ASE Technology Holding Co., Ltd.

Hello, I am Ken Shon, the Head of Investor Relations for ASC Technology Holdings. Welcome to our fourth quarter and full year 2024 earnings release. Thank you for attending our earnings release today. please refer to our Safe Harbor Notice on page 2. All participants consent to having their voices and questions broadcast via participation in this event. If participants do not consent, please disconnect at this time. I would like to remind everyone 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, dollar figures are generally stated in new Taiwan dollars unless otherwise indicated. As a Taiwan-based company, our financial information is presented in accordance with Taiwan IFRS. Results presented using Taiwan IFRS may differ materially from results using other accounting standards, including those presented by our subsidiary using Chinese GAAP. I am joined today by Dr. Tian Wu, our COO, and Joseph Tom, our CFO. For today's presentation, Dr. Wu will be giving the company's key message. I will be going over the financial results, and Joseph will then go through our company's guidance. Both Tian and Joseph will then be available to take your questions during the Q&A session that follows. During the Q&A session, I will be moderating. receiving, and as needed, clarifying and condensing each interaction down to a single question. With that, let me hand the presentation over to Dr. Tian Wu. Tian?

First of all, a belated Happy Chinese New Year to all of you. Let me give you the recap for 2024. Our consolidated revenues grew 2% year-on-year in 2024, with ATM revenues up 3% year-on-year. We have seen a very strong demand for leading-edge packaging and testing, while the mainstream segment was a mixed bag. We saw a soft recovery in some segment and some other segment due to inventory correction as well as end market demand were lagging behind the general market. Leading edge advanced packaging and testing revenues were over US $600 million, accounting for around 6% of ATM revenues, up from US $250 million in 2023. Our testing business grew 9% year on year in 2024, and in particular grew 18% year on year in Q4 of 24. We do expect the testing revenue will have accelerated momentum into 2025, an increased turnkey as well as our expanding leading edge test. Our machinery CapEx was US $1.9 billion, up by a billion versus 2023, mainly driven by advanced packaging and testing. Next, let me give you a 2025 outlook. Our ATM business to outgrow the logic semiconductor market driven by strong momentum of our leading edge of advanced packaging and testing business. Leading edge of advanced packaging and testing revenues to increase by US $1 billion versus 2024. that will account for about 10% of our growth in 2025. While the general segment will be better than 2024, we expect them to grow mid to high single-digit year-on-year. On the investment in R&D, human capital, advanced packaging and testing capacity, and also factory automation, and all of the smart factory buildings, we will continue to accelerate in preparation for the AI-led super cycle, which we believe have started in 2024, and we will see the momentum in 2025, 2026, and beyond. Lastly, let me give you a market landscape and ASE's positioning. We believe the total semiconductor revenues are likely to reach one trillion in the next decade, driven by AI, robotics, electrification of all systems, also the energy and the IoT-related products. ASE is well-positioned to benefit from the strong demand of leading-edge advanced technology, as well as the growing volume of peripheral chips on accelerating edge AI adoption. A comprehensive technology toolbox, 3D, 2.5D, fan out, large panel, SIP, co-package optics, power automation, scale advantages, as well as the geographic diversification of AAC, make ASE the preferred partner for customers. ASE's strong financial performance and flexibility and agility in handling business model evolutions further widen the moat against competitors. Let me pass the floor back to Ken.

