Good morning and good evening everyone. Thank you for attending ASE’s Q1 2006 Earnings Release Conference Call. For access of the presentation materials, please go to our website www.aseglobal.com where you can find the hyperlink to our presentation. Let me start, as we turn to page 3, which will show you the sequential comparative of our performance in quarter one. To start, we had a much stronger than normal Q1 as our consolidated revenue of NT$24.8 million dropped only 6% sequentially, compared to a normal seasonal drop of 10-15%. In fact, in US dollar terms, revenue only declined 2.6%. If we take out the negative impact on revenue from continuing (inaudible) businesses in China, our main business actually stayed flat of last quarter. Despite a minor revenue decline, we will continue to see efficiency and improvement in stress and cost management. Q1 margins further improved as gross profit went up 1% to reach NT$6.6 billion, and operating profits grew 10% to NT$4.7 billion. Netting our non-operating expenses of NT$602 million, pre-tax income is monitored to NT$1.4 billion. Net income after tax and minority interest grew to NT$3.2 billion, after recognizing tax of NT$18 million and minority interest adjustment of NT$426 million. EPS for the quarter was NT$0.69, up from $0.65 a quarter ago. On a sequential basis, assembly revenue dropped 5%. Tax revenue dropped 3%, while marginal assembly revenues dropped 28%. Separately, material revenue dropped 17%; largely as a result of the discontinuing of our lead (inaudible) operation at the end of Q4. Substrate revenue came down 8% due to normal seasonality. Utilization rate of both assembly and test were above 90% and ASP remains stable in the quarter. In terms of profit margins, gross margins improved from 24.8% a quarter ago to 26.7%. Looking at respective costs of goods…

At this time we will open the floor for questions. If you would like to ask a question, please slowly press star 1 on your telephone keypads and should you wish to cancel your question, you may press the hash or pound key. The first question will be coming from Timothy Arcuri, Citigroup Global Markets

Hi. Actually, I have two things. Number one, I am wondering given the build up inventory occurring at a number of your different customers, is your guidance for June the same as it might have been 3 or 4 weeks ago? That’s my first question.

In June…?

Yes, so your sequential guidance for the June quarter - is it the same as it would have been had you given it 3 to 4 weeks ago?

Yes, pretty much so, but I think in the 2nd quarter we will see a gradual step up pattern with April being the lowest month and then gradually moving up throughout the quarter. And for the whole quarter we are looking at low single digits to mid single digits top line growth. I think the much stronger momentum was hard to build from Q3 when PC start to pick up it’s pace.

Just for some historical view, during prior cycles when you’ve seen a build up of your customers at inventory levels, how has that manifested itself in your forecast? Do they, is there some sort of leading indicator that you get or do your customers just cut the forecast and that’s when you find out?

I think we will have a few just by looking at how the flow of this is coming into our factory. At this point, we are not actually seeing a very serious inventory piled up as far as our customers are concerned, but maybe it is just a very selective few customers. Maybe in the PC sector we’ll have a heftier inventory than the other. While in communications, the consumer may think the inventories are being kept at a very lean level.

So you see no change in your wafer bank inventories?

Not so much, no.

Next question is coming Manny Hudseney, USA

Thanks for taking my question. Just as a follow-up to the previous question. Can you help me understand what dibanks are… how they change Q4 into Q1 and how would it change or your expectation from Q1 into Q2? And, also with the increased CapEx, to what extent would you expect test CapEx to change and would it be front end loaded first half more than second half or is it going to be more linear throughout the year?

To answer your CapEx question first, I think, first of all, we are raising the CapEx budget to $400 million up $50 million from before and the distribution will be $125 million to (inaudible), up from $100 million dollars before. Then, $75 to test up from $50, whereas CapEx budget for materials remains $200 million dollars. And the pattern will be more or less back end loaded, I think. But starting from Q2 we will start to pick up our pace on CapEx. As I mentioned, we are now looking at around a little over $100 million dollars for the quarter and the rest will be spending in the second half of the year. The first part of your question was?

The first part of the question had to do with dibanks – if you could help me understand how it changed from Q4 into Q1 and your expectation for Q2.

