IQE PLC Trading Update And Comment On Vcsel Supply Chain

 
TIDMIQE 
 
 
   IQE plc 
 
   Cardiff, UK. 13(th) November 2018: IQE plc (AIM: IQE; "IQE", the 
"Company" or the "Group"), the leading global supplier of advanced wafer 
products and materials solutions to the semiconductor industry, provides 
the following trading update further to the announcement made by IQE on 
12(th) November 2018. 
 
   IQE confirms it was notified on 12(th) November 2018, following an 
announcement made by a major chip company in the VCSEL supply chain on 
the same day, that the chip company had received notice from one of 
their largest customers for 3D sensing laser diodes that they would 
materially reduce shipments for the current quarter. 
 
   As a consequence of the change in market conditions, IQE announces that 
it now expects to deliver revenues of approximately GBP160m for FY 2018 
(H1 2018 GBP73.4m, FY 2017 GBP154.6m). 
 
   Photonics demand was facing a later but steeper Photonics ramp for 
VCSELs for consumer products moving into Q4 2018, a reflection of the 6 
inch VCSEL inventory overbuild in FY 2017 being larger and taking longer 
than expected to be consumed during FY 2018. With the impact of this 
recent announcement coming at this critical time, Photonics wafer 
revenues growth for FY 2018, on a constant currency basis, is now 
expected to be approximately 11% (previous guidance for FY 2018 
Photonics wafer revenue: 35% to 50%) and based on early initial 
indications, is currently expected to return to previously guided levels 
of 40% to 60% revenue growth in FY 2019. 
 
   Wireless wafer revenues for FY 2018, on a constant currency basis, is 
expected to grow at 8%, above the top end of the 0% to 5% revenue growth 
guidance, given in the Company's H1 trading statement.  Wireless demand, 
especially for GaN products, has been strong and capacity was retained 
through Q3 2018, to continue to address demand following the 
replenishment of inventory channels depleted during H2 2017. The late 
ramp of Photonics production also provided an extended opportunity for 
additional engagement and qualification programs with more than 25 VCSEL 
chip manufacturers. 
 
   Infrared wafer revenues, on a constant currency basis, is also expected 
to grow at or exceed the top end of current CAGR guidance range of 5% to 
15% for FY 2018 and remain in the 5% to 15% range for FY 2019. 
 
   As a result, FY 2018 Adjusted EBITDA is now expected to be approximately 
GBP31m (FY 2017 GBP37.1m). 
 
   Dr Drew Nelson, Chief Executive of IQE, said: 
 
   "The much reported VCSEL inventory overbuild following the successful H2 
2017 ramp for a new 3D sensing consumer product application for this 
technology, took longer to work through the inventory channels than the 
industry expected.  It is now clear that some of this inventory likely 
satisfied product build as late as September and October 2018. This 
resulted in a steeper and later ramp for VCSEL production in Q4 2018. 
The impact of an immediate slowdown in shipments of VCSEL wafers will 
therefore materially impact our expected year end revenues and 
profitability. 
 
   Nonetheless, Photonics revenues, on a constant currency basis, from FY 
2016 through to FY 2018 is still expected to deliver revenue growth of 
at least 45%, which is within the guidance range we retain for FY 2019. 
We believe that we have retained approximately 90% share of the VCSEL 
epi-wafer market that we enjoyed last year and based on early initial 
indications, we expect a similar market share in FY 2019, but with a 
significantly broader OEM end customer spread as the technology 
penetrates many more devices and applications. 
 
   IQE is the premier solution provider for this VCSEL technology serving 
the mobile, sensing and datacom applications.  We have demonstrated the 
three key elements for establishing a pre-eminent position for this 
high-growth material; technical competence, 6 inch production capability 
through an aggressive ramp and finally a commitment to install and 
qualify significant capacity to meet industry assumptions for future 
VCSEL demand. Our technical leadership is underwritten by more than 25 
years' experience with these highly complex structures and this will be 
maintained by an unrivalled technology roadmap ensuring we continue to 
excel. The added capacity to be provided by our Newport Foundry is 
progressing, with 10 reactors now installed and 4 of which are already 
engaged in multiple customer qualification activity with some initial 
volume mass production possible at the very end of the current quarter. 
The throughput, yield and quality (uniformity) of the qualifications 
currently underway are very encouraging. 
 
   Our Photonics business is building a wide customer base across multiple 
chip manufacturers providing VCSELs for a number of different end market 
applications including 3D sensing and this increasing customer 
diversification will in time produce a better-balanced and more 
uniformly distributed demand profile. I am also delighted by the strong 
performance of both our Wireless and Infrared business units and the 
opportunities they face for 2019 and beyond. 
 
   We reiterate our long-term guidance for each of the photonics, wireless 
and infrared businesses." 
 
   The information contained within this announcement is deemed to 
constitute inside information as stipulated under the Market Abuse 
Regulations (EU) No. 596/2014. Upon the publication of this announcement, 
this inside information is now considered to be in the public domain. 
 
   GLOSSARY OF TERMS 
 
   VCSEL......................... Vertical Cavity Surface Emitting Laser 
 
   GaN............................. Gallium Nitride 
 
   CAGR.......................Compound Annual Growth Rate 
 
   Adjusted EBITDA.......EBITDA after adjusting for the impact of one-off, 
non-cash and non-operational items 
 
   CONTACTS: 
 
 
 
 
IQE plc 
 Godfrey Ainsworth 
 Drew Nelson 
 Chris Meadows                                [phone] 
Canaccord Genuity (Nomad and Joint Broker) 
 Simon Bridges 
 Richard Andrews                             + 44 (0) 20 7523 8000 
Peel Hunt (Joint Broker) 
 Edward Knight 
 Nick Prowting                                [phone] 
 
 
 
 
 
 
   ABOUT IQE 
 
   https://www.globenewswire.com/Tracker?data=yZf7NKp1JKLALUCxlBuC8wkLnLAqoe5-kjjIlkMIDci9q9W0x_02bwZV-eorSbpLXZxy4zi3xHh-O4FM8nWjeg== 
http://iqep.com 
 
 
 
 
 
   IQE is the leading global supplier of advanced semiconductor wafers that 
enable a diverse range of applications, supported by an innovative 
outsourced foundry services portfolio that allows the Group to provide a 
'one stop shop' for the wafer needs of the world's leading semiconductor 
manufacturers. 
 
 
 
 
 
   IQE uses advanced crystal growth technology (epitaxy) to manufacture and 
supply bespoke semiconductor wafers 'epi-wafers' to the major chip 
manufacturing companies, who then use these wafers to make the chips 
which form the key components of virtually all high technology systems. 
IQE is unique in being able to supply wafers using all of the leading 
crystal growth technology platforms. 
 
 
 
 
 
   IQE's products are found in many leading-edge consumer, communication, 
computing and industrial applications, including a complete range of 
wafer products for the wireless industry, such as smartphones and 
wireless infrastructure, Wi-Fi, base stations, and satellite 
communications; optical communications, optical storage, printing, 
thermal imagers, leading-edge medical technologies, automotive and 
aerospace technologies, a variety of advanced silicon based systems and 
high efficiency concentrator photovoltaic (CPV) solar cells. 
 
 
 
 
 
   IQE operates multiple manufacturing and R&D facilities worldwide. 
 
 
 
 
 
 

(END) Dow Jones Newswires

November 13, 2018 02:00 ET (07:00 GMT)

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