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.
SHANGHAI, China, Feb. 6 /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
December 31, 2008.
Fourth Quarter 2008 Highlights:
-- Overall revenue decreased to $272.5 million in 4Q08, down 27.5% QoQ
from 3Q08 due to a 25.1% decrease in wafer shipments.
-- For the 2008 full year, non-DRAM revenue increased by 14.3% YoY
while revenue from China increased by 28.0% YoY.
-- Gross margin was -27.4% in 4Q08 compared to 7.2% in 3Q08 due to a
significant drop in fab utilization.
-- The Company recorded a net loss of $124.5 million in 4Q08 compared
to a net loss of $30.3 million in 3Q08.
-- Net cash flow from operations, however, increased to $171.2 million
in 4Q08 from $110.1 million in 3Q08 due to a decrease in the use of
working capital. Net cash flow from operations after deducting
capital expenditure improved to $23.7 million in 4Q08 from -$120.6
million in 3Q08.
-- As a result of the new equity funding from a strategic investor and
debt repayment during the quarter, the Company's debt equity ratio
improved to 39.7% as of 4Q08 from 45.7% as of 3Q08.
-- Simplified ASP fell 3.2% QoQ but increased 6.0% YoY to $843 in 4Q08.
For the 2008 full year, simplified ASP was $840 as compared to $838
in 2007.
Commenting on the quarterly results, Dr. Richard Chang, Chief Executive Officer of SMIC, remarked, "Although our fourth quarter 2008 performance was impacted by the worldwide economic situation, we were able to achieve revenue in-line with our guidance. For the full year of 2008, consistent with our stated strategy of focusing on the non-DRAM business, we have managed to grow our non-DRAM revenue by 14.3% year-on-year despite a difficult fourth quarter. In addition, leveraging our strength in the China market, we have increased our sales to the domestic IC companies by 28% in 2008 relative to 2007.
"Moving forward, we will continue our key strategy of capturing growth opportunities in China because we expect the Chinese economy to recover relatively quicker due to the numerous stimulus packages being implemented by the Chinese government which is expected to drive the local market demand, as well as infrastructure development such as the recent issuance of third generation ("3G") wireless licenses. SMIC's proven technology and track record in serving both China and global customers has enabled us in capturing China's 3G opportunities. As part of our China strategy, we have formed a strategic partnership with Datang, a leader in China's mobile telecommunication technologies. We expect that this partnership will position SMIC to be the primary supplier of the silicon requirements for Datang's
TD-SCDMA technology, China's self-developed 3G wireless standard. We are committed to collaborating with world-class partners in better servicing various customers to enhance our leadership position in the China market. Currently, we are already producing CIS, Mobile CMMB, HDTV, RFID, and LCOS products for our Chinese customers and we expect our product portfolio to continue to strengthen.
"In 2008, our total new customer tape outs increased 16% compared to the previous year. In the fourth quarter of 2008, new tape outs grew 9%
year-over-year, and we expect new tape outs for the first quarter of 2009 to remain strong. In terms of our advanced technology development, we have achieved 45 nanometer silicon success ahead of schedule, and we released three of our own 65 nanometer standard cell libraries to our customers. Our Beijing fab DRAM conversion into logic capability has also been completed and now has a total capacity of 40,500 8-inch equivalent logic wafers per month.
"In addition, we continue to strengthen our balance sheet. We have maintained positive EBITDA throughout the years, which we expect to continue into 2009. Our net cashflow from operations after deducting capital expenditure has increased to $24 million in the fourth quarter of 2008 from negative $121 million in the third quarter of 2008 as a result of a decrease in the use of working capital as well as tightened control over capital expenditure. As a result of the new equity funding from Datang and debt repayment, our debt equity ratio has improved to 39.7% as of the end of the fourth quarter as compared to 45.7% as of the end of the third quarter. We are also exercising tight capital expenditure and expense control during this downturn. We estimate that our capital expenditure for 2009 will be around $190 million, representing approximately a 72% decline from 2008. In addition, we are targeting to reduce our payroll costs by 15% in 2009 without workforce reduction. We thank our employees for their support during this difficult time.
