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TechFaith Reports Fourth Quarter and Fiscal Year 2007 Results
Company Sees Continued Success in ODP Development With Enhanced Portfolio in 2008; Targets Continued Revenue Growth and Profitability
BEIJING, Feb 25, 2008 (MARKET WIRE via COMTEX News Network) -- China TechFaith Wireless Communication Technology Limited (NASDAQ: CNTF), an original developed product (ODP) provider focused on research and development of cell phone solutions, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2007.

Net revenues for the fourth quarter of 2007 were US$45.7 million, representing a 56.7% increase from US$29.1 million for the same period in 2006. Net revenues for the quarter increased by 18.8% sequentially, from US$38.4 million in the third quarter of 2007. Net revenues for the quarter exceeded prior guidance for net revenues, which was in the range of US$42.3 million to US$43.8 million, due to stronger than expected performance of the ODP business. Gross profit was $14.3 million for the quarter, an increase of $6.2 million, or 75.6%, compared to $8.2 million for the same period last year. This is attributed to the stronger contribution from our ODM business during the quarter. Gross margin for the quarter increased to 31.3%, compared to 28.0% during the year ago period. Operating expense was $12.3 million for the quarter, a decrease of $3.6 million, or 22.5%, compared to $15.9 million for the same period last year. This decrease in operating expenses was mainly attributed to continued cost cutting efforts. Net income for the fourth quarter of 2007 was US$3.2 million, or US$0.07 per weighted average outstanding ADS (basic and diluted), compared to a net loss of US$6.7 million, or US$0.15 per weighted average outstanding ADS (basic and diluted) in the same period in 2006.

Net revenues for fiscal year 2007 were US$143.4 million, representing a 77.5% increase from US$80.8 million for fiscal year 2006. Revenues from the ODP business for fiscal year 2007 were US$109.6 million, and design fees and royalty income for fiscal year 2007 were US$33.8 million. Gross profit was $38.6 million for fiscal year 2007, an increase of $13.0 million, or 50.4%, compared to $25.7 million for the same period last year. This is attributed to the stronger contribution from our ODM business during the year. Net loss for fiscal year 2007 was US$3.3 million, or US$0.08 per weighted average outstanding ADS (basic and diluted), compared to a net loss of US$8.8 million, or US$0.20 per weighted average outstanding ADS (basic and diluted) in fiscal year 2006.

As part of our Sarbanes Oxley compliance we have conducted an internal control assessment. We have identified certain internal control deficiencies including material weaknesses. We are working to remedy these issues and already have action plans and remediation deadlines in place. The final results of our assessment of our internal controls will be disclosed in our 2007 20-F.

Defu Dong, TechFaith's Chairman and Chief Executive Officer, said, "We believe our success this quarter was a result of our transition to an ODP provider model, coupled with core technological strengths and advancements. We believe 2007 was a significant year for TechFaith as we made considerable progress in the development and production of middle to high end and tailor-made handsets. We successfully launched 51 ODP models, which include multimedia phones and dual mode dual card handsets consisting of multiple wireless technology combinations, as well as Windows-based smartphones and Pocket PC phones. Toward the end of 2007, our successful transition to an ODP provider model enabled TechFaith to penetrate new markets and ship products to global customers in Europe, Russia, Japan, North America, Latin America, South East Asia, India, Africa and the Middle East.

In 2007, TechFaith had 199 technological patents pending which was helpful for us to establish a unique market position and build higher entry barriers to protect our products. Pursuant to this ODP strategy, the company plans to develop Mobile Internet Devices with phone function based on Windows XP and work actively with Google to develop a Google phone based on an Android operation system. At the same time, TechFaith is in the process of establishing TechFaith Interactive Limited, a wholly-owned subsidiary focusing on the development and operation of wireless applications and content. The new business will enhance TechFaith's current product portfolio by adding handsets with interactive online games and professional game terminals with phone functionality. We expect to generate revenues from this new category of ODP products beginning in Q3 2008. "

Bob Huo, TechFaith's Deputy Chief Executive Officer, added, "We are encouraged by our progress in the fourth quarter, and our prospects for 2008. We expect continued revenue growth and profitability based on the development of our enriched ODP portfolio and increased orders from a globally diversified customer base. Based on our position in the handset value chain, we do not expect a near-term slow down for TechFaith. We believe there is increasing demand for middle to high-end and tailor made handsets from China and the international handset market, which continues to be robust.

