AGM statement: 20 years and still innovating

21st 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, held its annual general meeting at 10am today, at which all resolutions were duly passed. The Chairman of IQE, Dr Godfrey Ainsworth made the following statement:

"I am pleased to report that IQE is making strong progress. As we stated in our half year trading update last Thursday, the strong first quarter growth reported in March has continued throughout the second quarter. The Board anticipates that the Group’s performance will be ahead of market expectations, with first half revenues of around £30 million and EBITDA (before exceptional items) of at least £3.3 million.

“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.

“This week marks the 20th anniversary of the creation and launch of IQE – this is a tremendous achievement.

“At the time IQE came into being in 1988, many of today’s high-tech products behind which the company provides the enabling materials, were either emerging technologies or had not yet been imagined. The world-wide-web was in its infancy and communications were dominated by voice traffic rather than data but the anticipated growth in communications during the ‘90s drove the advancement of a range of fibre optic technologies.

“CDs were taking over from vinyl discs for recorded music but the technology for the same to happen with video in the form of Digital Versatile Discs (DVD) was still several years away.

“Mobile phones were becoming available but were not the elegant devices with which we are now so familiar. During the late ‘80s and early ‘90s, the functionality and efficiency of mobile telephony made it difficult for some commentators to see a future for mobile communications for ordinary voice calls let alone for data, music, photography, video and entertainment.

“Video on demand through cable or satellite was evolving but was limited by the technologies available at the time and satellite navigation was limited to the realms of science fiction.

“IQE has played an important role in providing the enabling technology behind many of the technologies that we today take for granted. Many of today’s high technology products have been developed and produced by major blue-chip, multinational companies using IQE’s wafers and during the last twenty years IQE has been a key driver in promoting and providing a highly cost effective outsourcing business model for the specialist provision of advanced semiconductor materials, as an alternative to in house manufacture. This has been an outstanding success and many early customers have now switched totally to the wafer outsource model. “During the ‘90s, the rapid expansion of the fibre optic market was a key driver for the Group. IQE embarked on an ambitious expansion programme to keep up with demand and this was financed through funds raised from its IPO in May ‘99. Strong demand continued through to 2001 when the “dot-com” bubble burst and it became apparent that there were considerable excess inventories throughout the supply chain.

“Since the technology crash in 2001 IQE has deliberately and successfully diversified its product range and has limited its exposure to single technology nodes by focussing on a wide range of high growth potential markets. Over the last few years the Company has grown both organically and through selected acquisitions to become the leading player in advanced semiconductor materials. During the same period, the industry has matured and is increasingly embracing the “Asset-Lite” outsource business model that IQE has always promoted.

“IQE’s primary product range focuses on RF components that are used in mobile communications devices and wireless applications, but its core technology also enables a range of other products that include lasers for CD/DVD players and recorders, printers, copiers and emerging laser projection devices. And demand for fibre-optic products which were part of our original core competency is now also returning.

“IQE continues to be innovative and is working with its customers on exciting emerging technologies including low power, ultra high brightness light sources and high efficiency solar cells. Concerns over climate change and oil costs rising to more than $140 barrel provide renewed urgency in bringing these new technologies in to volume production. Over the next five years it is expected they will provide market opportunities for IQE which could dwarf our existing wireless business.

“IQE’s 20 years of experience as a global leader in advanced semiconductor materials uniquely places the Group as the partner of choice in providing the core enabling technologies behind a wide range of future generation products.

“The advanced semiconductor materials in which IQE specialises are an essential component in ultra-high brightness light emitting diodes (UHB-LEDs), which are rapidly replacing incandescent lighting in many areas from automotive applications through to industrial, commercial and residential lighting.

“Our advanced materials also form the very core of concentrator-photovoltaic (C-PV) solar cells which offer the highest efficiencies for converting solar energy into electricity. The optoelectronic properties that our materials offer are already being developed for use in next generation technologies such as image sensing, video projection, games consoles and a host of other applications that will transform our world over the coming years.

“Many of the Group’s senior management team have provided the company with leadership during the last twenty years including one of the co-founders, Drew Nelson. We continue to expand the company by bringing on line additional capacity at several locations to meet the continuing, increasing demand.

“Although no one knows what the digital age will bring over the next 20 years, let alone a few years, the Board is confident that the continuing buoyant market conditions and our robust strategy will ensure that we remain on course to deliver strong growth in revenues and profits in the current financial 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.