As
filed with the Securities and Exchange Commission on June 24,
2009
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
20-F
|
o
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REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE
ACT OF 1934
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OR
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x
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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|
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For
the fiscal year ended December 31,
2008
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OR
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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OR
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o
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SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
Commission
file number: 001-16125
日月光半導體製造股份有限公司
(Exact
Name of Registrant as Specified in Its Charter)
Advanced
Semiconductor Engineering, Inc.
(Translation
of Registrant’s Name into English)
REPUBLIC
OF CHINA
(Jurisdiction
of Incorporation or Organization)
26
Chin Third Road
Nantze
Export Processing Zone
Nantze,
Kaohsiung, Taiwan
Republic
of China
(Address
of Principal Executive Offices)
Joseph
Tung
Room
1901, No. 333, Section 1 Keelung Rd.
Taipei,
Taiwan, 110
Republic
of China
Tel: 886-2-8780-5489
Fax: 882-2-2757-6121
Email: ir@aseglobal.com
(Name,
Telephone, Email and/or Facsimile number and Address of Company Contact
Person)
Securities
registered or to be registered pursuant to Section 12(b) of the
Act:
|
Title of Each
Class
Common
Shares, par value NT$10.00 each
|
Name of Each Exchange
on which Registered
The
New York Stock Exchange*
|
*Traded
in the form of American Depositary Receipts evidencing American Depositary
Shares, each representing five Common Shares
(Title of
Class)
Securities
registered or to be registered pursuant to Section 12(g) of the
Act:
None
Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act:
None
(Title of
Class)
Indicate
the number of outstanding shares of each of the issuer’s classes of capital or
common stock as of the close of the period covered by the annual
report:
5,690,427,734
Common Shares, par value NT$10 each**
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes þ No ¨
If this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
Yes ¨
No þ
Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes þ No
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act. (Check one):
Large
accelerated filer þ Accelerated
filer ¨ Non-accelerated
filer ¨
Indicate by check mark which basis of
accounting the registrant has used to prepare the financial statements included
in this filing:
U.S. GAAP ¨ International Financial Reporting
Standards as issued by the International Accounting Standards
Board ¨ Other þ
If “Other” has been checked in response
to the previous question, indicate by check mark which financial
statement item the registrant has elected to follow:
Item 17
¨
Item 18 þ
If this
is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨
No
þ
** As a
result of the exercise of employee stock options and the cancellation of
treasury stock subsequent to December 31, 2008, as of May 31, 2009, we had
5,547,064,694 shares outstanding.
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All
references herein to (i) the “Company”, “ASE Group”, “ASE Inc.”, “we”, “us”, or
“our” are to Advanced Semiconductor Engineering, Inc. and, unless the context
requires otherwise, its subsidiaries, (ii) “ASE Test” are to ASE Test Limited, a
company incorporated under the laws of Singapore, and its subsidiaries, (iii)
“ASE Test Taiwan” are to ASE Test, Inc., a company incorporated under the laws
of the ROC, (iv) “ASE Test Malaysia” are to ASE Electronics (M) Sdn. Bhd., a
company incorporated under the laws of Malaysia, (v) “ISE Labs” are to ISE Labs,
Inc., a corporation incorporated under the laws of the State of California, (vi)
“ASE Korea” are to ASE (Korea) Inc., a company incorporated under the laws of
the Republic of Korea, (vii) “ASE Japan” are to ASE Japan Co. Ltd., a company
incorporated under the laws of Japan, (viii) “ASE Shanghai” are to ASE
(Shanghai) Inc., a company incorporated under the laws of the PRC, (ix) “ASE
Electronics” are to ASE Electronics Inc., a company incorporated under the laws
of the ROC, (x) “PowerASE” are to PowerASE Technology, Inc., a company
incorporated under the laws of the ROC, (xi) “ASESH AT” are to ASE Assembly
& Test (Shanghai) Limited, formerly known as Global Advanced Packaging
Technology Limited, a company incorporated under the laws of the PRC, or GAPT,
(xii) “ASEN” are to Suzhou ASEN Semiconductors Co., Ltd., a company incorporated
under the laws of the PRC, (xiii) “ASEWH” are to ASE (Weihai), Inc., a company
incorporated under the laws of the PRC, (xiv) “Universal Scientific” are to
Universal Scientific Industrial Co., Ltd., a company incorporated under the laws
of the ROC, (xv) “Hung Ching” are to Hung Ching Development & Construction
Co. Ltd., a company incorporated under the laws of the ROC, (xvi) “ASE Material”
are to ASE Material Inc., a company previously incorporated under the laws of
the ROC that merged into ASE Inc. on August 1, 2004, (xvii) “ASE Chung Li” are
to ASE (Chung Li) Inc., a company previously incorporated under the laws of the
ROC that merged into ASE Inc. on August 1, 2004, (xviii) the “Securities Act”
are to the U.S. Securities Act of 1933, as amended, and (xix) the “Exchange Act”
are to the U.S. Securities Exchange Act of 1934, as amended.
All
references to the “Republic of China”, the “ROC” and “Taiwan” are to the
Republic of China, including Taiwan and certain other
possessions. All references to “Korea” or “South Korea” are to the
Republic of Korea. All references to the “PRC” are to the People’s
Republic of China and exclude Taiwan, Macau and Hong Kong.
We
publish our financial statements in New Taiwan dollars, the lawful currency of
the ROC. In this annual report, references to “United States
dollars”, “U.S. dollars” and “US$” are to the currency of the United States;
references to “New Taiwan dollars”, “NT dollars” and “NT$” are to the currency
of the ROC; references to “RMB” are to the currency of the PRC; references to
“JP¥” are to the currency of Japan; references to “EUR” are to the currency of
the European Union; and references to “KRW” are to the currency of the Republic
of Korea. Unless otherwise noted, all translations from NT dollars to
U.S. dollars were made at the noon buying rate in The City of New York for cable
transfers in NT dollars per U.S. dollar as certified for customs purposes by the
Federal Reserve Bank of New York as of December 31, 2008, which was
NT$32.76=US$1.00. All amounts translated into U.S. dollars in this
annual report are provided solely for your convenience and no representation is
made that the NT dollar or U.S. dollar amounts referred to herein could have
been or could be converted into U.S. dollars or NT dollars, as the case may be,
at any particular rate or at all. On June 1, 2009, the noon buying
rate was NT$32.36=US$1.00.
This
annual report on Form 20-F contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act, including statements regarding our future results of operations and
business prospects. Although these forward-looking statements, which
may include statements regarding our future results of operations, financial
condition or business prospects, are based on our own information and
information from other sources we believe to be reliable, you should not place
undue reliance on these forward-looking statements, which apply only as of the
date of this annual report. We were not involved in the preparation
of these projections. The words “anticipate”, “believe”, “estimate”,
“expect”, “intend”, “plan” and similar expressions, as they relate to us, are
intended to identify these forward-looking statements in this annual
report. Our actual results of operations, financial condition or
business prospects may differ materially from those expressed or implied in
these forward-looking statements for a variety of reasons, including risks
associated with cyclicality and market conditions in the semiconductor industry;
demand for the outsourced semiconductor
packaging
and testing services we offer and for such outsourced services generally; the
highly competitive semiconductor industry; our ability to introduce new
packaging and testing technologies in order to remain competitive; international
business activities; our business strategy; our future expansion plans and
capital expenditures; the strained relationship between the ROC and the PRC;
general economic and political conditions; the recent global economic crisis;
possible disruptions in commercial activities caused by natural or human-induced
disasters; fluctuations in foreign currency exchange rates; and other
factors. For a discussion of these risks and other factors, see “Item
3. Key Information—Risk Factors.”
Not
applicable.
Not
applicable.
The
selected consolidated statement of operations data and cash flow data for the
years ended December 31, 2006, 2007 and 2008, and the selected consolidated
balance sheet data as of December 31, 2007 and 2008, set forth below are derived
from our audited consolidated financial statements included in this annual
report and should be read in conjunction with, and are qualified in their
entirety by reference to, these consolidated financial statements, including the
notes thereto. The
selected consolidated statement of operations data and cash flow data for the
years ended December 31, 2004 and 2005 and the selected consolidated balance
sheet data as of December 31, 2004, 2005 and 2006, set forth below, are derived
from our audit consolidated financial statements not included herein.Our
consolidated financial statements have been prepared and presented in accordance
with accounting principles generally accepted in the ROC, or ROC GAAP, which
differ in some material respects from accounting principles generally accepted
in the United States of America, or U.S. GAAP. See note 32 to our consolidated
financial statements for a description of the significant differences between
ROC GAAP and U.S. GAAP for the periods covered by these consolidated financial
statements.
|
As
of and for the Year Ended December 31,
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||||||||||||||||||||||||
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2004
|
2005
|
2006
|
2007
|
2008
|
||||||||||||||||||||
|
NT$
|
NT$
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||||||||
|
(in
millions, except earnings per share and per ADS data)
|
||||||||||||||||||||||||
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ROC
GAAP:
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||||||||||||||||||||||||
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Statement
of Operations Data:
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||||||||||||||||||||||||
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Net
revenues
|
75,237.7 | 84,035.8 | 100,423.6 | 101,163.1 | 94,430.9 | 2,882.5 | ||||||||||||||||||
|
Cost
of revenues
|
(59,641.1 | ) | (69,518.0 | ) | (71,643.3 | ) | (72,074.7 | ) | (71,901.7 | ) | (2,194.8 | ) | ||||||||||||
|
Gross
profit
|
15,596.6 | 14,517.8 | 28,780.3 | 29,088.4 | 22,529.2 | 687.7 | ||||||||||||||||||
|
Total
operating expenses
|
(8,639.8 | ) | (8,698.6 | ) | (8,333.9 | ) | (9,791.2 | ) | (10,729.7 | ) | (327.5 | ) | ||||||||||||
|
Income
from operations
|
6,956.8 | 5,819.2 | 20,446.4 | 19,297.2 | 11,799.5 | 360.2 | ||||||||||||||||||
|
Non-operating
income (expense)
|
(3,993.9 | ) | (11,493.0 | ) | 1,805.0 | (1,945.3 | ) | (2,323.7 | ) | (71.0 | ) | |||||||||||||
|
Income
(loss) before income tax
|
2,962.9 | (5,673.8 | ) | 22,251.4 | 17,351.9 | 9,475.8 | 289.2 | |||||||||||||||||
|
Income
tax benefit (expense)
|
1,397.0 | 118.6 | (2,084.8 | ) | (3,357.4 | ) | (2,268.3 | ) | (69.2 | ) | ||||||||||||||
|
Income
(loss) from continuing operations
|
4,359.9 | (5,555.2 | ) | 20,166.6 | 13,994.5 | 7,207.5 | 220.0 | |||||||||||||||||
|
Discontinued
operations(1)
|
568.2 | 353.7 | — | — | — | — | ||||||||||||||||||
|
Cumulative
effect of change in accounting principle
|
(26.8 | ) (2) | — | (342.5 | ) (3) | — | — | — | ||||||||||||||||
|
Minority
interest in net loss (income) of subsidiaries
|
(691.6 | ) | 510.3 | (2,407.9 | ) | (1,829.2 | ) | (1,047.4 | ) | (32.0 | ) | |||||||||||||
|
Net
income (loss) attributable to shareholders of parent
company
|
4,209.7 | (4,691.2 | ) | 17,416.2 | 12,165.3 | 6,160.1 | 188.0 | |||||||||||||||||
|
Income
from operations per common share
|
1.36 | 1.11 | 3.86 | 3.58 | 2.19 | 0.07 | ||||||||||||||||||
|
Income
(loss) from continuing operations per common share
|
0.71 | (0.96 | ) | 3.36 | 2.26 | 1.14 | 0.03 | |||||||||||||||||
|
Earnings
(loss) per common share(4):
|
||||||||||||||||||||||||
|
Basic
|
0.82 | (0.89 | ) | 3.29 | 2.26 | 1.14 | 0.03 | |||||||||||||||||
|
Diluted
|
0.80 | (0.89 | ) | 3.14 | 2.18 | 1.12 | 0.03 | |||||||||||||||||
|
Dividends
per common share(5)
|
0.57 | 1.10 | — | 2.96 | 2.00 | 0.06 | ||||||||||||||||||
|
Earnings
(loss) per equivalent ADS(4):
|
||||||||||||||||||||||||
|
Basic
|
4.11 | (4.47 | ) | 16.46 | 11.28 | 5.71 | 0.17 | |||||||||||||||||
|
Diluted
|
4.01 | (4.47 | ) | 15.69 | 10.90 | 5.59 | 0.17 | |||||||||||||||||
|
As
of and for the Year Ended December 31,
|
||||||||||||||||||||||||
|
2004
|
2005
|
2006
|
2007
|
2008
|
||||||||||||||||||||
|
NT$
|
NT$
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||||||||
|
(in
millions, except earnings per share and per ADS data)
|
||||||||||||||||||||||||
|
Number
of common shares(6):
|
||||||||||||||||||||||||
|
Basic
|
5,121.9 | 5,248.9 | 5,291.6 | 5,390.9 | 5,392.9 | 5,392.9 | ||||||||||||||||||
|
Diluted
|
5,459.4 | 5,248.9 | 5,603.5 | 5,633.1 | 5,457.4 | 5,457.4 | ||||||||||||||||||
|
Number
of equivalent ADSs:
|
||||||||||||||||||||||||
|
Basic
|
1,024.4 | 1,049.8 | 1,058.3 | 1,078.2 | 1,078.6 | 1,078.6 |
|
Diluted
|
1,091.9 | 1,049.8 | 1,120.7 | 1,126.6 | 1,091.5 | 1,091.5 | ||||||||||||||||||
|
Balance
Sheet Data:
|
||||||||||||||||||||||||
|
Current
assets
|
35,894.9 | 47,544.0 | 48,762.8 | 56,902.0 | 46,366.9 | 1,415.3 | ||||||||||||||||||
|
Long-term
investments
|
4,907.4 | 4,898.1 | 5,734.5 | 4,850.2 | 4,327.0 | 132.1 | ||||||||||||||||||
|
Property,
plant and equipment, net
|
82,339.9 | 68,040.8 | 73,543.8 | 81,788.3 | 84,758.0 | 2,587.2 | ||||||||||||||||||
|
Intangible
assets
|
3,959.8 | 3,589.1 | 3,449.0 | 4,732.3 | 12,592.0 | 384.4 | ||||||||||||||||||
|
Other
assets
|
6,848.9 | 7,053.5 | 5,550.8 | 4,104.6 | 4,146.1 | 126.6 | ||||||||||||||||||
|
Total
assets
|
133,950.9 | 131,125.5 | 137,040.9 | 152,377.4 | 152,190.0 | 4,645.6 | ||||||||||||||||||
|
Short-term
borrowings(7)
|
6,852.8 | 10,523.1 | 8,499.1 | 15,773.9 | 11,473.2 | 350.2 | ||||||||||||||||||
|
Long-term
debts(8)
|
46,529.6 | 42,862.1 | 29,398.3 | 23,936.0 | 51,622.2 | 1,575.8 | ||||||||||||||||||
|
Other
liabilities(9)
|
20,851.9 | 22,890.0 | 22,016.7 | 22,927.6 | 17,133.8 | 523.0 | ||||||||||||||||||
|
Total
liabilities
|
74,234.3 | 76,275.2 | 59,914.1 | 62,637.5 | 80,229.2 | 2,449.0 | ||||||||||||||||||
|
Capital
stock
|
41,000.0 | 45,573.7 | 45,925.1 | 54,475.6 | 56,904.3 | 1,737.0 | ||||||||||||||||||
|
Minority
interest in consolidated subsidiaries
|
8,404.8 | 7,902.0 | 11,106.9 | 14,566.5 | 2,288.7 | 69.9 | ||||||||||||||||||
|
Total
shareholders’ equity
|
59,716.6 | 54,850.3 | 77,126.8 | 89,739.9 | 71,960.8 | 2,196.6 | ||||||||||||||||||
|
Cash
Flow Data:
|
||||||||||||||||||||||||
|
Net
cash outflow from acquisition of property, plant and
equipment
|
(28,521.4 | ) | (15,611.5 | ) | (17,764.2 | ) | (17,190.4 | ) | (18,583.3 | ) | (567.3 | ) | ||||||||||||
|
Depreciation
and amortization
|
14,786.3 | 15,032.8 | 14,488.2 | 16,626.2 | 17,244.9 | 526.4 | ||||||||||||||||||
|
Net
cash inflow from operating activities
|
19,206.7 | 18,751.1 | 37,310.8 | 28,310.6 | 30,728.8 | 938.0 | ||||||||||||||||||
|
Net
cash outflow from investing activities
|
(31,048.9 | ) | (11,632.0 | ) | (22,104.5 | ) | (18,108.4 | ) | (36,359.2 | ) | (1,109.9 | ) | ||||||||||||
|
Net
cash inflow (outflow) from financing activities
|
9,164.2 | (91.8 | ) | (12,581.9 | ) | (8,492.7 | ) | 13,862.4 | 423.2 | |||||||||||||||
|
Segment
Data:
|
||||||||||||||||||||||||
|
Net
revenues:
|
||||||||||||||||||||||||
|
Packaging
|
58,261.8 | 66,022.9 | 76,820.5 | 78,516.3 | 73,391.6 | 2,240.3 | ||||||||||||||||||
|
Testing
|
16,473.9 | 17,122.0 | 21,429.6 | 20,007.8 | 19,021.4 | 580.6 | ||||||||||||||||||
|
Others
|
502.0 | 890.9 | 2,173.5 | 2,639.0 | 2,017.9 | 61.6 | ||||||||||||||||||
|
Gross
profit (loss):
|
||||||||||||||||||||||||
|
Packaging
|
11,146.0 | 10,128.7 | 19,280.8 | 20,589.7 | 14,700.1 | 448.7 | ||||||||||||||||||
|
Testing
|
4,332.7 | 4,433.1 | 8,728.2 | 7,602.9 | 6,467.4 | 197.4 | ||||||||||||||||||
|
Others
|
117.9 | (44.0 | ) | 771.3 | 895.8 | 1,361.7 | 41.6 |
|
As
of and for the Year Ended December 31,
|
||||||||||||||||||||||||
|
2004
|
2005
|
2006
|
2007
|
2008
|
||||||||||||||||||||
|
NT$
|
NT$
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||||||||
|
(in
millions, except earnings per share and per ADS data)
|
||||||||||||||||||||||||
|
U.S.
GAAP:
|
||||||||||||||||||||||||
|
Statement
of Operations Data:
|
||||||||||||||||||||||||
|
Net
revenues
|
75,237.7 | 84,035.8 | 100,423.6 | 101,163.1 | 94,430.9 | 2,882.5 | ||||||||||||||||||
|
Cost
of revenues
|
(60,030.0 | ) | (70,544.4 | ) | (73,366.9 | ) | (75,134.7 | ) | (73,109.9 | ) | (2,231.7 | ) | ||||||||||||
|
Gross
profit
|
15,207.7 | 13,491.4 | 27,056.7 | 26,028.4 | 21,321.0 | 650.8 | ||||||||||||||||||
|
Total
operating expenses
|
(7,227.6 | ) | (21,882.8 | ) | (10,113.8 | ) | (11,108.7 | ) | (10,820.7 | ) | (330.3 | ) | ||||||||||||
|
Income
(loss) from operations
|
7,980.1 | (8,391.4 | ) | 16,942.9 | 14,919.7 | 10,500.3 | 320.5 | |||||||||||||||||
|
Non-operating
income (expense)
|
(5,127.2 | ) | 1,958.5 | 1,448.4 | 71.4 | (1,351.2 | ) | (41.2 | ) | |||||||||||||||
|
Income
tax benefit (expense)
|
1,506.1 | 190.3 | (1,980.7 | ) | (3,262.5 | ) | (2,503.5 | ) | (76.4 | ) | ||||||||||||||
|
Discontinued
operations(1)
|
568.2 | 353.7 | — | — | — | — | ||||||||||||||||||
|
Cumulative
effect of change in accounting principle
|
(26.8 | )(2) | — | (296.5 | )(10) | — | — | — | ||||||||||||||||
|
Minority
interest in net loss (income) of subsidiaries
|
(603.3 | ) | 358.4 | (1,991.4 | ) | (1,797.5 | ) | (1,153.5 | ) | (35.2 | ) | |||||||||||||
|
Net
income (loss)
|
4,297.1 | (5,530.5 | ) | 14,122.7 | 9,931.1 | 5,492.1 | 167.7 | |||||||||||||||||
|
As
of and for the Year Ended December 31,
|
||||||||||||||||||||||||
|
2004
|
2005
|
2006
|
2007
|
2008
|
||||||||||||||||||||
|
NT$
|
NT$
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||||||||
|
(in
millions, except earnings per share and per ADS data)
|
||||||||||||||||||||||||
|
Earnings
(loss) per common share(4):
|
||||||||||||||||||||||||
|
Basic
|
0.86 | (1.08 | ) | 2.71 | 1.87 | 1.02 | 0.03 | |||||||||||||||||
|
Diluted
|
0.84 | (1.08 | ) | 2.60 | 1.81 | 1.01 | 0.03 | |||||||||||||||||
|
Earnings
(loss) per equivalent ADS(4):
|
||||||||||||||||||||||||
|
Basic
|
4.29 | (5.38 | ) | 13.57 | 9.34 | 5.11 | 0.16 | |||||||||||||||||
|
Diluted
|
4.18 | (5.38 | ) | 12.98 | 9.03 | 5.04 | 0.16 | |||||||||||||||||
|
Number
of common shares(11):
|
||||||||||||||||||||||||
|
Basic
|
5,009.9 | 5,141.1 | 5,202.7 | 5,317.7 | 5,368.7 | 5,368.7 | ||||||||||||||||||
|
Diluted
|
5,340.1 | 5,141.1 | 5,505.5 | 5,566.1 | 5,405.3 | 5,405.3 | ||||||||||||||||||
|
Number
of equivalent ADSs(11):
|
||||||||||||||||||||||||
|
Basic
|
1,002.0 | 1,028.2 | 1,040.5 | 1,063.5 | 1,073.7 | 1,073.7 | ||||||||||||||||||
|
Diluted
|
1,068.1 | 1,028.2 | 1,101.1 | 1,113.2 | 1,081.1 | 1,081.1 | ||||||||||||||||||
|
Balance
Sheet Data:
|
||||||||||||||||||||||||
|
Current
assets
|
35,899.1 | 47,560.3 | 48,762.8 | 56,902.0 | 46,366.9 | 1,415.3 | ||||||||||||||||||
|
Long-term
investments
|
3,377.6 | 3,469.2 | 4,266.9 | 3,045.4 | 2,842.7 | 86.8 | ||||||||||||||||||
|
Property,
plant and equipment, net
|
81,849.1 | 67,547.9 | 70,894.1 | 80,036.6 | 82,694.5 | 2,524.3 | ||||||||||||||||||
|
Intangible
assets
|
3,954.4 | 4,112.6 | 3,972.4 | 5,255.8 | 12,940.6 | 395.0 | ||||||||||||||||||
|
Other
assets
|
7,008.5 | 7,284.7 | 5,834.9 | 3,766.7 | 3,963.5 | 121.0 | ||||||||||||||||||
|
Total
assets
|
132,088.7 | 129,974.7 | 133,731.1 | 149,006.5 | 148,808.2 | 4,542.4 | ||||||||||||||||||
|
Short-term
borrowings(7)
|
6,852.8 | 10,523.1 | 8,499.1 | 15,773.9 | 11,473.2 | 350.2 | ||||||||||||||||||
|
Long-term
debts(8)
|
46,529.6 | 42,862.1 | 29,398.3 | 23,936.0 | 51,622.2 | 1,575.8 | ||||||||||||||||||
|
Other
liabilities(9)
|
21,465.2 | 23,397.2 | 24,228.3 | 24,746.0 | 18,307.1 | 558.8 | ||||||||||||||||||
|
Total
liabilities
|
74,847.6 | 76,782.4 | 62,125.7 | 64,455.9 | 81,402.5 | 2,484.8 | ||||||||||||||||||
|
Minority
interest
|
8,584.0 | 8,233.0 | 11,021.3 | 14,449.2 | 2,102.7 | 64.2 | ||||||||||||||||||
|
Capital
stock
|
41,000.0 | 45,573.7 | 45,925.1 | 54,475.6 | 56,904.3 | 1,737.0 | ||||||||||||||||||
|
Total
shareholders’ equity
|
48,657.1 | 44,959.3 | 60,584.1 | 70,101.4 | 65,303.0 | 1,993.4 | ||||||||||||||||||
|
(1)
|
In
October 2005, we disposed of our camera module assembly operations in
Malaysia. Amount for 2005 includes income from discontinued operations of
NT$121.0 million and gain on disposal of discontinued operations of
NT$232.7 million, net of income tax expense. Such operations
were formerly classified as part of our packaging operations. Information
in this annual report from our consolidated statements of operations
for the years ended December 31, 2004 and 2005 has been adjusted to
reflect the reclassification of our camera module assembly operations as
discontinued operations. Information from our consolidated statements of
cash flows was appropriately not
adjusted.
|
|
(2)
|
Represents
the cumulative effect of our change from using the weighted-average method
to using the moving-average method to price our raw materials and
supplies.
|
|
(3)
|
Represents
the cumulative effect of our adoption of ROC Statement of Financial
Accounting Standards, or SFAS, No. 34 “Financial Instrument: Recognition
and Measurement” and ROC SFAS, No. 36 “Financial Instruments: Disclosure
and Presentation.” See note 3 to our consolidated
financial statements included in this annual
report.
|
|
(4)
|
The
denominators for diluted earnings per common share and diluted earnings
per equivalent ADS are calculated to account for the potential exercise of
options and conversion of our convertible bonds into our common shares and
American depositary shares, or
ADSs.
|
|
(5)
|
Dividends
per common share issued as a cash dividend and a stock
dividend.
|
|
(6)
|
Represents
the weighted average number of shares after retroactive adjustments to
give effect to stock dividends and employee stock bonuses. Beginning in
2002, common shares held by consolidated subsidiaries are classified as
“treasury stock”, and are deducted from the number of common shares
outstanding.
|
|
(7)
|
Includes
current portions of bonds payable, long-term bank loans and capital lease
obligations.
|
|
(8)
|
Excludes
current portions of bonds payable, long-term bank loans and capital lease
obligations.
|
|
(9)
|
Includes
current liabilities other than short-term
borrowings.
|
|
(10)
|
Represents
the cumulative effect of our adoption of U.S. SFAS No. 123R, “Share-Based
Payment.” See note 33 to our consolidated financial statements included in
this annual report.
|
|
(11)
|
Represents
the weighted average number of common shares after retroactive adjustments
to give effect to stock dividends.
|
Exchange
Rates
Fluctuations
in the exchange rate between NT dollars and U.S. dollars will affect the U.S.
dollar equivalent of the NT dollar price of the common shares on the Taiwan
Stock Exchange and, as a result, will likely affect the market price of the
ADSs. Fluctuations will also affect the U.S. dollar conversion by the depositary
under our ADS deposit agreement referred to below of cash dividends paid in NT
dollars on, and the NT dollar proceeds received by
the
depositary from any sale of, common shares represented by ADSs, in each case,
according to the terms of the deposit agreement dated September 29, 2000 and as
amended and supplemented from time to time among us, Citibank N.A., as
depositary, and the holders and beneficial owners from time to time of the ADSs,
which we refer to as the deposit agreement.
The
following table sets forth, for the periods indicated, information concerning
the number of NT dollars for which one U.S. dollar could be exchanged based on
the noon buying rate for cable transfers in NT dollars as certified for customs
purposes by the Federal Reserve Bank of New York.
|
NT
Dollars per U.S. Dollar Noon Buying Rate
|
||||||||||||||||
|
Average
|
High
|
Low
|
Period-End
|
|||||||||||||
|
2004
|
33.37 | 34.16 | 33.10 | 33.24 | ||||||||||||
|
2005
|
32.13 | 33.77 | 30.65 | 32.80 | ||||||||||||
|
2006
|
32.51 | 33.31 | 31.28 | 32.59 | ||||||||||||
|
2007
|
32.85 | 33.41 | 32.26 | 32.43 | ||||||||||||
|
2008
|
31.52 | 33.58 | 29.99 | 32.76 | ||||||||||||
|
December
|
33.16 | 33.58 | 32.45 | 32.76 | ||||||||||||
|
2009
|
||||||||||||||||
|
January
|
33.37 | 33.70 | 32.82 | 33.70 | ||||||||||||
|
February
|
34.24 | 35.00 | 33.61 | 35.00 | ||||||||||||
|
March
|
34.30 | 35.21 | 33.75 | 33.87 | ||||||||||||
|
April
|
33.60 | 33.88 | 32.99 | 33.06 | ||||||||||||
|
May
|
32.87 | 33.14 | 32.55 | 32.57 | ||||||||||||
Source:
Federal Reserve Statistical Release, Board of Governors of the Federal Reserve
System.
On June
1, 2009, the noon buying rate was NT$32.36=US$1.00.
Not
applicable.
Not
applicable.
Risks
Relating to Our Business
The
current global economic crisis has adversely affected the semiconductor industry
and the demand for our products and services, and a protracted global economic
crisis would have a material adverse effect on us.
Our
customers include a range of companies in the semiconductor industry, whose
success is linked to the health of the economy. As widely reported, the global
financial markets have recently been experiencing extreme volatility and
disruptions, which have severely diminished liquidity and credit availability.
This market turmoil and tightening of credit have led to an increased level of
commercial and consumer delinquencies, lack of consumer confidence, increased
market volatility and widespread reduction of business activity generally. There
can be no assurance that there will be no further deterioration in the global
financial markets.
Our
fourth quarter 2008 revenue decreased 36.8% over the prior year which reflected
the contraction in demand for our services as a result of the global economic
crisis. The protracted decline in the global economy and semiconductor industry
may also cause our customers to do the following:
|
·
|
cancel
or reduce planned expenditures for our products and
services;
|
|
·
|
seek
to lower their costs by renegotiating their contracts with
us;
|
|
·
|
consolidate
the number of suppliers they use which may result in our loss of
customers; and
|
|
·
|
switch
to lower-priced products or services provided by our
competitors.
|
The
current uncertainty in global economic conditions may also make it difficult for
our customers to accurately forecast and plan future business activities. We
cannot predict the timing, strength, or duration of the global economic slowdown
and downturn in the semiconductor industry or subsequent recovery. There can be
no assurance that the continuing or deteriorating trends in global economic
conditions will not further adversely impact our results of operations, cash
flow, financial position and/or prospects.
Since
we are dependent on the highly cyclical semiconductor industry and conditions in
the markets for the end-use applications of our products, our revenues and net
income may fluctuate significantly.
Our
semiconductor packaging and testing business is affected by market conditions in
the highly cyclical semiconductor industry. All of our customers operate in this
industry, and variations in order levels from our customers and service fee
rates may result in volatility in our revenues and net income. From time to
time, the semiconductor industry has experienced significant, and sometimes
prolonged, downturns. As our business is, and will continue to be, dependent on
the requirements of semiconductor companies for independent packaging and
testing services, any future downturn in the semiconductor industry would reduce
demand for our services. For example, in the fourth quarter of 2008,
the global economic crisis resulted in a significant deterioration in demand for
our customers’ products, which in turn affected demand for our services and
adversely affected our operating results. Although demand
has begun to recover in the second quarter of 2009, we expect there to
be continued downward pressure on our average selling prices and continued
volatility with respect to our sales volumes. If we cannot reduce our
costs or adjust our product mix to sufficiently offset any decline in average
selling prices, our profitability will suffer and we may incur
losses.
Market
conditions in the semiconductor industry depend to a large degree on conditions
in the markets for the end-use applications of semiconductor products, such as
communications, computer and consumer electronics products. Any deterioration of
conditions in the markets, including the recent severe deterioration of global
economic conditions, for the end-use applications of the semiconductors we
package and test would reduce demand for our services, and would likely have a
material adverse effect on our financial condition and results of operations. In
2006, approximately 37.2%, 24.7% and 37.3% of our net revenues were attributed
to the packaging and testing of semiconductors used in communications, computer,
and consumer electronics applications, respectively. In 2007, approximately
44.5%, 22.8% and 32.1% of our net revenues were attributed to the packaging and
testing of semiconductors used in communications, computer, and consumer
electronics applications, respectively. In 2008, approximately 44.7%, 22.8% and
32.1% of our net revenues were attributed to the packaging and testing of
semiconductors used in communications, computer, and consumer electronics
applications, respectively. Each of the markets for end-use applications is
subject to intense competition and significant shifts in demand, which could put
pricing pressure on the packaging and testing services provided by us and
adversely affect our revenues and net income.
A
reversal or slowdown in the outsourcing trend for semiconductor packaging and
testing services could adversely affect our growth prospects and
profitability.
In recent
years, semiconductor manufacturers that have their own in-house packaging and
testing capabilities, known as integrated device manufacturers, have
increasingly outsourced stages of the semiconductor production process,
including packaging and testing, to independent companies in order to reduce
costs and shorten production cycles. In addition, the availability of advanced
independent semiconductor manufacturing services has also enabled the growth of
so-called “fabless” semiconductor companies that focus exclusively on design and
marketing and outsource their manufacturing, packaging and testing requirements
to independent companies. We cannot assure you that these integrated device
manufacturers and fabless semiconductor companies will continue to outsource
their packaging and testing requirements to third parties like us. Furthermore,
during an economic downturn, these integrated device manufacturers typically
rely more on their own in-house packaging and testing
capabilities, therefore decreasing their need to outsource. A
reversal of, or a slowdown in, this outsourcing trend could result in reduced
demand for our services and adversely affect our growth prospects and
profitability.
If
we are unable to compete favorably in the highly competitive semiconductor
packaging and testing markets, our revenues and net income may
decrease.
The
semiconductor packaging and testing markets are very competitive. We face
competition from a number of sources, including other independent semiconductor
packaging and testing companies, especially those that offer turnkey packaging
and testing services. We believe that the principal competitive factors in the
packaging and testing markets are:
|
·
|
technological
expertise;
|
|
·
|
price;
|
|
·
|
the
ability to provide total solutions to our
customers;
|
|
·
|
range
of package types and testing platforms
available;
|
|
·
|
the
ability to work closely with our customers at the product development
stage;
|
|
·
|
responsiveness
and flexibility;
|
|
·
|
production
cycle time;
|
|
·
|
capacity;
|
|
·
|
diversity
in facility locations; and
|
|
·
|
production
yield.
|
We face
increasing competition from other packaging and testing companies, as most of
our customers obtain packaging or testing services from more than one source. In
addition, some of our competitors may have access to more advanced technologies
and greater financial and other resources than we do. Any erosion in the prices
for our packaging and testing services could cause our revenues and net income
to decrease and have a material adverse effect on our financial condition and
results of operations.
Our
profitability depends on our ability to respond to rapid technological changes
in the semiconductor industry.
The
semiconductor industry is characterized by rapid increases in the diversity and
complexity of semiconductors. As a result, we expect that we will need to
constantly offer more sophisticated packaging and testing technologies and
processes in order to respond to competitive industry conditions and customer
requirements. If we fail to develop, or obtain access to, advances in packaging
or testing technologies or processes, we may become less competitive and less
profitable. In addition, advances in technology typically lead to declining
average selling prices for semiconductors packaged or tested with older
technologies or processes. As a result, if we cannot reduce the costs associated
with our services, the profitability of a given service and our overall
profitability may decrease over time.
Our
operating results are subject to significant fluctuations, which could adversely
affect the market value of your investment.
Our
operating results have varied significantly from period to period and may
continue to vary in the future. Downward fluctuations in our operating results
may result in decreases in the market price of our common shares and the ADSs.
Among the more important factors affecting our quarterly and annual operating
results are the following:
|
·
|
changes
in general economic and business conditions, particularly given the recent
global economic crisis and the cyclical nature of the semiconductor
industry and the markets served by our
customers;
|
|
·
|
our
ability to quickly adjust to unanticipated declines or shortfalls in
demand and market prices for our packaging and testing services, due to
our high percentage of fixed costs;
|
|
·
|
changes
in prices for our packaging and testing
services;
|
|
·
|
volume
of orders relative to our packaging and testing
capacity;
|
|
·
|
changes
in costs and availability of raw materials, equipment and
labor;
|
|
·
|
timing
of capital expenditures in anticipation of future
orders;
|
|
·
|
our
ability to acquire or design and produce advanced and cost-competitive
interconnect materials;
|
|
·
|
fluctuations
in the exchange rate between the NT dollar and foreign currencies,
especially the U.S. dollar; and
|
|
·
|
earthquakes,
drought, epidemics and other natural disasters, as well as industrial and
other incidents such as fires and power
outages.
|
Due to
the factors listed above, our future operating results or growth rates may be
below the expectations of research analysts and investors. If so, the market
price of our common shares and the ADSs, and thus the market value of your
investment, may fall.
If
we are not successful in maintaining our in-house interconnect materials
capabilities, our margins and profitability may be adversely
affected.
We expect
that we will need to maintain our interconnect materials designs and production
processes in order to respond to competitive industry conditions and customer
requirements. In particular, our competitive position will depend on our ability
to design and produce interconnect materials that are comparable to or better
than those produced by independent suppliers and others. Many of these
independent suppliers have dedicated greater resources than we have for the
research and development and design and production of interconnect materials. In
addition, we may not be able to acquire the technology and personnel that would
enable us to maintain our in-house expertise and our design and production
capabilities. For more information on our interconnect materials
operations, see “Item 4. Information on the Company—Business Overview—Principal
Products and Services—Packaging Services—Interconnect Materials.” If we are
unable to maintain our in-house interconnect materials expertise to offer
interconnect materials that meet the requirements of our customers, we may
become less competitive and our margins and profitability may suffer as a
result.
Due
to our high percentage of fixed costs, we will be unable to maintain our gross
margin at past levels if we are unable to achieve relatively high capacity
utilization rates.
Our
operations, in particular our testing operations, are characterized by
relatively high fixed costs. We expect to continue to incur substantial
depreciation and other expenses in connection with our acquisitions of packaging
and testing equipment and facilities. Our profitability depends not
only on the pricing levels for our services, but also on utilization rates for
our packaging and testing machinery and equipment, commonly referred to as
“capacity utilization rates.” In particular, increases or decreases in our
capacity utilization rates can significantly affect gross margins since the unit
cost of packaging and testing services generally decreases as fixed costs are
allocated over a larger number of units. In periods of low demand, we experience
relatively low capacity utilization rates in our operations, which leads to
reduced margins. For example, in the fourth quarter of 2008, we experienced
lower than anticipated utilization rates in our operations due to a significant
decline in worldwide demand for our packaging and testing services, which
resulted in reduced margins during that period. We cannot assure you
that we will be able to maintain or surpass our past gross margin levels if we
cannot consistently achieve or maintain relatively high capacity utilization
rates.
If
we are unable to manage our expansion effectively, our growth prospects may be
limited and our future profitability may be affected.
We have
significantly expanded our packaging and testing operations in recent years, and
expect to continue to expand our operations in the future. In particular, we
intend to provide total solutions for the packaging and testing of
semiconductors in order to attract new customers and broaden our product range
to include products packaged
and
tested for a variety of end-use applications. In the past, we have expanded
through both internal growth and the acquisition of new operations. Rapid
expansion puts strain on our managerial, technical, financial, operational and
other resources. As a result of our expansion, we have implemented and will
continue to implement additional operational and financial controls and hire and
train additional personnel. Any failure to manage our growth effectively could
lead to inefficiencies and redundancies and result in reduced growth prospects
and profitability.
Because
of the highly cyclical nature of our industry, our capital requirements are
difficult to plan. If we cannot obtain additional capital when we need it, our
growth prospects and future profitability may be adversely
affected.
Our
capital requirements are difficult to plan in our highly cyclical and rapidly
changing industry. We will need capital to fund the expansion of our facilities
as well as fund our research and development activities in order to remain
competitive. We believe that our existing cash, marketable securities, expected
cash flow from operations and existing credit lines under our loan facilities
will be sufficient to meet our capital expenditures, working capital, cash
obligations under our existing debt and lease arrangements, and other
requirements for at least the next twelve months. However, future capacity
expansions or market or other developments may cause us to require additional
funds. Our ability to obtain external financing in the future is subject to a
variety of uncertainties, including:
|
·
|
our
future financial condition, results of operations and cash
flows;
|
|
·
|
general
market conditions for financing activities by semiconductor companies;
and
|
|
·
|
economic,
political and other conditions in Taiwan and
elsewhere.
|
Furthermore,
if global economic conditions in 2009 continue to deteriorate, we may incur
significant net losses in 2009. This may in turn affect our ability
to meet certain financial covenants contained in our loan agreements and thereby
restrict our ability to access unutilized credit facilities or the global
capital markets to meet our liquidity needs. If we are unable to obtain funding
in a timely manner or on acceptable terms, our growth prospects and future
profitability may decline.
Restrictive
covenants and broad default provisions in our existing debt agreements may
materially restrict our operations as well as adversely affect our liquidity,
financial condition and results of operations.
We are a
party to numerous loan and other agreements relating to the incurrence of debt,
many of which include restrictive covenants and broad default provisions. In
general, covenants in the agreements governing our existing debt, and debt we
may incur in the future, may materially restrict our operations, including our
ability to incur debt, pay dividends, make certain investments and payments,
other than in connection with restructurings of consolidated entities, and
encumber or dispose of assets. In the event of a prolonged downturn in the
demand for our services as a result of a downturn in the worldwide semiconductor
industry or otherwise, we cannot assure you that we will be able to remain in
compliance with our financial covenants which, as a result, may lead to a
default. Furthermore, a default under one agreement by us or one of our
subsidiaries may also trigger cross-defaults under our other agreements. In the
event of default, we may not be able to cure the default or obtain a waiver on a
timely basis. An event of default under any agreement governing our existing or
future debt, if not cured or waived, could have a material adverse effect on our
liquidity, financial condition and results of operations.
We have
on occasion failed to comply with certain financial covenants in some of our
loan agreements. Such non-compliance may also have, through broadly worded
cross-default provisions, resulted in default under some of the agreements
governing our other existing debt. For example, we failed to comply
with certain debt ratios in some of our loan agreements as a result of
additional borrowings to fund our privatization of ASE Test in May 2008 and the
distribution of cash dividends in August 2008. See “Item 4.
Information on the Company—History and Development of the
Company—ASE Test Share
Acquisition and Privatization” for more information on ASE Test. By
August 2008, we had either obtained waivers for, or refinanced on a long-term
basis, all of the relevant loans, and are not in default under any of our
existing debt. For these and other reasons, including our financial condition
and our relationship with our lenders, no lender has to date sought and we do
not believe that any of our lenders would seek to declare a default or enforce
remedies in respect of our existing debt as a result of cross-default provisions
or otherwise, although we cannot provide any assurance in this
regard.
We
depend on select personnel and could be affected by the loss of their
services.
We depend
on the continued service of our executive officers and skilled technical and
other personnel. Our business could suffer if we lose the services of any of
these personnel and cannot adequately replace them. Although some of these
management personnel have entered into employment agreements with us, they may
nevertheless leave before the expiration of these agreements. We are not insured
against the loss of any of our personnel. In
addition, we may be required to increase substantially the number of these
employees in connection with our expansion plans, and there is intense
competition for their services in the semiconductor industry. We may not be able
to either retain our present personnel or attract additional qualified personnel
as and when needed. In addition, we may need to increase employee compensation
levels in order to attract and retain our existing officers and employees and
the additional personnel that we expect to require. Furthermore, a portion of
the workforce at our facilities in Taiwan are foreign workers employed by us
under work permits which are subject to government regulations on renewal and
other terms. Consequently, our business could also suffer if the Taiwan
regulations relating to the employment of foreign workers were to become
significantly more restrictive or if we are otherwise unable to attract or
retain these workers at a reasonable cost.
If
we are unable to obtain additional packaging and testing equipment or facilities
in a timely manner and at a reasonable cost, our competitiveness and future
profitability may be adversely affected.
The
semiconductor packaging and testing businesses are capital intensive and require
significant investment in expensive equipment manufactured by a limited number
of suppliers. The market for semiconductor packaging and testing equipment is
characterized, from time to time, by intense demand, limited supply and long
delivery cycles. Our operations and expansion plans depend on our ability to
obtain a significant amount of such equipment from a limited number of
suppliers. From
time to time we have also leased certain equipment. We have no binding supply
agreements with any of our suppliers and acquire our packaging and testing
equipment on a purchase order basis, which exposes us to changing market
conditions and other substantial risks. For example, shortages
of capital equipment could result in an increase in the price of equipment and
longer delivery times. Semiconductor packaging and testing also require us to
operate sizeable facilities. If we are unable to obtain equipment or facilities
in a timely manner, we may be unable to fulfill our customers’ orders, which
could adversely affect our growth prospects as well as financial condition and
results of operations. See “Item 4. Information on the Company—Business
Overview—Equipment.”
Fluctuations
in exchange rates could result in foreign exchange losses.
Currently,
the majority of our revenues from packaging and testing services are denominated
in U.S. dollars, with a portion denominated in NT dollars and Japanese yen. Our
cost of revenues and operating expenses associated with packaging and testing
services, on the other hand, are incurred in several currencies, primarily NT
dollars and U.S. dollars, as well as, to a lesser extent, Korean won, Japanese
yen, Malaysian ringgit and Chinese yuan. In addition, a substantial portion of
our capital expenditures, primarily for the purchase of packaging and testing
equipment, has been, and is expected to continue to be, denominated in U.S.
dollars, with much of the remainder in Japanese yen. Fluctuations in exchange
rates, primarily among the U.S. dollar, the NT dollar, the Japanese yen and the
Chinese yuan, will affect our costs and operating margins. In addition, these
fluctuations could result in exchange losses and increased costs in NT dollar
and other local currency terms. Despite hedging and mitigating techniques
implemented by us, fluctuations in exchange rates have affected, and may
continue to affect, our financial condition and results of
operations. We incurred net foreign exchange gains of NT$92.8
million, NT$403.5 million and NT$282.0 million (US$8.6 million) in 2006, 2007
and 2008, respectively. See “Item 11. Quantitative and Qualitative
Disclosures about Market Risk—Market Risk—Foreign Currency Exchange Rate
Risk.”
The
loss of a large customer or disruption of our strategic alliance or other
commercial arrangements with semiconductor foundries and providers of other
complementary semiconductor manufacturing services may result in a decline in
our revenues and profitability.
Although
we have over 200 customers, we have derived and expect to continue to derive a
large portion of our revenues from a small group of customers during any
particular period due in part to the concentration of market share in the
semiconductor industry. Our five largest customers together accounted for
approximately 26.0%, 24.8%
and 27.1%
of our net revenues in 2006, 2007 and 2008, respectively. No customer accounted
for more than 10% of our net revenues in 2006, 2007 and 2008. The demand for our
services from a customer is directly dependent upon that customer’s level of
business activity, which could vary significantly from year to year. Our key
customers typically operate in the cyclical semiconductor business and, in the
past, have varied, and may vary in the future, order levels significantly from
period to period. Some of these companies are relatively small, have limited
operating histories and financial resources, and are highly exposed to the
cyclicality of the industry. We cannot assure you that these customers or any
other customers will continue to place orders with us in the future at the same
levels as in past periods. The loss of one or more of our significant customers,
or reduced orders by any one of them, and our inability to replace these
customers or make up for such orders could adversely affect our revenues and
profitability. In addition, we have in the past reduced, and may in the future
be requested to reduce, our prices to limit the level of order cancellations.
Any price reduction would likely reduce our margins and
profitability.
Since
1997, we have maintained a strategic alliance with Taiwan Semiconductor
Manufacturing Company Limited, or TSMC, one of the world’s largest dedicated
semiconductor foundries. TSMC designates us as their non-exclusive
preferred provider of packaging and testing services for semiconductors
manufactured by TSMC. In addition, on February 23, 2009, we and
Advanced Microelectronic Products, Inc., or AMPI, a provider of foundry
services, signed a memorandum of understanding to enter into a strategic
alliance focused on providing semiconductor manufacturing turnkey
services. These strategic alliances, as well as our other
commercial arrangements with providers of other complementary semiconductor
manufacturing services, enable us to offer total semiconductor manufacturing
solutions to our customers. These strategic alliances and any of our
other commercial arrangements may be terminated at any time. Any such
termination, and our failure to enter into substantially similar strategic
alliances or commercial arrangements, may adversely affect our competitiveness
and our revenues and profitability.
Our
revenues and profitability may decline if we are unable to obtain adequate
supplies of raw materials in a timely manner and at a reasonable
price.
Our
packaging operations require that we obtain adequate supplies of raw materials
on a timely basis. Shortages in the supply of raw materials experienced by the
semiconductor industry have in the past resulted in occasional price increases
and delivery delays. Raw materials such as advanced substrates are prone to
supply shortages since such materials are produced by a limited number of
suppliers such as Phoenix Precision Technology Corporation, Kinsus Interconnect
Technology Corporation, SMI Electronic Devices Inc. and Nanya Printed Circuit
Board Corporation. Our operations conducted through our wholly-owned subsidiary
ASE Electronics and ASE Shanghai have improved our ability to obtain advanced
substrates on a timely basis and at a reasonable cost. However, we do not expect
that our internal interconnect materials operations will be able to meet all of
our interconnect materials requirements. Consequently, we will remain dependent
on market supply and demand for our raw materials. Recent fluctuations in gold
prices have also affected the price at which we have been able to purchase gold
wire, one of the principal raw materials we use in our packaging processes. We
cannot guarantee that we will not experience shortages in the near future or
that we will be able to obtain adequate supplies of raw materials in a timely
manner or at a reasonable price. Our revenues and net income could decline if we
are unable to obtain adequate supplies of high quality raw materials in a timely
manner or if there are significant increases in the costs of raw materials that
we cannot pass on to our customers.
Any
environmental claims or failure to comply with any present or future
environmental regulations, as well as any fire or other industrial accident, may
require us to spend additional funds and may materially and adversely affect our
financial condition and results of operations.
We are
subject to various laws and regulations relating to the use, storage, discharge
and disposal of chemical by-products of, and water used in, our packaging and
interconnect materials production processes. Although we have not suffered
material environmental claims in the past, the failure to comply with any
present or future regulations could result in the assessment of damages or
imposition of fines against us, suspension of production or a cessation of our
operations. New regulations could require us to acquire costly equipment or to
incur other significant expenses that we may not be able to pass on to our
customers. See “Item 4. Information on the Company—Business Overview—Raw
Materials and Suppliers—Packaging.” Additionally, any failure on our part to
control the use, or adequately restrict the discharge, of hazardous substances
could subject us to future liabilities that may have a material adverse effect
on our financial condition and results of operations.
Our
controlling shareholders may take actions that are not in, or may conflict with,
our public shareholders’ best interest.
Members
of the Chang family own, directly or indirectly, a controlling interest in our
outstanding common shares. See “Item 7. Major Shareholders and
Related Party Transactions—Major Shareholders.” Accordingly, these shareholders
will continue to have the ability to exercise a controlling influence over our
business, including matters relating to:
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our
management and policies;
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the
timing and distribution of dividends;
and
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the
election of our directors and
supervisors.
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Members
of the Chang family may take actions that you may not agree with or that are not
in our or our public shareholders’ best interests.
We
may be subject to intellectual property rights disputes, which could materially
adversely affect our business.
Our
ability to compete successfully and achieve future growth depends, in part, on
our ability to develop and protect our proprietary technologies and to secure on
commercially acceptable terms certain technologies that we do not own. We cannot
assure you that we will be able to independently develop, obtain patents for,
protect or secure from any third party, the technologies required for our
packaging and testing services.
Our
ability to compete successfully also depends, in part, on our ability to operate
without infringing the proprietary rights of others. The semiconductor industry
is characterized by frequent litigation regarding patent and other intellectual
property rights. In January 2006, Tessera Inc. filed a suit against us and
others alleging patent infringement. See “Item 8. Financial Information—Legal
Proceedings.” Any litigation, whether as plaintiff or defendant and regardless
of the outcome, is costly and diverts company resources.
Any of
the foregoing could harm our competitive position and render us unable to
provide some of our services operations.
We
are an ROC company and, because the rights of shareholders under ROC law differ
from those under U.S. law and the laws of certain other countries, you may have
difficulty protecting your shareholder rights.
Our
corporate affairs are governed by our Articles of Incorporation and by the laws
governing corporations incorporated in the ROC. The rights of shareholders and
the responsibilities of management and the members of the board of directors
under ROC law are different from those applicable to a corporation incorporated
in the United States and certain other countries. As a result, public
shareholders of ROC companies may have more difficulty in protecting their
interests in connection with actions taken by management or members of the board
of directors than they would as public shareholders of a corporation in the
United States or certain other countries.
We
face risks associated with uncertainties in PRC laws and
regulations.
We
operate, among other things, packaging and testing facilities in the PRC through
our subsidiaries and joint ventures incorporated in the PRC. Under PRC laws and
regulations, foreign investment projects, such as our subsidiaries and joint
ventures, must obtain certain approvals from the relevant governmental
authorities in the provinces or special economic zones in which they are located
and, in some circumstances, from the relevant authorities in the PRC’s central
government. Foreign investment projects must also comply with certain regulatory
requirements. However, PRC laws and regulations are often subject to varying
interpretations and means of enforcement, and additional approvals from the
relevant governmental authorities may be required for the operations of our PRC
subsidiaries and joint ventures. If required, we cannot assure you
that we will be able to obtain these approvals in a timely manner, if at
all. Because the PRC government holds significant discretion in
determining matters relating to foreign investment, we cannot assure you that
the relevant governmental authorities will not take action that is materially
adverse to our PRC operations.
Any
impairment charges may have a material adverse effect on our net
income.
Under ROC
GAAP and U.S. GAAP, we are required to evaluate our assets, such as equipment,
goodwill and investments, for possible impairment at least annually or whenever
there is an indication of impairment. If certain criteria are met, we are
required to record an impairment charge.
With
respect to assets, in 2005 we recognized a loss of NT$13,479.1 million on damage
to our property, plant and equipment caused by a fire at our facilities in Chung
Li, Taiwan. In 2006, we reversed NT$2,190.6 million of the impairment loss
recognized in 2005 under ROC GAAP due to an increase in the estimated service
potential of the relevant assets. In 2007, we recognized an impairment charge of
NT$994.7 million, primarily as a result of idle capacity in our flip-chip
substrate production line caused by a lack of demand for certain
applications. In 2008, we recognized impairment charges of NT$293.3
million (US$9.0 million) related to our other-than-temporary loss in our
financial assets and impaired idle equipment. As of December 31, 2008,
goodwill under ROC GAAP and U.S. GAAP amounted to NT$9,456.1 million (US$288.6
million) and NT$9,804.7 million (US$299.3 million), respectively. See
“Item 5. Operating and Financial Review and Prospects—Operating Results and
Trend Information—Critical Accounting Policies and Estimates—Realizability of
Long-Lived Assets” and “—Goodwill.”
In
addition, we may be required to record substantial impairment charges with
respect to our subsidiary, PowerASE, a joint venture between us and Powerchip
Semiconductor Corp., or Powerchip. Powerchip operates in the dynamic
random access memory, or DRAM, industry and has suffered extensive losses
recently. A substantial portion of PowerASE’s revenues are derived
from Powerchip. In addition, we have also invested NT$450 million in Powerchip’s
unsecured corporate bonds. Powerchip’s financial position and
operations could render us unable to recover PowerASE’s accounts receivable and
cause us to record an impairment charge with respect to PowerASE’s property,
plant and equipment and corporate bonds, which could have a material adverse
effect on our net income.
We are
unable to estimate the extent and timing of any impairment charges for future
years under ROC GAAP or U.S. GAAP, and we cannot give any assurance that
impairment charges will not be required in periods subsequent to December 31,
2008. Any impairment charge could have a material adverse effect on our net
income. The determination of an impairment charge at any given time
is based significantly on our expected results of operations over a number of
years in the future. As a result, an impairment charge is more likely to occur
during a period in which our operating results and outlook are otherwise already
depressed.
Risks
Relating to Taiwan, ROC
Strained
relations between the ROC and the PRC could negatively affect our business and
the market value of your investment.
Our
principal executive offices and our principal packaging and testing facilities
are located in Taiwan and approximately 74.4%, 68.6% and 64.9% of our net
revenues in 2006, 2007 and 2008, respectively, were derived from our operations
in Taiwan. The ROC has a unique international political status. The government
of the PRC asserts sovereignty over all of China, including Taiwan, and does not
recognize the legitimacy of the ROC government. Although significant economic
and cultural relations have been established in recent years between the ROC and
the PRC, relations have often been strained and the PRC government has indicated
that it may use military force to gain control over Taiwan in some
circumstances, such as the declaration of independence by the
ROC. Political uncertainty could adversely affect the prices of our
common shares and ADSs. Relations between the ROC and the PRC and
other factors affecting the political or economic conditions in Taiwan could
have a material adverse effect on our financial condition and results of
operations, as well as the market price and the liquidity of our common shares
and ADSs.
Currently,
we manufacture interconnect materials in the PRC through our wholly-owned
subsidiary ASE Shanghai. We also provide wire bond packaging and
testing services in the PRC through our subsidiaries, ASESH AT, ASEN and ASEWH.
See “Item 4. Information on the Company—Organizational Structure—Our
Consolidated Subsidiaries.” The ROC government currently restricts certain types
of investments by ROC companies, including ourselves, in the PRC, including
certain types of investments in facilities for the packaging and testing of
semiconductors. In April 2006, these restrictions were amended to permit
investments in facilities for certain less advanced wire bond packaging and
testing services. We do not know when or if such laws and policies
governing
investment
in the PRC will be amended, and we cannot assure you that such ROC investment
laws and policies will permit us to make further investments in the PRC in the
future that we consider beneficial to us. Our growth prospects and profitability
may be adversely affected if we are restricted from making certain additional
investments in the PRC and are not able to fully capitalize on the growth of the
semiconductor industry in the PRC.
As
a substantial portion of our business and operations is located in Taiwan, we
are vulnerable to earthquakes, typhoons, drought and other natural disasters, as
well as power outages and other industrial incidents, which could severely
disrupt the normal operation of our business and adversely affect our results of
operations.
Taiwan is
susceptible to earthquakes and has experienced severe earthquakes which caused
significant property damage and loss of life, particularly in the central and
eastern parts of Taiwan. Earthquakes have damaged production facilities and
adversely affected the operations of many companies involved in the
semiconductor and other industries. We have never experienced structural damage
to our facilities or damage to our machinery and equipment as a result of these
earthquakes. In the past, however, we have experienced interruptions to our
production schedule primarily as a result of power outages caused by
earthquakes.
Taiwan is
also susceptible to typhoons, which may cause damage and business interruptions
to companies with facilities located in Taiwan. In the third quarter of 2004, a
typhoon caused a partial interruption for approximately two weeks in our water
supply at ASE Chung Li’s substrate operations.
Taiwan
has experienced severe droughts in the past. Although we have not been directly
affected by droughts, we are dependent upon water for our packaging and
substrates operations and a drought could interrupt such operations. In
addition, a drought could interrupt the manufacturing process of the foundries
located in Taiwan, in turn disrupting some of our customers’ production, which
could result in a decline in the demand for our services. In addition, the
supply of electrical power in Taiwan, which is primarily provided by Taiwan
Power Company, the state-owned electric utility, is susceptible to disruption
that could be prolonged and frequent, caused by overload as a result of high
demand or other reasons.
Our
production facilities as well as many of our suppliers and customers and
providers of complementary semiconductor manufacturing services, including
foundries, are located in Taiwan. If our customers are affected by an
earthquake, a typhoon, a drought or any other natural disasters, or power outage
or other industrial incidents, it could result in a decline in the demand for
our packaging and testing services. If our suppliers or providers of
complementary semiconductor manufacturing services are affected, our production
schedule could be interrupted or delayed. As a result, a major earthquake,
typhoon, drought, or other natural disaster in Taiwan, or a power outage or
other industrial incident could severely disrupt the normal operation of our
business and have a material adverse effect on our financial condition and
results of operations.
Any
outbreak of swine flu, avian flu or a recurrence of SARS or other contagious
disease may have an adverse effect on the economies and financial markets of
certain Asian countries and may adversely affect our results of
operations.
In April
2009, outbreaks of swine flu caused by the H1N1 virus were first reported in
Mexico and, subsequently, in several other locations including the U.S.,
the PRC and the ROC. Many of these cases were fatal and more cases
have since been reported. In addition, the World Health Organization
reported in January 2005 that “during 2004, large parts of Asia experienced
unprecedented outbreaks of highly pathogenic avian influenza, caused by the H5N1
virus”, which moved the world closer than at any time since 1968 to an influenza
pandemic “with high morbidity, excess mortality, and social and economic
disruption.” There have continued to be cases of outbreaks of avian flu in
certain regions of Asia, Europe and Africa with human casualties reported in
countries such as Azerbaijan, Cambodia, Egypt, Indonesia, Iraq, the PRC,
Thailand, Turkey and Vietnam. Additionally, in the first half of 2003, the PRC,
Hong Kong, Taiwan, Singapore, Vietnam and certain other countries encountered an
outbreak of severe acute respiratory syndrome, or SARS, which is a highly
contagious form of atypical pneumonia. The SARS outbreak had an adverse effect
on our results of operations for the first half of 2003, primarily due to the
lower than expected demand for our packaging and testing services that resulted
from the adverse effect of such SARS outbreak on the level of economic activity
in the affected regions. There is no guarantee that an outbreak of swine flu,
avian flu, SARS or other contagious disease will not occur again in the future
and that any future outbreak of swine flu, avian flu, SARS or other contagious
disease or the measures taken by the governments of the ROC,
Hong
Kong, the PRC or other countries against such potential outbreaks, will not
seriously interrupt our production operations or those of our suppliers and
customers, which may have a material adverse effect on our results of
operations. The perception that an outbreak of swine flu, avian flu, SARS or
other contagious disease may occur again may have an adverse effect on the
economic conditions of certain countries in Asia.
Risks
Relating to Ownership of the ADSs
The
market for the common shares and the ADSs may not be liquid.
Active,
liquid trading markets generally result in lower price volatility and more
efficient execution of buy and sell orders for investors, compared to less
active and less liquid markets. Liquidity of a securities market is often a
function of the volume of the underlying shares that are publicly held by
unrelated parties.
There has
been no trading market for the common shares outside the ROC and the only
trading market for the common shares will be the Taiwan Stock Exchange. The
outstanding ADSs are listed on the New York Stock Exchange. There is no
assurance that the market for the common shares or the ADSs will be active or
liquid.
Although
ADS holders are entitled to withdraw the common shares underlying the ADSs from
the depositary at any time, ROC law requires that the common shares be held in
an account in the ROC or sold for the benefit of the holder on the Taiwan Stock
Exchange. In connection with any withdrawal of common shares from our
ADS facility, the ADSs evidencing these common shares will be cancelled. Unless
additional ADSs are issued, the effect of withdrawals will be to reduce the
number of outstanding ADSs. If a significant number of withdrawals are effected,
the liquidity of our ADSs will be substantially reduced. We cannot assure you
that the ADS depositary will be able to arrange for a sale of deposited shares
in a timely manner or at a specified price, particularly during periods of
illiquidity or volatility.
If
a non-ROC holder of ADSs withdraws common shares, such holder of ADSs will be
required to appoint a tax guarantor, local agent and custodian bank in the ROC
and register with the Taiwan Stock Exchange in order to buy and sell securities
on the Taiwan Stock Exchange.
When a
non-ROC holder of ADSs elects to withdraw common shares represented by ADSs,
such holder of the ADSs will be required to appoint an agent for filing tax
returns and making tax payments in the ROC. Such agent will be required to meet
the qualifications set by the ROC Ministry of Finance and, upon appointment,
becomes the guarantor of the withdrawing holder’s tax payment obligations.
Evidence of the appointment of a tax guarantor, the approval of such appointment
by the ROC tax authorities and tax clearance certificates or evidentiary
documents issued by such tax guarantor may be required as conditions to such
holder repatriating the profits derived from the sale of common
shares. We cannot assure you that a withdrawing holder will be able
to appoint and obtain approval for a tax guarantor in a timely
manner.
In
addition, under current ROC law, such withdrawing holder is required to register
with the Taiwan Stock Exchange and appoint a local agent in the ROC to, among
other things, open a bank account and open a securities trading account with a
local securities brokerage firm, pay taxes, remit funds and exercise such
holder’s rights as a shareholder. Furthermore, such withdrawing holder must
appoint a local bank to act as custodian for confirmation and settlement of
trades, safekeeping of securities and cash proceeds and reporting and
declaration of information. Without satisfying these requirements, non-ROC
withdrawing holders of ADSs would not be able to hold or otherwise subsequently
sell the common shares on the Taiwan Stock Exchange or otherwise.
The
market value of your investment may fluctuate due to the volatility of the ROC
securities market.
The
trading price of our ADSs may be affected by the trading price of our common
shares on the Taiwan Stock Exchange. The ROC securities market is smaller and
more volatile than the securities markets in the United States and in many
European countries. The Taiwan Stock Exchange has experienced substantial
fluctuations in the prices and volumes of sales of listed securities and there
are currently limits on the range of daily price movements on the Taiwan Stock
Exchange. The Taiwan Stock Exchange Index peaked at 12,495.3 in
February 1990, and subsequently fell to a low of 2,560.5 in October 1990. On
March 13, 2000, the Taiwan Stock Exchange Index experienced a 617-point drop,
which represented the single largest decrease in the Taiwan Stock Exchange Index
in
its
history. During the period from January 1, 2008 to December 31, 2008, the Taiwan
Stock Exchange Index peaked at 9,295.2 on May 19, 2008, and reached a low of
4,089.9 on November 20, 2008. Over the same period, the trading price of our
common shares ranged from NT$9.6 per share to NT$34.7 per share. On June 5,
2009, the Taiwan Stock Exchange Index closed at 6,767.10, and the closing value
of our common shares was NT$20.05 per share.
The
Taiwan Stock Exchange is particularly volatile during times of political
instability, including when relations between Taiwan and the PRC are strained.
Several investment funds affiliated with the ROC government have also from time
to time purchased securities from the Taiwan Stock Exchange to support the
trading level of the Taiwan Stock Exchange. Moreover, the Taiwan Stock Exchange
has experienced problems such as market manipulation, insider trading and
settlement defaults. The recurrence of these or similar problems could have an
adverse effect on the market price and liquidity of the securities of ROC
companies, including our common shares and ADSs, in both the domestic and
international markets.
Holders
of common shares and ADSs may incur dilution as a result of the practice among
ROC technology companies of issuing stock bonuses and stock options to
employees.
Similar
to other ROC technology companies, we issue bonuses from time to time in the
form of common shares. Prior to 2009, bonuses issued in the form of
our common shares were valued at par. Beginning in 2009, bonuses in
the form of our common shares are valued at the closing price of the common
shares on the day prior to our shareholders’ meeting. In addition, under the
revised ROC Company Law we may, upon approval from our board of directors and
the ROC Securities and Futures Bureau of the Financial Supervisory Commission,
Executive Yuan (formerly known as the Securities and Futures Commission),
establish employee stock option plans. We currently maintain three
employee stock option plans pursuant to which our full-time employees and the
full-time employees of our domestic and foreign subsidiaries are eligible to
receive stock option grants. As of December 31, 2008, 271,837,630
options were outstanding. See “Item 6. Directors, Senior Management and
Employees—Compensation—ASE Inc. Employee Bonus and Stock Option Plans.” The
issuance of our common shares pursuant to stock bonuses or stock options may
have a dilutive effect on the holders of outstanding common shares and
ADSs.
Restrictions
on the ability to deposit our common shares into our ADS facility may adversely
affect the liquidity and price of our ADSs.
The
ability to deposit common shares into our ADS facility is restricted by ROC
law. A significant number of withdrawals of common shares underlying
our ADSs would reduce the liquidity of the ADSs by reducing the number of ADSs
outstanding. As a result, the prevailing market price of our ADSs may differ
from the prevailing market price of our common shares on the Taiwan Stock
Exchange. Under current ROC law, no person or entity, including you and us, may
deposit our common shares in our ADS facility without specific approval of the
ROC Financial Supervisory Commission, Executive Yuan, unless:
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(1)
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we
pay stock dividends on our common
shares;
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(2)
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we
make a free distribution of common
shares;
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(3)
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holders
of ADSs exercise preemptive rights in the event of capital increases;
or
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(4)
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to
the extent permitted under the deposit agreement and the relevant custody
agreement, investors purchase our common shares, directly or through the
depositary, on the Taiwan Stock Exchange, and deliver our common shares to
the custodian for deposit into our ADS facility, or our existing
shareholders deliver our common shares to the custodian for deposit into
our ADS facility.
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With
respect to item (4) above, the depositary may issue ADSs against the deposit of
those common shares only if the total number of ADSs outstanding following the
deposit will not exceed the number of ADSs previously approved by the ROC
Financial Supervisory Commission, Executive Yuan plus any ADSs issued pursuant
to the events described in subparagraphs (1), (2) and (3) above.
In
addition, in the case of a deposit of our common shares requested under item (4)
above, the depositary will refuse to accept deposit of our common shares if such
deposit is not permitted under any legal, regulatory or other restrictions
notified by us to the depositary from time to time, which restrictions may
include blackout periods during which deposits may not be made, minimum and
maximum amounts and frequency of deposits.
The
depositary will not offer holders of ADSs preemptive rights unless the
distribution of both the rights and the underlying common shares to our ADS
holders are either registered under the Securities Act or exempt from
registration under the Securities Act.
Holders
of ADSs will not have the same voting rights as our shareholders, which may
affect the value of their ADSs.
The
voting rights of a holder of ADSs as to the common shares represented by its
ADSs are governed by the deposit agreement. Holders of ADSs will not be able to
exercise voting rights on an individual basis. If holders representing at least
51% of the ADSs outstanding at the relevant record date instruct the depositary
to vote in the same manner regarding a resolution, including the election of
directors and supervisors, the depositary will cause all common shares
represented by the ADSs to be voted in that manner. If the depositary does not
receive timely instructions representing at least 51% of the ADSs outstanding at
the relevant record date to vote in the same manner for any resolution,
including the election of directors and supervisors, holders of ADSs will be
deemed to have instructed the depositary or its nominee to authorize all the
common shares represented by the ADSs to be voted at the discretion of our
chairman or his designee, which may not be in the interest of holders of ADSs.
Moreover, while shareholders who own 1% or more of our outstanding shares are
entitled to submit one proposal to be considered at our annual general meetings
of shareholders, only holders representing at least 51% of our ADSs outstanding
at the relevant record date are entitled to submit one proposal to be considered
at our annual general meetings of shareholders. Hence, only one
proposal may be submitted on behalf of all ADS holders.
The
right of holders of ADSs to participate in our rights offerings is limited,
which could cause dilution to your holdings.
We may
from time to time distribute rights to our shareholders, including rights to
acquire our securities. Under the deposit agreement, the depositary will not
offer holders of ADSs those rights unless both the distribution of the rights
and the underlying securities to all our ADS holders are either registered under
the Securities Act or exempt from registration under the Securities Act.
Although we may be eligible to take advantage of certain exemptions under the
Securities Act available to certain foreign issuers for rights offerings, we can
give no assurances that we will be able to establish an exemption from
registration under the Securities Act, and we are under no obligation to file a
registration statement for any of these rights. Accordingly, holders of ADSs may
be unable to participate in our rights offerings and may experience dilution of
their holdings.
If the
depositary is unable to sell rights that are not exercised or not distributed or
if the sale is not lawful or reasonably practicable, it will allow the rights to
lapse, in which case holders of ADSs will receive no value for these
rights.
Changes
in exchange controls which restrict your ability to convert proceeds received
from your ownership of ADSs may have an adverse effect on the value of your
investment.
Under
current ROC law, the depositary, without obtaining approvals from the Central
Bank of the Republic of China (Taiwan) or any other governmental authority or
agency of the ROC, may convert NT dollars into other currencies, including U.S.
dollars, for:
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·
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the
proceeds of the sale of common shares represented by ADSs or received as
stock dividends from the common shares and deposited into the depositary
receipt facility; and
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·
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any
cash dividends or distributions received from the common
shares.
|
In
addition, the depositary may also convert into NT dollars incoming payments for
purchases of common shares for deposit in the ADS facility against the creation
of additional ADSs. The depositary may be required to obtain foreign exchange
approval from the Central Bank of the Republic of China (Taiwan) on a
payment-by-
payment
basis for conversion from NT dollars into foreign currencies of the proceeds
from the sale of subscription rights for new common shares. Although it is
expected that the Central Bank of the Republic of China (Taiwan) will grant this
approval as a routine matter, we cannot assure you that in the future any
approval will be obtained in a timely manner, or at all.
Under
current ROC law, a holder of the ADSs, without obtaining further approval from
the Central Bank of the Republic of China (Taiwan), may convert from NT dollars
into other currencies, including U.S. dollars, the following:
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·
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the
proceeds of the sale of any underlying common shares withdrawn from the
depositary receipt facility or received as a stock dividend that has been
deposited into the depositary receipt facility;
and
|
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·
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any
cash dividends or distribution received from the common
shares.
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However,
such holder may be required to obtain foreign exchange approval from the Central
Bank of the Republic of China (Taiwan) on a payment-by-payment basis for
conversion from NT dollars into foreign currencies of the proceeds from the sale
of subscription rights for new common shares. Although the Central Bank of the
Republic of China (Taiwan) is generally expected to grant this approval as a
routine matter, we cannot assure you that you will actually obtain this approval
in a timely manner, or at all.
