Daily Spotlight 16 March 2026 (852) 3988 6433 michael.meng@bocigroup.com Index Performance | | Last close | % 1D | % YTD | | --- | --- | --- | --- | | HSI | 25,466 | (1.0) | (0.6) | | HSCEI | 8,671 | (0.3) | (2.7) | | HSCCI | 4,330 | (0.4) | 7.8 | | MSCI HK | 14,590 | (1.5) | 6.6 | | MSCI CHINA | 80 | (0.5) | (3.4) | | FTSE CHINA A50 | 14,808 | (0.0) | (3.3) | | CSI 300 | 4,669 | (0.4) | 0.8 | | TWSE | 33,400 | (0.5) | 15.3 | | SENSEX | 76,034 | (1.1) | (10.8) | | NIKKEI 225 | 53,820 | (1.2) | 6.9 | | KOSPI ...

Group 1 - The semiconductor foundry stocks experienced a broad increase, with notable gains from companies such as ASE Technology rising over 5%, UMC up 4.6%, GlobalFoundries increasing by 3.4%, TSMC rising 2.3%, and Tower Semiconductor up 1.2% [1] - ASML researchers announced a technological solution to enhance the power of core chip manufacturing equipment light sources, increasing EUV light source power from the current 600 watts to 1000 watts [1] - The higher power output will allow for the production of more chips per hour, thereby reducing the manufacturing cost per chip [1] Group 2 - By the end of 2030, each piece of equipment is expected to process approximately 330 silicon wafers per hour, a 50% increase from the current capacity of 220 wafers [1]

Group 1 - The leading index of Chinese concept stocks rose by 0.94% on February 21 [1] - Among the constituent stocks, NetEase Youdao increased by nearly 10%, Hilltop Metal Mining rose over 5%, and Tuya Smart gained more than 4% [1] - Other notable gainers included Daylight Technology and Zhiyun Group, both rising over 3% [1] Group 2 - Century Internet and Lufax both fell by over 4%, while AHG and NEGG dropped more than 3% [1] - Other decliners included Wenyan Zhixing and Bilibili, which both decreased by over 2% [1]

Group 1 - ASE Technology Holding Co. Ltd. (NYSE:ASX) experienced a significant stock price increase of 6.69% to $20.26, following strong earnings results for the full year and fourth quarter of 2025 [1] - The company's attributable net income for the full year 2025 rose by 25% to NT$40.66 billion, up from NT$32.48 billion the previous year [2] - Net revenues for the full year increased by 8.4% to NT$645 billion, compared to NT$595 billion year-on-year [2] Group 2 - In the fourth quarter of 2025, attributable net income surged by 58% to NT$14.7 billion, up from NT$9.3 billion [3] - Fourth quarter net revenues grew by 9.6% to NT$177.9 billion, compared to NT$162.26 billion [3] - The revenue breakdown for the company shows that packaging operations contributed 49%, EMS operations 38%, testing operations 12%, and the remaining 1% from other sources [3] Group 3 - ASE Technology is recognized as a leading provider of semiconductor services in assembly and testing [4]

Core Viewpoint - ASE Technology is expanding its operations outside Taiwan, particularly in Penang, to cater to customers in the automotive and robotics sectors, while also anticipating a recovery in mainstream businesses by 2026 [1][2][6]. Group 1: Business Expansion and Strategy - ASE is focusing on a "Taiwan Plus One" strategy, with Penang as the primary expansion region, alongside Korea and the Philippines, to serve automotive and edge customers [1][6]. - The company expects leading-edge revenue to at least double in 2026, supported by increased capital expenditures of $1.5 billion, primarily for leading-edge services [5][19]. - Management highlighted a "cross-collaboration" model across various semiconductor processes, emphasizing the importance of Taiwan in semiconductor manufacturing [2][6]. Group 2: Financial Performance - For 2025, ASE reported a consolidated revenue growth of 12%, with the assembly, test, and materials (ATM) business up 23%, contributing 60% of total revenue [7][12]. - The fourth-quarter results showed a gross margin improvement due to higher ATM loading, with overall ATM utilization around 80% [9][11]. - Full-year 2025 net income rose 25% to TWD 40.7 billion, with ATM accounting for 87% of operating profit [14][15]. Group 3: Future Outlook - Management anticipates a lighter seasonality in Q1 2026, projecting a revenue decline of 5% to 7% quarter-over-quarter, but expects margins to improve throughout the year [16][18]. - The company expects to triple full-process revenue in 2026, contributing significantly to LEAP service revenue [20]. - ASE's gross margin for Q1 2026 is projected to be between 24% and 25%, with expectations for continued improvement in the second half of the year [19].

