2 September 2010


IQE revenue grows 54% year-on-year to record £33m in first-half 2010

Following an interim trading update in mid July, for first-half 2010 epiwafer foundry and substrate maker IQE plc of Cardiff, Wales, UK has confirmed record revenue of £33m, up 54% on £21.4m a year ago and significantly ahead of market expectations.

This was driven mainly by strong demand for wireless components used in smartphone and tablet PC technologies (which contain much more gallium arsenide content than previous generations of handheld devices), supported by accelerating growth in optoelectronic and advanced silicon components, with strong performance in all main markets (with wireless revenue up 52% from £16.3m to £24.8m; optoelectronics up 55% from £4.6m to £7.1m; and electronics up 102% from £0.54m to £1.09m).

In particular, with wireless growth being driven by the increasing adoption of smartphones, IQE is designed into most top-tier smartphones by virtue of its broad customer base and its market share of about 30%

Emerging optoelectronic markets are accelerating, with concentrator photovoltaic (CPV) solar up 100% and vertical-cavity surface-emitting lasers (VCSELs) for finger navigation and optical USB up 70% 

Electronics revenue growth is driven by advanced BiCMOS and initial sales of IP-rich advanced substrates such as germanium-on-insulator (GeOI) and silicon-on-sapphire (SOS).

“Our focus remains on exploiting our powerful intellectual property to deliver innovative and high-quality products to rapidly growing markets,” says chief executive Dr Drew Nelson.

Gross margin rose from 17.8% a year ago to 22.2% in first-half 2010. Selling, general & administrative expenses were unchanged at £4.6m and therefore shrank as a percentage of sales from 22% to 14%. Demonstrating IQE’s highly operationally levered business model, 54% revenue growth has translated into earnings before interest, tax, depreciation and amortization (EBITDA) rising by 184%, from £1.9m to £5.4m.

Compared to an operating loss of £0.8m a year ago, operating profit was £2.7m. Cash inflow from operations rose from £0.1m to £1.9m. Net debt has fallen year-on-year from £19m to £15.6m.

IQE says that its strategy remains focused on delivering market leadership in high growth markets, protected by technology leadership and intellectual property. 

The firm claims that it has established a clear leadership position in the wireless communications market, which currently accounts for 75% of sales. The wireless market currently provides IQE with high-volume sales and the expectation of continued high growth. In particular, although smartphones represent a fundamental structural shift in mobile communications, they will still only account for 19% of the total handset market in 2010. IQE therefore sees the annual growth rate of 30–40% continuing for several years to come. In addition, the proliferation of wireless applications such as with smart meters and point-to-point communications should add further demand for IQE’s wireless products.

IQE adds that it is also replicating the growth of wireless-related products in other, emerging markets that are undergoing rapid development and offer further near-term, high-growth potential and product diversity. These include optoelectronic technologies such as high-efficiency LED solid-state light sources, VCSELs (for applications such as finger navigation and optical USB), advanced lasers (for applications such as pico projectors and high-density optical storage), and CPV materials for solar energy generation. IQE has correspondingly appointed Adrian Meldrum to its board, with specific responsibility developing optoelectronics business.

IQE says that it has therefore continued making progress in extending its portfolio of intellectual property, including high-speed VCSELs for next-generation optical communications, 6” CPV solar technology, 4” gallium antimonide (GaSb) substrates and free-standing gallium nitride (GaN) substrates, including additional patents granted for the nanocolumn technology of GaN substrate subsidiary NanoGaN Ltd (acquired in October 2009).

Significant growth is also occurring in IQE’s silicon-based product division, with the adoption of new engineered substrates launched in 2009 such as GeOI and SOS for next-generation ICs and high-speed devices.

“The second half of 2010 has started well, with strong demand across our full range of advanced semiconductor products leading us to have every confidence in both the short-term and long-term prospects of the business,” says Nelson. Second-half sales are now anticipated to be ahead of expectations.

See related items:

IQE expects first-half 2010 revenue up 50% year-on-year

IQE rebounds by 46% to record £31.2m revenue in second-half 2009

IQE expects second-half 2009 revenue 45% up on first half

See: IQE Company Profile

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