Leanne Sievers – Investor Relations Keh-Shew Lu – President and Chief Executive Officer Richard D. White – Chief Financial Officer, Secretary and Treasurer Mark A. King – Senior Vice President, Sales and Marketing.

Steven Smigie – Raymond James Christopher Longiaru – Sidoti & Company, LLC Gary Mobley – The Benchmark Company Shawn Harrison – Longbow Research Suji De Silva – Topeka Capital Markets Tristan Gerra – Robert W. Baird & Co. .

Welcome to Diodes Incorporated Third Quarter 2014 Financial Results Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of today’s conference call, instructions will be given for the question-and-answer session.

(Operator Instructions) As a reminder, this conference call is being recorded today, Thursday, November 6, 2014. I would now like to turn the call over to Leanne Sievers of Shelton Group, Investor Relations. Leanne, please go ahead..

Good afternoon, and welcome to Diodes third quarter 2014 financial results conference call. I’m Leanne Sievers, Executive Vice President of Shelton Group, Diodes’ Investor Relations firm. With us today are Diodes’ President and CEO, Dr.

Keh-Shew Lu, who is calling in from Taiwan; Chief Financial Officer, Rick White; Senior Vice President of Sales and Marketing, Mark King and Director of Investor Relations, Laura Mehrl. Before I turn the call over to Dr.

Lu, I would like to remind our listeners that management’s prepared remarks contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions.

Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995.

Actual results may differ from those discussed today and therefore we refer you to a more detailed discussion of the risks and uncertainties in the company’s filings with the Securities and Exchange Commission. In addition, any projections as to the company’s future performance represents management’s estimate as of today, November 6, 2014.

Diodes assumes no obligation to update these projections in the future as market conditions may or may not change. Additionally, the company’s press release and management statements during this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms.

Included in the company’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’s statements during this conference call, we refer to net income attributable to common stockholders as GAAP net income.

For those of you unable to listen to the entire call at this time, a recording will be available via webcast for 60 days in the Investor Relations section of Diodes’ website at www.diodes.com. And now, I will turn the call over to Diodes’ President and CEO, Dr. Keh-Shew Lu. Dr. Lu, please go ahead..

Thank you, Leanne. Welcome everyone and thank you for joining us today. Diodes achieved another quarter of solid financial results, highlighted by record revenue and record gross profit. Growth was driven by continued strength in the consumer, communication and computing market in Asia.

Additionally, ongoing improvement in product mix and our assembly/test capacity utilization contributed to gross margin reaching 32% for the first time, since the second quarter of 2011. Earnings per share also reached the highest level in three years, demonstrating the company’s strong operating performance.

As we look to the fourth quarter, we expect revenues to decline due to normal seasonality and gross margin is expected to be down slightly.

The continued benefit from our cost reductions combined with further improvement in product mix are anticipated to largely offset the low capacity utilization at our Shanghai wafer fabs causing gross margin to come in just under the current quarter’s level.

With that, I would now turn the call over to Rick to discuss our third quarter financial results as well as fourth quarter guidance in more detail..

Thanks Dr. Lu and good afternoon everyone. Revenue for the third quarter of 2014 was a record $233.8 million, an increase of 4.7%from the $223.2 million in the second quarter of 2014 and an increase of 4.1% from the $224.5 million in the third quarter of 2013.

The increase in revenue was due to growth across the consumer, communications, and computing end-markets. Gross profit for the third quarter also reached a record at $74.7 million or 32% of revenue, compared to $70.3 million or 31.5% of revenue in the second quarter of 2014 and compared to $69.6 million or 31% of revenue in the third quarter of 2013.

The increase in gross profit margin was primarily due to continued improvements in product mix and assembly/test capacity utilization.

GAAP operating expenses for the third quarter were $49.7 million or 21.3% of revenue, compared to $47.2 million or 21.1% of revenue in the second quarter of 2014 and $49.3 million or 22% of revenue in the third quarter of 2013.

Third quarter operating expenses as a percent of revenue were back to pre-BCD acquisition levels when considering the second quarter 2014 benefited from a $1.2 million gain or 0.5% of revenue looking specifically at selling, general and administrative expenses.

