Q4 2023 ASE Technology Holding Co Ltd Earnings Call

Unnamed Speaker: of our expectations. During the quarter, key equipment utilization rates were still relatively low, averaging out between the low and mid-sixties. For our EMS business, in the fourth quarter, revenues increased sequentially in line with our expectations. This was driven by customers' new devices and growth in computing and automotive segments. For the year as a whole, the seasonal peak was a bit later in the year.

During the quarter key equipment utilization rates were still relatively low averaging out between the low and mid sixties.

For our EMS business in the fourth quarter revenues increased sequentially in line with our expectations. This was driven by customers new devices and growth in computing and automotive segments for the year as a whole the seasonal peak was a bit later in the year.

With that please turn to page three where you will find our fourth quarter consolidated results.

Unnamed Speaker: With that, please turn to page 3, where you will find our 4th quarter consolidated results. For the fourth quarter, we recorded fully diluted EPS of $2.13 and basic EPS of $2.18. Consolidated net revenues increased 4% sequentially and declined 10% year over year. We had a gross profit of $25.8 billion with a gross margin of 16%. Our gross margin declined by 0.2 percentage points sequentially and declined by 3.2 percentage points year over year. The sequential decline in margin is principally due to higher EMS business mix and slightly lower ATM business loading during the quarter. The annual decline in gross margin is principally the result of lower loading during the current downturn; operating expenses increased by $0.4 billion sequentially and declined by $0.4 billion annually.

For the fourth quarter, we recorded fully diluted EPS of $2 13.

And basic EPS of $2 18 Consol.

Consolidated net revenues increased 4% sequentially and declined 10% year over year.

We had a gross profit of $25 8 billion with a gross margin of 16%. Our gross margin declined by 0.2 percentage points sequentially and declined by three two percentage points year over year.

The sequential decline in margin is principally due to higher EMS business mix and slightly lower ATM business loading during the quarter.

The annual decline in gross margin is principally the result of lower loading during the current downturn, our operating expenses increased by 0.4 billion sequentially and declined by 0.4 billion annually.

The sequential increase in operating expenses are primarily due to higher compensation expenses, specifically higher bonuses due to stronger goal achievement and Aesop expenses.

Unnamed Speaker: The sequential increase in operating expenses is primarily due to higher compensation expenses, specifically higher bonuses due to stronger goal achievement and ESOP expenses. The year-over-year decline was primarily attributable to lower bonus and profit-sharing expenses across the company. Our operating expense percentage declined 0.1 percentage points sequentially and increased 0.6 percentage points year-over-year to 8.7 percent. The operating expense percentage changes were primarily related to lower operating leverage in a downturn environment. Operating profit was $11.8 billion, up $0.4 billion sequentially, and down $8 billion year-over-year. Operating margins stayed flat at 7.4% sequentially and declined 3.7 percentage points year-over-year.

The year over year decline was primarily attributable to lower bonus and profit sharing expenses across the company.

Our operating expense percentage declined 0.1 percentage points sequentially and increased 0.6 percentage points year over year to eight 7% at the operating expense percentage changes were primarily related to lower operating leverage.

A downturn environment.

Operating profit was $11 8 billion up 0.4 billion sequentially and down $8 billion year over year.

Operating margin stayed flat at seven 4% sequentially and declined three seven percentage points year over year.

During the quarter, we had a net non operating gain of 0.6 billion. Our non operating gain for the quarter primarily consists of net foreign exchange hedging activities profits from associates and other nonoperating income offset in part by net.

Unnamed Speaker: During the quarter, we had a net non-operating gain of $0.6 billion. Our non-operating gain for the quarter primarily consists of net foreign exchange hedging activities, profits from associates, and other non-operating income offset in part by net interest expense of $1.3 billion. Tax expense for the quarter was $2.5 billion.

Interest expense of $1 3 billion.

Tax expense for the quarter was $2 $5 billion, our effective tax rate for the quarter was 19, 9%.

Unnamed Speaker: Our effective tax rate for the quarter was 19.9%. Net income for the quarter was $9.4 billion, representing an increase of $0.6 billion sequentially and a decline of $6.3 billion year over year. The NT dollar depreciated 1.5% against the U.S. dollar sequentially during the fourth quarter and 1.8% annually.

Net income for the quarter was $9 $4 billion, representing an increase of 0.6 billion sequentially and a decline of six 3 billion year over year. The NT dollar depreciated, 1.5% against the U S dollar sequentially during the fourth quarter.

And one 8% annually.

Unnamed Speaker: From both a sequential and year-over-year perspective, we estimate the NT dollar depreciation had a 0.5 percentage point positive impact on the company's gross and operating margins. At the bottom of the page, we provide key P&L line items without the inclusion of PPA-related expenses. Consolidated gross profit excluding PPA expenses would be $26.7 billion, with a 16.6% gross margin. Operating profit would be $13 billion, with an operating margin of 8.1%. Net profit would be $10.5 billion, with a net margin of 6.6%. Basic EPS excluding PPA expenses would be $2.45; please refer to page 4. Here you will find the 2023 Consolidated Full Year Results versus 2022 Full Year Results. Fully diluted EPS for the year was $7.18, while basic EPS was $7.39.

On both a sequential and year over year perspective, we estimate the NT dollar depreciation had a 0.5 percentage point positive impact to the company's gross and operating margins.

On the bottom of the page, we provide key P&L line items without the inclusion of PPA related expenses consolidate.

Consolidated gross profit, excluding PPA expenses would be $26 7 billion with a 16, 6% gross margin.

Operating profit would be 13 billion with an operating margin of eight 1% net.

Net profit would be 10.5 billion with a net margin of six 6% basic EPS, excluding PPA expenses would be $2 45.

Please refer to page four.

Here you will find the 2023 consolidated full year results versus 2022 full year results.

Fully diluted EPS for the year was $7 18.

Basic EPS was $7.39.

Unnamed Speaker: For 2023, Consolidated Net Revenues declined 13% as compared with 2022. ATM revenue declined 15%, while EMS revenue declined 11% annually. Gross profit for the year was $91.8 billion, declining $43.2 billion year-over-year, or by 32 percent. In 2023, our consolidated gross margin declined 4.3 percentage points to 15.8%, principally as a result of the electronics industry downturn for both our ATM and EMS businesses. Operating expenses declined $3.3 billion for the year and came in at $51.4 billion.

For 2023 consolidated net revenues declined 13% as compared with 2022.

T M declined 15%, while <unk> revenue declined 11% annually.

<unk> profit for the year was 91 8 billion declining $43 $2 billion year over year or by 32%.

In 2023, our consolidated gross margin declined four three percentage points to 15, 8% principally as a result of the electronics industry downturn for both our ATM and EMS businesses.

Operating expenses declined $3 3 billion for the year and came in at $51 4 billion given the lower operating leverage during the downturn, our operating expense percentage increased by 0.6 percentage points to eight 8% for the year.

Unnamed Speaker: Given the lower operating leverage during the downturn, our operating expense percentage increased by 0.6 percentage points to 8.8 percent for the year. Operating profit for the year was $40.3 billion, down $39.8 billion from the previous year. Operating margin for the year was 6.9 percent, representing a decline of 5.1 percentage points from 2022. We recorded a net non-operating gain of $2.3 billion for the year, including a net interest expense of $4.7 billion. Most of the non-operating gains were associated with our foreign currency hedging activity. The total tax expense was $9 billion. The effective tax rate for the year was 21.2 percent.

Operating profit for the year was $40 3 billion for the year declining 39 8 billion.

Operating margin for the year was six 9% representing a decline of five one percentage points from 2022.

We recorded a net nonoperating gain of $2 3 billion for the year, including a net interest expense of $4 7 billion.

Most of the non operating gains were associated with our foreign currency hedging activities.

Total tax expense was $9 billion the effective tax rate for the year was 21, 2%. We believe our ongoing effective tax rate for the coming year to be about 25%.

Unnamed Speaker: We believe our ongoing effective tax rate for the coming year will be about 20.5%. However, net income declined by 49% to $31.7 billion. On a full year basis, we estimate that the depreciating NT dollar had a positive 1.3 percentage point impact on gross and operating margins. Removing the effect of PPA depreciation, our gross margin would be 16.4%, our operating margin would be 7.7%, and our basic EPS would be $8.46. It's worth noting that despite the prolonged correction lasting throughout the entirety of 2023, our $7.18 EPS for 2023 represents the third highest EPS the company has historically delivered. Only the 2021 and 2022 COVID-driven demand years had higher EPS.

Net income declined by 49% to 31 7 billion.

On a full year basis, we estimate that the depreciating NT dollar had a positive 1.3 percentage point impact to gross and operating margins.

Removing the effect of PPA depreciation our gross margin would be 16.4% our operating margin would be 7.7% our basic EPS would be $8 46.

It's worth noting that despite the prolonged correction lasting throughout the entirety of 2023 or $7 18.

For 2023 represents the third highest EPS the company has historically delivered.

Only 2021, and 2022 Covid driven demand years had higher EPS.

On page five is a graphical presentation of our consolidated financial performance.

Unnamed Speaker: On page 5, we present a graphical presentation of our consolidated financial performance. On page 6, we present our ATM P&L. The ATM revenue reported here includes revenues eliminated at the holding company level related to intercompany transactions between our ATM and EMS businesses.

On page six is our ATM P&L. The ATM revenue reported here contains revenues eliminated at the holding company level related to intercompany transactions between our ATM and EMS businesses.

For the fourth quarter 2023 revenues for our ATM business were at $82 billion down $1 7 billion from the previous quarter and down $12 3 billion from the same period last year. This represents a 2% decline sequentially and a 13%.

Unnamed Speaker: For the fourth quarter of 2023, revenues for our ATM business were $82 billion, down $1.7 billion from the previous quarter and down $12.3 billion from the same period last year. This represents a 2% decline sequentially and a 13% decline annually. Gross profit for our ATM business was $19.2 billion, up $0.6 billion sequentially and down $7 billion year over year. Gross profit margin for our ATM business was 23.4%, up 1.2 percentage points sequentially and down 4.4 percentage points year over year. Gross margin was higher than our original expectation. The sequential margin improvement was the result of product mix and the end of summer utility rates. The annual margin decline is primarily the result of lower loading during the current downturn. During the fourth quarter, operating expenses were $10 billion, up $0.2 billion sequentially and down $0.4 billion year-over-year. The sequential increase in operating expenses was primarily driven by higher labor-based expenses. The annual operating expense decline was driven primarily by lower profit sharing and bonuses.

<unk> decline annually.

Gross profit for our ATM business was $19 2 billion up 0.6 billion sequentially and down 7 billion year over year.

<unk> profit margin for our ATM business was 23, 4% up one two percentage points sequentially and down four four percentage points year over year.

Gross margin was higher than our original expectations. The sequential margin improvement was the result of product mix and the end of summer utility rates. The annual margin decline is primarily the result of lower loading during the current downturn.

