TIDMIQE
IQE plc
Cardiff, UK
24 November 2021
Trading Update
-- Emerging softness in smartphone-related demand
-- Continued weakness in roll out of 5G infrastructure
-- Ongoing foreign exchange headwinds on reported numbers
-- Constant currency revenues now anticipated to be down by circa 8%
year-on-year
IQE plc (AIM: IQE, "IQE" or the "Group"), the leading supplier
of compound semiconductor wafer products and advanced material
solutions to the global semiconductor industry, announces a trading
update for the year ending 31 December 2021.
Wireless Update
Demand for Wireless GaAs epi-wafers has continued to grow in H2
2021, driven by 5G penetration of the smartphone handset market and
WiFi 6. Whilst growing year-on-year, GaAs volumes are below
management expectations in Q4, in the context of softening demand
within the broader smartphone supply chain.
Despite the challenges of supply chain constraints within the
broader semiconductor industry, the solid performance of GaAs
throughout 2021 has resulted in high utilisation at the Group's
Taiwan facility, where the Group is investing in eight new and
refurbished tools. This includes three new Aixtron G4 reactors
which are now on-site and being commissioned to support further
growth in 2022.
Sales of Wireless GaN epi-wafers have continued to be weak due
to end-market dynamics, including significantly lower levels of
mMIMO base station deployments in Asia and the slow rate of
deployments in Western markets. GaN remains an essential material
for 5G infrastructure and demand is still expected to recover over
the multi-year deployment cycle.
Photonics Update
Demand for VCSELs used in 3D sensing applications has remained
solid throughout H2 2021 but is expected to tail off towards the
end of the year in line with supply chain seasonality and general
softening in smartphone supply chains.
Sales of other Photonics products are also below management
expectations in Q4 due to the re-phasing of certain defence and
security orders associated with large programmes into 2022 and the
slower introduction of sales of new DFB products.
R&D Update
Strong progress continues to be made on research and development
programmes, with significant milestones reached for long wavelength
VCSELs, advanced healthcare sensing, Porous Silicon for front-end
module switching and the commercialisation of GaN on Si
technologies for infrastructure markets.
Operational progress
Operational progress has also been strong, with the closure of
the Group's Pennsylvania facility and associated consolidation of
MBE capacity in North Carolina which is on schedule for completion
by 2024.
The recently announced closure of the Singapore facility is also
on track and due to be completed by mid-2022. These closures are
part of the Group's consolidation strategy and will improve
production efficiency and margins in the medium to long term.
Outlook and Guidance
A significant foreign exchange headwind has been incurred in
2021 on a reported basis, caused by the relative strength of
Sterling, versus the US Dollar in which the majority of IQE's
revenues are denominated.
As a result of softening demand in Q4, IQE now expects full year
reported revenues to be in the region of GBP GBP152m. This is
equivalent to circa GBP164m at constant currency, representing
circa 8% reduction in revenues year-on-year.
The resultant reported Adjusted EBITDA is expected to be in the
region of GBP GBP18m. This is equivalent to circa GBP25m at
constant currency, representing an EBITDA margin of circa 15% at
constant currency (FY2020 17%).
Cash capex in the year is expected to be in the range of GBP14m
to GBP17m compared to the previous guidance of GBP20m to GBP30m,
due to the phasing of payments for certain tool purchases into
2022. Net debt is expected to be less than GBP10m.
Phil Smith, Interim Executive Chairman of IQE, commented:
"Whilst it is disappointing that 5G infrastructure deployments
have remained weak all year, we still expect this macro trend to
provide a multi-year growth cycle for IQE. In the immediate term,
broader semiconductor market shortages have softened demand in some
supply chains but we believe these effects to be temporary and
remain excited by the opportunities ahead.
Meanwhile IQE has made significant strategic and operational
progress in 2021. This has laid strong foundations, which newly
announced CEO Americo Lemos will look to capitalise on as he sets
out his strategy for the future direction of the business next
year."
Contacts:
IQE plc
+44 (0) 29 2083 9400
Phil Smith
Tim Pullen
Amy Barlow
Peel Hunt LLP (Nomad and Joint Broker)
+44 (0) 20 7418 8900
Edward Knight
Paul Gillam
James Smith
Citigroup Global Markets Limited (Joint Broker)
+44 (0) 20 7986 4000
Christopher Wren
Peter Catterall
Headland Consultancy (Financial PR)
+ 44 (0) 20 38054822
Andy Rivett-Carnac: +44 (0) 7968 997 365
Chloe Francklin: +44 (0)78 3497 4624
This announcement contains inside information for the purposes
of Article 7 of the UK version of the Market Abuse Regulation
(Regulation (EU) No 596/2014). The person responsible for arranging
and authorising the release of this announcement is Tim Pullen,
Chief Financial Officer.
Glossary
GaAs Gallium Arsenide
----- ----------------------------------------------
GaN Gallium Nitride
----- ----------------------------------------------
mMIMO Massive MIMO (Multiple-Input, Multiple Output)
----- ----------------------------------------------
VCSEL Vertical Cavity Surface Emitting Laser
----- ----------------------------------------------
DFB Distributed Feedback Laser
----- ----------------------------------------------
About IQE
https://www.globenewswire.com/Tracker?data=-xA2sA2YumHwHb0xEDHe71ZuRJTZthu9wBcjwwCi7n6Pu29pYjxTcEswGAiBgRho5ZGGMmnXRNrbpwkVuzaxxhv7uZcIylFMOnxU-UZ7O2w7JKpCL1bWTEVStq3yBOs5U0S9OwD69BABkMWcZmeMU9RHeb_f0GzNkhcGki34Q-ej0Gnxk_1b5VMnRKoWP72O1d6yLKNreawBJy2807xXFoCibHg9cCFcedZHVT0-yN0=
http://iqep.com
IQE is the leading global supplier of advanced compound
semiconductor wafers and materials solutions that enable a diverse
range of applications across:
-- handset devices
-- global telecoms infrastructure
-- connected devices
-- 3D sensing
As a scaled global epitaxy wafer manufacturer, IQE is uniquely
positioned in this market which has high barriers to entry. IQE
supplies the whole market and is agnostic to the winners and losers
at chip and OEM level. By leveraging the Group's intellectual
property portfolio including know-how and patents, it produces
epitaxy wafers of superior quality, yield and unit economics.
IQE is headquartered in Cardiff UK, with c. 670 employees across
nine manufacturing locations in the UK, US, Taiwan and Singapore,
and is listed on the AIM Stock Exchange in London.
(END) Dow Jones Newswires
November 24, 2021 02:00 ET (07:00 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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