ASE Technology Holding Co Ltd

TWSE:3711

Earnings Call Transcript 2020-Q4

[Kenneth Hsiang, executive]

Hello. I am Ken Hsiang, the Head of Investor Relations for ASE Technology Holdings. Welcome to our fourth quarter and full year 2020 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 of this event.

I would like to remind everyone on this call 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.

I'm joined today by Dr. Tien Wu, our COO; and Joseph Tung, our CFO. For today's call, I will be going over our financial results. Tien will be providing a business recap and Joseph will provide financial highlights and our guidance. We will have a Q&A session following the prepared remarks.

Please turn to Page 3, where you'll find our fourth quarter's consolidated results. Intercompany transactions between our ATM and EMS businesses have been eliminated during consolidation. For the fourth quarter, we recorded fully diluted EPS of $2.30 and basic EPS of $2.35. Consolidated net revenue increased 21% quarter-over-quarter and 28% year-over-year. We had a gross profit of $23.2 billion, with a gross margin of 15.7%. Our gross margin declined by 0.3 percentage points sequentially and 1.4 percentage points year-over-year. Both margin declines are principally the result of higher EMS business mix. Our operating expenses increased by $1.5 billion during the fourth quarter to $12.1 billion as a result of higher profit sharing expenses issued during this strong quarter. Despite the absolute dollar increase, our operating expense percentage declined 0.5 percentage points sequentially and 1.5 percentage points year-over-year to 8.1%.

Operating profit was up $2.1 billion sequentially and $2.5 billion year-over-year. Sequentially, operating margin increased 0.2 percentage points to 7.6% and increased 0.1 percentage points year-over-year. During the quarter, we had a net nonoperating gain of $1.4 billion. This amount primarily consists of gains related to the sale of our Fujian plant of $0.8 billion, gain on sale of operating assets of $0.5 billion and net foreign exchange in investment income of $0.2 billion. This amount was offset in part by net interest expense of $0.6 billion.

Tax expense for the quarter was $1.8 billion. The effective tax rate for the fourth quarter was 15%. The decline in the effective tax rate this quarter was the result of research and development tax credits that are able to be recognized during the quarter.

Net income for the quarter was $10 billion, representing an improvement of $3.3 billion sequentially and an improvement of $3.6 billion year-over-year. At the holding company level, we estimate that the strengthening NT dollar had a 0.9 percentage point negative impact to gross margin sequentially and a 2.3 percentage point negative impact year-over-year. As a rule of thumb, for every percent the NT dollar appreciates, we see a corresponding 0.4 percentage point impact to our holding company 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, excluding PPA expenses, would be $24.2 billion, with a 16.2% gross margin. Operating profit would be $12.4 billion, with an operating margin of 8.3%. Net profit would be $11.2 billion, with a net margin of 7.5%. Basic EPS, excluding PPA expenses, would be $2.63.

Please refer to Page 4. Here, you will find the 2020 consolidated full year result. Fully diluted EPS for the year was $6.31, while basic EPS was $6.47. For 2020, consolidated net revenues grew by 15% as compared with 2019. ATM revenues grew 10% while EMS revenues grew 23% annually. In 2020, our gross margin improved 0.7 percentage points to 16.3%, principally as a result of stronger loading. This margin improvement was achieved despite higher EMS product mix and negative impact from the strong NT dollar.

Operating expenses increased to $2.3 billion for the year and came in at $43.1 billion. We were able to lower our operating expense percentage by 0.9 percentage points to 9%. Operating profit for the year was $34.9 billion, improving by 38% to $11.4 billion. Operating margin improved by 1.6 percentage points as a result of increased gross profit margins with a lower operating expense percentage.

Total tax expense was $6.5 billion. The effective tax rate for the year was 18.1%. During the year, we confirmed the deductibility of certain holding company level expenses for tax purposes. This resulted in [ attach ] of tax assets during the year, leading to a lower effective tax rate. For ongoing purposes, we believe our current effective tax rate to be about 22%.

Net income increased by $10.7 billion to $27.6 billion. On a full year basis, we estimate that the strengthening NT dollar had a 1.8 percentage point impact to gross margin. Removing the effect of PPA depreciation, our gross margin would be 17.1%, our operating margin would be 8.3%, our EPS would be $7.60.

On Page 5 is our ATM P&L. It is worth noting here that the ATM revenue reported here contains revenue eliminated at the holding company level related to intercompany transactions between our ATM and EMS businesses. During the quarter, we did see 3 major challenges. First, the most important challenge was the strengthening NT dollar, appreciating 2.3% from Q3 to Q4. A strengthening NT dollar environment is generally negative for us. As a rule of thumb, for every percent the NT dollar appreciates, we see a corresponding 0.5 percentage point impact in our ATM gross margin. Second, the strength in the current market has created tightness across large parts of the semiconductor manufacturing chain. We are seeing longer delivery times for many products, including reframes, [ substrate ] components, capital equipment as well as upstream wafer supply from our partner foundries. As a result, we have seen some higher manufacturing costs. But for the most part, with the positive ASP environment, we have been better able to pass along these cost increases. Finally, the current COVID environment continues to make operations and logistics difficult. However, being mostly Asia-based, we have been less impacted than many operations elsewhere in the world. And to a certain extent, because of our ability to provide supply chain stability during COVID, our businesses have been performing relatively well.

From the business perspective, throughout the entirety of the fourth quarter, most business lines within our ATM business ran pretty much at full capacity. Strength was across the board in all product categories. Wirebond and advanced packaging, consumer, communications and computing, even our test business recovered more rapidly than expected. Heading into the first quarter, things are loaded and running fairly smoothly. We continue to see a strong loading pattern with a positive ASP environment. More on this from Dr. Wu a bit later.

For the fourth quarter 2020, revenues for our ATM business were $17.8 billion, up $1 billion from the previous quarter and up $3.5 billion from the same period last year. This represents a 1% increase sequentially and a 5% increase year-over-year. Our ATM revenues came in ahead of our expectations due to higher-than-expected loading and a more positive ASP environment, offset in part by a stronger NT dollar. On a U.S. dollar basis, our ATM revenues grew by 3.7% sequentially. Gross profit for our ATM business was $16.5 billion, up $2 billion sequentially and $0.8 billion year-over-year. $0.9 billion of this increase was due to a onetime inventory related write-off during the third quarter. The remaining sequential and year-over-year improvement in gross profit are primarily the result of higher loading levels.

