SMIC Reports 2010 Third 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, Nov. 3, 2010 /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 September 30, 2010.  

Third Quarter 2010 Highlights:

• Revenue up by 7.6% to $410.1 million in 3Q10 from $381.1 million in 2Q10 and up by 26.8% compared to 3Q09.
• Gross margins improved to 24.5% in 3Q10 compared to 15.6% in 2Q10 primarily due to an increase in fab utilization and lower depreciation costs.
• Net cash flow from operations decreased to $125.2 million in 3Q10 from $167.5 million in 2Q10.
• Gain attributable to holders of ordinary shares was US$30.4 million in 3Q10, compared to gain of US$96.0 million in 2Q10.
• Diluted EPS was $0.06 per ADS.

Fourth Quarter 2010 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 be flat quarter-on-quarter.
• Gross margin is expected to range from 21% to 23%.
• Operating expenses excluding foreign exchange differences are expected to range from $80 million to $84 million.
• 2010 annual capital expenditures are expected to range from $750 million to $800 million.

Commenting on the quarterly results, Dr. David NK Wang, President and Chief Executive Officer of SMIC remarked, "I am pleased to report that SMIC is profitable this quarter on both operational and net income levels, due to a good overall market environment and SMIC's internal improvements. With only 3% capacity increase year-over-year, we were able to grow our revenue 27% and our gross margin from 0.8% in Q3 last year to 24.5% this year.

"Revenue contribution from 65nm doubled compared to the second quarter. Our 40nm low-leakage technology process was frozen on schedule with a leading customer's endorsement. We are accelerating our other 45nm programs, targeting revenue in the second half of 2011."

A live webcast of the 2010 third quarter announcement will be available at http://www.smics.com under the "Investor Relations" section, or at

URL: http://phx.corporate-ir.net/playerlink.zhtml?c=176474&s=wm&e=3448095.  

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, 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 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 under "Fourth Quarter 2010 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.

Summary of Third Quarter 2010 Operating Results

• Revenue increased to $410.1 million in 3Q10, up 7.6% QoQ from $381.1 million in 2Q10 due to a 4.0% increase in wafer shipments.
• Cost of sales decreased to $309.4 million in 3Q10, down 3.8% QoQ from $321.8 million in 2Q10 primarily due to lower depreciation expenses.
• Gross profit of $100.6 million in 3Q10, compared to a gross profit of $59.4 million in 2Q10 and gross profit of $2.7 million in 3Q09.
• Gross margins improved to 24.5% in 3Q10 from 15.6% in 2Q10 primarily due to an increase in fab utilization and lower depreciation costs.
• Total operating expenses increased to $80.0 million in 3Q10 from $71.5 million in 2Q10, an increase of 11.8% QoQ driven by an increase in R&D expenses and loss from sale of equipment and fixed assets.
• R&D expenses increased to $47.4 million in 3Q10, up 9.3% QoQ from $43.3 million in 2Q10 due to increase in R&D experiments.  
• G&A expenses increased to $16.8 million in 3Q10 from $15.0 million in 2Q10 due to foreign exchange gains of $5.4 million in 2Q10.
• Selling & marketing expenses increased to $7.8 million in 3Q10, up 10.7% QoQ from $7.0 million in 2Q10 primarily due to an increase in selling activities and related fees.

• Advanced technology shipments comprising 0.13um and below made up 56.3% of overall wafer revenue in 3Q10.

• Wafer shipments increased 4.0% QoQ to 516,792 units of 8-inch equivalent wafers in 3Q10 from 496,766 units of 8-inch equivalent wafers in 2Q10, and up 20.2% YoY from 429,843 8-inch equivalent wafers in 3Q09.

Detailed Financial Analysis

• Cost of sales decreased to $309.4 million in 3Q10, down 3.8% QoQ from $321.8 million in 2Q10 primarily due to lower depreciation expenses.
• Gross profit of $100.6 million in 3Q10, compared to a gross profit of $59.4 million in 2Q10 and gross profit of $2.7 million in 3Q09.
• Gross margins improved to 24.5% in 3Q10 from 15.6% in 2Q10 primarily due to an increase in fab utilization and lower depreciation costs.

