We were always moving closer Even when we couldn't see All the lines that ran between us All the ways you'd guess Hello, I am Ken Sheng, the Head of Investor Relations at ASC Technology Holdings.

Welcome to our third quarter 2026 earnings release. I am joined today by Joseph Tung, our CFO. Thank you for joining us 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 you do not consent, please refrain from asking questions or leave the session now. 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, dollar figures are generally stated in New Taiwan Dollars unless otherwise indicated. As a Taiwan-based company, our financial information is presented in accordance with Taiwan IFRS. Results presented using Taiwan IFRS may differ materially from results using other accounting standards, including those separately presented by our subsidiaries. For today's presentation, I'll give a brief business update and then go through the Q3 results. Joseph will close with our Q4 outlook. During the third quarter, our ATM capacities ran at or near full utilization rates. Demand for our services continues to outpace our ability to supply such services within our LEAP and much of our non-LEAP capacities. Our revenues grew faster than we had initially expected, driven primarily by faster than expected installations of high demand LEAP capacities. Non-LEAP also performed slightly better than initial expectations. and even though, historically speaking, third quarters tend to be driven by seasonal strength, given the increasing mix of LEAP services, seasonality related to underlying consumer buying patterns are becoming less of a factor in our overall loading patterns. Overall ATM profitability also improved more than anticipated, primarily as a result of higher than expected LEAP loading. Our EMS business's third quarter grew slightly ahead of our expectations. The third quarter continues to exhibit strong underlying seasonal demand for our SIP-related products. Our EMS business's profitability was in line with our expectations. Please turn to page 3 where you will find our third quarter consolidated results. For Q3, fully diluted EPS was $5.84 and basic EPS came in at $6.13. Year-to-date through Q3, our fully diluted EPS was $13.40 and basic EPS was $14.17. Consolidated net revenues reached a record $244.2 billion, up 28% sequentially and 45% year-over-year. Gross profit was $54 billion, with a gross margin of 22.1%, up 1.1 percentage points sequentially and 5 percentage points year-over-year. The sequential improvement stems from higher LEAP content in our ATM business. The annual improvement reflects higher ATM revenue and a more favorable NT dollar environment. Operating expenses totaled $20.8 billion, up $1.8 billion sequentially, and $5.1 billion year-over-year, primarily driven by higher headcount, profit-sharing expenses, and further R&D spend to support LEAP initiatives. As a percentage of revenue, operating expenses declined sequentially by 1.5 percentage points and annually by 0.8 percentage points to 8.5%. Our OPEX percentage declined principally from leap revenue growth after previous periods of R&D investment. We currently see operating expenses continuing to rise on an absolute level, but on a percentage basis should remain near the range demonstrated in the current year. This delivered an operating profit of $33.1 billion, up 57% quarter over quarter and 151% year over year. We had an operating margin of 13.6%, expanding 2.5 percentage points sequentially and 5.8 percentage points annually. Rising company profitability was primarily driven by higher loading and expanding LEAP product mix. Non-operating loss totaled $0.4 billion. This amount includes net interest expenses of $2.6 billion, Up $0.8 billion sequentially due to higher debt levels. Tax expense was $4.8 billion. Our effective tax rate for the quarter was 14.8%. During the quarter, we saw beneficial changes to tax regulations and foreign currency movements which positively affected our net deferred tax position. Given these changes, we now expect our full-year effective tax rate to be between 16% to 17%. Net income for the quarter was $27 billion, up 28% sequentially and 148% year-over-year. On page 4 is a graphical view of our consolidated quarterly performance. For the third quarter 2026, our ATM business represented 62% of our consolidated holding company revenues, while representing 91% of our operating profits. This is compared to 59% of consolidated holding company revenues, while representing 82% of operating profit in the third quarter of last year. As our ATM Leap business continues to outgrow our other service areas, we continue to believe that our ATM business will continue to increase as a percentage of our overall business and profitability. ATM P&L For the third quarter of 2026, we recorded record revenues for our ATM business of $151.5 billion, up $25.3 billion sequentially and $51.2 billion annually, representing an increase of 20% sequential and 51% annual growth. Gross profit for our ATM business was $46.4 billion, up $11.9 billion sequentially and up $23.7 billion year-over-year. ATM gross profit margin was 30.6%, up 3.3 percentage points sequentially and 8 percentage points annually, driven by higher operating leverage and a more favorable revenue mix. particularly a higher mix of LEAP. Our gross margin has surpassed our historical structural margin ceiling. A theoretical structural margin for our ATM business would now substantially depend upon the amount of expected LEAP product mix. Given that our LEAP business continues to grow rapidly, our margin range now appears to be dynamic rather than fixed structurally. During the third quarter, operating expenses were $16.2 billion, up $1.5 billion sequentially and $4.3 billion year-over-year. The sequential and annual increases in operating expenses are primarily related to higher overall labor costs and general R&D expenses. Our operating expense ratio was 10.7%. We are approaching our near-term ATM OpEx percentage target as we balance cost in a more technology-led growth framework. During the third quarter, operating profit was $30.2 billion, representing a sequential 53% increase of $10.5 billion. and a 178% annual increase of $19.4 billion. Operating margin was 20%, up 4.3 percentage points sequentially and up 9.2 percentage points year-over-year. The NT dollar had a positive 0.5 sequential and a 3.3 annual percentage point impact to our gross and operating margins. On page 6, you'll find a graphical representation of our ATM P&L. The chart currently highlights our gross profit margin. Over the displayed time frame, our margin improvement has been largely driven by improving utilization rates