2nd Quarter & Interim Results

IQE PLC
23 August 2000

                                         
                         IQE plc

Unaudited Interim Results  :  Record Sales and Profits

IQE plc, the leading 'pure play' outsource supplier of custom
epiwafers to the compound semiconductor industry is pleased to
announce its interim results for the six month period ended 30
June 2000, showing record sales and profits.

Highlights :

Record sales for the six months to 30 June, up 41% to £13.208
million (1999 : £9.348 million), despite continuing capacity
constraints.

Net profit before tax and exceptional charges up 46% to £0.911
million (1999 : £0.623 million excluding exceptional costs).

EPS, for the six months of 3.7 pence (1999: 1.7p)

Received 2 additional large scale MBE reactors and 1 additional
multiwafer MOCVD reactor during quarter which are expected to
boost output from Q4.

Continued strong demand for company's products.

Strengthening of senior management team through key
appointments.

Successful secondary offering raised £43million for further
expansion of production and listing of Shares on LSE (techMARK
Index).

Plans for a ten for one share split announced.

Dr Drew Nelson, Chairman & CEO commented :
'The Group continues to make significant progress. New
production capacity is now being delivered to both our US and UK
sites and sales continue to increase as demand for our products
continues at a high level. We have made a number of  key
appointments to enable the Group to effectively manage the large
increase in capacity and production output anticipated over the
coming quarters. In addition, our successful secondary offering
has provided the funds to help us achieve our ambitious goals.
We continue to look forward to the future with 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

Introduction

The Group's products continue to be in very strong demand,
driven by the continuing communications needs 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.

There were several key achievements during the first half of
2000.  As previously indicated, we are  in the process of
accelerating our capacity expansion programme to cope with the
increasing demand for epitaxial wafers.  Our successful
secondary offering, which raised £43million, will allow us to
establish a much greater capacity for manufacturing wafers in a
highly cost effective manner over the coming twelve months. As
part of the offering process, our shares were listed on the LSE
techMARK index. Important operational milestones achieved during
the first half included establishing full production of 6'
wafers on the first of the new generation multiwafer 6' MBE
equipment in Bethlehem, development of  high quality HBT
technology for both AlGaAs and GaInP products on the new AIX
2600 multiwafer MOCVD platform in Cardiff, and the delivery of
additional large scale multiwafer MBE and MOCVD systems which
are expected to help boost output from Q4 onwards.

Overview

The 1st half of 2000 saw several 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. In addition, increasing demand for both
Vertical Cavity Surface Emitting Lasers (VCSELs) and red lasers
for DVD applications  has led to the negotiation of  important
new contracts, which are expected to be concluded soon.

We successfully established in full production our new
multiwafer 6' MBE system (VG150) in Bethlehem with three large
electronics customers, helping  us to substantially increase our
first half revenues. We have also taken delivery of two more
large capacity MBE systems, albeit several weeks later than
originally anticipated due to supplier delays. These are
currently undergoing acceptance trials prior to supplying
samples for customer qualifications, and are expected to
contribute to revenue from Q4 onwards. The new systems include
additional design improvements based on our experiences to date,
together with full automation.  An additional two systems are
due for delivery in Q3.

We have also been successful in establishing powerful HBT
technologies 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 cycles with a significant number of
customers. We have  received another Aixtron 2600 system during
Q2, with an additional two planned for delivery in Q3.  Again
these are expected to be contributing to increased revenue from
Q4 onwards. In addition to HBT wafer supply, these new systems
will be used for both Vertical Cavity Surface Emitting Lasers
(VCSELs) for which there is a rapidly growing market in local
area optical fibre networks and visible wavelength lasers for
DVD and other optical storage systems.  IQE is currently the
leading provider of these complex wafers to the compound
semiconductor industry.

Our secondary offering, completed in May,  was very successful,
with the share subscription being four times oversubscribed in a
difficult and volatile market, raising £43million for investment
in new production capacity.  The Group also took the opportunity
to list its shares on the LSE (techMARK Index) in addition to
its existing EASDAQ listing. The funds raised for the Group will
be used to execute our 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 world-wide compound semiconductor industry.

