Semiconductor Manufacturing International Corp
HKEX:981
Semiconductor Manufacturing International Corp
In the competitive and rapidly-evolving world of chip production, Semiconductor Manufacturing International Corp. (SMIC) stands as one of China's premier players. Founded in 2000 and headquartered in Shanghai, SMIC has carved a niche in the global semiconductor industry by providing comprehensive foundry services. This means SMIC doesn't design or sell chips under its brand but focuses on manufacturing integrated circuits designed by its clients across various sectors. The company leverages cutting-edge technology to produce a diverse array of semiconductor components, utilizing advanced nodes to cater to industries ranging from consumer electronics and telecommunications to automotive solutions. By maintaining robust manufacturing capabilities, SMIC ensures high-quality, large-scale production, thus keeping prominent international clients engaged in its operations.
SMIC's revenue model is primarily driven by its ability to attract significant foundry orders due to its strategic location, bolstering China's tech aspirations amidst global supply chain shifts. The company thrives by offering competitive pricing and reducing the geographic risk that many global companies face when diversifying their manufacturing bases. Moreover, SMIC capitalizes on China's increasing semiconductor demand, powered by the country's push for technological self-reliance and innovation. It's this blend of strategic positioning and technical prowess that allows SMIC not only to sustain its growth within China's borders but also to leave a significant imprint on the global semiconductor landscape.
Earnings Calls
In the fourth quarter of 2024, Semiconductor Manufacturing International Corporation (SMIC) reported revenue of $2.2 billion, a sequential increase of 1.7%, and a gross margin rise to 22.6%. For the full year, revenue hit $8.03 billion, growing 27% year-over-year. Looking forward, SMIC anticipates a 6% to 8% sequential revenue growth for Q1 2025 with gross margins between 19% and 21%. Key metrics include a capital expenditure of $7.33 billion and significant customer demand from China, reflecting a transformational shift in the market. The company's strategic focus continues on enhancing capacity and product mix amidst rising competition.
Management
Dr. Xunfeng Liu is a prominent figure in the semiconductor industry, known for his significant contributions to Semiconductor Manufacturing International Corporation (SMIC). He holds the position of Executive Vice President and Chief Operating Officer at SMIC, where he plays a critical role in overseeing the company’s operations and strategic developments. Dr. Liu holds a doctorate in electrical engineering with a specialization in areas pertinent to semiconductor fabrication and technology. His profound understanding of semiconductor processes and his leadership skills have been instrumental in enhancing SMIC’s manufacturing capabilities and technological advancements. With extensive experience in the industry, Dr. Liu is recognized for his expertise in the development and implementation of innovative semiconductor technologies, contributing to SMIC's position as a leading semiconductor foundry. His leadership extends to streamlining operations and improving production efficiency, ensuring that SMIC remains competitive in the rapidly evolving semiconductor market. Dr. Liu’s contributions are a vital element of SMIC’s success, driving the company's growth and adaptation within the global semiconductor landscape.
Dr. Mong-Song Liang is a highly respected figure in the semiconductor industry, renowned for his expertise in the field of semiconductor manufacturing and technology development. He is particularly recognized for his leadership role at Semiconductor Manufacturing International Corporation (SMIC), one of the leading semiconductor foundries in China. Dr. Liang holds a Ph.D. in electrical engineering and has an extensive background in advanced semiconductor processing technologies. Prior to joining SMIC, he gained significant experience and contributed to technological advancements at various major semiconductor companies, including Taiwan Semiconductor Manufacturing Company (TSMC), where he played a pivotal role in the development of several generations of process technologies. At SMIC, Dr. Liang has been instrumental in driving innovation and advancing the company's technological capabilities, particularly in the development of cutting-edge nodes and improving manufacturing processes. His expertise has been crucial in helping SMIC compete on the global stage, especially in the challenging environment of cutting-edge semiconductor manufacturing. Dr. Liang's work is highly regarded in the industry, and he holds numerous patents and has contributed to many publications in the field of semiconductor technology. His leadership continues to influence the direction of semiconductor development and manufacturing in China and beyond.
Dr. Junfeng Wu is an esteemed figure in the semiconductor industry, currently serving as an executive officer at Semiconductor Manufacturing International Corporation (SMIC). With a rich background in engineering and extensive experience in semiconductor fabrication, Dr. Wu has been pivotal in advancing SMIC’s technological capabilities and expanding its market reach. Dr. Wu has contributed significantly to process technology development, driving innovation in semiconductor manufacturing processes. His leadership has been instrumental in the company's efforts to enhance its production technologies and maintain competitiveness in the global market. Under his guidance, SMIC has made progress in scaling its technological processes and improving production efficiencies, further solidifying its position as a leading pure-play semiconductor foundry in China. His expertise in the field, combined with a strong academic foundation, has enabled him to steer strategic initiatives and foster collaborative endeavors that align with industry standards and advancement trajectories. Dr. Wu's proficiency and forward-thinking approach continue to influence SMIC’s strategic direction and its journey towards achieving technological breakthroughs and sustainable growth in the semiconductor sector.
