Q3 2025 ASE Technology Holding Co Ltd Earnings Call

October 30, 2025

This meeting is being recorded.

Kenneth Hsiang: Hello, I am Ken Shung, the Head of Investor Relations for ASE Technology Holding. Welcome to our Q3 2025 Earnings Release. I am joined today by Joseph Tung, our CFO. Thank you for attending our earnings release today. Please refer to the Safe Harbor notice on page 2. All participants consent to having their voices and questions broadcast via participation in this event. If participants do not consent, please do not ask questions or you may leave the session at this time. I would like to remind everyone that the presentation that follows may contain forward-looking statements. These forward-looking statements are subject to a high degree of risk and our actual results may differ materially. For the purposes of this presentation, dollar figures are generally stated in New Taiwan dollars, unless otherwise indicated.

Hello. I am Ken Shung, the head of Investor Relations for ASE Technology Holdings.

Welcome to our third quarter 2025 earnings release.

I am joined today by Joseph Tung, our CFO. Thank you for attending our earnings release today.

Please refer to the safe harbor. Notice on page 2 that all participants consent to having their voice broadcast via participation in this event. If participants do not consent, please do not ask questions or you may leave the session at this time.

I would like to remind everyone that the presentation that follows may contain forward-looking statements. These forward-looking statements are subject to a high degree of risk, and actual results may differ materially.

Kenneth Hsiang: As a Taiwan-based company, our financial information is presented in accordance with Taiwan IFRS. Results presented using Taiwan IFRS may differ materially from results using other accounting standards, including those presented by our subsidiary using Chinese GAAP. For today's presentation, I will go over the financial results and Joseph will give the company's guidance. Afterwards, we will be available to take your questions during the Q&A session. With that, let's get started. During Q3, both our ATM and AMS businesses outperformed our original sales and profitability expectations. Packaging and testing utilization percentages were in the high 70s. Loading on LEAP and traditional advanced packaging lines were generally full. Our wire bond utilization also showed some improvement. Our test business continues to grow faster than our assembly business with our chip probe testing leading the way.

For the purposes of this presentation, dollar figures are generally stated in New Taiwan dollars, unless otherwise indicated as a Taiwan-based company. Our financial information is presented in accordance with Taiwan IFRS results. Presented using Taiwan IFRS made different material from results. Using other accounting standards, including those presented by our...

Subsidiary, using Chinese Gap.

For today's presentation, I will go over the financial results, and Joseph will give the company's guidance.

Afterwards, we will be available to take your questions during the Q&A session.

With that, let's get started.

During the third quarter, both our ATM and EMS businesses outperformed our original sales and profitability expectations.

Packaging and testing utilization percentages were in the high 70s.

Improvement.

Kenneth Hsiang: From a profitability perspective, with our factory loading being better than anticipated, we were able to extract higher operating leverage. However, the company's performance was still impacted significantly by foreign exchange. Despite the NT dollar's near-term decline in value against the US dollar, for much of Q3, the NT dollar traded at a relatively appreciated level when compared with Q2. During Q3, the NT dollar moved from an average exchange rate of 31.2 to 0.7 NT dollar per US dollar, strengthening by 4.6%. Simplistically, we estimate that for every percentage point appreciation of the NT dollar relative to the US dollar, we see a corresponding 0.3 percentage point negative impact to margins at the holding company level, and a 0.45 percentage point negative impact to margins at the ATM level.

Our test business continues to grow faster than our assembly business, with our chip probe testing leading the way.

From a profitability perspective, with our factory loading being better than anticipated, we were able to extract higher operating leverage.

However, the company's performance was still impacted significantly by foreign exchange.

Despite the NT dollar's near-term decline in value against the US dollar for much of the third quarter, the NT dollar traded at a relatively appreciated level when compared with the second quarter.

During the quarter, the NT dollar moved from an average exchange rate of 31.2 to 0.7 NT dollars per US dollar, strengthening by 4.6%.

Kenneth Hsiang: Using this simplified approach, foreign exchange had negative sequential impacts to our holding company and ATM margins of 1.4 and 2.1 percentage points respectively. Annually, negative impacts to our holding company and ATM margins of 2.4 and 3.6 percentage points respectively. Heading into Q4, we expect a more stable NT dollar environment with an average exchange rate of 30.4 NT dollar to US dollar. Please turn to page 3 where you will find our Q3 consolidated results. For Q3, we recorded fully diluted EPS of $2.41 and basic EPS of $2.50. Consolidated net revenues were $168.6 billion, representing an increase of 12% sequentially and 5% year-over-year. On a US dollar basis, our sales increased by 17% sequentially and 14% year-over-year.

We estimate that for every percentage point appreciation of the NT dollar relative to the US dollar, we see a corresponding 0.3 percentage point negative impact to margins at the holding company level, and a 0.45 percentage point negative impact on margins at the ATM level.

Using the simplified approach, foreign exchange had negative sequential impacts to our holding company and ATM, with margins of 1.4 and 2.1 percentage points, respectively, and annually negative impacts to our holding company and ATM margins of 2.4 and 3.6 percentage points, respectively.

Heading into the fourth quarter, we expect a more stable NT dollar environment, with an average exchange rate of 30.4 NT dollars per US dollar.

Please turn to page 3, where you will find our third-quarter consolidated results.

For the third quarter, we recorded fully diluted EPS of $241 and basic EPS of $2.50.

Consolidated net revenues were $168.66 billion, representing an increase of 12% sequentially and 5% year-over-year.

Kenneth Hsiang: We had a gross profit of TWD 28.9 billion with a gross margin of 17.1%. Our gross margin improved by 0.1 percentage points sequentially and 0.6 percentage points year-over-year. The sequential improvement in margin is primarily due to higher loading in our ATM business, offset in large part by foreign exchange. The annual improvement is primarily due to higher utilization and beneficial product mix, offset by foreign exchange. We estimate that foreign exchange had a negative 1.4 and 2.4 percentage point impact to our gross margins on a sequential and annual basis, respectively. Our operating expenses increased by TWD 0.2 billion sequentially and TWD 0.7 billion annually to TWD 15.7 billion. The sequential and annual increases in operating expenses are primarily due to higher R&D costs.

On a U.S. dollar basis, our sales increased by 17% sequentially and 14% year-over-year.

We had a gross profit of $28.9 billion, with a gross margin of 17.1%.

Our gross margin improved by 0.1 percentage points sequentially and 0.6 percentage points year-over-year. The sequential improvement in margin is primarily due to higher loading in our ATM business, offset in large part by foreign exchange.

The annual improvement is primarily due to higher utilization and a beneficial product mix, offset by foreign exchange. We estimate that foreign exchange had a negative 1.4 and 2.4 percentage point impact on our gross margins on a sequential and annual basis, respectively.

Our operating expenses increased by $0.2 billion sequentially and $0.7 billion annually to $15.7 billion.

Kenneth Hsiang: Our operating expense percentage declined a percentage point sequentially to 9.3% and was flat annually. Operating profit was TWD 13.2 billion, up TWD 3 billion sequentially and TWD 1.7 billion year-over-year. Operating margin was 7.8%, up a percentage point sequentially and up 0.6 percentage points year-over-year. During the quarter, we had a net non-operating gain of TWD 0.8 billion. Our non-operating gain for the quarter primarily consists of net foreign exchange hedging activities, offset in part by net interest expense of TWD 1.4 billion. Tax expense for the quarter was TWD 2.6 billion. Our effective tax rate for the quarter was 19%. Net income for the quarter was TWD 10.9 billion, representing an increase of TWD 3.4 billion sequentially and TWD 1.2 billion annually.

The sequential and annual increases in operating expenses are primarily due to higher R&D costs.

Operating expense percentage declined sequentially by 1 percentage point to 9.3% and was flat annually.

Operating profit was $13.2 billion, up $3 billion sequentially and $1.7 billion year-over-year.

It was 7.8% up a percentage point sequentially and up 0.6 percentage points year-over-year.

During the quarter, we had a net non-operating gain of $0.8 billion.

Our non-operating gain for the quarter primarily consists of net foreign exchange hedging activities, offset in part by net interest expense of $1.4 billion.

19%.

Kenneth Hsiang: On 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 TWD 29.4 billion with a 17.4% gross margin. Operating profit would be TWD 14 billion with an operating margin of 8.3%. Net profit would be TWD 11.6 billion with a 6.9% net margin. Basic EPS excluding PPA expenses would be TWD 2.68. On page four is a graphical presentation of our consolidated quarterly financial performance. On page five 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.

Net income for the quarter was $10.9 billion, representing an increase of $3.4 billion sequentially and $1.2 billion year-over-year.

On 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 $29.4 billion, with a 17.4% gross margin.

Operating profit would be $14 billion with an operating margin of 8.3%. Net profit would be $11.6 billion with a net margin of 6.9%. Basic EPS excluding PPA expenses would be $2.68.

On page 4 is a graphical presentation of our consolidated quarterly financial performance.

On page 5 is our ATM. P&L?

Kenneth Hsiang: For Q3 2025, we had record revenues for our ATM business of TWD 100.3 billion, up TWD 7.7 billion from the previous quarter and up TWD 14.5 billion from the same period last year. This represents an increase of 8% sequentially and a 17% increase annually. On a US dollar basis, our ATM revenues were up 13% sequentially and 27% annually. Our test business's growth as a whole continues to outpace our assembly business as a whole, growing 11% sequentially and 30% annually. Gross profit for our ATM business was TWD 22.7 billion, up TWD 2.5 billion sequentially and up TWD 2.9 billion year-over-year. Gross profit margin for our ATM business was 22.6%, up 0.7 percentage points sequentially and down 0.5 percentage points year-over-year.

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 third quarter of 2025, we had record revenues for our ATM business of $100.3 billion, up $7.7 billion from the previous quarter and up $14.5 billion from the same period last year.

This represents an increase.

Of 8% sequentially and a 17% increase annually.

On a U.S. dollar basis, our ATM revenues were up 13% sequentially and 27% annually.

Our test business's growth as a whole continues to outpace our assembly business.

Growing 11% sequentially and 30% annually.

Gross profit for our ATM business was $22.7 billion, up $2.5 billion sequentially and up $2.9 billion year-over-year.

Kenneth Hsiang: The sequential gross margin increase was due to equipment utilization rate improvement, offset in large part by NT dollar appreciation. The annual gross margin decline was primarily due to NT dollar appreciation and, to a much lesser extent, higher electricity rates offset in large part by higher loading. On a constant currency basis relative to our Q1, we estimate our gross margin would be roughly 4.2 percentage points higher during the quarter. This difference would have put our adjusted Q3 gross margin at 26.8% in the middle of our previously stated structural ATM gross margin range. During the Q3, operating expenses were TWD 11.8 billion, up TWD 0.4 billion sequentially, and TWD 1.2 billion year-over-year. The sequential increase in operating expenses was primarily related to higher overall R&D costs, including labor, equipment, and factory supplies.

For our ATM. Business was 22.6% up, 0.7 percentage Point sequentially. And down 0.5 percentage points year-over-year, the sequential gross margin. Increase was due to equipment utilization rate, Improvement, offset and large part by NT dollar appreciation.

