1st Quarter Results

IQE PLC
21 May 2003


                                  21st MAY 2003

                                    IQE plc

                            1st Quarter 2003 Results


IQE plc (IQE), the world's leading global outsource supplier of customised
epitaxial wafers to the semi-conductor industry, today announces its 1st Quarter
2003 Results for the period ended 31 March 2003.

KEY POINTS
     
•    Q1/2003 sales were £4.959m, 7% lower than the previous quarter (Q4/
     2002: £5.316m) and 13% lower than the same quarter last year (Q1/2002: 
     £5.680m).
     
•    Q1/2003 operating loss was £3.420m, 35% lower than the previous
     quarter (Q4/2002: £5.276m) and 31% lower than the same quarter last year 
     (Q4/ 2002: £4.977m) due to continued cost cutting measures and reduced 
     depreciation charges resulting from the impairment charges taken in 2002.

•    Q1/2003 operating cash outflow was £3.005m, compared with Q4/2002
     £0.966m and Q1/2002 £3.319m.

•    Q1/2003 capital expenditure was reduced to £0.070m compared with Q4/
     2002 £0.576m and Q1/2002 £1.366m.  Exceptional costs of £0.299m were also
     incurred in the quarter associated with staff reductions and restructuring.

•    Q1/2003 total cash outflow was £4.217m (Q4/2002: £2.233m) including
     repayment of £1.219m of long term borrowing.

•    Continued aggressive cost cutting measures, including a reduction of
     50 staff as previously reported and restructuring of the Group, which will 
     save approximately £2.000m per year.

•    Gross cash at the close of Q1/2003 was £13.497m (Q1/2002: £27.918m).

•    Continued progress in diversifying the Group's product ranges,
     particularly in the optical technologies area away from its traditional 
     reliance on optical communication products, should bear fruit in the 
     coming quarters.

•    Some delays in order pull through from one major customer in the
     wireless sector due to end customer design changes, otherwise continued 
     strength in the RF wireless sector.

Commenting on the results, Dr Drew Nelson, President/CEO said

'Although revenues fell slightly in Q1 due to strong pricing pressures and
seasonal effects, wafer volumes continued to rise. The results were closely in
line with those presented at the year end 2002 results, illustrating the
continued difficult trading conditions in the technology markets. The Group is
realising significant cost savings and these continuing efforts are resulting in
lower cash outflows, despite the lower levels of sales.  The Group remains
confident that it is in a strong position in the outsource market but recognises
the protection of its cash position is paramount, so management are focussed on
growing sales, continual cost savings and working capital improvements. We
expect a significantly reduced total cash outflow in Q2, including the repayment
of approximately £0.8m of long term borrowing on relatively flat sales.  The
Board continues to believe that the Group will benefit strongly as the overall
semiconductor industry recovers and will continue to strengthen its position as
the leading outsource supplier of advanced wafer products to the sector.'


For further information please contact :


IQE plc                                                       [phone]
Drew Nelson, (President/CEO)
Tim Hawkes (Acting CFO)
Chris Meadows (Investor Relations)
Leslie Coventry (Company Secretary)

Buchanan Communications                                        [phone]
Tim Thomson/Nicola Cronk


FIRST QUARTER 2003 RESULTS

INTRODUCTION

Group sales appear to have stabilised at around the current levels, with price
declines being offset by higher volumes.  In contrast, a number of other
companies in our sector have continued to experience continued significant sales
declines. We believe this is as a result of the Group increasing its share of
the outsource wafer market. We are also encouraged by the number of customers
who are indicating strongly their desire to increase outsourcing as the market
returns.

Following our earlier initiatives, actions were taken which are now bearing
fruit and these are resulting in significant cost reductions, reduced cash
outflows moving forward and a stronger competitive position. As the market
recovers, the Board continues to believe that IQE is in a strong position to be
a major beneficiary.