Xin Zhang is a prominent figure in the semiconductor industry, known for his role as an executive at Semiconductor Manufacturing International Corporation (SMIC). SMIC is one of the leading semiconductor foundries in the world, and Xin Zhang has been instrumental in steering the company's strategic and operational initiatives. Under his leadership, SMIC has focused on advancing its technological capabilities and expanding its production capacity, solidifying its position in the competitive global semiconductor market. With significant experience in the field, Xin Zhang has contributed to innovative developments in semiconductor manufacturing processes, aligning with global industry standards and catering to a wide range of clients worldwide. Xin Zhang's work at SMIC has involved collaborating with various stakeholders to enhance the company's R&D efforts, optimizing supply chain management, and exploring new business opportunities to drive growth. His expertise in the semiconductor domain is complemented by a deep understanding of market dynamics, which has helped SMIC navigate challenges in the rapidly evolving tech landscape.
Zhi Li is a prominent executive in the semiconductor industry, associated with Semiconductor Manufacturing International Corporation (SMIC), one of the largest semiconductor foundries in Mainland China. At SMIC, Zhi Li has held significant roles that contribute to the company’s strategic direction and technological advancements. With a strong background in engineering and management, Zhi Li plays an important role in leading projects that enhance SMIC's production capabilities and expand its market reach. His expertise is crucial in navigating the challenges of the semiconductor industry, particularly in areas such as process technology development and production efficiency. Zhi Li's leadership is also pivotal in fostering innovation and ensuring that SMIC remains competitive in the global semiconductor market. Through his contributions, SMIC continues to advance in technology nodes and expand its customer base, positioning itself as a key player in the global supply chain. Zhi Li's influence and decisions impact not only the company but also the broader industry, as SMIC is a vital component of the global electronics ecosystem.
As of the latest available information, Guangli Guo serves as the Chief Financial Officer of Semiconductor Manufacturing International Corporation (SMIC). She is a Certified Public Accountant (CPA) with extensive experience in finance and accounting. Prior to joining SMIC, Guangli Guo held a variety of senior financial roles in notable companies, which helped her develop a robust expertise in corporate finance, financial strategy, and operational management. Throughout her career, Guo has been known for her strategic vision and leadership capabilities, enhancing financial performance, driving efficiency, and contributing to business growth. Her tenure at SMIC is marked by a commitment to financial integrity and excellence, playing a crucial role in the company's financial planning and policy development. Her contributions have been instrumental in navigating the complexities of the semiconductor industry's global financial landscape. Please verify this information from direct company releases or official publications for the most accurate and updated biography.
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[Foreign Language] Welcome to Semiconductor Manufacturing International Corporation's Fourth Quarter 2024 Webcast Conference Call. Today's call will be simultaneously streamed through the Internet and telephone. [Operator Instructions] [Foreign Language] Without further ado, I'd like to introduce Ms. Guo Guangli, Senior Vice President and Board Secretary to host the webcast.
[Foreign Language] Greetings. Welcome to SMIC's Fourth Quarter 2024 Webcast Conference Call. Attending today's call are Dr. Zhao Haijun, Co-Chief Executive Officer; Dr. Wu Junfeng, Senior Vice President and person in charge of Finance.
[Foreign Language] Let me remind you that today's presentation may contain forward-looking statements that do not guarantee future performance but represent the company's expectations and are subject to inherent risks and uncertainties. Please refer to the forward-looking statements in our earnings announcement. Please note that today's earnings statement is is presented in accordance with International Financial Reporting Standards, IFRS, and all currency figures are in U.S. dollars, unless otherwise stated.
[Foreign Language] I will now hand the call to Dr. Wu Junfeng to introduce the company's financial status.
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First, I will report our unaudited operating results for the fourth quarter and full year of 2024, followed by our guidance for the first quarter of 2025.
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[Interpreted] The fourth quarter operating results are as follows: Revenue was $2,207 million, up 1.7% sequentially. Gross margin was 22.6%, up 2.1 percentage points sequentially. Profit from operations was $214 million. EBITDA was $1,280 million. EBITDA margin was 58%. Profit attributable to the company was $108 million.
