Welcome, and thank you for standing by. [Operator Instructions] Today's call is being recorded. If you have any objections, you may disconnect at this time. And now I would like to turn the call over to your host, Joseph Tung. Please go ahead, sir.

Good morning, good evening. Welcome to ASE First Quarter 2013 Earnings Conference Call. We're glad to have our CFO, Joseph Tung, here to present to you our Q1 results.

Good morning, and good evening, everyone. Thank you for attending ASE 2013 earnings release conference call. Before I start the presentation, please turn to Page 2. Here on Page 2 is the Safe Harbor notice. I'd like to remind everyone on this call that the presentation that follows may contain forward-looking statements. These forward-looking statements are subject to high degree of risk, and our actual results may differ materially from these forward-looking statements. Good morning, and good evening. As anticipated, we saw a typical seasonal slowdown in our business during the first quarter of 2013. In particular, the first 2 months of the year were, as expected, somewhat sluggish. As could be seen in our monthly revenue releases, things started to pick up back up during March. Our March revenue run rate were -- at the end of March were exceeding our Q4 run rate. So let's get into the details. Page 3. On a fully consolidated basis, the company delivered EPS for the quarter TWD 0.29. During Q1, we saw seasonal declines in our IC packaging, testing and EMS businesses. Our Direct Material business saw a small increase during the quarter. Consolidated revenue was TWD 48.2 billion, a decrease of 14% from the previous quarter, a notch better than guidance. Gross margins decreased 2.4 percentage points to 17.2% from 19.6% the previous quarter, primarily as a result of reduced revenues. Netting out the effect of real estate, the actual drop of gross margin was 1.6 percentage points. Operating margins decreased to 7.5% from 10.6%. It's worth noting that our operating expenses came down TWD 364 million, due largely to savings on labor costs. Non-operating expense went up TWD 326 million to TWD 444 million this quarter, due to lower FX gain, increased customer compensation and increased investment loss. Pre-tax…

[Operator Instructions] And our first question will come from Randy Abrams. Randy Abrams - Crédit Suisse AG, Research Division: You have good result and outlook. Want to test the first question on the materials business, where the internal substrates are now down to 23%. And it looks like margins like low teens. A few years ago, it was a mid-20s margin business. So if you could talk about some of the dynamics going on in that business or maybe the strategy? And if there is any potential to get back -- like if you want to get back to using more of your own substrates? Or there's potential to get the margins back up to the level from a few years ago?

Okay, I guess, what's happening is a lot of the business is moving from wirebond to flip chip, and therefore, because our substrate operation does not yet provide any buildup substrate for our own use, therefore, the self-supply ratio is declining a bit. Although, in quarter 1, there is also a bit of a seasonality factor involved, and therefore, the self-supply ratio came down from 29% to 23%, and we're expecting that to go over 25% in the second quarter. I think in longer run, I think, we will be looking at sadly, some of the capacity for the chip substrates. And we are working in a -- we are working on that very aggressively. And hopefully, at the later part of the year, we will start to have some capacity to supply ourselves. In terms of margin, I think, as this revenue, because of the -- as we mentioned, the utilization of our material operations is at the low 70s, and therefore, there is still some other capacity remain, and therefore, causing some pressure on the margins. We do not expect margins to come back to the 20s level, but we do see that we are, with the ramp-up in early Q2, we will see our margin coming back to the over 15% in the later quarters. And of course, once we started to ship for buildup substrates -- I'm sorry, the flip chip substrates, we will see some improvement in the margin going forward. Randy Abrams - Crédit Suisse AG, Research Division: Okay. When would the flip chip -- or when do you anticipate that timing for the -- to move on to doing your own flip chip?

Right now, I think it's still in -- we still have a building up a pilot line. And it really depends on how fast or how soon our customers can start adapting to these new substrates that we will be building. And the most -- more likely time frame is toward the end of this year or early next year [indiscernible]. Randy Abrams - Crédit Suisse AG, Research Division: My follow-up question, just following on from this afternoon on the free cash flow you're generating now from the lower CapEx. I just want to look back at what the priority to raise the dividend versus deleveraging the balance sheet further. Just maybe where you're targeting, whether it's like a net debt-to-equity or a net cash -- net debt position, where you kind of want to get to on leverage. And if you could talk a bit more, it looks like the board renewed the convertible proposal. Just potential target or was that part of the process to restructure some of the debt?

