SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of August 2005
Commission File Number 1-31994
SEMICONDUCTOR MANUFACTURING INTERNATIONAL CORPORATION
(Translation of Registrant’s Name Into English)
18 Zhangjiang Road
Pudong New Area, Shanghai 201203
People’s Republic of China
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F):
Form 20-F X Form 40-F
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1)):
Yes No X
(Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7)):
Yes No X
(Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934):
Yes No X
(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- )
Semiconductor Manufacturing International Corporation (the “Registrant”) is furnishing under the cover of Form 6-K:
| Exhibit 99.1: | Press announcement, dated July 28, 2005, relating to the appointment of a new chairman of the board of directors of the Registrant. | |
| Exhibit 99.2: | Press announcement, dated July 29, 2005, containing the Registrant’s results of operations for the three months ended June 30, 2005. | |
| Exhibit 99.3: | Press release, dated July 29, 2005, relating to the Registrant’s license to SAIFUN NROM of technology to expand its semiconductor business. | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Semiconductor Manufacturing International Corporation | ||
| By: | /s/ Richard R. Chang | |
| Name: | Richard R. Chang | |
| Title: | President and Chief Executive Officer | |
Date: August 1, 2005
EXHIBIT INDEX
| Exhibit |
Description | |
| Exhibit 99.1: | Press announcement, dated July 28, 2005, relating to the appointment of a new chairman of the board of directors of the Registrant. | |
| Exhibit 99.2: | Press announcement, dated July 29, 2005, containing the Registrant’s results of operations for the three months ended June 30, 2005. | |
| Exhibit 99.3: | Press release, dated July 29, 2005, relating to the Registrant’s license to SAIFUN NROM of technology to expand its semiconductor business. | |
Exhibit 99.1
The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
SEMICONDUCTOR MANUFACTURING INTERNATIONAL CORPORATION
(Incorporated in the Cayman Islands with limited liability)
(STOCK CODE: 0981)
CHANGE OF CHAIRMAN
Semiconductor Manufacturing International Corporation (the “Company”) announces that in order to comply with code provision A2.1. of the Code on Corporate Governance Practices contained in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited regarding the segregation of the roles of chairman and chief executive officer of the Company, the board of directors of the Company (the “Board”) elected Professor Yang Yuan Wang (“Prof. Wang”), an existing independent non-executive director of the Company, as chairman of the Board (the “Chairman”) to succeed Dr. Richard Ru Gin Chang (“Dr. Chang”) with effect from July 28, 2005. Prof. Wang will remain as an independent non-executive director of the Company. Dr. Chang will remain as an executive director and the Chief Executive Officer of the Company.
Prof. Wang, age 70, has been a director of the Company since 2001. Prof. Wang has more than 40 years of experience related to the semiconductor industry. He is the chairman of the board of directors of Semiconductor Manufacturing International (Shanghai) Corporation, Semiconductor Manufacturing International (Beijing) Corporation and Semiconductor Manufacturing International (Tianjin) Corporation and is also the Chief Scientist of the Microelectronics Research Institute at Beijing University. He is a fellow of the Chinese Academy of Sciences, of The Institute of Electrical and Electronics Engineers (USA) and of The Institute of Electrical Engineer (UK).
Prof. Wang has not entered into any services contract with the Company. Prof. Wang’s appointment as Chairman will cease upon his ceasing to be a director of the Company. In accordance with the Articles of Association of the Company, he will retire as a director at the Company’s 2007 annual general meeting of the shareholders and will then be eligible for re-election to hold office for an additional three years.
Prof. Wang currently is interested in 500,000 shares in the Company within the meaning of Part XV of the Securities and Futures Ordinance.
Prof. Wang is not related to any director or the senior management of the Company or with any substantial or controlling shareholder of the Company.
As at the date of this announcement, the directors of the Company are Yang Yuan Wang as Chairman and independent non-executive director of the Company; Richard R. Chang as executive director of the Company; Lai Xing Cai and Fang Yao (alternate director to Lai Xing Cai) as non-executive directors of the Company; and Ta-Lin Hsu, Yen-Pong Jou, Tsuyoshi Kawanishi, Henry Shaw and Lip-Bu Tan as independent non-executive directors of the Company.
Semiconductor Manufacturing International Corporation
Richard R. Chang
Chief Executive Officer
Shanghai, PRC
July 28, 2005
| * | for identification only. |
Exhibit 99.2
The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
SEMICONDUCTOR MANUFACTURING INTERNATIONAL CORPORATION
(Incorporated in the Cayman Islands with limited liability)
(STOCK CODE: 0981)
SMIC REPORTS RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2005
| • | Semiconductor Manufacturing International Corporation (NYSE: SMI; SEHK: 981) (‘‘SMIC’’ or the ‘‘Company’’), one of the leading semiconductor foundries in the world, today announced its consolidated results of operations for the three months ended June 30, 2005. Sales increased 12.3% in the second quarter of 2005 to $279.5 million from $248.8 million in the prior quarter. The Company reported an increase in capacity to 139,025 8-inch equivalent wafers per month and a utilization rate of 87% in the second quarter of 2005. Net loss increased to $40.4 million in the second quarter of 2005 compared to a loss of $30.0 million in the first quarter of 2005. |
| • | Set out below is a copy of the full text of the press release made in the United States by the Company on July 29, 2005 in relation to its results for the three months ended June 30, 2004. |
| • | This announcement is made pursuant to the disclosure obligations under Rule 13.09(1) of The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited as the Company made the press release, reproduced below, on July 29, 2005. |
Set out below is a copy of the full text of the press release made in the United States by the Company on July 29, 2005 in relation to its results for the three months ended June 30, 2005.