During the fourth quarter operating expenses were $10 billion up zero point $2 billion sequentially and down <unk> 4 billion year over year. The sequential increase in operating expenses was primarily driven by higher labor based expenses.

Annual operating expense decline was driven primarily by lower profit sharing and bonus expenses.

Our operating expense percentage for the quarter was 12, 2% up 0.5 percentage points sequentially and up one two percentage points annually.

Unnamed Speaker: Our operating expense percentage for the quarter was 12.2%, up 0.5 percentage points sequentially and up 1.2 percentage points annually. The sequential operating expense percentage increased as a result of higher compensation-related expenses, while the annual increase was due to lower operating levels.

Sequential operating expense percentage increased as a result of higher compensation related expenses. The annual increase was due to lower operating leverage.

Unnamed Speaker: During the fourth quarter, operating profit was $9.2 billion, representing an increase of $0.4 billion quarter over quarter and a decline of $6.6 billion year over year. Operating margin was 11.2%, improving 0.7 percentage points sequentially and declining 5.5 percentage points year over year. For foreign exchange, we estimate the NT to U.S. dollar exchange rate had a positive 0.7 percentage point impact on our ATM sequential margins and a positive 0.9 percentage point impact on a year over year basis. Without the impact of PPA-related depreciation and amortization, ATM gross profit margin would be 24.5%, and operating profit margin would be 12.6%.

During the fourth quarter operating profit was $9 2 billion, representing an increase of 0.4 billion quarter over quarter.

And a decline of 6.6 billion year over year operating.

<unk> margin was 11, 2% improving 0.7 percentage points sequentially.

And declining five five percentage points year over year.

For foreign exchange, we estimate the N T to U S. Dollar exchange rate had a positive 0.7 percentage point impact on our ATM sequential margins and a positive 0.9 percentage point impact on a year over year basis.

Without the impact of PPA related depreciation and amortization ATM gross profit margin would be 24, 5% and operating profit margin would be 12, 6%.

On page seven we have our ATM full year P&L.

Unnamed Speaker: On page 7, we have our ATM full-year P&L. 2023 revenues for our ATM business declined by 15%, with our packaging and test businesses down 16% and 11%, respectively. Gross profit for the year declined 35% to $68.7 billion.

23 revenues for our ATM business declined by 15%.

With our packaging and test businesses down 16, and 11% respectively.

Gross profit for the year declined 35% to 68 7 billion.

Gross margin was 21, 8% down six seven percentage points, primarily as a result of the prolonged correction.

Unnamed Speaker: Gross margin was 21.8%, down 6.7 percentage points, primarily as a result of the prolonged correction. Our operating expense percentage increased 1.1 percentage points to 11.7%. The increase was primarily the result of lower economies of scale. Operating profit declined 52% to $31.8 billion, with operating margin declining 7.8 percentage points to 10.1%. Foreign Exchange, on a full year basis, we estimate that the depreciating N2 dollar had a 2.4 percentage point impact on the market. Without the impact of PPA expenses, gross profit margin would be 22.9%, and operating margin would be 11.5%. Certainly, on its surface, the full-year comparative results appear to be somewhat unappetizing.

Our operating expense percentage increased 1.1 percentage points to 11, 7%.

The increase was primarily the result of lower economies of scale.

Operating profit declined 52% to $31 8 billion with operating margin declining seven eight percentage points to 10, 1%.

For foreign exchange on a full year basis, we estimate that the depreciating NT dollar had a 2.4 percentage point impact on margins.

Without the impact of PPA expenses gross profit margin would be 22, 9% and operating margin would be 11, 5%.

Certainly on its surface the full year comparative results.

Peer to be somewhat an appetizer.

But given the breadth and severity of the industry downturn during 2023 and the history of even more on appetizing results.

Previously even lesser downturns, we believe this annual performance on its whole shows a reset and our ongoing ATM profitability structure.

On page eight you'll find a graphical representation of our ATM P&L. This shows the long protracted downturn that we are slowly coming out of.

Unnamed Speaker: But given the breadth and severity of the industry downturn during 2023 and the history of even more unappetizing results during previously even lesser downturns, we believe this annual performance, on its whole, shows a reset in our ongoing ATM profitability structure. On page 8, you'll find a graphical representation of our ATM P&L.

On page nine is our ATM revenue by three C market segments, our communications application took it seasonally larger position in the fourth quarter, our computing segment dropped from the previous quarter, but still remains a point above historical levels.

On page 10, you will find our ATM revenue by service type.

We have seen a higher revenue mix of advanced packaging and testing business in the back half of 2023 versus the first half of the year.

Unnamed Speaker: This shows the long, protracted downturn that we are slowly coming out of. On page 9, we have our ATM revenue by 3C market segment. Our communications application took its seasonally larger position in the fourth quarter. Our computing segment dropped from the previous quarter, but it still remains a point above historical levels. On page 10, you will find our ATM revenue by service title.

During the coming years, we expect a higher growth rate from these two segments given the increased complexity and content in newer generations of devices.

On page 11, you can see the fourth quarter.

<unk> full year results of our EMS business.

During the quarter EMS revenues were $79 2 billion, improving $8 2 billion or 12% sequentially.

Unnamed Speaker: We have seen a higher revenue mix for the advanced packaging and testing business in the back half of 2023 versus the first half of. During the coming years, we expect a higher growth rate from these two segments given the increased complexity and content in newer generations of devices. On page 11, you can see the fourth quarter and full year results of our EMS business. During the quarter, EMS revenues were $79.2 billion, improving $8.2 billion, or 12% sequentially, and declining 4.8 billion, or 6% year-over-year. The sequential revenue increase is primarily attributable to a slightly later than seasonal peak in our EMS business, while the year-over-year revenue decline is primarily due to the broad-based soft electronics demand environment. sequentially, our EMS business's gross margin declined 0.7 percentage points to 8.4 percent, while our operating margin declined 0.4 percentage points to 3.5%. The operating margin decline was driven primarily by product mix.

And declining $4 8 billion or 6% year over year.

The sequential revenue increase is primarily attributable to a slightly later than seasonal peak to our EMS business, while the year over year revenue decline is primarily due to the broad based soft electronics demand environment.

Sequentially, our EMS businesses gross margin decline 0.7 percentage points to eight 4%.

While our operating margin declined <unk> four percentage points to three 5%.

The operating margin decline was driven primarily by product mix.

Our EMS fourth quarter operating profit was $2 $8 billion flat sequentially and down 1.2 billion annually.

From a full year perspective, our EMS business declined $33 7 billion or 11%.

Full year gross and operating profit declined by $5 7 billion and 5 billion respectively.

Full year gross and operating profit margins decline 0.9, and one three percentage points respectively.

Generally the full year declines in our EMS business are the result of the soft electronics market, leading to lower operating leverage.

Unnamed Speaker: Our EMS fourth-quarter operating profit was $2.8 billion, flat sequentially, and down $1.2 billion annually. From a full-year perspective, our EMS business declined $33.7 billion, or 11%; full-year gross and operating profit declined by $5.7 billion and $5 billion, respectively; full-year gross and operating profit margins declined 0.9 and 1.3 percentage points, respectively. Generally, the full-year declines in our EMS business are the result of the soft electronics market leading to lower operating leverage. On page 12, you will find a graphical representation of our EMS revenue by application. The shifts here...

On page 12, you will find a graphical representation of our EMS revenue by application.

The shifts here.

Overall, we're generally due to product timing.

Relative to previous years, some products, where earlier, while others were later in accordance with customer requests.

Further our computing revenues were also higher driven by a stronger networking server.

And general restocking revenues.

On page 13, you will find key line items from our balance sheet at.

At the end of the fourth quarter, we had cash cash equivalents and current financial assets of $72 billion.

Our total interest bearing debt was down 27 5 billion to 191 7 billion.

Total unused credit lines amounted to 373 8 billion.

Our EBITDA for the quarter was $28 6 billion, while our EBITDA for the year was 106 billion.

Unnamed Speaker: Overall, this was due to product timing. Relative to previous years, some products were earlier, while others were later in accordance with customer requirements. Furthermore, our computing revenues were also higher, driven by stronger networking, server, and general restocking revenues. On page 13, you will find key line items from our balance sheet. At the end of the fourth quarter, we had cash, cash equivalents, and current financial assets of $72 billion. Our total interest-bearing debt was down $27.5 billion to $191.7 billion. The total unused credit lines amounted to $373.8 million.

Our net debt to equity this quarter was down two 0.38.

On page 11, you'll find our equipment capital expenditures machinery and equipment capital expenditures for the fourth quarter in U S dollars totaled $234 million of which 130 million were used in packaging operations $76 million in testing operations 21 million and <unk>.

EMS operations and $7 million in interconnect material operations and others.

Machinery and equipment capital expenditures for the full year of 2023 and U S dollars totaled $914 million of which 460 million were used in packaging operations $314 million in testing operations $114 million in EMS operations.

Dr. Tian Wu: Our EBITDA for the quarter was $28.6 billion, while our EBITDA for the year was $106 billion. Our net debt to equity this quarter was down to 0.38. On page 11, you will find our Equipment Capital Expenditures, Machinery and Equipment Capital Expenditures for the fourth quarter, and U.S. dollars totaled $234 million, of which $130 million were used in packaging operations, $76 million in testing operations, 21 million in EMS operations, and $7 million in interconnect material operations and others. Machinery and equipment capital expenditures for the full year of 2023 and in U.S. dollars totaled $914 million, of which $460 million were used in packaging operations, $314 million in testing operations, $114 million in EMS operations, and $26 million in interconnect material operations and others. Current quarter EBITDA of 0.9 billion U.S. dollars continues to outpace our equipment capital expenditures of $0.2 billion. At this point, I would Dr. Wu?

$26 million in interconnect material operations and others.

Current quarter EBITDA of 0.9 billion U S dollars continues to outpace our equipment capital expenditures of zero point $2 billion.

At this point I would like to hand, the presentation off to Dr. Tien <unk> Dr. Lu.

Hi, everyone. This is Tim.

Tim: Year, 2024 will be a year of recovery.

Tim: In the last few years there has been many changes so I think it is appropriate for me to give you a market update take a snapshot.

Tim: What we see today and how ASE is competing in this new environment before I go to the year 2020 for full year outlook.

Tim: Let me talk about the semiconductor landscape.

Tim: As you know.

Tim: Many organization and many analysts has been talking about one trillion industry target by.

Tim: Year 2030.

Tim: We believe that the industry is likely to reach one trillion revenue target in the next decade. It can be 30 can be 31, 32, 33, but with high confidence we think the revenue will be one trillion mark.

Tim: In the next decade, driven by AI robotics, EV all of the new applications.

Tim: The industry has.

Tim: <unk> has a clear understanding about our responsibility in net zero ESG circle economy as was recycling throughout the whole supply chain.

Tim: Perfect ASE has been putting a lot of endeavor in this area.

