Hello, I am Ken Hsiang, the Head of Investor Relations at ASE Technology Holdings. Welcome to our second quarter 2026 earnings release.

I'm joined today by Dr. Tien Wu, our COO, and Joseph Tung, our CFO.

Thank you for joining us today. Please refer to our safe harbor notice on page 2.

All participants consent to having their voices and questions broadcast via participation in this event. If you do not consent, please refrain from asking questions or leave the session now.

I would like to remind everyone that the presentation that follows may contain forward-looking statements. These forward-looking statements are subject to a high degree of risk and our actual results may differ materially.

For the purposes of this presentation, dollar figures are generally stated in New Taiwan dollars unless otherwise indicated. As a Taiwan-based company, our financial information is presented in accordance with Taiwan IFRS.

Results presented using Taiwan IFRS may differ materially from results using other accounting standards, including those separately presented by our subsidiaries. For today's presentation, Dr.

Tien Wu will begin with a midyear business update. I will then walk through the Q2 results, and Joseph will close with our third quarter outlook.

With that, let me hand the presentation over to Dr. Tien Wu.

Good afternoon. I would like to give you the first half 2026 recap, and also the full-year outlook.

For my presentation, will be all on US dollar term. Consolidated revenue grew 24% year-on-year in the first half of 2026, with ATM revenues up 35% year-on-year for the first half.

Leading-edge advanced packaging and overall testing outpaced growth. For ATM business, we expect to maintain the same growth momentum into the second half.

For full year, LEAP services revenue is tracking ahead of prior guidance of $3.5 billion. While general segment expected to grow by 30% year-on-year versus previous guidance of 13%.

For the full year, we expect the ATM business revenue to grow by 35%. Machinery capex was $2.7 billion.

Building, facility, automation was $1.4 billion in first half. Joseph will give you more detail for the full year.

Stepping up the investment in R&D, human capital, advanced capacity, and also automation, smart factory infrastructure to support the multiyear growth. On the second page, I would like to give you some highlight on market dynamics and positioning.

There are many moving parts in the market today. You're reading the same newspaper, watching the same news as I do.

What I'm trying to present to you is the company view. We will try to present you the logic why are we making particular decision in this particular junction of time.

AI enabled new applications with bigger scale and potentials. I'm not going to articulate the detail.

If you are interested, we can talk more in the Q&A. That's our current view.

I think very few of you will disagree with this statement that AI is a paradigm shift and we do have potential bigger scale and multiple applications. That's our current view.

In terms of when, how, we are monitoring the progress. I believe we are at the beginning of the AI paradigm shift.

There will be multiple stages of transition. We can talk more in the Q&A.

The second comment is how we feel: AI demands new hardware that does not exist previously in size, complexity, and integration. You can argue about the computation intensity, the memory, the power, the linkage, the bandwidth.

All in all, what we're trying to develop right now is a brand-new platform to support the potential AI applications. The data center, the agentic, and future in the physical AI, humanoid, all of the hardware will be different than what we have been producing so far.

There is a growing need for industrial, power, connectivity, and storage devices because of the AI transition, evolution, or paradigm shift. The company is seeing all three right now from all of our customers on the multiyear basis.

Let me talk about ASE's strategic priorities. Again, this is the company view.

We have to have a blueprint, a plan, a vision in order for the 100,000 employees to act on. What I'm trying to present to you is the highlight for that blueprint.

Hardware infrastructure is a bottleneck. With AI, the hardware requirement is new, insatiable, and more complicated and more complex.

Today, there are very few manufacturers capable of producing hardware. Therefore, it is the bottleneck today from capacity, from automation, and more importantly, from innovation perspective.

We can talk a little bit more detail about the panel, about CoWoS, about glass substrate, about V-core N, about silicon photonics, I can go on and on. All of this are tied to the infrastructure and your capability to ramp with the complexity, integration, and the design blueprint the customer asking to do.

All in all, I call all of this to be hardware infrastructure and that is the new bottleneck. We have not experienced this for the last 40 years.

Packaging is moving up in system architecture value chain. For me, as a designer by training, the system architecture always is at the top of the value chain.

Packaging is approaching the system architecture value by providing the new complexity integration capability with the variable that I just talk about it. Now, if you believe hardware is the new bottleneck and the packaging is moving up in the value chain of the system architecture, then ASE has unique position to support the AI migration, evolution, or paradigm shift and align with all customers' long-term objectives today.

ASE's competitive position, I talk about this for many times: the ecosystem position, cluster or Taiwan cluster, scale or the AI data center Taiwan scale and other digital scale, the efficiency. I want to single out the pure play.

The pure play enable you to have a seamless cooperation with all supply chain players. In future, this could be one of the competitive advantage for ASE as a pure-play OSAT that we have no conflict with foundry, with no conflict with substrate provider, we have no conflict with anybody.

Therefore, we have a good way not only to collaborate with our customers long term, also collaborate with all the ecosystem players that would turn critical for the overall complex, integrated nature for the AI transition or evolution. The first-mover advantage, I'm very specific about the first-mover advantages: technology, speed, capacity, and most importantly, trust.

Everything the company does circle around the long-term business objective, as well as the seamless integration with ecosystem player, and give you the speed, the efficiency, and earn the customer trust. That's the highlight for me for the second half.

Thank you.

Thank you, Tien. As Dr.

