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Semiconductor Manufacturing International Corp
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Welcome to the Semiconductor Manufacturing International Corporation's Third Quarter 2018 [Audio Gap] Conference Call. Today's conference call is hosted by Dr. Zhao Haijun, co-Chief Executive Officer; Dr. Liang Mong Song, co-Chief Executive Officer; Dr. Gao Yonggang, Chief Financial Officer; and Mr. Tim Kuo, Director of Investor Relations.
Today's webcast conference call will be simultaneously streamed through the Internet at SMIC's website. [Operator Instructions] The earnings press release is available for download at www.SMICS.com. Webcast playback will also be available approximately one hour after the event.
Without further ado, I would like to introduce you Mr. Tim Kuo, Director of Investor Relations for cautionary statement. Thank you. Please go ahead.
Thank you. Good morning and good evening. Welcome to SMIC's third quarter 2018 earnings webcast conference call. Today, our CFO, Dr. Gao, will highlight our financial performance and give guidance for the next quarter, and then our co-CEOs, Dr. Zhao and Dr. Liang, will provide some business commentary. This will be followed by our Q&A session.
As usual, our call will be approximately 60 minutes in length. The earnings press release and financial presentation are available for you to download at www.SMICS.com under Investor Relations in the IR calendar section. Let me also remind you that the presentation we'll be making today includes forward-looking statements. These statements and other comments are not guarantees of future performance, but represent the company's estimates and are subject to risks and uncertainty. Our actual results may differ significantly from those projected or suggested in any forward-looking statements. For a more complete discussion of the risks and uncertainties that could impact our future operating results and financial condition, please see our filings and submissions with the U.S. Securities and Exchange Commission and The Hong Kong Stock Exchange Limited, including our annual report on Form 20-F filed with the United States Securities and Exchange Commission on April 27, 2018.
During the call, we will make reference to financial measures that do not conform to generally accepted accounting principles, GAAP. These measures may be calculated differently than similar non-GAAP data presented by other companies. Please refer to the tables in our press release for a reconciliation of GAAP to the non-GAAP numbers we will be discussing. Please note that all currency figures are in U.S. dollars unless otherwise stated. I will now hand the call to our CFO, Dr. Gao, for financial highlights.
Thank you, Tim. Greetings to all our listeners. First, I will highlight our third quarter results and then Q4 core guidance. In third quarter 2018, our revenue was $851 million, a decrease of 4.5% quarter on quarter. If excluding the technology licensing revenue, revenue grew marginally quarter on quarter, mainly due to an increase in wafer shipment in the third quarter.
Gross margin was 20.5% compared to 19.7% gross margin, excluding the technology licensing revenue in second quarter, mainly due to the better utilization rates in the third quarter. Non-GAAP operating expenses were $228 million. Profits for the period attributable to SMIC was $27 million, while noncontrolling interest was $90 million of credits to SMIC's attributable profit.
Moving to the balance sheet. At the end of third quarter, cash on hand, including financial assets, were close to $3 billion. Gross debt to acquisition was 42% and net debt to acquisition was 5%. In terms of cash flow, we generated $216 million of cash from operating activities in the third quarter.
Now looking ahead into the fourth quarter of 2018. Our revenue is guided to be down 7% to 9% quarter-over-quarter, mainly due to low seasonality. Gross margin is expected to range from 15% to 7% (sic) [17%], mainly due to the lower utilization rates, which is expected to be middle-80s. Non-GAAP operating expenses are expected to range from $226 million to $230 million. Noncontrolling interest of our majority honored subsidiaries are expected to range from positive $20 million to positive $22 million, which are losses be borne by noncontrolling interest.
The planned 2018 CapEx for foundry operations decreases from approximately $2.3 billion to approximately $2 billion, of which approximately $1.2 billion are expected to be spent for expansion of capacity and approximately $0.3 billion is mainly expected to be used for R&D equipment. The decrease in CapEx is mainly due to the equipment moving schedule, scheduled delay and broad activity improvement.
The planned 2018 CapEx for non-foundry operations are approximately $110 million, mainly for the construction of employees' living quarters. Our planned 2018 DNA is approximately $1.06 billion. Our 2018 gross margin is expected to be low 20s. If excluding the technology licensed revenue, our 2018 gross margin is expected to be high teens.
I will now hand the call over to our co-CEO, Haijun, for our general remarks.
Thank you, Yonggang. Thank you all for joining us on today's call. This morning, I will share with you the results of third quarter, some highlights of our differentiated platforms and our outlook for the remainder of this year.