The annual gross margin decline was primarily due to NT dollar appreciation and, to a much lesser extent, higher electricity rates, offset in large part by higher loading.

On a constant currency basis, relative to our first quarter, we estimate our gross margin would be roughly 4.2 percentage points higher during the quarter.

This difference would have put our adjusted third quarter.

Gross margin was 26.8% in the middle of our previously stated structural ATM gross margin range.

Kenneth Hsiang: The annual increase is primarily the results of R&D ramp-up and labor-related expenses. Our operating expense percentage for the quarter was 11.8%, decreasing 0.5 percentage points sequentially and down 0.5 percentage points year-over-year. The decline was primarily the result of higher revenues during the quarter. As we previously have mentioned, we believe our spending in R&D on an absolute dollar level will continue to increase. As the associated LEAP revenue syncs up with the R&D spending, our operating expense percentage should continue to moderate. During Q3, operating profit was $10.9 billion, representing a sequential increase of $2.1 billion and an annual increase of $1.7 billion. Operating margin was 10.8%, up 1.3 percentage points sequentially and up 0.1 percentage points year-over-year.

During the third quarter, operating expenses were $11.8 billion, up $0.4 billion sequentially and $1.2 billion year-over-year. The sequential increase in operating expenses was primarily related to higher overall R&D costs, including labor, equipment, and factory supplies.

The annual increase is primarily the result of R&D ramp-up and labor-related expenses.

Our operating expense percentage for the quarter was 11.8%.

Decreasing 0.5 percentage points sequentially and down 0.5 percentage points annually.

The decline was primarily the result of higher revenues during the quarter.

As we previously mentioned, we believe our spending and R&D on an absolute dollar level will continue to increase.

But as the associated leap revenue syncs up with the R&D spending, our operating expense percentage should continue to moderate.

During the third quarter, operating profit was $10.9 billion, representing a sequential increase of $2.1 billion and an annual increase of $1.7 billion.

Kenneth Hsiang: Without the impact of PPA related depreciation and amortization, ATM gross profit margin would be 23.1% and an operating profit margin would be 11.6%. On page 6, you'll find a graphical representation of our ATM P&L. Please note the generally upsloping revenue bars. Using the Q1's foreign exchange rate, we estimate the gross margin percentages for the Q2 and Q3 would be 24.1% and 26.8%. On page 7 is our ATM revenue by the three C market segments. You can see here that the computing segment continues to become a relatively larger component of our business. This was largely driven by a higher percentage of LEAP-based revenues. On page 8, you will find our ATM revenue by service type. Here you can see the two service types containing LEAP services, bump and flip chip, and testing.

10.8% up 1.3 percentage points sequentially and up 0.1 percentage points year-over-year.

And amortization, ATM. Gross profit margin would be 23.1%, and an operating profit margin would be 11.6%.

On Page 6, you'll find a graphical representation of our ATM P&L.

Please note the generally upsloping revenue bars.

Using the first quarter's foreign exchange rate, we estimate the gross margin percentages for the second and third quarters would be 24.1% and 26.8%, respectively.

On page 7 is our ATM revenue by the

3 C market segments.

You can see here that the Computing segment continues to become a relatively larger component of our business.

This was largely driven by a higher percentage of leap-based revenues.

On page 8.

You will find our ATM revenue by service type.

Here, you can see the two service types, containing leap services.

Kenneth Hsiang: Both are becoming a larger component of our overall business. We expect continued momentum in these areas heading into 2026. On page 9, you can see the Q3 results of our EMS business. The annual seasonality of our EMS business has been inconsistent over the last few years due to differing device ramp-up schedules. As such, we believe the annual comparability of our quarterly results may be impacted. During the quarter, EMS revenues were NTD 69 billion, increasing 17% sequentially, while down 8% year-over-year. The sequential increase and annual decline were both primarily the result of differing underlying device seasonality. Sequentially, our EMS business' gross margin declined 0.2 percentage points to 9.2%. This slight change was principally the result of product mix.

Bump and flip chip and testing.

Both are becoming a larger component of our overall business.

We expect continued momentum in these areas heading into 2026.

On page 9, you can see the third-quarter results of our EMS business.

The annual seasonality of our EMS business has been inconsistent over the last few years due to differing device ramp-up schedules.

As such, we believe the annual comparability of our quarterly results may be impacted.

During the quarter, EMS revenues were $69 billion, increasing 17% sequentially while down 8% year-over-year.

Annual declines were both primarily the result of differing underlying devices and seasonality.

Sequentially.

Kenneth Hsiang: Operating expenses within our EMS business decreased by $0.2 billion sequentially and declined $0.5 billion annually. The sequential decline is primarily the result of lower compensation and professional fees. While on an annual basis, the decline is primarily related to lower compensation expenses. Our Q3 EMS operating expense percentage of 5.6% was down 1.3 percentage points sequentially, while annually, our EMS operating expense percentage declined slightly by 0.1 percentage points on lower spending and revenues. Operating margin for the Q3 was 3.7%, up 1.1 percentage points sequentially and up 0.4 percentage points year-over-year. The improvements are primarily the results of higher loading rate and some one-time inventory related adjustments.

Our EMS business's gross margin declined by 0.2 percentage points to 9.2%. This slight change was principally the result of product mix.

Operating expenses within our EMS business decreased by $0.2 billion sequentially and declined by $0.5 billion annually.

The sequential decline is primarily the result of lower compensation and professional fees.

While on an annual basis, that decline is primarily related to lower compensation expenses.

Our third quarter EMS operating expense percentage of 5.6% was down 1.3 percentage points sequentially. While annually, our EMS operating expense percentage declines slightly by 0.1 percentage points on lower spending and revenues.

Operating margin for the third quarter was 3.7%, up 1.1 percentage points sequentially and up 0.4 percentage points year-over-year.

Kenneth Hsiang: Our EMS Q3 operating profit was $2.5 billion, up $1 billion sequentially and $0.1 billion annually. On the bottom of the page, you will find a graphical representation of our EMS revenue by application. The Q3 application mix shows the seasonal ramp-up of our customers' consumer products, with our consumer segment growing while all other segments declining in application share. We believe at a strategic level, our EMS business faces similar technological manufacturing trends as our ATM business does. Trends such as power delivery and thermal control are core themes at the forefront in both our ATM and EMS businesses. Having the ability to address customer challenges at both the ATM and EMS level allows us to provide a broader set of technical solutions to our customers. On page 10, you will find key line items from our balance sheet.

The improvements are primarily the results of higher loading rates and some one-time inventory-related adjustments.

Our EMS third quarter operating profit was $2.5 billion, up $1 billion sequentially and $0.1 billion annually.

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

The third quarter application mix shows the seasonal wrap-up of our customers' consumer products.

With our consumer segment growing while all other segments are declining in application share.

We believe that at a strategic level, our EMS business faces similar technological manufacturing trends as our ATM business does.

Trans such as power delivery and thermal control are core themes at the forefront, and both our ATM and EMS businesses have the ability to address customer challenges at both the ATM and EMS levels. This allows us to provide a broader set of technical solutions to our customers.

Kenneth Hsiang: At the end of the year, we had cash equivalents, and current financial assets of TWD 83.4 billion. Our total interest-bearing debt increased by TWD 55.6 billion to TWD 295.7 billion. This increase was primarily due to the completion of a TWD 50 billion syndicated loan to fund our CapEx. Total unused credit lines amounted to TWD 344.7 billion. Our EBITDA for the quarter was TWD 32.6 billion. Our net debt to equity this quarter was 63%. On page 11, you will find our equipment capital expenditures relative to our EBITDA.

On page 10, you will find key line items from our balance sheet.

At the end of the year, we had cash, cash equivalents, and current financial assets of $83.4 billion. Our total interest-bearing debt increased by $55.6 billion to $295.7 billion. This increase was primarily due to the completion of a $50 billion indicated loan to fund our capex.

Total unused credit lines amounted to $344.7 billion. Our EBITDA for the quarter was $32.6 billion.

Our net debt to equity this quarter was 63%.

Kenneth Hsiang: Machinery and equipment capital expenditures for Q3 in US dollars totaled $779 million, of which $534 million was used in packaging operations, $199 million in testing operations, $40 million in EMS operations, and $6 million in interconnect material operations and others. In addition to spending on machinery and equipment, during the quarter, we also spent $716 million on facilities which includes land and buildings. The overall environment appears to be strengthening. For us, the upward seasonality during Q3 has been the strongest since the COVID timeframe. From a customer sentiment perspective, the pendulum appears to be swinging from booking capacity on an as-needed basis to pre-booking capacities and making sure raw materials are available. As a whole, our customers are now looking for more assurance and security in their supply chains.

On page 11, you will find our equipment: capital expenditures relative to our EBITDA.

machinery and equipment Capital expenditures for the third quarter and US Dollars totaled 779 million of which 534 million was used in packaging operations, 199 million and testing operations 40 million in EMS operations and 6 million in interconnect material operations and others.

In addition to spending on machinery and equipment during the quarter, we also spent $716 million on facilities, which includes land and buildings.

The overall environment appears to be strengthening for us the upward seasonality. During the third quarter, it has been the strongest since the comparable time frame.

from a customer sentiment perspective, the

The pendulum appears to be swinging from booking capacity on an as-needed basis to pre-booking capacities and making sure raw materials are available.

Kenneth Hsiang: For the quarter, LEAP and Test Services continued to lead growth for the company. LEAP continues to be driven by AI. Although we are seeing more customers target their products for use within the AI super cycle, many new products are inferring AI capability or AI readiness. Products are expounding new and smart AI capabilities and features. Newer generations of products are becoming more robust electronically while allowing streamlined access to certain aspects of GenAI capability, such as video and document creation. The key is whether the end consumers are enticed to integrate new generations of products into their lives. To that end, AI does appear to be upping the basic standards of quality in various contexts, not just limited to the school, office, and social media. There does appear to be the not-so-subtle ominous angle of you need AI to be competitive.

As a whole, our customers are now looking for more assurance and security in their supply chains.

For the quarter, Leap and Test Services continue to lead growth for the company.

Sleep continues to be driven by AI.

Although we are seeing more customers target their products for use within the AI super cycle.

Many new products are inferring AI capability or AI readiness.

Products are expounding new and smart AI capabilities and features.

Newer generations of products are becoming more robust electronically while allowing streamlined access to certain aspects of Gen AI capability.

Such as video and document creation.

The key is whether the end consumers are enticed to integrate new generations of products into their lives.

And to that end, AI does appear to be upping the basic standards of quality in various contexts.

Not just limited to the school office and social media.

Kenneth Hsiang: This is bringing an intelligence and capabilities arms race to everyone's front door. In such a context, understanding the seemingly insatiable need for more capable chips and hardware seems fairly straightforward. From the packaging and test perspective, the higher the AI computational capability, the stronger the chip's packaging and testing needs are. Critical improvement paths in power delivery, processing bandwidth, and thermal performance will continue to drive our LEAP services. With that, I'll hand the presentation over to Joseph to present the company's outlook.

And there does appear to be the not-so-subtle, ominous angle of you need AI to be competitive.

