Hello, I am Ken Hsiang, the Head of Investor Relations for ASE Technology Holdings. Welcome to our second quarter 2023 earnings release. Thank you for attending our conference call today. Please refer to our safe harbor notice on page two. All participants consent to having their voices and questions broadcast via participation in this event. If participants do not consent, please disconnect at this time. I would like to remind everyone that the presentation that follows may contain forward-looking statements. These forward-looking statements are subject to a high degree of risk, and our actual results may differ materially. For the purposes of this presentation, our dollar figures are generally stated in new Taiwan dollars, unless otherwise indicated. As a Taiwan-based company, our financials are presented in accordance with Taiwan IFRS. Results presented using Taiwan IFRS may differ materially from results using other accounting standards, including those presented by our subsidiary using Chinese GAAP. I am joined today by Joseph Tung, our CFO. For today's session, I will be giving the prepared remarks. Joseph will then be available to take your questions during the Q&A session that follows. The following financial references will be referring to the first half of 2023, as compared to first half 2022. The first half of the year has been characterized not just by an unprecedented inventory correction, but also broad-ranging declines in electronics demand as consumers catch up on travel and socialization. Issues relating to a slower than expected economy in China exacerbated our already lackluster electronic spending. The excess inventory environment appears to be stretching out well into the back half of 2023. In this climate, the holding company first half revenues declined 12% year-over-year, while our ATM and EMS first half revenues declined by 17% and 7%, respectively. For our ATM business, our automotive-related application bucked the trend and grew by 15%. Advanced packaging revenues declined slightly more than wire bond packaging revenues during the first half of the year, 20% and 17%, respectively. Our advanced packaging products have more exposure to the more heavily impacted communications segment. Meanwhile, our testing business fared relatively better during the first half, declining 10% when compared with last year. This was driven by more stability of our China test business. Our EMS business declined 7% in the first half of 2023 when compared with the first half of 2022. This represents the overall weaker environment during the current year. Holding company first half operating income declined by 53%. ATM first half operating income declined by 57%. As can be seen here, our business is highly dependent upon the leverage generated when equipment utilizations are full and operating efficiency is more optimized. For our business, it may appear things seem pretty bad with the overall economic environment and lengthening inventory digestion. If we see this as the trough of all troughs, ASE appears to be doing okay. Of course, we would like a rapid return to health for the entire industry, as a point of historical comparison, the last major downturns ASE saw were as follows: In 2001, revenues were down 27% year-over-year, with gross margin at 13%. In 2005, business was down 20%, with gross margin at 19%. In 2009, business was down 12%, with gross margin at 20%. Arguably, the current downturn is more severe in duration and at least equal in terms of correction%, and yet our margin structure has held up and we are making more EPS in this downturn during the two trough quarters than compared to any of those full years. We believe this downturn is proving that our market position has significantly increased our resiliency and improved our structural business model. For the second quarter, our ATM business experienced a relatively sluggish environment, but was somewhat better than original expectations due to higher than expected rush orders. Overall, demand for services slightly improved off of first quarter trough levels. Customer wafer inventories at our facilities appeared to be in the initial stages of decline. However, given the overall tepid market environment, customers are becoming even more conservative on their inventory levels. For our ATM factories during the quarter, key equipment utilization rates were still low, staying near 60%. On a more positive note, we are seeing more incremental pickup related to R&D new product introduction work. Our EMS business picked up slightly as anticipated. This is in line with our outlook and in line with our typical seasonality. With that, please turn to page three, where you will find our second quarter consolidated results. For the second quarter, we recorded fully diluted EPS of $1.76, and basic EPS of $1.80. Consolidated net revenues increased 4% sequentially and declined 15% year-over-year. We had a gross profit of $21.7 billion, with a gross margin of 16%. Our gross margin improved by 1.2 percentage points sequentially and 5.4 percentage points year-over-year. The sequential