Gokul Hariharan

Gokul Hariharan asked about the allocation of 2026 CapEx to full process packaging, the potential for the full process business to scale to 30-40% of total revenue, and how this aligns with foundry partners' future plans. He also questioned the mainstream demand outlook, specifically how potential toning down of smartphone demand fits with the expectation of similar growth to 2025.

Answer

Tien Wu clarified that full process packaging, projected to reach 10% of LEAP revenue this year, is not competing with foundry partners but provides a second source, emphasizing collaboration and the need for diverse toolboxes for the evolving AI market. He stated that CapEx is justified by the vast AI market and ASE's first-mover advantage. Regarding mainstream demand, Dr. Wu acknowledged potential smartphone fluctuations but highlighted full loading from AI data center components and contributions from acquired factories (Infineon, ADI), indicating strong general sector recovery and potential market share gains.

Gokul Hariharan asked about the allocation of 2026 CapEx to full process packaging, the potential scaling of this business beyond 10% of LEAP revenue in the next 2-3 years, and how this aligns with partner plans without creating competition. He also questioned how the expectation for mainstream demand to grow similarly to 2025 (10%+) reconciles with recent toning down of smartphone demand by some large customers.

Answer

Dr. Tien Wu, COO, clarified that full process packaging is expected to be 10% of LEAP revenue by year-end, emphasizing collaboration with foundry partners to provide diverse toolboxes for evolving AI applications rather than competition. Regarding mainstream demand, Dr. Wu acknowledged the communication/cell phone sector's importance but highlighted full loading from AI data center components and recent factory acquisitions (Infineon, ADI) as key drivers for general sector recovery and potential market share gains.

Gokul Hariharan asked about the progress of LEAP revenues against the $1.6 billion guidance for 2025, the outlook for 2026, and the margin contribution from LEAP-related business. He also inquired about the overall pricing environment for ASE's offerings, including LEAP and mainstream advanced packaging, and customer feedback on pricing.

Answer

CFO Joseph Tung confirmed ASE is on track to reach $1.6 billion in LEAP revenue for 2025, with strong momentum in AI/HPC offsetting geopolitical impacts on packaging. He projected over $1 billion in LEAP revenue increase for 2026 and emphasized continued heavy CapEx investment. Tung stated that LEAP is quickly becoming margin and return accretive. Regarding pricing, he noted that it remains resilient and sensitive, with mainstream pricing currently stable due to market recovery.

Gokul Hariharan asked about the specific levers ASE plans to use to return to its structural gross margin range in 2026, particularly the role of pricing power. He also sought details on the expansion of LEAP applications beyond AI accelerators into CPUs and other HPC devices, and asked how management defines long-term success for its current hyper-investment phase.

Answer

CFO Joseph Tung stated that confidence in returning to structural margins comes from improved operational efficiency, automation, easing of ramp-up costs, and the accretive nature of leading-edge business, assuming currency rates stabilize. COO Tien Wu explained that pricing power comes from trust and technology solutions, but the company prefers to leverage technical strength. He confirmed that the AI trend will cascade to CPUs and ASICs, driving future volume. Success is defined by flawless execution and earning a larger, long-term client base.

Gokul Hariharan inquired about the strategy for increasing AI test market share, the economic return framework for the significant test-related capital expenditures, and the company's plans for U.S. investments in advanced packaging, especially in light of competitor and foundry partner activities.

Answer

Joseph Tung, CFO, confirmed an aggressive investment strategy in testing, aiming for it to comprise nearly 20% of ATM revenue by year-end. He highlighted that the economic return on test investments is similar to leading-edge packaging and is accretive to overall margins. Regarding U.S. expansion, Tung stated that while they were invited by a customer to evaluate opportunities, any potential investment is still under review and must be economically viable, with no specific details on size or timing available.

Gokul Hariharan of JPMorgan Chase & Co. asked for the growth outlook and margin profile of the test business, the momentum of full-stack packaging solutions versus foundry partnerships, and the adoption of advanced packaging in non-AI applications. He later followed up on the long-term growth trajectory of leading-edge packaging and the ROI philosophy for the increased CapEx.

Answer

CFO Joseph Tung stated the test business is expected to grow at twice the rate of the packaging business in 2025, with stable gross margins around 35%. COO Dr. Tien Wu noted that non-AI applications are beginning to adopt advanced packaging platforms. Regarding long-term growth, Dr. Wu preferred to take projections one year at a time. Mr. Tung added that while leading-edge business is margin-accretive, it is premature to provide specific ROI metrics on the new investments.