This is bringing an intelligence and capabilities arms race to everyone's front door.

In such a context, understanding the seemingly insatiable need for more capable chips and hardware seems fairly straightforward.

From the packaging and test perspective, the higher the AI computational capability, the stronger. The chips, packaging, and testing needs are.

Critical improvement paths in power delivery, processing, bandwidth, and thermal performance will continue to drive our LEAP services.

Joseph Tung: Thank you, Ken. Let me give you the Q4 guidance. Based on our current business outlook and exchange rate assumption of 1 US dollar to 30.4 NT dollars, versus in the Q3, we have 29.7 exchange rate. Management projects overall performance for the Q4 of 2025 to be as follows. On consolidated level in NT dollar terms, our consolidated Q4 revenue should grow by 1% to 2% quarter-over-quarter. Our consolidated Q4 gross margin should increase by 70 to 100 basis points quarter-over-quarter. Our consolidated Q4 operating margin should increase by 70 to 100 basis points quarter-over-quarter. For ATM, in NT dollar terms, our ATM Q4 revenue should grow by 3% to 5% quarter-over-quarter.

With that, I'll hand the presentation over to Joseph to present the company's outlook.

Thank you, K. Let me give you order guidance.

Um, based on our current business outlook and exchange rate, assuming 1 US dollar to 30.490.

Uh, versus Q3, we have $29.27.

exchange rate.

Uh, management projects overall performance for the fourth quarter of 2025 to be as follows.

In NT dollar terms are Consolidated. Fourth quarter Revenue should grow by 1 to 2% quarter or over a quarter.

Our consolidated fourth quarter gross margin should increase by 70 to 100 basis points quarter over quarter.

Our consolidated fourth quarter operating margin should increase by 70 to 100 basis points quarter over quarter.

Joseph Tung: Our ATM Q4 gross margin should increase by 100 to 150 basis points quarter-over-quarter. In NT dollar terms, our EMS Q4 revenue should stay flat or decline slightly quarter-over-quarter. Our EMS Q4 operating margin should be similar to Q4 2024 level. With that, let me also give you some color for the full year. ATM, we're seeing better than expected momentum of mainstream business given the continuing recovery of the general market. On leading edge revenue, we are on track to reach the US dollar $1.6 billion mark as planned. Altogether, we expect ATM 2025 full year revenue to exceed our target and grow over 20 year, 20% year-over-year in US dollar terms.

For ATM in NT dollar terms, our ATM for the fourth quarter should grow by 3% to 5% quarter over quarter.

Our ATM, fourth quarter gross margin should increase by 100 to 150 basis points, quarter over quarter.

For EMS.

In NT dollar terms, our EMS fourth quarter revenue should stay flat or decline slightly quarter over quarter.

Our EMS fourth quarter operating margin should be similar to the fourth quarter 2024 level.

With that, let me also give you some color for the full year.

For ATM.

We're seeing better-than-expected momentum in mainstream business, given the continuing recovery of the general market.

Well, our leading edge revenue, we are on track to reach the $1.6 billion mark, as planned.

All together, we expect ATM's 2025 full-year revenue to exceed our target and grow over 20% year-over-year in U.S. dollar terms.

Joseph Tung: As for machinery CapEx, we expect to further increase our full year CapEx by another few hundred million US dollars to meet customers' requests and to support continuing business momentum into 2026. The increase is largely for wafer probing for both AI and non-AI chips, as well as for general capacity ramp and some new initiatives for year 2026. With that, let's give it back to Ken to open the floor for questions.

As for machinery, capex.

We expect to further increase our full-year capex.

By another few hundred million U.S. dollars to meet customer requests and to support continuing business momentum into 2026.

The increase is largely for wafer probing, for both AI and non-AI chips.

As well as for general capacity ramp and some new initiatives for the year to 2026.

Kenneth Hsiang: Thank you, Joseph. During the Q&A session that follows, we would appreciate if questions can be kept concise and asked one at a time. I will be receiving each question and repeating the asked question to Joseph. Again, we will be limiting the number of questions asked to two questions per turn, but asked one at a time.

With that, let's uh, give it back to Ken to open the floor for questions.

Thank you, Joseph.

Uh, during the Q&A session that follows, we would appreciate if questions can be kept concise and asked one at a time.

I will be receiving each question and repeating the asked question to Joseph.

Again, we will be limiting the number of questions asked to 2 questions per turn, but asked 1 at a time.

Kenneth Hsiang: The first question is from Gokul Hariharan of J.P. Morgan. Goku.

Operator: The first question is from Gokul Hariharan of J.P. Morgan. Goku.

The first question is from Goku, Harry Haron of J.P. Morgan.

Gokul Hariharan: Hi. Thanks for taking my question, Ken and Joseph. First question obviously on LEAP. Could you give us a little bit more color about how the progress has been on LEAP revenues this year? I think you had the $1.6 billion guidance or additional $1 billion guidance. What are we tracking to compare to that guidance now? Any indications for what it could do next year? I think based on our own math, it looks like it could easily double next year. You're also raising capacity and CapEx pretty much every quarter. Also on LEAP, what is the margin contribution from LEAP related business? Is it already accretive or it will turn accretive once you reach a certain kind of revenue run rate? Any indications on that?

Goku.

Hi. Uh, thanks for taking my question. Uh, Ken Joseph, uh, first question obviously on Leap. Um.

Gokul Hariharan: That's my first question. Thank you.

Could you give us a little bit more uh color about how the progress has been on Lee revenues this year? I think you had the 1.6 billion uh guidance or additional 1 billion dollar guidance. Uh what are we tracking to compare to that guidance now and any indications uh for what it could do next year? I think, based on our own math, it looks like it could easily double next year and you're also raising capacity and capex pretty much every quarter and also on leap. Um, what is the margin uh contribution from leap? Uh, related business is it already a creative or, um, it'll turn a creative? Once you reach a certain kind of Revenue run rate in any any indication

Kenneth Hsiang: You're looking for revenue progress and then, generally, kind of what we're thinking about for this year and then on, correct?

On that, that's my first listing. Thank you.

Okay.

Revenue progress.

Generally.

What we're thinking.

Gokul Hariharan: Yes.

or this year and then,

yes.

Joseph Tung: Okay. Like I said, we are on track in reaching our $1.6 billion mark this year. Everything is progressing well. I think we have shown very strong momentum in the AI and HPC related part of the business. In terms of the revenue mix, I think, you know, because of the geopolitical uncertainties, in terms of packaging, we are a little bit short from our original target. That was sufficiently replenished by our more than expected growth in our test business. We are very, very confident that we will reach our $1.6 billion mark for this year. Going forward into 2026, we continue to see very strong momentum.

We, uh, replenished by, uh, our more than expected growth in our test business.

Joseph Tung: We are very, very confident that we will gain another over a $1 billion-dollar kind of revenue increase for 2026 in this space. CapEx-wise, we will continue to make heavy investments in our leading edge, I think to support the strong momentum that we're seeing today. You know, I think AI or HPC is really the momentum is here to stay. We're not gonna be shy on making the necessary investment to not just secure our dominant position in this space, but also to expand that dominance against our competitors and to fully support our customers' needs.

So, uh, we are very, very confident that we will uh, uh reach our 1.6 billion Mark uh, for this year and going forward into 2026, we see we continue to see very strong momentum and we are very, very confident that we will uh gain another uh over a billion dollar, kind of Revenue increase uh for 2026 in this space.

Um, CapEx wise, we will continue to make heavy investments in our Leading Edge. Uh, I think to support the, uh, the strong momentum that we're seeing today.

Joseph Tung: In terms of margin and return, I think the at steady state, as we mentioned before, the LEAP will definitely be both margin as well as return accretive, and we are quickly reaching that point at this point.

And, uh, you know, I think AI or HPC is really the momentum is here to stay. Uh, we're not going to be shy about making the necessary investment to, uh, not just secure our dominant position in this space but also to expand that dominance against our competitor's combat. And to, uh, fully support our customers' needs.

Um,

Gokul Hariharan: Okay. That's very clear. Thanks, Joseph. Maybe one other question. Can you talk a little bit about pricing? I think Ken mentioned in the opening remarks that you're pretty much running full on flip-chip and bumping, you're pretty much running full on LEAP. I think last time around, I think Tien Wu had discussed about potential price negotiations. Anything that you can report on what are we seeing on pricing for your overall offering? Should we expect that pricing should go up? I think OSAT pricing doesn't usually go up that much, but just wanted to understand how we should think about pricing going into next year.

In terms of margin and return, I think the, uh, aesthetic state, as we, uh, mentioned before, uh, the, uh, leap, uh, will definitely be, uh, both margin as well as return creative, and we'll quickly reach that point at this point.

Kenneth Hsiang: Gokul, you're looking for commentary on overall just pricing environment for us for this year and next year.

Okay. Uh, that's very clear. Uh, thanks Joseph. Maybe 1 other question. Uh, can you, um, talk a little bit about pricing? I think, uh, I think Ken mentioned in the opening, the marks that you are pretty much running full on, uh, flip chip, um, and bumping your pretty much running full on leap. Um, I think, uh, last time around, I think Dr. Buu had discussed about potential, uh, price negotiations, uh, anything that you can report on. What are we seeing on pricing for, uh, your overall offering, uh, should be expected. That pricing should go up. I think, uh, with that pricing doesn't usually go up that much. But uh uh, I just wanted to understand how we should think about pricing uh, going into next year.

Gokul Hariharan: maybe also specifically on LEAP as well as your flip chip and bumping, kind of advanced, the mainstream advanced packaging business as well because the customer set is slightly different. LEAP, you're kind of largely partnering with the large foundry.

Okay, you're looking for a commentary on overall, just pricing environment for us, uh, for this year. And, uh, maybe also specifically on leap, as well as, uh, your um, uh, flip chip, uh, and uh bumping uh, kind of advanced the mainstream Advanced packaging, uh business as well because the customers that are slightly different leap. Your kind of, uh, largely partnering.

With the large Foundry.

Joseph Tung: Well, without getting into specific, I think, in general, I think our pricing remains to be resilient. you know, I think it's very sensitive to talk about pricing, but as a whole, I think we will continue to set the pricing, the most suitable pricing structure, based on the current situation. I think there are a lot of moving parts, and there are a lot of uncertainties in front of us. In general, I think we will continue to make our pricing a very resilient level.

Well, without giving

Without getting into specific, I think, in general, I think our pricing uh remains to be resilient.

and um, you know, um,

I think it’s very sensitive to talk about pricing, but as a whole, I think we will continue to, um,

to set the, uh, our pricing, uh,

the most suitable pricing structure.

Gokul Hariharan: Maybe if I kind of tweak it a little bit, Joseph, like what is customer feedback? I think I'm sure that everybody is talking about this. We hear that from your tablet customers as well. I just wanted to understand, like, what is customer feedback to pricing even in... I wanted to think about a little bit more on the mainstream stuff like flip-chip CSP or flip-chip BGA, where there is no super cycle of growth. Even in those areas, are you able to have some, like, value add programs coming through?

Uh, based on the current situation, I think there are uh there are a lot lot of moving parts and there are a lot of uncertainties in front of us. But in general, I think we will continue to uh make our pricing a very, very resilient level.

