Financial Data and Key Metrics Changes - Consolidated revenues grew by 2% year-on-year in 2024, with ATM revenues up by 3% year-on-year [9][31] - For Q4 2024, fully diluted EPS was TWD 7.23, while basic EPS was TWD 7.52 [31][20] - Gross profit for the year was TWD 96.9 billion, improving by TWD 5.2 billion year-on-year or by 6% [100] - Operating profit for the year was TWD 39.2 billion, declining by TWD 1.1 billion [102] Business Line Data and Key Metrics Changes - The testing business grew by 9% year-on-year in 2024, with Q4 growth at 18% year-on-year [11][79] - ATM business revenues for Q4 2024 were TWD 88.3 billion, up 3% sequentially and 8% year-on-year [39][107] - EMS revenues for Q4 2024 were TWD 74.9 billion, declining by 1% sequentially and 5% year-on-year [120] Market Data and Key Metrics Changes - Leading-edge advanced packaging and testing revenues exceeded USD 600 million, accounting for around 6% of ATM revenues, up from USD 250 million in 2023 [10][79] - The overall equipment utilization was in the mid- to high 60s [86] - The company expects total semiconductor revenues to reach $1 trillion in the next decade, driven by AI and IoT-related products [14][82] Company Strategy and Development Direction - The company plans to invest significantly in R&D, human capital, and advanced packaging capacity in preparation for an AI-led super cycle [13][81] - The company aims to double its CapEx to around USD 2 billion in multiple new sites to support aggressive expansion [65][68] - The company is focused on maintaining flexibility and agility in handling business model evolutions to widen its competitive moat [14][83] Management's Comments on Operating Environment and Future Outlook - Management noted a soft recovery in some segments due to inventory correction and lagging end market demand [10][78] - The company expects its ATM business to outgrow the logic semiconductor market, driven by strong momentum in leading-edge advanced packaging and testing [12][80] - Management acknowledged uncertainties ahead that could change the overall business landscape but remains focused on executing plans for 2025 [70] Other Important Information - Operating expenses increased by TWD 6.4 billion for the year, primarily due to the ramp-up of leading-edge advanced packaging services [101][90] - The effective tax rate for the year was 18.6%, with expectations for a slight decrease in the coming year due to government incentive programs [104][36] - The company recorded a net nonoperating gain of TWD 2.5 billion for the year, primarily from foreign currency hedging activities [103][34] Q&A Session Summary Question: What is the outlook for the first quarter of 2025? - The company projects ATM revenue to decline by mid-single digits quarter-over-quarter and EMS revenue to decline slightly year-over-year [62][61] Question: How does the company plan to address the inflationary environment? - Management indicated that higher operating expenses are due to active R&D investment and that they expect operating expense ratios to decline as revenues grow [68][69] Question: What are the expectations for the gross profit margin in 2025? - The company expects ATM gross profit margin to recover to the structural target of 24% to 30% as capacity ramps up [66][68]

Third Quarter 2024 Earnings Release ASE Technology Holding aseglobal.com 31 October, 2024 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 statements, which ma ...

