SMIC boosting capex by 15%

February 6, 2006 – Chinese foundry Semiconductor Manufacturing International Co. (SMIC) expects to spend $1.1 billion on its own in 2006 as well as explore deals through “strategic alliances” to expand capacity.

SMIC reduced its net losses from $26.1 million to $15.0 million in 4Q05, on 7.5% higher sales of $333.1 million. Overall ASPs increased although sales of technology utilizing 0.13µm processes declined slightly to 43% of overall sales, and dropped from ~15% to 11% for logic products. The company added about 6.6% to overall capacity, to 1323,260 wafers/month (200mm equivalent), with 300mm capacity rising to about 21% of overall capacity vs. 17% in 3Q05.

SMIC stated that it will pursue alternatives to expanding capacity through the use of strategic alliances. Capital expenditure budget for 2006 has been set at $1.1 billion, roughly a 15% increase from the $950 million it spent in 2005, with a big chunk of that coming from $648 million it generated in cash during the year.

For 1Q06, SMIC projects a 2%-4% increase in wafer shipments, with utilization remaining steady at 93% and gross margins flat at ~13%. Capex for 1Q06 is seen increasing from $229.8 million in 4Q to a range of $250-$300 million.


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