China-based pure-play foundry Semiconductor Manufacturing International (SMIC) expects to post a revenue decline of 4-6% sequentially in the third quarter of 2018, with gross margin ranging from 19% to 21%.

When excluding the technology licensing revenues recognized in the second quarter, revenues for the third quarter are forecast to register an up to 2% sequential increase, SMIC added.

SMIC reported revenues of US$890.7 million for the second quarter of 2018, up 7.2% sequentially and 18.6% on year. Gross margin came to 24.5% in the second quarter compared with 26.5% in the prior quarter and 25.8% in the second quarter of 2017.

"We are on track to grow high-single digits annual revenue as demand and utilization recovered in the second quarter," said SMIC in a statement.

SMIC generated operating profits of US$19.14 million in the second quarter of 2018, down 54.7% sequentially and 11.5% from a year ago.

SMIC utilized 94.1% of its capacity in the second quarter, compared with 88.3% in the first quarter and 85.7% in second-quarter 2017. SMIC shipped a total of nearly 1.26 million 8-inch equivalent wafers in the second quarter.

SMIC's China-based clients accounted for 58.6% of the foundry's total revenues in the second quarter of 2018, down from 62.4% in the prior quarter but up from 45.3% a year earlier, while its North America-based customers as a proportion of company revenues reached 33% in the second quarter compared with 28.6% in the first quarter and 41.8% in the second quarter of 2017.

Meanwhile, revenues generated from SMIC's 28nm process technology accounted for 8.6% of company revenues in the second quarter of 2018, up from 3.2% in the prior quarter and 6.6% a year ago, while the share for its 28nm technology slid to 17.5% from 21.7% in the first quarter and 19.1% in second-quarter 2017.

"We are pleased to say that we have achieved significant progress on our 14nm FinFET development. The R&D of our first version of FinFET technology is now ready for business engagement," SMIC noted. "In addition to our 28nm PolySiON and HKC, our HKC+ technology development is now complete. Our 28nm HKC continues to ramp up, as its yield meets industry benchmark."

Profits for the second quarter of 2018 attributable to SMIC were US$51.6 million, up 75.6% on quarter and 42.3% on year, driven by rising non-operating income. The company disclosed its earnings per ADS came to US$0.05 compared with US$0.03 in the prior quarter and US$0.04 a year earlier.