Continuing strong growth in high speed wireless markets drive revenues and profits ahead of market expectations

17 July 2008

IQE plc (AIM: IQE, “IQE” or the “Group”) the leading global supplier of advanced semiconductor wafer products and wafer services to the semiconductor industry, is providing a trading update for the first half ended 30 June 2008 ahead of the expected announcement of its interim results on 2 September 2008.

The strong first quarter growth reported in the 2007 preliminary announcement on 17 March 2008 has continued throughout the second quarter. The Board therefore anticipates that the Group’s performance will be ahead of market expectations, with the Group expecting to achieve revenue for the first half of around £30 million and EBITDA (before exceptional items) of at least £3.3 million. This reflects organic growth in revenues and EBITDA of over 26% and 115% respectively compared with the first half of 2007. Robust working capital management and strong cash conversion has contributed to cash balances in excess of £1 million as at 30 June 2008. With a further £9 million of working capital facilities available, the Board considers IQE to be well placed to fund further growth.

This financial performance reflects the continued and increasingly successful execution of IQE’s strategy. The Group has developed a market leading position, with significant competitive advantages in high growth markets. In particular, IQE’s multi-site global manufacturing capabilities and its technology leadership, have enabled it to increase its share of the fast growing high speed 3G wireless communications and mobile broadband markets.

This trading update follows two recent announcements which underpin the Board’s confidence that this rapid growth is expected to continue. Firstly, the extension of a sole supply contract with a major US wireless chip maker, which is expected to generate revenues of approximately $20 million over the next two years, and secondly, a record $20 million order book from its New Jersey facility, following the influx of orders from a number of major customers.

The Group is continuing to bring on line additional capacity at several locations as demand continues to thrive. The successful transfer of technology and production between the Group’s manufacturing facilities has allowed customers to benefit from this additional capacity and multiple site manufacturing. Furthermore, the relocation to the new state-of-the-art manufacturing facility in Singapore is progressing on plan, with more than half of the tools now transferred and in full production at the new site. Strong customer demand to keep the remaining tools in production at the old site will result in the completion of the move by early Q4’2008 only three months later than originally envisaged one year ago.

Dr Drew Nelson, IQE’s Chief Executive, said:

“The rapidly growing demand for our products is being fuelled in part by a number of significant factors in the wireless communications marketplace. Firstly, the advanced features, higher performance and low power consumptions that are enabled by the use of gallium arsenide mean that the volume of our products being used in handsets and other wireless devices is growing substantially faster than the overall handset market. Secondly, the growth in wireless communications in emerging markets is driving additional demand for feature rich handsets with advanced features and efficiencies made possible by our products. Thirdly, competing technologies and protocols are being consolidated within hardware by building multiple components in handsets to enable greater compatibility between new and emerging wireless standards.

“Together, these factors contribute to a substantially growing demand for gallium arsenide based components, and we have seen no evidence of any let-up in the demand from any of our key customers in the wireless marketplace.

“In addition we have a range of new technologies we are currently in the process of bringing to market, including highly efficient solar cells, ultra high brightness LEDs for lighting, and advanced microprocessor and memory products.

“The Board is confident that the continuing bouyant market conditions and our robust strategy will ensure that we remain on course to deliver strong growth in revenues and profits for the full year.”



Contacts:

IQE plc (+44 29 2083 9400)
Drew Nelson
Phil Rasmussen
Chris Meadows

College Hill (+44 20 7457 2020)
Adrian Duffield
Kate Norton

Noble & Company Limited (+ 44 20 7763 2200)
John Llewellyn-Lloyd
Sam Reynolds

Panmure Gordon (UK) Limited (+44 20 7459 3600)
Aubrey Powell
Ashton Clanfield



NOTE TO EDITORS

ABOUT IQE www.iqep.com

IQE plc is the leading global supplier of advanced semiconductor wafers with products that cover a diverse range of applications. It is able to provide a 'one stop shop' for the wafer needs of the world's leading compound semiconductor manufacturers, who in turn use these wafers to make the chips which form the key components of virtually every high technology system.

IQE has particular focus on the growing global wireless sector for applications including; mobile handsets, wireless infrastructure, Wi-Fi, WiMAX, base stations, GPS and satellite communications; as well as for the optical communication sector including; optical storage (CD, DVD), laser optical mice, laser printers & photocopiers, thermal imagers, leading-edge medical products, bar-coding, high efficiency LEDs and advanced solar cells.

The manufacturers of these chips are increasingly seeking to outsource wafer production to specialist foundries such as IQE in order to reduce overall wafer costs and accelerate time to market. IQE is unique in being able to supply wafers using all of the leading crystal growth technology platforms including Metal Organic Vapour Phase Epitaxy (MOVPE) and Molecular Beam Epitaxy (MBE) and the Group is able to leverage its global purchasing volumes to reduce the cost of raw materials.

IQE also provides bespoke R&D services to deliver customized materials for specific applications and offers specialist technical staff to manufacture to specification either at its own facilities or on the customer's own sites. This is backed by a strategy of duplicating each key product processes over multiple sites to assure customers of security of supply as well as provide compelling customer benefits in terms of flexibility and predictability of cost, thereby significantly reducing operating risk.

IQE operates six manufacturing facilities; two in Cardiff and one in Milton Keynes in the UK; two more in Bethlehem, Pennsylvania and Somerset, New Jersey in the USA; and its most recent acquisition in Singapore. The Group also has 11 sales offices located in major economic centres worldwide.