improvement of margin is principally due to higher loading in the current quarter. The annual decline in gross margin is principally the result of lower loading during the current downturn. Our operating expenses increased by TWD 0.7 billion sequentially, and declined by TWD 1.5 billion annually. The sequential increase in operating expenses are primarily due to higher R&D expenses at our ATM business and labor-related costs, as customers are starting to ramp new product introductions. The year-over-year decline was primarily attributable to lower bonus and profit sharing expenses across the company. Our operating expense percentage increased 0.1 percentage points sequentially and 0.4 percentage points year-over-year to 9%. The sequential operating expense percent increase was primarily related to higher R&D costs relative to revenues generated. The annual operating expense increase is primarily due to lower overall loading relative to semi-fixed operating costs. Operating profit was $9.4 billion, up $1.7 billion sequentially and down $11.2 billion year-over-year. Operating margin was 6.9%, improving 1.0 percentage points sequentially and declining 5.9 percentage points year-over-year. During the quarter, we had a net non-operating gain of $0.7 billion. Our non-operating gain for the quarter primarily consists of net foreign exchange hedging activities, profits from associates, and other non-operating income, offset by net interest expense of $1.1 billion. Tax expense for the quarter was $1.9 billion. The effective tax rate for the quarter was 18.9%. Net income for the quarter was $7.7 billion, representing an increase of $1.9 billion sequentially and a decline of $8.3 billion year-over-year. The NT dollar depreciated 0.6% against the US dollar sequentially during the second quarter and 4.5% annually. From a sequential perspective, we estimate the NT dollar depreciation had a 0.16 percentage point positive impact to the company's gross and operating margins. From a year-over-year perspective, we estimate that the depreciating NT dollar had a 1.28 percentage point positive impact to gross and operating margins. As a rule of thumb, for every percent the NT dollar appreciates, we see a corresponding 0.29 percentage point impact to our holding company gross margin. On the bottom of the page, we provide key P&L line items without the inclusion of PPA-related expenses. Consolidated gross profit, excluding PPA expenses, would be TWD 22.7 billion, with a 16.6% gross margin. Operating profit would be TWD 10.6 billion, with an operating margin of 7.8%. Net profit would be TWD 8.9 billion, with a 6.5% net margin. Basic EPS, excluding PPA expenses, would be $2.07. On page 4 is a graphical presentation of our consolidated financial performance. You can see the impact of the current weak environment here. It does look like we are looking at the first quarter as the bottom, though. On page five is our ATM P&L. It is worth noting here that the ATM revenue reported here contains revenue eliminated at the holding company level related to intercompany transactions between our ATM and EMS businesses. For the second quarter of 2023, revenues for our ATM business were TWD 76.1 billion, up TWD 2.8 billion from the previous quarter and down TWD 18.9 billion from the same period last year. This represents a 4% improvement sequentially rather than a flat quarter, while on a year-over-year basis, we declined 20%. Gross profit for our ATM business was TWD 16.2 billion, up TWD 1.4 billion sequentially and TWD 11.6 billion year-over-year. Gross profit margin for our ATM business was 21.2%, up 1.1 percentage points sequentially and down eight percentage points year-over-year. The sequential margin improvement is the result of slightly improved loading, offset in part by higher utility costs, while the annual margin decline is primarily the result of lower loading due to the current downturn. During the second quarter, operating expenses were $8.7 billion, up $0.4 billion sequentially and down $1.1 billion year-over-year. The sequential increase in operating expenses was primarily driven by higher R&D expenses related to higher labor and new product introduction costs. The annual operating expense decline was driven primarily by lower labor costs due to lower profit sharing and bonus accrual. Our operating expense percentage for the quarter was 11.5%, up 0.1 percentage points sequentially, and 1.2 percentage points year-over-year. The sequential increase was due to increased R&D expenses, while the annual increase was due to lower loading relative to semi-fixed costs. During the second quarter, operating profit was $7.4 billion, representing an increase of $1 billion quarter-over-quarter and a decline of $10.6 billion year-over-year. Operating margin was 9.7%, improving one percentage point sequentially and declining 9.2 percentage points year-over-year. For foreign exchange, we estimate that the NT to US dollar exchange rate had a 0.28 percentage point impact on our ATM sequential margins and a 2.21 percentage point impact on a year-over-year basis. Without the impact of