Hello, I am Ken Hsiang, the Head of Investor Relations for ASE Technology Holding Co., Ltd. Welcome to our Q3 2022 earnings release. Thank you for attending our conference call today. Please refer to our safe harbor notice on page 2. All participants consent to having their voices and questions broadcast via participation in this event. If participants do not consent, please disconnect at this time. I would like to remind everyone that the presentation that follows may contain forward-looking statements. These forward-looking statements are subject to a high degree of risk, and our actual results may differ materially. For the purposes of this presentation, our dollar figures are generally stated in New Taiwan dollars unless otherwise indicated. As a Taiwan-based company, our financials are presented in accordance with Taiwan IFRS.
Results presented using Taiwan IFRS may differ materially from results using other accounting standards, including those presented by our subsidiary using Chinese GAAP. Intercompany transactions between our ATM and EMS businesses have been eliminated during consolidation but appear within business unit results. For today's call, I am joined by Joseph Tung, our CFO. During the call, I will go over our financial results and outlook. Joseph will be available to answer questions during the Q&A session that follows. Also, as a reminder, we disposed of ASE, Inc.'s China sites at the end of 2021. For our financial results presented here, in addition to our legal entity results, we have included information on a pro forma basis or as if the disposition of ASE, Inc.'s China sites had already occurred.
We believe the pro forma results give additional meaningful information which would assist in providing comparability of our financial results. For the purposes of this presentation, we will generally discuss our full company and ATM Q3 results sequentially, compared with Q2 legal entity results and year-over-year compared with pro forma Q3 2021. Please turn to page 3, where you will find our Q3 consolidated results with legal entity and pro forma basis comparisons. For the Q3, we recorded fully diluted EPS of TWD 3.92 and basic EPS of TWD 4.03. Consolidated net revenue increased 18% sequentially and 25% year-over-year. We had a gross profit of TWD 38 billion, with a gross margin of 20.1%. Our gross margin declined by 1.3 percentage points sequentially and 0.3 percentage points year-over-year.
The sequential and annual margin decreases were primarily attributable to higher EMS business mix, offset in part by favorable variable currency conditions within our ATM and EMS businesses. Our operating expenses increased sequentially by TWD 0.5 billion during the Q3 to TWD 14.3 billion, primarily as a result of higher R&D expenses with new product introductions or NPIs and higher profit sharing expenses during the quarter. On a year-over-year basis, our operating expenses increased by $1.9 billion, mainly from the increase of scale in both of our ATM and EMS businesses. Our operating expense percentage declined sequentially to 7.6%. On an annual basis, our operating expense percentage declined one percentage point from 8.6%. Improvements in operating expense percentage were achieved as a result of operating leverage created.
Operating profit was TWD 23.7 billion, up TWD 3.1 billion sequentially and TWD 5.3 billion year-over-year. Operating margin was 12.6%, declining 0.2 percentage points sequentially. Operating margin increased 0.3 percentage points on an annual basis as a result of higher operating leverage. During the quarter, we had a TWD 0.1 billion net non-operating loss. This amount included gain from our net foreign exchange hedging activities, offset in full by net interest expense of $1 billion. Interest expense is higher as a result of higher interest rates on our floating rate debt and higher borrowing after our dividend distribution during the quarter. Tax expense for the quarter was TWD 5 billion. The effective tax rate for the Q3 was 21.4%. We expect the tax rate to taper down during the Q4.
We now expect a full-year effective tax rate being closer to 21%. Net income for the quarter was TWD 17.5 billion, representing an improvement of TWD 1.5 billion sequentially and TWD 3.3 billion year-over-year. The US dollar strengthened against the NT dollar and the Chinese yuan during the Q3. Sequentially, we estimate that currency fluctuation had a 1.2 percentage point beneficial impact to our holding company gross margin. From a year-over-year perspective, we estimate that currency fluctuation had a 3.1 percentage point positive impact to gross margin. On the bottom of the page, we provide key P&L line items without the inclusion of PPA related expenses. Consolidated gross profit would be TWD 38.9 billion with a 20.6% gross margin. Operating profit would be TWD 24.9 billion with an operating margin of 13.2%.
