Firm whose building was bought and refitted with £34m of public money has been put up for sale with its share price down to less than 8p

Martin Shipton

A semiconductor company whose building was bought and refitted by the Cardiff Capital Region at a cost of £34m now has a share price of just 7.84p and has been put up for sale by its owners.

The Times reported how IQE, based on the outskirts of Newport, has cut its full-year revenue forecasts, further hitting the struggling technology company’s share price.

The firm announced a strategic review in November and moved to prioritise a possible sale of its Taiwan business, alongside a potential public share offering . It also warned of a “slower-than-anticipated recovery in key sectors driven by weak consumer demand in end markets”.

It said it was “progressing negotiations with multiple parties for the sale of the group’s Taiwan operations”.

It plans to use any proceeds to repay its revolving credit facility with HSBC and convertible loan notes, following £18m of financing in March, and to invest in its core business.

The wafers IQE produces are used in 5G and 6G networks, virtual reality, smartphone cameras and sensing devices and the company is understood to be an enabler of Apple’s facial recognition technology.

But despite its advanced products, its share price is down by two thirds in the past 12 months on the London Stock Exchange’s junior stock market.

Trump tariffs

The sector has been buffeted by the Trump administration threatening huge tariffs on imports from semiconductor companies that are not manufacturing in the United States or those that have not vowed to do so.

The UK Government recently wrote to semiconductor businesses, preparing them for the impact of import tariffs.

QE’s valuation has now declined to £77m.

IQE is based in a building originally built for LG Semiconductors at the Celtic Lakes development at Imperial Park in Newport – a much vaunted project that came to nothing.

The Welsh Government boasted in a press release in September 2017: “World’s first semiconductor cluster comes to Wales thanks to Welsh Government.

“Tech giant IQE will extend its world-renowned semiconductor design and manufacturing operation in Newport thanks to a Welsh Government facilitated, special purpose building in south east Wales.

“As one of the premier business locations in South East Wales, its use as a compound semiconductor wafer foundry is a key part of the Welsh Government’s strategy to build the world’s first semiconductor cluster – bringing high end jobs, investment and skills to Wales.”

Semiconductor industry cluster

In May 2017, the Cardiff Capital Region cabinet announced it would give £37.9m to “support the development of a Compound Semiconductor industry cluster in south-east Wales”. It was the first investment of the £1.2bn city deal scheme.

A press release announcing the deal said: “The project has been subject to a detailed due diligence process to provide expert assurance to decision-makers that outputs are achievable and affordable. Importantly the project is not a grant or a loan – it is a commercial investment with ownership of the foundry remaining with the 10 councils [that together form the Cardkiff Capital Region].

“The proposal seeks to return the original investment plus interest over the life of the project.”

In December 2018, the Wales Audit Office published a report into the IQE investment.

That found that “aspects of the City Deal’s investment decision-making process were compromised” and “most of the City Deal partners felt that high level risks were managed appropriately to enable them to make an informed decision, however they had very limited time to consider large amounts of complex information”.

It concluded there were “lessons to be learnt from the process of going through the first investment decision for future investment decisions”.

‘Valuable asset’

We asked Cardiff Capital Region and the Welsh Government to comment on the latest development.

A spokesperson for Cardiff Capital Region said: “In 2017 Cardiff Capital Region (CCR) invested £34m of its City Deal funds in the acquisition and fit out of a 375,000 sq ft building at Imperial Park in Newport. The building, known as the CSC Foundry, is now widely regarded as being at the heart of the semiconductor cluster in Wales and is occupied by IQE Plc on a commercial lease, remaining a valuable asset in CCR’s ownership. CCR is not an investor in IQE Plc and does not hold shares.

“CCR is proud to work with the wider cluster, via UK and Welsh governments, in the development and deployment of the £160m SEW Investment Zone, within which Imperial Park and next generation semiconductors have been identified as a priority site and priority sector.”

The Welsh Government declined to comment.