Q4 2021 Diodes Inc Earnings Call

Speaker 1: Good afternoon and welcome to Diodes Incorporated fourth quarter and fiscal 2021 financial results conference call. At this time all participants are in a listen only mode.

Good afternoon, and welcome to diodes incorporated fourth quarter and fiscal 2021 financial results Conference call.

At this time all participants are in a listen only mode.

Speaker 1: At the conclusion of today's conference call, instructions will be given for the question-and-answer session.

At the conclusion of today's conference call instructions will be given for the question and answer session.

Speaker 1: If anyone needs assistance at any time during the conference call, please press the star key followed by the zero on your touchstone phone.

If anyone needs assistance at any time during the conference call. Please press the star key followed by the zero on your Touchtone phone.

Speaker 1: As a reminder, this conference call is being recorded today, Wednesday, February 9, 2022.

As a reminder, this conference call is being recorded today Wednesday February 19 2022.

Speaker 1: I would now like to turn the call over to Leanne Seavers of the Shelton Group Investor Relations. Leanne, please go ahead.

I would now like to turn the call over to Leann Sievers of the Shelton Group Investor Relations Liane. Please go ahead.

Speaker 2: Good afternoon and welcome to Diode's fourth quarter in fiscal 2021 financial results conference call. I'm Leanne Severs, president of Shelton Group, Diode's investor relations firm.

Good afternoon, and welcome to diodes fourth quarter and fiscal 2021 financial results Conference call I'm Leanne Sievers President of Shelton Group Investor Relations firm joining us today are diodes, Chairman President <unk>, Chief Financial Officer, Brett Whitmire, Senior Vice President of worldwide sales and marketing Emily.

Speaker 2: Joining us today are Diode's Chairman, President and CEO , Dr. Keixu Liu, Chief Financial Officer, Brett Whitmire, Senior Vice President of Worldwide Sales and Marketing, Emily Yang, Senior Vice President of Business Groups, Gary Yu, and Director of Investor Relations for Meet Gali Lab.

<unk> senior Vice President of business groups, Gary Yu, and director of Investor Relations for meat Dhaliwal before I turn the call over to Dr. Lu I'd like to remind our listeners that the results announced today are preliminary and they are subject to the company finalizing its closing procedures and customary quarterly review by the company's independent registered public accounting firm.

Speaker 2: Before I turn the call over to Dr. Liu, I'd like to remind our listeners that the results announced today are preliminary as they are subject to the company finalizing its closing procedures and customary quarterly review by the company's independent registered public accounting firm.

Speaker 2: As such, these results are unaudited and subject to revision until the company files its Form 10K for its 2021 fiscal year ending December 31, 2021.

As such these results are unaudited and subject to revision until the company filed its Form 10-K .

2021 fiscal year ending December 31, 2021. In addition, 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.

Speaker 2: In addition, management's prepared remarks contain forward-looking statements.

Speaker 2: which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your question.

Speaker 2: 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...

With formats with 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 Companys filings with the Securities and Exchange Commission, including forms 10-K, and 10-Q. In addition, any projections as to the Companys future performance represent managements estimates as of today February .

Speaker 2: in the company's filings of the Securities and Exchange Commission, including forms 10K and 10Q. In addition, any projections as to the company's future performance represent management's estimates as of today, February 9, 2022. DAAS assumes no obligation to update these projections in the future as market conditions may or may not change, except to the extent required by applicable law.

2022.

<unk> assumes no obligation to update these projections in the future as market conditions may or may not change except to the extent required by applicable law.

Speaker 2: 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.

Only 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.

Speaker 2: Included in the company's press release are definitions and reconciliations of gap to non-gap items which provide additional details. Also, throughout the company's press release and management statements during this conference call, we refer you to Net Income Attributable to Commons stockholders as gap net income.

Included in the company's press release are definitions and reconciliations of GAAP to non-GAAP items, which provide additional details also throughout the company's press release and management statements. During this conference call. We refer you 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.

Speaker 2: For those of you unable to listen to the entire call at this time, a recording will be available via webcast for 90 days in the investor relations section of DIO's website at www.dios.com. And now I'll turn the call over to DIO's Chairman, President and CEO , Dr. Keishu Liu. Dr. Liu, please go ahead. Thank you.

A webcast for 90 days in the Investor Relations section of diodes website at Www Dot diodes Dot com and now I'll turn the call over to <unk>, Chairman President and CEO . Dr. <unk>. Dr. Lu. Please go ahead.

Thank you Ian.

Welcome everyone.

And thank you for joining us today.

Speaker 3: style had a record year in 2021.

Kyle.

In 2021.

Speaker 3: defecting sustained execution. That consists of five consecutive quarters of recordickets rage.

Reflecting sustained execution.

Does that consist of five consecutive quarter of record revenue.

Speaker 3: as well as seven consecutive quarters of adjusted earnings growth.

As well as seven consecutive quarter.

Adjusted earnings growth.

Correct.

Speaker 3: full year revenue grew 47% and the gross profit grew 56%.

Full year revenue grew 47% and gross profit grew 56%.

Speaker 3: with gap earnings per year expanding 166%.

With GAAP earnings per share expanding 166%.

Speaker 3: and adjusted earning per share, expanding 120%.

And adjusted earnings per share.

And in two.

20%.

Speaker 3: demonstrate the significant operating damage in our motor.

Demonstrating the significant operating leverage.

Sure.

Additionally, gross.

Speaker 3: Gross margin expanded 610 basis points from the first quarter of 2021.

Gross margin expanded 610.

10 basis points from the first quarter of 2021.

Speaker 3: the first full quarter after completing the 9 ohm semiconductor.

The first full quarter after completing the.

Semi conductor.

Speaker 3: to the fourth quarter of 2021.

To the fourth quarter of 2021.

Speaker 3: This increase was driven by a combination of product mix improvement. Manufacturing efficiency

This increase was driven by a combination of product mix improvement.

Manufacturing efficiency.

And improved globally.

Speaker 3: Also, contributing to our ongoing Ma-Chi expansion has been the achievement of five consecutive quarter of Raker- propel gun range.

Also contributing to our ongoing margin expansion has been a shipment of five consecutive quarter of rig or pill count gravy.

Speaker 3: 3. Consecutive Quarters or Breakers in Natural Ray

Three consecutive quarter of recur industrial right.

Speaker 3: as well as 6 consecutive quarters of breaker automotive range.

As well as six consecutive quarter of <unk>.

<unk> automotive revenue.

Speaker 3: which grew 59% in 2021 and reached a record 12% of total revenue for the first time in 2019, which has emerged around the world.

For each group.

<unk>, 9% in 2021.

We reached a record 12% of total revenue for the full year.

Speaker 3: With a full year revenue of 1.8 billion and the growth profit of 0.7 billion, 2021 represented a significant step toward our 2025 target of 1 billion in gross growth.

Sure.

Full year revenue of $1 8 billion and gross four points.

<unk> 7 billion in 2021 represented a significant step toward our 2020.

Five target of 1 billion in gross profit.

Speaker 3: on 2.5 billion revenue and 40 percent gross price.

All two five per year in revenue and 40%.

Bruce.

Speaker 3: in addition to the manufacturing synergy.

In additional to the manufacturing synergies provided by OFC a confusion over these past years.

Speaker 3: provided by AOC acquisition over this past year.

Speaker 3: We expect to realize expanded synergies across our portal portfolio....

We expect to realize explain these synergies.

Our product portfolio.

Customers in the market.

Speaker 3: the coming year to drive additional revenue growth and the growth margin explained.

In the coming year to drive additional revenue growth and gross margin expansion.

Speaker 3: With that, let me now turn the call over to Brett to discuss our fourth quarter financial result.

We've got that.

Let me now turn the call over to Brett to discuss our fourth quarter financial results.

Speaker 3: our first quarter 2022 guidance in more detail.

Our first quarter 2022 guidance in more detail.

Thanks, Dr Lu and good afternoon, everyone.

Speaker 4: As part of my financial review today, I will focus my comments on the sequential change for each of the line items and will refer you to our press release for a more detailed review of our results as well as the year-over-year comparison.

As part of my financial review today, I will focus my comments on the sequential change for each of the line items and we will refer you to our press release for a more detailed review of our results as well as the year over year comparisons.

Speaker 4: Revenue for the fourth quarter 2021 was a record $480.2 million, an increase of 1.9% from $471.4 million in the third quarter 2021. For the full year 2021, revenue was a record $1.81 billion, an increase of 46.9% from $1.23 billion in the prior year.

Revenue for the fourth quarter 2021 was a record $482 million an increase of one 9% from 471 $4 million in the third quarter 2021.

For the full year 2021 revenue was a record 181 billion.

An increase of 46, 9% from $1 billion to $3 billion in the prior year.

Speaker 4: Gross profit for the fourth quarter was also a record at one hundred ninety point seven million dollars

Gross profit for the fourth quarter was also a record at $197 million or.

Speaker 4: or a record 39.7% of revenue, increasing 5.2% or 130 basis points from $181.2 million or 38.4% of revenue in the third quarter 2021. For the full year, gross profit increased 55.5% to a record $670.4 million or 37.1%.

For a record 39, 7% of revenue, increasing five 2% or 130 basis points from $181 2 million or 38, 4% of revenue in the third quarter 2021 for the full year gross profit increased.

55, 5% to a record $674 million or 37, 1% from 431 1 million or 35, 1% in 2020.

Speaker 4: from $431 million or 35.1% in 2020.

Speaker 4: Gap operating expenses for the fourth quarter, 2021, were $104.7 million, or 21.8% of revenue. And on a non-gap basis, were $100.1 million, or 20.8% of revenue, which excludes $4.1 million of amortization of acquisition-related intangible asset expenses, and $0.6 million of acquisition-related costs.

GAAP operating expenses for the fourth quarter, 2021 were $104 7 million or.

Or 21, 8% of revenue.

On a non-GAAP basis were $100 1 million or 28% of revenue, which excludes $4 1 million of amortization of acquisition related intangible asset expenses and zero point $6 million of acquisition related costs.

Speaker 4: This compares to non-GAAP operating expenses in the prior quarter of $99.6 million, or 21.1% of revenue. GAAP operating expenses for the full year were $394.4 million, or 21.8% of revenue, compared to $296.8 million, or 24.1% of revenue, in 2020.

This compares to non-GAAP operating expenses in the prior quarter of $99 6 million or 21, 1% of revenue.

GAAP operating expenses for the full year were $394 4 million or 21, 8% of revenue compared to $296 8 million or 24, 1% of revenue in 2020.

Speaker 4: Total other income amounted to approximately $22.8 million for the quarter, consisting of $13.2 million of unrealized gain on investments, $11.2 million of other income.

Total other income amounted to approximately $22 8 million for the quarter.

Consisting of $13 2 million of unrealized gain on investments of $11 2 million of other income.

Speaker 4: 788,000 of interest income, 1.1 million dollars in foreign currency losses, and 1.2 million in interest expense.

788000 of interest income $1 $1 million in foreign currency losses, and $1 2 million and interest expense.

Speaker 4: Income before taxes and non-controlling interest in the fourth quarter 2021 was $108.8 million compared to $85.6 million in the previous quarter.

Income before taxes and Noncontrolling interest in the fourth quarter 2021 was $108 $8 million.

Pair to $85 6 million in the previous quarter.

Speaker 4: Turning to income taxes, our effective income tax rate for the fourth quarter was approximately 39.1%, which includes taxes related to non-GAAP items. On a non-GAAP basis, the tax rate for the fourth quarter was approximately 18.4%.

Turning to income taxes, our effective income tax rate for the fourth quarter was approximately 39, 1%, which includes taxes related to non-GAAP items on a non-GAAP basis, the tax rate for the fourth quarter was approximately 18, 4%.

Speaker 4: gap net income for the fourth quarter 2021 was $65.5 million.

GAAP net income for the fourth quarter, 2021 was $65 5 million or.

Speaker 4: or $1.43 per diluted share, compared to gap net income of $68.4 million or $1.50 per diluted share in the third quarter of 2021.

Or $1 43 per diluted share compared to GAAP net income of $68 4 million or $1 50 per diluted share in the third quarter of 2021.

Speaker 4: Net income per diluted share in the fourth quarter increased 142% year over year from the 59 cents per diluted share in the fourth quarter 2020.

Net income per diluted share in the fourth quarter increased 142% year over year from the 59 per diluted share in the fourth quarter 2020.

Speaker 4: The share count used to compute GAP diluted EPS for the fourth quarter 2021 was 45.9 million shares.

The share count used to compute GAAP diluted EPS for the fourth quarter 2021 was $45 9 million shares.

Speaker 4: Gap net income for the full year 2021 was a record $228.8 million, or $5 per diluted share, a 166% improvement compared to the $1.88 per diluted share, or $98.1 million in 2020.

GAAP net income for the full year 2021 was a record $228 8 million or $5 per diluted share.

166% improvement compared to the $1 88 per.

Per diluted share were $98 $1 million in 2020.

Speaker 4: On a non-GAAP adjusted net income in the fourth quarter was a record $73.3 million, or $1.60 per diluted share, which excluded net of tax $3.3 million of acquisition-related intangible asset costs.

On a non-GAAP adjusted net income in the fourth quarter was a record $73 3 million or.

Or $1 60 per diluted share, which excluded net of tax $3 3 million of acquisition related intangible asset cost.

Speaker 4: $0.4 million of acquisition-related costs, $13.5 million of costs related to certain LSE investments.

<unk> 4 million of acquisition related costs.

$13 5 million of costs related to certain LSC investments and a $9 $4 million gain on the sale of our manufacturing subsidiary. This represents an eight 8% improvement from the third quarter 2021 of $1 47 per diluted share or $67 three.

Speaker 4: and a $9.4 million gain on the sale of a manufacturing subsidiary. This represents an 8.8% improvement from the third quarter, 2021, of $1.47 per diluted share, or $67.3 million, and a 116% improvement from $0.74 per diluted share, or $37.3 million in the fourth quarter, 2020.

$3 million and a 116% improvement from 74.

Per diluted share or <unk>, $37 3 million in the fourth quarter 2020.

Speaker 4: On a non-GAAP adjusted net income for the full year 2021 was a record $237.2 million or $5.18 per diluted share, a 120% improvement compared to $2.35 per diluted share or $122.7 million in 2020.

On a non-GAAP adjusted net income for the full year 2021 was a record $237 2 million.

Or $5 18 per diluted share, a 120% improvement compared to $2 35 per diluted share or $122 $7 million in 2020.

Speaker 4: Excluding share-based compensation expense of $6.5 million for the fourth quarter and $26.2 million for the full year 2021, both GAAP earnings per share and non-GAAP adjusted EPS would have increased by 14 cents per diluted share for the fourth quarter and 57 cents for the full year.

Excluding share based compensation expense of $6 5 million for the fourth quarter.

$26 $2 million for the full year 2021, both GAAP earnings per share and non-GAAP . Adjusted EPS would have increased by <unk> 14 per diluted share for the fourth quarter and 57 for the full year.

Speaker 4: EBITDA for the fourth quarter was a record $139 million, or 28.9% of revenue, compared to $114.5 million, or 24.3% of revenue in the prior quarter.

EBITDA for the fourth quarter was a record $139 million or 28, 9% of revenue compared to $114 5 million or 24, 3% of revenue in the prior quarter on a year over year basis EBIT to incur.

Speaker 4: On a year-over-year basis, EBITDA increased 107.2% from $67.1 million in the fourth quarter of 2020.

<unk> 107, 2% from $67 1 million in the fourth quarter 2020, further highlighting our significant operating improvements over the past year EBITDA.

Speaker 4: further highlighting our significant operating improvements over the past year.

Speaker 4: EBITDA for the full year 2021 increased 82.1% to a record $434.6 million, or 24.1% of revenue.

EBITDA for the full year 2021 increased 82, 1% to a record $434 6 million or.

Or 24, 1% of revenue from.

Speaker 4: from $238.6 million or 19.4% in 2020.

From $238 6 million or 19, 4% in 2020.

Speaker 4: We have included in our earnings release a reconciliation of GAAP net income to non-GAAP adjusted net income and GAAP net income to EBITDA which provides additional details.

We have included in our earnings release, a reconciliation of GAAP net income to non-GAAP adjusted net income and GAAP net income to EBITDA, which provides additional details.

Speaker 4: Cash flow generated from operations was $77.6 million for the fourth quarter 2021 and $338.5 million for the full year.

Cash flow generated from operations was $77 6 million for the fourth quarter of 2021.

$338 $5 million for the full year.

Speaker 4: Free cash flow was $22.5 million for the fourth quarter, which included $55 million for capital expenditures.

Free cash flow was $22 5 million for the fourth quarter, which included $55 million for capital expenditures.

Speaker 4: and $197.3 million for the full year, which included $141.2 million of capital expenditures, or 7.8% of revenue.

And $197 3 million for the full year, which included a $141 2 million of capital expenditures or seven 8% of revenue.

Speaker 4: Net cash flow in the fourth quarter was a positive $82 million and a positive $46.3 million for the full year, which included a pay down of approximately $152.6 million of long-term debt during the year.

Net cash flow in.

In the fourth quarter was a positive $82 million and a positive $46 3 million for the full year, which included a paydown of approximately $152 6 million of long term debt during the year.

Speaker 4: Turning to the balance sheet, at the end of fourth quarter, cash, cash equivalents, restricted cash plus short-term investments totaled approximately $373 million. Working capital was $717 million and total debt, including long-term and short-term, was $301 million.

