Back to GetFilings.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended September 30, 2002

Or

o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION
PERIOD FROM                        TO                         

Commission File Number 0-22660

TRIQUINT SEMICONDUCTOR, INC.
(Exact Name of Registrant as Specified in Its Charter)

2300 NE Brookwood Parkway
Hillsboro, OR 97124
(Address of Principal Executive Offices) (Zip Code)

(503) 615-9000
(Registrant's Telephone Number, Including Area Code)

        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 ý    No o

        As of October 28, 2002, there were 132,486,447 shares of the registrant's common stock outstanding.

TRIQUINT SEMICONDUCTOR, INC.

INDEX

2

PART I—FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

TRIQUINT SEMICONDUCTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)

See notes to Condensed Consolidated Financial Statements.

3

TRIQUINT SEMICONDUCTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

(1)

The information in this column was derived from the Company's audited financial statements as of December 31, 2001.

See notes to Condensed Consolidated Financial Statements.

4

TRIQUINT SEMICONDUCTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

See notes to Condensed Consolidated Financial Statements

5

TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.    Basis of Presentation

        The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. However, certain information or footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed, or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In the opinion of management, the statements include all adjustments necessary (which are of a normal and recurring nature) for the fair presentation of the results of the interim periods presented. These condensed consolidated financial statements should be read in conjunction with the audited financial statements of TriQuint Semiconductor, Inc. (the "Company") for the fiscal year ended December 31, 2001, as included in the Company's 2001 Annual Report on Form 10-K as filed with the SEC on March 27, 2002.

        The Company's fiscal quarters end on the Saturday nearest the end of the calendar quarter. For convenience, the Company has indicated that its third quarter ended on September 30. The Company's fiscal year ends on December 31.

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

2.    Acquisitions

Sawtek, Inc.

        On July 19, 2001, Sawtek, Inc. became a wholly owned subsidiary of the Company. The Company issued approximately 48.8 million shares of common stock in exchange for all the outstanding common stock of Sawtek. Additionally, outstanding options to purchase Sawtek common stock were exchanged for approximately 2.6 million options to purchase the Company's common stock. The transaction was accounted for as a pooling-of-interests transaction and qualified as a tax-free exchange of shares.

        All financial information set forth in this document has been restated to include the historical information of Sawtek.

Infineon Technologies AG GaAs Business

        On July 1, 2002, the Company closed the acquisition of the GaAs Business of Infineon Technologies AG ("Infineon"). The Company added approximately 60 employees as part of the acquisition. The acquisition was accounted for as a purchase transaction and the results of operations are included in the condensed consolidated financial statements from the date of acquisition. At the closing date, the Company paid Infineon EUR50.0 million ($45.0 million at forward contract rate of $.9000/EUR1.00), of which EUR10.0 million ($9.0 million at forward contract rate of $.9000/EUR1.00) represents an earnout deposit. Pursuant to the purchase agreement, Infineon may earn up to an additional EUR74.0 million over a 24-month period based upon revenues generated by the acquired business, for an aggregate purchase price of EUR124.0 million. Subsequent to the close of the acquisition, certain fixed assets were also purchased for EUR5.5 million less EUR1.5 million in funded liabilities acquired ($4.0 million at various spot rates). There are also various other guarantees and contingencies which could affect the amount of the final purchase price. The Company acquired this business to strengthen its European presence and to expand its market and product offerings in the wireless communications industry.

6

        Details of the purchase price are as follows (in thousands):

        The purchase price was allocated to the assets and liabilities based on fair values as follows (in thousands):

        Pro forma results of operations as if this acquisition had closed on January 1, 2002 and for the corresponding periods in the preceding year are as follows (in thousands, except per share amounts):

        In connection with this acquisition, the Company obtained a third-party valuation of the assets for purposes of the purchase price allocation. Acquired in-process research and development ("IPR&D") assets were expensed at the date of acquisition in accordance with FASB Interpretation No. 4 ("FIN 4"), Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future alternative uses existed. The fair value was determined using the income approach, which discounts expected future cash flows from projects under development to their net present value using a risk adjusted rate. Each project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated based upon management's estimates of revenues expected to be generated upon completion of the projects and the beginning of commercial sales and related operating

7

costs. The projections assume that the technologies will be successful and that the product's development and commercialization will meet management's time schedule. The discount rates utilized ranged from 25% to 50% and were based on the novelty of the technology, the risks remaining to complete each project, and the extent of the Company's familiarity with the technology. The estimated cost to complete this IPR&D is approximately $900,000.

A Portion of the Assets of IBM's Wireless Phone Chipset Business

        On July 1, 2002, the Company closed the acquisition of a portion of the assets of IBM's wireless phone chipset business. The Company added 9 employees as part of the acquisition. The acquisition was accounted for as a purchase transaction and the results of operations are included in the condensed consolidated financial statements from the date of acquisition. At the closing date, we paid $21.8 million to IBM for the related assets, of which $5.0 million represents an earnout deposit. Subsequent adjustments to the purchase price contingent upon business volumes could increase the final aggregate purchase price up to $40.0 million. The Company acquired this business to expand its market and product offerings in the wireless communications industry and to strengthen its capabilities in silicon germanium process technology.

        Details of the purchase price are as follows (in thousands):

        The purchase price was allocated to the assets and liabilities based on fair values as follows (in thousands):

        In a transaction related to this acquisition, the Company transferred $1.3 million of the acquired machinery and equipment, $1.0 million of the technology licenses, $733,000 of acquired workforce and $11.0 million in cash to a privately held technology company in exchange for a note receivable of $14.0 million.

        Pro forma results of operations have not been presented for this acquisition because its effects were not material on either an individual or aggregate basis.

        In connection with this acquisition, the Company obtained a third-party valuation of the assets for purposes of the purchase price allocation. Acquired IPR&D assets were expensed at the date of acquisition in accordance with FIN 4. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future alternative uses existed. The fair value was determined using the income approach, which discounts expected future cash flows from projects under development to their net present value using a risk adjusted rate. Each project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and

8

the stage of completion. Future cash flows were estimated based upon management's estimates of revenues expected to be generated upon completion of the projects and the beginning of commercial sales and related operating costs. The projections assume that the technologies will be successful and that the product's development and commercialization will meet management's time schedule. The discount rate utilized was 29% and was based on the novelty of the technology, the risks remaining to complete each project, and the extent of the Company's familiarity with the technology. The estimated cost to complete this IPR&D is approximately $40,000.

3.    Segment Information

        SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information ("SFAS 131") establishes standards for the reporting by public business enterprises of information about operating segments, products and services, geographic areas and major customers. The method for determining what information to report is based on the way that management organizes the segments within the Company for making operating decisions and assessing financial performance. The Company has aggregated its businesses into a single reportable segment as allowed under SFAS 131 because they have similar long-term economic characteristics, including average gross margin. In addition, they are similar in regards to (a) nature of products and production processes, (b) type of customers and (c) method used to distribute products. Accordingly, the Company describes its reportable segment as high-performance, integrated circuits and electronic filters for the wireless and broadband communications markets. All of the Company's revenues result from sales in its products lines.

        Our sales outside of the United States were 56% of revenues for the nine months ended September 30, 2002 and 42% of revenues for the nine months ended September 30, 2001.

4.    Net Income (Loss) Per Share

        Earnings (loss) per share is presented as basic and diluted net income (loss) per share. Basic net income (loss) per share is net income (loss) available to common stockholders divided by the weighted-average number of common shares outstanding. Diluted net income (loss) per share is similar to basic except that the denominator includes potential common shares that, had they been issued, would have had a dilutive effect.

        The following is a reconciliation of the basic and diluted earnings (loss) per share (in thousands, except per share amounts):

        Stock options and other exercisable convertible securities totaling approximately 20,556,000 and 18,927,000 shares for the three and nine months ended September 30, 2002 and 11,979,000 and 10,156,000

9

shares for the three and nine months ended September 30, 2001 were not included in the diluted net income (loss) per share calculations, because to do so would have been antidilutive.

5.    Income Taxes

        Deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting and tax basis of assets and liabilities, applying enacted statutory tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized.

        The provision for income taxes has been recorded based on the current estimate of the Company's annual effective tax rate. For periods of income reported, this rate differs from the federal statutory rate primarily because of tax exempt income earned by the Company's Costa Rican facility, which currently operates in a free trade zone, tax exempt interest income earned on certain cash and investment items within the Company's portfolio and tax credits, which are offset by state taxes and other items.

6.    Investments in Marketable Securities

        The Company classifies its investments in marketable securities as available-for-sale in accordance with Statement of Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and Equity Securities ("SFAS 115"). Investments in marketable securities are comprised of U.S. treasury securities and obligations of U.S. government agencies, municipal notes and bonds, corporate debt securities and other investments. Investments are recorded at fair value. Unrealized gains and losses, net of tax, on investments are reported as a separate component of stockholders' equity.

7.    Investments in Other Companies

        The Company has made several investments in small, privately held technology companies in which the Company holds less than 20% of the capital stock and does not have significant influence. The Company accounts for these investments using the cost method. The Company monitors these investments for impairment and makes appropriate reductions in carrying value when an other than temporary decline is evident. During the three months and nine months ended September 30, 2002, the Company recorded impairments of the value of these investments of $4.9 million and $8.1 million, respectively. During the three and nine months ended September 30, 2001, the Company recorded impairments of the value of these investments of $1.5 million.

8.    Inventories

        Inventories, net of reserves of $19.5 million and $20.2 million as of September 30, 2002 and December 31, 2001, respectively, are stated at the lower of cost or market and consist of (in thousands):

9.    Goodwill and Other Acquisition-Related Intangible Assets

        In accordance with SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS 142"), goodwill is no longer amortized. The Company is required to perform impairment tests at least annually or when events

10

and circumstances warrant. Factors to be considered which would trigger an impairment review include the following:

•

Significant underperformance relative to expected historical or projected future operating results.



•

Significant changes in the manner of use of the acquired assets or the strategy for the overall business



•

Significant negative industry or economic trends



•

Significant decline in the Company's stock price for a sustained period



•

The Company's market capitalization relative to net book value.

        Changes in the carrying amount of goodwill for the nine months ended September 30, 2002 are as follows (in thousands):

        Information regarding the Company's other acquisition-related intangible assets is as follows (in thousands):

(1)

In accordance with SFAS 142, acquired workforce is no longer accounted for as a separately identified intangible asset and, as shown in the tables above, has been reclassified as goodwill.

