Question-and-Answer Session
Operator
(Operator Instructions). Our first question comes from the line of Bill Lu - Morgan Stanley.
Bill Lu - Morgan Stanley
Just a couple of questions on the 1Q results, and a couple more on the 2Q guidance, first of all Nan-Horng talked about 1Q benefiting from a one-time inventory replenishment. Anyways you can help us quantify how much that was?
Patricia Chou
Hi Bill, this is Patricia. We are enjoying the [inaudible] showed us right after the Chinese New Year through the end of the first quarter, but we do not expect the same situation happening in the second quarter. So, that’s why we guidance the second quarter range quite similar to the first quarter.
Bill Lu – Morgan Stanley
Okay. So, really the portion that exceeded your guidance is really what you think is the rush orders at the end? Is that fair to say?
Patricia Chou
That’s correct.
Bill Lu – Morgan Stanley
Okay. On your ASP, you talked about 1Q ASP down to about 12%. I guess to be 13%, grew by 70% quarter-on-quarter. Can you help me reconcile that? Does that mean, if I look at ASP for the lower end products, it actually came down a lot more than the 12% then?
Patricia Chou
Yes, it’s pretty much correct. We experienced a severe price pressure in the lower end and also the percentage of our, Series of 13 shipments accounted for the overall, was still relatively low in the first quarter even though were the Series 13 itself, that shipments incurred in the first quarter versus the fourth quarter ?08 was a big increase.
Bill Lu – Morgan Stanley
Okay, got it. What will be your expectations for ASP declines in the second quarter?
Patricia Chou
Very good question. We have been suffering with a very limited visibility since the fourth quarter ?08 based on our latest market intelligence up to April. For the second quarter, we might still suffer with around 10-Q, 15% of the ASP erosion pressure.
Bill Lu – Morgan Stanley
Okay. But wouldn’t that imply then that, do you think second quarter units will grow by more than 10% or 15%. And secondly, you were guiding to a flat gross margin. Does that mean you feel you are pretty confident that costs came down by about 10%, 15% in the second quarter?
Patricia Chou
Most likely the volumes. Yes, we expect that the shipment volume in the second quarter would be increased by around 10% versus the first quarter interest of our gross margin. We benefit a portion of our cost beyond our efforts in the second quarter, but not fully yet. We expect to take advantage of the forecast beyond benefit in the second half of this year. However, since we gave out a range of 30% to 35% for gross margin, we believe that we can still stay within this range.
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