SMIC's revenues for the second quarter of 2011 declined 4.9% sequentially to US$352.4 million. "This decline was in part due to our customer transition to 65nm and 45nm and largely due to unexpected changes in some of our customers' programs - including some customers skipping 65nm to work on 45nm and one customer abandoning their lower-end baseband business," said SMIC CFO Gary Tseng.

Second-quarter revenues represent a 5.9% decline compared to the US$381.1 million posted in the second quarter of 2010.

Gross margin slid to 14.3% in the second quarter from 18.6% in the first, due to fewer wafer starts as a result of weakened demand, SMIC revealed. Revenues matched the company's guidance of a 3-7% sequential drop while gross margin fell below its previous estimate of 15-18%.

Looking forward, SMIC said revenues for the third quarter of 2011 are likely to decrease 14-17% sequentially, with gross margin falling to 0-3%. "The overall demand from both international and domestic customers is weaker than expected due to relatively soft end-market consumption and high inventory, in addition to sudden customer product changes," Tseng indicated.

"Our visibility into fourth quarter demand is currently limited, and the overall global economic outlook also contributes to uncertainty," Tseng continued. "We currently do not see any particular strengths from customer demand for back-to-school and holiday seasons, so we currently remain cautious on our overall second half 2011 outlook."

By: DocMemory
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