Gross profit margin for our ATM business was 22.6%, up 2.4 percentage points sequentially and down 0.1 percentage points year-over-year. The inventory write-down in the third quarter accounted for 1.2 percentage points of gross margin improvement in the fourth quarter. The remaining improvement was the result of stronger loading and a positive ASP environment, offset in part by the strengthening NT dollar.

During the fourth quarter, operating expenses were $8.5 billion, up $0.7 billion sequentially and $0.2 billion year-over-year. The sequential and year-over-year increases were primarily driven by higher employee bonuses tied to corporate performance. Operating margin was 11%, improving 1.5 percentage points sequentially and 0.4 percentage points year-over-year. We estimate that the strengthening NT dollar had a 1.2 percentage point negative impact to our ATM gross margin sequentially and a 2.9 percentage point impact year-over-year.

Without the impact of PPA-related depreciation and amortization, ATM gross profit margin would be 23.9% and operating profit margin would be 12.6%.

On Page 6, we have our ATM's full year P&L. We're fairly proud of our 2020 full year ATM results. On this page, you can see that we saw significant improvement in all aspects of our business. And bear in mind, all of this achievement was done despite the loss of a 20% run rate customer in September. Revenues for our ATM business increased by 12%, with our packaging business and test businesses up 12% and 11%, respectively. At the outset of the year, we did expect to see our test business to significantly outgrow our assembly business. However, the AAR impact was much more harshly felt by our test business. And as a result, we did have to rebalance our tester capacity.

Gross profit for the year improved 19% to $59.4 billion. Gross margin was up 1.3 percentage points, primarily as a result of higher loading, offset in part by NT dollar appreciation. Operating expenses were up for the year by $0.9 billion. The increases in operating expenses are related to bonuses tied to ATM business performance. Meanwhile, our operating expense percentage declined 0.9 percentage points. Operating income improved 45% to $27.6 billion, with operating margin improving 2.2 percentage points to 9.8%. On a full year basis, we estimate that the strengthening NT dollar had a 2.3 percentage point impact to gross margins. Without the impact of PPA expenses, gross profit margin would be 22.5% and operating margin would be 11.5%.

On Page 7, you'll find a graphical representation of our ATM P&L. And despite the significant impact of this U.S. EAR, we took a hit on our third quarter margins and have recovered. However, we do believe the appreciating NT dollar has flattened out our recent year margin performance. Without such NT dollar appreciation, gross margin would have otherwise made a more pronounced move up into the right of this chart.

On Page 8 is our ATM revenue by market segment. We understand that this may run contrary to recent interpretations of the overall market environment. But we would like to point out here that our Communications segment has actually been trending down as a percentage of our overall business. Though Communications demand is healthy, what we are actually seeing is our automotive, consumer and other business segments rebounding.

On Page 9, you will find our ATM revenue by service type. As mentioned previously, we rebalanced our test capacity after the U.S. EAR went into effect. Here, you can see the negative impact that the U.S. EAR had on our test business, with its revenue share declining 2 percentage points. As expected, our wirebond business has picked up. Meanwhile, our advanced service type declined 2 percentage points.

On Page 10, you can see the fourth quarter and full year results with our EMS business, USI. The information we provide in regards to USI may differ materially from the information directly provided by our subsidiary, as they report independently using Chinese GAAP. For our EMS business, demand was stronger than anticipated, driven by strong SiP demand. During the quarter, we completed our acquisition of the Asteelflash Group, or AFT. Their results are being fully consolidated as of December 2020. Currently, AFT represents about 10% of our ongoing EMS revenues. We do not expect to report AFT details in future earnings.

During the fourth quarter, EMS revenues increased 49% sequentially, primarily because of our seasonal business ramp and strong demand for SiP products. EMS revenues increased 62% year-over-year as a result of stronger demand for SiP products. Gross profit margin for the EMS business unit came in at 8.8%, which is a decline of 0.9 percentage points sequentially and 0.1 percentage points year-over-year. The market declines are primarily the result of product mix changes. Our EMS business unit's fourth quarter operating expenses were $3.5 billion, increasing $0.7 billion sequentially and $0.8 billion year-over-year. Operating expenses increased primarily as a result of increased employee profit sharing. Our operating expense percentage was 4.5%, down 0.8 percentage points sequentially and 1.2 percentage points year-over-year. Our EMS operating profit improved $1.2 billion sequentially and $1.9 billion year-over-year. These improvements were primarily due to increased seasonal demand for SiP products.

Our EMS operating margin was 4.4%, which is flat sequentially and up 1.2 percentage points year-over-year. On a full year perspective, our EMS business delivered a banner year, driven by strong SiP sales. On a full year perspective, our EMS business revenues increased 23%, gross profit increased 29%, gross profit margin also improved 0.4 percentage points to 9.2%. Operating margin increased 0.9 percentage points to 3.8%.

On Page 11, you will find a graphical representation of our EMS revenue by application. With sales increasing 49% sequentially, interpreting this chart gets a bit tricky. What's fairly straightforward to see is that our Communications segment increased by 5 percentage points as a result of product seasonality. Other categories generally grew in absolute dollars. However, their growth was not as pronounced as that of the Communications segment.

On Page 12, 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 $56.4 billion. Our interest-bearing debt decreased $15.5 billion to $209.1 billion. Total unused credit lines amounted to $275.2 billion. Our EBITDA for the quarter was $26.1 billion. EBITDA for the year was $90.9 billion. Our net debt-to-equity ratio for the quarter dropped to 65%, the higher end of our targeted range.

As of the end of 2020, our ownership of USI, listed on the Shanghai Stock Exchange under the ticker number 60231, is 73.4%.

On Page 13, you will find our equipment capital expenditures. Machinery and equipment capital expenditures for the fourth quarter totaled $379 million, of which $296 million were used for packaging, $16 million for testing, $19 million for EMS and $4 million for interconnect materials. For the full year, machinery and equipment capital expenditures were $1.7 billion. $1.1 billion was spent on packaging, $0.4 billion on test and $0.2 billion on EMS. We continue to provide our EBITDA in U.S. dollar 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.

I would like to turn the floor over to Dr. Tien Wu.