        Amortization expense of other acquisition-related intangible assets was $1.1 million and $1.9 for the three months and nine months ended September 30, 2002, respectively, and $.01 million and $0.2 million for the three months and nine months ended September 30, 2001. The periods over which the Company amortizes these intangible assets range from three to seven years, depending on the estimated useful life of the intangible asset.

10.  Convertible Subordinated Notes

        During the three months and nine months ended September 30, 2002, the Company repurchased $15.7 million and $27.7 million, respectively, of the principal amount of its convertible subordinated notes at the then current market prices. This resulted in gains of $3.7 million and $6.0 million, respectively, net of deferred financing fees. During the third quarter of 2001, the Company repurchased $48.5 million principal amount of its convertible subordinated notes at the then current market prices. This resulted in a gain of $9.4 million, net of deferred financing fees.

11.  Commitments

        In conjunction with the Company's purchase of Infineon's GAAs Business, Infineon and the Company entered into an interim supply agreement whereby Infineon is required to sell, and the Company is

11

required to purchase EUR22.5 million ($22.0 million at September 30, 2002 exchange rate of $.9772/EUR1.00) of GaAs Business products during a one-year period at stipulated prices. The remaining commitment as of September 30, 2002 is EUR17.1 million ($16.7 million at September 30, 2002 exchange rate of $.9772/EUR1.00).

12.  Stockholders' Equity

        Components of stockholders' equity (in thousands, except per share amounts):

13.  Supplemental Cash Flow Information (in thousands)

14.  Comprehensive Income

        The components of comprehensive income, net of tax, are as follows (in thousands):

15.  Foreign Currency Exchange Contract

        In connection with the Company's commitment to acquire Infineon's GaAs Business, the Company entered into a forward currency exchange contract on April 30, 2002 for delivery of EUR50.0 million on July 1, 2002 at an exchange rate of $.90 to EUR1.0.

        On July 1, 2002, the Company recorded a realized gain on the forward currency transaction of $4.6 million.

12

16.  Special Purpose Entity—Off-Balance Sheet Financing

        In August 2000, the Company acquired a 420,000 square foot wafer fabrication facility located in Richardson, Texas for $87 million. The acquisition was financed by a special purpose entity ("SPE") sponsored by a financial institution in which the Company contributed $73 million and a lender contributed $14 million. In September 2002, the Company completed an $18.5 million improvement to the Richardson, Texas facility, which was financed through the same financial institution-sponsored SPE as part of the original financing agreement. The Company contributed $15.5 million and the lender contributed $3.0 million. Of the total amount contributed to the SPE, 97% has been collateralized by the Company through pledged investment securities and a participation interest in the SPE which amounts appear on the Company's balance sheet as "Restricted Long-Term Assets" and "Other Investment". The SPE is not consolidated in the Company's financial statements and the Company has accounted for the arrangement as an operating lease. The Company is required to make lease payments through August 2005 or purchase the property. If the Company elects to purchase the property, the Company will assign the pledged securities to the lender and incur some incremental closing costs to obtain title to the property. The Company may also renew the lease for an additional four-year period in August 2005. The lease is secured by the value of the property as well as the pledged investment securities. Restrictive covenants are also included in this financing arrangement which require the Company to maintain (a) a quick ratio of not less that 1.25 to 1.00, (b) tangible net worth not less than the sum of $431 million and (c) a maximum leverage ratio not greater than 0.50. As of September 30, 2002, the Company was in compliance with these covenants.

17.  Recent Accounting Pronouncements

        In August 2001, the Financial Accounting Standards Board ("FASB") issued FASB Statement No. 143 ("SFAS 143"), Accounting for Asset Retirement Obligations, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS 143 is required to be adopted for fiscal years beginning after June 15, 2002. The Company will adopt SFAS 143 on January 1, 2003 and it is not expected to have a significant impact on the Company.

        In April 2002, the FASB issued Statement No. 145 ("SFAS 145"), Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections. SFAS 145 rescinds Statement No. 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. Upon adoption of SFAS 145, companies will be required to apply the criteria in APB Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, in determining the classification of gains and losses resulting from the extinguishment of debt. Additionally, SFAS 145 amends Statement No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. SFAS 145 will be effective for fiscal years beginning after May 15, 2002 with early adoption of the provisions related to the rescission of Statement No. 4 encouraged. The Company adopted SFAS 145 as of January 1, 2002.

        In July 2002, the FASB issued FASB Statement No. 146 ("SFAS 146"), Accounting for Costs Associated with Exit or Disposal Activities, which changes the way companies will report the expenses related to restructuring. SFAS 146 is required to be adopted for exit or disposal activities initiated after December 31, 2002.

18.  Subsequent Events

        On October 22, 2002, the Company announced its agreement to purchase a substantial portion of the optoelectronics business of Agere Systems, Inc. ("Agere") for $40 million in cash. The transaction will

13

include the products, technology and some facilities related to Agere's optoelectronics business, which includes lasers, detectors, modulators, passive components, arrayed waveguide-based components, amplifiers, transmitters, receivers, transceive transponders and micro electro-mechanical systems. As part of the transaction, approximately 300 Agere research and development, process engineering, marketing, product management and assembly and test employees will join the Company. The Company anticipates closing the transaction in January 2003, subject to regulatory approval and closing conditions. The acquisition will be accounted for as a purchase transaction.

        On October 1, 2002, the time period lapsed for the Company and Infineon to reach a subsequent agreement as to inclusion of Infineon's Hi Rel business in the Company's acquisition of Infineon's GaAs Business. Since an agreement was not reached, the minimum purchase price of the acquisition will be adjusted to EUR42 million from EUR45 million.

14

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Introduction

        You should read the following discussion and analysis in conjunction with our condensed consolidated financial statements and the related notes thereto included in this Report on Form 10-Q. The discussion in this Report contains both historical information and forward-looking statements. A number of factors affect our operating results and could cause our actual future results to differ materially from any forward-looking results discussed below, including, but not limited to, those related to operating results; demand for integrated circuits and the electronic products into which they are manufactured, including wireless phones; investments in new facilities; sales to a limited number of customers; new competitive technologies; growth and diversification of our markets; startup of new facilities; transition of manufacturing processes from four-inch to six-inch wafers; equity investments in closely held companies; integration of our recent acquisitions of Infineon's GaAs business and IBM's wireless phone chipset business and integration of any future acquisitions. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "anticipates", "intends", "plans", "thinks", "believes", "estimates", "predicts", "potential", "continue", "our future success depends", "seek to continue" or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In addition, historical information should not be considered an indicator of future performance. Factors that could cause or contribute to these differences include, but are not limited to, the risks discussed in the section of this report titled "Factors Affecting Future Operating Results". These factors may cause our actual results to differ materially from any forward-looking statement.

        We are a leading supplier of high-performance components and modules for communications applications. We design, develop, manufacture and market a broad range of high-performance integrated circuits, bandpass filters, resonators, oscillators and other products for communications markets. The specific applications served by our products in these communication markets include wireless phones, base stations, optical networks and broadband and microwave with a specific focus on radio frequency (RF), analog and mixed-signal applications. Our components and modules are incorporated into a variety of communications products, including wireless phones and pagers, base stations for wireless communications, digital microwave communication systems, fiber optic telecommunications equipment, satellite communications systems, data and wireless local area networking products, broadband access systems and aerospace applications. We provide customers with standard and custom products as well as foundry services.

        Our products are designed on various wafer substrates such as gallium arsenide (GaAs), silicon germanium (SiGe) and quartz, using a variety of devices including Pseudomorphic High Electron Mobility Transistor (pHEMT), Heterojunction Bipolar Transistor (HBT), Heterostructure Field Effect Transistor (HFET), Metal Semiconductor Field Effect Transistor (MESFET) and Surface Acoustic Wave (SAW). Using these materials, devices and our proprietary technology, our products can overcome the performance barriers of competing devices in a variety of applications and offer other key advantages such as steeper selectivity, lower distortion, reduced size and weight and more precise frequency control. For example, GaAs has inherent physical properties that allow its electrons to move up to five times faster than those of silicon. This higher electron mobility permits the manufacture of GaAs integrated circuits that operate at much higher speeds than silicon devices, or operate at the same speeds with reduced power consumption. We sell our products worldwide to end-user customers, including Agere Systems Inc., The Boeing Company, Ericsson Inc., Kyocera, LG Group, Motorola, Inc., Nokia Corporation, Northrop Grumman Corporation, Nortel Networks Corporation, Raytheon Company and Samsung Microelectronics.

        In the United States, we have design and manufacturing facilities in Oregon, Texas and Florida and design facilities in New England. We also have an assembly facility in Costa Rica and design centers in

15

Taiwan and Germany. We own and operate our own wafer fabrication and product test facilities and use our proprietary processes to produce RF, analog and mixed-signal components and modules cost-effectively in high volumes. We believe that control of these manufacturing processes provides us with a reliable source of supply, greater opportunities to enhance quality, reliability and manufacturing efficiency. In addition, control of our manufacturing process and our combined research and design capabilities assist us to develop new processes and products and to be more responsive to customer requirements. We have also established a strategic foundry business serving leading communications companies.

        We are incorporated under the laws of the State of Delaware. Our principal executive offices are located at 2300 N.E. Brookwood Parkway, Hillsboro, Oregon 97124 and our telephone number at that location is (503) 615-9000.

Critical Accounting Policies

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We review our estimates, including, but not limited to, allowance for doubtful accounts, sales returns reserves, inventory reserves, income tax valuation and warranty reserves on a regular basis and make adjustments based on historical experiences and existing and expected future conditions. These evaluations are performed regularly and adjustments are made as information is available. We believe that these estimates are reasonable; however, actual results could differ from these estimates.

        We recognize revenues on standard products upon shipment of product with provisions established for estimated customer and distributor product returns. Generally, we ship products FOB shipping point. We recognize revenues on certain foundry and customer-specific products based on certain design, manufacturing and other milestones. We recognize revenues on cost-plus contracts as work is performed. Revenues from customers who have acceptance criteria are not recognized until all acceptance criteria are satisfied.

        We state our inventories at the lower of cost or market. We use a standard cost methodology to determine our cost basis for our inventories. This methodology approximates actual cost on a first-in, first-out basis. Our accounts receivables represent those amounts which have been billed to our customers but not yet collected. We establish an allowance for doubtful accounts for the portion of those accounts which we determine may become uncollectible.

