ASE raises capital spending by 23.5%

‘STRONGER DEMAND’ : Company executives said that a lot of new investments are needed, although there are capacity bottlenecks for automation and innovation

ASE Technology Holding Co (日月光投控) yesterday increased its capital expenditure for this year to US$10.5 billion, up 23.5 percent from its previous budget of US$8.5 billion, amid robust demand for artificial intelligence (AI) applications.

The world’s largest supplier of packaging and testing services plans to allocate about 70 percent of the increased spending to capacity expansion, mainly for leading-edge advanced packaging (LEAP) technology, with LEAP revenue forecast to exceed US$3.5 billion this year, ASE said.

“Obviously we are seeing a stronger demand ... from not just customers, but also our foundry partner,” ASE chief financial officer Joseph Tung (董宏思) told an earnings conference in Taipei.

That “requires a lot of new investments, not just for this year, but also for next year,” Tung said.

The firm is expanding capacity at full speed, with 13 greenfield projects and eight brownfield projects under way, he said.

“The uncertainty exists in terms of how we can execute. So the business demand is not a concern,” ASE chief operating officer Tien Wu (吳田玉) said. “With AI, the hardware requirement is new, insatiable, more complicated and more complex, so it is a capacity bottleneck for automation and, more importantly, from an innovation perspective.”

Regarding rising competition from Intel Corp’s advanced embedded multi-die interconnect bridge packaging technology, Wu said that if there is any alternative technology that can offer the same yield to resolve the bottleneck in AI infrastructure, ASE would welcome it, given severe capacity constraints.

ASE’s focus is on supporting the mainstream chip-on-wafer-on-substrate packaging technology developed by Taiwan Semiconductor Manufacturing Co (台積電), he said.

The company is also striving to ramp up the next-generation chip-on-panel-on-substrate technology and would include alternative technologies in its roadmap if customers ask for them, he said.

The company’s panel-level packaging technology is to enter volume production in the first quarter next year, Wu added.

ASE yesterday reported net profit of NT$21.07 billion (US$649.23 million) in the second quarter, up 180.19 percent from NT$7.52 billion a year earlier and 49 percent from NT$14.13 billion the previous quarter.

Earnings per share rose to NT$4.8 from NT$1.74 a year earlier and NT$3.23 a quarter earlier.

In the first half of the year, ASE’s packaging-and-testing service revenue rose 35 percent annually.

The firm said it expects the growth momentum to persist in the second half.

For the whole year, packaging-and-testing service revenue is forecast to jump 35 percent from last year, it said.

ASE said it expects overall revenue to grow 21 or 22 percent sequentially this quarter from a record of NT$191.06 billion last quarter.

Gross margin for packaging-and-testing services is expected to improve to 30 percent by the end of the year, from 28 or 29 percent this quarter, ASE said, citing a larger revenue share of margin-accretive LEAP technology.