband communications markets. Our products include power amplifiers (PAs),
      tuner integrated circuits, active splitters and other components, which can
      be
      sold individually or packaged as integrated RF modules. In the wireless handset
      market, we focus on RFIC and RF front end solutions for wireless handsets
      operating over various air interface standards. In the broadband market, our
      focus is on applications for Wireless Local Area Networking (WLAN) systems,
      cable set-top boxes, cable television infrastructure systems, worldwide
      interoperability for microwave access (WiMAX) systems and fiber-to-the-premises
      (FTTP) communications systems. Our integrated solutions enable our customers
      to
      improve RF performance, power efficiency, reliability and time-to-market, while
      reducing the size, weight and cost of their products.





We
      design,
      develop and manufacture RFICs primarily using GaAs compound semiconductor
      substrates with various process technologies, Metal Semiconductor Field Effect
      Transistors (MESFET), Pseudomorphic High Electron Mobility Transistors (pHEMT),
      and Heterojunction Bipolar Transistors (HBT). Our proprietary technology, which
      utilizes InGap-plusTM, combines InGAP HBT and pHEMT processes on a
      single substrate, enabling us to integrate the PA function and the RF active
      switch function on the same die. We fabricate substantially all of our ICs
      in
      our six-inch diameter GaAs wafer fabrication facility. We believe our strong
      fabrication capability combined with integrated product design and logistics
      expertise, allow quick development and manufacture of products to meet market
      and customer requirements.





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.





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 in the consolidated financial
      statements and the accompanying notes. Actual results could differ from those
      estimates. Significant estimates that affect the financial statements include,
      but are not limited to: recoverability of inventories, useful lives and
      amortization periods and recoverability of long-lived assets.




CONCENTRATION
      OF CREDIT RISK




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





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





YEAR
                ENDED DECEMBER 312003
            2004
            2005Customer
                (application)
            
            
            
            
            $
            
            %
            
            
            
            $
            
            %
            
            
            
            $
            
            %World
                Peace Group (Wireless & Broadband)
            
            
            <10
            %
            
            <10
            %
            
            <10
            %
            
            <10
            %
            
            17,275
            
            
            16
            %Intel
                (Broadband)
            
            
            <10
            %
            
            <10
            %
            
            <10
            %
            
            <10
            %
            
            15,678
            
            
            14
            %LG
                Electronics (Wireless)
            
            
            10,346
            
            
            14
            %
            
            13,628
            
            
            15
            %
            
            12,321
            
            
            11
            %Kyocera
                (Wireless)
            
            
            21,263
            
            
            28
            %
            
            9,751
            
            
            11
            %
            
            <10
            %
            
            <10
            %Motorola
                (Broadband)
            
            
            10,422
            
            
            14
            %
            
            9,184
            
            
            10
            %
            
            <10
            %
            
            <10
            %Scientific
                Atlanta (Broadband)
            
            
            <10
            %
            
            <10
            %
            
            9,218
            
            
            10
            %
            
            <10
            %
            
            <10
            %





Accounts
      receivable at December 31, 2004 and 2005 from the greater than 10% customers
      accounted for 51% and 29% of total accounts receivable,
      respectively.


**35**


REVENUE
      RECOGNITION





Revenue
      from
      product sales is recognized when the title, risk and rewards of product
      ownership are transferred to the customer, price and terms are fixed, no
      significant vendor obligation exists and collection of the resulting receivable
      is reasonably assured. The Company sells to certain distributors who are granted
      rights of return and exchange and certain price protection. Revenue is not
      recognized for the portion of shipments subject to return, exchange or price
      protection until such rights expire. 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. The
      value of the inventory related to cancellation revenue may, in some instances,
      have been reserved during prior periods in accordance with the Company’s
      inventory obsolescence policy. The Company maintains an allowance for doubtful
      accounts for estimated losses resulting from customers' failure to make
      payments.




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.





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. Leasehold improvements
      are amortized and included in depreciation over the useful life of the leasehold
      or the life of the lease, whichever is shorter.





The
      cost of
      equipment acquired under capital leases was $10,545 and $9,781 at December
      31,
      2004 and 2005, respectively, and accumulated amortization was $10,519 and $7,726
      at December 31, 2004 and 2005, respectively. Equipment acquired under a capital
      lease is amortized and included in depreciation over the useful life of the
      leased equipment or the life of the lease, whichever is shorter.





GOODWILL
      AND OTHER INTANGIBLES





Goodwill,
      process technology, customer list and a covenant-not-to-compete were recorded
      as
      part of the Company's acquisitions. Goodwill is not subject to amortization
      but
      is reviewed for potential impairment annually or upon the occurrence of an
      impairment indicator using a two-phase process. The first phase screens for
      impairment; while the second phase measures the impairment. Process technology,
      the customer list and the covenant continued to be amortized using the
      straight-line method over three to four year lives. 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.
      For each of the reporting units, fair value is determined primarily using the
      anticipated cash flows, discounted at a rate commensurate with the associated
      risk.





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. The Company maintains
      a
      full valuation allowance on its deferred tax assets.





RESEARCH
      AND DEVELOPMENT COSTS




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




**36**


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 a maturity of three
      months or less when purchased as cash equivalents.




MARKETABLE
      SECURITIES




Available
      for
      sale securities are stated at fair value, as determined by quoted market prices,
      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. See Note 8 for a summary of available for sale
      securities.





INVENTORY




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





DEFERRED
      RENT





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




FOREIGN
      CURRENCY TRANSLATION





The
      financial
      statements of subsidiaries outside of the United States are measured using
      the
      local currency as the functional currency. Assets and liabilities of these
      subsidiaries are translated at the rates of exchange at the balance sheet 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.




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. 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.




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, 2005, the fair value of the Company's outstanding Convertible
      senior notes, estimated based upon dealer quotes, was approximately
      $93,694.





**37**


IMPACT
      OF
      RECENTLY ISSUED ACCOUNTING STANDARDS





In
      November
      2004, the Financial Accounting Standards Board issued Statement No. 151 (FAS
      151), Inventory costs, an amendment of ARB No. 43, Chapter 4. FAS 151 clarifies
      that abnormal amounts of idle facility expense, freight, handling costs and
      wasted materials should be recognized as current period charges. In addition,
      FAS 151 requires that allocation of fixed production overhead to inventory
      be
      based on the normal capacity of the production facilities. FAS 151 is effective
      for inventory costs incurred during fiscal years beginning after June 15, 2005.
      The Company currently believes that the adoption of FAS 151 will not have a
      material impact on its consolidated financial statements.





In
      December
      2004, the Financial Accounting Standards Board issued Statement No. 123(R)
      (FAS
      123R), Share-Based Payment, amending FAS 123 and requiring that all share-based
      payments to employees be recognized in the financial statements. Generally,
      the
      approach to accounting for share-based payments in FAS 123R is similar to the
      approach described in FAS 123, however, pro forma footnote disclosure will
      no
      longer be an alternative to financial statement recognition. In April 2005,
      the
      SEC deferred the implementation date of FAS 123R. As a result, the Company
      will
      adopt FAS 123R effective January 1, 2006 rather than the initial implementation
      date of July 1, 2005, using the modified-prospective transition method described
      in FAS 123R. Under this method, the Company will be required to recognize
      compensation expense over the remaining vesting period for all awards that
      remain unvested as of January 1, 2006. As permitted by FAS 123, prior to January
      1, 2006, the Company accounted for share-based payments to employees using
      APB
      25's intrinsic value method (as defined below) and, as such, generally
      recognized no compensation cost for employee stock options or its Employee
      Stock
      Purchase Plan (ESP Plan). The Company believes based on the level of share-based
      payments previously granted and unvested and ESP Plan participation, that the
      adoption of FAS 123R will not have a material effect on its consolidated
      financial position, results of operations or cash flows. However, the level
      of
      future equity based compensation grants and ESP Plan participation could have
      a
      material effect on amounts recorded in our consolidated statement of
      operations.





STOCK
      BASED COMPENSATION




As
      permitted
      by FASB Statement No. 123, Accounting for Stock-Based Compensation (FAS 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
      and
      other stock based compensation 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. Compensation expense attributable to restricted
      stock awards is based on the fair value of such shares at the date of issuance
      and is amortized over the vesting period.





The
      following
      table illustrates the effect on net loss and 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 FAS 123:





2003
            
            
            2004
            
            
            2005Net
                loss, as reported
            
            $
            (50,757
            )
            $
            (43,082
            )
            $
            (31,233
            )Stock
                based compensation included in reported net loss
            
            
            26
            
            
            704
            
            
            2,649Stock
                based compensation expense under fair value reporting
            
            
            (7,905
            )
            
            (9,978
            )
            
            (3,758
            )Pro
                forma net loss
            
            $
            (58,636
            )
            $
            (52,356
            )
            $
            (32,342
            )Basic
                and diluted loss per shareNet
                loss, as reported
            
            $
            (1.65
            )
            $
            (1.33
            )
            $
            (0.92
            )Pro
                forma net loss
            
            $
            (1.91
            )
            $
            (1.62
            )
            $
            (0.95
            )





On
      July 3,
      2003, the Company announced a voluntary stock option exchange program for
      employees and officers. Directors of the Company were not eligible for the
      exchange program. Pursuant to the terms and conditions of the offer, which
      expired on August 4, 2003, the Company accepted for cancellation options to
      purchase 1,674 shares of common stock having a weighted average exercise price
      of $19.49. On February 6, 2004, participating employees were issued 552 stock
      options, under this one for three exchange program, for the cancelled options.
      The new options have an exercise price equal to $7.27, which represented the
      fair market value at the date of grant and are now fully vested.





On
      December
      22, 2004, the Company authorized the immediate vesting of eligible employees’
unvested share options with an exercise price greater than $5.00 per share.
      Directors were not eligible. In total, 1,772 options with an average exercise
      price of $7.26 immediately vested and had an average remaining contractual
      life
      of 9.1 years. The unamortized fair value associated with these accelerated-vest
      shares in the amount of $2,654 amortized immediately. Had the accelerated-vest
      program not occurred, the related cost in the years ended December 31, 2006
      and 2007 would have included $751 and $57, respectively. In addition to its
      employee-retention value, the Company’s decision to accelerate the vesting of
      these “out-of-the-money” options was based upon the accounting of such costs
      moving from disclosure-only in 2004 to being included in the Company’s
      consolidated statement of operations in 2005 based upon the Company’s expected
      adoption of FAS 123R prior to its required adoption date being
      deferred.   For the year ended December 31, 2005, $1,846 would have
      been included in the pro forma disclosure.




**38**




In
      the years
      ended December 31, 2004 and 2005, the Company granted restricted shares under
      the 1995 Long Term Incentive and Share Award Plan (the “1995 Plan”), 1997 Long
      Term Incentive and Share Award Plan for Employees (the “1997 Plan”) and the 2005
      Long Term Incentive and Share Award Plan (the “2005 Plan”, and together with the
      1995 Plan and the 1997 Plan, the “Plans”). The value of the grants have been
      recorded as deferred compensation, a component of Stockholders’ Equity and
      amortized over their respective vesting periods. Restricted share grant activity
      is illustrated below:





As
                of December 31, 2005Grant
                date
            
            
            Plan
                Type
            
            
            Shares
                granted
            
            
            Grant
                market price
            
            
            Vest
                condition
            
            
            Shares
                forfeited
              To
                date
            
            
            Shares
                vestedJuly
                23, 2004
            
            
            1995
                Plan
            
            
            67
            
            $
            4.01
            
            
            1
                year
            
            
            -
            
            
            67
            
            *July
                23, 2004
            
            
            1997
                Plan
            
            
            336
            
            
            4.01
            
            
            1
                year
            
            
            47
            
            
            289
            
            *January
                21, 2005
            
            
            1995
                Plan
            
            
            191
            
            
            3.15
            
            
            3
                years
            
            
            -
            
            
            -January
                25, 2005
            
            
            1995
                Plan
            
            
            11
            
            
            3.04
            
            
            1
                year
            
            
            -
            
            
            -February
                4, 2005
            
            
            1995
                Plan
            
            
            149
            
            
            2.65
            
            
            1
                year
            
            
            17
            
            
            -February
                4, 2005
            
            
            1995
                Plan
            
            
            666
            
            
            2.65
            
            
            3
                years
            
            
            69
            
            
            1August
                1, 2005
            
            
            2005
                Plan
            
            
            15
            
            
            2.54
            
            
            3
                years
            
            
            -
            
            
            -August
                4, 2005
            
            
            2005
                Plan
            
            
            271
            
            
            2.60
            
            
            1
                year
            
            
            2
            
            
            -




*
      Of the
      357 restricted shares which have fully vested, 114 shares were repurchased
      by
      the Company, as Treasury stock, from the employees and officers to fund
      withholding tax obligations.





