Final Results

IQE PLC
24 March 2004

Embargoed until 7:00am                          24 March 2004


                                    IQE plc

                  Preliminary Results for the Year Ended 2003

IQE plc (IQE), the leading global outsource supplier of customised epitaxial
wafers to the semiconductor industry, today announces its Group Preliminary
Results for the year ended 31 December 2003.

Key Points

-           Sales down 18.3% at £18.753m, (2002: £22.960m) as a result of
            adverse dollar exchange rate movements and aggressive pricing to 
            attract higher volume outsourcing opportunities. At comparable 2002 
            exchange rates 2003 sales would have been £20.328m, a reduction of 
            11.5% compared with 2002.

-           Operating loss (before exceptional items of £0.828m) reduced by 43%
            to £12.589m compared with the previous year (2002: £22.025m before 
            exceptional items of £96.193m).

-           Loss on ordinary activities before taxation £13.640m (2002:
            £118.234m)

-           Operating cash outflow £10.100m (2002:  £8.995m).

-           Wafer volumes increased 28% to over 110,000 wafers compared with the
            previous year.

-           Following the transition from the main list to the Alternative
            Investment Market (AIM) of the London Stock Exchange and a 
            successful placing of 125m new shares in November 2003, through 
            which £17.770m was raised net of placing costs, gross cash at the 
            end of the year was £21.738m (2002: £17.715m).

-           Good progress on significant outsourcing opportunities.

-           All major products transitioned to high throughput production
            platforms to improve efficiency and allow an aggressive pricing 
            policy to be adopted.

-           Continued advances in technology and ongoing customer qualification
            activity are expected to yield significant results in first half of 
            2004.

-           Positive initial qualification results on several new products
            developed during the year.



Commenting on the results, Dr Drew Nelson, President and CEO, said ....... '
Although 2003 sales revenue fell due to a combination of adverse exchange rates
and aggressive pricing policy by the Group, losses before exceptional items were
reduced even more significantly by 43% due to tight cost control, lower raw
material prices and better operational efficiencies.   Wafer volumes increased
by 28% with the Group shipping over 110,000 wafers during the year.  The product
portfolio was substantially strengthened and a number of exciting outsource
opportunities began to emerge during the year.   All key products were
transitioned to large volume production systems to improve efficiencies and
lower production costs and as a result we continue to see improved demand for
our products'.



For further information please contact:
IQE plc:                                                      [phone]

Drew Nelson,  President & Chief Executive
Stuart Hall, Finance Director
Chris Meadows, Investor Relations Manager

Tim Thompson/Nicola Cronk, Buchanan Communications:           [phone]




PRELIMINARY RESULTS 2003

INTRODUCTION

IQE is a global leader in wafer outsourcing for the advanced semiconductor
industry. The Group specialises in the manufacture of highly advanced
semiconductor materials. These products provide the enabling technology for a
wide range of applications. Materials produced by the Group are typically found
in high speed electronic and optical systems for a diverse range of devices
including those used for data/audio/visual storage, optical communications,
wireless handset and RF devices and systems, and in an increasing range of
automotive, medical and industrial applications. The Group supplies atomically
engineered substrates and epitaxial films built to produce precisely defined
electrical and optical characteristics. Products such as amplifiers and switches
used in mobile communications applications (mobile phones, PDAs, wireless
connectivity), lasers and light emitting diodes used in a diverse range of
optical technologies, and emerging products such as those based on
nanotechnology and mechanical electrical microtechnology systems all rely upon
the technologies in which IQE plays a leading role.

The semiconductor industry has shown an average year on year growth rate of 17%
during its 40 year history despite the notoriety of its cyclical nature. The
industry segment itself is characterised by continuous technological innovation,
technological progress having been achieved through increasingly complex design
and continual miniaturisation. However, the industry has now arrived at a
critical juncture where future developments will be born out of advanced
materials engineering, a key area of IQE's expertise.   Increasing numbers of
companies are evaluating the cost benefits of outsourcing as cost pressures
throughout the supply chain continue to be experienced.   IQE is strongly
positioned to act as the industry's leading proponent of this outsourcing trend
because of its broad product portfolio, advanced and efficient production
systems, and large production capacity.

OVERVIEW 2003

Revenues in 2003 were adversely affected by a combination of reduced average
selling prices and fall in the value of the US dollar, particularly during the
second half of the year. IQE adopted a highly aggressive pricing policy in order
to grow market share by attracting higher volume outsourcing opportunities,
which was facilitated by a reduced cost base. The P&L impact of the weakening US
dollar was not as dominant as it might have been due to natural hedging since
both sales and purchases are transacted in local currencies.  Despite this, IQE
managed to reduce its operating loss (excluding exceptional items) by 43%
through tight cost control and improved operational efficiencies.   Total wafer
shipments (III-V epiwafers, Si epiwafers and III/V substrates) increased by 28%
during the year to over 110,000 wafers (2002: 86,000 wafers) as demand for the
Group's products grew through the year.

