# ASE Technology Holding Co., Ltd. (ASX): Business, Risks and Management's Discussion ASE reports in New Taiwan dollars. Its fiscal 2025 figures, from the Form 20-F, follow IFRS as issued by the International Accounting Standards Board. Its 2026 quarterly figures, from the results releases and the reviewed first-quarter statements, follow Taiwan-IFRS (IFRS as endorsed for use in Taiwan), so the two are not strictly comparable. Every money amount below has been converted into US dollars. Fiscal 2025 flows use the 2025 average rate (31.17 NT dollars per US dollar). Third-quarter 2026 flows use the rate the company states for the quarter (31.96), and nine-month 2026 flows use its stated nine-month rate (31.69). Balances use the rate on the balance-sheet date. Where a change is shown in both currencies, the NT dollar figure is the one the company reports. Percentages the company gives without an amount are in NT dollar terms. Each American Depositary Share (ADS) represents two common shares, and per-share amounts are stated per ADS. ## Business *From the 2025 Annual Report on Form 20-F, accession 0001193125-26-135585.* ASE sells outsourced back-end semiconductor manufacturing. Its customers include fabless chip companies and integrated device manufacturers. It receives finished wafers from those customers or their foundries, then packages and tests the chips and ships them to the end users its customers designate. Through its USI subsidiary group it is also an electronic manufacturing services (EMS) provider, building boards, modules and systems for computing, communications, consumer, industrial and automotive applications. In 2025 the company had operating revenues of $20.71 billion: packaging 47.8%, testing 11.1% and EMS 39.9%. By customer headquarters, 56.7% of revenue came from the United States, 18.0% from Taiwan, 15.2% from the rest of Asia and 10.0% from Europe. Customers usually supply the silicon die on consignment, so the most expensive part of a packaged chip is in neither ASE's revenue nor its costs. The business has three operating lines, each priced differently: - **Packaging (assembly).** ASE packages chips using leadframe and substrate technologies, and it makes some of its own substrates: its interconnect-materials operations met about 8.7% of its substrate needs by value in 2025. The mix has moved steadily toward advanced packages. Bumping, flip chip, wafer-level packaging and system-in-package (SiP) made up 59.6% of packaging revenue in 2025, against 51.3% in 2023. Wirebonding fell to 32.9% from 39.8% over the same period. The leading-edge advanced packaging (LEAP) portfolio covers fan-out chip-on-substrate (FOCoS and FOCoS-Bridge), 2.5D and 3D integration using through-silicon vias, and co-packaged optics. The company says these technologies have helped bring advanced ASIC and high-bandwidth-memory products for AI and high-performance computing to market. Packaging and EMS are priced on actual costs and prevailing market prices. - **Testing.** Services cover front-end engineering test, wafer probing and final test, including system-level and burn-in testing. Wafer probing rose to 44.0% of testing revenue in 2025 from 35.4% in 2023, and final test fell to 54.0%. The company says complex AI processors, switches, automotive driver-assistance chips and SiP modules are a growing share of what it tests. Testing is priced mainly on the tester time (CPU seconds) each test program consumes, plus the cost of the equipment. - **EMS (USI Group).** USI makes server and PC motherboards, AI cards, solid-state drives, Wi-Fi and SiP modules, consumer control boards, automotive electronics and industrial devices. Its operations are in China, Taiwan, Mexico, Vietnam and, through the Asteelflash (2020) and Hirschmann Car Communication (2023) acquisitions, Europe and Tunisia. Raw materials were 78.7% of EMS revenue in 2025, so the business is high-volume and low-margin. USI's Shanghai subsidiary is listed on the Shanghai Stock Exchange (601231). Revenue is concentrated in a few customers. ASE's five largest customers provided 46.5% of operating revenues in 2025, and one customer exceeded 10% in each of the last three years. In packaging and testing, communications applications were 45.8% of 2025 revenue (50.9% in 2024), computing rose to 24.0% from 18.1%, and consumer, industrial and automotive were 30.2%. Since 1997 ASE has been TSMC's non-exclusive preferred provider of packaging and testing for chips TSMC fabricates. This lets ASE offer customers a full manufacturing solution from foundry through test. Taiwan is the operating center. Operations in Taiwan produced 58.9% of 2025 operating revenues, and the main packaging campuses are in Kaohsiung (ASE Inc.) and in Taichung, Changhua, Yunlin and Hsinchu (SPIL). There are further plants in China, South Korea, Japan, Malaysia, Singapore, the Philippines, Vietnam, the United States, Mexico and Europe. The present structure dates from April 30, 2018, when ASE Technology Holding was formed to combine Advanced Semiconductor Engineering and Siliconware Precision Industries (SPIL). The holding company directly controls the ASE, SPIL and USI groups. Its common shares trade on the Taiwan Stock Exchange (3711), and its ADSs trade on the NYSE. ## Risk factors *From Item 3 of the 2025 Form 20-F, accession 0001193125-26-135585.