OVERVIEW

ANADIGICS, Inc. ("we" or the "Company") is a leading provider of semiconductor solutions in the growing broadband wireless and wireline communications markets. Our products include radio frequency (RF) power amplifiers (PAs), tuner integrated circuits, active splitters, line amplifiers and other components, which can be sold individually or packaged as integrated front end modules (FEMs). We believe that we are well-positioned to capitalize on the high growth and convergence occurring in the voice, data and video segments of the broadband wireless and wireline communications markets.

Our RF power amplifier products enable mobile handsets, datacards and other devices to access third and fourth generation (3G and 4G) wireless networks utilizing international standards including LTE (Long Term Evolution), WCDMA (Wideband Code Division Multiple Access), HSPA (High Speed Packet Access), CDMA (Code Division Multiple Access) EVDO (Evolution Data Optimized) and WiMAX (Worldwide Interoperability for Microwave Access). Our WiFi products enable connectivity for wireless mobile devices and other computing devices. Our CATV (Cable Television) products enable fixed-point, wireline broadband communications over CATV infrastructure as well as cable modem and set-top box products. Our Wireless infrastructure products support operator commitments worldwide to optimize the increasing demands for subscriber data through deployment of new small-cell base stations as part of a heterogeneous network.

Our business strategy focuses on enabling anytime, anywhere connectivity which enhances the consumer's broadband and wireless experience. We develop RF front end solutions for communications equipment manufacturers and we partner with industry-leading wireless and wireline chipset providers who incorporate our solutions into their reference designs. Our solutions cost-effectively enhance communications devices by improving RF performance, efficiency, reliability, time-to-market and integration while reducing the size, weight and cost of these products.

We leverage our technological knowledge and advantages to be a leading technology-enabler via innovative semiconductor solutions for broadband wireless and wireline communications. We believe our patented InGaP-plus technology, which combines bipolar amplifying structures and pHEMT RF switches on the same die, coupled with our three level metal interconnect process provides us with a competitive advantage in the marketplace. Additionally, we believe proprietary designs of our HELP™ (High Efficiency at Low Power) power amplifiers when combined with higher efficiency at high output power provide our customers a competitive advantage by delivering performance required for 3G and 4G devices with lower battery power consumption and longer use time than comparable products in these markets.

Revenue during the second quarter of 2012 declined in comparison to the first quarter of 2012 principally due to a decrease in demand from our former largest customer resulting from certain of such customer's programs reaching end of life.

During the first half of 2012, we reduced our workforce by approximately 30 positions, primarily in manufacturing and selling and administrative, resulting in restructuring charges of $1.7 million. We expect the annualized cost savings from these restructurings to approximate $4.0 million.

We believe our markets are, and will continue to remain, competitive which could result in continued quarterly volatility in our net sales. This competition has resulted in, and is expected over the long-term to continue to result in competitive or declining average selling prices for our products and increased challenges in maintaining or increasing market share.

We were 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.

RESULTS OF OPERATIONS

The following table sets forth unaudited consolidated statements of operations
data as a percent of net sales for the periods presented:

                                                   Three months ended                        Six months ended
                                            June 30, 2012        July 2, 2011        June 30, 2012       July 2, 2011

Net sales                                            100.0 %             100.0 %              100.0 %            100.0 %
Cost of sales                                        108.8 %              81.6 %              101.0 %             76.3 %

Gross margin                                          (8.8 )%             18.4 %               (1.0 )%            23.7 %
Research and development expenses                     45.0 %              31.9 %               42.8 %             31.5 %
Selling and administrative expenses                   25.2 %              20.6 %               24.6 %             21.2 %
Restructuring charges                                  4.9 %               2.9 %                3.2 %              1.3 %

Operating loss                                       (83.9 )%            (37.0 )%             (71.6 )%           (30.3 )%
Interest income                                        0.5 %               0.3 %                0.5 %              0.3 %
Interest expense                                         -                   -                    -                  -
Other income, net                                        -                   -                  2.4                  -

Net loss                                             (83.4 )%            (36.7 )%             (68.7 )%           (30.0 )%

NET SALES. Net sales decreased 29.5% during the second quarter of 2012 to $25.1 million from $35.6 million in the second quarter of 2011. For the six months ended June 30, 2012, net sales were $53.5 million, a 32.3% decrease from net sales of $79.0 million for the six months ended July 2, 2011. The net sales decrease primarily resulted from a decrease in market demand in the wireless cellular device market.

Sales of integrated circuits for wireless applications decreased 29.8% during the second quarter of 2012 to $18.0 million from $25.6 million in the second quarter of 2011. For the six months ended June 30, 2012, net sales of integrated circuits for wireless applications decreased 36.8% to $39.0 million from $61.8 million for the six months ended July 2, 2011. The decrease in sales was primarily due to decreased demand from our former largest customer due to certain products reaching end of life and their change in chipset providers that do not utilize our power amplifiers.

Sales of integrated circuits for broadband applications decreased 28.6% during the second quarter of 2012 to $7.1 million from $9.9 million in the second quarter of 2011. For the six months ended June 30, 2012, net sales of integrated circuits for broadband applications decreased 16.1% to $14.5 million from $17.2 million for the six months ended July 2, 2011. The decrease in sales was primarily due to declining demand for gallium arsenide integrated circuits in set-top box applications.

GROSS MARGIN. Gross margin during the second quarter of 2012 decreased to (8.8)% of net sales from 18.4% of net sales in the second quarter of 2011. For the six months ended June 30, 2012, gross margin decreased to (1.0)% from 23.7% for the six months ended July 2, 2011. The decrease in gross margin was primarily due to lower production and sales volume and a concentration of fixed costs as a percent of smaller revenues. Fixed production costs include, but are not limited to depreciation, maintenance and operations' support functions.

