1st Quarter Results

IQE PLC
23 May 2000


                         IQE plc
 1st Quarter 2000  Results : Record Sales and Increased
                         Profits
                            
IQE  plc (IQE), the world's largest 'pure play' outsource
supplier  of customised epitaxial wafers to the  compound
semiconductor  industry, is pleased to announce  its  1st
Quarter results for the period ended 31 March 2000.

Highlights

* Record Q1 sales, up 40% to £6.351m (Q1/1999:
  £4.535m) and up 25.3% sequentially on Q4 1999 (£5.068m),
  despite continued capacity limitations.

* Net profit before tax and exceptional costs for Q1 up
  70% to £0.373m (Q1 1999 : £0.220m).

* EPS for Q1 up to 1.98p per share, up by 42%  (Q1 1999:
  1.41 pence per share).

* Continued strong demand for the Company's products.

* First of new generation MBE systems at Bethlehem now
  in full production of 6' epiwafers.

* High  quality  HBT technology for both  AlGaAs  and
  GaInP  products  established on new  generation   MOCVD
  systems in Cardiff and now under customer qualification.

* Strong acceleration in capital expenditure programme
  to maximise opportunities.

* In  addition, since the end of Q1, IQE completed  a
  successful secondary offering and listing on LSE to raise
  £37m (US $56m) for expansion of business.


Dr Drew Nelson, Chairman & CEO commented:
'The  Groups results are now beginning to show the fruits
of  our  investments  from the IPO as  our  new  capacity
starts to come on line, resulting in record revenues  for
the  first quarter of 2000. We are continuing to increase
our   profitability   despite   significantly   increased
investment  to further accelerate our capacity  expansion
plans  in order to cope with growing customer demand  for
our products.

Our successful secondary offering and listing on the LSE,
which  we completed last week, will not only provide  the
funds  for rapid expansion of our capacity but will  also
enable  greater  visibility for the Group  and  increased
liquidity in our shares.  We continue to look forward  to
the future with great confidence.'

For further information please contact:
Drew Nelson, Chairman & CEO, IQE (029)20 839400
Tom Hierl, Chief Technical Officer, IQE ([phone]
Tim Thompson/Nicola Cronk, Buchanan Communications
020 7466 5000

1st Quarter 2000 Results

Introduction

The Groups products continue to be in very strong demand,
driven  by  the  increasing need to expand  the  Internet
infrastructure  via  higher capacity and  faster  optical
fibre    data   links   and   to   provide   increasingly
sophisticated mobile communications systems. In addition,
many other applications of compound semiconductor devices
continue to grow rapidly.

As previously indicated, we are accelerating our capacity
expansion  programme to cope with the  increasing  demand
for   epitaxial  wafers  and  our  successful   secondary
offering  will  allow  us  to establish  a  much  greater
capacity  for  manufacturing  wafers  in  a  highly  cost
effective manner over the coming twelve months. Important
milestones   achieved   during   the   quarter   included
establishing full production of 6' wafers on the first of
the  new  generation  multiwafer  6'  MBE  equipment   in
Bethlehem, and successfully developing a high quality HBT
production technology for both AlGaAs and GaInP  products
on the new AIX 2600 multiwafer MOCVD reactors in Cardiff.
These   products   are  now  in  qualification   with   a
significant number of customers around the world.

Results for Q1 2000.

