China’s SMIC expects to return to profit in Q4
China’s biggest contract chipmaker, Semiconductor Manufacturing International Corp (0981.HK: Quote, Profile, Research), is confident it will return to profit in the fourth quarter of 2008 after it posted deep losses in the first three months of this year, a senior executive said.
The second and third quarters should remain tough for the company but the fourth quarter is expected to see profits as it transforms to higher margin logic chip production from the DRAM business it plans to exit, President and Chief Executive officer Richard Chang told a telephone conference on Wednesday.
SMIC reported quarterly net losses to $119.1 million in the three months ended March, including a $44 million provision taken against dynamic random access memory (DRAM) inventories.
The result extended a $21.2 million loss for the quarter ended Dec. 31 due to sharp price declines in the global computer memory chip market.
Shares in SMIC had dropped 1.6 percent by the midday break on Wednesday, lagging a 0.2 percent drop in the benchmark index .HSI.
SMIC said late on Tuesday the first-quarter losses could deepen further if the company booked an impairment loss against the DRAM business.
For results story please read [ID:nHKG367869]
“SMIC and its clients have reached a consensus that we would completedly retreat from the DRAM market after the first quarter and converse the DRAM equipments for logic production,” Chang said.
“I believe the company could see profits in the fourth quarter and will continue to be profitable thereafter.”
Shares in the company dropped 34 percent in the first quarter, lagging an 18 percent drop in Hong Kong’s benchmark Hang Seng Index .HSI.
But the stock have risen 13 percent so far in the second quarter to HK$0.61 on Wednesday after it said in late March it was in advanced talks with strategic investors it did not identify.
Chang said SMIC was studying proposals from potential investors, which could bring the company advanced technology.
The company also expected its overall sales to fall 3-6 percent in the second quarter from the pervious quarter while non-DRAM sales should rise 3-6 percent from the first quarter.
“SMIC’s non-DRAM revenue guidance seems strong but we believe it could be challenged to meet this guidance, and could miss its bullish expectations once again,” Merrill Lynch said in a research note shortly after the conference.
Tags: Semiconductor, SMIC