Good morning and welcome to Diodes Incorporated Fourth Quarter and Full Year 2011 Financial Results Conference Call. (Operator Instructions) As a reminder this conference call is being recorded today, Wednesday, February 08, 2012. I would now like to turn the call to Leanne Sievers of Shelton Group, the Investor Relations Agency for Diodes. Leanne, please go ahead.

Good afternoon, and welcome to Diodes’ Fourth Quarter and Fiscal 2011 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; Chief Financial Officer, Rick White; Senior Vice President of Sales and Marketing, Mark King; and Director of Investor Relations, Laura Mehrl. Before I turn the call over to Dr. Lu I would 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 Securities and Exchange Commission. In addition, any projections as to the company’s future performance represents management’s estimates as of today, February 8, 2012. 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’s statements during this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms, including the company’s press release or definitions and reconciliation of GAAP net income to non-GAAP adjusted net income and GAAP net income to EBITDA, which provide additional details. Also, throughout the company’s press release and management’s statements during this conference call we refer to net income attributable to common stockholders as GAAP net income. For those of you unable to listen to the entire call at this time, a recording will be available via webcast for at least 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. I’m very pleased to report that Diodes continued with its growth during 2011 and achieved record revenue for the full year. Despite the ongoing uncertainties in the global economy, this past year also represented our 21st consecutive year of profitability. Despite the broad market weakness that began late in the second quarter of 2011, we were still able to gain market share as a result of our past design win momentum and new product initiatives. This weakness was even more pronounced in the first quarter as most of our market segment declined significantly. Revenue in the fourth quarter was $143 million, a decrease of 13% over the prior-year period and 11% sequentially. During the quarter, we continued to shift our product mix to grow our market in commodity products to support the correlation of our install capacity. Gross margin was also impacted by increased price inflation and the decline of weakness in both America and Europe, where our gross margin are typically higher as a compared to Asia. During the quarter, our productivity and manufacturing efficiencies in our Shanghai facility has recovered to prior data. And we increased our finished goods inventory in advance of the Chinese New Year. However, this collectively did not completely offset the product mix and the price inflation experienced in the quarter. As a result of the current market environment, we are maintaining the cost reduction actions that we implemented last quarter. This includes the delay of capital investments except for those related to new product extension and the copper wire conversion. We have also slowed the pace of building the construction at our Chengdu facility, and now expect completion by the end of second quarter this year. Our decision to increase capacity at our Chengdu facility at both the current pilot line level will depend upon market requirements and improvement in demand. In addition, we are closely monitoring the market environment, and plan to maintain our operating expense controls. As we start the New Year, I believe we are better positioned than we were coming out of 2009’s downturn. With a 50% higher revenue base, a greatly expanded product portfolio and a stronger annualized margin, we are already beginning to see the sign of a slow recovery in our end markets with our first quarter guidance expecting better than typical seasonal payment. We believe this will set the stage for the growth of the remainder of the 2012. With that, I now turn the call over to Rick to discuss our fiscal 2011 and the fourth quarter financial results, and first quarter guidance in the more detail.

Thanks, Dr. Liu, and good afternoon, everyone. Revenue for 2011 was a record $635.3 million, an increase of 3.6% over the $612.9 million in 2010. For the fourth quarter of 2011, revenue was $143.3 million, a decrease of 12.5% over the $163.8 million in the fourth quarter of 2010, and a decrease of 10.8% from the $160.6 million in the third quarter 2011. The decrease in quarterly revenue was due to general market weakness across most of our market segments, including the consumer, computing and communication markets. Gross profit for 2011 was $193.7 million or 30.5% of revenue, compared to $224.9 million or 36.7% of revenue in 2010. For the fourth quarter of 2011, gross profit was $35.5 million or 24.8% of revenue, compared to $62.6 million or 38.3% in the fourth quarter of 2010, and $45.2 million or 28.1% of revenue in the third quarter of 2011. The decline in fourth quarter gross profit margin was due primarily to a weak pricing environment, a mix shift of business to Asia from North America and Europe where we have a richer mix of products and a sustained move in product mix through lower margin products in an effort to maintain capacity utilization at our wafer fabs and Shanghai packaging facilities. Total operating expenses for the fourth quarter were $30.6 million or 21.4% of revenue, compared to $30.4 million or 18.6% of revenue in the fourth quarter of 2010, and $31.8 million or 19.8% of revenue last quarter. Looking specifically at selling, general and administrative expenses for the fourth quarter, SG&A was approximately $22.6 million or 15.8% of revenue, compared to $23.1 million or 14.1% of revenue in the fourth quarter of 2010, and $23.4 million or 14.6% of revenue last quarter. Investment in research and development for the fourth quarter…