within traditional product lines and increasing leap product mix. In this time frame from peak to trough, our gross profit margin percentage has climbed 8.7 percentage points. On page 7 is our ATM revenue by communications, computing, and consumer applications. Leap services are primarily included within our computing applications with a lesser amount being included in our communications applications. As can be seen here, our computing applications percentage continues to grow steadily. With a large amount of our LEAP services coming from computing, revenues for our computing application grew by 39%. Meanwhile, automotive, industrial, and consumer all grew by about 14%. Our communications application had the least amount of growth during the quarter, growing 8%. At this time, we continue to believe that our computing application will lead growth into 2027 and 2028. On page 8, you will find our ATM revenue by service type. At the beginning of the year, we believe that our test business, led by rapid expansion of our wafer sword business, would outpace growth of our assembly business. However, during the year, our assembly business has been showing even stronger than expected growth, especially as it relates to our traditional businesses. The demand for our test services continues to be robust. However, as with much of our business expansion, test capacities are awaiting new facilities. As stated during the previous quarter, we believe that both our assembly and test businesses will grow at similar rates during the year. On page 9, you can see the third quarter results of our EMS business. Our EMS business has historically focused more on products closer to consumer-driven end markets. Many of these products are experiencing a higher component cost environment driven by shortages caused by the rapid AI build-out. These extra pass-through costs are increasing both our reported revenues and raw material costs. When netted, this ultimately negatively impacts our EMS business's margin performance. EMS revenues grew 42% sequentially and 35% annually to $93.5 billion. Sequentially, our EMS business's gross margin decreased by 0.6 percentage points to 8.3%. This change was principally the result of higher pass-through component costs and product mix differences. EMS operating expenses increased by $0.4 billion sequentially and by $0.8 billion annually. Our third quarter EMS operating expense ratio was 5%, declining 1.5 percentage points sequentially and 0.6 percentage points annually. Operating margin came in at 3.3%, improving 0.9 percentage points sequentially and declining 0.4 percentage points annually. The sequential margin improvement is the result of product mix offset by a higher component cost environment. The annual decline is the result of higher component costs. Our EMS third quarter operating profit was $3.1 billion, up $1.5 billion sequentially and up $0.6 billion annually. On the bottom of the page, you will find a graphical representation of our EMS revenue by application. Generally, the moves in the consumer and communication categories are related to the seasonality of the underlying products we service. and though the communications application percentage looks to have declined on an absolute dollar basis, our EMS communications application grew quarterly. Annually, the communications application percentage declined primarily due to underlying customer production timing changes. The growth in the computing application is largely driven by business related to AI accelerator products. From a longer term perspective, we continue to pursue potential synergies between our ATM and EMS businesses to co-develop system-level solutions. By integrating critical EMS competencies with ATM technologies, we have the potential to optimize entire systems end-to-end. applying the same co-engineering disciplines that successfully scaled SIP architecture. As complexities increase at the die and package level, the system level will need to follow suit. On page 10, you will find key line items from our balance sheet. At the end of the quarter, we had cash, cash equivalents, and current financial assets of $107.9 billion. Our total interest bearing debt increased by $100.2 billion to $406.5 billion. Total unused credit lines amounted to $457.3 billion. Our EBITDA for the quarter was $58 billion. Our net debt to equity ratio this quarter was 66%. As expressed in previous quarters, the third quarter represents the near-term peak of our net debt to equity ratio. We expect this ratio to come down somewhat in the fourth quarter. On page 11, you will find our equipment capital expenditures relative to our EBITDA. Machine and equipment capital expenditures for the third quarter in U.S. dollars totaled $2.1 billion, of which $1 billion was used in packaging operations, $1.1 billion in testing operations, $41 million in EMS operations, and $5 billion in interconnect materials operations and others. In addition to spending on machinery and equipment, during the quarter we also spent $1.8 billion on facilities and land. We continue to believe that the growth of the company is highly dependent upon the execution of our various facility teams to deliver new manufacturing space and install equipment in those buildings for scaled-up mass production. We believe the ability to accelerate CAPEX at this point to be beneficial to the company, as it allows us to bring in new manufacturing capacity at a time when we are running full. Year to date, we have spent $8 billion of CAPEX, $4.8 billion in equipment, and $3.2 billion in facilities. We currently have 22 ongoing building projects in Taiwan. We expect more than half of these projects will start supporting some level of revenue from now through 2027. One final point before handing the presentation off. Our overall business outlook continues to be increasingly defined by our leading-edge capacities. And though our LEAP services are frequently tied to AI-related products, We see our LEAP capacities as the manufacturing basis for future generations of products, not just AI-related. Multi-chip interconnectivity on leading-edge devices has become the norm. We are in the midst of an evolution of electronics production where systemization is increasingly happening at the chip level. Simply put, what we are seeing is the next evolution of miniaturization. It bears repeating the capacities we are putting in place are not specifically made for AI. AI products just so happen to need the performance benefits Leap Interconnections provide. Our investments today are laying the future groundwork for generations of products to come. I'll hand the presentation over to Joseph to walk through the company's Q4 outlook.

