iqe plc...this presenta5on has been prepared by and issued by, and is the sole responsibility of,...

EnablingAdvancedTechnologies

IQEPlcIntroduc8ontoIQENovember2017


Disclaimer

THISPRESENTATIONANDITSCONTENTSARECONFIDENTIALANDARENOTFORRELEASE,PUBLICATIONORDISTRIBUTION,INWHOLEORINPART,DIRECTLYORINDIRECTLY,INORINTOORFROMTHEUNITEDSTATESOFAMERICA,CANADA,AUSTRALIA,JAPANORANYJURISDICTIONWHERESUCHDISTRIBUTIONISUNLAWFUL.Thispresenta5onhasbeenpreparedbyandissuedby,andisthesoleresponsibilityof,IQEplc(the"Company")solelyforinforma5onandforuseatapilotfishingpresenta5oninconnec5onwithapoten5alofferingofordinarysharesinthecapitaloftheCompany(the"Offer").Forthepurposesofthisno5ce,"presenta5on"meansthisdocument,anyoralpresenta5on,anyques5onandanswersessionandanywriHenororalmaterialdiscussedordistributedduringthepilotfishingpresenta5onmee5ng.Thispresenta5onmaynotbecopied,distributed,reproducedorpassedon,directlyorindirectly,inwholeorinpart,ordisclosedbyanyrecipient,toanyotherperson(whetherwithinoroutsidesuchperson'sorganisa5onorfirm)orpublishedinwholeorinpart,foranypurposeorunderanycircumstances.Thepresenta5onhasnotbeenindependentlyverifiedandnorepresenta5onorwarranty,expressorimplied,ismadeorgivenbyoronbehalfoftheCompanyand/oranyofCanaccordGenuityLimitedandS5felNicolausEuropeLimited(together,the"Banks")oranyoftheirrespec5veparentorsubsidiaryundertakings,orthesubsidiaryundertakingsofanysuchparentundertakings,oranyofsuchperson'srespec5vedirectors,officers,employees,agents,affiliatesoradvisers(collec5vely,"Representa5ves"),asto,andnorelianceshouldbeplacedon,theaccuracy,completenessorfairnessoftheinforma5onoropinionscontainedinthispresenta5onandnoresponsibilityorliabilityisassumedbyanysuchpersonsnorisanyrepresenta5on,warrantyorundertaking,expressorimplied,madeorgivenbyanysuchpersonforanysuchinforma5onoropinionsorforanyerrorsoromissions.Anyliabilityorresponsibilityforsuchinforma5onandopinionsis,tothemaximumextentpermiHedbylaw,expresslydisclaimedwhetherarisingintort,contractorotherwise.Allinforma5onpresentedorcontainedinthispresenta5onissubjecttoverifica5on,correc5on,comple5onandchangewithoutno5ce.Ingivingthispresenta5on,noneoftheCompany,oranyoftheBanksoranyoftheirrespec5veRepresenta5ves,undertakesanyobliga5ontoamend,correctorupdatethispresenta5onortoprovidetherecipientwithaccesstoanyaddi5onalinforma5onthatmayariseinconnec5onwithit.Thispresenta5ondoesnotformthebasisofanycontractanddoesnotcons5tuteorformpartof,andshouldnotbeconstruedas,anyoffer,invita5onorrecommenda5ontopurchase,sellorsubscribeforanysecuri5esinanyjurisdic5onandneithertheissueoftheinforma5onnoranythingcontainedhereinshallformthebasisoforberelieduponinconnec5onwith,oractasaninducementtoenterinto,anyinvestmentac5vity.Thispresenta5ondoesnotpurporttocontainalloftheinforma5onthatmayberequiredtoevaluateanyinvestmentintheCompanyoranyofitssecuri5esandshouldnotbereliedupontoformthebasisof,orbereliedoninconnec5onwith,anycontractorcommitmentorinvestmentdecisionwhatsoever.Thispresenta5onisintendedtopresentbackgroundinforma5onontheCompany,itsbusinessandtheindustryinwhichitoperatesandisnotintendedtoprovidecompletedisclosureuponwhichaninvestmentdecisioncouldbemade.Neitherreceiptofthepresenta5onbyanyperson,noranyinforma5oncontainedinit,suppliedwithitorsubsequentlycommunicatedtoanypersonby,oronbehalfof,theCompany,orbytheBanksoranyoftheirrespec5veRepresenta5veseithercons5tutes,oristobetakentocons5tute,thegivingofinvestmentadvicebytheCompany,theBanksortheirrespec5veRepresenta5ves.ThemeritandsuitabilityofaninvestmentintheCompanyshouldbeindependentlyevaluatedandanypersonconsideringsuchaninvestmentintheCompanyisadvisedtoobtainindependentadviceastothelegal,tax,accoun5ng,financial,creditandotherrelatedadvicepriortomakinganinvestment.Totheextentavailable,theindustryandmarketdatacontainedinthispresenta5onhascomefromofficialorthirdpartysources.Thirdpartyindustrypublica5ons,studiesandsurveysgenerallystatethatthedatacontainedthereinhavebeenobtainedfromsourcesbelievedtobereliable,butthatthereisnoguaranteeoftheaccuracyorcompletenessofsuchdata.WhiletheCompanybelievesthateachofthesepublica5ons,studiesandsurveyshasbeenpreparedbyareputablesource,theCompanyhasnotindependentlyverifiedthedatacontainedtherein.Inaddi5on,certainoftheindustryandmarketdatacontainedinthispresenta5oncomefromtheCompany'sowninternalresearchandes5matesbasedontheknowledgeandexperienceoftheCompany'smanagementinthemarketinwhichtheCompanyoperates.WhiletheCompanybelievesthatsuchresearchandes5matesarereasonableandreliable,they,andtheirunderlyingmethodologyandassump5ons,havenotbeenverifiedbyanyindependentsourceforaccuracyorcompletenessandaresubjecttochangewithoutno5ce.Accordingly,nounduerelianceshouldbeplacedonanyoftheindustryormarketdatacontainedinthispresenta5on.Thispresenta5onisanadver5sementforthepurposesoftheUnitedKingdomProspectusRulesandnotaprospectus.Thispresenta5onis,andtheOfferifandwhenmadewillbe,onlyaddressedtoanddirectedatpersonsinmemberstatesoftheEuropeanEconomicArea("EEA")whoarequalifiedinvestorswithinthemeaningofAr5cle2(1)(e)oftheProspectusDirec5ve(Direc5ve2003/71/EC)("QualifiedInvestors").Inaddi5on,intheUnitedKingdom,thispresenta5onisaddressedtoanddirectedonlyat,QualifiedInvestorswho(i)arepersonswhohaveprofessionalexperienceinmaHersrela5ngtoinvestmentsfallingwithinAr5cle19(5)oftheFinancialServicesandMarketsAct2000(FinancialPromo5on)Order2005,asamended(the"Order"),(ii)arepersonswhoarehighnetworthen55esfallingwithinAr5cle49(2)(a)to(d)oftheOrder,or(iii)areotherpersonstowhomthispresenta5onmayotherwiselawfullybecommunicated(allsuchpersonstogetherbeingreferredtoas"relevantpersons").Thispresenta5onmustnotbeactedonorreliedon(i)intheUnitedKingdom,bypersonswhoarenotrelevantpersons,and(ii)inanymemberstateoftheEEAotherthantheUnitedKingdom,bypersonswhoarenotQualifiedInvestors.Anyinvestmentorinvestmentac5vitytowhichthispresenta5onrelatesisavailableonlytorelevantpersonsintheUnitedKingdomandQualifiedInvestorsinanymemberstateoftheEEAotherthantheUnitedKingdom,andwillbeengagedinonlywithsuchpersons.Thispresenta5onandtheinforma5oncontainedhereinisnotintendedforpublica5onordistribu5onin,anddoesnotcons5tuteanofferofsecuri5esin,theUnitedStatesortoanyU.S.person(asdefinedinRegula5onSundertheU.S.Securi5esActof1933(the"Securi5esAct"),asamended,Canada,Australia,Japanoranyotherjurisdic5onwheresuchdistribu5onorofferisunlawful.TheCompanyhasnotregisteredanddoesnotintendtoregistertheofferingintheUnitedStatesortoconductapublicofferingofanysecuri5esintheUnitedStates.Securi5esmaynotbeofferedorsoldwithintheUnitedStateswithoutregistra5on,exceptpursuanttoanexemp5onfrom,orinatransac5onnotsubjectto,theregistra5onrequirementsoftheSecuri5esAct.Subjecttocertainlimitedexcep5ons,neitherthispresenta5onnoranycopyofitmaybetaken,transmiHedordistributed,directlyorindirectly,intotheUnitedStates,itsterritoriesorpossessions.Anyfailuretocomplywiththeforegoingrestric5onsmaycons5tuteaviola5onofU.S.securi5eslaws.Thispresenta5onincludesforward-lookingstatementswhichspeakonlyasofthedatetheyaremade.Thewords"expect","an5cipate","intend","plan","es5mate","aim","forecast","project"andsimilarexpressions(ortheirnega5ve)iden5fycertainoftheseforward-lookingstatements.Theseforward-lookingstatementsarestatementsregardingtheCompany'sinten5ons,beliefsorcurrentexpecta5onsconcerning,amongotherthings,theCompany'sresultsofopera5ons,financialcondi5on,liquidity,prospects,growth,strategiesandtheindustryinwhichtheCompanyoperates.Theforward-lookingstatementsinthispresenta5onarebasedonnumerousassump5onsregardingtheCompany’spresentandfuturebusinessstrategiesandtheenvironmentinwhichtheCompanywilloperateinthefuture.Forward-lookingstatementsinvolveinherentknownandunknownrisks,uncertain5esandcon5ngenciesbecausetheyrelatetoeventsanddependoncircumstancesthatmayormaynotoccurinthefutureandmaycausetheactualresults,performanceorachievementsoftheCompanytobemateriallydifferentfromthoseexpressedorimpliedbysuchforward-lookingstatements.Manyoftheserisksanduncertain5esrelatetofactorsthatarebeyondtheCompany'sabilitytocontrolores5mateprecisely,suchasfuturemarketcondi5ons,currencyfluctua5ons,thebehaviourofothermarketpar5cipants,theac5onsofregulatorsandotherfactorssuchastheCompany'sabilitytocon5nuetoobtainfinancingtomeetitsliquidityneeds,changesinthepoli5cal,socialandregulatoryframeworkinwhichtheCompanyoperatesorineconomicortechnologicaltrendsorcondi5ons.Pastperformanceshouldnotbetakenasanindica5onorguaranteeoffutureresults,andnorepresenta5onorwarranty,expressorimplied,ismaderegardingfutureperformance.TheCompanyandeachoftheBanksexpresslydisclaimsanyobliga5onorundertakingtoreleaseanyupdatesorrevisionstotheseforward-lookingstatementstoreflectanychangeintheCompany'sexpecta5onswithregardtheretooranychangeinevents,condi5onsorcircumstancesonwhichanystatementisbasedagerthedateofthispresenta5onortoupdateortokeepcurrentanyotherinforma5oncontainedinthispresenta5on.Accordingly,nounduerelianceshouldbeplacedontheforward-lookingstatements,whichspeakonlyasofthedateofthispresenta5on.EachoftheBanks,whichareeachauthorisedandregulatedbytheUKFinancialConductAuthority,isac5ngexclusivelyfortheCompanyandnooneelseinconnec5onwiththeOffer.NeitheroftheBankswillregardanyotherperson(whetherornotarecipientofthispresenta5on)asaclientinrela5ontotheOfferandwillnotberesponsibletoanyoneotherthantheCompanyforprovidingtheprotec5onsaffordedtotheirrespec5veclientsnorforthegivingofadviceinrela5ontotheOfferoranytransac5on,maHerorarrangementreferredtointhispresenta5on.ByaHendingthemee5ngwherethispresenta5onismadeorbyaccep5ngacopyofthispresenta5on,anyrecipientofthispresenta5onagreestobeboundbytheforegoinglimita5onsandtomaintainabsoluteconfiden5alityregardingtheinforma5ondisclosedinthispresenta5on.

