Operator: name is Nicole and I will be your conference operator today. At this time I would like to welcome everyone to the Cogo Group, Inc. earnings conference call. All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer period. If you would like to pose a question during this time, please press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. This conference is being recorded today, Thursday, February 12, 2009. I would now like to turn the conference over to Waynee Ho, Investor Relations Director. Please go ahead.

Wanyee Ho: Thank you, Nicole. Thank you all for joining this conference call. My name is Wanyee Ho. I'm Cogo's Investor Relations Director and I'd like to thank you all for joining us today to participate in Cogo's Preliminary 2008 Fourth Quarter Earnings Conference Call.

After market close today, Cogo issued a press release reporting final unaudited financial results for the quarter ending December 31st, 2008. This release can be accessed in the Investor Relations section of Cogo's website at www.cogo.com.cn and on most other financial websites.

The discussion today will be hosted by Jeffrey Kang, Chairman and CEO, who will discuss the Company's business operations;Frank Zheng, our CFO, who will report the Company's financials; and Will Davis, our Senior Vice President of Business Development and Chief Marketing Officer.

Before we begin, I'd like to remind everyone that the call today may contain forward-looking statements regarding future events and the financial performance of the company. We wish to caution you that such statements are just predictions, and actual results may differ materially as a result of the risks and uncertainties inherent in the company's business. We refer you to documents that the company files periodically with the SEC, specifically the company's Form S-1, and the most recently filed Form 10-K, as well as the Safe Harbor statement made in today’s press release. These documents contain important risk factors that could cause actual results to differ materially from those contained in the company's current projections. Cogo assumes no obligation to revise the forward-looking information contained in today's call.

At this time, I would like to turn the call over Jeffrey. Jeffrey, the floor is yours.

Jeffrey Kang: Thank you, Wanyee, and thanks to everyone for joining our earnings call.

During the fourth quarter of 2008, Cogo posted revenue of $82.3 million in US dollars, up 16% year-over-year and 10% sequentially. Our non-GAAP EPS Diluted was 18 cents, with gross margin of 14.2% and operating margin of 7.7% We continue to target gross margins of 15% and operating margins of 10%. The results were slightly ahead of our projections, and Cogo continued to experience growth across all product categories.

Mobile handsets comprised 32% of total sales, a decrease of 7% year-over-year and an increase of 0.4 % quarter-over-quarter.

Digital media made up 30% of total sales, representing an increase of 36% year-over-year and was up 8% quarter-over-quarter.

Telecom infrastructure represented 29% of total sales showing an increase of 10% year–over-year and an increase of 6% quarter-over-quarter.

Service business represented almost 1% of total sales, a decrease of 74% year-over-year and an increase of 14% quarter-over-quarter.

The industrial application business segment represented 9% of total business. This segment grew 126% quarter-over-quarter.

In fourth quarter 2008, Cogo had 1,251 active customers, up 5% from 1,188 in the prior quarter and an Average Revenue Per User (ARPU) of around $66 thousand, up $3 thousand from third quarter, or about 5% growth. In fourth quarter our repeat customer ratio was over 90%.

Overall, we are very pleased with Cogo’s business results in the fourth quarter and are encouraged by the opportunities ahead of us. We grew revenue 16% from the prior year and we continue to make progress towards our margin targets.

Economic Situation and Chinese Stimulus
While we are not immune to the current global economic conditions, we are encouraged by the Chinese government’s monetary and [fiscal] policy to stimulate demand. We continue to believe that China economic growth will exceed most other developed markets.

Business Discussion
Additionally, we are [benefitting] from a number of tailwinds that we believe put us in a unique position to grow our revenue in 2009. These include China 3G, the growth of our export business and the opportunities in our industrial segment. I’d like to expand on several of these.

Handsets
On the handset front, the first quarter proceeded about as we expected, with business improving from a weak November. The build going into the Chinese New Year appears to have proceeded smoothly. Handset inventories appear to be fairly normal and we continue to benefit from exports by domestic handset vendors, including ZTE and Huawei. Additionally, we believe we gained some share versus some weakened competition. Going forward, we see several potential drivers, including the expected ramp up of CDMA handsets at China Telecom and ultimately higher content driven by new applications like CMMB, which is a version of mobile TV prevalent in the domestic Chinese market. Additionally, we expect to benefit from our relationships with VIA Telecom and BYD. Ultimately, we expect to see strength from TD-SCDMA handsets at China Mobile.

Telecom segmment
While we view the official announcement of Chinese 3G licenses to be a watershed event for Cogo and the China wireless market, we began benefitting from these builds several quarters ago through China Mobile and China Telecom. The announcement of the licenses also provided some final [clarity] for China Unicom to build a WCDMA network. Our relationships with Huawei, ZTE and Alcatel-Lucent should continue to benefit Cogo as they are all likely share gainers in the Chinese wireless market. Additionally, Cogo benefits from the continued rapid international telecom growth by Huawei and ZTE.

