Welcome to Semiconductor Manufacturing International Corporation's first quarter 2024 webcast conference call. Today's call will be simultaneously streamed through the internet and telephone. Please be advised that if you join the meeting by phone, your dial-ins are in listen-only mode. However, after the conclusions of the management's presentation, we'll have a question and answer session. At that time, you'll receive instructions on how to participate. Without further ado, I would like to introduce Miss Guo Guangli, Senior Vice President and Board Secretary, to host the meeting.
[Foreign language] Greetings. Welcome to SMIC's first quarter 2024 webcast conference call. Attending today's call are Dr. Zhao Haijun, Co-Chief Executive Officer, Dr. Wu Junfeng, Senior Vice President and Person-in-Charge of Finance.
[Foreign language] Let me remind you that today's presentation may contain forward-looking statements that do not guarantee future performance, but represent the company's expectations and are subject to an inherent risk and uncertainties.
Please refer to the forward-looking statements in our earnings announcement. Please note that today's earnings statement is presented in accordance with International Financial Reporting Standards, IFRS, and all currency figures are in U.S. dollars, unless otherwise stated. [Foreign language] I will now hand the call to Dr. Wu Junfeng to introduce the company's financial status.
[Foreign language]
First, I will report our unaudited financial results for the first quarter of 2024, followed by our guidance for the second quarter.
[Foreign langauge] The first quarter's operating performance is as follows: sales revenue of $1.75 billion, quarter-over-quarter growth of 4.3%, gross margin of 13.7%, quarter-over-quarter decline of 2.7 percentage points, operating profit of $2.41 million, EBITDA of $887 million, EBITDA margin of 50.7%, profit attributable to the Company of $72 million.
The first quarter operating results are as follows: revenue was $1,750 million, up 4.3% sequentially. Gross margin was 13.7%, down 2.7 percentage points sequentially. Profit from operations was $2.41 million. EBITDA was $887 million. EBITDA margin was 50.7%. Profit attributable to the company was $72 million.
[Foreign language]
Moving to the balance sheet. At the end of the first quarter, the company had total assets of $48.2 billion, of which total cash on hand was $15.4 billion. Total liability was $17.3 billion, of which total debt was $10.3 billion. Total equity was $30.8 billion. Debt to equity was 33.5%, and net debt to equity was -16.4%.
[Foreign language] Regarding cash flow, in the first quarter, net cash from operating activities was an inflow of $470 million, net cash used in investing activities was an outflow of $1.328 billion, net cash from financing activities was an inflow of $44 million.
In terms of cash flow, in the first quarter, we generated $470 million cash from operating activities. Net cash used in investing activities was $1,328 million. Net cash from financing activities was $44 million.
[Foreign language]
For the second quarter 2024, our guidance is as follows: revenue is expected to grow 5%-7% sequentially, and gross margin is expected to be in the range of 9%-11%.
[Foreign language]
This concludes the financial status. Next, let me recap the relevant matters related to the company's 2023 annual report. 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 should 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 date of the annual general meeting.
[Foreign langauge]
The technical capability, product capacity, revenue scale, and market share are important indicators for foundry in IC market to measure its competitiveness and market position. The company is currently in an important period of capacity construction rollout and continuously increasing market share.
Both capacity construction, research and development activities require significant capital expenditure. Therefore, currently, the company's free cash flow, the difference between operating cash flow and capital expenditure investment, is negative. At present, prioritizing the use of funds for core business, including capacity construction and research and development activities, can help enhance the company's core competitiveness and corporate value, ensure that the company maintain its leading position in fierce market competition, and maximize the protection of investor interests. Based on aforementioned consideration, the company plans not to pay dividends for the year 2023. This arrangement is more in line with the company's long-term development needs and the long-term interests of shareholders, and in accordance with relevant laws and regulations, regulatory documents, and the company's profit distribution policy.
There are no circumstances that harms the interests of the company and its shareholders. The plan has been reviewed and approved by the Board of Directors and published in annual report, and will be submitted for approval at the annual general meeting. We would like to thank our shareholders for their understanding and support.
[Foreign language]
Thank you, Dr. Wu. Next, I will hand the call to Dr. Zhao Haijun to comment on operations.
[Foreign langauge]
Good morning! Thank you for attending SMIC's first quarter 2024 earnings call.
[Foreign langauge]
[Foreign langauge]
First, let us share with you what we have observed in the first quarter. In the first quarter, the IC industry was still in the recovery stage and customer inventory gradually improved. Compared to three months ago, we have noticed that our global customers are more willing to build up inventory, leveraging inventory certainty in the face of market uncertainties. For domestic customers, some managed to gain a larger market share and require their products to be pulled in to secure their positions, while others, upon witnessing competitors restocking, also made preparations to build up inventory in advance to seize the initiative, responding to rapidly changing market demands. For overseas customers, some raised their inventories to their desired levels due to geopolitical consideration, and thus they also had some degree of products pull in. Combining the above factors, the company's first quarter revenue and growth margin both beat guidance.
Utilization rates increased by four percentage points sequentially to 80.8%. Revenue increased by 4.3% sequentially to $1,750 million, realizing four consecutive quarters of growth. Breaking down the revenue, eight inch equivalent wafer shipments increased by 7% sequentially to 1,795K pieces. Blended ASP declined by 3% sequentially due to the product mix change and other factors. In the first quarter, depreciation and amortization increased, and thus, gross margin decreased by 2.7 percentage points sequentially to 13.7%.