* The 20-F's risks center on four things: ASE's dependence on a cyclical and increasingly AI-driven chip market, a heavy fixed-cost investment program, its location in Taiwan, and a short list of large customers. The most material: - **Cyclicality and reliance on AI demand.** Revenue and profit swing with semiconductor and electronics cycles. During downturns, integrated device manufacturers rely more on their own in-house packaging and testing and outsource less. The company now names a slowdown in AI-driven demand as its own risk. Customers building AI processors, HPC chips and accelerators drive much of its recent growth, and if their return on AI infrastructure disappoints, ASE warns of lower utilization of specialized equipment, stranded assets and margin compression. - **Customer concentration and competition from foundries.** A small group of customers provides a large share of revenue, and ASE has cut prices in the past to limit order cancellations. The TSMC alliance can be ended at any time. Foundries, TSMC among them with its integrated fan-out (InFO) technology, have also built their own advanced-packaging capacity and won customers with it. - **Fixed costs and funding.** Testing and leading-edge packaging carry high fixed costs, so gross margin depends on keeping capacity utilization high. Expansion needs continuous outside financing. Debt agreements carry restrictive covenants and cross-default provisions. The company was in compliance at December 31, 2025. - **Materials and energy.** Few suppliers make IC substrates; the 20-F names Kinsus, Nan Ya PCB and Unimicron. ABF substrates for high-performance chips are singled out for possible shortages and long lead times as AI demand grows. Gold prices affect packaging costs, and the company expects AI to push electricity demand and prices higher, costs it may not fully pass on. - **Trade policy and China exposure.** U.S. tariffs, including semiconductor-specific tariffs that the 20-F says the U.S. government intends to raise over time, could increase costs ASE cannot pass through. U.S. export licensing on advanced computing and AI items sold to China, and China's push for chip self-sufficiency, add uncertainty to its Chinese supply chain. ASE also has packaging, testing, EMS and real estate development businesses in China. - **Taiwan location.** Strained relations between Taiwan and mainland China, Taiwan's domestic politics, earthquakes, typhoons, droughts and power outages could all disrupt operations that produce most of ASE's revenue. ASE is evaluating overseas plant expansion in Southeast Asia, Northeast Asia, Europe and the Americas to answer customer concerns, but warns that a more fragmented footprint brings its own vulnerabilities. - **Currency.** Much of its revenue and capital spending is in US dollars, while its costs are spread across NT dollars, US dollars, renminbi, yen, won and euros. Exchange-rate moves can therefore cause losses despite hedging. A stronger NT dollar was one of the drags on 2025 gross margin. - **Litigation involving the chief operating officer.** Director and COO Dr. Tien Wu was indicted in 2017 for alleged insider trading in SPIL shares around the SPIL tender offers. After several reversals and remands, the Taiwan High Court Kaohsiung Branch affirmed his acquittal on February 11, 2026, and prosecutors appealed on March 2, 2026. A separate civil suit seeking his removal from the board was remanded for retrial on December 17, 2025, and a related damages class action is also being retried. The company says that losing his services, or negative publicity, could hurt its business and share price. - **Environmental compliance and climate.** ASE has faced fines, operating restrictions and criminal charges over past wastewater discharges. Carbon pricing could add costs, and production needs a reliable water supply, which a prolonged drought could interrupt. - **Controlling shareholders.