Tien Wu: Rush order, you can view it from 2 different angle. For example, if you look at the – well, offer you my perspective first. Industry is going through a very prolonged inventory correction, right, after COVID. And so then we have a lot of wafer bank. And then the people looking their inventory days, they look at the order pattern, they’re trying to make 2 adjustments on the inventory days as well as the foundry order and the supply chain cycle time pipeline. Now what we have seen a few months ago is, for example, in China, the high-end cell phone was selling really well. And therefore, some of our customers start having the rush order on different wafer, different devices. I think that’s what you were referring to.
And this is really good, right? So the next question is, can this be prolonged. Our belief is this is the beginning of the hub to the boom cycle or this is nearly – we’re at a tail end of the inventory control. For example, the first customer that started the inventory control was back to like January of 2023. And there’s some customers they start doing inventory control at a much later of the year. So, every company, every sector will go through a different inventory adjustment. But I believe by the third quarter of this year, they’re pretty much done. And then we’re really going back to the sell-through cycle. There’s a lot of uncertainty on what exactly the sell-through cycle because of high inflation, the China economy, the war that is going on.
And so complicated comment. But the general belief is this year, the semiconductor will grow. The logic will grow around high single-digit, like 10%. So everybody is working towards that goal. All of the order pattern that we’re seeing today with every sector in a different pace, different tempo, they all pointed to that direction. The best way we can judge is in January, February, will give you this position based on the snapshot. And every quarter, we’ll give you a different snapshot. I think that’s probably the best we can do because there’s really no right or wrong. And both sides of the factors can be correct, but we believe that we are seeing towards the tail end of the inventory adjustment. So, the order pattern will start coming in and become more persistent and consistent.
Operator: Next question is from Bruce Lu of Goldman Sachs.
Bruce Lu : Again, I still want to ask about advanced packaging. I think in the past, the difficulty for us in terms of advanced packaging is that there are so many different solutions and each one require different capacity and different CapEx. And obviously, we do see a clear direction for the — driven by AI at this moment. So, can you tell us that is that the direction for moving into the specific advanced packaging is more confirmed? Do we see a clear — our CapEx is somehow focused on that? Do we get a reasonable ROIC or ROE for this business moving forward? Is that accretive business for us moving forward? Basically, that’s the question, which I’d ask.
Tien Wu: Okay. This is a loaded questions. Now the — how long would the AI last. We believe it will be a long time. So the — initially it could be 1 or 2 representative customers. But over time, the other players will come in. So, I think we’re seeing the beginning or the tip of iceberg, right? Now, if we believe that is the case, then the leading edge foundry which says, okay, this is a capacity they’re willing to put in and the other capacity, the other OSAT players, if you can do it, you will come in to help us. I think that was the situation pretty much described last year. The company has decided we think we have the technology, we have the initial capacity. We understand the investment. We understand the return profile, so we want to do this business not just from the leading-edge foundry customer, but also from all of the end customer and the potential system customer, they asked us to do this.
Now, we’re doing the OS or we’re doing the VIPack as of now, but as AI become more evolved, in other words, once we evolve beyond the brain, the logic or the memory, you will start adding the other requirements. And all of this will require a similar capacity to build that required system over time. So, we think company will be more. The application will be more, the system requirement will be more but all going back to automation, going back to the understanding of the basic technology and also the company has enough portfolio and financial strength to shoulder the business model and the liability. So, this is one area which is quite definitive for ASE. So, we’re not doing this for 3 to 6 months, if that answers your question.
Joseph Tung: I want to add a point that the AI is really at its early stage and we believe that as they continue to proliferate, I think we will go to some other applications and will create another run of replacement market for us. So, it’s not just the — to us, it’s not just the advanced packaging that will start to have very strong growth. But also as a expense into other applications, all the other chips will be coming out and the overall volume for the also high end, but the mainstream packages will also benefit from the overall AI boom. So that will create another round of volume growth for us going forward but not just on the advanced packaging.
Bruce Lu : But the question is small, in the early stage of advanced packaging, which took quite a bit R&D and CapEx, are we seeing that the advanced packaging margin or how you are accretive in 2024 in the early stage of the AI?
Joseph Tung: As I mentioned, we don’t particularly comment on different packages’ profit margin. But as a whole, I think as long as technology continue to advance, I think that our margin will reflect that. And as I said, if you look at this year, we will continue to see our margins starting to improve as we go along with the technology advancement.
Operator: Next question is from Randy Abrams of UBS.
Randy Abrams : Yes. I wanted to ask the first question, if you can elaborate on the growth profile for this year. First quarter looks like seasonal or slightly lower than seasonal. For the outlook, it sounds like more confident in the second half, but I’m curious for second quarter, do you see we get back to the point at least look seasonal from the low base. So, we start getting back to like high-single, low-teens type of recovery? And then for applications, what I’m curious, the auto was very strong through the upturn. How is that application weathering the downturn in correction? And do you see the content growth where — I’m curious how auto is faring through all this.
Tien Wu: The Q1 typically, if you go back to my 20 years with ASE, the Q1 typically is 10% to 15% down, right? And the typical number that we work with is 12%. So, I think this year, if we can be flattish to Q1 of last year, I think we’re better than the typical Q1. Of course, our Q4, you have to look at the relative. So that will be the first comment. And then Q2, we believe that we go back to our typical growth path. So, I think this year, we’re looking at a typical year where Q1 low, Q2 growth, the second half stronger. I think we’re looking at that pattern now. In terms of the automotive, some of the IoT and the analog and mixed-signal customer, I think they’re having a lot of inventory concerns. So, we are seeing a sluggish order in the first half in those arenas.
And some of the customers do supply to an automotive. However, the ASE automotive business per se is growing, mainly because of the — I think, the auto line has a lot to do with it. And Joseph will comment more on the auto growth.
Joseph Tung: We did see very good growth in auto motor part of the business since 2022, 2023, and we’re expecting a higher growth also in 2024. Right now, I think the automotive-related business has already — has had a quite decent growth. And in 2023, it already represents close to 10% of our overall business. And we’re seeing that continue to grow into 2024. And in terms of the overall growth rate, I think it will outpace the other sectors for 2024 as well. Although we are seeing some softer market conditions for the first half of the year because selectively, there are a few areas that we’re seeing some inventory adjustments. But overall, I think the overall growth momentum will continue into 2024 in terms of our automotive business.
Randy Abrams: And there’s a quick follow-up on that, and then I’ll ask the second question. Doing some IoT analog mixed signal because the consumer downturn lasted a lot longer. Do you think we are through that based on the customer feedback that we should also improve in the second half or risk just given the inventory and how long it was strong stays. And then the second question is actually the EMS business where it’s coming off a slow year and there hasn’t been that much — it feels like having customer innovation on new SiP projects. How do you see EMS, if it’s also just general environment recovering or applications they’re pushing and if there’s — you’re seeing new activity for SiP that could jump start that part.
Tien Wu: We already said that second half, we believe that will be the beginning of the recovery. All right, for the first question. The second question is EMS. And I think if you hear the EMS earning announcement, I think they will also have a similar growth with ASE this year. I’m not sure how to answer the SiP part of the question because we don’t typically comment on the specific SiP or prod our customers.
Joseph Tung: I think for ‘24, I think in terms of EMS SiP business, it will stay relatively flat from this – from last year because of the different dynamics that’s happening in this business. Well, all in all, I think we still remain very, very active in engaging with the different products and different customers in the SiP arena, and we believe that we will see very, very strong momentum, start to happen in 2025. I think 2024 is really the year that we are entering a lot of NPIs, a lot of the new engagements in different areas, including automotive, consumer and communication.
