ASE Technology Holding (ASX) 20-F2022 FY Annual report (foreign)

TABLE OF CONTENTS

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USE OF CERTAIN TERMS

Unless the context otherwise requires, references in this annual report to:

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We publish our financial statements in New Taiwan dollars, the lawful currency of the R.O.C. In this annual report, references to “United States dollars,” “U.S. dollars” and “US$” are to the currency of the U.S.; references to “New Taiwan dollars,” “NT dollars” and “NT$” are to the currency of the R.O.C.; references to “RMB” are to the currency of the P.R.C.; references to “JP¥” are to the currency of Japan; references to “MYR” are to the currency of Malaysia; references to “SGD” are to the currency of the Republic of Singapore; references to “KRW” are to the currency of the Republic of Korea; references to “EUR” are to the currency of the EU; and references to “PLN” are to the currency of the Poland. Unless otherwise noted, all translations from NT dollars to U.S. dollars were made at the exchange rate as set forth in the H.10 weekly statistical release of the Federal Reserve System of the United States (the “Federal Reserve Board”) as of December 30, 2022, which was NT$30.73=US$1.00, and all translations from RMB to U.S. dollars were made at the exchange rate as set forth in the H.10 weekly statistical release of the Federal Reserve Board as of December 30, 2022, which was RMB6.8972=US$1.00. All amounts translated into U.S. dollars in this annual report are provided solely for your convenience and no representation is made that the NT dollar, RMB or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or NT dollars/RMB, as the case may be, at any particular rate or at all. On March 24, 2023, the exchange rate between NT dollars and U.S. dollars as set forth in the H.10 weekly statistical release by the Federal Reserve Board was NT$30.30=US$1.00. On March 24, 2023, the exchange rate between RMB and U.S. dollars as set forth in the H.10 weekly statistical release by the Federal Reserve Board was RMB6.8675=US$1.00.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Although these forward-looking statements, which may include statements regarding our future results of operations, financial condition, or business prospects, are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on these forward-looking statements, which apply only as of the date of this annual report. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions, as they relate to us, are intended to identify these forward-looking statements in this annual report. Our actual results of operations, financial condition or business prospects may differ materially from those expressed or implied in these forward-looking statements for a variety of reasons, including risks associated with cyclicality and market conditions in the semiconductor or electronics industry; changes in our regulatory environment, including our ability to comply with new or stricter environmental regulations and to resolve environmental liabilities; demand for the outsourced semiconductor packaging, testing and EMS we offer and for such outsourced services generally; the highly competitive semiconductor or manufacturing industry we are involved in; our ability to introduce new technologies in order to remain competitive; international business activities; our business strategy; our future expansion plans and capital expenditures; the strained relationship between the R.O.C. and the P.R.C.; general economic and political conditions; the recent global economic crisis; possible disruptions in commercial activities caused by natural or human-induced disasters; fluctuations in foreign currency exchange rates; and other factors. For a discussion of these risks and other factors, see “Item 3. Key Information—Risk Factors.”

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PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

[RESERVED]

CAPITALIZATION AND INDEBTEDNESS

Not applicable.

REASON FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

RISK FACTORS

Below please find a summary of the principal risks we face, organized under relevant headings.

Risks Relating to Our Business

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Risks Relating to Taiwan, R. O. C.

Risks Relating to the SPIL Acquisition

Risks Relating to Ownership of Our Common Shares and the ADSs

Below please find the detailed analysis of the principal risks we face.

Risks Relating to Our Business

Since we are dependent on the highly cyclical semiconductor and electronics industries and conditions in the markets for the end-use applications of our products, our revenues and net income may fluctuate significantly.

Our business is affected by market conditions in the highly cyclical semiconductor and electronics industries. Most of our customers operate in this industry, and variations in order levels from our customers and service fee rates may result in volatility in our revenues and net income. From time to time, the semiconductor and electronics industries experience significant, and sometimes prolonged, downturns. As our business is, and will continue to be, dependent on the requirements for independent packaging, testing and EMS, any future downturn in the industry would reduce demand for our services. If we cannot reduce our costs or adjust our product mix to sufficiently offset any decline in sales volumes, our profitability will suffer, and we may incur losses.

Market conditions in the semiconductor and electronics industries depend to a large degree on conditions in the markets for the end-use applications of various products, such as communications, computing, and consumer electronics products. Any deterioration of conditions in the markets for the end-use applications would reduce demand for our services and would likely have a material adverse effect on our financial condition and results of operations. In 2022, approximately 52.5%, 15.8% and 31.7% of our operating revenues from packaging and testing of semiconductors were attributed to communications, computing and consumer electronics/industrial/automotive/other applications, respectively. In the same year, approximately 37.3%, 10.2%, 32.0%, 12.8% and 7.7% of our operating revenues from EMS were attributed to communications, computing, consumer electronics applications, industrial, and automotive applications and other, respectively. Across end-use applications, our customers face intense competition and significant shifts in demand, which could put pricing pressure on our services and may adversely affect our revenues and net income.

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A reversal or slowdown in the outsourcing trend for semiconductor packaging and testing services and EMS could adversely affect our growth prospects and profitability.

Semiconductor manufacturers that have their own in-house packaging and testing capabilities, known as integrated device manufacturers and original equipment manufacturers, have increasingly outsourced stages of the production process, including packaging, testing, electronic manufacturing, and assembly, to independent companies to reduce costs, eliminate product complexity, and meet fast-to-market requirements. In addition, the availability of advanced independent semiconductor manufacturing services has also enabled the growth of so-called “fabless” semiconductor companies that focus exclusively on design and marketing and outsource their manufacturing, packaging, and testing requirements to independent companies. We cannot ensure that these manufacturers and companies will continue to outsource their packaging, testing, and manufacturing requirements to third parties like us. Furthermore, during an economic downturn, these integrated device manufacturers typically rely more on their own in-house packaging and testing capabilities, therefore decreasing their need to outsource. A reversal of, or a slowdown in, this outsourcing trend could result in reduced demand for our services and adversely affect our growth prospects and profitability.

Any global economic downturn could adversely affect the demand for our products and services, and a protracted global economic crisis would have a material adverse effect on us.

Higher inflation, especially in the U.S. and major European economies, has triggered a tightening of global financial conditions. P.R.C.’s economy slowed down as a result of the stringent COVID-19 lockdown policy, and there have been further negative impacts from the Russia-Ukraine conflict. As a result, global economic growth has slowed and faces more uncertainty. Our revenue and net income are impacted to a significant extent by economic conditions in Asia and globally, as well as economic conditions specific to our business. The global economy, markets and levels of spending by businesses and consumers are influenced by many factors beyond our control, including pandemics and other natural disasters.

In addition, there have been concerns about the relationships among the P.R.C. and other Asian countries, the relationship between the P.R.C. and the U.S., as well as the relationship between the U.S. and certain other Asian countries such as North Korea, which may result in or intensify potential conflicts in relation to territorial, regional security and trade disputes. The Russia-Ukraine conflict has resulted in significant disruptions to supply chains, logistics and business activities in the region. The conflict has also caused, and continues to intensify, significant geopolitical tensions in Europe and across the globe. The resulting sanctions imposed are expected to have significant impacts on the economic conditions of the countries and markets targeted by such sanctions, and may have unforeseen, unpredictable secondary effects on global energy prices, supply chains, and other aspects of the global economy.

As of the date of this annual report, our business, results of operations, and financial condition have not been materially affected by the global trade tensions, military conflicts, or pandemics. Nevertheless, any economic downturn or crisis may cause our customers to cancel or reduce planned expenditures for our products and services. Any uncertainty or significant volatility in global economic conditions, including inflation, interest rates, the continuing global supply chain crisis, and economic sanctions and restrictive measures in response to the Russia-Ukraine conflict, may negatively affect our business, results of operations, and financial condition.

If we are unable to compete favorably in the highly competitive markets of semiconductor packaging and testing and EMS, our revenues and net income may decrease.

The markets of semiconductor packaging and testing and EMS are very competitive. We face competition from many sources, including other independent semiconductor packaging and testing companies, integrated device manufacturers, and other EMS providers with large-scale manufacturing capabilities who can quickly react to market changes. In addition, some foundry players have actively invested and expanded their advanced packaging capacity and gained some customer bases with their services and solutions.

We believe that the principal competitive factors in our industry are:

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We face increasing competition, as most of our customers obtain services from more than one source. Rapid technological advancements and aggressive pricing strategies by our competitors may continue to increase the level of competition. Our ability to successfully compete depends on factors both within and outside of our control and may be constrained by the distinct characteristics and production requirements of individual products. We cannot ensure that we will be able to continue to improve production efficiency and maintain reasonable profit for all our products.

In addition, some of our competitors may have superior financial, marketing, manufacturing, research and development and technological resources than we do. For example, the central government of the P.R.C., as well as provincial and municipal governments, have provided various incentives to domestic companies in the semiconductor industry, including major semiconductor testing and packaging providers, such as Jiangsu Changjiang Electronics Technology Co., Ltd. Similarly, our customers may face competition from their competitors in the P.R.C., and such competitors may also receive significant subsidies from the P.R.C. government. As we are upstream providers, the impact of such government policies on competition and price pressure of our customers may negatively impact our business. Increasing competition may lead to declines in product prices and profitability and could have a material adverse effect on our business, financial condition, results of operations, and future prospects.

Our profitability depends on our ability to respond to rapid technological changes in the semiconductor industry.

The semiconductor industry is characterized by rapid increases in the diversity and complexity of semiconductors. As a result, we expect that we will need to continually offer more sophisticated packaging and testing technologies and processes in order to respond to competitive industry conditions and customer requirements. We have successfully combined our packaging, testing, and materials technologies with the expertise of EMS at the systems level to develop our SiP business. Still, there is no assurance that we will be successful in achieving the features and benefits we expect.

We continue to develop new products in anticipation of future demand. However, there is no assurance that the launch of any new product will be successful or that we will be able to produce enough of these products to meet market demand. If we fail to develop, or obtain access to, advances in packaging or testing technologies or processes, we may become less competitive and less profitable. In addition, advances in technology typically lead to declining average selling prices for semiconductors packaged or tested with older technologies or processes. As a result, if we cannot reduce the costs associated with our services, the profitability of a given service and our overall profitability may decrease over time.

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Our operating results are subject to significant fluctuations, which could adversely affect the market value of our Common Shares and the ADSs.

Our operating results have varied significantly from period to period and may continue to vary in the future. Downward fluctuations in our operating results may result in decreases in the market price of our Common Shares and the ADSs. Among the more important factors affecting our quarterly and annual operating results are the following:

Due to the factors listed above, our future operating results or growth rates may be below the expectations of research analysts and investors. If so, the market price of our Common Shares and the ADSs, and thus the market value of your investment, may fall.

Due to our high percentage of fixed costs, we may be unable to maintain our gross margin at past levels if we are unable to achieve relatively high capacity utilization rates.

Our operations, in particular our testing operations, are characterized by relatively high fixed costs. We expect to continue to incur substantial depreciation and other expenses in connection with our acquisitions of equipment and facilities. Our profitability depends not only on the pricing levels for our services or products, but also on utilization rates for our machinery and equipment, commonly referred to as “capacity utilization rates.” Increases or decreases in our capacity utilization rates can significantly affect gross margins since the unit cost generally decreases as fixed costs are allocated over a larger number of units. In periods of low demand, we experience relatively low capacity utilization rates in our operations, which lead to reduced margins. We cannot ensure that we will be able to maintain or surpass our past gross margin levels if we cannot consistently achieve or maintain relatively high capacity utilization rates.

We may not be successful in pursuing mergers and acquisitions. Any mergers or acquisitions we make may lead to a diversion of management resources.

Our future success may depend on acquiring businesses and technologies, making investments, or forming joint ventures that complement, enhance, or expand our current product offerings or otherwise offer growth opportunities. In pursuing such acquisitions, we may face competition from other companies in the semiconductor industry. Our ability to acquire or invest in suitable targets may be limited by applicable laws and regulations in the R.O.C., P.R.C., U.S., European countries, and other jurisdictions where we do business. Even if we are successful in making such acquisitions or investments, we may have to expend substantial amounts of cash, incur debt, assume loss-making divisions, and incur other types of expenses. We may also face challenges in successfully integrating any acquired companies into our existing organization or in creating the anticipated synergistic benefits. Each of these risks could have a material adverse effect on our business, financial condition, and results of operations.

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The loss of a large customer or disruption of our strategic alliance or other commercial arrangements with semiconductor foundries and providers of other complementary semiconductor manufacturing services may result in a decline in our revenues and profitability.

Although we have a large customer base, we have derived, and expect to continue to derive, a large portion of our revenues from a small group of customers during any particular period due in part to the concentration of market share in the semiconductor and electronics industries. Our five largest customers together accounted for approximately 54.5%, 49.6% and 50.2% of our operating revenues in 2020, 2021 and 2022, respectively. One customer accounted for more than 10.0% of our operating revenues in 2020, 2021 and 2022. The demand for our services from a customer is directly dependent upon that customer’s level of business activity, which could vary significantly from year to year. Our key customers typically operate in the cyclical semiconductor and electronic business and order levels have significantly varied from period to period in the past and may vary in the future. Some of these companies are relatively small, have limited operating histories and financial resources, and are highly exposed to the cyclicality of the industry. We cannot ensure that these customers or any other customers will continue to place orders with us in the future at the same levels as in past periods. The loss of one or more of our significant customers, or reduced orders by any one of them, and our inability to replace these customers or make up for such orders, could adversely affect our revenues and profitability. In addition, we have in the past reduced, and may in the future be requested to reduce, our prices to limit the level of order cancellations. Any price reduction would likely reduce our margins and profitability.

Since 1997, we have maintained a strategic alliance with Taiwan Semiconductor Manufacturing Company Limited, or TSMC, one of the largest dedicated semiconductor foundries in the world. TSMC designates us as its non-exclusive preferred provider of packaging and testing services for semiconductors manufactured by TSMC. Such strategic alliances, as well as our other commercial arrangements with providers of other complementary semiconductor manufacturing services, enable us to offer total semiconductor manufacturing solutions to our customers. These strategic alliances and other commercial arrangements may not achieve their anticipated commercial benefits and may be terminated at any time. Any failure in successfully maintaining such alliances, any termination of such alliances or our failure to enter substantially similar strategic alliances or commercial arrangements may adversely affect our competitiveness, revenues, and profitability.

We rely on a limited number of key customers in certain products for our revenues, and our results of operations may be adversely affected by a reduction of our key customers’ business.

Our results of operations also depend on the performance and business of our key customers. Accordingly, risks that could seriously harm our key customers could harm us as well, including:

The launch and market acceptance of our individual key customers’ products could significantly impact our product and customer mix, resulting in significant volatility in the demand for the solutions we offer and our results of operations. It is also possible that a key customer’s market share with respect to its product may decline as its competitors introduce new products, which could adversely affect our results of operations, particularly if we are unable to sell our solutions to such competitors. Furthermore, sales of our key customers’ products are subject to seasonal fluctuation.

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Our revenues and profitability may decline if we are unable to obtain adequate supplies of raw materials in a timely manner and at a reasonable price.

Our operations, such as packaging operations, substrate operations, and EMS require that we obtain adequate supplies of raw materials on a timely basis. Shortages in the supply of raw materials have in the past resulted in occasional price increases and delivery delays. In addition, the operations of some of our suppliers are vulnerable to natural disasters, such as earthquakes and typhoons, the occurrences of which may deteriorate and prolong the shortage or increase the uncertainty of the supply of raw materials. For example, after the Fukushima nuclear disaster in 2011, we experienced a disruption to the supply of raw materials from Japan for about three to four weeks due to the fear of radiation contamination and the reduction or postponement in production by some of our Japanese suppliers. Although the purchase of supplies from Japan has been restored to the previous level, we cannot ensure that we will not suffer long term impacts from future earthquakes and tsunamis.

Raw materials such as IC substrates are prone to supply shortages since such materials are produced by a limited number of suppliers, such as Kinsus Interconnect Technology Corporation, Nan Ya Printed Circuit Board Corporation, LG Innotek Co., Ltd., Samsung Electro-Mechanics Co. Ltd., and Unimicron Technology Corporation. The growing demand for high-performance computing driven by artificial intelligence (AI), and the supporting infrastructure such as servers, data centers, and networking equipment has resulted in increased demand for semiconductor chips. However, this demand has also led to greater complexity in chip and substrate design. Specifically, the Ajinomoto Build-up Film (ABF) substrate, a crucial component for manufacturing high-performance chips, may face a higher risk of supply shortages or extended lead times due to potential strong demand for AI, elevated manufacturing difficulty, and heavy capital requirements for capacity expansion.

Operations conducted through our wholly-owned subsidiaries, ASE Electronics and ASE Shanghai, have improved our ability to obtain IC substrates on a timely basis and at a reasonable cost. In 2022, our interconnect materials operations supplied approximately 8.5% of our consolidated substrate requirements by value. We do not expect that these internal interconnect materials operations will be able to meet all our interconnect materials requirements for the foreseeable future. Consequently, we will remain dependent on market supply and demand for our substrates.

