Hitting what it believes to be its low point in the current semiconductor cycle, China’s Semiconductor Manufacturing International Corp. (SMIC) today reported a $40.4 million net loss, a 25 percent increase over Q1’s $30 million loss, on sales of $279.5 million, which were up 12.3 percent sequentially from $248.8.

Coinciding with its Q2 loss, SMIC has elected Yang Yuan Wang as chairman of the board to succeed Richard Ru Gin Chang, who will remain president and CEO, effective immediately.

“The second quarter of 2005 marked what we believe to be the trough of this current semiconductor cycle,” said Chang in a statement. “During this period, our financial performance was consistent with our expectations. Despite the general weakness in the semiconductor industry as a whole and in particular the foundry sector, we continued to increase our revenues during the second quarter of 2005.”

And with Wang -- who has served SMIC as a non-executive director since 2001 and has more than 40 years of experience in the semiconductor industry -- behind the wheel, the company looks to drive growth and finish the year on a positive note.
 
“The appointment of Professor Wang as our chairman of the board further illustrates our dedication to a high standard of corporate governance where the role of chairman is separate from that of CEO,” said Chang in a separate statement. “Prof Wang is well respected in the semiconductor industry and we are confident of his impartiality in enhancing our standards of corporate governance and level of transparency.”

Despite its loss for the quarter, SMIC reported an increase in capacity to 139,025 8-inch equivalent wafers per month and a utilization rate of 87 percent during Q2. The foundry added 20 new customers during the quarter, more than half of which are based in Mainland China – a sign that progress is ongoing in the region, the company said.

On the technology front, SMIC’s 90nm customer products are currently under qualification and remain on schedule. The company added that its 65nm technology process is under development at its 300mm fabs.

SMIC is also looking to increase its presence in the consumer electronics and telecommunication sectors, inking a licensing deal Thursday with Saifun Semiconductors Ltd. to gain access to its NROM technology for the production of flash memory-based products. At the same time, the company is in the midst of a wafer reclamation project in Shanghai to produce solar power modules. Facility installation is slated for the third quarter, and the company expects to move equipment in during the fourth quarter.

Those projects, Wang’s appointment and a shift in market conditions have SMIC officials optimistic about the next two quarters.

“Based on the demand forecasts provided by our customers, we believe that the second half of 2005 will be a period of financial growth and improvement and have increased our projected capital expenditure budget to $1.1 billion for 2005,” Chang said. “With the semiconductor industry gearing up for a rebound in the second half of the year, we have secured an additional $600 million in financing which we believe, together with our expected cash flow from operations, will be sufficient to cover our funding requirements for 2005 and into 2006.”

By: DocMemory
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