Top contract chipmaker SMIC posts record-high earnings in busy season Q2

PUBLISHED : Tuesday, 11 August, 2015, 11:17pm
UPDATED : Tuesday, 11 August, 2015, 11:17pm

Semiconductor International Manufacturing Corp (SMIC), No.1 contract chipmaker in the world's No.2 economy, expects to post its third consecutive profitable quarter at the end of September, after reaching a new milestone with record-high earnings in the three months ended June 30.

"The second quarter was our best quarter to date ... shipments and [plant] utilisation exceeded our expectations," SMIC chief executive Chiu Tzu-yin said on Tuesday.

In its regulatory filing, Shanghai-based SMIC reported a 35 per cent increase in net profit last quarter to US$76.7 million, up from US$56.8 million in the same period last year.

The company said it was a record-high quarterly profit. It excluded the US$96.2 million net profit posted in the second quarter of 2010, which was mainly due to the monetary gain made from a commitment to grant shares and warrants during that period. 

Chiu attributed the strong solid earnings last quarter to inventory adjustments made by some customers, which enabled SMIC to increase silicon wafer production and keep its chip fabrication plants busy.

Revenue in the three months to June grew 6.9 per cent to a record quarterly high of US$546.6 million from US$509.8 million a year ago.
Operating expenses, however, rose 36.4 per cent last quarter to US$115.7 million from US$84.8 million the previous year.

Customers in Mainland China contributed 51.1 per cent to SMIC's second-quarter revenue, compared with 44.4 per cent a year earlier. Chiu said that marked a record high for the company in terms of revenue generated from its home market.

The company's domestic customers consist of "fabless" semiconductor companies, which design chips and outsource fabrication to semiconductor foundries like SMIC.

Revenue contribution from North America decreased to 32 per cent last quarter from 42 per cent a year ago. Texas Instruments and Qualcomm, which supply many of the essential chips used in smartphones and media tablets, are among the top multinational customers of SMIC.

It forecast revenue in the three months to September to advance modestly between 1 per cent and three per cent quarter on quarter, reflecting its industry's cautious outlook in the second half of this year.

Mark Li, a senior analyst at Bernstein Research, said in a report that SMIC was mindful of the market risks in the second half, but saw "no clear signs of weakness as order cuts from some customers are offset by increased orders from other customers".

SMIC is the No 2 supplier for fabless companies in mainland China, behind the world's biggest contract chipmaker, Taiwan Semiconductor Manufacturing Corp. It operates two chip fabrication plants in Shanghai, one in Beijing and another one in Tianjin.

This year, SMIC expected its capital expenditure for foundry operations to total US$1.5 billion. Its capital spending in the second quarter reached US$367.6 million.