Monday, 24 October 2011

SIM Technology Announces 2011 Interim Results High-end ODM Projects to Start Shipment in 2H2011, Committed to Transitioning to High Value Added ODM for Future Sustainable Growth

(Hong Kong, 19 August 2011) – SIM Technology Group Limited (“SIM Technology” or the “Group”; SEHK stock code: 2000), a leading mobile handset and wireless communication module solutions developer in the PRC, announced its interim results for the six months ended 30 June 2011.

During the period under review, the Group’s revenue dropped to HK$1,265.4 million (1H 2010: HK$2,015.1 million), mainly due to the reduction in customer demand of mid- to low-end solutions in the open market handset segment and the lack of high-end ODM shipment. Gross profit declined to HK$123.2 million (1H 2010: HK$243.2 million) while gross profit margin was 9.7% (1H 2010: 12.1%). The Group incurred a net loss of approximately HK$18.7 million (1H 2010: profit of HK$108.2 million), translating into basic loss per share of HK1.2 cents (1H 2010: earnings per share of HK7 cents).

Nevertheless, as at 30 June 2011, the Group continued to maintain a strong financial position with net cash balances amounting to HK$508 million (31 December 2010: HK$511 million). The Board of Directors is confident about the business growth in 2H 2011, thus declared payment of an interim dividend of HK1 cents per share for the six months ended 30 June 2011 (1H 2010: HK2.5 cents).

Affected by the drastic drop in demand from open market handset customers, revenue derived from the handsets and solutions segment decreased to HK$934 million (1H 2010: HK$1,583 million) with a gross margin at 8.2% (1H 2010: 10.7%). Though revenue of 2G/2.5G handset solutions dropped by 53% compared with the last corresponding period, that of 3G/3.5Gsolutions rose by 74% due to the increase in sales of WCDMA solutions for the China Unicom network and CDMA solutions for the China Telecom network. The Group launched 118 (1H 2010:100) handset models and 41 (1H 2010: 46) handset platforms during 1H 2011.

The wireless communication modules segmental revenue declined by 25.4% to HK$273 million (1H 2010: HK$365 million) due to the decrease in sales of TD-SCDMA modules, while gross profit margin was maintained at 18.6%. Although increases in sales of 2.5G modules partly offset the drop in TD-SCDMA modules, the higher average selling price of TD-SCDMA modules has still resulted in a revenue decrease for the segment. The Group’s new SIM900 family of wireless modules is smaller, faster and offers exceptional value and is expected to be a growth driver of the segment in the future. The SIM900 family of modules commanded a higher gross margin relative to other modules during the period.

The display modules segment recorded a revenue of HK$58 million (1H2010: HK$67 million). In anticipation of the strong growth of smart phones, the Group was phasing out the low-end display business and upgrading its factory equipment to produce high-end LCD modules to support the Group’s ODM handset business. The Group also increased its R&D resources and production capability for manufacturing capacity touch panel (CTP) in 1H 2011.

The Group is making steady progress towards the business transition and is confident about prospects in the second half year, primarily due to the high-end ODM projects to be launched in the coming months. For example, it has already passed through the Japanese operator’s audit of its manufacturing facility in preparation to launching its first model in the Japanese market. Indeed, the Group believes that the demand of the two Japanese and two domestic ODM customers enables it to achieve its handset business target in the said period. The Group will continue to invest in the most advanced technology including development of 4G and high-end 3Gsmart phones and tablets to facilitate its transition.

Mr. Cho-Tung Wong, Executive Director of SIM Technology, concluded, “We are firmly committed to the strategy of transitioning to become a high value added ODM. In fact the market has shown that only a differentiated business model can sustain long term profitable growth. Our ability to meet the tier one ODM customers’ uncompromising demand for excellence quality and service has set us apart from our competitors. We are confident that our successful execution will lead the Group to another phase of profit and business growth.”


The SIM stores network state information, which is received from the  (LAI). Operator networks are divided into Location Areas, each having a unique LAI number. When the device changes locations, it stores the new LAI to the SIM and sends it back to the operator network with its new location. If the device is power cycled, it will take data off the SIM, and search for the previous LAI. This saves time by avoiding having to search the whole list of frequencies that the telephone normally would..


SIM cards are identified on their individual operator networks by a unique IMSI. Mobile operators connect mobile phone calls and communicate with their market SIM cards using their IMSIs. The format is:
§  The first 3 digits represent the Mobile Country Code (MCC).
§  The next 2 or 3 digits represent the Mobile Network Code (MNC). 3-digit MNC codes are allowed by E.212 but are mainly used in the United States and Canada.
§  The next digits represent the mobile station identification number. Normally there will be 10 digits but would be fewer in the case of a 3-digit MNC or if national regulations indicate that the total length of the IMSI should be less than 15 digits.


