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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 
 (Mark One)
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010.
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 Date of event requiring this shell company report _______
 For the transition period from _____ to _______
 Commission file number: 001-34943
 
 RDA MICROELECTRONICS, INC.
 (Exact name of Registrant as specified in its charter)
 
 N/A
 Cayman Islands
 Suite 302, Building 2, 690 Bibo Road
Pudoug District, Shanghai 201203
The Peoples Republic of China
 Lily Dong
Tel: +86 (21) 5027-1108
E-mail: lily.dong@rdamicro.com
Fax: +86 (21) 5027-1099
Suite 302, Building 2, 690 Bibo Road
Pudoug District, Shanghai 201203
The Peoples Republic of China
  Title of Each Class
    
    Name of Exchange on Which RegisteredAmerican depositary shares, each representing six
    
    Nasdaq Global Marketordinary sharesOrdinary shares, par value US$0.01 per share
    
    Nasdaq Global Market*
 
 *
    
    Not for trading, but only in connection with the listing on Nasdaq Global Market of the American depositary shares. Securities registered or to be registered pursuant to Section 12(g) of the Act:
 None
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
 None
 
 261,510,076 ordinary shares, par
value US$0.01 per share, as of December 31, 2010.
 o þ
 o þ
 þ o
 o o
  Large accelerated filer o

    
    Accelerated filer o
    
    Non-accelerated filer þ
  þ
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TABLE OF CONTENTS
 INTRODUCTION
    
    
    1FORWARD-LOOKING STATEMENTS
    
    
    2PART I
    
    
    2ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
    
    
    2ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    2ITEM 3. KEY INFORMATION
    
    
    2ITEM 4. INFORMATION ON THE COMPANY
    
    
    24ITEM 4A. UNRESOLVED STAFF COMMENTS
    
    
    37ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    37ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    51ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    60ITEM 8. FINANCIAL INFORMATION
    
    
    60ITEM 9. THE OFFER AND LISTING
    
    
    61ITEM 10. ADDITIONAL INFORMATION
    
    
    61ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    67ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    68PART II
    
    
    69ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    69ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    69ITEM 15. CONTROLS AND PROCEDURES
    
    
    69ITEM 16. [RESERVED]
    
    
    71ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    71ITEM 16B. CODE OF ETHICS
    
    
    71ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    71ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    71ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    71ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
    
    
    72ITEM 16G. CORPORATE GOVERNANCE
    
    
    72PART III
    
    
    72ITEM 17. FINANCIAL STATEMENTS
    
    
    72ITEM 18. FINANCIAL STATEMENTS
    
    
    72ITEM 19. EXHIBITS
    
    
    72EX-8.1 List of SubsidiariesEX-12.1 Certification by the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002EX-12.2 Certification by the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002EX-13.1 Certification by the Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002EX-13.2 Certification by the Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002EX-15.1 Consent of Jun He Law OfficesEX-15.2 Consent of Independent Registered Public Accounting Firm




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INTRODUCTION
  
    
    we, us, our company, our, and RDA refer to RDA Microelectronics, Inc., a
Cayman Islands company, and its consolidated subsidiaries;
    
    RDA International refers to RDA International, Inc.; RDA US refers to RDA
Technologies, Inc.; RDA Hong Kong refers to RDA Technologies Limited; RDA Shanghai
refers to RDA Microelectronics (Shanghai) Co., Ltd.; RDA Beijing refers to RDA
Microelectronics (Beijing) Co., Ltd.;
    
    China or PRC refers to the Peoples Republic of China, and for the purpose of this
annual report, excludes Taiwan, Hong Kong and Macau;
    
    shares or ordinary shares refers to our ordinary shares, par value $0.01 per share;
    
    ADSs refers to our American depositary shares, each of which represents six ordinary
shares, and ADRs refers to any American depositary receipts that evidence our ADSs;
    
    all references to RMB or Renminbi refer to the legal currency of China; and
    
    all references to $,US$, dollars or U.S. dollars refer to the legal currency of
the United States.
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FORWARD-LOOKING STATEMENTS
   
    
    our growth strategies;
    
    our future business development, results of operations and financial condition;
    
    expected changes in our revenue and certain cost or expense items;
    
    our ability to develop new products and attract customers;
    
    trends and competition in the semiconductor and mobile handset industries;
    
    our ability to protect our intellectual property rights; and
    
    assumptions underlying or related to any of the foregoing.
   
 PART I
 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
  
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3. KEY INFORMATION
 A. Selected Financial Data
  2




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For the Year Ended December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(in thousands, except for share, per share and per ADS data)Consolidated Statement of Operations Data:Revenue
    
    $
    4,521
    
    
    $
    13,664
    
    
    $
    55,500
    
    
    $
    118,373
    
    
    $
    191,163Cost of Revenue
    
    
    (3,360
    )
    
    
    (8,819
    )
    
    
    (37,555
    )
    
    
    (87,410
    )
    
    
    (134,258
    )Gross Profit
    
    
    1,161
    
    
    
    4,845
    
    
    
    17,945
    
    
    
    30,963
    
    
    
    56,905Operating Expenses:Research and development expenses(1)
    
    
    (5,538
    )
    
    
    (7,071
    )
    
    
    (13,198
    )
    
    
    (14,475
    )
    
    
    (25,815
    )Selling, general and administrative
expenses(1)
    
    
    (1,718
    )
    
    
    (2,108
    )
    
    
    (4,518
    )
    
    
    (4,649
    )
    
    
    (9,939
    )Total operating expenses
    
    
    (7,256
    )
    
    
    (9,179
    )
    
    
    (17,716
    )
    
    
    (19,124
    )
    
    
    (35,754
    )Income (loss) from operations
    
    
    (6,095
    )
    
    
    (4,334
    )
    
    
    229
    
    
    
    11,839
    
    
    
    21,151Income (loss) before income tax expense
    
    
    (6,449
    )
    
    
    (4,346
    )
    
    
    203
    
    
    
    11,683
    
    
    
    21,640Income tax benefit (expense)
    
    
    (63
    )
    
    
    (155
    )
    
    
    454
    
    
    
    (377
    )
    
    
    (2,508
    )Net Income (loss)
    
    $
    (6,512
    )
    
    $
    (4,501
    )
    
    $
    657
    
    
    $
    11,306
    
    
    $
    19,132Accretion/deemed dividends on convertible
redeemable preferred shares
    
    
    (1,213
    )
    
    
    (1,348
    )
    
    
    (2,179
    )
    
    
    (9,479
    )
    
    
    (13,842
    )Net income (loss) attributable to ordinary
shareholders
    
    $
    (7,725
    )
    
    $
    (5,849
    )
    
    $
    (1,522
    )
    
    $
    1,827
    
    
    $
    5,279Weighted average number of ordinary shares used in
per share calculations:Basic
    
    
    29,965,396
    
    
    
    37,434,517
    
    
    
    37,434,517
    
    
    
    38,671,413
    
    
    
    82,221,102Diluted
    
    
    29,965,396
    
    
    
    37,434,517
    
    
    
    37,434,517
    
    
    
    58,901,016
    
    
    
    97,358,770Earnings (loss) per ordinary share(2)Basic
    
    $
    (0.26
    )
    
    $
    (0.16
    )
    
    $
    (0.04
    )
    
    $
    0.05
    
    
    $
    0.06Diluted
    
    $
    (0.26
    )
    
    $
    (0.16
    )
    
    $
    (0.04
    )
    
    $
    0.03
    
    
    $
    0.05Earnings (loss) per ADS(2)(3)Basic
    
    $
    (1.55
    )
    
    $
    (0.94
    )
    
    $
    (0.24
    )
    
    $
    0.28
    
    
    $
    0.39Diluted
    
    $
    (1.55
    )
    
    $
    (0.94
    )
    
    $
    (0.24
    )
    
    $
    0.19
    
    
    $
    0.33Dividends per ordinary share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 Notes:(1)
    
    Share-based compensation was allocated in operating expenses as follows (in thousands of $): Research and development
    
    
    
    
    
    
    
    
    
    
    2,739
    
    
    
    532
    
    
    
    4,990Selling, general and administrative
    
    
    956
    
    
    
    
    
    
    
    999
    
    
    
    310
    
    
    
    3,385
 
 (2)
    
    The data for the year ended December 31, 2006 is unaudited(3)
    
    Each ADS represents six ordinary shares 3




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As of December 31,2006
    
    2007
    
    2008
    
    2009
    
    2010Actual
    
    Actual
    
    Actual
    
    Actual
    
    Actual(in thousands)Consolidated Balance Sheet Data:Cash and cash equivalents
    
    $
    1,484
    
    
    $
    8,018
    
    
    $
    13,170
    
    
    $
    24,638
    
    
    $
    98,920Accounts receivable
    
    
    176
    
    
    
    3,207
    
    
    
    4,894
    
    
    
    4,603
    
    
    
    22,715Inventories
    
    
    1,702
    
    
    
    4,026
    
    
    
    8,082
    
    
    
    25,403
    
    
    
    35,494Total assets
    
    
    6,144
    
    
    
    17,157
    
    
    
    28,674
    
    
    
    60,271
    
    
    
    168,246Accounts payable
    
    
    156
    
    
    
    2,322
    
    
    
    7,609
    
    
    
    20,183
    
    
    
    20,524Total liabilities
    
    
    1,820
    
    
    
    7,227
    
    
    
    13,976
    
    
    
    33,291
    
    
    
    40,180Convertible redeemable preferred shares:Series A
    
    
    11,721
    
    
    
    11,974
    
    
    
    12,880
    
    
    
    12,880
    
    
    
    Series B
    
    
    5,494
    
    
    
    5,886
    
    
    
    6,281
    
    
    
    6,281
    
    
    
    Series C
    
    
    
    
    
    
    10,703
    
    
    
    11,157
    
    
    
    11,157
    
    
    
    Ordinary Shares(1)
    
    
    374
    
    
    
    374
    
    
    
    374
    
    
    
    503
    
    
    
    2,615Retained earnings/(Accumulated deficit)
    
    
    (15,198
    )
    
    
    (19,699
    )
    
    
    (19,042
    )
    
    
    (7,736
    )
    
    
    11,396Total shareholders equity/(deficit)
    
    
    (12,891
    )
    
    
    (18,633
    )
    
    
    (15,620
    )
    
    
    (3,338
    )
    
