IQE Slots In The Final Piece Of The Puzzle
DN: We merged with Quantum Epitaxial Devices (QED) in 1999 principally to give ourselves a position in the wireless market place with MBE technology. That business is focused on PHEMTs and has been very successful. It has established strong positions with a number of key players, but what was obviously missing was an MOCVD electronic position, principally for HBTs and upcoming materials like BiFETs, BiHEMTs and GaN. The electronics materials division (EMD) acquisition fits perfectly into that strategy.
It was a good time for both IQE and Emcore to make the transaction. As a company Emcore is focusing more on systems so the EMD was becoming significantly non-core to their main business. They were keen to find a good home for it and IQE fits that bill perfectly.
MH: How will your customers benefit?
DN: It allows our customers to deal with a single company for their complete range of current and future products. Consolidation of supply chains is a key trend in the industry and we can offer more cost-effective products, a complete route to future product roadmaps, and largecapacity. Capacity is an important issue. Companies are faced with the prospect of either having to install internal epi if they don t have it – which is obviously very costly and time consuming – or risk expanding their existing capabilities. They can also recall the problems of 2001 and 2002 quite vividly. At IQE, the entire business is about outsourcing epi effectively and we re committed to expansion.
MH: How is MOCVD capacity affected?
DN: EMD was coming up against some capacity constraints. For some of their customers there were some concerns about future investment in capacity. IQE does have some spare MOCVD capacity, as a result of the investments that we made two or three years ago. In Europe, our main focus is optoelectronics, but we have developed HBT capability here and we can use some of the spare capacity [in Cardiff, UK] to help EMD.
MH: Will we see more acquisitions by IQE?
DN: From a technological point of view we ve got all the pieces of the puzzle. We d never rule out more acquisitions if they made sense, but it s not something that we re going all-out for. In general, I think that further consolidation is probably inevitable. As the largest independent epiwafer supplier, we re in a position to command keener prices [for materials] than a smaller supplier. We should therefore be able to offer our customers better, more secure, deals than some of our rivals.
Small epi companies will have to come up with something that s specific and very attractive to the supply chain to overcome the disadvantages in terms of security of supply, economies of scale and future roadmaps.
MH: How does EMD fit into the overall business?
DN: The new IQE-RF site has a solid managerial and operational team, who have built the business strongly. We don t envisage making any fundamental changes and it ll be run as a stand-alone entity. The big benefit is that there can be lots of cross-fertilization of ideas and we can obviously purchase things like raw materials in bulk.
MH: Do Asia-Pacific suppliers pose a threat to IQE?
DN: There is MOCVD capability supplying HBTs into the market place from Taiwan. Through the EMD acquisition, we have an answer for that. I think that the Far East companies are starting from a very low base, even if they are increasing very rapidly. The scale of our operation will mitigate the competition.
MH: How are current business conditions?
DN: We re pretty excited by wireless because there are a number of drivers in the market place – from Wi-Fi to WiMAX to 3G. The EMD division has a strong BiFET technology, which is really beginning to get a lot of interest. It also has GaN capability for base station applications, as well as the existing InGaP HBT business for CDMA and W-CDMA protocols. Add to that the products from IQE and we can cover the entire wireless space. Market growth is forecast to continue and more GaAs will be used [in handsets] because of multiple radios and faster communications, so I think we re in a very strong position and we re very bullish about the future.
In optoelectronics, there are lots of new applications that require VCSELs in very large quantities – and that s exciting for us as we are one of only a few suppliers of VCSEL wafers in the world. For example, the new laser [computer] mouse uses VCSELs instead of red LEDs. Other applications include laser printers, photocopiers and short-distance communications.
Revenue from the Cardiff business is growing at about 25–30% per year. Selling prices have decreased a little bit, but not that much. That growth rate illustrates the buoyancy of the market although, undoubtedly, wireless is growing more rapidly than optoelectronics.
MH: Where is the market for GaN technology?
DN: It is driven by the needs of 3G base stations and although right now it is difficult to predict when base stations featuring GaN will appear, we re certainly getting quite a lot of interest in the technology and EMD is selling the wafers on a commercial basis.
MH: How much revenue will EMD add?