TFS Selected as Color Display Supplier for Tier 1 Handset Maker

TEMPE, Ariz., Feb. 9 /PRNewswire-FirstCall/ -- Three-Five Systems, Inc. announced today that it has been selected as a supplier of next-generation color thin film transistor (TFT) display modules for a Tier 1, global handset original equipment manufacturer (OEM).

The company indicated that design work with the customer is nearing completion, and that it had received authorization to commence tooling. The company expects initial shipments to begin in late Q2 2005, ramping to high volume production quantities in the third quarter of 2005. While specific revenue forecasts were not provided, TFS officials indicated that they expect to ship over a million units during the second half of 2005.

TFS indicated in June of 2004 that it had developed a platform strategy to enter the small-format color TFT display module market. The platform strategy is a new fabless TFT foundry model, similar to the established fabless semiconductor model used in IC development. TFT Platform Products from TFS allow makers of mobile handheld devices to leverage the popularity and increasing cost-effectiveness of small form factor TFT displays. The TFT technology is rapidly becoming the standard for cell phones and PDAs because of its brightness and its ability to display video speed images. The reduced prices of small sized TFT displays are helping drive the growth in this market and are allowing manufacturers to achieve the price targets that consumers demand. TFS is able to deliver semi-custom versions of its Platform Products that are optimized for handheld device market requirements from an electrical, optical and mechanical perspective. As they require little customization, average product cycle time is only four months. This allows original equipment manufacturers (OEMs) to deliver new technology to the market faster and enhance their chances of capturing greater initial market share.

TFS has partnered its LCD design services and products groups with some of the world's top-tier color display manufacturers to create a line of semi-custom color modules, specifically designed for handheld applications. TFS then employs its electronic manufacturing services (EMS) structure, and specifically its module manufacturing services facility in Beijing, China, to manufacture state-of-the-art color TFT modules for leading original equipment manufacturers (OEMs).

Jack Saltich, CEO of TFS said, "Our fabless platform strategy has allowed us to take advantage of the excess capacity that exists with many color TFT glass manufacturing companies. Since this excess capacity situation is expected to be present for the next several years, we believe our newly introduced platform products, which target the mobile electronic device market, position us well to penetrate this huge market. With over 20 years experience in the display sector and our existing production capability, we have both the expertise and the capacity to win in this fast-growing market. We are pleased to have secured our first anchor customer in this business. This announcement reflects the achievement of a significant milestone in our color TFT business development strategy. Now we will focus on growing this anchor TFT customer, along with several existing, smaller TFT customers, into a sizeable business within TFS."

According to a Worldwide Flat Panel Display Market Growth Report published in the fourth quarter of 2004 by DisplaySearch for the United States Display Consortium (USDC), revenues from amorphous silicon TFT LCDs for the third quarter of 2004 were $10.4 billion, with 14% of those displays shipped for mobile telephones. DisplaySearch predicts that the total mobile phone market for amorphous silicon TFT LCDs will exceed $6.3 billion in 2005.

About Three-Five Systems(R)

TFS is a recognized leader in providing specialized electronics manufacturing services (EMS) to original equipment manufacturers (OEMs). TFS has a global footprint, with operations in the United States, Europe, and several locations in Asia. TFS offers a broad range of engineering and manufacturing capabilities, with a special emphasis and expertise in display solutions. TFS' website is located at http://www.tfsc.com/. Three-Five Systems, Inc. and the TFS logo are trademarks or registered trademarks of TFS. All other trademarks are the property of their respective owners.

Certain statements contained in this document may be deemed to be forward-looking statements under federal securities laws, and TFS intends that such forward-looking statements be subject to the safe-harbor created thereby. Such forward-looking statements include, but are not limited to: (1) initial volume production will commence in Q2 of 2005 and ramp to high volumes in Q3 of 2005; and (2) shipments during the second half of 2005 will reach or exceed one million units; and (3) excess capacity in the industry will exist for several years; and (4) expected growth of the market for small format TFT displays. TFS cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements contained herein. Such factors include, but are not limited to: (a) changes in markets or demand; (b) the failure of the platform products and the fabless TFT foundry model to achieve desired results; (c) the failure of TFS or its foundries to meet all requested production schedules due to manufacturing, yield, or supply issues; and (d) other risks as identified from time to time in TFS' SEC reports, including Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and Annual Reports on Form 10-K.