ASE Technology Q3 2025 Earnings Report

ASE Technology EPS Results

• Actual EPS: $0.16
• Consensus EPS: $0.13
• Beat/Miss: Beat by +$0.03
• One Year Ago EPS: N/A

ASE Technology Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $162.64 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

ASE Technology Announcement Details

• Quarter: Q3 2025
• Date: 10/30/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, October 30, 2025
• Conference Call Time: 3:00AM ET

ASE Technology (NYSE:ASX) Holding Co., Ltd. (NYSE: ASX), commonly referred to as ASE, is a Taiwan-based provider of semiconductor assembly and testing services. The company focuses on back-end semiconductor manufacturing and related services that prepare integrated circuits and other semiconductor devices for final use. Its core activities include advanced IC packaging, final testing, wafer probing, and related engineering and supply-chain support for semiconductor customers.

ASE offers a range of products and technical capabilities designed to meet increasingly complex packaging and system-in-package requirements. Services include a variety of packaging platforms, surface-mount and substrate technologies, reliability and qualification testing, and turnkey solutions that integrate design-for-manufacturing, assembly and test. The company serves customers across multiple end markets including consumer electronics, communications, computing and industrial applications, and supports collaboration on process development and supply-chain integration.

Founded in the 1980s and headquartered in Taiwan, ASE operates manufacturing and service facilities across Asia, Europe and the Americas to support a global customer base. The company is publicly traded on the New York Stock Exchange under the symbol ASX and is governed by a Taiwan-based board and executive management team. ASE positions itself as a strategic partner to semiconductor companies by combining technical packaging expertise with global manufacturing footprint and customer support capabilities.

ASE Technology Q3 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: ASE reported strong Q3 results — consolidated revenue of TWD 168.6 billion (+12% q/q, +5% y/y), record ATM revenue of TWD 100.3 billion, and diluted EPS of TWD 2.41, driving sequential margin improvement.
• Negative Sentiment: Management said NTD appreciation materially pressured margins (NTD strengthened ~4.6% q/q), estimating FX reduced margins by ~1.4ppt sequentially at the holding level and ~2.1ppt at the ATM level (larger annual impacts).
• Positive Sentiment: LEAP (leading-edge packaging) and test services are the growth engine — the company is on track for the $1.6 billion LEAP target this year and expects another >$1 billion of LEAP-related revenue in 2026 while accelerating machinery and facilities CapEx.
• Negative Sentiment: CapEx expansion was funded partly by a TWD 50 billion syndicated loan, raising interest-bearing debt to TWD 295.7 billion and net debt/equity to 63%, increasing leverage and future depreciation/interest burdens.

Presentation

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Hello, I am Ken Shung, the Head of Investor Relations for ASE Technology Holdings. Welcome to our third quarter 2025 earnings release. I am joined today by Joseph Tung, our CFO. Thank you for attending our earnings release today. Please refer to the Safe Harbor notice on page two. All participants consent to having their voices and questions broadcast via participation in this event. If participants do not consent, please do not ask questions or you may leave the session at this time. I would like to remind everyone that the presentation that follows may contain forward-looking statements. These forward-looking statements are subject to a high degree of risk and our actual results may differ materially. For the purposes of this presentation, dollar figures are generally stated in New Taiwan dollars unless otherwise indicated. As a Taiwan-based company, our financial information is presented in accordance with Taiwan IFRS.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Results presented using Taiwan IFRS may differ materially from results using other accounting standards, including those presented by our subsidiary using Chinese GAAP. For today's presentation, I will go over the financial results and Joseph will give the company's guidance. Afterwards, we will be available to take your questions during the Q&A session. With that, let's get started. During the third quarter, both our ATM and EMS businesses outperformed our original sales and profitability expectations. Packaging and testing utilization percentages were in the high 70s. Loading on LEAP and traditional advanced packaging lines were generally full. Our wire bond utilization also showed some improvement. Our test business continues to grow faster than our assembly business, with our chip probe testing leading the way. From a profitability perspective, with our factory loading being better than anticipated, we were able to extract higher operating leverage.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

However, the company's performance was still impacted significantly by foreign exchange. Despite the NT dollar's near-term decline in value against the U.S. dollar, for much of the third quarter, the NT dollar traded at a relatively appreciated level when compared with the second quarter. During the quarter, the NT dollar moved from an average exchange rate of TWD 31.2 to TWD 29.7 per US dollar, strengthening by 4.6%. Simplistically, we estimate that for every percentage point appreciation of the NT dollar relative to the U.S. dollar, we see a corresponding 0.3% negative impact to margins at the holding company level and a 0.45% negative impact to margins at the ATM level. Using this simplified approach, foreign exchange had negative sequential impacts to our holding company and ATM margins of 1.4% and 2.1%, respectively, and annually negative impacts to our holding company and ATM margins of 2.4% and 3.6%, respectively.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Heading into the fourth quarter, we expect a more stable NT dollar environment with an average exchange rate of TWD 30.4 per U.S. dollar. Please turn to page three, where you will find our third quarter consolidated results. For the third quarter, we recorded fully diluted EPS of TWD 2.41 and basic EPS of TWD 2.50. Consolidated net revenues were TWD 168.6 billion, representing an increase of 12% sequentially and 5% year over year. On a U.S. dollar basis, our sales increased by 17% sequentially and 14% year over year. We had a gross profit of TWD 28.9 billion with a gross margin of 17.1%. Our gross margin improved by 0.1% sequentially and 0.6% year over year. The sequential improvement in margin is primarily due to higher loading in our ATM business, offset in large part by foreign exchange.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