The reduced cost base was achieved through further headcount reductions,
aggressive negotiations on raw materials and improved operational efficiencies,
which significantly reduced material costs across the Group. Capital expenditure
remained very low and further savings were made in research and development
costs by focusing on projects with near term potential without compromising our
leading technological position for future products. Fixed costs remained stable
throughout the year.  As a result, the Group is well placed to meet its target
of achieving cash breakeven by the end of 2004.  At cash breakeven, the Group
will still only be operating at approx 35% of productive capacity and will be
well placed to obtain significant benefit from its operational gearing from
further increases in volume.

The Group made important strides in improving efficiencies and product quality
during the second half of the year with both IQE Europe and IQE Inc successfully
achieving the transition to ISO9001:2000, the new international standard for
quality management. Our commitment to quality is further evidenced by our very
low product return rate.

Overall production activity has increased during 2003 and this has continued
into 2004.  Furthermore, new product qualifications are progressing well with
the potential for a number of new products to enter production during the course
of the year. The qualification process for new wafer products in the
semiconductor industry, particularly for leading edge technologies such as
IQE's, can be up to 18 months since evaluation includes processing through a
long and often fragmented supply chain. IQE now has many products progressing
towards the end of their qualification with volume expected to start to increase
during the coming months. Many of the ongoing qualifications are in markets that
are for new products, further strengthening our overall portfolio. Several of
the new markets are in the Far East where our sales and marketing efforts have
been bolstered by increased presence in the form of customer visits and
attendance at trade shows. We continue to actively evaluate additional
opportunities in the Far East to enhance our presence in the region.

The fundraising in November 2003 raised £17.770m net of placing costs,
strengthened our balance sheet and added to customer confidence. The Board is
confident that the bottom of the industry downturn is behind us and the
opportunities that lie ahead will allow us to reap the benefits from the
investments we have made in our people, equipment and technology.

RESULTS

The Group's operating results are detailed in the Profit and Loss Analysis and
Cash Flow Statements.

Sales in H2 were £8.697m (H1/2003: £10.056m) which represented a 13.5% reduction
compared with the first half year.  This was mainly due to reduced sales of
wireless materials at IQE Inc and by the impact of the significant weakness in
the US dollar.  IQE Inc revenues were impacted by aggressive pricing designed to
attract higher volume outsourcing opportunities and a temporary reduction in
demand from some existing customers. Revenues for the full year were £18.753m
compared with £22.960m in 2002.  The average exchange rate for the year was 8.4%
worse than the rate for the previous year at USD 1.6280/GBP (2002: USD 1.5025/
GBP) resulting in a reduction in the full year sales line of approximately
£1.575m.

The gross loss in H2 was marginally greater than the first half year at £1.715m
(H1/2003: £1.562m) equivalent to a gross margin of -19.7% (H1/2003: -15.5%).
The full year's gross loss was £3.278m (2002: £8.233m excluding exceptional
items of £59.386m).  Sales price reductions to enable volume growth by
attracting more outsourcing were a major factor in the Group's pricing strategy,
offset by the Group's continued focus on lower raw material prices and
manufacturing cost reductions in order to maintain gross margins as far as
possible across its product ranges.

Significant cost savings were also made in respect of research and development
costs which were 43.0% down on the first half year at £0.668m (H1/2003: £1.172m)
representing 7.7% of H2 sales. All research and development costs incurred in H2
were expensed in the period.

SG&A costs in H2 (comprising distribution costs and other administrative
expenses) were 10.1% up on the first half year but in line with the same period
last year at £3.916m (H1/2003: £3.555m).   Exchange rate losses of £0.576m (H1/
2003: £0.016m gains) accounted for all of the increase, including £0.463m in
respect of the revaluation of provisions for costs denominated in foreign
currencies.

As a result of the above, the Group's operating loss for H2 before exceptional
items of £0.522m was £6.299m (H1/2003: £6.289m before exceptional items of
£0.306m). The operating loss for the year before exceptional items of £0.828m
was £12.589m (2002: £22.025m before exceptional items of £96.193m).  The pre tax
loss for the half year was £6.872m (H1/2003: £6.768m).   The pre tax loss for
the year was £13.640m (2002: £22.041m before exceptional items of £96.193m).