Gokul Hariharan asked about the Test business, seeking color on its growth acceleration, timeline to reach 25% of revenue, and current margins. He also inquired about momentum for full-stack advanced packaging solutions versus partnerships, the demand for 2.5D/3D packaging in non-AI applications, and the ROI philosophy for the significant CapEx.

Answer

CFO Joseph Tung stated the Test business will outgrow packaging by twofold in 2025 with stable margins around 35%. COO Tien Wu noted that non-AI applications are adopting similar advanced packaging platforms. Regarding CapEx, Mr. Tung explained it is premature to give a specific ROI but confirmed the leading-edge business is margin-accretive.

Gokul Hariharan of JPMorgan Chase & Co. inquired about ASE's full-year ATM growth prospects, the reasons for a lower-than-expected Q3 gross margin, and the breakdown of the increased CapEx. He also asked about the potential scale of the 2.5D advanced packaging business, the nature of foundry partnerships, the demand status of the smartphone segment, and the timeline for chiplet adoption in mobile devices.

Answer

CFO Joseph Tung explained that a slower recovery in the general market is tempering the full-year outlook and Q3 margins, though leading-edge demand remains strong. He provided a CapEx breakdown of 53% for assembly and 38% for test. COO Tien Wu added that the smartphone outlook is moderately positive for the second half and that AI features could accelerate the adoption of advanced packaging and chiplet architectures in mobile and edge devices over time.

Gokul Hariharan from JPMorgan Chase & Co. asked about the conversations with PC OEMs regarding overall demand and any potential slowdown in PCIe Gen5 migration due to cost inflation and de-specing trends. He sought Silicon Motion's baseline PC market expectations and how they plan to achieve growth in client SSDs through market share, units, and ASP. He also inquired about PCIe Gen5 penetration targets for the end of 2024 and the expected ramp of PCIe 5 four-channel DRAM-less controllers. In a follow-up, he asked about the potential size of the boot drive storage business, given key customer wins, and whether the NAND bundle model would continue or shift to NAND pass-through with higher margins.

Answer

Wallace Kou (President and CEO, Silicon Motion Technology) confirmed an expected 5-10% decline in 2026 PC unit shipments, noting that sharp NAND and DRAM price increases lead to de-specing in value lines and price increases for high-end. He reiterated Silicon Motion's strong position due to NAND maker resource shifts and module maker design wins. He stated that PCIe Gen5 eight-channel ramp would slow due to DRAM shortage, but PCIe 5 four-channel DRAM-less controllers are expected to ramp meaningfully in H2. For boot drives, Kou estimated revenue around $50 million this year, with much higher potential next year, depending on NAND procurement and margin negotiations. He clarified they are not the sole supplier for DPU programs and that it's a strategic long-term business.

Gokul Hariharan asked about Silicon Motion's discussions with PC OEMs regarding demand skepticism, potential slowing of PCIe Gen4 to Gen5 spec migration due to cost inflation, baseline PC market expectations, and how Silicon Motion plans to achieve growth in its client SSD business.

Answer

President and CEO Wallace Kou confirmed an expected 5%-10% decline in PC unit shipments for 2026. He acknowledged that rising NAND and DRAM prices are leading to de-specing in value-line PCs, impacting demand. However, Silicon Motion expects continued growth due to its strong position with NAND makers and module makers, who are filling the supply gap left by NAND makers prioritizing CSPs. Mr. Hariharan followed up on PCIe Gen5 penetration, asking if it would reach high teens or 20% by the end of 2024. Mr. Kou stated that while PCIe Gen5 was expected to ramp stronger, the 8-channel high-end slowed due to DRAM shortage. However, the PCIe 5 4-channel DRAM-less controller is seeing much stronger demand, especially in the second half of the year. Mr. Hariharan then inquired about the potential size of the boot drive storage business, its market share, and whether Silicon Motion would maintain a NAND bundle or transition to a pass-through model. Mr. Kou estimated boot drive revenue around $50 million for 2026, with much higher expectations for next year. He noted that Silicon Motion is not the sole supplier and that the business's growth depends on NAND procurement and successful cost pass-through, making it a strategic but dynamic area. He anticipates it becoming a much larger business in 2027-2028.

Gokul Hariharan asked about the incremental margin profile of the growing automotive business and requested more detail on the MonTitan product roadmap, including future generations and the potential for addressing the cold storage market.

