Acquisition

IQE PLC
22 December 2006

22 December 2006



IQE plc



IQE secures position as leading supplier of advanced wafers to the global
wireless industry with £7.5m acquisition in Singapore



IQE plc ('IQE', 'the Group', AIM: IQE), the UK-based leading outsource supplier
of advanced wafers and outsource wafer services to the global semiconductor
industry, has agreed to acquire MBE Technology Pte Ltd ('MBE'), a Singapore
based manufacturer of compound epitaxial ('epi') wafers for a total cash
consideration of S$23 million (£7.5 million).



This acquisition will be immediately earnings enhancing and completes the
Group's strategy to become the largest supplier of epi-wafers into chip
manufacturers for the global wireless industry.



The enlarged Group will have the industry's broadest range of current and next
generation products, together with enhanced purchasing power for raw materials.
The addition of MBE to the Group will also provide significant opportunities to
accelerate IQE's sales into existing and new customers in the major markets of
the Pacific Rim region.



The Group has also published separately a trading update for the year to 31
December 2006.



Consideration and funding



The consideration is based on an initial payment of S$11.5 million (£3.8
million) in cash and a further S$11.5 million (£3.8 million) by the issue to the
vendor of loan notes bearing interest of 6.5%. The loan notes are repayable in
three instalments in January 2008, June 2008 and January 2009.



Noble & Company Limited has placed 25 million new ordinary IQE shares ('New
Ordinary Shares') at 18p per share to raise approximately £4.5 million (before
expenses) to finance the cash consideration payable on completion of the
acquisition and working capital (the 'Placing').  The New Ordinary Shares will
be admitted to trading on AIM on 27 December 2006.



MBE Technology



MBE, incorporated in Singapore 1993, is one of the leading independent global
manufacturers of compound semiconductor epi-wafers for use in very high-speed
electronic components in the wireless and optical telecommunications industries.
  It has state-of-the-art facilities in Singapore and a strong team of
management and employees.



In 2006, MBE is expected to generate revenues in the order of US$15 million and
an EBITDA of over US$ 3.2 million.



MBE's growth and premier position are sustained by its strong customer base
across the Far East including a strategic supplier agreement with a substantial
Japanese electronics manufacturer.



Acquisition Rationale



The acquisition positions IQE as the largest outsource supplier worldwide of epi
wafers to the global wireless industry.  It will provide IQE with a very strong
presence in Asia including excellent links into Japan, Taiwan, China and Korea.
IQE intends to use the new base in Asia to aggressively sell into the Pacific
Rim wireless industry.



IQE will now have a dual-source manufacturing capability for all its wireless
products with facilities in Singapore, the US, and the UK qualified for the
production of wafers for RF components.  The Board believe this will enable the
Group to offer its customers effectively risk free sourcing of wafers.



The acquisition is expected to increase the Group's purchasing power of raw
materials and the utilisation of IQE's other facilities as demand, particularly
from the Pacific Rim countries, continues to grow.



Industry background



The wireless industry continues to grow extremely rapidly driven by increasing
mobile handset sales and the addition of WiFi, WiMAX and wireless media.
Consumers are demanding increased functionality, with faster access, any time,
anywhere and more comprehensive interactive content. This is creating a huge
demand for faster, more sophisticated handsets.



These higher data rate and more sophisticated handsets and wireless systems
require much more use of Gallium Arsenide wafers, IQE's leading product
offering. According to Strategic Analytics, the amount of Gallium Arsenide
wafers used in mobile phones alone is expected to at least double between 2005
and 2009.





Dr Drew Nelson, IQE Chief Executive, said:



'The earning enhancing acquisition of MBE, with its strong product and customer
base, coupled with its very powerful regional presence provides IQE with clear
global leadership in the supply of advanced wafer products to the worldwide
wireless industry.



'Following the acquisition of EMD in August, we have now completed our strategy
of becoming the leading supplier of wafers to the global wireless industry,
providing all the required wafer technologies.



'MBE provides us with a Far East base for the aggressive penetration of the
major markets of the Pacific Rim, particularly Japan, China, Taiwan and Korea.
It also means that the Group now has a second source for the manufacture of  all
wafer products for the wireless industry.  This brings significant manufacturing
synergies, allowing us to more fully leverage our global purchasing power and
excess manufacturing capacity at our facilities in the US.



'IQE is the only wafer company capable of supplying products for the full
spectrum of the wireless market, from handset to infrastructure.  We can provide
our customers with complete assurance of supply and a one stop shop for all of
their wafer requirements - we are uniquely well positioned to play a leading
role the rapid growth of the global wireless market.'