SMIC REPORTS 2005 SECOND QUARTER RESULTS
Highlights
| • | Sales increased to $279.5 million in 2Q05, up 12.3% from $248.8 million in 1Q05. |
| • | Capacity increased to 139,025 8-inch equivalent wafers per month. |
| • | Utilization rate increased to 87% in 2Q05 from 85% in 1Q05. |
| • | Compared to 1Q05, wafer shipments increased 16.0% to 330,499 8-inch equivalent wafers. |
Shanghai, China — July 29, 2005. Semiconductor Manufacturing International Corporation (NYSE: SMI; SEHK: 981) (‘‘SMIC’’ or the ‘‘Company’’), one of the leading semiconductor foundries in the world, today announced its consolidated results of operations for the three months ended June 30, 2005. Sales increased 12.3% in the second quarter of 2005 to $279.5 million from $248.8 million in the prior quarter. The Company reported an increase in capacity to 139,025 8-inch equivalent wafers per month and a utilization rate of 87% in the second quarter of 2005. Net loss increased to $40.4 million in the second quarter of 2005 compared to a loss of $30.0 million in the first quarter of 2005.
‘‘The second quarter of 2005 marked what we believe to be the trough of this current semiconductor cycle,’’ said Dr. Richard Chang, President and Chief Executive Officer of SMIC. ‘‘During this period, our financial performance was consistent with our expectations. Despite the general weakness in the semiconductor industry as a whole in particular the foundry sector, we continued to increase our revenues during the second quarter of 2005. Based on the demand forecasts provided by our customers, we believe that the second half of 2005 will be a period of financial growth and improvement and have increased our projected capital expenditure budget to $1.1 billion for 2005. With the semiconductor industry gearing up for a rebound in the second half of the year, we have secured an additional $600 million in financing which we believe, together with our expected cashflow from operations will be sufficient to cover our funding requirements for 2005 and into 2006.
During the quarter we added 20 new customers, over half of which came from Mainland China. We are pleased to see continuous progress from our customers in China.
On the technology front, our first customer products at 90nm are currently under qualification and remain on-schedule. Further along the technology roadmap, we are now developing our 65nm technology process flow in our 300mm fabs.
Today we are pleased to announce two separate projects. The first relates to a partnership which SMIC has formed with Saifun Semiconductors, Ltd. to license Saifun’s NROM® technology for the production of flash memory-based products. Our new flash-memory strategy will enable us to meet the increasing demand for flash-based products in the consumer electronics and telecommunication sectors.
The second project relates to the wafer reclamation project in Shanghai to produce solar power modules. We will start facility installation in the third quarter and anticipate equipment move-in during the fourth quarter.
In addition to our core foundry business, we will continue to look for ways to increase shareholder value and maximize our position as the leading foundry in China.’’
Conference call/Webcast announcement details
Date: July 29, 2005
Time: 8:00 a.m. Shanghai time
Dial-in numbers and pass code: U.S. 1-617-614-2714 or HK 852-3002-1672 (Pass code: SMIC)
A live webcast of the 2005 second quarter announcement will be available at http://www.smics.com under the ‘‘Investor Relations’’ section. An archived version of the webcast, along with a soft copy of this news release will be available on the SMIC website for a period of 12 months following the webcast.
About SMIC
SMIC (NYSE: SMI, SEHK: 0981.HK) is one of the leading semiconductor foundries in the world, providing integrated circuit (IC) manufacturing at 0.35-micron to 0.11-micron and finer line technologies to customers worldwide. Established in 2000, SMIC has four 8-inch wafer fabrication facilities in volume production in Shanghai and Tianjin. In the first quarter of 2005, SMIC commenced commercial production at its 12-inch wafer fabrication facility in Beijing. SMIC also maintains customer service and marketing offices in the U.S., Europe, and Japan, and a representative office in Hong Kong. As part of its dedication towards providing high-quality services, SMIC strives to comply with or exceed international standards and has achieved ISO9001, ISO/TS16949, OHSAS18001, TL9000 and ISO14001 certifications. For additional information, please visit http://www.smics.com.
Safe harbor statements
(Under the Private Securities Litigation Reform Act of 1995)
This press release may contain, in addition to historical information, ‘‘forward-looking statements’’ within the meaning of the ‘‘safe harbor’’ provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on SMIC’s current assumptions, expectations and projections about future events. SMIC uses words like ‘‘believe,’’ ‘‘anticipate,’’ ‘‘intend,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘project’’ and similar expressions to identify forward-looking statements, although not all forward-looking statements contain these words. These forward-looking statements are necessarily estimates reflecting the best judgment of SMIC’s senior management and involve significant risks, both known and unknown, uncertainties and other factors that may cause SMIC’s actual performance, financial condition or results of operations to be materially different from those suggested by the forward-looking statements including, among others, risks associated with cyclicality and market conditions in the semiconductor industry, intense competition, timely wafer acceptance by SMIC’s customers, timely introduction of new technologies, SMIC’s ability to ramp new products into volume, supply and demand for semiconductor foundry services, industry overcapacity, shortages in equipment, components and raw materials, availability of manufacturing capacity and financial stability in end markets.
Investors should consider the information contained in SMIC’s filings with the U.S. Securities and Exchange Commission (SEC), including its registration statement on Form F-1, as amended, filed with the SEC on March 11, 2004, especially in the ‘‘Risk Factors’’ and ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ sections, its registration statement on Form A-1 as filed with the Stock Exchange of Hong Kong (SEHK) on March 8, 2004, its annual report on Form 20-F, filed with the SEC on June 28, 2005 and such other documents that SMIC may file with the SEC or SEHK from time to time, including on Form 6-K. Other unknown or unpredictable factors also could have material adverse effects on SMIC’s future results, performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this press release may not occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this press release.
Except as required by law, SMIC undertakes no obligation and does not intend to update any forward-looking statement, whether as a result of new information, future events or otherwise.