Turning to the balance sheet at the end of fourth quarter cash cash equivalents restricted cash plus short term investments totaled approximately $373 million working capital was $717 million in total debt, including long term and short term was 301 million.

Speaker 4: In terms of inventory, at the end of the fourth quarter, total inventory days increased to approximately 107 in the quarter as compared to 99 last quarter. Finished goods inventory days were 32 compared to 27 last quarter.

In terms of inventory at the end of the fourth quarter total inventory days increased to approximately 107 in the quarter as compared to 99 last quarter finished goods inventory days were <unk> 32, compared to <unk> 27 last quarter.

Speaker 4: Total inventory dollars increased $26.5 million to approximately $348.6 million.

Total inventory dollars increased $26 5 million to approximately $348 6 million.

Speaker 4: Total inventory in the quarter consisted of an $18.5 million increase in finished goods, a $15 million increase in raw materials, and a $6.9 million decrease in work and process.

Total inventory in the quarter consisted of an $18 $5 million increase in finished goods a $15 million increase in raw materials, and a $6 $9 million decrease in work in process.

Speaker 4: Capital expenditures on a cash basis for the fourth quarter 2021 were $55 million, or 11.5% of revenue, and 7.8% for the full year, which is within our target model of 5 to 9%.

Capital expenditures on a cash basis for the fourth quarter 2021 were $55 million or 11, 5% of revenue and seven 8% for the full year, which is within our target model of 5% to 9%.

Speaker 4: Now turning to our outlook. For the first quarter 2022, we expect revenue to be approximately $480 million, plus or minus 3%, which at the midpoint is better than typical seasonality of down 5%.

Now turning to our outlook for the first quarter 2022, we expect revenue to be approximately $480 million, plus or minus 3%, which at the midpoint is better than typical seasonality of down 5%.

Speaker 4: We expect gap gross margin on a consolidated basis to be 39.7%, plus or minus 1%.

We expect GAAP gross margin on a consolidated basis to be 39, 7% plus or minus 1% non.

Speaker 4: non-GAAP operating expenses, which are GAAP operating expenses adjusted for amortization of acquisition-related intangible assets, are expected to be approximately 21% of revenue, plus or minus 1%.

non-GAAP operating expenses, which are GAAP operating expenses adjusted for amortization of acquisition related intangible assets are expected to be approximately 21% of revenue plus or minus 1%. We expect net interest expense to be approximately $1 4 million.

Speaker 4: We expect net interest expense to be approximately $1.4 million.

Speaker 4: Our income tax rate is expected to be 18.4%, plus or minus 3%, and shares used to calculate diluted EPS for the first quarter anticipated to be approximately 46.3 million shares.

Our income tax rate is expected to be 18, 4% plus or minus 3% and shares used to calculate diluted EPS for the first quarter are anticipated to be approximately $46 3 million shares.

Speaker 4: Please note that purchasing accounting adjustments of $3.3 million after tax for previous acquisitions is not included in these non-GAAPs.

Note that purchasing accounting adjustments of $3 $3 million after tax for previous acquisitions is not included in these non-GAAP estimates with that said I will now turn the call over to Emily Yang.

Speaker 4: With that said, I will now turn the call over to Emily Yang.

Thank you Brett and good afternoon as Dr. Lu and Brett mentioned fourth quarter revenue increased one 9% quarter over quarter, which is better than the midpoint of our guidance due to the continued strong demand and record revenue across all the regions.

Speaker 5: As Dr. Liu and Brad mentioned, fourth quarter revenue increased 1.9% quarter over quarter, which is better than the midpoint of our guidance due to the continued strong demand and record revenue across all the...

Speaker 5: distributor inventory in the fourth quarter in terms of weeks increased slightly quarter over quarter, which is still below our defined normal range of 11 to 14.

Truth of their inventory in the fourth quarter in terms of weeks increased slightly quarter over quarter, which is still below our normal range of 11 to 14 weeks.

Speaker 5: Looking at global sales in the fourth quarter, Asia represented 78% of revenue, Europe 13%, and North America 9%. In terms of our end market, computing represented 29% of revenue, industrial 24%, COVID-19%, communication 16%, and automotive 12% of revenue. We achieved record revenue in the automotive, industrial, communications, and consumer segments. Now let me review the end market in

Looking at global sales in the fourth quarter Asia represented 78% of revenue.

Up 13% and North America, 9%.

In terms of our end market computing represented 29% of revenue industrial 24% consumer, 19% communication, 16% and automotive 12% of revenue we achieved record revenue in the automotive industrial communications and customer segments.

Now, let me review the end markets in greater detail.

Speaker 5: In the automotive market, we continue to extend our strong growth momentum with revenue increasing 37% year over year and 59% for the full year to set new records.

In the automotive market, we continue to extend our strong growth momentum with revenue, increasing 37% year over year and 59% for the full year to set new records.

Speaker 5: Since 2013, when we began our expansion initiative into the automotive market, we have achieved an eight-year compounded annual growth rate of 30%. One key to our success has been our content expansion initiatives and design-win momentum that has continued across all target application areas, particularly in three focus areas of connected driving, comfort style and safety, and power.

2013, when we began our expansion initiatives into the automotive market. We have achieved an eight year compound annual growth rate of 30% one key to our success has been our tomcat expansion initiatives and design win momentum that has continued across all target application area.

Particularly in three focus areas of connected driving conference.

In powertrain.

Speaker 5: Automotive DC-DC 32V and 40V box converters, LED switching drivers, and SDRs continue to see strong demand for telematics, front and rear LED lighting, daylight running lights, and AWS selected to

Automotive D CPC 32, well and <unk> converters, our EDI switching drivers and FBR <unk> continued to see strong demand for telematics front and rear <unk> lighting daylight running light and asos application. Similarly, named BMO LTE driver product with the site into first.

Speaker 5: Similarly, linear mode LED driver product would be signed into first responders emergency lighting system. And high efficiency charge pump LED drivers has been seen traction for indicator LED lights in the household EV plug-in charging.

Sponsors emergency lighting system and high efficiency charge pump LCD drivers has been seeing traction for indicate our RGB lighting the household EV plug in charging.

Speaker 5: Newly released LDOs, current limit power switches, and ParaCon product line of level shifters, crystal oscillators, buffers, and PCI Express clocks are seeing new design wins in ADAS, telematics, anomalous vehicle control units, and infotainment systems.

Newly released Ldls current amendment power switches and <unk> product line of level shifters Crystal oscillator buffers and PCI Express Clos are seeing music signed leasing asos telematic anomalous vehicle control units and infotainment system.

Speaker 5: We are also seeing great success from the high voltage regulators and only polar switching, including fans, window lifters, motors, water pump, and door lock athletes.

We are also seeing great success from the high voltage high voltage regulators and Amy Poehler Hoff switching in cooling side window, lifters motors water pumps and door lock applications.

Speaker 5: Additionally, transient voltage suppressors, MOSFET, gate driver ICs, and USB charging controller products are being designed into applications, including battery managed system, wireless charger converters, and in-vehicle USB charging ports. Fast recovery rectifier were also well accepted in electric vehicle heat exchanger applications, as well as automotive electric intelligent controllers.

Additionally, trust and voltage suppressors, MOSFET gate driver Ic's, and USB charging controller product.

Sign into applications, including battery managed system wireless charger converters and vehicle USB charging ports.

Fast recovery Rectifier will also well accepted electric vehicle heat exchanger applications as well as automotive electric intelligent controllers.

Speaker 5: MOSFET design in Mote-Anthem continues for automotive brushed and brushless electric motor applications including power steering, fuel, oil and ABS pump, seats and mirrors.

Simon welcome anthem continue for automotive brush and press release electric motor applications, including power Steri Shield oil and ABS, Tom Steve and mirrors.

Speaker 5: Our low-capacitance ESC and surge protection devices are also being designed into applications for protection of in-vehicle networks and for the IOPort protections of its far-field cameras for advanced driving assistance.

Our low capacity the ESP and surge protection devices are also being designed into applications for protection of in vehicle network and for the Io core protection.

<unk> camera for advanced driving assistance.

Speaker 5: In the industrial market, revenue increased 43% year over year and 46% for the full year to also reach new records. We are continuing to see growth and adoption of display port, HDMI switches and redrivers in the commercial display applications.

In the industrial market revenue increased 43% year over year and 46% for the full year. Two also reached new records.

We are continuing to see growth and adoption of display port HDMI switches and re drivers in the commercial display application.

Speaker 5: Our ultra-fast recovering Retrify product and PCI Express Gen 3 packet switch are gaining traction in the artificial intelligence, video analytics, 3D sensing camera module, and civilian and security applications. We are also seeing strong demand for application-specific multi-chip circuits and standard recovering Retrify products driven by multiple applications.

Our ultra fast recovery rectifiers product and PCI Express Gen. III packet switch are gaining traction in the artificial intelligence.

Now, let's take three D sensing camera module and Sophia and security applications.

We are also seeing strong demand for application specific multi chip circuits and standby recuperating retrofitted products driven by multiple applications such as diagnostic test system Brushless DC motor drivers energy metering power supply smart lighting and electrical medical applications, including.

Speaker 5: such as diagnostic test system, brushless DC motor drivers, energy metering, power supplies, smart lighting, and electromagnetic applications, including automated blood and body fluid analyzer.

Automated lab and Bobby flu annualized it.

Speaker 5: We have also been pleased with the strong design win momentum for the light-on semiconductor image sensor product line being used in document scanners, lottery bar scanners, and PCB inspection applications.

We have also been pleased with the strong design win momentum for the Lite on semiconductor image sensor product line being used in documents scanners lottery bar scanners, and PCB inspection applications.

Speaker 5: Additionally, our ultrafast recovery retrofit products, bipolar transistors, sycloized controllers, and MOSFETs continue to gain momentum in power supply and inverter applications.

Additionally, our ultra fast recovery rectifiers.

Bipolar transistors centralized controllers, and MOSFET continue to gain momentum and power supplies.

<unk> application maybe.

Speaker 5: Medium voltage DC-DC LED drivers have been gaining design wings in smoke detectors, and SDR products are expanding in GPS tracking applications, which enable real-time location monitoring during the transportation.

Medium voltage DC DC LCD drivers has been gaining design win and smoke detectors and SBR products expanding in GPS tracking application, which enable real time location monitoring during their transportation.

Speaker 5: In the computing market, revenue was up 72% year over year and 122% for the full year. We're seeing strong traction for USB Type-C power switches, TVS, high power density shock keys, low voltage only polar hot sensors, dual output unit polar hot Audience

In the computing market revenue was up 72% year over year and 122% for the full year, we are seeing strong traction for USB type C power switches.

TVN high power density Schottky low voltage Omi polar hall sensors do alcohol Unipolar Hall sensors, DC DC converters as well as HDMI two dot OLED drivers in the new compute platform, including gaming notebooks and workstations.

Speaker 5: DC-DC buck converters, as well as HDMI 2.0 redrivers in the new compute platform, including gaming notebooks and workstations. Similarly, we are seeing increasing interest with this play port, USB Type-C, HDMI switches and redrivers in the docking station, dongles, active cables, and keyboard, video mask apps.

Maloney with the increasing interest for display port USB type C. HDMI switches as we drive raising the docking station diagnosed active cable and keyboard video mass applications.

Speaker 5: We also continue to see strong demand for SSD mux, crystal, and oscillator products in the enterprise SSD story modules and data center surfer applications. We have several design wings for the universal level shifter product family in various applications, including SSD storage, gaming, surfer, laptops, and mobile device.

We also continue to see strong demand for SSD, Mark Crystal and oscillator products in the enterprise SSD story modulus and datacenter Sir for application, we have several design wins for the universal level shifts or product family.

<unk> applications, including SSD storage gaming surfer laptops, and mobile devices. Additionally, lite on semiconductor you make sensor product continued to gain momentum with new signings in the scanner and coffee machines.

Speaker 5: Additionally, light-on semiconductor image sensor product continues to gain momentum with new design in the scanner and copy machine.

Speaker 5: In the consumer market, revenue increased 18% year over year and 12% for the full year to also set new record for the quarter and year.

In the consumer market revenue increased 18% year over year and 12% for the full year. Two also set new record for the quarter ended year that you'll continue to see strong revenue growth of standout recovery rectifier products and FBR in the consumer applications, including digital light projection.

Speaker 5: Stio continues to see strong revenue growth of standard recovery retrofit products and SBR in the consumer applications including digital light projection, LED light light modules and high efficiency vacuum cleaners.

Modules and high efficiency vacuum cleaners, we also have new design wastewater USB, Marc and bipolar transistors, and LTV television and display panels as well as increasing demand for low power class D audio amplifiers, FBR <unk> drive throughs utilizing monitor Bluetooth speaker.

Speaker 5: We also have new design wings for USB mops and bipolar transistors and LED TV and display panels, as well as increasing demand for low-power, classy audio amplifiers, SBRs, and LED drivers, utilizing monitor, Bluetooth speakers, LED lighting, and smart doorbell apps.

<unk> led lighting and smart doorbell applications.

Speaker 5: We also continue to see strong momentum for CFP and small DFM MOSFET for IoT and wearable devices, as well as high-power density products securing new design wins in the home exercise equipment. Mobile phone adapter generate a strong demand for diode fast-recovering rectifiers, and AC DC products continue to see growth from quick charging out.

We also continue to see strong momentum with BSP is small DFM MOSFET for Iot and wearable devices as well as high power density products, securing new design wins in the home exercise equipment.

Mobile phone adapter generated strong demand for diodes, SaaS recovering retrofire AC DC product continued to see growth from quick charging application.

Speaker 5: Lastly, in the communication market, revenue was also a record and grew 10% year over year and 13% for the full year. Design-win momentum for the ParaCon product line continues in this market for our USB MUX and ultra-high voltage protection of 5G CPE applications. There has also been growing demand for USB redrivers, primarily driven by the USB Type-C application.

Lastly in the communication market revenue with also a record and grew 10% year over year and 13% for the full year design win momentum for the <unk> product line continues in this market for our USB marks in ultra high voltage protection with <unk>.

CPE application. There has also been growing demand for USB re drivers primarily driven by the USB type C application.

Speaker 5: Additionally, our small size low saturated transistors continue with design wins across multiple applications from base stations, routers, network cameras to doorbells. We saw strong demand for our SBR chip scale package and design wins for high PSR LEO product family in smartphone applications.

Additionally, our small size low saturate the transistor continue with design wins across multiple applications from base station routers network cameras to do our best we saw strong demand for SBR chip scale package and design wins for our <unk> product family in smartphone apps.

Speaker 5: In summary, 2021 was an exceptional year for Diode, both operationally and financially. We achieved strong revenue growth and margin expansion for our total solution sales approach and content expansion initiatives, especially in the automotive, industrial, and market, as well as the ParaCon product.

Vacation.

In summary, 2021 was an exceptional year for diode, both operationally and financially we achieved strong revenue growth and margin expansion for our total solution sales approach and content expansion initiatives, especially in the automotive industrial end markets as well as the <unk> product.

Speaker 5: We also successfully integrated Lion Semiconductor acquisition and benefited from the manufacturing synergy.

Yeah.

Also successfully integrate that lie on semiconductor acquisition and benefited from the manufacturing synergies with additional opportunities for the growth and expansion through the product customer and market synergies that we expect to realize over the coming quarters and years.

Speaker 5: with additional opportunities for the growth and expansion through the products, customers, and end-market synergies that we expect to realize over the coming quarters and years.

Speaker 5: With that, we now open the floor to questions. I'll pray.

With that we now open the floor to questions operator.

Speaker 1: Thank you. As a reminder, to ask a question, you would need to press the star 1 on your touchstone telephone. To withdraw your question, please press the pound key. Please stand by while we compile...

Thank you <unk>.

As a reminder to ask a question you would need to press the star one on your Touchtone telephone to withdraw your question. Please press the pound key.

Please standby, while we compile the Q&A roster.

Speaker 1: I show our first question comes from the line of Matt Ramsey from Cowen. Please go ahead.

I show our first question comes from the line of Matt Ramsay from Cowen. Please go ahead.

Thank you very much good afternoon, everyone.

Speaker 6: Congrats on the great results, Dr. Liu. I wonder if you might provide some commentary. Over the last, I don't know, year and a half or so, the industry has been...

Hi, Matt.

Congrats on the great results Dr. Lu.

Wonder if you might.

Provide some commentary over the last I don't know.

Year, and a half or so the industry has been.

Very supply constrained.

Speaker 6: company was fortunate enough to acquire the capacity from light on and did an amazing job in executing and filling that capacity.

Your company with I was fortunate enough to acquire the capacity from white on and did an amazing job in executing and filling that capacity.

Speaker 6: and it's led to some pretty remarkable growth. I wonder as you think about the next year or two in Diode's growth plan, where do you have the opportunity?

And it's led to some pretty remarkable growth I wonder as you think about the next year or two in diodes growth plan.

Where do you have the opportunity to add more capacity.

Speaker 6: and how much of the growth are you thinking coming from pricing versus units?

And how much of the growth are you thinking coming from pricing versus units versus additional capacity.

Speaker 3: Okay, so I just answered several of your questions. Okay, first you are talking about, you know, how much of the growth coming from price increase and how much is coming from...

Okay.

Just I missed.

Several of your question.

First you are talking about how much of the growth.

Coming from price increase.

And how much is coming from.

Speaker 3: revenue growth, okay, or the capacity expansions. So we do not really separate that number very clearly, but we only...

Revenue growth okay.

Okay.

Capacity expansions. So we did not really separate that number very clearly, but we only.

Speaker 3: increase the price based on our wafer or our cost material equips.