Under the
ROC Foreign Exchange Control Law, the Executive Yuan of the ROC government may,
without prior notice but subject to subsequent legislative approval, impose
foreign exchange controls in the event of, among other things, a material change
in international economic conditions. We cannot assure you that foreign exchange
controls or other restrictions will not be introduced in the
future.
The
value of your investment may be reduced by possible future sales of common
shares or ADSs by us or our shareholders.
While we
are not aware of any plans by any major shareholders to dispose of significant
numbers of common shares, we cannot assure you that one or more existing
shareholders or owners of securities convertible or exchangeable into or
exercisable for our common shares or ADSs will not dispose of significant
numbers of common shares or ADSs. In addition, several of our subsidiaries and
affiliates hold common shares, depositary shares representing common shares and
options to purchase common shares or ADSs. We or they may decide to sell those
securities in the future. See “Item 7. Major Shareholders and Related Party
Transactions—Major Shareholders” for a description of our significant
shareholders and affiliates that hold our common shares.
We cannot
predict the effect, if any, that future sales of common shares or ADSs, or the
availability of common shares or ADSs for future sale, will have on the market
price of the common shares or the ADSs prevailing from time to time. Sales of
substantial numbers of common shares or ADSs in the public market, or the
perception that such sales may occur, could depress the prevailing market prices
of the common shares or the ADSs.
Advanced
Semiconductor Engineering, Inc. was incorporated on March 23, 1984 as a company
limited by shares under the ROC Company Law, with facilities in the Nantze
Export Processing Zone located in Kaohsiung, Taiwan. We were listed on the
Taiwan Stock Exchange in 1989. Our principal executive offices are
located at 26 Chin Third Road, Nantze Export Processing Zone, Nantze, Kaohsiung,
Taiwan, ROC and our telephone number at the above address is (886) 7361-7131.
Our common shares have been listed on the Taiwan Stock Exchange under the symbol
“2311” since July 1989 and ADSs representing our common shares have been listed
on the New York Stock Exchange under the symbol “ASX” since September
2000.
Acquisition
of ASESH AT
On
January 11, 2007, we completed the acquisition of 100.0% of GAPT, now known as
ASESH AT, for a purchase price of US$60.0 million. Based in Shanghai, China,
ASESH AT provides wire bond packaging and testing services for a wide range of
semiconductors.
Joint
Venture with NXP Semiconductors
On
September 25, 2007, we entered into a joint venture with NXP B.V., or NXP
Semiconductors, formerly known as Philips Semiconductors, by completing the
acquisition of 60.0% of ASEN, formerly known as NXP Semiconductors Suzhou Ltd.,
from NXP Semiconductors for a purchase price of US$21.6 million. NXP
Semiconductors holds the remaining 40.0% of ASEN. ASEN is based in Suzhou, China
and is engaged in semiconductor packaging and testing.
Acquisition
of ASE (Weihai), Inc.
On May
14, 2008, we completed the acquisition of 100.0% of Weihai Aimhigh Electronic
Co. Ltd., now known as ASE (Weihai), Inc., from Aimhigh Global Corp. and TCC
Steel for a purchase price of US$7.0 million. ASE (Weihai), Inc. is based in
Shandong, China and is engaged in semiconductor packaging and
testing.
ASE Test Share Acquisition and
Privatization
Our subsidiary, ASE Test, was previously the holding company for
the majority of our testing
services. On
September 4, 2007, we and ASE Test entered into a scheme implementation
agreement under which we agreed to acquire, by way of a scheme of arrangement
under Section 210 of the Companies Act, Chapter 50 of Singapore, or the Scheme,
all the outstanding
ordinary shares of ASE Test that we did not already directly or indirectly
own. We sought to effect the Scheme in order to simplify our
organizational structure, reduce costs and administrative burdens associated
with filing and compliance requirements relating to ASE
Test’s Nasdaq Global Market and Taiwan Stock
Exchange listings and public company reporting obligations, enhance our brand
recognition through the promotion of a single common brand, and increase our
flexibility in making investments and allocating resources among
our subsidiaries.
We reached an agreement with ASE Test on
the terms of the Scheme following an evaluation by a special committee of ASE
Test’s board of directors, comprised of two
of ASE Test’s independent directors, that was established to, among other
things, review, evaluate, negotiate and consider all matters arising in
connection with the Scheme. The Scheme was unanimously approved on our behalf by
our board of directors and unanimously approved by ASE Test’s independent directors at the recommendation
of ASE Test’s special committee. On May 6, 2008, the
Scheme was approved by a majority of ASE Test’s shareholders (other than us or our
affiliates) present and voting, either in person or by proxy, at the
shareholders meeting, who represented not less
than 75% in value of the shares held by shareholders (other than us or our
affiliates) present and voting, either in person or by proxy, at the
shareholders meeting. The Scheme became effective on May 30, 2008 and
ASE Test became our wholly-owned
subsidiary.
Pursuant to the terms of the scheme
implementation agreement, each ASE Test shareholder (other than us and our
subsidiaries) received US$14.78 in cash for each ASE Test ordinary share held by
the shareholder and listed
on the Nasdaq Global Market, and NT$5.6314, the New Taiwan dollar equivalent of
US$0.185 in cash based on the exchange rate as of May 29, 2008, for each ASE
Test depositary share (representing 0.0125 ASE Test ordinary shares) held by the
shareholder and listed on the Taiwan Stock
Exchange. This acquisition price was a 25.6% premium above ASE
Test’s closing price on the Nasdaq Global
Market as of August 31, 2007, and was determined after arm’s length negotiations between us and the
special committee of ASE Test’s board of
directors.
Also pursuant to the terms of the scheme
implementation agreement, each ASE Test option exercisable for ASE Test ordinary
shares (whether or not vested) that had a per share exercise price lower than
US$14.78 was deemed to have
been exercised by ASE Test on behalf of the option holder on a cashless
basis. We then acquired these newly issued ASE Test ordinary shares
for US$14.78 per share in cash. As a result, each of these option
holders received a cash payment per share equal to the excess of US$14.78 over the
per share exercise price of their options, less any
interest, fees and
charges. Each ASE Test option that had a per share exercise price
equal to or higher than US$14.78 was cancelled without any payment to the
option holder.
Through
this transaction, we acquired a total of 58,438,944 shares of ASE Test,
7,843,663 of which were acquired from the mandatory option
exercise. The total transaction value of the Scheme was US$863.9
million. In order to finance our acquisition
of ASE Test’s
shares, we entered into two syndicated loan agreements for term loan facilities
of NT$24,750.0 million, which we and the lenders subsequently agreed to reduce
to NT$17,500.0 million, and US$200.0 million, respectively. For a
further description
of these agreements, see “Item
5. Operating and Financial Review and Prospects—Liquidity
and Capital Resources.”
ASE Test’s ordinary shares were delisted from the
Nasdaq Global Market on
June 12, 2008. ASE Test’s ordinary shares were deregistered under the
Exchange Act effective
September 10, 2008. ASE Test’s depositary shares were delisted from
the Taiwan Stock Exchange
on July 14, 2008.
Currently, ASE Test’s subsidiaries comprise ASE Test
Malaysia, ISE Labs and ASE Singapore Pte. Ltd., all of which ASE Test wholly
owns.
For more information on the Scheme, see
the Schedule 13E-3, as amended, filed by ASE Test with the United States
Securities and Exchange Commission, or the SEC, on May 30,
2008.
For more information on our history and
development, see “-Organizational
Structure.”
We are
the world’s largest independent provider of semiconductor packaging and testing
services based on 2008 revenues. Our services include semiconductor packaging,
design and production of interconnect materials, front-end engineering testing,
wafer probing and final testing services. We believe that, as a result of the
following, we are better positioned than our competitors to meet the
requirements of semiconductor companies worldwide for outsourced packaging and
testing services across a wide range of end-use applications:
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our
ability to provide a broad range of cost-effective semiconductor packaging
and testing services on a large-scale turnkey basis in key centers of
semiconductor manufacturing;
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our
expertise in developing and providing cost-effective packaging,
interconnect materials and testing technologies and
solutions;
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our
scale of operations and financial position, which enable us to make
significant investments in capacity expansion and research and development
as well as to make selective
acquisitions;
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our
geographic presence in key centers of outsourced semiconductor and
electronics manufacturing; and
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our
long-term relationships with providers of complementary semiconductor
manufacturing services, including our strategic alliance with TSMC, one of
the world’s largest dedicated semiconductor
foundries.
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We
believe that the trend for semiconductor companies to outsource their packaging
and testing requirements is accelerating as semiconductor companies increasingly
rely on independent providers of foundry and advanced packaging and testing
services. In response to the increased pace of new product development and
shortened product life and production cycles, semiconductor companies are
increasingly seeking independent packaging and testing companies that can
provide turnkey services in order to reduce time-to-market. We believe that our
expertise and scale in advanced technology and our ability to integrate our
broad range of solutions into turnkey services allow us to benefit from the
accelerated outsourcing trend and better serve our existing and potential
customers.
We
believe that we have benefited, and will continue to benefit, from our
geographic location in Taiwan. Taiwan is currently the largest center for
outsourced semiconductor manufacturing in the world and has a high concentration
of electronics manufacturing service providers, which are the end users of our
customers’ products. Our close proximity to foundries and other providers of
complementary semiconductor manufacturing services is attractive to our
customers who wish to take advantage of the efficiencies of a total
semiconductor manufacturing
solution
by outsourcing several stages of their manufacturing requirements. Our close
proximity to end users of our customers’ products is attractive to our customers
who wish to take advantage of the logistical efficiencies of direct shipment
services that we offer. We believe that, as a result, we are well positioned to
meet the advanced semiconductor engineering and manufacturing requirements of
our customers.
Our
global base of over 200 customers includes leading semiconductor companies
across a wide range of end-use applications, such as:
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· Altera
Corporation
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· NEC
Electronics Corporation
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· ATI Technologies, Inc.
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· NVIDIA
Corporation
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· Broadcom Corporation
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· NXP
Semiconductors
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· Cambridge
Silicon Radio Limited
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· Powerchip
Semiconductor Corp.
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· Freescale
Semiconductor, Inc.
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· Qualcomm
Incorporated
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· Infineon
Technologies
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· RF
Micro Devices, Inc.
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· Kawasaki Microelectronics, Inc
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· Silicon
Integrated Systems
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· Marvell Technology Group Ltd.
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· STMicroelectronics
N.V.
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· Media
Tek Inc.
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· Zoran
Corporation
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· Microsoft Corporation
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Industry
Background
General
Semiconductors
are the basic building blocks used to create an increasing variety of electronic
products and systems. Continuous improvements in semiconductor process and
design technologies have led to smaller, more complex and more reliable
semiconductors at a lower cost per function. These improvements have resulted in
significant performance and price benefits to manufacturers of electronic
products. As a result, semiconductor demand has grown substantially in our
primary end-user markets for communications, computers and consumer electronics,
and has experienced increased growth in other markets such as automotive
products and industrial automation and control systems.
The
semiconductor industry is characterized by strong long-term growth, with
periodic and sometimes severe cyclical downturns. The Semiconductor Industry
Association estimates that worldwide sales of semiconductors increased from
approximately US$51 billion in 1990 to approximately US$255.3 billion in 2008.
As a result of the global economic crisis, demand for semiconductors plummeted
in the fourth quarter of 2008 and continued to deteriorate in the first quarter
of 2009. Although the rate of growth may begin to slow, we believe
that overall growth and cyclical fluctuations will continue over the long-term
in the semiconductor industry.
Outsourcing
Trends in Semiconductor Manufacturing
Historically,
semiconductor companies designed, manufactured, packaged and tested
semiconductors primarily in their own facilities. Over the past several years,
there has been a trend in the industry to outsource stages in the manufacturing
process. Virtually every significant stage of the manufacturing process can be
outsourced. Wafer foundry services and semiconductor packaging and testing
services are currently the largest segments of the independent semiconductor
manufacturing services market. Most of the world’s major integrated device
manufacturers use some independent manufacturing services to maintain a
strategic mix of internal and external manufacturing capacity.
The
availability of technologically advanced independent manufacturing services has
also enabled the growth of “fabless” semiconductor companies that focus on
semiconductor design and marketing and outsource their wafer fabrication,
packaging and testing requirements to independent companies. We believe that the
growth in the number and scale of fabless semiconductor companies that rely
solely on independent companies to meet their manufacturing requirements will
continue to be a driver of growth in the market for independent foundry,
packaging and testing services. Similarly, the availability of technologically
advanced independent manufacturing services has encouraged integrated device
manufacturers, which had traditionally relied on in-house semiconductor
manufacturing
capacity, to increasingly outsource their manufacturing requirements to
independent semiconductor manufacturing companies.
We
believe the outsourcing of semiconductor manufacturing services will increase in
the future from current levels for many reasons, including the
following:
Technological
Expertise and Significant Capital Expenditure. Semiconductor
manufacturing processes have become highly complex, requiring substantial
investment in specialized equipment and facilities and sophisticated engineering
and manufacturing expertise. Technical expertise becomes increasingly important
as the industry transitions from one generation of technology to another, as
evidenced by the current migration of the fabrication process from 8-inches to
12-inches in sub-micron technology and the size of technology nodes fabricated
from 65 nm to 45 nm, as well as the integration of different functions into a
single-chip service. In addition, product life cycles have been shortening,
magnifying the need to continuously upgrade or replace manufacturing equipment
to accommodate new products. As a result, new investments in in-house packaging,
testing and fabrication facilities are becoming less desirable to integrated
device manufacturers because of the high investment costs as well as the
inability to achieve sufficient economies of scale and utilization rates
necessary to be competitive with the independent service providers. Independent
packaging, testing and foundry companies, on the other hand, are able to realize
the benefits of specialization and achieve economies of scale by providing
services to a large base of customers across a wide range of products. This
enables them to reduce costs and shorten production cycles through high capacity
utilization and process expertise. In the process, they are also able to focus
on discrete stages of semiconductor manufacturing and deliver services of
superior quality.
In recent
years, semiconductor companies have significantly reduced their investment in
in-house packaging and testing technologies and capacity. As a result, some
semiconductor companies may have limited in-house expertise and capacity to
accommodate large orders following a recovery in demand, particularly in the
area of advanced technology. On the other hand, some semiconductor companies
with in-house packaging and testing operations focusing on low-end
leadframe-based packages are under increasing pressure to rationalize these
operations by relocating to locations with lower costs or better infrastructure,
such as the PRC, in order to lower manufacturing costs and shorten production
cycle time. We expect semiconductor companies to increasingly outsource their
packaging and testing requirements to take advantage of the advanced technology
and scale of operations of independent packaging and testing
companies.
Focus on Core
Competencies. As the semiconductor
industry becomes more competitive, semiconductor companies are expected to
further outsource their semiconductor manufacturing requirements in order to
focus their resources on core competencies, such as semiconductor design and
marketing.
Time-to-Market
Pressure. The increasingly short
product life cycle has accelerated time-to-market pressure for semiconductor
companies, leading them to rely increasingly on outsourced suppliers as a key
source for effective manufacturing solutions.
Capitalize on the
High Growth Rates in Emerging Markets. Emerging markets, and
China in particular, have become both major manufacturing centers for the
technology industry and growing markets for technology-based products. Thus, in
order to gain direct access to the Chinese market, many semiconductor companies
are seeking to establish manufacturing facilities in China by partnering with
local subcontractors. As a result, certain stages of the
semiconductor manufacturing process that were previously handled in-house will
be increasingly outsourced in order to improve efficiency.
The
Semiconductor Industry in Taiwan
The
semiconductor industry in Taiwan has been a leader in, and a major beneficiary
of, the trend in outsourcing. The growth of the semiconductor industry in Taiwan
has been the result of several factors. First, semiconductor manufacturing
companies in Taiwan typically focus on one or two stages of the semiconductor
manufacturing process. As a result, these companies tend to be more efficient
and are better able to achieve economies of scale and maintain higher capacity
utilization rates. Second, semiconductor manufacturing companies in Taiwan that
provide the major stages of the manufacturing process are located close to each
other and typically enjoy close working relationships. This close network is
attractive to customers who wish to outsource multiple stages of the
semiconductor
manufacturing process. For instance, a customer could reduce production cycle
time and unit cost and streamline logistics by outsourcing its foundry,
packaging, testing and drop shipment services to electronics manufacturing
companies in Taiwan. Third, Taiwan also has an educated labor pool and a large
number of engineers suitable for sophisticated manufacturing industries such as
semiconductors.
Notwithstanding
the recent effects of the global economic crisis, the semiconductor industry in
Taiwan has over the past decade made significant capital expenditures to expand
capacity and technological capabilities. The ROC government has also
provided tax incentives, long-term loans at favorable rates and research and
development support, both directly and indirectly through support of research
institutes and universities. As a result of investments made in recent years,
Taiwan has achieved substantial market share in the outsourced semiconductor
manufacturing industry. Furthermore, the growth of Taiwan’s electronics
manufacturing industry, particularly in personal computer, mobile handset and
digital camera design and manufacturing, has created substantial local demand
for semiconductors.
The
Semiconductor Industry in Other Asian Regions
Many of
the factors that contributed to the growth of the semiconductor industry in
Taiwan have also contributed to the recent development of the semiconductor
industry in Southeast Asia. Access to expanding semiconductor foundry services
in Singapore, convenient proximity to major downstream electronics manufacturing
operations in Malaysia, Singapore and Thailand, government-sponsored
infrastructure support, tax incentives and pools of skilled engineers and labor
at relatively low cost have all encouraged the development of back-end
semiconductor service operations in Southeast Asia. The downstream electronics
manufacturers in Southeast Asia have typically focused on products used in the
communications, industrial and consumer electronics and personal computer
peripheral sectors. The proximity to both semiconductor foundries and end users
has influenced local and international semiconductor companies increasingly to
obtain packaging, testing and drop shipment services from companies in Southeast
Asia.
In
addition, the world’s leading electronics manufacturing service providers, many
of them from Taiwan, are increasingly establishing manufacturing facilities in
the PRC and Vietnam in order to take advantage of lower labor costs, government
incentives for investment and the potential size of the domestic market for end
users of electronics products. Many of the factors that contributed to the
growth of the semiconductor industry in Taiwan are beginning to emerge in the
PRC and may play an increasingly important role in the growth of its
semiconductor industry over the long term.
Overview
of Semiconductor Manufacturing Process
The
manufacturing of semiconductors is a complex process that requires increasingly
sophisticated engineering and manufacturing expertise. The manufacturing process
may be divided into the following stages from circuit design to
shipment:
We are
involved in all stages of the semiconductor manufacturing process except circuit
design and wafer fabrication.
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Process
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Description
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Circuit
Design
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The
design of a semiconductor is developed by laying out circuit components
and interconnections.
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Front-End
Engineering Test
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Throughout
and following the design process, prototype semiconductors undergo
front-end engineering testing, which involves software development,
electrical design validation and reliability and failure
analysis.
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Wafer
Fabrication
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Process
begins with the generation of a photomask through the definition of the
circuit design pattern on a photographic negative, known as a mask, by an
electron beam or laser beam writer. These circuit patterns are transferred
to the wafers using various advanced processes.
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Wafer
Probe
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Each
individual die is electrically tested, or probed, for defects. Dies that
fail this test are marked to be discarded.
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Packaging
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Packaging,
also called assembly, is the processing of bare semiconductors into
finished semiconductors and serves to protect the die and facilitate
electrical connections and heat dissipation. The patterned silicon wafers
received from our customers are diced by means of diamond saws into
separate dies, also called chips. Each die is attached to a leadframe or a
laminate (plastic or tape) substrate by epoxy resin. A leadframe is a
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Process
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Description
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miniature
sheet of metal, generally made of copper and silver alloys, on which the
pattern of input/output leads has been cut. On a laminate substrate,
typically used in ball grid array, or BGA, packages, the leads take the
shape of small bumps or balls. Leads on the leadframe or the substrate are
connected by extremely fine gold wires or bumps to the input/output
terminals on the chips, through the use of automated machines known as
“bonders.” Each chip is then encapsulated, generally in a plastic casing
molded from a molding compound, with only the leads protruding from the
finished casing, either from the edges of the package as in the case of
the leadframe-based packages, or in the form of small bumps on a surface
of the package as in the case of BGA or other substrate-based
packages.
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Final
Test
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Final
testing is conducted to ensure that the packaged semiconductor meets
performance specifications. Final testing involves using sophisticated
testing equipment known as testers and customized software to electrically
test a number of attributes of packaged semiconductors, including
functionality, speed, predicted endurance and power consumption. The final
testing of semiconductors is categorized by the functions of the
semiconductors tested into logic/mixed-signal/RF final testing and memory
final testing. Memory final testing typically requires simpler test
software but longer testing time per device
tested.
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Strategy
Our objective is to provide
semiconductor packaging and testing services and interconnect materials
design and production
capabilities which set industry standards and to lead and facilitate the
industry trend towards outsourcing semiconductor manufacturing requirements. The
principal elements of our strategy are to:
Grow Our Advanced Packaging Services
and Expand into the Legacy
Packaging Market
We believe that an important factor in
our ability to attract leading semiconductor companies as our customers has been
our ability to fulfill demand for a broad range of packaging solutions on a
large scale. We intend to
continue to develop process and product technologies to meet the requirements of
clients using our advanced packaging services. Our expertise in packaging
technology has enabled us to develop advanced solutions such as fine-pitch wire
bonding, stacked die packaging and bump chip carrier
packaging. We are continuously investing in research and development
in response to and in anticipation of migrations in technology and intend to
continue to acquire access to new technologies through strategic alliances and licensing
arrangements.
We also intend to expand our legacy
leadframe-based packaging product offerings and services. We believe that our
clients will continue to outsource their legacy packaging requirements. To
capitalize on this trend, we plan to accelerate our single
outline legacy packaging production in Shanghai
and expand into the discrete packaging business by leveraging the existing
assets of ASE (Weihai), Inc. in Shandong, China.
The increasing miniaturization of semiconductors and the
growing complexity of interconnect technology have also resulted in the blurring
of the traditional distinctions among assembly at different levels of
integration: chip, module, board and system. We currently provide module assembly services primarily at our
facilities in Korea. Our
approximately 18.2% ownership interest
in Universal Scientific has provided us with access to process and product
technologies at the levels of module, board and system assembly and test, which
helps us to better anticipate industry trends and take
advantage of potential growth opportunities.
Strategically Expand and Streamline
Production Capacity
To capitalize on the growing demand for
advanced and legacy packaging and testing services, we intend to
strategically expand our
production capacity, both through internal growth and through selective
acquisitions and joint ventures, with a focus on providing cost competitive and
innovative packaging and testing services.
For our advanced packaging and testing
business, we intend to
invest in trends that are essential to the development of the industry. We plan
to expand our capacity with respect to, among other things, 12-inch wafer
process, bumping, FC-CSP
and system-in-a-package products to meet demand for smaller form factors, higher performance and
higher packaging density. We believe rising commodity prices will expedite the
migration from leadframe and BGA-based packaging to flip-chip packaging and
wafer level packaging, as the cost differential narrows. We intend to increase our capacity for
flip-chip packaging and wafer level packaging in order to cope with rising
demand for these packaging technologies.
In addition, we intend to promote our copper wire
solutions to our customers in addition to gold wire. Gold wire is a significant raw material for
us. Gold prices, however, are subject to intense fluctuations, which
have in the past impacted our profitability. We believe that replacing gold wire
in some of our packages with the copper wire technology that we are developing will enable us to provide
more value to our customers, which will enhance our competitiveness. We plan to
focus initially on integrating copper wire into traditional leadframe-based
packages and thereafter into higher end substrate-based packages.
For our legacy packaging and testing
business, we expect to focus on providing cost competitive services through our
China operations by leveraging China’s lower cost of labor and land and a
rapidly growing end market. Our clients may also benefit from easier inventory management and
savings in transportation costs and taxes by outsourcing their packaging and
testing requirements to China. Through better management of capacity utilization
and efficiency improvements, we plan to offer cost competitive legacy packaging and testing services
on a large scale with the intention of driving more integrated device
manufacturer outsourcing in the long-run.
We evaluate acquisition and joint
venture opportunities on the basis of access to new markets and
technology, the enhancement
of our production capacity, economies of scale and management resources, and
closer proximity to existing and potential customers. In July 2006, we entered
into a joint venture with Powerchip, a DRAM manufacturer in Taiwan that
focuses on the packaging and testing of memory
semiconductors, in order to help develop our capabilities with respect to memory
semiconductors and to benefit from future growth in the market for memory
products. The joint venture began operations in December 2006. In January 2007, we completed the
acquisition of GAPT, a company that provides wire bond packaging and testing
services for a wide range of semiconductors. In February 2007, we and NXP
Semiconductors formed a joint venture in Suzhou, China focused on semiconductor testing and packaging. We
currently own a 60.0% interest in the joint venture. In May 2008, we completed the
acquisition of ASE (Weihai), Inc., a company that also engages in
semiconductor packaging and testing services.
Continue to Leverage Our Presence in Key Centers of
Semiconductor and Electronics Manufacturing
We intend to continue leveraging our
presence in key centers of semiconductor and electronics manufacturing to
further grow our business. We have significant packaging and testing
operations in Taiwan,
currently the largest center for outsourced semiconductor manufacturing in the
world. This presence enables our engineers to work closely with our customers as
well as foundries and other providers of complementary semiconductor
manufacturing services early in the semiconductor
design process, enhances our responsiveness to the requirements of our customers
and shortens production cycles. In addition, as a turnkey service provider, we
are able to offer in Taiwan packaging and testing services, including interconnect materials
solutions, all within relatively close geographic proximity to our customers,
complementary service providers and the end users of our customers’ products. In addition to our current
operations, we intend to expand our packaging and testing operations in
Chung Li, Taiwan to
better serve our customers located in
northern Taiwan and customers who request that we maintain the capability of
packaging and testing their products at more than one location in
Taiwan.
In addition to our locations in Taiwan, we have
operations in the following locations:
|
●
|
PRC — a fast-growing market for
semiconductor manufacturing for domestic consumption and our primary site
for serving legacy packaging
clients;
|
|
●
|
Korea — an increasingly important
center for the
manufacturing of memory and communications
devices;
|
|
●
|
Malaysia and Singapore
— an emerging center for outsourced
semiconductor manufacturing in Southeast
Asia;
|
|
●
|
Silicon Valley in California
— the preeminent center for
semiconductor design, with a concentration of fabless
customers; and
|
|
●
|
Japan — an emerging market for
semiconductor packaging and testing services as Japanese integrated device
manufacturers increasingly outsource their semiconductor manufacturing
requirements.
|
Strengthen
and Develop Strategic Relationships with Providers of Complementary
Semiconductor Manufacturing Services
We intend
to strengthen existing, and develop new, strategic relationships with providers
of other complementary semiconductor manufacturing services, such as foundries,
as well as equipment vendors, raw material suppliers and technology research
institutes, in order to offer our customers total semiconductor manufacturing
solutions covering all stages of the manufacturing of their products from design
to shipment.
Since
1997, we have maintained a strategic alliance with TSMC, currently one of the
world’s largest dedicated semiconductor foundries, which designates us as their
non-exclusive preferred provider of packaging and testing services for
semiconductors manufactured by TSMC. Through our strategic alliance
with and close geographic proximity to TSMC, we are able to offer our customers
a total semiconductor manufacturing solution that includes access to foundry
services in addition to our packaging, testing and direct shipment
services. In addition, on February 23, 2009, we and AMPI, a provider
of foundry services, signed a memorandum of understanding to enter into a
strategic alliance focused on providing semiconductor manufacturing turnkey
services.
Principal
Products and Services
We offer
a broad range of advanced and legacy semiconductor packaging and testing
services. Our package types employ either leadframes or substrates as
interconnect materials. The semiconductors we package are used in a wide range
of end-use applications, including communications, computers, consumer
electronics, industrial, automotive and other applications. Our testing services
include front-end engineering testing, which is performed during and following
the initial circuit design stage of the semiconductor manufacturing process,
wafer probe, final testing and other related semiconductor testing services. We
focus on packaging and testing logic semiconductors. We offer our customers
turnkey services which consist of packaging, testing and direct shipment of
semiconductors to end users designated by our customers. In 2006, 2007 and 2008,
our packaging revenues accounted for 76.5%, 77.6% and 77.7% of our net revenues,
respectively, and our testing revenues accounted for 21.3%, 19.8% and 20.1% of
our net revenues, respectively.
Packaging
Services
We offer
a broad range of package types to meet the requirements of our customers, with a
focus on advanced packaging solutions. Within our portfolio of package types, we
focus on the packaging of semiconductors for which there is expected to be
strong demand. These include advanced leadframe-based package types such as quad
flat
package,
thin quad flat package, bump chip carrier and quad flat no-lead package, and
package types based on substrates, such as flip-chip BGA and other BGA types as
well as other advanced packages such as wafer-bumping products. We are among the
leaders in such advanced packaging processes and technologies and are well
positioned to lead the technology migration in the semiconductor packaging
industry.
The
semiconductor packaging industry has evolved to meet the advanced packaging
requirements of high-performance semiconductors. The development of
high-performance electronics products has spurred the innovation of
semiconductor packages that have higher interconnect density and better
electrical performance. As a part of this technology migration, semiconductor
packages have evolved from leadframe-based packages to substrate-based packages.
The key differences of these package types are:
|
·
|
the
size of the package;
|
|
·
|
the
density of electrical connections the package can support;
and
|
|
·
|
the
thermal and electrical characteristics of the
package.
|
Leadframe-Based
Packages. Leadframe-based packages are packaged by connecting
the die, using wire bonders, to the leadframe with gold wire. As packaging
technology improves, the number of leads per package increases. Packages have
evolved from the lower pin-count plastic dual in-line packages to higher
pin-count quad flat packages. In addition, improvements in leadframe-based
packages have reduced the footprint of the package on the circuit board and
improved the electrical performance of the package. The following table sets
forth our principal leadframe-based packages.
|
Package
Types
|
Number
of
Leads
|
Description
|
End-Use
Applications
|
|||
|
Quad
Flat Package (QFP)/ Thin Quad Flat Package (TQFP)
|
44-256
|
Designed
for advanced processors and controllers, application-specific integrated
circuits and digital signal processors.
|
Multimedia
applications, cellular phones, personal computers, automotive and
industrial products, hard disk drives, communication boards such as
ethernet, integrated services digital networks and notebook
computers.
|
|||
|
Quad
Flat No-Lead Package (QFN)/Microchip Carrier (MCC)
|
12-84
|
QFN,
also known as MCC, uses half-encapsulation technology to expose the rear
side of the die pad and the tiny fingers, which are used to connect the
chip and bonding wire with printed circuit boards.
|
Cellular
phones, wireless local access networks, personal digital assistant devices
and digital cameras.
|
|||
|
Advanced
Quad Flat No-Lead Package (aQFN)
|
104-248
|
aQFN
allows for leadless, multi-row and fine-pitch leadframe packaging and is
characterized by enhanced thermal and electrical
performance. aQFN is a cost-effective packaging solution due to
its cost-effective materials and simpler
packaging process.
|
Telecommunications
products, wireless local access networks, personal digital assistants,
digital cameras, low to medium lead count
packaging information
appliances.
|
|
Package
Types
|
Number
of
Leads
|
Description
|
End-Use
Applications
|
|||
|
Bump
Chip Carrier (BCC)
|
16-156
|
BCC
packages use plating metal pads to connect with printed circuit boards,
creating enhanced thermal and electrical performance.
|
Cellular
phones, wireless local access networks, personal digital assistant devices
and digital cameras.
|
|||
|
Small
Outline Plastic Package (SOP)/Thin Small Outline Plastic Package
(TSOP)
|
8-56
|
Designed
for memory devices including static random access memory, or SRAM, dynamic
random access memory, or DRAM, fast static RAM, also called FSRAM, and
flash memory devices.
|
Consumer
audio/video and entertainment products, cordless telephones, pagers, fax
machines, printers, copiers, personal computer peripherals, automotive
parts, telecommunications products, recordable optical disks and hard disk
drives.
|
|||
|
Small
Outline Plastic J-Bend Package (SOJ)
|
20-44
|
Designed
for memory and low pin-count applications.
|
DRAM
memory devices, microcontrollers, digital analog conversions and
audio/video applications.
|
|||
|
Plastic
Leaded Chip Carrier (PLCC)
|
28-84
|
Designed
for applications that do not require low-profile packages with high
density of interconnects.
|
Personal
computers, scanners, electronic games and monitors.
|
|||
|
Plastic
Dual In-line Package (PDIP)
|
8-64
|
Designed
for consumer electronic products.
|
Telephones,
televisions, audio/video applications and computer
peripherals.
|
Substrate-Based
Packages. Substrate-based packages
generally employ the BGA design, which utilizes a substrate rather than a
leadframe. Whereas traditional leadframe technology places the electrical
connection around the perimeter of the package, the BGA package type places the
electrical connection at the bottom of the package surface in the form of small
bumps or balls. These small bumps or balls are typically distributed evenly
across the bottom surface of the package, allowing greater distance between
individual leads and higher pin-counts.
The BGA
package type was developed in response to the requirements of advanced
semiconductors. The benefits of the BGA package type include:
|
·
|
smaller
package size;
|
|
·
|
higher
pin-count;
|
|
·
|
greater
reliability;
|
|
·
|
superior
electrical signal transmission; and
|
|
·
|
better
heat dissipation.
|
The
industry demand for BGA packages has grown significantly in recent years. BGA
packages are generally used in applications where size, density and performance
are important considerations, such as cellular handsets and high pin-count
graphic chipsets. Our expertise in BGA packages also includes capabilities in
stacked-die BGA, which assembles multiple dies into a single package. As an
extension to stacked-die BGA, we also assemble system-in-a-package products,
which involve the integration of more than one chip into the same package. We
believe that we are among the leaders in these packaging
technologies.
We
believe that there will continue to be growing demand for packaging solutions
with increased input/output density, smaller size and better heat dissipation
characteristics. In anticipation of this demand, we have focused on developing
our capabilities in some advanced packaging solutions, such as flip-chip BGA.
Flip-chip BGA technology replaces wire bonding with wafer bumping for
interconnections within the package. Wafer bumping involves the placing of tiny
solder balls, instead of wires, on top of dies for connection to substrates. As
compared with more traditional packages, which allow input/output connection
only on the boundaries of the dies, flip-chip packages significantly enhance the
input/output flow by allowing input/output connection over the entire surface of
the dies.
The
following table sets forth our principal substrate-based packages.
|
Package
Types
|
Number
of Leads
|
Description
|
End-Use
Applications
|
|||
|
Plastic
BGA
|
5-1520
|
Designed
for semiconductors which require the enhanced performance provided by
plastic BGA, including personal computer chipsets, graphic controllers and
microprocessors, application-specific integrated circuits, digital signal
processors and memory devices.
|
Telecommunications
products, global positioning systems, notebook computers, disk drives and
video cameras.
|
|||
|
Cavity
Down BGA
|
256-1140
|
Designed
for memory devices such as flash memory devices, SRAM, DRAM and FSRAM,
microprocessors/controllers and high-value, application-specific
integrated circuits requiring a low profile, light and small
package.
|
Telecommunications
products, wireless and consumer systems, personal digital assistants, disk
drives, notebook computers and memory boards.
|
|||
|
Stacked-Die
BGA
|
44-591
|
Combination
of multiple dies in a single package enables package to have multiple
functions within a small surface area.
|
Telecommunications
products, local area networks, graphics processor applications, digital
cameras and pagers.
|
|||
|
Flip-Chip
BGA
|
16-2401
|
Using
advanced interconnect technology, the flip-chip BGA package allows higher
density of input/output connection over the entire surface of the
dies. Designed for high-performance semiconductors that require
high density of interconnects in a small package.
|
High-performance
networking, graphics and processor applications.
|
|||
|
Hybrid
(Flip-Chip and Wire Bumping)
|
49-608
|
A
package technology which stacks a die on top of a probed good die to
integrate ASIC and
|
Digital
cameras, smartphones, Bluetooth applications
and
|
|
Package
Types
|
Number
of Leads
|
Description
|
End-Use
Applications
|
|
memory
(flash, SRAM and DDR) into one package and interconnecting them with wire
bonding and molding. This technology suffers from known good
die issues (i.e., one bad die will ruin the entire module). Rework is also
not an option in hybrid packages.
|
personal
digital assistants.
|
|||||
|
Land
Grid Array (LGA)
|
10-72
|
Leadless
package which is essentially a BGA package without the solder
balls. Based on laminate substrate, land grid array packages
allow flexible routing and are capable of multichip module
functions.
|
High
frequency integrated circuits such as wireless communications products,
computers servers and personal computer peripherals.
|
|||
|
Flip-Chip
Chip Scale Package (FC-CSP)
|
16-200
|
A
lightweight package with a small, thin profile that provides better
protection for chips and better solder joint reliability than other
comparable package types.
|
RFICs
and memory ICs such as digital cameras, DVDs, devices that utilize WiMAX
technology, cellular phones, GPS devices and personal computer
peripherals.
|
|||
|
Package-on-Package
(POP)
|
136-288
|
This
technology places one package on top of another to integrate different
functionalities while maintaining a compact size. It offers procurement
flexibility, low cost of ownership, better total system cost and faster
time to market. Designers typically use the topmost package for memory
applications and the bottomost package for ASICs. By using this
technology, the memory known good die issue can be mitigated and the
development cycle time and cost can be reduced.
|
Cellular
phones, personal digital assistants and system
boards.
|
Wafer-Level
Packages. Wafer-level packages typically have an area no
greater than 1.2 times of the silicon die. Unlike substrate-based
packages, where the die is usually mounted on an interposer which then contains
electrical connections in the form of small bumps or balls, wafer-level packages
do not include an interposer. The electrical connections are etched
or printed directly onto the wafer itself, resulting in a package very close to
the size of the silicon die.
We
provide numerous technologies to meet various customer demands. The
following table sets forth our principal wafer-level packaging
products:
|
Package
Types
|
Number
of Leads
|
Description
|
End-Use
Applications
|
|||
|
Wafer
Level Chip Scale Package (aCSP)
|
6-88
|
A
wafer level chip scale package that can be directly attached to the
circuit board. Provides shortest electrical path from the die
pad to the circuit board, thereby enhancing electrical
performance.
|
Cellular
phones, personal digital assistants, watches, MP3 players, digital cameras
and camcorders.
|
|||
|
Advanced
Wafer Level Package (aWLP)
|
189-364
|
This
technology allows the “fanout” of the package I/Os using an area larger
than the die size without the need for a separate substrate. It offers
cost effective alternatives to flip-chip and wire bumping packaging. 2D
and 3D multi-die packages can enable leadless, multi-row and fine-pitch
leadframe packages with enhanced thermal and electrical
performance.
|
Telecommunications
products, basebands and multiband
transceivers.
|
Module
Assembly. We also offer module assembly services, which
combine one or more packaged semiconductors with other components in an
integrated module to enable increased functionality, typically using automated
surface mount technology, or SMT, machines and other machinery and equipment for
system-level assembly. End-use applications for modules include cellular phones,
PDAs, wireless LAN applications, Bluetooth applications, camera modules,
automotive applications and toys. We currently provide module
assembly services primarily at our facilities in Korea for radio frequency and
power amplifier modules used in wireless communications and automotive
applications.
Interconnect
Materials. Interconnect materials connect the input/output on
the semiconductor dies to the printed circuit board. Interconnect materials
include substrate, which is a multi-layer miniature printed circuit board,
and is an important element of the electrical characteristics and overall
performance of semiconductors. We produce substrates for use in our
packaging operations.
The
demand for higher performance semiconductors in smaller packages will continue
to spur the development of advanced substrates that can support the advancement
in circuit design and fabrication. As a result, we believe that the market for
substrates will grow and the cost of substrates as a percentage of the total
packaging process will increase. In the past, substrates we designed for our
customers were produced by independent substrate manufacturers. Since 1997, we
have been designing and producing a portion of our interconnect materials
in-house. In 2008, our interconnect materials operations supplied approximately
51.7% of our consolidated substrate requirements by value.
The
following table sets forth, for the periods indicated, the percentage of our
packaging revenues accounted for by each principal type of packaging products or
services.
|
Year
Ended December 31,
|
||||||||||||
|
2006
|
2007
|
2008
|
||||||||||
|
(percentage
of packaging revenues)
|
||||||||||||
|
Advanced
substrate and leadframe-based packages(1)
|
82.8 | % | 86.7 | % | 88.0 | % | ||||||
|
Traditional
leadframe-based packages(2)
|
5.2 | 4.3 | 4.7 | |||||||||
|
Module
assembly
|
7.1 | 6.2 | 4.1 | |||||||||
|
Other
|
4.9 | 2.8 | 3.2 | |||||||||
|
Total
|
100.0 | % | 100.0 | % | 100.0 | % | ||||||
|
(1)
|
Includes
leadframe-based packages such as QFP/TQFP, QFN/MCC and BCC and
substrate-based packages such as various BGA package types (including
flip-chip and others) and LGA.
|
|
(2)
|
Includes
leadframe-based packages such as SOP/TSOP, SOJ, PLCC and
PDIP.
|
Testing
Services
We
provide a complete range of semiconductor testing services, including front-end
engineering testing, wafer probing, final testing of logic/mixed-signal/RF and
memory semiconductors and other test-related services.
The
testing of semiconductors requires technical expertise and knowledge of the
specific applications and functions of the semiconductors tested as well as the
testing equipment utilized. We believe that our testing services employ
technology and expertise which are among the most advanced in the semiconductor
industry. In addition to maintaining different types of testing equipment, which
enables us to test a variety of semiconductor functions, we work closely with
our customers to design effective testing and conversion programs on multiple
equipment platforms for particular semiconductors.
In recent
years, complex, high-performance logic/mixed-signal/RF semiconductors have
accounted for an increasing portion of our testing revenues. As the testing of
complex, high-performance semiconductors requires a large number of functions to
be tested using more advanced testing equipment, these products generate higher
revenues per unit of testing time, as measured in central processing unit
seconds.
Front-End
Engineering Testing. We
provide front-end engineering testing services, including customized software
development, electrical design validation, and reliability and failure
analysis.
|
·
|
Customized
Software Development. Test engineers develop customized
software to test the semiconductor using advanced testing equipment.
Customized software, developed on specific testing platforms, is required
to test the conformity of each particular semiconductor type to its unique
functionality and
specification.
|
|
·
|
Electrical
Design Validation. A prototype of the designed
semiconductor is subjected to electrical tests using advanced test
equipment and customized software. These tests assess whether the
prototype semiconductor complies with a variety of different operating
specifications, including functionality, frequency, voltage, current,
timing and temperature range.
|
|
·
|
Reliability
Analysis. Reliability analysis is designed to assess the
long-term reliability of the semiconductor and its suitability of use for
intended applications. Reliability testing can include “burn-in” services,
which electrically stress a device, usually at high temperature and
voltage, for a period of time long enough to cause the failure of marginal
devices.
|
|
·
|
Failure
Analysis. In the event that the prototype semiconductor
does not function to specifications during either the electrical design
validation or reliability testing processes, it is typically subjected to
failure analysis to determine the cause of the failure to perform as
anticipated. As part of this analysis, the prototype semiconductor may be
subjected to a variety of analyses, including electron beam probing and
electrical testing.
|
Wafer
Probing. Wafer probing is the step immediately before the
packaging of semiconductors and involves visual inspection and electrical
testing of the processed wafer for defects to ensure that it meets our
customers’ specifications. Wafer probing services require expertise and testing
equipment similar to that used in final testing, and most of our testers can
also be used for wafer probing.
Logic/Mixed-Signal/RF
Final Testing. We conduct final tests of a wide variety of
logic/mixed-signal/RF semiconductors, with the number of leads ranging from the
single digits to over one thousand and operating frequencies of over 5 Gbps for
digital semiconductors and 6 GHz for radio frequency semiconductors, which are
at the high end of the range for the industry. The products we test include
semiconductors used for networking and wireless communications, graphics and
disk controllers for home entertainment and personal computer applications, as
well as a variety of application-specific integrated circuits for various
specialized applications.
Memory Final
Testing. We provide final testing services for a variety of
memory products, such as SRAM, DRAM, single-bit erasable programmable read-only
memory semiconductors and flash memory semiconductors.
Other
Test-Related Services. We provide a broad range of additional
test-related services, including:
|
·
|
Burn-in
Testing. Burn-in testing is the process of electrically
stressing a device, usually at high temperature and voltage, for a period
of time to simulate the continuous use of the device to determine whether
this use would cause the failure of marginal
devices;
|
|
·
|
Module Sip
Testing. We provide module sip testing through bench instrument
testing and stand-alone testing to our customers with a complete solution
with respect to wireless instruments, global positioning system devices,
personal navigation devices and digital video broadcasting
devices;
|
|
·
|
Dry
Pack. Process which involves heating semiconductors in
order to remove moisture before packaging and shipping to
customers;
|
|
·
|
Tape and
Reel. Process which involves transferring semiconductors
from a tray or tube into a tape-like carrier for shipment to customers;
and
|
|
·
|
Electric
Interface Board and Mechanical Test Tool Design. Process of
designing individualized testing apparatuses for unique semiconductor
devices and packages.
|
Drop Shipment
Services. We offer drop shipment services for shipment of
semiconductors directly to end users designated by our customers. Drop shipment
services are provided mostly in conjunction with logic/mixed-signal/RF testing.
We provide drop shipment services to a significant percentage of our testing
customers. A substantial portion of our customers at each of our facilities have
qualified these facilities for drop shipment services. Since drop shipment
eliminates the additional step of inspection by the customer before shipment to
the end user, quality of service is a key consideration. We believe that our
ability to successfully execute our full range of services, including drop
shipment services, is an important factor in maintaining existing customers as
well as attracting new customers.
The
following table sets forth, for the periods indicated, the percentage of our
testing revenues accounted for by each type of testing service.
|
Year
Ended December 31,
|
||||||||||||
|
2006
|
2007
|
2008
|
||||||||||
|
(percentage
of testing revenues)
|
||||||||||||
|
Testing
Services:
|
||||||||||||
|
Front-end
engineering testing
|
4.7 | % | 3.6 | % | 3.2 | % | ||||||
|
Wafer
probing
|
18.7 | 20.1 | 18.1 | |||||||||
|
Final
testing
|
76.6 | 76.3 | 78.7 | |||||||||
|
Total
|
100.0 | % | 100.0 | % | 100.0 | % | ||||||
Seasonality
See “Item
5. Operating and Financial Review and Prospects—Operating Results and Trend
Information—Quarterly Net Revenues, Gross Profit and Gross Margin.”
Sales
and Marketing
Sales
and Marketing Offices
We
maintain sales and marketing offices in Taiwan, the United States, Austria,
Belgium, France, Germany, Singapore, the Philippines, the PRC, Korea, Malaysia
and Japan. Our sales and marketing offices in Taiwan are located in Hsinchu and
Kaohsiung. We conduct marketing research through our customer service personnel
and through our relationships with our customers and suppliers to keep abreast
of market trends and developments. We also provide advice in the area of
production process technology to our major customers planning the introduction
of new products. In placing orders with us, our customers specify which of our
facilities these orders will go to. Our customers conduct separate qualification
and correlation processes for each of our facilities that they use. See
“—Qualification and Correlation by Customers.”
Customers
Our
global base of over 200 customers includes leading semiconductor companies
across a wide range of end-use applications, such as:
|
· Altera
Corporation
|
· NEC
Electronics Corporation
|
|
· ATI Technologies, Inc.
|
· NVIDIA
Corporation
|
|
· Broadcom Corporation
|
· NXP
Semiconductors
|
|
· Cambridge Silicon Radio Limited
|
· Powerchip
Semiconductor Corp.
|
|
· Freescale
Semiconductor, Inc.
|
· Qualcomm
Incorporated
|
|
· Infineon
Technologies
|
· RF
Micro Devices, Inc.
|
|
· Kawasaki Microelectronics, Inc
|
· Silicon
Integrated Systems
|
|
· Marvell Technology Group Ltd.
|
· STMicroelectronics
N.V.
|
|
· Media
Tek Inc.
|
· Zoran
Corporation
|
|
· Microsoft Corporation
|
Our five
largest customers together accounted for approximately 26.0% , 24.8% and 27.1%
of our net revenues in 2006, 2007 and 2008, respectively. No customer accounted
for more than 10% of our net revenues in 2006, 2007 and 2008.
We
package and test for our customers a wide range of products with end-use
applications in the communications, computers, consumer electronics, industrial
and automotive sectors. The following table sets forth a breakdown of the
percentage of our net revenues, for the periods indicated, by the principal
end-use applications of the products which we packaged and tested.
|
Year
Ended December 31,
|
||||||||||||
|
2006
|
2007
|
2008
|
||||||||||
|
Communications
|
37.2 | % | 44.5 | % | 44.7 | % | ||||||
|
Computers
|
24.7 | 22.8 | 22.8 | |||||||||
|
Consumer
electronics/industrial/automotive
|
37.3 | 32.1 | 32.1 | |||||||||
|
Other
|
0.8 | 0.6 | 0.4 | |||||||||
|
Total
|
100.0 | % | 100.0 | % | 100.0 | % | ||||||
Many of
our customers are leaders in their respective end-use markets. For example, we
provide Freescale Semiconductor, Inc., an industry leader in automotive and
wireless communications semiconductor products, with a substantial portion of
its outsourced packaging and testing requirements. The following table sets
forth some of our
largest
customers, in alphabetical order, categorized by the principal end-use
applications of the products which we package and test for them.
|
Communications
|
Computers
|
Consumer
Electronics/Industrial/Automotive
|
||
|
Broadcom
Corporation
Cambridge
Silicon Radio Limited
Freescale
Semiconductor, Inc.
Infineon
Technologies
Media
Tek Inc.
NXP
Semiconductors
Qualcomm
Incorporated
RF
Micro Devices, Inc.
|
ATI
Technologies, Inc.
NVIDIA
Corporation
Powerchip
Semiconductor Corp.
STMicroelectronics
N.V.
|
Freescale
Semiconductor, Inc.
Microsoft
Corporation
NEC
Electronics Corporation
STMicroelectronics
N.V.
Zoran
Corporation
|
We
categorize our packaging and testing revenues geographically based on the
country in which the customer is headquartered. The following table sets forth,
for the periods indicated, the percentage breakdown by geographic regions of our
packaging and testing revenues.
|
Year
Ended December 31,
|
||||||||||||
|
2006
|
2007
|
2008
|
||||||||||
|
America
|
53.1 | % | 49.8 | % | 53.0 | % | ||||||
|
Taiwan
|
18.7 | 21.2 | 19.8 | |||||||||
|
Asia
|
15.7 | 16.6 | 13.7 | |||||||||
|
Europe
|
12.5 | 12.4 | 13.5 | |||||||||
|
Other
|
* | * | * | |||||||||
|
Total
|
100.0 | % | 100.0 | % | 100.0 | % | ||||||
|
*
|
Indicates
percentage is less than 0.1% of net
revenues.
|
The
majority of our testing revenues is accounted for by the testing of
semiconductors that were also packaged at our packaging facilities. The balance
represented testing revenues from customers who delivered packaged
semiconductors directly to our facilities for testing services alone. The
majority of our packaging revenues is accounted for by the packaging of
semiconductors which were subsequently tested at our facilities. We expect that
more customers of our packaging facilities will begin to contract for our
packaging and testing services on a turnkey basis.
Qualification
and Correlation by Customers
Customers
generally require that our facilities undergo a stringent qualification process
during which the customer evaluates our operations and production processes,
including engineering, delivery control and testing capabilities. The
qualification process typically takes up to eight weeks, but can take longer
depending on the requirements of the customer. In the case of our testing
operations, after we have been qualified by a customer and before the customer
delivers semiconductors to us for testing in volume, a process known as
correlation is undertaken. During the correlation process, the customer provides
us with sample semiconductors to be tested and either provides us with the test
program or requests that we develop a conversion program. In some cases, the
customer also provides us with a data log of results of any testing of the
semiconductors which the customer may have conducted previously. The correlation
process typically takes up to two weeks, but can take longer depending on the
requirements of the customer. We believe our ability to provide turnkey services
reduces the amount of time spent by our customers in the qualification and
correlation process. As a result, customers utilizing our turnkey services are
able to achieve shorter production cycles.
Pricing
We price
our packaging services primarily on a cost-plus basis with reference to
prevailing market prices. We price our testing services primarily on the basis
of the amount of time, measured in central processing unit seconds, taken by the
automated testing equipment to execute the test programs specific to the
products being tested, as well as the cost of the equipment, with reference to
prevailing market prices. Prices for our packaging and testing services are
confirmed at the time firm orders are received from customers, which is
typically four to eight weeks before delivery.
Raw
Materials and Suppliers
Packaging
The
principal raw materials used in our packaging processes are interconnect
materials such as leadframes and substrates, gold wire and molding compound.
Interconnect materials, such as leadframes, substrates, gold wire and molding
compound represented approximately 11.2%, 32.9%, 38.5% and 6.3%, respectively,
of our total cost of packaging materials in 2008.
The
silicon die, which is the functional unit of the semiconductor to be packaged,
is supplied in the form of silicon wafers. Each silicon wafer contains a number
of identical dies. We receive the wafers from the customers or the foundries on
a consignment basis. Consequently, we generally do not incur inventory costs
relating to the silicon wafers used in our packaging process.
We do not
maintain large inventories of leadframes, substrates, gold wire or molding
compound, but generally maintain sufficient stock of each principal raw material
for approximately one month’s production based on blanket orders and rolling
forecasts of near-term requirements received from customers. In addition,
several of our principal suppliers dedicate portions of their inventories,
typically in amounts equal to the average monthly amounts supplied to us, as
reserves to meet our production requirements. However, shortages in the supply
of materials experienced by the semiconductor industry have in the past resulted
in occasional price adjustments and delivery delays. For example, in the first
half of 2000, the industry experienced a shortage in the supply of advanced
substrates used in BGA packages, which, at the time, were only available from a
limited number of suppliers located primarily in Japan. Recent fluctuations in
gold prices have also affected the price at which we have been able to purchase
gold wire. We cannot guarantee that we will not experience shortages in the near
future or that we will be able to obtain adequate supplies of raw materials in a
timely manner and at a reasonable price. In the event of a shortage, we
generally inform our customers and work together to accommodate changes in
delivery schedules.
We
produce substrates for use in our packaging operations. In 2008, our
interconnect materials operations supplied approximately 51.7% of our
consolidated substrate requirements by value. See “—Principal Products and
Services—Packaging Services—Interconnect Materials.”
As a
result of the “Directive 2002/95/EC on the restriction of the use of certain
hazardous substances in electrical and electronic equipment”, or RoHS, which
became effective on July 1, 2006, we have adjusted our purchases of raw
materials and our production processes in order to use raw materials that comply
with this legislation for part of our production. This legislation
restricts the use in the European Union, or EU, of certain substances the EU
deems harmful to consumers, which includes certain grades of molding compounds,
solder and other raw materials that are used in our
products. Manufacturers of electrical and electronic equipment must
comply with this legislation in order to sell their products in an EU member
state.
Testing
Apart
from packaged semiconductors, no other raw materials are needed for the
functional and burn-in testing of semiconductors. For the majority of our
testing equipment, we often base our purchases on prior discussions with our
customers about their forecast requirements. The balance consists of testing
equipment on consignment from customers and which are dedicated exclusively to
the testing of these customers’ specific products.
Equipment
Packaging
The most
important equipment used in the semiconductor packaging process is the wire
bonder. Wire bonders connect the input/output terminals on the silicon die using
extremely fine gold wire to leads on leadframes or substrates. Typically, a wire
bonder may be used, with minor modifications, for the packaging of different
products. We purchase our wire bonders principally from Kulicke & Soffa
Industries Inc. and Oerlikon Assembly Equipment Ltd. As of April 30, 2009, we
operated an aggregate of 8,425 wire bonders, of which 7,705 were fine-pitch wire
bonders. As of the same date, 58 of the wire bonders operated by us were
consigned by customers. For the packaging of certain types of substrate-based
packages, such as flip-chip BGA, die bonders are used in place of wire
bonders. We purchase our die bonders principally from Hitachi High
Technologies Corporation, Oerlikon Assembly Equipment Ltd and ASM Assembly
Automation Ltd. The number of bonders at a given facility is commonly used as a
measure of the packaging capacity of the facility. In addition to
bonders, we maintain a variety of other types of packaging equipment, such as
wafer grind, wafer mount, wafer saw, automated molding machines, laser markers,
solder plate, pad printers, dejunkers, trimmers, formers, substrate saws and
scanners. We purchase our molding machines principally from Towa Corporation,
Fico B.V. and ASM Assembly Automation Ltd.
Testing
Testing
equipment is the most capital intensive component of the testing process. We
generally seek to purchase testers from different suppliers with similar
functionality and the ability to test a variety of different semiconductors. We
purchase testers from major international manufacturers, including Verigy Ltd.,
Teradyne, Inc., Credence Systems Corporation, LTX Corporation, Seiko Epson and
Tokyo Electron Limited. Upon acquisition of new testers, we install, configure,
calibrate, perform burn-in diagnostic tests on and establish parameters for the
testers based on the anticipated requirements of existing and potential
customers and considerations relating to market trends. As of April 30, 2009, we
operated an aggregate of 1,571 testers, of which 315 were consigned by customers
and 32 were leased under operating leases. In addition to testers, we maintain a
variety of other types of testing equipment, such as automated handlers and
probers (special handlers for wafer probing), scanners, reformers and computer
workstations for use in software development. Each tester may be attached to a
handler or prober. Handlers attach to testers and transport individual packaged
semiconductor to the tester interface. Probers similarly attach to the tester
and align each individual die on a wafer with the interface to the
tester.
Test
programs, which are the software that drive the testing of specific
semiconductors, are written for a specific testing platform. We often perform
test program conversions that enable us to test semiconductors on multiple test
platforms. This portability between testers enables us to allocate
semiconductors tested across our available test capabilities and thereby improve
capacity utilization rates. In cases where a customer requires the testing of a
semiconductor product that is not yet fully developed, the customer may provide
personal computer workstations to us to test specific functions. In cases where
a customer has specified testing equipment that was not widely applicable to
other products which we test, we have required the customer to furnish the
equipment on a consignment basis.
Intellectual
Property
As of
April 30, 2009, we held 1,400 Taiwan patents, 445 U.S. patents and 68 PRC
patents related to various semiconductor packaging technologies. In addition, we
registered “ASE” as a trademark and as a servicemark in Taiwan.
We have
also entered into various non-exclusive technology license agreements with other
companies involved in the semiconductor manufacturing process, including
Freescale Semiconductor Inc., Tessera Inc., Fujitsu Limited, Flip Chip
International, L.L.C., Mitsui High-Tec, Inc. and Infineon Technologies AG. We
paid royalties under our license agreements in the amount of NT$282.3 million,
NT$246.8 million and NT$199.2 million (US$6.1 million) in 2006, 2007 and 2008,
respectively. The technology we license from these companies includes solder
bumping, redistribution, ultra CSP assembly, advanced QFN assembly, wafer level
packaging and other technologies used in the production of package types, such
as BCC, flip-chip BGA, film BGA and QFN. The license agreement with Tessera Inc.
will not expire until the expiration of the Tessera Inc. patents licensed by the
agreement. For
information
regarding our intellectual property dispute with Tessera, see “Item 8. Financial
Information—Legal Proceedings.” Our license agreements with Freescale
Semiconductor Inc. will expire on December 31, 2010. Our
license agreements with Flip Chip International, L.L.C. will not expire until
the expiration of the Flip Chip International, L.L.C. patents licensed by the
agreement. Our license agreement with Infineon Technologies AG
will expire on November 5, 2017, and our license agreement with Mitsui High-Tec,
Inc. will expire on June 24, 2012. Our license agreement with Fujitsu Limited
renews automatically each year unless the parties to the agreement agree
otherwise.
Our
success depends in part on our ability to obtain, maintain and protect our
patents, licenses and other intellectual property rights, including rights under
our license agreement with Freescale Semiconductor, Inc.
Quality
Control
We
believe that our advanced process technology and reputation for high quality and
reliable services have been important factors in attracting and retaining
leading international semiconductor companies as customers for our packaging and
testing services. We maintain a quality control staff at each of our facilities.
Our quality control staff typically includes engineers, technicians and other
employees who monitor packaging and testing processes in order to ensure high
quality. Our quality assurance systems impose strict process controls,
statistical in-line monitors, supplier control, data review and management,
quality controls and corrective action systems. Our quality control employees
operate quality control stations along production lines, monitor clean room
environments and follow up on quality through outgoing product inspection and
interaction with customer service staff. We have established quality control
systems which are designed to ensure high quality service to customers, high
product and testing reliability and high production yields at our facilities. We
also have established an environmental management system in order to ensure that
we can comply with the environmental standards of our customers and the
countries within which they operate. See “—Raw Materials and
Suppliers—Packaging.” In addition, our packaging and testing facilities have
been qualified by all of our major customers after satisfying stringent quality
standards prescribed by these customers.
Our
packaging and testing operations are undertaken in clean rooms where air purity,
temperature and humidity are controlled. To ensure stability and integrity of
our operations, we maintain clean rooms at our facilities that meet U.S. Federal
Standard 209E class 1,000, 10,000 and 100,000 standards.
Our
packaging, testing and interconnect materials facilities in Taiwan, Malaysia,
Japan, the PRC, Singapore and Korea have been certified as meeting
ISO/TS16949:2002 standards. Such standards were originally created by the
International Automotive Task Force in conjunction with the International
Standards Organization, or ISO. These standards provide for continuous
improvement with an emphasis on the prevention of defects and reduction of
variation and waste in the supply chain. The ISO/TS16949:2002 certification is
required by some semiconductor manufacturers as a threshold indicator of
company’s quality control standards.
Our
packaging, testing and interconnect materials facilities in Taiwan, Japan,
Korea, Malaysia, the PRC, California and Singapore have been certified as
meeting the ISO 9001 quality standards set by the ISO. Our packing,
testing and interconnect materials facilities in Taiwan, Japan, Korea, Malaysia,
the PRC, California and Singapore have also been certified as meeting the ISO
14001 quality standards. In addition, our packaging facilities in
Kaohsiung, Taiwan have been certified as meeting the ISO 17025:2005 quality
standards set by the ISO. ISO certifications are required by many
countries in connection with sales of industrial products.
Our
packaging, testing and interconnect materials facilities in Taiwan, Korea,
Singapore and the PRC have also been certified to be in compliance with OHSAS
18001, a set of standards designed upon collaboration with occupational health
and safety experts and now offered by many certification organizations as an
indication of compliance with certain standards for occupational health and
safety.
ISE
Labs’s testing facilities in Fremont, California have been approved by the U.S.
military’s Defense Supply Center, Columbus, Sourcing and Qualifications Unit as
a laboratory possessing the requisite level of performance, quality and
reliability required of suppliers for the U.S. Department of
Defense.
Our
packaging, testing and interconnect materials facilities in Taiwan, Malaysia,
the PRC and Korea have been certified as a “Sony Green Partner”, which indicates
our compliance with the “Sony Green Package” standard requirements.
Our
packaging, testing and interconnect material facilities in Taiwan, the PRC,
Japan and Malaysia have been certified to be in compliance with IECQ HSPM
QC080000, a certification designed to manage, reduce and eliminate hazardous
substances.
In
addition, we have received various vendor awards from our customers for the
quality of our products and services.
Competition
We
compete in the highly competitive independent semiconductor packaging and
testing markets. We face competition from a number of sources, including other
independent semiconductor packaging and testing companies. More importantly, we
compete for the business of integrated device manufacturers with in-house
packaging and testing capabilities and fabless semiconductor design companies
with their own in-house testing capabilities. Some of these integrated device
manufacturers have commenced, or may commence, in-house packaging and testing
operations in Asia. Substantially all of the independent packaging
and testing companies that compete with us have established operations in
Taiwan.
Integrated
device manufacturers that use our services continuously evaluate our performance
against their own in-house packaging and testing capabilities. These integrated
device manufacturers may have access to more advanced technologies and greater
financial and other resources than we do. We believe, however, that we can offer
greater efficiency at lower cost while maintaining equivalent or higher quality
for several reasons. First, as we benefit from specialization and economies of
scale by providing services to a large base of customers across a wide range of
products, we are better able to reduce costs and shorten production cycles
through high capacity utilization and process expertise. Second, as a result of
our customer base and product offerings, our equipment generally has a longer
useful life. Third, as a result of the continuing reduction of investments in
in-house packaging and testing capacity and technology at integrated device
manufacturers, we are better positioned to meet their advanced packaging and
testing requirements on a large scale.
Environmental
Matters
Our
packaging and interconnect materials operations generate environmental wastes,
including gaseous chemical, liquid and solid industrial wastes. We have
installed various types of anti-pollution equipment for the treatment of liquid
and gaseous chemical waste generated at all of our semiconductor packaging
facilities. We believe that we have adopted adequate anti-pollution measures for
the effective maintenance of environmental protection standards that are
consistent with the industry practice in the countries in which our facilities
are located. In addition, we believe we are in compliance in all material
respects with present environmental laws and regulations applicable to our
operations and facilities.
Insurance
We have
insurance policies covering property damage and damage to our production
facilities, buildings and machinery. In addition, we have insurance policies
covering our public and product liabilities. Significant damage to any of our
production facilities would have a material adverse effect on our results of
operations.
We are
not insured against the loss of key personnel.
The
following chart illustrates our corporate structure and our effective equity
interest in each of our principal operating subsidiaries and affiliates as of
May 31, 2009. The following chart does not include wholly-owned
intermediate holding companies.
Our
Consolidated Subsidiaries
ASE Test Taiwan
ASE Test
Taiwan, which was acquired in 1990, is our 99.99%-owned subsidiary. It is
incorporated in Taiwan and is engaged in the testing of integrated
circuits;
ASE Test
Malaysia
ASE Test
Malaysia, which was established in 1991, is our wholly-owned subsidiary. It is
incorporated in Malaysia and is engaged in the packaging and testing of
integrated circuits.
ISE
Labs
ISE Labs
is our wholly-owned subsidiary. It is a semiconductor company specializing in
front-end engineering testing that is incorporated in the United States and has
its principal facilities located in Fremont and Santa Clara, California. Through
ASE Test, we acquired 70.0% of the outstanding shares of ISE Labs in 1999, and
increased our holding to 100.0% through purchases made in 2000 and
2002.
ASE
Singapore Pte. Ltd.
ASE
Singapore Pte. Ltd. is incorporated in Singapore and provides testing
services. It was previously our wholly-owned subsidiary through ISE
Labs’s 100% interest. Through a restructuring in November 2008, we
acquired 100% of ASE Singapore Pte. Ltd. through one of our
wholly-owned intermediate holding companies.
ASE
Electronics
ASE
Material was established in 1997 as an ROC company for the design and production
of interconnect materials, such as substrates, used in the packaging of
semiconductors. We initially held a majority stake in ASE Material, but acquired
the remaining equity by means of a merger of ASE Material with and into us in
August 2004. In August 2006, we spun off the operations originally conducted
through ASE Material into our wholly-owned subsidiary ASE
Electronics. ASE Electronics currently supplies our packaging
operations with a substantial portion of our substrate
requirements. The facilities of ASE Electronics are primarily located
in the Nantze Export Processing Zone near our packaging and testing facilities
in Kaohsiung, Taiwan.
ASE
Chung Li and ASE Korea
In July
1999, we purchased Motorola’s Semiconductor Products Sector operations in Chung
Li, Taiwan and Paju, South Korea for the packaging and testing of semiconductors
with principally communications, consumer and automotive applications, thereby
forming ASE Chung Li and ASE Korea. In August 2004, we acquired all of the
outstanding shares of ASE Chung Li that we did not already own by means of a
merger of ASE Chung Li into us.
ASE
Japan
ASE
Japan, which we acquired from NEC Electronics Corporation in May 2004, is our
wholly-owned subsidiary. It is incorporated in Japan and is engaged in the
packaging and testing of semiconductors.
ASE
Shanghai
ASE
Shanghai was established in 2001 as a wholly-owned subsidiary of ASE Inc. and
began operations in June 2004. ASE Shanghai primarily manufactures and supplies
interconnect materials for our packaging operations.
PowerASE
Technology, Inc.
In July
2006, we established PowerASE, a joint venture with Powerchip, focusing on the
packaging and testing of memory semiconductors. PowerASE began operations in
December 2006. Pursuant to the joint venture agreement, we invested US$30.0
million for 60.0% of the equity interest in PowerASE and Powerchip invested
US$20.0 million for the remaining 40.0%. We currently own 56.0% of
PowerASE and Powerchip owns 37.4%. The remaining 6.6% is owned by our
employees and certain other individuals.
ASE
Assembly & Test (Shanghai) Limited
We
acquired 100.0% of GAPT, now known as ASESH AT, in January 2007. ASESH AT is a
PRC company based in Shanghai, China that provides wire bond packaging and
testing services for a wide range of semiconductors.
ASEN
In
September 2007, we acquired 60.0% of ASEN from NXP
Semiconductors. ASEN is based in Suzhou, China and is engaged in
semiconductor packaging and testing.
ASE
(Weihai), Inc.
In May
2008, we acquired 100.0% of the shares of ASE (Weihai), Inc. from Aimhigh Global
Corp. and TCC Steel. ASE (Weihai), Inc. is based in Shandong, China
and is engaged in semiconductor packaging and testing.
Our
Unconsolidated Affiliates
As of
May 31, 2009, we held
approximately 18.2% of the
outstanding shares of Universal Scientific and 26.2% of the outstanding shares
of Hung Ching.
Universal
Scientific
Universal
Scientific, which is an ROC company, manufactures electronics products in
varying degrees of system integration principally on a contract basis for
original equipment manufacturers, including:
|
·
|
electronic
components such as thick film mixed-signal devices, thick film resistors,
high frequency devices and automotive and power electronic
devices;
|
|
·
|
board
and sub-system assemblies such as customized surface mount technology
board assemblies, mother boards for personal computers, wireless local
area network cards and fax control boards;
and
|
|
·
|
system
assemblies such as portable computers, desktop personal computers, network
computers and servers.
|
Universal
Scientific’s principal manufacturing facilities are located in Nantou, Taiwan.
The shares of Universal Scientific are listed on the Taiwan Stock Exchange under
the symbol “2350.”
We
purchased 22.6% of the outstanding shares of Universal Scientific in 1999,
principally through open market purchases on the Taiwan Stock Exchange. We
subsequently increased our holding to 23.3% following open market
purchases
of additional shares in 2000. As of May 31, 2009, we held
approximately 18.2% of
Universal Scientific’s outstanding equity shares. We exercise significant
influence over Universal Scientific and therefore account for this investment by
the equity method.
In 2006,
Universal Scientific recorded net revenues of NT$53,211.5 million, operating
income of NT$1,830.4 million and net income of NT$1,377.0 million. In 2007,
Universal Scientific recorded net revenues of NT$65,124.1 million, operating
income of NT$2,288.8 million and net income of NT$1,868.4 million. In 2008,
Universal Scientific recorded net revenues of NT$64,809.4 million (US$1,978.3 million), operating
income of NT$1,437.1
million (US$43.9 million)
and net income of NT$342.6
million (US$10.5 million).
As of May 31, 2009, Universal Scientific had a market capitalization of
NT$12,955.4 million (US$395.5 million).
Hung
Ching
Hung
Ching is an ROC company engaged in the development and management of commercial,
residential and industrial real estate properties in Taiwan. The shares of Hung
Ching are listed on the Taiwan Stock Exchange under the symbol “2527.” Hung
Ching was founded in 1986 by Chang Yao Hung-ying. Chang Yao Hung-ying is the
mother of both Jason C.S. Chang, our Chairman and Chief Executive Officer, and
Richard H.P. Chang, our Vice Chairman and President. As of May 31, 2009, we held 26.2% of Hung Ching’s outstanding
equity shares.
In 2006,
Hung Ching recorded net revenues of NT$1,663.5 million, operating income of
NT$245.6 million and net income of NT$204.6 million. In
2007, Hung Ching recorded net revenues of NT$799.1 million, operating income of
NT$46.9 million and net income of NT$62.5 million. In 2008, Hung Ching recorded
net revenues of NT$859.7
million (US$26.2 million),
operating loss of NT$14.1
million (US$0.4 million)
and net income of NT$63.9
million (US$1.9 million).
As of May 31, 2009, Hung Ching had a market capitalization of NT$2,957.9 million
(US$90.3 million).
