Greetings and welcome to Himax Technologies Incorporated second quarter earnings 2008 conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Joseph Joubert of the Ruth Group. Thank you, you may begin.

Thank you, operator. Welcome everyone to Himax's second quarter 2008 earnings call. Joining us from the company are Mr. Jordan Wu, President and Chief Executive Officer, and Mr. Max Chan, Chief Financial Officer. After the company's prepared comments we will then have time for any questions. If you have not yet received a copy of today's results release, please call The Ruth Group at 1-646-536-7026. Or you can get a copy off Himax's website at www.himax.com.tw. Before we begin the formal remarks, I'd like to remind everyone that some of the statements in this conference call, including statements regarding expected future financial results and industry growth, are forward-looking statements that involve a number of risks and uncertainties that could cause actual events or results to differ materially from those described in this conference call. Factors that could cause actual results to differ include, but not limited to, general business and economic conditions and the state of the semiconductor industry, the level of competition, demand for end-use applications products, reliance on a small group of principal customers; the uncertainty of continued success in technological innovations, our ability to develop and protect our intellectual property, pricing pressures including declines in average selling prices, changes in customer order patterns, shortages in supply of key components, changes in environmental laws and regulations, exchange rate fluctuations, regulatory approvals for further investments in our subsidiaries, and other risks described from time-to-time in the Company's SEC filings, including those risks identified in the section entitled "Risk Factors" in its Form 20-F for the year ended December 31, 2007 filed with SEC on dated June 20, 2008, as amended. The financial information included in this conference call is unaudited and consolidated, and prepared in accordance with US GAAP. Such financial information is generated internally and has not been subjected to the same review and scrutiny, including internal auditing procedures and audit by independent auditors, to which we subject our audited consolidated financial statements, and may vary materially from the audited consolidated financial information for the same period. Any evaluation of the financial information included in this conference call should also take into account our published audited consolidated financial statements and the notes to those statements. In addition, the financial information included in this conference call is not necessarily indicative of our results for any future period. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. At this time, I would now like to turn the call over to Mr. Jordan Wu. Please go ahead, sir.

Thank you Joseph and thank you everyone for joining us on today's call. I will now start with a brief highlight of Himax's performance during the second quarter of 2008 and discuss the outlook for the third quarter. Max Chan, our CFO, will then provide further details on our financial performance. Our second quarter revenues came in-line with our guidance, while gross margin and EPS were both above our guidance. Our second quarter revenues were $246.9 million, representing a 10.8% growth year-over-year and a 6.6% growth sequentially, driven primarily by the growth of large panel display drivers and non-driver products. Revenues from large panel display drivers were up 10.8% from the same period last year, and up 6.2% sequentially, and accounted for 82.2% of our total revenues in the second quarter. According to iSuppli, we've become the worldwide number one display driver supplier for largesized TFT-LCD panel applications, with a market share of 20.4% in the first quarter of 2008. We are pleased to have achieved this leading position in just seven years since our inception in June 2001. Revenues from small- and medium-sized display drivers were weaker than expected, down 9.5% year-over-year and down 5.5% sequentially. The sequential decline in revenues was mainly due to weak demand in many of the end-market applications. Small and medium-sized display drivers accounted for about 12.4% of our total revenue, as compared to 14% in the previous quarter. While the rate of revenue growth from display drivers sales has shown signs of decelerating, momentum in our non-driver products remains strong and the pipeline looks promising. Revenues from our non-driver products were $13.2 million, representing year-over-year growth of 127.4% and quarter-over-quarter growth of 65.7%. As a percentage of total revenues, non-driver products accounted for 5.4% in the second quarter, as compared to 3.4% in…

