Good afternoon and welcome to Diodes Incorporated third quarter 2009 financial results conference call. At this time, all participants are in a listen-only mode. At the conclusion of today's conference call, instructions will be given for the question-and-answer session. (Operator instructions) As a reminder, this conference is being recorded today, Monday, November 2, 2009. I would now like to turn the call over to Leanne Sievers of Shelton Group, the Investor Relations Agency for Diodes Incorporated. Leanne, please go ahead.

Good afternoon and welcome to Diodes Third Quarter 2009 Earnings Conference Call. I'm Leanne Sievers, Executive Vice President of Shelton Group, Diodes' Investor Relations firm. With us today are Diodes' President and CEO, Dr. Keh-Shew Lu, who is joining us from Taiwan; Chief Financial Officer, Rich White; Senior Vice President of Sales and Marketing, Mark King; and Vice President of Finance and Investor Relations, Carl Wertz. Before I turn the call over to Dr. Lu, I'd like to remind our listeners that management's prepared remarks contain forward-looking statements, which are subject to risks and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today and therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's filings with the Securities and Exchange Commission. In addition, any projection as to the company's future performance represent management's estimate as of today, November 2, 2009. Diodes assumes no obligation to update these projections in the future as market conditions may or may not change. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms. Included in the company earnings release is a reconciliation of GAAP net income to non-GAAP adjusted net income, which provides additional details. For those of you unable to listen to the entire call at this time, a recording will be available via web cast for 60 days in the Investor Relations' section of Diodes website at www.diodes.com. And now I'll turn the call over to Diodes' President and CEO, Dr. Keh-Shew Lu. Dr. Lu, please go ahead.

Thank you, Leanne. Welcome everyone and thank you for joining us today. The third quarter marks a significant milestone for Diodes in which we returned to GAAP profitability. While we have been profitable from a GAAP earnings point of view, we are pleased with those results. For the quarter, revenue increased about 18% and gross profit increased 37% sequentially. Revenue grew across all geographies with Europe increasing the hardest with almost 30% sequentially. Our revenue exceeded the high-end of our guidance, due to customers in Asia advanced fourth quarter orders into the third quarter in preparation for the one week national holiday shutdown in China, which began on October 1. As I discussed last quarter, we have been actively hiring at our packaging facility to increase our equipment utilization, and as a result were fully utilized by the end of the third quarter. Gross margin was 30.8%, which is a 450 basis point improvement over the second quarter. Utilization also improved at our two wafer fabs during the quarter, but they are not yet fully utilized. We are raising further utilization improvements at our wafer fab's to provide opportunity for upside in gross margin in the coming quarters. With regard to other key financial results, EBITDA has been steadily increasingly throughout the year, and we have now returned to our previous $20 million per quarter run rate. In fact, the third quarter EBITDA was up 29% from the second quarter and up 10% from the third quarter a year ago. In terms of capital expenditures, we spent approximately $6 million in our manufacturing facilities during the quarter. With the recent improvements in our business, we will resume our more normalized CapEx between 10% to 12% of the revenue, primarily due to equipment lead time and our initial forecast of demand…

Thanks, Dr. Lu, and good afternoon everyone. Revenue was a $122.1 million, an 18% increase compared to the $103.9 million last quarter and only 9% below the $134 million reported in the third quarter of 2008. Gross profit for the third quarter of 2009 was $37.6 million or 30.8% of revenue compared to $27.4 million or 26.3% in the second quarter of 2009 and $38.1 million or 28.4% in the third quarter of 2008. As Dr. Lu mentioned, this represents a 450 basis point sequential increase, primarily attributable to our packaging facilities being fully utilized by the end of the quarter, as well as the continued improvements in utilization at our wafer fabs. We expect further improvements in utilization at our wafer fab facilities, which will have a positive impact on the fourth quarter. ASPs were down 4.7% sequentially during the quarter primarily due to product mix. Selling, general and administrative expenses for the third quarter were approximately $19.1 million or 15.6% of revenues, compared to $15.2 million or 14.7% of revenue last quarter. The increase in SG&A expenses was primarily due to increased employee related expenses due to the cancellation of our temporary salary reductions, increased sales commissions, increased equity compensation expenses and additional global ERP costs. Investment in research and development for the third quarter was $6.3 million or 5.1% of revenue, which was comparable on a percent of revenue basis to the $5.4 million or 5.2% of revenue in the second quarter. We plan to continue to invest in R&D at similar levels going forward to support our future product initiatives in alignment with our growth. Total operating expenses amounted to $26.3 million or 21.6% of revenue comparable to the 20.7% last quarter. We expect the fourth-quarter operating expenses to be comparable to the third quarter on…