Financial Data and Key Metrics - Consolidated net revenues increased 14% sequentially and 4% year-over-year to TWD26.4 billion with a gross margin of 16.5%, improving 0.1 percentage points sequentially and 0.3 percentage points year-over-year [4] - Operating profit was TWD11.5 billion, up TWD2.5 billion sequentially and TWD0.1 billion year-over-year, with an operating margin increase of 0.8 percentage points sequentially [5] - Net income for the quarter was TWD9.7 billion, representing an increase of TWD1.9 billion sequentially and TWD0.9 billion year-over-year [6] - The NT dollar depreciated 0.3% against the US dollar sequentially and 2.7% annually, positively impacting gross and operating margins by 0.1 percentage points sequentially and 0.7 percentage points annually [6][7] Business Line Performance - ATM revenues were TWD85.8 billion, up 10% sequentially and 3% annually, with a gross profit margin of 23.1%, up 1 percentage point sequentially and 0.9 percentage points year-over-year [9][10] - EMS revenues were TWD75.4 billion, improving 20% sequentially and 6% year-over-year, with a gross margin decline of 0.6 percentage points sequentially to 9% [15] - Test business grew 6% year-to-date compared to 1% for the assembly business, with test business expected to see a more pronounced pickup in Q4 [14] Market Performance - Leading-edge advanced packaging and seasonal ramps of communications devices drove better-than-anticipated Q3 performance [3] - The Automotive segment showed an increase in overall business, contributing to EMS revenue growth [17] - The company expects leading-edge advanced packaging revenues to double in FY2025, driven by AI, high-performance computing, and high-end networking and communications [20][21] Strategic Direction and Industry Competition - The company is investing heavily in leading-edge advanced packaging and testing, with capital expenditures expected to exceed annual depreciation and amortization levels of $1.9 billion [22][23] - The company is focusing on expanding capacity for leading-edge services, which are becoming more complex and require higher precision, leading to increased capital intensity [21][22] - The company is preparing for significant growth in leading-edge packaging and testing, with a focus on AI, networking, and communications [20][21] Management Commentary on Operating Environment and Future Outlook - The company expects Q4 ATM revenues to grow slightly quarter-over-quarter with flattish gross margins, while EMS revenues are expected to decline mid-single-digit quarter-over-quarter with a 1 percentage point decline in operating margin [27] - The company anticipates a challenging environment for EMS due to earlier seasonality and lackluster general demand [26] - Leading-edge products, particularly in AI and networking, are expected to drive strong growth, while seasonal products like communications and handset-related products remain stable [24][25] Other Important Information - The company had cash, cash equivalents, and current financial assets of TWD78.4 billion at the end of Q3, with total interest-bearing debt increasing by TWD29.3 billion to TWD213.2 billion [18] - Machinery and equipment capital expenditures for Q3 totaled $603 million, with $312 million used in packaging operations and $274 million in testing operations [19] Q&A Session Summary Question: Update on leading-edge advanced packaging revenue targets for 2025 - The company maintains its target of doubling leading-edge packaging and test revenue, with leading-edge expected to account for low teens percentage of overall ATM revenue [32][33] Question: Relationship with TSMC and competition from Amkor - The company is partnering with TSMC to expand capacity, with a natural division of work based on customer requests and economic considerations [39] - The company is focused on meeting current demand and is not overly concerned about competition from Amkor in the near term [39] Question: Gross margin trends and impact of leading-edge advanced packaging - The company expects margins to improve in 2025 as leading-edge capacity expands and test business grows, but margins will be front-end loaded due to higher investment costs [64][65] Question: Customer concentration in leading-edge advanced packaging - Customer concentration is high currently but is expected to become more broad-based in 2025 as demand diversifies [54] Question: Utilization rates and semiconductor market outlook - Utilization rates for packaging and testing were 65% to 70% in Q3 and are expected to remain similar in Q4 [55] - The general semiconductor market is expected to remain lukewarm in 2025, with leading-edge and AI-related business being the bright spots [57] Question: Investment in testing business and return profile - The company is investing across all aspects of testing, including wafer sort, final test, and burn-in, with a focus on turnkey services [61] - The return profile for leading-edge advanced packaging is expected to remain close to the rule of thumb of $1 of investment generating $1 of revenue [73] Question: Impact of edge AI on communications segment - Edge AI is expected to drive growth in the communications segment, but the timing and magnitude of this impact remain uncertain [76] Question: Smartphone and automotive demand trends - The company sees typical seasonality in smartphone demand and stable conditions in other segments, with some softness in automotive and industrial [87] Question: Burn-in testing and cost structure - The company is not yet able to comment on the cost structure for burn-in testing, as it depends on future business requirements [88]

