26 July 2018

IQE expects first-half 2018 revenue of £73m, with double-digit sales growth on constant-currency basis in each primary market

© Semiconductor Today Magazine / Juno PublishiPicture: Disco’s DAL7440 KABRA laser saw.

In a trading statement, epiwafer foundry and substrate maker IQE plc of Cardiff, Wales, UK says that for first-half 2018 it expects revenue of £73m, up 3.7% on £70.4m in first-half 2017, despite a currency headwind of 9.5%. On a constant-currency basis, this reflects double-digit sales growth year-on-year in each of the firm’s three primary markets.

The Wireless segment has shown strong growth of nearly 11%, as IQE delivered on its intention to replenish wireless inventory channels following the capacity allocation made to vertical-cavity surface-emitting laser (VCSEL) production in second-half 2017. The Wireless segment remains in a strong position and has been underpinned by the renewal of the supply agreement with its largest customer. This contract has been extended for a further 15 months’ supply in addition to expanding to cover a wider range of products and increased share of the customer’s epiwafer requirements to IQE.

As a consequence of this extended agreement, together with additional qualifications recently completed with other Wireless customers, IQE’s board has approved an expansion program to increase Wireless capacity at the firm’s plant in Hsinchu, Taiwan by more than 40% in 2019. This should have two benefits: (i) delivering further production efficiencies and capacity improvements in the USA for Photonics materials, and (ii) eliminating cost inefficiencies incurred in converting and re-converting reactors between the two materials systems.

The Photonics segment is expected to deliver growth of 30% year-on-year on a constant-currency basis. Revenue from the largest Photonics customer was broadly flat year-on-year, as the supply chain absorbed inventory following a very steep production ramp up for VCSELs relating to 3D sensing applications in second-half 2017. Excluding revenue from this customer, underlying Photonics revenue is up about 40%. IQE says that this demonstrates the traction it is experiencing across a number of VCSEL chip makers, who took advantage of capacity availability to embark on a significant number of production qualifications, in addition to growth in other parts of the Photonics business.

The Infrared segment delivered growth of about 11% year-on-year, and is expected to show further strong growth in second-half 2018.

“Our highly successful second-half 2017 ramp of 6-inch VCSEL production for a major customer has established IQE as the go-to materials solution provider for this technology,” says chief executive Dr Drew Nelson. “It is widely recognised that, with more than 25 years’ experience of working with VCSELs and a clear, visible, commitment to world-leading manufacturing capacity on two continents, we are and will remain the premier preferred manufacturer of these materials,” he adds. “First-half 2018 has seen a very significant increase in the number and extent of our engagements with VCSEL chip customers.” IQE is now engaged with over 20 VCSEL chip makers in Asia, North America and Europe on qualifications for mobile, sensing, automotive and datacom applications. It is already fully qualified and in mass production with six of these companies and in final qualification stages with six more.

“Furthermore, as detailed in our announcement of 9 July, we reached a production milestone for our NIL [nano-imprint lithography] technology, which demonstrates our ability to bring to market some of the leading materials solutions that we have been showcasing and sampling to our customers,” says Nelson. “We have significant engagements for our other core technologies, including gallium nitride on silicon (GaN-on-Si), cREO [crystalline rare earth oxide] and QPC, and these are proceeding as planned. The second-half 2018 ramp for Photonics has already started and we look forward to the rest of 2018 and in particular the further ramp up which is expected in 2019.”

The capacity expansion at the firm’s new ‘Mega Foundry’ plant in Newport, South Wales, UK is proceeding according to plan. The first five reactors, which will be qualified for Photonics, are now installed and are at various stages of acceptance testing, commissioning and qualification. Initial results on quality and reactor performance remains encouraging, says the firm. A further five reactors will be delivered in second-half 2018, with acceptance testing, commissioning and qualification expected to commence immediately after delivery. Phase one of the build out at the Newport facility will provide 20 fully serviced reactor bays, which should be fully operational during first-half 2019. Further reactors are planned to be installed through the remainder of 2019.

IQE says that it continues to trade in line with current market expectations. The previous guidance provided in the statement of June’s annual general meeting (AGM) for a 40:60 H1:H2 2018 revenue split remains unchanged, accompanied by a shift back from Wireless to Photonics, which has already begun during June.

IQE expects to report its half-year 2018 results on 29 August (earlier than the previously announced 5 September due to a number of conflicting events).

See related items:

IQE’s Wireless business unit renews major contract with tier-1 customer

IQE’s nano-imprint lithography technology production qualified by DFB laser manufacturer

IQE's record full-year 2017 results driven by adoption of VCSEL technology in mass-market consumer applications

IQE places new shares to raise £95m

IQE extends production of VCSEL epiwafers with Aixtron AIX 2800G4-TM MOCVD systems

IQE’s first-half wafer revenue up 17% year-on-year, driven by Photonics growth of 48%

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