Ms Anna Wong Choi-kam, Chairman, Sunway International, noted, "In the first half of this year, our Group continued to feel acute price pressure across the electronics industry, to which we have responded by implementing new pricing strategies and adjusting our product portfolio in order to maintain our leading market position and share. While these strategies have helped to strengthen our Group's lead in the market, they inevitably led to a short-term decline in both turnover and gross profit."

The Group is a leading manufacturer and trader of electronic components and parts, including quartz crystals, liquid crystal displays (LCD), watch movements and integrated circuits (IC) in Hong Kong, as well as a major supplier of electronic calculators, clocks and watches, and other consumer telecoms products, including fax machines.

Sales drops were recorded in traditional electronic calculators and lower-end watch movements. To capture new market trends, the Group has implemented a series of operational realignments to reengineer its product portfolio, resulting in the launch of new high-end product lines including personal data assistants (PDA) and high frequency quartz crystals.

The production of high frequency quartz crystals, which are used in audio-visual, telecoms and PC devices, commenced last September. Monthly production capacity has now topped 3 million pieces which is half of the full design capacity. The Group aims to increase the monthly capacity to 5 million pieces in the second half of this financial year. The major markets for this new product line include Taiwan, the PRC and Hong Kong. The management anticipates double-digit growth for this new business line, which will become a major profit contributor to the Group in the future. This new product line posted a gross profit margin of 20% to 30%.

The market for LCD panels remained competitive but the Group was able to maintain a stable turnover from this business line. In addition to expanding existing capacity, the Group also plans to invest in new facilities for STN (super twisted nematic) LCDs, which are widely used on telecoms and PC products.

As part of its product reengineering initiatives, the Group has also earmarked investments for the development and production of a new line of PDAs. The new product line, branded and registered as "Supermate", is designed to capture the upper-end market for business executives and professionals in the PRC. The first batch of PDAs will be distributed on the mainland next month. This new business line is expected to command a higher profit margin, and will help the Group further diversify its product and revenue base.

During the Period, the Group has paid up the remaining part of the capital contribution, amounting to US$1 million, for its investment in Taiwan Communication (Fujian) Company Limited. The joint venture is engaged in the manufacture of telecommunications products including fax machines and IC card and video-conferencing telephony products. Taiwan Communication plans to expand its product offering to digital cameras, IP phones and MP3s.

Subsequently in April 2001, the Group paid up the remaining investment contribution in Angstrem Joint Stock Company, a leading Russian IC producer. The Group considers this acquisition a long-term investment, as well as a means to enable it to secure a stable supply of ICs and to reduce the lead-time in product delivery, helping the Group to strengthen its competitive position as a leading ICs trader.

During the Period, one of the convertible bondholders, Credit Suisse First Boston (Hong Kong) Limited ("CSFB"), converted twice in the total sum of US$300,000 bonds into ordinary shares of the Company. The Company has also redeemed a total of US$200,000 in bonds from CSFB during the period, and a further US$1 million in bonds subsequent to the balance sheet date, resulting in the balance of the convertible bonds being reduced to US$8,100,000 at the date of this announcement.

Sunway International Holdings Limited (HKSE : 58 / SES : SIHL) was listed on the main boards of the Stock Exchange of Hong Kong and the Stock Exchange of Singapore in September 1999. The Group develops, manufactures and sells consumer electronic products and electronic components such as quartz crystals, liquid crystal displays (LCD) and watch movements. The Group has also participated in the thriving telecoms equipment manufacturing business through its 40% interest in a joint venture with Taiwan Telecommunication Investment Co. Ltd.

Issued by :
Sunway International Holdings Limited

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