** Members of the Chang family hold a significant interest and can strongly influence management, dividends and board elections. ## Management's discussion: fiscal 2025 *From Item 5 of the 2025 Form 20-F, accession 0001193125-26-135585.* Fiscal 2025 growth came from advanced packaging and testing, which more than offset a weaker EMS year. Operating revenues rose to $20.71 billion, up 11.7% in US dollars (8.4% in NT dollars). Packaging revenue grew to $9.89 billion, up 21.4% in US dollars (17.8% in NT dollars), and testing to $2.31 billion, up 35.8% (31.8% in NT dollars). Management attributed both to growing demand for leading-edge advanced packaging and testing. EMS revenue fell to $8.25 billion, down 2.3% in US dollars (5.2% in NT dollars), which the company attributed to a slow recovery in general communication and automotive products. The mix shift lifted margins. Gross profit was $3.66 billion, and gross margin rose to 17.7% from 16.3%, helped by the larger share of packaging and testing and higher factory utilization, partly offset by a stronger NT dollar and higher utility costs. Segment gross margins were 22.1% in packaging, 31.0% in testing and 9.2% in EMS. Raw materials fell to 48.4% of revenue from 51.5%, which the company attributed to changes in product mix. Labor rose to 11.3% from 10.8% on higher headcount, mainly in packaging. Depreciation, amortization and rental rose to 9.6% from 9.1% because of heavier capital spending. Margins improved through the year: overall gross margin moved from 16.8% in the first quarter to 19.5% in the fourth, and testing gross margin reached 36.0% in the fourth quarter. Profit from operations rose to $1.65 billion, up 31.3% in US dollars (27.5% in NT dollars), and operating margin rose to 8.0% from 6.8%. Research and development spending was $1.05 billion, or 5.1% of revenue against 4.8%. The company said the rise in operating expenses was mainly for research to meet demand for leading-edge advanced packaging, plus higher labor costs. Net profit attributable to shareholders was $1.28 billion, up 27.3% in US dollars (23.6% in NT dollars). Diluted earnings per ADS were $0.56, against $0.45 in 2024. The effective tax rate rose to 19.70% from 18.97% because of higher taxable income, withholding tax, Taiwan's surtax on undistributed earnings and Pillar Two minimum tax. In the first half the company recorded a goodwill impairment of $4.17 million on cash-generating units whose results had missed expectations. Investment has outgrown operating cash flow. Operating cash flow was $4.56 billion in 2025, while net cash payments for property, plant and equipment were $5.20 billion, against $2.45 billion in 2024. Capital expenditures incurred on property, plant and equipment, which the 20-F reports separately, were $5.51 billion in 2025, against $3.00 billion in 2024; the company notes that payments can fluctuate with the timing of purchase, receipt and acceptance of equipment. Of the 2025 capital expenditures incurred, $2.09 billion went to buildings and $3.40 billion to machinery and equipment. Financing activities were a net inflow, because new borrowing exceeded dividends paid of $739.07 million. At December 31, 2025, ASE held cash and equivalents of $2.95 billion against total debt of $8.70 billion, with $12.77 billion of unused credit lines. It also had $4.31 billion of capital commitments outstanding and goodwill of $1.67 billion. Management expects to fund 2026 spending from cash, operating cash flow and existing credit lines. ## Current quarter: third quarter 2026 *From the third-quarter results release (6-K, accession 0000950103-26-016324) and earnings presentation (6-K, accession 0000950103-26-016323), both filed October 29, 2026. The second-quarter presentation is the 6-K with accession 0000950103-26-011353, filed July 30, 2026. These figures are unaudited.* In the quarter, packaging and testing (ATM) drove the profit gains as computing applications took a larger share of its revenue, while EMS added volume at much thinner margins. Consolidated revenue grew 27.8% sequentially in NT dollars, against 10.0% in the second quarter. EMS revenue jumped 42.1% sequentially and ATM revenue rose 20.1%. **ATM is the earnings engine.