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[Interpreted] The company's unaudited results for 2024 are as follows: Revenue was $8,030 million. Gross margin was 18%. Profit from operations was $474 million. EBITDA was $4,380 million. EBITDA margin was 54.5%. Profit attributable to the company was $493 million. Capital expenditure was $7,326 million.
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[Interpreted] Moving to the balance sheet. At the end of 2024, the company had total assets of $49.2 billion, of which, total cash on hand was $15 billion, total liability was $17.3 billion, of which, total debt was $11.6 billion, total equity was $31.9 billion, debt to equity was 36.4%, and net debt to equity was negative 10.6%.
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[Interpreted] In terms of cash flow, in 2024, we generated $3,176 million cash from operating activities. Net cash used in investing activities was $4,518 million. Net cash generated from financing activities was $1,608 million.
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[Interpreted] For the first quarter 2025, our guidance is as follows: Revenue is expected to grow 6% to 8% sequentially, and gross margin is expected to be in the range of 19% to 21%.
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[Interpreted] This concludes the financial status. Thank you. [Foreign Language] Thank you, Dr. Wu. Next, I will hand the call to Dr. Zhao Haijun to comment on operations.
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[Interpreted] Greetings. Today is the Lantern Festival. Wish you all a belated happy Chinese New Year and a joyful Lantern Festival. Thank you for attending SMIC's Fourth Quarter 2024 Earnings Webcast Conference Call.
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[Interpreted] Traditionally, the fourth quarter followed seasonal pattern, and the customers' willingness of taking goods was relatively low. However, on the basis of the incremental 28,000 12-inch wafer capacity in the quarter, the product mix was optimized and the blended ASP increased by 6% quarter-over-quarter, which roughly offset the impact of declining shipments on revenue and rising depreciation on gross margin.
Combining the above factors, the company's revenue in the fourth quarter increased by 1.7% sequentially to exceed $2.2 billion, realizing 7 consecutive quarters of growth. Gross margin increased by 2.1 percentage points sequentially to 22.6%.
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[Interpreted] Next, let's turn to the full year. The overall semiconductor market showed a recovery trend in 2024. The industry of design companies roughly returned to a healthy level. The main industry reshuffled to domestic supply chain at a relatively fast pace in 2024 in order to meet market and customer demand. The company took steps to be fully prepared. The pace of capacity expansion was accelerated. The comprehensiveness of platforms was further improved and the new products of domestic customers were verified and ramped up quickly. Thus, quarterly revenue in 2024 continuously climbed, and revenue growth for the full year exceeded the original expectations at the beginning of that year.
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[Interpreted] According to the unaudited financial results, the company's revenue in 2024 increased by 27% year-over-year to $8.03 billion, hit a record high. Gross margin was 18%, down 1.3 percentage points year-over-year due to the increase in depreciation and others. By region, revenue from China, Americas and Eurasia accounted for 85%, 12% and 3%, respectively. Among these, attributable to the reshuffling of industry chain and the increase in customer market share, capitalized by the demand for localized manufacturing, revenue from Chinese customers increased by 34% year-over-year. By size, wafer revenue from 12-inch and 8-inch both increased which accounted for 77% and 23%, respectively. Among these, revenue from 12-inch increased by 35% year-over-year, primarily attributable to the expansion of capacity scale and that the new capacity could be verified and pulled into production relatively quickly.
Wafer revenue by application, smartphone, computer and tablets, consumer electronics, connectivity and IoT, industrial and automotive accounted for 28%, 16%, 38%, 10% and 8%, respectively, attributable to the above-mentioned factors and the national policies of consumption similars. Revenue from consumer electronics, smartphones and other applications increased significantly year-over-year.
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[Interpreted] By product platforms, for those advantages technology platforms such as analog BCD, CIS, display driver IC and others, revenue continue to grow. In 2024, the process, iterations and product performance upgrade were rapidly implemented across multiple technology platforms. In a field of analog device, the company continued to expand high-voltage, large current, high-performance and high-reliability 8-inch and 12-inch technology platforms quickly engage various types of end market applications including customer electronics, industrial control, automotive, electronics and new energy.
In the field of high-voltage display driver IC, the company continued to deliver the 28-nanometer high VC mode technology into mass production and to end market applications with ultra-low power consumption and performance enhancements. There were increasing customer demands that surpass the offering of capacities.
In the field of DIF and ISP, the company offers CIS products with higher resolution, smaller pixel size and higher density and rapidly introduce image signal processor solutions with better performance and ultra-low power consumption. Meanwhile, the company closely aligned with customer needs, benchmarks the industry's leading process and the newly launched numbers of power discrete device platforms, which have realized mass production and contributed revenue, mainly used in smartphones, industrial control, new energy and other fields.
