T R O P E R L A U N N A 9 9 9 1 D E T A R O P R O C N I S E D O I D moving into competitive prices on-time delivery top quality products dependable customer support 80$ 70 60 50 40 30 20 10 0 $1.20 1.00 .80 .60 .40 .20 0 95 96 97 98 99 N E T S A L E S (in millions) 95 96 97 98 99 E A R N I N G S P E R S H A R E (diluted) $35 30 25 20 15 10 0 95 96 97 98 99 S T O C K H O L D E R S (cid:213) E Q U I T Y (in millions) FINANCIAL HIGHLIGHTS (in thousands except per share data) 1998 1999 change Net sales Gross profit $ 61,328 $ 79,251 15,402 20,948 Selling, general and administrative expenses Income from operations Interest expense, net Other income Income before taxes and minority interest Provision for income taxes 11,016 4,386 281 93 4,198 1,511 13,670 7,278 292 182 7,168 1,380 Minority interest in joint venture earnings Net income Earnings per share: Basic Diluted (14) 2,673 (219) 5,569 $ $ 0.53 0.50 $ $ 1.10 1.02 Number of shares used in computation: Basic Diluted 5,029 5,3 7 1 5,084 5,469 +29% +36% +24% +66% +4% +96% +71% -9% +108% +108% +104% +1% +2% 1998 1999 change Total assets $ 45,389 $62,407 Working capital Long-term debt Stockholders(cid:213) equity 16,639 8,102 27,460 15,903 6,984 34,973 +37% -4% -14% +27% AA CChhaannggiinngg WWoorrlldd to our shareholders Raymond Soong Chairman of the Board With our steadfast commitment to business growth through manufacturing capabilities and customer service, 1999 was a year of record performance for Diodes Incorporated. We are pleased to report strong increases in both revenues and net income for 1999. The steps taken in 1998, aimed at providing a solid basis for future growth, paid off handsomely. Revenues for 1999 grew to a record $79.3 million, compared to $61.3 million for 1998, an increase of 29%. Net income for 1999 increased 108% to a record $5.6 million, or $1.02 per share, compared to $2.7 million, or $0.50 per share, last year. The record operating results are largely due to a combination of increased demand for the Company(cid:213)s products, improved product mix, and better inventory management. In addition, Diodes-China, our manufacturing facility in Shanghai, was a major contributor to our performance as manufacturing profits from this facility, combined with stronger average selling prices toward the latter part of the year, contributed to higher gross margins. Finally, demand was strong across all product lines, especially in the Far East, which accounted for approximately 45% of total sales. As important as our record financial performance in 1999 were the considerable invest- ments made in personnel and capital equipment to help set the strategic course for Diodes Incorporated into the new millennium, and to provide our customers: ¥ CONSISTENTLY COMPETITIVE PRICES (cid:209) our Diodes-China facility with its state-of-the- art manufacturing equipment, access to a large labor pool and low cost structures, is becoming a stronger world-class manufacturer of discrete semiconductor devices. ¥ TOP QUALITY PRODUCTS THAT PERFORM TO SPECIFICATION (cid:209) our Diodes-China (QS-9000 and ISO-9002 certified) and Diodes-Taiwan (ISO-9002 certified) manufacturing facilities are diligently monitored to assure product quality. ¥ RELIABLE PRODUCT AVAILABILITY (cid:209) Information Technology (IT) enhancements to our warehouse and distribution networks facilitate further efficiencies in inventory control to assure immediate product availability and timely delivery of customer orders. ¥ DEPENDABLE CUSTOMER SUPPORT (cid:209) dedicated to matching our products to customer require- ments, our sales, marketing and engineering teams provide a level of customer service that is key to our continued success. As we move into the year 2000 and beyond, we hold every confidence that our strate- gic investments will set a strong foundation for the Company(cid:213)s success. Our strategic objec- tives for Diodes Incorporated include: ¥ Continuing to invest in our manufacturing capabilities as guided by inputs from our sales, marketing and engineering teams, with a focus on serving the technical requirements of our customers. ¥ Implementing a company-wide Enterprise Resource Planning (ERP) system to drive new business value by energizing our organization and operations, and a compatible