FINANCIAL HIGHLIGHTS

The below information is prepared in accordance with International Financial Reporting Standards.

• Revenue increased by 39.3% from US$3,907.0 million in 2020 to US$5,443.1 million in 2021.
• Gross margin increased from 23.6% in 2020 to 30.8% in 2021.
• Earnings before interest, tax, depreciation and amortization margin increased from 54.3% in 2020 to 70.2% in 2021.

LETTER TO SHAREHOLDERS

DEAR  SHAREHOLDERS,

The year 2021 was an exceptional year in SMIC’s development history. The global shortage of chips and the strong demand for local and indigenous manufacturing brought the Company a rare opportunity, while the restrictions of the entity list set many obstacles to the Company’s development. Focused on the primary task of ensuring operation continuity, meeting customer demand, and alleviating the supply chain shortage, under the leadership of the Board of Directors and through the concerted efforts of all employees, the Company continued to push forward, while marketing, sales, planning, procurement, and operations proceeded in tandem, and the Company’s operation continuity has been basically stabilized.

The Company has made persistent efforts to meet customer demands and alleviate shortages in the supply chain. The Company has also maintained open communication and close cooperation with customers and suppliers, effectively understood the demands and development of end-user companies and the entire industry ecosystem, and continued to launch the construction of capacity. At the same time, the Company continues to improve customer satisfaction by meeting customers’ needs, which has been broadly recognized and supported by customers. The Company maintained full utilization for the whole year of 2021 and achieved solid growth in its revenue of US$5.4 billion from US$3.9 billion in the previous year.

In terms of mature technology, the eight major product platforms laid out by the Company in the past four years have precisely penetrated the existing traditional markets such as mobile, consumer products, and incremental markets such as IoT, panels, electric vehicles, new energy and so forth. In terms of advanced technology, under the continuous efforts of the dual-preparation effect of cultivating a diversified customer base and multi-product platforms, marginal benefits of output continually improves.

The Company’s development is inseparable from talent cultivation. Through multiple measures such as multi- channel recruitment, expansion of talent development avenues and establishing medium- and longterm incentive mechanisms, the Company further optimizes the structure of the talent pool, building a dedicated and innovative team.

The Company continues to uphold the concept of “caring for people, the environment and society” and actively practises corporate social responsibility. The Company also won the “Outstanding CSR Award” from Mirror Post Hong Kong again, and the first “Corporate Social Responsibility Award” from China IC Top Award. The Company will continue to strengthen its governance and create long-term value for investors.

Facing the evolution of the epidemic, the complex external environment, and the rapidly changing industry dynamics, 2022 will remain a year of challenges and opportunities. While the overall capacity in the industry is still in short supply, demand has been slowing down in some application areas, and there is a gradual shift from capacity shortage across the board to structural shortage. Following the development trend of the industry, dynamically balancing the existing traditional and incremental demand, and filling the structural gap of the supply chain are important tasks for the Company in 2022. The Company will consistently adhere to compliant operations, continuing internationalization and deep integration into the global supply chain, in order to serve customers across the globe; the Company will continue to strengthen close cooperation with customers and suppliers, orderly advance capacity expansion projects, secure existing volume, and expand incremental volume.

At last, we sincerely thank all employees for their efforts and dedication, and thanks to all our customers, suppliers, shareholders and the community for their trust and support！

Gao  Yonggang

Chairman of the Board 

Shanghai, China March  30,  2022