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Technology Stocks : ASX - Chip Packaging and Testing -- Ignore unavailable to you. Want to Upgrade?

To: tech101 who wrote (29)	10/30/2003 2:19:34 PM
From: tech101	Respond to of 58

GROSS MARGE 20%+, RELATIVELY DEBT-FREE, ASX REVENUE BEATS AMKOR, BUT SHARE PRICE LAGS Taiwan's ASE profit jumps as chip sector rebounds Thursday October 30, 6:12 am ET By Michael Kramer (Adds analyst comment, background) TAIPEI, Oct 30 (Reuters) - Taiwan's ASE (Taiwan:2311.TW - News) reported a 85 percent rise in third quarter profit on Thursday and said strong revenue growth had made it the world's largest microchip packaging firm as a semiconductor sector recovery gathers pace. Surging demand for consumer electronics like DVD players, digital cameras and mobile phones has helped ASE regain momentum after a slow recovery from the sector's record downturn in 2001. Advanced Semiconductor Engineering Inc (ASE) (NYSE:ASX - News) also gave an unexpectedly upbeat forecast for a 15 percent rise in revenue in the fourth quarter from the third quarter. It also sees operating profit margins jumping to around 10 percent, from 5.7 percent in the third quarter. "Demand from the communications sector picked up at the end of the third quarter, and in fourth quarter we expect communications momentum to be a little faster than the others," chief financial officer Joseph Tung told an analyst conference. The company counts mobile phone chip makers Motorola (NYSE:MOT - News) and Qualcomm (NasdaqNM:QCOM - News) among its top 10 customers, and both U.S. firms have announced strong results in recent months. ASE posted consolidated net profit of T$583 million (US$17 million) for the July-September period after a T$315 million profit in the year-ago period. Earnings were also up 62 percent from T$360 million in the previous quarter. ASE told the analyst conference it expected gross margins to rise to the "low 20 percent range" in the fourth quarter against 19.2 percent in the July-September period. "You can tell that this industry is starting to turn around," said PrimAsia Securities analyst George Wu. "Guidance of 15 percent growth in the fourth quarter is actually very high," he said, referring to ASE's revenue forecast. Wu was forecasting 14 percent revenue growth in the fourth quarter from the third quarter before the result, but was at the top end of analyst forecasts. REVENUE BEATS AMKOR ASE's third-quarter revenue hit a record-high T$14.5 billion ($427 million), pulling slightly ahead of chief competitor Amkor Technology Inc's (NasdaqNM:AMKR - News) $424 million. The U.S. firm, which had previously boasted the highest sales of the microchip packaging sector, said on Tuesday it made a US$16 million quarterly profit, reversing a year ago-loss on the strength of improved demand from cell phone chip makers. Taiwan-based competitor Siliconware Precision Industries Ltd (Taiwan:2325.TW - News; NasdaqNM:SPIL - News) also saw its July-September profit surge to T$1.1 billion from T$35 million a year ago. "ASE and Siliconware should be able to cease their reliance on price-slashing and start making a more reasonable profit," Wu said. Although Wu said he held a long-term positive view on ASE's shares, he was neutral in the near term as the issue has already risen more than 70 percent since the beginning of the year. ASE announced consolidated results after close of trade in Taipei. The stock lost 1.22 percent to finish at T$32.3, while the benchmark TAIEX (Taiwan:^TWII - News) share index advanced 0.2 percent. ASE is currently trading on a price to forecast earnings multiple of 70, well ahead of local chip giants Taiwan Semiconductor Manufacturing Co (TSMC) (Taiwan:2330.TW - News) on 29.5 and United Microelectronics Co (UMC) (Taiwan:2303.TW - News) on 48.7. Packaging firms take silicon chips from semiconductor makers, test them for defects and encase them in plastic packages for insertion on circuit boards of electronics gadgets. ASE says the lengthy semiconductor sector downturn, which began when Internet and telecom-fuelled demand evaporated, has been a blessing as well as a curse, as many major chip manufacturers stopped investing in their own in-house packaging facilities and turned to outsourced firms like ASE. Unlike top competitor Amkor, ASE remains relatively debt-free, giving the company more financial leeway to invest in cutting-edge packaging and testing technologies. However, Amkor's stock price has outperformed ASE, jumping more than four-fold since the beginning of 2003 as investors count on the emerging tech recovery to lighten Amkor's debt burden. (US$1 = T$33.9)