Q1  sales  reached their highest ever quarterly level  of
£6.351m, an increase of 40% over Q1-1999 (£4.535m) and up
sequentially  by  25.3%  on Q4-1999  revenues  (£5.068m).
Turnover   continued  to  be  limited  by   testing   and
qualification,  but  benefited  significantly  from   the
increased  revenue generated from our new multiwafer  MBE
(VG150)  system which we were able to establish  in  full
production of 6' wafers, which is fully qualified by  our
customers  -  the first in the industry.   As  previously
indicated gross margin was impacted by continued  testing
and  qualification  and  by  increased  investment  costs
associated with building our infrastructure and  staffing
ahead  of  further  acceleration of our expansion  plans.
Nonetheless  gross  profit  increased  29%   to   £2.039m
compared  with Q1-1999 (£1.576m), although  gross  margin
was  reduced to 32.1% from 34.8% for the same period last
year.  SG&A costs were reduced as a percentage of revenue
to  16.8%  from 18.8% for Q1-2000 compared with  Q1-1999.
Increased  R&D  costs associated with the successful  HBT
product development limited the pre-exceptional operating
profit  increase to £0.423m, still up by 12% from Q1-1999
(£0.378m).   Net  profits before  taxes  and  exceptional
costs  rose to £0.373m, an increase of 70% compared  with
the   same  period  last  year  (Q1-1999:£0.220m).   Pre-
exceptional  post tax profits increased to  £0.269m  (Q1-
1999:£0.190m)  resulting in earnings of  1.98  pence  per
share  for the quarter compared with 1.41 pence  for  the
same quarter in 1999.  Including exceptionals,  post  tax
profits increased by 77% to £0.230m from £0.130m  in  Q1-
1999.

Overview

The 1st quarter of 2000 saw several more major milestones
achieved  and  continued strong demand for our  products,
particularly  those  used in optical fibre  communication
systems  which  provide increased capacity  for  Internet
infrastructure systems and those used to support  rapidly
increasing growth in the mobile telephony marketplace.

We  successfully established in full production  our  new
multiwafer  6' MBE system (VG150) in Bethlehem  with  our
three  largest  electronics  customers,  enabling  us  to
substantially increase our Q1 revenues. As  this  is  the
first  of a new generation of large capacity MBE systems,
the  risk  associated  with its operation  has  now  been
eliminated and we have established a commanding time lead
over  our  competitors.  We have  several  further  large
capacity MBE systems arriving over the next four  months,
to  cope  with  customer  demand  and  additional  design
improvements based on our experiences to date  are  being
incorporated  into  the new systems, which  will  include
full automation.

We  have  also been successful in establishing a powerful
HBT technology for both the AlGaAs and GaInP products  on
the new generation AIX2600 MOCVD platform in Cardiff, and
device  results achieved to date are highly  encouraging.
These  products  for  the  mobile telephony  and  optical
fibre    communication   systems   are    currently    in
qualification  with  a significant  number  of  customers
around  the world. We will receive several more of  these
large  capacity MOCVD systems over the next twelve months
which  will be used for a variety of products,  including
Vertical  Cavity  Surface Emitting  Lasers  (VCSELs)  for
which  there  is a rapidly growing market in  local  area
optical  fibre  networks.  IQE is currently  the  leading
provider of these complex wafers to the industry.

The  development of our large scale multiwafer 4' and  6'
technology   for  both  HBT  and  PHEMT  is  particularly
relevant  since  the  electronics part  of  the  Compound
Semiconductor  Industry is moving  rapidly  to  6'  wafer
processing, with some customers now in production with 6'
wafer  technology.  Almost all of the major companies  in
the  sector have now announced their plans to move to  6'
wafers,  confirming  the timeliness of  our  strategy  to
invest heavily in large scale 6' epitaxy equipment, which
we announced last September.

Capital  expenditure, including deposits on new equipment
in  the  quarter  was  £4.154m,  ahead  of  our  original
intentions and reflecting the significant acceleration in
our  capex plans which are aimed at bringing forward  our
capacity increase to cope with rising customer demands.

Trading Prospects

The  markets  for  our products are  continuing  to  grow
rapidly,  with demand especially strong in the  materials
for   Internet  infrastructure  projects  such  as  Dense
Wavelength  Division  Multiplexing (DWDM)  optical  fibre
systems  for  long  haul and metro networks,  short  haul
optical fibre links and mobile telephony systems.  Almost
all  the  major companies in the electronics sector  have
announced  plans  to  move  to 6' wafer  processing,  as
anticipated  by  IQE last September, strongly  supporting
the  rapid  growth  strategy adopted by  the  Group.   In
addition  the  installation at IQE's  sites  of  the  new
generation  reactors,  which  are  also  much  more  cost
effective  at  producing 4' wafers compared  to  existing
technology,  has presented the Group with the opportunity
to   supply  traditionally  fully  captive  manufacturing
facilities  with  a more cost effective alternative  than
fully  re-equipping  their  plants  with  new  generation
reactors.    This   will  encourage   current   'captive'
manufacturers  to  reappraise  their  in-house  strategy,
faced   with  the  prospect  of  having  to   replace   a
significant   amount   of  their  current   manufacturing
equipment.