Cash flow was a key priority for the Group throughout the year with management
focusing on the reduction of operating costs and the careful management of
working capital. Stock and debtor reductions generated a combined cash flow
improvement in H2 of £1.348m (H1/2003: £1.459m) (H2/2002: £3.085m) making an
improvement of £2.806m for the year as a whole.  However, despite those
reductions, the Group's cash outflow continued at the rate of approx £0.850m/
month throughout the year, with the result that the operating cash outflow for
H2 was £5.106m (H1/2003: £4.994m).  This will now begin to reduce as increased
sales, lower operating costs and lower financing/loan repayments impact during
2004.

Capital expenditure continued to be restricted to essential items only and
totalled £0.149m in H2 (H1/2003: £0.085m).  Loan and lease repayments in H2
totalled £1.618m (H1/2003: £2.052m), resulting in total borrowings at the year
end reducing to £5.962m (2002: £9.756m). The placing and open offer in November
2003 of 125,000,000 new shares at 15p/share generated a net inflow after placing
costs of £17.770m, and this resulted in gross cash at the year end of £21.738m,
an overall increase of £11.043m over the first half year.

OPERATIONS

IQE Inc

IQE Inc has continued to see general improvements to trading in the wireless
sector despite a temporary dip in Q4/2003, with at least one major customer now
actively evaluating the Group with the aim of outsourcing an increasing
proportion of its business over the coming months.  IQE Inc is already qualified
with several of the world's top RF component companies and, as demand increases
and further customers are brought on line, this business unit is likely to
become cash generative within the second half of 2004.

Wafer shipments increased significantly with a total of 540,000 sq inches
shipped, representing an increase of 45% over the previous year as a result of
increased demand and aggressive pricing to attract higher volume outsourcing.

However, there remains a degree of variability of orders in this sector as
customers win or lose significant contracts from the major mobile phone
manufacturers. Such variability continues to make short term forecasting
difficult which in turn can impact on reactor planning and hence utilisation and
yields, but this variability will diminish as more volume customers become
qualified.

IQE Europe Ltd

Demand for optical materials for communications remained weak during 2003, but a
concentrated effort on diversifying the product range, particularly with
customers in the Far East, has shown encouraging signs of success. The Company
has engaged with a number of key producers of consumer products, and is shipping
increasing volumes to three customers involved in the manufacture of optical
storage systems (CD/DVD players and recorders) and in various qualification
stages with numerous other customers in the areas of short distance
communications, high power lasers, laser printing, LED technology, handset power
amplifiers and several other optical applications.  There are increasing signs
that the communications market is beginning to pick up and the level of
enquiries is now showing significant improvement.

As the optoelectronic markets recover, opportunities should grow for products
such as VCSELs which are deployed in short distance communications systems,
sensing and imaging applications, LEDs and optical communications devices.

All key products were transitioned from small scale development tools to large
scale production platforms during the year, thereby benefiting from greater
production efficiencies and gaining from economies of scale, again allowing an
aggressive pricing policy to be adopted.

IQE Silicon Compounds Ltd

Strained silicon continues to dominate the trade press as the material of the
future for the semiconductor industry. IQE is recognised as a leading player in
this emerging technology with samples in qualification with leading foundries,
integrated device manufacturers and wafer manufacturers worldwide. Feedback to
date has indicated that IQE's technology is world-class and two major foundries
have recently requested further samples of entry level products for which their
customers have significant near term demands.

Strained silicon looks set to become the industry's key material for advanced
high speed silicon applications such as microprocessors and mixed signal
processors (MSP). IQE offers its own 17% SiGe product targeted at the sub 100nm
technology node and has been asked to develop an entry level product to meet
imminent demand for enhanced performance for 130nm applications.   If
successful, this should enable volume to grow more rapidly as the technology for
130nm products is now well established.

Interest in IQE's strained silicon product has continued to grow with seven
wafer manufacturers and device processing plants and five research institutions
currently evaluating our materials. One major opportunity that has previously
been reported remains on schedule to provide device qualification results in the
coming weeks.

Wafer Technology Ltd

H2/2003 saw continuing increases in demand for GaAs substrates driven by the
recovery in the LED market with additional staff being recruited to open
capacity that had previously been mothballed. Demand for the range of narrow gap
materials produced by the Company was also sustained resulting in a sequential
increase in revenue and improvements in operating cash flow to the point of
being virtually breakeven.   Wafer Technology saw significantly increased wafer
demand during 2003, again partly as a result of aggressive pricing.

TRADING PROSPECTS

A combination of broadened product range, improved production efficiencies, and
lower material costs has allowed the Group to pursue an aggressive pricing
policy aimed at gaining greater market share, particularly from those companies
who currently produce most of their wafers internally.   This resulted in
significantly increased wafer shipments across the Group during 2003 and the
emergence of several outsourcing opportunities.  Consequently, the Group has
many ongoing qualification programmes in hand.  As these are completed and move
into volume production, the operational gearing of the Group's business model
should take effect, allowing the Group to achieve its immediate goal of cash
breakeven on an ongoing basis during the current calendar year.   Several
products have the potential of large volume production, and the Group is
involved in a number of exciting outsource opportunities.

