Pre-Close Trading Update

IQE PLC
27 January 2006


For Immediate Release                                         27th January 2006

                                    IQE plc
                            Pre Close Trading Update

IQE plc ('IQE' or 'the Group'), a leading global outsource supplier of
customised wafers to the semiconductor industry, is pleased to provide a Pre
Close Trading Update, following continued good progress within the Group's
activities during the second half of 2005.

As anticipated in last year's trading update, the Group has made very
substantial progress during 2005 with the result that revenues for the second
half of 2005 are likely to be approximately £11.3 million, a year on year
increase compared with H2'04 of 55%, and a sequential increase over H1'05 of
17%. Full year revenues for 2005 are therefore likely to be around £21 million,
an increase of 37% on the prior year revenues of £15.3 million. EBITDA loss for
2005 is likely to be around £3.8 million, a reduction of 53% on the prior year
EBITDA loss of £8.1 million. Substantial progress was made in reducing the
EBITDA loss as the year progressed and revenues increased, resulting in the
Group achieving EBITDA breakeven for the latter half of Q4'05. Costs have been
kept under close control, although unavoidable increases in energy costs
resulted in a second half increase compared with H1.

The Group decided to incur some exceptional rapid qualification costs in the
second half of '05 in order to secure substantial new contracts for the current
financial year and subsequent years. It is anticipated that these specific
qualifications are likely to generate revenues of at least $5 million for the
Group in 2006. These, combined with the $2 million of additional revenues
expected from the newly secured, five year, full outsource contract separately
announced today, and the anticipated revenues in 2006 of some $15 million from
the largest of the Group's existing outsource contracts, means that visibility
of the Group's future revenue stream continues to improve.

Cash on hand at the year end is likely to be in excess of £6 million, following
the draw down of a newly secured bank loan to fund the Group's working capital
requirements as revenues continue to increase substantially. In addition to the
working capital loan, the Group also has access to a £2 million overdraft
facility.

Overall, the business climate continues to improve, with substantial demand now
becoming apparent in several of the Group's end markets, particularly in the
wireless sector where the Group is working with a number of very high profile
accounts.

Wireless markets
The wireless markets continued to strengthen during the year and indications
from virtually all major accounts point to a buoyant year ahead as wireless
technology continues to permeate an increasing number of applications. Our
largest full outsource partner has continued to win market share and we
anticipate revenues from this customer in '06 of around 30% higher than those in
'05 as a result of their increased market share. Several other outsource
accounts continue to increase their demands and a number of additional
qualifications continue to progress.

Opto markets
Optical storage, laser printing, short range communications markets continue to
be strong, and steady increases were achieved throughout 2005. This is set to
continue in 2006, and coupled with an increasing fibre optics marketplace we
expect this division to continue to show steady progress during the forthcoming
year.

Silicon Markets
A major feature of this marketplace is the increasing use of epitaxy in most
standard processes and the increasing focus on advanced technologies such as
strained silicon. IQE Silicon is well placed to benefit from both of these
developments, and continues to win market share as evidenced by the Group
separately announcing today the winning of a major full outsource contract for
this division which could be worth some $10 million to the Group over the next
five years. Strong progress continues to be made on the advanced technologies,
and there is now a higher level of interest being shown in moving these
technologies forward into pilot production during the coming year.

Substrate markets
The substrate marketplace continued to strengthen during 2005, as demand for
compound semi wafers increased and Wafer technology ended the year with its
strongest order book for over three years. A number of technical developments,
including improved surface finishes on key products and the development of
improved quality, high margin products for infrared sensing applications helped
the division end 2005 on a positive note which we anticipate will strengthen
further during 2006.

Commenting, Dr Drew Nelson, CEO of IQE plc said
'Overall, the Board is confident that substantially increasing revenues, coupled
with the strong operational gearing of the business, improving visibility and
adequate cash resources, will result in significantly improved shareholder
returns over the next few years'.

The Group expects to announce its preliminary results for the year ended 31
December 2005 on 22nd March 2006.

Dr Drew Nelson,
CEO, IQE plc

For further information, please contact:

IQE plc :
Drew Nelson                                     [phone]
Stuart Hall                                     [phone]
Chris Meadows                                   [phone]

Buchanan Communications :
Tim Thompson/Nicola Cronk                       [phone]





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