Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue for the third quarter reached a record high of $2.17 billion, marking a 14.2% sequential increase.
- Gross margin improved significantly by 6.6 percentage points sequentially to 20.5%.
- The company's EBITDA margin was strong at 53.3%, with EBITDA totaling $1,157 million.
- The overall utilization rate increased by 5.2 percentage points to 90.4%, effectively reducing per unit depreciation costs.
- The company achieved a milestone by reaching $2 billion in revenue in a single quarter for the first time.
Negative Points
- Revenue growth for the fourth quarter is expected to be flat to up only 2% sequentially, indicating a potential slowdown.
- Gross margin guidance for the fourth quarter is lower, expected to be in the range of 18% to 20%.
- The proportion of overseas revenue decreased by 6 percentage points sequentially due to geopolitical factors.
- The overall utilization rate and shipments are expected to decrease in the fourth quarter.
- Net cash used in investing activities was high at $1,345 million, indicating significant capital expenditure.
Q & A Highlights
Q: Can you provide more details on the factors contributing to the revenue increase in the third quarter?
A: Dr. Haijun Zhao, Co-Chief Executive Officer, explained that the revenue increase was driven by a combination of factors. These include an increase in 12-inch shipments, improved pricing for some 12-inch nodes, and an optimized product mix. The company also saw a 5.2 percentage point increase in overall utilization rate, which helped dilute per unit depreciation costs, contributing to a 14% sequential revenue increase to $2.17 billion.
Q: What is the company's outlook for the fourth quarter in terms of revenue and gross margin?
A: Dr. Junfeng Wu, Senior Vice President and Person-in-Charge of Finance, stated that for the fourth quarter, revenue is expected to be flat to up 2% sequentially, with a gross margin in the range of 18% to 20%. Despite a traditionally weaker fourth quarter, the company aims to maintain revenue levels through product mix optimization.
Q: How is the geopolitical situation affecting SMIC's business, particularly in terms of regional revenue distribution?
A: Dr. Haijun Zhao noted that geopolitical factors have led to a decrease in overseas revenue by 6 percentage points sequentially, as some overseas customers pulled in shipments to the second quarter. However, the demand from Chinese customers increased, resulting in a 6 percentage point rise in revenue from China, which now accounts for 86% of total revenue.
Q: What are the company's plans for capacity expansion, especially for 12-inch wafers?
A: Dr. Haijun Zhao mentioned that around 30,000 12-inch monthly capacity is expected to be released in the fourth quarter. However, it will take time for verification. The company is accelerating capacity deployment to meet existing customer needs, particularly in the automotive, industrial, and new energy markets.
Q: Can you elaborate on the company's strategic focus and market positioning moving forward?
A: Dr. Haijun Zhao emphasized that SMIC will maintain its strategic focus on wafer manufacturing and accelerate platform verification. Despite intensified industry competition, the company aims to stabilize its market share and consolidate its position, with a full-year revenue expectation of around $8 billion, representing approximately 27% year-over-year growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
