Good day ladies and gentlemen and welcome to the Third Quarter Silicon Motion Technology Corporation’s Q3, 2013 Earnings Conference Call. My name is Desmond and I’ll 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 limitations, 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 informations 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 states of, and any change in our relations with our major customers and changes in political, economic, legal and social conditions in Taiwan. For additional discussions 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 obligations 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.

Thank you, very much and good morning everyone. Welcome to the Silicon Motion third quarter 2013 financial results conference call and webcast. My name is Jason Tsai. And 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 third quarter financial results and provide our outlook. We’ll then conclude with Q&A. Before we get started, I would like to 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 U.S. 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. The reconciliation of GAAP to non-GAAP financial data can we found on our earnings release issued yesterday. We ask that you review it in conjunction with this call. With that, I would now turn the call to Wallace.

Thank you, Jason. Hello everyone and thank you for joining our earnings call. In the third quarter, I’m pleased to report that our mobile storage revenue grew sequentially with our SSD+embedded scale further and now card controller sales rebounded. Over the last several years, we have been investing aggressively in our SSD+embedded solutions and I’m delighted that our eMMC controller sales have continued to successfully scale. And then in the second quarter of this year this product line had already become our largest. I’m also delighted that our SATA III client SSD controllers which we recently launched and have received very favorable third-party benchmarking reviews has already entered initial sales for a few of our customer sales to both retail channel and Chinese for PC OEMs. Overall, I am pleased that we continue to make good progress in transitioning our Mobile Storage products from mature external storage solution to longer term growth opportunity in the embedded storage space. Additionally, we believe our card controller sales has stabilized a risk relating to card debundling has largely play out. Overall, our revenue declined slightly due to revenue LTE product finishing went down. Excluding LTE sales, our revenue will have increase modestly this quarter. Our growth in our operation and profitability on the other hand increased in the third quarter. Earnings per ADS in the third quarter grew to $0.32 up from $0.27 in the second quarter. Riyadh will go into our financial later in the call. Our SSD+embedded product are the future of our Mobile Storage business with consumer and electronic devices are increasingly smart devices that require embedded memory. SSD are rapidly replacing HDD in PCs. And more and more category of devices whether for industrial, automotive or commercial application are now seeking specialized embedded memory solutions. We are being developing…

Thank you, Wallace. First I will outline our financial results for the third quarter and then I will provide our fourth quarter guidance. For the third quarter of 2013 we delivered total revenue of $51.1 million, a 2% decrease compared to the prior quarter. Let me recap the performance of our two key product lines. First mobile storage. Mobile storage revenue increased 4% sequentially, mobile storage controller shipments increased 7% sequentially, mobile storage controller ASPs decreased by 3% sequentially have increased 8% year-over-year, our 15th consecutive quarter of annual ASP increases. Our card controller revenue increased by 8% sequentially and our USB controller revenue decreased by 23% sequentially. OEM revenue again accounted for nearly 70% of our controller sales in the third quarter similar to the second quarter. Moving to Mobile Communications, mobile communications revenue decreased 27% sequentially due to the continuing (indiscernible) transition of Samsung LTE smartphones. Our corporate gross margin increased from 48.4% in the second quarter to 48.8% in the third quarter. Our corporate operating margin increased from 19.7% in the second quarter to 22.7% in the third quarter. In the third quarter our operating expenses decreased to $14.9 million as compared to $16.8 million in the second quarter due to lower accruals of compensation expenses. We ended the third quarter with 711 employees, 17% more than at the end of the previous quarter. Earnings per ADS in the third quarter were $0.32, an increase from the $0.27 in the second quarter, as a result of higher gross margins and lower operating expenses. Stock-based compensation in the third quarter was $1.5 million up slightly compared to the $1.4 million in the second quarter. I will now move to our balance sheet and cash flow. Inventory days increased slightly to 91 days in the third quarter from 88…

Thank you. (Operator Instructions) The first question comes from the line of Suji De Silva from Topeka. Please ask your question.

Yeah, good morning guys. Can you talk about the impact you saw from the Hynix expire on availability of NAND for your customers?

I think the Hynix (indiscernible) produce DRAM to file therefore directly of that DRAM supply and the price. However memory OEMs have converts from NAND flash capacity to DRAM in light of the higher DRAM prices in the market impact of the shortened supply of NAND. We are monitoring the situation closely and continue to have conservative expectation in term of near-term NAND supply growth. I would like to point out that any of their ability Hynix will impact our module markers and now our OEM business which in the third quarter was nearly 70% of our controller business.

Okay, thank you. And then the inventory collection you’re seeing in the fourth quarter in handsets is that evenly split between the Tier 1s in the China low cost handset manufacturers or is it more meaning towards one or the other?

Suji, could you please repeat your question so we can answer more appropriately.

Sure, the handset inventory collection for the fourth quarter is that more of the Tier 1 OEM or the low cost China handset OEM?

Well we cannot comment the endmarket for the smartphone but we believe the inventory correction has started since May Q3, but we believe currently just because procurement of our customer that’s why the eMMC our revenue was declined shortly from Q3, but we do not see any really smartphone volume decline, we believe that we still see the strong rebound from first quarter next year.

