Operating Expenses (Income) Analysis

Amounts in US$ thousands

3Q13

2Q13

QoQ

3Q12

YoY

Operating expenses

63,447

56,095

13.1%

106,455

-40.4%

Research and development

37,564

36,736

2.3%

72,945

-48.5%

General and administrative

24,718

42,636

-42.0%

24,859

-0.6%

Selling and marketing

9,324

9,775

-4.6%

8,178

14.0%

Other operating expense (income)

(8,159)

(33,052)

-75.3%

473

-

• R&D expenses increased to $37.6 million in 3Q13, compared to $36.7 million in 2Q13. The increase was primarily due to an $6.8 million increase in R&D expenses associated with higher R&D activities from quarter to quarter, partially offset by a $6.0 million increase in funding of R&D contracts from the government, which was $9.0 million in 3Q13, compared to $3.0 million in 2Q13.
• General and administrative expenses decreased to $24.7 million in 3Q13, down 42.0% QoQ from $42.6 million in 2Q13, mainly due to a decrease of employee bonus accrual in 3Q13.
• Other operating income was $8.2 million in 3Q13, compared to $33.1 million in 2Q13, and consisted mainly of the gain arising from the disposal of part of the Company-owned living quarters in Shanghai. This 75.3% decrease from 2Q13 was mainly due to a one-time gain recorded in 2Q13 arising from the disposal of the Company's total ownership interest in SMIC (Wuhan) Development Corporation.

Other Income (expense), Net

Amounts in US$ thousands

3Q13

2Q13

QoQ

3Q12

YoY

Other income (expense), net

(4,681)

(3,292)

42.2%

(7,335)

-36.2%

Interest income

1,394

936

48.9%

1,088

28.1%

Finance costs

(8,673)

(9,080)

-4.5%

(11,150)

-22.2%

Foreign exchange gains or losses

2,404

2,949

-18.5%

1,405

71.1%

Other gains or losses

(357)

1,126

-

537

-

Share of profits of associates

551

777

-29.1%

785

-29.8%