IQE is converting existing manufacturing tooling to increase indium-phosphide capacity as stronger demand from artificial-intelligence infrastructure, optical communications, wireless systems, and defence applications drives a sharp improvement in first-half trading. The Cardiff-headquartered compound-semiconductor manufacturer reported revenue of £64.6 million for the six months to 30 June 2026, up 43% from £45.3 million a year earlier.
The improvement was broad rather than confined to one customer programme. Wireless revenue increased 40% to £26.0 million, reflecting market-share gains and higher sales into newly qualified mobile-connectivity platforms, while Photonics revenue rose 45% to £38.5 million. IQE attributed the photonics increase to continued growth in AI and data-centre markets alongside funding releases on US military and defence programmes.
Higher utilisation has changed the manufacturing economics as well as the top line. Adjusted EBITDA reached £6.0 million compared with a £0.4 million loss in the first half of 2025, with IQE pointing to greater use of installed assets and a more favourable product mix. Reported loss before tax narrowed from £18.3 million to £12.6 million.
The next operational constraint is capacity allocation. IQE plans to convert existing tooling during the second half to increase production capability for indium phosphide, a material used extensively in high-speed photonic devices for moving data between processors, memory, storage, and network equipment. The decision is commercially significant because epitaxy tools cannot be switched between material systems as casually as general factory floor space.
Each platform depends on qualified processes, recipes, tool conditions, metrology, and customer approvals. Reassigning equipment towards InP therefore says more about expected order duration than a short-term sales spike would. IQE is effectively moving part of its installed asset base towards the applications it expects to provide the strongest utilisation.
Recent orders support that judgement. In July, IQE secured a $14 million multi-year production order for wafers to be made at its Newport foundry for AI and data-centre applications. The company has also moved six-inch gallium-arsenide quantum-dot laser material into customer sampling with Quintessent, extending a supply relationship aimed at optical interconnects for increasingly dense computing infrastructure.
Those programmes sit across different compound-semiconductor material systems, which is why manufacturing flexibility remains valuable. Indium phosphide is central to many high-speed optical-communications devices, gallium arsenide is used in lasers, sensing, and radio-frequency applications, while gallium nitride supports high-power and high-frequency devices. IQE’s value lies partly in being able to manufacture across those platforms without depending on one end market.
The company operates manufacturing sites in the UK, US, and Taiwan. Cardiff supports wireless, photonics, power, and display applications, while Newport is a high-volume MOCVD facility serving photonics, power, and display markets. IQE also uses molecular-beam epitaxy and other specialist deposition technologies across its wider network, giving customers access to several compound-semiconductor manufacturing routes.
Yield and equipment utilisation remain critical. IQE said it is already seeing improvements in production output and yield after increasing operational oversight, while a larger number of supply agreements has improved forward visibility. Matthew Geen was appointed chief operating officer during the period to strengthen execution across the manufacturing base.
The balance sheet has also become less restrictive. Cash and cash equivalents were £41.6 million at the end of June, with adjusted net cash of £30.2 million compared with adjusted net debt of £23.5 million a year earlier. The change followed an £81 million fundraising completed in May, including strategic investment and supply agreements involving MACOM.
Capital expenditure remains deliberately restrained. Cash spending on property, plant, and equipment was £1.1 million in the half, only slightly above the prior-year figure. Converting installed tooling rather than building an entirely new line allows IQE to respond to stronger demand without immediately taking on the cost and lead time of another capacity expansion.
The company is guiding to full-year revenue growth of more than 30% and adjusted EBITDA in the low-teens millions of pounds, while also planning a move from AIM to the London Stock Exchange’s Main Market in the first half of 2027. The more immediate industrial test is whether higher InP volumes can be introduced without sacrificing yield, delivery performance, or the flexibility needed to serve the rest of the portfolio.
That makes the second-half tooling conversion a relatively clear operational milestone. If customer demand continues at the current pace, utilisation can rise without the delay of building an entirely new facility; if demand softens, IQE retains the risk that capacity has been configured around markets whose qualification cycles remain difficult to predict.
