Solomon Systech (International) Limited Delivers Encouraging Performance in The First Half of 2022

Revenue Increased by about 45.1% to US$108.5 Million Successfully Adjust the Product Mix to Focus on High-End Products

Financial Highlights:

• Revenue increased by about 45.1% to US$108.5 million
• Gross profit was US$42.2 million, jumped by 45.0%
• Gross margin was 38.9%
• Profit attributable to owners of the parent was US$21.8 million
• Earnings per share was 0.87 US cent (equivalent to 6.74 HK cents)

(HONG KONG, 19 August 2022) Solomon Systech (International) Limited (the “Company’’; SEHK: 2878) announced today its interim results of the Company and its subsidiaries (collectively, the “Group”) for the six months ended 30 June 2022 (the “period under review”).

During the period under review, the demand for the Group’s products remained strong. The Group strategically procured and managed to adjust the product mix to focus on high-end products, which rewarded with an outstanding performance and results. The Group achieved strong growth in sales revenue and total revenue during the Period which amounted to approximately US$108.5 million, an increase of more than 45.1% over that of the same period last year (1H 2021: US$74.8 million). The increase in revenue was because of the Group shifted its focus to areas with higher value and more sophisticated features. Gross profit of US$42.2 million and gross margin of 38.9% were recorded during the Period (1H 2021: US$29.1 million and 38.9%, respectively). The significant increment in gross profit was mainly attributable to the change in product mix types during the six months ended 30 June 2022. The Group reported a net profit attributable to owners of the parent of US$21.8 million during the Period (1H 2021: US$10.7 million).

BUSINESS REVIEW

During the period under review, even as city-lockdowns and various travelling restrictions were still common in the Greater China Area, the Group benefited from a resumption in global economic activities and changing customer habits which drove demand for electric vehicles and 5G smartphones as well as a steady demand for wearables and Artificial Internet of Things (AIoT)/Internet of Things (IoT) devices. With worldwide semiconductor demand remaining strong in the first half of 2022, the increase in raw material and procurement costs resulted in higher selling prices across the industry. To tackle the chip component shortage, in starting from early 2021, the Group entered into agreements with leading overseas foundries, these established relationships allow us to maintain a stable supply of chip components in order to support the demand for the Group’s products in 2022.

New Display ICs

During the Period, New Display ICs products showed a significant growth in revenue, as a result of a better product mix and the shifting of focus to more sophisticated products. The increase in demand arose from Electronic Shelf Labels (ESL) in the European and the North American markets. The Group co-developed with E Ink Holdings Inc. (“E Ink”) for the Display IC Solutions for Spectra™ 3100, a next-generation specialized platform for ESL and retail signage application. In 2021, the Group had a major technological break-through that enabled us to develop an ESL with four colour spectrum display. The four colour spectrum display project is expected to launch in 2023, at which time it will enter mass production for use in Advanced Colour e-Paper (ACeP) products. To further tap into the markets of e-Signage and e-Reader applications, the Group developed a specific driver IC, which is expected to commence mass production soon.

OLED Display ICs

Group is a leading PMOLED display driver IC player and was a global leading supplier in terms of units of shipment in 2021 and during the Period. During the Period, the Group’s OLED Display business benefited from the strong market demand for PMOLED wearable devices, smart home solutions and Internet of Things (IoT)/Artificial Internet of Things (AIoT) solutions. This need for sophisticated features and product upgrades is driving the demand momentum.

Our next-generation display solution milestone will be a micro-LED display that uses arrays of tiny micro-LED chips arranged on LTPS backplane. Solomon Systech is a forerunner in the application of mini/micro-LED. Our mini-LED DDI solutions for 50” to 100” indoor signage display have been in mass production since 2018 and are used in the curved signage display in the underground and subways in the UK and the US. As the global high-end consumer electronics market continues to expand, orders for the Group’s mini/micro-LED IC products are expected to grow accordingly.

Mobile Display and Mobile Touch ICs

Solomon Systech provides a wide range of ever-expanding Mobile Display and Mobile Touch IC solution. During the Period, although demand for Mobile Displays dropped due to reduced market demand for consumable electronic products, there was a substantial growth in both volume and average selling price in Mobile Touch ICs. This fully offset the negative impact from the drop in the demand for Mobile Displays, resulting in a substantial increase in sales revenue over that of 1H 2021.

In 2021, the Group, as part of the latest proprietary scheme, launched its first full-colour TDDI specialised for wearables and IoT devices. The TDDI has superior features and offers a combination of cost-effective high performance and low power consumption. Besides, our MIPI – Local Dimming IP is ready to be commercialized and is scheduled to be launched in Q4 2022. In addition, to leverage the Group’s pioneering TDDI technologies, the Group is co-developing a human interface display platform with a leading small-to-medium-sized TFT-LCD panel maker. The IC solution is expected to enter mass production in Q3 2022.

Large Display ICs

The Group provides a wide range of large display driver IC solutions that support various applications, including monitors, notebooks and large-size TVs. Sales revenue during the Period was lower than 1H2021 because of the COVID-19 Pandemic and the change in customer preference. The Group launched a high-speed Peer-to-peer (P2P) display driver IC for the 165Hz high-refresh-rate gaming monitor and 8K HDTV. The driver IC also utilizes a novel architecture with I/O speed up to 3.6Gbps. This latest offering will enhance our product value and increase the Group’s visibility in the booming high-end entertainment market.

OUTLOOK

During the period under review, Supply chain issues are widespread while global supply chain issues and chip shortages are not as significant as they were in 2021, prices remain at a relatively high level. Nonetheless, the Group will continuously develop and provide value-added products to customers, despite the ever-increasing pressure in logistic and materials costs. To maintain the Group’s business growth and to enhance our global visibility, the Group is working on a new ESL IC solution that supports seven colours and on providing novel display IC solutions to the e-Reader market. Following the launch of the Group’s mini-LED display IC products, the Group will intensify its marketing efforts among our first-tier customers to expand our market share.

Embracing the growing trends in the game console controller market, the Group plans to offer players an unprecedented gaming experience. To capture the market potential of the metaverse, we intend to capitalise on our capability in high-speed and high-resolution display IC technology by leveraging the development of enhanced AR and VR products. With larger high-resolution TVs being introduced to the market, the Group is implementing a promotion plan to strengthen our presence in the market.

Mr. Wang Wah Chi, Raymond, Chief Executive Officer and Executive Director of Solomon Systech (International) Limited said,: “While global supply chains and chip shortage remained under pressure over the past year due to a number of factors including continued outbreaks of Covid-19, logistics delays, bottlenecks and higher transportation costs, the Group was able to successfully navigate these challenges. With efficient supply chain management to ensure smooth operations and long-term development, the Group persisted with innovation and diligently implemented its strategies with foresight on market trends which rewarded us with an outstanding performance and results. As part of our corporate strategy, we will stay focused on products that create value for our customers and seek opportunities arising from evolving trends.”

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