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TriQuint Semiconductor (NASDAQ:TQNT) recently released its Q4 results which topped analysts' estimates. In spite of a good performance, the stock took a beating on account of weak forecast for the upcoming quarter. CEO Mark Quinsey stated that they are expecting lower demand from a major customer, most probably Apple (NASDAQ:AAPL), in Q1 due to short-term inventory corrections. This was cited as the main reason behind the decline.

Apart from this, TriQuint has a very bullish look for the rest of the year, making it a worthy investment. It is in a good position to profit from Apple's new devices this year and the deployment of LTE in China.

Moreover, TriQuint out-performed analysts' expectations and came out with good results for the previous quarter. Its revenue for the quarter was $267.7 million and gross profit was up 16%, both exceeding the prior guidance. Total revenue grew 15% as compared to Q4 last year. Talking about the entire year, revenue rose 8% to $892.9 million, and this growth trend is expected to continue this year also.

LTE growth

TriQuint added 190 products to its product mix last year, which helped it grow considerably. The company is decreasing its revenue from low-margin products while investing in high-value products like discrete filters, primarily BAW and TC-SAW, along with MNPA and integrated PA duplexer modules. These products have been developed to meet the growing demand for LTE devices, so it is a big market that TriQuint is targeting. The company has also forayed into defense products and this assisted revenue growth, as sales from the segment were up 50% in 2013 as compared to last year.

The firm is strategically managing its expenses by decreasing its capacity according to the market's requirements by reducing unused capacity to save costs. In addition, the chipmaker improved its gross margin by 550 basis points. This resulted in a strong quarterly performance.

Also, TriQuint has got strong relationships with equipment suppliers like Huawei, ZTE (OTCPK:ZTCOF), Alcatel (NYSE:ALU), etc, which should keep the orders flowing in as these are involved in China Mobile's (NYSE:CHL) LTE roll out. China Mobile is looking to build 500,000 base stations this year, covering close to 350 cities. As a result, China Mobile is expected to incur record capital expenditure, benefiting equipment makers. Since TriQuint supplies base station products as well, and it is a supplier to the above-mentioned equipment makers, it is in a good position to benefit from the LTE deployment in China.

Moreover, with demand for premium filter products such as BAW and TC-SAW on the rise, the future seems promising for TriQuint.

Apple Will Drive Growth

There is another reason for the chipmaker to be positive about. Foxconn (OTC:FXCOF), Apple's contractor, accounts for 44% of TriQuint's revenue. After the collaboration of Apple with China Mobile, Apple is all set to make merry in the Chinese smartphone market.

According to analysts, Apple could sell 20 million more units this year due to its collaboration with China Mobile. Also, Apple is planning to launch devices with bigger screens as it is targeting markets where larger screen sizes are in vogue. The boost in sale of Apple's devices due to the China Mobile deal and launch of new products will in turn increase the sales of TriQuint as it is a key Apple supplier.

Apple is aggressively looking to improve its sales and CEO Tim Cook has announced that 50 more carriers will get the iPhone in the current quarter, globally, according to the Wall Street Journal. Late last year, in his year-end memo to employees, Tim Cook had stated that the company has big plans that customers are going to love, and the latest rumors suggest that Apple is preparing the iPhone 6 with a 4.7-inch screen this year.

In addition, smartphones outsold feature phones for the first time in 2013. However, feature phones still accounted for 46.5% of the global handset shipments. This shows that the smartphone market has a lot of room to grow and Apple is making the right moves to benefit from this opportunity and TriQuint is well positioned to benefit from those moves.

Yet another reason

TriQuint is merging with fellow radio frequency company RF Micro Devices (NASDAQ:RFMD). In a merger of the equals, TriQuint shareholders will receive 1.675 shares of the new entity and RFMD shareholders will receive one share for each TriQuint or RFMD share held. The combined entity will result in cost synergies of $150 million, so it can be expected that TriQuint's margins will increase further in the future. Also, since RF Micro also enjoys solid prospects, as it is also an Apple supplier and is looking to benefit from the LTE rollout, this is a win-win deal for TriQuint.

Wrapping Up

Overall, TriQuint is performing well. However, as already mentioned, the first-quarter results have to be watched out on account of lower demand from one of its major customers. But this should not have any long-term impact as the company has a lot of potential. The company is also looking forward to gain from its improved product mix that should result in better margins. The launch of Apple's new devices is another area where the company is betting on, while the roll out of LTE in China is another encouraging driver. Keeping all these in mind, TriQuint should continue to perform well this year after its solid appreciation in 2013.

Source: 3 Solid Reasons Why TriQuint Is A Terrific Buy