Initial feedback indications from the various qualification processes indicate
that IQE's material is leading edge across a number of product types, with
several suggesting that our material is 'best in class'.

The strength of our balance sheet, breadth of our product range, and large
cost-effective production capacity should allow IQE to grow significantly with
existing resources, and the Board continues to believe that the Group's business
model will prove successful as volumes continue to pick up.


Dr Drew Nelson
President and Chief Executive Officer
IQE plc


                                                      6 months    6  months      12 months 12 months to
                                                            to           to             to
                                                   31 Dec 2003  31 Dec 2002    31 Dec 2003  31 Dec 2002
PROFIT AND LOSS ACCOUNT                     Note
(All figures GBP000s)                                unaudited    unaudited      unaudited      audited


Turnover : Continuing Operations                         8,697       10,923         18,753       22,960
Cost of Sales                                         (10,412)     (63,493)       (22,031)     (90,579)

Gross Loss                                             (1,715)     (52,570)        (3,278)     (67,619)
Gross Loss %                                              (20)        (481)           (17)        (295)

Operating Expenses :
    Distribution Expenses                                (775)        (811)        (1,555)      (1,591)
    Administrative Expenses :
    Research/Development                                 (668)      (1,337)        (1,840)      (3,210)
    Other administrative expenses
    (including goodwill amortisation and
        impairment and exceptional items)     2,3      (3,663)      (5,418)        (6,744)     (45,798)
                                              
                                                       (5,106)      (7,566)       (10,139)     (50,599)

Operating Loss before goodwill amortisation and
  Impairment and exceptional items                     (6,300)     (10,999)       (12,589)     (21,134)

    Cost of Sales Exceptional Items             3            0     (47,341)              0     (59,386)
    Other Operating Expenses:
    Goodwill amortisation and impairment      2,3            0          (0)            (0)     (34,302)
    Exceptional items                           3        (522)      (1,796)          (828)      (3,396)


Operating Loss : Continuing Operations                 (6,821)     (60,136)       (13,417)    (118,218)
Operating Loss % : Continuing Operations                  (78)        (551)           (72)        (515)

Interest Received/(Paid)                                  (51)         (28)          (223)         (16)

Loss on Ordinary Activities before Taxation            (6,872)     (60,164)       (13,640)    (118,234)
Loss %                                                    (79)        (551)           (73)        (515)

Current Taxation                                             0            0            (0)          (0)
Deferred Taxation                                            0        1,217            (0)        1,217

Loss for the Period                                    (6,872)     (58,946)       (13,640)    (117,017)

Dividends                                                    0            0            (0)          (0)

Retained Loss for the Period                           (6,872)     (58,946)       (13,640)    (117,017)


Basic Earnings Pence/Share                              (3.31)      (31.77)         (6.57)      (63.08)
Basic Earnings Pence/Share excl Goodwill                (3.31)      (31.77)         (6.57)      (44.59)
Diluted Earnings Pence/Share                    4       (3.31)      (31.77)         (6.57)      (63.08)
Diluted Earnings Pence/Share excl Goodwill      4       (3.31)      (31.77)         (6.57)      (44.59)

Net Profit/(Loss) before Interest/Taxes/
Depreciation and Amortisation (EBITDA)                 (5,766)      (8,169)       (11,300)     (19,537)





PROFIT AND LOSS ACCOUNT ANALYSIS    Note       2003       2003         2003       2002          2002       2002
                                                           non                                   non
(All figures GBP000s)                     recurring  recurring        total  recurring     recurring      total


6 MTHS TO 31 DECEMBER 2003

Turnover : Continuing Operations              8,697          0        8,697     10,923             0     10,923
Cost of Sales                          3   (10,412)          0     (10,412)   (16,152)      (47,341)   (63,493)

Gross Loss                                  (1,715)          0      (1,715)    (5,229)      (47,341)   (52,570)
Gross Loss %                                   (20)                    (20)       (48)                    (481)

Operating Expenses :
    Distribution Expenses                     (755)          0        (755)      (791)             0      (791)
    Administrative Expenses :
       Research/Development                   (668)          0        (668)    (1,337)             0    (1,337)
       Goodwill Amortisation and     2,3          0          0            0        (0)             0        (0)
    Impairment
       Exceptional Items               3          0      (522)        (522)        (0)       (1,796)    (1,796)
       Other Administrative            3    (3,161)          0      (3,161)    (3,397)         (245)    (3,642)
    Expenses

