SMIC's decline widened to 8%; the company said increased depreciation would put pressure on net profit

After the release of the interim financial report, SMIC fell on August 7 and has fallen by more than 8% so far.

According to the financial report released on August 6, 2020, SMIC achieved revenue of approximately US$939 million in Q2, a month-on-month increase of 3.7% and a year-on-year increase of 18.7%; gross profit was approximately US$249 million, a month-on-month increase of 6.4% and a year-on-year increase of 64.5%; gross profit margin was 26.5%, an increase of 0.7 percentage points from the previous month and 7.4 percentage points from the previous year; the profit attributable to the company was US$138 million, a record high for a single quarter, a month-on-month increase of 115% and a year-on-year increase of 644.2%; basic earnings per common share were US$0.03. The announcement stated that the increase in revenue and gross profit was mainly due to an increase in wafer shipments and changes in product mix.

By region, in the second quarter of 2020, the proportion of SMIC's domestic revenue increased significantly. Specifically, revenue from mainland China and Hong Kong accounted for 66.1%, up 4.5 percentage points and 9.2 percentage points from the previous quarter and year-on-year respectively; revenue from the United States accounted for 21.6%, down 3.9 percentage points and 5.9 percentage points from the previous quarter and year-on-year respectively; revenue from Eurasia accounted for 12.3%, down both from the previous quarter and year-on-year.

On the morning of the 7th, SMIC executives said in a performance conference call that China's semiconductor industry and Asia's semiconductor industry are getting stronger and stronger. China's local equipment, accessories, and materials have been working hard to develop, but now the scale is relatively small. The company is very happy to see that major companies have been listed and are doing research and development. The company is optimistic about the future, but this takes time. What SMIC is doing now is to innovate with the industry and try to use it, but SMIC is an international company and does not have too much inclination.

Zhou Zixue, Chairman of SMIC, said that driven by many new businesses, the long-term demand for the IC foundry industry is strong. The company will plan capital expenditures and capacity construction in a rhythmic manner, make good use of the raised funds, and drive the company's performance growth with continuous innovation.

Before the market opened today, SMIC issued an announcement stating that the net funds raised from the initial public offering of A shares were 45.663 billion yuan (before the exercise of the over-allotment option). The funds raised will be used for the 12-inch chip SN1 project, the mature process production line construction project, the reserve funds for advanced and mature process R&D projects, and to supplement working capital.

Following the increase in capital expenditure in the Q1 financial report, SMIC's Q2 financial report further significantly increased its capital expenditure plan. The planned capital expenditure for 2020 increased from US$4.3 billion to US$6.7 billion. In this regard, SMIC's Chief Financial Officer Gao Yonggang said that the increase in capital expenditure is mainly to meet customers' demand for advanced and mature processes.

SMIC also stated that the construction target of advanced production capacity is 15,000 wafers by the end of this year. Mature production capacity is indeed very tight at present, and a lot of funds are needed. The financial report shows that the company's Q2 shipped wafer capacity utilization rate was 98.6%, up 0.1 percentage points from the previous quarter and up 7.5 percentage points from the previous year.

In addition, SMIC said in response to questions that the increase in depreciation this year will affect the gross profit margin by about 5 percentage points. There is pressure on net profit from gross profit margin, but the company is also looking for ways to alleviate it.

via Futu NiuNiu