Their relatively low costs and access to the fast-growing China market often make major Chinese tech firms look like attractive business partners to their foreign peers. But big hopes for new partnerships often end in disappointment, resulting in the kinds of divorce we are now witnessing in the new slow-motion break-ups between PC giant Lenovo (HKEx: 992) and Japan’s NEC (Tokyo: 6701); and between global contract chip-making leader TSMC (Taipei: 2330; NYSE: TSM) and Chinese counterpart SMIC (HKEx: 981; NYSE: SMI). In both cases, the foreign companies have just started selling down previous strategic stakes in their Chinese partners, in what’s likely to end in an outright divorce for each pairing.
Tag Archives: SMIC
SMIC: Respectable Earnings, But No Respect 中芯国际：收益可观，但不被追捧
Investors once held out big hopes for China’s biggest chip maker SMIC (HKEx: 981; NYSE: SMI) when it went public back in 2004, but reaction to its latest earnings continue their more recent indifference to this giant that seems unable to earn respect from anyone. That’s my main conclusion after SMIC released second-quarter results that showed an encouraging return to profitability, as well as third-quarter guidance that looked stable despite the weaker Chinese and global economies. SMIC’s US-traded shares were largely unchanged after the report came out, dipping 1.6 percent and reflecting to me what looks like investor indifference over this disappointing giant that once held so much potential.
News Digest: August 9, 2012 报摘： 2012年8月9日
The following press releases and media reports about Chinese companies were carried on August 9. To view a full article or story, click on the link next to the headline.
══════════════════════════════════════════════════════
- Caterpillar (NYSE: CAT) Exporting China-Made Goods (English article)
- Xiaomi to Launch Smart TV – Industry Source (English article)
- Director James Cameron Takes 3D Film Venture to China (English article)
- SMIC (HKEx: 981) Announces Q2 Results (HKEx announcement)
- Battery Maker Boston-Power to Supply Battery Systems to BAIC (Businesswire)
- Latest calendar for Q2 earnings reports (Earnings calendar)
Silcon Valley Bank Forges Into China 美国矽谷银行与浦发成立合资银行
I’ve previously written about a low-key second wave of financial service companies quietly coming into China after a pull-back of earlier arriving big names like Goldman Sachs (NYSE: GS) and Citigroup (NYSE: C), with US tech-focused lender Silicon Valley Bank the latest name to join this trend. What’s equally interesting in this latest news is the rapid speed with which the government has approved the joint venture between Silicon Valley Bank and Shanghai-based Pudong Development Bank (Shanghai: 600000), indicating Beijing may be keen to bring in more foreign expertise from these smaller names as it looks to build up a viable private sector banking industry that operates outside the traditional realm of big state-owned lenders. Let’s look at the latest reports, which have an executive from California-based Silicon Valley Bank saying he was surprised at the rapid speed with which his bank’s joint venture was approved following its announcement last October, and that new joint venture bank will aims to open by September. (English article) Silicon Valley Bank’s pairing comes just months after Citibank sold a 3 percent stake it had held in Pudong Development Bank for several years, mirroring a recent trend that has seen many major western banks sell off investments they made nearly a decade ago in Chinese lenders. (previous post) While the western lenders made many of those sales to raise cash to bolster their shaky balance sheets, observers also noted that many were disappointed that their investments never led to strategic partnerships to help them tap the fast-growing China market for financial services. This new tie-up between Silicon Valley Bank and Pudong Development Bank looks like a clearly focused initiative to help service the growing semiconductor chip sector, anchored by leading chip maker SMIC (HKEx: 981; NYSE: SMI), and a growing field of LCD and LED makers emerging in the Yangtze River delta area. Whereas many of the earlier tie-ups between the big western banks and their Chinese counterparts contained lofty dreams that were never really realized, this more recent round of new initiatives by smaller players looks much more targeted and modest in its ambitions, seeing foreign companies pair with smaller local players in highly-focused moves with specific aims. As such, I would give them a much better chance for success than the previous tie-ups. Other recent lower-profile tie-ups in the financial services sector have included moves by money transferring specialist MoneyGram (NYSE: MGI), which recently expanded its tie-up with Bank of China (HKEx: 3988; Shanghai: 601988); and American Express, which has invested in an electronic payments firm called Lianlain. (previous post) Beijing is probably quietly encouraging these kinds of tie-ups to more rapidly propel its financial services sector to world-class status, especially as it faces its own internal banking crisis that is largely the result of older practices still seen at many banks that behave more like policy-based institutions than true market-oriented lenders. Accordingly, look for a growing number of these kinds of new tie-ups involving mid-tier western players in the months ahead.