Thank you, Jordan. Our net revenues in the second quarter were $246.9 million, representing a 10.8% increase over $222.9 million in the same period last year and a 6.6% increase over the $231.6 million in the previous quarter. The growth was primarily contributed by the sales of our display drivers for large panel applications, specifically those for PC-related panels. Our non-driver revenues, although still small compared to our display driver revenues, showed strong sequential growth of 65.7% and accounted for 5.4% of our total revenues, with LCOS microdisplay and timing controller being the top contributing items. Our gross margin increased to 25.5%, up from 20.4% a year ago and up from 25.3% in the previous quarter. Our GAAP operating income was $34.8 million, up 39.9% from $24.9 million in the same period last year, and up 9.9% from $31.7 million in the previous quarter. Our GAAP operating expenses were $28.3 million in the second quarter, up from $27 million in the previous quarter. Share based compensation accrued in the second quarter was $2.4 million, as compared to $1.5 million accrued in the same period last year and $2.4 million in the first quarter of 2008. Our GAAP net income was $37.7 million, up 40.5% from $26.8 million in the same period last year, and up 10.5% from $34.1 million sequentially. GAAP EPS was $0.20, up from $0.14 in the same period last year and up from $0.18 in the previous quarter. Excluding share based compensation and acquisition-related charges, our non-GAAP gross margin was 25.6%. Non-GAAP operating income was $37.8 million, up from $28.1 million in the same period last year and up from $34.6 million in the previous quarter. Non-GAAP net income was $39.8 million, up from $30 million in the same period last year, and up from $37 million…

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions). Our first question is from Gary Mobley with Piper Jaffray. Please go ahead with your question.

Hi, guys. Doing the math I guess Chi Mei was the 10% customer during the quarter, could you talk about any the other greater than 10% customers, and which customers came on strong for you in the quarter?

We probably comments typically on customer, but I can tell you note that in the monitor segment we’ve seen major decline, but other segments are actually okay and particularly mobile application, the handset applications we are –

Are you talking about second quarter or third quarter outlook?

Both actually.

Well, I was referring to the third quarter outlook. We are expecting to see the major decline on monitor application. For other applications, we remain quite healthy actually, in particular sensor application, which of course came from a weak base in the second quarter.

Okay. And in terms of the pricing environment for TV drivers, have you seen your vertically integrated competitors getting more aggressive on pricing to try to fill manufacturing mode?

I truly don’t see any particular trend about vertically integrated vendors against [tactics] vendors. I think the competition remains pretty much the same.

Alright, thank you.

Thank you, Gary.

(Operator Instructions). Our next question is from Frank Wang with Morgan Stanley. Please go ahead with your question.

Hi. Good morning. For your third quarter outlook, can you talk about on how much of your business is on firm booking and versus how much work on return basis?

Well, as usual, our customers typically provide us with pretty solid three months forecast with along materials of indicated demands. Now, the things we’re seeing now is that all in particular over the last month of June also we have seen customers revising downwards their three months forecast. So, in our earlier couple of remarks, we talked through there is ability been perhaps slower than usual during this quarter, because we have seen customers revising their forecasts I guess more frequently with a greater extent compare to usual. So that’s how we are seeing now. As far as – so how longer period they have provided their forecasts, I think remains [the same] within the customers, so the behavior patterns we sense remains the same, however, I think they are revising their forecasts more frequency. And we’ve seen in the last month of June is that they actually revising their forecasts in the downward fashion.

Can you talk about in terms of strong side or upside risks relative to the revenue outlook in the third quarter?

I think if we look at our forecast talk at a moment, given that this is still the beginning of the month, the August. So there could be potentially upside to August. September will be a well though. I have been talking to numerous customers about our outlook for September and Q4, but when we are hearing is that customers are saying if the liquidity stay very good, may be to however believe there is a chance of rebound. But I think what we do primarily is to keep talking to customers, [very good] to get the best update.

And can you talk about your non-driver continues outlook for the third quarter?

