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» Semiconductor Manufacturing International Corporation Q2 2010 Earnings Call Transcript
Please also be reminded of the Safe Harbor statement which provides as follows. SMIC's statements of its current expectation are forward looking statements, subject to significant risk and uncertainties.The actual results may differ materially from those contained in such forward-looking statements. Information as to those factors that could cause actual results to vary can be found in SMIC's Form 20-F filed with the United States Securities and Exchange Commission on June 29, 2010. For today's agenda, our President and CEO, Dr. David N.K. Wang will speak on SMIC's key initiatives and comment on our business. Following that, CFO, Gary Tseng will walk us through our first quarter 2011 financial results and followed by second quarter 2011 guidance. Then we will open the call for questions-and-answers. I will now turn the call over to our CEO, Dr. David Wang. Dr. David N. K. Wang Thank you, En-Ling. Good morning and good evening to everyone. Thank you for joining us. Today, I’m going to highlight our first quarter performance, our outlook for 2011, several of our recent events, our technology progress and our position in the strengthening Chinese market. Highlighting our first quarter performance, revenue increased 7% year-over-year and decreased 9% quarter-over-quarter to US$371 million. The quarter-over-quarter revenue decline was largely due to first quarter seasonality and our key customer transition through 65 and 45-nanometer. Despite these situations, China is placed resilient and in the first quarter, China sales grew 54% year-over-year and 3% quarter-over-quarter, and now account for 36% of our revenue. Looking into the second quarter, as mentioned previously, our customer transition to 65-nanometer and 45-nanometer were also impact our second quarter revenue, for the well rebound in the second half of the year. As we have a large percentage exposure for the communications market, Q2 is also in part – impacted by communication customers experiencing paradigm shifts in the T&T [ph] sector. Due to this paradigm shift the Japan earthquake disruption for semiconductor supply chain, sound continued adjustment to inventory levels, as well as our continued customer transition to 65-nano and 45 nanometers, we expect our Q2 revenue to decrease as guided.
We do not believe the market adjustment and the supply chain issues will carry significantly into the second half, cautiously optimistic about growth in the second half of this year.In recent event we are happy to have announced an agreement with China Investment Corporation or CIC, a sovereign wealth fund investment institution, to invest in SMIC for convertible preferred shares and warrants. Following this announcement, Datang, our largest shareholder also supported us by expressing their intention to exercise its pre-anti right by investing additional cash for convertible preferred shares and pre-anti warrants. We welcome our new and existing shareholders and greatly appreciate their confidence in our future execution. These capital intentions will further help SMIC to expand its technology roadmap and strengthen our good hope as one of the leading boundaries globally. Another significant event I would like to highlight, on May 12th, we announced the signing of a joint venture with Hubei Science & Technology Investment Corporation, to jointly invest in and manage the 12-inch wafer production line of Wuhan Xinxin. Xinxin currently has both 90-nanometer and 65-nanometer in volume production with 45-nanometer production expected in 2012. This joint cooperation will serve as a strategic component in our expansion plan over the next five years and will allow us to quickly expand and increase market share on advanced technology capacity. Now, let me move on to our advanced technology developments. Our 65-nanometer revenue increased by more than one-third quarter-over-quarter to over 13% of revenue, 65-nanometer continues to be a key revenue driver for us this year, continued growth is expected as planned more takeout for 65-nanometer will more than double in second quarter, compared to first quarter of 2011. Customers are also taking advantage of our costs enhanced to 55-nanometer process. As an example in early March we announced entering 55-nanometer production with our Chinese customer RDA. Our 45 and 40-nanometer is also progressing and we have a leaving custom takeouts scheduled for this quarter. Read the rest of this transcript for free on seekingalpha.com