Increase.

Right.

Based on Lora.

Wafer.

Sure.

Speaker 3: So we reflect the material increase to our cost only. But we take a deep look at the

Real quick.

So we expect that materially increase to our.

Okay.

But we took a decent opportunity.

Speaker 3: by, you know, better support customer to ask them to give us more design opportunity.

Alright.

To support customer.

So asking them to give us more design opportunity so some of our.

Speaker 3: So some of the area our customers would not allow us to touch in the past. Now with this great support to our customers, we can demand or ask them to open up the design in opportunity for us. So that is what we are doing today and using the capacity constraints.

Our customers allow us to touch in the past now.

This great support to our customer we could be Ben or asking them to open up that opportunity for us.

So that is.

What we are doing today.

Using the capacity constraint.

Speaker 3: to our advantage of opening up more beaches opportunities.

To our advantage of opening up more pitches opportunities.

Speaker 3: Now you are talking about the future growth, then we have our expectations.

No.

About the future growth then.

No.

We think.

Thank you.

Yes.

Speaker 3: to 8 inches. We just form buried door ramped it up.

Two eight.

Each.

Hey, Jeff.

There is no ramp it up.

Speaker 3: to fully load by December last year.

<unk> fully loaded by December last year.

Speaker 3: you listen to what we have been talking about, last year, the whole year, we ramped up the S-fact II, so this year that will be fully loaded.

If you listen to what we have been talking about that yields a whole yield we ramp up.

So.

This year that will be fully loaded okay.

Speaker 3: So then another is our G-Fab. If you remember, we bought our G-Fab back in 2019.

Okay. So then either.

He's our chief Whip, if you remember we bought at G fast vector.

2019.

Speaker 3: And we committed to the original owner who support them.

And.

And we have.

Committed to the or regionally owner all supporting them.

Four five years.

Speaker 3: and that every year they would reduce their loading to us 10 percent.

And every year they would use the loading to us 10%.

Speaker 3: And so we gradually qualify our production or our technology, our product into the G5 app. And so we actually...

So we.

Great jewelry holding flat.

<unk>.

<unk> knowledge, our pulled up into the chief.

And so we actually.

Speaker 3: have additional capacity by original owner requirement reduce. And so we are able to take the opportunity to give us more capacity.

Yes.

Kunal capacity.

Bye.

Operational only.

Requirement did you.

And so we.

Able to pick gabel opportunity to give us more capacity.

Speaker 3: for the growth. And this will continue because they're going to be, you know, their demand going to go down and we continue ramping up.

The grille and decent continue because they are going to be.

These.

Their demand going to go down.

We continue ramping up as the same time, we still need more time than.

Speaker 3: At the same time, if we still need more than that, we can. They still have

We can.

Do you have.

Speaker 3: enough capacity we can bring that capacity or bring that voting even higher because the time.

<unk> capacity.

We can bring.

Bringing the capacity of green that going even higher because of the time.

Speaker 3: When we say they are fully loaded, but in the wafer-fed definition, when we say fully loaded, it's 80%.

We bought that and we said 40 loaded but in.

Wafer fab definition when we.

We say Lido AG.

Speaker 3: And if you look at some of our wafer fab, it already goes up to 100% or 95%. So we still have more room.

80%.

And if you look at some of our wafer fab is already built.

100% or.

95% right. So we still have more room.

Speaker 3: in the G Fair to give us additional growth.

In the <unk>.

Give us additional growth.

Then.

Speaker 3: We are our supplier other external fair with our relationship. We still can continue asking for a little bit more every quarters or, you know, here, there to get a little bit more.ail out.

Our supplier.

Total fear.

Our relationship.

Few can continue.

Ask you for keeping.

More every quarter.

Sure there to get even more so.

Speaker 3: We still believe we have enough capacity.

We still believe we have enough capacity to support our growth.

Speaker 3: support our growth in this year or next year. And then when the demand starts to do so, we can take that opportunity to continue.

<unk>.

In this year or next year.

<unk>.

Then when the demand start to boost it up.

Could take the Dol opportunity.

To continue our growth.

Thanks.

Speaker 5: Right, and then on top of that, Matt, we also will continue to drive the product mix improvement. So we want to focus to better utilize the available capacity to support better business as well.

Alright, and then on top of that Matt. We also will continue to drive the product mix improvement. So we want to focus to better utilize the available capacity to support better business as well.

Speaker 6: Got it. Thank you both for the commentary there. As my follow-up question, I guess I'd be remiss to not mention that you're bumping right up against your long-term 40% gross margin.

Got it. Thank you both for the commentary there as my.

Follow up question.

I guess I'd be remiss to two.

Mentioned that Europe .

Jumping right up against your long term, 40% gross margin target I think you are.

Run rate of revenues slightly under $2 billion and you were planning to hit 40%.

$2 5 billion in revenue. So if you could just kind of walk me through the puts and takes on gross margin.

Speaker 6: as we go forward, is this kind of a new floor of margin and sustainable? And what are the incremental margin drivers as you add that additional 500

As we go forward is this kind of a new floor of margin and sustainable.

And what are the incremental margin drivers as you add that additional.

$500 million in revenue towards towards the target model. Thank you.

Speaker 3: Well, you know, really what we're looking for is a $1 billion growth block.

Well no.

Sure.

Really.

The full one.

$1 billion of gross profit.

Speaker 3: Okay, and when I said that, it's really is the goal. $1 billion gross profit, because that follows through to the EPS.

Okay, and when I said that is really is the goal one building gross profit because that fall through to the EPS.

Speaker 3: So that is really the goal. Now, when I say $1 billion gross profit, then we say, how do we make? Then we say $2.5 billion revenue, 40% GDP to make up that.

All that is really to go now.

I saved 1 billion gross profit that we say how do we make when we say two five period not a revenue 40% GP to Mick.

Speaker 3: And if our gross margin can be better than 40%, we are not going to be... We just continue to improve our gross margin and we get there without...

Got it.

Our gross margin can be.

40%.

We just continue to improve our gross margin and we kept deal we sell two 5 billion. So we'll achieve that goal.

Speaker 3: 2.5 billion. So who achieved that goal early?

Speaker 3: Then after that, then we'll start to get to our next target. But I'm not ready to announce that next target yet, but we are quite close to the target of $1 billion gross profit.

Then after that then we'll start to get to our next talk.

Im not ready to announce.

<unk> talked to yet, but we.

<unk>.

Hi, Charles.

To the target of $1 billion.

Gross profit.

Got it. Thank you. Thank you I'll get back in the queue, but congratulations on the progress.

Thank you.

Thank you I show. Our next question comes from the line of William Stein from <unk> Securities. Please go ahead.

Great. Thanks for taking my question I'll add my congratulations, especially to the outlook, but both the results and outlook are great.

I have a question about the guidance by end market normally.

Q1 is down a little bit.

Speaker 4: And I think the end markets that tend to do that are the, I think what you call the three Cs, right? Consumer comms and communications. I think those are typically down sequentially while industrial and automotive are typically up a little bit. So if we think about the Delta or the difference in this Q1.

And I think the end markets that tend to do that or the.

I think what you call the <unk> consumer comes in.

Medications I think those are typically down sequentially, while industrial and automotive are typically up a little bit. So if we think about the delta or the difference in this Q1.

Speaker 4: know, is it more spread across all end markets that they're all going to do a little better than typically or is it more that you're going to see sequential growth a little bit in each of the end markets or some or is there some different explanation?

Is it.

Is it more spread across all end markets that theyre, all going to do a little better than typically or is it more that youre going to see sequential growth a little bit in each of the end markets or some or is there some different explanation.

Speaker 5: Okay, hi this is Emily. So I think overall what we're seeing is actually strength across all the end markets.

Okay.

Hi, This is Emily so I'd say overall, we're seeing it's actually strength across all the end markets.

Speaker 5: I think all in all we have really strong demand and if we look down to the specific segments, so for example automotive, we actually have a full year growth of 59%. We see that momentum continue.

I think all in all we have really strong demand and if we look down to the specifics steadman stock based on automotive, we actually have a full year growth of 59%, we see that momentum continues and therefore, the industrial we also seeing a lot of growth like 46% for the full year.

Speaker 5: And for the industrial, we also see a lot of growth, like 46% for the full year. And again, a lot of design in pipeline continue to grow.

Again, a lot of design in pipeline continue to grow on the computer computer side. When we talk about the low end PC theres definitely a little bit of softness, but we're also seeing strength on the <unk>.

Speaker 5: On the computer side, we talk about the low-end PC, there's definitely a little bit softness, but we're also seeing strength on the cloud computing and server, so it's kind of balanced itself. But anyhow,agonal!

Loud computing as those kind of balance itself on the consumer side Youre right. Absolutely Q1, usually is not a super strong quarter, and we definitely see a little bit of softness I would say more from the China consumer side again, we have a lot of overall other demands whether it's home care or some other consumer application.

That will continue to see the strength right.

New indications di I think there is a lot of.

Speaker 5: news about the smartphone stockness a little bit in China, but since we are very well diversified into all the tier one smartphone manufacturers that we are actually seeing not that much of the impact to the overall dials. So I would say all in all 5G continues to drive a lot of momentum, not just on the base station but 5G related applications. So yeah, I would say all in all still very, very strong. My follow up if I can, I think I saw an announcement recently about Diode's dip...

News about the smartphone softness a little bit in China, but since we are very well diversified into all the tier one smartphone manufacturer that we actually seen not that much of the impact to the overall <unk>.

Speaker 5: So I would say all in all 5G continues to drive a lot of momentum, not just on the base station but 5G related applications. So yeah, I would say all in all, still very, very strong.

I would say all in all five <unk> continued to drive a lot of momentum not just on the base station, but <unk> related applications.

I would say all in all still very very strong.

Speaker 7: My follow-up if I can, I think I saw an announcement recently about diodes dipping its toe into silicon carbide development. Can you maybe clarify what you envision, well first, what capabilities you're developing and what market or opportunity you believe you'll be able to address. Thank you.

My follow up if I can I think I saw an announcement recently.

Diodes.

Dipping its toe into silicon carbide.

Development.

Can you maybe.

Clarify what you envision well first what capabilities, you're developing and what.

<unk> market opportunity you believe youll be able to address thank you.

Speaker 8: Okay, this is Gary and Will and nice to talk to you. And Ashley, you know, the Slink and Carbide development we've been starting for this kind of project probably a year ago and with you that's a very strong trend from the market.

Okay. This is <unk>.

Ari and nice to talk to you and Ashley the silicon carbide, the environmentally being starting about this time target probably a year ago and we see it as a very strong trend from the market and we have our design team in house and we do our wafer design and that we use are defined using outside fabrication pseudo wafer and.

Speaker 8: And we have our design team in-house, and we do our wafer design. And we use our design using outside fabrication to the wafer. And particularly, the silicon carbide we are using is for the automotive-related part, like the OBC onboard charger, like a micro EV and inverter. And especially, if you see the news we have for the dial set.

Thanks, <unk>, we are using to explore the automotive related potline to OTC onboard charger.

Hey, Michael or EV in the inverter and especially if you see the new news, we have but that dialogue.

Speaker 8: That's the GE joint venture activity that we have with your silicon carbide modes, with the technology that we have put into module. Module goes to the inverter, and those inverters go into the electronic vehicle's motors. And that's the area we're kind of focused on.

Jay joint venture activity that we have with our silicon carbide most.

That technology that we have put into module module go to the inverter and those things go into it.

Electronic vehicles Motors and that's the area, we're kind of focused on.

Speaker 8: any revenue to discuss in that area yet or is it all? No, not yet. Not yet. Not yet. Our engineering samples should be delivered by end of this year. And we are looking forward because of the motive related probably one year or a little bit longer. And we're looking for probably the first revenue going to come in probably the middle of next year. Great. Thank you.

Any revenue to discuss in that area, yet or is it all no not yet.

Our engineering samples you'll be de lever by end of this year and we are looking for work because the automotive related probably one year or a little bit longer and looking.

Looking for probably than the first revenue going to accommodating probably the mid of next year.

Great. Thank you congrats again no.

Speaker 1: Thank you. Our next question comes from the line of Gary Mobley from Wells Fargo Securities. Please go ahead.

No problem.

Thank you I show. Our next question comes from the line of Gary Mobley from Wells Fargo Securities. Please go ahead.

Speaker 9: Good afternoon, everybody. Thanks for taking my question. Congrats to a strong 2021 and a good start to the current calendar year.

Good afternoon, everybody. Thanks for taking my question and congrats to the strong 2021 and a good start to the current calendar year.

Speaker 9: I wanted to ask about your manufacturing footprint in China. I realize the majority of your employees are based in China. So have you seen any impact on your production facilities past or...

I wanted to.

Ask about your.

Manufacturing footprint, China realize the majority of your employees are based in China. So have you seen any impact on your production facilities past or.

Speaker 9: present or maybe in the future from China's COVID zero power.

Present, or maybe in the future from China's Cobra zero policy.

Speaker 3: Well, let me answer this one. Actually, our vehicle fed majority.

Well, let me answer this one.

Actually.

Speaker 3: However, we've felt internally it's not in China.

Majority of which will affect internally.

Speaker 3: Okay. And, you know, we have external, but internal.

In China Okay.

We have external but in total.

Speaker 3: We in the, you know, G-FAB and O-FAB in Europe , and the AOSC have, you know, the wafer fab in Taiwan. So today in China, we only have S-FAB 2. Okay. So we,

In the.

<unk>.

All fair you will in Europe and.

It always sheet.

Phil.

So fab in Taiwan.

Today in China, we only.

Okay. So we don't have.

Speaker 3: majority is not there. Now for assembly

Majority of it is not big now four ish Tim Murray.

Speaker 3: Yes, but virtually we, the two major sites...

Yes.

Virtually.

We the two major site.

Speaker 3: is in Shanghai, which don't have that big problem of COVID-19. And Chengdu, again, in the sense of the China government is very, very careful too. So we don't see the problem due to COVID-19.

In Shanghai, which don't have that problem.

<unk> 19 and <unk>.

Again.

Thanks, Bob.

The.

China government is very good very careful too so we don't we see.

The problem due to COVID-19.

Speaker 3: And actually, it's helping us because, for example, you know, typically every year during the Chinese New Year, we're going to have...

Okay, and actually helping us because for example.

Typically every year during the Chinese new year, we go into <unk>.

Speaker 3: shut down because a lot of workers were going to go home for the Chinese New Year. During the Chinese New Year that money.

Down.

And because of Volcker going to go home for the Chinese new year, So do it into Chinese new year.

That month.

Speaker 3: our productivity or our production is actually slow down. That's why one of the reasons we have this scenario in one queue, we cannot get enough of it.

Activity or our production is actually slowed down that's what one of the.

The reason we have this is in the early <unk>.

We cannot get enough output.

Speaker 3: But this year, like last year, the China government actually encouraged, quote-unquote, encouraged the people to go home.

But this year.

Last year.

China government.

Actually encourage core by coal encourage their people.

Speaker 3: stay in the door code and either take off or continue working.

State.

The adult pool.

Either pick all all continued walking.

Speaker 3: So, because of that, this year, our output affected by Chinese New Year is not.

Okay, so the cost of debt.

This year.

Output affected by.

Chinese new year.

Yeah.

Speaker 3: that great or that critical and therefore we are able to support our demand.

That.

Great.

Political.

Therefore, we are able to.

Paul.

On what demand.

Speaker 3: Still not enough, but we are able to support.

Still not enough, but we are.

Speaker 3: So therefore we have guided our 1Q revenue, you know, thread from 4Q because our output is not really going to slow down.

Able to support.

So deal full week.

Hello.

<unk> <unk> revenue.

Fred.

Q4.

No.

<unk> going to slowdown.

Speaker 3: that much. At the same time, we do build some inventory in 4Q, try to get support on 1Q. So overall, we do not really affect.

Much at a certain time, we do build some inventory in full Q try to get.

Paul <unk>. So overall, we did not really affect.

Speaker 3: many section-wise by COVID-19 effect in China, but actually we are better than...

Manufacturing wise by COVID-19.

The effect in China, but actually we updated it.

Speaker 3: in the past is due to the worker to not really go home.

In the past due to the altar do not re vehicles.

Speaker 9: Appreciate the color there, Dr. Liu. I have a couple of follow-ups for Emily, perhaps.

Got it I appreciate the color there Dr. Lu and I have a couple of follow ups for Emily perhaps.

Speaker 9: Normally, Q1 is down 5%.

Normally Q1 is down 5%.

Speaker 9: but I presume that you're going to have a better than seasonal.

But I presume that you're going to have a better than seasonal.

Speaker 9: one because perhaps you're having a getting an opportunity to replenish distributor inventory

Q1, because perhaps youre getting an opportunity to replenish distributor inventory.

Speaker 9: And related to that, would you expect me back up in the normal 11 to 13 week range? And is there any way to quantify the impact of your competitors, one in particular that is exiting a few hundred million dollars last year and the next year in some product categories that you directly compete in? Thank you.

Weighted to that would you expect to be back up in the normal 11 to 13 week range.

Is there any way to compact quantify excuse me quantify the impact of your competitors. One in particular that is exiting a few hundred million dollars last year and the next year in.

Some product categories that you directly compete in.

Thank you.

So I think.

Speaker 5: Gary, you know, with the, like Dr. mentioned, better than maybe...

Gary.

No.

The Doctor I mentioned other than maybe.

