Spreadtrum Communications, Inc. Announces Second Quarter 2008 Results

2008-08-13 15:00:00

   Second Quarter 2008 Financial Summary: -- Total revenue increased 25%

  year-over-year and 2% sequentially to US$40.2 million. Baseband revenue

                grew 42% year-over-year and 9% sequentially.

    -- Diluted earnings per American Depositary Share (ADS) was US$0.06,

                      unchanged from US$0.06 in 1Q08.

  -- Gross margin in 2Q08 was 45.2% compared to 44.9% in 1Q08 and 45.5% in

                                   2Q07.

 -- Operating margin in 2Q08 was 4.2% compared to 5.1% in 1Q08 and 7.9% in

  2Q07. Excluding share-based compensation and amortization of intangibles

 from the acquisition of Quorum Systems, Inc. (Quorum), non- GAAP operating

                          margin in 2Q08 was 9.8%.

 -- GAAP net income decreased 6% year-over-year and sequentially to US$2.6

                                  million.

                        Recent Business Highlights:

 -- Spreadtrum announced and began sampling its SC6600V mobile TV solution,

 an integrated CMMB demodulator and source decoder chip that supports both

                  AVS and H.264 video decoding standards.

-- Spreadtrum hosted its annual technology forum on June 17-18. This year's

   theme was "collaboration creates value," and the Company has received

          favorable feedback from customers and business partners.

  -- Spreadtrum worked with Lenovo Mobile to enable Lenovo to deliver TD-

  SCDMA handsets with mobile TV feature to China Mobile before the Beijing

                                 Olympics.



    SHANGHAI, China, Aug. 13 /Xinhua-EMWNews/ -- Spreadtrum

Communications, Inc. (Nasdaq: SPRD; the "Company"), one of China's leading

wireless baseband chipset providers, today announced its second quarter

2008 financial results. Under accounting principles generally accepted in

the United States of America (US GAAP), diluted earnings per ADS was

US$0.06 in the second quarter of 2008 (2Q08), a decrease of 14% from

US$0.07 in the same period in 2007 (2Q07) and unchanged from US$0.06 in the

first quarter of 2008 (1Q08). Net income for 2Q08 was US$2.6 million, a

decrease of 6% from US$2.8 million in 2Q07 and 1Q08.



    US GAAP net income for 2Q08 included US$1.7 million of share-based

compensation expense and US$0.6 million of amortization of intangibles from

the Quorum acquisition. Excluding the impact of this share-based

compensation expense and the amortization of intangibles from the Quorum

acquisition, the Company's non-GAAP net income for 2Q08 would have been

US$4.9 million, up 13% from US$4.3 million in 2Q07 and down 3% from US$5.0

million in 1Q08. Diluted non-GAAP earnings per ADS in 2Q08 was US$0.11,

flat from US$0.11 in 2Q07 and Q108.



    Commenting on the results, the Company's President and CEO, Dr. Ping

Wu, said: "We are pleased that we were able to achieve our financial

guidance in light of several factors that made this a challenging quarter.

The Chinese consumer market this year has been negatively affected by a

number of events, including a major snowstorm that disrupted travel and

consumer spending around the time of the Chinese New Year, flooding in

southern China, a major earthquake in May, a slower-than-anticipated

overall development in TD-SCDMA, the disruption to business travel and

logistics brought about by the Beijing Olympics, an approximate 50% decline

this year in the value of the local stock market that has reduced

consumers' spending power, and an approximate 8% increase in CPI. These

factors have contributed towards a slowdown in the Chinese consumer market

and continue to have a negative impact on our customers' business and

financial conditions. We are also affected by a few company specific

issues, including a delay in our Mocor software platform, which affected

our 6600R baseband and which delay has since been corrected, and

slower-than-anticipated transition by our customers to our 6600H and 6600R

basebands. Customer design activities on our 6600H and 6600R basebands have

picked up in Q2, especially after our technology forum, and we believe some

of these new designs should enter into volume production sometime in the

fourth quarter.



    As a result of these factors, we expect Q3 to be a very challenging

transition quarter for us. Despite these short-term difficulties, we are

focused on positioning Spreadtrum to capture the long-term growth

opportunities in this market and improving our product development process

and internal execution. We offer to our customers a mobile solutions

platform that includes basebands for GSM feature phones and smartphones,

basebands for TD-SCDMA handsets and data cards, RF transceivers that work

with these basebands and more, a mobile TV baseband, and a common software

platform.