We certainly expect the momentum to continue. If you look at our non-driver products, everything we do is about the same. So, we again, we are provider of semiconductor solutions which is better in display. So, other than [real costs] where we actually are trying create an alternative being safe to the industry, every other things is definitely related primarily. We means is the market is weak which is effected over there as well. However, even that we are in all of those areas we spent, we start with the real base where we’re still increasing our market share, so we remain quite committed from the growth of most segments. May be our prospects for those non-real costs and non-display driver semiconductor areas with the penetrating the market average, much better than the market average. And now real costs display, again it is still early stage in this commercialization, but we’re very excited on the moment we took the customers that always see the progress, and always feel there is a very good chance you can actually beat the world in creating in this new market segment. So, we do believe to see continues revenue and volume growth over there also our mobile appreciation products, our mobile projective products.

Okay. I guess there have been a lot of talks about from the offshore listing companies comeback, TV or Taiwan listing, can you talk about where you are in terms of best opportunities?

Yes, as you know there been a lot of talks about the foreign Taiwanese based companies coming back to Taiwan, so is that primary listing or secondary listing. And we talk to a lot of authorities and we are currently in the stability starting stage. And I think this is a major complex and big issues, big topics. So, we will continue to talk to the councils and authorities, and we haven’t reached the stage of deciding yet. And now there is a lot of new measures from the government, and we would like to know more about the details of what the government is try to open. And so, we’re still in the early stage of the study.

I think more specifically what we’re trying to resolve is accountability issue, meaning we like to see our ideas and local which we call to be fully or this close to fully – close to be fully accountable within the two. There appears to be some technical issues over here for this – as mentioned earlier, we are talking to the authorities here locally. This current authority appears to be broader minded with all changing the status close to [mix issue] requirement perhaps. But again, I don’t think we are there yet. So, we can’t answer what is the authorities, we hope we can get there at some point.

Okay. Thank you.

Thank you, Frank.

The next question is from David Dulley with Merriman. Please go ahead with your question.

Yeah, I just had a couple of clarifications, so I apologies. I think you already gave this number out. The dollar number of non-display driver revenue, and that was driven by a cost growth. Could you just give that growth rate of that number again and what the dollar number was?

Okay. The non-driver products in Q2, the total revenue was $13.2 million, which was 427.4% year-over-year growth and 65.7% sequential growth.

Okay. So non-driver 13.2 –

5.4% in the second quarter.

All right. Okay. And then was there – I am sorry, you didn’t answer the question about who the 10% customers were in Q2 and what percentages they were at?

We have only one 10% customers, which is CMO. And we have – there are several customers which each accounting for low-single digit to high-single digit of our total revenues. They are SVA-NEC, Samsung, InnoLux, HannStar. But none of these; the names I just named above exceeding 10% of our total revenues. So to answer your question, CMO was the only one customer of Himax which accounted for more than 10% of our total revenues.

Yes. What was a percentage in Q2 and what was it in Q1?

The percentage of CMO in Q2?

Yes.

About 60, slightly over 50. But this percentage in Q2 has been decreased from the Q1 levels. In Q1 this revenue from related party was 66.6% in Q1. And this ratio in Q2 was 62.6%, actually this ratio down in Q2 coming from the different parties.

Thank you.

Next question is from Michael Bertz with Kennedy Capital Management. Please go ahead with your question.

Thank you. And good morning Jordan and Max.

Good morning.

Few questions to ask. So in Q2 could you maybe give us little bit detail on sort of the unit growth if it’s possible by application segment and then also in pricing change?

Yes. Q2, you are talking about Q2’s shipment growth in applications?

Yes.

Okay. As Q2, the growth was mainly driven by our large panel drivers, primarily from PC-related, mainly monitor and notebook. Notebook has been strong in the second quarter, and TV shipment was relatively look worm in the second quarter. And so the shipment of TV panel drivers just about single digit, while both monitor and notebook had a double-digit growth in the second quarter.

Thanks. And what about pricing mix in those segments?

