WESTLAKE VILLAGE, CA — Diodes Inc.said that net income for the first quarter of 2001 will be lower than previously expected due to continuing softness in demand, particularly in the computing and communications sectors.
Late in the fourth quarter of 2000, Diodes, and the semiconductor industry as a whole, experienced a sharp inventory correction in these key markets, which has continued in the first quarter of 2001. As a result, management now expects revenues to be in the range of $24 to$26 million for the first quarter of 2001, as compared with $26.1 million in the fourth quarter of 2000. Net income is anticipated to be in the range of $500,000 to $700,000, as compared with $2.8 million in the previous quarter.
The impact to earnings is largely attributable to reduced capacity utilization of the company’s manufacturing assets and changes in product mix, both of which have had a negative impact on gross margins. Due to market conditions, capacity utilization at Diodes’ FabTech subsidiary has decreased 45 percent, as compared with the previous year, while Diodes-China’s utilization has decreased 15 percent.
“The past few months have been challenging, as the industry was hit with a quick and deep inventory correction,” said Diodes President and Chief Executive Officer C.H. Chen. “The risks of becoming a fully integrated manufacturer are amplified in an industry-wide slowdown because of the fixed costs associated with manufacturing facilities.
“Management has responded to this cyclical downturn by implementing programs to cut operating costs, including reducing our worldwide workforce by 26 percent, primarily at the FabTech and Diodes-China manufacturing facilities. We will continue to actively adjust our cost structure as dictated by market conditions, but are pleased that our SG&A expenses for the quarter have decreased to less than 15 percent of revenues, compared to 16 percent in 2000.”
Diodes completed its first strategic acquisition when it acquired FabTech Inc. of Kansas City, Mo., in the fourth quarter of 2000. The 70,000-square-foot wafer foundry, with its 16,000-square-foot cleanroom, and experienced engineering team contribute to the company’s strategic goal of becoming a vertically integrated manufacturer and supplier of discrete semiconductors.
Looking forward, Chen stated, “It is important to note that we believe we have maintained our market share in our discrete semiconductor products, and we are cautiously optimistic as we are just beginning to enter new markets such as Europe and have expanded our Asian sales force.
“Long term, we believe that we will continue to generate value for our shareholders and customers, not just from our expanded Diodes-China manufacturing and FabTech’s foundry assets, but also by the addition of a true technology component to Diodes. It is unfortunate that the market conditions changed just as we started our initiative, but this will not stop us from achieving our goal of becoming a total solution provider.
“We reiterate that this is a multi-year initiative that will increase our ability to serve our customers’ needs, while establishing Diodes Inc. at the forefront of the next generation of discrete technologies.”