As filed with the Securities and Exchange Commission on March 7, 2011

Registration No. 333-169667

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

AMENDMENT NO. 3

TO

FORM F-3

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

 

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED

(Exact name of Registrant as specified in its charter)

N.A.
(Translation of Registrant’s Name into English)

Cayman Islands (State or other jurisdiction of incorporation or organization)		7389 (Primary Standard Industrial Classification Code Number)		N.A. (I.R.S. Employer Identification No.)

Building 1, No. 13, Yong Chang North Road
Beijing Economic-Technological Development Area (Yi Zhuang)
Beijing 100176, People’s Republic of China
+86 10 5822-8288
(Address and telephone number of Registrant’s principal executive offices)

Law Debenture Corporate Services Inc.
400 Madison Avenue, 4th Floor
New York, New York 10017
(212) 750-6474
(Name, address and telephone number of agent for service)

Copy of all communications, including communications sent to the agent for service, to:

Yuping Ouyang

No.10 A, Tower D2, IT Park
Electronic Town
Jiu Xian Qiao North Road
Chao Yang District
Beijing 100015, People’s Republic of China
+86 10 5822-8420

Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. o

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. þ

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a registration statement pursuant to General Instruction I.C. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. o

If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.C. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. o

CALCULATION OF REGISTRATION FEE

Proposed maximum

Proposed maximum

Title of each class of

Amount to be

offering price per

aggregate offering

Amount of

securities to be registered

registered(1) (2)

ordinary share(3)

price(3)(4)

registration fee

Ordinary shares, par value $0.00002 per share

78,814,628

$

0.30

23,355,401.40

$

2,711.56

     The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

The information in this prospectus is not complete and may be changed. The selling shareholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission, or SEC, is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED MARCH 7, 2011

PROSPECTUS

CHINA TECHFAITH WIRELESS

COMMUNICATION TECHNOLOGY LIMITED

5,254,309 American Depositary Shares

Representing

78,814,628 Ordinary Shares

     This prospectus relates to the proposed sale from time to time by IDG-Accel China Growth Fund II L.P. and IDG-Accel China Investors II L.P., the Selling Shareholders, or their pledgees, donees, transferees or other successors in interest, of up to 78,814,628 of our ordinary shares, par value $0.00002 per share, represented by 5,254,309 ADSs. Each ADS represents 15 ordinary shares of China Techfaith Wireless Communication Technology Limited.

     The Selling Shareholders acquired the ordinary shares, which are represented by the ADSs that are being registered hereby, in a private transaction that was exempt from the registration requirements of the Securities Act of 1933, as amended, on June 9, 2009. See “Offer Statistics and Expected Timetable.”

     Our ADSs are currently listed on the NASDAQ Global Market, or NASDAQ, under the symbol “CNTF.” On March 4, 2011, the last reported sale price of our ADSs on the NASDAQ was $4.45 per ADS. Our principal executive offices are located at Building 1, No. 13, Yong Chang North Road, Beijing Economic-Technological Development Area (Yi Zhuang), Beijing 100176, People’s Republic of China. Our telephone number at this address is +86 10 5822-8288.

     The Selling Shareholders may offer and sell the securities from time to time at fixed prices, at market prices or at negotiated prices, to or through underwriters, to other purchasers, through agents, or through a combination of these methods. The names of any underwriters may be stated in the applicable prospectus supplement, if any such prospectus supplement is prepared. See “Plan of Distribution” elsewhere in this prospectus for a more complete description of the ways in which the securities may be sold by the Selling Shareholders.

     We will not receive any proceeds from any sale of such ordinary shares by either of the Selling Shareholders. We will pay all reasonable expenses to be incurred in connection with this offering, other than any broker’s commission, underwriter’s discount, concession or commission, if any, in connection with an offering of the ADSs representing these ordinary shares.

     Investing in our ADSs involves a high degree of risk. See “Risk Factors” on page 5.

     Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is March 7, 2011.

TABLE OF CONTENTS

		Page
ABOUT THIS PROSPECTUS			4
RISK FACTORS			5
FORWARD-LOOKING STATEMENTS			6
OFFER STATISTICS AND EXPECTED TIME TABLE			7
OUR COMPANY			8
SELLING SHAREHOLDERS			9
CAPITALIZATION AND INDEBTEDNESS			10
REASONS FOR THE OFFER AND USE OF PROCEEDS			11
PLAN OF DISTRIBUTION			12
EXPENSES			15
DESCRIPTION OF SHARE CAPITAL			16
DESCRIPTION OF AMERICAN DEPOSITARY SHARES			20
PRICE RANGE OF OUR ADS			21
MATERIAL CHANGES			22
RECENT DEVELOPMENTS			23
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			25
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE			32
EXCHANGE RATE INFORMATION			33
EXPERTS			34
ENFORCEABILITY OF CIVIL LIABILITIES			35
DISCLOSURE OF SEC POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES			36
WHERE YOU CAN FIND MORE INFORMATION			37
INDEX TO FINANCIAL STATEMENTS		F-1
INFORMATION NOT REQUIRED IN PROSPECTUS		II-1
INDEX TO EXHIBITS		II-6
EX-5.1
EX-23.1

ABOUT THIS PROSPECTUS

     In this prospectus, unless otherwise indicated or unless the context otherwise requires, “we,” “us,” “our company,” “our” and “Techfaith” refer to China Techfaith Wireless Communication Technology Limited, its subsidiaries and consolidated variable interest entities and their subsidiaries. All references to “shares” or “ordinary shares” refer to our ordinary shares. All references to ADSs refer to our American Depositary Shares, each of which represents 15 ordinary shares. All references to and statements regarding China, or the People’s Republic of China, or the PRC, in this prospectus do not apply to Hong Kong, Macau or Taiwan. All references to “RMB” or “Renminbi” are to the legal currency of China and all references to “$,” “dollars,” “US$” or “U.S. dollars” are to the legal currency of the United States.

     This prospectus is part of a registration statement that we filed with the SEC, utilizing a “shelf” registration process for the delayed offering and sale of securities pursuant to Rule 415 under the Securities Act of 1933, as amended, or the Securities Act. Under this shelf registration process, the Selling Shareholders may, from time to time, sell the securities described in this prospectus in one or more offerings. This prospectus provides you with a general description of the securities being offered by the Selling Shareholders. This prospectus and any accompanying prospectus supplement do not contain all of the information included in the registration statement. We have omitted parts of the registration statement in accordance with the rules and regulations of the SEC. Statements contained in this prospectus and any accompanying prospectus supplements about the provisions or contents of any agreement or other documents are not necessarily complete. If the SEC rules and regulations require that an agreement or other document be filed as an exhibit to the registration statement, please see that agreement or document for a complete description of these matters. This prospectus may be supplemented by a prospectus supplement that may add, update or change information contained or incorporated by reference in this prospectus. You should read this prospectus and any prospectus supplement together with the additional information described under the heading “Where You Can Find More Information About Us” and “Incorporation of Documents by Reference.”

     We have not authorized any person to give any information or to make any representation not contained in this prospectus, and, if given or made, such information or representation must not be relied upon as having been authorized by us or on our behalf. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities covered by this prospectus in any jurisdiction or to any person to whom it is unlawful to make such offer or solicitation. The information in this prospectus is current as of its date. Neither the delivery of this prospectus nor any sale made hereunder shall, under any circumstances, imply that there has been no change in the affairs of our company or that the information contained in this prospectus is correct as of any subsequent date. You should not assume that the information in this prospectus, any prospectus supplements or in any documents incorporated herein or therein by reference is accurate as of any date other than the date on the front of each of such documents.

RISK FACTORS

     Investing in our ADSs involves a high degree of risk. Prior to making a decision about investing in our securities, you should carefully consider the risk factors incorporated by reference herein from our most recent Annual Report on Form 20-F (File No. 000-51242) for the fiscal year ended December 31, 2009, or our 2009 20-F, and other information contained or incorporated by reference in this prospectus and any accompanying prospectus supplements, as the same may be updated from time to time by our future filings under the Securities Exchange Act of 1934, as amended, or the Exchange Act. For more information, see “Where You Can Find More Information” in this prospectus.

FORWARD-LOOKING STATEMENTS

     This prospectus, any accompanying prospectus supplement and the documents incorporated by reference contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act as well as the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to future events, including our future operating results and conditions, our prospects and our future financial performance and condition. These statements involve known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors” that are incorporated by reference in this prospectus which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.

     Forward-looking statements typically are identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions or the negative of these words or expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:

	•		our anticipated growth strategies;
	•		our future business development, results of operations and financial condition;
	•		our plans to develop into the branded mobile phone business and the game business;
	•		competition in the highly competitive mobile handset market in China;
	•		the expected growth in consumer spending, average income levels and advertising spending levels;
	•		growth of the mobile and online game business and market in China; and
	•		PRC governmental policies relating to our business.

     You should not rely upon forward-looking statements. For a more complete discussion of the risks of an investment in our securities, you should read these statements in conjunction with the risk factors incorporated by reference in this prospectus, including, without limitation, the risk factors set forth in “Item 3—Key Information—Risk Factors” of our 2009 20-F. These risk factors disclosed are not exhaustive. New risk factors emerge from time to time and it is impossible for us to predict all risk factors, nor can we assess the impact all risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. The forward-looking statements incorporated by reference herein are made only as of the date of this prospectus or the date of the incorporated document. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required under applicable law.

OFFER STATISTICS AND EXPECTED TIME TABLE

     Our subsidiary Leo Technology Limited, now renamed 798 Entertainment Limited, issued US$10 million aggregate principal amount of 8% senior secured convertible promissory notes to the Selling Shareholders in June 2009. Pursuant to conversion options granted to them under the relevant investor rights agreement, the Selling Shareholders exercised their conversion rights in relation to the notes in September 2010, converting 62.5% of the principal amount of the notes into our ordinary shares and the remaining principal amount into ordinary shares of Leo Technology Limited. As a result of the conversion, the Selling Shareholders now hold 78,814,628 of our ordinary shares, represented by 5,254,309 ADSs which the Selling Shareholders may offer and sell from time to time at fixed prices, at market prices or at negotiated prices, to or through underwriters, to other purchasers, through agents, or through a combination of these methods.

     Further information on the method and expected time table for distribution is set forth under “Selling Shareholders” and “Plan of Distribution” below.

OUR COMPANY

     We are a publicly traded Cayman Islands company. Our ADSs representing our ordinary shares are listed on the NASDAQ under the symbol “CNTF.”

     We are a China-based provider of original developed products (“ODP”) , focused on the original design and development of handsets and sales of finished products to local and international customers. While we maintain the stable growth of product sales, we enter into new businesses, including the branded mobile phone business and the game business, to generate additional revenue streams as part of our growth strategy.

     Since our inception in 2002, we have been providing complete handset design services spanning the entire handset design cycle, which involves industrial design, hardware design, component selection and sourcing, prototype testing, pilot production and production support. We design mobile handsets based on major technology platforms including GSM/GPRS, CDMA1X, CDMA EVDO, WCDMA/UMTS, HSDPA, and TD-SCDMA. In 2006, we expanded our business from being an independent design house to an ODP provider. As an ODP provider, we not only provide handset design services but also sell finished products by subcontracting electronics manufacturing services (“EMS”) providers to assemble or manufacture mobile phone handsets to meet the demand of our customers. Currently, our revenues from product sales comprise the majority of our total net revenues. Our strong technological capabilities, high-quality design capabilities, strong customer relationships, strategic relationships with leading technology providers and ample skilled, low-cost engineering resources enable us to deliver our services and products at competitive costs and with relatively shorter product cycles when compared to our competitors.