SG&A was approximately $33.9 million for the third quarter or 14.5%of revenue compared to $33.3 million or 14.9% of revenue in the second quarter and $33.8 million or 15.1% of revenue in the third quarter of 2013.

Investment in research and development for the third quarter was approximately $13.9 million or 5.9% of revenue compared to $12.8 million or 5.7% of revenue last quarter and $13.6 million or 6.1% of revenue in the third quarter of 2013.

SG&A plus R&D combined equaled 20.4% of revenue which was down 20 basis points from 20.6% last quarter and 70 basis points from 21.1% in the third quarter of 2013. Total other income amounted to $1.3 million for the quarter.

We had approximately $2.1 million of other income and currency gains approximately $325,000 of interest income and approximately $1.1 million of interest expense. Income before taxes and non-controlling interest in the third quarter 2014 amounted to $26.3 million compared to the income of $23.5 million in the second quarter of 2014 and $17.

5 million in the third quarter of 2013. Turning to income taxes, our effective income tax rate for the third quarter was approximately 23%, which was within our guidance of 22% plus or minus 3%.

GAAP net income for the third quarter of 2014 was $19.4 million or $0.40 per diluted share compared to $17.4 million or $0.36 per diluted share in the second quarter of 2014 and compared to $13.6 million or $0.28 per diluted share in the third quarter of 2013.

The share count used to compute GAAP diluted EPS for the third quarter of 2014 was $48.7 million shares.

Third quarter non-GAAP adjusted net income was $21.2 million or $0.43 per diluted share, which excluded net of tax $1.6 million of non cash acquisition related intangible asset amortization cost and approximately a $180,000 of retention cost associated with the BCD acquisition.

This compares to non-GAAP adjusted net income of $18.2 million or $0.38 per diluted share in the second quarter of 2014 and $15.8 million or $0.33 per diluted share in the third quarter of 2013. We have included in our earning release a reconciliation of GAAP net income to non-GAAP adjust net income, which provides additional details.

Included in the third quarter of 2014 GAAP and non-GAAP adjust net income was approximately $2.4 million, net of tax, non-cash share-based compensation expense. Excluding share-based compensation expense, both GAAP and non-GAAP adjusted diluted EPS would have increased by an additional $0.05 per diluted share in the third quarter.

Cash flow generated from operations for the third quarter of 2014 was $27.3 million. Free cash flow for the third quarter of 2014 was $13.8 million, which included $13.5 million of capital expenditures and net cash flow for the third quarter was a positive $1.4 million, which includes the pay down of approximately $15.2 million of our long-term debt.

Turning to the balance sheet. At the end of the third quarter, we had approximately $237 million in cash and cash equivalents and $14 million in short-term cash investments. Working capital was approximately $527 million.

At end of the third quarter, inventory increased by $6 million to approximately $189 million compared to approximately $183 million at the end of the second quarter of 2014.

Inventory in the quarter reflects a $3 million increase in finished goods and a $4 million increase in raw materials, which were partially offset by an $800,000 decrease in work-in-process. Inventory days were 108 in the third quarter compared to 107 days last quarter.

At the end of the third quarter, accounts receivable was approximately $194 million, up about $6 million from second quarter. AR days were 75 compared to 74 last quarter. Our long-term debt totaled approximately $147.5 million, down $15.2 million from the second quarter.

Third quarter capital expenditures were $16.7 million or 7.2% of revenue, which was at the midpoint of our reduced CapEx spending target range of 5% to 9% of revenue. For the nine months of 2014 we are at approximately 6.4% of revenue. Depreciation and amortization expense for the third quarter was $18.9 million. Now turning to our outlook.

For the fourth quarter 2014, we expect revenue to range between $217 million to $231 million or down 7% to 1% sequentially. We expect gross margin to be 31.6% plus or minus 2%. Operating expenses are expected to be approximately 22.2% of revenue, plus or minus 1%.

We expect our income tax rate to be 25%, plus or minus 3%, and shares used to calculate diluted EPS for the fourth quarter are anticipated to be approximately $49 million. With that said, I will now turn the call over to Mark King..

Thank you Rick and good afternoon. As Dr. Lu and Rick mentioned, revenue reached a record and was up 5% quarter-over-quarter, driven primarily by strength in consumer, computing, and communications in Asia. OEM sales were up 6% and distributor POS increased by 10% in the quarter.

