Q4 2021 ASE Technology Holding Co Ltd Earnings Call
Speaker 1: Welcome to our fourth quarter and full year 2021 earnings release. Thank you for attending our...
<unk> fourth quarter and full year 2021 earnings release thank.
Thank you for attending our conference call today.
Hello, I am Ken Hsiang, the head of Investor Relations for ASE Technology Holdings, welcome to our fourth quarter and full year 2021 earnings release. Thank.
Speaker 1: Hello, I am Ken Chung, the head of investor relations for ASC Technology Holdings. Welcome to our fourth quarter and full year 2021 earnings release. Thank you for attending our.
Thank you for attending our conference call today.
Speaker 1: Please refer to our safe harbor notice on page 2 all participants consent to having their voices and questions brought.
Please refer to our safe Harbor notice on page two all participants consent to having their voices and questions broadcast.
Speaker 1: via participation in this event. If participants do not consent, please disconnect at this time. I would like to remind everyone that the presentation that follows may contain forward-looking statements. These forward-looking statements are subject to a high degree of risk and our actual results may differ material.
Our participation in this event if participants do not consent. Please disconnect at this time I would like to remind everyone that the presentation that follows may contain forward looking statements. These forward looking statements are subject to a high degree of risk and our actual results may differ materially.
Speaker 1: For the purposes of this presentation, our dollar figures are generally stated in new Taiwan dollars, unless otherwise indicated. As a Taiwan based company, our financials are presented in accordance with Taiwan IFRS. Results presented using Taiwan IFRS may differ materially from results using other accounting standards, including those represented by our subsidiary using Chinese GAAP.
For the purposes of this presentation. Our dollar figures are generally stated in new Taiwan dollars, unless otherwise indicated as a Taiwan based company. Our financials are presented in accordance with Taiwan I FRS results presented using Taiwan, I FRS may differ materially from results using other accounting.
Standards, including those represented by our subsidiary using Chinese gap.
Speaker 1: I am joined today by Dr. Tian Wu, our COO, and Joseph Tung, our CFO . For today's call, I will be going over our financial results. Tian will be providing our annual business recap and outlook, and Joseph will then provide an update on our China site dispositions and our quarterly guidance. We'll have a Q&A session following the prepared remarks.
I am joined today by Dr. Tien <unk>, our C O O and Joseph Tung, our CFO for today's call I will be going over our financial results churn will be providing our annual business recap and outlook and Joseph will then provide an update on our China site dispositions and our quarterly guidance we will.
Have a Q&A session following the prepared remarks.
Speaker 1: Please turn to page 3 where you will find our 4th quarter consolidated results. Intercompany transactions between our ATM and EMS businesses have been eliminated during consolidation.
Please turn to page three where you will find our fourth quarter consolidated results intercompany transactions between our ATM and EMS businesses have been eliminated during consolidation.
Speaker 1: During the quarter, we announced and completed the disposition of our subsidiary ASE, Inc's major China sites. From a financial perspective, the sites were valued at an enterprise value of US dollar 1.46 billion. And the final consideration was US dollar 1.33 billion after adding cash balances and deducting the existing debt.
During the quarter, we announced and completed the disposition of our subsidiary ASE, Inc. 's major China sites from a financial perspective, the sites were valued at an enterprise value of U S. Dollar 1.46 billion and the final consideration was U S. Dollar one point.
<unk> 3 billion after adding cash balances and deducting the existing debt.
Speaker 1: We recorded in the fourth quarter a gain of US dollar 551 million net of related expenses and taxes. Joseph will give more details regarding this transaction towards the end of our prepared remarks.
We recorded in the fourth quarter, a gain of <unk> dollars 551 million net of related expenses and taxes Joseph will give more details regarding this transaction towards the end of our prepared remarks.
Speaker 1: For the fourth quarter, we recorded fully diluted EPS of $6.99 and basic EPS of $7.20.
For the fourth quarter, we recorded fully diluted EPS of $6 99.
And basic EPS of $7 20.
Without the inclusion of our China site disposition gain.
Speaker 1: Without the inclusion of our China site disposition gain, fully diluted and basic EPS would be $3.45 and $3.66, respectively.
Fully diluted and basic EPS would be $3 45.
And $3 six the six respectively.
Speaker 1: Consolidated net revenue increased 15% sequentially and 16% year over year. We had a gross profit of $32.9 billion with a gross margin of 19%.
Consolidated net revenue increased 15% sequentially and 16% year over year, we had a gross profit of $32 9 billion.
With a gross margin of 19% our gross margin declined by one four percentage points sequentially and increased by three three percentage points year over year.
Speaker 1: Our gross margin declined by 1.4 percentage points sequentially and increased by 3.3 percentage points year over year. The sequential margin decline is principally the result of higher EMS business mix. The annual increase is primarily the result of higher profitability of our ATM business.
The sequential margin decline is principally the result of higher EMS business mix. The annual increase is primarily the result of higher profitability of our ATM business.
Speaker 1: Our operating expenses increased by $0.9 billion during the fourth quarter to $13.3 billion as a result of higher profit sharing expenses issued during the quarter. Despite the absolute dollar increase, our operating expense percentage declined 0.5 percentage points sequentially and 0.4 percentage points year over year to 7.7%.
Our operating expenses increased by zero point $9 billion during the fourth quarter too.
$13 3 billion as a.
<unk> of higher profit sharing expenses issued during the quarter. Despite the absolute dollar increase our operating expense percentage declined 0.5 percentage points sequentially and 0.4 percentage points year over year to seven 7%.
Speaker 1: Operating profit was $19.6 billion, up $1.2 billion sequentially, and $8.4 billion year-over-year.
Operating profit was $19 6 billion.
Up $1 $2 billion sequentially and $8 $4 billion year over year.
Speaker 1: Operating margin was 11.3%, declining 0.9 percentage points sequentially as a result of higher EMS product mix.
Operating margin was 11, 3% declining 0.9 percentage points sequentially as a result of higher EMS product mix.
Speaker 1: while operating margin increased 3.7 percentage points year over year as a result of higher profitability from our ATM business.
While operating margin increased three seven percentage points year over year as a result of higher profitability from our ATM business.
Speaker 1: During the quarter, we had a net non-operating gain of $17.7 billion. The gain from the China site dispositions accounted for $17.3 billion of this net non-operating gain. The remaining non-operating gain was from our foreign exchange activities, government grants, and other non-operating gains.
During the quarter, we had a net non operating gain of $17 7 billion.
The gain from the China site dispositions accounted for $17 $3 billion of net nonoperating gain.
The remaining non operating gain was from our foreign exchange activities government grants and other nonoperating gains. This amount was offset in part by net interest expense of zero point $6 billion.
Speaker 1: This amount was offset in part by net interest expense of 0.6 billion dollars.
Tax expense for the quarter was $5 6 billion the effective tax rate for the fourth quarter was 15% the lower effective tax rate during the quarter was principally the result of differing taxation methodology related to our China site disposal.
Speaker 1: Tax expense for the quarter was 5.6 billion dollars. The effective tax rate for the fourth quarter was 15 percent. The lower effective tax rate during the quarter was principally the result of differing taxation methodology related to our China site disposal.
Speaker 1: Net income for the quarter was $30.9 billion, representing an improvement of $16.7 billion sequentially and an improvement of $20.9 billion year-over-year.
Net income for the quarter was $30 9 billion, representing an improvement of $16 7 billion sequentially and an improvement of $29 billion year over year, excluding the gain net of taxes and related expenses from the sale of our China sites are net income.
Speaker 1: excluding the gain net of taxes and related expenses from the sale of our China sites, our net income would be $15.6 billion, which would still represent substantial earnings growth of $1.4 billion sequentially and $5.6 billion year over year.
Would be $15 6 billion, which would still represent substantial earnings growth of one $4 billion sequentially and $5 $6 billion year over year.
Speaker 1: The NT dollar US dollar exchange rate was fairly stable from the 3rd to 4th quarter, and as a result did not impact holding company level margins meaningfully.
The NT dollar U S. Dollar exchange rate was fairly stable from the third to fourth quarter and as a result did not impact holding company level margins meaningfully however from a year over year perspective, we estimate that the strengthening NT dollar had a one percentage point negative impact.
Speaker 1: However, from a year over year perspective, we estimate that the strengthening NT dollar had a 1 percentage point negative impact gross margin.
<unk> gross margin as a rule of thumb for every percent. The NT dollar appreciates, we see a corresponding 0.3 percentage point impact to our holding company gross margin on the bottom of the page we provide key P&L line items without the inclusion of PPA related.
Speaker 1: As a rule of thumb, for every percent the NT dollar appreciates, we see a corresponding 0.3 percentage point impact to our holding company gross margin.
Speaker 1: On the bottom of the page, we provide key P&L line items without the inclusion of PPA related expenses.
Expenses consolidated gross profit, excluding PPA expenses would be $33 8 billion with a 19, 6% gross margin operating profit would be $28 billion with an operating margin of 12% net profit would be $32 1 billion.
Speaker 1: Consolidated gross profit, excluding PPA expenses would be 33.8 billion dollars with a 19.6% gross margin. Operating profit would be 20.8 billion dollars with an operating margin of 12%. Net profit would be 32.1 billion dollars with a net margin of 18.6%. Basic EPS, excluding PPA expenses would be $7.48.
The net margin of 18, 6% basic EPS, excluding PPA expenses would be $7.48.
Speaker 1: Please refer to page 4 here you will find the 2021 consolidated full year result. Fully diluted EPS for the year was 14 dollars 40 cents. While basic EPS was 14 dollars 84 cents. Fully diluted EPS for the year without inclusion of our China site dispositions would be 10 dollars 86 cents and basic EPS would be 11 dollars.
Please refer to page four here you will find the 2021 consolidated full year result, fully diluted EPS for the year was $14 40.
While basic EPS was $14 84 fully diluted EPS for the year without inclusion of our China site dispositions would be $10 86.
And basic EPS would be $11 30.
Speaker 1: For 2021 consolidated net revenues grew 20% as compared with 2020. ATM revenues grew 21% while revenues grew 17% annually.
For 2021 consolidated net revenues grew 20% as compared with 2020 ATM revenues grew 21%, while EMS revenues grew 17% annually.
Speaker 1: Gross profit for the year was $110.4 billion, increasing $32.4 billion year over year, or 42%.
Gross profit for the year was 110 4 billion, increasing $32 $4 billion year over year or 42% in 2021, our gross margin improved three one percentage points to 19, 4% print.
Speaker 1: In 2021, our gross margin improved 3.1 percentage points to 19.4 percent.
Speaker 1: principally as a result of higher profitability in our ATM business and slight improvement in EMS.
Principally as a result of higher profitability, and our ATM business and slight improvement in MFS.
Speaker 1: Operating expenses increased 5.1 billion dollars for the year and came in at 48.2 billion dollars. We were able to lower our operating expense percentage by 0.5 percentage points to 8.5% for the year. Operating profit for the year was 62.1 billion dollars, improving 78% or 27.2 billion dollars.
Operating expenses increased $5 1 billion for the year and came in at $48 $2 billion, we were able to lower our operating expense percentage by 0.5 percentage points to eight 5% for the year operating profit for the year was 62.
$1 billion, improving 78% or 27 $2 billion.
Speaker 1: Operating margin for the year was 10.9%. An improvement of 3.6 percentage points.
Operating margin for the year was 10, 9% an improvement of three six percentage points.
Speaker 1: We recorded a net non-operating gain of $18.2 billion for the year.
We recorded a net nonoperating gain of $18 2 billion for the year.
As mentioned earlier $17 $3 billion of this was attributable to the disposition of our China sites.
The remainder was primarily attributable to investment income government grants and other nonoperating income offset by net interest expense of $2 3 billion.
Speaker 1: Total tax expense was $14.3 billion. The effective tax rate for the year was 17.8%. Our full year effective tax rate was primarily lower as the result of differing taxation methodology related to our China site disposal.
Total tax expense was $14 3 billion.
The effective tax rate for the year was 17, 8% our full year effective tax rate was primarily lower as the result of differing taxation methodology related to our China site disposals.
Speaker 1: For ongoing purposes, we believe our effective tax rate to be about 20.5%.
Our ongoing purposes, we believe our effective tax rate to be about 25%.
Speaker 1: Net income increased by 132% to $63.9 billion.
Net income increased by 132% to $63 $9 billion on a full year basis, we estimate that the strengthening NT dollar had a negative one six percentage point impact to gross and operating margins removing the effect of <unk>.
Speaker 1: On a full year basis, we estimate that the strengthening NT dollar had a negative 1.6 percentage point impact to gross and operating margins. Removing the effect of PPA depreciation, our gross margin would be 20%. Our operating margin would be 11.8%. Our basic EPS would be $15.96.
Depreciation our gross margin would be 20% our operating margin would be 11, 8% our basic EPS would be $15 96.
Speaker 1: On page 5 is our ATM P and L. it is worth noting here that the ATM revenue reported here contains revenue eliminated at the holding company level related to enter company transactions between our ATM and business.
On page five is our ATM P&L. It is worth noting here that the ATM revenue reported here contains revenue eliminated at the holding company level related to intercompany transactions between our ATM and EMS businesses.
Speaker 1: During the 4th quarter, our ATM business continued to run at a fully loaded rate. Operationally, it was almost a continuation of the 3rd quarter, with slightly more business.