PPA-related depreciation and amortization, ATM gross profit margin would be 22.4%, and operating profit margin would be 11.2%. On page six, you'll find a graphical representation of our ATM P&L. As can be seen here, current year loading levels are still significantly lower than 2022. On page seven is our ATM revenue by market segment. It's fairly similar as last quarter. However, over the course of the last year and a half, our computing segment does appear to be gradually taking on larger segment share. On page eight, you will find our ATM revenue by service type. There isn't a significant change here. On page nine, you can see the second quarter results for our EMS business and a graphical representation of its market segment allocation. As usual, the second quarter is the dull financial quarter, during which not much changes from the first quarter, but in actuality, our EMS business is in the midst of preparing for its seasonal upcycle. During the second quarter, EMS revenues were TWD 60.4 billion, improving TWD 2.7 billion or 5% sequentially, and declining TWD 5.8 billion or 9% year-over-year. Sequentially, our EMS business's gross margin improved 1.4 percentage points, while our operating margin improved 1.2 percentage points. The margin improvements were driven primarily from favorable foreign exchange impacts to raw materials and overall product mix. Our EMS second quarter operating profit was TWD 2.1 billion, up TWD 0.8 billion sequentially and down TWD 0.6 billion annually. For our EMS market segment, our consumer segment picked up as industrial and automotive segments declined. This was driven by slightly stronger demand in the current quarter related to our consumer SIP product and temporarily weaker demand environment related to industrial products. Our automotive business looks to be impacted by end market dynamics. On page 10, you will find key line items from our balance sheet. At the end of the quarter, we had cash equivalents, and current financial assets of TWD 66.4 billion. Our total interest-bearing debt was down TWD 3.2 billion to TWD 187.1 billion. Total unused credit lines amounted to TWD 384.6 billion. Our EBITDA for the quarter was TWD 25.8 billion. Net debt to equity was down to 41% at the end of the quarter. We expect our debt position to increase during the third quarter as a result of incremental cash usage to pay our upcoming dividend. On page 11, you will find our equipment capital expenditures. Machinery and equipment capital expenditures for the second quarter and US dollars totaled $209 million, of which $107 million were used in packaging operations, $60 million in test operations, $33 million in EMS operations, and $9 million in interconnect material operations and others. Current quarter EBITDA of $0.8 billion continues to outpace our equipment capital expenditures of $0.2 billion. Before we get to our outlook, I would like to spend a bit of time on what we believe drives our business and touch upon the topic of the moment: AI. Our core business is to provide our customers unprecedented scale and repeatability of manufacturing. With such scale, we are able to achieve the lowest manufacturing cost without compromising quality. Interestingly, this improved scale of manufacturing also delivers the highest packaging yield. We consider this to be our competitive advantage. I've included a rough and very simplified chart related to our business. The x-axis represents the number of package I/Os, and the y-axis is a smooth, exponential, scaled estimate of volumes. We've placed some of our offered package types roughly along the x-axis. These package types actually overlap much more than what is shown here, but the basic message follows. Our business is driven by the center area of the plot, where there are mass volumes. The more units we manufacture of a particular package type, the better able we are to ramp up economies of scale and manufacturing efficiency. The right side of this curve identifies leading-edge advanced package types. As we've seen time and time again, as the industry adopts higher I/O counts, new package types reach a manufacturing critical mass and start climbing up the curve. This represents when lower volume R&D lines become suitable to be scaled up for high volume mass production. We're starting to see this with some of our fan-out based packages. For us, having substantial capabilities in leading-edge technologies is necessary as we want to be ahead of the curve, quite literally, as in this reference to this graph. The most technologically advanced packages neither drive significant volume nor significant profitability. For the back end, package technology migration matters, but volume fundamentally determines manufacturing efficiency and thus, for us, profitability. Now to the business of AI. Recently, we have been frequently asked to comment on our view of AI. Often, these discussions have centered on products that are very specific to the core enablement of AI training. We understand the excitement and importance of such specific products, which are enabling AI development. We believe that