Thank you, Rick, and good afternoon. As Dr. Lu mentioned, we achieved another stronger solid quarter of revenue growth as we executed our new product strategy initiatives. Our increase in revenue was driven by strong demand for our products utilized in LCD and LED televisions, LCD panels, set-top box, mobile handsets and notebooks. In particular, we achieved significant gains in MOFSETS, SBR devices, bipolar transistors, LED drivers and USB power switches. Additionally, our continued focus on new product development and product line expansion further strengthened our customer position as an analogue supplier with analogue revenue reaching an all-time high and surpassing the prior high posted in the third quarter of 2008. We also achieved sequential revenue growth across all geographies, and were particularly pleased with our expansion in China as we continue to focus on this region as a key growth initiative. Also during the quarter, we released new products at record levels and in process design activity remained high, which I will discuss in greater detail in a moment. In terms of our end-market breakout, consumer and each represented 32% of revenue with industrial at 18%, communications 15% and automotive 3%. In regards to geographic breakout, Asia represented 78% of total revenue growing 18% sequentially, led by continued improvements in strong demand for notebook, mobile phones, panels, LCD TVs as well as power supply and DC fans. Distributor point of purchase grew in support of continued gains in point of sale and slightly exceeded POS. Distributor inventory increased 4% from historical low levels and ended the quarter at 1.4 months. Design activity remained strong in the quarter and included 11 different design wins for our USB switches utilized in notebooks, set-top boxes and LCD TVs. As previously mentioned, we are pleased with our continued revenue growth and account development…

(Operator instructions) Your first question comes from the line of John Vinh with Collins Stewart. Please go ahead. John Vinh – Collins Stewart: Good afternoon. Congratulations on the quarter. First question I had was, on the gross margin side why aren’t we seeing may be a little bit more gross margin upside there? If you look at your original guidance of top line 10% and 15% growth, your gross margin was 28% to 32% (inaudible) up-tick that in the quarter to a 13% revenue growth, maintain your gross margins, and then ultimately your top line revenues came in at the high end of that, actually slightly above that and you're kind of slightly above kind of the midpoint there. I would expect that that you would have had slightly higher gross margins, maybe coming in close to the higher-end, maybe slightly above that just given your original gross margin guidance. I was wondering if you could comment on that please.

Well, our original guidance, if you look the midpoint is 30% and we now actually get 30.8% due to maybe a couple of the reasons. One is our back end is you know, loading up quite a bit and almost full now, and actually we reached to the full capacity utilization in September month. Okay. So it went up from now fully loaded in July to September. That is faster than what we expected and number two is due to our fab, okay. Our fab recover, you know, fab is not easy to recover at first at the back-end. We are hiring the people, but the training took a little bit longer and to ramp up is a bit slow. And so our fab is basically (inaudible). They are not rented up – actually they went up a little bit better than what I expected and so our (inaudible) you know, is better at 80 basis points better than we expected. And some minor one is, you know, we originally (inaudible) declaration and it is a little bit better than what we expected, because due to the capacity shortage. So all those give us you know, 30.8% and look at our guidance for fourth-quarter. We actually guided, if we look at midpoint that would be above 32%, which is again we believe from the wafer fab loading helping us. John Vinh – Collins Stewart: Okay, I appreciate that. And then on peak margins, you know, obviously you know peak margins historically, if you have been in the mid-30% range given that your front end utilization return are seeing some meaningful improvements over the next couple of quarters, you know how soon could we be back to kind of those kind of key gross margin run rates at this point?

