RF Micro Devices, Inc., has established an assembly facility at its Beijing, China, location to provide internal module packaging capabilities. The new facility is expected to help streamline RFMD's manufacturing supply chain and contribute directly to the company's ongoing gross margin improvement plan.

Prior initiatives to improve profitability include the recent conversion from four-inch to six-inch GaAs wafers, ongoing test yield improvements, higher levels of integration and its strategic relationship with Jazz Semiconductor. Now, with the new assembly capabilities, RF MD expects to lower its overall manufacturing cost structure, provide for guaranteed assembly capacity and enable cycle time reductions. Cycle time reductions will be driven by both reduced time in transit to third-party suppliers as well as enhanced proximity to handset production, which is increasingly located in Asia.

Additionally, by housing its new assembly operations in its existing Beijing facility, RFMD significantly strengthens its position as a one-stop shop for semiconductor assembly, test and tape and reel.

The new assembly operations are expected to become fully operational in the December 2004 quarter. RFMD forecasts the assembly operations will become accretive to earnings in calendar 2005. The new assembly facility will supplement RFMD's existing assembly capacity, which it currently sources from the world's leading assembly houses.

GC Lee, divisional vice president of Asia operations residing in RF Micro Devices' Beijing facility, said, "The Asia-Pacific region is quickly becoming a central hub for handset design and manufacturing, and we are pleased to expand our Beijing test and tape-and-reel facility to include module packaging assembly operations. This new operation will help streamline and simplify the supply chain and reduce total manufacturing costs, while enabling us to provide improved supply chain management and accelerate time to market to the many handset manufacturers quickly migrating their handset production to this high-growth region."

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