Good day ladies and gentlemen and welcome to the Fourth Quarter Silicon Motion Technology Corp. Q4 2012 Earnings Conference Call. My name is Edwin and I will be your conference moderator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) Before we begin today’s conference, I have been asked to read the following forward-looking statements. This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 as amended. Such forward-looking statements include, without limitation, statements regarding trends in the semiconductor industry and our future results of operations, financial condition and business prospects. Although such statements are based on our own information and information from other sources we believe to be reliable; you should not place undue reliance on them. These statements involve risks and uncertainties and actual market trends and our results may differ materially from those expressed or implied in these forward-looking statements for a variety of reasons. Potential risks and uncertainties include, but are not limited to continued competitive pressure in the semiconductor industry and the effect of such pressure on prices, unpredictable changes in technology and consumer demand for multimedia consumer electronics, the state of, and any change in our relationship with our major customers and changes in political, economic, legal and social conditions in Taiwan. For additional discussion of these risks and uncertainties and other factors, please see the documents we file from time-to-time with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statements which apply only as of the date of this press release. I would now like to hand our presentation over to our host, Mr. Jason Tsai, Director of IR and Strategy. Please proceed, sir.

Thank you, Edwin and good morning everyone. Welcome to the Silicon Motion fourth quarter 2012 financial results conference call and webcast. My name is Jason Tsai; I am the Director of IR and Strategy. With me here is Wallace Kou, our President and CEO and Riyadh Lai, our Chief Financial Officer. The agenda for today is as follows: Wallace will start with a review of some of our recent business developments. Riyadh will then discuss our fourth quarter financial results and provide our outlook. We’ll then conclude with Q&A. Before we get started, I would like remind you of our Safe Harbor policy, which is read at the start of this call. For a comprehensive overview of the risks involved in investing in our securities, please refer to our filings with the US SEC. For more details on our financial results, please refer to our press release which was filed on Form 6-K after the close of market yesterday. This webcast will be available for replay on our website, www.siliconmotion.com for a limited time. To enhance investors’ understanding of our ongoing economic performance, we will discuss non-GAAP information during this call. We use non-GAAP financial measures internally to evaluate and manage our operations. We have therefore chosen to provide this information to enable you to perform comparisons of our operating results in a manner similar to how we analyze our own operating results. A reconciliation of the GAAP to non-GAAP financial data can be found in our earnings release issued yesterday. We ask that you review it in conjunction with this call. With that, I would like to turn the call over to Wallace.

Thank you, Jason. Hello everyone and thank you for joining our earning call. I am pleased with our (inaudible) result for the fourth quarter and the significant progress we have made for the company over the past year. Our fourth quarter results were largely expected and we have communicated to you three months ago and provided solid finish to our record strong 2012. In 2012, we delivered highest annual revenue and EPS in our company’s history. We believe that our business remains very well positioned for further growth led by our company’s New Growth Products. Riyadh will go into our financial later in the call. First, let me start by taking you back to before 2012. Well, we had set ourselves two important goals that we needed to grow and quickly scale up our New Growth Products and that we needed to manage well, our large, but maturing core products. We have done just well on both goals. Our new growth product primarily, our eMMC controllers and LTE transceivers grew almost 140% and account for 31% of our full-year revenue. Our core products, primarily, our card and USB flash drive controllers grew 5% year-over-year. As a result, we grew our overall revenue 25% for full-year 2012. I am very happy with the tremendous success that we have achieved with our eMMC controllers business. 2012 was our first full-year of eMMC revenue and already for the full-year; eMMC account for roughly 10% of our overall revenue and we have become the eMMC merchant controller and market share and technology leader by now. We're now supplying our eMMC controllers to both Samsung and SK Hynix. Our flash partner supplying eMMC memory solution bringing our eMMC controllers to seven of the Top 10 smartphone OEMs. These seven smartphone OEMs already are mass producing…