On
      January
      31, 2006, the Company granted an additional 1,395 restricted shares under
      the 2005 Plan at a market price equal to $6.64, which represents the fair market
      value at the date of grant.





RECLASSIFICATIONS





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








2.
            BUSINESS
                ACQUISITIONS





On
      March 31,
      2003, the Company acquired certain assets and liabilities of the WLAN power
      amplifier business of RF Solutions (“RFS”). The RFS acquisition was a strategic
      initiative that allows the Company to participate in the WLAN market with a
      depth of experienced design personnel and cutting-edge products. The Company
      paid cash purchase consideration on March 31, 2003 of $2,800 and issued 747
      shares effective March 31, 2004, valued at $4,648 after RFS achieved certain
      revenue milestones. In addition, the Company incurred $217 in
      acquisition-related costs.





On
      October
      14, 2003, the Company acquired certain assets of a CDMA wireless handset power
      amplifier developer, formerly named Tavanza, a wholly-owned subsidiary of
      Celeritek. The Company paid cash consideration of $1,000 and incurred $255
      in
      acquisition-related costs.





The
      acquisitions were accounted for using the purchase method of accounting. The
      results of operations for RFS and Tavanza are included in the results of
      operations of the Company from the respective dates of purchase. There are
      no
      significant differences between the accounting policies of the Company and
      RFS
      or Tavanza.





The
      acquisition costs of $8,920 was allocated to the assets acquired and liabilities
      assumed, based on their fair values as follows:





TotalFair
                value of tangible assets
            
            $
            1,029Fair
                value of liabilities assumed
            
            
            (527
            )In-process
                research and development
            
            
            1,863Process
                technology
            
            
            210Covenant-not-to-compete
            
            
            175Customer
                list
            
            
            240Goodwill
            
            
            5,930Total
                purchase price
            
            $
            8,920





The
      Company
      recorded a charge of $1,863 representing the fair value of certain acquired
      research and development projects relating to dual band, high gain and modules
      applications for Wireless LAN and certain passive-free power amplifier
      applications, in the case of Tavanza, that were determined to have not reached
      technological feasibility and to not have alternative future uses. The fair
      value of such projects was determined based on discounted net cash flows. These
      cash flows were based upon 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 cash flows.


**39**


The
      following
      table reflects the changes in goodwill for the year ended December 31,
      2004:





Balance
                at December 31, 2003
            
            $
            1,227Additions,
                primarily related to RFS share issuance
            
            
            4,703Balance
                at December 31, 2004
            
            $
            5,930





The
      following
      unaudited pro-forma consolidated financial information reflects the results
      of
      operations for the twelve months ended December 31, 2003, as if the acquisitions
      of RFS and Tavanza had occurred on December 31, 2002 and after giving effect
      to
      purchase accounting adjustments. The charge for purchased in-process research
      and development is not included in the pro-forma results, because it is
      non-recurring.





Year
              ended December 31, 2003Pro-forma
                revenue
            
            $
            75,751Pro-forma
                net loss
            
            
            (51,947
            )Basic
                and diluted net loss per sharePro-forma
                net loss
            
            $
            (1.69
            )





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, 2002. 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
                AND GOODWILL





As
      of
      December 31, 2004 and 2005, the Company's intangible assets consist of the
      following:





Gross
                Carrying Amount
            Accumulated
                AmortizationDecember
                31,
            December
                31,2004
            
            
            2005
            
            
            2004
            
            
            2005Goodwill
            
            $
            5,930
            
            $
            5,918
            
            $
            -
            
            $
            -Process
                Technology
            
            
            210
            
            
            210
            
            
            91
            
            
            147Covenant
                not to compete
            
            
            175
            
            
            175
            
            
            70
            
            
            175Customer
                list
            
            
            240
            
            
            240
            
            
            97
            
            
            177$
            6,555
            
            $
            6,543
            
            $
            258
            
            $
            499





Annual
      amortization expense related to intangible assets is calculated over their
      estimated useful lives of three to four years and was $194 and $240 in the
      years
      ended December 31, 2004 and 2005, respectively.





Future
      annual
      amortization expense related to intangible assets is expected to be as
      follows:





2006
            
            
            2007Amortization
                expense
            
            $
            116
            
            $
            11








4.
      RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES





During
      2003,
      the Company recorded restructuring charges of $925 pertaining to severance
      and
      related benefits of workforce reductions of approximately 19 operations and
      administrative positions and lease-related costs. Certain lease-related
      obligations were settled during 2005 and resulted in a savings to the Company
      of
      $120.





Activity
      and
      liability balances related to the restructuring and other charges for the years
      ended December 31, 2003, 2004 and 2005 are as follows:





Lease
                Related
            
            
            Workforce
                Reductions
            
            
            TotalDecember
                31, 2002 restructuring balance
            
            $
            2,804
            
            $
            152
            
            $
            2,956Restructuring
                and other expenses
            
            
            300
            
            
            625
            
            
            925Deductions
            
            
            (1,124
            )
            
            (763
            )
            
            (1,887
            )December
                31, 2003 restructuring balance
            
            
            1,980
            
            
            14
            
            
            1,994Deductions
            
            
            (1,254
            )
            
            (14
            )
            
            (1,268
            )December
                31, 2004 restructuring balance
            
            
            726
            
            
            -
            
            
            726Deductions
            
            
            (566
            )
            
            -
            
            
            (566
            )Savings
                on settlement of obligation
            
            
            (120
            )
            
            -
            
            
            (120
            )December
                31, 2005 restructuring balance
            
            $
            40
            
            $
            -
            
            $
            40





**40**


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 31,2003
            
            
            2004
            
            
            2005Wireless
            
            $
            41,538
            
            $
            45,379
            
            $
            53,143Broadband
            
            
            33,674
            
            
            45,971
            
            
            55,138Total
            
            $
            75,212
            
            $
            91,350
            
            $
            108,281





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




Year
                Ended December 31,2003
            2004
            2005Asia
            $31,014
            $48,939
            $57,188USA
                and Canada
            38,024
            35,982
            41,729Other
            6,174
            6,429
            9,364Total
            $75,212
            $91,350
            $108,281








6.
      LONG-TERM DEBT




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





On
      November
      27, 2001, the Company issued $100,000 aggregate principal amount of 5%
      Convertible Senior Notes ("2006 Notes") due November 15, 2006. The outstanding
      2006 Notes are convertible into shares of common stock at any time prior to
      their maturity or prior redemption by the Company. The 2006 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 in arrears on May 15 and November
      15 of each year.





ANADIGICS,
      Inc. has the option to redeem all or a portion of the 2006 Notes at a redemption
      price of 101% of the principal amount during the period from December 31, 2005
      to November 14, 2006. In the event of a change in control, as defined, 2006
      Note-holders may require the Company to repurchase the notes at 100% of the
      principal amount. In the event of a change in control, the Company, in certain
      circumstances, may elect to repay the 2006 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.





As
      of
      December 31, 2005, $46,700 aggregate principal amount of the 2006 Notes remain
      outstanding. During 2002, the Company repurchased and retired $33,300 aggregate
      principal amount of the 2006 Notes. In addition, in the third quarter of 2004
      and concurrent with the issuance of the 2009 Notes, the Company repurchased
      and
      retired $20,000 aggregate principal amount of the 2006 Notes for $19,758 in
      cash, inclusive of accrued interest of $358. The Company recognized a gain
      of
      $327 on the repurchase after adjusting for the write-off of a proportionate
      share of unamortized offering costs.





Unamortized
      debt issuance costs of $2,744 and $1,999 at December 31, 2004 and 2005,
      respectively, consisting principally of underwriters' fees, were included in
      other assets and are being amortized over the life of the notes.


**41**


7.
      COMMITMENTS AND CONTINGENCIES




The
      Company
      leases manufacturing, warehousing and office space and manufacturing equipment
      under noncancelable operating leases that expire through 2016. The Company
      also
      leases certain equipment under capital leases that expire through 2011. Rent
      expense, net of sublease income was $3,225, $3,063 and $2,447 in 2003, 2004
      and
      2005, respectively. Sublease income was $789, $780 and $270 in 2003, 2004 and
      2005, respectively. The future minimum lease payments under the noncancelable
      operating leases and the present value of the minimum capital lease payments
      are
      as follows:





YEAR
            
            
            Capital
                Leases
            
            
            Operating
                Leases2006
            
            
            427
            
            
            1,9432007
            
            
            427
            
            
            1,7782008
            
            
            427
            
            
            1,7042009
            
            
            427
            
            
            1,7762010
            
            
            427
            
            
            1,859Thereafter
            
            
            390
            
            
            12,257Total
                minimum lease payments
            
            
            2,525
            
            
            21,317Less:
                contractually-required sublease income
            
            
            -
            
            
            (8
            )Less:
                amount representing interest
            
            
            (493
            )
            
            -$
            2,032
            
            $
            21,309





In
      addition
      to the above, at December 31, 2005, the Company had unconditional purchase
      obligations of approximately $4,820.





8.
      MARKETABLE SECURITIES





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





Available-for-Sale
                SecuritiesCost
            
            
            Gross
                Unrealized Gains (Losses)
            
            
            Estimated
                Fair ValueUS
                Treasury & Agency Debt Securities
            
            $
            11,908
            
            $
            (81
            )
            $
            11,827State
                & Municipal Debt Securities
            
            
            5,275
            
            
            -
            
            
            5,275Corporate
                Debt Securities
            
            
            76,208
            
            
            (430
            )
            
            75,778Total
                at December 31, 2004
            
            $
            93,391
            
            $
            (511
            )
            $
            92,880US
                Treasury & Agency Debt Securities
            
            $
            8,500
            
            $
            (53
            )
            $
            8,447State
                & Municipal Debt Securities
            
            
            10,725
            
            
            -
            
            
            10,725Corporate
                Debt Securities
            
            
            55,510
            
            
            (216
            )
            
            55,294Total
                at December 31, 2005
            
            $
            74,735
            
            $
            (269
            )
            $
            74,466





Management
      has the ability and intent, if necessary, to liquidate any of its marketable
      securities in order to meet the Company’s liquidity needs in the next 12 months.
      Accordingly, certain securities with contractual maturities greater than one
      year from year-end have been classified as short-term on the accompanying
      consolidated balance sheet. Expected maturities may differ from contractual
      maturities because the issuers of the securities may have the right to prepay
      obligations. The amortized cost and estimated fair value of marketable
      securities at December 31, 2005, are shown below:





Available-for-Sale
                SecuritiesCost
            
            
            Estimated
                Fair ValueDue
                in one year or less
            
            $
            70,598
            
            $
            70,364Due
                after one year through two years
            
            
            4,137
            
            
            4,102Total
            
            $
            74,735
            
            $
            74,466


**42**





9.
      INVENTORIES




Inventories
      consist of the following:




December
                31,2004
            
            
            2005Raw
                materials
            
            $
            3,510
            
            $
            2,870Work
                in progress
            
            
            9,026
            
            
            10,973Finished
                goods
            
            
            5,974
            
            
            5,06818,510
            
            
            18,911Reserves
            
            
            (4,074
            )
            
            (2,902
            )Total
            
            $
            14,436
            
            $
            16,009








10.
      ACCRUED LIABILITIES




Accrued
      liabilities consist of the following:





December
                31,2004
            
            
            2005Accrued
                compensation
            
            $
            2,005
            
            $
            2,123Warranty
                reserve
            
            
            159
            
            
            396Other
            
            
            2,619
            
            
            2,153$
            4,783
            
            $
            4,672





Warranty
      reserve movements in the years ended December 31, 2004 and 2005 for returns
      were
      $331 and $397, respectively. The periodic charges for estimated warranty costs
      were $390 and $634 in the years ended December 31, 2004 and 2005.