[Tien Wu, executive]

Hi, everyone. To begin with, I would like to wish all of you a Happy Chinese New Year. Here, I would like to provide 2 updates. The first part will be a business recap, mainly addressing some of the comments which I made at our Q3 earnings calls back to October 30 of last year.

First item, the EAR-affected ATM business has been recovered by Q4 of last year versus our previous commentary and expectation to be fully covered by end of Q1 of this year. So that is good news.

Second item, capacity remains tight. Last time, I made a comment that the wirebond shortage will be at least to Q2 of this year. Right now, we're slightly adjusting our view. We believe the wirebond shortage will be throughout the whole year of 2021.

The machine delivery schedule, last time we talked about between 6 to 8 months. Right now, we're slightly elongated, the machine delivery lead time now is more like 6 to 9 months.

CapEx. The Holdco 2020, our machinery CapEx was USD 1.7 billion versus our previous estimate of $1.8 billion. The $0.1 billion was mainly due to the machine delivery schedule tied to the machine lead time. For this year, we believe our machinery CapEx will not be lower than $1.7 billion. The actual number will be depending on the business landscape and how do we collaborate with our customers as well as the machine delivery schedule. 2020, the group SiP business grew nicely, 50% year-on-year to USD 3.5 billion. We made a comment, target our incremental SiP revenue from new customers or new project should exceed our target of $100 million. In Q3 time frame, we made a comment that it will be 3x of $100 million target. The actual came in $386 million. That is in year 2000 from new SiP customers and projects, we have accrued $386 million of revenue. I would like to make a comment on the SiP momentum. For 2021, this year, we do believe the momentum will continue, and we will have new SiP customers and new SiP projects in the north of $400 million. That will be the -- a very, very nice momentum and ramp.

With that note, I would like to turn to the next page. I would like to give you highlight for the 2021 business outlook. For this year, we expect quarter-to-quarter growth at a HOLDCO level. In other words, after Q1 we expect sequential growth in Q2, followed by Q3 and Q4. The second message here is for this year, we expect at the group level, our operating margin will further expand by 1.5 to 2 percentage points.

Next, let me make some comment on the ATM and also the EMS separately. The semi-logic market growth, we estimate between 5% to 10%. We're seeing a very strong ATM run rate. As a matter of fact, we just closed our January. In our Q1, our run rate actually is the same as Q4 of last year. Just for your information, we have never seen this kind of run rate in the last 30 years in semiconductor industry. The ATM 2021 full year growth, we were target at 2x of semi-logic market growth in U.S. dollar terms. This is the current expectation. The 2020 ATM operating margin, that Ken just went through with you, has improved 2.2 to 2.3 percentage points. For 2021, we expect this margin expansion will continue. As a matter of fact, our margin expansion in 2021 will be better than the 2.3 percentage points, mainly from SPIL synergy, economies of scale, efficiency improvement as well as technology leadership, despite the foreign exchange impact for NT against U.S. dollar. The EMS business should have a higher year-on-year growth rate than our ATM business with operating margin target at 4%, another slight improvement.

Future growth engines to drive the rising trend into the next 5 years. I put 5 years here with some optimism. From where we stand right now, I think the 2021 loading is very strong, and we're quite confident in the that. Right now, all our optimism has expanded into 2022. I would like to make a comment about our next 5 years with our growth strength and growth strategy. I think in 2020 as well as in 2021, we will demonstrate efficiency in ramping up and the overall supply chain management to all of our key customers and to our shareholders and our investors. In 2020, we have pandemic as well as supply chain constraint at all levels. The ramping up at such a dramatic rate was not a simple challenge. Also, we have replaced one of our high [ runners ] due to the EAR effect. The retooling, recalibration, readjustment of our manufacturing portfolio as well as requalification for many of the products asked by our customers was not an easy task.

So in 2020, we have clearly demonstrated our capability to ramp up as well as procure necessary materials in a very adverse and challenging environment. We're confident we will repeat the same thing in 2021, and that will give a boost of confidence to our key customers and securing the future business based on that performance.

Following that comment, we do see very strong loading agreements, mostly 2 years as well as very strong NPI pipeline, which covers a wide variety of application, namely 5G, SiP, sensors, and very strong ramp in automotive as well as smart devices and edge devices.

We made a comment previously talking about our LiDAR factory or the fully automated line. At the end of 2020, we had a total of 18 LiDAR factories. In this year, we have more than 25. The comment I would like to make here is those LiDAR factories proven to be very efficient and very useful in ramping up new volume, particularly with customers who have to do this remote. All of the automated -- the LiDAR factory or the automated lines are in very, very high demand from 2 types of customers, either high reliability seeking or beta seeking for a variety of reasons. Our LiDAR factory can provide real-time information in a very detailed manner to our customers either in medical, automotive or high reliability applications. We're seeing more volumes demanding multiple dies and sensors. And we believe this will fall into ASE's sweet spot. In other words, since 2013, we have been building a portfolio covering multiple dies as well as different packaging, algorithm, methods, process, material set for all kinds of sensors. And we're seeing huge demand due to the IoT, edge device and smart device enabled by the 5G.

In net, what ASE is trying to do is to build a pervasive foundation and to be the preferred choice for all high-volume applications. We do see that the pandemic, learn from home, play from home, work from home, has created a slight uptick on the overall semiconductor demand. With the high-performance computing, the cloud, e-commerce as well as the 5G load latency and high data rate, we're seeing more application released into the smart device, electrical vehicle and all of the IoT application. With that, the traditional packages will be expanding to multiple die and sensors. We believe the OSAT market we are taking a clear leadership. Also because of our performance in economy of scales, we have better traction with all of our key customers, and this describes why we're having such a demand curve in 2020 as well as 2021.

With that, I would like to pass the floor to our CFO, Joseph. Joseph?

[Joseph Tung, executive]

Okay. Happy New Year to everybody. And before I come into -- go into our financial highlights, let me give you the guidance for our first quarter. Like Ken just mentioned, fourth quarter last year was a very exceptional strong quarter for us, and we were able to recuperate whatever business loss that we had from the EAR impact. And this strong momentum will continue into first quarter. So we're going to have an unprecedented first quarter performance from the ATM perspective. In U.S. dollar terms, ATM first quarter 2021 business should be similar with fourth quarter 2020 level. Consequently, the gross margin should also be kept at a similar level with fourth quarter of 2020 as well. In terms of EMS, in U.S. dollar terms, EMS will follow the seasonality. First quarter 2021 business should be similar with third quarter 2020 levels, whereas EMS first quarter operating margin should be slightly below the whole year 2020 level. That is the guidance that we're providing.

