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20 July 2006


IQE acquiring Emcore's epi division for RF

Epiwafer foundry IQE, which has manufacturing facilities in Cardiff and Milton Keynes, UK and in Bethlehem, PA, USA, has conditionally agreed to acquire the assets and business of Electronic Materials Division (EMD), the New Jersey-based epi foundry business of Emcore Corporation Inc. The purchase price is $16m ($13m in cash on completion and a further $3m in cash payable in four equal quarterly payments starting three months after closing.

EMD provides foundry-based production of high performance electronic epi materials (e.g. for power amplifier products), focusing on wireless markets
for both handsets and infrastructure. "EMD has been an innovator in developing state-of-the-art RF materials for over 10 years," says Emcore's CEO Scott Massie, "but as we continue to focus our strategy on broadband infrastructure, solar power and value-added products,
it became clear we needed to find a more strategic fit for EMD¹s products and employees". Massie added, "The sale of this division will lower our cost base, improve gross margins company-wide and permit us to further consolidate operations in New Mexico and California."

EMD has about 50 employees, 10 epitaxial tools and is one of the top five third-party suppliers of epiwafers in the world, says IQE. For its financial year to end-September 2005, EMD's revenue was $12.2m and the value of its
assets was $9.0m. The business has continued to grow strongly in the current financial year. All of EMD's staff will be offered employment with IQE. IQE's board intends EMD to continue to be run as a stand-alone entity in New

"The addition of EMD's products, employees and intellectual property will clearly enhance IQE's position as the leading player in the epitaxial foundry industry," claims Dr Drew Nelson, IQE plc's president and CEO. "EMD's current and next generation products are extremely complementary to
IQE's product base and its customer base will increase IQE's customer reach to a broad spectrum of world-class RF manufacturers."

EMD has concentrated on HBT-based technologies for power amplifier applications, as well as integrated BiFET and GaN structures, and consequently supplies a range of highly complementary products to a range of customers different to that of IQE's own customer base. The acquisition will provide "significant opportunities to accelerate sales into existing and new [wireless] customers by providing the broadest range of current and
next-generation products," adds Nelson.

To finance the acquisition, IQE aims to raise about £12m in a placement of new shares on the London Stock Exchange's AIM market (equivalent to about 21.6% of IQE's enlarged ordinary share capital). The placement is conditional on the passing of a shareholder resolution at an extraordinary general meeting in Cardiff, UK on 15 August. IQE's chairman, Dr Godfrey Ainsworth added "The board is confident that IQE's existing cash resources, together with the further capital provided through the placing, will provide
sufficient funds not only for the acquisition but for working capital to support the business and its growth expectations over the next 12 months." The directors believe this will create significant opportunity to grow revenues within existing IQE and EMD customers by offering all major
technology platforms to the enlarged customer base, from the largest, state-of-the-art production capacity in the industry, IQE claims.

* IQE has provided a trading update ahead of the formal preliminary first-half results to be presented on 30 August 2006.

"Trading has continued in line with our pre-Annual General Meeting Trading Update released on 30 May 2006," said Dr Drew Nelson, president and CEO. "During Q2, the overall business has continued to grow strongly."

Detailed half-year results are still to be finalised, but directors expect H1/2006 revenues to be about £14.5m, up £3.3m (30%) on H2/2005 and up £4.8m (50%) on H1/2005.

All four business units grew, particularly the wireless division, IQE Inc in the USA and IQE Silicon in the UK. Both the optical and substrate businesses have also grown significantly, says IQE, and are set to grow even more
strongly in H2/2006. However, IQE Group's breakeven point for EBITDA (earnings before interest, taxes, depreciation and amortization) remains at about £30m. 

Visit: http://www.iqep.com