Dr. Wu? I will now go over the financial results. The fourth quarter ATM and EMS businesses came in slightly better than originally anticipated. Our ATM business's fourth quarter outperformance was driven primarily by some communications-related business. Strength was driven by our test business, with it growing 11% quarterly. For the full year, our ATM business grew by 3%. Our leading-edge advanced packaging business accounted for most of this growth. And though testing finished strong, we believe our test growth will be even stronger during 2025. Our overall equipment utilization was in the mid to high 60s. For our EMS business, despite a muted fourth quarter outlook due to earlier seasonality, our SIP product flow came in slightly ahead of our expectations during the fourth quarter. For the full year, our EMS business was flattish. We believe that this is somewhat in line with the electronics industry as a whole. It should be noted that an earlier seasonality somewhat distorts our annual comparisons for our EMS business and to a lesser extent, also at the holding company level. Please turn to page 6 where you will find our fourth quarter consolidated results. For the fourth quarter, we recorded fully diluted EPS of $2.07 and basic EPS of $2.15. Consolidated net revenues increased 1% sequentially and year over year. We had a gross profit of $26.6 billion with a gross margin of 16.4%. Our gross margin declined by 0.1 percentage points sequentially and improved by 0.4 percentage points year over year. The sequential decline in margin is principally due to lower profitability from our EMS business. Our operating expenses increased by $0.4 billion sequentially and by $1.5 billion annually to $15.4 billion. The sequential increase in our operating expenses are primarily due to leading-edge advanced packaging and testing services ramp-up and timing of equity compensation-related expenses from our ATM business. The year-over-year increase in operating expenses is primarily attributable to continued R&D staff up and other labor-related costs. Our operating expense percentage increased sequentially by 0.2 percentage points and annually by 0.8 percentage points year-over-year to 9.5%. Our operating expense probably requires a bit of explanation here. Extensive preparation and groundwork for our leading-edge advanced packaging-related businesses started in late 2023 and ramped during 2024. We have been aggressively hiring and training new employees throughout 2024. We also needed to ramp our new product introduction efforts, including perfecting tooling and process flows that eventually needed to be in place. Finally, semiconductor manufacturing has become very visible throughout the world. The skill sets necessary to prepare, manage, and run manufacturing also are in high demand. Retention of our employees has become increasingly important. And all of this has been done in an inflationary environment. As such, these expenditures have created a ramp in our operating expenses that started in 2024. We see our operating expenses continuing to rise on an absolute basis, but will level off in the middle part of 2025. Further, as revenues related to these efforts grow, our operating expense percentage should start to decline during the back half of 2025. Operating profit was $11.2 billion, down $0.3 billion sequentially and $0.6 billion year over year. Operating margin declined 0.3 percentage points sequentially and declined 0.5 percentage points year over year. We believe this margin decline was primarily driven by higher compensation and ramp-up expenses related to leading-edge advanced packaging and geographical scale-up across our ATM and EMS businesses. During the quarter, we had a net non-operating gain of 0.2 billion dollars our non-operating gain for the quarter primarily consists of net foreign exchange hedging activities profits from associates and other non-operating income offset in part by net interest expense of 1.3 billion dollars Tax expense for the quarter was $1.9 billion. Our effective tax rate for the quarter was 16%. The effective tax rate during the quarter was lower than expected, primarily as a result of higher tax investment credit recognition. Net income for the quarter was $9.3 billion, representing a decrease of $0.4 billion sequentially and $0.1 billion year over year. The NT dollar appreciated 0.5% against the U.S. dollar sequentially, while depreciating 0.75% annually. From a sequential perspective, we estimate the NT dollar appreciation had a 0.1 percentage point negative impact to the company's gross and operating margins. while from an annual perspective, we estimate the NT dollar depreciation had a 0.2 percentage point positive impact to the company's gross and operating margins. On the bottom of the page, we provide key P&L line items without the inclusion of PPA-related expenses. Consolidated gross profit excluding PPA expenses would be $27.3 billion, with a 16.8% gross margin. Operating profit would be $12.1 billion with an operating margin of 7.5%. Net profit would be $10.2 billion with a net margin of 6.3%. Basic EPS excluding PPA expenses would be $2.36. Please refer to page 7. Here you will find the 2024 consolidated full year result versus 2023 full year results. Fully diluted EPS for the year was $7.23, while basic EPS was $7.52. For 2024, consolidated net revenues improved 2% as compared with 2023. ATM improved by 3%, while EMS business improved 2% annually. Gross profit