Now let me move into some of the financial highlights we have going through 2020. In the beginning of the year, in 2020, we set out to say that we have set an operating expense ratio. We want to lower it to 2018's level, which is 9.4%, and we have actually achieved ahead of that target. In 2020, our whole year operating expense ratio was managed to be held at 9%. And we will continue to put a very tight control over our OpEx ratio, and we're expecting to maintain the same OpEx ratio for 2021 as well. Also, in 2020, we also set a target to say, we want our operating margin to improve by 2%. From the reported operating margin, we stood at 7.3%, which was 1.6% higher than previous year. But still, if in all fairness, we have to look at the FX impact, in 2020, the operating -- if we net out the currency impact, the operating margin would have been 9.2%, which is 3.5 percentage points higher than 2019 level. Therefore, we believe that we have actually achieved our goal to have the operating margin improvement.

For 2021, with the strong business momentum, we are targeting another 1.5 to 2 percentage points operating margin improvement for the year. And also to support the strong business momentum in 2021, in the last quarter, we were saying that we were expecting the -- our CapEx for the year to be lower somewhat from 2020's level. With the strong business momentum, we are actually raising that expectation in our CapEx to be similar to 2020's level, which is -- was at $1.7 billion. Having said that, I think we wanted to dive a little bit more deeper into the CapEx number. As we mentioned, in 2020, because of the EAR restriction, we actually disposed some of our capacity up to the amount of around $300 million. And for this year, we need to recuperate that capacity. So part of the CapEx that we're going to spend in 2021 will be to recuperate that capacity that we sold, and we will reconfigure the capacity to fit the current demand.

Also, in 2020, we said that we want to -- we set a goal to have our net debt-to-equity ratio down to 65 -- 60% to 65% level, and I think we have reached that goal ahead of time. In fact, in -- at the end of 2020, we already reached the 65% or the high end of the target. And this, we will continue to monitor very closely, and hopefully, we can try to be further down in 2021.

In terms of dividend, we are raising -- actually raising our dividend payout. We expect to raise that from no less than $3 a share, as I previously mentioned, to no less than $4 a share. So to give our shareholders -- have our shareholders to share more of the benefit that we -- are coming out of the strong performance that we have for 2020.

With that, we are opening the floor for questions.

[Operator]

[Operator Instructions]

The first to ask questions, Randy Abrams, Crédit Suisse.

[Randy Abrams, analyst]

Okay. Yes. Congratulations on the results and outlook. I wanted to ask the first question on the wirebond tightness, the change in view from mid-year to full year. Just how much -- you mentioned the equipment lead time push out, but just how much a factor of demand and maybe what demand changes you saw to push that out to end of year? And if you could talk about how much wirebonder capacity you'll be adding to keep up to that demand?

[Kenneth Hsiang, executive]

So the first question is, the demand has not slowed down at all and the machine lead time is getting longer. That's why the -- we're confident that wirebond capacity will remain to be tight to the end of this year, at least, if not longer. In terms of the number of wirebonder we're adding, I think last year, we had 1,800 and this year, we believe we will add to a similar number of units. Right now, we have confirmed delivery of 1,200, and we're working on the other. But in terms of the wirebond tightness, is a combination of demand has not slowed down as well as the machine lead time. It's not just wirebonder, it's the whole [ line ] balance.

[Randy Abrams, analyst]

Okay. And if I could follow-up on the demand for wirebonder, just the application. Is it more PC consumer related? But also the other side, automotive, I think since you last reported it got even more tight. If you could remind us just how big the automotive sector is [ or ] tight? How you see that coming in? And whether you need to even prioritize some capacity with that market it seems like picked up quite a bit into year-end.

[Kenneth Hsiang, executive]

Right now, we have very high demand in automotive, mainly from the automated line as well as some high quality, the wirebonding process. The demand is actually getting to be very strong. In terms of the percentage, it's actually very difficult to estimate because the -- we do have a specific customer we're 100% engaged in the automotive business. But what we're seeing today is because of the advent of electrical vehicle, we have more customers getting into the [ design in ] with the automotive guys. And therefore, the -- it will take us a while to really comprehend exactly where the end application is.

[Randy Abrams, analyst]

Okay. Okay. Fair enough. And if I could ask on the pricing, where you talked last quarter about raising price. How should we see the pricing in terms of magnitude, like how much? And then how it's taking effect? Because it looks like your expectation will be tight through the year. So would it be like sequentially you see ability to take up pricing so we see it coming throughout the year? And I think you talked a bit about even 2 years -- some 2-year contracts. If you could talk a little more about what that involved, like how much of your business or what's that -- what you're contracting in for pricing on those?

[Kenneth Hsiang, executive]

Well, the comment that I made, the last quarter caused a lot of confusion and complaints. So I'm not going to comment on that anymore. And the only thing I can tell you is we do have a very friendly pricing environment. And the pricing adjustment, it's not -- it's a science, it's art. You have to really look at the business dynamics, how do you really collaborate with your customers and how do you really support them in their total business portfolio. I think we have struggled the second half of last year and all the way to now trying to accomplish the [ more asking task ] and the balances. So the 2 comments that I made last time caused a lot of confusion. First, I gave a very quantitative number on the wirebond shortage. I'm not going to do that again. And then I talk about the pricing environment, and I don’t want to do that again there. I apologize.

[Randy Abrams, analyst]

Okay. The last question I'll just ask for now. On OpEx, I just want to clarify. I think, Joseph, you made a comment about manage the OpEx to keep at 9%. The -- but I think the sales, you're guiding up double digit. So is it expectation the OpEx would be growing in line with the revenue run rate?

[Joseph Tung, executive]

I will say that there's still room for further improvement. But with the growing profitability, I think the bonuses in the salary adjustments will start to kick in a little bit more so. At this point, I want to stay a bit conservative, although I'm not precluding any possibility of further improvement in our OpEx ratio.

[Randy Abrams, analyst]

Okay. Is the bonus expense tied to a percent of net income or is there a way to think of that -- how we should model that structure?

[Joseph Tung, executive]

The OpEx?

