Ase Technology Holding ((ASX)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The earnings call for ASE Technology Holdings revealed a mixed sentiment, reflecting both optimism and caution. While the company reported robust growth in certain segments such as advanced packaging and testing, challenges were evident in declining operating margins and a subdued EMS business environment. Despite these hurdles, significant capital investments were highlighted, signaling a strategic focus on future growth.
Revenue Growth in Leading-edge Advanced Packaging
The company saw impressive revenue growth in its leading-edge advanced packaging and testing segment, with revenues rising to over USD 600 million in 2024 from USD 250 million in 2023. The growth trajectory is expected to continue, with projections of a USD 1 billion increase in 2025, reflecting the strong demand in this sector.
Testing Business Acceleration
ASE Technology Holdings reported a significant acceleration in its testing business, which grew by 9% year-on-year in 2024 and 18% in the fourth quarter alone. This segment is projected to maintain its rapid growth into 2025, underpinning the company’s strategic focus on this area.
Strong Capital Expenditure
The company demonstrated its commitment to growth through substantial capital expenditures, with machinery CapEx reaching USD 1.9 billion in 2024, an increase of USD 1 billion from the previous year. These investments are primarily directed towards advanced packaging and testing capabilities.
Positive Financial Performance
ASE Technology Holdings reported an overall positive financial performance, with consolidated net revenues increasing by 2% in 2024 compared to the previous year. The ATM segment contributed significantly with a 3% year-on-year increase in revenues.
Operating Margin Decline
Despite the revenue growth, the company faced a decline in operating margins, which fell by 0.3 percentage points sequentially and 0.5 percentage points year-over-year. This decline was attributed to increased compensation and ramp-up expenses.
Increased Operating Expenses
Operating expenses rose by TWD 6.4 billion in 2024, driven largely by the ramp-up of leading-edge advanced packaging services and higher labor-related costs, presenting a challenge to the company’s bottom line.
EMS Business Performance
The EMS business faced a challenging environment with muted electronics demand, resulting in only a 2% revenue growth and a decline in operating margins. These challenges were compounded by costs associated with geographical expansion and acquisitions.
Challenges with Currency Fluctuations
Currency fluctuations posed additional challenges, negatively impacting gross and operating margins by 0.1 percentage points sequentially, adding to the financial pressures faced by the company.
Forward-looking Guidance
Looking ahead, ASE Technology Holdings provided optimistic guidance for 2025. The company anticipates a USD 1 billion increase in revenues from leading-edge advanced packaging and testing, aiming to capitalize on strong ATM business demand. Capital expenditures are expected to remain robust, with a significant portion allocated to leading-edge projects. Despite inflation and ramp-up costs, the company targets a mid-range gross profit margin of 24% to 30%. An improved operating expense ratio and a tax rate below 20% are also expected, supported by government incentives.
In summary, ASE Technology Holdings’ earnings call highlighted a blend of strong growth prospects and existing challenges. While the company is poised for expansion in advanced packaging and testing, it must navigate issues such as declining margins and increased expenses. Investors will be keen to see how ASE leverages its strategic investments to capture opportunities in the evolving semiconductor market.
