ASX - Earnings call transcript Q2 2021 | ASE Technology Holding Co., Ltd.

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Ken Hsiang

Hello. I am Ken Hsiang, the Head of Investor Relations for ASE Technology Holdings. Welcome to our Second Quarter 2021 Earnings Release. Thank you for attending our earnings presentation today. Please refer to our safe harbor notice on Page 2. having event. and to participation broadcast consent this in participants their questions voices via All do consent, participants If not this time. please disconnect at would everyone may I remind presentation to follows that that contain the statements. forward-looking like are statements actual our differ risk may forward-looking high degree subject These results of materially. and a to

are otherwise For indicated. figures our the New in presentation, this stated purposes Taiwan of dollar generally Dollars, unless

materially with from our Chinese Taiwan based today using our As company, financials IFRS our our are Wu, may in by Taiwan a and Dr. by standards differ Results IFRS. GAAP. accounting CFO. Joseph accordance results presented other joined presented including Tung, using Taiwan presented Tien COO I those am in subsidiaries

I and be results. during over For like our Tien now financial will will Tien the over would to today's to the Dr. mid-year hand then Q&A will call, going answer Joseph Tien be first then Wu. floor available give I questions Dr. session. update. to a

Dr. Tien Wu

Thank everyone you, wish XXXX for I you us. our Ken. well. all of exciting joining Thank been an has Hello, safe year and everyone. is conference call. for

For conference items. brief two report call, you like I on give today's to a would

second achievement, the a to and like I sentiment XXXX. which business including towards half First, then half will would business outlook, update, first the the second third give and you quarter quarter touch on

like and give solving signals, several state short with, you update. would perspective, term. the the there causing you have in our like In term current angle about and outlook, to long and to I business would give with so speculation the of customers key from begin Second, business key puzzle. some I been To some business ASE's the reports past another weeks, landscape. partners you has conflicting

and the revenue track. both are on 'XX and Our 'XX half margin first quarter second

grew in terms. X% 'XX US Second quarter-over-quarter revenue dollar quarter ATM

grew half year-over-year. First 'XX XX% ATM revenue

will revenue, be XX% If the it affected EAR exclude you year-over-year.

schedule. of recovered revenue test 'XX ahead half First

First affected 'XX exclude revenue the EAR half if year-over-year, we business. grew XX%

both we So starting quarter, from third business will assembly and grow. test see

HoldCo Second revenue quarter XX% grew quarter-over-quarter. 'XX

revenue First HoldCo half 'XX grew year-over-year. XX%

HoldCo year-over-year. margin 'XX half operating X.X First percentage improved points

half Let 'XX. me the about talk second

expect quarter-to-quarter than previously previous revenue as very quarter, We're have strong improvement, our we indicated. and demand seeing target. third We and ATM quarter fourth margin

Our semiconductor grow do better twice and last last is we than now, XX% our guidance that. we momentum into previous our The estimated will Right guidance. will better than of XXXX. sentiment will

half. second target, words, half higher XXXX to First a and previously year should full at up gross further have X%, we margin target expansion end target gross Therefore, in other first exceed or expect we at 'XX, ATM guided. In margin year QX. as we the achieved margin full do the operating HoldCo in XX%. QX X.X% target half

about indicating first I me talk business to will a Let than the outlook. XXXX short turn demands with strong first another quarter. better term the seasonal

XXXX. first XXXX extending all service into the has of another than our strong in of to know, you the expectation. We're customers As quarter beyond agreement forward of looking Many are term QX long XXXX. been XXXX stronger

comment expansion and equipment, expansion complete on The ecosystem. the consider it. has needs process about ask been, capacity me the material, balanced Let and which people across continuity holistic supply to many

and supply the the need still will in other balance managing in be bottlenecks. very we Our demand to earliest of estimate, In be words, XXXX, and the smart in be XXXX. efficient sometime very

inventory about exist. and control ask double booking people Next, may which

to with at from should in the business be However, ASE's little OSAT demand overall least momentum, impact overall with the perspective. very that temporal and fact localized profile

What with is perspective do a of trying a On here ASE's current I'm longer ASE's outlook. Next conceptual is OSAT diagram about this outlook, state of page, I concept I page, the business. on trying on have semiconductor to What share do would illustrate a to term I'm to maybe the perspective, comment business pyramid. to our term. you like and to longer

know, driven semiconductor you business As is mainly by innovation.

tip pyramid. the If you is driven innovation technology, imagine is which at of by the

becomes length, the taller, not in bigger all than innovation becomes proportionally. support more This to the the ecosystem. to pervasive, width, taller pyramid, our the order description mathematical a increase need pyramid As exact the height, is the of

seeing However, that. can you have see two driving we conceptually, we're What today forces. is

So let of them. one comment on me each

EV, all is industry what already the etc. including IoT, The the AI, first manufacturing, time, [indiscernible] longest one XG, smart

and all instigated this system to innovation type you the be to demand demand which in of for need new devices. incur for semiconductor pervasive scale, Now, infrastructure, will therefore for develop new

had the last similar COVID-XX in the did to However, this. the innovation. What not the two It's actually we impact. years, new COVID-XX unexpectedly, is

it capacity a any function asking infrastructure. used increase existing or demand on without a step a pace. building up at However, systems new sudden of is the industry put to The slower for very