Industrials
While our Industrial business is still under 10% of our total sales, we continue to believe that this segment should be our fastest growing segment in 2009. Currently, Cogo is participating largely in the rapid growth of both the domestic railway system and the modernization of the Chinese electric grid. Longer term, we see potential in the automobile, cleantech, security and medical sectors. While some of the technology and end market customers in our industrial segment are different from our core segments, the business model is the same: Cogo is a gateway for component suppliers wanting to do business in China and we speed the time to market for our end market customers. Lastly, Cogo is making solid progress with its recently signed component relationships, including Maxim, Microsoft and Freescale.

M&A
On the M&A front, we didn’t close any deals in fourth quarter, although we are continuing to closely monitor a number of opportunities. Given our cash position and the sharply lowered multiples of potential targets, we view M&A as a critical part of Cogo’s growth long-term strategy and to diversify into new vertical segments. However, it is just as important to ensure that any acquisition would be the right fit for Cogo.

With that, I would like to turn the call to Will to discuss our guidance. Will, the floor is yours.

Will Davis: Thank you, Jeffrey.

Good afternoon everyone. Please keep in mind that our guidance does not include any potential M&A activity that could occur later in 2009. In the first quarter of 2009, we expect that our revenue will be in the range of $60-65 million US dollars with non-GAAP EPS of 12-13 cents. We expect gross margins to remain roughly stable in the first quarter from the fourth quarter, in the range of 14%. We expect to demonstrate good opex discipline given current market conditions while staying flexible to pursue new opportunities where appropriate.

We are not providing specific annual guidance for Cogo in 2009. While we continue to have good visibility over most of our end markets for the next 1-2 quarters, we note that the global economic situation makes full-year 2009 projections more difficult. However, given our current visibility and our current tailwinds that include China 3G rollouts, continued growth of our export businesses, and the rapid growth of our industrial segment, we continue to expect revenue growth in all four business units in 2009 vs 2008. We expect to continue to broaden our customer base and see opportunities to gain share vs some weakened competitors. Additionally, we expect to continue to add new existing component supplier relationships in 2009, while also enhancing our status with key suppliers like Broadcom, Freescale and Maxim.

Non-GAAP Operating expenses for R&D and SG&A in the first quarter should be approximately $4.5 million, split approximately 25% for R&D and 75% for SG&A. As indicated earlier, we maintain our longer term gross and operating margin targets of 15% and 10%, respectively. Interest income in the first quarter is estimated to be around $500,000. The effective tax rate for the first quarter is expected to be 8%, unchanged from our prior estimate. We expect this same effective tax rate to apply for the rest of 2009 also. In first quarter, stock compensation is estimated to be around $1.5 million -and acquisition related costs, including amortization and impairment of intangible assets will be approximately $1.5 million also. Other than those items noted, there are no significant differences between GAAP and our Non-GAAP results.

With that, I would like to turn the call over to Mr. Frank Zheng, our Chief Financial Officer, to review our unaudited fourth quarter balance sheet and cash flow.

Frank Zheng: Thank you Will. Good afternoon everyone. For clarity, all the figures I’m discussing here, unless otherwise noted, are in US dollars. Now, let me review the line items for the fourth quarter.

Since Jeffrey highlighted the main points of the P&L statement, I will focus on the balance sheet and cash flow and buybacks. Cogo continues to have a very healthy balance sheet, and while we don’t have a fully audited balance sheet at this time, we did generate operating cash flow in the quarter and are very comfortable with our cash position. During Q4, we have repurchased around 1.4 million shares at a weighted average of $4.72 per share, As of December 31, we have bought back a total of approximately 3.94 million shares with a weighted average of $6.02 per share. Under the existing stock repurchase program, the Company may buyback up to 5 million shares of its outstanding common stock on the open market or in the [negotiated] transactions, of which approximately 1.05 million shares still remain under the current program.

Jeffrey Kang:Thank you Frank. At this time let’s turn the call to the operator to open up the floor for questions. We will look to end this call around 5:30. Operator?

Operator: All right. Thank you. Ladies and gentlemen at this time we will begin our question and answer session. As a reminder, if you do have a question simply press the * followed by the 1 on your touchtone phone. If you decide you’d like to withdraw your question pressing the * followed by the 2 will remove your line from the cue. Also if you are using speaker equipment today please note you will need to lift up your handset prior to making your selection.

Our first question comes from the line of Brian White with Collins Stewart. Please go ahead.

Brian White: Hi, Jeffrey, Will, Frank. I've got a question regarding the subsidy program in China. I think it's had a pretty significant impact on the LCD TV markets, especially around the Chinese New Year, and I'm just curious the impact that you've seen on handsets and maybe any other pieces of your business.

