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SMIC Presentation

NYSE: SMI HKSE: 0981-HK

Nov 2017

This presentation is available at

http://www.smics.com/download/ir_presentation.pdf

2 SMIC Presentation

All copyrights and IP belong to SMIC. For reference only and may not be copied or distributed without written permission from SMIC. SMIC shall not be responsible for any party’s reliance on these materials.

2 SMIC Presentation


Safe Harbor Statements Under the Private Securities Litigation Reform Act of 1995

This presentation contains, in addition to historical information, "forward-looking statements" within the meaning of the "safe harbor" provisions

of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements, including statements under “Fourth Quarter

2017 Guidance”, “CapEx Summary” and the statements contained in the quotes of our co-Chief Executive Officers are based on SMIC's current

assumptions, expectations and projections about future events. SMIC uses words like "believe," "anticipate," "intend," "estimate," "expect,"

"project," "target" and similar expressions to identify forward looking statements, although not all forward-looking statements contain these

words. These forward-looking statements are necessarily estimates reflecting the best judgment of SMIC's senior management and involve

significant risks, both known and unknown, uncertainties and other factors that may cause SMIC's actual performance, financial condition or

results of operations to be materially different from those suggested by the forward-looking statements including, among others, risks

associated with cyclicality and market conditions in the semiconductor industry, intense competition in the semiconductor industry, SMIC's

reliance on a small number of customers, timely wafer acceptance by SMIC's customers, timely introduction of new technologies, SMIC's ability

to ramp new products into volume, supply and demand for semiconductor foundry services, industry overcapacity, shortages in equipment,

components and raw materials, availability of manufacturing capacity, financial stability in end markets, orders or judgments from pending

litigation, intensive intellectual property litigation in semiconductor industry, general economic conditions and fluctuations in currency exchange

rates.

In addition to the information contained in this presentation, you should also consider the information contained in our other filings with the SEC,

including our annual report on Form 20-F filed with the SEC on April 27, 2017, especially in the "Risk Factors" section and such other

documents that we may file with the SEC or The Hong Kong Stock Exchange Limited ("SEHK") from time to time, including current reports on

Form 6-K. Other unknown or unpredictable factors also could have material adverse effects on our future results, performance or achievements.

In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this presentation may not occur. You are

cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated or, if no date is stated, as of

the date of this presentation. Except as may be required by law, SMIC undertakes no obligation and does not intend to update any forward-

looking statement, whether as a result of new information, future events or otherwise.

During this presentation, references to financial measures of SMIC will include references to non-GAAP financial measures, including

non-GAAP operating expenses and adjusted EBITDA, and EBITDA margin. For an explanation to the most directly comparable GAAP

financial measures, see our earnings release.

About Non-Generally Accepted Accounting Principles (“non-GAAP”) Financial Measures

3 SMIC Presentation


3 SMIC Presentation


Introduction

SMIC Performance

China Semiconductor Opportunity

Strategies for Profitable Growth

Concluding Remarks

4 SMIC Presentation


4 SMIC Presentation


SMIC: Largest and Most Advanced IC Foundry in PRC

Strong Global Presence

Established in 2000, headquartered in Shanghai

Listed both on HKSE and NYSE

The leading semiconductor foundry in China and Italy

2016 revenue: US$2.9bn

Target revenue CAGR of 20% from 2016 to 2019

Company Overview

Shareholding Structure

Top 10 customers: 4 from China, 4 from US, 2 from Eurasia.

