| SAN JOSE, Calif. When it reports on Thursday (July 28), Chinese silicon foundry provider Semiconductor Manufacturing International Corp. (SMIC) is projected to meet expectations for Q2, with a possibility of moving out of the red in Q3, according to an analyst. |
C. William Lu, an analyst with investment banking firm Piper Jaffray (Minneapolis), also raised his forecast for SMIC (Shanghai) for 2005, due to a better-than-expected outlook for the second half.
For Q2, SMIC is projected to lose $0.09 a share on sales of $283.6 million, according to the firm. The company’s results are projected to be “in line with guidance, with blended ASP down 2 percent quarter-over-quarter, wafer shipments up 17 percent, and a utilization rate at 87 percent,” Lu said in a report. “[SMIC’s] logic customers were still cautious in early Q2, but demand picked up toward the end of Q2.”
SMIC reported sales of $248.8 million in the first quarter of 2005, down 14.7 percent from $291.8 million in the prior quarter. SMIC said its net loss increased to $30.0 million in the first quarter of 2005, compared to a loss of $11.2 million in the fourth quarter of 2004.
The losses are partly due to a legal settlement with Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC). Last year, TSMC said that it has reached an out-of-court settlement with Chinese silicon foundry rival SMIC over patent infringement and related issues. Under the terms, SMIC will pay TSMC some $175 million to settle the bitter patent and trade secret suit.
Meanwhile, after a string of losses, SMIC could achieve breakeven results in the third quarter of 2005, versus Lu’s previous estimates for EPS of minus $0.05 and consensus of minus $0.02.
“We expect SMIC to guide for strong sequential revenue growth in 3Q,” he said. “We believe revenue could be up 15-20 percent, with ASP up 10 percent quarter-over-quarter and a fab utilization rate above 90 percent.”
For Q4, SMIC’s growth is projected to be moderate, “with wafer shipment up 6 percent, ASP up modestly, and a utilization rate around 95 percent,” he said.
Demand is strong for leading-edge processes. “We see SMIC gaining traction with its 130-nm copper production line beyond the Texas Instrument backend business,” Lu said. “Several communication and consumer customers are engaging with SMIC for full 130-nm copper chip production, albeit at small volumes near term.”
As a result, Lu is raising his estimates for SMIC in 2005. Sales are projected to hit $1.24 billion, up from $1.17 billion. EPS is now minus $0.11, up from minus $0.22 for the year.