Diodes Incorporated (DIOD)

Company Website 2020 Financial Report Stock Analysis 2020 ESG Report

23^%

Renewable Sources

23% of Diodes’ energy consumption came from renewable sources in 2020

25000

Products

are in Diodes’ product line

1.2

Billion Dollars

in 2020 sales

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The Path to Drawdown: LEDs

First invented in the 1990s, Light-emitting diodes (LEDs) designed as high-brightness, highly efficient light bulbs. LEDs work like solar panels in reverse, converting electrons to photons rather than the other way around. They use 90% less energy than incandescent bulbs, and half as much as compact fluorescents, for the same amount of light. While other lighting technologies convert energy into heat (and most of it wasted), LEDs convert 80% of their energy use into emitting light.

LEDs have many environmental benefits. Their efficiency in converting energy into light rather than heat helps reduce electricity consumption and air-conditioning loads. For people without ready access to ample energy, LEDs can be powered with small solar cells and can replace expensive kerosene lamps and their noxious fumes and emissions. When LEDs are used in streetlights, they can save up to 70% of energy and significantly reduce maintenance costs.

Project Drawdown predicts that if LED lighting becomes widespread in both the residential and commercial lighting market, it can help avoid between 10.2 - 10.8 gigatons of CO2 emissions in residences, and between 5.9 - 6.7 gigatons in commercial buildings. To get there, the global market share of LEDs needs to scale rapidly:

<::marker> In 2018, LED lights comprised 3% of the overall commercial lighting market and 2% of the residential lighting market
<::marker> By 2050, LEDs should account for 95% and 90% of the residential and commercial markets, respectively
<::marker> That’s 12.82% CAGR for residential LED, and 11.21% CAGR for commercial LED lighting between 2018 and 2050.

About

Diodes Incorporated (stock ticker: DIOD) manufactures and supplies a broad range of discrete, logic, analog, and mixed-signal semiconductor products. These products include diodes, rectifiers, transistors, MOSFETs, protection devices, etc., and serve the consumer electronics, computing, communications, industrial, and automotive markets. Headquartered in Plano, Texas, they sell their products worldwide.

DIOD's Role in Drawdown

Diodes’ product line consists of over 25,000 products that are designed for use in high-volume consumer electronic devices like liquid crystal display (LCD) and LED televisions and LCD panels, set-top boxes and consumer portables like smartphones, tablets and notebooks. In particular, these include LED lighting drivers, and their end-product application for industrial lighting, power supplies, LED lighting accounted for between 20% and 30% of Diodes’ total sales since 2018 (p. 4).

DIOD: What We Like

We commend Diodes for taking several initiatives to enhance their environmental sustainability. For example:

<::marker> In 2020, renewable energy accounted for 23.5% of their energy use (p. 18), up from 11.3% in 2018
<::marker> The share of recycled hazardous waste has gone up slightly, from 82% in 2018 to 85% in 2020 (p. 25)

In the area of supplier management, Diodes demonstrates boldness that’s rare among public companies. Their detailed supplier code of conduct (p. 5) sets out their expectation for suppliers to improve energy efficiency and minimize energy consumption and GHG emissions.

What We Want to See Improve

Disclose GHG Emissions

Diodes professes (p. 17) to be prioritizing the reduction of emissions and establishing goals and objectives to reduce their overall carbon footprint. Yet they don’t list any specific commitments or targets, not to mention quantitative metrics of their GHG emissions. Setting targets requires precise and accurate tracking of emissions, and we urge Diodes to begin disclosing their direct and indirect emissions in their sustainability report.

Completely Transition to Renewables

We commend Diodes for steadily increasing the share of renewable energy in their total energy consumption. But we want them to go further faster. Diodes’s electricity use still comes overwhelmingly from natural gas and diesel fuel (p. 18), and their use of renewables is growing too slowly. We urge Diodes to transition completely to renewable and/or clean energy by the end of this decade.

Shift to Clean Banks

Diodes and their subsidiaries have entered into credit agreements with several banks (Exhibit 10.95) that are still the largest funders of fossil fuel companies, including Bank of America, Citibank, and HSBC. Diodes should carefully select financial institutions that, as a matter of principle, don’t fund fossil fuels for their credit needs.

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Allocated	Company	Description
5.00%	Applied Materials (AMAT)	Applied Materials supplies equipment, services and software for LED manufacturing. LEDs help conserve energy and cut emissions
0.56%	Universal Display (OLED)	Universal Display makes organic LEDs, replacing fluorescent and incandescent lighting and improving building energy efficiency
0.47%	Acuity Brands (AYI)	Acuity makes LEDs, smart lighting and building technology solutions that can improve energy efficiency and emissions from buildings
0.40%	Power Integrations, Inc. (POWI)	POWI makes energy-efficiency products like AC-DC power converters and LED drivers. These solutions help buildings conserve energy and cut emissions
0.28%	Diodes Incorporated (DIOD)	Diodes makes a range of semiconductor products for LCD display, LED monitors and lighting. LED lighting is a key solution for cutting building emissions
0.07%	Veeco Instruments Inc. (VECO)	Veeco makes equipment and processing systems used in making high-tech LEDs. Energy-efficient LEDs help buildings cut energy use and emissions
0.05%	Magnachip Semiconductor Corp. (MX)	Magnachip Semiconductor derives its revenue in part from the promotion of LEDs and solar PVs, through the sale of LED products and products used with solar PVs. It creates no products specifically for the fossil fuel industry.
0.02%	Agrify Corporation (AGFY)	Agrify provides LED lighting and other products for high-yield indoor agriculture. Efficient LEDs are an energy-saving alternative to conventional lights
0.02%	Amtech Systems, Inc. (ASYS)	Amtech Systems makes semiconductor equipment for LED and power device applications. LED lighting helps buildings cut emissions
0.02%	AXT, Inc. (AXTI)	AXT sells semiconductor substrates used in LEDs, thermal imaging, and autonomous vehicles. It makes no products specifically for the fossil fuel industry, thus passing our revenue filter.
0.02%	Energy Focus (EFOI)	Energy Focus makes LEDs for the Navy, federal, state and local governments, and big organizations, helping them save energy and cut building emissions
0.02%	Highway Holdings Limited (HIHO)	HIHO makes electronic components, some of which are used in making LEDs. LEDs are energy-efficient lighting that can cut emissions from buildings
0.02%	SemiLEDs Corporation (LEDS)	SemiLEDs makes LED components for lighting and other applications. LEDs are an energy-efficient lighting alternative that can cut building emissions
0.02%	LSI Industries Inc. (LYTS)	LSI Industries makes LEDs for automotive, restaurant, retail and grocery store customers. Energy-efficient LEDs help buildings cut emissions
0.02%	Orion Energy Systems, Inc (OESX)	Orion offers LED lighting and custom-made energy management systems for big organizations - a solution that cuts energy use and emissions from buildings
0.02%	O2Micro International Limited (OIIM)	O2Micro International makes LED products and lighting. LEDs are an energy-efficient lighting alternative that can cut emissions

Diodes Incorporated (DIOD)

The Path to Drawdown: LEDs

About

DIOD's Role in Drawdown

What We Want to See Improve

Related LED Lights Stocks in the Climate Index

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