* (Loss)/Earnings Per Share, Basic calculation is based on the weighted average number of shares for the year
 ** (Loss)/Earnings Per Share, Diluted calculation is based on the adjusted weighted average number of shares for the year

• Display IC shipment reached 115 million units

• Mobile-TFT display ICs shipment recorded a 23% growth and became the largest revenue contributor of the Group

• Business transformation braced solid results: expanded product portfolio from IC components to system solutions, extended market applications from mobile phone to consumer electronics, enriched revenue sources from single to multiple

• Book to bill ratio for the year ended 31 December 2008 was 0.82 

• The Board proposed a final dividend per share of 3 HK cents

• Display system solutions and green power products set to become new revenue sources

(Hong Kong - 25 March 2009) - Solomon Systech (International) Limited (“Solomon Systech” or “the Group”; SEHK: 2878) announced its FY2008 results and indicated that, although 2008 was a challenging and difficult year, at its effort in business transformation and investment in research and development (“R&D”), it succeeded in diversifying its product portfolio and opening new income streams during the year, which has in turn strengthened its foundation for weathering the testing times ahead.  

For the year ended 31 December 2008 (“FY2008”), the Group’s sales amounted to US$93 million, decreased by 44% year-on-year. The decline of revenue was mainly the result of (1) average selling price eroded by 15%; (2) weaker than expected demand for consumer electronics against deteriorating economic conditions and (3) slower than expected development of the Group’s new businesses. Gross profit margin was lower to 18.2% as the result of inventory provision of US$4.7 million due to rapid market and technology change. 

Affected by a lower gross profit and provision for impairment loss of US$4.6 million and the unrealized loss on financial assets of US$5.1 million, the Group recorded net loss attributable to the equity holders for the year of US$23.4 million (2007: US$10.2 million net profit). Basic loss per share was 0.97 US cent. 

The Board of the Directors proposed to declare a final dividend of 3 HK cents per share. The full year dividend per share will be 3 HK cents (2007: 3 HK cents) translating into a yield of 8.7% based on the average daily closing price of HK$0.344 for 2008. 

The Group’s Managing Director, Mr. Humphrey Leung, said, “2008 was a challenging year for Solomon Systech as its overall performance was affected by the global economic downturn. Pushing on with transforming our business for a better future, we have broadened our capabilities, moving on to deliver total system solutions and building a stronger base for growth.” 

The transformation made by the Group during the year and going forward: 

• Business transformation: from IC component sales to application system solution sales

• Market application transformation: from mobile phone to consumer electronics and industrial applications

• Revenue transformation: from single to multiple revenue streams

• Expertise transformation: from IC know-how to software and system design expertise

• Operating effectiveness transformation: continuous improvement

Business Review

During the FY2008, the Group shipped a total 115 million units of display IC (2007: 173 million units). The shipment of monochrome STN and color STN (“CSTN”) display ICs decreased as the mobile phone market continued to shift its demand to mobile TFT (“m-TFT”) display ICs. m-TFT display ICs shipment recorded a 23% growth to 36.6 million units, reflecting the rate at which the m-TFT product family has been over-taking the monochrome STN and CSTN in sales. OLED display market has more or less stabilized with the OLED display technology finding its way into various new applications.  Shipment of new display ICs fluctuated as volume shipment changed from mobile phone application to other new emerging applications like electronic shelf label (“ESL”), e-card and portable storage device. The Group also shipped an initial volume of system ICs for the system solution businesses in 2008.

To enhance business development and customer relations, the Group strategically focused resources on developing several key customer accounts in 2008. The focused-arrangement led to the landing of several major projects in new market applications such as audio video (“AV”) product, personal navigation device (“PND”), mobile digital TV (“MDTV”) and ESL. The Group will continue to support these strategic accounts targeting to open more business opportunities. 

The Group spent roughly US$19.3 million on R&D in 2008, similar to that of the previous year. The Group’s R&D team had been realigned to include more system application and software engineers to match the requirements of the system solution businesses. The team continually designs products using various wafer technologies as advanced as 90nm.  

Prospects

The first half of 2009 is expected to stay challenging for the Group. Heeding the situation, it has been pushing for progress in delivering new technologically leading ICs, new system solutions for emerging applications and expanding its customer base. The Group will continue to diversify its product portfolio and provide fast turnkey solutions to customers. 

Mobile Display

Catering to the changing needs of the market, the Mobile Display business unit continues to develop new generation display IC products that can support more display resolution formats and with competitive features such as touch panel IP, dynamic backlight control and MIPI interface. Market applications have extended from mobile phone to MP3/MP4, PND, AV application, etc. New families of m-TFT driver IC in landscape display resolution format have been developed specifically to address those new applications. In 2009, the Group expects m-TFT display ICs to continue to claim a dominant portion of the IC unit shipment of the segment as the product family continues to develop and support competitive features for different applications. 

OLED Display

The Group continues to be the leader in the Passive Matrix OLED display ICs market and will continue to develop Active Matrix OLED display ICs with leading panel makers. The market for OLED display ICs may be affected by uncertain consumer confidence, but in general, it will remain stable and steady in 2009 as the OLED display continues to expand to new applications like industrial appliance, office equipment and health care product. 

New Display

As a leader in the industry with high production capacity for new display ICs, the Group is positive about capturing the emerging new display IC market as more applications take advantage of the new display technology. The Group began shipping production quantities for ESL application in 2008 and design-in work will continue in 2009 for other e-paper projects involving e-signage and portable storage device. As the e-paper technology improves, new markets such as e-card and mobile decorative display will surface. The Group believes the demand for new display will surge and present it with new revenue streams as it moves forward in tapping emerging markets and new applications.

Display System Solution

Given the continual design-wins for new display controller products, the Group expects volume shipment to continue for the segment in 2009. Mass production of its Mobile Industry Processor Interface (“MIPI”) chipset commenced in 2008 and one of the end products employing the chipset was launched to the market at the end of the year. More design-win projects are expected to be ready for mass production in 2009. 

The high-performance MagusCore^TM  multimedia system solution was launched in the 3Q 2008, and the end products using MagusCore^TM for China Mobile Multimedia Broadcasting (“CMMB”), the MDTV standard adopted in China, were subsequently introduced in the China market in November 2008. The Group believes the MagusCore^TM system solution stands well in capturing the market and will help to accelerate development of the MDTV industry in China. It expects to deliver other system solutions based on the current MDTV platform and expand into other high-volume applications like PND, WiFi and 3.5G mobile internet device. 

Green Power

The Group continues to seek for new business opportunities in emerging market and sees promises in the growing solid state lighting and signage industry for extending its display business with a special focus on the energy-saving or “green” product. To immediately tap opportunities in the thriving industry, the Group set up the Green Power business unit in 2008, which aligns its core IC design capability with display specialist and system integrator in the value chain to supply immediate LED lighting solution to the market.  

Armed with the proprietary technology for high-brightness LED, lighting system integration expertise and new LED driver ICs, the collaboration has enabled the Group to capture business right away and will be able to bring in new sources of revenue beyond 2009.  

“We are determined to improve, seize opportunities amid changes and continue to diversify our business to provide total system solutions. We are prepared for growth riding on the diversified revenue streams from different businesses and different market places,” concluded Mr. Leung.

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