SMIC Q4 Margin Forecast Drops to 26‑28%

SMIC Q4 Margin Forecast and Q3 Results Overview

SMIC forecast its fourth‑quarter gross margin to fall within the 26%‑28% range, lower than the 29.9% recorded in the third quarter, even though the company expects revenue to grow 4%‑6% year‑on‑year in Q4.

In the third quarter, SMIC reported revenue of $3.19 billion, representing a 6.1% increase quarter‑on‑quarter and a 33.9% rise year‑on‑year, driven by higher wafer shipments that rose 5.7% QoQ and 21.4% YoY. Gross profit climbed to $953.2 million from $760.6 million in the second quarter and $522.8 million a year earlier. The gross margin improved to 29.9%, up from 25.3% in Q2 and 22% YoY, aided by plant utilisation reaching 97.3% versus 93.7% in the prior quarter and a favourable product‑mix shift.

Profit from operations increased 32.9% quarter‑on‑quarter to $710.1 million and more than doubled year‑on‑year (102.3% growth). Other operating income, largely from recognised government funding, rose to $155 million from $112.6 million in Q2. Research and development expenditure rose to $258.4 million from $208.5 million in the second quarter, reflecting heightened R&D activity.

Net profit declined 11.2% quarter‑on‑quarter to $650.9 million, but more than doubled compared with the same period last year. Profit attributable to owners fell 10.6% quarter‑on‑quarter to $428.4 million, yet surged 123.4% year‑on‑year. Earnings per share were $0.05, down from $0.06 in Q2 but up from $0.02 a year earlier.

Other income swung to a net loss of $32.1 million from a gain of $275.9 million in Q2, as the share of results from associates and a joint venture turned negative, recording a $23 million loss versus a $193.8 million gain previously.

Net cash generated from operations fell sharply to $1.18 billion from $2.52 billion in Q2, while capital spending decreased to $1.09 billion from $1.84 billion. Net debt rose to $1.50 billion at the end of September from $162.3 million at the end of June. Receivables increased to $2.29 billion from $1.51 billion, and inventories grew to $4.83 billion from $4.36 billion over the same period.

Smartphone wafer revenue accounted for 14.3% of total wafer revenue, down from 16.9% in Q2, whereas industrial and automotive segments rose to 19.3% from 16.5%.

Geographically, China contributed 90.8% of revenue, a slight rise from 90.2% in the prior quarter and up from 86.2% a year earlier. Monthly production capacity expanded to 1,116,750 8‑inch‑equivalent wafers, compared with 1,096,500 in Q2.