Semiconductor Manufacturing International (SMI)

QUOTE AND NEWS
StreetInsider.com  Oct 27  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Corporate+News/Semiconductor+Manufacturing+%28SMI%29%2C+ASML+%28ASML%29+Enter+EUR+450M+Volume+Purchase+Agreement/9942010.html for the full story.
Banking Business Review  Aug 20  Comment 
Electronic cash transaction network PayNearMe and payment processing provider for US government agencies Systems & Methods (SMI) have partnered to offer a cash collection method that eliminates the hassle of manual cash processing, while giving...
SeekingAlpha  Aug 7  Comment 
Semiconductor Manufacturing International Corporation (NYSE:SMI) Q2 2014 Earnings Conference Call August 7, 2014 8:30 PM Executives En-Ling Feng – Senior Director, Investor Relations Tzu-Yin Chiu – Chief Executive Officer Gao...
newratings.com  Jul 21  Comment 
BEIJING (dpa-AFX) - Semiconductor Manufacturing International Corp. (SMI) lifted its second-quarter gross margin guidance for the three months ended June 30 to 27-29% from the the original guidance of 22-24%. Dr. Yonggang Gao, Chief Financial...
StreetInsider.com  Jul 3  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Corporate+News/Semiconductor+Manufacturing+%28SMI%29%2C+Qualcomm+%28QCOM%29+Enter+Snapdragon+Wafer+Manufacturing+Agreement/9636473.html for the full story.
Red Orbit  Jul 3  Comment 
April Flowers for redOrbit.com - Your Universe Online A new study, led by Washington University in St. Louis, suggests that seasonal diet changes may have played a role in the development of bigger brains and higher-level cognitive functions in...
newratings.com  May 21  Comment 
BRUSSELS (dpa-AFX) - Swiss stocks edged higher on Friday, with the Swiss Market Index closing above 8,700 for the first time since December 2007. (SMI) rose to 0.11 percent to 8,703.84 for a small weekly gain. There were few catalysts to drive...
SeekingAlpha  Apr 29  Comment 
Semiconductor Manufacturing International Corporation (SMI) Q1 2014 Earnings Conference Call April 28, 2014 8:30 p.m. ET Executives En-Ling Feng – Senior Director, IR T.Y. Chiu – CEO Yonggang Gao – CFO Gareth Kung – EVP,...




 

Semiconductor Manufacturing International Corp. (SMI) is a semiconductor wafer fabrication manufacturer, or foundry, based in Shanghai, China. The company makes semiconductor wafers containing multiple copies of integrated circuits (ICs) based on a customer's design or those of customer-affiliated designers. As the only pure play mainland Chinese semiconductor foundry, the company is tapping into domestic demand growth with the Rise of China's Middle Class.[1]

Business Overview

SMI is a manufacturer, and operates its factories throughout mainland China. The company has taken advantage of local tax incentives spurred by Chinese municipalities to gain tax incentives and foster relationships throughout the country.[2]

Strategic alliances with Chartered Semiconductor Manufacturing (CHRT), Toshiba (TOSBF), Infineon Technologies AG (IFX), Fujitsu Limited (FJTSY), Motorola (MOT), ARM, Elpida Memory, Inc. and IMEC have provided access to intellectual property (IP) associated with a variety of semiconductor process technologies. Other services include libraries and circuit design blocks, in-house photomask capability, wafer probing, assembly/test and design support.

Business & Financial Metrics[3]

In 2009, SMI incurred a net loss of $213.6 million on revenues of $20.9 million. This represents a turnaround from 2008, when the company generated a net income of $92.0 million on revenues of $208.5 million.

Business Segments[4]

SMI operates through one reportable segment which manufactures and sells semiconductor wafers.

Trends/Forces

SMI is a low/negative margin business, compared with competitor TSM, making its business vulnerable to volatility

As the withdrawal from the DRAM business demonstrated, changes in SMI's business can cause negative financial results, due to distances to the utilization of the factories. This is because SMI needs to run its factories at full-steam to make itself profitable, due to the high level of fixed costs involved in its business. Decreases in business caused by issues with suppliers, fewer orders, or any other volatility would amplify the negative operating profitabiliy of the company, as it needs to continue to pay its laborers and researchers, depreciate its capital investments, and have "lights-on" at the plant for the capacity that is being used.

Rise of China's Middle Class will lead to increased consumption of electronic consumer goods

As one of the world's largest developing markets, the potential for semiconductor consumption in China is huge. SMI has nurtured its relationship with domestic semiconductor companies, and has it advantage as the "local" foundry. At present, approximately 10% of its sales come from domestic chip design firms.[5] Other once-luxury goods that are demanded by Chinese consumers with newly disposable income include computers, cars, and other electronics. SMI is poised to take advantage and gain sales if domestic consumers turn to domestic consumer electronics companies.

Lifting trade restrictions between Taiwan and China has positives and downsides for SMI

  • Upside: Increasing Strategic Acquisition Interest
  • Downside: Increased Competition Threat

The decreased political tensions, and easing of economic restrictions between China and Taiwan opens up the mainland to investment by SMI's chief competitors: Taiwan Semiconductor Manufacturing Company (TSM) and United Microelectronics (UMC). In the past TSM has tangled with SMI legally over IP Theft, and SMIC settled for $175 million.[6] SMI is still getting legal attention from TSM.[7] The opening of borders between the two territories can either allow for increased competition if the competition chooses to grow organically, or a strategic acquisition, if they choose to solve the issue by acquiring the competition. For TSM, this would give them further capability in China, and solve many of the legal issues. For UMC, it would help to purchase manufacturing power in cheaper China.

Competition

  • Taiwan Semiconductor Manufacturing Company (TSM) - TSM market leadership by revenues was based initially on technology leadership, which has allowed it to charge a price premium. This helps both its margins as well as its ability to reinvest into the business.
  • United Microelectronics (UMC) - UMC is the oldest company in the industry, but now occupies the #2 spot for revenues. The lower margins achieved by the business have led the executives to begin using the company's capital to invest in securities.
  • Chartered Semiconductor Manufacturing (CHRT) - CHRT is Singapore's chief semiconductor company, and offers a similar full-service approach to TSM through cooperation with its sister company, STATS ChipPAC.

References

  1. Semiconductor Manufacturing International 2007 Annual Report "Chairman's Statement" pg. 13
  2. Semiconductor Manufacturing International 2007 Annual Report "Government Subsidies" pg. 113
  3. SMI 2009 20-F pg. F-49  
  4. SMI 2009 20-F pg. 58  
  5. Morningstar Analysis "Semiconductor Manufacturing International" Aprril 28, 2008
  6. Financial Times "SMIC settles TSM patent suit for $175m" January 31, 2005
  7. Semiconductor Manufacturing International 2007 Annual Report "Recent TSMC Legal Developments" pg. 22
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