Under the current business environment, we plan to continue our focus on maintaining excellent customer relations, strengthening our product portfolio, focusing on the Greater China market, while continuing to develop advanced technology and reduce costs, in effort to position ourselves as a stronger and more competitive player in the foundry sector when the global economy recovers."
Conference Call / Webcast Announcement
Date: February 6, 2009
Time: 8:30 a.m. Shanghai time
Dial-in numbers and pass code: U.S. +1-617-597-5342 or HK +852-3002-1672 (Pass code: SMIC).
A live webcast of the 2008 fourth 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.
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 0.35um 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 http://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 SMIC's ability to continue capturing growth opportunities in China, the quicker recovery of the Chinese economy relative to the global economy, SMIC's expectation of becoming the primary supplier of silicon requirements for Datang's TD-SCDMA technology, the continued strengthening of SMIC's product portfolio, SMIC's expectation that new tape outs in the first quarter of 2009 will remain strong, SMIC's ability to maintain a positive EBITDA in 2009, SMIC's expectations regarding the amount of its capital expenditures in 2009 and targeted reduction in payroll costs, SMIC's efforts in positioning itself as a stronger and more competitive player in the foundry sector, and statements under "Depreciation and Amortization", "Capex Summary" and "First 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 become the primary supplier of silicon requirements for Datang's TD-SCDMA technology, SMIC's ability to strengthen its products 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.
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, as amended, filed with the SEC on November 28, 2008, 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 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.
Material Litigation
Recent TSMC Legal Developments:
On August 25, 2006, TSMC filed a lawsuit against the Company and certain subsidiaries (SMIC (Shanghai), SMIC (Beijing) and SMIC (Americas)) in the Superior Court of the State of California, County of Alameda for alleged breach of the Settlement Agreement, alleged breach of promissory notes and alleged trade secret misappropriation by the Company. TSMC seeks, among other things, damages, injunctive relief, attorneys' fees, and the acceleration of the remaining payments outstanding under the Settlement Agreement.
In the present litigation, TSMC alleges that the Company has incorporated TSMC trade secrets in the manufacture of the Company's 0.13 micron or smaller process products. TSMC further alleges that as a result of this claimed breach, TSMC's patent license is terminated and the covenant not to sue is no longer in effect with respect to the Company's larger process products.
The Company has vigorously denied all allegations of misappropriation. The Court has made no finding that TSMC's claims are valid. The Court has set a trial date of September 1, 2009.
On September 13, 2006, the Company announced that in addition to filing a response strongly denying the allegations of TSMC in the United States lawsuit, it filed on September 12, 2006, a cross-complaint against TSMC seeking, among other things, damages for TSMC's breach of contract and breach of implied covenant of good faith and fair dealing.
On November 16, 2006, the High Court in Beijing, the People's Republic of China, accepted the filing of a complaint by the Company and its wholly-owned subsidiaries, SMIC (Shanghai) and SMIC (Beijing), regarding the unfair competition arising from the breach of bona fide (i.e. integrity, good faith) principle and commercial defamation by TSMC ("PRC Complaint"). In the PRC Complaint, the Company is seeking, among other things, an injunction to stop TSMC's infringing acts, public apology from TSMC to the Company and compensation from TSMC to the Company, including profits gained by TSMC from their infringing acts.
TSMC filed with the California court in January 2007 a motion seeking to enjoin the PRC action. In February 2007, TSMC filed with the Beijing High Court a jurisdictional objection, challenging the competency of the Beijing High Court's jurisdiction over the PRC action.
In March 2007, the California Court denied TSMC's motion to enjoin the PRC action. TSMC appealed this ruling to California Court of Appeal. On March 26, 2008, the Court of Appeal, in a written opinion, denied TSMC's appeal.
In July 2007, the Beijing High Court denied TSMC's jurisdictional objection and issued a court order holding that the Beijing High Court shall have proper jurisdiction to try the PRC action. TSMC appealed this order to the Supreme Court of the People's Republic of China. On January 7, 2008, the Supreme Court heard TSMC's appeal. On June 13, 2008, the Supreme Court denied TSMC's appeal and affirmed the jurisdiction of the Beijing High Court.
