RF Micro Devices to Boost Capacity

It will spend $80 million to capitalize on the cell-phone boom.
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RF Micro Devices

(RFMD)

will spend $80 million to expand its chip manufacturing capacity, as the company seeks to capitalize on the growth in cell-phone handset sales.

Shares of the Greensboro, N.C. chipmaker rose 39 cents, or 4.7%, to $8.71 Thursday after the company announced the planned expansion. A separate bullish report on handset sales by

Nokia

(NOK) - Get Report

, RF Micro's largest customer, also contributed to the share gains.

According to RF Micro, the move will allow it to boost its wafer manufacturing capacity by 40% from current levels. The company said the extra manufacturing capacity at its Greensboro campus would also reduce its cost per wafer and enable the company to increase internal production of essential technology associated with the power amplifier and transmit module chips it sells to wireless companies.

With wireless companies adding new features to cell phones, RF Micro said it expects to increase its semiconductor content in mobile devices.

"We are the leader in cellular transmit modules, driven by shipments to our two largest customers and we expect our leadership to grow this year as we add customers to these products," said CEO Bob Bruggeworth in a statement.

In fiscal 2005, Nokia and

Motorola

(MOT)

represented 35% and 10% of RF Micro's total revenue, respectively. Nokia said Thursday that it expects handset sales

to grow 15% this year, up from its previous expectation of 10% growth.

RF Micro said it views manufacturing capacity expansions as key to its revenue and earnings growth. After its most recent facility expansion in 2005, RF Micro's revenue increased to $208 million from $150.4 million in less than a year, the company said. Thursday's announcement marks the fifth expansion the company has announced in its 15-year history.

RF Micro will receive up to $4.9 million in tax credits from the state of North Carolina to help with the expansion and expects to add 300 highly-skilled jobs at the expanded facility, with volume production slated to begin in late 2006.