RFMD Rings Up New Factory

SAN FRANCISCO -- RF Micro Devices(RFMD Quote) will build a new chip manufacturing facility to meet what it says is rising demand for wireless products.

The Greensboro, N.C., company said Friday that favorable trends in its primary markets, including the transition to advanced cell-phone standards, mean that it needs to expand its in-house manufacturing capacity.

Shares were up 4% at $6.74 in midday trading Friday.

"It's an indication of their confidence in the market and of their position in that market over the long term," says Stifel Nicolaus analyst Cody Acree, who rates RFMD a hold.

Jerry Neal, head of RFMD's marketing and strategic development, said construction of the new fab -- which will be its fourth manufacturing facility -- will begin within days, with the facility expected to be up and running within the next 10 to 12 months.

Neal put the cost of the new fab at roughly $100 million. He said RFMD was not providing details on how much additional manufacturing capacity this would give the company, but he said the facility would be built in a modular manner, so that capacity can be added to meet demand on an ongoing basis.

RFMD has struggled in recent months, as problems at Motorola(MOT Quote) -- its second-largest customer -- have affected its own business. Last quarter, RFMD reported revenue that was down 11% year over year.

In a note to investors Friday, JPMorgan analyst Christopher Danely said that Motorola was beginning to ramp up chip orders once again, as the company prepares for the seasonal increase in handset demand. As a result, Danely raised his annual sales and EPS estimates for RFMD.

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