Distributor POP was up 3.6% and global distributor inventory remained inline. In terms of our end markets, consumer represented 34% of revenue, communications 22%, computing 21%, industrial 19%, and automotive was 4%. Turning to global sales, Asia represented 79% of revenue, Europe 11%, and North America 10%.

Customer activity level remained strong in all regions and product lines with a growing number of design wins across our end markets. We continue to have a solid pipeline of new products and design wins to drive long-term growth.

On the product side, it was a record quarter for our discrete product group driven by record sales of MOSFETs, protection devices, SBR and bipolar transistors. On our analog side, we also saw record quarter for load switches, LED drivers, DC to DC and audio products.

In terms of product introductions, we released 64 new discrete products across 13 product families. We continue to expand our broad-based product offering to meet the needs of a wide range of market segments and customer applications.

Once again, Diode launched a number of new innovative products and is enabling improved energy efficiency and portable devices such as smartphones, tablets, and wearable devices as well as chargers, adapters, and power supplies.

In addition, we further capitalized on our recent growth in the automotive market with product launches, design wins, and sales momentum with products specifically qualified for the automotive segment.

Looking more closely at the portable device market, our rapidly expanding TVS portfolio was further enhanced by industry leading battery protection products aimed at major suppliers’ of portable, handheld and wearable electronics.

Diodes also delivered first samples of its ultra-high speed data line protectors to our leading portable device manufacturer to meet the needs of their future product roadmap. A new MOSFET for smartphones and tablets also said industry benchmark featuring the lowest RDS(on) with sub 1.5mm by 1.5mm footprint.

Also in the MOSFET portfolio we added a small DFM Dual MOSFET, which was optimized for wireless charging applications. Now turning to the automotive market, Diodes continue to expand its content with automotive customers.

During the quarter, our automotive MOSFETs are strong design-in activity and several important PVS designing’s began ramping to volume production contributing to strong sales momentum. Also in Q3 we began sampling our first MOSFET devices using a new split type process that is aimed at high volume auto application.

Finally, in the industrial market Diodes continue to capitalize on a strong capabilities in efficient power management and introduced 50 and 60 volt MOSFETs with the industry’s lowest RDS(on) for industrial power supply application.

For a higher liability power supply systems and servers, we also introduce the latest and the family of all ring controllers providing outstanding energy efficiency for this demanding application.

For renewal energy we launched an SPR Diode were a key solar panel customer in a ruggedized DFM package with ultra high reliability to maximize panel utilization and solar yield. Turning to analog, we had 56 new analog product releases across six product lines during the quarter.

In support of our LED lighting strategy, we released several new products including a Triac Dimmable LED driver, which optimize the design of LED lamps by offering a full dimming range of 1% to 100% and also offers 30% reduction in building material cost.

This device received early market acceptance with several new socket awards for retrofit PAR16 and A40 LED driver opportunities. We also released a back-lighting boost controller that is well suited for back-lighting TV and monitor application.

In terms of analog design wins, we continue to target large scale consumer product such as flat panel TVs and set-top boxes.

In fact we were awarded more than 10 significant design wins across several of the market leading LED television platforms for our products including low drop out regulators, voltage supervisors, load switches and audio amplifiers.

Design win activity was also strong for our Class D audio amplifiers with 15 key new wins in consumer products including televisions, tablets and wireless speakers.

In the communications market, we saw significant design win activity across a number of product lines, including multiple Hall sensors, USB Power Switches, reset supervisors, LDO wins for smartphone, load switch opportunity for a videophone and a DC to DC converter for a new router application.

Also during the quarter, we continue to expand our logic product offerings with a release of a family of Octal’s CMOS logic functions in space-saving QFN and TSSOP packaging. These devices are well suited for data line communications applications. In summary, DIOD once again had a solid quarter, achieving record revenue and gross profit.

We continue to expand our content with customers and secured major design wins in portable, consumer, computing, automotive, and industrial applications. In addition, we further executed on our new product initiatives and launched innovative new products and technologies to further establish our leading position across our target markets.

With that I’ll open the floor to question.

Operator?.

(Operator instructions) Our first question comes from the line of Steve Smigie from Raymond James.

Your question please?.