On August 14, 2007, the Company filed an amended cross-complaint against TSMC seeking, among other things, damages for TSMC's breach of contract and breach of patent license agreement. TSMC thereafter denied the allegations of the Company's amended cross-complaint and subsequently filed additional claims that the Company breached the Settlement Agreement by filing an action in the Beijing High Court. The Company has denied these additional claims by TSMC.
On August 15-17, 2007, the California Court held a preliminary injunction hearing on TSMC's motion to enjoin use of certain process recipes in certain of the Company's 0.13 micron logic process flows.
On September 7, 2007, the Court denied TSMC's preliminary injunction motion, thereby leaving unaffected the Company's development and sales. However, the court required the Company to provide 10 days' advance notice to TSMC if the Company plans to disclose logic technology to non-SMIC entities under certain circumstances, to allow TSMC to object to the planned disclosure.
On March 11, 2008, TSMC filed an application for a right to attach order in the California Court. By its application, TSMC sought an order securing an amount equal to the remaining balance on the promissory notes issued by the Company in connection with the Settlement Agreement. The Company opposed the application. A hearing was held on April 3, 2008. On June 24, 2008, the Court denied TSMC's application.
In May 2008, TSMC filed a motion in the California Court for summary adjudication against the Company on several of the Company's cross claims. The Company opposed the motion and on August 6, 2008, the Court granted in part and denied in part TSMC's motion.
On June 23, 2008, the Company filed in the California court a
cross-complaint against TSMC seeking, among other things, damages for TSMC's unlawful misappropriation of trade secrets from SMIC to improve its competitive position against SMIC.
On July 10, 2008, the California Court held a preliminary injunction hearing on TSMC's motion to enjoin disclosure of information on certain process recipes in the Company's 0.30 micron logic process flows to 3rd parties. On August 8, 2008, the Court granted-in-part TSMC's motion and preliminarily enjoined SMIC from disclosing fourteen 0.30 um process steps. On October 3, 2008, SMIC filed a notice of appeal of the Court's August 8, 2008 Order with the California Court of Appeal.
During the pre-trial proceedings in the matter, questions have arisen regarding the actual terms of the 2005 Settlement Agreement between SMIC and TSMC, and regarding whether a valid agreement was executed by the parties. In light of recent disclosures made in the case, SMIC is now of the view that the Settlement Agreement attached as an exhibit to the Company's 2005 Form 20-F does not correctly reflect the terms of an agreement between the parties. From January 13-16, 2009, the California Superior Court held trial to determine (a) if a valid agreement exists between the parties and, if so, (b) the terms of such agreement. When issued, these determinations might materially impact our financial statements and our financial position and results of operations both historically and prospectively.
The Court has scheduled a trial upon all liability issues related to a selected list of TSMC trade secret claims and SMIC trade secret claims to commence on September 1, 2009.
Under the provisions of SFAS 144, the Company is required to make a determination as to whether or not this pending litigation represents an event that requires a further analysis of whether the patent license portfolio has been impaired. We believe that the lawsuit is at a preliminary stage and we are still evaluating whether or not the litigation represents such an event. The Company expects further information to become available to us, which will aid us in making a determination. The outcome of any impairment analysis performed under SFAS 144 might result in a material impact to our financial position and results of operations. Because the case is in its preliminary stage, the Company is unable to evaluate the likelihood of an unfavorable outcome or to estimate the amount or range of potential loss.