I think the -- what we have in our agenda for the shareholders meeting, we typically quote in several alternatives -- funding alternatives so that we have the flexibility whenever we decide to raise some funds for different instruments, we will be able to do that. So there is no set plans for making any offerings at this point of time. But we're simply leaving the quota there to give us some flexibility. And in terms of the use of our free cash flow. I think, we actually want to do both things. One is to deleverage our balance sheet a bit, and also to increase the dividend yield for our shareholders, and, hopefully, we can achieve both in the year. Our target for the interest-bearing debt, I think, in quarter 1, we have managed to bring it down to TWD 2.7 billion level. But with the increased CapEx, I think that amount will come back up in quarter 2, and then start to come down again in quarter 3. So -- but, I think, the overall goal is really to bring the interest-bearing debt down to TWD 2.5 billion level for this year at least. And also, in terms of dividend payout, I think this year, we have already announced that we will be, of course subject to shareholders' approval, we have announced that we will pay out 70%. The payout ratio will be 70% in terms of dividend payout. It will all be paid in cash. With that, with the current stock price, we will be able to give the shareholders a dividend yield -- test dividend yields of about 4%, which is much more in line with the market average.

[Operator Instructions] And our next question will come from Mr. Szeho Ng.

It's actually Szeho from BNP. Two questions from my side. The first one with regard to copper wirebonding. The penetration stayed at 60% last quarter, so when should we expect the next phase of penetration ramp for copper wirebonding?

We will continue to see increase in our -- growth in our copper wirebond revenue going into Q2, as we started to ramp up with some of our IDM customers, some in Europe as well as in States. We are expecting the ratio to grow from 60% at this currently to roughly 62% to 63% in coming quarters. And into the second half of the year, that remains to be seen how fast or -- how fast we can further penetrate all those IDM customers, particularly in the States and Europe.

I see. And then second question for the tax rate. It has been high for the last 2 quarters. Any reason for that? And how should we model for the entire year?

I think there are a couple of reasons. One is that in quarter 4 last year, we did enjoy some of the tax credit and also some subsidy from government and various governments. And therefore, the tax rate is comparatively lower than this quarter. Going forward, I think, because the overall income tax rate is higher at this point, government has raised the minimum tax rate from 10% to 12%. And also, as I mentioned earlier on in the afternoon session, we are kind of struggling a bit with our China operations, in particular, because these areas in China, we do have much favorable tax rates. But if we're not creating enough income there, we don't get to enjoy that tax benefit. And therefore, as a whole, the tax rate will be higher. So if we go into, more so, in second half of the year as we pretty much completed the streamlining of the business -- our operations in China and started to see positive contribution on the bottom line, we will see our tax rate to come back to a more normal level. And I think for model-building purposes, I think 15% to 17% seems to be a reasonable target.

Okay, all right. Okay, last question. For gross margin, are you still comfortable with achieving 20% gross margin sometime in second half this year?

Twenty-something?

25%. I mean, for the back end.

IC ATM?

Yes.

No, I think we were saying that we are very confident that we will be back to quarter 4 level, if not slightly better than that. I think, of course, revenue growth is one boost to the margin, but we're also getting into a bit more favorable environment, including NT dollar appreciated somewhat, and also gold price is lower. Although gold price doesn't have that much of an impact on us anymore because right now, our wirebond business is mostly copper.

Okay, I mean second half this year, 25% gross margin is realistic?

Well, that's certainly a target that we will be aiming at. I think we have a reasonable -- I think it's a very reasonable target for us.

Our next question would come from Mr. David Duley.

Could you just review your gross margin guidance for the June quarter again? The pieces -- you were speaking pretty quickly; I didn't write them all down. So I guess what I just heard is the IC ATM business should -- gross margin should increase back to Q4 levels, which was what?

Which was 23.2%. For the EMS business, we have 11.5% in quarter 1, and we expect that to remain flat in second quarter -- remain the same and...

Okay, so there's going to be a nice snapback in the gross margin numbers.

That's correct.

So can you talk about what the depreciation is going to be in Q2? And maybe give us an idea of what the depreciation balance for the IC ATM business is going to be for the balance of this year on a quarterly basis?

Okay, for depreciation, we are running at about 5. -- depreciation plus amortization and rental expenses, we are at about close to TWD 5.7 billion for IC ATM, NT dollar. And we're expecting a slight increase going into Q2 and start stabilizing at that level. I think in Q2, we should be seeing roughly TWD 5.7 billion coming from depreciation, amortization and rental expenses. And for the group as a whole, I think the overall, on a quarterly basis, it should reach -- it should stay relatively flat about TWD 6 billion.

Okay, so the depreciation's going to flatten out later in the year, because your CapEx is coming -- is lower this year than it was last year?

Yes.

Okay. And could you talk about the difference in markets in the June quarter? Just a little more detail about how the segments are going to act for you guys?

Well, in first quarter, I think the communication actually had the weakest performance because we had some of our -- particularly Asian customers have been going through some inventory correction. But that seems to be picking up from March, and we're seeing that trend to reverse. Communication, actually, will be the strongest performer in the second quarter, followed by auto and industry -- industrial and then computing.