zeroing in on a couple of specific tip of the iceberg products tend to be somewhat missing the bigger picture. AI's impact on ASE will be much broader and multifaceted than focusing in on specific leading-edge units. We believe AI is substantially a much larger phenomenon. We believe AI serves as a catalyst to the next super cycle for the semiconductor industry. At a basic level, AI means more information will be collected, stored, and analyzed everywhere and pertaining to anything and everything. From AI's edge data collection to the inference of that data represents new volumes all along AI's processing chain. Not only do we see incremental product volumes ahead, future AI features will require an incremental step up in capabilities, increasing both die and package level requirements. If we try to show this on our chart here, as incremental complexity ramps, higher I/O counts push the entire curve to the right. You can see, this step up will also drive adoption at the leading edge of our vertically integrated solutions. In this graph, the line pushes up for volumes and to the right for the technology step up. We also see further opportunities for system-level complexities that may force further parallel design versus historical monolithic design tendencies. Overall system architecture must accommodate increasingly power-hungry applications such as AI, we believe it becomes increasingly necessary to solve power issues near or at the package level. These are all frontiers on the Heterogeneous integration roadmap. AI only serves to add to this need and opportunity for us. The chart here extends once again for the potential proliferation of Heterogeneous integration all across our package types. We may see AI as a novelty now. It will be ubiquitous soon enough. As we come back to look towards the nearer term, we are seeing a ramp in manufacturing for the coming third quarter across our businesses. It's definitely not the pickup of a typical manufacturing year, given the entire macro climate, including post-Covid spending patterns, lackluster China demand, and tightening inventory control by our customers, it's a decent start. The current year does not look to be the V-shaped recovery that the industry was hoping for. It's looking more like a checkmark, with a return to optimal manufacturing, unfortunately stretching into future quarters. From the cost perspective, the coming quarter's cost environment will be impacted by higher summer consumption and three full months of higher summer utility rates. Further, we have a smaller set of products ramping in the third quarter as versus normal. Given the selective product mix, we see a temporarily higher raw material content environment for the coming third quarter. We would like to summarize our outlook for the third quarter as follows: For our ATM business, in NT dollar terms, our ATM third quarter 2023 revenues should grow quarter-over-quarter by mid to high single digits. Our ATM third quarter 2023 gross margin should improve 75 to 100 basis points versus the second quarter of 2023. For our EMS business, in NT dollar terms, our EMS third quarter 2023 revenues should increase 20% quarter-over-quarter. Our EMS third quarter 2023 operating margin should be similar with the second quarter of 2023. This concludes our prepared remarks. We would like to start the Q&A here. Thank you. Now, we would like to open the floor for questions. If you have any questions, please raise your hand. When you ask questions, please hold two questions at a time. Thank you. We have a question from Mr. Randy Abrams of Credit Suisse. Okay. Yes, thank you. I'll ask the first question on the sales guidance. For the IC ATM, looks like it's tracking fairly close to TSMC, but leading the tier two foundries. Could you discuss a bit more on the split by applications, where you're seeing the incremental growth momentum continuing, and if you see that continuing into fourth quarter? For EMS, the 20% sequential looks like it's lagging traditional seasonality. Could you talk if it's delayed timing on product ramps, softness in certain applications, or just a timing issue that could help shift some of the business out to fourth quarter? I think for both ATM as well as EMS, the delayed of the somewhat delayed new product launches does have an impact on the second half performance or revenue performance. As we are expecting sequential growth continuing for the second half, also into fourth quarter. The inventory digestion, as well as the weak end market consumption, is still continuing. We are now taking a more conservative outlook on the second half. What we are, what we're showing here is really the forecast with some judgment, with the forecast that we got and with our own, some of our own judgment, to come up with the numbers. Okay. For the profitability, I, you discussed a few impacts on utilities and materials. Could you discuss a little more the mix, what's driving that short-term material shift? With the leverage, where it's about it looks like about one or two light of kind of a normal pickup with that type of volume, are there