"Chartered revenues in second quarter 2009 were up 43 percent, and revenues including our share of SMP were up 46 percent compared to the previous quarter. Revenues from 65-nanometer (nm) and below technologies, including those from 45nm, grew around 75 percent and accounted for approximately 29 percent of our total business base revenues. Revenues from 45nm alone represented approximately two percent of our total business base revenues. We ended the quarter with a net loss attributable to Chartered of $39 million, which is a substantial improvement over the prior quarter," said George Thomas, senior vice president and CFO of Chartered.

Summary of Second Quarter 2009 Performance

Revenues were $349.0 million in second quarter 2009, down 23.7 percent from $457.6 million in second quarter 2008. Revenues including Chartered's share of SMP were $368.8 million, down 23.6 percent from $482.5 million in the year-ago quarter, primarily due to a significant decline in semiconductor demand across all sectors. Sequentially, revenues were up 43.1 percent compared to $243.9 million in first quarter 2009. Revenues including Chartered's share of SMP were up 45.5 percent from $253.5 million in first quarter 2009, primarily due to strength in the communications sector and followed by the consumer and computer sectors.

Gross profit was $30.9 million, or 8.9 percent of revenues, compared to a gross profit of $69.9 million, or 15.3 percent of revenues in the year-ago quarter. The decline was primarily due to lower revenues resulting from lower shipments and higher cost per wafer resulting from lower production volumes over which fixed costs are allocated, including the impact of significantly lower utilization of manufacturing assets, partially offset by higher selling prices resulting from a favorable product mix. The fixed costs in second quarter 2009 included the impact of an upward revision of projected useful lives and a corresponding elimination of projected residual values for 12-inch process equipment used for leading-edge technologies. This upward revision of projected useful lives and elimination of projected residual values, which was made in fourth quarter 2008, resulted in a favorable impact of $18.0 million for second quarter 2009. Compared to the previous quarter, gross profit was up from a gross loss of $27.5 million, or negative 11.3 percent, primarily due to higher revenues resulting from higher shipments and lower cost per wafer resulting from higher production volumes over which fixed costs are allocated.

Research and development (R&D) expenses were $45.8 million, an increase of 6.9 percent from $42.8 million in the year-ago quarter, primarily due to higher cost of development activities related to the advanced 32nm and 28nm technologies and lower reimbursement of expenses from grants, partially offset by lower payroll-related expenses. Compared to the previous quarter, R&D expenses were down 4.6 percent from $48.0 million in first quarter 2009, primarily due to lower cost of development activities related to certain advanced technologies.

Sales and marketing expenses were $13.6 million, down 23.6 percent compared to $17.8 million in the year-ago quarter, primarily due to lower financial support for pre-contract customer design validation activities, lower payroll-related expenses and lower Electronic Design Automation (EDA) expenses. Compared to the previous quarter, sales and marketing expenses were up 6.2 percent from $12.8 million, primarily due to higher payroll-related expenses, partially offset by lower financial support for pre-contract customer design validation activities.

General and administrative (G&A) expenses were $10.5 million, down 6.1 percent compared to $11.2 million in the year-ago quarter, primarily due to lower payroll-related expenses, partially offset by higher costs for external services. Compared to the previous quarter, G&A expenses were down 1.0 percent from $10.6 million primarily due to lower costs for external services.

Other operating expenses, net, were $5.6 million, compared to $1.3 million in the year-ago quarter and $3.0 million in the previous quarter. Other operating expenses included an exchange loss of $4.0 million in second quarter 2009, compared to an exchange gain of $1.4 million and $4.8 million in second quarter 2008 and first quarter 2009 respectively. In first quarter 2009, other operating expenses also included recognition of $5.9 million from a workforce re-sizing exercise.

