SMIC Reports 2019 First Quarter Result

May 8, 2019 -- SMIC reports unaudited results for the three months ended March 31, 2019

• Revenue was $668.9 million in 1Q19, compared to $787.6 million in 4Q18 and $831.0 million in 1Q18. Excluding the recognition of the technology licensing revenue (the “Licensing Revenue”), revenue was $668.9 million in 1Q19, compared to $787.6 million in 4Q18 and $723.4 million in 1Q18.
• Gross profit was $122.1 million in 1Q19, compared to $134.1 million in 4Q18 and $220.2 million in 1Q18. Excluding the recognition of the Licensing Revenue, gross profit was $122.1 million in 1Q19, compared to $134.1 million in 4Q18 and $112.6 million in 1Q18.
• Gross margin was 18.2% in 1Q19, compared to 17.0% in 4Q18 and 26.5% in 1Q18. Excluding the recognition of the Licensing Revenue, gross margin was 18.2% in 1Q19, compared to 17.0% in 4Q18 and 15.6% in 1Q18.

Second Quarter 2019 Guidance:

The following statements are forward looking statements based on current expectations and involved risks and uncertainties, some of which are set forth under “Safe Harbor Statements” below.The Company expects:

• Revenue toincreaseby 17%to 19% QoQ.
• Gross margin to range from 18%to20%.
• Non-GAAP operating expenses, excluding the effect of employee bonus accrual, government funding, impairment loss of tangible and intangible assets, gain or loss on the disposal of machinery and equipment and gain from the disposal of living quarters, to range from $269million to $273million.
• Non-controlling interests of our majority-owned subsidiaries to range from positive $34 million to positive $36million (losses to be borne by non-controlling interests).

Dr. Zhao Haijun and Dr. Liang Mong Song, SMIC’s Co-Chief Executive Officers commented, “For the past two years, SMIC was in a period of transition. Through optimization and reformation, we enhanced our capability and accelerated R&D significantly. We have been building up competency and competitiveness to accelerate our pace and catch up with the new trends in the industry, meet the needs of the upcoming market opportunities, emerge from the transitional period and accelerate our growth.”

Dr. Zhao said, “Looking at 2019, the first quarter seems to be the bottom for us, as the inventory adjustment cycle is coming to an end and new mature technology platforms that SMIC worked hard to prepare are also ready. New applications such as analog power management, and CMOS RF for Internet of Things will drive revenue growth. Revenue in the second quarter is expected to increase by 17% to 19% quarter over quarter.”

Dr. Liang said, “Our FinFET technology R&D is progressing smoothly, as our 12nm is entering customer engagement, and the research and development of our next generation of FinFET is progressing well based on our accumulated technology development. The construction of SMIC South FinFET Fab was completed successfully, and we have begun capacity deployment. We will prepare ourselves to be ready for rapid transitions in customer technology migration to face the ever-changing industry environment.”