HDTV Rollout in China Continues to Power Cogo's Digital Media Growth

Thursday, December 9th, 2010 

New HDTV Set-top Box Solution Now Shipping

SHENZHEN, China — Cogo Group, Inc. (Nasdaq: COGO), a leading embedded solutions and software provider for the technology and industrial sectors in China, continues to benefit from the strong roll-out of HDTV as total HDTV subscribers in China passed 2 million subscribers in the fourth quarter of 2010, up from 2 million in July 2010. Cogo, in conjunction with its partner, a leading global semiconductor company, provides customized solutions for HDTV set-top boxes (“STB”) for use in both domestic China and various export markets.

Additionally, Cogo, in conjunction with this same semiconductor partner, has recently launched an upgraded STB solution with additional functionality (including cable modem features) that carries a higher Average Selling Price (“ASP”) for Cogo than the current solution. Cogo has already started shipping this new solution to its HDTV customers, and shipments are expected to ramp significantly in 2011. It is believed that China’s HDTV ecosystem will continue to evolve over the next five years and will require new platform upgrades to drive increased functionality. It is expected this trend will continually drive higher ASPs for Cogo’s customized solutions.

Several factors are unfolding that are expecting to accelerate the HDTV ramp in 2011. First, an increasing number of cable operators are expected to roll-out HDTV over the next year. Second, the government will expand the number of HDTV channels from the current 12 to 42 by the end of 2011. Triple-play field trials started in the third quarter of 2010 and trials are active in 12 cities currently; the number of cities and scope of the trials are expected to ramp significantly in 2011. Finally, cable operators in China are utilizing “mass market” upgrade pricing packages for migration to HDTV services.

“I am very pleased that Cogo continues to participate in the rapidly growing HDTV roll-out in China,” commented Jeffrey Kang, CEO of Cogo. “We prove time and again and that we can quickly position ourselves to take advantage of the ‘sweet spot’ of rapidly growing new end markets, like 3G Smartphones, tablets, smart meters, autos and HDTV. Our order patterns in these end markets continue to drive upside to our revenue targets and provide strong visibility to maintaining high-growth in 2011.”