SMIC poised to complete its turnaround this year

The turnaround is mainly from higher sales on the mainland, an increase in wafer revenue and greater use of capacity at its chip plants

PUBLISHED : Wednesday, 28 August, 2013, 12:00am
UPDATED : Wednesday, 28 August, 2013, 4:17am

Semiconductor Manufacturing International Corp (SMIC) expects to post a full year of record-high revenue by the end of December, which would cap a remarkable two-year turnaround by the mainland's largest contract chipmaker.

Chief executive Chiu Tzu-yin, who has presided over the once-struggling company's recovery since August 2011, yesterday told the South China Morning Post: "We are on track in our strategic execution to capture growth with our differentiated applications and advanced technology. We're pretty excited about our prospects for the coming years."

Optimism at Shanghai-based SMIC has surged after the firm last week reported significant gains in its earnings for the six months to June.

First-half net profit reached a record US$116 million, compared with a US$35.8 million loss in the same period last year. That improvement was primarily because of higher sales to customers on the mainland, increase in wafer revenue and greater use of capacity at its chip fabrication plants.

Revenue climbed 38.2 per cent to hit a new high of US$1.04 billion, up from US$754.5 million in the same period last year. Nearly 41 per cent of this year's first-half revenue was generated from domestic "fabless" semiconductor companies, which design chips and outsource fabrication to semiconductor foundries like SMIC. Its biggest multinational customers included Texas Instruments and Qualcomm, the world's biggest mobile chips supplier.

Hong Kong-listed SMIC also described total sales for the three months to June as "the fifth consecutive quarter of record-high revenue" that it had posted. Its revenue last quarter rose 8 per cent to US$541.3 million from US$501.6 million a year earlier. "The semiconductor industry in mainland China is still growing. We're seeing more and more fabless companies, so we expect tremendous growth in the domestic market to continue," Chiu said.

"We're also trying very hard to expand our market share with global customers and re-enter markets where we used to have a large presence, such as Japan."

In a research note, Bernstein Research senior analyst Mark Li said: "We think SMIC is well-positioned to capture the fabless growth in China."

Li said SMIC's other growth driver would be its 40/45-nanometre foundry process, which primarily makes chips for applications such as smartphones and media tablets. The mainland has been the world's largest market for smartphones since last year.

SMIC plans to expand its 45/40nm capacity to produce up to 15,000 12-inch wafers per month in the fourth quarter to meet strong demand.

The company's share price fell 1.75 per cent yesterday, closing at 56 HK cents.