Operating Loss : Continuing Operations      (6,299)      (522)      (6,821)   (10,754)      (49,382)   (60,136)
Operating Loss % : Continuing Operations       (72)                    (78)       (98)                    (551)

Interest Received/(Paid)                       (51)          0         (51)       (28)             0       (28)

Loss on Ordinary Activities before
Taxation                                    (6,350)      (522)      (6,872)   (10,782)      (49,382)   (60,164)
                                            

YEAR TO 31 DECEMBER 2003

Turnover : Continuing Operations             18,753          0       18,753     23,050          (90)     22,960
Cost of Sales                          3   (22,031)          0     (22,031)   (31,283)      (59,296)   (90,579)

Gross Loss                                  (3,278)          0      (3,278)    (8,233)      (59,386)   (67,619)
Gross Loss %                                   (17)                    (17)       (36)                    (295)

Operating Expenses :
    Distribution Expenses                   (1,555)          0      (1,555)    (1,591)             0    (1,591)
    Administrative Expenses :
       Research/Development                 (1,840)          0      (1,840)    (3,210)             0    (3,210)
       Goodwill Amortisation and
    Impairment
                                     2,3        (0)          0          (0)      (891)      (33,411)   (34,302)
       Exceptional Items               3          0      (828)        (828)        (0)       (2,686)    (2,686)
       Other Administrative            3    (5,916)          0      (5,916)    (8,100)         (710)    (8,810)
    Expenses

Operating Loss : Continuing Operations     (12,589)      (828)     (13,417)   (22,025)      (96,193)  (118,218)
Operating Loss % : Continuing Operations       (67)                    (72)       (96)                    (515)

Interest Received/(Paid)                      (223)          0        (223)       (16)             0       (16)

Loss on Ordinary Activities before
Taxation                                   (12,812)      (828)     (13,640)   (22,041)      (96,193)  (118,234)
                                           


The foregoing non statutory information is provided because, in the view of the
Directors, it helps to give a better understanding of the Group's accounts


                                                   6 months     6 months    12 months to 12 months to
TOTAL RECOGNISED GAINS AND LOSSES                        to           to
AND MOVEMENT IN SHAREHOLDERS FUNDS                   31 Dec  31 Dec 2002     31 Dec 2003  31 Dec 2002
                                                       2003

(All figures GBP000s)                             unaudited    unaudited       unaudited      Audited

TOTAL RECOGNISED GAINS AND LOSSES

Loss for the Period                                 (6,872)     (58,946)        (13,640)    (117,017)
Currency Translation Differences on
  Foreign Currency Net Investments                    (158)        (979)           (356)      (1,567)

Total Recognised Gains and Losses relating to
the Period                                          (7,029)     (59,925)        (13,995)    (118,584)
                                                    


MOVEMENT IN SHAREHOLDERS FUNDS

Balance at 01 January 2003                           15,177       81,674          21,936      137,612

Shares Issued net of Issue Costs                     17,909          187          18,116        3,265
Deferred Consideration on Acquisition of
Subsidiary                                                0            2               0        (356)
                                                          
Foreign Exchange Translation Differences              (158)        (979)           (356)      (1,567)
Loss Attributable to Members of the Group           (6,872)     (58,946)        (13,640)    (117,017)

Balance at 31 December 2003                          26,057       21,937          26,057       21,937






                                                             As At            As At
BALANCE SHEET                                          31 Dec 2003      31 Dec 2002

(All figures GBP000s)                                    unaudited          audited

Fixed Assets :
    Intangible Fixed Assets                                      0                0
    Tangible Fixed Assets                                   11,349           13,862
    Investment in Own Shares                                    15                9

    Total Fixed Assets                                      11,364           13,871

Current Assets :
    Stocks                                                   3,464            4,988
    Debtors                                                  2,439            3,721
    Cash at Bank and in Hand                                21,738           17,715

    Total Current Assets                                    27,641           26,425

Creditors Falling Due within One Year                      (8,606)         (11,908)

Net Current Assets                                          19,035           14,516

Total Assets less Current Liabilities                       30,399           28,388

Creditors Falling Due after One Year :
    Deferred Income                                          (385)            (452)
    Long Term Borrowings                                   (3,056)          (5,999)

Provision for Liabilities and Charges                        (901)              (0)

Net Assets                                                  26,057           21,936


Capital and Reserves :
    Called Up Share Capital                                  3,151            1,871
    Share Premium Account                                  157,118          140,328
    Shares to be Issued                                        180              133
    Merger Reserve                                           (605)            (605)
    Retained Earnings                                    (133,147)        (119,507)
    Other Reserves                                           (640)            (284)

