Reuters Summit-UPDATE 1-SMIC aims profitability in Q4 2009

(For other news from the Reuters Global Technology Summit, click on: here)

* Aims to return to profitability as early as Q4 2009 - CEO

* Q2 capacity utilisation rate doubles to more than 70 pct

* Initial indications from large customers point to recovery (Adds quotes, details)

By Michael Wei and Kirby Chien

BEIJING, May 19 (Reuters) - SMIC (0981.HK), China's biggest contract chip maker, which counts Texas Instruments and Qualcomm among its clients, hopes to turn a profit as early as the fourth quarter due to improved demand from China.

Initial signs from Semiconductor Manufacturing International Corp's big customers are pointing to a recovery, due largely to a pick-up in demand for consumer products such as cellphones.

"Our goal is to turn a profit next year," Chief Executive and President Richard Chang told the Reuters Global Technology Summit from Shanghai. "Optimistically speaking, we could see a profit in the fourth quarter this year, otherwise the first half of next year."

SMIC's (SMI.N) capacity utilisation rate doubled to more than 70 percent in the current quarter from the first quarter, Chang said. The company competes against bigger rivals TSMC (2330.TW) and UMC (2303.TW) from Taiwan.

Last month, SMIC narrowed its first quarter net loss to $178 million from $225.7 million a year ago, helped by cost cuts. [ID:nN29419630]

The greater China region, which accounted for roughly half of the company's total revenue of $1.35 billion in 2008, has seen the biggest increase in demand, particularly in telecommunication and consumer products, Chang said.

"Greater China has rebounded quickly, followed by the U.S., but Japan and Europe still remain cloudy," he said.

IMPROVED OUTLOOK

SMIC is a supplier to global players including cellphone chip supplier Qualcomm Inc (QCOM.O), chipmaker Texas Instruments TXN.N and Fujitsu Ltd (6702.T).

"We have seen some positive forecasts by our clients. So, it seems the third quarter will fare better than the second," said Chang, who founded the company in 2000.

He however said the company would reach breakeven only when utilisation rates rise to around 85 percent, because of the heavy depreciation expenses from purchases of new equipment.

SMIC plans to spend $190 million this year on capital expenditure and could increase that for next year.

The company is capable of funding the next two years of capital expenditure and does not need to raise any capital through a stock or debt offering, Chang said.

"But if a strategic partner wanted to cooperate closer with us, we would consider it," he said.

Local media have reported SMIC had talked with Intel (INTC.O) and Singapore's Chartered Semiconductor CSMF.SI on stake sales but Chang declined to comment on the reports.

SMIC's Hong Kong-traded shares have risen 6 percent this year, underperforming a 22 percent rise in the broader market .HSI. ($ = 6.83 yuan) (Additional reporting by Judy Wu; Editing by Anshuman Daga) (For summit blog: blogs.reuters.com/summits/)