COVID-XX the the develop leveraged systems. demand a infrastructure, we on quantity also While only up they infrastructure, effect new large of cranking new the existing systems. for is But we're

the which will a start even by of like Because driving. the example, incentive up developing So manufacturing, the years. the off be do demand do the COVID-XX talking IoT is how long this know What not the smart two wave seeing We now. can will caught actually industry are is impact The know about can Signified manufacturing a last. And on XG would innovation, make industry years, that we're this act lasting we what building new be building on industry. building is chain devices, years, here we dissipate impact guard. we're to The infrastructure. be five capacity. are capacity, accordingly assembly we capacity in a short. also comment are accordingly. in test the is the up IoT, two much EV, for the next by of vehicle, Therefore electric the for huge and the the to COVID-XX impact The supply I on we five all whole industry, a AI, the to longer wafer much, if autonomous great is, to

will new All this and a of brand new system. infrastructure new paradigm require

to our shift. the perspective term, the building So our semiconductor great we accommodate to increase COVID-XX to capacity healthy. the while a by the by build incentive driven capacity new the have of very requirement paradigm accommodate is, up future are is Short system demand needed we

going So the me the next page, let for to talk tailwinds about perspective. our three other

and consolidation. customer's service The first the alternative. for standard, everyone, for our supply term, provider platform accept What proprietary, is great consolidation constraint is secure more will used OSAT OSAT. other is and suppliers. customer, open is what now accept alternative. customer, forced thesis the has being forcing done chain Foundry platform why supply this gaining flexible the Foundry This over proprietary our like industry more words, Long be share to be to and are the In to open and

for about known. talk flexibility third seeing What ASE. chain heavy we're in Taiwan years has cluster very, supply last me Let CapEx is, cluster. tailwind, Taiwan a the and investing including Taiwan has been way, efficiency, few scale cluster of the very economy been

matter fact, cluster efficiency. and is another of merger As ASE/SPIL synergy example of the Taiwan

choosing additional virtuous sector So their CapEx with efficiency cycle. a this hand, or as forming choices, in preferred a invested, Taiwan with more positive is with customers

ASE market is demonstrated leadership Let tailwind a talk margin, which scale, Co. efficiency. me clear share, the ASE today HoldCo. in last about Holding has

silicon driving, We manufacturing, smart XG, and integration have about how non-silicon silicon, sensors. with view will a the including demand silicon very clear new autonomous heterogeneous wave,

AI, the view high which driven, clear by manufacturing, the very a and about is have data tracking We future big done quality automation.

turn a will thank de for floor the are you I Ken. you. manufacturing the today to indispensable With that, We an for facto Thank listening. I choice, partner semiconductor ecosystem. back

Ken Hsiang

depth our go Thank you, Dr. financial into Wu. in will I results. more now

First order that like for reporting would of off, to bit up clean explanation I an of needs transparency. of sake the business a

our of XXXX. Asteelflash its acquisition you completed As subsidiary in know, USI all

price the Given or allows purchase the IFRS companies year is valuation up is usually valuation retroactive process. a adjustment PPA, complete allocation a complexities completed, generally of made. After the to this to process

purchase or Asteelflash's our price completed On adjusted representing first of balance quarter allocation by allocation the NT$X.X quarter. our into we as million NT$X.XX during per totaling results of price P&L, billion, retroactively expenses X.X% assets quarter. NT$XX.X incremental sheet total purchase share. the the our have first in Accordingly, second was booked the

by holding percentage margin points. has margin X.X reduced reduced company points, quarter by percentage while reported been gross operating First has been consolidated X.X

PPA at added Intercompany our adjustment. Please amount will to find where our Page net in negligible current operating growth and For PPA be will quarterly turn on businesses consolidated quarters course in during results. margin have quarter. our second future been period to second you the considered to approximately X.X%. the EMS future ATM and eliminated impact quarter transactions income will depend impact but NT$XX future is will X to less between than consolidation. of million This Impacts be per revenues such

NT$X.XX. the recorded increased was diluted and ATM EPS of had by For dollars basic a Consolidated primarily second revenue business. increase XX% our we of sequential by by of XX.X%. quarter-over-quarter, quarter, profit gross and billion with a We X% EPS net driven year-over-year. margin fully NT$XX.X gross NT$X.XX This of

appreciation. percentage improvements to NT by year-over-year appreciation of a point principally point to gross points Both two and X.X margin. percentage sequential dollar negative impact year-over-year. the ATM percentage dollar negative and Our are in sequentially, X.X by improved offset NT business had part gross higher margin impact margin X.X margin a result points gross mix, percentage

to billion NT$X.X sequentially. by increased expenses operating Our NT$XX.X billion

at flat percentage X.X% and expense year-over-year. declined X.X operating Our points, stayed percentage sequentially

an see rather to percentage improvement last maintain sequentially than year's percentage Operating X.X targeting and from year-over-year expecting at points margin now we're year, the X.X increased to X% XX.X%. For to level. points

we for quarter related billion. foreign was net activities, our tax gain sales for XX%. offset expense rate the gains quarter, had consists exchange NT$X.X the dollars. investments billion of the to amount Tax expense a by NT$X.X part of in quarter non-operating billion. asset primarily effective NT$X.X and interest second During of was The net This hedging

earnings third expect undistributed the tax. our annual For to we quarter, record

the an rate of account dollars such the please For Net impact. quarter third quarter NT$X.X an increase for billion modeling NT$X.X improvement sequentially, year-over-year. use purposes, representing for for of NT$XX.X and to effective of an tax income billion, XX% billion was tax

line would On a reported related expenses revenue our margin Basic would is dollars contains transactions profit businesses. holding the billion operating PPA provide PPA an margin. worth NT$XX.X excluding Consolidated inclusion be the eliminated billion, and ATM expenses be X.X%. the of P&L. bottom company excluding expenses. Operating NT$X.XX. with EPS gross NT$XX.X between a profit PPA key level ATM NT$XX.X of margin ATM at X, Page XX.X%. of that we with be intercompany EMS noting On the profit here It to the gross net here billion P&L would with without would is Net page, related of revenue our be items XX.X%

looks our this XXXX. and healthy business very Dr. indicated, ATM for into year Wu As heading

NT$X.X billion and up year-over-year. of the For billion, sequentially, represents quarter from period billion year. same and XXXX, previous a NT$X.X the were second the quarter XX% from last increase our ATM for business increase X% revenues NT$XX This a up