Summary of Fourth Quarter 2008 Operating Results
Amounts in US$ thousands, except for EPS and operating data
4Q08 3Q08 QoQ 4Q07 YoY
Revenue 272,479 375,945 -27.5% 395,254 -31.1%
Cost of sales 347,114 348,721 -0.5% 360,207 -3.6%
Gross profit (74,635) 27,224 -- 35,047 --
Operating expenses 46,445 40,451 14.8% 57,389 -19.1%
Loss from operations (121,080) (13,227) 815.4% (22,342) 441.9%
Other expenses, net (4,146) (15,631) -73.5% (1,655) 150.5%
Income tax (expenses)
credit (745) (4,499) -83.4% 23,100 --
Net loss after income
Taxes (125,971) (33,357) 277.6% (897) 13943.6%
Minority interest 1,520 3,094 -50.9% 1,157 31.4%
Loss from equity investment (92) (26) 253.8% (882) -89.5%
Loss attributable to
holders of ordinary
shares (124,543) (30,289) 311.2% (622) 19923.0%
Gross margin -27.4% 7.2% 8.9%
Operating margin -44.4% -3.5% -5.7%
Net (loss) income per
ordinary share -
basic(1) (0.0066) (0.0016) (0.0000)
Net (loss) income per
ADS - basic (0.3287) (0.0814) (0.0017)
Net (loss) income per
ordinary share -
diluted(1) (0.0066) (0.0016) (0.0000)
Net (loss) income per
ADS - diluted (0.3287) (0.0814) (0.0017)
Wafers shipped (in 8"
wafers)(2) 323,175 431,660 -25.1% 497,454 -35.0%
Capacity utilization 67.7% 90.5% 94.4%
Note:
(1) Based on weighted average ordinary shares of 18,948 million (basic)
and 18,948 million (diluted) in 4Q08, 18,612 million (basic) and
18,612 million (diluted) in 3Q08 and 18,550 million (basic) and
18,550 million (diluted) in 4Q07
(2) Including copper interconnects
-- Overall revenue decreased to $272.5 million in 4Q08, down 27.5% QoQ
from $375.9 million in 3Q08 and down 31.1% YoY from $395.3 million
in 4Q07 due to lower wafer shipments.
-- Cost of sales decreased to $347.1 million in 4Q08, down 0.5% QoQ
from $348.7 million in 3Q08.
-- Gross profit decreased to -$74.6 million in 4Q08, down QoQ from
$27.2 million in 3Q08 and down YoY from $35.0 million in 4Q07.
-- Gross margins decreased to -27.4% in 4Q08 from 7.2% in 3Q08 due to a
significant drop in fab utilization.
-- Total operating expenses increased to $46.4 million in 4Q08 from
$40.5 million, an increase of 14.8% QoQ primarily due to higher
amortization of acquired IP-related intangible assets.
-- R&D expenses decreased to $12.5 million in 4Q08, down 29.8% from
$17.8 million, primarily due to an increase in government subsidies
received in 4Q08. Excluding the government subsidies, R&D expenses
increased 8.0% QoQ due to the expenses related to 45nm and 65nm R&D
activities.
-- G&A expenses increased to $16.1 million in 4Q08 from $10.8 million
in 3Q08 due to reversal of overprovision of legal fee in 3Q08,
higher professional fees, and higher doubtful debt provision in 4Q08.
-- Selling & marketing expenses increased to $5.8 million in 4Q08, up
4.8% QoQ from $5.6 million in 3Q08.
Analysis of Revenues
Sales Analysis
By Application 4Q08 3Q08 4Q07
Computer 4.5% 5.4% 22.9%
Communications 45.9% 53.0% 47.4%
Consumer 37.5% 32.8% 22.7%
Others 12.1% 8.8% 7.0%
By Service Type 4Q08 3Q08 4Q07
Logic(3) 85.6% 87.4% 67.4%
DRAM 2.6% 2.4% 23.6%
Management Services 2.2% 2.4% 1.5%
Mask Making, testing, others 9.6% 7.9% 7.5%
By Customer Type 4Q08 3Q08 4Q07
Fabless semiconductor companies 65.0% 55.1% 49.3%
Integrated device manufacturers (IDM) 15.2% 26.1% 38.5%
System companies and others 19.8% 18.8% 12.2%
By Geography 4Q08 3Q08 4Q07
North America 59.9% 58.6% 44.6%
Asia Pacific (ex. Japan) 36.0% 34.6% 26.4%
Japan 1.7% 2.1% 10.4%
Europe 2.4% 4.7% 18.6%
Wafer Revenue Analysis
By Technology (logic, DRAM &
copper interconnect only) 4Q08 3Q08 4Q07
0.09um 11.1% 19.4% 25.3%
0.13um 34.4% 25.1% 24.4%
0.15um 2.2% 2.0% 5.5%