Actually there wasn’t that much change in the dibank situation. If you look at our revenue Q4 to Q1 taking out the (inaudible) dollar appreciation impact and also the discontinuation of our camera module business in Shanghai, which was from Flectronics, being taken out. The net change in the assembly and test revenue has not really dropped that much; about 26%, 27% only. And considering the less working days in the 1st quarter, the output that we had in the 1st quarter is phenomenal in any 1st quarter. Though the dibank situation we are not seeing any real pile up so to speak in the dibank – we are still looking at anything from a week to two weeks at a normal level.

Let me rephrase my question, some people are comparing 2006, the first half of 2006 to 2004 where inventories were built up and then (inaudible) fell off. What is your view regarding the current customer order and relative to inventory and how do you compare this year to 2004?

Well, 2004 I think people were expecting that the sky was the limit in terms of growth. The cycle…I’ve seen cycle no longer exists. I think at this time around the whole industry is much more rationalized and that is part of the reason why all the sub accounts are very cautious in terms of capacity (inaudible). I think it is a very different scenario from last time around. There was too much excess capacity in 2004 but not at this point in time.

Next question will be coming from David Lily, USA

Nice quarter – I was wondering given that you upped the CapEx a little bit if you might just remind us what you think the overall industry growth will be and how that might translate into your growth this year and then could you just clarify, I am sorry, I was trying to write furiously, you talked about substrate capacity additions like millions of units per month, could you just review the flip chip and BTA substrate capacity additions so I can write those down? Thanks.

I think if the industry estimate is anywhere correct, I think everybody is expecting about 9-10% industry growth for the year. We typically grow 2-2 ½ times the industry average. I think we, this year around, we are looking at a bottom heavy normal pattern for the year. Whatever we are doing now and what we are budgeting in terms of CapEx, is really important in the second half ramp up. I think that is also being just from the customer forecast that we are getting. We will prepare ourselves for the ramp up and of course the CapEx number, the (inaudible) number is always a moving target depending on the overall market situation. In terms of substrate capacity, in terms of standard PBTA, right now we are only supplying with the existing capacity that we have. We are only supplying about 37% of our own means and we believe that once we of course like to bring that ratio up as much as possible so I think there is plenty room for us to ramp up our internal capacity.

And you have just given us some metrics about what you added; could you just give me those again?

In terms of (inaudible) and capacity, right now we are at 36 million units and in Q2 there won’t be that much added. But in Q3 we’ll move it up to about 48 million units and then eventually to about 60 million units by the end of the year. To be more or less in line with our internal use requirements as well as developing the direct sales part of the business. Which right now we have about 20% of materials being in the direct sales mode and our plan is to grow that part of the business to about 30% of our overall material revenue by year end. In terms of flip chip capacity, right now we have a million units capacity installed and we are in the phase of having customer qualifications and we are targeting to have mass production by September time frame. The plan is to install up to 3 million units capacity by year end and we will do it gradually throughout the year.

Thank you and did you mention how many wirebonders that you added in the 1st quarter and why don’t you give us a target for how much it might add for the year to the port what about 20% or 25% growth whatever number it might add up to be.

We currently have about 6,036 wirebonders and in the 1st quarter we are higher (inaudible) bonders but added 50 new bonders. Then we had a reduction of 40 units in our bonders. In terms of our actual number of bonders that we will be adding, I don’t have the numbers off hand. But, in quarter 2 we are looking at about 30-50 units being shipped in and I think in quarter 3 we’ll start to add more bonders at that point.

Our next question will be coming from Seu Ng, BNB Hong Kong

Hi good evening, Joseph, congratulations on a great quarter – two questions and number one, what is the FX assumption underlined your revenue guidance for same quarter?

For the 2nd Quarter?

Yes…

It will be 31.5.

I see, ok and the same question, right now what is the current installed flip chip packaging capacity and the capacity ramp up rates for the rest of the year?

You mean targeting capacity?

Flip chip packaging…

I will need to update myself on that.

No problem. And then the last question – roughly speaking what percentage of your flip chip package is done on a substrate on consignment basis?

Right now it is still up 20-30%.

Do you expect that number to go up for the rest of the year right?

Yes…

Any rough number you can give me?

No, not at this point.