Thank you, Rick and good afternoon. As Dr. Lu and Rick mentioned, revenue for the fourth quarter declined sequentially, led by Europe and North America, and was predominately TOP concentrated. Globally, direct sales were down only 4% sequentially while distributer POP declined 18%. Channel inventory decreased 8% in the quarter. We expect the channel inventory reductions will also impact the first quarter, but less dramatically than in Q4. Our results in Europe were also impacted by an 8% sequential decline in the euro, and sales to European automotive market declined for the first time in eight quarters. Although there continues to be uncertainty in the macro environment, we expect distributer order rates to begin improving in the first quarter, and we will also begin to ramp a number of new projects for our products used in smartphones and tablets, which continue to be bright spots in terms of end equipments. Turning to global sales, Asia represents 79% of revenue while Europe and North America were both 10.5%. Our end market breakout consisted of consumer representing 34% of revenue, computing 28%, industrial 19%, communication 16% and automotive 3%. Now turning to new products, traction remains strong as we continue to execute our new product initiatives. Highlights include several developments for the LED TV market, further expansion of our standard logic product family and continued strength in power management. Although the macro environment continues to weigh heavily on demand, we remain focused on new product introductions, and our design win activity and pipeline is solid. Looking specifically at our discrete product line, our product introductions totaled 34 new products across 10 product families. Diodes launched a range of BJT devices aimed at improving the efficiency of the current balance for LED backlighting of larger LED screen TVs. These were complemented by a…

(Operator Instructions) Your first question comes from line of Steve Smigie from Raymond James. Steve Smigie – Raymond James: Great. Thank you. Dr. Lu, I was hoping you could give us some color on orders post-Chinese New Year. I don’t know if it’s too early at this point yet to know how things are recovering. Just I think that would obviously give some indication of if the pickup in orders at the end of last year, start of this year, is something that might be following through. Thanks.

Okay. Thank you, Steve. You know, it’s very difficult to call because now is only about two weeks after Chinese New Year, but we already start to see some pocket pooling before the Chinese New Year, and after Chinese year we start to see more and more pooling. And in additional, we see a sign of stronger POS, now from our disti. Therefore, we feel or this I feel much better than last quarter, but unfortunately, you know, due to the Chinese New Year shutdown of our customer, shorter February month, and our customers’ shorter workforce or shortage, workforce shortage of our customer. Therefore, we cannot really show much stronger revenue, so we say our 1Q revenue is plus/minus $5 million. Steve Smigie – Raymond James: Okay. And, Dr. Lu, if you could also comment a little bit on your CapEx plans where I think last cycle as things recovered, you guys are one of the first to see the turn and put capital equipment back on. You’re being, I think, a little bit more cautious so far in this recovery. Is that just because the magnitude of the recovery is not there yet? Or is it just that because you’re doing the Chengdu expansion in addition to the normal CapEx you don’t need to do as much this cycle?

Okay. Actually, this is a very good question. It is really, one, because we do put CapEx at about mid or beginning to the middle of last year because in 2011 first half, looking at the sign is very strong. Okay? Then even after that we tried to slow down, but a lot of equipment order for the third quarter you cannot really stop it. And therefore our margins get hurt a little bit in 4Q and even 1Q this year is because we had the capacity, but we did not have the demand. And so, depreciation and excess capacity hurting us. And so, at the end we do have excess capacity during – well right now we have excess capacity. So, we are really prepared and ready. If the markets turn we should have enough capacity to support the upside. Then, we will look at it and then we can put in the capacity to support even further strong demand. But, we are ready for the second quarter upside, if it’s coming. Steve Smigie – Raymond James: Okay. Can I sneak one last one in? When do you think you will see meaningful return of North American, European revenues such that that will positively impact gross margin? Thanks a lot.

Well, actually we already see – in 1Q we already see a stronger North America and Europe. Unfortunately they are only like 20-something percent of our total revenue. So even their GPM, their product GPM is higher. It probably cannot really offset the capacity underutilization because of the capacity underutilization. Okay? So, our GPM recovery is going to be strongly dependent on the recovery and the capacity utilization. Steve Smigie – Raymond James: Great. Thank you very much.

Thank you.

Your next question comes from Shawn Harrison. Shawn Harrison – Longbow Research: Hi there, everyone.

