smic presentation

SMIC Presentation

NYSE: SMI HKSE: 0981-HK

March 2018

2 SMIC Presentation

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2 SMIC Presentation


Safe Harbor Statements Under the Private Securities Litigation Reform Act of 1995

This presentation contains, in addition to historical information, "forward-looking statements" within the meaning of the "safe harbor" provisions

of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements, including statements under “First Quarter 2018

Guidance” and “CapEx Summary” are based on SMIC's current assumptions, expectations and projections about future events. SMIC uses

words like "believe," "anticipate," "intend," "estimate," "expect," "project," "target" and similar expressions to identify forward looking statements,

although not all forward-looking statements contain these words. These forward-looking statements are necessarily estimates reflecting the best

judgment of SMIC's senior management and involve significant risks, both known and unknown, uncertainties and other factors that may cause

SMIC's actual performance, financial condition or results of operations to be materially different from those suggested by the forward-looking

statements including, among others, risks associated with cyclicality and market conditions in the semiconductor industry, intense competition in

the semiconductor industry, SMIC's reliance on a small number of customers, timely wafer acceptance by SMIC's customers, timely introduction

of new technologies, SMIC's ability to ramp new products into volume, supply and demand for semiconductor foundry services, industry

overcapacity, shortages in equipment, components and raw materials, availability of manufacturing capacity, financial stability in end markets,

orders or judgments from pending litigation, intensive intellectual property litigation in semiconductor industry, general economic conditions and

fluctuations in currency exchange rates.

In addition to the information contained in this presentation, you should also consider the information contained in our other filings with the SEC,

including our annual report on Form 20-F filed with the SEC on April 27, 2017, especially in the "Risk Factors" section and such other

documents that we may file with the SEC or The Hong Kong Stock Exchange Limited ("SEHK") from time to time, including current reports on

Form 6-K. Other unknown or unpredictable factors also could have material adverse effects on our future results, performance or achievements.

In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this presentation may not occur. You are

cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated or, if no date is stated, as of

the date of this presentation. Except as may be required by law, SMIC undertakes no obligation and does not intend to update any forward-

looking statement, whether as a result of new information, future events or otherwise.

During this presentation, references to financial measures of SMIC will include references to non-GAAP financial measures, including

non-GAAP operating expenses and adjusted EBITDA, and EBITDA margin. For an explanation to the most directly comparable GAAP

financial measures, see our earnings release.

About Non-Generally Accepted Accounting Principles (“non-GAAP”) Financial Measures

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Introduction

SMIC Performance

China Semiconductor Opportunity

Strategies for Growth

Concluding Remarks

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SMIC: Largest and Most Advanced IC Foundry in PRC

Strong Global Presence

Established in 2000, headquartered in Shanghai

Listed both on HKSE and NYSE

The leading semiconductor foundry in China and Italy

2017 unaudited revenue: US$3.1bn

Company Overview

Shareholding Structure

Wafer Revenue by

Technology

Revenue by

Geography Datang Telecom Technology 16.24%

China IC Industry Investment Fund 15.06%

Other Global Investors 68.70%

Source: Public Filings: NASDAQ OMX data, Dec, 2017

Revenue by

Application

Source: Company 2017 unaudited results

North America 40.0%

Eurasia 12.7%

China 47.3%

Computer 6.2%

Communi-cations 44.3%

Consumer 37.4%

Auto/ Industrial

7.9%

Others 4.3%

28nm 8.0%

40/45nm 20.9%

55/65nm 20.4% 90nm

1.5%

110/130nm 11.6%

150/180nm 34.8%

250/350nm 2.9%

Strong Global Presence

Diversified Revenue Sources

USA Italy

China Beijing

China Tianjin

China Headquarters

Shanghai

Hong Kong

Japan

Taiwan

China Shenzhen

Italy Avezzano Germany

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2014: Exited

Wuhan business

2012: Net income

turnaround

SMIC’s Milestones

2000

Incorporated

2002

Started 8”

production

Realized revenue

2005

Started 12”

production

2009

Management

changed

2014

Established

bumping JV

2004

IPO in NYSE and HKSE

Achieved profitability

2011

Turnaround

management

team on

board

2013

Established

Beijing 12’’ JV

2016

Strategic partnership with JCET

Merger of LFoundry

New fabs plan in SH, TJ & SZ.