Can be if I, if I kind of tweak it a little bit Joseph, like, what is uh what is customer? Uh, feedback. I think, I'm sure that everybody is talking about this. We hear that from your tablet, customers as well. I just wanted to understand like, um, uh, what is customer feedback to, uh, pricing, even in I, I I, I wanted to think about a little bit more on the mainstream stuff, like, flip chips, CSP, or flip, to BGA, uh, where there is no super cycle of growth. Uh, even in those areas, are you able to have some, uh, like value app programs, coming?

Coming through.

Kenneth Hsiang: Are you asking for expansion on the original pricing question there?

Gokul Hariharan: Yes, sir. Maybe talk a little bit like more on the mainstream advanced packaging as well. Yeah.

You're asking for expansion on the original pricing question there?

Yes, sir. Um, maybe talk a little bit more on the mainstream advanced packaging as well. Yeah.

Joseph Tung: For mainstream, I think, you know, we are seeing the continuing recovery of the general market, and therefore, I think pricing-wise, I think it's right now at a very stable level.

uh, for mainstream, I think, uh, you know, we are seeing the continuing recovery of the General market and therefore, I think pricing wise I think it's uh right now at a at a very stable level

Gokul Hariharan: Okay. All right. Thank you very much. I'll go back to the queue. Thank you.

Joseph Tung: All right. Thank you.

Okay. All right. Uh, thank you very much. I'll go back to the queue. Thank you.

Kenneth Hsiang: Next question is from Charlie Chan of Morgan Stanley. Charlie?

Operator: Next question is from Charlie Chan of Morgan Stanley. Charlie?

Next question is from Charlie Chan of Morgan Stanley.

Charlie Chan: Yes. Hi. I just unmuted myself. First of all, congratulations for very good results and outlook. My first question is really on sort of supply chain and related discussion. For example, what's the update plan for you to do the US operation? Because your major customers, major foundry partners, are all very active in the US, and there seems to be your competitor, Amkor, in that presence. You know, one is that your update plan for the US operation to enjoy that ASME kind of growth. Also we are very concerned about the sort of T glass shortage.

Charlie.

Yes. Uh, I I just amused. My my myself. Uh, first of all. Congratulations. For a very uh, good results in in Outlook. Uh, my uh, first question is, uh, really on uh, sort of uh,

Supply chain related.

uh discussion, uh, for example,

Uh, what's the update plan for Q4?

Uh, do the US operation, uh, because you're major concerns.

Uh, major Foundry Partners, uh, are all very active in in the US and there seems to be have a your competitor M core uh in that presence. Uh, so uh, you know, 1 1 is that you're

Update the plan for the U.S. operation to enjoy that.

A asme kind of growth. And also, we are very concerned about

Charlie Chan: I think, lots of customers are going through with your fab to see if they can secure more substrates, right? I'm not sure if there would be kind of getting factor for your next visit growth. That's the first question. Thank you.

The, uh, circle of tea, glass shortage.

Kenneth Hsiang: Charlie, that sounds like two questions. Let's start with question number one, the US building out perspective.

Um I I think a lot of customers are going through with your Fab uh to see if they can secure more. Uh substrates, right? So uh I'm not sure if that would be kind of uh getting factored for your next visit growth. So this is the first first question. Thank you.

That's Charlie. That sounds like 2 questions.

Let's start with questions.

Us building out perspective.

Joseph Tung: Okay. Thank you for your question, and thanks for coming to my concert.

Okay, thank you for your question, and uh, thanks for coming to my concert.

Charlie Chan: Yeah, that was a great one.

Joseph Tung: Anyway, on US, we don't have anything new to report except that, let me reiterate what we mentioned last time, that we were invited by our customer...

Joseph Tung: Anyway, on US, we don't have anything new to report except that, let me reiterate what we mentioned last time, that we were invited by our customer...... to look at the investment opportunities in the US. We are currently still engaging in discussion with our customers, and we're evaluating different opportunities. You know, no decision is made at this point. Whatever decision we will eventually make, it will have to make economical sense for us. In terms of the competition, I think, you know, Amkor has its own mind. You know, I think, I'm not gonna answer for Amkor. Overall, we will continue to be watchful on the overall competition landscape and see how we can better position ourselves in terms of meeting this competition.

You will.

Us. Uh,

Uh, we don't have anything new to report, except that, uh,

Charlie Chan: Mm-hmm

Joseph Tung: ... to look at the investment opportunities in the US. We are currently still engaging in discussion with our customers, and we're evaluating different opportunities. You know, no decision is made at this point. Whatever decision we will eventually make, it will have to make economical sense for us. In terms of the competition, I think, you know, Amkor has its own mind. You know, I think, I'm not gonna answer for Amkor. Overall, we will continue to be watchful on the overall competition landscape and see how we can better position ourselves in terms of meeting this competition.

Uh, let me really, really what we, what we mentioned last time that we will we were invited by our customers, uh, to look at the uh uh to look at the investment opportunities in in the US.

Uh, we are currently still engaging in, uh, discussion with our customers.

And we're evaluating different opportunities.

Um, but you know, no decision is made at this point. Whatever decision we eventually make will have to make economical sense for us.

Yeah, in terms of the competition, I think, you know, M Core has its own mind.

So, you know, I think, um,

Uh, I, I’m not going to answer, uh, for AM Court, uh, but overall, we will continue to be watched for on the overall competition landscape and see how we can, uh, better position ourselves, um, in terms of, uh, uh, meeting these competition.

Kenneth Hsiang: Charlie, do you want your second question to be about, your previous question on T glass and such?

Charlie Chan: Yeah, maybe we can save it for maybe second round. My major second question is really the final test of completion. Sorry, I know this one is a little bit controversial. I wanted to get your updates or confidence level about your final test market share at major customers next generation GPU. Oh, yeah, and by the way, congratulations for very strong share price. I think your efforts were recognized by foreign shareholders. Yeah. Second question is really about your final test business update.

So, Charlie, do you want your second question to be about your previous question on Tlass and such?

yeah, maybe uh, we can

uh, save you for uh maybe maybe second round but but my my major second question is really

The final test, uh, competition. So, I know this one is a little bit controversial, um, but I wanted to.

Uh, get your updates or confidence level.

Uh, about your final test, uh, like you share at Major Customers Next Generation.

Uh, GPU. Um, oh yeah. And and by the way, congratulations for uh, very uh, strong share price. Uh, so I I think you're afraid were recognized by, by, uh, for in shareholders. Yep. So second question is really about your, uh, final test.

Kenneth Hsiang: You're looking for a more comprehensive explanation or update on our final test market share gains?

Uh, PC update.

Kenneth Hsiang: You're looking for a more comprehensive explanation or update on our final test market share gains?

Charlie Chan: Yeah. Your, your Taiwanese competitor seems to be very aggressive in the test purchases and capacity expansion as well. I hope, you know, both can win. Yeah, just wanted to get a little bit more color about your realistic assumption about your final test market share.

So, uh, you're looking for a more comprehensive, uh, explanation or uh, update on our final tests, uh, market share gains.

yeah, because you're you're uh Talent is competitor seems to be uh, very aggressive in the uh, testers purchase and

Uh capacity is been as well. Uh so I I hope uh I hope uh uh you know, both both getting Wayne. Um yeah. So just wanted to get a a little bit more color about uh your realistic assumption about your final test market share.

Joseph Tung: I think, as we mentioned, we have been aggressive, and we have been pretty successful in terms of expanding our test business. I think for this year, our test business growth is gonna be plus the packaging revenue growth. We will continue to make large investment into our test capacity. You know, our resources are also limited. We don't have unlimited resources to try to cover everything in the market. Right now, the main FOCoS for our investment in test is really on the wafer probing. I think we will continue to on this effort for the time to come.

uh I think uh uh as we mentioned that we have been aggressive and we have been uh,

Pretty successful in terms of, uh, um,

Business, I think for this year, our tests, business growth is going to be plus the packaging revenue growth.

And uh, we will continue to make uh uh large investment into our tax kit capacity. Uh, but, you know, our, our resource are also limited. Uh, we don't have unlimited resources to try to cover everything. Uh,

In in the market. So right now, the main focus, uh, for our investment in test is really on the uh,

Uh, wafer probing.

And, uh, I think we will continue on this, uh, effort, uh,

Joseph Tung: In terms of final test, I think, we are making the investment, necessary investment at this point, to build up the capacity. We're expecting to have meaningful revenue being generated in the later part of next year when we start serving the next generation AI chips.

for the, for the time to come and in terms of final tests, I think, um, uh, we are making the investment necessary investment at this point, uh, to build up the capacity and we're expecting to have

Charlie Chan: Okay. Okay. Yeah, thanks for the update. It was great to see you in Cannes. Thank you.

Uh, meaningful Revenue being generated, uh, in the later, part of, uh, next year when we, uh, start serving the Next Generation, ai, ai chips.

Joseph Tung: Thank you.

Okay. Okay, yeah, thanks for the update. Uh, and it was great to to see you and and and can thank you.

Thank you.

Kenneth Hsiang: Next question is from Bruce Lu of Goldman Sachs.

Operator: Next question is from Bruce Lu of Goldman Sachs.

Next question is from Bruce, Liu of common sax.

Bruce Lu: Hello. Can you hear me?

Kenneth Hsiang: Yes.

Hello, can you hear me?

Bruce Lu: Okay. My question is regarding to your revenue split for your incremental TWD 1 billion revenue in 2026 for, you know, your AI-related revenue. We understand that the revenue contribution is more geared to testing for this year. Are we able to see incremental more revenue contribution from packaging? To be more specific, can we get more like, you know, packaging related business from both outsourcing as well as your own, you know, packaging or AI packaging business?

Yes. Okay, my question is regarding to your

Uh Revenue split for your incremental, 1 billion Revenue in 2026.

For you know your AI-related revenue. We understand that the revenue contribution is more geared towards package testing for this year.

Kenneth Hsiang: Bruce, you're asking for the incremental revenue for this year, right?

Are we able to see incremental more Revenue contribution from packaging and to be more specific? Can we get more like, you know, packaging related business from both Outsourcing as well as your own, you know, uh, uh, packaging, uh, or AI package business.

Bruce Lu: Next year. Because Joseph just said that we will see another, additional $1 billion dollar revenue for next year, right?

Kenneth Hsiang: He may have said that. Yeah. Okay.

First, you're asking for the incremental revenue for this year, right? And next year, because Joseph just said that we will see an additional $1 billion in revenue for next year, right?

Kenneth Hsiang: He may have said that. Yeah. Okay.

Um, he may have said that.

Uh, so yeah. Okay.

Joseph Tung: For the 1 billion increase of our leading edge revenue, I think the breakdown is 650 from packaging and about 350 from test for this year. For next year, well, we'll see how things go. I think. We'll kind of give you a ballpark number saying that we will be having at least a billion-dollar revenue growth. In terms of the exact composition, I think that remains to be seen, and we'll base on the current situation to allocate our resources and to grow both of the business, but without, you know...