Equity in income of Chartered's minority-owned joint-venture fab, SMP (Fab 5), was $6.7 million compared to equity in income of $9.6 million in the year-ago quarter, primarily due to lower revenues resulting from lower shipments and lower selling prices. Compared to the previous quarter, equity in income of SMP was up from a loss of $1.7 million, primarily due to higher revenues resulting from higher shipments and lower cost per wafer resulting from higher production volumes over which fixed costs are allocated, partially offset by lower selling prices.

Net interest expense was $14.0 million, compared to $14.2 million in the year-ago quarter, primarily due to lower interest expense arising from lower interest rates, partially offset by lower interest income and lower interest capitalization associated with the ramp of Fab 7 arising from lower interest rates.

The net loss of Chartered's consolidated joint venture fab, Chartered Silicon Partners (CSP or Fab 6), was $4.3 million. As a result of the adoption of FAS160 with effect from January 1, 2009, a 49 percent share of CSP's loss amounting to $2.1 million was allocated to noncontrolling interest in CSP. No profit or loss was allocated to the noncontrolling interest in CSP in second quarter 2008.

Net loss was $41.5 million, or negative 11.9 percent of revenues, compared to a net income of $43.4 million, or 9.5 percent of revenues in the year-ago quarter, and a net loss of $114.2 million or negative 46.9 percent of revenues in the previous quarter. Net loss attributable to Chartered was $39.4 million in second quarter 2009. Net loss for second quarter 2009 included a tax benefit of $8.8 million. This tax benefit arose primarily from recognition of deferred tax assets for Fab 3E's unabsorbed wear-and-tear allowances and tax losses, which became available for carry forward upon approval from the Singapore tax authorities in second quarter 2009. This tax benefit is net of valuation allowances against a portion of the deferred tax assets that is assessed to be not realizable for offset against future taxable income. Such future taxable income is based on Chartered's projection, which is contingent upon future market conditions. Net income for second quarter 2008, included a tax benefit of $48.7 million. This tax benefit arose primarily from recognition of deferred tax assets for Fab 7's unabsorbed wear-and-tear allowances and tax losses, which became available for carry forward subsequent to a retroactive change of tax status for Fab 7 from "pioneer" to "non-pioneer." This tax benefit is net of valuation allowances against a portion of the deferred tax assets that is assessed to be not realizable for offset against future taxable income. Such future taxable income is based on Chartered's projection, which is contingent upon future market conditions.

Basic loss per American Depositary Share (ADS) and basic loss per share in second quarter 2009 were ($0.50) and ($0.05) respectively, compared with basic earnings per ADS and basic earnings per share of $1.07 and $0.11 respectively in second quarter 2008. Diluted loss per ADS and diluted loss per share in second quarter 2009 were ($0.50) and ($0.05) respectively, compared with diluted earnings per ADS and diluted earnings per share of $0.96 and $0.10 respectively in second quarter 2008. The basic and diluted loss per ADS and loss per share figures have been adjusted for the 27-for-10 rights offering and the 10-into-1 share consolidation which were completed during second quarter 2009.

Wafer Shipments and Average Selling Prices (eight-inch equivalent)

Shipments in second quarter 2009 were 358.9 thousand wafers, a decrease of 30.6 percent compared to 517.3 thousand wafers in second quarter 2008. Shipments in second quarter 2009 increased by 55.2 percent compared to 231.2 thousand wafers shipped in first quarter 2009. Shipments including Chartered's share of SMP were 385.1 thousand wafers, a decrease of 29.8 percent compared to 548.5 thousand wafers in second quarter 2008. Shipments including Chartered's share of SMP in second quarter 2009 increased by 59.2 percent compared to 241.9 thousand wafers shipped in first quarter 2009.

ASP was $921 per wafer in second quarter 2009, compared to $928 per wafer in first quarter 2009. ASP including Chartered's share of SMP was $910 per wafer in second quarter 2009 compared to $927 per wafer in first quarter 2009.

Capacity and Utilization

Capacity utilization in second quarter 2009 was 60 percent compared to 88 percent in the year-ago quarter, and 38 percent in first quarter 2009. Capacity utilization is based on total shipments and total capacity, both of which include Chartered's share of SMP.