Great. Thank a lot guys and congratulations on the record numbers there. Dr. Lu, as I look out to your guidance for the fourth quarter, you’re down about 4% sequentially at the midpoint that’s in line with the seasonality over the last few years and that compares to other guys with the selling that’s more or like down 8%.

And so, you’re in line with seasonal and better than the comps and the comps are below seasonal.

I’m just curious if you could talk a little bit about why you’re seeing better patterns than competition here?.

Well, thank you Steve. We do continue in certain area, gain the market share that’s really well. And that’s really the three reasons while we adjust product mix and – but we still continue gaining the market share..

Great, thanks. And then as I look at automotive that’s been growing as a percentage here.

Can you talk about what that looks like in terms of growth over the next couple of years relative to the rest of your business and what are those for margins?.

Okay number one, I think I mentioned to everybody before, we officially form the automotive business units last year.

Okay, in last year and that enabled us to put more resource, more focus in the automotive area, that’s the reason we you know able to grow technically in the auto area and that we do see a lot of design win and especially automotive went up slow than other market segment.

And therefore, we should see a better growth even updated in this year’s auto area. So we could be able to see a higher growth in next year and that will even be after.

So I think next year, we should have updated growth in automotive area than 2014 versus 2013, and we always target at higher GP percent for automotive products, because their requirement is much tougher.

Why I am talking about requirement, I talking about the quality, requirement, the production requirement and so therefore we expect automotive will give us a better gross margin..

Okay, thanks a lot.

And if I just look at gross margin that’s been steadily improving here, can you talk about how that looks in the next year, it seems like you are getting better utilization at the BCD Fab 2 and also it seems like as you just referenced with auto, the mixes is improving, so just talk about little about the gross margin trend here?.

Well, we have improvement from gross margin from 2013 to 2014 and we will see that continue improvement going to 2015 and we will expect the same kind of improvement rate in 2015. And especially we continue in addition of utilization, we will continue to do cost reduction and continue profile product mix and that product mix including automotive.

So product mix, cost reduction and utilization all three will enable us to continue to improve our GP through 2015. Our end goal is to try to go to our business model of 35%, that is our business model to go to 35% of that revenue..

Great. Thanks a lot, Dr. Lu..

Okay. Thank you, Steve..

Thank you. Our next question comes from the line of Christopher Longiaru from Sidoti & Company. Your question please..

Actually on the results….

Yes, Chris. .

So my question sort of has to do with – your communications revenue held up in an environment where communicating was kind of weak.

Can you give us some granularity as to where you saw relative strength and also what your customers are kind of telling you now in terms of what their expectations are for the business?.

Well, Mark, why don’t you take this answer?.

Okay. I think we had some strong new product growth in Q3 that we did not have in Q2 and I thought that in a couple of key customers that our numbers were quite good.

So I don’t see, I mean, one customer on our AC to DC side, that was little bit down, but outside of that I think we have some new wins and some new position that drove our number relatively strongly in the quarter..

And then just on the RF side, so I think you guys were at something like 3% of revenue for a long time or less on that automotive side and recently it popped up and you hit the pop up again. Even though it’s a small component it’s a gross margin component.

How does that sort of trend in terms of – is that going to be a big step up for – do you expect this continue gradual 1%, 2% increase per year over the next couple of years? Can you give us kind of an outlook on that?.

Yes, I think it’s really a long-term plan, but it’s hard to say because we participate in the highest volume and equipments that are growing fast. And so it’s hard to predict exactly where and how quickly our revenue will grow in automotive as a percentage.

But the key is for the first time we’re actually developing product specifically for the automotive market and putting teams of people and sales people as well as business unit people positioned to support that marketplace. And it changed the way we approach that market to a very specific strategy.

So I think that to jump up to 5% is going to take us a period of time. To jump up to 10%, it’s going to take us a really long time. But really the progress that we’re making of that 3% to 4% area has been great progress for us and the whole positioning of the company within the automotive community is changing a lot.

So, I think we just have a lot of momentum in that area. How you’ll see it based on the size of it relative to our overall number is hard to predict..

Well what about – just in terms of its profile. So normally your parts end up being about a third to two-thirds of the costs are tied to the packaging.

