Advanced Semiconductor Engineering, Inc. Reports Consolidated Year 2005 Second-Quarter Financial Results

TAIPEI, Taiwan, Aug. 3 /Xinhua-PRNewswire-FirstCall/ -- Advanced Semiconductor Engineering, Inc. ("We", ASE", or the "Company"), the world's largest independent provider of IC packaging and testing services, today reported unaudited consolidated net revenues* of NT$18,819 million for the second quarter of 2005 (2Q05), down 7% year-over- year and up 1% sequentially. Net loss for the quarter totaled NT$9,094 million, down from net income of NT$2,020 million in 2Q04 and down from net loss of NT$128 million in 1Q05. Loss per share for the quarter was NT$2.31 (or US$0.368, per ADS), compared to EPS of NT$0.51 for 2Q04 and loss per share of NT$0.03 for 1Q05.

    * All financial information presented in this press release is unaudited,
      consolidated and prepared in accordance with generally accepted
      accounting principles in the Republic of China, or ROC GAAP.  Such
      financial information is generated internally by us, and has not been
      subjected to the same review and scrutiny, including internal auditing
      procedures and review by independent auditors, to which we subject our
      audited consolidated financial statements, and may vary materially from
      the audited consolidated financial information for the same period.
      Any evaluation of the financial information presented in this press
      release should also take into account our published audited
      consolidated financial statements and the notes to those statements.
      In addition, the financial information presented is not necessarily
      indicative of our results for any future period.

"With the support from our customers, vendors, employees and management team, we have been able to successfully implement our recovery plan to greatly reduce the impact of the fire accident on May 1st. By mobilizing our internal resources, we were able to quickly resume majority of the business impacted by the fire and maintain our strong relationships with our business partners. Although the fire loss had a significant impact on our 2Q financial result, our business momentum remains solid as we go into second half of the year. Going forward, while continuing our recovery effort and insurance claim process, we will also continue to focus on our management initiatives including streamlining our capacity planning, resource allocation, pricing strategy and technology development," commented Mr. Jason Chang, the Chairman.

    2Q05 Results

    -- Net revenues amounted to NT$18,819 million, up 1% sequentially and down
       7% year-over-year.  The revenue contribution from IC packaging
       operations, testing operations, module assembly, and others was
       NT$12,693 million, NT$3,752 million, NT$2,283 million and NT$91
       million, respectively.
    -- IC packaging, testing and module assembly represent approximately 67%,
       20% and 12%, respectively, of net revenues for the quarter.
    -- Cost of revenues was NT$16,679 million, consistent with the prior
       quarter and up 5% year-over-year.
    -- As a percentage of net revenues, cost of revenues was 89% in 2Q05, down
       from 90% in 1Q05 and up from 78% in 2Q04.
    -- Raw material costs as a percentage of net revenues increased to 34%,
       one percentage point higher than 1Q05 due to higher material price and
       decreased substrate output as a result of the fire accident in our
       Chungli factory.
    -- Depreciation expense totaled NT$3,456 million during the quarter, down
       9% sequentially and up slightly by 1% year-over-year.  We stopped
       recording approximately NT$339 million of depreciation expense for
       those assets that were impacted by the fire.  (See more details in the
       non-operating expenses section below.)  As a percentage of net
       revenues, depreciation expense was 18% during the quarter, down from
       20% in 1Q05 and up from 17% in 2Q04.
    -- Gross profit for 2Q05 was NT$2,140 million, up 14% from NT$1,883
       million in 1Q05 and down 52% from NT$4,469 million in 2Q04.  Gross
       margin was 11% for the quarter, which increased from 10% in the
       previous quarter and decreased from 22% in 2Q04.
    -- Total operating expenses during 2Q05 were NT$2,245 million including
       NT$672 million in R&D and NT$1,573 million in SG&A.  Total operating
       expenses as a percentage of net revenues for the current quarter was at
       12%, up from 11% in 1Q05 and 10% in 2Q04.
    -- Operating loss for 2Q05 was NT$105 million, compared to loss of NT$166
       million and income of NT$2,359 million for 1Q05 and 2Q04, respectively.
       Operating margin was negative 0.6% in 2Q05, which improved slightly
       from 1Q05 but decreased from 12% in 2Q04 due to gross margin decline.
    -- We recorded net non-operating expenses of NT$9,968 million in 2Q05,
       which increased by NT$9,626 million sequentially, and by NT$9,667
       million year-over-year.
           -- The Company recorded fire loss of NT $8.7 billion.  Such loss
              amount assumed total loss on all fire-impacted assets with net
              book value of NT$13.2 billion, and labor & rental cost totaling
              NT$151 million that were idled in May and June, netted by
              insurance receivable of NT$4.6 billion.  The insurance
              receivables of NT$4.6 billion were based on certain assets with
              their damage amount currently assessed by the Company and
              adjusted for the insurance deductibles.  Beyond 2Q05, the
              Company will continue its damage-assessment and insurance-claim
              process with the insurance companies and expects to further
              reduce the fire loss amount as the process continues.  The
              Company stopped recording May and June's depreciation expenses
              for a total of NT$339 million for the assets that were written
              off as a result of the fire accident.
           -- Net interest expense increase was mainly due to higher
              outstanding loan balances and interest rate, plus transaction
              cost associated with the partial buy-back of our Euro
              Convertible Bond.
           -- Loss on long-term investment was NT$2 million, consisting of
              NT$25 million investment income from minority-owned affiliates
              and NT$27 million of goodwill amortization related to such
              minority-owned affiliates.  The NT$25 million investment income
                          from  minority-owned  affiliates  included  NT$28  million  of
                            investment  income  from  Universal  Scientific  Industrial  Co.
                            ("USI"),  NT$2  million  of  investment  loss  from  Hung  Ching
                            Construction,  NT$1  million  of  investment  loss  from  Hung  Ching
                            Kwan  Co.,  NT$1  million  of  investment  loss  from  Inprocomm,  Inc.'s
                            ("IPCM"),  and  NT$1  million  of  investment  income  from  other
                            invested  companies.
                      --  The  remaining  non-operating  expenses  were  primarily  related  to
                            inventory  provision  adjustment  and  other  miscellaneous  expenses.

        --  Loss  before  tax  was  NT$10,073  million  for  2Q05.    We  recognized  an
              income  tax  expense  of  NT$22  million  during  the  quarter.    Minority
              interest  adjustment  was  NT$1,001  million.
        --  In  2Q05,  net  loss  was  NT$9,094  million,  compared  to  net  loss  of  NT$128
              million  for  1Q05  and  net  income  of  NT$2,020  for  2Q04.
        --  Our  total  shares  outstanding  at  the  end  of  the  quarter  were
              3,945,235,664.    Our  loss  per  share  for  the  second  quarter  of  2005  was
              NT$2.31,  or  US$0.368  per  ADS,  based  on  3,945,235,664  weighted  average
              number  of  shares  outstanding  during  the  first  quarter.


        --  Capital  expenditures  in  2Q05  totaled  US$48  million,  of  which  US$24
              million  was  for  IC  packaging,  US$1.2  million  for  module  assembly,  US$13
              million  for  testing  and  US$10  million  for  interconnect  materials.
        --  EBITDA  for  the  quarter  totaled  NT$2,736  million,  down  64%  year-over-
              year  and  down  44%  sequentially.    The  EBITDA  number  has  been  adjusted
              for  the  fire  loss  number.
        --  As  of  the  end  of  2Q05,  we  had  cash  on  hand  plus  short-term  investment
              of  NT$12,542  million,  which  increased  by  NT$1,880  million  from  the  end
              of  1Q05.
        --  As  of  the  end  of  2Q05,  we  had  total  bank  debt  of  NT$57,975  million,
              consisting  of  NT$6,204  million  of  revolving  working  capital  loans,
              NT$4,461  million  of  current  portion  of  long-term  debt,  NT$38,311
              million  of  long-term  debt  and  NT$8,999  million  of  long-term  bonds
              payable.    Total  unused  banking  facilities  were  NT$24,415  million.
        --  Total  number  of  employees  was  28,948  as  of  June  30,  2005.

