ASE Technology Holding Co., Ltd.

Hello, I am Ken Hsiang, the Head of Investor Relations at ASC Technology Holdings. Welcome to our second quarter, 2026, earnings release. I am joined today by Dr. Tien Wu, our COO, and Joseph Tung, our CFO. Thank you for joining us 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 you do not consent, please refrain from asking questions or leave the session now. 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 separately presented by our subsidiaries. For today's presentation, Dr. Tian Wu will begin with a mid-year business update. I will then walk through the Q2 results and Joseph will close with our third quarter outlook. With that, let me hand the presentation over to Dr. Tien Wu.

Good afternoon. I would like to give you the first half 2026 recap and also the full year outlook. For my presentation, we'll be all on U.S. dollar terms. Consolidated revenue grew 24% year-on-year. In the first half of 2026, with ATM revenues up 35% year-on-year for the first half, leading edge advanced packaging and overall testing outpaced growth. For ATM business, we expect to maintain the same growth momentum into the second half. For full year, LEAP services revenue is tracking growth. I had a prior guidance of 3.5 billion U.S. dollars. While general segment expected to grow by 30% year-on-year versus previous guidance of 13%. So for the full year, we expect the ATN business revenue to grow by 35%. Machinery cap tax was 2.7 billion U.S. dollars. Building, Facility, Automation was $1.4 billion in the first half. Joseph would give you more detail for the full year. Stepping Up Investment, R&D, Human Capital, Advanced Capacity, and also Automation, Smart Factory, Infrastructure to Support the Multi-Year Growth. On the second page, I would like to give you some highlights on Market Dynamics and Positioning. There are many moving parts in the market today. You're reading the same newspaper, watching the same news as I do. What I'm trying to present to you is the company view. We will try to present you the logic. Why are we making particular decisions in this particular junction of time? AI enabled new applications with bigger scale and potentials. I'm not going to articulate the detail. If you're interested, we can talk more in the Q&A. That's our current view. I think very few of you will disagree with this statement, that AI is a paradigm shift, and we do have potential bigger scale and multiple applications. And that's our current view. In terms of when, how, we are monitoring the progress. I believe we are at the beginning of the AI paradigm shift. There will be multiple stages of transition. We can talk more in the Q&A. The second comment is how we feel. AI demands new hardware that does not exist previously in size, complexity, and integration. You can argue about the computational intensity, the memory, the power, the linkage, the bandwidth. All in all, what we're trying to develop right now is a brand new platform to support the potential AI applications. The data center, the agentic, and future in the physical AI, humanoid. All of the hardware will be different than what we have been producing so far. There is a growing need for industrial power connectivity and storage devices because of the AI transition, evolution, or paradigm shift. The company is seeing all three right now from all of our customers on the multi-year basis. Let me talk about ASU's strategic priorities. Again, this is the company view. We have to have a blueprint, a plan, a vision in order for the 100,000 employees to act on. And where I'm trying to present to you is the highlight for that blueprint. Hardware infrastructure is a bottleneck. With AI, the hardware requirement is new, insatiable, and more complicated and more complex. And today, there are very few manufacturers capable of producing hardware. Therefore, it is the bottleneck today for our capacity, From automation and more importantly, from innovation perspective. We can talk a little bit more detail about the panel, about co-op, about glass substrate, about VRM, about silicon photonics. I can go on and on. But all of these are tied to the infrastructure and your capability to ramp with the complexity, integration, and the design blueprint the customer is asking to do. All in all, I call all of this to be hardware infrastructure. And that is the new bottleneck. We have not experienced this for the last 40 years. Packaging is moving up in system architecture value chain. For me, as a designer, by training, the system architecture always is at the top of the value chain. Packaging is approaching the system architecture value by providing the new complexity integration capability with the variable that I just talked about it. Now, if you believe hardware is the new bottleneck and the packaging is moving up in the value chain of the system architecture, Then, ASE has a unique position to support the AI migration, evolution, or paradigm shift and align with all customers' long-term objectives today. ASE's competitive position, I've talked about this for many times, the ecosystem position, cluster, or Taiwan Cluster. Scale or the AI data center Taiwan scale and other digital scale. The efficiency, I want to single out the pure play. The pure play enable you to have a seamless cooperation with all supply chain players. In future, This could be one of the competitive advantage for ASE as a pure play OSAP that we have no conflict with foundry, with no conflict with substrate provider, we have no conflict with anybody. Therefore, we have a good way not only to collaborate with our customers long term, also collaborate with all the ecosystem players that will turn critical for the overall complex integrated nature The First Movers Advantage I'm very specific about the first movers as advantages. Technology, speed, capacity, and most importantly, trust. So everything the company does circle around the long-term business objective as well as the seamless integration with the ecosystem player and give you the speed, the efficiency and earn the customer trust. So that's the highlight for me for the second half. Okay, thank you.

