ASE Technology Holding Co Ltd (NYSE:ASX) Q2 2020 Earnings Conference Call - Final Transcript

Jul 31, 2020 • 02:00 am ET


ASE Technology Holding Co Ltd (NYSE:ASX) Q2 2020 Earnings Conference Call - Final Transcript


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Kenneth Hsiang

Hello, I am Ken Hsiang, the Head of Investor Relations for ASE Technology Holdings. Welcome to our Second Quarter 2020 Earnings Release. Thank you for attending our conference call today.

Please refer to our safe harbor notice on Page 2. All participants consent to having their voices and questions broadcast via participation of this event. I would like to remind everyone on this call 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, our dollar figures are generally stated in New Taiwan dollars unless otherwise indicated. As a Taiwan-based Company, our financials are presented in accordance with Taiwan IFRS. Results presented using Taiwan IFRS may differ materially from results using other accounting standards.

For today's call, I will be going over financial results. Afterwards, we will have a Q&A session with Joseph Tung, our Chief Financial Officer.

Entering the second quarter, we were concerned about supply chain durability and COVID-19's impact on overall electronics demand. After, we do believe that supply chains generally held up, while COVID-19 appears to have bolstered consumers' demand for electronics.

On Page 3 is a high level first half recap. Holding company revenues grew 18% year-over-year on U.S. dollar terms. ATM revenues grew 23% year-over-year on U.S. dollar terms with gross margins improving 3.8 percentage points or 5.3 percentage points, excluding foreign exchange impact. EMS revenues grew 12% year-over-year in U.S. dollar terms. We continue to see strong demand from our various business lines. In particular, our SIP business is driving our ATM and EMS business growth. SIP, for the first half of this year, grew 20% year-over-year in U.S. dollar terms. We actually expect SIP growth to accelerate in the back half of 2020 for both our ATM and EMS businesses. Our fan-out business grew 68% year-over-year in U.S. dollar terms and our test business also continues to outpace assembly growth, growing 30% year-over-year in U.S. dollar terms.

For the second quarter, our ATM business somewhat outperformed our initial expectations. We believe that our geographical diversification and Taiwan's lower manufacturing risk continued to benefit us. For our factories, during 2020, business has been much more linear. Given strong demand during the first quarter, we started the quarter from a seasonally high base, and as such, it didn't take particularly long for key capacities to start running tight. Our ATM business also encountered a strengthening NT dollar environment. Our first half year-over-year sales growth was 19% on NT dollar terms, while it was 23% by U.S. dollar terms. For the second quarter, on a year-over-year basis, NT dollar appreciation negatively impacted our sales by 3.6% and gross margin by 1.8 percentage points. We continue to see a strong NT dollar environment though, at least through the third quarter.

For our EMS business, the second quarter usually represents the trough quarter in terms of seasonality. However, our EMS business started at seasonal manufacturing