Well, we don't really give the guidance, you know, further than in the next fourth-quarter you know, and we already said 32%, and I believe with the fab continue recovery, you know we continue to improve and then the (inaudible) we really don't know, right. And if next year, the (inaudible) we don't like that. We try to convert it but still today, you know, depending on our (inaudible), and depending on how do they recover. It is very difficult for us to guess. John Vinh – Collins Stewart: I see, okay. And then on the poolings, can you help us understand kind of what the magnitude these poolings are, also whether any sort of key end markets where you saw more of these poolings or were they maybe broad based, I hope you could shed a little bit more color on that?

Our pooling, every year typically the Chinese national holiday always come October 1. So, every year, (inaudible) every year, you know maybe (inaudible) and this year the pooling than the past is because you know, our customers inventory is quite low. Due to the capacity constraint, our customers’ inventory is particularly low. So, they are all asking us to give them more than you know, first week of their production, but again we are constrained by our output. So we help them as much as our back-end can deliver and so I would say, you know, probably you know, couple of million, somewhere there. John Vinh – Collins Stewart: Got it. Okay, thank you very –

More than you know, our expectation, you know. John Vinh – Collins Stewart: I see. Okay, thank you very much.

Your next question comes from the line of Harsh Kumar with Morgan Keegan. Please go ahead. Harsh Kumar – Morgan Keegan: First of all, congratulations, these are very good numbers. I also had a couple of questions on your margins. Dr. Lu could you tell us about what your long-term goal again for gross margins is going out, and in this recent quarter did you get any benefit from mix per se?

Harsh Kumar – Morgan Keegan: Got it.

The company's focus, yes. So, that and actually you know the product mix I think in the markets is our ASP actually, equity you know decreased a little bit but it's due to the product mix. Okay, so our, you know, it depends on which one grow, which one not our ASP is affected by product mix. Harsh Kumar – Morgan Keegan: Got it.

But, you said 4%, right. Harsh Kumar – Morgan Keegan: Okay, okay, and that was very helpful, Dr. Lu. Then, let me ask you a question on what you were saying. Looking into December a lot of companies have guided flat, you're guiding for growth. Of your four or five markets, what are you most excited about for December, is it computing or consumer or one of the other ones?

I think computing is not (inaudible). We still feel very strong in the LCD, you know, the LCD TV, LED TV, and those areas. So consumer area is still you know, quite exciting for us. Harsh Kumar – Morgan Keegan: Okay, that's also helpful, and then the last question. It's a little bit tough because I'm trying to reach a little bit into March, Dr. Lu. Chinese New Year is in the second week of February. I guess question for Dr. Lu and Mark. Do you feel like it's going to impact the March seasonality to be a little bit worse than normal?

Well, you know, that's really is the seasonality, and we did for our business, for diodes we are back to the, you know normal cynical cycles. So you know, first quarter of 2010 it will be back to this normal cynical. Harsh Kumar – Morgan Keegan: Okay. That's very helpful. Congratulations guys. Very good numbers. Very good execution. Thank you.

Thank you.

Your next question comes from the line of Steve Smigie with Raymond James. Please go ahead. Steve Smigie – Raymond James: Great, thank you, and I'll let my congratulations on the numbers as well.

Thank you. Steve Smigie – Raymond James: I was hoping you could talk a little bit about where your inventory is in the channel in terms of weeks. You guys certainly don’t I think provide the exact numbers here, but if you get some color. It sounds like you put a little bit more into the channel, but you also said you're coming off record lows. So is it – are your weeks of inventory in the channel half of what they normally are or something like that. Just to get some sense of that.

No, you know, I think that in the Mark's speech, you know he kept to the POS versus POP and you can see you know in Asia POP is more than POS, inventory up above 4% and that POS is actually going down and Europe is (inaudible). Anyway, but if you've got to look at those number compared with our growth, you know third-quarter we actually grew up 17%. So those inventories compared with the (inaudible), I would say it is actually going down, okay, as a percent. (inaudible) That's why we come to say because the inventory is very (inaudible), historically loadable and we are up from that historical level, but very slight decline, and if you look at whether these two our revenue you know revenue grew up 17%. So you need a little bit better inventory (inaudible) to support the continued growth. Then from that percentage point of view, it's not high.