Financial Data and Key Metrics Changes - Consolidated net revenues for Q4 were NT$177.9 billion, a 6% sequential increase and a 10% year-over-year increase [15] - Fully diluted EPS for Q4 was $3.24, and basic EPS was $3.37 [14] - Gross profit was NT$34.7 billion, with a gross margin of 19.5%, improving by 2.4 percentage points sequentially and 3.1 percentage points year-over-year [15] - Operating profit for Q4 was NT$17.7 billion, up NT$4.5 billion sequentially and NT$6.5 billion year-over-year, with an operating margin of 9.9% [16] - Net income for Q4 was NT$14.7 billion, representing a 35% increase year-over-year [17] Business Line Data and Key Metrics Changes - ATM revenue grew 23% year-over-year, driven by advanced packaging services and testing business [10] - The general segment grew 13% year-over-year, while the testing business grew 36% year-over-year [10] - EMS revenues were flat sequentially at NT$69 billion, down 8% year-over-year due to product seasonality [28] Market Data and Key Metrics Changes - The ATM business accounted for 60% of consolidated net revenue in 2025, up from 54% in 2024 [18] - The overall ATM utilization rate was around 80%, with higher loading in ATM factories in Taiwan [13] Company Strategy and Development Direction - The company is focusing on expanding its footprint outside Taiwan, particularly in Penang, Korea, and the Philippines, to capture customers and wafers not produced in Taiwan [9] - The strategy includes a "Taiwan Plus One" approach to support global manufacturing requirements [9] - The company aims to double its LEAP services revenue to NT$3.2 billion in 2026, with a significant focus on advanced packaging and testing [11] Management's Comments on Operating Environment and Future Outlook - Management expects revenue growth to continue in 2026 and beyond, driven by AI proliferation and market recovery [11] - The company anticipates a favorable pricing environment and improved operating leverage, with gross margins expected to stay within structural ranges [37] - Management acknowledges the challenges of capacity constraints but remains optimistic about meeting demand [52] Other Important Information - Machinery CapEx for 2025 totaled NT$3.4 billion, with NT$2.1 billion allocated to building facilities and automation [10] - The company plans to maintain aggressive CapEx spending in 2026, adding another $1.5 billion in machinery [37] Q&A Session Questions and Answers Question: Can you provide a breakdown of your LEAP business revenue? - Management indicated that LEAP revenue is expected to double to NT$3.2 billion, with a significant portion coming from OSAT and wafer sort, and full process revenue expected to reach about 10% of overall LEAP service revenue [41][42] Question: What is the outlook for your mainstream business? - The mainstream business is expected to grow at a similar pace as last year, with a friendly pricing environment and decent loading from IoT, automotive, and industrial sectors [51] Question: Is the EMS business being downsized? - Management clarified that the EMS business is not being downsized but is realigning to focus on AI and system-level optimization opportunities [97]

Financial Data and Key Metrics Changes - Consolidated net revenues for Q4 were NT$177.9 billion, a 6% sequential increase and a 10% year-over-year increase [15] - Fully diluted EPS for Q4 was $3.24, and basic EPS was $3.37 [14] - Gross profit was NT$34.7 billion, with a gross margin of 19.5%, improving by 2.4 percentage points sequentially and 3.1 percentage points year-over-year [15] - Operating profit for Q4 was NT$17.7 billion, up NT$4.5 billion sequentially and NT$6.5 billion year-over-year, with an operating margin of 9.9% [16] - For the full year 2025, consolidated net revenues improved by 8% compared to 2024, with net income increasing by 25% to NT$40.7 billion [20] Business Line Data and Key Metrics Changes - The ATM business grew by 20% in 2025, accounting for 60% of consolidated net revenue, up from 54% in 2024 [18] - The EMS business declined by 5% annually, with revenues flat sequentially at NT$69 billion in Q4 [28] - The testing business grew 36% year-on-year in 2025, supported by expanding turnkey and leading-edge test services [10] Market Data and Key Metrics Changes - The overall ATM utilization rate was around 80%, with higher loading in Taiwan factories [13] - The general segment is expected to grow at a similar pace as last year, driven by AI proliferation and recovery in automotive and industrial sectors [11] Company Strategy and Development Direction - The company is focusing on expanding its footprint outside Taiwan, particularly in Penang, Korea, and the Philippines, to capture customers and wafers not produced in Taiwan [9] - The strategy includes a "Taiwan Plus One" approach to support global manufacturing requirements [8] - The company aims to double its LEAP revenue to TWD 3.2 billion in 2026, with a strong focus on leading-edge solutions [11][37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the semiconductor manufacturing leadership in Taiwan and the competitive advantages of the Taiwan cluster amid supply constraints [5][6] - The outlook for 2026 is optimistic, with expectations for continued revenue growth driven by leading-edge solutions and broad-based semiconductor demand [11][37] Other Important Information - Machinery CapEx for 2025 totaled TWD 3.4 billion, with significant investments in R&D and advanced capacity [10][33] - The company plans to remain aggressive in CapEx spending to support strong business prospects for 2026 and beyond [37] Q&A Session Summary Question: Can you provide a breakdown of LEAP business revenue? - Management indicated that LEAP revenue is expected to double to TWD 3.2 billion, with a significant portion coming from OS and wafer sort testing, and full process revenue expected to triple [41][42] Question: What is the outlook for the mainstream business? - The mainstream business is expected to grow at a similar pace as last year, with a friendly pricing environment and decent loading from IoT, automotive, and industrial sectors [51][52] Question: Is the EMS business being downsized? - Management clarified that the EMS business is not being downsized but is realigning to focus on AI and system-level optimization opportunities [96][97] Question: How much of the CapEx is going to full process packaging? - Management stated that about 10% of the LEAP revenue will come from full process packaging, with ongoing collaboration with foundry partners [111][112]

