Update

IQE PLC
29 September 2002

30th SEPTEMBER 2002

              IQE and Rockwell settle Lawsuit ; IQE Trading Update

IQE plc and Rockwell Automation Inc, have announced today that they have settled
their disputes relating to MOCVD process patents held by Rockwell Automation,
which were part of a Licensing Agreement between the Companies, during the
period October 1991 to January 2000.

The settlement agreement includes a cash payment by IQE and the issue of 300,000
shares of IQE ordinary shares of 1p to Rockwell Automation.

In return Rockwell Automation has agreed to release and discharge IQE and all of
its customers, past, present and future, from any obligations under any Rockwell
MOCVD process patents in relation to wafers purchased from IQE.

Consequently, application has today been made to the UK Listing Authority and
the London Stock Exchange for 300,000 ordinary shares of 1p each in the Company
('Ordinary Shares') to be admitted to the Official list. The Ordinary Shares are
being issued to Rockwell Automation Inc as part consideration of the Settlement
Agreement. Admission is expected to become effective 1st October 2002.

The cash element of the settlement falls within the £750K estimated by IQE in
its first half interim results statement as the legal expenses which would have
been necessary to prosecute trial of the matter, due to have gone to Court in
January 2003. The IQE Board has considered that it is more appropriate to settle
the case now with certainty and concentrate all corporate efforts on increasing
current business opportunities.

The cost of settlement will be charged to the Profit and Loss Account in Q3,
2002.

Current trading remains difficult, with no appreciable change in the marketplace
dynamics from that given by the Group in its interim statement of six weeks ago.
The wireless portion of the business continues to grow and there is increasing
interest in the Group's strained Silicon product for next generation
microprocessors and other electronic applications. The optoelectronic
marketplace for communication devices however, remains very depressed, although
the Group is making progress on its visible laser (DVD) product range and
developing its LED strategy. The substrate business has remained relatively flat
during Q3.

Due to the continued decline in the opto-electronics industry for communications
and the seasonal impact of shutdowns of many companies during Q3, particularly
in Europe, Group sales for Q3 are expected to be in the range of £5.4 - £5.6
million.

The actions arising from the strategic review announced earlier have been fully
implemented and further cost cutting initiatives are continuing to be introduced
across the Group. The effect of these changes on cash outflows in Q3 (currently
expected to be approximately £4 million) is likely to be minimal. Their overall
impact on cashflow will only become evident in Q4 and beyond. A full Q3
statement is due on 20th November 2002.

For further information please contact :
Nelson, IQE plc                                                    02920 839405
Tim Hawkes, IQE plc                                                02920 839419
Chris Meadows, IQE plc                                             02920 839472

Matthew Wood, Evolution Beeson Gregory                             0207 488 4040

Nicola Cronk/Fergus Mellon, Buchanan Communications                0207 466 5000


                      This information is provided by RNS
            The company news service from the London Stock Exchange