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IQE (LSE:IQE), the world’s leading supplier of semiconductor wafers, saw its share price surge today following its announcement that it will be taking over the manufacturing facilities of RF Micro Devices (RFMD) located in Greensboro, North Carolina, USA. The value of the stock had increased by 12.63% to 26.75p
The Agreement
RF Micro Devices is a major manufacturer of high performance radio frequency components and compound semiconductors and a leading supplier of those products to communication equipment providers worldwide. RFMD will be transferring its molecular beam epitaxy (MBE) wafer growth manufacturing to IQE. RFMD has already been outsourcing its is metal-organic chemical vapor disposition (MOCVD) process. This agreement will complete the RFMD outsourcing plan for its wafer growing processes. Under the terms of the agreement, RFMD will transfer assets valued at nearly $27 million (£17.44 million) and 70 employees to IQE. IQE shareholders especially favour the deal because the company has entered in a seven year, $55 million (£35.53 million) supply agreement with RFMD in lieu of any upfront cash settlement. This strategy prevents dilution of IQE shares and ensures ongoing cooperation between the two companies. In return for the supply agreement IQE will receive a 135,000 sq.ft. stand-alone building in Greensboro, North Carolina, equipped with 16 MBE production systems and a fully operational, 90,000 sq.ft. clean room contained within the larger facility. IQE also gains enough unutilized space in the facility to set up manufacturing to support an additional $35 million (£22.61 million) in annual sales of manufactured CPV Solar products to Solar Junction, with whom it signed a supply agreement in early 2012. Capturing the unutilized space under the agreement with RFMD significantly reduces the need for upfront capex by IQE to meet the increased Solar Junction requirements.
Corporate Comments
RFMD President & CEO Bob Bruggeworth said that “We expect this transaction will provide RFMD with lower MBE and MOCVD pricing, higher return on invested capital (ROIC), and more predictable operating results. This is a mutually beneficial transaction for both RFMD and IQE.” IQE’s President & CEO, Drew Nelson added that “This landmark agreement with RFMD, one of the true global leaders in the wireless semiconductor industry, provides us with a significant step up in our manufacturing capacity, bringing substantial financial and scale benefits. This is a clear win-win for both organizations.”
Company Spotlight
IQE is the leading supplier of advanced semiconductor wafers in the world. IQE manufactures the wafers using the all of the leading crystal growth systems. The wafers are then sold to semiconductor companies who cut the wafers into the chips that are the core element in semiconductor production. Because the process of producing silicon wafers is expensive, precise, and time-consuming, many semiconductor companies who used to manufacture wafers are now outsourcing, which, of course, is a boon to IQE and its growth and expertise in the field.
References
↑ NASDAQ
↑ Semiconductor Today
↑ Official Company Information