     In an effort to minimize the adverse effects of the global financial crisis and weakening economic conditions, we have strengthened our position through strategic collaborations with leading brands in consumer digital products to help promote our products in China and swiftly bring them to market. In addition, one of our majority-owned subsidiaries, Glomate Mobile (Beijing) Co., Ltd., is primarily focused on licensing well-known, international brands for high-end, brand-name mobile phones in China. Furthermore, in February 2010, we acquired Citylead Limited (“Citylead”) together with its subsidiaries and variable interest entity. Through this acquisition, we obtained, and commenced to sell under, our own brand –“QIGI smartphones” in the brand name phone sales segment. We put emphasis on the branding of our mobile handset products because branded products—especially products bearing well-known brands and images—offer a higher profit margin compared with other mobile handsets we sell.

     In 2008, we started to develop, and made significant progress in, our online and mobile game business, and set up three studios to develop games. We also outsourced the development of online games to another independent studio and set up an in-house studio to design and develop mobile games. Beginning in the fourth quarter of 2009, we started providing and earn revenues from mobile game-related services. We launched one multiplayer online role-playing game in January 2010 and expect to launch more games in the future. We expect an increasing portion of our revenues to come from this part of our business.

     Our business currently comprises the following three areas: (1) ODP products; (2) brand name phone sales and (3) game business.

     Our headquarters and principal executive offices are located at Building 1, No. 13, Yong Chang North Road, Beijing Economic-Technological Development Area (Yi Zhuang), Beijing 100176, People’s Republic of China. Our telephone number at this address is +86 10 5822-8288. Our website address is http://www.techfaithwireless.com. Information contained in or linked to from our website does not constitute part of this prospectus.

SELLING SHAREHOLDERS

     This prospectus relates to the disposition from time to time of up to 5,254,309 of our ADSs held by the Selling Shareholders, representing 78,814,628 of our ordinary shares. In connection with the investor rights agreement in relation to the 8% senior secured convertible promissory notes, we agreed to file this registration statement to enable the resale of the ADSs representing ordinary shares upon conversion of the notes into our ordinary shares.

     The following table, to our knowledge, sets forth information regarding the beneficial ownership of the ADSs of the Selling Shareholders as of September 30, 2010. As of that date, there were 793,986,739 ordinary shares, or 52,932,449 ADSs, outstanding. Beneficial ownership is determined in accordance with the rules of the SEC. Neither Selling Shareholders is a registered broker-dealer or an affiliate of broker-dealers.

     The information provided in the table below is provided as of the date of this prospectus and is based in part on information provided by or on behalf of the Selling Shareholders. The percentage ownership is determined according to the number of ordinary shares represented by the ADSs held by the Selling Shareholders.

		Number of ADSs																Number of ADSs
		Owned Before the				Percentage Owned				Number of Ordinary Shares				Number of ADSs				Owned After the			Percentage Owned
Name of Selling Shareholders		Offering				Before the Offering				Offered Hereby				Offered Hereby				Offering (1)			After the Offering
IDG-Accel China Growth Fund II L.P.			4,857,083				9.2	%			72,856,242				4,857,083				0			—
IDG-Accel China Investors II L.P.			397,226				0.8	%			5,958,386				397,226				0			—

CAPITALIZATION AND INDEBTEDNESS

     The following table sets forth our capitalization and indebtedness as of September 30, 2010. The financial data in the following table should be read in conjunction with our quarterly financial information as of and for the nine-month period ended September 30, 2010, included in our Report on Form 6-K filed on November 23, 2010, which has been incorporated by reference in this prospectus.

		As of September 30, 2010
		Actual
		(Unaudited)
		(in thousands)
Shareholders’ equity
Ordinary shares, US$0.00002 par value, 50,000,000,000 shares authorized; 793,986,739 shares issued and outstanding		$	16
Additional paid-in capital			138,116
Statutory reserve			10,993
Retained earnings			74,309
Accumulated other comprehensive income			28,074
Non-controlling interest			5,374
Total shareholders’ equity			256,882
Total capitalization		$	256,882

REASONS FOR THE OFFER AND USE OF PROCEEDS

     The Selling Shareholders received 78,814,628 of our ordinary shares, represented by 5,254,309 ADSs, in September 2010, as a result of exercising their rights of conversion in relation to the 8% senior secured convertible notes issued by our subsidiary, Leo Technology Limited. The Selling Shareholders were granted registration rights in relation to these ordinary shares, and now intend offer these ordinary shares for resale from time to time.

     The ADSs being offered by this prospectus are solely for the accounts of the Selling Shareholders. We will not receive any of the proceeds from the ADSs sold by the Selling Shareholders in this offering.

PLAN OF DISTRIBUTION

     We are registering shares held by the Selling Shareholders, for sale from time to time after the date of this prospectus. The Selling Shareholders are entitled to, and will receive, the net proceeds from sales of ADSs sold pursuant to this prospectus.

     The Selling Shareholders and any of their pledgees, assignees and successors-in-interest may sell all or a portion of the ADSs offered hereby from time to time on the NASDAQ or any other stock exchange, market or trading facility on which the ADSs are traded or in a private transaction. These sales may be at fixed prices which may be changed, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale or at negotiated prices. The ADSs may be sold using one or more of the following methods:

•

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

•

block trades in which the broker-dealer will attempt to sell the ADSs as agent but may position and resell a portion of the block as principal to facilitate the transaction;

•

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

•

an exchange distribution in accordance with the rules of the applicable exchange;

•

privately negotiated transactions;

•

settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;

•

broker-dealer may agree with the Selling Shareholders to sell a specified number of such ADSs at a stipulated price per share;

•

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

•

a combination of any such methods of sale; or

•

any other method permitted pursuant to applicable law.

     The Selling Shareholders may also transfer their ADSs by means of gifts, donations and contributions. Subject to certain limitations under rules promulgated under the Securities Act, this prospectus may be used by the recipients of such gifts, donations and contributions to offer and sell the ADSs received by them, directly or through brokers-dealers or agents and in private or public transactions.

     If the Selling Shareholders effect such transactions by selling ADSs to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the Selling Shareholders or commissions from purchasers of the shares for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). The Selling Shareholders and any broker-dealer participating in a distribution of the ADSs may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the

Securities Act. As a result, we have informed the Selling Shareholders that Regulation M of the Exchange Act may apply which could limit the timing of purchases and sales of any of the ADSs by the Selling Shareholders and any other participating person. Regulation M may also restrict the ability of any person engaged in a distribution of the shares to engage in market-making activities, if any, with respect to our ADSs. The Selling Shareholders may agree to indemnify any broker, dealer or agent that participates in transactions involving the sale of their ADSs against certain liabilities, including liabilities arising under the Securities Act.

     At the time a particular offering of the ADSs is made, a prospectus supplement, may be distributed which will set forth the aggregate amount of ADSs being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from or on behalf of the Selling Shareholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.

     The Selling Shareholders may enter into sale, forward sale and derivative transactions with third parties, or may sell ADSs not covered by this prospectus to third parties in privately negotiated transactions. If there is a prospectus supplement and such supplement indicates, in connection with those sale, forward sale or derivative transactions, the third parties may sell ADSs covered by this prospectus and the applicable prospectus supplement, including in short sale transactions and by issuing securities that are not covered by this prospectus but are exchangeable for or represent beneficial interests in the ADSs. The third parties also may use ADSs received under those sale, forward sale or derivative arrangements or ADSs pledged by the Selling Shareholders or borrowed from the Selling Shareholders or others to settle such third-party sales or to close out any related open borrowings of ADSs. The third parties may deliver this prospectus in connection with any such transactions. Any third party in such sale transactions will be an underwriter and may be identified in the applicable prospectus supplement or a post-effective amendment to the registration statement of which this prospectus is a part, if any such supplement or amendment is prepared.

     In addition, the Selling Shareholders may engage in hedging transactions with broker-dealers in connection with distributions of ADSs or otherwise. In those transactions, broker-dealers may engage in short sales of ADSs in the course of hedging the positions they assume with the selling shareholder. The Selling Shareholders also may sell ADSs short and redeliver ADSs to close out such short positions. The Selling Shareholders also may enter into option or other transactions with broker-dealers which require the delivery of ADSs to the broker-dealer. The broker-dealer may then resell or otherwise transfer such ADSs pursuant to this prospectus. The selling shareholder also may loan or pledge ADSs, and the borrower or pledgee may sell or otherwise transfer the ADSs so loaned or pledged pursuant to this prospectus. Such borrower or pledgee also may transfer those ADSs to investors in our securities or the Selling Shareholders’ securities or in connection with the offering of other securities not covered by this prospectus.

     Under the securities laws of some states, the ADSs offered in this offering may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states our shares may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

     The Selling Shareholders are acting independently of us in making decisions with respect to the timing, price, manner and size of each sale. We have not engaged any broker-dealer or agent in connection with the sale of ADSs held by the Selling Shareholders, and there is no assurance that each Selling Shareholder will sell any or all of the shares registered pursuant to the shelf registration statement of which this prospectus forms a part. We have agreed to make available to the Selling Shareholders copies of this prospectus and any applicable prospectus supplement and have informed the Selling Shareholders of the need to deliver copies of this prospectus and any applicable prospectus supplement to purchasers prior to any sale to them.

     The Selling Shareholders may also sell all or a portion of their ADSs in open market transaction under Section 4(1) of the Securities Act including transactions in accordance with Rule 144 promulgated thereunder, if available, rather than under the shelf registration statement, of which this prospectus forms a part.

     Pursuant to the investor rights agreement we entered into with the Selling Shareholders and other parties on June 9, 2009, each of us and the Selling Shareholders will be indemnified by the other against certain liabilities, including certain liabilities under the Securities Act, or will be entitled to contribution for payments required to be made as a result of these liabilities.

     Also pursuant to the investor rights agreement for the 8% senior secured convertible notes, subject to certain limitations and qualifications, we shall not be obligated to prepare and file a registration statement or declare or order to be put into effect any registration statement if (i) within ten (10) days of receipt of any registration request from the Selling Shareholders, we give notice of its bona fide intention to effect the filing for our own account of a registration statement with the SEC within sixty (60) days of receipt of that request, provided that we are actively employing in good faith all reasonable efforts to cause that registration statement to become effective; (ii) our board of directors (excluding any interested directors) concludes in good faith that the filing of a registration statement would be materially detrimental to us and our shareholders in the near future because such an action would (a) materially interfere with a significant acquisition, corporate reorganization, or other similar transactions involving us; (b) require premature disclosure of material information that we have a bona fide business purpose for preserving as confidential; or (c) render us unable to comply with requirements under the Securities Act or the Exchange Act, and that, as a result, it is in the best interest of us and our shareholders to defer the filing of such a registration statement at such time for a period not to exceed ninety (90) days.

EXPENSES

     The following are the estimated expenses of the offering of the securities being registered under the registration statement of which this prospectus forms a part, all of which will be paid by us.