Wu highlighted, our businesses performed extremely well throughout the first half of the year. For the quarter, we saw strong growth within both our LEAP and our general businesses.

Non-LEAP capacities like wire bond and traditional advanced packaging were also tight. For test, our wafer sort and final test capacities were also running near full.

Effectively, outside of equipment lines being placed into service, capacities were generally very close to being full. Our blended utilization rate for the quarter was between 80 to 85%.

Our capability for near-term incremental growth is being gated by our abilities to install capital equipment and build out our buildings and facilities. From a financial perspective, second quarter ATM revenues came in ahead of our original expectations driven by higher loading from both our LEAP and general services.

From the profitability perspective, we also saw our gross margin outpacing our original expectations driven by higher loading resulting in more operating leverage. Revenues for our EMS business were generally in line with our expectations.

EMS profitability was slightly below our expectations due to product mix and higher component prices. Please turn to page 5 where you will find our second quarter consolidated results.

For Q2, fully diluted EPS was $4.61 and basic EPS came in at $4.80. We believe our earnings reflect strong core profitability and a few nonoperating items we'll outline shortly.

Consolidated net revenues reached $191.1 billion, up 10% sequentially and 27% year-over-year. Gross profit was $40.2 billion with a gross margin of 21.0%, up 1 percentage point sequentially and 4 percentage points year-over-year.

The sequential improvement stems from higher operating leverage in our ATM business. The annual improvement reflects both structural efficiency gains and a more favorable NT dollar environment.

Operating expenses totaled $19 billion, up $3.5 billion year-over-year, primarily driven by higher labor costs and further R&D spend to support LEAP initiatives. As a percentage of revenue, operating expenses remained flat at 10% and declined 0.3 percentage points annually.

This delivered an operating profit of $21.1 billion, up 21% quarter-over-quarter and 107% year-over-year, with an operating margin of 11.1%, expanding 1 percentage point sequentially and 4.3 percentage points annually. Nonoperating income totaled $4.6 billion compared to $0.7 billion in the prior quarter.

While this amount appears relatively elevated versus prior quarters, the increase primarily reflects some potentially nonrecurring gains. Our net nonoperating income includes mark-to-market equity gains related to our corporate investments of $4.2 billion, foreign currency hedging gains of $1.5 billion, and other items including equity method investment income, government grants, rent income, and dividends totaling $0.8 billion.

These gains were partially offset by $1.9 billion in net interest expenses. Tax expense was $4.2 billion.

Our effective tax rate came in at 16.4%. We saw a lower effective tax rate due to higher R&D credits generated during the quarter.

We continue to expect an effective tax rate of 18% for the year. Net income for the quarter was $21.1 billion, up 49% sequentially and 180% year-over-year.

On page 6 is a graphical view of our consolidated quarterly performance. For the second quarter 2026, our ATM business represented 66% of our consolidated holding company revenue while representing 94% of our operating profit.

This is compared to 61% of consolidated holding company revenue while representing 87% of operating profit in the second quarter last year. We see this being primarily driven by the growth of our ATM LEAP services over the last few years.

On page 7 is our ATM P&L. The ATM revenue reported here contains revenues eliminated at the holding company level related to intercompany transactions between our ATM and EMS businesses.

For the second quarter of 2026, we recorded record revenues for our ATM business of $126.1 billion, up $13.7 billion sequentially and $33.6 billion annually, representing an increase of 12% sequential and 36% annual growth. Gross profit for our ATM business was $34.5 billion, up $5.3 billion sequentially and up $14.2 billion year-over-year.

ATM gross profit margin was 27.3%, up 1.3 percentage points sequentially and 5.4 percentage points annually, driven by higher operating leverage and a more favorable revenue mix, particularly a higher mix of LEAP. During the second quarter, operating expenses were $14.7 billion, up $1.4 billion sequentially and $3.3 billion year-over-year.

The sequential and annual increases in operating expenses are primarily related to higher overall labor costs and general R&D expenses. Our operating expense ratio was 11.7%, down by 0.1 percentage points sequentially and 0.6 percentage points annually.

We expect our ATM operating expense ratio should continue to improve during the back half of 2026. During the second quarter, operating profit was $19.8 billion, representing a sequential 25% increase of $3.9 billion and a 124% annual increase of $11 billion.

Operating margin was 15.7%, up 1.6 percentage points sequentially and up 6.2 percentage points year-over-year. The NT dollar had a positive 0.1 sequential and a 0.6 annual percentage point impact to our gross and operating margins.

On page 8, you'll find a graphical representation of our ATM P&L. The chart highlights the improvement in our gross profit margin.

It should be noted here that our second and third quarter 2025 margins were heavily impacted by NT dollar strengthening. Over this timeframe, our margin improvement has been largely driven by the recovery of our utilization rate related to our general manufacturing capacities and increasing LEAP product mix.

On page 9 is our ATM revenue by the 3C market segments. LEAP services are primarily included within our computing applications, with a lesser amount being included in the communications applications.

As can be seen here, the computing application percentage continues to grow steadily. At this time, we see this trend continuing into 2027 and 2028.

On page 10, you will find our ATM revenue by service type. Despite the overall growth in our business, we did not see substantial shifts in service types during the quarter.

All business lines appeared to be keeping pace outside of small adjustments between materials and others. At the beginning of the year, we believed that our test business, led by rapid expansion of our wafer sort business, would outpace growth in our assembly business.

