News Article

Demand For GaAs Insatiable, Says IQE

Although 3G is driving strong growth, the epiwafer supplier is trying to improve sales into other compound semiconductor markets to reduce its dependence on wireless.

IQE is backing GaAs sales to support its ongoing expansion, irrespective of large market share shifts amongst its customers.

The Cardiff, UK, headquartered company s operating profit for the first half of 2008 rose to £1.6million ($2.9 million) from £11,000 year-on-year. However this was wiped out by the costs of relocating its Singapore operation, to help accommodate burgeoning orders, even as it invested another £3.4 million in additional capacity elsewhere.

“I think it s true to say that at the moment demand is outstripping supply across the GaAs sector," said Chris Meadows, IQE's investor relations executive. “Certainly from the forecasts that we re getting from customers it would seem to be the case."

“We re not aware of a huge stash of machines capable of switching on and turning out increased amounts of GaAs HBTs and PHEMTs and BIFETs," Meadows said, “yet customers are saying that they just need more and more of them."

Wireless revenues grew from £17.3 million in the first half of 2007 to £23.6 million in the same period in 2008.The company is confident that this figure will continue to increase and support its expansion, in spite of a remarkable drop in orders at Anadigics, an important customer of IQE's.

“The leading handset brands seem to shop around quite a lot," Meadows said. “We see downturns from some customers but that's more than made up for by others. Whenever handset makers switch it actually doesn't affect us, because we're right at the beginning of the supply chain."

Continued robust handset sales in the weak broader economy are also helping IQE's prospects, but even without this the wafer maker still sees GaAs revenues growing.

“3G and smartphones are using up to four times the amount of GaAs that the previous generations did," Meadows said. “The sudden, almost insatiable, demand for GaAs is actually dwarfing any increase in handset sales."

Seeking another III-V driver
IQE is now pressing ahead with business in several other areas in the hope that they might come close to matching GaAs sales in the long term. The first new technology to record significant sales will be III-V photovoltaics, which Meadows anticipates will feature in 2009. IQE currently has two key partners in this sector, which are likely to be the startups Cyrium and Quantasol.

LEDs are another sector that IQE wants to penetrate in 2009, although Meadows admits the company is still “waiting for an opportunity" to make a large impact in this area.

Ironically the new venture looking most likely to come to fruition in the short term would fall squarely back in IQE s wireless division. It has recently announced two new silicon processes, including a silicon-on-sapphire line that has already attracted a significant customer. This is almost certain to be linked to the RF electronics firm Peregrine Semiconductor, which has recently moved to a 95 percent outsourced manufacturing model.

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