SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark one)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003.

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

Commission File No. 0-25662

ANADIGICS, Inc.
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(Exact name of registrant as specified in its charter)

Delaware 22-2582106
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

141 Mt. Bethel Road
Warren, New Jersey 07059
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(Address of principal executive offices) (Zip Code)

(908) 668-5000
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(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value

The above securities are registered on the NASDAQ National Market

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 /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes /X/ No / /

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of June 28, 2003 was approximately $98 million, based upon the
closing sales price of the Registrant's common stock as quoted on the NASDAQ
National Market on such date.

The number of shares outstanding of the Registrant's common stock as of March 8,
2004 was 31,575,258.

Documents incorporated by reference: Definitive proxy statement for the
Registrant's 2004 annual meeting of shareholders (Part III).

TABLE OF CONTENTS

PART I

Item 1: Business 3

Item 2: Properties 18

Item 3: Legal Proceedings 18

Item 4: Submission of Matters to a Vote of Security Holders 18

PART II

Item 5: Market for Registrant's Common Equity and Related Stockholder Matters 18

Item 6: Selected Financial Data 19

Item 7: Management's Discussion and Analysis of Financial Condition and
Results of Operations 19

Item 7A: Quantitative and Qualitative Disclosures About Market Risk 25

Item 8: Financial Statements and Supplementary Data 27

Item 9: Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 44

Item 9A: Controls and Procedures 44

PART III

Item 10: Directors and Executive Officers of the Registrant 45

Item 11: Executive Compensation 45
Item 12: Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters 45

Item 13: Certain Relationships and Related Transactions 45

Item 14: Principal Accountant Fees and Services 45

PART IV

Item 15: Exhibits, Financial Statement Schedules and Reports on Form 8-K 45

PART 1

ITEM 1. BUSINESS.

Background

ANADIGICS, Inc. (the "Company") was incorporated in Delaware in 1984.
Our corporate headquarters are located at 141 Mt. Bethel Road, Warren, New
Jersey 07059, and our telephone number at that address is 908-668-5000.

ANADIGICS, Inc. designs and manufactures radio frequency integrated
circuit (RFIC) solutions for the wireless and broadband communications markets.
Our high frequency RFIC products enable manufacturers of communications
equipment to enhance overall system performance and reduce manufacturing cost
and time to market. Our products are primarily included in cellular and PCS
(personal communications service) phones and base stations, wireless local area
networks (WLANs), and cable television infrastructure and set-top boxes. We
offer a broad array of products including amplifiers, switches, tuner integrated
circuits, photodiodes and integrated RF modules. These integrated circuits
perform the transmit and receive functions that are critical to the performance
of wireless and broadband communication systems.

In the wireless market, we focus on RFIC solutions for wireless
communication handset applications operating over various air interface
standards, including CDMA, GSM, WCDMA, GPRS and EDGE (Code Division Multiple
Access, Global System for Mobile communication, Wideband CDMA, General Packet
Radio Service and Enhanced Data rate for GSM Evolution). In the broadband
markets, our focus is on applications for WLAN systems, cable television (CATV)
subscriber products, CATV infrastructure systems, and fiber optic communications
systems. We believe we have a competitive advantage in the markets we serve due
to our design, development and applications expertise, our superior compound
semiconductor technologies, our high-volume, low-cost state-of-the-art
manufacturing processes and expertise, and our strong working relationships with
leading original equipment manufacturers (OEMs), original design manufacturers
(ODMs) and reference design houses (collectively our "market customers").

We design, develop and manufacture RFICs primarily using Gallium
Arsenide (GaAs) compound semiconductor substrates with various process
technologies, Metal Semiconductor Field Effect Transistors (MESFET),
Pseudomorphic High Electron Mobility Transistors (pHEMT), and Heterojunction
Bipolar Transistors (HBT).

The quality and reliability of our products results from a
comprehensive design, characterization, qualification, and robust manufacturing
process. In addition to the design team located at our corporate headquarters in
Warren, New Jersey, we operate development centers in Richardson, Texas;
Atlanta, Georgia; San Jose, California; Aalborg, Denmark; Taipei, Taiwan and
Seoul, Korea.

Our design and applications engineering staff is strategically active
and engaged with customers during all phases of design and production. This
strategy helps our customers streamline their design process and time to market,
achieve cost-effective and manufacturable designs, and ensure a smooth
transition into high-volume production.

We have two company-owned fabrication facilities ("fabs"): a
state-of-the-art six-inch diameter analog GaAs fab located at our corporate
headquarters in Warren, New Jersey, and a two-inch diameter indium phosphide
(InP) fab located in Camarillo, California. Our six-inch wafer fab allows us to
produce, at a small incremental cost, more than twice the RF die per wafer
compared with the current industry norm four-inch wafer. We believe our strong
manufacturing fabrication capability, combined with logistics expertise and
innovative product designs, allow us to quickly develop and manufacture products
in line with market and customer requirements.

Developments

In March 2003, we acquired the WLAN power amplifier product line from
RF Solutions, headquartered in Atlanta, Georgia as an entrance into the
high-growth and emerging WLAN market. In October 2003, we acquired the Tavanza
CDMA power amplifier business located in San Jose, California from Celeritek,
increasing our customer expansion and product design efforts within the CDMA
handset market.

Industry Background

Over the last decade, there have been remarkable developments in
electronic communications, as evidenced by the emergence of wireless
communications, Internet services and digital television services. Radio
frequency/microwave and integrated circuit technologies have enabled increases
in communications capacity and significant reductions in systems costs. The
wireless and broadband communications markets are beneficiaries of current
technological trends, including higher frequencies, digital modulation and
higher levels of electronic integration.

Wireless communications are growing rapidly and replacing landline
telephone services in mature markets and are being built in lieu of landline
services in other emerging markets. Worldwide unit sales of cellular/PCS
wireless handsets were approximately 500 million in 2003.

Broadband markets are also benefiting from technological changes. Cable
television systems are moving from one-way analog signal distribution systems to
interactive digital systems offering increased and new video content, Internet
connection services and telephony. We estimate that approximately 10 million
digital cable television (CATV) set-top boxes were produced in 2003. The
continued build out of the cable infrastructure network required a production of
approximately 2.5 million line extenders, systems amplifiers and fiber nodes.
Additionally, WLANs continue to be a bright spot in the worldwide chip
marketplace. The demand for increased mobility, seamless communications,
internet browsing, and streaming video/audio is driving the need for increased
throughput and gaining even greater momentum in WLANs in the enterprise and home
markets. New standards, such as 802.11g, 802.11 b/g as well as dual-band combo
products, are accelerating the adoption and expanding the use of WLANs globally.
We estimate that approximately 40 million WLAN chipsets, primarily wireless
notebooks and access points, were shipped in 2003.

Activity in broadband fiber optic networks is being driven by demand
from Internet and corporate users for high-speed data transfer capability and
the resultant demand for Internet, Local Area Networks (LAN), Metropolitan Area
Networks (MAN), and Storage Area Networks (SAN).

Given these developments, our market customers are facing the following
challenges and need the following solutions from their suppliers:

o Shorter cycle times. In both the wireless and broadband
communications markets, manufacturers must bring new
subscriber products to market quickly in order to maintain
their market position. The development of multi-chip modules,
using advanced packaging techniques, and the development of
relationships with providers of RF reference designs is
imperative;

o Need for low-cost products. Wireless handsets and cable
set-top boxes are increasingly becoming consumer-driven,
commodity products. Component suppliers must be cost effective
in order for their market customers to stay competitive; and

o Stronger supplier relationships. The digital, wireless, cable
and fiber optic industries are standards driven. Companies in
the communications industry must work very closely with their
suppliers in order to develop new products. Companies
therefore limit themselves to a small number of suppliers in
order to keep their competitive advantages.

The GaAs Advantage

Through our research and development efforts, we have developed
expertise in producing cost-effective GaAs-based RFICs for high-volume
commercial applications. These circuits offer the performance attributes
required for radio frequency/microwave applications that are not easily
obtainable with silicon-based integrated circuits. GaAs transistors can operate
at frequencies greater than silicon transistors, and therefore can handle the
requirements of radio frequency/microwave applications. GaAs RFICs have a lower
noise figure than silicon-based integrated circuits, providing increased
sensitivity, less distortion and interference and better dynamic range, thereby
enabling systems to handle a wide range of signal strengths. GaAs is a
semi-insulating material that facilitates integration of the passive components
required in radio frequency/microwave applications. Finally, GaAs RFICs used in
transmitter applications are more power-efficient than silicon-based circuits,
allowing for longer battery life or use of smaller batteries.

The InGaP Advantage

In the industry, there are two predominant commercially viable types of
HBT process technologies. Earlier generations use either beryllium or carbon
doping in the base layer and Aluminum Gallium Arsenide (AlGaAs) in the emitter
layer. The state-of-the-art for HBT uses carbon doping in the base layer and
Indium Gallium Phosphide (InGaP) in the emitter layer.

There are several significant advantages to InGaP. One advantage is
stability over a range of temperatures. An InGaP HBT device will experience only
an approximate 10% drop in gain over a range of 0 to 100 degrees Celsius, while
the gain loss in an AlGaAs device approximates 50%. An InGaP device has much
higher reliability than an AlGaAs device, giving the option to run the InGaP
device at higher temperatures. These advantages lead to smaller chip sizes and
thus lower cost. Finally, InGaP allows for more robust manufacturing because the
material has the advantage of a selective etch process not possible with AlGaAs.

The InGaP advantages of performance, reliability and manufacturability
led to our decision to develop the world's first commercially viable 6-inch
InGaP HBT process, which was completed in 2000 and complements our GaAs MESFET
technology.

ANADIGICS' Strategy

Our objective is to be a leading supplier of RFICs for the wireless and
broadband communications markets. The cornerstone of our strategy is to
capitalize on opportunities in the wireless and broadband communications markets
by addressing applications that leverage our RFIC design and manufacturing
expertise and longstanding relationships with leading companies in these
markets. The key elements of this strategy include:

Be First-to-Market with Proprietary Value-Added Products

We intend to continue to design timely, cost-effective RFIC solutions
for our target markets. In developing prototypes, the combination of an
experienced engineering staff, a "quick-turn" wafer fabrication facility, the
flexibility of using both in-house and contracted product assembly, and a world
class product testing process generally allow us to develop parts and be ready
for customer evaluation in less than one month. This design efficiency
contributes to customer satisfaction and allows us to improve product designs
rapidly for manufacturing efficiency. We will continue to apply our
"best-of-breed" product differentiation strategy, which focuses on developing
high-performance and integrated products. We believe that this strategy has
expanded the company's potential available market in 2003 from $200 million to
$1.1 billion covering wireless RFICs shipped into the mobile handset market,
wireless LAN (WLAN) market, and the wireless infrastructure market.

Capitalize on World Class Manufacturing Capabilities, while Reducing
Costs

We will continue to focus on improving manufacturing performance and
customer service, while reducing costs. We believe we can effectively control
the critical phases of the production process in order to realize high
manufacturing yields, product quality and customer satisfaction. Our six-inch
wafer fab provides increased manufacturing capacities and shorter cycle times at
a lower incremental cost than four-inch wafer fabs. We believe our strong
working relationship with overseas manufacturing subcontractors will allow us to
continue to deliver low-cost products to our customers.

Forge Strong Customer Relationships

We have developed strong working relationships with our customers, many
of whom are leading manufacturers in their markets. Because our target markets
are standards-driven, customer relationships are important. These relationships
provide us with product development opportunities and the ability to anticipate
future market needs. The rapid feedback received from our customers during the
product design phase increases the likelihood that our designs will meet our
customers' cost and performance requirements. We believe furthering our
relationships with reference design companies will continue to contribute market
share gains within each of the wireless and broadband communications markets.

Pursue Strategic Alliances and Investments

We will continue to pursue strategic alliances and investments to
expand and improve upon our technologies, industry expertise, products and
market share. We expect that these alliances and investments will be
complementary to current activities and will enhance our ability to work with
leading companies to develop next generation solutions. We believe the
acquisitions completed during 2003 related to the purchase of the WLAN Power
Amplifier product line from RF Solutions and the TAVANZA CDMA Power Amplifier
business from Celeritek have strategically positioned us to capitalize on the
large and growing markets in wireless and WLAN. As new strategic opportunities
to increase shareholder value arise, we will continue to monitor and selectively
pursue them.

Target Markets and Products

The Company classifies its revenues based upon the end application of
the product in which its integrated circuits are used. For the years ended
December 31, 2001, 2002 and 2003, wireless applications accounted for
approximately 38%, 54% and 55% of total net sales, while broadband applications
accounted for approximately 62%, 46% and 45% of total net sales.

Wireless Communications

The wireless communications market is a growing, dynamic market as a
result of increasing demand for:

o Portable voice and data communications;

o Smaller, lighter handsets offering increased functionality;

o Reliable access and voice quality comparable to land lines;

o Longer talk-time and standby time; and

o Wireless access to the Internet.

Our RFIC products are used in handsets where small size, multi-band
operation and low power consumption are key features. Currently in the United
States, the primary digital air interface communications standard is Code
Division Multiple Access (CDMA). Another standard, Global System for Mobile
communication (GSM), is the most widely deployed digital standard on a worldwide
basis, with total subscribers expected to exceed one billion in 2004. We
currently offer and continue to bring to market an array of products for both
the handset and infrastructure markets for these major air interface standards.

We have developed multiband/multimode InGaP HBT power amplifier (PA)
modules for the CDMA and GSM standards. InGaP HBT module technology offers high
efficiency, low power consumption and stability over a range of temperatures, as
well as a lower total solution cost. This combination allows our customers to
build the transmitter section of the wireless handset more efficiently by
reducing design complexity and component counts.

Our principal customers in the wireless market include Kyocera and LG
Electronics. Of our total net sales in the year ended December 31, 2003, Kyocera
accounted for 28% and LG Electronics accounted for 14%, while no other customer
in this market accounted for more than 10% of total net sales during 2003.

The following table sets forth information regarding our principal
products in the wireless communications market:

Product Application

Handset Products

o Power Amplifier (PA) Used in RF transmit chain of wireless handset to
amplify signal to base station.

o Single-band PA module Encapsulates InGaP HBT PA die and certain passive
components in multi-layer laminate module. Used primarily
in CDMA handsets

o Quad-band PA module Encapsulates InGaP HBT PA die, CMOS bias control chip,
and certain passive components in multi-layer laminate
module. Used primarily in GSM handsets

o PowerPlexer (TM) Encapsulates two InGaP HBT PA die, CMOS, bias and power
control chip, antenna switch, coupler, harmonic filter
and passives in multi-layer laminate module. Used in GSM
handsets

o RF Switches Used in wireless handsets and other wireless
applications to switch between receive and transmit
modes and multiple frequency bands

Infrastructure Products

o Driver Amplifiers Used in cellular base stations in the transmit chain

o Gain Blocks Used in cellular base stations in the transmit chain

Broadband

Broadband encompasses our key markets in support of data and
telecommunications support systems and primarily covers cable television, WLAN
and fiber applications.

The trends that currently drive product development in the cable
television markets are:

o Shift to digital cable television with interactive services;

o Demand for high speed Internet access; and

o Emergence of cable telephony.

The convergence of these trends, enabled by digital transmission,
creates the need for innovative RFICs for cable television applications.

Cable television systems, which traditionally delivered one-way analog
television programming, limited to a few entertainment channels, are
increasingly used to deliver a wide array of interactive video and other
services, such as high speed Internet access and telephony. In order to support
these new applications, cable system operators must upgrade both the bandwidth
(i.e., capacity) and quality of the infrastructure and terminal equipment. The
new equipment must also be able to handle digital as well as analog modulated
signals.

Our cable products are used in CATV set-top boxes and infrastructure
applications. We produce tuner and reverse amplifier RFICs, as well as line
amplifiers and systems amplifiers for infrastructure applications. The tuner
RFICs are used in double conversion tuners to receive analog and digital signals
in the 50-860 megahertz frequency band. Reverse amplifier RFICs are used in
certain cable set-top boxes that require a reverse path for interactivity. These
tuner and reverse amplifier RFICs enable customers to accelerate and simplify
their designs, and reduce manufacturing complexity and costs.

We have also developed GaAs RFIC line amplifiers to be used in 50-860
megahertz cable television infrastructure equipment, such as line extenders,
distribution amplifiers and system amplifiers. Our product offerings in this
area include amplifier RFICs that operate at 24 volts.

Our principal customer in the cable and broadcast markets is Motorola,
Inc., which represented 14% of total net sales in 2003. No other customer in
this market accounted for more than 10% of our total net sales in 2003.

The following table sets forth information regarding our principal
products in the cable television market:

Product Application

Subscriber Products:

o Upconverters and downconverters Used in set-top box double conversion video and
data tuners

o Reverse amplifiers Used in set-top boxes and cable telephony to transmit signals from a
set-top box upstream to a cable company headend for interactive
applications

Infrastructure Products:

o Line amplifiers Used in cable television systems to distribute signals from cable
headends to subscribers

o Drop amplifiers Used in cable television systems to amplify signals at individual
subscriber homes

In March 2003, we acquired the WLAN power amplifier product line from
RF Solutions, headquartered in Atlanta, Georgia as an entrance into the growing
WLAN market. The WLAN market is being driven by:

o Demand for wireless data access and portability of wireless
access devices;

o Emergence of several wireless data networking mediums,
primarily via personal computers; and

o new market applications such as consumer electronics and
wireless voice over Internet protocol (VoIP).

Adoption of wireless data networking has been enabled by the
introduction of a family of industry standards for WLAN technology that have
substantially increased capacity and data rates. The introduction of the 802.11g
standard allows the existing 2.4 GHz spectrum to be operated more efficiently
with a substantial increase in data rates from the previous one or two megabits
per second (Mbps) now up to 54 Mbps. The introduction of the 802.11a standard
has enabled the use of the 5 GHz spectrum and substantially increased the
available channel capacity. The wireless networking market is further
transitioning from products that operate using a single standard to products
that support all of the standards using the 2.4 GHz and 5 GHz bands in a variety
of combinations. These 802.11a/g dual band products will support the continued
growth of the market while substantially diminishing or avoiding frequency
interference and network congestion.

The wireless capabilities of WLAN networking products are provided
primarily by a semiconductor chipset. A wireless chipset typically contains a
radio transceiver, a digital media access controller (MAC), baseband processor
and power amplifier to boost the transmit signal; improving range and data
throughput. Traditionally, a single power amplifier supported a chipset.
However, the market has begun seeking both dual band power amplifiers and power
amplifiers with higher levels of integration. This increased integration will
provide for smaller size, higher reliability and faster time to market for WLAN
systems.

