ASE Technology Holding Co (日月光投控), the world’s largest chip testing and packaging service provider, yesterday said net profits contracted 10 percent quarter-on-quarter to NT$15.73 billion (US$523.15 million) last quarter, as customers curtailed orders due to a server inventory correction cycle.
Factory utilization dipped to about 80 percent last quarter from about 85 percent in the prior quarter, driving down gross margin to 19.2 percent from 20.1 percent in the third quarter.
ASE last year saw net profits drop 3 percent annually to NT$62.09 billion from NT$63.91 billion in 2021, marking the second-best performance in the company’s history. Earnings per share fell to NT$14.53 last year from NT$14.84 the previous year.
Photo: Grace Hung, Taipei Times
With some sectors approaching the end of the inventory correction cycle, the Kaohsiung-based company said it expects the first quarter to be the lowest for revenue in its core chip assembly and testing manufacturing (ATM) businesses, followed by double-digit percent growth in the second quarter.
“We expect ASE ATM revenue in the first quarter to be below seasonal expectations due to industry destocking,” chief operating officer Tien Wu (吳田玉) told an online investors’ conference.
ASE expects revenue at its businesses this quarter to plunge about 21.6 percent to NT$72.7 billion, compared with NT$92.74 billion last quarter. Gross margin is to trend down further to about 18.6 percent this quarter, Wu said.
ASE expects ATM revenue for the year to be flat or decline a high single-digit percentage year-on-year from NT$365.59 billion last year, as the company is facing multiple market uncertainties.
“We believe that ASE is late to fall and early to rise during this market correction. Because of skilled technology leadership, flexibility and proven records, making ASE an inexpensive manufacturing partner,” Wu said.
The company expects its ATM business gross margin to hold at the range between 25 percent and 30 percent this year, versus 28.5 percent last year, Wu said.
However, ASE expects a challenging year for its electronics manufacturing service (EMS) business, including system in package (SiP) services, with a majority of its business expected to originate from the consumer electronics segment.
Revenue from its EMS business this quarter is to decline a high-single-digit percentage annually, Wu said.
To cope with the inventory correction cycle, ASE said it plans to scale back “a few hundred million” US dollars in machinery capital spending this year, compared with US$1.7 billion last year.
ASE is adding new ATM capacity at its Malaysia, Singapore and South Korea sites to meet customer needs.
Customers in the past two years have requested further diversity in capacity manufacturing sites due to concerns over geopolitical tensions, Wu said.
ASE said it is also adding new SiP manufacturing capacity in Vietnam for these reasons.
The company expects 25 percent of its SiP capacity to exist outside of China within 2 years, Wu said.
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