• Total operating expenses increased to $80.0 million in 3Q10 from $71.5 million in 2Q10, an increase of 11.8% QoQ driven by an increase in R&D expenses and loss from sale of equipment and fixed assets.
• R&D expenses increased to $47.4 million in 3Q10, up 9.3% QoQ from $43.3 million in 2Q10 due to an increase in R&D experiments.  
• G&A expenses increased to $16.8 million in 3Q10 from $15.0 million in 2Q10 due to foreign exchange gains of $5.4 million in 2Q10.
• Selling & marketing expenses increased to $7.8 million in 3Q10, up 10.7% QoQ from $7.0 million in 2Q10 primarily due to an increase in selling activities and related fees.

• Combined with the foreign exchange difference arising from operating activities, the Company recorded an overall foreign exchange gain of $1.4 million in 3Q10 as compared to an exchange gain of $2.2 million in 2Q10.
• Other non-operating income in 3Q10 included a change in the fair value of the commitment to grant shares and warrants in connection with the litigation settlement in an amount of $10.8 million.

Depreciation and Amortization

• Total depreciation and amortization decreased to $148.4 million in 3Q10 from $164.9 million in 2Q10 due to depreciated 8-inch production equipment.

• Equity in 3Q10 was $2.0 billion compared to $1.7 billion in 2Q10 primarily due to new shares issuance and the reclassification from liability to equity of litigation settlement related expenses.

Capex Summary

• Capital expenditures for 3Q10 were $297 million.

Recent Highlights and Announcements

• SMIC to Invest in Wuhan Xinxin, Writing a New Chapter in Scientific Development     (2010-10-29)
• Notification of Board Meeting (2010-10-20)
• ARM and SMIC Extend Comprehensive Product Portfolio of Free Libraries of Physical IP to 65NM and 40NM ll Process Technology (2010-10-11)
• Extraordinary General Meeting Held on 21 September, 2010 Poll Results (2010-09-21)
• SMIC 2010 Technology Symposium kicks off in Shanghai     (2010-09-16)
• SMIC Adopts Cadence Silicon Realization End-to-End Product Line for 65-40nm Design     (2010-09-16)
• Grant of Options (2010-09-08)
• Form of Proxy for Use at The Extraordinary General Meeting To Be Held On 21 September 2010 (2010-09-03)
• Notice of Extraordinary General Meeting (2010-09-03)
• Circular - Non-Exempt Connected Transaction (1) Subscription Of New Shares Under Special Mandate By Datang Telecom Technology & Industry Holdings Co., Ltd. And (2) Release Of Datang Telecom Technology & Industry Holdings Co., Ltd. From Lock-Up Restriction (2010-09-03)
• Reply Form (2010-09-03)
• Notification Letter and Change Request Form to registered shareholders (2010-09-03)
• Notification Letter and Request Form to Non - Registered Shareholders (2010-09-03)
• 2010 Interim Report (2010-09-03)
• Closure of Register of Members (2010-09-01)
• Announcement of Unaudited Interim Results for the Six Months Ended June 30, 2010 (2010-08-27)
• Non-Exempt Connected Transaction (1) Subscription f New Shares Under Special Mandate By Datang Telecom Technology & Industry Holdings Co., Ltd. And (2) Release Of Datang Telecom Technology & Industry Holdings Co., Ltd. From Lock-Up Restriction (2010-08-16)
• Notification of Board Meeting (2010-08-16)
• SMIC Reports Results for the Three Months Ended June 30, 2010  (2010-08-10)
• SMIC 65-nm Technology Successfully Moves to Volume Production (2010-08-03)
• SMIC Schedules Second Quarter 2010 Webcast Conference Call (2010-07-30)
• Notification of Board Meeting (2010-07-29)
• SMIC and Virage Logic Extend Partnership to 40nm LL Process Technology (2010-07-22)
• Overseas Regulatory Announcement (2010-07-21)
• Completion of Placing of New Shares under General Mandate (2010-07-15)
• Placing of New Shares under General Mandate (1) Potential Subscription of New Shares under Special Mandate by Datang Telecom Technology & Industry Holdings Co., Ltd. And (2) Release of Datang from Lock-up Restriction; Non-exempt Connected Transactions; Pre-emptive Right of TSMC (2010-07-08)
• Potential Non-exempt Connected Transactions (1) Potential Exercise of Pre-emptive Right and Further Subscription by Datang and (2) Release of Datang from Lock-up Restriction; Pre-emptive Right of TSMC (2010-07-07)

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