Semiconductor Manufacturing International Corporation (SMIC) has reported revenues of $272.5 million for the fourth quarter of 2008, down 27.5%, compared with revenues in the previous quarter. It has also reported a net loss of $124.5 million for the fourth quarter of 2008, compared with the net loss of $30.3 million in the previous quarter.
Fourth Quarter 2008 Highlights:
For the 2008 full year, non-DRAM revenue increased by 14.3% YoY while revenue from China increased by 28.0% YoY.
Gross margin was -27.4% in fourth quarter of 2008 compared to 7.2% in third quarter of 2008 due to a significant drop in fab utilization.
Net cash flow from operations, however, increased to $171.2 million in fourth quarter of 2008 from $110.1 million in third quarter of 2008 due to a decrease in the use of working capital. Net cash flow from operations after deducting capital expenditure improved to $23.7 million in fourth quarter of 2008 from -$120.6 million in third quarter of 2008.
As a result of the new equity funding from a strategic investor and debt repayment during the quarter, the Company’s debt equity ratio improved to 39.7% as of fourth quarter of 2008 from 45.7% as of third quarter of 2008.
Simplified ASP fell 3.2% QoQ but increased 6.0% YoY to $843 in fourth quarter of 2008.
For the 2008 full year, simplified ASP was $840 as compared to $838 in 2007.
Commenting on the quarterly results, Richard Chang, chief executive officer of SMIC, remarked, Although our fourth quarter 2008 performance was impacted by the worldwide economic situation, we were able to achieve revenue in-line with our guidance. For the full year of 2008, consistent with our stated strategy of focusing on the non-DRAM business, we have managed to grow our non-DRAM revenue by 14.3% year-on-year despite a difficult fourth quarter. In addition, leveraging our strength in the China market, we have increased our sales to the domestic IC companies by 28% in 2008 relative to 2007.
Moving forward, we will continue our key strategy of capturing growth opportunities in China because we expect the Chinese economy to recover relatively quicker due to the numerous stimulus packages being implemented by the Chinese government which is expected to drive the local market demand, as well as infrastructure development such as the recent issuance of third generation (3G) wireless licenses. SMIC’s proven technology and track record in serving both China and global customers has enabled us in capturing China’s 3G opportunities. As part of our China strategy, we have formed a strategic partnership with Datang, a leader in China’s mobile telecommunication technologies. We expect that this partnership will position SMIC to be the primary supplier of the silicon requirements for Datang’s TD-SCDMA technology, China’s self-developed 3G wireless standard. We are committed to collaborating with world-class partners in better servicing various customers to enhance our leadership position in the China market. Currently, we are already producing CIS, Mobile CMMB, HDTV, RFID, and LCOS products for our Chinese customers and we expect our product portfolio to continue to strengthen.
In 2008, our total new customer tape outs increased 16% compared to the previous year. In the fourth quarter of 2008, new tape outs grew 9% year-over-year, and we expect new tape outs for the first quarter of 2009 to remain strong. In terms of our advanced technology development, we have achieved 45 nanometer silicon success ahead of schedule, and we released three of our own 65 nanometer standard cell libraries to our customers. Our Beijing fab DRAM conversion into logic capability has also been completed and now has a total capacity of 40,500 8-inch equivalent logic wafers per month.
In addition, we continue to strengthen our balance sheet. We have maintained positive EBITDA throughout the years, which we expect to continue into 2009. Our net cashflow from operations after deducting capital expenditure has increased to $24 million in the fourth quarter of 2008 from negative $121 million in the third quarter of 2008 as a result of a decrease in the use of working capital as well as tightened control over capital expenditure. As a result of the new equity funding from Datang and debt repayment, our debt equity ratio has improved to 39.7% as of the end of the fourth quarter as compared to 45.7% as of the end of the third quarter. We are also exercising tight capital expenditure and expense control during this downturn. We estimate that our capital expenditure for 2009 will be around $190 million, representing approximately a 72% decline from 2008. In addition, we are targeting to reduce our payroll costs by 15% in 2009 without workforce reduction. We thank our employees for their support during this difficult time.
Under the current business environment, the company plans to continue our focus on maintaining excellent customer relations, strengthening our product portfolio, focusing on the Greater China market, while continuing to develop advanced technology and reduce costs, in effort to position ourselves as a stronger and more competitive player in the foundry sector when the global economy recovers.