Bottom line: The rapid approval of Silicon Valley’s new joint venture bank indicates Beijing wants to bring in more niche-oriented foreign firms to bolster its financial services sector.
Related postings 相关文章:
◙ AmEx Chases E-Payments With Lianlian Link 美国运通联手中国连连集团
◙ MoneyGram In Latest Financial Services Move 速汇金携手中行 提供汇款服务
◙ Goldman Flees ICBC as Bank Crisis Looms 中国银行业危机隐现 高盛迅速转让工行股票
News Digest: May 11, 2012 报摘： 2012年5月11日
The following press releases and media reports about Chinese companies were carried on May 11. To view a full article or story, click on the link next to the headline.
══════════════════════════════════════════════════════
◙ Proview Refuses Apple (Nasdaq: AAPL) $100 Mln Offer for iPad Trademark – Source (Chinese article)
◙ Yum (NYSE: YUM) to Open Restaurants in Suning (Shenzhen: 002024) Stores (English article)
◙ ICBC (HKEx: 1398) Gets Fed Nod as Chinese Banks Seek US Growth (English article)
◙ SEC Charges Deloitte Shanghai with Refusal to Produce Documents (SEC announcement)
◙ SMIC (HKEx: 981) Reports Q1 Results (HKEx announcement)
◙ Latest calendar for Q1 earnings reports (Earnings calendar)
Advice to SMIC: Stay Away From Elpida 中芯国际应远离尔必达
I’ll admit that I secretly am cheering for a successful turnaround at SMIC (HKEx: 981; NYSE: SMI), a perennial underdog to its better-run Taiwanese rivals, which is why I’m a bit disappointed at the latest reports that say that China’s top chipmaker is considering a bid to buy some operations from bankrupt Japanese DRAM maker Elpida. Of course there’s a chance that the news, which was reported in Japanese media, isn’t true, which would be a relief as this purchase makes little or no sense in my view. But I suspect there may be some truth to the news, which would be a big mistake for SMIC if it succeeded in such a purchase. Let’s take a look at the actual news, which says that Hony Capital, a major Chinese high-tech private equity firm, wants to buy the bankrupt Elpida, and then would sell one of Elpida’s DRAM plants in Hisroshima to SMIC. (English article; Chinese article) The report also says one other plan being discussed would have SMIC come in and simply operate the plant, while Hony would presumably remain the owner. This latest report follows another one last month, when Japanese media first broke the news that Hony and US private equity firm TPG were teaming up to make a bid for Elpida, which declared bankruptcy earlier this year following years of losses in the ultra competitive global memory chip market. (previous post) What’s new in this latest report is the inclusion of SMIC in this potential buyout plan. For those who don’t follow SMIC that closely, the company was launched more than a decade ago with big hopes for challenging Taiwanese leaders TSMC (Taipei: 2330; NYSE: TSM) and UMC (Taipei: 2303; NYSE: UMC) for a share of the lucrative global market for made-to-order microchips that power everything from LCD televisions to cellphones. Those hopes were never quite realized, largely due to poor management that led SMIC to report a steady stream of losses for most of its life as a publicly traded company. Things finally appeared to be improving after a change in top management nearly 2 years ago, but then the company stumbled again following an internal power struggle last summer. (previous post) That struggle was finally resolved and the company again seemed to be making progress on a turnaround, which, in my view, could now seriously be jeopardized if SMIC buys or tries to operate some of Elpida’s assets. Such assets would be a huge distraction for SMIC, which has no experience operating outside its home China market. Furthermore, the DRAM sector is already super competitive, which is what drove Elpida into bankruptcy in the first place, and I have little confidence that SMIC could succeed in turning around this company, which probably suffered from high costs due to its location in Japan. Obviously no deal has been reached yet, but I still fear that SMIC may be pursuing such a purchase as new CEO Tzu-Yin Chiu, who assumed his position last August, tries to chart a new course for the company. But an Elpida purchase is not the correct route back to profits, and in fact could actually prolong SMIC’s turnaround, leaving it in the red for many years to come.
