SMIC Reports 2011 First Quarter Results

SHANGHAI, May 19, 2011 /PRNewswire-Asia/ -- Semiconductor Manufacturing International Corporation (NYSE: SMI; SEHK: 981) ("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 March 31, 2011.  

First Quarter 2011 Highlights:

• Revenue down by 9.3% to $370.6 million in 1Q11 from $408.6 million in 4Q10 and up by 7.2% compared to 1Q10.
• Gross margin was 18.6% in 1Q11 compared to 24.3% in 4Q10 primarily due to a decline in fab utilization.
• Net cash flow from operations decreased to $73.4 million in 1Q11 from $248.6 million in 4Q10.
• Income attributable to holders of ordinary shares was US$10.2 million in 1Q11, compared to income of US$68.6 million in 4Q10.
• Diluted EPS was $0.02 per ADS.

Second Quarter 2011 Guidance:

The following statements are forward looking statements which are based on current expectation and which involve risks and uncertainties, some of which are set forth under "Safe Harbor Statements" below.

• Revenue is expected to decline between 3% to 7%.
• Gross margin is expected to range from 15% to 18%.
• Operating expenses excluding foreign exchange differences are expected to range from $82 million to $86 million.

Dr. David NK Wang, President and Chief Executive Officer of SMIC commented, "Highlighting our first-quarter performance, revenue increased 7% year-over-year and decreased 9% quarter-over-quarter to US$371 million. The quarter-over-quarter revenue decline was largely due to first quarter seasonality and our key customers' transition to our 65nm and 45nm.  Despite these situations, China displays resilience and in the first quarter, China sales grew 54% year-over-year and 3% quarter over quarter and now accounts for 36% of our revenue.

"We are happy to have announced an agreement with China Investment Corporation (or "CIC"), a sovereign wealth fund investment institution, to invest in SMIC for convertible preferred shares and warrants.  These capital injections will further help SMIC to expand its technology roadmap and strengthen our foothold as one the leading foundries globally."

Dr. Wang further remarked, "On May 12th we announced the signing of a joint venture with Hubei Science & Technology Investment Corporation, to jointly invest in and manage the 12-inch wafer production line of Wuhan Xinxin. This joint cooperation will serve as a strategic component in our expansion plan over the next five years and will allow us to quickly expand and increase market share on advanced technology capacity."

Dr. Wang later added, "Despite the short-term setbacks, we look forward to regaining growth in the second half of 2011.  The short-term customer transitions will continue to impact our business performance in second quarter 2011, but given our successful funding, capacity ramping, enhanced technology mix, operational improvements, and China positioning, we are on track in executing sustainable competitiveness for the long-term."

Conference Call / Webcast Announcement

Date: Friday, May 20, 2011

Time: 8:30 a.m. Shanghai time

Dial-in numbers and pass code:

A live webcast of the 2011 first quarter announcement will be available at http://www.smics.com under the "Investor Relations" section, or at URL: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=176474&eventID=3981260

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 ("SMIC"; NYSE: SMI; SEHK: 981) 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 0.35-micron to 45/40-nanometer. 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. 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 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 belief that we are on course to profitability, and statements under "Second Quarter 2011 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, 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 filed with the SEC on June 29, 2010, 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 The Hong Kong Stock Exchange Limited ("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.

• Revenue decreased to $370.6 million in 1Q11, down 9.3% QoQ from $408.6 million in 4Q10 due to a 8.9% decrease in wafer shipments.
• Cost of sales decreased to $301.8 million in 1Q11, down 2.4% QoQ from $309.3 million in 4Q10 primarily due to a decrease in wafer shipments.
• Gross profit of $68.8 million in 1Q11, compared to a gross profit of $99.3 million in 4Q10 and gross profit of $54.3 million in 1Q10.
• Gross margin was 18.6% in 1Q11 down from 24.3% in 4Q10 primarily due to a decline in fab utilization.
• R&D expenses increased to $49.6 million in 1Q11, up 5.4% QoQ from $47.0 million in 4Q10 due to an increase in personnel related expenses.
• G&A expenses were $19.4 million in 1Q11, compared to a gain of $(7.5) million in 4Q10 due to a $28.5 million recovery from bad-debt write-off in 4Q10.
• Selling & marketing expenses decreased to $7.7 million in 1Q11, down 9.8% QoQ from $8.6 million in 4Q10 primarily due to a decrease in selling activities.
• Income on discontinued operations of $14.7million represents both the results of operations of Semiconductor Manufacturing International (AT) Corporation ("AT") for the period from January 1, 2011 to the date it was deconsolidated and a gain on deconsolidation of AT.

• Wafer shipments decreased 8.9% QoQ to 471,231 units of 8-inch equivalent wafers in 1Q11 from 517,404 units of 8-inch equivalent wafers in 4Q10, and up 3.6% YoY from 455,010 8-inch equivalent wafers in 1Q10.