        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 2002 and 2001, we determined it to be more likely than not that a portion of our deferred tax asset would not be realized, and therefore, recorded a valuation allowance for that amount. We evaluate the need for valuation allowance on a regular basis and adjust as needed. These adjustments will have an impact on our financial statements in the periods in which they are recorded.

        We have made several investments in small, privately held technology companies in which we hold less than 20% of the capital stock. We account for these investments using the cost method. We monitor these investments for impairment and make appropriate reductions in carrying value when an other than temporary decline is evident.

        Our cash investment portfolio, both restricted and unrestricted portions, are classified as available-for-sale securities and are comprised of highly-rated, short and medium-term investments, such as U.S. treasury securities and obligations of U.S. government agencies, corporate debt securities and similar low risk investments. Although we manage investments under an investment policy, economic,

16

market and other events may affect the companies and instruments in which we invest, which we cannot control. We do not hold or issue derivatives, derivative commodity instruments or other financial instruments for trading purposes.

        We will perform goodwill impairment tests at least annually or when events and circumstances warrant. Factors to be considered which would trigger an impairment review include the following:

•

Significant underperformance relative to expected historical or projected future operating results.



•

Significant changes in the manner of use of the acquired assets or the strategy for the overall business



•

Significant negative industry or economic trends



•

Significant decline in our stock price for a sustained period



•

Our market capitalization relative to net book value.

        In response to changes in industry and market conditions, we may be required to strategically realign our resources and consider restructuring, disposing, or otherwise exiting businesses, which could result in an impairment of goodwill.

Acquisitions

Merger with Sawtek Inc.

        On July 19, 2001, Sawtek became a wholly owned subsidiary of our Company. We issued approximately 48.8 million shares of common stock in exchange for all the outstanding common stock of Sawtek. Additionally, outstanding options to purchase Sawtek common stock were exchanged for approximately 2.6 million options to purchase our common stock. The transaction was accounted for as a pooling-of-interests transaction and qualified as a tax-free exchange of shares.

        All financial information set forth in this document has been restated to include the historical information of Sawtek.

Acquisition of Infineon's GaAs Business

        On July 1, 2002, we closed the acquisition of Infineon's GaAs Business. We added approximately 60 employees as part of the acquisition. The acquisition was accounted for as a purchase transaction and the results of operations are included in the condensed consolidated financial statements from the date of acquisition. At the closing date, we paid Infineon EUR50.0 million ($45.0 million at forward contract rate of $.9000/EUR1.00), of which EUR10.0 million ($9.0 million at forward contract rate of $.9000/EUR1.00) represents an earnout deposit. Pursuant to the purchase agreement, Infineon may earn up to an additional EUR74.0 million over a 24-month period based upon revenues generated by the acquired business, for an aggregate purchase price of EUR124.0 million. Subsequent to the close of the acquisition, certain fixed assets were also purchased for EUR5.5 million less EUR1.5 million in funded liabilities acquired ($4.0 million at various spot rates). There are also various other guarantees and contingencies which could affect the amount of the final purchase price. We acquired this business to strengthen our European presence and to expand our market and product offerings in the wireless communications industry.

        In connection with this acquisition, we obtained a third-party valuation of the assets for purposes of the purchase price allocation. Acquired in-process research and development ("IPR&D") assets were expensed at the date of acquisition in accordance with FASB Interpretation No. 4 ("FIN 4"), Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future alternative uses existed. The fair value was determined using the income approach, which discounts expected future cash flows from projects under development to their net present value using a

17

risk adjusted rate. Each project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated based upon management's estimates of revenues expected to be generated upon completion of the projects and the beginning of commercial sales and related operating costs. The projections assume that the technologies will be successful and that the product's development and commercialization will meet management's time schedule. The discount rates utilized ranged from 25% to 50% and were based on the novelty of the technology, the risks remaining to complete each project, and the extent of our familiarity with the technology. The estimated cost to complete this IPR&D is approximately $900,000.

        On October 1, 2002, the time period lapsed for our Company and Infineon to reach a subsequent agreement as to inclusion of Infineon's Hi Rel business in our acquisition of Infineon's GaAs Business. Since an agreement was not reached, the minimum purchase price of the acquisition will be adjusted to EUR42 million from EUR45 million.

Acquisition of a portion of the assets of IBM's wireless phone chipset business

        On July 1, 2002, we closed the acquisition of a portion of the assets of IBM's wireless phone chipset business. We added 9 employees as part of the acquisition. The acquisition was accounted for as a purchase transaction and the results of operations are included in the condensed consolidated financial statements from the date of acquisition. At the closing date, we paid $21.8 million to IBM for the related assets, of which $5.0 million represents an earnout deposit. Subsequent adjustments contingent upon business volumes could increase the final aggregate purchase price up to $40.0 million. We acquired this business to expand our market and product offerings in the wireless communications industry and to strengthen our capabilities in silicon germanium process technology.

        In connection with this acquisition, we obtained a third-party valuation of the assets for purposes of the purchase price allocation. Acquired IPR&D assets were expensed at the date of acquisition in accordance with FIN 4. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future alternative uses existed. The fair value was determined using the income approach, which discounts expected future cash flows from projects under development to their net present value using a risk adjusted rate. Each project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated based upon management's estimates of revenues expected to be generated upon completion of the projects and the beginning of commercial sales and related operating costs. The projections assume that the technologies will be successful and that the product's development and commercialization will meet management's time schedule. The discount rate utilized was 29% and was based on the novelty of the technology, the risks remaining to complete each project, and the extent of our familiarity with the technology. The estimated cost to complete this IPR&D is approximately $40,000.

Acquisition of a portion of Agere's optoelectronics business

        On October 22, 2002, we announced our agreement to purchase a substantial portion of the optoelectronics business of Agere Systems Inc. ("Agere") for $40 million in cash. The transaction will include the products, technology and some facilities related to Agere's optoelectronics business, which includes lasers, detectors, modulators, passive components, arrayed waveguide-based components, amplifiers, transmitters, receivers, transceive transponders and micro electro-mechanical systems. As part of the transaction, approximately 300 Agere research and development, process engineering, marketing, product management and assembly and test employees will join our Company. We anticipate closing the transaction in January 2003, subject to regulatory approval and closing conditions.

18

Results of Operations

        The following table sets forth the results of our operations expressed as a percentage of revenues. Our historical operating results are not necessarily indicative of the results for any future period.

Revenues

        We derive revenues from the sale of standard and customer-specific products and services. Our revenues also include nonrecurring engineering revenues relating to the development of customer-specific products. For the three months ended September 30, 2002, revenues were $71.0 million, a decrease of 12.1% from the $80.8 million reported for the three months ended September 30, 2001. For the nine months ended September 30, 2002, revenues were $194.6 million, a decrease of 27.8% from the $269.5 million reported for the nine months ended September 30, 2001. The decrease in revenues for the three months and nine months ended September 30, 2002 reflected decreased demand generally across all of our optical networking components and semiconductor products for wireless phones, offset by increased revenues from our SAW filter business, particularly duplexers, RF filters and IF filters for GSM and CDMA phones. We expect revenues for the three months ended December 31, 2002 to be flat to slightly higher than the three months ended September 30, 2002.

        Domestic revenues for the three and nine months ended September 30, 2002 decreased to $28.0 million and $85.3 million, respectively, from $45.6 million and $155.3 million for the three and nine months ended September 30, 2001, respectively. International revenues for the three months ended September 30, 2002 increased to $43.0 million from $35.2 million for the three months ended September 30, 2001. International revenues for the nine months ended September 30, 2002 decreased to $109.3 million from $114.2 million for the nine months ended September 30, 2001.

19

Gross Profit

        Gross profit is equal to revenues less cost of goods sold. Cost of goods sold includes all direct material, labor and overhead expenses and certain production costs related to nonrecurring engineering revenues. In general, gross profit generated from the sale of customer-specific products and from nonrecurring engineering revenues is typically higher than gross profit generated from the sale of standard products. For the three months ended September 30, 2002, gross profit was $25.1 million, a decrease of 25.1% from the $33.5 million reported for the three months ended September 30, 2001. For the nine months ended September 30, 2002, gross profit was $68.5 million, a decrease of 39.7% from the $113.6 million reported for the nine months ended September 30, 2001. The decrease in gross profit was attributable to the decreased demand for our products, underutiliziation of our fabrication facilities, and to lower average selling prices of some of our SAW filter products.

        The operation of our own wafer fabrication facilities entails a high degree of fixed costs and requires an adequate volume of production and sales to be profitable. During periods of decreased demand, as we have experienced recently, high fixed wafer fabrication costs have a materially adverse effect on our operating results. We expect gross profit to continue to be affected by decreased absorption of fixed overhead costs associated with decreased demand and production volume, which will continue to affect our results of operations for as long as demand continues at existing or lower levels.

        Additionally, we have at various times in the past experienced lower than expected production yields, which have delayed shipments of a given product and adversely affected gross profits. There can be no assurance that we will be able to maintain acceptable production yields in the future and, to the extent that we do not achieve acceptable production yields, our operating results would be materially adversely affected.

Research, Development and Engineering

        Research, development and engineering expenses include the costs incurred in the design of new products, as well as ongoing product research and development expenses. Research, development and engineering expenses for the three months ended September 30, 2002 increased to $16.7 million from $13.2 million for the three months ended September 30, 2001. As a percentage of revenues for the three months ended September 30, 2002, research, development and engineering expenses increased to 23.5% from 16.3% for the three months ended September 30, 2001. For the nine months ended September 30, 2002, research, development and engineering expenses increased to $42.1 million from $36.9 million for the nine months ended September 30, 2001. As a percentage of revenues for the nine months ended September 30, 2002, research, development and engineering expenses increased to 21.6% from 13.7% for the nine months ended September 30, 2001. The increase in research, development and engineering expenses for the three and nine month periods ended September 30, 2002 was primarily due to the additional research, development and engineering activities associated with our acquisition of the Infineon and IBM businesses, to the engineering and requalification costs associated with the start up and move from our Dallas facility to our Richardson facility and to other costs associated with the increased investment in wireless, broadband and microwave products and technologies. We are committed to substantial investments in research, development and engineering and expect these expenses will continue to increase in the future.

