SMIC Q2 revenue hit an all-time high and revised annual revenue growth and gross profit margin target

On Aug. 5, SMIC reported a new high of $1.344 billion in revenue for the second quarter of 2021, up 21.8% from a month earlier and 43.2% from a year earlier.

In the second quarter of this year, SMIC's gross profit reached $405 million, up 61.9 per cent from a month earlier and 62.9 per cent from a year earlier. In addition, gross profit margin rose sharply to 30.1% from 22.7% in the first quarter.

It is worth mentioning that SMIC's second-quarter results also revealed two key information: first, at a time when global chip production capacity is tight, SMIC's revenue from mainland China and Hong Kong increased to 62.9% in the second quarter from 55.6% in the previous quarter. Second, SMIC's 28nm and FinFET process revenue contribution rebounded, rebounding to 14.5% in the second quarter of this year after falling to 6.9% last quarter due to external factors.

Detailed explanation of financial report

SMIC's monthly production capacity increased to 561500 in the second quarter from 540800 8-inch wafers in the previous quarter, mainly due to the expansion of 8-inch wafer production capacity in the second quarter. Sales of wafers (about 8 inches) reached 1.7452 million in the second quarter, up 12.0% from the previous quarter and 21.6% from a year earlier. SMIC's capacity utilization reached an astonishing 100.4% in the second quarter, as capacity utilization was calculated by dividing the total amount of wafers produced by Jordan by the estimated quarterly capacity.

SMIC's share of revenue by app in the second quarter was 31.6% for smartphones, 12.4% for smart homes, 25.1% for consumer electronics and 30.9% for others. According to the type of service, wafer foundry still accounts for a very high proportion of 91.7%, while the proportion of mask manufacturing, wafer testing and other aspects has dropped to 8.3%.

Across regions, revenue from mainland China and Hong Kong still accounts for more than half, reaching 62.9% this quarter; Eurasia accounts for 13.8%, while North America's share fell to 13.8% from 16.7% in the first quarter of this year.

According to different processes, the proportion of revenue contributed by 28nm and FinFET processes has increased to 14.5%, while that of other processes is 150/180nm (28.4%), 55/65nm (29.9%), 40/45nm (14.9%), 110/130nm (5.9%), 250/350nm (3.2%) and 90nm (3.2%), respectively.

SMIC's capital expenditure was $771 million in the second quarter of this year, compared with $534 million in the first quarter. The planned capital expenditure for the whole year of 2021 is about US $4.3 billion, most of which is used for production expansion of mature processes, and a small portion is spent on advanced technologies, civil construction of new joint venture projects in Beijing and others.

A steadier pace and a higher goal

Zhao Haijun, SMIC's co-chief executive, and Liang Mengsong, SMIC's co-chief executives, pointed out in the financial report that SMIC had been moving forward in difficulties since it was added to the entity list last year. In terms of operational continuity, the company actively cooperates with suppliers to ensure that promises to customers are realized and the risk of uncertainty in mature processes is further reduced. In terms of capacity expansion, SMIC is still advancing as planned, but uncontrollable factors such as permit approval, shortage of the industrial chain and logistics caused by the epidemic also inevitably affect the arrival time of the equipment. The company will try its best to optimize the internal procurement process, speed up the efficiency of capacity installation, and strive to shorten the procurement cycle and reach production as soon as possible.

Zhao Haijun and Liang Mengsong stressed: "We understand that there are high expectations for SMIC, but there is no bend overtaking and leaping forward in the integrated circuit manufacturing industry." The company will take one step at a time, grasp its own advantages in the field of segmentation, improve its core competitiveness, and enhance customer satisfaction. "

Gao Yonggang, chief financial officer of SMIC, also said that all the financial indicators of the company in the second quarter were better than expected, and although there was some uncertainty in the expectations of the indicators affected by the entity list, the company would make active efforts to solve the problem. make every effort to ensure operational continuity and performance improvement, and better return to shareholders.

Looking ahead, Gao Yonggang expects the company's sales revenue to grow by 2% and 4% month-on-month in the third quarter, with a gross profit margin of between 32% and 34%. Based on the performance in the first half of the year and the outlook for the second half of the year, the company's annual sales revenue growth target and gross profit margin target have been raised to about 30% on the premise that the external environment is relatively stable. Due to depreciation and dilution, the adverse impact of advanced processes on the company's overall gross profit margin this year is expected to drop to about five percentage points.