November 18, 2019 / 7:57 AM / 24 days ago

UPDATE 2-IQE shares plunge as UK tech firm hit by trade turmoil

* Sees adjusted operating loss in 2019

* Trims annual revenue, capex guidance

* Sees weak Q1 2020

* Shares plunge around 25% (Adds analyst, details, background, shares)

By Yadarisa Shabong

Nov 18 (Reuters) - Shares in IQE Plc plunged around a quarter in value on Monday after the British technology company warned it would sink to an operating loss this year following a second cut to revenue expectations in five months.

IQE, which makes semiconductor wafers for chips used in Apple Inc products and also manufactures for Asian customers in Taiwan and Singapore, has been hit by Sino-U.S. trade tensions that have roiled the chipmaking industry.

The Cardiff-based company had said in June it would miss its 2019 revenue forecast due to a bigger-than-expected hit on the industry’s supply chain from U.S. restrictions on China’s Huawei .

“IQE has experienced very challenging market conditions in 2019. Shortfalls in revenue relate predominantly to two major customers,” the company said in a statement, without identifying the customers.

IQE now expects revenue this year of 136-142 million pounds ($174-$182 million), down from 140-160 million pounds previously, as its wireless unit struggles with low volumes of orders. Its revenue was 156.3 million pounds in 2018.

Consequently, the company expects a “mid-single digit” adjusted operating loss, compared with a profit of 16 million pounds in 2018.

One-off costs related to its recently constructed Newport factory, inclusion of its loss-making Singapore CSDC entity and lower volumes at some sites, were also expected to hit the bottom line, it said.

For 2020, IQE sees a seasonally weak first quarter and continued supply chain transitions in the wireless market. It is “cautiously optimistic” beyond that, however, anticipating revenue to return to “moderate growth” in 2020.

After its June warning, IQE has been trying to reassure investors with a push into new supply chains in Asia and last month said it would take full control of its loss-making joint venture in Singapore to capitalise on supply chains in the Asian country and China’s 5G market.

Monday’s warning erased share price gains since those moves. The stock was last down 22.5% at 51.05 pence, after touching a two month low of 48.90 pence.

Peel Hunt analysts said they now expected an adjusted operating loss of 5.3 million pounds this year, and cut their 2020 profit forecast to 3.3 million from 15.7 million.

IQE said it had taken action to reduce costs and capital spending following completion of the infrastructure phase of its capacity expansion plans.

It now expects 2019 capital expenditure towards the bottom end of its previous guidance of 30-40 million pounds.

$1 = 0.7815 pounds Reporting by Yadarisa Shabong in Bengaluru; Editing by Sherry Jacob-Phillips and Mark Potter

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