Hello. I am Ken Hsiang, the Head of Investor Relations for ASE. Welcome to ASE Group's Fourth Quarter 2016 Earnings Release. All participants consent to having their voice and questions broadcast via participation of this event. Please refer to Page 1 of our presentation which contains - please refer to our Safe Harbor notice here. I would like to remind everyone on this call 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 from these forward-looking statements. For the purposes of this presentation, dollar figures are generally stated in new Taiwan dollars unless otherwise indicated. For this earnings release, Dr. Tien Wu, our COO will start by giving a Group update. After which I will be going over the financial results. Joseph Tung, our CFO, and Dr. Wu will be answering questions during our Q&A session. Following the event, our VP in charge of Public Relations, Eddie Chang will be addressing the media in Mandarin Chinese. We will distribute our fourth quarter handouts following Dr. Wu’s presentation. Ladies and gentlemen, our COO, Dr. Tien Wu.

Happy New Year to everyone. First of all welcome to our earnings release. I would like to provide a few piece of information in the following shoot. First of all, I would like to give you an update on the SPIL. I will give you a quick status update. Then I will give you the 2016 ASE Group recap in terms of the major improvement, also the accomplishment. The third piece of information I would like to offer to you is our CSR accomplishment in 2016. 2016 has been a very eventful year. I would like to give you a few highlights in terms of our Group accomplishment in the CSR arena. And lastly, I would like to give you a brief summary of the 2017 focus. First of all, let me start with the update on joint share exchange agreement with SPIL. As we have reported, the Taiwan TFTC has approved the proposed transaction. Right now, the China MOFCOM has formally accepted our application on December 14 of 2016. We are going through the proposed transaction under the Phase II review. On the U.S. side, on January 17 this year, ASE and SPIL each certified that we have responded to the FTC’s request for information. Both parties are continued to cooperate with FTC’s investigation. The transaction is expected to be closed in year 2017 with a more specific timeline pending and subject to approvals by ASE and SPIL shareholders as well as relevant authorities. As of today, we continue to work on the regulatory proactively, and we do not see any negative comment. So the process continues. The second piece of information I would like to offer to you is the 2016 recap. At the Group level, I see IC ATM revenue up 3.9% year-on-year, doubled the semi industry…

Thank you, Dr. Wu. We can now distribute the fourth quarter handouts. Okay, we can now begin the financial section here. We’re pleasantly surprised by how well business orders held up during our seasonally down quarter. Within communication some customers declined in line with typical seasonality, while many others remained strong. Consumer related product seen particularly strong during the quarter. So on Page 2 here, our Group quarter-over-quarter consolidated P&L. On a fully consolidate basis, the fourth quarter, the company delivered fully diluted EPS of TWD 0.86 and basic EPS of TWD1.40. Our packaging and testing businesses were both up 1%. Our direct materials business was flat. Our EMS business grew 11%. Our revenues shows - our other revenues shown here are related to real estate sales. Total revenues for the consolidate Group increased 6% from the third quarter to TWD77.1 billion. Gross profit increased 9% from TWD14.1 billion to TWD15.4 billion. Despite having more EMS revenue mix, we’re still able to improve our consolidated gross profit margin by 0.5 percentage points from 19.4% to 19.9%. Operating expenses edged up by TWD0.6 billion. Our operating expenses as a percentage of sales increased slightly from 9.2% to 9.4%. Professional fees incurred in conjunction with our transaction with SLIP were the primary cause for this increase. Operating profit for the fourth quarter was TWD8.1billion, up TWD0.7 billion from TWD7.4 billion in the third quarter. Our operating margin increased 0.3 percentage points from 10.2% to 10.5%. During the fourth quarter, we had a net non-operating gain of TWD1.6 billion, as versus a net non-operating loss TWD0.6 billion the previous quarter. The current quarter’s non-operating gain includes the following. ECB related gain from our stock movement of TWD1.2 billion, net foreign exchange and hedging activities of TWD0.6 billion, contribution from SPIL net of purchase…

We can start the Q&A session. Name and company please.

Hi, Bill Lu from UBS. First of all Happy New Year. First question is for Dr. Wu. Dr. Wu, you talked about the 2017 being better growth and higher CapEx. On the better growth comment, can you talk a little bit more about how that breaks out by segment, is it IC ATM, EMS and also some of the new newer technologies like as SIP like maybe fan-out you know what’s the outlook by segment?

