I'm Ken Hsiang, the Head of Investor Relations for ASE. Welcome to ASE Group's first quarter 2018 earnings release. All participants consent to having their voices and questions broadcast via participation of this event. Please refer to Page 1 of our presentation, which contains our safe harbor notice. 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 today's event, I will be going over the financial results; afterwards we will have Q&A session with Joseph Tung, our CFO. Following the event, our VP in Charge of Public Relations, Eddie Chang, will be available to address the media in Mandarin Chinese. If you would go to Page 2. So before we get into our results, I would like to spend just a bit of time to show the NT dollar, U.S. dollar exchange rate impact. There are 2 charts here, for the chart on the left you can see our year-over-year group and IC ATM revenues on a U.S. dollar versus NT dollar basis. Given our purchase orders are predominantly received on a U.S. dollar basis, we believe the 4% group and the 3% IC ATM revenue growth figures more accurately reflect our true business performance. The chart on the right shows the impact of the NT dollar fluctuation on group and IC ATM margins. Please note the following point it may be useful for clarifying our guidance towards the end of its presentation. We approximate that for every 1 percentage point the NT dollar appreciates there is a corresponding 0.4…

First question comes from the line of Randy Abrams from Credit Suisse.

My first question, just want to get a profile for just the ASE business, I guess the demand outlook how you're viewing like any changes, like if you took the communication space and in then the other end markets like if you've seen any kind of movements within that. And for the EMS business, I guess it was slower start to the year, if you could give an outlook for how EMS is shaping up? And I guess for the SiP business in particular how you're viewing this year now versus last year, but if it's still could stay stable or if that outlook has changed? And if you could give an update maybe on projects within that, if any new projects could start to contribute?

I think in terms of IC ATM in second quarter we're seeing again a broad base type of growth except with various strength, I think in the second quarter we will be seeing computing as well as industrial consumer will be relatively stronger than the other segments. As far as the EMS business is concerned we're still confident that we will have some growth this year. And in terms of margin we will -- always continue to maintain our gross margin level at the last year's level. In terms of SiP business, I think right now what we're seeing is a stable year, although the eventual results will have to depend on the end market sell through situation.

And could talk on the cost side -- there's been headwind of currencies the past year, if you're seeing any change on cost pressure for things like materials and substrates and if any ability to firm up pricing to pass on some of the costs? And then also on the bottlenecks where there's been some passive components and a little bit of equipment I guess if you're seeing those bottlenecks and any tightness you're seeing in the business right now?

In terms of passive components we do see some negative impacts on our overall business, although it's not a gaining factor for the year. Right now, I think the, as far as IC ATM is concerned I think the impact is minor, for EMS it's a little bit larger but then you still, at the management level, I think being, in terms of the company size I think we, relatively speaking, still, we can still -- we can obtain a more stable type of supply situation. So yes, there will be some negative impact particularly a small impact on the margin but in terms of the magnitude of the impact is both manageable as well as in terms of ICM is really minor.

And from a ASE perspective with SPIL coming in and you'll have access to their facilities and also their teams, do you have a view yet on the core ASE expense, growth and how you're viewing CapEx, if you already see a way to maybe slow those down not bringing in all those resources?

We're still being required to maintain 2 separate operations without too much integration at least for the next 18 months before the restriction is expired. Therefore, the -- I think -- I don't -- I think at the operating level there is not going to be too much integration to, in the foreseeable future, at least for the next 18 months. But in terms of R&D, in terms -- some of the -- with legitimate business reasons, there is some flexibility in terms of aligning our capacity. So I think some of these savings or synergies can be created in those areas.

We can now take questions from the floor. Name and company, please.

Rick from Daiwa Securities. I'm kind of getting to be too old to -- can you go through your previous housekeeping update into a number of the wirebonders, how many you had at the end of first quarter and tester as well?

We have all together 16,000 wirebonders, we added 66 and exited 127 bonders in the quarter. Tester wise we have altogether 3,801 testers.

Okay. So wirebonders is 16,000?

16,000, yes.

Okay. And what's your utilizing rate for wirebonding?

For wirebonding, in second quarter was about mid-70s, advance packaging at mid-70s as well, testing a low 70s and substrate at mid-70s.

Substrate at mid-70s, this is for Q1 right?

That's for Q1.

All right. And what about the number of wirebond and tester for Q2 based on your plan and also the loadings?

We will be adding very few bonders for the year, I think we can count in 100s, maybe. In terms of utilization in the second quarter because of the unit -- the overall growth in revenue, in terms of wirebonding utilization it would be around 80s.

And tester?

For advance packaging it will also grow to about low 80s and testing to high 70s.

And a second question is, when I look at your IC ATM gross margin decline Q1 of 5 PP roughly. It looks to me it's kind of more than seasonal, can you sort of break it down into a component of impact; how much frontloading, how much from the currency change, how much from material costs, and how much from some -- any kind of critical components?

I think about -- mostly is from loading, I guess about 0.5% maybe coming from the currency.

Bill Lu from UBS. Thanks very much for taking the questions. I should know this, but I can't remember, it's been a while. When customers do consignment testers, what's the impact to revenues and margins?

Once we -- we don't own the machines and we don't carry the depreciation of such machines and then our price will be based on the costs without depreciation costs. It will still be on a cost plus type of arrangement, but just the cost doesn't include depreciation. So if you take that part of the costs out then overall revenue from a particular machine will be lower.

