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The semiconductor market is looking hotter than ever as we move into 2021, so no surprise to us to see shares in IQE (LON:IQE) are on a roll this morning.

The semiconductor wafer products manufacturer says it expects 2020 revenues of £178m compared to £140m in 2019. This is consistent with previous guidance and represents 25% year on year growth.

This is a very different story from a year ago when IQE reported a 2019 operating loss on falling sales, a reduced gross margin and increased central costs. The management team was sounding fairly positive in Q1 2020, despite the onset of the pandemic, and it now looks as if that optimism has been justified.

Shares in IQE seem to be on a roll

Shares in IQE had bottomed out at 20.06 in March and have since had an amzing run, but recent share price action has been even more positive. Taking a look at just the past week, IQE shares have climbed higher from 75.75 to trading at around 88 at time of writing. We saw some heavy buying of the stock during UK trading hours on Wednesday.

We are seeing some really interesting moves in the semiconductor market at the moment, which bear further scrutiny. Dutch chipmaker ASML (AS:ASML) said this week it was raising its dividend and launching a €6bn share buyback. It also posted a solid profit rise along with higher revenues in Q4 of 2020. Apart from gains in ASML stock this week, German semiconductor manufacturer Dialog Seminconductor (DE:DLGS) was also up.

The global chip market is on a bull run and investors would be sensible to get some level of exposure in this sector. Gartner had said going into the pandemic that the semiconductor market was going to have a tough year in 2020: it grew by 7.3%.

Massive demand for new servers and PCs

Part of the growth is coming from the demand for new servers. You will recall all the bullish predictions of technology fund managers about the Internet of Things? Much of that will have to be fuelled by building more servers. And more servers require more chips. More people are also buying PCs as they face up to the prospect of studying from home.

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Globally, semiconductor sales are booming. According to the Semiconductor Industry Association in Washington DC, annual sales tracked in 2020 well ahead of 2019 sales. European sales were more disappointing compared with the Americas, for example, which saw year on year growth of +12.5%.

Advanced wafer products manufacturer

Founded in Cardiff in 1988, IQE focuses on advanced wafer products for the semiconductor market. It has one of the broadest portfolios of materials IP in the industry and a unique platform for a secure, low cost supply. It has a great market position in the market for compound semiconductor materials. The sheer breadth of its IP makes it a one stop shop for its products at a time when the market is looking for multiple materials solutions to meet diverse needs.

IQE looks like it should justify the enthusiasm for its shares at the moment – the recent gains have been magnificent, so watch out for some near term profit taking. But the stock does look like it has plenty of momentum and is being lifted by some significant macro trends across the entire semiconductor market.


Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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