Solomon Systech (International) Limited 20-21 October … Oct 2005 Sing NDR.pdf · Worldwide large display shipments (m) 0 50 100 150 200 250 ... notebook . ... OEM ODM Own factory

7 September 2005Hong Kong

Solomon Systech (International) Limited

20-21 October 2005Singapore

www.solomon-systech.com

P. 2Nomura Singapore NDR 20-21 Oct

Table of contents Table of contents

• Our mission • Interim results• Q3 performance • Business outlook • Investment summary



Our Mission Our Mission Our Mission Our Mission




Mission statements Mission statements

• Be a dominant display IC supplier • Be a respectable enterprise with high standard of

business integrity

Newdisplay

Largedisplay

Mobiledisplay

Display panel

Display system



Market potential Market potential –– mobile display mobile display

Worldwide mobile phone shipments (m)

500

600

700

800

900

1,000

2004 2005 2006 2007 2008

2G & 2.5G 3G

Worldwide MP3 player shipments (m)

0

20

40

60

80

100

120

140

2004 2005 2006 2007 2008

1.8+ inch HD 1 inch HD Flash

Source: IDC, April 2005 Source: CIBC World Markets, April 2005



Market potential Market potential –– large display large display

Worldwide large display shipments (m)

0

50

100

150

200

250

2004 2005 2006 2007 2008

Notebook LCD monitor

Source: CIBC World Markets, April 2005; HSBC, March 2005

Worldwide large display shipments (m)

0

10

20

30

40

50

60

2004 2005 2006 2007 2008

LCD TV Plasma



Market potential Market potential –– new display new display

E-Paper

LED

Micro Display

BacklightSamsung’s 46” LED

powered LCD TV

Outdoor TV Automotive Indoor lighting

Digital Camera Viewfinder

Eyewear for Video & 3D Games

Electronic Signboard

Timepiece Credit Card with Flexible Display



Interim Results Interim Results Interim Results Interim Results




• Turnover up 69%, year-on-year • Net profit growth of 62% • EPS reaching 11.7 HK cents for the 6-month period • Dividend per share of 4.0 HK cents • Global market share in mobile display ICs

approaching 20%

Summary Summary –– Continuing to deliver Continuing to deliver



Profit and loss Profit and loss

54%2.64.0 Dividends per share

39%8.411.7Earnings per share*

(HK cents)

62%22.536.3Profit attributable to shareholders

46%39.757.9Gross profit

69%110.1185.7Turnover

Change20042005(US$ million)

YoYSix months ended 30 June

* EPS calculation is based on the weighted average number of shares for the period



Balance sheet Balance sheet

(HK cents)

19%148.7176.3Shareholders’ funds

20%124.4149.9 Net cash

21% 3947Net cash per share

20% 4655Shareholders’ funds per share

N/ANilNilTotal borrowings

25%190.9238.2Total assets

ChangeAs at 30

June 2004As at 30

June 2005(US$ million)

Note: 2004 balance sheet items extracted from interim report without restatement All per share figures are based on the outstanding shares of the Company at the period-end



Adopting of new accounting standards Adopting of new accounting standards

• Effective date January 1, 2005

• Impact immaterial• One standard

worth mentioning



HKFRS 2 HKFRS 2 –– Share based paymentsShare based payments

• Its impact on SSIL can be summarized below:

~1.0%~0.2%~0.2%Dilution (increase in no. of shares)

~2.0%b~1.5%b<1.0%aExpense* (as % of revenue)

2007P2006P2005EImpact on

* The dollar value impact on expense is reflected as a percentage of 2005E revenue Note (a): Estimated impact on expenseNote (b): Projected impact on expense assuming the equity compensation, revenue and profit are the same in 2005



Units shipment by product line Units shipment by product line

0

20

40

60

80

100

120

1H 2002 1H 2003 1H 2004 1H 2005

Un

its

(mill

ion

) LARGE PANEL OTHERSOLEDm-TFTCSTNMONO

Source: Solomon Systech



Gross margin and market shareGross margin and market share

0%

10%

20%

30%

40%

50%

2002 2003 2004 1H 20050%

5%

10%

15%

20%

25%Gross margin SSIL market share (RHS)

Assumptions:(1) Mobile handsets with dual display as a percentage of overall mobile handsets shipped in the previous years are 15% (2001), 20% (2002), 23% (2003), 27% (2004) and 29% (1H 2005) respectively (2) 90% of the Group’s display ICs are used for the mobile handsets(3) A total of 383 million units of mobile handsets shipped in 1H 2005 Note: 1H 2005 gross margin number is unaudited



What we delivered in the first half? What we delivered in the first half?

Mobile display

New display

Large display

• m-TFT display ICs for 3G phone

• OLED display ICs for MP3 player

• Controller ICs for micro-display applications

• TFT driver ICs for LCD TV, LCD monitor and notebook



New awards in the first half New awards in the first half

2005 International ARC AwardsGrand Winner – Best of Hong Kong

2004 Employer of the Year Award- Manufacturing

2005 International ARC AwardsOverall Annual Report Gold Award

- Technology Consulting



Q3 Performance Q3 Performance Q3 Performance Q3 Performance




Wafers started Wafers started

0

20,000

40,000

60,000

80,000

100,000

120,000

Q1 Q2 Q3

6"8"




Units shipment and bookUnits shipment and book--toto--bill ratiobill ratio

0.5

1.0

1.5

2.0

2.5

Q12002

Q3 Q12003

Q3 Q12004

Q3 Q12005

Q30

10

20

30

40

50

60

70

80

Units shipment (million) Book to bill ratio (LHS)




Change in blended ASPChange in blended ASP

Note: Quarterly change in ASP for the corresponding period Source: Solomon Systech