Investor Contacts:
| Jimmy Lai | Calvin Lau | |
| Investor Relations Department | Investor Relations Department | |
| Tel: 86-21-5080-2000, ext. 16088 | Tel: 86-21-5080-2000, ext. 16693 | |
| Fax: 86-21-5080-3619 | Fax: 86-21-5080-3619 |
Summary:
| 2Q05 |
1Q05 |
QoQ |
2Q04 |
YoY |
||||||||||||||
| Amounts in US$ thousands, except for per share, per ADS, and operating rata |
||||||||||||||||||
| Sales |
279,500 | 248,808 | 12.3 | % | 220,988 | 26.5 | % | |||||||||||
| Cost of sales |
273,111 | 233,696 | 16.9 | % | 158,247 | 72.6 | % | |||||||||||
| Gross profit |
6,389 | 15,112 | -57.7 | % | 62,741 | -89.8 | % | |||||||||||
| Operating expenses |
38,469 | 37,086 | 3.7 | % | 26,351 | 46.0 | % | |||||||||||
| Income (loss) from operations |
(32,081 | ) | (21,974 | ) | 46.0 | % | 36,390 | — | ||||||||||
| Other income (expenses) |
(8,234 | ) | (8,012 | ) | 2.8 | % | (2,225 | ) | 270.1 | % | ||||||||
| Income tax |
118 | 9 | 1259.3 | % | — | — | ||||||||||||
| Net income (loss) after income taxes |
(40,433 | ) | (29,995 | ) | 34.8 | % | 34,165 | -218.4 | % | |||||||||
| Minority interest |
(12 | ) | — | — | — | — | ||||||||||||
| Income (loss) attributable to holders of ordinary shares |
(40,445 | ) | (29,995 | ) | 34.8 | % | 34,165 | — | ||||||||||
| Gross margin |
2.3 | % | 6.1 | % | 28.4 | % | ||||||||||||
| Operating margin |
-11.5 | % | -8.8 | % | 16.5 | % | ||||||||||||
| Basic EPS — per ordinary share(1) |
($ | 0.0022 | ) | ($ | 0.0017 | ) | $ | 0.0019 | ||||||||||
| Basic EPS — per ADS |
($ | 0.1113 | ) | ($ | 0.0831 | ) | $ | 0.0955 | ||||||||||
| Diluted EPS — per ordinary share |
($ | 0.0022 | ) | ($ | 0.0017 | ) | $ | 0.0019 | ||||||||||
| Diluted EPS — per ADS |
($ | 0.1113 | ) | ($ | 0.0831 | ) | $ | 0.0941 | ||||||||||
| Wafers shipped (in 8” wafers)(2) |
330,499 | 284,912 | 16.0 | % | 201,534 | 64.0 | % | |||||||||||
| Blended ASP |
$ | 807 | $ | 829 | -2.7 | % | $ | 1,034 | -22.0 | % | ||||||||
| Logic ASP(3) |
$ | 938 | $ | 967 | -3.0 | % | $ | 1,089 | -13.9 | % | ||||||||
| Capacity utilization |
87 | % | 85 | % | 99 | % | ||||||||||||
Note:
| (1) | Based on weighted average ordinary shares of 18,169 million in 2Q05, 18,054 million in 1Q05 and 17,897 million in 2Q04 |
| (2) | Including copper interconnects |
| (3) | Excluding copper interconnects |
| • | Sales increased to $279.5 million in 2Q05, up 12.3% QoQ from $248.8 million in 1Q05 and up 26.5% YoY from $221.0 million in 2Q04. Key factors leading to these increases were the following: |
| • | increased capacity to 139,025 8-inch equivalent wafers; |
| • | increased 8-inch equivalent wafer shipments to 330,499, up 16.0% QoQ from 284,912 in 1Q05; and |
| • | increased utilization rate to 87%. |
| • | The Company has retroactively reclassified certain expenses to disclose financial performance in a manner consistent with the practices of other high-tech companies. All figures presented herein have given effect, where applicable, to this reclassification. Amortization expenses, largely related to the patent cross-license agreement relating to the settlement of the litigation and other license agreements, previously classified in Cost of sales and Research and development have been reclassified into a single line item, Amortization of intangible assets under operating expenses. The impact of the reclassification of expenses in 1Q05 resulted in a decrease in Cost of sales of $6.6 million, a decrease in Research and development expenses of $3.3 million and an increase in Amortization of intangible assets expenses of $9.9 million. |
| • | After giving effect to the reclassification, Cost of sales increased to $273.1 million in 2Q05, up 16.9% QoQ from $233.7 million in 1Q05, primarily due to the increase in wafer shipments and depreciation expenses. |
| • | Gross profit decreased to $6.4 million in 2Q05, down 57.7% QoQ from $15.1 million in 1Q05. |
| • | After giving effect to the reclassification, Gross margins decreased to 2.3% in 2Q05 from 6.1% in 1Q05, primarily due to the increase in depreciation expenses and a lower blended ASP, which was the result of a decline in pricing of DRAM products and general industry softness. |
| • | After giving effect to the reclassification, R&D expenses increased to $16.3 million in 2Q05, up 11.6% QoQ from $14.6 million in 1Q05, primarily due to 90nm and 65nm research and development activities. |
| • | G&A expenses including foreign exchange decreased to $5.4 million in 2Q05, down 18.1% QoQ from $6.6 million in 1Q05, primarily due to a decrease in legal fees. |
| • | Selling & marketing expenses increased to $3.0 million in 2Q05, up 20.8% QoQ from $2.5 million in 1Q05, primarily due to an increase in engineering materials associated with sales activities. |
| • | Amortization of intangible assets as a result of the new classification was $10.1 million in 2Q05, up 2.2% QoQ from $9.9 million in 1Q05. |
| • | Loss from operations was $32.1 million in 2Q05 from a loss from operations of $22.0 million in 1Q05. |
| • | Other non-operating loss increased to $8.2 million in 2Q05 from a loss of $8.0 million in 1Q05, primarily due to an increase in interest expense. |
| • | Interest expense increased to $9.0 million in 2Q05, up 16.7% QoQ from $7.7 million in 1Q05, primarily due to the increase in bank borrowings. |
