SRS Labs (NASDAQ: SRSL) and Skyworth Group, based in China, have formed a partnership to develop new audio technology in a new jointly staffed application laboratory located in the Shenzhen. The new application center gives the Skyworth Group access to SRS Labs' Hong Kong and Shenzhen-based engineering staff as well as SRS Labs' portfolio of patented audio, voice and surround sound technologies, which has been licensed by more than 200 manufacturers worldwide and included in over 500 million hardware and software products to date.

Skyworth will provide the facility and staff for the audio laboratory, as well as provide valuable customer feedback and industry perspective from the explosive China consumer electronics market. The two companies will also work together to promote SRS Labs' Circle Surround(R) ("CS") technology as the standard surround encode/decode format for China.

Skyworth has been a licensee of SRS Labs since 1999 when Skyworth began implementing a variety of SRS audio enhancement technologies. Over this period, Skyworth recognized great success with TVs that included the SRS technology. Their market share for televisions increased dramatically in China and they have become known as a leading innovator of television products. By 2004, Skyworth had become China's most profitable and fastest growing maker of televisions.

"Skyworth has established itself as China's TV market leader in terms of innovation, and this momentum is carrying it into the global market," said Thomas CK Yuen, chairman and CEO of SRS Labs, Inc. "We are very pleased to form such a close technology partnership with one of China's most dynamic consumer electronics brands. The establishment of this R&D partnership is a first for SRS Labs — not just in China, but worldwide — in terms of direct

involvement in consumer product development. I believe it will provide us with valuable market insight that can be fed back into our own R&D efforts, creating a point-of-reference for the development of next generation audio

technologies."

"The sophistication of China's consumers is catching up with their international counterparts," said Huang Hongsheng, chairman of the Skyworth Group. "That means we need to offer more value for the money and we need to deliver home entertainment systems with innovative features and superior performance. Skyworth TVs, with high-end audio capabilities, have been very well received in the market, so we see great value in taking our relationship with SRS Labs to a new level through this new research initiative. This will position us well to respond to new HDTV opportunities and apply our increasing audio expertise to other segments of the consumer electronics market."

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