US GAAP net loss for 3Q08 included US$2.4 million of share-basedcompensation expense, US$0.4 million of amortization of intangibles from theQuorum acquisition, US$6.6 million of in process research and development(IPR&D) expense related to the Quorum acquisition and US$17.5 million ofimpairment loss of long-lived assets. Excluding the impact of this share-based compensation expense, the amortization of intangibles from the Quorumacquisition, IPR&D expense related to the Quorum acquisition and impairmentloss of long-lived assets, the Company's non-GAAP net loss for 3Q08 would havebeen US$4.3 million, down from net income of US$7.6 million in 3Q07 and netincome of US$4.9 million in 2Q08. Diluted non-GAAP loss per ADS in 3Q08 wasUS$0.10 down from diluted earnings of US$0.16 in 3Q07 and US$0.11 in 2Q08.

Commenting on the results, the Company's Chairman and CEO, Dr. Ping Wu,said:

"Q3 was a challenging quarter for us. The slowing Chinese economydampened domestic consumption, including demand for mobile phones in theChinese market. This resulted in a negative impact on a number of ourcustomers. Furthermore, we were affected by the delayed impact of producttransition issues. We have since resolved these issues and customers areworking on new designs.

With turmoil in the financial markets in September and October, thepossibility for a dramatic rebound in our business in the fourth quarter hasdiminished considerably. While we still expect some improvement in the fourthquarter, it will be much more subdued than we previously expected. To copewith this adverse environment, we are taking steps to pare down expenses, tore-evaluate our business priorities, and to make sure that our resources areallocated to the most critical parts of our business. Despite these short-term difficulties, we believe the Chinese mobile phone market still offersvery attractive growth potential in the longer term.

There are a few bright spots in the fourth quarter. Our mobile TV chip,which we made available to the market at the end of Q3, has received favorablefeedback from customers and potential customers alike. We believe our mobileTV chip is very well positioned by having the right features at veryattractive price points. We have also made progress with our RF products,which are already designed into approximately half of our customers' newmobile phones.

We remain focused on positioning Spreadtrum to capture the long-termgrowth opportunities in this market and improving our product developmentprocess and internal execution. To this end, we have recently appointed Dr.Leo Li as our President. Leo has more than two decades of experience in thewireless industry and has held product development, business development, andgeneral management positions in a number of leading wireless semiconductorcompanies. His skill and experience are expected to be quite useful as westrive to improve our product quality and to better serve our customers."

Third Quarter 2008 Financial Review

Revenue

Revenue in the third quarter totaled US$20.0 million, representing adecrease of 48% from 3Q07 and 50% from 2Q08. Revenue from basebandsemiconductors was US$18.8 million, or 94% of revenue, up from 89% of revenuein 3Q07 and down from 96% of revenue in 2Q08. Revenue from turnkey solutionswas US$1.2 million, which represented 6% of revenue, down from 11% of revenuein 3Q07 and up from 4% of revenue in 2Q08.

Revenue from baseband semiconductors decreased 45% from 3Q07 and 52% from2Q08 to US$18.8 million in 3Q08. Unit shipments of baseband semiconductorsdecreased 47% from 3Q07 and 53% from 2Q08. Nearly all baseband semiconductorshipments in the third quarter were 2G/2.5G related products. 3G productsaccounted for approximately 1% of the baseband shipments in 3Q08. The averageselling price per unit for baseband semiconductors increased by 4% from 3Q07and 3% from 2Q08 due to better product mix.

Revenue from turnkey solutions decreased during the quarter by 73% from3Q07 and 20% from 2Q08 to US$1.2 million, as a result of the Company's ongoingplan to phase out its modules business.

Gross Margin

The gross margin for the quarter was 43.7%, down from 45.6% in 3Q07 and45.2% in 2Q08. The non-GAAP gross margin was 44.3%, down from 45.7% in 3Q07and 45.4% in 2Q08.

The cost of revenue in 3Q08 totaled US$11.2 million, representingdecreases of 46% from 3Q07 and 49% from 2Q08. The year-over-year andsequential decreases were attributed to a decline in total sales volume.

