Welcome to Semiconductor Manufacturing International Corporation's First Quarter 2021 Webcast Conference Call. Today's call will be live streamed through the Internet at SMIC's website. Webcast playback will also be available approximately 1 hour after the event. Please be advised that your dial ins are in listen only mode. However, at the conclusion of the management presentation, we will have a question and answer session, at which time you will receive instructions on how to participate.
Today's conference call will proceed in both Chinese and English. Without further ado, I would like to introduce Ms. Guo Guang Li, Board Secretary for the forward looking statement.
Greetings. Welcome to SMIC's Q1 2021 Earnings Call. Today's call is hosted by Doctor. Zhao Haijun, Co Chief Executive Officer and Doctor. Gao Yong, Gao, Chief Financial Officer.
The call will last about 60 minutes. The management will provide their commentary in Chinese and Investor Relations team will provide English interpretation. During the subsequent Q and A session, we will accept questions in both Chinese and English. The earnings release and presentation are available at Let me remind you that today's presentation includes forward looking statements that do not guarantee Standards, IFRS and all currency figures are in U. S.
Dollars unless otherwise stated. However, we will also reference financial measures that do not conform to IFRS in order to help investors Compare SMIC's past performance. These non IFRS measures may differ from similar data presented by other companies. Please refer to the tables in our announcement. I will now hand the call to CFO, Doctor.
Gao Yonggang for financial highlights and guidance. Let me recap related events from 2020. According to the relevant regulations of Shanghai Stock Exchange, When a listed company has made profits during the annual reporting period and its accumulated undistributed profits are positive, But no cash dividends are distributed. The company shall provide a key explanation on matters related to The cash dividend plan in the earnings webcast after the disclosure of the annual report and before the record day of the Annual General Meeting. On this basis, the company's 2020 profit distribution plan is as follows: SMIC's 2020 key financial metrics significantly increased as compared to that of previous year.
According to China accounting standards, by the end of 2020, the accumulated Tributed profit was ky8.1 billion. In 2020, the company's free cash flow generated from operating activities After deducting cash paid for the purchase and construction of fixed assets, intangible assets and other long term assets was negative 24,000,000,000. Taken into account that the company's current operating situation, The need of 2021 CapEx of KRW 28,100,000,000, future development and other factors, The company proposed not to make profit distribution for 2020, which is in line with the company's long term development needs and the long term interest of shareholders and in accordance with relevant laws and regulations. This will cause no harm to the interest of the company and its shareholders, especially the small and medium shareholders. Has been reviewed and approved by the Board of Directors and will be submitted for approval at the Annual General Meeting on June 25.
We would like to thank our shareholders for their understanding and support. Now I will highlight our Q1 2021 unaudited results, then give the Q2 guidance and full year outlook. Please be reminded that all earnings figures in the following statements are prepared in Q1 2021 revenue and gross margin beat guidance. Revenue was CNY1104 million, an increase of 12.5% quarter over quarter an increase of 22% year over year. Gross margin was 22.7%, sequentially up 4.7 1st quarter 2021 results improved and beat guidance mainly because, 1, Pricing adjustment and product mix optimization brought an increase of 5% in wafer ASP quarter over quarter 2, increase in wafer shipments by 10% quarter over quarter.
1st quarter profit from operations was 3.3% year over year. Profit for the period attributable to SMIC was CNY159 1,000,000. Non controlling interest were RMB43 1,000,000, which are losses borne by non controlling interest of Moving to the balance sheet. At the end of the first quarter, Total assets were RMB30.8 billion. Among that, total cash on hand, including cash and cash equivalents, Related restricted cash and financial assets was RMB14.3 billion.
Total liabilities were RMB8.6 billion, While total equity was RMB22.2 billion, including non controlling interest, total debt was RMB5.8 billion And net debt was negative RMB8.5 billion after deducting cash on hand. Gross debt to equity was 26 0.2% and net debt to equity was negative 38.4%. In terms of cash flow in the Q1, We generated CNY464 1,000,000 of cash from operating activities, a sequential down mainly due to changes in working capital. Net cash used in investing activities and from financing activities were negative RMB1056 1,000,000 and negative RMB216,000,000 respectively. Now for the Q2, our guidance is as follows.
