IQE plc AGM
PRESENTATION
25th June 2019
2018/19 Business Highlights • A year of significant investment in capacity expansion and site
rationalization
• New mega-foundry in Newport opened and ten reactors delivered and installed
• Throughput, uniformity and yield all significantly better than expected at the outset of the Newport project and now operating 24/7 from March 2019
• Multiple high intensity customer audits completed successfully,
• Mass Production commenced in May for lead OEM supply chain on 4 tools, expect two other customers will commence mass production in H2 2019
• 13 other photonics customers already qualifying the Newport facility
• Taiwan expansion will increase dedicated wireless capacity from that site by 40% bringing operational efficiencies; completed on time and budget, 2 high volume Asian supply chains for PAs in qualification
• Expansion in Massachusetts (GaN) and Milton Keynes infrared completed end H1 2019
• Multiple investment in VCSEL qualification programs extends global footprint for 3D sensing. Engagement with c 30 VCSEL chip manufacturers
2018/19 Business Highlights (cont)
• 5G opportunities secured as market interest accelerates
• Research and Development activity focused on:• next generation materials for high performance Power Amplifiers;
• Porous RF switches and Crystalline RF Filters for 5G;
• next generation VCSELs and diffusers for VCSELs;
• Full service 10G/25G DFB lasers, PIN and APD detectors for Datacoms;
• infrared materials for high volume consumer markets
• Acquired cREO™ technology and patent protected IP portfolio from Translucent for US$ 5m in September 2018
• Milestone 1st production order of US$ 250k received for DFB edge-emitting lasers using “NIL”
• Re-negotiated a long term supply contract with Tier 1 wireless customer – extending product range and share
• Successful recruitment of Tim Pullen from ARM as CFO – took up office on 4th February 2019
Overview of IQE’s Markets and Growth
Opportunities
Enabling advanced technologies
5G
InfraRedImaging
IQE’s product roadmaps span multiple high growth markets
Enabling advanced technologies
5G landscape: long-term
Connected autonomous vehicles
Smart-city cameras
Industrial and vehicular automation
Gigabytes in a second
Work & play in the cloud
Augmented reality
Mission critical broadband
3D video / 4 & 8K screens
Massive IoT
Enhanced Mobile Broadband
Low Latency
Sensors for connected devices
Voice/data
Enabling advanced technologies2-Jul-19 7
5G Opportunity Overview
Infrastructure Handset 5G mm-Wave
Network backboneFiber fronthaul
Hyperscale Datacenters
1000x bandwidth100x connected devices FTTP
IQE5G Infrastructure
Opportunity
Enabling advanced technologies
5G Antenna Arrays
2-Jul-19 9
Each element has its own T/R
5G Materials Choices
Si CMOS and SiGe require >10x the number of antenna elements
relative to GaN
Enabling advanced technologies
Enabling advanced technologies
IQE GaN … Industry’s Broadest Portfolio
2-Jul-19 11
1kHz 1MHz 1GHz 10GHz
Frequency
Volta
ge R
atin
g
50V
200V
600V
1,200V
GaN / GaN
GaN/Si
GaN / SiCGaN/Si +GaN/SiC
#1 Merchant Epi Supplier
100GHz
IQE5G Handset
Opportunity
Enabling advanced technologies
RF Front End (2017-2023) Market Opportunity
2017$15B
2023$35B
Source: Yole Developpement, June 2018
Enabling advanced technologies
RF Front End – IQE Strategy for Addressable Content (2019 NPIs)IQE Solution
SicREO
Epi Metal
Epi Al(Sc)N
Sputtered / epi-Metal
2-Jul-19 15
IQE’s Content Growth in Handsets
HBT PAs
HBT PAs
HBT PAs
BiHEMT PAs
BiHEMT PAs
Proximity sensors
3D sensorsFace recognitionTOF sensorsCamera focus
Integrated FEM
Proximity sensors
3D sensorsWorld facing / AR
TOF sensorsCamera focus
Accessory sensors
3D sensorsFace recognition
3D sensorsWorld facing / VR
Integrated opticsVCSEL/DOE/WLO
SAW & BAW Filters
5G mm wave
Porous Si Switches
3D Sensing and other VCSEL
markets
Enabling advanced technologies
VCSEL epiwafer
VCSEL chip
Magnetic storagePrinting
Data centres
Cosmetic
3D Sensing
Industrial Heating
VCSEL Applications
LIDAR
Enabling advanced technologies
VCSEL market set for long term significant growth
Enabling advanced technologies
Higher Power Arrays means lots more VCSEL wafers
Enabling advanced technologies
VCSEL Market Growth
Enabling advanced technologies
1988: IQE
Established
1994: • First commercial contract
for 3” single multi wafer reactor AX2400
• First 4” VCSEL demo2003:
1310nm VCSEL
2009:World record VCSEL
speed and power
2001:AX2600 G3 reactors
in Cardiff facility
2002:• Red VCSEL
• 1550 Metamorphic
2008:• 10 GB/s VCSEL
technology• EU Visit program
2010:>40GB/s VCSEL
technology
2016: New G4 tools in Cardiff
facility2013:
4” VCSEL in volume production.