    We are seeing more design activities around our 6600R and 6600H

basebands and believe that these basebands compare well against competing

products. After a slow start, we are seeing higher attach rates of our RF

transceiver chips in our customers' new cellphone designs, which we believe

should translate into meaningful volume once the new designs go into mass

production. We are encouraged by our customers' favorable response to our

6600V mobile TV chip and, having used initial samples of our customers'

TD-SCDMA and GSM versions of mobile TV phones over the past few days to

watch the Olympics, we are quite pleased with the quality of the viewing

experience. We believe that mobile TV will be an important new feature for

the Chinese consumer market going forward and, being the only supplier with

both basebands and mobile TV solutions currently, we believe we should be

able to benefit from this growing opportunity. On the TD-SCDMA front, we

are encouraged that China Mobile is proceeding with a plan to build out

phase two of its TD-SCDMA network beyond the initial 8 cities that were

selected for commercial trial. This bodes well for sales of TD-SCDMA

handsets next year and for sales of our TD-SCDMA baseband."



    Second Quarter 2008 Financial Review



    Revenue



    Revenue in the second quarter totaled US$40.2 million, representing an

increase of 25% from 2Q07 and 2% from 1Q08. Revenue from baseband

semiconductors was US$38.7 million, or 96% of revenue, up from 85% of

revenue in 2Q07 and 90% of revenue in 1Q08. Revenue from turnkey solutions

was US$1.5 million, which represented 4% of revenue, down from 15% of

revenue in 2Q07 and 10% of revenue in 1Q08.



    Revenue from baseband semiconductors grew 42% from 2Q07 and 9% from

1Q08 to US$38.7 million. Unit shipments of baseband semiconductors

increased 54% from 2Q07 and 9% from 1Q08. Nearly all baseband semiconductor

shipments in the second quarter were 2G/2.5G related products. 3G products

accounted for less than 1% of the baseband shipments in 2Q08. The average

selling price per unit for baseband semiconductors declined by 8% from 2Q07

and 1% from 1Q 08.



    Revenue from turnkey solutions decreased during the quarter by 69% from

2Q07 and 62% from 1Q08 to US$1.5 million, as a result of the Company's

ongoing plan to phase out its modules business.



    Gross Margin



    The gross margin for the quarter was 45.2%, down from 45.5% in 2Q07 and

up from 44.9% in 1Q08. The non-GAAP gross margin was 45.4%, down from 45.7%

in 2Q07 and up from 45.1% in 1Q08.



    The cost of revenue in 2Q08 totaled US$22.1 million, representing

increases of 26% from 2Q07 and 1% from 1Q08. The year-over-year increase

was driven by an increase in the total cost of baseband semiconductors from

higher volumes partially offset by a decline in the total cost of turnkey

solutions. The total cost of turnkey solutions declined as the Company

continued to de- emphasize its SM5100 series module business. The

sequential increase was primarily driven by an increase in inventory

write-down in 2Q08 partially offset by a decline in the total cost of

turnkey solutions.



    Operating Margin



    The Company's operating margin was 4.2% in 2Q08, compared to 7.9% in

2Q07 and 5.1% in 1Q08. The year-over-year decrease in operating margin was

primarily attributed to higher R&D expense as a percentage of revenue. The

increase in R&D expenses was primarily due to the acquisition of Quorum,

whose primary activities are the research and development of radio

frequency transceivers. The sequential decrease in operating margin was

attributed to higher R&D and SG&A expenses, as percentages of revenue.

Excluding stock- based compensation expense and the amortization of

intangibles from the Quorum acquisition, the non-GAAP operating margin in

2Q08 was 9.8%, down from 12.6% in 2Q07 and 10.8% in 1Q08.



    Total operating expenses in 2Q08, which include selling, general and

administrative (SG&A) expenses and research and development (R&D) expenses,

were US$16.5 million, representing increases of 36% from 2Q07 and 5% from

1Q08. Total operating expenses for the quarter represented 41.0% of

revenue, compared to 37.6% and 39.9% of revenue in 2Q07 and 1Q08,

respectively. Excluding stock-based compensation expense and the

amortization of intangibles from the Quorum acquisition, total non-GAAP

operating expenses in 2Q08 were US$14.3 million, representing increases of

35% from 2Q07 and 6% from 1Q08. Total non-GAAP operating expenses for the

quarter represented 35.6% of revenue.



