By Karina Dsouza
(Reuters) - Britain's IQE joined several other semiconductor companies in issuing a bleak earnings forecast, highlighting broader technology sector weakness as China's economy slows.
Friday's announcement by IQE, which makes semiconductor wafers used in Apple Inc products, comes on the heels of warnings from the iphone maker and Samsung Electronics, as well as dismal forecasts from chipmakers ranging from South Korea's SK Hynix to U.S.-based Texas Instruments.
Cardiff-based IQE said it expects to report 2018 adjusted core earnings of 27.5 million pounds, short of Peel Hunt analyst Damindu Jayaweera's 31.1 million pound estimate.
Shares in the company initially plunged by 13 percent before recovering losses to stand 4.3 percent down at 71.3 pence at 1015 GMT.
The company had already issued a November forecast of a 16 percent decline in full-year earnings to 31 million pounds, citing a drop in orders at a major chipmaker that supplies 3D sensing technology.
"Apple's warning was foretold by a huge warning by Lumentum back in November. Following that November warning, IQE did a big downgrade. Today's trading update is just a tweak on that big downgrade," Jayaweera said.
"The negative news flow has continued across the board in the semis (semiconductor) space."
IQE produces about 80 percent of the global supply of outsourced "epi-wafers", a type of advanced material used in products from laser hair removal to the 3D-sensing camera in the latest iPhone X.
Chief Executive Drew Nelson said revenue and profitability had been hit by a substantial inventory correction in the first half of the year and then by disruption in a significant supply chain and short-term demand for VCSEL wafers in November.
IQE said it expects a charge of about 4.5 million pounds related to a lease accounting provision for a facility in Singapore, but it reiterated its 2019 and longer-term guidance.
"We remain excited by the longer-term prospects despite the muted near-term semis outlook and a soft start to Q1 for IQE itself," Peel Hunt's Jayaweera said.
(Reporting by Karina Dsouza and Noor Zainab Hussain in Bengaluru; Editing by David Goodman)