IQE PLC (AIM:IQE) shares plummeted almost 20% after the technology company said revenues for 2021 are expected to fall by 8% as a result of softening demand from smartphone producers and weakness in the roll-out of 5G infrastructure.
The strength of sterling against the dollar has also caused a significant foreign exchange headwind, as most of the company’s revenues are generated in the US currency.
IQE, which supplies semiconductor wafers for Apple products, said it expects full-year reported revenues to come in around £152mln. In constant currenty, this is equivalent to £164mln, representing an 8% fall year-on-year.
As a result, the forecast for adjusted EBITDA is £18mln, or £25mln at constant currency, representing an EBITDA margin of around 15% at constant currency, down from 17% last year.
IQE downgraded its cash capex forecast to £14mln-£17mln from its previous guidance of £20mln-£30mln, due to the phasing of payments for tool purchases.
Net debt is expected to be less than £10mln.
Interim chief executive Phil Smith 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.”
IQE said demand for its wireless GaAs epi-wafers were below management expectations in the fourth quarter due to weakening demand within the broader smartphone supply chain.
Meanwhile, sales of wireless GaN epi-wafers continued to be soft due to significantly lower levels of mMIMO base station deployments in Asia and the slow rate of deployments in western markets. GaN is an essential material for 5G infrastructure and demand is still expected to recover over the multi-year deployment cycle, the company said.
It said demand for VCSELs used in 3D sensing applications has remained solid throughout the second half but is expected to tail off towards the end of the year in line with supply chain seasonality and general softening in smartphone supply chains.
Sales of other photonics products were below management expectations in final quarter due to the re-phasing of defence and security orders associated with large programmes into 2022 and the slower introduction of sales of new DFB products.
Shares sank 19.94% to 40.35p in late morning trade.