RESULTS

Q1/2003 sales were £4.959m, a 7% reduction on Q4/2002 due to normal Q1 seasonal
effects and 13% down on  Q1/2002 mainly due to the change in US$ exchange rate,
with reductions in the telecom opto market being compensated for by the
strengthening electronics/wireless market.

The gross margin for Q1/2003 was -20% compared with -44% in Q4/2002 excluding
exceptional, non-recurring costs and -21% in Q1/2002 as a result of reduced
depreciation charges, ongoing reductions in labour costs and improvements in
operating efficiencies. The negative gross margin continues to reflect a high
(but continually reducing) proportion of the production overhead costs being
largely fixed in nature. This should improve further in Q2/2003 when the impact
of the Q1/2003 headcount reductions is realised.

Q1/2003 research and development costs were £0.659m, representing 13% of sales
(Q4/2002: £0.811m, 15%).  Development is now being focussed mainly on the InGaP
HBT product for the wireless market, where short-medium term returns can be
expected as qualification with a number of customers is well underway, as well
as high power lasers for industrial applications, optical storage (DVD and CD)
and LED products. All research and development expenditure was expensed in the
quarter.

Q1/2003 SG&A costs were £1.764m, an 18% reduction on Q4/2002 and 33% down on Q1/
2002, reflecting substantial cost cutting and restructuring measures taken
throughout the Group.

As a result of the above, the Group incurred a Q1/2003 operating loss before
exceptional items (restructuring costs) and non-recurring charges of £3.420m
compared with operating losses of £5.276m in Q4/2002 and £4.977m in Q1/2002. The
restructuring costs related to the reduction in headcount, mainly in IQE Europe,
which reduced the Group headcount from 310 to 260, the beneficial impact of
which will be realised in Q2/2003.  After charging net interest costs of £0.082m
and exceptional items of £0.299m, the pre tax loss for the quarter was £3.801m.

Q1/2003 capital expenditure fell to £0.070m, well below both the previous
quarter (Q4/2002: £0.576m) and the same quarter last year (Q1/2002: £1.366m).
Future capex is likely to be minimal, as the major upgrade to the operations is
complete and only maintenance capex is now required.  Q1/2003 cash outflow from
operations was £3.005m (£2.706m before restructuring costs of £0.299m), down
from £3.319m in Q1/2002 on 13% lower sales but up from £0.966m in Q4/2002.  Q4/
2002 benefited substantially from a working capital improvement of £2.118m and a
grant release of £0.420m. Total cash outflow for Q1/2003 was £4.217m, which
included repayment of £1.219m of long term borrowings.

Gross cash reduced to £13.497m from £17.715m at last year end.

OPERATIONS

The Group is continuing to increase its market share and feedback from customers
on the Group's broad product range and large production capability has been
positive.

IQE Inc has continued to see improving conditions in its wireless business as
customer inventories have now been largely worked through and demand for
handsets and infrastructure components is improving, one exception being a
significant contract which has been delayed due to a specification change in the
final model.  However, this should resume within the next two quarters.
Internal programmes to extend efficiency improvements and achieve cost
reductions are continuing successfully, enabling the variable costs of
production to be maintained as a percentage of the sales price, a critical
achievement as the industry is experiencing significant price reduction
pressures.

Optical storage related components and High Efficiency LED market segments
remain relatively buoyant, and IQE Europe has been successfully qualifying with
Far East OEM DVD suppliers. In addition, IQE Europe's InGaP HBT product is
proving to be highly reliable and offers enhanced performance over competitors'
products. A new high power laser product is also under development and is in
qualification with key tier 1 customers. The Group is currently transitioning
products and technologies into these areas, both in the epitaxy and substrate
divisions, which should help to raise margins in future quarters as they are
brought into production.

Wafer Technology has seen a strengthening in demand for GaAs substrates for LED
applications albeit offset to some extent by price erosion.  The Company's range
of narrow gap materials for longer wavelength IR applications has also continued
to be well-received to the extent that steps have been initiated to bring
additional capacity on line during the quarter.  These developments, coupled
with close management of costs and inventories, has enabled the Company to
outperform the rest of the industry in continuing to trade at close to
cash-breakeven for the period.