[Randy Abrams, analyst]

Like the bonus expense -- like back when bonus expensing first started, it was a percent of net -- is it a percent of like pretax income or is there a way to think on that -- or that goes up with more profit sharing as you get more profitable?

[Joseph Tung, executive]

Yes. It goes up with the profit that we're making. In terms of the profit margin.

[Operator]

Next one to ask question, Gokul Hariharan, JPMorgan.

[Gokul Hariharan, analyst]

Congrats on the good results. First of all, could we talk a little bit about advanced packaging and testing, how is the kind of backfill and recovery from the impact? I think we did have some impact in Q4 for both these areas. I think it was lower than Q3. How should we think about those areas? If you think about double-digit growth for IC ATM this year, if we were to rank wirebond versus advanced packaging versus testing, how should we think about the growth ranking for these 3 components of IC ATM?

[Kenneth Hsiang, executive]

Okay. 2020, especially Q4 was kind of a painful process for us, mainly because the EAR-affected customer, which happens to be very high run rate on our fan-out and some of the advanced packaging facility as well as the advanced testing facility. We have fully recovered that. We have disposed some of the assets, as Joseph already talked about it. The remaining asset, we have to retool, recalibrate, reconfigure to accommodate the other customer who might not have exactly the same configuration requirement compared to EAR-affected customers. That has been largely done. In terms of the -- now after that recalibration, in 2021, we do expect the advanced packaging as well as testing to resume the growth curve.

[Gokul Hariharan, analyst]

Do you feel that it will grow faster than overall average or is probably still going to be in line with the overall average or slightly lower?

[Kenneth Hsiang, executive]

It will be in line with our overall growth.

[Gokul Hariharan, analyst]

Understood. My second question, as you mentioned, work-from-home, stay at home and some of the new demand drivers that have emerged as a result of the pandemic. When you think about your increased confidence in demand, not just for this year but also for next year, and that is kind of reflected in your CapEx increase as well, do you feel -- or do you kind of bake in some kind of mean reversions here in terms of demand going back once we get into some kind of a recovery? Or you think that this is a new normal and your customers are basically expecting the demand to be -- stay at these levels or even grow from here rather than [ mean ] toward back.

[Kenneth Hsiang, executive]

All right. The -- of course, that is the educated guess, assuming that the vaccination, the -- and also the pandemic situation is the -- largely under control. The question now is, will we still see the current demand curve to continue? My believe is, the answer is yes, mainly from the following reasons. Now once you are adjusted to -- once you're accustomed to using a WiFi, using the smart device, using multiple computers, that -- there is no turning back. Also, the -- I think for you, myself, as was many of the semiconductor veteran, we're used to travel, flying around. I think 18 months, 24 months of time is enough to change on how the human behavior. For example, the -- all my customers who have not been traveled since the last 12 months. In future, there will be increasing percentage of people working from home, having conference at home to replace some of the travel, face-to-face meeting. In that regard, I think the IT equipment, the bandwidth and the quality and also the number of units people are willing to spend by as well as the age group, which covers the older age group as well as younger age group. I think that effect is there. Of course, we actually do not know the -- how much that slope is going to change, but I believe the slope will be better than pre-pandemic days.

[Gokul Hariharan, analyst]

Understood. That's very helpful. Maybe if I could ask 1 more question to Joseph. Joseph, when you talk about margin expansion on the -- it looks like a lot of the margin expansion is going to still come from gross margin, given you're expecting OpEx to remain largely flattish, at least the starting point of your expectations. Is it -- given that except for maybe 1 quarter, we were recently fully utilized all through last year, is it mainly a pricing translating into gross margin expansion because of capacity tightness and the different kind of pricing or are there any other variables? Is it more of the SPIL synergies starting to kind of come in when we think about the gross margin [indiscernible].

[Joseph Tung, executive]

Well, I think it's a combination of many different factors. Of course, a friendly pricing environment certainly helps. But I think we will continue to improve our efficiency through further automation in our factories. Also, the synergy that we're going to be creating with the collaboration with SPIL will continue to benefit us in terms of margin improvement. And there are other measures that we're taking at this point to -- like Ken just mentioned. There are a lot of the ways that we do business will be different, will be more efficient. So all these -- and plus the continuing technology advancement that we're putting in our factory in terms of making new products and creating new projects, particularly in the SiP area, those all put together will definitely have a positive impact on our margin.

[Gokul Hariharan, analyst]

Got it. Maybe 1 last question. Could you also talk a little bit about how much of our EMS revenues were SiP last year? And could you talk a little bit about what are the new projects -- like what kind of products? Are there still 3 key products that we are looking at in terms of this new $400 million revenue coming in, in this year? Are we also seeing some diversification of this into other verticals?

[Kenneth Hsiang, executive]

We're seeing the whole wide variety of new SiP projects that covers the optical, the audio and silicon photonics as well as a lot of the smartphone edge devices. The -- so we're kind of pleased to see that the -- finally, the SiP project start to gain momentum. And one other thing I always like to tell people is, when I talk about the heterogeneous integration, I'm really not addressing the silicon on silicon type of integration. I think the ASE sweet spot for the SiP will be the traditional silicon on silicon multiple die as well as optical sensor, integrated in a very packaging manner. I think that we are looking at a huge growth rate ahead of us. And I can't really give you a number. But over the last few years, we have been ceaselessly collaborating with a lot of our key customers and trying to come up with design applications that can improve efficiency, leverage the success of the HPC bigger brain and also the success of very powerful network in cloud with the 5G data ray and low latency, I think we're seeing more application in all areas.

But all of the little devices for the mass market, that is really the sweet spot that ASE has been designing for. And with our key customers, with our early success, I think ASE today almost become the first choice. For example, in 5G, in most of the unique SiP, the ASE has always been the first one to engage with our key customers. And I think that trend, hopefully, will repeat in 2021, then we'll have an even higher confidence and maybe we'll be able to give you a projected market size based on the effort. But in the last few years, we couldn't give you that number because we're primarily working with few customers. But now we're seeing a broader, more diversified portfolio and we gradually understand the design rule, the value, the physical, electrical, the cost performance, so we're just building the database to that. Our fully automated factory really was part of the overall architecture to accommodate that because if we don't understand how the sensor interact physically and the -- electrically with one another, it's very, very difficult to build high multiple die, high level integration with a variety of sensor using different material and different configuration. And I think that is something that becomes more obvious to us through the effort of the last few years. It's a long answer, but I think it's a key answer, it's a key message I would like to deliver to all of our partner investors.

