ASE Financial Briefing: Quarterly Profit Soars to NT$21 Billion, EPS at NT$4.8! Q3 Revenue to Rise 22% QoQ, CFO Dong: Packaging Gross Margin Likely to Exceed 30% in Q4

Rising demand for AI and general semiconductor packaging has driven ASE Holding (3711) to deliver high-growth results in the second quarter. ASE held its financial briefing today (30th), announcing consolidated revenue of NT$191.064 billion and attributable net profit of NT$21.068 billion (up 180% YoY), with basic earnings per share (EPS) at NT$4.80. Looking ahead, the company expects consolidated revenue to increase 21–22% QoQ in Q3, with semiconductor packaging and testing gross margin approaching 29%. CFO Hong-Si Dong stated that packaging gross margin in Q4 is 'very likely' to exceed the current structural ceiling of 30%.

Packaging Segment Contributes 94% of Operating Profit; LEAP Drives Profitability Upgrade

ASE’s Q2 consolidated revenue reached NT$191.064 billion, up 10% QoQ and 26.7% YoY. Gross profit was NT$40.15 billion, with a gross margin of 21%, up 1 percentage point QoQ and 4 points YoY. Operating profit reached NT$21.134 billion, up 21% QoQ and 107% YoY, lifting the operating margin to 11.1%.

Net profit attributable to owners of the parent was NT$21.068 billion in Q2, up 49% QoQ and 180% YoY. Basic EPS was NT$4.80, with diluted EPS at NT$4.61.

However, ASE’s non-operating income in Q2 reached NT$4.566 billion, significantly higher than NT$668 million in Q1. This included NT$4.2 billion in stock valuation gains, NT$1.5 billion in foreign exchange hedging gains, and approximately NT$800 million from equity-method investments, government subsidies, rental income, and dividends, partially offset by NT$1.9 billion in net interest expenses.

Looking deeper into the business structure, the packaging segment accounted for about 66% of consolidated revenue in Q2 but contributed approximately 94% of operating profit, primarily driven by rapid growth in LEAP advanced packaging services, rising test demand, and improved capacity utilization in general packaging.

Packaging segment revenue in Q2 reached NT$126.148 billion, up 12.2% QoQ and 36.3% YoY, setting a new quarterly record. Gross profit was NT$34.491 billion, with a gross margin of 27.3%, up 1.3 percentage points QoQ and 5.4 points YoY. Packaging operating profit reached NT$19.782 billion, up 25% QoQ and 124% YoY, with an operating margin of 15.7%.

ASE stated that the improvement in packaging gross margin was driven by higher capacity utilization, operating leverage, and an increased share of high-margin LEAP services. The proportion of computing applications in packaging revenue rose from 27% in Q1 to 30% in Q2, and the company expects this trend to continue through 2027 and 2028.

Test Capacity Near Full Utilization; Short-Term Growth Hinges on Equipment Installation Speed

ASE noted that demand for both LEAP and general packaging in Q2 exceeded initial expectations. Non-LEAP capacity, including wire bonding and traditional advanced packaging, was also tight. Wafer testing and final product testing capacity were nearly fully utilized.

Overall capacity utilization in Q2 was approximately 80–85%. Excluding equipment still being installed and not yet in formal operation, existing capacity was nearly at full load. Therefore, ASE’s ability to further expand revenue in the short term depends not on customer demand, but on the speed of equipment installation, factory construction, and production line validation.

At the beginning of the year, the company expected wafer testing expansion to make test business growth outpace packaging. However, packaging demand in Q2 was stronger than expected, especially with a clear rebound in traditional wire bonding demand. As a result, the company now expects packaging and testing business growth to be roughly equivalent for the full year.

Q3 Consolidated Revenue to Grow 21–22% QoQ; Packaging Gross Margin to Approach 29%

Looking ahead to Q3, ASE assumes an exchange rate of USD 1 = NT$31.9, and expects consolidated revenue to grow 21–22% QoQ. Consolidated gross margin is projected between 20.5% and 21.5%, with operating margin between 11.5% and 12.5%.

Packaging segment revenue in Q3 is forecast to grow 11–13% QoQ, with gross margin between 28% and 29%. COO Tian-Yu Wu stated that ASE is in a unique position where demand is not the constraint—capacity is.

'When we say Q3 growth of 11–13%, it means we must add 11–13% more capacity,' Wu noted. Overall, customer demand for Q3 and Q4 remains very strong, with nearly all customers requesting increased supply from ASE.

For EMS, Q3 revenue is expected to grow approximately 40% QoQ, with operating margin between 3.2% and 3.4%. Dong explained that the 40% increase is significantly higher than typical seasonal peaks, primarily due to rising component prices—especially memory—which are being passed through to revenue via cost recovery.

Excluding the impact of rising memory and component prices, Q3 EMS would reflect normal seasonal growth, with operating margin reaching approximately 3.7–3.8%. Q4 EMS revenue is expected to be flat compared to Q3, with full-year growth below 20%.

Material Cost Increases Are Passable; Q4 Packaging Gross Margin to Challenge 30%+

The market is watching whether ASE will raise prices for both traditional and advanced packaging in the second half of 2024. Dong stated that the current pricing environment is very favorable, and despite inflationary pressures on materials and components, the company can pass on cost increases to customers through pricing arrangements.

He emphasized that the improvement in packaging gross margin is not due to a single factor, but driven by multiple factors: growth in high-margin businesses, continued expansion of automated production lines, higher capacity utilization, operating leverage, and declining operating expense ratios.

Dong expects packaging gross margin to improve sequentially in the second half of 2024, with Q4 very likely to exceed the current structural ceiling of 30%. At that point, ASE will reassess its long-term structural gross margin range, and the adjustment will be upward.