But shouldn't that make the gross margin percentage higher?

It depends on how much lower your price gets. Theoretically, it shouldn't have that much of an impact on the margin itself.

I guess I am just thinking of a value that you are adding, right, the gross profit is the same, but the ASP is lower that means the percentage should be higher.

Not necessarily, because of the -- a lot of the overhead or the operating expenses still remains and some of the -- although the machine is down, the revenue is lower but then the -- that part of the costs remains the same, the overhead.

Can you tell me, what the cryptocurrency was as a percentage of sales?

It will be in the low single digit.

Still low single digit. What's the outlook for the rest of the year?

I am sorry.

What's the outlook for the rest of the year?

It could be mid.

So it sounds to me like a TSMC strategy in crypto, if they have any excess capacity to give to the crypto guys, but not really aggressively building for the crypto guys. Is that the same as your strategy?

That's the same -- I think the overall business is kind of opportunistic and the packages that required is still typical flip chip type of packages so we can use leverage on our existing capacity without adding too much.

Last question. TSMC last week said that their long-term growth outlook is the same but the portion from communications is smaller, the portion from HPC is bigger, right. How does that impact your business and a lot of these HPC customers are using advance packaging 2.5D. Can give us an update there as well?

Well, I think the business composition is a bit different and I think the business characteristics is also a little bit different. But it really depends on the second half end demand or the product sale through. So I think communication will continue to be the largest portion of our overall business. But in terms of the actual percentage changes it really depends on the second half performance of each segment.

A quick update on advance packaging, 2.5D packaging.

Anything you want to add?

Our definition of advanced encompasses a little bit more than just 2.5D packaging.

Are you referring to fan now?

Well I mean however you want to define it, just advance packaging in general would be great.

For us it's flip chip bumping wafer level packaging. And SiP.

Also Fan.

Yes, sorry maybe I'll be a little more specific, if you look at these GPUs and such they do use a lot of TSMC co-walls right. How are you going to capture that opportunity?

This is our 2.5D solution. We have offered 2.5D for a significant period of time. I think our AMD SIP project was well talked about. That was a 2.5D type solution. I think we will continue to offer that. And I think -- but just talking about it as the standalone entity at this point, may not just be proper, but we're definitely focused on it. Do we have the line working? All right, any more questions from the floor.

I am Sebastian from CL. The first question is for Bill's questions on the crypto, is that -- just want to clarify is that percentage contribution is for IC ATM or?

IC ATM.

IC ATM, okay. Second question is the earlier -- can't talk about the broad based trends seen in the second quarter, but the guidance on the IC ATM if I calculate it right it seems to be flat quarter-on-quarter? No, I calculate wrong?

No.

There'll be some growth, yes in the second quarter.

Above second quarter '17, below 4Q '17, in U.S. dollars terms. Okay. I will cover that again. So you talk about the strength in computing, consumer, industrial, but didn't talk about communications, so the communication is the weakest?

As compared to the other two, yes, it's --compared to the -- in the second quarter although there is still growth.

So even the weakest still grow. So everything's growing.

It's growing, it's broad based growth with various brands.

Okay. And when you look at, I think in the last quarter, last conference, I think I remember the company was -- it sounds pretty upbeat about full year this year, talk about the higher CapEx, talked about the opportunity you seize for this year and how do you -- what's the difference now or is there any difference or is still the same thing three months past.

No. We're still very excited about the year. Growth prospects are still fairly promising.

The excitements mainly come from, which application particularly.

I don't know if we single that out at this time. You're asking beyond the coming quarter and then?

No, full year.

I understand but -- I don't know how you're going to get back to that later on, because this is the last one that we're doing as a standalone entity.

Yes, I'm just asking about ASE standalone.

They are actually fairly broad-based actually for us, across the board.

Well I think, first of all we are still confident that this year we're going to experience some healthy growth. That growth can just really go broad-based. Although as I said it is really same as second quarter, there will be various strengths among different sectors. At this point, I think, at least for second quarter we're seeing that communication is not as strong as the other sectors, but going into the second half it really depends on the end product sale through and how the product is being launched to see whether the relative strengths will be different from, the [indiscernible] strengths in profile would be different from the first half of the year. But overall, we are still pretty optimistic about the whole year.

Okay, and another follow-up on the crypto question, is that the -- earlier, Joseph, you mentioned that right now is both single digit percentage of IC ATM. And full year is mid-single?

Like I said, this thing is really opportunistic. I think even now, the overall situation that we're seeing is less than what we were expecting in the beginning of the year. So it fluctuates quite a bit. So it's very difficult to make any hard predictions on where this business exactly is going to go. All we can say is that even with a more conservative view on this business, we're still seeing quite a bit of growth in this area.

Now, the reason I'm asking is that if the full year is about mid-single digit, and usually you have a stronger second half from the first half, which mean the second half it going to be the high-single digit, but you make it like missing a digit for full year.

That seems to be the case that is -- where we're seeing it now, yes.

So you see the stronger growth in second half than the first half. And this is just for ASIC, not including GPU.

Yes.

Any other questions from the floor? Do we have a line? No.

I hope this is recorded, now.

Yes, it's recording. No questions from the line? All right thank you very much.

We'll see you next quarter with a different presentation.