Ladies and gentlemen, welcome to Semiconductor Manufacturing International Corporation's 4th Quarter 2019 Webcast Conference Call. Today's conference call is hosted by Doctor. Zhao Haijun Co Executive Officer, Doctor. Liang Mong Song and Co Chief Executive Officer, Doctor. Gao Yonggang Chief Financial Officer and Mr.
Tim Co, Director of Investor Relations. Today's webcast conference call will be simultaneously streamed through the Internet at SMIC's website. Please be advised that your dial ins are in a listen only mode. However, at the conclusion of the management presentation, we will be having a question and answer session, The earnings press release is available for download at www.smics.com. Webcast playback will also be available approximately 1 hour after the event.
Without further ado, I would now like to introduce to you Mr. Tim Kuo, the Director of Investor Relations for the cautionary statement. Please go ahead.
Good morning and good evening. Welcome to SMIC's Q4 2019 earnings webcast conference call. Today, our CFO, Doctor. Gao, will highlight our financial performance and give guidance for the next quarter. And then our Co CEO, Doctor.
Zhao will provide some business commentary. This will be followed by our Q and A session hosted by Doctor. Zhao, Doctor. Liang and Doctor. Gao.
As usual, our call will be approximately 60 minutes in length. The earnings press release and financial presentation are available for you to download at ww dotsmics.com under Investor Relations in the IR Calendar section. Let me also remind you that the presentation we'll be making today includes forward looking statements. These statements and other comments are not guarantees of future performance, but represent the company's estimates and are subject to risk and uncertainty. Our actual results may differ significantly from those projected or suggested in any forward looking statements.
For a more complete discussion of the risks and uncertainties that could impact our future operating results and financial condition, please see our filings and submissions with the Hong Kong Stock Exchange Limited. During the call, we will make reference to financial measures that do not conform to International Financial Reporting Standards, IFRS. These measures may be calculated differently than similar non IFRS data presented by other companies. Please refer to the tables in our press release for a reconciliation of IFRS to the non IFRS numbers we will be discussing. Please note that all currency figures are in U.
S. Dollars unless otherwise stated. I will now hand the call to our CFO, Doctor. Gao for the financial highlights.
Okay. Thank you, Tim. First, I will highlight our 2019 full year unaudited results, which are based on the sum of our unaudited quarterly results for the year of 2019. And then I will summarize our 4th quarter results and give the Q1 2020 guidance. Revenue in 2019 was $3,120,000,000 compared to 3 point $36,000,000,000 in 2018, mainly due to our exist from AirFoundry.
If excluding one time license revenue and impact from airfoundry exist 2019 revenue increased slightly comparing to 2018. Gross margin in 2019 was 21% compared to 20.20% in 2018. If excluding one time license revenue and impact from AirFoundry Exist, 2019 gross margin was 21.5%, comparing to 19.1% in 2018. Profit for the period attributable to SMRC in 2019 was $235,000,000 comparing to $134,000,000 in 2018. EBITDA reached a record high of 1,370,000,000 dollars in 2019 comparing to $1,160,000,000 in 2018.
In the Q4 2019, our revenue was 839,000,000 dollars an increase of 2.8 percent quarter over quarter, mainly due to the increase in ship in WIP shipments. Excluding the revenue from airfoundry, our revenue increased 4.6% quarter over quarter. Gross margin was 23 point 8%, a sequentially increase mainly due to the rise in utilization. Non IFRS operating expenses was 248,000,000 dollars which was lower than the guided range, mainly due to the control of R and D expenses.
Profit for
the period attributable to SMRC was $89,000,000 comparing to $27,000,000 in the Q4 of 2018. Non controlling interests or $30,000,000 of credits to SMIC is attributable to profit, lower than the guidance range mainly due to the decreased loss in some majority owned subsidiaries. Moving to the benefits. At the end of the quarter, cash on hand including finance assets and excluding restricted cash was close to $4,600,000,000 Gross debt to equity was 39% and net debt to equity was negative 6%. In terms of cash flow, we generated $345,000,000 cash from operating activities in the 4th quarter.