Is it a similar situation with automotive or is it higher because of the automotive grade packaging, is it lower, can you give us a little relative information on that?.

To be honest with you – do you want to take that Dr.

Lu?.

Yes. From the manufacturing point of view, they do actually – if you look at in business motto wafer or die cost is much less than packaging cost. And automotive has actually increased packaging cost too..

Okay. So you’re going to see some more emphasized in the – or increase of cost in the packaging, but it’s not going to be a big increase. So relative to – that’s what I just said, that’s why we are able to improve the GP for automotive business even the assembly cost is relatively higher..

If I could add. It also has to do with the products we’re selecting to sell to automotive. So we’re packing. Part of our strategy is to pick a very specific performance parts and focus those into the automotive segment, and show different value in that area. So it has to do with the part selection also..

And I’m going to jump over. Thank you for that. I’m going to jump over to – just in terms of BCD, you guys have slowly kind of integrated this and improved your margins. How much of that was a contributing factor to September? And I think you had said a couple of quarters ago that you had about 100 to 150 basis points last.

Where in that progression are you?.

Well, I don’t know do we answer that or we have data for that.

Rick, can you take over?.

Yes, I don’t think we have that data. What we said in the fourth quarter guidance is that there is some capacity utilization issues in BCD wafer fabs in Shanghai. The issue there is that we’ve been ramping those wafer fabs and we’ve gotten to a point of enough inventory.

And so we’re toning it down until we can decide exactly which way the market is going to go into the rest of the fourth quarter and the first quarter. So from the fourth quarter numbers they’re a drag rather than being a gain. Over the last several quarters they’ve been ramping and it’s been somewhat of a gain..

Okay. Great. I’ll jump out. Thank you, guys..

Okay. Thank you..

Thank you. Our next question comes from the line of Gary Mobley from Benchmark. Your question please..

Hi, Mark and Rick and good morning, Dr. Lu..

Hi, Gary..

I was hoping that you could share your thoughts on the linearity of bookings as you’ve concluded the third quarter and as we say here five weeks into the fourth quarter.

I guess what we’ve been hearing industry-wide especially from companies that participate with pure competition, bookings of shipments in September just didn’t live up to normal seasonal strength.

But what we’ve heard more recently was some normalization of bookings and shipment trends in October, I guess the first week of November excluding any sort of impact to seasonality.

Is that sort of what you guys have seen as well?.

Yes, I mean, I think….

Well, Mark, you go ahead..

You go ahead, Dr. Lu. Go ahead..

Well, my answer is yes. We see normal. That’s why in my speech I say we see the normal similarity and we gave our guidance, which like Steve is talking about, is better than our competitors. And so, we don’t see any particular weakness or strength.

We just see normal marketing and we just concentrate on how do we continue gaining stock, gaining the design win.

Mark, why don’t you comment?.

Yes, I mean I would agree with what you said. I think we’re positioning our staff well and I think we’re on track to what we can. It did soften around in some of the early announcements and then it seemed to pick up a little bit more in the last few weeks..

Okay.

And that soft conclusions in the third quarter, was that the reason, Rick, why inventories increased sequentially despite your guidance for 4% sequential revenue decline in Q4?.

Well, I think it’s particularly on wafer fab in Shanghai BCD. Okay. The other fab we do not.

So if you look at our majority of business we do not changing the wafer fab loading and wafer fab loading quite mention is only talking about wafer fab in Shanghai, which just means BCD wafer fab, and that is just, the new fab we are ramping it up and we now concentrate, so that we are getting enough inventory, so we put in a break (indiscernible).

And another reason is one of our original OEM customer those systems do have some slowdown. And so we afraid some break for the inventory for the wafer fab (indiscernible) in Shanghai fab. Okay..

So you also have to remember that the inventory bill was about $6 million to $7 million and there were about $3 million or $4 million of just raw material increases in there. So although the days went up slightly from 107 to 108, it was focused in the raw material area..

Okay. It’s been I think just over 18 months since you concluded the BCD acquisition and you’ve been paying down your bank line to the tune of about $15 million a quarter.

So has enough time lapsed, since the acquisition and since you’ve been able to post your balance sheet a bit in that time frame to where you’re may be have an appetite again some further consolidation of the industry, some more M&A activity.

