Semiconductor Manufacturing International (SMIC), China's largest chip maker, racked up another loss during the second quarter and restated its first-quarter results, nearly doubling the loss it earlier reported for that period.
SMIC reported second-quarter revenue fell 8.5 percent compared to last year, to US$342.9 million. Meanwhile, the company's net loss widened to $45.6 million from $2.1 million last year.
Company officials blamed the losses on its move away from making memory chips to more profitable logic chips. "We are still transitioning from majority DRAM to pure logic in our Beijing facility," said Richard Chang, SMIC's chairman and CEO, in a conference call with analysts.
SMIC stopped producing DRAM during the second quarter, although the company has inventory of the chips that it plans to sell off. Most of that inventory should be sold off by the fourth quarter, Chang said.
SMIC hopes to break even in the fourth quarter, he said.
SMIC also restated its first-quarter results, taking a $105.8 million charge to write down the value of long-lived assets related to the company's move away from memory-chip manufacturing. The additional charge against SMIC's first-quarter earnings means the company's loss for that period increased to $224.9 million from $119.7 million previously.
In its first-quarter conference call with analysts, SMIC announced a third-party was hired to evaluate whether or not an impairment charge would be required for these assets, and warned any charge, if required, would be taken against its first-quarter earnings. The company did not offer an estimate of the potential charge at that time.
Restatements of previous earnings results are rare, as generally accepted accounting principles (GAAP) usually require these types of charges to be recorded during the same period that a decision is made on how much to write down. But GAAP is a framework, not a set of hard and fast rules, which means many accounting decisions depend on the judgement of a company's executives.
"We announced plans to exit the DRAM business in Q1, so we also have to take the impairment charge in Q1," said Theresa Teng, SMIC's head of finance and investor relations, explaining why the company opted to restate its first-quarter results.
The company does not expect to take further impairment charges this year.