SEC registration fee		$	2,712
Transfer agent fees			4,000
Legal fees and expenses			80,000
Accounting fees and expenses			60,000
Miscellaneous			2,000
Total		$	148,712

     All amounts are estimated, except for the SEC registration fee.

DESCRIPTION OF SHARE CAPITAL

     We are a Cayman Islands company and our affairs are governed by our amended and restated memorandum and articles of association and the Companies Law (2010 Revision) of the Cayman Islands, which is referred to below as the Companies Law.

     Our authorized share capital is US$1,000,000,000 divided into 50,000,000,000,000 ordinary shares of a nominal or par value of US$0.00002 each. As of September 30, 2010, we had 793,986,739 ordinary shares, or 52,932,449 ADSs, outstanding. Under Cayman Islands law, we must keep a register of members and there shall be entered therein: (a) the names and addresses of the members, and a statement of the shares held by each member, and of the amount paid or agreed to be considered as paid, on the shares of each member; (b) the date on which the name of any person was entered on the register as a member; and (c) the date on which any person ceased to be a member. Under Cayman Islands law, the register of members of our company is prima facie evidence of the matters set out therein (i.e. the register of members will raise a presumption of fact on the matters referred to above unless rebutted) and a member registered in the register of members shall be deemed as a matter of Cayman Islands law to have legal title to the shares as set against its name in the register of members. Upon the closing of this offering, the register of members shall be immediately updated to reflect the issue of shares by us to The Bank of New York as the depositary. Once our register of members has been updated, the shareholders recorded in the register of members shall be deemed to have legal title to the shares set against their name.

     The following are summaries of material terms and provisions of our amended and restated memorandum and articles of association and the Companies Law insofar as they relate to the material terms of our ADSs and ordinary shares. This summary is not complete, and you should read our memorandum and articles of association, which has been filed as an exhibit to our Form F-1 (File no. 333-123921) filed with the SEC on April 7, 2005, as amended from time to time. For information on how to obtain copies of our amended and restated memorandum and articles of association, see “Where You Can Find More Information.”

Ordinary Shares

     General. All of our outstanding ordinary shares are fully paid and non-assessable. Certificates representing the ordinary shares are issued in registered form. Our shareholders who are nonresidents of the Cayman Islands may freely hold and vote their shares.

     Dividends. The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors subject to the Companies Law and our amended and restated memorandum and articles of association.

     Voting Rights. Each ordinary share is entitled to one vote on all matters upon which the ordinary shares are entitled to vote. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by one or more shareholders present in person or by proxy entitled to vote and together holding at least ten percent of our paid up voting share capital.

     A quorum required for a meeting of shareholders consists of holders of at least one-third of our total outstanding shares present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative. Shareholders’ meetings may be convened by our board of directors on its own initiative or upon a request to the directors by shareholders holding, at the date of the deposit of the requisition for a meeting, in aggregate not less than thirty-three percent of our voting share capital. Advance notice of at least seven business days is required for the convening of our annual general meeting and other shareholders meetings.

     An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinary shares cast in a general meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes cast attaching to the ordinary shares. A special resolution is required for important matters such as a change of name. Holders of the ordinary shares may effect certain changes by ordinary resolution, including alter the amount of our authorized share capital, consolidate and divide all or any of our share capital into shares of larger amount than our existing share capital, and cancel any shares.

     Transfer of Shares. Subject to the restrictions of our articles of association, as applicable, any of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board.

     The registration of transfers may be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 40 days in any year.

     Liquidation. Subject to our amended and restated articles of association, if we shall be wound up, the liquidator may, with the sanction of an ordinary resolution from us, divide amongst the shareholders in specie or in kind the whole or any part of our assets.

     Calls on Shares and Forfeiture of Shares. Our board of directors may, from time to time, make calls upon shareholders for any amounts unpaid on their shares in a notice served to such shareholders at least 14 days prior to the specified time and place of payment. The shares that have been called upon and remain unpaid on the specified time are subject to forfeiture.

     Redemption of Shares. Subject to the provisions of the Companies Law and our amended and restated articles of association, we may issue shares on terms that are subject to redemption, at our option or at the option of the holders, on such terms and in such manner as the directors may, before the issuance of such shares, determine.

     Variations of Rights of Shares. All or any of the special rights attached to any class of shares may, subject to the provisions of the Companies Law and our amended and restated articles of association, be varied either with the written consent of the holders of a majority of the issued shares of that class or with the sanction of a resolution passed by at least a majority of the holders of the shares of that class at a separate general meeting of the holders of the shares of that class.

     Inspection of Books and Records. Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. See “Where You Can Find Additional Information.”

History of Securities Issuances

     The following is a summary of our securities issuances since our inception in July 2002.

     Ordinary Shares. In September 2003, Techfaith Wireless Technology Group Limited (formerly known as Techfaith Wireless Communication Technology Limited), our direct and wholly owned subsidiary incorporated in the British Virgin Islands, issued a total of 50,000,000 ordinary shares at par value to six individuals, including our founders, through a private placement.

Convertible Notes

     In April 2004, Techfaith BVI issued interest-free notes in the aggregate principal amount of US$14 million to HTF 7 Limited, QUALCOMM, SeaBright China Special Opportunities (I) Limited and Intel Capital Corporation, pursuant to a note subscription and rights agreement. The notes were converted into our ordinary shares at the time of our initial public offering.

     In June 2009, Leo Technology Limited issued 8% senior secured convertible promissory notes of US$10 million aggregate principal amount to the Selling Shareholders. Under the investor rights agreement dated June 9, 2009, the notes were convertible into our ordinary shares or ordinary shares of Leo Technology Limited at the option of the note holders. The Selling Shareholders exercised their conversion rights with respect to the notes in September 2010, converting 62.5% of the principal amount of the notes into 78,814,628 of our ordinary shares and the remaining principal amount into ordinary shares in Leo Technology Limited.

     In August 2010, Techfaith entered the contract to issue a redeemable and convertible bond at the principle amount of US$30 million with 0.5% interest per annum to Beijing E-town International Investment and Development Co., Ltd. (“BEIID”). The bond is convertible into Techfaith’s ordinary shares over the next 5 years at the price of US$5 per ADS at the option of the bond holder as long as each conversion is at the value of more than US$10 million.

Differences in Corporate Law

     The Companies Law of the Cayman Islands, or the Companies Law, is modeled after that of the United Kingdom but does not follow recent United Kingdom statutory enactments. In addition, the Companies Law differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Companies Law applicable to us and the laws applicable to companies incorporated in the United States and their shareholders.

Mergers and Similar Arrangements

     The Companies Law permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a) “merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company and (b) a “consolidation” means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation (a “Plan”), which must then be authorised by either (a) a special resolution of the shareholders of each constituent company voting together as one class if the shares to be issued to each shareholder in the consolidated or surviving company will have the same rights and economic value as the shares held in the relevant constituent company or (b) a shareholder resolution of each constituent company passed by a majority in number representing 75% in value of the shareholders voting together as one class. The Plan must be filed with the Registrar of Companies

together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures. In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:

•

the statutory provisions as to majority vote have been met;

•

the shareholders have been fairly represented at the meeting in question;

•

the arrangement is such that a businessman would reasonably approve; and

•

the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.

     When a take-over offer is made and accepted by holders of 90.0% of the shares within four months, the offerer may, within a two month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.

     If the arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of United States corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

     Shareholders’ Suits

     The Cayman Islands courts can be expected to follow English case law precedents. The common law principles (namely the rule in Foss v. Harbottle and the exceptions thereto) which permit a minority shareholder to commence a class action against or derivative actions in our name to challenge (a) an act which is ultra vires or illegal, (b) an act which constitutes a fraud against the minority where the wrongdoers are themselves in control of our company, and (c) an action which requires a resolution with a qualified (or special) majority which has not been obtained) have been applied and followed by the courts in the Cayman Islands.

Registration Rights

     Pursuant to our investor rights agreement entered into in June 2009, we have granted certain registration rights to the Selling Shareholders as holders of our ordinary shares upon conversion of the notes. Set forth below is a description of the registration rights granted pursuant to the investor rights agreement. We also previously granted similar registration rights to certain other holders of our ordinary shares issued upon conversion of interest-free notes in the aggregate principal amount of US$14 million pursuant to a note subscription and rights agreement at approximately US$0.21 per share at the time of our initial public offering on May 11, 2005.

Demand Registration Rights

     Holders of at least 30% or more of our outstanding registrable securities converted from the notes may request us, in writing, to file a registration statement providing for the resale of their securities.

     We are not obligated to effect more than one such registration statement within any 12-month period. Such registration statement should be on Form F-3, unless we are not then eligible to use Form F-3, in which case Form F-1 other appropriate form should be used.

     We are also not obligated to effect a demand registration if (1) we notify the requesting holder or holders of the registrable securities of our intention to file for our own account a registration statement within sixty days of receiving the request, (2) the reasonably anticipated aggregate price to the public, net of selling expenses would not be more than US$1,000,000 or (3) we provide a certified signed by our chief executive officer stating that our board of directors concludes in good faith that the filing of such registration statement would be materially detrimental to us and our shareholders in the near future. In the case of (3), we cannot exercise the deferral right more than once in any 12-month period.

Piggyback Registration Rights

     If we propose to file a registration for a public offering of our securities other than relating to an employee benefit plan or to a corporate reorganization, we must offer holders of registrable securities an opportunity to include in the registration all or any part of their registrable securities. The underwriters of any underwritten offering will have the right to limit the number of shares with registration rights to be included in the registration statement.

Expenses of Registration

     We will pay all expenses relating to any demand, piggyback or Form F-3 registrations, other than broker’s commission, underwriter’s discount, concession or commission in connection with the sale of the registrable securities.

     For more detailed information relating to the registration rights, see the investor rights agreement filed as an exhibit to the 2009 20-F.

     Other than this investor rights agreement, we have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4. Information on the Company” or elsewhere in the 2009 20-F.

DESCRIPTION OF AMERICAN DEPOSITARY SHARES

     We incorporate by reference into this prospectus the description of American Depositary Shares that appears under “Description of American Depositary Shares” in our Form F-1 registration statement (File No. 333-123921) filed with the SEC on April 20, 2005, as amended from time to time.

PRICE RANGE OF OUR ADS

     Our ADSs, each representing 15 of our ordinary shares, have been listed on the NASDAQ since May 5, 2005. Our ADSs are traded under the symbol “CNTF.” For the period from January 3, 2006 to March 4, 2011, the trading price of our ADSs on the NASDAQ has ranged from US$0.71 to US$18.00 per ADS. The following table provides the high and low trading prices for our ADSs on the NASDAQ for all quarters from the date of our initial listing on the NASDAQ through the date of this prospectus.

		Trading Price
		High				Low
		US$				US$
Annual High and Low
2006			18.00				6.58
2007			11.13				4.01
2008			6.98				0.71
2009			3.93				1.11
2010			4.34				1.91
Quarterly Highs and Lows
First Quarter 2009			1.94				1.11
Second Quarter 2009			2.69				1.31
Third Quarter 2009			3.85				1.95
Fourth Quarter 2009			3.93				2.88
First Quarter 2010			3.65				2.58
Second Quarter 2010			2.98				1.91
Third Quarter 2010			3.70				2.49
Fourth Quarter 2010			4.34				3.46
Monthly Highs and Lows
2010
July			3.16				2.49
August			3.45				2.74
September			3.70				3.20
October			4.14				3.46
November			4.34				3.80
December			4.30				3.66
2011
January			4.69				3.99
February			4.47				3.85
March (through March 4, 2011)			4.78				4.17

MATERIAL CHANGES

     Except as set forth herein and otherwise described in our 2009 20-F filed under the Exchange Act and incorporated by reference, no reportable material changes have occurred since December 31, 2009.

