UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR | --- | --- | |--------------------------|----------------------------------------------- ...

PART I [Key Information](index=9&type=section&id=Item%203.%20Key%20Information) This section presents selected five-year financial data and details significant business, acquisition, and operational risk factors [Selected Financial Data](index=9&type=section&id=SELECTED%20FINANCIAL%20DATA) This chapter details key financial performance metrics from 2018 to 2019, showing revenue growth alongside decreased profitability Selected Financial Performance (2018 vs. 2019) | Financial Metric | 2018 (NT$ millions) | 2019 (NT$ millions) | 2019 (US$ millions) | | :--- | :--- | :--- | :--- | | **Operating Revenues** | 371,092.4 | 413,182.2 | 13,814.2 | | **Gross Profit** | 61,163.0 | 64,310.8 | 2,150.2 | | **Profit from Operations** | 27,019.3 | 23,257.8 | 777.6 | | **Profit for the year (Attributable to Owners)** | 26,220.7 | 17,060.6 | 570.4 | | **Diluted Earnings per Common Share (NT$)** | 6.07 | 3.91 | 0.13 | Selected Financial Position and Cash Flow (2018 vs. 2019) | Financial Metric | 2018 (NT$ millions) | 2019 (NT$ millions) | 2019 (US$ millions) | | :--- | :--- | :--- | :--- | | **Total Assets** | 534,061.9 | 557,223.7 | 18,630.0 | | **Total Liabilities** | 315,034.0 | 344,421.4 | 11,515.3 | | **Capital Expenditures** | (41,386.4) | (56,810.2) | (1,899.4) | | **Net Cash Inflow from Operating Activities** | 51,074.7 | 72,303.3 | 2,417.4 | Segment Operating Revenues (2018 vs. 2019) | Segment | 2018 (NT$ millions) | 2019 (NT$ millions) | 2019 (US$ millions) | | :--- | :--- | :--- | :--- | | **Packaging** | 178,308.2 | 198,916.8 | 6,650.5 | | **Testing** | 35,903.2 | 42,658.7 | 1,426.2 | | **EMS** | 151,890.4 | 165,789.5 | 5,543.0 | [Risk Factors](index=11&type=section&id=RISK%20FACTORS) The company faces significant risks from its SPIL acquisition, industry cyclicality, customer concentration, and geopolitical tensions - Financial and operational results may not be comparable across periods due to the **SPIL Acquisition on April 30, 2018**, which combined operations[16](index=16&type=chunk) - The business is highly dependent on the cyclical semiconductor and electronics industries, with significant revenue concentration in **communications (52.5% of packaging/testing)** and **EMS (37.4%)** end-markets[18](index=18&type=chunk) - The company faces intense competition from other independent packaging/testing companies and integrated device manufacturers, with **government subsidies to competitors in the P.R.C.** noted as a specific pressure[21](index=21&type=chunk) - Customer concentration is a significant risk, with the **five largest customers accounting for 51.1% of operating revenues in 2019**[34](index=34&type=chunk) - Strained relations between the R.O.C. and the P.R.C. could negatively affect the business, as a **substantial majority of operations and revenues are derived from Taiwan and the P.R.C.**[58](index=58&type=chunk) [Information on the Company](index=33&type=section&id=Item%204.%20Information%20on%20the%20Company) This section details the company's history, business overview, organizational structure, and global operational footprint [History and Development of the Company](index=33&type=section&id=HISTORY%20AND%20DEVELOPMENT%20OF%20THE%20COMPANY) The company was formed in 2018 through the combination of ASE and SPIL, with capital expenditures increasing significantly since - ASEH was formed on April 30, 2018, through a statutory share exchange that made **ASE Inc. and SPIL wholly-owned subsidiaries**[75](index=75&type=chunk)[77](index=77&type=chunk) - The Anti-Monopoly Bureau of China, which had imposed a 24-month period of independent operation on ASE and SPIL, **officially lifted all restrictive conditions on March 25, 2020**[77](index=77&type=chunk)[78](index=78&type=chunk) Capital Expenditures (2017-2019) | Year | Machinery & Equipment (NT$ millions) | Building & Improvements (NT$ millions) | Total (NT$ millions) | | :--- | :--- | :--- | :--- | | 2017 | 19,432.9 | 4,244.8 | 23,677.7 | | 2018 | 32,575.3 | 6,516.9 | 39,092.2 | | 2019 | 14,365.1 | 48,708.8 | 63,073.9 | [Business Overview](index=37&type=section&id=BUSINESS%20OVERVIEW) The company is a leading provider of semiconductor packaging, testing, and EMS solutions across diverse end-markets - The company's strategy is to provide integrated solutions by growing packaging services, strategically expanding production capacity, leveraging its presence in key manufacturing centers, and strengthening strategic relationships[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) - The company is subject to various environmental regulations and has been involved in administrative and judicial proceedings related to wastewater discharge at its K7 facility in Kaohsiung[40](index=40&type=chunk)[135](index=135&type=chunk) 2019 Revenue Breakdown by Service | Service | Percentage of Operating Revenues | | :--- | :--- | | Packaging | 48.2% | | Testing | 10.3% | | EMS | 40.1% | 2019 Packaging Revenue by Technology | Package Type | Percentage of Packaging Revenue | | :--- | :--- | | Bumping, Flip Chip, WLP and SiP | 41.7% | | IC Wirebonding | 48.2% | | Discrete and other | 10.1% | 2019 Revenue Breakdown by End-Use Application | End-Use Application | Packaging & Testing Revenue % | EMS Revenue % | | :--- | :--- | :--- | | Communications | 52.5% | 37.4% | | Computing / Computers & Storage | 14.6% | 11.3% | | Consumer/Industrial/Automotive | 32.9% | 46.7% (sum of Consumer, Industrial, Automotive) | [Organizational Structure](index=62&type=section&id=ORGANIZATIONAL%20STRUCTURE) The company operates under a holding structure with three principal groups for packaging, testing, and EMS services - The corporate structure consists of three main operating groups under the ASEH holding company: **ASE Group (packaging & testing), SPIL Group (packaging & testing), and USI Group (EMS)**[142](index=142&type=chunk)[144](index=144&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) [Property, Plants and Equipment](index=65&type=section&id=PROPERTY,%20PLANTS%20AND%20EQUIPMENT) The company operates numerous manufacturing facilities with a primary concentration in Taiwan and a significant international presence - The company's primary packaging and testing facilities are located in **Taiwan (Kaohsiung, Chung Li, Taichung, Hsinchu)**[161](index=161&type=chunk)[165](index=165&type=chunk) - Significant international manufacturing presence includes facilities in **China, South Korea, Malaysia, Singapore, Japan, Mexico, and Poland**[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) [Operating and Financial Review and Prospects](index=71&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) This section analyzes financial results, showing revenue growth in 2019 offset by margin decline due to acquisition effects and higher costs [Operating Results and Trend Information](index=71&type=section&id=OPERATING%20RESULTS%20AND%20TREND%20INFORMATION) Revenues increased 11.3% in 2019 due to the SPIL acquisition, but margins declined from higher costs and PPA amortization - The increase in 2019 revenue was primarily due to the **SPIL Acquisition** and an **11.6% increase in packaging revenues** and a **9.2% increase in EMS revenues**[192](index=192&type=chunk) - The decrease in operating margin was primarily due to an **18.2% increase in operating expenses**, driven by higher R&D and general & administrative costs, as well as PPA effects from the SPIL acquisition[192](index=192&type=chunk) Comparison of Operating Results (2018 vs. 2019) | Metric | 2018 (NT$ millions) | 2019 (NT$ millions) | Change | | :--- | :--- | :--- | :--- | | **Operating Revenues** | 371,092.4 | 413,182.2 | +11.3% | | **Gross Profit** | 61,163.0 | 64,310.8 | +5.1% | | **Profit from Operations** | 27,019.3 | 23,257.8 | -13.9% | | **Gross Margin** | 16.5% | 15.6% | -0.9 ppt | | **Operating Margin** | 7.3% | 5.6% | -1.7 ppt | [Liquidity and Capital Resources](index=84&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Operating cash flow increased significantly in 2019, and the company maintains sufficient liquidity to meet near-term obligations - As of December 31, 2019, the company had **NT$60.1 billion in cash and cash equivalents** and **NT$225.4 billion in total unused credit lines**[204](index=204&type=chunk) - Total debt as of December 31, 2019, was **NT$220.7 billion**, consisting of NT$43.3 billion in short-term debt and NT$177.4 billion in long-term debt[204](index=204&type=chunk) Cash Flow Summary (2018 vs. 2019) | Cash Flow Activity | 2018 (NT$ millions) | 2019 (NT$ millions) | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | 51,074.7 | 72,303.3 | | **Net Cash used in Investing Activities** | (129,542.3) | (54,579.1) | | **Net Cash from (used in) Financing Activities** | 83,111.4 | (6,498.8) | [Research and Development](index=88&type=section&id=RESEARCH%20AND%20DEVELOPMENT) R&D spending increased in 2019, focusing on advanced packaging, testing solutions, and innovative EMS products - R&D activities are focused on packaging technology, developing testing solutions for advanced ICs, and creating diversified products for the EMS segment[214](index=214&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) R&D Expenditures | Year | R&D Expenditure (NT$ millions) | % of Operating Revenues | | :--- | :--- | :--- | | 2018 | 14,962.8 | 4.0% | | 2019 | 18,395.3 | 4.5% | [Tabular Disclosure of Contractual Obligations](index=89&type=section&id=TABULAR%20DISCLOSURE%20OF%20CONTRACTUAL%20OBLIGATIONS) As of year-end 2019, total contractual obligations were NT$203.4 billion, primarily composed of long-term debt Contractual Obligations as of December 31, 2019 (NT$ millions) | Obligation Type | Total | Under 1 Year | 1 to 3 Years | 3 to 5 Years | After 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | **Long-term debt** | 186,574.8 | 8,185.4 | 137,999.7 | 29,626.7 | 10,763.0 | | **Lease liabilities** | 6,672.9 | 723.4 | 892.0 | 644.6 | 4,412.9 | | **Purchase obligations** | 10,130.6 | 10,130.6 | - | - | - | | **Total** | **203,378.3** | **19,039.4** | **138,891.7** | **30,271.3** | **15,175.9** | [Directors, Senior Management and Employees](index=90&type=section&id=Item%206.%20Directors,%20Senior%20Management%20and%20Employees) This section details the company's leadership structure, compensation policies, and global workforce composition [Directors and Senior Management](index=90&type=section&id=DIRECTORS%20AND%20SENIOR%20MANAGEMENT) The company is led by a 13-member board with established audit, compensation, and risk management committees - The board consists of **13 directors**, including three independent directors who form the audit committee[223](index=223&type=chunk) - Key leadership includes **Jason C.S. Chang (Chairman & CEO)**, Richard H.P. Chang (Vice Chairman & President), Tien Wu (COO), and Joseph Tung (CFO)[224](index=224&type=chunk)[226](index=226&type=chunk) [Compensation](index=97&type=section&id=COMPENSATION) Director and executive remuneration totaled NT$1.2 billion in 2019, supplemented by several employee stock option plans - Total remuneration to directors and executive officers in 2019 was approximately **NT$1,163.9 million (US$38.9 million)**[232](index=232&type=chunk) - ASEH maintains three active employee stock option plans (2010, 2015, 2018), with **170.8 million options outstanding** as of December 31, 2019[234](index=234&type=chunk) [Employees](index=99&type=section&id=EMPLOYEES) As of year-end 2019, the company employed over 96,000 people, with the majority in direct labor and located in Taiwan and the P.R.C Employee Breakdown as of Dec 31, 2019 | Category | Number of Employees | | :--- | :--- | | **Total Employees** | **96,528** | | **By Function:** | | | Direct labor | 51,389 | | Indirect labor (manufacturing) | 26,335 | | R&D | 10,768 | | Indirect labor (administration) | 8,036 | | **By Location:** | | | Taiwan | 57,543 | | P.R.C. | 28,920 | | Other | 10,065 | [Major Shareholders and Related Party Transactions](index=101&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) The Chairman is the largest beneficial owner, and key related party transactions include foundation contributions and asset purchases - As of January 31, 2020, Chairman and CEO Jason C.S. Chang beneficially owned 949.4 million common shares, representing **21.92% of the total outstanding shares**[241](index=241&type=chunk)[243](index=243&type=chunk) - In 2019, the company contributed **NT$100.0 million to the ASE Cultural and Educational Foundation** and purchased a production facility from its associate Hung Ching for **NT$2.3 billion**[248](index=248&type=chunk) [Financial Information](index=102&type=section&id=Item%208.%20Financial%20Information) This section covers legal proceedings related to environmental and patent issues, and outlines the company's dividend policy - The company is involved in legal proceedings concerning a wastewater discharge incident at its K7 plant, a **settled patent dispute with Broadcom for US$5.0 million**, and an environmental pollution case in China[249](index=249&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk) - The board proposed a **cash dividend of NT$2.00 per share for 2019**, following a dividend of NT$2.50 per share for 2018[252](index=252&type=chunk)[254](index=254&type=chunk) [Additional Information](index=106&type=section&id=Item%2010.%20Additional%20Information) This section details material contracts, including a major EMS acquisition, and outlines the regulatory and tax environment for investors - In December 2019, a subsidiary entered into an agreement to acquire Financiere AFG S.A.S. (Asteelflash) for a base equity value of **US$450.0 million** to expand its EMS business[81](index=81&type=chunk)[276](index=276&type=chunk) - For non-R.O.C. holders, dividends are subject to a **21% withholding tax**, while capital gains from the sale of common shares are exempt from R.O.C. income tax as of January 1, 2016[285](index=285&type=chunk)[286](index=286&type=chunk)[287](index=287&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=120&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is primarily exposed to interest rate and foreign currency risks, which it manages using derivative instruments - The company is exposed to **interest rate risk** primarily from its long-term floating-rate loans[300](index=300&type=chunk) - **Foreign currency risk** arises as most revenues are in USD, while costs are primarily in NTD, USD, and RMB; the company uses derivative instruments to hedge this risk[302](index=302&type=chunk)[303](index=303&type=chunk) PART II [Controls and Procedures](index=127&type=section&id=Item%2015.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of year-end 2019 - Management concluded that the company's **disclosure controls and procedures were effective** as of December 31, 2019[312](index=312&type=chunk) - Management's assessment concluded that **internal control over financial reporting was effective** as of December 31, 2019, based on the COSO framework, excluding certain recent acquisitions[313](index=313&type=chunk) [Corporate Governance](index=132&type=section&id=Item%2016G.%20Corporate%20Governance) As a foreign private issuer, the company follows R.O.C. corporate governance practices, which differ from NYSE standards - The company follows **R.O.C. corporate governance practices**, which differ from NYSE standards for U.S. companies[326](index=326&type=chunk) - Significant differences include **not having a majority of independent directors** on the board and **not having a dedicated nominating/corporate governance committee**[329](index=329&type=chunk)[330](index=330&type=chunk)[332](index=332&type=chunk) - The company has an audit committee with three independent members that **satisfies SEC Rule 10A-3**[223](index=223&type=chunk)[336](index=336&type=chunk) PART III [Financial Statements](index=137&type=section&id=Item%2018.%20Financial%20Statements) This section contains the company's audited consolidated financial statements for fiscal year 2019, prepared under IFRS - The consolidated financial statements have been prepared in accordance with **International Financial Reporting Standards (IFRS)** as issued by the IASB[396](index=396&type=chunk) - The report includes the audited consolidated financial statements of ASE Technology Holding Co., Ltd. and its subsidiaries, as well as the report of the independent registered public accounting firm for its subsidiary, SPIL[347](index=347&type=chunk)[357](index=357&type=chunk)

Part I [Key Information](index=10&type=section&id=Item%203.%20Key%20Information) This section summarizes key financial data, emphasizing the 2018 SPIL acquisition's impact on comparability, and details various business, operational, and geopolitical risks [Selected Financial Data](index=10&type=section&id=SELECTED%20FINANCIAL%20DATA) The company's 2018 financial performance shows significant growth, with operating revenues increasing by **27.8%** to **NT$371.1 billion**, primarily due to the SPIL acquisition, affecting comparability with prior years - ASEH was formed on April 30, 2018, through a share exchange with ASE Inc. and SPIL. The financial data for 2018 includes the results of ASE for the full year and SPIL from April 30, 2018, making it not directly comparable with prior periods which only reflect ASE's results[19](index=19&type=chunk)[30](index=30&type=chunk) Selected Consolidated Financial Data (IFRS, in NT$ millions) | Indicator | 2016 | 2017 | 2018 | | :--- | :--- | :--- | :--- | | **Operating revenues** | 274,884.1 | 290,441.2 | 371,092.4 | | **Gross profit** | 53,187.2 | 52,732.3 | 61,163.0 | | **Profit from operations** | 25,860.1 | 25,327.2 | 