The annual improvement is primarily due to higher utilization and beneficial product mix offset by foreign exchange. We estimate that foreign exchange had a negative 1.4% and 2.4% impact to our gross margins on a sequential and annual basis, respectively. Our operating expenses increased by TWD 0.2 billion sequentially and TWD 0.7 billion annually to TWD 15.7 billion. The sequential and annual increases in operating expenses are primarily due to higher R&D costs. Our operating expense percentage declined a percentage point sequentially to 9.3% and was flat annually. Operating profit was TWD 13.2 billion, up TWD 3 billion sequentially, and TWD 1.7 billion year over year. Operating margin was 7.8%, up a percentage point sequentially, and up 0.6% year over year. During the quarter, we had a net non-operating gain of TWD 0.8 billion.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Our non-operating gain for the quarter primarily consists of net foreign exchange hedging activities offset in part by net interest expense of TWD 1.4 billion. Tax expense for the quarter was TWD 2.6 billion. Our effective tax rate for the quarter was 19%. Net income for the quarter was TWD 10.9 billion, representing an increase of TWD 3.4 billion sequentially and TWD 1.2 billion annually. On the bottom of the page, we provide key P&L line items without the inclusion of PPA-related expenses. Consolidated gross profit excluding PPA expenses would be TWD 29.4 billion with a 17.4% gross margin. Operating profit would be TWD 14 billion with an operating margin of 8.3%. Net profit would be TWD 11.6 billion with a net margin of 6.9%. Basic EPS excluding PPA expenses would be TWD 2.68. On page four is a graphical presentation of our consolidated quarterly financial performance. On page five is our ATM P&L.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

The ATM revenue reported here contains revenues eliminated at the holding company level related to intercompany transactions between our ATM and EMS businesses. For the third quarter of 2025, we had record revenues for our ATM business of TWD 100.3 billion, up TWD 7.7 billion from the previous quarter and up TWD 14.5 billion from the same period last year. This represents an increase of 8% sequentially and a 17% increase annually. On a US dollar basis, our ATM revenues were up 13% sequentially and 27% annually. Our test business's growth as a whole continues to outpace our assembly business as a whole, growing 11% sequentially and 30% annually. Gross profit for our ATM business was TWD 22.7 billion, up TWD 2.5 billion sequentially, and up TWD 2.9 billion year over year. Gross profit margin for our ATM business was 22.6%, up 0.7 percentage points sequentially, and down 0.5 percentage points year over year.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

The sequential gross margin increase was due to equipment utilization rate improvement, offset in large part by NT dollar appreciation. The annual gross margin decline was primarily due to NT dollar appreciation and, to a much lesser extent, higher electricity rates offset in large part by higher loading. On a constant currency basis relative to our first quarter, we estimate our gross margin would be roughly 4.2 percentage points higher during the quarter. This difference would have put our adjusted third quarter gross margin of 26.8% in the middle of our previously stated structural ATM gross margin range. During the third quarter, operating expenses were TWD 11.8 billion, up TWD 0.4 billion sequentially, and TWD 1.2 billion year over year. The sequential increase in operating expenses was primarily related to higher overall R&D costs, including labor, equipment, and factory supplies. The annual increase is primarily the result of R&D ramp-up and labor-related expenses.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Our operating expense percentage for the quarter was 11.8%, decreasing 0.5 percentage points sequentially and down 0.5 percentage points annually. The decline was primarily the result of higher revenues during the quarter. As we previously have mentioned, we believe our spending in R&D on an absolute dollar level will continue to increase, but as the associated LEAP revenue syncs up with the R&D spending, our operating expense percentage should continue to moderate. During the third quarter, operating profit was TWD 10.9 billion, representing a sequential increase of TWD 2.1 billion and an annual increase of TWD 1.7 billion. Operating margin was 10.8%, up 1.3 percentage points sequentially, and up 0.1 percentage points year over year. Without the impact of PPA-related depreciation and amortization, ATM gross profit margin would be 23.1% and an operating profit margin would be 11.6%. On page six, you'll find a graphical representation of our ATM P&L.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Please note the generally upsloping revenue bars. Using the first quarter's foreign exchange rate, we estimate the gross margin percentages for the second and third quarters would be 24.1% and 26.8%. On page seven is our ATM revenue by the three C market segments. You can see here that the computing segment continues to become a relatively larger component of our business. This was largely driven by a higher percentage of LEAP-based revenues. On page eight, you will find our ATM revenue by service type. Here you can see the two service types containing LEAP services: bump and flip chip and testing. Both are becoming a larger component of our overall business. We expect continued momentum in these areas heading into 2026. On page nine, you can see the third quarter results of our EMS business.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

The annual seasonality of our EMS business has been inconsistent over the last few years due to differing device wrap-up schedules. As such, we believe the annual comparability of our quarterly results may be impacted. During the quarter, EMS revenues were TWD 69 billion, increasing 17% sequentially, while down 8% year over year. The sequential increase and annual decline were both primarily the result of differing underlying device seasonality. Sequentially, our EMS business's gross margin declined 0.2 percentage points to 9.2%. This slight change was principally the result of product mix. Operating expenses within our EMS business decreased by TWD 0.2 billion sequentially and declined TWD 0.5 billion annually. The sequential decline is primarily the result of lower compensation and professional fees. While on an annual basis, the decline is primarily related to lower compensation expenses.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Our third quarter EMS operating expense percentage of 5.6% was down 1.3 percentage points sequentially, while annually our EMS operating expense percentage declined slightly by 0.1 percentage points on lower spending and revenues. Operating margin for the third quarter was 3.7%, up 1.1 percentage points sequentially, and up 0.4 percentage points year over year. The improvements are primarily the results of higher loading rate and some one-time inventory-related adjustments. Our EMS third quarter operating profit was TWD 2.5 billion, up TWD 1 billion sequentially, and TWD 0.1 billion annually. On the bottom of the page, you will find a graphical representation of our EMS revenue by application. The third quarter application mix shows the seasonal ramp-up of our customers' consumer products, with our consumer segment growing while all other segments declining in application share. We believe at a strategic level, our EMS business faces similar technological manufacturing trends as our ATM business does.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Trends such as power delivery and thermal control are core themes at the forefront in both our ATM and EMS businesses. Having the ability to address customer challenges at both the ATM and EMS level allows us to provide a broader set of technical solutions to our customers. On page 10, you will find key line items from our balance sheet. At the end of the year, we had cash, cash equivalents, and current financial assets of TWD 83.4 billion. Our total interest-bearing debt increased by TWD 55.6 billion to TWD 295.7 billion. This increase was primarily due to the completion of a TWD 50 billion syndicated loan to fund our CapEx. Total unused credit lines amounted to TWD 344.7 billion. Our EBITDA for the quarter was TWD 32.6 billion. Our net debt to equity this quarter was 63%. On page 11, you will find our equipment capital expenditures relative to our EBITDA.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Machinery and equipment capital expenditures for the third quarter in U.S. dollars totaled $779 million, of which $534 million was used in packaging operations, $199 million in testing operations, $40 million in EMS operations, and $6 million in interconnect material operations and others. In addition to spending on machinery and equipment during the quarter, we also spent $716 million on facilities, which includes land and buildings. The overall environment appears to be strengthening. For us, the upward seasonality during the third quarter has been the strongest since the COVID timeframe. From a customer sentiment perspective, the pendulum appears to be swinging from booking capacity on an as-needed basis to pre-booking capacities and making sure raw materials are available. As a whole, our customers are now looking for more assurance and security in their supply chains. For the quarter, LEAP and test services continue to lead growth for the company.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

