Prospectus Summary
PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the financial statements and related notes appearing elsewhere in this prospectus. You should read the entire prospectus carefully in evaluating an investment in our securities. Please see “Annex A—Glossary of Technical Terms” for a description of certain technical terms and definitions used in this prospectus.Overview
We are one of the leading semiconductor foundries in the world. As a foundry, we fabricate semiconductors for customers based on their own or third parties’ integrated circuit designs. We were founded in April 2000 and within three years have developed the capabilities to offer a wide range of leading edge integrated wafer manufacturing services, including copper interconnects capabilities, to our global customer base. We operate 8-inch wafer fabrication facilities in the Zhangjiang High-Tech Park in Shanghai, China and, as a result of a recent acquisition, an 8-inch wafer fab in Tianjin, China. These fabs had an aggregate capacity as of December 31, 2003 of 49,000 8-inch wafers per month for wafer fabrication and 9,000 wafers per month for copper interconnects, which positions us as a leading foundry in China. In addition, we are currently constructing 12-inch wafer fabrication facilities in Beijing, which we believe will be the first 12-inch fabs in China. Fab 1 at our facility in Shanghai was selected as one of the two “Top Fabs of 2003” by Semiconductor International, a leading industry publication. In addition, we were ranked second in a readers’ poll of top global foundries of 2003 conducted by Silicon Strategies, another leading semiconductor industry publication.
We currently provide semiconductor fabrication services using 0.35 micron to 0.13 micron process technology for the following devices:
We intend to expand our capabilities in the fabrication of semiconductor wafers using both high-end logic and memory technologies. In addition to wafer fabrication, our service offerings include a comprehensive portfolio of intellectual property consisting of libraries and circuit design blocks, design support, mask-making and wafer probing. We also work with our partners to provide assembly and testing services.
We have a global and diversified customer base that includes integrated device manufacturers, such as Fujitsu Limited, Infineon Technologies AG, Samsung Electronics Co., Ltd., STMicroelectronics Pte. Ltd. and Texas Instruments Incorporated, and fabless semiconductor companies, such as Broadcom Corporation, Elite Semiconductor Memory Technology Inc. and Marvell Semiconductor, Inc. The foregoing is not intended to identify our top customers, but rather to provide a representative sampling of our customer base.
In recent years, fabless semiconductor companies have grown both in terms of their geographic reach as well as their overall worldwide sales. In addition, integrated device manufacturers have increasingly outsourced their manufacturing requirements for complex and high performance semiconductor devices to semiconductor foundries in order to become more cost competitive. Semiconductor foundries have emerged as key strategic partners to fabless semiconductor companies and integrated device manufacturers, enabling the manufacturing of increasingly more complex, higher performance semiconductor devices at lower costs. According to IC Insights, a leading semiconductor industry publication, the compound annual growth rate of the semiconductor foundry industry in terms of worldwide sales is projected to increase by 21.8% from 1998 to 2008, compared to 9.5% for the semiconductor industry as a whole for the same period. We believe that we are well positioned to benefit from the growth of fabless semiconductor companies and the increase in outsourcing by integrated device manufacturers, particularly because our facilities are equipped to manufacture integrated circuits using leading edge technologies at competitive costs.
China has emerged as a global manufacturing center for electronic products that are sold both within China and abroad. In addition, according to China’s Ministry of Information Industry, the domestic market for electronic information products in China has grown in terms of overall sales from US$20.2 billion in 1999 to US$77.1 billion in 2002. An increasing proportion of the semiconductors required for these products has been sourced in China. We believe our position as a leading foundry in China will allow us to take advantage of this growth in local semiconductor sourcing to meet domestic Chinese demand as well as for use in electronic products for export.
Our Solutions and Competitive Advantages
We offer a wide range of integrated manufacturing services and solutions to our global customers to assist them in bringing their products to market rapidly and cost effectively. Our solutions and competitive advantages include the following:
Our Strategy
The key elements of our strategy consist of the following:
Risks of Investment
See “Risk Factors” beginning on page 10 for a description of the risks relating to an investment in our shares or ADSs.
Corporate Information
We are a limited liability company that was incorporated in the Cayman Islands in April 2000. Our principal executive offices are located at 18 Zhangjiang Road, Pudong New Area, Shanghai 201203, China. Our telephone number in Shanghai is (+86-21) 5080-2000. Investor inquiries should be directed to our Investor Relations Department at (+86-21) 5080-2000, extension 16012. Our website is www.smics.com. Information contained on our website does not constitute part of this prospectus.
The Global Offering
If the number of ordinary shares validly applied for in the Hong Kong public offering is 15 times or more but less than 50 times, 50 times or more but less than 100 times, or 100 times or more than the number of ordinary shares initially available for subscription in the Hong Kong public offering, then we will reallocate an additional ordinary shares, ordinary shares or ordinary shares, respectively, to the Hong Kong public offering. If so, we will reduce the number of ordinary shares, representing ADSs, allocated to the U.S. offering and/or the international offering in a manner the underwriters consider appropriate. Any unsold ordinary shares in the Hong Kong public offering may be reallocated to the U.S. offering and/or the international offering.
representing ordinary shares, exercisable in whole or in part by the representatives of the underwriters to cover overallotments.
The initial public offering price for ADSs under the U.S. and international offerings is payable in U.S. dollars.
The initial public offering price for ordinary shares in the Hong Kong public offering is payable in Hong Kong dollars.
In addition, we are in the process of requesting certain of our security holders to agree to a further lock-up of securities for a period equal to the shorter of three years from the expiration of the 180-day lock-up period and the date on which these shareholders collectively own less than 10% of our ordinary shares. The purpose of these additional restrictions is to provide a mechanism following completion of the global offering for orderly sales of our securities by our large shareholders, which sales are consistent with our expected need to raise primary capital. See “Related Party Transactions — Registration Rights Agreement” for more information on this additional lock-up.
Assuming that all of the outstanding options and warrants that do not terminate upon completion of the global offering are exercised and the issuance of all ordinary shares issuable as of December 31, 2003 in connection with acquisitions and technology investments, the number of ordinary shares to be outstanding immediately following the global offering would be .
Summary Consolidated Financial Data
The following summary consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, both of which are included elsewhere in this prospectus. The summary consolidated financial data presented below has been prepared in accordance with U.S. GAAP. The summary consolidated financial data presented below as of and for the years ended December 31, 2001, 2002 and 2003 is derived from our audited consolidated financial statements included elsewhere in this prospectus. The quarterly consolidated financial data presented below has been derived from unaudited consolidated financial statements not included in this prospectus. In our opinion, all adjustments necessary for a fair presentation of the quarterly consolidated financial data are contained in the financial statements that are included elsewhere in this prospectus. The historical results are not necessarily indicative of results to be expected in any future period.