Selling, General and Administrative

        Selling, general and administrative expenses include commissions, labor expenses for marketing and administrative personnel, start-up costs for our recent move to our Richardson facility, costs associated with the acquisition of the Infineon and IBM businesses and other corporate administrative expenses. Selling, general and administrative expenses for the three and nine months ended September 30, 2002 decreased to $9.9 million and $31.3 million, respectively, from $11.4 million and $35.3 million for the three

20

and nine months ended September 30, 2001, respectively. This decrease was predominantly due to the reduced selling expenses associated with reduced revenues offset by start-up costs for our move to our Richardson facility and additional costs associated with our acquisition of the Infineon and IBM businesses. Selling, general and administrative expenses as a percentage of revenues for the three months ended September 30, 2002 decreased slightly to 14.0% from 14.1% for the three months ended September 30, 2001. For the nine months ended September 30, 2002, selling, general and administrative expenses as a percentage of revenues increased to 16.1% from 13.1% for the nine months ended September 30, 2002.

Impairment of Long Lived Assets

        Long lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During the three and nine months ended September 30, 2002, we decided to abandon certain production assets associated with one of our 6-inch wafer productions lines at our Richardson facility. This resulted in an impairment charge of $5.8 million to write these assets down to estimated salvage value from carrying cost.

Acquisition Related Costs

        During the three and nine months ended September 30, 2002, we recorded a charge of $8.6 million for the write-off of acquired in-process research and development and other costs associated with our acquisition of the Infineon and IBM businesses. The value of acquired in-process research and development is determined through independent appraisal. Acquisition related costs recorded in the three and nine months ended September 30, 2001 were merger-related costs of $7.5 million attributable to the merger with Sawtek in July 2001. Merger-related costs consisted primarily of investment banker, legal, accounting, regulatory filing and printing fees.

Reduction in Work Force

        During the three and nine months ended September 30, 2002, we reduced our workforce as a result of the decreased demand for our products and the underutilization of our fabrication facilities. We recorded a charge of $1.0 million associated with this reduction in workforce. During the nine months ended September 30, 2001, we recorded a charge for a similar reduction in workforce in the amount of $1.1 million.

Interest Income (Expense) and Other

        Interest income (expense) and other was $408,000 and $15,000 net expense, respectively, for the three and nine months ended September 30, 2002. For the three and nine months ended September 30, 2001, interest income (expense) and other was net income of $2.3 million and $10.6 million, respectively. This change was primarily attributable to lower interest rates and a lower level of investments due to our recent capital investments and the repurchase of a portion of our convertible subordinated notes.

Impairment of Equity Investments

        During the three and nine months ended September 30, 2002, we recorded permanent declines in the carrying values of some of our investments in small, privately held technology companies in the amounts of $4.9 million and $8.1 million, respectively. During the three and nine months ended September 30, 2001, we recorded a charge for a similar valuation impairment in the amount of $1.5 million. The impairment was due to the decline in value below cost that was judged to be other than temporary.

21

Retirement of Debt

        During the three and nine months ended September 30, 2002, we repurchased a portion of our convertible subordinated notes and recorded a gain of $3.7 million and $6.0 million, respectively. During the three and nine months ended September 30, 2001, we recorded a gain of $9.4 million on a similar repurchase.

Foreign Currency Gains, Net

        Foreign currency gains, net for the nine months ended September 30, 2002 was $4.6 million. This resulted from a realized gain of $4.6 million on a forward currency contract associated with the Infineon acquisition.

Income Tax Expense

        We recorded an income tax benefit of $9.2 million and $8.9 million for the three and nine months ended September 30, 2002, respectively, compared to the income tax expense of $5.0 million and $18.1 million recorded in the three and nine months ended September 30, 2001, respectively. The decrease in income tax expense was attributable to our decreased income before income tax.

        We recorded our provision for income taxes based on the current estimate of our annual effective tax rate of 50.0%. Our estimated effective tax rate differs from the federal statutory rate primarily because of tax exempt income of our Costa Rican facility, which currently operates in a free trade zone, tax exempt interest income earned on certain cash and investment items within our portfolio and tax credits, which were offset by state taxes and other items. Our future effective tax rate could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates, changes in valuation of our deferred tax assets and liabilities or changes in tax laws or interpretations thereof. We have not recorded a valuation allowance for certain deferred tax assets as we believe it is more likely than not that the results of future operations will generate sufficient taxable income to realize these assets.

Liquidity and Capital Resources

        As of September 30, 2002, we had cash, cash equivalents and short-term investments of $336.5 million. In addition, we had $119.0 million of investments in long-term marketable securities, which are investments in high-grade securities whose initial maturity is one year to 24 months. As of September 30, 2002, working capital declined to $394.6 million from $560.6 million as of December 31, 2001. The decrease in working capital was attributable to the repurchase of convertible debt, purchases of the Infineon and IBM businesses, purchases of equipment and investments in long-term marketable securities.

        For the nine months ended September 30, 2002 and September 30, 2001, cash provided by operating activities was $17.3 million and $123.9 million, respectively. Cash provided by operating activities for the nine months ended September 30, 2002 was mainly due to our net loss offset by depreciation and amortization, loss on investments and reduction of prepaid and other assets, which was offset by a gain on extinguishment of debt, a realized gain on a forward contract, the increase of accounts receivable and the reduction of accounts payable and accrued expenses. For the nine months ended September 30, 2001, cash used by operating activities was primarily due to net income, adjustment to conform the fiscal year end of a pooled entity, an increased tax benefit from stock option exercises, the decrease of accounts receivable and depreciation and amortization, offset by increases in prepaid and other assets and decreases in accounts payable and accrued expenses.

        For the nine months ended September 30, 2002, cash used by investing activities was $53.1 million, which primarily comprised purchases of investments, purchases of capital equipment, advances to or investments in other companies, offset by maturities/sales of investments. For the nine months ended September 30, 2001, cash provided by investing activities was $57.1 million, which was due to the net

22

maturity and sale of investments and a decrease in restricted long-term assets, offset by capital expenditures.

        For the nine months ended September 30, 2002, cash used in financing activities was $16.9 million. For the nine months ended September 30, 2001, cash used in financing activities was $41.7 million. The cash used in financing activities for the nine months ended September 30, 2002 was from principal payments on capital leases and the repurchase of convertible subordinated notes, offset by the proceeds from the issuance of common stock. The cash used in financing activities for the nine months ended September 30, 2001 was primarily due to the repurchase of convertible subordinated notes, the purchase of treasury stock and principal payments on capital leases, offset by the proceeds from the issuance of common stock.

        In August 2000, we acquired a 420,000 square foot wafer fabrication facility located in Richardson, Texas for $87 million. The acquisition was financed by a special purpose entity ("SPE") sponsored by a financial institution in which we contributed $73 million and a lender contributed $14 million. In September 2002, we completed an $18.5 million improvement to the Richardson, Texas facility, which was financed through the same financial institution-sponsored SPE as part of our original financing agreement. We contributed $15.5 million and the lender contributed $3.0 million. Of the total amount contributed to the SPE, 97% has been collateralized by us through pledged investment securities and a participation interest in the SPE which amounts appear on our balance sheet as "Restricted Long-Term Assets" and "Other Investment". The SPE is not consolidated in our financial statements and we have accounted for the arrangement as an operating lease. We are required to either make lease payments through August 2005 or purchase the property. If we elect to purchase the property, we will assign the pledged securities to the lender and incur some incremental closing costs to obtain title to the property. We may also renew the lease for an additional four-year period in August 2005. The lease is secured by the value of the property as well as the pledged investment securities. Restrictive covenants are also included in this financing arrangement which require us to maintain (a) a quick ratio of not less than 1.25 to 1.00, (b) tangible net worth not less than the sum of $431.0 million and (c) a maximum leverage ratio not greater than .50. As of September 30, 2002, we were in compliance with these covenants.

        In February and March 2000, we completed a private placement of $345.0 million (net proceeds of $333.9 million) of 4% convertible subordinated notes due 2007. The notes are unsecured obligations, are initially convertible into our common stock at a conversion price of $67.80 per share and are subordinated to all of our present and future senior indebtedness. To date, we have repurchased approximately $60.5 million of the 4% convertible subordinated notes due 2007. From time to time, we evaluate opportunities to repurchase additional portions of the debt and may from time to time repurchase portions of the debt. We have, in prior periods, completed public offerings of our common stock in order to fund our operating and capital needs. In addition, we have funded our operations to date through other private sales of equity, borrowings, equipment leases and cash flow from operations.

        On July 1, 2002, we closed the acquisition of Infineon's GaAs Business. We added approximately 60 employees as part of the acquisition. The acquisition was accounted for as a purchase transaction and the results of operations are included in the condensed consolidated financial statements from the date of acquisition. At the closing date, we paid Infineon EUR50.0 million ($45.0 million at forward contract rate of $.9000/EUR1.00), of which EUR10.0 million ($9.0 million at forward contract rate of $.9000/EUR1.00) represents an earnout deposit. Pursuant to the purchase agreement, Infineon may earn up to an additional EUR74.0 million over a 24-month period based upon revenues generated by the acquired business, for an aggregate purchase price of EUR124.0 million. Subsequent to the close of the acquisition, certain fixed assets were also purchased for EUR5.5 million less EUR1.5 million in funded liabilities acquired ($4.0 million at various spot rates). There are also various other guarantees and contingencies which could affect the amount of the final purchase price. On October 1, 2002, the time period lapsed for the us to reach a subsequent agreement with Infineon as to the inclusion of Infineon's Hi Rel business in our acquisition of Infineon's GaAs Business. Since an agreement was not reached, the minimum purchase price of the acquisition will be adjusted to EUR42 million from EUR45 million. In conjunction with our

23

purchase of Infineon's GAAs Business, we entered into an interim supply agreement whereby Infineon is required to sell, and we are required to purchase EUR 22,500 ($21,987 at September 30, 2002 exchange rate of $.9772/EUR1.00) of GaAs Business products during a one-year period at stipulated prices. The remaining commitment as of September 30, 2002 is EUR17,099 ($16,709 at September 30, 2002 exchange rate of $.9772/EUR1.00).

        On July 1, 2002, we closed the acquisition of a portion of the assets of IBM's wireless phone chipset business. We added 9 employees as part of the acquisition. The acquisition will be accounted for as a purchase transaction and the results of operations are included in the condensed consolidated financial statements from the date of acquisition. At the closing date, we paid $21.8 million to IBM for the related assets. Subsequent adjustments contingent upon business volumes could increase the final aggregate purchase price up to $40.0 million.

