By performing Monte Carlo simulations of InAlAs/InGaAs high-electron-mobility transistors (HEMTs), we have reproduced the measured DC, RF, and on-state breakdown characteristics of a real device. Our calculations reveal for open-channel conditions the occurrence of impact ionization not only in the channel but also in the cap layer of our device. The necessary conditions for this phenomenon are discussed. Furthermore, the dynamic of breakdown is studied by calculating the frequency-dependent two-port parameters for operating the HEMT under high-ionization conditions. A significant frequency dispersion of the extracted small-signal elements is obtained in the conventional equivalent circuit model of the FET. In order to eliminate this dispersion, we propose a new small-signal equivalent circuit model which includes strong impact ionization effects on the microwave performance and overcomes the limitations of previous models. (C) 2002 Elsevier Science Ltd. All rights reserved.