Taiwan's ASE Test sales surge; expansion continues after buying Motorola plants
A service of Semiconductor Business News, CMP Media Inc.
Story posted 11:30 a.m. EST/8:30 a.m., PST, 7/23/99
TAIPEI--ASE Test Ltd. here today reported a 46.9% increase in net revenues to $68.2 million in the second quarter compared to the same period in 1998 after gaining the testing business of San Jose-based ISE Labs Inc. in a $98 million stock purchase of the operation earlier this year (see March 29 story). The purchase of ISE expands ASE Test into a number of frontend steps, including test program development, wafer sorting, and failure analysis.
In addition, the Taiwan testing house is gearing up to take on other major competitors in the chip assembly and final test arena after completing the purchase of Motorola Inc.'s plants in Taiwan and South Korea. ASE Test and its parent, ASE Group, are taking aim at Amkor Technology Inc. and ChipPAC Inc.
"The primary increase of the revenue for Q2/99 compared to Q2/98 was the revenue from ISE Labs. Inc., which was $20.4 million for Q2/99," said Jeffrey Chen, chief financial officer of Taiwan's ASE Test. "The Q2/99 revenue for ASE Test Ltd. without ISE's revenue would have been $47.7 million [representing a 2.9% increase from a year ago]." The purchase of ISE in Silicon Valley was completed on May 5.
"The completion of this transaction effects the combination of the strong frontend engineering test performed by ISE during IC design stage, together with the existing assembly and final testing capability of ASE Test, offering the highest-quality testing services to a diversified customer base," declared David Pan, president of ASE Test. "Second, the company has also successfully launched an $150 million convertible bond on June 24. In fact, the offering was well received and the underwriter has exercised the green shoe option of US$10 million on July 14," he added.
ASE Test has become one of the most aggressive contract testing houses in the industry, according to suppliers of equipment and chip managers. Recently, the company's parent--ASE Group--finished its acquisition of Motorola's test and assembly plants in Taiwan and Korea, after announcing the purchase agreement with the U.S. chip giant (see Feb. 5 story). The two plants are located in Chung Li, Taiwan, and Paju, South Korea. These facilities are now performing final chip assembly and test on a range of devices, including automotive semiconductors, radio-frequency chips and other ICs for wireless communications products for Motorola, which sold the plants as part of its strategy to increase the use of contract manufacturing.
ASE Test now holds a 30% stake in each of the two facilities, and ASE Inc. owns the remaining 70% interests. ASE Group said it bought the Taiwan plant from Motorola for $150 million in cash, with an initial payment of $80 million at the closing and $70 million paid over a three-year period if certain sales targets are met. The Korean plant was bought for $140 million, with an initial payment of $36 million and $104 million payable over the next five years, according to ASE Group.
"I am extremely excited about this transaction as it not only represents significant business growth for the ASE Group, but enhances our partnership with Motorola," said Jason Chang, chairman of ASE Test. "We are buying business, not just capacity, as both facilities will continue to provide assembly and test services for Motorola pursuant to a manufacturing service agreement with Motorola for the next five years."
"It's our intention not only to use this transaction as a model to further build our strategic relationship with integrated device manufacturers, but to also better position ourselves to capture the outsourcing trend," he added. "And this transaction definitely evidenced the outsourcing trend is irreversible."
For the quarter, ended June 30, ASE Test posted pre-tax profit of $12.9 million, an increase of 10.8%. The company said its post-tax profit declined 11.5% to $11.1 million in the quarter compared to the period a year ago. ASE Test's gross margin and operating margin declined to 33.3% and 20.2% respectively in the quarter, compared to 34.7% and 25.7% a year ago.
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ASTSF (up 1 today), the direct competitor of Amkor and second largest independent chip packaging and testing company in the World, is benefiting from its increased capacity purchased from Motorola with apparently adequate utilization.
However, the existing capacity is limited on the Earth, and it is too late for new comers to catch the current wave of surging demandd because it takes at least two years to construct new facility and assembly line to make it operational.
The only result shall be fully utilization, higher margin, and ... |