Financial Data and Key Metrics Changes - For Q4 2025, consolidated net revenues were NT$177.9 billion, a 6% sequential increase and a 10% year-over-year increase. On a US dollar basis, sales increased by 2% sequentially and 14% year-over-year [14] - The gross profit was NT$34.7 billion, with a gross margin of 19.5%, improving by 2.4 percentage points sequentially and 3.1 percentage points year-over-year [14] - Operating profit for Q4 was NT$17.7 billion, up NT$4.5 billion sequentially and NT$6.5 billion year-over-year, resulting in an operating margin of 9.9% [15][16] - For the full year 2025, consolidated net revenues improved by 8% compared to 2024, with net income increasing by 25% to NT$40.7 billion [20] Business Line Data and Key Metrics Changes - The ATM business improved by 20% in 2025, accounting for 60% of consolidated net revenue, up from 54% in 2024. The EMS business declined by 5% annually [18] - In Q4 2025, ATM revenues reached NT$109.7 billion, up 9% sequentially and 24% year-over-year, with a gross profit margin of 26.3% [22] - The testing business grew 36% year-over-year in 2025, supported by expanding turnkey and leading-edge test services [10] Market Data and Key Metrics Changes - The company anticipates that the mainstream business, including IoT and automotive sectors, will recover better in 2026 compared to 2025, driven by AI proliferation and general market recovery [3][11] - The EMS business is expected to extend its capabilities into AI and AI-adjacent applications, with a focus on server, optical, and power solutions [30] Company Strategy and Development Direction - The company is focusing on a "Taiwan Plus One" strategy to support global manufacturing requirements, with significant investments in Penang, Korea, and the Philippines [9] - The company plans to aggressively increase CapEx spending to support strong business prospects for 2026 and beyond, with an additional $1.5 billion in machinery planned [37] - The company aims to enhance its competitive advantage through technology collaboration and resource management within the Taiwan semiconductor cluster [6][8] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing a favorable pricing environment and expected improvements in operating leverage [37] - The company expects the ATM business to continue outperforming the logic semiconductor market, with leading-edge assembly packaging services projected to double in revenue [11] - Management acknowledged the challenges of supply constraints and the need for careful resource planning to meet demand [52] Other Important Information - The company reported a net non-operating gain of NT$0.6 billion for Q4, primarily from foreign exchange hedging activities [16] - The effective tax rate for 2025 was 18.4%, with expectations for 2026 to be around 18% [20] Q&A Session Questions and Answers Question: Can you provide a breakdown of your LEAP business revenue? - The company expects to double LEAP revenue to NT$3.2 billion this year, with a significant portion coming from OSAT and wafer sort, and anticipates tripling full process revenue to about 10% of overall LEAP service revenue [41][43] Question: What is the outlook for your mainstream business? - The mainstream business is expected to grow at a similar pace as last year, with a friendly pricing environment and decent loading from general sectors, including AI data centers [51] Question: Is the EMS business being downsized? - The EMS business is not being downsized but is realigning to focus on AI and system-level optimization, with expectations for growth in the coming years [96]

Market Dynamics and Positioning Fourth Quarter 2025 Earnings Release ASE Technology Holding 5 February, 2026 Safe Harbor Notice This presentation contains "forward-looking statements" within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Although these forward-looking s ...

Core Viewpoint - ASE Technology Holding Co., Ltd. reported a significant increase in net revenues for the fourth quarter of 2025, indicating strong performance in the semiconductor assembly and testing services sector [1] Financial Performance - The company achieved unaudited net revenues of NT$177,915 million for 4Q25, representing a year-over-year increase of 9.6% and a sequential increase of 5.5% [1]