11.
      INCOME TAXES




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




Year
                Ended December 31,2003
            
            
            2004
            
            
            2005Current
                benefit
            
            
            Federal
            
            $
            (382
            )
            $
            -
            
            $
            -State
              and foreign
            
            
            -
            
            
            -
            
            
            -Deferred
                provision
            
            
            Federal
            
            
            -
            
            
            -
            
            
            -State
              and foreign
            
            
            -
            
            
            -
            
            
            -Total
            
            
            
            
            $
            (382
            )
            $
            -
            
            $
            -




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





Significant
      components of the Company’s net deferred taxes as of December 31, 2004 and 2005
      are as follows:





December
                31,2004
            
            
            2005Deferred
                tax balancesAccruals/reserves
            
            $
            3,642
            
            $
            3,148Net
                operating loss carryforwards
            
            
            94,285
            
            
            105,819Research
                and experimentation credits
            
            
            5,073
            
            
            5,870Deferred
                rent expense
            
            
            1,160
            
            
            1,215Difference
                in basis of plant and equipment
            
            
            2,689
            
            
            3,560Other
            
            
            -
            
            
            -Valuation
                allowance
            
            
            (106,849
            )
            
            (119,612
            )Net
                deferred tax assets
            
            
            -
            
            
            -


**43**


As
      of
      December 31, 2005, the Company had net operating loss carryforwards of
      approximately $290,000 for both federal and state tax reporting purposes. The
      federal carryforward will begin to expire in 2019, and the state carryforwards
      began to expire in 2005. At December 31, 2005, $25,149 of the deferred tax
      asset
      related to net operating loss carryforwards and an equivalent amount of deferred
      tax asset valuation allowance represented tax benefits associated with the
      exercise of non-qualified stock options. Such benefit, when realized, will
      be
      credited to additional paid-in capital. The valuation allowance increased
      $17,850 and $12,763 in the years ended December 31, 2004 and 2005,
      respectively.





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




Year
                Ended December 31,2003
            2004
            2005Tax
                at US statutory rate
            
            $
            (17,899
            )
            
            (35.0
            )%
            $
            (15,079
            )
            
            (35.0
            )%
            $
            (10,932
            )
            
            (35.0
            )%State
                and foreign tax (benefit), net of federal tax effect
            
            
            (1,662
            )
            
            (3.2
            )
            
            (1,400
            )
            
            (3.2
            )
            
            (1,015
            )
            
            (3.2
            )Research
                and experimentation tax credits, net
            
            
            -
            
            
            -
            
            
            (516
            )
            
            (1.2
            )
            
            (797
            )
            
            (2.6
            )Valuation
                allowance
            
            
            20,098
            
            
            39.3
            
            
            17,850
            
            
            41.4
            
            
            12,763
            
            
            40.9Other
            
            
            (919
            )
            
            (1.8
            )
            
            (855
            )
            
            (2.0
            )
            
            (19
            )
            
            (0.1
            )Benefit
                from income taxes
            
            $
            (382
            )
            
            (0.7
            )%
            $
            -
            
            
            0.0
            %
            $
            -
            
            
            0.0
            %





12.
      STOCKHOLDERS' EQUITY




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 2,694 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. Pursuant
      to the terms of ESP Plan, shares purchased and their applicable per share prices
      were 529 ($2.32), 182 ($3.11), and 328 ($3.13) for the years ended December
      31,
      2003, 2004 and 2005, respectively.





Employees
      and
      outside directors have been granted options to purchase shares of common stock
      under stock option plans adopted in 1994, 1995, 1997 and 2005. An aggregate
      of
      489, 4,913, 5,100 and 2,700 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, the 1997 Long-Term Incentive and Share Award Plan
      and the 2005 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 have been granted under the
      Plans.


**44**





In
      year 2004
      and 2005, the Company granted restricted shares under the 1995 Long Term
      Incentive and Share Award Plan, 1997 Long Term Incentive and Share Award Plan
      for Employees and the 2005 Long Term Incentive and Share Award Plan. The value
      of the grants have been recorded as deferred compensation, a component of
      Stockholders’ Equity and amortized over their respective vesting
      period.





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
      shares of common stock having a weighted average exercise price of $36.90.
      On
      December 20, 2002, participating employees were issued 761 options under this
      program in exchange for the cancelled options. The new options had an exercise
      price equal to $2.53, which represented the fair market value at the date of
      grant and fully vested on December 20, 2003.





On
      July 3,
      2003, the Company announced a voluntary stock option exchange program for
      employees and Officers. Directors of the Company were not eligible for the
      exchange program. Pursuant to the terms and conditions of the offer, which
      expired on August 4, 2003, the Company accepted for cancellation options to
      purchase 1,674 shares of common stock having a weighted average exercise price
      of $19.49. On February 6, 2004, participating employees were issued 552 stock
      options, under this one for three-exchange program, for the cancelled options.
      The new options had an exercise price equal to $7.27, which represented the
      fair
      market value at the date of grant and fully vested on December 22,
      2004.





A
      summary of
      the Company’s stock option activity, and related information for the years ended
      December 31, 2003, 2004 and 2005 are as follows:





2003
            2004
            2005Common
                Stock Options
            
            
            Weighted
                Average Exercise Price
            
            
            Common
                Stock Options
            
            
            Weighted
                Average Exercise Price
            
            
            Common
                Stock Options
            
            
            Weighted
                Average Exercise PriceOutstanding
                at beginning of year
            
            
            7,132
            
            $
            10.80
            
            
            5,905
            
            $
            7.30
            
            
            6,792
            
            $
            7.47Granted
            
            
            856
            
            
            3.44
            
            
            1,944
            
            
            7.16
            
            
            159
            
            
            3.12Exercised
            
            
            (23
            )
            
            2.93
            
            
            (537
            )
            
            2.53
            
            
            (416
            )
            
            2.80Forfeited
            
            
            (386
            )
            
            10.78
            
            
            (520
            )
            
            9.31
            
            
            (591
            )
            
            7.57Cancelled
            
            
            (1,674
            )
            
            19.49
            
            
            -
            
            
            -
            
            
            -
            
            
            -Outstanding
                at end of year
            
            
            5,905
            
            
            7.30
            
            
            6,792
            
            
            7.47
            
            
            5,944
            
            
            7.67Exercisable
                at end of year
            
            
            4,185
            
            
            8.65
            
            
            6,172
            
            
            7.94
            
            
            5,759
            
            
            7.83





Stock
      options
      outstanding at December 31, 2005 are summarized as follows:





Range
                of exercise prices
            
            
            Outstanding
                Options at Dec. 31, 2005
            
            
            Weighted
                average remaining contractual life
            
            
            Weighted
                average exercise price
            
            
            Exercisable
                at Dec. 31, 2005
            
            
            Weighted
                average exercise price$1.39
                - $2.84
            
            
            1,354
            
            
            7.08
            
            $
            2.58
            
            
            1,261
            
            $
            2.60$2.89
                - $5.33
            
            
            1,323
            
            
            4.19
            
            $
            4.31
            
            
            1,234
            
            $
            4.39$5.58
                - $7.27
            
            
            1,712
            
            
            8.03
            
            $
            7.18
            
            
            1,709
            
            $
            7.19$7.65
                - $53.48
            
            
            1,555
            
            
            3.82
            
            $
            15.50
            
            
            1,555
            
            $
            15.50





FAS
      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 FAS 123. The fair value of
      these equity awards was estimated at the date of grant using a Black-Scholes
      option pricing model. The following are weighted average assumptions for stock
      option grants for 2003, 2004 and 2005, respectively: risk-free interest rate
      of
      1.8%, 2.2% and 3.4%; expected volatility of 1.10, 1.01 and 0.95; 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 2003, 2004 and 2005 was
      $2.24, $4.17 and $1.70, respectively.


**45**





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. This 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 $628, $730 and $675 for the years ended December 31, 2003, 2004
      and
      2005, respectively, 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 31,2003
            
            
            2004
            
            
            2005Weighted
                average common shares outstanding used to calculate basic earnings
                per
                share
            
            
            30,717
            
            
            32,413
            
            
            34,012Net
                effect of dilutive securities - based on treasury stock method using
                average market price
            
            
            -*
            
            
            -*
            
            
            -*Weighted
                average common shares outstanding used to calculate diluted earnings
                per
                share
            
            
            30,717
            
            
            32,413
            
            
            34,012




*
      Any
      dilution arising from the Company's outstanding stock options or shares
      potentially issuable upon
      conversion of the Convertible notes, as summarized below, are not included


as
      their
      effect is anti-dilutive.





2003
            2004
            2005Number
                of Shares
            
            
            Average
                Exercise price
            
            
            Number
                of shares
            
            
            Average
                Exercise price
            
            
            Number
                of shares
            
            
            Average
                Exercise priceExercise
                of options outstanding
            
            
            5,905
            
            $
            7.30
            
            
            6,792
            
            $
            7.47
            
            
            5,944
            
            $
            7.675%
                Convertible notes, due in 2006
            
            
            3,176
            
            
            21.00
            
            
            2,224
            
            
            21.00
            
            
            2,224
            
            
            21.005%
                Convertible notes, due in 2009
            
            
            -
            
            
            -
            
            
            7,600
            
            
            5.00
            
            
            7,600
            
            
            5.00








15.
      OTHER
      ACCUMULATED COMPREHENSIVE INCOME (LOSS)





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





Foreign
                Currency Translation Adjustments
            
            
            Unrealized
                Gain (loss) on available-for-sale securities
            
            
            TotalBalance
                at December 31, 2003
            
            $
            13
            
            $
            125
            
            $
            138Unrealized
                loss on available-for-sale securities
            
            
            -
            
            
            (617
            )
            
            (617
            )Foreign
                currency translation adjustment
            
            
            12
            
            
            -
            
            
            12Net
                gain recognized in other comprehensive income
            
            
            -
            
            
            (19
            )
            
            (19
            )Balance
                at December 31, 2004
            
            
            25
            
            
            (511
            )
            
            (486
            )Unrealized
                gain on available-for-sale securities
            
            
            -
            
            
            242
            
            
            242Foreign
                currency translation adjustment
            
            
            (72
            )
            
            -
            
            
            (72
            )Balance
                at December 31, 2005
            
            $
            (47
            )
            $
            (269
            )
            $
            (316
            )




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.


**46**


16.
      LEGAL
      PROCEEDINGS





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 consolidated financial condition or results of
      operation.




17.
      QUARTERLY FINANCIAL DATA (UNAUDITED)





Quarter
                Ended2004
            2005April
              3
            
            
            July
                3
            
            
            Oct.
                2
            
            
            Dec.
                31
            
            
            April
                2
            
            
            July
                2
            
            
            Oct.
                1
            
            
            Dec.
                31Net
                sales
            
            $
            21,195
            
            $
            22,687
            
            $
            25,053
            
            $
            22,415
            
            $
            21,773
            
            $
            23,943
            
            $
            29,264
            
            $
            33,301Cost
                of sales
            
            
            19,175
            
            
            19,207
            
            
            19,811
            
            
            19,162
            
            
            19,252
            
            
            19,511
            
            
            22,691
            
            
            24,475Gross
                profit
            
            
            2,020
            
            
            3,480
            
            
            5,242
            
            
            3,253
            
            
            2,521
            
            
            4,432
            
            
            6,573
            
            
            8,826Research
                and development expenses
            
            
            8,902
            
            
            8,866
            
            
            7,884
            
            
            7,654
            
            
            7,862
            
            
            7,374
            
            
            7,491
            
            
            7,179Selling
                and administrative expense
            
            
            5,790
            
            
            6,099
            
            
            5,482
            
            
            5,140
            
            
            5,552
            
            
            5,506
            
            
            5,234
            
            
            5,001Restructuring
                and other charges
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (120
            )
            
            -
            
            
            -
            
            
            -Operating
                loss
            
            
            (12,672
            )
            
            (11,485
            )
            
            (8,124
            )
            
            (9,541
            )
            
            (10,773
            )
            
            (8,448
            )
            
            (6,152
            )
            
            (3,354
            )Interest
                income
            
            
            659
            
            
            551
            
            
            469
            
            
            524
            
            
            577
            
            
            599
            
            
            607
            
            
            690Interest
                expense
            
            
            (940
            )
            
            (940
            )
            
            (955
            )
            
            (1,250
            )
            
            (1,249
            )
            
            (1,249
            )
            
            (1,250
            )
            
            (1,249
            )Gain
                on notes repurchase
            
            
            -
            
            
            -
            
            
            327
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Other
                income (expense)
            
            
            201
            
            
            143
            
            
            (36
            )
            
            (13
            )
            
            (6
            )
            
            9
            
            
            15
            
            
            -Loss
                before income taxes
            
            
            (12,752
            )
            
            (11,731
            )
            
            (8,319
            )
            
            (10,280
            )
            
            (11,451
            )
            
            (9,089
            )
            
            (6,780
            )
            
            (3,913
            )Benefit
                from income taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                loss
            
            $
            (12,752
            )
            $
            (11,731
            )
            $
            (8,319
            )
            $
            (10,280
            )
            $
            (11,451
            )
            $
            (9,089
            )
            $
            (6,780
            )
            $
            (3,913
            )Basic
                and diluted loss per share
            
            $
            (0.40
            )
            $
            (0.36
            )
            $
            (0.25
            )
            $
            (0.31
            )
            $
            (0.34
            )
            $
            (0.27
            )
            $
            (0.20
            )
            $
            (0.11
            )





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





For
      information regarding the Company’s change in independent registered public
      accounting firm from Ernst & Young LLP to J.H. Cohn LLP, please refer to the
      Company’s current report on Form 8-K filed with the SEC on June 3, 2005. The
      Company had no disagreements during its 2005 fiscal year with its independent
      auditors regarding accounting or financial disclosure matters.