In addition, recent fluctuations in prices of precious metals, such as gold, have affected the price at which we have been able to purchase the principal raw materials we use in our packaging processes. We cannot guarantee that we will not experience shortages in the future or that we will be able to obtain adequate supplies of raw materials in a timely manner or at a reasonable price. Our revenues and net income could also decline under these circumstances, or if there are significant increases in the costs of raw materials that we cannot pass on to our customers.

If we are unable to manage our expansion or investments effectively, our growth prospects may be limited, and our future profitability and core business operations may be adversely affected.

We have significantly expanded our operations through acquisitions and joint ventures in recent years. We anticipate that further expansion will be required as we adapt to the changing needs of customers. For our expansions and investments, see “Item 4. Information on the Company—Business Overview—Strategy—Strategically Expand and Streamline Production Capacity.”

Expansion in general increases the complexity of operations and places significant strains on our management, operational, and financial resources. We also face uncertainties in creating strategic and operational synergies as we combine existing operations with the new sites. Furthermore, we may have limited experience in operating business in certain new countries or regions. As a result of our expansion, we may incur additional costs and expenses, such as hiring and training additional employees, devoting more of management’s attention to operations and compliance, and allocating additional resources in dealing with potential disputes relating to its operations. The expected growth and expansion of our business will place significant demands on our management and operations teams and require significant additional resources to meet our needs, which may not be available at a reasonable price. If we cannot effectively manage our expansion or investments, we may not be able to execute our business plan, respond to competitive pressures, take advantage of market opportunities, satisfy customer requirements, or maintain high-quality product offerings, any of which could lead to inefficiencies, redundancies, and result in reduced growth prospects and profitability. We cannot ensure that we will be able to deploy and manage new business initiatives successfully or effectively.

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In addition, we have made several investments in the real estate development businesses in the P.R.C. The P.R.C. property market is volatile and may experience undersupply or oversupply, as well as property price fluctuations. Central and local governments frequently adjust monetary and other fiscal policies to prevent or curtail the overheating of the economy. Such policies may lead to changes in market conditions, including price instability, and imbalance of supply and demand in respect to office, residential, retail, entertainment, cultural, and intellectual properties. Our exposure to risks related to real estate development may also increase over time as a result of our expansion into such a business. We may continue to make investments in this area in the future and our diversification in this industry may put pressure on our managerial, financial, operational, and other resources. There can be no assurance that our investments in such a business will yield the anticipated returns and that our expansion into such a business, including the resulting diversion of management’s attention, will not adversely affect our core business operations.

If we are unable to obtain sufficient funding in a timely manner or on acceptable terms, our results of operations and financial conditions may be materially and adversely affected.

Our businesses regularly require significant capital investments in order to support the expansion of our facilities both domestically and globally. If we are required to rapidly increase our current geographical footprint to fulfill our customers’ needs, our capital requirements may increase suddenly and significantly. In addition to capacity expansion, we will also need increasing levels of resources to fund our research and development activities in order to remain competitive, and to support operations outside of its existing footprint. We believe that our existing cash, marketable securities, expected cash flow from operations, and existing credit lines under our loan facilities will be sufficient to meet our capital expenditures, working capital, and cash obligations under our existing debt and lease arrangements, and other requirements for at least the next 12 months.

Our ability to obtain external financing in the future is subject to a variety of uncertainties, including:

If we are unable to obtain new or additional land or land use rights, additional equipment, or facilities in a timely manner and at a reasonable cost, our competitiveness and future profitability may be adversely affected.

In order to meet customer demand, we need to expand existing facilities or obtain suitable land for construction of new facilities. Both expansion and construction projects are currently underway or being contemplated. Such expansion or construction requires us to obtain land use or development rights. If we are unable to obtain new or additional land or use rights in a timely manner, we could experience significant fulfillment delays in our customers’ orders, resulting in negative impacts on our results of operations. In addition, semiconductor businesses are capital intensive and require significant investment in expensive equipment manufactured by a limited number of suppliers. The market for semiconductor equipment is characterized by intense demand, limited supply, and long delivery cycles. Our operations and expansion plans depend on our ability to obtain a significant amount of such equipment from a limited number of suppliers. From time to time, we have also leased equipment. We have no binding supply agreements with any of our suppliers and acquire our equipment on a purchase order basis, which exposes us to changing market conditions and other substantial risks. For example, shortages of capital equipment could result in an increase in the price of equipment and longer delivery times. Semiconductor products and services also require sizeable facilities. If we are unable to obtain equipment or facilities in a timely manner, we may be unable to fulfill our customers’ orders, which could adversely affect our growth prospects as well as financial condition and results of operations. See “Item 4. Information on the Company—Business Overview—Equipment.”

Our global manufacturing and sales activities subject us to risks associated with legal, political, economic, or other conditions which could negatively affect our business, financial status, and the market value of our Common Shares and ADSs.

Our principal executive office and production facilities are in the R.O.C, and generate the majority of our net revenues In addition, we have operations worldwide and a significant percentage of our revenue comes from sales to overseas locations. Changes in policies and laws, including environmental regulations, as well as general political and economic conditions, security risks, health conditions, and possible disruptions in transportation networks in the various countries in which we operate, could adversely affect our business, and negatively impact our results of operations as well as the market price and liquidity of our Common Shares and ADSs.

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Any global political, economic, or financial crisis, as well as trade barriers, could adversely affect our business, financial condition, and results of operations.

Political changes in the U.S. have created uncertainty regarding future U.S. trade policies. Recently, the U.S. government has called for changes to its domestic and foreign policy, including policies toward the P.R.C. and Russia. Specifically, U.S.-P.R.C. trade relations remain uncertain as the U.S. continues to add more P.R.C. companies to the entity list and implements more regulations aimed at advanced computing, semiconductor manufacturing, and AI. Further, the U.S. and other countries have imposed sanctions and revised export control and other regulations against Russia in response to the military aggression against Ukraine. If the U.S. expands licensing requirements and regulatory controls in the future, or if tariffs on foreign-sourced goods imported into the U.S. continue to rise, our U.S. customers may seek new suppliers in the U.S. or other countries, which could adversely affect our business, financial condition and results of operations. Also, in response to U.S. trade restrictions, the P.R.C. government has doubled down on cash incentives and policy support for domestic semiconductor companies, as part of the drive to achieve greater self-sufficiency in semiconductor production amid heightened rivalry with the U.S., reducing reliance on foreign suppliers and adds to the uncertainty of our business related to the P.R.C. supply chain.

Furthermore, the increasing economic uncertainty and the related investment risk in the P.R.C. in association with trade tensions has accelerated the relocation of many production facilities from the P.R.C. We build flexible and resilient supply chains to address shifts in market conditions and to satisfy customer needs, broadening our markets through expansion of operations, joint ventures, acquisitions, and other strategic investments. While we strive to continue providing customers with a cost-competitive manufacturing location and attract them with supply chain diversification, any future political turmoil could cause revenue or profits for the semiconductor industry as a whole to decline dramatically. If economic or financial conditions for our customers were to deteriorate, the demand for our products and services may decline, which could adversely affect our business, financial condition, and results of operations.

We do business within the P.R.C. This may expose us to additional political, regulatory, economic, and foreign investment risks.

We have packaging and testing, EMS, and real estate subsidiaries in the P.R.C. that require approval and compliance with regulatory requirements. However, P.R.C. laws and regulations are often subject to varying interpretations, means of enforcement, and additional approvals from the relevant governmental authorities, which may be delayed or denied. The P.R.C. government holds significant discretion in matters relating to foreign investment, which may adversely affect our operations.

In addition, our controlling stake of USI Shanghai, an entity currently listed on the Shanghai Stock Exchange under the symbol “601231,” makes us vulnerable to extreme price and volume fluctuations in the P.R.C. stock market that may indirectly affect the market price of our Common Shares and ADSs.

The escalation of tensions between South Korea and North Korea could have an adverse effect on our operations in South Korea and the market value of our shares.

The political relationship between South Korea and North Korea has been tense throughout Korea’s modern history. The level of tension between the two countries has heightened and may increase abruptly as a result of current or future events. In recent years, there have been increasing security concerns stemming from North Korea’s nuclear weapons and ballistic missile testing, and uncertainty regarding North Korea’s actions and potential responses from the international community. Although we do not derive any revenue from, nor sell any products in, North Korea, any further increase in tension between North Korea and South Korea. For example, if North Korea experiences a leadership crisis, high-level contacts between South Korea and North Korea break down or military conflicts occur, could have a material adverse effect on our South Korea subsidiary, our business, financial condition, results of operations, and the market value of our common stock.

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We depend on select personnel and could be negatively affected by the loss of their services.

We depend on the continued service of our executive officers and skilled technical personnel. Our business could suffer if we lose the services of any of these personnel and cannot adequately replace them. Although some of these management personnel have entered into employment agreements with us, they may nevertheless leave before the expiration of these agreements. We are not insured against the loss of the services of any of our personnel. In addition, the resulting disruption may shift these and other employees’ attention from our business operations.

We may be required to increase substantially the number of employees as a result of our expansion plans, and there is intense recruiting and hiring competition in this industry. We may not be able to retain our present personnel or attract additional necessary qualified personnel. In addition, we may need to increase employee compensation levels in order to retain our existing officers and employees and attract the additional personnel that we expect to require. Recently, some companies have accelerated efforts to maliciously poach talented Taiwan semiconductor experts by offering high-level positions with substantial salaries. If the number of malicious acts involving technology theft increase, Taiwan’s semiconductor industry would be seriously affected and our business would be adversely jeopardized.

Furthermore, a portion of the workforce at our facilities in Taiwan is foreign workers employed under work permits, which are subject to government regulations on renewal and other terms. Consequently, our business could suffer if Taiwan’s regulations relating to the employment of foreign workers were to become significantly more restrictive or if we are otherwise unable to attract or retain these workers at a reasonable cost.

The ongoing legal proceeding involving Dr. Tien Wu may have an adverse impact on our business and cause our Common Shares and ADS price to decline.

Dr. Tien Wu, our director and chief operating officer, was involved in a criminal proceeding brought by the Taiwan Kaohsiung District Prosecutors Office. The indictment alleged that Dr. Tien Wu violated Article 157-1 of the R.O.C. Securities and Exchange Act for insider trading activities involving SPIL’s common shares conducted during the Initial SPIL Tender Offer, the Second SPIL Tender Offer, and negotiations of the memorandum of understanding in connection with the SPIL Acquisition. Dr. Tien Wu was accused of informing a friend about the aforementioned tender offers and negotiation ahead of the public announcements. After an investigation spanning over two years, the Taiwan Kaohsiung District Court, on February 5, 2020, found Dr. Tien Wu NOT guilty. On March 20, 2020, the Taiwan Kaohsiung District Prosecutors Office filed an appeal against the February 5, 2020 judgment, and the appeal was rejected by the Taiwan High Court Kaohsiung Branch Court on June 9, 2021 (the “June 9 judgment”). On July 2, 2021, the Kaohsiung Branch, Taiwan High Prosecutors Office filed another appeal against the June 9 judgment. The Supreme Court of the R.O.C. reversed the June 9 judgment and remanded this case to the Taiwan High Court Kaohsiung Branch Court on January 6, 2022. This matter is now being tried by the Taiwan High Court Kaohsiung Branch Court. We have strengthened internal control measures after this incident, and no other directors are expected to become a party to any current or future litigation in connection with Dr. Tien Wu.

On October 26, 2018, the R.O.C. Securities and Futures Investors Protection Center (the “SFIPC”) filed a civil lawsuit against Dr. Tien Wu and ASEH, requesting the court to remove Dr. Tien Wu from ASEH’s board of directors based on Article 10-1 of the R.O.C. Securities Investor and Futures Trader Protection Act (the “Director Removal Case”). On August 25, 2020, the Taiwan Ciaotou District Court ruled in favor of Dr. Tien Wu. SFIPC filed an appeal against the August 25, 2020 judgment and the appeal was rejected by the Taiwan High Court Kaohsiung Branch Court on September 29, 2021 (the “September 29 judgment”). On October 20, 2021, SFIPC filed another appeal against the September 29 judgment. The Supreme Court of the R.O.C. reversed the September 29 judgment and remanded this case to the Taiwan High Court Kaohsiung Branch Court on May 25, 2022. This matter is now being tried by the Taiwan High Court Kaohsiung Branch Court. In addition to the Director Removal Case, on July 8, 2021, SFIPC filed an additional class action to request Dr. Tien Wu and other three defendants of the aforementioned criminal proceeding of insider trading to be jointly liable for the damages caused by the alleged insider trading activities. The Intellectual Property and Commercial Court of the R.O.C. ruled in favor of SFIPC and portion of the damages was awarded on August 18, 2022, and all defendants of this class action filed appeals against the August 18 judgment. This matter is now being tried by the Supreme Court of the R.O.C. The proceedings in connection with this incident, or potential regulatory scrutiny, might attract further media attention. Any negative publicity in connection with the legal proceedings may adversely affect our brand and reputation, which might result in a material adverse impact on our business operations and prospects.

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As we depend on the continuing service of our directors and executive officers, and we are not insured against the loss of service of any of our personnel, our business operations could suffer from the loss of services of any director or executive officer, including Dr. Tien Wu. There are no assurances that we will be able to find suitable replacement directors or executive officers.

Our insurance coverage may be inadequate to cover all our business risks.

Although we seek to obtain insurance for some of our primary operational risks, the amount of our insurance coverage may not be adequate to cover all potential claims or liabilities, and we may be forced to bear substantial costs resulting from the risks and uncertainties of our business. There is also no guarantee that we will be able to obtain insurance coverage when desired or that insurance will be available on commercially attractive terms. Any failure to obtain adequate insurance coverage on terms favorable to us, or at all, could have a material adverse effect on our business, financial condition, and results of operations.

Volatility of LIBOR and potential changes of the use of LIBOR as a benchmark could affect our profitability, earnings, and cash flow.

The continued availability of the London Inter-bank Offering Rate (the “LIBOR”) is not guaranteed after 2022 and by June 2023, LIBOR is scheduled to be eliminated entirely. LIBOR is the subject of recent national, international, and other regulatory guidance and proposals for reform. The publication of U.S. Dollar LIBOR for the one-week and two-month U.S. Dollar LIBOR tenors ceased on December 31, 2021, and the ICE Benchmark Administration (the “IBA”), the administrator of LIBOR, with the support of the United States Federal Reserve and the United Kingdom’s Financial Conduct Authority, announced the publication of all other U.S. Dollar LIBOR tenors will cease on June 30, 2023. The United States Federal Reserve concurrently issued a statement advising banks to cease issuing U.S. Dollar LIBOR instruments after 2021. As such, any new loan agreements we enter will not use LIBOR as an interest rate.

We cannot predict whether or to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR or whether any additional reforms to LIBOR may be enacted. At this time, no consensus exists as to what rate or rates may become acceptable alternatives to LIBOR with the exception of overnight repurchase agreements, which are expected to be based on the Secured Overnight Financing Rate (the “SOFR”). Uncertainty about the nature of alternative reference rates and potential changes or other reforms to LIBOR may adversely affect LIBOR rates and the value of LIBOR-based loans. Discontinuation of LIBOR and uncertainty about the nature of potential changes, alternative reference rates, or other reforms may impact the amounts of interest we pay under our debt arrangements. We cannot predict what impact this transition will have on our operations.

Inflation could adversely affect our business, financial condition, results of operations, and cash flows.

We are exposed to economic and political conditions in the countries and regions where we operate. We are also affected by governmental policies regarding spending and investment, exchange controls, regulatory and taxation changes, and other adverse political, economic, or social developments in the countries and regions in which we operate. Like all companies with extensive operations, we are exposed to risks from fluctuations in inflation.

High inflation rates may adversely affect our business by increasing the cost of the raw materials, energy, labor, and transportation. Current or future efforts by various governments to stimulate their economies may increase the risk of inflation. In the event of an increase in inflation, we may need to increase the sales prices of our services in order to maintain satisfactory profits; however, such increases may not be accepted by our customers, and may not sufficiently compensate for the negative impacts of inflation. At a macro level, inflation might reduce households’ disposable income and reduce people’s savings, which may decrease discretionary spending and negatively impact the sales of our customers’ products and, correspondingly, their demand for our manufacturing services. If we are unable to fully offset the effects of increased inflation, we may have material adverse impacts on our business, financial condition, results of operations, and cash flows.

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Fluctuations in exchange rates could adversely affect our business, results of operations, or financial condition.

Within our global operations, significant transactions and balances are denominated in currencies other than the NT dollar. A significant portion of our revenues are denominated in U.S. dollars, with the remaining portion denominated in NT dollars and Japanese yen. Our operating costs and operating expenses are also incurred in several currencies, primarily NT dollars, U.S. dollars, RMB, Japanese yen, Korean won, as well as, to a lesser extent, Singapore dollars and Malaysian ringgit, Polish zloty and EUR. In addition, a substantial portion of our capital expenditures, primarily for the purchase of equipment, has been, and is expected to continue to be, denominated in U.S. dollars, with the remainder in Japanese yen. As a result, fluctuations in exchange rates, primarily among the U.S. dollar and Japanese yen against the NT dollar, RMB and EUR, will affect our financial condition and results of operations. In addition, these fluctuations could result in exchange losses in NT dollar and other local currency terms, even if we have implemented hedging and mitigating techniques. We recorded net foreign exchange gains of NT$1,005.4 million in 2020, net foreign exchange gains of NT$1,395.1 million in 2021 and net foreign exchange losses of NT$2,459.5 million (US$80.0 million) in 2022. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk— Market Risk—Foreign Currency Exchange Rate Risk.”

