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## Chief Executive’s review 

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## Dear Shareholders, 

Dialog continued to perform very strongly in 2012 with top-line growth of 47% year-on-year, against a backdrop of broadly flat global semiconductor industry revenue according to industry analysts. This is our fifth successive year of profitable and rapid growth. 

At the same time, in 2012, the Company has improved its gross operating margin quarter on quarter as a percentage of revenue to 37.8% over the last four quarters by focusing on product yield improvements, supply chain negotiations and material cost reductions. Continued margin improvement remains a key focus. 

Dialog’s financial performance in 2012 was driven by success in the smartphone and tablet sectors. Beyond the boom in smartphones, tablets, e-books and media players, we expect to see the emergence of other portable devices, such as next generation convertible Ultrabooks™ that can be used as a tablet or laptop. Ultrabooks™ are closer in architecture to smartphones and tablets than PCs, in terms of their battery and energy requirements, creating opportunities for Dialog’s power management technologies. 

We’re also expanding into new sectors. Using our DECT technology, Dialog is able to support reliable, interference-free wireless signals to cordless phones and headsets, microphones and gaming controllers in real time with no buffering, achieving ceiling to cellar reach. Additionally our Ultra Low Energy (ULE) DECT ICs are increasingly used in home automation applications that can also be controlled over the cloud from your smartphone or tablet. This expertise in short-range wireless connectivity is enabling us to develop new ICs for transmitting data between personal devices, smartphones and tablets, and we already have some exciting new products in development. 

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As such, innovation continues to be the lifeblood of our Company. Our power management IC, featuring a new multiphase buck converter for powering quad-core application processors, was sampled to key customers in 2012. It meets the more complex power management needs of next generation smartphones, tablets and Ultrabooks™. 

In due course, we believe there will be additional technical capabilities that Dialog must develop or acquire to ensure it maintains its strengths in the mixed signal semiconductor market for portable devices. This was one of the main reasons for our successful US$201 million convertible bond issue in March 2012. 

Dialog is also keeping pace with technology and in 2013, together with our foundry partners, will start its transition to a smaller geometry, 130 nanometer manufacturing process that will yield more chips per wafer. As a fabless semiconductor company, we’ve forged close partnerships with a number of foundries to enable us to integrate more analog, digital and high voltage components, including Field Effect Transistors (FETs) into a smaller form factor, single chip power management solutions. This will help to increase the talk time of portable devices while meeting the consumers’ desire of faster charging. 

Dialog continues to seek the brightest and the best and has significantly increased its employee base to a total of 806 in Asia, the US and Europe; during the last quarter of 2012 we opened two new design centres in Turkey and Italy to attract further talent. 

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