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SCMP Reporter

Solomon Systech (International), a Hong Kong-listed display chip designer,  said its second-half net profit slumped 89 per cent because of a severe slowdown in demand.

For the six months to December last year, the company had net income of US$4.5 million, compared with US$40 million in the same period in 2005, based on its reported earning for the full year.

Sales halved to US$105 million for the six months.

For the year,  net profit dropped 71 per cent to US$22.4 million, compared with US$76.3 million in 2005. Sales plummeted 36 per cent to US$254.1 million.

The decline was mainly due to a 26 per cent drop in the price of chips  for the year, as well as 'severe demand slowdown' in the third quarter,  said Humphrey Leung, the company's managing director.

'Also, our new business of mobile thin-film-transistor (m-TFT) was not taking off as quickly as we had expected,' Mr Leung said.

The decline in prices was due to the company selling  more low-end products.

Gross profit margin was 23.3 per cent,  seven percentage points down from 2005, the company said.  Average selling price of the company's products fell 26 per cent to US$1.11.

'We expected the gross margin would be around 20 to 25 per cent [this year],'  Mr Leung said.

'The selling price of our products keeps on falling 20 to 30 per cent every year so we have to launch new products such as e-paper integrated circuit (IC) to maintain the average selling price.'

Shipments of m-TFT - used in  mobile handsets - fell 43.6 per cent to 18.9 million units, as key customers including Motorola and Nokia struggled to sell  top-of-the-line models.

The company shipped more than 10 million units of its newly developed e-paper IC, a thin display used on Motorola's Motofone entry-level handsets, in the fourth quarter of last year,  accounting for 4 per cent of  shipments last year.

Shipments of monochrome and colour super-twisted-nematic displays, used in low-end mobile telephones, fell 5.8 per cent to 176 million units, representing 77 per cent of  shipments last year  compared with 71 per cent in 2005.

The company said its overall third-quarter shipments fell almost 50 per cent to 34 million units from 65 million in the same period in 2005.

A final dividend of four HK cents per share was proposed,  compared with 15 HK cents last year.  Total dividend was six  HK cents per share,  against 19 HK cents in 2005.

Solomon had US$121.5 million cash on hand at the end of last year.

'We are not actively seeking  strategic investors,'  Mr Leung said. 'Anyone  interested in our shares can buy them from the stock market.'

Shares in Solomon yesterday rose 3.55 per cent to close at HK$1.46, down  60 per cent  from a year ago.



Solomon Systech second-half results fall 89pc