Bottom line: SMIC should stay away from Elpida, or risk prolonging its losses for years to come if it actually buys or takes over some operations from the bankrupt Japanese firm.
Related postings 相关文章:
◙ SMIC: Still Tethered to the State 中芯国际：仍然依赖国家
◙ SMIC Puts Turmoil Behind It — Again 中芯国际又走出内讧
◙ Chip Merger Near, More Consolidation Ahead? 华虹NEC和宏力半导体合并预示未来或有更多整合
News Digest: April 11, 2012 报摘： 2012年4月11日
The following press releases and media reports about Chinese companies were carried on April 11. To view a full article or story, click on the link next to the headline.
══════════════════════════════════════════════════════
◙ Disney (NYSE: DIS) Named a Founding Partner of China’s Animation Creative R&D Initiative (Businesswire)
◙ Gaopeng to Merge with FTuan – Source (English article)
◙ China’s ZTE (HKEx: 763) Planned US Computer Sale to Iran (English article)
◙ Anti-virus Firm Rising to IPO (English article)
◙ SMIC (HKEx: 981) Raises First Quarter 2012 Revenue and Gross Margin Guidance (HKEx announcement)
SMIC: Still Tethered to the State 中芯国际：仍然依赖国家
China’s largest chip maker SMIC (HKEx: 981; NYSE: SMI) seems firmly dependent on support from the Chinese government despite its best efforts to show it can compete in the lucrative but also highly competitive market for these high-tech products that lie at the heart of most electronic gadgets. The latest evidence of SMIC’s inability to stand on its own comes in the company’s latest announcement that it has secured a $600 million loan to help it upgrade its state-of-the-art factory in Beijing. (company announcement) Within the announcement, SMIC’s CEO Tzu-Yin Chiu points out that the participation of commercial banks in the loan validates the company’s strong prospects, implying that commercial banks would only lend money to a company with strong future potential. But a closer look at the list of banks participating in the loan reveals that it’s all Chinese policy banks and state-run commercial lenders, all of which take their orders from the government. The list includes policy banks China Development Bank and Export Import Bank of China, and commercial lenders China Construction Bank (HKEx: 939; Shanghai: 601939), Bank of Beijing and Bank of Shanghai. No one should be surprised that SMIC’s 2 biggest bases are in Shanghai and Beijing, which explains why 2 of the top regional banks in these cities were among the commercial lenders on the deal, no doubt instructed by local government officials to participate. I’m not saying that there’s anything inherently wrong with accepting money from government-controlled banks, but it’s certainly not very strong evidence to convince investors of your strong long-term prospects. Indeed, investors seemed unimpressed and and perhaps even worried by the loan announcement, with the company’s New York-traded shares falling nearly 5 percent after the news came out. SMIC’s Hong Kong-listed shares have languished since last summer, when an internal management battle broke out after its chairman suddenly died and its well-respected CEO was forced to resign. (previous post) A period of instability followed before the instigator of the internal battle himself was pushed out and Tzu was brought in as new CEO to return some stability. SMIC’s shares fell from as high as HK$0.90 before the battle, when the previous CEO was showing clear signs of turning around the underperforming company, to their current position where they are now stuck in the HK$0.40 to HK$0.50 range. This latest loan announcement just underscores that any progress made under the previous CEO has been dismantled as the highly cyclical global chip sector heads for its next downturn, and any return to profits for this once-promising but consistently troubled company probably won’t come until late next year at the earliest.
Bottom line: SMIC’s continued dependence on state support for its financing reflects a company stuck firmly in the red, with no near-term prospects for return to profitability.
Related postings 相关文章:
◙ SMIC Puts Turmoil Behind It — Again 中芯国际又走出内讧
◙ Chip Merger Near, More Consolidation Ahead? 华虹NEC和宏力半导体合并预示未来或有更多整合
News Digest: March 17-19, 2012 报摘： 2012年3月17-19日
The following press releases and media reports about Chinese companies were carried on March 17-19. To view a full article or story, click on the link next to the headline.
