ASE Technology Holding Co (ASX) Risk Analysis

The political relationship between South Korea and North Korea has been tense throughout Korea's modern history. The level of tension between the two countries has heightened and may increase abruptly as a result of current or future events. In recent years, there have been increasing security concerns stemming from North Korea's nuclear weapons and long-range missile testing, and uncertainty regarding North Korea's actions and potential responses from the international community. Although we do not derive any revenue from, nor sell any products in, North Korea, any further rising tension on the Korean Peninsula could affect our results of operations. For example, if North Korea experiences a leadership crisis, high-level contacts between South Korea and North Korea break down or military conflicts occur, could have a material adverse effect on our South Korea subsidiary, our business, financial condition, results of operations, and the market value of our common stock.

Anthropogenic greenhouse gas emissions could adversely and irreversibly affect the global economy if substantial remediation is not taken. Even a modest change in average global temperatures could result in increased coastal flooding, altered precipitation patterns, and increased risk of biodiversity loss for vulnerable species. Climate change can also cause extreme weather conditions, such as heat, droughts, and floods, that can impact business operations and financial performance. For example, our business operations depend on adequate supplies of water, so an extended drought may affect our ability to obtain sufficient amounts of water and threaten our production capability. We believe that we should play our part in the mitigation of man-made climate change. For example, we have incorporated green design standards and building concepts into the construction of our facilities. Since 2012, we have transformed existing facilities and built new facilities and offices that comply with international low carbon building standards. Through quantifying and analyzing the entire life cycle of building carbon emissions, carbon reduction was driven from the design stage and promoted along the value chain to build sustainable factories. Public expectations for reductions in greenhouse gas emissions could result in increased energy, transportation, and raw material costs. Changes in scientific findings, political attention, and regulations related to the existence and extent of man-made climate change may also result in increased production costs due to higher energy prices or the introduction of energy or carbon taxes. Regulations and further legislation aimed at reducing greenhouse gas emissions may require companies to purchase emission credits at higher cost, new equipment, or raw materials with lower carbon footprints, which could negatively affect our operations and financial performance. Additionally, changes in environmental regulations, such as those regarding the use of perfluorinated compounds (commonly known as the "PFCs"), could increase our production costs, which may adversely affect our results of operation and financial results. Stable water supply of sufficient amounts of good-quality freshwater plays a critical role for us. Taiwan is also susceptible to typhoons and droughts, which may cause damage and business interruptions to facilities. Since our business operations depend on adequate supplies of water, an extended drought may affect our ability to obtain sufficient water and threaten our production capability. Although we have not yet been directly affected by droughts, we are dependent upon water for our packaging and substrate operations and a drought could interrupt such operations. To address related risks, we have established a wastewater reclamation recycling system and implemented three water use strategies, including reduce, reuse, and recycle, to prevent water shortages. These actions will enable us to respond effectively to climate change. Considering the relatively high prices of renewable energy in Taiwan, transitioning towards net-zero emissions presents a significant challenge to us. However, in order to meet the demand for sustainable energy in our production processes and fulfill our commitments to our domestic and foreign customers, our major subsidiaries have established the Taiwan Renewable Energy Platform to negotiate renewable energy procurement. Through the platform, we plan to continue to purchase solar photovoltaic and onshore wind power, and negotiate with the government for purchases of Phase 3-1 and Phase 3-2 offshore wind power. We also purchase green power certificates from overseas facilities to increase our use of renewable energy. The implementation of these goals and initiatives may require considerable investments, and our goals, with all of their contingencies, dependencies, and in certain cases, reliance on third-party performance, are complex and may change. We cannot guarantee that our goals and initiatives will be fully realized in a timely manner or at all, and projects that are completed as planned may not achieve the results we anticipate. Any failure, or perceived failure, by us to adhere to our public statements, comply fully with developing interpretations of ESG laws and regulations, or meet evolving and varied stakeholder expectations and standards could harm our business, reputation, financial condition, and operating results.