Dr. Tian Wu: Hey everyone, this is Tian Wu. The year 2024 will be a year of recovery. In the last few years, there have been many changes, so I think it is appropriate for me to give you a market update, take a snapshot of what we see today and how ASE is competing in this new environment before I go to the year 2024 full year outlook. First, let me talk about the semiconductor landscape. As you know, the CENI organization and many analysts have been talking about the 1 trillion industry target by the year 2030. We believe that the industry is likely to reach the 1 trillion revenue target in the next decade. It can be 30, can be 31, 32, 33, but with high confidence, we think the revenue will reach the 1 trillion mark in the next decade, driven by AI, robotics, EV, and all of the new applications. The industry has a clear understanding of its responsibility in net zero, ESG, the circular economy, as well as recycling throughout the whole supply chain.

Tim: Industry is facing challenges.

Tim: Geopolitical tensions regionalization market bifurcation.

Tim: And with all of this new Ifs.

Tim: In fact, it will be added cost.

Tim: So the reduced scale those are new variables that industry need to learn how to manage.

Tim: Industry.

Tim: We'll have a few things we need to do first industry has to propose more innovations with higher value I think AI is a perfect example in that regard.

Tim: Structure improvement of efficiency and cost.

Tim: Everyone. The whole supply chain is putting a lot of effort into impact also talent.

Tim: Need to align talent will work for us with the new complexities of doing business.

Tim: With that I would like to turn to the next page.

Tim: And how do we see ASC competing.

Tim: In this new environment. So let me list a few competitive advantages and this is based on the feedback from all of our customers as well as the internal discussion.

Tim: The first competitive advantages technology.

Here.

Tim: I'm splitting the technology content into four large sector let.

Tim: Let me talk about the high performance computing or the AI arena.

Dr. Tian Wu: As a matter of fact, ASE has been putting a lot of effort in this area. However, the industry is facing challenges, geopolitical tensions, regionalization, market bifurcation, and with all of this new effect, it will be at a cost, also at a reduced scale. Those are new variables that industry needs to learn how to manage. We'll have a few things we need to do first. The industry has to propose more innovations with higher value. I think AI is a perfect example in that regard.

In that arena, I think the Taiwan ecosystem with foundry with design companies ask why is the whole supply chain becomes very critical.

Tim: In this regard we're in the center of the Taiwan ecosystem.

Tim: So specifically for AI and HBC, we do have the assembly and packaging and testing technology leadership.

Tim: No doubt in the last 10 years Aes has demonstrated a clear leadership in heterogeneous integration.

Dr. Tian Wu: Structural Improvement of Efficiency and Cost; everyone in the whole supply chain is putting a lot of effort into doing that. Also, talent; we need to align the talent workforce with the new complexities of doing business. With that, I would like to turn to the next page and discuss how we see ASE competing in this new environment. So, let me list a few competitive advantages, and this is based on the feedback from all of our customers, as well as internal discussions.

Tim: Well as embedded devices.

Tim: In the optical.

Tim: We are slowly revealing our endeavor with all of our key customer in silicon Photonics as west co packaged optics, we believe that will be the next paradigm shift, which will mark the new growth spur.

Tim: For the whole semiconductor industry, if that becomes a reality and the law.

Tim: Last one is automation.

Tim: He has been working on.

Tim: Fully automated light our factory.

Dr. Tian Wu: The first competitive advantage is technology, and here I'm splitting the technology content into four large sectors. Let me talk about high-performance computing or the AI arena.

Tim: Including software development.

Tim: The collection as well as design ecosystem, including collaboration.

Tim: With designers asphalt customers.

Speaker Change: So we believe this area will mark a strong competitive advantage for ASC.

Dr. Tian Wu: In that arena, I think the Taiwan ecosystem with foundry, design companies, as well as the whole supply chain becomes very critical. ASE in this regard, we're in the center of the Taiwan ecosystem. Also, specifically for AI and HPC, we do have the assembly, packaging, and testing technology leadership. On SIP, no doubt in the last 10 years, AES has demonstrated clear leadership in heterogeneous integration, as well as embedded devices, in the optical. We are slowly revealing our endeavor with all of our key customers in silicon photonics, as was co-packaged optics. We believe that will be the next paradigm shift, which will mark a new growth spurt for the whole semiconductor industry if that becomes a reality. And the last one is automation. ASE has been working on a fully automated LIDAR factory, including software development, data collection, as well as a design ecosystem, including collaboration with designers as well as customers.

Speaker Change: In this new environment, where the.

Speaker Change: The higher value of innovation becomes a key competitive requirement.

Speaker Change: The next one will be scale efficiencies.

Speaker Change: From the financial performance in up cycle also in the down cycle.

Speaker Change: We can pretty much see how do we compare to our peers in the industry.

Speaker Change: The financial performance as well as cash flow.

Speaker Change: AFC will continue as a buyer for the strong financial discipline.

Speaker Change: And we will make all the necessary investments according to our customers' requirements as well as the technology trend in the industry.

Speaker Change: The next one will be flexibility and agility to handle business model evolution.

Speaker Change: We believe that in the next 10 years.

Speaker Change: We have to work with different geography in a different business model for example, we might choose.

Speaker Change: Might have to work with tier one or OEM or system house directly in a different kind of business environment I think ASC in the last 20 years has demonstrated we have a clear flexibility and agility to work with different companies and different geographies throughout the home.

Dr. Tian Wu: So we believe this full area will mark a strong competitive advantage for ASE in this new environment, where the higher value of innovation becomes a key competitive requirement. The next one will be scale efficiencies, from the financial performance in the up cycle and also in the down cycle. We can pretty much see how we compare to our peers in the industry on the financial performance as well as cashflow. ASU will continue to abide by this strong financial discipline, and we will make all of the necessary investments according to our customers' requirements, as well as the technological trends in the industry. The next one will be flexibility and agility to handle business model evolution. We believe that in the next 10 years, we will have to work with different geography in a different business model.

Speaker Change: Different business model and evolution.

Speaker Change: Lastly, we'll be the geographical diversity.

Speaker Change: Thank <unk>.

Speaker Change: <unk> pathway as a holdco include the U S side, we do have the most diversified geographic presence throughout the world. We data vintages and also the resources, we should be able to handle all of the customer requirement in.

Speaker Change: In the next 10 years, depending on how the political environment varies.

Speaker Change: Please turn to the next page I will talk about 2020 for outlook.

Speaker Change: First I wanted to talk about the revenue recovery 2024 will be a year of recovery.

Speaker Change: We will be coming out of inventory adjustment in the first half.

Speaker Change: We do expect growth to accelerate in the second half.

Dr. Tian Wu: For example, we might choose to work with tier one or an OEM or a system house directly in a different kind of business environment. I think ASE, in the last 20 years, has demonstrated clear flexibility and agility to work with different companies in different geography throughout the whole different business model and evolution. Lastly, will be the geographical diversity. I think ASE, as well as ASE HOKU, including USI, we do have the most diversified geographic presence throughout the world.

Speaker Change: Full year ATM revenue.

Speaker Change: Should grow at a similar rate with the logic semiconductor market.

Speaker Change: We expect a higher revenue mix of advanced packaging technology.

Speaker Change: Technology leadership.

Speaker Change: As well as testing revenue on the increasing turnkey ratio just like what Ken has just shown you in the 2022 and 2023.

Speaker Change: We would target higher investment in machinery and building a smart factory compared to 2023.

Speaker Change: We believe.

Speaker Change: We are enter into a new industrial upcycle and increasing adoption of diverse technology based on our customers' feedback.

Dr. Tian Wu: With these advantages and also the resources, we should be able to handle all of the customer requirements in the next 10 years, depending on how the political environment varies. Please turn to the next page. I will talk about 2024 Outlook, but first, I want to talk about Revu recovery. 2024 will be a year of recovery; we will be coming out of inventory adjustment in the first half. We do expect growth to accelerate in the second half, and full year ATM revenue should grow at a similar rate to the logic semiconductor market. We expect a higher revenue mix of advanced packaging on technology leadership as well as testing revenue on the increasing turnkey ratio, just like what Kent has just shown you in 2022 and 2023. We will target higher investment in machinery and building a smart factory compared to 2023. We believe we are entering into a new industrial upcycle and increasing adoption of advanced technology based on customers' feedback. Please turn to the next page.

Speaker Change: Please turn to the next page.

Speaker Change: Let me talk about the advanced packaging and also the.

Speaker Change: Hi, Brian.

Speaker Change: In 2024, we're on track to double our leading edge advanced packaging revenue from.

Brian: For our existing customers.

Brian: We expect to have additional $250 million revenue in 2024.

Brian: And we think the momentum will continue in the next few years.

Brian: ASE does have a comprehensive technology toolbox, including three D. Two five D.

Brian: Pan out.

Brian: Co packed optics automation et cetera.

Brian: Our scale advantages and technology leadership will make ASC the preferred partner for customers as it is apparent today, we have mainly new MPI <unk> collaborative project with many tier one.

System customers also that these IHOP.

Brian: ASE will not only benefit from the adoption of leading edge advanced packaging.

Brian: But also the expansion of mainstream packaging, which will be utilized to address the growing semiconductor demand for all of the surrounding shifts of the booming AI use.

Brian: I'd like to turn the floor to our CFO Joseph.

Joseph: Okay. Thank you Ted.

Joseph: Hello, everybody.

Joseph: And to give you the guidance for first quarter of 2024.

Dr. Tian Wu: Let me talk about advanced packaging and also the AI boom. In 2024, we're on track to double our leading-edge advanced packaging revenue, from existing customers; we expect to have an additional $250 million U.S. revenue in 2024, and we think the momentum will continue in the next few years. ASE has a comprehensive technology toolbox including 3D, 2.5D, fan-out, SIP, co-packaged optics, automation, etc. Our scale advantages and technology leadership will make ASE the preferred partner for customers. As it is apparent today, we have many new MPIs as well as collaborative projects with many tier one system customers, also the design houses. ASU will not only benefit from the adoption of leading-edge advanced packaging but also the expansion of mainstream packaging, which will be utilized to address the growing semiconductor demands for all of the surrounding chips in the booming AIE. I'd like to turn the floor to our CFO, Joseph.

Joseph: Based on our current business outlook and exchange rate assumptions, our guidance for the first quarter of 2024 to be as follows.

Joseph: In NT dollar terms ATM first quarter 2020 for revenue and gross margin should be similar to the first quarter of 2023.

Joseph: Yeah.

Joseph: Okay.

Joseph: The terms of this first quarter of 2020 for revenues.

Joseph: Should be similar to the first quarter of 2043.

Joseph: This first quarter of 2024 operating margin should approach first quarter 2008 operating margin.

Speaker Change: Thank you.

Speaker Change: I'd like to open the floor for questions.

Speaker Change: If you have any question please raise your hand.

Speaker Change: And you ask questions. Please hold two questions at a time.

Speaker Change: Thank you.

Mr. <unk>: We have a question from Mr. <unk>, how do you how long.

Mr. <unk>: Of JP Morgan.

Mr. <unk>: Alright.

Mr. <unk>: Thanks for taking my question.

Speaker Change: Let me talk a little bit more about how we think about growth.

Speaker Change: Andy.

