Ladies and gentlemen, welcome to Semiconductor Manufacturing International Corporation's Third Quarter 2019 Webcast Conference Call. Today's conference call is hosted by Doctor. Joe Shixue, Chairman of SMIC Doctor. Zhao Haijun, Co Chief Executive Officer Doctor. Liang Mong Song, Co Chief Executive Officer Doctor.
Gao Yonggang, Chief Financial Officer and Mr. Tim Kuo, 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 listen only mode. However, at the conclusion of the management presentation, we will be having a question and answer session, at which time you will receive further instructions as to how to participate.
The earnings press release is available for download at www dotsmics.com. Webcast playback will also be available approximately 1 hour after the event. Without further ado, I would like to introduce to you Mr. Tim Kuo, Director of Investor Relations for the cautionary statement.
Good morning and good evening. Welcome to SMIC's Q3 2019 earnings webcast conference call. Today, we are pleased to have all of our top management present. We will begin with a few words from them, both in Mandarin and English, starting with our Chairman, Doctor.
Zou.
Welcome to today's webcast. I would like to thank each and every one of you for your continuous interest and support to SMIC. It has been exactly 2 years since the last time I attended the webcast in the Q3 of 2017. I would like to take this opportunity to talk about the trend in the semiconductor industry and SMIC's recent development and results from reformation.
Hello everyone. I'm Haijun. Thank you all for joining us today. In the past 2 years, we have continued to expand and develop SMIC's mature technology platform and have made extensive planning according to market demands. So far, we have achieved initial results.
At the same time we are optimistic about new growth and collaborative opportunities in China. I will share with you in detail later.
Hello, everybody. This is Mong Song. To date, we will update you on the SMIC's R and D progress and prospects of our advanced technology. In particular, the 1st generation of the FinFET technology has entered production and expect revenue contribution. The development of the 2nd generation FinFET technology has been carried out steadily and SMIC will strive to seize new opportunities.
Haijun later will also have more explanation. Thank you.
Greetings to our friends from the Capital Markets. I'm Yonggang. I hope that through today's special arrangement you will have a more comprehensive and complete understanding of SMIC's current status. I will now return to the call back to Tim.
Thank you, Doctor. Gao. Now I'll go through the statement cautionary statement. Today, our Chairman, Doctor. Zhou Zixue will make a statement on the company.
Following 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 www.smics dotcom 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 further 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 table in our press release for a reconciliation of IFRS to the non IFRS numbers we'll be discussing. Please note that all currency figures are in U. S. Dollars unless otherwise stated.
I will now turn the call over to our Chairman, Doctor. Zhou Zixue. Welcome to today's webcast. I would like to take this opportunity to thank each and every one of you for your continuous interest and support to SMIC. It has been exactly 2 years since the last time I attended the webcast in the Q3 of 2017.
In the past 2 years, the semiconductor industry was impacted and faced downward pressure due to the increased macroeconomic uncertainty. In this challenging situation, we have worked closely with domestic and global customers and suppliers to continue to innovate and capture market in order to maintain continuous growth in revenue. Moreover, during these last two years, under the joint leadership of Doctor. Liang and Doctor. Zhao, SMIC has experienced radical reformation.
We have streamlined our organization, promoted a more disciplined management culture and improved the level of our management, efficiency of decision making and our team's ability to execute. The outstanding achievements we have made in the development of technology platforms over this time period are the best proof of our improved execution. In advanced technology within these two years, our 28 nanometer HKC plus entered production. Our 14 nanometer FinFET completed R and D, engaged customers and entered production. In addition, our 12 nanometer and second generation FinFET technology have made steady R and D progress and are both now in customer engagement.
Under the leadership of Doctor. Liang, our R and D team's advanced technology node, project experience and overall capabilities have been greatly enhanced. In Material Technology, we have set up a team to specialize in product technology development to focus on our CIS, CMOS image sensor, PIMIC, NORFLASH, fingerprint and other technology platforms. We are proactively driving the growth of the company through continuous innovation, constant improvement in the comprehensiveness and competitiveness of our technology platforms, active expansion of our customer base and engagement in new products with international and domestic customers. In order to meet with the increasing market and customer demand, we are also expanding our production capacity at a steady pace.
It can be predicted that the macro environment in the next few years will still be complicated and the development of the semiconductor industry will still be full of challenges. However, the rise of 5 gs, artificial intelligence and other related fields will greatly boost the market demand and bring new opportunities for the development of the industry. Industry. This year, China has licensed 5 gs. In the next 2 years, there will be widespread networking and the launch of consumer products.