Operating Margin

In 3Q08, the Company finalized its purchase accounting related to theacquisition of Quorum Systems. As a result, the Company recognized as anoperating expense US$6.6 million IPR&D charge related to the Quorumacquisition. The Company also reviewed its long-lived assets for impairmentwhen indicators of impairment occurred. The Company recognized US$17.5million impairment loss in 3Q08, which included US$12.7 million of impairmentloss in IP acquired from Quorum and US$4.8 million of impairment loss in otherlong-lived assets.

As a result of these expenses, the Company's operating margin was -159.0%in 3Q08, compared to 11.7% in 3Q07 and 4.2% in 2Q08. The year-over-year andsequential decreases in operating margin were primarily attributed to US$6.6million of IPR&D expense related to the Quorum acquisition and US$17.5 millionof impairment loss of long-lived assets together with a decline in salesvolume. Excluding stock-based compensation expense, the amortization ofintangibles from the Quorum acquisition, IPR&D expense related to the Quorumacquisition and impairment loss of long-lived assets, the non-GAAP operatingmargin in 3Q08 was -24.1%, down from 15.7% in 3Q07 and 9.8% in 2Q08.

Total operating expenses in 3Q08, which include selling, general andadministrative (SG&A) expenses and R&D expenses, were US$40.5 million,representing increases of 210% from 3Q07 and 146% from 2Q08. Excluding stock-based compensation expense, the amortization of intangibles from the Quorumacquisition, IPR&D expense related to the Quorum acquisition and impairmentloss of long-lived assets, total non-GAAP operating expenses in 3Q08 wereUS$13.7 million, compared to US$11.6 million in 3Q07 and US$14.3 million in2Q08. Total non-GAAP operating expenses for the quarter represented 68.5% ofrevenue.

SG&A expenses increased in 3Q08 by 14% from 3Q07 and decreased 10% from2Q08. The year-over-year dollar increase was driven primarily by higherstock-based compensation expense and higher professional fees, partiallyoffset by lower employee salary and benefits expenses. The sequential dollardecrease was driven primarily by lower expenses in employee salary andbenefits, investor relations and marketing, partially offset by higher stock-based compensation expense.

Recurring R&D expenses in 3Q08 increased 31% year-over-year and 4%sequentially. The year-over-year dollar increase was driven primarily by theCompany's efforts to expand its product portfolio and the acquisition ofQuorum Systems, which is primarily a research and development center. Thesequential dollar increase was primarily due to higher software license andmaintenance fees and stock-based compensation, partially offset by lower non-recurring engineering and amortization expenses.

Non-Operating Income

In 3Q08, the Company recorded net interest income of US$0.5 million,representing a decrease of US$1.1 million from 3Q07 and flat from 1Q08. Theyear-over-year decrease was primarily attributed to interest earned frominvesting a lower balance of cash and cash equivalents as well as declines ininterest rates.

In 3Q08, the Company also recognized other income of US$0.3 million,approximately flat from 3Q07 and a decrease of US$0.7 million from 2Q08. Thesequential decrease was primarily attributed to a decrease in foreign exchangegain.

Earnings

Diluted loss per ADS was US$0.71, down from diluted earnings of US$0.13 in3Q07 and US$0.06 in 2Q08. Excluding stock-based compensation expense, theamortization of intangibles from the Quorum acquisition, IPR&D expense relatedto the Quorum acquisition and impairment loss of long-lived assets, non-GAAPdiluted loss per ADS for 3Q08 was US$0.10, down from diluted earnings ofUS$0.16 in 3Q07 and US$0.11 in 2Q08.

The Company's net loss totaled US$31.3 million in 3Q08, compared to netincome of US$6.1 million in 3Q07 and net income of US$2.6 million in 2Q08.The net margin was -156.5%, down from 15.7% in 3Q07 and 6.5% in 2Q08.Excluding stock-based compensation expense, amortization of intangibles fromthe Quorum acquisition, IPR&D expense related to the Quorum acquisition andimpairment loss of long-lived assets, non-GAAP net margin was -21.6% in 3Q08,down from 19.7% in 3Q07 and 12.1% in 2Q08.

Balance Sheet and Cash Flow

As of September 30, 2008, the Company had US$66.3 million in cash and cashequivalents, which represented a decrease of US$2.6 million from June 30, 2008.The Company also had $6.6 million in term deposits with maturity dates over 90days. In 3Q08, the Company generated US$0.2 million cash from operatingactivities, and used US$2.1 million cash on property and equipment and US$0.6million on intangible assets.

