Net income attributable to Cogo Group, Inc. for the second quarter of 2010 was $4.0 million, up 58.2% from $2.5 million in the same period last year, with Non-GAAP net income (excluding share-based compensation expense, acquisition-related costs including amortization of intangible assets and related deferred taxation) attributable to Cogo Group, Inc. up 28.1% on the same period last year. Earnings per share (“EPS”) Diluted attributable to Cogo Group, Inc. on a U.S. GAAP basis was $0.11, and $0.19 on a Non-GAAP basis. Non-GAAP Diluted EPS was up 26.7% from the second quarter of 2009.

Key Financial Indicators
(all numbers in USD thousands, except share data)
							
							Q2 2010(1)	Q2 2009(1)
							(unaudited)	(unaudited)	Percent Change
Net Revenue						$90,980  		$73,589  		23.6%
Cost of Sales 						$78,110 		$63,102 		23.8%
Gross Profit						$12,870 		$10,487 		22.7%
Operating Expenses						$8,667 		$8,178 		6.0%
Net Income attributable to Cogo Group, Inc. 			$4,005		$2,532		58.2%
EPS Diluted attributable to Cogo Group, Inc.			$0.11 		$0.07 		57.1%
Non-GAAP EPS Diluted attributable to Cogo Group, Inc.		$0.19 		$0.15  		26.7%

(1)	The US dollar amounts are calculated based on a conversion rate of US $1 to 
	RMB 6.7815 as of June 30, 2010 and US $1 to RMB 6.8302 as of June 30, 2009.
(2)	Included in the Q2 2010 net income attributable to Cogo Group, Inc. was $2.6 
	million of share-based compensation expense recognized in accordance with 
	Accounting Standards Codification (“ASC”) 718, Compensation-Stock Compensation 
	and $0.7 million of acquisition related costs, net, such as amortization and 
	impairment of intangible assets and related deferred taxation. Non-GAAP net 
	income attributable to Cogo Group, Inc., excluding the effects of share-based 
	compensation expense and acquisition related costs, was $7.3 million.

Financial Results
Revenue for the second quarter was $91.0 million, a 23.6% increase on the $73.6 million reported for the same period in 2009. The revenue breakdown was as follows:

Cogo’s cost of sales, which includes the aggregate purchase of components from suppliers and the direct cost of services, was $78.1 million compared to $63.1 million in the second quarter of 2009, representing an increase of 23.8% year-over-year. Gross profit for the second quarter was $12.9 million, up 22.7% from $10.5 million during the second quarter of last year. Gross margin for second quarter was 14.1%, compared to 14.3% reported for the second quarter of 2009.

Operating expenses, including selling, general and administrative, and research and development expenses, totaled $8.7 million, up 6.0%, compared to $8.2 million reported for the second quarter of last year.

Income from operations was $4.2 million, an increase of 82.0% from $2.3 million reported in the same period of 2009. Operating margin for the second quarter was 4.6% compared to 3.1% for the second quarter of 2009. Excluding the effects of share-based compensation and acquisition-related costs, operating margin would have been 8.4% for the second quarter of 2010, compared to 7.7% for the same period in 2009.

The effective tax rate for the second quarter of 2010 was 10.0%, compared to 10.4% for the same period in 2009. Included in the income tax expense for the quarter ended June 30, 2010 was a deferred income tax benefit of $0.1 million as a result of the amortization of intangible assets of $0.8 million. Non-controlling interests’ share of income was $0.02 million for the second quarter of 2010 down from $0.05 million in the corresponding period of 2009.

Net income attributable to Cogo Group, Inc. for the second quarter of 2010 was $4.0 million or EPS Diluted attributable to Cogo Group, Inc. of $0.11 on a U.S. GAAP basis, compared to net income of $2.5 million, or EPS Diluted attributable to Cogo Group, Inc. of $0.07, in the second quarter of 2009. Included in the second quarter of 2010 was $2.6 million attributable to share-based compensation expense and $0.7 million attributable to acquisition related costs, including amortization of intangible assets and related deferred taxation. Excluding stock-based compensation expenses and acquisition related costs, including amortization of intangible assets and related deferred taxation, the net income would have been $7.3 million or $0.19 Non-GAAP EPS Diluted attributable to Cogo Group, Inc. for the second quarter of 2010. The weighted average number of shares used in the calculation of diluted EPS was 38.0 million compared to 37.7 million in the second quarter of 2009.

