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17 July 2008


IQE grows 26% year-on-year in Q1/2008

In a trading update for first-half 2008 (ahead of announcing interim results on 2 September), substrate and epiwafer supplier IQE plc of Cardiff, UK says that the strong first-quarter growth reported in its preliminary announcement on 17 March has continued throughout second-quarter 2008. The board therefore expects the performance to be ahead of market expectations, with first-half revenue of about £30m and earnings before interest, taxes, depreciation and amortization (EBITDA), before exceptional items, of at least £3.3m. The firm says that this reflects organic growth in revenues and EBITDA of over 26% and 115%, respectively, on first-half 2007.

Robust working capital management and strong cash conversion has contributed to cash balances in excess of £1m at the end of June. With a further £9m of working capital facilities available, the board considers IQE to be well placed to fund further growth.

IQE reckons that the financial performance reflects the continued and increasingly successful execution of its strategy in high-growth markets. In particular, multi-site global manufacturing capabilities have enabled it to increase its share of fast-growing high-speed 3G wireless communications and mobile broadband markets.

The trading update follows two recent announcements which underpin the board’s confidence that the firm’s rapid growth is set to continue: a contract extension worth about $20m over the next two years for its business unit in Bethlehem, PA as sole supplier of GaAs-based pHEMT epiwafers (grown by MBE) to a major US wireless chip maker; and a record $20m order book from its New Jersey MOCVD facility, following the influx of orders from a number of major customers.

As demand continues to thrive, IQE is continuing to bring on line additional capacity at several locations, while the transfer of technology and production between manufacturing facilities has allowed customers to benefit from multi-site manufacturing. Also, the relocation to the new manufacturing facility in Singapore is progressing on plan, with more than half of the tools now transferred and in full production. IQE says that strong customer demand to keep the remaining tools in production at the old site will result in completion of the move by early Q4/2008, only three months later than originally envisaged a year ago.

“The rapidly growing demand for our products is being fuelled in part by a number of significant factors in the wireless communications marketplace,” says chief executive Dr Drew Nelson. “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. Together, these factors contribute to a substantially growing demand for gallium arsenide based components, and we have seen no evidence of any let-up in the demand from any of our key customers in the wireless marketplace.”

Nelson adds that IQE has a range of new technologies that it is currently in the process of bringing to market, including high-efficiency solar cells, ultra-high-brightness LEDs for lighting, and advanced microprocessor and memory products.
“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 for the full year,” he concludes.

See related items:

IQE’s New Jersey order book grows to record $20m

IQE wins contract extension as sole supplier to US wireless component maker

IQE’s 54% growth in 2007 drives return to operating profit

IQE wins its largest commercial GaN epiwafer order

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