Good day, ladies and gentlemen. And welcome to the Fourth Quarter Silicon Motion Technology Corp. Q4 2013 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 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 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 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 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.

Thank you. Good morning, everyone. Welcome to the Silicon Motion’s fourth quarter 2013 financial results conference call and webcast. My name is Jason Tsai. 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’d 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 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. The 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 be found in our earnings release issued yesterday. We ask that you review it in conjunction with this call. With that, I would now like to turn the call to Wallace.

Thank you, Jason. Hello, everyone, and thank you for joining our earnings call. 2013 was an important transition year for Silicon Motion for both our controllers business, as well as our LTE products. We had previously communicated that end market for our controller was shifting from mature removable storage market to a growing embedded storage markets. And that we have been increasingly investing in SSD+embedded product to rapidly enlarge our initial revenue that target growing embedded storage market. In 2013, we delivered on this strategic objective by growing our SSD+embedded revenue by about 100% to where they have become our largest product line. And by the fourth quarter, SSD+embedded sales already account for about half of our total mobile storage sales. We scale our SSD+embedded revenue for 110% of total mobile storage sales in 2011 to about 20% in 2012 and last year to almost 50% of our controllers. The primary driver of our SSD+embedded growth has been our controller for eMMC. The SSD for mobile devices widely used in a vast majority of all smartphone and tablets. We have been supplying our eMMC controller for both Samsung and SK Hynix since early 2012 as well as a third NAND flash customer in the first quarter. Our flash partners are supplying eMMC memory solution building our eMMC controller to eight out of the top 10 non-iOS smartphone OEMs. For smartphones ranging from global model to lower cost phones, whether running Android, Window 8 or Blackberry OS. In 2013, 15% to 20% of all eMMC devices were using our controllers up from 5% to 10% the previous year. In the fourth quarter alone, our eMMC 4.5 controllers were designed into 18 new devices, including two Window 8 tablets and numerous Android smartphone and tablets. Technologies underlying eMMC solution have been advancing…

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 guidance. In the fourth quarter, revenue declined 8% as expected with our controller sales declining a milder 3% and RF IC sales declining significantly faster due to the end-of-life of our previous generation LTE transceivers and weak mobile TV SSD sales. Our SSD plus embedded sales declined due to seasonally weak eMMC controller sales. Our SSD plus embedded sales, however, increased about 70% year-over-year and accounted for about half of all controller sales. This quarter, our removable storage controllers for card and USBs increased modestly, sequentially, due to better availability flash to our module maker customers. Our corporate gross margin was unchanged at 48.8% in the fourth quarter as compared to the prior quarter. In the fourth quarter, our operating expenses decreased to $13.8 million as compared to $14.9 million in the third quarter due to lower compensation expenses. We ended the fourth quarter with 731 employees, 20 more than at end of the previous quarter. Our corporate operating margin decreased to 22.5% in the fourth quarter from 22.7% in the third quarter. Earnings per ADS in the fourth quarter were $0.30, a slight decrease from $0.32 in the third quarter. Stock-based compensation in the fourth quarter was $4.9 million, significantly higher than the $1.5 million in the third quarter. The largest stock-based compensation amount this quarter was a catch-up payment, offset the unsustainably low amounts in the first three quarters. For the full year, our total stock-based compensation was $10.3 million, an amount comparable to the $11.8 million in 2012. I will now move to our balance sheet and cash flow. Inventory days increased to 105 days in the fourth quarter from 91 days…

Thank you. (Operator Instructions) Your first question comes from the line of Anthony Stoss from Craig-Hallum. Please ask your question.

Hi guys. Good morning. If you wouldn’t mind, your full 2014 guidance, if you can give us a sense on as a percentage of each of the categories, I know you threw in a whole bunch of info on this is isn’t included and that's not included but can you just give us a sense on the guide as percentage of each of the divisions? Also secondly, your share buybacks been applied, may sky for 2014, any thoughts about reinitiating the share buyback? Thanks.

Okay. So let me just quickly go through again the color on the guidance that we have provided. Pinning first on eMMC, we're expecting our eMMC to grow top 25% this year. This is based on our current existing two flash partners business and does not include revenue -- anticipated revenue from our third flash partner. This third flash partner sale should begin in the first quarter but the sales numbers are not baked into our eMMC revenue. Now turning over to our SSD controllers. On the industrial SSD part of our business, we're assuming 20% to 30% revenue growth. For our SATA III SSD controller business, last year we had fairly negligible sales and this year until we starts securing or rather our OEM customer start securing wins as the major global tier 1 PC vendors, we are also assuming negligible revenue. So negligible revenue or zero revenue has been included in our SATA III SSD numbers which are but blown up into our overall guidance. On the LTE side of our business, we are assuming revenue similar to what we had achieved for last year and this is based on the potential wins that we are in the final leg of testing. And so if this testing is completed at that point satisfactorily, we should be expecting with our first design win of revenues comparable to what we achieved last year which was roughly $12 million. For our renewable storage controller business that's our card plus UFD controllers, we're expecting flat revenue this year compared to last year and similarly for our other products, we are expecting no revenue growth. Your other question about buyback, we remain optimistic about our future and strongly believe our stock is undervalued and our Board will continue to look at improving fundamentals and our return to growth as some of the metrics we're considering a share buyback program. However, let me also emphasize that our primary means of returning capital to our shareholder is from our dividend payment but we may consider again to opportunistically return capital from a share repurchase program, if the metrics that our Board is considering unmet.