0.18um 32.5% 33.9% 28.3%
0.25um 0.6% 0.5% 0.5%
0.35um 19.2% 19.1% 16.0%
By Technology (Logic Only)(1) 4Q08 3Q08 4Q07
0.09um 10.9% 19.4% 7.7%
0.13um(2) 32.6% 23.2% 21.0%
0.15um 2.2% 2.0% 7.7%
0.18um 33.7% 35.0% 40.3%
0.25um 0.7% 0.5% 0.6%
0.35um 19.9% 19.9% 22.7%
Note:
(1) Excluding 0.13um copper interconnects
(2) Represents revenues generated from manufacturing full flow wafers
(3) Including 0.13um copper interconnects
Capacity*
Fab / (Wafer Size) 4Q08 3Q08
Shanghai Mega Fab (8")(1) 88,000 88,000
Beijing Mega Fab (12")(2) 40,500 36,000
Tianjin Fab (8") 32,000 30,000
Total monthly wafer fabrication capacity 160,500 154,000
Note:
* Wafers per month at the end of the period in 8" wafers
(1) Shanghai Mega Fab is now comprised of Fab 1, Fab 2, and Fab 3
(2) Beijing Mega Fab is now comprised of Fab 4, Fab 5, and Fab 6
Shipment and Utilization
8" equivalent wafers 4Q08 3Q08 4Q07
Wafer shipments including copper
interconnects 323,175 431,660 497,454
Utilization rate(1) 67.7% 90.5% 94.4%
Note:
(1) Capacity utilization based on total wafer out divided by estimated
capacity
-- Wafer shipments decreased 25.1% QoQ to 323,175 units of 8-inch
equivalent wafers in 4Q08 from 431,660 units of 8-inch equivalent
wafers in 3Q08, and down 35.0% YoY from 497,454 8-inch equivalent
wafers in 4Q07.
-- For the full year of 2008, the overall wafer shipments were
1,611,208 units of 8-inch equivalent wafers, down 12.9% YoY while
logic only wafer shipments increased 24.9% YoY.
Detailed Financial Analysis
Gross Profit Analysis
Amounts in US$ thousands 4Q08 3Q08 QoQ 4Q07 YoY
Cost of sales 347,114 348,721 -0.5% 360,207 -3.6%
Depreciation 183,916 165,641 11.0% 161,232 14.1%
Other manufacturing
costs 156,446 176,329 -11.3% 190,671 -18.0%
Deferred cost
amortization 5,886 5,886 -- 5,886 --
Share-based compensation 866 865 0.1% 2,418 -64.2%
Gross Profit (74,636) 27,224 -- 35,047 --
Gross Margin -27.4% 7.2% 8.9%
-- Cost of sales decreased to $347.1 million in 4Q08, down 0.5% QoQ
from $348.7 million in 3Q08.
-- Depreciation increased in 4Q08 primarily due to low fab utilization
resulting in most of the depreciation being expensed in the same
quarter instead of being capitalized as inventory costs.
-- Gross profit decreased to -$74.6 million in 4Q08, down QoQ from
$27.2 million in 3Q08 and down YoY from $35.0 million in 4Q07.
-- Gross margins decreased to -27.4% in 4Q08 from 7.2% in 3Q08 due to a
significant drop in fab utilization.
Operating Expense Analysis
Amounts in US$ thousands 4Q08 3Q08 QoQ 4Q07 YoY
Total operating expenses 46,445 40,451 14.8% 57,389 -19.1%
Research and development 12,524 17,838 -29.8% 26,201 -52.2%
General and administrative 16,146 10,761 50.0% 18,820 -14.2%
Selling and marketing 5,843 5,578 4.8% 5,688 2.7%
Amortization of intangible
assets 11,564 6,906 67.4% 6,878 68.1%
Impairment loss of long-lived
assets 967 -- -- -- --
Income from disposal of
properties (599) (632) -5.2% (198) 202.5%
-- Total operating expenses increased to $46.4 million in 4Q08 from
$40.5 million, an increase of 14.8% QoQ primarily due to an increase
in the amortization of acquired IP-related intangible assets.
-- R&D expenses decreased to $12.5 million in 4Q08, down 29.8% from
$17.8 million primarily due to an increase in government subsidies
received in 4Q08. Excluding government subsidies, R&D expenses
increased 8.0% QoQ due to higher expenses related to 45nm and 65nm
R&D activities.
-- G&A expenses increased to $16.1 million in 4Q08 from $10.8 million
in 3Q08 due in part to a reversal of overprovision of legal fees
recorded in 3Q08, higher professional fees, and higher doubtful debt
provision in 4Q08.