Answer

President & CEO Wallace Kou highlighted strong automotive design wins in China and with Toyota as drivers of optimism. He detailed the MonTitan roadmap, including a new 8-channel version and a future PCIe Gen 6 controller. He noted the cold storage market is a longer-term, 3-to-5-year opportunity tied to the development of nearline flash standards.

Gokul Hariharan of JPMorgan Chase & Co inquired about the increased optimism in the automotive business, its margin profile, and potential operating leverage. He also asked for details on the MonTitan product roadmap and the company's ability to address the cold storage market.

Answer

President and CEO Wallace Kou attributed automotive optimism to major design wins in China with brands like BYD and Xiaomi, and upcoming ramps with global models from Toyota. For the MonTitan roadmap, he detailed the current 16-channel PCIe Gen 5 controller, a new 8-channel version, and a future PCIe Gen 6 controller. He noted that addressing the cold storage market with 'nearline flash' is a 3-to-5-year opportunity.

Gokul Hariharan asked about the strengthening AI demand, specifically if TSMC's previously guided mid-40% CAGR for AI accelerator growth until 2029 needs updating given current market positivity. He also inquired about TSMC's CapEx strategy, noting that while revenue has grown significantly, CapEx growth has been comparatively lower, and asked if much higher CapEx is expected in the coming years to meet demand. He followed up by asking for an update on CoWoS capacity plans for 2026, specifically the year-on-year increase, and inquired about the contribution of AI accelerator revenue (narrow definition) to TSMC's total revenue for 2025, asking if it would be close to 30%.

Answer

CEO Che-Chia Wei stated that AI demand is stronger than anticipated three months ago, and while the mid-40% CAGR is still a good estimate, it might be slightly better, with an update expected early next year. CFO Wendell Huang explained that CapEx is based on future business opportunities, and TSMC aims for revenue growth to outpace CapEx growth, which has been the case. He reiterated that higher CapEx correlates with higher growth opportunities. Che-Chia Wei also indicated that TSMC is actively working to narrow the gap between CoWoS demand and supply, continuing to increase capacity in 2026, but deferred specific numbers until next year, confirming that both front-end and back-end AI-related capacity are very tight.

Gokul Hariharan asked about the demand outlook for data center AI, the supply-demand balance for CoWoS advanced packaging, the development progress of on-device AI, and the rationale behind the implied fourth-quarter revenue forecast.

Answer

Chairman & CEO Dr. C.C. Wei confirmed that AI demand remains robust and that TSMC is focused on narrowing the supply-demand gap for CoWoS capacity. He noted that on-device AI is seeing continued development with increasing die sizes. Dr. Wei explained the implied Q4 outlook reflects a conservative stance due to potential tariff impacts and other uncertainties, but affirmed TSMC's readiness to capture upside opportunities.

Gokul Hariharan inquired about the supply-demand balance for TSMC's CoWoS advanced packaging, seeking clarity on capacity plans for 2025 and 2026. He also asked about the strategy behind the major U.S. investment, its impact on margins, and the company's ability to pass on higher costs to customers.

Answer

CEO C. C. Wei confirmed that CoWoS capacity is set to double in 2025 and remains fully loaded, though the demand situation is more balanced than before, with expectations for it to be even more so in 2026. Wei attributed the Arizona expansion to strong customer demand, noting about 30% of 2nm capacity will be located there. CFO Wendell Huang added that geographic flexibility is a value proposition and pricing discussions with customers are progressing well.

Gokul Hariharan inquired about the sustainability of AI-related demand, asking if it could be a bubble and what gives TSMC confidence in a long-term growth cycle. He also asked about the outlook for the broader semiconductor up-cycle and future CapEx plans, noting that spending has been stable despite strong demand.

Answer

CEO Dr. C. C. Wei affirmed that AI demand is "real" and "just the beginning," citing TSMC's internal productivity gains from AI as tangible proof of its ROI. He stated the ex-AI semiconductor market is stabilizing. CFO Mr. Wendell Huang added that while a 2025 CapEx figure is not yet available, it is "very likely" to be higher than 2024's, with more details to be provided in January.

Gokul Hariharan from JPMorgan Chase & Co. inquired about the supply-demand balance for AI accelerators and CoWoS advanced packaging, asking for 2025 capacity expansion plans. He also questioned the future gross margin trajectory, including the potential to return to previous highs and the financial impact of government subsidies.

