Advanced Semiconductor Engineering Inc (ASE, 日月光半導體) yesterday reported its strongest quarterly net profit in more than four years, bolstered by increased demand for communications chips and its growing adoption of copper wire bonding chip packaging technology.
The world’s top chip packager, ASE led competitors in migrating to the more cost-effective copper wire bonding technology and benefited from this early transition by winning orders and improving its cost structure in the face of soaring gold prices, the company said.
Net income expanded 18.44 percent to NT$5.46 billion (US$177 million) last quarter, compared with NT$4.61 billion in the second quarter. It was ASE’s highest quarterly net profit since the second quarter of 2006, when it earned NT$7.32 billion.
On an annual basis, net income in the third quarter soared 71 percent from NT$3.19 billion last year, after the firm fully acquired Universal Scientific Industries Co Ltd (USI, 環電), an electronics manufacturing service provider, in the second quarter of this year. USI earned NT$906 million last quarter.
Growth is expected to continue in the current quarter, aided by further market share gains from rivals and sustainable end product demand, mostly from smartphones, ASE financial executive Joseph Tung (董宏思) told an investor conference.
“Our market share gain is not over yet ... We are widening our lead in the wire bonding business, helped by copper bonding [technology],” Tung said.
Revenues would be little changed this quarter from NT$51.49 billion in the third quarter as a strengthening NT dollar and rising gold prices would offset a slight growth in shipments, Tung said.
This compares with Credit Suisse’ forecast of a 4.7 percent decline.
ASE expects the local currency to appreciate 3.25 percent to an average of NT$30.765 against the US dollar this quarter, compared with NT$31.80 in the third quarter.
Next year, ASE’s revenue growth would outpace its rivals and the semiconductor industry, bolstered by increasing production outsourcing from chipmakers and growing adoption of its copper wire bonding technology, Tung said.
Starting this quarter, European and US customers have been increasingly shifting to copper wire bonding service from gold bonding in the face of rising gold prices, following in the steps of ASE’s Asian clients, Tung said.
Shipment of chip packaged using copper wire bonding technology would account for 20 percent of overall shipments, up from 16 percent in the third quarter, ASE said.
With growing usage of copper wire bonding, the impact of the rising price of gold will gradually drop, Tung said.
Currently, every US$50 per ounce rise in the gold price translates into a 0.5 percentage point margin erosion, he said.
Local rival Siliconware Precision Industries Co (矽品精密) expects a bigger impact, estimating a margin erosion of 0.7 percentage points as it lagged ASE in shifting to copper wire bonding machines.
Anticipating robust demand next year, ASE said capital spending on new equipment would stay the same as this year. The company raised its capital spending this year to US$850 million from the US$700 estimated earlier this year.
This quarter, gross margin would drop by 1 to 1.5 percentage points from 21.6 percent in the quarter ending Sept. 30, ASE said.
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