5 gs requires a lot of ICs from cloud based to end products. In addition, 5 gs is a high speed and low latency telecommunication technology. Will also promote the development of new applications such as autonomous driving, Internet of Things, etcetera, which will further boost the market demand of the semiconductor industry. Our key international and domestic customers have strategic plans for 5 gs related fields. We are working closely with them to engage new products in advanced and mature process nodes and to bring these to market in the next 2 years.
Overall, we are stepping forward into an important period in SMIC's history of development and expansion. In the past 2 years, through tough reform, we have successfully shaped a strong team, laid out and developed a good number of technology platforms and strengthened trust and cooperation with customers and suppliers. These efforts have laid a solid foundation for our confidence in the future. Finally, we look forward to returning to a strong revenue growth next year. Thank you, Doctor.
Cio. I will now hand the call to our CFO, Doctor. Gao for financial highlights.
Thank you, Chairman Zhu and team. First, I will highlight our 3rd quarter results and give the Q4 2019 guidance. In the Q3 2019, our revenue was $860,000,000 an increase of 3.2% quarter over quarter, mainly due to the increase in wave shipment. If closing the revenue from the L400, our revenue was $803,000,000 an increase of 6.1% quarter over quarter. Gross margin was 20.8%, a sequential increase mainly due to the rise in utilization in the Q3.
Non operating expenses were $257,000,000 lower than guided rent, mainly because of control of R and D and GA expenses in the 3rd quarter. Profit for the period attributable to SMIC was 150,000,000 dollars among which $81,000,000 came from the disposal gain of air foundry, which was deposited in July. Non controlling interest were $31,000,000 of credit to SMIC's attributable profit, higher than the guided rents, mainly due to the currency exchange loss from RMB depreciation for our joint venture. Moving to the balance sheet. At the end of Q3, cash on hand, including financial assets, were close to 3,800,000,000 dollars Gross debt to equity was 45%, and net debt to equity was 6%.
In terms of cash flow, we generated $380,000,000 of cash from operating activities in the Q3. From Q3, we changed accounting policy to reallocate R and D government funding from directly deducting R and D expenses to under the category of other operating income. The purpose of this accounting policy change is to be more comparable to peers. Now looking ahead into the Q4 of 2019, our revenue is guided to be up 2% to 4% quarter over quarter. When excluding LFoundry, revenue is expected to increase 4% to 6% quarter over quarter.
Gross margin is expected to range from 23% to 25%, mainly due to high utilization, improved product mix and a stable pricing environment. Non IFRS operating expenses are expected to range from $271,000,000 to 277,000,000 dollars Non controlling interest of our majority owned subsidiaries are expected to range from positive $70,000,000 to $90,000,000 which are losses The planned 2019 CapEx for foundry operations is approximately $2,100,000,000 which are mainly for the equipment and the facility in our majority owned Shanghai 12 fab and FinFET R and D line. The planned 2019 CapEx for non foundry operations are approximately 106,000,000 dollars Our planned 2019 D and A is approximately $1,100,000,000 And lastly, we would like to highlight that our 2019 gross margin is expected to reach to 20%, compared to the original guided range of high teens to 20%. Our estimated EBITDA for 2019 is approximately $1,300,000,000 compared to the original expectation of 1,100,000,000 dollars I will now hand the call over to our Co CEO, Haijun, for general remarks.
Thank you, Yonggang. Again, thank you all for joining us today. Today, I'll give an overview of business and technology overview, then Monsoon, Yun Gang and I will answer questions from
the line. Let
us begin by highlighting the results of our Q3. Then I will update you on our maternal technology application platforms, advanced technology progress, capacity plans, business development and our outlook for the rest of the year. Overall, our Q3 was better than our guided expectations. Reported revenue increased by 3% quarter over quarter compared to our guidance of flat to 2%. Revenue excluding our foundry grew by 6% quarter over quarter beating our guidance of 2% to 4%.
The increase in revenue was due to better than overall business, higher sales of advanced nose of mask, customer inventory digestion and fresh incremental revenue from newer applications. Overall, wafer shipments in the 3rd quarter increased 2.4% quarter over quarter. Gross margin improved to 21%, which was the high end of our guidance. The improved margin was largely due to higher utilization, growth in shipments and a change in revenue mix. For a regional perspective, business continues to be strong particularly in China region which increased 10% quarter over quarter contributing to 60.5% of our revenue.