for the year was 96.9 billion, improving 5.2 billion year-over-year, or by 6%. In 2024, our consolidated gross margin improved 0.5 percentage points to 16.3%, principally as a result of foreign currency fluctuation, and improved operating leverage from our ATM business, offset in part by higher utility costs. Operating expenses increased $6.4 billion for the year and came in at $57.8 billion. Higher operating expenses, as discussed earlier, are the result of the ramp-up of leading-edge advanced packaging services and higher labor-related costs. Our overall operating expense percentage also increased to 9.7% as a result of these increases. Operating profit for the year was $39.2 billion for the year, declining $1.1 billion. Operating margin for the year was 6.6%, representing a decline of 0.3 percentage points from 2023. we recorded a net non-operating gain of 2.5 billion for the year, including a net interest expense of 4.9 billion versus 4.7 billion in 2023. And though interest rates may appear to be moderating, we believe that our interest expenses will most likely increase or stay near current levels heading into next year, given additional borrowing necessary to fund our expansion. Most of the non-operating gains were associated with our foreign currency hedging activities. Total tax expense was $7.8 billion. The effective tax rate for the year was 18.6%. Current year income tax expense came in lower as a result of recognized deferred tax assets from increased government incentive programs on R&D. For the coming year, we believe our ongoing effective tax rate will be lowered by increased government incentive programs and offset in part by recent global minimum tax applications. We expect that the effective tax rate for the coming year will be slightly below 20%. Net income for the year increased by 2% to $32.5 billion. On a full year basis, we estimate that the depreciating entity dollar had a positive 0.8 percentage point impact to gross and operating margins. Removing the effect of PPA depreciation, our gross margin would be 16.9%. Our operating margin would be 7.3%. Our basic EPS would be $8.54. On page 8 is a graphical presentation of our consolidated quarterly financial performance. On a year-over-year basis, gross margins have been gradually improving. On the operating margin front, as was stated earlier, operating expenses increased in preparation of leading-edge advanced packaging capacity, labor staff up, offshore site expansion costs from our EMS businesses, and equity compensation. On page nine is our ATM P&L. The ATM revenue reported here contains revenues eliminated at the holding company level related to intercompany transactions between our ATM and EMS businesses. For the fourth quarter of 2024, revenues for our ATM business were $88.4 billion, up $2.6 billion from the previous quarter, and up $6.4 billion from the same period last year. This represents a 3% increase sequentially and an 8% increase annually. Gross profit for our ATM business was $20.6 billion, up $0.8 billion sequentially, and up $1.4 billion year-over-year. Gross profit margin for our ATM business was 23.3%, up 0.2% sequentially, and down 0.1% year-over-year. The sequential margin improvement was primarily related to higher tests and leading-edge advanced packaging business offset in part by the impact of product mix shift. The annual margin decline is primarily the result of higher utility costs and product mix shifts offset in part by favorable foreign exchange. During the fourth quarter, operating expenses were $11.2 billion, up $0.6 billion sequentially, and $1.2 billion year over year. The sequential increase in operating expenses was primarily driven by scale-up of compensation costs, including headcount and timing of certain equity compensation. The annual operating expense increase was driven primarily by the continued scale-up of R&D labor and timing of equity compensation. Our operating expense percentage for the quarter was 12.6%, increasing 0.3% sequentially and up 0.4% annually. The sequential and annual increases were primarily due to labor ramp-ups preparing for higher leading-edge advanced packaging revenues. During the fourth quarter, operating profit was $9.4 billion, representing an increase of $0.2 billion both quarterly and annually. Operating margin was 10.7%, flat sequentially and down 0.5 percentage points year-over-year. For foreign exchange, we estimate that the NT to US dollar exchange rate had a negative 0.2 percentage point impact on our ATM sequential margins and a positive 0.4 percentage point impact on a year-over-year basis. Without the impact of PPA-related depreciation and amortization, ATM gross profit margin would be 24%, and operating profit margin would be 11.6%. On page 10, we have our ATM full-year P&L. 2024 revenues for our ATM business improved by 3%, with our packaging and test businesses up 2% and 9%, respectively. Gross profit for the year improved 6% to $73.2 billion. Gross margin was 22.5% up 0.7 percentage points. Margin improvement was the result of higher factory efficiency and a favorable foreign exchange environment offset in part by higher utility costs and factory supply consumption due to shifting product mix. Our operating expense percentage increased 0.9 percentage points to 12.6%. Operating profit nudged up $0.2 billion to $32 billion, while operating margin declined 0.3 percentage points to 9.8%. For foreign exchange, on a full-year basis, we estimate