omniture

SMIC Reports 2008 Fourth Quarter Results

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

Source: Semiconductor Manufacturing International Corporation
Related Stocks:
HongKong:981 NYSE:SMI
collection