As  a  result  of  this acceleration  in  our  plans,  we
announced a primary fund raising of £37m (US $56m) and  a
move  to the techMARK index of the LSE.  This was  highly
successful, with the share subscription being four  times
oversubscribed  in a very difficult and volatile  market.
The  funds  raised for the Group will be used to  execute
our  ambitious  expansion plan, which  will  give  IQE  a
significant advantage over its competitors in providing a
comprehensive and cost effective epitaxial wafer  foundry
service to the worldwide compound semiconductor industry.

Overall,  the rapidly growing demand and ever  increasing
range and size of applications for compound semiconductor
wafers,  represents  a  unique  opportunity  for  IQE  to
establish  itself  as the first choice supplier  globally
for  outsource epi-wafer supply, particularly as we  have
the  financial strength to execute our plans.  We  expect
our  revenues will grow strongly as new reactors capacity
is  brought on line during the next twelve months, and we
continue  to  look  forward  to  the  future  with  great
confidence.


Profit and Loss Account  

                               Quarter 1  Quarter 1     Quarter 1  
                               31 Mar 00  31 Mar 00     31 Mar 99  
                                          unaudited               
                                          excluding             

(All figures                   unaudited exceptionals   unaudited
GBP000s except
Earnings/Share)


Sales                             6,351       6,351        4,535

Cost of Sales                    (4,312)     (4,312)      (2,959)

Gross Profit                      2,039       2,039        1,576
Gross Margin %                     32.1        32.1         34.8

Research/Development               (545)       (545)        (345)
Selling/General/Admin            (1,070)     (1,070)        (853)
Selling/General/Admin               (39)          0          (60)      
Exceptionals              

Operating Profit                    384         423          318
Operating Marging %                 6.1         6.7          7.0

Interest Receivable/(Payable)       (50)        (50)        (158)
Interest (Payable) Exceptional       (0)          0            0

Net Profit before Taxes             334          373         160
Net Margin %                        5.3          5.9         3.5

Current Taxes                      (104)        (104)        (30)
Deferred taxes                       (0)          (0)         (0)
Dividend                             (0)          (0)         (0)

Profit/(Loss) after Taxes           230          269         130
Earnings £/share                   0.02         0.02        0.01       
Earnings $/share                   0.03         0.03        0.02
Exchange Rate $/£ Average          1.63         1.63        1.62
Exchange RAte $/£ Closing          1.61         1.61        1.61



                                   Quarter 1          12 months
                                   31 Mar 1999       31 Dec 1999
                                   Unaudited
                                   excluding
                                   exceptionals       audited


Sales                               4,535              19,043                  
         

Cost of Sales                      (2,959)            (12,558)

Gross Profit                        1,576               6,485
Gross Margin %                       34.8                34.1

Research/Development                 (345)             (1,302)
Selling/General/Admin                (853)             (3,729)
Selling/General/Admin                   
Exceptionals                            0                (171)          

Operating Profit                      378               1,283
Operating Marging %                   8.3                 6.7

Interest Receivable/(Payable)        (158)              (261)
Interest (Payable) Exceptional         (0)              (328)

Net Profit before Taxes               220                694
Net Margin %                          4.9                3.6

Current Taxes                         (30)                47
Deferred taxes                         (0)               102
Dividend                               (0)                 0

Profit/(Loss) after Taxes             190                843
Earnings £/share                      0.02               0.06
Earnings $/share                      0.03               0.10
Exchange Rate $/£ Average             1.62               1.61
Exchange Rate $/£ Closing             1.61               1.61



Balance Sheet

                           As At          As At         As At
                     31 Mar 2000    31 Mar 1999   31 Dec 1999
                      (unaudited)    (unaudited)     audited