Uh, for the 1 billion increase, uh, of, uh, our Leading Edge Revenue. I think the, uh, the breakdown is, uh, or 60 650 from, uh, Packaging.

And about 350 from, uh, from test.

For this year.

Joseph Tung: Right now, we don't have a set mind on what kind of breakdown it will be. What I can say is that, you know, test seems to be continue to have stronger momentum at this point.

And for next year. Um, well, we'll see how it how things go. Uh, I think the uh, we'll kind of give you a ballpark number saying that we will be having maybe at least at least a billion dollar Revenue growth. Uh, but, uh, in terms of the, uh, exact composition, I think that remains to be seen. Then we will we will base on the current situation to, uh, to allocate our resources, and to uh, um, to grow both of the business. Uh, but without, um, you know

But right now, we don't have a set mind on what kind of breakdown it will be.

But what I can say is, you know, the test seems to be continued to have stronger, uh,

momentum at this point.

Bruce Lu: I see. The testing will grow faster than packaging next year for within this $1 billion?

Joseph Tung: It has been growing faster than packaging. You know, come next year when the new generation products comes on stream, the composition may have some changes. What I'm saying is that we are seeing, we're continuing to see strong momentum in test at this point.

I see, so the testing will grow faster than taxing next year for within this $1 billion.

It has been growing faster than the packaging, but ...

You know, come next year, when the new, uh, generation products come on stream.

The composition may have some changes, but what I'm saying is we continue to see strong momentum in tests at this point.

Bruce Lu: I see. Okay. Thank you. The second question is for, again, I want to break down a little bit for the US plan. I mean, TSMC has a plan to build some, you know, CoWoS process and, you know, Amkor committed to build some on-substrate process. It seems to me that they have, you know, your customer, your competitor seems to have at least one supply chain in US, which probably, you know, what's the strategy for ASE at the current stage? Obviously, you probably don't need, like, two supply chain in United States, right? The potential losing some market share for TSMC out zone business is definitely a threat for our future business, right? Can we elaborate more about, like, what's the strategy from ASE?

I see. Okay, thank you.

The second question is for, again, I want to break down a little bit for the U.S. plan. I mean, TSMC has filled like that's the plan to build some, you know, C process. And, you know, M code committed to build some substrate process.

So it seems to me that they have, you know,

Your customer and your competitor seem to have, uh,

At least 1 supply chain in the U.S.

Kenneth Hsiang: Rick, you're looking for a reiteration on the on the US plan on our behalf?

You know what, what's the strategy for? AAC at the current stage? Obviously you probably don't need a 2 supply chain and in, in, in United States, right? So the potential losing some market share for tsmc, I was on business is definitely a threat for our future business, right? So can we elaborate more about, like, what, what's the strategy from, uh, AC?

Bruce Lu: Yes.

We're here looking for a reiteration on the, uh, on the U.S. plan on our behalf.

Yes.

Joseph Tung: Well, we don't fight for market share just for market share's sake. I mean, we fight for the market share that makes sense or make profit for us. If we don't, if we don't see return, if we don't see it, you know, at least acceptable margin, then that's not the part of the business that we want to pursue. I think the, you know, like I said, regardless if US or in any part of the world, for us to make an investment, it has to make economical sense. That's, if Amkor feels that they, with that kind of investment they can make a profit out of it, fine. You know, right now we're not sure on that.

Well, we don't, we don't fight for market share, just for market share sake, and we, we, we fight for product to market share that make sense or make make profit for us.

uh, if if we don't

If we don't see a return, if we don't see the, uh, you know, at least an acceptable, uh, margin, uh, then that's not the part of the business that we want to pursue. I think the, uh, you know, like I said, um, regardless if it's us or in any part of the world, for us to make an investment, it has to make economical sense. So, that's, um, if Ankle feels that they, uh, with that kind of investment, they can make a profit out of it, fine. Uh, you know, but right now we're not sure about that.

Bruce Lu: There's no way to pass on the incremental cost to the customer in order to make the investment, like, you know, profitable?

So, there's no way to pass on the incremental cost to the customer in order to make the investment. You know, ...

Joseph Tung: Well, it's not just about pricing, it's about the overall infrastructure which that can support that kind of a business at a reasonable cost structure. Even with some premium pricing, whether that cost that can cover the costs associated with it, remains to be seen. Right now, I think that's a very tall task, actually.

Uh, a profitable.

Bruce Lu: Okay. Understand. Thank you.

Well, it's not just about pricing, it's about the overall infrastructure, which that can support that kind of a business at a, uh, at a reasonable cost structure. And even with some premium pricing, uh, whether that cost, uh, that can cover the, the costs associated with it. Uh, remains to be seen and I right now, I think that's a, that's a very tall task actually.

Joseph Tung: Thank you.

Okay, understand. Thank you.

Thank you.

Kenneth Hsiang: Next question is from Laura Chen of Citigroup.

Operator: Next question is from Laura Chen of Citigroup.

Next question is from Laura Chan of Citigroup.

Operator: Thank you. Hi, can you hear me?

Laura Chen: Thank you. Hi, can you hear me?

Kenneth Hsiang: Yes.

Thank you. Uh, hi. Can you hear me?

Operator: Hi. Good afternoon. Hi. I just want to consult, Joseph, your view on the growth margin outlook and also congratulate for the great result. Obviously we see quite full utilization rate, like Ken just mentioned. At the same time, there's a stronger testing business. I recall, Joseph, you mentioned before that in the long term, if the utilization rate break to 80%+, the growth margin could go back to high twenties. Just wondering how is the dynamic now? Are you also increasing the CapEx for the future demand. Just wondering how should we think about the growth margin outlook into next year or longer term?

Laura Chen: Hi. Good afternoon. Hi. I just want to consult, Joseph, your view on the growth margin outlook and also congratulate for the great result. Obviously we see quite full utilization rate, like Ken just mentioned. At the same time, there's a stronger testing business. I recall, Joseph, you mentioned before that in the long term, if the utilization rate break to 80%+, the growth margin could go back to high twenties. Just wondering how is the dynamic now? Are you also increasing the CapEx for the future demand. Just wondering how should we think about the growth margin outlook into next year or longer term?

Hi, good afternoon. Hi, uh, just uh, uh, want to consult Joseph. Uh, your view on the growth margin outlook, and also, congratulations for the great resolve. Uh, I just think we see quite a full duration rate, like you just mentioned. At the same time, there's a stronger testing business. Uh, I recall Joseph, you mentioned before that, in the longer term, if the iteration rate breaks to 80% plus, the growth margin could go back to the high 20s. So, just wondering how is the dynamic now? Uh, are you also, um, and also...

Kenneth Hsiang: Laura, you're looking for commentary on the relationship between utilization and our margin structure.

Uh you you you are increasing the care packs uh for the future demand. So just wondering how should we think about the growth margin Outlook uh, into next year or a longer time?

Operator: Yeah.

Laura Chen: Yeah.

Kenneth Hsiang: Is that correct?

Operator: At the same time we are also increasing CapEx. I believe that there's also some increasing in depreciation cost. Just wondering the dynamic right now, how should we think about the gross margin outlook?

Laura Chen: At the same time we are also increasing CapEx. I believe that there's also some increasing in depreciation cost. Just wondering the dynamic right now, how should we think about the gross margin outlook?

How are you looking for, commentary on, uh, the relationship between utilization and our margin structure?

Yeah, and also yeah.

At the same time, we are also increasing care packs. I believe that there's also some increase in depreciation cost. So, I'm just wondering about the dynamic right now. How should we think about the growth margin outlook?

Joseph Tung: Well, if we exclude the foreign exchange impact, I think we have already come back to our structural margin. Like Ken mentioned, in Q3, if we were on the same Forex level as Q1, our margin should be around 26.8%. Going into Q4, there will be further margin improvement. You know, again, at the same currency level, we should be over 27%. What we mentioned before, once our utilization reaches 70% and above, then we should go back to our structural margin range. You know, unfortunately the foreign exchange does have a pretty big impact on our overall margin.

Uh, well, if we exclude the, uh, the um, uh, uh Foreign Exchange impact.

I think we have already, uh, come back to our, uh, structural margin, uh, like Ken mentioned in Q3.

if we, if we, uh,

If we were at the same Forex level as Q1, our margins should be around 26.8%.

And going into uh uh, fourth quarter. There will be further, uh, margin Improvement. And you know again at the same currency, uh, level uh,

We should be over 27%. So, um, what we mentioned before, when our utilization reaches 70% and above, then we should go back to our, uh, uh.

Joseph Tung: Having said that, I think we will continue to. I think right now the foreign exchange seems to be stabilizing now. We will start our margin effort from this level. We are very confident that with the continuing expansion of our leading edge business. As the capacity being ramped up, we are confident that we will continue to see margin improvement. Right now we are very, very confident that in 2026, for the whole year, we should have a gross profit margin for ATM at the structural margin range.

Um, structural margin range. But the unfortunately, the, uh, the uh, from exchange does have a uh, pretty me, uh, pretty big impact on our overall margin. But having said that, I think we will continue to uh, I think right now the uh, for exchange

uh,

seems to be stabilizing now.

uh, start our margin uh,

effort. Uh,

From this, uh, from this level.

And, uh, we are very confident that with the, uh, continuing expansion of our Leading Edge. Uh,

Business.

Uh, we're confident that we will continue to see, as the, uh, capacity being ramped up. Uh, we are confident that we will continue to see, uh, margin improvement. And, uh, right now we are very, very confident that in 2026 for the whole year, we should be, uh,

Operator: Yeah, thank you. Very looking forward that. My second question is that about the Leading-Edge Advanced Packagings, that AAC also developed your own FOCoS technologies. Just wondering that, how is the current progress and the customer's engagement? It's not just focused on the offload opportunities on the on-substrates. Also, how does AAC's your own FOCoS progress?

Laura Chen: Yeah, thank you. Very looking forward that. My second question is that about the Leading-Edge Advanced Packagings, that AAC also developed your own FOCoS technologies. Just wondering that, how is the current progress and the customer's engagement? It's not just focused on the offload opportunities on the on-substrates. Also, how does AAC's your own FOCoS progress?

We should have a, uh, a gross profit margin for 8 years at the, uh, structural margin range.

Kenneth Hsiang: Laura, you're looking for an update on our internal, advanced packaging solutions.

Thank you, uh, very looking forward to that. Um, my second question is that, uh, about the, uh, Leading Age Advanced packages such, uh, AAC also developed your own Focus Technologies. Um, I'm just wondering that uh how is the current progress and the customers engagement? It's not just uh focus on the Outlook opportunities on the on sub. Traits are also uh how uh does the AC is uh your own Focus progress.

Operator: Yes.

Laura Chen: Yes.

Kenneth Hsiang: Which is FOCoS.

Operator: Right.

Laura Chen: Right.

Kenneth Hsiang: Okay.

Laura, you're looking for an update on our, uh, on our internal, uh, Advanced Packaging Solutions, uh, which is focused, right?

