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Good afternoon and welcome to Diodes Incorporated Fourth Quarter and Full-Year 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of today's conference call, instructions will be given for the question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded today, Tuesday, February 11, 2020.
I would now like to turn the call over to Leanne Sievers of Shelton Group Investor Relations. Leanne, please go ahead.
Good afternoon and welcome to Diodes' fourth quarter and 2019 financial results conference call. I'm Leanne Sievers, President of Shelton Group, Diodes' Investor Relations firm. Joining us today are Diodes' President and CEO, Dr. Keh-Shew Lu; Chief Financial Officer, Brett Whitmire; Vice President of Worldwide Sales and Marketing, Emily Yang; and Director of Investor Relations, Laura Mehrl.
Before I turn the call over to Dr. Lu, I'd like to remind our listeners that the results announced today are preliminary, as they are subject to the company finalizing its closing procedures and customary quarterly review by the company's independent registered public accounting firm. As such, these results are unaudited and subject to revision, until the company files its Form 10-K for its fiscal year 2019.
In addition, management's prepared remarks contain forward-looking statements, which are subject to risks and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995.
Actual results may differ from those discussed today and therefore we refer you to a more detailed discussion of the risks and uncertainties in the company's filings with the Securities and Exchange Commission, including Forms 10-K and 10-Q. In addition, any projections as to the company's future performance represent management's estimates as of today, February 11, 2020. Diodes assumes no obligation to update these projections in the future as market conditions may or may not change, except to the extent required by applicable law.
Additionally, the company's press release and management statements during this conference call will include discussions of certain measures in financial information and GAAP and non-GAAP terms. Included in the company's press release are definitions and reconciliations of GAAP to non-GAAP items, which provide additional details.
Also throughout the company's press release and management statements during this conference call. We refer to net income attributable to common stockholders as GAAP net income. For those of you unable to listen to the entire call at this time a recording will be available via webcast for 90 days in the investor relations section of Diodes’ website at www.diode.com.
And now I'll turn the call over to diodes President and CEO, Dr. Keh-Shew Lu, Dr. Lu, please go ahead.
Thank you, Leanne. Welcome, everyone, and thank you for joining us today. 2019 was another record quarter year for Diodes across all financials measures generating solid revenue growth, as well as increasing profitability and cash flow. Additionally, our record performance in automotive and industrial market combined with record sales from our Pericom IC products continue to be key contributors to our growth and margin expansion.
As a result of our strong cash flow generation, we have also been able to strengthen our balance sheet and significantly reduce long-term debt to below $100 million. Our full-year revenue growth of 2.9% once again outperformed our server market, which was down 6.6% in 2019.
This consistent above-market performance is a direct result of our targeted sales strategy to serve as a total solutions provider, leveraging our expanded product portfolio and broadened customer relationships. Our approach has also resulted in increased market share and content gains across key end equipment, while also addressing new application areas.
Looking forward to the coming year, we expect to maintain our strong performance and continued achievement of good results, as we take further steps toward our long-term financial goals of 40% gross margin and 20% operating margin. With the automotive and industrial markets approaching our target of 40% of total revenue, we are well-positioned to further drive growth and margin expansion.
Our focus remains on increasing content across the growing end markets of automotive, industrial, high-end servers, and storage, 5G, as well as IoT. Before I turn the call over to Brett, I would like to take a moment to comment about the coronavirus outbreak in China. First and foremost, our top priority is our people and Diodes is taking proactive measures to protect the safety, health, and the well-being of our global associates, as well as their family and the communities. Brett will discuss this further as part of the first quarter 2020 outlook.
Additionally, I would like to provide a brief update on how proposed acquisition of Lite-On Semiconductor. As we announced in January, Lite-On Semiconductor approved a resolution in which they sold more than half of their holding of [indiscernible] or 16.5% of outstanding to [indiscernible], an entity in which [indiscernible] will become a wholly-owned subsidiary. This stock transition was completed on January 14 at [NT$230] per share.