Suji let me also add our expectations about overall eMMC growth for this year is substantially higher than what we had originally expected. As you may recall originally we’re expecting eMMC growth this year to be roughly around 30%, our latest view is now that eMMC growth will be about 55% for this year because of substantially higher low cost smartphone volume ramping from China and so these are obviously opportunity for our eMMC business.

Well a quick question what’s the typical 4Q seasonality declines for eMMC typical I guess it’s still growing but what was expected to go?

Suji, we – we’re still very lean to the eMMC business. We’ve this is we’re going to our second just completing our second year of eMMC business and so the seasonal patents we’re seeing are still early days since we’re ramping our business and so the patents that we are seeing probably not going to be reflective of the longer-term patents, the longer-term patents would probably be closer to what you normally expect towards was the handset.

Okay. Thanks guys.

Thank you for your question. Next question comes from the line of Rajvindra Gill from Needham & Co. please ask your question. Rajvindra Gill - Needham & Co.: Yes, thank you. A question on the eMMC, from a technology perspective as well as from a sales strategy, what is the difference in developing this type of controller versus a controller that would go into a bundled card, is it, does it take longer to develop, is there more complexity and then how do you factor that in when you’re looking at the growth rate next year?

The eMMC controller design for invalid solution and frankly speaking we believe eMMC controller technology to lease about three times complicated than the card controller technology, because you need to have much more robust power management to prevent in sudden power down and you have a much better algorithm for performance driven spend especially the focus at both rend and rely and sequential rewriting. And also you have to recover any (indiscernible) condition and doing the event user and status operation. So I think in many areas for eMMC technology as much more complicated than removable storage controller technology. Rajvindra Gill - Needham & Co.: So, does that help you in terms of providing a value proposition to the flash vendors who don’t necessarily want to develop the eMMC controller themselves?

I think we mentioned in the past eMMC technology, the success of eMMC technology remains rely on several factors if it’s not just controller technology for the hardware SLC in the algorithm and (indiscernible). It’s also in addition is a verification process and also the pre-cap resistant integrator and including the debundling technology in kind of supporting the field how strong your team can depart the product and their official kind of OEM customers because they’re relying all dynamics rely on your team, overall not to control the technology but the overall scale and technology and provide a robust solution to them. Rajvindra Gill - Needham & Co.: Thank you and this last question on the LTE business, I mean I don’t understand some of this testing their baseband and, but do you have any additional visibility into what the roadmap would be into 2014 because I mean clearly this year 90 odd percent of Samsung LTE phones are using Qualcomm I'm just wondering – what makes you more confident that mix shift could, that split could go more to Samsung internally, if you could elaborate a little bit further?

First of all from a technology point of view last year our LTE transceiver and Samsung baseband do not have career application and below tracking features. I think this year all product needs the LTE-Advanced requirement including carrier. And we really do not believe Samsung commitment to their own platform has changed and they are actually working on their next generation LTE-Advanced cable baseband and we are on the track to pay our transceiver with their part maintenance here. I cannot reveal the detail to you but we have the confidence, good confidence I think by year end we could have a full update to you. Rajvindra Gill - Needham & Co.: Thank you very much.

Thank you for your questions. 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. Can you please talk about the margin, expected margin impact on the shift eMMC 5.0 solutions?

Well all of our new solutions have gross margins that are above corporate average and so for this product as well as other products you should expect the same trend of higher gross margin blended into our overall growth margin profile. Mike Crawford - B. Riley & Company: Okay, Riyadh is this eMMC 5.0 becomes more prevalent say I don’t know Q2 would you expect margins to ever get above that 49% level on the gross margin side?

All of our products when they initially come to market they have much higher gross margin but over time we are committed to delivering a cost down program to our customer. So, our overall gross margin profile for our products are the combination of the individual product as well as the product mix of all the various parts that we have and so the more of an easy product that we bring to market and the larger the significance the better our gross margin is going to be. Let me just add that our long term target still remains 50% for our gross margin. Mike Crawford - B. Riley & Company: Okay, thank you. Regarding the LTE-Advanced I think the statement was that Samsung remains committed well to development of baseband I think we can understand that. And Silicon Motion is the preferred partner to the baseband. Would you expect to have a majority of a tax rate with Samsung next year or still close to 100% share of, if they’ve used their own LTE-Advanced baseband?

I think we have been very successfully meeting their requirement and so long as, as long as we continue to meet this requirement we do not believe we will see any competitive threat entering the market whether internal or external. Well we believe our solution outperform their internal other solution. And we think Samsung is committed to use internal solution as possible as they can. They have internal solution have similar of better performance they will have a more model using internal solution to differentiate their product. Mike Crawford – B. Riley & Company: Okay, thank you. And then last question on stock based comp. I think it’s been about $5.4 million through nine months you didn’t say $5 million for Q4 did you, or did I miss you there?

I'm sorry. Mike Crawford – B. Riley & Company: Stock based…

You heard right it is 5 million. Mike Crawford – B. Riley & Company: And is that….