No single customer in the WLAN market was responsible for more than 10%
of total net sales in 2003. The following table sets forth information regarding
our principal products in the WLAN market:

Product Application

Single band Products:

o 2.4 GHz power amplifiers Used in wireless network interface cards (NIC),
embedded PC notebook (mini-PCI) and access point
(AP) applications to boost the transmit signal for
increased range and data throughput.

o 5 GHz power amplifiers Used in wireless rich-media applications, such as
streaming audio/video, to boost the transmit
signal for increased range and data throughput.

o Dual band power amplifiers Used in wireless network systems that require
seamless transition between frequencies to mitigate
interference and congestion.

The fiber optic market is being driven by:

o Internet data traffic use;

o Implementation of corporate local area networks (LAN) and
storage area networks (SAN), which require high speed data
transfer capability;

o Upgrades of existing telecommunication and data communication
systems with fiber optic systems; and

o Expected build outs to Metropolitan Area Networks (MAN)

Fiber optic communication systems use low-loss fiber optic cable to
link central office switches with one another and to connect the central office
to the serving area. Most telecommunication networks today are based on
Synchronous Optical Network (SONET) (United States and Japan) or SDH (Europe)
standards, which require high sensitivity, high bandwidth, and wide dynamic
range receivers. Fiber optic data communications systems use either Gigabit
Ethernet or Fibre Channel standards to achieve high-speed data transfer. The
Gigabit Ethernet standard has emerged as the most widely used in LAN
environments, as it addresses the need for short distance, high speed transfers
of large volumes of information. The Fibre Channel and emerging 4x Fibre Channel
standards have become the most widely used in SAN environments.

The front end of most fiber optic receivers contains a photodetector
and a transimpedance amplifier (TIA), which are used in both fiber optic
telecommunications and data communications networks. Our GaAs TIAs for the
telecommunications networks are designed to meet the requirements of SONET/SDH
systems covering data speeds of OC-3 through OC-192, certain of which are for
use in Dense Wavelength Division Multiplexing (DWDM) systems. With respect to
telecommunications receivers and transceivers, we offer long wavelength (1300
nanometer) positive-intrinsic-negative photodiodes and transimpedance amplifiers
(PIN TIAs) for SONET and SDH applications.

For data communications receivers and transceivers, we sell short
wavelength (850 nanometer) monolithically-integrated metal-semiconductor-metal
photodiodes and transimpedance amplifiers (MSM-TIAs) and short wavelength PIN
TIAs for the Gigabit Ethernet and Fibre Channel standards.

The continued LAN/SAN growth is placing new demands on MANs to provide
expanded cost-effective capacity at 2.5 and 10 gigabits per second (Gb/s) to
meet the needs of dedicated high-speed Internet users and the requirements for
high-speed communication between private LANs and remote storage. We are
expanding our product portfolio to offer low power consumption 3.3 volt TIAs
addressing data rates from OC3 to OC48, 1, 2 and 4X Fibre Channel and Gigabit
Ethernet applications.

In April 2001, we acquired Telcom Devices Corp. ("Telcom"), an
optoelectronic semiconductor manufacturer of indium phosphide (InP) based "long
wavelength" (1310 and 1550 nanometers) emitter (light-emitting diode, or LED)
and detector (photodiode) products for the telecommunications and data
communications markets. Telcom division produces active components used
primarily for fiber optic applications in telecommunications systems, data
communications networks, CATV broadcast and reception, fiber optic test and
measurement equipment, and scientific, custom, and military markets.

No single customer in the fiber optics market was responsible for more
than 10% of total net sales in 2003. The following table sets forth information
regarding our principal products in the fiber optic market:

Product Application

Fiber Optic Products:

o Transimpedance amplifiers Used in the receivers or transceivers of a telecom
fiber optic link to amplify the signal received

o Limiting amplifiers Used in the receivers or transceivers of a telecom
fiber optic link to provide a voltage limited output

o Metal semiconductor metal Used in the transceiver of a datacom fiber optic
transimpedance amplifiers link to detect and amplify short wavelength optical
(MSM-TIA) signals

o PIN-TIA Used in the transceiver of a datacom fiber optic link
to detect and amplify long wavelength optical signals

o Photodiodes Long wavelength detectors for SONET/SDH transmitters
and receivers, CATV receivers and instrumentation

o Light-Emitting Diodes (LEDs) Long wavelength emitters

Marketing, Sales, Distribution and Customer Support

We primarily sell our products to our direct customers worldwide. We
have developed close working relationships with leading companies in the
broadband and wireless communications markets. Additionally, we selectively use
independent manufacturers' representatives and distributors to complement our
direct sales and customer support efforts. In 2003 we continued to evaluate,
upgrade and expand our sales representative organization. We believe this is
critical to our objective of expanding our customer base, especially as we
expand our product portfolio. In particular, we established a strategic presence
in both Taipei, Taiwan and Seoul, South Korea by opening field sales
applications support centers. These support centers position our resources in
close proximity to our existing and potential customers in these regions
allowing us to provide real-time service.

We believe that the technical nature of our products and markets
demands an extraordinary commitment to building and maintaining close
relationships with our customers. The sales and marketing staff, assisted by the
technical staff and senior management, visit prospective and existing customers
worldwide on a regular basis. Additionally, both field and factory sales
personnel communicate regularly with our customers. We believe that these
contacts are vital to the development of close, long-term working relationships
with our customers, and in obtaining regular forecasts, market updates and
information regarding technical and market trends.

Our design and applications engineering staff actively communicate with
customers during all phases of design and production. We provide our customers
with engineering data and up-to-date product application notes, and communicate
with our customers' engineers on a regular basis to assist in resolving
technical problems on and off site. In most cases the design and applications
engineers obtain prototypes from our customers in order to troubleshoot and
identify potential improvements to the design in parallel with our customers'
efforts. This strategy helps our customers speed up their design process,
achieve cost-effective and manufacturable designs, and ensure a smooth
transition into high-volume production.

We believe that reference-design manufacturers in the wireless and
broadband market will continue to play an ever-increasing role in the future of
these markets. Therefore, we believe it is essential that we maintain strong
relationships in partnering with these companies to penetrate market
opportunities in the U.S. market and abroad.

Our policy is to provide our customers with applications engineering
support at our customers' design locations and factories throughout the world,
generally within 48 hours of a customer request. Our sales are made pursuant to
customer purchase orders.

Manufacturing, Assembly and Testing

Manufacturing

We fabricate substantially all of our integrated circuits in our
six-inch diameter GaAs wafer fab in Warren, New Jersey and in our two-inch
diameter InP fab in Camarillo, California.

Our Warren facility has a 19,000 square foot fab, including 10,000
square feet of Class 100 "clean room" space. Based on physical floor space,
weekly production capacity at the Warren facility is approximately 1,600
equivalent six-inch MESFET wafers (adjusting for the additional mask layers, or
processing steps, inherent in HBT production). Based on equipment currently
installed, present weekly capacity is 800 equivalent six-inch MESFET wafers,
although this space can be equipped to expand capacity as market conditions
require. On the basis of equivalent four-inch MESFET wafers, which is the
industry norm, present weekly capacity is 1,800 wafers per week. See "Risk
Factors - We may face constraints on our manufacturing capacity which would
limit our ability to increase sales volumes."

Our InP fab in Camarillo is a 22,000 square foot facility with 2,000
and 6,000 square feet of fab and assembly clean room, respectively. Production
capacity is currently 50 InP wafers per week per shift.

Our six-inch diameter InGaP HBT process, including a backside VIA hole
process, was among the first in the industry and is the technology platform for
our newer-generation PA module wireless applications. The advantages of better
performance over a range of temperatures and higher reliability lead to smaller
chip sizes and thus lower cost. InGaP also allows for more robust manufacturing
because the material has the advantage of a selective etch process not possible
with AlGaAs.

Our wafer processing technologies have been developed for low cost,
high yield, rapid throughput and short cycle-time manufacturing. Our GaAs MESFET
process uses ion implant variations to optimize performance and yield, allowing
us to produce high-linearity, low-noise, receiver integrated circuits or
transmitter integrated circuits with high power and efficiency. MESFET is the
technology platform underlying the majority of our broadband products.

Our GaAs pHEMT manufacturing process achieves extremely high electron
mobility. Devices manufactured using this process have better sensitivity and
bandwidth than conventional MESFET devices, and offer better stability at higher
frequencies. The pHEMT process is an enabling technology for our wireless switch
products.

Our Warren manufacturing processes were first certified as ISO 9001
compliant in December 1993. Since that time, we have updated our compliance to
the ISO 9001:2000 upgrade of this standard.

Our manufacturing process technology includes our two-inch InP process
in Camarillo. InP applications for discrete active devices are widespread in
communications networking, making it the natural starting place for wholesale
integration of passive devices for a complete system on a chip. As a
semiconductor material, InP can provide all-in-one integrated functionality that
includes light generation, detection, amplification, high-speed modulation and
switching, as well as passive splitting, combining and routing. The same
material can be used to make high-speed modulators, switches, amplifiers and
detectors, or just passive waveguides for interconnecting these diverse devices.

Assembly

Fabricated GaAs wafers are shipped to contractors in Asia for packaging
into monolithic microwave integrated circuits (MMICs) or for assembly into
standard plastic lead frame-based packaging or modules.

The components within mobile phones have become increasingly
integrated, enabling the development of ever smaller, lighter, and more
efficient phones. However, integration in the RF subsystem at the IC level is
considerably more challenging, given that various components require different
manufacturing processes for optimal performance. Typical RF processes include
pHEMT, MESFET, HBT, and RF CMOS. The choice of process for various RFICs is
typically based on a trade-off between performance (often measured by efficiency
and linearity) and cost. In general, the process selection will depend on the
relative weight given to performance versus cost. In low-end phones, cost will
dominate, and less-efficient, less-costly components will be used. On the other
hand, in high-end phones, the emphasis will shift to better performance.

Since the processes cannot be easily or economically integrated onto a
single die, multi-chip modules that combine multiple die within a single package
have taken hold, enabling the selection of the optimal process technology for
each IC within the package, while providing enhanced integration at the system
level. These solutions generate significant size and weight reductions in
handset component circuitry, while simultaneously increasing the reliability of
the components.

A number of challenges, outlined below, are being overcome as we become
a fully integrated module manufacturer:

Design complexity: Within a cellphone, the RF section arguably
represents the greatest design challenge for engineers. Modules place
the burden of designing and optimizing RF front-end subsystems on RFIC
manufacturers. The suppliers must focus on providing the optimal IC
process (e.g., InGaP HBT for PAs) and then integrate the technology
into a well-designed module that also incorporates additional passive
and control circuitry. The quality of the RF module design ultimately
drives the device's performance and manufacturability.

Increased cost: Modules can be substantially more expensive to produce
than individual IC components. Modules often require extensive design
and engineering expertise, new production processes, and additional
assembly costs. In many cases, the necessary components (e.g.,
discretes and passives) must be purchased from outside vendors.
Consequently, the gross margin is generally lower for modules than for
discrete RF MMICs.

Manufacturing challenges: In addition to the increased costs of
designing modules, achieving sufficient yields on new products can be
problematic. Previously, RFIC companies had little or no experience in
manufacturing modules. As a result, our gross margins were under
pressure as we progressed on the learning curve. In order to attain
high "final test" yields, the challenge continues to be to achieve high
yields in the fab, in assembly, and in test.

It is clear that modules result in our customers getting their product
to market more rapidly at a lower overall end-product cost to our customers due
largely to the reduced parts count and reduction in engineering effort by our
customers. We believe we are well positioned to address the shift toward
multi-chip modules because we possess both extensive process breadth (a key
advantage, as modules typically incorporate numerous process technologies) and a
large portfolio of RF expertise (e.g., PAs, switches, transceivers, filters, and
discretes).

Final Test

After assembly, packaged integrated circuits are tested prior to
shipment to our customers. Increasingly, these test activities are being
performed by third party contractors in Asia.

Early in 2002, we announced an agreement with Universal
Communications, Inc. ("UCOMM") for the outsourcing of the majority of our
production RF testing operations. Under the agreement, the production RF testing
operation was transferred closer to our module assembly contractors in Asia,
which added considerable efficiencies to the device manufacturing process and
further reduced product cycle times and manufacturing costs.

In line with our procedure of 100% RF testing of all parts before
shipping, the majority of production testing is now performed by UCOMM. This
agreement supports our initiative to reduce manufacturing costs by lowering test
cost per unit.

See "Risk Factors - We depend on foreign semiconductor assembly
contractors and a loss of an assembly contractor could result in delays or
reductions in product shipment," "The manufacturing of our products could be
delayed as a result of the outsourcing of our test operations" and "We may face
constraints on our manufacturing capacity which would limit our ability to
increase sales volumes."

Raw Materials

GaAs wafers, InP wafers, HBT/pHEMT epitaxial wafers, passive
components, other raw materials, and equipment used in the production of our
integrated circuits are available from a limited number of sources. See "Risk
Factors - Sources for certain components, materials and equipment are limited
which could result in delays or reductions in product shipments."

Research and Development

We have made significant investments in our proprietary processes,
including product design, wafer fabrication and integrated circuit testing,
which we believe gives us a competitive advantage. Research and development
expenses were $37.8 million, $29.7 million, and $32.1 million in 2001, 2002, and
2003, respectively. Our research and development efforts in 2001 were primarily
focused on developing high yield, low cost, high volume production of InGaP HBT
integrated circuit products for the wireless and broadband communications
markets. In 2002, development activities focused on improving performance
relative to the size of our CDMA products and developing products to compete in
the GSM market. In 2003, our activities included the continued development and
expansion of products offered to the GSM and emerging WLAN markets.

As of December 31, 2003, we had approximately 146 engineers assigned
primarily to research and development.

Our wireless power amplifier capability has expanded from
plastic-packaged GaAs RF integrated circuit products to RF modules incorporating
multiple technologies. This capability is critical to encapsulating RF
intellectual property and know-how into a module that may be used to shrink the
time-to-market for cellular phone manufacturers. Our RF power amplifier modules
use a multi-layer laminate substrate to combine our proprietary InGaP HBT power
amplifier integrated circuits with custom-designed CMOS controllers and passive
components.

Module integration capability required extending our design tools in
several dimensions. Electromagnetic simulation of laminate substrates to design
embedded passive components and model parasitic effects were added to our RF
design tool set. In addition, the ability to simulate at the module level was
greatly enhanced through our partnership with a leading manufacturer of
electronic design automation tools.

Additionally, several silicon CMOS components were developed to support
our module efforts. We currently do not intend to manufacture this technology
in-house, as we believe there will be adequate external foundry capacity
available. See "Risk Factors - Sources for certain components, materials and
equipment are limited, which could result in delays or reductions in product
shipments."

Customers

We receive most of our revenues from a few significant customers. See
"Risk Factors - We depend on a small number of customers; a loss of or a
decrease in purchases and/or change in purchasing patterns by one of these
customers would materially and adversely affect our revenues and our ability to
forecast revenue."

Employees

As of December 31, 2003, we had 480 employees, including five employees
in Denmark who were members of the Danish Engineering Union. We believe our
labor relations to be good and we have never experienced a work stoppage. During
the year our workforce increased by 26 employees, consisting primarily of
engineers working in our two acquired businesses.

Competition

Competition in all of the markets for our current products is intense;
competition is on the basis of performance, price and delivery. Our competitors
in the wireless market are suppliers of both discrete devices and integrated
circuits, and include Hitachi, Ltd., RF Micro Devices, Inc., Skyworks Solutions,
Inc. and certain of our customers who design and fabricate their own in-house
solutions.

Within the Broadband markets, which include the cable television, WLAN
and fiber optic markets, our competitors are also primarily manufacturers of
both discrete components and integrated circuits. Our competitors include Analog
Devices, Inc., Applied Micro Circuits Corp., Conexant Systems, Inc., Maxim
Integrated Products, Inc., Microsemi Corp., Microtune, Inc. and Vitesse
Semiconductor Corp., as well as certain of our customers who design and
fabricate their own in-house solutions.

Many of our competitors have significantly greater financial,
technical, manufacturing and marketing resources. Increased competition could
adversely affect our revenue and profitability through price reductions or
reduced demand for our products. See "Risk Factors - We face intense
competition, which could result in a decrease in our products' prices and
sales."

Patents, Licenses and Proprietary Rights

It is our practice to seek U.S. and foreign patent and copyright
protection on our products and developments where appropriate and to protect our
valuable technology under U.S. and foreign laws affording protection for trade
secrets and for semiconductor chip designs. We own 33 U.S. patents and have ten
pending U.S. patent applications and one pending foreign patent application
filed under the Patent Cooperation Treaty. The U.S. patents were issued between
1992 and 2003 and will expire between 2009 and 2022.

We rely primarily upon trade secrets, technical know-how and other
unpatented proprietary information relating to our product development and
manufacturing activities. To protect our trade secrets, technical know-how and
other proprietary information, our employees are required to enter into
agreements providing for maintenance of confidentiality and the assignment of
rights to inventions made by them while in our employ. We have also entered into
non-disclosure agreements to protect our confidential information delivered to
third parties in conjunction with possible corporate collaborations and for
other purposes. See "Risk Factors - We may not be successful in protecting our
own intellectual property rights or in avoiding claims that we infringed on the
intellectual property rights of others."

Environmental Matters

Our operations are subject to federal, state and local environmental
laws, regulations and ordinances that govern activities or operations that may
have adverse effects on human health or the environment. These laws, regulations
or ordinances may impose liability for the cost of remediating, and for certain
damages resulting from, sites of past releases of hazardous materials. We
believe that we currently conduct, and have conducted, our activities and
operations in substantial compliance with applicable environmental laws, and
that costs arising from existing environmental laws will not have a material
adverse effect on our results of operations. We cannot assure you, however, that
the environmental laws will not become more stringent in the future or that we
will not incur significant costs in the future in order to comply with these
laws. See "Risk Factors - We are subject to stringent environmental regulation
both domestically and abroad."

Available Information

Copies of our Annual Report on Form 10-K, Quarterly Reports on Form
10-Q, Current Reports on Form 8-K, and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 are available free of charge through our website (www.anadigics.com) as
soon as reasonably practicable after we electronically file the material with,
or furnish it to, the Securities and Exchange Commission.

