IQE shares moved sharply higher after the British chipmaker told investors that cost cutting efforts had helped lift profits ahead of expectations.

The Cardiff-based firm, which makes epi-wafers for use in laser hair removal and facial recognition sensors in iPhones, has seen trade hampered by weakness in global semiconductor demand.

But IQE said on Thursday it had confronted 'macro headwinds' with 'focused cost control and improved operational performance'.

The group now expects to post revenues of £118million and adjusted earnings before nasties of £7.5million for 2024, ahead of market consensus of £115million and £5million, respectively.

IQE shares were up 7.3 per cent to 13.26p in early trading, having lost roughly 37 per cent over the last 12 months and almost 75 per cent over the last five years. 

IQE launched a strategic review of its assets in November as part of efforts to bolster its capital position, amid 'slower than anticipated recovery in key sectors driven by weak consumer demand in end markets'.

The review includes a broadening of the proposed initial public offering of its Taiwan operations to include 'all strategic options', including a full sale - rather than the minority stake it would have retained under previous plans.

The group boasts a market capitalisation shy of £120million and bosses believe there is significant value in IQE not currently reflected in its share price.

It follows the sudden departure of chief executive Americo Lemos in October.

IQE told investors on Thursday it had been encouraged by 'positive levels of interest' from partners, and 'the broader recognition that the group is a technical leader across a variety of strategically important vertical markets, with a well-invested asset base'.

IQE is also in 'the final stages' of concluding a proposed convertible loan note.

Boss Mark Cubitt said the proposed financing will provide IQE 'with greater resilience as we continue to strengthen key customer relationships and expand further into emerging high growth areas'.

He added: 'Amid ongoing macro headwinds, [interim chief executive Jutta Meier] and the leadership team have taken effective action to refocus the group on its core strengths and improve operational performance, resulting in an encouraging financial picture.'

IQE set for AI boost to smartphone demand

The global semiconductor industry typically goes through relatively short cycles of rising and falling demand.

Booming use of the wafers led to an unprecedented shortages in 2021 and 2022, before a combination of rising inflation, geopolitical tensions and a pandemic hangover led to an industry slump in 2023.

Last year showed improvement, with global semiconductor sales up 15.2 per cent year-on-year in January 2024, but the recovery proved 'uneven'. 

Going forward analysts at Peel Hunt warned 'the great 'unknown' for IQE and the broader industry is 'the ongoing tariff war' and export controls brought in by the Chinese government.

But Peel Hunt said on Thursday the demand picture should improve for IQE.

'While much of the industry bellwether TSMC's buzz is on AI, its management also expects smartphones to be boosted in the coming periods via AI-driven shortening of upgrade cycles; and an AI-related increase in semis content,' it said.

'We believe this bodes well for IQE on the other side of the current cyclical downturn.'