Our our and X.X points of ATM for X.X On revenues our ahead sequentially, our grew percentage revenues in XX.X%, margin ATM by Gross US dollar was expectations. points profit basis, X% an business sequentially. up ATM percentage year-over-year. came

sequential impact mix environment. and a gross higher The quarter-over-quarter gross Our of X.X appreciation due improvement a negative NT despite the primarily year-over-year improved margin a percentage was result three percentage loading. friendlier to impact primarily having point ASP was gross improvement product higher improvement ATM year-over-year. loading, was margin and accomplished dollar margin point efficiency,

even for in be ATM already full year our margin with year gross We first in XX% improvement margins, of to expect the able deliver the gross ATM the half quarter-on-quarter target. of year reaching the last half to

driven second up $X.X employee and annual sequential bonus profit up year-over-year. billion, the on model. accruals, $X.X billion are increase increased $X.X operating and primarily sequentially, by based expenses expense was The were quarter, During a sharing operating which billion

fair profit percentage percentage was XX%, XX.X%, points, down had year-over-year. negative ATM troughs. operating we of having was revenue The PPA highs, is operating scale percentage ATM XX.X%. margins. strengthening by we the position believe sequentially, On the representation gross immune our of year-over-year. linearizing that to percentage percentage our points, X.X to X.X higher sequentially, benefits our that X.X related cyclicality and by Operating is the mention we our ATM points X.X would find historical will believe margins almost XX our business and would three not XX.X% On to think a margin achieve percentage gross hitting year-over-year point quarter-over-quarter to the Page dollar see synergies points margins and Dr. we graphical P&L. operating that shallower four amortization, Our impact it's expense a as tailwinds Without and peaks percentage be But here inherent X.X Wu, electronics. and ATM future point NT margin do market with mentioned and margin and down be depreciation gradually to you'll I be Page in improving When X, of impact segment. profit do and impact

market You widespread our near would automotive, has likely. our XXXX. by can communications with more decline term our in has see our components communication communications computing see segment products. and our can from of Meanwhile, steady somewhat seem consumer here here, segment, driven performance related be overproduction been we such with And related that what not other a it speculated since share devices. communications up importantly, a to by in decline roughly picked held segment Again, less

create earlier consumer basic On Page too new trying find products semiconductor our quarter's in Wu's statement and revenue much will movement by ATM XX, Our expansion There's been generally you of devices. This near Dr. term performance that growing primarily by to and individual supports here. general type. an technology more each service noise understand supporting expansion. has driven

the story. when a chart a more taken whole, is as it complete However, tells

EMS some our revenue improvement Chinese will the services EAR. impact for year. information that the of using a business. independently the EMS start by subsidiary, application. business bond decline, and the do advanced you products have regards do this of of to to differ representation by with may here a see provide our can we a as our gradual strength On information wire You We believe results XX, the in seen in services has provided GAAP. graphical The of of US can half our the Meanwhile, materially EMS which and from they business however Page rebound our of advanced back report see our underlying related gradual directly

PPA quarter been adjusted first As retroactively mentioned the earlier, [indiscernible] have of for costs.

seasonal Our revenue trough. second the usually quarter represents of end our

main that is what revenues of this customers expectations. slightly experiencing quarter. unusual the are the is more why saw in the we reason our second component fall EMS year initial impact of our However, many our is of short shortages This

the the pushed of third However, into shortfall this do we that believe revenue out quarter. gets majority

full tends business things for by production investment speed. second The characterized lines readying be third quarters factory when quarter get preparation, expenses up fourth EMS for to and the our to training mass and

is more requires factory case, spontaneous that the upcoming product oftentimes year true is this quarter As it's up especially the we COVID nature for spending two of when This ramps. during a have new locations ramping spread.

costs startup have As for half stage such, to R&D, extra and set the to operating the second logistics we in incurred costs quarter related factory growth. second

increased year-over-year. quarter, second XX% X% the and EMS sequentially During revenues by

sequentially, profit and of annual The different mix. business sequential billion is percentage higher Our gross was in and X.X X.X mix. profit of EMS EMS due sequential margin increasing gross EMS from billion which higher at decline primarily The of point and gross points, improvement is for unit a year-over-year. cost the margin X.X%, product [grew] profit the NT$X.X product result NT$X.X improvement and of year-over-year result came to was primarily NT$X.X overhead. billion, decline differences operating The sequentially, an is in percentage year-over-year. Gross

increased EMS billion second year-over-year. primarily up sequentially, a R&D a up increasing result Our operating are while startup a costs. result operating operating business of expenses billion as factory Sequential base. NT$X.X NT$X.X as were increasing operating unit's NT$X.X of expenses Annual were larger expenses quarter primarily billion, and

increasing year-over-year. factory R&D expense X.X percentage increase operating Our by sequentially startup percentage expense driven percentage increased primarily points, X.X% points The while X.X costs. and operating higher to is sequential percentage

the seasonal back up our half production of ramp to expect percentage our during mass temper operating as our revenues typically down upcycle. during We year the expense

extra more result become shortages. Our near X% costs the the see has business a our target and shortages a one. challenging We challenging component a term. more component more COVID of has for in of of EMS worsening conditions operating EMS operating this had Therefore, it's underlying margin the run changed have a not simply, do to than start year, or difficult and our expected. subsiding and as now business expensive Quite conditions

of the application. will by a EMS graphical bottom half page, our the you revenue find On of representation

softness. total used are balance XX, like Page The increase brought the amounted consumer here is dropped by to you dollars. ratio capital operations declining that slide Amounts XX, for quarter our million the credit Machinery line On packaging, of industrial expenditures. products in seasonally denoted The NT$XXX.X will net while on totaled our to in key is and you would find industrial second US$XX change second with debt US$XXX are here to and about a testing, driven X% others. our equity million, expenditures the interconnect million find equipment million million XX%. were only products things US$XXX lines Page our segment up capital which US$XX after COVID equipment and quarter EMS and items more to unused materials in in and On we in from $X add of picking billion year sheet. will this US

As quarter, we And end a capacity expenditures our running last the XX% this capital more range. we from of are of this on up constrained to from end continue environment. to the the of higher XX% year, time, still see although at second in

the improvement sequential to XXXX Holding quarter second quarter the levels. increase XXXX with versus The XX% we third as However, XXXX status equipment volatile would of quarter of expenditure improvement more than in differ that outlook business XXXX. this volume to second third accelerate. like US quarter timing ATM may should is provide year's or be quarter be stable margins our ASE sequential dollar with terms previous capital In third similar timing gross years. With may ATM follows.

around margin in for XXXX quarter operating be targeted With terms, slightly be We're should level level business, higher third operating average that, US fourth than in should quarter our time EMS XXXX. of slightly EMS our I'd EMS dollar differently doing it XXXX margin. third For the XXXX the the around. quarter questions. third business floor full like to year open this and

question, direct and Tien. We the get we We - different and Joseph I I when people rooms then repeat to throughout would the will question. scattered it over And have such.

