The major assembly and test subcontractors ended 2004 with revenues up significantly over 2003, but with a slowing trend leading into 2005.
ASE consolidated its position as the largest subcontractor in 2004, with revenue growth of 46.4% compared to 2003, which put ASE near $2.5 billion for the year. Jason Chang, chairman and CEO of ASE stated, “2004 is definitely the best year in ASE’s history,” and he cited the acquisition of NEC’s packaging facility in Japan as an important factor in the growth. In fact, revenue from Japan accounted for 10% of ASE’s business in 2004, compared to just 2% in 2003. An interesting detail in ASE’s earnings release for 2004 is that the revenue growth was significantly larger than the growth in headcount (42%), wirebonders (28%), and testers (20%). Chang was confident that 2005 would be another year of growth for ASE, in spite of a deceleration to 3% growth in the fourth quarter of 2004 and a general slow-down in the industry.
Amkor’s revenues were up to $1.9 billion for 2004, showing a growth of 18.6% over 2003. The company saw a net loss for the year, although almost all of that was in the fourth quarter. James Kim, Amkor’s chairman and CEO, predicted a drop of 8 to 12% in the first quarter of 2005, but was optimistic about the benefits of the major deals Amkor made in 2004. Specifically, the agreement to share technology with IBM helps position Amkor as a technology leader, while providing a good piece of business from IBM. Also, the acquisition of Unitive gives Amkor a leading position in advanced packaging technologies. Unitive’s 12-in. line in Taiwan will be expanded in 2005, and it will be interesting to see how that impacts business with the foundries in Taiwan. Amkor’s enhanced position in Taiwan might help it fare better compared to the Taiwanese subcontractors that have performed well recently.
SPIL continued its steady revenue growth, with solid results for the fourth quarter (up 9%) and the full year (up 32.2%). As in previous quarters, SPIL has an excellent utilization rate, staying at 90% for both assembly and test in the fourth quarter of 2004, while some of the competitors were around 70%. SPIL also stayed quite profitable in 2004, with $139 million in earnings on just over a billion dollars in revenue. This gave SPIL the best earnings to revenue ratio among the largest subcontractors in 2004. It should be noted that some of the financial data for Taiwanese companies does not agree perfectly with other reports because of variations in the international exchange rates during the course of the year.
STATS ChipPAC, reporting annual results for the first time since the merger between STATS and ChipPAC was finalized, had the strongest quarterly growth at the end of 2004, increasing revenue by 14.6%. Tan Lay Koon, STATS ChipPAC’s president and CEO, expected a drop in the first quarter of 2005, but foresees enough of a rebound for 2005 to be a growth year overall.
With a general feeling of uncertainty in the semiconductor industry at the end of 2004, it is hard to call 2004 a uniform success for the assembly and test subcontracting business. Still, the overall numbers for the year are generally positive – outstanding in some cases – even with some cooling off in the second half of the year. The hope is that the slump that we are entering is not as bad as the last one, and the predictions of most analysts seem to support that. Perhaps the slow-down will be short enough that 2005 will be the reverse of 2004, with a strong finish to a flat year.
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JEFFREY C. DEMMIN, director of advanced programs, may be contacted at Tessera Technologies Inc., 3099 Orchard Dr., San Jose, CA 95134; (408) 383-3691; e-mail: [email protected].