Accounts receivable (A/R) decreased by US$6.0 million from US$17.4 millionat June 30, 2008 to US$11.4 million at September 30, 2008. As a result of thedecrease in sales, average A/R days increased from 21 days to 66 days. As ofOctober 31, 2008, the Company has collected US$2.6 million of its A/R andUS$5.6 million of the outstanding receivables was past due. The Company hasreceived reassurance that the US$5.6 million will be paid in the fourthquarter. Inventory at September 30, 2008 was US$18.0 million, an increase of$0.2 million from June 30, 2008, and the inventory days increased from 73 daysto 146 days as a result of the slower sales volume. Total assets as ofSeptember 30, 2008 were US$203.9 million, down 19% from US$250.6 million atJune 30, 2008. The decrease in total assets was primarily attributed toreductions in intangible assets due to impairment and goodwill perfinalization of purchase accounting.

Current liabilities decreased from US$32.6 million at June 30, 2008 toUS$30.7 million at September 30, 2008, primarily due to a decrease in advancefrom customers as a result of slower sales volume, accrued warranty andaccounts payable, partially offset by an increase in the current portion oflong term notes payable. Long-term liabilities at September 30, 2008 wereUS$1.3 million, compared to US$16.9 million at June 30, 2008, primarily due toan adjustment in deferred tax liability per finalization of purchaseaccounting and reclassification from long-term notes payable to short-termnotes payable, as a US$0.7 million interest-free loan becomes due in 3Q09.

Business Outlook:

As stated earlier in this press release, conditions in the Chinese mobilephone market remain challenging. In recent weeks, customers have turned morecautious in their business outlook for this quarter, as impact of the globalfinancial crisis begins to spread. As a result, Spreadtrum currently expectsfourth quarter revenue to be approximately flat or slightly better than thethird quarter of 2008. Spreadtrum estimates its 4Q08 gross margin to beapproximately 40% and its 4Q08 operating expenses to be in the range of US$15-16 million.

Webcast of Conference Call:

The Company's management team will conduct a conference call at 8:00 am USEastern Time on November 7, 2008. A webcast of the conference call will beaccessible on the Company's web site at http://www.spreadtrum.com . Theconference call can also be accessed via the following telephone numbers:

USA (Toll Free): 1 888 680 0878 USA (Toll): 1 617 213 4855 Hong Kong (Toll Free): 800 962 844 China (Toll Free): 10 800 130 0399 Participant Passcode: 3627 9406 Pre-registration (optional): https://www.theconferencingservice.com/prereg/key.process?key=PJFMME98R A replay of the conference call will be available for seven days via thefollowing telephone numbers:

USA (Toll Free): 1 888 286 8010 USA (Toll): 1 617 801 6888 Participant Passcode: 8068 4449 Discussion of Non-GAAP Financial Measures

In addition to disclosing financial results prepared in accordance with USGAAP, the Company's earnings release contains non-GAAP financial measures thatexclude the effects of share-based compensation, amortization of intangiblesfrom the Quorum acquisition, in process R&D expense from the Quorumacquisition, and impairment loss of long-lived assets. The non-GAAP financialmeasures used by management and disclosed by the Company exclude the incomestatement effects of all forms of share-based compensation, amortization ofintangibles from the Quorum acquisition, in process R&D expense from theQuorum acquisition, and impairment loss of long-lived assets.

The non-GAAP financial measures disclosed by the Company should not beconsidered a substitute for financial measures prepared in accordance with USGAAP. The financial results reported in accordance with US GAAP andreconciliation of GAAP to non-GAAP results should be carefully evaluated. Thenon-GAAP financial measures used by the Company may be prepared differentlyfrom and, therefore, may not be comparable to similarly titled measures usedby other companies.

The Company believes that the presentation of non-GAAP gross margin, non-GAAP operating margin, non-GAAP net income, and non-GAAP diluted earnings perADS provides important supplemental information to management and investorsregarding financial and business trends relating to the Company's financialcondition and results of operations. The non-GAAP diluted earnings per ADS iscalculated by dividing non-GAAP net income by the US GAAP weighted averagediluted shares outstanding.

