SpatiaLight Announces Production Progress as Output Accelerates

SpatiaLight Announces Production Progress as Output Accelerates

NOVATO, Calif., Sept. 5 /PRNewswire-FirstCall/ -- SpatiaLight, Inc. (NASDAQ:HDTV), a leading developer and manufacturer of ultra high-resolution Liquid Crystal on Silicon (LCoS) microdisplays for the high definition television market, announced today that in August, the Company began shipping LCoS imagers manufactured under its standardized process and employing sample testing methods.

On July 31st, 2006, SpatiaLight announced that it moved to sample testing of its six million pixel 1080p imager sets from 100% testing of certain product characteristics. These tests created a significant manufacturing bottleneck and were performed to validate the consistency and reliability of demanding customer expectations.

In August, after the first week, which was a national Korean holiday, considerable time was spent on redeployment and retraining of more than 50% of the 102 employees at the Company's state-of-the-art manufacturing facility in South Korea, SpatiaLight Korea, Inc. These employees were involved in the laborious 100% testing process and have now been retrained for production processes and have been deployed to continue ramping production volumes. In August, the Company shipped 458 LCoS imager chipsets and expects month over month production volumes to grow dramatically throughout the year and into the First Quarter. The Company expects to ship in excess of 800 LCoS imager chipsets in the month of September and to continue growth in production numbers at a similar percentage rate throughout the end of the year as it fulfills its initial purchase order from LG Electronics.

The August production lots include 30 LCoS imager sets that will be specifically used by LG to qualify its 62" LCoS High Definition television model in anticipation of full production and product introduction. Similarly, the September production lots have 30 imager sets earmarked for LG to qualify its anticipated 56" LCoS television model. Both the 62" and 56" models are expected to capture the bulk of the volume in the marketplace.

David Hakala, SpatiaLight's Chief Operating Officer, remarked, "We are pleased that we have completed the transition from 100% testing to sample testing. The inefficient nature of manufacturing in the 100% testing environment caused a tremendous bottleneck in our efforts. Although it was necessary, we are very happy that we have achieved our process related goals and now proceeding with our standardized proprietary manufacturing process."

"We are on plan to reach our delivery targets with consistency and the highest quality throughout the year. LG recently informed us that based on our production schedule; they intend to move into the U.S. market with LCoS televisions in the 4th quarter of 2006. It will be a significant milestone for the Company to finally have televisions built around our LCoS imagers in U.S. stores," Hakala continued.

About SpatiaLight

SpatiaLight, Inc., founded in 1989, manufactures high-resolution LCoS microdisplays for use in high-definition televisions and other display applications. The company manufactures its products at its production facility in South Korea. SpatiaLight is committed to developing microdisplay technologies that will be the standard for the next generation of high definition televisions and to providing OEMs with the most cost effective, high-resolution microdisplays in the industry.

For more information about SpatiaLight, please visit the Company's website at: http://www.spatialight.com/.

Safe Harbor Statement

This news release includes forward-looking statements that reflect SpatiaLight's current expectations about its future results, performance, prospects and opportunities. SpatiaLight has tried to identify these forward- looking statements by using words and phrases such as "may," "will," "expects," "anticipates," "believes," "intends," "estimates," "plan," "should," "typical," "preliminary," "we are confident" or similar expressions. These forward-looking statements are based on information currently available to SpatiaLight and are subject to a number of risks, uncertainties and other factors that could cause SpatiaLight's actual results, performance, prospects or opportunities in the remainder of 2006 and beyond to differ materially from those expressed in, or implied by, these forward-looking statements. These risks and uncertainties are outlined in the Company's filings with the U.S. Securities and Exchange Commission, including its most recent reports on Form 10-Q and 10-K.

Source: SpatiaLight, Inc.

CONTACT: SpatiaLight, Inc., +1-415-883-1693, ext. 132, or
ir@spatialight.com

Web site: http://www.spatialight.com/

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