Joseph Tung: Well, obviously, in terms of the overall capacity, I think for CoWoS or CoWoS like, you know, 2.5D, you know, I think our foundry partner as well as ourselves is still scrambling to try to make the necessary investment for our capacity to catch up with the demand. Given the tightness, I think obviously there will be other customers that would like to have other alternatives or solutions for to meet their demand. That creates a very good business opportunity for us to try to sell our own solutions. On that, we are making the necessary investment at this point. We do have engagement with multiple customers. You know, these things take time.

Well, obviously, in terms of the overall capacity, I think for call was or call us like 2.5D, you know, I think,

A fun partner as well as ourselves is still scrambling to trick to try to, uh, make the necessary Investments for our capacity to catch up with the demand.

And, um, so, uh, given the tightness, I think, obviously there will be customers, other customers that would like to have other alternatives or solutions to meet their demand. And that creates a very good, uh, business opportunity for us, uh, to try to sell our own, uh, solutions.

And on that, we are making the necessary investment at this point, and we do have engagement with multiple customers.

Joseph Tung: I think the what we're expecting is that by later part of next year, we will start to see meaningful full process revenue coming in.

Operator: Thank you.

Laura Chen: Thank you.

Joseph Tung: Serving multiple customers, yeah.

And, you know, but, um, this thing takes time. I think they, uh, uh, what we're expecting is that by the later part of next year, we will start to see, uh, meaningful, uh, full process revenue coming in.

Operator: Okay. Does this add also included in your at least $1 billion revenue increase into next year?

Thank you. Multiple customers, you know?

Joseph Tung: Yes.

Okay, so does this add also include in your at least $1 billion revenue increase into next year?

Operator: Okay. Thank you. Very clear.

Laura Chen: Okay. Thank you. Very clear.

Uh, yes.

Okay, thank you. Very clear.

Kenneth Hsiang: Next question is from Sunny of UBS.

Operator: Next question is from Sunny of UBS.

Next question is from Sunny of UBS.

Kenneth Hsiang: Sunny, are you there?

Sunny, are you there?

Sunny Lin: Yeah. Could you hear me okay?

Kenneth Hsiang: Yes.

Yeah, could you hear me, okay?

Sunny Lin: Thank you very much. Congrats on the very good results and guidance. Glad to see LEAP business ramping up and gaining momentums going to 2026. Maybe a question on mainstream. Could you help us understand the recovery ahead? When you guide ICAT sales to growth, 3% to 5% sequentially, how's the growth by mainstream and LEAP? How should we think about the cycle for mainstream going to 2026? Do you see the current utilization rate being a good base for critical recovery going to 2026?

Yes.

Kenneth Hsiang: Sonny, you're looking for basically our more trailing edge capacity or trailing edge plus traditional advanced packaging capacity?

Thank you very much. Uh, so congrats on the very good result and guidance. Uh, glad to see, uh, look, this is ramping up and gaining momentum going into 2026. Uh, so maybe a question on mainstream, uh, could you help us understand, uh, the recovery ahead? Uh, and so when you guys at ACM sell to growth uh, 3% to 5% sequentially, uh, how's the growth uh, by mainstream and look? Uh, and how should we think about the cycle uh, for mainstream uh, going to 2026? Do you see uh, the current utilization rate being a good base uh, for political recovery going to 2026?

Sunny Lin: mostly on the mainstream. wire bonding, die bonding.

Sonny, you're looking for basically our, uh, our more trailing edge capacity or, uh, trailing edge plus traditional advanced packaging capacity.

Kenneth Hsiang: Okay. You're looking for commentary on more traditional packaging and then.

So mostly on the mainstream. Uh, so why bonding? Die bonding?

Sunny Lin: Yeah.

Kenneth Hsiang: for this year and the next year.

You're looking for commentary on more traditional packaging, and then, um,.

Sunny Lin: Yeah. How should we think about the cycle from here?

For this year.

Think about cycle from here.

Joseph Tung: Well, as I mentioned, the mainstream business is we're seeing better than expected performances. I think that's a result of the general market recovery. Also in some part of the in different sectors, we are also seeing ourselves gaining shares, particularly. If we look at different sectors, I think communication and communications and of course, PC or computing is recovering better than the other like automotive and industrial. Nonetheless, I think the recovery is very obvious at this point. Maybe in terms of automotive, it's kind of moving in a slower pace than the other three sectors.

Well, as I mentioned, the mainstream business, uh, we're seeing, uh, uh.

Uh, better than expected performance is, and, uh,

Uh, I think that's a result of the, uh, general market recovery.

and,

Uh, communications. Uh, and of course, uh, PC or, uh, computing is, uh, recovering better than the other.

Uh, like, um, automotive and industrial. Uh, but nonetheless, I think the recovery is very obvious at this point. Um, maybe in terms of automotive, it's kind of, uh,

Joseph Tung: On that, we actually posted very, very good growth in our automotive business. I think for ATM this year, we're gonna see over 20% growth in this part of the business. I think that's a largely the result of where we're continuing getting gaining market share in this space through our factory automation. You know, in general, I think in the beginning of the year, we were saying that we will have our leading edge giving us 10% growth and mid to high single digit growth coming from coming from the mainstream.

Uh, moving at a slower pace than the other three sectors.

But on that, we are, we actually posted a very, very um,

Good growth in our in our Automotive business. Uh I think for ATM this year, we're going to see uh over 20% uh growth and this part of the business. I think that's a largely result of where we continue in getting uh getting getting market share in this in this space uh throughout our Factory automation.

Joseph Tung: You know, obviously, as I mentioned in the beginning of the session, I told everybody that we're gonna exceed our revenue growth target to over 20%. That means the mainstream performance is much better than what we were expecting in the beginning of the year. We're not seeing anything negative at this point in terms of mainstream business. Without, you know, giving you any further guidance for next year, we do think that we are in a very healthy space at this point for both in the general market and we're still seeing very strong momentum in the leading edge as well.

Um, you know, in general, I think, uh, in the beginning of the year, we were saying that we, uh, uh, we will have our Leading Edge, uh, giving us 10% uh, growth and uh, mid to high single-digit growth coming from, uh, uh, coming from the, uh, mainstream. Uh, uh,

No, obviously, as I, as I mentioned in the beginning of the uh, session, I told everybody that, uh, uh, we're going to exceed our, uh, uh, Revenue growth Target, uh, to over 20%. So that means the, uh, mainstream, uh, performance is much better than what we were expecting, uh, in the beginning of the year. And we're, we're, we're not, we're not seeing anything negative at this point in terms of man, uh, mainstream business.

Sunny Lin: Maybe a very quick follow-up. For Q4, is the utilization rate for mainstream continuing to recover a bit?

So, uh, without, you know, uh, giving you, uh, any further guidance for next year, uh, but we do think that, uh, we are in a very healthy space at this point, uh, for both, um, in the general market. And, uh, we're still seeing very strong momentum in the, uh, in the leading edge as well.

Maybe a very quick follow-up. So for Q4, if the utilization rate for mastering continues to recover, but...

Joseph Tung: Yes. I think in the like what Ken just mentioned, I think our bumping and flip chip are pretty full. Wire bonding is improving, although it's not entirely full, but it is fairly improving.

Uh, yes, I think in the, uh, like, um,

Sunny Lin: Got it. My second question is on gross margin. From here, one, we'll see improving mainstream business. And then secondly, accelerating ramp, probably flip-chip, going to 2026, and then stabilizing FX. Should we assume for IC ATM, the gross margin recovery should accelerate in the coming few quarters?

Like what can you just mentioned? I think our bumping and uh future are pretty full uh where our bonding is improving. Although it's not entirely full but it's it is uh very improving.

Got it. My second question is on gross margin.

Kenneth Hsiang: Sunny, you're looking for an update in terms of forward-looking commentary regarding our gross margin structure.

So, from here, uh, 1, uh, was the improving measuring business, uh, and then, secondly, uh, accelerating ramp, uh, properly, uh, for lip, uh, going to 2026, and then stabilizing FX. Should we assume, uh, for ICM, uh, the growth margin recovery, uh, should accelerate uh, in the coming few quarters.

Sunny Lin: Yeah, especially on the pace of the improvement.

Uh, Sunny, you're looking for an update in terms of forward-looking commentary regarding our gross margin structure.

Yeah, especially on the pace of the improvement.

Joseph Tung: Well, we're not in a perfect world, right? There's still a lot of moving parts and uncertainties in front of us, which includes foreign exchange movements. Yes, I think the general trend is very certain because as we continue to expand rapidly in our leading edge, which is margin accretive, so that give us a very good pace for margin improvement going forward. In terms of the pace, I think there is still, I think right now it's still too early to give you a clear path of what kind of pace we're gonna have in terms of our margin expansion.

Uh, well we're we're not in a perfect world, like this. There are a lot of the moving parts and uncertainties in front of us. Uh, which includes includes a foreign exchange movements.

Uh, so yes, I think the, uh, general trend is, uh,

Sunny Lin: Got it. Also on LEAP, is there a margin difference between outsourcing and full process CoWoS, meaning if you start to ramp more full process from second half of next year, will that further boost your growth margin for IC ATM?

Very certain because uh as we continue to expand uh rapidly in our Leading Edge, which is margining the creative. So that gave us a very good pace for margin Improvement, going forward for, in terms of the pace. I think there's still uh, I think right now is still too early to, uh, to give you a clear path of. Uh, what kind of pace we're going to have, um, in terms of our margin expansion.

Got it. What's going on? Uh, look, um, is there a margin difference between outsourcing and full process co-op? Meaning if you start to ramp more full process, can that have a next year without further boost your growth margin for ICM?

Joseph Tung: I think, you know, in terms of full process, we're still at the early stage, so it's kind of difficult to make any meaningful comparison at this point. I think both needs to be at a really a more stable level for us to make the comparison.

Sunny Lin: Got it. Very helpful. Thank you very much.

To, to make the comparison.

Joseph Tung: In general, I think theoretically, you know, leading edge does give us margin accretion.

Got it very helpful.

Theoretically.

You know.

Regardless of our own performance or outsourcing, you know, uh Leading Edge gives us, uh, margin accretion.

Sunny Lin: Got it. Thank you.

Kenneth Hsiang: Our next question is from Felix Pan of KGI.

Operator: Our next question is from Felix Pan of KGI.

Our next question is from Felix Pan of KGI.

Felix Pan: Hi. Yeah, good afternoon. Can you guys hear me okay?

Kenneth Hsiang: Yes.

Yeah, good afternoon. Can you hear me? Okay?

Yes.

Felix Pan: Yes. Yeah, thank you for taking my question. My first question regarding to, I have seen your foundry partner incremental CP test also seeing demand. Just correct me if I was wrong, but I find it very difficult to quantify how big for the ten is. Maybe for you it's really hard to comment on the same, but maybe on the ten side or even the percentage of the bond, can you just give us some sense how can we quantify how big for the CP test demand? Just any color, we'll be grateful. That's my first question.

Kenneth Hsiang: Hi, Felix. I think I'll take this one. In terms of the overall TAM for something like that, I would say that that's not quantifiable, at least from our perspective. This is something that is probably known by our foundry partners. You may want to address the amount of work that they want to outsource, you know, directly to them. We don't quantify that at this point.