Total Equity Shareholders' Funds                            26,057           21,936






                                                    6 months 6 months to       12 months   12 months
                                                          to                          to          to
                                                      31 Dec 31 Dec 2002     31 Dec 2003 31 Dec 2002
CASH FLOW STATEMENT                                     2003

(All figures GBP000s)                              unaudited   Unaudited       unaudited     audited


Net Inflow/(Outflow) from Operations                 (5,106)     (4,563)        (10,100)     (8,995)

Returns on Investment and Servicing Finance :
    Disposals of Fixed Assets                             58           0             134           0
    Interest Received/(Paid)                            (51)        (28)           (223)        (16)

Capital Expenditures :
    Purchases of Fixed Assets less Leases              (149)       (147)           (234)     (3,765)
    Received
    Payments to Acquire Investments in
    Subsidiaries                                           0           0               0           0
                                                          
    Capitalized Development Costs                          0           0             (0)         (0)

Taxes Received/(Paid)                                      0         (9)               0        (67)

Net Inflow/(Outflow) before Financing                (5,248)     (4,747)        (10,423)    (12,843)

Financing :
    Issues of Ordinary Share Capital                  17,909         189          18,116       3,267
    Loans Received/(Repaid)                            (100)       (222)           (978)       (662)
    Leases (Repaid)                                  (1,518)     (1,321)         (2,692)     (2,578)

Net Inflow/(Outflow) from Financing                   16,291     (1,354)          14,446          27


Increase/(Decrease) in Total Cash and Bank            11,044     (6,102)           4,023    (12,816)

Management of Cash at Bank Accessible
between 1 and 7 days                                (11,800)       5,750         (5,550)      12,250

Increase/(Decrease) in Cash and Bank Excluding
Cash at Bank Accessible between 1 and 7 days           (756)       (352)         (1,527)       (566)
                                                       






                                                     6 months to     6 months      12 months 12 months to
                                                                           to            to
RECONCILIATION OF LOSS TO CASH INFLOW/(OUTFLOW)      31 Dec 2003  31 Dec 2002    31 Dec 2003  31 Dec 2002
FROM OPERATIONS
(All figures GBP000s)                                  unaudited    unaudited      unaudited      audited


Operating Loss                                           (6,821)     (60,136)       (13,417)    (118,218)

Depreciation Charged                                       1,057       51,966          2,118       64,379
Goodwill Amortisation and Impairment                           0            0              0       34,302
Loss on Sale of Assets                                        46            0             46            0
(Increase)/Decrease in Stocks                                831        1,993          1,524        7,289
(Increase)/Decrease in Debtors                               517        1,092          1,282        3,774
Increase/(Decrease) in Creditors                           (668)          171        (1,586)        (800)
Grants Released                                             (67)        (249)           (67)        (141)
Grants Received                                                0          600              0          420

Net Cash Inflow/(Outflow) from Operations                (5,106)      (4,563)       (10,100)      (8,995)







                                                6 months     6 months      12 months 12 months to
RECONCILIATION OF NET CASH                            to           to             to
CASH FLOW TO MOVEMENT IN NET FUNDS           31 Dec 2003  31 Dec 2002    31 Dec 2003  31 Dec 2002

(All figures GBP000s)                          unaudited    unaudited      unaudited      audited


Increase/(Decrease) in Cash and Bank

Excluding Cash at Bank Accessible

between 1 and 7 days                               (756)        (352)        (1,527)        (566)

Management of Cash at Bank
Accessible between 1 and 7 days                   11,800      (5,750)          5,550     (12,250)

Increase/(Decrease) in Cash                       11,044      (6,102)          4,023     (12,816)

Loans (Received)/Repaid                              100          222            978          662
Leases Repaid                                      1,518        1,321          2,692        2,578

Change in Funds Resulting from Cash Flows         12,662      (4,559)          7,693      (9,576)

New Finance Leases                                     0            3            (0)        (389)
New Loans Non Cash                                     0      (1,315)            (0)      (1,315)

Net Movement                                      12,662      (5,871)          7,693     (11,280)

Net Funds at Start                                 3,045       13,693          7,959       19,104
Exchange Differences Loans/Leases                     70          137            124          135

Net Funds at Close                                15,776        7,959         15,776        7,959


Analysis of Net Funds :
    Cash in Hand and at Bank                         938        2,465            938        2,465
    Cash at Bank Accessible between 1 and 7
    Days                                          20,800       15,250         20,800       15,250
                                                  

    Total Cash and Bank                           21,738       17,715         21,738       17,715

    Loans Due after One Year                     (2,451)      (3,049)        (2,451)      (3,049)
    Loans Due within One Year                      (531)      (1,035)          (531)      (1,035)
    HP/Finance Leases Due after One Year           (605)      (2,950)          (605)      (2,950)
    HP/Finance Leases Due within One Year        (2,375)      (2,722)        (2,375)      (2,722)

    Total                                         15,776        7,959         15,776        7,959



NOTES TO THE ACCOUNTS

1              ACCOUNTING POLICIES

                The financial statements are prepared in accordance with
applicable United Kingdom accounting standards.  The particular
accounting policies adopted are described below:

*              The financial information is prepared under the historical cost
convention and in accordance with United Kingdom accounting standards, which
have been applied on a consistent basis during the period under review.

