September 18, 2003

News Release: SpatiaLight Receives Initial Purchase Order from CEC, China's Largest Electronics Manufacturer

SpatiaLight, Inc. (Nasdaq: HDTV) today announced that it has signed an agreement with China Electronics Corporation (CEC), the largest electronics manufacturer in China and a Chinese state-owned enterprise, for the purchase by CEC of 2000 display units from SpatiaLight.

A display unit is comprised of three SpatiaLight imagEngine(TM) microdisplays fitted onto a light engine designed by SpatiaLight and Fuji Photo Optical Co., Ltd. and manufactured by Fuji. Utilizing more than 3.6 million pixels, SpatiaLight's display units are designed to be incorporated into High Definition televisions and rear projection monitors. The purchase order provides for an initial delivery of ten display units and ten sets of LCoS imagers to Wuhan ZhungYuan Electronics Group Co. Ltd. (Wuhan), a wholly owned subsidiary of CEC, which is expected to be made later this month, with a second delivery of 100 display units to follow. Additional shipments under the purchase order will be made periodically according to a schedule to be determined by the parties. The purchase order is subject to customary terms and conditions pertaining to the purchase by CEC of the 2000 display units.

Robert A. Olins, Chief Executive Officer of SpatiaLight, stated, 'This purchase order is a significant step forward from our initial Memorandum of Understanding with CEC signed in October 2001. We are pleased and honored to strengthen our business relationship with both CEC and the Chinese Government. We consider this purchase order from CEC to be another strong endorsement of our proprietary LCoS technology and believe it bodes well for our ability to capitalize on the substantial High Definition television market in China.'

Ted Banzhaf, Executive Vice President of SpatiaLight, commented, 'We are very pleased to see another MOU result in a full-scale purchase order contract. This is an exciting time for our Company and the High Definition television industry.'

Liu Xue Hong, Vice President of CEC and Chairman of Wuhan, stated, 'We have been working cooperatively with SpatiaLight since we signed the MOU in late 2001 and this new agreement marks an important step in CEC's relationship with SpatiaLight.'

Xiang Zi Zhong, General Manager of Wuhan, commented, 'We believe in SpatiaLight's technology as a solution for our development of LCoS rear projection televisions and we look forward to working with SpatiaLight toward developing this product.'

The 2001 MOU between CEC and SpatiaLight sets forth CEC's intent to transform its existing production capacity into a production line with a target annual capacity of 200,000 to 300,000 LCoS rear projection televisions. The MOU calls for production ramp in the first year at a minimum of 2000 units, in the second year at a minimum of 60,000 units, and in the third year at a range of 200,000 to 300,000 units. CEC has indicated to SpatiaLight that it intends to fulfill initial production with complete display units supplied by SpatiaLight, and eventually transition to a light engine developed by CEC incorporating SpatiaLight's imagEngine(TM) microdisplays. The production targets contained in the 2001 MOU do not constitute a purchase order arrangement.

Since October 2001, SpatiaLight has entered into seven agreements or MOUs with eight major television manufacturers in China contemplating the purchase by these prospective customers of SpatiaLight display units and/or SpatiaLight imagEngine(TM) microdisplays. SpatiaLight is currently negotiating the terms of purchase orders with five of the prospective customers in China. SpatiaLight has also entered into similar agreements or MOUs with two television manufacturers in Korea, one of which contains an agreement to jointly develop a High Definition television incorporating SpatiaLight microdisplay devices.

The agreement announced today with CEC represents the second purchase order agreement to result from an MOU. SpatiaLight has a purchase order agreement with Skyworth Display, China's largest television exporter and third largest television manufacturer. SpatiaLight announced earlier this month that it had completed an initial delivery of a limited number of display units to Skyworth Display.

About SpatiaLight, Inc.

SpatiaLight, Inc., founded in 1989, manufactures high-resolution liquid crystal on silicon (LCoS) microdisplays for use in High Definition televisions and rear projection monitors. The Company's proprietary SpatiaLight imagEngine(tm) LCoS microdisplays represent a solution for OEMs of large-screen rear projection monitors, home theater projection systems, video projectors, and other display applications. SpatiaLight is committed to developing microdisplays technologies that will become the standard for the next generation of rear projection display devices and to providing OEMs with the most cost effective, high resolution microdisplays in the industry. For more information about SpatiaLight, please see the Company web site: www.spatialight.com

About China Electronics Corporation

China Electronics Corporation (CEC) is China's largest state sponsored conglomerate, comprised of 26 fully funded enterprises, 30 stock companies with CEC controlling interests, 6 overseas operations and 4 publicly traded companies with CEC controlling interests. CEC has registered capital of USD $750 million, total assets in excess of USD $4.6 billion, and had combined revenues of USD $2.9 billion in 2002. The individual businesses operate in a range of industries, including integrated circuit manufacturing, software, communications and networking as well as consumer electronics. CEC has established business with more than 100 countries and regions to import and integrate the most advanced technologies from around the world. CEC was established in 1989 as a subsidiary of China's Ministry of Information Industry to manage all of the factories and companies relating to the electronics industry previously owned by the State.

Safe Harbor Statement

This news release includes forward-looking statements that reflect SpatiaLight's current expectations about its future results, performance, prospects and opportunities. SpatiaLight has tried to identify these forward-looking statements by using words and phrases such as 'may,''will,' 'expects,''anticipates,''believes,''intends,''estimates,''plan,' 'should,''typical,''preliminary,''we are confident'or similar expressions. These forward-looking statements are based on information currently available to SpatiaLight and are subject to a number of risks, uncertainties and other factors that could cause SpatiaLight's actual results, performance, prospects or opportunities in the remainder of 2003 and beyond to differ materially from those expressed in, or implied by, these forward-looking statements. These risks and uncertainties are outlined in the Company's filings with the Securities and Exchange Commission, including its most recent Form 10-Q, 10-KSB and Proxy Statement.

SOURCE SpatiaLight, Inc.

Ted Banzhaf of SpatiaLight, Inc., +1-415-883-1693, ext. 132

http://www.spatialight.com



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