RESEARCH AND DEVELOPMENT. Company-sponsored research and development expenses remained flat during the second quarter of 2012 at $11.3 million in comparison to the second quarter of 2011. Company sponsored research and development expenses for the six months ended June 30, 2012 decreased 8.0% to $22.9 million from $24.9 million during the six months ended July 2, 2011. A management separation charge of $0.8 million was included in the first quarter of 2011. The remaining decrease resulted from improved controls over our key projects and lower stock-based compensation expense.

SELLING AND ADMINISTRATIVE. Selling and administrative expenses decreased 13.8% to $6.3 million during the second quarter of 2012 from $7.3 million during the second quarter of 2011. Selling and administrative expenses for the six months ended June 30, 2012 decreased 21.4% to $13.2 million from $16.8 million during the six months ended July 2, 2011. A management separation charge of $2.1 million was included in the first quarter of 2011. The remaining decrease resulted from the quarterly savings achieved from our ongoing cost reduction actions.

RESTRUCTURING CHARGE. During the three and six months ended June 30, 2012, we implemented workforce reductions which eliminated approximately 30 positions, resulting in restructuring charges of $1.2 million and $1.7 million, respectively, for severance, related benefits and other costs.

During the second quarter of 2011, we implemented workforce reductions, which eliminated approximately 40 positions, resulting in a restructuring charge of $1.0 million for severance and related benefits.

OTHER INCOME, NET. For the six months ended June 30, 2012, other income of $1.3 million was primarily from redemption proceeds on one of our ARS in excess of our amortized cost basis.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2012, we had $17.2 million in cash and cash equivalents and $55.9 million in marketable securities.

Operating activities used $21.5 million in cash during the six month period ended June 30, 2012. Investing activities provided $4.1 million of cash during the six month period ended June 30, 2012 consisting principally of net sales of marketable securities of $6.2 million, partly offset by purchases of fixed assets of 2.1 million. Financing activities provided $1.9 million of cash proceeds received from stock option exercises.

We had unconditional purchase obligations at June 30, 2012 of approximately $3.0 million.

Within our $55.9 million in marketable securities at June 30, 2012, we held a total of $27.1 million of fixed income securities, $19.5 of U.S. government agency debt securities, $1.1 million of municipal notes, $5.5 million of auction rate securities (ARS) and $2.7 million as a former auction corporate debt security originally purchased as an ARS prior to its exchange for the underlying 30 year notes due 2037. The ARS instruments used a monthly Dutch auction process to provide liquidity on long-term financial instruments by resetting the applicable interest rate and through the reset, allowed existing investors to rollover or liquidate their holdings at par value. During 2007 and early 2008, ARS failed to auction due to sell orders exceeding buy orders and trading continues to be constrained. The funds associated with the failed auctions will not be accessible until a successful auction occurs, a suitable buyer is found outside of the auction process or an issuer redeems its security. If the credit ratings of the security issuers deteriorate and any decline in market value below our amortized cost basis is determined to be other-than-temporary, we would be required to adjust the carrying value of the investment through an additional impairment charge.

We anticipate selling the existing and former-auction corporate debt securities prior to a recovery in valuation. We will continue to monitor and evaluate these investments for impairment and for short term classification purposes. We may not be able to access cash by selling the aforementioned debt or preferred securities without the loss of principal until a buyer is located, a future auction for these investments is successful, they are redeemed by their issuers or they mature. If we are unable to sell these securities in the market or they are not redeemed, then we may be required to hold them to maturity or in perpetuity for the preferred ARS. Based on our ability to access our cash, our expected operating cash flows, and our other sources of cash, we do not anticipate that the potential illiquidity of these investments will affect our ability to execute our current business plan.

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 at least the next twelve months. We may elect to finance all or part of our future capital requirements through additional equity or debt financing.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

Changes to accounting principles generally accepted in the United States of America are established by the Financial Accounting Standards Board (FASB) in the form of Accounting Standards Updates (ASU's) to the FASB's Accounting Standards Codification.

In May 2011, the FASB issued guidance on fair value measurements and disclosure requirements. The guidance provides a consistent definition of fair value to ensure fair value measurement and disclosure requirements are similar between U.S. Generally Accepted Accounting Principles and International Financial Reporting Standards. This guidance is effective for interim and annual periods beginning on or after December 15, 2011. Adoption of this guidance did not have a material impact on our consolidated financial statements.

In June and December 2011, the FASB issued guidance on the presentation of other comprehensive income (OCI). This guidance eliminates the option to present the components of OCI as part of the statement of changes in stockholders' equity and also requires presentation of reclassification adjustments from OCI to net income on the face of the financial statements. This guidance is effective for fiscal years and interim periods beginning after December 15, 2011, with the exception of the requirement to present reclassification adjustments from OCI to net income on the face of the financial statements, which has been deferred pending further deliberation by the FASB. Adoption of this guidance did not have a material impact on our consolidated financial statements.

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains projections and other forward-looking statements (as that term is defined in the Securities Exchange Act of 1934, as amended). These projections and forward-looking statements reflect the Company's current views with respect to future events and financial performance and can generally be identified as such because the context of the statement will include words such as "believe", "anticipate", "expect", or words of similar import. Similarly, statements that describe our future plans, objectives, estimates or goals are forward-looking statements. No assurances can be given, however, that these events will occur or that these projections will be achieved, and actual results and developments could differ materially from those projected as a result of certain factors. Such factors include, but are not limited to, those risk factors listed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and in this quarterly report on Form 10-Q. The Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.