Key details of the acquisition

• IQE has acquired the assets and business of EMD for a total of $16 million. The total consideration is based on an initial payment of $13 million in cash and a further $3 million in cash payable in four equal quarterly payments. The deferred consideration will bear interest at 7.5 per cent. per annum
• The acquisition has created the leading global outsource supplier of epi wafers to the wireless market, providing significant opportunities to accelerate sales into existing and new customers by providing the broadest range of current and next generation products
• All of EMD’s employees, including its strong management team, have been offered employment with IQE and it is the intention of the Board that the EMD business will continue to be run as a stand alone entity in New Jersey
• Noble & Company Limited has placed 87.5 million new ordinary IQE shares (“New Ordinary Shares”) at 13.75p per share to raise approximately £12 million (before expenses) to finance the consideration and working capital (the “Placing”). The new ordinary shares were admitted to trading on AIM on 16 August 2006
• Following the passing of the resolutions put to the shareholders at the Extraordinary General Meeting held on 15 August 2006, admission of the New Ordinary Shares to trading on AIM on 16 August 2006, and settlement of funds with EMCORE IQE has now completed the acquisition.

Details of the business

EMD provides foundry based production of high performance compound semiconductor electronic epitaxial materials, with a focus on the wireless markets. EMD is based in the US, has approximately 50 employees, ten advanced epitaxial tools and is one of the top five third-party suppliers of epi wafers in the world.

EMD has pursued a similar strategy to that of IQE, in building a strong outsource foundry model for the supply of epi wafers. They have concentrated on HBT based technologies for power amplifier applications, as well as integrated BiFET and GaN structures, and consequently supply a range of highly complementary products to a range of customers different to that of IQE’s own customer base.

The acquisition positions IQE as the leading global outsource supplier of current and next generation products into the wireless marketplace including PHEMT, HBT, integrated BiFET and advanced GaN technologies. The Directors believe this will create significant opportunity to grow revenues within existing IQE and EMD customers by offering all major technology platforms to the enlarged customer base, from the largest, state of the art production capacity in the industry.

Dr Drew Nelson, President & CEO of IQE plc commented: “We are very happy to have completed this acquisition, which represents a key step forward in IQE’s development as the leading outsource wafer supplier worldwide to the global semiconductor industry. The joining of the two companies allows IQE to offer a truly one stop wafer outsource service to its customers, with a complete range of current and next generation products. This transaction assures EMD’s current customers that as part of a larger wafer outsource group all the necessary resources are in place to fully support the joint customer base as their wafer demands continue to grow.”

Contacts

IQE plc +44(0) 29 2083 9400
Dr Drew Nelson, President & CEO
Stuart Hall, CFO
Chris Meadows, Investor Relations

Noble & Company Limited +44(0) 20 7763 2200
John Llewellyn-Lloyd
Graeme Bayley