In addition, the company continued to introduce high-performance, high-quality and high-reliability, automotive, electronics, technologies and services in order to meet IC customers and automotive OEM demands. For those platforms such as high-voltage, large current and high-reliability BCD platforms, ultra-low-power logic platforms, high-performance e-Flash platforms, automotive-grade high-V CMOS platforms and high reliability memory platforms have all achieved automotive-grade certification, mass production and being applied into end market.
Facing the future growth of the automotive market, the company strived for revenue growth by accelerating the deployment of customer products and comprehensively covering the vehicle applications such as infotainment, connectivity, powertrain, body, chassis and et cetera.
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[Interpreted] The company's capital expenditure in 2024 was $7.33 billion. Monthly capacity was 948,000 standard logic 8-inch equivalent wafers by the end of the year. Total shipment exceeded 8 million wafers, and annualized capacity utilization rate was 85.6%.
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[Interpreted] Overall, currently, the inventory of customer products is relatively healthy. Based on extensive communication with industry chain partners, [ they ] generally recognized that in 2025, except that AI is expected to continuously grow in a fast paced demand is expected to be flat or grow moderately across other various fields in the market.
Recently, we have observed 2 phenomena. Firstly, the reshuffling process to domestic supply chains for the automotive and other industries has moved from the verification state to ramp-up stage. Some products have been put into volume production officially. Secondly, driven by the national policies of consumption stimulus, the restocking willingness of customers are relatively higher. We see more replenishment orders and rush orders in the field, such as consumer, connectivity and phones.
Overall, the first quarter represents an uptick leading the traditional seasonality. However, at the same time, the external environment has brought a certain degree of uncertainty to the second half of this year, and industry competition is intensifying. The company will overcome the difficulties and strive to do the best. Facing the challenges and opportunities the company will target making SMIC stronger and bigger, continue to build up capacity, support customers to expand the market, focus on quality and efficiency.
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[Interpreted] Combining the above factors, the company's first quarter guidance is as follows: Revenue is expected to grow 6% to 8% sequentially, and the gross margin is expected to be in the range of 19% to 21%.
Based on the promise that there are no significant changes in the external environment, the company's guidance for the year 2025 are: The revenue growth is expected to be higher than industry average in the same market; and the capital expenditure is expected is expected to be flat compared to that of previous year.
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[Interpreted] Let me give some comments for the company's 2025 outlook.
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[Interpreted] Firstly, the geopolitics has brought profound changes to the industry landscape in recent years. The company has focused on strengthening its management on security, reliability and resilience of the supply chain. In order to see the growing demand for localization, the company has made continuous high investments, driving its rapid growth in revenue. However, this has also brought higher depreciation pressure on the gross margin. The depreciation is expected to grow around 20% in 2025. Except the depreciation, the gross margin is also impacted by price, utilization rates and other factors. The company will always target sustained profitability through increasing the utilization rate against the depreciation and enriching the product mix against cyclicality.
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[Interpreted] Secondly, localization has brought increased market demand, but homogeneous competition has led to intensive competition in structural surplus capacity even under the market recovery situation. The company improves its core competitiveness and by customers by forging advantages technologies and mitigate the pricing pressures by launching new products. The company maintains a consistent pricing strategy that follows the market price and does not initiate price reduction. However, when necessary, the company will directly face the price competition with our strategic customers to maintain our market share and competitive advantages across various fields.
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[Interpreted] Finally, we would like to extend our sincere thanks and best wishes to friends who care and support the development of the company. Thank you.
[Foreign Language] Thank you, Dr. Zhao. Next is our Q&A session. Questions will be answered by Dr. Zhao and Dr. Wu. Chinese questions will be answered in Chinese. English questions will be answered in English. [Operator Instructions] I would now like to open up the call for Q&A. Operator, please assist.
[Operator Instructions] First question comes from the line of Leping Huang from Huatai Securities.
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Our next question comes from [indiscernible] [Foreign Language]
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Next question comes from the line of Jin Kwai from Orient Securities.
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Our next question comes from the line of Sujan Wang from Citic Securities.
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Our next question comes from the line of Huang Chen from [indiscernible].
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[Foreign Language] I would now like to hand the call back to Ms. Guo Guangli for closing remarks.
[Foreign Language] Thank you for participating in today's conference call. Thank you for your trust and support.
[Foreign Language] This concludes SMIC's fourth quarter webcast conference call. We thank you for joining us today.
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]