So question, please. Session Question-and-Answer

Operator

Gokul? Our Hariharan is Gokul of first question Mr. from JPMorgan?

Gokul Hariharan

question. my a in as what demand/supply Yeah, margin My to XXXX. little terms thanks pricing talk Could you're looks you It XXXX. balance a situation to trends, similar going is in on trends about in first question Wu of you taking bit for mentioned year? like coming Dr. be what next be expect still

So this? as QX you focus. investor which into little talked booking estimate booking, we think better book-to-bill XXXX? when to how very think book? double Secondly, first for early That's demand/supply? affect looking your big And is does how how should year about you being a do you talk my order question. How could next seasonal you about is You that allude than a we about also bit head did and double topic book-to-bill within about your

Ken Hsiang

for double I then for circle for were asking to number the over back Gokul. to outlook year, questions two a Okay, of of booking. XXXX. were to go trying somehow around. And contracts and pricing also here next that up questions for you have Generally, keep we concepts about an

two, the pricing for outlook with XXXX. go first the the let's and So

Tien Wu

fulfillment. our to make first delivery so and Alright, customer priority is

all efficiently customer handling requirements been XXXX and throughout XXXX. the have we of Now very

continue to will that. We do

estimate or half into expedite material either occasionally, XXXX the the is we you make for XXXX, very of dynamic. pricing is believe second the a to well where get I we'll year current quantitative pricing full to very as because need what the a we continue fee. the will cost of adjustments, for higher It Now a situation the is difficult this give as trend.

first is Our to make priority expedite delivery.

be the remains very However to pricing environment friendly.

about The question we seen customers making some have overbooking, the second adjustments.

timing delivery seen some making equipment also were adjustment. have a We

about completely I not may mentioned chain be slow supply the business they to However, due the continuity. down.

point process Sometimes to and there's you do while shortage, the substrate on at makes the no one BGA time have shortage, lead over capacity have equipment same not or there's sometimes materials. a a frame

the the supply/demand XXXX, delivery. that easier XXXX, of sometimes not will we balanced So definitely in capacity a And hopefully I in comment and that time will customer made, have balance be in an holistic a we XXXX. to more see will execute

Gokul Hariharan

it. Thank you. Got

Tien Wu

Exactly. Exactly, so -

Gokul Hariharan

one clarification. Just

this guidance at it think looking on year, you IC sounded for So I growth XX for like a on are plus ATM basis. the percent USD

clarify if I right? to Just that, wanted got

Joseph Tung

That's correct.

Gokul Hariharan

up. you. I'll you, thank Okay, queue Thank back

Joseph Tung

But EAR. on this I mention our via business the of is recovery affected to do top want US that of

full also Dr. that mentioned exclude the ATM his only overall making in in XX%. if again, schedule, business Wu a business, - the of So affected actual than our the tests, also rather excluding half, actual from part the part not of of as first was growth And growth XX%. first later our that we the presentation, the the ahead terms are equation, the recovery if year, we about of half, in EAR is

in terms very, it's Yeah, XXXX. and we're So seeing point. leading growth that strong momentum our seems very it ATM to at business this of also a

Ken Hsiang

question. Next

Operator

Next Mr. Randy of Randy? question is Crédit Suisse. Abrams from

Randy Abrams

Yes, you. Okay. thank and

I'm Okay, can phone hear me. the you hopefully line, on

the heavy I in the stretched supply do and - assume first delivered just seen pretty how of would curious next the times those year. get until we've about but tightness back lead The I'm industry you side, question, equipment the out, for equipment see to comment XXXX, are bookings

COVID-related PC, if factoring you how then consumer coming through think that equipment you - resolved, bottleneck high the side, are So the electronics you're I'm demand back moving home fear are the base. next viewing about you And curious, how parts environment? on from and it on There's one off some of side, of end the supply the the gets year?

curious, for or continuing either the to what comfort year, as gives tightness Some factors next supplier, I'm you're what just XXXX? those the reflecting if

Ken Hsiang

regarding you're the Randy, question or a looking the for So situation -

Randy Abrams

Yeah, equipment.

Ken Hsiang

in see looking for demand the structure. and year's tightness, Relating an also impact to we demand end changes overall next back whether overall equipment market and market on

Tien Wu

Okay.

Randy Abrams

tightness Yeah, the just for to way to give the all confidence 'XX? right. That's

Tien Wu

delivery. talk machine Well, let about me the

lead machine I time the improved, has think I last not is year. improve And right the start will It now call. lead conference as is to delivery not as time believe this bad stretching. our time the lead

lead have expansion. in a we about time capacity once lead I process Sometime becomes see still time surrounding But better, the Well, balanced gets XXXX, better. you the talked to might and need everything that. the material

I next reasonable probably will up time year months of capacity the between way year, believe as ago, more I believe as So the be and well build throughout some this six all in profile. will balanced see XXXX, a we

the Okay? little second a is answer, comment bit more The to difficult demand.

have Now adjustment. we seen some

the sector in some some example, For of the making customers out are - push delivery.

for the very other into of is overall strong the because which clearly situation, and to switch very, test ASE necessary it application, on demand easy equipment the over demand. side However, is very the assembly the a on

some adjustment. has is Right in end reasons, bank tight healthy making are of high, kind but still adjustment will think to of for local wafer some I everyone. welcome, is situation whatever so delivery now, are have been why now the really mentally this reasons - we're each because Our correction very they their width inventory right not which local our spot, concerned the about due not unique now, actually, customer terribly the

will strong XXXX. pyramid. half, the be continue So to I second it strong about I think demand talked the will for be the

