Chipmakers break into profit

Two of China's leading chipmakers Semiconductor Manufacturing International Corp (SMIC) and Advanced Semiconductor Manufacturing Corp (ASMC), have both recorded profits after long-running losses in their latest financial reports. However, the profits disguise different fortunes of the two Shanghai-based companies.

The profits at SMIC, China's largest chipmaker, were largely due to a tax benefit and were somewhat unexpected coming after six quarters of sequential losses. AMIC's profits on the other hand came as a result of strong sales of eight-inch wafers. The company recorded a net profit of Rmb22.13 million over the first two quarters of the year with eight-inch wafer sales up nearly 50 percent on January. AMIC's revenues were up 51.8 per cent to Rmb653.82 million from Rmb430.71 million a year ago.

Hong Kong and Nasdaq-listed SMIC recorded a second-quarter profit of US$2.2 million following a tax benefit payment of US$18.9 million. The company recorded a first quarter loss of US$8.7 million and US$40.4 million second quarter loss last year. Although sales at the company were up 2.9 percent quarter-on-quarter at US$361.4 million and up 29.3 percent year-on-year, the company nonetheless recorded a US$6.9 million operating loss, 16.1 percent more than over the first quarter. A spokesman for SMIC pointed out that there is oversupply and weak demand in the sector, accompanied by falling prices, all of which make things difficult for SMIC. Nonetheless, the company, which is also considering a domestic listing, predicts a bounce back in the fourth quarter of the year after further losses in the current quarter.

By contrast ASMC, which is partly owned by Royal Phillips Electronics, expects to remain profitable for the rest of the year. A spokesman for the company said that 2005 had been a heavy year of capital investment in the company, but that the rewards that investment has brought are already visible. Over the first half last year ASMC recorded net losses of Rmb39.38 million.

The company runs two plants in Shanghai making five, six and eight inch wafers. According to company sources, the utilisation rate at the two factories rose to 69 percent in the second quarter up from 62 percent in the first quarter.

CMI - 22/8/06