Answer

CEO C.C. Wei stated that AI-related demand is extremely high, and supply will remain very tight through 2025, with a potential easing in 2026. He confirmed plans to more than double CoWoS capacity again in 2025. CFO Wendell Huang addressed gross margins, reiterating the long-term target of 53% and higher is achievable, though reaching high 50s would require very high utilization. Huang explained that overseas fabs will dilute margins by 2-3 percentage points, and subsidies are used to offset asset values on the balance sheet, with Japan being a primary source of recent subsidies.

Gokul Hariharan of JPMorgan Chase & Co inquired about the impact of the back-end loaded delivery schedule on 2026 growth and whether a reacceleration should be expected. He also asked for an update on customer conversations regarding AI orders, considering the ongoing chip supply uncertainties.

Answer

CFO Daniel Newman responded that the new capacity is for high-density AI inferencing with lower incremental revenue per square meter, and reiterated a high single-digit EBITDA growth target. He stated that the main sticking point for large AI orders remains chip supply uncertainty, with customers potentially waiting for next-generation technology. He emphasized that GDS is well-prepared with developable land and capital access for when demand materializes.

Gokul Hariharan of JPMorgan Chase & Co. questioned the ramp-up of the Singapore 22nm fab, the path back to mid-30s gross margins, and the roadmap for high-voltage technology below 22nm.

Answer

President Jason Wang confirmed the Singapore Fab 12i Phase 3 will ramp in January 2026, with healthy ASPs. He outlined the path to higher margins via better loading and product mix. CFO Qi Dong Liu added that depreciation growth will slow significantly in 2026, aiding the cost structure. Wang also confirmed a sub-22nm high-voltage solution is on the roadmap.

Gokul Hariharan from JPMorgan Chase & Co. asked about the expected gross margin cadence in the second half, the full-year depreciation growth forecast, and whether the 22/28nm nodes have higher margins than the corporate average. He also inquired about potentially accelerating the Singapore P3 fab ramp and the customer profile and margin impact of the Intel collaboration.

Answer

CFO Chi-Tung Liu confirmed the depreciation growth forecast remains at high-20% for 2025 and noted that a one-off earthquake impact suppressed Q1 margin by about 2 percentage points. He explained that the margin for 22/28nm is complex due to new depreciation from fabs in Tainan and Singapore. The Singapore P3 ramp remains dynamic but is still scheduled for early 2026. Senior Director of Finance Michael (Jinhong) Lin identified WiFi and high-speed interface SoCs as key applications for the 12nm node, with Liu adding that its margin impact will depend on utilization.

Gokul Hariharan of JPMorgan Chase & Co. asked about the key factors behind the significant Q2 gross margin beat, the sustainability of mid-30% margins amid rising costs, pricing differences between 8-inch and 12-inch nodes, the long-term utilization outlook for 8-inch fabs, and the revenue contribution from AI-related interposers.

Answer

President Jason Wang attributed the Q2 gross margin outperformance primarily to favorable foreign exchange rates. He expects Q3 margins to hold in the mid-30s despite higher depreciation and utility costs, with the EBITDA margin remaining firm. Wang noted that while like-for-like pricing is stable, blended ASP is affected by product mix. He acknowledged pressure on 8-inch utilization from 12-inch mature capacity but stated the goal remains 95%. CFO Chi-Tung Liu clarified that interposer revenue contribution is less than 4-5%.

Gokul Hariharan of JPMorgan Chase & Co. asked for an updated full-year growth outlook for UMC versus the foundry industry and questioned the company's market presence in specialty technologies like RF-SOI. He also sought clarity on CapEx subsidies for the Singapore fab and plans for 8-inch capacity.

Answer

President Jason Wang revised the foundry industry growth forecast to low-teens, driven by AI servers, and stated UMC's addressable market now appears flattish for 2024, though the company aims to outperform it. He confirmed significant market share gains in RF-SOI but did not provide specific figures. CFO Chi-Tung Liu added that the Singapore government incentives include both tax breaks and capital expenditure subsidies. Mr. Wang noted that for 8-inch, UMC is exploring silicon carbide and gallium nitride, but these initiatives are in very early stages.

Gokul Hariharan inquired about the strategy for increasing AI test market share, the economic return framework for significant test-related capital expenditures, and the company's investment plans for the U.S., particularly for advanced packaging.

Answer

Joseph Tung, CFO, explained that the company is aggressively investing in its test business, aiming for it to constitute 20% of ATM revenue by year-end, with a focus on AI final test in the second half. He noted the returns are similar to leading-edge packaging and are margin-accretive. Regarding U.S. expansion, Mr. Tung confirmed they were invited by a customer to evaluate the opportunity, but any decision will be based on economic viability, with no specific details on timing or size available yet.