ASE Holding Earnings Call: AI Demand Soars, Capex Revised Up Again to $10.5 Billion This Year

ASE Holding (3711-TW)(ASX-US) held its earnings call today (30th), where COO Tim Chen announced a further upward revision of capital expenditure to meet escalating demand for advanced packaging and testing. Analysts estimate ASE Holding's capex for 2024 will reach $10.5 billion, up 23.5% from the previous $8.5 billion, setting another record high.

Analysts noted that ASE Holding initially set its 2024 capex at $7 billion, raised it to $8.5 billion during the last earnings call, and has now increased it again to $10.5 billion. This marks the second upward revision and the first time the company has surpassed the $10 billion threshold.

ASE Holding plans to add an extra $2 billion in capex this year, with $1 billion each allocated to facilities and equipment. In total, $4 billion will be spent on new facilities and infrastructure, and $6.5 billion on production equipment to support capacity expansion for LEAP advanced packaging, mainstream packaging, and testing.

Tim Chen emphasized that demand for both advanced and general packaging and testing remains extremely strong, with customer needs extending beyond this year into next. In addition to existing products, the company is taking on new products, new projects, and more process steps, requiring not only equipment purchases but also the construction of more advanced facilities and infrastructure to accommodate new capacity.

Currently, ASE Holding has 13 greenfield projects underway and another 8 brownfield renovation projects, with over 20 factory projects progressing simultaneously.

Tim Chen expects the facilities and capacity currently under construction will support the company through 2028, with some capacity extending into 2029, and the company continues to seek suitable new locations in preparation for the next phase of expansion.

Tim Chen acknowledged that the group has clear visibility into customer demand and that the current challenge is not insufficient market demand, but rather accelerating factory construction, equipment installation, and capacity ramp-up. He anticipates that free cash flow will remain negative for some time under high capex, and the capex peak may extend into next year.

Tim Chen believes AI is still in the early stages of a long-term, large-scale trend, and the company will not reduce necessary investments due to short-term free cash flow pressure. The investments are essential not only to meet customer demand but also to maintain its leading position in the advanced packaging and testing market.