Speaker 5: little bit better than expected output in Q1. That's the reason we provided a flight guidance, which you are absolutely right, this is usually about 5% down quarter, right? So what we do, we feel aggressively working with all the customers closely and review all the opportunities in front of us, right? So if this is the right fit for the overall DAIO's growth and fit it into our overall strategy, we aggressively pursue. And like I mentioned earlier, anytime there's a strategic change from my peers or merchant acquisition always create a more opportunity for DAIO's to pursue after, right? But again, we are not just blindly going after every business, we really more focus on strategic good business that will continue to drive our product mix improvement as well as a total solution sales strategy that we initiated a few years ago, right?

A little bit better than expected output in Q1. That's the reason we provided a slight guidance, which you are absolutely right. This is usually about 5% down quarter right. So what we do what we feel are aggressively working with our customers closely and review all the opportunities in front of US right. So if this is.

Fifth the overall diose growth and fit into our overall strategy, we aggressively pursue and like I mentioned earlier any time there are some strategic change from my peers or merge and acquisition will always create more opportunity for us to pursue after it right, but again, we are not just.

Blindly going after every business, we really more focus or strategic business that we're continuing to drive our product mix improvement as well as total solution itself.

G that we initiated a few years ago right.

Speaker 9: in the impact from one of your competitors exiting the market.

Got it.

And the impact from one of your competitors exiting the market.

Speaker 5: I think it's really hard to really say how big or how small the impact. I also think one of my peers published a lot of statements, but there's also others maybe didn't really that vocal but also making changes.

I think it's really hard to really say, how big or how small the impact I also thing.

One of my peer Poplit publish allowed a statement, but there's also others, maybe you didn't really that local but also making changes so again we.

Speaker 5: So again, we monitor all this very closely as long as it fits into our long-term plan, as long as that's going to help us to achieve the $1 billion gross profit that we mentioned earlier, we're definitely aggressively going after it.

Monitor this very closely.

Epsilon is fit into our long term plan as long as thats going to help us to achieve the $1 billion gross profit Dr. Lu mentioned earlier with definitely aggressively.

Going after it.

Thanks Emily.

Speaker 1: Thank you. I show our next question comes from the line of Tristan Garra from Baird. Please go ahead.

Thank you.

Our next question comes from the line of Tristan <unk> from Baird. Please go ahead.

Speaker 9: Hi guys, quick question on the gross margin trajectory for the next two quarters for this year. What's going to be the next component versus further fixed cost absorption? It sounds like you have room to further expand utilization rates, so how should we put that in the mix in terms of margin expanding this year? Is this

Hi, guys.

Question on the gross margin trajectory for the next few quarters for this year, what's going to be the mix component versus.

The fixed cost absorption.

It sounds like you have room to further expand utilization rates. So how should we put that in the mix in terms of margin expanding this year.

Speaker 5: Yes, so maybe let me make a comment and Dr. Liu and some others maybe can add some more. I think the margin improvement really consists of a few things and they're all very important, right? Because when this problem makes...

Well I think that yes, so maybe let me make a comment and got to lose some others. Maybe you can add some more I think the margin improvement really cost us a few things and they are very important rate one of the biggest one is product mix improvement and we've been talking about this for a while so we will continue to drive.

Speaker 5: improvement and we've been talking about this for a while so we will continue to drive. This is really more from the total solution sales replacing some of the legacy stuff with some of the newer products with better margins, better ASP as well.

This is really more on the total solution sales, replacing some of the legacy start with some of the newer product with better margins further.

Speaker 5: And we believe this is actually just the beginning of this whole initiative. And this is actually something we established probably about two or three years ago and will continue to drive for improvement. I think manufacturing efficiency improvement has always been the strength for dials.

Asps as well and.

We believe this is actually just the beginning of this whole initiative and this is actually something we established probably about two or three years ago and will continue to drive for improvement I think manufacturing efficiency improvement has always been the strength of <unk> and <unk>.

Speaker 5: And like Dr. Liu mentioned, we continue to add additional capacities.

Dr. Lu mentioned, we'll continue to add additional capacities.

Speaker 5: This can be even adding more equipment within existing lines or replacing some of the old equipment with the new ones, expanding to 4 inches to 6 inches, stuff like that. So that will continue to drive some of the capacity improvements and in result that will continue to drive our manufacturing efficiency and continue to improve our cost. And then we also have a light on semiconductor synergies that I talked about. So we start seeing the benefit of the manufacturing synergy but there is still customer synergy and market synergy and product synergy that we can actually…

This can be.

Adding more of the equipment within existing life or replacing some of the old equipment with a new one expanding two four inch six interest stuff like that so that will continue to drive some of the capacity improvement and a result that will continue to drive our manufacturing expenses.

We continue to improve our cost right and then we also have a lie on semiconductor synergies that I talked about so we start seeing the benefit of the manufacturing synergy, but there are still customers energy end markets energy and.

I'm proud of our markets and the GM product synergy that we can actually.

Speaker 5: continue to see benefit over the next few years. So I would say all in all, this is few areas will continue to help us to drive the margin. And just like Dr. Liu mentioned, we definitely not gonna stop at 39.7 or 40%. And this is continued the direction and we definitely want to continue to deliver the results to you guys as well.

Continue to see benefit over the next few years. So I would say all in all there's a few areas will continue to help us to drive the margin and just like Dr. Lu mentioned, we are definitely not going to stop at $39 seven or 40% and this is continued at the direction and.

We definitely want to continue to deliberate that reached out to you guys as well.

Speaker 10: Okay, great. And then for my follow up, it's going to be about inventories in the channel. So you've mentioned that you

Okay, Great and then for my follow up.

Going to be about inventories in the channel or so you've mentioned that you.

Speaker 10: You mentioned the well advertised slowdown in China's smartphone, but you're also very diversified. So are you seeing any pockets of inventories in the supply chain outside of the states that you could point out?

You mentioned the.

Well advertised.

Down in China's smelters.

Also very diversified so are you seeing any pockets of inventories in the supply chain outside of this piece that you could point out.

Speaker 10: despite that diversification and also are you seeing inventory rebalancing because of the high level of work in process inventories? So are you seeing some customers basically choosing and picking what they're going to order because they can't close the box so they're kind of waiting for that last component.

Despite that diversification and then also.

Are you seeing inventory rebalancing because of the high level of work in process inventories.

So are you seeing some customers basically choosing and picking what theyre going to order because they can't close the books. So they are kind of waiting for that last component.

Speaker 5: Yeah, I think Tristan, overall we're still seeing the channel inventory very lean. So even we see a very slightly increase in our channel inventory end of Q4. That's actually driven by some of the support for the Chinese New Year customers and also the timing of the shipments.

Yes, I think overall, we're still seeing the channel inventory very lean so we see a very slightly increased our channel inventory end of Q4.

That's actually driven by some of the support for the Chinese new year customers and also the timing of the shipments, but all in all still extremely lean I think.

Speaker 5: But all in all, still extremely lean. I think Gary asked a question. I probably didn't address it. It's actually, do we expect back to the 11 to the 13 weeks or 14 weeks that we define as the normal range? We don't really expect return to that normal range in a short period of time. So we believe that with all the visibility that we have, with all the customers that we actually have a direct communication.

Gary asked the question I, probably didn't address it is actually we do we expect back to that 11 to 13 weeks or 14 weeks that we define as a normal range.

Don't really expect return to that normal range in a short period of time. So we believe that with all the visibility that we have with all the customers that we actually have a direct communication.

Speaker 5: So far, no one has the opportunity to build up a lot of inventory on the shelf at this moment. So I believe that will continue for a few quarters to come and will continue to monitor very closely. That pretty much applies to all the tier 1, tier 2 that we have a direct contact and then with the tier 3, tier 4 customers, we actually monitor very closely with each of our distributor's partners and they also monitor very closely and so we definitely don't see that as an issue at this moment.

So far no one has the opportunity to be up a lot of inventory on the shelf at this moment. So I believe that that will continue for a few quarters to come and we're continue monitor very closely.

Pretty much apply to all the tier one tier two is that we have a direct contact and then with the tier three tier four customers, we actually monitor very closely with each of our tissue.

No.

And they also monitor very closely.

So we definitely don't see that as an issue at this moment.

Speaker 10: Great. Thank you very much.

Great. Thank you very much.

Speaker 1: Thank you. As a reminder, to ask a question at this time, you would need to press star 1 on your telephone. To withdraw your question, please press the pound key.

Thank you.

As a reminder to ask a question at this time you would need to press star one on your telephone to withdraw your question. Please press the pound key.

Speaker 1: I show our next question comes from the line of David Williams from Benchmark. Please go ahead.

I show. Our next question comes from the line of David Williams from Benchmark. Please go ahead.

Speaker 11: Hey, good afternoon and thanks for letting me ask the question. So, and I apologize, I jumped on a little bit late, but Dr. Liu, I wanted to ask you, you've been through a lot of these cycles and we've talked about it in the past.

Hey, good afternoon, and thanks for let me ask the question.

I apologize I jumped on a little bit late but Dr. Lu I wanted to ask you you've been through a lot of these cycles and we've talked about in the past, but just kind of curious how you're seeing the landscape today and how do you think maybe the it seems like that the channel inventories still remain extremely lean, but it always tends to be that we've got excess.

Speaker 11: Just kind of curious how you're seeing the landscape today and how you think maybe...

Speaker 11: It seems like the channel inventory still remains extremely lean, but it always tends to be that we've got excess through the supply chain.

Through the supply chain do you think do you feel pretty comfortable today that there really isn't maybe.

Speaker 11: Do you feel pretty comfortable today that there really isn't maybe some excesses that are kind of building up within that channel that just maybe aren't being seen or aren't as visible? And do you think there's even an opportunity for that to have happened?

Some some excesses that are kind of building up within that channel that maybe aren't being seen or aren't as visible and do you think there is even an opportunity for that to have happened.

Kind of given the demand and where that.

The level of it.

Well.

Speaker 3: Yes, you are right. I have been in San Nicolas business for a long time and I go through 1970, 1980, 1990, up and down cycles.

Yes, you are right.

In semi conductor introduced a long time and go through 1970, 80, 90, 90 up and down cycles.

Speaker 3: I'm familiar with that, but I want to say this year, this cycle is really different from the previous cycles. In previous, always.

<unk>.

I am familiar with that.

If I wanted to say this year. This cycle is really different from the.

Previous.

Okay.

Please as always.

The man.

Speaker 3: continue and expansion for the capacity.

Continue.

Exploration for the capacity.

Speaker 3: and then all of a sudden you get a shortage. Then people wait until they cannot send, then they go to exit the capacity.

Hi.

And then <unk> got a shortage then people.

Yes.

The people that cannot stand then they go to etsy the capacity.

Speaker 3: Then the problem is the d-time of the equipment takes a long time. So the time then gets capacity.

Then the problem is the day Tom.

Take a long time.

The tons.

Speaker 3: There, everybody gets it at the same time, then all of a sudden you get over capacity.

Capacity.

They're they're everybody again at the same time that all of a sudden you get.

Overcapacity.

Speaker 3: then everything goes down, then it goes to the down cycle. So if you look at, it's a timing issue of the capacity improvement.

Then everything hold on.

Then go to the downside so if you took it.

Each of the capacity improvement.

Speaker 3: And that's why if you remember several years ago, our strategies put in capacity ahead of

And that's why if you remember several years ago.

Our strategies put in capacity.

Speaker 3: the demand. So, during... So, during...

Ed.

The demand so.

So do you win.

Speaker 3: the downtime you actually edit the capacity because the lead time is common lead time issue.

The.

You actually.

Lastly, the daytime.

Each equipment type niche.

Speaker 3: Now, this time, that's what I'm able to grow this year, 2021 much better than 2020, is because we ramp up F5-2 at that time. We get AIC.

Now this time that's what.

We're able to to grow this year.

2021, much better in 2020, it should be Kohl's.

We ramped up two.

At that time, we always see.

Speaker 3: ahead of time and then we get G-FAB even one or two years.

Tom.

Then we get she said even.

One or two years before the shortage so.

Speaker 3: So we prepare for all this one, you know, and all this shortage. And that's why we are able to take advantage of the

Prepare for all this one.

And all of this shortage and Thats, what we are able to.

It's been off.

But no if you're talking about.

Speaker 3: move forward. I think the move forward still.

Move forward I think the move for steel.

Speaker 3: have shown because you don't see that many of people eating capacity that crazy. Okay? Everybody buriesTH trailer. LEAK

Because you don't see the Manny.

People.

Capacity that place.

Okay.

Body <unk>.

2018 to capacity.

<unk>.

Speaker 3: I think this shortage will continue.

<unk>.

Yes.

I think this shortage will be continue.

Speaker 3: at this this year. Now you're going to start to do sit up but in the trying to

This year no.

You're going to start to boost it up.

Speaker 3: The demand actually continued to increase ahead of more than in the past.

Is it <unk>.

Demand actually continue.

Increased.

<unk> more than in the past.

Speaker 3: and so on. I would see that demand going to continue very strong and then the capacity increase gradually catching up.

And so how we see that.

Then going to continue very strong.

And then the capacity.

Please.

<unk> catch up.

Mick.

Speaker 11: Definitely great insight. I certainly appreciate it. And then maybe one other one here for Emily, but you've had some really nice growth in the automotive side, and that's been a fairly diversified application area across the...

Okay.

Definitely great inside I certainly appreciate it.

And then maybe one.

One other one here for Emily but.

Some really nice growth in the automotive side and that's been a fairly diversified application area across the different areas of the vehicle but.

Speaker 11: But when you think about your maybe eyes for traditional vehicle.

But when you think about your maybe is a traditional vehicle versus the EV.

Speaker 11: How do you think that split looks like maybe this year and or?

Do you think that split looks like maybe this year.

Speaker 11: Are you seeing much adoption within the EV space now, or is that primarily still driven by the traditional? And then how do you think that mix kind of shakes as we go into maybe the next...

Or even in 'twenty. One are you seeing much adoption within the EP space now or is that primarily still driven by the traditional and then how do you think that mix kind of shakes out as we go into maybe the next 12 to 18 months or do you see the demand in EV and kind of that pull through.

As it has happened fairly quickly for you all in terms of seeing that reflected within your revenue base.

Speaker 5: Right, so I think the EV volume increase is definitely real, right? I think there's a lot of data in public companies that we can refer to their output unit increase and expectations.

Right. So I think the EV volume increase is definitely real right.

There's a lot of data in public company that we can refer to their output unit increase and expense expectations for 2020 growth 2022 growth as well as 2023.

Speaker 5: for 2020 growth, 2022 growth, as well as 2023. So there's also a lot of new startup or any of the tier one traditional manufacturing are all working on some sort of EV application. So we think that's real. There's a lot of opportunity for Dios continue to expand and continue to grow in this area. So this is actually volume increase as well as contact expansion increase.

There's also a lot of new startup or any of the tier one traditional manufacturing all working on some sort of an EV applications. So we think that's real there is a lot of opportunity for diodes, continuing to expand and continue to grow in this area. So this is actually volume increase as well as content expansion increase.

Speaker 5: So on the traditional side, what we really focus on, there's also a lot of comfort, safety, we're talking about the number of lightings, the number of cameras, I talk about brushless DC motors, and all this additional contact expansion for us to go after. So we're really growing, I would say, both from traditional vehicles as well as the EV vehicles, right? If you remember the three areas we focus on is electrification, that covers the EV, the high brakes, right? Or the battery management system. And then we also talk about the comfort, safety, and style, as well as connectivity. This is actually for the ADAS, the telematic, and infotainment system. So I would say all in all applies to both. And the good news for Dios is we continue to have a lot of momentum and continue to have a lot of opportunity in front of us. And with our new product introduction, we are very confident that we'll continue to drive a very strong momentum in the automotive growth, which should be, and we have been demonstrated, stronger than the overall market, right? So if we look at the track record from the beginning,

For us the traditional Si.

We really focus on there is also a lot of comfort style safety with talking about the number of lighting a number of cameras I talk about brushless DC motors and all of this additional content expansion for us to go after so we really growing I would say both from traditional tradition.

Yes.

Well ask the EV vehicles. So if you remember the three areas we focus on.

Electrification that copper say EV, the high breakthrough or the battery management system and then we also talk about the comfort safety and style as well as connectivity. This is actually for the Adas telematics and for <unk>.

Payment system, So I would say all in all applies to both and the good news for dialysis. We continue to have a lot of momentum and continue to have a lot of opportunity in front of us and with our new product introduction. We are very confident that we'll continue to drive a very strong momentum in the automotive.

<unk> growth, which you should be and we have been demonstrated stronger than the overall market right. So if we look at our track record.

Speaker 5: From 2013 till 2021, we actually have a compounded annual growth rate of 30%. And that will continue to be the focus for Dios. And so we're definitely ready.

2013 till 2021, we actually have a compounded annual growth rate of 30% and that that will continue to be the focus for diodes and so we are definitely ready.

Great. Thanks, so much certainly appreciate the help.

Speaker 1: I'm showing no further questions in the queue. At this time, I'd like to turn the call back over to Dr. Liu for any closing remarks. Thank you for your participation on today's call.

Thank you.

I am showing no further questions in the queue at this time I would like to turn the call back over to Dr. Lu for any closing remarks.

Thank you for your participation in today's call.

Operator.

Now disconnect.

Yes.

Yes.

Yes.

Speaker 12: Music

Okay.

Yes.

Yes.

[music].

Speaker 12: That's better than a little piece of milkoke

Speaker 12: The.

Okay.

[music].

[music].

Speaker 1: Good afternoon and welcome to Diodes Incorporated fourth quarter and fiscal 2021 financial results conference call. At this time all participants are in a listen only mode.

