Subcontractor Update
10/01/2003
By Jeffrey C. Demmin
The quarterly updates from the major sub-contractors had more positive than negative news for the first time in many quarters. Most of the major firms saw at least 10 percent revenue growth in the second quarter of 2003 compared to the first quarter, and most of them showed improvements in the profit/loss column as well.
Amkor and ASE stayed within a few percent of each other at the top, with both posting 10.1 percent revenue gains last quarter. Companies in the next tier, including SPIL, ChipPAC and STATS saw even greater growth (Table 1). ChipPAC exceeded its own projections with revenue jumping more than 20 percent this quarter. ASAT saw the biggest increase (27.5 percent), while also decreasing its loss significantly, just as STATS and ChipPAC did during the second quarter.
 Figure 1. Quarterly revenue at assembly and test subcontractors over the last six quarters. STATS surpassed OSE for the first time in 2Q03. |
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STATS maintained its currently unmatched streak of quarter-over-quarter improvement with a healthy revenue gain of 16 percent (Figure 1). This moved STATS ahead of OSE's quarterly revenue for the first time. (ChipPAC moved ahead of OSE in the first quarter of 2003.) STATS also had the majority of its revenue derived from test operations (Figure 2). With 82.5 percent of its test revenue coming from mixed signal test, more than 45 percent of its total business is from that growing segment.
 Figure 2. The split of revenue between assembly and test differed significantly among some of the top packaging subcontractors during the second quarter of 2003. |
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For the third quarter of 2003, Amkor is predicting a revenue increase of 8 to 10 percent, and further growth of its industry leading gross margin, to the 21 to 24 percent range. James Kim, Amkor's chairman and CEO, reported that the company expects "to approach or exceed break-even net income in the third quarter, and based on long-range customer forecasts, we expect a sequentially stronger Q4." ASE was similarly optimistic, with chairman Jason Chang saying, "We remain confident about the prospect going into the second half of this year, and even more so for 2004." ASE has seen especially good results from its substrate business. While it is a small fraction of the total revenue, ASE Materials grew 32 percent this quarter and was up more than 50 percent from a year ago.
 Table. Financial results for the second quarter of 2003 at seven of the largest packaging subcontractors. |
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Dennis McKenna, ChipPAC's chairman and CEO, had a positive view of the near future as well, but he qualified it. McKenna said, "We believe some of the strength in the second quarter was the result of wafer and assembly build rates in advance of demand. As a result, we expect to see a slower start to the third quarter, with improvements through the remainder of the period. Overall, we are confident in our growth prospects for the second half of the year."
With the industry's best quarter in a long time, there should be plenty of optimistic people in the sub-contractor business.
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JEFFREY C. DEMMIN, director, product marketing, may be contacted at Tessera Technologies Inc., 3099 Orchard Dr., San Jose, CA 95134; (408) 383-3691; E-mail: [email protected].