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ASE chairman says Chungli fire won't cost it orders

Advanced Semiconductor Engineering Inc (ASE, 日月光半導體), the world's top semiconductor testing and packaging services provider, yesterday said a fire at a plant in northern Taiwan would not cause a massive loss in orders as production will be restored soon.

"Our priority is to maintain our business. As we plan to restore the production at the site within four months, I believe the likelihood of losing orders is slim," ASE chairman Jason Chang (張虔生) said at his first public appearance since Sunday's fire at the Chungli plant.

The Chungli plant is ASE's advanced packaging and IC-substrate manufacturing site.

The plant accounts for an estimated 10 percent of the company's total production capacity.

KAOSHIUNG OPTION

Chang said losses would be minimal, less US$2 million, as most customers had agreed to ASE's proposal to use its Kaohsiung plant to provide testing and packaging services.

The temporary shutdown of the Chungli factory would deduct about NT$1 billion, or just 2 percent, from the company's revenues for this year, Chang said.

Spending on new equipment this year, however, would not increase significantly, he said.

The company had already planned to spend US$250 million, down from US$400 million earlier, on new equipment.

"The impact will be short lived and will not, in any way, be a serious blow to Advanced Semiconductor," Chang said .

But the fire has dashed ASE's hope of returning to profitability in the current quarter.

The company posted a loss of NT$128 million, or NT$0.03, for the first three months.

OUTLOOK ADJUSTMENT

"We will adjust [down] our outlook for the second quarter, in particular, sales and margin," said ASE financial chief officer Joseph Tung (董宏思).

He did not elaborate.

The company had hoped to turn a profit in the current quarter by reducing its raw materials costs after boosting substrate production at the Chungli plant.

Chang said the company planned to quickly reduce the portion of substrates purchased from outside sources to less than 50 percent from the current 67 percent.

"This plan will now be postponed by one or two quarters," Chang said.

The fire caused at least NT$4 billion in damage, including equipment, facilities and goods, company officials have said.

Those fixed assets are worth NT$12.2 billion but were covered by the company's NT$16.5 billion fire damage policy.

APPEAL TO GOVERNMENT

Meanwhile, Chang called on the government to lift its long-term ban on Taiwanese chip testers and packagers building factories in China.

"As our rivals are building plants in China, the ban will hurt our competitiveness," he said.

Shares of ASE remained flat on the Taiwan Stock Exchange yesterday at NT$19.35.
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