During the fourth quarter, our ATM business continued to run at a fully loaded rate operationally. It was almost a continuation of the third quarter with slightly more business. We had a reclassification of bonus expense from cost of goods sold to operating expense during the quarter we will.
Speaker 1: We had a reclassification of bonus expense from cost of goods sold to operating expense during the quarter. We will explain sequential fluctuations that are impacted by this after the reported numbers are presented.
We will explain sequential fluctuations that are impacted by this after the reported numbers are presented here.
Speaker 1: For the 4th quarter 2021 revenues for ATM business were 92.0Billion dollars up 1.9Billion from the previous quarter and up 19.2Billion dollars from the same period last year. This represents a 2%.
For the fourth quarter 2021 revenues for our ATM business were $92.0 billion up $1 9 billion from the previous quarter and up 19 $2 billion from the same period last year. This represents a 2%.
Speaker 1: increase sequentially and a 26% increase year over year. Our ATM revenues came in slightly ahead of our expectations due to higher than expected customer load.
Increase sequentially and a 26% increase year over year, our ATM revenues came in slightly ahead of our expectations due to higher than expected customer loading.
Speaker 1: Gross profit for our ATM business was $25.7 billion up $1 billion sequentially and $9.3 billion year over year. Gross profit margin for our ATM business was 28% up 0.6 percentage points sequentially and up 5.4 percentage points.
Gross profit for our ATM business was $25 7 billion up $1 billion sequentially and nine $3 billion year over year gross profit margin for our ATM business was 28% up <unk> six percentage points sequentially and up.
5.4 percentage points year over year, the year over year gross profit margin improvement was primarily attributable to higher loading improved efficiency and a friendlier ASP environment offset in part by a stronger NT dollar appreciation.
Speaker 1: year over year. The year over year gross profit margin improvement was primarily attributable to higher loading, improved efficiency, and a friendlier ASP environment offset in part by a stronger NT dollar appreciation.
Speaker 1: During the 4th quarter operating expenses were 9.7Billion dollars up 0.6Billion dollars sequentially and 1.2Billion dollars year over year. The year over year increase was primarily driven by a higher employee headcount and incremental bonuses tied to corporate performance.
During the fourth quarter operating expenses were $9 $7 billion up 0.6 billion sequentially and $1 $2 billion year over year. The year over year increase was primarily driven by a higher employee head count and incremental bonuses tied to court.
Great performance, our operating expense percentage was 10, 5% up <unk> four percentage points sequentially and down one one percentage points year over year.
Speaker 1: Our operating expense percentage was 10.5%, up 0.4 percentage points sequentially, and down 1.1 percentage points year over year.
Speaker 1: During the 4th quarter, operating profit was $16.1 billion, representing an improvement of $0.5 billion quarter over quarter, and an improvement of $8.1 billion year over year. The year over year mark represents a 101% increase from last year.
During the fourth quarter operating profit was $16 1 billion representing.
Representing an improvement of 0.5 billion quarter over quarter, and an improvement of $8 $1 billion year over year the year over year, Mark represents a 101% increase from last year.
Speaker 1: Operating margin was 17.5%, improving 0.2 percentage points sequentially and 6.5 percentage points year over year. The NT dollar exchange rate did not have a significant impact on our ATM sequential margin.
Operating margin was 17, 5%, improving 0.2 percentage points sequentially and six five percentage points year over year. The NT dollar exchange rate did not have a significant impact on our ATM sequential margins, however on a year over year.
Speaker 1: However, on a year over year basis, we estimate that the strengthening NT dollar had a 1.5 percentage point negative impact. During the quarter, we made a 1 time reclassification of 0.4B relating to how bonuses were classed.
Year basis, we estimate that the strengthening NT dollar had a one five percentage point negative impact during the quarter. We made a one time reclassification of 0.4 billion relating to how bonuses were classified between cost of goods sold and operate.
Speaker 1: between cost of goods sold and operating expenses during the first three quarters of the year. In the fourth quarter, this reclassification lowers cost of goods sold compensation expenses while increasing OPEX level compensation expenses.
<unk> expenses during the first three quarters of the year.
In the fourth quarter. This reclassification lowest cost of goods sold compensation expenses, while increasing opex level of compensation expenses adjusting for bonus reclassification, our gross profit margin would be 27, 6% or flat sequentially.
Speaker 1: Adjusting for bonus reclassification, our gross profit margin would be 27.6% or flat sequentially.
Speaker 1: Our sequential operating expenses would be flattish up 0.1Billion and our operating expense percentage would be 10.1% down 0.2% sequential.
Sequential operating expenses would be flattish up zero point $1 billion and our operating expense percentage would be 10, 1% down 0.2 percentage points sequentially.
Speaker 1: This reclassification has no impact to ATM operating margins. It also has no impact at a full year level. Without the impact of PPA related depreciation and amortization, ATM gross profit margin would be 28.9% and operating profit margin would be 18.7%.
This reclassification has no impact to ATM operating margins. It also has no impact at a full year level.
Without the impact of PPA related depreciation and amortization ATM gross profit margin would be 28, 9% and operating profit margin would be 18, 7% on page six we have our ATM full year P&L on this page you can see how that we saw.
Speaker 1: On page 6, we have our ATM full year P&L. On this page, you can see how that we saw significant improvement in all aspects of our business during the year.
Improvement in all aspects of our business during the year.
Speaker 1: 2021 revenues for ATM business increased by 19% with our packaging business and test business up 22% and 6% respect.
2021 revenues for our ATM business increased by 19% with our packaging business and test business up 22% and 6% respectively.
Speaker 1: Gross profit for the year improved 49% to $88.7 billion.
Gross profit for the year improved 49% to $88 7 billion.
Speaker 1: Gross margin was up 5.3 percentage points primarily as a result of higher loading and efficiency, a friendly ASP environment and offset in part by NT dollar appreciation.
Gross margin was up five three percentage points, primarily as a result of higher loading and efficiency a friendly ASB environment and offset in part by NT dollar appreciation.
Speaker 1: Our operating expense percentage declined by 0.9 percentage points from 11.4% to 10.5%.
Our operating expense percentage declined by <unk> nine percentage points from 11, 4% to 10, 5% operating profit improved 94% to $53 4 billion with operating margin improving six two percentage points too.
Speaker 1: Operating profit improved 94% to $53.4 billion, with operating margin improving 6.2 percentage points to 16%.
16%.
Speaker 1: On a full year basis, we estimate that the strengthening NT dollar had a 2.3 percentage point impact gross margins. Without the impact of PPA expenses, gross profit margin would be 27.5% and operating margin would be 17.3%.
On a full year basis, we estimate that the strengthening NT dollar had a 2.3 percentage point impact to gross margins without the impact of PPA expenses gross profit margin would be 27, 5%.
<unk> operating margin would be 17, 3% on page seven you will find a graphical representation of our ATM P&L when commentary we would like to reinforce here is that we believe the improvements in our business are not only related to a prolonged.
Speaker 1: On page 7, you'll find a graphical representation of our ATM P&L. The commentary we would like to reinforce here is that we believe the improvements in our business are not only related to a prolonged semiconductor cyclical uptick.
Semiconductor cyclical uptick we strongly believe that we have substantial systemic improvements from our combination with spill and while cyclicality in the industry as a given from a longer term perspective, we believe that our margins still have further room to run.
Speaker 1: We strongly believe that we have substantial systemic improvements from our combination with spill. And while cyclicality in the industry is a given from a longer term perspective, we believe that our margins still have further room to rise. Given our strengthened market position after the combination with.
Given our strengthened market position after the combination with spill.
Speaker 1: On page 8 is our ATM revenue by market segment. There is not a significant change here. However, it is worth noting that our computing segment appears to be outperforming our communication.
On page eight is our ATM revenue by market segment. There is not a significant change here. However, it is worth noting that our computing segment appears to be outperforming our communications segment. This appears to be driven by strong demand from high performance computing products.
Speaker 1: This appears to be driven by strong demand from high performance commuting.
Speaker 1: On page 9, you will find our ATM revenue by service type. As we have mentioned, we expected a significant uptick in our advanced packaging services during the quarter. We expect continued strength within advanced packaging to persist through 2022.
On page nine you'll find our ATM revenue by service type as we have mentioned, we expected a significant uptick in our advanced packaging services during the quarter. We expect continued strength within advanced packaging to persist through 2022, we also.
Speaker 1: We also expect our testing revenues to outperform during 2022 after a muted 2021, which was impacted by related business.
Backed our testing revenues to outperform during 2022 after a muted 2021, which was impacted by EHR related business adjustment.
Speaker 1: As a percentage of revenue, our wire bond revenues have declined, but we're flattish on an absolute dollar.
As a percentage of revenue our wire bond revenues have declined but were flattish on an absolute dollar basis.
Speaker 1: On page 10, you can see the fourth quarter and full year results of our EMS business.
On page 10, you can see the fourth quarter and full year results of our EMS business.
Speaker 1: The information we provide in regards to USI may differ materially from the information directly provided by our A-Share listed subsidiary as they report independently using Chinese GAAP.
The information we provide in regards to ESI may differ materially from the information directly provided by our a share listed subsidiary as they report independently using Chinese gap.
Speaker 1: During the quarter demand was stronger than anticipated, driven by stronger than expected demand for our service.
During the quarter demand was stronger than anticipated driven by stronger than expected demand for our services.
Speaker 1: As production was slowed by component and chip shortages in its third quarter, such operating conditions continued to persist throughout the fourth quarter.
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Duction was slowed by component and chip shortages in its third quarter, such operating conditions continue to persist throughout the fourth quarter.
Speaker 1: Further, in 2020, our consumer SIP business had a significantly later start as compared to the current year 2021.
Further in 2020, our consumer S. IP business had a significantly later start as compared to the current year 2021.
Speaker 1: We believe the combination of these 2 factors distorts 4th quarter year over year comparisons and as such, we believe that comparing back half numbers may be more telling of our business performance in such situations.
We believe the combination of these two factors distorts fourth quarter year over year comparisons and as such we believe that comparing back half numbers, maybe more telling of our EMS business is performance in such situations.
Speaker 1: For EMS business during the 4th quarter, EMS revenues increased 33% sequentially and 3% year over year. As a result of component and chip shortages, this year's production cycle of certain SIP products was more evenly spread out across our 3rd and 4th quarters.
For our EMS business during the fourth quarter, Ams revenues increased 33% sequentially and 3% year over year as a result of component and chip shortages. This year's production cycle of certain IP products was more evenly spread out across our third and fourth quarter.
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Speaker 1: Some production will push into the first quarter of 2022.
Some production will push into the first quarter of 2022.
Speaker 1: In 2020, the production cycle for some of our consumer SIP products launched later than 2021. As such, the year over year percentage increase was a bit muted. If we compare second half numbers between 2020 and 2021, we saw a 13% improvement in revenue.
In 2020, the production cycle for some of our consumer products launched later than 2021.
As such the year over year percentage increase was a bit muted.
If we compare second half numbers between 2020 in 2021, we saw a 13% improvement in revenues.
Speaker 1: Our gross profit was 7.1Billion dollars, improving 1.2Billion dollars sequentially and 0.1Billion dollars year over year. The sequential gross profit improvement is the result of the seasonal ramp of our SIP related product.
Our EMS gross profit was 7.1 billion, improving one $2 billion sequentially.
And zero point $1 billion year over year. The sequential gross profit improvement is the result of the seasonal ramp of our IP related products. The year over year improvement is again, a reflection of comparing to manufacturing cycles at different times, comparing second half gross profit.
Speaker 1: the year over year improvement is again the reflection of comparing two manufacturing cycles at different times.
Speaker 1: Comparing second half gross profits, we saw a 7% improvement from 2020 to 2021.
We saw a 7% improvement from 2020 to 2021.
Speaker 1: Gross profit margin for the EMS business unit came in at 8.7%, which is a decline of 0.9% of point sequence.
Gross profit margin for the EMS business unit came in at eight 7%, which is a decline of 0.9 percentage points sequentially.
Speaker 1: and 0.1 percentage points year over year. The margin declines are primarily the result of product mix shifting to higher material pass through products.
And 0.1 percentage points year over year. The margin declines are primarily the result of product mix shifting to higher material pass through products.
Speaker 1: our EMS business units fourth quarter operating expenses were $3.5 billion, increasing the $0.3 billion sequentially, and flat year over year.
Our EMS business unit's fourth quarter operating expenses were $3 5 billion.
Increasing the 0.3 billion sequentially and flat year over year.
Speaker 1: Operating expenses increased primarily as a result of increased employee profit sharing recorded during the year.
Operating expenses increased primarily as a result of increased employee profit sharing recorded during the year end.
Speaker 1: Our EMS units operating expense percentage was 4.3% down 1 percentage point sequentially and 0.2 percentage points year over year. The sequential decline and operating expense percentage is primarily attributable to higher revenues while containing operating expense.
Our EMS units operating expense percentage was four 3% down one percentage point sequentially and 0.2 percentage points year over year. The sequential decline in operating expense percentage is primarily attributable to higher revenues while containing operating.
<unk> expenses, our Ams operating profit improved 0.9 billion sequentially and zero point $1 billion year over year. The sequential improvement was primarily due to increased seasonal demand for <unk> products.
Speaker 1: Our EMS operating profit improved 0.9 billion dollars sequentially and 0.1 billion dollars year over year. The sequential improvement was primarily due to increased seasonal demand for SIP products.
Speaker 1: Our EMS operating margin was 4.4%, which is up 0.1% as point sequentially and is flat year over year.