ITEM
      9A.
      CONTROLS AND PROCEDURES.





Conclusion
      Regarding the Effectiveness of Disclosure Controls and Procedures





Under
      the
      supervision and with the participation of our management, including our Chief
      Executive Officer, or CEO and Chief Financial Officer, or CFO, we conducted
      an
      evaluation of the effectiveness of our disclosure controls and procedures as
      of
      December 31, 2005. Based on that evaluation, our management, including our
      CEO
      and CFO, concluded that our disclosure controls and procedures were effective
      to
      ensure that information required to be disclosed by us in reports that we file
      or submit under the Exchange Act is recorded, processed, summarized and reported
      as specified within the SEC’s rules and forms.


**47**


Management’s
      Report on Internal Control Over Financial Reporting





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting, as such term is defined in Exchange Act Rule
      13a-15(f). Under the supervision and with the participation of our management,
      including our CEO and CFO, we conducted an evaluation of the effectiveness
      of
      our internal control over financial reporting based on the framework of *Internal
      Control-Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
      Based on that evaluation, our management concluded that our internal control
      over financial reporting was effective as of December 31, 2005.





Our
      management’s evaluation of the effectiveness of our internal control over
      financial reporting as of December 31, 2005 has been audited by J.H. Cohn LLP,
      an independent registered public accounting firm, as stated in their report
      which is included below.





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





Inherent
      Limitations of Controls





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





ITEM
      9B.
      OTHER INFORMATION





None.


**48**





Report
      of
      Independent Registered Public Accounting Firm








To
      the
      Board of Directors and Stockholders


ANADIGICS,
      Inc.








We
      have
      audited management's assessment, included in Item 9A, Management's Report on
      Internal Control over Financial Reporting, that ANADIGICS, Inc. maintained
      effective internal control over financial reporting as of December 31, 2005
      based on criteria established in "Internal Control - Integrated Framework"
      issued by the Committee of Sponsoring Organizations of the Treadway Commission.
      ANADIGICS, Inc.'s management is responsible for maintaining effective internal
      control over financial reporting and for its assessment of the effectiveness
      of
      internal control over financial reporting. Our responsibility is to express
      an
      opinion on management's assessment and an opinion on the effectiveness of the
      Company's internal control over financial reporting based on our
      audit.





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





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





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





In
      our
      opinion, management's assessment that ANADIGICS, Inc. maintained effective
      internal control over financial reporting as of December 31, 2005, is fairly
      stated, in all material respects, based on the criteria established in "Internal
      Control - Integrated Framework" issued by the Committee of the Sponsoring
      Organizations of the Treadway Commission. Also, in our opinion, ANADIGICS,
      Inc.
      maintained, in all material respects, effective internal control over financial
      reporting as of December 31, 2005, based on such criteria.





We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the consolidated balance sheet of ANADIGICS,
      Inc. as of December 31, 2005, and the related consolidated statements of
      operations, comprehensive loss, stockholders' equity and cash flows for the
      year
      then ended, and our report dated February 27, 2006 expressed
      an unqualified opinion thereon.








/s/
      J.H.
      Cohn LLP





Roseland,
      New Jersey


February
      27, 2006




**49**





PART
        III





ITEM
      10.
      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.





The
      current Executive Officers and Directors of the Company are as follows:


*Name*
            *Age*
            *Position*Bami
                Bastani
            52
            President,
                Chief Executive Officer and DirectorRonald
                Rosenzweig
            68
            Chairman
                of the Board of Directors and DirectorCharles
                Huang
            58
            Executive
                Vice President and Chief Technical OfficerThomas
                C. Shields
            46
            Executive
                Vice President and Chief Financial OfficerPaul
                Bachow
            54
            DirectorGarry
                McGuire
            59
            DirectorHarry
                T. Rein
            61
            DirectorLewis
                Solomon
            72
            DirectorDennis
                F. Strigl
            59
            Director




Set
      forth
      below is certain information with respect to the Company’s Executive Officers
      and Directors. Officers are appointed to serve at the discretion of the Board
      of
      Directors. There are no family relationships between Executive Officers or
      Directors of the Company.




The
      Company’s
      by-laws provide that the Board of Directors shall be divided into three classes
      designated Class I, Class II and Class III with each class consisting as nearly
      as possible of one-third of the total number of Directors constituting the
      Board
      of Directors; provided, however, that in no case will a decrease in the number
      of Directors shorten the term of any incumbent Director. The Board of Directors
      is presently comprised of seven members each of whom is independent within
      the
      NASDAQ listing standards except for Ronald Rosenzweig and Dr. Bami
      Bastani.




The
      term of
      office for each Director in Class I (Messrs. Bachow and Bastani) expires at
      the
      Annual Meeting in 2006; the term of office for each Director in Class II
      (Messrs. McGuire, Rosenzweig and Solomon) expires at the Annual Meeting in
      2007;
      and the term of office for each Director in Class III (Messrs. Rein and Strigl)
      expires at the Annual Meeting in 2008. At each annual meeting of stockholders,
      Directors will be elected for full terms of three years to succeed those
      Directors whose terms are expiring.




Dr.
      Bastani has served as a Director, President and Chief Executive Officer of
      the
      Company since October 1998. Prior to joining the Company, Dr. Bastani served
      as
      Executive Vice President, System LSI Group for Fujitsu Microelectronics, Inc.,
      from 1996 to 1998. Dr. Bastani held various positions at National Semiconductor
      including Vice President and General Manager - Embedded Technology Division,
      Vice President and General Manager - Memory Products Division, and Vice
      President - Technology Development from 1985 to 1996. Dr. Bastani served on
      the
      board of directors of Globespan Virata in 2003, and is a national member of
      the
      AEA Board of Directors. Dr. Bastani received a B.S.E.E. from the University
      of
      Arkansas and a M.S. and Ph.D. in Electrical Engineering from the Ohio State
      University.




Mr.
      Rosenzweig, a co-founder of the Company in 1985, has served as a Director of
      the
      Company since its inception and as Chairman of the Board of Directors since
      1998. From the Company’s inception in 1985 until 1998, Mr. Rosenzweig served as
      President and Chief Executive Officer of the Company. He was a co-founder of
      Microwave Semiconductor Corp. and served as the company’s President and Chief
      Executive Officer and director from 1968 to 1983. Mr. Rosenzweig received his
      Bachelor Degree in Chemical Engineering from City College of New
      York.




Dr.
      Huang, a co-founder of the Company in 1985, has served as Executive Vice
      President of the Company since its inception. In addition, he served as a
      Director until April of 1999. He was director of GaAs research and development
      and wafer fabrication services at Avantek from 1980 to 1984. Dr. Huang received
      his Ph.D.E.E. at the University of California, Berkeley.




Mr.
      Shields
      has served as Executive Vice President of the Company since January 2006; he
      has
      served as Chief Financial Officer of the Company since July 1999. He served
      as
      Senior Vice President of the Company from July 1999 through January 2006. Prior
      to joining the Company, Mr. Shields served as Vice President and Controller
      of
      Fisher Scientific Company from 1997 to 1999. From 1994 to 1997, Mr. Shields
      served as Vice President and Controller for Harman Consumer Group. From 1986
      to
      1994, Mr. Shields served in various positions with Baker & Taylor, Inc. Mr.
      Shields received his B.S. and M.B.A. degrees from Fairleigh Dickinson
      University.


**50**


Mr.
      Bachow
      has served as a Director of the Company since January 1993. He has been
      President of Bachow & Associates, Inc., a private investment firm, since he
      founded the firm in 1989.  Bachow & Associates also serves as the
      manager of Paul S. Bachow Co-Investment Fund, L.P. and Bachow Investment
      Partners III, L.P., private equity investment funds. Mr. Bachow has a B.A.
      from
      American University, a J.D. from Rutgers University, and a Masters Degree in
      tax
      law from New York University, and is a C.P.A.




Mr.
      McGuire has served as a Director of the Company since March 2005. He has served
      as the Chief Financial Officer for AVAYA, a global leader in communication
      systems and applications since its formation in October 2000 and since 2003
      has
      been Chief Financial Officer & Senior Vice President Corporate Development.
      Previously, Mr. McGuire served as President and Chief Executive Officer of
      Williams Communications Solutions LLC. Prior to that, he served in a number
      of
      senior positions at Nortel Networks. Mr. McGuire has a Bachelor of Science
      degree from the University of Dayton School of Business.




Mr.
      Rein has
      served as a director of the Company since 1985. He is a General Partner with
      Foundation Medical Partners. Mr. Rein was the principal founder of Canaan
      Partners in 1987, a venture capital investment firm and served as its managing
      general partner until 2002. Prior to that, he was President and CEO of GE
      Venture Capital Corporation. Mr. Rein joined General Electric Company in 1979
      and directed several of its lighting businesses as general manager before
      joining the venture capital subsidiary. Mr. Rein attended Emory University
      and
      Oglethorpe College and holds an MBA from the Darden School at the University
      of
      Virginia.




Mr.
      Solomon
      has served as a Director of the Company since September 1994 and, previously,
      from 1985 to 1989. Mr. Solomon has been Chairman of G&L Investments, a
      consulting firm specializing in technology, since 1990 in addition to serving
      as
      a director on the boards of Harmonic Inc., Artesyn Technologies Inc., Terayon
      Communications Inc. and several private companies. Prior to joining G&L
      Investments, Mr. Solomon was an Executive Vice President with Alan Patricof
      Associates from 1983 to 1986, and a Senior Vice President of General Instrument
      from 1967 to 1983. Mr. Solomon received a Bachelor Degree in Physics from St.
      Joseph’s College and a Masters Degree in Industrial Engineering from Temple
      University.




Mr.
      Strigl
      has served as a Director since January 2000. He has served as President and
      CEO
      of Verizon Wireless, one of the largest wireless communications providers in
      the
      US, since its formation in April 2000, and is an Executive Vice President of
      Verizon Communications. Previously, Mr. Strigl served as President and Chief
      Executive Officer of Bell Atlantic Mobile, Group President and Chief Executive
      Officer of the Global Wireless Group of Bell Atlantic, Vice President of
      Operations and Chief Operating Officer of Bell Atlantic New Jersey, Inc.
      (formerly New Jersey Bell Telephone Company) and served on its Board of
      Directors. He also served as President and CEO of Applied Data Research Inc.
      Mr.
      Strigl currently serves on the board of directors of PNC Financial Services
      Group and PNC Bank. Mr. Strigl holds an undergraduate degree in Business
      Administration from Canisius College and an M.B.A. from Fairleigh Dickinson
      University.





***Audit
      Committee***




The
      Audit
      Committee is a separately-designated standing committee of the Board of
      Directors established in accordance with applicable securities laws. The Audit
      Committee operates under a written charter adopted by the Board of Directors
      and
      is responsible for (i) determining the adequacy of the Company’s internal
      accounting and financial controls, (ii) reviewing the results of the audit
      of
      the Company performed by the independent public accountants, and (iii)
      recommending the selection of independent public accountants. Messrs. Bachow
      (Chair), Rein and McGuire were members of the Audit Committee during fiscal
      2005
      and are independent within the meaning of the NASDAQ listing standards. The
      Company’s Board of Directors has determined that two members of the Audit
      Committee, Messrs. Bachow and McGuire, are audit committee financial experts
      as
      described in Item 401(h) of Regulation S-K.   Messrs. Bachow and
      McGuire's qualifications as an audit committee financial expert are set
      forth in his profile as a Director above.