headwinds from pricing environment, how you're seeing pricing or other factors? I think pricing is still remains to be resilient at this point. Going into third quarter, we do have a higher cost structure, given the fact that the, we're in the summertime, and we're subject to summer rates for energy, and that put us some pressure on our margin expansion. Typically, when we, when we see our overall, utilization goes up and revenue goes up, the margin expansion should be a bit higher than what we are presenting here. Given the, higher energy costs, I think that's, putting some pressure on the margin expansion. Also, in terms of product mix, I think, some of the, higher material content, products are being, put out in this coming two quarters. That's also putting some pressure on the material costs of ours and therefore the margin expansion. I think overall, the, in terms of material content or product mix, effect, will start to improve in the fourth quarter. Next question is from Mr. Gokul Hariharan of JP Morgan. Okay, thanks for taking my question. My first question is on the state of the inventory cycle. Could you give us a little bit more color on what you're seeing overall on wafer bank inventory? How quickly are customers drawing that down? Also, could you give us some more color on the Q3 revenue guidance of sequential growth? Which segments are driving the growth of mid to high single digit? Is there any divergence between what you're seeing on your communication platform versus automotive, industrial and computing? I think the overall pickup in third quarter, I think is across the board and through our all applications. As we see new products coming out, we see, you know, automotive continue to be a brighter spot for us. The first part of the question? Wafer bank. I think it's being gradually worked down, but I think the nowadays, I think the old customers, given the soft market condition, I think people are getting more cautious. I think the inventory digestion will continue for maybe the next two quarters or even further quarters into the future. As a whole, I think going into 2024, I think things will start to improve quite a bit, and we are expecting a much more healthier growth year for us in 2024. My second question is on the AI-related demand. Any estimate of exposure to AI for ASE as of now? I think TSMC talked about roughly 6% of revenue this year. How are you planning for capacity on AI, starting from some of your 2.5D and fan-out related products, to also, like Ken mentioned, moving into some of the more mainstream, higher volume kind of products as well? How are you thinking about, like, when do these products start to kind of kick in into your packaging and testing portfolio? Well, I think that if we are narrowly defining AI today, the associated revenue for us is roughly at this low single digit of our ATM revenue at this point. I think more importantly, is really given time, AI will be adopted into all existing and new applications. Therefore, given time, it would create tremendous volume and business opportunities for us, covering all kinds of different chips that will be coming on stream, as Ken has demonstrated in the chart that we've shown earlier on. In terms of exact timing, I think that's. Right now, AI is still at its early stage, and I think it will take some time for us to for this segment to continue to grow. Not particularly just AI itself, but as AI gets immersed into all different application, that's when we will start to see explosive, both volume growth and that will and driving the whole industry into the next super cycle. Next question is from Mr. Brad Lin of BofA. Hello, Brad. Hello. Hi, sorry. Thank you for taking my question. I have a question on advanced packaging. Basically, Ken just mentioned that critical mass is quite important for us to ramp up the advanced packaging capacity. Are we reaching the so-called sweet spot yet? When should we expect the company to, or the industry to reach the sweet spot? Do we have any incremental CapEx plan on it? That's my first question. Thank you. Well, it will definitely go into that stage, and we are preparing ourselves by keeping us at the forefront of the technology development. We will be making the necessary investment as we see fit when the time comes. You know, exactly when it will start to happen, I think it will be a progressive, you know, it will take steps, and it will progressive very nicely going forward. You know, we do have the capacity in place, meetings, different kinds of requirements. What we're waiting for is for the volume to start to increase and to grow, and we will make our necessary investment accordingly. Got it. Thank you very much. Also, we have learned from UMC's call yesterday about- Mm-hmm. I ts collaboration with the ASE and some IC design service firms on a so-called open ecosystem for advanced packaging. Would you please share the pros and cons associated with this open system that ASE and UMC are forming? Would you please also provide some insights into the so-called optimal cover preparation model versus the current dominant