that the depreciating NT dollar had a 1.4 percentage point impact on margins. Without the impact of PPA expenses, gross profit margin would be 23.5% and operating margin would be 11.1%. On page 11, you'll find a graphical representation of our ATM P&L. On page 12 is our ATM revenue by three C market segments. You can see here the relative strength of our communications segment during the fourth quarter. As previously mentioned, our leading edge advanced services are currently spread across our computing and communications segments. On page 13, you will find our ATM revenue by service type. The most prominent thing here is that our wire bond services saw gradual declines over the last eight quarters. Traditional wire bond products are in everyday electronics like Wi-Fi, televisions, and household appliances. Frequently, they are not the main chip, but may serve supporting roles as peripherals, like a screen or power controller. This chart shows a somewhat simple concept. More basic products, like many of those upgraded during COVID, have a longer replacement cycle. We would expect to see a pickup in wirebond when a general recovery starts to happen. A corollary you can see from this chart is that there's strength in our advanced packaging and test businesses. We believe our efforts involved with growing our test business are continuing to pay off. Our test services have also managed to outgrow the corporate average going from 16% to 18% of ATM. Our test business grew by 11% quarterly and 18% annually. As Dr. Wu mentioned earlier, we see our test business accelerating during 2025. On page 14, you can see the fourth quarter results of our EMS business. During the quarter, EMS revenues were $74.9 billion, declining $0.5 billion, or 1% sequentially, and $4.3 billion, or 5% year-over-year. The sequential and annual revenue declines are primarily the result of accelerated seasonality for the year. Sequentially, our EMS business's gross margin declined 0.7 percentage points to 8.3%. This change was principally the result of product mix and lowering operating leverage. Operating expenses within our EMS business declined 0.1 billion sequentially. and while increasing $0.3 billion annually. The sequential expense decrease was primarily attributable to lower compensation expenses, while the annual increase is related to geographical expansion and acquisitions. Operating margin for the fourth quarter was 2.7%, declining 0.6 percentage points sequentially and declining 0.8 percentage points year-over-year. The sequential and annual declines were primarily due to product seasonality. Our EMS fourth quarter operating profit was $2 billion, down $0.5 billion sequentially, while down $0.8 billion annually. For the full year, our EMS business experienced a somewhat muted electronics demand environment. For the full year, EMS revenues grew by 2%. Gross margin improved by 0.3 percentage points primarily due to product mix. Operating margin for the year was 2.9%. The decline in our EMS operating margin was primarily due to geographical expansion and acquisitions with differing cost structures. Operating profit declined by $1 billion. On page 15, you will find a graphical representation of our EMS revenue by application. There was a slight shift from consumer devices to communications devices. The shift here are generally due to underlying product seasonality. On page 16, you will find key light items from our balance sheet. At the end of the year, we had cash, cash equivalents, and current financial assets of $85.9 billion. Our total interest-bearing debt increased by $0.7 billion to $213.9 billion. Total unused credit lines amounted to $375.7 billion. Our EBITDA for the quarter was $28.8 billion. Our net debt to equity this quarter was 0.37. On page 17, you will find our equipment capital expenditures relative to our EBITDA. machinery and equipment capital expenditures for the fourth quarter and U.S. dollars totaled $640 million, of which $321 million were used in packaging operations, $290 million in testing operations, $23 million in EMS operations, and $5 million in interconnect material operations and others. Machinery and equipment capital expenditures for 2024 and U.S. dollars totaled 1,876,000,000, of which 957,000,000 were used in packaging operations, 815,000,000 in testing operations, 89,000,000 in EMS operations, and 15,000,000 in interconnect material operations and others. In addition to spending on machinery and equipment, we also spent $655 million on land and building, or for simplicity's sake, facilities during the fourth quarter, while spending $1.1 billion for the full year. During the year 2024, we invested significantly in our facilities as part of our generational advancement in packaging technology. Given that our facilities spending is sporadic in nature, we have historically discussed our capital expenditures, mainly as it pertains to our machinery and equipment spending, for the sake of comparability. Our facilities were also previously more generic and not as specialized as our machinery and equipment. But as factory automation, advancing technologies, and tighter building specifications are now driving new facility investments, the scale of investment steps up and now also represents significant technology advancements and competitive advantages for our businesses. At this point, I would like to hand the presentation over to Joseph for further discussion on our overall company outlook. Joseph?