H1 2018 Post-close Trading Update and notice of results

24 July 2018

Very significant expansion of VCSEL engagements and successful replenishment of wireless inventory

Cardiff, UK. 24th July 2018: IQE plc (AIM: IQE; "IQE", the “Company” or the "Group"), the leading global supplier of advanced wafer products and wafer services to the semiconductor industry, provides a trading statement for the six months ended 30 June 2018.

The Group announces that it expects to deliver revenues of approximately £73m for the first half of 2018 (H1 2017: £70m), which was achieved against a currency headwind of 9.5%, reflecting strong double-digit sales growth on a constant currency basis in each of its three primary markets. 

The Wireless segment has shown strong growth of nearly 11% on a constant currency basis, when comparing it with H1 2017, as the Group delivered on its intention to replenish wireless inventory channels following the capacity allocation made to VCSEL production in H2 2017. The Wireless segment remains in a strong position and as described in the additional announcement made today, has been underpinned by the renewal of the supply agreement with our largest customer. This contract has been extended for a further 15 months’ supply in addition to expanding to cover a wider range of products and increased share of the customer’s epiwafer requirements to IQE. As a consequence of this extended agreement, together with additional qualifications recently completed with other Wireless customers, the Board has approved a Wireless expansion programme for our plant in Hsinchu, Taiwan with the aim of increasing Wireless capacity there by more than 40% in 2019. This will have two benefits; (i) delivering further production efficiencies and capacity improvements in the US for Photonics materials, and (ii) eliminating cost inefficiencies incurred in converting and re-converting reactors between the two materials systems.

The Photonics segment is expected to deliver significant growth of 30% on a constant currency basis for the first six months of the year, when compared with H1 2017.  Revenue from our largest Photonics customer was broadly flat when compared with H1 2017, as the supply chain absorbed inventory following a very successful and steep production ramp up for VCSELs relating to a 3D sensing application in H2 2017. Excluding revenue from this customer, underlying Photonics revenues are up approximately 40% on a constant currency basis when compared with H1 2017. This is a clear demonstration of the traction the Company is experiencing across a number of VCSEL chip manufacturers, who took advantage of capacity availability to embark on a significant number of production qualifications, in addition to growth in other parts of our Photonics business.  

The Infrared segment also delivered  growth of approximately 11% on a constant currency basis, when compared with H1 2017 and is expected to show further strong growth in H2. 

The capacity expansion at our new Newport, South Wales, UK, facility is proceeding according to plan. The first five reactors, which will be qualified for Photonics, are now installed and are at various stages of acceptance testing, commissioning and qualification. Initial results on quality and reactor performance remains very encouraging. A further five reactors will be delivered in H2, with acceptance testing, commissioning and qualification expected to commence immediately after delivery. Phase one of the build out at the Newport facility will provide 20 fully serviced reactor bays, which are expected to be fully operational during H1 2019.  Further reactors are planned to be installed through the remainder of 2019.

The Group continues to trade in line with current market expectations; the previous guidance provided in the June AGM statement for a 40:60 H1:H2 2018 revenue split remaining unchanged, accompanied by a shift back from Wireless to Photonics, which has already commenced during June 2018.

Notice of Results

The Group now expects to report its half-year results for 2018 on 29thAugust 2018, having decided to bring forward this date from the previously announced 5thSeptember, due to a number of conflicting events.

Dr Drew Nelson, Chief Executive of IQE, said:

“Our highly successful H2 2017 ramp of 6 inch VCSEL production for a major customer has established IQE as the go-to materials solution provider for this technology.  It is widely recognised that with more than 25 years’ experience of working with VCSELs and a clear, visible, commitment to world leading manufacturing capacity on two continents, we are and will remain the premier preferred manufacturer of these materials. H1 2018 has seen a very significant increase in the number and extent of our engagements with VCSEL chip customers.  We are now engaged with over 20 VCSEL chip manufacturers in Asia, North America and Europe on qualifications for mobile, sensing, automotive and datacom applications. We  are already fully qualified and in mass production with six of these companies and in final qualification stages with an additional six more. Furthermore, as detailed in our announcement of 9 July 2018, we reached a production milestone for our NIL technology which demonstrates our ability to bring to market some of the leading materials solutions that we have been showcasing and sampling to our customers. We have significant engagements for our other core technologies, including GaN on Silicon, cREO and QPC, and these are proceeding as planned. The H2 2018 ramp for Photonics has already started and we look forward to the rest of 2018 and in particular the further ramp up which is expected in 2019, with considerable anticipation.”

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

 

GLOSSARY OF TERMS

VCSEL............... Vertical Cavity Surface Emitting Laser
GaN.................... Gallium Nitride
RF...................... Radio Frequency
DFB.................... Distributed Feedback Laser
cREO(TM)............. Crystalline Rare Earth Oxide 

 

 

 

CONTACTS

IQE plc +44 (0) 29 2083 9400 
Godfrey Ainsworth

Drew Nelson 
Chris Meadows 

 

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

Richard Andrews

 

Peel Hunt +44 (0) 20 7418 8900
Edward Knight

Nick Prowting

 

 

 

ABOUT IQE

http://iqep.com

IQE is the leading global supplier of advanced semiconductor wafers that enable 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 smartphones and wireless infrastructure, Wi-Fi, base stations, and satellite communications; optical communications, optical storage, printing, thermal imagers, leading-edge medical technologies, automotive and aerospace technologies, a variety of advanced silicon based systems and high efficiency concentrator photovoltaic (CPV) solar cells.

IQE operates multiple manufacturing and R&D facilities worldwide.