Net profit would be TWD 18.6 billion with a net margin of 9.9%. Basic EPS excluding PPA expenses would be $4.30. On page four is a graphical presentation of our consolidated financial performance. The overall gross margin performance of the company fluctuates somewhat generally in line with the mix of EMS revenue relative to our ATM revenue. The overall profitability of the businesses have improved with increased business scale. Despite the business environment appearing to slow down, we still delivered record revenues and operating profit at the holding company level and at each of our ATM and EMS business units. On page five is our ATM P&L with historical results on a legal entity and pro forma basis. During the Q3, on a US dollar basis, our ATM business revenues performed in line with our original outlook.
Capacities continued to be relatively tight during the quarter and with strong demand for our advanced and SIP products, leading to higher material content. Overall demand for our services remained strong despite ongoing inventory digestion. Customer forecast achievement was also relatively good during the quarter. We did not see major surprises to either the upside or downside, although forecast adjustments for future quarters were more dynamic. Certain communications, automotive, and networking products were relatively stronger during the quarter. On the expense side of our ATM business, as somewhat anticipated, we continued to see a higher cost environment relating to various unfavorable macro situations. In particular, we are noting some inflationary impact on our cost of goods sold, including costs related to various bills of material, energy costs, and rising labor rates. These impacts have largely been offset by local currency depreciation and higher passthrough pricing to our customers.
For the Q3, revenues for our ATM business were a record TWD 98.8 billion, up TWD 3.8 billion from the previous quarter and up TWD 8.7 billion from the same period last year. This represents a 4% increase sequentially and a 10% increase year-over-year. Gross profit for our ATM business was TWD 28.8 billion, up TWD 1.1 billion sequentially and up TWD 4.1 billion year-over-year. Gross profit margin for our ATM business was 29.2%, flat sequentially and up 1.8 percentage points year-over-year. The sequential gross margins were flat primarily due to the effect of NT dollar depreciation, offset by higher raw material product mix and higher utility costs.
The year-over-year gross profit margin improvement was primarily attributable to business scale benefits and NT dollar depreciation, offsetting the negative impact of a higher raw material product mix and increases in other manufacturing costs. During the Q3, operating expenses were TWD 10.2 billion, up TWD 0.4 billion sequentially and TWD 1.1 billion year-over-year. Our operating expense percentage was 10.3%, flat sequentially and up 0.2 percentage points year-over-year. The increase was driven by higher salary and profit sharing expenses from achieving higher profitability targets. During the Q3, operating profit was TWD 18.7 billion, representing an increase of TWD 0.7 billion quarter-over-quarter and an improvement of TWD 3 billion year-over-year. Operating margin was 18.9%, flat sequentially and up 1.5 percentage points year-over-year.
The NT dollar depreciating against the US dollar had a positive 1.3 percentage point impact on our ATM sequential margins. On a year-over-year basis, we estimate that the strengthening US dollar had a 3.8 percentage point positive impact to margins. Without the impact of PPA related depreciation and amortization, ATM gross profit margin would be 30.1%. Operating profit margin would be 20%. On page six, you'll find a graphical representation of our pro forma ATM P&L. On page seven is our pro forma ATM revenue by market segment. The market segments were relatively unchanged as compared with the previous quarter, with a percentage increase in communications and a percentage point decrease in automotive consumer, and others. Though the automotive segment is not separately displayed here, it continues to outgrow other market segments.
On page eight, you will find our pro forma ATM by service type. Service type percentages were relatively stable, with advanced packaging and wire bonding, each giving a percentage point to materials and others. Seasonal softness within our advanced packaging and wire bonding businesses, compounded with seasonality of our RF module production, led to small percentage movements in each category. On page nine, you can see the Q3 results of our EMS business. During the quarter, demand was stronger than anticipated, driven by higher loading and stronger than expected demand for both our traditional EMS and SIP services. We believe some products may have an earlier manufacturing cycle when compared with the previous year. Customers in general have been proactive to produce earlier as a preventative measure against any unforeseen supply chain disruptions.
