SMIC Investor Presentation HKSE: 981 OTCQX: SMICY SMIC Investor Relations February 2020
Forward-Looking Statements This presentation contains, in addition to historical information, forward-looking statements. These forward-looking statements, including statements under “First 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) Total China IC Market Revenue (US$bn) Total China IC Market Local Brands Local Design Local Foundries Chinese Fabless Global Fabless USA Japan China Others 204 106 100 64 95 89 89 87 2000 82 82 100 7% 74 69 89 79 54 41 43 16 33 40 26 27 20 12 12 10 4 5 8 2 7 2008 2019E 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2020F 52 29 SMIC’s Rapid Revenue Growth from China Clients ( US$mn) 140 Local brands Local design Local foundries 48% 2019E 1,985 1,851 204 1,466 1,447 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 (Unaudited) *Including local system companies Source: SMIC analysis with 3rd party reference data, 2Q19 *2018 SMIC China revenue included one-time technology licensing fee of ~$160M SMIC Presentation 4
I. II. III. IV. V. Market SMIC SMIC Strategies for Concluding Opportunity Introduction Performance Growth Remarks SMIC Presentation 5
SMIC: LARGEST AND MOST ADVANCED IC FOUNDRY IN PRC #4 Annual Revenue US$B Established Listed on #1 globally in 2000 HKEX in PRC t eens’ growth $ 3.1 2019 2020F (Unaudited) 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 Turnaround Gearing up for New Growth SMIC Annual Revenue (US$bn) 3.4 3.1 3.1 2.9 Foundry of Choice in China 2.2 2.1 2.0 1.7 Aiming to: 1.6 1.5 1.5 1.4 1.3 1.2 1.1 be a world-class, mainstream foundry 1.0 0.4 0.1 0.0 accelerate technology development 0.4 0.3 0.2 0.13 0.23 0.01 -0.2 0.02 0.2 0.2 -0.1 -0.07 0.09 -0.1 -0.04 -0.02 0 -0.4 SMIC Net Profit Attributable to SMIC -1 build key platforms and partnerships 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (Unaudited) SMIC Presentation 7
SMIC FAMILY OF IC MANUFACTURING 449K TOTAL 8” EQUIV WPM 4Q19 -end 98K 12” wpm 228K 8” wpm 115 52 41 58 55 3 2 SH TJ SZ SH BJ BJ-JV SH-JV Expansion Conditions: • New Fabs Market and customer demand • Technological readiness • Majority-owned advanced JV fab, Shanghai JV 12” 14nm and below • Partnership with China IC fund and Shanghai IC fund • Targeting to be the World's Largest Tianjin 8” Integrated 8-inch IC Production Line SMIC Presentation 8
I. II. III. IV. V. Market SMIC SMIC Strategies for Concluding Opportunity Introduction Performance Growth Remarks SMIC Presentation 9
FINANCIAL SUMMARY Gross Margin Non-IFRS Opex (US$mm) Non-controlling interests (US$mm) Revenue (US$mm) 300 856 23% 13 294 839 21% 839 24% 248 4Q19 Results 1Q Guidance (17) 0 4Q19 Results 1Q Guidance (19) 4Q19 Results 1Q Guidance 4Q19 Results 1Q Guidance Revenue and Profitability (US$mm) Diversified Revenue Sources Revenue by Wafer Revenue by Revenue by Revenue Net profit attributable to SMIC Gross Margin Application Technology Geography 28nm 31% 14nm 29% Auto/ Computer United .25/.35um 5.0% Others 1.0% 25% 24% States* Industrial 5.5% 4.1% 8.9% 22% 21% 21% 40/45nm 20% 3.1% 22.2% 16.2% .15/.18um 3,360 3,101 3,116 35.0% 2,914 Mainland Eurasia Communi- China 12.7% 2,236 cations 2,069 and Hong 1,970 55/65nm 44.4% Consumer 1,702 Kong 31.0% .11/.13um 38.1% 65.1% 6.2% 90nm 377 153 253 235 173 180 134 1.5% 23 2012 2013 2014 2015 2016 2017 2018 2019 (unaudited) *Presenting the Revenue to those companies whose headquarters are in the United States, but ultimately selling and Note: All figures before 2013 are based on US GAAP, and all figures after 2013 are based on IFRS shipping the products to their global customers . SMIC Presentation 10
CAPEX, EBITDA, AND CASH LEVELS Balance Sheet (US$bn) Capex (US$bn) 0.06 Liabilities 6.2 0.03 Assets 0.12 0.06 Non-Foundry 16.4 Equity 3.1 2.5 Foundry 10.2 2.0 1.8 2017 2018 2019 2020F Cash and EBITDA (US$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 (unaudited) * 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 (Unaudited) (Unaudited) SMIC Presentation 12
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