March 12, 2001–Westlake Village, Callifornia–Diodes Inc. reports that net income for the first quarter of 2001 will be lower than previously expected, and that the company intends to reduce its worldwide workforce by 26%–primarily at the FabTech and Diodes-China manufacturing facilities.
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, Diodes 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%, as compared with the previous year, while Diodes-China’s use has decreased 15%.
“The past few months have been challenging, as the industry was hit with a quick and deep inventory correction,” says Diodes President and CEO 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%–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% of revenues, compared to 16% 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-sq.-ft. wafer foundry, with its 16,000-sq.-ft. cleanroom, and experienced engineering team contribute to the company’s strategic goal of becoming a vertically integrated manufacturer and supplier of discrete semiconductors.
“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,” says Chen. “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.”