RECENT DEVELOPMENTS

     The following table sets forth our unaudited condensed consolidated statements of operations information for the three months ended September 30, 2009 and September 30, 2010 and the unaudited condensed consolidated balance sheets information as of September 30, 2010. We have prepared this unaudited condensed consolidated financial information on the same basis as our audited consolidated financial statements. The unaudited condensed consolidated financial information reflects all adjustments, consisting only of normal and recurring adjustments, which we consider necessary for a fair statement of our financial position and operating results for the periods presented. We cannot assure you that our results for the three months ended September 30, 2010 will be indicative of our financial results for the full year ending December 31, 2010 or for future interim periods. See “Risk Factors.” Please also refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus for information regarding trends and other factors that may influence our results of operations.

		Three Months Ended
		September 30
		2009				2010
		(In thousands of U.S. Dollars)
Revenues:
ODP		$	52,799			$	55,793
Brand name phone sales			—				11,252
Game			—				1,548
Total net revenues			52,799				68,593
Cost of revenues:
ODP			42,519				45,753
Brand name phone sales			—				6,454
Game			—				23
Total cost of revenues			42,519				52,230
Gross Profit			10,280				16,363
Operating expenses:
General and administrative			1,459				2,980
Research and development			2,556				3,001
Selling and marketing			987				1,441
Exchange gain			(52	)			(40	)
Total operating expenses			4,950				7,382
Government subsidy income			257				—
Income from operations			5,587				8,981
Interest expense			(165	)			(201	)
Interest income			165				240
Other income (expense), net			(94	)			168
Change in fair value of derivatives embedded in Convertible notes			(9,214	)			(3,329	)
Change in fair value of put option			(39	)			(30	)
Income (loss) before income taxes			(3,760	)			5,829
Income tax expenses			(1,314	)			(2,538	)
Net (loss) income			(5,074	)			3,291
Less: net loss attributable to the noncontrolling interest			1,674				1,015
Net income (loss) attributable to TechFaith		$	(3,400	)		$	4,306

     Our net revenue increased by 29.9% from $52.8 million for the three months ended September 30, 2009 to $68.6 million for the three months ended September 30, 2010. The increase was attributed to the increased sale of smart phones and feature phones as well as revenues from brand name phone sales and from the game segments of our business which did not exist in the three months ended September 30, 2009.

     Our cost of revenue increased by 22.8% from $42.5 million for the three months ended September 30, 2009 to $52.2 million for the three months ended September 30, 2010. This increase was due primarily to the increase in cost of revenues for product sales and the recent introduction of brand name phones and games into our business.

     Our gross profit was $16.4 million for the three months ended September 30, 2010, as compared to $10.3 million for the three months ended September 30, 2009, representing gross margins of 23.9% and 19.5%, respectively.

     Our operating expenses increased by 48.0% from US$5.0 million for the three months ended September 30, 2009 to US$7.4 million for the three months ended September 30, 2010. The increase was mainly due to the increase in bad debts expense and the introduction of our brand name phone business and game segment.

     We went from a net loss of $3.4 million for the three months ended September 30, 2009 to a net income of $4.3 million for the three months ended September 30, 2010.

		As of June 30,				As of September 30,
		2010				2010
		(In thousands of U.S. Dollars)
Consolidated Balance Sheet Data
Cash and cash equivalents		$	170,879			$	179,433
Accounts receivable			17,613				19,137
Inventories			22,218				21,258
Total assets			277,701				287,162
Total current liabilities			30,340				29,841
Total non-current liabilities			11,519				439
Total liabilities and equity		$	277,701			$	287,162

Our cash and cash equivalents increased by 5.0% from US$170.9 million as of June 30, 2010 to US$179.4 million as of September 30, 2010. Our cash and cash equivalents primarily consist of cash on hand, bank deposits with terms of three months or less.

Our accounts receivable increased by 8.5% from $17.6 million as of June 30, 2010 to $19.1 million as of September 30, 2010 in line with our growth of revenues.

Senior secured convertible promissory notes

The holders of the senior secured convertible promissory notes, namely, IDG-Accel China Growth Fund II L.P. and IDG-Accel China Investors II L.P., exercised their conversion rights in relation to the notes in September 2010, converting 62.5% of the principal amount of the notes into our ordinary shares and the remaining principal amount into ordinary shares of 798 Entertainment Limited. As a result of the conversion, IDG-Accel China Growth Fund II L.P. and IDG-Accel China Investors II L.P. now hold an aggregate of 78,814,628 of our ordinary shares.

The carrying amount of our senior secured convertible promissory notes was credited to our equity accounts upon conversion and no gain or loss was recognized.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

     We are a China-based ODP provider focused on the original design and development of handsets and sales of finished products to our local and international customers. While we maintain the stable growth of product sales, we enter into new businesses, including the branded mobile phone business and the game business, to generate additional revenue streams as part of our growth strategy. Our business currently comprises the following three areas: (1) ODP products; (2) brand name phone sales and (3) game business.

     Our strong technological capabilities, high-quality design capabilities, strong customer relationships, strategic relationships with leading technology providers and ample skilled, low-cost engineering resources enable us to deliver our services and products at competitive costs and with relatively shorter product cycles when compared to our competitors.

Summary Condensed Consolidated Financial Information

Results of Operations for the Six Months ended June 30, 2010

     The following tables present summary condensed consolidated financial information for our company for the periods indicated. You should read the following information in conjunction with “Item 5. Operating and Financial Review and Prospects” included in our 2009 20-F filed with the SEC on May 19, 2010, incorporated by reference in this prospectus, for more financial information and for information regarding trends and other factors that may influence our results of operations.

     The summary unaudited condensed consolidated statement of operations data for the six-month periods ended June 30, 2009 and 2010 below have been derived from our unaudited condensed consolidated financial statements for the six-months period ended June 30, 2009 and 2010 and prepared on the same basis as our audited consolidated financial statements included in our 2009 20-F, except for the presentation changes described as follows. As a result of our having obtained control of QIGI&BODEE Technology (Beijing) Co., Ltd. (“QIGI Technology”) by acquiring 100% of equity interest of the primary beneficiary of QIGI Technology, Citylead Limited (“Citylead”) in the first quarter of 2010, we now operate a new business segment for the sales of brand name phones. We have adjusted our segment reporting accordingly since the first quarter of 2010. We have also combined the business activities of previously reported handset design segment and product sales segment into one segment, the ODP segment. The business activities of QIGI Technology now represent a new segment, the brand name phone sales segment. The summary of unaudited condensed consolidated balance sheet data as of June 30, 2010 have been derived from our unaudited condensed consolidated financial statements for the six-months period ended June 30, 2010 and prepared on the same basis as our audited consolidated financial statements included in our 2009 20-F.

     The unaudited condensed financial statements data presented herein include all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair presentation of our financial position and operating results for the periods presented. Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP. Historical results are not necessarily indicative of results to be expected in any future period.

Unaudited Condensed Consolidated Statement of Operation Data

(In Thousands of U.S. Dollars)

		Six Months Ended
		June 30
		2009				2010
Revenues:
ODP		$	98,516			$	110,774
Brand name phone sales			—				12,844
Game			—				2,791
Total net revenues			98,516				126,409
Cost of revenues:
ODP			80,222				89,118
Brand name phone sales			—				7,906
Game			—				112
Total cost of revenues			80,222				97,136
Gross profit			18,294				29,273
Operating expenses:
General and administrative			(5,254	)			(6,160	)
Research and development			(6,285	)			(5,759	)
Selling and marketing			(1,426	)			(2,872	)
Total operating expenses			(12,965	)			(14,791	)
Government subsidy income			17				151
Income from operations			5,346				14,633
Income before income taxes			7,720				19,232
Income tax expenses			(1,113	)			(4,108	)
Net income			6,607				15,124
Less: Net loss (income) attributable to the noncontrolling interest			18				(987	)
Net income attributable to Techfaith		$	6,625			$	14,137

Unaudited Condensed Consolidated Balance Sheet Data

(In Thousands of U.S. Dollars)

		June 30, 2010
Cash and cash equivalents		$	170,879
Accounts receivable			17,613
Inventories			22,218
Total assets			277,701
Total current liabilities			30,340
Total non-current liabilities			11,519
Total liabilities and equity		$	277,701

Comparison of the Six Months Periods Ended June 30, 2009 and 2010

Net Revenues

     Our net revenue increased by 28.3% from US$98.5 million for the six months ended June 30, 2009 to US$126.4 million for the six months ended June 30, 2010. The increase was attributed to the increased sales of smart phones and feature phones as well as revenues from brand name phone sales and from the game segments of our business which did not exist in the six months ended June 30, 2009.

     ODP. Our net revenues from ODP increased by 12.5% from US$98.5 million for the six months ended June 30, 2009 to US$110.8million for the six months ended June 30, 2010. The increase was primarily due to the increased sales of smart phones and feature phones.

     Brand Name Phone Sales. Revenues from brand name phone sales increased from nil for the six months ended June 30, 2009 to US$12.8 million for the six months ended June 30, 2010. The increase was primarily due to the introduction of brand name phones in our business.

     Game. Revenues from game increased from nil for the six months ended June 30, 2009 to US$2.8 million for the six months ended June 30, 2010. The increase was primarily due to the fact that we started to provide mobile game services and mobile game design services and began generating income from this business beginning in the fourth quarter of 2009. We expect game revenues to increase in the coming years as we continue our efforts to develop and launch more mobile and online games.

Cost of Revenue

     Cost of revenues increased by 21.1% from US$80.2 million for the six months ended June 30, 2009 to US$97.1 million for the six months ended June 30, 2010. The increase was attributable to the increase in cost of revenues for product sales.

     ODP. Cost of revenues for handset design increased by 11.1% from US$80.2 million for the six months ended June 30, 2009 to US$89.1 million for the six months ended June 30, 2010, due to our increased focus on the portion of our business as a ODP provider. The increase is expected to continue due to our transformation of business model to an ODP provider.

     Brand Name Phone Sales. Cost of revenue from brand name phone sales increased from nil for the six months ended June 30, 2009 to US$7.9 million for the six months ended June 30, 2010. The increase was primarily due to the introduction of brand name phones in our business.

     Game. Cost of revenue from game increased from nil for the six months ended June 30, 2009 to US$112,000 for the six months ended June 30, 2010. The increase was primarily due to the fact that we began providing mobile game services and mobile game design services during 2009, and generated income from one mobile phone game we developed for a customer and the mobile game

services we provided to some manufacturers of branded mobile phones. We expect this cost will continue to increase in the future due to our continued efforts to develop and expand the mobile and online games portion of our business.