Overall, seems our tracking in line with our original expectations, but we remain cautious on the near term. The lackluster end markets on global tension continue to keep industry growth muted. However, the development and the adoption of new technologies with China keep us optimistic about the long term.
Internally, during our period of preparation and transition, we also continue to work on developing our technology on the platforms to allow ourselves with the interesting trend in the China markets. Our third quarter results were in line with our original guidance.
In third quarter, our total revenue decreased to 4.5% quarter-over-quarter, but increased 10.5% year-over-year. The decrease was a result of a one-time technology license revenue actualized in the second quarter. When excluding revenue from this technology licensing, our revenue increased slightly Q-over-Q.
We were in line with our third quarter gross margin guidance at 20.5%, a slight sequential increase. Now to address our markets and the platforms. In third quarter, our core base needs revenue from the China region hit record high, which grew 40% year-over-year at a 5% [ sequential loading ]. We continue to see China represent the largest IC market. And as the preferred foundry, we position ourselves and aim to capture the opportunities by working closely with our customers. China is not only the largest IC market, but also is proactively developing and adopting new technologies, yet it is the [ cities ] from severance artificial intelligence to smart city and autonomous transportation. We believe that in the long term, this will prove beneficial to participants in the China IC supply chain and especially to SMIC.
As we continue to enhance our competitiveness to better serve our customers and address the opportunities, we also need to focus on our fundamentals while expanding and enhancing our mature and advanced node's platforms. For example, we have expanded our fingerprint sensor portfolios as we have began under-glass solution production and shipments. Although there was a general [ solved ] output, we still benefited from power IC, RF connectivity and a fingerprint related devices, consumer-related business, including [ thereabouts ] and home appliance, also had some progressive revenue.
Our power management business platform continues to be one of our key revenue drivers for this year, and we continue to see strong demands from this area for the coming year. Our revenue from power, RF connectivity and the fingerprint sensors grew 30% a year-over-year and 5% sequentially in third quarter.
As we are reaching towards the end of 2018, we maintain our revenue targets of high single-digit percentage [ growth ]. Our core business gross margin targeted in the high teens percentage and a positive annual net profitability attributable to shareholders. We do see a decline in revenue from mid- to high single digits percentage for the coming quarter due to seasonality, market uncertainty and a softer demand as well as the continued weakness in the smartphone sector.
The growing trade tension and the weakening of currencies also are causing uncertainties and the limitations in the overall economic environment.
In closing my remarks, we reiterate our annual targets and the cultures all look in the nearer term due to the global uncertainties, but remain optimistic in the long term given our unique position in the China market. We are in a [ form to be able ] to capture in a progression of SMIC's strategy for profitable growth and the long-term value creation to benefit our customers, stock shareholders and the employees. So we thank you for the continued support.
I will now turn to the call over to our co-CEO, Mong Song, for further comments.
Thank you, Haijun, and good morning, everyone. Thank you for joining us today. I would like to take this opportunity to share our current progress on R&D and business development. We completed our 28-nanometer HKC+ development and we now have several projects kicking off for our 28-nanometer platform. At the same time, we are on track with building up our 28-nanometer IP portfolio to serve a diverse range of customers. Meanwhile, our 28-nanometer [indiscernible] is becoming increasingly competitive as we enhance its performance and expand our portfolio and derivatives.
On the FinFET side, I'm happy to say that we are also on track with our FinFET technology as we are working towards [ risk ] production in the second half of next year.
As mentioned in my last earnings call, our first version of FinFET technology was really for business engagement. We qualified our process and delivered our first FinFET process design kit to our customers. We are in an ongoing process of IP validation with our customers to verify the prototype functionality while we aim to engage more business opportunities. Our FinFET may address mobile and wireless customers migrating from 28-nanometer stemming from 4G LTE and in the future, 5G in China.
In addition to mobile applications, FinFET is suited to address emerging applications such as AI, IoT and automotive industry sectors as we plan to expand our 40-nanometer portfolios to cover these areas. We are seeing quite a lot of changes in industry dynamics in the past few quarters and increasing opportunities in FinFET technology. We are accelerating our R&D, giving us the chance to seize opportunities.
To conclude my remarks to date, we are executing on our technology roadmap and we will continue to execute our strategies cautiously while concentrating on more focused R&D efforts, seeking profit in our operations, targeting precise market opportunities and producing reliable quality products.