We will maintain a fast growth rate in 2008, with a continued focus on the optimization of our cost structure. Despite regular seasonality in the first quarter due to the Chinese New Year and the severe snow storms in China at the end of January, we still expect sequential revenue growth with sustained profitability for the first quarter of 2008, with revenues expected to be in the range of US$48 million to US $49 million."

China TechFaith's ADSs, each of which represents 15 ordinary shares of China TechFaith, are currently trading on the Nasdaq Global Market under the symbol ''CNTF.''

Investor Conference Call / Webcast Details

The dial-in number for the live audio call beginning on February 25, 2008 at 7:00 p.m. U.S. Eastern Time (8:00 a.m., February 26, 2008 in Beijing) is +1-866-713-8307 or +1-617-597-5307 (international). The passcode is 10796370. A live webcast of the conference call will be available on China TechFaith's website at www.techfaithwireless.com.

A replay of the call will be available on February 25, 2008 at 9 p.m., U.S. Eastern Time (10 a.m., February 26, 2008 in Beijing) through midnight on March 3, 2008, U.S. Eastern Time (1 p.m., March 4, 2008 in Beijing) at www.techfaithwireless.com and by telephone at +1-888-286-8010 (domestic) or +1-617-801-6888 (international). The passcode to access the replay is 32845456.

About TechFaith

TechFaith (NASDAQ: CNTF) is an original developed product provider focused on research and development of cell phone solutions. Based in China, TechFaith employs approximately 1,300 professionals, of whom approximately 90% are engineers. TechFaith engages in the development and production of middle to high end handsets and tailor made handsets. TechFaith's original developed products include:

1. Multimedia phones and dual mode dual card handsets of multiple wireless technology combination such as GSM/GSM, GSM/CDMA, GSM/WCDMA, GSM/TD-SCDMA and UMTS/CDMA;

2. Windows-based smartphone and Pocket PC phone; and

3. Handsets with interactive online gaming and professional game terminals with phone functionality.

With the capability of developing MMI/UI software on 2G/2.5G(GSM/GPRS, CDMA1X), 3G(EV-DO, WCDMA/UMTS, TD-SCDMA) and 3.5G(HSDPA) communication technologies, TechFaith is able to provide MMI/UI software packages that fulfill the specifications of handset brand owners and carriers in the global market. For more information, please visit www.techfaithwireless.com.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, the business outlook, as well as TechFaith's strategic and operational plans, contain forward-looking statements. TechFaith may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on Forms 20-F and 6-K, etc., in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about TechFaith's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, TechFaith's limited operating history, TechFaith's ability to retain existing or attract additional domestic and international customers, TechFaith's earnings or margin declines, failure to compete against new and existing competitors, mobile handset brand owners' discontinuation or reduction of the use of independent design houses, and other risks outlined in TechFaith's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. TechFaith does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

        CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
        UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  (In Thousands of U.S. Dollars, except share and per share/ADS data and
                         unless otherwise stated)
           Three Months
              Ended        Three Months Ended        Twelve Months Ended
           September 30        December 31               December 31
               2007         2006         2007         2006         2007
           -----------  -----------  -----------  -----------  -----------
Revenues:
Design
 fees      $     5,425  $     4,293  $     5,314  $    29,864  $    26,042
Royalty
 income          1,280        1,864        1,059        7,674        7,772
Component
 and
 products
 sales          31,723       22,992       39,283       43,266      109,577
Service
 income             18            -           35            -           53
           -----------  -----------  -----------  -----------  -----------
Total net
 revenues  $    38,446  $    29,149  $    45,691  $    80,804  $   143,444
Cost of
 revenues:
Design
 fees      $     2,177  $     2,890  $     3,054  $    19,998  $    16,882
Royalty
 income              -            -            -            -            -
Component
 and
 products
 sales          27,096       18,107       28,301       35,107       87,884
Service
 Cost                4            -           25            -           29
           -----------  -----------  -----------  -----------  -----------
Total cost
 of
 revenues  $    29,277  $    20,997  $    31,380  $    55,105  $   104,795
Gross
 Profit    $     9,169  $     8,152  $    14,311  $    25,699  $    38,649
Operating
 expenses:
General
 and
 administ-
 rative    $     1,839  $     4,867  $     2,852  $    13,923  $    11,014
Research
 and
 developm-
 ent             6,524        7,825        7,808       21,970       30,876
Selling
 and
 marketing         794          648          868        2,260        3,422
Exchange
 loss              357        1,159          790        1,187        2,128
Write off
 of
 leasehold
 improvem-
 ent                 -        1,388            -        1,388            -
           -----------  -----------  -----------  -----------  -----------
Total
 operating
 expenses  $     9,514  $    15,887  $    12,318  $    40,728  $    47,440
Other
 operating
 income            864            -           81          180        1,734
(Loss)
 income
 from
 oper-
 ations    $       519  ($    7,735) $     2,074  ($   14,849) ($    7,057)
Interest
 expense           (89)         (14)         (26)         (18)        (166)
Other
 income,
 net               905        1,403          970        5,028        3,651
Change in
 fair
 value of
 put
 option             24         (273)         (12)        (269)         (43)
           -----------  -----------  -----------  -----------  -----------
Income
 before
 income
 taxes     $     1,359  ($    6,619) $     3,006  ($   10,108) ($    3,615)
Income tax           -          (85)          (3)        (100)          (6)
           -----------  -----------  -----------  -----------  -----------
Income
 before
 minority
 interests $     1,359  ($    6,704) $     3,003  ($   10,208) ($    3,621)
Minority
 interests         226          447          223        1,808        1,200
Equity in
 loss of
 an
 affiliate           -         (393)           -         (393)        (851)
           -----------  -----------  -----------  -----------  -----------
Net (loss)
 income    $     1,585  ($    6,650) $     3,226  ($    8,793) ($    3,272)
           ===========  ===========  ===========  ===========  ===========
Net income
 per
 ordinary
 share
  Basic    $         -  ($     0.01) $         -  ($     0.01) ($     0.01)
           ===========  ===========  ===========  ===========  ===========
  Diluted  $         -  ($     0.01) $         -  ($     0.01) ($     0.01)
           ===========  ===========  ===========  ===========  ===========
Net income
 per ADS*
  Basic    $      0.04  ($    0. 15) $      0.07  ($     0.20) ($     0.08)
           ===========  ===========  ===========  ===========  ===========
  Diluted  $      0.04  ($    0. 15) $      0.07  ($     0.20) ($     0.08)
           ===========  ===========  ===========  ===========  ===========
Weighted
 average
 ordinary
 shares
 outstanding
  Basic    649,863,772  650,484,876  649,885,592  656,255,882  649,800,974
           ===========  ===========  ===========  ===========  ===========
  Diluted  649,863,772  650,484,876  649,885,592  656,255,882  649,800,974
           ===========  ===========  ===========  ===========  ===========
Revenue
 Breakout    1Q06    2Q06    3Q06    4Q06    1Q07    2Q07    3Q07    4Q07
            ------- ------- ------- ------- ------- ------- ------- -------
Design fees
 International
  customers $ 5,737 $ 5,299 $ 3,546 $ 1,883 $ 9,463 $ 4,811 $ 2,687 $ 2,415
 Domestic
  customers $ 3,253 $ 7,151 $   585 $ 2,410 $   655 $   374 $ 2,738 $ 2,899
Royalty
 International
  customers $   454 $   918 $   184 $   141 $   300 $   461 $   194 $   287
 Domestic
  customers $   638 $   885 $ 1,285 $ 1,723 $ 1,851 $ 1,427 $   925 $   483
