• Display IC shipment reached 40.5 million units

• Profitability improved as reflected in 62% loss reduction YoY and 87% HoH to US$2.3 million

• Book to bill ratio at 1.07 for the period ended 30 Jun 2009, reflecting the Group has potential improvement in its 2H 2009 business 

• Keep on its efforts in product diversification and provision of fast turnkey solutions

(Hong Kong - 18 August 2009) - Solomon Systech (International) Limited ("Solomon Systech" or "the Group"; SEHK: 2878) announced its interim results for the six months ended 30 June 2009 ("1H 2009").  Profitability improved as reflected by smaller loss incurred in the review period, it also saw the potential recovery in the business of 2H 2009 as its book to bill ratio for the period ended 30 June 2009 raised to 1.07. 

In 1H 2009, Solomon Systech reported sales amounted to US$26.7 million (equivalent to HK$206.6 million), a decrease of 47% year-on-year.  The decline was mainly due to (1) demand weakened by global market recession; (2) erosion of average selling price ("ASP") and change of product mix and; (3) new businesses taking longer time for market development.  During the review period, it shipped a total of 40.5 million units of display ICs, declined by 33% year-on-year.  And its blended ASP dropped by 21% year-on-year. 

The Group's gross profit margin recorded a net increase of 6 percentage points year-on-year and reached 27.9%, where 3.4 percentage points were contributed by  selling off of US$1.2 million worth of obsolete inventory. Meanwhile, the Group implemented an array of expenses control and belt tightening measures, which total expenses (including research and development ("R&D"), selling & distribution, administrative) were down by US$4.1 million accordingly, representing a cut of 24%.

With the total contribution of US$3.6 million from interest and financial assets at fair value through profit or loss and also the tax credit of US$1.2 million, the Group recorded net loss attributable to equity holders of US$2.3 million (equivalent to HK$18.1 million), a significant reduction by 87% or US$15.1 million as compared to the Group's 2H 2008 loss attributable to equity holders of US$17.4 million.  Basic loss per share was 0.75 HK cent, which also translated to an improvement of 86% HoH.  No interim dividend was declared by the Board of Directors. 

The Group's financial position remained healthy with net cash at US$93.1 million (equivalent to HK$722.0 million), as at 30 June 2009. 

Mr. Humphrey Leung, Managing Director of the Group, said, "The market sentiment of 1H 2009 had gradually picked up from adverse effect of the global economic slowdown in 2008.  The Group keeps up our efforts in product diversification and provision of fast turnkey solutions to customers." 

Business Review

Among the 40.5 million units of display ICs shipped, STN display ICs and mobile TFT ("m-TFT") display ICs decreased reflecting an overall weak consumer electronics market.  OLED display ICs shipment moderately increased by 10% year-on-year to 11.8 million units as the market was stable with the OLED display technology findings its way into various new applications. 

Shipment of new display ICs also grew by 15% to 3.8 million units as demand in electronic shelf label ("ESL") application started to pick up.  Also, it shipped over 1 million units of system IC under the Display System Solution business including graphic controllers, multimedia processors in the MagusCore^TM family and Mobile Industry Processor Interface ("MIPI") chipsets. Meanwhile, the Green Power business started a small pilot run quantity shipment of LED lighting solution.

The Group has strategically focused resources on developing several key customer accounts.  The initiative has led to the landing of several major projects in new market applications such as audio video ("AV") products, personal navigation device ("PND"), mobile digital TV ("MDTV"), mini-projector, ESL and LED street lamp.  Armed with leading technology, Solomon Systech has consolidated business relationship with existing customers and attracted new key customers. 

The Group's R&D expenses amounted to US$6.9 million for the 1H 2009.  During the period, it filed four patent applications with and had five earlier applications granted by the United States Patent and Trademark Office. 

Prospects

Seeing the potential improvement in market demand in 2H 2009, the Group will continue to deliver new ICs that employ leading technologies and expand its customer base. 

Display IC Businesses

For Mobile Display ICs, the Group expects m-TFT display ICs to continue to make up a major portion of shipment of this business unit in the 2H as more supportive features and diverse applications will be developed.  Touch panel ICs are expected to bring new business opportunities.  New and competitive features, such as multi-touch panel IP, dynamic backlight control, landscape display resolution and MIPI/Mobile Display Digital Interface ("MDDI") interface, shall enable the Mobile Display products to compete in the market. 

On OLED display, the Group shipped more than 150 million unit in the past 9 years, it is leading in the Passive Matrix OLED display IC market, covering products from icon, mono, gray scale to full color, and is developing new innovative display solutions that integrate new features such as touch sensor and charge bump into the ICs for the purpose of reducing overall system cost.  Mobile phones and MP3 players continue to be the two major applications.  Meanwhile, the Group is developing Active Matrix OLED technology display ICs, another family of OLED technology, with leading panel makers. 

Solomon Systech is positive about the emerging new display IC business as their advantages on applications are being realized, particularly in mobile phone index and decorative display, ESL, portable storage devices such as USB thumb drive and external hard disk drive, and e-cards.  The Group is providing a wide range of IC solutions for different new display technologies such as Electrophoretic, Cholesteric and other bistable displays.  All-in-all, the Group believes demand for new display will surge, thus it will keep investing in research and expansion of the business to make sure it stays ahead of the competition. 

System Solution Businesses

For the Display System Solution business, the Group is putting out total system solutions with system IC like image processors and graphic controllers that support consumer applications such as handsets, MP4 players, PND and other portable consumer products.  

Given the continual design-wins received by its graphic controller products, the Group expects volume shipments for the segment will continue in 2H 2009.  Boasting early leadership in MIPI, mass production of the MIPI chipset has commenced in 1H 2009 and more design-win projects are expected to be ready for mass production in the 2H. 

Following the launch of the first high-performance MagusCore^TM multimedia system solution for the China MDTV market in Q3 2008, another multimedia processor of high cost-performance ratio was added in 1H 2009.  More advanced solutions will be introduced in 2H.  The Group believes the MagusCore^TM system solutions stand well in capturing new market opportunities in product applications like MDTV, PND, mini-projector and AV products. 

Set up in late 2008, the Green Power business unit focuses on energy-saving or "green" products. Applying its proprietary high-brightness LED technology, lighting system integration expertise and complementary LED driver ICs, the Group has already started selling LED driver ICs and LED emitter products for indoor LED lighting.  It has also developed complete and competitive LED lighting solutions for outdoor LED lighting applications in China such as street lamp and architectural lighting.  Many design-in projects with customers are in final product evaluation stage.  Serving an emerging market with tremendous growth potential, the Green Power business unit will strive to capture new business opportunities and new revenue sources beyond 2009. 

"We will concentrate on developing projects with strategic alliances, providing dedicated services, launching new and comprehensive products and solutions to customers to defend our market position and brace long-term growth," concluded Mr. Leung. 

- end -

Solomon Systech (International) Limited 

Condensed Consolidated Interim Income Statement

For the six months ended 30 June 2009