27,019.3 | | **Profit for the year** | 22,577.9 | 24,497.1 | 27,424.3 | | **Profit attributable to Owners of the Company** | 21,324.4 | 22,819.1 | 26,220.7 | | **Basic Earnings per common share (NT$)** | 5.57 | 5.59 | 6.18 | | **Total assets** | 357,930.6 | 363,922.3 | 534,061.9 | | **Total liabilities** | 191,089.4 | 162,612.1 | 315,034.0 | Segment Operating Revenues (in NT$ millions) | Segment | 2016 | 2017 | 2018 | | :--- | :--- | :--- | :--- | | Packaging | 125,282.8 | 126,225.1 | 178,308.2 | | Testing | 27,031.8 | 26,157.3 | 35,903.2 | | Electronic manufacturing services | 115,395.1 | 133,948.0 | 151,890.4 | [Risk Factors](index=13&type=section&id=RISK%20FACTORS) The company faces significant risks from the SPIL acquisition's financial non-comparability and antitrust issues, semiconductor industry cyclicality, intense competition, customer and supplier dependencies, high fixed costs, and geopolitical tensions - **SPIL Acquisition Risks:** The financial results for 2018 are not comparable to prior periods due to the SPIL acquisition. The company must also adhere to "Hold-Separate conditions" imposed by China's antitrust authority (SAMR) for 24 months, which could lead to unfavorable actions if not met[30](index=30&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - **Business & Market Risks:** The company is highly dependent on the cyclical semiconductor industry. A slowdown in the outsourcing trend, intense competition (including from state-subsidized P.R.C. companies), and the need for continuous technological innovation pose significant risks to profitability[35](index=35&type=chunk)[40](index=40&type=chunk)[47](index=47&type=chunk) - **Customer & Supplier Risks:** A large portion of revenue comes from a small group of customers, with the top five accounting for **46.2%** of operating revenues in 2018. The loss of a key customer could adversely affect revenues. The company also relies on a limited number of suppliers for key raw materials like IC substrates[77](index=77&type=chunk)[83](index=83&type=chunk) - **Operational & Financial Risks:** Operations have high fixed costs, making profitability sensitive to capacity utilization rates. The company faces risks from managing its global expansion, potential environmental liabilities (such as those related to the K7 plant), and cybersecurity threats[53](index=53&type=chunk)[55](index=55&type=chunk)[96](index=96&type=chunk) - **Geopolitical & Regional Risks:** A substantial portion of operations are in Taiwan, making the company vulnerable to strained R.O.C.-P.R.C. relations, natural disasters, and power outages. Changes in U.S. trade policy, particularly regarding China, could also adversely affect business[130](index=130&type=chunk)[133](index=133&type=chunk)[147](index=147&type=chunk) [Information on the Company](index=35&type=section&id=Item%204.%20Information%20on%20the%20Company) This section details the company's history, business overview including semiconductor packaging, testing, and EMS, strategic focus on expanding offerings and capacity, organizational structure, and principal properties [History and Development of the Company](index=35&type=section&id=HISTORY%20AND%20DEVELOPMENT%20OF%20THE%20COMPANY) ASE Technology Holding Co., Ltd. was established on April 30, 2018, through a share exchange combining ASE and SPIL, with its ADSs listed on the NYSE, and capital expenditures in 2018 totaling **NT$39.1 billion** for capacity expansion - ASEH was formed on April 30, 2018, through a statutory share exchange, making ASE and SPIL its wholly-owned subsidiaries. ASEH's common shares are listed on the TWSE (3711) and its ADSs on the NYSE (ASX)[182](index=182&type=chunk)[190](index=190&type=chunk)[192](index=192&type=chunk) - The acquisition of SPIL was a multi-year process, starting with an initial tender offer in August 2015, followed by a second offer, open market purchases, and a final Joint Share Exchange Agreement in June 2016[185](index=185&type=chunk)[186](index=186&type=chunk)[189](index=189&type=chunk) Capital Expenditures (in NT$ millions) | Year | Machinery and Equipment | Building and Improvements | Total | | :--- | :--- | :--- | :--- | | 2016 | 21,978.3 | 5,702.6 | 27,680.9 | | 2017 | 19,432.9 | 4,244.8 | 23,677.7 | | 2018 | 32,575.3 | 6,516.9 | 39,092.2 | [Business Overview](index=37&type=section&id=BUSINESS%20OVERVIEW) ASEH is a leading semiconductor manufacturing services provider, focusing on expanding packaging offerings, increasing capacity, and leveraging global presence, while facing intense competition and environmental regulatory scrutiny - The company's strategy is to provide integrated solutions by expanding its range of packaging offerings (flip-chip, SiP, fan-out), strategically expanding production capacity, and leveraging its presence in key semiconductor manufacturing centers like Taiwan, P.R.C., and Korea[223](index=223&type=chunk)[225](index=225&type=chunk)[231](index=231&type=chunk) Revenue Breakdown by Service (2018) | Service | Revenue Percentage | | :--- | :--- | | Packaging | 48.1% | | Testing | 9.7% | | Electronic Manufacturing Services | 40.9% | Packaging Revenue by Technology Type | Packaging Type | 2016 | 2017 | 2018 | | :--- | :--- | :--- | :--- | | Bumping, Flip Chip, WLP and SiP | 28.6% | 29.9% | 36.1% | | IC Wirebonding | 61.4% | 59.2% | 54.0% | | Discrete and other | 10.0% | 10.9% | 9.9% | Packaging & Testing Revenue by End-Use Application (2018) | End-Use Application | Revenue Percentage | | :--- | :--- | | Communications | 49.9% | | Computing | 14.0% | | Consumer electronics/industrial/automotive/other | 36.1% | - The company faces significant competition from other independent providers and integrated device manufacturers. A key competitive threat is from TSMC's integrated fan-out (InFO) technology[327](index=327&type=chunk)[329](index=329&type=chunk) - The company is subject to environmental regulations and has faced scrutiny over