ASE Technology Holding Co (日月光投控), the world’s largest chip testing and packaging service provider, yesterday reported record-high net profits for last quarter, but also announced cuts to capital spending this year by about 10 percent as demand slows.
Three months ago, ASE said that it would spend US$2 billion this year on new facilities and manufacturing equipment, with more than half the amount earmarked for chip packaging operations, but capital spending was yesterday lowered to US$1.8 billion.
ASE yesterday attributed customers’ longer-than-expected inventory digestion to the capital spending cuts.
Photo: Grace Hung, Taipei Times
The Kaohsiung-based company expects the customer inventory correction period to stretch into the first half of next year.
As the industry is entering a slow season, ASE predicts a normal and seasonal decline in revenue of between 5 percent and 10 percent next quarter from last quarter, it said.
“There are a lot of uncertainties in front of us. We are not ready to give guidance for the first quarter yet. But, what we can say is we are seeing normal seasonality factors come back,” ASE chief financial officer Joseph Tung (董宏思) told a virtual investors’ conference yesterday.
By sector, automotive and networking businesses are to outgrow other segments, extending the growth momentum of last quarter, Tung said.
For the whole of next year, ASE expects to see a “flattish year” in terms of revenue, while the overall semiconductor industry is expected to experience a downturn, Tung said.
Commenting on the impact of the US’ latest semiconductor curbs on China, ASE said that there would be no material financial impact, as very few devices made ASE fit the specifications indicated in the US rules.
As geopolitical tensions rise, ASE had received more customer requests for electronics manufacturing service (EMS) capacity outside of China, Tung said.
The company is building new capacity in Poland, Vietnam and Taiwan to cope with customer demand, he said, adding that China makes up about 60 percent of ASE’s total EMS capacity.
However, there had been no requests for chip testing and packaging capacity beyond Taiwan or China, he said.
For the fourth quarter of this year, ASE is seeing a softening environment as concern over a potential economic recession and anti-inflationary policies are dampening overall demand, ASE said.
Revenue from its core chip packaging and testing services, or semiconductor assembly and test manufacturing (ATM), are to drop about 4 percent this quarter to below NT$94.9 billion (US$2.96 billion), compared with NT$98.83 billion last quarter, ASE said.
Gross margin for its ATM business is to contract under 27.5 percent, primarily due to a decline in factory utilization, to between 75 percent and 80 percent in the fourth quarter, from 80 percent last quarter, the company said.
Net profits last quarter soared 23 percent year-on-year to NT$17.443 billion. Earnings per share rose to an all-time high at NT$4.03.
Gross margin fell to about 20.1 percent last quarter, from 21.4 percent in the second quarter.
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