Hi, Shawn. Shawn Harrison – Longbow Research: Just a follow up on the comments on the new facility. Is there a way to quantify right now the drag on operating profit, either in dollars or percentage terms? Just because of that excess capacity?

Well, I would say – very difficult, but I would say this. We probably 10%, let’s say from the SKE our backend capacity, we’re probably somewhere around 10% to 15% underutilized. But we have one more knob we can turn is by changing product mix. So right now I think you know what our strategy is. When we are under-loaded we try to sell more or put our product mix to more commodity products. And that is another knob we can turn to improve our GPM percent. So it’s not – underutilization is one affect on us, but another one, product mix adjustment will be, is another one we can improve our GPM. If the – when the demand is very strong, then we can adjust the product mix. Shawn Harrison – Longbow Research: That’s helpful. And then two brief follow-ups. I was wondering with the commentary of new smartphone and tablet PC wins, what that could represent as a percentage of sales, maybe mid-year or after the first quarter? And then the other question is what do you typically view as June quarter sequential seasonality?

Okay. Hold on. Let me talk about sequential, then I’ll let Mark answer you on this smartphone and tablets. Typically our second quarter – our first quarter typically 5% to 10% down, but this time we guided for that. Okay? Then typically after 5% to 10% down, in second quarter we are typically somewhere around 10% up. But this time is very difficult to tell because since we say 1Q is a threat and then we really don’t know. So, we don’t see the guidance, we don’t give the second quarter guidance yet. And it really depend on how strong the recovery is before we can say it. Okay? But to let Mark answer you...

Shawn, regarding the – we don’t really quantify our design wins and we really never have. But in reality we’re pretty excited about the progress that we’re making in those segments, both with products to support those and equipment, as well as the design wins on those products. So we put a lot of emphasis in that area and we have some exciting new stuff to support those marketplaces, and I think we’re achieving our objectives in that area. So I think that’s as far as I can really quantify it. Shawn Harrison – Longbow Research: Okay. Are they categorized in terms of the end market breakout? Does it fall within computing? Or is it the tablets in computing and smartphones in communications?

They’re in consumer, but sometimes the crossover kind of gets mixed up between the end customer, it’s sometimes hard to break it all out. So I think that over – as we go on, computer and consuming are getting more clouded. Shawn Harrison – Longbow Research: Very understandable. Thanks so much.

Your next question comes from the line of Gary Mobley of Benchmark. Gary Mobley – Benchmark: Hi, everyone. Rick, I was curious about how the ramp of your facility is going to impact your gross margin in the second half of the year. At a minimum, what will the increased depreciation expense mean to gross margin if you can measure it in margin terms or absolute dollar terms? And then as well, what poor yields might mean or low initial yield might mean for the overall gross margin?

Okay. So there’s really two pieces there. One is the building and its impact on gross margin. I think it’s going to be minimal. If you think about the depreciation schedule for a building or road or something like that, you’re talking about 30 years. So, the impact is going to be minimal in any one quarter. The, what we’re going to do next year is...

This year.

Or 2012 this year, is we’re going to put the MERF, what we call the manufacturing equipment-related facilities, which are the filters and air conditioning and that kind of stuff, we’re going to delay that until we see the market coming back. That’s pretty quick to put in. And we do have this pilot line running. The pilot line is up and running. Yields are pretty good. It’s in the 130 million units a month range. And so right now the Chengdu facility; I don’t see it causing us any problem. As we continue into the third and fourth quarter, if we continue to run the pilot line where it is with no ramp, then the yields are going to be okay. And again, I don’t think there’s going to be any impact to our gross margins from the Chengdu facility. Gary Mobley – Benchmark: Okay. All right. That’s helpful. And with respect to inventories held by your distributors, could you give us a sense measured in days or weeks where channel inventories sit today compared to where they were sitting at this point last quarter?

Well they were down 8%. I don’t have exactly what we quoted last quarter for it, but we’re sitting at about 3.5 months. Gary Mobley – Benchmark: Okay. All right. Thanks, guys.

Your next question comes from the line of Stephen Chin, UBS. Stephen Chin – UBS: Hi. Thanks for taking my questions. Can you hear me okay?

Yeah. Sure. Stephen Chin – UBS: Okay. Great. Dr. Lu, first question may be better for you to address that, specifically about the Chinese markets. I guess, could you offer some color in terms of the Chinese consumer demand and maybe also government policies, if you could, in terms of policies that might be a positive for demand creation this year, either from an enterprise or telecom side as well as the consumer, first.