In terms of EMS profitability, current quarter improvements were driven by increased scale of manufacturing and the strength of the US dollar relative to the RMB, causing short-term reductions in raw material costs recorded during the quarter. During the Q3, EMS revenues increased TWD 24.4 billion or 37% sequentially, and increased TWD 29.5 billion or 48% year-over-year. Revenues were somewhat ahead of where we expected, primarily as a result of higher than expected SIP and traditional EMS business. Overall profitability for our EMS business improved, with gross margin increasing 0.1 percentage points to 10.1% and reaching 5.6% operating margin. The RMB weakening against the US dollar improved gross margins by 0.8 percentage points during the quarter. On the bottom half of the page, you will find a graphical representation of our EMS revenue by application.
Application movements here are generally in line with underlying product seasonality, with consumer and communications peaking and other applications declining. On page ten, you will find key line items from our balance sheet. At the end of the quarter, we had cash equivalents, and current financial assets of TWD 62 billion. Our total interest-bearing debt was TWD 224 billion. Total unused credit lines amounted to TWD 296.1 billion. Our EBITDA for the quarter was TWD 38.6 billion. Net debt to equity was 53%. Our annual dividend payment was made during the Q3, resulting in higher net debt to equity percentage. On page eleven, you will find our equipment capital expenditures.
Machinery and equipment capital expenditures for the Q3 in US dollars totaled $400 million, of which $197 million were used in packaging operations, $134 million in test operations, and $50 million in EMS operations, and $19 million in interconnect material operations and others. We continue to provide our EBITDA in US dollars here as a reference. We believe that the company's EBITDA relative to our equipment CapEx serves as a key financial performance metric for the company. For the quarter, EBITDA was $1.3 billion. Looking forward, we would first like to address the potential impact of the recent US EAR. We at this time, believe that relatively few devices that are currently serviced by ASE fit the specifications indicated in the recently issued US rules.
As such, at this time, we do not believe there to be a material financial impact. Nevertheless, we will continue to work closely with our customers to assess if future products may cross such thresholds. Second, in regards to the ongoing business environment, as our COO, Dr. Tien Wu, mentioned in our previous quarter's call, we believe the industry continues to be in a state of inventory correction. Unexpected demand, compounded with supply instability, created an unprecedented manufacturing situation. The volatile supply chain was unusually complicated as COVID spread throughout the world. Companies not only needed to order more products, they also had to deal with longer lead times and earlier order commitments. As signs of cooling began towards the end of 2021 into early 2022, production continued at previously established rates. This phenomenon appears to have created a higher level of inventory throughout the semiconductor manufacturing chain.
Now, as most of the world adapts to in an endemic COVID society, the semiconductor industry looks to reset back to a more normalized level of inventory. In the same light that our customers look to bring up overall inventory, they are now choosing to bring down inventory to adjust for lower manufacturing risk and a softening demand environment. This is the framework of the current industry inventory digestion. For the Q4, we see a generally softening environment. There will be some products that remain relatively strong, but issues with potential recessions and anti-inflationary policies look to be dampening overall demand. Even looking beyond the Q4, our customer forecasts are also experiencing an additional level of volatility as customers balance inventory reduction with product demand. Despite adjusting downward, forecast movements are on balance very controlled.
We do see this environment continuing to stretch into the first half of 2023. We believe that the interesting question to ask would be: What impact will the inventory digestion period have on ASE? And what will the impact be once it's over? Of course, we don't have a magic crystal ball, but we can take an educated guess based upon three differences between the previous down cycle versus the upcoming one. First and foremost, our combination with SPIL has been completed. This increases our service offerings and our pricing capability even in a soft environment. Second, we have demonstrated that customers prefer ASE over our competition. As a result, we continue to gain share, and even more so in a downturn. We estimate that we are roughly three times the size and scale in pure ATM business of our nearest competitor.
With sizable scale advantages comes competitive advantages in the form of lower cost and better yield. Third, heterogeneous integration paired with recent developments in advanced packaging technologies are encouraging our customers to rethink how their future products are designed. ATM manufacturing processes are now becoming part of the mainstream methodology for increasing transistor density. ASE is in a unique position to deliver additional value in these newly developing markets. These competitive factors lead us to believe that we are in the most competitive position we have been in ever, and as a result, we believe we can continue to outgrow our competition. Even though next year we see the logic semiconductor industry's prospects as being somewhat soft, ASE can continue to outperform our competition. It's definitely early, and customer forecasts are not particularly firm.