IQE Silicon Compounds continues to develop the strained silicon product family
and supply other more standard silicon products to the wider market.

TRADING PROSPECTS

The outlook for the remainder of 2003 continues to look very challenging, with
increasing wafer volumes offset to some extent by a tight pricing environment.
As a result, sales are not expected to increase rapidly. However, the Group has
achieved a number of operational efficiencies, which have enabled IQE to offer
customers attractive pricing and to gain market share without prejudicing the
financial position of the business.

To summarise:
     
•    We have made significant cost savings, whilst ensuring that the Group is 
     well positioned to respond rapidly to increased sales demands.

•    We have substantially reduced SG&A costs.

•    We have continued to invest in new product development, with the main focus 
     on products offering short to medium term paybacks.

•    Our planned capacity expansion has been completed and we are capable of 
     producing up to £120m sales revenue through investment in the purchase, 
     installation and run-up of significant capital assets.  As the Group
     continues to increase market share, incremental sales will have a 
     significant positive impact on profitability and cash position.

•    The Board remains confident that IQE is in a strong position within the 
     outsourcing market as a 'one stop shop' advanced wafer supplier. With a 
     large available production capacity and the necessary capital resources, 
     the Board believes the Group will benefit strongly as the overall
     semiconductor industry recovers and will continue to strengthen its 
     position as the leading outsource supplier of advanced wafer products to 
     the sector.

•    We realise the protection of our cash position is paramount.  We are 
     focussed both on continual cost-savings and working capital reductions 
     along with increasing sales and reviewing strategic relationships that 
     could benefit the Group.

Dr Drew Nelson
President and Chief Executive Officer
IQE plc


  ACCOUNTS FOR 3 MONTHS TO 31 MARCH 2003                                                                              
                                                                              3 months to   3 months to   12 months to
  PROFIT AND LOSS ACCOUNT                                              Note   31 Mar 2003   31 Mar 2002    31 Dec 2002

  (All figures GBP000s)                                                                                               

  Turnover                                                                          4,959         5,680         22,960
  Cost of Sales                                                                   (5,956)       (6,895)       (90,579)

  Gross Profit/(Loss)                                                               (997)       (1,215)       (67,619)
  Gross Profit/(Loss) %                                                            (20.1)        (21.4)        (294.5)

  S G and A Costs including Distribution :                                                                            
      Research/Development                                                          (659)       (1,142)        (3,210)
      Selling/General/Administration                                              (1,764)       (2,620)       (10,401)

  Operating Profit/(Loss) before Goodwill/Exceptionals                            (3,420)       (4,977)       (81,230)
  Operating Profit/(Loss) % before Goodwill/Exceptionals                           (69.0)        (87.6)        (353.8)

  Goodwill Written off                                                    2           (0)         (437)       (34,302)
  Exceptional Items                                                       3         (299)         (345)        (2,686)

  Operating Profit/(Loss) after Goodwill/Exceptionals                             (3,720)       (5,759)      (118,218)
  Operating Profit/(Loss) % after Goodwill/Exceptionals                            (75.0)       (101.4)        (514.9)

  Interest Received/(Paid)                                                           (82)          (12)           (16)

  Net Profit/(Loss) before Taxes                                                  (3,801)       (5,771)      (118,234)
  Net Profit/(Loss) %                                                              (76.7)       (101.6)        (515.0)

  Current Taxes                                                                       (0)           (0)              0
  Deferred Taxes                                                                      (0)           (0)          1,217
  Dividends                                                                           (0)           (0)              0

  Net Profit/(Loss) after Taxes                                                   (3,801)       (5,771)      (117,017)


  Basic Earnings Pence/Share                                                       (2.05)        (3.13)        (63.08)
  Basic Earnings Pence/Share excl Goodwill                                         (2.05)        (2.90)        (44.59)
  Diluted Earnings Pence/Share                                            4        (2.05)        (3.13)        (63.08)
  Diluted Earnings Pence/Share excl Goodwill                              4        (2.05)        (2.90)        (44.59)