wastewater disposal at its K7 plant in Kaohsiung, though it was ultimately found not guilty in a criminal case and had a major fine overturned[333](index=333&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk) [Organizational Structure](index=63&type=section&id=ORGANIZATIONAL%20STRUCTURE) ASE Technology Holding Co., Ltd. serves as the parent holding company, overseeing principal manufacturing subsidiaries including ASE Inc., SPIL, and the USI Group, with a global network of other subsidiaries for packaging, testing, and materials production - The corporate structure is a holding company (ASEH) with three main operating groups: ASE Inc., SPIL, and USI Inc., each with its own set of global subsidiaries[349](index=349&type=chunk)[350](index=350&type=chunk) - Key subsidiaries include ASE Test Taiwan (testing), ASE Electronics (interconnect materials), ASE Korea, ASE Japan, and multiple facilities in China (Shanghai, Suzhou, Weihai, Kunshan) for packaging and testing[351](index=351&type=chunk)[354](index=354&type=chunk)[356](index=356&type=chunk) - The USI Group, which focuses on electronic manufacturing services, underwent significant restructuring, culminating in USI Inc. becoming a direct, wholly-owned subsidiary of ASEH after a spin-off and merger process completed in January 2019[364](index=364&type=chunk)[373](index=373&type=chunk) [Property, Plants and Equipment](index=66&type=section&id=PROPERTY%2C%20PLANTS%20AND%20EQUIPMENT) The company operates numerous packaging, testing, and EMS facilities across Asia, the US, and Mexico, with key locations in Taiwan, China, Korea, and Malaysia, and has successfully overturned a major administrative fine related to its K7 plant - The company's primary packaging and testing facilities are located in Kaohsiung, R.O.C., with other significant integrated facilities in Chung Li (R.O.C.), Penang (Malaysia), Paju (Korea), and Shanghai (China)[378](index=378&type=chunk)[379](index=379&type=chunk) - Following the acquisition, the company now operates SPIL's major facilities in Taichung, Changhua, and Hsinchu in Taiwan, as well as a facility in Suzhou, China[380](index=380&type=chunk) - The company leases land in Taiwan's export processing and science parks from government administrations, with leases expiring through 2035[381](index=381&type=chunk) [Operating and Financial Review and Prospects](index=71&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) This section analyzes the company's financial condition and results, highlighting the **SPIL acquisition's** impact on **2018 revenue growth** and **gross margin decline**, discusses liquidity, debt structure, R&D efforts, and tabulates contractual obligations [Operating Results and Trend Information](index=71&type=section&id=OPERATING%20RESULTS%20AND%20TREND%20INFORMATION) Operating revenues for 2018 increased by **27.8%** to **NT$371.1 billion** due to the SPIL acquisition, though gross margin decreased to **16.5%** primarily from PPA effects and a higher mix of lower-margin EMS business Year-over-Year Financial Performance (2018 vs. 2017) | Metric | 2017 (NT$M) | 2018 (NT$M) | Change | Reason | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | 290,441.2 | 371,092.4 | +27.8% | SPIL Acquisition and growth in EMS. | | Gross Profit | 52,732.3 | 61,163.0 | +16.0% | - | | Gross Margin | 18.2% | 16.5% | -1.7pp | PPA effects and increased mix of lower-margin EMS business. | | Profit from Operations | 25,327.2 | 27,019.3 | +6.7% | - | | Net Profit (to owners) | 22,819.1 | 26,220.7 | +14.9% | Aided by lower effective tax rate. | - The decrease in gross margin for the packaging business (**22.8%** to **18.9%**) and testing business (**35.6%** to **34.2%**) in 2018 was primarily due to PPA effects from the SPIL acquisition, which added **NT$3.2 billion** to cost of goods sold[442](index=442&type=chunk) - The company adopted IFRS 9 (Financial Instruments) and IFRS 15 (Revenue from Contracts with Customers) in 2018. The adoption did not have a material impact on the consolidated financial statements[398](index=398&type=chunk)[406](index=406&type=chunk) Quarterly Gross Margin Trend (%) | Quarter | 2017 | 2018 | | :--- | :--- | :--- | | Q1 | 18.0% | 16.0% | | Q2 | 18.3% | 16.2% | | Q3 | 18.7% | 17.1% | | Q4 | 17.6% | 16.4% | [Liquidity and Capital Resources](index=83&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintains strong liquidity, with **NT$51.1 billion** in operating cash flow in 2018, utilizing significant cash for the **SPIL acquisition** and capital expenditures, and managing **NT$198.4 billion** in total debt with substantial unused credit lines Consolidated Cash Flow Summary (in NT$ millions) | Cash Flow Activity | 2016 | 2017 | 2018 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | 52,107.9 | 47,430.8 | 51,074.7 | | Net cash from investing activities | (43,159.5) | (16,086.2) | (129,542.3) | | Net cash from financing activities | (21,087.0) | (19,323.4) | 83,111.4 | - In 2018, major uses of cash in investing activities included **NT$95.2 billion** for the acquisition of subsidiaries (primarily SPIL) and **NT$41.4 billion** for property, plant, and equipment[467](index=467&type=chunk) - As of December 31, 2018, the company had total debt of **NT$198.4 billion**, unused credit lines of **NT$219.9 billion**, and cash and cash equivalents of **NT$51.5 billion**[469](index=469&type=chunk)[470](index=470&type=chunk) - In April 2018, the company entered into a **NT$90.0 billion** five-year syndicated credit facility to finance the SPIL Acquisition. As of year-end, **NT$55.0 billion** was outstanding under this facility[485](index=485&type=chunk) [Research and Development](index=88&type=section&id=RESEARCH%20AND%20DEVELOPMENT) The company's R&D efforts focus on optimizing technologies across packaging, testing, and EMS segments, with **NT$15.0 billion** in expenditures in 2018, representing **4.0%** of operating revenues, supported by a team