Authentication key (Ki)

The Ki is a 128-bit value used in authenticating the SIMs on the mobile network. Each SIM holds a unique Ki assigned to it by the operator during the personalization process. The Ki is also stored in a database (known as Authentication Center or AuC) on the carrier's network.
The SIM card is designed not to allow the Ki to be obtained using the smart-card interface. Instead, the SIM card provides a function, Run GSM Algorithm, that allows the phone to pass data to the SIM card to be signed with the Ki. This, by design, makes usage of the SIM card mandatory unless the Ki can be extracted from the SIM card, or the carrier is willing to reveal the Ki. In practice, the GSM cryptographic algorithm for computing SRES_2 (see step 4, below) from the Ki has certain vulnerabilities that can allow the extraction of the Ki from a SIM card and the making of a duplicate SIM card.
Authentication process:
1.   When the Mobile Equipment starts up, it obtains the International Mobile Subscriber Identity (IMSI) from the SIM card, and passes this to the mobile operator requesting access and authentication. The Mobile Equipment may have to pass a PIN to the SIM card before the SIM card will reveal this information.
2.   The operator network searches its database for the incoming IMSI and its associated Ki.
3.   The operator network then generates a Random Number (RAND, which is a nonce) and signs it with the Ki associated with the IMSI (and stored on the SIM card), computing another number known as Signed Response 1 (SRES_1).
4.   The operator network then sends the RAND to the Mobile Equipment, which passes it to the SIM card. The SIM card signs it with its Ki, producing SRES_2, which it gives to the Mobile Equipment along with encryption key Kc. The Mobile Equipment passes SRES_2 on to the operator network.
5.   The operator network then compares its computed SRES_1 with the computed SRES_2 that the Mobile Equipment returned. If the two numbers match, the SIM is authenticated and the Mobile Equipment is granted access to the operator's network. Kc is used to encrypt all further communications between the Mobile Equipment and the network.


SIM cards store network-specific information used to authenticate and identify subscribers on the network. The most important of these are the ICCID, IMSI, Authentication Key (Ki), Local Area Identity (LAI) and Operator-Specific Emergency Number. The SIM also stores other carrier-specific data such as the SMSC (Short Message Service Center) number, Service Provider Name (SPN), Service Dialing Numbers (SDN), Advice-Of-Charge parameters and Value Added Service (VAS) applications. (look to GSM 11.11).


Each SIM is internationally identified by its integrated circuit card identifier (ICCID). ICCIDs are stored in the SIM cards and are also engraved or printed on the SIM card body during a process called personalization. The ICCID is defined by the ITU-T recommendation E.118 as thePrimary Account Number. Its layout is based on ISO/IEC 7812. According to E.118, the number is up to 19 digits long, including a single check digit calculated using the Luhn algorithm. However, the GSM Phase 1 defined the ICCID length as 10 octets with operator-specific structure.
The number is composed of the following subparts:
Issuer identification number (IIN)
Maximum of seven digits:
§  Major industry identifier (MII), 2 fixed digits, 89 for telecommunication purposes.
§  Country code, 1-3 digits, as defined by ITU-T recommendation E.164.
§  Issuer identifier, 1-4 digits.
Individual account identification
§  Individual account identification number. Its length is variable but every number under one IIN will have the same length.
Check digit
§  Single digit calculated from the other digits using the Luhn algorithm.
With the GSM Phase 1 specification using 10 octets into which ICCID is stored as packed BCD, the data field has room for 20 digits with hexadecimal 'F' being used as filler when necessary.
In practice, this means that on GSM SIM cards there are 20-digit (19+1) and 19-digit (18+1) ICCIDs in use, depending upon the issuer. However, a single issuer always uses the same size for its ICCIDs.
To confuse matters more, SIM factories seem to have varying ways of delivering electronic copy of SIM personalization datasets. Some datasets are without the ICCID checksum digit, others are with the digit.


There are three operating voltages for SIM cards: 5 V, 3 V and 1.8 V (ISO/IEC 7816-3 classes A, B and C, respectively). The operating voltage of the majority of SIM cards launched before 1998 was 5 V. SIM cards produced subsequently are compatible with 3 V and 5 V or with 1.8 V and 3 V.
Dual SIM phones are now made by some mobile phone manufacturers, which save the user from carrying around a separate phone for every number. There are two types: the first allows one to switch between the SIMs, whilst the second allows both SIMs to be active simultaneously.
SIM operating systems come in two main types: native and Java Card. Native SIMs are based on proprietary, vendor-specific software, whereas the Java Card SIMs are based on standards, particularly Java Card, which is a subset of the Java programming language specifically targeted at embedded devices. Java Card allows the SIM to contain programs that are hardware independent and interoperable.


The first SIM card was made in 1991 by Munich smart card maker Giesecke & Devrient, who sold the first 300 SIM cards to Finnish wireless network operator Radiolinja.
 The specification that standardized the micro-SIM form factor continues to evolve. Some features introduced recently include:
§  A micro-SIM form factor
§  Allowance for multiple simultaneous applications accessing the card through logical channels
§  Mutual authentication as a way to eliminate carrier spoofing by allowing the SIM card to authenticate the cell tower to which it is connecting
§  PIN protection with hierarchical PIN management with a universal PIN, an application PIN and a local PIN.

§     Expanded phone book storage on the SIM card with entries for email, second name, and groups.

subscriber identification module (SIM)

A subscriber identity module or subscriber identification module (SIM) is an integrated circuit that securely stores the service-subscriber key (IMSI) used to identify a subscriber on mobile telephony devices (such as mobile phones and computers).
 A SIM is held on a removable SIM card, which can be transferred between different mobile devices. SIM cards were first made the same size as a credit card (85.60 mm × 53.98 mm × 0.76 mm). The development of physically smaller mobile devices prompted the development of a smaller SIM card, the mini-SIM card. Mini-SIM cards have the same thickness as full-size cards, but their length and width are reduced to 25 mm × 15 mm.
 A SIM card contains its unique serial number (ICCID), internationally unique number of the mobile user (IMSI), security authentication and ciphering information, temporary information related to the local network, a list of the services the user has access to and two passwords (PIN for usual use and PUK for PIN unlocking).

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