        On October 22, 2002, we announced our agreement to purchase a substantial portion of the optoelectronics business of Agere for $40 million in cash. The transaction will include the products, technology and some facilities related to Agere's optoelectronics business, which includes lasers, detectors, modulators, passive components, arrayed waveguide-based components, amplifiers, transmitters, receivers, transceive transponders, and micro electro-mechanical systems. As part of the transaction, approximately 300 Agere research and development, process engineering, marketing, product management and assembly and test employees will join our Company. We anticipate closing the transaction in January 2003, subject to regulatory approval and closing conditions.

        We believe that our current cash, cash equivalent and short-term investments balances, together with cash anticipated to be generated from operations and any financing arrangements we may enter into, will satisfy our projected working capital and capital expenditure requirements and possible future acquisitions, at a minimum, through the next 12 months. However, we may be required to finance any additional requirements through additional equity, debt financings or credit facilities. We may not be able to obtain additional financings or credit facilities, or if these funds are available, they may not be available on satisfactory terms.

Recent Accounting Pronouncements

        See Note 17 of the Notes to Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Factors Affecting Future Operating Results

        An investment in our common stock is extremely risky. You should carefully consider the following risk factors and other information in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 27, 2002 before investing in our common stock. Our business and the results of operations could be seriously harmed by any of the following risks. The trading price of our common stock could decline due to any of these risks and you may lose part or all of your investment.

Our operating results may fluctuate substantially, which may cause our stock price to fall.

        Our quarterly and annual results of operations have varied in the past and may vary significantly in the future due to a number of factors including, but not limited to, the following:

•

cancellation or delay of customer orders or shipments;



•

our success in achieving design wins in which our products are designed into those of our customers;



•

market acceptance of our products and those of our customers;



•

variability of the life cycles of our customers' products;

24

•

variations in manufacturing yields;



•

timing of announcements and introduction of new products by us and our competitors;



•

changes in the mix of products we sell;



•

declining average sales prices for our products;



•

ability to integrate existing and newly developed technologies;



•

changes in manufacturing capacity and variations in the utilization of that capacity;



•

variations in operating expenses;



•

the long sales cycles associated with our customer-specific products;



•

the timing and level of product and process development costs;



•

performance of vendors and subcontractors;



•

realization of research and development efforts;



•

variations in raw material quality and costs;



•

delays in new process qualification or delays in transferring processes;



•

the cyclical nature of the semiconductor and electronic communications component industries;



•

the timing and level of nonrecurring engineering revenues and expenses relating to customer-specific products;



•

our ability to successfully integrate the operations of acquired businesses and to retain the customers of acquired businesses; and



•

significant changes in our and our customers' inventory levels.

        We expect that our operating results will continue to fluctuate in the future as a result of these and other factors. Any unfavorable changes in these or other factors could cause our results of operations to suffer as they have in the past. Due to potential fluctuations, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as indicators of our future performance.

        Additionally, if our operating results are not within the market's expectations, then our stock price may fall. The public stock markets have experienced, and are currently experiencing, extreme price and trading volume volatility, particularly in high technology sectors of the market. This volatility has significantly affected 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 adversely affect the market price of our common stock.

25

We may face challenges and risks associated with our planned acquisition of the optoelectronics business of Agere and, as a result, may not realize the expected benefit of this acquisition.

        On October 22, 2002, we announced our agreement to purchase a substantial portion of the optoelectronics business of Agere for $40 million in cash. The transaction will include the products, technology and some facilities related to Agere's optoelectronics business, which includes lasers, detectors, modulators, passive components, arrayed waveguide-based components, amplifiers, transmitters, receivers, transceive transponders, and micro electro-mechanical systems. As part of the transaction, approximately 300 Agere research and development, process engineering, marketing, product management and assembly and test employees will join TriQuint. We anticipate closing the transaction in January 2003, subject to regulatory approval and closing conditions.

        Risks associated with this planned acquisition include:

•

negotiation of collateral agreements associated with the purchase agreement;



•

adequate preparation and planning for the integration of the acquisition;



•

addition of a foreign entity located in Mexico;



•

continuation and integration of manufacturing processes substantially different from our current processes;



•

a currently depressed market for optoelectronics products;



•

Agere's ability to support us and the business through an ownership transition period;



•

retention of existing partners and customers;



•

retention of Agere's employees and their integration into our corporate culture;



•

significant management attention and financial resources in assimilating these businesses; and



•

increased complexity of our corporate structure requiring additional resources for such responsibilities as tax planning, foreign currency management and risk management.

We may face challenges with our integration of Infineon's GaAs business and the acquired assets of IBM's wireless phone chipset business and, as a result, may not realize the expected benefits of those acquisitions.

        On July 1, 2002, we completed the acquisition of Infineon's GaAs semiconductor business and a portion of the assets of IBM's wireless phone chipset business.

        The challenges involved in integrating these businesses include:

•

realization of expected benefits from the acquisitions such as increased business in Europe;



•

fulfillment of the supply agreement between Infineon and us until we are able to produce the products within our existing facilities;



•

retention of existing partners and customers;



•

transfer and integration of Infineon's process and technologies into our Oregon facility;



•

redesign of Infineon products to allow for manufacture in our Oregon facility;



•

retention of Infineon's and IBM's employees and their integration into our corporate culture;



•

incremental costs associated with a foreign subsidiary such as taxes, duties and employee benefits;



•

significant management attention and financial resources in assimilating these businesses; and

26

•

increased complexity of our corporate structure requiring additional resources for such responsibilities as tax planning, foreign currency management and risk management.

We face continuing challenges in integrating Sawtek and, as a result, may not realize the expected benefits of the acquisition of Sawtek.

        Integrating the operations, systems and personnel of TriQuint and Sawtek, as with all mergers of companies, is a complex process and we are uncertain that the integration will achieve the anticipated benefits of the merger. We have made significant progress in the implementation of this integation, however, efforts are on-going in some areas. Areas of continuing work in this integration process include:

•

coordinating research and development activities to enhance introduction of new products, services and technologies;



•

combining product and service offerings and marketing efforts;



•

developing, maintaining and combining uniform standards, controls, procedures and policies.

        We may not succeed in addressing these risks or any other problems encountered in connection with the merger. The diversion of the attention of our management and any difficulties encountered in the process of combining the companies could cause the disruption of, or a loss of momentum in, the activities of our business. We cannot assure you that the remaining integration work between TriQuint and Sawtek can be successfully completed or that any of the anticipated benefits will be realized. Further, we cannot assure you that our growth rate will equal the historical growth rates of either company.

If investors or financial or industry analysts do not think our integration of our acquisitions are proceeding as anticipated or that the benefits of the acquisitions are not going to be realized, the market price of our common stock may decline.

        The market price of our common stock may decline if:

•

the integration of Sawtek and the IBM and Infineon businesses are not completed in a timely and efficient manner;



•

our assumptions about Sawtek's business model and operations and those of the IBM and Infineon businesses, considered on a stand-alone basis and their role in our business model, such as our ability to introduce new products incorporating acquired technology;



•

the effect of the acquisitions on our financial results is not consistent with the expectations of financial or industry analysts; or



•

following the acquisitions, our stockholders that hold relatively larger interests in our company may decide to dispose of their shares because the results of the acquisitions are not consistent with their expectations.

We are currently undergoing a management transition.

        We recently announced the appointment of Ralph Quinsey as our President and Chief Executive Officer. Steven J. Sharp, our former President and Chief Executive Officer who announced his intent to reduce his involvement in the day-to-day management of our company in October 2001, remains our working Chairman of the Board and will focus on new technologies and strategic growth opportunities. In addition, we recently announced a corporate reorganization of our company into three business units, each of which is managed by an Office of the President. Our success will depend, in part, on our ability to manage this management transition and reorganization and on the ability of our executive officers to operate effectively, both independently and as a group. The manner in which the new management team conducts the business of our company, and the direction in which the new management team moves the

27

business, may differ from the manner and direction in which the former management has directed our company in the past. If we fail to manage this management transition effectively, our operating results could be negatively affected.

Our operating results may suffer due to fluctuations in demand for semiconductors and electronic communications components.

        From time to time, the wireless phone, base station, optical network, broadband and microwave markets have experienced significant downturns and wide fluctuations in product supply and demand, often in connection with, or in anticipation of, maturing product cycles, capital spending cycles and declines in general economic conditions. The cyclical nature of these markets has led to significant imbalances in demand, inventory levels and production capacity. It has also accelerated the decrease of average selling prices per unit. We have experienced, and may experience again, periodic fluctuations in our financial results because of these or other industry-wide conditions. We expect that the current decline in demand for wireless, base station, optical network and broadband and microwave components, including ours, could last for the remainder of 2002, if not longer. For example, if demand for communications applications were to decrease substantially, demand for the integrated circuits and SAW filter components in these applications would also decline, which would negatively affect our operating results.

We depend on the continued growth of communications markets.

        We derive all of our product revenues from sales of products for electronic communication applications. These markets are characterized by the following:

•

cyclical demand;



•

intense competition;



•

rapid technological change; and



•

short product life cycles, especially in the wireless market.

        Recently, the electronic communications markets have reversed their previous pattern of growth. These markets may not resume historical growth rates. If these markets do not recover and demand for electronic communications applications continues to decline, our operating results could suffer. In addition, to the extent this economic downturn affects our customers' business, it may affect their ability to pay us for products we have already shipped to them.

        Products for electronic communications applications are often based on industry standards, which are continually evolving. Our future success will depend, in part, upon our ability to successfully develop and introduce new products based on emerging industry standards, which could render our existing products unmarketable or obsolete. If communications markets evolve to new standards, we may be unable to successfully design and manufacture new products that address the needs of our customers or that will meet with substantial market acceptance.

We face risks from the failures in our manufacturing processes, the maintenance of our fabrication facilities and the processes of our vendors.

        The fabrication of integrated circuits, particularly those made of GaAs, is a highly complex and precise process. Our integrated circuits are currently manufactured on wafers made of GaAs and SiGe. Our SiGe products are currently manufactured externally by Atmel, our strategic partner in the development of these products and by IBM. Our SAW filters are currently manufactured primarily on quartz wafers. During manufacturing, each wafer is processed to contain numerous integrated circuits or

28

SAW filters. We may reject or be unable to sell a substantial percentage of wafers or the components on a given wafer because of:

•

minute impurities;



•

difficulties in the fabrication process, such as failure of special equipment, operator error or power outages;



•

defects in the masks used to print circuits on a wafer;



•

electrical performance;



•

wafer breakage; or



•

other factors.

