Sat, Oct 29, 2011 - Page 12 News List

ASE predicts lower Q4 earnings on correction cycle

By Crystal Hsu  /  Staff Reporter

Advanced Semiconductor Engineering Inc (ASE, 日月光半導體), the world’s largest supplier of chip packaging and testing services, yesterday said the global technology correction cycle would continue to impede its earnings in the current quarter during which time its revenues may drop slightly from last quarter.

The Greater Kaohsiung-based company expects revenues to weaken a sequential 3 percent to 4 percent in the fourth quarter, because falling demand from integrated device manufacturers would cut into the market share gains it has made from smartphone and tablet makers, chief financial officer Joseph Tung (董宏思) told an investors’ meeting.

ASE, whose major customers include US chipmaker Qualcomm Inc, China’s top PC vendor, Lenovo Group (聯想), and Taiwan’s top handset chip designer, MediaTek Inc (聯發科), posted NT$3.47 billion (US$116.11 million) in net income in the third quarter, a decline of 36 percent from a year earlier and 5 percent from the second quarter.

That raised net profits to NT$11.09 billion for the first nine months, shrinking 18 percent from the year-ago level and translating into earnings of NT$1.63 per share, a company report said.

Gross margin narrowed to 22.9 percent as of Sept. 30 from 25.6 percent a year earlier, and it is expected to stagnate or edge down for the rest of the year, because the higher cost of gold would continue to pressure the firm’s profitability, Tung said.

ASE predicted that gold prices would climb to US$1,700 an ounce this quarter, from an average of US$1,548 last quarter.

To prop up its bottom line, the company aims to speed up the conversion to the more cost-efficient copper wirebonding technology that gives it an edge over 150 rivals worldwide, Tung said.

The company had 6,537 copper wirebonders last quarter, accounting for 49 percent of the total, Tung said, adding that the company plans to add 200 more this quarter and raise their ratio to 60 percent by June 30 next year to cut costs.

“The cost-saving strategy coupled with [planned] market share gains should be the growth driver, which can be achieved despite the macroeconomic condition,” Tung said.

The utilization rates for its packaging and testing operations are forecast to remain at 85 percent and 80 percent in the coming months respectively, Tung said.

ASE has no intention of reducing its capital expenditure and it plans to spend an extra US$80 million this quarter on copper wirebonder purchases. Total spending would be US$750 million this year as previously estimated, Tung said.

ASE has substantially increased its debt ratio — to 0.52 percent of equity last month from a year earlier after two bond issues — because it expects borrowing costs to rise going forward, Tung said.

“It is increasingly difficult to borrow money in China where the firm’s expansion will take place,” Tung said.

The company is using part of the funds to buy back ASE shares because it believes they are undervalued by the market given the firm’s financial performance, he said.

ASE shares closed up just 0.19 percent to NT$26.75 yesterday, lagging the TAIEX’s 0.67 percent advance, Taiwan Stock Exchange data showed.

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