4th Quarter and Preliminary Full Year Results 2002

26th March 2003

IQE plc (IQE), the world's leading global outsource supplier of customised epitaxial wafers to the semi-conductor industry, today announces its 4th Quarter and Preliminary Full Year Results for the period ended 31 December 2002.

HIGHLIGHTS

• Q4 sales were 5% lower than the previous quarter at £5.316m (Q3/2002: £5.607m) mainly due to the weakening of the US$, and were 31% less than the same period last year (Q4/2001: £7.696m) as a result of the dramatic downturn in the optical telecoms market.

• Full year sales were down by 45% at £22.960m (2001: £42.047m).

• As detailed in the Profit and Loss Account Analysis, Q4 operating loss before goodwill amortisation, exceptional operating items and non-recurring charges was £5.276m compared with a loss of £3.795m in the same period in 2001. Operating loss for the full year before goodwill, exceptionals and non-recurring costs was £21.134m (2001: £3.467m).

• Operating cash outflow for Q4 reduced to £0.966m compared with £3.598m for the previous quarter and £4.516m for the same quarter in the previous year, and capital expenditure reduced to £0.576m compared to £2.784m in Q4 2001.

• Aggressive cost cutting measures undertaken during year, including a headcount reduction of 120 staff (30% of workforce) completed in March 2003 saving over £6.000m/annum of payroll and other costs.

• Year end gross cash stood at £17.715m compared with £30.532m at end 2001.

• Continued good progress at IQE Silicon Compounds including the successful completion of customer qualification programs and continued growth in interest in SiGe and related products.

• Strong evidence of sustainable pick up in wireless product business serviced by US operations with several major customers now taking regular volume deliveries.

• Non-recurring charges in Q4 of £47.607m of which £47.329m was accelerated depreciation (impairment of fixed assets).

Commenting on the results, Dr Drew Nelson, President/CEO said "2002 was an exceptionally difficult year for the semiconductor industry, particularly in the field of optical communications which had been a key market for the Group. However, some market segments had begun to recover by the year end, notably the RF Wireless market where IQE has built a strong competitive position. During the year, the Group achieved major reductions in its cost base by aggressively cutting overheads, whilst continuing to diversify its product ranges to reduce dependence on the optical communications sector. These initiatives are beginning to bear fruit and with gross cash of £17.7 million at year end, continuing moves to outsourcing throughout the semiconductor industry, and further product diversification, we continue to believe the Group is strongly positioned as the economy recovers."

For further information please contact :

IQE plc
Drew Nelson, (President/CEO) +44 (0)2920 83 9400
Tim Hawkes (Acting CFO) +44 (0)2920 83 9400
Chris Meadows (Investor Relations) +44 (0)2920 83 9400
Leslie Coventry (Company Secretary) +44 (0)2920 83 9400

Buchanan Communications
Tim Thomson/Nicola Cronk, +44 (0)2074 665000