ASE profit falls on weak SiP demand

RECOVERY::The chip tester and packager expects to see an increase in system-in-a-package demand in the second half, when clients launch second-generation products

By Lisa Wang  /  Staff reporter

Sat, Apr 30, 2016 - Page 13

Advanced Semiconductor Engineering Inc (ASE, 日月光半導體), the world’s largest chip tester and packager, yesterday posted its weakest net profit in three quarters, dragged by weaker-than-expected demand in its system-in-a-package (SiP) business.

ASE provides SiP services for fingerprint modules used in Apple Inc’s iPhones, as well as in wearable devices for other clients.

During the quarter ending March 31, net income contracted 17 percent to NT$4.16 billion (US$128.87 million) from NT$4.99 billion in the previous quarter and declined 7 percent from NT$4.47 billion the previous year.

Despite the decline, net income in the first three months of the year surpassed the NT$3.27 billion projected by BNP Paribas SA analyst Szeho Ng (吳思浩).

Gross margin slid to 22 percent in the first quarter from 26 percent in the previous quarter, with ASE attributing the decline to fewer SiP orders.

The company expects SiP demand to remain weak through this quarter because of seasonal factors, and for its core chip packaging and testing business to see mild single-digit percentage growth from last quarter’s revenue of NT$35.54 billion.

Revenue from its electronics manufacturing business is forecast to decline moderately this quarter from the previous quarter’s NT$24.75 billion, the company said.

“We see a recovery in the second quarter. We believe our chip testing and packaging business will have mild growth, bringing it back to fourth-quarter levels,” chief financial officer Joseph Tung (董宏思) said.

The recovery should be across the board, with the automotive segment posting stronger growth, Tung said.

The communications segment will be relatively weaker due to tepid demand for SiP services, the executive said.

The SiP business, which accounted for 20 percent of ASE’s revenue last year, should pick up in the second half of this year, as customers launch their second-generation products, Tung said.

ASE said it is adjusting its SiP strategy by focusing on higher-margin products — rather than volume growth — to enhance returns on investment.

SiP gross margins are lower than overall margins, it said.

SinoPac Securities Investment Services Co (永豐投顧) forecast that ASE’s second-quarter revenue would increase 11.3 percent to NT$69.42 billion from NT$62.37 billion last quarter.

Separately, ASE on Thursday announced that it plans to acquire a 20.52 percent stake in Deca Technologies Inc for US$59.88 million, in a bid to speed up its expansion into next-generation integrated fan-out (InFO) packaging technology.

To obtain technology patent licensing from Deca, ASE is to pay US$12.5 million and an unspecified amount of royalties.

Tung said the company would start the technology transfer from Deca this year and he expects Deca to contribute meaningful revenue from next year.