What is the market environment like for M&A, our companies out there with realistic valuation expectations?.

Well, M&A always one of my growth strategy, and so I’m continue looking for M&A. The problem why we are not able to take action most of them is due to the market poll expectation, okay. And so, we’ll continue and when the opportunities right, then we’ll take action..

All right, fair enough. Thank you guys..

Thank you..

Thank you. (Operator Instructions) Our next question comes from the line of Shawn Harrison from Longbow Research. Your question please..

Good morning, Dr. Lu, and afternoon everybody else..

Hi Shawn..

Mark, I guess a question for you, the POS vs POP distribution, selling being much less than sell through, is that normal for this time of the year, it’s been moving around a lot of going back from my notes, but just in terms of what distribution is doing with their inventory, is that normal or you seeing maybe any abnormal pressure?.

I think towards this part of the year, we have – we always have pressure, but I think in some cases, there are distributors, they did a pretty good job of pre-predicting where they were and I think that they did better job of positioning inventory in the second quarter than they usually do.

So I think I was a little surprised by that number also when it first came in, but when I looked at the numbers in total, it was pretty strong inventory, pretty strong POP in the previous quarter, so I think it is a good balancing.

We are really happy about where our inventory is and the cleanliness of our inventory within our channel, so I think it is all pretty good..

Gotcha.

And then, I guess Rick on both SG&A and R&D, is it been trending down on a dollar basis or I guess trending relatively steady and we have to jump up this quarter, was there anything within there in terms of specific investments that could pay off in subsequent quarters or what drove kind of the absolute dollar increase quarter-to-quarter?.

Yes, so the upper EX in the second quarter was $47 million and it did jump up to $49.7 million in the third quarter, but one of the issues there is that we had a gain on the sale of assets in the second quarter of about $1.2 million. So if you take that out, then we would have been at $48.5 million, somewhere in that range.

And if you look at the increase, it is mainly in the R&D area and they are talking about buying [mass assets] (ph) but there is really no increase in spending from a people standpoint.

So there is really no specific item that’s in there that would – that cost that jump up other than the gain in the second quarter and some increased R&D spending, but the whole goal that we have is to keep reducing this upper EX as a percent of revenue as we move forward and we have been, as I mentioned in my speech SG&A and R&D has gone down, 20 basis points and then 70 basis points from this time last year, so we are still working on that number..

Okay. And then a final question….

In additional let me add the innovation that third quarter typically is our very adjustment quarters, okay. We give the adjustment in July which start from July 1. So if you look at third quarter versus second quarter typically your salary portion will be increasing..

Very helpful. Thank you, Lu. And then just lastly Rick you see here the FX gains this quarter.

Where do you think other income will fallout into the December quarter?.

No, I think it’s going to be more or like the interest income and interest expense that I talked about. The currency gains will be whether – the euro is moving around and the pound is moving around, so there will be some adjustment there, but I think it’s going to be comparable of where we were this quarter..

And where these just gains on hedges you had in place?.

Not gains on hedges and we haven’t disclosed where those gains came from so....

Got it. Okay, thanks a lot and congrats on the results..

Okay..

Thank you..

Thank you. Our next question comes from the line of Suji De Silva from Topeka. Your question please..

Dr. Lu congrats on the record revenues here..

Thank you..

In terms of the mix improvement you described that’s going to help to offset utilization decline in the fourth quarter.

Can you talk about in detail where that was coming from because the end markets mix staying relatively consistent and I’m wondering if that’s a sustainable mix improvement you’d have help as a tailwind in 2015?.

Well, Mark do you want to tackle this..

Yes, I mean I think we’re constantly improving our mix and I think you can look at from our investment strategy, the products that we’re moving into and the products – the packages that we’re investing is a constant long-term strategy to improve our mix. So, I think you can expect for us to continue on this in this direction and in improving our mix.

I mean it’s a key portion of what we’re trying to do..

Okay, great. And then if I look at the last two quarters and then the guidance, year-over-year revenue growth is around 5%.

I’m wondering if that’s meant to accelerate and toward what your longer-term target would be and what that target might be relatively – to relatively 5%?.

Mark?.

I think he is asking our long-term revenue target..

Yes relative to the last two quarters..

You’re talking about the next long-term..