Following a Group wide review, we have also finalised on a
number of  organisational changes in order to ensure the Group
is well positioned to execute its ambitious growth plans and we
have successfully concluded on  a number of important
appointments to help strengthen the Group infrastructure.  A new
MD for the UK operations has been recruited,  together with the
appointment of COO, Scott Massie, as  President for the US
operation.  The US team has also been strengthened by the
recruitment  of a new Director of Manufacturing and a new
Director of North America Sales. It was also determined that the
CFO position needed to  be located in the UK. Due to personal
circumstances, Mr Al Pastino who recently joined the Group to
become CFO, has relinquished that role, since he found he would
be  unable to spend the necessary time in Europe. A new CFO, to
be located in the UK is now under recruitment, with Mr Pastino
acting as a consultant to the US operation.

Capital expenditure, including deposits on new equipment in the
quarter was £5.886m, 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.

Interim Results for First Half 2000.

First half sales reached their highest ever level of £13.208m,
an increase of 41% over first half in 1999 (£9.348m), despite
continued capacity constraints ahead of new production systems
coming on stream later this year. Turnover 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 36% to
£4.380m compared with first half-1999 (£3.232m), although gross
margin was reduced to 33% from 35% for the same period last
year. SG&A costs were static as a percentage of revenue at 19%
for first half-2000 compared with first half-1999, as a result
of strong spending on infrastructure to prepare the Group for
increasing output later this year and in 2001.   R&D spending
associated with new product development was also accelerated,
rising by 81% to £1.123m compared with £0.621m for the same
period in 1999. The increased R&D and SG&A spending limited the
operating profit to £0.786m (1999: £0.901m). Net profits before
taxes and exceptional costs rose to £0.911m, an increase of 46%
compared with the same period last year (1999:£0.623m).  Pre-
exceptional post tax profits increased to £0.674m
(1999:£0.645m).  Post tax profits including exceptionals
increased by 141% to £0.552m (1999: £0.229m), resulting in
earnings of 3.7 pence per share compared with 1.7 pence per
share for first half 1999.

Results for Q2 2000

Sales for the second quarter were also a record for the Group,
rising by 42% to £6.857m compared with  £4.813m for the same
quarter in 1999. Gross margin was 34%, similar to the equivalent
period last year, resulting in a gross profit of £2.341m (1999:
£1.656m),  up 41%.  R&D costs, at 8.4% of turnover was up 109%
compared to the same period last year, reflecting increased
expenditure on developing new products on the large scale
production platforms. This together with significantly increased
SG&A costs in building the Group infrastructure,  limited
operating profits to £0.279m compared with £0.491m for Q2-1999.
Net profit excluding exceptionals increased to  £0.538m (Q2-1999
: £0.403m), an increase of 33%.  EPS was 2.1 pence per share.

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. In the opto electronic marketplace, our
telecom products have penetrated some of the largest volume
customers in the industry and our VCSEL product demand is
growing very strongly. In addition we will be dedicating at
least one of our new MOCVD reactors exclusively to red lasers
for DVD applications, for which we are currently in negotiations
for a significant contract. In the electronics sector almost all
the major companies have announced plans to move to 6' wafer
processing over the coming 12 months, 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.  We anticipate that 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.  In addition we have secured some important orders
for products to be produced on our existing smaller scale
reactors, which are currently being gradually converted for
these new products.

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. At present our revenues and consequently our
results during the current financial year are strongly dependent
on a small number of large platform reactors, and therefore
susceptible to the timely delivery, run up and qualification of
our new reactor capacity.  However, as this new  capacity is
brought on line during the next twelve months we expect our
revenues will grow strongly, and we continue to look forward to
the future with a high degree of confidence.

