ASE Lands Intel's Packaging and Test Contract

Taipei, May 12, 2009 (CENS)--Advanced Semiconductor Engineering Inc. (ASE), the world's No.1 chip assembler, recently confirmed reports that Intel Corp. had placed it with a sizable contract for packaging and testing its south-bridge chips.

The contract is so "tremendous" that it would considerably help boost ASE's revenue for this quarter to an unexpected level, according to people familiar with the deal.

Industry watchers pointed out that the outsourcing contract came as a result of Intel's closures of several uneconomical in-house packaging and test houses early this year, suggesting the world's No.1 chipmaker is weighing outsourcing on cost concern.

The watchers also expected other international integrated device manufacturers (IDMs) like NXP Semiconductor, Toshiba and Renesas Technology to follow Intel in giving pure assemblers contracts. In addition to ASE, other Taiwanese packaging and test houses like Siliconware Precision Industrial Co., Ltd., Powertech Technology Inc. and Chipbond Technology Corp. are also expected to benefit from the outsourcing trend.

Insiders of Taiwan's chip industry pointed out that Intel ships tens of millions of south-bridge chips a quarter and ASE has received the largest portion of the Intel contract as compare with Siliconware and Amkor.

ASE executives said their company had been Intel's contract supplier of south-bridge chip packaging and test service and Intel had increased the outsourcing since early this year, when it calibrated its manufacturing operation.

With Intel's added contract rolling in and inventory replenishment plans at big American and European chipmakers launched, ASE executives estimate revenue for this quarter to soar around 40% from last quarter.

Last month alone, ASE had unexpectedly high revenue of NT$6.1 billion (US$179 million at US$1:NT$34), up 11% month on month. In the meantime, Siliconware saw revenue rise only 9%.

Inspired by Intel's outsourcing contract to ASE, foreign institutional investors have recently over bought ASE stock.