IQE to take full ownership of CSDC joint venture

(Sharecast News) - Semiconductor wafer products and materials supplier IQE announced the acquisition of third-party shareholdings in its CSDC joint venture in Singapore on Thursday, taking its ownership to 100%.
The AIM-traded firm explained that CSDC was formed in March 2015, as a joint venture between its Singapore subsidiary MBE Technology at 51%, WIN Semiconductors at 25%, Nanyang Technological University at 18%, and individuals of the NanYang University at 6%.

It was established as a vehicle for the development and commercialisation of compound semiconductor technologies for academic and industrial customers based on molecular beam epitaxy (MBE) technologies in Asia.

Since formation, the company said the geopolitical landscape had changed "significantly".

During 2019 in particular, the localisation of Asian technology supply chains was rapidly becoming evident, the board said, with "significant" opportunities emerging for the China 5G market.

It said that by taking the operation under 100% ownership, IQE would become best placed to take the necessary steps to restructure the operation, which was currently loss-making as a result of underutilisation of assets and property lease obligations.

The firm would also be able to pursue Asian market sales opportunities for MBE-based products, to return the operation to profitability.

Revenue recognised by IQE and its Singaporean subsidiary would be unaffected by the transaction, with the board anticipating that post acquisition adjusted EBITDA and adjusted operating profit in the consolidated group accounts for the 2019 financial year would be adversely affected by around £0.5m.

The acquisition was for a nominal fee of $1 to WIN Semiconductors, and SGD 1 to each of the other third party shareholders, to be settled in cash.

IQE said the non-cash balance sheet impacts would be finalised as part of the completion of acquisition accounting for the shareholdings.

For the year ended 31 December, CSDC recorded net losses of SGD 8.9m, with net liabilities attributable to the company at year-end standing at SGD 15.4m.

Drew Nelson would remain as a director of CSDC, and LG Yeap - general manager for MBE Technology - would become a director of CSDC.

"In the current geopolitical context, Singapore represents a strategically significant site for IQE," said chief executive officer Drew Nelson.

"The capabilities of the CSDC team and skills availability in that location, coupled with proximity to Asian chip customers and OEMs, provide a strong opportunity to contribute to IQE's global growth opportunities.

"With 100% control, IQE will be best positioned to address the current financial position and secure the strategic direction of the operation," Dr Nelson added.