Welcome to Semiconductor Manufacturing International Corporation 4th Quarter 2020 Webcast Conference Call. Today's call will be live streamed through the Internet at SMIC website. Webcast playback will also be available approximately 1 hour after the event. Please be advised that your dial in are in through the recent earnings call. However, at the conclusion of the management presentation, we will have a question and answer session.
Each time you will receive instructions on how to participate. Today's conference call will proceed in both Chinese and English. Through. Without further ado, I would like to introduce Ms. Guo Guang Li, Board for the forward looking statements.
Thank you.
Through. Greetings. Welcome to SMIC's 4th quarter 2020 earnings today's call is hosted by Doctor. Zhao Haijun, Co Chief Executive Officer and Doctor. Gao Yonggang, 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 in parallel. During the subsequent Q and A session, We will accept questions in both Chinese and English. Through the call. The earnings release and presentation are available at www.smics.com.
Through the call.
Let me remind you that today's presentation includes forward looking statements that do not guarantee future performances, but represent our estimates and are subject to risks and uncertainties. Please refer to the forward looking statements in our press release. Through today's earnings statements use International Financial Reporting Standards, IFRS, but we will also reference financial measures that do not conform to IFRS in order to help investors compare SMIC's past performance. Through the Q4 of 2018. These non IFRS measures may differ from similar data presented by other companies.
Please refer to the tables in our press release. Through. Please note that all currency figures are in U. S. Dollars unless otherwise stated.
Through the call. I will now hand the call to CFO, Doctor. Gao Yonggang for financial highlights and guidance. Through. Greetings to all.
Please be reminded that all earnings figures and prepared in accordance with IFRS unless otherwise stated. First, I will highlight our 4th quarter 2020 and audited results and then give the Q1 2021 guidance. Through. 4th quarter 2020 revenue was CNY 9 to RMB81 1,000,000, an increase of 16.9% year over year and a decrease of 9.4% sequentially, mainly because: 1, decrease in FinFET Wafer Shipment 2, decrease in other revenue. Gross margin was 18%, sequentially down mainly due to: 1, revenue mix change to FinFET utilization relatively low, so overall utilization rate down to 95.5%.
Through. Profit for the period attributable to SMIC was CNY257 million, a record high, partly due to investment gain from associate companies. Non controlling interests were RMB28 1,000,000, which are losses borne by non controlling interests. Moving to the balance sheet. At the end of the 4th quarter, Total cash on hand was close to RMB15 1,000,000,000.
Total assets were close to RMB31.3 billion and total equity was around CNY21.7 billion, including non controlling interest. Gross debt to equity was 29 point 4% and net debt to equity was negative 39.6%. Accounts receivable turnover was 41 days and inventory turnover was 89 days. Through the Q4. In terms of cash flow in the 4th quarter, we generated CNY 534,000,000 of cash from operating activities, a sequential down, partly due to changes in working capital.
Through. Based on 4th quarter results, through. I will summarize an audited 2020 results. The company's key financial metrics significantly as compared to that of 2019. Revenue in 2020 was CNY3907 1,000,000, an increase of 25.4%, mainly attributable to increased shipments and ASP from product mix optimization.
Gross profit was CNY 921,000,000, an increase of 43.3%. Gross margin was 23.6%, an increase of 3 percentage points, mainly due to increased utilization and ASP from product mix optimization. Through the year. Profit for the period attributable to SMIC was CNY716 million, an increase of 2 104.9 percent due to improved operating profit and other investment gains. Through.
EBITDA was CNY2123 million, an increase of 54.6 percent. Through the Q4 of the above, SMIC reached record highs for revenue, gross profit, profit for the period attributable to SMIC and
EBITDA.
To grow 7% to 9% sequentially, mainly due to strong customer demand for non FinFET process. Gross margin is expected to range from 17% to 19%, using the midpoint is sequentially flat. Through the Q4. Non IFRS OpEx is not expected to differ much from the 4th quarter, while losses to be borne by non controlling interest are expected to increase substantially quarter over quarter. Through.
Looking to 2021, through SMIC was placed on the U. S. Entity list. The company is restricted from procuring related U. S.
Items or technology. So there are risks and uncertainties to our annual forecast. The forecast we give today assumes that through operational continuity is not significantly adversely affected. Export license application processes must be followed. Through the Q1 of 2019.
Based on the above, our targets and plan for 2021 are as follows. Our revenue target is mid to high single digit percentage growth. Revenue target for first half is around RMB 2,100,000,000. Through our annual gross margin target is in the mid teens range. SMIC's sales negative impact to company's overall gross margin this year is estimated to be around 10 percentage points.