Our EMS operating margin was four 4%, which is up <unk>, one percentage points sequentially and is flat year over year.
Speaker 1: On a full year perspective, our EMS business in challenging conditions delivered another strong year. On a full year perspective, our EMS business revenues increased 17%. Gross profit increased 14%
On a full year perspective, our EMS business and challenging conditions delivered another strong year on a full year perspective, our EMS business revenues increased 17% gross profit increased 14% in these challenging operating conditions characterized by wafer and component.
Speaker 1: In these challenging operating conditions characterized by wafer and component shortages, our full year growth and operating profit margins each declined by 0.2 percentage point.
<unk>, our full year growth in operating profit margins each declined by 0.2 percentage points.
Speaker 1: On page 11, you will find a graphical representation of our E.M.S. revenue by application. With sales increasing 33% sequentially, interpreting this chart gets a bit tricky.
On page 11, you will find a graphical representation of our EMS revenue by application with sales, increasing 33% sequentially and interpreting this chart gets a bit tricky.
Speaker 1: What is fairly straightforward to see is that our consumer segment increased by five percentage points as a result of product seasonality. Other categories generally grew in absolute dollars. However, their growths were not as pronounced as that of the consumer segment.
What is fairly straightforward to see is that our consumer segment increased by five percentage points as a result of product seasonality. Other categories. Generally grew in absolute dollars. However, there are growths were not as pronounced as that of the consumer segment.
Speaker 1: On page 12, you will find key line items from our balance.
On page 12, you will find key line items from our balance sheet at the end of the quarter, we had cash cash equivalents and current financial assets of $79 1 billion or.
Speaker 1: At the end of the quarter, we had cash, cash equivalents, and current financial assets of $79.1 billion.
Speaker 1: Total interest bearing debt was $227.2 billion. Total unused credit lines amounted to $278.8 billion. Our EBITDA for the quarter was $51.9 billion. EBITDA for the year was $136.8 billion.
Our total interest bearing debt was $227 2 billion.
Total unused credit lines amounted to $278 8 billion our.
Our EBITDA for the quarter was $51 9 billion EBITDA for the year was $136 8 billion.
Speaker 1: And our net debt to equity was 54% at the end of the year.
And our net debt to equity was 54% at the end of the year.
Speaker 1: On page 13, you will find our equipment capital expenditures. Machinery and equipment capital expenditures for the fourth quarter and US dollars totaled $472 million, of which $231 million were used in packaging operations, $160 million in test operations, $68 million in EMS operations, and $13 million in interconnect material operations and others.
On page 13, you'll find our equipment capital expenditures machinery and equipment capital expenditures for the fourth quarter in U S dollars totaled $472 million.
All of which $231 million were used in packaging operations $160 million in test operations $68 million in EMS operations and $13 million in interconnect material operations and others.
Speaker 1: For the full year, machinery and equipment capital expenditures were $2 billion. $1.3 billion was spent on packaging.
For the full year machinery and equipment capital expenditures were $2 billion.
One 3 billion was spent on packaging.
Speaker 1: 0.5 billion on TAST and 0.2 billion on EMS.
0.5 billion on test and zero point $2 billion on Ams.
Speaker 1: Our ATM business continues to be constrained by substrate and wafer availability in addition to a lack of our own manufacturing capacity.
Our ATM business continues to be constrained by substrate and wafer availability. In addition to a lack of our own manufacturing capacity give.
Speaker 1: Given that we can generally put in capacity faster than our upstream foundry partners and our substrate suppliers, we can be a lot more nimble in our approach to our business. Although our smart factories do take somewhat more investment and time to build, we still believe that many of our investments are granular, which allows us to adapt quickly to market conditions.
Given that we can generally put and capacity faster than our upstream foundry partners and our substrate suppliers, we can be a lot more nimble in our approach to our business, although our smart factories do take somewhat more investment and time to build we still believe.
Leave that many of our investments are granular, which allows us to adapt quickly to market conditions.
Speaker 1: We continue to provide our EBITDA and US dollars here as a reference.
We continue to provide our EBITDA in U S dollars here.
Speaker 1: The earnings related to the China site disposition are separated for better comparability. We believe that the company's EBITDA relative to our equipment CAPEX serves as a key financial performance metric for the company.
Reference the earnings related to the China site disposition are separated for better comparability, we believe that the company's EBITDA relative to our equipment Capex serves as a key financial performance metric for the company.
Speaker 1: Before we move on to Dr. Tian Wu and Joseph Tang's section.
Before we move on to Dr. Tien <unk> and Joseph Tung section I would like to inform everyone that they will make forward looking references on a pro forma basis, removing the results of the China factory is sold.
Speaker 1: I would like to inform everyone that they will make forward looking references on a pro forma basis.
Speaker 1: removing the results of the China factory solar
Speaker 1: As a reference, we have included an appendix to the slide deck that has a set of quarterly pro forma financial statements for the consolidated holding company and 1 for our ATM business unit.
As a reference we have included an appendix to the slide deck that has a set of quarterly pro forma financial statements for the consolidated holding company and one for our ATM business unit with that said I pass the presentation over to Dr. <unk>.
Speaker 1: With that said, I pass the presentation over to Dr. Tian Wu. Dr. Wu.
Dr <unk>.
Yeah.
Speaker 1: Hi, everyone. I would like to give you the 2021 recap, as well as the outlook for 2022. I will also touch base on the industry perspective from what we can see. First of all, 20...
Hi, everyone I would like to give you the 2020 I want to recap as well as the outlook for 2022 I will also touch base on the industry perspective, where we can see.
First of all 2021.
Speaker 1: With a good year, we have seen a revenue and market improvement better than Target. For example, in 21, the ATM revenue grew 26% year over year or 45% year over year if we exclude the year our effective business.
It was a good year, we have seen revenue and larvae improvement better than target for example in 'twenty one the ATM revenue grew 26% year over year.
Or 45% year over year, if we exclude the year our effective business.
Speaker 1: The ATM margin, gross margin was twenty six point five percent, approaching historical peak level of twenty seven percent.
The ATM margin gross margin was 26, 5%.
Approaching historical peak level of 27%.
Speaker 1: ASE consolidated revenue grew 26% year over year.
ASE consolidated revenue grew 26% year over year.
Speaker 1: and ASC consolidate the operating margin improved 3.6 percentage points.
ASC consolidated operating margin improved three six percentage points.
Speaker 1: versus the target that we set at the beginning of the year of 2.5 to 3%. So overall, 2021 was a good year.
<unk> is the target that we set at the beginning of the year of two 5% to 3%.
So overall 21 was a good year.
We have seen broad based growth.
In all sectors.
Speaker 1: with momentum that carry over to at least 2022. For example, the 2021 waterbound revenue grew 36%.
With momentum.
Carryover to at least 2022.
Example, the 2021 wire bond revenue grew 36%.
Speaker 1: We continue to see the wire bond to be fully loaded, and we do expect wire bond revenue in 2022 will achieve double digit growth.
We continue to see the wire bond to the fully loaded and we do expect wire by revenue in 2022, we have achieved double digit growth.
Speaker 2: even with the EAR impact, which was very significant in test business.
Even with the <unk> impact, which was very significant in pest business the.
Speaker 2: the 2021 test revenue grew 12% year over year.
The 2021 test revenue grew 12% year over year.
Speaker 2: We do expect a test business in 2022 without the EAR impact. The growth rate
We do we expect the test business in 2020 to resolve the year or impact the.
The growth rate will double.
Speaker 2: from the 2021 level. So we do expect the testing business to play more of an important role for our business in 2022 and beyond.
From the 2021 level so.
So we do expect the testing business to play more of the former role for our business in 'twenty two and beyond.
Speaker 2: Advanced packaging based on the customer's requirements, we're seeing more complexity and more demand.
Advanced packaging.
Just on the customer's requirement.
We're seeing more complexity and more demand.
Speaker 2: In 2021, we have seen the advanced packaging revenue grew 23% year over year.
In 2021.
We have seen the advanced packaging revenue grew 23% year over year.
Speaker 2: we do expect the growth rate in 2022 to be better than the number.
We do expect the growth rate in.
In 2022 to be better and number.
Speaker 2: which is another important sign that we're migrating more mix to the testing business as well as advanced packaging business while we're maintaining the established space in Wirebond and everything else.
Which is another <unk>.
Important si that we're migrating more mix towards testing business as well as advanced packaging business, while we're maintaining the established base a wire Bob and everything else.
Okay.
Speaker 2: ATM automotive revenue grew over 60% year over year.
HCM automotive revenue grew over 60% year over year.
Speaker 2: The momentum will continue in 2022 and beyond.
The momentum will continue into 2022 and beyond.
Speaker 2: The good news is we do expect to achieve 1 billion automotive revenue in 2022, which will be a significant milestone for ATM business.
The good news is we do expect to achieve 1 billion automotive revenue in 2022, which will be a significant milestone for our ATM business.
Let me talk about the 2022 outlook.
Okay.
Speaker 2: We do expect the revenue and margin to continue to see improvement in 2022.
We do expect a revenue and margin to continue to see improvement in 2022.
Speaker 2: our demands and forecasts indicating a very strong 2022.
Our demands and.
<unk> forecast, indicating a very strong 2022.
Speaker 2: And Joseph will talk about the specific guidance for Q1. Again, we're seeing a better than seasonal Q1, followed by our traditional pattern of quarter to quarter growth for the remainder of the year.
As Josef would talk about the specific guidance for Q1 again, we're seeing a better than seasonal Q1, followed by our traditional pattern of.
Quarter to quarter growth for the remainder of the year.
Speaker 2: The logic semiconductor industry without a better number, we believe will be in the 5% range for reference.
The largest.
Semiconductor industry without a better number we believe will be in the 5% to 10% range for reference.
Speaker 2: And our ATM revenue year-over-year growth should be 2x of that.
Our ATM revenue year over year growth should be two acts of gap.
Speaker 2: And we have been following this traditional pattern for at least the last 15 years. And 2022 will be of no exception. And the reason being market demand is very strong and we are seeing signs of IDM outsourcing accelerating. The price of the product is $2.5 billion. And the price of the product is $2.5 billion. And the price of the product is $2.5 billion.
And we have been following this traditional pattern for at least the last 15 years and 2022 will be no exception and the reason being market demand is very strong and we are seeing signs of IBM all sourcing accelerating.
The pricing environment is friendly is stable.
Speaker 2: with a higher mix of testing and VEX packaging business. And our margin, also our position, will continue to improve.
With a higher mix of testing in the <unk> business and our margin also our position will continue to be improved.
Speaker 2: We are expanding the SIP customer portfolio, and we're happy to report that in 2022, our new SIP customers with a diversified background from all sectors, for the first time, our new SIP customers revenue will break the half a billion mark in 2022. Another good news.
We are expanding the IP customer portfolio and.
And we're happy to report that in 2022 are new customers.
Customers with a diversified background for all sectors for the first time, our new Sip customers revenue will break the half a billion mark in 2022.
Another good news.
Speaker 2: The 2022 ATM grows an operating margin.
The 2022 ATM growth in operating margin.
Speaker 2: to surpass historical peak levels set in 2014.
Just surpassed historical peak level set in 2014.
Speaker 2: consolidate operating margin to see further improvement versus 2021.
Consolidated operating margin.
You'll see further improvement versus protocol award.
Speaker 2: Next page, let me comment a little bit on the industry.
Next page, let me comment a little bit on the industry.
We do see a solid outlook for year 2022.
Capacity and supply constraints.
Last year I commented in Q1 timeframe.
Sometime in 2023, we will see.
Speaker 2: a holistic balance of the supply versus demand. And right now, we believe the capacity and supply constraint will last maybe beyond 2023.
Our holistic balanced the supply versus demand, but right now we believe the capacity is supply constraint will lag maybe beyond 2023.
Speaker 2: Scale, technology leadership, flexibility, and proven record for the past two years is making ASE an indispensable manufacturing partner. And we're gaining trust, support from customers, which is signified by the long-term service agreement as well as the design in the socket that we have been receiving for the last two years particularly.
Scale technology leadership flexibility and proven record for the past two years is making ASC, an indispensable manufacturing partner and we're gaining trust support from customers, which as signified by the long term service agreement as well as the design in a socket.
Now we have been receiving for the last two years, particularly.
Speaker 2: customer long range service agreements are in place through 2023. We will continue to discuss, collaborate with our customer and see how do we stand this beyond.
Customer long range service agreements are in place through 'twenty, three we will continue to discuss collaborate with our customer and see how do we extend this beyond.
Speaker 2: as we're building additional capacity for our loyal customers.
As we are building additional capacity for our loyal customers.
Speaker 2: IDM outsourcing, racial accelerating.
IBM outsourcing ratio accelerating.
Speaker 2: We do see healthy growth of HPC automotive, 5G migration, IoT, and also the expanding silicon content leading to a quite robust end market environment. But we are optimistic about a long term prospect.
We do see healthy growth of HBC automotive <unk> migration Iot and also the expanding silicon content, leading to a quite robust end market environment. So we are optimistic about the long term prospects.
Speaker 2: I would like to comment a little bit on what ASC is doing to prepare for years beyond 2022.
I would like to comment a little bit.
<unk> is doing to prepare for years beyond 2022.