2


Anintroduc5ontoCompoundSemiconductorTechnology

3


Referencepoint:siliconchipsupplychains

SiliconWafer(Semiconduc5ngmaterial)

ChipFabrica8on(PaHerning,Etching,metalisa5on,

packaging)

Device(egsmartphone)

Chips

But,siliconisnottheonlysemiconductor…

4


Compoundsemichips

Siliconchips

Compoundsemiconductorsupplychains

Wafer Chip Device

Wemakeadvancedwafers

Whichourcustomers

usetomakehigh-

performancechips

Combiningarangeofsemiconduc8ngelements…

…thathavemoreadvancedproper8esthansilicon

5


Howwemakecompoundsemiconductorwafers…

Epitaxy – engineering advanced materials •  Atomically engineered films •  Crystal growth technology •  Bespoke to each application •  Customer qualification requirements •  Barriers to entry

6


ThemarketsforCompoundSemiconductors

7


Evolu8onofsemiconductortechnology

Internet

Mar

ket s

ize

SourceIQE:nottoscale

Forillustra3on

§  Single element– basic properties

§  Growth has been driven by miniaturisation (Moore’s Law) and scale

§  Diminishing returns §  Basic performance

Ultra Low Cost

§  Multiple elements– engineer advanced properties

§  High performance- wireless, light, power, speed

§  High performance Higher Cost

Hybrid Technology : “CS on Si” §  High Performance of CS

Low cost of Si

SILICON WAFER CS SUBSTRATE

EPI FILMS

SILICON WAFER

EPI FILMS

8


TheCSindustry:mul8plegrowthdrivers

Healthcare,Robo8cs&AutonomoussystemsHeathcare,medicaldiagnos5cs&treatmentRobo5csSelfdrivevehiclesMachineawarenessAdvancedSensorTechnology

Communica8ons&BigdataMobileandinfrastructure

DatastorageInternetofThings

Wearables&TeleHealthcareSensingandbiophotonics

EnergyefficiencyCleanenergy(CPVsolar)SolidStateLigh5ng(LED)

PowerswitchingBaseSta5ons

FactoriesoftheFuture

DefenseandAerospaceSatellitepowerCommunica5onsUAVsInfraRedImagingFoodSecurity

9


-15

-10

-5

0

5

10

15

20

25

30

35

0

20

40

60

80

100

120

140

'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Diversifica8on

Theevolu8onofIQE:gearedtogrowthacrossmul8plemarketsSales£’m EBITDA£’m

SALES&EBITDA*

BuildingthePla]orm

10

*EBITDAhas been calculatedas earnings before : non-controlling interest, tax, share basedpayments, finance costs, deprecia3onof tangible fixedassets, amor3sa3onof intangible fixedassets, loss/(profit) on

disposaloffixedassets,impairmentofassets,gainonreleaseofcon3ngentdeferredconsidera3on,andrestructuringandre-organisa3oncosts..


