Chip supplier IQE has reported lower revenue as the global phone market is still cool and weak supply chains are yet to recover from the pandemic, but an Asian expansion provides a glimmer of hope.
Shares in the British manufacturer dipped over three per cent on Tuesday market open after it said revenue in its wireless unit fell nearly 52 per cent to £22.4m in its unaudited results for the first half of the year, compared to the same period in 2022.
This was due to “weakness in global handset demand and supply chain inventory build”.
IQE, and other chip suppliers, have been grappling with these issues since Covid-19 halted crucial supply chains and they are yet to tick back up to pre-pandemic levels.
Overall revenue was down almost 40 per cent from the first half of last year, as IQE’s photonics devices – which can create or detect light – also under-performed thanks to the fragile smartphone market.
However, IQE said to expect improvement in 2024 as customer demand and the supply chain creep back to higher levels.
Americo Lemos, chief executive officer said: “In a challenging macro environment, we have taken decisive action to manage costs and deliver immediate efficiencies and longer-term margin benefits.
“We are accelerating our diversification strategy with new customer designs in GaN Power electronics and broadening our market penetration into the China wireless market,” Lemos added.
IQE are delivering their wireless products to Chinese Wi-Fi suppliers to tap into growing smartphone markets in China and India.
“The good news is that IQE is not issuing a third profit warning this year, after those of January and March, but the bad is that the hoped-for recovery in the second half of the year is developing more slowly that the specialist silicon chip wafer-maker would like,” said AJ Bell investment director Russ Mould.
Today’s setback could also affect the global economy he argued.
“This could have implications for the ARM initial public offering, or at least the after-market once the float takes place, and the wider semiconductor industry, which is a fair proxy for worldwide economic activity and a useful measure for stock markets’ risk appetite,” Mould explained.