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OSAT ASE upbeat about demand for automotive, HPC and network ICs

Taiwan-based OSAT ASE Technology expects demand for automotive, HPC and network ICs to stay robust and buoy further its sales performance in the second quarter and the second half of 2022.

ASE expects its revenue and profits to grow through the fourth quarter of 2022. The core IC assembly, testing and material (ATM) business is forecast to generate a 20% revenue surge this year, the company said.

Looking into the second quarter, ASE expects sales of its core ATM business in US dollar terms to slightly outperform the levels in the fourth quarter of 2021 when gross margin also grew slightly on quarter.

As for its EMS services, sales (in US dollar) in the second quarter will be about the prior quarter’s levels, but there wil be a slight drop in operating margin, the company indicated.

ASE’s packaging fab capacity utilization rates will stay high in the second quarter and be on par with the first quarter’s levels, which came to 80-85%, and its testing fab capacity utilization rates are expected to exceed the about 80% reached in the prior quarter.

Despite logistics restrictions, rising raw materials costs and production bottlenecks experienced by the customers of its EMS business, ASE expects its overall operations to stay robust in the second quarter, according to company CFO Joseph Tung.

Handset and consumer electronic demand is slowing down, but the overall end-market demand is “healthy” driven by demand for automotive, HPC and network device applications, Tung noted. In particular, sales generated from the automotive sector will log a substantial increase and drive ASE’s overall revenue growth in 2022, Tung said.

Tung said orders for automotive are expected to generate 7% of ASE’s total IC ATM revenue in 2022. The proportion came to about 6% in the first quarter. Its EMS division will also enjoy robust growth in sales generated from the automotive segment this year.

Strong demand for HPC and network chips will also boost ASE’s advanced flip-chip (FC) and system-in-package (SiP) packaging sales in 2022, Tung said.

In addition, ASE estimated its capex this year at US$2 billion. The company expects to allocate more of its 2022 capex for advanced testing, which will therefore drag down its spending on packaging to 51% as a proportion of the total capex.

ASE reported net profits of NT$12.91 billion on consolidated revenue of NT$144.39 billion for the first quarter of 2022. EPS for the quarter came to NT$3.01. Gross margin and operating margin arrived at 19.7% and 11.2%, up 1.4pp and 2.1pp, respectively, on year.