Prospectus Summary
PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our ADSs discussed under “Risk Factors,” before deciding whether to purchase our ADSs.Vimicro International Corporation
Overview
We are a fabless semiconductor company that designs, develops and markets proprietary semiconductor products and solutions that enable multimedia capabilities in a variety of products for the consumer electronics and communications markets. Combining our multimedia systems experience with our skills in high performance, mixed-signal system-on-chip, or SoC, design, we provide customers with comprehensive, system-level solutions that include highly integrated semiconductors, customizable firmware and software, software development tools, reference designs and applications support. We conduct most of our operations in China. Although there are uncertainties with respect to China’s legal and regulatory environment, including its regulations and policies governing dividend distribution, tax and foreign currency exchange, we believe that we benefit from our access to high quality design talent, the competitive cost structure, the growing electronics design and manufacturing industry, and the increasingly significant domestic consumer electronics markets in China.
We are a leading supplier of PC camera multimedia processors in terms of the number of peripheral PC cameras shipped worldwide in 2004. Our PC multimedia processors are incorporated into the products of leading PC camera vendors, such as Logitech. We seek to establish a leading position in the mobile phone multimedia processor market by leveraging our core multimedia technology capabilities. Our mobile phone multimedia processors have been used by leading international and China-based mobile phone brand owners, such as Bird, Capitel, Lenovo Mobile, Pantech and UTStarcom, as well as leading mobile phone design houses based in China, such as China Techfaith, CECW and Yuhua. We intend to continue to identify and actively pursue additional markets which we believe have the potential for high volume sales of multimedia semiconductor products, such as digital home entertainment systems.
The growing demand for mobile, networked, multimedia content and communications has led to advances in hardware and software technology enabling sophisticated multimedia functions to be incorporated into mass-market electronic products, such as PCs, mobile phones, home entertainment systems and other devices. The increased availability of sophisticated multimedia functions has in turn led to the development of popular applications, including digital media content, Internet voice and video communications, and interactive entertainment.
Increased broadband penetration has accelerated the use of video conferencing and other forms of video-enabled multimedia communication, which has greatly boosted demand for products such as PC cameras. In addition, the market for PC cameras is expanding into new applications in enterprise Web-based collaboration, security, authentication, surveillance, gaming, e-learning and automotive markets. According to International Data Corporation, or IDC, a leading market research firm, annual peripheral PC camera shipments increased from 9.9 million units in 2002 to 18.0 million units in 2004 and are expected to grow to annual shipments of 30.1 million units by 2008. Annual shipments of PC cameras in 2004 represented a penetration rate of just 11% of the annual shipments of 117.8 million units of desktop PCs and 46.0 million units of notebook PCs. We believe that PC cameras will evolve from optional accessories to standard features of desktop and notebook PCs in the near future.
The incorporation of multimedia functions into mobile phones has been spurred by the rapid growth in demand for multimedia content and device personalization, coupled with improvements in the size, sophistication, cost and energy efficiency of electronic components. Advanced wireless networks established by mobile operators are facilitating the convergence of multimedia applications across different platforms. Vendors of mobile phones are seeking to differentiate their products, drive the mobile phone replacement market and expand their market shares through frequent introduction of new mobile phone models with new and differentiating multimedia functions while optimizing the phones’ size, form factor and battery life. The growing popularity of multimedia functionality in the mobile phone market is illustrated by IDC’s forecast that mobile phones incorporating an image capture function are expected to increase from 324 million units or 47% of all mobile phones shipped worldwide in 2004 to 723 million units or 81% in 2008. According to IDC, worldwide multimedia-related mobile phone semiconductor revenue is expected to increase from US$2.8 billion in 2004 to US$7.4 billion in 2008, and revenue from multimedia-related semiconductors as a percentage of total mobile phone semiconductor revenue is expected to increase from 11% in 2004 to 21% in 2008.
Multimedia semiconductors are critical components of multimedia electronic products. The size of the multimedia semiconductor market is expanding due to increased sales volume of multimedia electronic products as well as the growing complexity of the semiconductors that enable multimedia functions. Designing semiconductors that support multimedia functions involves a number of significant technical challenges, including simultaneous handling of analog and digital signals, high-volume, real-time data processing, minimization of noise and signal interference and minimization of power consumption.
Our Solutions, Competitive Strengths and Challenges
Our solutions consist of semiconductors, software and system-level reference designs. We have designed our solutions to support a broad range of standards, baseband platforms and components in order to facilitate our customers’ design, assembly and supply chain management processes. We believe that we possess a number of significant competitive strengths, including:
We expect to face challenges in our business operations, including:
Our Strategy
Our goal is to become a leading provider of semiconductor solutions enabling multimedia capabilities in consumer electronics and communications products. To achieve this goal, we intend to:
Corporate Information
We commenced operations in 1999 through Vimicro China, a company established in China. In February 2004, we incorporated Vimicro International Corporation in the Cayman Islands to prepare for our issuance and sale of preferred shares through a private placement to international investors. In May 2004, we effected a corporate reorganization whereby all former owners of Vimicro China transferred their ownership interests in Vimicro China to Vimicro International Corporation, and Vimicro China became a wholly-owned subsidiary of Vimicro International Corporation. Following the share transfer, each former owner of Vimicro China and/or its designated nominee subscribed for the shares of Vimicro International Corporation based on such former owner’s pro rata ownership interest in Vimicro China prior to the reorganization.
Vimicro China primarily conducts our research and development, marketing, finance and administrative activities. It currently has two directly wholly-owned subsidiaries:
Our principal executive offices are located at 15/F Shining Tower, No. 35 Xueyuan Road, Haidian District, Beijing 100083, People’s Republic of China. Our telephone number at this address is (8610) 6894-8888 and our fax number is (8610) 6894-4075. Our registered office in the Cayman Islands is located at the offices of M&C Corporate Services Limited, P.O. Box 309 GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands. Our telephone number at this address is (1-345) 949-8066. In addition, we have regional offices in Shanghai, Shenzhen, Hong Kong and Mountain View, California.
Investor inquiries should be directed to us at the address and telephone number of our principal executive offices set forth above. Our website is www.vimicro.com. The information contained on our website is not part of this prospectus. Our agent for service of process in the United States is CT Corporation System, located at 111 Eighth Avenue, New York, New York 10011.