ASE Technology Holdings Co., Ltd. (ASE), the world's largest chip packaging and testing services provider, recently said that in order to meet the needs of artificial intelligence (AI) applications and the broader recovery of non-artificial intelligence fields, the company's capital expenditures will increase to a record US$7 billion this year. That's an increase of about 27% from last year's $5.5 billion, the report said.
The company said about two-thirds of the spending will be on cutting-edge service capabilities as demand exceeds supply.
Chief Financial Officer Tung Chee-hwa (left) and Chief Operating Officer Wu Tian (right) of ASE Technology Holdings Co., Ltd.
Wu Tianyu, chief operating officer of ASE, said during an earnings call in Taipei: "The AI server cycle is still continuing, mainly led by the development of hyperscale data centers and data centers. The physical layer is also very active, and agile application areas are one of them."
“For example, we’re seeing more design perspectives on robots and drones, as well as cars and smart manufacturing equipment,” he said.
ASE Semiconductor said the Kaohsiung-based company expects its advanced packaging (LEAP) services revenue to at least double to $3.2 billion this year, compared with $1.6 billion last year.
LEAP services include wafer substrate process technology, which is part of Chip on Wafer on Substrate (CoWoS) technology.
ASE is widely expected to obtain outsourced wafer substrate packaging orders from TSMC to help ease the limitations of CoWoS technology for artificial intelligence chip packaging.
"We expect cutting-edge technology revenue to at least double in 2026 from last year, and demand will continue to significantly exceed supply," said Dong Hongsi, chief financial officer of ASE, adding that there is room for further revenue growth if there are no capacity constraints.
"In terms of the overall market, last year's growth momentum will continue this year given the popularity and resurgence of artificial intelligence in the automotive and industrial sectors," he said.
Mr. Dong said ASE's active capital investments this year and beyond are based on its optimistic expectations for medium- and long-term profitability.
Additionally, ASE expects gross margin to rise in each quarter this year, to the high end of its forecast range of 25%, as both LEAP and test services are "margin accretive" factors, he said.
ASE said it expects this quarter's revenue to fall by 5% to 7% from the previous quarter's NT$177.92 billion (US$5.62 billion), of which core chip packaging and testing service revenue will drop slightly by 3% to 5%, bucking the trend.
"In the first quarter of 2026, we will see much stronger seasonal fluctuations than normal," Dong said.
Gross margins for its chip packaging and testing services are expected to improve to 24% to 25% this quarter, compared with 23.5% in the previous quarter.
ASE said the pricing environment is "friendly."
The company said it has reached long-term service agreements with customers to cope with fluctuations in the cost of gold, substrates and other materials.
Sun & Moon's net profit soared 58% last quarter, from NT$9.31 billion in the same period last year to NT$14.71 billion, the highest level in three quarters. On a quarterly basis, net profit increased by 35% from the previous quarter, from NT$10.87 billion to NT$14.71 billion.
Full-year net profit increased by 25%, from NT$332.48 billion in 2024 to NT$40.66 billion, a three-year high. Earnings per share increased to NT$9.37 from NT$7.52. Gross margin improved to 17.7% last year, compared with 2024 expectations of 16.3%.