While our test business has shown the strong growth we initially expected, our assembly business has been showing even stronger than expected growth, especially as it relates to legacy wire bond services. We now believe that both our assembly and test businesses will grow at similar rates during the year.

On page 11, you can see the second quarter results of our EMS business. EMS revenues grew 6% sequentially and 12% annually to $65.8 billion.

Sequentially, our EMS business's gross margin decreased by 0.6 percentage points to 8.9%. This change was principally the result of product mix differences.

EMS operating expenses increased by $0.3 billion sequentially and annually. Our second quarter EMS operating expense ratio of 6.5% was flat sequentially and down 0.4 percentage points annually.

Operating margin came in at 2.4%, down 0.6 percentage points sequentially and 0.2 percentage points year-over-year. The sequential margin decline is the result of product mix and a higher component cost environment.

Our EMS second quarter operating profit was $1.6 billion, down $0.3 billion sequentially and up $0.1 billion annually. On the bottom of the page, you will find a graphical representation of our EMS revenue by application.

Generally, the moves in the consumer and communication categories are related to the seasonality of the underlying products we service. The growth in the computing category is largely driven by business related to our AI accelerator products.

From the holding company perspective, we continue to pursue synergies between our ATM and EMS businesses to codevelop system-level solutions, particularly in key areas such as optical interconnects, power delivery, and thermal management. By integrating critical EMS competencies with ATM technologies, we have the potential to optimize entire systems end-to-end, applying the same coengineering disciplines that successfully scaled SiP architecture.

On page 12, you will find key line items from our balance sheet. At the end of the quarter, we had cash, cash equivalents, and current financial assets of $107.4 billion.

Our total interest-bearing debt increased by $40.9 billion to $306.2 billion. Total unused credit lines amounted to $396.2 billion.

Our EBITDA for the quarter was $45.8 billion. Our net debt to equity this quarter was 47%.

On page 13, you will find our equipment capital expenditures relative to our EBITDA. Machinery and equipment capital expenditures for the second quarter in US dollars totaled $1.7 billion, of which $840 million was used in packaging operations, $804 million in testing operations, $49 million in EMS operations, and $2 million in interconnect materials operations and others.

In addition to spending on machinery and equipment, during the quarter we also spent $658 million on facilities. It is worth reiterating what Dr.

Wu spoke of earlier. We are investing in capacities and facilities because what we do has immediate impacts on key bottlenecks in semiconductor supply, performance, and efficiency.

The AI buildout, regardless of open or closed model weighting, will require unprecedented hardware capacity and capability expansion. At this point, we are just trying to keep up.

With that, I'll hand the presentation over to Joseph to walk through the company's outlook.

Now for third quarter 2026 outlook. Based on our current business outlook and exchange rate assumption of $1 US dollar to 31.9 NT dollars versus last quarter's 31.6, management projects overall performance for the third quarter of 2026 to be as follows.

On consolidated basis, in NT dollar terms, our consolidated third quarter revenue should grow by 21 to 22% quarter-over-quarter. Our consolidated third quarter gross margin should be between 20.5% to 21.5%.

Our consolidated third quarter operating margin should be between 11.5 to 12.5%. For ATM, in NT dollar terms, our ATM third quarter revenue should grow by 11 to 13% quarter-over-quarter.

Our ATM third quarter gross margin should be between 28 to 29%. On EMS, in NT dollar terms, our EMS third quarter revenue should grow by around 40% quarter-over-quarter.

Our EMS third quarter operating margin should be between 3.2 to 3.4%. With that is the 2026 third quarter outlook.

Now, adding a bit of color for the full year and next. First, on capex.

Given stronger demand for LEAP in 2026 and beyond, we will need to add another US$1 billion each this year for facilities and equipment. The total is adding another $2 billion for capex.

While the additional investment for facilities and most of the equipment are for LEAP, we also need to add capacity for mainstream advanced packaging and testing to support the general market demand. On LEAP, while this year's LEAP service revenue is tracking ahead of our prior quarter guidance of US$3.5 billion, as business momentum continues to be very strong, we are aiming to double our LEAP revenue in 2027.

Lastly, on ATM profitability. With expanding margin-accretive LEAP and test businesses, our second quarter ATM gross margin of 27.3% came in ahead of our guidance.

We continue to expect sequential margin improvement, with fourth quarter ATM gross margin likely to exceed our structural margin ceiling of 30%. At such point, we will start to review if we would adjust our structural margin range.

With that, thank you.

During the Q&A session that follows, we would appreciate if your questions could be as clear and concise as possible and ask singularly. We will start by taking questions from live participants and then alternate in questions from our online participants.

I as the moderator will be receiving each question and repeating and directing each asked question. After an initial question, the participant may ask a follow-up question, clarifications of the earlier question, or another question entirely.

Then we'll move to the next participant. Participants may return to the queue for any additional questions and/or clarifications.

Thank you.

Dr. Wu, just to follow our conversation, your industry peer seems to be more aggressively in the US operation, not just Amkor, but also KYEC announced to do that, right?

I want to ask you about kind of your partnership with the US customers and also your operation in the US. I guess it is a little bit separate question, but can you also comment a little bit about the Intel EMIB involvement by ASE?

Thank you.

Charlie, you're asking about the competitive landscape that we're facing and secondly, EMIB. Okay.

Dr. Wu?