Revenue is expected to grow 17% to 19 Gross margin is expected to range from 25% to 27%, mainly due to: 1, the huge gap Between supply and demand, under the current market dynamics, the company has made reasonable pricing adjustment accordingly After communication with our customers, wafer ASP will further strengthen, driving revenue growth exceeding expectations from earlier this year. 2, capacity expansion and improving operational efficiency will further increase Now IFRS OpEx is expected to increase sequentially, while losses to be borne by non controlling interest According to 1st quarter results and Q2 guidance. Revenue for the first half of twenty twenty one will be expected to be around RMB2.4 billion, Beating original forecast, this year, the semiconductor market notes a positive development. Under normal circumstances, the company should have maintained a rapid growth momentum from last year. But as SMIC was Placed on the U.
S. Entity list, the company is restricted from procuring related U. S. Origin items and technology. There are still risks and uncertainties to our second half of twenty twenty one.
In February, the annual forecast we gave were revenue growth target to high single digit percent and gross margin target to be in the mid teens range. In light of the information currently available to the company and based on the uncertain assumption that operational continuity will not be significantly adversely affected. Our annual revenue and gross margin are expected to beat original forecast. However, out of an abundance of caution, we ask for your understanding that we will not provide and exact revised range of our second half and full year expectation for the time being. We will do our best to ensure operation 2021 CapEx plan of RMB4.3 billion, the majority is for non FinFET capacity expansion and the remaining is for FinFET, The infrastructure of the Beijing Jingchun project and others, annual depreciation and amortization is estimated to be roughly RMB2 1,000,000,000 and EBITDA is expected to be above RMB2.3 billion.
This concludes the financial remarks. Thank you. Thank you, Doctor. Gao, for the financial update. I will now hand the call to our Co CEO, Doctor.
Zhao Haijun to comment on market, company operations and technology platforms. During the Q1 of 2021, SMICs still face a challenging environment. On one hand, market demand was strong. Our current Capacity could not fulfill customer needs and products in every market segment face shortages from power management, RF, driver ICs to microcontroller units, specialty memory, CIS and other applications. On the other hand, certain restrictions on the company's supply chain caused by the U.
S. Entity list created a lot of uncertainties in operational continuity and further capacity building and brought higher requirements to operational planning and engineering management. The company united as one and actively responded under this complex situation. We work in production planning and engineering management steadily dedicated and devoted repeatedly checking every link In the production process that may affect the company's operational continuity, designed and implemented Under the current supply shortage situation, Our principle for capacity allocation is give priority to meet the needs of customers that have collaborated and co developed with the company for the long term, then consider products with high growth margin and at the same time, Communicate closely with other customers to negotiate and accommodate their most important needs. We commit to be the finest and largest in Under the unremitting efforts of all our staff, 8 inches equivalent wafer shipment was RMB1.56 million in Q1 2021, a 10% growth sequentially.
1st quarter revenue and gross margin beat guidance. Revenue grew 12.5% sequentially and exceeding RMB1.1 billion for the first Gross margin was 22.7%, sequentially up 4.7 percentage points. Now let me provide details on non FinFET and FinFET technology, respectively. For non FinFET processes, The current market continues to be very strong and is in high demand and capacity will continue to be in short supply till the end of this year. Among the nodes, 40 nano and 0.15, 0.18 micron are particularly tight.
In the Q1, revenue grew across the board in the Combined revenue from CIN, specialty memory and power management grew 20% sequentially. In addition, With the development of domestic panel display supply chain, high voltage driver IC rose to the prominence. Demand has entered a rapid upward trajectory. In the Q1, revenue from high voltage panel display driver ICs doubled sequentially using our 0.15 micro, 55 and 40 nano technologies. Everyone is concerned about our expansion progress.
We continue to push forward on the expansion plan of non FinFET we disclosed Earlier this year, to increase monthly capacity of 10,000 for 12 inches 45,000 for 8 inches There will be some new capacity gradually released quarter by quarter, but most will form in the second half of this year. Follow-up plans for our new fabs, in addition to the Beijing Jingchen project, we signed the cooperation framework agreement for Shenzhen project in March with a goal of building a capacity of 40,012 inches wafers per month For Nao Finsat Technology, the shale has been built and the fab is expected to commence production in the coming year. However, there may be some delay for equipment to reach production considering the impact of the entity list. As for FinFET technology progress, the 1st generation FinFET has entered the mature stage of mass production And the product yield has reached the industry standard. Furthermore, the development of multiple derivative platforms are carrying out as planned and achieving the goal of diversified product portfolio and new tapered projects are steadily engaging.