******************************************************************************

RISK FACTORS

CERTAIN STATEMENTS IN THIS REPORT ARE FORWARD-LOOKING STATEMENTS (AS THAT TERM
IS DEFINED IN THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED) THAT INVOLVE
RISKS AND UNCERTAINTIES. THESE FORWARD-LOOKING STATEMENTS CAN GENERALLY BE
IDENTIFIED AS SUCH BECAUSE THE CONTEXT OF THE STATEMENT WILL INCLUDE WORDS SUCH
AS WE "BELIEVE", "ANTICIPATE", "EXPECT" OR WORDS OF SIMILAR IMPORT. SIMILARLY,
STATEMENTS THAT DESCRIBE OUR FUTURE PLANS, OBJECTIVES, ESTIMATES OR GOALS ARE
FORWARD-LOOKING STATEMENTS. THE CAUTIONARY STATEMENTS MADE IN THIS REPORT SHOULD
BE READ AS BEING APPLICABLE TO ALL RELATED FORWARD-LOOKING STATEMENTS WHEREVER
THEY APPEAR IN THIS REPORT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS
AND DEVELOPMENTS TO BE MATERIALLY DIFFERENT FROM THOSE EXPRESSED OR IMPLIED BY
THE FORWARD-LOOKING STATEMENTS PRESENTED HEREIN INCLUDE THE RISK FACTORS
DISCUSSED BELOW, AS WELL AS THOSE DISCUSSED ELSEWHERE HEREIN.

IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS REPORT, THE
FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN
INVESTMENT IN ANADIGICS, INC. AND IN ANALYZING OUR FORWARD-LOOKING STATEMENTS.

Risks Related to ANADIGICS

Our results of operations can vary significantly.

The semiconductor industry has been cyclical, seasonal and subject to
significant downturns. Since the beginning of 2001, the industry has experienced
market weaknesses that have created lower order demand, production overcapacity,
high inventory levels, and accelerated declines in average selling prices for
our products, which is expected to continue in the future. These elements have
continued to negatively affect our operating results.

Our results of operations have been subject to significant quarterly
fluctuations. As a result, we may experience substantial period-to-period
fluctuations in future operating results. Investors should not rely on our
results of operations for any previous period as an indicator of what results
may be for any future period.

We cannot accurately predict whether or when demand will strengthen
across our product lines. If we are unable to reverse the recent trend of
revenue declines and net losses, either because the economy does not improve or
because we under-perform, our ability to compete in a very difficult market may
be materially and adversely affected.

Our decline in revenue and underutilized manufacturing capacity have adversely
affected our gross margins and profitability.

Our manufacturing infrastructure and capacity was established to
address significantly higher volume levels and consequently we have
underutilized manufacturing capacity. Many of our expenses, particularly those
relating to capital equipment and manufacturing overhead, are fixed.
Accordingly, our fixed production costs increase as a percent of revenues during
a period of declining revenues, which adversely affects our gross margin and
profitability. In the future, improved utilization of our manufacturing capacity
will primarily depend on continued growth in demand for our wireless products.
Our ability to reduce expenses is further constrained because we must continue
to invest in research and development in order to maintain our competitive
position.

We depend on a small number of customers; a loss of or a decrease in purchases
and/or change in purchasing patterns by one of these customers would materially
and adversely affect our revenues and our ability to forecast revenue.

We receive most of our revenues from a few significant customers and
their subcontractors. Sales to Kyocera, Motorola and LG Electronics accounted
for 28%, 14% and 14%, respectively, of total net sales during 2003. Sales to our
greater than 10% customers has exceeded 55% of total revenues in each of the
last three years. Our operating results have been materially and adversely
affected in the past by the failure of anticipated orders to be realized and by
deferrals or cancellations of orders as a result of changes in customer
requirements. If we were to lose Kyocera, Motorola, LG Electronics or another
major customer, or if sales to these customers were to decrease materially,
results of operations would be materially and adversely affected.

Several of our customers have reduced the lead times on orders placed
with us for our products. While this trend has enabled us to reduce our
inventories, it also restricts our ability to forecast future revenues. We
cannot predict whether a change in order demand patterns or lead times from
customers will take place.

We will need to keep pace with rapid product and process development and
technological changes as well as product cost reductions to be competitive.

Rapid changes in both product and process technologies characterize the
markets for our products. Because these technologies are continually evolving,
we believe that our future success will depend, in part, upon our ability to
continue to improve the efficiencies of our product and process technologies and
rapidly develop new products and process technologies. If a competing technology
emerges that is, or is perceived to be, superior to our existing technology and
we are unable to develop and/or implement the new technology successfully or to
develop and implement a competitive and economic alternative technology, our
results of operations would be materially and adversely affected. We will need
to make substantial investments to develop these enhancements and technologies,
and we cannot assure investors that funds for these investments will be
available or that these enhancements and technologies will be successful.

Our products have experienced rapidly declining unit prices.

In each of the markets where we compete, prices of established products
tend to decline significantly over time. Accordingly, in order to remain
competitive, we believe that we must continue to develop product enhancements
and new technologies that will either slow the price declines of our products or
reduce the cost of producing and delivering our products. If we fail to do so,
our results of operations and financial condition would be materially and
adversely affected.

The variability of our manufacturing yields may affect our gross margins.

Our manufacturing yields vary significantly among products, depending
on the complexity of a particular integrated circuit's design and our experience
in manufacturing that type of integrated circuit. We have experienced
difficulties in achieving planned yields in the past, particularly in
pre-production and upon initial commencement of full production volumes, which
have adversely affected our gross margins.

Regardless of the process technology used, the fabrication of
integrated circuits is a highly complex and precise process. Problems in the
fabrication process can cause a substantial percentage of wafers to be rejected
or numerous integrated circuits on each wafer to be nonfunctional, thereby
reducing yields. These difficulties can include:

o defects in masks, which are used to transfer circuit patterns
onto our wafers;
o impurities in the materials used;
o contamination of the manufacturing environment; and
o equipment failure.

Many of our manufacturing costs are relatively fixed and average
selling prices for our products tend to decline over time. Therefore, it is
critical for us to improve the number of shippable integrated circuits per wafer
and increase the production volume of wafers in order to maintain and improve
our results of operations. Yield decreases can result in substantially higher
unit costs, which could materially and adversely affect our operating results
and have done so in the past. We cannot assure you that we will not suffer
periodic yield problems, particularly during the early production of new
products or introduction of new process technologies. In either case, our
results of operations and financial condition could be materially and adversely
affected.

We depend on foreign semiconductor assembly contractors and a loss of an
assembly contractor could result in delays or reductions in product shipment.

We do not assemble our integrated circuits or multi-chip modules.
Instead, we provide the integrated circuit die and, in some cases, packaging and
other components to assembly vendors located primarily in Asia. We maintain two
qualified service suppliers for each assembly process. If we are unable to
obtain sufficient high quality and timely assembly service, or if we lose one of
our current assembly vendors, or if we experience delays in transferring our
production between assembly vendors, or if means of transportation to our
vendors are interrupted, we would experience delays or reductions in product
shipment, and/or reduced product yields, that could materially and adversely
affect our results of operations and financial condition.

The manufacturing of our products could be delayed as a result of the
outsourcing of our test operations.

We outsource most of the testing of certain of our products to test
houses or vendors overseas, primarily in Asia. The failure of these test houses
or other third parties to maintain our standards of testing or complete the
testing process of our products in a timely manner, could subject us to
manufacturing delays and delivery of products to customers, which could have a
material adverse effect on our results of operations and financial condition. In
addition to the test houses, we also test some of our products internally.

The short life cycles of some of our products may leave us with obsolete or
excess inventories.

The life cycles of some of our products depend heavily upon the life
cycles of the end products into which our products are designed. For example, we
estimate that current life cycles for cellular and PCS telephone handsets, and
in turn our cellular and PCS products, are approximately 12 to 24 months.
Products with short life cycles require us to manage production and inventory
levels closely. We cannot assure investors that obsolete or excess inventories,
which may result from unanticipated changes in the estimated total demand for
our products and/or the estimated life cycles of the end products into which our
products are designed, will not affect us beyond the inventory charges taken in
the past.

Our announced restructuring plans may have insufficiently addressed market
conditions.

In 2001, 2002 and 2003, we announced restructuring plans in response to
a sharp downturn in our industry. Under our restructuring plans, we have
incurred charges relating to reductions in our workforce, impairments of certain
manufacturing and research fixed assets, and the consolidation of facilities.
From January 1, 2001 to December 31, 2003, our workforce was reduced by over
25%, primarily through restructuring initiatives. We may have incorrectly
anticipated the extent of the long-term market decline for our products and
services and we may be forced to restructure further or may incur further
operating charges due to poor business conditions.

We face intense competition, which could result in a decrease in our products'
prices and sales.

The semiconductor industry is intensely competitive and is
characterized by rapid technological change. We compete primarily with
manufacturers of discrete gallium arsenide and silicon semiconductors and with
manufacturers of gallium arsenide and silicon integrated circuits. We expect
increased competition from:

o other gallium arsenide integrated circuit manufacturers who
may replace us as a supplier to our market customers or
otherwise dilute our sales to them;
o silicon analog integrated circuit manufacturers; and
o companies which may penetrate the radio frequency/microwave
integrated circuit communications market with other
breakthrough technologies.

Increased competition could result in:

o decreased prices of our integrated circuits;
o reduced demand for our products; and
o a reduction in our ability to recover development-engineering
costs.

Any of these developments could materially and adversely affect our
results of operations and financial condition.

Most of our current and potential competitors, including Hitachi Ltd.,
Maxim Integrated Products Inc., Microtune Inc., Motorola, RF Micro Devices Inc.
and Skyworks Solutions, Inc. have significantly greater financial, technical,
manufacturing and marketing resources than we do. We cannot assure investors
that we will be able to compete successfully with existing or new competitors.

We face a risk that capital needed for our business will not be available when
we need it.

In the future, we may need to access sources of financing to fund our
growth. Taking into consideration our cash balance including marketable
securities of $121.6 million and our $66.7 million in outstanding convertible
subordinated notes due November 2006, we believe that our existing sources of
liquidity, together with cash expected to be generated from operations, will be
sufficient to fund our research and development, capital expenditure, working
capital and other financing requirements for at least the next twelve months.

However, there is no assurance that the capital required to fund these
expenses will be available in the future. Conditions existing in the U.S.
capital markets when we seek financing, as well as the then current condition of
the Company will affect our ability to raise capital, as well as the terms of
any financing. We may not be able to raise enough capital to meet our capital
needs on a timely basis or at all. Failure to obtain capital when required would
have a material adverse affect on the Company.

In addition, any strategic investments and acquisitions that we may
make to help us grow our business may require additional capital resources. We
cannot assure you that the capital required to fund these investments and
acquisitions will be available in the future.

We may pursue selective acquisitions and alliances and the management and
integration of additional operations could be expensive and could divert
management time and acquisitions may dilute the ownership of our current
shareholders.

As part of our strategy, we will selectively pursue acquisitions and
alliances. Our ability to complete acquisitions or alliances is dependent upon,
and may be limited by, the availability of suitable candidates and capital. In
addition, acquisitions and alliances involve risks that could materially
adversely affect our operating results, including the management time that may
be diverted from operations in order to pursue and complete such transactions
and difficulties in integrating and managing the additional operations and
personnel of acquired companies. We cannot assure investors that we will be able
to obtain the capital necessary to consummate acquisitions or alliances on
satisfactory terms, if at all. Further, any businesses that we acquire will
likely have their own capital needs, which may be significant, which we would be
called upon to satisfy independent of the acquisition price. Future acquisitions
or alliances could result in additional debt, equity, costs and contingent
liabilities, all of which could materially adversely affect our results of
operations and financial condition. Any such additional debt could subject us to
substantial and burdensome covenants and any such equity could be materially
dilutive to existing stockholders. The growth that may result from future
acquisitions or alliances may place significant strains on our resources,
systems and management. If we are unable to effectively manage such growth by
implementing systems, expanding our infrastructure and hiring, training and
managing employees, our ability to offer our products could be materially
harmed.

We depend heavily on key personnel.

Our success depends in part on keeping key technical, marketing, sales
and management personnel. We must also continue to attract qualified personnel.
The competition for qualified personnel is intense, and the number of people
with experience, particularly in radio frequency engineering, integrated circuit
design, and technical marketing and support, is limited. We cannot be sure that
we will be able to attract and retain other skilled personnel in the future.

Our international sales and operations involve foreign exchange risks.

Sales to customers located outside North America (based on shipping
addresses and not on the locations of ultimate end users) accounted for 65%, 46%
and 49% of our net sales for the years ended December 31, 2001, 2002 and 2003,
respectively. We expect that revenues derived from international sales will
continue to represent a significant portion of our net sales.

In addition, independent third parties located in Asia supply a
substantial portion of the starting wafers and packaging components that we use
in the production of gallium arsenide integrated circuits, and assemble and test
nearly all of our products.

Due to our reliance on international sales and foreign suppliers,
assemblers and test houses, we are subject to risks of conducting business
outside of the United States, including primarily those arising from currency
fluctuations, which could affect the price of our products and/or the cost of
producing them.

Sources for certain components, materials and equipment are limited, which could
result in delays or reductions in product shipments.

We do not manufacture any of the starting wafers, packaging or
passive components used in the production of our gallium arsenide integrated
circuits. Wafers and packaging components are available from a limited number of
sources. If we are unable to obtain these wafers or components in the required
quantities and quality, we could experience delays or reductions in product
shipments, which would materially and adversely affect our results of operations
and financial condition.

We depend on a limited number of vendors to supply equipment used in
our manufacturing processes. When demand for semiconductor manufacturing
equipment is high, lead times for delivery of such equipment can be substantial.
We cannot assure investors that we would not lose potential sales if required
manufacturing equipment is unavailable and, as a result, we are unable to
maintain or increase our production levels.

We may face constraints on our manufacturing capacity which would limit our
ability to increase sales volumes.

We believe that our expanded six-inch wafer fabrication facility should
be able to satisfy our forecasted production needs. However, if production
volumes were to increase significantly from expected levels, we might be
required to hire, train and manage additional production personnel in order to
successfully increase production capacity at our facility. We cannot assure
investors that we would be able to implement these changes successfully. A delay
for any reason in increasing capacity would limit our ability to increase sales
volumes. In addition, if we fail to increase production and do not have
sufficient capacity to satisfy the demand for our products, our relationships
with customers could be harmed.

We may face interruptions in our manufacturing processes.

Our manufacturing operations are complex and subject to disruption,
including for causes beyond our control. The fabrication of integrated circuits
is an extremely complex and precise process consisting of multiple steps. It
requires production in a highly controlled, clean environment. Minor impurities,
contamination of the clean room environment, errors in any step of the
fabrication process, defects in the masks used to print circuits on a wafer,
defects in equipment or materials, human error, or a number of other factors can
cause a substantial percentage of wafers to be rejected or numerous die on each
wafer to malfunction. Because our operating results are highly dependent upon
our ability to produce integrated circuits at acceptable manufacturing yields,
these factors present could have a material adverse affect on our business. In
addition, we may discover from time to time defects in our products after they
have been shipped, which may require us to replace such products.

Additionally, our operations may be affected by lengthy or recurring
disruptions of operations at any of our production facilities or those of our
subcontractors. These disruptions may include electrical power outages, fire,
earthquake, flooding, war, acts of terrorism, or other natural or man-made
disasters. Disruptions of our manufacturing operations could cause significant
delays in shipments until we are able to shift the products from an affected
facility or subcontractor to another facility or subcontractor. In the event of
such delays, we cannot assure investors that the required alternative capacity,
particularly wafer production capacity, would be available on a timely basis or
at all. Even if alternative wafer production or assembly and test capacity is
available, we may not be able to obtain it on favorable terms, which could
result in higher costs and/or a loss of customers. We may be unable to obtain
sufficient manufacturing capacity to meet demand, either at our own facilities
or through external manufacturing or similar arrangements with others.

Due to the highly specialized nature of the gallium arsenide integrated
circuit manufacturing process, in the event of a disruption at the Warren, New
Jersey semiconductor wafer fabrication facility, alternative gallium arsenide
production capacity would not be immediately available from third-party sources.
These disruptions could have a material adverse effect on our business,
financial condition and results of operations.

We are subject to stringent environmental regulation both domestically and
abroad.

We are subject to a variety of federal, state and local requirements
governing the protection of the environment. These environmental regulations
include those related to the use, storage, handling, discharge and disposal of
toxic or otherwise hazardous materials used in or resulting from our
manufacturing processes. Failure to comply with environmental laws could subject
us to substantial liability or force us to significantly change our
manufacturing operations. In addition, under some of these laws and regulations,
we could be held financially responsible for remedial measures if our properties
are contaminated, even if we did not cause the contamination.

We may not be successful in protecting our intellectual property rights or in
avoiding claims that we infringed on the intellectual property rights of others.

Our success depends in part on our ability to obtain patents and
copyrights, maintain trade secret protection and operate without infringing on
the proprietary rights of third parties. As is typical in the semiconductor
industry, we have been notified, and may be notified in the future, that we may
be infringing on certain patent and/or other intellectual property rights of
others. We are currently reviewing a claim alleging that we are or may be
infringing certain patents. We cannot assure investors that we will not be
subject to patent litigation to defend our products or processes against claims
of patent infringement or other intellectual property claims. Any such
litigation could result in substantial costs and diversion of our resources. If
we determine that we have infringed on the intellectual property rights of
others, we cannot assure investors that we would be able to obtain any required
licenses on commercially reasonable terms.

In addition to patent and copyright protection, we also rely on trade
secrets, technical know-how and other non-patented proprietary information
relating to our product development and manufacturing activities, which we seek
to protect, in part, by confidentiality agreements with our collaborators and
employees. We cannot assure investors that these agreements will not be
breached, that we would have adequate remedies for any breach or that our trade
secrets and proprietary know-how will not otherwise become known or
independently discovered by others.

Provisions in our governing documents and our shareholders' rights agreement
could discourage takeovers and prevent shareholders from realizing an investment
premium.

Certain provisions of our articles of incorporation and by-laws could
have the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of our Company.
These provisions include the ability of the board of directors to designate the
rights and preferences of preferred stock and issue such shares without
shareholder approval, our staggered board of directors, and our advance notice
requirements for stockholder proposals and director nominations. In addition,
the Company has adopted a shareholders' rights agreement that may make it more
difficult and expensive for a third party to acquire the Company. Any of the
foregoing could limit the price that certain investors might be willing to pay
in the future for shares of our common stock.

We have had significant volatility in our stock price and it may fluctuate in
the future. Therefore, the ability to sell shares of common stock at or above
the price paid for them may be difficult.

The trading price of our common stock has and may continue to fluctuate
significantly. Such fluctuations may be influenced by many factors, including:

o our performance and prospects;
o the performance and prospects of our major customers;
o the depth and liquidity of the market for our common stock;
o investor perception of us and the industry in which we
operate;
o changes in earnings estimates or buy/sell recommendations by
analysts;
o general financial and other market conditions; and
o domestic and international economic conditions.

Public stock markets have experienced, and are currently experiencing,
extreme price and trading volume volatility, particularly in the 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 materially and adversely
affect the market price of our common stock.

In addition, fluctuations in our stock price and our price-to-earnings
multiple may have made our stock attractive to momentum, hedge or day-trading
investors who often shift funds into and out of stocks rapidly, exacerbating
price fluctuations in either direction, particularly when viewed on a quarterly
basis.

