Chinese chipmaker posts profit

Semiconductor Manufacturing International Corp (SMIC, 中芯), China's biggest chipmaker, posted its first profit in seven quarters because of a tax benefit and as demand for consumer electronics drove sales higher.

Net income was US$2.2 million, or 0.6 cents per American depositary share, in the second quarter, compared with a loss of US$40.4 million, or 11.1 cents, a year earlier, the Shanghai-based chipmaker said yesterday in a statement on its Web site. Sales gained 29.3 percent to US$361.4 million.

"We want to be conservative," about prospects for third-quarter profit, chief executive officer Richard Chang (張汝京) said on a conference call. "We want to prepare ourselves in case some customers want to take delivery a few months later in the fourth quarter."

He said the forecast is still for a "very profitable" third quarter.

SMIC, whose customers include Infineon Technologies AG, expects sales this quarter to remain flat or increase up to 2 percent from the second quarter.

The company narrowed its operating loss to US$6.9 million in the second quarter from US$32.1 million a year earlier. Loss from operations in the first quarter was US$6 million.

The chipmaker is sticking to its planned US$1.1 billion capital spending forecast for this year, Chang said. Capital expenditure in the second quarter rose to US$317.3 million from US$255 million in the previous three-month period.

The company said it used 93.5 percent of its factory capacity in the second quarter, compared with 87 percent a year earlier and 95 percent in the first quarter. Usage in the current quarter will likely be between 90 percent and 91 percent, Chang said.

Second-quarter gross margin, the percentage of sales left after deducting production costs, was 13.6 percent, compared with 2.3 percent a year earlier and 12.4 percent in the first quarter. Gross margin this quarter will be between 8 percent and 12 percent, it said.

Semiconductor Manufacturing's shipments of 8-inch wafers, which make up the bulk of its production, rose 17.5 percent in the second quarter to 388,498 units, from 330,499 a year earlier. In the first quarter, the chipmaker shipped 388,010 units.

The average selling price in the second quarter rose 10 percent from a year earlier, it said.

The company joins Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) in beating analysts' estimates on stronger demand for chips used in consumer electronics such as Microsoft Corp's Xbox 360 game console.