    SG&A expenses increased in 2Q08 by 25% from 2Q07 and 8% from 1Q08 and

represented 12.9% of revenue, compared with 12.9% of revenue in 2Q07 and

12.1% of revenue in 1Q08. The year-over-year dollar increase was driven

primarily by higher investor relations, marketing and legal expenses,

partially offset by lower stock-based compensation expense. The sequential

dollar increase was driven primarily by higher investor relations and legal

expenses, partially offset by lower stock-based compensation expense.



    R&D expenses in 2Q08 increased 42% year-over-year and 3% sequentially

and represented 28.1% of revenue in 2Q08, compared to 24.7% in 2Q07 and

27.8% in 1Q08. The year-over-year dollar increase was driven primarily by

the Company's efforts to expand its product portfolio and the impact of the

Quorum acquisition. The sequential dollar increase was primarily due to

higher depreciation and amortization expenses and a decrease in government

grants for R&D projects, partially offset by lower stock-based compensation

expense.



    Non-Operating Income



    In 2Q08, the Company recorded net interest income of US$0.5 million,

representing an increase of US$0.2 million from 2Q07 and a decrease of

US$0.3 million from 1Q08. The year-over-year increase was primarily

attributed to interest earned from investing a higher balance of cash and

cash equivalents. The sequential decrease was primarily due to a reduction

in the balance of cash and cash equivalents, as a result of the share

repurchase program and declines in interest rates.



    The other income in 2Q08 was US$0.9 million, an increase of US$0.8

million from 2Q07 and US$0.3 million from 1Q08. The year-over-year and

sequential increases were primarily attributed to increases in foreign

exchange gain.



    Earnings



    Diluted earnings per ADS was US$0.06, down 14% from US$0.07 in 2Q07 and

flat from US$0.06 in 1Q08. Excluding stock-based compensation expense and

amortization of intangibles from the Quorum acquisition, non-GAAP diluted

earnings per ADS for 2Q08 was US$0.11, flat from US$0.11 in 2Q07 and in

1Q08.



    The Company's net income totaled US$2.6 million in 2Q08, a decrease of

6% from US$2.8 million in 2Q07 and in 1Q08. The net margin was 6.5%, down

from 8.6% in 2Q07 and 7.0% in 1Q08. Excluding stock-based compensation

expense and amortization of intangibles from the Quorum acquisition,

non-GAAP net margin was 12.1% in 2Q08, down from 13.3% in 2Q07 and 12.7% in

1Q08.



    Balance Sheet and Cash Flow



    As of June 30, 2008, the Company had US$68.9 million in cash and cash

equivalents, which represented a decrease of US$28.3 million from March 31,

2008 due primarily to the US$14.9 million cash spent on the share

repurchase program and US$6.6 million cash transferred to term deposits. In

2Q08, the Company also used US$7.5 million cash for operating activities

and US$1.0 million cash on property and equipment.



    Accounts receivable (A/R) increased from US$1.4 million at March 31,

2008 to US$17.4 million at June 30, 2008, as the Company extended credit

terms to some select customers in 2Q08. As a result of the increase in A/R,

average A/R days increased from 4 days to 21 days. As of July 31, 2008, the

Company has collected US$5.1 million of its A/R and none of the outstanding

receivables was past due. Inventory at June 30, 2008 was US$17.8 million, a

decrease of $2.5 million from March 31, 2008, and the inventory days

decreased from 85 days to 73 days. Total assets as of June 30, 2008 were

US$250.6 million, down 3% from US$257.5 million at March 31, 2008.



    Current liabilities increased from US$28.0 million at March 31, 2008 to

US$32.6 million at June 30, 2008, primarily due to an increase in the

current portion of long term notes payable and accounts payable. Long-term

liabilities at June 30, 2008 were US$16.9 million, compared to US$19.8

million at March 31, 2008, primarily due to a reclassification from

long-term notes payable to short-term notes payable.



    Business Outlook:



    As stated earlier in this press release, a number of factors have

negatively affected our customers' business this year. In addition,

Spreadtrum is also affected by delays in its Mocor software platform and in

customers' transition to its newer basebands. As a result, Spreadtrum

currently expects revenue in the third quarter to be approximately US$20

million, which represents a sequential decrease of approximately 50% from

the US$40.2 million in the second quarter of 2008. Spreadtrum estimates its

3Q08 gross margin to be 43%-45% and its 3Q08 operating expenses to be in

the range of US$17-18 million.