Speaker 2: We have started a new round of smart factory building and infrastructure investment. As you know, building takes the longest time, and the smart manufacturing environment infrastructure does take a long time to develop. In 2021, 2022, empathizing with the smart-paying industry, the smart-paying industry has definitelyChange. the technology andHop deteriorating quickly across the environment. A green way for a construction interview really improved the skills of soft-paying invention,
We have started a new round of smart factory building, an infrastructure investment as you know building takes the longest time and the smart manufacturing environment infrastructure. It does take a long time to develop in 2021 2022.
Speaker 2: as well as years beyond, we have launched a new way of smart manufacturing building. The purpose of that is working with our customer. We do believe that in 2023 and beyond, there will be impending wave of wafer supply coming. In case
As well as in years beyond we have launched a new wave of smart manufacturing building.
The purpose of that is working with our customer we do believe that in 2023 and beyond there will be pending wave.
While wafer supply company.
Speaker 2: The market demands a much higher volume of wafer and silicon devices supply. ASE should be ready for that.
In case.
The market in Mezz, a much higher volume of wafer as silicon devices supply ASE should be ready for that.
Speaker 2: With that, I would like to pass to Joseph. Joseph? Thank you. Let me start with a bit of a recap of what we did on our China sites. In fact, we actually sold...
With that I would like the past.
So Joseph Joseph Thank you.
Let me start with a bit of a recap.
Our China sites.
In fact, we actually sold.
Speaker 3: AA Sinks made its manufacturing sites in China. And the deal closed in December on December 16.
It's major.
Its actually its sites in China.
And the deals closed in December on December 16, two.
Speaker 3: 2021. The total value of these sites that we saw are the combined enterprise value of $1.46 billion.
2021.
Total value of these sites that we sold.
The combined enterprise value of one.
$4 $6 billion.
Speaker 3: And as Ken mentioned earlier on, after adding the cash balance and deducting the existing liabilities or debts that we had, the total consideration was $1.33 billion.
As Kevin mentioned earlier, all after adding.
Our cash balance at <unk>.
Existing liabilities.
The total consideration was $133 billion.
Speaker 3: Now, the disposed sites accounted for about 7.6% of our overall ATM revenues in 2021, and about 4.5% of our consolidated revenues in 2021 as well.
Now the disposed sites accounted for about 36% of our Oh.
Overall ATM revenues through 2021 at about four 5% of our consolidated revenues.
But it wasn't as well.
Speaker 3: The GPS-wise, it generated about a little below.
Okay.
Jim.
Was it generated at all.
Below.
Speaker 3: 80 cents, $80 in 2021. And the purpose of doing this transaction is really to better realign our resources and to focus on the investments in our mega sites, which is maybe still suits all.
<unk> NT dollars.
What it was.
The purpose of doing this transaction is really too.
Better rely on our resources and to focus on.
Investments in our Mega sites, which is mainly.
So.
Speaker 3: to continue to address the China opportunity. In fact, in this year, we're expecting very high growth in our Suzhou sites, still Suzhou sites. And as a result of...
To continue to address the China opportunity in fact this year, we're expecting a very high growth in our retail sites are still single site.
And as a result also.
Speaker 3: revenue coming from expanded customer base, mostly Chinese customers in the region.
Revenue coming from.
From an expanded customer base most of your Chinese customers.
Richard.
Speaker 3: And this transaction does provide us with more cash resources for our continuing organic expansion, as well as we see the opportunities to further make further strategic investments so it has our overall market position.
And this transaction does provide us with more cash resource for our continuing organic expansion as well as we see the opportunities look like.
So to make.
Further as physician investments as our overall market position.
Speaker 3: Now with that, let me give you a bit of a first quarter outlook.
Okay.
So with that let me give you a bit of a first quarter outlook.
Speaker 3: Based on the current business outlook and exchange rate assumptions, management rejects overall performance for the first quarter of 2022 to be a very strong quarter to start with and with the details as follows. Now on the pro forma basis in US dollar terms, our ATM first quarter 2022 business will slightly be impacted, we're up 4%. Our
Based on the current business I'll look at an exchange rate assumptions.
Management, which is overall performance for the first quarter of <unk>.
Turning to be a very strong quarter to start with.
No.
With the details as follows.
On a pro forma basis U S. Dollar terms, our ATM first quarter of 2022 business will certainly be impacted.
Up 4%.
Speaker 3: because of the lower working days in the quarter and also the SIP seasonality. That really implies that the aside from the SIP business, our overall ATM business continues to be running at full loading.
Because of the lower working days in the quarter and also the seasonality.
That really implies.
Aside from the Sip business overall ATM business continue.
To be running at full loading.
Speaker 3: and the momentum is continuing throughout the year.
And the momentum is continuing throughout the year.
Speaker 3: On a performer basis, our ATM first quarter 2022 gross margin should be slightly higher than our second quarter 2021 gross margin.
On a pro forma basis, our first quarter of 2022 gross margin should be slightly higher than our second quarter gross margin.
Speaker 3: The margin will be slightly, will be a bit lower than that, for supporters, largely because of the, first of all, of course the lower revenue, but more so on the,
Okay.
The margin will be <unk> will be a bit lower than our fourth quarter.
Largely because of the.
First of all of course, the lower revenue.
But more so on the.
Speaker 3: increase of labor costs and also depreciation as we continue to plan for the support our overall
Increase of labor costs and also depreciation.
We continue to plan for the year.
Support our overall business going forward.
Okay.
Speaker 3: In terms of EMS, first quarter business level should be similar with the quality average of a full year 2021, which follows a normal seasonality pattern.
And in terms of first.
First quarter.
This level should be similar with the quarterly average of the full year 2021.
It follows a normal seasonality pattern.
Speaker 3: In terms of operating margin, it should be close to the average of second and third quarter 21 operating margin as we continue to run our EMS business following the systematology pattern.
Yeah.
In terms of operating margin it should be close to the average of second and third quarter 'twenty, one operating margin as we continue to delever.
The emphasis on A&P is not bad.
Sure.
Now a bit of a comment on the.
Speaker 3: OK, and this is the guidance, the first quarter. And we will now open the floor for questions. Thank you.
Okay.
<unk>.
The guidance on the first quarter.
We'll now open the floor for questions. Thank you.
Speaker 4: If you have any questions, please raise your hand.
If you have any question please raise your hand.
Speaker 4: We have a question from Randy Abrams of Freddie's Ridge.
We have a question from Randy Abrams of credit Suisse.
Wendy.
Yes.
Speaker 2: OK, yes, sorry. OK, I'm unmuted. OK, I wanted to ask the first question on the new view that you have further out. So extending the period of tightness in the industry beyond 2023, we have seen more capex announcements from the supply side. So I'm curious on your commentary, which drove the change, and then how much it's a reflection of what you're seeing.
Okay, Yes, sorry, okay I'm on mute, Okay, I wanted cash Thats first question.
The new view that you have further out so extending the period of <unk>.
Tightness in the industry beyond 2023.
We have seen more capex announcements from the supply side. So I'm curious on your commentary.
Chose to change and then.
That's a reflection of what you are seeing supply.
Speaker 2: supply, if that's a commentary on the front end, the boundary, the back end or substrate, or if it's commentary on demand side of different confidence on the demand driver.
The commentary on the front end foundry, the backend or substrate or if it's a commentary on demand side of different confidence on the demand driver.
To comment.
Made.
Speaker 1: was referring to a holistic supply chain line balance.
Was referring to a holistic supply chain line balance.
Speaker 1: What we're seeing today is the foundries are making major investments.
What we're seeing today is the foundries are making major investments.
Speaker 1: The IDMs are making the front end.
The ibms are making the front end.
Speaker 1: the old-fashioned industry, equipment industry, the substrate industry, lead-brain epoxy, everyone has increased the CAPAC.
Investment.
The <unk> industry equipment industry, the substrate industry Libre proxy.
Everyone has increased the capex.
Speaker 1: But judging on the fact that the equipment delivery, our students slow comparing to historical more.
But judging on the fact that equipment deliberate.
Our students slow comparing to historical norm.
Speaker 1: And that typically is the first indicator that we're not back to normal yet. The second indicator is
And that typically is the first indicator that we're not back to normal.
The second indicator is among audible, which.
Speaker 1: Sometimes we're waiting for age wafer, sometimes we're waiting for 12 inch wafer for different technology nodes.
Sometimes we are waiting for age wafer somehow were waiting or talking to wafer or different technology nodes.
Speaker 1: And sometimes we're waiting for substrates of different technologies. Sometimes we're waiting for lead frames.
And some tiger awaiting for substrates.
Different technology, sometimes waiting for lease rates.
Speaker 1: So we do not see a holistic squareness.
So we do not see a holistic square in this.
Speaker 1: of all of the material, equipment, capacity, balance versus the overall
All of the material equipment capacity.
<unk> versus the overall.
Demand.
Speaker 1: Now, in 2021 timeframe, we...
Now in 2021 time frame.
We were calculating.
Speaker 1: We believe in 2023, sometime in 2023, we should see the squareness stack.
We believe in 'twenty three.
Sometime in 2023 wishes.
We should see the square in a stack.
Speaker 1: But based on the last year, as was all of the conversation with our supplier and customers, we have experienced everyone
But based on the last year as well as all of the conversation with our suppliers and customers.
Now, we believe that line balance.
Speaker 1: on the holistic view will be beyond 2023. For example, some of the technology substrate
On the holistic view.
Will be beyond 2023 for example, some of the technology substrates.
Speaker 1: We're confident that the demand will be oversupplied for a much longer than 2023. Just ask an example.
We're confident that the.
On the.
The demand will be oversupply.
For a much longer it in 2023, just as an example.
Speaker 2: Okay, great. No, that's helpful. And the other question on the IDM, and you mentioned about the CapEx that we're seeing the investment, and a few, I mean, TI was one that talked about raising the ratio, and I thought all the time they'd mainly focused on outsourcing that, but they're mentioning the ratio. A few other IDMs are talking about actually adding capacity as well to back. And so I'm curious to your comments for IDM. Are they seeing that as...
Okay, Great that's helpful.
The other question on the IDM.
Mentioned about the Capex that we're seeing the investment.
A few <unk>.
Ti was one that talked about raising the ratio.
I'd thought all the time they may focus on outsourcing that they are mentioning the ratio a few other ibm's youre talking about actually adding capacity as well too so.
I'm curious your comments for IBM are they seeing that.
Speaker 2: a fix over the next year as they try to put in capacity, are you seeing a different trend that's multi-year for behavior of IDM? Does some of their tone on call sound like they want to also do more?
Our fix over the next year as they.
Try to put in capacity or are you seeing.
A different trend it's multiyear.
After behavior of IBM.
Some of their tone on call it sounds like they want to also do more.
Speaker 2: just for self-sufficiency, add some more capacity on the back end. I'll try to be more careful in making this comment because you're asking a very sensitive question.
Just for self sufficiency add some more capacity on the backend or trying to be more careful in making this comment because the euro.
You are asking a very sensitive questions right now based on our discussion as well as some new news release in general the U S based IVF.
Speaker 1: Now, based on our discussion as was news release, in general, the US-based IDM, it will declare
It will declare it would reduce their outsourcing.
Speaker 1: But let's put that comment in a separate category.
Let's put that comment in a separate category.
Speaker 1: Let's focus on everybody else in all other geographies.
Let's focus on everybody else in all other geographies.
Speaker 1: No one comments on increasing the internal or everyone agree in public a specific milestone to talk about increasing outsourcing ratio.
No one comments all increasing.
The eternal or everyone agree in public a specific milestone to talk about increasing our sourcing ratio.
Speaker 1: But what that is telling us is as the foundry in the OSAT world is gaming technology positioning.
What would that is telling us is as the foundry and the old set world if gaming technology positioning.
Speaker 1: I won't even use the word leadership, but you can make that judgment yourself.
Will you be used award leadership.
You can make that judgment yourself.
Speaker 5: the economic scale and in the last two years.
The economic scale and in the last two years.
Foundry World.
Speaker 5: has clearly demonstrate a flexibility.
Has clearly demonstrate.
A flexibility.
Speaker 5: and agility that the IBM cannot match.
Agility.
IBM cannot match.
Speaker 5: Otherwise, we will not have the automotive issues until today. So if you judge all the facts...
Otherwise, we will not have the automotive issues until today.
So if we judge all of the facts.
Speaker 5: When you fast forward, you look at the total dollar amount of CapHacks of all companies, IBM included. What is the percentage they want to put into the design service as was front end? What is the percentage they want to allocate to the back end?
You fast forward you look at the total dollar amount of Capex of all company IBM included what is the percentage they want to put it into the design service as was from <unk>.
As the percentage if you want to allocate to the back yet.
Speaker 5: It is not difficult to go figure out because the competition is a multi-dimensional. You do a parametric study in the OSAT world with the scale, with the fungibility, agility, and flexibility, and the supply chain or the cost impact, and the economic benefits. But how do you judge upon that?
It is not difficult to both figure out because the competition is a multi dimensional.
Do a parametric study in <unk> oral.
With the scale with the Fungibility agility and flexibility in our supply chain or the cost creep back and economic benefit.
How do you judge the pound all porting ratio.
Speaker 5: Now, the U.S. base, we do understand politically and also incentive wise, there are reasons, but at the end of the world...
Now the U S phase I do what we do understand politically and also incentive wise there are reasons, but at the end of the world.
Speaker 5: this world is competing. Some of the industry is competing on efficiency. So that's why we have a.
This world is competing semiconductor industries compete on efficiency.
