SMIC Expects Record Roll to Continue

TAIPEI—Semiconductor Manufacturing International Corp. (SMIC), China’s largest foundry, said it expects strength in its business to continue as it rides a wave of demand in China.

The company forecast in a conference call to announce its third-quarter results that sales in the current quarter will rise as much as 7 percent from the record $774.8 million in revenue it posted during the July to September period this year.

“SMIC is seeing robust demand across the board, and we reiterate our growth target of 20% compounded annual growth from 2016 to 2019,” said SMIC CEO Tzu-Yin Chiu. “In 2016, SMIC is growing in excess of 28 year on year. We are forecasting growth for both the fourth quarter of 2016 and the first quarter of 2017. We are on track to achieve another record year of revenue and net profit.”

The company said it is addressing demand by preparing for expansion. In the last month, SMIC announced several new fab projects in the Chinese cities of Tianjin and Shenzhen that it plans to roll out based on demand, technological readiness and sustained profitability. A fab in Shanghai will increase the company’s supply of finer geometry products.
China accounted for 51.6 percent of SMIC’s sales during the third quarter, followed by North America with 28.3 percent. Communications chips are SMIC’s largest segment by sales. The company’s cash cow process technology is 40/45nm, more than two generations behind larger foundry rivals such as Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung.
Even so, SMIC has been cruising along at nearly full utilization in its six fabs in the Chinese cities of Shanghai, Beijing, Tianjin and Shenzhen since the middle of 2015. In addition, the company has completed the takeover of LFoundry in Italy this year. The company said it will nudge up capital expenditures in 2016 to $2.6 billion from the $2.5 billion it planned earlier this year, with the increase in capex going toward expanded output of 55nm products.
SMIC said it is likely that the company’s 2017 capex will be less than the $2.6 billion budgeted for this year.
SMIC said it expects to outpace global industry growth during the next few years.
28nm
The company expects to double its revenue from its leading edge 28nm process during the fourth quarter this year from the amount it made during the third quarter. That process node accounted for 1.4 percent of overall sales in the third quarter.
SMIC said it aims to expand output at its Beijing fab to meet demand for 28nm and 40nm products. The company is ramping 8-inch and 12-inch production at several locations with a combination of second-hand and new equipment.
SMIC's largest competitors are years ahead with process technology. TSMC expects to see its first revenue from 10nm during the first quarter of 2017.

http://www.eetimes.com/document.asp?doc_id=1330810