of **10,283 employees** R&D Expenditures | Year | R&D Expense (NT$M) | % of Operating Revenues | | :--- | :--- | :--- | | 2016 | 11,391.1 | 4.1% | | 2017 | 11,746.6 | 4.0% | | 2018 | 14,962.8 | 4.0% | - R&D activities are centralized in Kaohsiung and Taichung, focusing on advanced packaging, IC substrate technology, and developing testing solutions for complex semiconductors like 3D ICs[496](index=496&type=chunk)[497](index=497&type=chunk)[498](index=498&type=chunk) - As of December 31, 2018, the company's research and development team comprised **10,283 employees**[495](index=495&type=chunk) [Tabular Disclosure of Contractual Obligations](index=89&type=section&id=TABULAR%20DISCLOSURE%20OF%20CONTRACTUAL%20OBLIGATIONS) As of December 31, 2018, total contractual obligations amounted to **NT$171.3 billion**, predominantly long-term debt of **NT$162.5 billion**, with **NT$20.4 billion** due within one year Contractual Obligations as of December 31, 2018 (in NT$ millions) | Contractual Obligations | Total | Under 1 Year | 1 to 3 Years | 3 to 5 Years | After 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt | 162,465.8 | 13,694.0 | 98,522.4 | 45,881.8 | 4,367.6 | | Capital lease obligations | 248.8 | 17.1 | 231.7 | - | - | | Operating leases | 2,386.1 | 510.0 | 519.5 | 309.0 | 1,047.6 | | Purchase obligations | 6,203.8 | 6,203.8 | - | - | - | | **Total** | **171,304.5** | **20,424.9** | **99,273.6** | **46,190.8** | **5,415.2** | [Directors, Senior Management and Employees](index=90&type=section&id=Item%206.%20Directors%2C%20Senior%20Management%20and%20Employees) This section details the company's leadership, compensation structure, and workforce, noting a thirteen-member board, **NT$1.05 billion** in 2018 executive compensation, and a significant increase in employees to **93,891** due to the SPIL acquisition [Directors and Senior Management](index=90&type=section&id=DIRECTORS%20AND%20SENIOR%20MANAGEMENT) The company is led by a **thirteen-member board** including three independent directors, with **Jason C.S. Chang** as Chairman and CEO, and notes an ongoing insider trading proceeding against COO **Dr. Tien Wu** - The board of directors consists of **13 members**, including **3 independent directors**. Key leadership includes **Jason C.S. Chang** (Chairman & CEO) and **Richard H.P. Chang** (Vice Chairman & President)[511](index=511&type=chunk)[512](index=512&type=chunk)[517](index=517&type=chunk) - The Audit Committee is composed of three independent directors: Shen-Fu Yu, Ta-Lin Hsu, and Mei-Yueh Ho, who are financially literate and independent under SEC and R.O.C. rules[513](index=513&type=chunk) - **Dr. Tien Wu**, the company's Director and COO, is involved in a criminal proceeding for alleged insider trading related to the SPIL tender offers. The R.O.C. Securities and Futures Investors Protection Center has also filed a civil lawsuit to remove him from the board[71](index=71&type=chunk)[72](index=72&type=chunk) [Compensation](index=95&type=section&id=COMPENSATION) In 2018, total remuneration for directors and executive officers was approximately **NT$1.05 billion**, with **188.7 million** employee stock options outstanding across three plans as of year-end - Total remuneration for directors and executive officers in 2018 was approximately **NT$1,054.2 million**. The company also accrued **NT$11.1 million** for management retirement benefits[558](index=558&type=chunk) - ASEH maintains **three employee stock option plans** (2010, 2015, 2018). As of Dec 31, 2018, **188.7 million options** were outstanding, with **56.9 million** assumed from ASE and **131.9 million** granted by ASEH[163](index=163&type=chunk)[562](index=562&type=chunk) - Subsidiaries USI Enterprise Limited and Universal Scientific Industrial Shanghai also have active employee stock option plans[564](index=564&type=chunk)[565](index=565&type=chunk) [Employees](index=97&type=section&id=EMPLOYEES) The company's total workforce significantly increased to **93,891** as of December 31, 2018, primarily due to the SPIL acquisition, with the majority of employees in direct labor and located in Taiwan and the P.R.C. Employee Headcount by Year | Year-End | Total Employees | | :--- | :--- | | 2016 | 66,711 | | 2017 | 68,753 | | 2018 | 93,891 | Employee Breakdown (as of Dec 31, 2018) | Category | Number of Employees | | :--- | :--- | | **By Function** | | | Direct labor | 50,877 | | Indirect labor (manufacturing) | 25,002 | | Indirect labor (administration) | 7,729 | | Research and development | 10,283 | | **By Location** | | | Taiwan | 55,679 | | P.R.C. | 28,123 | | Korea | 2,429 | | Malaysia | 3,867 | | Others | 5,193 | [Share Ownership](index=97&type=section&id=SHARE%20OWNERSHIP) As of January 31, 2019, Chairman and CEO **Jason C.S. Chang** was the largest beneficial owner, holding approximately **22%** of the company's outstanding common shares, primarily through various holding companies and a family trust - As of January 31, 2019, Chairman and CEO **Jason C.S. Chang** beneficially owned **949,352,706 common shares**, representing **21.96%** of the total outstanding shares[573](index=573&type=chunk)[574](index=574&type=chunk)[578](index=578&type=chunk) - Vice Chairman **Richard H. P. Chang** beneficially owned **124,175,228 common shares**[573](index=573&type=chunk) [Major Shareholders and Related Party Transactions](index=99&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section identifies **Jason C.S. Chang** as the only major shareholder with over **5%** beneficial ownership and details key related party transactions, including contributions to the ASE Cultural and Educational Foundation and patent acquisitions - As of January 31, 2019, **Jason C.S. Chang** is the only major shareholder with beneficial ownership exceeding **5%**, holding **21.96%** of the company's common shares through a combination of direct ownership and various holding companies under a family trust[576](index=576&type=chunk)[578](index=578&type=chunk) - Several of the company's own subsidiaries, including ASE Test and Hung Ching, hold a small percentage of ASEH's common shares[579](index=579&type=chunk)[580](index=580&type=chunk) - Significant related party transactions include annual **NT$100 million** contributions to the ASE Cultural and Educational Foundation for environmental projects, and past transactions for factory construction and patent acquisitions[588](index=588&type=chunk)[590](index=590&type=chunk)[591](index=591&type=chunk) [Financial Information](index=101&type=section&id=Item%208.