2014:• VIDaP programme
• First 150mm (6”) VCSEL epiwafers
2017:• 6” VCSEL production• 14 tools for VCSELs
2019 and beyond: New facility in South Wales,
total of 23 VCSEL production
reactors
IQE VCSEL: 20 Years of Leadership
Optical Communications
Enabling advanced technologies
CAGR 2019-2024 = 30%
Biggest driver for optical comms is Datacom driven by hyperdatacentres &5G front haul/backhaul
Enabling advanced technologies
Biggest driver is Datacom 100GbE and above (25G components)
Enabling advanced technologies
IQE Photonics Product Portfolio for 5G
Detectors
Substrates Wafers
APDDetectors
PINDetectors
SW IRSensors
MW/LW IRSensors
LW IRSensors
MW IRSensors
VCSEL Edge Emitters
VCSEL VisibleVCSEL
RC LED FP Laser
DFB Laser
HP Laser Diode
Emitters VCSEL
5G Fibre Front Haul and Backhaul, FTTP5G Hyperscale Datacentres
Nano-imprint Lithography for DFB lasers
CompoundSemiconductor.net
iQPrint™
DFB laser full service manufacturing solutionEpi growthGrating fabrication
Grating with pitch of ~ 200 nm& width of ~ 80 nm
InfraRed
Enabling advanced technologies
Edge Emitting Laser Epitaxial ProductsIQE: The leading supplier of edge emitting laser epitaxy for almost 30 years
Volume production across a range of applications, MOCVD & MBE platforms
VCSEL development and ramp translates to enhanced capability applicable to EELUniformity, thickness and doping control, calibration, metrology
GaAsInP
GaSb
3”, 4”, 6”2”, 3”, 4”,6”
2”, 3”, 4”,6”
VCSEL
Enabling advanced technologies
Infra Red ……..New Product Roadmap
2018 20232019 2020 2021 2022
IRDetectors
IRLasers
AdvancedMaterials
2”-3” InP/GaInAs3”-4” GaSb/InAs
Adoption of IR laser technology in volume consumer applications
Adoption of GaSb detector technology across multiple defence/security platforms
Advanced III-V materials demand drives production
capacity expansion2”-3” InP/AlGaInAs3”-4” GaSb/AlGaSb
High Volume 4”-6” IR detector and laser growth capability serving >$500m TAM
consumer and defence/security markets
2”-4” InP/GaSb/InSb/InAs
Diversification & GrowthCore Products
DEFENCE/SECURITY & LIDAR
WEARABLES, BIO & ENVIRONMENTAL SENSING
COMPUTING, SENSING, IoT
• Transition to largerdiameter wafers (more
die/better yield)
• Production Capacity Expansion
• IR product integration with
siliconDefence/Security è Consumer
Enabling advanced technologies
Healthcare & Wearables
InP/GaSb EpitaxyHigh sensitivity
specific & tuneablesensors made possible by
compound semiconductors
Low technologyIR sensor
Prevention, Diagnosis, Treatment
Continuous vital signsmonitoring
IQE’s Product Development
Strategy
3D sensing(VCSEL)
DFB(NIL)
IQE Key Technologies road map
4G 5G
LIDAR DOE WLO(QPC)
Security Industrial
Renewables Electric Vehicles
Space High Altitude UAVs
CS on Silicon
Filters/High perf switches/PAs(cREO) SoC
Machine vision
Consumer/Healthcare
Consumer
Terrestrial
InP
Power GaN
SOI
RF GaN
Wafer Bond
GaSb/ InSb
Dilute Nitride
cREOTM
NIL
Quasi
Photonic
Crystal
GaAs
Epi
Metal
SiGe/GaAs/
Ge
InGaAs
III-V on Si
Enabling advanced technologies
IQE R&D: Leveraging Technology Platforms
Technology Platforms
Porous Silicon
Advanced III-N QPC NIL
Dilute Nitrides
III-V on Group IVRare Earth Technologies
Enabling advanced technologies
Rare Earth Technology: Enabling Platform Across Multiple Markets
Si
Phot
onic
s
HBTs
IR
Det
ecto
rs
III-V
RFGaN
Pnictides (RE-V)
cREOTM
Epi-twist
GaN Power
RFFilters
AlN
III-NPhotonics
Non
-pol
ar
III-N
Group IVEpi
DBR
cSOI™
Up
conv
ersi
on
ReSi + epi contacts
Epimetal
Polar III-N
IQE’s Global Manufacturing
Strategy
Enabling advanced technologies