We
operate a number of packaging and testing facilities in Asia and the United
States. Our facilities provide varying types or levels of services
with respect to different end-product focus, customers, technologies and
geographic locations. With our diverse facilities we are able to tailor our
packaging and testing solutions closely to our customers’ needs. The following
table sets forth the location, commencement of operation, primary use,
approximate floor space and ownership of our facilities as of April 30, 2009.
|
Facility
|
Location
|
Commencement
of Operation
|
Primary
Use
|
Approximate
Floor Space (in sq. ft.)
|
Owned
or Leased
|
|||||
|
ASE
Inc.
|
Kaohsiung,
Taiwan
|
March
1984
|
Our
primary packaging facility, which offers complete semiconductor
manufacturing solutions in conjunction with ASE Test Taiwan and foundries
located in Taiwan. Focuses primarily on advanced packaging services,
including flip-chip, wafer bumping and fine-pitch wire
bonding.
|
2,924,000
|
Land:
leased Buildings: owned and leased
|
|||||
|
Chung
Li, Taiwan
|
Acquired
in July 1999
|
An
integrated packaging and testing facility that specializes in
semiconductors for communications and consumer
applications.
|
1,618,000
|
Land
and buildings: owned
|
|
Facility
|
Location
|
Commencement
of Operation
|
Primary
Use
|
Approximate
Floor Space (in sq. ft.)
|
Owned
or Leased
|
|||||
|
ASE
Test Taiwan
|
Kaohsiung,
Taiwan
|
December
1987
|
Our
primary testing facilities, which offer complete semiconductor
manufacturing solutions in conjunction with ASE Inc.’s facility in
Kaohsiung and foundries located in Taiwan. Focuses primarily on advanced
logic/mixed-signal/RF testing for integrated device manufacturers, fabless
design companies and system companies.
|
986,000
|
Land:
leased
Buildings:
owned and leased
|
|||||
|
Chung
Li, Taiwan
|
October
2001
|
Our
primary wafer probing testing facilities.
|
18,000
|
Land
and building: leased
|
||||||
|
ASE
Test Malaysia
|
Penang,
Malaysia
|
February
1991
|
An
integrated packaging and testing facility that focuses primarily on the
requirements of integrated device manufacturers.
|
828,000
|
Land:
leased
Buildings:
owned
|
|||||
|
ASE
Korea
|
Paju,
Korea
|
Acquired
in July 1999
|
An
integrated packaging and testing facility that specializes in
semiconductors for radio frequency, sensor and automotive
applications.
|
621,000
|
Land
and buildings: owned
|
|||||
|
ISE
Labs
|
Silicon
Valley,
California,
Austin,
Texas
|
Acquired
in May 1999
|
Front-end
engineering and final testing facilities located in northern California in
close proximity to some of the world’s largest fabless design companies.
Testing facilities located in close proximity to integrated device
manufacturers and fabless companies in Texas.
|
153,000
|
Land
and buildings: owned and leased
|
|||||
|
ASE
Singapore
|
Singapore
|
Acquired
in May 1999
|
An
integrated testing, sorting and related backend supporting facility that
specializes in semiconductors for communication, computers and consumer
applications.
|
111,000
|
Land
and buildings: leased
|
|||||
|
ASE
Shanghai
|
Shanghai,
China
|
June
2004
|
Design
and production of semiconductor packaging materials.
|
1,431,000
|
Land:
leased
Buildings:
owned
|
|||||
|
ASE
Japan
|
Takahata,
Japan
|
Acquired
in May 2004
|
An
integrated packaging and testing facility that specializes in
semiconductors for cellular phone, household appliance and automotive
applications.
|
298,000
|
Land
and buildings: leased
|
|||||
|
ASE
Electronics
|
Kaohsiung,
Taiwan
|
August
2006
|
Facilities
for the design and production of interconnect materials such as substrates
used in the packaging of semiconductors.
|
311,000
|
Buildings:
leased
|
|||||
|
Chung
Li, Taiwan
|
August
2006
|
Facilities
for the design and production of interconnect materials such as substrates
used in packaging of semiconductors.
|
337,000
|
Buildings:
leased
|
||||||
|
PowerASE
|
Chung
Li, Taiwan
|
December
2006
|
An
integrated packaging and testing facility that specializes in memory
semiconductors for personal computer applications.
|
221,000
|
Buildings:
leased
|
|||||
|
ASESH
AT
|
Shanghai,
China
|
Acquired in | An integrated packaging and testing |
796,000
|
Land: leased |
|
Facility
|
Location
|
Commencement
of Operation
|
Primary
Use
|
Approximate
Floor Space (in sq. ft.)
|
Owned
or Leased
|
|||||
|
|
|
January
2007
|
facility
that specializes in semiconductors for communications and consumer
applications.
|
|
Buildings:
owned
|
|||||
|
ASEN
|
Suzhou,
China
|
Acquired
in September 2007
|
An
integrated packaging and testing facility that specializes in
communication applications.
|
142,000
|
Land:
leased
Buildings:
owned
|
|||||
|
ASE
(Weihai), Inc.
|
Shandong,
China
|
Acquired
in May 2008
|
An
integrated packaging and testing facility that specializes in
semiconductors for
communications,
computers and consumer applications.
|
168,000
|
Land:
leased Buildings: owned
|
Our
leased property in Kaohsiung consists primarily of approximately twenty leases
of land in the Kaohsiung Nantze Export Processing Zone between ASE Inc. and ASE
Test Taiwan, as the lessees, and the Export Processing Zones Administration, or
the EPZA, under the Ministry of Economic Affairs. The leases have ten year terms
that expire between the middle of April 2010 and the end of September 2017. No
sublease or lending of the land is allowed. The EPZA has the right to adjust the
rental price in the event the government revalues the land. The
leases are typically renewable with three months notice prior to the termination
date.
For
information on the aggregate capacity of our facilities in terms of the number
of bonders and testers we operate, see “—Business
Overview—Equipment.”
None.
The following discussion of our
business, financial condition and results of operations should be read in
conjunction with our consolidated financial statements, which are included
elsewhere in this annual report. This discussion contains forward-looking
statements that reflect our current views with respect to future events and
financial performance. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of any number of
factors, such as those set forth under “Item 3. Key Information—Risk Factors”
and elsewhere in this annual report. See “Special Note Regarding Forward-Looking
Statements.”
Overview
We offer
a broad range of semiconductor packaging and testing services. In addition to
offering each service separately, we also offer turnkey services, which consist
of the integrated packaging, testing and direct shipment of semiconductors to
end users designated by our customers. Our net revenues decreased from
NT$100,423.6 million in 2006 and NT$101,163.1 million in 2007 to NT$94,430.9 million (US$2,882.5 million) in
2008.
Discussed
below are several factors that have had a significant influence on our financial
results in recent years.
Global
Economic Crisis
Through
the first three quarters of 2008, demand for our services mirrored historical
fluctuations. Beginning in late 2008, however, the global economy
suffered an unprecedented crisis that had a significant adverse impact on
the semiconductor industry. As a result, our clients substantially
reduced their demand for our services and we experienced a significant
deterioration in sales volume, which led to a corresponding decline in our
revenues beginning in the fourth quarter of 2008 and into the first quarter of
2009. While we cannot accurately predict when worldwide demand will
recover significantly, we believe that over the long-term, demand for our
services will return to levels that we experienced prior to the economic crisis
in 2008.
Pricing
and Revenue Mix
We price
our services on a cost-plus basis, taking into account the actual costs involved
in providing these services, with reference to prevailing market prices. The
majority of our prices and revenues are denominated in U.S. dollars. Any
significant fluctuation in the exchange rates, especially between NT dollars and
U.S. dollars will affect our costs and, in turn, our pricing.
In the
case of semiconductor packaging, the cost of the silicon die, typically the most
costly component of the packaged semiconductor, is usually not reflected in our
costs (or revenues) since it is generally supplied by our customers on a
consignment basis.
The
semiconductor industry is characterized by a general trend towards declining
prices for products and services of a given technology over time. In addition,
during periods of intense competition and adverse conditions in the
semiconductor industry, the pace of this decline may be more rapid than in other
years. The average selling prices of our packaging and testing services have
experienced sharp declines during such periods as a result of intense price
competition from other independent packaging and testing companies that attempt
to maintain high capacity utilization levels in the face of reduced
demand.
The
average selling prices of our testing services are more severely affected by a
downturn in the semiconductor industry than the average selling prices of our
packaging services. During an industry downturn, a decline in the average
selling prices of our testing services is often exacerbated by a decrease in
demand from our integrated device manufacturer customers, who typically maintain
larger in-house testing capacity than in-house packaging capacity. These price
declines are also exacerbated by intense price competition from other
independent testing service providers, who typically offer large price discounts
during periods of depressed demand in order to maintain higher capacity
utilization rates to defray the high fixed costs associated with testing
operations. In 2006, 2007 and 2008, packaging revenues, including
revenues from module assembly, accounted for 76.5%, 77.6% and 77.7% while
testing revenues accounted for 21.3%, 19.8% and 20.1%, respectively, of our net
revenues.
We
believe that, over the long term, the market for outsourced semiconductor
testing services has more potential for growth than the market for outsourced
semiconductor packaging services for two reasons. First, the portion of the
semiconductor testing market that is currently accounted for by independent
testing service providers is smaller than that for packaging. Second, the large
capital expenditures needed for increasingly sophisticated testing equipment, as
compared to less expensive packaging equipment, is also a driver for further
outsourcing of testing services by integrated device manufacturers.
Declines
in average selling prices have been partially offset over the last several years
by changes in our revenue mix. In particular, revenues derived from
packaging more advanced package types, such as flip-chip BGA, higher density
packages with finer lead-to-lead spacing, or pitch, and testing of more complex,
high-performance semiconductors have increased as a percentage of total
revenues. We intend to continue to focus on packaging more advanced package
types, such as BGA and flip-chip BGA, developing and offering new technologies
in packaging and testing services and expanding our capacity to achieve
economies of scale, as well as improving production efficiencies for older
technologies, in order to mitigate the effects of declining average selling
prices on our profitability.
Our
profitability for a specific package type does not depend linearly on its
average selling price. Some of our more traditional package types,
which typically have low average selling prices, may well command steadier and
sometimes higher margins than more advanced package types with higher average
selling prices.
High
Fixed Costs
Our
operations, in particular our testing operations, are characterized by
relatively high fixed costs. We expect to continue to incur substantial
depreciation and other expenses as a result of our acquisitions of packaging and
testing equipment and facilities. Our profitability depends in part not only on
absolute pricing levels for our services, but also on utilization rates for our
packaging and testing equipment, commonly referred to as “capacity utilization
rates.” In particular, increases or decreases in our capacity utilization rates
could have a significant effect on gross margins since the unit cost of
packaging and testing services generally decreases as fixed costs are allocated
over a
larger
number of units. The capacity utilization rates of the machinery and equipment
installed at our production facilities typically depend on factors such as the
volume and variety of products packaged or tested using such machinery and
equipment, the efficiency of our operations in terms of the loading and
adjustment of machinery and equipment for the packaging or testing of different
products, the complexity of the different products to be packaged or tested, the
amount of time set aside for the maintenance and repair of the machinery and
equipment, and the experience and schedule of work shifts of
operators.
The
current generation of advanced testers typically cost between US$1.0 million and
US$3.0 million each, while wire bonders used in packaging typically cost between
US$60,000 and US$70,000 each. In 2006, 2007 and 2008, our depreciation and
amortization as a percentage of net revenues was 13.3%, 15.1% and 16.7%,
respectively. The increase in depreciation and amortization as a
percentage of net revenues in 2008 compared to 2007 was primarily a result of
the depreciation of new equipment, particularly with respect to equipment
acquired for newly-acquired or newly-formed subsidiaries. See “Item 4.
Information on the Company—Business Overview—Equipment.” We begin depreciating
our equipment when it is placed into service. There may sometimes be a time lag
between when our equipment is placed into service and when it achieves high
levels of utilization. In periods of depressed industry conditions, such as the
fourth quarter of 2008, we may experience lower than expected demand from
customers, resulting in an increase in depreciation relative to net revenues. In
particular, the capacity utilization rates for our testing equipment are more
severely affected during an industry downturn as a result of the decrease in
outsourcing demand from integrated device manufacturers, which typically
maintain larger in-house testing capacity than in-house packaging
capacity.
In
addition to purchasing testers, we also lease a portion of our testers, which we
believe allows us to better manage our capacity utilization rates and cash
flow. Since testers operated under operating leases can be replaced
with more advanced testers upon the expiration of the lease, we believe that
these operating leases have enabled us to improve our capacity utilization rates
by allowing us to better align our capacity with changes in equipment
technology. For more information about our testers, including the
number of testers under lease, see “Item 4. Information on the Company—Business
Overview—Equipment—Testing.”
Raw
Material Costs
Substantially
all of our raw material costs are accounted for by packaging and the production
of interconnect materials, as testing requires minimal raw materials. In 2006,
2007 and 2008, raw material cost as a percentage of our net revenues was 29.2%,
27.6% and 28.9%, respectively.
Gold wire
is one of the principal raw materials we use in our packaging
processes. Recent volatility in the price of gold has affected our
cost of revenues. In 2008, the spot rate for gold fluctuated from
approximately US$700 per ounce to approximately US$1,000 per
ounce. It may be difficult for us to adjust our average selling
prices to account for fluctuations in the price of gold. We expect
that gold wire will continue to be an important raw material for us and we
therefore expect to continue to be subject to significant fluctuations in the
price of gold.
ASE
Test Share Acquisition and Privatization
On May
30, 2008, we acquired, by way of a scheme of arrangement under Singapore law,
all the outstanding ordinary shares of ASE Test that we did not already directly
or indirectly own, making ASE Test our wholly-owned subsidiary. See “Item 4.
Information on the Company—History and Development of the Company—ASE Test Share
Acquisition and Privatization.” Prior to this transaction, we held 50.3% of ASE
Test and 50.3% of ASE Test’s net income or loss was reflected in our
consolidated net income and the remaining 49.7% was reflected as minority
interest. As a result of the transaction, beginning on June 1, 2008, 100.0% of
ASE Test’s net income or loss has been reflected
in our consolidated net income. Any losses at ASE Test therefore have a
greater adverse affect on our net income than prior to the effectiveness of the
scheme of arrangement.
Recent
ROC GAAP Accounting Pronouncements
The ROC
ARDF issued Interpretation 96-052, “Accounting for Bonuses to Employees,
Directors and Supervisors”, or Interpretation 96-052, in March 2007, which
requires companies to record bonuses paid to employees, directors and
supervisors as an expense rather than an appropriation of
earnings. Pursuant to
Interpretation
96-052, we accrued between 9% and 12% of our earnings as bonuses to our
employees, directors and supervisors beginning on January 1, 2008.
The ROC
ARDF revised ROC SFAS No. 10, “Accounting for Inventories”, or ROC SFAS No. 10,
in November 2007, which requires inventories to be stated at the lower of cost
or net realizable value item by item. Inventories are recorded by the
specific identification method, first-in, first-out method or weighted average
method. The last-in, first-out method is no longer
permitted. The revised ROC SFAS No. 10 should be applied to financial
statements for the fiscal years beginning on or after January 1,
2009. We believe that ROC SFAS No. 10 has no material impact on
us.
Critical
Accounting Policies and Estimates
Preparation
of our consolidated financial statements requires us to make estimates and
judgments in applying our critical accounting policies which have a significant
impact on the results we report in our consolidated financial statements. We
continually evaluate these estimates, including those related to revenue
recognition, sales discounts and allowances for doubtful accounts, inventories,
allowances for deferred income tax assets, losses on impairment of assets,
goodwill and investments, bonuses to employees, directors and supervisors and
purchase price allocations on our investments. We base our estimates on
historical experience and other assumptions which we believe to be reasonable
under the circumstances. Actual results may differ from these estimates under
different assumptions and conditions. We have identified below the accounting
policies that are the most critical to our consolidated financial
statements.
Revenue
Recognition. Revenues from
semiconductor packaging and testing services are recognized upon completion of
the services or shipment. We do not take ownership of:
|
·
|
bare
semiconductor wafers received from customers that we package into finished
semiconductors; and
|
|
·
|
packaged
semiconductors received from customers that we test for performance
specifications.
|
The title
and risk of loss remains with the customer for those bare semiconductors and/or
packaged semiconductors. Accordingly, the cost of customer-supplied
semiconductor materials is not included in our consolidated financial
statements. Other criteria that we use to determine when to recognize revenue
are:
|
·
|
existence
of persuasive evidence of an
arrangement;
|
|
·
|
the
selling price is fixed or determinable;
and
|
|
·
|
collectibility
is reasonably assured.
|
These
policies are consistent with provisions in the Staff Accounting Bulletin No. 104
issued by the SEC. We do not provide warranties to our customers except in cases
of defects in the packaging services provided and deficiencies in testing
services provided. An appropriate sales discount is recognized in the period
during which the sale is recognized, and is estimated based on historical
experience.
Allowance for
Doubtful Accounts. We periodically
record a provision for doubtful accounts based on our evaluation of the
collectibility of our accounts receivable. The total amount of this provision is
determined by us as follows. We first identify the receivables of customers that
are considered to be a higher credit risk based on their current overdue
accounts with us, difficulties collecting from these customers in the past or
their overall financial condition. For each of these customers, we estimate the
extent to which the customer will be able to meet its financial
obligations to us, and we record an allowance that reduces our accounts
receivable for that customer to the amount that we reasonably believe will be
collected. For all other customers, we maintain an allowance for doubtful
accounts equal to a percentage of their aggregate accounts receivable. As of
December 31, 2006, 2007 and 2008, the allowance we set aside for doubtful
accounts was NT$244.4 million, NT$109.7 million and NT$99.2 million (US$3.0
million), respectively. Additional allowances may be required in the future if
the financial condition of our customers or general economic conditions further
deteriorate, and this additional allowance would reduce our net
income.
Inventories. Inventories are recorded at cost
when acquired and stated at the lower of moving or weighted average cost or
market value. Unbilled processing charges incurred are included in finished
goods and work in progress and are stated at actual cost. Market value for
finished goods and work in process is estimated to be the net realizable value.
Market value for raw materials, supplies and spare parts is the cost of
replacement. Materials received from customers for processing, mainly of
semiconductor wafers, are excluded from inventories, as title and risk of loss
remains with the customers. An allowance for loss on decline in market value and
obsolescence is provided based on the difference between the cost of inventory
and the estimated market value based upon assumptions about future demand and
market conditions. An additional inventory provision may be required if actual
market conditions are less favorable than those projected.
Valuation
Allowances for Deferred Income Tax Assets. Tax benefits arising from deductible
temporary differences, unused tax credits and net operating loss carryforwards
are recognized as deferred income tax assets. We record a valuation allowance to
the extent that we believe it is more likely than not that deferred income tax
assets will not be realized. We have considered future taxable income and
ongoing prudent and feasible tax planning strategies in assessing the need and
amount for the valuation allowance. In the event we were to determine that we
would be able to realize our deferred income tax assets in the future in excess
of our net recorded amount, an adjustment to our deferred income tax assets
would increase income in the period such determination was made. Alternatively,
should we determine that we would not be able to realize all or part of our
deferred income tax assets in the future, an adjustment to our deferred income
tax assets would decrease income in the period such determination was
made.
Realizability of
Long-Lived Assets. We are required
to evaluate our equipment and other long-lived assets for impairment whenever
there is an indication of impairment. If certain criteria are met, we are
required to record an impairment charge.
In
accordance with ROC SFAS No. 35, long-lived assets held and used by us are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. If the recoverable
amount increases in a future period, the amount previously recognized as
impairment will be reversed and recognized as a gain. However, the
adjusted amount may not exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss had been
recognized.
In
accordance with U.S. SFAS No. 144, long-lived assets held and used by us are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. For purposes of
evaluating the recoverability of long-lived assets, the recoverability test is
performed by comparing undiscounted net cash flows of the assets against the net
book value of the assets. If the recoverability test indicates that an
impairment has occurred, the impairment loss is the amount of the asset’s net
book value in excess of the related fair value.
In 2005,
we recognized a loss of NT$13,479.1 million on damage to our property, plant and
equipment caused by a fire at our facilities in Chung Li, Taiwan. In 2006, we
reversed NT$2,190.6 million of the impairment loss recognized in 2005 under ROC
GAAP due to an increase in the estimated service potential of the relevant
assets. See note 30 to our consolidated financial statements included in this
annual report. Reversal of the amount is prohibited under U.S.
GAAP. See note 32 to our consolidated financial statements included
in this annual report for a reconciliation of the differences in the cost basis
of the damaged machinery and associated depreciation expense. In 2007, we
recognized impairment of NT$816.2 million, based on an independent appraiser’s
assessment of fair value, on idle assets due to an impairment in our flip-chip
substrate production line that was primarily the result of idle capacity, which
was caused by lack of demand for certain applications. In 2008, we recognized
impairment of NT$34.6
million (US$1.1 million) on idle assets. See note 15 to our consolidated
financial statements included in this annual report.
Business
Combinations. When we acquire businesses, we allocate the purchase price
to tangible assets and liabilities and identifiable intangible assets acquired.
Any residual purchase price is recorded as goodwill. The allocation of the
purchase price requires management to make significant estimates in determining
the fair values of assets acquired and liabilities assumed, especially with
respect to intangible assets. These estimates are based on historical
experience, information obtained from the management of the acquired companies
and independent external service providers’ reports. These estimates can
include, but are not limited to, the cash flows that an asset is
expected
to generate in the future, the appropriate weighted-average cost of capital, and
the synergistic benefits expected to be derived from the acquired business.
These estimates are inherently uncertain and unpredictable. In addition,
unanticipated events and circumstances may occur which may affect the accuracy
or validity of such estimates.
In May
2008, we acquired from minority shareholders 58,438,944 shares of ASE
Test. See “Item 4. Information on the Company—History and Development of the
Company—ASE Test Share
Acquisition and Privatization” for more information on the ASE Test share
acquisition and privatization. Pursuant to ROC SFAS No. 25 “Business
Combinations”, No. 37 “Intangible Assets”, U.S. SFAS No. 141 “Business
Combinations” and U.S. SFAS No. 142 “Goodwill and Other Intangible Assets”,
acquired tangible assets were valued at estimates of their current fair
value. The valuation of acquired intangible assets was determined
based on management’s estimates and consultation with an independent
appraiser. Intangible assets of NT$1,675.1 million (US$51.1 million)
consisted of patents, acquired special technology and customer
relationships. These
intangible assets are amortized on a straight-line basis over the estimated life
of five to 11 years to reflect the pattern in which the economic benefits of the
intangible asset are consumed or otherwise used up. In
addition, we also recognized goodwill of NT$6,271.2 million (US$191.4 million).
We paid a premium for this acquisition in order to fully consolidate ASE Test’s
earnings with ours, simplify our organizational structure, reduce costs and
administrative burdens associated with filing and compliance requirements
relating to ASE Test’s Nasdaq Global Market and Taiwan Stock Exchange listings
and public company reporting obligations, enhance our brand recognition through
the promotion of a single common brand and increase our flexibility in making
investments and allocating resources among our subsidiaries.
Goodwill. Goodwill is evaluated for impairment at least
annually and we test for impairment between annual tests if an event occurs or
circumstances change that would indicate that the carrying amount may be
impaired. Goodwill is evaluated for impairment by comparing the
recorded amount of the cash-generating unit to which the goodwill has been
allocated to its recoverable amount. Recoverable amount is defined as
the higher of a cash-generating unit’s fair value less costs to sell or its
“value in use”, which is defined as the present value of the expected future
cash flows generated by the assets. In conducting the future cash
flow valuation, we make assumptions about future operating cash flows, the
discount rate used to determine present value of future cash flows, and capital
expenditures. Future operating cash flows assumptions include sales
growth assumptions, which are based on our historical trends and industry
trends, and gross margin and operating expense growth assumptions, which are
based on the historical relationship of those measures compared to sales and
certain cost cutting initiatives. An impairment charge is incurred to
the extent the recorded amount exceeds the recoverable amount. As of December
31, 2008, we had goodwill of NT$9,456.1 million (US$288.6 million) and
NT$9,804.7 million (US$299.3 million) under ROC GAAP and U.S. GAAP,
respectively. Based on our analysis, we believe that our estimated
fair value exceeded the carrying value of the goodwill and no impairment existed
as of December 31, 2008. Our conclusion could, however, change in the
future if actual results differ from our estimates and judgments under different
assumptions and conditions.
Valuation of
Long-term Investments. We hold significant long-term investments in
public and non-public entities. We evaluate these long-term investments annually
for impairment based on market prices, if available, the financial
condition of the investee company, economic conditions in the industry, and our
intent and ability to hold the investment for a long period of time. These
assessments usually require a significant amount of judgment, as a significant
decline in the market price may not be the best indicator of impairment. Under
U.S. GAAP, we evaluate long-term investments using the above mentioned criteria
and, to the extent any decline in the value of a long-term investment is
determined to be other than temporary, an impairment charge is recorded in the
current period. The methods to measure the amount of impairment under ROC GAAP
and U.S. GAAP may be based on different estimates of fair value depending on the
circumstances. Under U.S. GAAP, market price is to be used, if available, to
determine the fair value. Under ROC GAAP, however, if the market price is deemed
to be a result of an inactive market, other measures of fair value may be used.
Several of the long-term investments held by us are accounted for under the
equity method or cost method. Any significant decline in the operations of an
equity method or cost method investee could affect the value of the long-term
investment and an impairment charge may occur. In 2007, we recognized an
impairment of NT$178.5 million on our investment in Taiwan Fixed Network Co.,
Ltd. We disposed of this investment in April 2007. In 2008, we recognized an
impairment of NT$ 21.4 million (US$ 0.7 million) on our investment in ID
Solutions, Inc.
Results
of Operations
The
following table sets forth, for the periods indicated, financial data from our
consolidated statements of income, expressed as a percentage of net
revenues.
|
Year
Ended December 31,
|
||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||
|
(percentage
of net revenues)
|
||||||||||||||
|
ROC
GAAP:
|
||||||||||||||
|
Net
revenues
|
100.0 | % | 100.0 | % | 100.0 | % | ||||||||
|
Packaging
|
76.5 | 77.6 | 77.7 | |||||||||||
|
Testing
|
21.3 | 19.8 | 20.1 | |||||||||||
|
Others
|
2.2 | 2.6 | 2.2 | |||||||||||
|
Cost
of revenues
|
(71.3 | ) | (71.2 | ) | (76.1 | ) | ||||||||
|
Gross
profit
|
28.7 | 28.8 | 23.9 | |||||||||||
|
Operating
expenses
|
(8.3 | ) | (9.7 | ) | (11.4 | ) | ||||||||
|
Income
from operations
|
20.4 | 19.1 | 12.5 | |||||||||||
|
Non-operating
income (expense)
|
1.8 | (1.9 | ) | (2.5 | ) | |||||||||
|
Income
before income tax
|
22.2 | 17.2 | 10.0 | |||||||||||
|
Income
tax expense
|
(2.1 | ) | (3.3 | ) | (2.4 | ) | ||||||||
|
Income
before cumulative effect of change in accounting principle
|
20.1 | 13.9 | 7.6 | |||||||||||
|
Cumulative
effect of change in accounting principle
|
(0.4 | )(1) | — | — | ||||||||||
|
Minority
interest in net income of subsidiaries
|
(2.4 | ) | (1.8 | ) | (1.1 | ) | ||||||||
|
Net
income of parent company’s shareholders
|
17.3 | % | 12.1 | % | 6.5 | % | ||||||||
|
(1)
|
Represents
the cumulative effect of our adoption of ROC SFAS No. 34 and ROC SFAS No.
36. See note 3 to our consolidated financial statements included in this
annual report.
|
The
following table sets forth, for the periods indicated, the gross margins for our
packaging and testing services and our total gross margin. Gross margin is
calculated by dividing gross profits by net revenues.
|
Year
Ended December 31,
|
||||||||||||
|
2006
|
2007
|
2008
|
||||||||||
|
(percentage
of net revenues)
|
||||||||||||
|
ROC
GAAP:
|
||||||||||||
|
Gross
margin
|
||||||||||||
|
Packaging
|
25.1 | % | 26.2 | % | 20.0 | % | ||||||
|
Testing
|
40.7 | % | 38.0 | % | 34.0 | % | ||||||
|
Overall
|
28.7 | % | 28.8 | % | 23.9 | % | ||||||
The
following table sets forth, for the periods indicated, a breakdown of our total
cost of revenues and operating expenses, expressed as a percentage of net
revenues.
|
Year
Ended December 31,
|
||||||||||||
|
2006
|
2007
|
2008
|
||||||||||
|
(percentage
of net revenues)
|
||||||||||||
|
ROC
GAAP:
|
||||||||||||
|
Cost
of revenues
|
||||||||||||
|
Raw
materials
|
29.2 | % | 27.6 | % | 28.9 | % | ||||||
|
Labor
|
14.2 | 14.5 | 15.4 | |||||||||
|
Depreciation
and amortization
|
13.3 | 15.1 | 16.7 | |||||||||
|
Others
|
14.6 | 14.0 | 15.1 | |||||||||
|
Total
cost of revenues
|
71.3 | % | 71.2 | % | 76.1 | % | ||||||
|
Year
Ended December 31,
|
||||||||||||
|
2006
|
2007
|
2008
|
||||||||||
|
(percentage
of net revenues)
|
||||||||||||
|
Operating
expenses
|
||||||||||||
|
Selling
|
1.2 | % | 1.0 | % | 1.2 | % | ||||||
|
General
and administrative
|
4.5 | 5.5 | 6.1 | |||||||||
|
Research
and
development
|
2.6 | 3.2 | 4.1 | |||||||||
|
Total
operating
expenses
|
8.3 | % | 9.7 | % | 11.4 | % | ||||||
Year
Ended December 31, 2008 Compared to Year Ended December 31, 2007
Net Revenues.
Net revenues decreased 6.7% to NT$94,430.9 million (US$2,882.5 million)
in 2008 from NT$101,163.1 million in 2007, primarily due to a sharp decline in
demand in the fourth quarter of 2008 as a result of the global economic
crisis. Packaging revenues decreased 6.5% to NT$73,391.6 million
(US$2,240.3 million) in 2008 from NT$78,516.3 million in
2007. Testing revenues decreased 4.9% to NT$19,021.4 million
(US$580.6 million) in 2008 from NT$20,007.8 million in 2007. The
decrease in packaging revenues was primarily due to a decrease in average
selling prices for our packaging services and the appreciation of the NT dollar
against the U.S. dollar. The decrease in testing revenues was
primarily due to a decrease in average selling prices for our testing services
and the appreciation of the NT dollar against the U.S. dollar, offset by an
increase in testing volume. The decrease in average selling prices
for our packaging and testing services was due to normal trends relating to the
semiconductor industry. The increase in testing volume resulted
primarily from the strong demand in the first three quarters of 2008 and
newly-acquired subsidiaries that focus on providing testing services, offset by
a significant decline in demand in the fourth quarter of 2008.
Gross
Profit. Gross profit decreased
22.5% to NT$22,529.2 million (US$687.7 million) in 2008 from NT$29,088.4 million
in 2007. Our gross profit as a percentage of net revenues, or gross margin,
decreased to 23.9% in 2008 from 28.8% in 2007. Our gross margin for packaging
decreased to 20.0% in 2008 from 26.2% in 2007. This decrease was
primarily due to an increase in raw material costs, labor costs and depreciation
expenses as a percentage of net packaging revenues. Our gross margin for testing
decreased to 34.0% in 2008 from 38.0% in 2007. This decrease was primarily due
to an increase in depreciation, utility expenses and labor costs as a percentage
of net testing revenues. Raw material costs in 2008 were NT$27,275.6
million (US$832.6 million) compared to NT$27,913.1 million in
2007. As a percentage of net revenues, raw material costs increased
to 28.9% in 2008 from 27.6% in 2007, primarily due to a change in our product
mix toward packaging requiring more raw materials. Depreciation,
amortization and rental expenses in 2008 was NT$16,370.6 million (US$499.7
million), compared to NT$16,358.7 million in 2007. As a percentage of
net revenues, depreciation, amortization and rental expenses increased to 17.3%
in 2008 from 16.1% in 2007. Labor cost in 2008 was NT$14,549.9 million (US$444.1
million) compared to NT$14,684.1 million in 2007. As a percentage of net
revenues, labor cost increased to 15.4% in 2008 from 14.5% in 2007, primarily
because of a change in an ROC accounting standard that requires us to record
bonuses
paid to employees, directors and supervisors as an expense rather than an
appropriation of earnings. This increase in labor cost was partially
offset by a decrease in our employee headcount.
Operating
Income. Operating income decreased 38.9% to NT$11,799.5 million (US$360.2
million) in 2008 compared to NT$19,297.2 million in 2007. Operating expenses
increased 9.6% to NT$10,729.7 million (US$327.5 million) in 2008 compared to
NT$9,791.2 million in 2007. The increase in operating expenses was
primarily due to an increase in research and development expense and, to a
lesser extent, an increase in general and administrative expense and selling
expense. General and administrative expense increased 3.3% to
NT$5,694.2 million (US$173.8 million) in 2008 from NT$5,512.9 million in
2007. This increase was primarily the result of an increase in
salaries and bonuses, which reflected the impact from a change in an ROC
accounting standard that requires us to record bonuses paid to employees,
directors and supervisors as an expense rather than an appropriation of
earnings. General and administrative expense represented 6.1% of our net
revenues in 2008 compared to 5.5 % in 2007. Research and development
expense increased 18.0% to NT$3,876.8 million (US$118.3 million) in 2008 from
NT$3,284.1 million in 2007. This increase was primarily due to
increases in salaries and bonuses and depreciation expense. The increase in
salaries and bonuses was due to the expanded scope of our research and
development efforts and a change in an ROC accounting standard that requires us
to record bonuses paid to employees, directors and
supervisors
as an expense rather than an appropriation of earnings. The increase
in depreciation expense was due to the purchase of new equipment and as a result
of the expanded scope of our research and development efforts. Research and
development expense accounted for 4.1% of our net revenues in 2008 compared to
3.2% in 2007. Selling expense increased 16.5% to NT$1,158.6 million
(US$35.4 million) in 2008 from NT$994.2 million in 2007. This increase was
primarily due to the rearrangement of the sales department’s functions. Selling
expense as a percentage of net revenues increased to 1.2% in 2008 from 1.0% in
2007. Our operating income as a percentage of net revenues, or operating margin,
decreased to 12.5% in 2008 from 19.1% in 2007, primarily as a result of an
increase in operating expenses and a decrease in our net revenues.
Non-Operating
Income (Expense). We incurred a net non-operating expense of NT$2,323.7
million (US$71.0 million) in 2008 compared to a net non-operating expense of
NT$1,945.3 million in 2007. This overall increase was primarily the
result of an increase in loss on the valuation of financial assets and
liabilities offset by a foreign exchange gain, a decrease on the income
earned from equity method investments and an increase in interest expense,
partially offset by a decrease in impairment loss. In 2008, we
recorded net loss on the valuation of financial assets and liabilities and
foreign exchange of NT$163.3 million (US$5.0 million) in 2008 compared to a net
gain of NT$580.9 million in 2007 primarily due to a decline in the market
value of marketable finance instruments. We recognized income from equity method
investments of NT$77.5 million (US$ 2.4 million) in 2008 compared to NT$345.7
million in 2007. The decrease was due to the weakened operating performance of
such equity method investments. We recognized net interest expense of NT$
1,486.5 million (US$45.4 million) in 2008 compared to NT$1,225.9 million,
primarily due to additional loans we obtained in connection with the
privatization of ASE Test. We recognized impairment losses of NT$293.3 million
(US$9.0 million) compared to NT$994.7 million in 2007. The impairment
of our flip-chip substrate production line in 2007 was primarily the result of
idle capacity caused by lack of demand for certain applications.
Net
Income. Net income decreased 49.4% to NT$6,160.1 million (US$188.0
million) in 2008 from NT$12,165.3 million in 2007. Our net income per ADS
decreased to NT$5.6 (US$0.2) in 2008 compared to a net income per ADS of NT$10.9
in 2007 (retroactively adjusted to account for stock dividends issued in 2008).
Our income tax expense decreased 32.4% to NT$2,268.3 million (US$69.2 million)
in 2008 from NT$3,357.4 million in 2007, primarily due to a decrease in our
pre-tax income.
Year
Ended December 31, 2007 Compared to Year Ended December 31, 2006
Net Revenues.
Net revenues increased 0.7% to NT$101,163.1 million in 2007 from
NT$100,423.6 million in 2006. Packaging revenues increased 2.2% to
NT$78,516.3 million in 2007 from NT$76,820.5 million in 2006. Testing
revenues decreased 6.6% to NT$20,007.8 million in 2007 from NT$21,429.6 million
in 2006. The increase in packaging revenues was primarily due to an
increase in packaging volume. The decrease in testing revenues was
primarily due to a decrease in testing volume. The increase in
packaging volume resulted primarily from increased capacity as a result of new
operations in the PRC acquired in 2007 and the commencement of our operations
for the packaging of memory semiconductors in December 2006. The
increase in packaging volume in 2007 is also attributable to the trend of
increasing outsourcing of the packaging of semiconductor devices. The
decrease in testing
volume resulted primarily from the reduction of our customer base in order to
allow us to focus on higher-margin customers.
Gross
Profit. Gross profit increased
1.1% to NT$29,088.4 million in 2007 from NT$28,780.3 million in
2006. Our gross profit as a percentage of net revenues, or gross
margin, remained largely unchanged in 2007 at 28.8%, versus 28.7% in
2006. Our gross margin for packaging increased to 26.2% in 2007 from
25.1% in 2006. This increase was primarily due to a decrease in raw
material costs as a percentage of net packaging revenues. Our gross
margin for testing decreased to 38.0% in 2007 from 40.7% in 2006. This decrease
was primarily due to an increase in depreciation, partially offset by a decrease
in rental expense, each as a percentage of net testing revenues. Raw
material costs in 2007 were NT$27,913.1 million, compared to NT$29,296.2 million
in 2006. As a percentage of net revenues, raw material costs
decreased to 27.6% in 2007 from 29.2% in 2006, primarily because of a change in
our product mix toward packages requiring less expensive raw
materials. Depreciation, amortization and rental expenses in 2007 was
NT$16,358.7 million, compared to NT$15,096.1 million in 2006. As a
percentage of net revenues, depreciation, amortization and rental expenses
increased to 16.1% in 2007 from 15.0% in 2006.
Operating
Income. Operating income
decreased 5.6% to NT$19,297.2 million in 2007 compared to NT$20,446.4 million in
2006. Operating expenses increased 17.5% to NT$9,791.2 million in 2007 compared
to NT$8,333.9 million in 2006. The increase in operating expenses was
primarily due to increases in general and administrative expense and research
and development expense, partially offset by a decrease in selling
expense. General and administrative expense increased 23.2% to
NT$5,512.9 million in 2007 from NT$4,474.1 million in 2006. This
increase was primarily the result of an increase in salaries and bonuses
expense, primarily as a result of bonuses paid by ASE Test Taiwan under ROC
earnings distribution requirements, and, to a lesser extent, an increase in
professional fees and other expenses in connection with the privatization of ASE
Test. General and administrative expense represented 5.5% of our net revenues in
2007 compared to 4.5% in 2006. Research and development expense
increased 24.8% to NT$3,284.1 million in 2007 from NT$2,632.0 million in
2006. This increase was primarily due to increases in salaries and
bonuses expense, depreciation and amortization and the cost of factory supplies,
each in connection with our new operations in the PRC acquired in 2007. The
research and development expenses of our PRC operations were made with a view
towards qualifying for certain PRC tax incentives. Research and development
expense accounted for 3.2% of our net revenues in 2007 compared to 2.6% in
2006. Selling expense decreased 19.0% to NT$994.2 million in 2007
from NT$1,227.8 million in 2006. This decrease was primarily due to a decrease
in commission and sales fees as a result of our moving certain sales functions
that were previously handled by a third-party sales agent in-house in
2007. Selling expense as a percentage of net revenues decreased to
1.0% in 2007 from 1.2% in 2006. Our operating income as a percentage
of net revenues, or operating margin, decreased to 19.1% in 2007 from 20.4% in
2006, primarily as a result of an increase in operating expenses.
Non-Operating
Income (Expense). We incurred a net
non-operating expense of NT$1,945.3 million in 2007 compared to a net
non-operating income of NT$1,805.0 million in 2006. This overall
decrease was primarily a result of gain on insurance settlement and impairment
recovery in 2006 and, to a lesser extent, impairment losses in 2007, partially
offset by a decrease in 2007 in loss on inventory valuation and obsolescence and
increases in 2007 in net gains on the valuation of financial assets and
liabilities and net foreign exchange gains. In 2006, we recognized
NT$4,574.5 million for gain on insurance settlement and impairment recovery in
connection with the fire at our facilities in Chung Li, Taiwan in May
2005. For more information on the Chung Li fire, see note 30 to our
consolidated financial statements included in this annual report. In
2007, we recognized impairment losses of NT$994.7 million, primarily in
connection with our flip-chip substrate production line, whereas in 2006 we did
not recognize any impairment loss. The impairment of our flip-chip
substrate production line in 2007 was primarily the result of idle capacity
caused by lack of demand for certain applications. We recorded a loss on
inventory valuation and obsolescence of NT$634.4 million in 2007 compared to a
loss on inventory valuation and obsolescence of NT$1,143.9 million in 2006,
which resulted primarily from changes in our customer base in connection with
our strategy of focusing on higher-margin customers. We recorded net
gains on the valuation of financial assets and liabilities and foreign exchange
of NT$580.9 million in 2007 compared to net loss of NT$167.8 million in 2006.
The net gains in 2007 were primarily due to the appreciation of the RMB against
the U.S. dollar and the fact that U.S. dollar liabilities exceed U.S. dollar
assets for our operations in the PRC.
Net
Income. Net
income decreased 30.1% to NT$12,165.3 million in 2007 from NT$17,416.2 million
in 2006. Our net income per ADS decreased to NT$10.9 in 2007 compared to a net
income per ADS of NT$15.7 in 2006
(retroactively adjusted to account for stock dividends issued in 2007 and 2008).
Our income tax expense increased 61.0% to NT$3,357.4 million in 2007 from
NT$2,084.8 million in 2006, primarily due to the use of tax credits, a tax on
undistributed earnings of our domestic subsidiaries and a withholding tax on
dividends imposed on some of our foreign subsidiaries.
Quarterly
Net Revenues, Gross Profit and Gross Margin
The
following table sets forth our unaudited consolidated net revenues, gross profit
and gross margin for the quarterly periods indicated. The unaudited quarterly
results reflect all adjustments, consisting of normal recurring adjustments,
that, in the opinion of management, are necessary for a fair presentation of the
amounts, on a basis consistent with the audited consolidated financial
statements included elsewhere in this annual report. You should read the
following table in conjunction with the audited consolidated financial
statements and related notes included elsewhere in this annual report. Our net
revenues, gross profit and gross margin for any quarter are not necessarily
indicative of the results for any future period. Our quarterly net revenues,
gross profit and gross margin may fluctuate significantly.
|
Quarter
Ended
|
||||||||||||||||||||||||||||||||
|
Jun.
30,
2007 |
Sept.
30,
2007 |
Dec.
31,
2007 |
Mar.
31,
2008 |
Jun.
30,
2008 |
Sept.
30,
2008 |
Dec.
31,
2008 |
Mar.
31,
2009 |
|||||||||||||||||||||||||
|
NT$
|
NT$
|
NT$
|
NT$
|
NT$
|
NT$
|
NT$
|
NT$
|
|||||||||||||||||||||||||
|
(in
millions)
|
||||||||||||||||||||||||||||||||
|
Consolidated
Net Revenues
|
||||||||||||||||||||||||||||||||
|
Packaging
|
18,029.5 | 21,643.6 | 22,560.7 | 19,227.1 | 20,033.3 | 20,126.6 | 14,004.6 | 10,208.0 | ||||||||||||||||||||||||
|
Testing
|
4,724.5 | 5,282.4 | 5,676.9 | 4,894.5 | 5,101.6 | 5,194.9 | 3,830.4 | 2,767.9 | ||||||||||||||||||||||||
|
Others
|
607.9 | 806.9 | 738.0 | 573.1 | 474.8 | 493.6 | 476.4 | 421.1 | ||||||||||||||||||||||||
|
Total
|
23,361.9 | 27,732.9 | 28,975.6 | 24,694.7 | 25,609.7 | 25,815.1 | 18,311.4 | 13,397.0 | ||||||||||||||||||||||||
|
Consolidated
Gross Profit (Loss)
|
||||||||||||||||||||||||||||||||
|
Packaging
|
4,518.6 | 5,918.7 | 6,562.0 | 4,051.0 | 4,224.5 | 4,284.4 | 2,140.2 | 542.9 | ||||||||||||||||||||||||
|
Testing
|
1,632.5 | 2,177.0 | 2,547.1 | 1,810.7 | 1,937.5 | 1,888.7 | 830.5 | 133.9 | ||||||||||||||||||||||||
|
Others
|
252.3 | 334.2 | 149.7 | 325.9 | 350.2 | 456.5 | 229.1 | (18.6 | ) | |||||||||||||||||||||||
|
Total
|
6,403.4 | 8,429.9 | 9,258.8 | 6,187.6 | 6,512.2 | 6,629.6 | 3,199.8 | 658.2 | ||||||||||||||||||||||||
|
Consolidated
Gross Margin
|
||||||||||||||||||||||||||||||||
|
Packaging
|
25.1 | % | 27.3 | % | 29.1 | % | 21.1 | % | 21.1 | % | 21.3 | % | 15.3 | % | 5.3 | % | ||||||||||||||||
|
Testing
|
34.6 | % | 41.2 | % | 44.9 | % | 37.0 | % | 38.0 | % | 36.4 | % | 21.7 | % | 4.8 | % | ||||||||||||||||
|
Overall
|
27.4 | % | 30.4 | % | 32.0 | % | 25.1 | % | 25.4 | % | 25.7 | % | 17.5 | % | 4.9 | % | ||||||||||||||||
Our
results of operations are affected by seasonality. Our first quarter
net revenues have historically decreased over the preceding fourth quarter,
primarily due to the combined effects of holidays in the United States, Taiwan
and elsewhere in Asia. Moreover, the increase or decrease in net revenues of a
particular quarter as compared with the immediately preceding quarter varies
significantly. See “Item 3. Key Information—Risk Factors—Risks Relating to Our
Business—Our operating results are subject to significant fluctuations, which
could adversely affect the market value of your investment.”
Exchange
Rate Fluctuations
For
quantitative and qualitative disclosure of our exposure to foreign currency
exchange rate risk, see “Item 11. Quantitative and Qualitative
Disclosures about Market Risk—Market Risk—Foreign Currency Exchange Rate
Risk.”
Taxation
The
regular corporate income tax rate in the ROC applicable to us is 25%. Effective
January 1, 2010, this rate will change to 20%. Under the ROC Statute of
Upgrading Industries, which gives certain preferential tax treatment to
companies that qualify as operating in a “newly-emerging important and strategic
industry” or “manufacturing industry”, we may apply for tax holidays covering
the portion of our income attributable to eligible machinery and equipment upon
receipt of a cash infusion from our shareholders, including through rights
offerings, if the proceeds of which are used to purchase eligible machinery and
equipment. We may also apply for this tax holiday after the capitalization of
retained earnings through the issuance
of stock dividends. See note 24 to our consolidated financial
statements included in this annual report. As of May 31, 2009, we had six
five-year tax exemptions on income derived from a portion of our operations in
Kaohsiung, Taiwan. Two such exemptions will expire on September 30, 2009 and
December 31, 2013, respectively. We are in the process of applying for the use
of the remaining four exemptions in connection with our operations in Kaohsiung,
Taiwan, following the completion of related capacity expansions. As of May 31,
2009, we had also received two five-year tax exemptions for two cash injections
from our shareholders in connection with our operations in Chung Li, Taiwan.
Both exemptions will expire at the end of 2011.
ASE Test
Taiwan has one five-year tax exemption that will expire at the end of 2010 on
income derived from a portion of its testing operations. ASE Test Taiwan is also
in the process of applying for two additional five-year exemptions
following the completion of related capacity expansions.
PowerASE
has one five-year tax exemption that will expire on September 30, 2012 on income
derived from a portion of its testing and packaging operations. It also plans to
apply for an additional five-year tax exemption following the completion of
related capacity expansions.
Under the
ROC Statute for Upgrading Industries, we are also entitled to tax credits for
the purchase of qualifying manufacturing equipment. The tax credits
were set at 7% for 2006, 2007 and 2008 and are expected to remain at 7% in 2009.
We are also entitled to tax credits set at 30% of the amount spent on qualifying
research and development expenses and employee training expenses. These tax
credits generally expire five years following their respective grants and are
available to reduce 50% of our income taxes payable in the first four years and
100% of such taxes payable in the fifth year, subject to the application of the
Alternative Minimum Tax Act, or AMT Act, discussed below.
In
addition, since we have facilities located in special export zones such as the
Nantze Export Processing Zone in Taiwan, we enjoy exemptions from various import
duties, commodity taxes and sales taxes on imported machinery, equipment, raw
materials and components which are directly used for manufacturing finished
goods. Finished goods produced by companies located in these zones and exported
or sold to others within the zones are exempt from otherwise applicable
commodity or business taxes in Taiwan.
Under the
ROC Income Tax Act, all earnings generated in a year which are not distributed
to shareholders as dividends in the following year will be assessed a 10%
undistributed earnings tax. As a result, if we do not distribute all of our
annual earnings as either cash or stock dividends in the following year, these
undistributed earnings will be subject to the 10% undistributed earnings
tax.
The ROC
government enacted the AMT Act, which became effective on January 1, 2006. The
alternative minimum tax, or AMT, imposed under the AMT Act is a supplemental tax
of 10% of taxable income as defined under the AMT Act, which includes most
income that is exempt from income tax under various legislation such as tax
holidays. If the amount of income tax determined by the AMT Act falls below the
amount of the AMT, any difference should be payable. The AMT rate for business
entities is 10%. However, the AMT Act grandfathered certain tax exemptions
granted prior to the enactment of the AMT Act.
In 2006,
our effective income tax rate increased to 9% primarily due to an increase in
taxable income and the AMT Act, which became effective in that year. In 2007, our effective
income tax rate increased to 19% primarily due to the use of tax credits,
undistributed earnings tax on our domestic subsidiaries and withholding tax on
dividends imposed on some of our foreign subsidiaries. In 2008, our
effective income tax rate increased to 24% due to an increase in the valuation
allowance against the deferred tax assets and a decrease in tax-exempt
income. We believe that our future estimated taxable income will be
sufficient to realize the current and long-term portion of our net deferred tax
assets recorded as of December 31, 2008.
Inflation
We do not
believe that inflation in Taiwan or elsewhere has had a material impact on our
results of operations.
U.S.
GAAP Reconciliation
Our
consolidated financial statements are prepared in accordance with ROC GAAP,
which differ in certain material respects from U.S. GAAP. The following table
sets forth a comparison of our net income and shareholders’ equity in accordance
with ROC GAAP and U.S. GAAP as of and for the periods indicated.
|
As
of and For the Year Ended December 31,
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
(in
millions)
|
||||||||||||||||
|
Net
income:
|
||||||||||||||||
|
ROC
GAAP
|
17,416.2 | 12,165.3 | 6,160.1 | 188.0 | ||||||||||||
|
U.S.
GAAP
|
14,122.7 | 9,931.1 | 5,492.1 | 167.7 | ||||||||||||
|
Total
shareholders’ equity:
|
||||||||||||||||
|
ROC
GAAP
|
77,126.8 | 89,739.9 | 71,960.8 | 2,196.6 | ||||||||||||
|
U.S.
GAAP
|
60,584.1 | 70,101.4 | 65,303.0 | 1,993.4 | ||||||||||||
Note 32
to our consolidated financial statements included in this annual report provides
a description of the significant differences between ROC GAAP and U.S. GAAP as
they relate to us and a reconciliation of net income and shareholders’ equity.
Significant differences between ROC GAAP and U.S. GAAP, include impairment loss
reversal, undistributed earnings tax and compensation expense pertaining to
bonuses to employees, directors and supervisors.
Recent
U.S. GAAP Accounting Pronouncements
On
January 1, 2008, we adopted U.S. SFAS No. 157, “Fair Value Measurements”, or
U.S. SFAS No. 157, which defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value
measurements. U.S. SFAS No. 157 does not require any new fair value
measurements, but provides guidance on how to measure fair value by providing a
fair value hierarchy used to classify the source of the
information. The adoption of U.S. SFAS No. 157 did not have a
material impact on our consolidated financial position and results of
operations.
In
February 2008, the FASB issued FASB Staff Position 157-2, “Effective Date of
FASB Statement No. 157”, or FSP 157-2, which delays the effective date of U.S.
SFAS No. 157 to January 1, 2009 for all non-financial assets and non-financial
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). We
believe that the adoption of the delayed items of U.S. SFAS No. 157 will not
have a material impact on our consolidated financial position or results of
operations.
In
October 2008, the FASB issued FSP 157-3, “Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active”, or FSP 157-3,
which clarifies the application of U.S. SFAS No. 157 in a market that is not
active and provides an example to illustrate key considerations in determining
the fair value of a financial asset when the market for that financial asset is
not active. We believe the adoption of FSP 157-3 will not have a
material impact on our consolidated financial position and results of
operations.
In April
2009, the FASB issued FSP 157-4, “Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly”, or FSP 157- 4, which clarifies
the application of U.S. SFAS No. 157 when there is no active market or where the
price inputs being used represent distressed sales. Additional
guidance is provided regarding estimating the fair value of an asset or
liability (financial and nonfinancial) when the volume and level of activity for
the asset or liability have significantly decreased and identifying transactions
that are not orderly. FSP 157-4 will be effective for interim and
annual periods ending after June 15, 2009. We believe the adoption in
fiscal 2009 will not have a material impact on our consolidated financial
position and results of operations.
In
February 2007, the FASB issued U.S. SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities- Including an Amendment of FASB
Statement No.115”, or U.S. SFAS No. 159. This statement permits
companies to choose to measure eligible items at fair value at specified
election dates and report unrealized gains and losses in earnings at each
subsequent reporting date on items for which the fair value option has been
elected. The objective of this statement is to improve financial
reporting by providing companies with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions. We may
decide whether to elect the fair value option for each eligible item on its
election date, subject to certain requirements described in the
statement. This statement was effective beginning January 1,
2008. We did not elect the fair value option for any eligible
financial asset or liability.
In
December 2007, the FASB issued U.S. SFAS No. 141R, “Business Combination” (“U.S.
SFAS No. 141R”) and U.S. SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements- An Amendment of ARB No. 51”, or U.S. SFAS No.
160. U.S. SFAS No. 141R requires most of the assets acquired and
liabilities assumed in the business combination to be measured at fair value as
of the acquisition date. In addition, the net assets of
non-controlling interests’ share of the acquired subsidiaries should be
recognized at fair value. U.S. SFAS No. 160 requires us to include
non-controlling interests as a separate component of shareholders’ equity,
instead of liability or temporary equity. U.S. SFAS No. 141R was
effective for business combinations consummated on or after January 1, 2009 and
U.S. SFAS No. 160 was effective beginning January 1, 2009. The
adoption of U.S. SFAS No.
141R will
change our accounting treatment for business combinations on a prospective
basis. We believe the adoption of U.S. SFAS No. 160 has no material
impact on our consolidated financial position or results of
operations.
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities - an Amendment of FASB Statement No. 133”, or U.S. SFAS
No. 161, which requires additional disclosures about the objectives of
derivative instruments and hedging activities, the method of accounting for such
instruments under U.S. SFAS No. 133 and its related interpretations, and a
tabular disclosure of the effects of such instruments and related hedged items
on our financial position, financial performance, and cash
flows. U.S. SFAS No. 161 became effective on January 1,
2009. We believe the adoption of U.S. SFAS No. 161 will not have a
material impact on our consolidated financial position or results of
operations.
We have
historically been able to satisfy our working capital needs from our cash flow
from operations. We have historically funded our capacity expansion from
internally generated cash and, to the extent necessary, the issuance of equity
securities and long-term borrowings. If adequate funds are not available on
satisfactory terms, we may be forced to curtail our expansion plans. Moreover,
our ability to meet our working capital needs from cash flow from operations
will be affected by the demand for our packaging and testing services, which in
turn may be affected by several factors. Many of these factors are outside of
our control, such as economic downturns and declines in the prices of our
services caused by a downturn in the semiconductor industry. See “Item 3. Key
Information—Risk Factors—Risks Relating to Our Business—Our operating results
are subject to significant fluctuations, which could adversely affect the market
value of your investment.” The average selling prices of our packaging and
testing services are likely to be subject to further downward pressure in the
future. To the extent we do not generate sufficient cash flow from our
operations to meet our cash requirements, we will have to rely on external
financing.
Net cash
provided by operating activities amounted to NT$30,728.8 million (US$938.0
million) in 2008, primarily as a result of adjusting for non-cash depreciation
and amortization of NT$17,244.9 million (US$526.4 million). Net cash provided by
operating activities amounted to NT$28,310.6 million in 2007, primarily as a
result of adjusting for non-cash depreciation and amortization of NT$16,626.2
million. Net cash provided by operating activities amounted to NT$37,310.8
million in 2006, partially as a result of adjusting for non-cash depreciation
and amortization, and, to a lesser extent, for gain on insurance settlement and
impairment recovery of NT$9,913.8 million. The increase in net cash provided by
operating activities in 2008 compared to 2007 was primarily due to a net
decrease in accounts receivable of NT$12,915.1 million (US$394.2 million) and a
decrease in financial assets for trading of NT$1,108.6 million (US$33.8
million), partially offset by a decrease in net income to NT$6,160.1 million
(US$188.0 million) in 2008 from NT$12,165.3 million in 2007 and a net decrease
in accounts payable of NT$5,006.5
million (US$152.8 million). The decrease in net cash provided by operating
activities in 2007 compared to 2006 was primarily due to a decrease in net
income to NT$12,165.3 million in 2007 from NT$17,416.2 million in 2006 and a net
increase in accounts receivable of NT$9,634.0 million, partially offset by
non-cash gain on insurance settlement and impairment recovery of NT$4,574.5
million in 2006 and a net increase in accounts payable of NT$4,341.3
million.
Net cash
used in investing activities amounted to NT$36,359.2 million (US$1,109.9
million) in 2008, primarily due to the acquisition of our subsidiaries for NT$
26,490.5 million (US$ 808.6 million), the acquisition of property, plant and
equipment, such as machinery and equipment for our packaging, testing and
interconnect materials operations, of NT$ 18,583.3 million (US$567.3 million),
offset by net proceeds from sales of available-for-sale financial assets of
NT$9,021.6 million (US$275.4 million). Net cash used in investing activities
amounted to NT$18,108.4 million in 2007, primarily due to the acquisition of
property, plant and equipment, such as machinery and equipment for our
packaging, testing and interconnect materials operations, of NT$17,190.4
million. Net cash used in investing activities amounted to NT$22,104.5 million
in 2006, primarily due to the acquisition of property, plant and equipment, such
as machinery and equipment for our packaging, testing and interconnect materials
operations, of NT$17,764.2 million and, to a lesser extent, the net increase
acquisition of available-for-sale financial assets of NT$9,134.1 million,
partially offset by proceeds from insurance claims of NT$5,768.0
million.
Net cash
provided by financing activities in 2008 amounted to NT$13,862.4 million
(US$423.2 million). This amount reflected primarily net proceeds from long-term
debts and capital lease obligations of NT$30,162.4 million (US$920.7 million),
which was offset by the issuance of cash dividends of NT$ 8,826.6 million
(US$269.4 million) and repayment of bonds payable of NT$5,550.0 million
(US$169.4 million). Net cash used in financing activities in 2007 amounted to
NT$8,492.7 million. This amount reflected primarily the issuance of cash
dividends of NT$6,669.1 million and a decrease in long-term debts of NT$4,639.5
million, which was partially offset by an increase in short-term borrowings of
NT$3,784.1 million. Net cash used in financing activities in 2006
amounted to NT$12,581.9 million. This amount reflected primarily a decrease in
long-term debts of NT$13,745.7 million.
As of
December 31, 2008, our primary source of liquidity was NT$26,138.9 million
(US$797.9 million) of cash and NT$1,267.3 million (US$38.7 million) of financial
assets—current. Our financial assets—current primarily consisted of quoted
stocks and bond investments. As of December 31, 2008, we had total unused
short-term credit lines of NT$51,041.4 million (US$1,558.0 million), and total
unused long-term credit lines of NT$18,245.9 million (US$557.0 million). As of
December 31, 2008, we had working capital of NT$21,096.2 million (US$644.0
million).
As of
December 31, 2008, we had total borrowings of NT$62,703.7 million (US$1,914.0
million), NT$8,779.3 million (US$268.0 million) of which were short-term
borrowings and NT$53,924.4 million (US$1,646.0 million) of which were long-term
borrowings. The interest rate for borrowings under our short-term borrowings
ranged from 1.50% to 8.59% per year as of December 31, 2008. Our short-term
loans are primarily revolving facilities with a term of one year, each of which
may be extended on an annual basis with lender consent. Our long-term borrowings
consist primarily of bank loans, bonds payable and capital lease obligations. As
of December 31, 2008, we had outstanding long-term borrowings, less current
portion, of NT$51,230.5 million (US$1,563.8 million). As of December 31, 2008,
the current portion of our long-term borrowings was NT$2,693.9 million (US$82.2
million). Our long-term borrowings carried variable interest rates which ranged
between 1.35% and 7.56% per year as of December 31, 2008.
We have
pledged a portion of our assets, with a carrying value of NT$4,355.4 million
(US$132.9 million) as of December 31, 2008, to secure our obligations under our
short-term and long-term facilities.
In March
2008, we entered into a syndicated loan agreement with a banking syndicate led
by Citibank, N.A., Taipei Branch for a NT$24,750.0 million term loan facility,
which we and the lenders subsequently agreed to reduce to NT$17,500.0 million to
afford us more flexibility to request additional loans in the future. As of June
3, 2008, we had drawn down NT$17,500.0 million, the full amount of the facility,
to finance a portion of the consideration for our acquisition, by way of a
scheme of arrangement under Singapore law, of all the outstanding ordinary
shares of ASE Test that we did not already directly or indirectly
own. In May 2008, we entered into an additional syndicated loan
agreement with a banking syndicate led by Citibank, N.A., Taipei Branch for a
US$200.0 million term loan facility, also for the purposes of financing our
acquisition of ASE Test’s outstanding ordinary shares. As of June 4, 2008, we
had drawn down the entire balance of this facility.
In March
2005, ASE Shanghai entered into a US$119.0 million five-year syndicated credit
facility for which the Hongkong and Shanghai Banking Corporation Limited,
Shanghai Branch acted as arranger and agent. We agreed to act as guarantor for
ASE Shanghai. We used US$119 million to refinance exiting credit facilities to
fund our capital expenditure requirements. The facility bears interest at LIBOR
plus 0.75% per annum.
In
January 2004, we issued eleven series of secured non-convertible bonds in the
aggregate principal amount of NT$2.75 billion. These bonds bear semi-annual
interest at floating LIBOR-based rates. We repaid half of the aggregate
principal amount of the bonds in January 2008 and the remaining half in January
2009. Our payment obligations under the bonds were secured by
guarantees provided by syndicate banks pursuant to a guarantee agreement entered
into in December 2003, for which Chinatrust Commercial Bank, Ltd. and The
Hongkong and Shanghai Banking Corporation Limited, Taipei Branch acted as
arrangers. As of December 31, 2008, we had obtained new long term credit lines
payable on a long-term basis to refinance the bonds.
Our
long-term loans and facilities contain various financial and other covenants
that could trigger a requirement for early payment. Among other things, these
covenants require the maintenance of certain financial ratios, such as liquidity
ratio, indebtedness ratio, interest coverage ratio and other technical
requirements. In general, covenants in the agreements governing our existing
debt, and debt we may incur in the future, may materially restrict our
operations,
including our ability to incur debt, pay dividends, make certain investments and
payments, other than in connection with restructurings of consolidated entities,
and encumber or dispose of assets. A default under one debt instrument may also
trigger cross-defaults under our other debt instruments. An event of default
under any debt instrument, if not cured or waived, could have a material adverse
effect on our liquidity, as well as our financial condition and
operations.
We have
on occasion failed to comply with certain financial covenants in some of our
loan agreements. Such non-compliance may also have, through broadly worded
cross-default provisions, resulted in default under some of the agreements
governing our other existing debt. For example, we failed to comply with certain
debt ratios in some of our loan agreements as a result of additional borrowings
to fund our privatization of ASE Test in May 2008 and the distribution of cash
dividends in August 2008. By August 2008, we had either obtained waivers for, or
refinanced on a long-term basis, all of the relevant loans, and as such are not
in default under any of our existing debt. We
cannot assure you that we will be able to remain in compliance with our
financial covenants under our loan agreements. In the event of
default, we may not be able to cure the default or obtain a waiver, and our
operations could be significantly disrupted and harmed. See “Item 3.
Key Information—Risk Factors—Risks Relating to Our Business—Restrictive
covenants and broad default provisions in our existing debt agreements may
materially restrict our operations as well as adversely affect our liquidity,
financial condition and results of operations.”
Our
contingent obligations consist of guarantees provided by us to our subsidiaries.
As of December 31, 2008, we endorsed and guaranteed the promissory notes of our
subsidiaries in the amount of NT$8,468.0 million (US$257.7 million). Other than
such guarantees, we have no other contingent obligations.
We have
made, and expect to continue to make, substantial capital expenditures in
connection with the expansion of our production capacity. The table below sets
forth our principal capital expenditures incurred for the periods
indicated.
|
Year
Ended December 31,
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
(in
millions)
|
||||||||||||||||
|
Machinery
and equipment
|
13,491.2 | 14,592.8 | 12,312.5 | 375.8 | ||||||||||||
|
Building
and improvements
|
4,239.7 | 3,579.4 | 4,311.2 | 131.6 | ||||||||||||
We have
budgeted capital expenditures of approximately US$150 million for 2009,
primarily to purchase machinery and equipment in connection with the expansion
of our packaging and testing operations. We may adjust the amount of our capital
expenditures upward or downward based on market conditions, the progress of our
expansion plans and cash flow from operations. Due to the rapid changes in
technology in the semiconductor industry, we frequently need to invest in new
machinery and equipment, which may require us to raise additional capital. We
cannot assure you that we will be able to raise additional capital should it
become necessary on terms acceptable to us or at all. See “Item 3. Key
Information—Risk Factors—Risks Relating to Our Business—Because of the highly
cyclical nature of our industry, our capital requirements are difficult to plan.
If we cannot obtain additional capital when we need it, our growth prospects and
future profitability may be adversely affected.”
We
believe that our existing cash, marketable securities, expected cash flow from
operations and existing credit lines under our loan facilities will be
sufficient to meet our capital expenditures, working capital, cash obligations
under our existing debt and lease arrangements, and other requirements for at
least the next twelve months. We currently hold cash primarily in
U.S. dollars, New Taiwan dollars, Malaysian ringgit, Chinese yuan, Japanese yen
and Korean won. As of December 31, 2008, we had contractual obligations of
NT$45,935.1 million (US$1,402.2 million) due in the next three years. We
currently expect to meet our payment obligations through the expected cash flow
from operations, long-term borrowings and the issuance of additional equity or
equity-linked securities. We will continue to evaluate our capital structure and
may decide from time to time to increase or decrease our financial leverage
through equity offerings or borrowings. The issuance of additional equity or
equity-linked securities may result in additional dilution to our
shareholders.
From time
to time, we evaluate possible investments, acquisitions or divestments and may,
if a suitable opportunity arises, make an investment, acquisition or
divestment.
Our
treasury team, under the supervision of our chief financial officer, is
responsible for setting our funding and treasury policies and objectives. Our
exposure to financial market risks relate primarily to changes in interest rates
and foreign currency exchange rates. To mitigate these risks, we utilize
derivative financial instruments, the application of which is primarily to
manage these exposures, and not for speculative purposes.
We have,
from time to time, entered into interest rate swap transactions to hedge our
interest rate exposure. As of December 31, 2008, we had NT$13,375.0 million
(US$408.3 million) outstanding in interest rate swap contracts. See “Item 11.
Quantitative and Qualitative Disclosures about Market Risk—Market Risk—Interest
Rate Risk.” We have entered into swap contracts and forward exchange contracts
to hedge our existing assets and liabilities denominated in foreign currencies
and identifiable foreign currency purchase commitments. As of December 31, 2008,
we had US$ 154.5 million outstanding in swap contracts and US$130.0 million
outstanding in forward contracts. In October 2003, we entered into
cross-currency swap contracts to hedge against exchange rate fluctuations in
connection with our US$200.0 million zero coupon convertible bonds due 2008, of
which US$15.0 million were repurchased in the market in April 2005. The final
outstanding amount under these contracts expired in October 2007, and we have
subsequently entered into a number of smaller, monthly cross-currency swap
contracts. As of December 31, 2008, we had no outstanding cross-currency swap
contracts. See “Item 11. Quantitative and Qualitative Disclosures about Market
Risk” and note 5 and note 26 to our consolidated financial statements included
in this annual report.
For 2006,
2007 and 2008, our research and development expenditures totaled approximately
NT$2,632.0 million, NT$3,284.1 million and NT$3,876.8 million (US$118.3
million), respectively. These expenditures represented approximately 2.6%, 3.2%
and 4.1% of net revenues in 2006, 2007 and 2008, respectively. We have
historically expensed all research and development costs as incurred and none is
currently capitalized. As of April 30, 2009, we employed 2,212 employees in
research and development.
Packaging
We
centralize our research and development efforts in packaging technology in our
Kaohsiung, Taiwan facilities. After initial phases of development, we conduct
pilot runs in one of our facilities before new technologies or processes are
implemented commercially at other sites. Facilities with special product
expertise, such as ASE Korea, also conduct research and development of these
specialized products and technologies at their sites. One of the areas of
emphasis for our research and development efforts is improving the efficiency
and technology of our packaging processes and these efforts are expected to
continue. We are also putting significant research and development efforts into
the development and adoption of innovative technology. We work closely with
manufacturers of our packaging equipment and materials in designing and
developing the equipment and materials used in
our production process. We also collaborate with our significant customers to
co-develop new product and process technologies.
In
addition to investing in the development of advanced package assembly technology
and improving production efficiency, a significant portion of our research and
development efforts is focused on the development of advanced substrate
production technology for BGA packaging. Substrate is the principal raw material
for BGA packages. Development and production of advanced substrates involve
complex technology and, as a result, high quality substrates are currently
available only from a limited number of suppliers, located primarily in Japan.
We believe that our successful development of substrate production capability
has, among other things, enabled us to capture an increasingly important
value-added component of the packaging process, helped ensure a stable and
cost-effective supply of substrates for our BGA packaging operations and
shortened time to market.
Testing
Our
research and development efforts in the area of testing have focused primarily
on improving the efficiency and technology of our testing processes. These
efforts include developing software for parallel testing of logic
semiconductors, rapid
automatic generation and cross-platform conversion of test programs to test
logic/mixed-signal/RF semiconductors, automatic code generation for converting
and writing testing programs, testing new products using existing machines and
providing customers remote access to monitor test results. We are also
continuing
the development of interface designs to provide for high-frequency testing by
minimizing electrical noise. We work closely with our customers in designing and
modifying testing software and with equipment vendors to increase the efficiency
and reliability of testing equipment. Our research and development operations
also include a mechanical engineering group, which currently designs handler
kits for semiconductor testing and wafer probing, as well as software to
optimize capacity utilization.
There are
no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.
The
following table sets forth the maturity of our contractual obligations as of
December 31, 2008.
|
Payments
Due by Period
|
||||||||||||||||||||
|
Total
|
Under
1 Year
|
1
to 3 Years
|
3
to 5 Years
|
After
5 Years
|
||||||||||||||||
|
NT$
|
NT$
|
NT$
|
NT$
|
NT$
|
||||||||||||||||
|
(in
millions)
|
||||||||||||||||||||
|
Contractual
Obligations:
|
||||||||||||||||||||
|
Long-term
debt(1)
|
53,885.4 | 8,512.4 | 35,586.8 | 9,786.2 | — | |||||||||||||||
|
Capital
lease obligations(2)
|
39.0 | 23.1 | 15.6 | 0.3 | — | |||||||||||||||
|
Operating
leases(3)
|
673.7 | 287.0 | 253.5 | 73.5 | 59.7 | |||||||||||||||
|
Purchase
obligations(4)
|
1,256.7 | 1,256.7 | — | — | — | |||||||||||||||
|
Total(5)(6)(7)(8)
|
55,854.8 | 10,079.2 | 35,855.9 | 9,860.0 | 59.7 | |||||||||||||||
|
(1)
|
Excludes
interest payments.
|
|
(2)
|
Represents
our commitments under property leases less imputed interest. These
obligations are recorded on our consolidated balance
sheets.
|
|
(3)
|
Represents
our commitments under leases for land, machinery and equipment such as
testers, and office buildings and equipment. See note 29 to our
consolidated financial statements included in this annual
report.
|
|
(4)
|
Represents
unpaid commitments for construction. These commitments are not recorded on
our consolidated balance sheets as of December 31, 2008. See note 29 to
our consolidated financial statements included in this annual report.
Total commitments for construction of buildings were approximately
NT$1,532.0 million (US$46.8 million), of which NT$275.3 million (US$8.4
million) had been paid as of December 31,
2008.
|
|
(5)
|
Excludes
non-binding commitments to purchase machinery and equipment of
approximately NT$2,243.0 million (US$68.5 million), of which NT$27.6
million (US$0.8 million) had been paid as of December 31, 2008. See note
29 to our consolidated financial statements included in this annual
report.
|
|
(6)
|
Excludes
payments that vary based upon our net sales or sales volume, such as
commissions, service fees and royalty payments for technology license
agreements. Royalty expenses in 2008 were approximately NT$199.2 million
(US$6.1 million). See note 29 to our consolidated financial statements
included in this annual report.
|
|
(7)
|
Excludes
our minimum pension funding requirements since such amounts have not been
determined. Under defined benefit pension plans, we made pension
contributions of approximately NT$485.2 million in 2007 , NT$ 153.4
million (US$ 4.7 million) in 2008, and we estimate that we will contribute
approximately NT$147.8 million (US$4.5 million) in 2009. See “—Operating
Results and Trend Information—Critical Accounting Policies and Estimates”
and note 20 to our consolidated financial statements included in this
annual report.
|
|
(8)
|
We
recognized additional long term taxes payable of NT$19.8 million (US$ 0.6
million) and accrued interest and penalties of NT$17.4 million (US$ 0.5
million)related to uncertain tax positions in the year ended
December 31, 2008. At that time, we were unable to make a reasonably
reliable estimate of the timing of payments in individual years beyond 12
months due to uncertainties in the timing of the outcome of the tax
audits.
|
Directors
Our board
of directors is elected by our shareholders in a general meeting at which a
quorum, consisting of a majority of all issued and outstanding common shares, is
present. The chairman is elected by the board from among the directors. Our
seven-member board of directors is responsible for the management of our
business.