Now look ahead into the Q4 of 2020. Our revenue is guided to increase 0% to 2% quarter over quarter. Gross margin is expected to range from 21% to 23%, mainly due to the increased manufacturing costs during the period. Non IFRS operating expenses are expected to range from $294,000,000 to $300,000,000 dollars Non controlling interest of our majority owned subsidiaries are expected to range from negative $70,000,000 to $90,000,000 debt from SMS's attributable profit, which are going to be borne by non controlling interest. The planned 2020 CapEx for foundry operating is approximately RMB3.1 billion which is mainly for the equipment and facility in our majority owned Shanghai 12 inches fab.
The planned 2020 CapEx for non foundry operations is approximately $60,000,000 mainly for the construction of employees' living quarters. Our planned 2020 D and A is approximately $1,400,000,000 Our gross margin target is to maintain around 20% and we target to maintain our EBIT margin for 2020 in the mid-40s percentage. I will now hand the call over to our Co CEO, Haijun for general remarks.
Thank you, Yonggang. Thank you all for joining us today. I'll give the overall business commentary. Then Monsoon, Yonggang and I will answer questions from the line. Looking back, 2019 was an even full year as SMIC transitioned its strategies to align with the changing markets and as we prepared for our next stage of growth.
We believe that 2020 is the beginning of new phase for SMIC as our labor on technology development is now translating into production and revenue. Going into 2020, we were excited to see positive momentum and strong orders. For many individuals though, the New Year is shadowed by an unfolding health situation in Central China. Our sales goes to those affected in Wuhan and elsewhere. SMIC has put together donations to support the health efforts in Hubei province.
At the same time, the company has taken measures to safeguard the health and safety of our employees as our fabs continue to run-in full. At present, SMIC's fab operations have not been affected and are running normally. We remain optimistic about the health growth based on the current customer feedbacks. Meanwhile, the effects of virus on the end demands is still unfolding and we are still monitoring the situation closely. Let me continue my remarks by highlighting the results of the full year 2019 Q4 of 2019.
Then I will update you on our mature nodes technology, advanced technology progress, capacity plans and a preliminary outlook for 2020. Total revenue in 2020 was $3,120,000,000 compared to 3,360,000,000 in 2018. As our as we focus on preparing the company's technology for coming growth and exceeded the operations in Italy. Our original targets for 2019 full year gross margin was stated to be mid teen to 20%. The result of 21% was due to better product mix, utilization and cost control.
With limited fiber expansion in 2019, utilization is running high. Meanwhile, profit attributable to SMIC grew 75% year over year to $234,700,000 in 2019 from US134.1 million dollars in 2018 a year ago. Our 2019 EBITDA reached a historical high of $1,400,000,000 representing a 44% EBITDA margin. Also, as a result of improved utilizations mix and decreased cost and expenses. Our 4th quarter revenue and gross margin were within our guided expectations.
Revenue increased 2.8% quarter over quarter and 6.6% year over year compared to Q4 2018. And when excluding revenue contribution from AirFoundry in Italy, revenue was up 4.6% quarter over quarter and 13.8% year over year. Reported gross margin was 23.8% in Q4 2019, compared to 20.8% in Q3 last year and 17% in Q4 2018 a year ago, as the capacity utilization climbed to 99%. Overall, wafer shipments in the 4th quarter increased 2% quarter over quarter and 10% year over year. And our profit attributable to SMIC in the 4th quarter was US88.7 million dollars compared to US26.5 million dollars in Q4 a year ago as revenue grew more relative to cost.
From a regional perspective, business was particularly strong in the China region, which increased 11% quarter over quarter and 21% year over year, contributing to 85% of our total revenue. SMIC's role in China ecosystem is becoming increasingly important as we work hard to provide expanded technology, capacity and solutions to address growing market demands. We are pleased to see growth from both existing and new customers. Meanwhile, we aim to serve an international market, while having the natural advantage of being close to the largest IC market. United States and Eurasia revenue contribution was down sequentially as we shifted some of our business in the sales of our European fab.
However, revenue from our Eurasia customers is up 27% year over year. Now to address our mature node technologies. I'm pleased to see that our past efforts on mature technology platforms have paid off as we see full utilizations in our mature fabs, firm pricing, quality improvements and a great track record. Our strategy on mature technology continues to be to provide best in class technologies for specific platforms to maintain healthy profit margins, while adding values. I believe we have set a strong foundation with strategic customer partnership for long term health.
