Agreement/Placing&Open Offer

IQE PLC
14 November 2001


NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN THE USA, CANADA, AUSTRALIA OR
JAPAN


Embargoed until 07:00hrs, Wednesday 14th November 2001


IQE plc (IQE) 'The Company'



  IQE Announces Major Agreements with Motorola to Commercialise Breakthrough
                           Semiconductor Technology



IQE Granted Licensing Agreements for Wafer Supply using Breakthrough
Semiconductor Technology


Motorola to make equity investment of $10 million and be granted warrants to
subscribe for $10 million, supported by £14,000,000 Equity Drawdown Facility
to provide funding for exploitation of new Technology


Placing and Open Offer to existing shareholders to raise up to approximately 
£ 20 million,



INTRODUCTION

IQE plc (LSE : IQE.L) the world's largest outsource manufacturer of specialist
epitaxial wafers and services, today announced that it has signed a series of
agreements with Motorola, including  a licensing agreement for the manufacture
of a breakthrough semiconductor Technology employing gallium arsenide on
silicon substrates (the Technology), which includes a limited period of
exclusivity for wafers up to 6 inch in diameter.



BACKGROUND

IQE has for the past 12 months, been closely involved with Motorola Inc (NYSE
: MOT) in Motorola's development of this new Technology that combines the best
properties of workhorse silicon with the speed and optical capabilities of
high-performance compound semiconductors known as III-V materials. IQE plans
to begin supplying evaluation wafers, under a further agreement, to potential
customers in the first half of 2002.  This Evaluation Program is intended to
accelerate the learning curve for the industry on this Breakthrough
Technology. It will enable potential customers to assess the Technology and
gather their own information as a pre-cursor to target new designs, re-map
existing products and explore other new options. Under the Customer Evaluation
Agreement, IQE will be allowed to enter into evaluation programmes with
customers of IQE and Motorola.  



OPPORTUNITIES

 The new Technology is expected to open the door to significantly less
expensive optical communications, high-frequency radio devices and high-speed
microprocessor-based subsystems by potentially eliminating the current cost
barriers holding back many advanced applications. For consumers, the
Technology should result in smarter electronic products that cost less,
perform better and have exciting new features. The Technology  may change the
economics and accelerate the development of new applications, such as
broadband 'fiber' cable to the home, streaming video to cell phones and
automotive collision avoidance systems.



Until now, there has been no way to combine light-emitting semiconductors with
silicon integrated circuits on a single chip, and the need to use discrete
components has compromised the cost, size, speed and efficiency of high-speed
communications equipment and devices.



'The implications for high-speed electronics in general and optoelectronics in
particular are profound and far-reaching, for everything from cell phones to
computers to optical networking equipment,' said Richard Cunningham, Senior
Analyst, Cahners In-Stat Group.



Since the initial announcement in September 2001, Motorola Labs has continued
to improve the Technology and, with IQE, the manufacturing processes,
including the quality and uniformity of material across large wafers



'In light of the Motorola Labs discovery, we're busy rethinking everything we
know about everything -- from ultra wide band links to the integration of
optical sensing and processing to free space optics,' said David J. Brady,
Director of the Fitzpatrick Center for Photonics and Communication Systems and
Professor of Electrical and Computer Engineering at Duke University.



The discovery also specifically impacts the semiconductor industry by its
potential for:

*         increasing substrate size, reducing substrate cost and processing
costs for III-V manufacturing;

*         integrating the superior electrical and optical performance of III-V
semiconductors with mature silicon Technology to create a new industry based
on Integrated Semiconductor Circuits;

*         extending the life of silicon and existing capital investments;

*         improving cost effectiveness for higher performance applications
such as optical communications;

*         enabling larger scales of integration



Motorola, who have filed more than 280 patent applications on inventions
related to this new Technology, also announced today that it has created a
wholly owned subsidiary, Thoughtbeam, Inc., to commercialize the  compound
semiconductor on silicon Technology.  Thoughtbeam launches operations with a
strong management team led by Padmasree Warrior, corporate vice president,
Motorola Inc., as the general manager.  Warrior was previously chief
technology officer and director of the 1100 member central R&D organization
for Motorola Semiconductor Products Sector.



'This Breakthrough Semiconductor Technology has the potential to benefit
multiple industries, from semiconductors to communications to optoelectronics,
and we plan to license it broadly,' said Warrior.  'The next step is to ensure
that a supply of GaAs on silicon wafers is made available to potential
customers for their internal evaluation. So, in addition to the commercial
license, we have also now authorized IQE to produce and supply GaAs on silicon
evaluation wafers for our Evaluation Program.'



Initially, IQE will manufacture GaAs on silicon wafers for customer evaluation
purposes before rolling out to full scale manufacturing.



'We have been working with IQE for nearly a year now, and we are impressed
with their capabilities and market strength.  We are excited to expand our
relationship,' said Warrior.



The two Companies have also entered into a separate Services and Cooperation
Agreement through which Motorola will purchase development services from IQE.



'We are delighted that an established global force such as Motorola with its
strong history in innovative technologies has chosen to partner so closely
with IQE.' Said Dr Drew Nelson, Chairman and CEO of IQE. 'I believe the move
endorses our outsourcing business model whilst recognizing our unparalleled
expertise in compound semiconductor materials development and manufacturing
fields. We look forward to a continued and expanded relationship with
Motorola.'