If we talk about ASP, actually the ASP is a combination of manufacturers, of course, product mix, as we are still in the mid of migrating to small geometries. So naturally, the ASP will continue to go down as we continue to provide the cost reduction to our customers. So, I would say the ASP decline in the second quarter of our large panel drivers was single digit.

Would you expect that to be similar for Q3?

The costing pressure for Q3 will be higher than Q2.

Okay. So, let me try and indulge in just a little bit. So, if in Q2 it was little bit more moderate would you characterize that it maybe low to mid single digit, and in Q3 maybe high single digit?

Yes. But, Michael let me remind you, while we talk about ASP do you have to separate whether the ASP change due to product mix. All the ASP change is simply by price concession, so, that's different. As I pointed out we are in progress of migrating to 0.18 to our [sales] drivers for large panels. So, naturally every quarter we are seeing our branded ASP go down and partially because we have such a product mix over quarters.

Okay. We will go to another question then Max so it's clearly some of it because you are able to offer the price concessions and clearly the cost reduction and of course being a little bit ahead, but your margins I thought are pretty well, so would you think that as you talked about mix coming down. Maybe can you give us a sense of how you would expect that the trend do you think you are still able to stay ahead of it on obviously the gross margin come down this quarter but is that due to mix or is that due to not being able to keep up on a cost reduction?

I think it totally depends a lot on how much price per share the customers have given to us. And we are at the moment and I hope I am right. And again our [annual] price earlier that we do estimate that our abilities that it sounds very good in this quarter. Having said all that, I think we have seen the pricing pressure for this quarter among most of our customers being stabilized compared to perhaps a month or two ago. And if you do actually look at Q2 in the majority of Q2 it was very much because I think so until towards the very end of Q2 all of sudden mix, this sudden shift of market segment which certainly resulted in more pricing pressure on us than adverse. So, it's a very good question, it's harder to say how the panel market is going to go. If you look at silicon pattern, it is not surprising but our customers are doing well margin wise. We tend to do better as well as I said. Now, further we can pick up our cost reduction. I think if you look at the history, typically we are talking about 20% on apple-to-apple basis, we mean roughly per channel base cost reduction and more or less cost reduction for guys like us. Now there are periods when the price reduction is ahead of cost reduction and they are curious we did see the other way around. And we are certainly seeing in Q3 our cost not really catching up our cost reduction is now pushing our price pressure. That is primarily because of I guess (inaudible). One. The pricing pressure coming from our customer can be in a rush. So, I guess our people were not very well prepared for this. And secondary, digging into theory backend 10 million [hospice] in Goldblum. We are seeing more and more limited capacities pension coming from our suppliers. So, that's somehow limited our cost reduction potential. But we are still giving a lot of efforts to improve that. I will give you track two examples, we are using "smarter" ways to protect our ICs that way we can reduce our cost. So, as everybody know the gold price has been going up that crazy over the last few years. So naturally the cost go [Goldblum] for us has increased recently. But again we are trying to do a more credit way of design our ICs so why we are turning on [useless gold]. So, there are bits and pieces many, many different measures for us to try to give that cost. In addition to our effort to other suppliers who also while we do see our cost. But I cannot guarantee you for our cost reduction will be possible in our price reduction.

Okay.

In Q4 or the other way around behalf of trading line.

Okay. When you look at the I guess some of the demand reaction, can you see if there is any excess inventory your customers take along to, or is there anything that has to get burn through in the quarter?

This question you better ask our customer, what we have seen now is we have always believe that our customers, even though at base, is healthy and they have been healthy. So, how come over across two months, there were such changing momentum I think that this is the old economy I still don’t see. And I think the customers are pushing the level even so that now. We mean they perhaps they have negative a medium term outlook. So, I think our Q3 guidance is a reflection of -- first be our customers. We do feel that they are capacities are rationed and also they are trying to level further their end product inventory level, which ought to be has some been excessive in the past. I think it is reflection of their old developing.

Right, well I guess Jordan also I kind of meant specifically to their inventory of your product because they have any extra they have gotten pull-through in Q2, they need to reduce that any of your product.