The term
of office for our directors is three years from the date of election. The
current board of directors began serving on June 22, 2006. The terms
of the current directors expire on June 21, 2009. We plan to reelect
nine new directors, including two independent directors, at our upcoming
shareholders’ meeting on June 25, 2009. The final directors’ list will be
confirmed by way of a resolution passed at this shareholders’
meeting. Directors may serve any number of consecutive terms and may
be removed from office at any time by a resolution adopted at a meeting of
shareholders. Normally, all board members are elected at the same time, except
where the posts of one-third or more of the directors are vacant, at which time
a special meeting of shareholders shall be convened to elect directors to fill
the vacancies. We and our subsidiaries do not have service contracts with our
directors that provide for benefits upon termination of employment.
Our board
of directors established an audit committee on July 22, 2005 to satisfy the
requirements of Rule 10A-3 under the Exchange Act. The audit committee is
appointed by the board of directors and currently consists of Alan Cheng, who is
independent under Rule 10A-3 and financially literate with accounting or related
financial management expertise. The audit committee has
responsibility for, among other things, overseeing the qualifications,
independence and performance of our independent auditors and the integrity of
our financial statements.
The
following table sets forth information regarding all of our directors as of May
31, 2009.
|
Name
|
Position
|
Director
Since
|
Age
|
Other
Significant
Positions
Held Outside of the ASE Group
|
||||
|
Jason
C.S. Chang(1)
|
Director,
Chairman and Chief Executive Officer
|
1984
|
64
|
Director
of Universal Scientific
|
||||
|
Richard
H.P. Chang(1)
|
Director,
Vice Chairman and President
|
1984
|
62
|
Chairman
of Universal Scientific
|
||||
|
Tien
Wu(2)
|
Director
and Chief Operating Officer
|
2003
|
51
|
None
|
||||
|
Joseph
Tung(2)
|
Director,
Chief Financial Officer and Vice President
|
1997
|
50
|
Supervisor
of Universal Scientific; Independent director of Ta Chong Bank
Ltd.
|
||||
|
Raymond
Lo(2)
|
Director
and General Manager, Kaohsiung packaging facility
|
2006
|
55
|
None
|
|
Jeffrey
Chen(2)
|
Director
and Vice President
|
2003
|
45
|
Director
of Universal Scientific
|
||||
|
Alan
Cheng
|
Director
|
2005
|
63
|
Director
of Hung Ching
|
|
(1)
|
Jason
C.S. Chang and Richard H.P. Chang are
brothers.
|
|
(2)
|
Representative
of ASE Enterprises, a company organized under the laws of Hong Kong, which
held 17.12% of our outstanding common shares as of May 31, 2009. All of
the outstanding shares of ASE Enterprises are held by a company organized
under the laws of the British Virgin Islands in trust for the benefit of
the family of our Chairman and Chief Executive Officer, Jason C.S. Chang,
who is the sole shareholder and director of that
company.
|
Supervisors
We
currently have five supervisors, each serving a three-year term. The
current supervisors began serving on June 22, 2006, and their terms will expire
on June 21, 2009. We
plan to reelect five new supervisors at our upcoming shareholders’ meeting on
June 25, 2009. The final supervisors’ list will be confirmed by way
of a
resolution
passed at this shareholders’ meeting. The supervisors’ duties and
powers include investigation of our business condition, inspection of our
corporate records, verification and review of financial statements presented by
our board of directors at shareholders’ meetings, convening of shareholders’
meetings, representing us in negotiations with our directors and notification,
when appropriate, to the board of directors to cease acting in contravention of
any applicable law or regulation, our Articles of Incorporation or the
resolutions of our shareholders’ meeting. Each supervisor is elected by our
shareholders and cannot concurrently serve as a director, managerial officer or
other staff member. The ROC Company Law requires at least one supervisor be
appointed at all times, or two supervisors for a company with publicly issued
equity shares, and that a supervisor’s term of office be no more than three
years.
The
following table sets forth information regarding all of our supervisors as of
May 31, 2009.
|
Name
|
Position
|
Supervisor
Since
|
Age
|
Other
Significant
Positions
Held Outside of the ASE Group
|
||||
|
Feng
Mei-Jean(1)
|
Supervisor
|
1984
|
54
|
None
|
||||
|
Samuel
Liu(2)
|
Supervisor
|
2005
|
61
|
Chief
Executive Officer and director of Universal Scientific
|
||||
|
Tien-Szu
Chen(2)
|
Supervisor
|
2006
|
47
|
None
|
||||
|
John
Ho(2)
|
Supervisor
|
1998
|
54
|
Director
of Universal Scientific
|
||||
|
Yen-Yi
Tseng(2)
|
Supervisor
|
2000
|
67
|
Chairman
of Hung Ching
|
|
(1)
|
Feng
Mei-Jean is the wife of Richard H.P.
Chang.
|
|
(2)
|
Representative
of ASE Test Taiwan.
|
In
accordance with ROC law, each of our directors and supervisors is elected either
in his or her capacity as an individual or as an individual representative of a
corporation or government. Persons designated to represent corporate or
government shareholders as directors are typically nominated by such
shareholders at the annual general meeting and may be replaced as
representatives by such shareholders at will. Of the current directors and
supervisors, four represent ASE Enterprises and four represent ASE Test
Taiwan. The remaining directors and supervisors serve in their
capacity as individuals.
Executive
Officers
The
following table sets forth information regarding all of our executive officers
as of May 31, 2009.
|
Name
|
Position
|
Years
with
the
Company
|
Age
|
|||
|
Jason
C.S. Chang
|
Chairman
and Chief Executive Officer
|
25
|
64
|
|||
|
Richard
H.P. Chang
|
Vice
Chairman and President
|
25
|
62
|
|||
|
Tien
Wu
|
Chief
Operating Officer; Chief Executive Officer, ISE Labs
|
9
|
51
|
|
Joseph
Tung
|
Chief
Financial Officer and Vice President
|
14
|
50
|
|||
|
Raymond
Lo
|
President,
ASE Test Taiwan; General Manager, Kaohsiung packaging
facility
|
23
|
55
|
|||
|
Tien-Szu
Chen
|
President,
PowerASE
|
21
|
47
|
|||
|
Chih-Chiang
Lee
|
President,
ASESH AT
|
22
|
47
|
|||
|
Chun-Che
Lee
|
President,
ASE Shanghai
|
25
|
49
|
|||
|
Une
Bae
|
President,
ASE Korea
|
11
|
52
|
|||
|
Nobukatsu
Manabe
|
President,
ASE Japan
|
5
|
65
|
|||
|
Kwai
Mun Lee
|
President,
ASE South-East Asia operations
|
11
|
46
|
Biographies
of Directors, Supervisors and Executive Officers
Jason C.S. Chang has served
as Chairman of ASE Inc. since its founding in March 1984 and as its Chief
Executive Officer since May 2003. He holds a degree in electrical engineering
from National Taiwan University and
a
master’s degree from the Illinois Institute of Technology. He is the brother of
Richard H.P. Chang, our Vice Chairman and President.
Richard H.P. Chang has served
as Vice Chairman of ASE Inc. since November 1999 after having served as
President of ASE Inc. since its founding in March 1984, and served as Chief
Executive Officer of ASE Inc. from July 2000 to April 2003. In February 2003, he
was again appointed President of ASE Inc. upon the retirement of Mr. Leonard Y.
Liu. He holds a degree in industrial engineering from Chung Yuan Christian
University of Taiwan. He is the brother of Jason C.S. Chang, our Chairman and
Chief Executive Officer.
Tien Wu has served as a
director of ASE Inc. since June 2003 and Chief Operating Officer since April
2006, prior to which he served as the President of Worldwide Marketing and
Strategy of the ASE Group. Prior to joining ASE Inc. in March 2000, Mr. Wu held
various managerial positions with IBM. He holds a B.S.C.E. degree from the
National Taiwan University, a M.S. degree in mechanical engineering and a Ph.D.
in applied mechanics from the University of Pennsylvania.
Joseph Tung has served as a
director of ASE Inc. since April 1997 and Chief Financial Officer since December
1994. Before joining ASE Inc., Mr. Tung was a Vice President at Citibank, N.A.
He received a degree in economics from the National Chengchi University of
Taiwan and a master’s degree in business administration from the University of
Southern California.
Raymond Lo has served as a
director of ASE Inc. and General Manager of our packaging facility in Kaohsiung,
Taiwan since April 2006. Mr. Lo also served as a supervisor of ASE
Inc. between July 2000 and April 2006. Before joining ASE Inc., Mr.
Lo was the Director of Quality Assurance at Zeny Electronics Co. He holds a
degree in electronic physics from the National Chiao-Tung University of
Taiwan.
Jeffrey Chen has served as a
director of ASE Inc. since June 2003. He is also a Vice President of ASE Inc.
Prior to joining the ASE Group, he worked in the corporate banking department of
Citibank, N.A. in Taipei and as a Vice President of corporate finance at Bankers
Trust in Taipei. He holds a degree in finance and economics from Simon Fraser
University in Canada and a master’s degree in business administration from the
University of British Columbia in Canada.
Alan Cheng has served as a
director of ASE Inc. since June 2005 and is the Chairman of H.R. Silvine
Electronics, Inc. as well as a director of Hung Ching Development &
Construction Co., Ltd., an affiliate of ours. Mr. Cheng holds a degree in
industrial engineering from Chung Yuan Christian University in Taiwan and a
master’s degree in industrial engineering from Rhode Island
University.
Feng Mei-Jean has served as a
supervisor of ASE Inc. since March 1984. She holds a degree in economics from
National Taiwan University. She is the wife of Richard H.P. Chang, our Vice
Chairman and President.
Samuel Liu has served as a
supervisor of ASE Inc. since May 2005. He is currently the Chief Executive
Officer and a director for Universal Scientific Industrial, Inc., an affiliated
company of ASE Inc. Mr. Liu has worked in the electronics industry for over 30
years in various technical and management roles. He holds a B.S.E.E. from
National Taiwan University and a Ph.D. in material science from Stanford
University.
Tien-Szu Chen has served as a
supervisor of ASE Inc. since June 2006. Mr. Chen holds a bachelor’s degree in
industrial engineering from Chung Yuan Christian University in
Taiwan.
John Ho has served as a
supervisor of ASE Inc. since April 1998. He is also a director of Universal
Scientific. He served as Chief Financial Officer of ASE Inc. from 1988 until
1995. He holds a degree in business administration from National Taiwan
University and a master’s degree in business administration from the University
of Iowa.
Yen-Yi Tseng has served as a
supervisor of ASE Inc. since July 2000 and Chairman of Hung Ching since July
2002. Mr. Tseng served as President of Ret-Ser Engineering Agency from 1991 to
1998. He holds a degree in civil engineering from National Taiwan University and
a master’s degree in system engineering from Asian Institute of Technology in
Thailand. He was also a participant in the Program for Management Development at
Harvard Business School.
Chih-Chiang Lee has served as
a President of ASESH AT since 2007 prior to which he has occupied various
managing positions at ASE Inc. since 1988. Mr. Lee holds a degree in
engineering management from National Tsing Hua University in
Taiwan.
Chun-Che Lee has served as a
President of ASE Shanghai since July 2005. Mr. Lee has also served as a
President of R&D of ASE Inc., prior to which he was a vice president,
director and manager of research and development at ASE Inc. since
1984. Mr. Lee holds a degree in Aeronautic from the Tamkung
University of Taiwan.
Ung Bae has served as
President of ASE Korea since July 2008, after serving as Senior Vice President
of ASE Korea since July 1999. Mr. Bae was Vice President of Motorola
Korea, Limited before joining ASE Korea when we acquired Motorola Korea,
Limited. He holds a degree in electronic engineering from the In-Ha
university of Korea.
Nobukatsu Manabe has served
as President of ASE Japan since May 2004. Prior to this appointment, he served
as Executive Officer of Yamaguchi NEC and Yamagata NEC Co., Ltd. after occupying
various managing positions within the NEC Group including positions in the
United Kingdom and Singapore. He holds a bachelors of Science in
Physics from Kyushu University of Japan.
Kwai Mun Lee has served as
President of our Southeast Asia operations, with responsibility for the
operations of our Penang, Malaysia and Singapore manufacturing facilities, since
March 2006. Before joining the ASE Group, Mr. Lee held senior management
positions at Chartered Semiconductor and STATSChipPAC. He started his career as
an engineer at Intel. He holds a degree in engineering from the Swinburne
Institute of Technology in Australia.
The
business address of our directors, supervisors and executive officers is our
registered office.
In 2008,
we paid to our directors, supervisors and executive officers approximately
NT$335.3 million (US$10.2 million) in cash remuneration and 2,400,528 shares in
stock bonuses. We did not pay any remuneration in kind to our directors,
supervisors or executive officers in 2008. In 2008, we accrued pension costs of
NT$74.2 million (US$2.3 million) for retirement benefits for our management. The
remuneration of our independent directors is set at NT$ 2.0 million per person
per year. As of May 31, 2009, we had not appointed any independent directors. In
addition, according to our Articles of Incorporation, not more than two percent
of our annual net earnings (after recovering any losses incurred in prior years
and deducting the legal reserve and special reserve provisions, if any) may be
distributed as bonuses to our directors. 7% to 10% of our annual net earnings
(after recovering any losses incurred in prior years and deducting the legal
reserve and special reserve provisions, if any) may be distributed as a bonus to
employees, including executive officers.
We have
not provided any loans to or guarantees for the benefit of any of our directors,
supervisors or executive officers. For information regarding our
pension and other retirement plans and those of our subsidiaries, see note 20 to
our consolidated financial statements included in this annual
report.
ASE
Inc. Employee Bonus and Stock Option Plans
We award
bonuses to employees of ASE Inc. and its subsidiaries who are located in Taiwan
based on overall income and individual performance targets. Prior to
2009, these employees were eligible to receive bonuses in the form of our common
shares valued at par. Beginning in 2009, employees are eligible to
receive bonuses in the form of our common shares valued at the closing price of
the common shares on the day prior to our shareholders’
meeting. Actual amounts of bonuses to individual employees are
determined based upon the employee meeting specified individual performance
objectives. We did not grant any bonuses or stock options in 2006. In
2007, we granted an aggregate of 53,502,850 common shares as stock bonuses with
an aggregate value of NT$535.0 million. At our annual shareholders’ meeting held
on June 28, 2007, our shareholders, in addition to approving such stock bonus,
also approved NT$535.0 million as cash bonuses to employees. In 2008, we granted
an aggregate of 38,320,500 common shares as stock bonuses with an aggregate
value of NT$ 383.2 million. At our annual shareholders’ meeting held on June 19,
2008, our shareholders, in addition to approving such stock bonuses, also
approved
NT$ 383.2 million as cash bonuses to employees. In 2009, our directors proposed
a distribution of NT$554.4 million as cash bonuses to employees. The
proposal is still awaiting shareholders’ approval.
We
currently maintain three option plans, adopted in 2002, 2004 and
2007. Pursuant to these plans, our full-time employees as well as the
full-time employees of our domestic and foreign subsidiaries are eligible to
receive stock option grants. Each option entitles the holder to purchase one ASE
Inc. common share at a price equal to the closing market price on the date of
the option issuance, such exercise price being subject to retroactive adjustment
in the event of certain capital transactions in subsequent periods. Each option
is exercisable upon vesting for five years. Forty percent of the options
originally granted vest upon the second anniversary of the grant date, and an
additional 10% of the options originally granted vest every six months
thereafter. Each option expires at the end of the 10th year following its grant
date. The options are generally not transferable. As of December 31, 2008, a
total of 159,968,000 options had been granted under the 2002 plan, 145,989,000
of which had an original exercise price of NT$20.80 per share (currently
adjusted to NT$10.30 per share) and 13,979,000 of which had an original exercise
price of NT$24.60 per share (currently adjusted to NT$14.30 per share). As of
December 31, 2008, a total of 139,917,000 options had been granted under the
2004 plan, 124,917,000 of which had an original exercise price of NT$26.60 per
share (currently adjusted to NT$18.90 per share) and 15,000,000 of which had an
original exercise price of NT$20.55 per share (currently adjusted to NT$15.40
per share). As of December 31, 2008, a total of 185,806,000 options
had been granted under the 2007 plan. The original exercise price
under the 2007 plan was NT$30.65 per share (currently adjusted to NT$29.60 per
share).
ASE
Test Share Option Plans
On May
30, 2008, we acquired, by way of a scheme of arrangement under Singapore law,
all the outstanding ordinary shares of ASE Test that we did not already directly
or indirectly own, making ASE Test our wholly-owned subsidiary. Upon the
effectiveness of this transaction on May 30, 2008, each ASE Test option
exercisable for ASE Test ordinary shares (whether or not vested) that had a per
share exercise price lower than US$14.78 was deemed to have been exercised by
ASE Test on behalf of the option holder on a cashless basis. We then
acquired these newly issued ASE Test ordinary shares for US$14.78 per share in
cash. As a result, each of these option holders received a cash
payment per share equal to the excess of US$14.78 over the per share exercise
price of their options, less any interest, fees and charges. Each ASE
Test option that had a per share exercise price equal to or higher than US$14.78
was cancelled without any payment to the option holder. See “Item 4.
Information on the Company—History and Development of the Company—ASE Test Share
Acquisition and Privatization.”
ASE
Mauritius Inc. Share Option Plans
As of
December 31, 2008, ASE Mauritius Inc. maintained one option plan adopted in
2007. Under this plan, certain employees of ASE Mauritius Inc. and the ASE Group
are granted options to purchase ordinary shares of ASE Mauritius Inc. at an
exercise price of US$1.70, which exercise price was determined by taking into
account a fairness opinion rendered by an independent appraiser and was reviewed
by our accountants. Each option is exercisable
upon vesting for five years and expires after 10 years. As of December 31, 2008,
a total of 30,000,000 options had been granted under this plan with an exercise
price of US$1.70.
The
following table sets forth, for the periods indicated, certain information
concerning our employees for the dates indicated.
|
As
of December 31,
|
||||||||||||
|
2006
|
2007
|
2008
|
||||||||||
|
Total
|
26,986 | 29,942 | 26,977 | |||||||||
|
Function
|
||||||||||||
|
Direct
labor
|
16,321 | 17,172 | 15,114 | |||||||||
|
Indirect
labor (manufacturing)
|
6,614 | 7,321 | 6,704 | |||||||||
|
Indirect
labor (administration)
|
2,227 | 2,992 | 2,922 | |||||||||
|
Research
and development
|
1,824 | 2,457 | 2,237 | |||||||||
|
Location
|
||||||||||||
|
As
of December 31,
|
||||||||||||
|
2006
|
2007
|
2008
|
||||||||||
|
Taiwan
|
19,145 | 18,614 | 16,291 | |||||||||
|
Malaysia
|
2,259 | 2,558 | 2,324 | |||||||||
|
PRC
|
1,972 | 5,187 | 4,846 | |||||||||
|
Korea
|
1,851 | 1,859 | 1,826 | |||||||||
|
Japan
|
1,020 | 1,009 | 974 | |||||||||
|
Singapore
|
392 | 371 | 380 | |||||||||
|
United
States
|
347 | 344 | 336 | |||||||||
The
reduction in our employee count in 2008 arose primarily as a response to the
global economic crisis in late 2008, which severely affected the entire
semiconductor industry. In November 2008, we implemented a series of
cost reduction measures, including layoffs, reductions in salary and/or overtime
compensation for certain employees and unpaid leave and early retirement
programs. In April 2009, demand for our services began to recover and
we suspended most of these cost reduction measures.
Eligible
employees may participate in our employee share bonus plan and stock option
plans and ASE Mauritius Inc’s share option plans. See “—Compensation—ASE Inc.
Employee Bonus and Stock Option Plans” and “—Compensation—ASE Mauritius Inc.
Share Option Plans.” See also note 22 to our consolidated financial statements
included in this annual report.
With the
exception of ASE Korea’s employees, our employees are not covered by any
collective bargaining arrangements. We believe that our
relationship with our employees is good.
The
following table sets forth certain information with respect to our common shares
and options exercisable for our common shares held by our directors, supervisors
and executive officers as of April 30, 2009.
|
Director,
Supervisor or Executive Officer
|
Number
of ASE Inc. Common Shares Held
|
Percentage
of Total ASE Inc. Common Shares Issued and
Outstanding
|
Number
of
Options
Held(1)
|
Exercise
Price of Options (NT$)
|
Expiration
Date
of
Options
|
||||||
|
Jason
C.S. Chang
|
57,544,012
|
(2) |
1.04%
|
11,180,000
|
10.30–29.60
|
12/24/2012–12/19/2017
|
|||||
|
Richard
H.P. Chang
|
73,453,840
|
1.32%
|
6,770,000
|
10.30–29.60
|
12/24/2012–12/19/2017
|
||||||
|
Tien
Wu
|
1,622,856
|
0.03%
|
*
|
10.30–29.60
|
12/24/2012–12/19/2017
|
||||||
|
Joseph
Tung
|
2,612,582
|
0.05%
|
*
|
10.30–29.60
|
12/24/2012–12/19/2017
|
||||||
|
Raymond
Lo
|
1,332,458
|
0.02%
|
*
|
10.30–29.60
|
12/24/2012–12/19/2017
|
||||||
|
Jeffrey
Chen
|
927,964
|
0.02%
|
*
|
14.30–29.60
|
08/22/2013–12/19/2017
|
||||||
|
Alan
Cheng
|
452,494
|
0.01%
|
*
|
29.60
|
12/19/2017
|
||||||
|
Feng
Mei-Jean
|
86,928,008
|
1.57%
|
200,000
|
29.60
|
12/19/2017
|
||||||
|
Samuel
Liu
|
68,277
|
0.00%
|
*
|
18.90
|
06/30/2014
|
||||||
|
Tien-Szu
Chen
|
355,391
|
|
0.01%
|
*
|
|
10.30–29.60
|
12/24/2012–12/19/2017
|
||||
|
John
Ho
|
1,366,106
|
|
0.02%
|
*
|
|
10.30–29.60
|
12/24/2012–12/19/2017
|
||||
|
Yen-Yi
Tseng
|
195,526
|
0.00%
|
*
|
18.90–29.60
|
06/30/2014–12/19/2017
|
||||||
|
Chih-Chiang
Lee
|
589,395
|
0.01%
|
*
|
10.30–29.60
|
12/24/2012–12/19/2017
|
||||||
|
Chun-Che
Lee
|
2,112,470
|
0.04%
|
*
|
10.30–29.60
|
12/24/2012–12/19/2017
|
||||||
|
Ung
Bae
|
0
|
0.00%
|
*
|
10.30–29.60
|
12/24/2012–12/19/2017
|
||||||
|
Nobukatsu
Manabe
|
30,867
|
0.00%
|
*
|
18.90–29.60
|
06/30/2014–12/19/2017
|
||||||
|
Kwai
Mun Lee
|
0
|
0.00%
|
*
|
14.30–29.60
|
08/22/2013–12/19/2017
|
|
(1)
|
Each
option covers one of our common
shares.
|
|
(2)
|
In
addition to holding 1.04% of our common shares directly, Jason C.S. Chang
is the sole shareholder and director of a company that holds all the
outstanding shares of ASE Enterprises, which holds 17.12% of our common
shares. See “Item 7. Major Shareholders and Related Party
Transactions—Major Shareholders.”
|
|
*
|
The
sum of the number of common shares held and the number of common shares
issuable upon exercise of all options held is less than 1% of our total
outstanding common shares.
|
The
following table sets forth information known to us with respect to the
beneficial ownership of our common shares, as of April 30, 2009, by each
shareholder known by us to beneficially own more than 5% of our outstanding
common shares and all directors, supervisors and executive officers as a
group.
|
Common
Shares Beneficially Owned
|
||||||||
|
Name
of Shareholder or Group
|
Number
|
Percentage
|
||||||
|
ASE
Enterprises(1)
|
949,483,271 | 17.1% | ||||||
|
Directors,
supervisors and executive officers as a group(2)
|
1,179,075,517 | 21.3% | ||||||
|
(1)
|
ASE
Enterprises is a company organized under the laws of Hong Kong. All of the
outstanding shares of ASE Enterprises are held by a company organized
under the laws of the British Virgin Islands in trust for the benefit of
the family of our Chairman and Chief Executive Officer, Jason C.S. Chang,
who is the sole shareholder and director of that
company.
|
|
(2)
|
Includes
shareholding of ASE Enterprises.
|
The
following table sets forth information relating to our common shares held
directly by our consolidated subsidiaries and unconsolidated affiliates as of
May 31, 2009.
|
Common
Shares Beneficially Owned
|
||||||||
|
Name
of Shareholder
|
Number
|
Percentage
|
||||||
|
ASE
Test Taiwan(1)
|
986,223 | 0.02% | ||||||
|
Hung
Ching(2)
|
61,230,021 | 1.1% | ||||||
|
J&R
Holding Limited(3)
|
109,770,444 | 2.0% | ||||||
|
(1)
|
ASE
Test Taiwan was our 99.99%-owned subsidiary as of May 31,
2009.
|
|
(2)
|
As
of May 31, 2009, we held 26.2% of the outstanding shares of Hung Ching.
See “Item 4. Information on the Company—Organizational
Structure—Our Unconsolidated
Affiliates.”
|
|
(3)
|
J&R
Holding Limited is our wholly-owned subsidiary. J&R Holding
Limited’s ownership of our common shares is the result of the merger of
ASE Chung Li with and into us in August 2004 and subsequent dividends upon
shares received in connection with this
merger.
|
In
connection with the merger of ASE Chung Li and ASE Material with and into ASE
Inc. in August 2004, we and ASE Test established a trust to hold and
dispose of 149,175,000 and 5,000,000 of our common shares that were issued to
ASE Test and ASE Test Taiwan, respectively, upon completion of the merger. As a
result, the trustee appointed under the trust agreement has become one of our
shareholders until such common shares are sold as permitted under the rules and
regulations of the Taiwan Stock Exchange and the terms and conditions of the
trust agreement. As of May 31, 2009, as a result of stock dividends, the total
amount of our common shares held by the trust was 211,775,294. See “—Related
Party Transactions.”
As of May
31, 2009, none of our major shareholders had voting rights different from those
of our other shareholders.
Other
than FMR Corp. becoming the beneficial owner of more than 5% of our outstanding
common shares in 2005, and ceasing to be the beneficial owner of more than 5% of
our outstanding common shares in 2006, there were no significant changes in our
major shareholders or significant changes in the percentage ownership of any of
our major shareholders in 2006, 2007 and 2008.
As of
May 31, 2009, a total of 5,547,064,694 common shares were outstanding. With
certain limited exceptions, holders of common shares that are not ROC persons
are required to hold their common shares through a brokerage account in the ROC.
As of May 15, 2009, 214,295,660 common shares were registered in the name of a
nominee of Citibank, N.A., the depositary under our ADS deposit agreement.
Citibank, N.A., has advised us that, as
of
May 15, 2009, 42,858,825 ADSs, representing 214,294,125 common shares, were held
of record by Cede & Co., and 296 ADSs, representing 1,480 common shares,
were held by seven other U.S. persons. The remaining 55 common shares held by
Citibank, N.A. are a result of fractional shares distributed during stock
distributions on the common shares underlying the ADSs. We have no further
information as to common shares held, or beneficially owned, by U.S.
persons.
In recent
years, we have awarded our common shares to the employees of our subsidiaries as
part of their compensation, based in part on our consolidated net income and the
subsidiaries’ contribution to the consolidated income. We expect this practice
to continue in the future.
In order
to comply with Singapore law and ROC Company Law, trusts organized under ROC law
have been established to hold and dispose of our common shares issued to ASE
Test and ASE Test Taiwan in connection with the merger of ASE Chung Li and ASE
Material into our company in August 2004. Under Section 76(1)(b)(ii) of the
Companies Act, Chapter 50, of Singapore, ASE Test, a Singapore company, may not
purport to acquire, directly or indirectly, shares or units of shares in our
company, ASE Test’s parent company. Pursuant to the applicable trust agreements,
the trustee under each trust is (1) the registered owner of the common shares,
(2) authorized to exercise all of the rights as a shareholder of the common
shares, (3) authorized to sell the common shares, subject to market conditions,
when such common shares become available for resale under ROC law and in
accordance with volume limitations under ROC law, at its sole discretion;
provided such common shares are sold (i) in compliance with ROC laws and
regulations, (ii) in an orderly manner in order to minimize the impact on the
trading price of the common shares, and (iii) in a manner consistent with its
fiduciary duties owed to ASE Test and (4) able to transfer and deliver to ASE
Test or ASE Test Taiwan the proceeds from the sale of our common shares and any
cash dividends distributed, as the case may be. Neither ASE Test nor ASE Test
Taiwan have any rights with respect to the common shares
held in trust pursuant to the applicable trust agreements other than the right
to receive the proceeds from the sale of such common shares and cash dividends
declared while the shares remain in trust. As of May 31, 2009, these trusts held
204,907,278 of our common shares issued to ASE Test and 6,868,016 of our common
shares issued to ASE Test Taiwan.
On May
30, 2008, we acquired, by way of a scheme of arrangement under Singapore law,
all the outstanding ordinary shares of ASE Test that we did not already directly
or indirectly own, making ASE Test our wholly-owned subsidiary. See “Item 4.
Information on the Company—History and Development of the Company—ASE Test Share
Acquisition and Privatization.”
We have
historically guaranteed the promissory notes of many of our subsidiaries. As of
December 31, 2008, we had endorsed and guaranteed an aggregate amount of
NT$8,468.0 million (US$257.7 million) of the outstanding promissory notes of our
subsidiaries.
On May
23, 2006, we purchased from Hung Ching two new buildings in Chung Li, Taiwan
that we built with Hung Ching for NT$1,311.4 million. These buildings have a
floor space of approximately 1,313,000 square feet and house part of our testing
and packaging operations. On December 19, 2007, we purchased from Hung Ching an
additional building in Chung Li, Taiwan for NT$141.2 million. This building
houses power generation and other ancillary support equipment.
We
entered into a contract with Hung Ching in connection with the construction of a
factory and office building in Kaohsiung, Taiwan. The contract was
terminated in 2008 as a result of which we paid Hung Ching NT$36 million (US$1.1
million) for certain costs incurred during the construction.
Consolidated
financial statements are set forth under “Item 18. Financial
Statements.”
On
January 31, 2006, Tessera, Inc. filed an amended complaint in the United States
District Court for the Northern District of California adding Advanced
Semiconductor Engineering, Inc. and ASE (U.S.) Inc., collectively referred to as
ASE, and other companies to a suit alleging that ASE’s and the thirteen other
defendants’ manufacturing, use, importation, offer for sale, and sale of various
packaged semiconductor products infringed patents owned by Tessera relating to
certain types of semiconductor chip packaging, and/or breached technology
license agreements regarding certain types of semiconductor chip packages
between Tessera and certain defendants, including ASE. Tessera
sought, among other things, monetary damages and injunctive relief in the
lawsuit. On March 27, 2006, ASE filed its answer and counterclaims
with the court.
On May
15, 2007, at Tessera’s request, the United States International Trade
Commission, or the ITC, instituted an investigation, or ITC Investigation No.
605, of certain of ASE’s co-defendants and other companies, including certain of
ASE’s customers, but not ASE and the other contract chip packagers that were
included as defendants in the California case. On May 20, 2009, the
ITC issued its final determination in ITC Investigation No. 605, finding
infringement of both asserted patents by the ITC Investigation No. 605
respondents’ accused semiconductor packages. The ITC also issued (1)
a limited exclusion order prohibiting the unlicensed entry of semiconductor
packages found to infringe, and products incorporating such chips, manufactured
abroad by or on behalf of, or imported by or on behalf of, Spansion, Qualcomm,
ATI, Motorola, ST-NV, and Freescale; and (2) cease and desist orders
directed to Motorola, Qualcomm, Freescale, and Spansion. The
foregoing remedies granted by the ITC could affect certain of ASE’s
customers. The ITC did not grant a general exclusion order as
requested by Tessera. The time for appealing the ITC’s final
determination is expected to begin on July 20, 2009. The district
court in the California case has vacated the trial schedule and stayed all
proceedings until a final resolution is reached in ITC Investigation No.
605.
After
initiating ITC investigation No. 605, Tessera indicated that it desired to
include ASE and the other contract chip packagers from the California case in a
new ITC investigation. Tessera obtained approval from the California
court to bring a new ITC investigation against the other contract chip packagers
after Tessera agreed to limit such investigation to packages outside the scope
of the licenses of the contract chip packagers. On April 21, 2008,
Tessera filed its ITC complaint against the contract chip packagers, and on May
21, 2008, the ITC instituted a new investigation against them, or ITC
Investigation No. 649, which involves three patents also asserted in the
original California case, as well as one newly-asserted patent. On
August 4, 2008, ASE, Inc., ASE (U.S.) Inc. and ASE Test Limited filed an action
in the United States District Court for the Northern District of California
against Tessera, Inc. seeking a declaratory judgment of non-infringement and
invalidity of the patent newly asserted by Tessera in the ITC. The
complaint was served on November 7, 2008. Tessera served its answer
and counterclaims on December 1, 2008. On December 19, 2008, the
court stayed the case in response to a joint motion of the
parties. On March 12, 2009, Tessera moved to terminate ITC
Investigation No. 649. In a press release announcing its motion to
terminate, Tessera pointed to uncertainties created by legal rulings concerning
the remedies available against non-importers, delays in the progress of ITC
Investigation No. 649, and its desire to focus its enforcement
efforts. The motion to terminate has not yet been acted on by the
Judge or the ITC, but in the event it is granted, ITC Investigation No. 649 will
be terminated without the issuance of an exclusion order or any other remedy in
ITC Investigation
No. 649 that would prevent the importation or sale in the United States of
semiconductor packages assembled by ASE, or products containing such packages
(other than as discussed above).
The
United States Patent and Trademark Office has also instituted reexamination
proceedings on all the patents Tessera has asserted in the California case and
the ITC investigations. Thus far, the United States Patent and Trade
Office has found that all of the claims asserted by Tessera in ITC Investigation
No. 649 are not patentable, but the reexamination proceedings have not yet
concluded.
It is not
possible to predict the outcome of the California litigation, the ITC
investigations, the reexamination proceedings, the total costs of resolving
these disputes, or when the stay of the California litigation will be
lifted.
We have
historically paid dividends on our common shares with respect to the results of
the preceding year following approval by our shareholders at the annual general
meeting of shareholders. We have historically paid the large majority
of our dividends in the form of stock. We have paid annual stock dividends on
our common shares since 1989, except in 2002 and 2006 when we did not pay any
dividend due to the losses we incurred in the 2001 and 2005 fiscal years,
respectively. We also paid cash dividends of NT$1.48 per share in 2007 and
NT$1.71 per share in 2008. Our directors have proposed to pay cash dividends of
NT$0.50 per share based on the 5,473,136,894 shares registered as of March 26,
2009. This proposal is awaiting shareholders’ approval and the actual cash
dividends per share will be adjusted by any fluctuations in the number of our
shares due to, for example, the exercise of share options or the cancellation of
treasury stock.
The
following table sets forth the stock dividends paid during each of the years
indicated and related information.
|
Stock
Dividends Per
Common
Share(1)
|
Total
Common Shares
Issued
as Stock Dividends
|
Outstanding
Common Shares on
Record Date(2)
|
Percentage
of
Outstanding
Common Shares
Represented
by Stock Dividends
|
|||||||||||||
|
NT$
|
||||||||||||||||
|
1997
|
3.80
|
277,020,000
|
729,000,000
|
38.0%
|
||||||||||||
|
1998
|
7.20
|
732,240,000
|
1,017,000,000
|
72.0%
|
||||||||||||
|
1999
|
1.07
|
190,460,000
|
1,780,000,000
|
10.7%
|
||||||||||||
|
2000
|
3.15
|
623,811,852
|
1,980,355,086
|
31.5%
|
||||||||||||
|
2001
|
1.70
|
467,840,000
|
2,752,000,000
|
17.0%
|
||||||||||||
|
2002
|
—
|
—
|
3,254,800,000
|
—
|
||||||||||||
|
2003
|
1.00
|
325,480,000
|
3,254,800,000
|
10.0%
|
||||||||||||
|
2004
|
0.57
|
221,977,360
|
3,862,595,437
|
5.7%
|
||||||||||||
|
2005
|
1.00
|
411,221,140
|
4,113,744,200
|
10.0%
|
||||||||||||
|
2006
|
—
|
—
|
4,592,508,620
|
—
|
||||||||||||
|
2007
|
1.48
|
694,101,071
|
4,645,295,431
|
14.9%
|
||||||||||||
|
2008
|
0.29
|
158,766,146
|
5,484,848,118
|
2.9%
|
|
(1)
|
Holders
of common shares receive as a stock dividend the number of common shares
equal to the NT dollar value per common share of the dividend declared
multiplied by the number of common shares owned and divided by the par
value of NT$10 per share. Fractional shares are not issued but are paid in
cash.
|
|
(2)
|
Aggregate
number of common shares outstanding on the record date applicable to the
dividend payment. Includes common shares issued in the previous year under
our employee bonus plan.
|
In order
to meet the needs of our present and future capital expenditures, we anticipate
paying both stock and cash dividends in the future. The form, frequency and
amount of future cash or stock dividends on our common shares will depend upon
our net income, cash flow, financial condition and other factors. While we have
a general policy of distributing cash dividends ranging from 0% to 50% of a
total dividend distribution, our Articles of Incorporation allow us to
distribute cash dividends in excess of 50% of a dividend distribution subject to
shareholder approval and other factors such as economic conditions, developments
in our operations and our cash position. Our directors have proposed an
amendment to our policy that requires that cash dividends comprise no less than
30% of our total dividend distributions. This
proposal is awaiting shareholders’ approval. See “Item 10. Additional
information––Articles of Incorporation––Dividends and
Distributions.”
In
general, we are not permitted to distribute dividends or make other
distributions to shareholders for any year where we did not record net income or
retained earnings (excluding reserves). The ROC Company Law also requires that
10% of annual net income (less prior years’ losses and taxes payable, if any) be
set aside as a legal reserve until the accumulated legal reserve equals our
paid-in capital. In addition, our Articles of Incorporation require that before
a dividend is paid pro rata out of our annual net income:
|
·
|
up
to 2% of our annual net income (less prior years’ losses, taxes payable
and legal and special reserves, if any) should be paid to our directors
and supervisors as compensation;
and
|
|
·
|
between
7% and 10% of the annual net income (less prior years’ losses, taxes
payable and legal and special reserves, if any) should be paid to our
employees as bonuses; the 7% portion is to be distributed to all employees
in accordance with our employee bonus distribution rules, while any
portion exceeding 7% is to be distributed in accordance with rules
established by our board of directors to individual employees who have
been recognized as having made special contributions to our
company. Such employees include those of our affiliated
companies who meet the criteria set by our board of
directors.
|
|
·
|
holders
of ADSs will be entitled to receive dividends, subject to the terms of the
deposit agreement, to the same extent as the holders of the common shares.
Cash dividends will be paid to the depositary in NT dollars and, except as
otherwise provided in the deposit agreement, will be converted by the
depositary into U.S. dollars and paid to holders of ADSs according to the
terms of the deposit agreement. Stock dividends will be distributed to the
depositary and, except as otherwise provided in the deposit agreement,
will be distributed by the depositary, in the form of additional ADSs, to
holders of ADSs according to the terms of the deposit
agreement.
|
Holders
of outstanding common shares on a dividend record date will be entitled to the
full dividend declared without regard to any prior or subsequent transfer of
common shares. Accordingly, holders of outstanding ADSs on the relevant dividend
record date will, subject to the terms of the deposit agreement, be similarly
entitled to the full amount of any dividend declared.
For
information relating to ROC withholding taxes payable on dividends, see “Item
10. Additional Information—Taxation—ROC Taxation—Dividends.”
Other
than as disclosed elsewhere in this annual report, we have not experienced any
significant changes since the date of the annual financial
statements.
Our
common shares were first issued in March 1984 and have been listed on the Taiwan
Stock Exchange since July 1989. The Taiwan Stock Exchange is an auction market
where the securities traded are priced according to supply and demand through
announced bid and ask prices. As of May 31, 2009, there were an aggregate
of 5,547,064,694 of our common shares outstanding. The following
table sets forth, for the periods indicated, the high and low closing prices and
the average daily volume of trading activity on the Taiwan Stock Exchange for
the common shares and the high and low of the daily closing values of the Taiwan
Stock Exchange Index. The closing price for our common shares on the Taiwan
Stock Exchange on June 5, 2009 was NT$20.05 per share.
|
Closing
Price per Share
|
Adjusted
Closing
Price
per Share(1)
|
Average
Daily
Trading
Volume
|
Taiwan
Stock
Exchange
Index
|
|||||||||||||||||||||||||
|
High
|
Low
|
High
|
Low
|
(in
thousands of shares)
|
High
|
Low
|
||||||||||||||||||||||
|
2004
|
35.73 | 19.19 | 28.07 | 15.07 | 26,992 | 7,034.1 | 5,316.9 | |||||||||||||||||||||
|
2005
|
31.00 | 17.59 | 26.91 | 13.82 | 29,280 | 6,575.5 | 5,633.0 | |||||||||||||||||||||
|
2006
|
38.30 | 26.50 | 33.25 | 23.00 | 53,789 | 7,823.7 | 6,257.8 | |||||||||||||||||||||
|
2007
|
48.80 | 29.55 | 42.36 | 26.83 | 28,931 | 9,809.9 | 7,344.6 | |||||||||||||||||||||
|
First
Quarter
|
41.20 | 35.90 | 35.76 | 31.16 | 25,379 | 7,935.5 | 7,344.6 | |||||||||||||||||||||
|
Second
Quarter
|
45.15 | 37.60 | 39.19 | 32.64 | 32,398 | 8,939.2 | 7,875.4 | |||||||||||||||||||||
|
Third
Quarter
|
48.80 | 30.55 | 42.36 | 27.74 | 29,749 | 9,744.1 | 8,090.3 | |||||||||||||||||||||
|
Fourth
Quarter
|
39.10 | 29.55 | 35.51 | 26.83 | 28,011 | 9,809.9 | 7,804.4 | |||||||||||||||||||||
|
2008
|
34.25 | 9.85 | 31.10 | 9.85 | 24,392 | 9,295.2 | 4,089.9 | |||||||||||||||||||||
|
Closing
Price per Share
|
Adjusted
Closing
Price
per Share(1)
|
Average
Daily
Trading
Volume
|
Taiwan
Stock
Exchange
Index
|
|||||||||||||||||||||||||
|
High
|
Low
|
High
|
Low
|
(in
thousands of shares)
|
High
|
Low
|
||||||||||||||||||||||
|
First
Quarter
|
32.50 | 25.00 | 29.51 | 22.70 | 23,517 | 8,865.4 | 7,408.4 | |||||||||||||||||||||
|
Second
Quarter
|
34.25 | 27.10 | 31.10 | 24.61 | 21,689 | 9,295.2 | 7,523.5 | |||||||||||||||||||||
|
Third
Quarter
|
28.30 | 16.05 | 25.70 | 16.05 | 23,773 | 7,408.0 | 5,642.0 | |||||||||||||||||||||
|
Fourth
Quarter
|
16.95 | 9.85 | 16.95 | 9.85 | 28,388 | 5,764.0 | 4,089.9 | |||||||||||||||||||||
|
December
|
12.35 | 9.85 | 12.35 | 9.85 | 32,673 | 4,694.8 | 4,225.1 | |||||||||||||||||||||
|
2009
|
||||||||||||||||||||||||||||
|
First
Quarter
|
18.50 | 10.75 | 18.50 | 10.75 | 35,485 | 5,390.7 | 4,242.6 | |||||||||||||||||||||
|
January
|
13.10 | 10.75 | 13.10 | 10.75 | 22,011 | 4,789.8 | 4,242.6 | |||||||||||||||||||||
|
February
|
12.50 | 11.15 | 12.50 | 11.15 | 27,651 | 4,592.5 | 4,260.0 | |||||||||||||||||||||
|
March
|
18.50 | 11.95 | 18.50 | 11.95 | 50,570 | 5,390.7 | 4,425.8 | |||||||||||||||||||||
|
Second
Quarter
|
||||||||||||||||||||||||||||
|
April
|
17.80 | 16.20 | 17.80 | 16.20 | 56,818 | 5,997.2 | 5,314.5 | |||||||||||||||||||||
|
May
|
20.90 | 18.60 | 20.90 | 18.60 | 48,322 | 6,890.4 | 6,330.4 | |||||||||||||||||||||
|
(1)
|
As
adjusted retroactively by the Taiwan Stock Exchange to give effect to
stock dividends paid in the periods indicated. See “Item 8. Financial
Information—Dividends and Dividend
Policy.”
|
The
performance of the Taiwan Stock Exchange has in recent years been characterized
by extreme price volatility. There are currently limits on the range of daily
price movements on the Taiwan Stock Exchange. In the case of equity securities
traded on the Taiwan Stock Exchange, such as our common shares, fluctuations in
the price of a particular security may not exceed a 7% change either above or
below the previous day’s closing price of such security.
Our ADSs
have been listed on the New York Stock Exchange under the symbol “ASX” since
September 26, 2000. The outstanding ADSs are identified by the CUSIP number
00756M404. As of May 15, 2009, a total of 42,859,121 ADSs were outstanding. The
following table sets forth, for the periods indicated, the high and low
closing
prices and the average daily volume of trading activity on the New York Stock
Exchange for our ADSs and the highest and lowest of the daily closing values of
the New York Stock Exchange Index. The closing price for our ADSs on the New
York Stock Exchange on June 5, 2009 was US$3.01 per ADS.
|
Closing
Price per ADS
|
Adjusted
Closing
Price
per ADS(1)
|
Average
Daily
Trading
Volume
|
New
York Stock
Exchange
Index
|
|||||||||||||||||||||||||
|
High
|
Low
|
High
|
Low
|
(in
thousands
of
ADSs)
|
High
|
Low
|
||||||||||||||||||||||
|
US$
|
US$
|
US$
|
US$
|
|||||||||||||||||||||||||
|
2004
|
5.95 | 3.18 | 3.87 | 2.09 | 300 | 7,253.56 | 6,217.06 | |||||||||||||||||||||
|
2005
|
4.49 | 2.85 | 3.41 | 2.12 | 331 | 7,852.18 | 6,935.31 | |||||||||||||||||||||
|
2006
|
6.12 | 4.00 | 4.65 | 3.04 | 404 | 9,179.40 | 7,719.78 | |||||||||||||||||||||
|
2007
|
7.45 | 4.59 | 5.66 | 4.15 | 658 | 10,311.61 | 8,837.97 | |||||||||||||||||||||
|
First
Quarter
|
6.10 | 5.57 | 4.63 | 4.23 | 304 | 9,453.93 | 8,837.97 | |||||||||||||||||||||
|
Second
Quarter
|
6.95 | 5.76 | 5.28 | 4.37 | 856 | 10,064.05 | 9,305.55 | |||||||||||||||||||||
|
Third
Quarter
|
7.45 | 4.73 | 5.66 | 4.15 | 805 | 10,220.67 | 9,087.10 | |||||||||||||||||||||
|
Fourth
Quarter
|
6.02 | 4.59 | 5.46 | 4.17 | 654 | 10,311.61 | 9,389.50 | |||||||||||||||||||||
|
2008
|
5.57 | 1.42 | 5.05 | 1.42 | 622 | 9,656.00 | 4,651.21 | |||||||||||||||||||||
|
First
Quarter
|
4.98 | 3.98 | 4.52 | 3.61 | 812 | 9,656.00 | 8,489.38 | |||||||||||||||||||||
|
Second
Quarter
|
5.57 | 4.45 | 5.05 | 4.04 | 423 | 9,603.01 | 8,623.51 | |||||||||||||||||||||
|
Third
Quarter
|
4.51 | 2.54 | 4.09 | 2.54 | 645 | 8,641.28 | 7,204.01 | |||||||||||||||||||||
|
Fourth
Quarter
|
2.58 | 1.42 | 2.58 | 1.42 | 615 | 7,519.95 | 4,651.21 | |||||||||||||||||||||
|
December
|
1.84 | 1.42 | 1.84 | 1.42 | 816 | 5,804.97 | 5,092.66 | |||||||||||||||||||||
|
2009
|
||||||||||||||||||||||||||||
|
First
Quarter
|
2.89 | 1.49 | 2.89 | 1.49 | 673 | 5,968.84 | 4,226.31 |
|
Closing
Price per ADS
|
Adjusted
Closing
Price
per ADS(1)
|
Average
Daily
Trading
Volume
|
New
York Stock
Exchange
Index
|
|||||||||||||||||||||||||
|
High
|
Low
|
High
|
Low
|
(in
thousands
of
ADSs)
|
High
|
Low
|
||||||||||||||||||||||
|
US$
|
US$
|
US$
|
US$
|
|||||||||||||||||||||||||
|
January
|
1.90 | 1.49 | 1.90 | 1.49 | 433 | 5,968.84 | 5,058.06 | |||||||||||||||||||||
|
February
|
1.82 | 1.60 | 1.82 | 1.60 | 505 | 5,479.88 | 4,617.03 | |||||||||||||||||||||
|
March
|
2.89 | 1.59 | 2.89 | 1.59 | 1,035 | 5,230.53 | 4,226.31 | |||||||||||||||||||||
|
Second
Quarter
|
||||||||||||||||||||||||||||
|
April
|
3.03 | 2.36 | 3.03 | 2.36 | 1,034 | 5,516.14 | 5,085.76 | |||||||||||||||||||||
|
May
|
3.38 | 2.83 | 3.38 | 2.83 | 2,266 | 6,004.07 | 5,568.76 | |||||||||||||||||||||
|
(1)
|
As
adjusted retroactively to give effect to stock dividends paid in the
periods indicated.
|
Not
applicable.
The
principal trading market for our common shares is the Taiwan Stock Exchange and
the principal trading market for ADSs representing our common shares is the New
York Stock Exchange.
Not
applicable.
Not
applicable.
Not
applicable.
Not
applicable.
General
We are a
company limited by shares organized under the laws of the ROC. Our
organizational document is our Articles of Incorporation. We have no
by-laws.
Our
Articles of Incorporation provide, in Article 2, that we may engage in the
following types of business:
|
●
|
the
manufacture, assembly, processing, testing and export of various types of
integrated circuitry;
|
|
●
|
the
research, development, design and manufacture, assembly, processing,
testing and export of various computers, electronics, communications,
information products and their peripheral
products;
|
|
●
|
general
import and export trading (excluding businesses that require trading
permits);
|
|
●
|
the
manufacture of electronic parts and
components;
|
|
·
|
the
manufacture of mechanical and electronic devices and materials (including
integrated circuit leadframes, BGA substrates and flip-chip
substrates);
|
|
·
|
wholesale
and retail sales of electronic
materials;
|
|
·
|
technical
support and consulting service for integrated circuit leadframes, BGA
substrates and flip-chip
substrates;
|
|
·
|
leasing;
and
|
|
·
|
except
any business requiring a special permit, any business not prohibited or
restricted by law or regulation.
|
We were
incorporated on March 23, 1984 as a company limited by shares under the ROC
Company Law. Our authorized capital was NT$80,000,000,000, divided into
8,000,000,000 common shares, 5,547,064,694 of which were issued in registered
form and outstanding as of May 31, 2009. We do not have any equity in the form
of preference shares or otherwise outstanding as of the date of this annual
report.
With the
approval of our board of directors and the ROC Financial Supervisory Commission,
Executive Yuan, we may grant stock options to our employees, provided that
NT$8,000,000,000 of our authorized capital is reserved for employee stock
options and that the shares to be issued under any option plan shall not exceed
10% of our outstanding common shares and the total number of shares to be issued
under all option plans shall not exceed 15% of our outstanding common
shares. The exercise price of an option shall not be less than the
closing price of our common shares on the Taiwan Stock Exchange on the grant
date of the option. As of December 31, 2008, we had granted 485,691,000 options
pursuant to employee stock option plans established on August 28, 2002, May 27,
2004 and November 22, 2007 to our full-time employees as well as to full-time
employees of our domestic and foreign subsidiaries. See “Item
6. Directors, Senior Management and Employees—Compensation—ASE Inc.
Employee Bonus and Stock Option Plans.” We have 800,000,000 common shares
reserved for issuance under our employee stock option plans.
Directors
Our
Articles of Incorporation provide that we are to have from seven to nine
directors with tenures of three years who are elected at a shareholders’
meeting. With effect from our 2009 annual general meeting of shareholders,
two of
our directors will be required to be independent directors. There is no minimum
amount of shares necessary to stand for election to a directorship. Many of our
directors are representatives appointed by corporate shareholders which appoint
individual representatives. Re-elections are allowed. The directors
have certain powers and duties, including devising operations strategy,
proposing to distribute dividends or make up losses, proposing to increase or
decrease capital, reviewing material internal rules and contracts, hiring and
discharging the general manager, establishing and dissolving branch offices,
reviewing budgets and audited financial statements and other duties and powers
granted by or in accordance with the ROC Company Law, our Articles of
Incorporation or shareholders resolutions.
The board
of directors is constituted by the directors, who elect a chairman from among
the directors to preside over the meeting of the board. Meetings of
the board may be held in the ROC or by teleconference. A director may
appoint another director to attend a meeting and vote by proxy, but a director
may accept only one proxy.
Dividends
and Distributions
In
general, we are not permitted to distribute dividends or make other
distributions to shareholders in any year in which we did not record net income
or retained earnings (excluding reserves). The ROC Company Law also requires
that 10% of annual net income (less prior years’ losses and taxes payable, if
any) be set aside as a legal reserve until the accumulated legal reserve equals
our paid-in capital. In addition, our Articles of Incorporation require that
before a dividend is paid out of our annual net income:
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up
to 2% of our annual net income (less prior years’ losses, taxes payable
and legal and special reserves, if any) should be paid to our directors
and supervisors as compensation;
and
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between
7% and 10% of the annual net income (less prior years’ losses, taxes
payable and legal and special reserves, if any) should be paid to our
employees as bonuses. The 7% portion is to be distributed to all employees
in accordance with our employee bonus distribution rules, while any
portion exceeding 7% is
to be distributed in accordance with rules established by our board of
directors to individual employees who have been recognized as having made
special contributions to our company. Such employees include those of our
affiliated companies who meet the criteria set by our board of
directors.
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At the
annual general shareholders’ meeting, our board of directors submits to the
shareholders for their approval any proposal for the distribution of dividends
or the making of any other distribution to shareholders from our net income for
the preceding fiscal year. All common shares outstanding and fully paid as of
the relevant record date are entitled to share equally in any dividend or other
distribution so approved. Dividends may be distributed in cash, in the form of
common shares or a combination of the two, as determined by the shareholders at
the meeting. While we have a general policy of distributing cash dividends
ranging from 0% to 50% of a total dividend distribution, our Articles of
Incorporation allow us to distribute cash dividends in excess of 50% of a
dividend distribution subject to shareholder approval and other factors such as
economic conditions, developments in our operations and our cash position. Our
directors have proposed an amendment to our policy that requires that cash
dividends comprise no less than 30% of our total dividend distributions. This
proposal is awaiting shareholders’ approval. See “Item 8. Financial
Information—Dividends and Dividend Policy.”
We are
also permitted to make distributions to our shareholders of additional common
shares by capitalizing reserves. However, the capitalized portion payable out of
our legal reserve is limited to 50% of the total accumulated legal reserve and
the capitalization can only be effected when the accumulated legal reserve
exceeds 50% of our paid-in capital.
For
information on the dividends we paid in recent years, see “Item 8. Financial
Information—Dividends and Dividend Policy.” For information as to ROC taxes on
dividends and distributions, see “—Taxation—ROC
Taxation—Dividends.”
Changes
in Share Capital
Under ROC
Company Law, any change in the authorized share capital of a company limited by
shares requires an amendment to its Articles of Incorporation. In the case of a
public company such as ourselves, the approval of the ROC
Financial Supervisory Commission, Executive Yuan and the ROC Ministry of
Economic Affairs is also required. Authorized but unissued common shares may be
issued, subject to applicable ROC law, upon terms as our board of directors may
determine.
Preemptive
Rights
Under the
ROC Company Law, when an ROC company issues new shares for cash, existing
shareholders who are listed on the shareholders’ register as of the record date
have preemptive rights to subscribe for the new issue in proportion to their
existing shareholdings, while a company’s employees, whether or not they are
shareholders of the company, have rights to subscribe for 10% to 15% of the new
issue. Any new shares that remain unsubscribed at the expiration of the
subscription period may be offered by us to the public or privately
placed.
In
addition, in accordance with the ROC Securities and Exchange Law, a public
company that intends to offer new shares for cash must offer to the public at
least 10% of the shares to be sold, except under certain circumstances or when
exempted by the ROC Financial Supervisory Commission, Executive Yuan. This
percentage can be increased by a resolution passed at a shareholders’ meeting,
which would diminish the number of new shares subject to the preemptive rights
of existing shareholders.
These
preemptive rights provisions do not apply to offerings of new shares through a
private placement approved at a shareholders’ meeting.
Meetings
of Shareholders
We are
required to hold an ordinary meeting of our shareholders within six months
following the end of each fiscal year. These meetings are generally held in
Kaohsiung, Taiwan. Any shareholder who holds 1% or more of our
issued
and outstanding shares may submit one written proposal for discussion at our
annual shareholders’ meeting. Extraordinary shareholders’ meetings may be
convened by resolution of the board of directors or by the board of directors
upon the written request of any shareholder or shareholders who have held 3% or
more of the outstanding common shares for more than one year. Shareholders’
meetings may also be convened by a supervisor. Notice in writing of general
meetings of shareholders, stating the place, time and purpose, must be
dispatched to each shareholder at least 30 days, in the case of ordinary
meetings, and 15 days, in the case of extraordinary meetings, before the date
set for each meeting. A majority of the holders of all issued and outstanding
common shares present at a shareholders’ meeting constitutes a quorum for
meetings of shareholders.
Voting
Rights
Under the
ROC Company Law, shareholders have one vote for each common share held, except
that there are no voting rights for those shares held by us or directly or
indirectly held by controlled companies or affiliates. Under the ROC Company
Law, our directors and supervisors are elected at a shareholders’ meeting
through cumulative voting, unless the articles of incorporation of a company
provide otherwise.
In
general, a resolution can be adopted by the holders of at least a majority of
the common shares represented at a shareholders’ meeting at which the holders of
a majority of all issued and outstanding common shares are present. Under ROC
Company Law, the approval by at least a majority of the common shares
represented at a shareholders’ meeting in which a quorum of at least two-thirds
of all issued and outstanding common shares are represented is required for
major corporate actions, including:
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amendment
to the Articles of Incorporation, including increase of authorized share
capital and any changes of the rights of different classes of
shares;
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transfer
of the company’s entire business or assets or substantial part of its
business or assets;
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execution,
amendment or termination of any contract through which the company leases
its entire business to others, or the company appoints others to operate
its business or the company operates its business with others on a
continuous basis;
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acquisition
of the entire business or assets of any other company, which would have a
significant impact on the company’s
operations;
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distribution
of any stock dividend;
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dissolution,
merger or spin-off of the company;
and
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removal
of the directors or supervisors.
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A
shareholder may be represented at an ordinary or extraordinary meeting by proxy
if a valid proxy form is delivered to us five days before the commencement of
the ordinary or extraordinary shareholders’ meeting.
Holders
of ADSs do not have the right to exercise voting rights with respect to the
underlying common shares, except as described in the deposit
agreement.
Other
Rights of Shareholders
Under the
ROC Company Law, dissenting shareholders are entitled to appraisal rights in
certain major corporate actions such as a proposed amalgamation by the company.
If agreement with the company cannot be reached, a dissenting shareholder may
seek a court order for the company to redeem all of their shares. Shareholders
may exercise their appraisal rights by serving written notice on the company
prior to or at the related shareholders’ meeting and/or by raising and
registering an objection at the shareholders’ meeting. In addition to appraisal
rights, shareholders have the right to sue for the annulment of any resolution
adopted at a shareholders’ meeting where the procedures were legally defective
within 30 days after the date of the shareholders’ meeting. One or more
shareholders who have held more than 3% of the issued and outstanding shares of
a company for more than one year
may
require a supervisor to bring a derivative action on behalf of the company
against a director as a result of the director's unlawful actions or failure to
act.
Rights
of Holders of Deposited Securities
Except as
described below, holders of ADSs generally have no right under the deposit
agreement to instruct the depositary to exercise the voting rights for the
common shares represented by the ADSs. Instead, by accepting ADSs or any
beneficial interest in ADSs, holders of ADSs are deemed to have authorized and
directed the depositary to appoint our chairman or his designee to represent
them at our shareholders’ meetings and to vote the common shares deposited with
the custodian according to the terms of the deposit agreement.
The
depositary will mail to holders of ADSs any notice of shareholders’ meeting
received from us together with information explaining how to instruct the
depositary to exercise the voting rights of the securities represented by
ADSs.
If we
fail to timely provide the depositary with an English language translation of
our notice of meeting or other materials related to any meeting of owners of
common shares, the depositary will endeavor to cause all the deposited
securities represented by ADSs to be present at the applicable meeting, insofar
as practicable and permitted under applicable law, but will not cause those
securities to be voted.
If the
depositary timely receives voting instructions from owners of at least 51.0% of
the outstanding ADSs to vote in the same direction regarding one or more
resolutions to be proposed at the meeting, including election of directors and
supervisors, the depositary will notify our chairman or his designee to attend
the meeting and vote all the securities represented by the holders’ ADSs in
accordance with the direction received from owners of at least 51.0% of the
outstanding ADSs.
If we
have timely provided the depositary with the materials described in the deposit
agreement and the depositary has not timely received instructions from holders
of at least 51.0% of the outstanding ADSs to vote in the same direction
regarding any resolution to be considered at the meeting, then, holders of ADSs
will be deemed to have authorized and directed the depositary bank to give a
discretionary proxy to our chairman or his designee to attend and vote at the
meeting the common shares represented by the ADSs in any manner, our chairman or
his designee may wish, which may not be in the interests of
holders.
The
ability of the depositary to carry out voting instructions may be limited by
practical and legal limitations and the terms of the securities on deposit. We
cannot assure ADS holders that they will receive voting materials in time to
enable them to return voting instructions to the depositary in a timely
manner.
While
shareholders who own 1% or more of our outstanding shares are entitled to submit
one proposal to be considered at our annual general meetings, only holders
representing at least 51% of our ADSs outstanding at the relevant record date
are entitled to submit one proposal to be considered at our annual general
meetings. Hence, only one proposal may be submitted on behalf of all ADS
holders.
Register
of Shareholders and Record Dates
Our share
registrar, President Securities Corp., maintains our register of shareholders at
its offices in Taipei, Taiwan, enters transfers of common shares in our register
upon presentation of, among other documents, certificates representing the
common shares transferred and acts as paying agent for any dividends or
distributions with respect to our
common shares. Under the ROC Company Law and our Articles of Incorporation, we
may, by giving advance public notice, set a record date and close the register
of shareholders for a specified period in order for us to determine the
shareholders or pledgees that are entitled to rights pertaining to the common
shares. The specified period required is as follows:
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ordinary
shareholders’ meeting—60 days;
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extraordinary
shareholders’ meeting—30 days; and
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relevant
record date—five days.
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Annual
Financial Statements
At least
ten days before the annual ordinary shareholders’ meeting, our annual financial
statements must be available at our principal executive office in Kaohsiung,
Taiwan for inspection by the shareholders.
Transfer
of Common Shares
The
transfer of common shares in registered form is effected by endorsement and
delivery of the related share certificates but, in order to assert shareholders’
rights against us, the transferee must have his name and address registered on
our register of shareholders. Shareholders are required to file their respective
specimen seals, also known as chops, with us. Chops are official stamps widely
used in Taiwan by individuals and other entities to authenticate the execution
of official and commercial documents.
Acquisition
of Common Shares by ASE Inc.
Under the
ROC Securities and Exchange Law, we may purchase our own common shares for
treasury stock in limited circumstances, including:
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to
transfer shares to our employees;
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to
deliver shares upon the conversion or exercise of bonds with warrants,
preferred shares with warrants, convertible notes, convertible preferred
shares or warrants issued by us;
and
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to
maintain our credit and our shareholders’ equity, provided that the shares
so purchased shall be canceled.
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We may
purchase our common shares on the Taiwan Stock Exchange or by means of a public
tender offer. These transactions require the approval of a majority of our board
of directors at a meeting in which at least two-thirds of the directors are in
attendance. The total amount of common shares purchased for treasury stock may
not exceed 10% of the total outstanding shares. In addition, the total cost of
the purchased shares shall not exceed the aggregate amount of our retained
earnings, any premium from share issuances and the realized portion of our
capital reserve.
We may
not pledge or hypothecate any of our shares purchased by us. In
addition, we may not exercise any shareholders’ right attaching to such
shares. In the event that we purchase our shares on the Taiwan
Securities Exchange, our affiliates, directors, supervisors, managers, and their
respective spouses and minor children and/or nominees are prohibited from
selling any of our shares during the period in which we are purchasing our
shares.
Pursuant
to the amended ROC Company Law, effective from November 14, 2001, our
subsidiaries are not permitted to acquire our common shares. This restriction
does not affect any acquisition of our common shares made by our subsidiaries
prior to November 14, 2001.
Liquidation
Rights
In the
event of our liquidation, the assets remaining after payment of all debts,
liquidation expenses and taxes will be distributed pro rata to the shareholders
in accordance with the relevant provisions of the ROC Company Law and our
Articles of Incorporation.
Transfer
Restrictions
Substantial
Shareholders
The ROC
Securities and Exchange Law currently requires:
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each
director, supervisor, executive officer or substantial shareholder (that
is, a shareholder who, together with his or her spouse, minor children or
nominees, holds more than 10% of the shares of a public company) to report
any change in that person’s shareholding to the issuer of the shares and
the ROC Financial Supervisory Commission, Executive Yuan;
and
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each
director, supervisor, executive officer or substantial shareholder, after
acquiring the status of director, supervisor, executive officer or
substantial shareholder for a period of six months, to report his or her
intent to transfer any shares on the Taiwan Stock Exchange to the ROC
Financial Supervisory Commission, Executive Yuan at least three days
before the intended transfer, unless the number of shares to be
transferred is less than 10,000
shares.
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In
addition, the number of shares that can be sold or transferred on the Taiwan
Stock Exchange by any person subject to the restrictions described above on any
given day may not exceed:
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0.2%
of the outstanding shares of the company in the case of a company with no
more than 30 million outstanding shares;
or
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0.2%
of 30 million shares plus 0.1% of the outstanding shares exceeding 30
million shares in the case of a company with more than 30 million
outstanding shares; or
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in
any case, 5% of the average trading volume (number of shares) on the
Taiwan Stock Exchange for the ten consecutive trading days preceding the
reporting day on which the director, supervisor, manager or substantial
shareholder reports the intended share transfer to the ROC Financial
Supervisory Commission, Executive
Yuan.
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These
restrictions do not apply to sales or transfers of our ADSs.
Common
Shares Issued to Substantial Shareholders in Connection with a
Merger
The rules
and regulations of the Taiwan Stock Exchange impose certain transfer
restrictions on common shares of a Taiwan Stock Exchange listed company issued
to a substantial shareholder (as defined under the ROC Securities and Exchange
Law and described under “—Substantial Shareholders”) of an unlisted company to
be merged with and into the acquiror. A substantial shareholder of an unlisted
company to be merged with and into a Taiwan Stock Exchange listed company is
restricted from selling or transferring common shares received in connection
with such merger for a period of six months after such shares are listed on the
Taiwan Stock Exchange. After the initial six-month lock-up period, such holder
is permitted to sell or transfer 50% of its holdings of the common
shares received in the merger. After one year from the date of the listing of
the common shares, the holder is permitted to sell or transfer all the remaining
common shares received in the merger.
Joint
Venture Agreement by and among Powerchip Semiconductor Corp. and Advanced
Semiconductor Engineering, Inc.
On July
14, 2006, we entered into a joint venture agreement with Powerchip Semiconductor
Corp. to establish PowerASE to focus on packaging and testing of memory
semiconductors. Pursuant to the joint venture agreement, we invested US$30.0
million for a 60.0% of the equity interest in PowerASE and Powerchip invested
US$20.0 million for the remaining 40.0%.
Sale
and Purchase Agreement by and among Seacoast Profits Limited and J&R Holding
Limited
On
January 11, 2007, we, through our subsidiary J&R Holding Limited, entered
into a sale and purchase agreement with Seacoast Profits Limited in connection
with the acquisition of all the shares of Top Master Enterprises Limited, the
sole shareholder of ASESH AT, for a purchase price of US$60.0
million.
Equity
Interests Transfer Agreement by and among NXP B.V., NXP Semiconductors Suzhou
Ltd. and J&R Holding Limited
On August
6, 2007, we, through our subsidiary J&R Holding Limited, entered into an
equity interests transfer agreement with NXP Semiconductors and NXP
Semiconductors Suzhou Ltd. in connection with our establishment of a joint
venture with NXP Semiconductors. Pursuant to the equity interests transfer
agreement, we acquired
60.0% of
the shares of NXP Semiconductors Suzhou Ltd., now known as ASEN, from NXP
Semiconductors for a purchase price of US$21.6 million. NXP
Semiconductors retained the remaining 40.0% of the shares.
Scheme
Implementation Agreement between Advanced Semiconductor Engineering, Inc. and
ASE Test
On
September 4, 2007, we and ASE Test entered into a scheme implementation
agreement under which we agreed to acquire, by way of a scheme of arrangement
under Singapore law, or the Scheme, all the outstanding ordinary shares of ASE
Test that we did not already directly or indirectly own for US$14.78 in cash for
each ASE Test ordinary share and the New Taiwan dollar equivalent of US$0.185 in
cash (based on the prevailing exchange rate) for each ASE Test depositary share.
The Scheme became effective on May
30, 2008 and ASE Test became our wholly-owned subsidiary. For additional
information on this transaction, see “Item 4. Information on the Company—History
and Development of the Company—ASE Test Share Acquisition and
Privatization.”
Syndicated
Loan Agreements between Advanced Semiconductor Engineering, Inc. and banking
syndicates led by Citibank, N.A., Taipei Branch
On March
3, 2008, we entered into a syndicated loan agreement with a banking syndicate
led by Citibank, N.A., Taipei Branch for a NT$24,750.0 million term loan
facility, which we and the lenders subsequently agreed to reduce to NT$17,500.0
million, for the purposes of financing our acquisition of all the outstanding
ordinary shares of ASE Test pursuant to the Scheme. On May 29, 2008, we entered
into an additional syndicated loan agreement with a banking syndicate led by
Citibank, N.A., Taipei Branch for a US$200.0 million term loan facility, also in
connection with the Scheme. For more information on the Scheme, see “Item 4.
Information on the Company—History and Development of the Company—ASE Test Share
Acquisition and Privatization.”
Equity
Purchase Agreement between Aimhigh Global Corp., TCC Steel and J&R Holding
Limited in respect of Weihai Aimhigh Electronic Co. Ltd.
On March
17, 2008, we, through our subsidiary J&R Holding Limited, entered into an
equity purchase agreement with Aimhigh Global Corp. and TCC Steel in connection
with the acquisition of 100.0% of ASE (Weihai), Inc., formerly known as Weihai
Aimhigh Electronic Co. Ltd., for a purchase price of US$7.0
million.
ROC
Exchange Controls
The ROC
Foreign Exchange Control Law and regulations provide that all foreign exchange
transactions must be executed by banks designated by the ROC Financial
Supervisory Commission, Executive Yuan and by the Central Bank of the Republic
of China (Taiwan) to engage in such transactions. Current regulations favor
trade-related foreign exchange transactions. Consequently, foreign currency
earned from exports of merchandise and services may now be retained and used
freely by exporters, and all foreign currency needed for the importation of
merchandise and services may be purchased freely from the designated foreign
exchange banks.
Apart
from trade, ROC companies and resident individuals may, without foreign exchange
approval, remit outside and into the ROC foreign currency of up to US$50 million
(or its equivalent) and US$5 million (or its equivalent) respectively in each
calendar year. The above limits apply to remittances involving a conversion of
NT dollars to a foreign currency and vice versa. A requirement is also imposed
on all enterprises to register medium- and long-term foreign debt with the
Central Bank of the Republic of China (Taiwan).
In
addition, foreign persons may, subject to specified requirements, but without
foreign exchange approval of the Central Bank of the Republic of China (Taiwan),
remit outside and into the ROC foreign currencies of up to US$100,000 (or its
equivalent) for each remittance. The above limit applies to remittances
involving a conversion of NT dollars to a foreign currency and vice versa. The
above limit does not, however, apply to the conversion of NT dollars into other
currencies, including U.S. dollars, from the proceeds of sale of any underlying
shares withdrawn from a depositary receipt facility.