If we were to guess at this point, with the current information, we see a seasonally shaped but flattish year ahead of us. From a profitability perspective, we reiterate our belief that annual structural margins have been lifted from peaking and troughing historically between cycles between 20%-25%, to now from the mid-20s to 30%. Though we do not necessarily wish for a down cycle, we do understand that with one, we will be given the opportunity to prove our strategic assessment and demonstrate our resiliency. As a note, we are trying to improve transparency and simplify the methodology used to provide our quarterly outlook. We have made a few changes in the way we provide our outlook. Part of this change includes using NT dollar figures with applicable exchange rate assumptions.
We see the US dollar and NT dollar exchange rate going from 30.1 in the Q3 to 31.8 in the Q4. With those exchange rates in mind, we provide our outlook as follows. For our ATM business in NT dollar terms, our ATM Q4 2022 business levels should be slightly below Q2 levels this year. As a reference, our ATM Q2 revenues were TWD 94.9 billion. Our ATM Q4 2022 gross margin should be slightly below first quarter 2022 gross margin. As a reference, our first quarter 2022 gross margin was 27.5%. For our EMS business in NT dollar terms, our EMS Q4 2022 business levels should be slightly above Q3 levels this year.
As a reference, our Q3 EMS revenues were TWD 90.7 billion. Our EMS Q4 2022 operating margin should be close to the operating margin in the same period last year. As a reference, our Q4 2021 operating margin was 4.4%. Thank you. We can start our Q&A session now.
If you have any question, please raise your hand. When you ask questions, please hold two questions at a time. Thank you. Now we have a question from Mr. Randy Abrams of Credit Suisse.
Yes, thank you. Okay. The first question I wanted to ask actually on your acknowledgment of the slowdown, could you talk about the CapEx outlook? It looks like you slowed it down a bit for Q3. If you could give a latest how you expect 2022 to come in and then also a view for 2023. Then within that, you've had relatively better utilization and strength on advanced technology, whether you're seeing that start to slow or do you still see into the coming quarters, the advanced holding up better than some of the mature wire bonding?
Yeah. I think for this year's CapEx, we will bring this down a little bit, roughly around 10%. For next year, we're still in the process of formulating the overall outlook. We will decide how much we will be spending for next year. In terms of utilization in Q3, we continue to have pretty tight utilization, with assembly and test both over 80%. Going into fourth, I think the overall utilization will range from 75%-80% for both assembly and tests, with the advanced packaging capacity slightly higher than wire bonding.
Okay, great. I guess I'm gonna get two. Okay. The second question I wanted to ask, actually, if you could give a bit more detail about the margin, where it looks like in your guidance, it's going back to first quarter levels, sales back to Q2, so implies a bit more dip, despite currency being favorable. If you could talk about that trend and then also, I think you mentioned it should be a better pricing environment, but just how you are seeing that, whether customer pressure, competitive pressure, how that's shaping up. Then just a factor on the margin, what's driving a little bit bigger decline there.
Well, I think overall in Q4, I think the pricing still remains to be stable. Although we do expect that there will be a round of going back to a normal pricing negotiation going into next year. In terms of margin, I think of course the loading really is the determining factor of a margin. Going into Q4, because there's gonna be some softness in terms of the overall utilization, and volume will come down a bit. The margin certainly will have some impact. In Q3, we have a better margin because the loading continues to be high.
I think in going to Q4, the margin prospects that we are looking at, it really reflects the differences in loading. Also, I think, as we mentioned earlier, we are entering into a higher cost structure, higher cost environment, because of the larger macro situations that we're facing.
Next question is from Miss Sunny Lin of UBS. Sunny?
Hi. Can you hear me?
Yes.
Thank you so much for taking my questions. My first question is to get your thoughts on how we should think about the seasonality going to first half of 2023. Understand things are still moving pretty quickly, but any initial expectation will be appreciated. Thank you.