Thank you, Wallace. First I will outline our financial results for the fourth quarter and then I will provide our first quarter and full year 2013 guidance. As Wallace had mentioned, we delivered $70.6 million in sales this quarter, an 8% decline compared to the prior quarter and a 5% increase compared to the fourth quarter 2011. In the fourth quarter, sales from our new growth products decreased 27% sequentially primarily because of Samsung’s third quarter accelerated LTE orders. New growth products accounted for 30% of total sales down from 40% of total sales in the prior quarter. For the full year 2012, new growth products accounted for 31% of total revenue up from 16% in 2011. Let me recap the performance of our of two key product lines. First mobile storage, mobile storage revenue was flat sequentially and up 12% year-over-year. Mobile storage controller shipments decreased 7% sequentially and 2% year-over-year. Mobile storage controller ASPs increased by 8% sequentially and 14% year-over-year, our 12 consecutive quarter of annual ASP increases. For the full year ASPs increased 11% in 2012 compared to the prior year. Our card controller revenue decreased by 5% sequentially and our USB flash drive controller revenue increased by 1% sequentially. Over 50% of our SB and USB controller sales are supporting 19 to 21 nanometer NAND flash. This portion is similar to our third quarter sales. OEM revenue was unchanged in the fourth quarter as compared to the third quarter and accounted for 65% of our controller sales in the fourth quarter. Moving to mobile communications, mobile communications revenue decreased 32% sequentially and increased 2% year-over-year driven largely by the accelerated build and shipment of our LTE transceivers to Samsung in the third quarter. Our corporate gross margin decreased in the fourth quarter to 44.6% from…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) Your first question comes from the line of Daniel Amir from Lazard Capital. Please ask the question.

A couple of questions here, first of all, on the LTE business; Wallace you said that there might be a shift in terms of carriers that historically have went with Qualcomm, they are now going to go with Samsung and the countries’ I guess, the share in the countries might get split. Can you expand a bit more what is exactly happening there? And then second is how do you think your share shift will, you say it’ll stay the same, can you just reiterate kind of what you think the share is currently in the market and how do you think its going to stay the same given the change of the geographical distribution of your product? And then I have another follow-up. Thanks.

Hi Daniel, let me clarify your first question. First, we do not imagine simply regarding LTE and winning or loosing to whatever the supplier. However, we do mention in some carriers specifically in Korea region it’s got requirement for carrier application. So I think this relates to certain base band solution whether you support carrier application or not. It has nothing to do with LTE transceivers. So we cannot comment and as for the mobile phone, their own decisions. Now regarding to your second question, I think Samsung will continue to use their own base band as a way to ensure that all their suppliers are offering the most capable solutions for the best price. Samsung also wants to differentiate their solution and using their own base band allows for that. We are there to make sure that Samsung solution is as competitive, as well as it’s revenue available for other base band providers. Now we believe Samsung is using their own base band is only about one quarter of their LTE devices and would like to use more of their own solution when their solution becomes more stable and mature and then we think we can continue to keep the same portion percentage and for the Samsung mobile smartphone with LTE.

So just to follow-up on that, so your share is somewhere around one quarter you think; something like that?

That's correct.

Okay, alright. And then the following question, two follow-ups, one is the eMMC area you know you highlighted that you have, it seems like you have a number of big growth opportunities here. Should we expect this to increase every quarter pretty significantly or is there a certain linearity here to the quarters as the year progresses; because it looks like you saw in the game console, TVs, set top boxes, I mean is the vast majority of the revenues basically from handsets and those other products don't really matter much and therefore it should increase as the year progresses or is there seasonality aspect?

I think we can only mention that our eMMC revenue will grow quarter-by-quarter in 2013. We have high confidence regarding our current design pipeline with our two major flash suppliers. We don’t want to comment outside, but we are, there are additional potential opportunities from NAND maker come to us when our resource will be available in the second half of the year, we will be ready to expand more opportunity with other several flash makers.

Daniel, let me also add to your question, most of our eMMC controllers are going in to memory modules targeting the smartphone industry. So the bulk of our volume will be driven by the smartphone industry, but its fantastic opportunity for us to have other applications like tablets, smart TV, smart set-top boxes and other applications that also required eMMC controllers and we've been designing to many of these, so we're delighted that addressable market is growing and enabling us to go in to more and more different directions.

Okay, great. The final question just on the tax rate, Riyadh, I mean, 15%, has anything changed this year, I mean, you’ve really never had 15% tax rate; it's always been a lot lower, so anything to clarify there?

