China TechFaith Wireless Communication Technology Limited (CNTF)

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Wall Street Breakfast

China TechFaith Wireless Communication Technology Ltd. (CNTF)
Q2 2007 Earnings Call
August 13, 2007 7:00 pm ET


David Pasquale - EVP, The Ruth Group
Defu Dong - Chairman & CEO
Gilbert Lee - President & COO
Christopher P. Holbert - CFO
Bob Huo - Deputy CEO


Brian White - Jefferies & Co.
Adele Mao - Susquehanna International Group
Jason Tsai - Montgomery & Company



Ladies and gentlemen, thank you for standing by. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions)

A replay will be available approximately one hour after the call today through midnight Eastern Daylight Time on August 20, 2007. The replay dial-in number is 888-286-8010 and 1-617-801-6888, with passcode 26444655. The replay will also be accessible at

I would now like to turn the conference over to David Pasquale. Please go ahead.

David Pasquale

Thank you operator, and thank you everyone for joining China TechFaith second quarter 2007 earnings call. The company’s attorneys advise that this call will contain forward-looking statements. These statements are made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the business outlook and the quotations from management in this call, as well as TechFaith's strategic and operational plans, contain forward-looking statements.

TechFaith may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on Forms 20-F and 6-K, etcetera, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties.

Statements that are not historical facts, including statements about TechFaith's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements.

Potential risks and uncertainties include, but are not limited to, TechFaith's limited operating history, mobile handset brand owners' discontinuation or reduction of the use of independent design houses, TechFaith's ability to retain existing or attract additional international customers, TechFaith's earnings or margin declines, failure of competing against new and existing competitors, and other risks outlined in TechFaith's filings with the U.S. Securities and Exchange Commission, in its annual report on Form 20-F.

TechFaith does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided on today’s conference call is as of today’s date. China TechFaith again does not have any obligation to update any forward-looking statement, except as required under applicable law.

With us today for the call are Mr. Dong, Chairman and CEO; Mr. Bob Huo the Company’s Deputy CEO; and Dr. Gilbert Lee, President and COO, along with CFO, Christopher Holbert.

Please note that Chief Executive Officer, Mr. Defu Dong is on business travel, so the quality of the phone may fluctuate back and forth, if so, we’ll be able to take any follow-up questions afterwards if he gets cut-off.

Finally, if you’ve not received a copy of today’s results release, please call The Ruth Group at 646-536-7003 or you can get a copy of the release off of TechFaith's website.

I would like to now turn the call over to Mr. Bob Huo. Please go ahead, sir.

Bob Huo

Thank you David. I have met many of our investors over the years. For those I have not talked with, I have been with TechFaith from the start. I was a former President of TechFaith and then resumed CEO of TechFaith’s handset design unit in early 2006. I'm more and more involved in the ODM business with the development of the company. I understand the dynamic of the marketplace and understand TechFaith’s strength and challenges.

In my role as Deputy CEO, I will be able to take on much of the operating issues that have consumed Mr. Dong and Gilbert's time. I am excited about our prospect and long-term plan.

With that introduction, I will turn the call over to Gilbert. I will provide product updates after Gilbert’s comment. Gilbert, please go ahead.

Gilbert Lee

Thank you, Bob. Good morning and good evening all the investors. We are encouraged by our progress in the second quarter. We think the transition period is behind us and we expect to see significant gains in the coming quarters. We have a full solution now to our customers through our differentiated ODM model. Our design strength continues to set us apart from our competitors, and we are delivering on more contract than anytime in our history.

Revenue growth in Q2, net total of $32 million compared with $21.8 million in the same period of last year. The business mix has changed significantly, and we expect that it will continue to change. When TechFaith was started five years ago, it was all about handset design and thus the market has evolved, customers now want more of a full service.

Our choice was single, either to ignore the market reality and continue to pursue just design business or change our business model. We decided a year ago to change our business model and continue to pursue revenue growth and profitability. This has not been easy, since we had been in constant change. We understand for our investors, it has also been frustrating. We certainly understand your frustration.

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