Alright, so thats why we have a solid.
Speaker 5: socket complexity that we're leveraging the foundry world of technology and we're trying to position ASC as well as our partner and our customer.
Trends.
Socket complexity.
We're leveraging.
The foundry world.
Technology, and we're trying to position ASC aswell as our partner and our customer.
Speaker 5: And I think the outsourcing ratio absolutely is increasing. You can use the same argument, go back to 25 or 30 years ago.
And I think the outsourcing ratio.
Absolutely.
He is increasing need to use the same argument go back to 25 or 30 years ago, how does that all sort of started.
Speaker 5: How does outsourcing started? And today in the outsourcing world, much stronger, much more flexible, and even politically, it makes a whole lot more sense. So I think the outsourcing ratio per se, it will increase. But geographically, where do you do the manufacturing? How do you manage the logistic route that can be discussed?
Today.
All sourcing world much stronger much more flexible and even politically.
It makes a whole lot more sense. So I think that all sourcing waste show per se it will increase but geographically where do you do the manufacturing how do you manage the logistic route that can be discussed.
Speaker 5: I mean, it's a long answer, but I have to answer this carefully because it's very politically sensitive. But I feel obligated to give you my best perspective explaining the difference between the declaration or the sentiment, the end of reality.
Right I mean, it's a low answer while I have to answer this carefully because of the very politically sensitive I feel obligated to give you my best perspective.
Blaming the difference between.
The declaration or sentiment.
And the reality.
Speaker 2: Okay, no, I appreciate that. And I feel in their comments, they're mentioning backend, there's an efficiency to the clusters in Asia. A question on the capex, if you could give a sense now also with the growth outlook and confidence, the view relative to I think last year it was about 2 billion equipment capex, how you're seeing that and then it sounds like the mix it's advanced and test.
Okay, No I appreciate that and I feel on their comments. They are mentioning backend. There is there is some efficiency to the clusters in Asia.
A question on the Capex.
If you could give a sense now also with the growth outlook and confidence the view relative to I think last year. It was about $2 billion equipment Capex.
Hi, how are you.
We're seeing that and then it sounds like the mix, it's in test with Bonder decent, but coming down from last year.
Speaker 5: with bond are decent but coming down from last year. But this year the CapEx dollar amount will be either equal or more than two billion.
This year the Capex dollar amount.
We either equal or more than 2 billion.
Speaker 5: And we will have a different mix, you know, maybe more towards the testing, maybe more towards the advanced technology, but we have the way for how the year evolves.
And we will have a different mix maybe.
May be more towards the testing maybe more towards the advanced technology, but we have to wait for how the year evolves.
Speaker 5: and then we'll just move the dynamically. But the comment that I was making is, in addition to
And they'll just move the dynamically.
Comment that I was making is.
In addition to the equipment Capex, we're spending more on the building and the smart factory and the infrastructure Capex and that number we normally will report it.
Speaker 5: We're spending more on the building and the smart factory and the infrastructure of HEPAC.
Speaker 5: and that number we normally don't report it. So the reason why we're doing that is, it shows our aspiration as far as our customers' collective confidence, they really will like us to get ready. In case 2023, the market demand doesn't come down and there's a surge wafer and the line balance is better, you will have a lot of backhand demand.
The reason why we're doing that now.
It shows.
Our aspiration as far as our customers' collective confidence.
They are really will likely to get ready in case 2023, the market demand doesn't come down and there is a surge of wafer and the line balance is better you will have a lot of back end demand.
Speaker 5: And then the question is, who will have the most readiness, flexibility, and also the willingness to support that search?
And then the question is now who will have the most readiness flexibility and also the willingness to support that is search.
Speaker 2: Okay. And the last one, it's a couple of, kind of housekeeping, but a few metrics. One is the wire bond and tester. If you could not how many actually sold with the venture, because it did drop. So trying to see how many you added or sold. And then a couple others, I was curious.
Okay and the last one it's a couple of.
Kind of housekeeping, but.
A few metrics one is the wire bonding tester, if you could how many actually sold what's the venture because it did drop so trying to see how many you added <unk> and then a couple of others. So I was curious since you gave us the 2022% and auto if you could give the base for $2000.
Speaker 2: Since you gave us the 2022 for SIP and auto, if you could give the base for 2021 and then the other housekeeping because of the one time gain.
'twenty one.
Then the other housekeeping because of the onetime gain.
Speaker 2: how do you see the payout because you have that sale in terms of the dividend?
You see the payout.
Because you have that sale in terms of the dividend.
Speaker 5: Let me comment on a few questions. I'm going to pass the floor to Joseph for the payout. The automotive in 21, the basis was $700 million.
Let me comment on.
A few questions and I'll pass the floor to Joseph.
Payouts.
The automotive in 'twenty, one debate that was 700 middle East.
If you.
And our Ats.
Speaker 5: Now the wire bonder, the Rothle, I think we add 4,000 wire bonders.
Now the wire bonder.
The roughly I think we add.
4000 wire bonder in Taiwan.
Speaker 3: No, I'm sorry. Let me give you the. Joseph, why don't you talk about it. Yeah, at the end of fourth quarter, our total live on the count was about 25,800.
No sorry.
Joseph.
At the end of.
Fourth quarter, our total <unk> was about 45000.
Speaker 3: And that number is actually reduced from third quarter, given the fact that we sold the floral factory or the China sites. And the number of boundaries that we sold is about four.
And that's that number has actually reduced from third quarter.
Given the fact that we sold the Florida factory.
China effects.
The.
Above the number of boundaries.
It's about four.
Speaker 3: It's over 4,000 units, 4,221 to be exact.
No.
There's over 4000 units.
4241 to be exact.
Speaker 3: And in terms of testers, our total count at the end of fourth quarter is...
And in terms of testers are total comp.
At the end of fourth quarter ish.
Speaker 3: a 4,890 testers in the quarter, along with the
<unk> 4890 testers.
In the quarter.
Along with the.
Speaker 3: cell of the sites, the testers that we filled out that they really spoke in many ways.
So of the sites.
The testers that we filled out its Bob.
<unk>.
Speaker 3: or 1522 units of testers that we sold out.
1542 units of testers that we fill it up.
Speaker 2: Okay. And then the last one was the, or last two, the SIP, I think 500 million if you have what SIP other customers was, and then also your view on the payout, just factoring the big one-time gain.
Okay and then.
And then the last one was the last to the Sip.
I think $500 million, if you have what you ship.
Are there customers was and then.
Let's say your view on the payout.
Just factoring that the big onetime gain.
Speaker 5: I'm sorry. The SIP revenue will break the 500 million.
I'm sorry.
Okay.
Yes.
The Sip revenue the Sip revenue breakdown $500 million.
Yes.
In point of volatility.
Speaker 2: Okay, what was that in 2021?
Okay.
And what was that in 2021.
Speaker 3: In 2021, I think the revenue from new customers
Yes.
In 2021 I think.
Revenue from new customers.
Speaker 3: was about $240 million.
With about 330 $340 million.
Got it.
And the payout.
Speaker 3: Oh, in terms of the dividend payout, we do not plan to have a special dividend payout. I think for this year, the dividend will continue to be paid out from the earnings that we made for the year.
In terms of dividend payout, we do not plan to have a special dividend payout I think the.
For this year.
Dividends will continue to be paid out on the earnings from the earnings that we made for the year from operations.
Yeah.
Speaker 3: Okay. Yeah, we're able to remain at about 60 to 65%.
Okay.
They added about 60% to 65%.
Speaker 2: Okay, and that includes the gains, like you'll pay out a proportion, even on the additional amount for sale. No, that does not include the special gain that we got from transaction. Okay. And we can head off from the operational earnings that we made. Okay, great. No, thanks a lot and congratulations.
Okay and that includes the game looks like Youll pay out.
Question, even even on the additional amount for those guys.
Included.
The special gain.
Okay.
From the operators operational earnings that we've made.
Okay, great. Thanks, a lot and congratulations thank you.
Thank you.
Speaker 4: If you have questions to ask, please keep two questions at a time. Our next question is from Goku Harihara.
If you have questions to ask please keep two questions at a time.
Our next question is from.
Goku Hollyhock of JP Morgan.
Yes, hi.
Speaker 6: Good afternoon and congratulations on the good results. A couple of questions from my side. I think obviously second half 2020 and 2021, we have seen some degree of price adjustment especially in the older technologies like web bonding, but also in some of the advanced packaging. If you think about the roughly 10 to 20% pro forma growth that you're guiding for.
Good afternoon, and congrats on the good results a couple of questions from my side.
I think obviously second half 'twenty to 'twenty and 2021 we have seen some degree of price adjustment.
In especially in the older technologies like our wire bonding, but also in some of the advanced packaging.
If we think about the.
Roughly 10% to 20% pro forma growth that youre guiding for.
Speaker 6: Could we talk a little bit about how much of that is roughly units, how much of that is roughly pricing?
Can we talk a little bit about how much of that is roughly units how much of that.
The pricing.
Speaker 6: expecting any further adjustments in price. So we think pricing is basically going to be largely settled and kind of stable from here on.
Ill.
Expecting any further adjustments in price, but we think pricing is basically going to be.
Largely settled in the kind of stable from here on.
Okay.
Speaker 3: Well, I think it's very, very difficult to break it out with the volume growth as well as the price increases. I think the so-called pricing adjustment is really across through many different ways of adjusting our pricing, including some of them expediting fees, some from discontinuing discounts.
Well I think it's very very difficult to break out break it out product.
With a volume growth as well.
Price increases I think.
So coal pricing adjustment is really across.
So very different many different ways of <unk>.
Adjusting our pricing including.
Some expedited.
Expediting fees upfront.
This continually discounts.
Speaker 3: and long term agreements and so on and so forth. There are many ways of dealing with the pricing issue. I think the bulk of the growth, we still come from the volume increase that we have, and also the different product mix that we...
Longer term agreements and so on and so forth there are many ways off.
Dealing with the pricing issue.
I think the bulk of.
The growth, we still come from deferred revenue from the <unk>.
The volume increase that we have and also the different product mix.
Yes.
That we that we've generated in the year.
Speaker 3: But in terms of overall pricing environment, I think 2022 will continue to be what we call the...
In terms of overall pricing environment in 2022 will continue to be.
So what we call the.
Pricing currently.
Speaker 3: year for us. And at this point, well, we're seeing very, very stable pricing.
Year for us at this point.
We're seeing very very stable pricing.
Speaker 3: And what we meant by friendly pricing is really a pricing environment that can help us better protect in order to lower returns.
And.
While we while we meant by a friendly pricing is really.
Environment that kind of pricing environment that can help us better protect in order to return.
Speaker 6: Understood. Thank you. So if we look at capex, now, I think we're expecting 2 billion or more capex in 2022, higher than everywhere, maybe middle of last year, given the increased confidence in the market.
Understood. Thank you.
So if we look at Capex now I think we are expecting 2 billion are more capex in 2022.
Then let me maybe middle of last year, given the confidence in the market.
Speaker 6: We've seen that some of your Chinese peers are starting to invest even further, especially for their outside China capacity by 40-50% increase in capex.
We are seeing that some of your Chinese peers.
Starting to invest even further if you bought them I would say China capacity by like 40% to 50% increase in Capex.
Speaker 6: And how do we think about competition with some of these China companies, especially their competition in advanced packaging?
And.
How do we think about how do we think about competent notes competition.
With the China companies, especially bad competition in advanced packaging.
Speaker 6: Are we starting to see more kind of competition for future bids? Currently things are clearly tied.
Are you starting to see more.
I know.
More.
Kind of competition for future bed. So let me ask you currently think that clearly tied.
Speaker 6: Around a year back, you mentioned that some of the China capacity or China market related demand is starting to become a little bit more segregated and you're kind of not really completing the same market.
Around you had a back you.
You had mentioned that some of the.
China capacity, China market related demand is starting to become a little bit more segregated and you're kind of not really meeting the same markets.
Speaker 6: Is that still the case or are we starting to see that there is still some linkage between what we are seeing in China outside because some of those companies are also seeing some
That's still the case or are we starting to see that there is still some linkage between what we are seeing in China or SaaS, but some of those companies are also seeing some utilization.
Speaker 5: I think it's natural for our China competitor under the
Yes.
Yeah.
I think there is natural for the archive.
R R.
China competitor.
Under the.
Speaker 5: under the support of the industrial market as well as the government to build our capacity.
Under the support of.
The industrial market as well as the <unk>.
<unk> Bill.
To build our capacity.
Speaker 5: because the midterm or even the short-term objective is to recreate a self-sufficient ecosystem in China, per se.
Because the the that the mid term or even the.
The short term objective is to recreate a self sufficient ecosystem in China per se.
Speaker 5: So many of the equipment as well as the capacity build up in China.
So many of the equipment as well as the.
The capacity build up in China.
Speaker 5: They're mainly targeted at the internal consumption in China.
They're mainly target at the internal consumption in China.
Speaker 5: I commented on the parallel universe. I think we're seeing the beginning.
I commented on the parallel universe.
I think we're seeing the beginning of that.
Speaker 5: For example, our long range forecast
For example, our long range forecast.
For our customers.
Speaker 5: primarily comes from the non-China.
Our primarily comes from.
The non China based.
Speaker 5: The technology requirement is different. The end market.
Technology requirement is different the <unk>.
<unk> market.
Speaker 5: the system is different. Of course, there are overlaps into the China, the consumer market.