***Section
      16(a) Beneficial Ownership Reporting Compliance***




Based
      solely on a review of copies of reports furnished to the Company or written
      representations that no other reports were required, the Company believes that
      during the fiscal year ended December 31, 2005, all filing requirements under
      Section 16(a) of the Securities Exchange Act of 1934 applicable to its Executive
      Officers and Directors were complied with.





***Code
      of Ethics***




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


**51**


ITEM
      11.
      EXECUTIVE COMPENSATION.




Shown
      below
      is information concerning the annual compensation for services in all capacities
      to the Company for the last three fiscal years of those persons who at December
      31, 2005, were the Company’s Executive Officers:





***Summary
      Compensation Table***




Long-Term
                Compensation AwardsName
                and Principal Position
            
            
            Year
            
            
            Salary
            
            
            Bonus(1)
            
            
            Other
                Annual
              
              Compensation
                (2)
            
            
            Restricted
              Share
              Awards
                (3)
            
            
            Securities
              
              Underlying
              
              Options
                (4)Bami
                Bastani
            
            
            2005
            
            $
            445,536
            
            
            —
            
            
            —
            
            $
            1,222,883
            
            
            —Chief
                Executive Officer
            
            
            2004
            
            $
            445,536
            
            $
            116,000
            
            
            —
            
            $
            486,705
            
            
            266,668
            (5)2003
            
            $
            445,536
            
            $
            287,418
            
            
            —
            
            
            —
            
            
            150,000Ronald
                Rosenzweig
            
            
            2005
            
            $
            100,000
            
            
            —
            
            
            —
            
            $
            66,400
            
            
            —Chairman
                of the Board
            
            
            2004
            
            $
            87,500
            
            $
            37,500
            
            
            —
            
            $
            34,200
            
            
            15,0002003
            
            $
            75,000
            
            $
            20,700
            
            $
            13,433
            
            
            —
            
            
            45,000Charles
                Huang
            
            
            2005
            
            $
            230,000
            
            
            —
            
            
            —
            
            $
            376,947
            
            
            —Executive
                Vice President
            
            
            2004
            
            $
            230,000
            
            $
            61,000
            
            
            —
            
            $
            165,033
            
            
            57,500
            (5)2003
            
            $
            165,000
            
            $
            120,000
            
            
            —
            
            
            —
            
            
            45,000Thomas
                C. Shields
            
            
            2005
            
            $
            233,846
            
            
            —
            
            
            —
            
            $
            486,550
            
            
            —Executive
                Vice President & Chief Financial Officer
            
            
            2004
            
            $
            225,000
            
            $
            59,000
            
            
            —
            
            $
            217,795
            
            
            121,251
            (5)2003
            
            $
            225,000
            
            $
            170,000
            
            
            —
            
            
            —
            
            
            45,000





(1)
            Represents
                bonuses earned in the fiscal years presented.




(2)
            While
                the named Executive Officers received some perquisites from the Company,
                the dollar value of such perquisites did not meet or exceed in any
                of the
                reported years (except with respect to Mr. Rosenzweig in 2003) the
                reporting threshold of $50,000 or ten percent of total annual salary
                and
                bonus of such Executive Officers set forth in the applicable rules
                of the
                Securities and Exchange Commission.




(3)
            The
                restricted share awards for 2005 reflect the Company’s January 31, 2006
                grant of 1,395,336 restricted shares of the Company’s common stock under
                the 2005 Long-Term Incentive and Share Award Plan (the “2005 Plan”),
                including 172,000 shares issued to Dr. Bastani (97,334 shares vesting
                on
                February 22, 2007; 37,333 shares vesting on February 22, 2008 and
                37,333
                shares vesting on February 22, 2009), 10,000 shares issued to Mr.
                Rosenzweig (10,000 vesting on February 22, 2007), 66,429 shares issued
                to
                Mr. Shields (38,873 vesting on February 22, 2007; 13,778 shares vesting
                on
                February 22, 2008 and 13,778 shares vesting on February 22, 2009)
                and
                50,333 shares issued to Dr. Huang (30,111 shares vesting on February
                22,
                2007; 10,111 shares vesting on February 22, 2008 and 10,111 shares
                vesting
                on February 22, 2009).




The
                restricted share awards for 2005 also reflect the Company’s August 4, 2005
                grant of 271,036 restricted shares of the Company’s common stock under the
                2005 Plan, including 31,078 shares issued to Dr. Bastani vesting
                on August
                4, 2006, 17,485 shares issued to Mr. Shields vesting on August 4,
                2006 and
                16,437 shares issued to Dr. Huang vesting on August 4,
                2006.




The
                restricted share awards for 2004 were granted on July 23, 2004 (vesting
                on
                July 23, 2005), on January 21, 2005 (vesting on February 17, 2006)
                and on
                January 25, 2005 (vesting on February 17, 2006).





The
      dollar amounts shown equal the number of shares of restricted stock granted
      multiplied by the stock price on the grant date. On December 31, 2005, Messrs.
      Bastani, Rosenzweig, Huang and Shields held 143,578, 11,250, 47,187, and 64,985
      shares, respectively, of restricted shares of common stock having a market
      value
      based on the closing price of the Company’s common stock on such date of
      $861,468, $67,500, $283,122 and $389,910 respectively. Dividends, if any, are
      paid on restricted shares of common stock at the same rate as paid on
      unrestricted common stock.


**52**


(4)
            No
                options were granted to the named Executive Officers for the fiscal
                year
                ended December 31, 2005.




(5)
            Includes
                options granted on February 4, 2004 to Messrs. Bastani (116,668 shares),
                Huang (12,500 shares) and Shields (71,251 shares) pursuant to the
                Company’s July 2003 voluntary stock option exchange program describedin
                the Company’s annual proxy statement on Schedule 14A filed on April 19,
                2005under “Report on Repricing of
                Options”.




***Current
      Annual Base Salary***





Set
      forth
      below is the annual base salary for our Executive Officers effective as of
      January 30, 2006:





Name
            
            
            Annual
                Base SalaryBami
                Bastani
            
            $
            490,090Charles
                Huang
            
            $
            234,830Thomas
                C. Shields
            
            $
            250,040Ronald
                Rosenzweig
            
            $
            100,000





***Stock
      Options***




***Aggregated
        Option Exercises in Last Fiscal Year and Fiscal Year-End Option
        Values***
  Stock
                  Price at December 31, 2005 — $6.00Name
              
              
              Shares
                  Acquired On
                
                Exercise
              
              
              Value
                  Realized
              
              Number
                  of Securities
                Underlying
                  Unexercised
                Options
                  at Fiscal Year End
              Value
                  of Unexercised
                In-the-money
                Options
                  at Fiscal Year EndExercisable
              
              
              
              
              
              
              
              
              Exercisable
              
              
              Unexercisable
              
              
              Exercisable
              
              
              UnexercisableBami
                  Bastani
              
              
              —
              
              
              —
              
              
              929,168
              
              
              12,500
              
              $
              1,395,250
              
              $
              39,500Ronald
                  Rosenzweig
              
              
              —
              
              
              —
              
              
              265,000
              
              
              10,000
              
              
              320,508
              
              
              31,100Charles
                  Huang
              
              
              —
              
              
              —
              
              
              488,750
              
              
              3,750
              
              
              230,850
              
              
              11,850Thomas
                  C. Shields
              
              
              —
              
              
              —
              
              
              162,501
              
              
              3,750
              
              
              130,350
              
              
              11,850


***Compensation
      of Directors***




Each
      non-employee Director receives an initial grant upon joining the Board of
      Directors of options to purchase 15,000 shares of the Company’s common stock at
      an exercise price per share equal to the fair market value on the date of grant.
      Each option will become exercisable in three equal installments, commencing
      one
      year from the date of grant and annually thereafter, and will expire ten years
      from the date of grant.




Each
      non-employee Director receives an annual retainer of $10,000, payable in
      quarterly installments, for Board services, $1,000 for each committee meeting
      attended (with a cap of $2,500 per day), and reimbursement for ordinary expenses
      incurred in connection with attendance at such meeting. Each committee
      chairperson also receives a $500 fee per meeting with the exception of the
      chairperson of the ad hoc Strategic Planning Committee, who received $25,000
      per
      quarter. In 2005, each non-employee Director received a grant of options to
      purchase 15,000 shares of the Company’s common stock at an exercise price of
      $3.68 which vested on January 2, 2006. On January 31, 2006, each non-employee
      Director received, in lieu of the annual grant of options to purchase 15,000
      shares, a grant of 10,000 shares of restricted stock vesting on February 22,
      2007.


**53**





*Compensation
      Committee Interlocks and Insider Participation*




The
      current
      members of the Compensation & HR Committee are Messrs. McGuire, Solomon and
      Strigl, none of whom are employees of the Company and all of whom are considered
      “independent” directors under the applicable NASDAQ rules. There were no
      interlocks or insider participation between any member of the Board of Directors
      or the Compensation & HR Committee and any member of the board of directors
      or the compensation committee of another company.





***Executive
      Employment Agreements***




*Chief
      Executive Officer* .
      In
      September 1998, Dr. Bami Bastani, President, Chief Executive Officer and member
      of the Board of Directors, entered into an employment agreement with the Company
      pursuant to which he was to receive an annual base salary, bonus, stock options,
      restricted stock, and executive benefits based upon the Compensation & HR
      Committee’s determination of the Company’s success in meeting certain of the
      operational, strategic, and financial goals approved by the Board of Directors.




If
      the
      Company terminates Dr. Bastani without cause or Dr. Bastani terminates his
      employment for good reason or for any reason following a change in control,
      he
      shall be entitled to (A) an amount equal to 299% of the sum of (i) the highest
      annualized rate of his base salary in effect at any point during the twelve
      months preceding the date of termination of employment, plus (ii) his bonus
      at a
      target of 110% of the highest annualized rate of his base salary in effect
      at
      any point during the twelve months preceding the date of termination of
      employment, (B) health benefits for a maximum of twenty-four months, and (C)
      immediate vesting of (i) all stock options and (ii) all restricted stock granted
      prior to termination of employment. In exchange for these benefits, Dr. Bastani
      agreed (x) not to solicit employees to leave the Company for twenty-four months
      after termination of his employment and (y) not to solicit customers or
      interfere with Company suppliers for twelve months following termination of
      his
      employment.




*Chairman
      of the Board* .
      In June
      1999, Ronald Rosenzweig, Chairman of the Board of Directors, entered into an
      employment agreement with the Company pursuant to which he was to receive an
      annual base salary, bonus, stock options, and executive benefits. The employment
      agreement, as amended, terminates on July 2, 2006. For the period from July
      2,
      2005 through July 1, 2006 his annualized base salary is $100,000.




If
      the
      Company terminates Mr. Rosenzweig without cause, he shall be entitled to (A)
      an
      amount equal to the sum of his then annual base salary plus his bonus, if any,
      earned during the immediately preceding calendar year, (B) health benefits
      for a
      maximum of twenty-four months, and (C) immediate vesting of all non-qualified
      stock options.





*Other
      Executive Officers* .
      During
      2000, the Company entered into an employment agreement with Charles Huang,
      Executive Vice President and Chief Technical Officer. The terms of the agreement
      provide that if the employee is terminated by the Company following a change
      in
      control or if the employee terminates employment with the Company as a result
      of
      a reduction in responsibilities and duties or a reduction in compensation
      following a change in control, the employee shall be entitled to receive (A)
      up
      to 12 months of base salary and bonus, (B) payment of the annual bonus (at
      100%
      of target) prorated for the number of months worked, (C) health benefits for
      a
      maximum of 12 months, (D) immediate vesting of all stock options, and (E)
      executive outplacement services for six months.




In
      2000, the
      Company entered into an employment agreement with Thomas Shields, Executive
      Vice
      President and Chief Financial Officer. Under the terms of the agreement, as
      amended, if the Company terminates Mr. Shields without cause or in the
      event of a change in control which results in either the involuntary termination
      without cause of his employment with the Company or Mr. Shields' voluntary
      resignation from the Company due to a reduction in the responsibilities and
      duties associated with his position, or reduction in compensation (base salary,
      plus bonus at target) without the prior express written consent of Mr. Shields,
      he shall be entitled to (A) an amount equal to 250% of the sum of (i) the
      highest annualized rate of his base salary in effect at any point during the
      twelve months preceding the date of termination of employment, plus (ii) his
      bonus at a target of 110% of the highest annualized rate of his base salary
      in
      effect at any point during the twelve months preceding the date of termination
      of employment, (B) health benefits for a maximum of twenty-four months, and
      (C)
      immediate vesting of (i) all stock options and (ii) all restricted stock granted
      prior to termination of employment.




