Sat, Jul 27, 2013 - Page 13 News List

ASE remains cautiously upbeat for second half

SMALL GAINS:The world’s biggest chip packager and tester expects revenue to lift in the second half of the year despite increasing competition from other brands

By Crystal Hsu  /  Staff reporter

Advanced Semiconductor Engineering Inc (ASE, 日月光半導體), the world’s biggest chip packager and tester, expects revenue to pick up this and next quarter but is struggling to keep a steady profit margin because the low-margin electronic manufacturing business is squeezing its overall earnings, senior executives said yesterday.

The Greater Kaohsiung-based company is looking at revenue growth of 1 percent to 5 percent for chip packaging and testing operations this quarter, compared with three months earlier, ASE chief financial official Joseph Tung (董宏思) told an investors’ conference.

ELECTRONICS

Meanwhile, the company’s EMS (electronic manufacturing services) segment may grow by more than 25 percent sequentially, reversing a decline last quarter, Tung said.

Gross profit margin should be flattish to slightly-up for chip packing and testing operations, while EMS gross margin should soften by 60 to 90 basis points, he said.

“The sharp increase in the EMS business may put pressure on our overall profit and we will try to keep the margin stable,” Tung said, after factoring in current business visibility and foreign exchange rate assumptions.

Average selling prices are likely to hold steady for all business segments, he said.

BOOSTING DEMAND

ASE chief operating offer Tien Wu (吳田玉) said he is cautiously optimistic about sequential quarterly growth for the second half of the year when major technology brands put new products on the market.

“We believe it will happen as the general economy is not bad,” Wu said.

Smartphone and tablet vendors are expected to launch new models in the third quarter, boosting demand for packaging and testing services for mobile device chips.

KEY DRIVER

While sales of PCs remain sluggish, it could still serve as one of the key growth drivers in the IC (integrated circuited) packaging and testing services sector, Wu said.

ASE plans between NT$700 million (US$23.37 million) and NT$750 million in capital expenditure this year, as previously guided, Wu said, adding that the spending may rise to NT$100 billion in the coming three years.

The company gave the guidance after posting NT$3.82 billion in net income for its core business — chip packaging and testing — in the April-to-June quarter, which represented an increase of 71 percent from the preceding quarter and a rise of 19.5 percent year-on-year.

PROFIT INCREASES

That translated into NT$0.5 earnings per share, up from NT$0.29 three months earlier, according to company data.

Accumulated profit totaled NT$6.05 billion for the first six months, representing an increase of 15.4 percent from the same period last year, or a share of NT$0.79, the company said.

LACKLUSTER GUIDANCE

UBS Securities chief semiconductor analyst Jonah Cheng (程正樺) said he is not particularly excited about ASE’s performance going forward, after Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) last week offered a lackluster revenue guidance for this quarter.

“Technology companies upstream in the supply chain are likely to see a sub-seasonal second half after a stronger-than-expected first half,” Cheng said.

Shares in ASE rose 1.01 percent to NT$25.1 yesterday, bucking the TAIEX’s 0.17 percent fall, Taiwan Stock Exchange data showed.

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