Listed below are the share-based compensation amounts included in netincome that management excludes in computing the non-GAAP financial measuresreferred to in the text of this press release. A reconciliation of GAAP tonon-GAAP results is presented after the consolidated balance sheets.

Three months ended September 30, June 30, September 30, 2007 2008 2008 (in thousands of US dollars) Share-based compensation: Cost of revenue $ 54 $ 89 $ 121 Research and development 582 773 1,185 Selling, general, and administrative 891 803 1,108 Spreadtrum Communications, Inc. Condensed Consolidated Income Statements (in thousands of US dollars, except per share data and percentages) (unaudited) Three months ended Change from September June September 30, 2007 30, 2008 30, 2008 3Q07 2Q08 Revenue $38,570 $40,227 $19,977 (48%) (50%) Cost of revenue 20,996 22,063 11,242 (46%) (49%) Gross profit 17,574 18,164 8,735 (50%) (52%) Operating expenses Research & development 8,997 11,316 11,756 31% 4% Selling, general & administrative 4,059 5,176 4,647 14% (10%) IPR&D expense acquired per Quorum acquisition -- -- 6,612 N/A N/A Impairment loss of long-lived assets -- -- 17,484 N/A N/A Total operating expenses 13,056 16,492 40,499 210% 146% Operating income (loss) 4,518 1,672 (31,764) (803%)(2,000%) Non-operating income (expense) Interest income 1,676 535 530 (68%) (1%) Interest expense (18) (42) (54) 200% 29% Other income, net 347 944 289 (17%) (69%) Total non-operating income 2,005 1,437 765 (62%) (47%) Income (loss) before tax 6,523 3,109 (30,999) (575%) (1097%) Income tax expense 465 496 259 (44%) (48%) Net income (loss) $6,058 $2,613 ($31,258) (616%)(1,296%) Income (loss) per ADS, basic $0.14 $0.06 ($0.71) (607%)(1,283%) Income (loss) per ADS, diluted $0.13 $0.06 ($0.71) (646%)(1,283%) Margin analysis: Gross margin 45.6% 45.2% 43.7% Operating margin 11.7% 4.2% (159.0%) Net margin 15.7% 6.5% (156.5%) Weighted average ADS equivalent: [1] Basic 42,005,199 44,252,776 43,935,121 Diluted 46,940,325 46,226,362 43,935,121 ADS equivalent outstanding at end of period 42,191,367 43,872,135 43,991,458 [1] Assumes all outstanding ordinary shares are represented by ADSs. Each ADS represents three ordinary shares. Spreadtrum Communications, Inc. Consolidated Income Statements (in thousands of US dollars, except per share data and percentages) (unaudited) Nine months ended Change September 30, September 30, 2007 2008 Revenue $96,924 $99,702 3% Cost of revenue 53,493 55,051 3% Gross profit 43,431 44,651 3% Operating expenses Research & development 22,945 34,039 48% Selling, general & administrative 12,128 14,597 20% IPR&D expense acquired per Quorum acquisition -- 6,612 N/A Impairment loss of long-lived assets -- 17,484 N/A Total operating expenses 35,073 72,732 107% Operating income (loss) 8,358 (28,081) (436%) Non-operating income (expense) Interest income 2,414 1,860 (23%) Interest expense (30) (131) (337%) Other income, net 794 1,870 136% Total non-operating income 3,178 3,599 13% Income (loss) before tax 11,536 (24,482) (312%) Income tax expense 665 1,385 108% Net income (loss) $10,871 ($25,867) (338%) Income (loss) per ADS, basic $0.59 ($0.59) (200%) Income (loss) per ADS, diluted $0.26 ($0.59) (327%) Margin analysis: Gross margin 44.8% 44.8% Operating margin 8.6% (28.2%) Net margin 11.2% (25.9%) Weighted average ADS equivalent: [2] Basic 18,307,807 43,784,579 Diluted 41,531,113 43,784,579 [2] Assumes all outstanding ordinary shares are represented by ADSs. Each ADS represents three ordinary shares. Spreadtrum Communications, Inc. Condensed Consolidated Balance Sheets (in thousands of US dollars) December 31, June 30, September 31, 2007 2008* 2008* (audited) (unaudited) (unaudited) Cash and cash equivalents $157,038 $68,930 $66,285 Term deposit -- 6,561 6,600 Accounts receivable, net 2,198 17,412 11,368 Inventories 25,054 17,799 18,021 Deferred tax assets 392 392 345 Prepaid expenses and other current assets 5,650 6,767 8,206 Total current assets 190,332 117,861 110,825 Property and equipment, net 23,046 25,875 26,209 Acquired intangible assets, net 14,220 48,465 22,191 Goodwill -- 46,789 32,345 Deferred tax assets 1,222 1,227 1,361 Other long term assets 8,102 10,404 11,009 Total assets 