Trading update: Two strategic and complementary transactions provide powerful platform for continuing growth and cash generation

25 July 2012

Cardiff, UK. 25 July 2012: IQE plc (AIM: IQE, “IQE” or the “Group”), the leading global supplier of advanced semiconductor wafer products and wafer services to the semiconductor industry, provides an interim trading update for the six months to 30 June 2012.

The Group expects to report first-half revenues of approximately £34 million and an EBITDA of approximately £4 million with net debt of less than £8 million. The Board remains confident of meeting its full year expectations, given the notable second half bias in revenues this year as a consequence of the destocking in H2’11/Q1’12 and the transfer of the RF Micro Devices epitaxial operation to IQE in July this year.

The inventory correction with two major wireless customers in the latter part of 2011, as anticipated, impacted the first quarter of 2012. Sales and customer order patterns returned to normal in the second quarter and the Group exited the half-year strongly. Customer qualifications have progressed well, and the outlook for wireless remains strong, driven largely by the increasing penetration of smartphones and 4G/LTE technology.

The major developments during the first half of the year were the completion of two strategic transactions: an exclusive supply contract and strategic investment in Solar Junction Corporation and the acquisition of the RF Micro Devices in-house epitaxial business.

Following the Solar Junction deal, there have been some significant project announcements, including a milestone 450MW installation in Mexico, which confirms that the CPV market is rapidly gaining traction. Solar Junction and IQE have received initial production orders and expect to capture a substantial share of this emerging market. The installation of tools is progressing well, in line with the Board’s expectations, and will be followed by a technology transfer. Once qualified, these tools will be used to satisfy existing production orders.

Transfer of the RF Micro Devices epitaxial operation to IQE was completed during July. This business is expected to deliver a stepped increase in IQE revenues and profitability in the second half of 2012. This deal complements the Solar Junction investment by bringing spare capacity to service the high-growth CPV market.

The Group continues to make good progress across its optoelectronics and electronics businesses in development projects that span a number of emerging high-growth opportunities.

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

The deals with Solar Junction and RF Micro Devices represent significant milestones in the execution of our growth strategy and will significantly enhance both our short and long term growth. They are highly complementary, extending our critical mass and global leadership in wireless, and bringing spare capacity to service the emerging high growth CPV market.

“The outlook for the Group’s core wireless markets continues to look strong and with our capacity expansion programme nearing completion, we are well positioned to deliver strong sales growth and return to free cash generation.

IQE expects to report its interim results in the week commencing 24 September 2012.


Contacts:

IQE plc +44 (0) 29 2083 9400
Drew Nelson
Phil Rasmussen
Chris Meadows

Espirito Santo Investment Bank + 44 (0) 20 7456 9191
Richard Crawley
James Bromhead

Canaccord Genuity + 44 (0) 20 7523 8000
Simon Bridges
Cameron Duncan

College Hill +44 (0) 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, which 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, optical storage (CD, DVD), laser optical mouse, laser printers & photocopiers, thermal imagers, leading-edge medical products, barcode, ultra high brightness LEDs, a variety of advanced silicon based systems 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.

In February 2012, IQE made a strategic investment and exclusive wafer supply agreement with leading edge Concentrated Photovoltaic (“CPV”) cell developer and manufacturer Solar Junction Corporation (“SJC”). The move marked a significant step in its strategy to become a leading global supplier of CPV wafers for the solar power markets.

In June 2012, IQE acquired the in-house MBE epitaxy manufacturing unit of RF Micro Devices and secured a seven-year wafer supply agreement.

IQE operates a number of global manufacturing and R&D facilities: Cardiff, Milton Keynes and Bath in the United Kingdom; Bethlehem (PA), Somerset (NJ), Greensboro (NC) and Spokane (WA) in the USA; and Singapore. The Group also has 11 sales offices located in major economic centres worldwide.