══════════════════════════════════════════════════════
◙ EBay’s (Nasdaq: EBAY) PayPal Aims to Challenge Alibaba With China Payments (English article)
◙ Sina (Nasdaq: SINA) Microblogging Users Ignore Real-Name Requirement (English article)
◙ UBS, StanChart Buy China Cinda Stake Ahead of IPO (English article)
◙ Vietnam Says CNOOC’s (HKEx: 883) South China Sea Bids Violate Territory (English article)
◙ SMIC (HKEx: 981; NYSE: SMI) Secures US$600 Million Syndicated Loan (HKEx announcement)
◙ Latest calendar for Q4 earnings reports (Earnings calendar)
SMIC Puts Turmoil Behind It — Again 中芯国际又走出内讧
SMIC (HKEx: 981; NYSE: SMI), China’s largest semiconductor chip maker that seems to hop from one internal crisis to the next, seems to be telling the world with its latest earnings that the days of trouble will soon be behind it. (Earnings announcement) The only problem is, we’ve heard this story before after previous crises, only to see the company sink yet again when the latest crisis emerges. For the moment, at least, investors seem to be giving the company the benefit of the doubt, bidding up SMIC’s New York-listed shares by nearly 5 percent after the results were announced on New York time. The results from the latest report tell a relatively straightforward story: the fourth quarter of 2011 was one that SMIC would probably rather forget, with both profit and margins falling squarely into the negative column, as revenue also fell both on a quarter-to-quarter and year-over-year basis. Clearly things weren’t moving in the right direction during the quarter, which was one of the first after SMIC named a new CEO after a bruising power struggle during the summer that saw first its previous capable CEO ousted, followed by the departure of the man who was angling to take his spot. (previous post) The turmoil took a toll on SMIC’s performance and stock, but the company did indeed look relatively well positioned to return to focusing on its turnaround after a new CEO was named. Of course, SMIC wants people to focus on its first quarter guidance for now rather than its poor fourth-quarter results, and investors seem to be doing that. It forecast its gross margins will return to positive territory in the current quarter, while revenue is expected to return to a growth track as well. Equally important, the company’s report shows several trends that look promising for its future. In one, its customer base is becoming increasingly China-based, with China now accounting for 34 percent of its sales versus just 31 percent the previous quarter. This shift is something that SMIC should have been doing all along, as its China base is obviously a strong point, unlike the competitive US and European markets where it has to compete with much stronger rivals in TSMC (Taipei: 2330; NYSE: TSM) and UMC (Taipei: 2303; NYSE: UMC). The other trend that looks good is the growth of business from fabless chip makers, which are usuallly the most profitable customers. All of this looks good, and I have to admit I’m cautiously optimistic that SMIC has finally learned its lesson from all its internal issues and may finally be able to focus on becoming a profitable company again. Then again, the company has shown positive signs in the past, only to sink back into the red due to internal turmoil. Let’s hope this time it can finally escape that cycle.
Bottom line: SMIC’s latest earnings show encouraging first-quarter guidance, but the company will need to avoid more internal strife to complete its turnaround.
Related postings 相关文章:
◙ Chip Merger Near, More Consolidation Ahead? 华虹NEC和宏力半导体合并预示未来或有更多整合
News Digest: February 9, 2012 报摘： 2012年2月9日
The following press releases and media reports about Chinese companies were carried on February 9. To view a full article or story, click on the link next to the headline.
══════════════════════════════════════════════════════
◙ Lenovo (HKEx: 992) Announces Results for Fiscal 3rd Quarter (HKEx filing)
◙ SMIC (HKEx: 981) Reports Results For 3 Months Ended Dec 31 (HKEx filing)
◙ Qihoo 360‘s (NYSE: QIHU) Mobile Apps Back on Apple’s iTunes App Store (PRNewswire)
◙ NYSE Euronext (NYSE: NYX) Signs 1st Contract to Manage 3 China Securities Indices (Businesswire)
◙ Xioami Aims to Become Smartphone Maker With Scale of 10 Mln Unit Sales (Chinese article)
◙ Latest calendar for Q1 earnings reports (Earnings calendar)