ROC
Taxation
The
following discussion describes the material ROC tax consequences of the
ownership and disposition of the common shares or ADSs to a non-resident
individual or non-resident entity that holds the common shares or ADSs (referred
to here as a “non-ROC holder”). As used in the preceding sentence, a
“non-resident individual” is a non-ROC national who owns the common shares or
ADSs and is not physically present in the ROC for 183 days or more during any
calendar year and a “non-resident entity” is a corporation or a non-corporate
body that owns the common shares or ADSs, is organized under the laws of a
jurisdiction other than the ROC and has no fixed place of business or business
agent in the ROC.
Dividends
Dividends
(whether in cash or common shares) declared by us out of retained earnings and
distributed to a non-ROC holder in respect of common shares or ADSs are subject
to ROC withholding tax, currently at the rate of 20% on the amount of the
distribution (in the case of cash dividends) or on the par value of the
distributed common shares (in the case of stock dividends). A 10% undistributed
earnings tax is imposed on a ROC company for its after-tax earnings generated
after January 1, 1998 which are not distributed in the following year. The
undistributed earnings tax so paid will further reduce the retained earnings
available for future distribution. When we declare a dividend out of those
retained earnings, an amount in respect of the undistributed earnings tax, up to
a maximum amount of 10% of the dividend to be distributed, will be credited
against the 20% withholding tax imposed on the non-ROC holders.
Distributions
of stock dividends out of capital reserves will not be subject to withholding
tax.
Capital
Gains
Under
current ROC law, capital gain realized upon the sale or other disposition of
securities is exempt from ROC income tax. This exemption currently applies to
capital gains derived from the sale of common shares.
Sales of
ADSs by non-ROC holders are not regarded as sales of ROC securities and thus any
gains derived from transfers of ADSs are not currently subject to ROC income
tax.
Sale
Securities
transaction tax will be imposed on the seller at the rate of 0.3% of the
transaction price upon a sale of common shares. Transfers of ADSs are
not subject to ROC securities transaction tax.
Subscription
Rights
Distributions
of statutory subscription rights for the common shares in compliance with the
ROC Company Act are currently not subject to ROC tax. Proceeds derived from
sales of statutory subscription rights evidenced by securities are currently
exempted from income tax but are subject to securities transaction tax,
currently at the rate of 0.3% of the gross amount received. Income derived from
sales of statutory subscription rights which are not evidenced by securities are
treated as income generated from property transactions and are subject to income
tax at a fixed rate of 20% of the income if the seller is a non-ROC holder.
Subject to compliance with ROC law, we, in our sole discretion, may determine
whether statutory subscription rights are evidenced by securities.
Estate
and Gift Tax
ROC
estate tax is payable on any property within the ROC of a deceased non-resident
individual, and ROC gift tax is payable on any property within the ROC donated
by a non-resident individual. Estate tax and gift tax are currently imposed at
the rate of 10%. Under the ROC Estate and Gift Act, shares and bonds issued by
ROC companies are deemed located in the ROC without regard to the location of
the owner. It is unclear whether a holder of ADSs will be considered
to own common shares for this purpose.
Tax
Treaty
At
present, the ROC has income tax treaties with Indonesia, Singapore, New Zealand,
Australia, the United Kingdom, South Africa, Gambia, Swaziland, Malaysia,
Macedonia, the Netherlands, Senegal, Sweden, Belgium, Denmark and Vietnam. These
tax treaties may limit the rate of ROC withholding tax on dividends paid with
respect to common shares in ROC companies. A non-ROC holder of ADSs will be
considered as the beneficial owner of common shares for the purposes of such
treaties. Accordingly, a holder of ADSs who wishes to apply a reduced
withholding tax rate that is provided under a tax treaty should consult its own
tax advisers concerning such application. The United States does not have an
income tax treaty with the ROC.
United
States Federal Income Taxation
The
following discussion describes the material U.S. federal income tax consequences
of the ownership and disposition of common shares or ADSs to those U.S. holders
described below who hold such common shares or ADSs as capital assets for U.S.
federal income tax purposes. For these purposes, you are a U.S. holder if you
are a beneficial owner of common shares or ADSs and are, for U.S. federal income
tax purposes:
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a
citizen or resident of the United
States;
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a
corporation, or other entity taxable as a corporation, created or
organized under the laws of the United States or of any political
subdivision of the United States;
or
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an
estate or trust the income of which is subject to U.S. federal income
taxation regardless of its source.
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This
discussion assumes that we are not a passive foreign investment company, as
discussed below.
This
discussion does not address all of the tax consequences that may be relevant in
light of your particular circumstances. In particular, it does not address all
of the tax consequences that may be relevant to holders subject to special
rules, including:
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persons
subject to the alternative minimum
tax;
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insurance
companies;
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tax-exempt
entities;
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dealers
or traders in securities who use a mark-to-market method
of accounting for U.S. federal income tax
purposes;
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certain
financial institutions;
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partnerships
or other entities classified as partnerships for U.S. federal income tax
purposes;
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persons
carrying on a trade or business in the
ROC;
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persons
who hold or will hold common shares or ADSs as part of a straddle, hedge,
conversion transaction, integrated transaction or similar
transaction;
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persons
whose functional currency for U.S. federal income tax purposes is not the
U.S. dollar;
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persons
who own or are deemed to own 10% or more of our voting stock;
or
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persons
who acquired our common shares or ADSs pursuant to the exercise of any
employee stock option or otherwise as
compensation.
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If an
entity that is classified as a partnership for U.S. federal income tax purposes
holds common shares or ADSs, the U.S. federal income tax treatment of a partner
will generally depend on the status of the partner and the activities of the
partnership. Partnerships holding commons shares or ADSs and partners in such
partnerships should
consult
their tax advisers as to the particular U.S. federal income tax consequences of
holding and disposing of the common shares or ADSs.
This
discussion is based on the Internal Revenue Code of 1986, as amended, final,
temporary and proposed Treasury regulations, administrative announcements and
judicial decisions, all as of the date hereof. These laws and regulations are
subject to change, possibly with retroactive effect. This discussion is also
based in part on representations by the depositary and assumes that each
obligation under the deposit agreement and any related agreement will be
performed in accordance with its terms.
In
general, for U.S. federal income tax purposes, a U.S. holder who owns ADSs
should be treated as the owner of the common shares represented by the ADSs.
Accordingly, no gain or loss should be recognized if a U.S. holder exchanges
ADSs for the common shares represented by those ADSs.
The U.S.
Treasury has expressed concerns that parties to whom American depositary shares
are released before delivery of shares to the depositary (“pre-release”), or
intermediaries in the chain of ownership between holders and the issuer of the
security underlying the American depositary shares, may be taking actions that
are inconsistent with the claiming of foreign tax credits by the holders of
American depositary shares. Such actions would also be inconsistent with the
claiming of the reduced rate of tax applicable to dividends received by certain
noncorporate U.S. holders. Accordingly, the analysis of the creditability of ROC
taxes and the availability of the reduced tax rate for dividends received by
certain noncorporate U.S. holders, both described below, could be affected by
actions that may be taken by such parties or intermediaries.
Please
consult your tax adviser with regard to the application of the U.S. federal
income tax laws to common shares or ADSs as well as any tax consequences arising
under the laws of any state, local or non-U.S. taxing jurisdiction.
Dividends
Distributions
paid on common shares or ADSs (other than certain pro rata distributions of
common shares to all shareholders, including holders of ADSs), including the
amount of any ROC taxes withheld thereon, reduced by any credit against the
withholding tax on account of the 10% retained earnings tax imposed on us,
generally will constitute foreign source dividend income to the extent paid out
of our current or accumulated earnings and profits as determined in accordance
with U.S. federal income tax principles. Because we do not maintain calculations
of our earnings and profits under U.S. federal income tax principles, we expect
that distributions will generally be reported to U.S. holders as dividends. The
amount you will be required to include in income for any dividend paid in NT
dollars will be equal to the U.S. dollar value of the NT dollars paid,
calculated by reference to the exchange rate in effect on
the date the payment is received by the depositary (in the case of ADSs) or by
you (in the case of common shares), regardless of whether the payment is in fact
converted into U.S. dollars on the date of receipt. If you do not convert the
amount of any dividend income received into U.S. dollars on the date of receipt
and you realize gain or loss on a sale or other disposition of NT dollars, it
generally will be U.S. source ordinary income or loss. The amount of any
distribution of property other than cash will be the fair market value of such
property on the date of distribution. You will not be entitled to a
dividends-received deduction for dividends you receive.
Subject
to applicable limitations and the discussion above regarding concerns expressed
by the U.S. Treasury, under current law, certain dividends paid by qualified
foreign corporations to certain noncorporate U.S. holders in taxable years
beginning before January 1, 2011 are taxable at a maximum rate of 15%. A foreign
corporation is treated as a qualified foreign corporation with respect to
dividends paid on stock that is readily tradable on a securities market in the
United States, such as the New York Stock Exchange, where our ADSs are traded.
You should consult
your own tax advisers to determine whether the favorable rates may apply to
dividends you receive and whether you are subject to any special rules that
limit your ability to be taxed at this favorable rate.
Subject
to applicable limitations and restrictions and the discussion above regarding
concerns expressed by the U.S. Treasury, the ROC taxes withheld from dividend
distributions, reduced by any credit against the withholding tax which is paid
by the Company on account of the 10% retained earnings tax, will be eligible for
credit against your U.S. federal income tax liability. The limitation on foreign
taxes eligible for credit is calculated separately with respect to specific
classes of income. The rules governing foreign tax credits are complex and,
therefore, you should consult your own tax adviser regarding the availability of
foreign tax credits in your particular circumstances. Instead of
claiming a credit, you may, at your election, deduct such otherwise creditable
ROC taxes in computing your taxable income, subject to generally applicable
limitations under U.S. law.
Certain
pro rata distributions
of common shares by a company to all of its shareholders, including holders of
ADSs, will not be subject to U.S. federal income tax. Accordingly, these
distributions will not give rise to U.S. federal income against which the ROC
tax imposed on these distributions may be credited. You should consult your tax
adviser as to whether any ROC tax imposed on these pro rata distributions of
common shares may be creditable against your foreign source income from other
sources.
Capital
Gains
You will
generally recognize U.S. source capital gain or loss for U.S. federal income tax
purposes on the sale or exchange of common shares or ADSs, which will be
long-term capital gain or loss if the common shares or ADSs were held for more
than one year. The amount of gain or loss will be equal to the
difference between your tax basis in the common shares or ADSs disposed of and
the amount realized on disposition, in each case as determined in U.S. dollars.
You should consult your own tax adviser about the treatment of capital gains,
which may be taxed at lower rates than ordinary income for non-corporate
taxpayers, and capital losses, the deductibility of which may be
limited.
Passive
Foreign Investment Company Rules
We
believe that we were not a passive foreign investment company, or PFIC, for U.S.
federal income tax purposes for 2008. However, since PFIC status
depends upon the composition of a company’s income and assets and the market
value of its assets (including, among others, less than 25 percent owned equity
investments) from time to time, there can be no assurance that we will not be
considered a PFIC for any taxable year. If we were treated as a PFIC
for any taxable year during which a U.S. holder held a common share or an ADS,
certain adverse consequences could apply the U.S. holder.
Information
Reporting and Backup Withholding
Payment
of dividends and sales proceeds that are made within the United States or
through certain U.S.-related financial intermediaries generally are subject to
information reporting, and may be subject to backup withholding unless (i) you
are a corporation or other exempt recipient or (ii) in the case of backup
withholding, you provide a correct taxpayer identification number and certify
that you are not subject to backup withholding.
The
amount of any backup withholding from a payment to you will be allowed as a
credit against your United States federal income tax liability and may entitle
you to a refund, provided that the required information is furnished to the
Internal Revenue Service.
Not
applicable.
Not
applicable.
We file annual reports on
Form 20-F and periodic reports on Form 6-K with the SEC. You can read and copy
these reports and other information at the SEC’s Public Reference Room at 450
Fifth Street, N.W., Washington, D.C. 20549. You can also request copies of the
documents, upon payment of a duplicating fee, by writing to the Public Reference
Section of the SEC. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the Public Reference Room. The reports and other
information we file electronically with the SEC are also available to the public
from the SEC’s website at http://www.sec.gov.
Not
applicable.
Market
Risk
Our
exposure to financial market risks relates primarily to changes in interest
rates and foreign currency exchange rates. To mitigate these risks we utilize
derivative financial instruments, the application of which is primarily to
manage these exposures and not for speculative purposes.
Interest Rate
Risk. Our exposure to
interest rate risks relates primarily to our long-term floating rate debt, which
is normally incurred to support our corporate activities and capital
expenditures.
We
entered into two interest rate swap contracts to mitigate the interest rate risk
on our long-term loans. One was signed in December 2003 in the amount of
NT$2,750.0 million, of which NT$1,375.0 million expired in January 2008 and the
remaining amount in January 2009.
The other
contract was signed in August 2008 in the amount of NT$12,000.0 million
(US$366.3 million), all of which expires in March 2013. Interest
receipt and payment were based on a floating rate of 1.88% and fixed rates of
2.45%~2.48%, as of December 31, 2008.
The fair
value of these two contracts as of December 31, 2008 was NT$0.2 million and
negative NT$391.7 million (US$12.0 million) and we recognized them as financial
instruments at fair value through profit or loss and hedging derivative
liabilities-noncurrent with an adjustment to shareholders’ equity.
The table
below sets forth information relating to our significant obligations that are
sensitive to interest rate fluctuations as of December 31, 2008.
|
Expected
Maturity Date
|
||||||||||||||||||||||||||||||||
|
2009
|
2010
|
2011
|
2012
|
2013
|
Thereafter
|
Total
|
Fair
Value
|
|||||||||||||||||||||||||
|
(in
millions, except percentages)
|
||||||||||||||||||||||||||||||||
|
Short-term
debt:
|
||||||||||||||||||||||||||||||||
|
Variable
rate (NT$)
|
130.0
|
–
|
– | – | – | – | 130.0 | 130.0 | ||||||||||||||||||||||||
|
Average
interest rate
|
1.98%
|
– | – | – | – | – | 1.98% | |||||||||||||||||||||||||
|
Variable
rate (US$)
|
144.5
|
– | – | – | – | – | 144.5 | 144.5 | ||||||||||||||||||||||||
|
Average
interest rate
|
4.11%
|
– | – | – | – | – | 4.11% | |||||||||||||||||||||||||
|
Fixed
rate (US$)
|
26.4
|
– | – | – | – | – | 26.4 | 26.4 | ||||||||||||||||||||||||
|
Average
interest rate
|
3.84%
|
– | – | – | – | – | 3.84% | |||||||||||||||||||||||||
|
Variable
rate (RMB)
|
630.6
|
– | – | – | – | – | 630.6 | 630.6 | ||||||||||||||||||||||||
|
Average
interest rate
|
5.58%
|
– | – | – | – | – | 5.58% | |||||||||||||||||||||||||
|
Long-term
debt:
|
|
|||||||||||||||||||||||||||||||
|
Variable
rate (NT$)
|
5,768.9
|
15,885.3 | 8,565.9 | 5,075.0 | 2,537.5 | – | 37,832.6 | 37,832.6 | ||||||||||||||||||||||||
|
Average
interest rate
|
1.95%
|
3.00% | 3.79% | 3.93% | 3.93% | – | 3.21% | |||||||||||||||||||||||||
|
Fixed
rate (NT$)
|
122.9
|
111.8 | 2.1 | 0.3 | – | – | 237.1 | 237.1 | ||||||||||||||||||||||||
|
Average
interest rate
|
3.21%
|
3.00% | 5.71% | 7.82% | – | – | 3.14% | |||||||||||||||||||||||||
|
Variable
rate (US$)
|
75.4
|
67.9 | 245.9 | 44.1 | 22.1 | – | 455.4 | 455.4 | ||||||||||||||||||||||||
|
Average
interest rate
|
2.80%
|
4.41% | 6.21% | 4.60% | 4.86% | – | 5.15% | |||||||||||||||||||||||||
|
Fixed
rate (US$)
|
5.0
|
* | * | – | – | – | 5.0 | 5.0 | ||||||||||||||||||||||||
|
Average
interest rate
|
3.62%
|
15.30% | 15.30% | – | – | – | 3.74% | |||||||||||||||||||||||||
|
Variable
rate (RMB)
|
–
|
150.0 | – | – | – | – | 150.0 | 150.0 | ||||||||||||||||||||||||
|
Average
interest rate
|
–
|
6.77% | – | – | – | – | 6.77% | |||||||||||||||||||||||||
*
Indicates amount is less than US$0.1 million.
Foreign Currency
Exchange Rate Risk. Our foreign currency exposure gives rise
to market risk associated with exchange rate movements against the NT dollar,
our functional currency. Currently, the majority of our revenues from packaging
and testing services are denominated in U.S. dollars, with a portion denominated
in NT dollars and Japanese yen. Our costs of revenues and operating expenses
associated with packaging and testing services are incurred in several
currencies, primarily in NT dollars and U.S. dollars, as well as, to a lesser
extent, Korean won, Japanese yen, Malaysian ringgit and Chinese yuan. In
addition, a substantial portion of our capital expenditures, primarily for the
purchase of packaging and testing equipment, has been, and is expected to
continue to be, denominated primarily in U.S. dollars with the remainder in
Japanese yen. Fluctuations in exchange rates, primarily among the U.S. dollar,
the NT dollar, the Chinese yuan and the Japanese yen, will affect our costs and
operating margins and could result in exchange losses and increased costs in NT
dollar and other local currency terms. Despite hedging and mitigating techniques
implemented by us, fluctuations in exchange rates have affected, and may
continue to affect, our financial condition and results of
operations. We recorded net foreign exchange gains of NT$92.8
million, NT$403.5 million and NT$282.0 million (US$8.6 million) in 2006, 2007
and 2008, respectively. In 2006, 2007 and 2008, the average exchange rate of the
NT dollar to the U.S. dollar was 32.51, 32.85 and 31.52, respectively,
calculated using noon buying rates in The City of New York for cable transfers
in NT dollars as certified for customs purposes by the Federal Reserve Bank of
New York.
Foreign
currency denominated liabilities as of December 31, 2008 primarily include U.S.
dollar debt and Chinese yuan debt. As of December 31, 2008, approximately 42.4%
and 42.2% of our cash and accounts receivable were denominated in U.S. dollars
and NT dollars, with a substantial portion of the remainder denominated
primarily in Japanese yen. As of December 31, 2008, approximately 54.1% of our
accounts payable and payable for properties were denominated in U.S. dollars,
with a substantial portion of the remainder denominated primarily in NT dollars
and Chinese yuan. To protect against reductions in value and the volatility of
future cash flows caused by changes in foreign currency exchange rates, we
utilize currency forward contracts from time to time to reduce the impact of
foreign currency fluctuations on our results of operations. Our policy is to
account for these contracts on a mark-to-market rate basis.
The table
below sets forth our outstanding forward exchange contracts and swap contracts
in aggregate terms by type of contract as of December 31, 2008.
|
Forward
Exchange Contracts and Swap Contracts
|
|
|
Sell
US$ against NT$
|
|
|
Notional
Amount
|
US$4
million
|
|
Weighted
Average Strike Price
|
US$/NT$33.061
|
|
Fair
Value
|
Negative
US$0.005 million
|
|
Sell
US$ against JP¥
|
|
|
Notional
Amount
|
US$1.1
million
|
|
Weighted
Average Strike Price
|
US$/JP¥89.77
|
|
Fair
Value
|
Negative
US$0.005 million
|
|
Buy
US$ against NT$
|
|
|
Notional
Amount
|
US$277.9
million
|
|
Weighted
Average Strike Price
|
US$/NT$33.123
|
|
Fair
Value
|
Negative
US$2.52 million
|
|
Sell
US$ against MYR
|
|
|
Notional
Amount
|
US$1.5
million
|
|
Weighted
Average Strike Price
|
US$/MYR3.519
|
|
Fair
Value
|
US$0.03
million
|
Other Market
Risk. Our
exposure to other market risk relates primarily to our investments in
publicly-traded stock and open-end mutual funds. The value of these investments
may fluctuate based on various factors including prevailing market conditions.
Moreover, the fair value of investments in unlisted securities may be
significantly
89
different
from their carrying value. Of our investments in publicly-traded stocks,
government and corporate bonds and open-end mutual funds held as of December 31,
2008, NT$536.4 million (US$16.4 million) were classified as financial assets
held for trading and NT$279.8 million (US$8.5 million) were classified as
available-for-sale financial assets.
Not
applicable.
Not
applicable.
Not
applicable.
Disclosure
Controls and Procedures
As of
December 31, 2008, we, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
performed an evaluation of the effectiveness of our disclosure controls and
procedures as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act.
Our management necessarily applied its judgment in assessing the costs and
benefits of such controls and procedures, which by their nature can provide only
reasonable assurance regarding management’s control objectives. Based on this
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective for recording,
processing, summarizing and reporting, within the time periods specified in the
SEC’s rules and forms, information required to be disclosed in the reports we
file or submit under the Exchange Act, and
for accumulating and communicating such information to our management, including
our Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure.
Management’s
Annual Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f)
promulgated under the Securities Exchange Act of 1934.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2008. In making this assessment, our
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
Framework.
Based on
this assessment, management concluded that, as of December 31, 2008, our
internal control over financial reporting is effective based on those
criteria.
Attestation
Report of the Registered Public Accounting Firm
To the
Board of Directors and Shareholders of
Advanced
Semiconductor Engineering, Inc.
We have
audited the internal control over financial reporting of Advanced Semiconductor
Engineering, Inc. and its subsidiaries (the “Company”) as of December 31, 2008,
based on the criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. The Company's management is responsible for
maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Annual Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the
Company's internal control over financial reporting based on our
audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A
company’s internal control over financial reporting is a process designed by, or
under the supervision of, the company's principal executive and principal
financial officers, or persons performing similar functions, and effected by the
company's board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial
statements.
Because
of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis. Also, projections of any evaluation of the
effectiveness of the internal control
over financial reporting to future periods are subject to the risk that the
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2008, based on the criteria
established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We have
also audited, in accordance with auditing standards generally accepted in the
Republic of China and the standards of the Public Company Accounting Oversight
Board (United States), the consolidated financial statements of the Company as
of and for the year ended December 31, 2008, and our report dated April 16, 2009
expressed an unqualified opinion on those financial statements and included
explanatory paragraphs regarding (i) the Company’s adoption of Interpretation
96-052, “Accounting for Bonuses to Employees, Directors and Supervisors,” issued
by the Accounting Research and Development Foundation of the Republic of China;
(ii) the reconciliation
to accounting principles generally accepted in the United States of America; and
(iii) the translation of New Taiwan dollar amounts into U.S. dollar amounts for
convenience purposes.
/s/Deloitte
& Touche
Deloitte
& Touche
Taipei,
Taiwan
The
Republic of China
April 16,
2009
There has
been no change in our internal control over financial reporting that occurred
during the period covered by this annual report that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.
Our board
of directors determined that Alan Cheng is an audit committee financial expert
as defined under the applicable rules of the SEC issued pursuant to Section 407
of the Sarbanes-Oxley Act of 2002 and is independent for the purposes of Rule
10A-3 of the Exchange Act.
We have
adopted a code of ethics that satisfies the requirements of Item 16B of Form
20-F and applies to all employees, officers, supervisors and directors of our
company and our subsidiaries, including our Chief Executive Officer and Chief
Financial Officer. We have posted our code of ethics on our website at
http://www.aseglobal.com.
Policy
on Pre-Approval of Audit and Non-Audit Services of Independent Registered Public
Accounting Firm
Our audit
committee, which was established on July 22, 2005, pre-approves all audit and
non-audit services provided by our independent registered public accounting
firm, including audit services, audit-related services, tax services and other
services, on a case-by-case basis. Accordingly, we have not
established any pre-approval policies and procedures. Prior to the establishment
of our audit committee, such services were pre-approved by our board of
directors.
Independent
Registered Public Accounting Firm’s Fees
The
following table sets forth the aggregate fees by categories specified below in
connection with certain professional services rendered by Deloitte & Touche.
We did not pay any other fees to our independent registered public accounting
firm during the periods indicated below.
|
For
the Year Ended December 31,
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
(in
thousands)
|
||||||||||||
|
Audit
fees(1)
|
116,097.2 | 113,110.1 | 3,452.7 | |||||||||
|
Audit-related
fees(2)
|
5,240.1 | – | – | |||||||||
|
Tax
fees(3)
|
11,540.7 | 9,877.5 | 301.5 | |||||||||
|
All
other fees(4)
|
2,535.4 | 14,023.3 | 428.1 | |||||||||
|
Total
|
135,413.4 | 137,010.9 | 4,182.3 | |||||||||
|
(1)
|
Audit
fees are defined as the standard audit and review work that needs to be
performed each year in order to issue an opinion on our consolidated
financial statements and to issue reports on the local statutory financial
statements. It also includes services that can only be provided by our
auditor such as statutory audits required by the Tax Bureau of the ROC and
the Customs Bureau of the ROC, auditing of non-recurring transactions and
application of new accounting policies, pre-issuance reviews of quarterly
financial results, consents and comfort letters and any other audit
services required for SEC or other regulatory
filings.
|
|
(2)
|
Audit-related
fees include assurance and related services provided by auditors that are
reasonably related to the performance of the audit or review of our
financial statements and not reported above under “Audit fees.” They
comprise amounts for services such as acquisition due diligence and
consultation concerning financial accounting and reporting
matters.
|
|
(3)
|
Tax
fees consist of professional services rendered by Deloitte & Touche
for tax compliance and tax advice. The services for the fees
disclosed under this category include tax return preparation and technical
tax advice.
|
|
(4)
|
Other
fees primarily consist of fees for agreed-upon procedures as required by
the ROC government for capital investments in the PRC and the review of an
application of one of our subsidiaries to PRC regulatory
authorities in connection with a proposed initial public
offering, and procedures required by the SEC for a “going private”
transaction for ASE
Test.
|
Not
applicable.
On
November 17, 2008 and January 23, 2009, we announced share repurchase programs
to repurchase up to 171 million and 285 million of our common shares at prices
between NT$8.00 to NT$18.00 and NT$8.00 to NT$17.00 per share during the period
from November 18, 2008 to January 17, 2009 and from February 2, 2009 to April 1,
2009, respectively. The share repurchase programs concluded on January 18, 2009
and April 2, 2009, when a total of 144.0 million and 73.9 million, respectively,
of our common shares had been repurchased pursuant to the
programs. As of May 31, 2009, 144,037,000 of the common shares we
repurchased had been cancelled. The table below sets forth certain
information about the repurchase of our common shares under the share repurchase
program.
|
Period
|
(a)
Total Number of Common Shares Purchased
|
(b)
Average Price Paid Per Common Share
|
(c)
Total Number of Common Shares Purchased as Part of Publicly Announced
Programs
|
(d)
Maximum Number (or Approximate Dollar Value) of Common Shares that May Yet
Be Purchased Under the Programs
|
||||||||||||
|
November
2008 (November 18, 2008 – November 30, 2008)
|
28,729,000 | 10.74 | 28,729,000 | 142,271,000 | ||||||||||||
|
December
2008 (December 1, 2008 – December 31, 2008)
|
79,971,000 | 9.90 | 79,971,000 | 62,300,000 | ||||||||||||
|
January
2009 (January 1, 2009 – January 17, 2009)
|
35,337,000 | 11.86 | 35,337,000 | 26,963,000 | ||||||||||||
|
Total
|
144,037,000 | 10.55 | 144,037,000 | - | ||||||||||||
|
February
2009 (February 2, 2009 – February 28, 2009)
|
66,096,000 | 12.12 | 66,096,000 | 218,904,000 | ||||||||||||
|
March
2009 (March 1, 2009 – March 3, 2009)
|
7,841,000 | 12.02 | 7,841,000 | 211,063,000 | ||||||||||||
|
Total
|
73,937,000 | 12.11 | 73,937,000 | - | ||||||||||||
As a
company listed on the New York Stock Exchange, or the NYSE, we are subject to
certain corporate governance rules of the NYSE. The application of
the NYSE’s corporate governance rules is limited for foreign private issuers,
recognizing that they have to comply with domestic requirements. As a
foreign private issuer, we must comply with the following NYSE corporate
governance rules: 1) satisfy the audit committee requirements of the SEC; 2)
chief executive officer must promptly notify the NYSE in writing upon becoming
aware of any material non-compliance with applicable NYSE corporate governance
rules; 3) submit annual and interim affirmations to the NYSE regarding
compliance with applicable NYSE corporate governance requirements; and 4)
provide a brief description
of any significant differences between our corporate governance practices and
those required of U.S. companies under the NYSE listing
standards. The table below sets forth the significant differences
between our corporate governance practices and those required of U.S. companies
under the NYSE listing standards.
|
New
York Stock Exchange Corporate Governance Rules Applicable to U.S.
Companies
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Description
of Significant Differences between Our Governance Practices and the NYSE
Corporate Governance Rules Applicable to U.S. Companies
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Director
independence
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Listed
companies must have a majority of independent directors, as defined under
the NYSE listing standards.
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One
member of our board of directors is independent as defined in Rule 10A-3
under the Exchange Act. We do not assess the independence of our directors
under the independence requirements of the NYSE listing
standards.
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| Pursuant to relevant laws and regulations of the ROC, we have two independent directors on our board of directors that were elected through the candidate nomination system at our annual general shareholders meeting on June 25, 2009. | |
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To
empower non-management directors to serve as a more effective check on
management, the non-management directors of each company must meet at
regularly scheduled executive sessions without management.
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All
of our directors attend the meetings of the board of
directors. Our non-management directors do not meet at
regularly scheduled executive sessions without management. The
ROC Company Law does not require companies incorporated in the ROC to have
their non-management directors meet at regularly scheduled executive
sessions without management.
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Nominating/Corporate
governance committee
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Listed
companies must have a nominating/corporate governance committee composed
entirely of independent directors and governed by a written charter that
provides for certain responsibilities of the committee set out in the NYSE
listing standards.
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We
do not have a nominating/corporate governance committee. The
ROC Company Law does not require companies incorporated in the ROC to have
a nominating/corporate governance committee.
Currently,
our board of directors performs the duties of a corporate governance
committee and regularly reviews our corporate governance principles and
practices.
The
ROC Company Law requires that directors be elected by
shareholders. Under ROC law and regulations, companies that
have independent directors are required to adopt a candidate nomination
system for the election of independent directors. Our two
independent directors were elected through the candidate nomination system
provided in our articles of incorporation. All of our
non-independent directors were elected directly by our shareholders at our
shareholders meetings without a nomination process.
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Compensation
committee
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Listed companies
must have a compensation committee composed entirely of independent
directors and governed by a written charter that provides for certain
responsibilities of the committee set
out in the NYSE listing standards.
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We
do not have a compensation committee. Under the ROC Company
Law, companies incorporated in the ROC are not required to have a
compensation committee. However, the ROC Company Law requires
that the measures by which director compensation is determined either be
set forth in the company’s articles of incorporation or be approved at a
shareholders meeting.
Our
articles of incorporation currently provide that total director and
supervisor remuneration shall be no more than 2% (inclusive) of our net
income after payment of all income taxes, deduction of any past losses,
allocation of 10% of our net income for legal reserves and allocation for
special reserves.
The
ROC Company Law requires the compensation of managers, including executive
officers, of a company
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limited
by shares to be approved by a resolution of the board of directors or
pursuant to a higher standard specified in its articles of
incorporation. Our articles of incorporation do not provide
measures by which the compensation of executive officers is determined and
such compensation is determined by our board of directors according to our
internal compensation policies.
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Audit
committee
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Listed
companies must have an audit committee that satisfies the requirements of
Rule 10A-3 under the Exchange Act.
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We
have an audit committee that satisfies the requirements of Rule 10A-3
under the Exchange Act.
Pursuant
to the ROC Securities and Exchange Law, beginning January 1, 2007, public
companies shall either establish an audit committee satisfying specified
requirements or install supervisors. Under certain
circumstances, public companies may be required by the Financial
Supervisory Commission (the "FSC") to establish an audit
committee. In addition to our Rule 10A-3 audit committee, we
currently have supervisors pursuant to the ROC Securities and Exchange
Law.
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The
audit committee must have a minimum of three members.
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We
currently have one member on our audit committee. Our audit
committee member satisfies the independence requirements of Rule 10A-3
under the Exchange Act. We do not assess the independence of
our audit committee member under the independence requirements of the NYSE
listing standards.
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In
addition to any requirement of Rule 10A-3(b)(1), all audit committee
members must satisfy the independence requirements for independent
directors set out in the NYSE listing standards.
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The
audit committee must have a written charter that provides for the duties
and responsibilities set out in Rule 10A-3 and addresses certain other
matters required by the NYSE listing standards.
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Our
audit committee charter provides for the audit committee to assist our
board of directors in its
oversight
of (i) the integrity of our financial statements, (ii) the qualifications,
independence and performance of our independent auditor and (iii) our
compliance with legal and regulatory requirements and provides for the
duties and responsibilities set out in Rule 10A-3. Our audit
committee charter does not address all the matters required by the NYSE
listing standards beyond the requirements of Rule 10A-3.
Because
the appointment and retention of our independent auditor are the
responsibility of our entire board of directors under ROC law and
regulations, our audit
committee charter provides that the audit committee shall make
recommendations to the board of directors with respect to these
matters.
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Each
listed company must have an internal audit function.
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We
have an internal audit function. Under the ROC Regulations for
the Establishment of Internal Control Systems by Public Companies, a
public company is required to set out its internal control systems in
writing, including internal audit implementation rules, which must be
approved by the board of directors.
Our
entire board of directors and the Chief Executive Officer are responsible
for the establishment of the
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internal
audit functions, compliance with the internal audit implementation rules
and oversight of our internal control systems, including the appointment
and retention of our independent auditor.
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Equity
compensation plans
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Shareholders
must be given the opportunity to vote on all equity-compensation plans and
material revisions thereto, except for employment inducement awards,
certain grants, plans and amendments in the context of mergers and
acquisitions, and certain specific types of plans.
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We
comply with the corresponding requirements of the ROC Company Law, the ROC
Securities and Exchange Law, and the ROC Criteria Governing the Offering
and Issuance of Securities by Securities Issuers, which require
shareholders’ approval for the distribution of employee bonuses, while the
board of directors has authority to approve employee stock option plans by
a majority vote of the board of directors at a meeting where at least
two-thirds of all directors are present and to grant options to employees
pursuant to such plans, subject to the approval of the Securities and
Futures Bureau of the FSC, Executive Yuan, and to approve treasury stock
programs and the transfer of shares to employees under such programs by a
majority vote of the board of directors in a meeting where at least
two-thirds of all directors are present.
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Corporate governance
guidelines
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Listed
companies must adopt and disclose corporate governance
guidelines.
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We
currently comply with the domestic non-binding Corporate Governance
Best-Practice Principles for Taiwan Stock Exchange and GreTai Stock Market
Listed Companies promulgated by the Taiwan Stock Exchange and the GreTai
Stock Market, and we provide an explanation of differences between our
practice and the principles, if any, in our ROC annual
report.
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Code of ethics for directors,
officers and employees
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Listed
companies must adopt and disclose a code of business conduct and ethics
for directors, officers and employees, and promptly disclose any waivers
of the code for directors or executive officers.
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We
have adopted a code of ethics that satisfies the requirements of Item 16B
of Form 20-F and applies to all employees, officers, supervisors and
directors of our company and our subsidiaries and will disclose any
waivers of the code as required by Item 16B of Form 20-F. We
have posted our code of ethics on our
website.
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Description
of significant differences
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Listed
foreign private issuers must disclose any significant ways in which their
corporate governance practices differ from those followed by domestic
companies under NYSE listing standards.
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This
table contains the significant differences between our corporate
governance practices and those required of U.S. companies under the NYSE
listing standards.
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CEO
certification
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Each
listed company CEO must certify to the NYSE each year that he or she is
not aware of any violation by the company of NYSE corporate governance
listing standards, qualifying the certification to the extent
necessary.
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As
a foreign private issuer, we are not required to comply with this rule;
however, our Chief Executive Officer provides certifications under
Sections 302 and 906 of the Sarbanes-Oxley
Act.
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Each
listed company CEO must promptly notify the NYSE in writing after any
executive officer of the listed company becomes aware of any material
non-compliance with any applicable provisions of Section
303A.
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We
intend to comply with this requirement.
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Each
listed company must submit an executed Written Affirmation annually to the
NYSE. In addition, each listed company must submit an interim
Written Affirmation each time a change occurs to the board or any of the
committees subject to Section 303A. The annual and interim
Written Affirmations must be in the form specified by the
NYSE.
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We
have complied with this requirement to date and intend to continue to
comply going forward.
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Website
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Listed
companies must have and maintain a publicly accessible
website
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We
have and maintain a publicly accessible
website.
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The
Company has elected to provide financial statements for fiscal year 2008 and the
related information pursuant to Item 18.
Reference
is made to pages F-1 to F-72 of this annual report.
The
consolidated financial statements of the Company and the report thereon by its
independent registered public accounting firm listed below are attached hereto
as follows:
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(a)
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Report
of Independent Registered Public Accounting Firm of the Company dated
April 16, 2009 (page F-1 to F-2).
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(b)
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Consolidated
Balance Sheets of the Company and subsidiaries as of December 31, 2007 and
2008 (page F-3).
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(c)
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Consolidated
Statements of Income of the Company and subsidiaries for the years ended
December 31, 2006, 2007 and 2008 (page F-4 to
F-5).
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(d)
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Consolidated
Statements of Changes in Shareholders’ Equity of the Company and
subsidiaries for the years ended December 31, 2006, 2007 and 2008 (page
F-6).
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(e)
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Consolidated
Statements of Cash Flows of the Company and subsidiaries for the years
ended December 31, 2006, 2007 and 2008 (pages F-7 to
F-9).
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(f)
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Notes
to Consolidated Financial Statements of the Company and subsidiaries
(pages F-10 to F-72).
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1.
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Articles
of Incorporation of the Registrant (English translation of Chinese)
(incorporating all amendments as of June 19, 2008).
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2.
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(a)
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Amended
and Restated Deposit Agreement dated as of September 29, 2000 among ASE
Inc., Citibank N.A., as depositary, and Holders and Beneficial Holders of
American Depositary Shares evidenced by American Depositary Receipts
issued thereunder, including the form of American Depositary Receipt
(incorporated by reference to Exhibit (a) to our registration statement on
Form F-6 (File No. 333-108834) filed on September 16,
2003).
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(b)
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Letter
Agreement dated as of February 1, 2001 by and between ASE Inc. and
Citibank N.A., as depositary for the sole purpose of accommodating the
surrender of ASE Inc’s Rule 144A Global Depositary Shares, the issuance of
American Depositary Shares and the delivery of American Depositary
Receipts in the context of the termination of ASE Inc.’s Rule 144A
Depositary Receipts Facility (incorporated by reference to Exhibit (b)(i)
to our registration statement on Post-Effective Amendment No. 1 to Form
F-6 (File No. 333-108834) filed on April 3,
2006).
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(c)
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Letter
Agreement dated as of September 25, 2003 by and between ASE Inc. and
Citibank N.A., as depositary for the sole purpose of accommodating the
issuance of American Depositary Shares upon ASE Inc.’s deposit of its
shares with the depositary following the conversion of certain bonds
issued by ASE Inc. in accordance with, and subject to, the terms and
conditions of the indenture governing such bonds (incorporated by
reference to Exhibit (b)(ii) to our registration statement on
Post-Effective Amendment No. 1 to Form F-6 (File No. 333-108834) filed on
April 3, 2006).
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(d)
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Amendment
No. 1 to Amended and Restated Deposit Agreement dated as of April 6, 2006
among ASE Inc., Citibank N.A., as depositary, and Holders and Beneficial
Holders of American Depositary Shares evidenced by American Depositary
Receipts issued thereunder, including the form of American Depositary
Receipt (incorporated by reference to Exhibit (a)(ii) to our registration
statement on Post-Effective Amendment No. 2 to Form F-6 (File No.
333-108834) filed on October 25,
2006).
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(e)
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Form
of Amendment No. 2 to Amended and Restated Deposit Agreement among ASE
Inc., Citibank N.A., as depositary, and Holders and Beneficial Holders of
American Depositary Shares evidenced by American Depositary Receipts
issued thereunder, including the form of American Depositary Receipt
(incorporated by reference to Exhibit (a)(iii) to our registration
statement on Post-Effective Amendment No. 2 to Form F-6 (File No.
333-108834) filed on October 25,
2006).
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4.
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(a)
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Asset
Purchase Agreement dated as of July 3, 1999 among ASE (Chung Li) Inc., ASE
Inc., Motorola Electronics Taiwan, Ltd. and Motorola, Inc. (incorporated
by reference to Exhibit 10.2 to ASE Test’s registration statement on Form
F-3 (File No. 333-10892) filed on September 27, 1999 (the “ASE Test 1999
Form-3”)).
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(b)
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Agreement
dated as of June 5, 2002 among ASE (Chung Li) Inc., ASE Inc., Motorola
Electronics Taiwan, Ltd. and Motorola, Inc. amending certain earn-out
arrangements provided for in Section 2.09(b)(ii)(D) of the Asset Purchase
Agreement dated as of July 3, 1999 among the same parties (incorporated by
reference to Exhibit 4(b) to our annual report on Form 20-F (File No.
001-16125) for the year ended December 31, 2002 filed on June 30,
2003).
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(c)
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Stock
Purchase Agreement dated as of July 3, 1999 among ASE Investment (Labuan)
Inc., ASE Inc., Motorola Asia Ltd. and Motorola, Inc. relating to the
purchase and sale of 100.0% of the common stock of Motorola Korea Ltd.
(incorporated by reference to Exhibit 10.3 to the ASE Test 1999 Form
F-3).
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(d)†
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BGA
Immunity Agreement dated as of January 25, 1994 between ASE Inc. and
Motorola, Inc. (incorporated by reference to Exhibit 10.6 to the Form
F-1).
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(e)†
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Amendment
dated March 18, 2003 renewing the BGA Immunity Agreement dated as of
January 25, 1994 between ASE Inc. and Motorola, Inc. (incorporated by
reference to Exhibit 4(g) to our annual report on Form 20-F (File No.
001-16125) for the year ended December 31, 2003 filed on June 30,
2004).
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(f)
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Consent
dated June 10, 2004 to the Assignment of the BGA Immunity Agreement
between ASE Inc. and Motorola, Inc. dated January 25, 1994 (incorporated
by reference to Exhibit 4(h) to our annual report on Form 20-F (File No.
001-16125) for the year ended December 31, 2003 filed on June 30,
2004).
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(g)
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Asset
Purchase Agreement by and among Flextronics Manufacturing (M) Sdn Bhd, as
Buyer, ASE Electronics (M) Sdn. Bhd. as Company, dated as of October 3,
2005 (incorporated by reference to Exhibit 4(g) to our annual report on
Form 20-F (File No. 001-16125) for the year ended December 31, 2005 filed
on June 19, 2006).
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(h)
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Joint
Venture Agreement dated as of July 14, 2006 among Advanced Semiconductor
Engineering, Inc. and Powerchip Semiconductor Corp. relating to the
establishment of, and our investment of 60.0% in, PowerASE (incorporated
by reference to Exhibit 4(r) to our annual report on Form 20-F (File No.
001-16125) for the year ended December 31, 2006 filed on June 25, 2007, as
amended).
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(i)
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Sale
and Purchase Agreement dated January 11, 2007 among J&R Holding
Limited and Seacoast Profits Limited relating to our acquisition of 100%
of GAPT (incorporated by reference to Exhibit 4(s) to our annual report on
Form 20-F (File No. 001-16125) for the year ended December 31, 2006 filed
on June 25, 2007, as amended).
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(j)
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Equity
Interests Transfer Agreement dated August 6, 2007 by and among NXP B.V.,
NXP Semiconductors Suzhou Ltd. and J&R Holding Limited relating to our
acquisition of 60% of ASEN, our joint venture with NXP
Semiconductors.
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(k)
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Scheme
Implementation Agreement dated September 4, 2007 between Advanced
Semiconductor Engineering, Inc. and ASE Test Limited relating to our
acquisition of all the outstanding ordinary shares of, and the
privatization of, ASE Test (incorporated by reference to Appendix A to
Exhibit (a)(1) to Schedule 13E-3 (File No. 005-55723) filed by ASE Test on
January 4, 2008).
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(l)
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Syndicated
Loan Agreement in the amount of NT$24,750 million dated March 3, 2008
among Advanced Semiconductor Engineering, Inc., Citibank, N.A., Taipei
Branch and the banks and banking institutions listed on Schedule I thereto
relating to our acquisition of all the outstanding ordinary shares of, and
the privatization of, ASE
Test.
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(m)
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Equity
Purchase Agreement dated March 17, 2008 between Aimhigh Global Corp., TCC
Steel and J&R Holding Limited in respect of Weihai Aimhigh Electronic
Co. Ltd. relating to our acquisition of 100% of ASE (Weihai),
Inc.
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(n)
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Syndicated
Loan Agreement in the amount of US$200 million dated May 29, 2008 among
Advanced Semiconductor Engineering, Inc., Citibank, N.A., Taipei Branch
and the banks and banking institutions listed on Schedule I thereto
relating to our acquisition of all the outstanding ordinary shares of, and
the privatization of, ASE Test.
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8.
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List
of Subsidiaries.
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12.
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(a)
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Certification
of Jason C.S. Chang, Chief Executive Officer of Advanced Semiconductor
Engineering, Inc. required by Rule 13a-14(a) of the Exchange
Act.
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(b)
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Certification
of Joseph Tung, Chief Financial Officer of Advanced Semiconductor
Engineering, Inc. required by Rule 13a-14(a) of the Exchange
Act.
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13.
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Certification
of the Chief Executive Officer and the Chief Financial Officer of Advanced
Semiconductor Engineering, Inc. required by Rule 13a-14(b) of the Exchange
Act and Section 1350 of Chapter 63 of Title 18 of the United States
Code.
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____________________
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†
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Does
not contain portions for which confidential treatment has been
granted.
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The
Company agrees to furnish to the Securities and Exchange Commission upon request
a copy of any instrument which defines the rights of holders of long-term debt
of the Company and its consolidated subsidiaries.
SIGNATURES
The
registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.
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ADVANCED
SEMICONDUCTOR ENGINEERING, INC.
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By:
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/s/
Joseph Tung
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Joseph
Tung
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Chief
Financial Officer
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Date:
June 24, 2009
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
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Page
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Consolidated
Financial Statements of Advanced Semiconductor Engineering, Inc. and
Subsidiaries
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Advanced
Semiconductor Engineering,
Inc. and Subsidiaries
Inc. and Subsidiaries
Consolidated
Financial Statements for the
Years Ended December 31, 2006, 2007 and 2008
and
Report
of Independent Registered Public Accounting Firm
The Board
of Directors and Shareholders
Advanced
Semiconductor Engineering, Inc.
We have
audited the accompanying consolidated balance sheets of Advanced Semiconductor
Engineering, Inc. (a corporation incorporated under the laws of the Republic of
China) and its subsidiaries (collectively, the “Company”) as of December 31,
2007 and 2008, and the related consolidated statements of income, changes in
shareholders’ equity and cash flows for each of the three years in the period
ended December 31, 2008, all expressed in New Taiwan dollars. These
consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We
conducted our audits in accordance with the Rules Governing the Audit of
Financial Statements by Certified Public Accountants, auditing standards
generally accepted in the Republic of China (“ROC”) and the Standards of the
Public Company Accounting Oversight Board (United States). Those
rules and standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company as
of December 31, 2007 and 2008, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
2008, in conformity with the Guidelines Governing the Preparation of Financial
Reports by Securities Issuers and accounting principles generally accepted in
the Republic of China.
As
discussed in Note 30 to the consolidated financial statements, the Company
incurred fire damage to its production line and facilities in Chung Li, Taiwan
on May 1, 2005. The Company recognized an estimated loss of
NT$13,479,079 thousand for the damage to its inventories, building, machinery
and equipment, net of NT$4,641,000 thousand of insurance receivable in
2005. The Company reached a final settlement with the insurers in
June 2006 with regards to the fire damage referred to above. The
final settlement amount of NT$8,068,000 thousand, less the NT$4,641,000 thousand
recorded in 2005 and the related repair and restoring expenses of NT$1,043,132
thousand, was recorded as a gain in 2006. The Company also reversed
NT$2,190,583 thousand of previously recorded impairment charges on these
fire-damaged building, machinery and equipment due to an increase in the
estimated service potential of the assets. The net amount of
NT$4,574,451 thousand was recognized as a gain on insurance settlement and
impairment recovery.
As
discussed in Note 3 to the consolidated financial statements, starting from
January 1, 2008, the Company changed its method of accounting for bonuses paid
to employees, directors and supervisors upon adoption of Interpretation 96-052,
“Accounting for Bonuses to Employees, Directors and Supervisors” issued by the
ROC Accounting Research and Development Foundation (“ARDF”) in March
2007. Besides, the Company adopted the ROC Statement of Financial
Accounting Standards (“SFAS”) No. 34, “Financial
Instruments: Recognition and Measurement”, No. 36, “Financial
Instruments: Disclosure and Presentation” and other revised SFASs on
January 1, 2006.
Accounting principles generally accepted
in the ROC differ in certain significant respects from
accounting principles generally accepted in the United States of America. Information relating
to the nature and effect of such differences is presented in Note 32 to the
consolidated financial statements.
Our audits also comprehended the translation
of New Taiwan dollar amounts into U.S. dollar amounts
and, in our opinion, such translation has been made in conformity with the basis
stated in Note 2 to the
consolidated financial statements. Such U.S. dollar
amounts are presented
solely for the convenience of the readers.
We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company’s internal control over financial
reporting as of December 31, 2008, based on the criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated April 16, 2009 expressed an unqualified
opinion on the Company’s internal control over financial reporting.
/s/
Deloitte & Touche
Taipei,
Taiwan
The
Republic of China
April 16,
2009
ADVANCED
SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
(Amounts
in Thousands, Except Par Value)
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December
31
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December
31
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2007
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2008
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2007
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2008
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ASSETS
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NT$
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NT$
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US$
(Note 2)
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LIABILITIES
AND SHAREHOLDERS’ EQUITY
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NT$
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NT$
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US$
(Note 2)
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CURRENT
ASSETS
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CURRENT
LIABILITIES
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Cash
and cash equivalents (Notes 2 and 4)
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$ | 17,157,935 | $ | 26,138,930 | $ | 797,892 |
Short-term
borrowings (Note 16)
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$ | 8,922,330 | $ | 8,779,267 | $ | 267,987 | ||||||||||||
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Financial
assets at fair value through profit or loss - current (Notes 2, 5 and
26)
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1,601,994 | 537,480 | 16,407 |
Short-term
bills payable (Notes 2 and 17)
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149,831 | - | - | ||||||||||||||||||
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Available-for-sale
financial assets - current (Notes 2, 6 and 26)
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9,406,327 | 279,812 | 8,541 |
Financial liabilities
at fair value through profit or loss - current (Notes 2, 5 and
26)
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44,331 | 82,876 | 2,530 | ||||||||||||||||||
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Held-to-maturity
financial assets - current (Notes 2 and 26)
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50,000 | - | - |
Accounts
payable
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9,242,092 | 5,167,347 | 157,733 | ||||||||||||||||||
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Bond
investments with no active market - current (Notes 2, 7 and
26)
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- | 450,000 | 13,736 |
Income
tax payable (Notes 2 and 24)
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1,237,325 | 1,265,274 | 38,622 | ||||||||||||||||||
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Accounts
receivable, net (Notes 2 and 8)
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18,747,503 | 11,388,105 | 347,622 |
Accrued
expenses (Note 20)
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4,045,167 | 4,194,044 | 128,023 | ||||||||||||||||||
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Other
receivables
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936,466 | 619,033 | 18,896 |
Payable
for properties
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4,137,437 | 2,246,924 | 68,587 | ||||||||||||||||||
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Guarantee
deposits - current (Note 26)
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332,717 | 16,074 | 491 |
Current
portion of bonds payable (Notes 2, 18 and 26)
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1,375,000 | - | - | ||||||||||||||||||
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Inventories
(Notes 2, 9 and 28)
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5,595,745 | 4,991,711 | 152,372 |
Current
portion of long-term bank loans (Notes 19, 26 and 28)
|
5,258,946 | 2,670,845 | 81,528 | ||||||||||||||||||
|
Deferred
income tax assets - current (Notes 2 and 24)
|
2,075,256 | 1,085,448 | 33,133 |
Deferred
income tax liabilities (Notes 2 and 24)
|
121,499 | - | - | ||||||||||||||||||
|
Other
current assets
|
998,078 | 860,258 | 26,259 |
Current
portion of capital lease obligations (Notes 2 and 26)
|
67,838 | 23,133 | 706 | ||||||||||||||||||
|
Other
|
1,149,158 | 840,984 | 25,671 | ||||||||||||||||||||||
|
Total
current assets
|
56,902,021 | 46,366,851 | 1,415,349 | ||||||||||||||||||||||
|
Total
current liabilities
|
35,750,954 | 25,270,694 | 771,387 | ||||||||||||||||||||||
|
LONG-TERM
INVESTMENTS
|
|||||||||||||||||||||||||
|
Financial
assets carried at cost - noncurrent (Notes 2, 10 and 26)
|
525,025 | 575,495 | 17,567 |
LONG-TERM
DEBTS
|
|||||||||||||||||||||
|
Equity
method investments (Notes 2 and 11)
|
4,325,119 | 3,751,543 | 114,516 |
Long-term
bonds payable (Notes 2, 18 and 26)
|
5,889,735 | 1,375,000 | 41,972 | ||||||||||||||||||
|
Long-term
bank loans (Notes 19, 26 and 28)
|
18,021,762 | 49,839,565 | 1,521,354 | ||||||||||||||||||||||
|
Total
long-term investments
|
4,850,144 | 4,327,038 | 132,083 |
Hedging
derivative liabilities - noncurrent (Notes 2 and 26)
|
- | 391,695 | 11,956 | ||||||||||||||||||
|
Capital
lease obligations (Notes 2 and 26)
|
24,512 | 15,927 | 486 | ||||||||||||||||||||||
|
PROPERTY,
PLANT AND EQUIPMENT (Notes 2, 12, 27 and 28)
|
|||||||||||||||||||||||||
|
Cost
|
Total
long-term debts
|
23,936,009 | 51,622,187 | 1,575,768 | |||||||||||||||||||||
|
Land
|
2,287,739 | 2,395,951 | 73,136 | ||||||||||||||||||||||
|
Buildings
and improvements
|
36,355,071 | 39,763,199 | 1,213,773 |
OTHER
LIABILITIES
|
|||||||||||||||||||||
|
Machinery
and equipment
|
113,204,238 | 129,424,251 | 3,950,679 |
Accrued
pension cost (Notes 2 and 20)
|
2,168,954 | 2,663,776 | 81,312 | ||||||||||||||||||
|
Transportation
equipment
|
192,330 | 212,956 | 6,500 |
Deferred
income tax liabilities (Notes 2 and 24)
|
150,009 | 151,729 | 4,632 | ||||||||||||||||||
|
Furniture
and fixtures
|
3,250,435 | 3,765,175 | 114,932 |
Other
|
631,636 | 520,859 | 15,899 | ||||||||||||||||||
|
Leased
assets and leasehold improvements
|
571,940 | 390,209 | 11,911 | ||||||||||||||||||||||
|
Total
cost
|
155,861,753 | 175,951,741 | 5,370,931 |
Total
other liabilities
|
2,950,599 | 3,336,364 | 101,843 | ||||||||||||||||||
|
Less: Accumulated
depreciation
|
(84,480,618 | ) | (98,560,461 | ) | (3,008,561 | ) | |||||||||||||||||||
|
Less: Accumulated
impairment
|
- | (12,991 | ) | (397 | ) |
Total
liabilities
|
62,637,562 | 80,229,245 | 2,448,998 | ||||||||||||||||
| 71,381,135 | 77,378,289 | 2,361,973 | |||||||||||||||||||||||
|
Construction
in progress
|
3,442,925 | 4,989,149 | 152,294 |
EQUITY
ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
|
|||||||||||||||||||||
|
Machinery
in transit and prepayments
|
6,964,269 | 2,390,546 | 72,971 |
Capital
stock - NT$10 par value
|
|||||||||||||||||||||
|
Authorized
- 8,000,000 thousand shares
|
|||||||||||||||||||||||||
|
Net
property, plant and equipment
|
81,788,329 | 84,757,984 | 2,587,238 |
Issued
- 5,447,559 thousand shares in 2007 and 5,690,428 thousand shares
in
|
|||||||||||||||||||||
|
2008 (Note
21)
|
54,475,589 | 56,904,278 | 1,737,005 | ||||||||||||||||||||||
|
INTANGIBLE
ASSETS
|
Capital
received in advance (Note 21)
|
491,883 | 3,387 | 103 | |||||||||||||||||||||
|
Patents
(Notes 2 and 14)
|
5,950 | 130,373 | 3,980 |
Capital
surplus (Notes 18 and 21)
|
|||||||||||||||||||||
|
Goodwill
(Notes 2 and 13)
|
3,188,117 | 9,456,091 | 288,647 |
Capital
in excess of par value
|
1,842,027 | 1,329,634 | 40,587 | ||||||||||||||||||
|
Deferred
pension cost (Notes 2 and 20)
|
52,058 | 73,793 | 2,253 |
Treasury
stock transactions
|
288,713 | 823,813 | 25,147 | ||||||||||||||||||
|
Acquired
special technology (Notes 2 and 14)
|
- | 626,362 | 19,120 |
Long-term
investment
|
3,535,840 | 3,536,854 | 107,963 | ||||||||||||||||||
|
Land
use rights (Notes 2, 14 and 28)
|
1,486,209 | 1,438,351 | 43,906 |
Other
|
728,254 | 682,986 | 20,848 | ||||||||||||||||||
|
Other
intangible assets (Notes 2 and 14)
|
- | 867,079 | 26,468 |
Total
capital surplus
|
6,394,834 | 6,373,287 | 194,545 | ||||||||||||||||||
|
Retained
earnings (Note 21)
|
13,898,213 | 9,221,404 | 281,484 | ||||||||||||||||||||||
|
Total
intangible assets
|
4,732,334 | 12,592,049 | 384,374 |
Other
equity adjustments (Notes 2, 20 and 21)
|
|||||||||||||||||||||
|
Unrealized
gain or loss on financial instruments
|
402,518 | (439,438 | ) | (13,414 | ) | ||||||||||||||||||||
|
OTHER
ASSETS
|
Cumulative
translation adjustments
|
2,179,808 | 4,873,957 | 148,778 | |||||||||||||||||||||
|
Idle
assets (Notes 2, 15 and 28)
|
801,969 | 361,388 | 11,031 |
Unrecognized
pension cost
|
(6,516 | ) | (230,401 | ) | (7,033 | ) | |||||||||||||||
|
Guarantee
deposits - noncurrent (Note 26)
|
157,589 | 45,150 | 1,378 |
Treasury
stock - 210,715 thousand shares in 2007 and 431,232 thousand shares
in
|
|||||||||||||||||||||
|
Deferred
charges (Note 2)
|
1,353,603 | 1,156,213 | 35,293 |
2008
|
(2,662,968 | ) | (7,034,480 | ) | (214,728 | ) | |||||||||||||||
|
Deferred
income tax assets - noncurrent (Notes 2 and 24)
|
1,461,402 | 1,629,709 | 49,747 |
Total
other equity adjustments
|
(87,158 | ) | (2,830,362 | ) | (86,397 | ) | |||||||||||||||
|
Restricted
assets (Notes 26 and 28)
|
279,068 | 191,416 | 5,843 | ||||||||||||||||||||||
|
Other
|
50,991 | 762,189 | 23,266 |
Total
equity attributable to shareholders of the parent
|
75,173,361 | 69,671,994 | 2,126,740 | ||||||||||||||||||
|
Total
other assets
|
4,104,622 | 4,146,065 | 126,558 |
MINORITY
INTEREST IN CONSOLIDATED SUBSIDIARIES
|
14,566,527 | 2,288,748 | 69,864 | ||||||||||||||||||
|
Total
shareholders' equity
|
89,739,888 | 71,960,742 | 2,196,604 | ||||||||||||||||||||||
|
TOTAL
|
$ | 152,377,450 | $ | 152,189,987 | $ | 4,645,602 |
TOTAL
|
$ | 152,377,450 | $ | 152,189,987 | $ | 4,645,602 | ||||||||||||
The
accompanying notes are an integral part of the consolidated financial
statements.
(With
Deloitte & Touche audit report dated April 16, 2009)
ADVANCED
SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
(Amounts
in Thousands, Except Per Share Data)
|
Year
Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
(Note 2)
|
|||||||||||||
|
NET
REVENUES (Note 2)
|
||||||||||||||||
|
Packaging
|
$ | 76,820,475 | $ | 78,516,274 | $ | 73,391,622 | $ | 2,240,281 | ||||||||
|
Testing
|
21,429,584 | 20,007,839 | 19,021,360 | 580,628 | ||||||||||||
|
Other
|
2,173,588 | 2,638,956 | 2,017,930 | 61,597 | ||||||||||||
|
Total
net revenues
|
100,423,647 | 101,163,069 | 94,430,912 | 2,882,506 | ||||||||||||
|
COST
OF REVENUES (Note 23)
|
||||||||||||||||
|
Packaging
|
57,539,702 | 57,926,623 | 58,691,485 | 1,791,559 | ||||||||||||
|
Testing
|
12,701,354 | 12,404,933 | 12,554,008 | 383,212 | ||||||||||||
|
Other
|
1,402,211 | 1,743,150 | 656,221 | 20,031 | ||||||||||||
|
Total
cost of revenues
|
71,643,267 | 72,074,706 | 71,901,714 | 2,194,802 | ||||||||||||
|
GROSS
PROFIT
|
28,780,380 | 29,088,363 | 22,529,198 | 687,704 | ||||||||||||
|
OPERATING
EXPENSES (Notes 23, 27 and 29)
|
||||||||||||||||
|
Research
and development
|
2,632,036 | 3,284,088 | 3,876,822 | 118,340 | ||||||||||||
|
Selling
|
1,227,842 | 994,229 | 1,158,637 | 35,367 | ||||||||||||
|
General
and administrative
|
4,474,071 | 5,512,880 | 5,694,224 | 173,816 | ||||||||||||
|
Total
operating expenses
|
8,333,949 | 9,791,197 | 10,729,683 | 327,523 | ||||||||||||
|
INCOME
FROM OPERATIONS
|
20,446,431 | 19,297,166 | 11,799,515 | 360,181 | ||||||||||||
|
NON-OPERATING
INCOME AND GAINS
|
||||||||||||||||
|
Interest
income (Note 26)
|
406,364 | 348,660 | 326,772 | 9,975 | ||||||||||||
|
Gain
on valuation of financial assets, net (Notes 2, 5 and 26)
|
29,278 | 205,997 | 286,914 | 8,758 | ||||||||||||
|
Equity
in earnings of equity method investees (Notes 2 and 11)
|
315,654 | 345,705 | 77,450 | 2,364 | ||||||||||||
|
Foreign
exchange gain, net
|
92,819 | 403,532 | 282,031 | 8,609 | ||||||||||||
|
Gain
on insurance settlement and impairment recovery (Note 30)
|
4,574,451 | - | - | - | ||||||||||||
|
Other
|
961,041 | 1,176,137 | 985,336 | 30,077 | ||||||||||||
|
Total
non-operating income and gains
|
6,379,607 | 2,480,031 | 1,958,503 | 59,783 | ||||||||||||
|
NON-OPERATING
EXPENSES AND LOSSES
|
||||||||||||||||
|
Interest
expense (Notes 2, 12 and 26)
|
1,620,294 | 1,574,524 | 1,813,296 | 55,351 | ||||||||||||
|
Loss
on valuation of financial liabilities (Notes 2, 5 and 26)
|
289,847 | 28,583 | 732,204 | 22,351 | ||||||||||||
|
Loss
on inventory valuation and obsolescence (Note 2)
|
1,143,925 | 634,457 | 554,106 | 16,914 | ||||||||||||
|
Impairment
loss (Notes 2, 6, 10, 12 and 15)
|
- | 994,682 | 293,319 | 8,954 | ||||||||||||
|
Other
(Notes 8, 20 and 27)
|
1,520,548 | 1,193,083 | 889,328 | 27,146 | ||||||||||||
|
Total
non-operating expenses and losses
|
4,574,614 | 4,425,329 | 4,282,253 | 130,716 | ||||||||||||
|
INCOME
BEFORE INCOME TAX
|
22,251,424 | 17,351,868 | 9,475,765 | 289,248 | ||||||||||||
|
INCOME
TAX EXPENSE (Notes 2 and 24)
|
2,084,787 | 3,357,384 | 2,268,282 | 69,239 | ||||||||||||
|
INCOME
BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES
|
20,166,637 | 13,994,484 | 7,207,483 | 220,009 | ||||||||||||
|
CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING PRINCIPLE, NET OF INCOME TAX BENEFIT OF
NT$114,168 THOUSAND IN 2006 (Note 3)
|
(342,503 | ) | - | - | - | |||||||||||
|
NET
INCOME
|
$ | 19,824,134 | $ | 13,994,484 | $ | 7,207,483 | $ | 220,009 | ||||||||
|
ATTRIBUTABLE
TO
|
||||||||||||||||
|
Shareholders
of the parent
|
$ | 17,416,151 | $ | 12,165,249 | $ | 6,160,052 | $ | 188,036 | ||||||||
|
Minority
interest
|
2,407,983 | 1,829,235 | 1,047,431 | 31,973 | ||||||||||||
| $ | 19,824,134 | $ | 13,994,484 | $ | 7,207,483 | $ | 220,009 | |||||||||
(Continued)
ADVANCED
SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME
(Amounts
in Thousands, Except Per Share Data)
|
Year
Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
(Note 2)
|
|||||||||||||
|
EARNINGS
PER SHARE (Note 25)
|
||||||||||||||||
|
Basic
earnings per share
|
||||||||||||||||
|
Before income tax
|
||||||||||||||||
|
Income
before cumulative effect of changes in accounting
principles
|
3.61 | 2.55 | 1.36 | 0.04 | ||||||||||||
|
Cumulative
effect of changes in accounting principles
|
(0.09 | ) | - | - | - | |||||||||||
|
Income
attributable to shareholders of the parent
|
3.52 | 2.55 | 1.36 | 0.04 | ||||||||||||
|
After income
tax
|
||||||||||||||||
|
Income
before cumulative effect of changes in accounting
principles
|
3.36 | 2.26 | 1.14 | 0.03 | ||||||||||||
|
Cumulative
effect of changes in accounting principles
|
(0.07 | ) | - | - | - | |||||||||||
|
Income
attributable to shareholders of the parent
|
3.29 | 2.26 | 1.14 | 0.03 | ||||||||||||
|
Diluted
earnings per share
|
||||||||||||||||
|
Before income
tax
|
||||||||||||||||
|
Income
before cumulative effect of changes in accounting
principles
|
3.44 | 2.46 | 1.33 | 0.04 | ||||||||||||
|
Cumulative
effect of changes in accounting principles
|
(0.08 | ) | - | - | - | |||||||||||
|
Income
attributable to shareholders of the parent
|
3.36 | 2.46 | 1.33 | 0.04 | ||||||||||||
|
After income
tax
|
||||||||||||||||
|
Income
before cumulative effect of changes in accounting
principles
|
3.20 | 2.18 | 1.12 | 0.03 | ||||||||||||
|
Cumulative
effect of changes in accounting principles
|
(0.06 | ) | - | - | - | |||||||||||
|
Income
attributable to shareholders of the parent
|
3.14 | 2.18 | 1.12 | 0.03 | ||||||||||||
|
EARNINGS PER ADS (Note
25)
|
||||||||||||||||
|
Basic earnings per
ADS
|
||||||||||||||||
|
Before income
tax
|
||||||||||||||||
|
Income
before cumulative effect of changes in accounting
principles
|
18.02 | 12.73 | 6.81 | 0.21 | ||||||||||||
|
Cumulative
effect of changes in accounting principles
|
(0.43 | ) | - | - | - | |||||||||||
|
Income
attributable to shareholders of the parent
|
17.59 | 12.73 | 6.81 | 0.21 | ||||||||||||
|
After income
tax
|
||||||||||||||||
|
Income
before cumulative effect of changes in accounting
principles
|
16.78 | 11.28 | 5.71 | 0.17 | ||||||||||||
|
Cumulative
effect of changes in accounting principles
|
(0.32 | ) | - | - | - | |||||||||||
|
Income
attributable to shareholders of the parent
|
16.46 | 11.28 | 5.71 | 0.17 | ||||||||||||
|
Diluted
earnings per ADS
|
||||||||||||||||
|
Before income
tax
|
||||||||||||||||
|
Income
before cumulative effect of changes in accounting
principles
|
17.20 | 12.32 | 6.67 | 0.20 | ||||||||||||
|
Cumulative
effect of changes in accounting principles
|
(0.41 | ) | - | - | - | |||||||||||
|
Income
attributable to shareholders of the parent
|
16.79 | 12.32 | 6.67 | 0.20 | ||||||||||||
|
After income
tax
|
||||||||||||||||
|
Income
before cumulative effect of changes in accounting
principles
|
16.00 | 10.90 | 5.59 | 0.17 | ||||||||||||
|
Cumulative
effect of changes in accounting principles
|
(0.31 | ) | - | - | - | |||||||||||
|
Income
attributable to shareholders of the parent
|
15.69 | 10.90 | 5.59 | 0.17 | ||||||||||||
The
accompanying notes are an integral part of the consolidated financial
statements.
|
(With
Deloitte & Touche audit report dated April 16, 2009)
|
(Concluded)
|
ADVANCED
SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
(Amount
in Thousands)
|
Retained
Earnings (Accumulated Deficits)
|
Other
Equity Adjustments
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
Capital
Stock |
Capital
Received in Advance
|
Capital
Surplus
|
Legal
Reserve
|
Unappropriated
Earnings (Accumulated Deficits)
|
Total
|
Unrealized
Gain (Loss) on Financial Instruments
|
Cumulative
Translation Adjustments
|
Unrecognized
Pension Cost
|
Treasury
Stock
|
Minority
Interest
|
Total
Shareholders’ Equity
|
|||||||||||||||||||||||||||||||||||||
|
New
Taiwan Dollars
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
BALANCE,
JANUARY 1, 2006
|
$ | 45,573,723 | $ | 156,228 | $ | 5,916,292 | $ | 1,746,913 | $ | (4,492,468 | ) | $ | (2,745,555 | ) | $ | (69,914 | ) | $ | 1,072,511 | $ | (17,421 | ) | $ | (2,808,436 | ) | $ | 7,901,988 | $ | 54,979,416 | |||||||||||||||||||
|
Effect
of adopting ROC SFAS No. 34
|
- | - | - | - | - | - | (129,179 | ) | - | - | - | - | (129,179 | ) | ||||||||||||||||||||||||||||||||||
|
Offset
against deficits
|
- | - | (2,314,447 | ) | (1,746,913 | ) | 4,061,360 | 2,314,447 | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
|
Unrealized
gain on available-for-sale financial assets
|
- | - | - | - | - | - | 16,827 | - | - | - | - | 16,827 | ||||||||||||||||||||||||||||||||||||
|
Valuation
gain on derivative financial instruments
|
- | - | - | - | - | - | 129,179 | - | - | - | - | 129,179 | ||||||||||||||||||||||||||||||||||||
|
Adjustment
of equity in subsidiaries
|
- | - | (65,104 | ) | - | - | - | 469,487 | - | (1,620 | ) | - | - | 402,763 | ||||||||||||||||||||||||||||||||||
|
Stock
options exercised by employees
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Common
stock
|
351,363 | (156,228 | ) | 269,027 | - | - | - | - | - | - | - | - | 464,162 | |||||||||||||||||||||||||||||||||||
|
Capital
received in advance
|
- | 384,428 | - | - | - | - | - | - | - | - | - | 384,428 | ||||||||||||||||||||||||||||||||||||
|
Net
income in 2006
|
- | - | - | - | 17,416,151 | 17,416,151 | - | - | - | - | 2,407,983 | 19,824,134 | ||||||||||||||||||||||||||||||||||||
|
Changes
in minority interest
|
- | - | - | - | - | - | - | - | - | - | 788,744 | 788,744 | ||||||||||||||||||||||||||||||||||||
|
Changes
in minority interest from acquisition of subsidiaries
|
- | - | - | - | - | - | - | - | - | - | 8,145 | 8,145 | ||||||||||||||||||||||||||||||||||||
|
Cumulative
translation adjustments
|
- | - | - | - | - | - | - | 258,140 | - | - | - | 258,140 | ||||||||||||||||||||||||||||||||||||
|
BALANCE,
DECEMBER 31, 2006
|
45,925,086 | 384,428 | 3,805,768 | - | 16,985,043 | 16,985,043 | 416,400 | 1,330,651 | (19,041 | ) | (2,808,436 | ) | 11,106,860 | 77,126,759 | ||||||||||||||||||||||||||||||||||
|
Appropriations
of 2006 earnings
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Legal
reserve
|
- | - | - | 1,698,504 | (1,698,504 | ) | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
|
Compensation
to directors and supervisors
|
- | - | - | - | (300,000 | ) | (300,000 | ) | - | - | - | - | - | (300,000 | ) | |||||||||||||||||||||||||||||||||
|
Bonus
to employees - cash
|
- | - | - | - | (535,028 | ) | (535,028 | ) | - | - | - | - | - | (535,028 | ) | |||||||||||||||||||||||||||||||||
|
Bonus
to employees - stock
|
535,029 | - | - | - | (535,029 | ) | (535,029 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
|
Cash
dividends - 15%
|
- | - | - | - | (6,941,011 | ) | (6,941,011 | ) | - | - | - | - | - | (6,941,011 | ) | |||||||||||||||||||||||||||||||||
|
Stock
dividends - 15%
|
6,941,011 | - | - | - | (6,941,011 | ) | (6,941,011 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
|
Adjustment
of equity in subsidiaries
|
- | - | 15,867 | - | - | - | (15,069 | ) | - | 12,525 | 145,468 | (142,209 | ) | 16,582 | ||||||||||||||||||||||||||||||||||
|
Cash
dividends paid to subsidiaries
|
- | - | 271,945 | - | - | - | - | - | - | - | - | 271,945 | ||||||||||||||||||||||||||||||||||||
|
Unrealized
gain on available-for-sale financial assets
|
- | - | - | - | - | - | 1,187 | - | - | - | - | 1,187 | ||||||||||||||||||||||||||||||||||||
|
Stock
options exercised by employees
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Common
stock
|
697,276 | (384,428 | ) | 649,392 | - | - | - | - | - | - | - | - | 962,240 | |||||||||||||||||||||||||||||||||||
|
Capital
received in advance
|
- | 61,952 | - | - | - | - | - | - | - | - | - | 61,952 | ||||||||||||||||||||||||||||||||||||
|
Conversion
of convertible bonds
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Common
stock
|
377,187 | - | 923,608 | - | - | - | - | - | - | - | - | 1,300,795 | ||||||||||||||||||||||||||||||||||||
|
Capital
received in advance
|
- | 429,931 | - | - | - | - | - | - | - | - | - | 429,931 | ||||||||||||||||||||||||||||||||||||
|
Capital
surplus from accrued interest on convertible bonds
|
- | - | 728,254 | - | - | - | - | - | - | - | - | 728,254 | ||||||||||||||||||||||||||||||||||||
|
Net
income in 2007
|
- | - | - | - | 12,165,249 | 12,165,249 | - | - | - | - | 1,829,235 | 13,994,484 | ||||||||||||||||||||||||||||||||||||
|
Changes
in minority interest
|
- | - | - | - | - | - | - | - | - | - | 1,283,507 | 1,283,507 | ||||||||||||||||||||||||||||||||||||
|
Changes
in minority interest from acquisition of subsidiaries
|
- | - | - | - | - | - | - | - | - | - | 489,134 | 489,134 | ||||||||||||||||||||||||||||||||||||
|
Cumulative
translation adjustments
|
- | - | - | - | - | - | - | 849,157 | - | - | - | 849,157 | ||||||||||||||||||||||||||||||||||||
|
BALANCE,
DECEMBER 31, 2007
|
54,475,589 | 491,883 | 6,394,834 | 1,698,504 | 12,199,709 | 13,898,213 | 402,518 | 2,179,808 | (6,516 | ) | (2,662,968 | ) | 14,566,527 | 89,739,888 | ||||||||||||||||||||||||||||||||||
|
Appropriations
of 2007 earnings
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Legal
reserve
|
- | - | - | 1,216,525 | (1,216,525 | ) | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
|
Compensation
to directors and supervisors
|
- | - | - | - | (216,000 | ) | (216,000 | ) | - | - | - | - | - | (216,000 | ) | |||||||||||||||||||||||||||||||||
|
Bonus
to employees - cash
|
- | - | - | - | (383,205 | ) | (383,205 | ) | - | - | - | - | - | (383,205 | ) | |||||||||||||||||||||||||||||||||
|
Bonus
to employees - stock
|
383,205 | - | - | - | (383,205 | ) | (383,205 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
|
Cash
dividends - 17.1%
|
- | - | - | - | (9,361,728 | ) | (9,361,728 | ) | - | - | - | - | - | (9,361,728 | ) | |||||||||||||||||||||||||||||||||
|
Stock
dividends - 0.9%
|
492,723 | - | - | - | (492,723 | ) | (492,723 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
|
Issuance
of common stock from capital surplus
|
1,094,939 | - | (1,094,939 | ) | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
|
Adjustment
of equity in subsidiaries
|
- | - | 1,014 | - | - | - | (432,247 | ) | - | (8,190 | ) | (3,271,523 | ) | (250,883 | ) | (3,961,829 | ) | |||||||||||||||||||||||||||||||
|
Cash
dividends of the parent paid to subsidiaries
|
- | - | 535,100 | - | - | - | - | - | - | - | - | 535,100 | ||||||||||||||||||||||||||||||||||||
|
Unrealized
gain on available-for-sale financial assets
|
- | - | - | - | - | - | (18,014 | ) | - | - | - | - | (18,014 | ) | ||||||||||||||||||||||||||||||||||
|
Change
in unrealized loss on cash flow hedging financial
instruments
|
- | - | - | - | - | - | (391,695 | ) | - | - | - | - | (391,695 | ) | ||||||||||||||||||||||||||||||||||
|
Stock
options exercised by employees
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Common
stock
|
198,067 | (61,952 | ) | 101,268 | - | - | - | - | - | - | - | - | 237,383 | |||||||||||||||||||||||||||||||||||
|
Capital
received in advance
|
- | 3,387 | - | - | - | - | - | - | - | - | - | 3,387 | ||||||||||||||||||||||||||||||||||||
|
Conversion
of convertible bonds
|
259,755 | (429,931 | ) | 436,010 | - | - | - | - | - | - | - | - | 265,834 | |||||||||||||||||||||||||||||||||||
|
Net
income in 2008
|
- | - | - | - | 6,160,052 | 6,160,052 | - | - | - | - | 1,047,431 | 7,207,483 | ||||||||||||||||||||||||||||||||||||
|
Changes
in minority interest
|
- | - | - | - | - | - | - | - | - | - | 1,435,527 | 1,435,527 | ||||||||||||||||||||||||||||||||||||
|
Changes
in minority interest from acquisition of subsidiaries
|
- | - | - | - | - | - | - | - | - | - | (14,509,854 | ) | (14,509,854 | ) | ||||||||||||||||||||||||||||||||||
|
Cumulative
translation adjustments
|
- | - | - | - | - | - | - | 2,694,149 | - | - | - | 2,694,149 | ||||||||||||||||||||||||||||||||||||
|
Change
in net loss not recognized as pension cost
|
- | - | - | - | - | - | - | - | (215,695 | ) | - | - | (215,695 | ) | ||||||||||||||||||||||||||||||||||
|
Acquisition
of treasury stock - 108,700 thousand shares
|
- | - | - | - | - | - | - | - | - | (1,099,989 | ) | - | (1,099,989 | ) | ||||||||||||||||||||||||||||||||||
|
BALANCE,
DECEMBER 31, 2008
|
$ | 56,904,278 | $ | 3,387 | $ | 6,373,287 | $ | 2,915,029 | $ | 6,306,375 | $ | 9,221,404 | $ | (439,438 | ) | $ | 4,873,957 | $ | (230,401 | ) | $ | (7,034,480 | ) | $ | 2,288,748 | $ | 71,960,742 | |||||||||||||||||||||
|
U.S.