Wafer Revenue by

Technology

Revenue by

Geography Datang Telecom Technology 17.16%

China IC Industry Investment Fund 15.91%

Other Global Investors 66.93%

Source: Public Filings: NASDAQ OMX data, Oct 10, 2017

Revenue by

Application

Source: Company 2017 Q3 results

North America 41.9%

Eurasia 12.4%

China 45.7%

Computer 5.8%

Communi-cations 45.3%

Consumer 37.0%

Auto/ Industrial

8.1%

Others 3.8% 28nm

8.8%

40/45nm 20.6%

55/65nm 20.2% 90nm

1.4%

110/130nm 8.1%

150/180nm 37.8%

250/350nm 3.1%

Strong Global Presence

Diversified Revenue Sources

USA Italy

China Beijing

China Tianjin

China Headquarters

Shanghai

Hong Kong

Japan

Taiwan

China Shenzhen

Italy Avezzano Germany

5 SMIC Presentation


5 SMIC Presentation


50

366

975 1,171

1,465 1,550 1,354

1,070

1,555

1,319

1,702

2,069 1,970

2,236

2,914

Q1~Q3 2,314

(unaudited)

(3) (103) (66)

90

(112) (44) (19) (440)

(962)

14

(247)

23 173 153

253 377

Q1~Q3 132

(unaudited)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F

Revenue($M) Net Profit attributable to SMIC($M)

2014: Exited Wuhan business

2012: Net income

turnaround

2016: Record high

rev and profit

SMIC’s Milestones

2000

Incorporated

2002

Started 8”

production

Realized revenue

2005

Started 12”

production

2009

Management

changed

2014

Established

bumping JV

2004

IPO in NYSE and HKSE

Achieved profitability

2011

Turnaround

management

team on

board

2013

Established

Beijing 12’’ JV

2016

Strategic partnership with JCET

Merger of LFoundry

New construction plan in SH, TJ

and SZ.

2000 2008: Completed exit

of DRAM business

2017

Co-CEO

Appointment

6 SMIC Presentation


6 SMIC Presentation


Independent and International Board

Zhou Zixue Chairman

Tzu-Yin Chiu Vice Chairman Previous SMIC CEO

Gao Yonggang

Chen Shanzhi Datang SVP and CIO

Zhou Jie Haitong Securities Executive Director

Ren Kai Sino IC-Capital VP

Lu Jun Sino IC-Capital President

William Tudor Brown ARM Founder

Lip-Bu Tan Cadence President and CEO

Carmen I-Hua Chang NEA Partner

Executive Directors

Non-Executive Directors

Independent Non-Executive Directors

Tong Guohua Datang President and Executive Director

Shang-yi Chiang Previous TSMC

COO

Jason Jingsheng Cong UCLA

Chancellor’s Professor

Zhao HaiJun

Liang Mong Song

7 SMIC Presentation


7 SMIC Presentation


International and Experienced Management Team

CEO Dr. Haijun Zhao

Technology

R&D Dr. Zhou

MeiSheng

CFO Dr. Gao

Yonggang

Sales &

Marketing Mike Rekuc

Engineering &

Services Dr. Jyishyang Liu

Legal

Public Affairs/

Corp. GA Jason Li

Design Service Dr. Tianshen

Tang

Co-CEO Dr. Liang

Mong Song

Co-CEO Dr. Zhao HaiJun

8 SMIC Presentation


8 SMIC Presentation


1,702

2,069 1,970 2,236

2,914

793 751 770

23 173 153 253 377

70 36 26

20% 21% 25%

31% 29% 28% 26%

23%

2012 2013 2014 2015 2016 1Q17 2Q17 3Q17

Revenue Net profit attributable to SMIC Gross Margin

8

3Q17 Financial Highlights

3Q 2017 Financial Highlights (US$mm)

Revenue +1% to +3% QoQ

$777M~$793M

Gross Margin 18% to 20%

Non-GAAP

Operating

Expenses (1)

$204M to $210M

Non-controlling

interests(2) $48M to $50M

(1) Exclude the effect of employee bonus accrual, government funding and gain from the disposal of living quarters

