Smartphone demand boosts parts maker IQE

IQE, a supplier of materials for semiconductors, has posted a 28 per cent rise in first-half profit due to surging demand for smartphones, its most important end-market.

IQE posted pre-tax profit of £2.8m on revenue up 16 per cent to £38.3m, and said it was on track to meet full-year expectations.

Chief executive Drew Nelson said the wireless market, which account for three quarters of revenue, continued to grow rapidly, whilst new applications such as energy efficiency were developing well.

"Smartphones are definitely one of the big drivers behind our business, principally because a smartphone has significantly more compound semiconductor chips than previous generations of phone," he said. "The same dynamic will be true when we go to 4G and LTE (mobile technologies)."

He said the upbeat outlook was tempered by recent growing uncertainty in the global economy.

"If the global economy goes in the direction it is currently in there is a possibility, no more than that at this point, of some inventory correction," he said.

IQE uses a technology called epitaxy to make bespoke semiconductor wafers, which form the basis for chips in mobile phones, next generation solar panels and optical products like ultra-high brightness LEDs.

IQE's shares have fallen 5.5 per cent in early trading and Investec analyst James Goodman noted the caution in its outlook.

"While the company remains confident in meeting full year expectations, for the first time this cycle there is reference to the macro backdrop and the potential for this to impact inventory levels," he said.

"IQE has not seen any impact from this to date, but if conditions deteriorate further, in our view it will not be fully immune, despite its unique market position."