Will Davis: Thanks, Brian. Yes, on the subsidy front, we view that is definitely a nice positive for us, particularly given the fact that a lot of the subsidies are focused on rural areas which we believe have a higher concentration of market share for the domestic handset vendors. So from that vantage point, we view it very favorably. And it's our understanding that there isn't a time limit on this subsidy change, so it looks to be indefinite at this point as a means of stimulating demand. So from that standpoint, we're pretty positive about it.

Brian White: And in terms of 2009, it sounds like you expect all your markets to grow in 2009. And I'm just curious if you could dig a little deeper into what market do you think will grow faster and what will grow a little slower.

Will Davis: Amongst our four markets -- handsets, telecom, digital media and industrial -- we're looking at the industrial segment growing significantly faster than the others. In the first quarter of 2008, that revenue was about $400,000 and it's obviously ramped pretty aggressively since then and we expect it to continue to ramp nicely into 2009. So that's going to be far and away our fastest grower. The other three segments are going to be much slower growth, although we do expect organic growth in handsets, telecom and digital media. So as a percentage of total sales, industrial should continue to ramp as a percentage as we go through 2009. And as we've indicated, that has positive gross margin benefits because typically, the industrial segment vertical has higher-than-average corporate gross margin.

Brian White: Okay. Just -- finally, as we look into the March quarter here -- obviously a seasonal time, especially for consumer and handsets -- if you could give us some type of color on what type of decline we can expect for those markets sequentially in the March quarter. Just some type of range.

Jeffrey Kang: In general, we didn't see anything particularly unusual in addition to the seasonally change. So we -- normally, Q1 is like a 20% down versus the fourth quarter, and if we -- usually in a -- for the whole year, the first quarter is roughly only 20% of the whole year's business and the fourth quarter will be around 30% of the whole year. So that's a typical seasonality in quarter-by-quarter in Chinese business.

Brian White: And Jeffrey, what do you typically see in handsets in the March quarter?

Jeffrey Kang: We are seeing -- and the business so far is good. Because it's the Chinese New Year, we're seeing -- the sales is good. But-- versus -- comparing to the fourth quarter last year, it certainly will go down because of the seasonality.

Brian White: Right. So what type of decline should we expect?

Jeffrey Kang: I'm not -- I cannot talk about some specific number, but in our mind, anything between like a 20%, 30% is a reasonable seasonally down.

Brian White: Okay. Great. Thank you.

Will Davis: Next Question please.

Operator: Thank you. Our next question comes from the line of Amir Rozwadowski with Barclays Capital. Please go ahead.

Amir Rozwadowski: Thank you very much for taking my question, gentlemen. Will, you had highlighted sort of the industrial segment growing significantly faster than the other segments. Can you give us a little bit of color in terms of what areas -- perhaps what areas that Jeffrey had highlighted earlier are really the drivers for that growth?

Will Davis: Sure. It's -- currently, we're participating in -- on the power supply side and the build of Chinese railways, a little bit of build in the electrical grid, participating in the security vertical. So there are a number of different things that we're working on, and it's still in its infancy. It's -- it was only 9% of sales in the quarter, so we feel like that we've got a pretty good runway there to continue to grow that. So at this point, it's -- we're looking at a lot of different opportunities. I think that longer term, you could see some potential in the automotive side. I think you could see some potential on the clean tech side, solar, medical. And I think right now, we're piggybacking on the efforts by the Chinese government to stimulate growth through its infrastructure build. They have --

Jeffrey Kang: Yes. Let me add on one thing. Will was just talking about a lot of our long-term growth in this industrial segment. In think in the near term in 2009, I think our focus is on two things: One is the railway-related business. The second is the electrical grid-related business. So that's the two areas directly benefiting from the Chinese government's stimulus plan and we expect a significant business ramp-up in the two areas.

Amir Rozwadowski: And Jeffrey, is that based on sort of current contracts that you have in place? How is the visibility in that business?

Jeffrey Kang: We -- all these are projections based on our design win and our customers' production and business plans this year. So that's why I think our business has a very good visibility. So anything we are talking about, say in the next one or two quarters, we have quite some visible contracts or business in line.

Amir Rozwadowski: Great.

Will Davis: And I would just add to that. If you look at our four business groups, typically the telecom and the industrial segments have longer visibility for us than handsets and digital media.

Amir Rozwadowski: Great. And then

Will Davis: Just generically speaking, so --. Keep that in mind.

Amir Rozwadowski: Great. Thank you, Will. And then in terms of sort of the domestic handset market, it seems like the commentary suggested that we've seen some pick-up around the Chinese New Year. It also seems like you folks aren't seeing too much of it -- you're seeing clean inventory in terms of the channel. In terms of the expectation for growth over 2009 for that business, is that predicated on some level of growth in the domestic Chinese handset market or how should we think about sort of the factors, or at least the market demand in general for '09?

