Press Releases

SMIC Reports 2008 Third Quarter Results

30 Oct 2008

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 [2008-10-30] -- 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, 2008.

Third Quarter 2008 Highlights:
‧ Overall revenue increased to $375.9 million in 3Q08, up 9.6% from 2Q08. Specifically, advanced logic sales from 0.13 micron and 90 nanometer technology nodes have increased by 23.3% in 3Q08 quarter-on-quarter.
‧ Simplified average selling price (“ASP”) increased by 2.1% from $853 in 2Q08 to $871 in 3Q08.
‧ Gross margin improved to 7.2% in 3Q08 compared to 6.1% in 2Q08.
‧ The Company reduced net loss to $30.3 million in 3Q08 as compared to the net
loss of $45.6 million in 2Q08.

Commenting on the quarterly results, Dr. Richard Chang, Chief Executive Officer of SMIC remarked, “In terms of the third quarter performance, I am pleased to see a 9.6% quarter-over-quarter increase in the total revenue. The revenue growth is primarily due to higher logic demand as well as higher ASP from change in product mix. Our total logic wafer shipments in the third quarter increased 9.9% quarter-over-quarter and logic sales accounted for 87.4% of our total revenue in the third quarter. In terms of customers, revenue contribution from fabless customers increased by 10.5% quarter-over-quarter and 16.2% year-over-year. In terms of applications, we have experienced stronger sales in the communications sector, resulting in a 13.9% quarter-over-quarter increase in third quarter. In addition, sales in consumer applications also increased by 10.9% in the third quarter.DRAM as a percentage of our total revenue continued to decline to 2.4% in the third quarter. As a result of the depreciation and amortization expense of $198 million, we recorded a net loss of $30.3 million. Depreciation and amortization expense as a percentage of revenue decreased by 5% against the previous quarter. Moreover, starting 2009, the depreciation expense of our Shanghai 200mm facilities will drop to almost half within two years, which will further improve our bottom line. Our EBITDA margin improved from 42.5% in the second quarter to 45.5% in the third quarter.

During the third quarter, we continued to make progress in our key strategic initiatives. First, the conversion of DRAM capacity into logic is still on track with estimated completion by the end of this year. We expect that, once completed, our Beijing 300mm logic capacity at 2008 year-end will have increased more than 50% since the beginning of 2008.

In terms of our advanced technology node development, I am pleased to announce that SMIC has received all needed export licenses to enter into 32nm research and development in both logic and flash, starting January 1, 2009. In terms of our 65nm technology development, more than 20 products have already taped-out and are qualifying in different stages. Our 45nm collaboration with IBM is on schedule in accordance to plan, and we expect to qualify the technology and begin risk production in the second half of 2009.

We are pleased to see our Chinese customers making strong progress and advancing their technology nodes. Our China shipment quantity grew 28% in the third quarter, and our greater China revenue contributed to 31% of our overall revenue in the third quarter. As we have announced previously, as a result of technology collaboration with us, one of our Chinese customers successfully introduced the demodulator chip for China’s high-definition TV application. This was the first and the most comprehensive chip solution on the Chinese DTV market. In addition, another Chinese customer introduced mobile TV solutions based on the China Multimedia Mobile Broadcasting (CMMB) standard. CMMB was initiated by the Chinese government and now covers 37 cities. China has also recently begun building the infrastructure for the fully commercialized use of the TD-SCDMA network. Chinese customers are working together with SMIC to produce TD-SCDMA chips. TD-SCDMA has been under pilot testing and currently covers 10 cities in China, and is expected to expand to another 28 cities in the near future. Moving forward, we intend to continue to strengthen our geographical focus in domestic China by collaborating with local fabless design houses.

Under the current business environment, we are working hard to tightly control costs and intend to hold back any capacity expansion until we have clear visibility of end-customer demand. "

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) manufacturing service at 0.35um to 65nm and finer line technologies. Headquartered in Shanghai, China, SMIC has a 300mm wafer fabrication facility (fab) under pilot production 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 and a 300mm 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
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