Thank you, Ken. Let me give everybody a one-quarter guidance. Based on our current business outlook and exchange rate assumption of US$1 to NT$31.9, which remains the same as in the third quarter, management projects overall performance for the fourth quarter of 2026 to be as follows. On a consolidated basis, in NT$ terms, a consolidated fourth quarter revenue should grow by 6% to 8% quarter over quarter. A consolidated fourth quarter growth margin should be between 23% to 24%. A consolidated fourth quarter operating margin should be between 14.5% to 15.5%. For ATM business, in NT dollar terms, Our ATM fourth quarter revenue should grow by 11% to 13% quarter over quarter. Our ATM fourth quarter gross margin should increase by 100 to 200 basis points quarter over quarter. For EMS, in NT dollar terms, our EMS fourth quarter revenue should be flattish quarter over quarter. Our EMS fourth quarter operating margin should be around 2%. Now with that, we'll open the floor for questions.

During the Q&A session that follows, we would appreciate it if your questions could be as clear and concise as possible and asked singularly. I, as the moderator, will be receiving each question and repeating each asked question. After an initial question, the participant may ask a follow-up question, Clarifications of the earlier question or another question entirely. Then we will move to the next participant. Participants may return to the queue for any additional questions and or clarifications. Thank you.

If you have any question, please raise your hand. Our first question is from Sunny Lin of UBS.

