IQE shares drop as semiconductor maker warns of slowdown in demand

IQE shares fell by almost a fifth today after the semiconductor wafer- maker warned of a slowdown in demand from an overstocked chipmaking industry.

The AIM-listed group makes the wafers, which are then used as the basis for the semiconductors vital to the production of products such as smart phones – including Apple iPhones – and mobile network infrastructure. 

After being hit by supply chain issues during the pandemic, companies like IQE and the wider chipmaking industry are battling with a slowing global economy that has reduced semiconductor prices and curbed demand for smartphones. 

The Cardiff-based company told investors that ‘it expects to see some destocking in the wider semiconductor industry, which may hurt demand from its existing customers in the first half of 2023′.

While revenues for 2022 are expected to come 8 per cent higher than the previous year at £154million, this is only thanks to sterling’s weakness. 

In fact, revenue is expected to be flat at constant currency, the company said.  

IQE shares tumbled 18 per cent to 49.20p in afternoon trading on Monday.

They have gained around 50 per cent over the last year, but are down by roughly 60 per cent over five years.

Some analysts have pointed to IQE and other semiconductor businesses as shares to rely on in a recession, as the industry is expected to keep growing. 

IQE said in a trading update ahead of its annual results: ‘The group’s trading in 2022 has been largely resilient to the challenging macro environment’.

‘In the first half of 2023 the Group expects to see some destocking in the wider industry which may impact upon demand from existing customers, but remains confident in its diversification strategy and longer-term growth targets set out at the Capital Markets Day last November. 

‘Strong commercial progress has been made in 2022 to lay the foundations of this strategy and management are excited by the pipeline of opportunities being developed for 2023 and beyond.’