China-based IC foundry Semiconductor Manufacturing International (SMIC) has announced net profits of US$42.5 million on sales of US$534.3 million for the third quarter of 2013. Sales were down 1.3% on quarter while profits registered a 43.6% sequential decline.

　　Gross margin for the third quarter slipped to 21% from 25% in the second quarter, due to an overall drop in utilization rates and product mix changes, the firm said.

　　Despite sequential decreases, SMIC's net sales and profits for third-quarter 2013 were up 15.8% and 255% from a year ago. Nonetheless, gross margin for the quarter represented an on-year decrease of 6.5pp.

　　Non-GAAP revenues excluding wafer shipments from Wuhan Xinxin were US$503.7 million in third-quarter 2013, up 0.4% sequentially and 21.7% on year. Non-GAAP gross margin for the quarter came to 21% compared to 25% in the prior quarter and 27.5% a year earlier.

　　"I am happy to announce that 40nm wafer revenue grew 50.3% sequentially to 15.7% of total wafer revenue. This growth was mainly driven by smartphone related products," said SMIC CEO Tzu-Yin Chiu. "Meanwhile, 40nm new tape outs grew significantly in the second half of this year, driven by both consumer and communications products like smartphones, set-top box, IPTV, and tablets. As a result, we are targeting strong growth for 40nm next year."

　　Sales generated from 45/40nm processes accounted for 15.7% of SMIC's total wafer sales in the third quarter, compared to 10% in the second quarter and only 0.8% in third-quarter 2012, the company disclosed in its presentation materials.

　　"During the quarter, demand for our differentiated applications continued to be strong, especially in the areas of power management, CIS, and EEPROM," Chiu continued. "Revenue from our differentiated applications, specifically PMIC, CIS, and EEPROM, grew over 50% year over year in 3Q 2013."

　　Looking forward, SMIC expects revenues excluding wafer shipments from Wuhan Xinxin to register flat growth or drop by 4.5% sequentially in the fourth quarter of 2013. Including wafer shipments from Wuhan Xinxin, fourth-quarter revenues will decrease by 4.5-9% on quarter, SMIC said.

　　"We target another full year of record high revenue in 2013 with sustainable profitability and growth as our priority," Chiu noted. "Looking into 2014, we aim to outgrow the industry average again."

　　Chiu pointed out four contributing factors that will drive company growth in 2014: a continued ramp-up of 40nm chip production; the availability of its 28nm process technology; growth in revenues from its embedded non-volatile memory offerings; and other new differentiated technologies that will be rolled out next year.

　　SMIC reported revenues of US$1.7 billion for 2012, with net profits climbing to a 7-year high of US$15.9 million.