Will Davis: I'll take that one. We had been planning for flattish growth for the handset market in '09 versus '08 in terms of units. Now if you think about what does that mean in terms of the total COGS for the market, if you assume an ASP decline for the overall market of -- pick a number -- 5% or 10%, you're looking at the total COGS of the market being down 5% to 10%. So definitely a pretty sharp slowdown from last year. I think within that framework, the ability for us to grow is predicating on exports continuing to grow -- particularly ZTE and Huawei -- growth of -- through CDMA on the China Telecom side. I think we have a pretty tempered outlook on TD-SCDMA. You can ask 20 people and you'll get 20 different estimates as to how many units there will be for TD this year, and we're not going to put out an estimate, but over time, I think that will benefit us. And things around the edges like a CMMB -- if you can get a few million units, that has a higher-than-average ASP for us for that module. So I'd say it's a number of different things, but certainly, we're cautious about the outlook for the Chinese market relative to the last couple years. There's no doubt.

Amir Rozwadowski: Okay. Thank you very much for taking my questions, gentlemen.

Will Davis: Thanks, Amir.

Jeffrey Kang: Thanks, Amir.

Operator: Thank you. Our next question comes from the line of Charles John with Piper Jaffray. Please go ahead.

Charles John: Hello Jeffrey and Will. Thanks for taking my questions.

Will Davis: Thank you.

Charles John: Congratulations on executing in a tough environment. I just had a few questions here. If I (Inaudible) the infrastructure business, in the past, you have talked about Cogo already participating in this industry's rebuild, but could you maybe add some color on -- are you getting any kind of material acceleration in orders as carriers deploying base stations pretty quickly? We're hearing some pretty aggressive statements from China Telecom and Unicom, and if you're not seeing any of the acceleration, when do you expect that to start in 2009?

Will Davis: Jeffrey, would you like to take that one?

Jeffrey Kang: Yes. Let me address these questions. We already -- basically the WCDMA, CDMA and base station equipments- technology-wise, there is nothing new. So we already have the design win in our key customers -- into our key customers, like a Huawei and ZTE. Just previously, all those business -- our customers' equipment -- mostly goes to the international market. This time, when the China Telecom is starting to roll out their CDMA network and China mobile -- in a China Unicom will be pushing the WCDMA network. So there was a significant increase in domestic demand and which will help us to increase our telecom business selling to Huawei and ZTE. So we -- as I told investors, since last year we were already seeing the contracts coming from our customers, and in the past quarter -- in the fourth quarter -- we certainly are seeing the more revenue from 3G-related business coming. And so we are in a -- in this year, we're going to continue to see the more business and in the wire sector and goes to the benefit from the Chinese 3G rollout.

Charles John: Okay. Thanks for that color, Jeffrey. So with this backdrop, do you -- are there any changed expectations for the engineering services, given the kind of deployments that we're seeing out there in the network? Are you all aggressively pursuing any engineering services related to these build-outs, or should we just keep it at the current run rate that we've seen in the last couple of quarters for the engineering services division?

Jeffrey Kang: We -- actually, we already -- engineering service -- as we had last year, or two years ago, will not be our core business. So that's why, in our last year's restructuring, we already cut most of our service engineering team, so that's why in the future, this won't be our focus anymore and we will keep our focus on the equipment and providing the design and other service to the manufacturing customers in China.

Charles John: Okay. Great. And just quickly, going back to the question on the industrial division, in terms of growth, you obviously have something in the pipeline and good contracts and the stimulus package seems to be working in your favor. Can you just comment on the linearity for 2009? Is this happening very quickly or should we put more of a back-half growth for this division?

Jeffrey Kang: I think -- because our base -- frankly speaking, because the base of the industrial business is relatively small comparing with our other business, so that's why -- what I can tell you is we already have a number of decent contracts in our pipeline for the next two quarters, and -- but just internally, we have a much bigger plan to expand this business in the next two years. So that's why we believe, in this business have a very good visibility, as Will mentioned, because this business is driven by the government infrastructure investment which usually have a better visibility than the consumer spending-driven business segment. So that's why we have been quite optimistic about our business ramping up in this sector since the first quarter of this year.

Charles John: And do you have any targets of percentage of total sales for 2009?

Jeffrey Kang: We are -- in last call, we are talking -- we've already been talking about like 15% of the total revenue will come from the new industrial segment in 2009. Today we still hold the same view about it.

Charles John: Okay. Perfect. Thanks a lot for that color.

Will Davis: Yes. I would just -- for modeling purposes, it should grow as a percentage of sales as we go through 2009. It's tough to give any more details on the linearity other than that, but that's what we're looking at -- that it should grow each quarter.

Charles John: Okay. Great. Thanks a lot, guys, and congrats again.

Will Davis: Thank you.

Operator: Thank you. Our next question comes from the line of Bill Choi with Jefferies. Please go ahead.

Bill Choi: Thanks. Hi, guys.