SMIC's key role in the China ecosystem continues to provide a solid foundation for the company's business growth. Excluding revenue from irefundry, sales from our United States region was stable and grew more than 2% in Q3. While Eurasia is up to 56% growth year over year. Satisfying significant market opportunities captured. I'd like to address now our mature node technology platforms.
We had begun to build and develop these application platforms in early 2018 and now they are paying off and translating into revenue. We have achieved significant breakthroughs in mature and mainstream applications in both quality and quantity as demand is high. Mature node technology for 8 inches 12 inches is stable and the capacity is full until the end of this year, which indicators that this demand may carry into the first half of last year depending on a stable macro environment. The platform area which show particular strength for both 8 inches 12 inches includes CMOS image sensors, power ICs, fingerprint ICs, Bluetooth ICs and specialty memories. Furthermore, we have seen some special smart card applications such as electronics toll collection, etc, continues to have a good stable demand and have contributed to some of our new incremental revenue in the recent quarters.
When analyzing revenue by applications, our customer segments grew 16% quarter over quarter and 3% year over year as we see the demand for 5 gs triggering the market for mature technology applications such as IoT and smart home appliance. 5 gs demand for SMIC includes a wide range of devices, including power management for quick charters, specialty memories for high end variables and CMOS image sensor for smartphones, consumer devices and surveillance. Our revenue from Power ICs, CIS, mixed signals, RF and fingerprints are up 6% quarter over quarter. By technology nodes, a majority of our growth in 3rd quarter came from 65 and 55 nanometer nodes. 65 and 55 is up 42% year over year, while revenue from 28 nanometer, 0.13 micron and 0.35 micron also increased.
These increases are largely due to connectivity, application processors and CMOS image sensor related applications. Our 28 nanometer platforms continue to experience customer appeal and continued demand. 28 nanometer wafer revenue contribution increased to 4.2% in Q3. Our 28 nanometer platforms are addressing applications such as high end consumer and set up box. Both polysane on and high key micro gate continue to experience demands and we plan to transit our mix that is heavier on high ks metal gate.
We continue to expect the 28 nanometer will provide low to mid single digits revenue contribution for the full year. I will now give a brief update on our advanced technologies, including the R and D progress and business opportunities. Let me address the progress of our 14 nanometer technologies. 14 nanometer successfully entered to reach production in Q2 and now in production. We are continuing to engage with customers and expect revenue contribution by year end.
Meanwhile, our team is conducting ongoing tape out projects and we continue to expand our customers both globally and domestically. Applications for our 1st generation FinFET technology include applications such as high end consumer, media related applications, mobile application processors and artificial intelligence. Auto related applications using our advanced technology are also progressing well with our customers validation on product quality. We continue to expand our advanced node portfolio as we are now also developing RF related applications. To address our progress on M plus 1 node, we continue to push forward with good progress.
Our N plus-one development is on track and customer engagement is smooth. Given the limited players in this area, we are optimistic about the potential opportunities and ability to provide diverse options for global and domestic customers. Allow me to talk about our market perspective for our advanced technologies. The growing FinFET market is being driven by the market trend like high performance computing and migration to 5 gs which bring increased IC demands from smartphone upgrades to connectivity using Wi Fi, IoT, Bluetooth, smart home and a smart city. We are confident that the upcoming market trend will benefit SMIC and the industry as well.
We target to see incremental revenue contribution from FinFET in 4th quarter coming from high end consumer to high performance computing. With new technology coming in production, we have planned our advanced capacity carefully. We reiterate our 2019 foundry CapEx of US21 $1,000,000,000 of which we have spent US1.5 billion dollars in the 1st 3 quarters. Our capital spending is largely for our new SMIC South Joint Venture Facility, which can address 14 nanometer and below. At this point of time, our capacity additions and research and development plans are running smoothly and on schedule.
With regards to business development, the transition to transfer AirFoundry ownership was completed in July. As a result, Q3 accounted only 1 month of our funderdiary's revenue and a one time disposal gain of US81 $1,000,000 We are glad to focus on our core manufacturing in China, while still having a foothold in automotive IC market. In Q3, we are nearly fully loaded on our main fronts. Meanwhile, we continue to work carefully with our customers and the business situation in mind to prudently expand our capacity to capture distinct opportunities. We reiterate our second half twenty nineteen is better than the first half of twenty nineteen.
