China-based pure-play foundry SMIC expects to post a sequential decrease of 3-6% in revenues for the second quarter of 2017, with gross margin ranging from 25% to 27%.

SMIC reported revenues of US$793.1 million for the first quarter of 2017, down 2.7% sequentially but up 25% on year. Gross margin came to 27.8% compared with 30.2% in the prior fourth quarter and 24.2% in the first quarter of 2016.

SMIC generated net profits of US$69.8 million in the first quarter of 2017, up 13.6% on year but down 32.9% sequentially.

"In the first half of 2017, we are confronting the challenges of customer changes in market positioning, seasonal inventory adjustments, and overall muted handset market growth in China," said SMIC CEO Haijun Zhao. "However, we have actively pursued new incremental revenue from a variety of customers and markets to mitigate the impact of such headwinds. We believe we are in a great position, both strategically and financially to weather this cyclical downturn and are positioned to benefit from some exciting future trends, including automotive, industrial, internet of things, and others."

In addition, SMIC disclosed 28nm process technology accounted for 5% of the company's total revenues in the first quarter of 2017 compared with 3.5% in the prior quarter and 0.4% a year ago. Sales generated from the node technology grew 39% sequentially in the first quarter, the foundry said.

"We continue to work with our customers on 28nm new tape outs for a diverse set of applications," Zhao continued. "We continue to ramp 28nm, 55nm and numerous products on 8-inch; and from a device-perspective, we are pursuing growth in areas in which we are seeing meaningful demand such as NOR flash, RF/connectivity, power IC, and others."

China remains SMIC's largest market. However, the region as a proportion of company revenues slid to 46.6% in the first quarter of 2017 from 47.8% in the prior quarter and 47.2% a year earlier, the foundry noted. Meanwhile, North America as a proportion of company revenues climbed to 38.4% in the first quarter from 33.2% in the fourth quarter and 29.4% during the same period in 2016.

In other news, SMIC announced recently the appointment of Zhao as CEO replacing Tzu-Yin Chiu. Chiu will continue to serve as vice chairman and non-executive director of SMIC's board and guide the company's future strategic direction. Chiu will also serve as a full-time advisor until June 30, 2017, working closely with Zhao to ensure a seamless transition of leadership responsibilities.

Zhao joined SMIC in October 2010 and has moved quickly through the company's ranks. Zhao has more than 25 years of experience in semiconductor operations and technology development.