SMIC Reports 2013 Fourth Quarter Results

Semiconductor Manufacturing International Corporation ("SMIC"; NYSE: SMI; SEHK: 981) is one of the leading semiconductor foundries in the world and the largest and most advanced foundry in mainland China, providing integrated circuit (IC) foundry and technology services at 0.35-micron to 40-nanometer. Headquartered in Shanghai, China, SMIC has a 300mm wafer fabrication facility (fab) and a 200mm mega-fab in Shanghai, a 300mm mega-fab in Beijing, a 200mm fab in Tianjin, and a 200mm fab project under development in Shenzhen. SMIC also has customer service and marketing offices in the U.S., Europe, Japan, and Taiwan, and a representative office in Hong Kong.

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Safe Harbor Statements

(Under the Private Securities Litigation Reform Act of 1995)

This press release contains, 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, including statements under "First Quarter 2014 Guidance" and the statements regarding future revenue from 28nm process technology in the end of 2014 and more significant ramp up in 2015, our confidence in our strategy and capability to capture growth opportunities, especially those in the China IC market, and our expectation to capture opportunities in 2014 and onward, as well as the statements regarding future 2014 capital expenditures are based on SMIC's current assumptions, expectations and projections about future events. SMIC uses words like "believe," "anticipate," "intend," "estimate," "expect," "project," "target" and similar expressions to identify forward-looking statements, although not all forward-looking statements contain these words. These forward-looking statements 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 the global economic slowdown, orders or judgments from pending litigation 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 annual report on 20-F filed with the SEC on April 15, 2013, as amended on December 19, 2013, especially the consolidated financial statements, and such other documents that SMIC may file with the SEC or The Hong Kong Stock Exchange Limited ("SEHK") from time to time, including current reports 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 may be 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.

About Non-Generally Accepted Accounting Principles ("Non-GAAP") Financial Measures

To supplement SMIC's consolidated financial results presented in accordance with IFRS, SMIC uses in this press release measures of operating results that are adjusted to exclude wafer shipments from Wuhan Xinxin Semiconductor Manufacturing Corporation ("Wuhan Xinxin"), which SMIC began gradually phasing out in 3Q13. This earnings release includes non-GAAP revenue, non-GAAP cost of sales and non-GAAP gross margin. It also includes first quarter 2014 guidance for non-GAAP operating expenses, which is adjusted to exclude the effect of foreign exchange, employee bonus accrual, funding of R&D contracts from the government and gain from the disposal of living quarters. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with IFRS.

SMIC believes that use of these non-GAAP financial measures facilitates investors' and management's comparisons to SMIC's historical performance. The Company's management regularly uses these non-GAAP financial measures to understand, manage and evaluate the Company's business and make financial and operational decisions.

The accompanying table has more information and reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis.


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Summary of Fourth Quarter 2013 Operating Results

Amounts in US$ thousands, except for EPS and operating data












Cost of sales






Gross profit






Operating expenses






Profit from operations






Other income (expense), net






Profit before tax






Income tax expenses






Profit for the period






Other comprehensive income:

Exchange differences on translating foreign operations






Total comprehensive income  for the period






Profit attributable to SMIC






Gross margin






Earnings per ordinary share (basic and diluted) ( 1 )






Earnings per ADS (basic and diluted)






Wafers shipped (in 8" equivalent wafers)






Capacity utilization ( 2 )







(1) Based on weighted average ordinary shares of 32,102 million (basic) and 33,693 million (diluted) in 4 Q1 3 , 32 , 084 million (basic) and 32,355 million (diluted) in 3 Q1 3 , and 31,997 million (basic) and 32,044 million (diluted) in 4 Q1 2 .

(2) B ased on total equivalent wafers out divided by estimated total quarterly capacity .

  • Revenue decreased to $491.8 million in 4Q13, down 7.9% QoQ from $534.3 million in 3Q13, mainly due to a decrease of wafer shipments in 4Q13.
  • Non-GAAP revenue excluding wafer shipments from Wuhan Xinxin was $483.6 million in 4Q13, compared to $503.7 million in 3Q13.
  • Cost of sales decreased to $398.9 million in 4Q13, down 5.5% QoQ from $422.3 million in 3Q13, mainly due to the same reason mentioned in the change of revenue.
  • Gross profit was $92.9 million in 4Q13, a decrease of 17.0 % QoQ from $112.0 million in 3Q13.
  • Gross margin was 18.9 % in 4Q13, down from 21.0% in 3Q13 primarily due to product mix change, lower utilization and a provision for customer claim in 4Q13.
  • Non-GAAP gross margin excluding wafer shipments from Wuhan Xinxin was 19.2% in 4Q13, down from 22.1% in 3Q13.
  • Operating expenses increased to $84.8 million in 4Q13, an increase of 33.7% QoQ from $63.4 million in 3Q13, mainly due to the reasons stated in Operating Expenses (Income) Analysis below.

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