It’s compared to higher than the previous quarter. We have, we’ve just are in process of bringing out a new stock based competition program and so the impact is going to be higher in the next quarter compared to the previous few quarters. Mike Crawford – B. Riley & Company: So a final question then is what would you – what get the stock based comp for next year?

You should look at that on a more annualized level right, quarter-by-quarter there are always some variance, variations in terms of one program that brought to our employee so the right way to look at it is to look at on a full year basis. Mike Crawford – B. Riley & Company: No, Riyadh but so you’re talking about $10 million in stock based comp this year, is that a good number for next year as well?

Roughly, if you add up the number for this year then that would give you a sense of magnitude that you should expect next year plus some scaling. Mike Crawford – B. Riley & Company: Okay, thank you.

Thank you for your questions. (Operator Instructions) The next question comes from the line of Bob Gujavarty from Deutsche Bank. Please ask your question.

Yeah I have a kind of a question I mean if I look at maybe a competitor to you indirectly like SanDisk they’ve been able to grow their USB and their flash card revenues some of the ASP but they lost a grown unit. Is that a function do you think in this environment where NAND is very tight is it that they are able to gain share in a tougher market or is it just I'm just curious how you just you kind of explain the discrepancy between their performance and your performance?

Hi Bob. It seems you are right. In today’s market NAND supply is very tight. So, NAND maker have a privilege to come show the product they want to sell. I believe SanDisk definitely gained their position in card and USB. I don’t believe they gain a much more volume in USB but definitely their card business is doing very well. And so it depend on the NAND maker clear strategy some NAND maker they don’t want to surprise the NAND to the card and USB business. But overall for NAND supplies the module maker is limited that’s why we are impacted by the module maker business.

Got it. And then if I think about kind of I mean you talked a little bit about the puts and takes for Q1. I mean obviously their eMMC customer coming back there is presumably some replenishment of inventory existing eMMC customers after they draw it down in Q4. What are some of the headwinds should we think about I mean – can USB take another leg down, flash cards are seasonably soft in 1Q. So, can you talk a little bit about maybe the offsets of some head winds in Q1 otherwise I can only think of good things and I don’t want to get the impression that its going to be an up, a big up quarter if that’s not the proper way to think about it?

We cannot predict about USB product line but we believe because PC market continues to decline the demand on USB flash drive also is very weak. So, the potentially we already mentioned the USB product line will moderately decline. But ASP card we believe is stable right now. We did see a very small rebound in third quarter and we see what the flat rate for Q4 and moving next year. However I think we can gain more high performance market share the total unit will may not increase but the ASP becomes higher but we can grow for the top line as well as profit. Well we also mentioned we start to ship the SATA III client SSD from this quarter with small volume but we believe entering to late Q1 or second quarter we start to be the sales contribution will be more meaningful to our business. So as you know in 2013 we don’t have any SATA III client SSD business this year.

Right. So net-net, a lot of good things potentially in 1Q and most of the bad stuff is largely gone. Okay, great. Thank you.

Thank you for your questions. (Operator Instructions) The next question comes from the line of Tom Sepenzis from Northland. Please ask your question.

HI guys, I think you mentioned earlier that you expect the embedded market to grow 25% next year, that’s just what the two existing customers not including the third, correct?

That’s correct, that’s the industry number, that’s the industry number. We believe the industry as a whole will grow about 25%, the industry, the market for our eMMC, so our business with Samsung and SK Hynix at a minimum it should grow as fast as the industry. And when we are – if a third customer comes online that will be incremental to what we expect to deliver with Samsung and Hynix.

Okay, good. And then as far as operating expenses, do you have anything in the plan for next year that take some backup obviously they were lower this quarter than expected. So do we just use the current (indiscernible) going forward?

Our OpEx for the third quarter was a bit lower as a result of lower accruals of compensation expenses, our fourth quarter OpEx on our hand should be about $2 million higher than the third quarter because of higher tape-out expenses. In general looking up a bit further out OpEx for upcoming quarters should be a bit higher than this quarter, the third quarter, we will continue to build out our R&D and other operating infrastructure this quarter our growing SSD+embedded sales as these investments are critical to our long-term growth. From a operating margin perspective if that’s what you are heading you should expect our operating margin target still to remain at 30%, a profitability level that is within reach and that what, that we had achieved in the past.

Great. And just in terms of tax rate for next year?

Our mobile tax rate is now 18%.

Great. Thanks so much.

Thank you for your questions. I would now like to hand the call back to Mr. Wallace Kou, President and CEO for closing remarks.

I would like to thank all of you for joining us today and your continuing interest in Silicon Motion. We will be performing conference this quarter in November 2013 we’ll be presenting at Wells Fargo Securities Tech, Media & Telecom conference in New York, RBC Capital Markets’ Technology, Internet, Media and Telecommunications Conference in New York, Deutsche Bank Conference in Taiwan, UBS Global Technology Conference in San Francisco. In January 2014 we will be presenting at the 14th Annual Nomura @CES Conference in Las Vegas, Needham Growth Conference in New York, details of these 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 your participation. You may now disconnect your lines.