Good afternoon, and welcome to diodes incorporated fourth quarter and fiscal 2021 financial results Conference call.

At this time all participants are in a listen only mode.

Speaker 1: At the conclusion of today's conference call, instructions will be given for the question and answer session.

At the conclusion of today's conference call instructions will be given for the question and answer session.

Speaker 1: If anyone needs assistance at any time during the conference call, please press the star key followed by the zero on your touchstone phone.

If anyone needs assistance at any time during the conference call. Please press the star key followed by the zero on your Touchtone phone.

Speaker 1: As a reminder, this conference call is being recorded today, Wednesday, February 9, 2022.

As a reminder, this conference call is being recorded today Wednesday February 19 2022.

Speaker 1: I would now like to turn the call over to Leanne Seavers of the Shelton Group Investor Relations. Leanne, please go ahead.

I'd now like to turn the call over to Leann fevers of the Shelton Group Investor Relations Liane. Please go ahead.

Speaker 2: Good afternoon and welcome to Diode's fourth quarter in fiscal 2021 financial results conference call. I'm Leanne Severs, president of Shelton Group, Diode's investor relations firm.

Good afternoon, and welcome to diodes fourth quarter and fiscal 2021 financial results Conference call I'm Leanne Sievers President of Shelton Group diodes, Investor Relations firm joining us today are diodes, Chairman President and CEO . Dr case, you live Chief Financial Officer, Brett Whitmire, Senior Vice President of worldwide sales and marketing Emily.

Speaker 2: Joining us today are Diode's Chairman, President and CEO , Dr. Keixu Liu, Chief Financial Officer, Brett Whitmire, Senior Vice President of Worldwide Sales and Marketing, Emily Yang, Senior Vice President of Business Groups, Gary Yu, and Director of Investor Relations for Meet Dollywell.

<unk> senior Vice President of business groups, Gary Yu, and director of Investor Relations for meeting Alibaba before I turn the call over to Dr. Lu I'd like to remind our listeners that the results announced today are preliminary and they are subject to the company finalizing its closing procedures and customary quarterly review by the company's independent registered public accounting firm.

Speaker 2: Before I turn the call over to Dr. Liu, I'd like to remind our listeners that the results announced today are preliminary as they are subject to the company finalizing its closing procedures and customary quarterly review by the company's independent registered public accounting firm. As such, these results are unaudited and subject to revision until the company files its Form 10-K for its 2021 fiscal year ending December 31, 2021. In addition, management's prepared remarks contain forward-looking statements from the company's internal management team.

As such these results are unaudited and subject to revision until the company filed its Form 10-K for 2021 fiscal year ending December 31, 2021. In addition, 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 question. Therefore.

Speaker 2: which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your question.

Speaker 2: 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.

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.

Speaker 2: in the company's filings with the Securities and Exchange Commission, including forms 10-K and 10-Q. In addition, any projections as to the company's future performance represent management's estimates as of today, February 9, 2022. DAAS assumes no obligation to update these projections in the future as market conditions may or may not change, except to the extent required by applicable law.

In the Companys filings with the Securities and Exchange Commission, including forms 10-K, and 10-Q. In addition, any projections as to the Companys future performance represent managements estimates as of today February 19, 2022 diodes assumes no obligation to update these projections in future as market conditions may or may not change except to the extent required by applicable.

Speaker 2: 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.

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 term.

Speaker 2: Included in the company's press release are definitions and reconciliations of GAAP to non-GAAP items which provide additional details. Also, throughout the company's press release and management statements during this conference call, we refer you to Net Income Attributable to Commons Talkholders as GAAP net income.

Included in the company's press release are definitions and reconciliations of GAAP to non-GAAP items, which provide additional details also throughout the company's press release and management statements. During this conference call. We refer you 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.

Speaker 2: For those of you unable to listen to the entire call at this time, a recording will be available via webcast for 90 days in the investor relations section of Diode's website at www.diode.com. And now I'll turn the call over to Diode's Chairman, President and CEO , Dr. Keishu Liu. Dr. Liu, please go ahead.

Via webcast for 90 days in the Investor Relations section of diodes website at Www Dot diodes Dot com and now I'll turn the call over to <unk>, Chairman President and CEO . Dr. <unk>. Dr. Lu. Please go ahead.

Thank you Ian.

Welcome everyone.

And thank you for joining us today.

Speaker 3: style had a record year in 2021.

Kyle.

In 2021.

Speaker 3: reflecting suspended execution. That consists of five consecutive quarters of record-raving.

Reflecting sustained its execution.

That consists of five consecutive quarter of breakaway Muni.

Speaker 3: as well as 7 consecutive quarters of adjusted earning growth.

As well as seven consecutive quarter of adjusted earnings growth.

Speaker 3: Full year revenue grew 47% and the gross profit grew 56%.

Perfect.

Full year revenue grew 47% and gross profit grew 56%.

Speaker 3: with gap earnings per year expanding 166%.

With GAAP, earning per shares spending 166%.

Speaker 3: and adjusted earning per share, expanding 120%.

And adjusted earnings per share expanding.

Speaker 3: demonstrate the significant operating leverage in our model.

20%.

NIM Entre $6, Ken operating day of week.

No.

Speaker 3: Gross margin expanded 610 basis points from the first quarter of 2021.

Additionally, <unk>.

Gross margin expanded 610.

10 basis points from the first quarter of 2021.

Speaker 3: the first full quarter after completing the 9 ohm semiconductor.

The first full quarter after completing the oldest semi conductor.

Speaker 3: to the fourth quarter of 2021.

To the fourth quarter of 2021.

Speaker 3: This increase was driven by a combination of product mix improvement. Manufacturing efficiency

This increase was driven by a combination of product mix improvement.

Manufacturing.

<unk>.

And improved loyalty.

Speaker 3: Also, contributing to our ongoing magic expansion has been the achievement of five consecutive quarters of raker pale gun range.

Also contributing to our ongoing margin expansion has been.

Shipment of five consecutive quarter of record pill come Ratably.

Speaker 3: 3. Conjective Quarters or Breakers in Natural Ray

Three consecutive quarter or recur industrial right.

Speaker 3: as well as 6 consecutive quarters of breaker automotive range.

As well as six consecutive quarter of Braker automotive revenue.

Speaker 3: which grew 59% in 2021 and reached a record 12% of total revenue for the first time in

Which grew 59% in 2021 and the reached.

<unk>, 12% of total revenue for the full year.

Speaker 3: With a full year revenue of 1.8 billion and the growth profit of 0.7 billion, 2021 represented a significant step toward our 2025 target of 1 billion in growth growth.

What is the full year revenue of $1 8 billion.

And the gross per fleet.

<unk> 7 billion.

2021 represented a significant step toward our 2025 target of one <unk> in gross profit.

Speaker 3: on 2.5 billion revenue and 40% gross...

$2 5 billion revenue and 40%.

Okay.

Speaker 3: in addition to the manufacturing synergy.

In additional to the manufacturing synergies provided by the OSC could you ship over this past year.

Speaker 3: provided by AOC acquisition over this past year.

Speaker 3: We expect to realize expanded synergies across our product portfolio. Constable

We expect to realize explained the synergies across our product portfolio.

Customers in the market.

Speaker 3: the coming year to drive additional revenue growth and the growth margin expand

In the coming year to drive additional revenue growth and gross margin expansion.

Speaker 3: With that, let me now turn the call over to Brett to discuss our fourth quarter financial research.

With that.

Let me now turn the call over to Brett to discuss our fourth quarter financial results.

Speaker 3: our first quarter 2022 guidance in more detail.

Oh first quarter 2022 guidance in more detail.

Thanks, Dr Lu and good afternoon, everyone.

Speaker 4: As part of my financial review today, I will focus my comments on the sequential change for each of the line items and will refer you to our press release for a more detailed review of our results as well as the year-over-year comparison.

As part of my financial review today, I will focus my comments on the sequential change for each of the line items and will refer you to our press release for a more detailed review of our results as well as the year over year comparisons.

Speaker 4: Revenue for the fourth quarter 2021 was a record $480.2 million, an increase of 1.9% from $471.4 million in the third quarter 2021. For the full year 2021, revenue was a record $1.81 billion, an increase of 46.9% from $1.23 billion in the prior year.

Revenue for the fourth quarter 2021 was a record $482 million an increase of one 9% from 471 $4 million in the third quarter 2021.

For the full year 2021 revenue was a record $1.81 billion.

An increase of 46, 9% from $1 billion to $3 billion in the prior year.

Speaker 4: Gross profit for the fourth quarter was also a record at one hundred ninety point seven million dollars.

Gross profit for the fourth quarter was also a record at $197 million or.

Speaker 4: or a record 39.7% of revenue, increasing 5.2% or 130 basis points from $181.2 million or 38.4% of revenue in the third quarter of 2021. For the full year, gross profit increased 55.5% to a record $670.4 million or 37.1%.

Or a record 39, 7% of revenue, increasing five 2% or 130 basis points from $181 2 million or 38, 4% of revenue in the third quarter 2021 for the full year gross profit increased.

55, 5% to a record $674 million.

Or 37, 1% from $431 1 million or 35, 1% in 2020.

Speaker 4: from $431.1 million or 35.1% in 2020.

Speaker 4: Gap operating expenses for the fourth quarter, 2021, were $104.7 million, or 21.8% of revenue. And on a non-gap basis, were $100.1 million, or 20.8% of revenue, which excludes $4.1 million of amortization of acquisition-related intangible asset expenses, and $0.6 million of acquisition-related costs.

GAAP operating expenses for the fourth quarter 2021 were $104 7 million or 21, 8% of revenue.

On a non-GAAP basis were $100 1 million or 28% of revenue, which excludes $4 1 million of amortization of acquisition related intangible asset expenses and zero point $6 million of acquisition related costs. This.

Speaker 4: This compares to non-GAAP operating expenses in the prior quarter of $99.6 million, or 21.1% of revenue.

Compares to non-GAAP operating expenses in the prior quarter of $99 6 million or 21, 1% of revenue.

Speaker 4: GAAP operating expenses for the full year were $394.4 million, or 21.8% of revenue, compared to $296.8 million, or 24.1% of revenue, in 2020.

GAAP operating expenses for the full year were $394 4 million or 21, 8% of revenue compared to $296 8 million or 24, 1% of revenue in 2020.

Speaker 4: Total other income amounted to approximately $22.8 million for the quarter, consisting of $13.2 million of unrealized gain on investments, $11.2 million of other income, and $12.2 million

Total other income amounted to approximately $22 8 million for the quarter, consisting of $13 2 million of unrealized gain on investments.

$7 2 million of other income.

Speaker 4: $788,000 of interest income, $1.1 million in foreign currency losses, and $1.2 million in interest expense.

788000 of interest income $1 1 million and foreign currency losses, and $1 2 million and interest expense.

Speaker 4: Income before taxes and non-controlling interest in the fourth quarter 2021 was $108.8 million compared to $85.6 million in the previous quarter.

Income before taxes and Noncontrolling interest in the fourth quarter 2021 was $108 8 million compared.

Compared to $85 6 million in the previous quarter.

Speaker 4: Turning to income taxes, our effective income tax rate for the fourth quarter was approximately 39.1%, which includes taxes related to non-GAAP items. On a non-GAAP basis, the tax rate for the fourth quarter was approximately 18.4%.

Turning to income taxes, our effective income tax rate for the fourth quarter was approximately 39, 1%, which includes taxes related to non-GAAP items on a non-GAAP basis, the tax rate for the fourth quarter was approximately 18, 4%.

Speaker 4: Gap net income for the fourth quarter 2021 was $65.5 million.

GAAP net income for the fourth quarter, 2021 was $65 5 million or $1 43 per diluted share compared to GAAP net income of $68 4 million or $1 50 per diluted share in the third quarter of 2021.

Speaker 4: or $1.43 per diluted share, compared to gap net income of $68.4 million or $1.50 per diluted share in the third quarter of 2021.

Speaker 4: Net income per diluted share in the fourth quarter increased 142% year over year from the 59 cents per diluted share in the fourth quarter 2020.

Net income per diluted share in the fourth quarter increased 142% year over year from the <unk> 59 per diluted share in the fourth quarter 2022.

Speaker 4: The share count used to compute GAP diluted EPS for the fourth quarter 2021 was 45.9 million shares.

The share count used to compute GAAP diluted EPS for the fourth quarter 2021 was $45 9 million shares.

Speaker 4: Gap net income for the full year 2021 was a record $228.8 million, or $5 per diluted share, a 166% improvement compared to the $1.88 per diluted share, or $98.1 million in 2020.

GAAP net income for the full year 2021 was a record $228 8 million or $5 per diluted share a 166% improvement compared to the $1 88.

Per diluted share were $98 $1 million in 2020.

Speaker 4: On a non-GAAP adjusted net income in the fourth quarter was a record $73.3 million or $1.60 per diluted share, which excluded net of tax $3.3 million of acquisition related intangible asset costs....

On a non-GAAP adjusted net income in the fourth quarter was a record $73 3 million or $1 60 per diluted share, which excluded net of tax $3 3 million of acquisition related intangible asset cost.

Speaker 4: $0.4 million of acquisition-related costs, $13.5 million of costs related to certain LSE investments.

Zero point $4 million of.

<unk> related cost $13 5 million of costs related to certain LSC investments.

Speaker 4: and a $9.4 million gain on the sale of a manufacturing subsidiary. This represents an 8.8% improvement from the third quarter, 2021, of $1.47 per diluted share, or $67.3 million, and a 116% improvement from $0.74 per diluted share, or $37.3 million, in the fourth quarter, 2020.

And a $9 $4 million gain on the sale of our manufacturing subsidiary.

This represents an eight 8% improvement from the third quarter 2021 of $1 47 per diluted share or $67 3 million.

And a 116% improvement from 74 per.

Per diluted share or <unk>, $37 3 million in the fourth quarter 2020.

Speaker 4: On a non-GAAP adjusted net income for the full year 2021 was a record $237.2 million or $5.18 per diluted share, a 120% improvement compared to $2.35 per diluted share or $122.7 million in 2020.

On a non-GAAP adjusted net income for the full year 2021 was a record $237 2 million or $5 18 per diluted share a 120% improvement compared to $2 and 35.

Per diluted share or $122 $7 million in 2020.

Speaker 4: Excluding share-based compensation expense of $6.5 million for the fourth quarter and $26.2 million for the full year 2021, both GAAP earnings per share and non-GAAP adjusted EPS would have increased by 14 cents per diluted share for the fourth quarter and 57 cents for the full year.

Excluding share based compensation expense of $6 5 million for the fourth quarter and $26 $2 million for the full year 2021, both GAAP earnings per share and non-GAAP . Adjusted EPS would have increased by <unk> 14 per diluted share for the fourth quarter.

<unk> 57 for the full year.

Speaker 4: EBITDA for the fourth quarter was a record $139 million, or 28.9% of revenue, compared to $114.5 million, or 24.3% of revenue in the prior quarter.

EBITDA for the fourth quarter was a record $139 million or 28, 9% of revenue compared to $114 5 million or 24, 3% of revenue in the prior quarter on a year over year basis EBIT.

Speaker 4: On a year-over-year basis, EBITDA increased 107.2% from $67.1 million in the fourth quarter of 2020.

Creased 107, 2% from $67 $1 million in the fourth quarter 2020, further highlighting our significant operating improvements over the past year EBITDA.

Speaker 4: further highlighting our significant operating improvements over the past year.

Speaker 4: EBITDA for the full year 2021 increased 82.1% to a record $434.6 million, or 24.1% of revenue.

EBITDA for the full year 2021 increased 82, 1% to a record $434 6 million or 24, 1% of revenue.

Speaker 4: from $238.6 million or 19.4% in 2020.

From $238 6 million or 19, 4% in 2020.

Speaker 4: We have included in our earnings release a reconciliation of GAAP net income to non-GAAP adjusted net income and GAAP net income to EBITDA which provides additional details.

We have included in our earnings release, a reconciliation of GAAP net income to non-GAAP adjusted net income and GAAP net income to EBITDA, which provides additional details.

Speaker 4: Cash flow generated from operations was $77.6 million for the fourth quarter 2021 and $338.5 million for the full year.

Cash flow generated from operations was $77 6 million for the fourth quarter of 2021.

And $338 $5 million for the full year.

Speaker 4: Free cash flow was $22.5 million for the fourth quarter, which included $55 million for capital expenditures.

Free cash flow was $22 5 million for the fourth quarter, which included $55 million for capital expenditures.

Speaker 4: and $197.3 million for the full year, which included $141.2 million of capital expenditures or 7.8% of revenue.

And $197 $3 million for the full year, which included $141 2 million of capital expenditures or seven 8% of revenue.

Speaker 4: Net cash flow in the fourth quarter was a positive $82 million and a positive $46.3 million for the full year, which included a pay down of approximately $152.6 million of long-term debt during the year.

Net cash flow in.

In the fourth quarter was a positive $82 million and a positive $46 3 million for the full year, which included a paydown of approximately $152 6 million of long term debt during the year.

Speaker 4: Turning to the balance sheet, at the end of fourth quarter, cash, cash equivalents, restricted cash plus short-term investments totaled approximately $373 million. Working capital was $717 million and total debt, including long-term and short-term, was $301 million.

Turning to the balance sheet at the end of fourth quarter cash cash equivalents restricted cash plus short term investments totaled approximately $373 million working capital was $717 million in total debt, including long term and short term was 301 million.