        IC  Packaging  Services

        --  Revenues  generated  from  our  IC  packaging  operations  were  NT$12,693
              million  during  the  quarter,  down  NT$62  million  or  1%  sequentially  and
              NT$60  million  or  1%  year-over-year.    On  a  sequential  basis,  the
              decrease  in  packaging  revenue  was  primarily  due  to  volume  decrease
              caused  by  the  fire  accident.    ASP  remained  relatively  stable  in  2Q.
        --  Revenues  from  advanced  substrate  and  leadframe-based  packaging
              accounted  for  87%  of  total  IC  packaging  revenues  during  the  quarter,
              down  slightly  from  88%  in  1Q05  and  up  from  85%  in  2Q04.
        --  Gross  margin  for  our  IC  packaging  operations  was  10%,  consistent  with
              the  prior  quarter  and  down  12  percentage  points  year-over-year.
        --  Capital  expenditure  for  our  IC  packaging  operations  amounted  to  US$24
              million  during  the  quarter,  of  which  US$10  million  was  for  wirebonding
              packaging  capacity,  and  US$14  million  was  for  wafer  bumping  and  flip
              chip  packaging  equipment.
        --  During  the  quarter,  16  wirebonders  were  added  and  493  wirebonders  were
              damaged  by  the  fire  accident  and  therefore  no  longer  in  operation.    As
              of  June  30,  2005,  we  operated  a  total  of  6,136  wirebonders.

        Testing  Services

        --  Revenues  generated  from  our  testing  operations  were  NT$3,752  million,
              up  NT$59  million  or  2%  sequentially  and  down  NT$350  million  or  9%
        --  Final  testing  contributed  80%  to  total  testing  revenues,  up  by  2
              percentage  points  from  the  previous  quarter.    Wafer  sort  contributed
              16%  to  total  testing  revenues,  down  by  1  percentage  points  from  the
              previous  quarter,  mainly  affected  by  the  loss  of  our  wafer  probing
              capacity  in  Chungli.    Engineering  testing  contributed  4%  to  total
              testing  revenues,  down  by  1  percentage  points  from  the  previous
        --  2Q05  gross  margin  for  our  testing  operations  was  16%,  up  by  6
              percentage  points  sequentially  and  down  by  13  percentage  points
              year-over-year.    The  increase  in  gross  margin  was  mainly  due  to  higher
              utilization,  lower  depreciation  expenses,  rental  expenses  and  labor
        --  Capital  spending  on  our  testing  operations  amounted  to  US$13  million
              during  the  quarter.
        --  During  the  quarter,  41  testers  were  added  and  109  testers  were  damaged
              by  the  fire  accident  and  therefore  no  longer  in  operation.    As  of  June
              30,  2005,  we  operated  a  total  of  1,350  testers.

        Module  Assembly  Services

        --  Revenues  generated  from  our  module  assembly  operations  were  NT$2,283
              million,  up  NT$358  million  or  19%  sequentially,  and  down  NT$1,096
              million  or  32%  year-over-year  mainly  due  to  volume  changes  and
              increased  ASP.
        --  Camera  module  assembly  revenue  accounted  for  61%  of  the  total  module
              assembly  revenues,  while  RF  and  baseband  module  assembly  accounted  for
        --  The  increase  in  gross  margin  from  11%  in  the  previous  quarter  to  12%  in
              the  current  quarter  was  primarily  attributed  to  volume  increases.

        Interconnect  Materials

        --  The  materials  output  manufactured  by  ASE  was  about  NT$1,238  million  for
              the  quarter,  down  by  NT$362  million  or  23%  sequentially  and  by  NT$840
              million  or  40%  year-over-year,  mainly  due  to  the  loss  of  capacity  in
              Chungli.    Gross  margin  for  material  was  negative  10%  during  the
              quarter,  which  decreased  from  0%  in  1Q05  and  23%  in  2Q04  due  to  a
              decline  in  production  volume  during  the  current  quarter.    Certain
              startup  costs  in  China  operations  were  also  incurred.    In  2Q05,  ASE
              Material  supplied  25%  (by  value)  of  our  total  PBGA  substrate


        --  Our  five  largest  customers  together  accounted  for  approximately  34%  of
              our  net  revenues  in  2Q05,  decreased  slightly  from  35%  in  1Q05  and  from
              36%  in  2Q04.    Only  one  customer  accounted  for  more  than  10%  of  our
              total  revenues.
        --  Our  top  10  customers  contributed  49%  of  our  net  revenues  during  the
              quarter,  decreased  from  51%  in  1Q05  and  from  50%  2Q04.
        --  Our  customers  that  are  integrated  device  manufacturers,  or  IDMs,
              accounted  for  44%  of  our  revenues  in  2Q05,  compared  to  49%  in  1Q05  and
              52%  in  2Q04.

        About  ASE,  Inc. 

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