Core Insights - ASE Technology Holding Co., Ltd. reported unaudited net revenues of NT$160,105 million for Q3 2024, representing a year-over-year increase of 3.9% and a sequential increase of 14.2% [1][3] - Net income attributable to shareholders for the quarter was NT$9,666 million, up from NT$8,776 million in Q3 2023 and NT$7,778 million in Q2 2024 [1][3] - Basic earnings per share for Q3 2024 were NT$2.24 (US$0.138 per ADS), compared to NT$2.04 for Q3 2023 and NT$1.80 for Q2 2024 [1][3] Financial Performance - Net revenues from packaging operations, testing operations, EMS operations, and others accounted for approximately 43%, 9%, 47%, and 1% of total net revenues in Q3 2024, respectively [3] - Cost of revenues was NT$133,673 million for the quarter, an increase from NT$117,184 million in Q2 2024 [3] - Gross margin increased by 0.1 percentage points to 16.5% in Q3 2024 from 16.4% in Q2 2024, while operating margin improved to 7.2% from 6.4% [3] ATM Operations - Net revenues for ATM operations were NT$85,790 million, up by 2.5% year-over-year and 10.3% sequentially [4] - Cost of revenues for ATM operations was NT$65,989 million, with a gross margin of 23.1%, an increase of 1.0 percentage points from Q2 2024 [4] EMS Operations - EMS operations generated net revenues of NT$75,384 million, reflecting a year-over-year increase of 6.2% and a sequential increase of 19.8% [5] - Cost of revenues for EMS operations was NT$68,627 million, with a gross margin of 9.0%, down from 9.6% in Q2 2024 [5] Liquidity and Capital Resources - Capital expenditures in Q3 2024 totaled US$603 million, with US$312 million allocated to packaging operations and US$274 million to testing operations [6] - The current ratio was 1.18 and the net debt to equity ratio was 0.41 as of September 30, 2024 [6] Customer Concentration - The five largest customers accounted for approximately 46% of total net revenues in Q3 2024, with one customer exceeding 10% of total revenues [7] - In EMS operations, the five largest customers represented about 72% of total net revenues, an increase from 67% in Q2 2024 [8]

Investment Rating - The report does not explicitly state an investment rating for the company Core Insights - The company reported a revenue of NT$140.238 billion for Q2 2024, representing a year-over-year increase of 3% and a quarter-over-quarter increase of 6% [3][4] - Gross margin for Q2 2024 was 16.4%, up 0.4 percentage points year-over-year and 0.7 percentage points quarter-over-quarter [3][4] - Operating profit margin was 6.4%, showing a decrease of 0.5 percentage points year-over-year but an increase of 0.7 percentage points quarter-over-quarter [3][4] - The company expects revenue growth in its ATM business for Q3 2024 to be in the high single-digit percentage range compared to Q2 2024 [12][13] - The advanced packaging market is experiencing robust growth, and the company is increasing capacity to meet rising demand, although the overall market recovery is slower than anticipated [12][14] Summary by Sections Overall Performance - Q2 2024 revenue reached NT$1402.38 billion, with a gross margin of 16.4% and an operating profit margin of 6.4% [3][4] - The continuous improvement in gross margin is attributed to the depreciation of the New Taiwan Dollar and changes in product mix within ATM and EMS businesses [3][4] Revenue Breakdown - ATM Business: Revenue of NT$778 billion in Q2 2024, with a gross margin of 22.1% and an operating profit margin of 9.3% [7][10] - EMS Business: Revenue of NT$629 billion in Q2 2024, with a gross margin of 9.6% and an operating profit margin of 3.1% [10][11] Capital Expenditure - Total capital expenditure for Q2 2024 was US$406 million, with allocations of US$215 million for packaging, US$154 million for testing, US$31 million for EMS, and US$6 million for interconnect materials and other businesses [6][10] Company Guidance - The company anticipates that the ATM business will see revenue growth of 15% to 20% in Q3 2024 compared to Q2 2024, with operating profit margins slightly above 3.5% [12][13] Demand Outlook - The advanced packaging market is thriving, and the company is working to expand capacity to meet increasing demand, particularly in the smartphone sector, which is expected to see a positive trend in Q3 and Q4 2024 [12][25]