    
    128,066
 
 Note (1) The data as of December 31, 2006 is unaudited B.
Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  D. Risk Factors
 RISK FACTORS
 Risks Related to Our Business
 Because we do not have long-term commitments from our customers, we must estimate customer
demand, and our ability to accurately forecast demand for and sales of our products is
limited, which may have a material adverse effect on our inventory levels, sales and
results of operations.
  If we fail to develop and introduce new products and enhancements or to manage
product transitions, or if our products do not achieve market acceptance on a timely basis
or at all, our ability to
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attract and retain customers could be impaired and our
competitive position may be harmed, which could have a material adverse effect on our
revenue and results of operations.
    The average selling prices of products in our markets have historically decreased
rapidly and will likely continue to do so in the future, which could result in lower
revenue and gross margins.
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If our competitors bundle the sale of or integrate their products, or if we cannot
integrate the features or functions that our customers demand, or if we are not otherwise
able to compete effectively, we may be unable to increase or maintain revenue and market
share.
  If our customers do not comply with the regulations of the countries in which they
sell their products, they may be unable to continue to sell their products in those
countries and their demand for our products may decline, which could have a material
adverse effect on our revenue and results of operations.
  Changes in industry standards could limit our ability to sell our products and force
us to write down our inventory.
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We do not expect to sustain our recent rates of growth in revenue.
  Our limited operating history may not serve as an adequate basis to assess our future
prospects and results of operations.
  If we are unable to manage our growth effectively, our business and financial results
may be adversely affected.
  We depend on independent foundries to manufacture our products, and any failure to
obtain sufficient foundry capacity could significantly delay our ability to ship our
products and damage our customer relationships.
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
    
    constraints in or unavailability of manufacturing capacity;
    
    limited control over delivery schedules, quality assurance and control,
manufacturing yields and production costs; and
    
    the unavailability of, or potential delays in obtaining access to, key process
technologies.
    If our third-party foundries do not achieve satisfactory yields or quality, our
relationships with our customers and our reputation will be harmed.
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We may experience difficulties in transitioning to smaller geometry process
technologies, which may result in reduced manufacturing yields, delays in product
deliveries and increased expenses.
   The loss of the services of our independent testing, and packaging vendors could
significantly disrupt our shipments, harm our customer relationships and reduce our sales.
  Our business depends substantially on the continuing efforts of our executive
officers and key employees, and our business may be severely disrupted if we lose their
services.
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If we are unable to attract, train and retain qualified personnel, our business may
be materially and adversely affected.
  Our existing shareholders have substantial influence over our company and their
interests may not be aligned with the interests of our other shareholders.
   
    
    an exemption from the rule that a majority of our board of directors must be
independent directors;
    
    an exemption from the rule that the compensation of our chief executive officer must
be determined or recommended solely by independent directors; and
    
    an exemption from the rule that our director nominees must be selected or
recommended solely by independent directors.
  Our products are becoming more complex and defects or errors in our products could
result in unexpected expenses or loss of customers, adversely affecting our results of
operations and market share.
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Our gallium arsenide semiconductors may cease to be competitive with CMOS-based
alternatives.
  We will have difficulty selling our products if customers do not design our products
into their product offerings.
  Third parties may claim that we are infringing their intellectual property, and we
could suffer significant litigation expenses or licensing expenses or be prevented from
selling certain of our products if these claims are successful.
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We rely upon third parties for technologies that are integrated into some of our
products, and if we are unable to continue to use these technologies and future
technologies, our ability to design and sell technologically advanced products would be
limited.
  We may not be able to prevent others from unauthorized use of our intellectual
property, which could harm our business and competitive position.
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Any dispute involving intellectual property could also include our distributors or
customers, which could trigger our indemnification obligations to them and result in
substantial expense to us.
  We currently sell substantially all of our products to customers through a small
number of independent, non-exclusive distributors, which exposes us to substantial credit
risk as well as to the risk of material disruption to our sales operations.
  We may be adversely affected by the cyclicality of the semiconductor industry.
  Demand for our products is highly dependent on the consumer electronics market, which
is characterized by short product life cycles and subject to risks related to product
transitions and supply of other components.
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The global financial and economic crisis may adversely affect our business, results
of operations and financial condition.
  Our results of operations are subject to substantial quarterly and annual
fluctuations due to a number of factors that could adversely affect our business and the
trading price of our ADSs.
  
    
    changes in end-user demand for the products manufactured and sold by our customers;
    
    the gain or loss of significant customers;
    
    our ability to develop, introduce and market new products and technologies on a
timely basis;
    
    new product announcements and introductions by our competitors;
    
    incurrence of research and development and related new product expenditures;
    
    intellectual property disputes;
    
    loss of key personnel or the shortage of available skilled workers; and
    
    the effects of competitive pricing pressures, including decreases in average selling
prices of our products.
  In the future, we may pursue selective acquisitions to complement our organic growth,
which may not be successful and may divert financial and management resources from more
productive uses.
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If we fail to implement and maintain an effective system of internal controls, we may
be unable to accurately report our results of operations or prevent fraud, and investor
confidence and the market price of our ADSs may be materially and adversely affected.
    We granted employee stock options and other share-based awards in the past and will
continue to do so in the future. We recognize share-based compensation expenses in our
consolidated statement of income in accordance with the relevant rules under U.S. GAAP,
which may have a material adverse effect on our net income.
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We have limited insurance coverage and may incur losses resulting from product
liability claims or business interruptions.
  Risks Relating to Doing Business in China
 Changes in Chinas economic, political or social conditions or government policies
could have a material adverse effect on our business and operations.
    Uncertainties in the interpretation and enforcement of Chinese laws and regulations
could limit the legal protections available to you and us.
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Under the PRC enterprise income tax law, we may be classified as a PRC resident
enterprise, which could result in unfavorable tax consequences to us and our shareholders
and have a material adverse effect on our results of operations and the value of your
investment.
     Our business benefits from certain tax incentives and government subsidies.
Expiration or elimination of, or other adverse changes to, these tax incentives and
subsidies could have a material adverse effect on our results of operations.
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The M&A rules establish complex procedures for some acquisitions of Chinese companies
by foreign investors, which could make it more difficult for us to pursue growth through
acquisitions in China.
  PRC regulations relating to offshore investment activities by PRC residents may limit
our subsidiaries ability to increase their registered capital or distribute profits to
us, limit our ability to inject capital into our PRC subsidiaries, or otherwise expose us
to liability under PRC law.
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PRC regulation of direct investment and loans by offshore holding companies to PRC
entities may delay or limit us from making additional capital contributions or loans to
our PRC subsidiaries.
  Fluctuations in exchange rates could have a material adverse effect on our results of
operations and the value of your investment.
   Risks Relating to Our ADSs
 The trading prices of our ADSs are likely to be volatile, which could result in
substantial losses to investors
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
    
    variations in our revenue, earnings and cash flow;
    
    announcements of new investments, acquisitions, strategic partnerships, or joint
ventures;
    
    announcements of new services and expansions by us or our competitors;
    
    changes in financial estimates by securities analysts;
    
    additions or departures of key personnel;
    
    release of lock-up or other transfer restrictions on our outstanding equity
securities or sales of additional equity securities;
    
    potential litigation or regulatory investigations; and
    
    fluctuations in market prices for our products.
  If securities or industry analysts do not publish research or reports about our
business, or if they adversely change their recommendations regarding our ADSs, the market
price for our ADSs and trading volume could decline.
  The sale or availability for sale of substantial amounts of our ADSs could adversely
affect their market price.
  We may become a passive foreign investment company, or PFIC, which could result in
adverse U.S. federal income tax consequences for U.S. holders.
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Our articles of association contain anti-takeover provisions that could have a
material adverse effect on the rights of holders of our ordinary shares and ADSs.
  You may face difficulties in protecting your interests, and your ability to protect
your rights through U.S. courts may be limited, because we are incorporated under Cayman
Islands law.
   
    
    to recognize or enforce against us judgments of courts of the United States based on
civil liability provisions of U.S. securities laws; and
    
    to impose liabilities against us, in original actions brought in the Cayman Islands,
based on civil liability provisions of U.S. securities laws that are penal in nature.
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Certain judgments obtained against us by our shareholders may not be
enforceable.
  The voting rights of holders of ADSs are limited by the terms of the deposit
agreement, and you may not be able to exercise your right to vote your ordinary shares.
  As a company incorporated in the Cayman Islands, we are permitted to adopt certain
home country practices in relation to corporate governance matters that differ
significantly from the Nasdaq Global Market corporate governance listing standards. These
practices may afford less protection to shareholders than they would enjoy if we complied
fully with the Nasdaq Global Market corporate governance listing standards.
  The depositary for our ADSs will give us a discretionary proxy to vote our ordinary
shares underlying your ADSs if you do not vote at shareholders meetings, except in
limited circumstances, which could adversely affect your interests.
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
    
    we have failed to timely provide the depositary with notice of meeting and related
voting materials;
 
    
    we have instructed the depositary that we do not wish a discretionary proxy to be
given;
 
    
    we have informed the depositary that there is substantial opposition as to a matter
to be voted on at the meeting;
 
    
    a matter to be voted on at the meeting would have a material adverse impact on
shareholders; or
 
    
    the voting at the meeting is to be made on a show of hands.
  You may not receive dividends or other distributions on our ordinary shares and you
may not receive any value for them, if it is illegal or impractical to make them available
to you.
  You may not be able to participate in rights offerings and may experience dilution of
your holdings.
  You may be subject to limitations on transfer of your ADSs.
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ITEM 4. INFORMATION ON THE COMPANY
 A. History and Development of the Company
          B. Business Overview
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Industry Background
 Wireless Communications
   Rich Features Driving Product Cycle Growth of Mobile Handsets
  Technical Challenges to Wireless Semiconductor Vendors
  25




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Industry Significance of Branded and White Box Manufacturers from China
    Challenges to Wireless Semiconductor Vendors in China
    Products
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Cellular Products
   Cellular Products
    
    YearGSM power amplifier module
    
    
    2007GSM power amplifier module with high power output
    
    
    2008GSM/EDGE power amplifier module
    
    
    20093G switch module
    
    
    2009Radio frequency switch
    
    
    2009GSM power amplifier and switch module (IPD)
    
    
    2010TD-SCDMA/GSM amplifier module
    
    
    2010SCDMA transceiver
    
    
    2006PHS transceiver
    
    
    2007GSM transceiver
    
    
    2008TD-SCDMA/GSM dual-mode transceiver
    
    
    2009TD-SCDMA transceiver
    
    
    2010EDGE transceiver
    
    
    2010
 Broadcast Products
   Broadcast Products
    
    YearFM radio receiver
    
    
    2007FM radio receiver with radio data system
    
    
    2008AM/FM radio receiver
    
    
    2009FM radio receiver and transmitter
    
    
    2009
 27




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##### Table of Contents



Broadcast Products
    
    YearAnalog mobile television receiver system-on-chip
    
    
    2010DVB-S satellite tuner
    
    
    2007DVB-S2 satellite tuner
    
    
    2008LNB satellite downconverter
    
    
    2009DVB-T tuner
    
    
    2010
 Connectivity Products
   Connectivity Products
    
    YearBluetooth system-on-chip for mobile handsets
    
    
    2009Bluetooth + FM system-on-chip for mobile handsets
    
    
    2010Walkie-talkie transceiver for family radio service applications
    
    
    2009Walkie-talkie transceiver for professional applications
    
    
    2010
 Technology
     28




---



##### Table of Contents



Customers
       Sales and Marketing
   29




---



##### Table of Contents



Competition
   
    
    level of integration;
 
    
    price;
 
    
    short design cycle;
 
    
    customer support;
 
    
    features and functionalities;
 
    
    die size and form factor; and
 
    
    performance, including reliability and power consumption.
  Intellectual Property
  30




---



##### Table of Contents



Manufacturing
  Wafer Fabrication
  31




---



##### Table of Contents



Testing and Packaging
  Quality Assurance
   Research and Development
    Insurance
  32




---



##### Table of Contents



REGULATION
  Regulations and Policies that Encourage the Development of Semiconductor Design Companies
  Accreditation of Integrated Circuit Design Enterprises
  
    
    be a legally established enterprise whose principal business is semiconductor
design;
 
    
    possess adequate production and quality assurance capabilities; and
 
    
    generate more than 30% of its total annual revenue from the design of semiconductor
products and integrated circuit design services.
   Foreign Investment Policy
  Preferential Taxation Policies
  Exemption of Customs Duties and Import-Related Value-Added Tax
  33




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##### Table of Contents



Enterprise Income Tax.
   Business Tax
 Intellectual Property Protection for Semiconductors
   Protection of Integrated Circuit Layout Design
    
    
    duplicate the entire protected layout design or any part of the original design; and
 
    
    use the protected layout design, the integrated circuit containing the layout
design, or commodities containing the integrated circuit commercially.
  34




