ASE announces profit on rising demand for chips

Advanced Semiconductor Engineering Inc (日月光), the world's largest packager of chips, said it turned a profit in the fourth quarter because of rising demand for its clients' products, such as Microsoft Corp's Xbox 360.

Fourth-quarter profit was NT$2.9 billion (US$90 million), compared with a loss of NT$1.4 billion the same quarter a year earlier, the Kaohsiung-based company said in a statement yesterday.

Advanced Semiconductor was expected to report net income of NT$3.3 billion, based on the median estimate of three analysts surveyed by Bloomberg.

"ASE's first-half outlook should improve from a year earlier," said Michael On, who manages the equivalent of US$60 million as managing director at Beyond Asset Management Co in Taipei.

Still, "the chip industry is likely to peak out in the first quarter," he said.

Advanced Semiconductor makes finished chips from silicon wafers for customers like Microsoft, which has a sales target of 4.5 million to 5.5 million Xbox 360 game consoles for the year.

Worldwide chip sales may rise 7.9 percent this year, after a 6.8 percent gain last year, the San Jose, California-based Semiconductor Industry Association said on Feb. 2.

The company's shares fell 2.2 percent to close at NT$27 (US$0.84) yesterday before the earnings announcement. Advanced Semiconductor's stock has fallen 10.3 percent this year, compared with a 1.2 percent gain in the key TAIEX index.

The stock will probably not rise above its Jan. 4 NT$31 closing price this year, said On, who does not hold the shares.

Fourth-quarter sales, announced earlier, rose 29.5 percent to NT$17.2 billion. For last year, Advanced Semiconductor posted a NT$4.7 billion loss, yesterday's statement said.

Advanced Semiconductor will boost capital spending this year to US$350 million from US$262 million last year, chief financial officer Joseph Tung (董宏思) said in an interview yesterday. The company plans to boost its production in China to make parts and materials used in assembling of chips, he said.

Taiwan's Investment Commission on Oct. 28 approved Advanced Semiconductor's plan to invest US$30 million in China.

Advanced Semiconductor is waiting for Taiwan's government to lift a ban on Taiwanese companies' investment in chip packaging plants in China.

"Our clients want us to also have capacity in China as soon as possible, but we have to wait for the Taiwan government's approval," Tung said.