Will Davis: Hi, Bill. Thanks.

Jeffrey Kang: Hi, Bill.

Bill Choi: This, obviously, government infrastructure build is quite important. I'm curious if you could provide a little more bigger perspective on this. How many major contracts are going on? How long is kind of the build and when do you kind of get to the products you sell? What is the components and the ASPs attached to these, and something bigger picture about what all the contracts out there might look like.

Jeffrey Kang: In this -- and Bill, as you know, for Cogo's business model, we are not just like a one contract and a one deal-focused business model. We are generating in a repeating revenue from each of our accounts -- each of our customers. So from that angle, we are -- we believe, from the macro picture perspective -- so we, at least, believe we're going to benefit from this stimulus plan in next two years -- in 2009 and 2010, driven by the government spending in -- to the infrastructure in China of mostly the 3G and in the wireless-related. And specifically, to our business model. So we are winning design more and more new module solutions from our key customers like Huawei, ZTE and many others telecom vendors for like a [TNW] and like a Huawei-3Com. Many other telecom customers. So we are -- so that's why and we are -- because this business -- the design cycle in the telecom business is usually much longer than in the consumer business, so that's why for everything we design -- in the design cycle, it takes around 6 to 12 months, but fortunately, we already have a lot of design-in from all of our key customers. And then, when their business ramps up, ultimately we will benefit and get a repeating revenue stream from each of them. So that's our -- the nature of our business, and we are very optimistic about we're going to continue to grow this business and -- in the next few quarters.

Bill Choi: Right. But when you -- just in terms of thinking of this, when you talk about one specific project -- railline between Beijing --was it, I think, Shanghai? -- or something like that, you -- if you [size up] the entire contract, what would a big project like that -- just to you guys -- would that bring?

Jeffrey Kang: Well, it's hard to say because we are not directly selling to the rail -- a project. So we [sell to] Huawei --

Bill Choi: No, I understand that.

Jeffrey Kang: And Huawei sells to the railway station. That's the typical. So technically, Huawei is my customer rather than the Beijing Railway Station.

Bill Choi: Right. Okay. Alright. Just in terms of the roughly $7 million you guys reported --

Will Davis: Bill, I would just add -- if you're trying to quantify, I would keep in mind when you think about Cogo's participation with any of our end-market customers, we're -- we don't account for more than 1% of the COGS with any one of these customers, right? So certainly, it's a -- I don't know if that helps give you any color in terms of --

Bill Choi: No. I understand.

Will Davis: Yes. Okay.

Bill Choi: Of the $7 million, how would you break that up between railway and electrical grid?

Jeffrey Kang: I think most of our business -- and if you were talking about 2009, I think most of the business and -- well, 70% or 60% of the industrial business will come from the electric grid and another -- what goes to the railway and other segments.

Bill Choi: Okay. That's helpful. By the way, is there a way to size your export business today? And also, can you give a percentage that Huawei and ZTE represented for you in the quarter?

Jeffrey Kang: I don't have the specific number at this moment, but I think each of them should be below 10%.

Will Davis: And in terms of a percentage of total business that ultimately gets exported, it's --

Jeffrey Kang: Total -- I think that's still around like 30%.

Will Davis: 30. Yes. And probably moving to 35 over time.

Jeffrey Kang: Yes.

Bill Choi: Okay. That's good. In terms of balance sheet items, I'm wondering if you could provide a little more details about what the ending cash was, maybe some of the other balance sheet metrics like DSOs, inventory turns, and how you think about overall health of the manufacturing partners there as you head into an economic slowdown, and any defaults or bankruptcies that you're noticing? Thanks.

Jeffrey Kang: We actually -- because this is a -- fourth quarter is a little bit special because right now, we are in the final auditing process, so that's why we haven't provided the detailed balance sheet number. But certainly, as I mentioned, we are generating positive cash flow in the fourth quarter, so that's why our cash position certainly should be better than last quarter. So I certainly believe that over $120 million or about. And in terms of the inventory and receivable, I believe -- and all of them are actually in a very healthy range and there's no difference between our normal range in the third quarter of last year. So that's why -- usually our inventory for the quarter is within the 30 days and our receivable is usually around 90 days to 100 days. So I still believe in fourth quarter, our business is in that range.

Bill Choi: That's helpful. Thanks a lot.

Will Davis: Sure. Thanks, Bill.

Operator: Thank you. Our next question comes from the line of Quinn Bolton with Needham and Company. Please go ahead.

Quinn Bolton: Hi. I just wanted to follow up on the industrial business, and I apologize if I missed this, but could you talk about specifically what types of components you source into the electrical grid and into the railway or the rail stations?

