(Yicai) May 10 -- Semiconductor Manufacturing International Corporation and Hua Hong Semiconductor, China’s two biggest chipmakers, have predicted higher revenues for the second quarter after cranking up capacity utilization in the first three months of the year amid signs of a recovery in demand.

SMIC's capacity utilization was 80.8 percent in the three months ended March 31, up from the previous quarter's 76.8 percent, the Shanghai-based company said in its first-quarter earnings report yesterday. It delivered 1.8 million eight-inch wafers, a 7 percent increase.

Although revenue rose 4 percent on the December quarter and 20 percent from a year earlier to USD1.75 billion, SMIC’s gross margin narrowed to 13.7 percent from 16.4 percent in late December. It gave guidance for a quarter-on-quarter rise in revenue of 5 percent to 7 percent.

Global clients were more willing to stock up in the first quarter, the chipmaker said, adding that its operating income and gross margin were better than expected. The drop in the firm’s profitability was mostly the result of depreciation, it explained.

Hua Hong earned CNY222 million (USD30.7 million) in net profit in the first quarter, down 79 percent from a year ago, due to falling product prices, according to its financial report released on the same day. Revenue slumped 25 percent to CNY3.3 billion (USD456.8 million). It expects second-quarter revenue of about USD470 million to USD500 million.

The Shanghai-based firm’s monthly output of 391,000 eight-inch wafers represented a capacity utilization of 91.7 percent, up from 84.1 percent as of Dec. 31. It delivered one million wafers, an 8 percent increase on the prior quarter.

The chip market has not yet emerged from its downturn, and the first quarter is usually the off-season for foundries due to seasonality and the impact of annual maintenance, said Hua Hong President Tang Junjun. But the firm’s capacity utilization rate, sales revenue, and gross profit margin all gained quarter on quarter, confirming demand is picking up, he added.
 

Big fabs are expected to increase capacity utilization further this quarter, Securities Times reported today, citing estimates from consultancy TrendForce. As a new upward cycle is on the horizon, SMIC and Hua Hong continue to actively expand output, it added.

Share of SMIC [SHA: 688981] closed 1.7 percent lower at CNY42.99 (USD6) each in Shanghai today, while Hua Hong [SHA: 688347] slid 1 percent to CNY31.87.

Editor: Emmi Laine