ASE Technology Holding Co., Ltd. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Results: Q1 consolidated net revenues declined 9% sequentially and increased 12% year-over-year. Fully diluted EPS was NT$1.64 and basic EPS was NT$1.75. Gross margin was 16.8%, improving 0.4 percentage points sequentially and 1.1 percentage points year-over-year. Operating expenses were NT$15.2 billion, increasing $1.9 billion annually.
• Strategic Focus: Emphasize long-term focus on technological trends like package-based connective technologies, continuous process improvement, and ensuring profitability of product offerings. LEAP services continued strong growth, test business had momentum, and EMS business customers adjusted order flow patterns.
• Capital Expenditures: Machinery and equipment capital expenditures for Q1 totaled US$892 million, with spending on packaging, testing, EMS, and interconnect material operations, aligning with servicing generational evolution of packaging in electronic devices.

Segment Performance

• ATM Business: Q1 2025 revenues were NT$86.7 billion, down 2% sequentially and up 17% year-over-year. LEAP services accounted for 10% of ATM revenues in Q1 compared to 6% for the full year 2024. Gross profit was NT$19.6 billion, with a gross margin of 22.6%, up 1.6 percentage points year-over-year. The test business grew 2% in the seasonally down quarter, with overall utilization slightly above 65%, and test utilization was full for advanced platforms.
• EMS Business: Q1 EMS revenues were NT$62.3 billion, declining 17% sequentially but up 5% year-over-year. Sequentially, the EMS business' gross margin improved 0.6 percentage points to 8.9%, and operating margin was 2.6%, flat year-over-year.

Guidance

• ATM Business: In NT dollar terms, Q2 2025 ATM revenues are expected to grow 9% to 11% quarter-over-quarter. ATM second quarter gross margin should increase by 140 to 180 basis points quarter-over-quarter.
• EMS Business: In NT dollar terms, Q2 2025 EMS revenues are expected to decline 10% year-over-year. EMS second quarter 2025 operating margin should decline by 100 basis points year-over-year.

Risks

• Tariff Impact: Uncertainty around trade tariffs affecting supply chain and inventory build, as it's difficult to quantify customer inventory build vs. product sell-through.
• Macro Environment: Volatility in the macro environment complicates long-term planning, though core technological trends like package-based connective technologies persist.

Question and Answer

Q: On test and AI testing market share, plans for final test of AI chips?

A: Focus on wafer sort progress, moving to final test, aligning capacity for the second half, and test is margin-accretive.

Q: U.S. investments given foundry's advanced packaging fabs?

A: Evaluating opportunities to support customer in the U.S., no details on size/timing, with economic viability being key.

Q: EMS Q2 revenue, sectors?

A: Difficult to specify by sector, second quarter typically slow for EMS, dip shallower due to pull-ins but still a down quarter.

Q: Tariff pull-in and second half outlook?

A: First half pull-in, second half hard to predict, no major behavioral changes seen from customers yet.

Q: Panel level packaging timeline?

A: Pilot line for customer qualification in later 2025/26, adoption dependent on customers, investing in alignment with foundry's progress.