ASE TEST LIMITED Annual Report 2002
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A S E ASE TEST LIMITED Annual Report 2002 T E S T L I M I T E D A n n u a l R e p o r t 2 0 0 2 四色版 Chinese porcelain has been treasured the world over ever since the West began trading with China in the 1700's. Then and now, it has been treasured for both its beauty and its craftsmanship. Like the ancient porcelain craftsmen who perfected the art of porcelain so many years ago, the engineers of ASE Test and all those who support them strive to achieve perfection in the art and business of semiconductor testing. We at ASE Test find inspiration in the engineering achievements of the great ancient craftsmen. ASE TEST LIMITED Annual Report 2002 CONTENTS Letter to Shareholders 10 Financial Highlights 2002 12 2002 FORM 20-F 16 四色版 The Peak of Perfection This rare and valuable porcelain plate commissioned by the Song Emperor is one of only a very few in existence. Made by the great Ru Kiln in Ru Zhou, experts say this piece represents the fusion of superior engineering and artistic expression. To bolster the structural integrity of the porcelain, the Ru Kiln invented the delicate process of inserting nails of a precise weight, size and shape into the porcelain before enameling. It's because of this exhibition of engineering prowess that experts to this day prize Ru Kiln porcelain. ASE Test Limited, the world's leading semiconductor testing service provider, offers customers a com- plete range of semiconductor testing services for 3C and networking products using a broad range of test platforms. ASE is also the global leader in the 300 mm test services. Like the Ru Kiln which exhibited a technical proficiency unmatched during the Song Dynasty in AD. 960 ~ 1127, ASE is now demonstrat- ing to the world its leadership in semiconductor test program development and multiple test platform conversion. Song Dynasty Official Ru Kiln Blue Rhombus-shaped-flower Porcelain Plate 02 ASE TEST LIMITED Annual Report 2002 03 四色版 Strike an Original Pose Ceramic glaze was one of the most important innovations in the history of Chinese enameling techniques. Jun Kiln's revolutionary formula used not only traditional oxidizing agents such as iron, but other agents such as copper, phosphorus and tin giving birth to unprecedented color tones. These colors marked the power of an artistic vision no other kiln was able to achieve. ASE Test Limited continues to invest in test technology development as well as test platform installation required by quick-changing market dynamics. We have the capabilities to provide test services for applications such as known good die and Wireless LAN. ASE is also the leader in multi-platform testing and test program conversions. Like the Jun Kiln which invented the revolutionary ceramic glazing techniques, ASE Test Limited is well-equipped to respond to the latest technology trends with our advanced test solutions. Song Dynasty Jun Kiln Purple Water-Lily-Shaped Basin 04 ASE TEST LIMITED Annual Report 2002 05 四色版 Superb Craftsmanship Porcelain coloring was one of the most important techniques developed by Chinese porcelain craftsmen. With knowledge of ceramic glaze accumulated over generations, craftsmen learned to color on top of or beneath the ceramic glaze. Chen-Hwa Kiln was the originator of such superb craftsmanship. Its exquisite porcelain is thought of as having the utmost in refined quality and elegance. The magnificent surface and fine colorings easily stir the deepest emotions of the connoisseur. ASE Test Limited has gathered the finest talent in professional semiconductor test services. Our experienced software, hardware and product engineering teams provide first-class added-value services to our customers with a "can-do" attitude. We are the leader in test program development and debugging. Like the superb craftsmen of Chen-Hwa Kiln, our team continuously strives for excellence in providing added-value services. Ming Chen-Hwa Kiln Porcelain Vase with Chicken Images 06 ASE TEST LIMITED Annual Report 2002 07 四色版 The Art of Circumspection The art of enameling was taken to new heights during the Chin Dynasty. New glazing techniques were developed by enamellists to create colorful three-dimensional effects. The impressive visual effects were created by placing the celadon body glaze evenly with white-lined dividers. The application of such technique requires strict control over the glazing process. The distribution of the decorative patterns and colors was designed with mathematical precision. The porcelain pieces are the ultimate demonstration of beauty and sophistication. ASE Test Limited not only provides front-end and final testing solutions but as a member of the ASE Group, it offers all the advantages and synergies of being an integral part of the