Gross Profit

     Our gross profit was US$29.3 million for the six months ended June 30, 2010, compared to US$18.3 million for the six months ended June 30, 2009, representing gross margins of 23.2% and 18.6%, respectively. The gross margin for ODP increased from 18.6% for the six months ended June 30, 2009 to 19.5% for the six months ended June 30, 2010. The increase was primarily due to the launching of several new high-end products with higher margins. The gross margin for brand name phone sales increased from nil for the six months ended June 30, 2009 to 38.4% for the six months ended June 30, 2010. This increase was primarily due to the introduction of our brand name phone business in the fourth quarter of 2009. The changes in our product mix also caused the increases in gross margins for brand name phone sales and game. Revenue from ODP decreased from 100.0% of the total net revenue for the six months ended June 30, 2009 to 87.6% for the six months ended June 30, 2010. In addition, revenues from brand name phone sales and game both increased from nil for the six months ended June 30, 2009 to 10.2% and 2.2% of the total net revenues for the six months ended June 30, 2010, respectively. As a result of the foregoing, our gross margins increased from 18.6% for the six months ended June 30, 2009 to 23.2% for the six months ended June 30, 2010.

Operating Expenses

     Operating expenses increased by 13.8% from US$13.0 million for the six months ended June 30, 2009 to US$14.8 million for the six months ended June 30, 2010. The increase was primarily due to the introduction of our brand name phone business and game segment.

     General and Administrative. General and administrative expenses increased by 17.0% from US$5.3 million for the six months ended June 30, 2009 to US$6.2 million for the six months ended June 30, 2010. The increase was due primarily to the increase in our general bad debts provision.

     Research and Development. Research and development expenses decreased by 8.0% from US$6.3 million for the six months ended June 30, 2009 to US$5.8 million for the six months ended June 30, 2010. The decrease was due primarily to the cost savings resulting from a human resource restructuring during 2009 and from the reduction of relevant salaries as a cost-control measure.

     Selling and Marketing. Selling and marketing expenses increased by 107.1% from US$1.4 million for the six months ended June 30, 2009 to US$2.9 million for the six months ended June 30, 2010. The increase was due primarily to the introduction of our brand name phone business and game segment and the increased selling and marketing activities in these areas.

Government Subsidy Income

     Some local governments in PRC give subsidies to companies as an incentive to establish business in their respective jurisdictions. These government subsidies are recognized as subsidy income when they are received as we do not have further obligation to earn this subsidy once received. We recorded a government subsidy income of US$17,000 and US$151,000 for the six months ended June 30, 2009 and 2010, respectively for this type of government subsidy, which constitutes the entirety of the subsidy income received during these periods.

Net Income Attributable to Techfaith

     As a result of the cumulative effect of the foregoing factors, we incurred a net income attributable to Techfaith of US$14.1 million for the six months ended June 30, 2010, as compared to a net income attributable to Techfaith of US$6.6 million for the six months ended June 30, 2009.

Capital Expenditure

     Our capital expenditures mainly relate to our purchase of plant, machinery and equipment related to our business operations. Our capital expenditure amounted to US$0.7 million and US$1.1 million for the six months ended June 30, 2009 and 2010, respectively. We expect that our capital expenditures for the next half of the year 2010 will amount to US$3.0 million because of

our purchase of software licenses and equipment and the construction of a plant. We plan to fund capital expenditures primarily through the issuance of cash generated from our operating activities.

Liquidity and Capital Resources

     The following table sets forth a summary of our cash flows for the periods indicated:

		Six months ended June 30,
		2009				2010
		(In thousands)
Net cash provided by operating activities		$	23,830			$	29,856
Net cash (used in) provided by investing activities			(626	)			9,664
Cash provided by financing activities			9,750				—
Effect of exchange rate changes on cash and cash equivalents			(86	)			815
Net increase in cash and cash equivalents			32,868				40,335
Cash and cash equivalents at the beginning of period			78,926				130,554
Cash and cash equivalents at the end of period		$	111,794			$	170,879

     We have financed our operations through cash generated from our operating activities and securities issuances, including our issuance of the 8% senior secured convertible notes to the Selling Shareholders in June 2009. As of June 30, 2009 and 2010, we had US$111.8 million and US$170.9 million, respectively, in cash and cash equivalents. Our cash and cash equivalents primarily consist of cash on hand, bank deposits with terms of three months or less.

     To develop our game business, on June 9, 2009, our subsidiary, Leo Technology Limited, now renamed 798 Entertainment Limited, issued to the Selling Shareholders 8% senior secured convertible promissory notes with an aggregate principal amount of US$10 million. Pursuant to this arrangement, the Selling Shareholders have exercised their conversion rights and are now registering their ordinary shares with this Form F-3. In addition, Infiniti Capital Limited invested US$10 million cash in Leo Technology’s common equity under a definitive agreement entered in 2009. In August 2010, we entered into a redeemable and convertible bond purchase agreement (the “BEIID Agreement”) with BEIID, a PRC stated-owned investment and financing company. According to the BEIID Agreement, we will issue a redeemable and convertible bond at the principal amount of US$30 million with 0.5% interest per annum to BEIID. The proceeds of the bond issuance will be used solely for our direct investment into our newly established subsidiary for the development of a 10 million-unit capacity smartphone production line in Beijing Economic and Technological Development Area. According to the BEIID Agreement, BEIID will be allowed to convert its interest in the redeemable and convertible bond into our ordinary shares over the next 5 years at the price of US$5 per ADS (1 ADS represents 15 ordinary shares) as long as each conversion is at the value of more than US$10 million.

     We believe that our current cash and cash equivalents and cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures for the next 12 months. We may, however, require additional cash resources beyond the next 12 months due to higher than expected growth in our business or other changing business conditions or future developments, including any possible investments or acquisitions. If our existing cash resources are insufficient to meet our requirements, we may seek to sell additional equity securities, debt securities or borrow from banks. We cannot assure you that financing will be available in the amounts we need or on terms acceptable to us, if at all. The sale of additional securities, including convertible debt securities, in one or more public offerings or private placements could result in additional dilution to our shareholders. The incurrence of indebtedness would result in debt service obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business, operations and prospects may suffer.

     The ability of our subsidiaries in China to convert Renminbi into U.S. dollars and make payments to us is subject to PRC foreign exchange regulations. Under these regulations, Renminbi is convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions. Conversion of Renminbi for capital account items, such as direct investment, loan, security investment and repatriation of investment, however, is still subject to the approval of relevant PRC government authorities. Techfaith is a holding company and has no present plan to pay any cash dividends on its ordinary shares in the foreseeable future. See “Item 8. Financial Information — A. Consolidated Statements and Other Financial Information — Dividend Policy” in our 2009 20-F, incorporated by reference herein. Nor does Techfaith have any loans or any other

outstanding debts except for the redeemable and convertible bond that will be issued to BEIID as described above. Accordingly, we believe that the impact of PRC foreign exchange regulations on our ability to meet its cash obligations is minimal.

     Operating Activities. Net cash provided by operating activities was US$23.8 million for the six months ended June 30, 2009 as compared to US$29.9 million for the six months ended June 30, 2010. The increase was mainly due to the operating profit from our ODP business. In connection with sales of products, our customers typically pay us a portion of the selling price before the products are delivered. We account for such prepayment as advance from customers until all the risks and rights associated with the products have been passed onto our customers. Net cash provided by advances from customers was US$1.5 million for the six months ended June 30, 2009 as compared to US$2.6 million for the six months ended June 30, 2010. The increase was due primarily to the increase of sales of products from June 30, 2009 to June 30, 2010.

     In connection with our handset design services, our customers typically pay us a portion of design fees immediately after the design contract is executed. Such design fee advances received from customers are accounted for as deferred revenue and are not recognized until a pre-agreed milestone has been reached.

     Net cash provided by our accounts receivables was US$10.5 million for the six months ended June 30, 2009 as compared to US$7.6 million for the six months ended June 30, 2010, which was primarily due to increase in our general bad debt provisions.

     Investing Activities. For the six months ended June 30, 2009, net cash used in investing activities was US$0.6 million, while for the six months ended June 30, 2010, the net cash provided by investment activities was US$9.7 million. The increase was primarily due to cash acquired from business acquisition of Citylead (net of cash consideration paid of US$0.5 million), which amounted to US$10.7 million.

     Financing Activities. Net cash provided by financing activities was US$9.8 million for the six months ended June 30, 2009 and nil for the six months ended June 30, 2010. The decrease was primarily due to the fact that in June 2009, our subsidiary, Leo Technology Limited, now renamed 798 Entertainment Limited, issued to the Selling Shareholders the 8% senior secured convertible promissory notes with an aggregate principal amount of US$10 million.

     Our capital expenditures amounted to US$0.7 million for the six months ended June 30, 2009 and US$1.1 million for the six months ended June 30, 2010. Our historical capital expenditure consisted principally of purchases of software, machinery, equipment and other items related to our ODP business. Our capital expenditures for the six months ended June 30, 2010 primarily consisted of plant and machinery, furniture, fixtures and equipment.

     Our capital expenditure plan for the second half of the year 2010 is US$3.0 million, which primarily consists of the purchase of software licenses and equipment and the construction of a plant.

Recently Issued Accounting Pronouncement

     In October 2009, the FASB issued an authoritative pronouncement regarding the revenue arrangements with multiple deliverables. This pronouncement was issued in response to practice concerns related to the accounting for revenue arrangements with multiple deliverables under existing pronouncement. Although the new pronouncement retains the criteria from exiting pronouncement for when delivered items in a multiple-deliverable arrangement should be considered separate units of accounting, it removes the previous separation criterion under existing pronouncement that objective and reliable evidence of the fair value of any undelivered items must exist for the delivered items to be considered a separate unit or separate units of accounting. The new pronouncement is effective for fiscal years beginning on or after June 15, 2010. Entities can elect to apply this pronouncement (1) prospectively to new or materially modified arrangements after the pronouncement’s effective date or (2) retrospectively for all periods presented. Early application is permitted; however, if the entity elects prospective application and early adopts this pronouncement after its first interim reporting period, it must also do the following in the period of adoption: (1) retrospectively apply this pronouncement as of the beginning of that fiscal year and (2) disclose the effect of the retrospective adjustments on the prior interim periods’ revenue, income before taxes, net income, and earnings per share. We are in the process of evaluating the effect of adoption of this pronouncement.

     In October 2009, the FASB issued an authoritative pronouncement regarding software revenue recognition. This new pronouncement amends existing pronouncement to exclude from their scope all tangible products containing both software and

non-software components that function together to deliver the product’s essential functionality. That is, the entire product (including the software deliverables and non-software deliverables) would be outside the scope of software revenue recognition and would be accounted for under other accounting literature. The new pronouncement include factors that entities should consider when determining whether the software and non-software components function together to deliver the product’s essential functionality and are thus outside the revised scope of the authoritative literature that governs software revenue recognition. The pronouncement is effective for fiscal years beginning on or after June 15, 2010. Entities can elect to apply this pronouncement (1) prospectively to new or materially modified arrangements after the pronouncement’s effective date or (2) retrospectively for all periods presented. Early application is permitted; however, if the entity elects prospective application and early adopts this pronouncement after its first interim reporting period, it must also do the following in the period of adoption: (1) retrospectively apply this pronouncement as of the beginning of that fiscal year and (2) disclose the effect of the retrospective adjustments on the prior interim periods’ revenue, income before taxes, net income, and earnings per share. We are in the process of evaluating the effect of adoption of this pronouncement.