The.
The system is different.
Of course, there are overlaps into the China consumer market.
Speaker 5: But there are a lot of markets that we have no access to.
But the but there are a lot of market that we.
Speaker 5: and therefore we're not privileged to understand some of the long-range capacity requirements. We're monitoring the situation closely. For example, we do understand some of our OSAT competitors continue to order some equipment because we do have a
We have no access to.
And therefore, we're not privilege to understand some of the long range capacity requirement, we are monitoring the situation closely.
For example, we do understand.
Some of our <unk> competitor continue to order.
Some equipment.
Speaker 5: a total diverse view on where the equipments are going.
Because we do have a.
A total.
First ICU, where the equipment is our goal.
Speaker 5: However, at this point in time, we don't believe the China competitor, based on technology as was access to the design of our key customer. We don't believe that the competition is anywhere near. All right, we are.
However at this point in time, we don't believe the.
China competitor based on technology as well as access to the design.
Of our key customer we don't believe that the competition is anywhere near.
But we are mindful of that.
Speaker 5: So far, we think we do have a clear leadership and also a clear firewall.
So far we think we do have a clear leadership that also clear firewall.
Speaker 5: between, not just the ASE, but ASE customer base versus the China base.
Between not just the ASC by ASC customer base versus the versus the China based.
Alright, Hey, one last question from my side.
Speaker 6: When you talk about supply demand not coming into balance into probably 2023 and beyond, what is your underlying industry growth expectation through this period given I think in 2022 itself we are expecting to see the logic semi-growth normalizing back to the 5 to 10% growth rate compared to like the 20++ in growth.
When you talk about on the supply side that might not come into balance into probably 2023 and beyond.
What is your underlying industry growth expectation to the spin.
Given I think in 'twenty, two and so we're going to see the largest semi growth normalizing back to the kind of growth.
Great.
The 20 plus percent growth.
Speaker 5: I mean, we're the last person to be able to tell you what the overall American doctor can do. I mean, we don't know any better. We always use 5 to 10 percent like everybody else.
Thank goodness that we saw last year.
Were the last person to be able to tell you.
American Doctor can do I mean.
We don't know any better we're always is 5% to 10% like everybody else.
Speaker 5: And I think there is a demand. The code is still very much in place.
And I think there is a demand the COVID-19 is still very much in place.
Speaker 5: And we are seeing the continuation of 5G migration. And the PC number, they went up. And it did not have the kind of phenomenal growth. However, it's not coming down.
And we are seeing the continuation of <unk> migration and the PC number went up.
<unk>.
It did not have the kind of phenomenal growth. However, it is not coming down.
Speaker 5: And then if you want to order any auto today, your waiting time is six to nine months. So we clearly know at the channel inventory system manufacturers, we do not have enough components to ship what the consumer wants. And that's a fact. It doesn't matter how we project the macro economy and all of the potential, but in the market, we know we're not shipping enough components.
And then if you want to order any auto today Youre waiting time is six to nine months. So we're clearly no.
The channel inventory.
System manufacturers, we do not have enough components to ship or the consumer wants and Thats. A fact, it doesn't matter how we project the macro economy in all of the potential.
In the market, we know we don't we're not shipping enough components, we're managing.
Speaker 5: We're managing the squareness of the line balance. But today the fact is we are short of wafer, we're short of substrate, we're short of leaf ring. For different customer we're short of different things.
Square Ines of the line balance but today. The fact is we are short of wafer were short of our substrate or showed of lead frame.
For a different customer with short of different things.
Speaker 5: under a very complex logistics and the line balance maneuver, I think all of us are trained in how do we grow our business and satisfy the end customer demand to the best of our capability. Along the way, you will have the expedite fee, you have a commoditized surcharge, you have all kinds of things. And that's why it's adding to...
Under a very complex logistics and the line balance maneuver I think all of US I can train the how do we grow our business and satisfy the end customer demand to the best of our capability along the way you will have the <unk>.
Expedite fee you will have a commoditized a surcharge.
We have all kinds of things and Thats why is adding to.
The pricing increase.
Speaker 5: So overall, within 2022, we need to struggle for another year. And the things are getting better. However, we're not seeing a line balance.
So overall, we think 2022, we need to struggle for another year and.
The things are getting better however were not seeing a line balance.
Speaker 5: by far. I know we don't believe in 2023 you will see that line balance. Of course, the end market
Are we.
We don't believe in 2023, you will see that line balance.
Of course.
Speaker 5: If there's any black swan or any kind of major impact that we won't be able to see. But based on all of our customers, the short term and long range fork.
The end market.
If there is any black.
Black Swan or any kind of major impact that we won't be able to see based on all of our customers. The short term and long range forecast the design pipeline and we'll look at the end market, the electrical vehicle Iot and smart manufacturing demand.
Speaker 5: the design pipeline and we look at the M market, the electrical vehicle, IoT and smart manufacturing demand. We're optimistic, which is why Joseph and myself, we're giving all of you a solid.
We are quite optimistic which is why <unk> is in itself, we're giving all of you a solid.
Speaker 5: a confident 2022 outlook. And we're trying to extend that a little bit beyond 2023. And we're building additional footprint in smart factory just in case.
Confident 2022 outlook and we're trying to extend that a little bit beyond 2023, and we are building additional footprint in small factory just in case.
Speaker 5: 2023 and 2024, 29 new fabs, waivers are coming out. And if they need a backend partner, at least we have been inspired in the last few years to make the investment. Just to get ready for the next.
2023, and 2024 29, new fab wafers coming out and if they need a backend partner at least we are.
We have the inspired in.
In the last few years to make investment.
Just to get ready for the next week.
Speaker 3: I don't know. Thank you. I think if I may comment, I think you'll from a higher.
Thank you.
If I may comment I think yield higher.
Speaker 3: level perspective, a more linear kind of a growth pattern actually helps us in terms of managing our overall business and so it gives us better planning.
Level perspective, or lean Europe kind of a growth pattern.
It helps.
Help us in terms of managing our overall business and so it gives a better planning.
And also the.
Speaker 3: During the last year, I think the whole industry is scrambling and there's a lot of that that needs to be breakthrough and makes overall planning a very difficult task. I think this more linear type of growth does help the industry as a whole and it certainly helps all sorts of people as well.
During the.
Last year I think the whole industry is scrambling.
So a lot of.
Although that is a big breakthrough.
It makes our planning overall planning a very difficult task.
In this.
More linear type of growth is does help the industry as a whole and it certainly helps it all sorts of as well.
Understood. Thank you very much thank you.
Speaker 4: Our next question is from Mr. Bruce Liu.
Our next question is from MS. Jetblue is slow.
Louis Please go ahead.
Speaker 7: Hello, can you hear me? Yes. OK, great. Thank you for taking my question and congrats to Greg. I think one thing management mentioned that strong growth in 2022. I just want to double check, is it like an airport to airport comparison or even you exclude your diverse in China and you still can generate like 2x of semi growth?
Hello can you hear me, yes, okay, great. Thank you for taking my question and congrats liquidity. So I think one thing.
Management mentioned that the strong growth in 2022.
I want to double check is that like in April to have poor comparison, or even you exclude deal with divestment in China and you still can generate about two weeks ago.
Speaker 7: But the question I'm trying to ask here, another one is that.
Semi growth.
But the question I'm trying to ask here and the other one is that.
Speaker 7: You suggest that you're testing business growth and it's substantially higher than your wire bonding growth. Is that for the company specific issue or is that for the market share issue or do you really see testing dollar content per devices is going up?
You suggest that youre testing business growth and.
It's substantially.
Higher than your wire bonding growths.
Is that for a company specific issue or is that for the market share issue or do you really see AV testing dollar content per device is going up.
Yeah.
Okay.
Okay, well, let me comment on the on the testing business.
Speaker 5: The testing business has two components to it. The first one is we would like to do turnkey.
Testing business have two components to it. The first one is we would like to do turnkey.
Speaker 5: end as the packaging becomes more complex.
Yeah.
Yeah.
And as the packaging because more complex.
Speaker 5: the testing naturally becomes proportionately more complex. And in that scenario in
The testing naturally becomes proportionately more complex.
In that scenario it makes more sense.
Speaker 5: for ASC to handle the packaging and the testing from design qualification all the way to manufacturing and ramp up. Now under that
For ASE to handle the packaging and the testing from design qualification, all the way to manufacturing and ramp up.
Now under that understanding stroke.
Speaker 5: Strategically, ASE is increasing our appetite and aspiration to improve our testing business percentage.
Strategically EAC is increasing our appetite and aspiration to improve our testing business percentage.
Speaker 3: So I think I pretty much covered your question. Now, in terms of the overall growth performance versus the China side, I will let Junsu answer that. I think the growth that we were mentioning is really an apple to apple comparison, which means that we are based on the commercial market over there, which means the buying market's going down in the Nope. But we don't have any Primary Market beef market yet. Right now, it's trying to be a dent that I think is surely current tomorrow as the BYD is
I think I pretty much covered your question Alright, Thats back now in terms of the overall growth pro forma versus <unk>.
That the China side, I will let Joseph answered that I think the growth that we were mentioning is really apple to Apple comparison.
With me Seth.
Speaker 3: For last year's numbers were based on the pro forma number that we were giving, which excludes the China sites that we sold out.
<unk>.
For last year's numbers were based on the pro forma number that we're giving which excludes the fortunate each had assets that we sold.
Speaker 7: So Tim, so to follow up that we should expect a stronger growth for the final task versus wafer test and we should see the testing business growth will be faster than overall ATM business growth even for the coming years. Is that a right assumption?
So.
So to follow up that we should expect stronger growth for the final.
Final test versus wafer test and we should see the testing business growth will be faster than the overall.
Business growth even for the coming years.
Speaker 5: It's the, all right, I'm not gonna get into the final task away for Swarth, how do we do the breakdown? The overall testing business will grow at a faster than the corporate average, yes.
Sorry, but my assumption.
Sure.
Alright, I am not going to get into the final task of wafers toward how do we do the breakdown. The overall testing business will grow at a faster than the corporate average yes.
On the EBIT for the following years.
Speaker 7: Correct. That's right. That's good. The second thing is that I think there are several counter traditional risks and things at this moment. Maybe you think can help us to understand it. We do see that the end demand fluctuation. Some of the end demand is not as good as expected. And we do see some EMA's overall inventory is going up. We also see your competitor was fighting for welfare plan increase.
Correct, that's right. So that's good.
Second thing is that I think our CFO commentary.
So additional waste is being at this moment, maybe you can help us to understand that right.
We do see that end demand fluctuations right. Some of the end demand is.
It's not as good as expected and we do see some E&S, although inventory is going up we also see your competitor was hiding for wafer price increase.
Speaker 7: However, we do not see like meaningful orders copy in a fungicide. We do see AAC, at least your ATM business, is still doing very very good.
We do not see meaningful orders coffee in fungicides, we do see H eight AAC at least your ATM business is still doing very very good so where is the discrepancy.
Speaker 7: So where is the discrepancy? And is that more the company specific, like AAC is getting some market share? Or at the end of the day, the fundamental demand is still very strong and help us to understand the discrepancy. OK, well, I think you're talking about the????????
Is that more of the company.
APM is 80.
AAC is getting some market share.
At the end of the day the fundamental demand is still very strong and.
How much to understand the discrepancy.
J D.
Well I think youre talking about a short term disconnect.
Speaker 5: Because in the marketplace, for example, you might see one area specifically, they're complaining about the inventory, also the order drop. And you have some suppliers that talk about specifically, they're saying slow down in a particular area, but at the same time, you have different companies serving a different segment.
Because in the marketplace. For example, you might see one area specifically that are complaining about inventory also the order trial and use some supplier to talk about specifically theyre seeing slowdown in particular area, but at the same time.
You have different company, serving a different segment.
Speaker 5: and then they will use the idle capacity from some of the idle sector and then they will support the higher growth.
And then the <unk>.
They will use the idle capacity for some of the.
The idle sector and then the will support the higher growth.
Speaker 5: So I think that's the nature of the outsourcing industry.
So I think thats the nature of the outsourcing industry.
Speaker 5: Now one of the key things that we have is we have 400 customers, some customers are growing very very fast, and some of the customers are growing in step function, like 50%, 100% a year.
One of the key thing that we have is we have 400 customers. Some customers are growing very very fast and in.
Some of the customer are growing in step function like a 50% 100% of year.
Speaker 5: So how do you support this kind of customer and you have to have fungible capacity?
So how do you support this kind of customer and you have to have fungible capacity.
Speaker 5: So in the foundry world, there's some fungibility. In the assembly world, the fungibility is quite good.
So in the foundry World there are some fungibility in the assembly world. The Fungibility is quite good.
Speaker 5: And therefore, we're riding between the foundry and the matera.
And therefore.
We're right in between the foundry and the materials.
Speaker 5: So our job is to make sure we will support the high growth rate in that particular timeframe to the best of what we can do. We do see some of our customers are having a slow down and they're going through inventory adjustments. But this is the kind of thing that we do.
So our job is to make sure we will support the high growth rate in that particular timeframe up to the best of what we can do we.
We do see some of our customer, having a slowdown and they're going through inventory adjustments.
But this is the kind of thing that we do for the last 30 years.
Speaker 5: a localized slowdown and seasonality.
Our localized slowed down as seasonality.
Speaker 5: for different customer and different sector is on a rotational basis. It's very normal and very healthy. As a matter of fact, industry needs that break.
