ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip assembly and testing manufacturing (ATM) service provider, expects to double its leading-edge advanced technology services revenue next year to more than US$1 billion, benefiting from strong demand for artificial intelligence (AI) chips, a company executive said on Thursday.
That would be the second year that ASE has doubled its advanced chip packaging and testing technology revenue, following an estimate of more than US$500 million for this year.
ASE is one of the major beneficiaries from the AI boom as Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is outsourcing production of advanced chip packaging technology, or chip-on-wafer-on-substrate (CoWoS), to local outsourced semiconductor assembly and test service providers such as ASE in efforts to solve prolonged capacity constraints.
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“TSMC’s aggressive expansion of their back-end leading technology capacity is really a statement of a very, very strong demand coming in the next few years. Being a chosen customer of our customers as well as a foundry partner, we’ll definitely share that nudge potential in front of us,” ASE chief financial officer Joseph Tung (董宏思) told a virtual investors’ conference on Thursday.
The strong growth momentum would elevate the revenue contribution from ASE’s advanced packaging and testing technology segment to 12 percent or 13 percent of the company’s total ATM revenue next year, Tung said.
AI chip supplier Nvidia Corp has been the main adopter of TSMC’s CoWoS technology. That demand is to increase further next year with the introduction of Nvidia’s new Blackwell AI chips, market researcher TrendForce Corp (集邦科技) said last month, Tung said.
In addition to TSMC, ASE is engaging with multiple customers to provide its advanced chip packaging and testing services, Tung said.
ASE is making necessary investments in a variety of advanced technologies for wafer sort, final test, and burn-in tests, he said, adding that the company is also aggressively expanding its turnkey business for existing and future customers.
“We are engaging with all the direct customers, with system houses, fabless houses and foundry houses. The demand is coming from different directions. The real issue is how efficiently we will catch up our capacity with the demand,” Tung said.
As a result, the capital expenditures this year are to surpass its annual depreciation and amortization levels of US$1.9 billion. ASE said 2021 was the last year it spent more on machinery and equipment than its depreciation and amortization.
ASE considers these leading-edge technology businesses to be “margin accretive.” The growth of these businesses would help bring the company’s gross margin of its ATM business back to its structural margin range from 24 percent to 30 percent next year, Tung said.
During the current quarter, ASE expects gross margin of its ATM business to be little changed compared with 23.1 percent in the third quarter, the best since the final quarter last year.
ATM revenue is expected to have grown slightly from NT$85.79 billion (US$2.68 billion) last quarter, ASE said, adding that revenue from the electronics manufacturing service (EMS) business is predicted to decline about 5 percent sequentially from NT$74.87 billion last quarter.
ASE reported its strongest quarterly net profit in about seven quarters for last quarter, totaling NT$9.67 billion. That represented a 10 percent annual expansion or 24 percent quarterly growth from NT$8.78 billion and NT$7.78 billion. Earnings per share rose to NT$2.24 from NT$2.04 a year ago and NT$1.8 a quarter earlier.
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