BEIJING - Semiconductor Manufacturing International Corp (SMIC), China's largest chip foundry by capacity, is preparing for a long industry downturn and has cut its planned capital spending for the year, company executives said on Thursday.

"We recognize the severe macroeconomic conditions out there," Tzu-Yin Chiu, who became CEO last week, said during a teleconference with analysts.

SMIC will work to implement cost reductions and speed up technology and new product development, he said.

The company has cut its planned capital expenditure (capex) this year to $800 million from $1 billion due to a recent market slowdown, Chief Financial Officer Gary Tseng said.

Mr Tseng also said he sees less need to raise more funds via equity, given the lower capex. SMIC had recently announced an ambitious capital expenditure plan and raised new funds to support it. In April it said China Investment Corp, the country's sovereign-wealth fund, agreed to invest $300 million in the firm by buying convertible preferred shares and warrants.

Meanwhile, SMIC said on Wednesday that it had swung to a second-quarter net loss on falling revenue, as customers switched to more advanced products. It forecast a further revenue drop in the third quarter.

Following years of losses, SMIC reported a net profit for four consecutive quarters through the first quarter of this year. But the company still trails behind rival contract chip makers such as Taiwan Semiconductor Manufacturing Co Ltd in production technology and scale. Analysts say this makes SMIC more vulnerable than its peers to slowdowns in the cyclical industry.

"Looking into the third quarter, the overall demand from both international and domestic customers is weaker than expected due to relatively soft end-market consumption and high inventory," Mr Tseng said in a statement. He added some customers unexpectedly changed their plans, requiring more advanced chip production technology.

SMIC said its net loss in the three months ended June 30 was $3.8 million, compared with a net profit of $96.0 million a year earlier, when SMIC benefited from a change in the fair value of a $105.9 million gain from a commitment to grant shares and warrants.

The net loss was smaller than the $27.8 million net loss average forecast of three analysts, according to a Thomson Reuters poll.

Revenue fell 6 percent to $352.4 million, slightly above the average forecast of $351.4 million in the poll.

SMIC said it expects third-quarter revenue to fall 14 percent -17 percent compared with the second quarter, due to "sudden" customer product changes and weak demand in China and abroad. It expects its third-quarter gross margin to be between 0 percent-3 percent.

SMIC hit further problems recently, replacing former chairman Jiang Shang Zhou, who died in late June. Last week it named a new chief executive after David Wang resigned in July. SMIC's new chairman is Zhang Wenyi, a former vice minister in China's Ministry of Electronics Industry, while new CEO Tzu-Yin Chiu was formerly CEO at Shanghai Hua Hong NEC Electronics Co.