Let me answer the US operation first. What I'm going to talk about it, I have repeated several times for the last two years.

We do have US operation, ISE, test development, also services in California. We have one factory in Fremont, California.

We have one factory in San Jose. We're in the process of expanding to number three and number four factories.

These are particularly required by our customers for the last 20 years in Bay Area for upfront chip design, test development, also technology development. That is ongoing right now.

The agreement that we have with our leading customer is the following: we will develop and build fully automated, efficient line in Taiwan. When we are comfortable with our resources and efficiency, in due time, we will migrate and move the operation to the other places in the world.

It could be United States, could be somewhere else. That has always been the case.

It's not like we're not supporting. We are supporting development, R&D, also architectural design.

In terms of manufacturing process development, for now, we are focusing on Taiwan. Until we build the appropriate scale, having the appropriate resources and know-how and efficiency, upon that time, we will work with our customers to move to the other part of the world for better logistics.

Okay. The second comment is EMIB.

EMIB, I'm going to repeat what TSMC has responded. Right now, it's really capacity-constrained.

If there's any other alternative technology that can offer the same yield to resolve the bottleneck that we have for the AI infrastructure, we welcome to see that. For ASE, we're also collaborating the other customers also along the same line, including EMIB.

The fundamental question is if EMIB posing potential threat, a competitive advantages over CoWoS, right? That's always a possibility.

I have been working in the packaging industry for 40 years. I've gone through about a thousand different packaging design.

At the end of the day, probably 20 will live, will be here. There's always a competing technology, alternative materials.

That's always been the focus of R&D, right? For EMIB, we're happy to see if EMIB can ramp up.

In terms of efficiency, performance, that's up to the system as well as the market to decide. We're not going to make a judgment call who has a superiority.

Our focus is to support the CoWoS. We're trying to ramp up the CoWoS scale and efficiency as fast as we can.

If customer ask for other alternative technology, ASE will also include that in our roadmap, right? I don't think there's a potential threat.

Again, we are pure play. If the EMIB substrate becomes the right alternative, we just buy EMIB substrate and we do the assembly.

There is no conflict. Anything is welcome.

It is not like a zero-sum game, like you can only choose one. It's never been the case.

Right, the world is a big place.

More question from floor?

Hi, Dr. Wu and Joseph, Ken.

Thank you for taking my question. My first question is, can you give us a little bit more detail guideline for your Q3 ATM demand driver both for LEAP and also for general packaging and testing, the more detail demand driver across the key applications or products?

Rick, you're asking for the segmented drivers of what's helping the industry or our results pick up at this point. Is that correct?

Right. Demand driver.

The question is the Q3 driver. Again, we have a very awkward and peculiar position because we're capacity-constrained.

We talk about 12 to 13% growth, that means we have to add 12 to 13% capacity. The demand overall is strong.

I'm not going to comment about the memory pricing or any consumer devices, but overall, all of our customer asking for more devices for Q3 and Q4.

Rick, follow-up?

No, not follow-up, the second question. Can you elaborate your development of the full CoWoS, and this year roughly about how much still coming from outsourcing, and what's your development and progress into next year of your full CoWoS development?

Rick, you're looking for the composition of our LEAP services between what is potentially OS-type services and full process and test.

Basically, we are on track with our full-process business development. For this year, we said that we're going to have about $300 million worth of revenue coming from that space, and things are on track.

We are aggressively expanding that capacity, and by next year, I think we will have pretty substantial growth in that area as well. Again, this is something that under development, I think margin-wise has not fully reflected at this point.

Going forward, I think the full process will also be another margin-accretive business for us, and with pretty good substantial growth coming to next year.

We have our next question coming from online.

Hello, could you hear me okay?

Yes, we can hear you.

Thank you very much. Good afternoon.

Congrats on the very strong outlook. Sorry for not being able to attend in person.

My first question is maybe to follow up on 2027 LEAP outlook. Maybe take a step back.

You are guiding for this year LEAP to exceed $3.5 billion. Should we be looking at maybe $4 billion or maybe between 3 to 3.5 to $4 billion?

Then for 2027 for it to double, have we already had an idea in terms of breakdown by full process, outsourcing for on-substrate, and also test?

Sunny, you're looking for an update on our LEAP guidance for this year, and then looking forward into 2027 whether we have any nuggets of information for you. Is that correct?

Right. Thank you, Ken.

I think Tien mentioned that we are ahead of our LEAP revenue this year, and by ahead, I think we will be adding another couple hundred million dollars worth of revenue coming out of this year. On top of that, for next year, we still see very strong momentum, and we believe at this point that we should be able to double the LEAP revenue next year.

We are going full speed ahead with both our assembly as well as test, and as Tien mentioned, at this point, assembly is also catching up in terms of its growth momentum with test. By next year, I think the combination will be pretty much similar to what we're seeing this year.

Maybe let me clarify if I may. Just want to get more color in terms of LEAP breakdown going to 2027.

I do assume that full process should account for a much larger portion for 2027. Any color will be very helpful.

Probably two quarters from now we'll give you a better color. Thank you.

Sure. Maybe if I may, second question.

Dr. Wu, I want to double-click on your earlier comment regarding AI driving lots of new applications with different complexities and scope.

If I may, maybe based on your current engagement with the clients, what type of devices you are seeing better visibility and then if we could see more meaningful ramp in the coming few years?

