ASE has raised its capital expenditure for the second time this year, and the revenue from advanced packaging will double again next year

Typhoon Kemi hit Taiwan, and most counties and cities took another day off yesterday. ASE still held an online briefing during the typhoon, and Wu Tianyu released good news.

Wu Tianyu did not disclose the exact amount of capital expenditure from Sun Moon Investment this year, only stating that this year's capital expenditure is mainly used for advanced packaging and testing, with 53% for packaging, 38% for testing, 1% for materials, and 8% for EMS.

The legal representative pointed out that ASE Investment Holdings had a capital expenditure of about 1.5 billion US dollars (about NT $49.2 billion) last year, and was originally expected to have a capital expenditure of about 2.1 billion US dollars (about NT $68.8 billion) this year, an annual increase of 40-50%. In April, it was raised to an annual increase of more than 50%. After this second increase, the annual capital expenditure is expected to reach 3 billion US dollars (about NT $98.4 billion), doubling from last year, highlighting that customer demand far exceeds expectations.

Dong Hongsi, Chief Financial Officer of ASE Investment Control, added that the second half of the year is the traditional peak season, but the market recovery speed is lower than the company's expectations, and the gross profit margin will be slightly suppressed. It is estimated that it will gradually recover to the target range in the future. However, in terms of advanced packaging business, we have felt strong demand growth and actively expanded production to catch up with customer demand.

Looking ahead to this quarter's operations, Wu Tianyu pointed out that based on current business evaluations and exchange rate assumptions, if priced in New Taiwan Dollars, the revenue of the testing business will increase by a single digit percentage and the gross profit margin will be between 23% and 23.5%; In terms of Electronic Manufacturing Services (EMS), if priced in New Taiwan Dollars, revenue will increase by 15% to 20% quarterly, with a slightly higher profit margin than the 3.5% in the fourth quarter of last year.

Market expectations indicate that ASE Investment Holdings' consolidated revenue for this quarter is approximately RMB 158 billion to RMB 160 billion, with a quarterly increase of 12% to 14%, competing for the second highest in the same period.

Wu Tianyu emphasized that the advanced packaging business is showing a strong growth trend and is actively expanding production to catch up with customer demand. In order to meet advanced packaging needs such as AI and high-performance computing (HPC), the group has more direct interaction with wafer fabs and customers to build sufficient production capacity, including packaging and testing.

Wu Tianyu pointed out that the group set a target of increasing advanced packaging revenue by 250 million US dollars at the beginning of the year, which currently seems to exceed the standard, and the growth trend will continue until next year. According to legal calculations, ASE Investment Holdings' advanced packaging is expected to account for over 5% of the overall packaging and testing revenue this year, which is better than the original estimate of 4% to 5%. The proportion will continue to rise next year, and the overall advanced packaging revenue is moving towards the goal of doubling again.

Wu Tianyu revealed that ASE Investment and Control will continue to build advanced testing capacity, including Burn in (aging testing), and will also benefit the capacity of customer turn key service solutions. It is estimated that the benefits will begin to emerge next year.

Wu Tianyu analyzed that the development of CoWoS advanced packaging technology takes several years, and whether it is oS or CoW, the group has been jointly developing with OEM partners for many years.