As the capacity remains pretty full in both mature 8 inches 12 inches we expect 4th quarter to be another stable quarter. Our capacity growth in the near term is limited. We are guiding our 4th quarter with single growth, single digit growth coming from broad based utilization growth and a new incremental revenue from an advanced technology nodes. We now believe we can outperform the full year guidance of being in line with the foundry industry growth to slightly beating the industry. When excluding the disposal of our foundry and the licensing revenue, SMIC may see slight revenue growth versus the industrial decline.
Looking forward, we are very optimistic about next year given our current visibility and customer demands. Products utilizing our technology platforms will continue to ramp up. To conclude SMIC has executed well in the recent quarters on delivering its platform technology and developing new technology nodes. Our advanced technology nodes research and development continues to accelerate and we are well on schedule to meet our various targets. At the same time, we have continued to build our comprehensive solutions to supporting our customers' needs and meeting the market opportunities.
SMIC continues to play an important role in the industry. We work to further support the domestic supply chain and collaborate with domestic and international customers that desire to take part in China's opportunities. Therefore, we continue to build trust with our customers and build up a solid network of service and market driven relationships. We see increasing opportunities and aim to grab strategically as we purposely maintain our leading position in China. We thank you for your continued support as we work to bring values to our shareholders.
Once again, 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. Ladies and gentlemen, we will now begin the question and answer Your first question comes from the line of Randy Abrams from Credit Suisse. Please ask your question.
Okay. Yes. Thank you. Good morning and appreciate the details. I wanted to ask the first question.
You alluded to strong growth expected in 2020. If you could talk more about magnitude of growth, kind of what you're expecting for industry and SMIC's growth next year? And then how you see the growth both from the advanced platform like 28 and 14 or FinFET and then how you see the mature nodes continuing to grow into next year to support that strong growth?
Hi, Randy. Thank you for the question. And looking to the nice year and about our business situation based on our current visibility to the market and we see very strong demands just now we already say that for our 8 inches 12 inches we are in the full loading stage for quite a while, you know that since last quarter we announced that and we do not see significant growth in our capacities in the mature nodes. So we are pretty confident that for our mature technologies and we should see the continued healthy loading. But because of we just now we already say that we do not have that fast investment in the capacity expansion in the mature technologies.
So we want to see right away immediate significant growth in the revenue even though we have confidence that the continued floating stage And the second half last year possibly we will have the item capacities, but that's a gradual just now we already say that our expansion on capacity is very prudent, careful and we may now see that big jump in the capacity providing part. And on the leading edge technologies in the FinFET, we already moved into the production stage and we have continued customer engagements on new tape outs And at this moment, it's still too early to announce the actual volume of real estate revenue growth.
Okay. If I could ask the second question then maybe split into 2 parts. It's maybe the view on CapEx. I think the 2 areas since you're full on mature nodes for next year, what your plan if because you mentioned a lot of specialty applications with good potential on 5 gs IoT. And then for the FinFET line, I think you have capability to move to 15 ks.
So if you could talk kind of your plans and what it might account to for spending? And then maybe the implication gross margin with the guidance up by a few points, if we should view kind of closer to mid-20s as a level of full utilization that you can maintain or kind of the recent range where it's been closer to 20% like into next year, if that's probably the level it may return back to?
Hi, Randy. Since SMIC continued situation of full loading and yes, just now we already say that because of the full loading situation very hard demand and we are confident that the gross margin of 20% type of things will be maintained. And as for the next year spending on the CapEx and the capacity things SMIC always follow on the principles that with the development of our technologies and the market everything based on our strategy needs and the actual building of capacity based on market demands. So we are consolidating the market demands and later we'll make the decision on the total spending on the capacities. And I really believe that when we have the data webcast for the Q4, we will announce more or less the capacity spending for 2020.
Okay. And if I can clarify the gross margin because you're guiding 23% to 25% in Q4, if because you mentioned about maintaining the 20%, but with Q4 23% to 25%, I was actually asking if you think you can maintain that higher level or maybe it's a one time function of mix or demand that's pushing it up to that level. I'm just trying to think of kind of looking forward if now you think the gross margin maybe a few points higher like it is in Q4 kind of continuing forward?
Hi, Randy. For the short term, yes, we announced just now that 24%, 25% type of things. But just now the second question is talking about a full year of nice year. So we made a comment that it's too early to comment out of things above 20 And we just say that for the gross margin 20% and based on the visibility that we should be able to maintain that. But for the full year, we can't say too much on more than that.
