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ASE net profit down over 30% in the first quarter

TAIPEI--Taiwan-based Advanced Semiconductor Engineering Inc. (ASE), the world's largest integrated circuit packaging and testing services provider, suffered a more than 30 percent sequential drop in net profit for the first quarter due to slow season effects.

However, market analysts said ASE will benefit from a rebound in the global semiconductor business and see its growth momentum pick up in the second quarter.

During the January-March period, ASE posted NT$3.44 billion (US$113.5 million) in net profit, down 34 percent from a quarter earlier, but up 54 percent from a year earlier.

The company's consolidated sales in the quarter fell 15 percent from a quarter earlier, but rose 14 percent from a year earlier to NT$54.7 billion.

ASE's gross margin on a consolidated basis for the past three months stood at 18.9 percent, down from the fourth quarter's 19.5 percent, while its operating margin fell to 9.3 percent from the previous quarter's 10.8 percent.

In its IC packaging and testing operations, ASE recorded NT$34.35 billion in sales for the first quarter, down 9 percent from a quarter earlier with the gross margin in the particular operations down at 24 percent from the previous quarter's 27.6 percent.

In the three-month period, communications devices accounted for 52 percent of the IC packaging and testing services provider's total revenue, while automotive and consumer products represented 36 percent and personal computers made up 12 percent.

North America accounted for 60 percent of ASE's total revenue in the first quarter. Taiwan made up 17 percent and Europe represented 11 percent, the company said, adding that its top 10 clients generated about 47 percent of the company's total sales during this period.

With the global IC business rebounding in the second quarter, ASE said sales in the IC packaging and testing operations could rise about 10 percent from the first quarter, while its gross margin on a consolidated basis could surpass the fourth quarter's level to hit more than 20 percent.

Analysts said consolidated sales for the April-June period are expected to rise 6-7 percent quarter-on-quarter.

ASE said as the company is gearing up to invest in high-end production technology, such as the system-in-package services, its gross margin is expected to continue to improve.

The company said its capital expenditure for 2014 could range between US$900 million and US$950 million and it will assign US$700 million to US$750 million out of the budget to strengthen its high-end technology.

Meanwhile, the Kaohsiung City Government has approved a petition from ASE to restart production of a plant located in the city on a trial basis. ASE was ordered to suspend part of the operations at the K7 plant in December due to pollution problems.

If the trial production resumption meets the authorities' requirements, the K7 plant could be allowed to return to full operation as early as July.

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