Andy: You mentioned those two the logic industry growth.

Andy: What does that number look like for you or is it more like a 10% number more than that and maybe give us a little bit more color on how you think about growth by what Gill communications.

Joseph: Okay, thank you, Dan. Hello, everybody, and to give you the guidance for the first quarter of 2024. Based on our current business outlook and exchange rate assumptions, our guidance for the first quarter of 2024 should be as follows. In NT dollar terms, our ATM first quarter 2024 revenue and gross margin should be similar to the first quarter of 2023. Again, in empty dollar terms, our EMS first quarter 2024 revenues should be similar to the first quarter of 2023, and our EMS first quarter 2024 operating margin should approach the first quarter 2023 operating margin. Thank you.

Very important.

Andy: Well the group's total revenue.

Andy: For your ATM business or are we thinking about communications versus computing.

Andy: The consumer segment.

Andy: Okay.

Andy: That's my first question.

Andy: As Tim mentioned this politically for will be Europe.

Andy: We are expecting.

Andy: To see.

Andy: This year to see.

Andy: Sequential growth.

Andy: Quarterly basis throughout the year, but with the second half.

Andy: Stronger momentum.

Andy: And as the overall overall full year.

Andy: Growth.

Andy: Also as Tim mentioned, we will be growing at a similar rate.

Andy: Certainly market growth.

Andy: Which is project at different sources.

It will grow 6% to 10%.

Andy: Industry, though.

Andy: Yeah.

Speaker Change: Okay understood.

Operator: I'd like to open the floor for questions. If you have any questions, please raise your hand. When you ask questions,

Speaker Change: Also.

Speaker Change: Any any guidance for margins are we expecting margins to get back to high 20% to 30%.

Goku Hariharan: Please hold two questions at a time. Thank you. We have a question from Mr. Goku Hariharan of J.P. Morgan. All right, happy new year. And thanks for taking my questions. We talked a little bit more about how we think about growth this year. I think, Dr.

Speaker Change: And could you also talk a little bit about your approach to the.

Speaker Change: AI related packaging.

Speaker Change: Some of your competitors that are setting up.

Speaker Change: Capacity to compete with the leading foundry.

Speaker Change: Is that A&P approach as well in terms of seeking out these.

Unnamed Speaker: Vu, you mentioned close to logic industry growth. What does that number look like for you? Is it more like a 10% number or more than that?

Speaker Change: AIA AIA.

Speaker Change: AI.

Speaker Change: Accelerated packaging or are you kind of.

Speaker Change: Noting that the meeting on green in terms of.

Unnamed Speaker: And maybe give us a little bit more color on how you think about growth by vertical communication is still a very important, more than 50% revenue for your ATM business. So how do you think about communication versus computing versus the consumer auto segment? That's my first question.

Speaker Change: So opportunities in advanced packaging.

Well I think we would certainly.

Speaker Change: Increase our overall capex for equipment for this year.

Speaker Change: Given the pipeline that we're seeing today.

Speaker Change: We will likely to have.

40% to 50% more.

Speaker Change: Equipment Capex budgeted for the year, although that's still subject to board approval.

Unnamed Speaker: As Tim mentioned, 2024 will be a year of recovery, and we are expecting, on ATM, sequential growth on a quarterly basis throughout the year, but with the second half having stronger momentum. And that's the overall four-year growth. Also, as Tim mentioned, we will be growing at a similar rate to the logic semi-market growth, which is projected by different sources to be anything from 6% to 10% in the industry now. Okay.

Speaker Change: And the bulk of the more than.

Speaker Change: 65% of the.

Speaker Change: The.

Speaker Change: Capex will be what it is.

Speaker Change: Assembly and the bulk of both part of it is really for the best packaging.

Speaker Change: Alright.

Speaker Change: Yes.

Speaker Change: And if we if we're looking at the breakdown of the <unk>.

Speaker Change: Capex that we're looking at today.

Speaker Change: We're roughly 67% will be for assembly.

Speaker Change: 18% for tests.

Speaker Change: 30% for.

Speaker Change: For EMS and.

Speaker Change: And a lot of it most of it is really for the new packages or new products that we'll be bringing up this year.

Unnamed Speaker: Also, any guidance for margins? Are we expecting margins to get back to the high 20s to 30%? And could you also talk a little bit about your approach to AI-related packaging? Some of your competitors are setting up capacity to compete with the leading foundry. Is that ASE's approach as well in terms of seeking out these high-end AI PC, and AI accelerator packaging? Or are you kind of partnering with the leading foundry in terms of potential opportunities in this advanced packaging? Well, I think we will certainly increase our overall budget for equipment for this year.

Speaker Change: In terms of margin I think though we are very very confident that the second half of the year, we will be.

Going back to <unk>.

Speaker Change: Structural module within the structural margin, which is.

Speaker Change: <unk> to 30%.

Speaker Change: We will believe that for the whole year.

Speaker Change: We could also have a margin coming back to what the structural margin.

Speaker Change: H.

Speaker Change: I think there is a question about the.

Speaker Change: Collaboration with leading foundry supplier.

Speaker Change: Or.

Speaker Change: Advanced packaging as well as the investment.

Speaker Change: Maybe in the other part of the World.

Speaker Change: So our position has been clear.

Speaker Change: We're working with all of the leading.

Speaker Change: Foundry and we have made public.

Unnamed Speaker: And given the pipeline that we're seeing, they think we will likely have 40 to 50% more, and equipment compacts budgeted for the year, although that's still subject to board approval, and the bulk of more than 65% of the cathodes will be put in the assembly. And both of both parts of it are really for the best. Um, And if we are, if we're looking at the breakdown of the campus that we are looking at today, roughly 67% will be for assembly, 80% for tests, and 30% for EMS. And a lot of it, most of it is really for the new packages of new products that we'll be bringing out this year. In terms of margin, I think we are very, very confident that in the second half of the year, we will be going back to our structural margin, which is set at the mid-20s to 30%. And we believe that for the whole year, we could also have our margin coming back to the structural margin range. I think there's a question about the collaboration with leading foundry supplier Advanced Packaging, as well as investment, maybe in other parts of the world. So our position has been clear.

Speaker Change: <unk> spent that for example, the ASC and TSMC collaboration has been ongoing for years and will continue to work very closely working on all of the required advanced packaging the.

Speaker Change: The investment and.

Speaker Change: The R&D readiness has always been place, which is another reason why we can ramp up for example.

Speaker Change: The Oss in later part of last year as well as the early part of this year and you will see the <unk> are coming out so the collaboration the readiness.

Speaker Change: Has always been here.

Speaker Change: Now in terms of going to different part of the world and making big investments.

Speaker Change: Need to have a better understanding about.

Speaker Change: The product and also the technology requirement right now we do not have any plan to go to U S. For example to make leading edge capacity investment. However, we will be very careful closely working with our customer and try to examine the situation but today.

Speaker Change: We're going to focus in Taiwan first to make sure. We can fulfill order to ramp up technology variation requirement based on the leading edge foundry suppliers as well as our customer I think that'll be the first order of business as we move to $25 20 states are in 'twenty seven.

Unnamed Speaker: We're working with all of the leading Foundries, and we have made public announcements that, for example, the ASE and TSMC collaboration has been ongoing for years, and we'll continue to work very closely, working on all of the required advanced packaging. The investment and the R&D readiness have always been in place, which is another reason why we can ramp up, for example, the OS in the later part of last year, as well as the early part of this year, and you will see good results coming out. So the collaboration, the readiness, has always been there.

Speaker Change: Depending on the environment, including political <unk> business environment, and we will make the different decision accordingly. Thank.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Next question is from MS. Laura Chen of CD.

Hi, Hello, Hi, can you hear me yes.

Speaker Change: Yes.

Laura Chen: Thank you. Thank you for taking my question.

Laura Chen: I also ask a question about the advanced packaging.

Laura Chen: You mentioned about like a addition, now to Hungary, and <unk> Mellon revenue contribution for this year.

Laura Chen: Now, in terms of going to different parts of the world and making big investments, we need to have a better understanding of the product and also the technology requirements. Right now, we do not have any plan to go to the US, for example, to make a leading-edge capacity investment. However, we will be very careful, closely working with our customer, and try to examine the situation. But today, we're going to focus on Taiwan first to make sure we can fulfill all of the Ramp-Up technology variation requirements based on the leading-edge foundry suppliers as well as our customer. I think that'll be the first order of business. As we move to 2025, 2026, and 2027, depending on the environment, including the political as well as the business environment, then we will make different decisions accordingly. Thank you. The next question is from Ms. Laura Chen of Citi. Hello, hi, can you hear me?

Laura Chen: A new engagement, we see other Vince packaging can you elaborate more.

Laura Chen: What kind of the applications that are including some of the pumping business or small focus on substrates.

Laura Chen: That kind of advanced packaging.

Speaker Change: Thank you.

Speaker Change: The 250 million revenue. We include all of the what we call the advanced packaging for example.

On substrate and.

Speaker Change: You are referring to our subsidiary business and that includes.

Speaker Change: Of course, the TSMC version of the co ops and the Unsub Street portion and that is inclusive also.

Speaker Change: ASE has.

Speaker Change: The six pack the Bipack that includes the all kinds of advanced packaging. So this year, we're saying the Oss customers we.

Speaker Change: We are also seeing the VIP pack customers and then the hopefully by the second half of this year, we can start announcing key customer ramping up the <unk>.

Unnamed Speaker: Yes. Thank you. Thank you for taking my question. I also have a question about advanced packaging. I think you mentioned about an additional 250 million revenue contributions for this year. That's the new engagement with advanced packaging. Can you elaborate more?

Speaker Change: The other advanced technology in volume.

Speaker Change: Thank you.

Speaker Change: Thank you and with that Oh.

Speaker Change: Also the expansion.

Unnamed Speaker: For what kind of application is that including some of the bumping business, or is it more focused on substrates? That kind of advanced packaging. Thank you. The $250 million revenue includes all of what we call advanced packaging. For example, the unsubstrate, if you're referring to a substrate business, and that includes, like, a COAS, the TSMC version of the COAS, and the unsubstrate portion. And that is inclusive. Also, the ASE has the six pack and the VI pack that includes all kinds of advanced packaging.

Speaker Change: What kind of margin impact that we're looking for.

Speaker Change: We don't normally comment on specific.

Product margin.

Speaker Change: But as a whole I think so.

Speaker Change: I think the overall corporate margin will continue to improve.

Speaker Change: As we see volume to come up and also.

Speaker Change: In the new technology that we are.

Speaker Change: Overall offering.

Speaker Change: Okay. Thank you very much.

Speaker Change: Next question is from Charlie Chan of Morgan Stanley.

Speaker Change: Charlie.

Hello.

Speaker Change: Yes.

Speaker Change: Hi.

Charlie Chan: Yeah happy new year so.

Charlie Chan: I also have a question regarding to advance that.

Charlie Chan: CPO, you seems to be very very future technology, but.