EQUITY INVESTMENTS

In order to support IQE's efforts to commercialize the Technology and subject
to customary regulatory and other approvals, Motorola has committed to
subscribe for 4,428,620 new Ordinary Shares at a price of 155p per share,
representing an aggregate subscription of $10 million. In addition, Motorola
will be granted warrants at the subscription price to subscribe a further $10
million over the next 5 years. The warrant price, subject to certain
conditions, will escalate at a maximum of 5% per annum.



In order to secure the investment from Motorola and to ensure funding is
available to rapidly exploit opportunities presented by the licensing
agreements, a £14 Million equity drawdown facility has been set up with two
institutional investors ('The Equity Providers'). The Equity Providers will
make available to the Company an equity draw down facility of up to £ 
14,000,000. This, subject to certain restrictions, can be drawn down at the
Company's discretion by the Company issuing Ordinary Shares to the Equity
Providers in return for funds over the next 3 years. The price to be paid by
the Equity Providers for the new Ordinary Shares to be issued will be 93 per
cent of a price calculated over a period of time following notice of exercise
of the Company's drawdown option.



In addition, the Equity Providers will be granted 2,000,000 share warrants
entitling them to subscribe in whole or in part at any time during the period
of 3 years from the date of Completion. The price for the Equity Providers
share warrants will be 178.25p per warrant share.



In conjunction with the conditional agreements referred to above, the Company
proposes to raise up to approximately £20,000,000 by means of an Open Offer of
13,152,247 new Ordinary Shares at 155p per share (the same price per share as
Motorola). Under the terms of the Open Offer, Qualifying Shareholders may
subscribe for Offer Shares on the basis of 2 new Ordinary Shares for every 25
Ordinary Shares held at close of business on the Record Date. Any offer shares
not taken up by Qualifying Shareholders may be placed by Beeson Gregory, as
agent for the Company, for the benefit of the Company at the Placing Price.
The Open Offer has been arranged in order to allow existing shareholders of
IQE to participate in these exciting developments without being greatly
diluted by the raising of the additional financing.  The Directors of IQE do
not anticipate having to use the equity drawdown facility in the foreseeable
future if the Open Offer and Placing are successful.




About IQE

IQE plc (LSE: IQE.L, NASDAQ EUROPE: IQEP) is the leading global outsource
supplier of advanced epi-wafers to the Semiconductor Industry with
manufacturing operations in Cardiff and Milton Keynes, UK and Bethlehem, PA,
USA. Its wafer products are used by a diverse range of customers worldwide to
manufacture the critical, advanced components used in fibre optic
communications systems, wireless and mobile telephony applications, optical
storage devices such as CD, DVD, Minidisc and a range of other leading edge
technologies including High Brightness LED displays, medical devices,
satellite systems and automotive applications. The group has expanded to over
450 people worldwide.



About Motorola

Motorola, Inc. (NYSE:MOT) is a global leader in providing integrated
communications and embedded electronic solutions.  Sales in 2000 were $37.6
billion. Motorola Labs serves as the advanced research arm of the company,
focusing on leading edge technologies for future products and product
enhancements. Motorola also actively licenses technologies developed in the
Labs to external customers.



Business Risks: Statements about the impact of this new Technology are
forward-looking and are based on current expectations that involve risk and
uncertainties.  Factors that could cause actual results to differ materially
from those in the forward-looking statements include: market acceptance of the
Technology; success in expanding Technology to other materials; unanticipated
technological delays; competing technologies; the cost of manufacturing the
Technology; and other factors found in Motorola's filings with the Securities
and Exchange Commission.



Media Contacts:

Chris Meadows

IQE plc

Tel: [phone]

Fax: [phone]

[e-mail]



Tim Thompson / Nicola Cronk

Buchanan Communications

Tel:[phone]

[e-mail]



This press release has been approved as an investment advertisement for the
purposes of Section 57 of the Financial Services Act 1986 by Beeson Gregory
Limited ('Beeson Gregory').  Beeson Gregory, which is regulated by the
Securities and Futures Authority Limited, is acting for IQE plc and no one
else in connection with the matters referred to in this press release and will
not be responsible to anyone other than IQE plc for providing the protections
afforded to customers of Beeson Gregory or for providing financial advice in
relation to the matters referred to in this press release.

This press release is for information purposes only.  This press release does
not constitute an offer to sell or issue or to the solicitation of an offer to
buy or acquire securities in the United States of America, Canada, Japan,
Australia or any jurisdiction in which such an offer or solicitation is
unlawful.  The making of an offer in or to residents or citizens in certain
jurisdictions may be restricted by the laws of the relevant jurisdiction and
overseas persons should inform themselves about and observe any such
applicable legal requirements of their respective jurisdictions.

The securities the subject of the placing and open offer of IQE plc have not
been marketed and will not be available in whole or in part to the public and
will not be registered under the securities laws of any other jurisdiction.
Such securities have not and will not be registered under the US Securities
Act of 1933 and may not be offered or sold in the United States of America
unless pursuant to an applicable exemption.

Neither this press release nor any part of it may be released, mailed,
transmitted, copied, distributed, taken or otherwise sent in or into the
United States of America, Canada, Australia or Japan.  Any failure to comply
with these restrictions may constitute a violation of United States of
America, Canada, Australia or Japanese securities laws.





There will be an analysts briefing today, 14 November, at 10.00 am at Buchanan
Communications, 107 Cheapside, London, EC2 followed by a press briefing at
11.30 am.  The Company will represented  by Drew Nelson, Chief  Executive and
Richard Clarke, Finance Director.