CHIPMOS TECHNOLOGIES INC annual report, Q4 FY2020

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Business context and reporting period

ChipMOS TECHNOLOGIES INC. is a Taiwan-based provider of semiconductor assembly, testing and bumping services, with operations centered in Taiwan. This is its audited annual Form 20-F for the fiscal year ended December 31, 2020, filed April 20, 2021—not a standalone 2020 fourth-quarter report. The financial statements are prepared under IFRS as issued by the IASB. Amounts below are in NT$ millions unless stated otherwise; US-dollar figures are convenience translations.

Financial performance and position

  • Revenue: NT$23,011 (US$819 million), up 13% from NT$20,338 in 2019. Testing revenue rose 17% to NT$5,003; assembly rose 17% to NT$6,002; display-driver services rose 1% to NT$7,023; and bumping rose 24% to NT$4,984.
  • Profit and margins: Gross profit increased 28% to NT$5,032; gross margin improved to 21.9% from 19.3%. Operating profit increased to NT$3,567 from NT$2,457, with operating margin of 15.5% versus 12.1%. Profit attributable to shareholders decreased 5% to NT$2,379 (US$85 million); net margin was 10.3% versus 12.3%. Basic EPS was NT$3.27, down from NT$3.45.
  • Segment gross margins: Testing 33.0% (24.3% in 2019); assembly 8.9% (3.3%); display-driver services 28.4% (30.8%); bumping 17.1% (14.6%).
  • Cash flow and investment: Operating cash flow was NT$5,940, near NT$5,982 in 2019. Investing cash outflow was NT$3,799 and financing cash outflow NT$2,720; cash decreased NT$590 to NT$4,114. Capital expenditure was NT$4,134, compared with NT$4,897 in 2019. Depreciation and amortization increased to NT$4,176.
  • Liquidity and debt: Current assets were NT$12,356 and current liabilities NT$5,726 at year-end (approximately 2.16 current ratio). Cash was NT$4,114. Bank debt outstanding was NT$7,734, all floating-rate, with rates of 0.65%–1.7895%; NT$7,664 was secured by assets. No short-term bank loans were outstanding. Lease liabilities were NT$870. The company reported unused credit facilities of NT$5,778 short-term and NT$11,239 long-term; it said available cash, operating cash flow and facilities should cover needs for the year after issuance, subject to economic uncertainty.
  • Other metrics: The top five customers contributed 61% of 2020 revenue. Average capacity utilization improved in memory/logic testing (78% from 71%), memory/logic assembly (83% from 72%) and bumping (82% from 74%); display-driver utilization was 76%, up from 74%.

Material changes versus 2019

  • Revenue growth and higher utilization/customer demand supported stronger gross and operating profit. Cost of revenue rose 10%, slower than revenue, but direct materials and depreciation increased.
  • Profit before tax edged down to NT$2,973 from NT$3,022. The 2019 comparison included a NT$974 gain on disposal of JMC shares; no comparable gain occurred in 2020. Excluding that item, 2020 operating improvement is more apparent.
  • Foreign-exchange losses increased to NT$355 from NT$155, contributing to net other losses of NT$323 versus NT$148 in 2019.
  • Cash flow from operations was broadly stable, while cash declined as the company paid dividends of NT$1,309 and repaid net long-term bank borrowings. Accounts receivable rose NT$911 and inventory rose NT$334 during the year.

Outlook, commentary and risks

  • Management described strong demand in several areas during 2020, including work-from-home-related cloud storage and display-driver demand, 5G-related products and automotive semiconductors, alongside tight capacity across foundries, materials and outsourced assembly and test providers. It also noted soft TV-panel demand earlier in the year.
  • The filing gives no quantified revenue, earnings or margin guidance. Management expects to continue research and development and capacity investment in advanced packaging, wafer-level packaging, COF and related technologies. It stated that COVID-19 was likely to negatively affect 2021 operating results; the extent remained uncertain.
  • Key risks include semiconductor cyclicality, price pressure and high fixed costs; reliance on major customers and memory/display markets; equipment and material availability; COVID-19 and supply-chain disruption; Taiwan earthquake, drought, power and water risks; Taiwan–Mainland China political tensions and trade restrictions; foreign-exchange exposure; and debt service and refinancing risk.
  • All bank debt is floating-rate; management estimated a 1% rate increase would add about NT$78 of annual interest expense. The company reported compliance with its loan financial covenants for 2015–2020. A stronger NT dollar can also affect earnings; a 5% appreciation sensitivity was estimated to reduce exchange gain by NT$195.
  • Unusual and accounting items: The 2019 JMC disposal gain did not recur. The 2020 audit identified revenue recognition for assembly, display-driver and bumping services as a critical audit matter because progress estimates depend on management’s expected total input costs. The auditor issued unqualified opinions on the financial statements and internal control; no material litigation, significant disaster loss or significant post-reporting-period event was reported.

Important facts for investors to verify

  • Review the full-year comparison alongside quarterly results: this 20-F does not provide a clear standalone Q4 revenue, profit or cash-flow value.
  • Track customer concentration, order visibility, utilization and pricing—especially the five largest customers’ 61% revenue share and the display-driver segment’s substantial revenue contribution.
  • Assess whether receivables and inventory growth converts to cash, and compare continuing operating cash flow with capital spending, dividends and debt repayments.
  • Confirm the availability, expiry, draw conditions and covenant headroom of undrawn facilities, and monitor floating-rate debt, secured assets and scheduled maturities.
  • Evaluate the sustainability of margin improvements by segment, the effect of the nonrecurring 2019 JMC gain, foreign-exchange losses, and the judgment involved in revenue-progress estimates.
  • Check subsequent company disclosures for quantified 2021 guidance and updates on COVID-19, semiconductor supply constraints, water and power availability, and Taiwan-related geopolitical risks.