The financial performance of our equity method investments could adversely affect our results of operations.

As part of our business strategy, we have and may continue to pursue acquisitions of businesses and assets, strategic alliances, and investments in associates and joint ventures. We currently have equity investments in certain entities and the accounting treatment applied for these investments varies depending on several factors, including, but not limited to, our percentage of ownership, our percentage of membership of the investee’s board, and the level of influence we have over the relevant entity. Any losses experienced by these entities could adversely affect our results of operations and the value of our investment. In addition, if these entities were to fail and cease operations, we may lose the entire value of our investment and the stream of any shared profits.

There can be no assurance that we will be able to maintain or enhance the value or performance of our investee companies or that we will achieve the returns or benefits sought from such investments. If our interests differ from those of other investors in our investee companies, we may not be able to enjoy synergies with the investee and it may adversely affect our financial results or condition.

We recognized impairment charges of nil in both 2020 and 2021, and NT$61.2 million (US$2.0 million) in 2022 in our investments under the equity method.

Any impairment charges may have a material adverse effect on our income.

Under IFRS, we are required to evaluate our assets, such as property, plant and equipment, investment properties, intangible assets, including goodwill, and investments in financial instruments, for possible impairment at least annually or whenever there is an indication of impairment. If certain criteria are met, we are required to record an impairment charge.

With respect to assets, we recognized impairment charges of NT$992.3 million, NT$126.8 million and NT$388.8 million (US$12.7 million) in 2020, 2021 and 2022, respectively, primarily as a result of impairment charges related to property, plant and equipment, and other intangible assets as well as investments under the equity method.

We are unable to estimate the extent and timing of any impairment charges for future years and we cannot give any assurance that impairment charges will not be required in periods subsequent to December 31, 2022. Any impairment charge could have a material adverse effect on our net income. The determination of an impairment charge at any given time is based significantly on our expected results of operations over several years in the future. As a result, an impairment charge is more likely to occur during a period in which our operating results and outlook are otherwise already depressed.

Any failure to achieve and maintain effective internal controls could have a material adverse effect on our business and results of operations.

We are subject to reporting obligations under the U.S. securities laws. As required by Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring every public company to include a management report on the effectiveness of such company’s internal control over financial reporting in its annual report. In addition, an independent registered public accounting firm must report on such company’s internal control over financial reporting.

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Any failure to maintain effective internal control over financial reporting could harm our business, erode investor confidence in our financial statements, and negatively impact the trading price of our Common Shares and ADSs. Furthermore, we may need to incur additional costs and use additional management and other resources in order to comply with Section 404 of the Sarbanes-Oxley Act and other requirements going forward. Please refer to “Item 15. Controls and Procedures” for details on our internal control over financial reporting.

Restrictive covenants and broad default provisions in our existing debt agreements may materially restrict our operations as well as adversely affect our liquidity, financial condition, and results of operations.

We are a party to numerous loans and other agreements relating to the incurrence of debt, which may include restrictive covenants and broad default provisions. Covenants in the agreements governing our existing debt, and debt we may incur in the future, may materially restrict our operations, including our ability to incur debt, pay dividends, and make certain investments and payments, other than in connection with restructurings of consolidated entities, and encumbering or disposing of assets. In addition, any global economic deterioration or ineffective expansion may cause us to incur significant net losses or force us to assume considerable liabilities. We cannot ensure that we will be able to remain in compliance with our financial covenants, which, as a result, may lead to a default. This may thereby restrict our ability to access unutilized credit facilities or the global capital markets to meet our liquidity needs. Furthermore, a default under any agreement by us or our subsidiaries may trigger cross-defaults under our other agreements. In the event of default, we may not be able to cure the default or obtain a waiver on a timely basis. An event of default under any agreement governing our existing or future debt, if not cured or waived, could have a material adverse effect on our liquidity, financial condition, and results of operations.

As of December 31, 2022, we were not in breach of any of the financial covenants under our existing loan agreements, although we cannot provide any assurance that we will not breach any of such financial covenants in the future.

We could potentially face tax uncertainties arising from our decisions, activities, and operations or any changes in tax laws in jurisdictions in which we operate, which may adversely affect our operations.

There are many activities in our daily operations that may give rise to tax issues, ranging from procurement, research and development activities, manufacturing to product storage and distribution, among others. Additional tax liabilities such as double taxation, inapplicability of tax incentives, tax adjustment, and related interest and penalties may arise if tax issues are not dealt with appropriately. The development and evolution of tax laws and regulations present considerable variations in interpretation and enforcement, which could result in more stringent compliance measures and tax audits in the jurisdictions in which we operate. Failure to comply with any change in tax laws could result in unfavorable tax consequences to us and have an adverse impact on our business, financial condition, and results of operations.

We have business operations in multiple countries and our worldwide operations are taxed under the laws of the jurisdictions in which we operate. However, the integrated nature of our worldwide operations can produce conflicting claims from revenue authorities in different countries as to the profits to be taxed in the individual countries, which could increase our effective tax rate and adversely affect our reputation and operations. Furthermore, our tax expense and effective tax rate could be adversely affected by several other factors, including changes in tax laws and their interpretation and the continuing Organization for Economic Co-operation and Development’s (OECD) international tax reform work, mainly for Base Erosion and Profit Shifting (BEPS) Action Plan, as well as the impact of acquisitions, disposals, and any restructuring of our businesses.

We may be subject to intellectual property rights disputes, which could adversely affect our business.

Our ability to compete successfully and achieve future growth depends in part on developing and safeguarding our proprietary technologies while securing commercially acceptable terms for non-owned technologies. Our failure to do so may seriously harm our competitive position.

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Our ability to compete successfully also depends in part on operating without infringing others’ proprietary rights. In particular, the semiconductor and electronics industries are characterized by frequent litigation regarding patent and other intellectual property rights. We have received communication alleging infringement of others’ technologies and may receive more in the future. Infringement claims could result in acquiring licenses, discontinuing certain technologies, paying damages, or unfeasibly seeking to develop alternative technologies, which could result in financial consequences. For example, in connection to the 2016 patent dispute between Broadcom and Tessera, we recognized a settlement amount of US$5.0 million in our consolidated financial statements for the year ended December 31, 2019, which fully settled in February 2020 between SPIL and Broadcom. See “Item 8. Financial Information—Consolidated Statements and Other Financial Information—Legal Proceedings” for more information about the Broadcom Patent Dispute.

Any litigation, whether as plaintiff or defendant and regardless of the outcome, is costly and diverts company resources. Any of the foregoing could harm our competitive position and render us unable to fully provide our services operations.

Regulations related to conflict minerals could adversely affect our business, financial condition and results of operations.

In August 2012, the SEC adopted annual disclosure and reporting requirements, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, for companies that use conflict minerals in their products. These rules require companies that manufacture or contract to manufacture products for which conflict minerals are necessary for functionality or production to begin scrutinizing the origin of conflict minerals in their products. We filed a specialized disclosure report on Form SD in accordance with the requirements and we have retained an independent auditing firm to conduct audits on our due diligence framework to provide a private sector report for our specialized disclosure report on Form SD. There will be costs associated with complying with these disclosure requirements, including costs for diligence to determine the sources of conflict minerals used in our products and other potential changes to products, processes, or sources of supply as a consequence of the results of such verification activities. The implementation of these rules could adversely affect the sourcing, supply, and pricing of materials used in our products.

As there may be only a limited number of suppliers offering “conflict free” minerals, we cannot be sure that we will be able to obtain necessary “conflict free” minerals from such suppliers in sufficient quantities or at competitive prices. Also, we may face adverse effects to our reputation if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins for all conflict minerals used in our products.

Any environmental claims or failure to comply with any present or future environmental regulations, as well as any fire or other industrial accident, may require us to spend additional funds and may materially and adversely affect our financial condition and results of operations.

We are subject to various laws and regulations relating to the use, storage, discharge, and disposal of chemical by-products of, and water used in, our packaging and interconnect materials production processes, and the emission of volatile organic compounds and the discharge and disposal of solid industrial wastes. In recent years, we have been subject to environmental administrative actions and judicial proceedings related to certain wastewater discharge incidents that occurred at our facilities. As a result of these proceedings, we have been subject to monetary fines as well as sanctions, including orders to suspend or limit our operations and criminal charges against us. For further details, see “Item 4. Information on the Company—Business Overview—Environmental Matters,” and “Item 8. Financial Information—Consolidated Statements and Other Financial Information—Legal Proceedings.”

Climate change, water shortages, and other environmental concerns could negatively affect our business and financial planning.

Anthropogenic greenhouse gas emissions could adversely and irreversibly affect the global economy if substantial remediation is not taken. Even a modest change in average global temperatures could result in increased coastal flooding, altered precipitation patterns, and increased risk of biodiversity loss for vulnerable species. Climate change can also cause extreme weather conditions, such as heat, droughts, and floods, that can impact business operations and financial performance. For example, our business operations depend on adequate supplies of water, so an extended drought may affect our ability to obtain sufficient amounts of water and threaten our production capability.

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We believe that we should play our part in the mitigation of man-made climate change. For example, we have incorporated green design standards and building concepts into the construction of our facilities. Since 2012, we have transformed existing facilities and built new facilities and offices that comply with international low carbon building standards. Through quantifying and analyzing the entire life cycle of building carbon emissions, carbon reduction was driven from the design stage and promoted along the value chain to build sustainable factories.

Public expectations for reductions in greenhouse gas emissions could result in increased energy, transportation, and raw material costs. Changes in scientific findings, political attention, and regulations related to the existence and extent of man-made climate change may also result in increased production costs due to higher energy prices or the introduction of energy or carbon taxes. Regulations and further legislation aimed at reducing greenhouse gas emissions may require companies to purchase emission credits at higher cost, new equipment, or raw materials with lower carbon footprints, which could negatively affect our operations and financial performance. Additionally, changes in environmental regulations, such as those regarding the use of perfluorinated compounds (commonly known as the “PFCs”), could increase our production costs, which may adversely affect our results of operation and financial results.

Stable water supply of sufficient amounts of good-quality freshwater plays a critical role for ASEH. Taiwan is also susceptible to typhoons and droughts, which may cause damage and business interruptions to facilities. Since our business operations depend on adequate supplies of water, an extended drought may affect our ability to obtain sufficient water and threaten our production capability. Although we have not yet been directly affected by droughts, we are dependent upon water for our packaging and substrate operations and a drought could interrupt such operations. To address related risks, we have established a sustainable water recycling system and implemented water management strategies to prevent water shortages. We operate one of the industry’s largest water recycling facilities in Taiwan, allowing us to reuse each drop of water more than three times and avoid disruptions caused by water shortages. Our twenty-two main facilities are also using scientific data from the World Resources Institute to conduct climate risk assessments and develop robust water risk management strategies. These actions will enable the company to respond effectively to climate change over the next decade.

Cyber attacks could harm our business, financial condition, and results of operations.

As technology advances, cyberattacks become more frequent and sophisticated. Attackers are organized, well-funded, and are developing increasingly sophisticated systems to attack and evade detection. While we take strict measures to protect our trade secrets and customer data, a security breach or failure could expose us and our customers, dealers, and suppliers to risks such as unauthorized access to information technology systems, misuse and compromise of confidential information, and manipulation and destruction of data. Such incidents could potentially disrupt our business operations, harm our reputation, weaken our competitive position, and adversely affect our financial condition and results of operations. Additionally, security breaches could lead to litigation with third parties, regulatory actions, and higher costs of implementing additional data protection measures. Furthermore, geopolitical tensions or conflicts may increase the risk of cyberattacks. While we continuously review and strengthen our information security policies and procedures, we cannot guarantee that we will be immune to new and emerging risks and attacks in the constantly evolving landscape of cybersecurity threats.

Negative publicity may adversely affect our brand and reputation, which may result in a material adverse impact on our business, results of operations and business prospects, and cause fluctuations in the trading price of our Common Shares and ADSs.

In addition, any change in policy or the direction in which we carry our corporate social responsibility or sustainability activities may also have an adverse effect on our business reputation. In recent years, we have experienced and may continue to experience negative publicity in connection with administrative penalties and criminal charges related to alleged violations of environmental regulations and laws. For further details, see “Item 4. Information on the Company—Business Overview—Environmental Matters,” and “Item 8. Financial Information—Consolidated Statements and Other Financial Information—Legal Proceedings.”

We face risks related to public health epidemics, natural disasters, and other disruptive events.

Our business could be materially and adversely affected by the outbreak of a 1) widespread health epidemic, such as COVID-19, swine flu, avian influenza, severe acute respiratory syndrome, Ebola, or Zika; 2) natural disasters, such as snowstorms, earthquakes, fires, floods, and the effects of climate change (such as drought, floods and increased storm severity); 3) or other events, such as wars, acts of terrorism, environmental accidents, power shortages, or communication interruptions. Disruptive events may have a material adverse effect on our business, financial condition, and results of operations. For example, these events could cause a temporary closure of the facilities we use for our operations, significantly disrupt supply chains and logistics services, or severely impact consumer behaviors and the operations of merchants, business partners, and other participants in our ecosystem. Our operations could also be disrupted if any of our employees or employees of our business partners are suspected of contracting an epidemic disease, since this could require us or our business partners to quarantine some or all these employees or disinfect the facilities used for operations. In addition, our revenue and profitability could be materially reduced to the extent that a natural disaster, health epidemic, or other outbreak harms the global economy in general.

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Risks Relating to Taiwan, R.O.C.

Strained relations between the R.O.C. and the P.R.C. and disruptions in Taiwan’s political environment caused by domestic political events could negatively affect our business and the market value of our Common Shares and ADSs.

Our principal executive offices and facilities are located in Taiwan and approximately 56.3%, 57.0% and 58.5% of our operating revenues in 2020, 2021 and 2022, respectively, were derived from our operations in Taiwan. Accordingly, our business and financial condition may be affected by changes in local governmental policies and political and social instability.

The R.O.C. has a unique international political status. The government of the P.R.C. asserts sovereignty over all of China, including Taiwan, and does not recognize the legitimacy of the R.O.C. government. Although significant economic and cultural relations have been established in recent years between the R.O.C. and the P.R.C., relations have often been strained. Any major change in the Taiwanese political environment, including the outcome of presidential or municipal elections, or potential shifts in government policy, may affect the direction of economic and political developments and negatively impact the economic and political environment in Taiwan. Past developments related to the interaction between the two governments, domestic political events, or election results have on occasion depressed the market prices of the securities of Taiwanese or Taiwan-related companies, including our own. Relations between the R.O.C. and the P.R.C. and other factors affecting the political or economic conditions in Taiwan could have a material adverse effect on our financial condition and results of operations, as well as the market price and the liquidity of our Common Shares and ADSs.

We manufacture interconnect materials in the P.R.C. through our wholly-owned subsidiary, ASE Shanghai. We also provide packaging and testing services, develop real estate, and manufacture computer peripherals and electronic components through our subsidiaries in the P.R.C. See “Item 4. Information on the Company—Organizational Structure—Our Consolidated Subsidiaries.” In the past, R.O.C. companies, including our own, were not allowed to invest in semiconductor packaging and testing facilities in the P.R.C. Although the prohibitions were relaxed in February 2010, the R.O.C. government currently still restricts certain types of investments in the P.R.C. We do not know when or if such laws and policies governing investment in the P.R.C. will be amended, and we cannot ensure that such R.O.C. investment laws and policies will permit us to make certain beneficial investments in the P.R.C. in the future. Our growth prospects and profitability may be adversely affected if we are restricted from making certain additional investments in the P.R.C. and are not able to fully capitalize on the growth of the semiconductor industry in the P.R.C.

As a substantial portion of our business and operations are located in Taiwan, we are vulnerable to natural disasters including earthquakes, typhoons, droughts, as well as power outages and other industrial incidents, which could severely disrupt the normal operation of our business and adversely affect our results of operations.

Taiwan is in a region that is prone to typhoons and earthquakes, and these natural disasters have caused significant property damage, business disruptions at operating facilities, and loss of life in the past. The semiconductor and electronics industries are particularly vulnerable to disruptions caused by earthquakes. While we have not experienced any structural damage to our facilities or damage to our machinery and equipment due to earthquakes, we have experienced interruptions to our production schedule in the past, primarily as a result of power outages caused by earthquakes. In the event of a major earthquake, we could experience significant disruptions to our operations, which could have a material adverse effect on our business, financial condition, and results of operations. We seek to continuously enhance our disaster preparedness and business continuity plans to minimize the impact of earthquakes and other natural disasters on our operations, but we cannot guarantee that such plans will be effective in all circumstances. The supply of electrical power in Taiwan, which is primarily provided by Taiwan Power Company, is susceptible to power disruptions that could be prolonged and frequent, caused by overload as a result of high demand or other reasons. Such power disruptions could further be exacerbated with the government of Taiwan having set the target of being free of nuclear power by 2025. For example, on March 3, 2022, Taiwan experienced a massive power blackout, which left millions of homes, offices, and factories without power. Although the power blackout did not have a material impact on our operations, future power blackout may disrupt our business operations and adversely affect our results of operations.