Dollars (Note 2)
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
BALANCE,
DECEMBER 31, 2008
|
$ | 1,737,005 | $ | 103 | $ | 194,545 | $ | 88,981 | $ | 192,503 | $ | 281,484 | $ | (13,414 | ) | $ | 148,778 | $ | (7,033 | ) | $ | (214,728 | ) | $ | 69,864 | $ | 2,196,604 | |||||||||||||||||||||
The
accompanying notes are an integral part of the consolidated financial
statements.
(With
Deloitte & Touche audit report dated April 16, 2009)
ADVANCED
SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
(Amounts
in Thousands)
|
Year
Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
(Note 2)
|
|||||||||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||||||
|
Net
income
|
$ | 19,824,134 | $ | 13,994,484 | $ | 7,207,483 | $ | 220,009 | ||||||||
|
Cumulative
effect of changes in accounting principles
|
342,503 | - | - | - | ||||||||||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||||||
|
Depreciation
|
13,488,180 | 15,558,722 | 16,333,515 | 498,581 | ||||||||||||
|
Amortization
|
1,000,031 | 1,067,430 | 911,337 | 27,819 | ||||||||||||
|
Impairment
loss
|
- | 994,682 | 293,319 | 8,954 | ||||||||||||
|
Equity
in earnings of equity method investees, net of cash dividends of NT$92,807
thousand, NT$154,517 thousand and NT$292,094 thousand received in 2006,
2007 and 2008, respectively
|
(222,847 | ) | (191,188 | ) | 214,644 | 6,552 | ||||||||||
|
Accrued
interest on convertible bonds
|
247,155 | 177,111 | - | - | ||||||||||||
|
Provision
for inventory valuation and obsolescence
|
1,143,925 | 634,457 | 554,106 | 16,914 | ||||||||||||
|
Gain
on insurance settlement and impairment recovery
|
(4,574,451 | ) | - | - | - | |||||||||||
|
Deferred
income taxes
|
481,919 | 2,029,567 | 701,722 | 21,420 | ||||||||||||
|
Other
|
221,736 | (115,818 | ) | 31,359 | 957 | |||||||||||
|
Changes
in operating assets and liabilities
|
||||||||||||||||
|
Financial
assets for trading
|
2,773,501 | (44,091 | ) | 1,064,514 | 32,494 | |||||||||||
|
Accounts
receivable
|
4,192,941 | (5,441,054 | ) | 7,474,046 | 228,145 | |||||||||||
|
Other
receivable
|
573,125 | (95,286 | ) | 223,690 | 6,828 | |||||||||||
|
Inventories
|
1,363,885 | (317,620 | ) | 146,620 | 4,475 | |||||||||||
|
Other
current assets
|
(228,740 | ) | 88,894 | 125,702 | 3,837 | |||||||||||
|
Financial
liabilities for trading
|
(436,667 | ) | (308,252 | ) | 38,545 | 1,177 | ||||||||||
|
Accounts
payable
|
(3,679,883 | ) | 661,423 | (4,345,030 | ) | (132,632 | ) | |||||||||
|
Income
tax payable
|
1,294,249 | (94,783 | ) | 27,949 | 853 | |||||||||||
|
Accrued
expenses and other current liabilities
|
(522,403 | ) | (268,766 | ) | (412,809 | ) | (12,601 | ) | ||||||||
|
Other
liabilities
|
28,526 | (19,298 | ) | 138,087 | 4,215 | |||||||||||
|
Net
cash provided by operating activities
|
37,310,819 | 28,310,614 | 30,728,799 | 937,997 | ||||||||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||||||
|
Acquisition
of property, plant and equipment
|
(17,764,237 | ) | (17,190,432 | ) | (18,583,343 | ) | (567,257 | ) | ||||||||
|
Proceeds
from disposal of property, plant and equipment
|
413,540 | 347,470 | 187,521 | 5,724 | ||||||||||||
|
Acquisition
of available-for-sale financial assets
|
(16,652,840 | ) | (11,768,642 | ) | (7,692,649 | ) | (234,818 | ) | ||||||||
|
Proceeds
from disposal of available-for-sale financial assets
|
7,518,738 | 11,825,157 | 16,714,277 | 510,204 | ||||||||||||
|
Acquisition
of financial assets carried at cost
|
(320,881 | ) | (17,970 | ) | (74,477 | ) | (2,273 | ) | ||||||||
|
Proceeds
from disposal of financial assets carried at cost
|
- | 910,307 | 6,295 | 192 | ||||||||||||
|
Proceeds
from disposal of held-to-maturity financial assets
|
- | - | 50,000 | 1,526 | ||||||||||||
|
Acquisition
of subsidiaries
|
- | (846,889 | ) | (26,490,526 | ) | (808,624 | ) | |||||||||
|
Acquisition
of equity method investments
|
(309 | ) | - | - | - | |||||||||||
|
Acquisition
of bond investments with no active market
|
- | - | (450,000 | ) | (13,736 | ) | ||||||||||
|
Decrease
in guaranteed deposits
|
- | 147,399 | 429,082 | 13,098 | ||||||||||||
|
Proceeds
from insurance claims
|
5,768,000 | - | - | - | ||||||||||||
|
Decrease
(increase) in restricted assets
|
(69,326 | ) | 57,395 | 87,652 | 2,676 | |||||||||||
|
Increase
in other assets
|
(815,006 | ) | (894,892 | ) | (442,555 | ) | (13,509 | ) | ||||||||
|
Acquisition
of patents
|
- | (6,595 | ) | (96,109 | ) | (2,934 | ) | |||||||||
|
Acquisition
of land use rights
|
(182,187 | ) | (670,669 | ) | (4,335 | ) | (132 | ) | ||||||||
|
Net
cash used in investing activities
|
(22,104,508 | ) | (18,108,361 | ) | (36,359,167 | ) | (1,109,863 | ) | ||||||||
(Continued)
ADVANCED
SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Amounts
in Thousands)
|
Year
Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
(Note 2)
|
|||||||||||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||||||
|
Proceeds
from (repayments of):
|
||||||||||||||||
|
Short-term
borrowings
|
$ | (2,216,799 | ) | $ | 3,784,091 | $ | (1,702,051 | ) | $ | (51,956 | ) | |||||
|
Short-term
bills payable
|
- | 149,831 | (149,831 | ) | (4,574 | ) | ||||||||||
|
Bonds
payable
|
- | - | (5,549,983 | ) | (169,413 | ) | ||||||||||
|
Proceeds
from long-term debts
|
16,148,800 | 3,072,061 | 42,020,525 | 1,282,678 | ||||||||||||
|
Repayments
of long-term debts and capital lease obligations
|
(29,894,517 | ) | (7,711,576 | ) | (11,858,119 | ) | (361,969 | ) | ||||||||
|
Increase
(decrease) in guarantee deposits received
|
261,754 | (212,271 | ) | (48,634 | ) | (1,485 | ) | |||||||||
|
Increase
(decrease) in collection of accounts receivable sold
|
1,491,110 | (2,378,464 | ) | - | - | |||||||||||
|
Proceeds
from exercise of stock options by employees
|
848,590 | 1,024,192 | 240,770 | 7,350 | ||||||||||||
|
Compensation
to directors and supervisors and bonus to employees
|
(9,536 | ) | (835,028 | ) | (599,205 | ) | (18,291 | ) | ||||||||
|
Cash
dividends, net of cash dividends received by subsidiaries
|
- | (6,669,066 | ) | (8,826,628 | ) | (269,433 | ) | |||||||||
|
Repurchase
of treasury stock
|
- | - | (1,099,989 | ) | (33,577 | ) | ||||||||||
|
Increase
in minority interest
|
788,744 | 1,283,507 | 1,435,527 | 43,820 | ||||||||||||
|
Net
cash provided by (used in) financing activities
|
(12,581,854 | ) | (8,492,723 | ) | 13,862,382 | 423,150 | ||||||||||
|
EFFECT
OF EXCHANGE RATE CHANGES
|
(162,734 | ) | (281,670 | ) | 748,981 | 22,862 | ||||||||||
|
EFFECT
OF FIRST INCLUSION FOR CONSOLIDATION OF A SUBSIDIARY
|
4,564 | - | - | - | ||||||||||||
|
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
2,466,287 | 1,427,860 | 8,980,995 | 274,146 | ||||||||||||
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
13,263,788 | 15,730,075 | 17,157,935 | 523,746 | ||||||||||||
|
CASH
AND CASH EQUIVALENTS, END OF YEAR
|
$ | 15,730,075 | $ | 17,157,935 | $ | 26,138,930 | $ | 797,892 | ||||||||
|
SUPPLEMENTAL
INFORMATION
|
||||||||||||||||
|
Interest
paid (excluding capitalized interest)
|
$ | 1,689,075 | $ | 1,605,936 | $ | 1,719,200 | $ | 52,479 | ||||||||
|
Income
tax paid
|
$ | 308,619 | $ | 1,604,529 | $ | 1,538,611 | $ | 46,966 | ||||||||
|
Cash
paid for acquisition of property, plant and equipment
|
||||||||||||||||
|
Acquisition
of property, plant and equipment
|
$ | 17,730,935 | $ | 18,172,155 | $ | 16,623,705 | $ | 507,439 | ||||||||
|
Decrease
(increase) in payable
|
444,718 | (973,359 | ) | 1,963,582 | 59,938 | |||||||||||
|
Increase
in capital lease obligations
|
(411,416 | ) | (8,364 | ) | (3,944 | ) | (120 | ) | ||||||||
| $ | 17,764,237 | $ | 17,190,432 | $ | 18,583,343 | $ | 567,257 | |||||||||
|
Cash
received from disposal of property, plant and equipment
|
||||||||||||||||
|
Proceeds
from disposal of property, plant and equipment
|
$ | 637,541 | $ | 259,924 | $ | 100,162 | $ | 3,057 | ||||||||
|
Decrease
(increase) in other receivables
|
(224,001 | ) | 87,546 | 87,359 | 2,667 | |||||||||||
| $ | 413,540 | $ | 347,470 | $ | 187,521 | $ | 5,724 | |||||||||
(Continued)
ADVANCED
SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Amounts
in Thousands)
|
Year
Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
(Note 2)
|
|||||||||||||
|
Cash
paid for acquisition of new subsidiaries
|
||||||||||||||||
|
Fair
value of assets acquired from Top Master Enterprises Limited ("TME") and
Suzhou ASEN Semiconductors Co., Ltd. ("ASEN")
|
$ | - | $ | 10,244,745 | $ | - | $ | - | ||||||||
|
Less: Fair
value of liabilities from TME and ASEN
|
- | (7,094,243 | ) | - | - | |||||||||||
| - | 3,150,502 | - | - | |||||||||||||
|
Attributable
to minority interest of ASEN
|
- | (489,134 | ) | - | - | |||||||||||
|
Net
fair value
|
- | 2,661,368 | - | - | ||||||||||||
|
Less: Cash
received at acquisition
|
- | (1,814,479 | ) | - | - | |||||||||||
|
Net
cash outflow
|
$ | - | $ | 846,889 | $ | - | $ | - | ||||||||
|
Fair
value of assets acquired from ASE WeiHai Inc. (“ASE
WeiHai”)
|
$ | - | $ | - | $ | 919,505 | $ | 28,068 | ||||||||
|
Less: Fair
value of liabilities from ASE WeiHai
|
- | - | (706,649 | ) | (21,570 | ) | ||||||||||
|
Net
fair value
|
- | - | 212,856 | 6,498 | ||||||||||||
|
Less: Cash
received at acquisition
|
- | - | (31,641 | ) | (966 | ) | ||||||||||
|
Net
cash outflow
|
$ | - | $ | - | $ | 181,215 | $ | 5,532 | ||||||||
|
Net
cash outflow from acquisition of ASE Test Limited ("ASE Test") (Note
2)
|
$ | - | $ | - | $ | 26,309,311 | $ | 803,093 | ||||||||
|
FINANCING
ACTIVITIES NOT AFFECTING CASH FLOWS
|
||||||||||||||||
|
Bonds
converted to capital stock
|
$ | - | $ | 1,730,726 | $ | 265,834 | $ | 8,114 | ||||||||
|
Current
portion of long-term bank loans
|
1,292,040 | 5,258,946 | 2,670,845 | 81,528 | ||||||||||||
|
Current
portion of bonds payable
|
3,798,233 | 1,375,000 | - | - | ||||||||||||
|
Current
portion of capital lease obligations
|
540,736 | 67,838 | 23,133 | 706 | ||||||||||||
The
accompanying notes are an integral part of the consolidated financial
statements.
| (With Deloitte & Touche audit report dated April 16, 2009) |
(Concluded)
|
ADVANCED
SEMICONDUCTOR ENGINEERING, INC. AND SUBSIDIARIES
FOR
THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
(Amounts
in Thousands, Except Per Share Data and Unless Otherwise
Stated)
|
1.
|
ORGANIZATION
|
|
|
Advanced
Semiconductor Engineering, Inc. (“ASE Inc.” or including its subsidiaries,
collectively the “Company”), a corporation incorporated under the laws of
Republic of China (the “ROC”), is an independent provider of semiconductor
packaging and testing services and offers a comprehensive range of IC
packaging and testing service. The common shares of ASE Inc.
are traded on the Taiwan Stock Exchange (“TSE”) under the symbol
“2311”. Since September 2000, the common shares of ASE Inc.
have been traded on the New York Stock Exchange under the symbol “ASX” in
the form of American depositary shares (“ADS”). The Company and
its affiliates are together referred to as the “ASE
Group”.
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As
of December 31, 2007 and 2008, the Company had approximately 30,000 and
27,000 employees, respectively.
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2.
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SIGNIFICANT
ACCOUNTING POLICIES
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The
accompanying consolidated financial statements have been prepared in
conformity with the Guidelines Governing the Preparation of Financial
Reports by Securities Issuers and accounting principles generally accepted
in the Republic of China (“ROC GAAP”). Under these guidelines
and principles, the Company should reasonably estimate the amounts of
allowances for doubtful accounts, sales discounts and inventory
valuations, depreciation of property, plant, and equipment, losses on
impairment of assets, pension expenses, gains or losses on valuation of
financial instruments, valuation allowances for deferred income tax assets
and bonuses to employees, directors and supervisors. Actual
results may differ from these estimates. Significant accounting
policies are summarized as follows:
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Basis
of Presentation
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The
Company prepares its consolidated financial statements pursuant to ROC
GAAP with a reconciliation to accounting principles generally accepted in
the United States of America (“U.S. GAAP”) (Note 32). The
accompanying consolidated balance sheets are presented as of December 31,
2007 and 2008, and the accompanying consolidated statements of income,
changes in shareholders’ equity and cash flows are presented for each of
the three years in the period ended December 31,
2008.
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Basis
of Consolidation
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The
consolidated financial statements include the accounts of all directly and
indirectly majority owned subsidiaries of ASE Inc. All
significant intercompany balances and transactions are eliminated upon
consolidation.
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The
consolidated entities of ASE Group were as
follows:
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Percentage
of Ownership
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December
31
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Name of
Investor
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Name of
Investee
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2007
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2008
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Remark
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ASE Inc.
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A.S.E.
Holding Limited (ASE Holding)
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100.0
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100.0
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Holding
company
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J&R
Holding Limited (J&R Holding)
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100.0
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100.0
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Holding
company
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Innosource
Limited (Innosource)
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100.0
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100.0
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Holding
company
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Omniquest
Industrial Limited (Omniquest)
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65.6
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77.6
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Holding
company
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ASE
Test
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-
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53.4
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Holding
company
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ASE
Marketing & Service Japan Co., Ltd.
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100.0
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100.0
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Engaged
in marketing and provides sales services
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ASE
Technologies, Inc.
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99.5
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99.5
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In
the process of liquidation
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ASE
Network, Inc.
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90.0
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-
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Dissolved
in December 2008
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PowerASE
Technology Inc. (PowerASE)
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2.9
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56.0
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Engaged
in the packaging and testing of memory integrated
circuit
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ASE Holding
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ASEP
Realty Corporation
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100.0
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100.0
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In
the process of liquidation
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ASE
Holding Electronics (Philippines), Incorporated
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100.0
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100.0
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In
the process of liquidation
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ASE
Investment (Labuan) Inc.
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70.0
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70.0
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Holding
company
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ASE
Test
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11.1
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10.2
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Holding
company
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ASE Investment
(Labuan)
Inc.
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ASE
(Korea) Inc. (ASE Korea)
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100.0
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100.0
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Engaged
in the packaging and testing of integrated circuit
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J&R
Holding
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J&R
Industrial Inc.
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100.0
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100.0
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Engaged
in the leasing of substrate, packaging and testing
equipment
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ASE
Japan Co., Ltd. (ASE Japan)
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100.0
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100.0
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Engaged
in the packaging and testing of integrated circuit
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ASE
(U.S.) Inc. (ASE US)
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100.0
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100.0
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After-sales
service and sales
support
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(Continued)
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Percentage
of Ownership
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December
31
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Name of
Investor
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Name of
Investee
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2007
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2008
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Remark
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Global
Advanced Packaging Technology Ltd., Cayman Islands (GAPT
Cayman)
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-
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100.0
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Holding
company
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ASE
WeiHai
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-
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100.0
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Acquired
in 2008. Engaged in the packaging and testing of
semiconductors
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ASEN
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60.0
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60.0
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Engaged
in the packaging and testing of semiconductors
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Omniquest
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14.4
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9.4
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Holding
company
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ASE
Test
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39.3
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36.4
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Holding
company
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Grand
Innovation Co., Ltd.
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100.0
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-
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Dissolved
in May 2008
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PowerASE
Technology Holding Limited
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58.9
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-
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Dissolved
in May 2008
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TME
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100.0
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-
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Dissolved
in March 2008
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Innosource
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ASE
Module (Shanghai) Inc. (Module Shanghai)
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100.0
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100.0
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Will
engage in the production of electronic component and printed
circuit board
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Omniquest
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20.0
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13.0
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Holding
company
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Module
Shanghai
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ASE
(Shanghai) Inc. (ASE Shanghai)
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-
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0.6
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Engaged
in the production of substrates
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Omniquest
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ASE
Corporation
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100.0
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100.0
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Holding
company
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ASE
Corporation
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ASE
Mauritius Inc.
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100.0
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100.0
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Holding
company
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ASE
Labuan Inc.
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100.0
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100.0
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Holding
company
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ASE Mauritius
Inc.
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ASE
Hi-Tech (Shanghai) Inc.
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100.0
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100.0
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Will
engage in the production of electronic component and printed circuit
board
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ASE
(Kun Shan) Inc.
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100.0
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100.0
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Will
engage in the production of electronic component and printed circuit
board
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ASE
Shanghai
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100.0
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98.8
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Engaged
in the production of substrates
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ASE
Module (Kunshan) Inc.
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-
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100.0
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Will
engage in the production of electronic component
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(Continued)
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Percentage
of Ownership
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December
31
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Name of
Investor
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Name of
Investee
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2007
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2008
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Remark
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ASE Shanghai
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Shanghai
Ding Hui Real Estate Development Co., Ltd.
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90.0
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90.0
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Engaged
in the development and sale of real estate properties
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Advanced
Semiconductor Engineering (HK) Limited
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-
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100.0
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Newly
established in April 2008. Engaged in trading
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ASE Labuan
Inc.
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ASE
Electronics Inc. (ASE Electronics)
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100.0
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100.0
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Engaged
in the production of substrates
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ASE Test
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ASE
Test, Inc.
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100.0
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100.0
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Engaged
in the testing of semiconductors
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ASE
Test Holdings, Ltd.
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100.0
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100.0
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Holding
company
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ASE
Holdings (Singapore) Pte Ltd
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100.0
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100.0
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Holding
company
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ASE
Test Finance Limited
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100.0
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100.0
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Engaged
in financing activity
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ASE
Investment (Labuan) Inc.
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30.0
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30.0
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Holding
company
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ASE
Singapore Pte. Ltd.
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-
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100.0
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Engaged
in the testing of semiconductors, and restructured from ISE Labs, Inc.
(“ISE”) in November 2008
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ASE Test Holdings,
Ltd.
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ISE
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100.0
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100.0
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Engaged
in the testing of semiconductors
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ISE
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ASE
Singapore Pte. Ltd.
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100.0
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-
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Restructured
to ASE Test in November 2008
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ASE Holdings
(Singapore) Pte
Ltd
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ASE
Electronics (M) Sdn. Bhd. (ASE Malaysia)
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100.0
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100.0
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Engaged
in the packaging and testing of semiconductors
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TME
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GAPT
Cayman
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100.0
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-
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Holding
company
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GAPT Cayman
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ASE
Assembly & Test (HK) Limited
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100.0
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100.0
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Engaged
in trading
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ASE
Assembly & Test (Shanghai) Limited (ASESH AT)
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100.0
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100.0
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Engaged
in the packaging and testing of semiconductors
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ASESH AT
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Shanghai
Wei Yu Hong Xin Semiconductors Inc.
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100.0
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100.0
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In
the development stage
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ASE
Shanghai
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-
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0.6
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Engaged
in the production of substrates
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PowerASE Technology Holding
Limited
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PowerASE
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90.7
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-
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Restructured
to J&R Holding in May
2008
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(Concluded)
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On
May 30, 2008, ASE Inc. acquired from minority shareholders the ordinary
shares of ASE Test listed on NASDAQ (the “ASE Test NASDAQ Shares”) for
US$14.78 per share, and listed on the TSE (the Taiwan Depositary Receipts,
“TDR”) for NT$5.6314 per TDR, respectively. The purpose of the
acquisition of the minority shareholders’ shares of ASE Test was to fully
consolidate ASE Test’s earnings with the Company’s, simplify the
organizational structure, reduce costs and administrative burdens
associated with filing and compliance requirements, enhance brand
recognition, and increase flexibility in making investments and allocating
resources among subsidiaries. The total purchase price was NT$26,309,311
thousand (US$803,093 thousand). After the acquisition, ASE Test
became an indirect wholly-owned subsidiary of ASE Inc., and ASE Test
NASDAQ Shares and TDR were delisted from NASDAQ and the TSE,
respectively. (See Note 19 for discussion of financing for the
acquisition)
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Current
and Noncurrent Assets and
Liabilities
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Current
assets include cash and cash equivalents, and those assets held primarily
for trading purposes or to be realized, sold or consumed within twelve
months from the balance sheet date. Current liabilities are
obligations incurred for trading purposes or to be settled within twelve
months from the balance sheet date. Assets and liabilities that
are not classified as current are noncurrent assets and liabilities,
respectively.
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Cash
Equivalents
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Government
bonds with repurchase agreements are highly liquid financial instruments
with maturities of less than three months when acquired and with carrying
amounts that approximate their fair
values.
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Financial
Assets/Liabilities at Fair Value through Profit or
Loss
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Financial
instruments classified as financial assets or financial liabilities at
fair value through profit or loss (“FVTPL”) include financial assets or
financial liabilities held for trading. The Company recognizes
a financial asset or financial liability on its balance sheet when the
Company becomes a party to the contractual provisions of the financial
instrument. A financial asset is derecognized when the Company
has lost control of its contractual rights over the financial
asset. A financial liability is derecognized when the
obligation specified in the relevant contract is discharged, cancelled or
expired.
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Financial
instruments at FVTPL are initially measured at fair
value. Transaction costs directly attributable to the
acquisition of financial assets at FVTPL are recognized immediately in
profit or loss. At each balance sheet date subsequent to
initial recognition, financial assets or financial liabilities at FVTPL
are remeasured at fair value, with changes in fair value recognized
directly in profit or loss in the year in which they
arise. Cash dividends received subsequently (including those
received in the year of investment) are recognized as income for the
year. On derecognition of a financial asset or a financial
liability, the difference between its carrying amount and the sum of the
consideration received and receivable or consideration paid and payable is
recognized in profit or loss. A regular way purchase or sale of
financial assets is recognized and derecognized on a settlement date
basis.
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A
derivative that does not qualify for hedge accounting is classified as a
financial asset or a financial liability held for trading. If
the fair value of the derivative is positive, the derivative is recognized
as a financial asset; otherwise, the derivative is recognized as a
financial liability.
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Fair
value is determined as follows: Open-end mutual funds - the net
asset value; quoted stocks - the closing-price at the balance sheet date;
derivatives with no quoted price in an active market - using valuation
techniques.
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Available-for-sale
Financial Assets
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Available-for-sale
financial assets are initially recognized at fair value plus transaction
costs that are directly attributable to the
acquisition. Changes in fair value of financial assets are
reported in a separate component of shareholders’ equity. The
corresponding accumulated gains or losses are recognized in earnings when
the financial asset is derecognized from the balance sheet. A
regular way purchase or sale of financial assets is recognized and
derecognized on a settlement date
basis.
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The
recognition and derecognition bases of available-for-sale financial assets
are similar to those of financial assets at
FVTPL.
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Cash
dividends are recognized on the ex-dividend date. Stock
dividends are not recognized as investment income but are recorded as an
increase in the number of shares. The total number of shares
subsequent to the increase is used for recalculation of cost per
share.
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Fair
values of open-end mutual funds and quoted stocks are determined using the
net asset value and closing-price at the balance sheet date,
respectively. Bonds are determined using the closing-price at
the balance sheet date or at prices quoted by Taiwan GreTai Securities
Market.
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If
certain objective evidence indicates that an available-for-sale financial
asset is impaired, a loss is recognized currently; if, in a subsequent
period, the amount of the impairment loss decreases, for equity
securities, the previously recognized impairment loss is reversed to the
extent of the decrease and recorded as an adjustment to shareholders’
equity; for debt securities, the amount of the decrease is recognized in
earnings, provided that the decrease is clearly attributable to an event
which occurred after the impairment loss was
recognized.
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Revenue
Recognition, Allowance for Doubtful Accounts and Allowance for Sales
Discounts
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Revenues
from semiconductor packaging and testing services are recognized upon
completion of the services or shipment. The Company does not
take ownership of: (i) bare semiconductor wafers received from
customers that the Company packages into finished semiconductors and (ii)
packaged semiconductors received from customers that the Company tests as
to whether they meet certain performance specifications. The
title and risk of loss remain with the customer for those bare
semiconductors and/or packaged semiconductors. Accordingly, the
costs of customer-supplied semiconductor materials are not included in the
accompanying consolidated financial statements. Other criteria
the Company uses to determine when to recognize revenue
are: (i) existence of persuasive evidence of an arrangement,
(ii) the selling price is fixed or determinable and (iii) collectibility
is reasonably assured.
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Revenues
are determined using the fair value taking into account related sales
discounts agreed to by the Company and customers. Since the
receivables from sales are collectible within one year and such
transactions are frequent, the fair value of receivables is equivalent to
the nominal amount of cash received or
receivable.
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An
allowance for doubtful accounts is provided based on an evaluation of the
collectibility of receivables. The Company determines the
amount of the allowance for doubtful accounts by examining the aging
analysis of the outstanding accounts receivable and current trends in the
credit quality of its customers. An allowance for sales
discounts is recognized based on historical experience in the same period
sales are recognized.
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Accounts
Receivable Securitization
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Accounts
receivable securitization is the transfer of a designated pool of accounts
receivable to a bank which in turn issues beneficial securities or
asset-backed securities based on the accounts receivable. Under
the ROC Statement of Financial Accounting Standards (“ROC SFAS”) No. 33,
“Accounting for Transfers of
Financial Assets and Extinguishments of Liabilities”, such transfer
of financial assets in which the transferor surrenders control over those
assets is accounted for as a sale to the extent that consideration other
than beneficial interests in the transferred assets is received in
exchange. The difference between the book value of accounts
receivable and total proceeds received is recorded as a gain or loss on
the disposal of financial assets.
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Inventories
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Inventories
including raw materials (materials received from customers for processing,
mainly semiconductor wafers, are excluded from inventories as title and
risk of loss remain with the customers), supplies and spare parts, work in
process, finished goods, supplies in transit and construction in progress
are stated at the lower of cost or market value. Market value
represents net realizable value for finished goods, work in process and
construction in progress, and replacement costs for raw materials,
supplies and spare parts.
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Raw
materials, supplies and spare parts are recorded at moving average cost;
work in process and finished goods are recorded at standard cost and
adjusted to the approximate weighted average cost at the balance sheet
date. Estimated losses on obsolescence and slow-moving items
are recognized and included in the allowance for
losses.
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Construction
in progress for the Company’s real estate developer is accounted for using
the completed-contract method.
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Held-to-maturity
Financial Assets
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Held-to-maturity
financial assets are carried at amortized cost using the effective
interest method. Those financial assets are initially measured
at fair value plus transaction costs that are directly attributable to the
acquisition. Gains or losses are recognized when the financial
assets are derecognized, impaired or
amortized.
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If
certain objective evidence indicates that a held-to-maturity financial
asset is impaired, a loss is recognized currently. If, in a
subsequent period, the amount of the impairment loss decreases and the
decrease is clearly attributable to an event which occurred after the
impairment loss was recognized, the previously recognized impairment loss
is reversed to the extent of the decrease. The reversal may not
result in a carrying amount that exceeds the amortized cost that would
have been determined as if no impairment loss had been
recognized.
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Financial
Assets Carried at Cost
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Investments,
such as non-publicly traded stocks that do not have a quoted market price
in an active market and whose fair value cannot be reliably measured, are
carried at their original cost. If certain objective evidence
indicates that such a financial asset is impaired, a loss is
recognized. A subsequent reversal of such impairment loss is
not allowed.
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Cash
dividends are recognized as investment income on the ex-dividend
date. Stock dividends which are not recognized as investment
income are recorded as an increase in the number of shares held and the
cost per share is recalculated based on the new total number of
shares.
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Bond
Investments with No Active Market
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Bond
investments with fixed or determinable payments and with no quoted prices
in an active market are carried at amortized cost using the effective
interest method. The accounting treatment for such bond
investments is similar to that for held-to-maturity financial assets,
except for the absence of restriction on the timing of their
disposal.
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Equity
Method Investments
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Investments
in companies of which the Company owns at least 20% of the outstanding
voting shares or where the Company exercises significant influence over
the investee companies’ operating and financial policy decisions are
accounted for using the equity method. Pursuant to the revised
ROC SFAS No. 5, “Long-term Investments under Equity Securities”, the
acquisition cost is allocated to the assets acquired and liabilities
assumed based on their fair values at the date of acquisition, and the
excess of the acquisition cost over the fair value of the identifiable net
assets acquired is recognized as goodwill. Goodwill is not
amortized.
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When
the Company subscribes for additional investees’ shares at a percentage
different from its existing ownership percentage, the resulting carrying
amount of the investment in the investees differs from the amount of the
Company’s share in the investee’s net equity. The Company
records such a difference as an adjustment to equity method investments
with the corresponding amount charged or credited to capital
surplus.
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Gains
or losses on sales between the Company and equity method investees are
deferred in proportion to the Company’s ownership percentage in the
investees until such gains or losses are realized through transactions
with third parties. Gains or losses on sales between equity
method investees are deferred in proportion to the product of the
Company’s ownership percentages in the investees until they are realized
through transactions with third
parties.
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Property,
Plant and Equipment
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Property,
plant and equipment are stated at cost less accumulated depreciation and
accumulated impairment. Borrowing costs direly attributable to
the acquisition or construction of property, plant and equipment are
capitalized as part of the cost of those assets. Major
additions and improvements to property, plant and equipment are
capitalized, while maintenance and repairs are expensed as
incurred.
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Assets
held under capital leases are initially recognized as assets of the
Company at the lower of their fair value at the inception of the lease or
the present value of the minimum lease payments; the corresponding
liability is included in the balance sheet as obligations under capital
leases. The interest included in lease payments is expensed
when paid.
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Depreciation
is computed using the straight-line method over estimated service life,
which ranges as follows: buildings and improvements, 3 to 55
years; machinery and equipment, 2 to 10 years; furniture and fixtures, 2
to 13 years; transportation equipment, 2 to 10 years; and leased assets
and leasehold improvements, 3 to 5 years. In the event that an
asset which has been depreciated to its residual value is still in
service, its residual value is further depreciated over its re-estimated
service life.
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When
property, plant and equipment are retired or disposed of, their cost,
accumulated depreciation and accumulated impairment are removed from the
accounts and any gain or loss is credited or charged to non-operating
income or losses.
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Intangible
Assets
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Patents
acquired are initially recorded at cost and are amortized on a
straight-line basis over their estimated useful lives. Land use
rights are amortized over the estimated life of 50 to 60
years.
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Patent,
acquired special technology and customer relationship (shown in other
intangible assets) acquired from the acquisition of subsidiaries are
amortized on a straight-line basis over the estimated life of 5 to 11
years.
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Goodwill
represents the excess of the consideration paid for an acquisition over
the fair value of identifiable net assets acquired. Prior to
January 1, 2006, goodwill was amortized on a straight-line basis over the
estimated life of 10 years. Effective January 1, 2006, pursuant
to the revised ROC SFAS No. 25, “Business Combinations-Accounting
Treatment under Purchase Method” (“ROC SFAS No. 25”), goodwill is no
longer amortized and instead is tested for impairment
annually.
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Idle
Assets
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Idle
assets are stated at the lower of their fair value or carrying
amount. The carrying amount in excess of the fair value is
recognized as an impairment loss. The remaining book value is
depreciated using the straight-line
method.
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Asset
Impairment
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The
Company evaluates whether or not there are indications that
assets (primarily property, plant and equipment, intangible assets,
and equity method investments) may be impaired as of the balance sheet
date. If there are indications, the Company estimates the
recoverable amount for the asset. If an asset’s recoverable
amount is lower than its carrying amount, the carrying amount of the asset
is reduced to its recoverable amount by recording an impairment
loss. When the recoverable amount subsequently increases, the
impairment loss previously recognized is reversed and recorded as a
gain. However, the carrying amount of an asset (other than
goodwill) after the reversal of the impairment loss should not exceed the
carrying amount of the asset that would have been determined, net of
depreciation, as if no impairment loss had been
recognized.
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|
|
For
the purpose of goodwill impairment testing, goodwill is allocated to each
of the relevant cash-generating units (“CGU(s)”) that are expected to
benefit from the synergies of the acquisition. A CGU to which
goodwill has been allocated is tested for impairment annually or whenever
there is an indication that the CGU may be impaired. If the
recoverable amount of the CGU becomes less than its carrying amount, the
impairment is allocated to first reduce the carrying amount of the
goodwill allocated to the CGU and then to the other assets of the CGU pro
rata on the basis of the carrying amount of each asset in the
CGU. A reversal of an impairment loss on goodwill is
disallowed.
|
|
|
For
equity method investments, the carrying amount (including goodwill) of
each investment is compared with its own recoverable amount for the
purpose of impairment testing.
|
|
|
Deferred
Charges
|
|
|
Deferred
charges consist of certain intangibles and other assets, including license
fees, telecommunications and computer network
systems. Amortization of deferred charges is computed on a
straight-line basis over 2 to 5
years.
|
|
|
Stock-based
Compensation
|
|
|
Employee
stock options granted on or after January 1, 2008 are accounted for under
ROC SFAS No. 39, “Accounting for Share-based Payment.” Under
the statement, the value of the stock options granted, which is equal to
the best available estimate of the number of stock options expected to
vest multiplied by the grant-date fair value, is expensed on a
straight-line basis over the vesting period, with a corresponding
adjustment to capital surplus - employee stock options. The
estimate is revised if subsequent information indicates that the number of
stock options expected to vest differs from previous
estimates.
|
|
|
Employee
stock options granted before January 1, 2007 were accounted for under the
interpretations issued by the ROC Accounting Research and Development
Foundation (“ARDF”). The Company adopted the intrinsic value
method, under which compensation cost was recognized on a straight-line
basis over the vesting period.
|
|
|
Pension
Cost
|
|
|
Pension
cost under defined benefit plans are determined by actuarial
valuations. Contributions made under defined contribution plans
are recognized as pension cost during the period in which employees render
services.
|
|
|
Short-term
Bills Payable
|
|
|
Commercial
paper, when issued at a discount, is recorded at the cash proceeds
received and accreted to its face value. The difference between
face value and cash proceeds is recognized as unamortized
discounts. Unamortized discount is amortized as interest
expense in the period between the issue date and maturity
date.
|
|
|
Convertible
Bonds
|
|
|
Prior
to the adoption of ROC SFAS No. 34 and No. 36 on January 1, 2006,
convertible bonds were recorded as a financial liability. The
stated redemption price in excess of the face value of the bond is
recognized as interest expense over the period from the issuance date to
the date the put option becomes exercisable, using the effective interest
rate method. If the market price of the common shares into
which the bonds are convertible is higher than the redemption price at the
time the put option expires, the related accrued interest is transferred
to capital surplus. Conversion of convertible bonds into common
shares is accounted for by the book value method. Under this
method, unamortized bond issuance costs and accrued interest, together
with face value of converted bonds, are written off, and the common shares
issued are recorded at their par value, with any excess recorded as
capital surplus. No change in accounting treatment was required
for convertible bonds after ROC SFAS No. 34 and No. 36 were
effective.
|
|
|
Treasury
Stock
|
|
|
Treasury
stock is stated at cost and shown as a deduction in shareholders’
equity.
|
|
|
ASE
Inc.’s shares held by its subsidiaries are accounted for as treasury stock
and, accordingly, the cost of such shares is reclassified from equity
method investments to treasury
stock.
|
|
|
Research
and Development Costs
|
|
|
Research
and development costs are charged to expenses as
incurred.
|
|
|
Income
Taxes
|
|
|
The
Company applies intra-period and inter-period allocations for its income
tax whereby (1) a portion of current income tax expense is allocated to
the cumulative effect of changes in accounting principles; and (2)
deferred income tax assets and liabilities are recognized for the tax
effects of temporary differences, loss carryforwards and unused tax
credits. Valuation allowances are provided to the extent, if
any, that it is more likely than not that deferred income tax assets will
not be realized. A deferred tax asset or liability is
classified as current or noncurrent in accordance with the classification
of its related asset or liability. However, if a deferred tax
asset or liability does not relate to an asset or liability in the
financial statements, then it is classified as either current or
noncurrent based on the expected length of time before it is realized or
settled.
|
|
|
The
temporary differences between the book value and taxable base of equity
method investments in foreign subsidiaries are not recognized as deferred
income tax assets or liabilities since the Company could control the
timing of reversal of the temporary differences and would not reverse them
in the foreseeable future.
|
|
|
Any
tax credits arising from purchases of machinery, equipment and technology,
research and development expenditures, and personnel training expenditures
are recognized using the flow-through
method.
|
|
|
Adjustments
of prior years’ income tax are added to or deducted from the current
year’s tax provision.
|
|
|
Income
tax on undistributed earnings is recorded by ASE Inc. and subsidiaries
under jurisdiction of ROC at the rate of 10% and is recorded as an expense
in the year shareholders resolve the distribution of
earnings.
|
Foreign Currency Transactions and
Translation of Foreign-currency Financial Statements
|
|
The
functional and reporting currency of ASE Inc. is the New Taiwan dollar,
while the functional currencies of its major subsidiaries are their local
currencies, namely, the U.S. dollar, Japanese yen, Korea Won, Renminbi and
Malaysia Ringgit, respectively.
|
|
|
Non-derivative
foreign currency transactions are recorded in local currencies at the
rates of exchange in effect when the transactions
occur. Exchange differences arising from settlement of
foreign-currency assets and liabilities are recognized in profit or
loss.
|
|
|
At the balance sheet date,
foreign-currency monetary assets and liabilities are revalued using
prevailing exchange
rates and the exchange differences are recognized in profit or
loss.
|
|
|
At the balance sheet date,
foreign-currency nonmonetary assets (such as equity instruments) and
liabilities that are measured at fair value are revalued using prevailing
exchange rates, with
the exchange differences treated as
follows:
|
|
|
a.
|
Recognized in
shareholders’ equity if the changes in fair
value are recognized in shareholders’
equity;
|
|
|
b.
|
Recognized in profit or loss if
the changes in fair value is recognized in profit or
loss.
|
|
|
Foreign-currency
nonmonetary assets and liabilities that are carried at cost continue to be
stated at exchange rates at trade
dates.
|
|
|
If
an investee’s functional currency is a foreign currency, translation
adjustments will result from the translation of the investee’s financial
statements into the reporting currency of the Company. Such
adjustments are accumulated and reported as a separate component of
shareholders’ equity.
|
|
|
The
financial statements of foreign subsidiaries are translated into New
Taiwan dollars at the following exchange rates: Assets and
liabilities - spot rates at the end of year; shareholders’ equity -
historical rates; income and expenses - average rates during the
year. The resulting translation adjustments are recorded as a
separate component of shareholders’
equity.
|
|
|
Hedging Derivative Financial
Instruments
|
|
|
Derivatives that qualify as
effective hedging instruments are measured at fair value, with subsequent
changes in fair value recognized in profit or loss, or in shareholders’ equity, depending on the nature
of the hedging relationship.
|
|
|
Hedge
Accounting
|
|
|
Hedge
accounting recognizes the offsetting effects on profit or loss of changes
in the fair values of the hedging instrument and the hedged item as
follows:
|
|
|
a.
|
Fair value
hedge
|
|
|
The gain or loss from remeasuring
the hedging instrument at fair value and the gain or loss on the hedged
item attributable to the hedged risk are recognized
in profit or loss.
|
|
|
b.
|
Cash flow
hedge
|
|
|
The portion of the gain or loss
on the hedging
instrument that is determined to be an effective hedge is recognized in
shareholders’ equity. The amount
recognized in shareholders’ equity is recognized in profit or
loss in the same year or years during which the hedged forecast
transaction or an
asset or liability arising from the hedged forecast transaction affects
profit or loss. However, if all or a portion of a loss
recognized in shareholders’ equity is not expected to be recovered
in the future, the amount that is not expected to be recovered is
reclassified into profit or loss.
|
Recent Accounting
Pronouncements
|
|
The
ROC ARDF revised ROC SFAS No. 10, “Accounting for Inventories” (“ROC SFAS
No. 10”) in November 2007, which requires inventories to be stated at the
lower of cost or net realizable value item by item. Inventories
are recorded by the specific identification method, first-in, first-out
method or weighted average method. The last-in, first-out
method is no longer permitted. The revised ROC SFAS No. 10
should be applied to financial statements for the fiscal years beginning
on or after January 1, 2009.
|
|
|
U.S.
Dollar Amounts
|
|
|
The
Company prepares its consolidated financial statements in New Taiwan
dollars. A translation of the 2008 consolidated financial
statements into U.S. dollars is included solely for the convenience of the
reader, and has been based on the U.S. Federal Reserve Bank of New York
noon buying rate of NT$32.76 to US$1.00 in effect on December 31,
2008. The translation should not be construed as a
representation that the New Taiwan dollar amounts have been, could have
been, or could in the future be, converted into U.S. dollars at this or
any other rate of exchange.
|
|
|
Reclassifications
|
|
|
Certain
accounts in the consolidated financial statements as of December 31, 2007
and for the years ended December 31, 2006 and 2007 have been reclassified
to conform to the presentation of the consolidated financial statements as
of and for the year ended December 31,
2008.
|
|
3.
|
ACCOUNTING
CHANGE
|
|
|
Adoption
of New and Revised Standards
|
|
|
Starting
January 1, 2008, the Company adopted Interpretation 96-052, “Accounting
for Bonuses to Employees, Directors and Supervisors” issued in
March 2007 by the ROC ARDF, which requires companies to record bonuses
paid to employees, directors and supervisors as an expense rather than as
an appropriation of earnings. The adoption of this
Interpretation resulted in a decrease in net income attributable to
shareholders of the parent and earnings per share of NT$675,111 thousand
(US$20,608 thousand) and NT$0.13 (US$0.003), respectively, for the year
ended December 31, 2008.
|
|
|
Starting
January 1, 2007, the Company adopted the released ROC SFAS No. 37,
“Intangible Assets”, ROC SFAS No. 38, “Non-current Assets Held for Sale
and Discontinued Operations” and ROC SFAS No. 39, “Share-based
Payment”. The adoption of ROC SFAS No. 37, ROC SFAS No. 38 and
ROC SFAS No. 39 had no impact on the results of operations and financial
position of the Company.
|
|
|
Starting
January 1, 2006, the Company adopted the released ROC SFAS No. 34,
“Financial Instruments: Recognition and Measurement” and No.
36, “Financial Instruments: Disclosure and Presentation” and
revisions of previously released ROC SFAS No. 5 and No.
25.
|
|
|
a.
|
Effect
of adopting the released SFASs and revisions of previously released
SFASs
|
|
1)
|
The
Company categorized its financial assets and liabilities upon the initial
adoption of the newly released ROC SFAS No.34 and No.36. The
adjustments made to the carrying amounts of the financial instruments
categorized as financial assets or liabilities at FVTPL were included in
the cumulative effect of changes in accounting principles; and the
adjustments made to the carrying amounts of those categorized as
available-for-sale financial assets were recognized as adjustments to
shareholders’ equity.
|
|
|
Deferred
exchange losses for cash flow hedges were reclassified as adjustments to
shareholders’ equity.
|
|
|
The
effect of adopting the released SFASs is summarized as
follows:
|
|
Recognized
as Cumulative Effect of Changes in
Accounting
Principles
(Net of income tax)
|
Recognized
as a Separate Component of Shareholders’
Equity
(Net of income tax)
|
|||||||
|
NT$
|
NT$
|
|||||||
|
Financial
assets at FVTPL
|
503 | - | ||||||
|
Financial
liabilities at FVTPL
|
(343,006 | ) | - | |||||
|
Derivative
financial liabilities for hedging
|
- | (129,179 | ) | |||||
| (342,503 | ) | (129,179 | ) | |||||
|
|
In
addition to the effect shown above, the adoption of ROC SFAS No. 34 and
No. 36 also resulted in an increase in net income before cumulative effect
of changes in accounting principles of NT$242,961 thousand, a decrease in
net income of NT$99,542 thousand (net of income tax effect of NT$33,181
thousand), and a decrease in basic earnings per share (after income tax)
of NT$0.02 for the year ended December 31,
2006.
|
|
2)
|
The
Company adopted the revised ROC SFAS No. 5 and No. 25, which prescribe
that investment premiums, representing goodwill, not be amortized and
instead be assessed for impairment at least on an annual
basis. This change resulted in an increase in net income before
cumulative effect of changes in accounting principles of NT$619,397
thousand and an increase in basic earnings per share (after income tax) of
NT$0.11 for the year ended December 31,
2006.
|
|
4.
|
CASH
AND CASH EQUIVALENTS
|
|
December 31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Cash
on hand
|
6,817 | 6,694 | 204 | |||||||||
|
Checking
and saving accounts
|
12,232,305 | 13,960,753 | 426,153 | |||||||||
|
Time
deposits
|
4,918,813 | 10,501,483 | 320,558 | |||||||||
|
Cash
equivalents –government bonds with repurchase agreements
|
- | 1,670,000 | 50,977 | |||||||||
| 17,157,935 | 26,138,930 | 797,892 | ||||||||||
|
5.
|
FINANCIAL
INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR
LOSS
|
|
December 31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Financial
assets for trading - current
|
||||||||||||
|
Domestic
quoted stocks
|
- | 536,427 | 16,375 | |||||||||
|
Forward
exchange contracts
|
2,641 | 1,053 | 32 | |||||||||
|
Open-end
mutual funds
|
1,599,353 | - | - | |||||||||
| 1,601,994 | 537,480 | 16,407 | ||||||||||
|
Financial
liabilities for trading - current
|
||||||||||||
|
Swap
contracts
|
- | 61,257 | 1,870 | |||||||||
|
Forward
exchange contracts
|
16,493 | 21,410 | 654 | |||||||||
|
Interest
rate swap contract
|
20,319 | 209 | 6 | |||||||||
|
Cross-currency
swap contracts
|
7,519 | - | - | |||||||||
| 44,331 | 82,876 | 2,530 | ||||||||||
|
|
The
Company entered into derivative contracts for the years ended December 31,
2006, 2007 and 2008 to manage exposures to foreign exchange and interest
rate risk. The derivative contracts entered into by the Company
did not meet the criteria for hedge accounting except Note 26h, therefore,
the Company did not apply hedge accounting treatment for its derivative
contracts.
|
|
|
Information
on such derivative transactions is as
follows:
|
|
a.
|
Swap
contracts
|
|
|
As of December 31, 2008, the amount of the outstanding
contracts of ASE Inc. was NT$5,133,164
thousand/ US$154,500
thousand. The maturity date of the contracts is from January 12, 2009 to April
10, 2009.
|
|
b.
|
Forward exchange
contracts
|
|
|
The outstanding forward exchange contracts of the Company as of December 31, 2007 and 2008
were as
follows:
|
|
Contract
Amount
|
||||
|
Currency
|
Maturity Date
|
(In Thousands)
|
||
|
December 31, 2007
|
||||
|
USD/JPY
|
2008.01.10-2008.03.24
|
USD16,000/JPY1,783,727
|
||
|
USD/NTD
|
2008.01.07-2008.03.28
|
USD190,000/NTD6,130,684
|
||
|
USD/KRW
|
2008.01.28
|
USD5,000/KRW4,697,500
|
||
|
USD/MYR
|
2008.01.08-2008.02.12
|
USD8,000/MYR26,594
|
||
|
NTD/USD
|
2008.01.22-2008.02.12
|
NTD483,050/USD15,000
|
||
|
December 31, 2008
|
||||
|
USD/JPY
|
2009.01.05-2009.01.09
|
USD1,105/JPY99,192
|
||
|
USD/NTD
|
2009.01.12-2009.01.20
|
USD4,000/NTD132,242
|
||
|
USD/MYR
|
2009.01.15-2009.01.22
|
USD1,500/MYR5,278
|
||
|
NTD/USD
|
2009.01.09-2009.02.23
|
NTD4,072,502/USD123,426
|
|
c.
|
Interest rate swap
contract
|
|
|
As of December 31, 2007 and
2008, the notional amount of the
outstanding contract
of ASE Inc. was
NT$2,750,000 thousand and NT$1,375,000 thousand
(US$41,972 thousand), respectively. Interest receipt and
payment were based on floating rates semi-annually. The last
maturity date of the
contract is January 9, 2009.
|
|
d.
|
Cross-currency swap
contracts
|
|
|
ASE Inc. entered into cross-currency swap
contracts with banks to manage its exposure to interest rate and exchange
rate fluctuations associated with its long-term bonds payable. As of December 31, 2007, the notional
amount of the outstanding contract was US$139,159 thousand/ NT$4,525,729
thousand. Interest receipt and payment were
based on fixed rates of 4.45% and 1.70%, respectively. The
maturity date of the contract was January 24, 2008.
|
|
|
For the years ended December 31, 2006, 2007 and 2008, the gain on valuation of financial
assets held for trading was NT$29,278 thousand, NT$205,997 thousand and
NT$286,914 thousand (US$8,758 thousand), respectively; the loss on
valuation of financial liabilities held for trading was NT$289,847
thousand, NT$28,583 thousand and NT$732,204 thousand (US$22,351 thousand),
respectively.
|
|
6.
|
AVAILABLE-FOR-SALE
FINANCIAL ASSETS - CURRENT
|
|
December
31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Domestic
quoted stocks
|
- | 165,623 | 5,056 | |||||||||
|
Government
and corporate bonds
|
88,874 | 100,000 | 3,052 | |||||||||
|
Overseas
quoted stocks
|
21,305 | 21,578 | 659 | |||||||||
|
Open-end
mutual funds
|
9,219,786 | - | - | |||||||||
|
Adjustment
of valuations
|
76,362 | (7,389 | ) | (226 | ) | |||||||
| 9,406,327 | 279,812 | 8,541 | ||||||||||
|
|
The
other than temporary or realized loss on impairment of available-for-sale
financial assets was nil for the years ended December 31, 2006 and
2007. For the year ended December 31, 2008, the other than
temporary or realized loss on impairment of available-for-sale financial
assets was NT$149,954 thousand (US$4,578
thousand).
|
|
7.
|
BOND
INVESTMENTS WITH NO ACTIVE MARKET -
CURRENT
|
|
|
In
July 2008, ASE Inc. purchased 3-year unsecured corporate bonds with a
coupon rate 4.202% issued by Powerchip Semiconductor Corp. (“PSC”) at face
value of NT$450,000 thousand (US$13,736 thousand). ASE Inc. is
eligible to request PSC to redeem the bonds on July 15, 2009 according to
the bond issuance terms.
|
|
8.
|
ACCOUNTS
RECEIVABLE
|
|
December 31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Accounts
receivable
|
18,985,816 | 11,585,292 | 353,641 | |||||||||
|
Allowance
for doubtful accounts (Note 2)
|
(109,727 | ) | (99,160 | ) | (3,027 | ) | ||||||
|
Allowance
for sales allowances (Note 2)
|
(128,586 | ) | (98,027 | ) | (2,992 | ) | ||||||
| 18,747,503 | 11,388,105 | 347,622 | ||||||||||
|
|
In
November 2005, ASE Inc. and ASE Test, Inc. entered into a three-year
revolving accounts receivable securitization agreement with a
bank. The agreement was early terminated in December
2007. Under the agreement, ASE Inc. and ASE Test, Inc.
transferred a pool of accounts receivable to the bank, which issued
securities backed by these accounts receivable. Proceeds
received from the bank were the net book value of the pool of accounts
receivable, less a deferred purchase price receivable at 20% of the
accounts receivable sold, guarantee deposit, program fee and other related
expenses. The Company surrendered control of these accounts
receivable at the time of transfer to the bank, and therefore the
transaction was accounted for as a sale of accounts receivable, for which
the book value of the accounts receivable was derecognized and the
difference between the book value and the proceeds received was recorded
as a non-operating loss. Losses from sale of receivables were
NT$235,509 thousand, NT$151,746 in 2006 and 2007,
respectively.
|
|
|
After
the transfer of the accounts receivable, the Company continued to service,
administer, and collect these accounts receivable on behalf of the
bank. Collections not yet passed over to the bank amounted to
NT$2,378,464 thousand as of December 31, 2006 and were included in
temporary receipts. Total accounts receivable sold was
NT$4,608,182 thousand as of December 31,
2006.
|
|
9.
|
INVENTORIES
|
|
December 31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Finished
goods
|
699,197 | 705,121 | 21,524 | |||||||||
|
Work
in process
|
763,236 | 371,880 | 11,352 | |||||||||
|
Raw
materials
|
3,327,118 | 2,902,156 | 88,588 | |||||||||
|
Supplies
and spare parts
|
717,782 | 702,908 | 21,456 | |||||||||
|
Supplies
in transit
|
203,955 | 59,589 | 1,819 | |||||||||
|
Construction
in progress
|
552,965 | 1,144,113 | 34,924 | |||||||||
| 6,264,253 | 5,885,767 | 179,663 | ||||||||||
|
Allowance
for valuation and obsolescence (Note 2)
|
(668,508 | ) | (894,056 | ) | (27,291 | ) | ||||||
| 5,595,745 | 4,991,711 | 152,372 | ||||||||||
|
|
The
movement of the allowance for valuation and obsolescence is as
follows:
|
|
NT$
|
||||
|
Balance
at January 1, 2006
|
490,991 | |||
|
Additions
charged to earnings
|
1,143,925 | |||
|
Write-offs
|
(1,060,921 | ) | ||
|
Balance
at December 31, 2006
|
573,995 | |||
|
From
newly acquired subsidiaries
|
124,229 | |||
|
Additions
charged to earnings
|
634,457 | |||
|
Write-offs
|
(664,173 | ) | ||
|
Balance
at December 31, 2007
|
668,508 | |||
|
From
newly acquired subsidiaries
|
4,691 | |||
|
Additions
charged to earnings
|
554,106 | |||
|
Write-offs
|
(333,249 | ) | ||
|
Balance
at December 31, 2008
|
894,056 | |||
|
US$
|
||||
|
Balance
at January 1, 2008
|
20,406 | |||
|
From
newly acquired subsidiaries
|
143 | |||
|
Additions
charged to earnings
|
16,914 | |||
|
Write-offs
|
(10,172 | ) | ||
|
Balance
at December 31, 2008
|
27,291 | |||
|
10.
|
FINANCIAL
ASSETS CARRIED AT COST - NONCURRENT
|
|
December 31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Non-publicly
traded common and preferred stocks
|
||||||||||||
|
H&HH
Venture Investment Corporation
|
73,921 | 73,921 | 2,256 | |||||||||
|
Global
Strategic Investment Inc.
|
64,886 | 65,720 | 2,006 | |||||||||
|
Universal
Scientific Industrial (Shanghai) Co., Ltd
|
- | 28,127 | 859 | |||||||||
|
UC
Fund II
|
32,443 | 26,288 | 802 | |||||||||
|
ID
Solutions, Inc.
|
25,899 | 10,236 | 313 | |||||||||
|
Other
|
1,138 | 1,153 | 35 | |||||||||
|
Limited
Partnership
|
||||||||||||
|
Ripley
Cable Holdings I, L.P.
|
247,915 | 287,467 | 8,775 | |||||||||
|
Crimson
Velocity Fund, L.P.
|
78,823 | 82,583 | 2,521 | |||||||||
| 525,025 | 575,495 | 17,567 | ||||||||||
|
|
There
is no quoted price from an active market for these investments and fair
value is not readily available. In addition, the Company owns
less than 20% of these investments and cannot exercise significant
influence. Therefore, these investments are carried at
cost.
|
|
|
For
the years ended December 31, 2006, 2007 and 2008, the loss on impairment
of financial assets carried at cost was nil, NT$178,500 thousand and
NT$21,395 thousand (US$653 thousand),
respectively.
|
|
11.
|
EQUITY
METHOD INVESTMENTS
|
|
December 31
|
||||||||||||||||||||
|
2007
|
2008
|
|||||||||||||||||||
|
%
of
|
%
of
|
|||||||||||||||||||
|
Owner-
|
Owner-
|
|||||||||||||||||||
|
NT$
|
ship
|
NT$
|
US$
|
ship
|
||||||||||||||||
|
Publicly
traded
|
||||||||||||||||||||
|
Universal
Scientific Industrial Co., Ltd. (“USI”)
|
3,317,168 | 18.7 | 3,067,864 | 93,647 | 18.3 | |||||||||||||||
|
Hung
Ching Development & Construction Co. (“HCDC”)
|
955,939 | 26.2 | 635,296 | 19,392 | 26.2 | |||||||||||||||
|
Non-publicly
traded
|
||||||||||||||||||||
|
Hung
Ching Kwan Co. (“HCKC”)
|
349,937 | 27.3 | 346,308 | 10,571 | 27.3 | |||||||||||||||
|
Inprocomm,
Inc.
|
2,224 | 32.1 | 2,224 | 68 | 32.1 | |||||||||||||||
| 4,625,268 | 4,051,692 | 123,678 | ||||||||||||||||||
|
Deferred
gain on transfer of land
|
(300,149 | ) | (300,149 | ) | (9,162 | ) | ||||||||||||||
| 4,325,119 | 3,751,543 | 114,516 | ||||||||||||||||||
|
|
Market
values of the publicly traded equity method investees as of December 31,
2007 and 2008 were as follows:
|
|
December 31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
USI
|
3,547,918 | 1,524,259 | 46,528 | |||||||||
|
HCDC
|
871,598 | 288,245 | 8,799 | |||||||||
| 4,419,516 | 1,812,504 | 55,327 | ||||||||||
|
|
As
of December 31, 2007 and 2008, the differences between the cost of
investments and equity in investees’ net assets were attributable to
goodwill of NT$371,436 thousand (US$11,338 thousand) and deferred gain on
transfer of land of NT$300,149 thousand (US$9,162
thousand).
|
|
|
As of December 31, 2007 and 2008, the Company had made an accumulated investment in USI of NT$3,838,677 thousand (US$117,176 thousand) and owned 18.7% and 18.3% of the outstanding
shares, respectively. The Company continues to exercise significant influence
over USI, therefore the investment was accounted for by the equity method. USI is
engaged in the manufacturing, processing and sale of computer peripherals,
integrated circuits, electrical parts, personal computers and related
accessories.
|
|
|
As of December 31, 2007 and 2008, the Company had made an accumulated investment in HCDC of NT$2,845,913 thousand (US$86,872 thousand) and owned 26.2% of the
outstanding shares. HCDC is engaged in the
development and management of commercial, residential and industrial real
estate properties in Taiwan.
|
|
|
The Company acquired a 27.3% equity interest in HCKC in
1992 by transferring a parcel of land valued at NT$390,470 thousand to HCKC. The resulting
gain of NT$300,149 thousand, which represents the excess of such value
over the cost of the land plus land value increment tax, has been deferred until the disposal of
this investment.
|
|
|
As of December 31, 2008, Inprocomm, Inc. was in the process of
liquidation.
|
|
|
The Company recorded equity in
earnings of equity method investees of NT$315,654 thousand, NT$345,705 thousand and NT$77,450 thousand (US$2,364 thousand) in 2006, 2007 and 2008,
respectively.
|
|
12.
|
PROPERTY,
PLANT AND EQUIPMENT
|
|
|
Accumulated depreciation
consisted
of:
|
|
December 31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Buildings
and improvements
|
9,246,951 | 11,568,335 | 353,124 | |||||||||
|
Machinery
and equipment
|
72,613,519 | 84,004,673 | 2,564,245 | |||||||||
|
Transportation
equipment
|
95,801 | 115,124 | 3,514 | |||||||||
|
Furniture
and fixtures
|
2,210,469 | 2,610,209 | 79,677 | |||||||||
|
Leased
assets and leasehold improvements
|
313,878 | 262,120 | 8,001 | |||||||||
| 84,480,618 | 98,560,461 | 3,008,561 | ||||||||||
|
|
For the years ended December 31,
2006 and 2007, the loss on impairment of property, plant and equipment was
nil. For the year ended December 31, 2008, the loss on
impairment of property, plant and equipment was NT$87,375 thousand (US$2,667
thousand).
|
Information about
capitalized interest
expense is as follows:
|
Year Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
Total
interest expense including capitalized
interest
|
1,861,482 | 1,744,718 | 1,947,431 | 59,445 | ||||||||||||
|
Less: Capitalized
interest (included in property,
plant and equipment)
|
(241,188 | ) | (170,194 | ) | (134,135 | ) | (4,094 | ) | ||||||||
|
Interest
expense
|
1,620,294 | 1,574,524 | 1,813,296 | 55,351 | ||||||||||||
|
Capitalization
rate
|
1.69%-6.07 | % | 1.56%-6.33 | % | 2.16%-6.48 | % | ||||||||||
|
13.
|
GOODWILL
|
|
Year Ended December 31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Balance,
beginning of year
|
2,831,274 | 3,188,117 | 97,317 | |||||||||
|
Additions
|
365,366 | 6,271,247 | 191,430 | |||||||||
|
Translation
adjustment
|
(8,523 | ) | (3,273 | ) | (100 | ) | ||||||
|
Balance,
end of year
|
3,188,117 | 9,456,091 | 288,647 | |||||||||
|
|
The
increase of goodwill
in 2007 and 2008 was due to acquisition of TME’s shares and the minority
shareholders’ shares of ASE Test,
respectively.
|
|
14.
|
INTANGIBLE
ASSETS
|
|
|
The
movements of intangible assets other than goodwill and deferred pension
cost were as follows:
|
|
Acquired
|
Other-
|
|||||||||||||||
|
Special
|
Land
Use
|
Customer
|
||||||||||||||
|
Patents
|
Technology
|
Rights
|
Relationship
|
|||||||||||||
|
NT$
|
NT$
|
NT$
|
NT$
|
|||||||||||||
|
Balance
at January 1, 2007
|
4,081 | - | 600,322 | - | ||||||||||||
|
Additions
|
||||||||||||||||
|
From
newly acquired subsidiaries
|
- | - | 153,087 | - | ||||||||||||
|
Acquisition
|
6,595 | - | 670,669 | - | ||||||||||||
|
Amortization
|
(4,726 | ) | - | (7,828 | ) | - | ||||||||||
|
Reclassified
from other assets
|
- | - | 19,074 | - | ||||||||||||
|
Translation
adjustment
|
- | - | 50,885 | - | ||||||||||||
|
Balance
at December 31, 2007
|
5,950 | - | 1,486,209 | - | ||||||||||||
|
Additions
|
||||||||||||||||
|
From
newly acquired subsidiaries
|
50,416 | 709,088 | 1,651 | 915,635 | ||||||||||||
|
Acquisition
|
96,109 | - | 4,335 | - | ||||||||||||
|
Amortization
|
(22,134 | ) | (82,726 | ) | (23,600 | ) | (48,556 | ) | ||||||||
|
Reclassified
to other assets-other
|
- | - | (121,736 | ) | - | |||||||||||
|
Translation
adjustment
|
32 | - | 91,492 | - | ||||||||||||
|
|
||||||||||||||||
|
Balance
at December 31, 2008
|
130,373 | 626,362 | 1,438,351 | 867,079 | ||||||||||||
|
Acquired
|
|
Other-
|
||||||||||||||
|
Special
|
Land
Use
|
Customer
|
||||||||||||||
|
Patents
|
Technology
|
Rights
|
Relationship
|
|||||||||||||
|
US$
|
US$
|
US$
|
US$
|
|||||||||||||
|
Balance
at January 1, 2008
|
182 | - | 45,367 | - | ||||||||||||
|
Additions
|
||||||||||||||||
|
From
newly acquired subsidiaries
|
1,539 | 21,645 | 50 | 27,950 | ||||||||||||
|
Acquisition
|
2,934 | - | 132 | - | ||||||||||||
|
Amortization
|
(676 | ) | (2,525 | ) | (720 | ) | (1,482 | ) | ||||||||
|
Reclassified
to other assets-other
|
- | - | (3,716 | ) | - | |||||||||||
|
Translation
adjustment
|
1 | - | 2,793 | - | ||||||||||||
|
Balance
at December 31, 2008
|
3,980 | 19,120 | 43,906 | 26,468 | ||||||||||||
|
|
The
intangible assets arising from newly acquired subsidiaries in 2007 and
2008 were mainly related to the acquisition of TME’s shares, ASEN’s shares
and ASE Test’s shares, respectively. The acquired special technology
represented the existing know-how of customizing testing programs for
individual customer’s needs. A portion of the purchase price was allocated
to customer relationships as the Company can exploit revenue associated
with the existing customer and/or relationships. The valuation of acquired
intangible assets was determined based on management’s estimates and
consultation with an independent
appraiser.
|
|
15.