Financial Data and Key Metrics Changes - For Q2 2024, the company reported fully diluted EPS of NTD 1.75 and basic EPS of NTD 1.80, with consolidated net revenues increasing by 6% sequentially and 3% year-over-year [6][9] - Gross profit was NTD 23.1 billion, with a gross margin of 16.4%, improving by 0.7 percentage points sequentially and 0.4 percentage points year-over-year [6][9] - Operating profit was NTD 9 billion, up NTD 1.5 billion sequentially but down NTD 0.4 billion year-over-year, with an operating margin of 7.3% [8][10] Business Line Data and Key Metrics Changes - The ATM business reported revenues of NTD 77.8 billion, up 5% sequentially and 2% year-over-year, with a gross profit margin of 22.1% [11][12] - EMS revenues were NTD 62.9 billion, improving by 6% sequentially and 4% year-over-year, with a gross margin of 9.6% [15][16] Market Data and Key Metrics Changes - The communications application segment saw a 3 percentage point drop, while computing and consumer segments increased, indicating mixed demand across different markets [14] - The automotive products within the EMS business experienced decent growth on an annual basis, although overall sentiment in the automotive market remained soft [17][69] Company Strategy and Development Direction - The company is focusing on increasing investments in leading-edge products, particularly in labor and equipment, to meet rising demand [5][18] - There is an ongoing expansion in Malaysia, with Phase 1 completed and volume production expected to start in Q1 2025, alongside acquisitions in the Philippines and Korea [22][23] Management Comments on Operating Environment and Future Outlook - Management noted a bifurcated market with strong demand for leading-edge products, particularly in AI and high-performance computing, while traditional products are seeing cautious customer behavior [4][19] - The company anticipates a moderate growth outlook for the full year, with expectations for improved margins in the second half of the year [26][27] Other Important Information - The company plans to double its full-year 2024 consolidated machinery CapEx from last year's USD 914 million levels to meet booming demand for leading-edge ATM capacity [22] - The effective tax rate for the quarter was 19%, with net income for the quarter at NTD 7.8 billion, flat year-over-year [9][10] Q&A Session Summary Question: Guidance on ATM growth and gross margin expectations - Management indicated that the full-year growth for ATM is now expected to be more moderate due to a slower recovery in the general market, with third-quarter gross margin projected to be slightly lower than previously expected [26][27] Question: CapEx breakdown for advanced packaging - The CapEx breakdown is approximately 53% for assembly, 38% for testing, and the remainder for materials and EMS [27] Question: Competitive strategies in advanced packaging - The company is enhancing its leading-edge testing capacity and leveraging turnkey services to meet demand, with expectations for good progress starting next year [35] Question: Expansion plans in the US - The company is considering how to apply for R&D and manufacturing funding under the CHIPS Act, with no tangible plans for high-volume manufacturing in the US yet [49] Question: Advanced packaging revenue contribution - The company expects leading-edge revenue to double this year, contributing over NTD 250 million, with a target of around 5% of ATM business revenue [66][67] Question: Automotive market outlook - The automotive segment is expected to represent roughly 11% of overall sales, with continued growth anticipated despite a soft overall market sentiment [69]

Core Viewpoint - ASE Technology Holding Co., Ltd. reported a 2Q24 net revenue of NT$140,238 million, reflecting a year-over-year increase of 2.9% and a sequential increase of 5.6, with net income attributable to shareholders reaching NT$7,783 million, up from NT$5,682 million in 1Q24 [1][2]. Financial Performance - Net revenues from packaging operations, testing operations, EMS operations, and others accounted for approximately 45%, 9%, 45%, and 1% of total net revenues in 2Q24, respectively [2]. - Cost of revenues for the quarter was NT$117,172 million, with raw material costs at NT$70,387 million (50% of total revenues) and labor costs at NT$15,673 million (11% of total revenues) [2]. - Gross margin improved to 16.4% in 2Q24 from 15.7% in 1Q24, while operating margin increased to 6.4% from 5.7% in the previous quarter [2]. - Basic earnings per share for 2Q24 were NT$1.80 (US$0.112 per ADS), consistent with 2Q23 and up from NT$1.32 in 1Q24 [1][2]. ATM Operations - ATM net revenues were NT$77,813 million for the quarter, up 2.2% year-over-year and 5.3% sequentially [3]. - Gross margin for ATM operations increased to 22.1% in 2Q24 from 21.0% in 1Q24, with an operating margin of 9.3% compared to 8.2% in the previous quarter [3]. EMS Operations - EMS net revenues reached NT$62,907 million, reflecting a 4.1% year-over-year increase and a 6.0% sequential increase [4]. - Cost of revenues for EMS was NT$56,870 million, with raw material costs at NT$49,075 million (78% of total revenues) and labor costs at NT$3,121 million (5% of total revenues) [5]. Liquidity and Capital Resources - Capital expenditures in 2Q24 totaled US$406 million, with significant allocations to packaging (US$215 million) and testing operations (US$154 million) [6]. - The current ratio was 1.17 and the net debt to equity ratio was 0.34 as of June 30, 2024 [6]. Customer Concentration - The five largest customers accounted for approximately 45% of total net revenues in 2Q24, with the top 10 customers contributing 60% [7]. - In EMS, the five largest customers represented about 67% of total net revenues, with the top 10 contributing 74% [8].