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Additionally, Taiwan has experienced severe droughts in the past and future droughts could significantly impact our operations. Our manufacturing process is heavily reliant on freshwater. We primarily recycle using ultra-filtration systems, chemical mechanical polishing wastewater recycling, and reverse osmosis water recycling. We also collect rainwater for scrubbing and cooling towers. We regularly monitor our water storage and recycling equipment and prepare truckloads of water to meet future water demand. We also refine our manufacturing capacity in response to water allocation to minimize the impact of water risks.

Although we have not experienced direct impacts from droughts, a drought could interrupt our packaging and substrate operations, which rely heavily on water. In addition, a drought could disrupt the manufacturing processes at other parts of the supply chain including our foundry partners, leading to potential production delays for our customers and a decline in demand for our services. While we are proactive in managing water risks and planning to mitigate their impact, we cannot guarantee that insufficient water storage will not affect our operations.

In addition, we are also subject to the risk of industrial and workplace accidents that could lead to injury or loss of life, damages to our facilities, and adversely impact our business reputation, commercial prospects, and operations.

Our production facilities, as well as many of our suppliers, customers, and providers of complementary semiconductor manufacturing services, including wafer foundries, are located in Taiwan. If our customers are impacted by natural disasters such as earthquakes, typhoons, droughts, or industrial incidents including power outage and labor strikes, these events could cause a decline in the demand for our services. If our suppliers or providers of complementary semiconductor manufacturing services are affected by such events, our production schedule could be interrupted, which might adversely impact our financial condition and results of operations.

Risks Relating to the SPIL Acquisition

There may be risks associated with the impacts of the SPIL Acquisition on our subgroups and our holding company structure.

ASE entered into a Joint Share Exchange Agreement with SPIL in June 2016, pursuant to which ASEH, a holding company in Taiwan, holds 100% of the equity interests in both ASE and SPIL such that ASE and SPIL became wholly-owned subsidiaries of ASEH. Subsequently, the Common Shares of ASEH were listed on the TWSE, and the ADSs of ASEH were listed on the NYSE.

This restructuring plan led to ASE Group and SPIL Group being separate subgroups under our holding company. This may create future difficulties in achieving strategic and operational synergies between them and could result in contingent risks, including increased tax liabilities or trading discounts relating to a holding company discount. For details about the Joint Share Exchange Agreement, see “Item 10. Additional Information—Material Contract.”

Risks Relating to Ownership of Our Common Shares and the ADSs

The market for our Common Shares and the ADSs may not be liquid.

Active, liquid trading markets generally result in lower price volatility and more efficient execution of buy and sell orders for investors, compared to less active and less liquid markets. Liquidity of a securities market is often a function of the volume of the underlying shares that are publicly held by unrelated parties.

There has been no trading market outside the R.O.C. for our Common Shares and the only trading market for our Common Shares is the TWSE. The outstanding ADSs are listed on the NYSE. There is no assurance that the market for our Common Shares or the ADSs will be active or liquid.

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Although ADS holders are entitled to withdraw our Common Shares underlying the ADSs from the depositary at any time, the R.O.C. law requires that our Common Shares be held in an account in the R.O.C. or sold for the benefit of the holder on the TWSE. In connection with any withdrawal of Common Shares from our ADS facility, the ADSs evidencing these Common Shares will be canceled. Unless additional ADSs are issued, the effect of withdrawals will be to reduce the number of outstanding ADSs. If a significant number of withdrawals are affected, the liquidity of our ADSs will be substantially reduced. We cannot ensure that the ADS depositary will be able to arrange for a sale of deposited shares in a timely manner or at a specified price, particularly during periods of illiquidity or volatility.

If a non-R.O.C. holder of ADSs withdraws and holds Common Shares, such holder of ADSs will be required to appoint a tax guarantor, local agent, and custodian in the R.O.C. and register with the TWSE or the Taipei Exchange in order to buy and sell securities on the TWSE.

When a non-R.O.C. holder of ADSs elects to withdraw and hold Common Shares represented by ADSs, such holder of the ADSs will be required to appoint an agent for filing tax returns and making tax payments in the R.O.C. Such agent will be required to meet the qualifications set by the R.O.C. Ministry of Finance and, upon appointment, becomes the guarantor of the withdrawing holder’s tax payment obligations. Evidence of the appointment of a tax guarantor, the approval of such appointment by the R.O.C. tax authorities, and tax clearance certificates or evidentiary documents issued by such tax guarantor may be required as conditions to such holder repatriating the profits derived from the sale of Common Shares. We cannot ensure that a withdrawing holder will be able to appoint, and obtain approval for, a tax guarantor in a timely manner.

In addition, under current R.O.C. law, such withdrawing holder is required to register with the TWSE or the Taipei Exchange and appoint a local agent in the R.O.C. to, among other things, open a bank account and open a securities trading account with a local securities brokerage firm, pay taxes, remit funds, and exercise such holder’s rights as a shareholder. Furthermore, such withdrawing holder must appoint a local bank or a local securities firm to act as custodian for confirmation and settlement of trades, safekeeping of securities and cash proceeds, and reporting and declaration of information. Without satisfying these requirements, non-R.O.C. withdrawing holders of ADSs would not be able to hold or otherwise subsequently sell our Common Shares on the TWSE or otherwise.

Pursuant to P.R.C. Regulations, only QDIIs or persons that have otherwise obtained the approval from the MOEAIC and registered with the TWSE are permitted to withdraw and hold our shares from a depositary receipt facility. In order to hold our shares, such QDIIs are required to appoint an agent and custodian as required by the P.R.C. Regulations. If the aggregate amount of our shares held by any QDII or shares received by any QDII upon a single withdrawal or in the aggregate accounts for 10.0% of our total issued and outstanding shares, such QDII must obtain the prior approval from the MOEAIC. We cannot ensure that such approval would be granted.

The market value of our ADSs may fluctuate due to the volatility of the R.O.C. securities market.

The trading price of our ADSs may be affected by the trading price of our Common Shares on the TWSE. The R.O.C. securities market is smaller and more volatile than the securities markets in the U.S. and in many European countries. The TWSE has experienced substantial fluctuations in the prices and volumes of sales of listed securities and there are currently limits on the range of daily price movements on the TWSE. During 2022, the TWSE Weighted Index peaked at 18,526.35 on January 4, 2022, and reached a low of 12,666.12 on October 25, 2022, and the trading price of our Common Shares ranged from NT$71.4 per Share to NT$112.0 per Share. On March 24, 2023, the TWSE Weighted Index closed at 15,914.7 and the closing value of our Common Shares was NT$111.0 per Share.

The TWSE is particularly volatile during times of political instability, including when relations between the R.O.C. and the P.R.C. are strained. Several investment funds affiliated with the R.O.C. government have also from time to time purchased securities from the TWSE to support the trading level of the TWSE. Moreover, the TWSE has experienced problems such as market manipulation, insider trading, and settlement defaults. The recurrence of these or similar problems could have an adverse effect on the market price and liquidity of the securities of R.O.C. companies, including our Common Shares and ADSs, in both the domestic and international markets.

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We may not continue to declare cash dividends in any particular amount.

We intend to continue to pay dividends. However, future dividends may be affected by, among other things, the best interests of our Company and our shareholders, our results of operations, cash balances and future cash requirements, financial condition, investments and acquisitions, legal risks, and other factors that the board of directors may consider relevant. Our dividend payments may change occasionally, and we cannot ensure that we will continue to declare dividends in any particular amount. A reduction in, a delay of, or elimination of our dividend payments could adversely affect our share price.

Our major shareholders may take actions that are not in, or may conflict with, our public shareholders’ best interests.

Members of the Chang family own, directly or indirectly, a significant interest in our outstanding Common Shares. See “Item 7. Major Shareholders and Related Party Transactions— Major Shareholders.” Accordingly, these shareholders will continue to have the ability to exercise a significant influence over our business, including matters relating to:

Members of the Chang family may take actions that public shareholders may not agree with or that are not in alignment with our or our public shareholders’ best interests.

We are an R.O.C. company and, because the rights of shareholders under R.O.C. law differ from those under U.S. law and the laws of certain other countries, our shareholders may have difficulty protecting their shareholder rights.

Our corporate affairs are governed by our Articles of Incorporation and by the laws governing corporations incorporated in the R.O.C. The rights of shareholders and the responsibilities of management and the members of the board of directors under R.O.C. law are different from those applicable to a corporation incorporated in the U.S. and certain other countries. As a result, public shareholders of R.O.C. companies may experience increased difficulty in protecting their interests in connection with actions taken by management or members of the board of directors than they would as public shareholders of a corporation in the U.S. or certain other countries.

Holders of Common Shares and ADSs may experience dilution if we issue stock bonuses, share options, or restricted stocks to employees or sell additional equity or equity-linked securities.

Like other R.O.C. technology companies, we periodically issue bonuses in the form of Common Shares. Bonuses in the form of our Common Shares are valued at the closing price of our Common Shares on the day prior to our meeting of the board of directors. Therefore, the issuance of our Common Shares pursuant to stock bonuses, share options and restricted stock awards may have a dilutive effect on the holders of outstanding Common Shares and ADSs. In addition, the issuance of additional equity or equity-linked securities may result in additional dilution to our shareholders.

As of December 31, 2022, a total of approximately 91,262 thousand share options and restricted stocks assumed and issued by ASEH were outstanding. See “Item 6. Directors, Senior Management and Employees—Compensation—Share-Based Payment Arrangements.”

Restrictions on the ability to deposit our Common Shares into our ADS facility may adversely affect the liquidity and price of our ADSs.

The ability to deposit Common Shares into our ADS facility is restricted by R.O.C. law. A significant number of withdrawals of Common Shares underlying our ADSs would reduce the liquidity of the ADSs by reducing the number of ADSs outstanding. As a result, the prevailing market price of our ADSs may differ from the prevailing market price of our Common Shares on the TWSE. Under current R.O.C. law, no person or entity, including shareholders and ourselves, may deposit our Common Shares in our ADS facility without specific approval of the FSC, unless:

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With respect to item (4) above, the depositary may issue ADSs against the deposit of those Common Shares only if the total number of ADSs outstanding following the deposit will not exceed the number of ADSs previously approved by the FSC, plus any ADSs issued pursuant to the events described in items (1), (2) and (3) above.

In addition, in the case of a deposit of our Common Shares requested under item (4) above, the depositary will refuse to accept deposit of our Common Shares if such deposit is not permitted under any legal, regulatory, or other restrictions notified by us to the depositary, which restrictions may include blackout periods during which deposits may not be made, minimum and maximum amounts, and frequency of deposits.

The depositary will not offer holders of ADSs preemptive rights unless the distribution of both the rights and the underlying Common Shares to our ADS holders are either registered under the Securities Act or exempt from registration under the Securities Act.

Holders of ADSs will not have the same voting rights as our shareholders, which may affect the value of their ADSs.

The voting rights of a holder of ADSs as to our Common Shares represented by its ADSs are governed by the deposit agreement. Holders of ADSs will not be able to exercise voting rights on an individual basis. If holders representing at least 51% of the ADSs outstanding at the relevant record date instruct the depositary to vote in the same manner regarding a resolution, including the election of directors, the depositary will cause all Common Shares represented by the ADSs to be voted in that manner. If the depositary does not receive timely instructions representing at least 51% of the ADSs outstanding at the relevant record date to vote in the same manner for any resolution, including the election of directors, holders of ADSs will be deemed to have instructed the depositary or its nominee to authorize all our Common Shares represented by the ADSs to be voted at the discretion of our chairman or his designee, which may not be in the interest of holders of ADSs. Moreover, while shareholders who own 1% or more of our outstanding shares are entitled to submit one proposal to be considered at our annual general meetings of shareholders, only holders representing at least 51% of our ADSs outstanding at the relevant record date are entitled to submit one proposal to be considered at our annual general meetings of shareholders. Hence, only one proposal may be submitted on behalf of all ADS holders.

The right of holders of ADSs to participate in our rights offerings is limited, which could cause dilution to their holdings.

We may from time to time distribute rights to our shareholders, including rights to acquire our securities. Under the deposit agreement, the depositary will not offer holders of ADSs those rights unless both the distribution of the rights and the underlying securities to all our ADS holders are either registered under the Securities Act or exempt from registration under the Securities Act. Although we may be eligible to take advantage of certain exemptions under the Securities Act available to certain foreign issuers for rights offerings, we can give no assurances that we will be able to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement for any of these rights. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings.

If the depositary is unable to sell rights that are not exercised or not distributed or if the sale is not lawful or reasonably practicable, it will allow the rights to lapse, in which case holders of ADSs will receive no value for these rights.

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Changes in exchange controls, which restrict to the conversion of proceeds received from ownership of ADSs, may have an adverse effect on the value of these investments.

Under current R.O.C. law, the depositary, without obtaining approvals from the Central Bank of the Republic of China (Taiwan) or any other governmental authority or agency of the R.O.C., may convert NT dollars into other currencies, including U.S. dollars, for:

In addition, the depositary may also convert into NT dollars incoming payments for purchases of Common Shares for deposit in the ADS facility against the creation of additional ADSs. The depositary may be required to obtain foreign exchange approval from the Central Bank of the Republic of China (Taiwan) on a payment-by-payment basis for conversion from NT dollars into foreign currencies of the proceeds from the sale of subscription rights for new Common Shares. Although it is expected that the Central Bank of the Republic of China (Taiwan) will grant this approval as a routine matter, we cannot ensure that in the future any approval will be obtained in a timely manner, or at all.

Under the R.O.C. Foreign Exchange Control Act, the Executive Yuan of the R.O.C. government may, without prior notice but subject to subsequent legislative approval, impose foreign exchange controls in the event of, among other things, a material change in international economic conditions. We cannot ensure that foreign exchange controls or other restrictions will not be introduced in the future.

The value of our Common Shares or ADSs may be reduced by possible future sales of Common Shares or ADSs by us or our shareholders.

While we are not aware of any plans by any major shareholders to dispose of significant numbers of Common Shares, we cannot ensure that one or more existing shareholders or owners of securities convertible or exchangeable into or exercisable for our Common Shares or ADSs will not dispose of significant numbers of Common Shares or ADSs. In addition, several of our subsidiaries and affiliates hold Common Shares, depositary shares representing Common Shares, and options to purchase Common Shares or ADSs. They may decide to sell those securities in the future. See “Item 7. Major Shareholders and Related Party Transactions—Major Shareholders” for a description of our significant shareholders and affiliates that hold our Common Shares.

We cannot predict the effect, if any, that future sales of Common Shares or ADSs, or the availability of Common Shares or ADSs for future sale, will have on the market price of our Common Shares or the ADSs at any time. Sales of substantial numbers of Common Shares or ADSs in the public market, or the perception that such sales may occur, could depress the prevailing market prices of our Common Shares or the ADSs.

Techniques employed by short sellers may drive down the trading price of the ADSs.

Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller’s interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of shares in the market.

Public companies listed in the U.S. that have material operations in the P.R.C., among others, have on occasion been the subject of short selling. Much of the scrutiny and negative publicity has centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto, and, in many cases, allegations of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in the interim, are subject to shareholder lawsuits and/or SEC enforcement actions.

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It is not clear what effect such negative publicity could have on us. If we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we would have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would endeavor to defend against any such short seller attacks, we may be constrained in how we can oppose a relevant short seller by principles of freedom of speech, applicable state law, or issues of commercial confidentiality. Such a situation could be costly and time-consuming and could divert our management’s attention from growing our business. Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact the ADSs and their value could be greatly reduced or rendered worthless.

Item 4. Information on the Company

HISTORY AND DEVELOPMENT OF THE COMPANY

ASE Technology Holding Co., Ltd. was jointly established on April 30, 2018 as a company limited by shares under the R.O.C. Company Law, by the combination of Advanced Semiconductor Engineering, Inc., which was incorporated on March 23, 1984, and Siliconware Precision Industries Co., Ltd., which was incorporated on May 17, 1984.

ASEH directly controls ASE Group, SPIL Group, USI Group, and ASE Social Enterprise Co., Ltd. ASEH’s main manufacturing facilities are located in Taiwan, the P.R.C., South Korea, Japan, Singapore, Malaysia, Vietnam, Mexico, America, Poland, France, the United Kingdom, Germany, Tunisia and Czech Republic. Our principal executive offices are located at 26, Chin 3rd Rd., Nanzih Dist., Kaohsiung, Taiwan, R.O.C. and our telephone number at the above address is (886) 7-361-7131. Our Common Shares have been listed on the TWSE under the symbol “3711” and ADSs representing our Common Shares have been listed on the NYSE under the ticker symbol “ASX” since April 2018.

SPIL Acquisition

In August 2015, ASE announced an offer to purchase 779,000,000 common shares (including those represented by American depositary shares) of SPIL through concurrent tender offers in the R.O.C. and the U.S., at a price of NT$45 per SPIL common share and NT$225 per SPIL American depositary share. The Initial SPIL Tender Offer expired on September 22, 2015, with 1,147,898,165 common shares (including those represented by American depositary shares) validly tendered and not validly withdrawn, exceeding the offer cap, and as a result, after proration, 725,749,060 SPIL common shares and 10,650,188 SPIL American depositary shares were accepted for purchase. On October 1, 2015, ASE became a shareholder holding approximately 24.99% of the issued and outstanding share capital in SPIL.

