Low-end products, 3G delay hit SIM earnings

PUBLISHED : Friday, 31 August, 2007, 12:00am
UPDATED : Friday, 31 August, 2007, 12:00am

SIM Technology Group, a mainland mobile handset technology provider, said first-half profit dropped 55 per cent as prices fell on its low-end products and shipments of more profitable third-generation mobile devices had been be delayed.

Net profit for the six months to June fell to HK$89.9 million from HK$201.53 million, while sales slumped 36 per cent to HK$1.11 billion from HK$1.73 billion.

The company will pay an interim dividend of three HK cents a share, against 6.8 HK cents a year earlier.

The company's mobile handset solutions business recorded 13.6 per cent growth in sales to four million units in the first half, but revenue was down 34 per cent at HK$691.38 million. Gross profit margin narrowed to 11.05 per cent from 17.07 per cent a year earlier.

'To avoid competition in such a low-margin market, we shifted our resources to sell more phone solutions with high-margin products such as smart-phones and mobile phones with built-in digital television receivers,' deputy chairman Raymond Tsang Hen-loon said.

SIM is hoping to expand into the TD-SCDMA handset market for 3G services in the mainland but is still waiting for the government to issue licences. The company previously estimated that 3G would be a growth engine in the first half of this year.

In the first half, the company won six new contracts for TD-SCDMA and GSM dual-mode handset projects from five vendors. Shipments will be made only after China Mobile Communications Corp awards handset procurement orders in October.

'We are conducting trials with our clients and preparing for China Mobile's tender. Once the contracts are confirmed, we can start our shipments soon after,' Mr Tsang said.

The company has reached an agreement with SK Telecom of South Korea to jointly develop TD-SCDMA mobile phones and related products

'The 3G market in China will not run away; we are ready to tap the market once the licences are issued,' Mr Tsang said.