Thank you, Tien. As Dr. Wu highlighted, our businesses performed extremely well throughout the first half of the year. For the quarter, we saw strong growth within both our LEAP and our general businesses. Non-LEAP capacities like wire bond and traditional advanced packaging were also tight. For test, our wafer sort and final test capacities were also running near full. Effectively, outside of equipment lines being placed into service, capacities were generally very close to being full. Our blended utilization rate for the quarter was between 80% to 85%. Our capability for near-term incremental growth is being gated by our abilities to install capital equipment and build out our buildings and facilities. From a financial perspective, second quarter ATM revenues came in ahead of our original expectations driven by higher loading from both our LEAP and General Services. From the profitability perspective, we also saw our gross margin outpacing our original expectations, driven by higher loading, resulting in more operating leverage. Revenues for our EMS business were generally in line with our expectations. EMS profitability was slightly below our expectations due to product mix and higher component prices. Please turn to page 5, where you will find our second quarter consolidated results. For Q2, fully diluted EPS was $4.61 and basic EPS came in at $4.80. We believe our earnings reflect strong core profitability and a few non-operating items we'll outline shortly. Consolidated net revenues reached $191.1 billion, up 10% sequentially and 27% year-over-year. Gross profit was $40.2 billion with a gross margin of 21.0%, up 1 percentage point sequentially and 4 percentage points year over year. The sequential improvement stems from higher operating leverage in our ATM business. The annual improvement reflects both structural efficiency gains and a more favorable NT dollar environment. Operating expenses totaled $19 billion, up $3.5 billion year over year, primarily driven by higher labor costs and further R&D spend to support LEAP initiatives. As a percentage of revenue, operating expenses remained flat at 10% and declined 0.3 percentage points annually. This delivered an operating profit of $21.1 billion, up 21% quarter over quarter, and 107% year-over-year, with an operating margin of 11.1%, expanding 1 percentage point sequentially and 4.3 percentage points annually. Non-operating income totaled $4.6 billion, compared to $0.7 billion in the prior quarter. While this amount appears relatively elevated versus prior quarters, the increase primarily reflects some potentially non-recurring gains. Thank you for joining us. We continue to expect an effective tax rate of 18% for the year. Net income for the quarter was $21.1 billion, up 49% sequentially and 180% year over year. On page 6 is a graphical view of our consolidated quarterly performance. For the second quarter 2026, our ATM business represented 66% of our consolidated holding company revenue while representing 94% of our operating profit. This is compared to 61% of consolidated holding company revenue while representing 87% of operating profit in the second quarter last year. We see this being primarily driven by the growth of our ATM LEAP services over the last few years. On page 7 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 second quarter of 2026, we recorded record revenues for our ATM business of $126.1 billion, up $13.7 billion sequentially, and $33.6 billion annually, representing an increase of 12% sequential and 36% annual growth. Gross profit for our ATM business was $34.5 billion, up $5.3 billion sequentially, and up $14.2 billion year-over-year. ATM gross profit margin was 27.3%, up 1.3 percentage points sequentially, and 5.4 percentage points annually, driven by higher operating leverage and a more favorable revenue mix. During the second quarter, operating expenses were $14.7 billion, up $1.4 billion sequentially, and $3.3 billion year-over-year. The sequential and annual increases in operating expenses are primarily related to higher overall labor costs and general R&D expenses. Our operating expense ratio was 11.7%, down by 0.1 percentage points sequentially and 0.6 percentage points annually. We expect our ATM operating expense ratio should continue to improve during the back half of 2026. During the second quarter, operating profit was $19.8 billion, representing a sequential 25% increase of $3.9 billion and a 124% annual increase of $11 billion. Operating margin was 15.7% up 1.6 percentage points sequentially and up 6.2 percentage points year over year. The NT dollar