Yes year-over-year growth, Dr. Lu..

Yes, I think we are more – we don’t know yet, but our biggest model always try to be 2X of the market growth, okay. And we feel I think I mentioned to everybody in our CAGR for the last ten years.

We are almost 20% and half of that probably will be coming from M&A the other half of that will be coming from M&A, the other half will be coming from organic growth, that’s roughly our biggest model. And so, next year depending on we get M&A or not, so very difficult to say. But then we will try to grow out growth in the market.

So I cannot tell you next year, but from long-term point of view, I think we’re looking at much higher growth rate than 5%..

Okay, great. And then last question. What was the relative utilization in the fab and the assembly/test in where those versus target levels? Thanks..

Okay, Rick do you want to take over that question..

Yes, hang on just a second. Yes, I got right here, thank you. So the assembly test was basically fully loaded, right. So the Shanghai assembly test was above 90% K fab has been running about where we’ve had in the past three or four quarter.

So no change there, O fab has been running very effectively over 90%, and the issue has been was the two Shanghai wafer fabs where they’re running lower than where we would like for them to be. And that’s going to continue in the fourth quarter as well..

Okay, great. Thanks for the color guys..

Okay..

Thank you. Our next question comes from the line of Tristan Gerra from Baird. Your question please..

Hi, good morning, Dr. Lu and good afternoon everybody else. First question is regarding the loading, so just as do you add follow-up to the last question. And you’ve talked about the fab 1 at BCD having being underutilized for sometime as you’re transitioning, where transitioning loadings to fab 2 which is more efficient.

Now at the time BCD went public, the purpose of the APO at the time as to waste money to build fab 2 and that was basically expand capacity because fab 1 at the time was full. So just trying to reconcile this – that were two years after the acquisition where the fab 2 loading are taking place at the expense of fab 1, if that still the case.

Is any function of BCD revenue growing in line with expectation the management team had at the time, if you could just give us little bit of clarity on that?.

Okay. Number one, from the BCD revenue growth, okay, we do see some growth in this year on the BCD and that really due to one of the major customer slowdown, okay, OEM customer slowdown and so that give us some disappointment on the growth, okay.

Second is, if you are talking about FAB 2, the loading on FAB 2, we are looking at two ways, one is a new product and one is move from FAB 1 to FAB 2 and full point of FAB 2 basically are completed, whatever we want to move in is already moved in.

And then the new product from that, this design after we consolidate, we start taking the action for any new product me to use in FAB 2 for their design. And you take probably one year to do the design and then you start to do codification, start to do all this, so it take us a while for the new product ramp.

So we will be or the management load (indiscernible) next year, we should see some new product ramp in that area..

Okay, that is very useful. And then I know you are going to provide the China revenue in your filing, in your Q2 filing your China revenue was roughly flat year-over-year and I think that is probably a below some of the low teen year-over-year increase as some of your peers had in China.

So maybe that question is related to my first one, so now we are excluding the Korea customer or any commentary that could help us reconcile the market share gains that you are having but that seem to be taking place outside of the China region?.

You are putting us in very tough position, I don’t think I should, I can’t answer that because it will be, I just don’t think I want to separate Korean customer versus China customer versus Europe. What I try, let me put much clear way.

When we look at the China, our business from Asia, okay, or you are talking about for China and China actually look at two areas. One is the business that building for the OEM customer in global, okay. That including U.S., Europe and sometimes including Korea, okay. And that area U.S.

is strong, Europe and Korea altogether is not very strong, okay and that is really we see some of the problem in the first quarter, okay. And then China internal consumption, we see just or it’s not weaker, it’s not stronger. And I think I will stop like that because I think that shipping answer your question..

Okay. Now, that’s very useful, very much appreciated.

And then last quick one, I know you don’t provide the mix between discrete and analog, but are you able to say whether the mix currently is roughly the same as it was a couple of years ago or whether the mix of analog has changed relative to what it used to be?.

It changed with BCD..

BCD..

It changed with BCD acquisition that made a big jump up, but from there on it’s been relatively consistent..

Okay, very good. Thanks again..

Thank you. This does conclude the question-and-answer session of today’s program. I’d like to hand the program back to management for any closing remarks..

Thank you for your participation today. Operator, you may now disconnect..

Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day..