Upon approval and the completion of the merger between On-Bright and [indiscernible], Lite-On Semiconductors remain in 14.69% of On-Bright shares will be exchanged for NT$230 per share on the record day of the merge. As we stated in our announcement, gross actions were taken in order to help facilitate the review by the revenant Chinese authorities.
We remain confident; our acquisition of Lite-On Semiconductor will cross as planned. Once the final regulatory approval has been secured, which we anticipate will be in the second half of the year. With that, let me now turn the call over to Brett to discuss our fourth quarter and full year financial results, and our first quarter 2020 guidance in more detail.
Thanks Dr. Lu and good afternoon everyone. As part of my financial review today, I will focus my comments on the sequential change for each of the line items and would refer you to our press release for a more detailed review of or results, as well as the year-over-year and full-year comparisons. Revenue for the fourth quarter 2019 was $301.2 million, as compared to $323.7 million in the third quarter 2019.
For the full-year 2019, revenue was a record $1.25 billion, an increase of 2.9% from $1.21 billion in 2018 and well over the growth of our served markets. Gross profit for the fourth quarter was $109.4 million or 36.3% of revenue, compared to the third quarter 2019 of $122 million or 37.7% of revenue. For the full-year, gross profit increased 7% to $465.8 million or 37.3% of revenue as compared to $435.3 million or 35.9% of revenue in the prior year. Both gross profit and gross margin were records.
GAAP operating expenses for the fourth quarter 2019 were $48.1 million or 16% of revenue and on a non-GAAP basis we’re $65.2 million or 22% of revenue, which excluded a 24.4 million pretax gain on the sale of land, 4.5 million of amortization of acquisition related intangible asset expenses, 1.6 million loss on asset impairment, and a 1.2 million acquisition related cost.
GAAP operating expenses in the prior quarter were $73.3 million or 22.7% of revenue. Total other expense amounted to approximately $1.7 million for the quarter, including $2.4 million of foreign currency losses, 1.7 million of interest expense, partially offset by 2 million of other income and 409,000 of interest income. Income before taxes and non-controlling interest in the fourth quarter 2019 was 59.6 million, compared to $48.7 million in the previous quarter.
Turning to income taxes, our effective income tax rate for the fourth quarter was approximately 20.2%. GAAP net income for the fourth quarter 2019 was $47.2 million or $0.90 per diluted share, compared to GAAP net income of $38.1 million or $0.73 per diluted share in the third quarter 2019. The share count used to compute GAAP diluted EPS for the fourth quarter 2019 was 52.1 million shares.
GAAP net income for the full-year 2019 was a record $153.3 million or $2.96 per diluted share, compared to a $104 million or $2.04 per diluted share in 2018. Non-GAAP adjusted net income in the fourth quarter was $33.8 million or $0.65 per diluted share, which excluded net of tax $19.2 million gain on land sales, 3.7 million or non-cash acquisition-related intangible asset amortization cost and 1.3 million of asset impairment charges.
This compares to non-GAAP adjusted net income of $41.9 million or $0.81 per diluted share in third quarter 2019. Non-GAAP adjusted net income for the full-year 2019 increased 24.6% to a record $151.1 million or $2.91 per diluted share, compared to $121.3 million or $2.38 per diluted share in 2018.
EBITDA for the fourth quarter was $88.3 million or 29.3% of revenue compared to $78.3 million or 24.2% of revenue in the prior quarter. EBITDA for the full-year improved over 20% to a record $313.6 million or 25.1% of revenue, compared to $261.1 million or 21.5% of revenue last year.
We have included in our earnings release a reconciliation of GAAP net income to non-GAAP adjusted net income and GAAP net income to EBITDA, which provides additional details. Cash flow generated from operations was $52.1 million for the fourth quarter 2019, and $229.8 million for the full-year.