[Operator]

Now the line is open to Roland Shu from Citigroup.

[Roland Shu, analyst]

I think the first question still for the gross margin. So I look at your IC ATM gross margin in fourth quarter, it improved by 2.4 percentage points with the overall IC ATM revenue was fairly better than 3Q last year. However, I look at this testing revenue actually did decline a lot in 4Q. So -- but still, your gross margin improved a lot. So Joseph just said, you have a lot of these efficiency improvements and also with better pricing environment. Question is, is this an improvement on gross margins write-off or are we expecting the gross margin improvement for this IC ATM will continue even low our testing business declined in 4Q?

[Joseph Tung, executive]

With the higher loading that's continuing with very strong business momentum and the continuous effort that we're putting in, in terms of improving our overall efficiency and also with the closer collaboration with SPIL to create further synergy. I do believe that in this year, we'll continue to see margin improvement at the growth level. So there are some headwinds in front of us, including the strong NT dollar. And also, as you mentioned, the -- we're still trying to -- we're in the process of recuperating some of the lost test business, which tend to have a higher gross margin. But all -- putting all these together, I think there are some plus and minuses, but we still -- we're still fairly confident that we will continue to see margin improvement going forward.

[Roland Shu, analyst]

Understood. Yes. And for your testing business, actually, in the past couple of years, you had a big amount of the testers, and then you also would like to increase this testing business. However, I think in 4Q, the revenue for the testing was the lowest in a quarter in last year, it was even lower than 4Q last 2019. We think the EAR was probably was the reason for this lower testing revenue. Except for this EAR, is there any other issue or cause this testing revenue decline in 4Q last year?

[Joseph Tung, executive]

No, I think that is really the main reason why -- because of this customer that is impacted by the EAR, unfortunately, has a very high turnkey ratio with us. And we are -- now that the -- this part of the business, it will take some time for us to bring back. And -- but I think -- fortunately, I think the current market environment does allow us to have more capability in terms of raising our overall turnkey ratio with our customers. So I think by second half of the year, we should be seeing a full recovery of our test momentum.

[Roland Shu, analyst]

Second half this year, 2021?

[Joseph Tung, executive]

Right. And it does take some time not only to bring in new business but also to reequip ourselves with the suitable testers. It does take some time for us to fully recover.

[Roland Shu, analyst]

So what is the utilization for the test at this moment?

[Joseph Tung, executive]

For fourth -- starting for fourth quarter, I think the overall test utilization has come down a little bit to below 80%. It was around 80% before.

[Roland Shu, analyst]

Okay. Yes. How about the for IC ATM and for packaging?

[Joseph Tung, executive]

Packaging? So packaging was -- we're running at full capacity. And I think typically, we'll say it's 80% plus.

[Roland Shu, analyst]

Okay. Yes. So I -- you said in first quarter, this utilization for packaging and testing in first quarter probably will be similar as 4Q?

[Joseph Tung, executive]

Yes. Going in -- like Ken mentioned, the run rate of our business remains the same as in the fourth quarter, so the utilization should be very similar.

[Roland Shu, analyst]

Okay. So previously, are you -- you have the target for testing revenue to be -- to reach 1/4 or 1/3 of the total IC ATM revenue. So now do you still keep the same goal for this testing revenue? And when do you think you will reach this goal?

[Joseph Tung, executive]

Yes. I think the test business is still a very, very lucrative business for us to build further. And we're setting a high goal for us, and we'll continue to work very hard on this.

[Roland Shu, analyst]

Okay. So you don't have the time frame for when to reach this 1/4 or 1/3 of the total IC ATM revenue?

[Joseph Tung, executive]

We will say [ whatever ] the time.

[Roland Shu, analyst]

Yes. Okay. Okay. Lastly, for -- you said you have this 2-year loading agreement with customers. I just would like to know, is this for all customers on all application or this is just for some specific customers' product? And is this loading agreement a fixed price on fixed volume for 2 years?

[Kenneth Hsiang, executive]

We have 90% of the customers covered 2 years.

[Roland Shu, analyst]

90%?

[Kenneth Hsiang, executive]

Yes.

[Roland Shu, analyst]

90% of all IC ATM customer?

[Kenneth Hsiang, executive]

No. I thought you were referring to wirebond.

[Roland Shu, analyst]

Okay. 90% of the wirebond customers?

[Kenneth Hsiang, executive]

Right. That covers the NPI [ volume ] as well as pricing.

[Roland Shu, analyst]

Okay. So this is a fixed pricing and fixed volume for 2 years?

[Kenneth Hsiang, executive]

Yes.

[Operator]

Next one to ask question, Rick Hsu from Daiwa.

[Rick Hsu, analyst]

I just have 1 simple question. Could you run through the details again about your Q4 nonoperating gains because I kind of missed this part at the beginning.

[Kenneth Hsiang, executive]

Great. We -- let's look at the page here. The majority of the gain relates to the disposition of the Fujian plant, about $800 million. We also saw some asset disposition gains. So we did have to reshuffle testers and such. So we did sell testers, but we did get gains on both.

[Rick Hsu, analyst]

So how much is gain for that?

[Kenneth Hsiang, executive]

$0.5 billion.

[Rick Hsu, analyst]

$0.5 billion, okay.

[Kenneth Hsiang, executive]

And then we have net interest expense, $0.6 billion.

[Joseph Tung, executive]

We also have some ForEx.

[Kenneth Hsiang, executive]

We have ForEx and investment related CapEx -- well, it's income this time around. So it's about $200 million -- so $0.2 billion.

[Operator]

Now we're having Charlie Chan from Morgan Stanley for questions.

[Charlie Chan, analyst]

Congratulations for the great results and Happy Chinese New Year. So my first question is really about your wirebond capacity expansion. So first of all, can Ken go through your strategic thinking behind it because if you expanded capacity maybe that kind of jeopardize your pricing power and if you don't expand, maybe you cannot capture the business opportunity. So that is the question number one.

And secondly, I'm a little bit curious about your machine lead time, right? Last year, you add 1,800 units and this year it's the same except -- but why last year, there wasn't a shortage and now you have such a lengthy lead time for those machines? And I know you probably more depends on collagen sulfur as the major wirebond vendor? And is that kind of long lead time only applied to the K&S and do you consider to also buy more wirebonders from Asian Pacific? Can you talk about all those topics?

