SMIC Investor Presentation HKSE: 981 OTCQX: SMICY SMIC Investor Relations May 2020
Forward-Looking Statements This presentation contains, in addition to historical information, forward-looking statements. These forward-looking statements, including statements under “Second Quarter 2020 Guidance”, “Capex Summary” and the statements contained in the quotes of our Co -Chief Executive Officers are based on SMIC's current assumptions, expectations, beliefs, plans, objectives, and projections about future events or performance. SMIC uses words like "believe," "anticipate," "intend," "estimate," "expect," "project," "target, "going forward", "continue", "ought to", "may", "seek", "should", "plan", "could", "vision", "goals", "aim", "aspire", "objective", "schedules", "outlook" and similar expressions to identify forward looking statements, although not all forward-looking statements contain these words. These forward-looking statements are necessary estimates reflecting 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 the 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 Hong Kong Stock Exchange Limited ("SEHK") from time to time. 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 required by applicable laws, SMIC undertakes no obligation and does not intend to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events after the date on which such statement is made or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or otherwise. About Non- International Financial Reporting Standards (“non - IFRS”) Financial Measures During this presentation, references to financial measures of SMIC will include references to non-IFRS financial measures, including non-IFRS operating expenses and adjusted EBITDA, and EBITDA margin. For an explanation to the most directly comparable IFRS financial measures, see our earnings release. SMIC Presentation 2
I. II. III. IV. V. Market SMIC SMIC Strategies for Concluding Opportunity Introduction Performance Growth Remarks SMIC Presentation 3
RAPID GROWTH OF THE CHINA IC MARKET China: World’s Largest IC Market ( US$bn) Chinese Fabless Market Growth (US$bn) Chinese IC Industry Revenue Development (US$mn) IC Design IC Manufactory IC Packaging and Testing Chinese Fabless Global Fabless USA Japan China Others 85733 97 97 66417 92 91 89 61 87 59013 83 82 74 2000 69 102 7% 48 40 42 33 26 16 20 7294 12 12 10 3952 4051 8 7 2009 2023F 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F SMIC’s Rapid Revenue Growth from China Clients ( US$mn) 47 Local brands Local design Local foundries 29 150 2020E 50% 1,985 1,833 1,466 1,447 213 1,067 837 852 578 431 Companies pictured are examples of and are not limited to. 2011 2012 2013 2014 2015 2016 2017 2018 2019 *Including local system companies *2018 SMIC China revenue included one-time technology licensing fee of ~$160M Source: SMIC analysis with 3rd party reference data, 1Q20 SMIC Presentation 4
I. II. III. IV. V. Market SMIC SMIC Strategies for Concluding Opportunity Introduction Performance Growth Remarks SMIC Presentation 5
SMIC: LARGEST AND MOST ADVANCED IC FOUNDRY IN PRC #4 Annual Revenue US$B Established Listed on #1 mid to high globally in 2000 HKEX in PRC teens’ growth $ 3.1 2019 2020F Shareholding Structure SMIC’s Strong Position in China IC Ecosystem Strong Global Presence Material/ Equipment Datang Holdings China China Fabless Mask 17% Beijing Tianjin Fab-lite making China USA Italy Headquarters Shanghai 16% China IC Fund IP Foundry Japan Provider CHINA IC China China ECOSYSTEM Hong Kong Taiwan China 67% Shenzhen Other Global Investors EDA tool Bumping Manufacturing Marketing Representative Packaging Design assembly service testing SMIC Presentation 6
