2025-08-11 01:21Summary of SMIC Earnings Call Company Overview - Company: Semiconductor Manufacturing International Corporation (SMIC) - Industry: Semiconductors - Date of Call: August 8, 2025 Key Financial Highlights - 2Q25 Revenue: US$2.21 billion, down 2% quarter-over-quarter (QoQ), but above guidance of -6% to -4% QoQ [5] - Gross Margin (GM): 20.4%, beating market expectations of 18.9% and company guidance of 18-20% [5] - Earnings Per Share (EPS): US$1.66 cents, missing consensus estimates of US$3.24/3.1 cents due to higher operating expenses [5] - 3Q25 Revenue Guidance: Expected to increase by 5-7% QoQ, driven by higher wafer shipments and blended average selling prices (ASP) [6] Market and Operational Insights - Utilization Rate (UTR): High UTR of 92.5% in 2Q25, expected to remain high in 3Q25 due to strong orders, particularly in the power discrete platform [6] - Impact of Tariffs: US business accounted for only 13% of revenue in 2Q25; potential 100% semi tariff could impact revenue by approximately 1.2-1.3% [3] - H20 Chip Availability: The lifting of H20 restrictions is not expected to significantly impact SMIC, as demand for domestic AI chips remains modest [4] Future Outlook - 3Q25 Gross Margin Guidance: Expected to be between 18-20% [6] - Long-term Revenue Growth: Projected revenue growth to Rmb136 billion by 2027, supported by SMIC's leading node capacity [18] - Earnings Estimates Revisions: 2025 EPS revised down by 8% due to high R&D and G&A expenses, while 2026 and 2027 EPS remain unchanged [32] Valuation and Investment Thesis - Price Target: Unchanged at HK$40, reflecting a valuation of 1.9x 2025 estimated price-to-book (P/B) [7] - Investment Rating: Equal-weight (EW) due to high valuation relative to historical averages [7] - Risks: Potential competition in 2H25 could pressure mature node wafer prices, affecting gross margins [48] Additional Insights - Domestic AI GPU Market: Local GPU revenue is expected to grow significantly, but reliance on NVIDIA's H20 remains strong among Chinese developers [12][18] - Capacity Utilization Trends: Foundry utilization rates in Greater China are recovering, with SMIC's utilization higher than Taiwanese peers [20][24] - Market Position: SMIC is well-positioned to benefit from localization demand and government support, but faces challenges from rising capex and competition [47][48] This summary encapsulates the key points from the earnings call, providing insights into SMIC's financial performance, market dynamics, and future outlook.