Steve, to give a little perspective of the inventory of the channels down just under 30% for the year. So it's still down very significantly. Steve Smigie – Raymond James: Okay, okay. And could you talk a little bit more about SG&A expense here, particularly sequentially it looks like it had a decent jump. Sounds like maybe it sort of some temporary stuff coming back online, but then you also guided to have OpEx seen percentage wise and normally you guys talk about having you know, OpEx grow less than revenue growth. So I was hoping you could just talk little bit about that.

Okay. There are a couple of key elements, okay affecting that. Number one, you know, during the 1Q and second quarter we have adopted temporary cost-reduction efforts. For example, we have (inaudible) and we have salary reduction and you know, we stopped order accrual and all these months. So we have due to the weakness, we are in the negative profit, (inaudible). We have a lot of (inaudible), we take it and stuff on third-quarter for example, our you know we just don't feel if the company turning to profit you're going to continue asking an employee to taking the salary reductions. Okay, so we stopped salary reduction in third-quarter. Okay. And we start to accrue some employee bonus, okay. So those are the key, and we believe we need to continue that, and that's why going to the fourth quarter we will be the same. Did I answer your question? Hello?

Your next question comes from the line of Ramesh Misra with Brigantine Advisors. Please go ahead. Ramesh Misra – Brigantine Advisors: Good morning and good afternoon gentlemen. Dr. Lu I wanted to ask you about Zetex, I know you – going forward you probably don't want to break out Zetex as part of your operations, but with the industry kind of coming back to a more normalized range, can you give us a sense of how Zetex did, are we back to the preacquisition revenue run rate, and do you see Zetex actually contributing to gross margin growth going forward?

Okay. Number one, it is really very difficult now to separate Zetex from Diodes’ operation because we consolidate together. Right now, our (inaudible) consolidated together and probably a year ago and then we consolidated last quarter. So it's very difficult now for us to look at Zetex and Diodes different because a lot of time we take a Zetex product, package in SKE and sell it. So, you know, very difficult to distinguish this is Zetex product or Diodes product. So very difficult, but I can tell you Zetex even you know, our diode business we are not back to the highest point yet. We are about 9% (inaudible) you know, higher this quarter. You know, I think our highest quarter is in the third quarter last year, and we third-quarter this year we are above 9% (inaudible). So, we almost recovered but not fully recovered yet, and Zetex is, you know, relatively slower than Diodes’ recovery. Okay. So you can from here you can guess that Zetex recovery is not as fast as a diode recovery. Ramesh Misra – Brigantine Advisors: All right, that helps Dr. Lu. In regards to your fab – the silicon fab production right now, can you give us a rough sense of from a wafer standpoint, how much is external and how much is internal currency?

In the past it was 50-50. Now it's internal more than external because our internal recovery better than our external, and Rick do you have that number?

I would say it is about 65% to 70% internal now. Ramesh Misra – Brigantine Advisors: Okay, got it.

Okay, and that's in the Fabtech, now Zetex fab is 100% internal. Ramesh Misra – Brigantine Advisors: Right.

Yes, Zetex fab is 100% internal. The only – the reason Zetex is a little bit slow to recovery is because we shut down. I don’t know you remember or not. We actually shut down the 4 inch line last year, fourth quarter last year, and we shut down 4 inch line. We transfer that to the 6 inch line. So we put the 6 inch line, and that gradually build up the capacity. It gradually built up the utilization. So Zetex current – Zetex in the third quarter is above 50% loaded, and Fabtech is about 70% loaded in third quarter, and moved to fourth quarter you know, Zetex probably increase to 75% and Fabtech probably will increase to 85%. Ramesh Misra – Brigantine Advisors: Okay, great. And then, Mark, this is in regards to your automotive business. I think you said it was around 3% of sales. Now I would have thought especially based upon common side of European automotive manufacturers that business has kind of rebounded and trending upwards. So I wanted to get a sense of you know, where do you see automotive becoming as a percentage of your revenue going forward and you know, is there a tangible lag in your Zetex automotive business versus the rest of the industry?

Actually, as I said, we did have good improvements in the quarter, although we don't look at the outlook quite as positively as they may be looking at it. We're not, you know, I think there is still little bit uncertainty in the automotive markets predominantly in Europe, and I don't foresee that I can forecast the growth in our automotive numbers because we have so many opportunities in our other end equipments to grow the Zetex line faster that I think the growth rate in the automotive section will be slower than some of the other segments. So it would be hard to keep up actually. Ramesh Misra – Brigantine Advisors: Okay, is there any real difference at gross margins in auto versus others?

