• Display IC shipment increased 71% to reach 69 million units

• Sales reached US$38 million, a growth of 42% as a result of strong market demand of the Group’s IC products

• Loss in respect of the principal business was US$2.9 million, significantly reduced by half year-on-year

• Book to bill ratio at 1.6 for the period ended 30 June 2010, reflecting strong market demand in 2H 2010

• Advancing the strategy of diversifying product portfolio and provision of complete turnkey solutions

(Hong Kong – 18 August 2010) – Solomon Systech (International) Limited ("Solomon Systech" or "the Group"; SEHK: 2878) announced its interim results for the six months ended 30 June 2010 (“1H 2010”).

In 1H 2010, Solomon Systech’s sales totaled US$38.0 million (equivalent to HK$294.6 million), increasing 42% year-on-year mainly due to (1) a global market recovery and stronger overall demand for semiconductors products; (2) a percentage increase in shipment quantity significantly larger than the change in average selling price (“ASP”); (3) Advanced Display products gaining a foothold in emerging market applications; and (4) the Group’s new businesses gradually increasing their contribution. The Group recorded a 71% increase in shipment quantity year-on-year but had a 15% year-on-year drop in the blended ASP of its products due to a change of product mix.

The Group’s gross profit was up by 51% to US$11.2 million (HK$86.9 million) compared with the corresponding period last year, while gross profit margin rose slightly to 29.5% from 27.9% due to a higher percentage of products with relatively higher profit margin contributions. While remaining vigilant in controlling expenditure, the Group’s total expenses (including research and development (“R&D”), sales and distribution, and administrative) were up 7% to US$14.1 million, to support the sales growth of 42%.

The Group recorded a net loss attributable to the Company’s equity holders of US$3.9 million (1H 2009: US$2.3 million), of which a US$2.9 million (HK$22.3 million) loss related to the principal business from core display IC and system-on-a-chip solution businesses was significantly reduced by half year-on-year. No interim dividend was declared by the Board of Directors.

The Group’s financial position remained healthy with net cash at US$78.3 million (equivalent to HK$606.7 million), as at 30 June 2010.

Mr. Humphrey Leung, Managing Director of the Group, said, “With the increased demand for semiconductors in the global market and the tight manufacturing production capacity upstream in the supply chain, we have seized the business opportunities through working closely with our foundry partners, winning new design-ins with our diversified display and multimedia products, and providing value-added total solutions to our customers. Our book to bill ratio reached 1.6 as at 30 June 2010, a promising trend of strong orders expected to gain momentum in the second half of 2010.”

Business Review
The Group has shipped a total of 69.1 million units of display ICs during the review period, representing a 71% increase year-on-year. The shipments of Mobile Display products, including STN/CSTN driver ICs, mobile TFT driver ICs and touch panel ICs, were up by 34% as the overall consumer electronics market demand was stronger. The shipment of Advanced Display products increased more than a double as its OLED display ICs and new display ICs were securing design-ins for a wide range of new applications. The Group also shipped more than 1.5 million units of graphic controllers, multimedia processors and Mobile Industry Processor Interface (“MIPI”) chipsets under the Display System Solution business, and the Green Power business shipped initial consignments of LED driver ICs and power modules.

During the review period, the Group has been actively engaged with leading customers and top-tier end-product manufacturers in China, Europe, Japan, Korea, Taiwan and USA to support them with the best products and to develop the next generation solutions with new competitive features. Besides, several top-tier brands’ advanced pico-projectors were successfully launched into the market using the Group’s MagusCore^TM multimedia system solution. The Green Power segment provides LED lighting system and backlight units. In collaboration with lighting system design houses, the Group was able to enlarge its total solutions offerings and broaden its customer base for emerging market applications. The leading-edge technology in the system-on-chip solutions of the Group has also reinforced its business relationships with existing customers while attracting new key customers.

The Group’s research and development costs were approximately US$7.3 million (HK$56.3 million) during the period. The commitment to R&D continues to bear fruit as the Group has filed two patents for operating capacitive touch panel and image compression technology in different regions including the US, China, Taiwan, Korea and Europe.

Prospects
To fulfill the expected strong market demand in the second half of 2010 and the greater willingness of customers to place long term orders, the Group continues to work closely with its foundry partners and manage the supply chain efficiently. The Group will also keep diversifying its product portfolio and to provide complete turnkey solutions to customers.

Display IC Businesses
For Mobile Display ICs, the Group believes there is a huge market potential for high-end products such as smart phones and mobile internet devices (“MID”) that come with high definition (“HD”), medium size display and multi-touch functions. Hence, this unit should continue to develop new generation display IC products to support higher display resolution and bigger display size, including multi-touch panel controllers for 5”, 7” or bigger displays and TFT driver controllers for WVGA and HD display. This unit has also started the development of new display ICs to support the next generation 3D display.

For Advanced Display, the Group believes the market for OLED display ICs and e-paper display ICs in general is expected to carry on its stable growth in the 2H 2010. The Group continues to be the leader in the Passive Matrix OLED (“PMOLED”) display IC market and further expands its capability to OLED Lighting in order to capture new market opportunities. The Group also develops Active Matrix OLED (“AMOLED”) display ICs with leading panel makers. While for its new display ICs, the Group is shipping production quantities for electronic shelf label applications and the design-in work is to continue in 2H 2010 involving e-signage, portable storage devices, mobile phone indices, mobile decorative displays, e-cards, and more.

As large display manufacturing begins blooming in China, a dedicated team has been set up for Large Display business unit and moved its operation to our new Beijing Technology and Business Center. New products to support its business partners in large display are under development and should be ready for customer qualification in 2H 2010. The team intends to work closely with the Green Power business unit on LED backlight solutions to provide local support to major LCD customers in China and Asia.

System Solution Businesses
For Display System Solution business, the Group expects increase in volume shipment for the segment in 2H 2010 with the continuous design-wins for its new display controller and the MIPI IC. The Group continues to expand its product offering on the high-performance MagusCore^TM multimedia system-on-chip solution through the launch of 3rd generation of multimedia chip, thereby gaining new business. In 2H 2010, the Group intends to further promote the capability of MagusCore^TM, aiming at Android-based applications for the 3CC - Converged Communication, Cloud Computing and Consumer Content - enabling more advanced high volume applications such as eBooks, MID and 3D TV. The Group believes the MagusCore^TM system solution is poised to capture the market segment and help to accelerate development of its business. To seize a potentially booming opportunity from the market for Android-based devices, the unit is also working on building its technical capabilities in Android mobile system solutions.

The Green Power business is still at its initial stage of development and has considerable room for to grow and expand. Therefore, the Group keeps working on new products and market development in 2H 2010 with more value-added LED driver ICs and LED power modules, and also LED backlight solutions for supporting large display applications such as LCD TVs, LCD monitors and notebook computers.

“We will continue delivering innovative industry-leading ICs, launching new system-on-chip solutions for emerging high-growth display and multimedia applications, expanding our customer base and further developing our business in the emerging China market for higher value-added products.” concluded Mr. Leung.

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  Solomon Systech (International) Limited
Condensed Consolidated Interim Income Statement
For the six months ended 30 June 2010