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Semiconductor Manufacturing International's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Our Shanghai 8-inch fab is heavily utilized, mainly driven by power management IC and other specialty ICs. We continue to allocate more capacity for this increasing power management IC demand. In the meantime, through efficiency improvement, we have been able to augment capacity by about 11,000 wafers per month, a 15% increase, with virtually no CapEx.

Our Beijing 12-inch fab achieved record-high utilization and revenue level, of which the revenue in the second quarter grew 45% quarter over quarter. Beijing's growth driver were mainly smartphone networking, tablet and connectivity applications. Also in the second quarter we have aligned the equipment in our Beijing fab for greater flexibility in order to handle the strong 65nm orders. We currently foresee that our Beijing fab's 65nm/55nm shipment will continue to increase into the third quarter, primarily driven by demand from our mobile phone and other consumer customers.

At our Tianjin fab, we transferred a significant amount of loading from our Shanghai 8-inch fab with excellent results. Tianjin fab has significantly increased loading in the second quarter and we expect the Tianjin fab to continue to be heavily loaded in the third quarter.

Apart from macro reasons, the increase in demand and utilization is also driven by fundamental performance improvement which include our customer service, product mix, yield improvement, cycle time and defect density level. These enhancements effectively helped us in gaining customer confidence and recognition. For example, with our precision execution on 65nm products for one of the leading customers, we are now considered by them as a top-tier foundry based on our control of excursions, yield and cycle time performance. This results in accomplishing a stronger partnership with these leading customers and more advanced technology business.

Regarding the overall demand for our advanced technology, we are currently expecting that the number of new tape-out for 65nm and below will grow 30% from the second quarter into the third quarter. A large part of the expected growth was driven by our consistent track record and delivery quality -- delivering quality products for our customers, and thus they are expanding their product portfolios to be sourced from SMIC.

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