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Taiwan ASE profit jumps 3-fold, sees sales growth

TAIPEI, Oct 28 (Reuters) - ASE , the world's largest microchip packaging firm, posted a more than three-fold jump in quarterly profit on Thursday due to booming demand for consumer electronics that others in the industry say is sputtering out.
ASE expects gross profit margins to rise to 21 percent in the fourth quarter after they fell to 20 percent in the second quarter due to rising costs after a typhoon cut water supply to its operations.

"Looking forward, we continue to expect sequential growth in our revenue in the 4th quarter and should close the year 2004 with significant annual revenue growth," said Advanced Semiconductor Engineering Inc. Chairman Jason Chang.

"Despite some recent concerns over the visibility of the semiconductor foundry business in the short-term, we believe the fundamentals of the IC (integrated circuit) assembly and testing subcontracting business remain strong in the longer term," Chang said.

ASE said July-September consolidated net profit reached T$1.960 billion (US$59 million), missing market expectations as rising water costs squeezed gross profit margins.

The third-quarter net profit was up from T$583 million in the same period last year, but flat with the T$2.02 billion in the second quarter.

The result comes as other firms in the semiconductor production chain sell off unwanted chip inventories as high oil prices and rising interest rates threaten demand for electronics.

ASE shares many customers with contract microchip makers like Taiwan Semiconductor Manufacturing Co. (TSMC) and United Microelectronics Corp. (UMC) , and both firms have forecasted weaker fourth quarter shipments.

Its largest competitor, U.S.-based Amkor Technology Inc. , posted a US$22.3 million quarterly loss on Tuesday compared with a year-ago profit of US$15.8 billion, blaming a semiconductor industry slowdown.

Singapore rival STATS ChipPAC Ltd. also swung to a net loss in the third quarter due to merger costs and a build-up of unsold inventory in China's mobile phone market.

Despite weakening semiconductor demand, analysts say ASE may not begin to show a revenue downturn until early 2005, as the company is still busy digesting third quarter production from microchip makers like TSMC and UMC.

ASE, whose major customers include Qualcomm Inc. and International Business Machines Corp. , takes silicon chips and encases them in plastic packages so they can be connected to circuit boards of electronic devices.

ASE announced results after close of stock market trade. Its Taiwan-listed shares gained T$0.50, or 2.24 percent, to close at T$22.80, outperforming a 0.79 percent rise in the benchmark TAIEX share index.

The issue lost 10.2 percent over the third quarter, compared with a 55.4 percent drop in competitor Amkor over the same period and a slight 0.1 percent rise in the benchmark TAIEX index. (US$1 = T$33.5)

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