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Integrated Silicon Solution, Inc. F2Q10 (Qtr End 03/31/10) Earnings Call Transcript

Integrated Silicon Solution, Inc. F2Q10 (Qtr End 03/31/10) Earnings Call Transcript

Integrated Silicon Solution, Inc. (ISSI)

F2Q10 (Qtr End 03/31/10) Earnings Call Transcript

April 27, 2010 4:30 pm ET


Scott Howarth – President and CEO

John Cobb – VP, Finance & Administration and CFO


Jie Liu – Auriga USA

Edwin Mok – Needham & Co.

Andy Ng – Morningstar

Shawn Boyd [ph] – Westcliff [ph] Capital Management



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Good day everyone and welcome to the ISSI fiscal second quarter 2010 quarterly earnings conference call. As a reminder, today’s conference is being recorded. At this time, I would like to turn the proceedings over to Mr. Scott Howarth, Chief Executive Officer. Please go ahead, sir.

Scott Howarth

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Good afternoon and welcome to ISSI’s conference call for the quarter ended March 31, 2010. I am Scott Howarth, President and Chief Executive Officer, and with me is John Cobb, our Chief Financial Officer. Before we proceed, I have asked John to comment on the nature of this call and any forward-looking comments that may be made.

John Cobb

Thanks, Scott, and good afternoon. During the course of this conference call we will provide financial guidance, make projections, comments and other forward-looking statements regarding future market development, the future financial performance of the company, new products or other matters. We wish to caution you that such statements are just predictions or opinions, and that actual events or results may differ materially due to fluctuations in the marketplace, delays in developing new products, changes in book demand or supply, our ability to secure manufacturing capacity or adverse developments in the global economy.

We refer you to the documents ISSI files from time to time with the SEC, specifically our most recent Form 10-K filed in December 2009 and our Form 10-Q filed in February. These documents contain and identify important factors that could cause our actual future results to differ materially from those contained in our financial guidance, projections, comments or forward-looking statements.

Scott Howarth

Thank you, John. Before I discuss our results for this past quarter, let me first discuss the DRAM and SRAM memory industry and some of the dynamics that we are seeing. From late 2007 to early 2009, the DRAM industry was saddled with excess capacity, low prices and severe losses, over $14 billion in losses according to Gartner.

In 2009, as recession was hitting all companies, DRAM companies had reduced costs, and as a result, 22% of all DRAM wafer supply was retired with approximately 8% of the reduction coming from the bankruptcy of Qimonda.

As the recession was coming to an end in late 2009, demand for DRAM, primarily DDR 3, surged with a growth of netbooks and PCs. That growth has continued into 2010. According to iSuppli, DRAM revenue in 2009 was $22 billion. For 2010, they are forecasting a DRAM market of $32 billion, a growth of 45%, while other market researchers have forecasted even higher numbers.

While ISSI doesn't participate directly in the PC market or DDR 3 at this time, the effects of shifting capacity away from low-density and legacy DRAM has benefited ISSI as our customers seek stable supply and the long-term support that we provide. We estimate our serviceable market for DRAM to be $5 billion which offers considerable opportunity for growth.

The SRAM market has been going through changes as well, as our competitors move away from SRAM, others are experiencing shortages and longer lead times. We estimate the total available market for synchronous and asynchronous SRAM to be $1 billion this year, which provides significant growth opportunity for us.

At ISSI, we provide complete SRAM and DRAM solutions plus long-term support which is what our customers want today and in the future.

I will now discuss the results of this recent quarter. We are very pleased with our results in the March quarter. The strong demand growth we saw in the prior three quarters continued into the March quarter resulting in 12.8% revenue growth quarter to quarter that far exceeded our initial expectations.

The demand growth occurred in all of our key markets and geographies. Overall end-market demand is approaching peak levels that we haven't seen prior to the world-wide recession and may soon surpass even those levels.

DRAM pricing continue to improve this quarter in our target markets as we saw increases for some products in various market segments. This pricing recovery shows a growing demand for DRAM that exceeded the markets supply this quarter. Our product mix also shifted to a higher margin products in market segments such as networking, telecom, and automotive which helped our gross margin this quarter. As a result of the improved demand conditions and our improved mix, we achieved one of the highest gross margins in our history. Looking forward, we believe this momentum will continue into the June quarter.

We entered the June quarter with a strongest backlog we have seen in several years and also strong backlog for the September quarter. So far, our bookings this quarter have also been very strong. Our employees work very hard to improve the company, grow our business and support our customers and these results show their hard work.

In addition, we’ve had one of the best quarters of design wins and continue to see a high level of customer design activity as our customers continue to face shortages and seek stable DRAM and SRAM supply and long-term support from ISSI.

Our top line growth this quarter was a clear highlight for us as we normally see fiscal Q2 as a seasonally flat-to-down quarter. Our revenue for the March quarter was $57 million. This compares to $50.6 million in the December quarter and $31.3 million in the March 2009 quarter.

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