ITEM 2. PROPERTIES.

Our executive offices and primary fabrication facility are located at
141 Mt. Bethel Road, Warren, New Jersey 07059. We currently lease space in
several buildings in Warren, New Jersey, all of which are located in the same
industrial park. Approximately 150,000 square feet of manufacturing and office
space is occupied in a building located at 141 Mt. Bethel Road in Warren, New
Jersey under a twenty year lease expiring on December 31, 2016. Approximately
92,500 square feet of office and laboratory space is leased at 35 Technology
Drive in Warren, New Jersey under a twelve-year lease, which expires on May 1,
2005. We have moved out of this space and over half of the space at 35
Technology Drive has been sublet in order to reduce costs. Additionally, we
lease an approximately 22,000 square foot building in Camarillo, California. The
lease expires on July 31, 2005; however, the term may be extended up to two
times for additional two-year periods.

We also lease approximately 5,400, 8,900, 4,000, 3,500, 6,500, 4,900
and 2,400 square feet of office space located in Richardson, Texas; Atlanta,
Georgia; San Jose, California; Aalborg, Denmark; Rehovot, Israel; Taiwan; and
Seoul, South Korea, respectively, under lease agreements with remaining terms
ranging from ten months to three years that can be extended, at our option. The
space in Rehovot, Israel has been sublet in order to reduce costs.

ITEM 3. LEGAL PROCEEDINGS.

The Company is a party to litigation arising out of the operation of
its business. We believe that the ultimate resolution of such litigation should
not have a material adverse affect on our financial condition, results of
operations or liquidity.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of the Company's security holders
during the fourth quarter of 2003.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Our $0.01 par value Common Stock, ("Common Stock") has been quoted on
the NASDAQ National Market under the symbol "ANAD" since the commencement of
trading on April 21, 1995 following our initial public offering of our Common
Stock. The following table sets forth for the periods indicated the high and low
sale prices for our Common Stock.

HIGH LOW
--------- ---------
Calendar 2003
Fourth Quarter.......................................... $ 7.38 $ 4.52
Third Quarter........................................... 5.65 2.98
Second Quarter.......................................... 3.72 1.81
First Quarter........................................... 2.95 1.69

Calendar 2002
Fourth Quarter.......................................... $ 4.18 $ 1.59
Third Quarter........................................... 8.20 2.00
Second Quarter.......................................... 13.61 6.60
First Quarter........................................... 16.29 9.40

As of December 31, 2003, there were 31,225,888 shares of Common Stock
outstanding and 328 holders of record of the Common Stock.

We have never paid cash dividends on our capital stock. We currently
anticipate that we will retain all available funds for use in the operation and
expansion of our business, and do not anticipate paying any cash dividends in
the foreseeable future.

See also "Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters" under Part III, Item 12 of this
report.

ITEM 6. SELECTED FINANCIAL DATA.

The selected financial data set forth below should be read in
conjunction with Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations", and our financial statements, related
notes and other financial information included herein. The selected consolidated
financial data set forth below as of December 31, 2003 and 2002 and for the
years ended December 31, 2003, 2002, and 2001 have been derived from our audited
financial statements included herein. The selected consolidated financial data
set forth below as of December 31, 2001, 2000 and 1999 and for the years ended
December 31, 2000 and 1999 have been derived from our audited financial
statements that are not included herein or incorporated by reference herein. Our
historical results are not necessarily indicative of the results that may be
expected for any future period.

YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1999 2000 2001 2002 2003
--------- ---------- --------- --------- ----------

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
RESULTS OF OPERATIONS
Net sales.......................... $ 131,159 $ 172,268 $ 84,765 $ 82,564 $ 75,212
Gross profit (loss)................ 55,339 82,797 (2,932) 7,262 3,285
Operating income (loss)............ 7,030 16,796 (85,986) (65,565) (50,998)
Income (loss) before income taxes.. 3,398 28,596 (82,782) (52,183) (51,139)
Net income (loss).................. 2,588 18,892 (107,120) (55,886) (50,757)

Earnings (loss) per share:
Basic............................ $ 0.11 $ 0.64 $ (3.54) $ (1.83) $ (1.65)
Diluted ......................... $ 0.10 $ 0.60 $ (3.54) $ (1.83) $ (1.65)

AT DECEMBER 31,
-----------------------------------------------
1999 2000 2001 2002 2003
-------- -------- -------- -------- --------

(IN THOUSANDS)
BALANCE SHEET DATA:
Total cash and marketable securities........ $171,751 $166,161 $200,095 $155,518 $121,630
Working capital............................. 176,322 179,987 132,062 110,151 81,100
Total assets................................ 317,610 352,473 346,914 255,671 207,898
Total capital lease obligations............. 183 250 94 - 90
Long-term debt, including current portion... 4,000 3,000 100,244 66,700 66,700
Total stockholders' equity.................. 276,649 328,832 226,636 171,088 121,046

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

OVERVIEW

We were organized in 1984 and initially focused on the development and
manufacture of GaAs integrated circuits for low-volume defense and aerospace
applications. In 1988 we began shifting our strategy to focus on radio
frequency/microwave communications systems for high-volume applications, and
began production for these applications in 1989. In 1992 we introduced
integrated circuits for the cable television market. In late 1994 we entered the
wireless communications market with the introduction of cellular telephone
integrated circuits. In 2001 we introduced our InGaP HBT power amplifier modules
to the wireless communications market and in 2003 expanded into the WLAN power
amplifier marketplace.

We strive to achieve market advantage through the application of our
radio frequency/microwave design and application knowledge. With our design
expertise we have led the industry with the introduction of innovative products.
Recent examples include quad-band GSM/GPRS power amplifiers with integrated
power control, high efficiency low power (HELP(TM)) 3mm x 3mm CDMA PA modules,
wideband CDMA power amplifier modules, PowerPlexer(TM) integrated GSM front end
modules, active splitter integrated circuits for cable infrastructure and
set-top box applications and high output 802.11 b/g WLAN power amplifier
modules, all of which offer greater levels of product performance and reduce
manufacturers' production costs.

We aim to achieve cost advantage through the scale and efficiency of
our manufacturing operations. During 1999 we began production in our six-inch
analog GaAs wafer fabrication facility, which we believe was among the first
six-inch analog GaAs wafer fabrication facility in our industry. Using a
six-inch wafer allows us to produce, at a small incremental cost, more than
twice the integrated circuit die per wafer than can be produced from the
industry norm four-inch wafer.

During 2003, we made two strategic acquisitions through the purchase of
(1) the Wireless LAN (WLAN) power amplifier business of RF Solutions, providing
an entrance into the emerging and high-growth WLAN market, and (2) the Tavanza
CDMA power amplifier handset business from Celeritek to enhance our customer and
product expansion in the CDMA market. These businesses also provide us with
enriched product portfolio, technology, know-how and high volume capability.

Our business outlook remains cautious after our markets weakened
substantially during 2001 and remained weak throughout much of 2002 and 2003.
With the well-publicized deterioration in the telecommunications industry, we
experienced a substantial decline in demand from 2000 levels for our products.
The downturn in demand reflected a reduction in capital spending by many of our
customers and lower end consumer demand and was compounded by high component
inventories at most of our customers, including components that we previously
supplied. Reduced production volumes contributed to a significant decline in our
gross margin and profitability from the levels achieved in 2000.

Many of our expenses, particularly those relating to capital equipment
and manufacturing overhead, are fixed. Accordingly, reduced revenue causes our
fixed production costs to increase as a percentage of revenue, which adversely
affects our gross margin and profitability. We will continue to strategically
invest in research and development in order to maintain our competitive
position.

The general slowdown in the industry in which we operate as well as the
overall slowing of the economy has had, and could continue to have, a negative
impact on our net sales, gross margins and other results of operations. We
cannot accurately predict whether or when demand will strengthen across all
product lines. If we are unable to reverse the recent trend of low revenues and
net losses because the economy does not improve or because we under perform, our
ability to compete in a very difficult market may be materially and adversely
affected.

We have only one reportable segment. For financial information related
to such segment and certain geographic areas, see Note 5 to the accompanying
financial statements.

CRITICAL ACCOUNTING POLICIES

GENERAL

We believe the following accounting policies are critical to our
business operations and the understanding of our results of operations. Such
accounting policies may require management to exercise a higher degree of
judgment and make estimates used in the preparation of our consolidated
financial statements.

REVENUE RECOGNITION

Production revenue is recorded when products are shipped to customers
pursuant to a purchase order. We charge customers for the costs of certain
contractually-committed inventories that remain at the end of a product's life.
Cancellation revenue is recognized when cash is received. The value of the
inventory related to cancellation revenue may, in some instances, have been
reserved during prior periods in accordance with our inventory obsolescence
policy.

WARRANTY COSTS

We provide for potential warranty claims by recording a current charge
to income. We estimate potential claims by examining historical returns and
other information deemed critical and provide for an amount which we believe
will cover future warranty obligations for products sold during the year. The
accrued liability for warranty costs is included in accrued liabilities in the
consolidated balance sheets.

LONG-LIVED ASSETS

Long-lived assets include fixed assets, goodwill and other intangible
assets. We regularly review these assets for circumstances of impairment and
assess the carrying value of the assets against market values. When an
impairment exists, we record an expense to the extent that the carrying value
exceeds fair market value.

Goodwill and intangibles impairment

We have intangible assets related to goodwill and other acquired
intangibles. Significant judgements are involved in the determination of the
estimated useful lives for our other intangibles and whether the goodwill or
other intangible assets are impaired. In assessing the recoverability of
goodwill and other intangibles, we must make assumptions regarding estimated
future cash flows and other factors to determine the fair value of the
respective assets.

Impairment of long-lived assets

We record impairment losses on long-lived assets used in operations or
expected to be disposed of when events and circumstances indicate that the
undiscounted cash flow estimated to be generated by these assets is less than
the carrying amounts of those assets. Management considers sensitivities to
capacity, utilization and technological developments in making its assumptions.

DEFERRED TAXES

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 2001, we determined that it was no longer more likely than not that we
would be able to realize all or part of our net deferred tax asset in the
future, and an adjustment to provide a valuation allowance against the deferred
tax asset was charged to income. We continue to maintain a full valuation
allowance on our deferred tax assets.

While we have considered future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for the valuation
allowance, in the event we were to determine that we would be able to realize
our deferred tax assets in the future, an adjustment to the deferred tax asset
would increase income in the period such determination was made.

INVENTORY

Inventories are valued at the lower of cost or market ("LCM"), using
the first-in, first-out method. In addition to LCM limitations, we reserve
against inventory items for estimated obsolescence or unmarketable inventory.
Our reserve for excess and obsolete inventory is primarily based upon forecasted
short-term demand for the product and any change to the reserve arising from
forecast revisions is reflected in cost of sales in the period the revision is
made.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

We maintain an allowance for doubtful accounts for estimated losses
resulting from customers' failure to make mandatory payments. If the financial
condition of our customers were to erode, making them unable to make payments,
additional allowances may be required.

RESULTS OF OPERATIONS

The following table sets forth statements of operations data as a
percentage of net sales for the periods indicated:

YEAR ENDED DECEMBER 31,
-------------------------------------
2001 2002 2003
----------- ----------- -----------

Net sales.............................................. 100.0% 100.0% 100.0%
Cost of sales.......................................... 103.5 91.2 95.6
------ ------ ------
Gross (loss)profit..................................... (3.5) 8.8 4.4
Research and development expenses...................... 44.5 36.0 42.7
Selling and administrative expenses.................... 32.2 25.9 25.8
Restructuring and other charges........................ 4.4 6.1 1.2
Asset impairment charges............................... 12.3 10.5 -
Goodwill impairment charge............................. - 9.7 -
Purchased in-process R&D............................... 4.5 - 2.5
------ ------ ------
Operating loss......................................... (101.4) (79.4) (67.8)
Interest income........................................ 8.2 7.7 4.4
Interest expense....................................... (0.8) (6.2) (5.0)
Impairment of investments.............................. (3.7) (0.5) -
Gain on repurchase of Convertible notes................ - 15.2 -
Other income (expense) ................................ - - 0.4
------ ------ ------
Loss before income taxes............................... (97.7) (63.2) (68.0)
Provision (benefit) for income taxes................... 28.7 (5.2) (0.5)
------ ------ ------
Loss before cumulative effect of accounting change..... (126.4) (58.0) (67.5)
Cumulative effect of accounting change................. - (9.7) -
------ ------ ------
Net loss............................................... (126.4%) (67.7%) (67.5%)
====== ====== ======

2003 COMPARED TO 2002

NET SALES. Net sales during 2003 decreased 8.9% to $75.2 million,
compared to $82.6 million for 2002. The sales decline was due to a decrease in
demand of TDMA power amplifiers used in cellular handsets resulting from a
market shift in the U.S. from the TDMA air interface standard to the emergence
and deployment of the CDMA-1X telecommunication standard. Additionally, demand
was lower for IC's used in set-top boxes attributed to overall market softness
for set-top boxes.

Specifically, net sales of integrated circuits for cellular and PCS
applications decreased 7.1% during 2003 to $41.5 million from $44.7 million in
2002. Net sales for TDMA power amplifiers declined to zero in 2003 from $3.5
million in 2002.

Sales during 2003 of integrated circuits for broadband applications
decreased 11.1% to $33.7 million from $37.9 million in 2002. The decline was
partially offset by sales of our power amplifiers used in Wireless LAN (WLAN)
applications. On March 31, 2003, we purchased the power amplifier business of RF
Solutions (RFS) providing the Company an entrance into the growing WLAN power
amplifier market.

Generally, selling prices for same product sales were lower during 2003
as compared to 2002.

GROSS MARGIN. Gross margin for 2003 decreased to 4.4% of net sales,
compared with 8.8% of net sales in the prior year. The decline in gross margin
from the prior year is the result of the decrease in revenue, lower production
throughput in our facilities due to outsourcing and consequent lower absorption
of fixed costs. The aforementioned lower pricing was largely offset by savings
related to lower test, assembly and raw material costs.

RESEARCH & DEVELOPMENT. Company sponsored research and development
expense increased 7.8% during 2003 to $32.1 million from $29.7 million during
2002 primarily due to the acquisition of the RFS power amplifier business on
March 31, 2003 and the acquisition of the Tavanza CDMA wireless handset business
from Celeritek on October 14, 2003.

PURCHASED IN-PROCESS R&D. The Company expensed purchased in-process
research and development costs of $1.9 million resulting from the acquisitions
of RFS and Tavanza. The charge represented the fair value of certain acquired
research and development projects that were determined to have not reached
technological feasibility and did not have alternative future uses. No
acquisitions or in-process R&D applied in 2002.

SELLING AND ADMINISTRATIVE. Selling and administrative expenses
decreased 9.3% during 2003 to $19.4 million from $21.4 million in 2002. The
decrease was primarily due to the elimination of intangibles' amortization as a
result of the write-off of intangibles in the fourth quarter of 2002 and savings
realized from the administrative headcount reductions resulting from our
restructuring activities. The expense reductions were partially offset by
increased expenses from the RFS acquisition and the establishment of new
application centers in Taiwan and South Korea.

ASSET AND INVESTMENT IMPAIRMENT CHARGES AND RESTRUCTURING AND OTHER
CHARGES. During 2003, we recorded charges of $0.9 million for restructuring and
other charges related to severance and related employee benefits of workforce
reductions of approximately 19 operations and administrative positions and
lease-related costs. The anticipated annual benefit from the workforce
reductions is expected to approximate $1.9 million. During 2002, we recorded
charges of $8.6 million for asset impairments, $0.4 million for impairment on
investments and $5.0 million for restructuring and other charges.

Activity and liability balances related to the restructuring and other
charges for the years ended December 31, 2002 and 2003 are as follows (in
millions):

Lease Workforce
Related Reductions Total
--------- ------------ --------

Year ended December 31, 2002
Restructuring and other expenses $ 3.4 $ 1.6 $ 5.0
Deductions (1.7) (2.2) (3.9)
December 31, 2002 restructuring balance 2.8 0.2 3.0
Year ended December 31, 2003 --------- ------------ ---------
Restructuring and other expenses 0.3 0.6 0.9
Deductions (1.1) (0.8) (1.9)
--------- ------------ ---------
December 31, 2003 restructuring balance $ 2.0 $ - $ 2.0
========= ============ =========

GOODWILL IMPAIRMENT CHARGE. During 2002, we monitored fiber market
conditions in light of additional job cuts and difficult prospects announced by
several of our end-market customers. In view of these weaker market conditions
during the third quarter of 2002, we evaluated our goodwill and intangible
assets for potential impairment. As a result of that evaluation, we recorded a
goodwill impairment charge of $8.0 million. Also see cumulative effect of
accounting change below. There was no impairment of goodwill in 2003.

INTEREST INCOME. Interest income decreased 47.0% to $3.3 million during
2003 from $6.3 million in 2002. The decrease was due to lower average invested
funds and was compounded by lower interest rates.

INTEREST EXPENSE. Interest expense decreased to $3.8 million in 2003
from $5.1 million in 2002. Our interest expense arises from obligations under
our 5% Convertible notes, issued on November 27, 2001. In September, 2002, we
repurchased $33.3 million in face value of the notes and consequently reduced
the outstanding principal balance to $66.7 million.

GAIN ON REPURCHASE OF CONVERTIBLE NOTES. During 2002, we recognized a
gain of $12.6 million, on the repurchase of $33.3 million in principal of our 5%
Convertible notes, after adjusting for accrued interest and the write-off of a
proportionate share of unamortized offering costs.

CUMULATIVE EFFECT OF ACCOUNTING CHANGE. In 2002, we adopted the
provisions of Statement of Financial Accounting Standards ("FAS") No 142,
"Goodwill and Other Intangible Assets". Under the new rules, goodwill is no
longer subject to amortization but is reviewed for potential impairment, upon
adoption and thereafter annually or upon the occurrence of an impairment
indicator. The annual amortization of goodwill which would have approximated
$2.6 million was no longer required. As a result of completing the required
test, we recorded a charge for the cumulative effect of the accounting change in
the amount of $8.0 million representing the excess of the carrying value of a
reporting unit as compared to its estimated fair value. In 2003, there was no
charge for an accounting change.

2002 COMPARED TO 2001

NET SALES. Net sales during 2002 decreased 2.6% to $82.6 million,
compared to $84.8 million for 2001. Improvement in our wireless business was
more than offset by a downturn in demand in the broadband market.

Specifically, net sales of integrated circuits for cellular and PCS
applications increased 38.6% during 2002 to $44.7 million from $32.3 million in
2001. The increase was due to our penetration into the CDMA power amplifier
module market more than offsetting the decrease in demand for TDMA power
amplifiers.