Sunny? Hello, could you hear me okay? Yes. Thank you very much for taking my questions and congrats on the very strong results. My first question is on your overall lip cells. Given the importance and your accelerating expansion, any update on your lip cells for 2027? And how should we think about the split by food process, substrate outsourcing and test?

For 2027, we're expecting to remain as we last projected to double our LEAP revenue for the year.

Well then, sorry, maybe just to follow up, and that'll be my second question. So any update on your LEAP sales for 2026?

Yeah, as I said, we are upping our 2026 leave revenue from originally $3.7 billion that we mentioned last quarter to over $4 billion for this year.

Got it.

Go ahead, please.

Sure. Sorry. Not sure if it's our connection issue, but I lost a part of the response, but it's okay. We will check the transcript. So my second question will be on the full process co-op. How's the overall ramp and yield for the key product second half of this year? And now looking into 2027 with your expansion, should we assume a more diversified customer base and product base? Yeah.

So, Sunny, you're asking about our full process business and then looking for any update in terms of the full process yield and such, right? Is that correct?

Yield and then the product base going to 2027.

I think for 2026, our full process business Thank you for joining us. at the level that we can get into mass production and major shipments.

Thank you very much.

Yes, thank you.

If you have any questions, please raise your hand. Okay, our next question is from Goku Harihara of JP Morgan.

Hi, Joseph and Ken.

Hello, Goku? Goku, I cannot hear you. Okay, next question is from Haslou. of BOA. Can you hear me? Okay, now we go back to Goku Hariharan of JP Morgan.

Hello? Hi, can you hear me?

Yes.

Okay, all right. So thank you very much for taking the question. Hi, Joseph and Ken. My first question is on gross margins. Could you talk a little bit about where we are seeing this upside in gross margins compared to our guidance range for Q3? Looks like a very clean kind of 150-200 basis points beat and further upside in Q4 as well. Is it pricing or is it your full process is ramping up better in terms of margins? And secondly, on the same topic, I think now that we have already exceeded our previous structural range, and obviously the product mix is also different, you're still expecting Leap to grow faster than the overall product mix. What is the kind of gross margin range we should think about as we think about the next couple of years?

Well, as we continue to ramp up our lead business, I think there will be further margin improvement in fourth quarter as well as going into next year. At this point, I think the so-called structural margin no longer applies because of the significant and rapidly changing business structures that we are having today. So if we are to come in on our margin, I think the first thing we will say is that the so-called structural margin ceiling has now become the base for us. And looking into next year, I think as we continue to ramp up our overall capacity and also in a very friendly type of pricing environment, we believe that we will continue to see gross margin improvement on a quarterly basis from the base of 30%. And we will continue to see sequential improvement in our margin on a quarterly basis for next year as well.

Just to follow up there, if you look at the overall portfolio, maybe we leave testing aside within packaging, what would be the highest gross margin that you're able to earn in any of the lead process? Is it already like close to 40% for some of the processes or that is too ambitious?

Goku, you're looking for the potential highest performing margin for Leap at this point? Is that your question?

Yeah, within the three or four components that are there, which one is the highest performing and what are those levels? Just to understand, what is the room for travel in terms of your overall gross margins, given your mix is clearly improving quite rapidly?

I don't think we need, we want to comment on the different margins in different products or different packages. But I think the overall, I think the overall leap business, both on assembly and test, our margin is accretive. And we'll continue to see improvement in the, you know, in our margin expansion.

Okay, okay, got it. My second question is on just a follow up on your leap full process revenues for next year. Joseph, I think you mentioned more than $1 billion, but that sounds quite conservative given you're already doing $300 million in the first quarter of RAMP this year. Could you talk a little bit more about your engagements on the full process and and also if you ramp up all these like 22 projects that you are currently ramping up in terms of facilities, both Greenfield and Brownfield, what does it mean in terms of, let's say you ramp it up in 2028, any indication in terms of What is the investment required from a CapEx perspective and what does it mean for a continued growth? Does it mean that you continue to grow at similar rates even into 2028, not just for 2027?

Gokul, you're asking about the characterization of our full process business and in certain regards, kind of a total return outlook. Is that correct?

