SMIC extends loss streak, but revenue up

Semiconductor Manufacturing International (SMIC), China's largest chip maker, posted its tenth straight quarterly loss on Wednesday, but a rise in revenue from the past quarter reflected the chip industry's ongoing recovery.

"This year the worst was over for foundries in the first quarter," company CEO Richard Chang said in a results call. "The second quarter was our time for recovery, and further recovery continued into the third quarter and fourth quarter."

SMIC reported revenue of US$323.4 million for the three months through the end of September. The figure was a 14 percent drop compared with a year earlier, well before the chip industry bottomed out amid the global economic recession. But it was also a 21 percent rise over SMIC's revenue for the previous quarter.

SMIC's results are another indication of improving health for the chip sector. Earlier this week Taiwan-based United Microelectronics (UMC), the world's second-largest contract chip maker, posted its best quarterly net profit in two years due to strong chip sales.

SMIC reported a net loss for the quarter of $69.3 million, more than double its loss of $30.3 million in the same quarter last year. The company aims to begin turning a profit by the third quarter next year and to have a profitable 2010 overall, Chang said.

SMIC's capacity utilization rate last quarter rose to 87.3 percent from 75.4 percent in the previous quarter, marking a hike in its production. But despite the economic recovery, the company will restrain its long-term capital spending next year, Chang said. Instead it will focus largely on expanding the company's production capacity for the 65 nanometer and 45 nanometer technologies, he said.

SMIC aims to pull in more revenue next quarter and next year by expanding sales of chips produced with the advanced 65-nanometer process. It hopes to do the same with 45nm technology after the chip design for its first related product is finalized and ready for manufacture later this year, said Chang.

The nanometer measurement indicates the size of the transistors and other parts on a chip. The more transistors, and the closer they are together, the faster the chip can perform tasks.

The IDG News Service is a Network World affiliate.