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Silicon Motion Technology Corporation Announces Fourth Quarter and Full-Year Results for the Period Ended December 31, 2005

TAIPEI, Taiwan, Jan 25, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- In the press release, "Silicon Motion Technology Corporation Announces Fourth Quarter and Full-Year Results for the Period Ended December 31, 2005", distributed by PRNewswire on Jan. 25, 2006, we are advised by the client of the following errors as originally issued inadvertently: 1) In the third paragraph under the section ''Expenses'', the first sentence should read ''Sales and marketing expenses in 4Q05 increased by 45% from 4Q04 and 53% from 3Q05 and represented 6.5% of net sales.'', where the first figure in the original version, ''4%'', should read ''45%''; 2) in the quarterly income statement, the heading for the 3rd column from the right should be in US$, not NT$; 3) In the quarterly income statement, item, net income, under the column Change from 3Q05(%) should be 15% instead of 16%; 4) in the full-year income statement, the heading for the 2nd column from the right should be in US$, not NT$. 5) In the Unaudited Consolidated Balance Sheet, the item Shareholders' equity under Dec. 31, 2005 should read 638,345 instead of 638,34. Full, correct release follows:

Silicon Motion Technology Corporation Announces Fourth Quarter and Full-Year
Results for the Period Ended December 31, 2005

                      Sales & Net Income Set New Record

     Fourth Quarter 2005 Financial Highlights:

     * Revenue grew 14% year-over-year and 17% sequentially to NT$872 million
       (US$26.1 million)

     * Gross margin increased from 52.3% in 3Q05 to 53.9% in 4Q05

     * Net income increased 164% year-over-year and 15% sequentially to NT$248
       million (US$7.4 million)

     * Diluted earnings per ADS was NT$7.85 (US$0.24), up 116% from NT$3.64
       (US$0.11) in 4Q04 and 15% from NT$6.85 (US$0.21) in 3Q05

     Fourth Quarter 2005 Business Highlights:

     * Unit shipments of mobile storage products grew 107% year-over-year and
       24% sequentially to 30 million units

     * Unit shipments of multimedia System-on-Chip (SoC) products grew 754%
       year-over-year and 133% sequentially to approximately 947,000 units

     * The Company started volume production of its new high-end SD, MMC, and
       CF controllers

Silicon Motion Technology Corporation (Nasdaq: SIMO; "the Company"), a leading fabless semiconductor company that designs, develops, and markets universally compatible, high-performance, low-power semiconductor solutions for the multimedia consumer electronics market, today announced its fourth quarter 2005 financial results. Under United States Generally Accepted Accounting Principles (US GAAP), diluted earnings per ADS was NT$7.85 (US$0.24) in the fourth quarter of 2005 (4Q05), an increase of 116% from NT$3.64 (US$0.11) in the same period of the previous year (4Q04) and an increase of 15% from NT$6.85 (US$0.21) in the third quarter of 2005 (3Q05). Net income for 4Q05 was NT$248 million (US$7.4 million), an increase from NT$94 million and NT$215 million in 4Q04 and 3Q05, respectively.

For the full year, diluted earnings per ADS was NT$23.09 (US$0.72), an increase of 124% from NT$10.32 (US$0.32) in 2004. Net income was NT$676 million (US$21.0 million), an increase of 152% from NT$268 million (US$8.5 million) in 2004.

Commenting on the results, Silicon Motion's President and CEO, Wallace Kou, said, "We are pleased with our performance in the fourth quarter despite a particularly challenging environment. There was a shortage of high-density NAND flash memory in October and November. Our top-tier customers who had supply contracts with NAND flash memory manufacturers were able to secure reasonable supply, but many of the second-tier flash memory card and USB flash disk manufacturers experienced considerable difficulty procuring sufficient high-density flash memory. The supply of high density NAND flash memory improved in December. However, by then, many customers were reluctant to place orders because NAND flash memory prices were rather unstable.

During the fourth quarter, we were able to secure additional design wins for our MP3 controllers, especially for use in MP3 players that use card- reader technology. In the first quarter of 2006, we expect to see higher shipments of our MP3 controllers from design wins at manufacturers of card- reader based MP3 players.

During the fourth quarter, we also secured additional design wins for our SD controller that is used in micro-SD cards, and we believe that we have gained market share in small form factor flash memory cards that are used in mobile phones.

To maintain the versatility of our controllers we added and expanded support for Renesas' AG-AND high-performance flash memory that features new memory cell architecture, multi-level technology, and high-speed programming. When Samsung and Hynix's new MLC flash memory enters volume production in the first quarter of 2006, all of our controllers will be ready to support it."