Well, the tax regime in Taiwan is (inaudible). There is a lower amount of R&D tax credit being available as over the next year. So we're holding to our 15% model tax rating and 15% continues to be what we use from modeling our business internally.

Thank you. And the next question comes from the line of Anthony Stoss from Craig-Hallum. Please ask the question.

I guess I have a two-part question; Wallace or Riyadh, you were talking about potential new eMMC customers coming in line; if you wouldn’t mind sharing a little bit more color, if you think that’s kind of the December quarter and to that same point heading into 2014, can you give us a sense of growth expectations from both your LTE and the embedded side of the business? Thank you.

I think we could say that we already have other OEM coming to us for eMMC solutions, but we also have a recent constraint. eMMC requires dedicate development and supporting team, as I said and mentioned earlier and we are in the process of building this new and new teams and we should be ready to support and serve OEM in the second half of this year; that’s all I can say. Regarding to 2014, we actually see our market share can grow in eMMC space area as we may guide above 10% to 20% for 2013; for 2014 we can grow to higher percentage with the eMMC market share growth as well as the new additional OEMs.

Okay. And Riyadh if you won’t mind you talked about grow margins jumping throughout the year; can you reiterate what those numbers were and then also what gives you the confidence I guess specifically to that September quarter gross margin that you can get there? Thanks.

Gross margins were 46.4% in the third quarter and they came down to 44.6% in the fourth quarter, so well within close to the midpoint of what we had guided previously. Our roadmap for returning to our 48% to 50% gross margin level is based on close to lower cost 55 nanometer manufacturing processes as well as increasing the proportion of our new growth product sales. The new product sales with this production we have hard gross margin. In terms of the first item moving to 55 nanometer manufacturing processes, we are making a very good progress in transitioning to these more cost effective products. Currently, the vast majority of our card and USB controllers that I previously mentioned are manufactured at 110 nanometers or older processes, all of these parts including new, all of my parts, I am sorry, including new card controllers, new eMMC controllers that we have recently tapped out or we will be tapping out, will be tapped out at 55 nanometers. So we are targeting the total of all our products to be at 55 nanometer by the fourth quarter and this is going to help our gross margin significantly. Furthermore, we will also going to be blending up our gross margin as we sell more and more new growth products. Our gross margin will improve as this new growth products are about 5 corporate average gross margins. Our eMMC sales will grow quickly throughout the year as well as I just talked about and we believe our LTE sales should start ramping aggressively in the third quarter.

Thank you. And the next question comes from the line of Mike Crawford from B. Riley & Company. Please ask your question. Mike Crawford - B. Riley & Company: Thank you, regarding your SSD business, so you expect that to become more significant once you have your status free cash as in the market or is that selling now?

Let me comment, we already starting sampling our SATA 3.0 SD controller, while we are late mover into ASP controller market, but being a late mover, I will go have this advantage that we have better understanding about the overall landscape and competition which allow us to have a more focused strategy when coming to design and marketing our ASP controller as well as our supporting for the next generation NAND of 2Y nanometer and 1A nanometer, it seems we have more compelling support in the new NAND solution. We are targeting for both NAND Flash and (inaudible) client SD market to use of SATA 3.0 controller. We believe we have a very compelling performance and power consumption and very competitive cost. We expect to see initial revenue contribution in the second half of this year, it seems our ASP controller are currently only sampling, and it’s too early to talk about revenue contribution. We will update you as the year progresses. Mike Crawford - B. Riley & Company: And then combined with all of your SSD products including the industrial fair eye branded SSDs what percent of revenue was SSD in 2012?

Our new growth product as a total for 2012 was about 31% of total revenue. Our card, our LTE was about 15%; our eMMC was about 10% so it’s a balance, the balance that adds up to 31% coming from our SSD products. Mike Crawford - B. Riley & Company: Okay. Thank you Riyadh and then just getting back, can you please just give a little bit more color what you mean by large customer rebalancing, the card business that's affecting you and you want to talk to what's happening there?