Through. CapEx of RMB4.3 billion, majority is for non FinFET capacity expansion and remaining for FinFET, the infrastructure of the new Beijing JV project and etcetera. Annual depreciation and amortization is estimated to be roughly RMB2 1,000,000,000 and EBITDA is expected to be around RMB2.3 billion. Lastly, I will address the termination of our American depository receipts. Through.
In 2019, our ADRs were delisted from the New York Stock Exchange. Considering that Current ADR shares are less than 0.3% of total outstanding shares and participation is low. Through SMIC has initiated termination of our ADR program on January 31 this year and is executing procedures in accordance with relevant regulations. This concludes our financial remarks. Thank you.
Through. 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.
Through the Q1
of 2019.
Thank you all for joining us. 2020 has been hot and cold for the IC industry. On the one hand, through the stay at home economy brought by the epidemic has strengthened people's demand for the Internet of Everything and the consumption of chips had far exceeded expectations. Semiconductor companies in various countries met rare market opportunities. On the other hand, due to geopolitical factors causing turbulence upstream and downstream, causing interruptions for global semiconductor company's business and affecting innovation and development of the industry.
Through 2020 was SMIC's 20th anniversary. Through the Q4 of 2019. Since its inception, SMIC strictly operates in compliance with the laws and regulations. After 20 years of independent technology development, market expansion, capacity building and the talent training, the company could have ceased this year's rare market opportunity and achieved rapid growth. However, due to impact of external factors, We were forced to adjust customer mix and capacity composition.
These adjustments caused additional costs. Through the Q4. Nevertheless, with the active support of our customers, suppliers as industry partners and investors and through the unremitting efforts of all employees. Revenue in the 4th quarter was CNY 981,000,000. Through the Q4.
Although it was down 9.4% sequentially, it increased 16.9% year over year and was our 2nd highest quarter in history. Last year, the company achieved hard won unaudited annual revenue of over RMB3.9 billion, an increase of 25% year over year. We sincerely appreciate everyone's efforts. Now let me provide some updates on Nao XinFET Technology. Through the Q4 of fiscal 2020.
In the past few years, SMIC worked on product platforms such as power management, ultra low power, radio frequency, through image sensors, fingerprint recognition and specialty memory, especially on 0.15, 0.18 micron, through 65, 55, 45, 40 nano, etcetera. All these reach industry leading standards. Through the quarter. We also achieved the inter conversion of 8 inches 12 inches for 0.13 micron copper and 0.15.80 micronaluminum processes possess market competitiveness in terms of quality and customer service and have expanded the company's profitability. Our MCU and high voltage driver IC output also continues to grow.
Through. Through.
Currently, the worldwide foundry capacity is still tight. On one hand, demand is increasing and on the other hand, capacity expansion cannot keep up. Last year, SMIC expanded around 30,000 wafers per month to our 8 inches fab in Tianjin and 20,000 wafers per month to our 12 inches fab in Beijing for 28 nano and above nodes, but did not meet the growing customer demand. Through. Given the impact of being added to the U.
S. Entity list, through. Uncertainties exist in 2021 operations. I would like to address 2 points for 2021. Through the Q1 of 2019.
To more than RMB1 1,000,000,000 in the Q1. 2nd, production continues to expand as we increase monthly capacity by 10,000 for 12 inches and no less than 45,000 for 8 inches Due to longer lead times for to this year's revenue. The annual revenue growth is expected to be in the mid to high single digits. We hope that the company's production capacity of 28 nano and above nodes will increase steadily in the next few years and maintain a certain level of profitability while expanding capacity.
Through
through the Q1 of 2019. As for FinFET technology, after 3 years of development, it has achieved good results. Through our N plus 1 process technology and to risk production. But under the influence of external factors, through FinFET utilization is relatively low since Q4 of last year. Ramp up takes time.
Revenue contribution has fallen short of expectations and depreciation places a burden on the company's overall profitability. Through. For 2021, our thoughts on FinFET technology are as follows: through. First, to ensure the continuity of production, we will continue work to apply for export licenses with our suppliers. Through the Q2.
2nd, to carefully expand capacity. At the end of last year, we reached our target of 15,000 wafers per month in store FinFET capacity as planned, but it is still far from economies of scale. If further expansion is needed, through the next quarter. 3rd, we will consider strengthening the development and the deployment of our 1st and second generation FinFET multi platform and expand the reliability and the competitiveness of our platforms. Through.
Overall, the company's growth in 2021 will still be by external sanctions. Future uncertainties still exist and potential risks are not completely eliminated. Through the Q4. Without these influences, SMIC could have maintained last year's rapid growth momentum. Through the Q4.
Although we cannot control external forces, we will cultivate new possibilities and opportunities in the face of crisis and changes. We will continue to try our best to sustain and will not change our goal to serve global
the
In the long run, the international through the Q4 of
20 20 Webcast Conference Call.