  Net Profit/(Loss) before Interest/ Taxes/Depreciation and                                                           
  Amortization                                                                                                        
  (EBITDA)                                                                        (3,187)       (3,396)       (19,537)
 

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

  (All figures GBP000s)                                                                                               

  Fixed Assets :                                                                                                      
    Intangible Fixed Assets                                                            0        33,866             0
    Tangible Fixed Assets                                                         13,514        74,772        13,862
    Investment in Own Shares                                                          14             3             9
    Capitalized Research and                                                           0             0             0
    Development                                                                  
    Total Fixed Assets                                                            13,528       108,640        13,871

  Current Assets :                                                                                                    
    Stocks                                                                         4,774        10,644         4,988
    Debtors                                                                        3,687         6,589         3,721
    Cash and Bank                                                                 13,497        27,918        17,715
    Total Current Assets                                                          21,958        45,150        26,424

  Creditors Falling Due within One Year                                          (11,302)       (9,404)      (11,908)

  Net Current Assets                                                              10,655        35,746        14,516

  Total Assets less Current Liabilities                                           24,184       144,386        28,387

  Creditors Falling Due after One Year :                                                                              
    Deferred Income                                                                (452)         (141)         (452)
    Long Term Borrowings                                                         (5,333)       (7,773)       (5,999)

  Provision for Liabilities and Charges :                                                                             
    Deferred Taxes                                                                   (0)       (1,215)             0

  Net Assets                                                                      18,398       135,256        21,936

  Capital and Reserves :                                                                                              
    Called Up Share Capital                                                        1,880         1,851         1,871
    Merger Reserve                                                                 (605)         (605)         (605)
    Share Premium Account                                                        140,464       140,162       140,328
    Shares to be Issued                                                              147             3           133
    Retained Earnings                                                          (123,309)       (8,261)     (119,507)
    Other Reserves                                                                 (179)         2,108         (284)

  Total Equity Shareholders' Funds                                                18,398       135,256        21,936
                                                                                                     
The financial statements were approved by the Directors of IQE plc on 20 May 
2003 
                                                                                                                      
                                                                              3 months to   3 months to   12 months to
  CASH FLOW STATEMENT                                                         31 Mar 2003   31 Mar 2002    31 Dec 2002

  (All figures GBP000s)                                                                                               

  Net Inflow/(Outflow) from Operations                                            (3,005)       (3,319)        (8,995)

  Returns on Investment and Servicing Finance :                                                                       
    Interest Received/(Paid)                                                         (82)          (12)           (16)

  Capital Expenditures :                                                                                              
    Purchases of Fixed Assets less                                                   (70)       (1,366)        (3,765)
    Leases Received                                                              
    Payments to Acquire Investments                                                     0             0              0
    in Subsidiaries                                                                             
    Capitalized Development Costs                                                     (0)           (0)              0

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

  Net Inflow/(Outflow) before Financing                                           (3,156)       (4,698)       (12,843)

  Financing :                                                                                                         
    Issues of Ordinary Share Capital                                                  158         2,950          3,267
    Loans Received/(Repaid)                                                         (625)         (258)          (662)
    Leases (Repaid)                                                                 (594)         (609)        (2,578)

  Net Inflow/(Outflow) from Financing                                             (1,061)         2,083             27

  Increase/(Decrease) in Cash and                                                                                     
  Bank Overdrafts                                                                 (4,217)       (2,614)       (12,816)
 

                                                                                                                   
  RECONCILIATION OF PROFIT TO CASH INFLOW/(OUTFLOW) FROM OPERATIONS           3 months to   3 months to   12 months to
                                                                              31 Mar 2003   31 Mar 2002    31 Dec 2002
  (All figures GBP000s)                                                                                        

  Operating Profit after Goodwill/Exceptionals                                    (3,720)       (5,759)      (118,218)

