SMIC Reports 2008 Third Quarter Results (Revenue up 10%)

All currency figures stated in this report are in US Dollars unless stated otherwise. The financial statement amounts in this report are determined in accordance with US GAAP.

SHANGHAI, China, Oct. 29 /Xinhua-PRNewswire/ -- Semiconductor Manufacturing International Corporation (NYSE: SMI) ("SMIC" or the "Company"), one of the leading semiconductor foundries in the world, today announced its consolidated results of operations for the three months ended September 30, 2008.



    Third Quarter 2008 Highlights:
    -- Overall revenue increased to $375.9 million in 3Q08, up 9.6% from 2Q08.
       Specifically, advanced logic sales from 0.13 micron and 90 nanometer
       technology nodes have increased by 23.3% in 3Q08 quarter-on-quarter.
    -- Simplified average selling price ("ASP") increased by 2.1% from $853 in
       2Q08 to $871 in 3Q08.
    -- Gross margin improved to 7.2% in 3Q08 compared to 6.1% in 2Q08.
    -- The Company reduced net loss to $30.3 million in 3Q08 as compared to
       the net loss of $45.6 million in 2Q08.


Commenting on the quarterly results, Dr. Richard Chang, Chief Executive Officer of SMIC remarked, "In terms of the third quarter performance, I am pleased to see a 9.6% quarter-over-quarter increase in the total revenue. The revenue growth is primarily due to higher logic demand as well as higher ASP from change in product mix. Our total logic wafer shipments in the third quarter increased 9.9% quarter-over-quarter and logic sales accounted for 87.4% of our total revenue in the third quarter. In terms of customers, revenue contribution from fabless customers increased by 10.5% quarter-over-quarter and 16.2% year-over-year. In terms of applications, we have experienced stronger sales in the communications sector, resulting in a 13.9% quarter-over-quarter increase in third quarter. In addition, sales in consumer applications also increased by 10.9% in the third quarter. DRAM as a percentage of our total revenue continued to decline to 2.4% in the third quarter. As a result of the depreciation and amortization expense of $198 million, we recorded a net loss of $30.3 million. Depreciation and amortization expense as a percentage of revenue decreased by 5% against the previous quarter. Moreover, starting 2009, the depreciation expense of our Shanghai 200mm facilities will drop to almost half within two years, which will further improve our bottom line. Our EBITDA margin improved from 42.5% in the second quarter to 45.5% in the third quarter.

During the third quarter, we continued to make progress in our key strategic initiatives. First, the conversion of DRAM capacity into logic is still on track with estimated completion by the end of this year. We expect that, once completed, our Beijing 300mm logic capacity at 2008 year-end will have increased more than 50% since the beginning of 2008.

In terms of our advanced technology node development, I am pleased to announce that SMIC has received all needed export licenses to enter into 32nm research and development in both logic and flash, starting January 1, 2009. In terms of our 65nm technology development, more than 20 products have already taped-out and are qualifying in different stages. Our 45nm collaboration with IBM is on schedule in accordance to plan, and we expect to qualify the technology and begin risk production in the second half of 2009.

We are pleased to see our Chinese customers making strong progress and advancing their technology nodes. Our China shipment quantity grew 28% in the third quarter, and our greater China revenue contributed to 31% of our overall revenue in the third quarter. As we have announced previously, as a result of technology collaboration with us, one of our Chinese customers successfully introduced the demodulator chip for China's high-definition TV application. This was the first and the most comprehensive chip solution on the Chinese DTV market. In addition, another Chinese customer introduced mobile TV solutions based on the China Multimedia Mobile Broadcasting (CMMB) standard. CMMB was initiated by the Chinese government and now covers 37 cities. China has also recently begun building the infrastructure for the fully commercialized use of the TD-SCDMA network. Chinese customers are working together with SMIC to produce TD-SCDMA chips. TD-SCDMA has been under pilot testing and currently covers 10 cities in China, and is expected to expand to another 28 cities in the near future. Moving forward, we intend to continue to strengthen our geographical focus in domestic China by collaborating with local fabless design houses.

