(Yicai Global) May 12 -- Shares in Semiconductor Manufacturing International surged as much as 5.4 percent today after the Chinese chipmaker said it expects sales to improve this quarter, after a sluggish first quarter.

SMIC’s share price [HKG:0981] was trading up 1.2 percent at HKD20.40 (USD2.60) as of 3 p.m. China time. Earlier in the day it hit HKD21.25.

Sales revenue is expected to grow between 5 percent and 7 percent in the second quarter from the previous quarter as shipments and the capacity utilization rate increase, the Shanghai-based company said in its first-quarter financial report released yesterday. And the firm’s gross profit margin will be between 19 percent and 21 percent, it added.

Revenue is expected to bottom out in the second quarter, but the degree of recovery is not yet clear, as the market outlook for the year is uncertain and the average unit price of wafers continues to fall, so the firm’s guidance for the full year remains unchanged, SMIC said.

The inventories of most components are expected to return to more healthy levels from the second quarter, market research firm TrendForce said. Producers can start stockpiling with the expectation of a strong second half, so they will no longer need to cut prices to boost demand.

SMIC’s net profit plunged 44 percent in the first quarter from a year earlier to CNY1.6 billion (USD230.3 million) while revenue plunged 13.9 percent in the first quarter from a year earlier to CNY10.2 billion (USD1.5 billion) on slow sales and a low capacity utilization rate, it said.

Rival Hua Hong Semiconductor, though, did well in the first three months thanks to larger demand for micro controller units, insulated gate bipolar transistors and vehicle chips. The chipmaker logged a 47.9 percent surge in net profit year on year to USD152 million and a 6.1 percent jump in revenue to USD631 million, according to its latest earnings report released yesterday.

Hua Hong is expecting to rake in revenue of USD630 million in the second quarter, with a gross profit margin of between 25 percent and 27 percent, slightly lower than the first quarter’s 32.1 percent, it said. The firm’s share price [HKG:1347] was trading down 6.4 percent at HKD26.15 (USD3.33) today.

As demand for consumer electronics such as personal computers and smartphones remains sluggish, there is plenty of capacity at wafer foundries, and thus the industry is having to adjust after a period of hot sales, analysts said.

Editor: Kim Taylor