For the six month period ended June 30, 2010, the Company reported revenue of $172.5 million, an increase of 26.0% on the $136.9 million reported during the first half of 2009. Gross profit was $24.4 million, an increase of 25.2% from $19.5 million reported during the first half of 2009. Gross margin was 14.1% of sales, from a gross margin of 14.2% for the same period last year. Net operating expenses were $16.6 million, an increase of 5.1% as compared to $15.8 million for the same period last year. Income from operations was $7.8 million, an increase of 109.8% from the $3.7 million reported during the prior year period. The Non-GAAP operating margin, excluding share-based compensation expense and amortization of intangible assets, was 8.3%, up 0.8% on the same period last year, as a result of effective control on operating expenses. The Company had an effective tax rate of 10.0% compared to 10.7% during the prior year period. Non-controlling interests’ share of income was $0.06 million as compared to $0.08 million during the first half of 2009. Net income attributable to Cogo Group, Inc. for the half-year period was up 83.7% at $7.5 million, or $0.20 per fully diluted share compared to $4.1 million or $0.11 per fully diluted share for the same period last year.

Balance Sheet
The Company completed the quarter with cash of $129.4 million, up $31.6 million on the $97.8 million reported at the end of 2009. Pledged bank deposits were $17.0 million as of June 30, 2010 and December 31, 2009. Total bank borrowings as of June 30, 2010 were $69.9 million compared with $17.5 million as of December 31, 2009. Inventories increased from $21.4 million on December 31, 2009 to $35.3 million as of June 30, 2010 as the Company expects strong demand in the second half of 2010. Accounts receivable increased slightly from $90.5 million on December 31, 2009 to $91.7 million as of June 30, 2010, and was collected on an average of 91 days in the second quarter. Inventory turnover in the second quarter of 2010 was 41 days. Accounts payable decreased from $11.9 million at the end of 2009 to $10.6 million as of June 30, 2010. Cogo Group, Inc. equity was $233.8 million as of June 30, 2010, increased from $226.1 million as of December 31, 2009. Operating Cash flow was negative $7.3 million in the second quarter of 2010, due mostly to the increase in inventories in anticipation of increased sales, particularly in the Industrial and Consumer segments.

Business Outlook
Management’s guidance for the third quarter of 2010 is $94-96 million in revenue and an estimated Non-GAAP EPS Diluted of $0.19-0.20. The Company continues to target longer term gross margins of 15% and operating margins of 10%.

Jeffrey Kang, CEO and Chairman of Cogo, remarked, “I am very pleased by the continued strong execution of the Cogo team in the second quarter of 2010, and we remain very optimistic about the remainder of the year. Cogo’s strong growth in the second quarter demonstrates our return to a sustainable high growth mode. We are seeing promising new opportunities in the automotive, HDTV, smart meters, smart grid and 3G handset areas. We are using our balance sheet to help drive revenue growth and opportunistically repurchase stock, and we see new opportunities across all of our Industrial verticals. We also continue to anticipate growth in our Small and Medium Enterprise customer base. The 3G handset market in China will remain strong, and this will bring an increase in dollar content per device.”

“While we acknowledge that China’s GDP growth may slow down in the second half of the year, from an arguably overheated situation in the first half of 2010, we are confident that the government’s monetary and fiscal policies will continue to drive very strong economic growth, and at the same time attempt to stem concerns on inflation. We also expect that technology spending will not slow down. All in all, we consider China to be a very favorable place to do business and we see multiple opportunities for new revenue growth in the second half of 2010 and into 2011.” Mr. Kang said.

Cogo 2010 Q2 Earnings Results Conference Call
Date/ Time:
August 5, 2010 (Thursday) @ 4:30 PM (ET)

Conference Call:
US/ Canada Toll-Free: 1-877-941-4774
International: +1-480-629-9760

Webcast/ Audio Recording:
http://viavid.net/dce.aspx?sid=00007765

Replay (from 08/05/2010 at 7:30 pm to 08/12/2010 at 11:59 pm ET):
US/ Canada Toll-Free: 1-877-870-5176 (Passcode: 4324860)
International: +1-858-384-5517 (Passcode: 4324860)

About Cogo Group, Inc.:
Cogo Group, Inc. (NASDAQ: COGO) is a leading provider of customized embedded solutions for the technology manufacturing sector in China. The Company believes it acts as a proxy to China's technology industry as it works with virtually all the major ODMs and OEMs in China. Cogo leverages these relationships and combines their IP to create designs that Cogo then sells to electronic manufacturers. These designs allow manufacturers to reduce their time to market for new products and ultimately increase sales. Cogo focuses on the telecommunications equipment, digital media and industrial applications end-markets for their customized design modules while also offering business and engineering services to their large telecommunications equipment vendor customers. Over the last fifteen years, Cogo has grown its customer list to include nearly 1,500 manufacturers across the telecommunications equipment, digital media and industrial applications markets, covering both multinational Chinese subsidiaries and Chinese domestic companies.