Detailed Financial Analysis

• Cost of sales decreased to $301.8 million in 1Q11, down 2.4% QoQ from $309.3 million in 4Q10 primarily due to a decrease in wafer shipments.
• Gross profit of $68.8 million in 1Q11, compared to a gross profit of $99.3 million in 4Q10 and gross profit of $54.3 million in 1Q10.
• Gross margin was 18.6% in 1Q11 from 24.3% in 4Q10 primarily due to a decline in fab utilization.

• R&D expenses increased to $49.6 million in 1Q11, up 5.4% QoQ from $47.0 million in 4Q10 due to increase in personnel related expenses.
• G&A expenses were $19.4 million in 1Q11, compared to a gain of $(7.5) million in 4Q10 due to a $28.5 million recovery from bad-debt write-off in 4Q10.
• Selling & marketing expenses decreased to $7.7 million in 1Q11, down 9.8% QoQ from $8.6 million in 4Q10 primarily due to a decrease in selling activities.
• Others, net were $0.1 million in 1Q11, compared to a loss of $5.8 million in 4Q10 due to reclassification of certain expenses.

Depreciation and Amortization

• Depreciation and amortization in 1Q11 was $130.9 million compared to $130.0 million in 4Q10.

Capex Summary

Capital expenditures for 1Q11 were $332.8 million.  

Recent Highlights and Announcements

• Spansion and SMIC Expand Foundry Agreement (2011-05-16)
• Further Information on Major Transaction Establishment of a Joint Venture with Hubei Science & Technology Investment Group Co., Ltd (2011-05-12)
• Announcement Major Transaction Establishment of a Joint Venture with Hubei Science & Technology Investment Group Co., Ltd (2011-05-12)
• SMIC and Hubei Science & Technology Investment Group Sign Joint Venture Agreement in Wuhan  (2011-05-12)
• Notice of Extraordinary General Meeting (2011-05-10)
• (1) Subscription of Convertible Preferred Shares and Warrants by Country Hill Limited, A Wholly-owned Subsidiary of China Investment Corporation (2) Pre-emptive Subscription of Convertible Preferred Shares and Warrants by Datang Holdings (hongkong) Investment Company Limited (3) Proposed Special Mandate and Further Special Mandate to Issue Convertible Preferred Shares, Warrants and Ordinary Shares on Conversion of the Convertible Preferred Shares (4) Notice of Extraordinary General Meeting (2011-05-10)
• Notification Letter and Request Form to Non-registered Holders (2011-05-10)
• Notification Letter (2011-05-10)
• Form of Proxy for Use at the Extraordinary General Meeting to be Held on 27 May, 2011 (2011-05-10)
• Closure of Register of Members (2011-05-09)
• Connected Transaction Pre-emptive Subscription of Convertible Preferred Shares and Warrants by Datang Holdings (Hong Kong) Investment Company Limited (2011-05-06)
• SMIC's Major Shareholder, Datang, Wishes to Subscribe for Pre-emptive Securities (2011-05-06)
• Notification of Board Meeting (2011-04-29)
• Letter and Reply Form to New Registered Shareholder - Election of Means of Receipt of Corporate Communication (2011-04-98)
• Notification Letter and Request Form to Non-registered Holders (2011-04-28)
• Notification Letter and Change Request Form to Registered Holders  (2011-04-28)
• Clarification Announcement (2011-04-21)
• SMIC to Receive Investment from CIC (2011-04-19)
• (1) Proposed Issue of Convertible Preferred Shares, Warrants and Warrant Preferred Shares to Country Hill Limited, a Wholly-Owned Subsidiary of China Investment Corporation under Special Mandate (2) Pre-emptive Right of Datang and (3) Pre-emptive Right of TSMC (2011-04-18)
• SMIC Earns Texas Instruments' Supplier Excellence Award for 2010 (2011-04-07)
• Announcement of 2010 Annual Results (2011-03-30)
• SMIC CEO David Wang Joins GSA Board (2011-03-30)
• Notification of Approval of the Publication of 2010 Annual Results by the Board (2011-03-17)
• Clarification Announcement (2011-03-16)
• RDA and SMIC Reach 55nm Joint Production Milestone - SMIC, RDA and Innopower collaborate on China's leading 55nm FM Receiver chip now in production (2011-03-09)
• SMIC Reports Results for the Three Months Ended December 31, 2010 (2011-02-17)
• Fingerprint Cards and SMIC Work in Collaboration to Bring the World's Smallest and Most Power-Efficient Fingerprint Sensor to China (2011-02-16)
• Resignation of Alternate Director (2011-02-14)
• Notification of Board Meeting (2011-01-18)

Please visit SMIC's website at http://www.smics.com/website/enVersion/Press_Center/newsRelease.ftl for further details regarding the recent announcements.

SOURCE Semiconductor Manufacturing International Corporation