(2) Losses to be borne by non-controlling interests

4Q 2017 Guidance

3Q 2017 Guidance 3Q 2017 Results

Revenue flat to +3% QoQ

$751 to $774 million

+2.5% QoQ

$770 million

Gross Margin 22% to 24% 23.0%

Non-GAAP Operating Expenses (1) $179 to $185 million $184 million

Non-controlling interests (2) $0 to $3 million -$4.7 million

9 SMIC Presentation


9 SMIC Presentation


SMIC Family of IC Manufacturing – Existing Fabs

Shanghai 8’’ Fab

114K/mth (0.11-0.35um)

Shanghai 12’’Fab

18K/mth (28/40/45nm)

Beijing 12’’ Fab

50K/mth (55-90nm, 0.13um)

Beijing JV 12’’ Fab

27.5K/mth (28/40/45nm)

Tianjin 8” Fab

47K/mth (0.13-0.35um)

Shenzhen 8” Fab

32K/mth (0.15-0.35um)

Shenzhen 12” Fab

tool installation(55/65nm)

Italy LF 8” Fab

40K/mth (90nm-0.18um)

Fab Technology

Node

Monthly

Capacity 3Q17

2017 Year-End

Target

Shanghai 12” 45nm and below 18K 18K

Beijing 12” 55-90nm, 0.13um 50K 48K

Beijing JV 12’’ 45nm and below 27.5K 30K

Shenzhen 12’’ 55-65nm Mini line

Shanghai 8” 0.11-0.35um 114K 113K

Tianjin 8” 0.13-0.35um 47K 52K

Shenzhen 8’’ 0.15-0.35um 32K 36K

Italy JV LF 8” 90nm-0.18um 40K 41K

Monthly Capacity 3Q17

12” Fab 95.5K

8” Fab 233K

10 SMIC Presentation




New Fabs for Future Growth

Expansion Conditions:

• Assured customer demand

• Technological readiness

• Sustained profitability

Shanghai

• Advanced 12-inch fab

Shenzhen

• Mature 12-inch fab

• 1st 12-inch line in South China

Tianjin

• 8-inch fab

• Targeting to be the World's Largest Integrated 8-inch IC Production Line





Introduction

SMIC Performance



Concluding Remarks





88% 91% 91%

101% 98%

92%

86% 84%

2012 2013 2014 2015 2016 1Q17 2Q17 3Q17

SMIC Utilization Industry Global Utilization*

1,541 1,962 1,970

2,236

2,914

793 751 770

2012 2013 2014 2015 2016 1Q17 2Q17 3Q17

Revenue excl. Wuhan

Efficiency & Profitability

23

173 153

253

377

70 36

26

20% 21%

25%

31% 29% 28%

26%

23%

2012 2013 2014 2015 2016 1Q17 2Q17 3Q17

Net profit Gross Margin

EBITDA(1) ($M) & ROE

Revenues ($M) Profit Capabilities ($M)

Note: All figures before 2013 are based on US GAAP, and all figures after 2013 are based on IFRS

(1) EBITDA margin is defined as profit for the period excluding impact of finance costs, depreciation and amortization, income tax benefit and expense divided by revenue.

(2) ROE=Trailing 12 months profit attributable to owners of the Company / average equity attributable to owners of the Company

Utilization Rate

*Source: SMIC analysis with third party reference data, 3Q17

620 759 735 798

1063

312 287 260

36% 37% 37% 36% 36% 39% 38%

34%

1% 7% 6% 8% 10% 9% 8% 5%

2012 2013 2014 2015 2016 1Q17 2Q17 3Q17

EBITDA EBITDA Margin (1) ROE ttm (2)





358

703

1,247 1,288

2,158 2,109

1,392

1,726

620760 708 767

1,063

312 287 260

48%45%

39%

34%

56%

47% 48%52%

33%

18%

1% 3%

16%11%

25% 24%

2012 2013 2014 2015 2016 1Q17 2Q17 3Q17

Cash in hand * EBITDA Gross Debt/Equity Net Debt/Equity

Capex, EBITDA, and Cash Levels

$2.3B

$70M

FoundryOperations

Non-foundryoperations

2017 Capex

Guidance

Cash and EBITDA

(US$M)

* Cash in hand includes cash and cash equivalent, plus other financial assets.





