Subcontractor Update: More Profits, More Optimism
01/01/2004
BY JEFFREY C. DEMMIN
Business is booming at most of the major assembly and test subcontractors. More of them returned to profitability in the third quarter of 2003, some saw record revenue, and most gave an optimistic outlook for the fourth quarter.
Amkor and ASE continued to track each other in the revenue column, with ASE growing a bit more to creep into a virtual tie (Table 1). In the third quarter, Amkor also improved its bottom line with its first profit in many quarters. In third place, SPIL has seen two strong quarters to increase its lead over the pack of companies behind it. SPIL's growth over the third quarter of 2002 is the highest among the top five companies, and its profit in the third quarter was also the highest in the group.
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STATS continued its quarterly run, with another solid increase, resulting in a growth of 55 percent since the same quarter last year (Figure 1). It also saw its first quarterly profits in a while. ChipPAC's quarter saw a slight dip, but this was in line with its expectations and was due in part to a very strong second quarter.
Of the companies providing projections for the fourth quarter, ChipPAC was the most optimistic. Dennis McKenna, chairman and CEO of ChipPAC, predicted a 10 to 15 percent revenue growth and a return to the break-even point or modest profitability. Amkor projected a sequential revenue growth of 5 to 8 percent and profits in a similar range as the third quarter. STATS president and CEO Tan Lay Koon sees 5 to 10 percent growth for his company in the fourth quarter.
 Table 1. Financial results for the third quarter of 2003 at seven of the largest assembly and test subcontractors. |
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ChipMOS does not cite a percentage growth in its outlook, but according to S.J. Cheng, deputy chairman and CEO, better results are expected next quarter. Cheng said, "Most of our capacity has been booked, in particular the capacity for LCD driver IC assembly and testing services." Other companies report utilization rates in excess of 75 percent. Amkor, ChipPAC and OSE also reported strengthening of their business during the course of the third quarter, which contributed to the optimism in the industry.
There was significant activity in China during the quarter, with, for example, STATS announcing the upcoming opening of a facility in Shanghai. ChipPAC also continued to strengthen its presence in China by transferring several leadframe package families from Korea to China.
Advanced packaging continues to drive the growth in the assembly segment. STATS reported 42 percent of its revenue coming from array packages, and SPIL saw 43 percent of its revenue from BGAs. ASE said that substrate-based packages accounted for 54 percent of its revenue. On the expenditure side, $18 million of ASE's $38 million capital expenditures for assembly was for flip chip and wafer bumping equipment. ASE also invested $4 million in capital expenditures for its interconnect materials business, citing the importance of a substrate supply to its business. ASE's substrate business provides 60 percent of the PBGA substrates used in its assembly operation.
The general strength of the subcontractor results reflects both a recovery in the industry and the continuing success of the outsourcing model.
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].