News Article

VCSELs Help Drive Record Year For IQE

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Revenue increased by 16 percent and operating profit increased by 19.2 percent

Advanced wafer company IQE has announced record final results for the year ended 31 December 2017. Revenue was £154.5 million (up 16 percent on 2016) and operating profit was £26.4 million (up 19.2 percent).

The results reflect continued revenue diversification with strong growth in high margin product lines, said CEO Drew Nelson. Highlights include the adoption of IQE's VCSEL technology in mass market consumer applications in H2 of 2017; and photonic sales up 109 percent to £47.6m for the full year, with H2 2017 sales up more than 160 percent over prior year H2.

"IQE delivered outstanding performance in 2017. Wafer revenues were up 21 percent, propelling adjusted operating profit from wafer sales up 58 percent. This reflects the high operational gearing in our business, and a more profitable sales mix," said Nelson.

"Photonics continues to be the star performer with 109 percent year on year growth in sales, and H2 sales up more than 160 percent over prior year H2. This substantial growth is largely being driven by VCSEL products for mass market consumer applications that ramped through H2 of 2017. The depth and breadth of customer engagements in Photonics provides a solid platform for continuing strong growth with several new product launches forecast over the next 12-18 months for multiple OEMs.

"We continue to expand capacity to meet forecast increases in demand, as well as driving throughput and yield improvements to release latent capacity and drive margin expansion in our existing business. Progress on the new foundry has progressed exceptionally well, with the first 5 five tools already installed and with further expansion scheduled for Q3 and beyond. This is an incredible achievement given that the initial building works only began in September 2017.

"Armed with an unparalleled breadth of IP and patent coverage, our business model is evolving from being the global leading supplier of advanced semiconductor wafers, to becoming a globally leading 'advanced materials solutions' company where our unique innovative materials and associated nanoscale fabrication technologies provide a route for our customers to push the boundaries of chip performance, extend semiconductor integration capabilities and thereby reduce the cost barriers to broad consumer adoption."

Outlook

The company sees continued growth in 2018 driven by expansion of existing business and qualifications of new business streams.

Photonics revenues are forecast to grow around 35 percent to 60 percent in 2018, based on expansion of products currently in production and the completion of ongoing qualification . The introduction of new technologies and additional market opportunities provide potential for yet higher growth rates, according to IQE.

Wireless revenues are expected to grow up to around 5 percent in 2018; SMI inventories are expected to replenish in 2018, with potential for revenue expansion as GaN products make stronger contribution. Infrared revenues are expected to grow around 5 percent to 15 percent in 2018, with customer engagement broadening

The company also sees potential for strong growth in 2019 and beyond.

Increasing VCSEL adoption for 3D sensing is forecast to accelerate across multiple smartphone OEMs, introduction of world facing 3D technology, and first deployment of LIDAR and several other high volume sensing applications.

IQE also expects increasing deployment of InP for high speed FTTX and data centre applications; more compound semiconductor content in 5G communication systems; and increasing adoption of GaN for basestations and other high power RF applications.

Other areas of growth for 2019 and beyond include Infrared products in mass market consumer application, power switching and non terrestrial solar markets, and adoption of IQEs IP portfolio using cREO, NanoImprint Lithography (NIL) and Quasi Photonic Crystal (QPC) technologies.

Expected CAGR over the next three to five years, based on current products, in the ranges of: wireless up to 10 percent; photonics 40-60 percent; and Infrared of 5-15 percent.


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