It Has Been Long Expected:
ASE to Surpass Amkor in IC-packaging Market, says report
By Mark LaPedus
Silicon Strategies
10/31/2003, 7:00 PM ET
SAN FRANCISCO -- Based on its projected growth, Taiwan's Advanced Semiconductor Engineering Inc. (ASE) is expected to become the world's largest chip-packaging vendor in terms of sales by year's end, surpassing Amkor Technology Inc., according to a report from WR Hambrecht + Co. LLC of San Francisco.
Amkor of Chandler, Ariz. has been the world's largest chip-packaging house for years, but Taipei-based ASE is nipping at the company's heels in terms of sales and market share.
This week, ASE reported lower-than-expected results for the third quarter of 2003. It posted earnings of $0.02 per share on sales of $423.8 million in Q3, up 15 percent sequentially, verses WR Hambrecht's estimates of $427.2 million and $0.04 in the period. In total, ASE's assembly business posted 16 percent growth to $333.2 million, while IC test sales grew 13 percent to $89.5 million.
In comparison, Amkor this week reported third quarter sales of $424 million, up 12 percent sequentially and up 8 percent over the third quarter of 2002. Amkor returned to profitability in the third quarter, with net income of $16 million, or $0.09 per share, compared with a loss of $59 million, or minus $0.36 per share, in the third quarter of 2002.
For Q4, Amkor's sales are projected to grow 5-to-8 percent. Net income in the range of 7 to 10 cents per diluted share.
However, ASE appears to be growing faster than Amkor, said Satya Chillara, an analyst with the San Francisco-based investment banking firm. ASE "gave extremely strong Q4 guidance of 15 percent topline growth, higher than any SAT (semiconductor assembly test) player," Chillara said in the report. "ASE is likely to surpass Amkor as the #1 SAT player in Q4," he said in the report.
ASE's business is booming, due in part to a migration to higher-margin products like chip-scale packaging and flip-chip. Its chip-assembly utilization rate is expected to hit 85 percent in Q4, up from 80 percent in Q3, he said. The company's IC-test utilization rate is expected to reach 80 percent in Q4, up from 75 percent in Q3, he said.
ASE's capital spending plans are also bold. "We believe ASE might spend $500-600 (million), equating to 24-28 percent of projected sales," he added.
Amkor is not expected to give up any ground, however. "As (Amkor's) customer forecasts continue to trend up, Q4 guidance was for 5-8 percent topline growth with suggestions that Q1 may come in better than traditional seasonality," he said in a separate report.
Amkor's "Q4 utilization is expected to increase to 85 percent," the report said. "As advanced package lines continue to run at full capacity, the company also increased 2003 capex guidance to $200 million, up from previous guidance of $150 million."
Both ASE and Amkor must watch out for the rising star in the sector--Siliconware Precision Industries Co. Ltd. (SPIL) of Taiwan, the world's third largest chip-packaging provider.
SPIL reported earnings of $0.09 a share on sales of $213.0 million, up 13 percent over the previous period. Assembly and test sales were both up 13 percent to $193.5 million and $19.5 million, respectively.
"As we believe the computing market is strong heading into Q4, we believe Q4 guidance of mid single-digit growth is conservative. We believe our current 7 percent growth estimate is very achievable," according to the analyst in a separate report.
"Utilization rates are running at an all-time high with assembly at 87 percent and test at 55 percent. We believe SPIL is now suffering from a lack of capacity, which suggests very robust demand," the report said. "(SPIL's) 2004 capex guidance of $175 million is roughly equivalent to 2002 levels."
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