ASE Technology Holding Co., Ltd. — FY2020 Form 20-F
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone Q4 filing; quarterly figures below are unaudited. Financial statements use IFRS and New Taiwan dollars (NT$). Unless stated otherwise, amounts below are NT$ millions; U.S. dollar equivalents are provided by the filing for convenience.
Business context
ASE Technology provides semiconductor packaging and testing, interconnect materials, and electronic manufacturing services (EMS). FY2020 results include the consolidated operations of ASE and SPIL, which combined in 2018, and FAFG from its acquisition on December 1, 2020. The company reported that historical results may not be fully comparable following the SPIL transaction.
Key financial metrics
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Revenue | 476,978.7 (US$16,986.4) | 413,182.2 | +15.4% |
| Gross profit / margin | 77,984.3 / 16.3% | 64,310.8 / 15.6% | +21.3%; +0.7 percentage points |
| Operating profit / margin | 35,378.6 / 7.4% | 23,257.8 / 5.6% | +52.1%; +1.8 percentage points |
| Profit attributable to company owners | 26,970.6 | 17,060.6 | +58.1% |
| Basic / diluted EPS per common share | NT$6.32 / NT$6.17 | NT$4.01 / NT$3.91 | Improved |
| Operating cash flow | 75,060.6 | 72,303.3 | +3.8% |
| Investing cash flow | (60,946.3) | (54,579.1) | Higher outflow |
| Financing cash flow | (21,995.3) | (6,498.8) | Higher outflow |
| Capital expenditures | 59,024.2 | 63,073.9 | Lower |
Segment revenue was NT$218,666.1 million for packaging (+9.9%), NT$47,271.1 million for testing (+10.8%), and NT$204,690.7 million for EMS (+23.5%). EMS represented 42.9% of total revenue. Packaging and EMS gross margins improved year over year; testing margin declined to 32.3% from 34.1%.
At December 31, 2020, cash and cash equivalents were NT$51,538.1 million; current assets NT$224,012.9 million; working capital NT$49,420.5 million; and unused credit lines NT$275,180.7 million. Total debt was NT$209,118.0 million, including NT$34,597.9 million short-term debt, NT$11,994.8 million current maturities of long-term debt, and NT$162,525.3 million long-term debt. Total liabilities were NT$351,845.7 million and total assets NT$583,576.9 million. Management said available cash, expected operating cash flow, and credit lines should cover requirements for at least the next 12 months.
For Q4 2020, unaudited revenue was NT$148,877.4 million and gross profit NT$23,299.5 million, for a 15.7% gross margin. Q4 revenue rose from NT$123,195.4 million in Q3 2020 and NT$116,022.5 million in Q4 2019; Q4 2020 gross margin was below Q4 2019’s 17.1%.
Material changes and unusual items
- Growth was led by EMS, mainly higher orders for communications SiP and consumer electronics products; packaging growth reflected advanced package demand, and testing growth reflected wafer-probe services.
- Management said stronger loading supported higher overall gross margin. Raw materials rose to 50.4% of revenue from 49.3%, while depreciation, amortization, and rental expense fell to 9.8% from 11.2% of revenue.
- U.S. export restrictions on Huawei and affiliates took effect for ASE on September 15, 2020. HiSilicon had been a major customer; the restrictions adversely affected results and led to unusable raw materials, reduced equipment loading, inventory write-offs, and impairment expense in Q3.
- FY2020 included NT$992.3 million of impairment losses on property, plant and equipment. Goodwill increased to NT$54,777.4 million, primarily reflecting acquisitions; no goodwill impairment was recorded.
- FAFG was acquired for tentative consideration of NT$12,829.4 million, including cash, newly issued USI Shanghai shares, and contingent consideration. Purchase-price allocation and certain fair values remained provisional at year-end.
- The company sold its Siliconware Electronics (Fujian) subsidiary, recognizing a gain of NT$802.8 million. It also reported net foreign-exchange gains of NT$1,005.4 million.
Outlook, risks, and contingencies
The filing gives no specific revenue or earnings guidance. Management anticipated 2021 capital spending would be funded through cash, operating cash flow, and credit lines; the report lists NT$32,627.4 million of capital-expenditure commitments at year-end, mainly for packaging and testing capacity. It also estimates 2021 environmental capital expenditures of about US$20.9 million.
- Principal risks include semiconductor cyclicality, pricing and utilization pressure, competition and technology shifts, customer concentration, and dependence on outsourcing demand. The five largest customers accounted for 54.5% of FY2020 revenue; one customer exceeded 10%.
- COVID-19 effects remained uncertain. Taiwan operations also face drought, water-supply, power, typhoon, and earthquake risks; the filing discussed severe drought conditions and the importance of water to production.
- Other material exposures include foreign-exchange and floating-rate debt risk, LIBOR transition, debt covenants, Taiwan–China tensions, cybersecurity, environmental compliance, and potential supply constraints. The company reported no covenant breach at year-end, though it disclosed past covenant non-compliance.
- Environmental matters include a China subsidiary case on appeal after a first-instance fine and benefit-repayment order; the final outcome could not be reliably measured. A Taiwan wastewater fine was revoked in December 2020 and remanded for further administrative action. The filing says no contingent obligations as defined by management were outstanding at year-end.
- The company proposed a cash dividend of NT$4.20 per share in March 2021, subject to shareholder approval and possible adjustment. The 2020 dividend paid was NT$2.00 per share.
The independent auditor issued an unqualified opinion on the consolidated financial statements and internal controls. Management also concluded controls were effective, but excluded FAFG from its control assessment because it was acquired late in 2020; integration and assessment were expected during 2021.
Most important facts for investors to verify
- Whether FY2020 revenue and margin gains, especially in EMS and packaging, are sustainable, and how Q4 performance compares with subsequent quarters.
- The continuing effect of Huawei-related export restrictions, including customer exposure, inventory write-offs, and equipment utilization.
- Customer concentration and the identity and outlook of the customer contributing more than 10% of revenue.
- Debt maturities, available credit facilities, covenant headroom, and the funding required for committed capital spending.
- FAFG’s final purchase-price allocation, earn-out exposure, integration performance, and internal-control remediation.
- Developments in environmental proceedings and Taiwan water availability, and shareholder approval of the proposed NT$4.20 dividend.