-- Selling & marketing expenses increased to $5.8 million in 4Q08, up
4.8% QoQ from $5.6 million in 3Q08.
Other Income (Expenses)
Amounts in US$ thousands 4Q08 3Q08 QoQ 4Q07 YoY
Other income (expenses) (4,146) (15,631) -73.5% (1,655) 150.5%
Interest income 1,184 2,542 -53.4% 3,971 -70.2%
Interest expense (7,133) (11,088) -35.7% (11,485) -37.9%
Foreign currency exchange
gain (loss) (2,543) (7,023) -63.8% 4,613 --
Other, net 4,346 (62) -- 1,246 248.8%
-- Interest expense decreased in 4Q08 relative to 3Q08 primarily due to
an increase in government interest subsidies received, the effect of
which was partially offset by a decrease in interest capitalization
resulting from lower capital expenditure. Excluding the effect
from government subsidies and interest capitalization, interest
expense in 4Q08 increased by $1.1 million from 3Q08.
-- Foreign exchange loss arising from non-operating activities has
decreased to $2.5 million in 4Q08 from $7.0 million in 3Q08.
Combined with the foreign exchange gain arising from the operating
activities (separately recorded under the G&A expenses), the
Company recorded an overall foreign exchange loss of $0.4 million in
4Q08 as compared to a foreign exchange loss of $4.6 million in 3Q08.
Depreciation and Amortization
-- Total depreciation and amortization for 4Q08 is $207.7 million as
compared to $197.7 million for 3Q08.
-- Total depreciation and amortization for 2008 is $805.6 million as
compared to $754.0 million for 2007.
-- The total depreciation and amortization for 2009 is expected to
remain flat as compared to 2008, but total depreciation and
amortization is expected to decline in 2010 as the majority of the
8-inch production equipment in our Shanghai Mega Fab will reach the
end of the depreciation life in 2010.
Liquidity
Amounts in US$ thousands 4Q08 3Q08
Cash and cash equivalents 450,230 392,881
Restricted Cash 6,255 3,000
Short term investments 19,928 50,646
Accounts receivable 199,372 285,874
Inventory 171,637 233,022
Others 79,437 72,272
Total current assets 926,859 1,037,695
Accounts payable 185,919 301,712
Short-term borrowings 201,258 212,600
Current portion of long-term debt 360,629 340,355
Others 151,967 177,736
Total current liabilities 899,773 1,032,403
Cash Ratio 0.5x 0.3x
Quick Ratio 0.7x 0.7x
Current Ratio 1.0x 1.0x
The increase in cash and cash equivalents as of end of 4Q08 was primarily due to $165.1 million of new equity funding raised during the quarter from a strategic investor.
Capital Structure
Amounts in US$ thousands 4Q08 3Q08
Cash and cash equivalents 450,230 392,881
Restricted Cash 6,255 3,000
Short-term investment 19,928 50,646
Current portion of promissory note 29,242 29,493
Promissory note 23,590 37,762
Short-term borrowings 201,258 212,600
Current portion of long-term debt 360,629 340,355
Long-term debt 536,518 692,131
Total debt 1,098,405 1,245,086
Shareholders' equity 2,764,279 2,721,561
Total debt to equity ratio 39.7% 45.7%
As a result of the new equity funding raised and debt repayment, the Company's debt equity ratio has improved to 39.7% as of end of 4Q08 from 45.7% as of end of 3Q08.
Cash Flow
Amounts in US$ thousands 4Q08 3Q08
Net cash from operating activities 171,213 110,119
Net cash from investing activities (120,085) (162,773)
Net cash from financing activities 6,460 (34,668)
Net change in cash 57,349 (87,384)
Net cash flow from operations has increased to $171.2M in 4Q08 from $110.1M in 3Q08 due to a decrease in the use of working capital. Net cash flow from operations after deducting capital expenditure has improved to $23.7 in 4Q08 million from -$120.6 million in 3Q08.
Capex Summary
-- Capital expenditures for 4Q08 were $56 million. The total capital
expenditure for 2008 was approximately $665 million as compared to
the earlier market guidance of $790 million.