Jeffrey Kang: Well, in the electrical grid -- it's just telecom equipment where mostly focus on the electrical controlling unit. So as you think about the component there -- still like an MCU, still like a power amplifier, still like the relay -- many other just key components there -- sensors. So we have a lot of partners -- products partners in the electrical grid segment. For example, Freescale -- their MCU, their power [PC] business have a significant portion. Maxim -- their ADDA analog chipset. And Matsushita -- Panasonic -- they have the relay and other passive components. We have many other this type of component partners with that to tap in this segment.

Quinn Bolton: Okay. And it's a similar question for the rail or the rail station?

Jeffrey Kang: It's quite the same. It's still MCU and imbedded software and analog stuff and controlling stuff, connectors, and all those kind of high-end stuff.

Quinn Bolton: Okay. Great. And then just sort of coming back to the handset market. You mentioned kind of both the CDMA opportunity as well as CMMB. Can you sort of again just sort of quantify -- how big do you think the CMMB market is this year? There seem to be a range of estimates in terms of the number of CMMB-enabled handsets that could ship. And then sort of similarly, on the China Telecom transition to CDMA, how is that progressing? Do you still think that 50 to 55 million units -- I think that you had put in a press release back last month -- is that still a good target?

Jeffrey Kang: Yes. I think that's still our target. So we didn't see too much of a downsided direction in terms of the overall CMMB in market rollout in China.

Quinn Bolton: Is that -- do you think just a few million handsets in 2009 and a bigger opportunity next year?

Jeffrey Kang: It's very hard to say what happens next year, but we are one of -- as Will just mentioned, in this environment, it's very hard to give like a longer projection, but we are quite positive on those mobile TV-related business. I believe in giving us a few quarters, we're going to say a mobile TV function is going to be one of the major features for the cell phone handset in China.

Quinn Bolton: Okay. And then lastly, just sort of uses of cash. I know you've been active on the share buyback program. It looks like you've got about a million shares left under that program before it gets maxed out. Can you sort of talk just about going forward in 2009? Do you think that M&A becomes a higher priority? It would seem to me that you probably can buy some pretty good companies at very reasonable valuations and view the balance sheet to really expand the operations rather than just buy shares back. But can you talk about the pros and cons of M&A versus renewed share buyback program?

Jeffrey Kang: Well, basically, our strategy is very simple and clear. We're going to both the M&A and buyback, because given our decent cash position today we are having -- and we'll also continue to expect and continue to profitable and generating cash in the next every quarter of this year. So that's why we're going to continue to do both the M&A and a buyback. So I think M&A is going to help us mostly expanding into the new verticals, finding the new business opportunities and help company grow faster. And buyback is also help our -- to achieve our shareholder value, becomes sometimes, our stock can be extremely cheap and we have to protect our shareholder value.

Quinn Bolton: Okay. And then just lastly, can you talk just about sort of how orders have trended monthly? I think you said that things had picked up post-November, but just wanted to sort of see the pattern that you saw, say, October through January.

Jeffrey Kang: October -- November is quite weak and December, January is quite good. We see a decent demand from end-markets. And after Chinese New Year, we still -- so far, we feel quite comfortable for the first quarter. In addition to the normal seasonality, I think there's nothing particularly weak at this moment.

Quinn Bolton: Do you think that December/January's strength was sort of -- obviously, that was build-up ahead of Lunar New Year, I would expect. Are you sort of -- can you talk about how the orders have trended post-Lunar New Year or what kind of forecasts you're seeing now that the holiday has passed?

Jeffrey Kang: We still believe -- because certainly, first quarter is seasonally down versus the fourth quarter last year, and so we already factored in that trend in our projection. But in addition to that, we didn't see anything particularly weak there. So we still believe so far, the Chinese domestic demand is okay and, more importantly, we are seeing most of -- many of our customers -- they are increasing their exporting cell phone business in last few months. So go against the global trend. So that's why -- it give us quite a positive signal to believe and that this cell phone business at least is not going to be [as bad] as all the people expected.

Quinn Bolton: Great. Thank you, Jeffrey.

Will Davis: Thanks, Quinn. Next question please.

Operator: Thank you. Our next question comes from the line of Mark Tobin with Roth Capital Partners. Please go ahead.

Mark Tobin: Hi, Jeffrey, Will. Can you give us an idea for the fourth quarter as well as -- I guess '09, you mentioned it's all organic growth, but for the fourth quarter, can you give us an idea of the contribution from the recent acquisitions?

Jeffrey Kang: Well, we actually -- we -- it's very hard for us to break down the acquisition revenue and organic revenue. As I mentioned many times before, so once we acquired a business, and we usually acquire their engineer capabilities, and then we are able to use our existing platform and sales customer base and all our network to sell those products. So we are -- basically it's very hard for us to break down how much revenue is because of acquisition, but certainly, the recent acquisition which is Long Rise and which is mostly CDMA-related business -- we did that deal in the summer and -- because we predicted the CDMA ramp-up in the second half and mostly this year in '09. So it proved that we made a right decision and today, we have seen our CDMA business increasing dramatically because of our -- we have the enough products offering to our existing customer. We have ready-to-sell mature solutions to help our customers shorten their design cycle to meet China Telecom's demand. So in this year, we're going to continue to see the benefit from that acquisition because of the CDMA ramp-up. Could it be one of the -- a growth driver for our handset business in 2009.