 Component
  vendors   $   757 $   394 $   295 $     - $   644 $   750 $   161 $   289
Component
 and
 products
  Smart
   Phone    $     - $ 1,906 $ 3,074 $13,055 $ 4,014 $ 6,557 $ 8,688 $17,185
  PCBA      $     - $   271 $ 3,016 $ 3,243 $ 2,149 $ 2,454 $   717 $    22
  Wireless
   module   $ 1,304 $ 2,776 $ 4,808 $ 4,039 $ 1,452 $ 7,202 $ 2,483 $ 1,377
  Feature
   phone    $     - $     - $     - $   452 $ 3,787 $ 5,349 $18,153 $20,134
  Other
   component
   sales    $   689 $ 1,970 $   460 $ 2,203 $ 2,965 $ 2,642 $ 1,682 $   565
Service
 income     $     - $     - $     - $     - $     - $     - $    18 $    35
            ------- ------- ------- ------- ------- ------- ------- -------
Total net
 revenues   $12,832 $21,570 $17,253 $29,149 $27,280 $32,027 $38,446 $45,691
            ======= ======= ======= ======= ======= ======= ======= =======
       CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
             UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                   (In Thousands of U.S. Dollars)
                                    December 31, September 30, December 31,
                                        2006         2007         2007
                                     -----------  -----------  -----------
Assets
Current assets:
Cash and cash equivalents            $   113,172  $    84,914  $    84,754
Restricted cash                            5,205        5,228        3,389
Accounts receivable                       37,229       45,617       40,014
Notes receivable                           2,234        1,992        4,020
Inventories                                8,546       34,442       50,763
Prepaid expenses and other current
 assets                                    9,120        8,558        9,148
                                     -----------  -----------  -----------
Total current assets                 $   175,506  $   180,751  $   192,088
                                     -----------  -----------  -----------
Deposits for acquisition of plant,
 machinery and equipment, and
 acquisition of intangible assets    $     5,905  $     8,713  $    10,177
Plant, machinery and equipment, net       25,092       27,639       28,275
Acquired intangible assets, net              355          320        1,646
Goodwill                                       6          606          606
Long-term investment in an affiliate         850            -            -
                                     -----------  -----------  -----------
Total assets                         $   207,714  $   218,029  $   232,792
                                     ===========  ===========  ===========
Liabilities and shareholders' equity
Current liabilities:
Current portion of Long term payable $       443  $       599  $     1,358
Short term Loan                                -            -            -
Accounts payable                     $     6,678       31,825       35,617
Note Payable                                 144            -            -
Accrued expenses and other current
 liabilities                              19,087       10,943       12,500
Advance from customers                     5,223        5,473        7,512
Deferred revenue                           5,408        2,284        1,541
Income tax payable                           140          139          142
                                     -----------  -----------  -----------
Total current liabilities            $    37,123  $    51,263  $    58,670
Long-term payable                    $       398  $         -  $       453
                                     -----------  -----------  -----------
Total liabilities                    $    37,521  $    51,263  $    59,123
                                     -----------  -----------  -----------
Minority interests                   $     3,843  $     1,883  $     1,660
Shareholders' equity
Ordinary shares                      $        13  $        13  $        13
Additional paid-in capital               109,833      110,312      110,327
Treasury stock                            (4,628)      (4,628)      (4,628)
Accumulated other comprehensive
 income                                    5,339        9,891       13,776
Statutory reserve                          6,093        6,093        6,813
Retained earnings                         49,700       43,202       45,708
                                     -----------  -----------  -----------
Total shareholders' equity           $   166,350  $   164,883  $   172,009
                                     -----------  -----------  -----------
Total liabilities and shareholders'
 equity                              $   207,714  $   218,029  $   232,792
                                     ===========  ===========  ===========

CONTACTS:
In China:
Ms. Helen Zhang
Tel: 86-10-5822-7390
Email Contact

In the U.S.:
Gerrard Lobo
The Ruth Group
Tel:+ 646-536-7023
Email Contact


SOURCE: China TechFaith

http://www2.marketwire.com/mw/emailprcntct?id=C707C5014610C10E
http://www2.marketwire.com/mw/emailprcntct?id=EF2CFE0A21886599

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