Unnamed Speaker: So this year we're seeing OS customers. We are also seeing VIPAC customers, and then hopefully, by the second half of this year, we can start announcing key customers ramping up the other advanced technologies in poly. Thank you.

Charlie Chan: And campaign come in at all.

Charlie Chan: Timing.

Charlie Chan: <unk> penetration and especially how are we going to walk out with.

Charlie Chan: The key foundry event TSMC, because I heard that since you may want to produce here.

Unnamed Speaker: And with that, also the expansion, what kind of margin impact are we looking for? We don't normally comment on specific product margins. But as a whole, I think there's a... I think the overall corporate margin will continue to improve as we see volume come up and also bring in the new technology that we are, you know, you know, overall. Okay, thank you very much. The next question is from Charlie Chan of Morgan Stanley. Charlie.

Charlie Chan: Silicon photonics so.

Charlie Chan: How are you going to.

Charlie Chan: Collaborates with the foundry partners or other vendors.

Charlie Chan: Okay.

Charlie Chan: The silicon Photonics is a big subject.

Charlie Chan: The whole idea is Dow will represent another paradigm shift.

Charlie Chan: As we enter into Silicon photonics will be open up to more dimensions more performance more flexibility for all of the designers. So it is good for the whole industry alright, the timing of Silicon Photonics and that has been the big question. We have been working on this for many many years there are many many people working on this.

Charlie Chan: Hello. Yes. Hi. Happy new year.

Unnamed Speaker: So I also have a question regarding the advanced packaging that CPO uses. It seems to be a very, very future technology. But can the company comment about the potential timing, penetration, time, especially how are we going to work out with the key foundry event of TSMC? Because I heard that TSMC may want to produce their silicon photonics. So how are you going to collaborate with the foundry partners or other vendors? Okay, silicon photonics is a big subject.

Charlie Chan: So this is really a future technology as well as an incremental growth driver for the whole industry.

Charlie Chan: In terms of the how do we partitioned the rolling responsibility that is less of a concern for example, the foundry will have foundries ROE in terms of making the photonics chips either in a stacked format or isolate a format and for ASE, We will focus on co package.

Charlie Chan: Optics for example, if we take the IDM photonics chips or the foundry photonic chips, how do we bundled that with everything else.

Unnamed Speaker: The whole idea is that it will represent another paradigm shift, and as we enter into Silicon Photonics, we'll be open to more dimensions, more performance, and more flexibility for all of the designers. So it is good for the whole industry, right? The timing of Silicon Photonics, and that has been the big question. You know, we have been working on this for many, many years. There are many, many people working on this. So this is really a future technology, as well as an incremental growth driver for the whole industry. In terms of how do we partition the role and responsibility, that is less of a concern.

Charlie Chan: So each.

Charlie Chan: Sector of the player will have a good responsibility and role to play in that new arena.

Charlie Chan: Now ASE has been talking about the CPO or silicon photonics, mainly.

Charlie Chan: Mainly because this is really an important innovation.

Charlie Chan: So industry is focusing on this.

Charlie Chan: As of today is working with all of the major.

Speaker Change: Driver in the industry in this arena I am not sure that answers your question, but that's what I have thank you.

Speaker Change: Yes, that's super helpful.

Speaker Change: Very fair and.

Speaker Change: India curve.

Speaker Change: My questions.

Speaker Change: My second follow up question maybe.

Speaker Change: Is that a near term.

Unnamed Speaker: For example, the foundry will have a role in terms of making the photonics chips, either in a stack format or isolated format. And for ASE, we will focus on co-packaged optics. For example, if we take the IDM photonic chips or the foundry photonic chips, how do we bundle that with everything else?

Speaker Change: As soon as the <unk>.

Speaker Change: I guess, a late third quarter, we see foundry.

Speaker Change: Raj odors that means that.

Speaker Change: EMEA is coming back I know so.

Speaker Change: People lack of visibility.

Speaker Change: First of all it into four months later.

Speaker Change: I'm not sure Ken or Joseph a.

Unnamed Speaker: So each sector of the player will have a good responsibility and role to play in that new arena. Now ASC has been talking about CPO or system photonics mainly because this is really an important innovation. The whole industry is focusing on this, and ASAE today is working with all of the major players. I'm not sure that answers your question, but that's what I have. Thank you. Thanks, Dan.

Speaker Change: I want to answer. This question do you think this kind of Russia.

Speaker Change: Ross your order patterns will continue.

Speaker Change: Actually on the kind of negative Si Russia overdose.

Speaker Change: <unk> already disappear.

Speaker Change: Okay Rush order you can view as trough arent too different angle.

Speaker Change: For example, if you look at the <unk> offer you my perspective first sure industry is going through a very prolonged.

Speaker Change: Inventory correction alright.

Unnamed Speaker: Yeah, it's super helpful, very, very fair, and it did clarify a lot of my questions. My second part of the question, maybe, is on the near-term. So since the, I guess, late third quarter, we see so-called foundry raw shoulder. That means that demand is coming back, and also people lack visibility as it fades forward into four months later. So, I'm not sure if Tien or Joseph want to answer this question, do you think this kind of rush order pattern will continue, or, actually, on the kind of negative side, rush orders have already disappeared? Okay, wash water. You can view it from two different angles.

Speaker Change: <unk>.

Speaker Change: And.

Speaker Change: So then we have a lot of wafer bank.

Speaker Change: And then the people looking at their inventory days to look at the order pattern. They are trying to make.

Speaker Change: Two adjustment on the inventory days as well as the.

Speaker Change: That the foundry order and the supply chain cycle time pipeline.

Speaker Change: Now, while we have seen for a few months ago is for example in China.

Speaker Change: The high end cell phone with selling really well.

Speaker Change: And therefore, some of our customers start having the rush water.

Speaker Change: Different wafer different devices I think that's what you're referring to and this is really good alright. So next question is.

Speaker Change: Can this be prolonged.

Speaker Change: Our belief is.

Unnamed Speaker: For example, if you look at the well, let me offer you my perspective first. Sure. The industry is going through a very prolonged, in in in in in, and so then we have a lot of wafer banks, and then the people looking at their inventory days, they look at the order pattern, they're trying to make two adjustments on the inventory days, as well as the foundry order and the supply chain cycle time pipeline. Now, what we saw a few months ago is, for example, in China, the high-end cell phone was selling And therefore, some of our customers start having rush orders on different wafers, different devices. I think that's what you were referring to. And This is really good.

Speaker Change: This is the beginning.

Speaker Change: Of the hub to the boom cycle or this is nearly where.

Speaker Change: At the tail end of the inventory control.

Speaker Change: For example, the first customer.

Speaker Change: Start with inventory.

Speaker Change: Inventory control was back to late January of 2023.

Speaker Change: And theres some customers they start doing them into control at a much later of the year. So.

Speaker Change: So every company every sector will go through different inventory adjustment, but I believe by.

Speaker Change: The third quarter of this year.

Speaker Change: Pretty much done and then we're really going back to the sell through cycle. There is a lot of uncertainty on what exactly the sell through cycle because high inflation. The China economy. The award is going on and I think so complicated comment, but the general belief is this year the semiconductor will grow.

Speaker Change: The logic will grow around high single digit 10%. So everybody is working towards that goal all the order pattern that we're seeing today.

Unnamed Speaker: So the next question is, can this be prolonged? Our belief is that this is the beginning of the boom cycle. Or this is nearly, we're at the tail end of in-venue control. For example, the first customer that started inventory control was back in January of 2023, and there are some customers, you know; they start putting them into control at a much later time of the year. So every company, every sector will go through a different inventory adjustment. But I believe by the third quarter of this year, they're pretty much done.

Speaker Change: With every sector in a different pace different temple, they all pointed to that direction.

Speaker Change: Best way, we can judge is in January February we'll give you a disposition.

Speaker Change: On the snapshot and every quarter, we give you a different snapshot I think thats, probably the best we can do because theres really no lateral long and both sides of the breast factors can be correct, but we believe that we are seeing towards the tail end of the inventory adjustment.

Speaker Change: The order pattern will start coming in and become more persistent and consistent thank you.

Next question is from Bruce Lu of Goldman Sachs.

Bruce Lu: Yes. Thank you for taking my question again.

Unnamed Speaker: And then we're really going back to the sell through cycle. There's a lot of uncertainty on what exactly the sell through cycle is because of high inflation, the Chinese economy, the war that's going on. And I have a so complicated comment.

Bruce Lu: I wanted to ask about Bob.

Bruce Lu: I think.

Bruce Lu: In the past the difficulty for us in terms of otherwise packaging.

Bruce Lu: So many different solutions.

Unnamed Speaker: But the general belief is that this year, the semiconductor will grow, and logic will grow around high single digits, like 10%. So everybody's working towards that goal. All the orders of pattern that we're seeing today, with every sector at a different pace, different tempo, they all point to that direction.

Bruce Lu: Ben.

Bruce Lu: Required if any capacity.

Bruce Lu: Capex.

Bruce Lu: And obviously, we do see a clear.

Direction forward driven by at this moment, so can you tell us that.

Bruce Lu: Is that.

Bruce Lu: The direction for moving into the specifics.

Unnamed Speaker: The best way we can judge you is in January and February, we'll give you this position based on the snapshot. And every quarter, we'll give you a different snapshot. I think that's probably the best we can do, because there's really no right or wrong.

Bruce Lu: Advanced packaging is more confirm Oh do.

Do we see a clear cut that out okay.

Bruce Lu: Somehow focus on that so we get a reasonable hour.

Bruce Lu: Our <unk> for this business moving forward is that acquisitive business for us when we bought basically thats. The question I'll just ask.

Unnamed Speaker: And both sides of the press factors can be correct, but we believe that we are seeing towards the tail end of the inventory adjustment. So the order pattern will start coming in and become more persistent. Thank you.

Bruce Lu: Yeah.

Speaker Change: Okay. This is a.

Speaker Change: A loaded question.

Speaker Change: Now the.

Speaker Change: Well.

Speaker Change: How long would the AI last.

Speaker Change: We believe it will be loans with a long time.

Speaker Change: So initially it could be one or two represented the customers, but over time. The other place we'll comment so I think we're seeing the beginning of the tipped the iceberg right now if we believe that is the case then the leading edge foundry with shares. Okay. This is the capacity they are willing to put in and the other capacity.

Bruce Lu: The next question is from Bruce Lu of Goldman Sachs. Yeah, thank you for taking my question. Again, I still want to ask about advanced packaging. In the past, the difficulty for us in terms of advanced packaging has been that there are so many different solutions, and each one requires different capacities and different capital expenditure. And obviously, we do see a clear direction for the driven by at this moment. So can you tell us that, you know, Is that?

Speaker Change: The Osage players if he can do it you will come in to help US I think that was the situation pretty much described last year. The company has decided we think we have the technology. We have the initial capacity we understand the investment.

Speaker Change: Understand.

The return profile.

Speaker Change: So we want to do this business not just brown, the leading edge foundry customer, but also from all of the end customer and the potential system customer. They asked us to do this now we're doing the Oss or we're doing the VIP pack.