Like you said, there is a lot of uncertainties in front of us. We are not giving out any guidance for first quarter yet. What we could say is, we're gonna see a normal seasonality factor comes into play. Typically, in the first quarter, in the past, under normal seasonality, we should be looking at a 5%-10% drop in the revenue.
Got it. My second question, if we look at the demand environment for the second half of this year, automotive, server, industrial are still relatively stable. How would you think about the sustainability going to early 2023? I guess, in recent weeks, we start to hear from the supply chain regarding the increasing uncertainties. Just want to get your thoughts here. Also, would you expect the IDM outsourcing to also slow down somewhat going to 2023?
I think we are not different from anybody else in the industry that we are facing the same uncertainties in front of us. Our best estimate for the year is that we should be looking at a flattish year. Given our position, we remain confident that we will outperform the industry as whole and also our competitors. Going into the first quarter, I think the same pattern remains that the automotive and networking will continue to be performing stronger than the other sectors.
I think the industry inventory digestion will continue in the first half of next year. And also the new restrictions imposed by the US that remains to be seen. There are a lot of moving parts in front of us, and we will be closely monitoring the situation.
Our next question is from Bhavya Kumar . Bhavya, please state your company name before your question. Bhavya? Our next question is from Rick Hsu.
Yeah, hi. Can you guys hear me?
Yes.
Okay. Just one question to Joseph. Hi, guys. I just wanted to clarify, when you said next year you are looking for kind of flattish 2023, does that mean the total your total business or the total industry IC ATM business or the global semiconductor market?
No, no. What we are talking about our sales, I think, you know, I think the general idea is that the market returns softer next year. From our best estimates, we're looking at our overall situation and the customer forecast. We are still confident that we will outcompete everybody else and maintaining at least a flattish year for ourselves in terms of ATM business. Another factor to look at is that we believe that particularly in a downward market situation, our market share expansion should actually accelerate given our leading position there.
Right. Okay, just one quick follow-up. Can you give us more color about what's your view on the global semiconductor market next year? Would that be declining or just give us some direction?
Well, I think the chance of coming down seems to be higher.
Okay, great. Yeah. That, that's helpful. Thank you so much. Yeah. Yeah. Yeah. That's all I have. Thank you.
You're welcome.
Next question is from Evelyn Yu of Goldman Sachs.
Hello, this is Bruce. Can you hear me?
Oh, Bruce.
Hi, Bruce.
Hi. Let me try to ask some simpler questions. So can you give us what's your capacity distribution? You know, how much of a capacity in China, how much of a capacity from, you know, different geographical location and what is the revenue coming from the different geographical location for ATM alone? For EMS, you know, for your consumer and communication business, how much of the business and the capacity is coming from China?
In terms of ATM, we have about 7% out of China in terms of capacity.
Mm.
Our Taiwan operation is about 85%.
By EMS?
EMS, around 60-some %, is in China.
Mm.
The others are, you know, all over the place.
Do you see a strong customer demand asking for Taiwan plus one or, you know, China plus one capacity or, you know, i.e., that they're asking you to have some backup site outside of Taiwan, China?
I don't think it's that obvious in terms of ATM. I think our going rate still continues to be strong in Taiwan because of the much larger and more complete infrastructure. It's very difficult to go outside to set up something new in a short run. I think all the technology development are still here. I think the customers are still pretty confident that working with Taiwan is a safer bet for them. In terms of EMS, we do see more requests from our customers to further expand to outside of China.
So-
We are making a lot of progress in terms of expanding our capacity outside of China, including our investment in Poland, in Vietnam, also in Taiwan.
I see. So which means that you don't have the capacity or, you know, or do you don't have any plan to increase your non-Taiwan, non-China ATM capacity?
No, I think we.
Any facility building up plan at this moment?
We'll continue to monitor the situation and, you know, we'll go where our customer wants us to go. Yeah, but, provided that makes commercial sense for us.
So it's-
It's gonna be a dynamic process. We'll continue to monitor the situation and make the right decision.
The current customer demand is not strong enough for you to make a decision to go aggressive to expand the ATM capacity outside Taiwan and China.
Well, I think what you are referring to is really the US and, yes, I think, there are some inquiries about whether we will be having something sizable in the US. Like I said, we are monitoring the situation to see how we can better address that when the time comes.