Investment Grade Credit Rating

S&P investment grade BBB- long-term corporate credit rating since Oct 2013

Moody’s investment grade Baa3 corporate credit rating in Oct 2015

China Chengxin International Credit Rating Agency’s triple A rating in Nov 2015

Committed to Net Debt/EBITDA less than 2x to maintain rating

1.6

2.3 2.2

1.8

1.2 0.9 1.0

0.8 0.6 0.5

0.3 0.3

0.1 0.2

(0.3) (0.2)

0.2

0.7 0.7

1.2

0.8 0.6

1.3 1.2

(0.5)

-

0.5

1.0

1.5

2.0

2.5

4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

Net Debt/EBITDA

18 15 13 14 16 17 19 21 23

27 27 35 34 35

47 50

63 58

50 59

46 41

37

64

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

EBITDA/Finance Costs





Introduction

SMIC Performance



Concluding Remarks





25% 22% 20%

15% 16%

14%

5% 7% 9%

2% 3% 6% 2% 2%

5% 5% 5%

4% 3% 4%

4% 5% 5%

3% 5% 4% 3% 3% 3% 2%

31% 29% 29%

Y14 Y15 Y16

Mobile Phone ~40% of WW

LCD TV ~35% of WW

Tablets ~35% of WW

Top-3 Chinese Brands 15%

PC/ Notebook ~25% of WW

Data Source: SMIC analysis with 3rd party reference data, 2Q17

Worldwide Shipment Share (Y16)

Samsung

Apple

Huawei

OPPO

Vivo

Xiaomi

ZTE

Lenovo

LG

TCL

Others

Samsung

Apple

Huawei

OPPO

Vivo

Xiaomi

ZTE

Lenovo

LG

TCL

Others

Smartphone Brands Shipment (Y14~Y16)

Chinese brands are gaining market share

Rising Chinese Brands in Global Markets





7 8 10

13 14

18

21

26

31

37

72

77

84

91 87

82

94

100

105

111

2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F

Chinese Fabless Global Fabless

USA $61

Japan $40

China $208

Others $143

USA 49

Japan 32

China $151

Others $121

USA $64

Japan $41 China

$16

Others $100

Rapid Growth of China IC Market

Chinese fabless market growth

(US$bn)

SMIC sees rapid growth of

revenue from China (US$mm)

431

578

837 852

1,067 1,447

2011 2012 2013 2014 2015 2016

SMIC's China Revenue

Source:

SMIC analysis with 3rd party reference data, 3Q17

China has become the world’s largest

IC market (US$bn)

2000 – China market share: 7%

2016 – China market share: 43%

2020F – China market share: 46%

~4x

Source:

SMIC analysis with 3rd party reference data, 3Q17





79.2

186

27.0

83

4.2

21

2.2

5

2008

2017F

Local foundries

Local design

Local brands*

Total China IC market

China IC Market Drives Foundry Growth

Large Domestic China IC Consumption

Domestic China IC consumption accounts for 2/5 of

worldwide consumption

Forecast IC purchases by local brands ~ $83B in 2017

Local brands

Local design

Local foundries Total China IC Market , Local Brands & Design

Revenue ($B)

*Including local system companies

627 870 962 974 1,047 1,162 1,220 1,261

2013 2014 2015 2016 2017F 2018F 2019F 2020F

China Smartphone Unit Production (mm)

*Source: SMIC analysis with 3rd party reference data, 3Q17

Source:

SMIC analysis with 3rd party reference data, 3Q17.

