Sat, Apr 26, 2014 - Page 13 News List

ASE reports solid profits

ON THE RIGHT TRACK:Credit Suisse expects ASE’s SiP rampup, its K7 plant’s production resumption and continued DRAM growth to support sales

By Lisa Wang  /  Staff reporter

Advanced Semiconductor Engineering Inc (ASE, 日月光半導體), the world’s biggest chip packager, yesterday said that earnings last quarter came in better than expected, as demand for fingerprint sensors for Apple Inc’s iPhone 5S bolstered its system-in-packaging (SiP) business.

First-quarter net income fell 34 percent to NT$3.44 billion (US$113 million) after a record profit of NT$5.21 billion in the fourth quarter of last year, the company said. The figure was also higher than the NT$3.04 billion forecast by Credit Suisse analyst Randy Abrams.

ASE’s core businesses include chip packaging and assembly testing. The Greater Kaohsiung-based firm also offers electronic manufacturing services (EMS) through Universal Scientific Industrial Co (環隆電氣), which it acquired in 2010.

The company expects business to rebound this quarter, driven by mobile communications products.

“Revenue from the core business will rise to the level seen in the fourth quarter of last year,” ASE chief financial officer Joseph Tung (董宏思) told investors.

Revenue from chip packaging and testing services is forecast to grow 10 percent sequentially from last quarter’s NT$34.35 billion, the company said. In the fourth quarter of last year, ASE’s core business revenue was NT$37.9 billion.

The 10 percent revenue growth forecast is a “moderate growth” projection, Abrams said in a report yesterday. He predicted a 12 percent sales expansion this quarter.

EMS revenue is likely to be flat or to fall slightly this quarter, from last quarter’s NT$21.37 billion, the firm said.

Credit Suisse remains positive about ASE’s outlook as it ramps up its SiP business, its K7 plant resumes production, A8 packaging and testing for Apple starts and DRAM demand continues to grow.

ASE expects diminished impact from the K7 plant’s partial shutdown due to a pollution incident, which eroded its core business revenue by between 4 percent and 5 percent last quarter.

ASE also said it was increasing its capital expenditure this year to between US$900 million and US$950 million, from its original target of US$700 million, with the money being spent mainly on its SiP and advanced testing and packaging businesses to cope with customer demand.

SiP is forecast to account for more than 20 percent of the company’s overall revenue in the fourth quarter of this year, compared with 7 percent in the first quarter, ASE said.

Aside from fingerprint sensors on mobile phones, SiP packaging technology can be used in a wide range of mobile communications applications such as wearable devices, Tung said.

The estimated capital expenditure does not include potential investment on a new chip testing and packaging plant in China, he said.

He declined to comment on media reports that ASE is in talks with US-based Micron Technology Inc to build a new plant in Xian in China’s Shaanxi Province.

ASE currently only has one plant, in Taoyuan County’s Jhongli (中壢), that provides chip testing and packaging services, Tung said.

This quarter, gross margin is expected to rebound to more than 20 percent, from last quarter’s 18.9 percent, the company forecast.

In other news, local memory chipmaker Winbond Electronics Corp (華邦電) yesterday said its net profit soared to NT$397 million last quarter from the previous quarter’s NT$72 million as robust demand for specialty DRAM chips boosted prices and shipments.

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