The comment on the better growth rate in 2017 is a broad based and I think we're already made that statement, all sectors all business unit looks incrementally better, right. So I cannot give us specific item in terms of which sector, how grow the other sectors. But we do see a quite a uniform growth in all market segments across the IC ATM as well as EMS.

So it does mean that EMS will be up year-on-year?

This is the implication, yes.

Okay. Great, thanks. I don't know a whole lot about the legal stuff. MOFCOM you said we're now in phase II, that's two out of how many phases?

It’s normally three phases.

I see.

Look, most of the decisions were made in second phase.

Okay. Looking now into our 2017, it does look like some of the big fabulous companies like Qualcomm maybe even then Nvidia will move from production a little bit more production to Samsung. Is that going to have an impact on your business?

If anything goes to Samsung of course it has to stay within Samsung. So there's another sign of IDM being one of our competitors as well.

Okay. Last question. If I look at 2016 just your IC ATM business, your growth rate is pretty close to what I think is the industry average, but EMCORE they grow quite a bit more than then ASE did. I think probably they had some nice niche markets like maybe fingerprint that it did well in 2016. I am wondering if you agree with that assignment and number two is in 2017. Can you capture some of these opportunities?

I think the growth rate is within the operational tolerance because once one fab is fuller than the other. Chances are the customer they do move business around and one other thing I would like to give a little bit more clarity is if you recall that for the first half of 2014, ASE bumping fab was partially shut down, very painful for ASE. So in 2014, our pipeline actually was affected. If you look at the growth rate on some of the flip chip, wafer-level packaging as well as bumping business, the growth rate I'm give you historical number now, the growth rate in 2014 to 2015 that was above 5% and that was below the industry average in that particular sector. If you look at the 2016, 2014 we have recovered to 13% out of the lower base. I'm happy to report that the - in the last few years all the condition has improved, so right now we do see a very, very strong pipeline recovery for 2014. So I believe that in 2017, we will see market share gain. In terms of the CapEx also reflects some of the customer demand in some of the specific sector which we now commented.

Can you comment how much CapEx is going to be up this year?

I think last year we spent the 683 close to 700.

This year, I think the CapEx overall CapEx will be higher than last year although it will still be lower than the depreciation, amortization put together.

Thank you.

I think another comment on the just a little bit on the growth comparison between us and EMCORE, I think it's also we need to look at the composition of the revenue a little bit because we went through a rebalancing period for our SiP business in the year and that cost the revenue from the SiP business but to the IC ATM level to be much lower than previous year. And there has an impact on the overall growth rate. If you look at the strictly on the traditional assembly and test, I think the growth rate is pretty similar.

Yeah. Happy New Year. This is Rick from Daiwa Securities. Just some housekeeping questions, I missed the utilization rates Ken was talking about the rate for your wirebonding and testing and pumping for Q4, can I have a number again?

In Q4, the wirebonding utilization is low to mid-80%. For now wirebonding is mid-80’s, for testing is around 80%, substrate is about - is at mid-70 level. Going into quarter one, I think the wirebonding would be mid-70’s, now wirebonding also at mid-70s, testing would be someone low-70s, whereas in substrate will also be at a mid-70 level.

Okay. Thank you. That's very clear. And before you go Q1 outlook; are you going to add any capacity or just basically flattish quarter-on-quarter?

Q1, we will add capacity at the specific sectors.

Okay. Can you give us some more color about your EMS progress this year? Apart from the three major projects, SiP project you have had this any new development which is more material?

No comment on that one.

Thank you so much. Happy New Year.

Happy New Year.

Our next question will be coming from a caller.

Hello Randy.

The next question comes from Mr. Randy Abrams from Credit Suisse. Go ahead.

Okay, yes. Thank you. The first question I wanted to just get perspective on your outlook, it sounds more positive then TSMC which kicked up with a bit more conservative turn about the first half, and slowdown continuing into the second quarter. Could you maybe talk about something is happening this driving more optimism for your business. And if you're offsetting at least better seasonality or normal rebound into second quarter as they seem to be implying a bit of decline continuing?