Manufacturing Execution System (MES) to streamline our manufacturing logistics methodology. ¥ Implementing a system of order placement and prompt fulfillment using the Internet, and harnessing new technologies that allow Diodes Incorporated to conduct business efficiently and effectively in our global environment. ¥ Increasing our engineering staff and the resulting stream of new products and packages. ¥ Strengthening our strategic partnerships with wafer fabrication facilities to support future requirements. ¥ Developing new markets in China and Europe. page no. 0002 D I O D E S I N C O R P O R A T E D 1 9 9 9 annual report As we begin the year 2000, the Company(cid:213)s book-to-bill ratio remains solid, and with our backlog at some of its highest levels ever, we are optimistic that we will achieve further top-and bottom-line growth. With our recently announced investments at Diodes- China (bringing our total investment in plant and equipment to close to $40 million) combined with strong demand for our products, the year 2000 could be another banner year for Diodes Incorporated. MOVING FORWARD . . . We are encouraged by the agreement that the Lite-On Group has made to repurchase from Vishay Intertechnology, Inc. ((cid:210)Vishay(cid:211)) the latter’s interest in Lite-On Power Semiconductor Corporation ((cid:210)LPSC(cid:211)), a major shareholder in Diodes Incorporated since 1991. Our optimism is based on our longstanding alliance with both the Lite-On Group and LPSC, and while we believe that our affiliation with Vishay has been mutually beneficial, Diodes Incorporated has and will continue to operate independently. We remain confident that with our competitive pricing, internal manufacturing capabilities and capacity, customer/applications engineering, and strong customer service reputation, Diodes Incorporated has proven itself to be a valuable discrete component manufacturer and supplier and we will continue to build on our strengths and customer relationships. We are further encouraged with the appointment of C.H. Chen as President and Chief Executive Officer of Diodes Incorporated. This appointment was announced following the resignation of Michael Rosenberg in March 2000. While we extend our appreciation to Mr. Rosenberg for his achievements that moved the Company forward over the last few years, we are delighted that an individual of Mr. Chen(cid:213)s caliber and experience of more than thirty years in the semiconductor industry, including twenty years with Texas Instruments, has accepted this leadership position. Mr. Chen is exceptionally well qualified to oversee the continuing advancement of the Company(cid:213)s technology and the enhancement of its customer base. IT(cid:213)S A CHANGING WORLD . . . Characterized by high-powered hand-held products such as wireless and cellular phones, Palm Pilots, and laptop computers resulting from small powerful discrete semiconductor devices, the millennium represents a new time of impres- sive opportunities for Diodes Incorporated. Focused on customer service, manufacturing capabilities, and new products, we are optimistically moving forward with prospects for significant growth. AND, WE(cid:213)RE READY . . . Our record financial performance along with our strategic investments and new corporate leadership set the stage for Diodes Incorporated into the new millennium. We have high expectations for the future as we embark on a new and exciting phase for our Company, our customers, and our shareholders. Today, we are in a better position than ever to assure our customers timely delivery of top-quality products at competitive prices. We are equally fortunate in now having what are unquestionably the finest sales, marketing, and engineering teams in the Company’s history. With more than forty years of experience in providing quality discrete semiconductors to telecommunications, computer, automotive, consumer and industrial electronics industries, we look forward to supporting our customers in advancing their technologies. As ever, we thank you, our shareholders, for your continued commitment to the Company(cid:213)s success. We also thank our customers, for their continued patronage, and our distributors, employees, and suppliers for their dedicated hard work. Sincerely, Raymond