COVID-XX This any have of people new infrastructure, what - addressing. articulate And all COVID-XX, are of we will just Now I we're struggled don't the on asking systems. When the now. problem therefore is impact we going for about short. are that. talking see sudden a devices increase without dissipate, they right long of is for conceptually a new really do time how

later, this Of course sooner disappear. we do or understand will

of the waves lot demand have semiconductor of manufacturing, up following levels. system aggressively devices new all we're AI, which multiple turn infrastructure, building IoT, smart in the a require you will However, that which

but I sees will in industry XX comment good you Everybody or has is the industry infrastructure So curve. is short. mean, deployed. COVID-XX build years. do no of the being are I practice. this incentive years a standard a the making. that short ahead will the new incentive, we think be impact manufacturing Foundry give years, three are guys though this, the know, four this fabs very The And to two XXXX/XXXX, even term not This be

is However, all enough be of our this world. what the capacity will will the we vision have belief view for be and that is. good and - the And needed

Ken Hsiang

question, please. Next

Randy Abrams

the okay, a second above Thanks, And seeing the question those kind are second just just too. weakness? the That's chain you you mentioned second And you driven I application the question think any the pockets in one The adjustments, down that of my clarification if great. up - in yeah and by local and or are constraints first guidance, just clarification. know the of quarter then question on seasonal. first all

And on to know expedites there's about For stable, and IC ATM you the fourth environment. talked quarter, part other if pricing in I friendly grow expect you're quarter? the do fourth coming then up with quarter, above seasonal in a third being

not pricing? improvement stable keeping seeing curious, So kind of we're price the little I'm season, bit a sequential what's or of you're given peak on in why a

Ken Hsiang

quarter, fourth rest a of outlook, the for looking quarter somewhat also Randy, a pricing and the a so commentary environment year. for fourth you're of

Randy Abrams

Yeah, yeah.

Tien Wu

And first is, component think are adjustments. comment why the could could local yes, we a be be reason there Okay, it related. seeing we're I I know or not some related business local adjustment. do It the - shortage

And those temporal. very localized right adjustment away. up adjustment and down However, we're seeing are and the

of on The is, QX yes, to are hoping like overall QX, last The is previous QX at not just does least best think another comment So see can the growth. year. comment what QX QX I QX see growth, we expected to the year. the point this affect to the you this give now. of I'm we business momentum, at it time, better is we can expecting of than about XXXX, course, We're of comment QX record.

XXXX. I'm say good XXXX going then But a throughout a that later optimistic date. a And that current for. in if will this with deal is view, I'm this the QX not to our hoping XXXX, we'll And and have believe, I momentum However, we at clear, now. right is what carry

Joseph Tung

still A quarterly also, continue improvement, side, volume And in and for sequential we're as bottom here. on line. for the on in very, a development well growing we're also efficiency expansion is automation. the aggressively next continuous for financial improvement terms basis margin. well of thing there's also margin we is effort Joseph including on forward. to - as very our That a an the going And as further growth healthy we this will of seeing room I'd see year as year, the half see performance. seeing, say, overall second

Tien Wu

there's not mean, about one talk pricing I will overall comparison. I the comment,

However, I by on the the you are you based mean, from profile, a efficiency from defined margin look make the eight synergy, the quarters, improvements is improvement that how doing not we pricing constant supplier. if by And automation. then quarter-to-quarter. Under at given pricing it's detailed last much how efficiency market. a much individual assumption, is improvement any analysis

solid will the Hsiang baseline confidence in All going in maybe we looking comment, made a the when a - now Ken are add of more that to said and this number XXXX for the up forward. future. we

Randy Abrams

Thank you.

Ken Hsiang

next question. Alright, the

Randy Abrams

Okay, you. thank

Operator

Bruce? Mr. Sachs. Goldman from Our Lu next is question Bruce of

Bruce Lu

you can me? Hello, hear

Ken Hsiang

Yeah.

Operator

Yes.

Bruce Lu

your Okay. result. long to Oh, for regarding question is the contract agreement. you Thank my term great

business So end I you that know that you're have big wirebonder. a complicated, actually very is

contract? your How this capacity have [indiscernible]. this? ask that You do I How is kinds secured much have does long of your of for work contract? long different How wirebonder, you term term by

Ken Hsiang

long character relates question and first term - to contracts? your the So our of the

Bruce Lu

Yes. to Help me understand.

Tien Wu

covered majority think I you more the you large very, I I it large mean, I contract. to can give is anything give that I percentage. think of a is the specific. service can it's don't Well, comment by customer very a

Bruce Lu

contract this mean, the actually capacity secured - the of most the I only has incremental for Yeah. or capacity?

Tien Wu

go needed assumption, to capacity of that intrinsic, it. and assembly big a lead compound, frame, is inherent there is materials substrate, of capacity, processing all have is, keep the whatever secure capacity, also to For referring comment not assembly when And look the all - assumption. have molding with think I the incremental. and That people is, you the today the will at that I to

the well as beyond overall to not secures into term contract part efficiency XXXX. management and well supplier And of I flexibility support continuity is as the the ASE XXXX, long it service customer balanced to. assembly was the this referring and overall only our secure the also as needed XXXX, as partner, So the supply capacity,

you're asking look real the really you for the competitiveness, se. the beyond effective or If assembly and have per test to

overall competition against ASE you the what provider and number seeing be understand the That's the proprietary. peer. But the competition, should from to I behind our campaign materials, seeing wafer, supply this analogy, you We're seeing look service the what nine whole to. between follow the we're the open if the was versus will referring same at yard able it. we're You regional meaning and is seeing. platform and We're the

Bruce Lu

term competitor supplier kind do - Because much contract, you contract? see. get - the reasonable can can long that I also a believe your have of term this long who or ensure pretty secured who it's

Tien Wu

a as do. good but I the don't competitor, answer, I'd assume know they

Bruce Lu

other their the how Or by hand, your term much of is demand long this contract? secured fully customers, on

Tien Wu

by long can development. best I illustrated well future think as the agreement service customers, term all as the the technology the be of motivation

If have short only you the are will the also facto you choice you all by will customer, not have future of pipelines. term/long the the loading, term de

whether of everything referring actually the So existing automotive, facto when customer, versus I or we future that key as I'm all-inclusive. just make IC talked or de to well as system the about statement loading the pipeline, our and it, our

Bruce Lu

see. I

next for mean, margin. my a exceed the high posted And gross thanks, gross greedy, result, for do that great bit but already so for semiconductor little basis? Joseph. when the I that expect ATM, a for again, your historical - is margin gross you comparative lot you high the of I'm Okay, a congrats as margin companies question the historical

Joseph Tung

be. Well can't we if - we

Tien Wu

That is motivation.