Our strategies to build up competitiveness in our key technology offerings work closely with our customers to increase share and to build up our ability to create long-term value for our stakeholders. We thank you for your continued ongoing support and for joining us today. I will now hand the call back to Tim for the Q&A session of this call.
Thank you, Dr. Liang. Today's Q&A will be hosted by Dr. Zhao and Dr. Liang; and our CFO, Dr. Gao. I would now like to open up the call for Q&A. [Operator Instructions] Operator, please assist.
[Operator Instructions] And our first question comes from the line of Randy Abrams from Crédit Suisse.
Okay, yes. My first question about the applications. For third quarter, there was lower mix from consumer and also 55-, 65-nanometer. Could you talk about the slowdown in those areas in third quarter? And looking to fourth quarter in your guidance, is it broad across application, the slowdown? Or are certain applications pulling back more and some holding up better?
Basically, we should say that the second part of this year for the communication side sectors and home appliance are running very high, and we really saw the third quarter -- the corrections, mainly 40 inventory, this kind of thing and the demands got slow down. And for the fourth quarter, that's the traditional seasonal quarter for the communications and other consumer products. And we do not see a specific type of sector to go for extreme. This is a general case. They tie together to move [ down ]. For example, we have both the communication sector connectivity and the consumers, and also including related memories, CII's and power devices. They move to the similar downturns. And we really see that as an correction on inventory. And just now I mentioned also [ certain ] part of uncertainty. So the customer now becomes more conservative.
Okay. And then one follow-up to the first and then I'll ask a second question. I guess, looking ahead to 2019, if you see certain areas, your focus on if you were to outgrow -- if you see areas outgrow the industry, whether recovering 28 or filling in the 12-inch or gains on 8-inch. The second question I had was on the sale and leaseback for [ 306.8 ]. If you could walk through the -- how that works in terms of your received cash? And then instead of depreciation, you may have like more of an operating expense? And then if you plan to take advantage or use that leasing program more. So maybe if you can talk through how the leasing program would work and how much you may use that?
Okay. Randy, I'll answer the question first and then go for the detailed number financial for leasing. I'll give the call to our Dr. Gao, CFO, to give you more input on that. For the 2019, we believe that from second quarter that the market will start to recover after 2 quarters type of correction on the inventory and settle down the uncertainties. Beyond that, at a previous conference call, I also shared with you and the other listeners that we have procured for the similarity of the market by building up additional platforms for our 12-inch. Currently, I mentioned about 6 or 7 new product lines, like the development and the expansion of the PMUs, CMOC major sensors and NOR Flash, NAND Flash, high-V drivers, [ et cetera ]. And for 12-inch, this kind of a product platforms are brand new. So they are the incremental revenue add on to our 12-inch wafer fabs. And [ that's the ] gross points of our [ last year ] together with the market recovery for the existing platforms and the customers. And for the operation, operating expense and cash and [ leasing ], I believe we'll continue, [ that's very good too, ] to support our [ expansion -- ] go together with expansion. But for the detailed strategy, I give to Dr. Gao.
[Foreign Language]
So -- let me help you translate. This is Tim. So over the past 2 years, we tried to utilize the operation leasing strategy. So end up -- in the end of third quarter this year, we have done USD 1.2 billion.
[Foreign Language]
So in this coming quarter, we will use this strategy to expand another USD 300 million on operation leasing.
[Foreign Language]
So according to this operation leasing, approximately USD 20 million of depreciation will be saved. This is the answer to your question?
Okay. Just one quick follow-up. The $1.2 billion leasing, is that on top of the CapEx? So implying your equipment and investment is on top of the $2 billion? Or yes, if you could explain that?
It is included.
And our next question comes from the line of Sebastian Hou from CLSA.
My first question is on the utilization rate. You're looking into fourth quarter separately in the 8-inch and 12-inch?
Seb, could you say your question again?
Sebastian, I got your question. You asked about the normalized utilization in the 8 [ case ]. And for the first quarter, yes [indiscernible], that's the normalization across 8-inch and the 12-inch. Basically, we should say that we are very strong on 8-inch utilization. We are still confident that. And the lower half mainly the 12-inch.
Okay. So you are seeing the, into fourth quarter, the 8-inch UTR will still stay pretty high, but the softness will be -- mainly come from 12-inch. Am I right?
Yes, yes.
Okay, okay. Just one follow-up. In terms of the 12-inch softness, is there any particular application or particular process nodes that are seen weaker than the others?