| • | Net foreign exchange gain of $0.9 million based on a foreign exchange gain of $2.5 million in G&A and a foreign exchange loss of $1.6 million relating to non-operating activities resulting from financing or investment transactions (i.e. forward contracts) classified as other income (expenses). |
| • | Net loss of $40.4 million in 2Q05 from a loss of $30.0 million in 1Q05. |
| 1. | Analysis of revenues |
Sales analysis
| 2Q05 |
1Q05 |
4Q04 |
3Q04 |
2Q04 |
|||||||||||
| By Application |
|||||||||||||||
| Computer |
39.8 | % | 36.8 | % | 26.8 | % | 20.5 | % | 22.5 | % | |||||
| Communications |
40.4 | % | 44.5 | % | 58.1 | % | 57.2 | % | 54.3 | % | |||||
| Consumer |
15.2 | % | 13.6 | % | 10.2 | % | 17.1 | % | 17.1 | % | |||||
| Others |
4.6 | % | 5.1 | % | 4.9 | % | 5.2 | % | 6.1 | % | |||||
| 2Q05 |
1Q05 |
4Q04 |
3Q04 |
2Q04 |
|||||||||||
| By Device |
|||||||||||||||
| Logic (including copper interconnect) |
58.9 | % | 61.9 | % | 75.1 | % | 77.6 | % | 73.5 | % | |||||
| DRAM(1) |
36.5 | % | 33.0 | % | 20.4 | % | 17.5 | % | 20.8 | % | |||||
| Other (mask making & probing, etc.) |
4.6 | % | 5.1 | % | 4.5 | % | 4.9 | % | 5.7 | % | |||||
| 2Q05 |
1Q05 |
4Q04 |
3Q04 |
2Q04 |
|||||||||||
| By Customer Type |
|||||||||||||||
| Fabless semiconductor companies |
42.2 | % | 48.1 | % | 50.2 | % | 35.3 | % | 36.1 | % | |||||
| Integrated device manufacturers (IDM) |
55.2 | % | 49.6 | % | 47.5 | % | 56.3 | % | 54.8 | % | |||||
| System companies and others |
2.6 | % | 2.3 | % | 2.3 | % | 8.4 | % | 9.1 | % | |||||
| 2Q05 |
1Q05 |
4Q04 |
3Q04 |
2Q04 |
|||||||||||
| By Geography |
|||||||||||||||
| North America |
40.8 | % | 40.4 | % | 34.9 | % | 41.8 | % | 44.0 | % | |||||
| Asia Pacific (ex. Japan) |
26.3 | % | 26.9 | % | 43.5 | % | 31.5 | % | 26.5 | % | |||||
| Japan |
6.0 | % | 8.0 | % | 8.8 | % | 15.6 | % | 16.2 | % | |||||
| Europe |
26.9 | % | 24.7 | % | 12.8 | % | 11.1 | % | 13.3 | % | |||||
| Wafer revenue analysis |
|||||||||||||||
| 2Q05 |
1Q05 |
4Q04 |
3Q04 |
2Q04 |
|||||||||||
| By Technology (logic, DRAM & copper interconnect only) |
|||||||||||||||
| 0.13µm |
44.5 | % | 29.2 | % | 13.8 | % | 11.9 | % | 9.9 | % | |||||
| 0.15µm |
2.5 | % | 12.5 | % | 14.9 | % | 13.2 | % | 13.3 | % | |||||
| 0.18µm |
40.7 | % | 40.3 | % | 33.6 | % | 46.2 | % | 48.6 | % | |||||
| 0.25µm |
3.9 | % | 4.6 | % | 6.0 | % | 6.4 | % | 8.3 | % | |||||
| 0.35µm |
8.4 | % | 13.4 | % | 31.7 | % | 22.3 | % | 19.9 | % | |||||
| 2Q05 |
1Q05 |
4Q04 |
3Q04 |
2Q04 |
|||||||||||
| By Logic Only(2) |
|||||||||||||||
| 0.13µm |
12.6 | % | 5.4 | % | 2.4 | % | 1.8 | % | 0.9 | % | |||||
| 0.15µm |
4.8 | % | 2.2 | % | 5.3 | % | 4.6 | % | 3.9 | % | |||||
| 0.18µm |
59.4 | % | 59.8 | % | 38.2 | % | 56.2 | % | 63.0 | % | |||||
| 0.25µm |
7.1 | % | 7.1 | % | 7.8 | % | 6.1 | % | 3.1 | % | |||||
| 0.35µm |
16.1 | % | 25.5 | % | 46.3 | % | 31.3 | % | 29.1 | % | |||||
Note:
| (1) | Previously referred to as “Memory”. However, all historical reported figures in this category have consisted of only DRAM devices |
| (2) | Excluding 0.13µm copper interconnects |
| • | Percentage of sales generated from European customers grew the most during the period, increasing to 26.9% in 2Q05 from 24.7% in 1Q05. |
| • | Percentage of wafer revenues from 0.18mm and below technologies increased to 87.7% of sales in 2Q05, as compared with 82.0% in 1Q05 and 71.8% in 2Q04. |
| • | Percentage of logic only wafer revenues from 0.18µm and below technologies increased to 76.8% of logic only sales in 2Q05, as compared with 67.4% in 1Q05 and 67.8% in 2Q04. |
| • | Percentage of logic only wafer revenues from 0.13µm increased to 12.6% of logic only sales in 2Q05 from 5.4% in 1Q05. Percentage of logic only wafer revenues from 0.35µm decreased to 16.1% of logic only sales in 2Q05 from 25.5% in 1Q05. |
Capacity:
| Fab/(Wafer Size) | 2Q05(1) |
1Q05(1) | ||
| Fab 1 (8”) |
45,000 | 45,731 | ||
| Fab 2 (8”) |
43,045 | 40,000 | ||
| Fab 4 (12”) |
16,787 | 10,220 | ||
| Fab 7 (8”) |
15,000 | 16,221 | ||
| Total monthly wafer fabrication capacity |
119,832 | 112,172 | ||
| Copper Interconnects: |
||||
| Fab 3 (8”) |
19,193 | 19,000 | ||
| Total monthly copper interconnect capacity |
19,193 | 19,000 | ||
Note:
| (1) | Wafers per month at the end of the period in 8” equivalent wafers |
| • | As of the end of 2Q05, monthly capacity, based on the product mix, increased to 139,025 8-inch equivalent wafers. |
Shipment and utilization:
| 8” wafers | 2Q05 |
1Q05 |
4Q04 |
3Q04 |
2Q04 |
||||||||||
| Wafer shipments including copper interconnects |
330,499 | 284,912 | 303,796 | 263,808 | 201,534 | ||||||||||
| Utilization rate(1) |
87 | % | 85 | % | 95 | % | 99 | % | 99 | % |
Note:
| (1) | Capacity utilization based on total wafer out divided by estimated capacity |
| • | Wafer shipments increased to 330,499 units of 8-inch equivalent wafers in 2Q05, up 16.0% QoQ from 284,912 units of 8-inch equivalent wafers in 1Q05, and up 64.0% YoY from 201,534 8-inch equivalent wafers in 2Q04. |
| • | Utilization rate increased to 87%. |
Blended average selling price trend
The blended ASP decreased to $807 in 2Q05 from $829 in 1Q05 and $1,034 in 2Q04, mainly due to a decline in pricing of DRAM products and general industry softness.