2000 2008: Completed exit

of DRAM business

2017

Co-CEO

Appointment

(unaudited)

50

366

975 1,171

1,465 1,550 1,354

1,070

1,555 1,319

1,702

2,069 1,970

2,236

2,914

3,101

(3) (103) (66)

90

(112) (44) (19) (440)

(962)

14

(247)

23 173 153

253 377

180

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Revenue($M) Net Profit attributable to SMIC($M)

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Independent and International Board

Zhou Zixue Chairman

Tzu-Yin Chiu Vice Chairman Previous SMIC CEO

Gao Yonggang

Chen Shanzhi Datang SVP and CIO

Zhou Jie Haitong Securities Chairman

Ren Kai Sino IC-Capital VP

Lu Jun Sino IC-Capital President

William Tudor Brown ARM Co-Founder

Lip-Bu Tan Cadence President and CEO

Carmen I-Hua Chang NEA Partner

Executive Directors

Non-Executive Directors

Independent Non-Executive Directors

Tong Guohua Datang President and Executive Director

Shang-yi Chiang Previous TSMC

COO

Jason Jingsheng Cong UCLA

Chancellor’s Professor

Zhao HaiJun

Liang Mong Song

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SMIC Family of IC Manufacturing – Existing Fabs

Shanghai 8’’ Fab

Shanghai 12’’Fab

Beijing 12’’ Fab

Beijing JV 12’’ Fab

Tianjin 8” Fab

Shenzhen 8” Fab

Shenzhen 12” Fab

Italy LF 8” Fab

Fab 2017 Year-End

(production capacity) 2018 Year-End Target (installed capacity)

Shanghai 12” 17K 17K

Beijing 12” 46K 42K

Beijing JV 12’’ 29K 33K

Shenzhen 12’’ Mini-line Mini-line

Shanghai 8” 109K 106K

Tianjin 8” 50K 60K

Shenzhen 8’’ 30K 35K

Italy JV LF 8” 40K 40K

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New Fabs for Future Growth

Expansion Conditions:

• Market and customer demand

• Technological readiness

Shanghai

• Advance 12-inch

majority-owned JV

fab, 14nm and below

• Partnership with

China IC fund and

Shanghai IC fund

Tianjin

• 8-inch fab

• Targeting to be the

World's Largest

Integrated 8-inch IC

Production Line

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Introduction

SMIC Performance



Concluding Remarks

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Financial Highlights

(1) Exclude the effect of employee bonus accrual, government funding, gain or loss on the disposal of machinery and equipment and gain from the disposal of living quarters (2) Losses to be borne by non-controlling interests (3) Include the forecast to recognize one-time technology licensing revenue estimated at $150 million

4Q 2017 Guidance 4Q 2017 Results 1Q 2018 Guidance

Revenue +1% to +3% QoQ

$777 to $793 million

+2.3% QoQ

$787 million

+7% to +9% QoQ

$842M~$858M (3)

Gross Margin 18% to 20% 18.9% 25% to 27%

Non-GAAP Operating Expenses (1) $204 to $210 million $201 million $212M to $218M

Non-controlling interests (2) $48 to $50 million $49 million $15M to $17M

1,702 2,069 1,970

2,236

2,914 3,101

23 173 153 253 377 180

20% 21% 25%

31% 29%

24%

2012 2013 2014 2015 2016 2017

Revenue Net profit attributable to SMIC Gross Margin

Revenue and Profitability (US$mm) EBITDA (US$mm) & ROE

620 759 735

798

1063 1118

36% 37% 37% 36% 36% 36%

1% 7% 6% 8% 10%

4%

2012 2013 2014 2015 2016 2017

EBITDA EBITDA Margin (1) ROE ttm (2)

Note: All figures before 2013 are based on US GAAP, and all figures after 2013 are based on IFRS

(1) EBITDA margin is defined as profit for the period excluding impact of finance costs, depreciation and amortization, income tax benefit and expense, divided by revenue.