Okay. Thank you.

Thank you. Your next question comes from the line of Suji De Silva from Topeka. Please ask your question.

Hi, guys. Good morning. Thanks for taking the question. Of the three segments, you guys have guided conservatively into ‘14, the third partner SSD, the SATA SSD and LTE events, which one do you have the rank-order confidence that you have the most confidence and that could provide upside of those three?

We believe our third eMMC NAND partner business is very solid. And I have seen just -- they are sending their product into the customer design application. So we’re shipping small order in the first quarter. I think ending second quarter which you will see the meaningful revenue ramping up from second quarter. Regarding SATA III, I think because we also are very quite confident, we should grow SATA III product this year but we really cannot anticipate the skill and how large would be. But we are engaging an industry NAND maker qualification at the moment. For LTE, because the most important is first LTE qualification, after if Samsung complete this internal solution, we believe we have a much better option to gain other model design.

Okay. That’s very helpful. Thank you. And then for eMMC, what kind of share do you think you are going to achieve in ‘14 versus late in ‘13. And can you help us understand that 18 wins you have with that perspective versus how many wins today you have of prior quarters? Thanks.

Well, last year in 2013, we had 15% to 20% global market share for our controllers going into global eMMC market. Right now based on the revenue projections that we have based on just our first two flash partners did and excluding the revenue expected from our third flash partner, we are expecting our eMMC revenue to grow 25% and 25% is well in line with the expectations of the eMMC market growth. So right now based on the 25% revenue growth, we are expecting to keep our market share at 15% to 20%. Naturally if -- when the revenue from our third flash partner, relating to the TLC eMMC memory solutions, when we start ramping and we start scoring the anticipated revenue into our guidance then our market share could be larger but for the time being until we have more -- better visibility on that part of business sticking to 25% revenue growth we should keep our market share at 15 to 20.

Thank you. Your next question comes from the line of Rajvindra Gill from Needham & Company. Please ask your question. Rajvindra Gill - Needham & Company: Yes. Thanks and congrats on the good outlook for the year. On the LTE side of the business, Wallace, wondering if you could kind of characterize what's going on in the marketplace for the adoption of LTE-Advanced and any kind of thoughts on what the carriers are doing, what the handset OEMs are doing to try and promote this new type of baseband?

I think, what we can say is we are nearing the very final page of testing with Samsung in terms of qualification. We do have high confidence that because our design is paired with Samsung LTE-Advanced model and their latest application processor. We believe we can complete -- we are quite confident to complete the first flash model. So we also believe Samsung have indulge in to continually using internal solution to come sooner with that facility and to show the demonstration to other competitor. And we believe Samsung should expand internal solution for broader model in 2014. Rajvindra Gill - Needham & Company: And just switching gears to the embedded side, so there is lot of growth covered in -- covered with flash partners, the two flash partners and potentially the third flash partner. Do you see any risk down the road of the flash partners developing their own internal eMMC controller?

I think that while we may be perceived to be competing with our NAND flash partner in general consulting but we are more of partners than a competitor. And we help our flash partner to extend their already resold in R&D capability and product portfolio and market competitiveness. I think that NAND flash makers, they tend to use internal R&D for high-end utilize to mainstream market for high volume (inaudible). Rajvindra Gill - Needham & Company: Thank you.

Thank you. Your next question comes from the line of Mike Crawford from B. Riley & Co. Please ask your question. Mike Crawford - B. Riley & Co: Thank you. I’m curious regarding your next-generation SSDs or you're designing PCIE Gen 2 controller for this year and also Gen 3 for next year targeting higher end solutions? Could you say what types of NAND flash you are expecting these controllers to work with?