Okay. I probably cannot really talk in too much about the China local demand, because we have some China local but allowed our China revenue is a full OEM and who produced the quarter for Global Link and that’s why we set our facility in export zone so it’s really to support the global requirement just in China. So, it’s very difficult for us to separate that portion. If you go to Quingdao, Honghai, (inaudible) to local, we don’t really know. Okay? And our China local disti, they are okay, but we don’t see a major upside or something. We don’t see that and I don’t know is it because that last year any strong government control on the money and the make the consumer very conservative or not, I don’t know. But, China still while their infraction is still there, but fortunately salary, government forced salary to go up and so our hope in China market start to turn. But I really don’t have much to tell me one way or the other. Stephen Chin – UBS: Okay. That’s helpful. Another question related to some of the other earlier comments about some of the lower priced business that you guys have pursued in recent quarters. Just if you can you help me better understand like how you think your customers whether it’s the distis or direct customers, how they may be using some of those products that they’re purchasing? I understand they’re making commodity-oriented product. Are they just stocking up these products that they want from you guys at a lower price or do you think they’re actually utilizing it, building products for in real-time during the quarter? Because I’m trying to understand what kind of environment would lead to a lower price decline.

When business gets soft we have a tendency to go back after business that we’ve kind of abandoned, okay, and so as business gets better and as product gets tighter we get more selective on the pieces of business that we take. So, we squeeze our distributors out, our Asian local distributors out of say SOT23s and so forth. And as business goes in, and they might get that product from somewhere else that’s cheaper than us or so forth, but when business gets bad then we push them to push those guys out and put our product back in. So, it’s not business that we love to be involved in, but it helps us with our utilization in the softer periods. So, the goal is to be able to, we also use that strategy when we’re expanding very rapidly. Well you can’t place a perfect mix when you’re adding 100 million units at a time. So, what you do is you add those units and you sell the lower products and then you try to move yourself into your mix. So, in good times and in bad times or in expansion times you use the commodities to try to drive utilization while you try to search for that mix that’s more rich.

And at the same time those commodity products go to our disti, we monitor very closely. So, it is not going to sit on the disti’s desk. That’s not our objective and it’s not our disti’s objective. So, disti, typically if we have commodity we want to ship it and we talk to disti and make sure to push it out of door instead of just sitting on desk.

Right, overall the inventory went down 8% in the quarter. So the parts aren’t sitting there. Stephen Chin – UBS: Okay. Great. Thanks.

Your next question comes from Vijay Rakesh with Sterne Agee. Vijay Rakesh – Sterne, Agee: All right. Thanks, guys. Hey Dr. Lu just a question here. In your, when I look at 2011, besides the product mix, I think one other thing that affected you was wages in China, right? I wonder how you’re looking at it in 2012, the wages and OpEx?

Okay. Number one, it’s not really, it’s the wage in itself okay? It’s several things. Number one, gold is one key one. I think we’re talking about gold price, do affect our GPM quite a bit. If you look at 2011, average gold price versus 2010 average gold price is a big increase. This 2012, I believe now – no, I don’t have the mirror to tell me, but at this I think it’s there. It’s about fair; it’s not really going up. Another thing is we put a lot of effort on the copper wire conversion. Okay? Now, for the general market, we can easily to convert but for those key major customers, a lot of them say, yes, we will convert it our next design. We don’t want to convert it at the current production. And therefore our hope this year, our gold conversion, or copper wire conversion will be better than last year because you get more and more design wins, more and more customers, especially major customers, convert to the copper. Those is the one really expect our GPM; then another one we’re talking about move the commodity because the capacity utilization. So, those is really those key ones, and you know we had the productivity problem because last year after Chinese New Year we lose a lot of people. And that productivity problem – I think in my speech, we always say, in 4Q we’re back to where we were in 4Q 2010. So, we are back to where we’re hoping. Now, we’ll continue to improve our productivity but in this, now we are recovered back to 2010 fourth quarter. Vijay Rakesh – Sterne, Agee: Got it. Of that margin impact in 2011, what percentage was due to capacity utilization, what percent was due to gold and what percent was due to mix?

I really don’t have that. I mean they are all mixed together, so it’s very difficult to give you that. Vijay Rakesh – Sterne, Agee: All right. And last question, obviously you guys are working on the inventory side. You know there is some base goods inventory that picked up ahead of the New Year. How do you see that trending here on the inventory side?

