In February, SMIC President and Chief Executive Officer Richard Chang promised investors the contract chip maker would show a profit for the full year 2006, with particular emphasis on the third quarter, which is traditionally the strongest quarter of the year for chip makers. The company seemed to be moving in the right direction in the second quarter when a $18.9 million tax credit helped it nose into the black with a $2.2 million profit. But it slid backward in the third quarter.The second quarter was SMIC’s first quarterly profit since the third quarter of 2004.Despite that boost, the third quarter proved tougher than expected. “SMIC is undergoing a very difficult time,” Chang said, speaking to analysts on a conference call Tuesday.SMIC reported revenue of $368.9 million, up 19 percent over the previous year. However, the company’s losses during the period increased by 34 percent, from $26.1 million during the same period last year. Chang blamed tough competition and weaker demand for the losses. “We see some of our competitors actually lower their pricing very much. …We don’t like it, but we have to comply to the market trend,” he said.SMIC also struggled with production issues, Chang said, citing problems ramping up production at its 300-millimeter chip plants and difficulties moving the production of some dynamic RAM (DRAM) chips to a 90-nanometer production process. The 90-nanometer process accounted for 4.9 percent of SMIC’s revenue during the period, but production issues hurt the company’s average selling price. “Our [DRAM] yield was not very high,” Chang said, promising that the company will do “much better” during the fourth quarter.Hoping to see the company return to profitability, SMIC has slashed its capital expenditure forecast for 2007 from $1.1 billion to $700 million, down from about $1 billion this year. Instead of focusing on expanding capacity next year, the company will focus its efforts on improving management, Chang said.Lower capital expenditures and a coming drop in depreciation costs should help put the company back into the black early next year, Chang said. “Our profitability will start to show,” he said.-Sumner Lemon, IDG News Service (Singapore Bureau)Related Links: SMIC Widens Legal Battle With TSMC Countersuit TSMC: SMIC Violated Terms of ’05 SettlementCheck out our CIO News Alerts and Tech Informer pages for more updated news coverage. Related content how-to How to create an effective business continuity plan A business continuity plan outlines procedures and instructions an organization must follow in the face of disaster, whether fire, flood, or cyberattack. Here’s how to create a plan that gives your business the best chance of surviving such an By Mary K. Pratt, Ed Tittel, Kim Lindros Dec 07, 2023 11 mins Small and Medium Business Small and Medium Business Small and Medium Business interview WestRock CIDO Amir Kazmi on building resiliency Multidimensional resiliency is vital to setting yourself, your teams, and your organization up for success. Kazmi sets the tone at WestRock by recognizing the pace of change, instilling a learning and growth mindset, and being transparent with his te By Dan Roberts Dec 07, 2023 8 mins IT Strategy Staff Management IT Leadership brandpost Sponsored by FPT Software Time for New Partnership Paradigms to Be Future-fit By Veronica Lew Dec 06, 2023 5 mins Vendors and Providers brandpost Sponsored by BMC Why CIOs should prioritize AIOps in 2024 AIOps empowers IT to manage services by incorporating AI/ML into operations. By Jeff Miller Dec 06, 2023 3 mins IT Leadership Podcasts Videos Resources Events SUBSCRIBE TO OUR NEWSLETTER From our editors straight to your inbox Get started by entering your email address below. Please enter a valid email address Subscribe