In the recent quarters, we saw growth momentum in our CMOS image sensors, power ICs, fingerprint, Bluetooth and specialty memory platforms. Revenue from these device applications during the Q4 of 2019 are up 5% quarter over quarter and 11% year over year. And going forward, we see these platform partnerships with customers providing a stable groundwork for solid business during the year. By technology nodes, a majority of our growth in 4th quarter came from 65 and 55 nodes. 65 and 55 nodes is up 8% quarter over quarter and 41% year over year.
These increases are largely due to connectivity, application processors, flash memory and the CMOS image sensor for IoT and consumer related applications. Now move on to our advanced technologies, which are becoming a vital part of SMIC's business strategy. Previously, SMIC has relied mainly on the mature nodes for incremental revenue growth. However, in this new phase, SMIC is focusing efforts and will begin to see an increasing amount of revenue growth coming from advanced nodes technologies in the coming years. We are pleased to see 14 nanometer has moved from development into production and has started contributing to our revenue, reaching 1% wafer sales, contribution in Q4 2019.
We have engaged a variety of customers on this node, and we will see a ready ramp up this year in both capacity and revenues. The ramp up of the new FinFET fab in Shanghai is starting up steadily and will likely pick up particularly in the second half of this year, a back end loaded expansion. With this in mind, we anticipate 14 nanometer revenue contribution to slowly tick up during the year and with a pickup at the end of the year. With regards to expansion, we repeat our commitment to prudent planning and a careful alignment with our customers. Meanwhile, our team is conducting ongoing FinFAT tape up projects and working closely with both domestic and global customers.
We are encouraged by the strong customer partnership being fostered as we co develop our technologies on multiple applications. 14 nanometer applications include high end consumer, high performance computing, media applications, application processors, artificial intelligence and automotive ICs. To address our progress on N plus-one, development is well underway and we are closely engaging our customers for upcoming projects that may undergo qualifications later this year. We are seeing opportunities to address a variety of consumer related applications from application processors to connectivity for mobile, televisions and wearables. Meanwhile, we continue research and development activities for beyond N plus 1 as we strategically expand our addressable market to serve the growing sophistication of our customers.
We are also tracking well in developing comprehensive solutions for our customers with robust IP libraries and advanced mask making for our FinFET nodes. I will now comment on our capacity expansion. As we entered an expansion stage to address the market for advanced technology, we must also boost our expenditures. We are increasing investments in capacity to address the new ramp up of FinFET Technologies. Our 2020 foundry CapEx is US3.1 billion dollars of which $2,000,000,000 will be used for our new advanced fab facilities and equipment.
SMIC remains prudent in NITI's expansion by carefully aligning our customer demands with company's profitability and capability. With the given spending SMIC plans to move in equipment for the FinFET production into the new wafer fab this year in line with customer demand. Now to give some insights on our 2020 outlook. In Q4, we were already 99% utilized. The constraint on capacity also limits our growth to the extent to which we can added capacity and increase efficiency.
Our Q4 2020 revenue is guided to be flattish to up 2%, which represents a 25% to 28% year over year growth compared to Q4 last year. As I mentioned, we entered 2020 optimistic about business growth. This optimism was driven by overall market strength and our successful developments of new technologies, which will enter production and contribute new incremental revenues as well as strong demand across our existing platform technologies as we had ramp up new customers and new applications in the recent quarters. Meanwhile, foundry industry growth in 2020 is being driven by trends in Internet of Things, 5 gs, smart consumer, artificial intelligence and automotives. Given our current outlook, we are targeting annual growth in the teens percent for 2020.
We also aim to maintain a gross margin of 20% and the targeted sustainable profitability. To conclude, SMIC has executed in preparing technology platforms and advanced nodes development, thereby leading SMIC to its current stage of new growth and investment. We aim for healthy expansion that aligns with our global to be fundamentally solid, while building up mutual trust with our clients. Our aim is to be the 1st choice in China for a comprehensive range of foundry services. We are gaining confidence in our ability to steadily climb with focused prudent efforts to become a respected provider in the advanced node foundry market.
SMIC is benefiting from the expanding market in China as customers increase their capacities, capabilities and SMIC also accelerates development in order to serve these customers. At the same time, we believe the current health crisis will have short term impact. And going forward, China will continue to expand its role in semiconductor industry and consumer demand will pick up once again. We thank you for your continued support and thank you for joining us today. I will now hand the call back to Tim for the Q and A session of this call.
Thank you, Doctor. Zhao. Today's Q and A will be hosted by our Co CEOs, Doctor. Zhao and Doctor. Liang and our CFO, Doctor.