Well, we’re intentionally doing that. Okay? I think we know you’re going to lose the people in – during the Chinese New Year. That is just something – is we’re going to fight in every year and there’s no way we can get away from it. So, this year we put a lot of caution. We know this is going to be happening, and that’s why in December we just build up almost $2.5 million of the finished good inventory and we put almost $1.5 million now, or $1.3 million of work in process. So, basically we’re building ahead of almost $4 million. And so, you know we know Chinese New Year we’re going to lose the people. We know you’ve got a short month in February and you know 1Q going to be total short working days. Vijay Rakesh – Sterne, Agee: Got it.

We go through that. Okay? Vijay Rakesh – Sterne, Agee: Okay. Great. Thanks a lot. I appreciate it.

Okay.

Your next question comes from Brian Piccioni of BMO Capital Markets. Brian Piccioni – BMO Capital Markets: Yeah. And I’m sorry I’ve got to ask the questions, because you were going through some of the numbers pretty quick for me earlier in the conference call. Can you give the revenue breakdown again please, in terms of segments like Consumer Electronics and so on.

Oh yes.

Okay.

Yeah. That was...

Mark?

Yeah. 34% of the revenue was consumer; 28% computing; 19% industrial; communications 16% and automotive 3%. Brian Piccioni – BMO Capital Markets: Automotive 3%?

Right. Brian Piccioni – BMO Capital Markets: Okay, great. Yeah. I knew I had made a few mistakes there. So, thanks a lot. In terms of your inventories and this sort of thing, do you have any way of determining whether a significant amount of your inventory is going into gray market channels or anything like that?

I don’t think much of our products ever makes it into gray market product at all. Brian Piccioni – BMO Capital Markets: And that would be simply because of the nature of the product?

Yeah. I mean, you know, you can generally see your places. I mean we have some places that we give some gray, like some stock quotations stuff to and so forth, but we just don’t see – we see our – to go into the gray market our distributors would have to be dumping it, and we see that in their POS that that’s not occurring. Brian Piccioni – BMO Capital Markets: Okay.

They do have some level of broker business, but that would be just people with specific – you know they just act as an intermediary, but it’s all pretty much above board business. Brian Piccioni – BMO Capital Markets: I see. Okay. Well, that’s basically it. Thank you.

Thank you.

Once again, ladies and gentlemen (Operator Instructions) Your next question comes from Christopher Longiaru with Sidoti & Company. Chris Longiaru – Sidoti & Company: Hey, guys.

Hi, Christopher. Chris Longiaru – Sidoti & Company: My question is – I think when Mark was speaking, he said that channel inventory was down about 8%. Is that correct?

Yes. Chris Longiaru – Sidoti & Company: Can you give us what it is in terms, in weeks? And how that relates to what is typically is at this point?

It’s running right at about 3.5 months and probably it’s a half-a-month high in North America and Europe and it’s probably somewhere between three-quarters and a month high in Asia.

But you know, when you use the...

Depending on how hot the market is. Asia operates anywhere between 1.8 months and 3 months, depending on the parts of the year. Chris Longiaru – Sidoti & Company: Okay. So, then my question becomes, it seems like there’s still probably a little bit of inventory to reduce, and yet you’ve kind of bucked seasonal trends, partially because of lower costs but also – I guess is all of this excess demand in terms of seasonality basically new products at this point? Is that the major reason for the flat guidance?

Well, let me answer that, and then Mark can follow it. Okay? Actually don’t forget, we, our disti, is just like us. We put a lot of finished goods inventory before the Chinese New Year. Okay? And so when you cut it off at December, Chinese New Year is in middle of January, they will worry about the customer going to shut down during the Chinese New Year. So, a lot of the people is taking the units and whenever Chinese New Year, they can ship all right before or after Chinese New Year. They can ship it to the customer’s site. Okay? So, I’m not really concerned that. And I’m going to say we need to remember when you use the month instead of use the dollar and that depend on what the POP. And we know in 4Q, POP is very low. So your inventory then you’re going to see a higher inventory for month’s point of view instead of the dollar point of view.

Yeah. And POP was pretty bad in North America and Europe. So we’re getting, even though inventory will continue to decrease, we’re still going to have improvements in our POP in Q1. Chris Longiaru – Sidoti & Company: Got it. All right. That’s very helpful, guys. Thank you.

Okay.

And there are no further questions at this time. I would now like to turn the call back over to Dr. Keh-Shew Lu.

Well thank you for your participation today. Operator, you may now disconnect.

Thank you. Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day and enjoy the remainder of your week.