Joseph Tung

And historical surpassed we've our peak. already

Bruce Lu

in you Well, if forma you SPIL's a use pro yet? gross no, if not add basis, margin aggregate,

Joseph Tung

- add That's passed if peak. to what the we have basis, fluctuation, we as FX our we that plus the already if bear, that we, we're including I'm PPA a already even saying, historical SPIL's combined well as - on passed

Bruce Lu

we, the norm gross - your do to So do gross because see value you fully How what to the we increase margin? how reflect how the we do know surpassed if for is new do we, margin? already proposition how that, and the -

Joseph Tung

I the clear your In if still fact, basis. mean, heading I being than basis, are. don't don't in reaching I'm peak PPA, - the if FX, on nominal you historical if may, an I I'm count the I more count the to annual - on

back half will quarterly confident that that. will in was it next XX%. about a the passing highest be on our on basis historical basis, second broken. reached And this, year, that think I annualized gross we I'm record pretty the have be We margin in And XXXX,

Bruce Lu

you. thank Okay,

Ken Hsiang

Next question, please.

Operator

Rick? is from Rick question Hsu Daiwa of Next Securities. Mr.

Rick Hsu

Now, can you guys hear me?

Ken Hsiang

can hear We ahead. Go Yes. you.

Operator

Yes.

Rick Hsu

great. questions. Yeah, just Okay, two little

the - is Joseph. The question first for one housekeeping the

board for in and what's outlook what's QX? in utilization bond, the the assembly your So across for and QX wire rate testing

Joseph Tung

assembly for about will over QX, XX% third in XX%. and tests. In I assembly, to XX% of assembly close wise in terms and test, over we're it's quarter, we be for think XX% And for

As we now. mentioned, we're running relatively our capacity full

Rick Hsu

is the wirebonding? Okay, be your for question - into across the When friendly assumption much for QX and to you more maybe pricing, going about great. for or specifically pricing. pretty just presume I next board and it's year the your And and your it's second QX about so

Ken Hsiang

the prices, Rick, or whether wire you're raising raised board across asking bonders? about or the on plan that we've just Is question? on prices

Rick Hsu

right. that's Yeah,

Ken Hsiang

Yeah. Thank you.

Tien Wu

QX, SiP already Our up utilization product. we'll the will start In be QX QX. full QX. ramping full for in and We're

busy. fabs not pricing the is a So concept. be will adjustment very The

raise am dynamics we don't business I to want price the answer, I not, line. have need follow across product our to the based privilege on however, not I have requirement. will We and and

that is might a we However, so. possibility there do

Sorry.

Rick Hsu

for the Thank Okay, you good Thank so yeah. time. that's Yeah, enough. you much.

Ken Hsiang

Next question, please.

Operator

is of Szeho Our China from Renaissance. next question Ng Mr. Szeho?

Szeho Ng

afternoon, Good Hi. have questions. I gentlemen. two

the one have you first number latest company not the the is for would that the merger, if their ratio. ready quarter. I'm before self-sufficiency The take out sure substrate

Ken Hsiang

repeat Can time? one question you that more

Szeho Ng

merger percentage you if before I'm self-sufficiency, have the you not past sure substrate of in with same could the share SPIL. that with The yeah. Oh, gave the all out on hand us? you that

Ken Hsiang

percentage. substrate for our looking You're sufficiency

Szeho Ng

exactly. Yeah. Right,

Joseph Tung

XX% And Well, it was XX%. hovering - around to

Szeho Ng

Okay, do you think well -

Joseph Tung

I still is around think it that.

sense, current in-house additional because actually a an stronger power our the of over and give the materials think or buying edge us in of or capability, substrates competitors also I our capacity. our tightness

Szeho Ng

already Oh, answered. that's my second you question. Yeah,

also And year. time, add roughly on XXXX/XXXX bond an the delivery the you planning Last provide schedule? could mentioned update this other that Okay. you wire question, bonder the is to wire company

So to wonder will if just be that there number? upside

Joseph Tung

Well, testers. added slots, to bonders, added second our be we to And test X,XXX, XXX we close quarter, in exact. XXXX the

still I - still ongoing will delivery half the is we're for And hopefully, we think are and year. full our second we the delivery. target that seeing maintaining in a have

Szeho Ng

you I I And can time roughly last mean? full great. delivery, October timeframe, mentioned delivery, remember Okay, The right? is

Joseph Tung

point. are very Yes, at but this as Ken things dynamic mentioned,

that's So, goes. the see we'll you but it know, how target,

Szeho Ng

right. all Okay,

Okay, you great. and Well, thank very much congratulations.

Joseph Tung

Thank you.

Ken Hsiang

question. Next

Operator

a have your now. hand question, please you If raise

a have from of JP Gokul? Gokul Morgan. We question Mr. Hariharan

Ken Hsiang

Go ahead, Gokul.

Gokul Hariharan

closer Thank tight supply agreements? the term higher. Yeah. or my still to remain are you Do to in Could about of be taking bit going given think you going to That's longer you for feel the about question. spending, sign year and this my XX% this high up again. at billion is XX% talk to how to $X is you range also mark is going customers or little looks be willing CapEx a next year for quite end even to first question capital high the like range

Ken Hsiang

outlook plans So into on our looking expenditure for an capital you're XXXX?