Gao. I would now like to open up the call for Q and A. And as usual, please be reminded to limit your questions to 2 per person. Operator, please assist.
Thank you so much, presenters. Now we'll begin the Q and A portion. Your first question comes from the line of Randy Abrams of Credit Suisse. Your line is now open, Randy.
Okay. Yes, thank you and I appreciate the details. And I wanted to ask the question just about the CapEx now with utilization running very high, where the spending would contribute to new capacity. So could you talk about both the FinFET, how quickly you plan to ramp from the 3,000 toward 15,000 in the first phase? And then for the 8 inches and mature 12 inches that's running full, what your plans are for fab capacity increase?
And when that fab capacity you think can start to allow additional revenue?
Okay. Hi, Randy. I would address the FinFET parts, okay? As the original brand, our FinFET capacity installation means wafer start starting from 4 ks in March, 9 ks in July and ramp to 15 ks in December. That's our current timing.
For the mature type for 8 inches we will add on 30,000 wafers per month type of capacity for 8 inches in Tianjin, Shanghai and Shenzhen fab. And we also add on 20,000 wafers capacity 12 inches in Beijing fab. And because the slowdown of the logistics and the shipments and this kind of thing will be happening in the Q3 and Q4.
Okay. And maybe the follow-up to that. So Q3, Q4, does that mean capacity installed and you can get revenue for that capacity or there's time to qualify, so it would be more later into next year. Just want to see if you're limited by capacity in second half on revenue or that will actually contribute as well?
Yes. That's true. We will see the revenue contributions from the Q3. And then possibly the numbers I mentioned will become a full contribution in the Q4.
Okay. For that. The second question I wanted to ask on advanced technology, 2 parts, I think on the FinFET where you'll have a pretty good ramp through the year. I guess talk about the first wave, which applications are coming in on this first wave. And maybe if you could say is that kind of the impact where you're guiding gross margin to 20%, like how much is from depreciation versus how much is maybe dilution from 14 still coming up to scale?
And the second part is the N plus-one, just curious if you could go through I think you mentioned about that production. If you could talk a bit more on the timing when that volume ramp up you expect and how that N plus 1 I guess compares to the 7 nanometer from like Samsung and TSMC, if it's getting into that range where it's still more like an 8ten nanometer? Just curious how it might stack up for the applications you could address?
Okay, Randy. To address your question, the first wave of the FinFET production product that including low end AP, baseband and also consumer, some all towards NTO and it will extend to the year of connectivity, IF connectivity product that is for 14. And there is extension of 14 is 12. We will see more product NTO 12 that ranging from blockchain application and low end mobile AP and media that kind of application. That's probably the first wave and second wave of 14 nanometer and 12 nanometer.
And as to the N plus-one, our NTO is just Q4 last year. So right now it's currently under customer product verification stage. And we expect to see the limited production in Q4. Your last question about this N plus-one, the definition of the N plus-one actually we refer to our 14 nanometer, okay? And our 14 nanometer, if we compare the 14 and N plus 1, performance is improved 20% and power reduced 57% and logic area reduced 63%.
SoC area reduced 55%. So if that compared to the market so called 7 nanometer actually in terms of power and the scalability they are very similar. The only difference is the performance. Performance for our N plus-one, there is about 20% enhancement, but for market benchmark that's probably around 35%. So that is the only gap.
So in terms of the power and stability, you can call it very close to 7. And in terms of performance, that's indeed worse than 7. So that is the definition. So we target this N plus-one is low cost application. The mask count can reduce around 10 from normal to 7 nanometer.
So that is a very special application for that, yes. I hope I answered
that question. Yes. No, I thought that was very helpful. The only one I'd squeeze in on that was on the margin on 14% as that ramps through the year. Is that the factor for the margin where you're guiding to 20% or I guess maybe a combination with the depreciation?
Yes. That is a good question. Okay. As you know, FinFET per k CapEx is very high, right? It is roughly in the range of RMB 150,000,000 to RMB250 1,000,000 per k investment.
So our that's why you can see our capacity ramping is very cautious. We have to kind of balance between the customer demands and also allow the budget constraint and also minimize the gross margin impact. In terms of the depreciation for that kind of ramping, since our depreciation is defined as wafer output over 3,000 and also maybe the tour moving after 6 months. So by that definition, the gross margin impact probably around for year over 2020 overall gross margin probably within 5%. Yes, that's a lot to talk, but just very first order estimation, yes.