Unnamed Speaker: the direction for moving into the specific advanced packaging is more confirmed. Do we see a clear, our KPIs somehow focus on that? Do we get a reasonable ROIC or ROE for this business moving forward? Is that a qualitative business for us moving forward? Basically, that's the question I'm trying to ask.

Speaker Change: As of now, but as AI become more evolved.

Speaker Change: In other words, no one's evolve beyond the brain the logic or the memory.

Unnamed Speaker: Okay, this is a loaded question now: How long will AI last? Um, we believe it will be a long, long time so initially, there could be one or two representative customers, but over time, the other players will come in, so I think we're seeing the beginning or the tip of the iceberg all right now. If that is the case, then the leading edge foundry will say okay, this is a capacity they're willing to put in, and the other capacity uh, the other OSAP players, The company has decided, we think we have the technology, we have the initial capacity, we understand the investment, we understand the return profile, so we want to do this business, not just from the leading-edge foundry customer but also from all of the end customers and the potential system customers. They asked us to do this. Now we're doing the OS, or we're doing VIPAC as of now, but as AI becomes more evolved, in other words, once you evolve beyond the brain, the logic, or the memory, you will start adding other requirements.

Speaker Change: You will start adding the other requirements and all of this will require a similar capacity to build that require system overtime. So.

Speaker Change: So we think company will be more the application will be more the system requirement would be more.

Speaker Change: All going back to automation going back to the understanding of the basic technology and also the.

Speaker Change: The company has enough portfolio and financial strengths to shoulder the business model and the liability.

Speaker Change: So this is one area, which is quite definitive for ASC. So we're not doing this for three to six months if that answers your question.

Speaker Change: I want to add a point.

Speaker Change: AI is really.

Speaker Change: Yeah.

Speaker Change: At this early stage.

Speaker Change: Lisa.

I would say continue to proliferate will go to.

Speaker Change: Sure.

Speaker Change: Applications.

Speaker Change: Another robust replacement market for us. So it's not just to US is not just DFS packaging that will stop.

Speaker Change: Stockholder.

Speaker Change: Very strong growth.

Speaker Change: So as a expense into other applications.

Speaker Change: Or the other.

Speaker Change: Other chips will be coming out at the overall volume for the year.

Speaker Change: Also higher.

Speaker Change: The Ministry packages will also benefit from the overall AI.

Speaker Change: So that will create another railroad.

Unnamed Speaker: And all of this will require a similar capacity to build that required system over time. So we think the company will be more, the application will be more, the system requirements will be more, but all going back to automation, going back to the understanding of the basic technology, and also the company has enough portfolio and financial strength to shoulder the business model and the liability. So this is one area which is quite definitive for ASE. So we're not doing this for three to six months, if that answers your question. I want to add a point. I think AI is really at its early stage, and we believe that as it continues to proliferate, it will go into some other applications and create another round of replacement markets for us. So it's not just the, to us, it's not just the advanced packaging that will and Bruce Lu. We'll see you next time.

Speaker Change: A lot of growth for us.

Speaker Change: Going forward with not just our VSS packet.

Speaker Change: For the question.

Speaker Change: Sure.

Speaker Change: In the early stage of that.

Speaker Change: King, which drove quite a bit.

Speaker Change: In R&D and Capex are we seeing that the led packaging.

Speaker Change: Margin.

Speaker Change: Creative in in two.

Speaker Change: Or in the early.

Speaker Change: Early stage of the AI.

Speaker Change: Hi.

Speaker Change: As I mentioned, we don't particularly.

Comment on different packages profit margin.

Speaker Change: As a whole I think as slow as technology continues to advance.

Speaker Change: Thank you.

Speaker Change: Margin.

Speaker Change: Will reflect that.

Speaker Change: As I said.

Speaker Change: Okay.

Speaker Change: Look at this year, we will continue to see our margins starting to improve as we.

Speaker Change: All along with the with the technology advancement.

Speaker Change: Okay. Thank you and the next question is from Wendy Huang of UBS.

Unnamed Speaker: Bye, very strong growth, but also as they expand into other applications. All the other chips will be coming out, and the overall volume for the boom. Also, high end, but in the mainstream packages will also benefit from the overall AI. So that will create another round of volume growth for us, going forward with not just our BFFs. But the question is more like at the early stage of the vets packaging, which should require good R&D and care text.

Okay. Yes. Thank you just wanted to catch the first question. If you can elaborate on the growth profile for this year first quarter, it looks like Cds or were slightly lower than seasonal.

Wendy Huang: For the outlook it sounds like more content in the second half, but I'm curious for second quarter do you see we get back to the lease looks seasonal from a low base. So we start getting back to like high single or low teens type of recovery and then for applications.

Unnamed Speaker: Are we seeing that the vets packaging margin, or are we accretive in 2024, in the early stage of AI? As I mentioned, we don't particularly comment on different packages of profit margin. But as a whole, I think as long as technology continues to advance, I think that our margin will reflect that and, uh..., as I said, if we look at this year, we'll continue to see our margins starting to improve as we go along with the technology at best. I see. Okay. Thank you.

Wendy Huang: One I'm curious the auto was very strong through the upturn.

Wendy Huang: Is that application weathering.

Wendy Huang: Downturn in correction and do you see the content growth where I am.

Wendy Huang: I'm curious how auto is bearing through all this.

Wendy Huang: The Q1.

Wendy Huang: The Q1 typically if you go back to my in my 20 years with ASC.

Wendy Huang: Q1, typically is 10% to 15% down.

Wendy Huang: And the typical number that will work with us.

Wendy Huang: 12%.

Wendy Huang: So I think the this year, if we can be flattish to Q1 of last year.

Wendy Huang: I think we're better than the typical Q1 of course, our Q4.

Randy Abrams: The next question is from Randy Abrams of UBS. Okay, yes, thank you. I wanted to ask the first question, if you can elaborate on the growth profile for this year. The first quarter looks like, you know, or slightly lower than seasonal. For the outlook, it sounds like a more confident second half, but I'm curious about the second quarter. Do you see we get back to the point, at least look seasonal from a low base? Getting back to like high single-low teens type of recovery and then for applications.

Wendy Huang: You have to look at it relative so that'll be the first comment and then Q2, we believe that will go back to.

Wendy Huang: Our typical growth path. So I think this year, we're looking at.

Wendy Huang: A typical year.

Wendy Huang: Year, where Q1 low Q2 growth the second half stronger I think we're looking at that pattern now.

Wendy Huang: In terms of the.

Wendy Huang: The automotive.

Wendy Huang: Some of the Iot and the analog and mixed signal customer I think they are having a lot of inventory concerns.

Unnamed Speaker: One thing I'm curious about is the auto industry being very strong through the upturn. How is that application weathering the downturn and correction, and do you see the content growth where I'm curious how the auto industry is bearing through all this. Um, the, the, the Q1.

Wendy Huang: So we are seeing sluggish order in the first half in those arena and some of the customer to supply to the automotive.

Wendy Huang: However, the ASC automotive business per se is growing.

Unnamed Speaker: The Q1 typically, if you go back to my 20 years with ASE, the Q1 typically is 10 to 15% down, right, and the typical number that we work with is proper. So I think this year, if we can be flattish to Q1 of last year, I think we're better than the typical Q1. Of course, our Q4, you have to look at the relative. So that'll be the first comment.

Wendy Huang: Mainly because of the.

Wendy Huang: I think the DB.

Wendy Huang: Auto line has a lot to do with it.

And Joseph will comment more on the outer worlds.

Joseph: We did see.

Joseph: Pretty good growth.

Joseph: Auto.

Joseph: Motor part of the business since 2022.

Unnamed Speaker: And then Q2, we believe that we'll go back to our typical growth path. So I think this year we're looking at a typical year where Q1 is low, Q2 grows, and the second half is stronger. I think we're looking at that pattern now, in terms of the automotive, Some of the IoT, and the analog and mixed signal customers, I think they're having a lot of inventory concerns. So we are seeing a sluggish order in the first half in those areas.

Joseph: So 83 and were expecting.

Oh.

Joseph: Higher growth also in 2024.

Joseph: Right now I think the.

Joseph: The automotive.

Joseph: <unk>.

Joseph: Related business.

Joseph: Sorry.

Joseph: Okay.

Joseph: At a quite decent growth in 2023 already represents close to 10% of our overall business.

Joseph: We're seeing that.

Joseph: <unk> to grow into.

Joseph: 2024.

In terms of the overall growth rate I think it will outpace.

Unnamed Speaker: And some of the customers do supply to the automotive industry. However, the ASC automotive business, per se, is growing mainly because of the. I think the outer line has a lot to do with it, and Joseph will comment more on that. We did see pretty good growth in the auto and motor part of the business, uh, since, uh, 2022, uh, 2023, and, uh, we're expecting higher growth also in 2024. Right now, I think the... the automotive-related business, uh, it's uh had quite decent growth, and in 2023, it already represents close to 10% of our overall business, and we' And in terms of the overall growth rate, I think it will outpace the other sectors for 2024 as well. Although we are seeing some softer market conditions for the first half of the year because, selectively, there are a few areas that we're seeing some inventory adjustment. But overall, I think the overall growth momentum will continue. 2024, in terms of our automotive industry. Okay, no, thanks for that color.

The other sectors.

244 as well.

Joseph: Although where.

Joseph: We are seeing.

Joseph: Thanks.

Softer market conditions for first half of the year because selectively.

Joseph: There are a few areas.

Joseph: So inventory adjustments.

Joseph: Overall, I think the overall growth momentum will continue into 2024, it in terms of our automotive business.

Speaker Change: Okay. Thanks for that color and there is a quick follow up on that and then I'll ask the second question. There was some Iot analog mixed signal to the consumer downturn lasted a lot longer do you think we are through that based on the customer feedback that we should also improve in the second effort or risk just given the inventory.

Long it was strong.

Speaker Change: And then the second question is actually the EMS business, where it's coming off a slow year, there hasnt been that much it feels like any customer innovation on new Sip projects, how do you see.

<unk>.

Speaker Change: It's also just general environment recovering your applications they are pushing.

Speaker Change: There is youre.

Speaker Change: Youre seeing new activity for us.

Speaker Change: So I'm sorry.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Well, we already said that second half, we believe that will be up.

Speaker Change: At the beginning of the recovery.

Speaker Change: Alright for for the first question. The second question is the EMS.

Speaker Change: If you hear it.

Speaker Change: Ms, earning announcement.

Unnamed Speaker: And there's a quick follow-up on that, and then I'll ask the second question. There was some IoT analog mixed signals because the consumer downturn lasted a lot longer. Do you think we are through that based on the customer feedback that we should also improve in the second half or risk just given the inventory and how long it was strong stays? And then the second question, it's actually the EMS business where it's coming off a slow year, and there hasn't been that much, it feels like end customer innovation on new SIP projects. How do you see EMS if it's also just general environment recovery or applications they're pushing, and if there is, are you seeing new activities for SIP that could jumpstart that part? Huh?