|
IDLE
ASSETS
|
|
December 31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Idle assets
|
||||||||||||
|
Cost
|
||||||||||||
|
Land
|
34,216 | 34,216 | 1,044 | |||||||||
|
Buildings and
improvements
|
24,019 | 24,019 | 733 | |||||||||
|
Machinery and
equipment
|
1,406,213 | 1,240,511 | 37,867 | |||||||||
|
Furniture and
fixtures
|
24,877 | 24,877 | 759 | |||||||||
|
Deferred
charges
|
7,532 | 647 | 20 | |||||||||
| 1,496,857 | 1,324,270 | 40,423 | ||||||||||
|
Accumulated
depreciation
|
(273,548 | ) | (696,224 | ) | (21,252 | ) | ||||||
|
Accumulated
impairment
|
(421,340 | ) | (266,658 | ) | (8,140 | ) | ||||||
| 801,969 | 361,388 | 11,031 | ||||||||||
|
|
The
idle assets and accumulated impairment were mainly due to the fact that in
December 2007 ASE Electronics identified an impairment in its Flip-Chip
production line caused by various commercial factors. According to an
independent appraiser’s report, the Company recognized an impairment loss
of nil in 2006, NT$816,182 thousand in 2007, of which NT$394,842 thousand
was recognized for deferred charges, and NT$34,595 thousand (US$1,056
thousand) in 2008.
|
|
16.
|
SHORT-TERM
BORROWINGS
|
|
December
31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Revolving
- interest at 2.37%-6.80% and 1.50%-8.59%
at
December 31, 2007 and 2008, respectively
|
8,678,473 | 8,779,267 | 267,987 | |||||||||
|
Letters
of credit - interest at 5.64%-5.85%
|
243,857 | - | - | |||||||||
| 8,922,330 | 8,779,267 | 267,987 | ||||||||||
|
17.
|
SHORT-TERM BILLS
PAYABLE
|
|
|
As of December 31, 2007, ASE
Electronics issued commercial papers with interest rate 2.42%
and face value of NT$150,000 thousand, and the unamortized discounts was NT$169
thousand.
|
|
18.
|
LONG-TERM
BONDS PAYABLE
|
|
December
31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Foreign
convertible bonds
|
4,514,735 | - | - | |||||||||
|
Domestic
secured bonds
|
2,750,000 | 1,375,000 | 41,972 | |||||||||
| 7,264,735 | 1,375,000 | 41,972 | ||||||||||
|
Current
portion
|
(1,375,000 | ) | - | - | ||||||||
| 5,889,735 | 1,375,000 | 41,972 | ||||||||||
|
|
Information on long-term bonds
payable is as follows:
|
|
|
a.
|
Foreign
convertible bonds
|
|
|
In
September 2003, the Company issued US$200,000 thousand of unsecured zero
coupon convertible bonds, consisting of 200,000 units with face value of
US$1,000 each. The bonds were due in September
2008.
|
|
|
From
31 days after the date of issuance through 10 days before the due date,
bondholders have the right to convert the bonds into common shares or ADS
of ASE Inc.
|
|
|
According
to the stipulation of redemption, bondholders shall have the right to
require the Company to purchase for cash the bonds at 116.02% of their
face value on September 25, 2007. The stipulation of redemption
expired on September 25, 2007, on which date the closing price of the
common shares into which the bonds are convertible was higher than the
redemption price, and therefore all the accrued interest based on implied
interest rate of 3.75% was transferred to capital
surplus.
|
|
|
The
Company at December 31, 2007 had obtained new long term credit lines to
refinance the bonds payable on a long-term basis. Therefore,
the bonds payable were not classified as short-term debts as of December
31, 2007.
|
|
|
b.
|
Domestic
secured bonds
|
|
|
In
January 2004, the Company issued NT$2.75 billion of domestic secured
bonds, which consisted of 275 units with face value of NT$10 million each
and are repayable in January 2009. The interest, payable
semiannually, was calculated at 0% in 2007 and 0%-0.88% in 2008,
respectively. A syndicate of banks has guaranteed the bonds and
has the right to request the Company to redeem the bonds early in the
event the Company violates certain provisions of the guarantee
agreement. As of December 31, 2008, the Company was in
compliance with all of the
provisions.
|
|
|
The
Company at December 31, 2008 had obtained new long term credit lines to
refinance the bonds payable on a long-term basis. Therefore,
the bonds payable were not classified as short-term debts as of December
31, 2008.
|
|
19.
|
LONG-TERM
BANK LOANS
|
|
|
Long-term
bank loans consisted of the
following:
|
|
December
31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Loans
for specified purposes
|
4,999,230 | 24,811,650 | 757,376 | |||||||||
|
Revolving
bank loans
|
14,736,559 | 26,455,101 | 807,543 | |||||||||
|
Mortgage
loans
|
3,544,919 | 1,243,659 | 37,963 | |||||||||
| 23,280,708 | 52,510,410 | 1,602,882 | ||||||||||
|
Current
portion
|
(5,258,946 | ) | (2,670,845 | ) | (81,528 | ) | ||||||
| 18,021,762 | 49,839,565 | 1,521,354 | ||||||||||
|
|
a.
|
Loans
for specified purposes
|
|
December
31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Syndicated
bank loan (Led by Citi bank)
|
||||||||||||
|
Repayable
through March 2013 in semi-annual
installments,
interest rate was 2.99%
|
- | 17,500,000 | 534,188 | |||||||||
|
US$200,000
thousand, repayment at maturity in
May
2011; interest rate was 5.11%
|
- | 6,572,000 | 200,611 | |||||||||
| - | 24,072,000 | 734,799 | ||||||||||
|
Others
- interest rate was 5.47%-6.00% at
December
31, 2007 and 1.35%-5.00% at
December
31, 2008
|
4,999,230 | 739,650 | 22,577 | |||||||||
| 4,999,230 | 24,811,650 | 757,376 | ||||||||||
|
|
The
above syndicated bank loans which were led by Citi bank were restricted
for use in the acquisition of ASE Test’s outstanding ordinary
shares. Pursuant to the loan agreements, ASE Inc. should hold
no less than 51%, directly or indirectly, of ASE Test’s equity and
maintain control of ASE Test at all
time.
|
|
|
Other
loans for specified purposes were designated to repay other loans or
purchase equipment.
|
|
|
b.
|
Revolving
bank loans
|
|
December
31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Syndicated
bank loans - due from December 2008 to
March
2013 - interest rate was
1.90%-5.81%
at December 31, 2007 and
1.53%-2.93%
at December 31, 2008
|
||||||||||||
|
ASE
Inc.
|
6,900,000 | 6,520,000 | 199,023 | |||||||||
|
ASESH
AT
|
- | 3,622,815 | 110,587 | |||||||||
|
ASE
Shanghai
|
3,860,717 | 2,346,204 | 71,618 | |||||||||
|
ASE
Japan
|
1,042,919 | - | - | |||||||||
|
Other
bank loans - due from March 2009 to
June
2011 - interest rate was 2.73%-6.00%
at
December 31, 2007 and 1.82%-6.25% at
December
31, 2008
|
||||||||||||
|
ASE
Inc.
|
200,000 | 12,220,000 | 373,016 | |||||||||
|
J&R
Holding
|
837,638 | 920,080 | 28,085 | |||||||||
|
PowerASE
|
800,000 | 300,000 | 9,158 | |||||||||
|
ASE
Shanghai
|
753,070 | 212,736 | 6,494 | |||||||||
|
Other
subsidiaries
|
342,215 | 313,266 | 9,562 | |||||||||
| 14,736,559 | 26,455,101 | 807,543 | ||||||||||
|
|
c.
|
Mortgage
loans
|
|
|
The
Company has mortgaged the inventory-construction in progress, buildings,
machinery and equipment as collateral for the loans, which are repayable
in quarterly installments or in a lump sum payment at
maturity. The interest rates ranged from 2.91% to 7.56% and
1.85% to 7.56% at December 31, 2007 and 2008,
respectively.
|
|
|
Pursuant
to the above loan agreements, the Company should maintain certain
financial ratios and interest payment capability. Such
financial ratios are calculated based on annual audited consolidated
financial statements or semi-annual reviewed consolidated financial
statements. As of December 31, 2008, the Company was in
compliance with all of the loan
covenants.
|
|
|
As
of December 31, 2007 and 2008, loans of NT$23,530 thousand and
NT$4,466,620 thousand (US$136,344 thousand), respectively, will mature
within one year. The Company had obtained new long term credit
lines to refinance the loans on a long - term basis. Therefore,
the loans were not classified as short - term
debts.
|
|
|
As
of December 31, 2008, the maturities of long-term bonds payable (Note 18)
and long-term bank loans were as
follows:
|
|
Amount
|
||||||||
|
NT$
|
US$
|
|||||||
|
Within
one year
|
8,512,465 | 259,844 | ||||||
|
During
the second year
|
18,939,024 | 578,114 | ||||||
|
During
the third year
|
16,647,732 | 508,173 | ||||||
|
During
the fourth year
|
6,524,126 | 199,149 | ||||||
|
During
the fifth year and thereafter
|
3,262,063 | 99,574 | ||||||
| 53,885,410 | 1,644,854 | |||||||
|
|
Long-term
bonds payable (Note 18) and long-term bank loans by currencies were
detailed as follows:
|
|
December 31
|
||||||||
|
2007
|
2008
|
|||||||
|
New
Taiwan dollars
|
NT$ | 11,303,510 | NT$ | 38,032,640 | ||||
|
U.S.
dollars
|
US$ | 531,605 | US$ | 460,486 | ||||
|
China
renminbi
|
RMB | 214,376 | RMB | 150,000 | ||||
|
Japanese
yen
|
￥ | 3,600,000 | ￥ | - | ||||
|
20.
|
PENSION
PLANS
|
|
|
Defined
Contribution Pension Plans
|
|
|
a.
|
Based
on the pension plan under the Labor Pension Act (The “LPA”), the Company
makes monthly contributions to employees’ individual pension accounts at
6% of monthly salaries and wages.
|
|
|
b.
|
ISE
has a defined contribution savings plan (“401k plan”) for eligible
employees. This plan permits employees to make contributions up
to the maximum limits allowable under the U.S. Internal Revenue Code
Section 401(k). ASE Malaysia and ASE Singapore Pte. Ltd. also
have a defined contribution pension plan
each.
|
|
|
c.
|
According
to local regulations, the subsidiaries in China made contributions to
local governments based on each employee’s average wage at specific
rates.
|
|
|
Under
defined contribution plans, the Company recognized pension cost of
NT$403,572 thousand, NT$483,717 thousand and NT$508,651 thousand
(US$15,527 thousand) for the years ended December 31, 2006, 2007
and 2008, respectively.
|
|
|
Defined
Benefit Pension Plans
|
|
|
a.
|
The Company has a defined benefit pension
plan under the ROC
Labor Standards Law (“LS Law”). The pension benefits are calculated based on
the length of service and average base salary in the six months prior to retirement. The
Company contributes a
certain percentage of monthly salaries of its ROC employees to a retirement fund, which is
deposited with the Bank of Taiwan
(the “BOT”) (the Central Trust of China merged with the BOT in July 2007,
with the BOT as the survivor entity) in the name of, and is administrated
by, the
employees’ pension monitoring committee.
|
|
|
b.
|
ASE
Japan has a pension plan under which eligible employees with more than ten
years of service are entitled to receive pension benefits based on their
length of service and salary at the time of termination. In
addition, ASE Korea has a pension plan under which eligible employees and
directors with more than one year of service are entitled to receive a
lump-sum payment upon termination of their service with ASE Korea, based
on their length of service and salary at the time of
termination.
|
|
|
c.
|
ASE Inc., ASE Test, Inc. and ASE Electronics maintain pension plans for
executive
managers. Pension
costs for these managers were NT$18,141 thousand, NT$42,916 thousand and NT$74,154 thousand
(US$2,264 thousand) for the years ended
December 31, 2006,
2007 and 2008,
respectively.
As of December 31, 2007 and
2008, accrued pension
costs were NT$83,617 thousand and NT$155,105 thousand
(US$4,735 thousand), respectively. Pension
payments were NT$2,666 thousand (US$81 thousand) each for the years
ended December 31, 2007 and
2008.
|
|
|
Under
the LS Law, the government is responsible for the administration of the
fund and determination of the investment strategies and
policies.
|
|
|
As
of December 31, 2007 and 2008, the asset allocation was primarily in cash,
equity securities and debt securities. Furthermore, under the
LS Law, the rate of return on assets shall not be less than the average
interest rate on a two-year time deposit published by the local
banks. The government is responsible for any shortfall in the
event that the rate of return is less than the required rate of
return.
|
|
|
Information
about defined benefit pension plans is summarized as
follows:
|
|
|
a.
|
Pension
cost for these entities consist of:
|
|
Year Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
Service
cost
|
366,314 | 379,750 | 333,538 | 10,182 | ||||||||||||
|
Interest
|
91,386 | 86,490 | 107,726 | 3,288 | ||||||||||||
|
Projected
return on plan assets
|
(35,408 | ) | (37,312 | ) | (46,788 | ) | (1,428 | ) | ||||||||
|
Amortization
|
11,751 | 17,958 | 20,674 | 631 | ||||||||||||
|
Curtailment
gain (recorded as a deduction of other losses)
|
- | - | (8,746 | ) | (267 | ) | ||||||||||
| 434,043 | 446,886 | 406,404 | 12,406 | |||||||||||||
|
|
b.
|
Other
pension information based on actuarial calculations of the plans is as
follows:
|
|
December 31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Benefit
obligation
|
||||||||||||
|
Vested
benefit obligation
|
2,216,322 | 2,516,940 | 76,830 | |||||||||
|
Non-vested
benefit obligation
|
1,675,759 | 1,907,886 | 58,238 | |||||||||
|
Accumulated
benefit obligation
|
3,892,081 | 4,424,826 | 135,068 | |||||||||
|
Additional
benefit based on future salaries
|
959,104 | 1,348,973 | 41,177 | |||||||||
|
Projected
benefit obligation
|
4,851,185 | 5,773,799 | 176,245 | |||||||||
|
Fair
value of plan assets
|
(2,132,706 | ) | (2,055,781 | ) | (62,753 | ) | ||||||
|
Funded
status
|
2,718,479 | 3,718,018 | 113,492 | |||||||||
|
Unrecognized
net transition obligation
|
(80,492 | ) | (72,818 | ) | (2,222 | ) | ||||||
|
Unrecognized
prior service cost
|
(12,343 | ) | (11,617 | ) | (355 | ) | ||||||
|
Unrecognized
net actuarial loss
|
(590,509 | ) | (1,427,640 | ) | (43,579 | ) | ||||||
|
Additional
pension liability
|
59,513 | 310,048 | 9,464 | |||||||||
|
Recorded
under accrued expenses
|
(9,311 | ) | (7,320 | ) | (223 | ) | ||||||
|
Accrued
pension cost
|
2,085,337 | 2,508,671 | 76,577 | |||||||||
|
c. Vested
benefit
|
1,026,162 | 1,014,941 | 30,981 | |||||||||
|
December
31
|
||||||||
|
2007
|
2008
|
|||||||
|
d. Actuarial
assumptions used:
|
||||||||
|
Discount
rate
|
2.50%-4.90 | % | 2.00%-4.90 | % | ||||
|
Increase
in future salary level
|
2.50%-5.00 | % | 2.75%-5.00 | % | ||||
|
Expected
rate of return on plan assets
|
2.50%-3.00 | % | 2.25%-2.50 | % | ||||
|
Year
Ended December 31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
e. Contributions
to the funds
|
485,244 | 153,370 | 4,682 | |||||||||
|
f. Payments
from the funds
|
48,285 | 93,653 | 2,859 | |||||||||
|
|
g.
|
The
Company expects to make contributions of NT$147,758 thousand (US$4,510
thousand) to its defined benefit pension plans in
2009.
|
|
h.
|
Expected
benefit payments:
|
|
Amount
|
||||||||
|
Year
of Payments
|
NT$
|
US$
|
||||||
|
2009
|
$ | 144,515 | $ | 4,411 | ||||
|
2010
|
140,338 | 4,284 | ||||||
|
2011
|
168,472 | 5,143 | ||||||
|
2012
|
163,337 | 4,986 | ||||||
|
2013
|
209,334 | 6,390 | ||||||
|
2014
and thereafter
|
909,630 | 27,766 | ||||||
|
|
Plan
assets and obligations reflected herein were measured as of December 31,
2007 and 2008.
|
|
21.
|
SHAREHOLDERS’
EQUITY
|
|
|
Common
Stock
|
|
|
The
Company reserved common stocks of NT$8,000,000 thousand for employee stock
option plans. For the years ended December 31, 2007 and 2008,
employees exercised options and paid NT$1,024,192 thousand and NT$240,770
thousand (US$7,350 thousand), of which NT$61,952 thousand and NT$3,387
thousand (US$103 thousand) was recognized as “capital received in advance”
for the years ended December 31, 2007 and 2008,
respectively.
|
|
|
For
the years ended December 31, 2007 and 2008, long-term bonds payable
converted to common stocks amounted to NT$1,730,726 thousand, of which
NT$429,931 thousand was recognized as “capital received in advance”, and
NT$265,834 thousand (US$8,115 thousand), respectively. The
shareholders’ meetings held in June 2007 and June 2008 resolved to
distribute stock dividends out of capital surplus and retained earnings in
the amount of NT$ 7,476,040 thousand (747,604 thousand shares) and
NT$1,970,867 thousand (197,087 thousand shares). The
ex-dividend date was Auguest 26, 2007 and Auguest 19, 2008,
respectively.
|
|
|
American Depositary
Shares
|
|
|
In September 2000, ASE Inc. issued 20,000 thousand ADS,
representing 100,000 thousand common shares. As of
December 31, 2008, 42,330 thousand ADS were outstanding and represented
approximately 211,648 thousand common shares of ASE Inc., or 3.72% of the
total outstanding common shares (including treasury
stock).
|
Capital Surplus
|
|
Under
ROC Company Law, capital surplus from paid-in capital in excess of par
value, treasury stock transactions and reversed interest of convertible
bonds may be used to offset a deficit. In addition, such
capital surplus may be transferred to capital, subject to a specified
percentage of paid-in capital.
|
|
|
Capital
surplus from equity method investments may not be used for any
purpose.
|
|
|
Appropriation
of Retained Earnings
|
|
|
The Articles of Incorporation
of ASE Inc.
provide that the
annual net income shall be distributed in the following order:
|
|
|
a.
|
Replenishment
of losses;
|
|
|
b.
|
10.0% as legal surplus reserve;
|
|
|
c.
|
Special
surplus reserve in
accordance with laws or regulations set forth be the by
the authorities concerned;
|
|
d.
|
An amount equal to the excess of the income from long-term
investments accounted for by the equity method over cash dividends as special
reserve;
|
|
e.
|
Not more than 2.0% of the
remainder from a.
to d. as compensation to directors
and
supervisors;
|
|
f.
|
Between 7.0% to 10.0% of the remainder from
a. to d. as a bonus to employees, of which
7.0% shall be distributed in accordance with
the employee bonus plan and the excess shall be distributed to specified employees as decided by the
board of directors;
and
|
|
g.
|
The remainder from a. to f. as dividends to
shareholders.
|
|
|
Employees
referred to in f. above include employees of subsidiary companies that
meet certain conditions, which are to be prescribed by the board of
directors.
|
|
|
The Company is currently in the business
growth stage. To meet the capital needs for business development now
and in the future and satisfy the requirements of shareholders for
cash inflow, the Company shall use residual dividend policy
to distribute dividends, of which the cash dividend distribution rate is
0%–50% of the total dividend amount,
with the remainder to be distributed as
stock dividends. However, depending on factors such as the economic
situation, business development, and cash position holdings, the Company shall adjust the cash
dividend and stock dividend distribution rate when
necessary with a surplus distribution plan made by the board of directors and passed by resolution
of the shareholders’ meeting.
|
|
|
The
bonus to employees of
NT$554,405 thousand (US$16,923 thousand) and the compensation to directors
and supervisors of NT$110,881 thousand (US$3,385 thousand), which
representing 10% and 2% of net income (net of the bonus to employees and
compensation to directors and supervisors), respectively, was recognized
for the year ended December 31, 2008. The amounts were
estimated based on past experiences. If the actual amounts
subsequently resolved by the shareholders differ from the proposed
amounts, the differences are recorded in the year of the shareholders’
resolution as a change in accounting estimate. If bonus shares
are resolved to be distributed to employees, the number of shares is
determined by dividing the amount of bonus by the closing market price
(after considering the effect of cash and stock dividends) of the shares
of the day preceding the shareholders’
meeting.
|
|
|
Based on a directive issued by the
Securities and Futures Bureau, an amount equal to the net debit
balance of certain
shareholders’ equity accounts (including unrealized loss on financial instruments, net
loss not recognized as pension cost, cumulative transaction
adjustments and the
excess of book value over market value of treasury shares held by
subsidiaries) shall
be transferred from unappropriated earnings to a special reserve. Any specific reserve
appropriated may be reversed to the extent of the decrease in the net
debit balance.
|
|
|
Under the ROC Company Law, the
appropriation for legal reserve shall be made until the reserve
reaches the paid-in capital of ASE
Inc. The reserve may be used
to offset a deficit, or be
distributed as dividends and bonuses for the portion in excess of 50% of
paid-in
capital if
ASE Inc. has no unappropriated earnings
and the reserve balance has exceeded 50% of paid-in
capital. Also, when the reserve has reached 50% of
paid-in capital, up to 50% thereof may be
transferred to capital stock if ASE Inc. doesn’t have a deficit.
|
|
|
Except for non-ROC resident
shareholders, all shareholders receiving the dividends are allowed a tax credit equal to
their proportionate
share of the income tax paid by the Company in the ROC.
|
|
|
The appropriation of
2006 and
2007 earnings resolved at the Company’s annual shareholders’ meeting and the appropriation of 2008
earnings proposed by the Company’s board meeting and to be resolved by the
Company’s annual shareholders’ meeting is as follows:
|
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
Legal
reserve
|
1,698,504 | 1,216,525 | 616,005 | 18,804 | ||||||||||||
|
Compensation
to directors and supervisors
|
300,000 | 216,000 | - | - | ||||||||||||
|
Bonus
to employees - cash
|
535,028 | 383,205 | - | - | ||||||||||||
|
Bonus
to employees - stock
|
535,029 | 383,205 | - | - | ||||||||||||
|
Stock
dividends - NT$1.50, NT$0.09 and nil in
2006, 2007 and 2008, respectively
|
6,941,011 | 492,723 | - | - | ||||||||||||
|
Cash
dividends - NT$1.50, NT$1.71 and NT$0.50 in 2006, 2007 and 2008,
respectively
|
6,941,011 | 9,361,728 | 2,736,568 | 83,533 | ||||||||||||
| 16,950,583 | 12,053,386 | 3,352,573 | 102,337 | |||||||||||||
|
|
Except
for the 2008 earnings appropriation as above, the board meeting also
proposed to distribute bonuses to employees and compensation to directors
and supervisors of NT$554,404 thousand and NT$88,800 thousand,
respectively.
|
|
|
The shareholders also resolved the
transfer of NT$1,094,939 thousand (US$33,423
thousand) of capital surplus to paid-in capital in the
shareholders’ meeting in June
2008.
|
|
|
Information about the
appropriations of earnings, bonus to employees and
compensation to directors and supervisors are available on the Market Observation Post System
website of the
TSE.
|
|
|
Unrealized Gain (Loss) on
Financial Instruments
|
|
|
Movements of the unrealized gain
on financial instruments for the years ended December 31, 2007 and 2008
were as follows:
|
|
Available-for-sale Financial
Assets
|
Equity Method Investments
|
Cash Flow
Hedges
|
Total
|
|||||||||||||||||
|
NT$
|
NT$
|
NT$
|
NT$
|
US$
|
||||||||||||||||
|
Balance
at January 1, 2007
|
16,827 | 399,573 | - | 416,400 | 12,711 | |||||||||||||||
|
Recognized
directly in shareholders’ equity
|
94,795 | (15,069 | ) | - | 79,726 | 2,433 | ||||||||||||||
|
Removed
from shareholders’ equity and recognized
in earnings
|
(93,608 | ) | - | - | (93,608 | ) | (2,857 | ) | ||||||||||||
|
Balance
at December 31, 2007
|
18,014 | 384,504 | - | 402,518 | 12,287 | |||||||||||||||
|
Recognized
directly in shareholders’ Equity
|
38,345 | (432,247 | ) | (391,695 | ) | (785,597 | ) | (23,980 | ) | |||||||||||
|
Removed
from shareholders’ equity and recognized
in earnings
|
(56,359 | ) | - | - | (56,359 | ) | (1,721 | ) | ||||||||||||
|
|
||||||||||||||||||||
|
Balance
at December 31, 2008
|
- | (47,743 | ) | (391,695 | ) | (439,438 | ) | (13,414 | ) | |||||||||||
|
|
Treasury
Stock
|
|
|
ASE Inc. held a meeting of the
board of directors on November 17, 2008 and approved a share buyback plan
to repurchase ASE
Inc.’s common shares up to 171,000 thousand shares listed on the TSE during
the period from
November 18, 2008 to January 17, 2009 for the buyback price in the
range from NT$8 to NT$18. As of December 31, 2008, ASE
Inc. had repurchased
108,700 thousand common
shares with
total purchase costs of NT$1,099,989 thousand (US$33,577
thousand). All the treasury
stocks repurchased under this share
buyback plan were cancelled for capital reduction on
March 16, 2009. In addition, ASE
Inc. held
another meeting of the board of directors on January 23, 2009 and approved the second share buyback plan to repurchase the
ASE Inc.’s common shares up to 285,000 thousand shares listed on the TSE during
the period from February 2, 2009 to April 1, 2009 for the buyback price in the
range from NT$8 to NT$17.
|
|
|
As of December 31, 2007 and 2008,
information regarding treasury shares held by subsidiaries
was as
follows:
|
|
Shares
|
||||||||||||||||
|
Held
By
|
Calculated by the Company’s
Ownership
|
|||||||||||||||
|
Subsidiaries
|
Thousand
|
Book
|
Market
|
|||||||||||||
|
(In Thousands)
|
Shares
|
Value
|
Value
|
|||||||||||||
|
Subsidiary
|
NT$
|
NT$
|
||||||||||||||
|
December 31, 2007
|
||||||||||||||||
|
ASE
Test
|
199,146 | 100,191 | 1,255,148 | 3,256,189 | ||||||||||||
|
J&R
Holding
|
106,684 | 106,684 | 1,335,870 | 3,467,235 | ||||||||||||
|
ASE
Test, Inc.
|
7,634 | 3,840 | 71,950 | 124,812 | ||||||||||||
| 313,464 | 210,715 | 2,662,968 | 6,848,236 | |||||||||||||
(Continued)
|
Shares
|
||||||||||||||||
|
Held
By
|
Calculated by the Company’s
Ownership
|
|||||||||||||||
|
Subsidiaries
|
Thousand
|
Book
|
Market
|
|||||||||||||
|
(In Thousands)
|
Shares
|
Value
|
Value
|
|||||||||||||
|
December 31, 2008
|
||||||||||||||||
|
ASE
Test
|
204,907 | 204,907 | 4,483,761 | 2,417,906 | ||||||||||||
|
J&R
Holding
|
109,771 | 109,771 | 1,254,053 | 1,295,291 | ||||||||||||
|
ASE
Test, Inc.
|
7,854 | 7,854 | 196,677 | 92,680 | ||||||||||||
| 322,532 | 322,532 | 5,934,491 | 3,805,877 | |||||||||||||
(Concluded)
|
Book
|
Market
|
|||||||
|
Value
|
Value
|
|||||||
|
Subsidiary
|
US$
|
US$
|
||||||
|
December 31, 2008
|
||||||||
|
ASE
Test
|
136,867 | 73,807 | ||||||
|
J&R
Holding
|
38,280 | 39,539 | ||||||
|
ASE
Test, Inc.
|
6,004 | 2,829 | ||||||
| 181,151 | 116,175 | |||||||
|
|
Cash
dividends received in 2007 and 2008 by the subsidiaries from ASE Inc. were
NT$271,945 thousand and NT$535,100 thousand (US$16,334 thousand),
respectively, which were recorded as capital surplus. Stock
dividends received in 2007 and 2008 by the subsidiaries from ASE Inc. were
40,396 thousand shares and 9,068 thousand shares,
respectively.
|
|
|
ASE
Inc. issued common shares in connection with its merger with ASE Chung Li
and ASE Material in August 2004. The shares held by its
subsidiaries were reclassified from long-term investments to treasury
stock. ASE Inc.’s subsidiary, ASE Test, is a Singapore
incorporated company and may not acquire, directly or indirectly, shares
in ASE Inc. under Singapore laws. In order to comply with
relevant regulations, a trust has been established to hold the shares
acquired by ASE Test in connection with the merger. Pursuant to
the trust agreement, ASE Test’s rights with respect to the shares held in
trust are limited to the right to receive the proceeds from the sale of
such shares and any cash dividends declared while the shares remain in
trust.
|
|
|
Although these shares are treated
as treasury stock in the consolidated financial statements, the
shareholders are entitled to exercise their rights on these shares, except
for participation in capital increases through cash contribution and
exercise of voting
rights.
|
|
22.
|
EMPLOYEE
STOCK OPTION PLANS
|
|
|
ASE
Inc. Option Plans
|
|
|
In
order to attract, retain and reward employees, ASE Inc. adopted three
employee stock option plans, the 2002 Plan, 2004 Plan and 2007 Plan, which
were approved in August 2002, May 2004 and November 2007,
respectively. The maximum number of units authorized to be
granted under the 2002 Plan, 2004 Plan and 2007 Plan is 160,000 thousand
units, 140,000 thousand units and 200,000 thousand units, respectively,
with each unit representing the right to purchase one share of common
stock when exercisable. Under the terms of the plans, stock
option rights are granted at an exercise price equal to the closing price
of the common shares listed on the TSE on the date of
grant. The option rights of these plans are valid for ten years
and exercisable at certain percentages subsequent to the second
anniversary of the grant date.
|
|
|
Information
regarding stock options for the years ended December 31, 2006, 2007 and
2008 was as follows:
|
|
Year
Ended December 31
|
||||||||||||||||||||||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||||||||||||||||||||||
|
Number
of Options (in Thousands)
|
Weighted
Average Exercise Price Per Share (NT$)
|
Weighted
Average Grant Date Fair Value (NT$)
|
Number
of Options (in Thousands)
|
Weighted
Average Exercise Price Per Share (NT$)
|
Weighted
Average Grant Date Fair Value (NT$)
|
Number
of Options (in Thousands)
|
Weighted
Average Exercise Price Per Share (NT$)
|
Weighted
Average Grant Date Fair Value (NT$)
|
||||||||||||||||||||||||||||
|
Beginning
outstanding
balance
|
227,341 | 19.8 | 171,256 | 16.6 | 295,748 | 24.5 | ||||||||||||||||||||||||||||||
|
Options
granted
|
- | - | - | 185,806 | 30.7 | 11.8 | - | - | - | |||||||||||||||||||||||||||
|
Options
forfeited
|
(11,086 | ) | 20.7 | (6,927 | ) | 17.3 | (7,891 | ) | 26.7 | |||||||||||||||||||||||||||
|
Options
exercised
|
(44,999 | ) | 18.9 | (54,387 | ) | 15.8 | (16,019 | ) | 13.8 | |||||||||||||||||||||||||||
|
Ending
outstanding
balance
|
171,256 | 20.0 | 295,748 | 25.6 | 271,838 | 25.0 | ||||||||||||||||||||||||||||||
|
Ending
exercisable
balance
|
78,092 | 19.4 | 71,096 | 16.0 | 78,141 | 15.8 | ||||||||||||||||||||||||||||||
|
|
The
exercise prices have been adjusted to reflect the dilution attributable to
the distribution of stock dividends in accordance with the terms of the
plans.
|
|
|
The
weighted average stock price at the date of exercise for stock options
exercised for the years ended December 31, 2006, 2007 and 2008 was
NT$31.13, NT$37.66 and NT$22.49 (US$0.69),
respectively.
|
|
|
Information
regarding outstanding and exercisable stock options as of December 31,
2008 was as follows:
|
|
Outstanding
|
Exercisable
|
|||||||||||||||||||||||||
|
Exercise
Price (NT$) |
Number
of
Options (in Thousands) |
Weighted
Average Exercise Price (NT$) |
Remaining
Contractual Life (Years) |
Number
of
Options (in Thousands) |
Weighted
Average Exercise Price (NT$) |
Remaining|
Contractual Life (Years) |
||||||||||||||||||||
|
10.3
|
23,083 | 10.3 | 4.0 | 23,015 | 10.3 | 4.0 | ||||||||||||||||||||
|
14.3
|
5,807 | 14.3 | 4.6 | 5,763 | 14.3 | 4.6 | ||||||||||||||||||||
|
18.9
|
54,384 | 18.9 | 5.5 | 44,300 | 18.9 | 5.5 | ||||||||||||||||||||
|
15.4
|
8,741 | 15.4 | 6.4 | 5,063 | 15.4 | 6.4 | ||||||||||||||||||||
|
29.6
|
179,823 | 29.6 | 9.0 | - | - | 9.0 | ||||||||||||||||||||
| 271,838 | 25.0 | 78,141 | 15.8 | |||||||||||||||||||||||
|
|
As
of December 31, 2008, the number of options that were expected to vest was
160,180 thousand units.
|
|
|
As
of December 31, 2008, the aggregate intrinsic value of outstanding and
exercisable stock options was NT$34,624 thousand (US$1,057 thousand) and
NT$34,522 thousand (US$1,054 thousand),
respectively.
|
|
|
Total
intrinsic value of options exercised for the years ended December 31,
2006, 2007 and 2008 was NT$585,948 thousand, NT$1,198,329 thousand and NT$183,166 thousand
(US$5,591 thousand),
respectively.
|
|
|
ASE
Test Option Plans
|
|
|
As
of December 31, 2008, all of ASE Test stock options that had a per share
exercise price lower than the per share acquisition price of US$14.78 had
been exercised. The ASE Test ordinary shares issued upon
exercise of the options were acquired by ASE Inc. for US$14.78 per ASE
Test NASDAQ Share in cash. Each ASE Test option that had a per
share exercise price equal to or higher than the per share acquisition
price was cancelled without any
payment.
|
|
|
Information
regarding outstanding and exercisable stock options granted or modified
after January 1, 2004 for the years ended December 31, 2006, 2007 and 2008
was as follows:
|
|
Year
Ended December 31
|
||||||||||||||||||||||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||||||||||||||||||||||
|
Number
of
Options (in Thousands) |
Weighted
Average Exercise Price Per Share (US$) |
Weighted
Average Grant Date Fair Value (US$) |
Number
of
Options (in Thousands) |
Weighted
Average Exercise Price Per Share (US$) |
Weighted
Average Grant Date Fair Value (US$) |
Number
of
Options (in Thousands) |
Weighted
Average Exercise Price Per Share (US$) |
Weighted
Average Grant Date Fair Value (US$) |
||||||||||||||||||||||||||||
|
Beginning
outstanding
balance
|
293 | 6.21 | 414 | 7.28 | 368 | 7.31 | ||||||||||||||||||||||||||||||
|
Options
granted
|
130 | 9.60 | 5.32 | - | - | - | - | - | - | |||||||||||||||||||||||||||
|
Options
forfeited
|
- | - | (12 | ) | 6.10 | - | - | |||||||||||||||||||||||||||||
|
Options
exercised
|
(9 | ) | 6.10 | (34 | ) | 7.38 | (368 | ) | 7.31 | |||||||||||||||||||||||||||
|
Ending
outstanding
balance
|
414 | 7.28 | 368 | 7.31 | - | - | ||||||||||||||||||||||||||||||
|
Ending
exercisable
balance
|
135 | 7.90 | 185 | 6.79 | - | - | ||||||||||||||||||||||||||||||
|
|
ASE
Mauritius Inc. Option Plan
|
|
|
ASE
Mauritius Inc. adopted an employee stock option plan which was approved in
November 2007 and granted 30,000 thousand units in December
2007. Under the terms of the plan, each unit represents the
right to purchase one share of common stock of ASE Mauritius Inc. when
exercisable. The options are valid for ten years and
exercisable at certain percentages subsequent to the second anniversary of
the grant date.
|
|
|
For
the year ended December 31, 2008, 380 thousand units of stock options were
cancelled. As of December 31, 2008, the outstanding and
exercisable stock options were 29,620 thousand units and nil,
respectively; the average exercise price per share is US$1.7; the
remaining contractual life is nine
years.
|
|
|
No
compensation cost was recognized under the intrinsic value method for the
years ended December 31, 2006, 2007 and
2008.
|
|
|
For
purposes of pro forma disclosure, the estimated fair values of the options
are amortized to expense over the option vesting periods. Had
the Company recorded compensation cost based on the estimated grant date
fair value which was determined using the Black-Scholes option pricing
model, the Company’s net income would have been reduced to the pro forma
amounts below:
|
|
Year Ended December 31
|
||||
|
Assumptions:
|
2006
|
2007
|
2008
|
|
|
ASE Inc.
|
||||
|
Expected dividend
yield
|
3.00%
|
3.00%
|
3.00%
|
|
|
Expected
volatility
|
46.0%-59.0%
|
46.0%-59.0%
|
46.0%-59.0%
|
|
|
Risk free interest
rate
|
1.80%-2.51%
|
1.80%-2.51%
|
1.80%-2.51%
|
|
|
Expected life
|
5.0-6.5
years
|
5.0-6.5
years
|
5.0-6.5
years
|
|
|
ASE Test
|
||||
|
Expected dividend
yield
|
-
|
-
|
-
|
|
|
Expected
volatility
|
59.95%-62.03%
|
59.95%-62.03%
|
-
|
|
|
Risk free interest
rate
|
4.88%
|
4.88%
|
-
|
|
|
Expected life
|
3-5
years
|
3-5
years
|
-
|
|
|
ASE Mauritius
Inc.
|
||||
|
Expected dividend
yield
|
-
|
-
|
-
|
|
|
Expected
volatility
|
-
|
47.21%
|
47.21%
|
|
|
Risk free interest
rate
|
-
|
4.17%
|
4.17%
|
|
|
Expected life
|
-
|
6.5
years
|
6.5
years
|
|
|
Year Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
Net
income attributable to shareholders of the
parent
for calculation of basic EPS:
|
||||||||||||||||
|
As reported
|
17,416,151 | 12,165,249 | 6,160,052 | 188,036 | ||||||||||||
|
Pro forma
|
16,301,168 | 12,013,309 | 5,436,867 | 165,961 | ||||||||||||
|
Net
Income attributable to shareholders of the
parent
for calculation of diluted EPS:
|
||||||||||||||||
|
As reported
|
17,582,151 | 12,280,224 | 6,099,460 | 186,186 | ||||||||||||
|
Pro forma
|
16,467,168 | 12,128,284 | 5,376,275 | 164,111 | ||||||||||||
|
Earnings
per share
|
||||||||||||||||
|
Basic EPS - as
reported
|
3.29 | 2.26 | 1.14 | 0.03 | ||||||||||||
|
Basic EPS - pro
forma
|
3.08 | 2.23 | 1.01 | 0.03 | ||||||||||||
|
Diluted EPS - as
reported
|
3.14 | 2.18 | 1.12 | 0.03 | ||||||||||||
|
Diluted EPS - pro
forma
|
2.94 | 2.15 | 0.99 | 0.03 | ||||||||||||
|
23.
|
PERSONNEL
EXPENDITURE AND DEPRECIATION AND
AMORTIZATION
|
|
Year Ended December 31,
2006
|
Year Ended December 31,
2007
|
|||||||||||||||||||||||
|
Cost
of
|
Operating
|
Cost
of
|
Operating
|
|||||||||||||||||||||
|
Revenues
|
Expenses
|
Total
|
Revenues
|
Expenses
|
Total
|
|||||||||||||||||||
|
NT$
|
NT$
|
NT$
|
NT$
|
NT$
|
NT$
|
|||||||||||||||||||
|
Personnel
|
||||||||||||||||||||||||
|
Salary
|
11,247,354 | 3,401,115 | 14,648,469 | 11,553,243 | 3,938,597 | 15,491,840 | ||||||||||||||||||
|
Pension
cost
|
748,437 | 191,233 | 939,670 | 745,641 | 227,878 | 973,519 | ||||||||||||||||||
|
Labor
and health insurance
|
862,163 | 242,791 | 1,104,954 | 851,918 | 291,508 | 1,143,426 | ||||||||||||||||||
|
Others
|
1,175,983 | 395,931 | 1,571,914 | 985,870 | 368,971 | 1,354,841 | ||||||||||||||||||
| 14,033,937 | 4,231,070 | 18,265,007 | 14,136,672 | 4,826,954 | 18,963,626 | |||||||||||||||||||
|
Depreciation
|
12,736,924 | 751,256 | 13,488,180 | 14,668,139 | 890,583 | 15,558,722 | ||||||||||||||||||
|
Amortization
|
576,102 | 423,929 | 1,000,031 | 630,435 | 436,995 | 1,067,430 | ||||||||||||||||||
|
|
(Continued)
|
|
Year Ended December 31,
2008
|
||||||||||||||||
|
Cost
of
|
Operating
|
|||||||||||||||
|
Revenues
|
Expenses
|
Total
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
Personnel
|
||||||||||||||||
|
Salary
|
11,578,736 | 4,862,392 | 16,441,128 | 501,866 | ||||||||||||
|
Pension
cost
|
688,237 | 309,718 | 997,955 | 30,464 | ||||||||||||
|
Labor
and health insurance
|
861,532 | 306,506 | 1,168,038 | 35,654 | ||||||||||||
|
Others
|
1,194,641 | 353,482 | 1,548,123 | 47,256 | ||||||||||||
| 14,323,146 | 5,832,098 | 20,155,244 | 615,240 | |||||||||||||
|
Depreciation
|
15,360,782 | 972,733 | 16,333,515 | 498,581 | ||||||||||||
|
Amortization
|
440,024 | 471,313 | 911,337 | 27,819 | ||||||||||||
|
|
(Concluded)
|
|
24.
|
INCOME
TAX
|
|
|
a.
|
A
reconciliation of income tax expense based on income before income tax at
statutory rates and income tax expense was as
follows:
|
|
Year Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
Tax
expense based on pre-tax income
at statutory rates
|
5,957,310 | 4,491,629 | 2,979,783 | 90,958 | ||||||||||||
|
Cumulative
effect of changes in accounting
principles
|
(114,168 | ) | - | - | - | |||||||||||
|
Add
(less) tax effects of:
|
||||||||||||||||
|
Permanent
differences
|
||||||||||||||||
|
Tax-exempt
income
|
(778,834 | ) | (1,016,270 | ) | (598,361 | ) | (18,265 | ) | ||||||||
|
Other
|
(89,430 | ) | (113,709 | ) | 23,908 | 730 | ||||||||||
|
Temporary
differences
|
||||||||||||||||
|
Unrealized
foreign exchange loss
(gain)
|
(90,000 | ) | 18,212 | 235,882 | 7,200 | |||||||||||
|
Loss
(gain) on valuation of financial
instruments
|
83,325 | (77,130 | ) | 160,271 | 4,892 | |||||||||||
|
Others
|
(542,776 | ) | (454,209 | ) | (155,366 | ) | (4,742 | ) | ||||||||
| 4,425,427 | 2,848,523 | 2,646,117 | 80,773 | |||||||||||||
|
Loss
carryforwards
|
(1,246,641 | ) | 77,863 | 151,359 | 4,620 | |||||||||||
|
Income
tax on undistributed earnings
|
- | 298,782 | 176,860 | 5,398 | ||||||||||||
|
Credits
for investments and research and
development
|
(1,697,397 | ) | (1,754,907 | ) | (1,423,852 | ) | (43,463 | ) | ||||||||
|
Tax
separately levied on interest from
short-term bills
|
- | 275 | - | - | ||||||||||||
|
Adjustment
of prior year’s income tax
|
121,479 | (142,719 | ) | 16,076 | 491 | |||||||||||
|
Current
income tax expense
|
1,602,868 | 1,327,817 | 1,566,560 | 47,819 | ||||||||||||
|
Deferred
income tax
|
367,751 | 2,029,567 | 701,722 | 21,420 | ||||||||||||
|
Cumulative
effect of changes in accounting
principles
|
114,168 | - | - | - | ||||||||||||
|
Income
tax expense
|
2,084,787 | 3,357,384 | 2,268,282 | 69,239 | ||||||||||||
|
|
b.
|
The
above-mentioned taxes on pre-tax income based on applicable statutory
rates for both domestic and foreign entities are shown
below:
|
|
Year Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
Domestic
entities in ROC (25%
statutory rate)
|
5,570,158 | 3,797,475 | 2,283,923 | 69,717 | ||||||||||||
|
Foreign
entities
|
||||||||||||||||
|
ASE
Korea (27.5%-30.8% statutory
rate)
|
97,499 | 297,857 | 160,140 | 4,888 | ||||||||||||
|
ASE
Japan (40%-42.99% statutory rate)
|
182,372 | 140,751 | 157,087 | 4,795 | ||||||||||||
|
ISE
(34%-35% federal tax rate
and 6% state tax rate)
|
(11,141 | ) | (15,480 | ) | 268,064 | 8,183 | ||||||||||
|
ASE
Malaysia (26%-28% statutory
rate)
|
118,422 | 271,026 | 110,569 | 3,375 | ||||||||||||
| 5,957,310 | 4,491,629 | 2,979,783 | 90,958 | |||||||||||||
|
|
c.
|
Deferred
income tax assets (liabilities) were as
follows:
|
|
December
31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Current
deferred income tax assets
|
||||||||||||
|
Unused
tax credits
|
1,992,245 | 772,658 | 23,585 | |||||||||
|
Unrealized
foreign exchange loss (gain)
|
(44,508 | ) | 137,035 | 4,183 | ||||||||
|
Other
|
333,286 | 384,268 | 11,730 | |||||||||
| 2,281,023 | 1,293,961 | 39,498 | ||||||||||
|
Valuation
allowance
|
(205,767 | ) | (208,513 | ) | (6,365 | ) | ||||||
|
Net
current deferred income tax assets
|
2,075,256 | 1,085,448 | 33,133 | |||||||||
|
Net
current deferred income tax liabilities
|
(121,499 | ) | - | - | ||||||||
|
Non-current
deferred income tax assets
|
||||||||||||
|
Unused
tax credits
|
1,904,773 | 1,669,503 | 50,962 | |||||||||
|
Accrued
pension costs
|
185,528 | 596,522 | 18,209 | |||||||||
|
Loss
carryforwards (expiring in 2018)
|
170,541 | 412,091 | 12,579 | |||||||||
|
Depreciation
|
(352,129 | ) | (344,156 | ) | (10,505 | ) | ||||||
|
Others
|
238,396 | 141,024 | 4,304 | |||||||||
| 2,147,109 | 2,474,984 | 75,549 | ||||||||||
|
Valuation
allowance
|
(685,707 | ) | (845,275 | ) | (25,802 | ) | ||||||
|
Net
non-current deferred income tax assets
|
1,461,402 | 1,629,709 | 49,747 | |||||||||
|
Net
non-current deferred income tax liabilities-mainly depreciation
differences
|
(150,009 | ) | (151,729 | ) | (4,632 | ) | ||||||
|
|
In assessing the realizability of
deferred income tax assets, the Company considers its future taxable
earnings and expected timing of the reversal of temporary
differences. In addition, in the event future taxable
earnings do not
materialize as forecasted, the Company will consider executing certain tax
planning strategies available to realize the deferred income tax
assets. The valuation allowance is provided to reduce the gross
deferred income tax assets to an amount which the Company believes
will more likely than not be realized. Deferred income tax
assets and liabilities are classified in the consolidated balance sheets
based on the classification of the related assets or liabilities or the
expected timing of the reversal of temporary
differences.
|
|
|
Pursuant to the amended
Article 39 of the ROC Income Tax Law
which was promulgated on January 6, 2009, the period for operating loss
carryforwards was extended from five years to ten years. The
Company recalculated
deferred tax assets according to the amended Article and recorded the resulting
differences as a deferred income tax
benefit.
|
|
|
The tax holidays for the Company
are as follows:
|
|
|
1)
|
A
portion of ASE Inc.’s income from packaging of semiconductors is exempt
from income tax for five years ending December 2007 and September 2009,
respectively. A portion of ASE Chung Li branch’s income from
manufacturing, processing and testing of semiconductors is exempt from
income tax for five years ending December 2007 and 2011,
respectively.
|
|
|
2)
|
A
portion of ASE Test, Inc.’s income from testing of semiconductors is
exempt from income tax for five years ending December 31,
2010.
|
|
|
3)
|
A
portion of PowerASE’s income is exempt from income tax for five years
ending September 2012.
|
|
|
4)
|
Under
the previous tax laws in China, those subsidiaries located in China were
eligible to enjoy the five-year tax holiday (two-year tax exemption and
subsequent three-year 50% reduction of applicable tax rate) starting from
first profit-making year. However, under the amended tax laws
effective from January 1, 2008, the manufacturing foreign investment
enterprises which have not started their tax holidays under the prior tax
laws will have their tax holidays take effect starting from the effective
date of the amended tax laws, and those subsidiaries would be eligible for
a 5-year transition period to move up to 25% tax rate. The tax
rate applied to above subsidiaries in China for 2008 is
18%.
|
|
|
Under
new income tax laws, the distribution of China-sourced income generated
after January 1, 2008 is subject to a 10% withholding tax, and enterprises
originating from those countries that have tax treaties with China may
apply for lower withholding tax
rates.
|
|
|
5)
|
ASE
Singapore Pte. Ltd. has been granted pioneer status under the provisions
of the Economic Expansion Incentives (Relief from Income Tax) Act for its
operation in Singapore for a qualifying period of 10 years commencing September 1,
1998. During the qualifying period, all income arising from pioneer status
activities is exempt from income tax. The tax exempt period
was approved to be extended for five
years.
|
|
|
The per share effect of
these tax holidays was NT$0.15, NT$0.19 and NT$0.11 (US$0.003) per share for the years ended
December 31, 2006,
2007 and 2008,
respectively.
|
|
|
d.
|
As
of December 31, 2008, unused tax credits, which may be utilized to offset
future income tax, are set forth
below:
|
|
Amount
|
||||||||
|
Year
of Expiry
|
NT$
|
US$
|
||||||
|
2009
|
578,136 | 17,648 | ||||||
|
2010
|
521,172 | 15,909 | ||||||
|
2011
|
682,110 | 20,821 | ||||||
|
2012
|
578,552 | 17,660 | ||||||
|
2013
and thereafter
|
82,191 | 2,509 | ||||||
| 2,442,161 | 74,547 | |||||||
|
|
Income
tax returns of ASE Inc. have been examined by the ROC tax authorities
through 2003. ASE Inc. disagreed with the result of an
examination relating to its 2002 income tax return and applied for an
appeal. In March 2009, the Supreme Administrative Court judged
against ASE Inc. ASE Inc. also disagreed with the result of the
examination relating to its 2003 income tax return and lost the suit in
administrative appeal in February 2009. ASE Inc. has appealed
the case to the High Administrative Court. As a result, ASE
Inc. recognized the related income tax expense in 2006 and 2007,
respectively. Income tax returns of other subsidiaries have
been examined by the tax authorities through 2003 to
2006.
|
|
|
Information
regarding Imputation Tax System
|
|
|
As
of December 31, 2008, the balance of the Imputation Credit Account (“ICA”)
amounted to NT$57,415 thousand (US$1,753 thousand). The creditable ratio
for the distribution of 2007 and 2008 earnings is 5.62% (actual) and 8.65%
(estimated), respectively.
|
|
|
Under
the Integrated Income Tax System which became effective on January 1,
1998, ROC resident shareholders are allowed a tax credit for their
proportionate share of the income tax paid by the Company on earnings
generated since January 1, 1998. Non-resident shareholders are
allowed only a tax credit from the 10% income tax on undistributed
earnings, which can be used to deduct the withholding income tax on
dividends. An ICA is maintained by the Company for such income
tax and the tax credit allocated to each shareholder. The
maximum credit available for allocation to each shareholder cannot exceed
the balance shown in the ICA on the date of distribution of
dividends. The expected creditable ratio for the 2008 earnings
may be adjusted, depending on the ICA balance on the date of dividend
distribution.
|
|
25.
|
EARNINGS
PER SHARE
|
|
Year
Ended December 31
|
||||||||||||||||||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||||||||||||||||||
|
Before
Income Tax
|
After
Income Tax
|
Before
Income Tax
|
After
Income Tax
|
Before
Income
Tax
|
After
Income
Tax
|
|||||||||||||||||||||||||||
|
NT$
|
NT$
|
NT$
|
NT$
|
NT$
|
US$
|
NT$
|
US$
|
|||||||||||||||||||||||||
|
Basic
EPS
|
||||||||||||||||||||||||||||||||
|
Income
before cumulative effect of changes in accounting
principles
|
3.61 | 3.36 | 2.55 | 2.26 | 1.36 | 0.04 | 1.14 | 0.03 | ||||||||||||||||||||||||
|
Cumulative
effect of changes in accounting principles
|
(0.09 | ) | (0.07 | ) | - | - | - | - | - | - | ||||||||||||||||||||||
(Continued)
|
Year
Ended December 31
|
||||||||||||||||||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||||||||||||||||||
|
Before
Income Tax
|
After
Income Tax
|
Before
Income Tax
|
After
Income Tax
|
Before
Income
Tax
|
After
Income
Tax
|
|||||||||||||||||||||||||||
|
NT$
|
NT$
|
NT$
|
NT$
|
NT$
|
US$
|
NT$
|
US$
|
|||||||||||||||||||||||||
|
Income
attributable to shareholders of the parent
|
3.52 | 3.29 | 2.55 | 2.26 | 1.36 | 0.04 | 1.14 | 0.03 | ||||||||||||||||||||||||
|
Diluted
EPS
|
||||||||||||||||||||||||||||||||
|
Income
before cumulative effect of changes in accounting
principles
|
3.44 | 3.20 | 2.46 | 2.18 | 1.33 | 0.04 | 1.12 | 0.03 | ||||||||||||||||||||||||
|
Cumulative
effect of changes in accounting principles
|
(0.08 | ) | (0.06 | ) | - | - | - | - | - | - | ||||||||||||||||||||||
|
Income
attributable to shareholders of the parent
|
3.36 | 3.14 | 2.46 | 2.18 | 1.33 | 0.04 | 1.12 | 0.03 | ||||||||||||||||||||||||
|
|
(Concluded)
|
EPS is computed as
follows:
|
Number
of
|
EPS
|
|||||||||||||||||||
|
Amounts
(Numerator)
|
Shares
|
Before
|
After
|
|||||||||||||||||
|
Before
|
After
|
(Denominator)
|
Income
|
Income
|
||||||||||||||||
|
Income Tax
|
Income Tax
|
(In
Thousands)
|
Tax
|
Tax
|
||||||||||||||||
|
NT$
|
NT$
|
NT$
|
NT$
|
|||||||||||||||||
|
Year ended December 31,
2006
|
||||||||||||||||||||
|
Basic
EPS
|
||||||||||||||||||||
|
Income
from continuing operations
|
19,067,237 | 17,758,654 | 5,291,575 | 3.61 | 3.36 | |||||||||||||||
|
Cumulative
effect of changes in accounting principles
|
(456,671 | ) | (342,503 | ) | - | (0.09 | ) | (0.07 | ) | |||||||||||
|
Income
attributable to shareholders of the parent
|
18,610,566 | 17,416,151 | 5,291,575 | 3.52 | 3.29 | |||||||||||||||
|
Effect of dilutive potential common
stock
|
||||||||||||||||||||
|
Convertible
bonds
|
213,079 | 168,993 | 236,734 | |||||||||||||||||
|
Employee
stock options issued by ASE Inc.
|
- | - | 75,219 | |||||||||||||||||
|
Employee
stock options issued by subsidiaries
|
(2,993 | ) | (2,993 | ) | - | |||||||||||||||
|
Diluted
EPS
|
||||||||||||||||||||
|
Income
attributable to shareholders of the parent plus effect
of potential dilutive common stock
|
18,820,652 | 17,582,151 | 5,603,528 | 3.36 | 3.14 | |||||||||||||||
|
Year ended December 31,
2007
|
||||||||||||||||||||
|
Basic
EPS
|
||||||||||||||||||||
|
Income
attributable to shareholders of the parent
|
13,729,800 | 12,165,249 | 5,390,907 | 2.55 | 2.26 | |||||||||||||||
|
Effect of dilutive potential common
stock
|
||||||||||||||||||||
|
Convertible
bonds
|
177,111 | 139,635 | 179,120 | |||||||||||||||||
|
Employee
stock options issued by ASE Inc.
|
- | - | 63,118 | |||||||||||||||||
|
Employee
stock options issued by subsidiaries
|
(24,660 | ) | (24,660 | ) | - | |||||||||||||||
|
Diluted
EPS
|
||||||||||||||||||||
|
Income
attributable to shareholders of the parent plus effect
of potential dilutive common stock
|
13,882,251 | 12,280,224 | 5,633,145 | 2.46 | 2.18 | |||||||||||||||
|
Year ended December 31,
2008
|
||||||||||||||||||||
|
Basic
EPS
|
||||||||||||||||||||
|
Income
attributable to shareholders of the parent
|
7,341,503 | 6,160,052 | 5,392,872 | 1.36 | 1.14 | |||||||||||||||
|
Effect
of dilutive potential common shares
|
||||||||||||||||||||
|
Bonus
to employees
|
- | - | 25,472 | |||||||||||||||||
|
Convertible
bonds
|
- | - | 6,164 | |||||||||||||||||
|
Employee
stock options issued by ASE Inc.
|
- | - | 32,848 | |||||||||||||||||
|
Bonus
to employees and employee stock options issued
by subsidiaries
|
(60,592 | ) | (60,592 | ) | - | |||||||||||||||
|
Diluted
EPS
|
||||||||||||||||||||
|
Income
attributable to shareholders of the parent plus effect
of potential dilutive common stock
|
7,280,911 | 6,099,460 | 5,457,356 | 1.33 | 1.12 | |||||||||||||||
(Continued)
|
Number
of
|
EPS
|
|||||||||||||||||||
|
Amounts
(Numerator)
|
Shares
|
Before
|
After
|
|||||||||||||||||
|
Before
|
After
|
(Denominator)
|
Income
|
Income
|
||||||||||||||||
|
Income Tax
|
Income Tax
|
(In
Thousands)
|
Tax
|
Tax
|
||||||||||||||||
|
US$
|
US$
|
US$
|
US$
|
|||||||||||||||||
|
Year ended December 31,
2008
|
||||||||||||||||||||
|
Basic
EPS
|
||||||||||||||||||||
|
Income
attributable to shareholders of the parent
|
224,100 | 188,036 | 5,392,872 | 0.04 | 0.03 | |||||||||||||||
|
Effect
of dilutive potential common shares
|
||||||||||||||||||||
|
Bonus to
employees
|
- | - | 25,472 | |||||||||||||||||
|
Convertible
bonds
|
- | - | 6,164 | |||||||||||||||||
|
Employee
stock options issued by ASE Inc.
|
- | - | 32,848 | |||||||||||||||||
|
Bonus
to employees and employee stock options issued
by subsidiaries
|
(1,850 | ) | (1,850 | ) | - | |||||||||||||||
|
Diluted
EPS
|
||||||||||||||||||||
|
Income
attributable to shareholders of the parent plus effect of potential
dilutive common stock
|
222,250 | 186,186 | 5,457,356 | 0.04 | 0.03 | |||||||||||||||
|
|
(Concluded)
|
|
|
For purposes of the ADS
calculation, the denominator represents the
above-mentioned weighted average outstanding shares
divided by five (one
ADS represents five common shares). The numerator was the
same.
|
|
|
The ROC ARDF issued Interpretation 96-052
that requires companies to recognize bonuses paid to employees, directors
and supervisors as compensation expenses beginning January 1,
2008. These bonuses were previously
recorded as appropriations from earnings. If the Company may settle the
bonus to
employees by cash
or shares, the Company should
presume that the entire amount of the bonus will be settled in shares and
the resulting potential shares should be included in the
weighted average number of shares outstanding used in the calculation of
diluted EPS, if the shares have a dilutive effect. The number of shares is estimated
by dividing the entire amount of the bonus by the closing price (after consideration of the
dilutive effect of dividends) of the shares at the balance
sheet date. Such dilutive effect of the
potential shares needs to be included in the calculation of diluted EPS
until the shareholders resolves the number of shares
to be distributed to
employees at their meeting in the following
year.
|
|
|
The weighted average number of
shares outstanding for EPS calculation has been retroactively adjusted
for the issuance of stock dividends, issuance of common stock from
capital surplus and employee stock
bonuses. This adjustment caused the basic after income tax EPS
for the years ended December 31, 2006 and 2007 to decrease from NT$3.95 to
NT$3.29 and NT$2.34 to NT$2.26, respectively. This adjustment
caused diluted after income tax EPS for the years ended December 31, 2006
and 2007 to decrease from NT$3.77 to NT$3.14 and from NT$2.26 to NT$2.18,
respectively.
|
|
26.
|
DISCLOSURES
FOR FINANCIAL INSTRUMENTS
|
|
|
a.
|
Fair values of financial instruments
were as
follows:
|
|
December 31
|
||||||||||||||||||||||||
|
2007
|
2008
|
|||||||||||||||||||||||
|
Carrying
|
||||||||||||||||||||||||
|
Amount
|
Fair Value
|
Carrying
Amount
|
Fair
Value
|
|||||||||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
NT$
|
US$
|
|||||||||||||||||||
|
Non-derivative financial
instruments
|
||||||||||||||||||||||||
|
Assets
|
||||||||||||||||||||||||
|
Financial
assets at fair value through profit
or loss
|
1,599,353 | 1,599,353 | 536,427 | 16,375 | 536,427 | 16,375 | ||||||||||||||||||
|
Available-for-sale
financial assets
|
9,406,327 | 9,406,327 | 279,812 | 8,541 | 279,812 | 8,541 | ||||||||||||||||||
|
Held-to-maturity
financial assets
|
50,000 | - | - | |||||||||||||||||||||
|
Bond
investments with no active market
|
- | 450,000 | 13,736 | |||||||||||||||||||||
|
Financial
assets carried at cost
|
525,025 | 575,495 | 17,567 | |||||||||||||||||||||
|
Guarantee
deposits
|
490,306 | 490,306 | 61,224 | 1,869 | 61,224 | 1,869 | ||||||||||||||||||
|
Restricted
assets
|
279,068 | 279,068 | 191,416 | 5,843 | 191,416 | 5,843 | ||||||||||||||||||
(Continued)
|
December 31
|
||||||||||||||||||||||||
|
2007
|
2008
|
|||||||||||||||||||||||
|
Carrying
|
||||||||||||||||||||||||
|
Amount
|
Fair Value
|
Carrying
Amount
|
Fair
Value
|
|||||||||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
NT$
|
US$
|
|||||||||||||||||||
|
Liabilities
|
||||||||||||||||||||||||
|
Long-term
bonds payable (including current
portion)
|
7,264,735 | 8,494,109 | 1,375,000 | 41,972 | 1,344,379 | 41,037 | ||||||||||||||||||
|
Long-term
bank loans (including current portion)
|
23,280,708 | 23,280,708 | 52,510,410 | 1,602,882 | 51,510,410 | 1,602,882 | ||||||||||||||||||
|
Capital
lease obligations (including current
portion)
|
92,350 | 92,350 | 39,060 | 1,192 | 39,060 | 1,192 | ||||||||||||||||||
|
Derivative financial
instruments
|
||||||||||||||||||||||||
|
Assets
|
||||||||||||||||||||||||
|
Forward
exchange contracts
|
2,641 | 2,641 | 1,053 | 32 | 1,053 | 32 | ||||||||||||||||||
|
Liabilities
|
||||||||||||||||||||||||
|
Swap
contracts
|
- | - | 61,257 | 1,870 | 61,257 | 1,870 | ||||||||||||||||||
|
Forward
exchange contracts
|
16,493 | 16,493 | 21,410 | 654 | 21,410 | 654 | ||||||||||||||||||
|
Interest
rate swap contract
|
20,319 | 20,319 | 391,904 | 11,962 | 391,904 | 11,962 | ||||||||||||||||||
|
Cross
currency swap contracts
|
7,519 | 7,519 | - | - | - | - | ||||||||||||||||||
|
|
(Concluded)
|
|
|
b.
|
Methods
and assumptions used in the estimation of fair values of financial
instruments were as follows:
|
|
|
1)
|
The
aforementioned financial instruments do not include cash and cash
equivalents, accounts receivable, other receivables, short-term
borrowings, short-term bills payable, accounts payable, accrued expenses
and payable for properties. These financial instruments’
carrying amounts approximate their fair
values.
|
|
|
2)
|
Fair
values of financial assets at FVTPL and available-for-sale financial
assets were determined using their quoted market prices in an active
market. Fair values of derivatives were determined using
valuation techniques incorporating estimates and assumptions consistent
with those generally used by other market participants to price financial
instruments.
|
|
|
3)
|
Financial
assets carried at cost, held-to-maturity financial assets and bond
investments with no active market are investments in unquoted securities,
which have no quoted prices in an active market and entail an unreasonably
high cost to obtain verifiable fair values. Therefore, no fair
value is presented.
|
|
|
4)
|
The
interest rates of long-term debts except bonds payable were mainly
floating; therefore, their fair values approximate carrying
amounts. Fair value of bonds payable was based on their quoted
market price.
|
|
|
5)
|
The
carrying amounts of guarantee deposits and restricted assets reflect their
fair values.
|
|
|
c.
|
Valuation
gains (losses) from changes in fair value of financial instruments
determined using valuation techniques were NT$(260,569) thousand,
NT$147,498 thousand and
NT$251,616 thousand (US$7,681 thousand) for the years ended
December 31, 2006, 2007 and 2008,
respectively.
|
|
|
d.
|
As
of December 31, 2007 and 2008, financial assets exposed to fair value
interest rate risk amounted to NT$185,821 thousand and NT$53,544 thousand
(US$1,634 thousand), respectively, financial liabilities exposed to
fair value interest rate risk amounted to NT$4,739,247 thousand and NT$215,927 thousand
(US$6,591 thousand), respectively, financial assets exposed to cash
flow interest rate risk amounted to NT$14,045,750 thousand and NT$16,263,728 thousand
(US$496,451 thousand), respectively, and financial liabilities
exposed to cash flow interest rate risk amounted to NT$34,207,038 thousand
and NT$61,302,873 thousand
(US$1,871,272 thousand),
respectively.
|
|
|
e.
|
For
the years ended December 31, 2006, 2007 and 2008, interest income of
NT$406,364 thousand, NT$364,933 thousand and NT$351,286 thousand
(US$10,723 thousand), and interest expense (including capitalized
interest) of NT$1,841,401 thousand, NT$1,696,609 thousand and NT$1,931,018 thousand
(US$58,944 thousand) were associated with financial assets or
liabilities other than those at
FVTPL.
|
|
|
f.
|
Strategy
for financial risk
|
|
|
The
derivative instruments employed by the Company are to mitigate risks
arising from ordinary business operation. All derivative
transactions entered into by the Company are designated as either hedging
or trading, which are governed by separate internal guidelines and
controls. Derivative transactions entered into for hedging
purposes must hedge risk against fluctuations in foreign exchange and
interest rates arising from operating activities. The currency
and the amount of derivative instruments held by the Company must match
its assets and liabilities.
|
|
|
g.
|
Information about financial
risk
|
|
|
1)
|
Market
risk
|
|
|
All
derivative financial instruments are mainly held to hedge the exchange
rate fluctuations of foreign-currency-denominated assets and liabilities
and interest rate fluctuations on its floating rate long-term
loans. Exchange gains or losses on these derivative contracts
are likely to be offset by gains or losses on the hedged assets and
liabilities. Interest rate risks are also controlled because
the expected cost of capital is fixed. Thus, market risk for
derivative contracts is believed to be
immaterial.
|
|
|
The
Company holds open-end mutual funds, bond investments and quoted stocks,
which are subject to price risk. The fair value of these funds
will decrease by NT$8,000 thousand (US$244 thousand) if their market price
decreases by 1%.
|
|
|
2)
|
Credit
risk
|
|
|
Credit
risk represents the potential loss that would be incurred by the Company
if counter parties or third parties breached contracts. Credit
risk represents the positive fair values of contracts as of the balance
sheet date. The Company’s maximum credit risk on financial
instruments approximated their carrying amounts as of December 31, 2007
and 2008.
|
|
|
3)
|
Liquidity
risk
|
|
|
The
Company’s operating funds are deemed sufficient to meet cash flow demand;
therefore, the Company’s liquidity risk is not considered to be
significant.
|
|
|
The
Company’s investments in open-end mutual funds and quoted stocks are
traded in active markets and can be disposed of quickly at close to their
fair values. The Company’s financial assets carried at cost
have no active markets; therefore, liquidity risk for such assets is
expected to be high.
|
|
|
4)
|
Cash
flow interest rate risk
|
|
|
The
Company’s short-term and long-term loans are mainly floating interest rate
debts. When the market interest rate increases by 1%, the
Company’s annual cash out flows will increase by NT$613,028 thousand
(US$18,713 thousand).
|
|
|
h.
|
Cash flow
hedge
|
|
|
ASE
Inc. entered into an interest rate swap contract in August 2008 to hedge
fluctuations in interest rates on its long-term loans. As of December 31,
2008, the notional amount of the outstanding contract was NT$12,000,000
thousand (US$366,300 thousand). Interest receipt and payment
were based on floating rates (1.88% as of December 31, 2008) and fixed
rate of 2.45%~2.48%, respectively. The contract will mature in
March 2013. The fair value of the interest rate swap contract
as of December 31, 2008 was a loss NT$391,695 thousand (US$11,956
thousand) and was recorded as hedging derivative liabilities-noncurrent
with an adjustment to shareholders’
equity.
|
|
|
In
addition, ASE Test, Inc. entered into cross currency swap contracts in
2007 and 2008 to hedge exposures from fluctuations in both foreign
exchange and interest rates on its receivable from an affiliate, ASE Test
Finance Limited. The contracts were settled in December 2007
and May 2008, respectively. Net gains from cross currency swap
contracts for hedging purposes were NT$5,475 thousand (recorded as a
deduction in interest income of NT$16,273 thousand and foreign exchange
gains of NT$21,748 thousand) and NT$ 58,282 thousand (recorded as a
deduction in interest income of NT$24,514 thousand and foreign exchange
gains of NT$82,796 thousand) for the years ended December 31, 2007 and
2008, respectively.
|
|
27.
|
RELATED
PARTY TRANSACTIONS
|
The
Company purchased real estate properties from HCDC for NT$141,238 thousand in
2007 and the prices were based on their fair market values as assessed by
appraisers. As of December 31, 2008, all of the amounts had been
paid.
The
Company contracted with HCDC for factory and office building construction, but
the contract was terminated in 2008. As a result of the termination,
NT$36,000 thousand (US$1,099 thousand) was paid by the Company to HCDC and was
recorded as non-operating losses.
Information regarding compensation
to directors, supervisors and management personnel:
|
Year
ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
Salary,
incentives and special compensation
|
740,176 | 545,656 | 455,078 | 13,891 | ||||||||||||
|
Bonus
|
96,028 | 102,635 | 71,453 | 2,181 | ||||||||||||
|
|
||||||||||||||||
| 836,204 | 648,291 | 526,531 | 16,072 | |||||||||||||
The
compensation of directors, supervisors and management personnel for the years
ended December 31, 2006 and 2007 included the bonuses appropriated from earnings
for 2006 and 2007 which had been approved by shareholders in their annual
meeting held in 2007 and 2008.
|
28.
|
ASSETS
PLEDGED OR MORTGAGED
|
|
|
The
following assets have been pledged or mortgaged as collateral for bank
loans, import duties for raw materials and as guaranty deposits for
employment of foreign labor, etc:
|
|
December
31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Property,
plant and equipment
|
||||||||||||
|
Land
|
505,151 | 511,644 | 15,618 | |||||||||
|
Buildings
and improvements
|
2,835,856 | 2,073,292 | 63,287 | |||||||||
|
Machinery
and equipment
|
4,807,205 | 434,907 | 13,276 | |||||||||
|
Inventory
- construction in progress
|
- | 1,144,113 | 34,924 | |||||||||
|
Restricted
assets
|
279,068 | 191,416 | 5,843 | |||||||||
|
Idle
assets
|
196,552 | - | - | |||||||||
|
Land
use rights
|
152,982 | - | - | |||||||||
| 8,776,814 | 4,355,372 | 132,948 | ||||||||||
|
29.
