March 31, 2005 – Semiconductor Manufacturing International Corp (SMIC), the biggest chipmaker on the Chinese mainland, saw its first quarterly losses in the 4Q last year, after becoming profitable a year ago, mainly due to compensation payments made to its competitor Taiwan Semiconductor Manufacturing Corp. (TSMC), said Asia Pulse Pte Ltd.

Shanghai-based SMIC said yesterday its revenues in the 4Q rose by 6.2% to US$291.8 million quarter-on-quarter. Its annual revenues hit US$975 million in 2004 with US$70.91 million in profits. However, it recorded losses of US$11.2 million in the 4Q, after paying US$23.2 million in compensation to TSMC. SMIC was accused of infringing on TSMC’s patents and stealing trade secrets by the Taiwanese semiconductor firm in December 2003.

The mainland company said on January 30 it had reached a settlement with TSMC, and revealed it would be paying TSMC US$175 million over six years and would therefore postpone the announcement of its annual results.

Richard Chang, chairman and CEO of SMIC, said the situation this quarter and the whole year will remain very challenging, but there will be some improvement from the second quarter. SMIC said its capital expenditure will be about US$1 billion this year depending on market conditions and will be mainly used to expand production capacity in its wafer plants in Beijing, Shanghai, and Tianjin.

Its production is expected to reach 147,000 pieces equivalent to 8-inch wafers by the end of the year, a 22% rise over 2004. The company predicted its wafer shipments are likely to decrease by 5 to 7% year-on-year and utilization will be about 85%.