2Q09 guidance implies 50% QoQ volume growth: We had written about strong QoQ growth momentum but we had vastly over-estimated the volume rebound. It appears that 8-inch fabs will continue to operate at much lower utilization than we expected but 12-inch fabs are fully loaded as we expected. With 2Q09 utilization at around 65%, CHRT should continue to report a large operating loss in 2Q09. CHRT commented that much of its 65nm volume recovery is coming from new product ramp rather than inventory restocking.

Operating breakeven can improve to high sixties but when? CHRT commented that because of reduced depreciation and cost cutting effort,it can bring down its operating breakeven to below 70%. Only question for us is when CHRT can get to 70% utilization. With very strong volume recovery in 2Q09, we believe that risk is for flat-to-down 3Q09 and hence it may take a while for CHRT to reach that breakeven point.

Adoption of FASB No 160 allows CHRT to finally book its portion of CSP loss as positive item on Minority interest: Over last five years, because of large accumulated losses on CSP's balance sheet, CHRT was unable to book positive minority interest due to ongoing losses in CSP. CHRT started to adopt FASB No.160 for its non-controlling shares in CSP from 1Q09. As such, 49% of CSP’s 1Q09 net loss of US$31.5 million could be excluded from CHRT’s income statement and result a positive US$15.5 million impact.

Maintain Neutral, add to AVOID side: CHRT's financial condition has improved though company requires refinancing of its debt in 2010. The stock now trades at relatively expensive 0.9x price/book and hence could face downward pressure based on earnings profile. As such we add CHRT to the AVOID side of AP tech trading portfolio. We believe downside could be as much as 25%