For a different customer and different sector is on a rotational basis is very normal and very healthy.
As a matter of fact industry needs that break.
Speaker 5: You know, if you look at 2020, the second half in 2021, we've been running straight line going nuts.
If you look at 2020, the second half of 2021, we've been running straight line.
Enough.
Speaker 5: So I think it's very healthy for the industry to go through.
So I think it's very healthy for the industry to go through.
Speaker 5: some localized the adjustment.
Some localized.
The.
Adjustment.
And Thats what were seeing.
Speaker 5: And we're giving you a solid outlook because the overall forecast is very strong. I would not comment into which company or which sector, but overall, we have to manage the logistics, the line balance and the fungibility between all requirements. And I think the ASE has clearly demonstrated over the last few years that we're very good at it.
And we're giving you a solid outlook because the overall forecast is very strong I would not comment into which company, which is sector, but overall, we have to manage the logistics the line balance and the fungibility between all requirements and I think the ASC.
Clearly demonstrated over the last few years that we're very good at that.
Speaker 5: And this is particularly appealing to IDM automotive, as well as some of the very high growth, like high performance computing. They really would like to have that flexibility.
And this is particularly.
Peeling to Ibms automotive.
As well as some of the very high growth.
Like high performance computing, they really would like to have the flexibility.
Speaker 3: I think the overall industry will continue to grow because of the increasing IC content as well as IC applications. And so I think the overall market will continue to grow and in a steeply position.
I think the overall industry is because it.
We'll continue to grow because of the.
Increasing IC Comcast as well as IC applications.
So I think the overall market will continue to grow.
Is it the emphasis.
Speaker 3: In particular, I think we are very confident that we are gaining market share and we are taking the lion's share of the increasing IDM outsourcing. And with all the volume growth and all the industry trends that work into our favor, I think that our growth is, we're going to see a very healthy growth pattern in the foreseeable future for us.
In particular I think.
We are very confident that we are gaining market share and we are taking the lion's share of the.
Increasing our idea of outsourcing.
As you know.
With all of the.
Volume growth in all of the industry.
<unk> trends look into our favor.
Our outgrowth is.
We're going to see a very healthy growth pattern.
In the foreseeable future for us.
Speaker 5: And just one additional comment I feel obligated to explain is the new product design cycle.
And just one additional comment the obligor.
Obligated to explain is the new product design cycle.
It takes two to three years.
Speaker 5: So, for example, if we're not...
So for example, if.
We're not.
Speaker 5: If we're not pre-positioning for capacity in technology ahead of the curve, the design will not...
If we're not pre positioning for capacity and technology ahead of the curve the design in will not occur.
Speaker 5: But once you have the technology and the infrastructure, the early stage, then the design starts coming in. The use starts developing the volume. I think we're all very used to it. So we're sitting...
But once you have the technology and the infrastructure the earliest stage.
Then the design start coming in these started doubling the volume I think we're all very used to it.
So we're sitting in 2022.
Speaker 5: If we believe 2023 and 2024, there's going to be a recession. If we say, if we believe that and you publicly announced that we're not investing in CAPAC, we're not building infrastructure.
We believe 2023 and 2024 is going to be a recession. If they just say if we believe that.
And Youll, probably announced that we will not invest in Capex, we're not building infrastructure.
Speaker 5: Then your customer will have concern. What is your aspiration? And what is your view and appetite for much longer term? So what helped us greatly is ask yourself the question, in the next five to 10 years, how do you see semiconductor? Going up in total content or going down in total content?
Then the customer will have concern.
Is your aspiration and what is your view and appetite for much longer term.
So will help us greatly is ask yourself the question.
In the next five to 10 years, how do you see some semiconductor.
Going up in total content or going down until the content.
Speaker 5: Everyone that I talk to believes in the next decade.
Everyone that I talk to beliefs in the next decade.
Speaker 5: Semiconductor will provide more efficiency to the world. So is it going up?
Semiconductor will provide more efficiency to the world. So it is going up.
Speaker 5: So if you see that, then you ask yourself, well, how about in the next five years?
You see that the accuracy, while hub on the next five years.
Speaker 5: and people move beyond the impending wave of semiconductor, of the wafer in 2023, they believe that next five years is still good. If you believe in that, then the infrastructure investment, the capacity investment to us makes perfect business.
And people move beyond the impending way of semiconductor wafer in 2023. They believe the next five years too good.
Believing that.
Then the infrastructure investment the capacity investment to us makes perfect business sense.
Speaker 5: Then you start asking what is your service agreement, pricing, margin? How do you do granularity with each one of your customers? And then that's what the management do. You do long term, mid term, as well as quarter to quarter.
They used are asking what is your service agreement pricing margin, how do you do.
Granularity with each one of your customer and then that's why the management do you do long term midterm.
As well as quarter to quarter.
Speaker 5: So I think there's a lot of disconnects between the mid to very, very short term. But that's why when we talk about our view and our customers' view, sometimes are distinct, different from the analyzed view.
Report.
So I think theres a lot of disconnect between the mid to very very short term.
That's why when we talk about our view and our customers view, sometimes are distinct differ from the annualized fee with analysts do so I'm just trying to offer my perspective on the disconnect. I don't think there is a disconnect but I think the timing difference between how we talk about.
Speaker 5: So I'm just trying to offer you my perspective on the disconnect. I don't think there's a disconnect, but I think the timing difference between how, when we talk about things, we don't talk about quarter. We talk about three years, design cycle, sector growth, content growth, electrical vehicle, autonomous driving. What kind of infrastructure do you need to have in place? So in five to ten years time.
We don't talk about quarter, we talk about three years design cycle sector growth content growth electrical vehicle autonomous driving what kind of infrastructure do you need to have in place. So in five to 10 Years' time weakest stopped por parte older design with you.
Speaker 5: we can start port, park all of the design with you, expect the efficiency and the ASP for the kind of volume that the world needs.
<unk> the efficiency and the ASP for the kind of volume.
Speaker 5: So I think the Taiwan and the ASE as a member of the cluster.
World needs.
So I think the Taiwan.
ASE as a member of the cluster.
Speaker 5: we understand that obligation. That's why we're building technology and economic scale and all of the smart factory, the light-off factory. Now we're developing all of this just to receive the next 5, 10 years of different waves of the semiconductor.
We understand that obligation that's why we're building technology and economic scale and all of the Smart factory.
Our light oil factory now we're developing all of this.
Just to receive the next 510 years of different.
Different ways.
No.
Dr.
Speaker 7: Oh, thank you for thank you. I think that this comment is actually pretty big between the investors and what industry we're seeing. So I think thanks again for the explanation. And then one last quick question from me is that we do see an increasing new customers, new revenue contribution from the SIP business. Do we expect a better, much better profitability moving forward, given that the newer customer or newer projects are axis-based? The question is, does this mean that different destinyixie side investments might be? Is this male market being carefully approached by asset skyl Tire and how filing electronics vs its SIP delivered is really important to see.
Thank you for thank you I think that is kind of maybe it's actually a pretty big between the investors and what the industry was seeing so thanks again for the X, but then and then one last quick question from me is that we do see increasing new customers new revenue contribution from the HIV business do we expect that base.
Must be the profitability moving forward given that you are a customer of newer projects.
Speaker 5: I'll give you the direction. The direction is yes.
Or the.
I'll give you the direction the direction is yes.
Speaker 5: with a diversified portfolio and then the assuring of IP technology and equipment set. I mean, that was the whole idea of building a strong base of SIP and then offer that library and the expertise to other customer. I mean, that's the whole idea of Foundry and outsourcing. So the answer is yes.
With a diversified portfolio and then the sharing of IP technology and equipment Shack.
That was the whole idea of building a strong base of S. ICD and then offer that library and the expertise to the two other customer I mean, thats the whole idea of foundry NPL and outsourcing and so the answer is yes.
Thank you I'll go back to what you think.
Speaker 4: Thank you. Next question is from Roland shoe of Citigroup.
Thank you next question is from Merrill Lynch.
Citigroup.
Speaker 7: Hi, good afternoon. Hi, Tian. I know you don't want to talk about this quarterly view, but I still have a problem, a question, on this first quarter ICATN guidance. So look at your ICATN revenue guidance. You guided our first quarter to decline by 4% quarter.
Hi, good afternoon.
Hi, Tim.
I know you don't want to talk about for this a quarterly view, but still have a problem or at least the first quarter IC ATM guidance so low.
Okay.
<unk> revenue guidance, you guided our first quarter, two declined by 4% quarter over quarter.
Speaker 7: However, if you look at the boundaries that have been reported, they all guide first quarter revenue up sequentially. And also, some of your key customers also reported a sequential up first quarter.
However, if you look at.
The boundaries have been reported on the <unk> first quarter revenue up sequentially and also some of your key customers also reported.
The sequential first.
Speaker 7: So for your ICAT and revenue to decline by 4% in first quarter.
First quarter.
So for your IC ATM revenue to decline.
Cleared by 4% in first quarter.
Speaker 7: Again, is there any disconnection between your ICAT and revenue with your foundry or your key customers that you have first quarter guidance? OK.
Is there any discoloration apathy.
IC ATM revenue.
Foundry or your customers.
First quarter guidance.
Speaker 5: Oh, by the way, there is no disconnect. I offer you two parameters to think about it. First of all, there is a time lapse.
By the way there is no disconnect, albeit too.
Parameters to think about it.
First of all.
Speaker 5: right, typically between the six weeks time. There is a time lapse between wafer to assembly.
There is a time lapse.
Alright typically between the two.
Six weeks time.
There is a time lag between wafer to assembly.
Speaker 5: Therefore, that will explain some of it.
Therefore, okay that explains.
Speaker 5: Now the second comment which Joseph already made it, our assembly task continue to run at a full run rate.
Explains some of it.
Now the second comment with Josef already made it.
Our assembly and test continued to run at full run rate.
Speaker 5: Now we have like two fewer days. So that's like two percentage sum.
We have like two fewer days, so thats like two percentage some.
Speaker 5: And then you do have seasonality between one of our largest customers on the SIV shipment. So when you look at revenue, they're reporting whatever they have, they're selling for inventory.
And then you do have seasonality.
Between one of our largest customer.
On the on the SIV shipment. So when you look at revenue they're reporting the whatever they have.
Speaker 5: or they're reporting the revenue of the last quarter. So our key customer revenue versus our shipment to them, you're off by one or one and a half.
They are selling from inventory or they're reporting the offset that the revenue of the last quarter. So our key customer revenue.
Versus our shipment to them.
Off by one or one and half quarter foundry to assembly.
Speaker 5: Foundry to assembly, you're typically off by like a core.
It typically off by a quarter.
Speaker 5: I'm not sure that that that explained it, but you know that that's what we.
Not sure that.
That explains it but that's what we see.
Speaker 7: Yeah, I agree. But the foundry and your customer also have two fewer working days in first quarter. So is there any business from you have been gapped or constrained by the component shortage in first quarter?
Yeah great.
Great.
The foundry and the <unk> are also had two fewer days working days.
Who.
First quarter so is that.
Thanks, Dave.
You have seen.
The gift cards.
Sure.
The components.
Sure.
Shortage in first quarter.
Speaker 5: I will not comment on why the Foundry is growing. And yes, we have...
I will now comment on the.
While the foundry issues is growing and yes, we have <unk>.
Speaker 5: Component shortage that we already talked about it. You know we have we have a variety of line balance issue which I will not comment more on that.
Component shortage that we already talk about it.
We have a variety of.
Your line balance issue, which I will not comment.
Speaker 7: OK, thanks. And my second question is, since I'm paying you on this call, so can you give us more colors on your progress for your 5G millimeter wave smart factory and also on the light-on factory? And how do you determine depth of your mold back to room lengths. You know, even in my bourbon field, I have a pair. The magenta on this is pretty close, so let's see if they have a line at sea area here. They're reproductionclick- partners accomplished.
More on that okay.
And my second question is that yes.
Yes.
Tim.
On this call. So can you give us more color on your progress for you.
<unk> millimeter wave small factor and also on the line.
Speaker 7: How did they contribute to your possibility of efficiencies and improvement last year? And what's the target for this year?
I'll bet.
Yes.
How delayed culture too.
Third our efficiencies will go for us last year and what's the target for this year.
Speaker 5: Last year we talked about our target was to build 27 LIDAR factories.
Alright.
Last year, we talk about our target was to build 2007.
Light oil factory.
Speaker 5: And we're happy to report that we have to build 25.
And.
We're happy to report that we have to build 25.
Speaker 5: and two of the factory was delayed.
<unk>.
Two of the factory was delayed.
Speaker 5: because we couldn't get the equipment in time. Well, anyway, this year we will have a new target of fall 37.
Because we couldnt get the equipment.
Ty.
Anyway this year.
We will have a new target for 37.
Speaker 5: So we continue to add a 10 light-off factories per year. Maybe accelerating over time based on the customer volume. How do we aggregate the volume into smart?
So we continue to add.
Add a 10 lite, our factories per year, alright, maybe accelerating over time based on the customer volume how do we aggregate the volume into smart.
Speaker 5: factories. In terms of the overall efficiency, I think you can see that from overall operating margin improvement. And that to us...
Factories in terms of the overall efficiency I think you can see that our overall operating margin improvement and that to us.
I'll continue to serve two purposes first is efficiency that goes to the margin.
Speaker 5: First is efficiency that goes to the margin. What is more important is I talk about the ramp of the SIP and also automotive. Our automotive customers.