(2) ROE=Trailing 12 months profit attributable to owners of the Company / average equity attributable to owners of the Company

(3) 2017 annual data is unaudited.





358

703

1,247 1,288

2,158

2,522

620760 708 767

1,063 1,118

48%45%

39%

34%

56%

49%

33%

18%

1%3%

16%12%

2012 2013 2014 2015 2016 2017

Cash in hand * EBITDA Gross Debt/Equity Net Debt/Equity

Capex, EBITDA, and Cash Levels

Capex

(US$mm)

Cash and EBITDA

(US$mm)

* Cash in hand includes cash and cash equivalent, plus other financial assets-current.

2,458

1,900

30 48

2017 2018F

Foundry non-Foundry





Investment Grade Credit Rating

S&P investment grade BBB- long-term corporate credit rating since Oct 2013

Moody’s investment grade Baa3 corporate credit rating in Oct 2015

China Chengxin International Credit Rating Agency’s triple A rating in Nov 2015

Committed to Net Debt/EBITDA less than 2x to maintain rating

1.6

2.3 2.2

1.8

1.2 0.9 1.0

0.8 0.6 0.5

0.3 0.3

0.1 0.2

(0.3) (0.2)

0.2

0.7 0.7

1.2

0.8 0.6

1.3 1.2

0.7

(0.5)

-

0.5

1.0

1.5

2.0

2.5

4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17

Net Debt/EBITDA

18 15 13 14 16 17 19 21 23

27 27 35 34 35

47 50

63 58

50 59

46 41

37

64 62

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17

EBITDA/Finance Costs





Introduction

SMIC Performance



Concluding Remarks





7 8 10

13 14

18

21

26

31

37

72

77

84

91 87

82

90

95 100

106

2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F

Chinese Fabless Global Fabless

USA $67

Japan $41

China $218

Others $150

USA 59

Japan 39

China $189

Others $142

USA $64

Japan $41 China

$16

Others $100

Rapid Growth of China IC Market

Chinese fabless market growth

(US$bn)

SMIC sees rapid growth of

revenue from China (US$mm)

431

578

837 852

1,067 1,447

1,466

2011 2012 2013 2014 2015 2016 2017

SMIC's China Revenue

Source:

SMIC analysis with 3rd party reference data, 4Q17

China has become the world’s largest

IC market (US$bn)

2000 – China market share: 7%

2017 – China market share: 44%

2020F – China market share: 46%

~5x

Source:

SMIC analysis with 3rd party reference data, 4Q17

(unaudited)





Introduction

SMIC Performance



Concluding Remarks





2478 3283

3990 4793

5675 6624

7618

2011 2012 2013 2014 2015 2016 2017


191 194 145

190 237 318

427

15% 11%

7% 10% 11% 11%

14%

2011 2012 2013 2014 2015 2016 2017

R&D Expense vs Sales

(US$mm)

Accumulative Number of

Granted Patents

(unaudited) (unaudited)

To accelerate advanced and mature technology development

To focus and build up key platforms to meet customers’ needs

To capture increased market share through strategic partnerships





32 33 35 36 39

41

2015 2016 2017F2018F2019F2020F

PMIC Rev (billion)

Growth Drivers & Opportunities

24 25 28

31 33

38

2015 2016 2017F2018F2019F2020F

IOT Rev (billion)

29 32

35 38

40 44

2015 2016 2017F2018F2019F2020F

Auto Rev (billion)

34 39

53 52 50

53

2015 2016 2017F2018F2019F2020F

Flash (billion)

Flash e-Flash PMIC Auto IOT

*Source: SMIC analysis with third party reference data, 3Q17





Introduction

SMIC Performance



Concluding Remarks





Concluding Remarks

Capacity

Financial

Technology

• Accelerate advanced technology

• Increase competitiveness of

differentiated platforms

• Prioritize capacity mix

• New fabs’ construction

Execution

Positioning

• Preferred foundry

in Mainland China

• Strategic partnership

Aiming to be a World-Class Foundry

• 2017 most honored company,

ranked by Institutional Investors • Operating cash

• JV business model





Thank You

Contact us: [email protected]

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