-40%

-20%

0%

20%

40%

Q12002

Q3 Q12003

Q3 Q12004

Q3 Q12005

Q3



Design wins Design wins

0

10

20

30

40

50

Q12002

Q3 Q12003

Q3 Q12004

Q3 Q12005

Q3




Business OutlookBusiness OutlookBusiness OutlookBusiness Outlook




General views on the second half General views on the second half

• Demand for mobile handsets and MP3 players

• New products and customers

• Stability of wafers supply

• Cost of sales

• Pricing pressure

• Competition

Most favorable Most unfavorable



Expected units growth of 2H versus 1H Expected units growth of 2H versus 1H

Note: Others include large display driver ICs and new display products

0 - 50% 50 - 100% >100%

MONO

CSTN

M-TFT

OLED

OTHERS

Growth



Investment Summary Investment Summary Investment Summary Investment Summary




High growth High growth

Earnings Per Share

11.7

0

4

8

12

16

1H 2003 1H 2004 1H 2005

HK cents

CAGR 80%

Turnover

185.7

0

50

100

150

200

1H 2003 1H 2004 1H 2005

US$m

CAGR 100%



High dividend payout High dividend payout

79%79%79%79%47.047.047.047.059.259.259.259.2Total 2004 Total 2004 Total 2004 Total 2004

US$ millionUS$ millionUS$ millionUS$ million

107%38.736.32H

Year 2005

36%12.936.31H

36%8.322.91H

Year 2004 Payout ratioPayout ratioPayout ratioPayout ratioDividendDividendDividendDividendNet profitNet profitNet profitNet profit

Source: Solomon Systech interim and annual reports



High ROE High ROE

0

40

80

120

160

200

2002 2003 2004 1H 2005

US

$m

0%

10%

20%

30%

40%

50%

Net profit Shareholders' funds Return on equity (RHS)

Note: ROE is calculated by net profit divided by shareholders’ funds. For 1H 2005 ROE figure, net profit is multiplied by a factor of 2, then divided by the shareholders’ fund as of 30 June 2005.



What do you look for?What do you look for?

• High growth• High dividend• High ROE• Leading market position• Strong balance sheet• Cash generative business• Share based payment

The answer is Solomon Systech

~80% EPS growth

~20% global market share

~80% dividend payout ratio

>40% return on equity

~US$150m net cash

Fabless model with min capex

Transparent and fair treatment



Thank YouThank YouThank YouThank YouSolomon Systech (International) LimitedSolomon Systech (International) LimitedStock code: 2878 HKStock code: 2878 HK



About Solomon SystechAbout Solomon SystechAbout Solomon SystechAbout Solomon Systech




Who are we? Who are we?

• Founded in 1999, a spun off unit of Motorola• Listed on the Main Board of the Stock Exchange

of Hong Kong (stock code: 2878) in April 2004• Included in the MSCI Hong Kong in May 2005,

with current market capitalization of roughly US$900 million

• A leading global flat panel display IC company, providing one-stop solutions for global customers

• The largest fabless IC company in Hong Kong and China in terms of revenue



Business model Business model

Customers

Sales & Marketing

Design & Development

Outsource Manufacturing

Mask Making

Wafer Manufacturing

Packaging and Testing

Quality Control

Co-development Own brand display ICs



Chain of customers Chain of customers

Display IC makers

More than 70 module makers

Global brand names

OEM ODM Own factory

Note: Customers related to mobile handsets business



New customers added New customers added

Business with Solomon Systech

0

5

10

15

20

2004 2005E

No.

of c

usto

mer

s

>US$ 10m >US$ 5m




Existing productsExisting products

Monochrome STN

Color STN

OLED

m-TFT Motorola Motorola Motorola

Putian TCL UTStarcom

Nokia Sony Ericsson LG

Motorola Samsung Philips



Existing products (continued) Existing products (continued)

E-paper(Flexible watch)

Graphics controller (Coffee machine & printer)

OLED products (MP3 player)



0

500

1,000

1,500

2,000

2,500

3,000

3,500Q

ualc

omm

Bro

adco

m

ATI

NVI

DIA

SanD

isk

Xilin

x

Mar

vell

Med

iaTe

k

Alte

ra

Con

exan

t

VIA

Sunp

lus

Qlo

gic

Nov

atek

Ada

ptec

Aer

ofle

x

Silic

on L

ab

Silic

on S

tora

ge

Om

niVi

sion

Zora

n

M-S

yste

ms

IC S

yste

ms

SiS

Solo

mon

Him

ax

US$

mRankings Rankings –– global top 25 global top 25 fablessfabless companies companies

Note: Rankings based on 2004 FY revenue Source: FSA (April 2005) and ITRI / IEK (May 2005) No. 24



Rankings Rankings –– total driver market shares total driver market shares

1.5Renesas152.2Leadis142.2Philips 133.4Magnachip123.8Sanyo114.3Matsushita 104.4Himax94.5Solomon Systech 84.5Toshiba75.2Oki / TI 66.2Novatek56.4Sharp46.7Seiko Epson 39.7NEC2

20.6Samsung Electronics1Market share (%) Company Position

Note: Rankings based on 2004 FY performanceSource: iSuppli Display Electronics (March 2005)



Shareholding structure Shareholding structure

JP Morgan 5.1%CBA

8.0%

GIC5.1%

CIDC Funds4.4%

Public 64.3%

Corporate Investor

3.6%

Board of Directors

9.5%

Source: Hong Kong Stock Exchange and Solomon Systech, as at October 17, 2005

Documents

Solomon Systech (International) Limited 20-21 October … Oct 2005 Sing NDR.pdf · Worldwide large display shipments (m) 0 50 100 150 200 250 ... notebook . ... OEM ODM Own factory