Free cash flow was $29.7 million for the fourth quarter, which included $22.4 million for capital expenditures and $131.3 million for the full-year, which included $98.5 million of capital expenditures, or 7.9% of revenue. Net cash flow in the fourth quarter was a positive $39.8 million, which includes the pay down of $22.6 million of long-term debt in the fourth quarter and a positive $17.7 million for the full-year, including pay down of approximately $117.3 million of long-term debt during the full-year 2019.
Turning to the balance sheet, at the end of fourth quarter, cash and cash equivalents plus short-term investments totaled approximately $263 million. Working capital was $524.5 million and long-term debt, including the current portion was $98 million. In terms of inventory, at the end of the fourth quarter, total inventory days increased to 112 in the quarter, compared to 104 last quarter as we prepared for the Chinese New Year.
Total inventory dollars amounted to approximately $236.5 million, which reflects a $3.2 million increase in finished goods and a $2.4 million increase across raw materials and work in process. Finished goods inventory days was 29 in the quarter compared to 27 in the third quarter 2019.
Capital expenditures on a cash basis for the fourth quarter 2019 were $22.4 million or 7.4% of revenue and $98.5 million or 7.9% of revenue for the full-year. We expect CapEx for the full-year 2020 to remain within our target model of 5% to 9% of revenue.
Now, turning to our outlook. For the first quarter 2020, we expect revenue to be approximately $290 million, plus or minus 3%. At the mid-point, this represents a reduction of approximately 3.7% sequentially, which is better than the typical seasonality. We expect GAAP gross margin to be 35.0% plus or minus 1%. These guidance ranges reflect the delayed start to manufacturing production following the extended Chinese New Year holiday due to the coronavirus outbreak in China.
All production, including wafer fabs and assembly test facilities in China, resumed on February 10, but we anticipate it to take longer to return to full production. At this time, it is difficult for us to fully determine the potential impact to the supply chain or the customer demand disruption resulting from the prevailing crisis.
As a reminder, Diodes does not have a manufacturing facility in the affected areas of Wuhan and Hubei province, as our primary facilities are located in Shanghai and Chengdu. Similar to many other companies, we will continue to closely monitor the situation.
Continuing with our first quarter guidance, non-GAAP operating expenses, which are GAAP operating expenses adjusted for amortization of acquisition related intangible assets are expected to be approximately 22.5% of revenue, plus or minus 1%. We expect net interest expense to be approximately $2 million.
Our income tax rate is expected to be 20%, plus or minus 3% and shares used to calculate diluted EPS for the first quarter are anticipated to be approximately 52.9 million. Please note that purchasing accounting adjustments of $3.7 million, after tax, for Pericom and previous acquisitions are not included in these non-GAAP estimates.
With that said, I now turn the call over to Emily Yang.
Thank you, Brett and good afternoon. As Dr. Lu and Brett mentioned, we had a record year in 2019 with revenue growth once again outperforming our served markets. Looking more closely at the fourth quarter, revenue reflecting there is no softness in inventory adjustments that are typical of our industry at the end of the year. POS was down slightly, mainly driven by the slow down during Christmas Holiday in North America and Europe. Distributor inventory in terms of weeks was flat in the fourth quarter, which is within our normal range of 11 to 14 weeks.
We expect distributor inventories to remain within our normal range of 11 to 14 weeks in the near term. Looking at the global sales for 2019, Asia represented 75% of revenue, Europe 15%, and North America 10%. In terms of our end market distributions for the whole year, the industrial market represented 28% of total revenue, consumer 23%, communication 23%, computing 16%, and automotive 10% of revenue.
Now, let me review the end markets in greater details. For the automotive market, we continue to see significant growth in this market as we capture both increasing market share and content gains, despite the overall challenges with the decrease unit output of outsource autos during the year. Revenue in this end market grew more than 14% in 2019 to 10% of the total revenue, representing a 29.4% CAGR since 2013.