Logic average selling price trend
(excluding 0.13µm copper interconnects)
The logic ASP (excluding 0.13µm copper interconnects) decreased to $938 in 2Q05 from $967 in 1Q05 and $1,089 in 2Q04, mainly due to general industry softness and a tough pricing environment for foundries.
| 2. | Detailed financial analysis |
Gross profit analysis
| 2Q05 |
1Q05 |
QoQ |
2Q04 |
YoY |
|||||||||||
| Amounts in US$ thousands | |||||||||||||||
| Cost of sales |
273,111 | 233,696 | 16.9 | % | 158,247 | 72.6 | % | ||||||||
| Depreciation |
171,216 | 145,307 | 17.8 | % | 83,990 | 103.9 | % | ||||||||
| Other manufacturing costs |
101,895 | 88,389 | 15.3 | % | 74,257 | 37.2 | % | ||||||||
| Gross profit |
6,389 | 15,112 | -57.7 | % | 62,741 | -89.8 | % | ||||||||
| Gross margin |
2.3 | % | 6.1 | % | 28.4 | % | |||||||||
| • | After giving effect to the reclassification, Cost of sales increased to $273.1 million in 2Q05, up 16.9% QoQ from $233.7 million in 1Q05, primarily due to the increase in wafer shipments and depreciation expenses. |
| • | Gross profit decreased to $6.4 million in 2Q05, down 57.7% QoQ from $15.1 million in 1Q05. |
| • | After giving effect to the reclassification, Gross margins decreased to 2.3% in 2Q05 from 6.1% in 1Q05, primarily due to the increase in depreciation expenses and a lower blended ASP, which was the result of a decline in pricing of DRAM products and general industry softness. |
Operating expense analysis
| 2Q05 |
1Q05 |
QoQ |
2Q04 |
YoY |
||||||||
| Amounts in US$ thousands | ||||||||||||
| Total operating expenses |
38,469 | 37,086 | 3.7 | % | 26,351 | 46.0 | % | |||||
| Research and development |
16,344 | 14,646 | 11.6 | % | 11,261 | 45.1 | % | |||||
| General and administrative |
5,397 | 6,591 | -18.1 | % | 6,019 | -10.3 | % | |||||
| Selling and marketing |
3,012 | 2,494 | 20.8 | % | 1,940 | 55.3 | % | |||||
| Amortization of intangible assets |
10,082 | 9,869 | 2.2 | % | 3,532 | 185.5 | % | |||||
| Amortization of deferred stock compensation |
3,634 | 3,487 | 4.2 | % | 3,599 | 1.0 | % | |||||
| • | Total operating expenses increased to $38.5 million in 2Q05, up 3.7% QoQ from $37.1 million in 1Q05. |
| • | After giving effect to the reclassification, R&D expenses increased to $16.3 million in 2Q05, up 11.6% QoQ from $14.6 million in 1Q05, primarily due to 90nm and 65nm research and development activities. |
| • | G&A expenses including foreign exchange decreased to $5.4 million in 2Q05, down 18.1% QoQ from $6.6 million in 1Q05, primarily due to a decrease in legal fees. |
| • | Selling & marketing expenses increased to $3.0 million in 2Q05, up 20.8% QoQ from $2.5 million in 1Q05, primarily due to an increase in engineering materials associated with sales activities. |
| • | Amortization of intangible assets as a result of the new classification was $10.1 million in 2Q05, up 2.2% QoQ from $9.9 million in 1Q05. |
Other income (expenses)
| 2Q05 |
1Q05 |
QoQ |
2Q04 |
YoY |
|||||||||||
| Amounts in US$ thousands | |||||||||||||||
| Other income (expenses) |
(8,234 | ) | (8,012 | ) | 2.8 | % | (2,225 | ) | 270.1 | % | |||||
| Interest income |
2,030 | 1,928 | 5.3 | % | 2,733 | -25.7 | % | ||||||||
| Interest expense |
(8,971 | ) | (7,688 | ) | 16.7 | % | (2,760 | ) | 225.1 | % | |||||
| Other, net |
(1,293 | ) | (2,252 | ) | -42.6 | % | (2,198 | ) | -41.1 | % | |||||
| • | Other non-operating loss increased to $8.2 million in 2Q05 from a loss of $8.0 million in 1Q05, primarily due to an increase in interest expense. |
| • | Interest expense increased to $9.0 million in 2Q05, up 16.7% QoQ from $7.7 million in 1Q05, primarily due to the increase in bank borrowings. |
| 3. | Liquidity |
| 2Q05 |
1Q05 | |||
| Amounts in US$ thousands | ||||
| Cash and cash equivalents |
576,292 | 438,802 | ||
| Short term investments |
2,768 | 10,349 | ||
| Accounts receivable |
196,132 | 180,878 | ||
| Inventory |
176,502 | 174,525 | ||
| Others |
16,397 | 8,565 | ||
| Total current assets |