Speaker Change: I think they will also have a similar growth.

Speaker Change: With ASC this year.

Speaker Change: I'm not sure how to answer the IP part.

Speaker Change: Part of the question.

Speaker Change: Because we don't typically comment.

Speaker Change: The.

Speaker Change: The specific MIP or proud of our customers.

Speaker Change: Thanks, a lot.

Speaker Change: 24, I think in terms of EMS.

Speaker Change: Business.

Speaker Change: It will stay relatively flat from this from.

Last year.

Speaker Change: Because of the different.

Speaker Change: Alright dynamics, that's happening in the business.

Speaker Change: So all in all I think we're still remains very very active in engaging with the different products and different customers immunotherapy arena.

We believe that we will see.

Speaker Change: Gary.

Speaker Change: Very strong.

Speaker Change: Momentum.

Speaker Change: Start to.

Unnamed Speaker: Okay, we already said that. The second half, we believe that will be the beginning of the recovery. All right for the first question. The second question is an EMS question. And I think if you hear the EMS earnings announcement, I think they will also have similar growth with ASE this year. I'm not sure how to answer the SIP part of the question because we don't typically comment on the specific SIP or product or customer.

Speaker Change: Start to happen in the <unk>.

Speaker Change: 45, I think.

Speaker Change: <unk> is really the year that we are entering a lot of API as a lot of the new engagements.

Speaker Change: Areas, including automotive consumer and communication.

Speaker Change: Our next question is from Seahawk <unk> of China Renaissance.

Seahawk: Oh, Hi, good afternoon first question regarding Q1 guidance Youre looking for revenue ATM business to be down.

Seahawk: Could you roughly.

Seahawk: How much is volume on loading terrific how much you pay FDA related.

Unnamed Speaker: I think for 24 I think in terms of EMS, and SIT business, it will stay relatively flat from this from last year because of the different dynamics that are happening in this business. Um, So all in all, I think we're still very, very active in engaging with the different products and different customers in the SAP arena, and we believe that we will see We uh, we will see you soon. Our next question is from Zihou Ng of China Renaissance. Hi, good afternoon.

Seahawk: Well <unk> is quite stable right now so I think when we talk about the well first of all let me just clarify a little bit I think 'twenty 'twenty four is the year of recovery.

Seahawk: Our Q1 flattish comparing to last year, our Q2 will grow.

Seahawk: When I talk about the second half inventory adjustment, mainly referring to most of the customers that we have some of the customer has already start ordering some of the customer and it is still waiting.

Seahawk: Although we do not know for sure starting July all of the inventory adjustment will be over.

Zihou Ng: First question regarding Q1 guidance, right? P.M. business to be down. Can I know how much volume or loading time?

Seahawk: Macroscopically, we think that in the third quarter of this year most of the customer will start to recovery path.

Unnamed Speaker: ASTP is quite stable right now, so I think when we talk about the well, first of all, let me just clarify a little bit. I think 2024 is the year of recovery. Our Q1 is flattish compared to last year. Our Q2 will grow. When I talk about the second half inventory adjustment, I'm mainly referring to most of the customers that we have. Some of the customers have already started ordering. Some of the customers, it is still waiting. Although we do not know for sure, starting July, all of the inventory adjustment will be over. But macroscopically, we think that in the third quarter of this year, most customers will start the recovery path. So I think that was just clarification.

Speaker Change: Alright, So I think that was the clarification now in terms of the ESP or volume.

Speaker Change: I think I am referring to volume driven.

Speaker Change: Assuming the ASP it is stable from now on.

Speaker Change: If that answers your questions.

Speaker Change: Yeah, Yeah, Yeah right right.

Speaker Change: And second question related to advanced packaging portfolio.

Speaker Change: Is it fair to assume that right now to open up portfolio for Patrick.

Speaker Change: Under which you have to the ATM business fall under what circumstances.

Speaker Change: We should expect to address advanced.

Speaker Change: Packaging to come on that margin similar to the division.

Speaker Change: To be sure module.

Speaker Change: I think the first answer is yes.

Unnamed Speaker: Now, in terms of the ASP or volume, I think I am referring to volume-driven. Assuming the ASP, it is stable from now on, if that answers your question. Oh, yeah, yeah, yes, very clear. And the second question relating to the advanced packaging portfolio, and is it fair to assume that right now the overall portfolio for here in business, or under what circumstances should we expect that? I'm on a margin similar to the division. I think the first answer is yes, when I talk about 250 million, that's all ATM. In terms of margin, I think Joseph has repeated over and over again, we don't comment specifically, but the overall margin contribution to the business will be a credit system. I think that would just force us to say that, so yeah, okay, I was going to say not that Lucas. Sorry, does that answer your question?

About $250 million, that's all ATM.

Speaker Change: In terms of margin I think Joseph has repeated over and over again, we don't comment specifically, but the overall margin contribution to the business will be accretive.

Speaker Change: I think it was just so just supports us to say that so yeah.

Speaker Change: Yes, okay, what's going to say not dilute.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: I'm sorry does that answer your question.

Speaker Change: Next question is from Mr. Goku Hollywood.

Speaker Change: J P Morgan.

Goku Hollywood: Yes, Hi, Alex.

I had a question.

Goku Hollywood: Business.

Goku Hollywood: Are we seeing the progress and trying to improve the bundling ratio or don't keep test.

Speaker Change: And could you also talk a little bit about your market percent somewhat advanced AI.

Speaker Change: Chips.

Goku Hariharan: The next question is from Mr. Goku Harihara of JP Morgan. Yeah, hi. I had a question on the test side of the business. How are we seeing progress in trying to improve the bundling ratio for turnkey tests? And could we also talk a little bit about your market presence in some of these advanced AI chips? How much testing business are we able to secure? And Dr. Hou, could you give us any milestones in terms of how we should be looking at your test business, given I think the bundling ratio is still quite low compared to what you want it to be in the medium? Well, in terms of our test business, we have been growing that part of the business, percentage wise, in terms of our overall revenue composition, I think from 23 to 23. I think we have been growing that from below 15% to now close to 16% now.

Speaker Change: Testing business are we able to secure.

Speaker Change: And.

Speaker Change: First of all if you could give us any milestones in terms of how we.

Speaker Change: Should we be looking at your business given I think the bundling ratio is quite low compared to what you want to be in the medium term.

Speaker Change: Well in terms of our test business and we have been growing that part of the business.

Speaker Change: Percentage wise.

Speaker Change: In terms of our overall revenue composition.

Speaker Change: I think from a quality.

Speaker Change: One two or three I think we have been growing that growth.

Speaker Change: Below 15% to $1 over over.

Speaker Change: Close to 16%.

Speaker Change: We believe that ratio will continue to grow in 2024.

Speaker Change: Two.

Speaker Change: Approach.

Speaker Change: 17%.

Speaker Change: And.

Speaker Change: We will continue to make efforts in growing.

Speaker Change: Our test business through the increasing.

Speaker Change: Turnkey ratio with our customers.

Speaker Change: That includes that.

As you can today.

Speaker Change: Which is.

Unnamed Speaker: And we believe that ratio will continue to grow in 2024. To Bruce Lu, doing for our customers. We believe that percentage will continue to rise, and we will strive to reach our peak test revenue percentage of around 18% in the next couple of years. All right.

Speaker Change: At this stage is that a low percentage of testing that we have.

Speaker Change: Do we need for our customers, we believe that our settings will continue to rise.

We will strive to reach our Pea.

Speaker Change: Pete.

Speaker Change: Test revenue percentage.

Speaker Change: 18% and.

Speaker Change: In the next couple of years.

Speaker Change: Got it my second question is on mobile.

Unnamed Speaker: My second question is on mobile, since that is still the primary revenue driver. We've been hearing that there are some changes happening on the mobile side, with more customers looking for 2.5D or fan-out package-in-package kind of solutions. There's also some discussion about the biggest flagship mobile customers starting to potentially see at least the foundry part of the mobile packaging step out of foundry and towards OSAT. Are these opportunities that are likely to benefit ASC? How is ASC positioned to benefit from these? And could you talk a little bit about this potential change from flip chip to fan-out package-in-package on mobile?

Speaker Change: There's still the primary revenue driver we've been hearing that there is some changes happening in the mobile side with more customers looking for to fight a fan out.

Speaker Change: Package on package and a solution there.

Speaker Change: Also some discussion about.

Speaker Change: The biggest flagship mobile customers starting to potentially see.

Speaker Change: At least the foundry part of the mobile packaging stepping out of foundry towards that.

Speaker Change: Are these opportunities that are likely to benefit AMC, how was E&P positioned to benefit from beef.

Speaker Change: And could you talk a little bit about this potential change from flip chip to panel package on package on mobile how beneficial is that to.

Unnamed Speaker: How beneficial is that to OSAT profits and revenue? Well, I'm not I'm not sure I can answer all of your questions, but let me try this. Uh, not just the mobile right, if you look at high-performance computing and the router, the uh, the server, I think they all go through a similar trend. So initially, they want to go with a foundry supplier to make sure the turnkey service will guarantee yield and also just-in-time delivery. As time goes on, a portion of the work, it can be packaging, it can be testing, it can be on substrate, and they will decide to go outside of the foundry service. And then the first question is, is ASE ready?

Speaker Change: The or was that.

Speaker Change: <unk>.

Speaker Change: Thank you.

Speaker Change: Well I'm not I'm not sure I can answer all of your questions.

Speaker Change: Let me try this.

Speaker Change: Not just the mobile right. If you look at the high performance computing and the router.

Speaker Change: The server.

Speaker Change: The I'll go through the similar trend. So initially they want to go with a foundry supplier to make sure. The turnkey service guarantee yield and also the just in time delivery.

Speaker Change: As time goes on.

Speaker Change: <unk>.

Speaker Change: A portion of.

Speaker Change: It can be packaging can be testing and KBR substrate and they will decide to go to the <unk>.

Speaker Change: Outside of the foundry service.

Speaker Change: And then the first question is.

Speaker Change: Is ASE ready.

Unnamed Speaker: I think ASE has been, this is really our business. And we are working with almost all of the customers in terms of development, just to make sure, apple to apple, we're at least at par, efficiency, cost, reliability-wise, with the foundry suppliers. And depending on the business model and also the volume, supply-demand requirement, I think we've seen the first wave of outsourcing activity. Once the door opens, I think this trend will continue.

Speaker Change: He has been this is really our business and we are working with almost all of the customers in terms of the development.

Speaker Change: Just to make sure.

Speaker Change: Apple to Apple.

Speaker Change: At least at par.

Speaker Change: Yes.

Speaker Change: Efficiency cost liable reliability wise.

Speaker Change: Par with the.

Speaker Change: The foundry suppliers.

Speaker Change: Depending on the business model and also the volume supply demand requirements and I think we've seen the first wave of the outsourcing activity.

Speaker Change: Once the door opens.

Speaker Change: I think this trend will continue as more people coming in as more technology.