In December 2015, following an announcement by SPIL that it planned to issue 1,033 million shares, if approved by SPIL shareholders, to a third party pursuant to a share placement agreement, ASE submitted a written proposal to SPIL’s board proposing to acquire all SPIL shares not otherwise owned by ASE, contingent upon the termination of the share placement agreement. The board of directors of SPIL did not respond to our acquisition proposal. Subsequently, ASE launched an offer to purchase 770,000,000 common shares (including those represented by American depositary shares) of SPIL through concurrent tender offers in the R.O.C. and the U.S., at a price of NT$55 per SPIL common share and NT$275 per SPIL American depositary share. The Second SPIL Tender Offer expired on March 17, 2016. Because the TFTC did not render a decision before the expiration of the Second SPIL Tender Offer, resulting in the failure to satisfy one of the tender offer conditions, the Second SPIL Tender Offer was not successful. The TFTC subsequently suspended its review on March 23, 2016.

Notwithstanding the failure of the Second SPIL Tender Offer, ASE continued to seek control of SPIL, with the purpose of effecting an acquisition of 100% of the common shares and American depositary shares of SPIL. Simultaneously with the acquisition of SPIL, ASE planned to establish a holding company in Taiwan that would hold 100% of the equity interests of both ASE and SPIL such that ASE and SPIL would be wholly-owned subsidiaries of such holding company, which would maintain all current operations of ASE and SPIL.

In March and April 2016, ASE acquired an additional 258,300,000 common shares of SPIL (including those represented by American depositary shares) through open market purchases.

In June 2016, ASE entered into the Joint Share Exchange Agreement with SPIL, pursuant to which ASEH was formed by means of a statutory share exchange pursuant to the laws of the Republic of China, and ASEH (i) acquired all issued shares of ASE in exchange for shares of ASEH, and (ii) acquired all issued shares of SPIL using cash consideration.

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The Share Exchange was conditionally approved by the Anti-Monopoly Bureau under the State Administration for Market Regulation on November 23, 2017. Among other restrictive conditions imposed by the Anti-Monopoly Bureau, ASE and SPIL had to maintain independent operations for 24 months.

On January 16, 2018, ASE converted 9,690,452 American depositary shares of SPIL that it owned into 48,452,260 common shares.

On February 12, 2018, ASE and SPIL, respectively, held extraordinary general shareholders’ meetings and each approved the proposed Joint Share Exchange, pursuant to which, ASEH acquired 100% of both ASE and SPIL shares.

The Share Exchange consummated on April 30, 2018, and ASE and SPIL became privately held and wholly-owned subsidiaries of ASEH concurrently.

On March 25, 2020, the Anti-Monopoly Bureau officially lifted all restrictive conditions imposed on the Share Exchange.

USI Group and USI Group Restructuring

USI Group engages primarily in EMS in relation to computing, consumer electronics, communications, industrial and automotive, among other services and businesses.

We have been purchasing shares of Universal Scientific Industrial since 1999. Upon several acquisitions through cash and stock tender offer, Universal Scientific Industrial became our subsidiary in 2010. In 2012, USI Shanghai completed its IPO on the Shanghai Stock Exchange with the symbol “601231.” In 2015, Universal Scientific Industrial completed a spin-off of USI Inc. Following the completion of a series of share transfers, USI Inc. became the parent company of the USI Group in 2016.

In October 2018, to enhance operational flexibility through organizational restructure, ASE’s board of directors resolved to spin off ASE’s investment department, which is responsible for managing the ordinary shares and assets of USI Inc., into USI Global, a newly established company. USI Global issued new ordinary shares to us as consideration for the spin-off. The spin-off consummated in November 2018 and we obtained control over ASE and USI Global. In December 2018, our board of directors and the board of director of USI Global resolved to merge USI Global and ASE Technology Holding Co., Ltd. The merger consummated in January 2019 and ASE Technology Holding Co., Ltd. became the surviving entity after the merger and USI Global was thereby dissolved. Our financial position or financial performance was not materially affected by USI Global’s spin-off from ASE Inc. or USI Global’s merger with ASE Technology Holding Co., Ltd.

On December 12, 2019, USIFR, FAFG and the shareholders of FAFG entered into a share purchase agreement (the “FAFG Share Purchase Agreement”), and USI Shanghai and ASDI, one of the shareholders of FAFG and privately held company owned by FAFG’s founder, entered into a framework agreement for purchasing assets through issuing shares, pursuant to which USIFR and USI Shanghai would ultimately acquire 100.0% of the share capital of FAFG by way of a share purchase (the “FAFG Transaction”). The FAFG Transaction proposed a two-step transaction. In the first step, USIFR would directly purchase 89.6% of FAFG’s share capital in exchange for a cash payment. In the second step, USI Shanghai would acquire the remaining 10.4% of FAFG’s share capital from ASDI in exchange for newly issued shares of USI Shanghai. At the conclusion of both steps, USI Shanghai would directly or indirectly own 100% of the share capital of FAFG. On March 26, 2020, the issuance of new shares for the FAFG Transaction was approved unconditionally by the M&A and Restructuring Committee of China Securities Regulatory Commission. On December 1, 2020, the transaction was completed and as a result, USI acquired 100% of FAFG’s total issued shares, 79,848 thousand shares. The consideration transferred amounted to NT$12,443.6 million.

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China Site Dispositions

In 2021, ASEH and Beijing Wise Road Asset Management Co., Ltd. (the “Wise Road Capital”) entered into a Sale and Purchase Agreement by which ASEH to sell shares and equity interests in GAPT Holding Limited (GAPT Holding Limited directly or indirectly holds 100.0% equity interests in Global Advanced Packaging Test (HongKong) Limited, ASEWH, ASEN and Advanced Shanghai) and ASEKS to Wise Road Capital or its designated affiliate in exchange for a cash consideration in an aggregate amount of NT$36,939.1 million. The due date of outstanding receivables of the cash consideration (the “Receivables”), originally scheduled to be the business day following the expiration of 6 months from the settlement date, was postponed to the business day following the expiration of 15 months from the settlement date, which was March 17, 2023, by the resolution of the board of directors and the agreement with the counterparty. To increase our opportunity for capital gains in the future, the Company’s board of directors resolved on March 15, 2023 to enter into a supplemental share purchase agreement (the “Agreement”) with the counterparty and its affiliates stipulating that the counterparty’s affiliate will offer us newly issued ordinary shares (the “Alternative Consideration Shares”) as an alternative to its obligation of the Receivables. If the counterparty’s affiliates fail to offer us the Alternative Consideration Shares within 12 months following the signing date of the Agreement, the counterparty and its affiliates should pay us the Receivables within 5 months after the expiry of the 12-month period.

Capital Expenditures

Our capital expenditures for the years ended December 31, 2020, 2021 and 2022 for property, plant, and equipment were NT$59,024.2 million, NT$74,417.5 million and NT$75,800.6 million (US$2,466.7 million), respectively. We had commitments for capital expenditures of approximately NT$59,675.6 million (US$1,941.9 million), of which NT$3,689.9 million (US$120.1 million) had been prepaid as of December 31, 2022, mainly in connection with the expansion of our operations in the R.O.C. and the P.R.C. In addition, we are adaptable to changing customer needs and will be able to expand our footprint to other countries and regions as needed in the future. Any future expansion of our operating activities could result in additional capital expenditures. We anticipate our capital expenditures in 2023 will be financed through existing cash, expected cash flow from operations, and existing credit lines under our loan facilities and will consist of, among other things, additional machinery and equipment procurements for our capacity expansions. See “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources” for more information. There were no significant financial investments or divestitures in 2020, 2021 and 2022.

For more information on our history and development, see “—Organizational Structure.”

BUSINESS OVERVIEW

ASEH is a leading provider of semiconductor manufacturing services in assembly and testing. Our services include semiconductor packaging, production of interconnect materials, front-end engineering testing, wafer probing, and final testing services, as well as integrated solutions for EMS in relation to computing, peripherals, communications, industrial, automotive, and server applications.

We believe that, as a result of the following strengths, we are able to compete effectively to meet customers’ requirements across a wide range of applications:

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We believe that it is still the trend for semiconductor companies to outsource their packaging, testing, and manufacturing requirements as semiconductor companies rely on independent providers of foundry, packaging and testing, and EMS. In response to the increased pace of new product development and shortened product life and production cycles, semiconductor companies are increasingly seeking both independent packaging and testing companies that can provide turnkey services that reduce time to market and electronic manufacturing companies with proactive original design capabilities that can provide large-scale production. We believe that our technological expertise, scale, and our ability to integrate a broad range of solutions into turnkey services and EMS allow us to benefit from the accelerated outsourcing trend and better serve our existing and potential customers.

We believe that we have benefited, and will continue to benefit, from our geographic location in Taiwan. Taiwan is currently the largest center for outsourced semiconductor manufacturing in the world and has a high concentration of EMS providers. Our close proximity to foundries and other providers of complementary semiconductor manufacturing services is attractive to our customers who wish to take advantage of the efficiencies of a total semiconductor manufacturing solution by outsourcing several stages of their manufacturing requirements. We believe that, as a result, we are well positioned to meet the advanced semiconductor engineering and manufacturing requirements of our customers.

Industry Background

General

Semiconductors are the building blocks used to create an increasing variety of electronic products and systems. Continuous improvements in semiconductor process and design technologies have led to smaller, more complex, and more reliable semiconductors at a lower cost per function. These improvements have resulted in significant performance and price benefits to manufacturers of electronic products. As a result, semiconductor demand has grown substantially in our primary end-user markets for communications, computing and consumer electronics, and has experienced increased growth in other markets such as automotive products and industrial automation and control systems.

The semiconductor industry is characterized by strong long-term growth, with periodic and sometimes severe cyclical downturns. The Semiconductor Industry Association reported that worldwide sales of semiconductors increased from approximately US$51.0 billion in 1990 to approximately US$573.5 billion in 2022. We believe that overall growth and cyclical fluctuations will continue over the long term in the semiconductor industry.

EMS

EMS providers typically achieve large economies of scale in manufacturing by pooling together product design techniques and providing value-added services such as warranties and repairs. Companies who do not need to manufacture a constant supply of products have increasingly outsourced their manufacturing to these service providers so that they can respond quickly and efficiently to sudden spikes in demand without having to maintain large inventories of products.

EMS are sought by companies in a wide range of industries including, among others, information, communications, computing, consumer electronics, automotive electronics, medical treatment, industrial applications, aviation, navigation, national defense, and transportation. Although affected by global economic fluctuations, we expect the EMS industry to continue to grow in the long term, and we have enhanced our presence in the industry through USI Group.

Outsourcing Trends in Semiconductor Manufacturing

Historically, semiconductor companies designed, manufactured, packaged, and tested semiconductors primarily within their own facilities. However, there is a clear trend in the industry to outsource the manufacturing process. Virtually every significant stage of the manufacturing process can be outsourced. Wafer foundry services, semiconductor packaging and testing services, and EMS are currently the largest segments of the independent semiconductor manufacturing services market.

The availability of technologically advanced independent manufacturing services has also enabled the growth of “fabless” semiconductor companies that focus on semiconductor design and marketing, while outsourcing their wafer fabrication, packaging, and testing requirements to independent companies. We believe that the growth in the number and scale of fabless semiconductor companies that rely solely on independent companies to meet their manufacturing requirements will continue to be a driver of growth for us. Similarly, the availability of technologically advanced independent manufacturing services has encouraged integrated device manufacturers, which traditionally have relied on in-house semiconductor manufacturing capacity, to increasingly outsource their manufacturing requirements to independent semiconductor manufacturing companies.

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We believe the outsourcing of semiconductor manufacturing services will increase in the future for many reasons, including:

Trends of Mergers and Acquisitions in the Semiconductor Industry

The global semiconductor industry is highly competitive, and the competitive landscape is changing as a result of a trend toward consolidation within the industry. Packaging and testing service providers, in particular, have engaged in cross-border mergers and acquisitions in recent years as part of their expansion strategy, which have gradually changed the ecosystem of the semiconductor industry.

Examples of mergers and acquisitions by and among semiconductor design companies, integrated device and chips manufacturers, and software business providers include Intel Corporation’s acquisition of Altera Corporation, ON Semiconductor Corporation’s acquisition of Fairchild Semiconductor International, NXP Semiconductors’s acquisition of Freescale Semiconductor, Avago Technologies’s acquisition of Broadcom Corporation, several acquisitions of semiconductor design companies by MediaTek, Bain Capital’s acquisition of Toshiba Corporation’s memory chip business, Microchip Technology’s acquisition of Atmel Corporation and Microsemi Corporation, Qualcomm Incorporated’s attempted acquisition of NXP Semiconductors, Broadcom Limited’s attempted acquisition of Qualcomm Incorporated, Infineon’s acquisition of Cypress, NXP Semiconductors’s acquisition of Marvell’s Wi-Fi Connectivity Business, ON Semiconductor Corporation’s acquisition of Quantenna, NVIDIA’s acquisition of ARM Limited from SoftBank Group, Analog Devices’s acquisition of Maxim Integrated Products, AMD’s acquisition of Xilinx, Intel’s acquisition of Tower Semiconductor, Beijing Zhiguangxin Holding’s acquisition of Tsinghua Unigroup, MaxLinear’s acquisition of Silicon Motion, AMD’s acquisition of Pensando, and Broadcom’s attempt to acquisition of VMware.

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Examples of mergers and acquisitions by and among semiconductor packaging and testing companies include Jiangsu Changjiang Electronics Technology’s acquisition of STATS ChipPAC, Nantong Fujitsu Microelectronics’s acquisition of the packaging and testing factory of AMD, Amkor’s acquisition of J-Devices, and Tianshui Huatian Technology’s acquisition of Unisem.

As a result of the aforementioned mergers and acquisitions, our competitors were able to further strengthen their competitive position by expanding their product offerings and combining their financial resources. We expect this consolidation trend to continue.

Overview of Semiconductor Manufacturing Process

The manufacturing of semiconductors is a complex process that requires increasingly sophisticated engineering and manufacturing expertise. The manufacturing process can be generally divided into the following stages:

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We are involved in all stages of the semiconductor manufacturing process except circuit design and wafer fabrication.

Strategy

Our objective is to provide integrated solutions that set industry standards, including packaging, testing services, interconnect materials design and production capabilities, and to lead and facilitate the industry trend toward outsourcing semiconductor manufacturing requirements. The principal elements of our strategy are to:

Grow Our Packaging Services and Expand Our Range of Offerings

We believe that an important factor in attracting leading semiconductor companies to be our customers is our ability to fulfill the demand for a broad range of packaging solutions on a large scale. We intend to continue to develop process and product technologies to meet the packaging requirements of clients. Our expertise in packaging technology has enabled us to develop sophisticated solutions such as flip chip packaging, bump chip carrier packaging, stacked die packaging, and fine-pitch wire bonding. We are continuously investing in research and development in response to and in anticipation of migrations in technology and intend to continue to acquire access to new technologies through strategic alliances and licensing arrangements.

The increasing miniaturization of semiconductors and the growing complexity of interconnect technology have also resulted in the convergence of assembly processes at different levels of integration: chip, module, board, and system. In response to this miniaturization and growing complexity, we have focused on providing module assembly services and, in addition, our subsidiary USI Group has provided us with access to process and product technologies at the levels of module, board, and system assembly and testing, which helps us to better anticipate industry trends and take advantage of potential growth opportunities. We expect to continue to combine our packaging, testing, and materials technologies with the expertise of USI Group at the systems level to develop our SiP business.

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Strategically Expand and Streamline Production Capacity

To capitalize on growing industry demand, we intend to strategically expand our production capacity, both through internal growth and selective acquisitions and joint ventures, with a focus on providing cost-competitive and innovative packaging and testing services.

We intend to invest in trends that are essential to the development of the industry. We plan to expand our capacity to meet demand for smaller form factors, higher performance, and higher packaging density.

In addition, we intend to promote our copper wire solutions to our customers in addition to gold wire. Gold wire is a significant raw material for us. Gold prices, however, are subject to intense fluctuations and have in the past impacted our profitability. We believe that replacing gold wire in some of our packages with copper wire technology will not only improve our profitability but will also enable us to provide more value to our customers by providing lower cost solutions, which could enhance our competitiveness and market share. We are currently the industry leader in terms of copper wire capacity. We plan to capitalize on the overall industry trend of copper conversion by maintaining our leadership and focusing on integrating copper wire into a wider range of traditional leadframe-based packages and higher-end substrate-based packages.

We expect to focus on providing cost-competitive services through better management of capacity utilization and efficiency improvements and offer our services on a large scale with the intention of driving more integrated device manufacturer outsourcing in the long run.

We evaluate acquisition and joint venture opportunities on the basis of access to new markets and technology, the enhancement of our production capacity, improvement of research and development capabilities, economies of scale and management resources, and closer proximity to existing and potential customers. The table below sets forth our recent major investments.

On March 17, 2023, the board of director of USISH, resolved to establish a special purpose vehicle (“SPV”) by its wholly-owned subsidiary, Universal Global Technology Co., Limited (“UGT”), and an unrelated party, Ample Trading, Co., Ltd. (“Ample Trading”), through a joint venture agreement. UGT will obtain 75.1% ownership of the SPV and Ample Trading will obtain the remaining 24.9% ownership of the SPV. The SPV will acquire the automotive wireless business (“Target Business”) of an unrelated party, TE Connectivity Ltd. The transaction is subject to the approvals from the respective countries where the Target Business will operate in.