%20Financial%20Information) This section covers consolidated financial statements, favorable conclusions in legal proceedings regarding the K7 plant, and the dividend policy aiming for at least **30%** cash payout, with a **NT$2.50 per share** cash dividend proposed for 2018 - Legal proceedings regarding the K7 plant's wastewater discharge concluded with the Supreme Administrative Court overturning a **NT$102.0 million** fine and ordering a refund to the company in June 2017. A related criminal case was also overturned in 2015[593](index=593&type=chunk) - The company's dividend policy targets a cash payout of at least **30%** of the total dividend. For 2018, the board proposed a cash dividend of **NT$2.50 per share**, to be distributed from capital surplus[597](index=597&type=chunk)[600](index=600&type=chunk)[601](index=601&type=chunk) Historical Cash Dividends Per Common Share (NT$) | Year Paid | Cash Dividend per Share | | :--- | :--- | | 2014 | 1.29 | | 2015 | 2.00 | | 2016 | 1.60 | | 2017 | 1.40 | | 2018 | 2.50 | [The Offer and Listing](index=103&type=section&id=Item%209.%20The%20Offer%20and%20Listing) The company's common shares are listed on the **TWSE** (symbol **"3711"**) and its ADSs on the **NYSE** (symbol **"ASX"**) since April 30, 2018, with **4.32 billion common shares** and **142.5 million ADSs** outstanding as of January 31, 2019 - ASEH common shares trade on the Taiwan Stock Exchange (TWSE) under symbol **"3711"**[606](index=606&type=chunk) - ASEH American Depositary Shares (ADSs) trade on the New York Stock Exchange (NYSE) under symbol **"ASX"**[608](index=608&type=chunk) - As of January 31, 2019, there were **4,322,321,982 common shares** and **142,511,705 ADSs** outstanding[606](index=606&type=chunk)[608](index=608&type=chunk) [Additional Information](index=104&type=section&id=Item%2010.%20Additional%20Information) This section outlines the company's corporate governance framework, including its Articles of Incorporation and key material contracts like the **NT$90 billion** syndicated loan for the SPIL acquisition, and discusses R.O.C. foreign investment regulations and tax implications for non-R.O.C. holders [Articles of Incorporation](index=104&type=section&id=ARTICLES%20OF%20INCORPORATION) The company's Articles of Incorporation establish it as a company limited by shares with **NT$50 billion** authorized capital, stipulate a thirteen-member board, and define a dividend policy requiring a **10%** legal reserve and at least **30%** cash distribution - The company has an authorized share capital of **NT$50 billion**, divided into **5 billion common shares**[614](index=614&type=chunk) - The dividend policy requires setting aside **10%** of annual net income as a legal reserve and distributing at least **30%** of total dividends in cash[620](index=620&type=chunk)[622](index=622&type=chunk) - Major corporate actions, such as amending the Articles of Incorporation or dissolution, require approval by at least **two-thirds** of shares represented at a meeting where a majority of all outstanding shares are present[629](index=629&type=chunk)[631](index=631&type=chunk) [Material Contract](index=109&type=section&id=MATERIAL%20CONTRACT) The company highlights two key material contracts: a **NT$90 billion** five-year syndicated credit facility for the SPIL acquisition and the Joint Share Exchange Agreement, where each ASE share was exchanged for **0.5 ASEH common shares** and each SPIL share for **NT$51.2 in cash** - On April 30, 2018, the company entered into a **NT$90 billion** five-year syndicated credit facility to finance the SPIL Acquisition[655](index=655&type=chunk) - The Joint Share Exchange Agreement stipulated that each ASE common share would be exchanged for **0.5 ASEH common shares**, and each SPIL common share would be acquired for **NT$51.2 in cash**[656](index=656&type=chunk)[657](index=657&type=chunk)[659](index=659&type=chunk) [Taxation](index=112&type=section&id=TAXATION) This subsection details R.O.C. tax implications for non-R.O.C. holders, including a **21%** dividend withholding tax, capital gains exemption on common shares, and a **0.3%** securities transaction tax, while noting the company believes it was not a PFIC for 2018 - **R.O.C. Taxation:** Dividends paid to non-R.O.C. holders are subject to a **21% withholding tax**. Capital gains on common shares are exempt from income tax, but a **0.3%** securities transaction tax applies to sales. ADSs are not subject to these taxes[679](index=679&type=chunk)[682](index=682&type=chunk)[683](index=683&type=chunk) - **U.S. Federal Income Taxation:** For U.S. Holders, distributions are generally taxed as foreign-source dividend income. Gains from the sale of common shares or ADSs are typically treated as U.S.