Okay, great. Thanks a lot guys.
Thanks Randy.
Your next question comes from the line of Letting Huang from CICC. Please ask your question.
Thank you for taking my questions. The first question is about how we SMIC to ramp up the 14 nanometer and 12 nanometer process in 2020. So do you have a more clear plan? And how to keep the balance between the profitability and the scale? Thank you.
Okay. Hi, Liping. Yes, thank you for your questions. FinFET capacity building certainly will be closely linked with customer demand. And for the first half of the next year, the demand on 14 is very clear.
So we will build our capacity according to that demand. The next second half of the next year is whether in how do we distribute between the 12 and N plus 1 that we still negotiate with the customer. So that is a little bit early to talk about second half of the next year capacity. But certainly we will balance all the capacity and customer demand very cautiously.
So there's no more detail on the scale or how much you plan to expand in 2020?
I think in the last meetings I already spent our capacity building plan from 3 ks to the 15 ks and that plan still exist here, still valid at this moment.
Okay. The second question. The second question is about asked Haijun. So what do you look on this market supply demand relation in the 12 nanometer mature process? So since you're doing very well in the differential process like CIS and the PIMIC last 2 years, so but we also see a lot of capacity are introduced in, I think, last 2 months.
So what do you what's your plan in the 12 inches by 12 inches? Thank you.
Hi, Liping. Yes, we'll build up our capacity further on on and based on the commitment to the customers and you're right in the past 2 years we have built up more than 7 new product platforms and for each platform we have 102 and very big customer working together with SMIC. And based on the mutual agreements and the market growth we will add down the capacity culturally and yes, next year we will add it down. But the range is not that big, may not be impacted by the market growth, I mean by the overall market capacity provided by the other guys in the past couple of months. And for the Beijing fab, you know that we are and DE original fab, I mean the first one already fully loaded for past couple of years.
And for the new fab, actually even now we already finished more than 75% of that fab space. So even though we got extension and the remaining part is not that big, but and we just work together with our customers on how to resolve these kind of things. So we do fab that's for 12 inches and SMIC, in order to resolve this kind of capacity constraints, we have really worked through that for the similar products, we can run both in 12 inches and 8 inches so that we can back up one another and that's one of the solution we have. So when we talk about 12 inches embedding fab for further expansion and we also work together to expand 8 inches capacity. So quite a couple of customers and the platforms are running at this moment on both 12 inches and 8 inches So we'll move concurrently 8 inches 12 inches So to conclude that, make it simple, we'll go for expansion, but slowly, gradually.
Thank you.
Your next question comes from the line of Si Ho Ng from China Renaissance. Please ask your question.
Hi, good morning, gentlemen. Congratulations on a strong quarter. My first question is regarding the account receivables in Q3. I saw a pretty strong increase quarter over quarter. Just want to know if it's a short term phenomenon or any implications you can share?
Ziho, could you say your question again, it's about account receivable?
Right, it's a big jump up in Q3, right. I just want to know the reason behind, Is it a short term thing or any implications that you can share?
We actually issued a RMB500 1,000,000 corporate bond in 2014 and it's due in the 7th November this year. Therefore, we have prepared this equivalent account of cash and other account receivables to pay this corporate bond.
Okay. Great. Thanks. And second question regarding the 14 nano and 12 nano, could you guys provide an update on the Tap Out activities for the moment?
Could you say what kind of activities?
The tape out, the customer tape out.
Customer tape out, okay.
Thank you.
Okay. Let me try to answer this one. At this moment, year 2019 most of tape out is on 14th. Starting from late this year to early next year, we will see more 12 nanometer Taobao coming in, yes.
Okay. All right. Okay. Thank you, Doctor. Lan.
Congratulations.
Your next question comes from the line of Gokul Hariharan from JPMorgan. Please ask your
My first question is on 28 nanometer. What is the anticipation on 28 nanometer going into next year? Do you expect that the situation starts to get better given other nodes are starting to see some demand recovery in second half of this year? Second question, specifically to Q4 gross margin moving up to 23% to 25%. Could you talk a little bit about what are the reasons for that move up, given this is a level we have not seen since the first half of twenty eighteen?
Is there any one off there or is it primarily because of utilization increase in 8 inches and mature 12 inches? Thanks.