-- Total planned capital expenditures for 2009 will be around $190
million.
First Quarter 2009 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" above.
-- Given the lack of visibility in this current market environment, we
are unable to provide specific revenue guidance. However, we
estimate that Q109 revenue may decline by approximately 50%.
-- Operating expenses excluding foreign exchange difference ranging
from $53 million to $56 million.
-- Capital expenditure expected to be approximately $40 million to $45
million.
-- Depreciation and amortization expected to be approximately $206
million to $208 million.
Recent Highlights and Announcements
-- Litigation Update [2008-12-24]
-- Unusual Increase in Share Trading Price [2008-12-24]
-- SMIC Achieves First 45-nanometer Silicon Success [2008-12-8]
-- Datang Holdings to Invest US$172 Million in SMIC [2008-11-10]
-- Issue of New Ordinary Shares under General Mandate and Resumption of
Trading [2008-11-10]
-- Suspension of Trading [2008-11-06]
-- SMIC Reports Results for the Three Months Ended September 30, 2008
[2008-10-29]
-- SMIC Received U.S. Export Licenses for 32nm Technologies [2008-10-27]
-- SMIC Successfully Develops 0.11 Micron CIS Process Technology
[2008-10-23]
-- HDIC Cooperates with SMIC for Successful Debut of High Definition TV
Transmission Chips during Beijing Olympic Games [2008-10-14]
-- Change in Directorate [2008-10-06]
Please visit SMIC's website at http://www.smics.com/website/enVersion/Press_Center/pressRelease.jsp
for further details regarding the recent announcements.
Semiconductor Manufacturing International Corporation
BALANCE SHEET
(In US dollars)
As of the end of
December 31, September 30,
2008 2008
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $450,229,569 $392,881,020
Restricted Cash 6,254,813 3,000,000
Short term investments 19,928,289 50,645,536
Accounts receivable, net of allowances
of $ 5,680,658 and $4,697,378 at
December 31, 2008 and September 30,
2008 respectively 199,371,694 285,873,827
Inventories 171,636,868 233,022,657
Prepaid expense and other current
assets 56,299,086 52,768,850
Receivable for sale of plant and
equipment and other fixed assets 23,137,764 19,503,560
Total current assets 926,858,083 1,037,695,450
Land use rights, net 74,293,284 74,437,989
Plant and equipment, net 2,963,385,840 3,106,399,766
Acquired intangible assets, net 200,059,106 212,611,259
Deferred cost, net 47,091,516 52,977,956
Equity investment 11,352,186 11,444,506
Other long-term prepayments 1,895,337 2,379,500
Deferred tax assets 45,686,470 43,971,049
TOTAL ASSETS $4,270,621,822 $4,541,917,475
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 185,918,539 301,711,981
Accrued expenses and other current
liabilities 122,173,803 147,725,420
Short-term borrowings 201,257,773 212,600,414
Current portion of promissory note 29,242,001 29,492,873
Current portion of long-term debt 360,628,789 340,355,129
Income tax payable 552,006 517,682
Total current liabilities 899,772,911 1,032,403,499
Long-term liabilities:
Promissory note 23,589,958 37,762,091
Long-term debt 536,518,281 692,131,401
Long-term payables relating to
license agreements 18,169,006 28,037,163
Deferred tax liabilities 411,877 621,029
Total long-term liabilities 578,689,122 758,551,684
Total liabilities $1,478,462,033 $1,790,955,183
Minority interest 27,881,250 29,401,201
Stockholders' equity:
Ordinary shares，$0.0004 par value,
50,000,000,000 shares authorized,
shares issued and outstanding
22,327,784,827 and 18,619,884,481
at December 31, 2008 and September
30, 2008, respectively 8,931,114 7,447,954
Additional paid-in capital 3,489,382,267 3,323,364,177
Accumulated other comprehensive loss (439,123) (199,305)
Accumulated deficit (733,595,719) (609,051,735)
Total stockholders' equity 2,764,278,539 2,721,561,091
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $4,270,621,822 $4,541,917,475
Semiconductor Manufacturing International Corporation
CONSOLIDATED STATEMENT OF OPERATIONS
(In US dollars)