Sales during 2002 of integrated circuits for broadband applications
decreased 27.9% to $37.9 million from $52.5 million in 2001. Lower investment by
telecom and cable providers led to declines in demand for our fiber and cable
subscriber parts used primarily in set-top boxes and cable modems. The principal
decrease was observed following the first quarter of 2001 when broadband
revenues were $22.2 million.

Generally, selling prices for same product sales were lower during 2002
as compared to 2001.

GROSS MARGIN (LOSS). Gross margin (loss) for 2002 increased to 8.8% of
net sales, compared with (3.5%) of net sales in the prior year. The improvement
in gross margin from the prior year is the result of lower inventory
obsolescence charges (down $8.7 million) and lower warranty related cost. The
aforementioned lower pricing was largely offset by savings related to lower
test, assembly and raw material costs.

RESEARCH & DEVELOPMENT. Company sponsored research and development
expense decreased 21.2% during 2002 to $29.7 million from $37.8 million during
2001 primarily due to headcount reductions from our restructurings and a
narrower focus on our fiber-related projects. As a percentage of sales, research
and development expense decreased to 36.0% in 2002 from 44.5% in 2001.

PURCHASED IN-PROCESS R&D. The Company expensed purchased in-process
research and development costs of $3.8 million as a result of the Telcom
acquisition on April 2, 2001. The charge represented the fair value of certain
acquired research and development projects that were determined to have not
reached technological feasibility and did not have alternative future uses. No
acquisitions or in-process R&D applied for 2002.

SELLING AND ADMINISTRATIVE. Selling and administrative expenses
decreased 21.6% during 2002 to $21.4 million from $27.3 million in 2001. The
decrease was primarily due to savings from administrative headcount reductions
from our restructurings, the elimination of goodwill amortization and other
expense reductions. As a percentage of sales, selling and administrative
expenses decreased to 25.9% in 2002 from 32.2% in 2001.

ASSET AND INVESTMENT IMPAIRMENT CHARGES AND RESTRUCTURING AND OTHER
CHARGES. During 2002, we recorded charges of $8.6 million for asset impairments,
$0.4 million for impairment on investments and $5.0 million for restructuring
and other charges. The asset impairment charge related to the write-off of
certain manufacturing and research equipment, leasehold improvements, certain
technology licenses that are no longer used in the ongoing activities of the
business and process technology from the Telcom acquisition following an
evaluation of our carrying value against the related business cash flows. The
charge for impairment on investments was recorded on a private-equity investment
following an evaluation that indicated the carrying value of such investment
exceeded its estimated fair market value. The restructuring and other charges
were for lease-related costs and for severance and related benefit costs of
workforce reductions. The workforce reductions eliminated approximately 83
positions throughout the Company. During 2001, we recorded charges of $10.4
million for asset impairments, $3.1 million for impairment on investments and
$3.8 million for restructuring and other charges, primarily severance and
related benefits costs of workforce reductions, with $1.6 million of benefits
paid through December 31, 2001, and the remainder paid out in 2002.

Activity and liability balances related to the restructuring and other
charges for the year ended December 31, 2002 were as follows (in millions):

Lease Workforce
Related Reductions Total
--------- ------------ --------

Year ended December 31, 2002
Restructuring and other expenses $ 3.4 $ 1.6 $ 5.0
Deductions (1.7) (2.2) (3.9)
December 31, 2002 restructuring balance 2.8 0.2 3.0

INTEREST INCOME. Interest income decreased 9.0% to $6.3 million during
2002 from $6.9 million in 2001. The decrease was due to generally lower interest
rates, despite an increase in average invested funds.

INTEREST EXPENSE. Interest expense increased to $5.1 million in 2002
from $0.6 million in 2001. The interest applies on our 5% Convertible notes,
issued on November 27, 2001. In September, 2002, we repurchased $33.3 million in
face value of the notes, consequently reducing the outstanding balance to $66.7
million.

GAIN ON REPURCHASE OF CONVERTIBLE NOTES. During 2002, we recognized a
gain of $12.6 million, on the repurchase of $33.3 million in principal amount of
our 5% Convertible notes, after adjusting for accrued interest and the write-off
of a proportionate share of unamortized offering costs.

PROVISION(BENEFIT) FOR INCOME TAXES. In December 2002, the Company
received a $4.3 million refund pursuant to a carryback claim under the Job
Creation and Workers Assistance Tax Act of 2002. The refund represented taxes
paid in 1996 and 1997. During 2001, the Company recorded a valuation allowance
of $26.8 million against the carrying value of its deferred tax asset. Since
realization of deferred tax assets is dependent upon the timing and magnitude of
future taxable income prior to the expiration of the deferred tax attributes,
management recorded a full valuation allowance in 2001 and 2002.

CUMULATIVE EFFECT OF ACCOUNTING CHANGE. Effective January 1, 2002, we
adopted the provisions of Statement of Financial Accounting Standards ("FAS") No
142, "Goodwill and Other Intangible Assets". Under the new rules, goodwill is no
longer subject to amortization but is reviewed for potential impairment, upon
adoption and thereafter annually or upon the occurrence of an impairment
indicator. The annual amortization of goodwill which would have approximated
$2.6 million was no longer required. Other intangible assets continue to be
amortized over their useful lives. As a result of completing the required test,
in 2002 we recorded a charge for the cumulative effect of the accounting change
in the amount of $8.0 million representing the excess of the carrying value of a
reporting unit as compared to its estimated fair value.

LIQUIDITY AND SOURCES OF CAPITAL

At December 31, 2003 we had $18.5 million of cash and cash equivalents
on hand and $103.1 million in marketable securities. We had $66.7 million of 5%
Convertible notes outstanding as of December 31, 2003.

Operations required the use of $23.6 million in cash during 2003.
Investing activities provided $16.6 million of cash during 2003, consisting
principally of net sales of marketable securities of $25.0 million, partially
offset by purchases of equipment of $4.2 million and the acquisitions of RFS and
Tavanza for $4.2 million. Financing activities consisting of proceeds received
from the employee stock purchase plan ("ESP Plan") provided $1.2 million of cash
in 2003.

At December 31, 2003, we had purchase commitments of approximately $2.1
million for equipment, furniture, and leasehold improvements for the first half
of 2004.

We believe that our existing sources of capital, including our existing
cash and marketable securities, will be adequate to satisfy operational needs
and anticipated capital needs for the next twelve months and beyond. Our
anticipated capital needs may include acquisitions of complimentary businesses
or technologies, investments in other companies or repurchasing our outstanding
debt or equity. However, we may elect to finance all or part of our future
capital requirements through additional equity or debt financing. There can be
no assurance that such additional financing would be available on satisfactory
terms.

The table below summarizes required cash payments as of December 31, 2003:

CONTRACTUAL OBLIGATIONS PAYMENTS DUE BY PERIOD (in thousands)
Total 1 year 1 - 3 4 - 5 After 5
And less years years years
-------- -------- -------- -------- -------

Long-term debt $ 66,700 $ - $ 66,700 $ - $ -
Other long-term liabilities 2,953 (175) (321) 214 3,134
Operating leases 27,182 3,795 4,093 3,403 15,891
Capital leases 90 84 6 - -
Unconditional purchase
obligations 2,056 2,056 - - -
-------- -------- -------- -------- -------
Total contractual cash
obligations $ 98,981 $ 5,760 $ 70,478 $ 3,617 $19,025
======== ======== ======== ======== =======

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement No. 143, Accounting for Asset Retirement Obligations (FAS 143). FAS
143 requires that asset retirement obligations that are identifiable upon
acquisition and construction, and during the operating life of a long-lived
asset be recorded as a liability using the present value of the estimated cash
flows. A corresponding amount would be capitalized as part of the asset's
carrying amount and amortized to expense over the asset's useful life. We
adopted the provisions of FAS 143 effective January 1, 2003 and there was no
impact on the financial statements.

In July 2002, the FASB issued Statement No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (FAS 146) which nullifies EITF Issue
No. 94-3. FAS 146 requires that a liability for a cost associated with an exit
or disposal activity be recognized when the liability is incurred, whereas EITF
No. 94-3 had recognized the liability at the commitment date to an exit plan.
The Company adopted the provisions of FAS 146 for exit or disposal activities
initiated after January 1, 2003.

In January 2003, the FASB issued Interpretation No. 46, Consolidation
of Variable Interest Entities (FIN 46). FIN 46 is the interpretation of
Accounting Research Bulletin No. 51 Consolidated Financial Statements, which
addresses consolidation by business enterprises of variable interest entities.
FIN 46 is effective immediately for all variable interest entities created after
January 31, 2003 and effective for periods ending after March 15, 2004 for
variable interest entities in which an enterprise holds a variable interest that
it acquired before February 1,2003. The adoption of FIN 46 did not, nor is
expected to, have a material impact on the Company's financial position or
results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to changes in interest rates primarily from our
investments in certain available-for-sale securities. Our available-for-sale
securities consist primarily of fixed income investments (Corporate bonds,
commercial paper and U.S. Treasury and Agency securities). We continually
monitor our exposure to changes in interest rates and credit ratings of issuers
with respect to our available-for-sale securities. Accordingly, we believe that
the effects of changes in interest rates and credit ratings of issuers are
limited and would not have a material impact on our financial condition or
results of operations. However, it is possible that we are at risk if interest
rates or credit ratings of issuers change in an unfavorable direction. The
magnitude of any gain or loss will be a function of the difference between the
fixed rate of the financial instrument and the market rate and our financial
condition and results of operations could be materially affected.

At December 31, 2003, we held marketable securities with an estimated
fair value of $103.1 million. Our primary interest rate exposure results from
changes in short-term interest rates. We do not purchase financial instruments
for trading or speculative purposes. All of our marketable securities are
classified as available-for-sale securities. The following table provides
information about our marketable securities at December 31, 2003:

Estimated Principal Amount and Weighted Average Stated Fair
Rate by Expected Maturity Value Value
- ----------------------------------------------------- ---------
($'s 000) 2004 2005 2006 Total ($'s 000)
- ----------------------------------------------------- ---------
Principal $53,439 $41,715 $5,190 $100,344 $103,105

Weighted
Average
Stated
Rates 4.70% 4.68% 6.51% 4.77% -
- ----------------------------------------------------- ---------

Our Convertible notes bear a fixed rate of interest of 5%. A change in
interest rates on long-term debt is assumed to impact fair value but not
earnings or cash flow because the interest rate is fixed. At December 31, 2003,
the fair value of the outstanding Convertible notes, estimated based upon dealer
quotes, was approximately $63.5 million.

The stated rates of interest expressed in the above table may not
approximate the actual yield of the securities which we currently hold since we
have purchased some of our marketable securities at other than face value.
Additionally, some of the securities represented in the above table may be
called or redeemed, at the option of the issuer, prior to their expected due
dates. If such early redemptions occur, we may reinvest the proceeds realized on
such calls or redemptions in marketable securities with stated rates of interest
or yields that are lower than those of current holdings, affecting both future
cash interest streams and future earnings. In addition to investments in
marketable securities, we place some of our cash in money market funds in order
to keep cash available to fund operations and to hold cash pending investments
in marketable securities. Fluctuations in short term interest rates will affect
the yield on monies invested in such money market funds. Such fluctuations can
have an impact on our future cash interest streams and future earnings, but the
impact of such fluctuations are not expected to be material.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Report of Independent Auditors

The Board of Directors and Stockholders
ANADIGICS, Inc.

We have audited the accompanying consolidated balance sheets of ANADIGICS, Inc.
as of December 31, 2003 and 2002, and the related consolidated statements of
operations, comprehensive loss, stockholders' equity and cash flows for each of
the three years in the period ended December 31, 2003. Our audits also included
the financial statement schedule listed in the Index at Item 15(a). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of ANADIGICS, Inc. as
of December 31, 2003 and 2002, and the consolidated results of their operations,
and their cash flows for each of the three years in the period ended December
31, 2003, in conformity with accounting principles generally accepted in the
United States. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

As discussed in Note 3, the Company changed its method of accounting for
goodwill and other intangible assets in 2002.

/s/ ERNST & YOUNG LLP

MetroPark, New Jersey
January 26, 2004, except for the fourth paragraph of Note 13,
as to which the date is February 6, 2004

ANADIGICS, INC.

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

DECEMBER 31,
--------------------
2002 2003
--------- ---------

ASSETS

Current assets:
Cash and cash equivalents............................................ $ 24,343 $ 18,525
Marketable securities................................................ 74,038 54,130
Accounts receivable, net of allowance for doubtful accounts of $781
and $752 in 2002 and 2003, respectively............................ 9,016 12,074
Inventories.......................................................... 13,277 10,321
Prepaid expenses and other current assets............................ 4,600 3,243
--------- ---------
Total current assets................................................... 125,274 98,293

Marketable securities.................................................. 57,137 48,975
Plant and equipment:
Equipment and furniture.............................................. 123,328 130,815
Leasehold improvements............................................... 37,473 38,437
Projects in process.................................................. 5,371 1,609
--------- ---------
166,172 170,861
Less accumulated depreciation and amortization....................... 97,572 115,619
--------- ---------
68,600 55,242
Goodwill and other intangibles, less accumulated amortization
of $64 in 2003....................................................... - 1,788
Other assets........................................................... 4,660 3,600
--------- ---------
$ 255,671 $207,898
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable..................................................... $ 7,434 $ 9,497
Accrued liabilities.................................................. 4,733 5,618
Accrued restructuring costs.......................................... 2,956 1,994
Current maturities of capital lease obligations...................... - 84
--------- ---------
Total current liabilities.............................................. 15,123 17,193

Long-term debt......................................................... 66,700 66,700
Other long-term liabilities............................................ 2,760 2,959

Commitments and contingencies..........................................

Stockholders' equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized, none
issued or outstanding..............................................
Common stock, convertible, non-voting, $0.01 par value, 1,000,000
shares authorized, none issued or outstanding......................
Common stock, $0.01 par value, 144,000,000 shares authorized at December 31,
2002 and 2003, and 30,674,033 and 31,225,888 issued
and outstanding at December 31, 2002 and 2003, respectively........ 307 312
Additional paid-in capital........................................... 334,162 335,477
Accumulated deficit.................................................. (164,124) (214,881)
Accumulated other comprehensive income............................... 743 138
--------- ---------
Total stockholders' equity............................................. 171,088 121,046
--------- ---------
$ 255,671 $207,898
========= =========

See accompanying notes.

ANADIGICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

YEAR ENDED DECEMBER 31,
----------------------------------
2001 2002 2003
---------- ---------- ----------

Net sales............................................... $ 84,765 $ 82,564 $ 75,212
Cost of sales........................................... 87,697 75,302 71,927
---------- ---------- ----------
Gross (loss) profit..................................... (2,932) 7,262 3,285
Research and development expenses....................... 37,764 29,742 32,075
Selling and administrative expenses..................... 27,282 21,400 19,420
Restructuring and other charges......................... 3,775 5,001 925
Asset impairment charges................................ 10,433 8,641 -
Goodwill impairment charges............................. - 8,043 -
Purchased in-process R&D................................ 3,800 - 1,863
---------- ---------- ----------
83,054 72,827 54,283
---------- ---------- ----------
Operating loss.......................................... (85,986) (65,565) (50,998)

Interest income......................................... 6,930 6,309 3,344
Interest expense........................................ (626) (5,119) (3,761)
Impairment of investments............................... (3,061) (390) -
Gain on repurchase of Convertible notes................. - 12,581 -
Other (expense) income.................................. (39) 1 276
---------- ---------- ----------
Loss before income taxes................................ (82,782) (52,183) (51,139)
Provision (benefit) for income taxes.................... 24,338 (4,307) (382)
---------- ---------- ----------
Loss before cumulative effect of accounting change...... (107,120) (47,876) (50,757)
Cumulative effect of accounting change.................. - (8,010) -
---------- ---------- ----------
Net loss................................................ $ (107,120) $ (55,886) $ (50,757)
========== ========== ==========
Net loss per share
Basic and diluted
Loss before cumulative effect of accounting change...... $ (3.54) $ (1.57) $ (1.65)
Net loss................................................ $ (3.54) $ (1.83) $ (1.65)

Weighted average common and dilutive securities
outstanding........................................... 30,248,476 30,587,032 30,716,749

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(DOLLARS IN THOUSANDS)

YEAR ENDED DECEMBER 31,
--------------------------------
2001 2002 2003
--------- ---------- ---------

Net loss................................................ $(107,120) $ (55,886) $ (50,757)
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities......... 560 116 (666)
Foreign currency translation adjustment................. (110) (10) 46

Reclassification adjustment:
Net realized (gain) loss previously included in
other comprehensive income............................ (30) (71) 15
--------- ---------- ---------
Comprehensive loss...................................... $(106,700) $ (55,851) $ (51,362)
========= ========== =========

See accompanying notes.

ANADIGICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(SHARES AND DOLLARS IN THOUSANDS)

ACCUMULATED
COMMON STOCK ADDITIONAL OTHER TOTAL
--------------- PAID-IN ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT INCOME (LOSS) EQUITY
------- ------- ---------- ----------- ------------- -------------

Balance, December 31, 2000.. 30,028 $300 $329,362 $ (1,118) $ 288 $ 328,832
Stock options exercised.... 420 5 3,036 3,041
Shares issued under
employee stock purchase
plan.................... 113 1 1,462 1,463
Unrealized gains on market-
able securities......... 560 560
Shares issued for warrants
exercised............... 8
Foreign currency translation
adjustment.............. (110) (110)
Net realized gain previously
included in other
comprehensive income.... (30) (30)
Net loss (107,120) (107,120)
------- ------- ---------- ----------- ------------- -------------
Balance, December 31, 2001.. 30,569 306 333,860 (108,238) 708 226,636
Stock options exercised.... 17 - 108 108
Shares issued under
employee stock purchase
plan.................... 88 1 194 195
Unrealized gains on market-
able securities......... 116 116
Foreign currency translation
adjustment.............. (10) (10)
Net realized gain previously
included in other
comprehensive income.... (71) (71)
Net loss (55,886) (55,886)
------- ------- ---------- ----------- ------------- -------------
Balance, December 31, 2002.. 30,674 307 334,162 (164,124) 743 171,088
Stock options exercised.... 23 - 67 67
Shares issued under
employee stock purchase
plan.................... 529 5 1,222 1,227
Unrealized loss on market-
able securities......... (666) (666)
Foreign currency translation
adjustment.............. 46 46
Net realized loss previously
included in other
comprehensive income.... 15 15
Stock-based compensation .. 26 26
Net loss (50,757) (50,757)
------- ------- ---------- ----------- ------------- -------------
Balance, December 31, 2003.. 31,226 $312 $335,477 $ (214,881) $ 138 $ 121,046
======= ======= ========== =========== ============= =============

See accompanying notes.

ANADIGICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

YEAR ENDED DECEMBER 31,
-------------------------------
2001 2002 2003
--------- --------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss...................................................... $(107,120) $(55,886) $ (50,757)
Adjustments to reconcile net loss to net cash used in
operating activities:
Cumulative effect of accounting change...................... - 8,010 -
Gain on repurchase of Convertible notes..................... - (12,581) -
Depreciation................................................ 24,601 19,828 18,481
Amortization................................................ 2,907 2,197 1,173
Amortization of premium on marketable securities............ 1,287 2,256 2,432
Impairments of long-lived assets and investments............ 14,577 17,074 -
Purchased in-process R&D.................................... 3,800 - 1,863
Deferred taxes.............................................. 24,306 - -
Loss on sale of equipment................................... 39 - 20
Changes in operating assets and liabilities:
Accounts receivable....................................... 12,847 1,184 (2,906)
Inventory................................................. 9,601 1,384 2,957
Prepaid expenses and other assets......................... (3,765) 1,070 1,234
Accounts payable.......................................... (2,256) (1,681) 1,730
Accrued and other liabilities............................. 955 (386) 172
---------- --------- ---------
Net cash used in operating activities........................ (18,221) (17,531) (23,601)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of plant and equipment.............................. (16,845) (4,945) (4,178)
Purchases of marketable securities............................ (157,691) (104,619) (97,605)
Proceeds from sales of marketable securities.................. 90,985 108,197 122,577
Business acquisitions......................................... (27,927) - (4,217)
Proceeds from sale of equipment............................... 45 2 -
---------- --------- ---------
Net cash (used in) provided by investing activities........... (111,433) (1,365) 16,577

CASH FLOWS FROM FINANCING ACTIVITIES
Payments of obligations under capital leases.................. (404) (94) (88)
Repayments of long-term debt.................. ............... (3,385) (244) -
Proceeds from issuance of long-term debt net of offering costs 96,925 - -
Repurchase of Convertible notes............................... - (19,828) -
Issuances of common stock, net of related expenses............ 4,504 303 1,294
---------- --------- ---------
Net cash provided by (used in) financing activities........... 97,640 (19,863) 1,206
---------- --------- ---------

Net decrease in cash and cash equivalents..................... (32,014) (38,759) (5,818)
Cash and cash equivalents at beginning of period.............. 95,116 63,102 24,343
---------- --------- ---------
Cash and cash equivalents at end of period.................... $ 63,102 $ 24,343 $ 18,525
========== ========= =========

Supplemental disclosures of cash flow information:
Interest paid................................................. $ 131 $ 4,549 $ 3,335
Taxes paid.................................................... 45 200 -
Acquisition of equipment under capital lease.................. 248 - -

See accompanying notes.

ANADIGICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

ANADIGICS, Inc. (the "Company") is a leading supplier of radio
frequency ("RF")/microwave integrated circuit solutions for the communications
industry. The Company's products are used to send and receive signals in a
variety of broadband and wireless communications applications. In the broadband
markets, the focus is on applications for cable subscriber products, cable
infrastructure systems, wireless local area networks ("WLAN"), and fiber optic
communications systems. In the wireless market, the Company's efforts are
focused on applications for cellular and personal communication systems ("PCS")
handsets.

The Company designs, develops and manufactures radio frequency
integrated circuit solutions primarily using gallium arsenide ("GaAs")
semiconductor material with either Metal Semiconductor Field Effect Transistor
(MESFET), Pseudomorphic High Electron Mobility Transistor (PHEMT) or
Heterojunction Bipolar Transistor (HBT) process technology. The Company
manufactures its integrated circuits in its six-inch analog GaAs wafer
fabrication facility. GaAs offers certain advantages in RF/microwave
applications including the integration of numerous RF/microwave functions, which
cannot be easily integrated in silicon-based circuits. The Company's high
frequency integrated circuits enable manufacturers of communications equipment
to enhance overall system performance and reduce manufacturing cost and time to
market.

The consolidated financial statements include the accounts of
ANADIGICS, Inc. and its wholly owned subsidiaries. All significant inter-company
accounts and transactions have been eliminated in consolidation.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
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. Actual results could differ from those estimates.
Significant estimates that affect the financial statements include, but are not
limited to: recoverability of inventories, useful lives and amortization periods
and recoverability of long-lived assets.

CONCENTRATION OF CREDIT RISK

The Company grants trade credit to its customers, who are primarily
foreign manufacturers of wireless communication devices, cable and broadcast
television receivers and fiber optic communication devices. The Company performs
periodic credit evaluations of its customers and generally does not require
collateral. Sales and accounts receivable from customers are denominated in U.S.
dollars. The Company has not experienced significant losses related to
receivables from individual customers.

Net sales to individual customers who accounted for 10% or more of the
Company's total net sales and corresponding end application information are as
follows:

YEAR ENDED DECEMBER 31,
---------------------------------------------------
Customer (application) 2001 % 2002 % 2003 %
------ ------ ------ ------ ------ -----
Motorola (Broadband) $ 27,387 32% $ 18,666 23% $ 10,422 14%
Kyocera (Wireless) 9,620 11% 29,231 35% 21,263 28%
Ericsson (Wireless) 21,401 25% < 10% <10% < 10% <10%
LG Electronics (Wireless) <10% <10% < 10% <10% 10,346 14%

Accounts receivable at December 31, 2002 and 2003 from the greater than
10% customers accounted for 51% and 49% of total accounts receivable,
respectively.

REVENUE RECOGNITION

Production revenue is recorded when products are shipped to customers
pursuant to a purchase order. The Company charges customers for the costs of
certain contractually-committed inventories that remain at the end of a
product's life. Cancellation revenue is recognized when cash is received. The
Company maintains an allowance for doubtful accounts for estimated losses
resulting from customers' failure to make mandatory payments.

WARRANTY COSTS

The Company provides, by a current charge to income, an amount it estimates, by
examining historical returns and other information it deems critical, will be
needed to cover future warranty obligations for products sold during the year.
The accrued liability for warranty costs is included in Accrued liabilities in
the consolidated balance sheets.

PLANT AND EQUIPMENT

Plant and equipment are stated at cost. Depreciation of plant,
furniture and equipment has been provided on the straight-line method over 3-5
years.

The cost of equipment acquired under capital leases was $10,719 and
$10,633 at December 31, 2002 and 2003, respectively, and accumulated
amortization was $10,673 and $10,484 at December 31, 2002 and 2003,
respectively. Equipment acquired under a capital lease is amortized and included
in depreciation over the useful life of the leased equipment or the life of the
lease, whichever is shorter.

GOODWILL AND OTHER INTANGIBLES

Goodwill, process technology, customer list and a
covenant-not-to-compete were recorded as part of the Company's acquisitions.
Effective January 1, 2002, the Company adopted the provisions of Financial
Accounting Standards Board Statement No. 142, Goodwill and Other Intangible
Assets (FAS 142). Under the new rules, goodwill is no longer subject to
amortization but is reviewed for potential impairment upon adoption and
thereafter annually or upon the occurrence of an impairment indicator. FAS 142
prescribes a two-phase process for impairment testing of goodwill. The first
phase screens for impairment; while the second phase measures the impairment.
Process technology, the customer list and the covenant continued to be amortized
using the straight-line method over three to four year lives. The carrying
amount of the Company's intangibles are reviewed on a regular basis for any
signs of an impairment. The Company determines if the carrying amount is
impaired based on anticipated cash flows. In the event of impairment, a loss is
recognized based on the amount by which the carrying amount exceeds the fair
value of the asset. For each of the reporting units, fair value is determined
primarily using the anticipated cash flows, discounted at a rate commensurate
with the associated risk.

IMPAIRMENT OF LONG-LIVED ASSETS

Long-lived assets used in operations are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
the assets might not be recoverable. For long-lived assets to be held and used,
the Company recognizes an impairment loss only if its carrying amount is not
recoverable through its undiscounted cash flows and measures the impairment loss
based on the difference between the carrying amount and fair value. Long-lived
assets held for sale are reported at the lower of cost or fair value less costs
to sell.

INCOME TAXES

Deferred income taxes reflect the net effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the income tax basis of such assets and liabilities. The Company
maintains a full valuation allowance on its deferred tax assets.

RESEARCH AND DEVELOPMENT COSTS

The Company charges all research and development costs associated with
the development of new products to expense when incurred.

IN-PROCESS RESEARCH AND DEVELOPMENT

In the event of an acquisition, the Company will calculate the fair
value of in-process research and development projects, based upon discounted
cash flows estimated by management of future revenues and expected profitability
of the related technology. The rate used to discount the projected future cash
flows accounts for the time value of money, as well as the risks of realization
of the cash flows. Management will record a charge to earnings where projects
are determined to have not reached technological feasibility and do not have
alternative uses.

CASH EQUIVALENTS

The Company considers all highly liquid marketable securities with an
original maturity of three months or less as cash equivalents.

MARKETABLE SECURITIES

Available for sale securities are stated at fair value, as determined
by quoted market prices, with unrealized gains and losses reported in other
accumulated comprehensive income or loss. The cost of securities sold is based
upon the specific identification method. The amortized cost of debt securities
is adjusted for amortization of premium and accretion of discounts to maturity.
Such amortization, realized gains and losses, interest and dividends are
included in interest income.

FOREIGN CURRENCY TRANSLATION

The financial statements of subsidiaries outside of the United States
are measured using the local currency as the functional currency. Assets and
liabilities of these subsidiaries are translated at the rates of exchange at the
balance sheet date. The resultant translation adjustments are included in other
accumulated comprehensive income or loss. Income and expense items are
translated at the average monthly rates of exchange. Gains and losses from
foreign currency transactions of these subsidiaries are included in the
determination of net income or loss.

STOCK BASED COMPENSATION

As permitted by FASB Statement No. 123, Accounting for Stock-Based
Compensation (FAS 123), the Company has elected to follow the intrinsic value
method under Accounting Principle Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25) and related interpretations in accounting for its
employee stock option plans. Under APB 25, no compensation expense is recognized
at the time of option grant when the exercise price of the Company's employee
stock options equals the fair market value of the underlying common stock on the
date of grant.

The following table illustrates the effect on net loss and loss per
common share as if the Company had applied the fair value method to measure
stock-based compensation, required under the disclosure provisions of SFAS No.
123:

2001 2002 2003
--------- --------- ----------
Net loss, as reported....................... $(107,120) $ (55,886) $ (50,757)
Stock based compensation included in
reported net loss, net of tax - - 26
Stock based compensation expense under fair
value reporting, net of tax................ (17,084) (10,863) (7,905)
--------- ---------- ---------
Pro forma net loss.......................... $(124,204) $ (66,749) $ (58,636)
--------- --------- ---------
--------- --------- ---------
Basic and diluted loss per share
Net loss, as reported...................... $ (3.54) $ (1.83) $ (1.65)
Pro forma net loss......................... $ (4.11) $ (2.18) $ (1.91)

EARNINGS PER SHARE

Basic and diluted earnings per share are calculated in accordance with
FASB Statement No. 128, Earnings Per Share. Basic earnings per share is computed
by dividing net income by the weighted average number of common shares
outstanding during the period. Diluted earnings per share reflects the potential
dilution that could occur if stock options and other commitments to issue common
stock were exercised resulting in the issuance of common stock of the Company.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing parties.
The fair value of each of the following instruments approximates their carrying
value because of the short maturity of these instruments: cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities. At
December 31, 2003, the fair value of the Company's outstanding Convertible
senior notes, estimated based upon dealer quotes, was approximately $63,532.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement No. 143, Accounting for Asset Retirement Obligations (FAS 143). FAS
143 requires that asset retirement obligations that are identifiable upon
acquisition and construction, and during the operating life of a long-lived
asset be recorded as a liability using the present value of the estimated cash
flows. A corresponding amount would be capitalized as part of the asset's
carrying amount and amortized to expense over the asset's useful life. The
Company adopted the provisions of FAS 143 effective January 1, 2003 and there
was no impact on the financial statements.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities (FIN 46). FIN 46 is the interpretation of Accounting
Research Bulletin No. 51 Consolidated Financial Statements, which addresses
consolidation by business enterprises of variable interest entities. FIN 46 is
effective immediately for all variable interest entities created after January
31,2003 and effective for periods ending after March 15, 2004 for variable
interest entities in which an enterprise holds a variable interest that it
acquired before February 1,2003. The adoption of FIN 46 did not, nor is expected
to, have a material impact on the Company's financial position or results of
operations.

RECLASSIFICATIONS

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

2. BUSINESS ACQUISITIONS

On March 31, 2003, the Company acquired certain assets and liabilities
of the WLAN power amplifier business of RF Solutions ("RFS"). The RFS
acquisition was a strategic initiative that allows the Company to participate in
the emerging and fast-growing WLAN market with a depth of experienced design
personnel and cutting-edge products. The Company paid cash purchase
consideration on March 31, 2003 of $2,800 and will be required to issue shares
of the Company's common stock as contingent consideration, based on the
achievement of certain revenue milestones over the 12 months ending March 31,
2004. Currently, management's estimate of the anticipated share issuance ranges
between 600,000 and 750,000 shares, which would increase the goodwill attributed
to RFS. The Company is unable to assess the specific amount of the contingent
purchase consideration and has therefore excluded it from the fair value
allocation. In addition, the Company incurred $217 in acquisition-related costs.

On October 14, 2003, the Company acquired certain assets of a CDMA
wireless handset power amplifier developer, formerly named Tavanza, a
wholly-owned subsidiary of Celeritek. The Company paid cash consideration of
$1,000 and incurred $200 in acquisition-related costs.

The acquisitions were accounted for using the purchase method of
accounting. The results of operations for RFS and Tavanza are included in the
results of operations of the Company from the respective dates of purchase.
There are no significant differences between the accounting policies of the
Company and RFS or Tavanza.

The acquisition costs of $4,217 was allocated to the assets acquired
and liabilities assumed, based on their fair values as follows:

Total
Fair value of tangible assets $1,029
Fair value of liabilities assumed (527)
In-process research and development 1,863
Process technology 210
Covenant-not-to-compete 175
Customer list 240
Goodwill 1,227
-----
Total purchase price $4,217

The Company recorded a charge of $1,863 representing the fair value of
certain acquired research and development projects relating to dual band, high
gain and modules applications for Wireless LAN and certain passive-free power
amplifier applications, in the case of Tavanza, that were determined to have not
reached technological feasibility and to not have alternative future uses. The
fair value of such projects was determined based on discounted net cash flows.
These cash flows were based upon management's estimates of future revenues and
expected profitability of each technology. The rate used to discount these
projected cash flows accounted for the time value of money, as well as the risks
of realization of cash flows.

The following unaudited pro-forma consolidated financial information
reflects the results of operations for the twelve months ended December 31, 2002
and 2003, as if the acquisitions of RFS and Tavanza had occurred on December 31,
2001 and after giving effect to purchase accounting adjustments. The charge for
purchased in-process research and development is not included in the pro-forma
results, because it is non-recurring.

YEAR ENDED DECEMBER 31
----------------------
2002 2003
--------- ---------
Pro-forma revenue $ 83,020 $ 75,751
Pro-forma net loss before cumulative
effect of accounting change (57,034) (51,947)
Pro-forma net loss (65,044) (51,947)

Basic and diluted net loss per share
Pro-forma net loss before cumulative
effect of accounting change $ (1.86) $ (1.69)
Pro-forma net loss (2.13) (1.69)

These pro-forma results have been prepared for comparative purposes
only and do not purport to be indicative of what operating results would have
been had the acquisition actually taken place on December 31, 2001. In addition,
these results are not intended to be a projection of future results and do not
reflect any synergies that might be achieved from the combined operations.

On April 2, 2001, the Company acquired Telcom Devices Corp. ("Telcom"),
a manufacturer of indium phosphide based photodiodes for the telecommunications
and data communications markets. The acquisition was accounted for using the
purchase method of accounting and the results of operations of Telcom are
included in the Company's consolidated results of operations from the date of
purchase. There were no significant differences between the accounting policies
of the Company and Telcom.

The cash consideration paid on April 2, 2001, for 100% of Telcom's
stock was $28,000. In addition, the Company incurred $300 in acquisition-related
costs. The total purchase price of $28,300 was allocated to the assets acquired
and liabilities assumed, based on their fair values (as determined by an
appraisal) as follows:

Fair value of tangible assets $5,522
Fair value of liabilities assumed (1,369)
In-process research and development 3,800
Process technology 3,400
Covenant not to compete 800
Deferred tax liability (1,831)
Goodwill 17,978
------
Total purchase price $28,300

The process technology and covenant not-to-compete were being amortized
using the straight-line method over their estimated useful lives of five and two
years, respectively. The Company recorded a charge of $3,800 representing the
fair value of certain acquired research and development projects that were
determined to have not reached technological feasibility and not have
alternative future uses.

The following unaudited pro-forma consolidated financial information
reflects the results of operations for the twelve months ended December 31,
2001, as if the acquisition of Telcom had occurred on December 31, 2000 and
after giving effect to purchase accounting adjustments. The charge for purchased
in-process R&D is not included in the pro-forma results, because it is
non-recurring.

YEAR ENDED
DECEMBER 31
2001
------------
Pro-forma revenue........................................ $ 87,245
Pro-forma net loss.................... .................. $ (106,313)

Basic and diluted pro-forma net loss per share $ (3.51)

These pro-forma results have been prepared for comparative purposes only and
do not purport to be indicative of what operating results would have been had
the acquisition actually taken place on December 31, 2000. In addition, these
results are not intended to be a projection of future results and do not reflect
any synergies that might be achieved from the combined operations.

3. INTANGIBLES, GOODWILL, CUMULATIVE EFFECT OF ACCOUNTING CHANGE AND
ACQUISITION INTANGIBLES' IMPAIRMENT CHARGES

As of December 31, 2002 and 2003, the Company's intangible assets
consist of the following:

Gross Carrying Amount Accumulated Amortization
December 31, December 31,
--------------------- -------------------------
2002 2003 2002 2003
--------- ---------- ----------- ------------
Goodwill $ - $ 1,227 $ - $ -
Process Technology - 210 - 35
Covenant not to compete - 175 - 12
Customer list - 240 - 17
--------- ---------- ----------- ------------
$ - $ 1,852 $ - $ 64
========= ========== =========== ============

Annual amortization expense related to intangible assets was $64 in the
year ended December 31, 2003. In the year ended December 31, 2002, intangible
asset amortization expense was $1,080 which was recorded prior to the impairment
write-off of the intangibles in the fourth quarter of 2002, as discussed below.