Fixed                    
Assets

Tangible
Fixed assets              14,759       7,094           11,483

Current  
Assets

Stocks                     3,058       1,533            2,573  
Debtors                    9,076       3,535            7,742
Cash and Bank              3,932         383            8,117
Total Current Assets      16,066       5,451           18,432

Creditors Falling         (5,392)     (6,268)          (4,517)
Due within One Year

Net Current Asset         10,674       -817            13,915

Total Assets less
Current Liablities        25,433       6,277           25,398

Creditors Falling
Due after One Year
Deferred Income             (89)         (8)             (93)
Long Term 
Borrowings               (3,840)     (5,029)          (4,024)
Deferred Tax
Liability                  (331)       (491)            (331)

Net Assets               21,176         749           20,950

Capital and 
Reserves

Called Up Share
Captal                    1,366       1,040            1,360
Merger Reserve             (605)       (759)            (605)
Share Premium
Account                   18,916          0           18,907
Retained
Earnings                  1,551         568            1,281
Other Reserves              (12)       (100)               7

Total Equity           
Shareholders' Funds      21,176         749           20,950





CASH FLOW            Quarter 1     Quarter 1     12 Months
STATEMENT          31 Mar 2000    31 Mar 1999 31 December 1999
(All figures
GBP000s)              unaudited      unaudited     audited

Net Inflow/(outflow)   (96)           1,250        (2,877)
from operations

Returns on Investment
and Servicing Finance
 Interest              (50)            (158)         (589)
 Receivable/(Payable)

Capital Expenditure  (3,850)         (1,917)       (7,413)

Equity Dividend
Paid                     (0)             (0)            0
Tax Paid                (20)              5          (282)  

Net Inflow/(Outflow) (4,016)           (820)       (11,161)
before financing

Financing
  Issue of Ordinary
  Share Capital           6               0            319
  Proceeds of IPO (net)   9              (0)        19,061  
  Loans                (184)            361           (443)

Net Inflow/(Outflow)
from Financing         (169)            361         18,937

Increase/(Decrease)
 in Cash and Bank    (4,185)          (458)          7,776
 Overdrafts

                       Quarter 1       Quarter 1   12 months
                      31 Mar 2000     31 Mar 1999  31 Dec 1999
UK GAAP                unaudited       unaudited    audited
RECONCILIATIONS TO IAS
(All figures GBP000s) ----------------------------------------

(1) Statement of 
    Cash Flows

The following shows the
statement of cash flows as
if they had presented under
IAS

Cash Inflow/(Outflow)       (129)         1,158          (3,525)
from Opertions 

Cash Inflow/(Outflow)     (3,850)        (1,917)         (7,136)
from Investing 

Cash Inflow/(Outflow)
Financing                   (208)           301           18,438

Net Increase/(Decrease)
in Cash and cash          (4,188)          (458)           7,777
equivalents

Cash and Cash 
Equivalent at the Start
of the Period per IAS      8,118             341             341
         
Exchange difference            2              (0)              0

Cash and Cash Equivalents
at the end of the period
IAS per IAS                3,933            (117)          8,118

2) Goodwill

Goodwill of £284,000 arose on acquisition of Epitaxial Products 
by EPIH on 27 March 1996.  Under UK GAAP, this has been written 
off directly to reserves.  Under IAS, however, goodwill arising 
on acquisition should be recognised as an asset and amortised
over its useful life.  The following shows the retained profit
and total net assets as if they had been prepared under IAS
with goodwill amortized over 5 years.

Profit/(Loss) after
Taxes and Exceptional
Items                        230             130         1,342
Dividends                     (0)             (0)            0
Retained Profit/(Loss) per
UK GAAP                      230             130         1,342
Goodwill Amortisation        (14)            (14)          (57)

Retained Profit/(Loss)
per IAS                      216             116         1,285
Equity Shareholders'
Funds per UK GAAP         21,176             749        20,950
Goodwill Capitalisation
at Cost                      284             284           284
Accumulated Goodwill
 Amortisation               (227)           (170)         (213)

Equity Shareholders'
 Funds per IAS            21,232             863        21,021