Hi, Gokul. Thank you for the questions. The first question is for 28 nanometer perspective into next year and basically we should say SMIC is loading in next year overall will be better than this year since we are working together with customers on both high key Metal Gate and C plus new applications and polysilon applications, we do have more tape outs and products ongoing. But since overall in the world 28 nanometer capacity is overcapacity situation is still there and the price gross margin still low running 28 nanometer. We are not in a very strong demand to push this area for further loading and basically we just meet up our customers' expectation and request on the capacity.
We do not have a plan to expand the capacity on 28 nanometer. So this is the answer to your first question. And for the 24%, 25% gross margin and 5% growth from Q3 and a couple of reasons. The first reason is the loading situation for our Beijing 12 inches wafer fab for the new fab and new capacity already got fully loaded. And the second reason is from the disposal of airfoundry.
You know that airfoundry fab has been running in a very low gross margin for 3 years. And the third is for small wafer fab in Shanghai running 12 inches 40 and 28 nanometer technologies in the past couple of years that's Shanghai fab and I did webcast we already say that we closed that fab operation and relocated machine to Beijing. So that we consolidate 14 nanometer, 28 nanometer operation in Beijing, that's a lot of push on the gross margin.
Thank you. Just one quick question on 28, if I may. So when you think about 14 nanometer and 12 nanometer ramping up, do you think that 14, 12 will be higher gross margin than 28 when it comes to, let's say, second half of next year or exiting 2020 once it ramps up to sufficient scale?
Gokul, are you referring that increasing of 14% and 12% will better improve our gross margin in the next second half?
No, I was just asking, since 20 28 gross margin still remains under pressure due to industry issue, Do we expect once 14 and 12 ramp up, let's say by end of next year we reach, let's say 15 ks that we talked about. Do we expect 14% and 12% gross margin to be higher than 28% or is it still going to be taking some time to get there?
Okay. I think that's great question about this 14 nanometer ramping not to repeat 28 nanometer to gross margin situation. So as I said earlier to answer the Deping's question, we will be very cautious about advanced technology capacity building versus our customer demand for our FinFET fab. So not to encounter this similar situation on 28.
Okay. Thank you.
We'll take the final question from the line of Roland Chu of Citigroup. Please ask your question.
Hi, good morning. I think my first question is look at your mature now, I think now have been fully loaded, I expect probably about 100% utilization. So question is on how much upside for you to still to improve your utilization for mature node? And you are you plan to expand 8 inches and 12 inches material capacity next year? So how big are the capacity you are going to expand this year?
Thank you.
Hi, Roland. Thank you for the questions. And upside is on the mature technology nodes and temporarily we can't, simply we are running fully loaded and we also have the commitment on the delivery of the cycle times, That means we have to deliver the wafer out and we think certain timeframe and furthermore loading into the fab and we'll fail this kind of delivery. So we want short term we want to go for upside type of loading right away. So we'll maintain the current situation.
And for the add on capacities on 8 inches 12 inches that's our slow progress. And just now we already say that for Vision fab for the new fab space and we already use 3 folds and hopefully in a nice 1 year timeframe we can fill up the last quarter of the new space. And for 8 inches we do have a new fab in Tianjin and it depends on the machine delivery on our vendor side. And we believe at this moment it's a slow progress because of the market situations that we can't build our capacity right away. And we should say that, okay, this gradual slow building up capacity is add on capacity to our existing 12 inches and 8 inches wafer fabs mainly happens in Beijing and Tianjin and Shanghai is mainly advanced and FinFET technology capacity.
Okay. Thanks. And since next year you have missed continuous capacity build plan on FinFET and also on this mature technology node. So what's your CapEx plan for next year? And also what will be the overall depreciation next year?
Thank you.
And we should say this way because this year we spent $2,100,000,000 majority of that part is used for the FinFET technology capacities. And the last year and we should say the similar CapEx or higher than this CapEx will be there and because we have a mature technology capacity building up.
Yes. How about the overall depreciation this year based on this RMB2.1 billion capital spending this year and this year?
We did not have the calculation right away. The depreciation just now from our CFO's reports, we have the current depreciation numbers and this year we have $8,000,000,000 and possibly we both can calculate.
Okay, understood. Thank you.
Sure. Thank you.
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 believe our special arrangements today would help you to understand SMIC more. Again, thank all of you for your trust and support to us. Thank you very much.
Ladies and gentlemen, this is the end of SMIC's 3rd quarter earnings conference call. We thank you for joining us today.