Yeah, similar to Flash OEM user card market and the module maker market as a buffer to their supply output. If supply is outpacing demand then it is so easier as a card or the wafer to module maker are held of inventory. This market is very dynamic and so can change quickly and technically depending on the royalty, profitability of a card versus wafer and other strategies considerations such as marketing timing. As the largest supplier of controller for Flash maker and the module maker, we benefit whether Flash maker make a card or module maker make a card. In the first quarter, we are seeing a short and shift away from (inaudible) card business as this can change course again very quickly. We are starting to see increasing deals wafer being released to module makers. This sale is relatively small. We expect wafer sale to become more meaningful in the second quarter. I think that every NAND maker, they have their own strategy and looking for maximizing their profits. We cannot comment whether it’s just to be consistent, and it’s very dynamic. The easier way I think we can grow for our card business and controller.

The next question comes from the line of Rajiv Gill from Needham & Company. Please ask your question. Rajiv Gill - Needham & Company: The 2013 annual growth of 10% to 20% implies a very steep ramp in the second half something in the order of maybe 40% to 50% from second half versus first half depending on what 2Q is, just want to give a sense of what are the kind of drivers for that very significant ramp in the second half, what are some of the risks that second half ramp might not materialize?

Rajiv, there are three pieces to our growth for this year. Our eMMC, our LTE and our card and USB business. Our card and USB business, we're expecting modest decline for 2013. Our eMMC business, we're expecting that revenue to essentially double and grow sequentially for the full year with a total full year revenue being roughly double what it was the prior year. Our LTE revenue should grow by about 50% to 75% for the full year compared to the prior year but this part of the business will be lumpy. As we previously talked about, we have regenerated a very large part of our LTE revenue in just one quarter. In the past two years, sales pattern are a precedent. We generate almost half of our LTE revenue in just the third quarter with smaller revenue, LTE related revenue in other quarters. So that’s going to one of the biggest moving parts in our revenue to get to the 10% to 20% revenue guidance for the full year.

So let me add some color here. So I think for eMMC growth, we have the very high confidence; we may have potential upside with our guidance regarding eMMC growth revenue. In the LTE side, if the risk is dependent on the production of Samsung new models and their selection about the solution and we're only LTE transceiver provider and we also depend on the baseband and other processors altogether becoming the new flagship model. Sometime it could be delay, sometime it may be moving earlier, so we cannot tell until that but however I think we know in today our fifth generation LTE transceiver is in very good shape, (inaudible) quality they meet the expectation and we believe we can win as well as they are planning a certain percentage to be general solution. So I think this moving part is (inaudible) where they will moving up or delay but I think (inaudible) we have confidence. Rajiv Gill - Needham & Company: That’s helpful and Wallace, you touched upon this before, but the NAND supply environment is expected to remain pretty tight, you looked at if you look at what Sandisk is saying or Samsung is saying they are looking at kind of 30% to 40% bid growth which is kind of historical low levels of NAND supply. They might increase NAND supply in the second half but it’s not certain. Wondering in terms of how that that tightness of supply impacts the module makers and how do you offset that at the OEM level?

I think the availability was a bit tight in the fourth quarter and currently remained tied as a fresh vendor hesitant to release too much flash into the market to module maker and to protect their NAND price. However, we are already seeing initial sign of additional wafer coming to the market with our China and Taiwan module maker customers, (inaudible) variability should improve in the late first quarter and that we are also believe there will be more supply of flash from NAND flash maker to both OEM and module maker in the second half. And so I think the overall I believe flash maker that without mean for more conservative guidance and because of the high demand balancing, but however [SSD] NAND has been significantly stronger then supply, incremental flash capacity can be brought online fairly quickly with introducing NAND, since module flash makers their (inaudible) are currently not fully noted especially Toshiba, they cut back 3% of capacity and I think they can recover to resume quickly by early second half. Rajiv Gill - Needham & Company: Thanks, and just last question, just that I understand it correctly. You said the core product should be flat at best in 2013 and the card business would decline modestly?

That's correct. Our core business is primarily are card and USB flash drive products, and so at best they are going to be flat but we believe our card and USB flash drive business, everything related should decline modestly for the full year? Rajiv Gill - Needham & Company: And is this mainly the result of significant decline in the attached rate for bundled cards? I just think that of your card controller business, is that why you are kind of saying cards can decline modestly?