Just now when I answer the question to -- and Randy mentioned that we see the seasonality across sectors. But consumer part, like a Bluetooth type set top box guiding more heat in the fourth quarter.
Okay, okay, got it. And also on the -- and my second question is on the inventory correction [ comments ] the CEO you just mentioned. But it seems like your – another foundry peers in Taiwan, TSMC, they -- I mean, a month ago, they were -- it seems like they were not too worried about this and they actually say that a sixth excessive inventory situation at the end of this year would be less severe than the end of last year. But it seems like the COU sounds more pessimistic or conservative compared to your peers. Can you elaborate more on that? And then what's the difference? Or maybe you see more weakness inventory correction coming from your Chinese customers or your foreign customers?
I do not comment our peers. But for SMIC part, I really communicate very carefully, thoroughly with our customers. I really found that for the fourth quarter, they are doing correction on the inventory mainly because the second quarter for the utilization, everything for SMIC is way too strong. And at that moment, they prepare for many things and now they like to stabilize the inventory. We really see the correction in the fourth quarter, and I believe this kind of correction and the seasonality will -- is tend to the first quarter and the recovery will mainly in the second quarter.
Okay, okay. But just last one. Is the -- and I just want to follow on, I think the last quarter, you mentioned about the next -- the technology development beyond 14-nanometers.
I was just wondering, maybe you haven't decided the name of that node. But I just wonder, in terms of the timeline, do you have a more specific timeline of that technology node?
No, we already kicked off that project and the program is ongoing on track. But it's too early to announce these kind of timelines.
And our next question comes from the line of Charlie Chan from Morgan Stanley.
So first of all, I want to talk about the 12-inch overcapacity issue, as some -- your industry peers have mentioned that there should be some overcapacity in 28-nanometer, 40-nanometer, and then it's not going to resolve any time soon, maybe take several years. So my question is that, does that affect your commitment to the future CapEx? Because I remember, company promised that in the coming 2 years, you want to keep the CapEx and label. So this is my first question.
Charlie, I got your question. For 12-inch, especially for 28-nanometer and for the overcapacity situation in the industry, is well known to everybody. And SMIC has built up its 28-nanometer technology together with 40-nanometer technology with moderate pace. So overall, we should say SMIC has not overbuilt too much. When you count the total available capacity in 28-nanometer, SMIC just take a very small fraction of this kind of overall build. So at this moment, we still manage the 28-nanometer capacity, while in the meantime, we use the other platforms to share the capacity. And previously I mentioned that SMIC is running up 24 nanometers standalone specialty NAND Flash. And we are also running 40-nanometer other platforms and they share the capacity. And so for SMIC, yes, in the fourth quarter this year, because of the seasonality and the correction on inventory, we see the lower utilization than the third quarter and second quarter. But overall, there's -- I mean, the utilization for 12-inch density across [indiscernible], not specifically [indiscernible] for 28 nanometer.
Right, okay. Got it. So it seems like your CapEx investment is basically for 14-nanometer could continue. Am I right down on this part of CapEx comment?
You mean 14 instead of 40, right?
Yes, 14-nanometer investment. And I would assume your CapEx to be flattish in Q -- coming 2 years? Is that a correct interpretation?
Yes. 14-nanometer CapEx for building up the initial stage of production for 14 FinFET is [ baked ] into the CapEx for next year, yes.
Okay, yes. So my -- and my next question is your profitability, right? So unfortunately, an accompanying post-operational loss last quarter, right? So with this kind of semi down cycle and tough industry competition, I mean, those are 12-inch capacity. So when would the company expect operational label can turn profitable again? And also, how is company going to manage your free cash flow? Meaning you want to spend the same level of CapEx, but at the same time, it seems like operational cash flow continues to be smaller than CapEx. So does coming need more funding or risk more debt in the coming years?
Charlie, actually, you reached quite a many points here. Just very good. Thank you. And overall, we should say this way, SMIC has announced our plan to build up on both sides. On the one-hand side, [indiscernible] in our manufacturing capability and to increase the profitability. And in other side, we continue to do the Advanced Technology development and to start the production of a 40-nanometer FinFET next year. And we try to do our best to balance both. At this moment, our cash situation is very good. So for the next stage, we'll try to do the [ mirrored ] pace on both sides to get the balance.
And our next question comes from the line of Szeho Ng from China Renaissance.
I have 2 questions. The first one regarding the recent share buyback. Are there any conditions you can share with us that will trigger more buyback going forward?