Okay, great. Thanks a lot for the color. Good luck on that.
Yes, thank you.
Thank you so much. Your next question comes from the line of Peter Chan of CIMB. Your line is now open, Peter.
Hi, good morning, ladies and gentlemen. My first question is on a more strategic level. On the grand scheme of things, the trade balance between the U. And China have always been on top of the concern. And I believe the semiconductor has to be part of the important equation.
So why do you foresee the impact on this? And I see, if the trade war ends in happy ending and U. S. May have to buy I mean, China may have to buy more semiconductor from the U. S.
And given the some recent development that, 1, the Goofengi and TSMC recently saw the litigation with open cross licensing. Theoretically, if the GoFundMe comes up with enough money and cable management, they could freely do anything that TSMC does. The number 2 is that Samsung already procure a sizable lane in Austin already for expanding the capacity there. So that's a scenario 1, but if the triple enzyme not so heavy ending, I guess, then China, the local domestic customer has to source more from the local foundry such as SMIC. And that probably will benefit SMIC and as long as you can come up with the capacity, the technology schedule, everything.
So at this crossroad, what is your thought on the long term strategy given the recent development? Thank you.
Peter, thank you for the question. Basically, as our name states, SMIC is international manufacturing. Our goal is to balance the overseas and the domestic revenue fifty-fifty. At this moment, because of the situation you mentioned just now and our U. S.
Revenue has dropped from 2 years by 50% in the total revenue to 22% in the Q4 last year. And that really gave us a challenge. We need to find a way to expand our business in overseas. But the overall demand for semiconductor ICs are still there possibly increase every year. So they have to be the buyer or producer from other places.
And you see SMIC's revenue are in a growth period. And that means there has to be a replacement if one customer from U. S. Could not supply the products there has to be another customer to produce it to cover this emission. And as Mike said, just try both part.
On the one hand side, we continue to try our best to find customers on the market from the overseas and in United States. And in the meantime, if it is customer meeting the similar products, since we already have the experience and the technologies in the similar products manufacturing, we can do to the replacements. And so to answer your question directly, we should say SMIC will maintain our strategy to be an international company and to develop overseas markets and customers. And in the meantime, we are really working very hard on the segmentation of the market. It doesn't matter the segmentation market supported by U.
S. Customer, European customer, Asian customers. Once we become the top 2 or top 3 players in manufacturing for the segmentation and we can maintain our market shares, For example, CMOS image sensors, BCD analog, low power, specialty memories and MCUs. For this kind of segmentation markets, the overall demands are increasing every year. Definitely, the players inside are interchanging.
But as long as SMIC have the market share in the segmentation of each market, we can make sure that our business will continue to grow. And that's the way. And the second thing just now you mentioned a lot of companies are trying hard at this moment litigations and set up the manufacturing side in states. And we very closely monitor the development. And at this moment what we can do is that SMIC is still relatively small and we just expand our technology platforms to make sure we can deliver more diversities to our customers, more solutions to our customers.
So we believe in the short term, mid term and we can gain market share instead of losing market share from the 3rd walls.
Okay. My second question is related to your forecast. Given the outlook that you just provided and also the latest expectation of the technology mix and the contribution going forward. Under the most recent outlook, what is your expectation that the EB level would turn positive without the R and D grant? That what that time frame might be, maybe 2021?
And when that might happen?
Okay. Let me translate for Doctor. Gao. So from government funding on R and D in 2019 was around US200 1,000,000,000. Dollars For year 2020, the R and D grant from the government would be more because we have more projects to be closed.
Also on the growing depreciation and amortization, we believe that our EBITDA for the coming years will be growing.
Thank you. Your next question comes from the line of Junji Shen from Chansang Securities. Your line is now open, Mr. Shen.
So let me translate for this question. So the Q1 guidance was in between 0% to 2%. And as the analyst estimated from his model, the 14 nanometer already contributed 1% in Q4 2019. So he's asking about whether we will see the growth catalyst from 40 nanometer or from other growing from other catalyst.