Sunny, you're looking for a little bit more color in terms of what potential applications, the end devices that we may see coming in the future.

Due to AI.

I would like to separate the technology statement versus business statement. Technology will take 15 to 20 years to develop, and the business statement typically you're interested in four quarters, probably the longest lead time.

Let me comment on the the the CoWoS, for example, or EMIB and other alternative technology. The AI data center is driving computation intensity.

Therefore, the reticle size becomes bigger and bigger. That we know already.

Everybody demands more bandwidth from logic, ASIC, as well as memory. Therefore, the immediate upfront will be the panel or more complicated CoWoS to accommodate the bigger chiplet or reticle size.

That's one dimension that we're dealing with. We also comment that somewhere along the line, towards the end of the year, the CPO will start launching.

Initially, could be in small volume. However, we will have a critical benchmark information in terms of the bandwidth and the system performance, and also the thermal dissipation that can resolve.

Depending on the cost-performance ratio and also the yield, we will learn critical information. When the reticle size becomes bigger and the optics to come in at a different hierarchy, then the power delivery becomes the next immediate questions.

This will be deployed in the next 2 to 3 years. On the much longer term, there are other things people are working on.

For example, today we're primarily dealing with digital and digital. There's a lot of activity going on to start accommodating sensor, analog, mixed-signal with digital.

If you think about the humanoid applications, other than the brain, the eyes, ears, fingers, they're all analog. What are the technology that can provide the low power, the bandwidth, as well as the fully automated high-volume integrated capability the digital to do digital analog mixed-signal?

These are the infrastructure a pure-play OSAT supplier should work with the customer trying to develop. The technology takes 15 to 20 years to develop.

All of the business we're taking, are deploying now are the results for the past 15 years of effort. I would like to make that separation.

If you're interested, I think the AI has a very long leg. You can listen to all the smart people about the infrastructure, AI data center, about agentic, and also the physical interface.

I also would like to give you some color on how I see the AI. I'm not the best person to talk about it.

I have a very simple view to look at AI. AI is for a new pattern recognition in the domain knowledge you're familiar with.

When people start crossing domain, IT versus pharmaceutical, IT IT versus medical, the new pattern get recognized. When you recognize the pattern, that's the potential application.

We're at the beginning of the knowledge collection and the early stage of a pattern recognition. That's what AI does.

Today, we're only talk about single field. Eventually, in the world, I do not know how many, it's got to be 100 domain.

How do you bridge all of the domain knowledge and start creating something hybrid? The medicine, the surgical, humanoid, all of this are the potential application.

All of the technology will use exactly the building block that we're developing today. What we're doing not just for AI data center.

If all we're thinking about is AI data center for a specific customer, then we really miss the point of what engineering does. Engineering is to build elegant solution for the future demand regardless how difficult it is.

It takes 15 to 20 years. This is not a stock trade.

What you're seeing is we are the first mover, we already have the cluster efficiency in the early stage of this AI transition. I think that means a lot if you really understand what I'm trying to tell you.

No problem. Sounds good.

Thank you very much for sharing, Dr. Tien.

Thank you, Sunny.

Good afternoon. Thanks Dr.

Wu, Joseph, Ken. My first question just to Dr.

Wu. You have been working in very close partnership with the lead foundry partner for the last few years, which has been helping the LEAP revenue growth quite nicely.

They seem to be transitioning a little bit towards 3D, panel-level kind of future technologies at least pretty aggressively. It looks like in the next 2 to 3 years compared to the last 3, 4 years have been largely being about CoWoS and various forms of CoWoS.

As they are embarking on that kind of transition, Dr. Wu, could you help us understand what is ASE's role?

Is it getting elevated further in that partnership? Obviously, some of the full process CoWoS is also a result of them leaving some of these older areas to you as well.

Just could you outline what you talked about on the technology side in relationship to how this partnership with the lead foundry is going to work out in the next maybe 2 to 3 years first?

Gokul, you're asking about as our foundry partner progresses further down their technology roadmaps, what our plans are to intermix and or interlink with them in this process. Is that correct?

Do you get more value add out of it as they kind of migrate out to more complicated packaging?

The collaboration is long term. Once again, I want to focus on the pure play.

The foundry ideally is a pure play for wafer. Testing, bumping, packaging are enabler to support the delivery of the wafer to the correct customer in the correct timing, also with the correct efficiency.

Packaging pure play is to develop a packaging architecture, all the Lego pieces to facilitate that. When the pure-play foundry with the pure-play packaging collaborate, that boundary is very clear.

Today, there are packaging that needs to be taken by the foundry people because access to the leading-edge wafer is simply not available to the others, or some architectural requirement that has strict IP that would like to honor and respect the customer as well as the foundry. That is a domain that the pure-play wafer people needs to decide.

Preclude from that, the collaboration will cover all aspect in the packaging arena. In terms of where do we stop the line, when do we start the line, that depends on the wisdom of the management team of the ecosystem collaborator, right?

I'm not sure how to give you a better answer, but as you can see, the OS, the full process, all of the collaboration are the full spectrum. In terms of future, we do not know, but it really depends on the pure play, IP, as well as the customer's requirement.

We will try to navigate through all of the complexity. Important thing is we all understand we would like to provide speedy, the most elegant solution in the quickest amount of time to our customers collectively.

That understanding is very clear and it's very obvious for the next 3 years, as well as the ramp-up in the next few years.

