26 October 2011 – trading update

The supplier of advanced wafer products and services to the semiconductor industry has revealed that short term demand has fallen and that as a result second half revenues are likely to be lower than those for the first half.  The fall in demand is a combination of market share shifts between customers and lower overall demand.  Effectively it seems that some of IQE’s larger customers are losing market share to smaller customers of the group.    However, the group has taken immediate action to mitigate the impact on profit and cash and these actions, together with an improvement in margins, means that higher profits will still be reported in the second half of the year.  The destocking by customers is only likely to affect Q4 2011 and Q1 2012  and IQE is already increasing supplies to those customers gaining market share.  Lomg term prospects remain good though and we think that today’s share price fall has been overdone.  BUY.