Future annual amortization expense related to intangible assets is
expected to be as follows:

2004 2005 2006 2007 2008
------- ------- ------- ------- -------
Amortization expense $ 194 $ 194 $ 162 $ 11 $ -

Effective January 1, 2002, the Company adopted the provisions of FAS
142 and under the new rules, goodwill is no longer subject to amortization but
is reviewed for potential impairment annually or upon the occurrence of an
impairment indicator. The annual amortization of Telcom's goodwill, which would
have approximated $2,567 was no longer required in 2002. Other intangible assets
continued to be amortized over their useful lives. As a result of completing the
initial required impairment test, the Company recorded a charge for the
cumulative effect of the accounting change in the amount of $8,010 ($0.26 per
share) representing the excess of the carrying value of a reporting unit
(Telcom) as compared to its estimated fair value as of January 1, 2002.

During the course of 2002, the Company monitored fiber market
conditions in light of job cuts and difficult prospects announced by several of
its end-market customers. In view of these weaker market conditions, the Company
performed several tests of its goodwill and intangible assets for potential
impairment during the year. As a result of those evaluations, the Company
recorded a goodwill impairment charge of $8,043 and an asset impairment charge
for its remaining acquired intangibles of $2,310. The $2,310 was included within
charges for asset impairments as discussed in Note 4 below.

Had FAS 142 been adopted on January 1, 2001, the net loss for the year
ended December 31, 2001 of $107,120 ($3.54 per share) would have reversed
goodwill amortization of $1,925 ($0.06 per share) and resulted in an adjusted
net loss of $105,195 ($3.48 per share).

4. RESTRUCTURING, IMPAIRMENT AND OTHER CHARGES

During 2003, the Company recorded restructuring charges of $925
pertaining to severance and related benefits of workforce reductions of
approximately 19 operations and administrative positions and lease-related
costs.

In 2002, the Company recorded charges for asset impairments, impairment
on investments and for restructuring and other charges of $8,641, $390 and
$5,001, respectively. The asset impairment charge of $8,641 related to the
write-off of certain manufacturing and research equipment, leasehold
improvements, certain acquired intangibles and certain technology licenses that
are no longer used in the ongoing activities of the business. The charge for
impairment on investments was recorded on a private-equity investment following
an evaluation that indicated the carrying value of such investment exceeded its
estimated fair market value. The restructuring and other charges were for
lease-related costs and for severance and related employee benefit costs of
workforce reductions. The workforce reductions eliminated approximately 83
positions throughout the Company.

In 2001, the Company recorded charges for asset impairment, impairment
of investments and for restructuring and other charges amounting to $10,433,
$3,061 and $3,775, respectively. The asset impairment charge of $10,433 related
to the write-down to fair market value of certain manufacturing and research
fixed assets, as they were surplus to the Company's operating levels and
research activities. The charge for impairment of investments was recorded for
certain private-equity investments following an evaluation of the Company's
investments indicated that the carrying value of such investments exceeded the
estimated fair market value. The restructuring and other charge was for
severance and related benefit costs of workforce reductions as well as certain
lease-related undertakings. The workforce reductions eliminated 109 positions
throughout the Company.

Activity and liability balances related to the restructuring and other
charges for the years ended December 31, 2002 and 2003 are as follows:

Lease Workforce
Related Reductions Total
--------- --------- --------
Year ended December 31, 2002
Restructuring and other expenses $ 3,374 $ 1,628 $ 5,002
Deductions (1,759) (2,185) (3,944)
December 31, 2002 restructuring balance 2,804 152 2,956
Year ended December 31, 2003 ------- ------- --------
Restructuring and other expenses 300 625 925
Deductions (1,124) (763) (1,887)
------- ------- -------
December 31, 2003 restructuring balance $ 1,980 $ 14 $ 1,994
======= ======= =======

5. SEGMENTS

The Company operates in one segment. Its integrated circuits are
primarily manufactured using common manufacturing facilities located in the same
domestic geographic area. All operating expenses and assets of the Company are
combined and reviewed by the chief operating decision maker on an
enterprise-wide basis, resulting in no additional discrete financial information
or reportable segment information.

The Company classifies its revenues based upon the end application of
the product in which its integrated circuits are used. Net sales by end
application are regularly reviewed by the chief operating decision maker and are
as follows:

YEAR ENDED DECEMBER 31,
--------------------------------
2001 2002 2003
------- ------- -------
Wireless .................... $32,250 $44,689 $41,538
Broadband ................... 52,515 37,875 33,674
------- ------- -------
Total .................. $84,765 $82,564 $75,212
======= ======= =======

The Company primarily sells to four geographic regions: Asia, U.S.A.
and Canada, Europe, and Latin America. The geographic region is determined based
on shipping addresses, not on the locations of the ultimate users. Net sales to
each of the four geographic regions are as follows:

YEAR ENDED DECEMBER 31,
--------------------------------
2001 2002 2003
------- ------- -------
Asia ........................... $27,408 $31,897 $31,014
U.S.A and Canada ............... 30,955 44,193 38,024
Europe ......................... 8,976 3,767 3,676
Latin America .................. 17,426 2,707 2,498
------- ------- -------
Total .................... $84,765 $82,564 $75,212
======= ======= =======

6. LONG-TERM DEBT

On November 27, 2001, the Company issued $100,000 aggregate principal
amount of 5% Convertible Senior Notes ("Convertible notes" or "notes") due
November 15, 2006. The notes are convertible into shares of common stock at any
time prior to their maturity or prior redemption by the Company. The notes are
convertible into shares of common stock at a rate of 47.619 shares for each
$1,000 principal amount (convertible at a price of $21.00 per share), subject to
adjustment. Interest is payable semi-annually on May 15 and November 15 of each
year.

ANADIGICS, Inc. has the option to redeem all or a portion of the notes
at a redemption price of 102% of the principal amount during the period from
November 15, 2004 through November 14, 2005 and at a redemption price of 101% of
the principal amount during the period from November 15, 2005 to November 14,
2006. In the event of a change in control, as defined, note-holders may require
the Company to repurchase the notes at 100% of the principal amount. In the
event of a change in control, the Company, in certain circumstances, may elect
to repay the notes in common stock valued at 95% of the average of the closing
prices of the Company's common stock for the five days immediately preceding and
including the third trading day prior to the repurchase.

During 2002, the Company repurchased and retired $33,300 principal
amount of the Convertible notes for $20,365 in cash, inclusive of accrued
interest of $537. The Company recognized a gain of $12,581 on the repurchase
after adjusting for accrued interest and the write-off of a proportionate share
of unamortized offering costs. In accordance with the provisions of FAS 145, the
gain on repurchase was included in the loss before income taxes and cumulative
effect of accounting change.

Unamortized debt issuance costs of $1,643 and $1,221 at December 31,
2002 and 2003, respectively, consisting principally of underwriters' fees, were
included in other assets and are being amortized over the life of the notes.

7. COMMITMENTS AND CONTINGENCIES

The Company leases manufacturing, warehousing and office space and
manufacturing equipment under noncancelable operating leases that expire through
2016. The Company also leases certain equipment under capital leases that expire
through 2005. Rent expense, net of sublease income was $3,946, $3,560 and $3,225
in 2001, 2002 and 2003, respectively. Sublease income was zero in 2001, $406 in
2002, and $789 in 2003. The future minimum lease payments under the
noncancelable operating leases and the present value of the minimum capital
lease payments are as follows:

CAPITAL OPERATING
YEAR LEASES LEASES
- ---- --------- -----------
2004................................................ $ 84 $ 3,795
2005................................................ 6 2,419
2006................................................ 1,674
2007................................................ 1,699
2008................................................ 1,704
Thereafter.......................................... 15,891
--------- ----------
Total minimum lease payments........................ 90 27,182
Less: contractually-required sublease income........ - (1,110)
--------- ----------
$ 90 $ 26,072
========= ==========

The lessor on the lease for the Company's headquarters building in
Warren, New Jersey, changed during 2003 as a result of the settlement of a
bankruptcy proceeding involving the prior lessor. The lease agreement is
unchanged as a result of the transfer of ownership.

In addition to the above, at December 31, 2003, the Company had
purchase commitments of approximately $2,056 for equipment, furniture, and
leasehold improvements.

8. MARKETABLE SECURITIES

The following is a summary of available-for-sale securities:

Available-for-Sale Securities
-----------------------------------------
Gross Estimated
Unrealized Fair
Cost Gains (Losses) Value
-----------------------------------------
U.S. Treasury and
Agency Securities $ 23,526 $ 66 $ 23,592
U.S. Corporate Securities 106,873 710 107,583
-------- -------- --------
Total at December 31, 2002 $130,399 $ 776 $131,175
-------- -------- --------
-------- -------- --------
U.S. Treasury and
Agency Securities $ 9,966 $ (16) $ 9,950
U.S. Corporate Securities 93,014 141 93,155
-------- -------- --------
Total at December 31, 2003 $102,980 $ 125 $103,105
======== ======== ========

The amortized cost and estimated fair value of debt and marketable
equity securities at December 31, 2003, by contractual maturity, are shown
below. Expected maturities may differ from contractual maturities because the
issuers of the securities may have the right to prepay obligations without
prepayment penalties.

Available-for-Sale Securities
-----------------------------
Estimated
Fair
Cost Value
-----------------------------
Due in one year or less $ 53,920 $ 54,130
Due after one year through three years 49,060 48,975
-------- --------
Total $102,980 $103,105
======== ========

9. INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out
method) or market. Inventories consist of the following:

DECEMBER 31,
--------------------
2002 2003
--------- ---------
Raw materials..................................... $ 4,316 $ 3,302
Work in process................................... 10,080 7,200
Finished goods.................................... 6,015 4,564
--------- ---------
20,411 15,066
Reserves.......................................... (7,134) (4,745)
--------- ---------
TOTAL............................................ $ 13,277 $ 10,321
========= =========

10. ACCRUED LIABILITIES

Accrued liabilities consist of the following:
DECEMBER 31,
--------------------
2002 2003
--------- ---------
Accrued compensation.............................. $ 2,715 $ 3,732
Warranty reserve.................................. 368 100
Other............................................. 1,650 1,786
--------- ---------
TOTAL $ 4,733 $ 5,618
========= =========

Warranty reserve movements in the years ended December 31, 2002 and
2003 for returns were $333 and $278, respectively. The periodic charge (benefit)
for estimated warranty costs were $(259) and $10 in the years ended December 31,
2002 and 2003.

11. INCOME TAXES

The components of the provision (benefit) for income taxes are as
follows:

YEAR ENDED DECEMBER 31,
---------------------------
2001 2002 2003
------- -------- -------
Current benefit: Federal.................... $ - $ (4,307) $ (382)
State and foreign.......... - - -
Deferred provision: Federal.................... 22,924 - -
State...................... 1,414 - -
------- -------- -------
Total ....................................... $24,338 $ (4,307) $ (382)
======= ======== =======

In December 2002, the Company received a $4,307 refund pursuant to a
carryback claim under the Job Creation and Workers Assistance Tax Act of 2002.
The refund represents taxes paid in 1996 and 1997. During 2001, the Company
recorded a valuation allowance of $26,814 against the carrying value of its
deferred tax asset. Deferred tax assets require a valuation allowance when, in
the opinion of management, it is more likely than not that some portion of the
deferred tax assets may not be realized. Whereas realization of the deferred tax
assets is dependent upon the timing and magnitude of future taxable income prior
to the expiration of the deferred tax attributes, management recorded a full
valuation allowance in 2001. The amount of the deferred tax assets considered
realizable, however, could change if estimates of future taxable income during
the carry-forward period are changed.

Significant components of the Company's net deferred taxes as of
December 31, 2002 and 2003 are as follows:

DECEMBER 31,
--------------------
2002 2003
--------- ---------
Deferred tax balances
Accruals/reserves..................................... $ 6,458 $ 3,790
Net operating loss carryforwards...................... 53,917 77,260
General business and research and development credits. 4,634 4,634
Deferred rent expense................................. 1,003 1,091
Difference in basis of plant and equipment............ 2,867 2,295
Other................................................. 22 (71)
Valuation reserve..................................... (68,901) (88,999)
--------- ---------
Net deferred tax assets................................. - -
========= =========

As of December 31, 2003, the Company had net operating loss
carryforwards of approximately $215,000 for both federal and state tax reporting
purposes. The federal carryforward will begin to expire in 2018, and the state
carryforwards will begin to expire in 2005. At December 31, 2003, approximately
$24 million of the deferred tax asset related to net operating loss
carryforwards and an equivalent amount of deferred tax asset valuation allowance
represented tax benefits associated with the exercise of non-qualified stock
options. Such benefit, when realized, will be credited to additional paid-in
capital.

The reconciliation of income tax expense computed at the U.S. federal
statutory rate to the provision (benefit) for income taxes is as follows:

YEAR ENDED DECEMBER 31,
-----------------------------------------------------
2001 2002 2003
---------------- ----------------- ----------------

Tax at U.S. statutory rate................ $(28,956) (35.0)% $(18,264) (35.0)% $(17,899) (35.0)%
State and foreign tax (benefit), net of
federal tax effect....................... (2,640) (3.2) (1,696) (3.2) (1,662) (3.2)
Research and experimentation tax credits.. (666) (0.8) (337) (0.6) - -
Valuation allowance, net of carryback..... 56,223 67.9 11,232 21.5 20,098 39.3
Intangibles amortization and other........ 377 0.5 4,758 9.1 (919) (1.8)
-------- ------ -------- ------ -------- ------
Provision (benefit) for income taxes...... $ 24,338 29.4% $ (4,307) (8.2)% $ (382) (0.7)%
======== ====== ======== ====== ======== ======

12. STOCKHOLDERS' EQUITY

On December 17, 1998, the Company adopted a Shareholders' Rights
Agreement (the "Agreement"). Pursuant to the Agreement, as amended on November
30, 2000, rights were distributed as a dividend at the rate of one right for
each share of ANADIGICS, Inc. common stock, par value $0.01 per share, held by
stockholders of record as of the close of business on December 31, 1998. The
rights will expire on December 17, 2008, unless earlier redeemed or exchanged.
Under the Agreement, each right will entitle the registered holder to buy one
one-thousandth of a share of Series A Junior Participating Preferred Stock at a
price of $75.00 per one one-thousandth of a share, subject to adjustment in
accordance with the Agreement. The rights will become exercisable only if a
person or group of affiliated or associated persons acquires, or obtains the
right to acquire, beneficial ownership of ANADIGICS, Inc. common stock or other
voting securities that have 18% or more of the voting power of the outstanding
shares of voting stock, or upon the commencement or announcement of an intention
to make a tender offer or exchange offer, the consummation of which would result
in such person or group acquiring, or obtaining the right to acquire, beneficial
ownership of 18% or more of the voting power of ANADIGICS, Inc. common stock or
other voting securities.

13. EMPLOYEE BENEFIT PLANS

In 1995, the Company adopted an employee stock purchase plan ("ESP
Plan") under Section 423 of the Internal Revenue Code. All full-time employees
of ANADIGICS, Inc. and part-time employees, as defined in the ESP Plan, are
eligible to participate in the ESP Plan. An aggregate of 1,693,750 shares of
common stock are reserved for offering under the ESP Plan. Offerings are made at
the commencement of each calendar year and must be purchased by the end of that
calendar year. Pursuant to the terms of ESP Plan, shares purchased and their
applicable per share prices were 113,157 ($12.93), 88,493 ($2.21), 528,894
($2.32), for the years ended December 31, 2001, 2002 and 2003, respectively.

Employees and outside directors have been granted options to purchase
shares of common stock under stock option plans adopted in 1994, 1995 and 1997.
An aggregate of 489,130, 4,912,500 and 5,100,000 shares of common stock were
reserved for issuance under the 1994 Long-Term Incentive Share and Award Plan,
the 1995 Long-Term Incentive Share Award Plan and the 1997 Long-Term Incentive
and Share Award Plan for Employees (the "Plans"), respectively. The Plans
provide for the granting of stock options, stock appreciation rights, restricted
shares, or other share based awards to eligible employees and directors, as
defined in the Plans. Options granted under the Plans become exercisable in
varying amounts over periods of up to three years. To date, no stock
appreciation rights or restricted shares have been granted under the Plans.

On May 20, 2002, the Company announced a voluntary stock option
exchange program for eligible employees. Officers and directors were not
eligible for the exchange program. Pursuant to the terms and conditions of the
offer, which expired on June 18, 2002, the Company accepted for cancellation
options to purchase 838,157 shares of common stock having a weighted average
exercise price of $36.90. On December 20, 2002, participating employees were
issued 760,742 options under this program in exchange for the cancelled options.
The new options have an exercise price equal to $2.53, which represents the fair
market value at the date of grant and fully vested on December 20, 2003.

On July 3, 2003, the Company announced a voluntary stock option
exchange program for employees and officers. Directors of the Company were not
eligible for the exchange program. Pursuant to the terms and conditions of the
offer, which expired on August 4, 2003, the Company accepted for cancellation
options to purchase 1,673,931 shares of common stock having a weighted average
exercise price of $19.49. On February 6, 2004, participating employees were
issued 551,564 stock options, under this one for three-exchange program, for the
cancelled options. The new options have an exercise price equal to $7.27, which
represents the fair market value at the date of grant and will fully vest after
one year.

A summary of the Company's stock option activity, and related
information for the years ended December 31, 2001, 2002 and 2003 are as follows:

2001 2002 2003
------------------- -------------------- ----------------
WEIGHTED WEIGHTED WEIGHTED
COMMON AVERAGE COMMON AVERAGE COMMON AVERAGE
STOCK EXERCISE STOCK EXERCISE STOCK EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- --------- -------- ------- --------

Outstanding at beginning
of year........................ 5,841,531 $ 18.27 6,283,632 $ 17.52 7,132,034 $ 10.80
Granted........................ 1,645,608 14.64 2,248,353 3.90 856,366 3.44
Exercised...................... (420,252) 7.23 (16,773) 6.44 (22,961) 2.93
Forfeited...................... (783,255) 22.84 (545,021) 21.17 (386,571) 10.78
Cancelled...................... - - (838,157) 36.90 (1,673,931) 19.49
--------- --------- ---------
Outstanding at end of year....... 6,283,632 17.52 7,132,034 10.80 5,904,937 7.30
========= ========= =========
Exercisable at end of year....... 3,553,713 16.65 3,903,164 13.69 4,185,488 8.65
========= ========= =========

Stock options outstanding at December 31, 2003 are summarized as
follows:

OUTSTANDING WEIGHTED AVERAGE WEIGHTED AVERAGE EXERCISABLE WEIGHTED AVERAGE
RANGE OF OPTIONS AT REMAINING EXERCISE AT EXERCISE
EXERCISE PRICES DEC.31, 2003 CONTRACTUAL LIFE PRICE DEC. 31, 2003 PRICE
- ---------------- ------------- ----------------- ---------------- -------------- ----------------

$ 0.38 to $ 2.53 2,016,839 8.84 $ 2.46 1,180,485 $ 2.47
$ 2.79 to $ 4.17 1,152,725 6.69 $ 3.59 645,769 $ 4.16
$ 4.84 to $ 9.56 986,924 4.98 $ 6.15 769,699 $ 6.29
$ 9.63 to $15.56 1,297,146 6.74 $ 13.50 1,143,745 $13.49
$15.94 to $53.48 451,303 5.19 $ 23.10 445,790 $23.17

FASB 123 requires pro forma information regarding net income and
earnings per share as if the Company has accounted for its employee stock
options, warrants and shares of common stock purchased by employees in
connection with the ESP Plan ("equity awards") under the fair value method
prescribed by FASB 123. The fair value of these equity awards was estimated at
the date of grant using a Black-Scholes option pricing model. The following are
weighted average assumptions for stock option grants for 2001, 2002 and 2003,
respectively: risk-free interest rate of 3.6%, 2.0% and 1.8%; expected
volatility of 1.10, 1.08 and 1.10; expected option life of one year from vesting
and an expected dividend yield of 0.0%. The weighted average fair value of
options granted during 2001, 2002 and 2003 was $9.64, $2.40 and $2.24,
respectively.