Under the current business environment, we are working hard to tightly control costs and intend to hold back any capacity expansion until we have clear visibility of end-customer demand."

Conference Call / Webcast Announcement

Date: October 30, 2008

Time: 8:30 a.m. Shanghai time

Dial-in numbers and pass code: U.S. 1-617-597-5342 or HK 852-3002-1672 (Pass code: SMIC).

A live webcast of the 2008 third quarter announcement will be available at under the "Investor Relations" section. An archived version of the webcast, along with an electronic copy of this news release will be available on the SMIC website for a period of 12 months following the webcast.

About SMIC

Semiconductor Manufacturing International Corporation (NYSE: SMI) is one of the leading semiconductor foundries in the world and the largest and most advanced foundry in Mainland China, providing integrated circuit (IC) manufacturing service at 0.35um to 65nm and finer line technologies. Headquartered in Shanghai, China, SMIC has a 300mm wafer fabrication facility (fab) under pilot production and three 200mm wafer fabs in its Shanghai mega-fab, two 300mm wafer fabs in its Beijing mega-fab, a 200mm wafer fab in Tianjin, a 200mm and a 300mm fab under construction in Shenzhen, and an in-house assembly and testing facility in Chengdu. SMIC also has customer service and marketing offices in the U.S., Europe, and Japan, and a representative office in Hong Kong. In addition, SMIC manages and operates a 200mm wafer fab in Chengdu owned by Cension Semiconductor Manufacturing Corporation and a 300mm wafer fab in Wuhan owned by Wuhan Xinxin Semiconductor Manufacturing Corporation


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    Safe Harbor Statements
    (Under the Private Securities Litigation Reform Act of 1995)


This press release contains, in addition to historical information, "forward-looking statements" within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements, including statements concerning estimated completion of our conversion of DRAM capacity into logic by the end of this year, percentage increase in our Beijing 300-mm logic capacity by the end of 2008, the expected timing for qualifying our technology and risk production in connection with our 45nm collaboration with IBM, the expected expansion of TD-SCDMA to another 28 cities in the near future, future collaborations with local fabless design houses, our intention to hold back on capacity expansion, our expectation for fourth quarter 2008 revenue, and statements under "Capex Summary" and "Fourth Quarter 2008 Guidance", are based on SMIC's current assumptions, expectations and projections about future events. SMIC uses words like "believe," "anticipate," "intend," "estimate," "expect," "project" and similar expressions to identify forward-looking statements, although not all forward-looking statements contain these words. These forward-looking statements are necessarily estimates reflecting the best judgment of SMIC's senior management and involve significant risks, both known and unknown, uncertainties and other factors that may cause SMIC's actual performance, financial condition or results of operations to be materially different from those suggested by the forward-looking statements including, among others, risks associated with cyclicality and market conditions in the semiconductor industry, the current global financial crisis, intense competition, timely wafer acceptance by SMIC's customers, timely introduction of new technologies, SMIC's ability to ramp new products into volume, supply and demand for semiconductor foundry services, industry overcapacity, shortages in equipment, components and raw materials, orders or judgments from pending litigation, availability of manufacturing capacity and financial stability in end markets.

Investors should consider the information contained in SMIC's filings with the U.S. Securities and Exchange Commission (SEC), including its annual report on 20-F, as amended, filed with the SEC on June 27, 2008, especially in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections, and such other documents that SMIC may file with the SEC or SEHK from time to time, including on Form 6-K. Other unknown or unpredictable factors also could have material adverse effects on SMIC's future results, performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this press release may not occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this press release. Except as required by law, SMIC undertakes no obligation and does not intend to update any forward-looking statement, whether as a result of new information, future events or otherwise.

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