Not really. On the Zetex line they are pretty consistent depending on products on the diode side there maybe some, but I think automotive is pretty close to the… Ramesh Misra – Brigantine Advisors: Okay, thanks very much, gentlemen.

Your next question comes from the line of Shawn Harrison with Longbow Research. Please go ahead. Shawn Harrison – Longbow Research: Hi, good evening and good morning. Just looking ahead I guess in terms of the March quarter, more operating expenses, given that you've had bonuses and other items come back during the September quarter. Will there be another step up in operating expenses to begin 2010 that we should look forward to or do you expect it getting back to an earlier question, just to see you know, grow continually steady in line with sales throughout 2010.

I don't think that right now you know, we would just you know try to back to the normal life, okay. What I say is 1Q, 2Q this year for us is not a normal life. You know, we are trying to tightened our belt and then try to you know, cost saving the cash and improve performance, and I think next year we'll continue our growth and we should be back to normal life. When you go back to the growth then you know, you can – easier to maintain your gross margin, the GPM and SG&A as a percent, okay or operation expense as a percent of revenue. You feel revenues can continue the growth. So we would try to get. That's why I think in my speech, I tell everybody now we all go back to our growth mode. Last year, this time we said that this outlook is for you and we go into the cash flow – positive cash flow. So we very careful our cash, you know our cash expenditure and our capital expenditure. We are very careful, but you know start from this quarter actually our CapEx for the next year, you know we start to go into go back to the profitable growth mode. And when we go back to the positive growth mode, you know, we will try to put in the capital, put in the capacity to support our growth and then if you are ready to grow [ph], then your operational expense as a percent of revenue should be easy to control. Shawn Harrison – Longbow Research: Okay. So, there shouldn't be a one time step up for you know, higher bonus or something like that or stock-based compensation that we should just kind of expect back to normal.

Well, it would be our third quarter, fourth quarter especially you know, we'll be go back to our fourth quarter long length. Shawn Harrison – Longbow Research: Okay.

Yes. And you know, if our revenue goes down, we reduce our bonus accrual. If the revenue goes up; the profit goes up. So, we will go back to this normal performance. Shawn Harrison – Longbow Research: Okay, my second question has to do with ASPs. Maybe if you could just clarify something with ASPs down 4%, but sales in Europe up strongly I thought you know, typically Europe is maybe, can be a better margin business, maybe if you can just compare and contrast. You know ASPs are down maybe a little bit less than you expected, but Europe was up so strong. I would have expected that to actually maybe help out ASPs a little bit.

Well, Mark, can you answer this one?

Yes, I think it all has to do – the ASPs all have to do with mix. We didn’t, you know, we were very firm on price throughout the third quarter in all regions. Okay, and Europe being up 20%, remember it only represents I think what I say 9% of our sales. So I don’t think that that could have the impact. Actually we're quite happy the way the price has progressed during the quarter, and we were pretty firm, you know there may have been a little bit of ASP move in Europe, and may be a little bit of ASP move in North America, but there was almost no ASP move in Asia. So really, I think it is a mix in the growth, maybe just -- we grew in areas that were a little lower in ASP, okay.

That's the reason our GPN came better than expected. It's because our ASP you know, really performed better than our expectation. Shawn Harrison – Longbow Research: And then, kind of final question based upon those ASP trends, my guess is you know given that there is a lot of capacity constraints in the industry that's aiding ASPs right now, do you think your capacity constraints will be fixed exiting this fiscal year, and does that mean that you could see a little bit more price aggression just in the market in general in early 2010 as other manufacturers also fix their capacity constraints?

We, very difficult for us to see okay, and you know, we in semiconductor business you always, you know, expect ASP degradation, and you just need to improve the productivity, improve the, you know, (inaudible) everywhere to pick out that and so you know, your gross profit will be continued to improve due to the (inaudible). So that's normal life. You know we are not really constant, you know the semiconductor business is. You know ASP degradation is right. So, always that way anyway. Shawn Harrison – Longbow Research: Okay, but just to confirm, you believe your capacity constraints should be fixed here in the fourth quarter on the back end?

