Operator: I’d like to open the floor for questions. [Operator Instructions] We have a question from Mr. Gokul Hariharan of JPMorgan.
Gokul Hariharan : Happy New Year. Could we talk a little bit more about how we think about growth this year? I think Dr. Wu, you mentioned close to the logic industry growth. What does that number look like for you? Is it more like a 10% number or more than that? And maybe give us a little bit more color on how you think about growth by vertical. Communication is still a very important, more than 50% revenue for your ATM business. So, how do you think about communication versus computing versus the consumer auto segment? That’s my first question.
Joseph Tung: As Tien mentioned, this 2024 will be a year of recovery. We are expecting to see, ATM to see sequential growth on a quarterly basis throughout the year. But with the second half having a stronger momentum. And as the overall full year growth, also, as Tien mentioned, we will be growing at a similar rate with the logic semi market growth, which is projected by different sources for anything from 6% to 10% in the industry now.
Gokul Hariharan: Also, any guidance for margins? Are we expecting margins to get back to high-20s to 30%? And could you also talk a little bit about your approach to the AI-related packaging? Some of your competitors are setting up capacity to compete with the leading foundry. Is that ASE’s approach as well in terms of seeking out these high-end AI accelerator packaging? Or are you kind of partnering with the leading foundry in terms of potential opportunities in this advanced packaging business?
Joseph Tung: Well, I think we will certainly increase our overall CapEx for equipment for this year. And given the pipeline that we’re seeing, I think we would likely to have 40% to 50% more equipment CapEx budgeted for the year, although that’s still subject to Board approval. And the bulk of the — more than 65% of the CapEx will be put in assembly and bulk part of it is really for the advanced packaging. And if we’re looking at the breakdown of the CapEx that we are looking at today, roughly 67% will be for assembly, 80% for tests and 30% for EMS. And a lot of it — most of it is really for the new packages or new products that we’ll be bringing out this year. In terms of margin, I think we are very, very confident that the second half of the year, we will be building back to our structural margin, within our structural margin, which is set at a mid-20s to 30%.
And we believe that for the whole year, we can also have our margin coming back to the structural margin range.
Tien Wu: I think there’s a question about the collaboration with the leading foundry supplier for advanced packaging as well as investment maybe in the other part of the world. So, our position has been clear. We’re working with all of the leading foundry and we have made public announcement that, for example, the ASE and TSMC collaboration has been ongoing for years, and we’ll continue to work very closely working on all of the required advanced packaging. The investment and the R&D readiness has always been in place, which is another reason why we can ramp up, for example, the OS in later part of last year as well as the early part of this year, and you will see the good results are coming out. So the collaboration, the readiness has always been here.
Now in terms of going to different parts of the world and making a big investment that we need to have a better understanding about the product and also the technology requirement. Right now, we do not have any plan to go to U.S., for example, to make leading-edge capacity investment. However, we will be very careful closely working with our customer and try to examine the situation. But today, we’re going to focus in Taiwan first to make sure we can fulfill all of the ramp-up technology variation requirement based on the leading-edge foundry suppliers as well as our customer. I think that will be the first order of business. As we move to ‘25, ‘26 and ‘27, depending on the environment, including political as well business environment, we will make the different decision accordingly.
Operator: Next question is from Ms. Laura Chen of Citi.
Laura Chen : Can you hear me?
Operator: Yes.
Laura Chen : I also have a question about the advanced packaging. I think you mentioned about like an additional NTD 250 million revenue contribution for this year. That’s the new engagement with the advanced packaging. Can you elaborate more for what kind of the application? Is that including some of the bump in business or more focus on substrates, that kind of advanced packaging?
Tien Wu: The NTD 250 million revenue, includes all of the what we call the advanced packaging. For example, the [indiscernible], if you’re referring to our substrate business, and that includes like CoWoS, the TSMC version of the CoWoS and the un-substrate portion, and that is inclusive. Also the ASE has the 6 Pack, the VIPack that includes all kinds of advanced packaging. So this year, we’re seeing the OS customers. We are also seeing the VIPack customers. And then hopefully, by the second half of this year, we can start announcing key customer ramping-up the other advanced technology in volume.
Laura Chen : And was that also the expansion, what kind of the margin impact we’re looking for?
Joseph Tung: We don’t normally comment on specific product margin. But as a whole, I think the overall corporate margin will continue to improve as we see volume come up and also by bringing in the new technology that we are in our overall offering.
Operator: Next question is from Charlie Chan of Morgan Stanley. Charlie?
Charlie Chan: Happy New Year. So, I also have a question regarding to advanced packaging. That CPO, seems to be very, very future technology, but can the company comment about the potential timing, penetration, TAM, especially how are you going to work out with the key foundry event at TSMC? Because I heard that TSMC may want to produce their silicon photonics. So, how are you going to collaborate with the foundry partners or other vendors?
Tien Wu: Okay. The silicon photonics is a big subject. The whole idea is that will represent another paradigm shift. And as we enter into silicon photonics, we’ll be opened up to more dimensions, more performance, more flexibility for all of the designers. So, it is good for the whole industry, right? The timing of silicon photonics, and that has been the big question. We have been working on this for many, many years. There are many, many people working on this. So, this is really a future technology as well as an incremental growth driver for the whole industry. In terms of the — how do we petition the rolling responsibility, that is less of a concern. For example, the foundry will have foundry’s role in terms of making the photonics chips either in a stack format or isolated format.
And for ASE, we will focus on co-packaged optics. For example, if we take the IDM, photonics chips or the foundry photonic chips, how do we bundle that with everything else. So, each sector of the player will have a good responsibility and role to play in that new arena. Now ASE has been talking about the CPO or silicon photonics, mainly because this is really an important innovation. The whole industry is focusing on this. ASE today is working with all of the major driver in the industry in this arena. I’m not sure that answers your question, but that’s what I have.
Charlie Chan : Very, very fair and indeed covered lots of my questions. My second part of the question maybe is on near term. So, since the — I guess, late third quarter, we see circled the foundry rush orders. That means that demand is coming back and also people like of visibility. Fast-forwarding to 4 months later, I’m not sure Tien or Joseph, who want to answer this question, do you think this kind of rush order patterns will continue or actually on the kind of negative side rush orders now already disappear?