LEAP continues to be driven by AI. Although we are seeing more customers target their products for use within the AI supercycle, many new products are inferring AI capability or AI readiness. Products are expounding new and smart AI capabilities and features. Newer generations of products are becoming more robust electronically while allowing streamlined access to certain aspects of Gen AI capability, such as video and document creation. The key is whether the end consumers are enticed to integrate new generations of products into their lives. To that end, AI does appear to be upping the basic standards of quality in various contexts, not just limited to the school, office, and social media. There does appear to be the not-so-subtle ominous angle of you need AI to be competitive. This is bringing an intelligence and capabilities arms race to everyone's front door.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

In such a context, understanding the seemingly insatiable need for more capable chips and hardware seems fairly straightforward. From the packaging and test perspective, the higher the AI computational capability, the stronger the chip's packaging and testing needs are. Critical improvement paths in power delivery, processing bandwidth, and thermal performance will continue to drive our LEAP services. With that, I'll hand the presentation over to Joseph to present the company's outlook.

[Joseph Tung, CFO at ASE Technology Holding]

Thank you, Ken. Let me give you the fourth quarter guidance. Based on our current business outlook and exchange rate assumption of $1 to TWD 30.4 versus in the third quarter, we have TWD 29.7 exchange rate, management projects overall performance for the fourth quarter of 2025 to be as follows. On a consolidated level, in NT dollar terms, our consolidated fourth quarter revenue should grow by 1%-2% quarter over quarter. Our consolidated fourth quarter gross margin should increase by 70 basis points-100 basis points quarter over quarter. Our consolidated fourth quarter operating margin should increase by 70 basis points-100 basis points quarter over quarter. For ATM, in NT dollar terms, our ATM fourth quarter revenue should grow by 3%-5% quarter over quarter. Our ATM fourth quarter gross margin should increase by 100 basis points-150 basis points quarter over quarter.

[Joseph Tung, CFO at ASE Technology Holding]

For EMS, in NT dollar terms, our EMS fourth quarter revenue should stay flat or decline slightly quarter over quarter. Our EMS fourth quarter operating margin should be similar to the fourth quarter 2024 level. With that, let me also give you some color for the full year. For ATM, we're seeing better than expected momentum of mainstream business given the continuing recovery of the general market. While on leading-edge revenue, we are on track to reach the $1.6 billion mark as planned. Altogether, we expect ATM 2025 full-year revenue to exceed our target and grow over 20% year over year in U.S. dollar terms. As for machinery CapEx, we expect to further increase our full-year CapEx by another few hundred million U.S. dollars to meet customers' requests and to support continuing business momentum into 2026.

[Joseph Tung, CFO at ASE Technology Holding]

The increase is largely for wafer probing for both AI and non-AI chips, as well as for general capacity ramp and some new initiatives for year 2026. With that, let's give it back to Ken to open the floor for questions.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Thank you, Joseph. During the Q&A session that follows, we would appreciate if questions can be kept concise and asked one at a time. I will be receiving each question and repeating the asked question to Joseph. Again, we'll be limiting the number of questions asked to two questions per turn, but asked one at a time.

[Operator]

The first question is from Gokul Hariharan of JPMorgan. Gokul.

[Gokul Hariharan, Senior Equity Research Analyst at JPMorgan]

Hi, thanks for taking my question, Ken and Joseph. First question, obviously on LEAP. Could you give us a little bit more color about how the progress has been on LEAP revenues this year? I think you had the $1.6 billion guidance or additional $1 billion guidance. What are we tracking to compare to that guidance now? Any indications for what it could do next year? I think based on our own math, it looks like it could easily double next year. You're also raising capacity and CapEx pretty much every quarter. Also on LEAP, what is the margin contribution from LEAP-related business? Is it already accretive or it'll turn accretive once you reach a certain kind of revenue run rate? Any indications on that? That's my first question. Thank you.

[Joseph Tung, CFO at ASE Technology Holding]

You're looking for revenue progress and then generally kind of what we're thinking about for this year and then on and off. Yes. Okay. Like I said, we are on track in reaching our $1.6 billion mark this year. Everything is progressing well. I think we have shown very strong momentum in the AI and HPC-related part of the business. In terms of the revenue mix, I think because of the geopolitical uncertainties, in terms of packaging, we are a little bit short from our original target, but that was sufficiently replenished by our more than expected growth in our test business. We are very, very confident that we will reach our $1.6 billion mark for this year. Going forward into 2026, we continue to see very strong momentum. We are very, very confident that we will gain another over a billion dollar kind of revenue increase for 2026 in this space.

