IQE PLC (AIM:IQE) shares fell 13.5% to 20.5p on Tuesday as it reported solid sales and a return to positive earnings but a patchy semiconductor market.
For the full year, revenue and underlying profits on an adjusted EBITDA basis are both expected to improve year-on-year, but due to some markets "remaining in recovery" in the second half the overall performance is expected to be at the lower end of the range of analyst forecasts.
First-half revenue of £66 million was reported, up 27% from a year ago as wireless revenue increased 73% to £38.8 million, a 4% fall in photonics to £26 million and a 70% decline in CMOS advanced semiconductor materials to £0.5 million.
The increase in wireless was a result of inventory normalisation and design wins in Android RF front-end markets, while the fall in CMOS++ revenue reflects a "strategic rebalancing" as this division is reported separately for the last time and IQE diversifies into GaN (gallium nitride) power and micro-LED instead.
An adjusted EBITDA of £6.6 million was reported, swinging from a loss of £5.7 million last time.
Chief executive Americo Lemos called it "a consistent performance" in the first half.
"We expect the market to continue to show pockets of recovery during the second half, resulting in more moderate growth for 2024 on a full-year basis."
He highlighted the planned IPO of IQE's Taiwanese subsidiary, expected on the Emerging Market board of the Taiwan Stock Exchange in the first half of 2025, which he said will help to accelerate the diversification strategy into the GaN power market and microLED, and will provide additional significant cash resources for the company.
IQE will maintain a tight focus on structural cost controls, footprint optimisation and operational efficiencies, he added, which "will allow the business to continue to improve its profitability while building its market-led technology roadmap in partnership with key customers".
House broker Peel Hunt said results cover 51% and 53% of expected full-year revenue and adjusted EBITDA, "which is helpful given the weak 2H commentary from the value chain".
"The AI revolution (see iPhone launch) is driving demand for compute. In the coming years, this is expected to shift to connectivity (source: Broadcom) and power (source: Global Foundries). In essence, into IQE’s sweet spot," said analyst Damindu Jayaweera.