Total growth outlook given the very sharp ramp in the facilities.

We do have multiple customers engagement at this point, although we are pretty much constrained by our capacity and we're aggressively building that up. So from the business outlook that we have so far, I think our resources are quite limited. So we are, although the demand is there, but we're still trying very hard to catch up in terms of supply. And for next year, we are expecting that demand can be way higher than what we'll be able to deliver. So right now we're still projecting over a billion dollar revenue coming from our full process. So I guess that's, I think the biggest bottleneck today is really still the space, although many different areas we do have find ourselves being constrained. But space is really one of the biggest, the constraint that we're facing today.

Okay, that's helpful. Thank you.

Our next question is from Laura Chen of Citigroup.

Hello. Hi, Grafton. Can you hear me?

Yes.

Yes, hi, thank you for taking my questions. I just want to follow that one billion US dollars, like the full process. Can you give us more color about that? What type of the full process will see the contributions next year? And also for our LIB overall revenue, so obviously still more driven by the substrate part. But we do see that our companies have various different type of technology. So I'm just wondering, can you give us more color about the growth breakdowns, particularly in the full process in the next two years?

Hi, Laura, this is Ken. I don't think we have a lot of characterization in terms of What types of full process? I think when we talk about full process, it's generally much more customer-specific, too. I think we probably can't really comment that much on that at this point.

Okay, sure. Understood. So that also seems like the growth into next year is more coming from the unsubstrate part?

Yeah. Yes, but we are seeing very, very strong demand in tests as well. Sure. And assembly and tests, we are both seeing a very strong momentum. Again, we are actually in constraint with our capacity buildup. So we're still trying to, very hard to try to catch up with it. In terms of full process, I think, Neil, as I mentioned, we are... We are moving ahead and on track. We hope that we can supply more for next year. At this point, we are conservatively looking at over a billion dollar revenue coming from that. There are some other new projects that we are entering. For example, CPO. And we're expecting over half a billion of revenue coming from CPO as well for next year. That will be included in our LEAP revenue.

Thank you very much. That's actually my second question about to ask about the CPO because we see that the Jensen's earlier last week, he mentioned about that 30 times the capacity will pick up for next year. So I assume that also, yes, in the LEAP revenues. But will we like going forward to kind of a split that revenues breakdowns? for better investors' understanding on that part growth?

I think we're kind of breaking it down already in terms of OS, in terms of full process, in terms of wafer sort, and as I mentioned, CPO.

Okay, thank you. So if I may also check on that, do we have any expectation on the CPO revenue contributions in two years?

In two to three years?

Yes.

No, we have a projection for next year, but we will see. We'll have better clarity after we finish what we're setting out to do for now.

Okay, sure. Looking forward to that. Thank you very much.

Our next question is from Hesliu of BOA.

Yes, hi, can you hear me now? Sorry, I was disconnected. Okay, thank you so much for taking my questions and congrats on the great results. I think just a quick follow-up on the structural gross margins where you already reported third-course ICATM gross margins up to slightly higher than 30%. So with your lead business set to be even higher in the next couple of quarters, and also your mainstream packaging and testing business utilization pricing are actually also improving, can we use third quarter gross margin as a base case going forward for your overall ICADM gross margin assumptions, as long as the cycle holds? Thank you.

Yes, I mentioned earlier that we're now using our structural margin ceiling as a base for next year.

Okay, so we can use like this kind of a roughly 30% of the gross margins as the base case for next year. Got it.

And then I think we will see quarterly improvement for next year as well.

Okay, sequential improvement. And then second thing is just on KPEX this year, you are already spending based on what you reported just now, you have already been spending and many more. and more equipment procurement in the next couple of quarters to meet your customers' demand.

Yes, as I said, space continues to be a constraint, one of the constraints that we have, and we are aggressively seeking for suitable existing plants for us to buy. But competition is pretty keen and there are We need not that many suitable factories for us to pursue at this point. So it's an ongoing effort that we are in. And also for this year's CapEx, we are increasing our CapEx for the year from 10.5 to 11.5 now. We're adding a billion, another billion. And of that billion, half of it will be for facilities as we continue to fit up our new factories. And the other half will be for equipment and 60% of it will be for LEAP and 40% will be for the mainstream events.