EnabledbyIQE’sbroadIPpor]olio

•  BroadpormolioofcompoundsemiconductormaterialsIP

•  Tradesecretsandpatents

•  Long-termcollabora5onwithUniversi5esandBlue-chips

•  IPenvironmentfragmented,IQEcompeteswithdifferentplayersineachmarket

•  BreadthofIQE’sIPisdifferen5ator

•  BusinessunitsreflectIQE’smarketfocus

InP

GaAs

cREOTMIII-VonSi

RFGaN

GaNPower

SbIR

11


Newfoundry–the“Cardiffcitydeal”•  CardiffCityDealtofundinfrastructureofnewfoundry

12

•  11yearlease•  3yearrentfree•  Op5ontopurchase(uptocirca£40m)•  Partoftheexpanding(>£300M)CScluster

•  IQEtofundtools•  First5toolsonorder•  Capacityforupto100newtools


IQE’soutlook–itsmarketengagement

13

EnablingAdvancedTechnologies 14

A3to5yearview–targetgrowthrates(IQEMANAGEMENTESTIMATES)

2018

2019

2020

2021

2022

RFFilter

PowerAmplifiers RFFiltersBasesta8ons

IndustryTargetCAGR 10-20% 20-30% 30-50%

3DSensing

FibreOp8cs

Augmentedreality

LIDAR

60-80%

Industrial

FTTX(DFB/NIL)

DWDM(NIL)

30-50% 50-80%Es5matedMarketby2022($m)*

$500m

$250m

$1000m

$800m

$400m

$150m

MachineVision

Industrialhea5ng

Datacentres

HandsetfrontEndfilters

Basesta5ons

5GRadar

Wirelesscharging/microwave

*Thesearemanagementcalcula0onsarebasedonthird-partysources,whichareinevitablysubjecttoanumberofuncertain0es.

EnablingAdvancedTechnologies 15

Charging

A3to5yearview–targetgrowthrates(IQEMANAGEMENTESTIMATES)

2018

2019

2020

2021

2022

Automo8ve Space

Terrestrial

30-50% 40-60% 40-60%

$50m

$100m

$150m

Defence Consumer

15-20%$125m

$100m

30-50% 10-15%

$250m

Industrial Consumer

10-15%

$50m

Inverters

DataCentres

AdvancedBiometrics

ConcentratedPhotoVoltaics

CPV

LargeSatellites

LEOConstella5ons

ElectricVehicles

WearableHealthMonitoring

NightVision

Military

Environmental

HALE

IndustryTargetCAGREs5matedMarketby2022($m)*

*Thesearemanagementcalcula0onsarebasedonthird-partysources,whichareinevitablysubjecttoanumberofuncertain0es.


Acloserlookatnear-termdriversToaccelerategrowth

16


Neartermdriverstoaccelerategrowth:VCSEL:anewerainlowcostlasertechnology

VCSEL’sarehighperformancelowcostlasersfor:•  Sensing•  Communica8ons•  Consumer•  Industrial

17


VCSEL epiwafer

VCSEL chip

Magnetic storage Printing

Data centres

Cosmetic

3D Sensing

Industrial Heating

VCSEL–theapplica8ons

LIDAR

18


DFB-fullservicewafersforFTTX

•  DFBLaser=DistributedFeedBackLaser•  Cri5calforfibreop5ccommunica5ons

•  Fibretothepremises(FTTX)•  DataCentre•  Corenetwork

•  DFBwafers:Base+gra5ng+overgrowth•  IQEhistoricallyprovidedBaseepionly• Wehavedevelopedapoten5allydisrup5vetechnologyforgra5ng-NanoImprintLithography(NIL)

•  Mul5plequalifica5onsfor“fullservice”wafers

Gra8ng–viewedbyScanningElectronMicroscope

XX X X X X X X X X X X X X X X X XXX XX XXX X XXX

Overgrowth

Gra8ng

Base

19


GaNforRFApplica8ons

•  GalliumNitride(GaN)hasmul5pleuseacrossRFapplica5on

•  IQEoffersmaterialstechnologiescoveringbothGaNonSiliconCarbide(SiC)andGaNonSilicon

•  Engagedwithmajorindustryplayers

RFEnergy

BaseSta8ons

Military Radar

20


Acloserlookatmid-termdriversToaccelerategrowth

21


Midtermdriverstoaccelerategrowth:Wirelessfilters(cREO)

