Solomon Systech (International) Limited Issues Major Profit Warning for 2025

Key Takeaways for Investors

• Significant Profit Decline Expected: Solomon Systech anticipates its unaudited consolidated profit attributable to shareholders for the year ended 31 December 2025 to be between US\$3.5 million and US\$4.0 million, representing a steep decline of approximately 60% to 65% compared to the US\$10.1 million reported in 2024.
• Reasons for Decline: The company attributes this sharp reduction in profit to two main factors:
  • A drop in the average selling price of the Group’s products, leading to a decrease in gross profit.
  • A notable increase in research and development (R&D) costs associated with new product development initiatives.
• Stable Shipment Growth in New Display IC Area: Despite pricing pressures, Solomon Systech reports stable growth in shipment quantities within its New Display IC segment.
• Commitment to R&D: The company assures shareholders that it has sufficient resources to continue investing in R&D, which is considered critical for its long-term competitiveness.

Details and Context

Solomon Systech (International) Limited, listed on the Hong Kong Stock Exchange (Stock Code: 2878), has issued this profit warning in compliance with Rule 13.09(2)(a) of the Listing Rules and the Inside Information Provisions under Part XIVA of the Securities and Futures Ordinance of Hong Kong.

The announcement, based on a preliminary review of unaudited consolidated management accounts for the year ended 31 December 2025, signals a significant setback in the company’s profitability. The Board explicitly cautions that these results are subject to further adjustments as the accounts have not yet been reviewed or audited by external auditors, nor by the Company’s audit committee.

The company highlights two main causes for the sharp drop in profits:

1. Market Challenges: A decrease in the average selling price for its products has put pressure on gross profit margins. This is a key risk factor for shareholders, as it implies that competitive forces or market dynamics are impacting the company’s pricing power and revenue generation ability.
2. Increased R&D Expenditure: The company has increased its R&D spending to support new product development. While this is a positive signal for long-term innovation and competitiveness, the near-term impact has been a significant rise in expenses, further eroding net profits.

Despite these challenges, the Board emphasizes that the Group continues to achieve stable shipment growth in its New Display IC business, and that resource allocation to R&D remains robust to safeguard future prospects.

What Shareholders Need to Know

• This profit warning is material and price-sensitive. A profit decline of this magnitude (60-65%) is likely to be viewed negatively by the market and could place downward pressure on the company’s share price, at least in the short term.
• The final, audited results may differ from the preliminary figures, and further details will be published before the end of March 2026.
• Shareholders and potential investors are advised to exercise caution when trading the company’s shares until the final results are released and the company provides further guidance.

Board Structure and Announcement Date

The announcement was made by CEO Wang Wah Chi, Raymond, and the current Board includes non-executive directors Yang Kun (Chairman), Wang Hui, and Liu Fei, as well as independent non-executive directors Dr. Chan Philip Ching Ho, Dr. Kwok Hoi Sing, and Mr. Chan Chi Kong.

The profit warning was issued on 6 March 2026.

Disclaimer: The information provided above is based on a preliminary review of unaudited management accounts and may be subject to change. Investors are urged to review the company’s official annual results announcement when published and consult with professional advisers before making investment decisions. The author and publisher accept no liability for actions taken based on this article.

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