Fourth Quarter 2005 Financial Review (1)

Sales

Net sales in the fourth quarter totaled NT$872 million (US$26.1 million), an increase of 14% from the fourth quarter of 2004 and 17% from the third quarter of 2005. By product, net sales from mobile storage products accounted for 84% of total net sales, which was down from 87% in the third quarter of 2005. Net sales from multimedia SoCs represented 16% of total net sales, which was an increase from 13% in 3Q05. Net sales from other products in the current period accounted for less than 1% of net sales.

As % of Total Net Sales   1Q04   2Q04   3Q04 4Q04   1Q05  2Q05  3Q05 4Q05
    Mobile Storage Products    80%    80%    87%  92%    86%   80%   87%   84%
    Multimedia SoCs            20%    18%    13%   7%    13%   19%   13%   16%
    Others                      0%     2%     0%   1%     1%    1%    0%    0%
    Total                     100%   100%   100% 100%   100%  100%  100%  100%

Net sales from mobile storage products, which include flash memory card controllers and USB 2.0 flash disk controllers, grew 4% from 4Q04 and 13% from 3Q05 to NT$732 million (US$21.9 million). Unit shipments increased 107% from 4Q04 and 24% from 3Q05 to 30 million units. Both the year-over-year and sequential increases were driven by strong demand for the Company's newer generation of SD, MMC, and USB 2.0 flash disk controllers. The average selling price (ASP) per unit declined 12% from 3Q05.

Net sales from multimedia SoC products, which include multimedia display processors and portable audio SoCs, grew 139% from 4Q04 and 44% from 3Q05 to NT$136 million (US$4.1 million). Unit shipments of multimedia SoC products increased 754% from 4Q04 and 133% from 3Q05 to approximately 947,000 units. The ASP per unit for multimedia SoC products declined 40% from 3Q05 primarily because portable audio SoCs, which have lower selling prices compared to multimedia display processors, comprised a greater proportion of the total number of multimedia SoC products sold in the fourth quarter. Increased competition in the portable audio SoC market also contributed to the decline in ASP.

Unit Shipment     1Q04   2Q04   3Q04    4Q04   1Q05    2Q05   3Q05    4Q05
     (thousand units)
    Mobile Storage
     Products        4,824  4,913  9,983  14,549 10,912  14,120 24,265  30,146
    Multimedia SoCs    112    114    128     111    163     337    407     947
        Others           2     34      3      --     17      59      3       7

The Company's top customers in the quarter included A-Data Technology, All American Semiconductor, ATP Electronics Taiwan, Kingmax Digital, Kingpak Technology, Lexar Media, Macrotron Systems, Microtek Inc, Power Digital Cards, and Samsung Electronics. The Company's top 5 customers accounted for 49% of total net sales in 4Q05, compared to 48% in 3Q05.

Expenses

The cost of sales in 4Q05 totaled NT$402 million (US$12.0 million), a decrease of 18% from 4Q04 and an increase of 13% from 3Q05. The year-over- year decrease was driven primarily by a decline in total wafer costs. The sequential increase was driven primarily by higher total wafer costs and higher assembly and test costs as a result of the higher sales volume overall. The gross margin for the quarter was 53.9%, up from 35.5% in 4Q04 and from 52.3% in 3Q05.

Total operating expenses in 4Q05, which include sales and marketing expenses, general and administrative (G&A) expenses, research and development (R&D) expenses, and amortization of intangible assets, were NT$207million (US$6.2 million), an increase of 42% from 4Q04 and 13% from 3Q05. Total operating expenses represented 23.7% of net sales, compared to 19.2% and 24.5% of net sales in 4Q04 and 3Q05, respectively. The Company's operating margin increased from 16.3% in 4Q04 and 27.8% in 3Q05 to 30.2% in 4Q05, primarily as a result of increases in our gross margin.

Sales and marketing expenses in 4Q05 increased by 45% from 4Q04 and 53% from 3Q05 and represented 6.5% of net sales. The year-over-year increase was primarily driven by higher salary and benefits that are associated with increased headcount, as well as higher promotional expenses. The increase was offset by reductions in total sales commissions and professional fees. The sequential increase was primarily due to higher salary and benefit expenses and higher commissions.

General and administrative expenses in 4Q05 increased 70% year-over-year, declined 31% sequentially, and represented 3.8% of net sales. The year-over- year increase was primarily due to higher salary and benefits from the higher headcount and was offset by decreases in professional fees and the reserve for bad debt. The sequential decrease was primarily due to decreases in professional fees and bad debt reserves and was offset by the higher salary and benefits.