Basically, we should say this way. In the 4th quarter SMIC has been running 99% utilization and the missing 1% mainly and contributed to the R and D engineering wafers. So for the Q4, we mainly benefit and for the advanced nodes more or less the same as the 4th quarter. And we mainly benefit a little bit incremental revenue from the more wafer start in the 4th quarter. And when we compare the wafer start quantity in the Q3 and the Q4 last year, our wafer side in the Q4 is better than the Q3.
I'm more like to say our 4th quarter utilization is higher than 3rd quarter utilization. But this kind of wafer have not come out 100% in 4th quarter. Quite many levels come to the shipment stage in the 4th quarter. So we should say this is the transfer effects from the overall 100% loading.
So, the analyst is addressing his second question. It's about the coronavirus situation impact, whether the inventory situation will be changed if under a very extreme case that this will be ended extra 3 months. So how should we manage this supply chain impact?
Hi, Jing Jie. And basically, we should say this coronavirus event will have negative impact on our industry and revenue. That's a sure thing. Just at this moment, we can now have a very clear picture of the overall impact. For the Q1 revenue and gross margin SMIC had communicated with our customers and there's no impact at this moment.
We believe this kind of impact will slowly show up in the Q2. And for SMIC, the Q4 last year and the Q1 at this moment, we're still in a stage of short capacity. That means our wafer orders are above our capacity. So the first stage when this kind of impact show up, there won't be direct impact to SMIC's revenue because anyway we cannot fill up the total wafer orders in our fab. And we believe that we can use this kind of efforts and to cover the 2nd quarter.
But we watch and monitor the situation very carefully. And the Q3, at that moment, we have additional capacity. We also have additional technology platform and product platforms show up. And we believe at that moment, we can hedge or compensate a loss from the frustrations in the adjustment of inventory. We believe especially for the domestic customers, the adjustment in their inventory will definitely happen.
And roughly, we also know the percentage they need to adjust. From the careful calculation in my hands at this moment, we believe that we can still manage and make sure SMIC's full loading stage will be maintained.
Okay. Thank you.
Your next question comes from the line of Bill Lu from UBS. Your line is now open, Bill.
Yes. Hi. Thank you very much. My first question is on the mature nodes. 2 part question.
One is, I know you're now running at 99%. I'm wondering if you have more room to convert additional 28 to maybe 55 65 and therefore get a little bit more capacity as the year goes on?
Okay, Bill. And for 28 nanometer technologies SMIC has set up the capacity convertible interchangeable with 40 nanometer except high key metal gate metal loop. And so we already build out the capacity that way. We maintain in order to maintain our profitability and gross margin, we limit the total volume running 28 nanometer because of the cost running 28 nanometer, high key metal gates are very high and everybody knows the market is oversupply situation. And so your questions whether or not we can convert 28 nanometer capacity interchangeable with the 35 and 55, the answer is yes.
Actually in SMIC, we have consolidated the capacity for 12 inches in giga fab in a very big fab in Beijing. So that fab is running more than 100,000 wafers per month. The capacities are interchangeable to support each other. Based on the allocation to the strategic customers and we can adjust the ratio of 28 nanometer capacity and 55 nanometer capacity.
So could you give me
a sense for how much more capacity there is to convert over if there is enough demand for 55,000 and 65,000?
20,000 wafers. Just now I mentioned we added 20,000 wafers. We will have additional 20,000 wafer per month 12 inches And this is a great deal project. That means we are converting now. In the Q3, we have more converting capacity in 55 nanometer.
In the Q4, we will have full conversion of the capacity.
Okay. Got it. My second question is on the N plus one node. I missed it, but can you give us a little bit more details on the timing in terms of risk production, in terms of when you think this node will come to market?
So N plus OneNote, first NTO is Q4 last year. Right now, it's still at customer product verification and qualification stage. It is expected to see the limited production in Q4.
Unlimited production in Q4 of this year? Yes. Great. Okay. Thank you very much.
Your next question comes from the line of Zhejieun from China Renaissance. Your line
is now open. Good morning.
Hi, good morning. Gentlemen, I'm CEO from Chai Rensors. Two questions from my side. First one regarding the tab out. Could you share with us the number of tab outs you're working on for the 12 nano and also 14 nano?
Hello?
Hello?
Yes, yes. For the 14 nanometer, we have the limited NTO, but with significant volume, most of NTO. And we will ship it to the 14 RF for the connectivity and we'll have even higher volume. And for 12 nanometer, we have many NTOs more than 14 nanometer. That's the current stage, yes.