  Utilization Table                                                                                                                                                   Data including Chartered's share of SMP                                           Thousand 8" equivalent wafers   2Q 2008   3Q 2008   4Q 2008   1Q 2009   2Q 2009   Total wafers shipped            548.5     544.5     377.7     241.9     385.1     Total capacity                  624.8     638.9     645.2     633.1     639.9     Utilization                     88%       85%       59%       38%       60%        -------------------------------------------------------------------------------  

  Capacity by Fab                                                                                                                                                                                       (Thousand 8" equivalent wafers)   2Q 2008   3Q 2008   4Q 2008   1Q 2009   2Q 2009   Est. 3Q 2009   Fab 2                             153.8     155.5     155.5     152.2     153.8     155.5          Fab 3                             80.4      83.1      83.1      81.3      82.2      83.1           Fab 3E                            74.3      75.1      75.1      73.5      74.3      75.1           Fab 5 (Chartered's share)         35.5      35.9      35.9      33.7      34.0      34.4           Fab 6                             126.2     127.4     130.2     130.5     131.9     111.9          Fab 7                             154.6     161.9     165.4     161.9     163.7     181.4          Total                             624.8     638.9     645.2     633.1     639.9     641.4           -------------------------------------------------------------------------------  

Market Dynamics

The following business statistics tables provide information on revenues including Chartered's share of SMP by market sector, region and technology.

  Breakdown by Market Sector                                          Revenues including Chartered's share of SMP (Percentage of Total)                    2Q 2008   3Q 2008   4Q 2008   1Q 2009   2Q 2009    Communications   48%       52%       48%       49%       51%        Computer         17%       13%       12%       8%        9%         Consumer         30%       31%       33%       37%       37%        Other            5%        4%        7%        6%        3%         Total            100%      100%      100%      100%      100%        -------------------------------------------------------------------------------  

  Breakdown by Region                                                 Revenues including Chartered's share of SMP (Percentage of Total)                  2Q 2008   3Q 2008   4Q 2008   1Q 2009   2Q 2009      Americas       58%       60%       63%       53%       56%          Europe         9%        10%       10%       8%        8%           Asia-Pacific   24%       21%       15%       24%       30%          Japan          9%        9%        12%       15%       6%           Total          100%      100%      100%      100%      100%          -------------------------------------------------------------------------------  

  Breakdown by Technology (micron)                                    Revenues including Chartered's share of SMP (Percentage of Total)                     2Q 2008   3Q 2008   4Q 2008   1Q 2009   2Q 2009   0.045 and below   -         -         -         3%        2%        Up to 0.065       13%       19%       23%       21%       27%       Up to 0.09        4%        3%        1%        1%        1%        Up to 0.13        32%       34%       34%       38%       35%       Up to 0.15        -         -         1%        1%        1%        Up to 0.18        21%       18%       17%       20%       15%       Up to 0.25        14%       10%       9%        5%        9%        Up to 0.35        10%       9%        8%        5%        6%        Above 0.35        6%        7%        7%        6%        4%        Total             100%      100%      100%      100%      100%       -------------------------------------------------------------------------------  

Review and Outlook

"As we go into the third quarter, we are seeing healthy sequential growth in our business mainly driven by our leading-edge 65nm technology node and to a lesser extent 0.35-micron and above technology nodes, partially offset by some reduction in the 0.25-micron technology node. The communications sector is expected to primarily drive this growth, followed by computer sector to a lesser extent. Based on our current outlook, we expect our total business base shipments and revenues to sequentially increase approximately 16 percent and 11 percent respectively in the third quarter. In line with the strength we are seeing at the leading-edge technologies, we expect revenues from 65nm and below technologies to increase approximately 25 percent sequentially and represent approximately 33 percent of our total business base revenues in the third quarter," said Thomas.