-source capital gains[687](index=687&type=chunk)[696](index=696&type=chunk)[700](index=700&type=chunk) - The company believes it was not a Passive Foreign Investment Company (PFIC) for the 2018 taxable year, but notes that this status is determined annually and cannot be guaranteed for future years[702](index=702&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=116&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks are interest rate and foreign currency fluctuations, managed with derivatives, resulting in a **NT$1.02 billion** net foreign exchange loss in 2018, reversing prior years' gains - The company is exposed to interest rate risk primarily through its long-term floating-rate debt. As of Dec 31, 2018, the company had significant variable rate long-term borrowings in NT$ (**NT$100.0 billion**) and US$ (**US$993.6 million**)[708](index=708&type=chunk)[712](index=712&type=chunk) - Foreign currency risk is managed through derivative instruments. The company recorded a net foreign exchange loss of **NT$1,015.6 million** in 2018, compared to gains of **NT$3,502.6 million** in 2017 and **NT$1,928.4 million** in 2016[714](index=714&type=chunk)[715](index=715&type=chunk) Outstanding Forward Exchange and Swap Contracts (as of Dec 31, 2018) | Contract Type | Notional Amount (Buy US$ vs NT$) | Notional Amount (Sell US$ vs NT$) | Notional Amount (Sell US$ vs JPY) | | :--- | :--- | :--- | :--- | | Forward Exchange | US$80.0 million | - | US$37.7 million | | Swap Contracts | US$1,687.4 million | US$208.8 million | US$54.2 million | Part II [Controls and Procedures](index=122&type=section&id=Item%2015.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2018, with the independent auditor issuing an unqualified opinion, excluding the SPIL subsidiary's internal controls - Management concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2018[732](index=732&type=chunk) - Based on the COSO 2013 framework, management concluded that the company's internal control over financial reporting was **effective** as of December 31, 2018[735](index=735&type=chunk) - The independent auditor, Deloitte & Touche, issued an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting. Their audit did not include the internal controls of the SPIL subsidiary, which were audited by other auditors (PricewaterhouseCoopers)[736](index=736&type=chunk)[738](index=738&type=chunk)[740](index=740&type=chunk) [Other Information](index=125&type=section&id=Item%2016.%20Other%20Information) This section covers various governance and compliance, including the identification of three audit committee financial experts, adoption of a Code of Business Conduct and Ethics, **NT$217.7 million** in fees paid to Deloitte & Touche in 2018, and differences in corporate governance practices from NYSE standards [Audit Committee Financial Expert](index=125&type=page&id=Item%2016A.%20Audit%20Committee%20Financial%20Expert) The board has determined that all three members of its audit committee, **Shen-Fu Yu, Ta-Lin Hsu, and Mei-Yueh Ho**, qualify as independent audit committee financial experts under SEC rules - The board has identified **Shen-Fu Yu, Ta-Lin Hsu, and Mei-Yueh Ho** as audit committee financial experts[757](index=757&type=chunk) [Code of Ethics](index=125&type=page&id=Item%2016B.%20Code%20of%20Ethics) The company has adopted a Code of Business Conduct and Ethics applicable to all personnel, covering anti-corruption, fair competition, anti-money laundering, and including a whistleblowing policy - A Code of Business Conduct and Ethics has been adopted, satisfying Item 16B requirements and applying to all company personnel[758](index=758&type=chunk) [Principal Accountant Fees and Services](index=125&type=page&id=Item%2016C.%20Principal%20Accountant%20Fees%20and%20Services) For fiscal year 2018, fees paid to Deloitte & Touche totaled **NT$217.7 million**, with the majority for audit services, and all services pre-approved by the audit committee Principal Accountant Fees (in NT$ thousands) | Fee Category | 2017 | 2018 | | :--- | :--- | :--- | | Audit fees | 158,872.5 | 157,244.5 | | Audit-related fees | 1,032.6 | 9,319.9 | | Tax fees | 16,087.7 | 31,394.8 | | All other fees | 19,024.7 | 19,776.7 | | **Total** | **195,017.5** | **217,735.9** | [Purchases of Equity Securities by the Issuer and Affiliated Purchasers](index=126&type=page&id=Item%2016E.%20Purchases%20of%20Equity%20Securities%20by%20the%20Issuer%20and%20Affiliated%20Purchasers) The company has conducted past share repurchase programs, including the repurchase and cancellation of **1.85 million** shares from dissenting shareholders in March 2018 related to the Share Exchange - In March 2018, ASE repurchased **1,852,000 common shares** from shareholders who dissented to the Share Exchange. These shares were subsequently canceled[763](index=763&type=chunk) [Corporate Governance](index=127&type=page&id=Item%2016G.%20Corporate%20Governance) As a foreign private issuer, the company's corporate governance practices differ from NYSE standards, notably regarding the absence of a majority of independent directors and dedicated nominating/corporate governance committee - The company follows R.O.C. corporate governance standards, which differ from NYSE rules for U.S. companies[767](index=767&type=chunk) - Key differences include: not having a majority of independent directors on the board, not having a dedicated nominating/corporate governance committee, and using R.O.C. independence standards for its compensation committee[769](index=769&type=chunk)[772](index=772&type=chunk)[778](index=778&type=chunk) Part III [Financial Statements](index=132&type=section&id=Item%2018.%20Financial%20Statements) This section presents the audited consolidated financial statements for 2016-2018, prepared under IFRS, including audit reports from Deloitte & Touche and PricewaterhouseCoopers for the SPIL subsidiary, detailing balance sheets, income, equity, and cash flows - The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB)[814](index=814&type=chunk)[895](index=895&type=chunk) - The audit report from Deloitte & Touche is based on their audit and the report of other auditors (PricewaterhouseCoopers) for the SPIL subsidiary, which was consolidated from April 30, 2018[815](index=815&type=chunk) - The financial statements for periods prior to the April 30, 2018 incorporation of ASEH are prepared under the assumption that ASEH was the continuation of ASE Inc., its predecessor entity[896](index=896&type=chunk)