Apple supplier IQE predicts profit plunge as wafer shortage starts to bite
Semiconductor wafer supplier IQE suffered a 27 per cent drop in shares yesterday and was trading at 36.9p on the FTSE AIM UK 50 Index by the evening.
The company’s shares were trading at 74.00 at the start of the year.
The fall from grace follows IQE releasing a highly pessimistic trading update ahead of its full year results in December.
The Cardiff-based company provides semiconductor wafers for Apple – which are used in the technology giant’s smartphones.
It is now warning shareholders of s a 40 per cent drop in annual core profits this year, with the firm struggling with supply chain issues and softened demand during its fourth quarter of trading.
It also anticipated an eight per cent year-on-year dive in revenues.
A semiconductor wafer is a thin slice of semiconductor, such as crystalline silicon, used to create integrated circuits.
It is a key component of semiconductors chips, which are used in most electrical products.
IQE is struggling with a decline in smart-phone makers requesting orders amid a global semiconductor shortage.
The company has also pointed to continued issues in the rollout of 5G infrastructure, and the strength of the UK pound against the US dollar.
Heading into its fourth quarter, IQE now expects full-year reported revenues to fall to £152m, while its adjusted EBITDA is expected to be around £18m, a two percentage point decline in margins.
Cash capex in the year is expected to be in the range of £14m-17m compared to the previous guidance of £20-30m, due to the phasing of payments for tool purchases into 2022.
The group is expected to contain its net debt to below £10m, but the results remain a disappointment for investors amid challenging headwinds for the company.
Phil Smith, interim executive chairman of IQE, said: “Whilst it is disappointing that 5G infrastructure deployments have remained weak all year, we still expect this macro trend to provide a multi-year growth cycle for IQE. In the immediate term, broader semiconductor market shortages have softened demand in some supply chains but we believe these effects to be temporary and remain excited by the opportunities ahead.”