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##### Table of Contents



Compulsory Licenses for Exploitation of Semiconductor Patents
    Regulations on Foreign Exchange
   Regulations on Dividend Distribution
  35




---



##### Table of Contents



SAFE Regulations on Offshore Special Purpose Companies
    PRC Technology Import and Export
   C. Organization Structure
  
 D. Property, Plants and Equipment
  36




---



##### Table of Contents



ITEM 4A. UNRESOLVED STAFF COMMENTS
  
 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 You should read the following discussion and analysis of our financial condition and results
of operations in conjunction with our consolidated financial statements and the related notes
included elsewhere in this annual report. This discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results and the timing of selected events could differ
materially from those anticipated in these forward-looking statements as a result of various
factors, including those set forth under Risk Factors and elsewhere in this annual report.
 A. Operating Results
 Overview
       37




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##### Table of Contents



Factors Affecting Our Results of Operations
 End User Demand
  Feature Attach Rate
  Product Mix
  Average Selling Price
  Cost Reductions
   38




---



##### Table of Contents



Revenue
     Cost of Revenue
  Operating Expenses
  Research and Development
   39




---



##### Table of Contents



Selling, General, and Administrative
  Taxation
 Cayman Islands and British Virgin Islands
 Hong Kong
 PRC
    Dividends
 Tax residence
 40




---



##### Table of Contents



Critical Accounting Policies
   Revenue Recognition
     Share-Based Compensation
  41




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##### Table of Contents



Grant date
    
    Restricted Share Units Granted
    
    Fair Value of Ordinary SharesJanuary 18, 2010
    
    
    108,107
    
    
    $
    2.15
         42




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##### Table of Contents



Year of Stock Option Grant,2006
    
    2007
    
    2008
    
    2009Risk-free interest rate
    
    
    3.26
    %
    
    
    4.22
    %
    
    
    4.22
    %
    
    
    4.02
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Average expected volatility
    
    
    51.82 ~ 53.39
    %
    
    
    53.77
    %
    
    
    58.42
    %
    
    
    53.32
    %Average expected time to exercise
    
    2.92 ~ 4.42 years
    
    4.69 years
    
    5.69 years
    
    6.27 years
       43




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##### Table of Contents



Inventories
   Income Taxes
   Results of Operations
  44




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##### Table of Contents



For the Year Ended December 312008
    
    2009
    
    2010(as a percentage of revenue)SummaryConsolidated Statement of Operations Data:Revenue
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of revenue
    
    
    (67.7
    )
    
    
    (73.8
    )
    
    
    (70.2
    )Gross profit
    
    
    32.3
    
    
    
    26.2
    
    
    
    29.8Operating expenses:Research and development expenses
    
    
    (23.8
    )
    
    
    (12.3
    )
    
    
    (13.5
    )Selling, general and administrative expenses
    
    
    (8.1
    )
    
    
    (3.9
    )
    
    
    (5.2
    )Total operating expenses
    
    
    (31.9
    )
    
    
    (16.2
    )
    
    
    (18.7
    )Income from operations
    
    
    0.4
    
    
    
    10.0
    
    
    
    11.1Income before income tax expense
    
    
    0.4
    
    
    
    9.9
    
    
    
    11.3Income tax benefit (expense)
    
    
    0.8
    
    
    
    (0.3
    )
    
    
    (1.3
    )Net income
    
    
    1.2
    
    
    
    9.6
    
    
    
    10.0Share-based compensation was allocated in
operating expenses as follows:Research and development
    
    
    (4.9
    )
    
    
    (0.4
    )
    
    
    (2.6
    )Selling, general and administrative
    
    
    (1.8
    )
    
    
    (0.3
    )
    
    
    (1.8
    )
 Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
 Revenue
 Cost of Revenue
 Gross Margin
 Research and Development Expenses
 Selling, General and Administrative Expenses
 45




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##### Table of Contents



Income Tax Expense
 Net Income
 Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
 Revenue
 Cost of Revenue
 Gross Margin
 Research and Development Expenses
 Selling, General and Administrative Expenses
 Income Tax Benefit (Expense)
 46




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##### Table of Contents



Net Income
 Inflation
  Recent Accounting Pronouncements
    B. Liquidity and Capital Resources
  47




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##### Table of Contents



For the Year Ended December 31,2008
    
    2009
    
    2010Net cash provided by operating activities
    
    
    5,968
    
    
    
    13,961
    
    
    
    6,772Net cash used in investing activities
    
    
    (1,045
    )
    
    
    (2,634
    )
    
    
    (5,812
    )Net cash provided by financing activities
    
    
    
    
    
    
    133
    
    
    
    73,402Net increase in cash and cash equivalents
    
    
    5,152
    
    
    
    11,468
    
    
    
    74,282Cash and cash equivalents at the beginning of the period
    
    
    8,018
    
    
    
    13,170
    
    
    
    24,638Cash and cash equivalents at the end of the period
    
    
    13,170
    
    
    
    24,638
    
    
    
    98,920
 Operating Activities
    Investing Activities
    48




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##### Table of Contents



Financing Activities
     Capital Expenditures
  C. Research and Development, Patents and Licenses, Etc.
 Technology
      49




---



##### Table of Contents



D. Trend Information
  E. Off-Balance Sheet Arrangements
  F. Tabular Disclosure of Contractual Obligations
  Payment Due by PeriodLess Than 1
    
    
    1-3
    
    
    3-5
    
    
    More ThanTotal
    
    
    Year
    
    
    Years
    
    
    Years
    
    
    5 Years(in thousands)Operating lease obligations
    
    $
    657
    
    
    $
    445
    
    
    $
    212
    
    
    
    
    
    
    
    Other commitments(1)
    
    
    3,580
    
    
    
    2,280
    
    
    
    1,300
    
    
    
    
    
    
    
    Purchase obligations
    
    
    28,906
    
    
    
    28,906
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    33,143
    
    
    $
    31,631
    
    
    $
    1,512
    
    
    $
    
    
    
    $
    
 
 Note (1) Future payments for software license fees under our agreements with third parties.    G. Safe Harbor
  50




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##### Table of Contents



ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and Senior Management
  Directors and Executive Officers
    
    Age
    
    Position/TitleVincent Tai
    
    55
    
    Co-Founder, Chairman and Chief Executive OfficerShuran Wei
    
    42
    
    Co-Founder, Director and Chief Technology OfficerJulian Cheng
    
    36
    
    DirectorGordon (Yi) Ding
    
    35
    
    DirectorKern Lim
    
    40
    
    Independent directorKin-Wah Loh
    
    56
    
    Independent directorPeter Wan
    
    58
    
    Independent directorLily (Li) Dong
    
    40
    
    Chief Financial OfficerLiang Zhang
    
    36
    
    Senior Vice President of EngineeringJun Chen
    
    37
    
    Senior Vice President of EngineeringShun Lam Steven Tang
    
    55
    
    Senior Vice President of OperationsDalei Fan
    
    36
    
    Vice President of SalesGuoguang Zhao
    
    34
    
    Vice President of Operation
 Mr. Vincent Tai
 Mr. Shuran Wei
 Mr. Julian Cheng
 Mr. Gordon (Yi) Ding
 Mr. Kern Lim
 51




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##### Table of Contents



Mr. Kin-Wah Loh
 Mr. Peter Wan
 Ms. Lily (Li) Dong
 Mr. Liang Zhang
 Mr. Jun Chen
 Mr. Shun Lam Steven Tang
 Mr. Dalei Fan
 Mr. Guoguang Zhao
 52




---



##### Table of Contents



B. Compensation of Directors and Executive Officers
  Employment Agreements
    Share Incentive Plans
  The 2009 Plan
   Types of Awards
 53




---



##### Table of Contents




    
    Options. Options provide for the right to purchase a specified number of our
ordinary shares at a specified price and usually will become exercisable in the
discretion of our plan administrator in one or more installments after the grant date.
The option exercise price may be paid, subject to the discretion of the plan
administrator, in cash, in our ordinary shares which have been held by the option
holder for such period of time as may be required to avoid adverse accounting
treatment, in other property with value equal to the exercise price, through a
broker-assisted cashless exercise, or by any combination of the foregoing.
 
    
    Restricted Shares. A restricted share award is the grant of our ordinary shares
which are subject to certain restrictions and may be subject to risk of forfeiture.
Unless otherwise determined by our plan administrator, a restricted share is
nontransferable and may be forfeited or repurchased by us upon termination of
employment or service during a restricted period. Our plan administrator may also
impose other restrictions on the restricted shares, such as limitations on the right to
vote or the right to receive dividends.
 
    
    Restricted Share Units. Restricted share units represent the right to receive our
ordinary shares at a specified date in the future, subject to forfeiture of such right
upon termination of employment or service during the applicable restriction period. If
the restricted share units have not been forfeited, then we shall deliver to the holder
unrestricted ordinary shares that will be freely transferable after the last day of the
restriction period as specified in the award agreement.
 Plan Administration
 Award Agreement
 Option Exercise Price
 Eligibility
 Term of the Awards
 Vesting Schedule
 Transfer Restrictions
 Termination of the Plan
 The 2005 Plan
  54




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##### Table of Contents



Plan Administration
 Award Agreement
 Exercise Price
 Eligibility
 Term of the Options
 Vesting Schedule
 Transfer Restrictions
 Termination of the Plan
  Ordinary SharesUnderlying
    
    Exercise Price /Name
    
    Options Awarded
    
    ($/share)
    
    Date of Grant
    
    Date of ExpirationVincent Tai
    
    
    2,038,885
    
    
    
    0.1100
    
    
    September 1, 2005
    
    September 1, 20152,038,885
    
    
    
    0.0844
    
    
    September 1, 2006
    
    September 1, 20162,038,885
    
    
    
    0.2727
    
    
    September 1, 2007
    
    September 1, 2017Shuran Wei
    
    
    966,447
    
    
    
    0.0844
    
    
    September 1, 2006
    
    September 1, 2016966,447
    
    
    
    0.2727
    
    
    September 1, 2007
    
    September 1, 2017Liang Zhang
    
    
    215,890
    
    
    
    0.0844
    
    
    September 1, 2006
    
    September 1, 2016588,790
    
    
    
    0.2727
    
    
    September 1, 2007
    
    September 1, 2017Jun Chen
    
    
    391,905
    
    
    
    0.0844
    
    
    September 1, 2006
    
    September 1, 2016605,671
    
    
    
    0.2727
    
    
    September 1, 2007
    
    September 1, 2017Dalei Fan
    
    
    *
    
    
    
    0.0844
    
    
    September 1, 2006
    
    September 1, 2016*
    
    
    
    0.2727
    
    
    September 1, 2007
    
    September 1, 2017*
    
    
    
    0.5000
    
    
    August 1, 2009
    
    August 1, 2019Guoguang Zhao
    
    
    *
    
    
    
    0.0844
    
    
    September 1, 2006
    
    September 1, 2016*
    
    
    
    0.2727
    
    
    September 1, 2007
    
    September 1, 2017*
    
    
    
    0.5000
    
    
    August 1, 2009
    
    August 1, 2019Other individuals
as a group
    
    
    6,815,414
    
    
    From 0.0844
to 0.5000
    
    
    From September 1, 2005
to August 1, 2009
    
    From September 1, 2015
to August 1, 2019Total
    
    
    16,984,871
 
 *
    
    Less than one percent of our total outstanding share capital and together holding stock
options exercisable for 317,652 ordinary shares. 55