Yes uh yes, thank you for taking my question. So um my first question regarding to uh I have seen uh, your Foundry partner incremental, uh, CP test also seen demand, uh, just correct me if I I was wrong, but, uh, but I found it very difficult to quantify how big for the 10th is maybe for you. It's really hard to comment on the same. But maybe on the 10th side or uh, even the percentage of the bone. Uh, can you just give us some sense? How can we quantify how big for the, uh, the CP test, uh, demand? Uh, just any, any color will be grateful? That's not a first question.

Hi Felix. Um, I think I'll take this 1 uh in terms of the overall Tam for something like that. Uh, I would say that that's not quantifiable at least from our perspective. Um, this is something that is, uh, probably known by our Foundry partners. And you may, you may want to address, uh, the amount of, uh, work that they, they want to Outsource, uh, you know, directly to them. We, we don't quantify that at this point.

Felix Pan: Okay. Yeah. My second question is, I think during the TSMC latest earning call, I think CC emphasize customers of customers engagement. We do see the incremental engagement. From your perspective, do you see the similar pattern, the engagement from customers, customer as well? I think there's a lot of things happening this month, so I just want to, if any color you can share, if any business model change or you have seen incremental customers, customer engagement as it is since as well. Yeah.

Kenneth Hsiang: Felix, you're asking for how we look at our overall market and whether we actually look into our customers similar to foundry...

Okay. Uh, yeah. So, uh, my second question is I think during the tsmc, the latest, uh, earning call, I think CC, uh, emphasize, uh, customers of customers engagement. Uh, we we do see the incremental engagement, um, from your perspective, do you see the similar pattern, uh, the engagement from customers customer as well? Or, um, uh, I, I think this is a lot of, uh, thing happening, uh, uh, this this month. So I just, uh, want to uh, uh, if any color you can share is any business model change or uh you have seen uh, incremental customers customer engagement, uh, as Citizens as well. Yeah.

Felix Pan: Actually my question is, does any customer, your customer's customer jump your customer to have e-engagement with you guys, like, to secure some critical capacity or something like that?

Kenneth Hsiang: I don't know if we can talk about that. Joseph, you wanna take a stab?

Hey, look, you're asking for how we, uh, look at our overall market. And whether we're, we actually look into our customers customers, uh, similar to, to Founders, actually my, as I actually, my question is, uh, does any customer your your customers customer? Jump your customer to have the engagement with you guys like to secure uh some critical capacity or something like that.

Kenneth Hsiang: I don't know if we can talk about that. Joseph, you wanna take a stab?

um,

I, I don't know if we can talk about that.

Uh,

Joseph Tung: Yeah. I think we have a very, very close communication with both our direct customers as well as our foundry partners. Those dialogues are being, you know, conducted on a routine basis so that we can better prepare ourselves in terms of our capacity and also our technology roadmap. So in this regard, we do talk to our... I think our information source is not just coming from our customer, but our customer will definitely keep us informed of what they're expecting from their own customers and how the overall market will shape up.

Joseph. You want to take a step? Yeah. I think we, uh, we, uh, we have a very, very, um, uh, close, uh,

Communication with, uh, both our direct customers, as well as our phony partners. Uh, those dialogues are being, uh, you know,

conducted on a routine basis so that we can better prepare ourselves in terms of our capacity and also our technology roadmap.

Um, so in, in this regard, we we do talk to our in. I think our in information source is not just coming from, uh, our customer. But our customer, our customer will definitely, uh,

Joseph Tung: You know, it's a constant dialogue among the industry players, to make sure that the demand is sufficiently being supported by the by supply. That, that's an ongoing process that has been going on for maybe forever.

Uh, keep us informed of what they're expecting from their own customers, and, um, how the overall Market was shaped up. Um, so, you know, it's, it's a constant dialogue among the, uh, industry players, uh, to make sure that the, uh, um, the demand is, uh, is sufficiently being supported by the, uh, by the supply.

That's an ongoing, um, process.

that has been uh, uh, going down for

Kenneth Hsiang: All right. Okay. Thank you.

Felix Pan: All right. Okay. Thank you.

maybe forever. All right. Okay. Thank you.

Joseph Tung: All right. Okay. Thanks. Thank you.

Kenneth Hsiang: Thank you.

All right, okay. Thanks. Thank you.

Thank you.

Kenneth Hsiang: If you have any question, please raise your hand. Next question is from Gokul Hariharan of J.P. Morgan.

Operator: If you have any question, please raise your hand. Next question is from Gokul Hariharan of J.P. Morgan.

If you have any questions, please raise your hand.

Next question is from Goku Haru haran of JP Morgan.

Gokul Hariharan: Thanks for taking my follow-up questions. First one, could you help us understand what is the progress on the full stack FOCoS or CoWoS like kind of processes going into next year? When do we expect this to start becoming more meaningful contributor to revenues to the LEAP total revenues? Are the applications still similar in terms of like AI accelerator or are the applications becoming more diverse in terms of networking or server CPU and other kind of stuff as well?

Kenneth Hsiang: Okay. You're looking for an update on our more on our full process type services. Is that correct?

Questions, uh, first 1, um, could you um help us understand. Um, what is the progress on the full stack? Uh Focus or cohort like kind of processes? Um, going into next year. Uh when do we expect this to start becoming more meaningful? Contributor to revenues to the leap. Uh uh total uh revenues uh and are the applications still similar in terms of like AI accelerator or are the applications becoming more diverse in terms of networking or server CPU and other other kind of stuff as well.

Okay, you're looking for an update on our, um, more on our full process, uh, type, uh, services. Is that correct?

Joseph Tung: I talked about this earlier. I think we are continuing our investment in full process, and we are currently engaging with multiple customers to plan for the capacity, and we expect that come later part of next year, we should start seeing some meaningful revenue coming from full process rather than just only from outsourced part of the business. In terms of the application, I think, you know, there will be AI accelerators, there will be other adoptions in different chips requiring such capability. At this point, I think it's a little bit too early to say the exact revenue scale of the revenue or the composition of that, of such revenue.

Uh, I I, uh, I, I talked about this earlier, I think, uh, we are continuing our investment in, uh, full process and, uh, uh, we are currently engaging with multiple customers.

Uh, to plan for the capacity.

And, uh, uh, we expect that uh, uh, come later. Part of next year. We, we should start seeing some meaningful Revenue coming from Full process, uh, rather than just only from uh, outsourced, uh, part of the business. Um,

In terms of the application, I think, you know, there will be uh, um,

AI accelerators. There will be other uh,

Adoptions in different ships. Uh, requiring, uh, such uh capability.

but at this point I think it's it's a little bit too early to say, um,

the the exact Revenue, uh,

Joseph Tung: We just have to continue to work very closely with our customers, multiple customers, to better understand what their demands will be and we'll prep ourself for the necessary capacity for them.

Scale of the revenue or the composition of that of such Revenue.

Uh, we just have to continue to work very closely uh with our customers, multiple customers uh to better understand what their demands will will will be and we will will prep.

Prep prep ourselves for the necessary capacity for them.

Gokul Hariharan: Got it. Thanks, Joseph. Maybe a slightly related question is on the CapEx. I think we are probably finishing this year about $3 billion, well above $3 billion in terms of fishery CapEx. How do we think about this investment cycle? Are we still going to be in this, like, increased CapEx, likely to continue to increase CapEx over the next couple of years given the demand outlook that you're seeing from your customers and your customers' customers?

Got it. Uh, thanks, Joseph. Maybe a slightly related question is on the capex? Um.

Um, I think we are probably finishing this year about 3 billion well, about 3 billion dollars in terms of patient recap X. Um,

Kenneth Hsiang: Okay. You're looking for an update on our overall CapEx view?

Um, how do we think about this investment cycle? Um, are we still going to be in this? Like, increased CapEx likely to continue to grow over the next couple of years, given the demand outlook that you are seeing from your customers to your customers' customers?

Gokul Hariharan: Yeah.

Kenneth Hsiang: also in the frame of.

Gokul Hariharan: Yeah.

Kenneth Hsiang: Yeah, in the frame of the Leading-Edge Advanced Packaging, how it works.

Okay, you're looking for an update on our overall capex view, uh and uh also in in the frame.

Gokul Hariharan: That's right. Yeah.

Yeah, in the frame of the leading edge of advanced packaging, how it works.

That's right. Yeah.

Joseph Tung: Like I said, we stay very close with our foundry partner. Our foundry partner being the dominant player, you know, they cover all the who's and who's in the whoever has any demand, that they will be the one to supply. They really have a very, very close connection to with their customer and their customers' customers.

Um, like I said, uh, we

we, uh, we we stay very close with our Foundry partner and uh,

And they are a fun part of being the dominant player, you know, they cover.

Of the host and who's in the, uh, whoever has any demand, uh, that they will be the one to supply. Um, so, um, they really have a very, very um,

Joseph Tung: Since we have a very close communication with them, so, you know, whatever information that they're gathering, we do have the benefit of sharing some of that information to better prepare ourselves for capacity expansion. You know, as I said earlier, again, we're not gonna be shy on making the necessary investment for, particularly for the leading edge, so as to secure and also to expand our dominance in this space. As such, we believe, at least for next year, we will continue to see pretty heavy investments in our capacity towards technology in this leading edge.

Close connection to, uh, with their customer and their customers' customers.

And it says we have a very close, uh, communication with them. So, you know, whatever information that.

Uh, they're getting, we, uh, we do have the benefit of, uh, sharing some of that, uh, information to, uh, uh, better prepare ourselves for our capacity expansion.

And, uh, you know, as I said earlier, again, uh, we're not going to be shy about making the necessary investment, uh, particularly for the Leading Edge. Uh,

So, as to secure and also to expand our dominance in this, uh, in this, uh...

In this space.

and uh,

as such, uh, we believe, um, at least for next year, we will continue to see, uh, pretty heavy investments in our capacity, as well as technology.

[Analyst]: Is it fair to say next year machinery CapEx is likely to be still higher than this year?

Gokul Hariharan: Is it fair to say next year machinery CapEx is likely to be still higher than this year?

In the Leading Edge.

Is it fair to say next year? Machinery capex is likely to be still higher than this year. Um,

Joseph Tung: We will give you a better guidance once we complete our budget cycle, which is starting now. We will reserve this question to next quarter.

uh,

We will give you a better guidance. Uh, once we, uh complete our uh, budget cycle which is starting now. And uh,

Uh, we will Reserve this question, uh, to, uh, next quarter.

[Analyst]: Got it. Very clear. Thank you very much and great performance.

Gokul Hariharan: Got it. Very clear. Thank you very much and great performance.

Joseph Tung: Thank you.

Got it very clear. Thank you very much, and great performance.

Kenneth Hsiang: Next question is from Charlie Chan of Morgan Stanley.

Operator: Next question is from Charlie Chan of Morgan Stanley.

Next question is from.

Charlie Chen of Morgan, Stanley.

Charlie Chan: Thanks for taking my second questions. Yeah, that question is about T glass resulting the shortage of substrates. Yeah, I'm not sure if there would be kind of a risk factor for ASE group to grow your revenue next year, because we start to hear some concerns on hard time to get the substrate source. How would ASE to help a customer to get a more sufficient supply?

