IQE's revitalising reboot

IQE has got its mojo back, thanks to substantial investment from Macom, which has signed two long-term supply deals

BY RICHARD STEVENSON, EDITOR, CS MAGAZINE

Those running companies within our industry often focus on commercialising trailblazing tech and ramping volumes. But they are not the only matters keeping them awake at night. Leaders must also concern themselves with their balance sheets. If they have debt, how do they plan to pay it off?

For a number of years, debt-related concerns have hung over the world’s leading supplier of epiwafers, IQE. But not anymore – this April it secured investment totalling £81 million ($107 million), in a deal involving Macom that IQE’s CEO Jutta Meier describes as ‘transformational’.

The lion’s share of this investment comes directly from Macom. There £30 million in cash, which Meier describes as a ‘true equity investment’, and another £15 million in the form of a convertible loan note.

Commenting on these contributions, Meier remarks: “The investment needed to really solve the debt structure was roughly £30 million.” The additional £15 million provides headroom for investment and an increase in capital expenditure.

During the financial restructuring of IQE, there were negotiations with existing convertible loan holders, who are reinvesting in the company. This secured around £23 million. And there’s a fourth element to the £81 million figure: the raising of a further £13 million from existing shareholders, a move supported by Macom.

According to Meier, IQE is now in a very strong position to weather any upcoming storms, while supporting growth.

Discussions between the two companies began over the supply of epiwafers. “[Macom] were obviously extremely happy with our technology, and they wanted assurance that we are going to be able to supply that technology for the longer future,” says Meier. Macom and IQE have now established two long-term supply agreements.

Strengthening ties between the two companies is the introduction of two Macom executives on IQE’s board.

“That means that we are going to benefit from their experience in manufacturing,” says Meier, who is keen to stress that this investor will not be calling the shots. “We're not a Macom house. It's really more advice sharing.”

Happy days
IQE’s re-financing has reinvigorated the company, and its interactions with its customer base. “What we're really seeing right now is a pure excitement to work with IQE,” enthuses Meier.

That’s not been the case in the recent past, when the company had to devise a plan for addressing its rolling credit facility with its bank, HSBC. Debt stood at $30 million, day-to-day operations could not reduce this figure, and a renewal date of September 2026 loomed over IQE.

When internal discussions on a solution began in summer 2024, an IPO for the Taiwan site emerged as the front runner. This facility focuses on the manufacture of GaAs-based epiwafers for the wireless sector. “It’s really quite separate from our growth opportunities,” argues Meier.

By the end of 2024, IQE discarded that option, due to a weakening wireless market and difficulties associated with an IPO. “You have to be listed on the emerging market for six months before you can actually complete an IPO there,” explains Meier.

IQE then considered the sale of its the Taiwan facility. This could clear debts and potentially support growth of the remaining business. But would this be the best way forward? To answer this question, IQE launched a strategic review, considering its options as it conversed with investors, customers, and other players in the eco-system.

These deliberations considered whether IQE could have a role to play in a vertically integrated company, through a sale of part or even all of its business.

“It was always difficult to pinpoint which technologies could be vertically integrated, versus what would just be left stranded,” explains Meier, who says that there are other matters demanding consideration: the integrity of both the portfolio and the company, and its geographical footprint. “Breaking it out and then integrating it into other components wouldn't quite yield the same value as keeping the company intact.”

During internal discussions, Meier and colleagues concluded that the best role for IQE is to be core supplier to vertically integrated companies, supporting them with product and technical expertise. And while they did consider selling IQE, they failed to find an interested party that valued the company in the right way.

IQE’s management also considered the ideal make-up of its order books. “You can run very low batch volume, however, you need to have a premium pricing associated with that. I think that's something that we haven't been doing enough in the past,” remarks Meier. According to her, high-volume orders are also crucial. “We're optimising our portfolio to have enough of a scale to drive profitability, but not lose that bespoke quality of the offering.”

When striking deals, IQE has not always been in a strong position. “Given our financial situation in the past, we were always on the back foot of negotiations,” admits Meier. But that’s changing, with IQE planning to sign long-term supply agreements that will improve visibility surrounding future demand.

During the strategic review, uncertainty over IQE’s future paralysed the company. Customers expected to strike a good deal with IQE, but it made little sense for to them to build or strength their relationships with this supplier of epiwafers, given its vulnerability.

IQE’s results for 2025 reflects this state-of-affairs, with annual sales just £97 million. This relatively low revenue results from uncertainty holding back IQE’s business and extenuating circumstances. In the wireless sector, customers built up inventory in 2024, then drew on that in the following year; and product orders from the US suffered very lengthy delays, due to a change of administration and a slow release of military and defence budgets.

Poor sales and uncertainty weighed heavily on IQE’s share price, which headed south through 2025, finishing the year at around 5p.

For this year, sales are forecast to be up year-over-year by 20 percent. And further ahead, even better figures should be delivered, supported in part by a multi-year InP epiwafer supply agreement signed this June with Tower Semiconductor. Note that this deal will not impact revenue immediately, due to qualification.

In September 2017, IQE announced the creation of a new state-of-the-art mega foundry in Newport, Wales. Since taking on the lease of the 30,000 m² building, IQE has completed the first phase of construction of cleanrooms and services

Learning from history
Meier is keen to avoid repeating errors made by IQE.

“Additional capacity increases will have to be coupled with very concrete customer commitments and customer co-funding. We will not just build capacity and hope that we will receive customer commitments.”

IQE fell into this particular trap during the VCSEL boom, which initially generated massive orders for the epiwafer supplier. “Once the devices shrunk and the yield increased, the demand of the wafers really subsided.”

While IQE will continue respond to surges in market demand, the focus is for a balanced portfolio. Although devices based on InP and GaN are currently attracting a great deal of interest, due to the rapid buildout of AI infrastructure, IQE will not neglect business activities associated with GaSb and GaAs epiwafers, used in infrared sensing and wireless markets.

Adopting this approach should help ensure a steady growth in sales. But will this lead to profitability, which has alluded IQE for many years?

“People ask me that all the time,” admits Meier, who points out that it’s possible to define profitability in multiple ways. “I'm not going to commit to a time when we are going to be cash accretive, but ultimately, I think that that is truly the goal. And looking at the growth rates right now, that goal will be achieved sooner than later.”