Semiconductor Manufacturing International Corporation

Welcome to Semiconductor Manufacturing International Corporation First Quarter 2020 Webcast Conference Call. Today's conference is hosted by Dr. Zhao Haijun, Co-Chief Executive Officer, Dr. Liang Mongsong, Co-Chief Executive Officer, Dr. Gao Yonggan, Chief Financial Officer, and Mr. Tim Ko, Director and Head of Investor Relations. Today's webcast conference call will be simultaneously streamed through the internet of SMIC's website. Please be advised that your dial-ins are in listen-only mode. However, at the conclusion of the management's presentation, we will be having question-and-answer sessions, at which time you will receive further instructions as to how to participate. The earnings press release is available for download at www.smics.com. Webcast playback will also be available approximately one hour after the event. Without further ado, I would like to introduce to you Mr. Tim Koh, Director and Head of Investor Relations for the Questionary Statement.

Good morning and good evening. Welcome to SMIC's first quarter 2020 earnings webcast conference call. Today, our CFO, Dr. Gal, will highlight our financial performance and give guidance for the next quarter. And then our co-CEO, Dr. Zhao, will provide some business commentary. This will be followed by our Q&A session hosted by Dr. Zhao, Dr. Liang, and Dr. 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.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 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, Dr. Gao, for financial highlights.

Thank you, Kim. Greetings to all our listeners. First, I will highlight our first quarter results and give second quarter 2020 guidance. In the first quarter 2020, our revenue was $905 million, an increase of 8% quarter-over-quarter and 35% year-over-year, higher than our original guidance range. mainly due to the increase in wave shipment. Gross margin was 26%, a sequential increase, mainly due to the better product mix in the first quarter. Non-GAAP operating expenses were 239 million, lower than guided range, mainly because of control of R&D and G&A expenses in the first quarter. Profits for periods attributable to SMIC was 64 million, while non-controlling interest were 13 million of credits to SMIC's attributable profits in the first quarter. Moving to the financial sheet, At the end of the first quarter, cash on hand including financial assets excluding restricted cash were close to $5.3 billion. Gross debt to equity was 48%, and net debt to equity was negative 3%. In terms of cash flow, which generated $260 million of cash from operating activities in the first quarter. Now, looking ahead into the second quarter of 2020, our revenue is guided to be up 3% to 5% quarter-over-quarter. Gross margin is expected to range from 26% to 28%. Non-GAAP operating expenses are expected to range from 240 million to 245 million. Non-controlling interest of our majority-owned subsidiaries are expected to range from zero to positive 10 million. which allows it to be borne by non-controlling interests. The planned 2020 CAPEX is raised from $30.2 billion to $4.3 billion. The incremental CAPEX is for mature technology product lines and the equipment and the facility in our majority-owned Shanghai 12-inch site. Our plant 2020 DNA is still 1.4 billion. Our 2020 gross margin is expected to be higher than 29, which was 20.6%. Earlier this month, we announced a proposed issue of RMB shares on the of SSE. The initial number of shares will not exceed 25% of total shares, including the new issuance. We plan to use the proceeds of our FinFET project, advanced and matured technology R&D and working capital. In the meantime, the proposed share issue is subject to shareholder and regulatory approvals. I will now hand the call over to our Co-CEO, Haijun, for general remarks.