*              The financial information consolidates the financial statements
of the Company and all of its subsidiaries.

                The acquisition of EPI Holdings Limited and IQE Inc (formerly
Quantum Epitaxial Designs Inc) by IQE plc, a new holding Company established for
that purpose, on 16 May 1999 has been accounted for under merger accounting
whereby the financial information is disclosed as if the companies had always
been part of the Group.     The acquisition of IQE (Europe) Limited (formerly
Epitaxial Products International Limited) and its subsidiary Epitaxial Products
Inc by EPI Holdings Limited, a new Company established for that purpose, on 27
March 1996 and the acquisition of Wafer Technology International Limited and its
subsidiary Wafer Technology Limited on 22 November 2000 have been accounted for
under acquisition accounting, whereby these companies became part of the Groupon
the date of acquisition.

*              Turnover represents amounts invoiced, exclusive of value added
tax

*              Tangible fixed assets are stated at cost less accumulated
depreciation and any provision for impairment.   Cost comprises all costs that
are directly attributable to bringing the asset into working condition for its
intended use, as defined by Financial Reporting Standard Number 15.
Depreciation has been calculated so as to write down the cost of assets to their
residual values over the following estimated useful economic lives.    No
depreciation is provided on land or assets yet to be brought into use.

                Freehold buildings                       25 years
                Short leasehold improvements             5/27 years
                Plant and machinery                      5/10 years
                Fixtures and fittings                    4/5 years
                Motor vehicles                           4 years

*              Stocks are stated at the lower of cost and net realizable value.

*              Research and development expenditure is fully written off when
incurred.

*              Transactions in foreign currencies during the period are recorded
at the rates ruling at the dates of the transactions.   Monetary assets and
liabilities in foreign currencies are translated into sterling at the rates
          ruling at the balance sheet date.   All exchange differences are taken
to the profit and loss account.   The balance sheets of IQE Inc are translated
into sterling at the closing rates of exchange for the period, while the profit
and loss accounts are translated into sterling at the average rates of exchange
for the period.   The resulting translation differences are taken direct to
reserves.

*              The Group operates defined contribution pension schemes.
Contributions are charged in the profit and loss account as they become payable
in accordance with the rules of the schemes.

*              Deferred taxation is provided in full on timing differences that
result in an obligation at the balance sheet date to pay more tax, or a right to
pay less tax, at a future date at rates expected to apply when they crystallize
based on current tax rates and law.    Timing differences arise from the
inclusion of items of income and expenditure in taxation computations in periods
different from those in which they are included in financial statements.

                Deferred tax is not provided on timing differences arising from
the revaluation of fixed assets where there is no binding contract to dispose of
those assets.  Deferred tax assets are recognized to the extent that it is
regarded as more likely than not that they will be recovered.   Deferred tax
assets and liabilities are not discounted

*              Government grants receivable in connection with expenditure on
tangible fixed assets are accounted for as deferred income, which is credited to
the profit and loss account by instalments over the expected useful economic
life of the related assets on a basis consistent with the depreciation policy.
  Revenue grants for the reimbursement of costs incurred are deducted from the
costs to which they related, in the period in which the costs are incurred.

*              Assets held under finance leases and hire purchase contracts are
capitalized at their fair value on inception of the leases and depreciated over
the shorter of the period of the lease and the estimated useful economic lives
of the assets.   The finance charges are allocated over the period of the lease
in proportion to the capital amount outstanding and are charged to the profit
and loss account.    Operating lease rentals are charged to the profit and loss
account in equal amounts over the lease term.

*    The only derivative instruments utilized by the Group are forward exchange
contracts.  The Group does not enter into speculative derivative contracts.
Forward exchange contracts are used for hedging purposes to alter the risk
profile of an existing underlying exposure of the Group in line with the Group's
risk management policies.