Soong ¥ Chairman of the Board page no. 0003 D I O D E S I N C O R P O R A T E D 1 9 9 9 annual report page no. 0004 D I O D E S I N C O R P O R A T E D 1 9 9 9 annual report Going global on the Internet Serving customers 24 hours a day... TTeelleeccoommmmuunniiccaattiioonnss S O T 363 Telecommunications technologies are significantly transforming our lives. Now we are interacting across time zones, continents, and cultures in real time. Vast and powerful, the Internet is catapulting us into a new economy, with instantaneous information exchange dramatically reducing time to market. The dynamic electronic network offers endless oppor- tunities for sales, market research, and personalized customer services. As companies harness telecommunications technologies and strengthen their networks and infrastructures to compete, we see remarkable growth opportunities for Diodes Incorporated(cid:213)s efficient, low-voltage discrete semiconductors (cid:209) a necessary component in these advancing technologies. FIBER OPTIC COMMUNICATION SYSTEMS ATM PROTECTION HIGH-SPEED ONLINE SERVICES PAGERS INTERACTIVE TV CELLULAR PHONES > As people around the world increasingly communicate over the Internet, using new robust high- speed online services, from interactive TV to broadband access, such products as cellular phones, pagers, and fiber optic communication systems are proliferating at accelerated speeds. page no. 0005 D I O D E S I N C O R P O R A T E D 1 9 9 9 annual report DATA SWITCHES WIRELESS COMMUNICATIONS PRODUCTS NETWORKS CB RADIOS CALL CENTERS SATELLITES > To compete in the digital economy, businesses are investing in telecommunications technologies, such as data switches, servers, networks, satellites, and a plethora of wireless communications products. For Diodes Incorporated, this means added sales opportunities for efficient low- voltage devices. page no. 0006 D I O D E S I N C O R P O R A T E D 1 9 9 9 annual report page no. 0007 D I O D E S I N C O R P O R A T E D 1 9 9 9 annual report Moving into a world With one bottom line(cid:209)better, faster, cheaper... CCoommppuuttiinngg D 2 pak Running at the speed of light, active people and businesses are on the move. Internet-enabled computer devices that fit in your palm or pocket allow you to excel in this fast-paced environment. You exchange information and ideas while making decisions on the go, receiving e-mail, electronic files, and facsimiles on laptop computers, and messages on mobile wireless phones and pagers. This proliferation of computing technology is an exciting growth opportunity for Diodes Incorporated. We design, engineer, manufacture, and deliver high-density discrete components for emerging space- constrained applications. ELECTRONIC NOTEBOOKS MODEMS MOTHERBOARDS CD-ROM DRIVES HIGH-DENSITY COMPONENTS RAM o m c . s e d o i d p : // w w w . t t h > When it comes to discrete components for computers, smaller and faster is the key. With the trend to portable and handheld products, the need for higher-density components in small packages is growing. Electronic notebooks, laptops, pagers, modems, CD-ROM drives, RAM, motherboards and more depend on high-density components. page no. 0008 D I O D E S I N C O R P O R A T E D 1 9 9 9 annual report TRANSACTIONS MUSIC PURCHASES MESSAGES INFORMATION EXCHANGE INVENTORY > Internet users may go online to check stock quotes and perform transactions. Some may research product specifications, prices, inventory, and shipping schedules as well as exchange information before making purchases. Others may go online to listen to music. As the Internet enters every home and business environment, the need for efficient semiconductors continues to expand. page no. 0009 D I O D E S I N C O R P O R A T E D 1 9 9 9 annual report page no. 0010 D I O D E S I N C O R P O R A T E D 1 9 9 9 annual report Driving on the fast-track to success in classy comfort and sensational style... AAuuttoommoottiivvee S O T 23 Racing down the road of product innovation, automo- biles are using more electronics than ever before. Providing drivers the supreme pleasure of effortless excursion, remote keyless entries, automatic seat and mirror settings, and climate controls are just the beginning. Cruising in ever-increasing comfort and style, drivers