---



##### Table of Contents



Ordinary SharesUnderlying RestrictedName
    
    Share Units Awarded
    
    Date of Grant
    
    Date of ExpirationJun Chen
    
    
    126,381
    
    
    November 2, 2009
    
    November 2, 2019Lily (Li) Dong
    
    
    *
    
    
    November 2, 2009
    
    November 2, 2019Dalei Fan
    
    
    *
    
    
    November 2, 2009
    
    November 2, 2019Guoguang Zhao
    
    
    *
    
    
    November 2, 2009
    
    November 2, 2019From November 2, 2009
    
    From November 2, 2019Other individuals as a group
    
    
    5,290,493
    
    
    to January 18, 2010
    
    to January 18, 2020Total
    
    
    5,816,402
 
 *
    
    Less than one percent of our total outstanding share capital and together holding restricted
share units representing 399,528 ordinary shares.  Ordinary Shares WithName
    
    Restrictions Granted
    
    Date of GrantVincent Tai
    
    
    477,096
    
    
    January 18, 2010Shuran Wei
    
    
    180,827
    
    
    January 18, 2010Liang Zhang
    
    
    136,290
    
    
    January 18, 2010Total
    
    
    794,213
 C. Board Practices
  Committees of the Board of Directors
  Audit Committee
 
    
    selecting the independent registered public accounting firm and pre-approving all
auditing and non-auditing services permitted to be performed by the independent
registered public accounting firm;
 56




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##### Table of Contents




    
    reviewing with the independent registered public accounting firm any audit problems
or difficulties and managements response;
 
    
    reviewing and approving all proposed related party transactions, as defined in Item
404 of Regulation S-K under the Securities Act;
 
    
    discussing the annual audited financial statements with management and the
independent registered public accounting firm;
 
    
    reviewing major issues as to the adequacy of our internal controls and any special
audit steps adopted in light of material control deficiencies;
 
    
    annually reviewing and reassessing the adequacy of our audit committee charter;
 
    
    meeting separately and periodically with management and the independent registered
public accounting firm; and
 
    
    reporting regularly to the board.
 Compensation Committee
 
    
    reviewing the total compensation package for our three most senior executives and
making recommendations to the board with respect to it;
 
    
    approving and overseeing the total compensation package for our executives other
than the three most senior executives;
 
    
    reviewing the compensation of our directors and making recommendations to the board
with respect to it; and
 
    
    periodically reviewing and approving any long-term incentive compensation or equity
plans, programs or similar arrangements, annual bonuses, and employee pension and
welfare benefit plans.
 Duties of Directors
  Terms of Directors and Officers
  D. Employees
  57




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##### Table of Contents



E. Share Ownership
  
    
    each of our directors and executive officers; and
 
    
    each person known to us to beneficially own more than 5% of our ordinary shares.
   Ordinary SharesBeneficially OwnedNumber
    
    %Directors and Executive Officers:Vincenti Tai (1)
    
    
    43,410,837
    
    
    
    16.1
    %Shuran Wei (2)
    
    
    8,182,304
    
    
    
    3.0Julian Cheng (3)
    
    
    142,625,365
    
    
    
    52.9Gordon (Yi) Ding (4)
    
    
    
    
    
    
    Lily (Li) Dong
    
    
    **
    
    
    
    **Liang Zhang (5)
    
    
    5,443,458
    
    
    
    2.0Dalei Fan
    
    
    **
    
    
    
    **Jun Chen (6)
    
    
    4,390,579
    
    
    
    1.6Shun Lam Steven Tang
    
    
    
    
    
    
    Guoguang Zhao
    
    
    **
    
    
    
    **All Directors and Executive Officers as a Group
    
    
    186,036,202
    
    
    
    69.0Principal Shareholders:Warburg Pincus entities (7)
    
    
    142,625,365
    
    
    
    52.9IDG entities (8)
    
    
    15,004,277
    
    
    
    5.6
 
 *
    
    Except for Messrs. Julian Cheng and Gordon (Yi) Ding, the business address of our directors
and executive officers is c/o Suite 302, Building 2, 690 Bibo Road, Pudong District, Shanghai
201203, Peoples Republic of China. The business address of Messrs. Cheng and Ding is c/o
Warburg Pincus Asia LLC, Suite 6703, Two IFC, 8 Finance Street, Hong Kong.**
    
    Less than 1%. 58




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##### Table of Contents



Notes:
    (1)
    
    Includes 5,436,219 ordinary shares held by Mr. Tai (including 341,920 ordinary shares
with restrictions on voting and dividend rights), 5,437,027 ordinary shares issuable upon
exercise of options held by Mr. Tai that are exercisable within 60 days of March 14, 2011 and
32,537,591 ordinary shares held by individual shareholders who authorize Mr. Tai to vote these
shares on their behalf under power of attorney. Such individuals include all of our executive
officers.
 (2)
    
    Includes 6,571,559 ordinary shares held by Mr. Wei (including 180,827 ordinary
shares with restrictions on voting and dividend rights) and 1,610,745 ordinary shares
issuable upon exercise of options held by Mr. Wei that are exercisable within 60 days of
March 14, 2011. Mr. Wei authorized Mr. Vincent Tai to vote the ordinary shares that Mr.
Wei currently holds.
 (3)
    
    Mr. Cheng is a managing director of Warburg Pincus Asia LLC, which advises Warburg
Pincus LLC, a New York limited liability company that acts as the manager of the Warburg
Pincus entities. Mr. Cheng disclaims beneficial ownership of the shares held by the
Warburg Pincus entities except to the extent of his pecuniary interests therein.
 (4)
    
    Mr. Ding is an employee of Warburg Pincus Asia LLC.
 (5)
    
    Includes 4,835,041 ordinary shares held by Mr. Zhang (including 136,290 ordinary
shares with restrictions on voting and dividend rights) and 608,417 ordinary shares
issuable upon exercise of options held by Mr. Zhang that are exercisable within 60 days
of March 14, 2011. Mr. Zhang authorized Mr. Vincent Tai to vote the ordinary shares that
Mr. Zhang currently holds.
 (6)
    
    Includes 3,719,791 ordinary shares held by Mr. Chen, 641,299 ordinary shares
issuable upon exercise of options held by Mr. Chen that are exercisable within 60 days of
March 14, 2011 and 29,489 ordinary shares under restricted share units that are vested or
will be vested within 60 days of March 14, 2011. Mr. Chen authorized Mr. Vincent Tai to
vote the ordinary shares that Mr. Chen currently holds.
 (7)
    
    Warburg Pincus entities refers to Warburg Pincus Private Equity VIII, L.P.,
Warburg Pincus Netherlands Private Equity VIII I, C.V., WP-WPVIII Investors, L.P. (as
successor in interest to Warburg Pincus Germany Private Equity VIII, K.G.), Warburg
Pincus International Partners, L.P., Warburg Pincus Netherlands International Partners I,
C.V. and WP-WPIP Investors L.P. (as successor in interest to Warburg Pincus Germany
International Partners, K.G.). Warburg Pincus LLC, a New York limited liability company,
acts as the manager of certain private equity funds, including the Warburg Pincus
entities. Warburg Pincus Partners, LLC, a New York limited liability company and a direct
subsidiary of Warburg Pincus & Co., a New York general partnership, is the general
partner of the Warburg Pincus entities. Warburg Pincus & Co. is the managing member of
Warburg Pincus Partners, LLC. The business address of the Warburg Pincus entities is 450
Lexington Avenue, New York, NY 10017, the United States. Charles R. Kaye and Joseph P.
Landy are managing general partners of Warburg Pincus & Co. and managing members and
co-presidents of Warburg Pincus LLC. Messrs. Kaye and Landy disclaim beneficial ownership
of the shares held by the Warburg Pincus entities except to the extent of their pecuniary
interests therein.
 (8)
    
    IDG entities refers to IDG-ACCEL China Growth Fund L.P., IDG-ACCEL China Growth
Fund-A L.P. and IDG-ACCEL China Investors L.P. Quan Zhou and Patrick J. McGovern are the
managing directors of IDG-Accel China Growth Fund GP Associates Ltd., which is the
General Partner of IDG-Accel China Growth Fund Associates L.P., which is in turn the
General Partner of IDG-Accel China Growth Fund L.P and IDG-ACCEL China Growth Fund-A L.P.
Messrs. Zhou and McGovern disclaim beneficial ownership of the shares held by IDG-ACCEL
China Growth Fund L.P. and IDG-ACCEL China Growth Fund-A L.P. except to the extent of
their pecuniary interests therein. Jim Breyer and Quan Zhou are the directors of
IDG-ACCEL China Investors Associates Ltd., which is the general partner of IDG-ACCEL
China Investors L.P. Messrs. Breyer and Zhou disclaim beneficial ownership of the shares
held by IDG-ACCEL China Investors L.P. The business address of the IDG entities is c/o
IDG Capital Management (HK) Limited, Unit 1509, The Center, 99 Queens Road, Central,
Hong Kong.
  59




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##### Table of Contents



ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A. Major Shareholders
  B. Related Party Transactions
 Transactions with Warburg Pincus Investment Portfolio Companies
    Employment Agreements
  Share Incentives
   C. Interests of Experts and Counsel
  
 ITEM 8. FINANCIAL INFORMATION
 A. Consolidated Statements and Other Financial Information
  Legal and Administrative Proceedings
  Dividend Policy
   60




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##### Table of Contents



Significant Changes
  
 ITEM 9. THE OFFER AND LISTING
 A. Offering and Listing Details
  B. Plan of Distribution
  C. Markets
  Trading PriceHigh
    
    LowUS$
    
    US$Annual High and LowFiscal Year 2010 (from November 10, 2010)
    
    
    18.20
    
    
    
    9.53Quarterly Highs and LowsFourth Fiscal Quarter of 2010 (from November 10, 2010)
    
    
    18.20
    
    
    
    9.53First Fiscal Quarter of 2011 (until March 30, 2011)
    
    
    15.90
    
    
    
    12.50Monthly Highs and LowsNovember 2010 (from November 10, 2010)
    
    
    18.20
    
    
    
    9.53December 2010
    
    
    16.64
    
    
    
    12.80January 2011
    
    
    15.90
    
    
    
    12.72February 2011
    
    
    13.85
    
    
    
    12.80March 2011 (until March 30, 2011)
    
    
    15.43
    
    
    
    12.50
 Selling Shareholders
  Dilution
  Expenses of the Issue
  
 ITEM 10. ADDITIONAL INFORMATION
 A. Share Capital
  61




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##### Table of Contents



B. Memorandum and Articles of Association
  Registered Office and Objects
  Board of Directors
  Ordinary Shares
 General
 Dividends
 Voting Rights
   Transfer of Shares
   62




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##### Table of Contents



Liquidation
 Calls on Shares and Forfeiture of Shares
 Redemption of Shares
 Variations of Rights of Shares
 Inspection of Books and Records
 Limitations on the Right to Own Shares
 Disclosure of Shareholder Ownership
 C. Material Contracts
  D. Exchange Controls
  E. Taxation
  Cayman Islands Taxation
  PRC Taxation
  63




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##### Table of Contents



United States Federal Income Taxation
  EACH US HOLDER IS URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S.
FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE AND LOCAL AND FOREIGN TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSS OR ORDINARY SHARES.
 General
   64




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##### Table of Contents



Passive Foreign Investment Company Considerations
     Dividends
    65




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##### Table of Contents



Sale or Other Disposition of ADSs or Ordinary Shares
  Passive Foreign Investment Company Rules
     Backup Withholding and Information Reporting
  F. Dividends and Paying Agents
  66




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##### Table of Contents



G. Statement by Experts
  H. Documents on Display
    I. Subsidiary Information
  
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
  Foreign Exchange Risk
    67




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##### Table of Contents



ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 A. Debt Securities
  B. Warrants and Rights
  C. Other Securities
  D. American Depositary Shares
 Fees and Charges Our ADS holders May Have to Pay
  Service
    
    Fees Issuance of ADSs
    
    Up to U.S.5¢ per ADS issued Cancellation of ADSs
    
    Up to U.S.5¢ per ADS canceled Distribution of cash
dividends or other cash
distributions
    
    Up to U.S.5¢ per ADS held Distribution of ADSs
pursuant to stock
dividends, free stock
distributions or
exercise of rights.
    