Mark Tobin: Okay. And looking ahead, when you think about M&A, would you stick with that same strategy so there'd be a little bit of a delay where the revenue is recognized that you incorporate the new employees into your infrastructure?

Jeffrey Kang: Yes. M&A, as I just mentioned, is still one of the critical part of Cogo in our long-term growth. We are -- yes, M&A can help us in this -- get at the market quicker. So that's why, and our existing acquisition strategy pretty much focusing on the new segment-- the industrial, security, auto -- from the new area, rather than the business we already have a decent customer base and a decent -- and a revenue size. So I think we're going to pursue our acquisition strategy, but definitely using more cautious way in this tough financial situation.

Mark Tobin: Okay. Thank you very much.

Jeffrey Kang: Thanks, Mark.

Will Davis: Thanks, Mark.

Operator: Thank you. Our next question comes from the line of James Faucette with Pacific Crest. Please go ahead.

James Faucette: Thanks. I have a couple of questions. First, on -- taking a look at the acquisitions, is it -- I'm hearing that it looks like you maybe were close, at least based on your previous commentary, and then have taken a bit of a step back, and I just want to know if that was because of overall market conditions or if you were re-evaluating what you wanted your targets to be and how we should think about any acquisitions that you may choose to pursue. And then my second question was there obviously have been some subsidy programs that have been ongoing by the government there in China that has helped some things like LCD TVs and, in some cases, handsets. Can you just give a little more detail on those, and more specifically, how long those subsidy programs are expected to last?

Jeffrey Kang: Why don't I answer your first questions and then let Will take your second one. So in terms of the acquisition, we are -- the reason why we postponed the -- a few deals -- there are really two. One is, of course, a valuation issue. So we believe in once the market becomes tough, so we should -- the valuation should favor us. And the second thing -- more important thing -- is when we look at a candidate, so if one year ago, this candidate can talk about it can grow 30% a year in the next five years. But in this tough environment, we're going to remeasure or re-evaluate the possibility. So if we have acquired this candidate, how much -- or what kind of growth rate they can get in this tough environment. So that's the combination that -- the postpone reason is the combination of the valuation issue as well as the business projection will have to be revisit -- their business visibility in the next few years. So that's why currently we use a cautious way to evaluate the acquisition opportunities. So we are -- but again, we wanted just to tell investor, acquisition still one of our -- a very important tool to expand our business to achieve our growth rates. Will, you can take the second one.

Will Davis: James, you had a question about the subsidies? Was that what it was?

James Faucette: Yes. Exactly. Just -- if -- how in force they still are, I guess, and what your expectation is, at least in terms of their duration.

Will Davis: It's our understanding that there isn't a time limit -- that it's indefinite. And I was reading, I think, that the subsidies -- it was 4 provinces maybe 9 months ago and then it grew to 8 and it -- and then 12, and I think now it's all of them currently. So from our vantage point, the fact that it's meant to stimulate demand in rural areas also where some of the domestic players have higher share is a good thing. Specifically and just in general, to stimulate demand -- we think it's a good thing. So we think it's indefinite. Tough to make a prediction, but that's kind of our viewpoint at this point and we think it's a good step.

James Faucette: Great. And then just on that -- related to that, I guess. You made a -- mentioned a couple times that you're seeing increasing demand, you think, for export of handsets from your Chinese customers. I guess with that, two questions. Firstly, are the domestic Chinese manufacturers or your customers specifically -- do you feel like they're taking share internally in China? And then secondly, what do you think is driving the -- or has driven the export growth for customers like Huawei and ZTE?

Will Davis: It seems to us that the domestic guys are pretty much maintaining share within China. I don't know that there's been any dramatic move either way with those guys. Certainly it fluctuates, but in general, I think that they're -- the share seems to be fairly stable. And in terms of the export business, it's a tough one to quantify. We raise it as a tailwind when we're talking in terms of showing -- okay, in a flat market in China, we can actually grow the business as one of the key drivers. We don't bring it up to say that the handset business is going to grow 30% in 2009, right? So we don't want to overplay that card, but it is -- it's certainly a tailwind for us, and longer term, we think that some of the domestic Chinese guys can continue to gain some incremental share, but we don't want to overplay that. So if you kind of see my point. It's a tailwind and should help us drive growth in '09 versus '08 within our handset business, but it's not a panacea.

James Faucette: That's great. I think that pretty well helps me size and measure its impact. Thank you very much.

Will Davis: Anytime. Thanks, James.

Operator: Thank you. (OPERATOR INSTRUCTIONS.) We do have a follow-up question from the line of Brian White with Collins Stewart. Please go ahead.