ANADIGICS, Inc. also sponsors an Employee Savings and Protection Plan
under Section 401(k) of the Internal Revenue Code which is available to all
full-time employees. Employees can make voluntary contributions up to
limitations prescribed by the Internal Revenue Code. The Plan was amended in
2001 and the Company now matches 50% of employee contributions up to 6% of their
gross pay. The Company recorded expense of $741, $681 and $611 for the years
ended December 31, 2001, 2002 and 2003, respectively, relating to plan
contributions.

14. EARNINGS PER SHARE

The reconciliation of shares used to calculate basic and diluted earnings
per share consists of the following:

Year ended December 31,
------------------------------------
2001 2002 2003
----------- ----------- ----------
Weighted average common shares
outstanding used to calculate
basic earnings per share........... 30,248,476 30,587,032 30,716,749

Net effect of dilutive securities -
based on treasury stock method
using average market price......... -* -* -*
---------- ---------- ----------
Weighted average common and dilutive
securities outstanding used
to calculate diluted earnings
per share......................... 30,248,476 30,587,032 30,716,749
========== ========== ==========

* Any dilution arising from the Company's outstanding stock options or shares
potentially issuable upon conversion of the Convertible notes are not
included as their effect is anti-dilutive.

15. OTHER ACCUMULATED COMPREHENSIVE INCOME

The components of other accumulated comprehensive income are as
follows:

UNREALIZED
FOREIGN GAIN (LOSS)
CURRENCY ON AVAILABLE-
TRANSLATION FOR-SALE
ADJUSTMENTS SECURITIES TOTAL
------------ ------------- --------
Balance at December 31, 2001 ...... $ (23) $ 731 $ 708
Unrealized gain on available-
for-sale securities ............ - 116 116
Foreign currency translation
adjustment ..................... (10) - (10)
Net gain recognized in other
comprehensive income ........... - (71) (71)
----- ----- -----
Balance at December 31, 2002 ...... (33) 776 743
Unrealized loss on available-
for-sale securities ............ - (666) (666)
Foreign currency translation
adjustment ..................... 46 - 46
Net gain recognized in other
comprehensive income ........... - 15 15
----- ----- -----
Balance at December 31, 2003 ...... $ 13 $ 125 $ 138
===== ===== =====

The earnings associated with the Company's investment in its foreign
subsidiaries is considered to be permanently invested and no provision for U.S.
federal and state income taxes on those earnings or translation adjustments have
been provided.

16. LEGAL PROCEEDINGS

ANADIGICS is a party to litigation arising out of the operation of our
business. We believe that the ultimate resolution of such litigation should not
have a material adverse effect on our financial condition, results of operations
or liquidity.

17. QUARTERLY FINANCIAL DATA (UNAUDITED)

QUARTER ENDED
-----------------------------------------------------------------------------------------------
MARCH 30, JUNE 29, SEPT. 28, DEC. 31, MARCH 29, JUNE 28, SEPT.27, DEC. 31,
2002 2002 2002 2002 2003 2003 2003 2003
----------- ----------- ---------- ---------- ----------- ---------- ----------- ---------

(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales .......................... $ 19,521 $ 23,021 $ 21,288 $ 18,734 $ 16,087 $ 18,037 $ 17,750 $ 23,338
Cost of sales ...................... 19,005 18,832 21,225 16,240 16,079 17,250 17,538 21,060
----------- ----------- ---------- ---------- ----------- ---------- ----------- ---------
Gross profit (loss) ................ 516 4,189 63 2,494 8 787 212 2,278

Research and development ........... 7,578 7,699 7,586 6,879 7,157 8,280 8,029 8,609
Selling and administrative
expense ......................... 5,279 5,656 5,463 5,002 4,518 4,521 4,795 5,586
Restructuring and other
charges ......................... 2,715 - 2,286 - 625 - - 300
Asset impairment charges ........... 3,244 - 3,087 2,310 - - - -
Goodwill impairment charge ......... - - 8,043 - - - - -
Purchased in-process R&D ........... - - - - - 1,690 - 173
----------- ----------- ---------- ---------- ----------- ---------- ----------- ---------
Operating loss ..................... (18,300) (9,166) (26,402) (11,697) (12,292) (13,703) (12,612) (12,390)
Interest income .................... 1,681 1,735 1,543 1,350 1,013 874 741 715
Interest expense ................... (1,442) (1,422) (1,307) (948) (941) (940) (940) (940)
Impairment on investments .......... - - (390) - - - - -
Gain on notes repurchase ........... - - 12,581 - - - - -
Other (loss) income ................ 2 - (5) 4 (21) (2) 183 116
----------- ----------- ---------- ---------- ----------- ---------- ----------- ---------
Loss before income taxes .......... (18,059) (8,853) (13,980) (11,291) (12,241) (13,771) (12,628) (12,499)
(Benefit) provision for income
taxes ............................ - - - (4,307) - - - (382)
----------- ----------- ---------- ---------- ----------- ---------- ----------- ---------
Loss before cumulative
effect of accounting change ...... (18,059) (8,853) (13,980) (6,984) (12,241) (13,771) (12,628) (12,117)
----------- ----------- ---------- ---------- ----------- ---------- ----------- ---------
Cumulative effect of accounting
change .......................... (8,010) - - - - - - -
----------- ----------- ---------- ---------- ----------- ---------- ----------- ---------
Net loss ........................... $(26,069) $ (8,853) $(13,980) $ (6,984) $(12,241) $(13,771) $(12,628) $(12,117)
=========== =========== ========== ========== =========== ========== =========== =========

Basic and diluted loss per share
Loss before cumulative effect
of accounting change ............ $ (0.59) $ (0.29) $ (0.46) $ (0.23) $ (0.40) $ (0.45) $ (0.41) $ (0.39)
Net loss ........................... $ (0.85) $ (0.29) $ (0.46) $ (0.23) $ (0.40) $ (0.45) $ (0.41) $ (0.39)

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES.

Under the supervision and with the participation of certain members of
the Company's management, including the President and Chief Executive Officer
and Chief Financial Officer, the Company completed an evaluation of the
effectiveness of the design and operation of its disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) to the Securities
Exchange Act of 1934, as amended, (the "Exchange Act")). Based on this
evaluation, the Company's President and Chief Executive Officer and Chief
Financial Officer believe that the disclosure controls and procedures were
effective as of December 31, 2003.

There was no change in the Company's internal control over financial
reporting during the Company's last fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The Company has adopted a Code of Conduct and Business Ethics that
applies to directors, officers and employees, including the President and Chief
Executive Officer, and Chief Financial Officer and has posted such code on its
website at (WWW.ANADIGICS.COM). Changes to and waivers granted with respect to
the Company's Code of Conduct and Business Ethics for officers and directors
that are required to be disclosed pursuant to the applicable rules and
regulations will be filed on a current report on Form 8-K and posted on the
Company website.

The registrant incorporates by reference herein information to be set
forth in its definitive proxy statement for its 2004 annual meeting of
shareholders that is responsive to the information required with respect to this
item.

ITEM 11. EXECUTIVE COMPENSATION.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) 1. Financial Statements

Financial Statements are included in Item 8, "Financial Statements and
Supplementary Data" as follows:

- Report of Independent Auditors

- Consolidated Balance Sheets - December 31, 2002 and 2003

- Consolidated Statements of Operations - Years ended December
31, 2001, 2002 and 2003

- Consolidated Statements of Comprehensive Loss - Years ended
December 31, 2001, 2002 and 2003

- Consolidated Statements of Stockholders' Equity - Years ended
December 31, 2001, 2002 and 2003

- Consolidated Statements of Cash Flows - Years ended December
31, 2001, 2002 and 2003

- Notes to Consolidated Financial Statements

2. Financial Statement Schedules

Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and
therefore have been omitted.

(b) Reports on Form 8-K filed during the quarter ended December 31, 2003.

On October 20, 2003, the Company furnished on Form 8-K a press
release announcing the Company's financial results for its third
quarter of 2003.

2.1 Stock Purchase Agreement dated April 2, 2001, among the
Company, Telcom Devices Corp. and the sellers named therein.
Filed as an exhibit to the Company's Current Report on Form
8-K dated April 6, 2001, and incorporated herein by reference.

3.1 Amended and Restated Certificate of Incorporation of the
Company, together with all amendments thereto. Filed as an
exhibit to the Company's Registration Statement on Form S-3
(Registration No. 333-75040), and incorporated herein by
reference.

3.2 Amended and Restated By-laws of the Company. Filed as an
exhibit to the Company's Registration Statement on Form S-3
(Registration No. 333-75040), and incorporated herein by
reference.

4.1 Form of Common Stock Certificate. Filed as an exhibit to the
Company's Registration Statement on Form S-1 (Registration No.
33-89928), and incorporated herein by reference.

4.2 Indenture, dated as of November 27, 2001, between the Company,
as Issuer, and State Street Bank & Trust Company, N.A., as
Trustee for the 5% Convertible Senior Notes due November 15,
2006. Filed as an exhibit to the Company's Registration
Statement on Form S-3 (Registration No. 333-75040), and
incorporated herein by reference.

4.3 Form of Registration Rights Agreement. Filed as an exhibit to
the Company's Registration Statement on Form S-1 (Registration
No. 33-89928), and incorporated herein by reference.

4.4 Schedule to Form of Registration Rights Agreement. Filed as an
exhibit to the Company's Registration Statement on Form S-1
(Registration No. 333-20783), and incorporated herein by
reference.

4.5 Rights Agreement dated as of December 17, 1998 between the
Company and Chase Mellon Shareholder Services L.L.C., as
Rights Agent. Filed as an exhibit to the Company's current
report on Form 8-K filed on December 17, 1998, and
incorporated herein by reference.

4.6 Amendment No. 1 as of November 20, 2000 to the Rights
Agreement dated as of December 17, 1998 between the Company
and Chase Mellon Shareholder Services L.L.C., as Rights Agent.
Filed as an exhibit to the Company's Current Report on Form
8-K filed on December 4, 2000.

4.7 Registration Rights Agreement, dated November 27, 2001,
between the Company, as Issuer, and the Purchasers of the 5%
Convertible Senior Notes due November 15, 2006. Filed as an
exhibit to the Company's Registration Statement on Form S-3
(Registration No. 333-75040), and incorporated herein by
reference.

4.8 Form of 5% Convertible Senior Note due November 15, 2006
(included in Exhibit 4.2).

4.9 Post-effective Amendment No. 1 to Form S-3 for 5% Convertible
Senior Notes due November 15, 2006. Filed on Form POS AM dated
November 6, 2002, and incorporated herein by reference.

+10.1 1994 Long-Term Incentive and Share Award Plan. Filed as an
exhibit to the Company's Registration Statement on Form S-1
(Registration No. 33-89928), and incorporated herein by
reference.

+10.2 1995 Long-Term Incentive and Share Award Plan, as amended May
29, 1997 and May 24, 2000. Filed as an exhibit to the
Company's current report on Form S-8 (Registration No.
333-49632), and incorporated herein by reference.

+10.3 Employee Savings and Protection Plan. Filed as an exhibit to
the Company's Registration Statement on Form S-1 (Registration
No. 33- 89928), and incorporated herein by reference.

+10.4 Form of Employee Stock Purchase Plan. Filed as an exhibit to
the Company's Registration Statement on Form S-1 (Registration
No. 33- 89928), and incorporated herein by reference.

10.5 Lease Agreement between Mt. Bethel Corporate Center and the
Company dated May 1, 1993. Filed as an exhibit to the
Company's Registration Statement on Form S-1 (Registration No.
33-89928), and incorporated herein by reference.

10.6 Lease Agreement between United States Land Resources, L.P. and
the Company dated as of April 26, 1996. Filed as an exhibit to
the Company's Registration Statement on Form S-1(Registration
No. 333-20783), and incorporated herein by reference.

10.7 First Amendment, dated as of November 20, 1996, to the Lease
agreement between United States Land Resources, L.P. and the
Company dated as of April 26, 1996. Filed as an exhibit to the
Company's Annual Report on Form 10-K405 dated March 29, 2002,
and incorporated herein by reference.

10.8 Second Amendment, dated as of September 8, 1997, to the Lease
agreement between Warren Hi-Tech Center, L.P. (successor in
interest to United States Land Resources, L.P.) and the
Company dated as of April 26, 1996. Filed as an exhibit to the
Company's Annual Report on Form 10-K405 dated March 29, 2002,
and incorporated herein by reference.

10.9 Third Amendment, dated as of December 20, 2000, to the Lease
agreement between Warren Hi-Tech Center, L.P. (successor in
interest to United States Land Resources, L.P.) and the
Company dated as of April 26, 1996. Filed as an exhibit to the
Company's Annual Report on Form 10-K405 dated March 29, 2002,
and incorporated herein by reference.

+10.10 Employment Agreement between the Company and Dr. Bamdad
Bastani, dated September 17, 1998. Filed as an exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended
July 4, 1999, and incorporated herein by reference.

+10.11 Employment Agreement between the Company and Ronald
Rosenzweig, dated June 1, 1999. Filed as an exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended
July 4, 1999, and incorporated herein by reference.

+10.12 Amendment No. 1 as of March 15, 2002, to the Employment
Agreement dated June 1, 1999, between the Company and Ronald
Rosenzweig. Filed as an exhibit to the Company's Annual Report
on Form 10-K405 dated March 29, 2002, and incorporated herein
by reference.

+10.13 Employment Agreement between the Company and Thomas Shields,
dated July 25, 2000. Filed as an exhibit to the Company's
Annual Report on Form 10-K405 dated March 29, 2002, and
incorporated herein by reference.

+10.14 Employment Agreement between the Company and Charles Huang,
dated July 25, 2000. Filed as an exhibit to the Company's
Annual Report on Form 10-K405 dated March 29, 2002, and
incorporated herein by reference.

*+10.15 Amendment No. 2 as of May 27, 2003, to the Employment
Agreement dated June 1, 1999, between the Company and Ronald
Rosenzweig.

*21 Subsidiary Listing

*23.1 Consent of Ernst and Young LLP.

24.1 Power of Attorney (included on the signature page of this
Annual Report on Form 10-K).

*31.1 Rule 13a-14(a)/15d-14(a) Certification of Bami Bastani,
President and Chief Executive Officer of ANADIGICS, Inc.

*31.2 Rule 13a-14(a)/15d-14(a) Certification of Thomas C. Shields,
Senior Vice President and Chief Financial Officer of
ANADIGICS, Inc.

*32.1 Section 1350 Certification of Bami Bastani, President and
Chief Executive Officer of ANADIGICS, Inc.

*32.2 Section 1350 Certification of Thomas C. Shields, Senior Vice
President and Chief Financial Officer of ANADIGICS, Inc.

+ Exhibit constitutes a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this report pursuant to Item 14(c) of
Form 10-K.
* Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 15th day of
March 2004.

ANADIGICS, INC.

BY: /s/ Bami Bastani
-----------------------------------------
Dr. Bami Bastani
CHIEF EXECUTIVE OFFICER
AND PRESIDENT

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Bami Bastani and Thomas Shields as
his/her attorney-in-fact and agent, with full power of substitution and
resubstitution, for him/her and in his/her name, place, and stead, in any and
all capacities, to sign and file any and all amendments to this Annual Report on
Form 10-K, with all exhibits thereto and hereto, and other documents with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he/she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF ANADIGICS,
INC. IN THE CAPACITIES AND ON THE DATES INDICATED:

NAME TITLE DATE
- ------------------------- --------------------------- ---------------

/s/ Bami Bastani President, Chief Executive Officer and March 15, 2004
- ------------------------- Director (Principal Executive Officer)
Dr. Bami Bastani

/s/ Thomas C. Shields Senior Vice President and Chief Financial March 15, 2004
- ------------------------- Officer (Principal Financial
Thomas C. Shields Accounting Officer)

/s/ Ronald Rosenzweig Chairman of the Board of Directors March 15, 2004
- -------------------------
Ronald Rosenzweig

/s/ Paul S. Bachow Director March 15, 2004
- -------------------------
Paul S. Bachow

/s/ Gary McGuire Director March 15, 2004
- -------------------------
Gary McGuire

/s/ Harry T. Rein Director March 15, 2004
- -------------------------
Harry T. Rein

/s/ Lewis Solomon Director March 15, 2004
- -------------------------
Lewis Solomon

/s/ Dennis F. Strigl Director March 15, 2004
- -------------------------
Dennis F. Strigl

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ------------------------------------------- ----------- ----------- ---------- ---------

(DOLLARS IN THOUSANDS)

Year ended December 31, 2003:
Deducted from asset account:
Allowance for doubtful accounts............ $ 781 $ - $ (29)(1) $ 752
Reserve for excess and obsolete inventory.. 7,134 287 (2,676)(2) 4,745
Reserve for warranty claims.................. 368 10 (278)(3) 100

Year ended December 31, 2002:
Deducted from asset account:
Allowance for doubtful accounts............ $ 715 $ 297 $ (231)(1) $ 781
Reserve for excess and obsolete inventory.. 8,502 4,188 (5,556)(2) 7,134
Reserve for warranty claims.................. 960 (259) (333)(3) 368

Year ended December 31, 2001:
Deducted from asset account:
Allowance for doubtful accounts............ $ 275 $ 442 $ (2)(1) $ 715
Reserve for excess and obsolete inventory.. 5,828 12,905 (10,231)(2) 8,502
Reserve for warranty claims.................. 403 869 (312)(3) 960

- -------------------------

(1) Uncollectible accounts written-off to the allowance account.

(2) Inventory write-offs to the reserve account.

(3) Warranty expenses incurred to the reserve for warranty claims.