Safe Harbor Statement:

This press release includes certain statements that are not descriptions of historical facts, but are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. These forward-looking statements may include statements about our proposed discussions related to our business or growth strategy such as growth in digital media, telecommunications and industrial applications businesses, as well as our potential acquisitions which are subject to change. Such information is based upon expectations of our management that were reasonable when made, but may prove to be incorrect. All such assumptions are inherently subject to uncertainties and contingencies beyond our control and upon assumptions with respect to future business decisions, which are subject to change. For further descriptions of other risks and uncertainties, see our most recent Annual Report filed with the Securities and Exchange Commission (SEC) on Form 10-K, and our subsequent SEC filings. Copies of filings made with the SEC are available through the SEC's electronic data gathering analysis retrieval system (EDGAR) at www.sec.gov.

About Non-GAAP Financial Measures:
To supplement Cogo Group, Inc.’s consolidated financial results presented in accordance with GAAP, Cogo uses the following measures defined as Non-GAAP financial measures by the SEC: 1) Non-GAAP net income attributable to Cogo Group, Inc. which is net income attributable to Cogo Group, Inc. excluding share-based compensation expenses and acquisition related costs, net, such as amortization and impairment of intangible assets, related deferred taxation, extraordinary gain on bargain purchase and impairment of goodwill and 2) Non-GAAP basic and diluted EPS attributable to Cogo Group, Inc., which is basic and diluted EPS excluding share-based compensation expenses and acquisition related costs such as amortization and impairment of intangible assets, related deferred taxation, extraordinary gain on bargain purchase and impairment of goodwill. The presentation of these Non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these Non-GAAP financial measures, please see the table captioned “Unaudited Reconciliations of Non-GAAP measures to the most comparable GAAP measures” set forth at the end of this release.

Cogo Group, Inc. believes that these Non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based expenses and acquisition related costs such as amortization and impairment of intangible assets that may not be indicative of its operating performance from a cash perspective. Cogo Group, Inc. believes that both management and investors benefit from referring to these Non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These Non-GAAP financial measures also facilitate management's internal comparisons to Cogo Group, Inc.'s historical performance and liquidity. Cogo Group, Inc. computes its Non-GAAP financial measures using the same consistent method from quarter to quarter. Cogo Group, Inc. believes these Non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using Non-GAAP net income, Non-GAAP basic and diluted earnings per share, Non-GAAP income from operation and Non-GAAP operating margin is that these Non-GAAP measures exclude share-based compensation charge and acquisition related costs such as amortization and impairment of intangible assets, related deferred taxation, extraordinary gain on bargain purchase and impairment of goodwill that have been and will continue to be for the foreseeable future a recurring expense in our business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each Non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to Non-GAAP financial measures.

                             Table Attached

  
COGO GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------------------------------------
						     June 30, 2010			December 31, 2009
						--------------------------		------------------
						USD’000		RMB’000		RMB’000
						--------		--------		--------
Assets 			
Current assets:
Cash						129,433		887,751		667,320
Pledged bank deposits				17,000		115,286		116,040
Accounts receivable, net				91,688		621,779		617,613
Bills receivable					6,524		44,241		17,592
Inventories					35,293		239,339		146,132
Income taxes receivable				181		1,229		1,263
Prepaid expenses and other receivables		4,168		28,263		28,083
						--------		--------		--------
Total current assets				284,287		1,927,888		1,594,043
Property and equipment, net				2,313		15,683		14,406
Goodwill and intangible assets, less 
accumulated amortization and impairment 
losses, RMB111,736 thousand (USD16,477 thousand) 
in 2010 and RMB100,834 thousand in 2009		44,497		301,760		312,662
Other assets					174		1,178		416
						--------		--------		--------
Total Assets					331,271		2,246,509		1,921,527
						==========	==========	==========
Liabilities and equity			
Current liabilities:			
Accounts payable					10,569		71,677		81,140
Bank borrowings					69,877		473,866		119,402
Income taxes payable				1,622		11,001		11,847
Accrued expenses and other liabilities		11,537		78,240		138,008
						--------		--------		--------
Total current liabilities				93,605		634,784		350,397
Deferred tax liabilities				2,552		17,309		19,108
Total liabilities					96,157		652,093		369,505
Equity			
Common stock: 
	Par value: USD 0.01	
    	Authorized: 200,000,000 Shares	
    	Issued: 40,552,178 shares	
    	Outstanding: 35,385,018 shares in 2010	
                     35,770,025 shares in 2009	485		3,290		3,258
Additional paid in capital				185,091		1,255,197		1,221,538
Retained earnings					96,643		655,383		604,464
Accumulated other comprehensive loss			(16,155)		(109,555)		(107,384)
						--------		--------		--------
						266,064		1,804,315		1,721,876
Less cost of common stock in treasury, 
5,167,160 shares in 2010 and 4,309,311 
shares in 2009					(32,236)		(218,618)		(178,309)
						--------		--------		--------
Total Cogo Group, Inc. equity			233,828		1,585,697		1,543,567
Noncontrolling interest				1,286		8,719		8,455
						--------		--------		--------
Total equity					235,114		1,594,416		1,552,022
						--------		--------		--------
Total liabilities and equity			331,271		2,246,509		1,921,527
						========		========		========



