SMIC, Hua Hong profits rise in second quarter; chip market will improve this year, analyst says

(Yicai) Aug. 9 — Chinese wafer foundries Semiconductor Manufacturing International and Hua Hong Semiconductor reported second-quarter net profit and revenue growth from the previous quarter. Chip sales should continue to grow in the second half of the year, an analyst said.

An analyst at a brokerage house told Yicai that the integrated circuit industry will see a weak recovery this year, and the situation should improve in the second half of the year.

The semiconductor market is slowly rebounding after several weak quarters, driven by industries such as consumer electronics, Tang Junjun, chairman and chief executive of Hua Hong, said on a financial results conference call yesterday. SMIC had previously said global customers were increasingly inclined to stock up.

SMIC’s second-quarter net profit more than doubled from the previous quarter but fell 59 percent year-on-year to $165 million, according to the Shanghai-based company’s latest financial report. Revenue rose 8.6 percent quarter-on-quarter and 21.8 percent year-on-year to $1.9 billion.

Hua Hong’s net profit fell 91.5 percent in the three months from a year earlier ended June 30 to $6.6 million, but the decline narrowed 79 percent from the previous quarter, the Shanghai-based company said in its latest earnings report. Revenue fell 24.2 percent year over year to $478.5 million, up 4 percent from the previous quarter.

The gross profit margin and capacity utilization rate of both companies are also slowly improving. SMIC’s gross profit margin in the second quarter was 13.9 percent, up 0.2 percentage points from the previous quarter, while Hua Hong’s was 10.5 percent, up 4.1 percentage points. The capacity utilization rates of SMIC and Hua Hong increased by 4.4 percentage points and 6.2 percentage points, respectively, from the previous quarter.

SMIC said it expects revenue to grow by 13% to 15% in the third quarter from the previous three months, with gross margins expected to be between 18% and 20%. However, estimates for the second half of the year remain cautious.

The market should improve in the second half of the year, and the company is eager for orders, Hua Hong said. The company expects revenue in the three months ended Sept. 30 to be between $500 million and $520 million, with gross margins of 10 percent to 12 percent.

Shares in SMIC (SHA:688981) closed 2.1 percent higher at CNY48.49 (USD6.70) today, while Hong Kong-listed shares (HKG:0981) ended the day 4.9 percent higher at HKD16.50 (USD15.30). However, Hua Hong (HKG:1347) fell 6.2 percent to end the day at HKD18.08 (USD2.30).

Editor: Kim Taylor