    Up to U.S.5¢ per ADS held Distribution of
securities other than
ADSs or rights to
purchase additional
ADSs
    
    Up to U.S.5¢ per ADS held Depositary services
    
    Up to U.S.5¢ per ADS held on the applicable
record date(s) established by the depositary bank Transfer of ADRs
    
    U.S.$1.50 per certificate presented for transfer
  
    
    fees for the transfer and registration of ordinary shares charged by the registrar and
transfer agent for the ordinary shares in the Cayman Islands ( i.e. , upon deposit and
withdrawal of ordinary shares);
 
    
    expenses incurred for converting foreign currency into U.S. dollars;
 
    
    expenses for cable, telex and fax transmissions and for delivery of securities;
 
    
    taxes and duties upon the transfer of securities ( i.e. , when ordinary shares are
deposited or withdrawn from deposit); and
 68




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##### Table of Contents




    
    fees and expenses incurred in connection with the delivery or servicing of ordinary
shares on deposit.
     Fees and Other Payments Made by the Depositary to Us
  
 PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
     
 ITEM 15. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  69




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Managements Annual Report on Internal Control over Financial Reporting
  Internal Control over Financial Reporting
   
    
    we appointed a financial reporting manager and an internal audit manager in January 2010
and August 2010, respectively, who have relevant financial reporting and internal control
knowledge and experience to lead our period-end financial reporting process and internal
audit function;
 
    
    we appointed three independent directors to our board and have established an audit
committee within our board in October 2010. The audit committee is responsible for
overseeing the accounting and financial reporting processes as well as audits of the
financial statements of our company;
 
    
    we implemented more comprehensive period end closing procedures, including a checklist
of procedures that are to be performed and then internally reviewed;
 
    
    we have engaged the services of external internal control consultants, other than our
independent registered public accounting firm, with relevant experience, skills and
knowledge to supplement our existing personnel and assist with the preparation of
compliance with Section 404 of the Sarbanes-Oxley Act of 2002. They are working under the
supervision and direction of our management to establish documentation of our internal
controls, policies and procedures for each key business cycle.
Through their work, communication and
training was delivered to the concerning departments and personnel; and
 
    
    we started running a new Enterprise Resource Planning (ERP) system in parallel with
our existing systems in the fourth quarter 2010. This new ERP system allows for greater
organizational accountability and lines of approval, and improved operational performance
of our finance and accounting processes including efficiency of period-end closing
procedures.
   70




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
  
 ITEM 16. [RESERVED]
 
 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B. CODE OF ETHICS
  
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  For the Year Ended December 31,2009
    
    
    2010(in US$ thousands)Audit fees(1)
    
    
    237
    
    
    
    257Audit-related fees(2)
    
    
    439
    
    
    
    297Tax fees (3)
    
    
    54
    
    
    
    
 
 (1)
    
    Audit fees means the aggregate fees billed for professional services rendered by our
independent registered public accounting firm for the audit of our annual financial statements
and the review of our comparative interim financial statements.(2)
    
    Audit related fees represents aggregate fees billed for professional services rendered by
our principal auditors for the assurance and related services, which mainly included the
issuance of the audit and review of financial statements and other assurance services rendered
in connection with our initial public offering in 2010.(3)
    
    Tax fees represents the aggregated fees billed for professional services rendered by our
independent registered public accounting firm for tax compliance, tax advice, and tax
planning. de
minimis
 
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
  71




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##### Table of Contents



ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
  
 ITEM 16G. CORPORATE GOVERNANCE
  
 
 
   
 PART III
 
 ITEM 17. FINANCIAL STATEMENTS
  
 ITEM 18. FINANCIAL STATEMENTS
  
 ITEM 19. EXHIBITS
 ExhibitNumber
    
    Description of Document1.1
    
    Fourth Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated
herein by reference to Exhibit 3.2 to the registration statement on Form F-1, as amended (File No.
333-170063))2.1
    
    Registrants Specimen American Depositary Receipt (incorporated herein by reference to Exhibit 4.1 to
the registration statement on Form F-1, as amended (File No. 333-170063))2.2
    
    Registrants Specimen Certificate for Ordinary Shares (incorporated herein by reference to Exhibit
4.2 to the registration statement on Form F-1, as amended (File No. 333-170063))2.3
    
    Form of Deposit Agreement among the Registrant, Citibank N.A. as depositary, and holders and
beneficial owners of American Depositary Shares evidenced by American Depositary Receipts issued
thereunder (incorporated herein by reference to Exhibit 4.3 to the registration statement on Form
F-1, as amended (File No. 333-170063))
 72




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##### Table of Contents



ExhibitNumber
    
    Description of Document2.4
    
    Second Amended and Restated Shareholders Agreement dated as of February 25, 2010 among the
Registrant, certain of the Registrants ordinary shareholders and all of its preferred shareholders
and RDA Microelectronics (BVI) Inc., RDA International, Inc., RDA Technologies Limited, RDA
Microelectronics (Shanghai) Ltd. and RDA Microelectronics (Beijing) Co., Ltd. (incorporated herein by
reference to Exhibit 4.4 to the registration statement on Form F-1, as amended (File No. 333-170063))4.1
    
    2005 Share Option Scheme (incorporated herein by reference to Exhibit 10.1 to the registration
statement on Form F-1, as amended (File. No. 333-170063))4.2
    
    2009 Share Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the registration
statement on Form F-1, as amended (File No. 333-170063))4.3
    
    Form of Indemnification Agreement with the Registrants directors (incorporated herein by reference
to Exhibit 10.3 to the registration statement on Form F-1, as amended (File No. 333-170063))4.4
    
    Form of Employment Agreement between the Registrant and an Executive Officer of the Registrant
(incorporated herein by reference to Exhibit 10.4 to the registration statement on Form F-1, as
amended (File No. 333-170063))4.5
    
    Technology License Agreement between the Registrant and ARM Limited dated February 26, 2008
(incorporated herein by reference to Exhibit 10.5 to the registration statement on Form F-1, as
amended (File No. 333-170063))4.6
    
    Annex to Technology License Agreement between the Registrant and ARM Limited dated June 22, 2009
(incorporated herein by reference to Exhibit 10.6 to the registration statement on Form F-1, as
amended (File No. 333-170063))4.7
    
    Annex to Technology License Agreement between the Registrant and ARM Limited dated June 22, 2009
(incorporated herein by reference to Exhibit 10.7 to the registration statement on Form F-1, as
amended (File No. 333-170063))4.8
    
    Distribution Agreement dated as of June 3, 2005 between RDA Microelectronics (BVI) Inc. (formerly
known as RDA Microelectronics, Inc.) and Arrow Asia Pacific Inc. (incorporated herein by reference
to Exhibit 10.8 to the registration statement on Form F-1, as amended (File No. 333-170063))4.9
    
    Distribution Agreement dated as of March 25, 2008 between RDA Technologies Limited and Auctus
Technologies (Hong Kong) Limited (incorporated herein by reference to Exhibit 10.9 to the
registration statement on Form F-1, as amended (File No. 333-170063))4.10
    
    Distribution agreement dated as of May 6, 2008 between RDA Technologies Limited and Giatek
Corporation Ltd. (incorporated herein by reference to Exhibit 10.10 to the registration statement on
Form F-1, as amended (File No. 333-170063))4.11
    
    License Agreement dated as of May 12, 2010, between RDA Technologies Limited and Silicon Laboratories
Inc. (incorporated herein by reference to Exhibit 10.11 to the registration statement on Form F-1, as
amended (File No. 333-170063))4.12
    
    Distribution Agreement dated as of September 3, 2010 between RDA Technologies Limited and China
Achieve Limited (incorporated herein by reference to Exhibit 10.12 to the registration statement on
Form F-1, as amended (File No. 333-170063))8.1*
    
    Subsidiaries of the Registrant11.1
    
    Code of Business Conduct and Ethics of the Registrant (incorporated herein by reference to Exhibit
99.1 to the registration statement on Form F-1, as amended (File No. 333-170063))12.1*
    
    Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200212.2*
    
    Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200213.1*
    
    Certification by Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200213.2*
    
    Certification by Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 73




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ExhibitNumber
    
    Description of Document15.1*
    
    Consent of Jun He Law Offices15.2*
    
    Consent of PricewaterhouseCoopers Zhong Tian CPAs Limited Company
 
 *
    
    Filed with this annual report on Form 20-F 74




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##### Table of Contents



SIGNATURES
  Date:  April 1, 2011
    RDA MICROELECTRONICS, INC.By:
    /s/ Vincent TaiName:
    Vincent TaiTitle:
    Chairman and Chief Executive Officer 75




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##### 



RDA MICROELECTRONICS, INC.
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
  
 PageConsolidated Financial Statements

F-1Report of Independent Registered Public Accounting Firm

F-2Consolidated Balance Sheets as of December 31, 2009 and 2010

F-3Consolidated Statements of Operations and Comprehensive Income for the years ended
December 31, 2008, 2009 and 2010

F-5Consolidated Statements of Convertible Redeemable Preferred Shares and Shareholders
Equity / (Deficit) for the years ended December 31, 2008, 2009 and 2010

F-6Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2009 and 2010

F-9Notes to the Consolidated Financial Statements

F-10
  F-1




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Report of Independent Registered Public Accounting Firm
      F-2




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 
 CONSOLIDATED BALANCE SHEETS
 December 31,2009
    
    
    2010(Amounts in thousands of USD, except number ofshares and per share data)ASSETSCurrent assets:Cash and cash equivalents
    
    
    24,638
    
    
    
    98,920Short-term investments
    
    
    1,318
    
    
    
    7,142Restricted cash
    
    
    350
    
    
    
    Accounts receivable
    
    
    4,603
    
    
    
    22,715Inventories
    
    
    25,403
    
    
    
    35,494Prepaid expenses and other current assets
    
    
    1,330
    
    
    
    1,580Deferred tax assets
    
    
    87
    
    
    
    5Total current assets
    
    
    57,729
    
    
    
    165,856Property and equipment, net
    
    
    2,318
    
    
    
    2,201Other long-term assets
    
    
    39
    
    
    
    62Deferred tax assets
    
    
    185
    
    
    
    127Total assets
    
    
    60,271
    
    
    
    168,246
 F-3




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 CONSOLIDATED BALANCE SHEETS  (Continued)
 December 31,2009
    
    
    2010(Amounts in thousands of USD,except number of shares and pershare data)LIABILITIESCurrent liabilities:Accounts payable
    
    
    20,183
    
    
    
    20,524Accrued expenses and other current liabilities
    
    
    7,689
    
    
    
    12,934Deferred revenue
    
    
    5,419
    
    
    
    6,722Total current liabilities
    
    
    33,291
    
    
    
    40,180Total liabilities
    
    
    33,291
    
    
    