closed system by TSMC? Thank you. Well, we're definitely one of the, we're definitely the initiator of the collaboration, particularly on the interposer. You know, this is a major component of the overall Chip-on-wafer type of process. We are collaborating with the foundries to complete the full process for us. On top of that, we also have our own solution focus that is progressing well. We have very active engagement with a lot of, well, quite a few of our customers, and we believe mass production will start soon, going into the later part of the year or maybe early next year. Next question is from Mr. Rick Hsu of Daiwa. Can you guys hear me? Yes. Okay, great. first question, just a very general housekeeping. What's your utilization rates across the board of your package and testing, Q2 and Q3? Q2, we are roughly at 60% across the board. Going to Q3, given the the pick of our business, we believe the the average utilization will be hovering around 65%. Okay, great. Thank you. Second question is, a quick follow-up on this open ecosystem, you guys cooperation with, the boundaries like, UMC producing the poster, and you guys are in charge of the back-end services like CoWoS and 2.5D and 3D. My further follow-up is, do you have any exposure right now in the core GPU area for the CoWoS? Any participants in this area for, you know, capitalizing the AI server, demand growth? Well, right now, the AI-related exposure is still low. We have, you know, as I mentioned earlier, around single, low single digit% of our overall ATM revenue. Not commenting on the specific products, but we are defining this as our leading-edge packaging technology that's AI related. I think mostly in the networking, in HPC, type of applications. I think the potential of this business is also pretty good. I think, going next year, we could probably see this part of the or this particular segment of business should easily double for in next year. Next question is from Sunny Lin of UBS. Hi, could you hear me okay? Yes. Yes. Thank you very much. Good afternoon. My first question is about longer term. Obviously, last years, ASE has been outperforming the semi industry, probably because of the share, again, and customers supply diversification. I wonder, now, looking ahead, how much of the growth upside you think ASE could continue to realize? Meanwhile, China also, companies are also expanding overseas, so will that affect ASE's opportunity to some extent? Well, definitely we're the clear leader in our space, and we will continue to gain shares going forward, leveraging on our scale, on our technology competencies, as well as our proximity to the foundries, particularly on these more advanced technology that is coming on stream. You know, going forward, I think geographical expansion will continue. That's the really the growing trend as we see demand starting to polarize between China and outside China. On that, we do have very good footprints around the world. We are currently expanding in Malaysia, in Poland, in Korea, in Japan, as we see fit or as required by our customer. When we see business opportunity that justifies our expansion, we will continue to do so. Got it. Thank you. And I think. Sorry. I'm sorry. Well, obviously, the Chinese will do the same, but then given the scale and also the leadership of ours in all aspects, I think, you know, we will continue to outcompete our peers wherever they are, they are. Got it. Thank you for the color. I recall, previously the company, had a growth target, to grow about two time, of the largest semis. Mm-hmm. Is that still a valid target, that we could continue to anticipate? Yes. Well, of course, 2023 is a very different year, because, you know, we are all going through a very challenging year. As I mentioned, I think, going into 2024, things will start to pick up, and we'll go to a much more healthier condition. Our target is continue to grow twice the logic semi growth. Next question is from Laura Chen of Citigroup. Hello. Hi, good afternoon. Can you hear me? Yes. Yes. Hi, thank you. My first question is actually about our ICATM growth margin outlook. We know that this year, we still see the inventory correction continue. Previously, we are looking for, like, a mid 20%-30% growth margin. Mm-hmm. IC ATM. I'm just wondering that at what kind of utilization rate we can reach that level? Considering that we are also doing some advanced packaging for the AI chip. I'm just wondering that for that kind of business, will that be a margin dilution for the overall IC ATM business? Right now, what we call the leading edge technology or leading edge packaging, I think the overall profitability as well as return, is actually above corporate average. In terms of the structural margin that we mentioned before, I think it takes us to go to a utilization rate of around 70%. Anything below that will be very difficult for us to reach that structural margin. Got it. Thank you. Also, on the EMS business, I think, just following what Randy previous also asked about, the seasonality into Q3 seems to be milder than historical. Just wondering that, is