[Foreign Language]
So actually we have done share buyback on the 27th of September as well as the 4th of October this year. Actually we have announced that.
[Foreign Language]
Actually we are overseeing our stock movement as well as the capital market. So any extended share buyback is still projected.
[Foreign Language]
Okay. Second question on the minority interest guidance. This year, you guided minority interest for Q4 only slightly up from the Q3 level. But for the last 2 years, in 2016 and 2017, the Q4 minority interest number were significantly higher than the previous quarters. I just want to know what was the reason behind that?
[Foreign Language]
Actually we are leveraging the JV model in all of our Advanced Technology business.
[Foreign Language]
So actually, we will announce the NCI number every quarter. Even they are subject to change depending on the actual results.
[Foreign Language]
So for upcoming SMIC South and SMIC North, the minority shareholders will continue to share the R&D expenses as well as the new projects.
[Foreign Language]
That's the answer to your question, Szeho.
Actually -- so that means that going forward, the minority interest is not going to be very lumpy in Q4, right? So you just happen to spread out for every quarter?
Could you say your question again?
So the minority interest is going to be evenly spread out instead of very lumpy in Q4 every year, like in 2016 and 2017?
[Foreign Language]
So actually for different expenses, we have different rules for listing. For example, like R&D or other like royalties, we will according -- we will lift these expenses in accordance with the actual results.
And our next question comes from the line of [ Chris Yim ].
My first question is on the FinFET first version, risk production second half '19. Can you discuss the number of tape-out you expect next year? And also, what type of customers are using your technology? Are they system customers, or are they fab-less customers?
Chris, just like we already communicate through last quarter and this quarter, our FinFET and technology platform now is ready for customer engagements, and we do have customers working with us to design the first product and the second. And the first part is the logic part, and the first application will be consumer media type as well as to mid- to low end mobile applications. And we planned the portfolio to serve most sectors, like IoT, automotive parts later.
My follow-up is on the 28 HKC+. Can you -- would you be able to discuss the 28-nanometer outlook for next year and later? And how big of the contribution you expect to see from the HKC+ platform?
Okay. Currently, our available capacity for high-k metal gate C version has been running to the industrial performance. And the loading is pretty well. And we switched this kind of C version loading to customers' demands and products to C+ from early next year. And the application more is to the similar sectors and just upgrade from C version to a C+ version. And from the capacity, just now, I already mentioned that we do not have that much overbuild capacity, because we viewed 28-nanometer capacity and the high-k metal gate mainly to the customer demands with a moderate pace. Means that planned build and later looking for customers. So the situation is still okay for 28-nanometer utilizations for SMIC.
My last question is on your differentiated technology. You mentioned quite a few of them. I also see in your presentation under your capacity by different fabs that your -- that you've raised your Shenzhen 200-millimeter fab capacity from 35,000 to 40,000 in the third quarter. And that -- it seems like it's for MOSFET. So I was wondering if you guys would start making MOSFET? And what's your strategy on the discrete side?
Yes, that's true. We increased 5,000 wafer capacity to do MOSFET. That's a [ decrease ] device, and on top of the existing capacity in Shenzhen 5. And for the Shenzhen 5, it's part of our 8-inch capacity. And from previous comments I already made and the 8-inch demands and the utilization at SMIC is still very good, pretty full.
This is something new, right? The MOSFET is something that you guys have been making your fabs before. This is a new product, is that correct?
We should say that. Quite many years back, when SMIC got a free capacity, we did make very small amounts of MOSFET in our Tianjin fab. So we do have the customer base and the baseline. And now we have more customer approach SMIC to do this kind of product. You know the market situation. So SMIC doesn't provide this type of service. We do not have any private space in Tianjin, Shanghai, or other place. And the only available clean room is in Shenzhen fab. That's why we set up the capacity there.
And next question comes from the line of JunJie Chen from Tianfeng Securities.
[Foreign Language]
So JunJie, you're asking about the -- whether there is going to be more capital ingestion from the minority shareholders. I'll let Dr. Gao answer this question.
[Foreign Language]
So as far as this advanced technology business moving on at SMIC, as you can see, it's actually done by the JV model, the joint venture model. So the shareholders will see different projects to inject the capital. So the first half of this year, around USD 600 million has been injected, and we target that the end of this year to have another USD 960 million. So for the external shareholders for 2018, the minority shareholders will inject USD 1.5 billion as total.