968,091 | 813,119 | ||
| Accounts payable |
249,595 | 333,442 | ||
| Short-term borrowings |
224,000 | 133,499 | ||
| Current portion of long-term debt |
228,625 | 228,625 | ||
| Others |
96,746 | 88,872 | ||
| Total current liabilities |
798,966 | 784,438 | ||
| Cash Ratio |
0.7x | 0.6x | ||
| Quick Ratio |
1.0x | 0.8x | ||
| Current Ratio |
1.2x | 1.0x | ||
| • | Cash and cash equivalents increased to $576.3 million from $438.8 million, primarily due to the increase in bank borrowings. |
Receivable/Inventory days outstanding trends
Capital Structure
| 2Q05 |
1Q05 |
|||||
| Amounts in US$ thousands | ||||||
| Cash and cash equivalents |
576,292 | 438,802 | ||||
| Short-term investment |
2,768 | 10,349 | ||||
| Current portion of promissory note |
19,090 | 4,833 | ||||
| Promissory note |
116,204 | 129,310 | ||||
| Short-term borrowings |
224,000 | 133,499 | ||||
| Current portion of long-term debt |
228,625 | 228,625 | ||||
| Long-term debt |
511,807 | 411,824 | ||||
| Total debt |
964,432 | 773,948 | ||||
| Net cash |
(520,666 | ) | (458,940 | ) | ||
| Shareholders’ equity |
3,053,111 | 3,086,256 | ||||
| Total debt to equity ratio |
31.6 | % | 25.1 | % | ||
| • | Total debt increased to $964.4 million in 2Q05 compared with $773.9 million in 1Q05, primarily due to the increase in bank borrowings. |
| • | Total debt-to-equity ratio increased to 31.6% in 2Q05 from 25.1% in 1Q05. |
| 4. | Cashflow & Capex |
| 2Q05 |
1Q05 |
|||||
| Amounts in US$ thousands | ||||||
| Net loss |
(40,445 | ) | (29,995 | ) | ||
| Depreciation & amortization |
185,978 | 166,243 | ||||
| Amortization of acquired intangible assets |
10,082 | 9,869 | ||||
| Net change in cash |
137,491 | (168,371 | ) | |||
Capex plans
| • | Capital expenditures for 2Q05 and 1H05 were $141.3 million and $484.4 million, respectively. |
| • | Planned capital expenditures for 2005 have been increased to approximately $1.1 billion and will be adjusted based on market conditions. |
Page 2
| 5. | 3Q05 guidance |
| • | Wafer shipments expected to increase by 7.5%-9.5%. |
| • | Utilization expected to increase to the range of 90-93%. |
| • | Blended ASP expected to increase by 8%-10%. |
| • | Gross margins expected to increase to the range of 12%-15%. |
| • | Operating expenses as a percentage of sales expected to be in the mid-teens. |
| • | Amortization of intangible assets expected to be approximately $11 million. |
| • | Other expenses expected to be approximately $10 million. |
| • | Capital expenditures expected to be in the range of $200-240 million. |
| • | Depreciation and amortization expected to be in the range of $200-210 million. |
| • | Amortization of deferred stock compensation charge expected to be approximately $7 million, of which $4 million will be charged to operating expenses and $3 million to cost of sales. |
| 6. | Recent announcements |
| • | SMIC Licenses SAIFUN NROM® Technology to Expand its Semiconductor Business [2005-07-28] |
| • | Change of Chairman [2005-07-28] |
| • | SMIC and SYNOPSYS Announce Reference Design Flow 2.0 [2005-07-20] |
| • | SMIC and Magma Forge Design Service Partnership to Offer Integrated RTL-to-GDSII Design Solution and Services for Nanometer Processes [2005-06-28] |
| • | SMIC Adds New Design Kit for its 0.18µm CMOS Process for Use with Agilent Technologies’ EDA Software [2005-06-09] |
| • | SMIC Beijing Secures Financing for Expansion [2005-05-26] |
| • | SMIC ARM926EJ Processor Chip Successfully Validated [2005-05-25] |
| • | Annual General Meeting held on May 6, 2005 Poll Results [2005-05-06] |
| • | SMIC and UTAC to Establish Semiconductor Assembly and Testing Facility in China [2005-05-03] |
| • | SMIC Reports 2005 First Quarter Results [2005-04-29] |
| • | Qualified Accountant Waiver [2005-04-29] |
| • | SMIC Joins ARM Connected Community [2005-04-27] |
Please visit SMIC’s website http://www.smics.com for further details regarding the above announcements.