    40,180Commitments and contingenciesCONVERTIBLE REDEEMABLE PREFERRED SHARESSeries A Preferred Shares, USD0.01 par
value; 142,500,000 shares authorized,
94,648,784 shares issued and outstanding as
of December 31, 2009, none outstanding as
of December 31,2010 (Liquidation value: USD
14,049 and nil as of December 31, 2009 and
2010)
    
    
    12,880
    
    
    
    Series B Preferred Shares, USD0.01 par
value; 35,000,000 shares authorized,
32,972,304 shares issued and outstanding as
of December 31, 2009, none outstanding as
of December 31,2010 (Liquidation value: USD
6,791 and nil as of December 31, 2009 and
2010)
    
    
    6,281
    
    
    
    Series C Preferred Shares, USD0.01 par
value; 31,000,000 shares authorized,
30,008,554 shares issued and outstanding as
of December 31, 2009, none outstanding as
of December 31, 2010 (Liquidation value: USD 12,333 and nil as of December 31, 2009
and 2010)
    
    
    11,157
    
    
    
    SHAREHOLDERS EQUITY / (DEFICIT)Ordinary shares, (USD0.01 par value;
261,500,000 shares authorized,
50,333,579 shares issued and outstanding
as of December 31, 2009, and
261,510,076 shares issued and
outstanding as of December 31, 2010)
    
    
    503
    
    
    
    2,615Additional paid-in capital
    
    
    5,090
    
    
    
    113,360Recourse loans
    
    
    (1,667
    )
    
    
    Accumulated other comprehensive income
    
    
    472
    
    
    
    695Retained earnings / (Accumulated deficit)
    
    
    (7,736
    )
    
    
    11,396Total shareholders equity / (deficit)
    
    
    (3,338
    )
    
    
    128,066Total liabilities, convertible redeemable
preferred shares and shareholders equity
/ (deficit)
    
    
    60,271
    
    
    
    168,246
  F-4




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 For the YearEnded December 31,2008
    
    
    2009
    
    
    2010(Amounts in thousands of USD, except number of shares andper share data)Revenue
    
    
    55,500
    
    
    
    118,373
    
    
    
    191,163Cost of revenue
    
    
    (37,555
    )
    
    
    (87,410
    )
    
    
    (134,258
    )Gross profit
    
    
    17,945
    
    
    
    30,963
    
    
    
    56,905Operating expenses:Research and development
    
    
    (13,198
    )
    
    
    (14,475
    )
    
    
    (25,815
    )Selling, general and administrative
    
    
    (4,518
    )
    
    
    (4,649
    )
    
    
    (9,939
    )(17,716
    )
    
    
    (19,124
    )
    
    
    (35,754
    )Income from operations
    
    
    229
    
    
    
    11,839
    
    
    
    21,151Interest income
    
    
    43
    
    
    
    57
    
    
    
    209Other income / (expenses), net
    
    
    (69
    )
    
    
    (213
    )
    
    
    280Income before income tax expense
    
    
    203
    
    
    
    11,683
    
    
    
    21,640Income tax benefit / (expense)
    
    
    454
    
    
    
    (377
    )
    
    
    (2,508
    )Net income
    
    
    657
    
    
    
    11,306
    
    
    
    19,132Accretion/cumulative dividends for
Series A Preferred Shares
    
    
    (971
    )
    
    
    (794
    )
    
    
    (680
    )Accretion/cumulative dividends for
Series B Preferred Shares
    
    
    (435
    )
    
    
    (436
    )
    
    
    (374
    )Accretion/cumulative dividends for
Series C Preferred Shares
    
    
    (773
    )
    
    
    (800
    )
    
    
    (687
    )Amount allocated to participating
preferred shareholders
    
    
    
    
    
    
    (7,449
    )
    
    
    (12,112
    )Net income/(loss) attributable to
ordinary shareholders
    
    
    (1,522
    )
    
    
    1,827
    
    
    
    5,279Earnings/(losses) per ordinary shareBasic
    
    
    (0.04
    )
    
    
    0.05
    
    
    
    0.06Diluted
    
    
    (0.04
    )
    
    
    0.03
    
    
    
    0.05Weighted average ordinary shares used
in per share calculationBasic
    
    
    37,434,517
    
    
    
    38,671,413
    
    
    
    82,221,102Diluted
    
    
    37,434,517
    
    
    
    58,901,016
    
    
    
    97,358,770Other comprehensive incomeNet income
    
    
    657
    
    
    
    11,306
    
    
    
    19,132Cumulative translation adjustments
    
    
    373
    
    
    
    6
    
    
    
    223Comprehensive income
    
    
    1,030
    
    
    
    11,312
    
    
    
    19,355Share-based compensation was
allocated in operating expenses as
follows:Research and development
    
    
    2,739
    
    
    
    532
    
    
    
    4,990Selling, general and administrative
    
    
    999
    
    
    
    310
    
    
    
    3,385
  F-5




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 
 CONSOLIDATED STATEMENTS OF CONVERTIBLE REDEEMABLE PREFERRED SHARES AND SHAREHOLDERS EQUITY / (DEFICIT)
 Shareholders Equity / (Deficit)Accumulated
    
    
    RetainedOther
    
    
    Earnings/
    
    
    TotalConvertible Redeemable
    
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Recourse
    
    
    Comprehensive
    
    
    (Accumulated
    
    
    ShareholdersPreferred Shares
    
    
    
    Ordinary Shares
    
    
    Paid-in Capital
    
    
    Loans
    
    
    Income
    
    
    Deficit)
    
    
    Equity / (Deficit)Amounts in thousands of USD except number of sharesShares
    
    
    Amount
    
    
    
    Shares
    
    
    Par Value
    
    
    Amount
    
    
    Amount
    
    
    Amount
    
    
    Amount
    
    
    AmountBalance as of January 1, 2008
    
    
    157,629,642
    
    
    
    28,563
    
    
    
    
    37,434,517
    
    
    
    374
    
    
    
    599
    
    
    
    
    
    
    
    93
    
    
    
    (19,699
    )
    
    
    (18,633
    )Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    657
    
    
    
    657Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    373
    
    
    
    
    
    
    
    373Accretion to redemption value of
Preferred Shares through date of
elimination of certain redemption
feature
    
    
    
    
    
    
    2,010
    
    
    
    
    
    
    
    
    
    
    
    
    (2,010
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,010
    )Reduction in carrying value of
Series B and Series C Preferred
Shares resulting from
modification of redemption
feature
    
    
    
    
    
    
    (255
    )
    
    
    
    
    
    
    
    
    
    
    
    255
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    255Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,738
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,738Balance as of December 31, 2008
    
    
    157,629,642
    
    
    
    30,318
    
    
    
    
    37,434,517
    
    
    
    374
    
    
    
    2,582
    
    
    
    
    
    
    
    466
    
    
    
    (19,042
    )
    
    
    (15,620
    )
  F-6




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 CONSOLIDATED STATEMENTS OF CONVERTIBLE REDEEMABLE PREFERRED SHARES AND SHAREHOLDERS EQUITY / (DEFICIT)
 (CONTINUED)
 Shareholders Equity / (Deficit)Accumulated
    
    
    RetainedOther
    
    
    Earnings/
    
    
    TotalConvertible Redeemable
    
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Recourse
    
    
    Comprehensive
    
    
    (Accumulated
    
    
    ShareholdersPreferred Shares
    
    
    
    Ordinary Shares
    
    
    Paid-in Capital
    
    
    Loans
    
    
    Income
    
    
    Deficit)
    
    
    Equity / (Deficit)Amounts in thousands of USD except number of sharesShares
    
    
    Amount
    
    
    
    Shares
    
    
    Par Value
    
    
    Amount
    
    
    Amount
    
    
    Amount
    
    
    Amount
    
    
    AmountBalance as of January 1, 2009
    
    
    157,629,642
    
    
    
    30,318
    
    
    
    
    37,434,517
    
    
    
    374
    
    
    
    2,582
    
    
    
    
    
    
    
    466
    
    
    
    (19,042
    )
    
    
    (15,620
    )Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,306
    
    
    
    11,306Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    6Issuance of ordinary shares in
connection with stock option
exercises
    
    
    
    
    
    
    
    
    
    
    
    12,899,062
    
    
    
    129
    
    
    
    1,666
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,795Recourse loans issued to
employees for stock option
exercises
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,795
    )
    
    
    
    
    
    
    
    
    
    
    (1,795
    )Interest accrual on recourse loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (5
    )Repayment of Recourse Loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    133
    
    
    
    
    
    
    
    
    
    
    
    133Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    842
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    842Balance as of December 31, 2009
    
    
    157,629,642
    
    
    
    30,318
    
    
    
    
    50,333,579
    
    
    
    503
    
    
    
    5,090
    
    
    
    (1,667
    )
    
    
    472
    
    
    
    (7,736
    )
    
    
    (3,338
    )
  F-7




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 CONSOLIDATED STATEMENTS OF CONVERTIBLE REDEEMABLE PREFERRED SHARES AND SHAREHOLDERS EQUITY / DEFICIT
 (CONTINUED)
 Shareholders Equity / (Deficit)Accumulated
    
    RetainedOther
    
    Earnings/
    
    TotalConvertible Redeemable
    
    
    
    
    
    
    
    
    
    
    Additional
    
    Recourse
    
    Comprehensive
    
    (Accumulated
    
    ShareholdersPreferred Shares
    
    
    Ordinary Shares
    
    Paid-in Capital
    
    Loans
    
    Income
    
    Deficit)
    
    Equity / (Deficit)Amounts in thousands of USD except number of sharesShares
    
    Amount
    
    
    Shares
    
    Par Value
    
    Amount
    
    Amount
    
    Amount
    
    Amount
    
    AmountBalance as of January 1, 2010
    
    
    157,629,642
    
    
    
    30,318
    
    
    
    
    50,333,579
    
    
    
    503
    
    
    
    5,090
    
    
    
    (1,667
    )
    
    
    472
    
    
    
    (7,736
    )
    
    
    (3,338
    )Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,132
    
    
    
    19,132Issuance of ordinary shares in the initial public offering
    
    
    
    
    
    
    
    
    
    
    
    50,802,000
    
    
    
    508
    
    
    
    66,973
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,481Conversion of preferred shares to ordinary shares in
conjunction with the initial public offering
    
    
    (157,629,642
    )
    
    
    (30,318
    )
    
    
    
    157,629,642
    
    
    
    1,576
    
    
    
    28,742
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,318Issuance of restricted shares
    
    
    
    
    
    
    
    
    
    
    
    794,213
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    223
    
    
    
    
    
    
    
    223Interest accrual on recourse loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46
    )
    
    
    
    
    
    
    
    
    
    
    (46
    )Repayment of recourse loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,713
    
    
    
    
    
    
    
    
    
    
    
    1,713Issuance of ordinary shares to an investor
    
    
    
    
    
    
    
    
    
    
    
    1,950,642
    
    
    
    20
    
    
    
    4,180
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,200Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,375
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,375Balance as of December 31, 2010
    
    
    
    
    
    
    
    
    
    
    
    261,510,076
    
    
    
    2,615
    
    
    
    113,360
    
    
    
    
    
    
    
    695
    
    
    
    11,396
    
    
    
    128,066
  F-8




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended December 31,2008
    
    
    2009
    
    
    2010Amounts in thousands of USDCash flow from operating activities:Net income
    
    
    657
    
    
    
    11,306
    
    
    
    19,132Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    548
    
    
    
    571
    
    
    
    754Loss on disposal of property, equipment
    
    
    137
    
    
    
