Joseph Tung: Take off in what? In silicon photonics?
Brad Lin: No, no. For the new generation of the consumer demand, which may be brought by the generative AI.
Joseph Tung: I think AI is coming and we were expecting the AI technology to proliferate into so many different kinds of edge devices. And they will be the main thing for the next few years, and will be a mega driving force for the industry to grow. And we’re certainly going to be well prepared for it. I think the real cream for us is not just the AI chip itself, but the proliferating applications into all different kinds of devices that will create tremendous peripheral chips, demand for us to satisfy.
Brad Lin: Got it. So that’s structure or tray and then we should see a lot of the new application to come in coming years.
Joseph Tung: Exactly. And I think the momentum will really start to accelerate in 2024.
Brad Lin: Got it. Got it. And then my second question is on the CPL. So we have learned ASE [Phonetic] started our development of the CPL photonics for a couple of years during the [Indiscernible]. So may we learn the opportunities and also the implication of the new technology? And what are the key barriers or challenges for ASE here in this new technology? Thank you.
Joseph Tung: Well, now being a technology guy, I think, from what I heard, that’s still a few years away. Right now we’re still focusing on the silicon photonics chips pathogen test. Going forward, I think the technology will just push the development of CPO and we’re still at the investing stage. When the demand really comes, we’ll be ready for it.
Operator: Next question is from Ms. Sunny Lin of UBS.
Sunny Lin: Hi, could you hear me okay?
Operator: Yes.
Sunny Lin: Thank you very much for taking my questions. So my first question is on interposer base 2.5D package. I think currently, the mastering solution is based on silicon interposer but there’s increasing discussions on the technology move into RDL-based 2.5D package. And so based on your engagement with key customers, when do you think that shift will start to happen? And for ASE, I assume that you should be getting more opportunities if the industry does start to make that shift.
Joseph Tung: Yeah, we’re seeing that happening now and we are aggressively engaging customers who are looking for a more cost effective kind of solution. At this point, I think if you call silicon based — silicon interposer based is still a bit more matured kind of technology and I think the RDL based, there will still be some discussions in terms of the design or the process of it that needs to be worked out individually with the customers that we are engaging now. We are in mass production at this point, but with limited amount, but we see this has a pretty good potential and we will continue to make investment into it and continue to work very closely with our customers to start expanding that part of the business for us.
Sunny Lin: Got it. So a quick follow up on this part of the business. So in terms of the competition, obviously the leading foundry is also aggressive on the overall technology roadmap, some of your competitors are also focusing on exploring the opportunities. And so for ASE, what are some of the competitive advantage that you think you have, when competing with key projects?
Joseph Tung: Well, our long partnering relationship with the foundry or the foundry, certainly give us an edge and given our scale and the technology that we have been growing over the years, I think we are certainly ahead of our competitors, and in whatever products that we are building today, or whatever technology that we’re developing. So, the competition is given, there’s always going to be competition. The key here is really to stay focused and you’ll continue to bring out the satisfactory offering to our customers, as well as our upstream foundry partners.
Operator: Next question is from Mr. Szeho Ng of China Renaissance.
Szeho Ng: Hi. Thank you. My first question is regarding the pricing environment. So far, it seems to be quite stable but would there be a reset the pricing environment would be more aggressive and inflection point really kicks in when the market rate bottoms?
Joseph Tung: Well, pricing is — pricing pressure is always there, but given our scale, and our leading position, I think our pricing is more resilient than our competitors. And we will continue to find the most suitable pricing strategy to satisfy ourselves as well as our customers.
Szeho Ng: I see. All right. And same question regarding the CapEx this year, and also any initial outlook for next year’s CapEx?
Joseph Tung: Nothing for next year, but this year, we’re sticking to our original CapEx roughly for equipment about a billion dollar and the split of it will be around 50% in assembly, 30% in tests, 17% in EMS, 3% for material.
Operator: Next question is from Mr. Gokul Hariharan of J.P. Morgan.
Gokul Hariharan: Yeah, hi, thanks for taking my question. So for some of these 2.5D packaging and advanced identity-related products, could you talk a little bit about how much more capital intensive these investments are? I think long time back, we used to talk about $1 revenue for $1 of CapEx for flip chip and much lower for wire bond. Could you talk a little bit about how we are seeing this capital intensity going up for some of these investments? Second, what is ASE’s stance on taking some customer supported capacity buildups? Some of your competitors or some of your peers have kind of done some of the capacity expansion in partnership with some of the AI customers. Any thoughts on how ASE is approaching this kind of capacity build out?
And lastly, I think we’ve been seeing CapEx cuts or CapEx declining since 2021, so do we feel like we are reaching an inflection where we start to have to add some capacity, increased CapEx in next year or you think given utilization is still mid-60s, next year outlook is still not that clear to guide for any meaningful CapEx increase? Thank you.
Joseph Tung: Well, we are seeing a better overall marketing environment for next year, it wouldn’t be surprised that we — next year’s CapEx, although I don’t have the number here, but I do believe that the CapEx that we need to put in for next year will be higher than this year. In terms of the advanced packaging, I think the — like we said, the — right now we’re still at the very early stage in developing this part of the business. And so I think we don’t have sufficient data points to come up with the real or more precise investment intensity at this point, plus, like I mentioned earlier on, whatever investment that we are on the table today for this type of products, it is mostly for de-bottling the current capacity that we have.
