ASM Pacific Technology Balances Growth With Margin Strain

ASM Pacific Technology ((HK:0522)) has held its Q4 earnings call. Read on for the main highlights of the call.

ASM Pacific Technology’s latest earnings call painted a cautiously optimistic picture, with strong bookings growth, record traction in cutting‑edge products and generous shareholder payouts offset by margin pressure and a sharp year‑ahead revenue dip. Management stressed that technology leadership and demand from AI and advanced packaging are intact, even as near‑term profitability and revenue conversion remain under pressure.

Strong Bookings and Revenue Growth Driven by AI and TCB

Group bookings climbed to USD 1.86 billion, a 21.7% year‑on‑year rise that outpaced the 10.0% increase in full‑year revenue to USD 1.76 billion. Management linked this growth to robust demand for thermal compression bonding (TCB) and AI‑related tools, underscoring that the order pipeline is running ahead of reported sales.

TCB Technology Leadership Fuels Expanding Market

TCB revenue surged about 146% year‑on‑year, confirming ASM Pacific’s strong position in this critical advanced node technology. The company now estimates the TCB total addressable market will more than double from roughly USD 759 million in 2025 to USD 1.6 billion by 2028 and is targeting a sizable 35%–40% market share.

Advanced Packaging Broadens Revenue Base

Advanced packaging revenue grew 30.2% year‑on‑year and lifted its share of group revenue from 26% in 2024 to 30% in 2025. Management highlighted broad adoption across logic, high‑bandwidth memory, photonics and system‑in‑package, positioning the business squarely in the center of AI and high‑performance computing trends.

Q4 Delivers Strong Top‑Line and Profit Rebound

In the fourth quarter, revenue from continuing operations reached USD 508.9 million, up 12.2% sequentially and 30.9% year‑on‑year. Adjusted net profit jumped to HKD 119.9 million, rising 42.2% quarter‑on‑quarter and nearly fivefold versus a year earlier as both the SEMI and SMT segments delivered double‑digit revenue growth.

Backlog and Book‑to‑Bill Underpin Visibility

The group’s book‑to‑bill ratio came in at 1.05, its highest level since 2021, indicating orders are outstripping shipments. Management cited an order backlog of almost USD 800 million, with roughly 60% tied to SEMI and 40% to SMT, providing solid visibility into future production.

Shareholders Rewarded with Strong Capital Returns

The board proposed a final dividend of HKD 0.34 per share and a special cash dividend of HKD 0.79 per share. Together with the interim dividend of HKD 0.26, total dividends for 2025 reach HKD 1.39 per share, signaling confidence in cash generation and a clear intent to return surplus funds to investors.

Margin Compression Weighs on Profitability

Full‑year adjusted gross margin declined to 38.3%, a drop of 172 basis points from the prior year. In Q4, adjusted gross margin slipped to 35.8%, down 175 basis points quarter‑on‑quarter and 101 basis points year‑on‑year, with both SEMI and SMT experiencing pressure from mix shifts and specific one‑off items.

Operating Expenses Rise with Strategic Investments

Operating expenses increased to HKD 4.56 billion, up 3.2% year‑on‑year as the company stepped up strategic R&D and IT spending by HKD 237 million. Management signaled that OpEx will rise by roughly another HKD 200 million in 2026, reflecting continued investment in technology and digital infrastructure.

Near‑Term Revenue Guidance Signals a Sharp Year‑On‑Year Drop

For the first quarter of 2026, ASM Pacific guided revenue between USD 470 million and USD 530 million, with the midpoint implying a 1.8% sequential decline and about a 29.5% drop year‑on‑year. Management emphasized that the midpoint still sits above market expectations for continuing operations, framing the slowdown more as a tough comparison than a structural demand issue.

Order Cancellation and Inventory Provisions Hit SEMI Margins

An isolated order cancellation from a global automotive‑focused IDM forced the company to take inventory provisions that dragged on SEMI segment margins. Q4 also included HKD 39 million in fees related to order cancellations, which partly cushioned the impact but did not fully offset the margin dilution from the provisions.

Automotive and Industrial Weakness Outside China Pressures SMT

The SMT business continued to face soft demand from automotive customers outside China and from industrial markets, weighing on profitability. These pressures, along with lower‑margin bulk billing, contributed to a 225‑basis‑point sequential decline in SMT gross margin during the fourth quarter.

Supply‑Chain Tightness Poses Revenue Conversion Risk

Management expects Q1 bookings to rise about 20% quarter‑on‑quarter and roughly 40% year‑on‑year, potentially marking the strongest quarterly bookings in four years. Even so, they warned that longer material lead times and supply‑chain tightness could delay the conversion of this robust order flow into recognized revenue.

Guidance Highlights Strong Orders but Near‑Term Headwinds

Looking ahead, the company expects Q1 2026 gross margins to improve, led by SEMI returning to the mid‑40s margin range while SMT margins stay broadly stable. High bookings growth, a book‑to‑bill of 1.05 for FY25 and a backlog above USD 800 million reinforce a solid medium‑term demand picture, though higher OpEx and supply‑chain bottlenecks may keep near‑term earnings volatile.

ASM Pacific’s call ultimately showcased a company winning in high‑growth niches like TCB and advanced packaging while grappling with cyclical and execution‑related challenges. For investors, the mix of strong bookings, rich dividends and improving technology positioning must be weighed against margin erosion, a sharp near‑term revenue drop and lingering macro‑sensitive end‑market softness.