Unnamed Speaker: As more people come in, as more technology becomes available, as the data points start going up, the confidence level of the supply chain, diversity, and resilience, I think it will be a natural force to drive that. So in this regard, I think ASE will benefit because this is the business which is incremental and also in the core portfolio of our business objectives. Now, in terms of how fast, how much, and the margin contribution, we believe the margin contribution will be accretive.

It becomes available as the data points.

Speaker Change: <unk> going up.

Speaker Change: Confidence level of the supply chain diversity and the resilience I think it will be a natural for us to drive that.

Speaker Change: So in this regard I think ASE will benefit.

Speaker Change: This is the business which is incremental.

Speaker Change: Also in the core portfolio of our business objective right now in terms of.

Speaker Change: Al.

Speaker Change: Fast how much and the margin contribution.

Speaker Change: We believe the margin contribution will be accretive.

We also believe that as this is coming in.

Unnamed Speaker: We also believe that as this is coming in, the testing turnkey becomes a natural extension, and the testing will be of higher margin to begin with because of the investment and also the IP. Um, so as we approach more of the turnkey, as we approach more of the high end, there's also a natural margin requirement based on the technology content. So the higher margin requirement, the higher turnkey ratio, so I think all of this will be very beneficial for ASE in the future. I hope that answers your question. If you have any questions, please raise your hand. Charlie Chen or Dylan Liu of Morgan Stanley has more questions. Yes, hello. Yeah, I'm asking because this is Dylan.

Speaker Change: The testing turn key becomes a natural extension and the testing will be off higher margin to begin with.

Speaker Change: Because of the investment and also the IP.

So as we approach more of the turnkey as we approach more of the high end.

Speaker Change: Also.

Speaker Change: <unk>.

Speaker Change: There is a natural margin requirement based on the technology content. So in the higher margin requirement in the higher turnkey ratio.

Speaker Change: I think all of this will be very beneficial for ASC future.

Speaker Change: Hope that answers your question.

Speaker Change: If you have any question please raise your hand.

Speaker Change: Charlie Chan or Steven Liu of Morgan Stanley has small question.

Speaker Change: Yes, Hello, Yes, I'm asking this is Dylan, so I'm asking on behalf of Charlie.

Unnamed Speaker: So I'm asking on behalf of Charlie. So the first question is, do we see any competition coming from Chinese OSETs? Because we heard some of our customers are exploring the possibility of shifting some of the capacity to Chinese OSETs. And if so, how do we tackle that?

Dylan: So the first question is do we see any competition coming from Chinese Osage, because we heard some of our customers are surveying the possibility of shifting some of the capacity to Chinese offset and if so how do we tackle that.

Dylan: Well we.

Unnamed Speaker: Will we lower our price just because of market share, or will we tend to focus more on the ASP and shift more of our focus to advanced packaging? I think this process for competitors has been ongoing for 30, 40 years. We're very used to this, right?

Dylan: Lower our price to.

Dylan: Just because of the market share or are we tend to focus more on the ASP.

Dylan: And shift more of our focus to advanced packaging as such.

Dylan: I think for competitor is ongoing for 30 40 years.

Dylan: We're very used to this and I think customers will always survey the worldwide suppliers.

Unnamed Speaker: I think customers will always survey the worldwide supplier. The decision point is going to be under the new geographic regulatory control. If you're comfortable going to a different part of the region, that'll be the first screen, the first filter.

Dylan: Decision point is going to be.

Dylan: Under the new geographic regulatory control.

Dylan: We're comfortable going to a different part of the region that will be the first screen the first filter.

Unnamed Speaker: I think for now, we have less concern for some of our key customers going to China because of that reason. But over time, this might change. Then we're going back to the cost, the efficiency, as well as the reliability and also data traceability. So at least what I cannot comment on the competitor, but what ASE has been doing is we're trying to have full traceability on everything we do. We're having to have 100% fully automated. Therefore, everything's logging the data with full transparency to our customers.

Dylan: I think for now we have less concern for some of our key customer going to China because of that reason, but over time this might change and we're going back to the past the efficiency as well as the reliability and also the data traceability so at least.

Dylan: I cannot comment on the competitor, but <unk> been doing is we're trying to have food traceability everything we do we're having to have 100% fully automated therefore, everything's lager in the data with a full transparency to our customers, we're trying to improve our scale by working with.

Unnamed Speaker: We're trying to improve our scale by working with a leading foundry partner. We're trying to work with all of the key tier one systems, IDM suppliers, customers, trying to increase the data points and our knowledge, and not only are we trying to do manufacturing know-how, we're trying to do the design simplification know-how, because we're trying to make the more simple design more complex. That's where the value is.

Dylan: Leading foundry partner.

Dylan: We're trying to work with all of the key tier one system IBM suppliers customers trying to increase the data point in our knowledge.

Dylan: And.

Dylan: Not only were trying to do manufacturing Knowhow, we're trying to do the design simplification knowhow because we're enter we're trying to make the more simple design more complex, that's where the value is and immediately will make them more complex expensive design to a cheaper simpler design.

Unnamed Speaker: And immediately, we'll make a more complex, expensive design to a cheaper, simpler design. So only with all of these positive cycles can we secure the key customer. And this is why ASE has been having very high traction with all of the leading edge customers. So in terms of competition with Japan, Korea, China, including, it's always the same. You can use the same analogy on all of the legacy.

Dylan: Only with all of this positive cycles can we secure the key customer and this is why.

Dylan: He has been having very high traction with all of the leading edge customer so in terms of.

Dylan: Competition to Japan, Korea, China, including.

Dylan: It's always the same.

Dylan: You can use the same analogy on.

Dylan: All of the legacy over time people are concerned about the legacy supply and demand.

Dylan: AAC is increasing our fully automated fab as well as our design simplification capability precisely to anticipate that on top of it we're trying to improve the silicon carbide, we are trying to improve the silicon photonics.

Unnamed Speaker: Over time, people are concerned about the legacy supply and demand. ASE is increasing its fully automated fab, as well as its design simplification capability, precisely to anticipate that. On top of it, we're trying to improve silicon carbide. We're trying to improve silicon photonics, as well as all of the high-performance computing like VIPAC.

Dylan: As well as all of the high performance computing like the V. AIPAC. So all of the innovation are meant to offer additional toolbox to our customers in their future design.

Dylan: Complexity as was simplification.

Dylan: I don't think any of our Chinese competitor are having this kind of ecosystem and the data and the AI Knowhow for now which is why I presented.

Unnamed Speaker: So all of the innovations are meant to offer an additional toolbox to our customers in their future design, complexity, as well as simplification. I don't think any of our Chinese competitors are having this kind of ecosystem and the data and the AI know-how for now, which is why I presented the ASE competitive advantage. I think we have a few years of clean leadership; we can leverage this window of opportunity to make sure our scale, efficiency, and know-how can extend quickly ahead of our competitors. Thanks for sharing the insights. And the second question is also circling back to advanced packaging.

Dylan: The ASC competitive advantage I think we have a few years of that clean leadership.

Dylan: We can leverage this window of opportunity to make sure our scale and efficiency and knowhow.

Dylan: Spend quickly ahead of our competitors.

Speaker Change: Got it. Thanks. Thanks, Thanks for sharing the insights and the second question is also circling back to the advanced packaging. So.

Speaker Change: We were curious about the business model because first thing is that how we how would we.

Speaker Change: <unk> are a competitive advantage for us versus the incumbent for example, those idms and foundries.

Unnamed Speaker: So we're curious about the business model, because the first thing is how will we frame our competitive advantage versus the incumbent, for example, those IDMs and foundries? And because, in our mind, we tend to think that more of a targeted market will be top guys coming from different foundries, and we can work as a collaborator. And if so, how do we guarantee the yield?

Speaker Change: <unk>.

Speaker Change: Because in our mind, we tend to think that that's more of a targeted market will be top dies coming from different foundries and we can work as a collaborator and if so.

Speaker Change: How do we.

How do we guarantee the yield because sometimes it could be packaging, sometimes it could be top die, but if the Dol and ended up the production deal is suboptimal, who will be responsible with it.

Unnamed Speaker: Because sometimes it could be packaging, sometimes it could be the top guy. But if you know, and it ends up that the production yield is suboptimal, who will be responsible? I'll try to give you the simplified version of it. It's a big challenge. We have struggled with this for a long time.

Speaker Change: I'll try to give you the simple answer is simplified version of it.

Speaker Change: It's a big it's a big challenge we struggled with this for a long time.

Speaker Change: Alright, the bill.

Speaker Change: <unk> of this is the.

Speaker Change: All of the customers or the suppliers has been working with one or two leading suppliers for a period of time.

Unnamed Speaker: All right. The beauty of this is all of the customers, all of the suppliers, have been working with one or two leading suppliers for a period of time. So the data log is there, they understand the memory yield, they understand the logic yield, they understand the so-called assembly yield overall.

Speaker Change: So the data lock is there they understand the memory yield they understand the logic yield the understand the <unk>.

Speaker Change: <unk>.

Speaker Change: <unk> yield overall.

Speaker Change: So the benchmark is very clear alright.

Unnamed Speaker: So the benchmark is very clear. All right. So the simple answer is such as: If ASE can produce the overall yield based on the overall benchmark at par with the benchmark, then we have this business. If we're below that, either we'll lose the business or there'll be punitive damage, which is why you were referring to.

Speaker Change: Alright.

Speaker Change: So the <unk> answer.

Speaker Change: As such.

Speaker Change: ASE can produce the overall yield based on the overall benchmark.

Speaker Change: At par to the benchmark then we got this business.

Speaker Change: If we're below that either will lose the business or there'll be punitive damage, which is why you were referring to.

Speaker Change: So the best way to look at is can we retain this business going forward as to making money alright.

Unnamed Speaker: So the best way to look at it is, can we retain this business going forward and still make money, all right? It is too early to tell, but I'm telling you, we do have confidence we will. We will manage this, right? In terms of the other question you asked, it was a little bit too complicated and too detailed, so I will not answer it, my apology. There's no question.

Speaker Change: Too early to tell but I am telling you we do have a confidence.

Speaker Change: Would do we will manage this right in terms of the other question you asked a little bit to comprehend into details.

Speaker Change: We're not answer my apology.

Speaker Change: Yes.

There's no questions.

Speaker Change: If that.

I would like to wish all of you happy new year wherever you are and we.

Dr. Tian Wu: If that's the case, I would like to wish all of you a Happy New Year, wherever you are. And we have gone through quite an exciting 2021-2022. 2023 was, a little bit of a break. I think 2024, we're entering into a new era.

Speaker Change: We have gone through.

Speaker Change: Finally, an exciting 2021 2022.

Speaker Change: 2023.

Speaker Change: Was <unk>.

Speaker Change: A little bit of a break alright, I think 2024 will enter into a new era and I think the I look forward to working with all of you. Thank you Joseph.

Speaker Change: Thank you all happy New year, we will see you next time bye bye.

Unnamed Speaker: And I look forward to working with all of you. Thank you, Joseph. Thank you all. Happy New Year. We'll see you next time. Okay, bye-bye.