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$50m Anadigics Deal Marks IQE's Returning Profit

Buoyed by a strengthening market for RF components used in high-end wireless applications and a new deal with key customer Anadigics, epiwafer supplier IQE posts an operating profit and a sharp increase in sales.

Independent epiwafer supplier IQE has shrugged off the weak US dollar and a slow start to the year by posting a sharp increase in sales revenue for the first half of 2007.

At £23.7 million ($47.1 million), sales were up 62 percent on the first half of 2006, reflecting the company s significant expansion over the past year (see related stories).

And, although the Cardiff, UK, headquartered company technically made a net loss in the six months to June 30, 2007, it broke even at the operational level, and registered a profit of £1.3 million before interest, taxes, and asset depreciation were factored in.

"This is a key milestone in our continuing progress and clearly demonstrates the strength of the business model," said CEO Drew Nelson, who recently received an award for services to the semiconductor industry from the Jemi UK organization.

With fast-growing GaAs chip maker Anadigics signing up to a supply deal that will be worth at least $50 million to IQE over the next two years, the wafer supplier is now in an excellent position to register a net profit over the coming months, and bolster its cash position.

Wireless components used in high-end applications like advanced handsets, high-speed wireless LAN connectivity and satellite communications now account for around 70 percent of IQE s sales. With Anadigics increasing its GaAs capacity significantly, including building a new wafer fab in China, that proportion looks likely to grow further.

However, IQE is also working to diversify its future business, with a number of research projects indicating the likely key future markets for epiwafer vendors.

As well as a UK project to develop very-high-brightness GaN LEDs for general lighting, IQE is involved with silicon device manufacturers on advanced materials for future memory and logic applications, such as strontium tin oxide, and says that it is "aggressively pursuing the development of compound semiconductor terrestrial solar cell technology".

IQE has also decided to relocate and expand its Singapore facility, which was acquired in the December 2006 deal to buy MBE Technology. What s more, the government in Singapore has offered the IQE operation there a major incentive in the form of tax-free status over the next ten years.

As a result, the cost of that expansion should be kept to a minimum, and provide a good location to support wafer customers in China, such as the new fab being built by Anadigics.

With the wireless component market showing no signs of weakness, as well as a rebound in the fiber-optic component sector, IQE says that it is confident of strong growth for the rest of 2007, although it did not issue any more detailed guidance on sales expectations.

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