Brit Chipmaker Issues Warning About Inventory Glut

Plunging demand for semiconductors is taking an obvious toll on the chip sector, and Brit compound semiconductor wafer maker IQE is warning of a serious dent in sales.

In a trading update to investors, the London Stock Exchange listed business said it had seen an acceleration of de-stocking trends across the tech industry, "with weaker demand leading to inventory build-up throughout the supply chain."

"This reduction in customer orders and forecasts is expected to result in a decline of approximately £30 million in reported revenues for H1 2023," the Cardiff-based wafer manufacturer said.

It noted the patterns monitored by the Semiconductor Industry Association that reported an 18.5 percent tumble in shipments during calendar Q1.

The "near-term softness" is calculated by management to be temporary based on current discussions taking place with customers and "our pipeline of new opportunities."

To provide some context for the revenue shortfall, IQE reported revenue of £86.2 million ($103 million) a year ago, so this is no small chunk of change for the business. The Wireless division offers radio frequency and wireless epitaxial wafer materials, and the Photonics unit builds components used in 3D sensing, data comms and datacenters.

IQE CEO Americo Lemos told The Times earlier this year that while the biz would like to stay in the UK, it had a duty to its shareholders to go where the money is – which may be the EU or the US.

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IQE makes wafers used for radio frequency and photonics applications in several smartphones, and was a major supplier to multiple chip companies who supplied Huawei, before the US government intervened to destroy Huawei's handset business. It is widening the portfolio to also include Power Electronics and Micro-LED tech used in VR headsets.

"Ours is an industry that has consistently demonstrated growth over many decades," said IQE's chief exec. "We expect IQE to return to growth in the second half of the year and remain excited about the future as we continue to execute our diversification strategy."

The smartphone industry has shrunk for the past two years and great things aren't expected this year either. Likewise, the PC industry has also stumbled and isn't expected to bumble along in 2023. As such, the sales bonanza that chipmakers enjoyed in recent years is over for now. ®