Source: SMIC analysis with 3rd party reference data, 3Q17.

http://de.wikipedia.org/w/index.php?title=Datei:China_Resources_Enterprise.svg&filetimestamp=20080316052434&





Introduction

SMIC Performance



Concluding Remarks





Strategy for Sustainable Profitability & Growth

Differentiate and diversify technology

portfolio to address broad market

needs and profitable areas of growth

Advance technology in preparation

for the migration of the applications we serve

Fully utilize

existing assets Fully utilize existing assets





32 33 35 36 39

41

2015 2016 2017F2018F2019F2020F

PMIC Rev (billion)

Growth Drivers & Opportunities

24 25 28

31 33

38

2015 2016 2017F2018F2019F2020F

IOT Rev (billion)

29 32

35 38

40 44

2015 2016 2017F2018F2019F2020F

Auto Rev (billion)

34 39

53 52 50

53

2015 2016 2017F2018F2019F2020F

NAND/NOR Rev (billion)

NAND/

NOR e-Flash PMIC Auto IOT





• Industry peers are focused on competing in the advanced Digital Logic segment

• SMIC’s strategy is to lead in selected differentiation technologies while continuing to invest carefully in advanced

digital logic technologies

Note: BROWN tech nodes are in production at SMIC.

Technology Migration on Application

RF/MS

28nm

40nm

65/55nm

90nm

0.11µm

0.13µm

-

0.18µm

0.25µm

0.35µm

Digital Logic

20/14nm

28nm

40nm

65/55nm

90nm

0.11µm

0.13µm

0.15µm

0.18µm

0.25µm

0.35µm

Application

Product

&

Process

Technology

Highly

competitive

Highly capex

intensive

Large end market demand with strong growth in China

Strong market share by Greater China based fabless design players

Less capex intensive

Market

Characteristics

e-NVM

55nm

90nm

0.11µm

0.13µm

-

0.18µm

-

0.35µm

CIS

65nm BSI

90nm BSI

0.11µm BSI

0.13µm FSI / BSI

0.15µm FSI

0.18µm FSI

-

-

PMIC

0.13µm

-

0.18µm

-

0.35µm

Other IC

0.13µm

-

0.18µm

-

0.35µm

WiFi

RF

LAN

WAN

CPU

GPU

FPGA

AP

ID Card

Smartcard

BankCard

SIM

Camera

Tablet

Auto

Security

Mobile

Tablet

Appliance

Drivers

Other IC

0.13µm

-

0.18µm

-

0.35µm

LCD Driver

MOSFET

Converter

Auto

3DIC & Sensors

12” Interposer

0.13um

CMOS-MEMS

0.18/0.13um

8” e-TSV

Smart

Sensors

APU

In mobile





905 1,307

1,689 1,938 2,346

2,919

54% 59%

66%

76% 78% 76%

2011 2012 2013 2014 2015 2016

2,469 3,270

3,974 4,769

5,673 6,512

2011 2012 2013 2014 2015 2016

Investments in Innovation and Performance

191 194 145

190 237

318 Q1~Q3

326 (unaudited)

15% 11%

7% 10% 11% 11%

Q1~Q3 14%

(unaudited)

2011 2012 2013 2014 2015 2016 2017

R&D Expense vs Sales R&D Expense vs Sales

(US$mm)

Accumulative Number of

Granted Patents

Design IP enabled Wafer Shipments

vs Total Shipments (000, 8’ equivalent)





Introduction

SMIC Performance



Concluding Remarks





Concluding Remarks

Capacity

Financial

Technology

• 14nm/28nm/40nm/55nm

• Differentiated technology • Exisiting fabs ramping

• New fabs’ construction

Execution

Positioning

• Preferred foundry

in Mainland China

• Strategic partnership

• China is building semi ecosystem

• Room to grow our foundry market share

• Disruptive innovation: IOT(shared bikes), etc

• 22 consecutive quarters of profit

• 2016 Rev grew 30% YoY

• 2016-2019 target 20% rev CAGR • Operating cash

• JV & leasing





Thank You

Contact us: [email protected]

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