[Foreign language]
In terms of revenue by region, revenue from China, America, and Eurasia accounted for 82%, 15%, and 3% respectively. The proportion was relatively stable. By service type, wafer revenue accounted for 93%, and other revenue accounted for 7%. Wafer revenue by application: smartphone, computer and tablet, consumer electronics, connectivity and IoT, industrial and automotive accounted for 31%, 18%, 31%, 13%, and 7% respectively.
We received some rush orders in the first quarter, but some of our production lines were almost fully loaded and could not fulfill all demand. We prioritized the rush orders of consumer electronics related to market share. Therefore, we negotiated with customers to push back the delivery time for products such as computers and tablets, which demand is generally stable. By size, wafer revenue from 8-inch and 12-inch accounted for 24% and 76% respectively.
[Foreign langauge]
[Foreign langauge]
In terms of the platform, the company has been accelerating the development of technology platforms for mainstream application scenarios such as smartphone, consumer electronics, automotive, IoT, etc., and establishing diversified platforms at each node. The company has focused on the layout of High-V, CIS, RF-SOI, special memory, NAND flash, NAND Flash, non-volatile memory, BCD, and other platforms to realize the rapid iteration of customer products from consumer to industrial and to automotive grade. In terms of the platform for display driver, the company has provided customers with a full range of multi-node platforms from large, medium to small screens. While keeping this market share in large and medium screens, the company has continued to make progress in platform for small screen drivers related to smartphones and consumer electronics.
The company has launched the first 28-nanometer AMOLED display driver platform in mainland China, with performance and power consumption reaching first-class level in industry. Additionally, automotive grade and other related platform developments have also been rolled out for 28-nanometer. The company's automotive reliability testing center has achieved laboratory accreditation certificates from CNAS, China National Accreditation Service for Conformity Assessment, which provides strong support for the company's continuous rapid introduction of automotive process platforms.
[Foreign language]
Next, let's look into the second quarter. For the second quarter, the company's guidance are: revenue is expected to grow 5%-7% sequentially. Gross margin is expected to be in the range of 9%-11%. The main reasons are, first, the company has seen continued demand for pull-in from some customers. The shipment is expected to continue to increase, and blended ASP is expected to decrease due to the product mix change and price decline. The overall situation of shipment volume increasing and blended ASP declining will continue in the second quarter. The company, second, the company has offset the impact of price cuts by reducing costs and increasing efficiency. However, along with the increase in capacity scale, depreciation is expected to rise quarter by quarter, so the gross margin is expected to decline sequentially.
[Foreign langauge]
For the whole year, we would like to share our views with you in three aspects. First, about the annual guidance. The first quarter's revenue beat guidance, and revenue is expected to continue to increase in the second quarter. By doing some calculations, you can figure out that the company's revenue in the first half of this year is expected to increase by nearly 20% compared to the same period of last year... However, we are still cautiously and closely observing whether the urgent cooling requirements from customers in the first half of this year is an early overdraft of the demand in the second half of the year. We don't have clear visibility on the second half of the year, but we will continue to work hard.
Based on the premise that there is no significant changes in the external environment, the company's 2024 revenue growth target is to exceed the industrial average in the same market.
[Foreign language]
Second, about the price. As China's local new capacity continues to come online, competition in the industry has been increasingly fierce, and the pricing for commodity products basically follows the market trend. The company fulfill its long termism through constructing quality technology platforms that lead peers in mainland China by one to two generations, offering competitive products to customers and establishing long-term partnership with strategic customers to come from and engage in the competition together with customers.
[Foreign language]
Third, about the depreciation pressure. In order to satisfy customers mid- to long-term demand, the company is in a stage of continuous high investment and expansion of 12-inch high-quality capacity, along with the release of company's new project capacity and rise of revenue scale. The corresponding increase in depreciation pressure will persist for a certain period of time into the future. It takes time for new projects to go from loss-making to realize economic scale and benefits. This is industry rule. The company will continue to optimize the management mechanism, focusing on capacity stabilization, cost control, technology, leadership and customer first as four pivots to continue to strive. We believe that as long as there is demand from customers, along with our technology and capacity readiness, we can ultimately be bigger, better and stronger despite the fierce competition.
[Foreign language]
Finally, I would like to thank all employees, customers, suppliers, investors and community for their attention, trust and support to the company. Thank you!
[Foreign language]
Thank you, Dr. Zhao. Next is our Q&A session. Questions will be answered by Dr. Zhao and Dr. Wu. Chinese questions will be answered in Chinese. English questions will be answered in English. Please limit your questions to two per person. I would now like to open up the call for Q&A. Operator, please assist.
Thank you. If you would like to ask question, please press star one one on your telephone. If you would like to cancel your request, please press star one one again. One moment for the first question. First question comes from the line of Sunny Lin from UBS. Please go ahead.
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
Thank you for the questions. One moment for the next question. Our next question comes from the line of Huang Leping from Huatai Securities. Please go ahead.
[Foreign language]
[Foreign language]
[Foreign langauge]
[Foreign langauge]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
Thank you for the question. The next question comes from the line of Zhang Xiaofei from Haitong. Please go ahead.
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
Thank you for the question. The next question comes from the line of Ziyuan Wang from CITIC Securities. Please ask your question.
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
Thank you for the question. One moment for the next question. There are no more questions at this time. [Foreign language] . I now like to hand the call back to Miss Guo Guangli for closing remarks.
[Foreign language] Thank you for participating in today's conference call, thank you for your trust and support.
[Foreign language] This concludes SMIC first quarter webcast conference call. We thank you for joining us today.