[Joseph Tung, CFO at ASE Technology Holding]

CapEx-wise, we will continue to make heavy investments in our leading edge, I think, to support the strong momentum that we are seeing today. I think AI or HPC is really the momentum is here to stay. We're not going to be shy on making the necessary investment to not just secure our dominant position in this space, but also to expand that dominance against our competitors and to fully support our customers' needs. In terms of margin and return, I think as a steady state, as we mentioned before, the LEAP will definitely be both margin as well as return accretive. We are quickly reaching that point at this point.

[Gokul Hariharan, Senior Equity Research Analyst at JPMorgan]

Okay. That's very clear. Thanks, Joseph. Maybe one other question. Can you talk a little bit about pricing? I think Ken mentioned in the opening remarks that you're pretty much running full on flip chip and bumping. You're pretty much running full on LEAP. I think last time around, I think Dr. Wu had discussed about potential price negotiations. Anything that you can report on? What are we seeing on pricing for your overall offering? Should we expect that pricing should go up? I think OSAT pricing doesn't usually go up that much, but I just wanted to understand how we should think about pricing going into next year.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Gokul, you're looking for a commentary on overall just pricing environment for us for this year and next year.

[Gokul Hariharan, Senior Equity Research Analyst at JPMorgan]

Maybe also specifically on LEAP as well as your flip chip and bumping, kind of the mainstream advanced packaging business as well, because the customer set is slightly different. LEAP, you're kind of largely partnering with the large foundry.

[Joseph Tung, CFO at ASE Technology Holding]

Without getting into specifics, I think in general, our pricing remains to be resilient. I think it's very sensitive to talk about pricing, but as a whole, we will continue to set our pricing, the most suitable pricing structure based on the current situation. There are a lot of moving parts and there are a lot of uncertainties in front of us. In general, we will continue to make our pricing a very, very resilient level.

[Gokul Hariharan, Senior Equity Research Analyst at JPMorgan]

Maybe if I kind of tweak it a little bit, Joseph, like what is customer feedback? I'm sure that everybody is talking about this. We hear that from your fabulous customers as well. I just wanted to understand, like what is customer feedback to pricing? I wanted to think about a little bit more on the mainstream stuff, like flip chip CSP or flip chip BGA, where there is no supercycle of growth. Even in those areas, are you able to have some value-add programs coming through?

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Are you asking for expansion on the original pricing question?

[Gokul Hariharan, Senior Equity Research Analyst at JPMorgan]

Yes, sir. Maybe talk a little bit more on the mainstream advanced packaging as well.

[Joseph Tung, CFO at ASE Technology Holding]

For mainstream, I think we are seeing the continuing recovery of the general market. Therefore, I think pricing-wise, I think it's right now at a very stable level.

[Gokul Hariharan, Senior Equity Research Analyst at JPMorgan]

Okay. All right. Thank you very much. I'll go back to the queue. Thank you.

[Joseph Tung, CFO at ASE Technology Holding]

Thank you.

[Operator]

Next question is from Charlie Chan of Morgan Stanley. Charlie?

[Charlie Chan, Technology Research Analyst at Morgan Stanley]

Yes. Hi, I just unmuted myself. First of all, congratulations for very good results and outlook. My first question is really on sort of a supply chain-related discussion. For example, what's the update plan for you to do the U.S. operation? Because your major customers, major foundry partners are all very active in the U.S.. There seems to be your competitor, M-Core, in that presence. One is that your update plan for the U.S. operation to ensure that ASE kind of growth. Also, we are very concerned about the so-called T-glass shortage. I think lots of customers are going through with your fab to see if they can secure more substrates, right? I'm not sure if that would be kind of a gaining factor for your next year's growth. This is the first question. Thank you.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Charlie, that sounds like two questions.

[Charlie Chan, Technology Research Analyst at Morgan Stanley]

Let's start with question number one, the U.S. building out perspective.

[Joseph Tung, CFO at ASE Technology Holding]

Okay. Thank you for your question and thanks for coming to my concert. Yeah, it was a great one. On the U.S., we don't have anything new to report except that let me reiterate what we mentioned last time, that we were invited by our customer to look at the investment opportunities in the U.S. We are currently still engaging in discussion with our customers, and we're evaluating different opportunities. No decision is made at this point. Whatever decision we will eventually make, it will have to make economical sense for us. In terms of the competition, I think M-Core has its own mind. I think I'm not going to answer for M-Core. Overall, we will continue to be watchful on the overall competition landscape and see how we can better position ourselves in terms of meeting this competition.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Charlie, do you want your second question to be about your previous question on T-glass and such?

[Charlie Chan, Technology Research Analyst at Morgan Stanley]

Maybe we can save it for the second round. My major second question is really the final test of competition. I know this one is a little bit controversial, but I wanted to get your updates or confidence level about your final test, making sure at major customers' next generation GPU. By the way, congratulations for a very strong share price. I think your efforts were recognized by foreign shareholders. The second question is really about your final test business update.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

You're looking for a more comprehensive explanation or update on our final test's market share gains?

[Charlie Chan, Technology Research Analyst at Morgan Stanley]

Yeah, because your Chinese competitor seems to be very aggressive in the testers' purchase and capacity expansion as well. I hope both can win. I just wanted to get a little bit more color about your realistic assumption about your final test market share.

[Joseph Tung, CFO at ASE Technology Holding]

I think, as we mentioned, we have been aggressive and we have been pretty successful in terms of expanding our test business. I think for this year, our test business growth is going to be twice the packaging revenue growth. We will continue to make large investments into our test capacity. You know our resources are also limited. We don't have unlimited resources to try to cover everything in the market. Right now, the main focus for our investment in tests is really on the wafer probing. I think we will continue on this effort for the time to come.

