Investor Relations

Solomon Systech Announces 2014 Interim Results

Extends Application and Product Portfolio with Improved Book-to-bill Ratio

Focuses on Higher-growth Smart Products to Boost Growth

 

Financial Highlights:

For the six months ended 30 June
 

2014

2013

 Change

US$’m

HK$’m equivalent

US$’m

HK$’m equivalent
Sales 27.3 211.2 31.1 241.4 -12%
Gross Profit 9.3 72.4 12.8 99.0 -27%
Gross Margin 34.3% 41.0% -6.7pts
Net Profit/ (Loss) (1.5) (11.4) 0.8 6.4
Earnings/ (Loss)

per share

 (0.06)

US cent

 (0.46)

HK cent

 0.03

US cent

 0.26

HK cent
Book-to-bill Ratio 1.1 0.8

 

(Hong Kong – 18 Aug 2014) – Solomon Systech (International) Limited (“Solomon Systech” or “the Group”; SEHK: 2878) announced today its 2014 interim results for the six months ended 30 June 2014 (“1H 2014”). Total sales decreased for the period but the book-to-bill ratio improved with an extended product and application portfolio.   

 

Total sales during the period under review were US$27.3 million, a decrease of 12% year-on-year. Gross margin was 34.3%, down 6.7 percentage points year-on-year. Excluding the provision for slow moving inventory of US$2 million in 1H 2014, the gross margin was about 41.7% which was at a comparable level to 1H 2013.

 

The Group’s total shipments saw a year-on-year decrease of around 7% to 44.3 million units. This was largely due to the volatile demand fluctuations of some of the Group’s key customers and market segments, as well as the general economic slowdown in Q1 2014. Yet, as the global economy started to pick up in Q2, the unit shipments of the Group in Q2 improved with an increase of around 6% year-on-year. It is also noteworthy that the book-to-bill ratio for 1H 2014 was 1.1 (1H 2013: 0.8), indicating that demand still outpaced supply, and that the sales backlog would be carried over to the rest of the year.

 

Dr. Humphrey Leung, Managing Director of the Group, said, “During the period under review, we remained focused on high-growth, high-volume smart applications. We have made satisfactory progress in making inroads into rapidly growing applications, like electronic shelf labels and wearable devices, in particular smart watches and health & fitness devices, which will likely become “the next big thing” in the consumer electronics market. For smartphones, we have extended our product and application portfolio to cover in-cell touch TFT LCD display driver ICs, FHD TFT LCD display driver ICs, etc. For TV and monitors, more new products have been qualified for production. Our shipments have shown improvement since Q2 and we shall strive to maintain the growth momentum.”

 

Business Review

 

For the Mobile Display business, the Group has made good progress in the development of TFT LCD display driver ICs targeting FHD resolution smartphones. It has also been collaborating with top-tier customers to develop display driver ICs for in-cell touch panels.

 

The capacitive touch panel controller business has been slow under increasingly intense competition and price erosion. This together with the reduced market demand for MIPI display interface controller ICs targeting HD/FHD display have impacted the unit shipment of the Mobile System products. Nonetheless, the Group has invested to further enhance product features and performance, and bolster the capability of its design engineering and marketing teams to speed up the development and launch of new technologies and higher value-added solutions. New touch panel controllers targeting smartphones and MIPI display interface controllers for large-sized WQXGA panels have been launched during the period. Meanwhile, the Group has started to penetrate into more portable applications, such as smart watches and other wearable devices, in view of their strong potential, laying the foundation for future growth.

 

The Advanced Display business recorded a rise in unit shipment which was mainly attributed to an increase in demand for the Group’s AMEPD driver ICs for Electronic Shelf-labels (ESL) displays. The Group’s AMEPD driver ICs have also won design-in projects for new ESL panel sizes and also successfully extended to new applications, including healthcare devices and smart cards. The Group’s PMOLED display driver ICs have made good inroads into the wearable health and fitness devices market by scoring design-wins with world renowned brands, and also captured design-wins for other applications.

 

The Large Display business unit saw an increase in revenue of around 7% despite a slight drop in unit shipment, attributed to the Group’s shift towards higher value-added products. Starting from Q2, the demand for its TVs and monitors has been growing. The Group’s TFT driver IC for 18.5” HD monitors has just started mass production, while that for 21.5” FHD monitors is expected to start early in 2H 2014.

 

Prospects

New Products in the Pipeline, Focusing on Bright Spots for Growth

 

For smartphones and tablets, the Group targets to complete qualification and start pilot production and shipment of its new TFT LCD display driver ICs for FHD resolution panels in 2H 2014. Mass production of a number of new capacitive touch panel controller ICs will also begin.

 

The growth momentum of smart TVs and monitors started in Q2, and it is expected to continue. The Group will further boost the growth of its large display driver business, increasing further its share of the major customer’s business.

 

For other smart devices, the Group will strive to continue to boost its business in smart watches and health & fitness devices. The global ESL market demand by retail stores is increasing; the Group will continue to penetrate further into the ESL business segment. It has also been identifying opportunities to extend the applications of PMOLED display ICs to set-top boxes, smartphone accessories, etc. For AMOLED and OLED lighting, the Group will complete new product evaluation, and provide customers with sample ICs for further development.

 

Dr. Leung concluded, “Looking ahead, our new products launched are expected to capitalize on the growth momentum. To be well prepared for the shipment ramp up, we shall further increase our manufacturing capacity and improve manufacturing lead-time. We aim to capture the business opportunities arise to achieve growth.”