Our abilities to secure an increasing number of design wins have been a key factor to our success. In particular, for application in connected driving, including ADAS telematics and infotainment as a result of the record increase of electronics in today's highly connected cars. In addition, robust USB protection is becoming increasingly more important and our productions products offer high reliability and high performance solutions in ESC protection that covers the entire spectrum for connected driving applications.
We are also seeing continued success with our proprietary SBR technology. These products are optimized by high surge capability to ensure greater protection against negative spikes inducted low surge, thereby you will need increasing revenue and reliability in often noisy automotive applications.
These product areas is suitable for wide range of applications in connected driving, power steering, battery management, lighting, body control and central infotainment display. Additionally, we continue to expand our content in comfort, safety, and lighting area. Our new Zener diodes product family is gaining momentum in automotive lighting applications, and we also have strong momentum for bipolar transistors in lighting, radar, and wireless charging.
Also in the automotive space, diodes leading PCI expressed Gen 1 package switch solution were broadly adopted in the next generation telematic designs and will start to ramp this year. During the quarter, we also continue to expand our leadership position by releasing additional Pericom products, including a PCI Express Gen 2 packet switch family that meets the AEC-Q 100 grade 2 for higher temperature requirements and low standby power consumption to satisfy the always on requirement.
In the industrial end market, revenue grew 14.7% for the full-year over 2018, representing a six-year CAGR of 14.6%. Brushless six years, CAGR are 14.6%. Brushless DC motor LED lightings are key industrial applications for Diodes [small size] product. We have addressed this application using our SGT MOSFET technology for low power loss, as well as normal density trench market technology for better safe operating areas.
We are also addressing new meter applications with our SASP and widening LDLs with the record adoption of high speed interfaces across multiple end applications in IOT industry. ESC protection is increasingly more important for this data links. Diodes data line platform features ultra low capacitance with industrial leading search handling and ESD protection characteristics.
For the industrial DC fan and lighting markets, our SBR and Schottky products offers cost performance in high-temperature operating environment that is ideal for this application. Schottky diodes offers low and stable leakage under the high thermal stress, while I rectify a package in the ultra thing CSP package are growing in priority for the space saving in DC fan applications. We're also seeing our latch and omnipolar hall sensors gaining momentum in the security cameras [indiscernible] applications.
Turning to consumer space, quick charges and direct charges have gained momentum in the response to the market need to reduce the charging time of batteries. The ultimate solution of USB power delivery is to propel the ultra power to a higher level. With Diodes advanced SGT Technology, 40 to 100 low MOSFET offers synchronized rectification and secondary synchronized rectification to support a wide voltage range of adapted technologies.
Additionally, wireless power charging also gained momentum because of the convenience of use to increase the wireless transmitter power 20 to 30 MOSFET in smaller package are required, which diodes offers. Also, in the consumer market, Diode's protection products, including TVS, DC-DC, LDL, SPR, and Schottky families are gaining tractions in channels.
In the communication market, mobile communications have profoundly changed people's life with a 5G emerging as the key solution to meet the significant speed upgrades and large bandwidth requirements. Diodes is seeing increasing demand in this area for our products that helps improve 5G amplifier performance both the power in the base station and also safe on power consumption. Diodes PCI Express Gen package switch family are designed into 5G mobile routers and 5G CPE home routers.
Diodes also released our next generation [indiscernible] switch for cell phone applications with higher resolution capability and superior performance under [indiscernible] further delivers the highest system performance for camera picture quality supporting 5G phones, which are expected to hit the mainstream market in 2020.
Lastly, in the computing market, our SASP products are a resurgence of revenue growth in local PC applications in GPP rectifiers and bridge rectifiers, as well as TVS products. As mobile and PC markets continue to adopt USB Type-C, this application is emerging as the next big growth engine for power protection.
