Chip designer Solomon Systech (International) expects surging demand for colour screen mobile telephones and portable digital media players will help maintain the company's growth and offset pricing pressure from customers. The company, which designs chips for liquid crystal displays (LCD) mainly used in mobile phones and portable electronics, shipped 1.08 million units in the first half of the year, a 17.8 per cent rise over the second half of last year. 'Despite keen competition from mainland and Taiwan rivals, we have gained market share,' managing director Humphrey Leung said. The company's global market share in display chips reached 20 per cent in the first half, up from 16 per 16 per cent a year earlier, but a 30 per cent fall in its average selling price since the second half of last year triggered investor concerns. Brokers forecast Solomon Systech's gross profit margin will drop to about 28 per cent by the end of this year, while the average selling price will fall a further 15 per cent in the second half. 'It is meaningless to look at the average selling price and profit margin,' Mr Leung said. 'We are only concerned about net profit growth. 'It is normal for the price of existing products to fall more than 10 per cent after it has been on the market for several months, so we keep launching higher-priced new products to keep our margin firm.' Mr Leung expects the gross profit margin to stay at its existing level of 30 per cent due to demand for large colour screen displays. He said chips for 1.8-inch and 2.2-inch thin film transistor liquid crystal displays were a key growth driver this year. Solomon Systech also began shipments of products for large LCD monitors in June to shareholder Quanta Computer. 'The two products share the same supply chain and therefore should help reduce costs,' Mr Leung said. However, the profit margin of the new products would be about 5 per cent lower than the company's existing mobile display business. 'We estimate our monthly shipment for large display [chips] will exceed one million units,' he said.