PROPOSED SUB-DIVISION OF SHARE CAPITAL

Notice has been published and sent to all shareholders covening
an Extraordinary Meeting of the Company to be held at the
offices of Eversheds, Senator House, 85 Queen Victoria Street,
London, EC4V 4JL at 10 am on 8 September 2000.  The ordinary
resolution to be proposed at the EGM is that each ordinary share
of 10 pence in the Capital of the Company is sub-divided into 10
ordinary shares of 1 pence each.  The Board of Directors believe
that such a sub-division will enhance the marketability of the
shares, increase share liquidity and reduce share price
volatility.  If the sub-division is approved at the EGM then the
record date will be 8 September 2000 with dealings in the new
shares commencing on 11 September 2000. The shareholders
circular is also available at  the Company's registered office,
Pascal Close, Cypress Drive, St Mellons, Cardiff, CF3 0EG.


Drew Nelson
Chairman, IQE plc
23 August 2000

                                            Q2 & Interim Results
                                                  23 August 2000

IQE plc


                               3 months 3 months 6 months 6 months 12 months
PROFIT AND LOSS ACCOUNT        30 Jun   30 Jun   30 Jun    30 Jun   31 Dec
(All figures GBP000s              00       99       00        99       99
except Earnings/Share         unaudited  audited unaudited unaudited audited
                                                      
Sales                              6,857   4,813  13,208   9,348  19,043
Cost of sales                     (4,516) (3,157) (8,829) (6,116)(12,558)

Gross Profit                       2,341   1,656   4,380   3,232   6,485
Gross Profit %                     34.1%   34.4%   33.2%   34.6%   34.1%
                                                          
Research/Development                (578)   (276) (1,123)   (621) (1,302)
Selling/General/Admin             (1,400)   (856) (2,470) (1,710) (3,729)
Selling/General/Admin                  
 Exceptional
                                       0       0       0       0    (171)
Operating Profit/(Loss)              363     523     786     901   1,283
Operating Profit/(Loss)%             5.3%   10.9%    6.0%    9.6%   6.7%

Interest                             175   (120)     125   (277)   (261)
 Receivable/(Payable)
Interest/ (Payable)                    0       0       0       0   (328)
Exceptional

Net Profit/(Loss)                    538     403     911     623     694
 before Taxes 
Net Profit/(Loss)%                   7.8%    8.4%     6.9%   6.7%   3.6%

Exceptional Items                    (84)   (357)   (123)   (417)      0
Current Taxes                       (132)    (88)   (237)   (118)     47
Deferred Taxes                         0     140       0     140     102
Dividend                               0       0       0       0       0
                                                                      
Net                                                                      
Profit/(Loss) after 
 Taxes/Exceptionals                  
                                     322      99     552     229      843
Earnings pence/share                2.15    0.75    3.68    1.73     6.00

   

                                      As At   As At    As At   As At    As At
BALANCE SHEET                        30 Jun  30 Jun   30 Jun  30 Jun     31
                                         00      99       00      99   Dec 99

(All figures GBP000s)          unaudited unaudited  unaudited unaudited audited
                                        

Fixed Assets
Tangible Fixed assets                19,145     9,155   19,145  9,155  11,483
  
Current Assets
  Stocks                              3,718     1,795    3,718  1,795   2,573
  Debtors                             8,574     3,085    8,574  3,085   7,742
  Cash and Bank                      47,359    16,355   47,359 16,355   8,117
Total Current Assets                 59,651    21,235   59,651 21,235  18,432


Creditors                                                                    
Falling                              (8,217)   (4,453)  (8,217) (4,453)(4,517)
Due within
One Year

Net Current Assets                   51,433    16,781   51,433  16,781 13,915
                                                                             

Total                                                                    
Assets                            
less Current Liabilities             70,579    25,936   70,579  25,936 25,398
       
Creditors                                                                    
Falling
Due after
One Year

Deferred Income                        (81)        12     (81)     12    (93)
Long Term Borrowings                (3,925)   (5,443)  (3,925)(5,443) (4,024)
Deferred Tax Liability                (331)     (358)    (331)  (358)   (331)

