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The conventional mesa isolation process in AlGaAs/InGaAs heterostructure FETs results in the gate contacting the exposed highly doped region at the mesa sidewalls, forming a parasitic gate leakage path. In this work, we suppress the gate leakage from the mesa-sidewall and enhance microwave power performance by performing an additional second mesa etching. The device gate leakage characteristics under high-input power swing are particularly investigated to reveal an improvement in device linearity, which is sensitive to the sidewall gate leakage. This modified device (M-HFETs) provides not only a higher linear RF output power but also a lower IM3 product than those characteristics in conventional HFETs.