Our next question will be coming from Grenad Sharma, Taiwan

Hi, good afternoon Joseph and good quarter. I have a couple of questions. The first one is basically could you give us some ASP trend of your product on 2nd quarter and probably (inaudible) prices and how it is going to effect you on the 2nd quarter?

I’ve checked with our own operational (inaudible) and 1st and 2nd quarter the pricing will remain stable. Of course, selectively there are customers looking for price negotiation but so far we have been defending our prices very nicely. Especially on the test side, I think now we are keeping our capacity very tight; and therefore, there is less pressing pressure. In terms of substrate, same situation with the substrate prices – we don’t see significant pressure on the substrate prices either.

So gold prices going up, how do you handle that gold price and current levels?

Excuse me?

Gold prices?

Gold prices – you mean material prices?

Material prices, yes.

Yes, of course there is going to be some pressure on it and not just gold prices but also on the fuel prices going up and copper prices going up as well. So what we are trying to build now is to some how better manage that through efficiency improvements as well as our better management on our purchase. For instance, we are consolidating some of the raw materials that we use to fewer vendors so that we can have a bulk purchase discount and this actually, this effort actually has been going on for the past nine months and we are starting to see the positive results of that, which is very evident in the 1st quarter. Our revenue came down by the margin as we improved.

And I think sometime in the last conference call you did mention about you are trying to get some of the testers from your customer on consignment basis. Currently, could you give us some idea, how many of your testers are consignment basis at this point?

Roughly about 10-15% - some of the testers are from (inaudible) vendors and some of the testers actually come from our customers.

10-15% - and that amount is not included in your CapEx, I guess.

No, it is not.

But is it included in your tester count?

Yes, it is.

And going forward how much of the testers are you going to get it from 2nd quarter on the consignment basis or it will remain about 10-15% or lower down?

That will be depending on the negotiations with our customers and vendors. I don’t have targeted numbers.

And if you think probably some of your customers are not willing to put enough tester on a consignment basis, your CapEx may go up from current number again?

It is possible but I think at this stage our advised CapEx (inaudible).

Last one is the lead time of the substrate and I guess the substrate prices are falling and how do you think it will grow amidst whether your materials divisions will be effected because of that?

Our what will be affected, I am sorry?

Since, I think, some of the substrate prices are falling a bit, are your material divisions going to get affected going forward? What the margins will be so far on the material divisions?

Well I think at this point the major driver for margin improvement as far the materials are concerned, is really on the yield. Right now we are running at about 80-85% and there is definitely more room for improvement of the yield. If we can continue to do so that will more than offset the pricing erosion of the materials. And as I mentioned, we are actually not seeing that much pressure on the substrate prices now.

Our next question, a follow-up question, will be coming from Meddy Haseeny, (country not specified)

Yes, I joined the conference call late, I apologize if I am repeating a question. Regarding your guidance of low to mid single digits, how is it different between assembly and tests? And the second follow-up question has to do with – is there any additional outsourcing agreement that you would expect to materialize going forward? I am not expecting specific customer names, but if you could just qualitatively talk around it. There is some speculation that you may get increased chip business outside of your existing customer’s lists. If you could elaborate on those two, I would appreciate it.

In terms of the respective growth, I think the test part will stand firmer than assembly. In terms of any other business initiatives, I think we are on a constant lookout on any possible opportunities involving our existing customers. There is nothing concrete at this point for me to report, but like I said, we are constantly reviewing any possibility there is with existing customers to set up something aiming at getting more business. On top of that, we also are working very aggressively in getting some designing in some of the upcoming business, some in the chipset area as well.

And those businesses, if it materializes it is not going to be in the immediate future. It is going to be in the second half or early 2007? Is that a fair assumption?

That is correct.

And just one more follow-up. When you said the test growth is higher than assembly; does that mean that it could actually grow about 5% on a sequential basis?

I would refer that to Freddy tomorrow. I think, well I don’t think you are far off.

Our next question will be coming from Andrew Wigs, USA

Hi good evening, a question on test in Q1 – I see that final test actually declined as a percentage of revenues or total test while away for certain engineering inquiry. Is there any dynamic at play or any rational for why that occurred?