Okay, great. All right. And second question, right now, if the company is running at 99 percent utilization, is it possible for the company to overdrive their capacity to say to achieve utilization over 100%?
JJ, theoretically you can't run more than 100% for long term. For short term, that's possible. And this mainly means for the non bottleneck machines, you can run to finish the process beforehand. And that means the bottleneck for example, bottleneck is 100, but the other machines non bottleneck will be more than 100. You can run movie first inside the fab and wait there until you get a new machine for bottleneck and you have the sudden opening of this bottleneck gate then the whole fab is running more than 100%.
You're getting my point. That means you're running more wafers to buy time and then you get a machine you can you don't need to wait for the wafer coming to the bottleneck machine. And that's a play. And another short term is sometimes you can do that way and you can stretch the bottleneck machine to run more than 100% calculated capacity. But overall, you can't run it alone because sooner or later you need to do the necessary stuff.
You need to do a lot of things. For example, for SMIC, we are running multiple products and every product is running in a small volume. And based on the transfer time from one product to another product, your scanner definitely lost time for changing masks, for qualification, for double checking and measurements. But if you're running single product, single level, you can run the scanner much more wafers in each hour. But this is just a short term risk making type, risk taking type.
And theoretically, yes, you can do that way, but cannot run it long. And for SMIC, the rules that if you can continuously running at a level, that level will become our capacity right away. So our capacities, the number is not from building up capacities, but from the actual runnings. So we adjust every month. So last month you're running 100%.
Next month that's not 100%. It's become baseline.
Okay.
So that's the saying that we're kind of running more than 100% for long term.
All right. Got you. Very useful. Thank you very much.
Your next question comes from the line of Leiping Wang from CICC. Your line is now open, Wang.
Okay. Thank you for taking my question. The first question is to Doctor. Liang. So I think in the call, you mentioned that you are developing the platform beyond N plus 1.
So since you just elaborate that your N plus 1 is quite close to 7 nanometer in TSMC and Samsung. So is it you are moving to EUV or you are it's an upgrade version of the current N plus 1? Also the second part of the question is that for the CapEx you are spending in this SMIC South, so for the $2,000,000,000 after you spend the $2,000,000,000 so you are mainly spend on this current RMB14 1,000,000,000 and RMB12 1,000,000,000 or you are this will also include in part of the CapEx for the N plus-one? Thank you. Okay.
Liping, let me try to address your two questions. First question is about anything beyond N plus-one. I stated earlier about N plus-one definition and beyond N plus-one means N plus-two. That definition, basically, it's only the performance difference, okay? In terms of power and scalability, they are quite similar, okay?
And N plus 1, N plus 2, the difference is just for cost, okay? Low cost, we call it n plus 1, okay? So that is the difference between N plus 1, N plus 2. And you asked about do we use the EUV, okay? At this moment for both N plus 1 and N plus 2, we do not plan to use the EUV, okay?
And when EUV get ready, then we will switch the N plus 2 a few layers to EUV. So that is the current plan. Then your second question is regarding the CapEx around this RMB2.1 billion. That is consist of both N14 and 12 also to the N plus-one and N plus-two, a small portion of that. It's not purely for 14 and 12.
Okay. Thank you very much. It's very clear. So the second question
is about
the SMIC nodes or the majority owned Beijing fab. So since the mature node or the your demand is very strong for various applications, how much room you still have to for the capacity expansion in Beijing? So and after you spend this, I think, RMB 500,000,000, if I remember correctly, the CapEx. So how much capacity you will reach by the end of this year?
Beijing fab, the fab space everything was designed to holding 120,000 wafers. And from the technology to 28 nanometer to all the way to 90 nanometer. But the product mix keep changing. If we dedicate 70,000 wafers to 28 nanometer, that needs a lot of tools, a lot of space. But with the limitation on 28 nanometer capacity, we can convert it in capacity calculation, We run more than 120,000 wafers.
We can run 128,000 wafers in total capacity. That's the number we will reach by the end of this year.
There are no further questions at this time. I would now like to hand the call back to IR Director, Tim Kuo for closing remarks.
In closing, we would like to thank everyone who participated in today's call and again thank all of you for your trust and support to SMIC. Thank you very much.
Thank you. This is the end of SMIC's 4th quarter earnings conference call. We thank you for joining us today. You may now disconnect the call. Thank you.