Gokul Hariharan

yeah. Yeah, just wanted know, to

Joseph Tung

it's year, for but well, the by - previous of range, don't - of I still don't I high the XX%. are end preclude think you're this or again. our of CapEx our this the maintaining I at the will be the way plan raising actual, And Okay, the right, going, for possibility maybe we year,

a really we market remain year, talk overall will too market, the situation, on next depends XXXX premature to it's be demand. CapEx. additional think although that, about bit little I after It there

Tien Wu

and - at is want statement The IDN - give the will you see in will of talking and the has the all to believe a want CapEx CapEx make very example, since the incoming for been there be to another of same time, and is, XXXX. you look for at for OSAT Just all why reason the XXXX; I scenario. now I XXXX. be in about fab interesting new wafers Tien. from I it the ASE are high But for different backend. that to keep this XXXX very started and that will yes, just very, mind, angle we XXXX

for demand, if about for substrates/lead view provider a a backend is needs and though it. make in And thesis guide up all if dynamic demand. customer, have all frame system of a will as part on will consolidation Therefore working the we other say, and there IDN but XX-inch, a system the dynamics less a XXXX, demand the be wafer that to the as all in different The to well to the there's Or better little that's much demand, even by system infrastructure or is the will So the the overall supplier. it demand, all investing who the down But scenario. there are demand case the X-inch be business early no are IC in of and XXXX, with new bit wafer, service will if for process. OSAT double the then the backend backend, the order of delta. XXXX earlier depending

you better We scenario. a in much will of number CapEx the give much, terms

Gokul Hariharan

little capacity Understood, you that spoken on Could Like LDAs. the are thinking in that follow how how about CapEx talk talked you margin your And maybe up is of for CapEx up? about lot one in You on returns bulk think future? how of about about front. gone you clearly are these being the structured? LDAs a a gross - now being bit

seeing likely cycle given the more through of higher, pricing is with commit what terms been higher, margins customers talk So to where has of can much historically, how that returns, there some about are And we we I returns much more something context, should your to longer seen mean, like or OSAT think about the we're term in is to returns? and willingness give just contracts? dynamics and that be cyclical as

Ken Hsiang

type especially semiconductor CapEx the evaluate we right? context environment, how about of the supply asking in you're Gokul, of this

Gokul Hariharan

you give and you Could hurdle that are when of, investment think in kind or ROIC CapEx the about or threshold use general? what ROE you rates

Joseph Tung

continue apparent we situation, return think on the have ROE are expansion, FX the you getting as I margin the impact, the XX%. overall to some we better negative a return that XX% but about as is threshold although have that a impact it's mentioned, to very is as at looking does

Gokul Hariharan

right? XX% for investment, new

Joseph Tung

correct. That's

Gokul Hariharan

you. very That's thank it, Got clear.

Ken Hsiang

question. Next

Operator

question Next Citigroup. Roland? Roland Shu from Mr. is of

Roland Shu

can hear Hi, me? you

Ken Hsiang

We you, ahead. go can hear

Roland Shu

Okay.

late. dialed-in Sorry, I

questions will if several from overseas. me, has plans new ask. TSMC me question to fab build I excuse my So A first is

business global it do to catch a So if to And ROI? you increase long the to fab mid how term? your built your well as so, prices impact the CapEx the in are wafer plans newly on opportunity want considering you to will spending

Ken Hsiang

of So term your thought our terms relates question global to longer expansion? process in footprint our

Roland Shu

Yes.

Tien Wu

diversified right, answer believe company that to ASE you now is, question footprint, I most at manufacturing by All ASE in if look far the OSAT the is world.

Singapore, well Korea, US and Japan, and continents, of China, course, three the and as across factories as have We Taiwan. Malaysia,

we So in terms the of are already diversification, there. global

want to part - the that which you you bit I to demand, delivery ask, be very, business as short to the piece, well China develop will a When think service how world. the overall you add look the have the provider? For respond Samsung, building a sensitive. contribute to this very we technology are by dynamics. or a sounds the little answer who pyramid processed. US to sensitive sensitivity, at the your service that or are will the in the of specific, to If is which the different After initiative, will cost pyramid part provider capacity into it user, Okay? And TSMC test which pyramid and that, and that is two user, sensitive, cost like offer which simple. And you So sensitive. the of portion efficiency the So massive by in look the to actually scale really effective, will I is, as process up piece, as you location more complicated, those Then flexible most of the end initiative, assembly at, in to route? pyramid very national picture of incentive, manufacturing a part as you under smaller that little end Intel semiconductor security who next the can different alternative portions, is gave are the I well is geopolitical question but everyone. of dissect are or goes the the the given

a will build requirement. does, of all When to any it and the be does ASE? the need. to what the alternative any assembly it at look volume partner that Then required will test the route? fails, If the anywhere to we we on based fab accordingly be have if business So the comparing is at other we the make wants foundry investment in look we world, ask output, the question,

by service diversified a requirement really the footprint, on on to we globally way, And have right as depend very in answer already business. a So footprint, not we that you. It of world. question clear assembly short but long by business a very, everybody test. the the make portfolio different have will the today adding by for this now adjustment been asked is Thank question, because the is to and

Roland Shu

business. last But is to In [indiscernible] probably for have try testing thanks. grow Understood, been testing in the three business. a year not to second two you past the My good because years, your question our about year think banned testing your supply the chain. was goal, your have I

going So the you grow business the to IC planning now total of testing still for look of and terms further testing Are you percentage forward? ATM your business in do how revenue? your

Joseph Tung

fairly Yes, terms we have the we were year, other I customers. think the busy of kind so serve of half to the test successfully. our capacity And realigning first of in done

the we'll half to going we As year I - further bring back first expand our to schedule. of test test have going fully start test said, to growth our forward. will business be continue necessary and will recovered further we we as investment ahead the mode of a And forward, make business business in to mentioned, I our the making the

Roland Shu

Do revenue the of testing? the you specific percentage target a from of have

Joseph Tung

I I need the go at around that's thing first were to XX% peak think and we Well that the right for. think we back

Roland Shu

Okay, Thank thanks. you.

Joseph Tung

Yeah.

Ken Hsiang

Next question.