[Kenneth Hsiang, executive]

Okay. We have reported we added 1,800 wirebonders last year. And some of the PO that we placed in the second half of last year has not been delivered yet. And some of the PO that we issued last year will be delivered throughout this year. We are also issuing new POs based on the loading agreement and also the requirement as well as many of the other equipment that were proposed to the full manufacturing line. So it's not just wirebonder. You also have all of the other equipment that go with the wirebond requirement and a different configuration based on the product. When I talk about the longer machine lead time, you have to go back to the machinery CapEx of the whole industry. If you go back to 2018 and 2019 and 2020 number for the whole OSAT. You will see that ASE was one of the companies that spend more money in 2019 and 2020 comparing to all of the other OSAT. So some of the orders that we placed in '19 and '20 and the capacity we build up and that was the leverage we had versus a lot of our customers in the delivery in the capacity crunch. We do have a better negotiation position based on our spending power as well as our strategic alliance to all of the customers. However, given the 2020 capacity crunch, I believe all of our competitors are placing order for all the equipment that are required to meet customer demand.

So in 2021, we do believe the delivery will not be as smooth comparing to '19 and '20. And this explains why we don't believe the -- I will not be able to comment on the particular vendor that we use and also the number because this will cover a lot of the instrument and equipment that we need. We also need to cooperate with the substrate, the lead frame and all the other material supplier. It's just not wirebond. And I appreciate you know how tight everythings are.

[Charlie Chan, analyst]

Okay. That's yes -- that's actually very helpful. So I guess the -- that kind of long lead times is kind of across board, maybe not just a single equipment or a single vendor. But Dr. Tien, would you think this kind of aggressive spending, not just your company but also, as you mentioned, your competitors, would win the discipline of the wirebonding markets. And next year, you probably see a kind of some appraiser from customers on the wirebonding price?

[Tien Wu, executive]

There's something we learn in 2020 that are slightly different than before. Before, we talked about capacity and the customer will come in, they leverage the underutilized capacity versus pricing. But in year 2000, I believe a few things have changed, right? The first, people cannot travel. Therefore, the customer needs to arrange capacity qualification via remote somehow, relatively speaking. So for the company that have a track record of consistent delivery as well as plenty of data to demonstrate the integrity of the process will give higher confidence to the key customer and their end customer to use our capacity. Now in 2020, I do not have the detailed number of all our competitors, but I do not believe our competitor were as full as ASE. Having said that, we still have a lot of customers who need high reliability or consistency in delivery or, more so, in the speed of ramping up or the so-called tight market. So in 2020, even though we're very, very tight, but we have more customers coming to ASE demanding a longer-term service agreement such that we can provide the data, the serviceability, the fast ramp-up as well as the quality expectation or the liability that go with the high quality requirement.

And you have to understand that we were running full in 2000 in a running full and another 10%, 20% ramp-up is a huge challenge. Without a fully automated line, without a careful landscape planning for the last few years, you simply cannot achieve this kind of time to market. So I think 2020 is a very good confidence boost to my sales team, to my manufacturing team. And based on all of the dialogue that I have with my key customer, they really appreciate how Taiwan was managed throughout the pandemic. How the Taiwanese semiconductor companies were managing the delivery in a very adverse supply chain environment throughout the whole 2020. And I believe that will carry us far. For the partner that we support, they're gaining market share. And I think this is another reason that I believe not only we will grow or we'll capture a huge chunk of the semiconductor grow in logic space, we will also force to enable more outsourcing for IDFs. That I believe that in the next few years, we will enjoy higher growth rate as a result of all of these factors.

[Charlie Chan, analyst]

Dr. Tien, I think that's very clear. So may I also follow-up, Roland's question about your gross margin trend. Sorry, I'm not sure if you did give the gross margin guidance for this year. Can you kind of break down by your ATM business and the EMS business gross margin trend in 2021? And also, I know you normally don't comment about the pricing, right? But may I know for flagship and testing, do you expect prices to go up this year?

[Kenneth Hsiang, executive]

Joseph, you will comment on the gross profit?

[Joseph Tung, executive]

As I mentioned earlier, I think the -- for 2021, I think we will continue to see margin improvement at the gross level. With the steady or improving OpEx ratio, I think also on the operating margin, we will continue to see improvement. And that comes from a lot of the efforts that we've put in, in terms of improving efficiency, creating synergy with SPIL. Also the higher loading, of course, it helps. A friendlier pricing environment also help. I think all of these put together give us a very high confidence that we will be improving our margin going forward for ATM. As far as EMS' perspective, I think the more relevant margin is at operating level. Because of the different product mix, they will have to create quite a bit of fluctuations on the growth level. So the more relevant or more meaningful benchmark is really on the operating level. For that, we are targeting a 4% operating margin for EMS business. That's slightly up from what we achieved in previous year, which was at 3.8%.

[Kenneth Hsiang, executive]

Okay. For the other line of business, flip-chip, the fan-out, all of the others, we're also seeing a more friendly environment. But not as friendly as wirebond, but they're friendly. Okay. I will not comment anymore on.

[Operator]

Next one to ask question Sebastian Hou, CLSA.

[Sebastian Hou, analyst]

So just to follow on the pricing and the margin that part. If I look at your Q4 2020 margin, that has improved. I think there's a combination of the utilization rate improve, synergies and then pricing. But looking now into your 1Q guidance, revenue and margin will be similar to the last quarter. So can we say that the pricing is not a factor anymore in this quarter to drive the margin for the improvement?

[Joseph Tung, executive]

I think it's to have a similar kind of margin for the quarter is quite a bit of a challenge itself already because we are facing further NT appreciation, which will have an over 1% impact on the margin. We are going through Chinese New Year. And some of the -- some of our factories are going through annual maintenance. So therefore we will have less working days. And also throughout the -- there's a lot of [ home ball ] that needs to be [ passed out. ] The overall compensation expense is going to be higher for the quarter. So all the things put together, I think we are -- I think we're doing a pretty good job in maintaining our margin at a similar margin from the fourth quarter.