Enquiries:

IQE plc  www.iqep.com.
    Dr Drew Nelson, Chief Executive
    Stuart Hall, Chief Finance Officer
    Chris Meadows, Investor Relations

Noble & Company Limited                                     [phone]
    John Llewellyn-Lloyd/ Sam Reynolds



College Hill
    Adrian Duffield/Ben Way                                [phone]




Placing Details


IQE has conditionally raised approximately £4.5 million (before expenses)
through a placing of 25,000,000 new ordinary shares at 18p per share.



The Placing is conditional, inter alia, on admission (''Admission'') of the New
Ordinary Shares to trading on AIM, a market operated by London Stock Exchange
plc (the ''London Stock Exchange'') ('AIM') (which is the market on which the
Company's existing issued ordinary shares are admitted to trading) occurring by
no later than 27 December 2006. The New Ordinary Shares are equivalent to
approximately 6 per cent. of the Company's enlarged ordinary share capital
following Admission and the Placing Price represents a discount of approximately
4 per cent. to the closing mid-market price of an existing issued ordinary share
of 18.75p on 21 December 2006, the latest practicable date prior to the posting
of this announcement.



Application has been made for the admission of the New Ordinary Shares to
trading on AIM. The shares will rank pari passu with the existing ordinary
shares of the Company. Dealings in the New Ordinary Shares are expected to
commence on 27 December 2006.


Note to Editors



IQE is the leading global outsource supplier of advanced semiconductor wafers,
with products that cover the whole spectrum of wafer structures, supported by an
innovative outsourced foundry services portfolio that allows the Group to
provide a 'one stop shop' for the wafer needs of the world's leading
semiconductor manufacturers



IQE uses advanced crystal growth technology (epitaxy) to manufacture and supply
bespoke semiconductor wafers ('epi-wafers') to the major chip manufacturing
companies, who then use these wafers to make the chips which form the key
components of virtually all high technology systems.  IQE is unique in being
able to supply wafers using all of the leading crystal growth technology
platforms.



IQE's products are found in many leading edge consumer, communication, computing
and industrial applications, including a complete range of wafer products for
the wireless industry, including mobile handsets and wireless infrastructure,
WiFi, WiMAX, base stations, GPS, and satellite communications; optical
communications, optical storage (CD, DVD), laser optical mouse, laser printers &
photocopiers, thermal imagers, leading edge medical products, barcode, high
efficiency LEDs and a variety of advanced silicon based systems.



These manufacturers are increasingly seeking to outsource wafer production to
specialist foundries such as IQE, in order to reduce overall wafer costs and
accelerate time to market.



IQE provides bespoke R&D services to deliver customised materials for specific
applications and offers specialist technical staff to manufacture to
specification either at its own facilities or on the customer's own sites.  The
Group is also able to leverage its global purchasing volumes to reduce the cost
of raw materials.  In this way IQE's outsourced services, provide compelling
benefits in terms of flexibility and predictability of cost, thereby
significantly reducing operating risk.



Following the acquisition, IQE will employ around 320 people and operate six
manufacturing facilities located in Cardiff (two) and Milton Keynes in the UK,
and in Bethlehem, Pennsylvania and Somerset, New Jersey in the USA, and
Singapore.  The Group also has nine sales offices located in major economic
centres worldwide.



Glossary



Epiwafer: A wafer of semiconducting material (made by a crystal growth process
called epitaxy) for use in the manufacture of microelectronic devices.  Two
methods of growing the epitaxial layer on existing silicon or other wafers are
currently used: metal organic chemical vapour deposition (MOCVD) and molecular
beam epitaxy (MBE).  These wafers are typically newer types of semiconductors
comprising some combination of the elements gallium, indium, aluminum, nitrogen,
phosphorus or arsenic.



Semiconductor: A solid whose electrical conductivity can be controlled over a
wide range, either permanently by introducing impurities ('doping') or
dynamically by applying electric fields.  Semiconductor devices with dynamically
controlled conductivity are the building blocks of integrated circuits, such as
microprocessors.  Semiconductors may be elemental materials such as silicon and
germanium, or compound semiconductors which comprise more than one element such
as gallium arsenide or alloys such as silicon germanium or aluminium gallium
arsenide.



Wafer: a thin slice of semiconducting material upon which microcircuits are
constructed.  Wafers are thus of key importance in the fabrication of
semiconductor devices such as integrated circuits.  Typically they are made in
various sizes ranging from 1 inch (25.4 mm) to 11.8 inches (300 mm), and
thicknesses of the approximately 0.5 mm.



RF: Radio Frequency components such as amplifiers, receivers and modulators,
which are designed to operate in the microwave and wireless ranges of the
electromagnetic spectrum.




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