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IQE Expands Epiwafer Offering With Emcore Deal

UK-based epiwafer foundry IQE is set to move into advanced RF applications with the acquisition of Emcore's electronic materials division.

IQE, the epiwafer foundry based in Cardiff, UK, will acquire the electronic materials division belonging to Emcore "“ provided that a planned £12 million ($22.2 million) share offering goes according to plan.

If that offering gets the go-ahead from IQE shareholders at an extraordinary general meeting near IQE's headquarters on August 15, the UK firm will acquire Emcore's Somerset, NJ, operations, including ten advanced epitaxy tools and 50 employees.

IQE will pay $13 million in cash to Emcore initially, with the remaining $3 million balance to be paid off quarterly in four instalments.

Drew Nelson, the CEO at IQE, said that the deal represented a big opportunity for the company to add some complementary technologies and clients to its existing portfolio: "Emcore's customer base will increase IQE's customer reach to a broad spectrum of world class RF manufacturers," he said.

Like IQE, Emcore has enjoyed success with its GaAs-based HBT technology for the cell-phone market. However, its development of integrated transistor structures, known as BiFETs, and wide-bandgap materials based on GaN, will certainly add to IQE's current product offering.

To finance the deal, 87.5 million ordinary shares in IQE will be offered for sale, assuming the existing shareholders give the move their assent. At 13.75p per share, the offering should raise £12 million.

Historically a III-V materials and equipment vendor, Emcore has increasingly started to focus on optoelectronic devices, fber-optic modules and solar cells in recent years. But after selling its MOCVD equipment division to Veeco in 2003 and now its materials expertise, Emcore's strategy to move up the semiconductor value chain is evident.

In its most recent trading statement, for the quarter that ended March 31, 2006, Emcore said that the electronic materials division had sales of $5 million. During the same period its fiber-optic unit posted over $25 million in revenue, and its photovoltaics business over $10 million.

Emcore COO Scott Massie said that the sale of the materials division would improve the company's overall financial performance: "It will lower our cost base, improve gross margins and allow us to consolidate operations in New Mexico and California."

• IQE says that its revenue for the first half of 2006 should be in the region of £14.5 million, up 50 per cent on the equivalent period in 2005.

Drew Nelson said that sales would continue to grow in the second half of 2006, while the planned acquisition of Emcore s materials business should add significantly to that figure.

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