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Apple chip supplier ASE vows to grow as 'big keep getting bigger'

World's top chip assembler does not rule out listing other units in China

ASE Chairman Jason Chang, second from left, made a rare public appearance at the company's groundbreaking event on April 3. (Photo by Cheng Ting-fang)

KAOHSIUNG, Taiwan -- Advanced Semiconductor Engineering, the world's largest chip assembler and a key Apple supplier, vowed Tuesday to expand its market share after completing the acquisition of smaller rival Siliconware Precision Industries, unfazed by growing competition from mainland China and a potential trade war.

"We will continue to expand production capacities and grow market share after we take over Siliconware Precision," Chairman Jason Chang told reporters Tuesday.

"We don't think we could lose any orders from this consolidation," Chang said, adding that the semiconductor industry is reaching a point when "the big one will become even bigger."

ASE cleared final hurdles in February for its 170 billion New Taiwan dollar ($5.82 billion) purchase of Siliconware Precision, the world's No. 4 chip packaging and testing firm by sales. The two Taiwanese companies will be controlled by a new entity, ASE Industrial Holding, which will relist in Taipei on April 30, as a wave of consolidation sweeps the global semiconductor industry amid a search for new growth catalysts.

ASE clients include Apple, Qualcomm, Broadcom, Nvidia, MediaTek, NXP Semiconductors and Huawei chip arm HiSilicon Technologies. Siliconware Precision shares a similar customer base, with the exception of Apple. The major production facilities for both companies are in Taiwan and mainland China.

The combined entity will have around 100,000 employees globally, Chang said. For outsourced chip packaging and testing, ASE controls a global market share of 19.2% while Siliconware Precision owns about 9.9%, Taipei-based research firm TrendForce says. But emerging mainland Chinese competitors such as Jiangsu Changjiang Electronics Technology and Tianshui Huatian Technology are aggressively playing catch-up with financing support from Beijing to cut reliance on foreign chip suppliers.

Jason Chang said a US-China trade war could hurt almost every industry but he expects the two countries to resolve their current dispute. (Photo by Cheng Ting-fang)

Chang said his company does not fear competition from China, as building a competitive chip industry takes an accumulation of efforts.

"We recognized that China is pouring a large amount of funds into the chip sector," he said. "But we don't think they can really poach that much qualified engineering talent in a short period of time and become a formidable rival overnight."

Yet Chang recognized the great investment and business opportunities in China even as Beijing and Washington negotiate to avoid a trade war.

"We will continue to look for new opportunities to further participate in China's capital markets, and we are evaluating whether we want to spin off more units to list in China," he said.

ASE listed its electronic-parts producer unit Universal Scientific Industrial, also an Apple supplier, in Shanghai back in 2012. The accelerating Chinese capital market often offers higher price-earnings ratios. USI currently enjoys a P/E ratio of more than 20, higher than the ratio of about 15 for parent company ASE's listing in Taipei.

Chang's words came as China pledged to lure high-tech, innovative companies to list on its stock exchanges or to issue China depositary receipts, which are surrogate securities that let local investors hold overseas shares. Major iPhone assembler Hon Hai Precision Industry received a fast-track approval in March from the China Securities and Regulatory Commission to list a spinoff unit, Foxconn Industrial Internet, in Shanghai.

Also on Tuesday, ASE broke ground on a $416 million new facility in the southern Taiwanese city of Kaohsiung, part of the company's commitment to build six advanced sites over five years starting in 2016 that could be worth a combined $3.43 billion.

The Kaohsiung facility, set for completion in early 2020, will help the company capture the growing opportunities in assembling and testing high-end chips for automobiles, artificial intelligence and communication.

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