Got it. And just on the overall pricing environment across your lead versus the mainstream packaging and testing business, how should we think about since the supply demand is still pretty tight?

Sorry to stop you there. You're on question number three. Sure. Thank you so much.

I'll be back in the queue.

Thank you.

Our next question is from Goku Harihara of JP Morgan.

Hi, a couple of follow-ups from my side. Thanks for the opportunity. So Joseph, I think you mentioned CapEx 11.5 higher by a billion dollars. Could you give an opinion on what you're thinking CapEx is going to look like next year? Are we still in an upward sloping curve for CapEx? and could you also talk a little bit about are you entering into any prepayment arrangements or anything like that with customers given a lot of this new CapEx seems to be targeted at some of the key customers itself. Yeah, that's my first question.

Roku, you're looking for an update on our CapEx outlook going forward.

and the kind of any funding arrangements that you have.

And the funding sources around it.

Well, we'll continue to see very strong demand coming in. And we do have a very strong prospect for next year as well. So at this point, I believe the CapEx spending for next year will be even larger than this year. And as we continue to ramp up our capacity, also in terms of R&D, we will continue to make the necessary investment to carry our missions. Funding-wise, we will continue to use whatever. We do have multiple cost-effective sources for us to raise funds to support our growth. I think at this point, we will not be shy from making the necessary investment to support the expansion. So I think for next year, we will continue to see negative cash flow. But I think this thing will be better solving in due course. In terms of, you know, as I mentioned, multiple funding sources that will also include some of the trade financing that we can arrange with the different customers.

Understood. And the second question is on the test business. Could you characterize the growth of the test business going into next year, final test versus chip probing? And I think how constrained are you on test versus packaging? Like if you think about a relative scale, is the constraints on test bigger than packaging from a facility or equipment perspective?

You're looking for an update in terms of looking at the test business going into next year and then in terms of the growth rates relative to what we're seeing in terms of the market. Is that correct?

Yeah, or related to packaging and related to like constraints related to packaging as well.

I think the same pattern will, like in the third and fourth quarter of this year, it will repeat into next year. I think in terms of assembly, the growth rate should outpace tests, given the limited resources that we have. and also for tests under the current resource constraint, we will need to prioritize our investment to more on wafer probe rather than final test.

Okay. Would you say test is more constrained in terms of your capacity versus demand compared to packaging or it is largely similar?

I think it's mostly space. I think the space that we use for assembly is more efficient. and Tess at this point. So given the constraint, we will allocate, we will put our priority on assembly and for Tess will be for final, for wafer sort.

Understood. That's very clear. Thank you.

Our next question is from Haz Liu of BOA.

Hi, thanks for taking my question again. I think just a quick follow-up on the CAPEX. A couple of your peers, including the ones in Korea, and also your foundry partner, mentioned that they are preparing for a significant or meaningful step-up on the CAPEX for next year. Given this is the third time of CAPEX upper revision for the year for ASC in 2026, Do you also expect a similar statement to hold for your Capex for next year? You already mentioned that next year's Capex will be higher than this year, but just wondering whether that kind of aggressiveness will be applied to AUC as well.

So you're looking for a characterization of how we view next year's investments.

In a qualitative way, as compared to your peers' comments, for a meaningful step up or just significantly higher than this year's CAPEX, do those statements also hold true for your CAPEX outlook?

Generally, we don't necessarily view our own CapEx relative to competitors or, I guess, peers in the market. In general, we do see that CapEx going into next year, we do see a lot of opportunity in terms of the business that will be available to us. And as Joseph previously mentioned, We will not be shy in terms of investing to get at that business. Does that answer your question?

Okay yeah and just a related follow-up on the Capex one is probably more specifically on the CPO that one of your key customers last week in its Germany event said you will hike CPO capacity by 15% next year at your facilities and then double again in 2028. Would you be able to share more detail on that? What is your role in What is the CPO package and testing? What is the related KPACs you expect to spend? And how should we expect or try to or quantify the related revenue contribution from that part of the business in the next few years from CPO based on your customer statement?