chart their destinations with GPS devices, relax with cruise control, and listen to music on high-performance audio systems. Emergent automotive electronics require highly reliable discrete devices. At Diodes Incorporated(cid:213)s QS-9000 and ISO-9000 certified facilities, reliability testing is a top priority. There(cid:213)s no faster way to drive to the competitive edge. We deliver quality. We focus on customer satisfaction. WINDSHIELD WIPERS RPM CONTROLS COMFORT AIR BAGS CRUISE CONTROLS SUSPENSION SYSTEM > From suspension systems to airbags to windshield wipers to cruise and rpm controls, the electronics built into cars for convenience, comfort, safety and style are limitless. At Diodes Incorporated, we design and manufacture high-reliability components for the new wave of automotive electronics. page no. 0011 D I O D E S I N C O R P O R A T E D 1 9 9 9 annual report INSTRUMENTATION PANELS AUTOMATIC HEADLIGHTS SOUND SYSTEMS NAVIGATION SYSTEMS > The new generation of automotive electronics is boosting the market demand for efficient high-reliability discrete components. Automobiles, with their sophisticated instrumentation panels, powerful sound systems, automatic headlights, navigation systems, and more are becoming so rich with electronics that they practically drive themselves. page no. 0012 D I O D E S I N C O R P O R A T E D 1 9 9 9 annual report page no. 0013 D I O D E S I N C O R P O R A T E D 1 9 9 9 annual report Changing our daily lives with smart consumer and industrial appliances... EElleeccttrroonniiccss S O D 123 We(cid:213)re moving into a world of timesaving and convenience products. Before long, microprocessor-embedded home and industrial appliances linked through the Internet will handle our routine tasks. As our cars pull into the drive- way, the lights, WebTV, coffeemaker, and microwave oven will automatically turn on. To ensure that our appliances are always up and running, monitoring devices will automatically perform maintenance checks, search for low-cost services, and schedule repairs. In this world of Internet-enabled consumer and industrial electronics, we see growth opportunities for Diodes Incorporated. With our engineering and manufacturing expertise and organizational flexibility, we are confident in our ability to meet our customers(cid:213) changing needs. STEREOS TV CHANNEL CHANGING DVD SYSTEMS REMOTE CONTROL UNITS VCR SYSTEMS > Manufacturers of garage door openers, power tools, stereos, VCR and DVD systems, blenders, washers and dryers, remote control units for everything from TV channel changing to opening window blinds and powering up ceiling fans, turn to Diodes Incorporated for quick delivery on cost-effective quality discrete components. page no. 0014 D I O D E S I N C O R P O R A T E D 1 9 9 9 annual report POWERTOOLS REMOTE CONTROL UNITS WASHERS BLENDERS WINDOW BLINDS > Whether for fire alarm and security systems, ballast lighting systems, home HVAC control systems, or a myriad of other consumer and industrial applications, the efficiency and quality of our products and services allow our customers to deliver their products in short cycle times. page no. 0016 D I O D E S I N C O R P O R A T E D 1 9 9 9 annual report SSttaattee--ooff--tthhee--AArrtt MMaannuuffaaccttuurriinngg In the midst of exciting and industrious Shanghai sits our world class Diodes-China manufacturing facility. This QS-9000 and ISO-9002 certified facility produces high-quality surface mount discrete components for the new generation of smaller, more powerful products. Equipped with cutting-edge technology as a result of our nearly $40 million investment since 1995, we reached new levels of productivity in 1999 and look forward to even greater achievements in the year 2000. Diodes-China and Diodes-Taiwan, our two manufacturing facilities, together accounted for about 44% of Diodes Incorporated(cid:213)s sales in 1999. As the call for high-circuit density components continues, the contribution from our manufacturing facilities is expected to climb. With a commitment to quality products and customer service excellence, Diodes Incorporated manufactures and supplies cost-effective discrete semiconductor components that allow our customers to advance their technologies as together we move into the Changing World.