Chip packagers' revenues climb

Silicon Corp and Advanced Semiconductor Engineering Inc (ASE, 日月光) reported yesterday that earnings in September reached record highs on the back of strong demand for chip packaging services. The figures demonstrate the benefit of outsourced semiconductor production when other sectors of the technology market may be facing a downturn, analysts said.

ASE Inc is the world's second largest semiconductor assembly and testing service provider. Silicon Corp provides logic chip testing services, and is in the midst of being bought by Siliconware Precision Industries Co (矽品精密), the third largest semiconductor assembly service provider in the world.

ASE Inc yesterday reported revenue for September rose 2.6 percent over the August figure to NT$2.52 billion, a monthly record, on the back of continued growth and strong demand. Silicon Corp's revenue for September was the highest this year, and the second highest after the NT$208 million posted last August. Revenue rose 21.7 percent over the August figure to NT$202 million.

The record revenues stand out as growth in certain industry sectors such as PCs and chipsets has failed to meet expectations due to slowing demand growth. "You're looking at the benefit of outsourced semiconductor production," said Michael Cheng, semiconductor assembly and test analyst at Salomon Smith Barney Securities Taiwan.

"If you're an outsourced semiconductor manufacturer, you have a portfolio of customers, and they're all in different places," said Cheng. "Look at any of the diversified semiconductor manufacturers; they tend not to be so hurt by downturns," he said.

Jong Lin, spokesman for Siliconware Precision Industries Co, said that demand at his company remained strong. "We have different kinds of customers -- some are up, some are down, but in total, the information on hand shows demand is still strong," he said.

"According to our experience, September's revenue should be higher than July and August," he said. Siliconware Precision has yet to report its September figures and disowned the numbers reported in the local media earlier this week. Silicon Corp was contacted, but provided no comment about its September revenue.

As well as benefiting from a diversified portfolio of customers, revenue should remain strong at the packaging and testing houses due to continued wafer foundry growth, analysts said. "The foundries give the wafers to the packaging houses for assembly," an analyst at Fubon Securities said. "So long as TSMC and UMC's revenue continues to grow, the revenue at the assembly houses will also continue to grow," he said. TSMC and UMC are the world's two largest producers of made-to-order computer chips.

Revenue will grow yet further through the expanded capacity of Taiwan's largest packaging companies and their provision of "one-stop-shopping" manufacturing solutions to customers, analysts said.

In view of this, Siliconware Precision will hold a joint shareholders meeting with Silicon Corp today to seek approval for the packaging company's acquisition of Silicon Corp. The boards of the two companies agreed to the acquisition at the end of August. Analysts said Siliconware Precision would benefit from the acquisition by enhancing operational efficiency and creating a one-stop-shop for testing and packaging.

The move is especially important if Siliconware Precision wants to keep up with ASE Group, which consists of ASE Inc and ASE Test, the semiconductor test service arm of the group. Yesterday, the group reported September revenue of NT$4.83 billion, up almost two percent over the August figure.