Okay. And could you talk a little bit about, I guess, you said TWD 116 million in CapEx, and the total is TWD 600 million to TWD 700 million for the year. So there's TWD 500 million to TWD 600 million to be spent for the balance of the year. How is that CapEx going to break out amongst the 3 quarters of balance of the year? And then, where do you plan to spend the money? It sounds like it's going to be almost entirely focused on advanced packaging.

The spending pattern for this year will be -- second quarter, will be -- I think, we will see our second quarter, as we prepare the second half's ramp-up, I think in second quarter, chances it will be double what we spent in quarter 1. And in terms of the actual spending, where this CapEx will be spent, I think TWD 250 million to TWD 300 million will be for -- about TWD 250 million to TWD 300 million will be for advanced packaging, and then about TWD 150 million to TWD 200 million in testing, TWD 50 million to TWD 100 million for material. I think we will still be spending some for wirebond, but mostly for bottleneck relieving.

Okay. Then why did the test business decline less in the current quarter than the packaging business as far as revenue?

Declined less?

Yes. I thought the test business performed better than the packaging business.

I think that's the result of we have more wafer sort business in quarter 1, because of the multi-dye [ph] type of products coming out. That pretty much put a layer of support to our test business in quarter 1. But going into quarter 2, I think the growth of packaging will outpace test, yes.

Okay. Final question for me is, when you look at your advanced packaging business, could you talk about the profitability there and the issues with adding capacity in a smooth basis to not impact the profitability because it's much higher ticket items? So how are you going to manage this process as you ramp that business up?

Well, I would rather talk about the margin as a whole, because if we single out one particular package, that will, obviously, refer to some customers and that wouldn't be very nice for us. So I think in terms of packaging, I think, in a broader sense, I can only say that, at this point, discrete is still behind the overall. And we are -- because this is a relatively new business, new operation of ours, we are still going through a learning curve. Although we're putting a lot of resources in streamlining the business. And hopefully, at the second half of the year, we'll start to see some improvement. And that will be one of the improving areas for us to continue to grow our margins. And as I said, the other part of the business is really the material. And hopefully, we can also improve the yield and efficiency. And also by bringing in new type of products, that will help the margin in that business as well for us to grow the overall margin of ours.

Well, let me ask it a different way then. As far as advanced packaging, you're spending a lot of money in that particular area, TWD 250 million to TWD 300 million, I guess, is what you said. What sort of increase in capacity can we expect with that CapEx, however you'd like to measure it? What is your current capacity? What would you get by adding this, or however you'd like to frame it for us?

I think for wirebond, you can have about $1 of investment, it gives you a $1.20 of revenue. So for advanced packaging, the return is lower because the capacity is a bit more expensive. And also, part of the so-called advanced packaging capacity really goes into bumping, which doesn't generate as much revenue as the assembly. And therefore, the ratio could be closer to 1:1.

Okay. And will this $300 million or whatever you're going to spend increase your flip chip capacity be measured by wafers or however you do that? Do you have a metric there?

Have a what?

A metric for the increase in the number of wafers or whatever, the $300 million. I'm just trying to figure out how much capacity is going to be added by this $300 million.

I have to get back to you on that.

[Operator Instructions] And our next question would come from Steven.

I guess you just quantified a little bit here that, I guess, packaging was going to outperform test in the second quarter. I'm wondering if you could talk a little bit about or quantify a little bit advanced packaging versus test versus copper versus gold wirebonding, kind of the relative growth rates of those in the second quarter. I mean, I guess if the average is 11% to 14%, what grows above that and what grows below that?

Growth will be across the board. All areas will have growth. But in terms of -- if you're using the overall 11% to 14% that we're looking at, I think the advanced packaging will certainly grow more than that, whereas the wirebond will have lower growth rate than the corporate average.

Okay. And you were just suggesting that opportunities for margin improvement from the material side as well as in advanced packaging. Advanced packaging margins today are kind of in line with corporate average packaging margins, kind of around 20%? Is that what you're hinting kind of today? And if so, where could they go in a, I don't know, by the end of the year, let's say?

Well, it varies from customer to customer, but as a whole, I think, it's pretty close to the corporate average, slightly above corporate average.

And as you guys get up the learning curve, and -- where do you think is the ultimate potential for advanced packaging margins? I mean, I have no idea. Is it as high as 30%, or is it kind of more in the mid-20s as well?

I would rather not answering that because, again, it wouldn't be wise for our customers to know about this.

No further questions in the queue.

Okay, if there's no further questions, let me sum up. I think we had a better-than-expected first quarter. And going to Q2, we will have a fairly healthy growth and with the margin coming back to where it should be. And going forward, we will continue to put more focus on advanced packaging, R&D efforts so as to further streamline our overall business. And also, we will put a lot of resources in continuing to streamline our low-end discrete business. And we will -- we remain confident that going into second half, we will continue to see some margin improvement as well. Thank you very much, and I'll see you next quarter.

Thank you. That concludes today's conference. You may go ahead and disconnect at this time.

Thank you.