So first our Gen 2 PCIE is a support HPI, this is majority for NLC, as well as 1y nanometer TLC. For our next year Q1 monitoring the PCIE Gen 3 it would become controller, we do support NV -- NVMHCI, they support those NLC and TLC including 1Y and 1Z. It also supports the upcoming 3D NAND TLC. Mike Crawford - B. Riley & Co: Okay. Thank you, Wallace. Just further on the buyback. So last year, I'd say buyback was widely successful, given that you were able to, although you only invested $10 million to return to shareholders, you were able to acquire this shares a very nice price well below where the company is trading today. Now, you're saying that the Board’s thoughts on the buyback, contingent upon not only good performance but also return to growth which is that fine but that philosophy also makes it more difficult to buyback shares when it’s maybe the most attractive to shareholders getting the best return on that invested capital, is my understanding of their belief in this regard correct or am I missing something?

Mike, as we have talked about, our Board looks at the key metrics for engaging in the share buyback program and those relates to our fundamental -- the fundamental valuation our company, as well as the visibility of our growth. But that said, the primary meaning that we -- our company has decided to take a returning capital to our shareholders is through our dividend program which we have designed to be for amount to be able payable to the -- our business cycle, the ups and down of our business cycle and then later on top of that buyback when it is opportunistically convenience for us to do from the perspective of meeting valuation and visibility metrics. Mike Crawford - B. Riley & Co: Okay. Thank you, Riyadh.

Thank you. Your next question comes from the line of Bob Gujavarty from Deutsche Bank. Please ask your question.

Hey. Thank you. Hey, Riyadh, this is -- this question probably for you. CapEx in 2013 was pretty elevated, kind of how should we think about it in ’14, ’15, is it still investment year or you kind of more -- kind of average the previously to 2013 kind of $4 million to $5 million, so just kind of ballpark it for the next couple of years, I appreciate it?

Well, generally, we don’t have much in terms of CapEx, every quarter we just have a couple of million dollars relating primarily to design tools, software design tools that we capitalized, so that's kind of it and every once a while when our headcount scale to a certain level we also need to deploy the building space to held our engineering team. This is important especially recently we've had quite a lot of headcount for the various teams involved in scaling up our SSD+embedded and when you are dealing with OEM customer they'll expect dedicated team and these dedicated team need to be fired well from one another to service their dedicated OEM customers. So that also adds to the CapEx from a facilities perspective.

Got it. And perhaps for Wallace, I mean, Wallace, we have had some a lot of cost occurrence in the Smartphone, tablet space, who has -- we have some cost occurrence, one of your major customers? What is your sense of where that kind of the mobile market is heading in 2014 and how does that impact your business. I think there is a lot of debate about high-end versus low-end and from your perspective, it seems like unit growth is what’s really important and you are kind of, you don’t care so much about the mix? So if you can kind of address what you see happening in 2014, I appreciate it?

Bob, you are absolutely right. We are unit growth. We don’t count just smartphone growth, high-end smartphone or low-end, we grow whatever smartphone can grow as a unit. But we also see our embedded better eMMC product and beyond smartphone and tablets such as Smart TV and we see probably 80% of the new Smart TV all use eMMC right now and eMCC also moving to all to automotive car, [infotainment system] and a lot of gaming devices and we are going to see quite a lot of new market for us to develop and to penetrate. So, we come on unit growth, so that’s why we are very confident for our new growth for 2014.

Great. Thank you.

Thank you. Your next question comes from the line of Tom Sepenzis from Northland Capital. Please ask your question.

Thank you for taking my question and congratulation on the LTEs news. Just two questions, one is, there any major difference with the new eMMC customer in terms of margins given that its lower cost NAND going into the low end and mid range phones?

So, we do see eMMC pricing becomes very comparative market because the smartphone customer ask lower price every year, actually almost every quarter. So, we continually develop a new controller and of course we can shrink the die side and maintain even better performance. We have dedicated software, algorithm developing so we continue launching the new algorithm and to utilize smaller threat, internal threat but maintain good performance and we for the NAND partner we develop dedicate 4.5 controller and also dedicate 5.0 eMMC controller because we have to fine tune out catcher for the TLC NAND.

Tom, let me also add, you should assume our gross margins to be fairly stable for our eMMC product lines going forward and these gross margins from these products are on average, above corporate average.

Great. Thank you. And then, as far as the transceiver in the LTE, you mentioned that, you are in the final phase of the qualification there, are there any other options for Samsung, are there any other transceivers that are also in the final phase of the qualification or you are the only one?

I think we can only say for the internal solution, we are the only one and our marking will be center logo two.

That’s great. Thanks very much.

(Operator instructions) As there are no further questions at this time, I would now like to hand the conference back to Mr. Wallace Kou. Thank you. Please continue.

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 Susquehanna Semiconductor and LED Summit in New York, Northland Capital Market 2014 Growth Conference in New York, UBS Technology One-on-One Conference 2014 in London, Bank of America Merrill Lynch Taiwan Technology & Beyond Conference in Taipei. 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 participation. You may all disconnect.