Re Joint Venture

IQE PLC
21 August 2001



                               21 August 2001

          IQE and QinetiQ sign Heads of Agreement for Joint Venture

                      in advanced semiconductor materials


Cardiff based manufacturer of advanced semiconductor materials, IQE plc (IQE)
has today signed a Heads of Agreement with QinetiQ (formerly the bulk of DERA
: The Defence Evaluation and Research Agency) to form a Joint Venture company
to undertake research and development contracts and provide materials
assessment services on behalf of IQE, QinetiQ and their customers globally.


Advanced semiconductor materials using alloys of indium, gallium, arsenic,
phosphorous, nitrogen, antimony, silicon, germanium and carbon have made a
major impact on electronic and optical devices and systems over the last few
years and the manufacture of fully characterised epitaxial structures is a
critical step in the supply chain.


As we look towards the next generations of technology based applications, the
impact of components based upon these materials will grow increasingly more
important. Key attributes of these 'compound semiconductors' include high
speed / high frequency switching, ultra low power consumption and a range of
vitally important optical properties from the visible through to the infrared
part of the spectrum, which have been the key enabling technology behind the
telecommunications infrastructure as well as data storage, automotive,
lighting and medical technologies.



The operation of the Joint Venture will be based on epitaxial growth
technology with eight tools dedicated to III-V materials and a further two
dedicated to complex silicon based epitaxy including SiGe and SiC products.
Both companies will input expertise and equipment and the Joint Venture's
services will be marketed through IQE's existing world-wide sales and
marketing operations. The Joint Venture is expected to be a profitable entity.
Completion is likely to be during Q4 2001.



The IQE/QinetiQ Joint Venture will initially operate from the existing QinetiQ
facility at Malvern, UK, although it is planned to have a separate facility
fully operational within the next three years. The new facility will also be
based in Malvern, UK.



Steve Byars, Managing Director of IQE (Europe) Ltd said 'This Joint Venture
consolidates both IQE's and QinetiQ's positions within the industry and allows
IQE to focus on volume production whilst offering customers access to a truly
world-class materials research and development centre'




Derek Barnes, QinetiQ's Director of Sensors & Electronics said 'This Joint
Venture with IQE is exemplary of QinetiQ's business strategy to partner with
industry leaders who can boast a strong track record and an excellent
pedigree.  QinetiQ will ensure that it continues to enjoy significant organic
growth through the exploitation of our technologies in the commercial sector'



For further information, please contact:



IQE:        Steve Byars on 02920 839 400 email [e-mail] or visit our
website at www.iqep.com



QinetiQ: Jonathan Byrne on 01252 394611 email [e-mail] or visit our
new website at www.QinetiQ.com



Buchanan Communications: Tim Thompson/Nicola Cronk 020 7466 5000







Notes for Editors:



IQE plc (LSE: IQE.L, NASDAQ EUROPE: IQEP) is the leading global outsource
supplier of advanced epi-wafers to the Semiconductor Industry with
manufacturing operations in Cardiff and Milton Keynes, UK and Bethlehem, PA,
USA. Its wafer products are used by a diverse range of customers worldwide to
manufacture the critical, advanced components used in fibre optic
communications systems, wireless and mobile telephony applications, optical
storage devices such as CD, DVD, Minidisc and a range of other leading edge
technologies including High Brightness LED displays, medical devices,
satellite systems and automotive applications. The group has expanded to over
450 people worldwide.






QinetiQ, formerly the larger part of DERA (Defence Evaluation and Research
Agency) incorporates the bulk of the MOD's non-nuclear research, technology
and test and evaluation establishments in its heritage. QinetiQ is one of
Europe's largest research organisations and among its 8,500 staff it employs
many leading scientists and internationally acclaimed experts.



In July 2000 the UK Government agreed to a programme that would see the bulk
of DERA being set up as a Public Private Partnership (PPP). In July 2001,
three-quarters of the agency became a wholly government owned plc called
QinetiQ (pronounced ki' ne tik as in 'kinetic energy'). This is a precursor to
eventual flotation, now likely in early 2002. A quarter of the Agency was
retained within the MOD as DSTL (the Defence Science and Technology
Laboratory).



QinetiQ has an incomparable track record in the fields of microelectronics and
optics and has received 13 Queen's Awards since 1979 for its pioneering
research and development in areas including the invention of liquid-crystal
displays (LCDs), infra-red sensors and microwave radar. With many years
experience in the processing, preparation and characterisation of
semiconductor materials (including III-V and Si(Ge) based materials), QinetiQ
has combined and inherited the technology and the expertise from government
defence research sites throughout the UK.