  Depreciation Charged                                                                532         1,926         64,379
  Goodwill Written off                                                                  0           437         34,302
  (Increase)/Decrease in Stocks                                                       214         1,633          7,289
  (Increase)/Decrease in Debtors                                                       34           906          3,774
  Increase/(Decrease) in Creditors                                                   (66)       (2,431)          (800)
  Grants Released                                                                       0          (32)          (141)
  Grants Received                                                                       0             0            420

  Net Cash Inflow/(Outflow) from Operations                                       (3,005)       (3,319)        (8,995)
                                                                                                                        
    
  RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS                    3 months to   3 months to   12 months to
                                                                              31 Mar 2003   31 Mar 2002    31 Dec 2002
  (All figures GBP000s)                                                                                               

  Increase/(Decrease) in Cash                                                     (4,217)       (2,614)       (12,816)

  Loans (Received)/Repaid                                                             625           258            662
  Leases Repaid                                                                       594           609          2,578

  Change in Funds Resulting from Cash Flows                                       (2,998)       (1,747)        (9,576)

  New Finance Leases                                                                  (0)         (376)          (389)
  New Loans Non Cash                                                                  (0)           (0)        (1,315)

  Net Movement                                                                    (2,998)       (2,123)       (11,280)
  Net Funds at Start                                                                7,959        19,104         19,104
  Exchange Differences                                                               (28)            19            135

  Net Funds at Close                                                                4,932        17,000          7,959

  Analysis of Net Funds :                                                                                             
    Cash and Bank                                                                  13,497        27,918         17,715
    Loans Due after One Year                                                      (2,936)       (2,640)        (3,049)
    Loans Due within One Year                                                       (551)         (656)        (1,035)
    HP/Finance Leases Due after                                                   (2,421)       (5,132)        (2,950)
    One Year                                                                  
    HP/Finance Leases Due within One Year                                         (2,657)       (2,490)        (2,722)
                                                                                                             
    Total                                                                           4,932        17,000          7,959


NOTES TO THE ACCOUNTS

1    BASIS OF PREPARATION
     
     The financial information is prepared under the historical cost convention 
     and in accordance with applicable accounting standards, which have been 
     applied on a consistent basis during the period under review.   The 
     particular accounting policies adopted are described below:

*    Turnover represents amounts invoiced, exclusive of value added tax
     
*    Tangible fixed assets are stated at cost less accumulated depreciation and 
     any provisions 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 in the course of 
     construction, or on assets in periods of non-use where no physical or 
     technological deterioration occurs and the remaining useful economic life 
     is extended by the period of non-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

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

*    Stocks are stated at the lower of cost and net realizable value.
     
*    Research and development expenditure is fully written off when incurred
     except where contracts of sufficient value exist or are likely to exist in 
     the foreseeable future, in which case it is written off over a two year 
     period commencing with the start of the contracts to which the costs 
     relate.

*    Transactions in foreign currencies during the period are recorded in
     sterling 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
     
     The goodwill arising on the acquisition of Wafer Technology International 
     Limited and its subsidiary Wafer Technology Limited had been capitalized 
     and was being amortized over its useful life, which was considered by the 
     Directors to be 20 years.  However, the Directors carried out an
     evaluation of the investment during 2002 and, in the light of current 
     market conditions, considered that no goodwill existed.  Accordingly, the 
     remaining value of goodwill was written off in full in the 2002 accounts.

3    EXCEPTIONAL ITEMS                                    2003           2002

     Exceptional items comprise :

     Restructuring costs                                 £299K            £0K
     Legal fees                                            £0K          £345K

     Restructuring costs relate to the cost of staff redundancies within the
     Group as part of the Group's cost reduction program.

     Legal fees related to a complaint lodged by IQE (Europe) against Rockwell 
     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 will be paid to 
     Rockwell during 2003 followed by a final payment of $250K during 2004.  The 
     cost of the settlement was charged in full in the 2002 accounts

4    EARNINGS PER SHARE
     
     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.


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