Got it. That's very clear.

Thank you, Dr. Wu.

My next question is just on a couple of the guidance increases that you have. One is on LEAP for 2027.

I think previously we were expecting I think $1.9 billion or so additional. Now we're expecting doubling of the revenue.

Is that primarily coming from having more line of sight into capacity availability? Because I think demand is probably still much higher than what you can really really support even next year.

Secondly, mainstream as expecting the growth to be close to 20% this year from the I think 13% previously. Where is that upside coming from on the mainstream growth?

Gokul, you're looking for incremental explanation related to what is driving our LEAP 2027 outlook and also what has helped us drive our mainstream expectations up this year. Is that correct?

That's right, yeah.

We have clear line of sight in terms of who needs what. We also have a clear line of sight on the building, the facility that we're building today.

When we make a comment that this year, by year-end, we're tracking ahead of the $3.5 billion, that comment is made because we see our yield and execution that gave us the confidence to tell you that by year-end, we will achieve that target. The same token, we also give you a comment that whatever the target has been achieved by year-end, with the next 12 months, building new facility, and adding new machines, we will be able to double that.

That line of sight is there. The uncertainty exist in terms of how can we execute.

The business demand is not a concern, is our own capability to execute the two line of sight, which is clear in front of us. In terms of the general devices, we see very strong demand in industrial, power, connectivity, and storage devices.

I do not know what the general market on semiconductor this year, I don't have that number, right? I believe we will outperform the general market simply because our association with a stronger AI infrastructure development, also our superior capability to have fully automated lines for most of the general devices.

If people wants to build devices to go into electrical vehicle, AI data center, or any high-impact, high-risk applications, chances are they will use our fully automated line. That's why we're having very good attraction.

In terms of capacity expansion, not only we need to expand the LEAP, we also need to expand the general market. That's putting tremendous amount of pressure on ASE.

Which is why, I think during the shareholders meeting, I complained that ASE is building 13 new facility simultaneously this year, and we just bought another seven brownfield. We're building, we're buying, and we're spending capex.

We're not happy about it. The question now is that is our obligation, this is why we're here.

We want to make sure we are providing the critical capacity to the best of our capability to satisfy the long-term objective from all of our customers.

Got it. That's very clear.

Thanks. Thanks very much, Dr.

Wu. Thank you.

Charlie, do you want a shot at another round of questions there? Yeah?

Go ahead. A microphone.

Thanks, Ken. I do have a two questions, but can I make a clarification on the previous Q&A?

Please, go ahead. It's

about the LEAP revenue next year, right? Joseph, you talked about the mix would be very similar to this year, next year's LEAP revenue mix, right?

According to our analysis, it seems like your full kind of a 2.5D the end customer is the x86 CPU, that part is growing 3x, right? I assume your testing business is also growing more than double.

How come the rest of the kind of on-substrate kind of outsourcing can also double next year? Because NVIDIA, I think the Street consensus is like next year is like growing 50%, and CoWoS expansion is like 70%.

I think that was referring to in general, assembly and test seems to have the same momentum. Assembly includes not just OS, the full process, there are other steps, process steps that we are doing.

Also some new packages that are coming on stream. I think that's a general description of what we're seeing next year in terms of between assembly and test.

We were very happy to see that strong growth. I just want to make sure we get the breakdown right.

The next question is a little bit joking, but I just see that your quarterly capex is exceeding your EBITDA, right? Is that your free cash flow is also turning negative.

Do you think the share price will react negatively tomorrow?

I think we will continue to have very heavy capex for this year, not only this year, but also going into next year. I think the negative cash flow situation will remain for some time.

At the same time, we're still maintaining a very healthy balance sheet, and we do have multiple cost-effective funding sources to fund the upcoming capex requirement. At this point, I think we're pretty confident that we will be able to support our growth in a healthy manner.

We are still at the early stage of this megatrend. Like I said last time, we are not going to be shy in making the necessary investment to not just to support our customer, but also to maintain our clear leadership position in this field.

Thanks, Joseph. We really like to hear you have a more funding need.

Last one is the pricing and the margin. We keep hearing from your customers that you hike price aggressively in second half.

Can we confirm if this is the case, whether it's more price hike in the traditional service or the advanced packaging? I think it's part one.

Secondly, how does that translate into your kind of a long-term gross margin outlook? I think you were having this 26 to 29% margin range for several years, right?

Do you think you can break through that 30% anytime soon? Thank you.

I think, like I said in the outset, we're very likely to exceed the margin ceiling in fourth quarter. At that point of time, I think we will start to review whether we should adjust our structural margin range.

Of course, when I say adjust, I mean upward adjustment. I think we are still in a very, very kind of a friendly pricing environment.

I think of course, we saw a lot of inflationary pressure in terms of materials and components so far. Far, we can definitely pass on these cost increases to our customers through our pricing arrangements.

Of course, we'll continue to seek for the most suitable pricing strategy considering the situation as well as our margin or return requirement.

Are you okay? Okay.

The next question, we will go back online.

Hi, can you hear me? Thank you so much for the time today.

Just a few questions from me. I think the first one is that when you commented on the gross margins is likely to exceed the ceiling of your structural gross margin range in fourth quarter, would you be able to share with us how much of that would actually be contributing from your higher utilization on the mature part of the business, and how much of that is potentially impacted by your growing mix in the LEAP contribution?

Thank you.