I see. Understand that.
Yeah.
The next question I'll try to follow with the seasonality. I'm actually very surprised that you mentioned that the first quarter is gonna be pretty. It will follow a seasonality, which is not the case for most of the foundry at this moment. I mean, we are looking at 15%-20% sequential decline in the first quarter for most of the foundry names. If there is no wafer, how can you have a similar seasonality like in previous years? Can you tell me where, you know, my thought process goes wrong?
There is a time lag between the foundries and production and our production. I think the wafer bank has already been there. We are looking at the quarter performance based on the forecast that we're getting from our customers. Right now, we do see a normal seasonality pattern in first quarter.
I see. Well, that's a lot better than expectation. One quick follow-up for the LTA. You know, what's the current situation for those LTA you signed like a couple of quarters ago? You also mentioned that some a little bit different pricing environment in the Q4. Can you elaborate a bit more?
Well, I think the LTA is signed during this relatively special circumstances, and it's one of the ways for us to secure or better our relationship with the customers. I think it did serve its purpose and is. The LTAs are going into a retirement cycle now. You know, I think coming next year, I think things will start to be normalized in terms of our pricing negotiations. I think our position does give us a good leverage to have a suitable pricing strategy that works for both ourselves and our customers. That would be the pricing environment for next year.
Next question is from Szeho Ng of China Renaissance.
Oh, hello. Hey, gentlemen. Hi, Joseph. Yeah, two questions from me. The first one, is it possible to quantify any additional cost synergy we can expect from the ASE-SPIL merger? Because Ken earlier mentioned that the merger actually make us more resilient in the downturn.
Well, of course, you know, the synergy can come from our business negotiations with our customers. It comes from the better usage or better allocation with our resource. In terms of our R&D efforts. In many different areas, we can have synergies created and, you know, sharing of best-known methods is also one of them. That's really what Ken was mentioning earlier on in the session. That through the merger with Spil, it does give us a better cost structure and also a higher efficiency when we are facing a challenging environment now.
Maybe from the OPEX intensity perspective, can we expect further improvement?
Well, I think we have been making a lot of improvement in terms of our OPEX ratio. In Q3, our OPEX ratio was 7.6%, down from. If we look at the same period last year, it was about 8.2%. We are making a lot of progress in operating expenses. For Q4, I think the OPEX ratio will remain at the similar level to Q3. We'll continue to have a tight control over our operating expenses.
Our next question is from Mr. Gokul Hariharan.
Hi. Thanks for taking my questions, and congrats on the resilience on the margins especially. I had a couple of questions. One, could you talk a little bit about the inventory situation that you're seeing today, compare it with the last maybe couple of cycles. Based on the wafer banks that you see, SLA, what you see with customers, it seems like inventory is definitely much more elevated compared to the last few cycles. Just wanted to understand why you feel by first half next year we should be done with the inventory correction. Or do you think that it could take longer than first half of next year to kind of clear out the inventory?
I think the inventory correction already started in the first half of the year, and it's continuing. I think it's stretching a little bit longer than what was originally expected. Same as everybody else, we're expecting this to last throughout first half of next year. I think partially it will be consumed. Also, some of the inventory will actually be replaced by the new products that we introduce for next year.
Okay. On your rough guidance or indication for next year being flattish, what is your expectation of industry down mid-single digit or something like that? Is that how we're thinking about how much ASE will outgrow the industry next year?
No, I don't really have a view except, you know, like I said, the chance of coming down is higher.
Understood.
Yeah.
On pricing, should we expect that we should see pricing going back to the maybe mid to high single digit kind of decline next year? Or we think when we talk about the more normalized pricing environment, it will still be better than the mid to high single digit kind of price declines that we were used to in the past.
Well, it's gonna be a normalized pricing environment and, you know, there will be price talks throughout the year. You know, like I mentioned, our position does give us better pricing capability when we start the negotiation process. We believe that we will have the capability to come up with a suitable pricing strategy that works for both ourselves and our customers. And like I said, like we mentioned, we do believe and we are very confident that the margin we gonna have will move up from previously between cycles 20%-25% now to mid-20% to 30%. We remain confident that we will have a structural margin improvement.