Hashi, you're looking for a clarification in terms of the potential joint press release that we have.

I don't think we will comment on specific product or specific customer. Overall, I think we are the most active participant in the all CPO effort and joining with our foundry partner as well as our customer and just from the business that we are projecting to have from our customers, we're expecting to generate more than half a billion worth of revenue coming from CPO for next year.

My second question will be just on the pricing environment. Across your lead business and also the mature or mainstream packaging and testing business, it seems that the supply tightness is actually happening across the board. Would you be able to share some detail on how that pricing improvement has been helping your gross margins improvement in third quarter? And in 2027, how should we expect the pricing negotiation with your customers at this stage to help your gross margins expansion beyond the product mix improvement?

Well, I will not comment on pricing, except, you know, we will continue to look for the most suitable pricing strategy, depending on the situation. And all I can say is overall, I think both for LEAP as well as for general market, I think we are in a very pricing friendly environment at this point.

Okay, okay. And could you also just try to quantify the...

I think you're on question number four.

Okay, I thought you just thought of that. Okay, yeah, I'll be back in a minute.

Thank you.

Our next question is from Charlie Chen of Morgan Stanley.

Oh, hi. Good afternoon, Joseph, Ken, and Iris. Thanks for taking my question. Just a quick some follow-up, right? Thanks for disclosing your CPO revenue. So if we may, can we know roughly is the testing part of, for example, insertion three, insertion four, a bigger revenue contribution or on sub-trade is a bigger contribution for that 0.5 billion US dollars revenue contribution?

I won't be able to comment on that. Sorry.

Okay. No worries. Yeah, and secondly, I think, as you mentioned, you wouldn't hesitate to kind of invest in space capacity, whatever, to gain share, right? But recently, there seems to be some industry dynamic that one of TSNC's subsidiary, they're also getting into the unsubscribed business. So I do think there is like, Demand overflow or is kind of a real competition to your own substrate business?

Charlie, you're asking for commentary in terms of competition within our lead business.

Yeah, because now it seems like demand is not an issue. But my question is that who seems to have the space can really gain share, right? Is that a fair comment? Because One of the TSNC subsidiaries is ordering lots of equipment. So we are a little bit worried whether there's a gain in share expense of ASC.

It's kind of sensitive to talk about a Foundry Partners subsidiary situation. And all I can say is, given the scale, I think we are really the dominant player in this field. And whatever competition, I think it's out of necessity from our Foundry partners as well as our customers. At this point, I don't think it will move the needle that much in terms of the overall market share kind of situation. As I said, we are still in a catch-up mode, trying to supply as much as we can to meet the demand. I think that's all I can say at this point.

Got you. At least there wouldn't be any circle the price competition. It's like demand is too big. Whoever can squeeze more...

I think the sheer scale differences, I don't think a price war will be created. Makes sense.

Yeah, so thank you. And if I may, non-AI, so we start to pick up some negative data points, PC and smartphone auto-cuts at the Wi-Fi front end. So, except for iOS ecosystem, right? So Joseph or Ken, can you share your observation about non-AI part of business and how that is going to impact your kind of meter outlook? Thank you.

Well, at least for this year, I think the general market growth is way ahead of our expectation in the earlier part of the year. I think we will have more than 20% growth in general market business as well. We all understand that cell phone and PC is going through a very soft period given the high component prices that's kind of hurting the overall demand. But that is more than compensated by the recovery of automotive and industrial. and more importantly, AI adjacent chips requirement. So we are seeing very strong growth in this year for general market and we're expecting that to happen again in next year as well.

Okay, thank you. Yes, sorry for kind of asking questions so late. I was experiencing some technical issue, but thanks for all the answers. Thank you. No problem. Thank you. Thank you.

Next question is from Sunny Lin of UBS.