Haas, you were kind of breaking up, but I think you're asking what is contributing to our positive outlook in terms of maybe perhaps hitting our structural margins.

Yes, in fourth quarter. Yes, that's correct.

In fourth quarter, and specifically I wanted to know which part of the sector is more important. Is it the LEAP business contributing more, or is it because on the mature packaging also hit because of your pricing strategy to make that further benefit?

Haas is looking for the prime contribution for structural margin.

I think margin improvement is the result of many combinations of different factors, including the margin-accretive business growth, including our improvement in efficiency, including the continuous expansion of our automated factories. Operating leverage, of course, it plays a very important role as well as we continue to see volume growth.

On the operating side, we are also seeing our past investments are paying off. On an annual basis, we're seeing opex ratio continue to drop.

I think overall, the efficiency is much, much improved and we have a much solid base in terms of our revenue coming on stream. That's give us the confidence that we should be continue to see margin expansion on a sequential basis, at least for this year and next.

Like I said, once we pass the structural margin range, we will start reviewing that and see how far we can go.

That's great. Thank you so much.

Then, just a quick follow-up is on your capex. Would you be able to provide the breakdown, since you also mentioned that the general market demand is also very strong as well?

Would you be able to provide a breakdown for your capex for this year? For next year, I know you probably will not be able to give quantitative guidance at this stage for capex, but would you be able to discuss that which part of the business is probably going to outgrow from the spending perspective?

Is it going to be advanced, or mature business is going to still be pretty solid from the spending? Thank you.

Haas, you're looking to understand what the capex makeup is of what's driving the increase or what components are driving the increase this year, and then maybe if we have any type of nuggets of wisdom related to next year's capex.

I think, obviously, we are seeing a stronger demand forecast coming from not just customers, but also our foundry partner. The requests that are coming in require a lot of the new investments, not just for this year, but also for next year as well, as we continue to see very, very strong business momentum in both assembly and test, like I expressed again.

Also, there are new projects or new products, new process steps that we are entering into. We will not just put in the necessary equipment, capex, we also have to have the new facilities to house this capacity, and also spending quite a bit of money for the R&D to support those new products or new projects that are coming on stream.

Our capex is really based on what was necessary coming out of our customers' demand, and we want to put the right resources onto those high-potential revenue businesses for us to continue to invest.

Okay. Your expansion going forward will probably just be pretty similar to your foundry peer, right?

You are going to probably focus more on the areas that you can convert capacity from one to the other. For example, wafer shipment and also bumping you can both use in the mature business as well as in the advanced business.

That is probably the area that you are spending more money?

Haas, we've got to try to limit those questions to two in the future again. I guess we can try to comment a little bit on where we're spending the capex as it relates to maybe this is an opportunity to talk about construction and our difficulties in terms of building buildings or getting enough buildings.

Okay. This year, we're raising the capex by another $2 billion.

That brings up the total to about $10.5 billion. Out of this 10.5, 4 will be for new factory buildings and facilities, and 6.5 for equipment.

Like Ken just mentioned, in terms of these new capacity that we're going to put in, we need to have the more advanced factory buildings and facilities to house this capacity. At the same time, at this very moment, we are having 13 greenfield projects going on.

We have another eight brownfield projects. By brownfield, we mean that we are buying existing factories and try to renovate them and to suit our needs.

I think the current projects would be sufficient for us to carry ourselves into 2028, maybe some part of 2029. We'll continue to look at the situation and find the suitable new locations for our further expansion going forward.

With this 20 projects going on at the same time, it puts a lot of challenge on us, puts a lot of pressure on us in terms of we really need to have a very, very efficient and very responsive construction partners for us to make sure everything is delivered on time, all the qualities according to spec. This is something that we are working on.

Hopefully I think Ken mentioned that execution is everything. Demand is there.

What we need to do is really to execute whatever we're set out to do.

Got it. Thank you so much, Joseph.

Do we have another question online there?

Thanks for taking my follow-up questions. On capex, Joseph, I know that you're not guiding for next year, but looking at what Dr.

Wu mentioned, it definitely seems like capex is still likely to keep rising into 2027. Is that a fair statement to make given the gap between supply and demand that you're currently facing, especially for LEAP?

Gokul, you're looking for some hint in terms of 2027

capex?

Capex,

yes. Next capex.

I think I know it's going to be big, but how big, I think we want to wait for another quarter or so to have a better clarity on how much we would need to spend next year.

Okay. Understood.

Could you also talk a little bit about anything that you're seeing on the CoWoS or the panel-level packaging development based on your current assessment? When do you expect this to potentially start entering production given that there are so many different views out there in the market?

Gokul, you're looking for an update on our panel processes?

Panel process, yes.

There

are different panel process. For ASE's panel process, our fully automated line will start production by Q1 of next year.

That is in the form factor of 310 by 310. In terms of the CoWoS, I know there are many alternative materials that people are evaluating.

Our R&D people are working with substrate supplier, foundry, as well as customer to evaluate the feasibility and also the economics of it. Right now, we do not have the glass substrate in production, not for the next 12 months, if that's the question you're asking.

Thank you.

Got it. How does the ASE's 310 by 310 solution differ?

Is it for a completely different kind of market or customer compared to the foundry's CoWoS kind of solution, or is it quite complementary compared to what they are trying to offer?

They're quite complementary. It's actually the same customer set.

