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Cogo Group Anticipates Advantage from China's HD TV Plan

Cogo Group, Inc. (Nasdaq: COGO), a leading platform services provider for the technology and industrial sectors in China, today announced that it expects to benefit from China's plan to migrate to High Definition Television ("HD") over the next three years.

Cogo has already secured design wins to provide HD solutions to three top-tier set-top box ("STB") manufacturers with scheduled shipments beginning in 2010. Additionally, Cogo is targeting an additional 20 STB vendors with its solution next year.

At the end of September 2009, the Chinese government announced that nine channels would begin offering HD transmissions. These HDTV channels comprise CCTV-1 and 8 other channels across China's tier-one cities, including Beijing, Shanghai and Shenzhen. Chinese consumers will need an HD set-top box to access HDTV, which Cogo believes together with the ongoing China stimulus package, will drive a significant STB replacement cycle. Various industry sources have estimated that total HD STB sales will reach 30-50 million subscribers over the next three years, from a very limited number today. Currently, Beijing Gehua, Shanghai Cable, and Shenzhen CATV are key cable operators aggressively rolling out HDTV; however, over 100 cable operators will ultimately deliver HDTV in China over the next few years.

The cable TV market in China is still relatively immature, with only 400 million television viewers as of June 2008 out of a population of 1.3 billion. Total cable subscriptions numbered 164 million as of June 2009 and only about 54 million of those were digital. Cogo believes that cable service upgrades and increased penetration in China will continue to provide significant opportunities for STB growth in China.

Cogo expects that its digital media business, which comprises 60% of the Company's business, will show accelerated growth in 2010 from 2009, as the Company benefits from a variety of positive revenue streams, including the HD roll-out, and increased sales of mobile Internet devices and Smartphones. China's consumer confidence index hit an all-time high since mid-2007, and in the years ahead, consumer spending is expected to rise significantly. According to Financial Times, "retail sales have increased 16.5 per cent in the first three quarters of 2009 ... at least two percentage points faster than last year before the crisis." The Company reiterates its belief that the worst of China's economic situation is past and the Company will significantly accelerate its overall revenue in 2010 over 2009.

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