IQE’s strong first-half revenue growth marks start of increased VCSEL wafer demand for mass-market consumer applications

Epiwafer foundry and substrate maker IQE plc of Cardiff, Wales, UK says that, for first-half 2017, it expects revenue of about £70m, reflecting increased sales in each of its three primary markets.

“All business units have progressed in line with expectations, although the Photonics unit has been the stand out,” says chief executive Dr Drew Nelson.

Notably, photonics continued to deliver strong double-digit growth (accelerating towards the end of first-half 2017), enjoying the early phase of a significant ramp in vertical-cavity surface-emitting laser (VCSEL) wafer supply for mass-market consumer applications. As a result, overall wafer sales are expected to grow by 16% on first-half 2016. Revenue is also supplemented by about £1m of license income (versus £3.5m in first-half 2016). IQE expects to report its full first-half 2017 results on 5 September.

IQE says that its broad range of end-market drivers is increasing the diversity of its wafer sales. The firm is engaged in a range of programs that provide significant upside potential to its near- and mid-term growth expectations. These include VCSELs, gallium nitride (GaN) for RF and power, full-service distributed feedback laser (DFB) wafers, infrared and cREO (crystalline rare-earth oxide).

IQE says that the start of the mass-market ramp for VCSEL wafers marks an inflection point in the commercialization of the technology. The firm has secured multiple, multi-year contracts for this VCSEL ramp, reflecting its track record of delivering wafers into high-volume consumer markets.

“The group has multiple high-growth opportunities ahead,” says Nelson. The board has hence now approved a capacity expansion plan to meet higher levels of expected demand in second-half 2018 than previously anticipated. This follows increased investment during first-half 2017 in operating costs, product development and working capital to help position the firm for the expected ramp and to meet higher levels of growth in second-half 2017.

As part of its expansion plan the firm says that it has agreed a memorandum of understanding (MoU) for the lease of a new premises in South Wales from the Cardiff City Region, which has a goal of supporting the development of the Compound Semiconductor Cluster in South Wales. IQE says that the 11-year lease (with an option to either extend it or purchase the freehold) provides the infrastructure needed for its expansion in a highly cost effective manner. In parallel, IQE has placed orders for new metal-organic chemical vapor deposition (MOCVD) equipment.

“In light of recent progress and its increasingly confident outlook, the board expects the group will now exceed market expectations for the full year,” says Nelson. “Whilst it remains early into the start of the mass-market adoption of our technology, it is possible that, with the current contract momentum, a more significant upgrade to current market expectations could be delivered for 2018.”