Similar the reticle size. In terms of the pitch size, line width, they're all identical, cover the similar range.

In terms of which customer will adopt what, not only depends on the capacity and the performance, and also the speed of execution.

Okay. That's clear.

Thank you very much. Thanks.

On capex, I want to give you guys a bit of a clarification. I think for this year, out of the total capex, like I said, $4 billion is for factory and facilities, $6.5 for equipment.

For equipment, I think it's about 56% is for assembly, 40% for test, and the remaining for EMS and some for material. In terms of assembly and test breakdown.

In terms of the leading edge, I think 70% of the equipment capex is for leading edge for this year.

Gokul, we got you covered there? He's off.

Okay. Another online question?

Thank you very much for taking my follow-ups. My first follow-up will be on CPO.

Maybe good time if you could share with us, given the complexity of the technologies, what type of services ASE as a group would be able to offer? Then based on the current development, when do you think the revenue contribution for ASE could become a bit more meaningful?

Then given USI, they also acquire optical module company as well earlier. What are the synergies that you think you could drive since you have IC, ATM, and also EMS capabilities?

Sunny, you're looking for an update on what particular we would be doing in regards to CPO and also potential linkages with our EMS business. Is that correct?

Right. Thank you.

On the CPO, I would like to wait for two quarters before I give you more detail. The CPO service, as well as the revenue, also the 2027 outlook, I prefer to have a little bit more time to talk about that.

In terms of the optical hierarchy, a hybrid between the electrical signal and also the optical signal, I think that direction is definitive. The question now is when and how could we execute that as a system architecture from near field to outer field.

Some optical devices are quite mature. It has been used for many, many years.

Some near field at a chip level, at a substrate level, that needs to be created, which is very, very difficult, which is why the industry has taken so much time trying to develop. I think by the end of the year, we'll have some database in terms of how that is behaving, how that is working, and how much benefit, how much ramp-up, I think in two quarters' time.

By the way, we have been working on this for about 20 years. Two more quarters, I think we can wait.

Sure. Looking forward to that.

Thank you.

Looking forward to that update. My second question, that will be very quick.

For your full process CoWoS, given you have a better visibility now for 2027, want to understand your progress internal diversifying for your client, also product mix. Should we assume for 2027 CPU should be very major, or should we assume good volume coming from the other applications like accelerators as well?

Sunny, you're looking for probably something that can't be answered, but you're looking for what are products that would be in terms of our full process services, is that...? Yeah.

Basically, your progress in terms of product-based diversification for full process.

I think for the full process, we should be able to give you a better visibility in a quarter or two. Right now, we do have line of sight in terms of full process.

We're tracking nicely. Also for the next year, we do have line of sight.

We have full visibility in terms of capacity that we're developing. Now, in terms of the customers, we need a little bit more time to digest how much information can we share.

I think in two quarters' time, we should be able to give you the following: our leading edge, our LEAP services revenue for next year, and also the OS, full process, and others, the assembly and test, I think that we can share. In terms of GPU, CPU, ASIC, we need a little bit more time to digest how much information we can share, right?

Right now, our clientele portfolio covers all of them, which is good. We're just waiting for a clear execution such that we know our yield and also how well the system performs in the marketplace.

That we're waiting anxiously. Thank you.

Thank you very much.

Hi, how are you? Thank you for the call here.

I just want to clarify, when you gave Q3 guidance, did you say that EMS will grow 40% quarter-on-quarter revenues?

Michael, you're looking for a little bit of explanation behind the EMS growth.

It's a pretty huge quarter-on-quarter growth, yeah, I just want to clarify what's going on there.

I think the 40% growth rate it is a little bit abnormal seasonality. I think this is largely because of the component price hikes, particularly in the memory sector.

If we take that part of the number out, I think the third quarter EMS should see a typical seasonality kind of a growth rate.

Makes sense. How about Q4 in terms of quarter-on-quarter?

Is it still growing over Q3, or will it shrink? Will EMS revenue shrink in Q4 versus Q3?

At this point, we're seeing a pretty similar level of revenue in the fourth quarter for EMS. Oh, okay.

That's

okay, that's very helpful. Do so overall for the year, did you did you say in your overall comments that you're looking for 25% plus full-year growth, revenue growth?

Michael, you're looking for full-year guidance, our full-year outlook for EMS and ATM, is that...?

Overall revenue growth. I thought there was a comment about sort of 25% plus type of revenue growth, is that right?

EMS at this point, I think on the full year, is a sub-20% annual growth for the year.

Sub-20?

Correct.

That's sub-20 and the ATM business will be 35% plus type of growth?

Also correct.

Got it. What is the impact on the EMS margins with the big memory component and larger revenues?

Is it flat year-over-year, or is there an increase or decrease roughly?

I can talk about third quarter. I think if we take out the component price hikes, I think the operating margin will be very similar to typical seasonality of 3.7, 3.8% level.

The memory is just sort of a pass-through type of cost for you guys.

That's correct.

Got it. Okay.

Thank you for that clarification, and, yeah, congratulations on very strong performance.

Thank you.

Thank you.

Do we have more questions online? More questions on the floor?

No? Okay.

Very good. Thank you very much.

I would like to thank everyone for attending our conference call today. Joseph, do you want to close up?

I'm sure we're going to have another good quarter in third quarter, and we'll bring you some more new, good news next quarter. We'll see you next quarter.