For first-half 2017, epiwafer foundry and substrate maker IQE plc of Cardiff, Wales, UK has reported revenue of £70.4m, up 12% on £63m for first-half 2016.
Licensing income from joint ventures was £0.95m, down 71% on £3.5m in first-half 2016 since that included significant upfront license fees (compared with none in first-half 2017).
Wafer revenue rose by 17% from £59.5m to £69.4m, reflecting increased sales in all three primary markets.
Wireless sales rose by 9% from £43.2m to £47.3m (68% of wafer sales, though falling from 73% in first-half 2016).
Comprising IQE’s fastest-growing segment (following several years of strong double-digit growth), Photonics sales rose by 48% from £10.7m to £15.9m (23% of wafer sales, rising from 18% in first-half 2016). Continued strong growth in Photonics includes the early phase of a significant ramp in vertical-cavity surface-emitting laser (VCSEL) wafers for a mass-market consumer application, contributing to record monthly Photonics sales in June.
Infrared sales rose by 19% from £4.7m to £5.6m (remaining 8% of wafer sales).
In contrast, CMOS++ revenue fell from $0.87m to £0.7m.
Gross margin on wafer sales rose from 24% to 25%, while gross margin on license income remained at 100%. However, overall gross margin fell from 28% to 26%, reflecting the mix effect of lower license income in 2017.
Selling, general & administration expenses (SG&A) rose from £7.3m to £7.5m.
Despite the increase in sales, operating profit of £10.6m was lower than first-half 2016’s £10.8m (which benefitted from the one-off upfront license income).
Adjusted profit after tax fell by £0.4m from £10.2m to £9.8m which, combined with an increase in the fully diluted share count (due to the increase in share price), resulted in an drop in adjusted fully diluted earnings per share (EPS) from 1.46p to 1.35p. After exceptional charges of £2.5m (up from £1.7m in first-half 2016), the reported profit after tax fell from £9.8m to £7.3m.
Due to the drop in profitability, net cash generated from operations fell from £11m to $9.2m.
To support further growth (including the expected mass-market adoption of VCSELs), investment in capital expenditure (CapEx) and product development has more than doubled from £7.6m in first-half 2016 to £15.4m, funded primarily through organic cash generation and supplemented by debt funding. During first-half 2017, net debt rose by £2.4m, from £39.5m to £41.9m.
A further capacity expansion plan has been initiated to meet the higher levels of demand that are expected in second-half 2018. Five new tools are on order, and a lease has been signed on new premises in South Wales to provide a flexible and cost-effective route to add up to 100 new tools (doubling IQE’s existing tool count).
IQE reckons that the breadth and depth of its customer engagement across a range of technologies and applications sets the scene for increasing revenue diversity and growth through 2018 and beyond.
The firm says that direct engagement with OEMs has expanded to multiple programs across a range of materials technologies (central to several next-generation mass-market applications), validating the strength of its IP portfolio as a key differentiator.
“The compound semiconductor industry is moving through an inflection point,” notes CEO Dr Drew Nelson. “Many of the key innovations that are taking place in the technology world would not be possible without the advanced properties of compound semiconductor materials. Indeed, compound semiconductors are the fundamental enabler of innovations such as 3D sensing, biometric sensors, electric and autonomous vehicles, high-speed wireless and optical communications, and advanced manufacturing. IQE has developed an unparalleled breath of materials IP, which position it to prosper from the inflection that is taking place,” he adds.
“The broad range of customer engagements across multiple technologies and multiple end markets provide a clear path to increase revenue diversity and accelerate growth over the coming months and years ahead,” continues Nelson. “The breadth and depth of customer engagement underpins the board’s confidence in approving the capacity expansion plan, which provides a flexible and cost-effective route to significantly scaling up in our business over the next few years.”