In
      exchange
      for these benefits, the employees agreed (X) after termination of employment,
      not to hire or solicit for hire the employees of the Company for 12 months,
      and
      (Y) to
      keep
      confidential information about the Company.


**54**





**Report
      of the Compensation & HR Committee**




The
      objectives of the Company’s compensation program are to enhance the Company’s
      ability to recruit and retain qualified management, motivate executives and other
      employees to achieve established performance goals and ensure an element of
      congruity between the financial interests of the Company’s management and its
      stockholders.




In
      fiscal
      year 2005, the Compensation & HR Committee considered the following factors
      in setting the compensation of the Company’s Executive Officers:





·
            The
                overall operating performance of the Company as well as the Company’s
                performance in relation to its industry
                competitors.




·
            The
                compensation packages for executives who have similar positions and
                levels
                of responsibility at other publicly held U.S. manufacturers of integrated
                circuits and other relevant products in related appropriate
                markets.




The
      Compensation & HR Committee believes that competition for qualified
      executives in the broadband and wireless integrated circuit industries is
      extremely strong and that to attract and retain such persons, the Company must
      maintain an overall compensation package that is competitive with those offered
      by its peer companies.




Compensation
      arrangements under the Company’s current compensation program may include up to
      four components: (a) a base salary, (b) a discretionary short-term bonus
      program, (c) the grant of equity incentives in the form of stock options and/or
      restricted stock awards and (d) other compensation and employee benefits
      generally available to all employees of the Company, such as health insurance
      and participation in the Company’s 401(k) plan. The Chief Executive Officer’s
      salary, bonus and equity incentive awards are established by the Compensation
      & HR Committee, subject to Dr. Bastani’s Employment Agreement.
      Recommendations regarding the base salary, bonuses and stock option or other
      equity awards of the Company’s Executive Officers, other than Dr. Bastani, are
      made to the Compensation & HR Committee by Dr. Bastani but are subject to
      Compensation & HR Committee review, modification and approval.




To
      assist it
      in overseeing compensation practices, the Compensation & HR Committee
      periodically requests Company Human Resource Department personnel to gather
      compensation data for Compensation & HR Committee review. The Company also
      is a member of certain human resources-focused industry groups that accumulate
      detailed data regarding position descriptions, responsibilities and compensation
      for all levels of employees within the semiconductor industry. This information
      is one of the factors applied in setting the overall base salary, bonus and
      other performance-based compensation levels for all Company Executive
      Officers.





*Base
      Salaries*




Subject
      to existing employment agreements, individual salaries for Executive Officers
      are annually reviewed and established by the Compensation & HR Committee. In
      determining individual salaries, the Compensation & HR Committee considers
      the scope of job responsibilities, individual contributions, labor market
      conditions, peer data and the Company’s overall annual budget guidelines for
      merit and performance increases. The Company’s objective is to deliver base
      compensation levels for each Executive Officer at the 70th percentile for the
      comparable position of the Company’s peer group. For fiscal year 2005, the
      Compensation & HR Committee believes that base salaries for the Company’s
      named Executive Officers were, as an average for the group, slightly below
      the
      median base salaries of the peer group comparable positions.


**55**


*Annual
      Cash Incentive*




A
      large part
      of each Executive Officer’s potential total cash compensation is intended to be
      variable and dependent upon semi-annual Company performance. Annual bonus awards
      are determined directly from three objective performance-based measures: (a)
      revenues and (b) the level of operating profit (EBITDA), and (c) achievement
      of
      specific operational goals. During fiscal year 2005, each Executive Officer
      was
      eligible for a short-term bonus computed using a formula based on these three
      objective performance-based measures and the individual’s pay tier. Adjustments
      may be made to operating profit to eliminate the effects of generally
      non-recurring, one-time events that may include but are not limited to the
      sale
      of investments in securities of other companies, acquisition-related expenses
      and the sale or disposal of assets no longer in service. The same criteria
      are
      used for Executive Officers as for all other employees.





*Equity
      Incentive Awards*




The
      Compensation & HR Committee believes that substantial equity ownership
      encourages management to take actions favorable to the long-term interests
      of
      the Company and its shareholders. Accordingly, equity-based compensation makes
      up a significant portion of the overall compensation of Executive Officers.
      The
      Company grants unvested equity-based awards to most of its newly hired,
      full-time employees, and many employees are periodically eligible thereafter
      for
      additional awards based on management’s evaluation of their
      performance.





*Additional
      Awards*




The
      Compensation & HR Committee may grant, and has done so in the past,
      additional short-term or long-term cash or equity awards to recognize increased
      responsibilities or special contributions to the Company, attract new employees
      to the Company or retain key employees.





*Chief
      Executive Officer Compensation*




The
      Compensation & HR Committee establishes the compensation of Dr. Bastani, the
      Chief Executive Officer of the Company, using the same criteria applicable
      to
      other Executive Officers of the Company subject to Dr. Bastani’s employment
      agreement. In addition, in setting Dr. Bastani’s compensation for fiscal year
      2005, the Compensation & HR Committee focused on Dr. Bastani’s ability to
      communicate effectively with the Board of Directors and the Company’s key
      customers and suppliers, as well as his leadership effectiveness with the other
      members of the executive management team. During fiscal year 2005, Dr. Bastani
      earned a base salary of $445,536. Dr. Bastani was awarded restricted stock
      awards as detailed under the heading “Summary Compensation Table”. The
      Compensation & HR Committee believes, based on its review of publicly
      available information concerning the Company’s public competitors, as well as
      the use of the extensive data available from the compensation surveys described
      above, that Dr. Bastani’s compensation is well within the range of compensation
      provided to executives of similar rank and responsibility in the Company’s
      industry.





*Code
      Section 162(m)*




In
      general,
      compensation in excess of $1,000,000 paid to any of the named Executive Officers
      may be subject to limitations on deductibility by the Company under Section
      162(m) of the Internal Revenue Code of 1986, as amended. The limits on deduction
      do not apply to performance-based compensation that satisfies certain
      requirements. The Company designs its compensation programs to preserve the
      tax
      deductibility of compensation paid to its Executive Officers to the extent
      possible, consistent with the need to attract and retain high-caliber executive
      officers.





SUBMITTED
      BY THE COMPENSATION & HR COMMITTEE OF THE BOARD OF DIRECTORS OF THE
      COMPANY.




Garry
      McGuire


Lewis
      Solomon


Dennis
      Strigl




**56**





**Performance
      Graph**




The
      following
      graph compares the cumulative total shareholder return on the Company's common
      stock from December 31, 2000 through December 31, 2005 with the cumulative
      total
      return on the NASDAQ Stock Market Index and the Philadelphia Semiconductor
      Index, considered to be an index of the Company’s peer group, during the same
      period. The comparison assumes $100 was invested on December 31, 2000 in the
      Company's Common Stock and in each of the foregoing indices and assumes
      reinvestment of dividends. The Company did not declare, nor did it pay any
      cash
      dividends during the comparison period. Notwithstanding any statement to the
      contrary in any of the Company's previous or future filings with the Securities
      and Exchange Commission, the graph shall not be incorporated by reference into
      any such filings.









**57**


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




The
      following table sets forth as of February 15, 2006 certain information about
      beneficial stock ownership of (i) each Director, (ii) the Executive Officers
      named in the Compensation table under Item 11, (iii) each beneficial owner
      of
      more than 5% of the common stock of the Company, and (iv) all Directors and
      Executive Officers as a group. Unless specifically stated in the footnotes
      below, each Executive Officer and Director listed below has sole voting and
      investment power as to the shares of common stock listed beside his
      name.




In
      addition,
      unless otherwise indicated, the address of each beneficial owner listed is
      c/o
      ANADIGICS, Inc., 141 Mt. Bethel Road, Warren, New Jersey 07059.




Name
              
              
              Common
                  StockBeneficially
                  Owned
              
              
              %
                  Beneficial
                Ownership**Dimensional
                  Fund Advisors Inc.
                1299
                  Ocean Avenue, 11thFloor
                Santa
                  Monica, CA 90401
              
              
              2,334,446
              (1)
              
              6.4
              %Merrill
                  Lynch & Co., Inc.
                World
                  Financial Center, North Tower
                250
                  Vesey Street
                New
                  York, NY 10381
              
              
              3,190,500
              (2)
              
              8.7
              %Ramius
                  Capital Group, LLC
                666
                  Third Avenue, 26th Floor
                New
                  York, NY 10017
              
              
              2,380,956
              (3)
              
              6.1
              %Paul
                  Bachow
              
              
              246,044
              (4)
              
              *Bami
                  Bastani
              
              
              1,312,346
              (5)
              
              3.5
              %Charles
                  Huang
              
              
              914,709
              (6)
              
              2.5
              %Garry
                  McGuire
              
              
              40,000
              (7)
              
              *Harry
                  Rein
              
              
              157,000
              (8)
              
              *Ronald
                  Rosenzweig
              
              
              454,051
              (9)
              
              1.2
              %Thomas
                  C. Shields
              
              
              310,378
              (10)
              
              *Lewis
                  Solomon
              
              
              157,000
              (11)
              
              *Dennis
                  Strigl
              
              
              137,500
              (12)
              
              *All
                  Directors and Executive Officers as a group
              
              
              3,729,028
              
              
              9.6
              %
 
 
 (1)
              As
                  reported by Dimensional Fund Advisors Inc. and related entities
                  on
                  Schedule 13G filed with the Securities and Exchange Commission
                  on February
                  6, 2006. In its Schedule 13G, Dimensional Fund Advisors Inc. states
                  that
                  it has sole voting power as to 2,334,446 shares, shared voting
                  power as to
                  no shares, sole dispositive power with respect to 2,334,446 shares
                  and
                  shared dispositive power with respect to no shares.
  (2)
              As
                  reported by Merrill Lynch & Co., Inc. and related entities on Schedule
                  13G filed with the Securities and Exchange Commission on January
                  10, 2006.
                  In its Schedule 13G, Merrill Lynch & Co., Inc. states that it has
                  shared voting power and shared dispositive power as to 3,190,500
                  shares.
                  Merrill Lynch’s subsidiary Master Value Opportunities Trust has shared
                  voting power and shared dispositive power as to 2,555,500 of the
                  3,190,500
                  shares.
  (3)
              As
                  reported by Ramius Capital Group, LLC and related entities on Schedule
                  13G
                  filed with the Securities and Exchange Commission on February 15,
                  2006. In
                  its Schedule 13G, Ramius Capital Group, LLC states that it has
                  sole voting
                  power as to 2,100,000 shares of common stock issuable upon conversion
                  of
                  Convertible Notes due October 15, 2009, and 280,956 shares of common
                  stock
                  issuable upon conversion of Convertible Notes due October 15, 2006;
                  shared
                  voting power as to no shares; sole dispositive power with respect
                  to
                  2,100,000 shares of common stock issuable upon conversion of Convertible
                  Notes due October 15, 2009, and 280,956 shares of common stock
                  issuable
                  upon conversion of Convertible Notes due October 15, 2006; and
                  shared
                  dispositive power as to no shares.
 
 (4)
              Includes
                  137,000 shares of common stock issuable pursuant to options, currently
                  exercisable or exercisable within 60 days.
  (5)
              Includes
                  941,668 shares of common stock issuable pursuant to options, currently
                  exercisable or exercisable within 60 days.
  (6)
              Includes
                  492,500 shares of common stock issuable pursuant to options, currently
                  exercisable or exercisable within 60 days.
  (7)
              Includes
                  30,000 shares of common stock issuable pursuant to options, currently
                  exercisable or exercisable within 60
                  days
  (8)
              Includes
                  137,000 shares of common stock issuable pursuant to options, currently
                  exercisable or exercisable within 60 days.
  (9)
              Includes
                  265,000 shares of common stock issuable pursuant to options, currently
                  exercisable or exercisable within 60 days.
 **58**
 (10)
              Includes
                  166,251 shares of common stock issuable pursuant to options, currently
                  exercisable or exercisable within 60 days.
  (11)
              Includes
                  137,000 shares of common stock issuable pursuant to options, currently
                  exercisable or exercisable within 60 days.
  (12)
              Includes
                  117,500 shares of common stock issuable pursuant to options, currently
                  exercisable or exercisable within 60 days.
  *
              Less
                  than 1%.
  **
              Calculated
                  using shares outstanding as of February 15,
                  2006.