If you have any questions, please raise your hand. Please hold two questions at a time. Thank you. Next question is from Szeho Ng of China Renaissance.
Yes, I have follow-up. Yeah, regarding the China ATM operation, can we assume that we are primarily serving the domestic clients in that factory?
Yes. It's more of local customers. I think the operation there is still working quite nicely at this point, at a healthy level. We believe that come next year it will remain a resilient operation of ours.
Good. Yeah. The other one on the dividend one. Going forward, for the dividend policy, would it be more based on the payout or based on the absolute dollar level?
I think it was more on the payout.
Oh, okay. That means it's sticking to the ballpark around 50%, right?
I'm sorry?
The ballpark is around 50%. Yeah.
I think we have been paying out roughly 60%-65%.
Oh, okay. All right. Okay. Got you.
Next question is from Mr. Gokul Hariharan of J.P. Morgan.
Yeah. Hi. Thanks. One follow-up question from my side. Could we talk a little bit about the demand environment in smartphones? Are we seeing mostly demand weakness in the Android camp, or are we starting to see some demand weakness in the high-end smartphones as well? Is it becoming a little bit more broad-based? And for your auto and industrial demand, do you now factor in any potential correction in that demand as well next year? Or you think that it'll be reasonably resilient through most of next year as well, unlike the rest of the semiconductor industry?
Yeah, I think automotive continues to be the brightest spot at this point. We do believe that the momentum will continue into next year. In fact, year to date, I think our automotive has been growing very fast. We have over 50% growth this year. From ATM perspective, I think we'll be able to hit the $1 billion revenue mark. And also for EMS, it will hit a $700 million threshold, and we'll continue to be going strong. I think in terms of EMS, the original goal was to reach a $1 billion mark by 2024, but that's gonna accelerate.
We have a very good chance in 2023, we'll already reach that goal. In terms of smartphone, I think, you know, across the board, I think the Android system continues to be soft. Although in terms of unit growth, in terms of unit volume, it does come down. One offsetting factor is the rising IC content in it. It's gonna be softer, but you know, it's not gonna crash.
Okay. Thank you very much.
Our next question is from Randy Abrams of Credit Suisse. Randy.
Yeah, thanks for taking the call. Actually, one too, just one on the U.S. side, which has had a very strong year. I think you discussed pull-in a bit earlier, Bill. Could you give a framework actually for that part of the business for next year, both the first half coming off a high base and then full year? If you see any shift and also traditionally in this, what the outlook is?
Well, we're not gonna talk about any customer in particular, but I think overall, we remain confident that we'll be seeing growth in our EMS business come next year.
Okay. That should still grow. I mean, you talked auto still has a lot of growth, but overall, sounds like better than IC ATM from what you're seeing.
EMS, yes.
Okay. The second question, it relates to China. I know not much direct impact. Could you discuss just the behavior? It might be early, but one is if there's any change in more localization. Like, where domestic customers prioritizing domestic. Flip side, international customers, if you've seen any inquiry that could be an incremental business that might have been using domestic. I'm just curious if you're seeing shifts in either direction there.
You mean the local-
Yeah. Like, one would be China-based. Your China-based customers, if they start prioritizing even a bit more local supply. Then the flip side is international customers, if they're a bit wary and actually move a bit out from domestic OSATs, if there's been any shift.
Well, I think the customer come to us regardless it's Chinese customers or other customers. They come to us for value. It's not coming for, you know-
Geopolitical.
This is business. It's not a political decision here. I think right now we are seeing that our Chinese customers are giving us normal forecast. There's not that much of a movement there because of the tension.
Okay. No, that's good. It sounds like not much movement internationally either. It's because it is kinda targeted on certain parts, so.
No. I think it's up and down, still going, you know.
With the normal business.
With the normal industry situation.
Okay, great. No, that's helpful. No, thanks a lot.
Thank you.
There is no more question.
Okay. If there is no more questions, I will end the session. I think, you know, there's a lot of challenges ahead of us, but we are confident that we can weather this very nicely. Given our leading position, we are very confident that we will continue to have a healthy year in front of us. Thank you very much.