Overview and Financial Performance

Solomon Systech (International) Limited (“the Group”) reported its financial results for the year ended 31 December 2025, revealing significant shifts in revenue, profitability, and operational strategies. The Group, a leading fabless semiconductor designer focusing on display driver ICs, faced global industry transformations, geopolitical challenges, and shifts in end-market demand. These factors, along with rising costs and operational headwinds, had a material impact on performance.

• Revenue: US\$93.3 million, down 17.8% year-on-year from US\$113.4 million.
• Gross Profit: US\$32.7 million, down 14.2% from US\$38.0 million.
• Gross Margin: Improved to 35.0% from 33.5%.
• Net Profit Attributable to Shareholders: US\$4.0 million, down 60.2% from US\$10.1 million.
• Earnings per Share (EPS): US 0.2 cents, halved from 0.4 cents.
• Shareholders’ Funds: US\$141.9 million, up 3.5%.
• Current Ratio: Strong at 7.01.
• No Debt-to-Equity Ratio: The company remains essentially debt-free.

Dividend: The Board does not recommend a final dividend for 2025, which may disappoint income-focused investors.

Strategic and Operational Highlights

Industry Context

The semiconductor sector experienced ongoing geopolitical tensions, leading to accelerated supply chain localisation, increasing trade policy fluctuations, and subdued end-market demand. The emergence of AI and new energy vehicle sectors have also reshaped demand and production priorities globally.

Key Management Actions

• The Group optimised its upstream supply chain, expanded partnerships with wafer foundries and packaging/testing providers, and ramped up the adoption of next-generation display driver IC process technologies.
• Significant focus was placed on cost control, operational efficiency, and management improvements.
• Breakthroughs reported in large-size e-paper and automotive applications, laying the foundation for future revenue growth.
• R&D intensity increased by 6.6 percentage points, with targeted investment in high value-added innovation, particularly in large-size displays, colour display technologies, Mini-LED, automotive displays, and seven-colour electronic display labels.

Market Leadership and Growth Opportunities

E-Paper and Smart Retail

The Group reinforced its global leadership in the e-paper display driver IC market. According to RUNTO, global e-paper module shipments surged by 87% in 2025, catalysed by Walmart’s large-scale deployment of electronic shelf labels (ESL). Solomon Systech effectively capitalised on this upgrade cycle, delivering robust shipment performance and securing its dominant market position.

Automotive Applications

The Group achieved strategic progress in automotive display solutions, capitalising on the rapid expansion of the smart cockpit and automotive intelligence sectors. These sectors are expected to drive further demand growth for display ICs in coming years.

OLED Segment

Solomon Systech remains among the world’s leading suppliers of PMOLED display driver ICs. Despite market challenges, shipment volume and revenue were maintained, indicating solid operational resilience.

Market Outlook

• The global electronic paper display market is forecast to grow at a CAGR of 11.9%, from US\$35.47 million in 2025 to US\$12.86 billion by 2036 (Research Nester).
• Solomon Systech plans to expand its e-paper IC product portfolio, targeting diversified applications including e-readers, signage, wearables, and more.
• Commercialisation of large-size e-paper and portable e-reader ICs is expected in the first half of 2026, with R&D investments set to bear fruit.

Corporate Governance and Shareholding

• Corporate governance is robust, with independent audit and risk management practices in place and regular policy reviews.
• As of 31 December 2025, public float remains strong at 71.5%, ensuring liquidity. Major shareholder China Electronics Corporation (CEC) holds 28.27%.
• No significant changes to constitutional documents or pre-emptive rights; share capital structure remains unchanged.
• The Group maintains compliance with applicable Listing Rules and Corporate Governance Code. No significant legal or regulatory breaches were reported.

Risks and Challenges

• Cost Pressures: Strong demand for AI chips and power management ICs is likely to push up wafer prices and increase production costs.
• Supply Chain Risks: Continued focus on diversifying and regionalising the supply chain to mitigate disruptions.
• Macroeconomic Uncertainty: Ongoing strategic rivalries among major economies, volatile trade policies, and unclear inflation outlook may lead to market volatility and prudent sentiment.
• Dividend Policy: The Board’s decision not to pay a final dividend, despite a robust capital position, may affect investor sentiment.
• Share Options: No new share options were granted in 2025, and most of the equity compensation reserve was transferred to accumulated losses, suggesting a reduction in stock-based incentives.

Other Notable Items

• Charitable donations increased significantly to US\$148,000 (up from US\$11,000 in 2024).
• Remuneration and rewards align with performance and market norms; long-term incentives via share options are in place but not expanded in 2025.
• Ernst & Young was reappointed as independent auditor, confirming an unmodified opinion and no major findings affecting the accounts.
• The Group emphasizes corporate social responsibility and ESG initiatives, with active monitoring and public disclosure.

Potential Price-Sensitive Information

• Sharp Decline in Profit: Net profit dropped over 60%, which could weigh on share price unless investors are comforted by the Group’s strategic positioning and future growth prospects.
• Sector Leadership and Market Expansion: The Group’s strong market position in e-paper and automotive segments, as well as the commercialisation of new products in 2026, may act as positive catalysts if growth materialises as expected.
• Dividend Suspension: The absence of a final dividend may negatively impact share valuation, particularly for income investors.
• R&D Commitment: The substantial increase in R&D spending, while a long-term positive, could be seen as a short-term drag on profitability.
• Supply Chain and Cost Risks: Any further escalation in wafer prices or supply chain disruptions could pressure margins and market sentiment.

Conclusion

Investors should closely monitor Solomon Systech’s execution of its growth strategy in e-paper, automotive, and OLED segments, as well as any developments related to supply chain stability and cost controls. While the Group is well-positioned for future growth, current profitability pressures and the lack of a dividend may weigh on the near-term share price. Any successful commercialisation of large-size e-paper ICs or unexpected market share gains in high-growth segments would be positive catalysts.