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Trading Statement

27 Jan 2005 07:00

IQE PLC27 January 2005 27 January 2005 IQE plc Trading Update IQE plc ("IQE", "the Company"), a leading supplier of advanced semiconductormaterials, is pleased to provide a trading update, following a number ofsignificant developments during the latter part of 2004, where substantialprogress was made in a number of key areas of the Group's activities. Wireless markets In the US, a major outsource agreement to supply a leading RF wireless componentmanufacturer with virtually all of its wafer requirements was concluded duringthe fourth quarter, resulting in that particular customer closing down its inhouse wafer manufacturing activity in favour of outsourcing both its productionand development needs to IQE Inc. Volume shipments to this customer began inthe last few weeks of the year and are continuing, with increasing requirementsexpected during the course of 2005. This, together with qualifications withleading Asian wireless component manufacturers due to conclude in the first halfof 2005, and increasing requirements from existing customers in the US, leadus to expect a significant upturn in business during 2005, enabling fullprofitability of this unit to be achieved by the end of the first half. In addition, the Company's US subsidiary, IQE Inc has several other outsourceand development opportunities under discussion and has recently received aCertified Supplier Award from a major U.S. Government contractor, for themanufacture of RF components. Achieving this status qualifies IQE to supplyepitaxial wafers for use in significant production volumes of RF devices fornext-generation applications taking place over the next several years startingin 2005. Optoelectronic markets The Group has continued to develop its product and customer base in consumerproducts, such as DVD, CD, industrial applications, Vertical Cavity lasers forprinting, high resolution copying, short distance communications and opticalsensing, High Brightness LEDs and Telecoms related products. The market foroptical storage components weakened somewhat during the fourth quarter, and HighBrightness LED markets were flat, but this was offset by strengthening marketsin telecoms and products for industrial applications. The Group has successfullycompleted a number of new product qualifications which should result in newrevenue streams for the Group as IQE's customers bring these to market. Silicon Markets Our Silicon business received device results during the fourth quarter from aleading IC manufacturer on IQE's proprietary 'UltraSmooth' strained siliconproduct that showed a very significant increase in speed due to the bettersurface quality of IQE's product compared with other strained silicon products.The materials are also under device evaluation by several other leadingcompanies, and are being used to develop next generation strained silicon oninsulator products. As a result of IQE Silicon's growing reputation for advancedproduct development, two further customer-funded development contracts have beenreceived both of which commence in early 2005. Standard silicon epi products areexpected to show consistent growth based on customer forecasts. Dr Drew Nelson, CEO, commented "The Group enters 2005 having made substantial progress in the last months of2004. The Group expects to report revenues for 2004 of not less than £15.3million, which, although below our previous expectations, primarily due to aweak third quarter and adverse exchange rates, have still resulted in usachieving our expectations for EBITDA and cash levels. A number of positivedevelopments, including the winning of a major outsource contract worth around$25m over the next two years, enabled the Group to exit 2004 with its largestorder book for two years, and an exit revenue run rate which will delivergrowing revenues in 2005. We believe we have sufficient capacity and resourceswithin the Group to deliver improved shareholder returns in the current year andbeyond." IQE's preliminary results for the year ended 31 December 2004 are expected to beannounced on 22nd March 2005. For further information please contact: IQE plc: +44 29 2083 9400Drew Nelson, President & Chief ExecutiveStuart Hall, Finance DirectorChris Meadows, Investor Relations Manager Tim Thompson/Nicola Cronk, +44 20 7466 5000Buchanan Communications: This information is provided by RNS The company news service from the London Stock Exchange

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