Uh, thanks for taking my uh second question. Uh,

Uh, yeah, that question is about, uh, T glass resulting in the shortage of substrates. Yeah, I'm not sure if that would be, uh, kind of, uh, a refactor, uh, for our group to grow your revenue next year because we start to hear some customers and how time to get the.

Kenneth Hsiang: Your, Charlie, your second or your third question is overall T glass supply.

Uh substrate uh source and how would the ASC to help our customers to get a more sufficient Supply?

Your, uh, Charlie, your, your, your...

Charlie Chan: Yeah.

Kenneth Hsiang: Whether it would impact our overall supply chain going forward.

Charlie Chan: Yeah. Yeah. How would ASE manage or help your customers on this period of shortage?

Second or your third question is regarding the overall tea, glass supply um and how it impacts our our over, whether it would impact, our overall, supply chain going forward. Yeah, yeah. And how would the ASC manager. Help your your customers on, on this, uh, uh, per period of, uh, shortage

Joseph Tung: Like I said, there's a lot of uncertainties and, you know, that's ahead of us. Like running any other business, there's gonna be ups and downs, there's gonna be changes. Right now, I think whatever we're seeing today, maybe some of the materials or, don't ask me what T glass is, but, you know, some of the materials may have a longer lead time. At this time, we haven't seen any real disruptions on our service to our customers at this point.

um,

Like I said, there are a lot of concerns and, you know,

That's, uh, ahead of us. So, it's like running any other business; there's going to be, uh, ups and downs, and there's going to be changes. Uh, but right now, I think whatever we're seeing today.

Maybe some of the materials, or don't ask me what T-class is, but you know, some of the materials may have a longer lead time. But at this time, we haven't seen any real disruptions on our.

Charlie Chan: Mm-hmm.

Joseph Tung: You know, I think if anything else, being the dominant player, if there's any problem, we're the ones that our customers come to. We certainly have the best leverage in trying to secure the needed materials or the components that will be needed for their, for serving them.

On our service to our customers at this point.

Um, you know, I think if anything else being the dominant player. Um,

If if there's any problem, we're the ones that our customers that come to and, uh, we certainly have the best leverage in, uh, trying to secure, um, the needed materials or where the components, uh, that will be needed for for their, for serving them.

Charlie Chan: Gotcha. Thank you. I would assume, for those materials or substrate, if there will be any cost or price increase, ASE would fully pass through to customers. Is that right? You would charge some markup, because those materials are getting harder to get?

Gotcha. Thank you. Uh, so I I would assume, uh, for those, uh, materials or subject, if they would be any cost or, or price increase, uh, ASC with fully passed through to customers. Is that, right? Or you would, uh, charge, uh, some rock up uh, because, uh, those materials are

Joseph Tung: We will find the most suitable pricing per situation.

Getting harder to get.

we will find the most suitable pricing, uh,

Charlie Chan: Okay. Okay. Thanks for that. I much appreciate for your answers.

situation.

Okay, okay.

Joseph Tung: Thank you.

Charlie Chan: Thank you.

Uh, thanks for that much. You appreciate for your answers. Thank you.

Kenneth Hsiang: Next question is from Bruce Lu of Goldman Sachs.

Operator: Next question is from Bruce Lu of Goldman Sachs.

Bruce Lu: Hi. Thank you for taking my follow-up. I think I asked this question last quarter, but I wanna ask it again. What is the CapEx to revenue nowadays? Is there any changes in terms of, like, how long does it take to see the revenue after you invest your CapEx? The reason I ask this is, you invest for, like, TWD 1.8 billion CapEx last year and TWD 3 point something billion this year, right? You generate additional TWD 1 billion revenue this year, but you also can only generate additional TWD 1 billion next year. Theoretically, you should be able to generate a bit more than TWD 1 billion next year, right? Is there any changes in terms of CapEx to revenue or time to generate revenue?

Next question is from Bruce Liu of Goldman Sachs.

Hi, thank you for taking my follow-up. I I think I asked this question last for the long as they ask it again. What is the capex to revenue nowadays? Or is it any, is there, any changes in terms of, like

How long does it take to see the revenue after you invest your capex? The reason I ask this is you invest for 1.8 billion capex last year.

Kenneth Hsiang: Bruce, you're looking for, the magic solution in terms of, CapEx to revenue, right?

And 3 point something be in this year, right? But you generate additional 1 billion Revenue this year, but you also can only generate additional 1 billion next year. So, regularly should be should be able to generate a bit more than 1 billion next year, right? Is there any changes in terms of capex to revenue or trying to generate Revenue?

Which you're looking for.

Bruce Lu: Which Joseph used to give us.

Um, the the the magic solution in terms of uh Revenue capex to revenue, right? Which Joseph used to give us.

Joseph Tung: Well, first of all, the $3 million-plus CapEx is not entirely for the leading edge. I think, for this year, 55% of that is for leading edge. Bear in mind that, you know, that's just a number. You know, we don't make capacity expansion overnight. Equipment needs to be delivered in, you know. You know, you don't have this equipment all delivered at once, right? Things moves progressively. Just simple math. If it's $1.8 billion worth of CapEx, that means, now on average $900 million worth of new capacity being put in. This year, if it's a $1 billion-dollar increase, you know, that ratio seems to be still on track.

um,

well, first of all the uh, the 3,

Here at 55%, that is for Leading Edge.

And bear in mind that, you know, uh, that's just a number, you know, we don't we don't make uh, capacity expansion overnight. Uh, equipment needs to be delivered in, you know,

um,

you know, their their their

You, you don't have all this equipment delivered at once, right? Things move.

Progressively. So you

just simple math. If its 1.8 billion dollar worth of a capex that means, um, now on average 900 million, uh, uh, worth of new capacity being put in,

so,

Joseph Tung: Of course, you know, the other half of the investment will start to generate revenue, but there is always a time gap between when the machineries or the CapEx is being spent and when the revenue is being generated. I'm not saying that we can only generate a billion dollar worth of new revenue coming in. I'm just saying that, you know, at this point, we are very, very confident that we can have at least a billion dollar worth of leading edge revenue, new revenue coming in next year.

Uh, so this year, if it's a billion-dollar increase, you know, that ratio seems to be still on track.

Um,

Of course, you know, the other half of the, um, the, uh, uh, the, uh,

investment, uh, will start to generate Revenue but there's always a uh, a Time gap between uh,

When the Machinery is, or the cap has been spent and when the, uh, revenue is being generated.

Um, I'm not, I'm not saying that I'm not giving you. I'm not saying I'm not saying that we, uh, we can only generate a billion dollars' worth of, uh,

new Revenue coming in, um,

Joseph Tung: You know, for the majority of the leading edge at this point, we're still in the earlier stage at this point, and we're still gathering data to come up with a more meaningful investment intensity on this kind of investment. You know, from the limited data that we've gathered so far, I think the traditional dollar of investment creating a dollar of annual revenue seems to still be the case for the main business that we are entering now, which is OSAT and test.

I'm just saying that, you know, at at this point we have a very, very confident that uh, we can uh, we can have uh at least a billion dollar worth of uh Leading Edge Revenue, new Revenue coming in next year.

uh, you know, for the, uh,

For the majority of the Leading Edge, at this point. Uh,

We're still in the uh, earlier stage at this point and we're still Gathering data uh to come up with the uh uh more meaningful, uh uh uh investment intensity on on these uh kind of investment.

um, but

you know, from the from the limited uh data that we've gathered so far, I think the uh traditional uh a dollar of investment creating a dollar of annual revenue, seems still be the case for the main business that we are entering now, which is OS and uh, and test

[Analyst]: One to one? That's the magic number.

Bruce Lu: One to one? That's the magic number.

So 1 to 1.

Joseph Tung: At this point.

[Analyst]: Still works.

Bruce Lu: Still works.

Joseph Tung: You know, still applies. Like I said, we're still in the process of gathering more data. Bear in mind that our capacity is not in full RAM at this point.

That's the matching number. It still works.

You'll still applies.

Uh, but yeah, like I said, we are still in the uh.

in the, in the

[Analyst]: Yeah.

Bruce Lu: Yeah.

Joseph Tung: You know...

Joseph Tung: You know...Going to take a little bit more time.

[Analyst]: Just, just-

Joseph Tung: Going to take a little bit more time.

[Analyst]: My brain is simple, right? 45% of your three-point-something billion dollar CapEx is $2 billion, right?

Bruce Lu: My brain is simple, right? 45% of your three-point-something billion dollar CapEx is $2 billion, right?

In the process of getting more data. Uh, and and bear in mind that the, uh, our capacity is not in full Ram at this point. Um, so, uh, you know, we take a little bit more time. My my my friend is simple, right? 45% of your 3, something billion dollar capex.

Is 2 billion US dollars.

Joseph Tung: Mm-hmm.

Right.

[Analyst]: I mean, you just mentioned that $3-point-something billion, 55% is for mature technology. Let's say 45%. Let's say 50% of your $3-point-something billion CapEx this year, that's close to $2 billion for next year in terms of incremental new revenue from AI. That's how the math works.

Bruce Lu: I mean, you just mentioned that $3-point-something billion, 55% is for mature technology. Let's say 45%. Let's say 50% of your $3-point-something billion CapEx this year, that's close to $2 billion for next year in terms of incremental new revenue from AI. That's how the math works.

I mean you just mentioned that 3 point. Something billion dollar 55% is for mature technology. Let's say 45% let's say 50% of your 3 point, something billion campus this year that's close to 2 billion for next year. In terms of incremental new revenue from AI

uh,

That's how the math works.

Joseph Tung: No, that's not how the math works. We don't live on math. We live in the real world.

No, that's not how the math works.

[Analyst]: Well, I only know math. Okay. Thank you.

Bruce Lu: Well, I only know math. Okay. Thank you.

We don't live on math; we live in the real world. Well, I, I only know math.

Joseph Tung: Well, if you're calling me conservative, well, call me conservative.

[Analyst]: Yeah, okay.

Bruce Lu: Yeah, okay.

Joseph Tung: All right.

[Analyst]: That's all I need.

Bruce Lu: That's all I need.

Okay, thank you. Well, if you're calling me conservative, or call me conservative, okay.

That's all I need.

Kenneth Hsiang: There's no question on the floor.

Operator: There's no question on the floor.

There's no question on the floor.

Kenneth Hsiang: Okay. I guess time has pretty much run out. I would like to thank everyone for participating in the call. Look forward to seeing you all either during the quarter or at the next earnings release.

Okay, uh, I guess, um, time has pretty much run out. I would like to thank everyone for participating in the call. I look forward to seeing you all.

Joseph Tung: Okay. We are having a good run, and we'll continue to have a good run, going into next year. Well, we're confident that we will continue to deliver good performances and good numbers for you. We'll see you next quarter. Thank you very much.

During the quarter or at the next earnings release.

Continue to have a good run, uh, going into next year.

and uh,

Well, confident that we will continue to deliver good performances and good numbers for you.

Um, we'll see you next quarter. Thank you very much.

Kenneth Hsiang: Goodbye.

Operator: Goodbye.

Q3 2025 ASE Technology Holding Co Ltd Earnings Call

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