SMIC Reports 2018 Second Quarter Results

All currency figures stated in this report are in US Dollars unless stated otherwise.

The consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS").

SHANGHAI, Aug. 9, 2018 /PRNewswire/ -- Semiconductor Manufacturing International Corporation (NYSE: SMI; SEHK: 981) ("SMIC", the "Company" or "our"), one of the leading semiconductor foundries in the world, today announced its consolidated results of operations for the three months ended June 30, 2018.

Second Quarter 2018 Highlights

• Revenue was $890.7 million in 2Q18, an increase of 7.2% QoQ from $831.0 million in 1Q18 and an increase of 18.6% YoY from $751.2 million in 2Q17. Excluding the recognition of the technology licensing revenue (the "Licensing Revenue"), revenue was $837.9 million in 2Q18, an increase of 15.8% QoQ from $723.4 million in 1Q18 and an increase of 11.5% YoY from $751.2 million in 2Q17.
• Gross profit was $217.8 million in 2Q18, compared to $220.2 million in 1Q18 and $194.1 million in 2Q17. Excluding the recognition of the Licensing Revenue, gross profit was $165.0 million in 2Q18, compared to $112.6 million in 1Q18 and $194.1 million in 2Q17.
• Gross margin was 24.5% in 2Q18, compared to 26.5% in 1Q18 and 25.8% in 2Q17. Excluding the recognition of the Licensing Revenue, gross margin was 19.7% in 2Q18, compared to 15.6% in 1Q18 and 25.8% in 2Q17.

Third Quarter 2018 Guidance

The following statements are forward looking statements based on current expectations and involved risks and uncertainties, some of which are set forth under "Safe Harbor Statements" below. The Company expects:

• Revenue to decrease by 4% to 6% QoQ. Excluding the technology licensing revenue recognized in 2Q18, revenue to be flat to up by 2% QoQ.
• Gross margin to range from 19% to 21%.
• Non-GAAP operating expenses, excluding the effect of employee bonus accrual, government funding, impairment loss of machinery and equipment, gain or loss on the disposal of machinery and equipment and gain from the disposal of living quarters, to range from $232 million to $238 million.
• Non-controlling interests of our majority-owned subsidiaries to range from positive $19 million to positive $21 million (losses to be borne by non-controlling interests).

Dr. Zhao Haijun and Dr. Liang Mong Song, SMIC's Co-Chief Executive Officers commented, "SMIC is in a period of transition and preparation. We are making encouraging progress in advancing our technology, building up our technology platforms, and forging partnerships. At the same time, we are on track to grow high-single digits annual revenue as demand and utilizations recovered in the second quarter. In the second quarter, our revenue from the China region when excluding the technology license revenue grew 14% sequentially and 38% year over year. As the preferred foundry partner in China, we are positioned to benefit from the growth opportunities of the China IC market.

We are pleased to say that we have achieved significant progress on our 14nm FinFET development. The R&D of our first version of FinFET technology is now ready for business engagement. In addition to our 28nm PolySiON and HKC, our HKC+ technology development is now complete. Our 28nm HKC continues to ramp up, as its yield meets industry benchmark. Moreover, we will continue to expand and enhance both our mature and advanced technology platforms to provide comprehensive and competitive services."

To see the complete results including financial tables, please click here: http://www.smics.com/uploads/5b6c0f07/2018%20Q2%20Earnings%20Release_ENG_News%20Release.pdf

Conference Call / Webcast Announcement

Date: August 10, 2018
Time: 8:30 a.m. Beijing time
Dial-in numbers and pass code:

The call will be webcast live with audio at http://www.smics.com/en/site/company_activity or  https://edge.media-server.com/m6/p/pmqpyy3p.

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), one of the leading foundries in the world, is Mainland China's largest foundry in scale, broadest in technology coverage, and most comprehensive in semiconductor manufacturing services. SMIC provides integrated circuit (IC) foundry and technology services on process nodes from 0.35 micron to 28 nanometer. Headquartered in Shanghai, China, SMIC has an international manufacturing and service base. In China, SMIC has a 300mm wafer fabrication facility (fab) and a 200mm fab in Shanghai; a 300mm fab and a majority-owned 300mm fab for advanced nodes in Beijing; 200mm fabs in Tianjin and Shenzhen; and a majority-owned joint-venture 300mm bumping facility in Jiangyin; additionally, in Italy SMIC has a majority-owned 200mm fab. SMIC also has marketing and customer service offices in the U.S., Europe, Japan, and Taiwan, and a representative office in Hong Kong.

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 under "Third Quarter 2018 Guidance", "Capex Summary" and the statements contained in the quotes of our Co-Chief Executive Officers are based on SMIC's current assumptions, expectations and projections about future events. SMIC uses words like "believe," "anticipate," "intend," "estimate," "expect," "project," "target" 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, intense competition in the semiconductor industry, SMIC's reliance on a small number of customers, 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, availability of manufacturing capacity, financial stability in end markets, orders or judgments from pending litigation, intensive intellectual property litigation in semiconductor industry, general economic conditions and fluctuations in currency exchange rates.

In addition to the information contained in this press release, you should also consider the information contained in our other filings with the SEC, including our annual report on Form 20-F filed with the SEC on April 27, 2018, especially in the "Risk Factors" section and such other documents that we may file with the SEC or The Hong Kong Stock Exchange Limited ("SEHK") from time to time, including current reports on Form 6-K. Other unknown or unpredictable factors also could have material adverse effects on our 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 may be 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.

About Non-Generally Accepted Accounting Principles ("non-GAAP") Financial Measures

To supplement SMIC's consolidated financial results presented in accordance with IFRS, SMIC uses in this press release non-GAAP measures of operating results that are adjusted to exclude finance cost, depreciation and amortization, income tax benefits and expenses, the effect of employee bonus accrual, government funding, impairment loss of machinery and equipment, gain or loss on the disposal of machinery and equipment and gain from the disposal of living quarters. This earnings release also includes third quarter 2018 guidance for non-GAAP operating expenses. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with IFRS. This earnings release includes EBITDA, EBITDA margin and non-GAAP operating expenses which consist of total operating expenses as adjusted to exclude the effect of employee bonus accrual, government funding, impairment loss of machinery and equipment, gain or loss on the disposal of machinery and equipment and gain from the disposal of living quarters. These non-GAAP financial measures are not calculated or presented in accordance with, and are not alternatives or substitutes for financial measures prepared in accordance with IFRS, and should be read only in conjunction with the Group's financial measures prepared in accordance with IFRS. The Group's non-GAAP financial measures may be different from similarly-titled non-GAAP financial measures used by other companies.

SMIC believes that use of these non-GAAP financial measures facilitates investors' and management's comparisons to SMIC's historical performance. The Group's management regularly uses these non-GAAP financial measures to understand, manage and evaluate the Group's business and make financial and operational decisions.

The accompanying table has more information and reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis because the effect of these adjustment items excluded for the purpose of non-GAAP operating expenses guidance are subject to some unpredictable conditions that cannot be estimated with reasonable certainty.

Contact:
Investor Relations
+86-21-3861-0000 ext. 12804
[email protected]

SOURCE Semiconductor Manufacturing International Corporation

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