that just due to the muted demand, or we see any significant delay for the new product launch in second half? No, I think it's just overall the muted demand that's causing a weaker seasonality seasonal pickup for our EMS business. You know, typically, if you look at a whole year from a quarter to quarter, typically the third quarter will be the peak quarter. At this time around, I think, not trying to be the spokesman for our customer, I think the market knowledge about, you know, some of the products seems to be launched later than normal, does have some impact on terms of some of the order being pushed back to fourth quarter. I think this year will be a little bit different from on a quarter-to-quarter performance perspective. Our next question is from Bruce Lu of Goldman Sachs. Hello, can you hear me? Yes. Okay, let's start with some easy ones. I think three months ago, you talked about why ATM business got declined by, you know, high single digits to low teens. As we get closer to the end, can you give us some outlook for the full year for the ATM business? I think it's gonna be low teens to mid teens. Okay. based on this kind of low teens to mid teens, we should see what kind of profitability? I think it will be sub or structural, margin. I see. Thank you. I still go back to the advanced packaging business. I do acknowledge that, you know, you guys talk about like, you know, a larger addressable market for the AI potential business. Which part of the AI packaging business will have faster growth for ASE? I mean, for the real advanced one, for the CoWoS one or for the peripheral chips, which one will have some higher profitability? In terms of, like, CoWoS or related packaging business, what's your return threshold and margin threshold for you to continue to invest more for this business? We're now still trying to figure out what kind of return we can get out of full process of CoWoS. I think, you know, that's depending on a lot of different factors, most importantly, whether we have a stable volume that we're going through, we will have how wide the adoption will be and how many customer will be using that, so we can diversify the risk. There are a lot of factors that are being considered. I don't think that it's not at a more as matured stage as we expect. I think the how much or how soon we will start investing into full process of CoWoS really depends on the situation that we're looking at. Right now, we do have some CoWoS capacity, but that's to maintain, to help us maintain our technology, with acquisition. But for the, I think the real bread and butter for us is really once the AI starts to proliferate into other applications, going into automotive, communication, computing, all sorts of app, new applications, that's where we're gonna see the mainstream packages being, start to be required for these chips, and that's where the volume is. I think that will be the main investment area that we'll be focusing on. Next question is from Szeho Ng of China Renaissance. Hello, gentlemen. Two questions. First one regarding this year's CapEx budget. Can you provide us an update, and in what areas we are spending our CapEx money? Hold on a second. I think the CapEx for equipment, our guidance remains the same as 3 months ago. In terms of its breakdown, I think, roughly 55?%-56% will be for assembly, and the bulk of it is for advanced packaging, and roughly 25% for test, and then 15% or so for EMS, and then another 3% for material. I see. All right. Going forward in the next couple of years, should we expect the CapEx intensity to rise because of our more involvement in the advanced packaging area? Yeah, really, I, again, it really depends on, you know, where the volume is and where we should be investing. All in all, I think, given the fact that this year we have been fairly cautious and conservative about our CapEx, and we're expecting growth to start resume next year. I believe the capital investment or CapEx for next year will be somehow somewhat higher. Next question is from Mr. Gokul Hariharan of JP Morgan. Okay, my question is that we are seeing a lot of capacity expansion on the front end, happening in China, especially for older technologies. Mm. What do you envisage for ASE? Do you think that you will kind of miss out on that potential packaging demand given you have lesser exposure in China today? Is that potentially a competitive threat down the line given that we are seeing some of that competitive threat emerge for the foundry side at this point in time? How do you see this evolve? Because we had a view maybe about a year back, that the market is kind of becoming a little bit more divergent between China and non-China. Mm-hmm. Do you still think that's the case, or you think some of the... Given that there is a lot of capacity getting built in China, even some of the non-China fabless companies will eventually go back, find their way back to the China capacity to leverage the lower pricing? Well, I think the demand is diversed at this point, but that also creates a lot of requirement in China for localization. We are seeing