Under current R.O.C. law, the depositary, without obtaining approvals from the Central Bank of the Republic of China (Taiwan) or any other governmental authority or agency of the R.O.C., may convert NT dollars into other currencies, including U.S. dollars, for: -   the proceeds of the sale of Common Shares represented by ADSs or received as stock dividends from our Common Shares and deposited into the depositary receipt facility; and -   any cash dividends or distributions received from our Common Shares. In addition, the depositary may also convert into NT dollars incoming payments for purchases of Common Shares for deposit in the ADS facility against the creation of additional ADSs. The depositary may be required to obtain foreign exchange approval from the Central Bank of the Republic of China (Taiwan) on a payment-by-payment basis for conversion from NT dollars into foreign currencies of the proceeds from the sale of subscription rights for new Common Shares. Although it is expected that the Central Bank of the Republic of China (Taiwan) will grant this approval as a routine matter, we cannot ensure that in the future any approval will be obtained in a timely manner, or at all. Under the R.O.C. Foreign Exchange Control Act, the Executive Yuan of the R.O.C. government may, without prior notice but subject to subsequent legislative approval, impose foreign exchange controls in the event of, among other things, a material change in international economic conditions. We cannot ensure that foreign exchange controls or other restrictions will not be introduced in the future.

Our results of operations also depend on the performance and business of our key customers. Accordingly, risks that could seriously harm our key customers could harm us as well, including: -   loss of market share for our key customers' products;-   recession in our key customers' markets;-   failure of their products to gain widespread commercial acceptance; and -   our key customers' inability to manage their operations efficiently and effectively. The launch and market acceptance of our individual key customers' products could significantly impact our product and customer mix, resulting in significant volatility in the demand for the solutions we offer and our results of operations. It is also possible that a key customer's market share with respect to its product may decline as its competitors introduce new products, which could adversely affect our results of operations, particularly if we are unable to sell our solutions to such competitors. Furthermore, sales of our key customers' products are subject to seasonal fluctuation.

In August 2012, the SEC adopted annual disclosure and reporting requirements, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, for companies that use conflict minerals in their products. These rules require companies that manufacture or contract to manufacture products for which conflict minerals are necessary for functionality or production to begin scrutinizing the origin of conflict minerals in their products. We filed a specialized disclosure report on Form SD in accordance with the requirements and we have retained an independent auditing firm to conduct audits on our due diligence framework to provide a private sector report for our specialized disclosure report on Form SD. There will be costs associated with complying with these disclosure requirements, including costs for diligence to determine the sources of conflict minerals used in our products and other potential changes to products, processes, or sources of supply as a consequence of the results of such verification activities. The implementation of these rules could adversely affect the sourcing, supply, and pricing of materials used in our products. As there may be only a limited number of suppliers offering "conflict free" minerals, we cannot be sure that we will be able to obtain necessary "conflict free" minerals from such suppliers in sufficient quantities or at competitive prices. Also, we may face adverse effects to our reputation if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins for all conflict minerals used in our products.

Our operations, in particular our testing operations and leading-edge advanced packaging (3D packaging, Fan-out Chip-on-Substrate and 2.5D packaging), are characterized by relatively high fixed costs. We expect to continue to incur substantial depreciation and other expenses in connection with our acquisitions of equipment and facilities. Our profitability depends not only on the pricing levels for our services or products, but also on utilization rates for our machinery and equipment, commonly referred to as "capacity utilization rates." Increases or decreases in our capacity utilization rates can significantly affect gross margins since the unit cost generally decreases as fixed costs are allocated over a larger number of units. In periods of low demand, we experience relatively low capacity utilization rates in our operations, which lead to reduced margins. We cannot ensure that we will be able to maintain or surpass our past gross margin levels if we cannot consistently achieve or maintain relatively high capacity utilization rates.