236,922 250,621 203,940 Current portion of long term loan 685 2,916 3,667 Accounts payable 24,857 13,307 12,607 Advances from customers 1,210 1,265 308 Income tax payable 3,088 3,392 3,737 Accrued expenses and other current liabilities 13,773 11,728 10,385 Total current liabilities 43,613 32,608 30,704 Long term loan 3,423 729 -- Deferred tax liabilities 37 14,365 37 Other long-term obligations 1,954 1,823 1,308 Total long term liabilities 5,414 16,917 1,345 Total liabilities 49,027 49,525 32,049 Shareholders' equity 187,895 201,096 171,891 Total liabilities & shareholders' equity $236,922 $250,621 $203,940 * The financial information at June 30, 2008 includes preliminary valuation of Quorum, while the financial information at September 30, 2008 includes final valuation of Quorum. Spreadtrum Communications, Inc. Supplemental Information (in thousands of US dollars, except percentages) Revenue (US$000) 4Q06 1Q07 2Q07 3Q07 Baseband Semiconductor $22,645 $20,589 $27,357 $34,161 Turnkey Solutions 8,317 5,578 4,830 4,409 Total $30,962 $26,167 $32,187 $38,570 As % of Total Revenue Baseband Semiconductor 73% 79% 85% 89% Turnkey Solutions 27% 21% 15% 11% Gross Margin 46.4% 42.9% 45.5% 45.6% Revenue (US$000) 4Q07 1Q08 2Q08 3Q08 Baseband Semiconductor $44,971 $35,532 $38,713 $18,765 Turnkey Solutions 3,571 3,966 1,514 $1,212 Total $48,542 $39,498 $40,227 $19,977 As % of Total Revenue Baseband Semiconductor 93% 90% 96% 94% Turnkey Solutions 7% 10% 4% 6% Gross Margin 45.5% 44.9% 45.2% 43.7% Spreadtrum Communications, Inc. Reconciliation of GAAP to Non-GAAP Results (in thousands of US dollars, except per share data and percentages) (unaudited) Three months ended September June 30, September 30, 2007 2008 30, 2008 Cost of revenue $20,996 $22,063 $11,242 Adjustment for share-based compensation (54) (89) (121) Cost of revenue (non-GAAP) $20,942 $21,974 $11,121 Operating income (loss) $4,518 $1,672 ($31,764) Adjustment for share-based compensation within: Cost of revenue 54 89 121 Research and development 582 773 1,185 Selling, general, and administrative 891 803 1,108 Adjustment for amortization of intangibles from Quorum acquisition within research and development -- 600 435 Adjustment for IPR&D expense acquired per Quorum acquisition -- -- 6,612 Adjustment for Impairment loss of long-lived assets -- -- 17,484 Operating income (loss) (non-GAAP) $6,045 $3,937 ($4,819) Net income (loss) $6,058 $2,613 ($31,258) Adjustment for share-based compensation within: Cost of revenue 54 89 121 Research and development 582 773 1,185 Selling, general, and administrative 891 803 1,108 Adjustment for amortization of intangibles from Quorum acquisition within research and development -- 600 435 Adjustment for IPR&D expense acquired per Quorum acquisition -- -- 6,612 Adjustment for impairment loss of long-lived assets -- -- 17,484 Net income (loss) (non-GAAP) * $7,585 $4,878 ($4,313) Income (loss) per ADS, diluted $0.13 $0.06 ($0.71) Adjustment for share-based compensation 0.03 0.04 0.05 Adjustment for amortization of intangibles from Quorum acquisition -- 0.01 0.01 Adjustment for IPR&D expense acquired per Quorum acquisition -- -- 0.15 Adjustment for impairment loss of long-lived assets -- -- 0.40 Income (loss) per ADS, diluted (non- GAAP)* $0.16 $0.11 ($0.10) Gross margin 45.6% 45.2% 43.7% Adjustment for share-based compensation 0.1% 0.2% 0.6% Gross margin (non-GAAP) 45.7% 45.4% 44.3% Operating margin 11.7% 4.2% (159.0%) Adjustment for share-based compensation 4.0% 4.1% 12.1% Adjustment for amortization of intangibles from Quorum acquisition -- 1.5% 2.2% Adjustment for IPR&D expense acquired per Quorum acquisition -- -- 33.1% Adjustment for impairment loss of long-lived assets -- -- 87.5% Operating margin (non-GAAP) 15.7% 9.8% (24.1%) Net margin 15.7% 6.5% (156.5%) Adjustment for share-based compensation 4.0% 4.1% 12.1% Adjustment for amortization of intangibles from Quorum acquisition -- 1.5% 2.2% Adjustment for IPR&D expense acquired per Quorum acquisition -- -- 33.1% Adjustment for impairment loss of long-lived assets -- -- 87.5% Net margin (non-GAAP)* 19.7% 12.1% (21.6%) * The non-GAAP adjustment does not take into consideration the impact of taxes. About Spreadtrum Communications, Inc.:

Spreadtrum Communications, Inc. (NASDAQ: SPRD; the "Company") is a fablesssemiconductor company that designs, develops, and markets baseband processorsolutions for the mobile wireless communications market. The Company combinesits semiconductor design expertise with its software development capabilitiesto deliver highly-integrated baseband processors with multimedia functionalityand power management. The Company has developed its solutions based on anopen development platform, enabling its customers to develop customizedwireless products that are feature-rich and meet their cost and time-to-marketrequirements.

Safe Harbor Statements:

This press release contains "forward-looking statements" within themeaning of the "safe harbor" provisions of the U.S. Private SecuritiesLitigation Reform Act of 1995. Such forward-looking statements include,without limitation, statements regarding diminished possibility for a reboundin the Company's business in the fourth quarter, expectations for someimprovement in the fourth quarter that will be much more subdued thanpreviously expected, the Chinese mobile phone market still offering attractivegrowth potential in the longer term, our mobile TV chip being well positionedby having the right features at very attractive price points, our expectationthat Dr. Leo Li's skill and experience will be useful as we strive to improveproduct quality and better serve our customers, $5.6 million of outstandingreceivables being paid in the fourth quarter, the Company's expectations withrespect to revenue, gross margin, and operating expenses for the fourthquarter, and efforts to improve quality, customer service, reducing expenses,allocating resources, and re-evaluate priorities. These statements areforward-looking in nature and involve risks and uncertainties that may causeactual market trends and the Company's actual results to differ materiallyfrom those expressed or implied in these forward-looking statements for avariety of reasons. Potential risks and uncertainties include, but are notlimited to, continuing competitive pressure in the semiconductor industry andthe effect of such pressure on prices; unpredictable changes in technology andconsumer demand for mobile phones; the Company's ability to integrate Quorum'soperations into its own; the Company's ability to successfully produce andmarket Quorum's RF transceivers in volume; the rate at which the commercialdeployment of TD-SCDMA technology will grow; market acceptance of productsutilizing TD-SCDMA technology; the Company's ability to sustain recent ratesof growth; the state of and any change in the Company's relationship with itsmajor customers; and changes in political, economic, legal and socialconditions in China. For additional discussion of these risks anduncertainties and other factors, please consider the information contained inthe Company's filings with the U.S. Securities and Exchange Commission (the"SEC"), including the registration statement on Form F-1 filed on June 26,2007, as amended, and the annual report on Form 20-F filed on June 30, 2008,especially the sections under "Risk Factors" and "Management's Discussion andAnalysis of Financial Condition and Results of Operations," and such otherdocuments that the Company may file with the SEC from time to time, includingon Form 6-K. The Company assumes no obligation to update any forward-lookingstatements, which apply only as of the date of this press release.

SOURCE Spreadtrum Communications, Inc.