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ASE sees 6% drop in Q2 earnings, blames forex woes

Advanced Semiconductor Engineering Inc (ASE, 日月光半導體) said yesterday that earnings shrank 6 percent in the second quarter as an unfavorable foreign exchange rate eroded gross profit margins.

The world’s top chip packager also said it expects weaker-than-forecasted growth this quarter because of global economic weakness.

Hsinchu-based ASE plans to reduce spending on new equipment this year by around 22 percent to US$350 million from its estimate of US$450 million.

During the quarter ending June 30, net income fell to NT$2.41 billion (US$78 million), or NT$0.44 per share, compared with NT$2.56 billion a year earlier, the company said.

ASE gave a conservative outlook for the current quarter yesterday, saying customers have huge inventories as the weakening global economy had reduced demand.

“The growth strength will be weaker this year than last year,” ASE financial executive Joseph Tung (董宏思) told an investor’s conference.

This quarter revenues may increase by low single digit percent, from NT$25.61 billion last quarter, versus the average double-digit percent growth in the traditionally high season, Tung said.

“Inventory problem is more evident for customers in wireless and communications segments,” Tung said.

Customers said they might spend one or two quarters to digest their stockpiles, he said.

Handset chipmakers Broadcom Corp, Freescale Semiconductor and MediaTek Inc (聯發科), the nation’s biggest handset chip supplier, are among ASE’s top five customers.

Communications made up the biggest share, or about 45 percent, of ASE’s revenues of NT$25.61 billion last quarter.

“ASE’s outlook disappoints me. The company’s revenue growth rate is lower than my expectations,” said Kenneth Lee (李克揚), a semiconductor analyst with Primasia Securities in Taipei.

Lee had predicted a 10 percent revenue increase this quarter compared to the first quarter.

However, Tung said ASE believes revenues will grow in the final quarter, against the downtrend of the overall semiconductor industry.

He did not explain further.
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