Well, I think in the first quarter, I think we are entering a normal seasonality. Although there may be a bit of an excess in terms of the decline in revenue because of we’re coming of a very strong fourth quarter last year. Without commenting on other companies on situation, I think what we're looking at is our own forecast, and also I think the rebalancing of our SiP business this shows some very good results including that because of the change of business terms and business model, we have been able to make this business a more linear i.e. to reduce some of the quality fluctuations in terms of the business volume in that particular segment. So if you put everything together, I think we are - I think the business is normal stage. And as Dr. Wu said, we do see things improving incrementally in all fronts.

Okay, if I could try that the follow-up on the SiP business and I know there is a “no” comment earlier, but I’m curious if that rebalancing effort is complete or if any risk one of one of your projects, if you still see some risk or some rebalancing way were decline or do you think we've reached a point of stabilization incept where the projects have now continue?

In terms of the rebalancing, thing is ongoing effort. The front business we saw, as you can see we have made good improvement, good progress in terms of how do we change the business turns and how do we try to do the loading versus utilization and the resource that we invested. Part of the rebalancing effort also includes the new pipeline development. We will not comment specifically on customers, but the SiP business pipeline has been quite strong. We have many customers approaching us in terms of the SiP development. The issues right now is when can we materialize and realize the volume tied to the potential of all of those customers. And this has been the issues that the whole industry is working on. We will not comment on specific customer or specific segments. But the SiP rebalancing effort includes the pipeline development, includes the investment, includes the utilization and resource that we manage the seasonality, as well as the business terms for the profitability, for the longer term sustainability.

Okay. The final question I wanted to ask a follow-up on the CapEx, if you could go through the priorities or where that higher CapEx is going across the different segments, and then comment on the developments on fan-out, if you see any meaningful project or volume this year and somewhat application or you pick more 2018 events?

I think this year you will see a bigger investment into the fan-out, into the bumping. Just to give you some of the background of the fan-out, ASE started the fan-out back to year 2009 with Infineon, back then we started the first generation of fan-out in the 8-inch format. Over the years, we've been monitoring the market condition of the industry and also the business volume that demand the particular fan-out advantage. So in 2016, we have started to fan-out and today we have 10,000 wafer per month fan-out in production. We do have a strong pipeline demanding ASE to continue to invest in a fan-out. In 2017, we do expect the fan-out capacity to move from 10,000 to 25,000. We’re also started a number of effort together with our partner throughout the ecosystem to develop the next generation fan-out namely in the panel format. We're now ready to disclose the panel format milestone and timeline, however hopefully sometime this year, we will disclose more detail. So we do have a demand in the fan-out to answer your specific questions. The CapEx not only on the fan-out, we’ll also invest in the other areas such as copper pillar and also we have customers are interested in different sector of the memory. So we're also making investment into some of the mobile DRAM. Thank you.

If I could just ask one quick follow-up, the memory if you see that it’s been a number of years since the power ASE, but did you see that growing into anything meaningful or is it still going to be kind of small and nature of the stage to go back into memory?

I think this is tied to the question about the rebalancing our portfolio. So we have made a number of investments in the level of packaging in the SiP, in the materials building blocks such as the TDK, the embedded substrate. Our believe is now when the memory and the logic at some point in time due to the boundary constraint on the wafer cost as well as to form factor performance and the power arrangement, they will come to a convergence point. So what we're trying to do is now apply the investment including design role capacity and the knowledge base and the material building block from the logic and when and how can we apply to the memory segment. I think the first half we have announced is the 2.5D project with the U.S. customer in the graphics arena. That's where we combined the graphics processor with the memory. So going forward, I believe in different kind of application you have a different power, form factor and cost requirement and that also includes the memory sectors. So our job is to seek out particular application - particular device level where the packaging will offer a nice compensation to the overall system requirements and those are the pipeline development that we're doing now.

Great, thanks a lot.

More questions from the floor.

Hi, Happy New Year. I’m Sebastian from CLSA. So I have a couple of questions. So the first one is, I am wondering if can you give us some hints or implication in terms of what's your outlook for the semiconductor growth and also industry growth for this year, and how does that compare to the IC ATM business growth? That’s my first question.

I think the semiconductor growth rate, I think the marquee has a lot of numbers flowing around, so right now we have seen a range between 3% to 7%. We do see the market condition continues to improve. So I think numbers in those categories, in those range sounds reasonable. For the OSAT, now if you look at the overall packaging and test, the packaging test gross rate has always been moving intended with the semiconductor at least for the last 15 years, okay. In the packing test, you segregated by the IDMs versus the OSAT which is the outsourcing versus the in-house, And the OSAT growth rate at least for the last 15 years has consistently outgrow the IDM mainly because the investment and also the product technology migration for the requirement of the semiconductor. So I believe the OSAT growth rate based on the last 15 years track record, with our growth to semiconductor even though the overall packaging and test will be identical to the semiconductor. And in terms of the ASE growth rate, I do not believe we can give a specific number par comparing to those and our aspirations there.