Speaker 4: In terms of inventory, at the end of the fourth quarter, total inventory days increased to approximately 107 in the quarter as compared to 99 last quarter. Finished goods inventory days were 32 compared to 27 last quarter.

In terms of.

Inventory at the end of the fourth quarter total inventory days increased to approximately 107 in the quarter as compared to 99 last quarter.

Anish goods inventory days were <unk> 32, compared to <unk> 27 last quarter.

Speaker 4: Total inventory dollars increased $26.5 million to approximately $348.6 million.

Total inventory dollars increased $26 5 million to approximately $348 6 million.

Speaker 4: Total inventory in the quarter consisted of an $18.5 million increase in finished goods, a $15 million increase in raw materials, and a $6.9 million decrease in work and process.

Total inventory in the quarter consisted of an $18 $5 million increase in finished goods a $15 million increase in raw materials, and a $6 $9 million decrease in work in process.

Speaker 4: Capital expenditures on a cash basis for the fourth quarter 2021 were $55 million, or 11.5% of revenue, and 7.8% for the full year, which is within our target model of 5 to 9%.

Capital expenditures on a cash basis for the fourth quarter 2021 were $55 million or 11, 5% of revenue and seven 8% for the full year, which is within our target model of 5% to 9%.

Speaker 4: Now turning to our outlook. For the first quarter 2022, we expect revenue to be approximately $480 million, plus or minus 3%, which at the midpoint is better than typical seasonality of down 5%.

Now turning to our outlook for the first quarter 2022, we expect revenue to be approximately $480 million, plus or minus 3%, which at the midpoint is better than typical seasonality of down 5%.

Speaker 4: We expect gap gross margin on a consolidated basis to be 39.7%, plus or minus 1%.

We expect GAAP gross margin on a consolidated basis to be 39, 7% plus or minus 1% non.

Speaker 4: non-GAAP operating expenses, which are GAAP operating expenses adjusted for amortization of acquisition-related intangible assets, are expected to be approximately 21% of revenue, plus or minus 1%.

non-GAAP operating expenses, which are GAAP operating expenses adjusted for amortization of acquisition related intangible assets are expected to be approximately 21% of revenue plus or minus 1%. We expect net interest expense to be approximately $1 4 million.

Speaker 4: We expect net interest expense to be approximately $1.4 million.

Speaker 4: Our income tax rate is expected to be 18.4%, plus or minus 3%, and shares used to calculate diluted EPS for the first quarter are anticipated to be approximately 46.3 million shares.

Our income tax rate is expected to be 18, 4% plus or minus 3% and shares used to calculate diluted EPS for the first quarter are anticipated to be approximately $46 3 million shares.

Speaker 4: Please note that purchasing accounting adjustments of $3.3 million after tax for previous acquisitions is not included in these non-GAAP estimates.

These notes that purchasing accounting adjustments of $3 $3 million after tax for previous acquisitions is not included in these non-GAAP estimates.

Speaker 4: With that said, I will now turn the call over to Emily Yang.

With that said I will now turn the call over to Emily Yang.

Speaker 5: As Dr. Liu and Brad mentioned, fourth quarter revenue increased 1.9% quarter over quarter, which is better than the midpoint of our guidance due to the continued strong demand and record revenue across all the...

Thank you Brett and good afternoon as Dr. Lu and Brett mentioned fourth quarter revenue increased one 9% quarter over quarter, which is better than the midpoint of our guidance due to the continued strong demand and record revenue across all the regions distributor inventory in the fourth quarter in terms of.

Speaker 5: distributor inventory in the fourth quarter in terms of weeks increased slightly quarter over quarter, which is still below our defined normal range of 11 to 14.

Weeks increased slightly quarter over quarter, which is still below our normal range of 11 to 14 weeks.

Speaker 5: Looking at global sales in the fourth quarter, Asia represented 78% of revenue, Europe 13%, and North America 9%. In terms of our end market, computing represented 29% of revenue, industrial 24%, COVID-19%, communication 16%, and automotive 12% of revenue. We achieved record revenue in the automotive, industrial, communications, and consumer segments. Now let me review the end market.

Looking at global sales in the fourth quarter Asia represented 78% of revenue.

13% and North America have nicely.

In terms of our end markets contributing represented 29% of revenue industrial 24% consumer, 19% communication, 16% and automotive 12% of revenue we achieved record revenue in the automotive industrial communications and customer sentiment.

Now, let me review the end markets in greater detail.

Speaker 5: In the automotive market, we continue to expand our strong growth momentum with revenue increasing 37% year over year and 59% for the full year to set new records.

In the automotive market, we continue to extend our strong growth momentum with revenue, increasing 37% year over year and 59% for the full year to set new records.

Speaker 5: Since 2013, when we began our expansion initiative into the automotive market, we have achieved an eight-year compounded annual growth rate of 30%. One key to our success has been our content expansion initiatives and design-win momentum that has continued across all target application areas, particularly in three focus areas of connected driving, comfort style and safety, and power.

Since 2013, when we began our expansion initiatives into the automotive market, we have achieved a compound annual growth rate of 30%.

Key to our success has been our tomcat expansion initiatives and design win momentum that has continued across all target application area.

Cheekily in three focus areas of connected driving conference die on safety and powertrain.

Speaker 5: Automotive DC-DC 32V and 40V box converters, LED switching drivers, and SDRs continue to see strong demand for telematics, front and rear LED lighting, daylight running lights, and ADAS.

Automotive D. CPC 32, volt and 40 will box converters, our EDI switching Blackbird and FBR <unk> continued to see strong demand for telematics front and rear AED lighting daylight running light and Adas applications. Similarly, named BMO L E drive for a product with the site into fresh risk.

Speaker 5: Similarly, linear mode LED driver product would be signed into first responders emergency lighting system. And high efficiency charge pump LED drivers has been seen traction for indicator LED lights in the household EV plug-in charging.

Sponsors emergency lighting system and heightened efficiency charge pump LCD drivers has been seeing traction for indicate our LGD lighting the household EV plug in charging.

Speaker 5: Newly released LDOs, current limit power switches, and ParaCon product line of level shifters, crystal oscillators, buffers, and PCI Express clocks are seeing new design wins in ADAS, telematics, anomalous vehicle control units, and infotainment systems.

Newly released Ldls current limit power switches and Paragon product line of level shifters Crystal oscillator buffers and PCI Express Clos are seeing new design asos.

Hello mate anomalous vehicle control unit and ink.

Speaker 5: We are also seeing great success from the high voltage latch, high voltage regulators, and only polar house switching, including fans, window lifters, motors, water pump, and door lock applications.

Flotation system.

We are also seeing great success from the high voltage high voltage regulators and Omi polar Haas switching in cooling side window investors motors water pumps and door lock applications. Additionally, transient voltage suppressor MOSFET JJ for Ics and USB charging controller.

Speaker 5: Additionally, transient voltage suppressors, MOSFET, gate driver ICs, and USB charging controller products are being designed into applications, including battery managed system, wireless charger converters, and in-vehicle USB charging ports. Fast recovery rectifier were also well accepted in electric vehicle heat exchanger applications, as well as automotive electric intelligent controllers.

<unk> are being designed into applications, including battery managed system wireless charger converters and vehicle USB charging ports.

Fast recovery rectifier will also well affected electric vehicle heat exchanger applications as well as automotive electric intelligent controllers.

Speaker 5: MOSFET design in multi-lentum continues for automotive brushed and brushless electric motor applications including power steering, fuel, oil and ABS pump, seats and mirrors.

MOSFET design Mckinnon, Tom continue for automotive brush and brushless electric motor applications, including power Steri shield oil and ABS pump seat and mirror.

Speaker 5: Our low-capacitance ESC and surge protection devices are also being designed into applications for protection of in-vehicle networks and for the IOPort protections of its far-field cameras for advanced driving.

Our low capacity ESP and surge protection devices are also being designed into applications for protection of in vehicle network and for the Io core protection of its far few cameras for advanced driving assistance.

Speaker 5: In the industrial market, revenue increased 43% year over year and 46% for the full year to also reach new records. We are continuing to see growth and adoption of DisplayPort, HDMI switches, and redrivers in the commercial display applications.

In the industrial market revenue increased 43% year over year and 46% for the full year. Two also reached new records.

We are continuing to see growth and adoption of display port HDMI switches and re drivers in our commercial display application.

Speaker 5: Our ultra-fast recovery retrofit product and PCI Express Gen 3 packet switch are gaining traction in the artificial intelligence, video analytics, 3D sensing camera module, and civilian and security applications. We are also seeing strong demand for application-specific multi-chip circuits and standard recovery retrofit products driven by multiple applications.

Our ultra fast recovery rectifiers product and PCI Express Gen. III packet switch are gaining traction in the artificial intelligence.

Now, let's take three D sensing camera module and Sofia and security applications.

We are also seeing strong demand for application specific multi chip circuits and C&I recovery retrofitted products driven by multiple applications such as diagnostic test system Brushless DC motor drivers energy metering power supply smart lighting and electrical medical applications, including.

Speaker 5: such as diagnostic test system, brushless DC motor drivers, energy metering, power supplies, smart lighting, and electromagnetic applications, including automated blood and body fluid analyzer.

Automated blood and Bobby if you annualize it.

Speaker 5: We have also been pleased with the strong design win momentum for the light on semiconductor image sensor product line being used in document scanners, lottery bar scanners, and PCB inspection application.

We have also been pleased with the strong design win momentum for the light also may conductor image sensor product line.

<unk>, Inc. Documents scanners lottery bar scanners, and PCB inspection applications.

Speaker 5: Additionally, our ultrafast recovery retrofit products, bipolar transistors, synchronized controllers, and MOSFETs continue to gain momentum in power supplies inverter applications.

Additionally, our ultra fast recovery rectifiers bipolar.

Bipolar transistors centralized controllers, and MOSFET continue to gain momentum and power supply.

Speaker 5: Medium voltage DC-DC LED drivers have been gaining design wings in smoke detectors, and SDR products are expanding in GPS tracking applications, which enable real-time location monitoring during the transportation.

<unk> application medium voltage DC DC LCD drivers has been gaining design win and smoke detectors and SBR products expanding in GPS tracking application, which enable real time location monitoring during their transportation.

Speaker 5: In the computing market, revenue was up 72% year over year and 122% for the full year. We're seeing strong traction for USB Type-C power switches, TVS, high power density shock keys, low voltage only polar hot sensors, dual output unit polar hot Still, the data that we have is fairly long and let the user see the path we are trying to take.

In the computing market revenue was up 72% year over year and 122% for the full year. We are seeing strong traction for USB type C power switches TVN high power density Shockey low voltage Omi Polar hall sensors do output Unipolar Hall sensors.

Speaker 5: DC-DC buck converters, as well as HDMI 2.0 redrivers in the new compute platform, including gaming notebooks and workstations. Similarly, we are seeing increasing interest for display port, USB Type-C, HDMI switches, and redrivers in the docking station, dongles, active cables, and keyboard, video, masks, apps, and different

DC DC converters as well as HDMI two <unk> efforts in the new compute platform, including gaming notebooks and workstations. Similarly, we are seeing increasing interest for display port USB type C. HDMI switches as we drive for us in the docking station diagnosed active.

Cable and keyboard video mass applications.

Speaker 5: We also continue to see strong demand for SSD mocks, crystal, and oscillator products in the enterprise SSD story modules and data center surfer applications. We have several design wings for the universal level shifter product family in various applications, including SSD storage, gaming, surfer, laptops, and mobile device.

We also continue to see strong demand for SSD, Mark Crystal and oscillator products in the enterprise SSD story modulus and datacenter surfer application, we have several design wins for the universal level shifts or product family in various applications, including SSD storage gaming.

Surfer laptops and mobile devices. Additionally.

Speaker 5: Additionally, light-on semiconductor image sensor products continue to gain momentum with new design in the scanner and copy machine.

Additionally, lite on semiconductor you make sensor product continued to gain momentum with new design is in the scanner and coffee machines.

Speaker 5: In the consumer market, revenue increased 18% year-over-year and 12% for the full year to also set new record for the quarter and E.

In the consumer market revenue increased 18% year over year and 12% for the full year. Two also set new record for the quarter and year <unk> continued to see strong revenue growth of stand a recovery rectifier products and FBR in the consumer applications, including digital light projection.

Speaker 5: Stio continues to see strong revenue growth of standard recovery retrofit products and SBR in the consumer applications including digital light projection, LED light modules and high efficiency vacuum cleaners.

Bartlett modules and high efficiency vacuum cleaners, we also have new design wins, what USB Moss and bipolar transistors, and LCD television and display panels as well as increasing demand for low power class D audio amplifiers, FBR <unk> drive throughs utilizing monitor Bluetooth speaker.

Speaker 5: We also have new design wings for USB mops and bipolar transistors and LED TV and display panels, as well as increasing demand for low-power Class D audio amplifiers, SBRs, and LED drivers utilizing monitor, Bluetooth speakers, LED lighting, and smart doorbell apps.

Led lighting and Mark doorbell applications.

Speaker 5: We also continue to see strong momentum for CFP and small DFM MOSFET for IoT and wearable devices, as well as high-power density products securing new design wins in the home exercise equipment. Mobile phone adapter generate a strong demand for diode fast-recovering rectifiers, and AC DC products continue to see growth from quick charging out.

We also continue to see strong momentum with BSP is small DFM MOSFET for Iot and wearable devices as well as high power density product securing new design wins in the home exercise equipment.

Mobile phone adapter generated strong demand for the iOS fast recovery rectifiers, and AC DC product continued to see growth from quick charging application.

Speaker 5: Lastly, in the communication market, revenue was also a record and grew 10% year over year and 13% for the full year. Design-way momentum for the ParaCon product line continues in this market for our USB Mux and ultra high voltage protection for 5G CPE applications. There has also been growing demand for USB redrivers, primarily driven by the USB Type C application.

Lastly in the communication market revenue was also a record and grew 10% year over year and 13% for the full year design win momentum for the <unk> product line continues in this market for our USB marks in ultra high voltage protections with CCTV application. There has also been grown.

Demand for USB re drivers, primarily driven by the USB type C applications Adil.

Speaker 5: Additionally, our small size low saturated transistors continue with design wins across multiple applications from base stations, routers, network cameras to doorbells. We saw strong demand for our SBR chip scale package and design wins for high PSR LEO product family in smartphone applications.

Additionally, our small size low saturate the transistor continue with design wins across multiple applications from base station routers network cameras to do our best with the strong <unk> Macquarie SBR chip scale package and design wins for our <unk> product family in smartphone apps.

Speaker 5: In summary, 2021 was an exceptional year for Diode, both operationally and financially. We achieved strong revenue growth and margin expansion for our total solutions sales approach and content expansion initiatives, especially in the automotive, industrial, and market, as well as the ParaCon product then.

Patients.

In summary, 2021 was an exceptional year for diode, both operationally and financially we achieved strong revenue growth and margin expansion for our total solution sales approach and content expansion initiatives, especially in the automotive and industrial end markets as well as the <unk> product.

Speaker 5: We also successfully integrated Lion Semiconductor acquisition and benefited from the manufacturing synergy.

We also successfully integrated <unk> semiconductor acquisition and benefited from the manufacturing synergies with additional opportunities for the growth and expansion through the products customers and end market synergies that we expect to realize over the coming quarters and years with that we now open.

Speaker 5: with additional opportunities for the growth and expansion through the products, customers, and end-market synergies that we expect to realize over the coming quarters and years.

Speaker 5: With that, we now open the floor to questions. I'll pray.

The floor to questions operator.

Speaker 1: Thank you. As a reminder, to ask a question, you would need to press the star 1 on your touchstone telephone. To withdraw your question, please press the pound key. Please stand by while we compile...

Thank you.

As a reminder to ask a question you will need to press star one on your Touchtone telephone.

Your question. Please press the pound key.

Standby, while we compile the Q&A roster.

Speaker 1: I show our first question comes from the line of Matt Ramsey from Cowen. Please go ahead.

I show our first question comes from the line of Matt Ramsay from Cowen. Please go ahead.

Thank you very much good afternoon, everyone.

Speaker 6: Congrats on the great results, Dr. Liu. I wonder if you might provide some commentary. Over the last, I don't know, year and a half or so, the industry has been...

Hi, Matt.

Congrats on the great results Dr. Lu I Wonder if you might provide.

Provide some commentary over the last I don't know.

Year, and a half or so the industry has been.

Very supply constrained.

Speaker 6: company was fortunate enough to acquire the capacity from light on and did an amazing job in executing and filling that capacity.

Your company I was fortunate enough to acquire the capacity from white on and did an amazing job in executing and filling that capacity.

Speaker 6: and it's led to some pretty remarkable growth. I wonder as you think about the next year or two in Diode's growth plan, where do you have the opportunity?

And it's led to some pretty remarkable growth I wonder as you think about the next year or two in diodes growth plan.

Where do you have the opportunity to add more capacity.

Speaker 6: and how much of the growth are you thinking coming from pricing versus units?

And how much of the growth are you thinking coming from pricing versus units versus additional capacity. Thanks.

Speaker 3: Okay, so I just answered several of your questions. Okay, first you are talking about, you know, how much of the growth coming from price increase and how much is coming from...

Okay.

Hi, Jeff.

Several of your question.

First you are talking about how much the grille.

Coming from price.

And how much is coming from.

Speaker 3: revenue growth, okay, or the capacity expansions. So we do not really separate that number very clearly but we only...

Revenue growth okay.

Okay.

Capacity expansions, so we did not really separate that number.

But we only be.

Speaker 3: increase the price based on our wafer or our cost material equips.