Today's call will be live streamed through the Q4 of 20 20.5. With the advent of the post smartphone era, Market requirements for chips have also diversified. There are many types of chips and great changes through. Facing the opportunity of supply chain reorganization, we should try and innovate to combine our strength and unique characteristics to explore a sustainable development path that is more suitable for SMIC. Through.
Lastly, I wish you all a Happy Chinese New Year. Thank you all.
Through.
Thank you, Doctor. Zhao. Next is our Q and A session. Through. 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.
Through through through Credit Suisse, Randy Abrams. Your first question comes from Randy everyone. Please ask your questions.
Yes. Thank you. Thank you for the updates and appreciate your ongoing work dealing with the restriction. The first question I wanted to ask on the 2021 guidance assumes no significant adverse impacts from the restriction. From that, can you give an update on the U.
S. Service and consumable support you're receiving from licenses Or from the U. S. Company's overseas sites. And second part of that question, could you discuss what areas You still need to resolve to either complete the expansion plans, or also for ongoing operations.
Through. Hi Randy, thank you for the questions here. Hi Jun. To your first question, you're asking about your progress that SMIC is working with suppliers to get a license from U. S.
Government. That's why we are working very hard with our suppliers and our suppliers majority are long term partnership has been working with SMIC for about 20 years. So we understand each other, we trust each other. So at this moment we're working hard to apply the licenses work closely with U. S.
Government. Through the Q2. I cannot give too much detail at this moment, but we're working very hard on that and the suppliers are working very, very closely with SMIC and U. S. Government.
And to your second question, through What area that we need to resolve in order to push the revenues in 2021, through? Right. That's your question.
Yes. It's 2 part. One is just, what bottlenecks both for operations and then also for that CapEx budget, If there's licenses you need to do the capacity expansion in the CapEx budget.
Randy, just now and from our update you already learned that and from our FinFET we already have 15,000 wafer installed through the next phase and we'll ramp up the capacity with products and also we say that and we cannot meet our customer demands especially for 0.15, 0.18 aluminum process for 8 inches wafers and 55 nanometer and the 40 nanometer for 12 inches wafers and we have a very big shortage. You possibly also heard the stories. Through SMIC, every foundry fab now are fully loaded short of the support and we already have the aligns with our customers for the capacity support and we're working hard to at this moment for the mature technologies, We have been running fully loaded for a couple of quarters and we do have a glitch in the Q3 last year. That's the reason and caused the dip of the Q4. You know that when we switch from one type of product mix and lost one of the biggest customer and then we switch to another one.
We have 1 quarter as a transition quarter. That's the Q4 we're updating and for the Q1 more or less we turn back to make the whole line fully loaded, But the problem is the demand is over our supply. So that's the area just now I mentioned that for 8 inches we'll add up the capacity and we will add up 45,000 wafer per month by the end of this year and 10,000 wafer 12 inches by the end of this year and that's the adding capacity. I know that this capacity come very late, could not meet up the market demands, through. But that's the device we can do at this moment.
Okay. I guess to clarify, do you have the licenses to add that capacity And then also on mature notes to resolve the bottlenecks for operations or do you still need to receive Some licenses to ensure those both of those.
Yes, that's true. We need the licenses. We work hard with our suppliers to do this and just now we said everything we work for the best, we work hard to build out the trust to get it through and just now our CFO already updated that the majority of the expansion for this year 3 quarter for the mature technologies is facing the guidelines You're now from the public media.
Okay. The second question I had, I wanted to ask on that guidance. It implies for 2nd quarter sales at similar levels to Q1, but also 3rd Q4 on full year 7% to 9%, similar run rate. Is that all from running 100%? Or is there any impact from Certain capacity having tool limitations like the advanced capacity or from any customer diversification?
Through. Yes, Randy, just now we said that for the first half year, you know now already in February and in the first half year and we gave the guidance and that's the portion and currently we're working on pretty solid and we also gave the cautions that for the second half of this year we're working towards to the stable supplies everything, but we also remind our investors that there are certain uncertainty that we cannot 100% control.
Okay. So it sounds like uncertainty for a second half to not guide further growth at this stage. Okay. All right. Thanks a lot.
Sure, Randy. Thank you.
Through. Your next question comes from from China Renaissance. Please ask your question. Through. Through through the Chenjing Jie.
Your next question comes from Chenjunjie from Tianfeng Securities. Please ask your question. Through to Stanley, Charlie Chan. Your next question comes from Charlie Chan from Morgan Stanley. Please ask your question.
Through
through. Your next question comes from CICC Ding Ning. Please ask your question. Through. I would now like to hand the call back Ms.
Kuo for closing remarks.
Through. Thank you all for participating in today's conference call. Thank you for your trust and support, and I wish everyone a happy Chinese New Year and good health.
3. This concludes SMIC 4th quarter earnings conference call. We thank you for joining us today.