ASE Technology Holding Co., Ltd. - Form 6-K Summary
Business Context and Reporting Period
Company: Advanced Semiconductor Engineering, Inc. (ASE)
Reporting Period: Fourth Quarter (4Q) and Full Year ended December 31, 2017.
Filing Date: February 1, 2018
Business Overview: ASE is a leading global provider of semiconductor packaging, testing, and electronic manufacturing services (EMS). Operations are segmented into IC Assembly, Testing, and Material (IC ATM) and EMS.
Key Financial Metrics
| Metric | 4Q 2017 | Full Year 2017 |
|---|---|---|
| Net Revenues | NT$83,986 million | NT$290,441 million |
| Net Income (Parent) | NT$6,246 million | NT$22,988 million |
| Basic EPS | NT$0.74 (US$0.123/ADS) | NT$2.82 (US$0.463/ADS) |
| Diluted EPS | NT$0.71 (US$0.118/ADS) | NT$2.62 (US$0.430/ADS) |
| Gross Margin | 17.6% | 18.2% |
| Operating Margin | 9.2% | 8.7% |
| Capital Expenditures | US$142 million | US$639 million |
| Current Ratio | 1.37 | 1.37 |
| Net Debt to Equity | 0.12 | 0.12 |
Material Changes vs. Prior Periods
- Revenue Growth: 4Q17 revenue increased 9% year-over-year (YoY) and 14% sequentially. Full-year 2017 revenue grew 6% YoY.
- Profitability Decline: Despite revenue growth, 4Q17 net income attributable to shareholders dropped 21% YoY (from NT$7,957 million) and 1% sequentially. Full-year net income rose 6% YoY.
- Margin Compression: Consolidated gross margin decreased 1.1 percentage points sequentially to 17.6% and 1.1 points YoY to 18.2%. Operating margin followed a similar downward trend.
- Segment Performance:
- IC ATM: Gross margin improved sequentially to 26.0% but declined YoY to 24.3%.
- EMS: Revenue surged 32% sequentially due to higher volume, but gross margin compressed to 9.2% from 10.3%.
- Non-Operating Items: A significant net foreign exchange gain of NT$780 million in 4Q17 (due to USD depreciation) offset a loss on valuation of financial assets (NT$216 million).
Guidance, Outlook, and Risks
Q1 2018 Outlook:
- IC ATM: Business volume expected to be slightly ahead of Q1 2017 levels (USD terms). Gross margin expected to slightly improve vs. Q1 2017 (excluding FX impacts).
- EMS: Business volume expected to be slightly below Q3 2017 levels. Gross margin expected to be slightly above Q4 2017 levels.
Risks and Contingencies:
- Customer Concentration: Top 5 customers accounted for 34% of IC ATM revenue and 82% of EMS revenue in 4Q17.
- Market Cyclicality: Exposure to semiconductor and electronic industry cycles.
- Geopolitical Factors: Risks associated with the relationship between the Republic of China and the People's Republic of China.
- Regulatory/Environmental: Compliance with environmental regulations and resolution of liabilities.
Investor Verification Checklist
- Margin Sustainability: Verify the drivers behind the sequential decline in consolidated gross margin (17.6%) despite revenue growth, particularly in the EMS segment.
- FX Impact: Assess the volatility of foreign exchange gains/losses, which contributed significantly to non-operating income in 4Q17.
- Customer Concentration: Review the dependency on the top 5 EMS customers (82% of revenue) and the risk of demand shifts from these clients.
- Capital Allocation: Confirm the utilization of the US$639 million in 2017 CapEx and its impact on future capacity and depreciation expenses.
- Unaudited Status: Note that all financial data presented is unaudited and prepared under Taiwan-IFRS.