Increase.

Alright.

Based on <unk>.

Sure.

Wafer.

Speaker 3: So we reflect the material increase to our customers only. But we take a deep breath and we reflect the material increase to our customers only.

Course material real quick.

So we expect them a few of the increase to our costs.

Only.

Speaker 3: by, you know, better support customer to ask them to give us more design opportunity.

We took additional opportunity.

Hi.

To support customer.

To asking them to give us more design opportunity so some of.

Speaker 3: So, you know, some of the area our customers would not allow us to touch in the past. Now, with this great support to our customers, we can demand or ask them to open up the design in opportunity for us. And so that is, you know, what we are doing today and using the capacity constraints.

Our cash flow allow us to touch in the past now.

And a great support to our customer we can been asking them to open up the opportunity for us.

So that is.

What we are doing today.

Using the capacity constraint.

Speaker 3: to our advantage of opening up more beaches opportunities.

Two hours advantage of opening up more pitches opportunities.

Speaker 3: Now you are talking about the future growth, then we have our S-FAB

Now youre talking about the future growth then.

No.

We think.

Thank you.

Speaker 3: two a inch. We just from bur door ramp it up.

Yes.

Two eight.

Each.

Jeff.

But no rented up.

Speaker 3: to fully loading by December last year.

<unk> fully loaded by December last year.

Speaker 3: you listen to what we have been talking about that year the whole year we ramped up the S-FET 2 so this year that would be fully loaded

If you listen to what we have been talking about the whole year, we ramp up.

So.

This year.

Speaker 3: So then another is our G-Fab. If you remember, we bought our G-Fab back in 2019.

Before you go okay. So.

Then either.

He's our chief where if you remember we bought <unk> back to 2019.

Speaker 3: And we committed to the original owner who support them.

And.

And we.

Committed to the regional owner all supporting them.

Speaker 3: and that every year they would reduce their loading to us 10 percent.

Four five years.

And every year they would use the loading to us 10%.

Speaker 3: And so we gradually qualify our production or our knowledge, our product into the G-FAB. And so we actually...

So we.

Great jewelry holding flat.

<unk>.

The college, our product into that cheap.

And so we actually.

Speaker 3: have additional capacity by original owner requirement reduce. And so we are able to take the opportunity to give us more capacity.

Additional capacity by.

Our issue only.

Did you.

So we are able to pick about opportunity to give us more capacity.

Speaker 3: for the growth. And this will continue because they're going to be, you know, their demand going to go down and we continue ramping up.

The grille and decent continue because they are going to be.

Their demand going to slowdown.

And we continue ramping it up.

Speaker 3: At the same time, if we still need more than that, we can. They still have

The same time.

You need more than.

We can.

Speaker 3: enough capacity we can bring that capacity or bring that loading even higher because the time.

Do you have.

No capacity.

Bringing that capacity well bring that going even higher because of the time.

Speaker 3: When we bought that, we said they are fully loaded. But in the wafer craft definition, when we say fully loaded, it's 80%.

We bought that and we said 40 dilutive but.

Wafer fab definition, when we say leisure.

Speaker 3: And if you look at some of our wafer fab, it already goes up to 100% or 95%. So we still have more room.

80%.

If you look at some of our wafer fab is already up 200% or 95% right. So we still have more room.

Speaker 3: in the G5 to give us additional growth.

In the <unk>.

And do you see unit growth.

Speaker 3: We are our supplier other external fair with our relationship. We still can continue asking for a little bit more every quarters or, you know, here, there to get a little bit more. So

Then.

Our supplier or the.

Total fair.

We saw a relationship.

We feel.

<unk> asking for IGT.

More if we can.

Quarters.

<unk>.

Sure there to get particularly more so.

Speaker 3: We still believe we have enough capacity.

We still believe we have enough capacity to support.

Speaker 3: support our growth in this year or next year. And then when the demand starts to do so, we can take that opportunity to continue.

Growth in this year or next year.

And.

Then when the demand start to boost it up we can do.

<unk>.

Continue our growth.

Speaker 5: Right, and then on top of that, Matt, we also will continue to drive the product mix improvement. So we want to focus to better utilize the available capacity to support better business as well.

Alright, and then on top of that Matt. We also will continue to drive the product mix improvement. So we want to focus to better utilize available capacity to support better business as well.

Speaker 6: Got it. Thank you both for the commentary there. As my follow up question, I guess I'd be remiss to not mention that you're bumping right up against your long term 40% gross margin.

Got it thank you both for the commentary there.

Follow up question.

I guess I'd be remiss to.

Not mentioned that Youre bumping.

Bumping right up against your long term, 40% gross margin target I think you are.

Run rate of revenues slightly under $2 billion and you were planning to hit 40%.

$2 5 billion in revenue. So if you could just kind of walk me through the puts and takes on gross margin.

Speaker 6: as we go forward, is this kind of a new floor of margin and sustainable? And what are the incremental margin drivers as you add that additional 500.

As we go forward is this kind of a new floor of margin and sustainable.

And what are the incremental margin drivers as you add that additional.

$500 million in revenue towards towards the target model. Thank you.

Speaker 3: Well, you know, really what we're looking for is a $1 billion growth block.

Well no.

The really.

The full $1 billion of gross profit.

Speaker 3: And when I said that, it really is the goal. One billion dollar gross profit, because that follows through to the EPS.

Okay, and when I think that is.

It really is the goal one build and.

Gross profit because that fall through to the EPS. So that is really to go now.

Speaker 3: So that is really the goal. Now, when I say $1 billion gross profit, then we say, how do we make? Then we say, $2.5 billion revenue, 40% GDP to make up that.

I saved 1 billion gross profit that we say how do we make then we say $2 5 billion revenue, 40% GP to make up that $1 billion.

Speaker 3: And if our gross margin can be better than 40%, we are not going to... We just continue to improve our gross margin and we get there without...

Our gross margin can be debated a 40%.

Yes.

We.

Continue improve our gross margin and we kept Dale we saw two five so we'll achieve that goal.

Speaker 3: 2.5 billion. So we will achieve that goal early.

Speaker 3: Then after that, then we'll start to get to our next target. But I'm not ready to announce that next target yet, but we are quite close to the target of $1 billion gross profit.

Then after that then we'll start to get to our next target.

Im not ready to announce that.

Next <unk>, yet, but we.

<unk>.

Hi crush.

To the target of $1 billion.

Gross profit.

Got it. Thank you. Thank you I'll get back into queue, but congratulations on the progress.

Speaker 1: Thank you. Our next question comes from the line of William Stein from Truitt Securities. Please go ahead.

Thank you.

Thank you I show. Our next question comes from the line of William Stein from <unk> Securities. Please go ahead.

Speaker 7: Great, thanks for taking my question. I'll add my congratulations, especially to the outlook, but both the results in outlook are great. I have a question about the guidance by end market. Normally Q1 is down a little bit.

Great. Thanks for taking my question I'll add my congratulations, especially.

Especially to the outlook, but both the results and outlook are great.

I have a question about the guidance.

And market normally.

Speaker 7: And I think the end markets that tend to do that are the, I think what you call the three Cs, right? Consumer comms and communications. I think those are typically down sequentially while industrial and automotive are typically up a little bit. So if we think about the Delta or the difference in this Q1.

Q1 is down a little bit and I think the end markets that tend to do that or the.

I think what you called the three CS right consumer comps.

Communications I think those are typically down sequentially, while industrial and automotive are typically up a little bit. So if we think about the delta for the difference in this Q1.

Speaker 7: know, is it more spread across all end markets that they're all going to do a little better than typically or is it more that you're going to see sequential growth a little bit in each of the end markets or some or is there some different explanation?

Is it.

Is it more spread across all end markets that theyre, all going to do a little better than typically or is it more that youre going to see sequential growth a little bit in each of the end markets or some or is there some different explanation.

Speaker 5: Okay, hi this is Emily. So I think overall what we're seeing is actually strength across all the end markets.

Okay.

Hi, This is Emily so I'd say overall, what are we seeing it's actually strength across all the end market.

Speaker 5: I think all in all we have really strong demand and if we look down to the specific segments, so for example automotive, we actually have a full year growth of 59%. We see that momentum continue.

I think all in all we have really strong demand and if we look down to the specific segments or facetime call automotive, we actually have a full year growth of 59%, we see that momentum continues and therefore, the industrial we also seeing a lot of growth like 46% for the full year.

Speaker 5: And for the industrial, we also seeing a lot of growth, like 46% for the full year. And again, a lot of design in pipeline continue to grow.

And again a lot of design in pipeline continue to grow on the computer computer side. When we talk about the low end PC there Stefan will go a little bit softness, but we're also seeing strength on the cloud computing and sorry for those kind of balance itself on the consumer side Youre right absolutely Q1, usually is novel.

Speaker 5: On the computer side, we talk about the low-end PC, there's definitely a little bit of softness, but we also see strength on the cloud computing and server, so it's kind of balanced itself.

Strong quarter, and we definitely see a little bit of softness I would say more from the China consumer side again, we have a lot of overall other demands whether it's home care or some other consumer applications that would continue to see the strength right.

New indications Sai I think Theres a lot of news about the smartphone softness a little bit in China, but since we are very well diversified into all the tier one smartphone manufacturer.

Speaker 5: news about the smartphone stockness a little bit in China, but since we are very well diversified into all the tier one smartphone manufacturers that we are actually seeing not that much of the impact to the overall dials. So I would say all in all 5G continues to drive a lot of momentum, not just on the base station but 5G related applications. So yeah, I would say all in all still very, very strong. My follow up if I can, I think I saw an announcement recently about Diode's...

We actually seen not that much of the impact to the overall dialysis.

Speaker 5: So I would say all in all 5G continues to drive a lot of momentum, not just on the base station but 5G related applications. So yeah, I would say all in all, still very, very strong.

So I would say all in all five <unk> continued to drive a lot of momentum not just on the base station <unk> related applications. So, yes, I would say all in all still very very strong.

Speaker 7: My follow-up if I can, I think I saw an announcement recently about diodes dipping its toe into silicon carbide development. Can you maybe clarify what you envision, well first, what capabilities you're developing and what market or opportunity you believe you'll be able to address. Thank you.

My follow up if I can I think I saw an announcement recently.

Diodes.

Dipping its toe into silicon carbide.

Development.

Can you maybe.

Clarify what you envision well first what capabilities, you're developing and what <unk>.

Market or opportunity you believe you'll be able to address thank you.

Speaker 8: Okay, this is Gary and Will and nice to talk to you. And Ashley, you know, the Slink and Carbide development we've been starting for this kind of a year ago and we see that's a very strong trend from the market.

Okay. This is Gary and well and nice to talk to you and Ashley the silicon carbide, the environmentally being starting about this time target probably a year ago and with you. That's a very strong trend from the market and we have our design team in house and we do our wafer design and we use are defined using outside fabrication.

Speaker 8: And we have our design team in-house, and we do our wafer design, and we use our design using outside fabrication through the wafer. And particularly the silicon carbide we are using is for the automotive-related part, like the OBC onboard charger, like micro EV and inverter, and especially this is the news we have for the dial set.

Wafer and particularly that takes in Colorado, we are using for the automotive related potline to OTC onboard charger like micro inverter.

Inverter and especially if you see the new news, we have but the dialysis that's J joint venture activity that we have with the art silicon carbide most.

Speaker 8: That's the GE joint venture activity that we have with your silicon carbide modes, with the technology that we have put into module. Module goes to the inverter, and those inverters go into the electronic vehicle's motors. And that's the area we're going to focus on.

That technology that we have put into a module module go to the inverter and dosing and ready to go into it.

Electronic vehicles Motors and that's the area, we're kind of focused on.

Speaker 8: any revenue to discuss in that area yet or is it all? No, not yet. Not yet. Not yet. Our engineering sample should be delivered by end of this year. And we are looking forward because of the motive related, probably one year or a little bit longer. And we're looking for probably the first revenue going to come in probably the middle of next year. Great. Thank you.

Any.

To discuss in that area, yet or is it all.

Yes.

No not yet.

Our engineering samples you'll be de lever up.

This year and we are looking for work because the automotive related probably one year or a little bit longer and with looking for probably the first revenue going to accommodate them probably the mid of next year.

Great. Thank you congrats again.

Speaker 1: thank you i thought next question comes from the line of gary mobley from well-farged security

<unk>.

Yes.

Thank you I show. Our next question comes from the line of Gary Mobley from Wells Fargo Securities. Please go ahead.

Speaker 9: Good afternoon, everybody. Thanks for taking my question and congrats to the strong 2021 and a good start to the current calendar year.

Good afternoon, everybody. Thanks for taking my question and congrats to the strong 2021 and a good start to the current calendar year.

Speaker 9: I wanted to ask about your manufacturing footprint, China. I realize the majority of your employees are based in China. So have you seen any impact on your production facilities past?

I wanted to.

Ask about your manufacturing footprint, China realize the majority of your employees are based in China. So have you seen any impact on your production facilities past or.

Speaker 9: present or maybe in the future from China's COVID zero power.

Present, or maybe in the future from China's Cobra zero policy.

Speaker 3: Well, that means answer this one. Actually, our work will fail. Long Live detonator stood,ARC KORIS

Well, let me answer this one.

Actually ill liquid.

Speaker 3: However, we feel that internally it is not in China.

Majority of which will affect internally.

Speaker 3: Okay. And, you know, we have external, but in total...

In China Okay.

We have external.

Speaker 3: We in the, you know, G-FAB and O-FAB in Europe , and the AOSC have, you know, the WIFO FAB in Taiwan. So today in China, we only have S-FAB 2. Okay. So we—

Total.

In the.

<unk>.

And the old Fab, you will in Europe and.

Ashish.

Phil.

In Taiwan so.

Today in China, we only.

Speaker 3: majority is not there. Now for a summary...

Okay. So we don't have.

Majorities no data now for Tim Murray.

Speaker 3: Yes, but virtually, the two major sites are in Shanghai, which don't have that big problem of COVID-19, and Chengdu, again, in San Francisco, the China government is very, very careful too. So we don't see the problem due to COVID-19.

Yes.

Virtually.

We the two major site.

In Shanghai, which don't have that problem.

COVID-19.

Hi, Ken.

Thanks, Bob.

Sure.

China government is very very careful to so we don't we see.

The problem due to COVID-19.

Speaker 3: And actually, it's helping us because, for example, you know, typically every year during the Chinese New Year, we're going to have...

Alright.

And actually helping us because for example.

Typically every year during the Chinese new year, we going to have.

Speaker 3: shut down because a lot of workers are going to go home for the Chinese New Year. During the Chinese New Year that money.

<unk> down and because of the out of old curve going to go home for Chinese new year. So do you within the Chinese new year.

Speaker 3: our productivity or our production is actually slow down. That's why one of the reasons we have this scenario in one queue, we cannot get enough OPPP

Months.

Our productivity.

Production is.

Actually slow down that's what NOLA.

The reason we have this is sidney.

<unk> Q.

Speaker 3: But this year, like last year, the China government actually encouraged, quote-unquote, encouraged the people to go home.

Could not getting now output.

This year.

Last year.

The China government.

I actually encourage coal by coal.

Rich people.

Speaker 3: stay in the door code and either take off or continue working.

Sure.

State.

The adult pool.

And.

Either.

Speaker 3: So, because of that, this year, our output affected by Chinese New Year is now.

<unk> will continue to work.

Okay, so because of that.

This year.

Sure.

Put affected by Chinese new year.

Speaker 3: that great or that critical and therefore we are able to support our demand.

No.

That.

Great.

Political.

Therefore, we are able to support it.

Speaker 3: Still not enough, but we are able to support.

Maine.

Still not enough.

Speaker 3: So therefore we have guided our 1Q revenue, you know, thread from 4Q because our output is not really going to slow down.

We are able to support.

So therefore weak.

Great.

For <unk> revenue.

Fred.

For Q first output.

Really going to slowdown.

Speaker 3: that much. At the same time, we do build some inventory in 4Q, try to get support on 1Q. So overall, we do not really affect.

Not much.

In time, we do build some inventory for Q try to get support.

So overall, we do not really expect.

Speaker 3: many section wise by COVID-19 effect in China, but actually we are better than.

Manufacturing wise by COVID-19.

Affecting China, but.

Speaker 3: in the past is due to the worker to not really go home.

We updated.

In the past due to the water.

Re vehicles.

Speaker 9: Appreciate the color there, Dr. Liu. I have a couple of follow-ups for Emily, perhaps.

Got it I appreciate the color there Dr. Lu and I have a couple of follow ups for Emily perhaps.

Speaker 9: Normally Q1 is down 5%.

Normally Q1 is down 5%, but I presume that you're going to have a better than seasonal.

Speaker 9: but I presume that you're going to have a better than seasonal.

Speaker 9: you won because perhaps you're having a getting an opportunity to replenish distributor inventory.

Q1, because perhaps you are having are getting an opportunity to replenish distributor inventory.

Speaker 9: And related to that, would you expect me back up in the normal 11 to 13 week range? And is there any way to quantify the impact of your competitors, one in particular that is exiting a few hundred million dollars last year and the next year in some product categories that you directly compete in? Thank you.

Related to that would you expect to be back up in the normal 11 to 13 week range.

Is there any way to compact quantify excuse me quantify the impact of your competitors. One in particular that is exiting a few hundred million dollars last year and the next year.

<unk>.

In some product categories that you directly compete in.

Thank you.

Speaker 5: Gary, you know, with the, like Dr. mentioned, better than maybe...

So I think.

Gary.

With.

Dr. <unk> mentioned other than maybe.