COGO GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME 
------------------------------------------------------------------------------------------
							Three Months ended June 30,
						------------------------------------------
						  2010		  2010		  2009
						--------		--------		--------
						USD’000		RMB’000		RMB’000
Net Revenue			
	Product sales				89,727		608,485		495,366
	Services revenue				1,253		8,496		7,263
						--------		--------		--------
						90,980		616,981		502,629
Cost of sales			
	Cost of goods sold				(77,095)		(522,818)		(425,147)
	Cost of services				(1,015)		(6,882)		(5,856)
						(78,110)		(529,700)		(431,003)
						--------		--------		--------
Gross profit					12,870		87,281		71,626
Selling, general and administrative expenses		(5,868)		(39,796)		(40,058)
Research and development expenses			(2,800)		(18,991)		(16,076)
Other operating income				1		9		286
						--------		--------		--------
Income from operations				4,203		28,503		15,778
Interest expense					(246)		(1,666)		(478)
Interest income					515		3,493		4,369
						--------		--------		--------
Earnings before income taxes			4,472		30,330		19,669
Income tax expense					(448)		(3,040)		(2,045)
						--------		--------		--------
Net income					4,024		27,290		17,624
Less net income attributable to 
noncontrolling interest				(19)		(132)		(327)
						--------		--------		--------
			
Net income attributable to Cogo Group, Inc.		4,005		27,158		17,297
						==========	==========	==========
			
						USD		RMB		RMB
Earnings per share attributable to Cogo Group, Inc.			
	Basic					0.11		0.73		0.48
						==========	==========	==========
	Diluted					0.11		0.71		0.46
						==========	==========	==========
			
Weighted average number of common shares outstanding			
Basic								37,133,304	36,330,036
								==========	==========
Diluted								38,045,705	37,698,805
								==========	==========


COGO GROUP, INC. and SUBSIDIARIES
UNAUDITED RECONCILIATION OF NON-GAAP MEASURES TO THE MOST COMPARABLE GAAP MEASURES
------------------------------------------------------------------------------------------

							      Three Months ended June 30,
							     -----------------------------
						  		  2010		  2009
								--------		--------
								USD'000		USD'000

Net Income				
	GAAP net income attributable to Cogo Group, Inc.		4,005		2,532
	Share-based compensation expense				2,600		2,183
	Acquisition related costs- amortization of intangible 
	assets and related deferred taxation				672		966
								--------		--------
	Non-GAAP net income attributable to Cogo Group, Inc.		7,277		5,681
				
Income from operation				
	GAAP income from operations					4,203		2,309
	Share-based compensation expense				2,600		2,183
	Acquisition related costs- amortization of intangible 
	assets							805		1,146
								--------		--------
	Non-GAAP income from operation				7,608		5,638
								========		========
					
Operating Margin				
	GAAP operating margin					4.6%		3.1%
	Non-GAAP operating margin					8.4%		7.7%
					
Earnings per share							$		$
	GAAP net income attributable to Cogo Group, Inc. per 
	common share- Diluted					0.11		0.07
								========		========
	Non-GAAP net income attributable to Cogo Group, Inc. 
	per common share- Diluted					0.19		0.15
								========		========
					
					
Weighted average number of common shares outstanding				
	Basic							37,133,304	36,330,036
								==========	==========
	Diluted							38,045,705	37,698,805
								==========	==========