        We refer to the proportion of final components that have been processed, assembled and tested relative to the gross number of components that could be constructed from the raw materials as our manufacturing yield. Compared to the manufacture of silicon integrated circuits, GaAs technology is less mature and more difficult to design and manufacture within specifications in large volume. In addition, the more brittle nature of GaAs wafers can result in lower manufacturing yields than with silicon wafers. We have in the past experienced lower than expected manufacturing yields, which have delayed product shipments and negatively impacted our results of operations. We may experience difficulty maintaining acceptable manufacturing yields in the future.

        In addition, the maintenance of our fabrication facilities and our assembly facility are subject to risks, including:

•

the demands of managing and coordinating workflow between geographically separate production facilities;



•

disruption of production in one of our facilities as a result of a slowdown or shutdown in our other facility; and



•

higher operating costs from managing geographically separate manufacturing facilities.

        We depend on certain vendors for components, equipment and services. We maintain stringent policies regarding qualification of these vendors. However, if these vendors' processes vary in reliability or quality, they could negatively affect our products, and thereby, our results of operations.

Some of our manufacturing facilities are located in areas prone to natural disasters.

        We have a SAW manufacturing and assembly facility located in Apopka, Florida. We also have an assembly facility for SAW products in San Jose, Costa Rica. Hurricanes, tropical storms, flooding, tornadoes and other natural disasters are common events for the southeastern part of the United States and in Central America. Additionally, mud slides, earthquakes and volcanic eruptions could also affect our Costa Rican facility. Any disruptions from these or other events would have a material adverse impact on our operations and financial results.

        Although we have manufacturing and assembly capabilities for our Sawtek products in both Apopka and San Jose, we are only capable of fabricating wafers for those products in our Apopka facility. As a result, any disruption to our Apopka facility would have a material adverse impact on our operations and financial results.

A disruption in our Costa Rican operations would have an adverse impact on our operating results.

        Operating a facility in Costa Rica presents risks of disruption such as government intervention, currency fluctuations, labor disputes, limited supplies of labor, power interruption or war. Any such

29

disruptions could have a material adverse effect on our business, results of operations and financial condition.

        We expect our Costa Rican operations to continue to account for a significant proportion of our SAW operations and our results of operations in the future.

We face risks from changes in tax regulations and a change in our Cost Rican subsidiary's favorable tax status would have an adverse impact on our operating results.

        We are subject to taxation in many different countries and localities worldwide. In some jurisdictions, we have employed specific business strategies to minimize our tax exposure. To the extent the tax laws and regulations in these various countries and localities could change, our tax liability in general could increase or our tax saving strategies could be threatened. Such changes could have a material adverse effect on our operations and financial results.

        For example, our subsidiary in Costa Rica operates in a free trade zone. We expect to receive a 100% exemption from Costa Rican income taxes through 2003 and a 50% exemption through 2007. The Costa Rican government continues to review its policy on granting tax exemptions to companies located in free trade zones and it may change our tax status or minimize our benefit at any time. Any adverse change in the tax structure for our Costa Rican subsidiary made by the Costa Rican government would have a negative impact on our net income.

Our business may be adversely affected by acts of terrorism.

        Acts of terrorism could interrupt or restrict our business in several ways. We rely extensively on the use of air transportation to move our inventory to and from our vendors and to ship finished products to our customers. If terrorist acts cause air transportation to be grounded or interrupted, our business would be similarly adversely impacted.

        In addition, acts of terrorism could cause existing export regulations to be changed, which could limit the extent to which we are allowed to export our products. To the extent that acts of terrorism also reduce customer confidence and create general economic weakness, our business would also be adversely affected.

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

        Because large portions of our manufacturing costs are relatively fixed, our manufacturing volumes are critical to our operating results. If we fail to achieve acceptable manufacturing volumes or experience product shipment delays, our results of operations could be harmed. During periods of decreased demand, as we are currently experiencing, our high fixed manufacturing costs negatively effect our results of operations. We base our expense levels in part on our expectations of future orders and these expense levels are predominantly fixed in the short-term. However, if the rate of growth of demand decreases from past levels, as we are currently experiencing, we will not be able to grow our revenue. If we receive fewer customer orders than expected or if our customers delay or cancel orders, we may not be able to reduce our manufacturing costs in the short-term and our operating results would be harmed.

If we do not sell our customer-specific products in large volumes, our operating results may be harmed.

        We manufacture a substantial portion of our products to address the needs of individual customers. Frequent product introductions by systems manufacturers make our future success dependent on our ability to select development projects, which will result in sufficient volumes to enable us to achieve manufacturing efficiencies. Because customer-specific products are developed for unique applications, we expect that some of our current and future customer-specific products may never be produced in volume and may impair our ability to cover our fixed manufacturing costs. Furthermore, if customers cancel or

30

delay orders for these customer-specific products, our inventory of these products may become unmarketable or obsolete, which would negatively affect our operating results.

        In addition, if we experience delays in completing designs, if we fail to obtain development contracts from customers whose products are successful or if we fail to have our product designed into the next generation product of existing volume production customers, our revenues could be harmed.

Our operating results could be harmed if we lose access to sole or limited sources of materials, equipment or services.

        We currently obtain some components, equipment and services for our products from limited or single sources, such as certain ceramic and plastic packages and chemicals. We purchase these components, equipment and services on a purchase order basis, do not carry significant inventories of components and do not have any long-term supply contracts with these vendors. Our requirements are relatively small compared to silicon semiconductor manufacturers. Because we often do not account for a significant part of our vendors' business, we may not have access to sufficient capacity from these vendors in periods of high demand. If we were to change any of our sole or limited source vendors, we would be required to requalify each new vendor. Requalification could prevent or delay product shipments that could negatively affect our results of operations. In addition, our reliance on these vendors may negatively affect our production if the components, equipment or services vary in reliability or quality. If we are unable to obtain timely deliveries of sufficient quantities of acceptable quality or if the prices increase, our results of operations could be harmed.

Our operating results could be harmed if our subcontractors and partners are unable to fulfill our requirements.

        We currently utilize subcontractors for the majority of our integrated circuit assemblies. IBM and Atmel manufacture all of our SiGe products. Infineon continues to manufacture our products acquired from them while we transfer the manufacturing processes to our Oregon facility. Infineon will also continue to provide assembly and test services for an indeterminant period of time after the transfer of manufacturing processes. There are certain risks associated with dependence on third party providers, such as minimal control over delivery scheduling, adequate capacity during demand peaks, warranty issues and protection of intellectual property. Additionally, if these subcontractors are unable to meet our needs, it could prevent or delay production shipments that could negatively affect our results of operations. If we were to change any of our subcontractors, we would be required to requalify each new subcontractor, which could also prevent or delay product shipments that could negatively affect our results of operations. In addition, our reliance on these subcontractors may negatively affect our production if the services vary in reliability or quality. If we are unable to obtain timely service of acceptable quality or if the prices increase, our results of operations could be harmed.

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

        The fabrication of GaAs and SiGe integrated circuits, SAW filters and the modules containing these components is a highly complex and precise process. Our customers specify quality, performance and reliability standards that we must meet. If our products do not meet these standards, we may be required to rework or replace the products. GaAs and SiGe integrated circuits and SAW filters may contain undetected defects or failures that only become evident after we commence volume shipments. We have experienced product quality, performance or reliability problems from time to time. We are currently experiencing field failures and returns on some components and are collecting data for analysis and

31

evaluation as to the extent of the problem. Other defects or failures may also occur in the future. If failures or defects occur, we could:

•

lose revenue;



•

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



•

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



•

experience increased product returns or discounts.

Our operating results may suffer as a result of the conversion of our manufacturing processes from four-inch wafer production to six-inch wafer production.

        We have converted our Hillsboro facility to accommodate equipment that uses six-inch (150-millimeter) wafers in production. All of our production has been converted to six-inch wafers. We have very limited experience processing six-inch wafers in our fabrication facilities. Our inexperience may result in lower yields and higher unit production costs. We may discover the need to substantially redesign our processes and procedures as we gain more experience with the larger wafers. As a result, the conversion to six-inch wafer production could interrupt our production of integrated circuits, harm our results of operations, or harm our relationship with our customers.

Increases in our manufacturing capacity may adversely affect our operating results if the current economic downturn continues for an extended period of time.

        We have converted our Hillsboro facility from four-inch wafer production to six-inch wafer production and have recently expanded the capacity of our Texas operations with the transition to the Richardson facility. In addition, we have acquired additional manufacturing facilities and personnel in connection with our recent acquisition of businesses from Infineon and IBM and our recently announced acquisition of the Agere optoelectronics business.

        These increases in capacity will directly relate to significant increases in fixed costs and operating expenses. These increased costs could have an adverse effect on our results of operations during the current economic downturn. If this economic downturn were to continue for an extended period of time, the decreased levels of demand and production in conjunction with these increased expense levels will have an adverse effect on our business, financial condition and results of operations.

We may face fines or our facilities could be closed if we fail to comply with environmental regulations.

        Federal, state and local regulations impose various environmental controls on the storage, handling, discharge and disposal of chemicals and gases used in our manufacturing process. For our manufacturing facilities located in Hillsboro, Richardson, Apopka and San Jose, Costa Rica, we provide our own manufacturing waste treatment and contract for disposal of some materials. We are required to report usage of environmentally hazardous materials.

        The failure to comply with present or future regulations could result in fines being imposed on us and we could be required to suspend production or cease our operations. These regulations could require us to acquire significant equipment or to incur substantial other expenses to comply with environmental regulations. Any failure by us to control the use of, or to adequately restrict the discharge of, hazardous substances could subject us to future liabilities and harm our results of operations.

Our business will be impacted if systems manufacturers do not use components made of GaAs, or other alternative materials we utilize.

        Silicon semiconductor technologies are the dominant process technologies for integrated circuits and the performance of silicon integrated circuits continues to improve. Recently, we introduced SiGe

32

components jointly developed and manufactured with Atmel Corporation and acquired the SiGe wireless chipset business of IBM. Although we have designed and manufactured GaAs products, have begun production of SiGe products developed jointly and manufactured by Atmel, and have acquired SiGe products manufactured by IBM, system designers may be reluctant to adopt our products because of:

•

their unfamiliarity with designing systems with our products;



•

their concerns related to manufacturing costs and yields;



•

their unfamiliarity with our design and manufacturing processes; and



•

uncertainties about the relative cost effectiveness of our products compared to high-performance silicon components.