What is more important is I talk about the ramp.
The.
And also automotive.
Our automotive customer per se.
Speaker 5: They are extremely delighted to have Light Out Factory, where you document our data of every single process station, every single process.
We're extremely delighted to have light on factory, where you document our data of every single process station every single process.
Speaker 5: and then it demonstrates the unparalleled quality as well as traceability.
And then the is demonstrate the unparalleled quality asphalt as traceability.
Speaker 5: I actually talked about this a few years ago. I'm not sure we all remember that. One of the key things going forward is in the heterogeneous integration world, things will become more complicated.
I should talk about this a few years ago I'm not sure.
We all remember that one of the key theme going forward is in the heterogeneous integration world.
Things will become more complicated.
The liability will become bigger.
Speaker 5: you really have to have much better granularity as well as traceability. And without the LIDAR factory of every single process you will not be able to...
You really have to have much better granularity as well as traceability and without the light our factory off.
Every single process.
We will not be able to demonstrate that we have demonstrated a 100% automated factory.
Speaker 5: We have demonstrated a 100% automated factory versus a 90% automated factory. They are different in nature. A lot of people couldn't comprehend that. But when you talk to the automotive guys, you understand.
Versus a 90% automated factory they are different in nature, a lot of people can comprehend that but when you talk to the automotive guys you understand.
Speaker 5: So in the hydrogenous integration going forward, as the microsystem become more...
So in the heterogeneous integration going forward as the micro system become more.
Speaker 5: smaller, more difficult, more complex, and then the material stack become more intricately involved.
Smaller more difficult more complex and then the materials sac.
Become more interestingly.
Intricately involved.
Speaker 5: And I think the LIDAR factory will play a great role in our engagement with our key customer in the complex design arena.
And I think the lateral factory will add.
We'll play is great.
Roll.
In our engagement with our key customer in the in the complex design Arena.
Speaker 7: OK, thanks. Just a follow up for the operating margin. So last year, you had the target to grow operating margin by 2.5% to 3% last year. And you end up having a better 3.6% improvement last year. So how about this year? Do you have any operating margin improvement target for this year?
Okay. Thanks, just a follow up on the operating margin.
Lastly, you have other targets to grow operating margin by two 5% to 3% last year.
And you end up.
How about your beta update by 6% improvement last year. So how about this year do you have operating margin improvement target.
Speaker 3: We don't have exactly a target per se, but what I can say is we'll continue to see margin improvement.
For this year.
We don't have exactly a target per se, but what I can say is we will continue to see margin improvement.
Speaker 3: both on the sequential and quarterly basis as well as on annual basis.
Both on a sequential quarterly basis as well as our annual basis, we will continue to see our margins both at the growth and the operating margin level to improve for the year.
Speaker 3: we'll continue to see our margin both at the growth and the operating margin level to improve for the year.
Okay. Okay. Thanks.
Speaker 4: Thank you. Our next question is from Rick Shue of Davos Security.
Thank you. Our next question is from Rick Shaw Stylists acuity.
Speaker 7: Hi, can you guys hear me? Yes. OK, yeah, just one quick housekeeping question from me, maybe to Joseph. What's your utilization rate across the board of your wire bound testing and friendship for Q4 last year and this year? Q1 this year. Thank you.
Hi, guys, Jeremy Yes, Okay. Yes, just one quick housekeeping question from me maybe to Joseph.
Physician right across the board there will be a wire bond test and free chip for Q4 last year end.
And this year Q1 this year. Thank you.
Speaker 3: Q4, our overall assembly utilization rate is about 85%, and test above 80. I think it's gonna be very similar in Q1 as well. Packaging will be 80 to 85, and test will continue to be above 80.
For our overall assembly.
Utilization rates, while 85%.
Tests above 80.
I think it is going to be very similar in Q1, as we're packaging will be 80 to 85.
Tesla CFO Avi.
Speaker 7: OK, just one quick follow up. When you say about 4% impact to your ATM, IC ATM sales in Q1 this year, that also has taken account of the capacity loss because of your China disposal, right? So it's not really an Apple to Apple comparison.
Okay. Just one quick follow up when you say above 4% impact to your <unk>.
IC ATM sales in Q1 this year that <unk>.
Has taken account.
The capacity loss because of the China disposal rate. So it's not really a apple to Apple comparison right.
Speaker 3: I don't quite get your question. I'm sorry. Can you repeat that? Okay. Because your ATM revenue in Q4 last year, that was still included in the China operation. But starting from Q1 this year. Oh, when we say reduced by 4% is really apple to apple. It's that's quarter four we excluded the China operation.
I don't quite get your question Im sorry can you repeat that okay, because youre HCM revenue in Q4 last year.
Yes that was still in crude in the China operation, but starting from Q1 this year.
When we say when we say reduced by 4% as really Apple to Apple is that.
Quarter, four we excluded the China operation.
Speaker 8: Oh, I see. All right. Thank you so much. Thank you.
Oh I see.
Alright. Thank you so much thank you.
Speaker 4: Next question from Dito of China Renaissance.
Next question.
All I know Renato.
See Hill.
Speaker 7: Oh, hello, hello. Yeah, good afternoon, gentlemen. Two questions from me. The first one, you mentioned that you are seeing more IDM outsourcing this year. Is it fair to assume that IDMs nowadays are turning more receptive to turnkey outsourcing to us? Because in the past, they tend to only outsource the assembly.
Hello, Hello, good afternoon gentlemen.
Two questions from me.
The first one and you mentioned that USD.
This year is it.
It is fair to assume that Ibm's, nowadays Tony mortgage captive too.
Turnkey outsourcing, yes, because in the past the past you only outsourcing firm.
Okay.
Speaker 5: But when I talk about IBM outsourcing, I mainly comment based on the fact from the last two years. As you know, automotive is the most difficult one to outsource simply because the automotive manufacturers and tier one, and they're not flexible at all. But we all know this. Now in the last two years, because of the supply chain disconnect, people are more accepting.
Okay.
But when I talk about IBM all sourcing.
Ah mainly comment based on the fact for the last two years.
As you know automotive is the most difficult work also us simply because the automotive manufacturers and tier one and theyre not flexible at all but we all know this.
Now in the last two years because of the supply chain disconnect.
People are more accepting.
Speaker 5: different material set, different suppliers, and different qualifications standard.
Alternative route.
Different materials set different suppliers and different qualification stender.
Speaker 5: So I think the COVID-19 has done great for the also the industry is it broke that constraint.
So I think that COVID-19 has done great for the <unk> industry is.
Grower.
Speaker 5: As a result of that, if the automotive end customers and the tier one are directly connecting to the autonomous industry, the IDM becomes one of the
At constrained.
As a result of that if the automotive and customers.
The tier one.
Our directly connecting to the us was industry.
The IDM.
Because one of the.
Speaker 5: acceptable alternative as well as the also seen this
Acceptable alternative as well as the outsourcing industry.
Speaker 5: So by that standard, it is good long term that the assembly and test.
So buybacks tender it has good long term that the assembly and test.
Speaker 5: will increase the outsourcing ratio from the IDMs. We talk of Fabulous as meaningless, because Fabulous has been outsourcing all of it. But IDM, we're seeing a clear trend, not only in the automotive, but you actually have the same issue even with the computing.
We'll increase the outsourcing ratio from the Ibms and we talk a fabulous it's meaningless because families has been also working all of it.
And we're seeing a clear trend not only in the automotive.
Actually have.
The same issue even with the computing.
Speaker 5: And so we are seeing the outsourcing acceleration. Of course, I'm not addressing the location of the manufacturer, which is a totally separate, the rationale, not purely, like, non-
And so we are seeing the outsourcing validation of course I'm not addressing.
The location of the manufacturer, which is a totally separate.
The rationale.
Not purely based on economics.
Speaker 7: Second question on speed-less, do you think OSAT or ASE in specific will play a meaningful role in the chip-like market? And if that's the case, in what areas and when we should see the contribution to...
And second question.
You would think Oh, Santa Paula.
Steve.
Play a meaningful role.
Market and if that's the case in what areas do you see the contribution to us.
Speaker 5: Well, I do see in the future.
Well I do see the.
Speaker 5: AASD will continue to play an important role in the outsourcing market, you know, whichever segment. I think you talk about the chiplet. Right. The, I mean, the chiplet that without naming.
In the in the future.
ASE will continue will play an important role in the in the outsourcing market whichever segment.
I think you talked about the chip led right.
Any the shipload that.
Speaker 5: There are only a handful of customers are dealing with the Chipleth architecture.
Without naming.
There are only a handful.
Our customers are dealing with the.
The triplet architecture.
Speaker 5: have more willingness to do outsourcing. And then the question is for the back end of the chiplet.
And I believe all of them.
All more willingness to do all sourcing and then the question is for.
Speaker 5: Should I go to Foundry or should I go to the OSAT? But if you have that view, I would advise you to have a bigger, longer term view. Just by I'm asking your opinion. All sourcing is one trend that's binary. Once you all source...
For the backend of the chip led should that go to foundry or should I go to.
The old staff.
But if you have that view.
My My I would advise you to have a bigger.
Longer term view.
I'm often your opinion all sourcing is one trend that's binary.
Once you're all sourced.
Speaker 5: And how do you partition the all-source volume as a totally separate question?
And how do you petitioned the also a volume at a totally separate questions.
Speaker 5: I think having the binary from zero to one is a whole lot more meaningful than how do you partition the one afterwards.
Having the binary from zero to one is a whole lot more meaningful there how do you partition the one afterwards.
Speaker 5: And afterwards, you have to look at technology, you have to look at the overall presence, logistics, business model, whether round is more meaningful or square is more meaningful. And then you get into an argumental arena, which I'm not ready to discuss online.
And afterwards, we have to look at technology have led the overall presence logistics business model.
Whether round.
It is more meaningful or square, it's more meaningful and then you get into a argumentative.
The arena, which I'm not ready to discuss online.
Speaker 5: but I believe outsourcing per se is very meaningful. Now once the customer outsourced, that becomes a competition. Who can ramp up faster? Who can manage the cost better? Who will have better service and less constraints?
I believe outsourcing per se is very meaningful.
The customer all sourced then becomes.
Our competition, who can ramp up faster, who can manage the cost better.
You will have.
Better service.
Speaker 5: The outsourcing will be doing this for 40 years. We are doing that.
And the less constrained.
Yes.
The outsourcing we've been doing this for 40 years, we understand.
Speaker 9: Yes, that's true. Yes. And that's a question maybe to Joseph. Can you see how rough the cut-back set breakdown between assembly and test issue, if a rough number would do?
Yes.
Okay.
Ladies.
Can you share with us.
Thanks, Tom Mcdonnell premium Assembly.
Speaker 3: I think the number Joseph, yeah, I wanted to. Yeah, this year I think we will increase our investment in tests. So from a very rough sketch, I think this year we're looking at about 50% of the capital, the current capital will be assembly, about 30 in tests. And you know,
Give me a rough number with you.
I think Joseph why don't you.
This year I think.
We will also increase our investment in test.
From a very rough sketch that maybe this year, we're looking at around 50% of the Capex equivalent Capex will be assembly, while 30 in test.
Speaker 3: As EMS will also because of the new projects that we're taking up, I think the percentage will increase to about 15% and the rest will material.
And.
<unk>.
As Ms. Laura also because of the new projects that we're taking it up.
The percentage will increase to about 15%.
Speaker 9: All right, great. Thank you very much, and happy canister year.
The rest of the material.
Alright, great. Thank you very much.
Yes.
Speaker 4: We have one last question online question from Mr. Charlie Chen of Morgan Stanley . I'm going to read it for the management.
We have one last question online question.
Mr. Charlie Chan of Morgan Stanley .
I'm going to wait for the management.
Speaker 4: Any observation for the cheap inventory trend in the supply chain? Will companies' ATM utilization stay high through the year?
Any observations for the inventory in the supply chain, where companies ATM utilization stays high through the year.
Speaker 4: How about the pricing and gross margin trends? Thanks.
How about the pricing and gross margin chain. Thanks.
Speaker 3: As we mentioned, I think we're still expecting a very strong year this year. I think reloading will be kept at a very high level. And in terms of pricing, it's still a very pricing friendly year for us.
As we mentioned I think we're still expecting a very strong year. This year I think the loading will be kept at a very high level.
In terms of pricing is still a very pricing friendly year for us.
Speaker 3: And as I mentioned earlier on, in terms of our margin, we are expecting sequential margin improvement on a quarterly basis. And for the whole year, I think there will be further improvement in terms of both our gross and operating margin compared to last year.
And as I mentioned earlier on in terms of our margin we are expecting a sequential margin improvement on a quarterly basis.
For the whole year, I think there will be.
Further improvement in terms of both our gross and operating margin comparing to last year.
Sure.
Speaker 5: But in terms of the chip inventory, we have seen some reports from some customers, but not all of the reports. We think the chip inventory is...
No.
But in terms of the chip inventory.
We have seen.
Some reports from some customers, but not all of the report.
The chip inventory is.
Speaker 5: Overall, of course, the chip inventory can be high in a very highly localized application sector. All right, that's all we want to share. Thank you.
It's low.
Overall of course, the chip inventory can be high in a very a highly localized application sector alright.
Alright, that's all we want to share.
Thank you.
There is no more question.
Thank you everyone for joining us this quarter.
See you next quarter. Thank you.