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.
Third Quarter 2009 Highlights: -- Revenue up by 20.9% to $323.4 million from $267.4 million in 2Q09 and down by 14.0% compared to 3Q08. -- 65nm production ramp is on schedule and we expect further increases in 65nm shipment in 4Q09 and into 2010. -- Wafer revenue from Greater China region grew 33.5% QoQ. -- Gross margins improved to 0.8% in 3Q09 compared to -4.8% in 2Q09 due to an increase in wafer shipments and fab utilization. -- Net cash flow from operations has increased substantially to $73.0 million from $43.2 million in 2Q09. -- Loss attributable to holders of ordinary shares of US$69.3 million in 3Q09, compared to loss of US$98.2 million in 2Q09. -- Fully diluted EPS was ($0.1550) per ADS.
Fourth Quarter 2009 Guidance:
The following statements are forward looking statements which are based on current expectations and which involve risks and uncertainties, some of which are set forth under "Safe Harbor Statements" below.
-- Revenue is expected to increase 2% to 5% QoQ. -- Operating expenses excluding foreign exchange differences are expected to range from $67 million to $72 million. -- Capital expenditures are expected to range from $90 million to $95 million. -- Depreciation and amortization is expected to be approximately $193 million.
Commenting on the quarterly results, Dr. Richard Chang, Chief Executive Officer of SMIC, remarked, "The third quarter of 2009 displayed a continued foundry market recovery. In the third quarter of 2009, SMIC exceeded its original guidance, achieving about 21% quarter-over-quarter growth in revenue; furthermore, we expect revenue for the fourth quarter of 2009 to continue to grow 2% to 5% quarter-over-quarter. Utilization rose to 87.3% in the third quarter compared to 75.4% in the second quarter. Significant growth was exhibited in consumer sales, which grew 40.6% quarter-over-quarter.
Regionally, Greater China revenue grew by 33.5%, North America sales increased by 16.7%, and European sales increased by 3% quarter-over-quarter. North America maintained the largest contribution to revenue with strong growth in the advanced nodes, while revenue contribution from Greater China increased to 36.6% of total revenue in the third quarter of 2009 compared to 33.2% in the second quarter of 2009 and 31.2% in the third quarter of 2008. In the third quarter of 2009, 80% of our new customers are from the Greater China region.
Our product mix is improving and we are accelerating our advanced node development. We see a shift to higher-end products, as sales from 0.18-um and above are shifting into 0.13-um and below. Our 0.13-um and below wafer revenue reached 52.8% of total wafer revenue in the third quarter of 2009 compared to 46.4% in the second quarter of 2009. In terms of advanced technology development, our 65-nm production ramp is on schedule and with our 65-nm low leakage library and key IPs in place, we expect to continue to ramp up 65-nm shipments in the fourth quarter of 2009 and into 2010. In addition, our 45-nm development is ahead of schedule with multiple customers working with us in various stages of qualification, and we target our first 45-nm product tape-out by the end of this year. We now provide a complete offering for advanced nodes down to 40-nm, and we recently announced the extension of our technology to 55-nm. Moreover, we have started our 32-nm program and have engaged partners and customers in the research and development phase.
Looking into the fourth quarter of 2009, we see improving gross margins on higher revenue with significant growth in the advanced nodes, including 90-nm and 65-nm nodes. Total depreciation and amortization expense is expected to fall considerably in 2010 as most of our Shanghai 8-inch fab equipment fully depreciates. We continue to exercise vigilant cost control and expect our full year capital expenditure to be around $190 million for the current year.
In summary, we continue to strive towards profitability through improving our product mix, advancing our process technology and remaining disciplined in capital expenditure."
Conference Call / Webcast Announcement Date: October 29, 2009 Time: 8:30 a.m. Shanghai time
Dial-in numbers and pass code: U.S. 1-617-614-3672 / 1-800-260-8140 or HK 852-3002-1672 (Pass code: SMIC).
A live webcast of the 2009 third quarter announcement will be available at http://www.smics.com 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.
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) foundry and technology services at 0.35um to 45nm. Headquartered in Shanghai, China, SMIC has a 300mm wafer fabrication facility (fab) 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 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.
For more information, please visit www.smics.com . 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 our expectation of a shift to higher-end products, our expectation of a continued ramp up of 65 nm shipments in the fourth quarter of 2009 and into 2010, target timing for our first 45-nm product tape-out, our expectations regarding the amount of our capital expenditures in 2009 and our total depreciation and amortization expense for 2009 and 2010, and statements under "Depreciation and Amortization", "Capex Summary" and "Fourth Quarter 2009 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 downturn in the global economy and the impact on China's economy, intense competition, timely wafer acceptance by SMIC's customers, timely introduction of new technologies, SMIC's ability to capture growth opportunities in China, SMIC's ability to strengthen its product portfolio, 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.