SMIC FINANCIALS
CONSOLIDATED BALANCE SHEET
| As of the end of |
||||||
| June 30, 2005 |
March 31, 2005 |
|||||
| (unaudited) |
(unaudited) |
|||||
| (In US dollars) | ||||||
| Assets |
||||||
| Current assets: |
||||||
| Cash and cash equivalents |
576,292,179 | 438,801,533 | ||||
| Short term investments |
2,768,085 | 10,349,390 | ||||
| Accounts receivable, net of allowances of $109,362 and $342,768 respectively |
196,132,014 | 180,877,544 | ||||
| Inventories |
176,502,315 | 174,525,252 | ||||
| Prepaid expense and other current assets |
14,564,660 | 6,732,846 | ||||
| Assets held for sale |
1,831,972 | 1,831,972 | ||||
| Total current assets |
968,091,225 | 813,118,537 | ||||
| Land use rights, net |
38,758,108 | 38,976,538 | ||||
| Plant and equipment, net |
3,309,941,020 | 3,354,240,115 | ||||
| Acquired intangible assets, net |
192,817,289 | 202,682,671 | ||||
| Long-term investment |
9,524,730 | 2,810,309 | ||||
| TOTAL ASSETS |
4,519,132,372 | 4,411,828,170 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||
| Current liabilities: |
||||||
| Accounts payable |
249,594,589 | 333,442,304 | ||||
| Accrued expenses and other current liabilities |
77,655,608 | 84,038,636 | ||||
| Short-term borrowings |
224,000,435 | 133,498,761 | ||||
| Current portion of promissory note |
19,090,094 | 4,833,421 | ||||
| Current portion of long-term debt |
228,625,170 | 228,625,170 | ||||
| Total current liabilities |
798,965,896 | 784,438,292 | ||||
| Long-term liabilities: |
||||||
| Promissory note |
116,203,745 | 129,309,552 | ||||
| Long-term debt |
511,806,547 | 411,824,480 | ||||
| Total long-term liabilities |
628,010,292 | 541,134,032 | ||||
| Total liabilities |
1,426,976,188 | 1,325,572,324 | ||||
| Commitments |
||||||
| Minority interest |
39,044,852 | — | ||||
| Stockholders’ equity: |
||||||
| Ordinary shares, $0.0004 per value, 50,000,000,000 shares authorized, shares issued and outstanding 18,246,615,105 and 18,233,297,823 respectively |
7,298,647 | 7,293,320 | ||||
| Warrants |
32,387 | 32,387 | ||||
| Additional paid-in capital |
3,289,932,622 | 3,289,197,990 | ||||
| Notes receivable from stockholders |
(287,629 | ) | (339,157 | ) | ||
| Accumulated other comprehensive income |
67,782 | 245,959 | ||||
| Deferred stock compensation |
(37,107,243 | ) | (43,794,707 | ) | ||
| Accumulated deficit |
(206,825,234 | ) | (166,379,946 | ) | ||
| Total stockholders’ equity |
3,053,111,332 | 3,086,255,846 | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
4,519,132,372 | 4,411,828,170 | ||||
CONSOLIDATED STATEMENT OF OPERATIONS
| For the three months ended | ||||
| June 30, 2005 |
March 31, 2005 | |||
| (unaudited) |
(unaudited) | |||
| (In US dollars) | ||||
| Sales |
279,500,151 | 248,808,088 | ||
| Cost of sales |
270,068,286 | 230,522,130 | ||
| Cost of sales — Amortization of deferred stock compensation |
3,043,259 | 3,173,661 | ||
| Gross profit |
6,388,606 | 15,112,297 | ||
| Operating expenses: |
||||
| Research and development |
16,343,815 | 14,645,779 | ||
| General and administrative |
5,396,571 | 6,591,065 | ||
| Selling and marketing |
3,012,598 | 2,493,753 | ||
| Amortization of intangible assets |
10,081,688 | 9,868,813 | ||
| Amortization of deferred stock compensation* |
3,634,441 | 3,486,827 | ||
| Total operating expense |
38,469,113 | 37,086,238 | ||
| For the three months ended |
||||||
| June 30, 2005 |
March 31, 2005 |
|||||
| (unaudited) |
(unaudited) |
|||||
| (In US dollars) | ||||||
| Loss from operations |
(32,080,507) | (21,973,941) | ||||
| Other income (expenses): |
||||||
| Interest income |
2,029,899 | 1,928,135 | ||||
| Interest expense |
(8,970,776 | ) | (7,688,304 | ) | ||
| Others, net |
(1,293,508 | ) | (2,252,173 | ) | ||
| Total other income (expenses), net |
(8,234,385) | (8,012,342) | ||||
| Net loss before income taxes |
(40,314,892) | (29,986,283) | ||||
| Income tax |
118,449 | 8,714 | ||||
| Minority interest |
(11,947 | ) | — | |||
| Net loss |
(40,445,288) | (29,994,997) | ||||
| Deemed dividends on preference shares |
— | — | ||||
| Loss attributable to holders of ordinary shares |
(40,445,288) | (29,994,997) | ||||
| Loss per share, basic |
(0.0022 | ) | (0.0017 | ) | ||
| Loss per ADS, basic (1) |
(0.1113 | ) | (0.0831 | ) | ||
| Loss per share, diluted |
(0.0022 | ) | (0.0017 | ) | ||
| Loss per ADS, diluted (1) |
(0.1113 | ) | (0.0831 | ) | ||
| Ordinary shares used in calculating basic income per ordinary share (in millions) |
18,169 | 18,054 | ||||
| Ordinary shares used in calculating diluted income per ordinary share (in millions) |
18,169 | 18,054 | ||||
| *Amortization of deferred stock compensation related to: |
||||||
| Research and development |
1,246,376 | 1,309,708 | ||||
| General and administrative |
1,810,959 | 1,573,391 | ||||
| Selling and marketing |
577,106 | 603,728 | ||||
| Total |
3,634,441 | 3,486,827 | ||||
| (1) | 1 ADS equals 50 ordinary shares. |
CONSOLIDATED STATEMENT OF CASH FLOWS
| For the three months ended |
||||||
| June 30, 2005 |
March 31, 2005 |
|||||
| (unaudited) |
(unaudited) |
|||||
| (In US dollars) | ||||||
| Operating activities: |
||||||
| Loss attributable to holders of ordinary shares |
(40,445,288 | ) | (29,994,997 | ) | ||
| Deemed dividends on preference shares |
— | — | ||||
| Net loss |
(40,445,288 | ) | (29,994,997 | ) | ||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||
| Minority interest |
11,947 | — | ||||
| Gain (loss) on disposal of plant and equipment |
23,609 | (3,434 | ) | |||
| (Reversal of) Bad debt expense |
(233,406 | ) | (762,397 | ) | ||
| Depreciation and amortization |
185,977,726 | 166,242,887 | ||||
| Amortization of acquired intangible assets |
10,081,688 | 9,868,813 | ||||
| Amortization of deferred stock compensation |
6,677,700 | 6,660,488 | ||||
| Non-cash interest expense on promissory notes |
1,150,866 | 1,173,682 | ||||
| Loss on long-term investment |
5,579 | 69,691 | ||||
| Changes in operating assets and liabilities: |
||||||
| Accounts receivable |
(15,021,064 | ) | (10,926,860 | ) | ||
| Inventories |
(1,977,063 | ) | (30,507,400 | ) | ||
| Prepaid expense and other current assets |
(7,684,704 | ) | 5,873,806 | |||
| Accounts payable |