    4
    
    
    
    4Allowance for doubtful accounts
    
    
    (5
    )
    
    
    
    
    
    
    Inventory write-down
    
    
    575
    
    
    
    2,910
    
    
    
    3,120Share-based compensation
    
    
    3,738
    
    
    
    842
    
    
    
    8,375Deferred income taxes
    
    
    (458
    )
    
    
    186
    
    
    
    140Interest income from recourse loans
    
    
    
    
    
    
    (5
    )
    
    
    (46
    )Changes in operating assets and liabilitiesAccounts receivable
    
    
    (1,682
    )
    
    
    291
    
    
    
    (18,112
    )Inventories
    
    
    (4,631
    )
    
    
    (20,232
    )
    
    
    (13,211
    )Prepaid expenses, other current and
Long-term assets
    
    
    341
    
    
    
    (1,226
    )
    
    
    (273
    )Accounts payable
    
    
    5,286
    
    
    
    12,574
    
    
    
    341Accrued expenses and other current
liabilities
    
    
    1,177
    
    
    
    3,946
    
    
    
    5,245Deferred revenue
    
    
    285
    
    
    
    2,795
    
    
    
    1,303Net cash provided by operating activities
    
    
    5,968
    
    
    
    13,962
    
    
    
    6,772Cash flow from investing activities:Sales of short-term investments
    
    
    
    
    
    
    732
    
    
    
    9,070Purchase of short-term investments
    
    
    
    
    
    
    (2,050
    )
    
    
    (14,661
    )Purchase of property and equipment
    
    
    (695
    )
    
    
    (1,316
    )
    
    
    (571
    )Changes in restricted cash
    
    
    (350
    )
    
    
    
    
    
    
    350Net cash used in investing activities
    
    
    (1,045
    )
    
    
    (2,634
    )
    
    
    (5,812
    )Cash flow from financing activities:Proceeds from repayment of recourse loans
    
    
    
    
    
    
    133
    
    
    
    1,713Proceeds from issuance of ordinary shares
    
    
    
    
    
    
    
    
    
    
    71,681Proceeds from issuance of restricted shares
    
    
    
    
    
    
    
    
    
    
    8Net cash provided by financing activities
    
    
    
    
    
    
    133
    
    
    
    73,402Effect of foreign exchange rate changes on cash
and cash equivalents
    
    
    229
    
    
    
    7
    
    
    
    (80
    )Net increase in cash and cash equivalents
    
    
    5,152
    
    
    
    11,468
    
    
    
    74,282Cash and cash equivalents  beginning of year
    
    
    8,018
    
    
    
    13,170
    
    
    
    24,638Cash and cash equivalents  end of year
    
    
    13,170
    
    
    
    24,638
    
    
    
    98,920Supplemental disclosure of non-cash investing
and financing activities:Issuance of recourse loans in connection with
stock option exercise
    
    
    
    
    
    
    1,795
    
    
    
    Conversion of preferred shares to ordinary shares
    
    
    
    
    
    
    
    
    
    
    30,318
  F-9




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 1. DESCRIPTION OF BUSINESS
    Name of subsidiaries
    
    Place of incorporation
    
    Date of incorporation
    
    Principal activitiesRDA Micro BVI
    
    BVI
    
    January 8, 2004
    
    Investment in other subsidiariesRDA International,
Inc. (RDA
International)
    
    BVI
    
    September 30, 2005
    
    Dormant since January 1, 2010
(Purchase of materials and
holding of intellectual
properties (IP) prior to
December 31, 2009)RDA Technologies,
Inc. (RDA US)
    
    United States of
America (US)
    
    September 24, 2004
    
    Dormant (closed in 2009)RDA Technologies
Limited (RDA
Tech)
    
    Hong Kong
    
    November 14, 2007
    
    Purchase of materials and
holding of intellectual
properties (IP) since January
1, 2010; Sales of productsRDA
Microelectronics
(Shanghai) Co.,
Ltd. (RDA
Shanghai)
    
    Shanghai, the
Peoples Republic of
China (PRC)
    
    April 13, 2004
    
    Research and developmentRDA
Microelectronics
(Beijing) Co., Ltd.
(RDA Beijing)
    
    Beijing, PRC
    
    December 20, 2005
    
    Research and development
  F-10




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (1) Basis of Presentation
  (2) Principles of Consolidation
  (3) Use of Estimates
  (4) Fair Value of Financial Instruments
    As of December 31, 2009
    
    Level 1
    
    Level 2
    
    Level 3
    
    TotalCash equivalents
    
    
    4,335
    
    
    
    
    
    
    
    
    
    
    
    4,335Short-term investments
    
    
    1,318
    
    
    
    
    
    
    
    
    
    
    
    1,318Total
    
    
    5,653
    
    
    
    
    
    
    
    
    
    
    
    5,653
 As of December 31, 2010
    
    Level 1
    
    Level 2
    
    Level 3
    
    TotalCash equivalents
    
    
    81,680
    
    
    
    
    
    
    
    
    
    
    
    81,680Short-term investments
    
    
    7,142
    
    
    
    
    
    
    
    
    
    
    
    7,142Total
    
    
    88,822
    
    
    
    
    
    
    
    
    
    
    
    88,822
 F-11




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 (5) Cash and Cash Equivalents
  (6) Short-term Investments
  (7) Restricted Cash
  (8) Concentration of Credit Risks
    Year Ended December 31,Revenue
    
    2008
    
    2009
    
    2010Company A
    
    
    44
    %
    
    
    58
    %
    
    
    53
    %Company B
    
    
    34
    %
    
    
    19
    %
    
    
    12
    %Company C
    
    
    10
    %
    
    
    15
    %
    
    
    15
    %
 December 31,Accounts receivable
    
    2009
    
    2010Company A
    
    
    42
    %
    
    
    63
    %Company C
    
    
    47
    %
    
    
    19
    %
  (9) Allowance for Doubtful Accounts
  F-12




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
  (10) Inventories
  (11) Property and Equipment
  Equipment and office furniture
    
    3-5 yearsMotor vehicles
    
    5 yearsSoftware
    
    5 yearsLeasehold improvements
    
    Shorter of remaining lease term or estimated useful lives
  (12) Investments
   F-13




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 (13) Impairment of Long-lived Assets
  (14) Revenue Recognition
      (15) Deferred Revenue
 .
 F-14




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 (16) Government Subsidies
  (17) Research and Development Costs and Software Development Costs
   (18) Advertising costs
  F-15




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 (19) Operating Leases
  (20) Share-based Compensation
    (21) Income Taxes
    F-16




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 (22) Comprehensive Income
  (23) PRC Statutory Reserves
  (24) Dividends
  (25) Segment Reporting
  (26) Earnings Per Share
  (27) Foreign Currency Translation and Foreign Currency Risk
  F-17




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
    (28) Recently Issued Accounting Standards
    3. RESTRICTED CASH
  F-18




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 4. INVENTORIES
  December 31,2009
    
    
    2010Raw materials
    
    
    10,150
    
    
    
    15,567Work in progress
    
    
    110
    
    
    
    573Finished goods
    
    
    15,143
    
    
    
    19,35425,403
    
    
    
    35,494
    For the YearEnded December 31,2008
    
    
    2009
    
    
    2010Beginning of year
    
    
    
    
    
    
    575
    
    
    
    3,442Addition during the year
    
    
    575
    
    
    
    2,910
    
    
    
    3,120Transfer-in from accrual for loss on firm,
noncancelable, and unconditional purchase
commitments that have been recognized
previously
    
    
    
    
    
    
    
    
    
    
    1,536Write-off during the year
    
    
    
    
    
    
    (43
    )
    
    
    (3,184
    )End of year
    
    
    575
    
    
    
    3,442
    
    
    
    4,914
 5. PREPAID EXPENSES AND OTHER CURRENT ASSETS
  December 31,2009
    
    
    2010Prepaid license fees
    
    
    985
    
    
    
    1,353Rental deposits
    
    
    92
    
    
    
    93Prepayment for equipment
    
    
    
    
    
    
    18Prepayment for raw material purchase
    
    
    138
    
    
    
    Others
    
    
    115
    
    
    
    1161,330
    
    
    
    1,580
 F-19




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 6. PROPERTY AND EQUIPMENT
  December 31,2009
    
    
    2010Equipment and office furniture
    
    
    3,430
    
    
    
    4,072Motor vehicles
    
    
    54
    
    
    
    55Software
    
    
    241
    
    
    
    248Leasehold improvement
    
    
    213
    
    
    
    2253,938
    
    
    
    4,600Less: Accumulated depreciation and amortization
    
    
    (1,620
    )
    
    
    (2,399
    )2,318
    
    
    
    2,201
  F-20




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,
2008, 2009 AND 2010
 7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  December 31,2009
    
    
    2010Accrued payroll
    
    
    3,519
    
    
    
    4,289Taxes payable
    
    
    527
    
    
    
    2,940Government subsidies
    
    
    293
    
    
    
    1,463Unearned commission received from depository bank
    
    
    
    
    
    
    912Accrued professional services fees
    
    
    237
    
    
    
    669Accrued royalty
    
    
    507
    
    
    
    461Rebate to end customers and distributors
    
    
    
    
    
    
    522Accrued warranty
    
    
    192
    
    
    
    406Accrued license fee
    
    
    140
    
    
    
    250Accrued annual leave
    
    
    135
    
    
    
    195Advances from customers
    
    
    30
    
    
    
    126Accrued freight
    
    
    96
    
    
    
    124Accrual for loss on firm, noncancelable, and
unconditional purchase commitments
    
    
    1,559
    
    
    
    Others
    
    
    454
    
    
    
    5777,689
    
    
    
    12,934
 Royalty
  Unearned commission received from depository bank
   8. INCOME TAXES
 Cayman
  F-21




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,
2008, 2009 AND 2010
 BVI
  Hong Kong
  PRC
     F-22




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,  2008, 2009 AND 2010
 Reconciliation of the differences between statutory tax rate and the effective tax rate
  For the YearEnded December 31,2008
    
    
    2009
    
    
    2010Statutory income tax rate
    
    
    25
    %
    
    
    25
    %
    
    
    25
    %Tax differential from statutory rate
applicable to subsidiaries in the PRC
    
    
    (125
    )%
    
    
    (22
    )%
    
    
    (13
    )%Change in valuation allowance
    
    
    (148
    )%
    
    
    
    
    
    
    Non-deductible expenses
    
    
    23
    %
    
    
    
    
    
    
    Other
    
    
    1
    %
    
    
    
    
    
    
    Effective income tax rate
    
    
    (224
    )%
    
    
    3
    %
    
    
    12
    %
 Significant components of deferred tax assets
 December 31,2009
    
    
    2010Property and equipment basis difference
    
    
    23
    
    
    
    18Pre-operating expenses difference
    
    
    81
    
    
    
    Net operating loss carry-forwards
    
    
    168
    
    
    
    114Total deferred tax assets
    
    
    272
    
    
    
    132
    For the YearEnded December 31,2008
    
    
    2009
    
    
    2010Current income tax expense
    
    
    4
    
    
    
    191
    
    
    
    2,368Deferred income tax expense/(benefit)
before valuation allowance
    
    
    (176
    )
    
    
    186
    
    
    
    140Change in valuation allowance
    
    
    (282
    )
    
    
    
    
    
    
    (454
    )
    
    
    377
    
    
    
    2,508
  F-23




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,  2008, 2009 AND 2010
 Balances as of January 1, 2008
    