Continue to Leverage Our Presence in Key Centers of Semiconductor and Electronics Manufacturing

We intend to continue leveraging our presence in key centers of semiconductor and electronics manufacturing to further grow our business. We have significant packaging, testing, and EMS operations in Taiwan, currently one of the leading centers for outsourced semiconductor and electronics manufacturing in the world. This presence enables our engineers to work closely with our customers as well as wafer foundries and other providers of complementary semiconductors and EMS early in the design process, enhances our responsiveness to the requirements of our customers, and shortens production cycles. In addition, as a turnkey service provider, we are able to offer our products to our customers and complementary service providers within relatively close geographic proximity. Besides our current operations in Taiwan, we intend to expand our operations in our other subsidiaries.

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In addition to Taiwan, we have primary operations in the following locations:

Strengthen and Develop Strategic Relationships with Our Customers and Providers of Complementary Semiconductor Manufacturing Services

We intend to strengthen existing and develop new strategic relationships with our customers and providers of complementary semiconductor manufacturing services, such as wafer foundries, as well as equipment vendors, raw material suppliers, and technology research institutes, in order to offer our customers total semiconductor manufacturing solutions covering all stages of the manufacturing process from design to shipment. In addition, we are working with our customers to co-develop new packaging technologies and designs.

Since 1997, we have maintained a strategic alliance with TSMC, which designates us as their non-exclusive preferred provider of packaging and testing services for semiconductors manufactured by TSMC. Through our strategic alliance with and close geographic proximity to TSMC, we are able to offer our customers a total semiconductor manufacturing solution that includes access to foundry services in addition to our packaging, testing, and direct shipment services.

Principal Products and Services

We offer a broad range of semiconductor packaging and testing services. In addition, we provide EMS through USI Group. Our package types generally employ either leadframes or substrates as interconnect materials. The semiconductors we package are used in a wide range of end-use applications, including communications, computing, consumer electronics, industrial, automotive, and other applications. Our testing services include front-end engineering testing, which is performed during and following the initial circuit design stage of the semiconductor manufacturing process, wafer probe, final testing, and other related semiconductor testing services. We focus on packaging and testing semiconductors. We offer our customers turnkey services, which consist of packaging, testing, and direct shipment of semiconductors to end users designated by our customers. Our EMS are used in a wide range of end-use applications, including, but not limited to, computing, peripherals, communications, industrial applications, automotive electronics, and server applications. In 2022, our revenues generated from packaging, testing, and EMS accounted for 45.3%, 8.3% and 45.0% of our operating revenues, respectively.

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Packaging Services

We offer a broad range of package types to meet the requirements of our customers, including flip chip BGA, flip chip CSP, aCSP (advanced chip scale packages), quad flat packages (QFP), low profile and thin quad flat packages (LQFP/TQFP), bump chip carrier (BCC), quad flat no-lead (QFN) packages, aQFN (advanced QFN), and Plastic BGA. In addition, we provide 3D chip packages, such as aMAP POP (advanced, laser ablation type), which enable our customers to mount packages more easily, and HB PoP (High-Band package on Package) for higher performance orientation and marketing requirement. We also offer other forms of stacked die solutions in different package types, such as stacked die QFN, hybrid BGAs containing stacked wire bond, and FC die. Meanwhile, we are developing cost-effective solutions to 3D packages, such as FOCOS (Fan-out Chip-on-Substrate) and 2.5D (silicon interposer), to fulfill current low-cost and high-performance requirements in parallel with 3D IC with TSV (Through Silicon Via) technology. In addition, to meet current trends toward low-cost solutions, we provide copper wire bonding solutions which can be applied to traditional gold wire products. We also provide a high-volume manufacturing experience with silver wire bonding for FCCSP Hybrid packages. Furthermore, we are one of the key providers of IoT (Internet of Things), server and automotive services. We believe we are among the leaders in such packaging processes and technologies and are well positioned to lead the technology migration in the semiconductor packaging industry.

To address the new demands of 5G wireless technology, we survey new materials and structures based on developed package structures and focus our efforts on developing more integration solutions, such as Application Processor (AP) module and RF front end (RFFE) with customized SiP services.

Wirebonding. We provide wirebonding, including leadframe-based packages and substrate-based packages. Leadframe-based packages are packaged by connecting the die, using wire bonders, to the leadframe with gold wire or copper wire. As packaging technology improves, the number of leads per package increases. In addition, improvements in leadframe-based packages have reduced the footprint of the package on the circuit board and improved the electrical performance of the package. To have higher interconnected density and better electrical performance, semiconductor packages have evolved from leadframe-based packages to substrate-based packages. The key differences of these package types are the size of the package; the density of electrical connections the package can support; flexibility at lower costs; the thermal and electrical characteristics of the package; and environmentally conscious designs. Substrate-based packages generally employ the BGA design. Whereas traditional leadframe technology places the electrical connection around the perimeter of the package, the BGA package type places the electrical connection at the bottom of the package surface in the form of small bumps or balls. These small bumps or balls are typically distributed evenly across the bottom surface of the package, allowing greater distance between individual leads and higher pin-counts. Our expertise in BGA packages also includes capabilities in stacked-die BGA, which assembles multiple dies into a single package.

3D packaging has recently gained a lot of publicity because of the advent of Through Silicon Via (TSV)-based chip stacking. Chip stacking has been employed for many years, albeit without TSVs. Wire bond die is routinely stacked on leadframes as well as BGA substrates. A more recent implementation is the stacking of packages as package on package (PoP) and the more specialized package in package (PiP). We have advanced PoP by the invention of aMAPPoP which provides the package interconnects by exposing a molded in solder ball with a laser via. Aside from being cost-effective due to block molding, this PoP also has much lower warpage, greatly improving the stacking yield.

The following table sets forth our principal wirebonding packages.

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Advanced Packages. The semiconductor packaging industry has evolved to meet the requirements of high-performance electronics products. We believe that there will continue to be growing demand for packaging solutions with increased input/output density, smaller size, and a better heat dissipation characteristic.

We have focused on developing our capabilities in certain packaging solutions, such as aCSP (wafer-level chip scale package), flip chip BGA, Heat-Spreader FCBGA, flip-chip CSP, Hybrid FCCSP (Flip Chip + W/B), Flip Chip PiP (Package in Package), Flip Chip PoP (Package on Package), aS^3TM (Advanced Single Sided Substrate), HB POP (High-Bandwidth POP), Fan-Out Wafer-Level Packaging, SESUB, and 2.5D. Flip-chip BGA technology replaces wire bonding with wafer bumping for interconnections within the package. Wafer bumping involves the placing of tiny solder balls, instead of wires, on top of dies for connection to substrates. As compared with more traditional packages, which allow input/output connection only on the boundaries of the dies, flip chip or wafer-level package solutions significantly enhance the input/output flow by allowing input/output connections over the entire surface of the dies.

Chip scale packages typically have an area no greater than 120% of the silicon die. For wafer-level packages, the electrical connections are plated or printed directly onto the wafer itself, resulting in a package very close to the size of the silicon die. Wafer-level packages do not include an interposer so they are unlike substrate-based packages, where the die is usually mounted on an interposer, which contains electrical connections in the form of small bumps or balls.

Advance Embedded Assembly Substrate Integration (aEASI) is a technology which allows the embedding of thin chips into substrate build-up layers. aEASI can be used in various technologies tailored to clients’ demands, such as package solution of miniaturization, and has also been proven to have better electrical/thermal performance. It also provides flexibility in design (such as for MicroSiP), and the electrical contacts to the chips are realized by laser-drilled and metallized micro-vias to replace the traditional wire bonding process. aEASI is mainly used in power management applications.

Wafer-Level MEMs (WL MEMs) is an advanced assembly technology for MEMs in wafer-level types instead of current LGA or leadframe types using TSV or chip-to-wafer technology. WL MEMs are mainly used in applications such as pressure, temperature, humidity, and gyroscope sensors, among others.

Fan-Out Wafer-Level Packages (FOWLP) provide an extended solution and package type to integrate different functional chips or packages, a reduction in resistance and inductance over FCCSP, better thermal performance, and smaller form factors of packages. FOWLP can be applied for different stack and SiP solutions.

We provide numerous technologies to meet various customer demands. The following table sets forth our principal advanced packages.

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Heterogeneous Integration. Heterogeneous Integration refers to the integration of separately manufactured components into a higher-level assembly that, in the aggregate, provides enhanced functionality and improved operating characteristics:

The drive towards semiconductor miniaturization and integration is expanding the commercial potential of SiP, a package or module containing a functional electronic system or subsystem that is integrated and miniaturized through IC greater assembly technologies. With attributes that deliver higher performance, cost-effectiveness, and shorter time to market, SiP technology is enabling functionality and creating more commercial opportunities across a broader variety of electronics applications.

ASEH is a market leader in SiP technologies from design to assembly and high-volume manufacturing. SiP involves the integration of multiple components from IC chips and components including ASICs, Memory, Analog & mixed signals devices, passives, MEMs, sensors, antennas, and other devices into one single package. SiP and Modules products are gaining significant traction within the industry, given growing demand for miniaturized electronic devices that deliver more functions and higher performance, lower power, greater speed, and increased bandwidth. ASEH’s SiP portfolio includes flip chip and wirebond multichip packaging, embedding technologies such as SESUB and aEASI, and wafer-level technologies including fan-out and IPD. IPD uses a wafer-level process to integrate passive components on an individual substrate. Recent IPD innovation involves the extension of the RDL (Redistribution) process to build a high-quality factor (Q) inductor and RF circuits on top of silicon wafers. It can be used in the following three approaches to enhance product performance: 1) replace discrete components such as Balun and Filter, 2) integrate other passive components and act as interposer, and 3) replace PWB and act as a substrate of the module. In addition, we leverage some of our SMT-based technologies, such as compartment shielding, double-sided module, and antenna integration.

We also offer module assembly services, which combine one or more packaged semiconductors with other components in an integrated module to enable increased functionality for system-level assembly. End-use applications for modules include cellular phones and wireless LAN applications, Bluetooth applications, camera modules, automotive applications, toys, networking, storage, and power management.

Fan-out packaging continues to gain prominence within the industry, based on significant technical advantages that have led to its broad commercialization. This advanced packaging platform is evolving to meet application demands for smaller form factors and improved electrical and thermal performance.

With the packaging done on singulated die formed into a reconstituted molded wafer or panel, fan-out packaging enables multi-die packages, through partitioning with different nodes and functionality. Fan-out can be done either chip first or chip last, with both options resulting in much higher-density interconnect and improved cost efficiency. Initially fan-out was used primarily for smaller, lower I/O count packages, until we introduced a very high-density fan-out alternative to 2.5D Interposer packages, Fan-out Chip on Substrate (FOCoS), a hybrid fan-out/FCBGA package. Today, fan-out is used in high-volume applications for a wide variety of products, including PMICs, RF packages, Baseband processors, and high-end networking systems. Key attributes include:

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As 5G, AI, and high-performance computing continue to make inroads on a global basis, we believe there is an increased demand for semiconductor devices that deliver enhanced performance, lower latency, increased bandwidth, and greater power efficiency. ASEH strives to meet this demand by innovating 2.5D and 3D technologies that we believe are becoming more central within the semiconductor industry. We have established ourselves as a leader in 2.5D technology through our successful pioneering of 2.5D solutions that helped bring advanced ASIC and HBM products to the marketplace. In addition, ASEH is introducing high-density fan-out technology for multi-die solutions to achieve high bandwidth and high-performance across the market landscape, addressing demand from high density data centers to consumer and mobile spaces.

Automotive Electronics. We assemble automotive electronic products based on our leading technology, good quality systems, and automation. We provide a variety of products, such as leadframe base, substrate base, Flip Chip, and Wafer-Level packages. We also provide robust package solutions to customers and end-users, including most types of industrial package solutions together with tailor-made solutions to meet customers’ and end-users’ requirements for automotive specifications.

Having accumulated production experience in using gold wire for automotive devices over several years, we collaborate with certain customers to develop and release copper wire for advanced wafer process (40nm for QFP and 40 nm for BGA) development that will fulfill criteria in AEC-Q100 and under development of the 28 nm wafer process with variety packaging structure. In addition, we offer the FOWLP solution for radar products according to requests from some tier 1 customers.

Interconnect Materials. Interconnect materials connect the input/output on the semiconductor dies to the printed circuit board. Interconnect materials include substrate, which is a multilayer miniature printed circuit board, and is an important element of the electrical characteristics and overall performance of semiconductors. We produce substrates for use in our packaging operations.

The demand for higher-performance semiconductors in smaller packages will continue to spur the development of IC substrates that can support the advancement in circuit design and fabrication. As a result, we believe that the market for substrates will grow and the cost of substrates as a percentage of the total packaging process will increase. In the past, substrates we designed for our customers were produced by independent substrate manufacturers. Since 1997, we have been designing and producing a portion of our interconnect materials in-house. In 2022, our interconnect materials operations supplied approximately 8.5% of our consolidated substrate requirements by value.

The following table sets forth, for the periods indicated, the percentage of our packaging revenues accounted for by each principal type of packaging products or services.

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Testing Services

We provide a complete range of semiconductor testing services, including front-end engineering testing, wafer probing, final testing of logic/mixed-signal/RF/(2.5D/3D) packages and SiP/MEMS/Discrete modules, and other test-related services.

The testing of semiconductors requires technical expertise and knowledge of the specific applications and functions of the semiconductors tested as well as the testing equipment utilized. We believe that our testing services employ technology and expertise which are among the most sophisticated in the semiconductor industry. In addition to maintaining different types of testing equipment, which enables us to test a variety of semiconductor functions, we work closely with our customers to design effective testing solutions on multiple equipment platforms for particular semiconductors.

In recent years, complex, high-performance logic/mixed-signal/RF/(2.5D/3D) packages and SiP/MEMS modules have accounted for an increasing portion of our testing revenues.

Front-End Engineering Testing. We provide front-end engineering testing services, including customized software development, electrical design validation, and reliability and failure analysis.

Wafer Probing. Wafer probing is the step immediately before the packaging of semiconductors and involves visual inspection and electrical testing of the processed wafer for defects to ensure that it meets our customers’ specifications. Wafer probing services require expertise and testing equipment similar to that used in final testing, and most of our testers can also be used for wafer probing.

Logic/Mixed-signal/RF/(2.5D/3D) Module and SiP/Discrete Final Testing. We conduct final tests of a wide variety of logic/mixed-signal/RF/(2.5D/3D) packages and SiP/MEMS/discrete modules, with the number of leads or bumps ranging from the single digits to over 30 thousand and operating frequencies of over 32 Gbps for digital semiconductors and mmWave for 5G semiconductors, which are at the high end of the range for the industry. The products we test include applications for wired, wireless, and mobile communications, automotive, home entertainment, IoT, personal computer, artificial intelligence, and high-performance computing applications, as well as a variety of consumer and application-specific integrated circuits for various specialized applications.

Other Test-Related Services. We provide a broad range of additional test-related services, such as:

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Drop Shipment Services. We offer drop shipment services for shipment of semiconductors directly to end users designated by our customers. Drop shipment services are provided mostly in conjunction with logic/mixed-signal/RF/3D IC/discrete testing. We provide drop shipment services to a significant percentage of our testing customers. A substantial portion of our customers at each of our facilities have qualified these facilities for drop shipment services. Since drop shipment eliminates the additional step of inspection by the customer before shipment to the end user, quality of service is a key consideration. We believe that our ability to successfully execute our full range of services, including drop shipment services, is an important factor in maintaining existing customers as well as attracting new customers.

The following table sets forth, for the periods indicated, the percentage of our testing revenues accounted for by each type of testing service.

EMS

We provide integrated solutions for EMS in relation to computing, peripherals, communications, industrial, automotive, and server applications through USI Group. The key products and services we offer to our customers include:

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Seasonality

See “Item 5. Operating and Financial Review and Prospects—Operating Results—Quarterly Operating Revenues, Gross Profit and Gross Margin.”

Sales and Marketing

Sales and Marketing Presence

We maintain sales and marketing offices in Taiwan, the U.S., Belgium, Singapore, the P.R.C., Korea, Malaysia, Japan, and a number of other countries. We also have sales representatives operating in certain other countries in which we do not have offices. Our sales and marketing offices in Taiwan are located in Hsinchu, Taichung and Kaohsiung. We conduct marketing research through our customer service personnel and through our relationships with our customers and suppliers we endeavor to keep abreast of market trends and developments. We also provide advice on production process technology to our major customers planning the introduction of new products. When placing orders, our customers specify which of our facilities will receive the order. Our customers conduct separate qualification and correlation processes for each of our facilities that they use. See “—Qualification and Correlation by Customers.”

Customers

Our five largest customers together accounted for approximately 54.5%, 49.6% and 50.2% of our operating revenues in 2020, 2021 and 2022, respectively. One customer accounted for more than 10.0% of our operating revenues in 2020, 2021 and 2022.