On the back end, we are 100% fully utilized on the back-end, but we start to utilize the CapEx, okay. And so, we start to put ready for this because we believe next year the revenue would be, (inaudible) will start to turn growth will be coming, and then we start to put in capital equipment authorization now and get ready for the next year growth. Shawn Harrison – Longbow Research: Okay.

May not be in first quarter but after the first quarter. Shawn Harrison – Longbow Research: Okay, thank you very much and congratulations everyone.

Thank you.

The next question comes from the line of Stephen Chin with UBS. Please go ahead. Stephen Chin – UBS: Great. Thanks for taking my question.

Yes, Stephen. Stephen Chin – UBS: Good morning, Dr. Lu. Dr. Lu, first a question for you in terms of China. I guess, looking at the growth expectations that your presuming out there, how does that change the (inaudible) business either from an OpEx perspective in terms of the headcount that you may need to hire to help pursue some of the opportunities from a sales perspective, and also from I think from a pricing perspective products that are targeted for the Chinese domestic market, does that also change the old pricing mix of your overall business?

Well, you know, growth coming from the Asia and (inaudible), it may not necessarily come to the US and Europe, the end-product our customer view is really consumed in the channel, especially the cost in the channel cost, and – but for some reason, we know the ASP typically channel should be loaded ASP, but due to the shortage, we don’t really particularly feel that it is worse than our normal. That is why our ASP did not really degrade or decrease, and so I just don’t think really in fact, but from operation point of view, yes, we are going to be probably put more people try to do the sales in the Asia or especially in China. So, we (inaudible) from sales point of view will continue enhance our channel sales, enhance our channel sales teams or sales force. Stephen Chin – UBS: Okay, great. And the other question I had is related to CapEx. In terms of the 10% sales – 10% sales spending that you are going to return to is that relatively constant on a quarterly basis or is that sort of the target for the next – over the next fiscal year and any inputs that you can provide on how that will be spent from a capacity expansion standpoint versus technology standpoint. I believe is your Zetex related technology that you have grown or waterfall that technology through some of your other products that may also have some increase in spending there too.

Okay. Our CapEx before this year or in the past historically we always grow 10% to 15%. So this just go back to our normal run rate other than this year equaled our normal run rate. We start to authorize the CapEx in first quarter because in equipment lead time and we document in our second quarter or third quarter the capacity, I mean the (inaudible) ramping up again and so due to lead time and then sell the equipment and qualify the equipment and get ready for our growth. So, we start to authorize the CapEx start from this quarter. Okay, (inaudible) wafer fab not in the packages. So when we are talking about CapEx, I am more talking about packaging capacity. Our wafer fab capital is still not as high. It is still a very small portion of our small portion of our CapEx expenditures. So, you know especially Fabtech still not fully loaded, and Zetex not fully loaded. We are not putting the manufacturing capitals. Now for R&D, yes, we are putting some wafer fab R&D equipment for our process technology R&D technology innovations. Now we spend some cash, but not a major amount. Most, when I say 10% to 12% is to go back to the packaging capacity feature (inaudible). Does that answer your question? Stephen Chin – UBS: Yes, and just one quick follow up there. So, the longer lead time that you are seeing for back-end packaging equipment, what is the approximate lead time currently?

About 3 months. Stephen Chin – UBS: Okay, great.

About 3 months, so we need to authorize in 4Q and get the equipment and then due to the Chinese New Year. So, I need to take action now, because Chinese New Year and the 3 months lead time is (inaudible) and getting qualify and getting ready for the – it won’t be ready for 1Q, but I hope they are ready sometime in the fourth quarter. Stephen Chin – UBS: That is very helpful. Thank you and (inaudible) quarter.

Thank you.

Ladies and gentlemen, we are out of time. I would like to turn the call back over to Dr. Keh-Shew Lu.

Okay. Thank you very much for joining us today and have a good afternoon -- for you, it is good afternoon; for me, it is morning. Anyway thank you for joining us. Operator, you may now disconnect.

Ladies and gentlemen, that concludes today conference. Thank you for your participation. You may disconnect and have a great day.