Compared with the previous generation, the 2nd generation FinFET technology has Greatly improved the transistor density per unit area, completed the development of low voltage process and enter risk production. In the Q1, FinFET revenue grew sequentially from a 12. However, FinFET Technology has a heavy depreciation burden and well placed pressure on the company's overall profitability for a long period of time. And the restriction of the entity list brings higher risks and uncertainties to FinFET. We believe that in 2021, challenges and growth opportunities coexist.
Although we cannot fully control external forces, We will respond actively, continue to focus on our business, adhere to customer orientation, tackle the difficulties with precision, Enter the 1st tier in the segment market, seize the market opportunities, execute cautiously and conscientiously and performed better and better. Thank you, Doctor. Zhao. Next is our Q and A session. Chinese questions will be answered in Chinese.
English questions will be answered in English. As usual, please limit your questions to 2 per person. Questions will be answered by Doctor. Zhao and Doctor. Gao.
I would now like to open up the call for Q and A. Operator, please assist.
Your first question comes from Randy Abrams from Credit Suisse. Please ask your question.
Okay. Yes. Thank you and congratulations on the outlook, especially considering the restrictions. The first question has 2 parts on the 2nd quarter guidance for the 17% 19% for the sales growth. For that growth, could you split the growth between shipment increase versus pricing And also from filling the 14 nanometer capacity, is it was underutilized after the Huawei That's the first part.
And the second part for growth through this year since you're operating near full, could you discuss how much capacity you would be increasing in second quarter and then also in second half over first half?
Randy, thank you for the questions. Actually, I can combine Two questions for one answer. I can give you the first answer is that for the capacity increment in the second quarter similar to And I could now break down right away the ratios between the price The reading and the shipments, but more or less you can calculate right away.
Okay. And I'll do a quick follow-up on that. For the FinFET, if you could discuss The applications and how that ramp is coming up from the trough. And the second question I had was on The gross margin coming back up to mid-20s, I think previously you expected could be Mid to high teens. Could you discuss now if you think that's the new baseline for gross margins, If no further restrictions or if you could even improve that with the stronger pricing.
So if you could discuss the gross margin
Yes. Even though we cannot forecast too much on the total On the margin part, since the price this part of allocations has been settled with customer and We can more like say it's pretty stable and on the forecast for the gross margins. But the valuation definitely will be there. You know that when we have more capacity getting into production and we got Into a phase of depreciation and that depends on how much we can move up the incremental capacity. So definitely For the final margin, there will be some frustration and factors there.
You know that.
Okay. And so to clarify, it sounds like stable similar levels may be able to be maintained as long as no Major changes that could keep stable in this level.
And just now I say that and For the ASP part more or less we are resettled with customer, but the factor facing is the speed And of the incremental capacity and the depreciation. So definitely, we have a Hi, number already forecast. And there will be a little gap between the CapEx and the 2 shipments. And we already say that this year we will have more than 10,000 wafers or 10,000 wafers for 12 inches getting into production and we also 45,000 wafers, 80 inches getting into production. And we can phase in this kind of depreciations And together with the guidance we gave, that's more or less the formula.
Okay. And one final follow-up. On the 45 ks 8 inches do you feel comfortable on securing all of the tools? And is that used or You're finding kind of semi or new tools and do you feel confident on that capacity?
We should say that for the Definitely, there could be some uncertainties. But after this moment, the capacity buildup Among these 45,008 inches wafers are ahead of schedule and we already have more than 33%, one third of capacity build up already contribute to the revenue.
Okay, great. Thank you.
Thanks, Randy.
Your next question comes from Ho Ng from China Renaissance. Please ask your question. Your next question comes from Leiping Huang from Huatai. Please ask your question. Your next question comes from Jing Song Zhu from Haitong Securities.
Please ask your question. Morgan Stanley, please ask your question.
This is
I would now like to hand the call back to Ms. Kuo for closing remarks.
Thank you all for participating in today's conference call. Thank you for your trust and support.
This concludes SMIC's 1st quarter earnings conference call. We thank you for joining us today.