The U.S. Bureau of Industry and Security (the “US BIS”) added Huawei and its affiliates to the entity list under the Export Administration Regulation (the “EAR”), published on August 20, 2020. As of September 15, 2020, we were no longer allowed to do business directly or indirectly with Huawei and its affiliates. HiSilicon, a Huawei affiliate, was one of our top customers during the first half of 2020; and, as a result, this US BIS action adversely affected our results of operations. Further, because of the EAR, we had unusable raw materials and reduced loading on our capitalized equipment, which resulted in an inventory write-off and an impairment loss to other operating expense during the third quarter of 2020.

We package and test for our customers a wide range of products with end-use applications in the communications, computing, and consumer electronics/industrial/automotive sectors. The following table sets forth a breakdown of the percentage of our operating revenues generated from our packaging and testing services, for the periods indicated, by the principal end-use applications of the products that were packaged and tested.

Our EMS provide a wide range of products with end-use applications. The following table sets forth a breakdown of the percentage of our operating revenues generated from our EMS for the periods indicated by the principal end-use applications.

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We categorize our operating revenues geographically based on the country in which the customer is headquartered. The following table sets forth, for the periods indicated, the percentage breakdown by geographic regions of our operating revenues.

Qualification and Correlation by Customers

Customers generally require that our facilities undergo a stringent qualification process during which the customer evaluates our operations and production processes, including engineering, delivery control, and testing capabilities. The qualification process typically takes up to several weeks but can take longer depending on the requirements of the customer. In the case of our testing operations, after we have been qualified by a customer and before the customer delivers semiconductors to us for testing in volume, a process known as correlation is undertaken. During the correlation process, the customer provides us with sample semiconductors to be tested and either provides us with the test program or requests that we develop a conversion program. In some cases, the customer also provides us with a data log of results of any testing of the semiconductors that the customer may have conducted previously. The correlation process typically takes up to two weeks but can take longer depending on the requirements of the customer. We believe our ability to provide turnkey services reduces the amount of time spent by our customers in the qualification and correlation process. As a result, customers utilizing our turnkey services are able to achieve shorter production cycles.

Pricing

We price our packaging services and EMS by taking into account the actual costs and prevailing market prices. We price our testing services primarily on the basis of the amount of time, measured in central processing unit seconds, taken by the automated testing equipment to execute the test programs specific to the products being tested, as well as the cost of the equipment, with additional consideration of prevailing market prices. Prices for our packaging, testing, and EMS are confirmed at the time orders are received from customers, which is typically several weeks before delivery.

Raw Materials and Suppliers

Packaging

The principal raw materials used in our packaging processes are interconnect materials such as leadframes and substrates, gold wire, and molding compound. The silicon die, which is the functional unit of the semiconductor to be packaged, is supplied in the form of silicon wafers. Each silicon wafer contains a number of identical dies. We receive the wafers from customers or foundries on a consignment basis. Consequently, we generally do not incur inventory costs relating to the silicon wafers used in our packaging process.

We do not maintain large inventories of leadframes, substrates, gold wire, or molding compound, but generally maintain sufficient stock of each principal raw material based on blanket orders and rolling forecasts of near-term requirements received from customers. In addition, several of our principal suppliers dedicate portions of their inventories as reserves to meet our production requirements. However, shortages in the supply of materials experienced by the semiconductor industry have in the past resulted in occasional price adjustments and delivery delays. In order to reduce adverse impacts caused by the price fluctuations of raw materials, we have developed substitute raw materials, such as copper wire, which costs much less than gold wire. However, we cannot guarantee that we will not experience shortages or price increases in the near future, or that we will be able to obtain adequate supplies of raw materials in a timely manner and at a reasonable price or to develop any substitute raw materials. In the event of a shortage and/or price increase, we generally inform our customers and work together to accommodate changes in delivery schedules and/or the price increase of raw materials.

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We produce substrates for use in our packaging operations. In 2022, our interconnect materials operations supplied approximately 8.5% of our consolidated substrate requirements by value. See “—Principal Products and Services—Interconnect Materials.”

In response to RoHS, we have adjusted our purchases of raw materials and our production processes in order to use raw materials that comply with this legislation for part of our production. This legislation restricts the use in the EU of certain substances that the EU deems harmful to consumers including certain grades of molding compounds, solder, and other raw materials that are used in our products. Manufacturers of electrical and electronic equipment must comply with this legislation in order to sell their products in an EU member state. Any failure by us to comply with regulatory environmental standards such as RoHS and REACH may have a material adverse effect on our results of operations.

Testing

For the functional and burn-in testing of semiconductors, no other raw materials are needed. However, we often design and outsource the manufacturing of test interface products such as load boards, probe cards, and burn-in boards.

EMS

Our manufacturing processes use many raw materials. For 2022, raw materials costs accounted for 80.9% of our operating revenues from EMS. Our principal raw materials include, among others, printed circuit boards, integrated chips, ink, semiconductor devices, computer peripherals, and related accessories and electronic components. Our principal raw materials varied in the past, depending on the end-use products provided.

To ensure quality, on-time delivery and pricing competitiveness, we have established both a standardized supplier assessment system and an evaluation mechanism, continued to maintain close working relationships with our suppliers, and jointly created a stable and sustainable supply chain. In addition, we adjusted the procurement strategy in line with industry trends as well as the nature of raw materials, and decentralized the sources of raw materials to lower our supply concentration risk. However, we cannot ensure that we will not experience any shortages or price increases in the near future. See “Item 3. Key Information—Risk Factors—Risks Relating to Our Business—Our revenues and profitability may decline if we are unable to obtain adequate supplies of raw materials in a timely manner and at a reasonable price.”

Equipment

Packaging

The wire bonding process is important for routing the signal out of die to the system for the IC wire-bonding solutions. Thus, wire bonder is the important equipment used for such process. As products become finer and finer pitch, the bumping process will replace the wire bonding process for the signal routing purpose. Thus, sputter and plater will be the crucial equipment for this type of process.

Wire bonders connect the input/output terminals on the silicon die using extremely fine gold or copper wire to leads on leadframes or substrates. Typically, a wire bonder may be used, with minor modifications, for the packaging of different products. As of January 31, 2023, we operated an aggregate of 25,859 wire bonders, of which 25,284 were fine-pitch wire bonders. As of the same date, 13 of the wire bonders operated by us were consigned by customers. For the packaging of certain types of substrate-based packages, die bonders are used in place of wire bonders. The number of bonders at a given facility is commonly used as a measure of the packaging capacity of the facility. In addition to bonders, we maintain a variety of other types of packaging equipment, such as wafer grinds, wafer mounts, wafer saws, heat sink placement, automated molding machines, laser markers, solder plates, pad printers, dejunkers, trimmers, formers, substrate saws, and scanners. We purchase our packaging equipment from major international manufactures, including Hanmi Semiconductor Co., Ltd., Besi Singapore Pte.Ltd., DISCO Corporation, TOWA Corporation, and All Ring Tech Co., Ltd.

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Testing

Testing equipment is the most capital-intensive component of the testing process. We generally seek to purchase testers from different suppliers with similar functionality and acquire the ability to test a variety of different semiconductors. We purchase testers from major international manufacturers, including Teradyne, Inc., Advantest Corporation, Aircare Engineering Corp., Qualcomm Semiconductor Limited, and Hon Precision, Inc. Upon acquisition of new testers, we install, configure, calibrate, perform burn-in diagnostic tests on, and establish parameters for the testers based on the anticipated requirements of existing and potential customers and considerations relating to market trends. As of January 31, 2023, we operated an aggregate of 5,378 testers, of which 2,167 were consigned by customers and 3 were leased. In addition to testers, we maintain a variety of other types of testing equipment, such as automated handlers and probers (special handlers for wafer probing), scanners, reformers, and computer workstations for use in software development. Each tester may be attached to a handler or prober. Handlers attach to testers and transport individual packaged semiconductors to the tester interface. Probers similarly attach to the tester and align each individual die on a wafer with the interface to the tester.

For the majority of our testing equipment, we typically base our purchases on prior discussions with our customers about their forecast requirements. The balance consists of testing equipment on consignment from customers, which is dedicated exclusively to the testing of these customers’ specific products.

Test programs, which consist of the software that drives the testing of specific semiconductors, are written for a specific testing platform. We sometimes perform test program conversions that enable us to test semiconductors on multiple test platforms. This portability between testers enables us to allocate semiconductors tested across our available test capabilities and thereby improve capacity utilization rates. In cases where a customer requires the testing of a semiconductor product that is not yet fully developed, the customer may provide computer workstations to us to test specific functions. In cases where a customer has specified testing equipment that was not widely applicable to other products that we test, we have required the customer to furnish the equipment on a consignment basis.

EMS

The SMT assembly line is the key facility of our electronic manufacturing operations and generally includes a printer and one or two high-speed mounters and/or a multifunction mounter. The SMT assembly process primarily consists of the following three manufacturing steps: (i) solder paste stencil printing, (ii) component placement, and (iii) solder reflow. High-speed SMT assembly systems offer both economic and technical advantages that may reduce both production cost and time while meeting quality requirements. Thus, SMT has become the most popular assembly method for sophisticated electronic devices. We had 230 SMT lines as of January 31, 2023.

Intellectual Property

As of January 31, 2023, we held 2,284 Taiwan patents, 1,914 U.S. patents, 1,858 P.R.C. patents, 13 Europe patents, and 30 patents in other countries related to various semiconductor packaging technologies and invention, utility, and design on our EMS. In addition, as of January 31, 2023, we had a total of 1,864 pending patent applications, 178 in Taiwan, 515 in the U.S., 1,153 in the P.R.C., 13 in Europe, and 5 in other countries. Moreover, we filed several trademarks applications in Taiwan, the U.S., the P.R.C., and the EU. For example, “ASE,” “aCSP,” “a-EASI,” “a-fcCSP,” “aQFN,” “a-QFN,” “a-S³, “ “a-TiV,” “aWLP,” “a-WLP,” “iSiP,” “iWLP,” “aSiM,” “SiP-id” “SPIL,” “HSiP,” “XnBay” and “Emerald” have been registered in Taiwan.

We have also entered into various non-exclusive technology license agreements with other companies involved in the semiconductor manufacturing process, including Infineon Technologies AG, TDK Corporation, and DECA Technologies Inc. The technology we license from these companies includes solder bumping, redistribution, ultra CSP assembly, advanced QFN assembly, wafer-level packaging, and other technologies used in the production of package types, such as BCC, flip chip BGA, film BGA, aQFN, and chip embedding. One of our license agreements with Infineon Technologies AG will remain in effect until expiration of the patents licensed by the agreement, and the other automatically renews each year unless the parties to the agreement agree otherwise. Our license agreement with TDK Corporation will remain in effect until expiration of the TDK’s patents licensed by the agreement. Our license agreement with DECA will expire on January 13, 2026.

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In addition, we improve our technological platform by licensing innovative package technologies. For example, through wafer bumping and redistribution technology, we are able to form and redistribute bumps on the chip to make a silicon die by directly attaching the substrate using bumps rather than wire bonding, and through wafer level CSP technology, we are able to produce a chip scale package at the stage of wafer level.

Our success depends in part on our ability to obtain, maintain, and protect our patents, licenses, and other intellectual property rights, including rights under our license agreements with third parties.

Quality Control

We believe that our process technology and reputation for high quality and reliable services have been important factors in attracting and retaining leading international semiconductor companies as customers of our services and/or products. We maintain a quality control staff at each of our facilities. Our quality control staff typically includes engineers, technicians, and other employees who monitor the processes in order to ensure high quality. Our quality assurance systems impose strict process controls, statistical in-line monitors, supplier control, data review and management, quality controls, and corrective action systems. Our quality control employees operate quality control stations along production lines, monitor clean room environments, and follow up on quality through outgoing product inspection and interaction with customer service staff. We have established quality control systems that are designed to ensure high-quality products/service to customers, hightesting reliability, and high production yields at our facilities. We also have established an environmental management system in order to ensure that we can comply with the environmental standards of our customers and the countries within which they operate. See “—Raw Materials and Suppliers—Packaging.” In addition, our facilities have been qualified by all of our major customers after satisfying stringent quality standards prescribed by these customers.

Our packaging and testing operations are undertaken in clean rooms where air purity, temperature, and humidity are controlled. To ensure stability and integrity of our operations, we maintain clean rooms at our facilities that meet U.S. Federal Standard 209E class 1,000, 10,000 and 100,000 standards.

ISE Labs’ testing facilities in Fremont, California are considered suitably equipped by the Defense Logistics Agency to perform the MIL-STD-883 tests on monolithic microcircuits in accordance with the requirements of military specification MIL-PRF-38535.

We have also obtained many certifications on our packaging, testing, and interconnect materials facilities. Some of these certifications are required by some semiconductor manufacturers as a threshold indicator of a company’s quality control standards or by many countries in connection with sales of industrial products. The table below sets forth the main certifications we have for our packaging, testing and interconnect materials.

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We also have strict process controls in our EMS business. UGTW’s facilities in Nantou, Taiwan, are considered suitably equipped by the Defense Logistics Agency to perform the MIL-STD-883 tests on assemble, seal, and test hybrid microcircuits in compliance with MIL-PRF-38534 Classes H and K. USIPL is in compliance with VDA 6.3 audit, which focuses on process audit for planning and manufacturing of products and services, and VDA 6.5, which is a qualification for product audit. The table below sets forth the certifications we have obtained for our EMS facilities.

The global market for semiconductor packaging and testing markets is highly competitive. We face competition from a number of sources and integrated device manufacturers with in-house packaging and testing capabilities and fabless semiconductor design companies with their own in-house testing capabilities. Some of these integrated device manufacturers have commenced, or may commence, in-house packaging and testing operations in Asia. Substantially all of packaging and testing companies that compete with us have established operations in Taiwan and across the region.

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Integrated device manufacturers that use our services continuously evaluate our performance against their own in-house packaging and testing capabilities. These integrated device manufacturers may have access to more sophisticated technologies and greater financial and other resources than we do. We believe, however, that we can offer greater efficiency at lower cost while maintaining equivalent or higher quality for several reasons. First, as we benefit from specialization and economies of scale by providing services to a large base of customers across a wide range of products, we are better able to reduce costs and shorten production cycles through high-capacity utilization and process expertise. Second, as a result of our customer base and product offerings, our equipment generally has a longer useful life. Third, as a result of the continuing reduction of investments in in-house packaging and testing capacity and technology at integrated device manufacturers, we are better positioned to meet their packaging and testing requirements on a large scale.

Our packaging and testing business also face actual and potential competition from companies at other levels of the supply chain, which have the financial resources and technical capabilities to enter into and effectively compete within the industry. For example, TSMC has offered advanced packaging technologies such as integrated fan-out (the “InFO”) technology since 2016. InFO is expected to further intensify the competition in the packaging and testing industry.

Our EMS business faces significant competition from other EMS providers, such as Hon Hai Precision Industry Co., Ltd., with comprehensive integration, wide geographic coverage, and large production capabilities that enable them to achieve economies of scale. We believe, however, that we can still achieve satisfactory performance in the market given that we have been able to provide products with high quality and we are capable of designing new products by cooperating with our customers.

Environmental Matters

Our operations of packaging, interconnect materials, and EMS generate both hazardous and non-hazardous wastes. We have installed various types of anti-pollution equipment for the treatment of liquid and gaseous chemical waste and adopted comprehensive antipollution measures for the effective management of environmental protection that we believe are consistent with international standards. In addition, we believe we are in compliance in all material respects with present environmental laws and regulations applicable to all our operations and facilities. Our estimated environmental capital expenditures for 2023 will be approximately US$27.3 million, of which 22.54% will be used in climate change adaptation.

In order to demonstrate our commitment to environmental protection, in December 2013, ASE’s board of directors approved contributions to environmental protection efforts in Taiwan in a total amount of not less than NT$3,000.0 million (US$97.6 million), to be made in the following 30 years. On November 13, 2020, we established the ASE Environmental Protection and Sustainability Foundation for the promotion of public interest related to environmental protection. For the year ended December 31, 2020, we made contributions in the amount of NT$100.0 million through ASE Cultural and Educational Foundation to fund various environmental projects and we have made contributions in the amount of NT$100.0 million (US$3.3 million) for each of the years 2021 and 2022 through the ASE Environmental Protection and Sustainability Foundation to continuously implement the activities related to environmental protection projects.

Our operations involving wafer-level process and requiring wastewater treatment at our Kaohsiung facility have been subject to scrutiny by the Kaohsiung City Environmental Protection Bureau as a result of alleged water pollution violations that occurred in 2013. In addition, five employees of a China subsidiary were accused by a People’s Procuratorate of the P.R.C. (the “Procuratorate”) for committing the crime of environmental pollution that occurred in 2018 and such case was concluded on April 7, 2021. For additional details of these administrative actions and judicial proceedings related to our environment claims, see “Item 8. Financial Information—Consolidated Statements and Other Financial Information—Legal Proceedings.”

Defending against any of the pending or future actions will likely be costly and time-consuming and could significantly divert our management team’s efforts and resources. Any future suspension of operations at our facilities may adversely affect our business, financial condition, results of operations and cash flows. See “Item 3. Key Information—Risk Factors— Risks Relating to Our Business—Any environmental claims or failure to comply with any present or future environmental regulations, as well as any fire or other industrial accident, may require us to spend additional funds and may materially and adversely affect our financial condition and results of operations.”

