China's biggest chip maker posts 12th straight loss

China's contract chip makers have struggled to compete

Semiconductor Manufacturing International (SMIC) reported its 12th straight losing quarter on Tuesday, despite a dramatic rebound in the global chip industry.

China's largest chip maker said the contract chip manufacturing business was solid in the first quarter and that an uptrend in the industry has continued in the second quarter.

Still, the company reported a wider loss than the same time last year. China's chip makers have struggled not only due to the global recession but because incumbents in the contract chip-making business have vigorously defended their turf.

SMIC's net loss in the first quarter widened to US$181.69 million from $178.11 million during the same quarter last year. The loss narrowed compared to the fourth quarter's $617.38 million loss. First-quarter revenue more than doubled year-on-year to $351.72 million.

The last time SMIC reported a net profit was in the first quarter of 2007, when it earned $8.76 million.

The company expects revenue in the second quarter to rise as much as 5 percent from the first quarter. "We continue to see the uptrend in the second quarter and remain cautiously optimistic about the third and fourth quarters," SMIC said in a statement.

SMIC ranked number five among contract chip makers, which manufacture chips according to the intricate circuit designs their customers create, according to Gartner.

Taiwan Semiconductor Manufacturing (TSMC) took first place in 2009 with a market share of 44.8 percent. United Microelectronics (UMC), also from Taiwan, remained in second place with a 13.6 percent share of the market, while Chartered Semiconductor, which was bought by GlobalFoundries, was third at 7.7 percent. GlobalFoundries ranked fourth last year at 5.5 percent and SMIC rounded out the top five with a 5.3 percent share.

No other company in the contract chip business took more than a 2 percent share, including IBM and Samsung Electronics.

Revenue in the global contract chip-making business fell 11.2 percent last year to $20.1 billion, Gartner said, but has rebounded sharply since hitting bottom in the first quarter of last year.

This year, iSuppli forecasts that the contract chip business will rise 39.5 percent year-over-year to $24.8 billion.

The overall chip industry is set for its highest annual growth in a decade this year, the market researcher said. Sales in the industry will grow 30.6 percent to an all-time high of $300.3 billion in 2010, up from $229.9 billion last year. The previous annual sales record was $274 billion in 2007.

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Tags ChinaTaiwan Semiconductor Manufacturing Company Ltd.semiconductor manufacturing international

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Dan Nystedt

IDG News Service
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