Year on year growth in sales and profits

18 January 2012

Cardiff, UK, 18 January 2012 - IQE plc (AIM: IQE, “IQE” or the “Group”), the leading global supplier of advanced semiconductor wafer products and services to the semiconductor industry, provides a trading update for the year ended 31 December 2011.
Full year revenues for 2011 are expected to exceed £75 million, up from £73 million the previous year. EBITDA is also expected to increase to be not less than £13.7 million. Net debt is expected to be less than £4 million.
Sales grew rapidly in the first half, driven by strong double-digit growth in the Group’s wireless and optoelectronics divisions. Growth in wireless sales reflected the increasing adoption and sophistication of portable devices such as smartphones and tablets using Gallium Arsenide (“GaAs”) technology, and by the increasing adoption of advanced Gallium Nitride (“GaN”) technology in high power wireless applications such as radar and infrastructure. Growth in optoelectronic sales was driven by a wide variety of applications including consumer, industrial and advanced high efficiency solar power applications.
As announced in October, second half sales were adversely affected by inventory corrections in the supply chain related to market share swings amongst a couple of IQE’s key customers. These inventory corrections have unwound as expected, and should be fully resolved by the end of the first quarter of 2012.
The Group’s long standing strategy to qualify multiple products with multiple customers across the entire supply chain went some way toward offsetting the impact of the market share shifts. As further qualifications complete the future impact of market share shifts will continue to diminish.
New product qualifications have progressed well, with significant milestones now achieved. The Group has successfully qualified its leading edge BiHEMT product with one of the top three Japanese mobile chip manufacturers, which has recently announced a major expansion programme in the smartphone market. Sales under this qualification have started to ramp, and this customer is expected to move into IQE’s “top 10” during the second half.
IQE is also in the final stages of qualification of BiHEMT products with two of the leading wireless chip manufacturers globally and expects to ramp into production during the second quarter. In addition, the Group is qualifying a number of next-generation wireless products with a significant number of customers.
IQE’s business is also being driven by increasing demand across the Group’s other core markets including advanced semiconductor materials for optoelectronic products which continued to enjoy strong growth driven by a range of existing and emerging end market applications which are expected to account for an increased proportion of the Group’s 2012 full-year revenues.
Dr Drew Nelson, IQE’s Chief Executive, said:
“2011 has been another positive year for the Group, with increased sales and profits to record levels, despite challenging supply chain and macro-economic conditions.
“Our core business of wireless-related products for all forms of mobile communications is performing as expected whilst new and emerging products for consumer, industrial and defence applications are generating demand across all our key markets.
“We have added to our manufacturing capacity during the year and expect to benefit strongly from some significant operational achievements including best in class quality improvements to our products. This will enable improved customer output and increased throughput from our own production tools and lead to continued improvements in operational and financial metrics.
“The Board remains confident that IQE is well positioned to build further on its robust business model and powerful market position to deliver strong growth in 2012 and beyond.”
IQE expects to report its preliminary results in late March 2012.

IQE plc (+44 29 2083 9400) Drew Nelson Phil Rasmussen Chris Meadows
Espirito Santo Investment Bank (+ 44 20 7456 9191) Richard Crawley James Bromhead
Canaccord Genuity (+ 44 20 7050 6500) Simon Bridges Cameron Duncan
College Hill (+44 20 7457 2020) Adrian Duffield Kay Larsen

Note to Editors
IQE is the leading global supplier of advanced semiconductor wafers with products that cover a diverse range of applications, supported by an innovative outsourced foundry services portfolio that allows the Group to provide a 'one stop shop' for the wafer needs of the world's leading semiconductor manufacturers.
IQE uses advanced crystal growth technology (epitaxy) to manufacture and supply bespoke semiconductor wafers ('epi-wafers') to the major chip manufacturing companies, who then use these wafers to make the chips which form the key components of virtually all high technology systems. IQE is unique in being able to supply wafers using all of the leading crystal growth technology platforms.
IQE's products are found in many leading-edge consumer, communication, computing and industrial applications, including a complete range of wafer products for the wireless industry, such as mobile handsets and wireless infrastructure, Wi-Fi, WiMAX, base stations, GPS, and satellite communications; optical communications. The Group also manufactures advanced optoelectronic and photonic components such as semiconductor lasers, vertical cavity surface emitting lasers (VCSELs) and optical sensors for a wide range of applications including optical storage (CD, DVD, BluRay), thermal imaging, leading-edge medical products, pico-projection, finger navigation ultra high brightness LEDs, and high efficiency concentrator photovoltaic (CPV) 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 also provides bespoke R&D services to deliver customised 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. The Group is also able to leverage its global purchasing volumes to reduce the cost of raw materials. In this way, IQE's outsourced services, provide compelling benefits in terms of flexibility and predictability of cost, thereby significantly reducing operating risk.
IQE operates eight facilities located in Cardiff (two), Milton Keynes and Bath in the UK; in Bethlehem, Pennsylvania, Somerset, New Jersey and Spokane, Washington in the USA; and Singapore. The Group also has 11 sales offices located in major economic centres worldwide.