        Systems manufacturers may not use GaAs components because the production of GaAs integrated circuits has been, and continues to be, more costly than the production of silicon devices. Systems manufacturers may not use our SiGe components because this is a newly introduced process. Systems manufacturers may be reluctant to rely on a technology that is new to us and not widely understood. Systems manufacturers may also be reluctant to rely on a jointly produced product because future supplies may depend on our continued good relationships with Atmel and IBM. As a result, we must offer devices that provide superior performance to that of traditional silicon-based devices.

        In addition, customers may be reluctant to rely on a smaller company like us for critical components. We cannot be certain that additional systems manufacturers will design our products into their systems or that the companies that have utilized our products will continue to do so in the future. If our products fail to achieve market acceptance, our results of operations would suffer.

New competitive products and technologies have been announced which could reduce demand for our SAW filter products.

        Products have been introduced that have some application in GSM phones, which will impact sales of GSM IF filters for wireless phones. Several companies recently announced a new product based on a direct conversion concept that will eliminate a SAW IF filter in certain CDMA phones. If these products are successful in the market, it could reduce or eliminate demand for our IF filters for CDMA phones and our revenues would be harmed if we do not introduce competitive or alternative products. SAW IF filters for wireless phones accounted for approximately 8% of our revenues in 2001. Any development of a cost-effective and reliable technology that replaces SAW filtering technology or reduces the need for SAW filtering technology could have a material adverse effect on our business, financial condition and results of operations.

A decline either in the growth of wireless communications or in the continued acceptance of CDMA technology would have an adverse impact on us.

        Our products for CDMA-based systems, including filters for base stations and receivers and power amplifiers for wireless phones, accounted for approximately 22% of our revenues for 2001 and approximately 30% of our revenues for the nine months ended September 30, 2002. CDMA technology is relatively new to the marketplace and there can be no assurance that emerging markets will adopt this technology. Our business and financial results would be adversely impacted if CDMA technology does not continue to gain acceptance.

Our business may be adversely impacted if we fail to successfully introduce new products or to gain our customers' acceptance of those new products.

        The markets for electronic communications applications in which we participate are subject to intense competition, rapid technological change and short product life cycles. It is critical for companies such as

33

ours to continually and quickly develop new products to meet the changing needs of these markets. If we fail to develop new products to meet our customers' needs on a timely basis, we will not be able to effectively compete in these markets.

        For example, we announced our intention to develop and market RF front-end modules for wireless phones at cost-effective prices. We will also need to continue to expand our wireless applications into CDMA and GSM applications. If we fail to design and produce these products in a manner acceptable to our customers or have incorrectly anticipated our customers' demand for these types of products, our operating results could be harmed.

We have substantial indebtedness.

        In February and March 2000, we sold $345.0 million of convertible subordinated notes due in 2007 in a private placement to qualified institutional buyers. Although we have repurchased $48.5 million and $27.7 million of these notes in 2001 and thus far in 2002, respectively, we have $268.8 million of indebtedness remaining. Our other indebtedness is for operating and capital leases. We may incur substantial additional indebtedness in the future. The level of our indebtedness, among other things, could:

•

make it difficult for us to make payments on the notes and leases;



•

make it difficult for us to obtain any necessary future financing for working capital, capital expenditures, debt service requirements or other purposes;



•

require us to dedicate a substantial portion of our expected cash flow from operations to service our indebtedness, which would reduce the amount of our expected cash flow available for other purposes, including working capital and capital expenditures;



•

limit our flexibility in planning for or reacting to, changes in our business; and



•

make us more vulnerable in the event of a downturn in our business.

        There can be no assurance that we will be able to meet our debt service obligations, including our obligation under the notes.

We may not be able to pay our debt and other obligations.

        If our cash flow is inadequate to meet our obligations, we could face substantial liquidity problems. If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments on the notes or our other obligations, we would be in default under the terms thereof. Default under the indenture would permit the holders of the notes to accelerate the maturity of the notes and could cause defaults under future indebtedness we may incur. Any such default could have a material adverse effect on our business, prospects, financial condition and operating results. In addition, we can not assure you that we would be able to repay amounts due in respect of the notes if payment of the notes were to be accelerated following the occurrence of an event of default as defined in the indenture.

Customers may delay or cancel orders due to regulatory delays.

        The increasing significance of electronic communications has increased pressure on regulatory bodies worldwide to adopt new standards for electronic communications, generally following extensive investigation of and deliberation over competing technologies. The delays inherent in the regulatory approval process may in the future cause the cancellation, postponement or rescheduling of the installation of communications systems by our customers. These delays have in the past had, and may in the future have, a negative effect on our sales and our results of operations.

34

Our revenues are at risk if we do not introduce new products and/or decrease costs.

        Historically, the average selling prices of some of our products have decreased over the products' lives and we expect them to continue to do so. To offset these decreases, we rely primarily on achieving yield improvements and other cost reductions for existing products and on introducing new products that can often be sold at higher average selling prices. Selling prices for our SAW products have declined due to competitive pricing pressures and to the use of newer surface mount package devices that are smaller and less expensive than previous generation filters. For example, we have experienced declines in average selling prices for filters for base stations due to the use of surface mount packages. We believe our future success depends, in part, on our timely development and introduction of new products that compete effectively on the basis of price and performance and adequately address customer requirements. The success of new product and process introductions depends on several factors, including:

•

proper selection of products and processes;



•

successful and timely completion of product and process development and commercialization;



•

market acceptance of our or our customers' new products;



•

achievement of acceptable manufacturing yields; and



•

our ability to offer new products at competitive prices.

        Our product and process development efforts may not be successful and our new products or processes may not achieve market acceptance. To the extent that our cost reductions and new product introductions do not occur in a timely manner, our results of operations could suffer.

We must improve our products and processes to remain competitive.

        If technologies or standards supported by our or our customers' products become obsolete or fail to gain widespread commercial acceptance, our results of operations may be materially impacted. Because of continual improvements in semiconductor technology, including those in high-performance silicon technologies such as complementary metal oxide semiconductor (CMOS), where substantially more resources are invested than in GaAs, SiGe or SAW products, we believe that our future success will depend, in part, on our ability to continue to improve our product and process technologies. We must also develop new technologies in a timely manner. In addition, we must adapt our products and processes to technological changes and to support emerging and established industry standards. We have and must continue to perform significant research and development into advanced material development such as indium phosphide (InP), gallium nitride (GaN), silicon carbide (SiC) and SiGe to compete with future technologies of our competitors. For example, we recently announced that we have entered into agreements with Atmel and IBM to fabricate portions of our proposed SiGe products. These research and development efforts may not be accepted by our customers, and therefore may not go into full production in the future. We may not be able to improve our existing products and process technologies, develop new technologies in a timely manner or effectively support industry standards. If we fail to do so, our customers may select another GaAs, SiGe or SAW product or move to an alternative technology.

Our results of operations may suffer if we do not compete successfully.

        The markets for our products are characterized by price competition, rapid technological change, short product life cycles and heightened global competition. Many of our competitors have significantly greater financial technical, manufacturing and marketing resources. Due to the increasing requirements for high-speed, high-frequency components, we expect intensified competition from existing integrated circuit and SAW device suppliers, as well as from the entry of new competitors to our target markets and from their internal operations of some companies producing products similar to ours for the internal requirements.

35

        For our integrated circuit devices, we compete primarily with both manufacturers of high-performance silicon integrated circuits as well as manufacturers of GaAs integrated circuits. Our silicon-based competitors include companies such as Applied Micro Circuits Corporation, Maxim Integrated Products Inc., Motorola, Philips and STMicroelectronics N.V. Our GaAs-based competitors include companies such as Anadigics Inc., Fujitsu Microelectronics, Inc., Infineon Technologies AG, Raytheon, RF Micro Devices, Skyworks Solutions, Inc. and Vitesse Semiconductor Corp. For our SAW devices, our competitors include companies such as CTS Wireless Components, Micro Networks, Phonon, RF Monolithics, Vectron, EPCOS AG, Thales, Fujitsu, Murata and Toyocom. Competition could also come from companies ahead of us in developing alternative technologies such as SiGe and InP integrated circuits and digital filtering and direct conversion devices.

        Competition from existing or potential competitors may increase due to a number of factors including, but not limited to, the following:

•

offering of new or emerging technologies in integrated circuit design using alternative materials such as SiGe or InP;



•

offering of new or emerging technologies such as digital filtering or direct conversion as alternatives to SAW filters;



•

mergers and acquisitions;



•

longer operating histories and presence in key markets;



•

development of strategic relationships;



•

access to a wider customer base; and



•

access to greater financial, technical, manufacturing and marketing resources.

        Additionally, manufacturers of high-performance silicon integrated circuits have achieved greater market acceptance of their existing products and technologies in some applications.

        We compete with both GaAs and silicon suppliers in all of our target markets. In microwave and millimeter wave applications, our competition is primarily from a limited number of GaAs suppliers, which are in the process of expanding their product offerings to address commercial applications other than aerospace.

        Our prospective customers are typically systems designers and manufacturers that are considering the use of GaAs or SiGe integrated circuits or SAW filters, as the case may be, for their high-performance systems. Competition is primarily based on performance elements such as speed, complexity and power dissipation, as well as price, product quality and ability to deliver products in a timely fashion. Due to the proprietary nature of our products, competition occurs almost exclusively at the system design stage. As a result, a design win by our competitors or by us typically limits further competition with respect to manufacturing a given design.

If we fail to integrate any future acquisitions or successfully invest in privately held companies, our business will be harmed.

        We face risks from any future acquisitions, including the following:

•

we may fail to merge and coordinate the operations and personnel of newly acquired companies with our existing business;



•

additional complexity may affect our flexibility and ability to respond quickly to market and management issues;



•

we may experience difficulties integrating our financial and operating systems;

36

•

we may experience additional financial and accounting challenges and complexities in areas such as tax planning, treasury management and financial reporting;



•

our ongoing business may be disrupted or receive insufficient management attention;



•

we may not cost-effectively and rapidly incorporate the technologies we acquire;



•

we may not be able to recognize the cost savings or other financial benefits we anticipated;



•

we may not be able to retain the existing customers of newly acquired operations;



•

our corporate culture may clash with that of the acquired businesses; and



•

we may incur unknown liabilities associated with acquired businesses



•

our increasing international presence resulting from acquisitions increases our exposure to foreign political, currency, and tax risks.

        We face risks from equity investments in privately held companies, such as:

•

we may not realize the expected benefits associated with the investment;



•

we may need to provide additional funding to support the privately held company; or



•

if their value decreases, we may realize losses on our holdings.

