Agere Systems and RF Micro Devices Inc. announced that they have signed definitive agreements to form a strategic alliance to develop, design and manufacture high-performance chips for next-generation, data-capable digital cellular phones and other communications products.

Under one part of the agreement, RF Micro Devices will invest approximately $58 million over two years to upgrade manufacturing clean room space and purchase semiconductor manufacturing equipment, which will be deployed within Agere's Orlando, Fla., manufacturing facility. RF Micro Devices anticipates no significant impact on fiscal year 2002 earnings, and capital expenditures related to the alliance have already been included in previous guidance for fiscal year 2002. Production from the purchased equipment will be allocated first to RF Micro Devices and then to Agere, thereby providing silicon capacity to RF Micro Devices while giving both companies the benefits of combined operations and increased manufacturing volumes. RF Micro Devices plans to deploy silicon manufacturing engineers in Orlando, Fla., as part of this alliance.

Agere Systems and RF Micro Devices will work together on a class of chips known as "radio frequency," or RF, which amplify and process signals transmitted by wireless devices. These RF chips will be based primarily on an emerging semiconductor materials technology called silicon germanium, which has excellent performance characteristics for certain wireless applications and can be economically produced using widely available silicon integrated circuit (IC) processing equipment and techniques. The alliance will also encompass Agere's other silicon processes.

The two companies also intend to create and staff an RF center of excellence to jointly advance RF chip process technology and design methodology. By combining Agere's silicon germanium process technology and wireless systems solutions with RF Micro Devices' expertise in the design and manufacture of highly integrated RF chips, the companies expect to be able to offer comprehensive solutions for multiple wireless technologies such as digital cellular phones, wireless local area networks, and Bluetooth short-range wireless connectivity.