[Joseph Tung, CFO at ASE Technology Holding]

In terms of final tests, I think we are making the necessary investment at this point to build up the capacity. We're expecting to have meaningful revenue being generated in the later part of next year when we start serving the next generation AI chips.

[Charlie Chan, Technology Research Analyst at Morgan Stanley]

Okay. Yeah. Thanks for the update. It was great to see you and Ken. Thank you.

[Joseph Tung, CFO at ASE Technology Holding]

Thank you.

[Operator]

Next question is from Bruce Lu of Goldman Sachs.

[Bruce Lu, VP and Equity Analyst at Goldman Sachs]

Hello. Can you hear me?

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Yes.

[Bruce Lu, VP and Equity Analyst at Goldman Sachs]

Okay. My question is regarding your revenue split for your incremental $1 billion revenue in 2026 for your AI-related revenue. We understand that the revenue contribution is more geared to testing for this year. Are we able to see incremental more revenue contribution from packaging? To be more specific, can we get more like packaging-related business from both outsourcing as well as your own AI packaging business?

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Bruce, you're asking for the incremental annual revenue for this year, right?

[Bruce Lu, VP and Equity Analyst at Goldman Sachs]

Next year, because Joseph just said that we will see another additional $1 billion revenue for next year, right?

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

He may have said that. Yeah, okay.

[Joseph Tung, CFO at ASE Technology Holding]

For the $1 billion increase of leading-edge revenue, I think the breakdown is $650 million from packaging and about $350 million from test for this year. For next year, we'll see how things go. I think we'll kind of give you a ballpark number saying that we will be having maybe at least a $1 billion revenue growth. In terms of the exact composition, I think that remains to be seen. Based on the current situation, we'll allocate our resources to grow both of the business. Right now, we don't have a set mind on what kind of breakdown it will be. What I can say is that test seems to continue to have stronger momentum at this point.

[Bruce Lu, VP and Equity Analyst at Goldman Sachs]

I see. The testing will grow faster than packaging next year within this $1 billion?

[Joseph Tung, CFO at ASE Technology Holding]

It has been growing faster than packaging. You know, come next year, when the new generation products come on stream, the competition may have some changes. What I'm saying is that we are seeing we'll continue to see strong momentum in tests at this point.

[Bruce Lu, VP and Equity Analyst at Goldman Sachs]

I see. Okay, thank you. The second question is for, again, I want to drill down a little bit for the U.S. plan. I mean, TSMC has built, like, has a plan to build some CoWoS process, and M-Core committed to build some substrate process. It seems to me that your customer and your competitor seem to have at least one supply chain in the U.S., which probably, you know, what's the strategy for ASE at the current stage? Obviously, you probably don't need two supply chains in the United States, right? The potential of losing some market share for TSMC's own business is definitely a threat for our future business, right? Can we elaborate more about what's the strategy from ASE?

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Bruce, you're looking for a reiteration on the U.S. plan on our behalf?

[Bruce Lu, VP and Equity Analyst at Goldman Sachs]

Yes.

[Joseph Tung, CFO at ASE Technology Holding]

We don't fight for market share just for market share's sake. We fight for the market share that makes sense or makes profit for us. If we don't see return, if we don't see at least an acceptable margin, then that's not the part of the business that we want to pursue. I think, like I said, regardless if it's in the U.S. or in any part of the world, for us to make an investment, it has to make economical sense. If M-Core feels that with that kind of investment, they can make a profit out of it, fine. Right now, we're not sure on that.

[Bruce Lu, VP and Equity Analyst at Goldman Sachs]

There's no way to pass on the incremental cost to the customer in order to make the investment, like, you know, profitable?

[Joseph Tung, CFO at ASE Technology Holding]

It's not just about pricing.It's about the overall infrastructure, which can support that kind of a business at a reasonable cost structure. Even with some premium pricing, whether that can cover the costs associated with it remains to be seen. Right now, I think that's a very tall task, actually.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Okay. Understand. Thank you.

[Joseph Tung, CFO at ASE Technology Holding]

Thank you.

[Operator]

Next question is from Laura Chen of Citigroup.

[Laura Chen, Analyst at Citigroup]

Thank you. Hi, can you hear me?

[Operator]

Yes.

[Laura Chen, Analyst at Citigroup]

Hi, good afternoon. I just want to consult Joseph, your view on the gross margin outlook, and also congratulate for the great result. Obviously, we see quite a full utilization rate, like Ken just mentioned. At the same time, there's a stronger testing business. I recall, Joseph, you mentioned before that in the longer term, if the utilization rate breaks to 80%+, the gross margin could go back to high 20s. Just wondering, how is the dynamic now? Are you also, and also you are increasing the CapEx for the future demand? Just wondering, how should we think about the gross margin outlook into next year or longer term?

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Laura, you're looking for commentary on the relationship between utilization and our margin structure.

[Laura Chen, Analyst at Citigroup]

At the same time, we are also increasing CapEx. I believe that there's also some increase in depreciation costs. Just wondering, the dynamic right now, how should we think about the gross margin outlook?

[Joseph Tung, CFO at ASE Technology Holding]

If we exclude the foreign exchange impact, I think we have already come back to our structural margin. Like Ken mentioned in the third quarter, if we were on the same forex level as quarter one, our margin should be around 26.8%. Going into the fourth quarter, there will be further margin improvement. At the same currency level, we should be over 27%. What we mentioned before, once our utilization reaches 70% and above, then we should go back to our structural margin range. Unfortunately, the foreign exchange does have a pretty big impact on our overall margin. Having said that, I think right now the foreign exchange seems to be stabilizing. We will start our margin effort from this level.

[Joseph Tung, CFO at ASE Technology Holding]

We are very confident that with the continuing expansion of our leading-edge business, we're confident that we will continue to see, as the capacity is being ramped up, we are confident that we will continue to see margin improvement. Right now, we are very, very confident that in 2026, for the whole year, we should have a gross profit margin for ATM at the structural margin range.