2    GOODWILL

On the acquisition of a business, fair values are attributed to the Group's
share of the net tangible assets acquired.  Where the cost of acquisition
exceeds the values attributable to such net assets, the difference is treated as
purchased goodwill.  The goodwill arising on the acquisition of Epitaxial
Products International Limited and its subsidiary Epitaxial Products Inc by EPI
Holdings Limited was written off directly to reserves in the year of
acquisition.   Goodwill of £284,000 remains eliminated in the profit and loss
reserve and will be charged to the profit and loss account on the subsequent
disposal of IQE (Europe) Limited (formerly Epitaxial Products International
Limited) and its subsidiary Epitaxial Products Inc.

Following the issue of Financial Reporting Standard 10, goodwill arising in
accounting periods ending on or after 23 December 1998 must be classed as an
asset on the balance sheet and amortized over its useful life.   The goodwill
arising on the acquisition of Wafer Technology International Limited and its
subsidiary Wafer Technology Limited had been capitalized and has been fully
impaired.

3   EXCEPTIONAL COSTS                                                      2003              2002

    Exceptional items comprise :

    * Fixed asset impairment                                                  0            55,931
    * Goodwill impairment                                                     0            33,411
    * Stock provisions                                                        0             2,866
    * Legal fees                                                              0             1,984
    * Restructuring costs                                                   300               702
    * Onerous lease provisions                                              528               743
    * Miscellaneous provisions                                                0               556

    * Exceptional costs                                                     828            96,193


Legal fees related to a complaint lodged by IQE (Europe) against Rockwell
Automation Technologies Inc regarding a declaratory judgment that IQE Europe's
processes did not infringe a Rockwell-owned MOCVD patent which expired on 11
January 2000 plus claims for damages related to this matter.   Rockwell
counter-claimed, alleging breaches of a licence agreement by IQE (Europe).  The
two parties settled their dispute during 2002.   Under the terms of the
settlement, IQE (Europe) paid Rockwell $500K and provided them with 300,000
shares in IQE plc in return for their agreement that neither IQE (Europe) nor
its customers had infringed the MOCVD patent.   A further $250K was paid to
Rockwell in October 2003 to be followed by a final payment of $250K during 2004.
The cost of the settlement was charged in full in the 2002 accounts.

Restructuring costs relate to the cost of staff redundancies within the Group as
part of the Group's cost reduction program.  The Group also incurred costs of
£528K (2002 : £743K) in respect of an onerous lease provision on two vacant
properties at IQE (Europe) Limited and Wafer Technology Limited.  The future
rent on those properties is now fully provided to termination of the respective
leases, the shorter of which is four years.


4   EARNINGS PER SHARE                                                        2003             2002

    Basic earnings per share is calculated by dividing the earnings
    attributable to ordinary shareholders by the weighted average
    number of ordinary shares during the period.   Diluted earnings per
    share is calculated by adjusting the weighted average number of
    ordinary shares in issue on the assumption of conversion of all
    dilutive potential ordinary shares

    Retained Loss                                                           (13,640)      (117,017)
    Goodwill and impairment                                                        0         34,302
                                                                                   -              -
    Retained Loss Excluding Goodwill
    Amortisation and Impairment                                             (13,640)       (82,715)
                                                                            
                                                                                   -              -

    Weighted Average Number of Ordinary Shares                           207,631,857    185,513,850
    Diluted Share Options                                                  1,665,548      6,768,468
                                                                                   -              -
    Adjusted Weighted Average Number of Ordinary Shares                  209,297,405    192,282,318
                                                                                   -              -

    Basic Earnings Pence/Share                                                (6.57)        (63.08)
    Basic Earnings Pence/Share excl Goodwill                                  (6.57)        (44.59)
    Diluted Earnings Pence/Share                                              (6.57)        (63.08)
    Diluted Earnings Pence/Share excl Goodwill                                (6.57)        (44.59)



FRS 14 requires the presentation of diluted EPS when a company could be called
upon to issue shares that would decrease net profit or increase net loss per
share.  For a loss making company with outstanding share options, net loss per
share would only be increased by the exercise of the out of the money options.
Since it seems inappropriate to assume that options holders would act
irrationally, no adjustment has been made to diluted EPS for out of the money
share options.

5  STATUTORY ACCOUNTS

The financial information set out in this announcement does not constitute the
Company's statutory accounts for the years ended 31 December 2003 and 31
December 2002.  The financial information for the six months ended 31 December
2003 and 31 December 2002 is unaudited.   The financial information for the year
ended 31 December 2002 is derived from the Company's statutory accounts for the
year ended 31 December 2002, which have been delivered to the Registrar of
Companies.   The auditors reported on those accounts ; their report was
unqualified and did not contain a statement under s237 (2) or (3) Companies Act
1985.

The statutory accounts for the year ended 31 December 2003 will be finalized on
the basis of the financial information presented by the Directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the Company's Annual General Meeting.






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