     In January 2010, the FASB issued authoritative guidance on accounting for distributions to shareholders with components of stock and cash. The objective of this new guidance is to clarify that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected prospectively in earnings per share and is not considered a stock dividend for purposes of accounting treatment of equity and earnings per share. This new guidance is effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis. We do not expect the adoption of this guidance would have a significant effect on our consolidated financial position or results of operations.

     In January 2010, the FASB issued authoritative guidance to clarify the scope of accounting and reporting for decreases in ownership of a subsidiary. The objective of this guidance is to address implementation issues related to changes in ownership provisions. This guidance clarifies certain conditions, which need to apply to this guidance, and it also expands disclosure requirements for the deconsolidation of a subsidiary or derecognition of a group of assets. This guidance is effective in the period in which an entity adopts the authoritative guidance on noncontrolling interests in consolidated financial statements. If an entity has previously adopted the guidance on noncontrolling interests in consolidated financial statements, the amendments in this update are effective beginning in the first interim or annual reporting period ending on or after December 15, 2009. Retrospective application to the first period that an entity adopted the guidance on noncontrolling interests in consolidated financial statements is required. We do not expect the adoption of this guidance would have a significant effect on our consolidated financial position or results of operations.

     In April 2010, the FASB issued an authoritative pronouncement on milestone method of revenue recognition. The scope of this pronouncement is limited to arrangements that include milestones relating to research or development deliverables. The pronouncement specifies guidance that must be met for a vendor to recognize consideration that is contingent upon achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. The guidance applies to milestones in arrangements within the scope of this consensus regardless of whether the arrangement is determined to have single or multiple deliverables or units of accounting. The pronouncement will be effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early application is permitted. Companies can apply this guidance prospectively to milestones achieved after adoption. However, retrospective application to all prior periods is also permitted. We are in the process of evaluating the effect of adoption of this pronouncement.

     In April 2010, the FASB issued an authoritative pronouncement on effect of denominating the exercise price of a share based payment award in the currency of the market in which the underlying equity securities trades and that currency is different from (1) entity’s functional currency, (2) functional currency of the foreign operation for which the employee provides services, and (3) payroll currency of the employee. The guidance clarifies that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should be considered an equity award assuming all other criteria for equity classification are met. The pronouncement will be effective for interim and annual periods beginning on or after December 15, 2010, and will be applied prospectively. Affected entities will be required to record a cumulative catch-up adjustment for all awards outstanding as of the beginning of the annual period in which the guidance is adopted. We are in the process of evaluating the effect of adoption of this pronouncement.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     We incorporate by reference into this prospectus the documents listed below and any future filings we make with the SEC pursuant to the Exchange Act, including any filings after the date of this prospectus, until this offering is completed. The information incorporated by reference is an important part of this prospectus.

	•		Our 2009 20-F, filed with the SEC on May 19, 2010;
	•		Our report on Form 6-K, filed with the SEC on November 23, 2010; and
	•		The description of our ADSs contained in our Registration Statement on Form F-1 (File no. 333-123921), filed with the SEC on April 7, 2005, as amended from time to time.

     Our 2009 20-F contains a description of our business and audited consolidated financial statements with reports by our independent registered public accounting firm. These financial statements are prepared in accordance with U.S. GAAP.

     We may incorporate any report on Form 6-K subsequently furnished to the SEC, but only to the extent we specifically indicate in the report that it is being incorporated by reference into this prospectus. Unless expressly incorporated by reference, nothing in this prospectus shall be deemed to incorporate by reference information furnished to, but not filed with, the SEC. You may obtain any of the documents incorporated by reference in this prospectus from the SEC through the SEC’s website at the address provided above. You also may request a copy of any document incorporated by reference in this prospectus from us (excluding any exhibits to those documents, unless the exhibit is specifically incorporated by reference in this document), at no cost, by calling us at (+86-10) 5822-8288 or writing to us at the following address: Building 1, No. 13, Yong Chang North Road, Beijing Economic-Technological Development Area (Yi Zhuang), Beijing 100176, People’s Republic of China.

     You should rely only on the information contained in, or incorporated by reference into, this prospectus. If you find inconsistencies between the documents and this prospectus, you should rely on the statements made in the most recent document. Any statement made in this prospectus concerning the contents of any contract, agreement or other document is only a summary of the actual document. Each statement regarding a contract, agreement or other document is qualified in its entirety by reference to the actual document.

     We have not authorized anyone to provide you with different or additional information. We are not offering to sell or soliciting any offer to buy any securities in any jurisdiction where such offer or sale is not permitted. You should not assume that the information in this prospectus or in any document incorporated by reference is accurate as of any date other than the date on the front cover of the applicable document. Any statement contained in a document incorporated or deemed to be incorporated by reference into this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or in any applicable prospectus supplement or in any other document subsequently filed with the SEC that also is or is deemed to be incorporated by reference into this prospectus modifies or supersedes that statement. Any statement that is so modified or superseded will not constitute a part of this prospectus, except as modified or superseded.

EXCHANGE RATE INFORMATION

     Our reporting and financial statements are expressed in the U.S. dollar, which is our reporting and functional currency. However, substantially all of the revenues and expenses of our consolidated operating subsidiaries and variable interest entities are denominated in RMB. This registration statement contains translations of RMB amounts into U.S. dollars at specific rates solely for the convenience of the reader. The conversion of RMB into U.S. dollars in this registration statement is based on the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all translations from RMB to U.S. dollars and from U.S. dollars to RMB in this registration statement were made at a rate of RMB6.7815 to US$1.00, the noon buying rate in effect as of June 30, 2010. We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, the rates stated below, or at all. The Chinese government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange. See “Risk Factors” incorporated by reference herein for discussions of the effects of fluctuating exchange rates and currency control on the value of our ADSs. On February 25, 2011, the noon buying rate was RMB6.5749 to US$1.00.

     The following table sets forth information concerning exchange rates between the RMB and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this registration statement or will use in the preparation of our periodic reports or any other information to be provided to you. The source of these rates is the Federal Reserve Bank of New York.

		Noon Buying Rate
		Period End				Average(1)				Low				High
Period		(RMB per US$1.00)
2006			7.8041				7.9579				8.0702				7.8041
2007			7.2946				7.5806				7.8127				7.2946
2008			6.8225				6.9193				7.2946				6.7800
2009			6.8259				6.8295				6.8470				6.8176
2010
July			6.7735				6.7762				6.7807				6.7709
August			6.8069				6.7873				6.8069				6.7670
September			6.6905				6.7396				6.8102				6.6869
October			6.6707				6.6678				6.6912				6.6397
November			6.6670				6.6538				6.6892				6.6330
December			6.6000				6.6497				6.6745				6.6000
2011
January			6.6017				6.5964				6.6364				6.5809
February			6.5749				6.5764				6.5965				6.5520

EXPERTS

     The consolidated financial statements and financial statement schedule of China Techfaith Wireless Communication Technology Limited (the “Company”) incorporated in this prospectus by reference to the Company’s 2009 20-F, and the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009 have been audited by Deloitte Touche Tohmatsu CPA Ltd., an independent registered public accounting firm, as stated in their reports, which are incorporated herein by reference (which reports (1) express an unqualified opinion on the consolidated financial statements and the financial statement schedule and includes an explanatory paragraph referring to the adoption of the authoritative guidance on noncontrolling interests in consolidated financial statements, effective on January 1, 2009 and (2) express an unqualified opinion on the effectiveness of internal control over financial reporting). Such consolidated financial statements and financial statement schedule have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

     The consolidated financial statements of Citylead Limited as of and for the years ended December 31, 2008 and 2009, included in this prospectus, have been audited by Deloitte Touche Tohmatsu CPA Ltd., independent auditors, as stated in their report appearing herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

     The offices of Deloitte Touche Tohmatsu CPA Ltd. are located at 8/F, Deloitte Tower, The Towers, Oriental Plaza, 1 East Chang An Avenue, Beijing 100738, the People’s Republic of China.

ENFORCEABILITY OF CIVIL LIABILITIES

     We were incorporated in the Cayman Islands in order to enjoy certain benefits, such as political and economic stability, an effective judicial system, a favorable tax system, the absence of exchange control or currency restrictions, and the availability of professional and support services. However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include a less developed body of Cayman Islands securities laws that provide significantly less protection to investors as compared to the securities laws of the United States, and the potential lack of standing by Cayman Islands companies to sue in the federal courts of the United States.

     Our organizational documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated.

     Almost all of our current operations are conducted in China, and substantially all of our assets are located in China. We have appointed Law Debenture Corporate Services Inc., 400 Madison Avenue, 4th Floor, New York, New York 10017, as our agent upon whom process may be served in any action brought against us under the securities laws of the United States. A majority of our directors and officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

     Maples and Calder, our counsel as to Cayman Islands law, and Guan Teng Law Firm, our counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands and China, respectively, would:

	•		recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or
	•		entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

     Maples and Calder has further advised us that a final and conclusive judgment in the federal or state courts of the United States under which a sum of money is payable, other than a sum payable in respect of taxes, fines, penalties or similar charges, and which was neither obtained in a manner nor is of a kind enforcement of which is contrary to natural justice or the public policy of the Cayman Islands, may be subject to enforcement proceedings as a debt in the courts of the Cayman Islands under the common law doctrine of obligation.

     Guan Teng Law Firm has further advised us that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other agreements with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether a PRC court would enforce a judgment rendered by a court in the United States.

DISCLOSURE OF SEC POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

     Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

WHERE YOU CAN FIND MORE INFORMATION

     We file reports and other information with the SEC under the Securities Exchange Act of 1934, as amended, or the Exchange Act. You may read and copy any of this information in the SEC’s Public Reference Room, 100 F Street, NE, Washington, DC 20549. You may also obtain copies of this information by mail from the Public Reference Section of the SEC, 100 F Street, NE, Washington, DC 20549, at prescribed rates. You can obtain information on the operation of the SEC’s Public Reference Room in Washington, D.C. by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains annual reports and other information about issuers, like us, that file electronically with the SEC. The address of that website is http://www.sec.gov.

          This prospectus is part of a registration statement that we filed with the SEC and does not contain all the information in the registration statement. You will find additional information about us in the registration statement. Any statement made in this prospectus concerning a contract or other document of ours is not necessarily complete, and you should read the documents that are filed as exhibits to the registration statement or otherwise filed with the SEC for a more complete understanding of the document or matter. Each such statement is qualified in all respects by reference to the document to which it refers. You may inspect, without charge, a copy of the registration statement at the SEC’s Public Reference Room in Washington D.C., as well as through the SEC’s website.