For the three months ended
December 31, September 30,
2008 2008
(Unaudited) (Unaudited)
Sales 272,478,762 375,944,833
Cost of sales 347,114,296 348,720,498
Gross profit (74,635,534) 27,224,335
Operating expenses:
Research and development 12,523,835 17,838,076
General and administrative 16,146,415 10,760,722
Selling and marketing 5,843,252 5,578,365
Amortization of acquired
intangible assets 11,563,678 6,906,344
Impairment loss of acquired
intangible assets 966,667 --
Income from sale of plant and
equipment and other fixed assets (598,819) (632,029)
Total operating expenses 46,445,028 40,451,478
Loss from operations (121,080,562) (13,227,143)
Other income (expenses):
Interest income 1,183,576 2,541,743
Interest expense (7,132,535) (11,087,893)
Foreign currency exchange loss (2,542,966) (7,022,913)
Other income, net 4,346,182 (62,216)
Total other income (expenses), net (4,145,743) (15,631,279)
Net loss before income tax, minority
interest and loss from equity
investment (125,226,305) (28,858,422)
Income tax expense (745,310) (4,499,387)
Minority interest 1,519,950 3,094,474
Loss from equity investment (92,319) (25,803)
Net loss $(124,543,984) $(30,289,138)
Net loss per share, basic (0.0066) (0.0016)
Net loss per ADS, basic (0.3287) (0.0814)
Net loss per share, diluted (0.0066) (0.0016)
Net loss per ADS, diluted (0.3287) (0.0814)
Ordinary shares used in calculating
basic loss per ordinary share 18,947,602,493 18,612,441,880
Ordinary shares used in calculating
diluted loss per ordinary share 18,947,602,493 18,612,441,880
Semiconductor Manufacturing International Corporation
CONSOLIDATED STATEMENT OF CASH FLOWS
(In US dollars)
For the three months ended
December 31, September 30,
2008 2008
(Unaudited) (Unaudited)
Operating activities
Net loss (124,543,984) (30,289,138)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Minority interest (1,519,951) (3,094,474)
Deferred tax (1,924,575) 511,663
Gain on disposal of plant and
equipment (598,820) (632,029)
Depreciation and amortization 193,779,737 188,387,781
Amortization of acquired
intangible assets 11,563,678 6,931,344
Share-based compensation 2,358,942 2,368,706
Non cash interest expense on
promissory notes 1,480,674 1,522,485
Loss from equity investment 92,320 25,803
Impairment loss of acquired
intangible assets 966,667 --
Changes in operating assets and
liabilities:
Accounts receivable, net 86,502,133 (23,455,351)
Inventories 61,385,789 19,371,201
Prepaid expense and other current
assets (5,798,142) (9,608,778)
Accounts payable (36,579,576) (57,377,721)
Accrued expenses and other
current liabilities (15,985,881) 15,422,174
Income tax payable 34,327 35,418
Net cash provided by operating
activities 171,213,338 110,119,084
Investing activities:
Purchase of plant and equipment (125,145,585) (220,937,580)
Proceeds from disposal of plant
and equipment 913,738 3,920,056
Proceeds received from sale of
assets held for sale -- 1,004,594
Purchases of acquired intangible
assets (23,315,762) (14,670,000)
Purchase of short-term
investments - (154,185,792)
Sale of short-term investments 30,717,248 135,865,909
Purchase of equity investment - (1,900,000)
Change in restricted cash (3,254,813) 88,129,665
Net cash used in investing
activities (120,085,174) (162,773,148)
Financing activities:
Proceeds from short-term borrowing 57,407,359 84,680,413
Proceeds from long-term debt 39,397,145 --
Repayment of promissory notes (15,000,000) --
Repayment of long-term debt (174,736,605) (4,435,051)
Repayment of short-term debt (68,750,000) (114,987,613)
Proceeds from exercise of
employee stock options 42,307 74,176
Proceeds from issuance of
ordinary shares 168,100,000 --
Net cash provided by (used in)
financing activities 6,460,206 (34,668,075)
Effect of exchange rate changes (239,821) (62,231)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 57,348,549 (87,384,370)
CASH AND CASH EQUIVALENTS,
beginning of period 392,881,020 480,265,390
CASH AND CASH EQUIVALENTS,
end of period 450,229,569 392,881,020
