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China's SMIC hopes to climb into the black during 2010

Sumner Lemon | Aug. 13, 2009
China's largest chip maker counting on higher utilization rates and advanced technology to turn a profit

"We expect depreciation will be reduced maybe more than $100 million, so that's going to help us a lot," Chang said. The lower depreciation expense will help improve SMIC's overall profitability, even as higher demand allows remaining depreciation expenses to be spread over more chips.

"If that all happens, plus we migrate to more advanced technology nodes, like 65 nanometer and we start to serve customers with 45 nanometer, then we have a high probability of becoming profitable in 2010," he said.

Because the 65 nanometer and 45 nanometer technologies are on the leading edge, they command higher selling prices and better margins than older process technologies. Chips produced using 65 process technology accounted for 0.1 percent of SMIC's revenue during the second quarter. The company didn't generate revenue from the 45-nanometer process during that period.


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