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IQE Share Price Fell 3.26% Despite a Landmark Agreement. So What’s Next for the Company?

Updated: 13 Oct 2021

IQE plc (LON: IQE) share price fell 3.26% despite unveiling a landmark partnership agreement with Critical Manufacturing yesterday to a muted response from investors.

Investors seemed unimpressed by the agreement to see Critical Manufacturing deliver a Manufacturing Execution System (MES).

The MES will help IQE better respond to customer needs, maintain its position as a leading wafer manufacturer, and create consistency across its global operations.

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The question on most investors minds is what will move the needle for IQE to turn around its fortunes as it lags other leading manufacturers such as Taiwan Semiconductors (TSM).

One of the critical concerns raised by investors over the years is IQE’s inability to increase its margins to align with industry standards as it has lower margins, which negatively affects its profitability.

IQE has taken tangible steps to cut its operations costs, as seen in the recent move to close its Singapore manufacturing site as part of more comprehensive cost-saving measures.

The recent partnership with Critical Manufacturing is another step in the right direction. The new MES will see IQE replace legacy manufacturing systems with automated systems to drive manufacturing efficiencies and standardisation globally.

The MES transformation is set to run from Q4 2021 to 2024. Over this period, IQE will have transformed its operations to become more competitive globally, which should hopefully result in wider operating margins.

According to most investors, IQE’s loss-making operations in the face of increased global demand for semiconductor wafers is concerning, given that it should typically translate into higher operating profits.

The company has set aside £20-30 million to fund capital projects as it seeks to expand its wafer manufacturing capabilities, which is why the partnership with Critical Manufacturing is such a crucial step given the scale of its capital investments.

IQE shares are trading near the 43p support level that has held since June 2020, which, if broken, would lead to the 37.75p support level further down the chart and then to the 31.35p support level.

However, if any support level holds and buyers step in to push prices higher, a rally could ensue.

*This is not investment advice.

IQE share price.

IG chart of IQE share price 13-10-2021

IQE shares dropped 3.26% to trade at 43.66p, falling from Tuesday’s closing price of 45.13p.

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