[Foreign Language]
Okay. So, JunJie, you're asking about the NOR NAND Flash status, especially you have seen the revenue contribution from 55-, 65-nanometer is decreasing in the past quarters. So you are wondering whether there's going to be some capacity issues or some ASP pressures. I'd like talk Dr. Zhao to answer this question.
JunJie, for this memory sector, SMIC is doing specialty memory service to our existing customers. And overall, we should say that the production is maintaining the same, because customer demands are there. But we really see the pricing pressure, and we have new competitors get into the 20-, 24-something technology range in the NAND specialties. And for the NOR Flash, we also have the other competitors getting into the similar markets. And overall, we should say the specialty memory, the applications that follow the trend of the overall industry, when we have the seasonality, the demands for memory have the similar change. They tie together with set top box, mobile phone, this kind of things. And our expectation is still that we'll have the similar trends go further down, and we feel the pricing pressure similarly in the markets.
And our next question comes from the line of [ Peter Chen ] from CIMB.
Can you hear me? Hello? Hello? Can you hear me? Hello, can you hear me? Hello?
Pardon the interruption. We are having some technical difficulties of your speaker.
[Technical Difficulty]
The speaker is now back online.
There is some unexpected issue. Sorry about that.
I'm so sorry for that one. So we will be proceeding to your question, comes from the line of Rick Hsu from Daiwa Securities.
So I guess, my first question is on your 28-nanometer specialty for HKC ramp up -- plus, sorry, HKC+. So could you give us some more color about your revenue contribution? Because I remember the 28-nanometer revenue ramped up quite nicely in 2017 and hit a double-digit rate in Q4 2017. And now it stopped. So right now, it's still staying around a single digit. So just wondering when do you guys expect the 28-nanometer to ramp up to double-digit contribution again? Sometime on their own?
Rick, the thing for 28-nanometer had been -- keep coming here on this topic through the quarters and which will stay this way. The first 28-nanometer ramp up in 2015 and '17 ramp up, up to 10%, over 10% total revenue [ mainly ] with the 28-nanometer PolySiON technology in the mobile phone sector. And later, when we had the high-k metal gate, we switched from mobile phone [ 28 ] PolySiON to high-k metal gate C type of version. And that's for consumer type of products. And now we continue to ramp certain part of 28 capacity in the mobile sector for 28 PolySiON products. In the meantime, we also run 28 HKC type of products. Now we introduced a C+ technology platform. First thing first, we're converting certain part of a C version, same products, into C+. So we do not expect running up in volume for the 28 sector. More like maintain the similar volume to run that, because we have the existing customer in the mobile station, we also have the 28 C customers in the consumer sector. And we mainly just upgrade it. We are building up 28 HKC+ IP, but it take time to get additional productions. So hopefully, in the second half of next year, we'll start to have additional loading from other customers to do this sub C+ ramping up. But for the overall capacity buildup with 28-nanometer, just now already mentioned that in the world, overall in the industry, we are oversupplied. So we do not have a greater plan to expand the capacity to aid on to 28-nanometer production. More or less, we maintain the similar volume dedicated to 28 PolySiON and high-k metal gate. So we do not expect the percentage getting higher in the overall revenue portion.
Okay, got you. And the second question is how much common subsidy did you guys expect to receive in Q4 this year?
This one I give to our CFO, Dr. Gao.
[Foreign Language]
Let me translate for you. So every year, we are receiving the government R&D grant. And as you can see, because we put more emphasis on Advanced Technology, so the grant amount is increasing. So as we estimate in the fourth quarter, this government grant on R&D would be approximately USD 50 million.
Okay, great. And the last question is could you run through your 2018 CapEx update again, because I missed this part at the very beginning.
Rick, could you say it again?
Could you run through your CapEx update for 2018, because I think Yonggang mentioned about these numbers update in the early part of this meeting, but I missed it. So could you run through the update again about this year's CapEx?
[Foreign Language]
So the Capex for this year is decreased from originally USD 2.3 billion to around USD 2 billion.
I would now like to hand the call back to IR Director, Tim Kuo, for closing remarks.
Before my closing remarks, I will hand the call to our co-CEO, Dr. Liang, for some further statements.
Thank you. Let me reiterate about our first generation FinFET technology risk production date. We were still on track with the original plan. Our risk production will be in the first half of next year.
Thank you.
Okay. Thank you, Dr. Liang. In closing, we would like to thank you, everyone, who participated in today's call. And again, thank all of you for your trust and support. Thank you very much.
This is the end of SMIS (sic) [SMIC] Third Quarter Earnings Conference Call.
We thank you for joining us today.