world's second largest semiconductor assembly service corporation. With our well-structured, strictly controlled parallel manufacturing process, we support our customers with the industry's broadest range of leading-edge technology offerings, manufacturing capabilities as well as optimized time-to-market. Chin Dynasty Kang-Shi Kiln Octagonal Enamel Flower Casket 08 ASE TEST LIMITED Annual Report 2002 09 Dear Shareholders, In 2002 the semiconductor industry began to show tentative signs of a recovery, after enduring a prolonged downturn We estimate that in 2002 less than 10% of total semiconductor testing was outsourced to service providers. The rest was throughout 2001. The industry registered four quarters of sequential revenue growth and three quarters of sequential unit still performed by in-house operations. The extent of outsourcing in semiconductor testing trails those in wafer fabrication growth. However, corporations remained cautious with their capital spending in an uncertain macro-economic and semiconductor packaging. In our view, this gap should narrow over time. Consequently, we remain firmly convinced environment. All in all, the industry eked out only a 1% revenue growth and 14% unit increase in 2002. that the outsourcing of semiconductor testing should continue to provide the company with significant growth opportunity going forward and to allow the company to achieve higher growth than the overall semiconductor industry. The continuing weak demand for semiconductors placed considerable pressure on the semiconductor industry and on the companies that provide manufacturing services to the semiconductor industry, including us. Our revenues showed only As we enter a new year, the various industry research groups have given upbeat forecasts for the semiconductor industry very modest growth in 2002 and the utilization of our equipment remained below optimal levels. for the next few years. We believe 2003 will be a better year for the industry and for us. Our focus this year will be returning the company to profitability, strengthening our balance sheet structure, and capturing the growth that comes with In this challenging operating environment, we continued to focus on ways to boost our efficiency and to improve our cost the industry recovery. structure. However, to prepare for the eventual upturn in the industry and to retain our leadership position, we also had to invest in advanced assembly and test capabilities and capacity, which we funded mostly with cash generated from our We wish to thank all the staff, the management team, and customers for their support and encouragement in a very operations, and in nurturing the new customers and start-ups who in due course may become substantial customers for us. difficult year. We also want to thank you for your support in 2002. We appreciate your confidence in us and look forward to your continued support in the year ahead. The semiconductor industry is incredibly dynamic. We believe the 2001-2002 downturn should transform the industry in many ways. One of them is the accelerated use of subcontractors in the manufacture of semiconductors. Integrated device manufacturers, who represent the vast majority of the semiconductor industry, scaled back substantially their investment in new assembly and test capabilities and capacity in the last two years, while continuing to push their products to new performance limits. Once the industry recovery is underway, we believe these IDMs should rely on semiconductor manufacturing service providers to a greater extent than before, given their underinvestment in the back end of the manufacturing process and their need for new technology and capacity. Richard Chang Chairman ASE TEST LIMITED 10 ASE TEST LIMITED Annual Report 2002 11 四色版 FINANCIAL HIGHLIGHTS 2002 Selected Financial Data Operating Data ( In thousands US dollars; 101 440 Consolidated Statements of Income: except shares, per share data ) 450 100 Years Ended December 31, 1998 1999 2000 2001 2002 50 55 Net revenues $ 184,663 $ 270,254 $ 440,285 $ 298,466 $ 301,962 50 Net revenues 298 302 Gross profit 66,920 96,496 176,772 33,195 21,389 300 270 Operating expense 0 Selling, general and administrative 13,165 27,765 49,861 42,865 79,008 185 1998 1999 2000 2001 2002 Research and development 2,384 3,837 12,059 14,397 18,342 150 Operating income 51,371 64,894 114,852 (24,067) (75,961) -50 Net income (loss) (ROC GAAP) 53,851 62,160 107,195 (45,759) (81,268) Net income (loss) (US GAAP) 49,590 55,356 101,173 (72,928) (73,325) -73 -73 Diluted earnings (loss) per share (ROC GAAP) 0.62 0.70 1.16 (0.48) (0.82) 0 -100 1998 1999 2000 2001 2002 Diluted earnings (loss) per share (US GAAP) 0.57 0.63 1.09 (0.77) (0.74) Net Revenues (in millions of US dollars) Net Income(Loss)(US GAAP) (in millions of US dollars) 1.09 1.00