ASE Technology Holding Co., Ltd. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• H1 Recap: Unconsolidated revenue grew 9% year-on-year in the first half of 2025, with ATM revenues up 18% year-on-year. Leading-edge advanced packaging and overall testing outpaced growth. Machinery CapEx was USD 1.9 billion, and factory facility automation was $0.9 billion in the first half of 2025, driven by advanced packaging and testing.
• Outlook: For the ATM business, momentum is expected to carry into Q3, with Q4 likely to see quarter-to-quarter growth compared to Q3. Leading-edge advanced packaging and testing revenue targets a $1 billion increase. The general segment is expected to grow mid- to high single digit year-on-year in 2025, with revenue uptrend continuing into 2026 and beyond driven by AI and general recovery.
• Market Dynamics: AI and data centers drive demand. Key technology focuses include integration, power management, silicon photonics, and cost. ASE's position is characterized by scale, speed, and synergy.
• Financials: Second quarter consolidated net revenues were NT$150.8 billion, up 2% sequentially and 7% year-over-year. Gross profit was NT$25.7 billion with a gross margin of 17%. Net income was NT$7.5 billion, down sequentially and year-over-year, impacted by foreign exchange fluctuations.

Segment Performance

• ATM Business: Second quarter 2025 revenues were NT$92.6 billion (approximately $3.0 billion USD), up 7% sequentially and 19% year-over-year. Gross profit was NT$20.2 billion, with a gross margin of 21.9%. Leading-edge advanced packaging and testing revenues accounted for over 10% of ATM revenues in the first half of 2025, compared to 6% for the full year of 2024. The testing business grew 31% year-over-year in the first half.
• EMS Business: Second quarter 2025 revenues were NT$58.8 billion, declining 6% sequentially and 7% year-over-year. Sequentially, the EMS business' gross margin improved 0.5 percentage points to 9.4%, and operating margin was 2.6%, flat sequentially but down 0.5 percentage points year-over-year.

Guidance

• Third Quarter 2025: Holdco consolidated revenue is expected to grow 12%-14% quarter-over-quarter in USD and 6%-8% quarter-over-quarter in NT$. Gross margin is projected to decrease 1-1.2 percentage points. ATM revenue is expected to grow 9%-11% quarter-over-quarter in USD and 3%-5% quarter-over-quarter in NT$. EMS revenue is expected to grow 18%-20% quarter-over-quarter in USD and 12%-14% quarter-over-quarter in NT$, with EMS operating margin increasing 0.3-0.5 percentage points. NT dollar appreciation impacted ATM gross margin, but the company is confident of returning to structural margins in 2026 through efficiency improvements and leading-edge expansion.

Risks

• Foreign Exchange: Fluctuations in the NT dollar to USD exchange rate negatively impact margins. For example, a 1 percentage point appreciation of the NT dollar relative to the USD can negatively impact gross and operating margins.
• Execution Issues: Challenges include regulatory control, product mix, customer order changes, machine delivery, and internal execution issues.
• Capacity Constraints: Leading-edge capacities in Taiwan are full, requiring optimization of resources between Taiwan and overseas.

Question and Answer

• **Q: How to reconcile end market weakness with fab utilization?

A: Forecast is based on customers' committed orders, which cover AI, wireless, industrial, and automotive, not just end market weakness.

• **Q: Why not revise advanced packaging revenue guidance?

A: Leading-edge capacities in Taiwan are full; incremental capacities are new, but capacity is constrained.

• **Q: Outlook for margin recovery?

A: The company is confident of returning to structural margins in 2026 through efficiency improvements, scale, and leading-edge expansion.

• **Q: Leading-edge packaging capacity and CapEx?

A: Capacity is full, and the company is investing in new capacities, but execution and machine delivery are challenges.

• **Q: Progress of testing business?

A: Final test revenue is expected in Q4 2025, with expansion into leading-edge test, which is margin accretive.