that, and we do have our-- aside from selling our four factories two years ago, we still remain to have a very sizable operation in Suzhou, which can accommodate whatever the opportunity there is. Plus, the Suzhou factory that we have is of a more advanced technology and more higher yield and efficiency. I think it's a very, very competitive operation of ours in China to address the local demand. As... We are also seeing that, you know, a lot of investment being put in China is for the mainstream technology type of products. We do feel that there is a fairly good potential in that area as well. I don't know if you all are aware that we are investing into the combination of of our... How should I put this? We are putting back some of our investment into the four factories that we sold, that four factories is now combining with another entity today. We are taking a two-pronged approach. One is using our own facility, leveraging our own facility to capture some of the opportunity for the more advanced type of demand, and also some minority interest in the 4 factories that we sold, and continue to benefit or to share some of the prospects in the mainstream or the legacy kind of demand in China, which has a fairly good potential at this point. Got it. Just a further question on the AI related demand. For the CoWoS like technologies, what portion of the demand does ASE expect to kind of fulfill next year? Do you expect to, I think TSMC talked about two expansion of their own capacity, and they probably account for the vast majority of the capacity right now. What percentage, like, roughly, how much of that demand does ASE expect to satisfy, once you start bringing some of the capacity online next year? I think by and large, I think most of the demand will still have to be satisfied by the foundry itself, because, you know, this type of technology or process is mostly wafer process, and it, I think they should be taking the leading role on this. You know, but as we've been saying all along, as time goes by, as the technology becomes more mature, the adoption becomes wider and there are multi-customer using that, and volume becomes more stable and much bigger in size. There will be a natural division of works between us and the foundry. Without specifying what kind of share we will be having, I think that is the going trend. That's, you know, it really depends on how much demand there is and what's the suitable working model between us and the foundry to share the work and to satisfy the demand. Next question is from Mr. Bruce Lu of Goldman Sachs. Can I know what's the CapEx for the second half, and what's the CapEx allocation for 2.5D packaging in the second half? I think, for second half, our overall CapEx will be in the range of $580 million-$600 million. For two quarters? For two quarters, yes. No, for the second half. For the second half. Okay. Yeah. The allocation of. We're not commenting on the 2.5D CapEx at this point. What's the threshold for you to invest more, in the 2.5D technology? Like I said, the business has to justify the investment. You know. What is the threshold? What is the threshold? Yes. Well, in terms of margin, in terms of, you know, the lifespan, in terms of the return, you know, it has to be above the corporate average. It really looks like the revenue is going out, like, you know, in a meaningful way, believe it or not, but, you know, that's the current outlook for all the supply chain. Yeah, as I said. It seems to me that you're not aggressive in terms of investing in this business, though. Like I said, We are not focusing, and we should not be focusing on these so-called AI chips as narrowly defined, which maybe includes CPU, GPU, or AI accelerators. I think that's really the, just the catalyst of our business expansion going forward. Mm. That's really not the part that we should be focusing our investment in. Once it gets to proliferate into other applications and volume be created for the, our mainstream packaging and test, that's really when we start to invest in a major way. I don't think it's wise to just focusing on the, you know, this CoWoS or 2.5D specifically, because that's we'll be missing out the whole, the full picture here. Okay, got it. Very clear. One more question, what do you think about the system-level testing business? You know, what's the revenue contribution from SLT for you, is that a growing business? Is that a profitable business? Is that a, you know, high ROE business for you in the future? Well, we do have system-level test, it's making a, you know, reasonable return. Just like every other businesses, as we see, there is real business potential, there is enough return for us to make, we'll make the necessary investment. If you have any question, please raise your hand. There is no more question. More or no? No more. Okay. Okay, thank you, everybody. You know, hopefully, we've clear some of the concerns or questions you may or may not have. I think we had a decent second quarter, and we'll have a decent second half to look after as well. Thank you very much. We will be seeing you next quarter.