Trading Update and comment on US Entity List

24 May 2019

Cardiff, UK. 24thMay 2019: IQE plc (AIM: IQE; "IQE", the “Company” or the "Group"), the leading global supplier of advanced wafer products and materials solutions to the semiconductor industry, provides the following trading update in response to action taken by the Bureau of Industry and Security (BIS) of the United States Department of Commerce to add Huawei Technologies Co., Ltd. and 68 of its affiliates (“Huawei”) to the “Entity List” maintained by the Department. The BIS action prohibits the sale to Huawei, by certain of IQE’s customers, of products covered by the Export Administration Regulations (EAR) absent obtaining an appropriate export license.

IQE wishes to clarify its potential exposure to this rapidly evolving situation, as it supplies epitaxial wafers to multiple chip companies in global supply chains, some of whom supply Huawei. 

The situation involving the ban is dynamic and it is not clear at this time how long it will remain in force or what the full implications will be. However, IQE believes it is in a strong position to adjust to the possible consequences and scenarios resulting from this in a positive manner. Across all product lines, IQE has supply relationships with multiple non-US customers, so is well placed to adapt to mid to long-term share shifts at both the component (chip) and the OEM level. The majority of IQE’s technologies and supply chains are not affected by the ban and IQE complies fully with the EAR.

In the short-term, IQE believes it may experience some delay to orders and the potential for adjustment of supplier managed inventory levels, predominantly in its Wireless Business Unit. The Photonics and Infrared Business Units are essentially unaffected. 

The company has been engaging across its customer base in recent days specifically on this subject and estimates that its current maximum risk exposure to this matter is less than 5% of total FY 2019 revenue guidance.

Although there remains uncertainty and unpredictability related to this specific matter, given the market opportunity IQE faces in H2, the company leaves full year guidance unchanged. 

Dr Drew Nelson, Chief Executive of IQE, said:

‘The recent ban on sales of products from US companies to Huawei and its affiliates is a factor completely outside of IQE’s control. However, our long-term strategy of supplying as many of the supply chains into all major OEMs as possible, protects IQEs overall supply to a verysignificant degree. As a result, we believe the ban will have a limited impact on our mid to long term revenue trajectory. Indeed, the breadth of IQE’s current product range, the new materials technologies being introduced to market over the coming months and years, and IQE’s global manufacturing footprint are powerful mitigating factors in dealing effectively with the ongoing  changing geopolitical landscape in our industry."

 

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.

 

 

CONTACTS:

 IQE plc                       +44 (0) 29 2083 9400

 

Tim Pullen

Drew Nelson

Chris Meadows

            

Canaccord Genuity (Nomad and Joint Broker)                + 44 (0) 20 7523 8000

Simon Bridges

Richard Andrews

 

Peel Hunt (Joint Broker)                +44 (0) 20 7418 8900

Edward Knight

Nick Prowting