(872,935 | ) | 8,296,980 | |||
| Income tax payable |
— | (152,000 | ) | |||
| Accrued expenses and other current liabilities |
(2,661,260 | ) | 13,982,097 | |||
| Net cash provided by operating activities |
135,033,395 | 139,821,356 | ||||
| Investing activities: |
||||||
| Purchases of plant and equipment |
(227,154,585 | ) | (248,495,009 | ) | ||
| Purchases of acquired intangible assets |
(2,353,756 | ) | (2,400,500 | ) | ||
| Purchase of short-term investments |
(2,416,480 | ) | — | |||
| Proceeds paid for long-term investment |
(6,720,000 | ) | (2,880,000 | ) | ||
| Sale of short-term investments |
10,000,000 | 9,932,932 | ||||
| Proceeds received for assets held for sale |
1,111,677 | 1,878,435 | ||||
| Proceeds from disposal of plant and equipment |
— | 1,089 | ||||
| Net cash used in investing activities |
(227,533,144 | ) | (241,963,053 | ) | ||
| Financing activities: |
||||||
| Proceeds from short-term borrowings |
145,540,347 | 28,475,559 | ||||
| Proceeds from long-term debt |
99,943,394 | 92,498,781 | ||||
| Repayment of promissory notes |
— | (25,000,000 | ) | |||
| Repayment of long-term debt |
— | (124,474,375 | ) | |||
| Repayment of short-term debt |
(55,000,000 | ) | (50,000,000 | ) | ||
| Proceeds from exercise of employee stock options |
777,415 | 196,032 | ||||
| Collection of notes receivables from employees |
51,529 | 52,218 | ||||
| Proceeds from minority interest shareholders |
39,000,025 | 12,082,400 | ||||
| Net cash provided by financing activities |
230,312,710 | (66,169,385 | ) | |||
| Effect of foreign exchange rate changes |
(322,315 | ) | (59,955 | ) | ||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
137,490,646 | (168,371,037 | ) | |||
| CASH AND CASH EQUIVALENTS, beginning of period |
438,801,533 | 607,172,570 | ||||
| CASH AND CASH EQUIVALENTS, end of period |
576,292,179 | 438,801,533 | ||||
As at the date of this announcement, the directors of the Company are Yang Yuan Wang as Chairman and independent non-executive director of the Company; Richard R. Chang as executive director of the Company; Lai Xing Cai and Fang Yao (alternate director to Lai Xing Cai) as non-executive directors of the Company; and Ta-Lin Hsu, Yen-Pong Jou, Tsuyoshi Kawanishi, Henry Shaw and Lip-Bu Tan as independent non-executive directors of the Company.
| By order of the Board Semiconductor Manufacturing International Corporation | ||
| Richard R. Chang | ||
| Chief Executive Officer | ||
Shanghai, PRC
July 29, 2005
| * | For identification only |
Page 3
Exhibit 99.3
 |
 | |
| Contacts:
Marsha Shalvi Tel: +972-989-28444x871 +972-544-942180 marshas@saifun.com |
America & Europe:
Reiko Chang Tel: +86 (21) 5080 2000 ext 10544 E-mail: PR@smics.com
Asia Pacific & Other regions: Angela Miao Tel: +86 (21) 5080 2000 ext 10088 Fax: +86 (21) 5080 2868 E-mail: PR@smics.com | |
SMIC Licenses SAIFUN NROM Technology to Expand
its Semiconductor Business
World-Leading Semiconductor Foundry to offer NROM
Two and Four Bit-Per-Cell Technology
Shanghai and Netanya, July 29 2005 — Semiconductor Manufacturing International Corporation (“SMIC”; NYSE: SMI and HKSE: 981), a world-leading semiconductor foundry, and SAIFUN Semiconductors, a provider of intellectual property (IP) solutions for the non-volatile memory (NVM) market, today announced that SMIC has licensed SAIFUN NROM® technology for production of flash memory-based products.
“SMIC has successfully used its DRAM filler strategy to navigate through the semiconductor industry’s recent downturn and has sought a filler strategy for its advanced logic fabs. SMIC believes that Saifun’s NROM technology, which is primarily based on an advanced logic process, will be ideal to fill this role,” said Mr. Marco Mora, Chief Operating Officer of SMIC. “SMIC is excited about partnering with a recognized innovator in the flash memory market by entering into license and design service agreements. These agreements will allow us to maintain our leadership position and to offer leading-edge NVM solutions.”
“With this agreement, SMIC joins other leading semiconductor manufacturers that are adopting our technology to expand their business and maintain their competitive edge,” said Kobi Rozengarten, President of SAIFUN Semiconductors. “The Chinese semiconductor market is an extremely important and high-potential market for us and we are proud that SMIC, the leader in this market, chose SAIFUN as its technology partner. We are confident that the combination of SMIC resources and NROM technology will set new standards in the industry.”
About SMIC
SMIC (NYSE: SMI, SEHK: 0981.HK) is one of the leading semiconductor foundries in the world, providing integrated circuit (IC) manufacturing at 0.35-micron to 0.11-micron and finer line technologies to customers worldwide. Established in 2000, SMIC has four 8-inch wafer fabrication facilities in volume production in Shanghai and Tianjin. In the first quarter of 2005, SMIC commenced commercial production at its 12-inch wafer fabrication facility in Beijing. SMIC also maintains customer service and marketing offices in the U.S., Europe, and Japan, and a representative office in Hong Kong. As part of its dedication towards providing high-quality services, SMIC strives to comply with or exceed international standards and has achieved ISO9001, ISO/TS16949, OHSAS18001, TL9000, and ISO14001 certifications. For additional information, please visit http://www.smics.com.
About Saifun Semiconductors Ltd.
Saifun is a provider of intellectual property (IP) solutions for the non-volatile memory (NVM) market. The company’s innovative Saifun NROM® technology allows semiconductor manufacturers to deliver high performance, reliable products at a lower cost per megabit, with greater storage capacity, using a single process for all NVM applications. Saifun licenses its IP to semiconductor manufacturers who use this technology to develop and manufacture a variety of stand-alone and embedded NVM products. These include Flash memory for the telecommunications, consumer electronic, networking and automotive markets. Among the companies licensing Saifun NROM are Infineon Technologies, Macronix International, Sony Corporation, Spansion, and Tower Semiconductors.