Core Viewpoint - ASE Technology Holding Co. Ltd. is a leading semiconductor manufacturing company that has not yet seen significant benefits from the AI boom, as the industry normalizes after a pandemic-induced inventory glut [1][2]. Financial Performance - ASE Technology reported Q1 2024 EPS of 4 cents, matching consensus estimates, with revenues of $4.28 billion, a 9.5% year-over-year decline but above the $4.25 billion consensus [4]. - Gross margin was 51.5%, while net income stood at $178 million, and operating margin decreased to 5.1% from 7.4% in Q4 2023 [4]. - The ATM segment saw revenues rise 0.8% year-over-year to $7.39 billion but fell 9.9% sequentially, with raw material costs at 27% of total net revenues [5]. - The EMS segment's revenues increased 2.8% year-over-year to $5.94 billion but dropped 25% sequentially, with raw material costs representing 79% of total net revenues [6]. Guidance and Outlook - ASE Technology issued downside revenue guidance for Q2 2024, estimating revenues between $7.44 billion and $8.11 billion, below the $8.41 billion consensus [7]. - The company reaffirmed its full-year 2024 revenue guidance at $30 billion, slightly above the $29.97 billion consensus [7]. - The head of investor relations indicated that demand for EMS services is slightly ahead of expectations, driven by improving customer inventory levels [8]. Market Position and Customer Base - ASE Technology is the world's largest chip assembler, employing 91,000 people and serving major clients like Apple, NVIDIA, and Qualcomm [1][2]. - The top 10 customers contributed 61% of total net revenues in the ATM segment, up from 58% in Q4 2023, indicating a concentration of revenue among key clients [5]. - In the EMS segment, the top 10 customers accounted for 75% of total net revenues, down from 79% in the previous quarter [6].

Company Expansion - USI officially opened its new Tonala Site in Mexico on July 16, 2024, with a significant investment of nearly 82 million USD, creating 3,000 new jobs in the region [1] - The Tonala Site is part of USI's strategic expansion in North America, enhancing service capabilities to meet client needs in a dynamic market [1] - The facility aims to foster innovation, quality, and community engagement, aligning with USI's commitment to economic development in the region [1] Sustainability Initiatives - USI prioritizes Sustainable Development Goals through four core strategies: Low Carbon, Circular, Collaborative, and Inclusive, with a focus on responsible business practices [1] - The Guadalajara factory achieved a 100% Green Electricity Ratio in 2023, and this sustainability program will extend to the Tonala factory [1] Regional Impact - The opening of the Tonala Site is seen as a long-term investment in Jalisco, contributing to the state's vision of innovation and high technology [1] - Local officials emphasize the importance of this investment for the municipality of Tonala, which is experiencing significant growth and development [1]

Core Viewpoint - The article emphasizes the importance of value investing, highlighting ASE Technology (ASX) as a strong candidate for value investors due to its favorable valuation metrics and earnings outlook [1][2][3] Group 1: Value Investing Strategy - Value investing focuses on identifying companies that are undervalued by the market, utilizing fundamental analysis and traditional valuation metrics [1] - The Zacks Rank system and Style Scores are tools that help investors find stocks with specific traits, particularly in the "Value" category [2] Group 2: ASE Technology (ASX) Metrics - ASE Technology has a Zacks Rank of 2 (Buy) and an A grade for Value, indicating strong potential for value investors [2] - The stock's P/E ratio is 16.16, significantly lower than the industry's average of 36.84, suggesting it may be undervalued [2] - The Forward P/E for ASX has ranged from 10.10 to 21.39 over the last 12 months, with a median of 13.22, further supporting its undervaluation [2] - The P/S ratio for ASX is 1.39, compared to the industry's average P/S of 3.88, reinforcing the notion that ASX is likely undervalued [2][3] Group 3: Earnings Outlook - The strength of ASE Technology's earnings outlook contributes to its appeal as a value stock, indicating potential for future growth [3]