ASE Technology Holding(ASX) - 2024 Q2 - Earnings Call Transcript

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]