INDEX TO FINANCIAL STATEMENTS

CHINA TECHFAITH
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2010			F - 2
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS PERIODS ENDED JUNE 30, 2009 AND 2010			F - 4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND COMPREHENSIVE INCOME FOR THE SIX MONTHS PERIODS ENDED JUNE 30, 2009 AND 2010			F - 5
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS PERIODS ENDED JUNE 30, 2009 AND 2010			F - 6
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			F - 8
CITYLEAD LIMITED
INDEPENDENT AUDITORS’ REPORT			F - 36
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2008 AND 2009			F - 37
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2009			F - 38
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2009			F - 39
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2009			F - 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			F - 41
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2009 AND THE SIX MONTHS PERIOD ENDED JUNE 30, 2010			F - 50

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share and per share data and unless otherwise stated)

		As of				As of
		December 31,				June 30,
		2009				2010
ASSETS
Current assets:
Cash and cash equivalents		$	130,544			$	170,879
Accounts receivable, net of allowances of $9,151 and $10,078 as of December 31, 2009 and as of June 30, 2010, respectively			28,992				17,613
Amount due from a related party			9,941				4,103
Inventories			22,937				22,218
Prepaid expenses and other current assets			12,420				14,104
Total current assets			204,834				228,917
Plant, machinery and equipment, net			44,582				43,861
Acquired intangible assets, net			645				3,075
Goodwill			606				1,848
TOTAL ASSETS		$	250,667			$	277,701
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable (including accounts payable of the consolidated variable interest entities without recourse to China Techfaith Wireless Communication Technology Limited, $30 and $nil as of December 31, 2009 and June 30, 2010, respectively)		$	10,514			$	9,727
Amounts due to related parties			266				43
Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated variable interest entities without recourse to China Techfaith Wireless Communication Technology Limited, $223 and $595 as of December 31, 2009 and June 30, 2010, respectively)			10,026				8,644
Advance from customers (including advance from customers of the consolidated variable interest entities without recourse to China Techfaith Wireless Communication Technology Limited, $178 and $338 as of December 31, 2009 and June 30, 2010, respectively)			4,720				7,351
Deferred revenue			755				889
Income tax payable (including income tax payable of consolidated variable interest entities without recourse to China Techfaith Wireless Communication Technology Limited, $25 and $797 as of December 31, 2009 and June 30, 2010, respectively)			1,162				2,366
Put option liability			1,257				1,320
Total current liabilities			28,700				30,340

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS — continued
(In thousands of U.S. dollars, except share and per share data and unless otherwise stated)

		As of				As of
		December 31,				June 30,
		2009				2010
Convertible notes and embedded derivatives			15,441				11,362
Deferred tax liability-noncurrent			—				157
Total liabilities			44,141				41,859
Commitments (Note 19)
Equity:
Ordinary shares of par value $0.00002 50,000,000,000,000 shares authorized; shares issued and outstanding, 650,156,045 and 715,172,111, including 918,000 and nil held as treasury stock, as of December 31, 2009 and June 30, 2010, respectively)			13				14
Additional paid-in capital			113,657				126,292
Treasury stock, at cost (918,000 and nil shares as of December 31, 2009 and June 30 2010, respectively)			(199	)			—
Accumulated other comprehensive income			23,863				25,220
Statutory reserve			10,993				10,993
Retained earnings			55,866				70,003
Total China Techfaith Wireless Communication Technology Limited shareholders’ equity			204,193				232,522
Noncontrolling interests			2,333				3,320
Total equity			206,526				235,842
TOTAL LIABILITIES AND EQUITY		$	250,667			$	277,701

The accompanying notes are an integral part of these consolidated financial statements.

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of U.S. dollars, except share and per share data and unless otherwise stated)

		Six months ended June 30,
		2009				2010
Revenues:
ODP		$	98,516			$	110,774
Brand name phone sales			—				12,844
Game			—				2,791
Total net revenues			98,516				126,409
Cost of revenues:
ODP			80,222				89,118
Brand name phone sales			—				7,906
Game			—				112
Total cost of revenues			80,222				97,136
Gross profit			18,294				29,273
Operating expenses:
General and administrative			(5,254	)			(6,160	)
Research and development			(6,285	)			(5,759	)
Selling and marketing			(1,426	)			(2,872	)
Total operating expenses			(12,965	)			(14,791	)
Government subsidy income			17				151
Income from operations			5,346				14,633
Interest expenses			(92	)			(530	)
Interest income			333				390
Other income			38				193
Change in fair value of put option			(18	)			(63	)
Change in fair value of derivatives embedded in convertible notes			2,113				4,609
Income before income taxes			7,720				19,232
Income tax expenses			(1,113	)			(4,108	)
Net income			6,607				15,124
Less: Net loss (income) attributable to noncontrolling interests			18				(987	)
Net income attributable to China Techfaith Wireless Communication Technology Limited		$	6,625			$	14,137
Net income per share attributable to China Techfaith Wireless Communication Technology Limited:
Basic		$	0.01			$	0.02
Diluted, as restated see note 21		$	0.01			$	0.01
Weighted average shares used in computation:
Basic			650,034,590				700,601,047
Diluted			664,671,776				826,715,923

The accompanying notes are an integral part of these consolidated financial statements.

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED

																														Equity
																														attributable to
																		Accumulated												China Techfaith
										Additional								other												Wireless				Non-
		Ordinary Shares								paid-in				Treasury				comprehensive				Statutory				Retained				Communication				controlling				Total				Comprehensive
		Number				Amount				capital				stock				income				reserve				earning				Technology Limited				interests				equity				Income
Balance at December 31, 2008			650,034,590			$	13			$	105,846				—			$	24,095			$	8,542			$	51,980			$	190,476			$	1,340			$	191,816
Vesting of non-vested shares			—				—				2				—				—				—				—				2				—				2
Foreign currency translation adjustments			—				—				—				—				(588	)			—				—				(588	)			—				(588	)		$	(588	)
Net income			—				—				—				—				—				—				6,625				6,625				(18	)			6,607				6,607
Balance at June 30, 2009			650,034,590			$	13			$	105,848				—			$	23,507			$	8,542			$	58,605			$	196,515			$	1,322			$	197,837			$	6,019
Balance at December 31, 2009			650,156,045			$	13			$	113,657			$	(199	)		$	23,863			$	10,993			$	55,866			$	204,193			$	2,333			$	206,526
Shares issued for acquisition of Citylead			65,934,066				1				12,834				—				—				—				—				12,835				—				12,835
Foreign currency translation adjustments			—				—				—				—				1,357				—				—				1,357				—				1,357			$	1,357
Cancellation of treasury stock			(918,000	)			—				(199	)			199				—				—				—				—				—				—				—
Net income			—				—				—				—				—				—				14,137				14,137				987				15,124				15,124
Balance at June 30, 2010			715,172,111			$	14			$	126,292				—			$	25,220			$	10,993			$	70,003			$	232,522			$	3,320			$	235,842			$	16,481

The accompanying notes are an integral part of these consolidated financial statements.

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED

		Six months ended June 30,
		2009				2010
Operating activities:
Net income		$	6,607			$	15,124
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on disposal of plant, machinery and equipment			211				(6	)
Amortization of acquired intangible assets			184				327
Warranty provision			923				51
Bad debts expense			1,311				3,036
Depreciation of plant, machinery and equipment			2,292				1,559
Change in fair value of put option			18				63
Amortization of share-based compensation			2				—
Change in fair value of derivatives associated with convertible notes			(2,113	)			(4,609	)
Change in fair value of contigent consideration receivable associated With business acquisition			—				(19	)
Amortization of convertible notes interest			59				530
Changes in operating assets and liabilities:
Accounts receivable			10,510				7,617
Notes receivable			(608	)			—
Inventories			10,121				2,817
Prepaid expenses and other current assets			(3,073	)			1,358
Deferred income tax			(81	)			(13	)
Accounts payable			(3,294	)			(1,010	)
Accrued expenses and other current liabilities			225				(938	)
Advance from customers			1,511				2,631
Deferred revenue			(975	)			134
Income tax payable			—				1,204
Net cash provided by operating activities			23,830				29,856
Investing activities:
Purchase of plant, machinery and equipment			(519	)			(575	)
Proceeds from sale of plant, machinery and equipment			29				55
Purchase of intangible assets			(217	)			(499	)
Decrease in restricted cash			81				—
Cash acquired from business acquisition of Citylead, net of cash consideration paid of $500			—				10,683
Net cash (used in) provided by investing activities			(626	)			9,664

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — continued
(In thousands of U.S. dollars, except share and per share data and unless otherwise stated)

		Six months ended June 30,
		2009				2010
Financing activities:
Proceeds from issuance of convertible notes, net of issuance cost paid of $250			9,750				—
Cash provided by financing activities			9,750				—
Effect of exchange rate changes on cash and cash equivalents			(86	)			815
Net increase in cash and cash equivalents			32,868				40,335
Cash and cash equivalents at the beginning of the year			78,926				130,544
Cash and cash equivalents at the end of the period		$	111,794			$	170,879
Supplemental cash flow information:
Cash paid during the year for:
Interest expenses		$	10			$	31
Income taxes		$	1,109			$	3,071

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED

1.

BASIS OF PREPARATION

The accompanying unaudited condensed consolidated financial statements include the financial information of China Techfaith Wireless Communication Technology Limited (the “Company”), its subsidiaries, and its variable interest entities (the “VIEs”) (collectively, the “Group”). All intercompany balances and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Security and Exchange Commission and U.S. generally accepted accounting standards for interim financial reporting. The results of operations for the six months periods ended June 30, 2009 and 2010 are not necessarily indicative of the results for the full years. The Group believes that the disclosures are adequate to make the information presented not misleading.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements, accounting policies and financial notes thereto. In opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair representation of financial results for the interim periods presented.

The financial information as of December 31, 2009 presented in the unaudited condensed financial statements is derived from our audited consolidated financial statements for the year ended December 31, 2009.

The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s consolidated financial statements on Form 20-F for the fiscal year ended December 31, 2009.

Acquisition of Citylead Limited in 2010

In February 2010, the Company acquired Citylead Limited (“Citylead”) together with its subsidiaries and VIE. Through this acquisition, the Group commenced to operate a new operating segment for the sales of brand name phones. The detail of this acquisition and the related contractual arrangements with the consolidated VIE is set out in Note 3.

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued
(In thousands of U.S. dollars, except share and per share data and unless otherwise stated)

1.

BASIS OF PREPARATION — continued

The following financial statement amounts and balances of the Group’s VIEs were included in the accompanying consolidated financial statements as of and for the periods ended:

		As of				As of
		December 31,				June 30,
		2009				2010
Total assets		$	7,090			$	29,193
Total liabilities		$	456			$	1,730

		Six months ended June 30,
		2009				2010
Net revenues		$	153			$	16,065
Net (loss) profit		$	(42	)		$	4,127

Business combinations

Business combinations are recorded using the purchase method of accounting.

The assets acquired, the liabilities assumed, and any noncontrolling interest of the acquiree at the acquisition date, if any, are measured at their fair values as of that date. Goodwill is recognized and measured as the excess of the total consideration transferred plus the fair value of any noncontrolling interest of the acquiree, if any, at the acquisition date over the fair values of the identifiable net assets acquired.

Common forms of the consideration made in acquisitions include cash and common equity instruments. Consideration transferred in a business acquisition is measured at the fair value as at the date of acquisition. For shares issued in a business combination, the Group has estimated the fair value as of the date of acquisition. Where the consideration in an acquisition includes contingent consideration the payment of which depends on the achievement of certain specified conditions post-acquisition, the contingent consideration is recognized and measured at its fair value at the acquisition date and if recorded as a liability it is subsequently carried at fair value with changes in fair value reflected in earnings.