    
    222Exchange rate difference
    
    
    15Balance as of December 31, 2008
    
    
    237Exchange rate difference
    
    
    1Balance as of December 31, 2009
    
    
    238Exchange rate difference
    
    
    7Balance as of December 31, 2010
    
    
    245
   For the YearEnded December 31,2008
    
    
    2009
    
    
    2010The aggregated dollar effect
    
    
    186
    
    
    
    (201
    )
    
    
    (146
    )Per ordinary share effect  basic
    
    
    0.00
    
    
    
    (0.00
    )
    
    
    (0.00
    )Per ordinary share effect  diluted
    
    
    0.00
    
    
    
    (0.00
    )
    
    
    (0.00
    )
 F-24




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,  2008, 2009 AND 2010
 9. CONVERTIBLE REDEEMABLE PREFERRED SHARE
 Series A Shares
  (a)
    
    First closing (completed in March 2004): Issuance of 8,000,775 ordinary shares and 18,929,757
Series A Shares for proceeds of USD2,000;(b)
    
    Second closing upon the achievement of certain operational conditions (achieved and completed
in June 2004): Issuance of 28,394,635 Series A Shares for proceeds of USD3,000;(c)
    
    Third closing upon the achievement of certain operational conditions (achieved and completed
in March 2005): Issuance of 47,324,392 Series A Shares for proceeds of USD5,000; and a(d)
    
    Fourth closing at the option of the investor to purchase up to an additional 47,324,392
Series A Shares for the purchase price of USD0.1057 per share (proceeds of USD5,000 if fully
exercised). The exercisability of this warrant is contingent on the Company not raising at
least USD7,500 from outside equity financing at a minimum price of USD0.33 per share before
the expiration date. The expiration date was three years from the third closing, which came
out to March 22, 2008. As of March 2004, this fourth closing is treated as a warrant to
contingently purchase Series A Shares at a fixed price and had a fair value of USD427. This
option was subsequently cancelled in December 2008 in conjunction with Series B Shares
issuance described below.
  Series B Shares
   a)
    
    at the new round of equity financing with gross proceeds of at least USD10,000, provided that
such financing is before May 31, 2007. Convertible at a per share price based on the higher of
(1) USD25,000 valuation of the Company, or (2) 80% of the per share price of the shares price
issued under the new round of equity financing;
 b)
    
    if there is a change in control event prior to May 31, 2007, then the Promissory Note is
convertible into a new series of preference share at a per share price based on a USD25,000
valuation of the Company; or
 c)
    
    if there has not been a new round of equity financing or a change in control event as of May
31, 2007, then the Promissory Note is convertible into a new series of preference shares at a
per share price based on a USD25,000 valuation of the Company. The new series of preference
shares shall rank pari passu to the Series A Shares.
   F-25




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,
2008, 2009 AND 2010
 Series C Shares
    Cumulative Dividends
   December 31,2008
    
    
    2009
    
    
    2010Series A Shares
    
    
    3,336
    
    
    
    4,130
    
    
    
    Series B Shares
    
    
    908
    
    
    
    1,344
    
    
    
    Series C Shares
    
    
    1,533
    
    
    
    2,333
    
    
    
    Total
    
    
    5,777
    
    
    
    7,807
    
    
    
    
  Participating Rights
  Conversion Rights
  F-26




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,
2008, 2009 AND 2010
 Voting rights
  Liquidation preferences
  Redemption rights
  Accretion
  Modification
    F-27




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,  2008, 2009 AND 2010
 10. ORDINARY SHARES
        11. SHARE-BASED COMPENSATION
  a)
    
    On September 1, 2005, the Company granted options to certain employees of the Company to
purchase 11,453,431 ordinary shares at an exercise price of USD0.11. These awards generally
vest equally on each of 4 anniversary dates of employment date.
 b)
    
    On September 1, 2006, the Company granted options to certain employees and a consultant of
the Company to purchase 8,181,058 ordinary shares at an exercise price of USD0.0844. These
awards generally vest monthly for 60 months following the grant date.
 c)
    
    On September 1, 2007, the Company granted options to certain employees and a consultant of
the Company to purchase 10,100,937 ordinary shares at an exercise price of USD0.2727. These
awards generally vest monthly for 60 months following the grant date.
 d)
    
    On August 1, 2009, the Company granted options to certain employees of the Company to
purchase 670,000
 F-28




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,  2008, 2009 AND 2010
 ordinary shares at an exercise price of USD0.5. These awards vest monthly over two to five years
following the grant date.
           F-29




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,
2008, 2009 AND 2010
 Stock Options to Employees
  Weighted
    
    
    Number of vested
    
    
    Weighted Average
    
    
    AggregateNumber of
    
    
    Average
    
    
    and exercisable
    
    
    Remaining Contractual
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    options
    
    
    Life (Years)
    
    
    ValueOutstanding at
December 31, 2007
    
    
    29,581,572
    
    
    
    0.1585
    
    
    
    
    
    
    
    8.626
    
    
    
    Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (232,562
    )
    
    
    0.2157Outstanding at
December 31, 2008
    
    
    29,349,010
    
    
    
    0.1580
    
    
    
    18,118,646
    
    
    
    7.620
    
    
    
    5,059,126Granted
    
    
    670,000
    
    
    
    0.5000Exercised
    
    
    (12,899,062
    )
    
    
    0.1392Forfeited
    
    
    (81,077
    )
    
    
    0.2278Outstanding at
December 31, 2009
    
    
    17,038,871
    
    
    
    0.1854
    
    
    
    9,013,027
    
    
    
    6.945
    
    
    
    33,527,957Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (54,000
    )
    
    
    0.5000Outstanding at
December 31, 2010
    
    
    16,984,871
    
    
    
    0.1844
    
    
    
    12,544,204
    
    
    
    5.936
    
    
    
    38,226,726
     F-30




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,  2008, 2009 AND 2010
 2005 grants *
    
    2006 grants *
    
    2007 grants *
    
    2009 grantsRisk-free rate of return
    
    
    3.26%
    
    
    
    4.22%
    
    
    
    4.22%
    
    
    
    4.02%Expected term (years)
    
    
    2.92~4.42
    
    
    
    4.69
    
    
    
    5.69
    
    
    
    6.27Expected volatility
    
    
    51.82%~53.39%
    
    
    
    53.77%
    
    
    
    58.42%
    
    
    
    53.32%Dividend yield
    
    Nil
    
    Nil
    
    Nil
    
    Nil
 
 *
    
    These assumptions are used to measure share-based compensation related to modification of
performance condition.  RSUs to Employees
  Weighted
    
    
    Number of vested
    
    
    Weighted Average
    
    
    AggregateNumber of
    
    
    Average
    
    
    and exercisable
    
    
    Remaining Contractual
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    RSUs
    
    
    Life (Years)
    
    
    ValueOutstanding at
December 31, 2008
    
    
    
    
    
    
    Granted
    
    
    7,260,134
    
    
    
    0.01Forfeited
    
    
    (22,920
    )
    
    
    0.01Outstanding at
December 31, 2009
    
    
    7,237,214
    
    
    
    0.01
    
    
    
    
    
    
    
    9.58
    
    
    
    15,510,073Granted
    
    
    108,107
    
    
    
    0.01Cancelled
    
    
    (1,476,218
    )
    
    
    0.01Vested
    
    
    (1,762,899
    )
    
    
    0.01Forfeited
    
    
    (52,701
    )
    
    
    0.01Outstanding at
December 31, 2010
    
    
    4,053,503
    
    
    
    0.01
    
    
    
    1,762,899
    
    
    
    8.58
    
    
    
    9,829,745
    RSs to Employees
  Weighted
    
    
    Number of vested
    
    
    Weighted Average
    
    
    AggregateNumber of
    
    
    Average
    
    
    and exercisable
    
    
    Remaining Contractual
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    RSs
    
    
    Life (Years)
    
    
    ValueOutstanding at
December 31, 2009
    
    
    
    
    
    
    Granted
    
    
    1,356,547
    
    
    
    0.01Cancelled
    
    
    (562,334
    )
    
    
    0.01Vested
    
    
    (225,027
    )
    
    
    0.01Outstanding at
December 31, 2010
    
    
    569,186
    
    
    
    0.01
    
    
    
    
    
    
    
    8.58
    
    
    
    1,380,276
 F-31




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,  2008, 2009 AND 2010
     Recourse Loans
   F-32




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,  2008, 2009 AND 2010
 12. EMPLOYEE BENEFITS
 (i) Staff welfare benefit
  (ii) Paid leave carried forward
  13. EARNINGS PER SHARE
  For the YearEnded December 31,2008
    
    
    2009
    
    
    2010Numerator:Net income
for the year
    
    
    657
    
    
    
    11,306
    
    
    
    19,132Accretion/cumulative dividends
for Preferred Shares
    
    
    (2,179
    )
    
    
    (2,030
    )
    
    
    (1,741
    )Amount allocated to
participating preferred
shareholders
    
    
    
    
    
    
    (7,449
    )
    
    
    (12,112
    )Numerator for basic and diluted
earning/(loss) per share
    
    
    (1,522
    )
    
    
    1,827
    
    
    
    5,279Denominator:Weighted average ordinary
shares outstanding for basic
calculation
    
    
    37,434,517
    
    
    
    38,671,413
    
    
    
    82,221,102Dilutive effect of share-based
awards
    
    
    
    
    
    
    20,229,603
    
    
    
    15,137,667Denominator for diluted
calculation
    
    
    37,434,517
    
    
    
    58,901,016
    
    
    
    97,358,769Basic earnings/(loss) per
ordinary share
    
    
    (0.04
    )
    
    
    0.05
    
    
    
    0.06Diluted earnings/(loss) per
ordinary share
    
    
    (0.04
    )
    
    
    0.03
    
    
    
    0.05
 F-33




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,  2008, 2009 AND 2010
  For the YearEnded December 31,2008
    
    
    2009
    
    
    2010Preferred shares
    
    
    157,629,642
    
    
    
    157,629,642
    
    
    
    134,860,916Share-based awards
    
    
    7,017,408
    
    
    
    
    
    
    
    
 14. RELATED PARTY TRANSACTIONS
  For the YearEnded December 31,2008
    
    
    2009
    
    
    2010Sales of products to a related
party
    
    
    275
    
    
    
    316
    
    
    
    1,143Royalty fee charged to a related party
    
    
    
    
    
    
    
    
    
    
    64Purchase of materials on behalf of
a related party
    
    
    
    
    
    
    373
    
    
    
    2,274Fees charged for material purchases to a
related party
    
    
    
    
    
    
    18
    
    
    
    124Purchase of IP license from
another related party
    
    
    
    
    
    
    200
    
    
    
    
  December 31,2009
    
    
    2010Due from a related party
    
    
    1
    
    
    
    1,273
 15. COMMITMENTS AND CONTINGENCIES
 Intellectual Property Indemnification
  F-34




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,
2008, 2009 AND 2010
 Purchase Commitments
  Legal Matters
    Operating Lease Commitments
  December 31, 2009
    
    
    December 31, 20102010
    
    
    381
    
    
    
    2011
    
    
    116
    
    
    
    4452012
    
    
    1
    
    
    
    212498
    
    
    
    657
  Capital Commitments
  F-35




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##### Table of Contents



RDA MICROELECTRONICS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,
2008, 2009 AND 2010
 Other Commitments
  December 31, 2009
    
    
    December 31,20102010
    
    
    1,570
    
    
    
    2011
    
    
    1,110
    
    
    
    2,2802012
    
    
    
    
    
    
    9252013
    
    
    
    
    
    
    3752,680
    
    
    
    3,580
  F-36