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IQE hopeful of return to growth in 2022

29 Mar 2022

Epiwafer foundry's shift to VCSEL production on larger platform expected to prompt wider adoption of the devices in 3D sensing.

IQE, the UK-headquartered maker of advanced compound semiconductor epiwafers used to fabricate a variety of photonics devices, believes it will return to growth this year - partly thanks to a growing portfolio of vertical-cavity surface-emitting lasers (VCSELs).

In its full-year results for 2021, the London-listed firm posted sales revenues of £154 million - down from £178 million in 2020, a decline partly resulting from the depreciating US dollar.

But the latest figures also show that the firm’s net loss ballooned from $2.9 million in 2020 to $31 million in 2021.

That was partly because IQE has decided to suspend and write down its development of quasi photonic crystal (QPC) technology previously expected to find use across a range of photonic components.

The company is also in the process of a costly restructuring - with its sites in Singapore and Pennsylvania set to close in 2022 and 2024 respectively - while simultaneously “refreshing” its business strategy.

Step-change for VCSELs
New CEO Americo Lemos and his team predicted that IQE’s sales would bounce back modestly this year, despite ongoing geopolitical turmoil and supply chain issues.

IQE said that as well as expanding its VCSEL portfolio with longer-wavelength emitters based on dilute nitride semiconductor material, it is scaling production of VCSELs on germanium substrates by moving to a larger, 200 mm-diameter, wafer format.

This would enable a “step-change in industry economics” in support of broader adoption of VCSELs in 3D sensing applications, said the firm.

While VCSELs have already appeared across a number of consumer electronics platforms, they have so far tended to feature in higher-end products and failed to generate the high level of business growth anticipated by IQE in 2018, partly because consumer electronics companies have migrated to using smaller VCSEL chips for 3D sensing.

IQE’s filing with the London Stock Exchange indicated that the firm’s photonics division posted sales of £68.1 million in 2021, down 11 per cent on the 2020 figure after currency fluctuations are taken into account.

“VCSEL revenue for 3D sensing applications was down by 19 per cent as a result of smaller chip sizes,” explained the company, also pointing out that it had maintained strong market share in its most important supply chain.

Delays were also said to hamper certain aerospace and security orders, with sales of related infrared devices down 8 per cent year-on-year.

Commercial engine
On the plus side, sales of products based on indium phosphide (InP) material were up year-on-year, reflecting strong demand in datacom and telecom markets, as well as new sensing applications.

“Operations remain resilient to the challenging macroeconomic and geopolitical backdrop,” stated the firm in its LSE filing, indicating that 2022 would represent a transitional year as it focused on building a platform for future growth in 2023 and beyond as trends like 5G connectivity and the so-called “metaverse” combine to drive demand for photonic and wireless components based on the firm's epiwafer material.

“As the only global outsourced epitaxy provider and a leader in our field, IQE is uniquely placed to capitalize on major technological trends while navigating a challenging external environment,” summed up Lemos.

“To secure this growth, we must first build a commercial engine that is orientated to our end markets, focussed on our customers and aligned with our technology innovation.

“My vision is to grow IQE through multiple strategic and long-term customer relationships. We will be developing this strategy more fully during 2022 and I look forward to communicating further in due course.”

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