No, actually for the majority of our customers the way they alter, that is almost adjusting hand basis. We mean that’s very-very legal if any inventory level at all. However, we do keep a small amount of inventory further and again, we write downwards. The outlook, we have to invest all the stuff. It is not a matter of having high level of (inaudible) fees, only at this moment. Over the past two months, two years I would say, maybe through substantially which we got. We need to keep it very-very low if any inventory level interim IC.

Okay, and then in the non-drive IC business of that 13.2 million, how much of that was actual LCOS products in that time in Q2?

The top two items are non-driver products or highly controller LCOS. In the second quarter timing controller accounted for about 50% of our total non-pay driver product and that sequentially growth was very good with timing controller. And LCOS was the second largest or largest item and now it’s accounting for about 20% to 25% of our non-driver products.

Okay.

And in the third quarter, we expect the LCOS will continue to show strong growth sequentially into the third quarter?

We believe we certainly hope, we will be seeing a very long-term LCOS volume and revenue growth. Bear in mind timing controller, you see part of the TFT display. So, yes we are gaining our market share, very nicely at the moment, there’s come to be a series at some point. So for LCOS we are creating this market at the moment. So, we are starting from zero. So, we believe we are very long term starting growth for this application.

Okay, and then Max, you talked previously about some of the applications and some of the customer wins you have preliminary shipment volumes. How much of volume you guys are doing with the LCOS business currently, in terms of unit volumes?

We are talking about at the moment give and take, $20 per panel versus plus $1 or less per panel IC sold. So you are talking about total (inaudible).

Okay.

So, in terms of number of units it would be very small.

Okay.

And, as I said earlier the couple of our customers in Asia had just started our (inaudible) end product in the marketplace. So, I would say the next six months [coupons] we will be able to tell in the house of (inaudible) this business is going to be. But what we are seeing and what we are hearing from customers and also further customers who are looking hard to design there end products to design the line product using our arbitrations. So, what we are hearing from them, the end market response has been quite excited. But again, it is for early stage.

Okay, and then last question I pressure you guys comparing with me for the long discussion, as we look, 2008 was expected to be a pretty strong year for [panels guys] and I assume you start up that well. Will the demand pause here in the second half maybe. But as you look in the 2009, [panel guys] themselves may see difficulty with lot of capacity that has come on. But in terms of your outlook for the overall market and maybe for yourselves, I necessarily asking for guidance, but for your picture for 2009 year, how do you look at typically unit volume and let’s say large size or small size. And what are your expectations for growth sort of overall?

Alright. Panel or panel companies capacity expansion is always a [AA4] for U.S. When they grow their capacity across 50, they have starting pressure on their own end, that pressure naturally will be [posted] from us. However, (inaudible). So, it's a matter of how (inaudible). But as I said earlier if you look at the -- typically when there is a few result with the (inaudible) situation, in the panel industry. We don’t do well, although it will unique growth increase, but it is more offset by pricing pressure. So, we used to believe this year will be a very good year for all of us and next year is a bit of a royal cause. But I think the downturn has a lot earlier but on the other hand our customers trust -- more prudent than before in terms of the way they manage their pricing and manage their capacity utilization. So, I think we do (inaudible) for next year, but in terms of P&L you see it's a bit too early to tell. Again, you can make price versus (inaudible). But we, however, are fairly confident on our long driver other areas. Again we are coming from small base and we are gaining our market share everywhere. And this segment all offer second margin (inaudible). We -- and hopefully in the longer term Himax will be a better company because of a better product mix in the long-term. So, this all for the next year.

[Operator Instructions]. I am sorry. No further questions in queue, I would like to turn the call back over to management for closing remarks.

Well, thank you everybody for taking time to join today’s call. And we look forward to talking to you again at our next earnings call in November. Thank you.

This concludes today’s teleconference; you may disconnect your lines at this time. Thank you for your participation.