Changes in the Group’s ownership interest while the Group retains its controlling financial interest in its subsidiary are accounted for as equity transactions (investments by owners and distributions to owners acting in their capacity as owners). Therefore, no gain or loss is recognized in consolidated net income or comprehensive income. The carrying amount of the noncontrolling interest is adjusted to reflect the change in its ownership interest in the subsidiary. Any difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interest is adjusted is recognized in equity attributable to the parent.

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued
(In thousands of U.S. dollars, except share and per share data and unless otherwise stated)

1.

BASIS OF PREPARATION — continued

Goodwill

The excess of the purchase price over the fair value of net assets acquired is recorded on the consolidated balance sheet as goodwill.

The Group completes a two-step goodwill impairment test. The first step compares the fair value of each reporting unit (operating segment or one level below an operating segment) to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of the affected reporting unit’s goodwill to the carrying value of that goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill. The annual impairment test is performed as of December 31of every year.

Impairment of long-lived assets and certain identifiable intangibles

The Group reviews its long-lived assets for impairment whenever events or change in circumstances indicate that the carrying amounts of an asset may no longer be recoverable. When these events occur, the Group measures impairment by comparing the carrying values of the long- lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amounts of the assets, the Group would recognize an impairment loss based on the fair values of the assets.

Segment Reporting

As a result of acquisition of Citylead in February 2010, the Group adjusted its segment reporting since then. The business activities of previously reported handset design segment and product sales segment are now combined into one segment, named as original developed products (the “ODP”) segment. The business activities of QIGI Technology acquired in 2010 are now representing a new segment of the Group, named as brand name phone sales segment. Prior-year figures have been adjusted retrospectively.

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued
(In thousands of U.S. dollars, except share and per share data and unless otherwise stated)

2.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

	(1)		Newly Adopted Accounting Pronouncement
			In June 2009, the Financial Accounting Standards Board (the “FASB”) issued an authoritative pronouncement that changes how a company determines whether an entity should be consolidated when such entity is insufficiently capitalized or is not controlled by the company through voting (or similar rights). The determination of whether a company is required to consolidate an entity is based on, among other things, the entity’s purpose and design and the company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. The pronouncement retains the scope of previously issued pronouncements but added entities previously considered qualifying special purpose entities, since the concept of these entities was eliminated by the FASB. The pronouncement is effective as of the beginning of the first fiscal year that begins after November 15, 2009.
			The Group adopted this pronouncement since January 1, 2010. The adoption of this pronouncement did not have a significant impact on the Group’s financial position or results of operations, other than the additional disclosure made regarding the assets of the VIEs for which can be used only to settle obligations of the VIEs and liabilities of the VIEs for which creditors (or beneficial interest holders) did not have recourse to the general credit of the Group on the face of the balance sheets as required by the guidance.
	(2)		Recently Issued Accounting Pronouncement Not Yet Adopted
			In October 2009, the FASB issued an authoritative pronouncement regarding the revenue arrangements with multiple deliverables. This pronouncement was issued in response to practice concerns related to the accounting for revenue arrangements with multiple deliverables under existing pronouncement. Although the new pronouncement retains the criteria from exiting pronouncement for when delivered items in a multiple-deliverable arrangement should be considered separate units of accounting, it removes the previous separation criterion under existing pronouncement that objective and reliable evidence of the fair value of any undelivered items must exist for the delivered items to be considered a separate unit or separate units of accounting. The new pronouncement is effective for fiscal years beginning on or after June 15, 2010. Entities can elect to apply this pronouncement (1) prospectively to new or materially modified arrangements after the pronouncement’s effective date or (2) retrospectively for all periods presented. Early application is permitted; however, if the entity elects prospective application and early adopts this pronouncement after its first interim reporting period, it must also do the following in the period of adoption: (1) retrospectively apply this pronouncement as of the beginning of that fiscal year and (2) disclose the effect of the retrospective adjustments on the prior interim periods’ revenue, income before taxes, net income, and earnings per share. The Group is in the process of evaluating the effect of adoption of this pronouncement.

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued
(In thousands of U.S. dollars, except share and per share data and unless otherwise stated)

2.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS — continued

	(2)		Recently Issued Accounting Pronouncement Not Yet Adopted — continued
			In October 2009, the FASB issued an authoritative pronouncement regarding software revenue recognition. This new pronouncement amends existing pronouncement to exclude from their scope all tangible products containing both software and non-software components that function together to deliver the product’s essential functionality. That is, the entire product (including the software deliverables and non-software deliverables) would be outside the scope of software revenue recognition and would be accounted for under other accounting literature. The new pronouncement include factors that entities should consider when determining whether the software and non-software components function together to deliver the product’s essential functionality and are thus outside the revised scope of the authoritative literature that governs software revenue recognition. The pronouncement is effective for fiscal years beginning on or after June 15, 2010. Entities can elect to apply this pronouncement (1) prospectively to new or materially modified arrangements after the pronouncement’s effective date or (2) retrospectively for all periods presented. Early application is permitted; however, if the entity elects prospective application and early adopts this pronouncement after its first interim reporting period, it must also do the following in the period of adoption: (1) retrospectively apply this pronouncement as of the beginning of that fiscal year and (2) disclose the effect of the retrospective adjustments on the prior interim periods’ revenue, income before taxes, net income, and earnings per share. The Group is in the process of evaluating the effect of adoption of this pronouncement.
			In January 2010, the FASB issued authoritative guidance on accounting for distributions to shareholders with components of stock and cash. The objective of this new guidance is to clarify that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected prospectively in earnings per share and is not considered a stock dividend for purposes of accounting treatment of equity and earnings per share. This new guidance is effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis. The Group does not expect the adoption of this guidance would have a significant effect on its consolidated financial position or results of operations.

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued
(In thousands of U.S. dollars, except share and per share data and unless otherwise stated)

2.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS — continued

	(2)		Recently Issued Accounting Pronouncement Not Yet Adopted — continued
			In January 2010, the FASB issued authoritative guidance to clarify the scope of accounting and reporting for decreases in ownership of a subsidiary. The objective of this guidance is to address implementation issues related to changes in ownership provisions. This guidance clarifies certain conditions, which need to apply to this guidance, and it also expands disclosure requirements for the deconsolidation of a subsidiary or derecognition of a group of assets. This guidance is effective in the period in which an entity adopts the authoritative guidance on noncontrolling interests in consolidated financial statements. If an entity has previously adopted the guidance on noncontrolling interests in consolidated financial statements, the amendments in this update are effective beginning in the first interim or annual reporting period ending on or after December 15, 2009. Retrospective application to the first period that an entity adopted the guidance on noncontrolling interests in consolidated financial statements is required. The Group does not expect the adoption of this guidance would have a significant effect on its consolidated financial position or results of operations.
			In April 2010, the FASB issued an authoritative pronouncement on milestone method of revenue recognition. The scope of this pronouncement is limited to arrangements that include milestones relating to research or development deliverables. The pronouncement specifies guidance that must be met for a vendor to recognize consideration that is contingent upon achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. The guidance applies to milestones in arrangements within the scope of this consensus regardless of whether the arrangement is determined to have single or multiple deliverables or units of accounting. The pronouncement will be effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early application is permitted. Companies can apply this guidance prospectively to milestones achieved after adoption. However, retrospective application to all prior periods is also permitted. The Group is in the process of evaluating the effect of adoption of this pronouncement.
			In April 2010, the FASB issued an authoritative pronouncement on effect of denominating the exercise price of a share based payment award in the currency of the market in which the underlying equity securities trades and that currency is different from (1) entity’s functional currency, (2) functional currency of the foreign operation for which the employee provides services, and (3) payroll currency of the employee. The guidance clarifies that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should be considered an equity award assuming all other criteria for equity classification are met. The pronouncement will be effective for interim and annual periods beginning on or after December 15, 2010, and will be applied prospectively. Affected entities will be required to record a cumulative catch-up adjustment for all awards outstanding as of the beginning of the annual period in which the guidance is adopted. The Group is in the process of evaluating the effect of adoption of this pronouncement.

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued
(In thousands of U.S. dollars, except share and per share data and unless otherwise stated)

3.

ACQUISITION

On February 10, 2010, the Group acquired Citylead together with its subsidiaries and VIE, QIGI&BODEE Technology (Beijing) Co., Ltd. (“QIGI Technology”), a domestic mobile phone trading company.

The consideration paid includes $500 of cash and 65,934,066 ordinary shares of the Company at a fair value of $0.19 per ordinary share as of the acquisition date. There are contingent receivables according to the acquisition agreements based on QIGI Technology’s operating performance. If QIGI Technology does not meet the performance target for year 2010 or 2011 as stipulated in the share purchase agreement, the former shareholders of Citylead are obligated to return certain number of ordinary shares of the Company back to the Group based on a pre-determined formula. Such contingent share receivable was initially recorded as contingent consideration receivable at fair value as of the acquisition date and subsequently remeasured at fair value at each period end.

Citylead, through its wholly owned subsidiary, QIGI&BODEE International Technology (Beijing) Co., Ltd (“QIGI International”), entered into a series of agreements with equity owners of QIGI Technology and QIGI Technology on February 5, 2010. The series of agreements include (i) exclusive business cooperation agreements under which QIGI International provides complete business support services and consulting services to QIGI Technology in exchange for a fee that constitutes substantially all of QIGI Technology’s net income, (ii) Power of attorney under which the equity owners of QIGI Technology executed an irrevocable power of attorney appointing the person(s) designated by QIGI International as their attorney-in-fact to vote on their behalf on all matters of QIGI Technology requiring shareholder approval under PRC laws and regulations and the article of association of QIGI Technology, (iii) equity interest transfer agreement which irrevocably grants an exclusive right to QIGI International to purchase, to the extent permitted by under PRC law, all or part of the equity interests in QIGI Technology at a price of one Renminbi (“RMB”) unless otherwise legally required, and (iv) equity interest pledge agreements under which the ultimate owners agreed to pledge all their respective rights and interests in QIGI Technology, in favour of QIGI International. Therefore, QIGI International is the primary beneficiary of QIGI Technology and QIGI Technology becomes a VIE of Citylead.

Through this acquisition the Group expanded its branding business to target enterprise users and operator tailored customers.

The transaction was considered an acquisition of a business and accordingly the purchase method of accounting has been applied. The amounts assigned to the identifiable intangible assets of the acquired business are based on the preliminary assessment of their fair values and are subject to change pending the finalization of the valuations of these intangibles. The finalization of those valuations could affect the amounts assigned to the intangible assets or goodwill of the acquired business of Citylead and the related periodic changes for these intangible assets.

The purchase price allocation of the transaction was determined by the Group with the assistance of an independent valuation firm, which was allocated to assets acquired and liabilities assumed as of the date of acquisition as follows:

Cash consideration		$	500
Fair value of ordinary shares			12,835
Fair value of contingent receivable			(196	)
Total consideration		$	13,139

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — continued
(In thousands of U.S. dollars, except share and per share data and unless otherwise stated)

3.		ACQUISITION — continued
		The purchase price was preliminarily allocated as follows:

						Amortization
						period
Cash acquired		$	11,183
Intangible assets:
Contract backlog			20			0.1 year
Customer base			680			5 years
Trade name & domain name			1,670			Indefinite life
Goodwill			1,242
Deferred tax liability			(170	)
Other net liabilities acquired			(1,486	)
Total		$	13,139