    The Company expects to see improvements in the fourth quarter as

business activities return to normal after the Beijing Olympics is over and

new design wins using the Company's 6600R, 6600H, 6600V, and RF chips go

into volume production.



    Webcast of Conference Call:



    The Company's management team will conduct a conference call at 8:00 am

US Eastern Time on Aug 14, 2008. A webcast of the conference call will be

accessible on the Company's web site at http://www.spreadtrum.com . The

conference call can also be accessed via the following telephone numbers:




USA (Toll Free): 1 866 679 8033 USA (Toll): 1 617 213 4846 Hong Kong (Toll Free): 800 962 844 China (Toll Free): 10 800 130 0399 Participant Passcode: 6492 9764 Pre-registration (optional): https://www.theconferencingservice.com/prereg/key.process?key=P4KGTDXNE A replay of the conference call will be available for seven days via the following telephone numbers:
USA (Toll Free): 1 888 286 8010 USA (Toll): 1 617 801 6888 Participant Passcode: 2060 2971 Discussion of Non-GAAP Financial Measures In addition to disclosing financial results prepared in accordance with US GAAP, the Company's earnings release contains non-GAAP financial measures that exclude the effects of share-based compensation and amortization of intangibles from the Quorum acquisition. The non-GAAP financial measures used by management and disclosed by the Company exclude the income statement effects of all forms of share-based compensation and amortization of intangibles from the Quorum acquisition. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for financial measures prepared in accordance with US GAAP. The financial results reported in accordance with US GAAP and reconciliation of GAAP to non-GAAP results should be carefully evaluated. The non-GAAP financial measures used by the Company may be prepared differently from and, therefore, may not be comparable to similarly titled measures used by other companies. The Company believes that the presentation of non-GAAP gross margin, non- GAAP operating margin, non-GAAP net income, and non-GAAP diluted earnings per ADS provides important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations. The non-GAAP diluted earnings per ADS is calculated by dividing non-GAAP net income by the US GAAP weighted average diluted shares outstanding. Listed below are the share-based compensation amounts included in net income that management excludes in computing the non-GAAP financial measures referred to in the text of this press release. A reconciliation of GAAP to non-GAAP results is presented after the consolidated balance sheets.
Three months ended June 30, March 31, June 30, 2007 2008 2008 (in thousands of US dollars) Share-based compensation: Cost of revenue $ 52 $ 75 $ 89 Research and development 563 790 773 Selling, general, and administrative 904 991 803 Spreadtrum Communications, Inc. Condensed Consolidated Income Statements (in thousands of US dollars, except per share data and percentages) (unaudited) Three months ended Change from June 30, March 31, June 30, 2Q07 1Q08 2007 2008 2008 Revenue $32,187 $39,498 $40,227 25% 2% Cost of revenue 17,543 21,746 22,063 26% 1% Gross profit 14,644 17,752 18,164 24% 2% Operating expenses Research & development 7,952 10,967 11,316 42% 3% Selling, general & administrative 4,149 4,774 5,176 25% 8% Total operating expenses 12,101 15,741 16,492 36% 5% Operating income 2,543 2,011 1,672 (34%) (17%) Non-operating income (expense) Interest income 299 795 535 79% (33%) Interest expense (6) (35) (42) 600% 20% Other income, net 116 637 944 714% 48% Total non-operating income 409 1,397 1,437 251% 3% Income before tax 2,952 3,408 3,109 5% (9%) Income tax expense 171 630 496 190% (21%) Net income $2,781 $2,778 $2,613 (6%) (6%) Basic earnings per ADS $0.41 $0.06 $0.06 (85%) 0% Diluted earnings per ADS $0.07 $0.06 $0.06 (14%) 0% Margin analysis: Gross margin 45.50% 44.90% 45.20% Operating margin 7.90% 5.10% 4.20% Net margin 8.60% 7.00% 6.50% Weighted average ADS equivalent: [1] Basic 6,859,226 43,164,186 44,252,776 Diluted 39,240,015 46,789,892 46,226,362 ADS equivalent outstanding at end of period 34,157,200 45,234,665 43,872,135 [1] Assumes all outstanding ordinary shares are represented by ADSs. Each ADS represents three ordinary shares. Spreadtrum Communications, Inc. Consolidated Income Statements (in thousands of US dollars, except per share data and percentages) (unaudited) Six months ended June 30, June 30, Change 2007 2008 Revenue $58,354 $79,725 37% Cost of revenue 32,497 43,809 35% Gross profit 25,857 35,916 39% Operating expenses Research & development 13,948 22,283 60% Selling, general & administrative 8,069 9,950 23% Total operating expenses 22,017 32,233 46% Operating income 3,840 3,683 (4%) Non-operating income (expense) Interest