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IQE plays down impact of Huawei dispute

IQE believes it is in a strong position to adjust to the possible consequences and scenarios resulting from the USA's blacklisting of Huawei in a positive manner.
Huawei smartphone
Across all product lines, IQE has supply relationships with multiple non-US customers, so as long as other countries don't also blacklist Huawei ...

IQE PLC (LON:IQE), which supplies materials to semiconductor manufacturers, has got caught in the crossfire in the technology battle between the USA and China.

The company supplies epitaxial wafers to multiple chip companies in global supply chains, some of whom supply Huawei, it told investors on Friday.

READ IQE slides as 2018 earnings miss forecasts despite previous downgrade

In the short-term, IQE believes it may experience some delay to orders and the potential for adjustment of supplier managed inventory levels, predominantly in its Wireless Business Unit. The Photonics and Infrared Business Units are essentially unaffected.

It estimates that its current maximum risk exposure to the Huawei fall-out is less than 5% of the revenue guidance for the whole of 2019.

Although there remains uncertainty and unpredictability related to this specific matter, the company said that “given the market opportunity” it faces in the second half of the year, it is leaving full year guidance unchanged.

“The recent ban on sales of products from US companies to Huawei and its affiliates is a factor completely outside of IQE’s control; however, our long-term strategy of supplying as many of the supply chains into all major OEMs [original equipment manufacturers] as possible, protects IQEs overall supply to a very significant degree,” stressed Dr Drew Nelson, the chief executive of IQE.

“As a result, we believe the ban will have a limited impact on our mid to long term revenue trajectory. Indeed, the breadth of IQE’s current product range, the new materials technologies being introduced to market over the coming months and years, and IQE’s global manufacturing footprint are powerful mitigating factors in dealing effectively with the ongoing changing geopolitical landscape in our industry," he added.

In a note to clients analysts at ‘house broker. Peel Hunt commented: “The global trade war risk has been discussed before in the context of the IQE story, and it's here that IQE’s global nature, from supply relationships (many non-US) to production locations, which puts it in a strong position to navigate any resulting market share shifts at the component or OEM level.”

Peel Hunt repeated a ‘buy’ rating and 137p price target on IQE shares, which in afternoon trading were down 3.7% at 70.80p.

 -- Adds analyst comment, updates share price --


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IQE PLC Timeline

CN Research
March 06 2018

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