Operator

next Crédit Abrams Randy? Our Mr. from is of Suisse. question Randy

Randy Abrams

follow for SiP. Yes, the Thanks Okay. the up and was up. on my follow

If the for year customer could you how USI, your IC expansion about just additional what also could customers? into looking And ATM is diversification the the pipeline and update, an give and contribution now you primary an next is? give for update it then percent

Ken Hsiang

SiP, ATM view looking and our contribution overview pipeline? also EMS and on entity from its on you're So basically our the for and potential an

Randy Abrams

that's correct. Yeah,

Joseph Tung

bit. quarter, this business of grow momentum start and overall EMS, assembly XX% business, test, is Well, But investment half. second in to we last for think cut I had second continue and from I about to to still overall standpoint. and these And overall, make the our growth grow X% think there to business. will necessary will a for down SiP ratios SiP rate think about the I our a think In about the of the SiP the business continue and Holding represents and overall XX% all the I we will so will terms year, growth - in year, is XX%

Randy Abrams

for right the EMS semi's EMS bit the a with where now sounds it Okay. better for like you're And business much relative little environment - a to tightness.

balance we to you until costs back improve ATM get there's to of I you're bit difficult that back mean, little that get doing of margin to a that's of that in or pricing offset have or a of target? to X%, like kind - is the a feel bit it place program So better in like type higher does to

Joseph Tung

in at think I fourth to it higher second what we're percentage terms of in rate a whole of the and ATM in the business grow for be continue than quarter third will year quarter. the and overall will for the seeing -

Randy Abrams

operating EMS at is X%?

Joseph Tung

asked EMS about margin. me Well, you

Randy Abrams

operating EMS margin. Yes,

Joseph Tung

we're still [cross - we're, Okay, talk].

Randy Abrams

Yeah, okay, so it's still X%.

Joseph Tung

X%. at looking still we're Yeah,

Randy Abrams

Okay, I that. get

Okay.

Joseph Tung

that challenging this of all the because target. But more a target point. rising, cost becoming certainties the is higher still we're It's is overall maintaining operating logistics at

Randy Abrams

I the And question last Okay. have.

not SoIC, TSMC-SoIC, and for end get it's the opportunity XD assembly if see? to we is market that participating we substrate? to you Foveros. move - If you there like OSAT in their you a is has or or as packaging stack, I'm there's final some full to XD the in some that for just like much curious things if CAC go see that an do. Or Intel one area? would to IC, still XD, Just

Tien Wu

two And have the Well, X.XD customer in example, key of answer a that we the at the customers. provider is But XD-IC the to not serving with we're key we If development providing company to two understand short have stop. X.XD first business versus trying service customer, is is, should OSAT definition service business. along a is, have of lines least really never with have articulate I business, launch and to we alternative should the been one service of OSAT that we was The always model. a you in in at the, proprietary, least any unique things that one for customer development the have Texas. the you

multiple leadership ASE that, with the there that have platform a we OSAT comes are business So take customers into open plenty viable OSAT multiple Whatever with a a world, sustainable and of will value. that. clear in becomes

service Now, and same offering not when words, performance, of alternative becomes chiplet to multiple the the the And believe I architecture are accepting including cost there end is that. achieving OSAT, in our platform are a like be will see process, architecture X.XD XD-IC participant. proprietary people their and or will kind world, whichever multiple driving customers in there foundry absolutely this similar other ASE and only open then or OSAT versus the and that. eventually Everybody the

one terms I do is in clear. But think macro the reality very of, trend to So complicated. we take how very step is another, the

good can the think to that's But we're prove for part. today. lies the really of critical define mechanical, standard packaging The company whole development, not emerging welcome. time to technology the industrial to And they ASE will take things have have but thing lot resource more of the is in ecosystem. is the I make a for a be material will a that's missing You as terms integral think semiconductor part put will all architectural And a process, R&D that pervasive. to and And that. what seeing be I foundry have sure have unique the thermal, development, more will would which this you

Randy Abrams

you. thank and Great

Ken Hsiang

Next question?

Operator

Lu Bruce? is question Goldman Mr. Bruce from Next of Sachs.

Bruce Lu

for to the testing, want follow the I What's up Okay. have bonding for this allocation CapEx for quick bonding, year? CapEx. a wire

Ken Hsiang

location allocation. or The CapEx

Bruce Lu

Allocation?

Ken Hsiang

Okay.

you're about cap, for basically So planned asking CapEx test?

Bruce Lu

what's know, the For CapEx everything, you Yes. allocation? I mean,

Joseph Tung

think for year, the to allocation I XX% EMS. for be likely for roughly X% then and for around material tests, will little this to XX% XX% bit XX% a assembly, for roughly

Bruce Lu

Okay.

year, So equipment should assuming your now more time for lead foreseeable? than CapEx be year that your so next right a is

Joseph Tung

Ah?

Bruce Lu

now that the than a the you Because equipment year, CapEx, already more right? mentioned right time lead is

Joseph Tung

Yes.

Bruce Lu

XX/XX coming basically for spend know the already. So how going many you're months equipment to you like

So which clear pictures. means a should next that very your have year CapEx for

Joseph Tung

It's CapEx about CapEx, Well, we're about. necessarily not talking CapEx. talking the required we're when test we talked that about

Bruce Lu

see. I Oh,

from Okay. your contributing good business? Oh, give us the then the question you in IDM a ATM automotive revenue from Can next is the or question.

Ken Hsiang

you're automotive much looking so for the revenue Bruce, how sector represents?

Bruce Lu

Yes, ATM. in

Joseph Tung

around quarter the second roughly, X%. X%, Oh, to X% is

Bruce Lu

a see uptrend? clear you Do

Joseph Tung

Yeah. our Well, pretty terms we're of programming I aggressive of auto business. think in

Bruce Lu

it you to XX% in XXXX? be than more Do expect

Joseph Tung

be going type Well, we'll of year, bit at it's XX% a over actually quite it's But growth. this growth it. to - look

Bruce Lu

Wow! Okay.

now? what is So revenue the right exposure IDM

Joseph Tung

IDM The exposure?

Bruce Lu

IDM Yes, customers.

Joseph Tung

this X/X from coming Yeah. all of Around IDM. is

Bruce Lu

you. understand. Thank see, I I

Ken Hsiang

we at have questions Do time? additional this

Operator

is no question. There

Ken Hsiang

Okay. up Tien to Wu turn call. the it I'll Dr. wrap over to

Dr. Tien Wu

us. extremely I supporting to support year very please the we'll us patience plagued to very And which to you. for and Much quarter. Thank would to the but and been safe has XXXX much And challenging, a next your EAR look impact, healthy. in you year, thank you thank a exciting like ASE. XXXX us. has And you resolved. meantime, stay of for for of Well, all last been and forward I talk successful

Ken Hsiang

very much. you Thank

ASE Technology Holding (ASX) 29 Jul 212021 Q2 Earnings call transcript