BECOMING FUNDAMENTALLY SOLID, RETURNING TO STRONG GROWTH Early Establishment New Phase of Growth Turnaround SMIC Annual Revenue (US$bn) 3.4 3.1 3.1 2.9 Foundry of Choice in China 2.2 2.1 2.0 1.7 Aiming to: 1.6 1.5 1.5 1.4 1.3 1.2 1.1 be a world-class, mainstream foundry 1.0 0.4 0.1 0.0 accelerate technology development 0.4 0.3 0.2 0.13 0.23 0.01 -0.2 0.02 0.2 0.2 -0.1 -0.07 0.09 -0.1 -0.04 -0.02 0 -0.4 SMIC Net Profit Attributable to SMIC -1 maintain leadership in key platforms and strategic partnerships 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 SMIC Presentation 7
SMIC FAMILY OF IC MANUFACTURING 476K TOTAL 8” EQUIV WPM 1Q20-end 108K 12” wpm 233K 8” wpm 115 52 50 63 55 4 2 SH TJ SZ SH BJ BJ-JV SH-JV Expansion Conditions: • New Fabs Market and customer demand • Technological readiness • Majority-owned advanced JV fab, Shanghai JV 12” 14nm and below • Partnership with China IC fund and Shanghai IC fund • Targeting to be the World's Largest Tianjin 8” Integrated 8-inch IC Production Line SMIC Presentation 8
I. II. III. IV. V. Market SMIC SMIC Strategies for Concluding Opportunity Introduction Performance Growth Remarks SMIC Presentation 9
FINANCIAL SUMMARY Gross Margin Non-IFRS Opex (US$mm) Non-controlling interests (US$mm) Revenue (US$mm) 13 950 28% 245 10 932 26% 240 905 26% 239 - 0 0 0 1Q20 Results 2Q Guidance - 1Q20 Results 2Q Guidance 1Q20 Results 2Q Guidance 1Q20 Results - 2Q Guidance Diversified Revenue Sources – 1Q20 Revenue and Profitability (US$mm) Revenue by Wafer Revenue by Revenue by Revenue Net profit attributable to SMIC Gross Margin Application Technology Geography 31% 29% 14nm 28nm Others Computer .25/.35um United Auto/ 25% 1.3% 24% 6.5% 7.7% 5.1% 4.3% States* Industrial 22% 21% 21% 20% 40/45nm 25.5% 2.9% 14.9% .15/.18um 3,360 33.4% 3,101 3,116 2,914 Mainland China Communi- Eurasia 2,236 and Hong 2,069 cations 12.9% 1,970 55/65nm Kong Consumer 48.9% 1,702 .11/.13um 32.6% 61.6% 35.4% 5.4% 90nm 377 153 253 235 173 180 1.6% 134 23 2012 2013 2014 2015 2016 2017 2018 2019 *Presenting the Revenue to those companies whose headquarters are in the United States, but ultimately selling and Note: All figures before 2013 are based on US GAAP, and all figures after 2013 are based on IFRS shipping the products to their global customers . SMIC Presentation 10
CAPEX, EBITDA, AND CASH LEVELS Balance Sheet (US$bn) Capex (US$bn) Liabilities 6.2 Assets 16.4 4.3 Equity 10.2 2.5 2.1 1.8 2017 2018 2019 2020F Cash and EBITDA (US$mm) 56% 48% 49% 45% 34% 38% 39% 39% 33% 18% Cash in hand * 16% 3% 12% 1% -5% EBITDA -6% Gross Debt/Equity Net Debt/Equity 4558 3825 2522 1373 1164 2158 1118 1063 760 767 708 620 1247 1288 358 703 2012 2013 2014 2015 2016 2017 2018 2019 * Cash in hand includes cash and cash equivalent, plus current financial assets, excluding restricted cash. SMIC Presentation 11
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 Net Debt/EBITDA EBITDA/Finance Costs 2x 2 1.6 ↓ 63 62 1.5 1.2 48 46 0.8 1 0.7 34 0.6 23 0.5 22 0.2 0.1 18 16 0 -0.3 -0.4 -0.5 2011 2012 2013 2014 2015 2016 2017 2018 2019 2011 2012 2013 2014 2015 2016 2017 2018 2019 SMIC Presentation 12
I. II. III. IV. V. Market SMIC SMIC Strategies for Concluding Opportunity Introduction Performance Growth Remarks SMIC Presentation 13
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