Brian White: Yes. Jeffrey, a few times you mentioned gaining market share. If you could maybe discuss a little bit what's going on in the competitive environment and why you think you're gaining market share.

Jerffrey Kang: Well, it's very simple. And for example, in the past, for any of our customer -- so you -- they can think about choosing partner, so they're --. As I mentioned, at Cogo, we have -- our competition is very fragmented, but we have -- we certainly have competition on every single project. Today, because of the financial crisis, the customer waiting to -- usually waiting to -- trying to find somebody stable financially (inaudible) partner to work with them. They don't want working with a partner with financial trouble, so if their project takes 6 months, but 3 months later that this guy disappeared. So that's why we're going to say more and more our customer is willing to [work] with Cogo to develop the new function, new solutions. And so that is going to significantly help us. On the other hand, we are seeing one or more in the US technology companies -- today there -- because China is still one of the fastest-growing region in the world. So that's why more and more, we're going to see more and more semiconductor partners willing to [work] with Cogo to [participate] into this broad market into China. So because of the -- we've got a financial crisis so we see more competition, but right now, because we're seeing -- we are probably -- we've become more and more perfect or ideal partners for either of our customers or our suppliers at this moment.

Brian White: Okay. And on the acquisition front, you talked about new verticals. Now industrial auto, you're already doing something, so what kind of new verticals that you're not in right now are you looking at?

Jeffrey Kang: As Will just mentioned, we have -- we are right now looking at the medicare -- medical business, which is certainly -- we believe will become another driver in long run. We are looking at like automobile, clean tech. So all those segments. But we're, just in this year, we believe, most of our industrial revenue will come in from like a power supply, electrical grid and railway-related business.

Brian White: Okay.

Will Davis: So Brian, I would say, just to clarify, when we talk about other verticals, we mean within the industrial segment, either -- so all of those being within the industrial segment, not that there's a new segment outside of industrial. So everything's going to be in that one segment.

Brian White: Okay. So medical would go into the industrial segment (inaudible).

Will Davis: Right.

Brian White: And I'd just be curious what -- you had an organic auto business. What type of developments are occurring there and what type of programs are you ramping in auto?

Jeffrey Kang: We are -- we already have the business like in auto -- entertainment systems, like GPS, like audio, like this type of system. We were already generating revenue in this segment. And moving forward, particularly in auto, we're working with Freescale so we want to move into much deeper into the auto controlling business. For example, as you know, BYD is developing an electrical car and [with Warren Buffet] investment in that company. So within that business -- in electrical controlling business - so we have - they're well using our solution in their electrical car segment.

Brian White: Okay. They're using it right now or they may use it later this year?

Jeffrey Kang: They may use later this year.

Brian White: Later this year. Okay. Thank you.

Will Davis: Thanks, Brian.

Operator: Thank you. And there are no further questions at this time. I'd like to turn the call back over to management for any closing remarks.

Thanks. I believe Cogo -- our unique business position within the Chinese market, our breadth of our relationship across a wide range of end-markets and a large net-cash position all support sustainable revenue growth in 2009. Even in this expects to continued economic downturn, we plan to continue to gain market share against the weakened competition by expanding business with both new and existing suppliers and increased exposure to the new end-markets. We are also making positive stride towards reaching our profitability target.

I want to take this opportunity to thank all Cogo's believers, employees, customer, partners and Long-term shareholders. You have provided Cogo with this opportunity to deliver robust and sustainable growth in the past, and we appreciate your support as we move into 2009. Management team is committed to driving sustainable high growth and providing significant returns to our shareholders. Thank you again for joining this call. I look forward to talking with you soon. Thank you.

Operator: Thank you, ladies and gentlemen. This conference is available for replay. You may access the replay system by dialing 303-590-3030 and entering in the access code of 3964131. You may also call 1-800-406-7325. Again the access number is 3964131. Again, those telephone numbers are 303-590-3030 and 1-800-406-7325 and the access code is 3964131. Thank you so much for your participation today. You may now disconnect.

About Cogo Group, Inc.:
Cogo Group, Inc. (NASDAQ: COGO) is a leading provider of customized module and subsystem design solutions in China. The Company believes it acts as a proxy to China's technology industry as it works with virtually all the major ODMs and OEMs in China. Cogo leverages these relationships and combines their IP to create designs that Cogo then sells to electronic manufacturers. These designs allow manufacturers to reduce their time to market for new products and ultimately increase sales. Cogo Group focuses on the mobile handset, telecommunications equipment and digital media end-markets for its customized design modules while also offering business and engineering services to their large telecommunications equipment vendor customers. Over the last twelve years, Cogo has grown its customer list to include more than 1,200 manufacturers across the mobile handset, telecommunications equipment, industrial and consumer markets, covering both multinational Chinese subsidiaries and Chinese domestic companies.