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On Jan 17, 2014, we have reaffirmed our long-term Neutral recommendation on TriQuint Semiconductor, Inc. (TQNT - Analyst Report).

TriQuint is one of the leading players in the handset market, and new users and applications are further creating a lucrative growth opportunity for it. TriQuint has restructured its factories and also aligned its mobile product strategy around premium filters, high-efficiency amplifiers and densely integrated solutions. However, increased competitive pressure is likely to impact its long-term profitability to some extent and forces us to be on the sidelines.

Why Neutral?

TriQuint is an original equipment manufacturer (OEM) of semiconductor communication integrated circuits (ICs). The company’s wireless handset segment contains a broad product offering of  radio frequency (RF) devices used in the front-end portion of wireless handsets, such as receivers, switches, power amplifiers and  surface acoustic wave (SAW) filters.

The RF industry is currently faced with rapidly rising demand with 3G content expansion, healthy smartphone unit growth and a rebound in infrastructure market. RF content is also increasing with new standards that provide greater bandwidth, higher data rates and a better quality of service.

Management believes that the overall market will grow significantly over the next several years as 3G penetration levels increase and multiple bands of 4G drive a new wave of revenue opportunities for both power amplifiers and high-performance duplexers.

However, increased competition is exerting pricing pressure on margins, which remain a matter of concern as the company plans to expand the existing manufacturing capacity to support higher revenue levels. This is likely to affect its bottom-line growth in the short term.

Other Stocks to Consider

TriQuint currently has a Zacks Rank #4 (Sell). Other better-ranked stocks in the industry include Broadcom Corp. (BRCM - Analyst Report), Marvell Technology Group Ltd  (MRVL - Snapshot Report) carrying a Zacks Rank #1 (Strong Buy) and Amtech Systems Inc. (ASYS - Snapshot Report),  carrying a Zacks Rank #2 (Buy).

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