income 738 1,330 80% Interest expense (12) (77) (542%) Other income, net 447 1,581 254% Total non-operating income 1,173 2,834 142% Income before tax 5,013 6,517 30% Income tax expense 200 1,126 463% Net income $4,813 $5,391 12% Basic earnings per ADS $0.77 $0.12 (84%) Diluted earnings per ADS $0.12 $0.12 0% Margin analysis: Gross margin 44.30% 45.00% Operating margin 6.60% 4.60% Net margin 8.20% 6.80% Weighted average ADS equivalent: [2] Basic 6,262,724 43,708,481 Diluted 38,798,495 46,538,301 [2] Assumes all outstanding ordinary shares are represented by ADSs. Each ADS represents three ordinary shares. Spreadtrum Communications, Inc. Condensed Consolidated Balance Sheets (in thousands of US dollars) (unaudited) Dec 31, March 31, June 30, 2008 2008 (Note) 2008 (Note) Cash and cash equivalents $157,038 $97,232 $68,930 Term deposit -- -- 6,561 Accounts receivable, net 2,198 1,410 17,412 Inventories 25,054 20,301 17,799 Deferred tax assets 392 392 392 Prepaid expenses and other current assets 5,650 5,625 6,767 Total current assets 190,332 124,960 117,861 Property and equipment , net 23,046 25,236 25,875 Acquired intangible assets , net 14,220 49,321 48,465 Goodwill -- 46,895 46,789 Deferred tax assets 1,222 1,225 1,227 Other long term assets 8,102 9,876 10,404 Total assets 236,922 257,513 250,621 Current portion of long term loan 685 -- 2,916 Accounts payable 24,857 10,165 13,307 Advances from customers 1,210 1,532 1,265 Income tax payable 3,088 3,703 3,392 Accrued expenses and other current liabilities 13,773 12,594 11,728 Total current liabilities 43,613 27,994 32,608 Long term loan 3,423 3,562 729 Deferred tax liabilities 37 14,365 14,365 Other long-term obligations 1,954 1,905 1,823 Total long term liabilities 5,414 19,832 16,917 Total liabilities 49,027 47,826 49,525 Shareholders' equity 187,895 209,687 201,096 Total liabilities & shareholders' equity $236,922 $257,513 $250,621 Note: The financial information at March 31, 2008 and June 30, 2008 includes preliminary valuation of Quorum, which is subject to further adjustments. Spreadtrum Communications, Inc. Supplemental Information (in thousands of US dollars, except percentages) Revenue (US$000) 3Q06 4Q06 1Q07 2Q07 Baseband Semiconductor $15,684 $22,645 $20,589 $27,357 Turnkey Solutions 11,017 8,317 5,578 4,830 Total $26,701 $30,962 $26,167 $32,187 As % of Total Revenue Baseband Semiconductor 59% 73% 79% 85% Turnkey Solutions 41% 27% 21% 15% Gross Margin 43.20% 46.40% 42.90% 45.50% Spreadtrum Communications, Inc. Supplemental Information (in thousands of US dollars, except percentages) Revenue (US$000) 3Q07 4Q07 1Q08 2Q08 Baseband Semiconductor $34,161 $44,971 $35,532 $38,713 Turnkey Solutions 4,409 3,571 3,966 1,514 Total $38,570 48,542 39,498 40,227 As % of Total Revenue Baseband Semiconductor 89% 93% 90% 96% Turnkey Solutions 11% 7% 10% 4% Gross Margin 45.60% 45.50% 44.90% 45.20% Spreadtrum Communications, Inc. Reconciliation of GAAP to Non-GAAP Results (in thousands of US dollars, except per share data and percentages) (unaudited) Three months ended June 30, March 31, June 30, 2007 2008 2008 Cost of revenue $17,543 $21,746 $22,063 Adjustment for share-based compensation (52) (75) (89) Cost of revenue (non-GAAP) $17,491 $21,671 $21,974 Operating income $2,543 $2,011 $1,672 Adjustment for share-based compensation within: Cost of revenue 52 75 89 Research and development 563 790 773 Selling, general, and administrative 904 991 803 Adjustment for amortization of intangibles from Quorum acquisition within research and development -- 400 600 Operating income (non-GAAP) $4,062 $4,267 $3,937 Net income $2,781 $2,778 $2,613 Adjustment for share-based compensation within: Cost of revenue 52 75 89 Research and development 563 790 773 Selling, general, and administrative 904 991 803 Adjustment for amortization of intangibles from Quorum acquisition within research and development 400 600 Net income (non-GAAP) * $4,300 $5,034 $4,878 Diluted earnings per ADS $0.07 $0.06 $0.06 Adjustment for share-based compensation 0.04 0.04 0.04 Adjustment for amortization of intangibles from Quorum acquisition -- 0.01 0.01 Diluted earnings per ADS (non-GAAP)* $0.11 $0.11 $0.11 Gross margin 45.50% 44.90% 45.20% Adjustment for share-based compensation 0.20% 0.20% 0.20% Gross margin (non-GAAP) 45.70% 45.10% 45.40% Operating margin 7.90% 5.10% 4.20% Adjustment for share-based compensation 4.70% 4.70% 4.10% Adjustment for amortization of intangibles from Quorum acquisition -- 1.00% 1.50% Operating margin (non-GAAP) 12.60% 10.80% 9.80% Net margin 8.60% 7.00% 6.50% Adjustment for share-based compensation 4.70% 4.70% 4.10% Adjustment for amortization of intangibles from Quorum acquisition -- 1.00% 1.50% Net margin (non-GAAP)* 13.30% 12.70% 12.10% * The non-GAAP adjustment does not take into consideration the impact of taxes.