Research and development expenses in 4Q05 increased 62% year-over-year and 21% sequentially and represented 13.2% of net sales. The year-over-year and sequential increases were driven by higher salary and benefits arising from higher R&D headcount and higher project costs that were a result of a greater number of R&D projects under development. Higher travel expenses and professional fees also contributed to the year-over-year and sequential increases.

The company-wide headcount increased 8% from 224 at the end of 3Q05 to 242 at the end of 4Q05. A large majority of the headcount increase took place in the Research and Development department. Separately, Jerry Shun, who was in charge of the Company's worldwide sales and marketing team, resigned from the Company to pursue other interests. Arthur Yeh, Julia Chen, and Vincent Sun, who are in charge of the Company's Asia, US, and Japan & Europe sales teams respectively, have assumed Jerry's responsibilities while the Company searches for a replacement.

Earnings

Net income totaled NT$248 million (US$7.4 million) in 4Q05, an increase of 164% from NT$94 million in 4Q04 and an increase of 15% from NT$215 million in 3Q05. The net margin was 28.5%, up from 12.3% in 4Q04 but down slightly from 28.8% in 3Q05. Diluted earnings per ADS were NT$7.85 (US$0.24), up 116% from NT$3.64 (US$0.11) in 4Q04 and up 15% from NT$6.85 (US$0.21) in 3Q05.

Balance Sheet

At the end of the fourth quarter of 2005, the Company had NT$1,559 million (US$47.5 million) in cash and cash equivalent funds and NT$1,181 million (US$36.0 million) in short-term investments. Accounts receivable (A/R) increased from NT$479 million at the end of 3Q05 to NT$573 million (US$17.5 million) at the end of 4Q05. The average A/R turnover days increased from 47 days to 55 days. Inventory increased from NT$232 million at the end of 3Q05 to NT$279 million (US$8.5 million) at the end of 4Q05. The average inventory turnover had a slight increase, from 56 days to 58 days. Total assets grew from NT$3,832 million at the end of 3Q05 to NT$4,090 million (US$124.7 million) at the end of 4Q05.

Current liabilities increased from NT$582 million at the end of 3Q05 to NT$631 million (US$19.2 million) at the end of 4Q05, primarily due to increases in tax payables and accrued expenses. There was no material change in the Company's long-term liabilities.

There were 122.612 million ordinary shares outstanding at the end of 4Q05, which was equivalent to 30.653 million American Depositary Shares.

Business Outlook:

The first quarter is traditionally a slower business environment for Silicon Motion given that much of the Company's products are used in consumer electronic devices. Additionally, due to the Chinese New Year holiday, there are fewer business days in the first quarter for many customers who manufacture flash memory cards and USB flash disk drives. As a result, the Company currently expects sales in the first quarter of 2006 to be approximately US$20-$21 million, which represents a 19%-23% sequential decline, but still a 23%-29% year-over-year increase. The Company estimates that the operating margin in 1Q06, excluding the impact of stock option expenses, will be approximately flat from the 4Q05 level. As a result of adopting FAS 123R, stock option expenses in the first quarter are expected to be approximately $0.59 million.

For full-year 2006, the Company believes that demand for small form factor flash memory cards will be strong, especially for use in mobile phones. Additionally, Silicon Motion's newer MP3 controllers and USB flash disk controllers should enhance the Company's competitive position in the markets in which these products compete. As a result, the Company believes it will see continued growth in its products, including flash memory controllers for use in small form factor flash memory cards, USB 2.0 flash disk controllers, and MP3 controllers. Given these factors, the Company estimates that its full-year earnings per ADS will be approximately $0.90-$1.00.

Webcast of Conference Call:

The Company's management team will conduct a conference call at 10:00 am Eastern Time on January 26. A webcast of this conference call will be accessible on the Company's web site at http://www.siliconmotion.com.