So, but based on your prepared remarks, it seems, as it’s quite confident in growing at least in line with the overall OSAT industry go in. Tien, you already mentioned about - you expect you to gain some market share back for this year, so mainly in line with OSAT growth which also outgrow the semiconductor industry growth, is that a fair comment?

I don't think Tien is saying about gaining share back I think we will resume gaining shares, gaining additional shares, because we have been gaining share since the couple of worrying effort. That momentum was disrupted for a while when we had the K7 event and that’s actually put a delayed or postponed a lot of our NPI or new product introduction process, I think after two or three years I think Tien was referring to that all the NPIs are getting back to normal track and therefore, he will bring us no new efforts and new business going forward back to much more normal track. So we are expecting that the gaining of new market shares should be resuming.

Okay. And my second question is on the SiP business, my understand that you couldn't provide at this moment, couldn't provide too much details right now, but I think Tien and Joseph you’ve already mentioned about your SiP, you expect your SiP business the profit rebalancing will continue or profit improvement continue this year. I wonder can you give us some clarification on is more driven by the contribution from more profitable projects or is there a more by to giving up some less profitable projects?

I think is all around. I think we did discontinue some of the projects that we don't think we can make any justifiable return whatsoever. On the existing projects we - there are several things that we've done to rebalance the business including rationalizing our capacity that enclose the labor and equipment that are required, as far as the streamlining of overall operation. That involves better renegotiate try to modify our business terms as well as our business model with our customers and better align our revenue with our cost items. So there are a lot of efforts being put into it. And we're seeing pretty good results and as you can see from the overall margin improvement particularly on our EMS side of the business.

Okay. And that also appears on your first quarter guidance for the EMS business just follow-up on that it seems like going to imply just down like less than 20% quarter-on-quarter and this seems - this sequential decline seems to be lower than or milder than the seasonality we see in the past three years, is it because our customer concentration has been lower or is anything else we miss?

I think we made a comment about how do we manage the loading linearity, all right. And that was part of the effort that has been ongoing. I think that effort will continue into the Q1.

Okay, thank you.

I think part of the rebalancing of our business kind of reduced the volatility of that business as well.

Okay, got it. And a follow-up on your 2016 growth in the IC ATM, your testing business grew 7% year-on-year, packaging grew 3% year-on-year, so it seems like testing how grow the packaging from the revenue perspective, we're not sure about the volume, but is there anything particularly that we need to note here, and how do you expect this kind of the growth discrepancy into 2017?

I think as I explained to earlier on, I think - if we look - if you take the SiP business aside, I think the growth rate is pretty much in line with each other.

And my last question is on your - I think you already made a comments about investing some in memory. You mentioned about the mobile DRAM and also you give us some examples about your cooperation with the U.S. customers on the graphics side, which is 2.5D, so it seems like you’re investing the memory packaging technology not I think more because the graphic, is that mobile or it's just I want to - we can get some clarification on your I mean future like plan in the memory packaging business?

I think the best way to look at is now we are treating the - we're not treating the memory specific segment per se or looking at the packaging as an overall offering to all segments, right. It was so happens to graphics than this memory. If so happen is the memory segment for particular application that needs to integrated packaging technology and we offer that, so that is the plan right now. And we do sense that the market has the demand from all sectors including memory.

Okay, so basically is you see the - I think you remember the comments in the conversions or more integration of the memory enlarge it. So that's why. So basically you are not - you probably will provide more of the integrated packaging, which includes memory, but not the standalone memory packaging.

Precisely. For example, let’s think about the process flow right. If ASE needs to do the last step of integration, putting memory onto any of the packaging that we do, and take the full ownership of the last packaging that it makes sense for ASE to develop the whole thing, instead of we are buying the components, we’re developing the logic components, and we're buying the memory compose and we put it together.

Okay, thank you.

Questions from the floor? There's no additional questions. I would like to thank you for participating in the fourth quarter earnings release. Thank you.

Happy New Year.