Global Manufacturing Strategy
Global Footprint
EUROPEUSA ASIA
Taunton, MA Greensboro, NC
Spokane, WABethlehem, PA
Somerset, NJ
Newport, UK
Cardiff, UK ⥤ CSC
Milton Keynes, UK
Bath, UK
Taiwan
Singapore ⥤ CSDC
Investment concentrated on three key sites covering each major global region (EU, NA, Asia)
• Newport UK • Flagship Photonics EpiFoundry• Future products to include GaN, IR, Solar, SiPh
• Taunton MA • Flagship GaN Epifoundry, plus wireless, photonics
• Hsinchu, Taiwan • Flagship wireless EpiFoundry, plus Photonics, NIL
• Greensboro, NC • MBE EpiFoundry (wireless, IR, cREO, photonics)
• Milton Keynes/Spokane/Bethlehem • InSb, GaSb, InP substrates and epi
• Bath, UK closed• Somerset NJ, will close Dec 2018. Annual savings usd4m pa
Enabling advanced technologies
Newport Mega Foundry
Enabling advanced technologies
IQE Taiwan Facility: Third floor expansion
Facility• 104 k ft2 total space
• 9.6k ft2 cleanroom (Class 1000 with Class 10 hoods for loading)• Room available for future expansion
• World class maintenance facilities to ensure reactor uptime
Epi Reactors• Production GaAs MOCVD (7x6”): 17x Aixtron 2600-G3 R&D MBE• Third floor; capacity for 20 reactors; 3 in place.• Facilitised rooms for 3 more. • Capacity plan being generated for next 1 – 3 yrs
Enabling advanced technologies
CS Cluster Branding
THE INTERNATIONAL CAPITAL OF COMPOUND SEMICONDUCTOR TECHNOLOGIES
Enabling advanced technologies
CS Cluster Locations
Enabling advanced technologies
European semiconductor clusters ..creating Europe’s 5th cluster but World’s 1st
Compound Semi Cluster
Enabling advanced technologies
Tech Background
My first four months …..
Strength
Opportunity Scaling
Enabling advanced technologies
Trading Update issued June 2019
• First Half impacted by weak handset market as previously guided• First Half Revenue of £65-68m expected (£68m consensus)• Risk of Huawei impact exacerbated by broader market weakness & uncertainty• Specific customer issue in Indium Phosphide lasers highlighted• Supply chain shifts from US to Asia becoming evident with IQE well placed to
adapt (albeit with short-term delays)• Full year Revenue of £140-160m now expected (£175m consensus)• Operating profit margin of less than 10% but still profitable• Forecast net debt position within the current Revolving Credit Facility ($35m
USD)
Enabling advanced technologies
5 Year Revenue Profile
0
50
100
150
200
2015 2016 2017 2018 2019 Guidance
Revenue - Low Revenue - High
2019 Revenue Variables- Handset market volumes
- Volumes from new Asia
market chip companies
(InP lasers, Wireless)
- GaN sales for 5G base
station deployments
2020 Trajectory Variables- Conclusion of US-China
trade tensions
- Recovery of global
technology market from
2019 downturn
- Pace of global 5G roll out
- Android adoption of 3D
sensing
- Proliferation of 3D sensing
in world facing cameras
Enabling advanced technologies
‘Infrastructure’ phase of expansion is complete in 2019
Future capex profile will linear between revenue and numbers of reactors
Pace of investment depends on pace of 5G rollout and 3D sensing adoption with prudence being exercised in the current market environmentFY16 FY17 FY18 FY19 FY20
Newport Epi Foundry & Reactors Taiwan and MA Expansion Other Capex
Capex Guidance remains unchanged
£40m
£30m
Capacity Constraints
Photonics Opportunity evident
Investment in Capacity
£15m
Revised Segmental Revenue Guidance for 2019(USD constant currency)
March Revenue Guidance
June Revenue Guidance
-15% YoY -20 to -25% YoY
> 50% YoY < 30% YoY
+15% YoY +15% YoY