I don’t see any obvious changes, I think it is just different business mix quarter-to-quarter.

Does that infer that that should flip flop or converge in Q2?

I think in the 1st quarter the wafer probes did have stronger momentum that is more in line with the (inaudible) foundry. But, I think going to 2nd quarter the two sectors should be moving in sync.

Ok – so gross margin was 39% in Q1 end tasks. What is your expectation for gross margin in Q2 just for the test segment?

I think there should be slight improvements.

Meaning, low 40’s?

That’s not slight though?

Another question on some of the testers and the packaging equipment you disposing of. Where are those going right now; the 92 wirebonders and the 35 testers that were disposed of?

Well those were just old fully depreciated testers or bonders that we have written off.

Ok, so you still have them, they are just fully depreciated?

No, those (inaudible)…

Okay, so they are no longer in production – they are not in production anywhere else?

No, they are not.

Okay. Last question, could you quantify your game console business in Q1 and then how you expect that to be as a percentage of revenues as we move through the year, Q2, Q3, and Q4?

Games console is roughly about 4-5% of our revenues in Q1. I think it should be up in Q2, but I don’t think that we are in a position to disclose percentages.

I mean is this near the peak to what it is going to represent as a percentage of revenues?

No, this is actually lower than the contribution in Q4.

But, I meant in terms of the rest of the year… do you think that Q4 will ultimately be the peak or do you think that game console could represent a bigger part than it did in Q4 as we go on through the remainder of this year?

Well I think in Q3 and Q4, as I had mentioned earlier on, the 2nd half we would be much stronger growth momentum. I think at this point, game console should stay at around 4-5% of the total.

Our next question will be coming Mr. Daniel Zu, Toronto

I have two questions.–The first one is, you mentioned the company will continue to pay down the debt, so what do you expect? How much more debt you will retire by the end of the year? The second one is, you mentioned that in Q2, 2005 company took initiative to improve performance and everything - gross margins, operating margins - has greatly improved. So going forward for Q2 and the rest of the year, do you expect the current trends for the margin improvements to continue? If you look at and compare 2006 Q1 verses 2005 Q4 the major improvements, I say it is from (inaudible) operations. Do you expect (inaudible) operations gross margin continue to improve?

Yes, I think there is certainly still room for improvement in terms of margins. I think it can come from various directions. One is, of course, we will continue our effort in better managing our costs as well as our expenses. As you can see from the 1st quarter, the operating expenses actually came down from above 9% a quarter ago to 8%, less than 8%. We will continue to work on that. On the console (inaudible) side, I think better ramp up and better yield on the material operation will continue to make a positive contribution to the margin expansion. As I mentioned earlier on, the yield is still at 80-85% and there is still room for improvement. With the expanded capacity as well as improved yield, the margin on that part will continue to improve. I think also on the test business, there is also room for improvement. I think one of the positives of our test operation is that the additional, the new testers that we are adding our old are commanding a higher than average gross margin and as we continue to ramp up, I think the margin improvement on the test side will continue. So for everything together, I think there is going to be continuous margin improvement just from the operation point of view and also, of course, as we ramp up our revenue, that will help the margin as well.

Ok, thank you, and back to the first question – how much more debt are you expected to retire?

Right now, I think in the 2nd quarter, we have already paid, the 4th and 1st quarters; we have already paid down about over $200 million dollars worth of debt. Going forward as we continue to have generous free cash flow, I am expecting another $200-300 million dollar pay down.

Once again, that is star one for questions and the hash or pound key to cancel your questions.

Ok – there are no more questions. Let me sum up this conference call. I think we had an exceptional 1st quarter so we are very confident that we are hitting off for a very good year. Although we are coming off from a very strong 1st quarter, the 2nd quarter as well will be a mild one, but we will continue to see margin improvements and we will see much stronger growth momentum starting from second half and that is one the reasons why we are revising our budget on CapEx anticipating the revenue growth going forward. We will continue to strive on reducing our cost and expenses. We will continue to improve our margins. Thank you very much for attending today’s conference call and this will be repeated on our website. Thank you very much. Copyright policy: : THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY’S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY’S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY’S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. : THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY’S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY’S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY’S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.