        We may not successfully address these risks or any other problems that arise in connection with future acquisitions or equity investments in privately held companies.

        We will continue to evaluate strategic opportunities available to us and we may pursue product, technology or business acquisitions or investments in strategic partners. In addition, in connection with any future acquisitions, we may issue equity securities that could dilute the percentage ownership of our existing stockholders, we may incur additional debt and we may be required to amortize expenses related to other intangible assets or record impairment of goodwill that may negatively affect our results of operations.

If we do not hire and retain key employees, our business will suffer.

        Our future success depends in large part on the continued service of our key technical, marketing and management personnel. We also depend on our ability to continue to identify, attract and retain qualified technical employees, particularly highly skilled design, process and test engineers involved in the manufacture and development of our products and processes. We must also recruit and train employees to manufacture our products without a substantial reduction in manufacturing yields. There are many other semiconductor companies located in the communities near our facilities and it may become difficult for us to attract and retain those employees. The competition for key employees is intense, and the loss of key employees could negatively affect us.

Our business may be harmed if we fail to protect our proprietary technology.

        We rely on a combination of patents, trademarks, copyrights, trade secret laws, confidentiality procedures and licensing arrangements to protect our intellectual property rights. We currently have patents granted and pending in the United States and elsewhere and intend to seek further international and United States patents on our technology. We cannot be certain that patents will be issued from any of our pending applications or that patents will be issued in all countries where our products can be sold or that any claims allowed from pending applications or will be of sufficient scope or strength to provide meaningful protection or any commercial advantage. Our competitors may also be able to design around our patents. The laws of some countries in which our products are, or may be developed, manufactured or sold, may not protect our products or intellectual property rights to the same extent as do the laws of the

37

United States, increasing the possibility of piracy of our technology and products. Although we intend to vigorously defend our intellectual property rights, we may not be able to prevent misappropriation of our technology. Our competitors may also independently develop technologies that are substantially equivalent or superior to our technology.

Our ability to produce our products may suffer if someone claims we infringe on their intellectual property.

        The integrated circuit and SAW device industries are characterized by vigorous protection and pursuit of intellectual property rights or positions, which have resulted in significant and often protracted and expensive litigation. If it is necessary or desirable, we may seek licenses under such patents or other intellectual property rights. However, we cannot be certain that licenses will be offered or that we would find the terms of licenses that are offered acceptable or commercially reasonable. Our failure to obtain a license from a third party for technology used by us could cause us to incur substantial liabilities and to suspend the manufacture of products. Furthermore, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Litigation by or against us could result in significant expense and divert the efforts of our technical personnel and management, whether or not the litigation results in a favorable determination. In the event of an adverse result in any litigation, we could be required to:

•

pay substantial damages;



•

indemnify our customers;



•

stop the manufacture, use and sale of the infringing products;



•

expend significant resources to develop non-infringing technology;



•

discontinue the use of certain processes; or



•

obtain licenses to the technology.

        We may be unsuccessful in developing non-infringing products or negotiating licenses upon reasonable terms, or at all. These problems might not be resolved in time to avoid harming our results of operations. If any third party makes a successful claim against our customers or us and a license is not made available to us on commercially reasonable terms, our business could be harmed.

Our business may suffer due to risks associated with international sales.

        Our sales outside of the United States were 61% and 56% of revenues for the three and nine months ended September 30, 2002, respectively, and 44% of revenues in 2001. We face inherent risks from these sales, including:

•

imposition of government controls;



•

currency exchange fluctuations;



•

longer payment cycles and difficulties related to the collection of receivables from international customers;



•

reduced protection for intellectual property rights in some countries;



•

unfavorable tax consequences;



•

difficulty obtaining distribution and support;



•

political instability; and



•

tariffs and other trade barriers.

38

        In addition, due to the technological advantages provided by GaAs integrated circuits in many military applications, the Office of Export Administration of the U.S. Department of Commerce must license all of our sales outside of North America. We are also required to obtain licenses from that agency for sales of our SAW products to customers in certain countries. If we fail to obtain these licenses or experience delays in obtaining these licenses in the future, our results of operations could be harmed. Also, because all of our foreign sales are denominated in U.S. dollars, increases in the value of the dollar would increase the price in local currencies of our products and make our products less price competitive.

We may be subject to a securities class action suit if our stock price falls.

        Following periods of volatility in the market price of a company's stock, some stockholders may file securities class action litigation. For example, in 1994, a stockholder class action lawsuit was filed against us, our underwriters and some of our officers, directors and investors, which alleged that we, our underwriters and certain of our officers, directors and investors intentionally misled the investing public regarding our financial prospects. We settled the action and recorded a special charge of $1.4 million associated with the settlement of this lawsuit and related legal expenses, net of accruals, in 1998. Any future securities class action litigation could be expensive and divert our management's attention and harm our business, regardless of its merits.

Our stock will likely be subject to substantial price and volume fluctuations due to a number of factors, many of which are beyond our control and may prevent our stockholders from reselling our common stock at a profit.

        The securities markets have experienced significant price and volume fluctuations and the market prices of the securities of semiconductor companies have been especially volatile. The market price of our common stock may experience significant fluctuations in the future. For example, our common stock price has fluctuated from a high of approximately $21.00 to a low of approximately $3.50 during the 52 weeks ended September 30, 2002. This market volatility, as well as general economic, market or political conditions could reduce the market price of our common stock in spite of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors, and in response, the market price of our common stock could decrease significantly.

Our certificate of incorporation and bylaws include anti-takeover provisions, which may deter or prevent a takeover attempt.

        Some provisions of our certificate of incorporation and bylaws and provisions of Delaware law may deter or prevent a takeover attempt, including a takeover that might result in a premium over the market price for our common stock. These provisions include:

        Cumulative voting.    Our stockholders are entitled to cumulate their votes for directors. This may limit the ability of the stockholders to remove a director other than for cause.

        Stockholder proposals and nominations.    Our stockholders must give advance notice, generally 120 days prior to the relevant meeting, to nominate a candidate for director or present a proposal to our stockholders at a meeting. These notice requirements could inhibit a takeover by delaying stockholder action.

        Stockholder rights plan.    We may trigger our stockholder rights plan in the event our board of directors does not agree to an acquisition proposal. The rights plan may make it more difficult and costly to acquire our company.

        Preferred stock.    Our certificate of incorporation authorizes our board of directors to issue up to five million shares of preferred stock and to determine what rights, preferences and privileges such shares have. No action by our stockholders is necessary before our board of directors can issue the preferred

39

stock. Our board of directors could use the preferred stock to make it more difficult and costly to acquire our company.

        Delaware anti-takeover statute.    The Delaware anti-takeover law restricts business combinations with some stockholders once the stockholder acquires 15% or more of our common stock. The Delaware statute makes it harder for our company to be acquired without the consent of our board of directors and management.

ITEM 3: QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT
MARKET AND INTEREST RATE RISK

        We are exposed to minimal market risks. We manage the sensitivity of our results of operations to these risks by maintaining an investment policy which allows investments in only highly-rated securities. Our investments, both restricted and unrestricted, are classified as available-for-sale securities and are comprised of highly-rated, short and medium-term investments, such as U.S. government agencies, corporate debt securities and other such low risk investments. Although we manage investments under an investment policy, economic, market and other events may occur to the companies and instruments in which we invest, which we cannot control. We do not hold or issue derivatives, derivative commodity instruments or other financial instruments for trading purposes. We are exposed to currency exchange fluctuations, as we sell our products internationally and have an operation in Costa Rica, are starting up a small operation in China, and have design centers in various other countries. We manage the sensitivity of our international sales, purchases of raw materials and equipment and our Costa Rican operation by denominating most transactions in U.S. dollars. We have engaged in limited foreign currency hedging transactions, principally to lock in the cost of purchase commitments that are not denominated in U.S. dollars.

        Our convertible subordinated notes due 2007 have a fixed interest rate of 4%. Consequently, we do not have significant cash flow exposure on our long-term debt. However, the fair value of the convertible subordinated notes is subject to significant fluctuations due to their convertibility into shares of our stock and other market conditions.

        We are exposed to interest rate risk if we use additional financing to fund capital expenditures. The interest rate that we may be able to obtain on financings will depend on market conditions at that time and may differ from the rates we have secured in the past.

ITEM 4: CONTROLS AND PROCEDURES

        (a)  Evaluation of disclosure controls and procedures.    Based on their evaluation as of a date within 90 days of the filing date of this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer have concluded that our company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the "Exchange Act")) are effective to ensure that information required to be disclosed by our company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

        (b)  Changes in internal controls.    There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

40

PART II—OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

        On October 3, 2002, a lawsuit was filed against us in the United States District Court for the Eastern District of Virginia. The suit alleges that we infringed upon certain patents held by Fujitsu Media Devices Limited. Although we believe the suit is without merit and intend to vigorously defend ourselves against the charges, we cannot be certain that we will be successful. Moreover, this litigation may require us to spend a substantial amount of time and money and could distract management from our day to day operations.

        In addition, from time to time we are involved in judicial and administrative proceedings incidental to our business. Although occasional adverse decisions (or settlements) may occur, we believe that the final disposition of such matters will not have a material adverse effect on our financial position or results of operations.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(a)

Exhibits

(b)

Reports on Form 8-K

We filed a Report on Form 8-K (File No. 000-22660) with the Securities and Exchange Commission on July 15, 2002 to disclose the purchase price and other terms of our agreement to acquire Infineon's gallium arsenide semiconductor business.

We filed a Report on Form 8-K (File No. 000-22660) with the Securities and Exchange Commission on August 29, 2002 to announce our intended reduction in force and its expected impact on our operating results for the three months ending September 30, 2002.

We filed a Report on Form 8-K/A (File No. 000-22660) with the Securities and Exchange Commission on September 13, 2002 to amend the Report on Form 8-K filed on July 15, 2002. The amendment was filed to disclose the audited financial statements of Infineon's gallium arsenide semiconductor business which we purchased.

41

SIGNATURES

        Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

42

I, Ralph Quinsey, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of TriQuint Semiconductor, Inc.;

2.

Based on my knowledge, this quarterly 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 quarterly report;

3.

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

4.

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

a)

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

b)

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

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

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

a)

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

b)

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

6.

The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

43

I, Raymond A. Link, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of TriQuint Semiconductor, Inc.;

2.

Based on my knowledge, this quarterly 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 quarterly report;

3.

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

4.

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

a)

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

b)

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

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

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

a)

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

b)

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

6.

The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

44

QuickLinks