[Laura Chen, Analyst at Citigroup]

Yeah, thank you. Very looking forward to that. My second question is about the Leading-Edge Advanced Packaging. ASE also developed your own FOCoS technologies. Just wondering how is the current progress and the customers' engagement? It's not just focused on the outflow opportunities on the substrate, also, how does ASE's your own FOCoS progress?

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Laura, you're looking for an update on our internal advanced packaging solutions, such as FOCoS.

[Laura Chen, Analyst at Citigroup]

Yes. Right.

[Joseph Tung, CFO at ASE Technology Holding]

Okay. Obviously, in terms of the overall capacity, I think for CoWoS or CoWoS-like 2.5D, I think our foundry partner, as well as ourselves, is still scrambling to try to make the necessary investment for our capacity to catch up with the demand. Given the tightness, I think there will be other customers that would like to have other alternatives or solutions to meet their demand. That creates a very good business opportunity for us to try to sell our own solutions. On that, we are making the necessary investment at this point. We do have engagement with multiple customers, but these things take time. I think what we're expecting is that by the later part of next year, we will start to see meaningful full process revenue coming in.

[Laura Chen, Analyst at Citigroup]

Thank you.

[Joseph Tung, CFO at ASE Technology Holding]

Serving multiple customers. Yeah.

[Laura Chen, Analyst at Citigroup]

Okay. Does this also include your at least $1 billion revenue increase into next year?

[Joseph Tung, CFO at ASE Technology Holding]

Yes.

[Laura Chen, Analyst at Citigroup]

Okay, thank you. Very clear.

[Operator]

Next question is from Sunny of UBS.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Sunny, are you there?

[Sunny Lin, Stock Analyst at UBS]

Yeah, could you hear me okay?

[Operator]

Yes.

[Sunny Lin, Stock Analyst at UBS]

Thank you very much. Congrats on the very good results and guidance. Glad to see LEAP business ramping up and gaining momentum going to 2026. Maybe a question on mainstream. Could you help us understand the recovery ahead? When you guide ICTM sales to grow 3%-5% sequentially, how's the growth by mainstream and LEAP? How should we think about the cycle for mainstream going to 2026? Do you see the current utilization rate being a good base for critical recovery going to 2026?

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Sunny, you're looking for basically our more trailing-edge capacity or trailing-edge plus traditional advanced packaging capacity?

[Sunny Lin, Stock Analyst at UBS]

Mostly on the mainstream, so wire bonding, tier bonding.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Okay. You're looking for commentary on more traditional packaging for this year and into next year.

[Sunny Lin, Stock Analyst at UBS]

Yeah, how should we think about the cycle from here?

[Joseph Tung, CFO at ASE Technology Holding]

As I mentioned, the mainstream business is we're seeing better than expected performances. I think that's a result of the general market recovery. Also, in some part of the in different sectors, we are also seeing ourselves gaining shares. Particularly, if we look at different sectors, I think communications and, of course, PC or computing is recovering better than the other, like automotive and industrial. Nonetheless, I think the recovery is very obvious at this point. Maybe in terms of automotive, it's kind of moving in a slower pace than the other three sectors. On that, we actually posted very, very good growth in our automotive business. I think for ATM this year, we're going to see over 20% growth in this part of the business. I think that's largely a result of where we continue in gaining market share in this space throughout factory automation.

[Joseph Tung, CFO at ASE Technology Holding]

In general, I think in the beginning of the year, we were saying that we will have our leading edge giving us 10% growth and mid to high single-digit growth coming from the mainstream. Obviously, as I mentioned in the beginning of the session, I told everybody that we're going to exceed our revenue growth target to over 20%. That means the mainstream performance is much better than what we were expecting in the beginning of the year. We're not seeing anything negative at this point in terms of mainstream business. Without giving you any further guidance for next year, we do think that we are in a very healthy space at this point for both in the general market, and we're still seeing very strong momentum in the leading edge as well.

[Sunny Lin, Stock Analyst at UBS]

Maybe a very quick follow-up. For Q4, is the utilization rate for mainstream continuing to recover a bit?

[Joseph Tung, CFO at ASE Technology Holding]

Yes. I think, like what Ken just mentioned, I think our bumping and flip chip are pretty full. Wire bonding is improving, although it's not entirely full, but it is steadily improving.

[Sunny Lin, Stock Analyst at UBS]

Got it. My second question is on gross margin. From here, one would be improving mainstream business, and then secondly, accelerating ramp probably for LEAP going to 2026, and then stabilizing FX. Should we assume for ICATM, the gross margin recovery should accelerate in the coming few quarters?

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Sunny, you're looking for an update in terms of forward-looking commentary regarding our gross margin structure.

[Sunny Lin, Stock Analyst at UBS]

Yeah, especially on the pace of the improvement.

[Joseph Tung, CFO at ASE Technology Holding]

We're not in a perfect world. There's still a lot of moving parts and uncertainties in front of us, which includes foreign exchange movements. Yes, I think the general trend is very certain because as we continue to expand rapidly in our leading edge, which is margin accretive, that gives us a very good pace for margin improvement going forward. In terms of the pace, I think right now it's still too early to give you a clear path of what kind of pace we're going to have in terms of our margin expansion.

[Sunny Lin, Stock Analyst at UBS]

Got it. Also on LEAP, is there a margin difference between outsourcing and full process CoWoS, meaning if you start to ramp more full process from second half of next year, will that further boost your gross margin for ICATM?

[Joseph Tung, CFO at ASE Technology Holding]

I think in terms of full process, we're still at the early stage. It's kind of difficult to make any meaningful comparison at this point. I think both need to be at a really more stable level for us to make the comparison.

[Sunny Lin, Stock Analyst at UBS]

Got it. Very helpful. Thank you very much.

[Joseph Tung, CFO at ASE Technology Holding]

In general, I think theoretically, regardless, if it's our own full process or outsource, leading-edge does give us margin accretion.