The
      following table provides information as of December 31, 2005, about securities
      issued or authorized for future issuance under the Company’s equity compensation
      plans.





***Equity
      Compensation Plan Disclosure***




As
                of December 31, 2005
            
            
            A
            
            
            B
            
            
            CPlan
                Category
            
            
            Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
            
            
            Weighted
                average exercise price of outstanding options, warrants and
                rights
            
            
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                A)***Equity
                Compensation Plans approved by security holders
                (1)***
            
            
            2,627,869
            
            $
            8.16
            
            
            3,155,188***Equity
                Compensation Plans not Approved by Security Holders
                (2)***
            
            
            3,315,555
            
            $
            7.29
            
            
            -Total
            
            
            5,943,424
            
            
            
            
            
            3,155,188





(1)
            These
                plans include the Company’s 1995 Long-Term Incentive and Share Award Plan
                for Officers and Directors, which terminated on February 28, 2005;
                the
                2005 Plan; and the Employee Stock Purchase Plan.




(2)
            For
                a description of the material provisions of the Company’s 1997 Long Term
                Incentive and Share Award Plan please refer to footnote 13 to our
                consolidated financial statements included
                herein.







ITEM
      13.
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.





None.


**59**


ITEM
      14.
      PRINCIPAL ACCOUNTING FEES AND SERVICES.





The
      Company
      changed its independent registered public accounting firm and auditors during
      fiscal year 2005 from Ernst & Young LLP to J.H. Cohn LLP. The aggregate fees
      billed or anticipated to be billed by the Company’s independent registered
      public accounting firm and auditors, J.H. Cohn LLP and Ernst & Young LLP,
      for professional services rendered to the Company for the two fiscal years
      ending December 31, 2005 were as follows:





Fee
                Category
            
            
            Fiscal
                Year 2005
            
            
            %
                of Total
            
            
            Fiscal
                Year2004
            
            
            %
                of TotalAudit
                Fees
            
            $
            375,000
            
            
            99.7
            %
            $
            697,450
            
            
            92.7
            %Audit-Related
                Fees (1)
            
            
            —
            
            
            —
            
            
            —
            
            
            —Tax
                Fees (2)
            
            
            1,300
            
            
            0.3
            
            
            42,800
            
            
            7.1All
                Other Fees (3)
            
            
            —
            
            
            —
            
            
            1,500
            
            
            0.2Total
                Fees
            
            $
            376,300
            
            
            100
            %
            $
            741,750
            
            
            100
            %





(1)
            Audit-Related
                Fees: The Company incurred no audit-related fees during its 2004
                and 2005
                fiscal years.




(2)
            Tax
                Fees: Aggregate fees billed for professional services rendered during
                2004
                and 2005 related to domestic tax
                assistance.




(3)
            All
                Other Fees: Fees billed for services rendered during 2004 related
                to
                license for accounting research
                software.




The
      Audit
      Committee of the Board of Directors has considered whether provision of the
      services described above is compatible with maintaining the independent
      registered public accountants’ independence and has determined that such
      services have not adversely affected Ernst & Young LLP’s or J.H. Cohn LLP’s
      independence.





***Audit
      Committee Pre-Approval Policies and Procedures***




The
      Audit
      Committee’s policy provides that the Company’s independent registered public
      accountants may provide only those services pre-approved by the Audit Committee
      or its designated subcommittee. The Audit Committee annually reviews and
      pre-approves the audit, review, attest and permitted non-audit services to
      be
      provided during the next audit cycle by the independent accountants. To the
      extent practicable, at the same meeting the Audit Committee also reviews and
      approves a budget for each of such services. The term of any such pre-approval
      is for the period of the annual audit cycle, unless the Audit Committee
      specifically provides for a different period.




Services
      proposed to be provided by the independent accountants that have not been
      pre-approved during the annual review and the fees for such proposed services
      must be pre-approved by the Audit Committee or its designated subcommittee.
      Additionally, fees for previously approved services that are expected to exceed
      the previously approved budget must also be pre-approved by the Audit Committee
      or its designated subcommittee.




All
      requests or applications for the independent accountants to provide services
      to
      the Company must be submitted to the Audit Committee or its designated
      subcommittee by the independent accountants and the Chief Financial Officer
      and
      must include a joint statement as to whether, in their view, the request or
      application is consistent with applicable laws, rules and regulations relating
      to auditor independence. In the event that any representative of the Company
      or
      the independent accountants becomes aware that any services are being, or have
      been, provided by the independent accountants to the Company without the
      requisite pre-approval, such individual must immediately notify the Chief
      Financial Officer, who must promptly notify the Chairman of the Audit Committee
      and appropriate senior management so that prompt action may be taken to the
      extent deemed necessary or advisable.




The
      Audit
      Committee may form and delegate to a subcommittee, composed of one or more
      of
      its members, the authority to grant specific pre-approvals under its policy
      with
      respect to audit, review, attest and permitted non-audit services, provided
      that
      any such grant of pre-approval shall be reported to the full Audit Committee
      no
      later than its next scheduled meeting. The Audit Committee may not delegate
      its
      responsibilities to pre-approve services performed by the audit firm to
      management.


**60**


PART
      IV








ITEM
      15.
      EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.





(a)
      1.
      Financial Statements





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





-
            Reports
                of Independent Registered Public Accounting
                Firms


-
            Consolidated
                Balance Sheets - December 31, 2004 and
                2005


-
            Consolidated
                Statements of Operations - Year ended December 31, 2003, 2004 and
                2005


-
            Consolidated
                Statements of Comprehensive Loss - Year ended December 31, 2003,
                2004 and
                2005


-
            Consolidated
                Statements of Stockholders’ Equity - Year ended December 31, 2003, 2004
                and 2005


-
            Consolidated
                Statements of Cash Flows - Year ended December 31, 2003, 2004 and
                2005


-
            Notes
                to Consolidated Financial
                Statements




2.
      Financial Statement Schedules





Schedule
      II - Valuation and Qualifying Accounts




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


**61**


(b)
      Exhibit List





2.1
            Stock
                Purchase Agreement dated April 2, 2001, among the Company, Telcom
                Devices
                Corp. and the sellers named therein. Filed as an exhibit to the Company’s
                Current Report on Form 8-K dated April 6, 2001, and incorporated
                herein by
                reference.3.1
            Amended
                and Restated Certificate of Incorporation of the Company, together
                with
                all amendments thereto. Filed as an exhibit to the Company's Registration
                Statement on Form S-3 (Registration No. 333-75040), and incorporated
                herein by reference.3.2
            Amended
                and Restated By-laws of the Company. Filed as an exhibit to the Company's
                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 dated 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 dated December 4, 2000, and incorporated herein by
                reference.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.4.10
            Indenture,
                dated as September 24, 2004, between the Company, as Issuer, and
                U.S. Bank
                Trust National Association, as Trustee for the 5% Convertible Senior
                Notes
                due October 15, 2009. Filed as an exhibit to the Company’s Current Report
                on Form 8-K dated September 28, 2004, and incorporated herein by
                reference.4.11
            Registration
                Rights Agreement, dated September 24, 2004, between the Company,
                as
                Issuer, and the Purchasers of 5% Convertible Senior Notes due October
                15,
                2009. Filed as an exhibit to the Company’s Current Report on Form 8-K
                dated September 28, 2004, and incorporated herein by
                reference.4.12
            Form
                of 5% Convertible Senior Note due October 15, 2009 (included in Exhibit
                4.10).10.1
            1994
                Long-Term Incentive and Share Award Plan. Filed as an exhibit to
                the
                Company's Registration Statement on Form S-1 (Registration No. 33-89928),
                and incorporated herein by reference.10.2
            1995
                Long-Term Incentive and Share Award Plan, as amended May 29, 1997
                and May
                24, 2000. Filed as an exhibit to the Company’s Current Report on Form S-8
                (Registration No. 333-49632), and incorporated herein by reference.10.3
            Employee
                Savings and Protection Plan. Filed as an exhibit to the Company's
                Registration Statement on Form S-1 (Registration No. 33-89928); as
                amended
                and filed as an exhibit to the Company’s Registration Statement on Form
                S-8 (Registration No. 333-125971) dated June 20, 2005; each as
                incorporated herein by reference.10.4
            Amended
                and Restated Employee Stock Purchase Plan. Filed as Appendix B to
                the
                Company's Definitive Proxy Statement on Schedule 14A filed on April
                19,
                2005 and incorporated herein by reference.10.5
            Lease
                Agreement between United States Land Resources, L.P. (and its successor
                in
                interest, Warren Hi-Tech Center, L.P.), and the Company dated as
                of April
                26, 1996. Filed as an exhibit to the Company's Registration Statement
                on
                Form S-1 (Registration No. 333-20783); as amended in the Company’s Annual
                Report filed on Form 10-K405 dated March 29, 2002; each as incorporated
                herein by reference.10.6
            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; as amended and filed as an exhibit
                to
                the Company’s Current Report on Form 8-K dated May 10, 2005; as amended
                and filed as an exhibit to the Company’s Current Report on Form 8-K dated
                November 7, 2005; and as amended and filed as an exhibit to the Company’s
                Current Report on Form 8-K dated February 2, 2006; each as incorporated
                herein by reference.10.7
            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; as amended and filed as an exhibit to
                the
                Company’s Current Report on Form 10-K405 dated March 29, 2002; as amended
                and filed as an exhibit to the Company's Annual Report on Form 10-K
                dated
                March 15, 2004; as amended and filed as an exhibit to the Company’s
                Quarterly Report on Form 10-Q dated November 3, 2004; and as amended
                and
                filed as an exhibit to the Company’s Quarterly Report on Form 10-Q dated
                August 5, 2005; each as incorporated herein by
                reference.10.8
            Employment
                Agreement between the Company and Thomas C. Shields, dated July 25,
                2000.
                Filed as an exhibit to the Company’s Annual Report on Form 10-K405 dated
                March 29, 2002; as amended and filed as an exhibit to the Company’s
                Current Report on Form 8-K dated May 10, 2005; as amended and filed
                as an
                exhibit to the Company’s Current Report on Form 8-K dated November 7, 2005
                and as amended and filed as an exhibit to the Company’s Current Report on
                Form 8-K dated February 2, 2006; each as incorporated herein by
                reference.10.9
            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; as amended and filed as an exhibit to the Company’s
                Current Report on Form 8-K dated February 2, 2006; each as incorporated
                herein by reference.10.10
            Form
                of 1997 Long-Term Incentive and Share Award Plan. Filed as an exhibit
                to
                the Company’s Annual Report on Form 10-K405 dated February 18, 1997, and
                incorporated herein by reference.10.11
            2005
                Long Term Incentive and Share Award Plan. Filed as Appendix C to
                the
                Company’s Definitive Proxy Statement on Schedule 14A filed on April 19,
                2005, and incorporated herein by reference.*21
            Subsidiary
                Listing*23.1
            Consent
                of J.H. Cohn LLP.*23.2
            Consent
                of Ernst & Young LLP.24.1
            Power
                of Attorney (included on the signature page of this Annual Report
                on Form
                10-K).*31.1
            Rule
                13a-14(a)/15d-14(a) Certification of Bami Bastani, President and
                Chief
                Executive Officer of ANADIGICS, Inc.*31.2
            Rule
                13a-14(a)/15d-14(a) Certification of Thomas C. Shields, Executive
                Vice
                President and Chief Financial Officer of ANADIGICS,
                Inc.*32.1
            Section
                1350 Certification of Bami Bastani, President and Chief Executive
                Officer
                of ANADIGICS, Inc.*32.2
            Section
                1350 Certification of Thomas C. Shields, Executive Vice President
                and
                Chief Financial Officer of ANADIGICS, Inc.*
                Filed herewith




**62**





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 28th day of February
      2006.