We have current solutions to protect all teams on Type C connectors and are also developing custom solutions for customer specific usage on Type C applications. Additionally, Diodes comprehensive product portfolio for docking stations continues to provide customer solutions for interface and switching need. Our newly released PCI Express Gen 4 crossbar switches offers a best performance with high bandwidth and low centre lock, while also being designing for connecting the mobile to [indiscernible] at major OEMs.
In summary, our achievement of record annual results and growth that exceeds our served markets is further testament to our success of our total solution sales approach that has resulted in a market share gain and contract expansion at key customers. We are well positioned to continue driving further growth and margin expansion in the coming year and looking forward to reporting our ongoing success and milestone achievements towards our long-term financial goals.
With that, we’ll now open the floor to questions. Operator?
Thank you. [Operator Instructions] And our first question comes from the line of Gary Mobley from Wells Fargo Securities. Your line is now open.
Good afternoon everybody and thanks for taking my question. Like to start by asking about, wanted to start of asking about your Q1 on guide, it sounds as if your own inventory days were sufficiently high enough heading into the – as you started the first quarter, and so therefore, I'm assuming that the fewer work days among your employee days is not really having too much of an impact on your sales outlook for the first quarter, but really more so on the gross margin side. And correct me if I'm wrong there, but the question is, can we see some reversal of this impact in the second quarter as presumably your manufacturing utilization rates could be higher in the second quarter and thus some fairly sharp improvement in the overall gross margin?
Okay, Gary. Let me answer those questions. First, you are 100% correct. In the fourth quarter last year, because we know we're going to have a Chinese New Year slowdown as usual. So, view up additional finished goods inventory to prepare for Chinese New Year. And then due to the coronavirus our factory in Chinese – in China actually slowed down the opening for more than we expected, and we planned. You know, typically, we only planned 3 to 1 weeks shutdown and this time we actually get over two weeks of the Chinese New Year shutdown.
So, it’s fortunate we have finished goods view up and therefore if you look at our guidance of [290 billion], is already [reflect] the manufacturing slowdown and the inventory [rush] all goes to reflect it is $290 million. The reason we put up a wider range of the revenue changing from typically plus/minus 2% to plus/minus 3%. It was due to we really still can offer you or we still don’t know the surprise channel of our floating material.
Most of them coming from outside of China, but some of the supply chain material is coming locally and that we don’t know what will be happening. Okay, even we are [indiscernible], but we still cannot offer you all what will be the whole picture. And most uncertainty is our customer because our customer gets a span, the reaction of restriction such that they cannot open until February 10 and some of the factories actually – some of the old customer even extend that shutdown.
If you have the factory in Wuhan that still is not going to happen. And so, from all these one, we opened up our range for the revenue. Then you were talking about gross margin. The gross margin – because of extended shutdown, and therefore we guide for 35% and that’s since – from that point of view we think we already know or at least we can queue up how many people returned and what kind of ground rate have gone up from week-to-week, how many people will return to work from week-to-week.
Therefore, we guide – that’s a huge plus/minus 1%. So, basically this is the reason we keep that king of guidance, we already in participate the revenue and the [indiscernible] function. And I think in my speech, we already tell you we do not have a factory in Wuhan or Hubei province. And most key mid-section factory is in Shanghai, including wafer fabs and assembly and [indiscernible] those are the key manufacturing areas and specially our wafer fab is not that much or is surprised by China, but it is not – we still have a lot of wafers to fall from like [indiscernible].
We have entry from Japan, [indiscernible] and Taiwan next year and making a shipping industry in Korea. Okay, and then the entire mix shift in Taiwan and even [indiscernible] in Japan. So, we have allowed – we feel surprised. So, our effect is a very small portion of our wafer fab support. And it is more concentrate in China. Okay, now from the guidance point of view, we still are better than seasonality even we in a balance 3.7% still better than seasonality and is already putting the consideration of the factory slow down and only thing we don’t know would be supply chain and customer requirement.
