Advanced Semiconductor Engineering Inc (ASE, 日月光半導體), the world’s biggest chip packager and tester, yesterday posted its strongest quarterly net profit in three years, helped by rebounding demand and increased orders for its high-margin copper technology services.
During the quarter from April to last month, ASE’s net income nearly tripled to NT$4.61 billion (US$143.8 million), or NT$0.76 per share, hitting the highest level since the third quarter of 2007. That represented about 36 percent growth from NT$3.4 billion last quarter.
This quarter, revenues are expected to grow only about 5 percent from last quarter’s NT$46.42 billion, of which 46 percent is coming from customers in the communications area, ASE said, citing slower-than-seasonal demand for electronic devices and computers.
“In the third quarter, we are seeing a slowdown in growth momentum,” ASE chief financial executive Joseph Tung (董宏思) told investors.
One major reason is that some of ASE’s major customers are reducing orders as they start absorbing excess inventories or they are going through other business adjustments in the first part of last month, Tung said.
“We believe ASE is talking about handset chipmaker MediaTek Inc (聯發科) and PC graphic maker Nvidia Inc as excess inventories dampened their third-quarter outlook,” said Jonah Cheng (程正樺), who tracks the chip industry for UBS Securities’ Taipei branch.
MediaTek, one of ASE’s top 10 clients, yesterday gave a weaker-than-expected third-quarter forecast, saying revenues would fall by 8 percent to 15 percent after missing its own second-quarter sales target.
“But, we do not think overall market demand will drip into negative territory based on forecast of our customers,” Tung stressed. “We are seeing pretty strong demand from the communications segment as our major customer is in the fast-growing smartphone area.”
US handset chipmaker Qualcomm Inc is also one of ASE’s major clients.
This quarter, ASE’s gross margin is expected to be flat at 21.4 percent from last quarter, as the increased adoption of cost-effective copper process technologies will offset price decline.
Sales from cooper technology would account for a bigger share, or 12 percent, of ASE’s overall chip packaging services, compared with 9 percent at the end of last month, the company said.
To reduce the price of gold’s erosion of profits, ASE started moving toward copper wire bonding in its packaging process in the first quarter, replacing gold wire bonding.
ASE’s lead in the copper process technology transition has helped it gain more market share and widen its leadership in terms of gross margin, Tung said. Major rival Siliconware Precision Industries Co (矽品) reported a 16.9 percent gross margin for last quarter.
ASE’s market share expanded to 66 percent last quarter, from 60 percent a year ago, according to Macquarie Securities’ tally.
ASE yesterday kept its capital spending unchanged at US$700 million this year, which is 80 percent higher than last year’s US$390 million.
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