ASE's Q2 2025: Key Contradictions in AI Testing, Advanced Packaging, and Market Demand

AI testing market share and growth, advanced packaging capacity and investment, AI and HPC market demand, capacity expansion and execution challenges, and overseas expansion and strategic initiatives are the key contradictions discussed in ASE's latest 2025Q2 earnings calls. These contradictions have the potential to impact investor trust and stock price volatility.



Revenue Growth and AI Integration:
- ASE Technology reported unconsolidated revenue growth of 9% year-on-year in the first half of 2025, with ATM revenues up 18% year-on-year.
- This growth was driven by strong demand in leading-edge packaging and overall testing, outpacing the general segment recovery, and is attributed to increased turnkey and expanding leading-edge test demand due to the broader semiconductor demand related to AI proliferation.

Capacity Expansion and Strategic Investments:
- Machinery CapEx in the first half of 2025 reached USD 1.9 billion, driven by advanced packaging and testing.
- The company is expanding capacity, particularly in Taiwan, and exploring overseas opportunities, to manage increasing demand and ensure resource optimization, with a focus on advancing leading-edge packaging and testing capabilities.

Currency Impact and Margin Fluctuation:
- The NT dollar strengthened by 4.9%, impacting gross margins by an estimated 1.5 to 2.2 percentage points sequentially, and 1.0 to 1.5 percentage points annually.
- Despite this currency impact, the company believes its financial performance does not fully reflect its underlying accomplishments, with a strategic focus on aligning future business opportunities with return goals.

Advanced Packaging and Testing Growth:
- The testing business grew 31% year-on-year in the first half, with a target to increase by USD 1 billion in the full year 2025, contributing 10% of the overall growth.
- This growth is supported by increased demand for AI-related leading-edge testing and the company's strategic investment in advanced capacity and smart factory infrastructures.

Future Outlook and Strategic Priorities:
- The company expects momentum in the ATM business to carry into Q3, with Q4 also anticipating quarter-to-quarter growth, driven by the leading-edge packaging and testing.
- Recent foreign exchange dynamics are prompting a recalibration of strategic initiatives, focusing on optimizing resource deployment and prioritizing investments based on new variables and long-term foundational technology requirements.