had a positive 0.1 sequential and a 0.6 annual percentage point impact to our gross and operating margins. On page 8, you'll find a graphical representation The chart highlights the improvement in our gross profit margin. It should be noted here that our second and third quarter 2025 margins were heavily impacted by NT dollar strengthening. Over this timeframe, our margin improvement has been largely driven by the recovery of our utilization rate related to our general manufacturing capacities and increasing LEAP product mix. On page 9 is our ATM revenue by the three C market segments. LEAP services are primarily included within our computing applications, with a lesser amount being included in the communications applications. As can be seen here, the computing application percentage continues to grow steadily. At this time, we see this trend continuing into 2027 and 2028. On page 10, you will find our ATM revenue by service type. Despite the overall growth in our business, we did not see substantial shifts in service types during the quarter. All business lines appear to be keeping pace outside of small adjustments between materials and others. At the beginning of the year, we believed that our test business, led by rapid expansion of our wafer sort business, would outpace growth in our assembly business. While our test business has shown the strong growth we initially expected, our assembly business has been showing even stronger than expected growth, especially as it relates to legacy wire bond services. We now believe that both our assembly and test businesses will grow at similar rates during the year. On page 11, You can see the second quarter results of our EMS business. EMS revenues grew 6% sequentially and 12% annually to $65.8 billion. Sequentially, our EMS business's gross margin decreased by 0.6 percentage point to 8.9%. This change was principally the result of product mix differences. EMS operating expenses increased by $0.3 billion sequentially and annually. Our second quarter EMS operating expense ratio of 6.5% was flat sequentially and down 0.4 percentage points annually. Operating margin came in at 2.4% down 0.6 percentage points sequentially and 0.2 percentage points year over year. The sequential margin decline is the result of product mix and a higher component cost environment. Our EMS second quarter operating profit was $1.6 billion, down $0.3 billion sequentially, and up $0.1 billion annually. On the bottom of the page, you will find a graphical representation of our EMS revenue by application. Generally, the moves in the consumer and communication categories are related to the seasonality of the underlying products we service. The growth in the computing category is largely driven by business related to our AI accelerator products. From the holding company perspective, we continue to pursue synergies between our ATM and EMS businesses to co-develop system-level solutions. Particularly in key areas such as optical interconnects, power delivery, and thermal management. By integrating critical EMS competencies with ATM technologies, we have the potential to optimize entire systems end-to-end, applying the same co-engineering disciplines that successfully scaled SIP architecture. On page 12, you will find key line items from our balance sheet. At the end of the quarter, we had cash, cash equivalents, and current financial assets of $107.4 billion. Our total interest-bearing debt increased by $40.9 billion to $306.2 billion. Total unused credit lines amounted to $396.2 billion. Our EBITDA for the quarter was $45.8 billion. Our net debt to equity this quarter was 47%. On page 13, you will find our equipment capital expenditures relative to our EBITDA. Machinery and equipment capital expenditures for the second quarter in U.S. dollars totaled $1.7 billion, of which $840 million was used in packaging operations, $804 million in testing operations. $49 million in EMS operations and $2 million in interconnect materials operations and others. In addition to spending on machinery and equipment, during the quarter we also spent $658 million on facilities. It is worth reiterating what Dr. Wu spoke of earlier. We are investing in capacities and facilities. because what we do has immediate impacts on key bottlenecks in semiconductor supply, performance, and efficiency. The AI build-out, regardless of open or closed model weighting, will require unprecedented hardware capacity and capability expansion. At this point, we are just trying to keep up. With that, I'll hand the presentation over to Joseph to walk through the company's outlook.