[Sunny Lin, Stock Analyst at UBS]

Got it. Thank you.

[Operator]

Our next question is from Felix Pan of KGI.

[Felix Pan, Equity Analyst at KGI]

Hi. Good afternoon. Can you guys hear me okay?

[Operator]

Yes.

[Felix Pan, Equity Analyst at KGI]

Yes, thank you for taking my question. My first question regarding, I have seen your foundry partner incremental CP test, also seeing demand. Just correct me if I am wrong, but I found it very difficult to quantify how big for the 10 is. Maybe for you, it's really hard to comment on the same, but maybe on the 10 side or even the percentage of the bond, can you just give us some sense? How can we quantify how big for the CP test demand? Just any color would be grateful. That's my first question.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Hi, Felix. I think I'll take this one. In terms of the overall TAM for something like that, I would say that that's not quantifiable, at least from our perspective. This is something that is probably known by our foundry partners. You may want to address the amount of work that they want to outsource directly to them. We don't quantify that at this point.

[Felix Pan, Equity Analyst at KGI]

Okay. Yeah. My second question is, I think during TSMC's latest earnings call, I think CC emphasized customers' engagement. We do see the incremental engagement. From your perspective, do you see a similar pattern, the engagement from customer's customer as well? I think there's a lot of things happening this month. I just want to ask if any color you can share, is any business model change, or you have seen incremental customer's customer engagement as it is as well? Yeah.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Felix, you're asking for how we look at our overall market and whether we actually look into our customers' customers, similar to foundry.

[Felix Pan, Equity Analyst at KGI]

Actually, my question is, does any customer's customer jump your customer to have engagement with you guys, like to secure some critical capacity or something like that?

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

I don't know if we can talk about that. Joseph, you want to take a step?

[Joseph Tung, CFO at ASE Technology Holding]

Yeah, I think we have very, very close communication with both our direct customers as well as our foundry partners. Those dialogues are being conducted on a routine basis so that we can better prepare ourselves in terms of our capacity and also our technology roadmap. In this regard, we do talk to our, and I think our information source is not just coming from our customer, but our customer will definitely keep us informed of what they're expecting from their own customers and how the overall market will shape up. It's a constant dialogue among the industry players to make sure that the demand is sufficiently being supported by the supply. That's an ongoing process that has been going on for maybe forever.

[Felix Pan, Equity Analyst at KGI]

All right. Okay. Thank you. All right. Okay. Thanks. Thank you.

[Joseph Tung, CFO at ASE Technology Holding]

Thank you.

[Operator]

If you have any question, please raise your hand. Next question is from Gokul Hariharan of JPMorgan.

[Gokul Hariharan, Senior Equity Research Analyst at JPMorgan]

Thanks for taking my follow-up questions. First one, could you help us understand what is the progress on the full stack FOCoS or CoWoS-like kind of processes going into next year? When do we expect this to start becoming a more meaningful contributor to revenues, to the LEAP total revenues? Are the applications still similar in terms of like AI accelerator, or are the applications becoming more diverse in terms of networking or server CPU and other kinds of stuff as well?

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Gokul, you're looking for an update on more on our full process type services. Is that correct?

[Joseph Tung, CFO at ASE Technology Holding]

I talked about this earlier. I think we are continuing our investment in FO process, and we are currently engaging with multiple customers to plan for the capacity. We expect that come the later part of next year, we should start seeing some meaningful revenue coming from FO process rather than just only from outsourced part of the business. In terms of the application, I think there will be AI accelerators. There will be other adoptions in different chips requiring such capability. At this point, I think it's a little bit too early to say the exact revenue scale of the revenue or the composition of that of such revenue. We just have to continue to work very closely with our customers, multiple customers, to better understand what their demands will be, and we'll prep ourselves for the necessary capacity for them.

[Gokul Hariharan, Senior Equity Research Analyst at JPMorgan]

Got it. Thanks, Joseph. Maybe a slightly related question is on the CapEx. I think we are probably finishing this year about TWD 3 billion, well about TWD 3 billion in terms of missionary CapEx. How do we think about this investment cycle? Are we still going to be in this like increased CapEx, likely to continue to increase CapEx over the next couple of years? Given the demand outlook that you're seeing from your customers and your customers' customers?

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Gokul, you're looking for an update on our overall CapEx view?

[Gokul Hariharan, Senior Equity Research Analyst at JPMorgan]

Yeah.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

In the frame of the leading-edge advanced packaging, how does it work?

[Gokul Hariharan, Senior Equity Research Analyst at JPMorgan]

That's right.

[Joseph Tung, CFO at ASE Technology Holding]

Like I said, we stay very close with our foundry partner, and our foundry partner being the dominant player, they cover all the who's and who's in the, whoever has any demand, that they will be the one to supply. They really have a very, very close connection with their customer and their customer's customers. Since we have a very close communication with them, whatever information that they're gathering, we do have the benefit of sharing some of that information to better prepare ourselves for a capacity expansion. As I said earlier, we're not going to be shy on making the necessary investment, particularly for the leading edge, so as to secure and also to expand our dominance in this space.

[Joseph Tung, CFO at ASE Technology Holding]

As such, we believe, at least for next year, we will continue to see pretty heavy investments in our capacity as well as technology in the leading edge.

[Gokul Hariharan, Senior Equity Research Analyst at JPMorgan]

Is it fair to say next year CapEx machinery CapEx is likely to be still higher than this year?

[Joseph Tung, CFO at ASE Technology Holding]

We will give you better guidance once we complete our budget cycle, which is starting now. We will reserve this question to next quarter.

[Gokul Hariharan, Senior Equity Research Analyst at JPMorgan]

Got it. Very clear. Thank you very much and great performance.

[Operator]

Next question is from Charlie Chan of Morgan Stanley.