That is correct.

Our next question comes from the line of Bob Gujavarty from Deutsche Bank. Please ask your question.

I know it’s all difficult given about a one-time type of things and design cycles and all that. But what do you think is the seasonality of your business. Is it primarily a 2Q, 3Q phenomena and then kind of 1Q and 4Q or relatively weak. How do you think about your business now given where you are trying to grow?

I think that for NAND controller business like we always saw weakest quarter, second quarter and third quarter will continue to grow, fourth quarter could be slightly declined or flat, but for LTE fourth quarter will always go down, for the (inaudible) and for our product line business the fourth quarter will all go down, Q1 also is weak. It depend whether it will be more new model design pipeline. I think currently we see the product transition in Q1 for LTE cell revenue decline bigger than in no more our product line, although I think when LTE business growing bigger and for the mobile space then we probably won't see such a big decline from first quarter.

And also some of the margin pressure because of strategic pricing moves you made, if you could expand a little bit on how that creates a revenue opportunity. Is it across your product line, is it certain key parts to your product line, can you talk about when we see some of that revenue because you took the margin and ASP head but up till now you haven't really seen the revenue come through so just can you talk about that a little bit.

I think its difficult for us to talk about specific customers. I think based on the business engagement, based on commitments some time our major customers they really suffer the price decline, and we have to share a certain plan. So whether there will be really upside for the business, but at least it will maintain the customer relationship and continue to engage long term business.

Our next question comes from the line of Tom Sepenzis from Northland Capital.

I'm just trying to get a better sense of the quarter-to-quarter decline in the card business in Q1. Given the rebalancing, it seems like most of the change in guidance is coming from that. So I am wondering if you can provide a little bit more color there. And then what gives you the confidence that that card business will rebound starting in Q2.

I think for OEM business the card controller is specifically stable. If you are looking for Q3 to Q4, the revenue will remain unchanged and we think in Q1 it maybe some (inaudible), this would probably maintain (inaudible). However due to the supply to module maker is limited so we see module maker portion for the car business a decline sequentially quarter-to-quarter. For second quarter we believe the availability of a NAND supply in the second quarter will be increased that's why we can’t predict we should see a better rebound for card controller business in second quarter.

And what is the current yield on 55 nanometer, are you having any issues there or is that coming off the line and working pretty well for you.

55 nanometer is very mature process technology, we use the (inaudible) lowly process technology of 55 nanometer. We are supposed to see around 90% yield around that range.

And you announced four new LTE handsets in South Korea in the press release, I am just wondering if you could give us some color there as to when that starts to hit the model and if we can see any kind of help from that in Q1 or if that’s more Q2, Q3 type?

I think we announced four new LTE models design and shipping in the first quarter. However, I think the (inaudible) was a fraction model relative small. So that’s why you won't see a significant revenue increase, however after we win the major fraction model for LTE and you are going to see the major revenue rebound. We expect to see increase from late Q2 and ramp up very quickly in the third quarter of this year.

Thank you. Ladies and gentlemen, that’s all the time we have for question and I will now like to hand the conference back to Jason Tsai, Director of IR and Strategy for closing. Mr. Tsai?

Before I hand the call to Jason, I am just going to make a statement about our dividend. As you know, we have declared dividend. So we just want to talk little bit more about our dividend policy. Essentially, barring any very exceptional events, we're expecting that our $0.15 per quarter dividend to be an ongoing event. As our business improves and scales, we could look to increase the dividend amount. We believe we can generate a fair amount of cash flow throughout our business cycle and $0.15 a quarter is a comfortably affordable amount for us. So for modeling purposes, we would guide that $0.15 per quarter should be an ongoing amount. So let me turn the call to Wallace for closing remarks.

I would like to thank all of you for joining us today and your continued interest in Silicon Motion. We will be at the following conference this quarter. In March we will be presenting at the (inaudible) Semiconductors Summit in New York, Northland Technology Conference in New York, Merrill Lynch Conference in Taipei. These obvious events are available on our website. Thank you and good bye for now.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating you may all disconnect.