Net Assets                          66,242    20,146   66,242  20,146  20,950

Capital and Reserves
Called Up Share Capital               1,498     1,324    1,498  1,324   1,360
Merger Reserve                        (605)     (609)    (605)  (609)   (605)
Share Premium Account               62,533     18,852   62,533 18,852  18,907
Retained Earnings                    1,833        667    1,833    667   1,281
Other Reserves                         983        (87)     983   (87)       7

Total                               66,242     20,146   66,242 20,146  20,950  
Equity                            
Shareholders' Fund




                                3      3    6 Months   6 Months      12
                              Months Months                       Months
CASH FLOW STATEMENT           30 Jun 30 Jun  30 Jun 00 30 Jun 99  31 Dec
                                  00     99                           99

(All figures GBP000s)      unaudited unaudited unaudited unaudited audited
                                

Net Inflow/
(Outflow)
from Operations                4,499   (878)    4,403        372  (2,877)
       
Returns on Investment
and Servicing Finance
Interest Receivable/
     (Payable)                   175   (444)      125      (602)    (589)
                                                                  
Capital Expenditure           (5,073) (2,403) (8,923)    (4,320)  (7,413)
                                                            
Equity Dividend Paid              0       0         0         0        0
Tax Paid                         (8)     (3)      (28)        2     (282)

Net                                                                   
Inflow/                                 
(Outflow)                                                  
before                         (407) (3,728)   (4,422)   (4,547) (11,161)
Financing


Financing                                                                   
Issue of Ordinary Share
   Capital                      132     284       138       284      319
Proceeds of IPO (net)        43,617  19,002    43,625      19,0   19,061
Loans                            85     414      (99)       775     (443)

Net                                                                   
Inflow/(Outflow)             43,834  19,700    43,665    20,061   18,937
from
Financing

Increase/                                                                   
(Decrease) in Cash
and Bank Overdrafts          43,427  15,972    39,242    15,514  7,776
                                                                
                                 
UK GAAP                      3 Months   3 Months  6 Months  6 Months  12 Months
RECONCILIATIONS             30 Jun 00  30 Jun 99  30 Jun 00 30 Jun 99  31 Dec   
  TO IAS                                                                99
                                                                          
(All                   
figures GBP000s)            unaudited  unaudited  unaudited unaudited audited   
                                    
(1)Statement of Cash Flows
The following shows the
statement of cash
flows as if they had
been presented under IAS

Cash                                                                  
Inflow/(Out                             
flow) from                                                                 
Operations                     4,726       (969)    4,597     189      (3,525)

Cash                                                                  
Inflow/(Out                           
flow) from                                                                 
Investing                     (5,073)    (2,403)  (8,923)  (4,320)     (7,136)
       
Cash                                                                  
Inflow/(Out                            
flow) from
Financing                     43,750     19,343   43,542   19,644      18,438

Net                                                                  
Increase/(Decrease) in Cash
and Cash Equivalents          43,404     15,972   39,216   15,514       7,777

Cash and Cash
Equivalents at the
Start of the Period per IAS    3,933       (117)   8,118      341         341
Exchange Difference               24          0       26        0           0

Cash and Cash
Equivalents
at the
End of the Period per IAS     47,360     15,855   47,360    15,855      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 recognized as an asset and
amortized 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                             322        99      552      229     1,342

Dividends                           0         0        0        0         0

Retained                                                                  
Profit/(Loss) per UK
GAAP                               322       99      552      229     1,342


Goodwill Amortization              (14)     (14)     (28)     (28)      (57)

Retained                                 
Profit/(Loss) per IAS              308       85      523      200     1,285


Equity                                                                  
Shareholders'                            
Funds
per UK GAAP                     45,066   19,397   66,242   20,146    20,950


Goodwill                             0        0      284      284       284
Capitalization at Cost

Accumulated                             
Goodwill
Amortization                        (14)    (14)    (241)    (185)     (213)
          
Equity                                                                  
Shareholder s' Funds
per IAS                          45,052  19,383   66,284   20,246    21,021