[Charlie Chan, Technology Research Analyst at Morgan Stanley]

Thanks for taking my second question. The question is about T-glass resolving the shortage of substrates. I'm not sure if there would be a risk factor for ASE Group. to grow your revenue next year because we start to hear some concerns on how long it takes to get the substrate sourced and how would ASE help our customers to get a more sufficient supply.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Charlie, your second or your third question is regarding the overall T-glass supply,

[Charlie Chan, Technology Research Analyst at Morgan Stanley]

Yeah.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

How it impacts our overall supply chain, going forward.

[Charlie Chan, Technology Research Analyst at Morgan Stanley]

Yeah. How would ASE manage or help your customers on this period of shortage?

[Joseph Tung, CFO at ASE Technology Holding]

Like I said, there's a lot of uncertainties, and that's ahead of us. We're like running any other business, there's going to be ups and downs. There's going to be changes. Right now, I think whatever we're seeing today, maybe some of the materials or don't ask me what tea glass is, but some of the materials may have a longer lead time. At this time, we haven't seen any real disruptions on our service to our customers at this point. I think if anything else, being the dominant player, if there's any problem, we're the ones that our customers come to. We certainly have the best leverage in trying to secure the needed materials or the components that will be needed for serving them.

[Charlie Chan, Technology Research Analyst at Morgan Stanley]

Gotcha. Thank you. I would assume, for those materials or substrate, if there would be any cost or price increase, ASE would fully pass through to customers. Is that right? Or would you charge some markup, because those materials are getting harder to get?

[Joseph Tung, CFO at ASE Technology Holding]

We will find the most suitable pricing for current situation.

[Charlie Chan, Technology Research Analyst at Morgan Stanley]

Okay, thanks for that. I much appreciate it for your answers. Thank you.

[Operator]

Next question is from Bruce Lu of Goldman Sachs.

[Bruce Lu, VP and Equity Analyst at Goldman Sachs]

Hi. Thank you for taking my follow-up. I think I asked this question last quarter, but I want to ask it again. What is the CapEx to revenue nowadays? Is there any changes in terms of, like, how long does it take to see the revenue after you invest your CapEx? The reason I ask this is that you invest more like $1.8 billion CapEx last year and $3 point something billion this year, right? You generate additional $1 billion revenue this year, but you also can only generate additional $1 billion next year. Theoretically, you should be able to generate a bit more than $1 billion next year, right? Is there any changes in terms of CapEx to revenue or trying to generate revenue?

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Bruce, you're looking for the magic solution in terms of CapEx to revenue, right?

[Bruce Lu, VP and Equity Analyst at Goldman Sachs]

Which Joseph used to give us.

[Joseph Tung, CFO at ASE Technology Holding]

First of all, the $3 million+ CapEx is not entirely for the leading edge. I think for this year, 55% of that is for leading edge. Bear in mind that that's just a number. We don't make capacity expansion overnight. Equipment needs to be delivered in, you don't have this equipment all delivered at once, right? Things move progressively. Just simple math, if it's $1.8 billion worth of CapEx, that means, on average, $900 million worth of new capacity being put in. This year, if it's a billion-dollar increase, that ratio seems to be still on track. Of course, the other half of the investment will start to generate revenue, but there's still always a time gap between when the machinery or the CapEx is being spent and when the revenue is being generated. I'm not saying that we can only generate a billion-dollar worth of new revenue coming in.

[Joseph Tung, CFO at ASE Technology Holding]

I'm just saying that, at this point, we are very, very confident that we can have at least $1 billion worth of leading-edge revenue, new revenue coming in next year. For the majority of the leading edge at this point, we're still in the earlier stage, and we're still gathering data to come up with a more meaningful investment intensity on this kind of investment. From the limited data that we've gathered so far, I think the traditional a dollar of investment creating a dollar of annual revenue seems to still be the case for the main business that we are entering now, which is OS and test.

[Bruce Lu, VP and Equity Analyst at Goldman Sachs]

One to one. That's the magic number.

[Joseph Tung, CFO at ASE Technology Holding]

It still works. Still applies. Like I said, we are still in the process of gathering more data. Bear in mind that our capacity is not in full ramp at this point, so we still have a little bit more time.

[Bruce Lu, VP and Equity Analyst at Goldman Sachs]

My brand is simple, right? 45% of your $3 point something billion CapEx is $2 billion, right? I mean, you just mentioned that $3 point something billion dollars, 55% is for matured technology. Let's say 45%. Let's say 50% of your $3 point something billion CapEx this year, that's close to $2 billion for next year in terms of incremental new revenue from AI. That's how the math works.

[Joseph Tung, CFO at ASE Technology Holding]

No, that's not how the math works. We don't live on math. We live in the real world.

[Bruce Lu, VP and Equity Analyst at Goldman Sachs]

I only know math. Okay. Thank you.

[Joseph Tung, CFO at ASE Technology Holding]

Well. If you're calling me conservative, don't call me conservative.

[Bruce Lu, VP and Equity Analyst at Goldman Sachs]

Okay. All right. That's all I need.

[Operator]

There is no question on the floor.

[Ken Shung, Head of Investor Relations at ASE Technology Holding]

Okay. I guess time has pretty much run out. I would like to thank everyone for participating in the call. I look forward to seeing you all either during the quarter or at the next earnings release.

[Joseph Tung, CFO at ASE Technology Holding]

Okay. We are having a good run, and we'll continue to have a good run going into next year. We're confident that we will continue to deliver good performances and good numbers for you. We'll see you next quarter. Thank you very much.

Participants

Executives

• Joseph Tung, CFO
• Ken Shung, Head of Investor Relations

Analysts

• Bruce Lu, VP and Equity Analyst at Goldman Sachs
• Gokul Hariharan, Senior Equity Research Analyst at JPMorgan
• Sunny Lin, Stock Analyst at UBS
• Charlie Chan, Technology Research Analyst at Morgan Stanley
• Felix Pan, Equity Analyst at KGI
• Laura Chen, Analyst at Citigroup