The world’s biggest chip packager, Advanced Semiconductor Manufacturing Co (ASE, 日月光半導體), yesterday reported an 8 percent increase in net profits for the last quarter, as limited supply of advanced 28-nanometer chips affected growth, which fell short of most analysts’ expectations.
However, ASE gave a stronger-than-expected forecast for this quarter, predicting revenue growth of about 5 percent to 7 percent sequentially from last quarter’s NT$48.99 billion (US$1.67 billion), fueled by rising end demand for smartphone chips, chief financial officer Joseph Tung (董宏思) told investors.
The projection exceeded the 0.5 percent quarterly increase in revenue forecast by Credit Suisse analyst Randy Abrams and was much better than a sequential decline of 0.96 percent predicted by Bloomberg.
“ASE’s fourth quarter revenue guidance is slightly better than we thought,” Eric Chen (陳慧明), a semiconductor analyst with Daiwa Capital Markets, said in a report note issued yesterday.
“Growth drivers pretty much come from the communications sector, particularly high-end smartphones,” Tung said.
Half of ASE’s revenue in the last quarter came from the communications sector, with handset chip makers Broadcom Inc, MediaTek Inc (聯發科) and Qualcomm Inc all clients in the last quarter.
“Besides, the percentage of IDM [integrated device manufacturer] customers will increase [from the third quarter’s 31 percent],” he said.
Net profits grew to NT$3.45 billion, or NT$0.45 per share, in the quarter ending Sept. 30, compared with NT$3.2 billion, or NT$0.42 a share, in the second quarter, according to ASE’s financial statement. That was a slight decrease from net profits of NT$3.47 billion in the third quarter of last year.
The figure was below the NT$4.08 billion in net income estimated by Abrams and a consensus estimate of NT$3.8 billion by Bloomberg.
“Supply of 28nm chips grew slower than expected,” Tung said.
Shipments last quarter only grew 4 percent sequentially, hitting the low end of his forecast range of 4 percent to 6 percent.
Gross margin for its packaging and testing business is expected to be flat this quarter, compared with last quarter’s 22.8 percent, as the strength of the New Taiwan dollar against the US dollar and an uptick in gold prices would offset gross margin improvement, Tung said.
Average selling price would only drop by 1 percent or 2 percent sequentially, he said.
ASE said every NT$0.5 appreciation of the NT dollar versus the US dollar would erode gross margin by 0.25 to 0.3 percent, ASE said.
“The NT dollar is appreciating at a faster pace than we expected,” Tung said.
Every US$50 increase per ounce in the price of gold would erode its gross margin by 0.5 percent, as gold is used in packaging technology, ASE said. It expected gold prices to rise to US$1,749 per ounce this quarter, from its prediction of US$1,610 last quarter.
To prevent rising gold prices from hurting gross margins, ASE started using copper wirebonding technology in 2009, with more than half of its wirebonding services for clients utilizing such technology.
ASE plans to spend US$900 million on new equipment this year, exceeding a previous estimate of US$800 million. Next year, spending would fall significantly, Tung said.
Daiwa’s Chen gave a “buy” rating on ASE and Credit Suisse rated ASE as “out-perform,” with a target price at NT$27.2.
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