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
a.
|
ASE Inc. and ASE Test, Inc. lease the land
on which their buildings are situated under various operating lease
agreements with the ROC government expiring on various dates through
September 2017. The agreements grant
these entities the option to renew the leases and reserve the
right for the lessor to adjust the lease payments upon an increase in the
assessed value of the land and to terminate the leases under certain
conditions. In addition, the
Company leases buildings, machinery and equipment under non-cancelable operating
leases.
|
|
|
The future minimum lease payments
under the above-mentioned operating leases as of December 31, 2008
were as
follows:
|
|
Amount
|
||||||||
|
|
NT$
|
US$
|
||||||
|
2009
|
287,035 | 8,762 | ||||||
|
2010
|
209,778 | 6,403 | ||||||
|
2011
|
43,722 | 1,335 | ||||||
|
2012
|
34,348 | 1,048 | ||||||
|
2013
and thereafter
|
98,862 | 3,018 | ||||||
|
Total
minimum lease payments
|
673,745 | 20,566 | ||||||
|
|
b.
|
As of December 31, 2008, unused letters of
credit of the
Company were
approximately NT$323,000 thousand (US$9,860
thousand).
|
|
c.
|
As of December 31, 2008, commitments to purchase
machinery and equipment of the Company were approximately
NT$2,243,000 thousand (US$68,468 thousand), of which
NT$27,623 thousand (US$843 thousand) had been
prepaid.
|
|
d.
|
As of December 31, 2008, outstanding commitments related
to construction of buildings of the Company were approximately NT$1,532,000 thousand (US$46,764 thousand), of which
NT$275,253 thousand (US$8,402 thousand) had been
prepaid.
|
|
e.
|
The Company entered into technology license agreements
with foreign companies which will expire on various dates through
2013. Pursuant to the
agreements, the Company shall pay royalties based on specified percentages
of sales volume and licensing fees to the counter parties. Royalties and licensing fees paid
for the years ended December 31,
2006, 2007 and 2008
were approximately NT$282,381 thousand, NT$246,849 thousand and NT$199,195 thousand
(US$6,080 thousand),
respectively.
|
|
f.
|
Tessera Inc. (“Tessera”) filed an amended complaint in the United States
District Court for the Northern District of California in February 2006
adding the Company to a suit alleging that the Company infringed patents
owned by Tessera (the “California Litigation”). At
Tessera’s request, the United States International Trade
Commission (“ITC”) instituted an investigation of
certain of the Company’s co-defendants and other
companies.
|
|
|
The district court in the
California Litigation has vacated the trial schedule and stayed all
proceedings pending a
final resolution of the first ITC investigation. The United
States Patent and Trademark Office have also instituted
reexamination proceedings on all the patents Tessera has asserted
in the California Litigation and the ITC Investigation. As of
March 12, 2009, Tessera moved to terminate the
investigation.
|
|
|
As
of April 16, 2009 the impact of the California Litigation or the ITC
Investigation cannot be estimated.
|
|
g.
|
The
Company and Spansion Inc. announced in October 2008 the signing of a
memorandum of understanding with respect to entering into a joint venture
to jointly own Spansion Inc.’s FMO facility in Suzhou, China. As of April
16, 2009, the project is suspended, and the definitive agreement has not
been signed.
|
|
30.
|
LOSS
ON FIRE DAMAGE
|
|
|
ASE
Inc. and its subsidiary, ASE Test, Inc., incurred fire damage to their
production lines in Chung Li, Taiwan on May 1, 2005, and recognized an
estimated loss of NT$13,479,079 thousand for damages to their inventories,
building, machinery and equipment. With the assistance of
external counsel, the Company submitted insurance claims of NT$4,641,000
thousand to its insurers for compensation for damages which the Company
believes to be clearly identifiable and reasonably estimated, and recorded
the amount as an offset to fire loss in
2005.
|
|
|
The
Company reached a final settlement with the insurers in June 2006 with
regards to the fire damage incurred to the production lines and facilities
in Chung Li. The final settlement amount of NT$8,068,000
thousand, offset by the NT$4,641,000 thousand recorded in 2005 and the
related repair and restoring expenses of NT$1,043,132 thousand, was
recorded in 2006. The Company also reversed NT$2,190,583
thousand of impairment loss recognized in 2005 after careful analysis of
the increase in the estimated service potential of the production line
facilities by an external specialist. The net amount of
NT$4,574,451 thousand was recognized as a gain on insurance settlement and
loss recovery in 2006. All of the insurance recoveries were
received in August 2006.
|
31. SEGMENT
AND GEOGRAPHICAL INFORMATION
|
|
a.
|
Geographical
sales and long-lived assets
information
|
1) Net
revenues:
|
Year Ended December 31
|
||||||||||||||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||||||||||||||
|
%
of
|
%
of
|
%
of
|
||||||||||||||||||||||||||
|
Total
|
Total
|
Total
|
||||||||||||||||||||||||||
|
NT$
|
Revenues
|
NT$
|
Revenues
|
NT$
|
US$
|
Revenues
|
||||||||||||||||||||||
|
America
|
53,280,483 | 53 | 50,389,904 | 50 | 50,082,695 | 1,528,776 | 53 | |||||||||||||||||||||
|
Taiwan
|
18,810,441 | 19 | 21,413,369 | 21 | 18,681,217 | 570,245 | 20 | |||||||||||||||||||||
|
Asia
|
15,752,825 | 16 | 16,760,893 | 17 | 12,950,935 | 395,328 | 14 | |||||||||||||||||||||
|
Europe
|
12,579,366 | 12 | 12,597,299 | 12 | 12,714,009 | 388,095 | 13 | |||||||||||||||||||||
|
Other
|
532 | - | 1,604 | - | 2,056 | 62 | - | |||||||||||||||||||||
| 100,423,647 | 100 | 101,163,069 | 100 | 94,430,912 | 2,882,506 | 100 | ||||||||||||||||||||||
2) Long-lived
assets:
|
December 31
|
||||||||||||||||||||
|
2007
|
2008
|
|||||||||||||||||||
|
NT$
|
%
|
NT$
|
US$
|
%
|
||||||||||||||||
|
Taiwan
|
47,364,686 | 58 | 44,802,206 | 1,367,588 | 53 | |||||||||||||||
|
Asia
|
34,074,540 | 42 | 39,090,983 | 1,193,253 | 46 | |||||||||||||||
|
America
|
349,103 | - | 864,795 | 26,397 | 1 | |||||||||||||||
| 81,788,329 | 100 | 84,757,984 | 2,587,238 | 100 | ||||||||||||||||
|
|
b.
|
Major
customers
|
|
|
For
the years ended December 31, 2006, 2007 and 2008, the Company did not have
a single customer to which the net revenues exceeded 10% of total net
revenues.
|
|
|
c.
|
Reported
segment information
|
|
|
The
Company has three reportable segments: Packaging, testing and
investing and other. The Company packages bare semiconductors
into finished semiconductors with enhanced electrical and thermal
characteristics; provides testing services, including front-end
engineering testing, wafer probing and final testing services; and engages
in investing activities. The accounting policies for segments
are the same as those described in Note 2. Segment information
for the years ended December 31, 2006, 2007 and 2008 was as
follows:
|
|
Investing
|
||||||||||||||||
|
Packaging
|
Testing
|
and Other
|
Total
|
|||||||||||||
|
NT$
|
NT$
|
NT$
|
NT$
|
|||||||||||||
|
2006
|
||||||||||||||||
|
Revenue
from external customers
|
76,820,475 | 21,429,584 | 2,173,588 | 100,423,647 | ||||||||||||
|
Inter-segment
revenues
|
74,879 | 51,214 | 5,821,221 | 5,947,314 | ||||||||||||
|
Interest
income
|
193,412 | 66,237 | 146,715 | 406,364 | ||||||||||||
|
Interest
expense
|
(861,737 | ) | (145,669 | ) | (612,888 | ) | (1,620,294 | ) | ||||||||
|
Net
interest expense
|
(668,325 | ) | (79,432 | ) | (466,173 | ) | (1,213,930 | ) | ||||||||
|
Depreciation
and amortization
|
(8,245,204 | ) | (4,889,792 | ) | (1,353,215 | ) | (14,488,211 | ) | ||||||||
|
Gain
on insurance settlement and impairment recovery
|
1,758,957 | 1,637,709 | 1,177,785 | 4,574,451 | ||||||||||||
|
Segment
profit (loss)
|
14,679,021 | 7,829,473 | (257,070 | ) | 22,251,424 | |||||||||||
|
Segment
assets
|
78,958,866 | 33,095,566 | 24,986,444 | 137,040,876 | ||||||||||||
|
Expenditures
for segment assets
|
7,025,247 | 4,859,188 | 5,846,500 | 17,730,935 | ||||||||||||
|
Goodwill
|
772,148 | 1,619,698 | 439,428 | 2,831,274 | ||||||||||||
|
2007
|
||||||||||||||||
|
Revenue
from external customers
|
78,516,274 | 20,007,839 | 2,638,956 | 101,163,069 | ||||||||||||
|
Inter-segment
revenues
|
222,086 | 45,576 | 8,769,842 | 9,037,504 | ||||||||||||
|
Interest
income
|
229,917 | 85,363 | 33,380 | 348,660 | ||||||||||||
|
Interest
expense
|
(773,671 | ) | (87,635 | ) | (713,218 | ) | (1,574,524 | ) | ||||||||
|
Net
interest expense
|
(543,754 | ) | (2,272 | ) | (679,838 | ) | (1,225,864 | ) | ||||||||
|
Depreciation
and amortization
|
(9,379,964 | ) | (5,410,619 | ) | (1,835,569 | ) | (16,626,152 | ) | ||||||||
|
Segment
profit (loss)
|
14,879,301 | 5,359,835 | (941,970 | ) | 19,297,166 | |||||||||||
|
Segment
assets
|
91,802,902 | 36,968,716 | 23,605,832 | 152,377,450 | ||||||||||||
|
Expenditures
for segment assets
|
10,502,494 | 6,330,268 | 1,339,393 | 18,172,155 | ||||||||||||
|
Goodwill
|
1,040,509 | 1,708,255 | 439,353 | 3,188,117 | ||||||||||||
(Continued)
|
Investing
|
||||||||||||||||
|
Packaging
|
Testing
|
and Other
|
Total
|
|||||||||||||
|
NT$
|
NT$
|
NT$
|
NT$
|
|||||||||||||
|
2008
|
||||||||||||||||
|
Revenue
from external customers
|
73,391,622 | 19,021,360 | 2,017,930 | 94,430,912 | ||||||||||||
|
Inter-segment
revenues
|
1,227,553 | 71,513 | 10,047,595 | 11,346,661 | ||||||||||||
|
Interest
income
|
174,358 | 80,379 | 72,035 | 326,772 | ||||||||||||
|
Interest
expense
|
(1,201,699 | ) | (62,048 | ) | (549,549 | ) | (1,813,296 | ) | ||||||||
|
Net
interest income (expense)
|
(1,027,341 | ) | 18,331 | (477,514 | ) | (1,486,524 | ) | |||||||||
|
Depreciation
and amortization
|
(9,706,923 | ) | (5,799,216 | ) | (1,738,713 | ) | (17,244,852 | ) | ||||||||
|
Segment
profit (loss)
|
8,152,859 | 4,159,597 | (512,941 | ) | 11,799,515 | |||||||||||
|
Segment
assets
|
79,836,198 | 49,326,401 | 23,027,388 | 152,189,987 | ||||||||||||
|
Expenditures
for segment assets
|
9,266,015 | 6,323,387 | 1,034,303 | 16,623,705 | ||||||||||||
|
Goodwill
|
1,392,743 | 7,639,685 | 423,663 | 9,456,091 | ||||||||||||
|
Investing
|
||||||||||||||||
|
Packaging
|
Testing
|
and Other
|
Total
|
|||||||||||||
|
US$
|
US$
|
US$
|
US$
|
|||||||||||||
|
2008
|
||||||||||||||||
|
Revenue
from external customers
|
2,240,282 | 580,627 | 61,597 | 2,882,506 | ||||||||||||
|
Inter-segment
revenues
|
37,470 | 2,183 | 306,703 | 346,356 | ||||||||||||
|
Interest
income
|
5,322 | 2,454 | 2,199 | 9,975 | ||||||||||||
|
Interest
expense
|
(36,682 | ) | (1,894 | ) | (16,775 | ) | (55,351 | ) | ||||||||
|
Net
interest income (expense)
|
(31,360 | ) | 560 | (14,576 | ) | (45,376 | ) | |||||||||
|
Depreciation
and amortization
|
(296,304 | ) | (177,021 | ) | (53,075 | ) | (526,400 | ) | ||||||||
|
Segment
profit (loss)
|
248,866 | 126,972 | (15,657 | ) | 360,181 | |||||||||||
|
Segment
assets
|
2,437,002 | 1,505,690 | 702,910 | 4,645,602 | ||||||||||||
|
Expenditures
for segment assets
|
282,845 | 193,022 | 31,572 | 507,439 | ||||||||||||
|
Goodwill
|
42,513 | 233,202 | 12,932 | 288,647 | ||||||||||||
(Concluded)
|
32.
|
SUMMARY
OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED
BY THE COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED
IN THE UNITED STATES OF
AMERICA
|
|
|
The Company’s consolidated financial
statements have been prepared in accordance with ROC GAAP, which
differs in the following respects
from U.S.
GAAP:
|
|
a.
|
Pension
benefits
|
|
|
The
Company adopted U.S. Statement of Financial Accounting Standards (“U.S.
SFAS”) No. 87, “Employers’ Accounting for Pensions” (“U.S. SFAS No. 87”)
on January 1, 1987, which requires the Company to determine the
accumulated pension obligation and the pension expense on an actuarial
basis.
|
|
|
U.S.
SFAS No. 87 was amended by U.S. SFAS No. 158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans” (“U.S. SFAS No.
158”) on September 29, 2006, which requires employers to recognize the
overfunded or underfunded status of a defined benefit pension plan as an
asset or liability in its statement of financial position and to recognize
changes in that funded status in the year in which the changes occur
through comprehensive income. Specifically, U.S. SFAS No. 158
defines the funded status of a benefit plan as the difference between the
fair value of the plan assets and the projected benefit
obligation. In addition, it requires companies to recognize
actuarial gains or losses, prior service costs or credits, and the
transition asset or obligation remaining that were unrecognized as of the
initial adoption date of U.S. SFAS No. 158. The Company adopted
U.S. SFAS No. 158 on December 31,
2006.
|
|
|
ROC
SFAS No. 18, “Accounting for Pensions” (“ROC SFAS No. 18”) is similar in
many respects to U.S. SFAS No. 87 and was adopted by the Company in
1996. However, ROC SFAS No. 18 does not require a company to
recognize the overfunded or underfunded status of a defined benefit
pension plan as an asset or liability in the statement of financial
position. The difference in the dates of adoption gives rise to
a U.S. GAAP difference in the actuarial computation for transition
obligation and the related
amortization.
|
|
b.
|
Marketable
securities
|
|
|
Under
ROC GAAP, prior to January 1, 2006, marketable securities were carried at
the lower of aggregate cost or market, and debt securities were carried at
cost, with only unrealized losses recognized. Effective January
1, 2006, the Company adopted ROC SFAS No. 34, “Financial
Instruments: Recognition and Measurement” and No. 36,
“Financial Instruments: Disclosure and
Presentation”. Financial instruments including debt securities
and equity securities are categorized as FVTPL, available-for-sale or
held-to-maturity securities. Financial assets at FVTPL has two
sub-categories: financial assets designated on initial recognition as
assets to be measured at fair value with fair value changes recognized in
profit or loss, and financial assets that are classified as held for
trading. These classifications are similar to those required by
U.S. SFAS No. 115, “Accounting for Certain Investments in Debt and Equity
Securities” (“U.S. SFAS No. 115”).
|
|
|
Under
U.S. SFAS No. 115, debt and equity securities that have readily
determinable fair values are classified as either trading,
available-for-sale or held-to-maturity securities. Debt
securities that the Company has the positive intent and ability to hold to
maturity are classified as held-to-maturity securities and reported at
amortized cost. Debt and equity securities that are bought and
traded for short-term profit are classified as trading securities and
reported at fair value, with unrealized gains and losses included in
earnings. Debt and equity securities not classified as either
held-to-maturity or trading are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported as a separate component of
shareholders’ equity.
|
|
|
Upon
adoption of ROC SFAS No. 34 and No. 36 on January 1, 2006, the Company
recorded a cumulative effect of changes in accounting principles of
NT$342,503 thousand for the year ended December 31, 2006 for marketable
securities and derivative financial instruments, of which NT$16,331
thousand relates to the adjustment of the carrying basis of trading
securities to fair market value. Such adjustment, representing
the unrealized gain on trading securities already recognized under U.S.
GAAP in 2005, was reversed in 2006 as a one-time reconciling adjustment
between U.S. GAAP and ROC GAAP.
|
|
|
Upon
adoption of ROC SFAS No. 34 and No. 36, the Company also adjusted the
carrying value of the marketable securities categorized as AFS, which were
carried at the lower of aggregate cost or market with unrealized losses
included in earnings, to fair market value on January 1,
2006. Therefore, prior to January 1, 2006, unrealized gains and
losses included in shareholders’ equity associated with AFS marketable
securities under ROC GAAP were different from those under U.S.
GAAP.
|
c. Bonuses
to employees, directors and supervisors
|
|
According
to ROC regulations and the Articles of Incorporation of ASE Inc., a
portion of distributable earnings is required to be set aside as bonuses
to employees, directors and supervisors. Bonuses to directors and supervisors are always
paid in cash. However, bonuses to employees may be granted in
cash or stock or both. Prior to January 1, 2008,
all of these
appropriations,
including stock bonuses which were valued at par value of NT$10,
were charged against retained earnings
under ROC GAAP after approval by the shareholders in the
following year.
|
|
|
Under U.S. GAAP, such bonuses are
charged to
earnings in the year
earned. Shares issued as
part of these bonuses are recorded at fair market value. Since
the amount and form of such bonuses are not usually determinable until the
shareholders’ meeting in the subsequent year,
the total amount of the aforementioned bonuses is initially accrued based on
management’s estimate regarding the amount to
|
be paid based on the Articles of
Incorporation. Any difference between the initially accrued amount
and the fair market value of any shares issued as bonuses is recognized in the
year of approval by the
shareholders.
|
|
Effective January 1, 2008,
the Company adopted
Interpretation 96-052, “Accounting for Bonuses to
Employees, Directors and Supervisors” issued in March 2007 by the
ROC ARDF, which requires companies to
record bonuses paid
to employees, directors and supervisors as an expense rather than as an
appropriation of earnings. The amount of compensation expense
related to stock bonuses is determined based on the market value of
ASE Inc.’s common stock at the date
immediately preceding the shareholders’ meeting.
|
|
|
Accordingly,
the Company is no longer required to record the first reconciling
adjustment for the year ended December 31, 2008 as mentioned above.
However, the Company recorded the second reconciling adjustment to reflect
the additional compensation expense recognized in 2008 for 2007 bonuses
paid in stock, which was measured at the fair market value on the date of
stock distribution. Starting from January 1, 2009, the only
U.S. GAAP reconciling adjustment for the bonuses paid in stock will be the
difference of the market value of the stock bonuses between the date of
stock distribution and the date immediately preceding the
shareholders’ meeting.
|
|
|
d.
|
Depreciation of
buildings
|
|
|
Under ROC GAAP, buildings may be
depreciated over
their estimated life or up to 40 years based on ROC practices and tax
regulations. For U.S. GAAP purposes, buildings are depreciated
over their estimated economic useful life of 25
years.
|
|
|
e.
|
Depreciation on the excess of book
value on transfer of
buildings between
subsidiaries
|
|
|
ASE Test, Inc. purchased buildings
and facilities from ASE Technologies Inc. in 1997. The purchase
price was based on market value, which meant the portion of the purchase price
in excess of book value of NT$17,667 thousand was capitalized by ASE
Test, Inc. as allowed under ROC GAAP. Under U.S. GAAP,
transfers of assets between entities under common control are recorded at
historical cost. Therefore, depreciation on the capitalized
excess amount recorded under
ROC GAAP is reversed
under U.S. GAAP until the buildings and facilities are fully depreciated
or disposed
of.
|
|
|
f.
|
Gain on sales of
subsidiary’s
stock
|
|
|
The carrying value of stock
investments in ASE Test by J&R Holding under ROC GAAP is different
from that under U.S.
GAAP, therefore differences in the
amount of related gains upon the sale of such stock investments have been
recorded in the equity
reconciliation.
|
|
|
g.
|
Effects of U.S. GAAP adjustments
on equity method
investments
|
|
|
The carrying amounts of equity method investments and the
investment income (loss) recognized by the equity method in HCDC,
HCKC and USI are reflected in the
consolidated financial statements under ROC GAAP. The financial
statements of these equity method investees prepared
under ROC GAAP are
different from the financial statements of such equity method investees prepared under U.S.
GAAP mainly due to the differences in accounting for bonuses to employees,
directors and supervisors, stock options and the depreciation of
buildings. Therefore, the
investment income (loss) has been adjusted to reflect the differences
between ROC GAAP and U.S. GAAP in the investees’ financial
statements.
|
|
|
h.
|
Impairment of long-lived
assets
|
|
|
Under U.S. GAAP, an impairment
loss is recognized when the carrying amount of an asset or a
group of assets is not recoverable from the expected future cash flows and
the impairment loss is measured as the difference between the fair value
and the carrying amount of the asset or group of assets. The
impairment loss is recorded in earnings
and cannot be reversed subsequently. Long-lived
assets
|
(excluding goodwill and other indefinite lived assets) held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
|
|
Under
ROC GAAP, for purposes of evaluating the recoverability of long-lived
assets, assets purchased for use in the business but subsequently
determined to have no use were written down to fair value and recorded as
idle assets. Under ROC GAAP, effective January 1, 2005, the
Company is required to recognize an impairment loss when an indication is
identified that the carrying amount of an asset or a group of assets is
not recoverable from the expected discounted future cash
flows. However, if the recoverable amount increases in a future
period, the amount previously recognized as impairment would be reversed
and recognized as a gain. The adjusted amount may not exceed
the carrying amount that would have been determined, net of depreciation,
if no impairment loss had been
recognized.
|
|
|
As discussed in Note 30, in 2006, the Company reversed
NT$2,190,583 thousand
of impairment loss recognized in 2005 under ROC GAAP after a careful
analysis of the increase in the estimated service
potential of the production line and facilities by an external specialist.
Such reversal is prohibited under U.S.
GAAP. As such, differences in the cost basis of these damaged
machinery and equipment, associated depreciation expense and gain on recoveries related to restoration of such damaged machinery and
equipment between ROC GAAP and U.S. GAAP are reflected in the
reconciliation.
|
|
|
i.
|
Stock
dividends
|
|
|
Under
ROC GAAP, stock dividends are recorded at par value with a charge to
retained earnings. Under U.S. GAAP, if the ratio of
distribution is less than 25 percent of the same class of shares
outstanding, the fair value of the shares issued should be charged to
retained earnings. The difference for stock dividends paid in
2007 and 2008 is treated as an additional reduction to retained earnings
and an increase to capital surplus of NT$14,264 million and NT$687 million
(US$20,981 thousand), respectively.
|
|
|
j.
|
Stock-based
compensation
|
|
|
Under
U.S. GAAP, stock-based compensation expense for the year ended December
31, 2006 includes compensation expense for all unvested stock-based
compensation awards granted prior to January 1, 2006 that are expected to
vest, based on the grant-date fair value estimated in accordance with the
transition method and the original provision of U.S. SFAS No. 123,
“Accounting for Stock-Based Compensation” (“U.S. SFAS No.
123”). Upon an
employee’s termination, unvested
awards are forfeited, which affects the quantity of options to
be included in the
calculation of stock-based compensation expense. Forfeitures do
not include vested options that expire
unexercised. Stock-based compensation expense for all
stock-based compensation awards granted after January 1, 2006 is based on
the grant-date fair value estimated in accordance with the provisions of
U.S. SFAS No. 123R, “Share-Based Payment” (“U.S. SFAS No.
123R”). The Company recognizes compensation expense using the
graded vesting method over the requisite service period of the award,
which is generally the option vesting term of five years. See
Note 33d for a further discussion on stock-based
compensation.
|
|
|
Certain
characteristics of the stock options granted under the ASE 2002 Option
Plan made the fair values of these options not reasonably estimable using
appropriate valuation methodologies as prescribed under U.S. SFAS No. 123;
therefore, these options have been accounted for using the intrinsic value
method. Upon the adoption of U.S. SFAS No. 123R, the Company
continued to account for these stock options based on their intrinsic
value, remeasured at each reporting date through the date of exercise or
other settlement.
|
|
|
Under
ROC GAAP, employee stock option plans that were granted or modified in the
period from January 1, 2004 to December 31, 2007 are accounted for by the
interpretations 2003-070~072 and 2004-073 issued by the ROC
ARDF. The Company adopted the intrinsic value method and any
compensation expense determined using this method is recognized over the
vesting period.
|
|
|
Effective
January 1, 2008, the Company adopted ROC SFAS No. 39, “Accounting for
Share-based Payment”, which is similar in many respects to U.S. SFAS No.
123R and requires companies to record share-based payment transactions in
the financial statements at fair value for the employee stock options that
were granted or modified after December 31, 2007. The Company
has not granted or modified employee stock options since January 1,
2008. No stock-based compensation expense was recognized under
ROC GAAP for the years ended December 31, 2006, 2007 and
2008.
|
|
|
k.
|
Derivative
financial instruments
|
|
|
The
Company accounts for derivatives that do not qualify for hedge accounting
be recorded as “financial assets or liabilities at fair value through
profit or loss” at fair value in accordance with ROC SFAS No.
34.
|
|
|
Under
U.S. GAAP, accounting for derivative instruments is prescribed in U.S.
SFAS No. 133, as amended by
U.S. SFAS No. 138, which requires that all companies recognize derivative
instruments as assets and liabilities in the balance sheet at fair
value. If certain conditions are met, including certain
rigorous documentation requirements, entities may elect to designate a
derivative instrument as a hedging instrument.
|
|
|
As
such, the GAAP difference presented in the reconciliation below for
derivative instruments represents the effect of the initial adoption of
ROC SFAS No. 34 on January1, 2006.
|
|
|
l.
|
Goodwill
|
|
|
Before January 1, 2006, under ROC
GAAP, the Company amortized goodwill arising from acquisitions over 10
years. Effective January 1, 2006, the
Company adopted ROC SFAS No. 25 (revised in 2005), “Business Combinations - Accounting
Treatment under Purchase Method” which is similar to U.S. SFAS No.
142 “Goodwill and Other Intangible
Assets”
(“U.S. SFAS No.
142”). The Company reviews goodwill for
impairment in accordance with the provision of the standards under ROC and U.S. GAAP
and found no
impairment as of December 31, 2007 and 2008.
|
|
|
Under U.S. GAAP, the Company
adopted U.S. SFAS No. 142, on January 1, 2002, which requires the Company to
review goodwill for possible impairment existed at the date of adoption and
perform subsequent impairment tests on at least an annual
basis. As a result, for U.S. GAAP purposes,
the Company ceased to
amortize goodwill effective January 1,
2002. Definite-lived intangible assets continue to be amortized
over their estimated useful
lives.
|
|
|
The determination of whether or not
goodwill is impaired
under U.S. SFAS No. 142 is made by first estimating the
fair value of the reporting unit and comparing the fair
value of a reporting unit with its carrying amount, including
goodwill. If the carrying amount of a reporting unit exceeds
its fair value, the Company calculates an implied fair value of the
goodwill based on an allocation of the fair value of the reporting unit to
the underlying assets and liabilities. If the carrying amount
of the reporting unit’s goodwill exceeds the implied fair value of that
goodwill, an impairment loss shall be recognized in an amount equal to
that excess.
|
|
m.
|
Undistributed earnings
tax
|
|
|
In the ROC, a 10% tax is imposed
on unappropriated earnings. For ROC GAAP purposes, the Company
records the 10% tax on unappropriated earnings in the year of
shareholders’ approval. In 2002, the American Institute
of Certified Public
Accountants International Practices Task Force (the “Task Force”) concluded that in accordance
with Emerging Issues Task Force (EITF) 95-10,
|
“Accounting for tax credits related to dividends in accordance with SFAS 109”, the 10% tax on unappropriated earnings should be accrued under U.S. GAAP during the period the earnings arise and adjusted to the extent that distributions are approved by the shareholders in the following year.
|
|
n.
|
Impairment loss on equity method
investments
|
|
|
ROC GAAP and U.S. GAAP require an
assessment of impairment of long-term investments whenever events or
circumstances indicate a decline in value that may be other than
temporary. The criteria for determining whether or not an impairment charge is
required are similar
under ROC GAAP and U.S. GAAP; however, the methods to measure the amount
of impairment may be based on different estimates of fair values depending
on the circumstances. When impairment is determined to have
occurred, U.S. GAAP generally requires the market price to be used, if
available, to determine the fair value of the long-term investment and
measure the amount of impairment at the reporting date. Under
ROC GAAP, if the investments have an inactive market, another measure of
fair value may be used. No impairment
charge was incurred under U.S. GAAP in 2006, 2007 and 2008. The accumulated GAAP difference of
NT$2,078,620 thousand was caused by the impairment charges recorded in 2002 and
2004.
|
|
o.
|
Uncertainty in income taxes
|
|
|
Under
ROC GAAP, uncertainty in income taxes or adjustments of prior years’
income taxes is recorded as current year’s income tax
expense. Under U.S. GAAP, effective January 1, 2007, the
Company accounts for uncertainties in income taxes in accordance with FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an
interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48
clarifies the accounting for uncertainty in income taxes by prescribing
the recognition threshold a tax position is required to meet before being
recognized in the consolidated financial statements. It also
provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure, and
transition. The adoption of FIN 48 resulted in a cumulative
effect of NT$24,154 thousand, which was recorded as an adjustment to
retained earnings at the beginning of
2007.
|
|
p.
|
Earnings per
share
|
|
|
Under ROC GAAP, basic earnings per share is
calculated by dividing net income by the weighted average number of shares outstanding in each
period, which is
retroactively adjusted to the beginning of the year for stock dividends
and stock bonuses issued subsequently. Under U.S. GAAP, basic earnings per share is
calculated by dividing net income by the
weighted average number of shares outstanding in
each period, which is
retroactively adjusted for stock dividends issued subsequently. For stock bonuses to employees,
shares are included in the calculation of weighted-average number of
shares outstanding from the date of issuance. For diluted earnings
per share, unvested stock options are included in the calculation using
the treasury stock method if the inclusion of such would be
dilutive.
|
|
|
U.S. SFAS No. 128, “Earnings per Share” provides guidance on applying the
treasury stock method
for equity instruments granted in share-based payment transactions in
determining diluted earnings per share, which states that the assumed
proceeds shall be the sum of (a) the exercise price, (b) the amount of
compensation cost attributed to future services and not yet
recognized, and (c) the amount of excess tax benefits that would be
credited to additional paid-in capital assuming exercise of the
options. Prior to January 1, 2006, the Company used
the intrinsic value method to account
for its stock-based
compensation under APB No. 25, and had no unrecognized compensation cost
to be included in the assumed proceeds. However, upon adoption
of U.S. SFAS No. 123R, the Company has unrecognized compensation cost, and
therefore, the number of shares included in the diluted
earnings per share calculation under U.S. GAAP is different from that under ROC
GAAP.
|
The following schedule reconciles net
income and shareholders’ equity under ROC GAAP as reported in
the consolidated financial statements to the net income and
shareholders’ equity amounts as determined
under U.S. GAAP, giving
effect to adjustments for the differences listed above.
|
Year Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
Net income
|
||||||||||||||||
|
Net income based on ROC
GAAP
|
17,416,151 | 12,165,249 | 6,160,052 | 188,036 | ||||||||||||
|
Adjustments:
|
||||||||||||||||
|
a. Pension
benefits
|
104,011 | 4,382 | 1,920 | 59 | ||||||||||||
|
b. Marketable
securities
|
(16,331 | ) | - | - | - | |||||||||||
|
c. Bonuses
to employees, directors and supervisors
|
(1,656,438 | ) | (2,054,493 | ) | (328,013 | ) | (10,013 | ) | ||||||||
|
d. Depreciation
of buildings
|
(103,493 | ) | (116,574 | ) | (117,394 | ) | (3,583 | ) | ||||||||
|
e. Depreciation
on the excess of book value of buildings
transferred between subsidiaries
|
432 | 432 | 432 | 13 | ||||||||||||
|
g.
Effect of U.S. GAAP adjustments on equity method investees
|
(38,719 | ) | (26,414 | ) | 5,453 | 166 | ||||||||||
|
h.
Impairment of long-lived assets
|
||||||||||||||||
|
Recoverable
amount
|
(2,190,583 | ) | - | - | - | |||||||||||
|
Depreciation
and gain on recoveries related to restoration
of damaged machinery and equipment
|
85,631 | 313,277 | 195,790 | 5,976 | ||||||||||||
|
j.
Stock-based compensation
|
(635,041 | ) | (489,490 | ) | (84,835 | ) | (2,590 | ) | ||||||||
|
j. Cumulative
effect of changes in accounting principles
upon adoption of U.S. SFAS No. 123R
|
45,976 | - | - | - | ||||||||||||
|
k. Derivative
financial instruments
|
590,481 | - | - | - | ||||||||||||
|
m. Undistributed
earnings tax
|
(300,438 | ) | 122,448 | (215,601 | ) | (6,581 | ) | |||||||||
|
o.
Uncertainty in income taxes adjustment upon adoption
of FIN 48
|
- | 24,154 | - | - | ||||||||||||
|
Income tax effect of U.S. GAAP
adjustments
|
404,491 | (43,603 | ) | (19,599 | ) | (598 | ) | |||||||||
|
Effect of U.S. GAAP adjustments
on minority interest
|
416,566 | 31,738 | (106,104 | ) | (3,239 | ) | ||||||||||
|
Net decrease in net
income
|
(3,293,455 | ) | (2,234,143 | ) | (667,951 | ) | (20,390 | ) | ||||||||
|
Net income based on U.S.
GAAP
|
14,122,696 | 9,931,106 | 5,492,101 | 167,646 | ||||||||||||
|
Earnings per share (Note 33g
)
|
||||||||||||||||
|
Basic
|
2.71 | 1.87 | 1.02 | 0.03 | ||||||||||||
|
Diluted
|
2.60 | 1.81 | 1.01 | 0.03 | ||||||||||||
|
Earnings per ADS (Note 33g
)
|
||||||||||||||||
|
Basic
|
13.57 | 9.34 | 5.11 | 0.16 | ||||||||||||
|
Diluted
|
12.98 | 9.03 | 5.04 | 0.16 | ||||||||||||
|
Number of weighted average
outstanding shares
(in thousands)
(Note 33g )
|
||||||||||||||||
|
Basic
|
5,202,736 | 5,317,695 | 5,368,718 | |||||||||||||
|
Diluted
|
5,505,529 | 5,566,118 | 5,405,280 | |||||||||||||
|
Number of ADS (in thousands)
(Note 33g )
|
||||||||||||||||
|
Basic
|
1,040,547 | 1,063,539 | 1,073,744 | |||||||||||||
|
Diluted
|
1,101,106 | 1,113,224 | 1,081,057 | |||||||||||||
|
December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
Shareholders’ equity
|
||||||||||||||||
|
Shareholders’ equity based on
ROC GAAP
|
66,019,899 | 75,173,361 | 69,671,994 | 2,126,740 | ||||||||||||
|
Adjustments:
|
||||||||||||||||
|
a. Pension
benefits and additional liability
|
||||||||||||||||
|
Pension
benefits
|
58,218 | 62,600 | 64,520 | 1,969 | ||||||||||||
|
Unrecognized pension cost on
adoption of
U.S. SFAS No.
158
|
(613,362 | ) | (613,362 | ) | (613,362 | ) | (18,723 | ) | ||||||||
|
Defined benefit pension plan
adjustment
|
- | (26,153 | ) | (627,783 | ) | (19,163 | ) | |||||||||
|
c. Bonuses
to employees, directors and supervisors
|
(1,656,438 | ) | (1,241,391 | ) | 3,394 | 104 | ||||||||||
|
d.
Depreciation of buildings
|
(582,287 | ) | (698,861 | ) | (816,255 | ) | (24,916 | ) | ||||||||
|
e. Depreciation
on the excess of book value of
buildings
transferred between subsidiaries
|
(13,599 | ) | (13,167 | ) | (12,735 | ) | (389 | ) | ||||||||
(Continued)
|
December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
f. Gain
on sale of subsidiary’s stock
|
(8,619 | ) | (8,619 | ) | (8,619 | ) | (263 | ) | ||||||||
|
g. Effects of
U.S. GAAP adjustments on
equity method
investees
|
611,004 | 273,901 | 594,283 | 18,141 | ||||||||||||
|
h. Impairment
loss reversal, net
|
(2,104,952 | ) | (1,791,675 | ) | (1,595,885 | ) | (48,715 | ) | ||||||||
|
j. Stock
option compensation
|
(908,661 | ) | (908,661 | ) | (908,661 | ) | (27,737 | ) | ||||||||
|
l. Goodwill
|
||||||||||||||||
|
Amortization
|
3,041,351 | 3,041,351 | 3,041,351 | 92,837 | ||||||||||||
|
Impairment
loss
|
(1,600,618 | ) | (1,600,618 | ) | (1,600,618 | ) | (48,859 | ) | ||||||||
|
m. Undistributed
earnings tax
|
(300,438 | ) | (177,990 | ) | (393,591 | ) | (12,014 | ) | ||||||||
|
n. Impairment
loss on equity method investments
|
(2,078,620 | ) | (2,078,620 | ) | (2,078,620 | ) | (63,450 | ) | ||||||||
|
Income tax effect of U.S. GAAP
adjustments
|
635,625 | 592,022 | 572,423 | 17,473 | ||||||||||||
|
Effect of U.S. GAAP
adjustments on minority interest
|
85,550 | 117,288 | 11,184 | 342 | ||||||||||||
|
Net decrease in shareholders’
equity
|
(5,435,846 | ) | (5,071,955 | ) | (4,368,974 | ) | (133,363 | ) | ||||||||
|
Shareholders’ equity based on
U.S. GAAP
|
60,584,053 | 70,101,406 | 65,303,020 | 1,993,377 | ||||||||||||
|
|
(Concluded)
|
|
Year Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
Changes in shareholders’ equity based on U.S.
GAAP
|
||||||||||||||||
|
Balance, beginning of
year
|
44,959,335 | 60,584,053 | 70,101,406 | 2,139,848 | ||||||||||||
|
Net income for the
year
|
14,122,696 | 9,931,106 | 5,492,101 | 167,646 | ||||||||||||
|
Adjustment for bonuses to
employees, directors and
supervisors
|
- | 1,634,513 | 973,593 | 29,719 | ||||||||||||
|
Adjustment for stock option
compensation
|
635,041 | 489,490 | 84,835 | 2,590 | ||||||||||||
|
Cumulative effect of changes
in accounting principles for
adopting U.S. SFAS
No. 123R
|
(45,976 | ) | - | - | - | |||||||||||
|
Translation
adjustment
|
258,140 | 849,157 | 2,694,149 | 82,239 | ||||||||||||
|
Adjustment from changes in
ownership percentages of
investees
|
(65,104 | ) | 15,867 | 1,014 | 31 | |||||||||||
|
Unrealized gain (loss) on
available-for-sale financial assets
|
486,314 | (13,882 | ) | (450,261 | ) | (13,744 | ) | |||||||||
|
Unrealized loss on cash flow
hedging financial instruments
|
- | - | (391,695 | ) | (11,957 | ) | ||||||||||
|
Issuance of common stock from
stock options exercised by
employees
|
464,162 | 962,240 | 237,383 | 7,247 | ||||||||||||
|
Capital received in advance
for stock options
|
384,428 | 491,883 | 3,387 | 103 | ||||||||||||
|
Cash dividends
|
- | (6,941,011 | ) | (9,361,728 | ) | (285,767 | ) | |||||||||
|
Conversion of convertible
bonds
|
- | 1,300,795 | 265,834 | 8,114 | ||||||||||||
|
Cash dividends paid to
subsidiaries
|
- | 271,945 | 535,100 | 16,334 | ||||||||||||
|
Capital surplus from accrued
interest on convertible bonds
|
- | 728,254 | - | - | ||||||||||||
|
Adjustment upon adoption of
FIN 48
|
- | (24,154 | ) | - | - | |||||||||||
|
Adjustment related to treasury
stock arising from changes in ownership percentage of
subsidiaries
|
- | 145,468 | (3,271,523 | ) | (99,863 | ) | ||||||||||
|
Effects of U.S. GAAP
adjustments on equity method
investees
|
- | (310,690 | ) | 314,929 | 9,613 | |||||||||||
|
Unrecognized pension
cost
|
(1,621 | ) | 12,525 | (223,885 | ) | (6,834 | ) | |||||||||
|
Unrecognized pension cost on
adoption of
U.S. SFAS No.
158
|
(613,362 | ) | - | - | - | |||||||||||
|
Defined benefit pension plan
adjustment
|
- | (26,153 | ) | (601,630 | ) | (18,365 | ) | |||||||||
|
Acquisition of treasury
stock
|
- | - | (1,099,989 | ) | (33,577 | ) | ||||||||||
|
Balance, end of
year
|
60,584,053 | 70,101,406 | 65,303,020 | 1,993,377 | ||||||||||||
|
|
The
following U.S. GAAP condensed consolidated balance sheets as of December
31, 2007 and 2008, and consolidated statements of income for the years
ended December 31, 2006, 2007 and 2008 have been derived from the audited
consolidated financial statements and reflect the adjustments presented
above.
|
|
December
31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Current
assets
|
56,902,021 | 46,366,851 | 1,415,349 | |||||||||
|
Long-term
investments
|
3,045,425 | 2,842,701 | 86,774 | |||||||||
|
Property,
plant and equipment, net
|
80,036,599 | 82,694,497 | 2,524,252 | |||||||||
|
Intangible
assets
|
5,255,787 | 12,940,638 | 395,014 | |||||||||
|
Other
assets
|
3,766,680 | 3,963,509 | 120,986 | |||||||||
|
Total
assets
|
149,006,512 | 148,808,196 | 4,542,375 | |||||||||
|
Current
liabilities
|
36,992,344 | 25,267,300 | 771,285 | |||||||||
|
Long-term
debts
|
23,936,009 | 51,622,187 | 1,575,768 | |||||||||
|
Other
liabilities
|
3,527,514 | 4,512,989 | 137,760 | |||||||||
|
Total
liabilities
|
64,455,867 | 81,402,476 | 2,484,813 | |||||||||
|
Minority
interest in consolidated subsidiaries
|
14,449,239 | 2,102,700 | 64,185 | |||||||||
|
Equity
attributable to shareholders of the parent
|
70,101,406 | 65,303,020 | 1,993,377 | |||||||||
|
Total
liabilities and shareholders’ equity
|
149,006,512 | 148,808,196 | 4,542,375 | |||||||||
|
Year Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
Net
revenues
|
100,423,647 | 101,163,069 | 94,430,912 | 2,882,506 | ||||||||||||
|
Cost
of revenues
|
73,366,954 | 75,134,707 | 73,109,934 | 2,231,683 | ||||||||||||
|
Gross
profit
|
27,056,693 | 26,028,362 | 21,320,978 | 650,823 | ||||||||||||
|
Operating
expenses
|
10,113,817 | 11,108,707 | 10,820,666 | 330,301 | ||||||||||||
|
Income
from operations
|
16,942,876 | 14,919,655 | 10,500,312 | 320,522 | ||||||||||||
|
Net
non-operating income (expense)
|
1,448,498 | 71,382 | (1,351,194 | ) | (41,245 | ) | ||||||||||
|
Income
from continuing operations before
income tax
|
18,391,374 | 14,991,037 | 9,149,118 | 279,277 | ||||||||||||
|
Income
tax expense
|
1,980,734 | 3,262,434 | 2,503,482 | 76,419 | ||||||||||||
|
Income
before cumulative effect of changes
in accounting principles
|
16,410,640 | 11,728,603 | 6,645,636 | 202,858 | ||||||||||||
|
Cumulative
effect of changes in accounting
principles
|
(296,527 | ) | - | - | - | |||||||||||
|
Minority
interest in net income of subsidiaries
|
(1,991,417 | ) | (1,797,497 | ) | (1,153,535 | ) | (35,212 | ) | ||||||||
|
Net
income
|
14,122,696 | 9,931,106 | 5,492,101 | 167,646 | ||||||||||||
|
|
The
Company applies ROC SFAS No. 17, “Statement of Cash Flows”. Its
objectives and principles are similar to those set out in the U.S. SFAS
No. 95, “Statement of Cash Flows” (“U.S. SFAS No.
95”). Summarized cash flow data by operating, investing and
financing activities in accordance with U.S. SFAS No. 95 are as
follows:
|
|
Year Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
Net
cash inflow (outflow) from:
|
||||||||||||||||
|
Operating
activities
|
37,280,483 | 27,471,750 | 30,129,594 | 919,706 | ||||||||||||
|
Investing
activities
|
(22,099,944 | ) | (18,108,361 | ) | (36,359,167 | ) | (1,109,863 | ) | ||||||||
|
Financing
activities
|
(12,551,518 | ) | (7,653,859 | ) | 14,461,587 | 441,441 | ||||||||||
|
Net
increase in cash and cash equivalents
|
2,629,021 | 1,709,530 | 8,232,014 | 251,284 | ||||||||||||
|
Cash
and cash equivalents, beginning
of year
|
13,263,788 | 15,730,075 | 17,157,935 | 523,746 | ||||||||||||
|
Effect
of exchange rate changes
|
(162,734 | ) | (281,670 | ) | 748,981 | 22,862 | ||||||||||
|
|
||||||||||||||||
|
Cash
and cash equivalents, end of year
|
15,730,075 | 17,157,935 | 26,138,930 | 797,892 | ||||||||||||
|
|
The
significant reclassifications for U.S. GAAP cash flow statements pertain
to bonuses to employees, directors and supervisors shown in the operating
activities under U.S. GAAP as opposed to financing activities under ROC
GAAP.
|
|
|
As
discussed in Note 3, the bonuses to employees, directors and supervisors
were recorded as an expense starting January 1,
2008. Therefore, the reclassification of the bonus expense will
no longer be required for the cash flow statement from
2009.
|
|
33.
|
ADDITIONAL
DISCLOSURES REQUIRED BY U.S. GAAP
|
|
|
a.
|
Recently
issued accounting standards
|
|
|
On
January 1, 2008, the Company adopted U.S. SFAS No. 157, “Fair Value
Measurements” (“U.S. SFAS No. 157”), which defines fair value, establishes
a framework for measuring fair value and expands disclosures about fair
value measurements. U.S. SFAS No. 157 does not require any new
fair value measurements, but provides guidance on how to measure fair
value by providing a fair value hierarchy used to classify the source of
the information. The adoption of U.S. SFAS No. 157 did not have
a material impact on the Company’s consolidated financial position and
results of operations.
|
|
|
In
February 2008, the FASB issued FASB Staff Position (“FSP”) 157-2,
“Effective Date of FASB Statement No. 157” (“FSP 157-2”), which delays the
effective date of U.S. SFAS No. 157 to January 1, 2009, for all
non-financial assets and non-financial liabilities, except for items that
are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). The Company believes that
the adoption of the delayed items of U.S. SFAS No. 157 will not have a
material impact on the Company’s consolidated financial position or
results of operations.
|
|
|
In
October 2008, the FASB issued FSP 157-3, “Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active” (“FSP
157-3”), which clarifies the application of U.S. SFAS No. 157 in a market
that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the
market for that financial asset is not active. The Company
believes the adoption of FSP 157-3 will not have a material impact on the
Company’s consolidated financial position and results of
operations.
|
|
|
In
April 2009 the FASB issued FSP 157-4, “Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly” (“FSP 157-
4”), which clarifies the application of U.S. SFAS No. 157 when there is no
active market or where the price inputs being used represent distressed
sales. Additional guidance is provided regarding estimating the
fair value of an asset or liability (financial and nonfinancial) when the
volume and level of activity for the asset or liability have significantly
decreased and identifying transactions that are not
orderly. FSP 157-4 will be effective for interim and annual
periods ending after June 15, 2009. The Company believes the
adoption in fiscal 2009 will not have a material impact on the Company’s
consolidated financial position and results of
operations.
|
|
|
In
February 2007, the FASB issued U.S. SFAS No. 159, “The Fair Value Option
for Financial Assets and Financial Liabilities- Including an amendment of
FASB Statement No.115” (“U.S. SFAS No. 159”). This statement
permits companies to choose to measure eligible items at fair value at
specified election dates and report unrealized gains and losses in
earnings at each subsequent reporting date on items for which the fair
value option has been elected. The objective of this statement
is to improve financial reporting by providing companies with the
opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to
apply complex hedge accounting provisions. Companies may decide
whether to elect the fair value option for each eligible item on its
election date, subject to certain requirements described in the
statement. This statement is effective beginning January 1,
2008. The Company did not elect the fair value option for any
eligible financial asset of
liability.
|
|
|
In
December 2007, the FASB issued U.S. SFAS No. 141R, “Business Combination”
(“U.S. SFAS No. 141R”) and U.S. SFAS No. 160, “Non-controlling Interests
in Consolidated Financial Statements- an amendment of ARB No. 51” (“U.S.
SFAS No. 160”). U.S. SFAS No. 141R requires most of the assets
acquired and liabilities assumed in the business combination to be
measured at fair value as of the acquisition date. In addition,
the net assets of non-controlling interests’ share of the acquired
subsidiaries should be recognized at fair value. U.S. SFAS No.
160 requires the Company to include non-controlling interests as a
separate component of shareholders’ equity, instead of liability or
temporary equity. U.S. SFAS No. 141R is effective for business
combinations consummated on or after January 1, 2009 and U.S. SFAS No. 160
is effective beginning January 1, 2009. The adoption of U.S.
SFAS No. 141R will change the accounting treatment of the Company for
business combinations on a prospective basis. The Company
believes the adoption of U.S. SFAS No. 160 has no material impact on its
consolidated financial position or results of
operations.
|
|
|
In
March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities - an amendment of FASB Statement No.
133” (“U.S. SFAS No. 161”), which requires additional disclosures about
the objectives of derivative instruments and hedging activities, the
method of accounting for such instruments under U.S. SFAS No. 133 and its
related interpretations, and a tabular disclosure of the effects of such
instruments and related hedged items on our financial position, financial
performance, and cash flows. U.S. SFAS No. 161 is effective
beginning January 1, 2009. The Company believes the adoption of
U.S. SFAS No. 161 will not have a material impact on its consolidated
financial position or results of
operations.
|
|
|
b.
|
Pension
|
|
|
Set
forth below is pension information about the defined benefit plans
disclosed in accordance with U.S. SFAS No.
132R:
|
|
Year Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
Components
of net periodic benefit cost
|
||||||||||||||||
|
Service
cost
|
267,351 | 382,371 | 333,538 | 10,182 | ||||||||||||
|
Interest
cost
|
89,761 | 86,490 | 107,726 | 3,288 | ||||||||||||
|
Expected
return on plan assets
|
(34,777 | ) | (37,312 | ) | (46,788 | ) | (1,428 | ) | ||||||||
|
Amortization
|
7,697 | 10,955 | 14,185 | 433 | ||||||||||||
|
Curtailment
gain on pension
|
- | - | (4,177 | ) | (128 | ) | ||||||||||
|
Net
periodic benefit cost
|
330,032 | 442,504 | 404,484 | 12,347 | ||||||||||||
(Continued)
|
Year Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
Changes
in benefit obligation
|
||||||||||||||||
|
Benefit
obligation at beginning of year
|
4,006,601 | 4,474,962 | 4,851,185 | 148,083 | ||||||||||||
|
Service
cost
|
376,027 | 382,371 | 333,538 | 10,182 | ||||||||||||
|
Interest
cost
|
88,341 | 86,490 | 107,726 | 3,288 | ||||||||||||
|
Initial
adoption of U.S. SFAS No.
158
|
31,691 | - | - | - | ||||||||||||
|
Curtailment
gain on settlement
|
(29,327 | ) | (13,562 | ) | (4,177 | ) | (128 | ) | ||||||||
|
Actuarial
gain
|
250,851 | 112,780 | 650,236 | 19,848 | ||||||||||||
|
Benefits
paid
|
(285,063 | ) | (245,692 | ) | (274,252 | ) | (8,372 | ) | ||||||||
|
Exchange
loss
|
35,841 | 53,836 | 109,543 | 3,344 | ||||||||||||
|
Benefit
obligation at end of year
|
4,474,962 | 4,851,185 | 5,773,799 | 176,245 | ||||||||||||
|
Change
in plan assets
|
||||||||||||||||
|
Fair
value of plan assets at beginning
of year
|
1,421,105 | 1,657,132 | 2,132,706 | 65,101 | ||||||||||||
|
Actual
return (loss) on plan assets
|
51,438 | 41,577 | (144,737 | ) | (4,418 | ) | ||||||||||
|
Employer
contribution
|
224,678 | 485,244 | 153,370 | 4,682 | ||||||||||||
|
Benefits
paid
|
(41,740 | ) | (48,285 | ) | (93,653 | ) | (2,859 | ) | ||||||||
|
Translation
adjustment
|
1,651 | (2,962 | ) | 8,095 | 247 | |||||||||||
| 1,657,132 | 2,132,706 | 2,055,781 | 62,753 | |||||||||||||
|
Funded
status
|
2,817,830 | 2,718,479 | 3,718,018 | 113,492 | ||||||||||||
(Concluded)
Actuarial
assumptions:
|
December 31
|
|||
|
2006
|
2007
|
2008
|
|
|
Discount
rate
|
2.25%
to 4.70%
|
2.25%
to 4.90%
|
2.00%
to 4.90%
|
|
Increase
in future salary level
|
2.50%
to 5.00%
|
2.50%
to 5.00%
|
2.50%
to 5.00%
|
|
Expected
rate of return on plan assets
|
2.50%
to 2.75%
|
2.50%
to 3.00%
|
2.25%
to 2.50%
|
|
|
The
Company has no other post-retirement or post-employment benefit
plans.
|
|
|
c.
|
Marketable
securities
|
|
|
At
December 31, 2007 and 2008, marketable securities by category were as
follows:
|
|
December 31
|
||||||||||||||||||||||||||||||||||||
|
2007
|
2008
|
|||||||||||||||||||||||||||||||||||
|
Unrealized
|
Unrealized
|
|||||||||||||||||||||||||||||||||||
|
Carrying
|
Holding
|
Holding
Losses
|
||||||||||||||||||||||||||||||||||
|
Amount
|
Fair Value
|
Gains
|
Carrying Amount
|
Fair Value
|
(Within One Year)
|
|||||||||||||||||||||||||||||||
|
NT$
|
NT$
|
NT$
|
NT$
|
US$
|
NT$
|
US$
|
NT$
|
US$
|
||||||||||||||||||||||||||||
|
Trading
|
||||||||||||||||||||||||||||||||||||
|
Open-end
mutual funds
|
1,599,353 | 1,599,353 | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
|
Quoted
stocks
|
- | - | - | 536,427 | 16,375 | 536,427 | 16,375 | - | - | |||||||||||||||||||||||||||
|
Available-for-sale
|
||||||||||||||||||||||||||||||||||||
|
Open-end
mutual funds
|
9,292,448 | 9,292,448 | 72,661 | - | - | - | - | - | - | |||||||||||||||||||||||||||
|
Government
and corporate
bonds
|
88,874 | 88,874 | - | 100,000 | 3,052 | 100,000 | 3,052 | - | - | |||||||||||||||||||||||||||
|
Quoted
stocks
|
25,005 | 25,005 | 3,701 | 179,812 | 5,489 | 179,812 | 5,489 | (7,389 | ) | (226 | ) | |||||||||||||||||||||||||
| 11,005,680 | 11,005,680 | 76,362 | 816,239 | 24,916 | 816,239 | 24,916 | (7,389 | ) | (226 | ) | ||||||||||||||||||||||||||
|
|
As
of December 31, 2008, the maturity date of the government and corporate
bonds is December 24, 2015.
|
|
|
The
Company uses the average cost method for trading securities and
available-for-sale securities when determining their cost
basis. Proceeds from sales of available-for-sale securities for
the years ended December 31, 2006, 2007 and 2008 were NT$7,518,738
thousand, NT$11,825,157 thousand and NT$ 16,714,277 thousand
(US$510,204 thousand), respectively. Net realized gains
on these sales for the years ended December 31, 2006, 2007 and 2008 were
NT$56,748 thousand, NT$111,586 thousand and NT$132,021 thousand
(US$4,030 thousand), respectively. The other than
temporary or realized loss on impairment of available-for-sale financial
assets was nil for the years ended December 31, 2006 and
2007. For the year ended December 31, 2008, the other than
temporary or realized loss on impairment of available-for-sale financial
assets was NT$149,954 thousand (US$4,578
thousand).
|
d. Employee
stock option plans
|
|
Effective
January 1, 2006, the Company adopted the fair value recognition provisions
of U.S. SFAS No. 123R, using the modified prospective transition method
and therefore has not restated results for prior periods. Under
this transition method, stock-based compensation expense for the year
ended December 31, 2006 included stock-based compensation expense for all
share-based payment awards granted prior to but not yet vested as of
January 1, 2006, based on the grant-date fair value estimated in
accordance with the original provision of U.S. SFAS No. 123. In
addition, the stock-based compensation expense also includes the intrinsic
value of certain outstanding share-based awards for which it was not
possible to reasonably estimate their grant-date fair value under the
requirement of U.S. SFAS No. 123. Stock-based compensation
expense for all share-based payment awards granted after January 1, 2006
is based on the grant-date fair value estimated in accordance with the
provision of U.S. SFAS No. 123R. The Company recognizes these
compensation costs using the graded vesting method over the requisite
service period of the award, which is generally a five-year vesting
period. The adoption of U.S. SFAS No. 123R resulted in a
cumulative gain from a change in accounting principle of $45,976 thousand,
which reflects the net cumulative impact of estimating future forfeitures
in the determination of period expense, rather than recording forfeitures
when they occur as previously permitted. Prior to the adoption
of U.S. SFAS No. 123R, the Company accounted for awards granted by ASE
Inc. under the intrinsic value method prescribed by APB 25 and related
interpretations, and provided the required pro forma disclosures
prescribed by U.S. SFAS No. 123, as amended. In March 2005, the
SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”) regarding the
SEC’s interpretation of U.S. SFAS No. 123R and the value of share-based
payments for public companies. The Company has applied the
provisions of SAB 107 in its adoption of U.S. SFAS No.
123R.
|
|
|
In
December 2007, the SEC issued Staff Accounting Bulletin No. 110 (“SAB
110”), which amends the SEC’s views discussed in SAB 107 regarding the use
of the simplified method in developing estimates of the expected life of
stock options in accordance with U.S. SFAS No. 123R. The
amendment allowed the continued use, subject to specific criteria, of the
simplified method in estimating the expected life of stock options granted
after December 31, 2008. No employee stock options have been
issued since 2008.
|
|
|
As
a result of adopting U.S. SFAS No. 123R, income before income taxes and
net income for the year ended December 31, 2006 were lower by NT$16,614
thousand and NT$12,640 thousand, respectively, than if the Company had
continued to account for stock-based compensation under APB
25.
|
|
|
Information
regarding the Company’s stock option plans is as
follows:
|
|
|
ASE Inc. and ASE
Mauritius Inc. Option Plan
|
|
|
Information
regarding these employee stock option plans is provided in Note
22.
|
|
|
ASE Test Option
Plan
|
|
|
As
discussed in Note 22, all ASE Test employee stock options were exercised
or forfeited as of December 31,
2008.
|
|
|
Information
regarding the Option Plans of ASE Test’s option plan is presented below
(in U.S. dollars):
|
|
Weighted
|
||||||||||||||
|
Average
|
Weighted
|
Aggregate
|
||||||||||||
|
Exercise
|
Average
|
Intrinsic
|
||||||||||||
|
Number
of
|
Price
|
Grant
Date
|
Value
(In
|
|||||||||||
|
Shares
|
Per
Share
|
Fair
Value
|
Thousands)
|
|||||||||||
|
Outstanding
options at January 1, 2006
|
10,491,064 | 10.37 | ||||||||||||
|
Options
granted
|
130,000 | 9.60 | $ | 5.32 | ||||||||||
|
Options
exercised
|
(79,201 | ) | 8.56 | |||||||||||
|
Options
forfeited
|
(216,825 | ) | 11.60 | |||||||||||
|
Options
expired
|
- | - | ||||||||||||
|
Outstanding
options at December 31, 2006
|
10,325,038 | 10.34 | ||||||||||||
|
Options
granted
|
- | - | $ | - | ||||||||||
|
Options
exercised
|
(1,200,503 | ) | 8.98 | |||||||||||
|
Options
forfeited
|
(401,363 | ) | 14.00 | |||||||||||
|
Options
expired
|
- | - | ||||||||||||
|
Outstanding
options at December 31, 2007
|
8,723,172 | 10.36 | ||||||||||||
|
Options
granted
|
- | - | $ | - | ||||||||||
|
Options
exercised
|
(8,085,352 | ) | 9. 69 | |||||||||||
|
Options
forfeited
|
(637,820 | ) | 18.92 | |||||||||||
|
Options
expired
|
- | - | ||||||||||||
|
Outstanding
options at December 31, 2008
|
- | - |
$
|
-
|
||||||||||
|
Exercisable
options at December 31, 2008
|
- | - |
$
|
-
|
||||||||||
|
|
Total
intrinsic value of options exercised for the years ended December 31,
2006, 2007 and 2008 was US$76 thousand, US$4,952 thousand and US$40,074
thousand, respectively.
|
|
|
ASE
Test has used the fair value based method (based on the Black-Scholes
model) to evaluate the options granted with the following
assumptions:
|
|
Year Ended December 31
|
|||
|
2006
|
2007
|
2008
|
|
|
Risk-free
interest rate
|
3.88%-4.88%
|
3.88%-4.88%
|
-
|
|
Expected
life
|
3-5
years
|
3-5
years
|
-
|
|
Expected
volatility
|
59.06%-62.03%
|
59.06%-62.03%
|
-
|
|
Expected
dividend yield
|
-
|
-
|
-
|
|
|
e.
|
In
accordance with U.S. SFAS No. 130, “Reporting Comprehensive Income”, the
statements of comprehensive income for the years ended December 31, 2006,
2007 and 2008 are presented below:
|
|
Year Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
Net
income based on U.S. GAAP
|
14,122,696 | 9,931,106 | 5,492,101 | 167,646 | ||||||||||||
|
Translation
adjustments on subsidiaries, net of income tax expense of NT$64,535
thousand, NT$212,289 thousand and NT$664,064 thousand (US$20,271 thousand)
in 2006, 2007 and 2008, respectively
|
193,605 | 636,868 | 1,992,193 | 60,812 | ||||||||||||
|
Unrealized
gain (loss) on financial instruments
|
486,314 | (13,882 | ) | (841,956 | ) | (25,701 | ) | |||||||||
|
Unrecognized
pension cost
|
(1,621 | ) | (13,628 | ) | (825,515 | ) | (25,199 | ) | ||||||||
|
Comprehensive
income
|
14,800,994 | 10,540,464 | 5,816,823 | 177,558 | ||||||||||||
|
|
f.
|
Goodwill
|
|
|
On
January 1, 2002, the Company adopted U.S. SFAS No. 142, which requires
that goodwill no longer be amortized, and instead, be tested for
impairment on at least an annual basis. In conjunction with the
implementation of U.S. SFAS No. 142, the Company completed a goodwill
impairment review as of January 1, 2002 using a fair-value based approach
in accordance with the provision of the standard and found no
impairment.
|
|
|
As
of December 31, 2007 and 2008, the Company had goodwill of NT$3,711,570
thousand and NT$9,804,680 thousand (US$299,288
thousand), respectively, primarily from the reporting units of the testing
operation.
|
|
|
Changes
in the carrying amount of goodwill for the years ended December 31, 2007
and 2008, by reporting units, were as
follows:
|
|
Packaging
|
Testing
|
Investing
and Other
|
Total
|
|||||||||||||||||
|
NT$
|
NT$
|
NT$
|
NT$
|
US$
|
||||||||||||||||
|
Balance
as of January 1, 2007
|
843,172 | 1,999,647 | 511,908 | 3,354,727 | 102,403 | |||||||||||||||
|
Goodwill
acquired
|
327,285 | 36,365 | - | 363,650 | 11,100 | |||||||||||||||
|
Translation
adjustment
|
(426 | ) | (6,307 | ) | (74 | ) | (6,807 | ) | (208 | ) | ||||||||||
|
Balance
as of December 31, 2007
|
1,170,031 | 2,029,705 | 511,834 | 3,711,570 | 113,295 | |||||||||||||||
|
Goodwill
acquired
|
315,657 | 5,780,726 | - | 6,096,383 | 186,092 | |||||||||||||||
|
Translation
adjustment
|
5,370 | (8,845 | ) | 202 | (3,273 | ) | (99 | ) | ||||||||||||
|
Balance
as of December 31, 2008
|
1,491,058 | 7,801,586 | 512,036 | 9,804,680 | 299,288 | |||||||||||||||
|
|
g.
|
Earnings
per share
|
|
|
U.S.
SFAS No. 128 requires the presentation of basic and diluted earnings per
share. Basic earnings per share was computed based on the
weighted average number of common shares outstanding during the
year. Diluted earnings per share included the effect of
dilutive potential common shares (such as stock options issued calculated
using the treasury stock method).
|
The following table presents the
calculation of basic and diluted earnings per share:
|
Year Ended December 31
|
||||||||||||||||
|
2006
|
2007
|
2008
|
||||||||||||||
|
NT$
|
NT$
|
NT$
|
US$
|
|||||||||||||
|
Basic
EPS
|
||||||||||||||||
|
Net
income
|
14,122,696 | 9,931,106 | 5,492,101 | 167,646 | ||||||||||||
|
Effect
of ASE Test and ASE Mauritius
Inc.’s stock option plans
|
(1,663 | ) | (20,185 | ) | (42,696 | ) | (1,303 | ) | ||||||||
|
Interest
on convertible bonds,
net of tax
|
168,993 | 139,635 | - | - | ||||||||||||
|
Diluted
EPS
|
||||||||||||||||
|
Net
income
|
14,290,026 | 10,050,556 | 5,449,405 | 166,343 | ||||||||||||
|
Weighted
average outstanding shares (in
thousands)
|
||||||||||||||||
|
Basic
|
5,202,736 | 5,317,695 | 5,368,718 | |||||||||||||
|
Effect
of dilutive securities
|
302,793 | 248,423 | 36,562 | |||||||||||||
|
Diluted
|
5,505,529 | 5,566,118 | 5,405,280 | |||||||||||||
|
|
For
the years ended December 31, 2006, 2007 and 2008, no options or
convertible bonds were excluded from the calculation of diluted
EPS.
|
|
|
The
denominator used for purposes of calculating earnings per ADS was the
above-mentioned weighted average outstanding shares divided by five (one
ADS represents five common shares). The numerator was the same
as mentioned in the above EPS
calculation.
|
|
|
h.
|
In
accordance with FIN 48 disclosure requirements, the following table
summarizes the activity related to the gross unrecognized tax benefits for
the years ended December 31, 2007 and
2008:
|
|
Year
Ended December 31
|
||||||||||||
|
2007
|
2008
|
|||||||||||
|
NT$
|
NT$
|
US$
|
||||||||||
|
Balance,
beginning of year
|
16,105 | 18,405 | 562 | |||||||||
|
Increase
related to prior year tax positions
|
- | - | - | |||||||||
|
Increase
decrease related to current year tax positions
|
2,300 | 1,415 | 43 | |||||||||
|
Balance,
end of year
|
18,405 | 19,820 | 605 | |||||||||
|
|
Upon
adoption of FIN 48, the Company recorded interest expense and penalties as
interest expense and other non-operating expense,
respectively. For the years ended December 31, 2007 and 2008,
the total amount of interest expense and penalties related to tax uncertainty
was approximately NT$4,887 thousand and NT$4,614 thousand (US$141 thousand),
respectively. The total amount of interest and penalties recognized as of December 31,
2007 and 2008 was
NT$12,810 thousand and NT$17,424 thousand (US$532
thousand), respectively.
|
|
|
i.
|
Fair
Value Disclosure
|
|
|
On
January 1, 2008, the Company adopted U.S. SFAS No. 157, which defines fair
value, establishes a framework for measuring fair value and expands
disclosures about fair value
measurements.
|
|
|
U.S.
SFAS No. 157 defines fair value as the price that would be received upon
sale of an asset or paid upon transfer of a liability in an orderly
transaction between market participants at the measurement date and in the
principal or most advantageous market for that asset or
liability. The fair value should be calculated based on
assumptions that market participants would use in pricing the asset or
liability, not on assumptions specific to the
Company.
|
|
|
In
addition to defining fair value, U.S. SFAS No. 157 expands the disclosure
requirements around fair value and establishes a fair value hierarchy for
valuation inputs. The hierarchy prioritizes the inputs into
three levels based on the extent to which inputs used in measuring fair
value are observable in the market. Each fair value measurement
is reported in one of the three levels which is determined by the lowest
level input that is significant to the fair value measurement in its
entirety. These levels
are:
|
|
|
Level
1 – Use unadjusted quoted prices in active markets for identical assets or
liabilities.
|
|
|
Level
2 – Use observable inputs other than Level 1 prices such as quoted prices
for identical or similar instruments in markets that are not active,
quoted prices for similar instruments in active markets, and model-based
valuation in which all significant inputs are observable or can be
corroborated by observable market data for substantially the full term of
the assets or liabilities.
|
|
|
Level
3 – Use inputs that are generally unobservable and reflect the use of
significant management judgments and
estimates.
|
|
|
The
following section describes the valuation methodologies we use to measure
financial assets and liabilities at fair
value.
|
|
|
For
investments other than forward exchange contracts, interest rate swap
contracts and swap contracts, the Company uses quoted prices in active
markets for identical assets to determine fair value where
applicable. This pricing methodology applies to our Level 1
investments such as government bonds and quoted stocks. If
quoted prices in active markets for identical assets are not available,
then the Company uses quoted prices that are observable and can be
corroborated with other observable market data for identical assets in
less active markets. These investments are included in Level 2
and consist primarily of derivative contracts. For the year
ended December 31, 2008, none of the Company’s financial assets’ fair
value was determined by using significant unobservable inputs and
classified as Level 3.
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|
|
For
forward exchange contracts, interest rate swap contracts and swap
contracts, fair values are estimated using industry standard valuation
models. These models use market-based observable inputs
including interest rate curves, foreign exchange rates, and forward and
spot prices for currencies to project fair value. The forward
and cross currency swap contract financial assets and liabilities are
included in Level 2.
|
|
|
The
following table presents our assets and liabilities measured at fair value
on a recurring basis as of December 31,
2008:
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||||||||||||||||||
|
NT$
|
US$
|
NT$
|
US$
|
NT$
|
US$
|
NT$
|
US$
|
|||||||||||||||||||||||||
|
Assets
|
||||||||||||||||||||||||||||||||
|
Derivative
financial assets
|
||||||||||||||||||||||||||||||||
|
Forward
exchange contracts
|
- | - | 1,053 | 32 | - | - | 1,053 | 32 | ||||||||||||||||||||||||
|
Marketable
securities - trading
|
||||||||||||||||||||||||||||||||
|
Quoted
stocks
|
536,427 | 16,375 | - | - | - | - | 536,427 | 16,375 | ||||||||||||||||||||||||
|
Marketable
securities - available-for-sale
|
||||||||||||||||||||||||||||||||
|
Government
and corporate bonds
|
100,000 | 3,052 | - | - | - | - | 100,000 | 3,052 | ||||||||||||||||||||||||
|
Quoted
stocks
|
179,812 | 5,489 | - | - | - | - | 179,812 | 5,489 | ||||||||||||||||||||||||
| 816,239 | 24,916 | 1,053 | 32 | - | - | 817,292 | 24,948 | |||||||||||||||||||||||||
|
Liabilities
|
||||||||||||||||||||||||||||||||
|
Derivative
financial liabilities
|
||||||||||||||||||||||||||||||||
|
Swap
contracts
|
- | - | 61,257 | 1,870 | - | - | 61,257 | 1,870 | ||||||||||||||||||||||||
|
Forward
exchange contracts
|
- | - | 21,410 | 654 | - | - | 21,410 | 654 | ||||||||||||||||||||||||
|
Interest
rate swap contract
|
- | - | 391,904 | 11,962 | - | - | 391,904 | 11,962 | ||||||||||||||||||||||||
| - | - | 474,571 | 14,486 | - | - | 474,571 | 14,486 | |||||||||||||||||||||||||
|
|
The
table below sets out the balances for those assets required to be measured
at fair value on a nonrecurring basis and the associated losses recognized
during the year ended December 31,
2008:
|
|
December 31, 2008
|
Level 1
|
Level 2
|
Level 3
|
Total Losses
|
||||||||||||||||||||||||||||||||||||
|
NT$
|
US$
|
NT$
|
US$
|
NT$
|
US$
|
NT$
|
US$
|
NT$
|
US$
|
|||||||||||||||||||||||||||||||
|
Assets
|
||||||||||||||||||||||||||||||||||||||||
|
Financial
assets carried at cost
|
575,495 | 17,567 | - | - | - | - | 575,495 | 17,567 | 21,395 | 653 | ||||||||||||||||||||||||||||||
|
Bond
investments with no active
market
|
450,000 | 13,736 | - | - | - | - | 450,000 | 13,736 | - | - | ||||||||||||||||||||||||||||||
|
Total
|
1,025,495 | 31,303 | - | - | - | - | 1,025,495 | 31,303 | 21,395 | 653 | ||||||||||||||||||||||||||||||
|
|
The
Company reviews the carrying values of financial assets carried at cost
when impairment indicators are present. Due to the absence of
quoted market price, the fair values are determined significantly based on
management judgment with the best information available. The
Company calculates these fair values using the market approach which
includes recent financing activities, valuation of comparable companies,
technology development stage, market condition and other economic factors
as their fair value inputs. When the market approach is not
available, the Company uses the income approach which includes the
discounted cash flow and other economic factors as
inputs.
|
|
|
In
accordance with the provisions of FSP 157-2, certain non-financial assets
measured at fair value on a non-recurring basis are not subject to these
fair value measurement requirements until January 1,
2009. These non-financial assets include non-financial assets
and non-financial liabilities measured at fair value in the second step of
a goodwill impairment test, as well as intangible assets and other
non-financial long-lived assets measured at fair value for impairment
assessment.
|
F-72