Hello. Thank you for taking my follow-ups. I have a question on a very high level. What's your view on CPO versus NPO? Besides CPO, could AAC also capture the opportunity in NPO as well? And then based on your commentary, would it be fair to say that Based on the current visibility, it's fair to say that 2027 CPO will be able to ramp up even with still some technical challenges or optimization that the industry need to go through.

Sunny, you're looking for an update in terms of how we view the CPO versus MPO market? and then our capability to ramp up to support CPO going forward.

Is that correct? Yeah, or maybe just CPO as a technology. Is it mature enough to start mass production for your key clients in 2027?

Yes, as I mentioned earlier on, CPO, we're expecting mass production. We already started mass production in quarter four. and that will continue into 2027. And as we are projecting at this point, we're looking at over half a billion worth of revenue coming from CPO. In terms of NPO and CPO, I think that they will both coexist. And it's just a matter of difference in terms of overall performance between the two different types of packages.

And for NPO, will ASC be able to capture as well?

If there is real demand, yes, of course, we will be a major player in that.

Got it. Thank you. And a quick question on EMS. So looking at the shirt, the scenario is a bit different. And how should you think about the girls going to Q1? Typically, Q1 should be a down quarter as the bill moderates. But this time around, the flagship smartphone clients are also launching for lower-end models going to early 2027. And so all things considered, how should we think about your EMS business maybe going to first half of 2027?

Sunny, you're looking for the seasonal patterns. of our EMS business as potential underlying customer products change their timing of release. Is that correct?

Right. Thank you.

Well, we will continue to expect for some growth going into 2027 as well for EMS business. I think the main focus will be on high-performance computing. And at this point, it represents roughly mid-teens of our overall EMS revenue. And we're seeing that ramping up pretty rapidly. And communication-wise or consumer-wise, it will be... At this point, relative to computing, it's weaker. But all in all, I think our EMS will continue to move into optical, silicon photonics, and power-related type of devices. and also, of course, AI-related business that we'll be focusing on. So yes, we do expect further growth, particularly in the AI-related part of the business.

Got it. Thank you.

Thank you.

Next, we have Has Liu of BOA coming back again. Has?

Okay, hi, yes, thanks. It's me again. I'm just wondering if you could provide more clarity on the Thank you very much. Back in the second half of last year, and now in third quarter this year, there's another step up. So as you accelerate your lead business, I think going forward, in addition to the question I just had now on the third quarter gross margins breakdown from the relative benefits, I think just going forward, may I also check on your expectation whether that kind of gross margins improvement will further accelerate through 2027?

So you're looking for further clarification in terms of what has caused our margin pickup during the third quarter, and then whether those types of improvements are sustainable going forward. Yes, that's right.

Well, third quarter margin improvement is largely because of the leap ramp up as well as overall improvement in utilization across the board, including the general market or mainstream packages and tests. And going forward, as we continue to ramp up our lead business, and having a healthy growth on the general market basis as well. I think, yes, we will continue to seek sequential improvement in our margin on a quality basis going into next year.

Okay, I think just a follow-up on the application mix that in third quarter you're a computing business seeing a nice ramp. Would you be able to share more detail on that? And what are the key applications are you targeting in that segment in the next one to two years between GPUs, CPUs, ASICs, and networking switches?

Hoss, you're looking for an answer in terms of the composition of our compute business? Is that correct?

Yeah, and your targeted application in the next few years between GPUs, CPUs, ASICs, and networking switches?

I don't know if we can comment so specifically. Yeah, I think from a targeting perspective, we should be targeting everything. We can't be particularly specific, but in terms of our technologies, we do hope to be able to address all applicable products within that high-performance computing section.

Got it. Thank you very much.

Do you have another question, Haas?

No, I'm good for now. Thank you.

Okay, I think you're the last question then. Do we have any other questions online?

No, no more questions.

Thank you everyone for attending the call. Joseph, do you want to?

We had a fabulous third quarter and we'll continue to see strong momentum going to fourth and to next year. We will make the necessary investment to support the overall expansion and we'll continue to expect good results for the fourth quarter as well as for next year. Thank you very much.