Now, you were talking about – and then after the second quarter, if the demand started [indiscernible] it is really the demand. We should have enough capacity and we already know by end of 1Q our workers should be already back to normal. So today, our CAT today is only – main power is up to 85%.
Now, SAT in Shanghai, yes is only 4% to 5%, but they are at a control nor would be bad, who cannot be bad, who will be – need to be [cornered at home] so we compare with all our employees to understand where they are and how quick they come back to work. So, we think that by end of this month February, we should be up to 60%, 70%. Then by end of March, we should be up to 90%.
So, I think you are right. In the second quarter, we should be truly up to run in the manufacturing. Then the only question will be, if our customer can fully back or not. So, that is the one we don’t know.
Okay. Thank you for the expanded answer Dr. Lu. Brett, couple of quick questions for you. I noticed your first quarter non-GAAP OpEx guidance is flat sequentially and correct me if I am wrong, but don’t you normally see some sort of a merit increase in the second fiscal quarter and sort of quantify what that maybe and as well what your full-year 2020 OpEx growth may look like, if there is any growth at all?
Well, our regulatory demand, so that is [indiscernible] okay, we have two different time period for the conversation in Greece, okay. In the [indiscernible] then is China making function and [official] compensation increase. Then in July 1 will be a compensation in increase for the rest of the people. So, the [indiscernible] for the gross margin actually in the 1Q, you can see some, but it is not a major should we can simply improve – simply burdens. The TP burden more is because the extent is the Chinese New Year slow down and especially this year that is more than usual rollout. And that is what caused our TP and another reason cause for TP is the revenue – because of the revenue down then your TP will be down because of [building rate in our factory typically will be slowdown. So, utilization will not be full.
Okay. What about tax rate for the year? You know, stay on this 20% mark that you're starting the year with?
Yes. I think 20% is a good assumption.
Alright. Thank you, guys. I will hop in the queue.
Thank you. Our next question comes from the line of Shawn Harrison from Longbow. Your line is now open.
Hi, good afternoon everybody.
Hi, Shawn.
Hi. Is my math right that the extra week of shutdown is maybe costing you within the guidance of $2.5 million or $3 million of cost, is that the right way to think about it on a dollar basis that that type of drag wouldn’t repeat itself into the June quarter.
I really don’t know on that because it depend on the mix, it was really important to [indiscernible] mix, and we do have the inventory if we could ship it out. Okay. So, I don’t have the number [indiscernible]. Okay. And I do, I remember the number we try to ship it out from the warehouse we call HDC in Shanghai, Shanghai distribution center, which is our warehouse. Currently, we plan to ship out that inventory 900 million units. I don’t know what would be the ASP and what would be the TP increase due to that, but I know the number, but do not gain to how much dollar would be.
Okay. You are seeing anything abnormal in the pricing environment right now that I know is still pretty benign still?
I actually do not want to top the price, because if the demand is the issue not the – for us, okay. Supply is, we…
Let me answer the question. We haven’t really seen anything at normal price pressure or price change going through this time period at this moment. We did have 1.5% to 2% tax reduction buffer into our business model.
Our biggest model typically is - once [indiscernible] dropped 1.5% to 2%, we still see in that kind of model, but we can see a huge price pressures.
Okay. And then one final question. Let’s exclude maybe the virus unknown for a second, but you grew a fantastic double digits in the industrial and auto business last year, do you think you have the kind of the product wins or share gains or whatever that would allow those businesses to see that type of robust growth again in 2020?
Okay. My answer is definitely yes. Because whoever down, the whole unit will be down anyway. If the demand really slowed down not because it’s due to some key components or some level that factored our customer and not getting up and they were to – during the unit or due to the key component can now supply the whole unit will be down anyway. So, we are in the position because the product portfolio and because our solution sales and all this one I just don’t think our growth will be changed. So, we will continue to end the market share. I don’t see a reason why not.
