Home Money British chipmaker IQE sees shares soar despite semiconductor slowdown

British chipmaker IQE sees shares soar despite semiconductor slowdown

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Analysts suggest an AI-driven boost in smartphone demand could improve IQE's fortunes
  • Cardiff company manufactures parts that allow facial recognition on iPhones

IQE shares rose sharply after the British chipmaker told investors that cost-cutting efforts had helped lift profits above expectations.

The Cardiff-based company, which makes epi wafers for use in laser hair removal and facial recognition sensors in iPhones, has seen its trading hampered by weak global demand for semiconductors.

But IQE said on Thursday it had faced “macro headwinds” with “focused cost control and improved operational performance”.

The group now expects to post revenue of £118m and adjusted profits before unpleasantness of £7.5m by 2024, ahead of the market consensus of £115m and £5m respectively.

IQE stock They rose 7.3 per cent to 13.26 pence in early trading, having lost about 37 per cent in the last 12 months and almost 75 per cent in the last five years.

IQE launched a strategic review of its assets in November as part of efforts to bolster its capital position, amid a “slower-than-expected recovery in key sectors driven by weak consumer demand in end markets.”

Analysts suggest an AI-driven boost in smartphone demand could improve IQE’s fortunes

The review includes an expansion of the proposed initial public offering of its Taiwan operations to include “all strategic options,” including an outright sale, rather than the minority stake it would have retained under previous plans.

The group has a market capitalization of £120m and bosses believe there is significant value in IQE which is not currently reflected in its share price.

This follows the sudden departure of CEO Américo Lemos in October.

IQE told investors on Thursday that it had been encouraged by “positive levels of interest” from partners and “broader recognition that the group is a technical leader in a range of strategically important vertical markets, with a base of assets well invested.

IQE is also in the “final stages” of finalizing a proposed convertible loan note.

Boss Mark Cubitt said the proposed funding will provide IQE with “greater resilience as we continue to strengthen relationships with key clients and further expand into emerging high-growth areas”.

He added: “Amid continued macroeconomic headwinds, (interim CEO Jutta Meier) and the leadership team have taken effective steps to refocus the group on its core strengths and improve operational performance, resulting in an encouraging financial outlook”.

IQE prepares to boost AI in the face of smartphone demand

The global semiconductor industry typically goes through relatively short cycles of rise and fall in demand.

The rise in wafer usage led to unprecedented shortages in 2021 and 2022, before a combination of rising inflation, geopolitical tensions and a pandemic hangover caused an industry downturn in 2023.

Last year showed improvement, with global semiconductor sales rising 15.2 percent year-on-year in January 2024, but the recovery proved “uneven.”

Looking ahead, Peel Hunt analysts warned that “the big ‘unknown’ for IQE and the wider industry is ‘the ongoing tariff war’ and export controls imposed by the Chinese government.

But Peel Hunt said on Thursday that the demand outlook should improve for IQE.

‘While much of the industry-leading TSMC’s buzz is focused on AI, its management also expects smartphones to be boosted in the coming periods through AI-driven reduction in refresh cycles; and an AI-related increase in semi-final content,” he said.

“We believe this bodes well for IQE on the other side of the current cyclical crisis.”

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