Silicon Motion Technology Corporation
                      Consolidated Statements of Income
     (in thousands, except percentages, per share data, and share count)
                                 (unaudited)


                    For the     For the    For the   For the    Change  Change
                    3 Months    3 Months   3 Months  3 Months    from    from
                     Ended       Ended      Ended     Ended      4Q04    3Q05
                    Dec. 31,    Sep. 30,   Dec. 31,  Dec. 31,     (%)     (%)
                    2004(NT$)   2005(NT$)  2005(NT$)  2005(US$)
                                                        (2)


    Net Sales        763,030   747,012    872,472     26,089        14     17
    Cost of sales    492,161   356,688    402,282     12,029       (18)    13
    Gross profit     270,869   390,324    470,190     14,060        74     20
    Operating expenses
     Research &
      development     71,195    95,690    115,342      3,449        62     21
     Sales &
      marketing       39,229    37,372     57,071      1,707        45     53
     General &
      administrative  19,585    48,489     33,300        996        70    (31)
     Amort. of
      intangible
      assets           4,440     1,126      1,125         34       (75)    --
     Impair. of
      intangible
      assets          11,718        --         --         --        --     --
     Subtotal        146,167   182,677    206,838      6,185        42     13
    Operating income 124,702   207,647    263,352      7,875       111     26
    Non-operating
     income (expense)
    Gain on sale of
     investments       4,538     3,394      3,880        116       (15)    14
      Interest income
       (net)             236    11,725     13,920        417     5,798     19
    Foreign exchange
     gain (loss)      17,086     4,710     (2,711)       (81)     (116)  (158)
    Others            (3,665)   (6,356)       520         15      114    (108)
    Subtotal          18,195    13,473     15,609        467      (14)     16
    Income
     before tax      142,897   221,120    278,961      8,342       95      26
    Income tax
     expense          48,847     6,021     30,585        915      (37)    408
    Net income       $94,050  $215,099   $248,376     $7,427      164      15

    Basic earnings
     per ADS         NT$3.64   NT$7.02    NT$8.10       0.24
    Diluted earnings
     per ADS         NT$3.64   NT$6.85    NT$7.85       0.24
    Margin Analysis:
    Gross margin        35.5%     52.3%      53.9%
    Operating margin    16.3%     27.8%      30.2%
    Net margin          12.3%     28.8%      28.5%
    Additional Data:
    Weighted average
     ADS equivalents
     (thousand)(3)    25,838    30,653     30,653
    Diluted ADS
     equivalents
     (thousand)       25,838    31,389     31,644



                    Silicon Motion Technology Corporation
                      Consolidated Statements of Income
     (in thousands, except percentages, per share data, and share count)
                                 (unaudited)


                          For the     For the        For the
                          3 Months      Year           Year
                            Ended      Ended          Ended
                           Dec. 31,    Dec. 31,      Dec. 31,
                          2004(NT$)   2005(NT$)      2005(US$)      Change(%)

    Net Sales            2,166,727    2,686,492       83,613           24
    Cost of sales        1,274,410    1,342,585       41,786            5
    Gross profit           892,317    1,343,907       41,827           51
    Operating expenses
      Research &
      development          238,485      373,548       11,626           57
      Sales & marketing    141,136      157,278        4,895           11
      General &
       administrative      103,303      129,141        4,019           25
      Amortization of
       intangible assets    17,758        4,501          140          (75)
      Impairment of
       intangible assets    11,718           --           --           --
      Subtotal             512,400      664,468       20,680           30
    Operating income       379,917      679,439       21,147           79

    Non-operating income (expense)
      Gain on sale
       of investments       10,135       13,002          405           28
      Interest income (net)    477       26,693          831        5,496
      Foreign exchange
       gain (loss)          13,719        1,811           56          (87)
      Others                (3,144)      (5,589)        (175)          78
      Subtotal              21,187       35,917        1,117           70
    Income before tax      401,104      715,356       22,264           78
    Income tax expense     133,101       39,713        1,236          (70)
    Net income          NT$268,003   NT$675,643    US$21,028          152

    Basic earnings
     per ADS              NT$10.32     NT$23.70
    Diluted earnings
     per ADS              NT$10.32     NT$23.09


    Margin Analysis:
    Gross margin              41.2%        50.0%
    Operating margin          17.5%        25.3%
    Net margin                12.4%        25.2%

    Additional Data:
    Weighted average ADS
     equivalents outstanding
     (thousand)             25,763       28,509
    Diluted ADS equivalents
     (thousand)             25,840       29,265



                    Silicon Motion Technology Corporation
                          Consolidated Balance Sheet
                               (NT$ thousands)
                                 (unaudited)

                                    Dec. 31,        Sep. 30,      Dec. 31,
                                       2004            2005          2005
    Cash and cash equivalents       727,165       1,624,817     1,558,998
    Short-term investments          154,428         993,382     1,180,950
    Accounts receivable, net        449,572         478,878       573,498
    Inventories                     509,149         232,341       278,528
    Refundable deposits - current   107,527          95,000        60,000
    Deferred income tax assets,
     net                             35,330           7,798        48,858
    Prepaid expenses and other
     current assets                  68,337         214,583       222,563
    Total current assets          2,051,508       3,646,799     3,923,395

