“SMIC intends to be a globally competitive foundry powerhouse,” says the new CEO of Shanghai foundry SMIC, Tzu-Yin Chiu.
However, SMIC’s Q3 revenue was down 12.9% on Q2, and down 24% on Q3 2010, to $306.9m because of a fall in Q3 capacity utilisation to 61%, down from 73.3% in Q2
Q3 gross margin was 1.4% compared to 14.3% in Q2. The decrease of 12.9% points was mainly due to a decrease in capacity utilisation.
Q3 OpEx was $89m compared to Q2’s $86.8m although the Q3 figure was offset by a government subsidy of $9m. The $2.2m increase was mainly due to larger R&D expenses.
Q4 revenues are expected to fall 5-8% on Q3 with gross margin ranging from minus 3% to minus 6%. Q4 OpEx is expected to be $89m to $92m.
Chiu says that SMIC’s near term plan is to boost overall capacity utilisation, maintain the company’s technology progression and pursue value-added differentiation.
“We are targeting some 45nm wafer revenue by the end of the year,” says Chiu, “our 32nm and 28nm development is on schedule as planned and we target to have both ready in 2013.”
As well as trying to fill its fabs, SMIC is “in the process of researching and analysing methods for differentiation as well as identifying specific markets, especially in China that are best suited for SMIC,” says Chiu.
Q3 cash flow was $106.9m positive up from $79.4m in Q2 thanks to collecting debts and reducing capex and would have been better if the company had not paid down $142m of short-term borrowing.
Consumer revenue dropped about 19.4% sequentially, contributing 45.8% to the total revenue.
Communications revenue declined 3.5% sequentially, contributing 41.7% to the total revenue.
North American revenues fell 15.7% on Q2, and contributed 55.7% of total revenue.
Revenue from China decreased 11.7% on Q2 and contributed 30.7% of revenue.
Eurasia revenue declined 3% and contributed 13.6% of total revenue.
CapEx for the first three quarters of 2011, was $709.3m. Total 2011 CapEx is expected to be about $800m.