Correct. So, we have really good pipeline right now. Really good results for all this commitment and demand creation from the past. So, we are pretty confident that we will continue to grow in automotive areas, especially for example the next generation telematics adapted like telecom side of the product. So, we’re really confident that the momentum will continue.
Thank you.
Thank you. [Operator Instructions] And our next question comes from the line of Tianyan Goellner from Sidoti. Your line is now open.
Hi, thank you for taking my questions. So, I just wanted to get some sense about the revenue in 2020, so because usually the revenue kind of in the first half and the second half are pretty evenly split. So, for this year, probably will see some second half loaded. Is that correct?
Well, for sure for this year will be because 1Q is going to be so much struggle or uncertainty due to the coronavirus, and I believe it will be slow down the impact in second quarter, but I still don’t have any information, are they going to be complete recover by end of second quarter, I don’t know. That will be the case or not, but if that happens than third quarter, fourth quarter will be start to boom in. So, I definitely think first half will be more than second half of 2020.
Okay. That's very helpful. Next one, maybe some color on the end markets, for example, communications and consumable computing. So, in 2020, I know industrial and automotive will still strong, but – so when we're looking into 2020, how should we think about those three remaining in the markets?
So, let me address this. This is Emily. I think for communication, you know, I did mention that we have got the 5G [indiscernible], especially on the mobile side going to start ramping and we believe that will be – that will boost up some of the area – this area. On top of that there is also the routers and switch related to the 5G. So, we think this is going to be a right spot for us, but the computing as well right. If you really think about and talk about the data array, we talk about the [C], so we believe the computing especially high-end and server and router and storage, we continue to drive some of the upside momentums and opportunity for us, right.
I think for consumer side, right, the IOT’s – even related to 5G that actually is going to drive some of new demand in this area. So, we are pretty confident. We continue to focus on the areas we have been talking about, right. 5G’s within communication, you know high-end server storage, we think that you know the computing area and IoT on the consumer side on top of the industrial automotive that we show significant performance in both of those areas already, right. So, that being – we will continue to focus and that is not going to change in 2020.
Okay. But in 2019, I think all those three end markets were down like single digits or low single digit. Should we expect the trend would be very similar in 2020?
When you say single digit, you mean the growth in single digits?
Yes. Correct.
Right. If you can see their overall market in Brett’s comment, the overall market with our participant area is 6.6% drop right. So, even with the single digit growth from diodes that still outperforms compared to all our other peers in the industry, right?
Right.
Well, if you looked at minus 6.6% plus 2.9% then actually it is almost 10%.
Right. And then you know, also for example in the computing area we are all aware of the Intel chipset short case and stuff like that, we believe in 2020 the situation will improve based on Intel’s announcement. So, that’s another area that you know is also driven by the market and also driven by the other vendors that are tracking the market as well.
Okay, that's very good. So, my last question, if I may, would be for Brett, on the CapEx. You just mentioned that in the prepared remarks, that 5% to 9% of revenue would be the good assumption. So, I'm wondering, considering in the third quarter and the fourth quarter that capital intensity was at like 7.9%. Should we assume at the higher end of 5% to 9% or just the midpoint?
Well, let me answer this because I would not allow, okay, the CapEx above our model because our model is 5% to 9%. So, I will not allow it, but on the one case, if we [indiscernible] then we will view a [indiscernible] another big [indiscernible] facility and the comment and all it. So, one we – out of the capacity of space for [indiscernible] we do need to build the buildings, then that will be – boost up our CapEx a little more, but fortunately they are depreciate in five years. They depreciate in 15 years. So, it’s not a big depreciation. Okay. So, always still try to keep it at 5% to 9% model.
Okay. Thank you. So, that’s all from me.
Thank you. At this time, I am showing no further questions. I would like turn the call back over to Dr. Lu for closing remarks.
Thank you for your participation on today’s call. Operator, you may now disconnect.
Ladies and gentlemen, this concludes today’s conference call. Thank you for participating, you may now disconnect.