    Long-term investments             3,142           3,142        15,954
    Property and equipment (net)     65,657          82,064        83,734
    Intangible assets, net            6,843           3,468         2,342
    Other assets                     39,887          96,289        65,047
    Total assets               NT$2,167,037    NT$3,831,762  NT$4,090,472

    Accounts payable                545,818         353,485       318,841
    Income tax payable               78,133          64,518       104,744
    Accrued expenses and
     other current liabilities       88,139         164,114       207,509
    Total current liabilities       712,090         582,117       631,094

    Accrued pension cost              4,813           7,855         5,365
    Other long-term liabilities       1,901           1,467         1,886
    Total liabilities               718,804         591,439       638,345
    Shareholders' equity          1,448,233       3,240,323     3,452,127
    Total liabilities &
     shareholders' equity      NT$2,167,037    NT$3,831,762  NT$4,090,472

    About Silicon Motion:

Silicon Motion Technology Corporation is a leading fabless semiconductor company that designs, develops, and markets universally compatible, high- performance, low-power semiconductor solutions for the multimedia consumer electronics market. The Company's semiconductor solutions include controllers used in mobile storage media, such as flash memory cards and USB flash drives, and multimedia systems on a chip, or SoCs, used in digital media devices such as MP3 players, PC cameras, PC notebooks and broadband multimedia phones.

Forward-Looking Statements:

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding trends in the multimedia consumer electronics market and our future results of operations, financial condition and business prospects. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue," or the negative of these terms or other comparable terminology. Although such statements are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on them. These statements involve risks and uncertainties, and actual market trends or our actual results of operations, financial condition or business prospects may 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, our belief in the outcome of any claim or lawsuit, including our claim against one of our subcontractors for the inventory loss that we sustained during a fire at the subcontractor's factory; unpredictable volume and timing of customer orders, which are not fixed by contract but vary on a purchase order basis; the loss of one or more key customers or the significant reduction, postponement, rescheduling or cancellation of orders from these customers; general economic conditions or conditions in the semiconductor or multimedia consumer electronics markets; decreases in the overall average selling prices of our products; changes in the relative sales mix of our products; changes in our cost of finished goods; the availability, pricing, and timeliness of delivery of other components and raw materials used in our customers' products; our customers' sales outlook, purchasing patterns, and inventory adjustments based on consumer demands and general economic conditions; our ability to successfully develop, introduce, and sell new or enhanced products in a timely manner; and the timing of new product announcements or introductions by us or by our competitors. For additional discussion of these risks and uncertainties and other factors, please see the documents we file from time to time with the Securities and Exchange Commission, including the registration statement on Form F-1 filed on June 24, 2005, as amended. We assume no obligation to update any forward- looking statements, which apply only as of the date of this press release.

(1) Note: Unless otherwise stated, all financial information used in this
        press release is unaudited, consolidated, prepared in accordance with
        US GAAP and denominated in New Taiwan dollars. US dollar amounts are
        translated for convenience only.  Such financial information is
        generated internally and has not been subjected to the same review and
        scrutiny, including internal auditing procedures and audit by
        independent auditors, to which we subject our audited consolidated
        financial statements, and may vary materially from the audited
        consolidated financial information for the same period. Any evaluation
        of the financial information presented in this press release should
        also take into account our published audited consolidated financial
        statements and the notes to those statements. In addition, the
        financial information presented is not necessarily indicative of our
        results for any future period.

    (2) The Company maintains its accounts and expresses its financial
        statements in New Taiwan dollars. For convenience only, U.S. dollar
        amounts presented in the income statement have been translated from
        New Taiwan dollars, using an average exchange rate of NT$33.4419 to
        US$1 for the fourth quarter of 2005 and NT$32.1312 to US$1 for full-
        year 2005 based on the average of the noon buying rate for cable
        transfers of the NT dollar as certified for customs purposes by the
        Federal Reserve Bank of New York.

    (3) Assumes all outstanding ordinary shares are represented by ADSs.  Each
        ADS represents four ordinary shares.

SOURCE Silicon Motion Technology Corporation

Investors: Richard Wei, Chief Financial Officer, +886-3-552-6888 x2886, or fax:
+886-3-552-6988, ir@siliconmotion.com, or, Media: Sara Hsu, Project Manager,
+886-2-2219-6688 x3509, or, fax: +886-2-2219-6868, sara.hsu@siliconmotion.com.tw,
both of Silicon Motion Technology Corporation
http://www.prnewswire.com