$0.0b

$2.5b

$5.0b

$7.5b

$10.0b

$12.5b

$15.0b

2013 2014 2015 2016 2017

Mobile Device RF TAM

~15% CAGR

FilterContent $0.25 $1.25 $4.00 $7.25

Switching/Tuning $0.00 $0.25 $1.50 $2.25

PowerAmplifiers $0.30 $1.25 $2.00 $3.25

Other $0.00 $0.00 $0.50 $0.50

TotalRFcontent $0.55 $2.75 $8.00 $13.25+

Typical2G

Typical3G

RegionalLTE

GlobalLTE

Poten8alroutestoaccessusingcREOTM

technology

22

Source:Qorvo(RFMD/TriQuint),2015


Markets&industrychallengesfornextgenera8onwireless

Parameter Limiter Reason IQEPoten8alSolu8on

IQECapability

PowerAdded

Efficiency(PAE)

Offsetvoltage

Fundamentaltocurrentmaterials

solu8ons

Alternatecollector

Dilutenitridebase

Frequency

PACutofffrequency

FundamentallimitofGaAsHBT

InP-basedHBT

GaAs-basedPHEMT

FilterFrequency

Fundamentalrequirementforthinpiezo-electric

layers

Novelepi-solu8on(AlN)

DeviceSize ChipSize Fundamentallimitoffeaturesize

Novelintegrateddevicestack

23

Es5m

ated

marketvalue

Source:MACOM/IQE


CompoundsemiconductorsforPower,RFandLigh8ng

10 100 1K 10K 100K 1M 10M10

100

1K

10K

100K

1M

10MSiC

GaN

Silicon

Opera5ngfrequency(Hz)

Outpu

tPow

er(V

A)

HighSpeed

HighPowerPowerinverters

EV/HEV

MicroInvertersPC(DC-DC)

DataCentre

PowerInverters

24

Source:IQEes3mates


Poten8alapplica8onsforIQESolarTechnology

•  Highefficiencysolarcells

•  44%efficiency(Silicon~18%)

•  PowerGenera8onMarkets•  Satellites•  LEOs•  Drones•  Terrestrial

25


MassmarketofadvancedInfraredThe Infrared (IR) business unit specialises in the manufacture of compound

semiconductor substrates and epitaxial wafers that are used in longer wavelength Infrared imaging, sensing and emitter product applications

Medical DefenseSecurity Environmental

Non Invasive Glucose Monitoring

Border Control Infrared Homing/Seeking

26


longer-termgrowthdrivers

27


Longertermdriverstoaccelerategrowth:Poten8aladop8onofhybridCS-on-Siacrossmul8plemarkets

•  Foundedin1988IQEhasalmost30yearsexperienceinsemiconductorsmaterialstechnology

•  IQE’sIPpormoliocoversmul5plematerialssystems

•  IQE’sexper5sedirectedtowardscombiningcompoundsemiconductorwithsilicontodeliverhighperformancechipsatlowcost

•  crystallineRareEarthOxide(cREO™)providesanoveltechnologybase

•  Transi5ontocREO™expectedtohappenapplica5onbyapplica5onoverthecomingyears,increasingIQE’saddressablemarkets

EpitaxiallayerscREO™interfacelayer

Epitaxiallayers

cREO™Approach

StandardIII-Vepi

28


Summary

•  TheCSIndustryismovingthroughanInflec5onPoint

•  IQEhasgeareditsstrategyandevolu5ontocapturethisopportunity•  AttheheartofitsstrategyIQE’sIPpormolioisakeydifferen5ator•  Thisissupportedbyaflexibleandcosteffec5veroutetoscalingthebusiness•  ThishastranslatedintomarketleadershipforIQE,withasoundbasecaseforcon5nuinggrowth

•  However,thebreadthanddepthofIQE’sengagementinabroadrangeofnear,midandlongtermopportuni5esprovidestrongupsidetothebasecase

•  ThestartoftheVCSELrampinJune2017providesakeymilestoneonthisjourney

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iqe plc...this presenta5on has been prepared by and issued by, and is the sole responsibility of,...

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