** ATM operating income was $946.28 million, up 159.1% in US dollars from a year earlier (178.4% in NT dollars), and ATM operating margin reached 20.0% against 15.7% in the second quarter and 10.8% a year earlier. Computing was 34% of ATM revenue, up from 25% a year earlier, while communications fell to 38% from 45%. Bumping, flip chip, wafer-level and SiP packages rose to 51% of ATM revenue. The installed base reflects the same shift: the company had 8,831 testers, against 7,066 a year earlier, while its wirebonder count fell slightly to 24,801. In NT dollars, ATM packaging revenue grew 53% year over year and testing revenue 43%. Testing's share of ATM revenue slipped to 17% from 19% in the second quarter. In July, management said it expected 2026 ATM revenue to grow about 35% in US dollar terms, and revenue from its general segment, as distinct from leading-edge advanced packaging, about 20%, up from an earlier estimate of 13%. **EMS grew volume at thin margins.** EMS operating income was $97.34 million, up 13.9% in US dollars (22.4% in NT dollars). EMS operating margin of 3.3% was up from 2.4% in the second quarter but below the 3.7% of a year earlier. Computing rose to 21% of EMS revenue from 9% a year earlier, and consumer products were 41%. Raw materials took 82% of EMS revenue, against 79% in the second quarter. **Below operating income.** Consolidated operating margin rose to 13.6% from 11.1% in the second quarter. Pre-tax margin, however, was 13.4% in both quarters, because non-operating items turned from a sizeable net gain in the second quarter to a small net loss. The gain on equity-method investments fell to a small fraction of the second quarter's, and the net gain on foreign-exchange hedging activities was about a third of the second quarter's. Net interest expense rose to $81.70 million, up 70.1% in US dollars from a year earlier (82.8% in NT dollars). EBITDA was $1.81 billion, and research and development spending was $352.72 million, up 26.3% in US dollars (35.7% in NT dollars). For the nine months, net income attributable to shareholders was $1.96 billion against $830.51 million a year earlier, up 136.3% in US dollars (139.7% in NT dollars). **Capital spending is outrunning operating cash flow.** Payments for property, plant and equipment were $3.94 billion in the quarter, up 160.7% in US dollars from a year earlier (180.2% in NT dollars), far more than operating cash flow. Over nine months they reached $7.88 billion, already above the $5.20 billion paid in all of 2025. Net proceeds from borrowings and bonds were $3.16 billion in the quarter, and dividends paid were $906.07 million. Interest-bearing debt rose to $12.76 billion at September 30, 2026 from $9.61 billion at June 30. Property, plant and equipment rose to $19.53 billion from $16.25 billion, and unused credit lines stood at $14.36 billion. ## Subsequent events *Sources: the 2025 Form 20-F (accession 0001193125-26-135585, Note 38), and the reviewed first-quarter 2026 consolidated financial statements (6-K filed August 3, 2026, accession 0001193125-26-329634, Notes 29, 37 and 38).* ASE has not yet furnished reviewed financial statements for the period ended September 30, 2026. The third-quarter release and presentation describe no transaction after the quarter end. The most recent subsequent-events notes, in the 2025 annual statements and the first-quarter 2026 statements, together with the first-quarter business-combinations note, record a run of 2026 acquisitions and capacity purchases: - **EugenLight Technologies (acquired January 15, 2026).** ASE took 65.47% of this Chengdu maker of optoelectronic devices and optical engines through its Universal Optoelectronics subsidiary. The $46.64 million cash consideration bought shares and convertible bonds, was fully paid by March 31, 2026, and produced provisionally recognized goodwill. A further small stake was bought in March 2026. - **SPIL factory in Tainan (approved March 24, 2026).** SPIL's board approved buying a factory building and related facilities in Xinshi District, Tainan, from an unrelated party for $197.78 million. - **2025 dividend (resolved March 27, 2026).** The board resolved a cash dividend of $0.41 per ADS. - **Analog Devices Sdn. Bhd. (signed March 2026, completed May 2026).** ASE's subsidiary ASE Electronics (M) Sdn. Bhd. signed a share purchase agreement with Linear Technology Pte Ltd. to buy 100% of Analog Devices Sdn. Bhd. Its board approved the deal on March 27, 2026 at a total consideration of $108.85 million. The acquisition completed in May 2026 for a transferred consideration of $115.85 million. - **Domestic bond program (April 2026).** The board authorized ASE's first unsecured corporate bonds, up to $631.35 million in aggregate, with maturities of up to 10 years and a coupon of no more than 2.20%. - **Southern Taiwan Science Park plants (April 2026).** To add capacity, ASE's board approved buying plants and facilities in the Southern Taiwan Science Park for about $468.78 million. SPIL's board approved two more purchases there for about $204.56 million and $136.37 million, before tax.