Speaker 5: little bit better than expected output in Q1. That's the reason we provided a flight guidance, which you are absolutely right. This is usually about 5% down quarter, right? So what we do, we feel aggressively working with all the customers closely and review all the opportunities in front of us, right? So if this is the right fit for the overall DAIO's growth and fit it into our overall strategy, we aggressively pursue. And like I mentioned earlier, anytime there's a strategic change from my peers or merchant acquisition always create a more opportunity for DAIO's to pursue after, right? But again, we are not just blindly going after every business, we really more focus on strategic good business that will continue to drive our product mix improvement, as well as a total solution sales strategy that we initiated a few years ago, right?

Little bit better than expected output in Q1 Thats. The reason, we provided a slide guidance, which you're absolutely right. This is usually about 5% down quarter right. So what we do we feel aggressively working with all the customers closely and review all the opportunities in front of US right. So if this is right.

The overall <unk> growth and fit into our overall strategy, we aggressively pursue and like I mentioned earlier any time there are some strategic change from my peers or merge and acquisition will always create more opportunity for us to pursue after it right, but again, we are not just <unk>.

Going after every business, we really are more focused on.

T J.

That will continue to drive our product mix improvement as well as the total solution sales strategy that we initiated a few years ago right.

Speaker 9: in the impact from one of your competitors exiting the market.

Got it.

And the impact from weather.

Speaker 5: I think it's really hard to really say how big or how small the impact. I also think one of my peers published a lot of statements, but there's also others maybe didn't really that vocal but also making changes.

Are your competitors exiting the market.

I think it's really hard to to really say, how big or how small the impact I also think one of my peer poplit publish allowed a statement, but there's also others maybe didn't really that local but also making changes so again we.

Speaker 5: So again, we monitor all this very closely as long as it fits into our long-term plan, as long as that's going to help us to achieve the $1 billion gross profit that we mentioned earlier, we're definitely aggressively going after it.

Monitor this very closely.

<unk> fits into our long term plan as long as that's going to help us to achieve the $1 billion gross profit Dr. Lu mentioned earlier with definitely aggressively.

Going after it.

Thanks Emily.

Speaker 1: Thank you. I show our next question comes from the line of Tristan Gare from Baird. Please go ahead.

Thank you.

I show. Our next question comes from the line of Tristan <unk> from Baird. Please go ahead.

Speaker 10: Hi guys, quick question on the gross margin trajectory for the next two quarters for this year. What's going to be the next component versus further fixed cost absorption? It sounds like you have room to further expand utilization rates, so how should we put that in the mix in terms of margin expanding this year? And that's going to divert Responseup Isaac Winners are heading out this year, so they're, you know, They're willing to fight as some people they won't have the answers. We're good. Great.

Hi, guys.

Quick question on the <unk>.

Gross margin trajectory for the next few quarters for this year, what's going to be the mix component versus.

Further fixed cost absorption.

It sounds like you have room to further expand utilization rates.

How should we put that in.

In the mix in terms of margin expanding this year.

Speaker 5: Yes, so maybe let me make a comment and Dr. Liu and some others maybe can add some more. I think the margin improvement really consists of a few things and they are all very important, right? I think that's one of the problems.

Well I think that yes, so maybe let me make a comment and got to lose some others. Maybe you can add some more I think the margin improvement is it really just a few things and they all very important rate one of the biggest one is product mix improvement and we've been talking about this for a while so we will continue to drive.

Speaker 5: improvement and we've been talking about this for a while so we will continue to drive. This is really more from the total solution sales replacing some of the legacy stuff with some of the newer products with better margins, better ASP as well.

This is really more from the total solution itself, replacing some of the legacy start with some of the newer product with better margins further.

Speaker 5: And we believe this is actually just the beginning of this whole initiative. And this is actually something we established probably about two or three years ago and will continue to drive for improvement. I think manufacturing efficiency improvement has always been the strength for dials.

ASP as well.

And.

We believe this is actually just the beginning of this whole initiative and this is actually something we established probably about two or three years ago and will continue to drive for improvement I think manufacturing efficiency improvement has always been the strength with iOS and Dr. Lu mentioned, we'll continue to add additional.

Speaker 5: And like Dr. Liu mentioned, we continue to add additional capacities.

Speaker 5: This can be even adding more equipment within existing life or replacing some of the old equipment with the new one, expanding to four inches, six inches, stuff like that. So that will continue to drive some of the capacity improvements and in result that will continue to drive our manufacturing efficiency and continue to improve our cost. And then we also have a light on semiconductor synergies that I talked about. So we start seeing the benefit of the manufacturing synergy but there are still customer synergy, end market synergy and product synergy that we can actually...

Capacities.

This can be.

Even adding more of the equipment within existing life or replacing some after all equipment with a new one expanding too.

Interest of six interest stuff like that so that will continue to drive some of the capacity improvement and in result that will continue to drive our manufacturing efficiency.

<unk> continue to improve our cost right and then we also have a lie on semiconductor synergies that I talked about so we start seeing the benefit of the manufacturing synergy, but there are still customers synergy end markets energy and <unk>.

I'm proud of end markets and the gem product synergy that we can actually.

Speaker 5: continue to see benefit over the next few years. So I would say all in all, this is few areas will continue to help us to drive the margin. And just like Dr. Liu mentioned, we definitely not gonna stop at 39.7 or 40%. And this is continued the direction and we definitely want to continue to deliver the results to you guys as well.

Continue to see benefit over the next few years. So I would say all in all there's a few areas will continue to help us to drive the margin and just like Dr. Lu mentioned, we are definitely not going to stop at $39 seven of 40% and this has continued the direction and.

We definitely want to continue to deliberate that reached out to you guys as well.

Speaker 10: Okay, great. And then for my follow up, it's going to be about inventories in the channel. So you've mentioned that you, you know, you mentioned.

Okay, Great and then for my follow up.

It's going to be about inventories in the channel or so you've mentioned that you.

Speaker 10: well advertised slow down in China's smartphone, but that you're also very diversified. So are you seeing any pockets of inventories in the supply chain outside of the stage that you could point out?

You mentioned the.

Advertised slowdown in China is small term, but youre also very diversified. So are you seeing any pockets of inventories in the supply chain outside of this piece that you could point out.

Speaker 10: despite that diversification. And then also, are you seeing inventory rebalancing because of the high level of work in process inventories? So are you seeing some customers basically choosing and picking what they're going to order because they can't close the box, so they're kind of waiting for that last component?

Despite the diversification and then also.

Are you seeing inventory rebalancing because of the high level of work in process inventories.

So are you seeing some customers basically choosing and picking what theyre going to order because they can't close the books. So they are kind of waiting for that last component.

Speaker 5: Yeah, I think Tristan, overall we're still seeing the channel inventory very lean. So even we see a very slightly increase in our channel inventory end of Q4. That's actually driven by some of the support for the Chinese New Year customers and also the timing of the shipments.

Yes, I think overall, we're still seeing the channel inventory very lean so.

We see a very slightly increased our channel inventory end of Q4, that's actually driven by some of the enel support for the Chinese new year customers and also the timing of the shipment, but all in all still extremely lean I think.

Speaker 5: But all in all, still extremely lean. I think Gary asked a question, I probably didn't address it. It's actually, do we expect back to the 11 to the 13 weeks or 14 weeks that we define as the normal range? We don't really expect return to that normal range in a short period of time. So we believe that with all the visibility that we have, with all the customers that we actually have a direct communication.

Gary ask a question that probably didn't address it is actually we do we expect back to the 11 to 13 weeks or 14 weeks that we define as a normal range.

Don't really expect return to that normal range in a short period of time. So we believe that with all the visibility that we have with all the customers that we actually have a direct communication.

Speaker 5: So far, no one has the opportunity to build up a lot of inventory on the shelf at this moment. So I believe that will continue for a few quarters to come and will continue to monitor very closely. That pretty much applies to all the tier 1, tier 2 that we have a direct contact. And then with the tier 3, tier 4 customers, we actually monitor very closely with each of our distributor's partners. And they also monitor very closely, so we definitely don't see that as an issue at this moment.

So far no one has the opportunity to be up a lot of inventory on the shelf at this moment. So I believe that that will continue for a few quarters to come and we're continue monitor very closely.

Pretty much apply to all the tier one tier twos that we have a direct contacts and then with the tier three tier four customers, we actually monitor very closely with each of our tissue, but theres partners and that they also monitor very closely and.

So we definitely don't see that as an issue at this moment.

Speaker 10: Great, thank you very much.

Great. Thank you very much.

Speaker 1: Thank you. As a reminder, to ask a question at this time, you would need to press star 1 on your telephone. So would you order your question, please press the pound key.

Thank you.

As a reminder to ask a question at this time you would need to press star one on your telephone to withdraw your question. Please press the pound key.

Speaker 1: I show our next question comes from the line of David Williams from Benchmark. Please go ahead.

I show. Our next question comes from the line of David Williams from Benchmark. Please go ahead.

Speaker 11: Hey, good afternoon and thanks for letting me ask the question. So, and I apologize, I jumped on a little bit late, but Dr. Liu, I wanted to ask you, you've been through a lot of these cycles and we've talked about it in the past.

Hey, good afternoon, and thanks for let me ask the question. So I apologize I jumped on a little bit late but Dr. Lu I wanted to ask you've been through a lot of these cycles and we've talked about in the past, but just kind of curious how youre seeing the landscape today and how do you think maybe the it seems like that the channel inventories still remain extremely.

Speaker 11: curious how you're seeing the landscape today and how do you think maybe...

Speaker 11: It seems like the channel inventory still remains extremely lean, but it always tends to be that we've got excess through the supply chain.

Lean, but it always tends to be that we've got excess.

Speaker 11: Do you feel pretty comfortable today that there really isn't maybe some excesses that are kind of building up within that channel that just maybe aren't being seen or aren't as visible? And do you think there's even an opportunity for that to have happened?

Through the supply chain do you think do you feel pretty comfortable today that there really isn't maybe.

Some some excesses that are kind of building up within that channel that just maybe arent being senior aren't as visible.

Think there's even an opportunity for that to have happened I guess kind of given the demand and where that.

The level of it.

Speaker 3: Yes, you are right. I have been in San Diego, LA, for a long time. And I go through 1970, 1980, 1990, up and down cycles.

Well.

Yes, Youre right.

In semi conductor introduced a long time and our goal through 1970, 80, 90, 90 up and down cycles.

Speaker 3: I'm familiar with that, but I want to say this year, this cycle is really different from the previous cycles. In previous, always.

So.

Im familiar with that.

I wanted to say this year this cycle is really different from that.

Previous.

Okay.

In previous always.

Speaker 3: continue and expansion for the capacity.

The man.

Continue.

Exploration for the capacity.

Speaker 3: and then all of a sudden you get a shortage. Then the people wait until they cannot stand, then they go to exit the capacity.

Hi.

And then Oda thought that you'd get a shortage.

Then people.

The the people wait until they cannot stand then they go to epic capacity.

Speaker 3: Then the problem is the d-time of the equipment take a long time. So the time they get capacity...

Then the problem is the D optic equipment take a long time.

Ton.

Speaker 3: There, everybody gets it at the same time that all of a sudden you get over capacity.

Capacity.

They're there.

We bought at the same time, but all of a sudden.

Speaker 3: then everything goes down, then it goes to the done cycle. So if you look at, it's a timing issue of the capacity improvement.

Overcapacity.

And then everything hold on.

Then we'll go to the downside.

So if you look at you said pardon me each of the.

Speaker 3: And that's why if you remember several years ago, our strategy is putting capacity ahead of

Capacity.

And that's why if you remember several years ago.

Our strategies put in capacity.

Speaker 3: the demand. So during... So during...

Ed.

The demand so so.

Speaker 3: the downtime you actually edit the capacity because the lead time, the common lead time issue.

It does.

Downtime you actually if you take a pause.

The cult daytime each equipment <unk> niche.

Speaker 3: Now, this time, that's what I'm able to grow this year, 2021 much better than 2020. It's because we ramped up S5-2 at that time. We get AIC.

Now this time that's what.

We're able to to grow this year.

2021, much better in 2020, you should be closed.

Ramp up effect.

At that time.

Speaker 3: ahead of time and then we get G-FAB even one or two years.

We get at OFC.

And then we get she said even.

One or two years before the shortage.

Speaker 3: So we prepare for all this one, you know, and all this shortage. And that's why we are able to take advantage of the

So we prepare for all this one.

And all this shortage and Thats, what we are able to.

It's been off.

But no if you're talking about.

Speaker 3: move forward. I think the move forward still.

Therefore, I think the move forward do you.

Speaker 3: Because you don't see that many of people in capacity that crazy. Okay, everybody very killed.

Because you don't see the Manny.

People.

Capacity that place.

Okay everybody.

80% of capacity so.

Speaker 3: I think this shortage will continue.

All right.

I think this shortage will be.

Speaker 3: at least this year. Now you're going to start to do sit up but if they're trying to...

<unk>.

This year now you're going to start to do speed up.

Speaker 3: the demand actually continued to increase ahead of more than in the past.

Is it <unk>.

Demand actually continue.

<unk> increased.

<unk> more than in the past.

Speaker 3: and so on. I would see that demand going to continue very strong and then the capacity increase gradually catching up.

And so how we see that then going to continue pretty strong and then the capacity increase.

Great jewelry catch up.

Yes.

Speaker 11: Definitely great insight. I certainly appreciate it. And then maybe one other one here for Emily, but you've had some really nice growth in the automotive side, and that's been a fairly diversified application area across the...

Okay. Good.

Definitely great inside I certainly appreciate it.

And then maybe.

And then another one here for Emily but.

Had some really nice growth in the automotive side and that's been a fairly diversified application area across the different areas of the vehicle, but when you think about your maybe is a traditional vehicle versus the EV.

Speaker 11: But when you think about your maybe eyes for traditional vehicle.

Speaker 11: How do you think that split looks like maybe this year and or?

How do you think that split looks like maybe this year and.

Speaker 11: Are you seeing much adoption within the EB space now, or is that primarily still driven by the traditional? And then how do you think that mix kind of shakes out as we go into maybe the next...

Even in 'twenty, one are you seeing much adoption within the EP space now or is that primarily still driven by the traditional and then how do you think that mix kind of shakes out as we go into maybe the next 12 to 18 months are you do you receive the demand in EV kind of that pull through.

As it has happened fairly quickly for you all in terms of seeing that reflected within your revenue base.

Speaker 5: Right, so I think the EV volume increase is definitely real, right? I think there's a lot of data in public companies that we can refer to their output unit increase and expectations.

Right. So I think the volume increase is definitely real Ray I think theres a lot of data in public company that we can refer to their output unit increase and expense expectations for 2020 growth 2022 growth as well as 2023. So there's also a lot of new startup or any.

Speaker 5: for 2020 growth, 2022 growth, as well as 2023. So there's also a lot of new startup or any of the tier one traditional manufacturing are all working on some sort of EV application. So we think that's real. There's a lot of opportunity for Dios continue to expand and continue to grow in this area. So this is actually volume increase as well as contact expansion increase for 2020.

All of the tier one traditional manufacturing all working on some sort of an EV applications. So we think thats real there is a lot of opportunity for diodes continued to expand and continue to grow in this area. So this is actually volume increase as well as content expansion increase for us on the traditional Si.

Speaker 5: So on the traditional side, what we really focus on, there's also a lot of comfort, style, and safety. We're talking about the number of lightings, the number of cameras. I talk about brushless DC motors and all this additional contact expansion for us to go after. So we're really growing, I would say, both from traditional vehicles as well as the EV vehicles. If you remember, the three areas we focus on is electrification that covers the EV, the high brakes, right, or the battery management system. And then we also talk about the comfort, safety, and style as well as connectivity. This is actually for the ADAS, the telematic, and infotainment system. So I would say all in all applies to both. And the good news for Dios is we continue to have a lot of momentum and continue to have a lot of opportunity in front of us. And with our new product introduction, we are very confident that we'll continue to drive a very strong momentum in the automotive growth, which should be, and we have been demonstrated, stronger than the overall market, right? So if we look at the track record...

What we really focus on there is also a lot of comfort style safety with talking about the number of lighting a number of cameras I talk about brushless DC motors and all of this additional content expansion for us to go after so we really growing I would say both from traditional.

Traditional vehicles.

Well ask the EV vehicles. So if you remember the three areas we focus on this.

Terrific patient that copper so EV the high breakthrough or the battery management system and then we also talk about the comfort safety style as well as connectivity. This is actually for the Adas telematics and for <unk>.

Payment system, So I would say all in all.

Applied to both and the good news for dialysis, we continue to have a lot of momentum and continue to have a lot of opportunity in front of us and with our new product introduction. We are very confident that we'll continue to drive a very strong momentum in the automotive growth, which you should be.

And we have been demonstrating stronger than the overall market right. So if we look at the track record.

Speaker 5: From 2013 till 2021, we actually have a compounded annual growth rate of 30%. And that will continue to be the focus for Dios. And so we're definitely ready.

From 2013 till 2021, we actually have a compounded annual growth rate of 30% and that that will continue to be the focus for diodes and so we are definitely ready.

Great. Thanks, So most certainly appreciate the help.

Speaker 1: I'm showing no further questions in the queue. At this time, I'd like to turn the call back over to Dr. Liu for any closing remarks. Thank you for your participation on today's call.

Thank you.

I am showing no further questions in the queue at this time I would like to turn the call back over to Dr. Lu for any closing remarks.

Thank you for your participation in today's call.

Operator, you may now disconnect.