ASE Technology Holding Co., Ltd. Q4 FY2025 earnings call

Megatrends and Future Opportunities

• AI server cycle continues led by hyperscalers and data centers, with edge applications like robotics and drones showing activity. Volume expected to grow in next 2 years.
• Mainstream business (IoT, automotive, general sector) expected to recover better in 2026 than 2025.
• ASE and Taiwan cluster have competitive advantages due to manufacturing leadership, cross-collaboration, and first-mover advantage in supply constraints.

2025 Recap

• Consolidated revenue grew 12% at holdco level, ATM revenue up 23% led by LEAP and testing. EMS revenue declined 5%.
• ATM factories in Taiwan ran near full capacity, non-Taiwan utilization improved. Overall ATM utilization ~80%.

2026 Outlook

• Expect ATM revenue to outperform logic semiconductor market. Leading-edge revenue to at least double. CapEx to support multiyear growth with investments in R&D, human capital, etc.

For 2025, consolidated net revenues improved 8% compared to 2024. The ATM business improved by 20%, with LEAP services reaching $1.6 billion in 2025, accounting for 13% of ATM revenue. The testing business grew 36% in 2025. The EMS business saw revenues decline by 5% in 2025, with gross profit declining 3% and gross margin at 9.1%. In the fourth quarter of 2025, ATM factory loading was slightly better than anticipated, with overall ATM utilization rate around 80%, and EMS business slowed due to seasonality.

2026 First Quarter

• Consolidated revenue to decline 5%-7% QoQ. ATM revenue to decline low to mid-single-digit QoQ, gross margin 24%-25%. EMS revenue and margin similar to Q1 2025.

Full Year 2026

• Leading-edge revenue to at least double vs 2025. Favorable pricing environment for ATM profitability. Gross margins to stay in structural range, improving each quarter. Aggressive CapEx spending, plan to add $1.5B in machinery on top of 2025's $3.4B, with ~2/3 for leading-edge services.

Q: On LEAP business, please provide breakdown by OS, outsourcing, full process and test.

A: Predominantly still in OS and wafer sort on test side. Full process to start meaningful revenue contribution later in the year, expected to triple full process revenue this year to reach about 10% of overall LEAP service revenue.

Q: Regarding mainstream business outlook and LEAP guidance.

A: Mainstream business (IoT, automotive, industrial) loading decent, pricing environment friendly. LEAP revenue revised to $3.2B as better visibility on factory space, demand far exceeds capacity but managed carefully.

Q: On USI's acquisition of EugenLight for CPO component, impact on ASE group.

A: Optical business is important for industry. ASE working on silicon photonics and CPO, USI's acquisition is part of early deployment in optical road map, no conflict with ASE's ATM business, and collaboration/synergy expected.

Q: On EMS strategy going forward.

A: EMS business adjusting to market shifts, focusing on AI sector, optical, power supply, etc., with design in pipeline for revenue contribution in AI space in next few years.