    About Spreadtrum Communications, Inc.:



    Spreadtrum Communications, Inc. (Nasdaq: SPRD; the "Company") is a

fabless semiconductor company that designs, develops, and markets baseband

processor solutions for the mobile wireless communications market. The

Company combines its semiconductor design expertise with its software

development capabilities to deliver highly-integrated baseband processors

with multimedia functionality and power management. The Company has

developed its solutions based on an open development platform, enabling its

customers to develop customized wireless products that are feature-rich and

meet their cost and time-to-market requirements.



    Safe Harbor Statements:



    This press release contains "forward-looking statements" within the

meaning of the "safe harbor" provisions of the U.S. Private Securities

Litigation Reform Act of 1995. Such forward-looking statements include,

without limitation, statements regarding factors that have had a negative

impact on China's consumer market continuing to have an impact on our

customers' business, new designs on our 6600H and 6600R basebands entering

into volume production sometime in the fourth quarter, 3Q08 being a very

challenging quarter for the Company, mobile TV becoming an important new

function for the Chinese consumer market going forward and our ability, as

the only vendor with both basebands and mobile TV solutions, to participate

in this growing opportunity, China Mobile's plans to build phase two of its

TD- SCDMA network beyond the initial 8 cities that were selected for

commercial trial boding well for sales of TD-SCDMA handsets next year and

the Company's expectations with respect to revenue, gross margin and

operating margin for the third quarter of 2008, and our expectation to see

improvements in the fourth quarter. These statements are forward-looking in

nature and involve risks and uncertainties that may cause actual market

trends and the Company's actual results to differ materially from those

expressed or implied in these forward-looking statements for a variety of

reasons. Potential risks and uncertainties include, but are not limited to,

continuing competitive pressure in the semiconductor industry and the

effect of such pressure on prices; unpredictable changes in technology and

consumer demand for mobile phones; the Company's ability to integrate

Quorum's operations into its own; the Company's ability to successfully

produce and market Quorum's RF transceivers in volume; the rate at which

the commercial deployment of TD-SCDMA technology will grow; market

acceptance of products utilizing TD-SCDMA technology; the Company's ability

to sustain recent rates of growth; the state of and any change in the

Company's relationship with its major customers; and changes in political,

economic, legal and social conditions in China. For additional discussion

of these risks and uncertainties and other factors, please consider the

information contained in the Company's filings with the U.S. Securities and

Exchange Commission (the "SEC"), including the registration statement on

Form F-1 filed on June 26, 2007, as amended, and the annual report on Form

20-F filed on June 30, 2008, especially the sections under "Risk Factors"

and "Management's Discussion and Analysis of Financial Condition and

Results of Operations," and such other documents that the Company may file

with the SEC from time to time, including on Form 6-K. The Company assumes

no obligation to update any forward-looking statements, which apply only as

of the date of this press release.




For more information, please contact: Investor Relations Tel: +86-21-5080-2727 x2268 Email: ir@spreadtrum.com

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