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Climate Change Management

ASEH established the Corporate Sustainability Committee (the “CSC”) as the highest level of authority in the planning and supervision of sustainability-related strategies including climate change and water-related issues and has entrusted the CSC with facilitating the accomplishment of sustainability management policies and the goals of the three key subsidiaries of ASEH. The CSC comprises ASEH’s directors and top management executives and is headed by the chairman of ASEH. The CSC oversees the performance of the company’s sustainability programs and reports progress to the board of directors annually. ASEH aims to balance the company’s growth trajectory with an equal focus on creating positive social and environmental impacts.

ASEH has passed a compliance review by the Science Based Targets initiative and also committed to Net-Zero emission targets to exert positive social influence. We have planned mid- and long-term absolute carbon reduction goals. Using 2016 as the base year for the completion of Scopes 1 and 2 verification, we plan to reduce absolute Scope 1 and 2 GHG emissions 35% by 2030 and commit to reduce absolute Scope 3 GHG emissions 15% by 2030 from a 2020 base year.

We are committed to reducing the emission of greenhouse gases from our business operations. We aim to address and integrate climate change into our business strategies by (i) Low-carbon energy resource diversification: promoting low-carbon development through energy saving, green energy, and energy storage; (ii) Smart green facilities: building low carbon buildings and factories which use resource recycling and smart technologies to manage operations and production; (iii) Innovative technology and investments: invest in renewable energy or carbon capture and storage technologies to lower environmental and external social costs; (iv) Climate solutions: providing the global market with feasible low-carbon solutions; and (v) Sustainable lifestyle: promoting and internalizing a sustainable way of life by fostering a low-carbon culture internally and contributing low-carbon solutions externally. For further information on our climate change management, please see our TCFD Report, which are available at https://www.aseglobal.com/csr/tcfd-report.

We believe that there are opportunities associated with climate change related risks and have implemented the following strategies to evaluate the risks and identify the opportunities:

Transition to Low-Carbon Economy

Our climate leadership stems from bringing low carbon solutions to the global market and through balancing operational growth and low-carbon transformation targets that meet stakeholders’ expectations.

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We explore potential pathways with environmental specialists to achieve carbon reduction targets and establish response systems to adapt to climate change. We are dedicated to providing high efficiency products as well as investing in the research and development of eco-friendly design. Starting from the product design stage, we actively incorporate environmentally friendly materials into production processes. We have also maintained a multi-site certification for ISO 14001, ISO 14064-1, and ISO 50001, which regularly examines the effectiveness of our environment and energy management systems. Global warming and climate change are contributing to extreme weather patterns and causing more stress to the environment. As global citizens, we are taking measurable actions to support and promote environmental sustainability. We have signed up with a major customer’s “Supplier Clean Energy Program” to increase our energy efficiency and transition to clean and renewable electricity. We have also joined the Semiconductor Climate Consortium (SCC) which is the first global collaborative of semiconductor ecosystem companies focused on reducing greenhouse gas emissions across the value chain, and Taiwan Institute for Sustainable Energy’s Net-zero Emission Alliance in pledging commitment to Net-zero 2030/2050, to build a supply chain that is resilient, transformative, and progressive.

We believe proactively engaging in supplier development is key to the sustainable development of our supply chain. We provide trainings, workshops, seminars, and face-to-face consultation to reinforce our suppliers’ capabilities to address sustainability issues and enhance their awareness of best practices for sustainability. In 2015, we joined the RBA, previously known as the Electronic Industry Citizens Coalition, and every year all of our facilities complete the RBA’s Self-Assessment Questionnaire to identify the labor, environmental, and ethical risks in their respective operations. For internal management, we have adopted the guidelines set out by the United Nations Framework Convention on Climate Change and encourage all our sites to submit self-initiated goals that are set according to their respective operation scale and capabilities.

To improve overall energy management, we established a green energy platform composed of multiple departments of our Group as well as teams based in Taiwan. We have allocated resources to support our suppliers in establishing GHG and product carbon footprint management systems that accelerate their efforts to meet emission regulatory requirements. In 2022, we collaborated with third party consultants on a medium to long term supplier low carbon guidance program which was conducted both online and in-person. The program not only supports suppliers to attain ISO 14064-1certification and carbon footprint verification but also facilitates carbon inventory management across the supply chain. A thorough understanding of the supply chain GHG emissions and carbon footprint allows ASEH to step up our carbon reduction plans and increase competitiveness. As part of our strategic efforts to build a stable and more sustainable supply chain, we established the Supplier Sustainability Awards, which recognizes suppliers with outstanding performance in sustainability. In 2020, the award program was jointly organized by all three ASEH subgroups. In addition, a new supplier incentive program focusing on the company’s Low Carbon and Circular strategies was launched, and the number of participating suppliers expanded. The program encourages suppliers to submit sustainability partnership projects of a 1-3 year duration for review by ASEH and independent third parties. The submitted projects will undergo a rigorous selection process based on the implementation timeframe and efficacy, and selected projects will be funded by the ASE Environmental Protection and Sustainability Foundation.

Sustainability Activities

We are committed to pursuing a win-win sustainable future and achieving our vision of contributing to society through a range of sustainability activities. In 2021, we established our long-term sustainability targets for 2030 based on major sustainability topics and their relative importance to our business operations. These targets serve to strengthen the correlation between the United Nations’ Sustainable Development Goals (SDGs) and our sustainability strategies, leading to the ultimate fulfillment of our commitment to corporate social responsibility.

We currently focus our sustainability efforts in sustainability governance, integrity and accountability, green transformation, sustainable supply chain, inclusive workplace, and corporate citizenship.

Moreover, in June 2022, we established ASE Social Enterprise Co., Ltd. to advance sustainable development, promote social inclusion, and address environmental problems.

For further information on our sustainability efforts, please see our annual ESG Report, which is available at https://www.aseglobal.com/csr-download.

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Information Security Management

We rely on the efficient and uninterrupted operation of complex information technology applications, systems, and networks to operate our business. Our systems are vulnerable to damage or interruption from earthquakes, terrorist attacks, floods, fires, power loss, telecommunications failures, cyberattacks, computer viruses, denial of service attacks, or other attempts to harm our system, and similar events. The risks we face from cyberattacks have increased significantly in recent years. Some of these attacks originate from well-organized, highly skilled organizations. Although there have not been reported major cyberattacks against our systems in recent years, any such attack or system or network disruption could result in a loss of our intellectual property, the release of commercially sensitive information and customer or employee personal data. Failures to protect the privacy of customer and employee confidential data against breaches of network security could result in damage to our reputation.

Furthermore, some of our data centers are located in areas with a high risk of major earthquakes. Our data centers are also subject to break-ins, sabotage, and intentional acts of vandalism, and to potential disruptions if the operators of these facilities have financial difficulties. Some of our systems are not fully redundant, and our disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster, or a decision to close a facility we are using without adequate notice for financial reasons or other unanticipated problems at our data centers could result in loss of production capabilities and lengthy interruptions in our service. Any damage to or failure of our systems could result in interruptions in our service. Interruptions in our service could materially and adversely affect our business, financial condition, and results of operations.

Cybersecurity threats continue to expand and evolve globally. The information security management committee established by the CSC is responsible for overall information security across all subsidiaries. Our vice chairman has been appointed the chair of the committee, which is dedicated to enhancing information security, preventing and mitigating information security threats and risks by developing strategic plans for information security, establishing benchmarks for information security maturity assessments, promoting information security risk management in our subsidiaries, and coordinating internal and external technologies, resources and information. Our chief information security officer is responsible for regular reviews of all our subsidiaries’ information security management and incident response plans, and submits the information security governance report to the board of directors in the fourth quarter of each year.

In 2020, initiated by the information security management committee of the CSC, information security committees of our subsidiaries worked together to integrate and strengthen the information security protection of each subsidiary. The committees also set up an information security risk alert system, through which we could conduct on-site operational inspections to minimize information security risks by hiring third-party experts. In addition, our major subsidiaries have obtained ISO 27001 certification (for information security management system) and ISO 22301 certification to strengthen crisis management and disaster response. In addition, our Kaohsiung facility has been facing accelerating digital transition and is the first semiconductor assembly and testing facility in the world to receive the ISO 21434 international automotive network security standard certification and passed the mobile communication security certification standard and obtained the GSMA certification. We also have established management procedures for the reporting and handling of information security incidents which allow employees to report any security incidents to ensure prompt handling, followed by efficient responses that will mitigate information security risks. In addition, we conduct an annual disaster recovery drill to mitigate the risk of service disruptions caused by impacts from major crisis events to our information systems. All employees participate in our annual proprietary information protection training courses, which include training on information security policy, management framework, and control measures.

Furthermore, we employ third-party service providers to conduct an annual audit and review of our information security performance. In the event of a sudden external cyberattack, our on-site safety teams would immediately hold a meeting to share information, discuss responses and countermeasures; external experts would be invited to join the meeting to conduct reviews and analyses if necessary. While we actively take measures to manage information technology security risks, there can be no assurance that these measures will be sufficient to mitigate all potential risks to our system, networks, and data.

In addition to focusing on information security technologies and capabilities of the semiconductor industry and high-tech manufacturing, in 2021, we joined the SEMI to jointly develop and launch the SEMI E187- Specification for Cybersecurity of Fab Equipment.

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In terms of trade secrets management, we continuously train our employees to enhance protection of trade secret and preventing the risk of infringement. Our management team reports to the board of directors on the progress of the management plan and implementation, and sets forth improvement measures based on the board of directors’ recommendations at least once a year.

Risk Management

Our board of directors established a risk management committee and approved the “Risk Management Policies and Procedures” as the ultimate guiding risk management principle. Awareness in risk management forms an integral part of our management, and risk management has been duly incorporated into our business strategies and organizational culture. To effectively review and oversee the overall sustainability-related opportunities and risks of ASEH, the CSC assigns a supervisory role to the chief administration officer of ASEH. Because chief administration officer concurrently serves as a member of the risk management committee and the chief risk officer of ASEH, in addition to performing a rolling review of the company’s internal sustainability strategies and approaches, the chief administration officer is also responsible for monitoring changes in the external environment and providing simultaneous feedback on the company’s risk management when analyzing sustainability-related opportunities and risks. On an annual basis, the chief administration officer reports the progress of strategies and implementation status directly to the board of directors and risk management committee, ensuring concise visibility of the environmental, social, and governance risk management at ASEH and its subsidiaries. We conduct risk assessments on an annual basis. For major risks, we formulate specific management plans covering goals, organizational structure and responsibilities, and risk management procedures. These plans have been developed to identify, measure, monitor and control various risk exposures effectively. We also conduct a comprehensive evaluation on the probability impacts of various risks faced during the ordinary course of business and take appropriate measures to continuously make improvements to better respond to natural disasters and other disruptive events such as cyberattacks or energy crises that could adversely affect the operation of our business.

We proactively implement risk management plans and report to the board of directors on a yearly basis. For example, in 2022, risk management committee have reported on major risks including the management of geopolitics and COVID-19, and also discussed emerging risks including renewable energy resources, cybersecurity, geopolitics, and talent retention. For a discussion of these risks and other factors, see “Item 3. Key Information—Risk Factors.”

Insurance

We have insurance policies covering property damage and damage to our production facilities, buildings, and machinery. We also have liability insurance policies, including but not limited to general liability insurance policies, product liability insurance policies for specified clients and products, and directors’ and officers’ insurance policies. In addition, considering the cybersecurity risks and challenges facing business entities, we adopted a cyber liability insurance policy, which is expected to help us respond to and control the impact of a cybersecurity incident.

We are not insured against the loss of key personnel.

ORGANIZATIONAL STRUCTURE

The following chart illustrates our corporate structure, including our principal packaging, testing, and EMS manufacturing subsidiaries as of January 31, 2023. The following chart does not include intermediate holding subsidiaries, internal trading subsidiaries, or those subsidiaries without manufacturing operations and in the process of construction. For complete information on our subsidiaries, see Note 4 to our consolidated financial statements included in this annual report.

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Our Consolidated Subsidiaries

ASE Group

ASE Inc.

ASE Inc., which was established on March 23, 1984, is our wholly-owned subsidiary. It is incorporated in Taiwan and provides packaging and testing services, wafer sort testing, final testing services, substrate design, and manufacturing.

ASE Test Taiwan

ASE Test Taiwan, which was acquired in 1990, is our wholly-owned subsidiary. It is incorporated in Taiwan and is engaged in the testing of integrated circuits.

ASE Malaysia

ASE Malaysia, which was established in 1991, is our wholly-owned subsidiary. It is incorporated in Malaysia and is engaged in the packaging and testing of integrated circuits.

ISE Labs

ISE Labs is our wholly-owned subsidiary. It is a semiconductor company specializing in front-end engineering testing that is incorporated in the U.S. and has its principal facilities located in Fremont, California. We acquired 70.0% of the outstanding shares of ISE Labs in 1999 through ASE Test and increased our holding to 100.0% through purchases made in 2000 and 2002.

ASE Singapore Pte. Ltd.

ASE Singapore Pte. Ltd., our wholly-owned subsidiary, is incorporated in Singapore and provides packaging and testing services. We acquired ASE Singapore Pte. Ltd., which was wholly-owned by ISE Labs, through our acquisition of ISE Labs in 1999.

ASE Electronics

ASE Material was established in 1997 as an R.O.C. company for the production of interconnect materials, such as substrates, used in the packaging of semiconductors. We initially held a majority stake in ASE Material, but acquired the remaining equity by means of a merger with ASE Material in August 2004. In August 2006, we spun off the operations originally conducted through ASE Material into our wholly-owned subsidiary ASE Electronics. ASE Electronics currently supplies our packaging operations with a substantial portion of our substrate requirements. The facilities of ASE Electronics are primarily located in the Nanzih Technology Industrial Park near our packaging and testing facilities in Kaohsiung, Taiwan.

ASE Chung Li and ASE Korea

In July 1999, we purchased Motorola’s Semiconductor Products Sector operations in Chung Li, Taiwan and Paju, South Korea for the packaging and testing of semiconductors, thereby forming ASE Chung Li and ASE Korea. In August 2004, we acquired the remaining outstanding shares of ASE Chung Li that we did not already own and merged with ASE Chung Li.

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ASE Japan

ASE Japan, which we acquired from NEC Electronics Corporation in May 2004, is our wholly-owned subsidiary. It is incorporated in Japan and is engaged in the packaging and testing of semiconductors.

ASE Shanghai

ASE Shanghai was established in 2001 as a wholly-owned subsidiary of ASE Inc. and began operations in June 2004. ASE Shanghai primarily manufactures and supplies interconnect materials for our packaging operations.

Wuxi Tongzhi

In May 2013, we, through our subsidiary ASESH AT, acquired 100.0% of the shares of Wuxi Tongzhi from Toshiba Semiconductor (Wuxi) Co., Ltd. Wuxi Tongzhi is based in Wuxi, P.R.C. and is engaged in semiconductor packaging and testing.

ISE Shanghai

ISE Shanghai was established in 2018 and began operating in 2019. ISE Shanghai is based in Shanghai, P.R.C. and is engaged in semiconductor testing.

SPIL Group

SPIL is a provider of semiconductor packaging and testing services. SPIL offers a full range of packaging and testing solutions, including advanced packages, substrate packages and leadframe packages, as well as testing for logic and mixed signal devices. SPIL also provides turnkey services, from packaging and testing to shipment services.

SPIL and ASE entered into a Joint Share Exchange Agreement on June 30, 2016, pursuant to which ASE established ASEH through a statutory exchange, and ASEH acquired all issued and outstanding shares of both ASE and SPIL. For details about the Joint Share Exchange Agreement, see “Item 10. Additional information—Material Contract.”

The Share Exchange consummated on April 30, 2018, and SPIL’s shares concurrently delisted from TWSE and NASDAQ on April 30, 2018. On April 30, 2018, ASE and SPIL became privately held wholly-owned subsidiaries of ASEH. For details about the SPIL Acquisition, see “Item 4. Information on the Company—SPIL Acquisition.”

The board of directors of the subsidiary, SPIL (Cayman) Holding Limited, resolved in September 2020 to dispose its 100% shareholdings in Siliconware Electronics (Fujian) Co., Limited to Shenzhen Hiwin System Limited with a consideration of RMB966,000 thousand. The disposal was completed in October 2020.

USI Group

USI Group engages primarily in EMS in relation to computing, consumer electronics, communications, industrial, and automotive, among other services and businesses.

As of January 31, 2023, we held 100.0% interest in USI Inc. and held 78.0% interest in USI Shanghai through our subsidiaries USI Inc. and ASE Shanghai. In addition, as of January 31, 2023, we held 100.0% interest in FAFG through our subsidiaries USIFR and USI Shanghai. See “Item 4. Information on the Company—Information on the Company—History and Development of the Company—USI Group and USI Group Restructuring” for more information.

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PROPERTY, PLANTS AND EQUIPMENT

We operate a number of packaging, testing, and electronic manufacturing facilities in Asia, Africa, the U.S., and Europe. Our facilities provide varying types or levels of services with respect to different end-product focus, customers, technologies, and geographic locations. With our diverse facilities we are able to tailor our packaging, testing, and electronic manufacturing solutions closely to our customers’ needs. The following table sets forth the location, commencement of operation, primary use, approximate floor space, and ownership of our principal facilities in operation as of January 31, 2023.

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