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:**




Name
              Title
              Date/s/
                  Bami Bastani
              President,
                  Chief Executive Officer and Director (Principal Executive
                  Officer)
              February
                  28, 2006Dr.
                  Bami Bastani/s/
                  Thomas C. Shields
              Executive
                  Vice President and Chief Financial Officer (Principal Financial
                  Accounting
                  Officer)
              February
                  28, 2006Thomas
                  C. Shields/s/
                  Ronald Rosenzweig
              Chairman
                  of the Board of Directors
              February
                  28, 2006Ronald
                  Rosenzweig/s/
                  Paul S. Bachow
              Director
              February
                  28, 2006Paul
                  S. Bachow/s/
                  Garry McGuire
              Director
              February
                  28, 2006Garry
                  McGuire/s/
                  Harry T. Rein
              Director
              February
                  28, 2006Harry
                  T. Rein/s/
                  Lewis Solomon
              Director
              February
                  28, 2006Lewis
                  Solomon/s/
                  Dennis F. Strigl
              Director
              February
                  28, 2006Dennis
                  F. Strigl
 **63**








SCHEDULE
      II--VALUATION AND QUALIFYING ACCOUNTS


Description
                (Dollars
                  in Thousands)
              
              
              Balance
                  at beginning of period
              
              
              Additions
                  charged to costs and expenses
              
              
              Deductions
              
              
              
              
              
              Balance
                  at end of periodYear
                  ended December 31, 2005:Deducted
                  from asset account:Allowance
                  for doubtful accounts
              
              $
              988
              
              $
              90
              
              $
              (18
              )
              
              (1
              )
              $
              1,060Reserve
                  for excess and obsolete inventory
              
              
              4,074
              
              
              269
              
              
              (1,441
              )
              
              (2
              )
              
              2,902Reserve
                  for warranty claims
              
              
              159
              
              
              634
              
              
              (397
              )
              
              (3
              )
              
              396Year
                  ended December 31, 2004:Deducted
                  from asset account:Allowance
                  for doubtful accounts
              
              $
              752
              
              $
              240
              
              $
              (4
              )
              
              (1
              )
              $
              988Reserve
                  for excess and obsolete inventory
              
              
              4,745
              
              
              1,636
              
              
              (2,307
              )
              
              (2
              )
              
              4,074Reserve
                  for warranty claims
              
              
              100
              
              
              390
              
              
              (331
              )
              
              (3
              )
              
              159Year
                  ended December 31, 2003Deducted
                  from asset account:Allowance
                  for doubtful accounts
              
              $
              781
              
              $
              -
              
              $
              (29
              )
              
              (1
              )
              $
              752Reserve
                  for excess and obsolete inventory
              
              
              7,134
              
              
              287
              
              
              (2,676
              )
              
              (2
              )
              
              4,745Reserve
                  for warranty claims
              
              
              368
              
              
              10
              
              
              (278
              )
              
              (3
              )
              
              100
 
 (2)
        Inventory write-offs to the reserve account.


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




**64**








EXHIBIT
      21





Subsidiaries
      of ANADIGICS, Inc.





Name
                of Subsidiary
            State
                of Jurisdiction of Incorporation
            %
                OwnedANADIGICS
                (U.K.) Limited
            United
                Kingdom
            100%ANADIGICS,
                Limited
            Israel
            100%ANADIGICS
                Denmark ApS
            Denmark
            100%ANADIGICS
                Acquisition Corp
            Delaware
            100%ANADIGICS
                Holding Corp.
            Delaware
            100%Broadband
                & Wireless Investors, Incorporated
            Delaware
            100%Integral
                Pathway, Inc.
            New
                Jersey
            100%Telcom
                Devices Corp.
            California
            100%


**65**


EXHIBIT
      23.1








CONSENT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








We
      consent to the incorporation by reference in the Registration Statement (Form
      S-8 No. 333-125971) pertaining to the ANADIGICS, Inc. 2005 Long-Term Incentive
      and Share Award Plan and Amended and Restated Employee Stock Purchase Plan
      and
      the Registration Statement (Form S-8 No. 33-89928) pertaining to the ANADIGICS,
      Inc. Stock Option Plan, 1994 Long-Term Incentive and Share Award Plan, 1995
      Long-Term Incentive Share Award Plan and Employee Stock Purchase Plan, in the
      Registration Statements (Form S-8 No. 33-32533 and Form S-8 No. 333-63836)
      pertaining to the ANADIGICS, Inc. 1997 Long-Term Incentive and Share Award
      Plan
      for Employees and in the Registration Statements (Form S-3 No. 333-75040, Form
      S-3 No. 333-110538 and Form S-3 No. 333-120947) of our reports
      dated February 27, 2006,
      with respect to the consolidated financial statements and schedule of ANADIGICS,
      Inc. and ANADIGICS, Inc. management's assessment of the effectiveness of
      internal control over financial reporting, and the effectiveness of internal
      control over financial reporting of ANADIGICS, Inc. included in this Annual
      Report (Form 10-K) for the year ended December 31, 2005.











/s/
      J.H.
      Cohn LLP





Roseland,
      New Jersey


February
      27, 2006


**66**





EXHIBIT
      23.2






CONSENT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM


We
              consent to
              the incorporation by reference in the Registration Statement (Form
              S-8 No.
              33-89928) pertaining to the ANADIGICS, Inc. Stock Option Plan, 1994
              Long-Term
              Incentive and Share Award Plan, 1995 Long-Term Incentive Share Award
              Plan
              and  Employee Stock Purchase Plan, in the Registration Statements (Form
              S-8
              No. 33-32533 and Form S-8 No. 333-63836) pertaining to the ANADIGICS,
              Inc. 1997
              Long-Term Incentive and Share Award Plan for Employees and in the Registration
              Statements (Form S-3 No. 333-75040, Form S-3 No. 333-110538 and Form
              S-3 No.
              333-120947) of our report dated March 2, 2005, with respect to the
              consolidated balance sheet of ANADIGICS, Inc. as of December 31, 2004
              and the
              related consolidated statements of operations, comprehensive loss,
              stockholders’
equity and cash flows for each of the two years in the period ended
              December 31,
              2004 and the information for each of the two years in the period ended
              December
              31, 2004 included in the related financial statement schedule of ANADIGICS,
              Inc.
              included in this Annual Report (Form 10-K) for the year ended December
              31,
              2005


/s/
      ERNST & YOUNG
      LLP







MetroPark,
      New Jersey


February
      27, 2006





















































**67**






Exhibit
      31.1


CERTIFICATION





I,
      Bami
      Bastani, certify that:





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





2.
            Based
                on my knowledge, this 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
                report;





3.
            Based
                on my knowledge, the financial statements, and other financial information
                included in this 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
                report;





4.
            The
                registrant's other certifying officer(s) and I are responsible for
                establishing and maintaining disclosure controls and procedures (as
                defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
                control over financial reporting (as defined in Exchange Act Rules
                13a-15(f) and 15d-15(f)) for the registrant and
                have:





a)
            Designed
                such disclosure controls and procedures, or caused such disclosure
                controls and procedures to be designed under our supervision, 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 report is
                being
                prepared;





b)
            Designed
                such internal control over financial reporting, or caused such internal
                control over financial reporting to be designed under our supervision,
                to
                provide reasonable assurance regarding the reliability of financial
                reporting and the preparation of financial statements for external
                purposes in accordance with generally accepted accounting
                principles;





c)
            Evaluated
                the effectiveness of the registrant's disclosure controls and procedures
                and presented in this report our conclusions about the effectiveness
                of
                the disclosure controls and procedures, as of the end of the period
                covered by this report based on such evaluation;
                and





d)
            Disclosed
                in this report any change in the registrant’s internal control over
                financial reporting that occurred during the registrant’s most recent
                fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
                annual report) that has materially affected, or is reasonably likely
                to
                materially affect, the registrant’s internal control over financial
                reporting; and





5.
            The
                registrant’s other certifying officer(s) and I have disclosed, based on
                our most recent evaluation of internal control over financial reporting,
                to the registrant’s auditors and the audit committee of the registrant’s
                board of directors (or persons performing the equivalent
                functions):





a)
            All
                significant deficiencies and material weaknesses in the design or
                operation of internal control over financial reporting which are
                reasonably likely to adversely affect the registrant’s ability to record,
                process, summarize and report financial information;
                and





b)
            Any
                fraud, whether or not material, that involves management or other
                employees who have a significant role in the registrant's internal
                control
                over financial reporting.





Date:  February
      28, 2006




By:
            /s/
                Bami BastaniBami
                BastaniPresident
                andChief
                Executive Officer




**68**





Exhibit
      31.2





CERTIFICATION


I,
      Thomas
      C. Shields, certify that:





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





2.
            Based
                on my knowledge, this 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
                report;





3.
            Based
                on my knowledge, the financial statements, and other financial information
                included in this 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
                report;





4.
            The
                registrant's other certifying officer(s) and I are responsible for
                establishing and maintaining disclosure controls and procedures (as
                defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
                control over financial reporting (as defined in Exchange Act Rules
                13a-15(f) and 15d-15(f)) for the registrant and
                have:





a)
            Designed
                such disclosure controls and procedures, or caused such disclosure
                controls and procedures to be designed under our supervision, 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 report is
                being
                prepared;





b)
            Designed
                such internal control over financial reporting, or caused such internal
                control over financial reporting to be designed under our supervision,
                to
                provide reasonable assurance regarding the reliability of financial
                reporting and the preparation of financial statements for external
                purposes in accordance with generally accepted accounting
                principles;





c)
            Evaluated
                the effectiveness of the registrant's disclosure controls and procedures
                and presented in this report our conclusions about the effectiveness
                of
                the disclosure controls and procedures, as of the end of the period
                covered by this report based on such evaluation;
                and





d)
            Disclosed
                in this report any change in the registrant’s internal control over
                financial reporting that occurred during the registrant’s most recent
                fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
                annual report) that has materially affected, or is reasonably likely
                to
                materially affect, the registrant’s internal control over financial
                reporting; and





5.
            The
                registrant’s other certifying officer(s) and I have disclosed, based on
                our most recent evaluation of internal control over financial reporting,
                to the registrant’s auditors and the audit committee of the registrant’s
                board of directors (or persons performing the equivalent
                functions):





a)
            All
                significant deficiencies and material weaknesses in the design or
                operation of internal control over financial reporting which are
                reasonably likely to adversely affect the registrant’s ability to record,
                process, summarize and report financial information;
                and





b)
            Any
                fraud, whether or not material, that involves management or other
                employees who have a significant role in the registrant's internal
                control
                over financial reporting.














Date:  February
      28, 2006


By:
            /s/
                Thomas C. ShieldsThomas
                C. ShieldsExecutive
                Vice Presidentand
                Chief Financial Officer











**69**




Exhibit
      32.1





CERTIFICATION





The
      undersigned, Bami Bastani, President and Chief Executive Officer of ANADIGICS,
      Inc. (the "Company") hereby certifies that the Annual Report of the Company
      on
      Form 10-K for the period ended December 31, 2005 fully complies with the
      requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934
      and that the information contained in such report fairly presents, in all
      material respects, the financial condition and results of operations of the
      Company.








Dated:
      February 28, 2006


By:
            /s/
                Bami BastaniBami
                BastaniPresident
                andChief
                Executive Officer







This
      certification shall not be deemed to be “filed” for the purpose of Section 18 of
      the Securities Exchange Act of 1934, as amended, and will not be incorporated
      by
      reference into any registration statement filed under the Securities Act of
      1933, as amended, unless specifically identified therein as being incorporated
      by reference.





A
      signed
      original of this written statement required by Section 906, or other document
      authenticating, acknowledging, or otherwise adopting the signature that appears
      in typed form within the electronic version of this written statement required
      by Section 906, has been provided to ANADIGICS, Inc. and will be retained by
      ANADIGICS, Inc. and furnished to the Securities and Exchange Commission or
      its
      staff upon request.








**70**







Exhibit
      32.2





CERTIFICATION





The
      undersigned, Thomas C. Shields, Executive Vice President and Chief Financial
      Officer of ANADIGICS, Inc. (the "Company") hereby certifies that the Annual
      Report of the Company on Form 10-K for the period ended December 31, 2005 fully
      complies with the requirements of Section 13(a) or 15(d) of the Securities
      Exchange Act of 1934 and that the information contained in such report fairly
      presents, in all material respects, the financial condition and results of
      operations of the Company.





Dated:
      February 28, 2006


By:
            /s/
                Thomas C. ShieldsThomas
                C. ShieldsExecutive
                Vice Presidentand
                Chief Financial Officer







This
      certification shall not be deemed to be “filed” for the purpose of Section 18 of
      the Securities Exchange Act of 1934, as amended, and will not be incorporated
      by
      reference into any registration statement filed under the Securities Act of
      1933, as amended, unless specifically identified therein as being incorporated
      by reference.





A
      signed
      original of this written statement required by Section 906, or other document
      authenticating, acknowledging, or otherwise adopting the signature that appears
      in typed form within the electronic version of this written statement required
      by Section 906, has been provided to ANADIGICS, Inc. and will be retained by
      ANADIGICS, Inc. and furnished to the Securities and Exchange Commission or
      its
      staff upon request.