[Tien Wu, executive]

I mean, the -- just for clarification, the so-called seasonality is still here. In other words, some of the key customers are running very high-volume design for consumer or wireless application and this to go through seasonality and [ I get why]. You can see, in our EMS business, will go through some sort of seasonality pattern. So to offset the vacuum created by the seasonality of loading, we have to go figure out how we add capacity, how do we enable other customers and ramp up that volume. In Q3 of last year, when I made a comment that our high run rate EAR customer who got affected, we expect the end of Q1 to fully recover that vacuum. So in fact, we had the EAR vacuum. We also have the normal seasonality vacuum in Q1. So what we're making a statement is we actually replenish 2 vacuums created by the unavoidable forces. Now how much of that is through efficiency, the product mix, then also pricing environment? I cannot get into the detail. But what we're telling you is at a macro level, given that we have 3 to 4 days, shorter working days because February as well as the annual maintenance, on top of that we have foreign exchange, that hopefully, we can deliver a very strong Q1, which will be a new record in my career time and revenue level in Q1 as well as the margin level. I hope that clarifies our current view about how unique Q1 is.

[Sebastian Hou, analyst]

Okay. And my second question is on the 2-year contract you have with wirebonding customers. So if I may just want to understand the pricing schemes you have, it is that the customers already agree with -- you have elevated price, one time. And from now on in the next 24 months, the customer will be sit on that fixed price already or schemes also cover some price increase this year and another part of the price increase will happen next year within the next 24 months?

[Tien Wu, executive]

I will not comment on that. I can only tell you that we have elevated the baseline and then there will be other calibration based on business dynamics. But I will not comment any more details on that because everyone is different.

[Sebastian Hou, analyst]

Okay. But so it's fair for us to assume that I think every customers have different scheme, and so which means that the price adjustment may not end yet?

[Tien Wu, executive]

I won't comment on that. You know I won't.

[Sebastian Hou, analyst]

Okay. And then another part of the question is that I think that you -- Dr. Wu, you have mentioned that aside from wirebonding, the auto business, the pricing environment also getting more friendly right now. So do you see the possibility that customers will also get on board with maybe some long-term agreements bumping or flip-chip business?

[Tien Wu, executive]

I won't comment on that right now. Sorry.

[Sebastian Hou, analyst]

Okay. No worry. Next question I have in terms of the wirebonding equipment availability, I know that the lead times get extended because everybody wanted to buy those equipment right now, but do you see there's any intrinsic bottlenecks or in terms of the limitation of the wide bonding equipment for the industry or for you to buy?

[Tien Wu, executive]

I don't think there is any other. It's just over delivery -- you need to have a line balance. You don't buy one type of equipment in excessive way. It will come in with the line balance, optimization as well as via a substrate, the epoxy and all of the other material supply. And I mean, mind you, the floor space, the training, IT system, I mean, I can just go and on about what you need to do on top of that, the wastewater, the air, I mean there's a whole lot of things that you cannot react just in time. The manufacturing floor takes years of planning to do. And we're just giving you at a macro level of what the estimated number in terms of increment that we will be able to achieve.

[Sebastian Hou, analyst]

Okay. That's fair. Last question from me is the EMS business, I think the company incumbent that I think this year, the EMS business the growth will be higher than IC ATM this year. So what is the -- can you give us some examples of the -- or give me more color about what's driving that?

[Tien Wu, executive]

Are you asking about the Asteelflash acquisition.

[Sebastian Hou, analyst]

If we exclude that?

[Tien Wu, executive]

Well, then you will have a combination of growth in all sectors. In a highly constrained environment, the traditional EMS business will grow because everyone is looking for parts.

[Sebastian Hou, analyst]

Okay. Thanks for mentioning that. If we exclude the acquisition, would EMS still be growing above IC ATM or below?

[Joseph Tung, executive]

I think the overall organic growth of -- the overall EMS growth comes from both organic growth as well as the addition of Asteelflash, which represents about 10% of the overall EMS going forward. So we did mention that we are expecting the ATM to grow 2x of the logic semi market growth. So you can do the math from there.

[Operator]

Next one to ask question, Chris from Goldman Sachs.

[Unknown Analyst]

I think my question is for the overall AUM growth in 2021, which is like 2x higher than the semi growth. So for the midpoint, about 15%. Can -- which is very, very good. Can you give us a little bit breakdown in terms of like which one will grow faster or what other growth driver is coming from? How much is coming from the share gain? How much is coming from SiP? Or how big is wirebond, [indiscernible], testing? What kind of rank in terms of their growth rate for 2021?

[Tien Wu, executive]

All right. 5G is at the onset. So we're seeing a lot of 5G volume and then the -- you probably know the number better than we do. So our key customer in the 5G space that cover the whole slew of application front module, part amplifier and the 5G chipset, the PMIC that go with it as well as the -- because of 5G and the -- a lot of the customers need to upgrade their infrastructure, WiFi. So the -- so WiFi is there. The -- we're having the -- a lot of demand from the automotives and the electrical vehicle. And I talked about the smart devices and the edge device. So we're seeing more SiPs. And I just comment in year 2000, we have $386 million of new SiP business that we believe in 2021, on top of that, we get another $400 million of SiP business. And they're mostly audio-, optical-oriented. And all of these are new. And honestly, I think we're the first mover in the -- I think in all of these applications. So I don't think it's a market share gain. It's just a brand new market, enabled by the pandemic or more specifically, enabled by the brain power of the HPC and AI, the cloud, data center and the e-commerce and the -- you're seeing a lot of smart devices and IoT being enabled. I will not comment any more detail. But I think over time, you will see a higher semiconductor growth rate reported by many of the semiconductor companies. And I think ASE has got the right infrastructure and know-how and the reputation to facilitate those high-value ramp-up and time-to-market in a very, very timely manner, particularly in a challenging environment. So I think 2021, at this point of time, we're very, very optimistic about the baseline that covers all of the loading agreement as was NPI and we look at the pipeline and their end market application. So our internal judgment is that those volumes are very real, and they will have longer life and stronger net in the next few years.

[Unknown Analyst]

Okay. Can I dig a little bit more into the SiP business? I mean, you just mentioned that SiP, the total group revenue is about $3.5 billion. But well, as an analyst, we have difficulty right now to break down how much is coming from EMS, how much is coming from ATM business because some of the projects is a bit confusing from our perspective. So can you give us a breakdown between SiP business -- between EMS and ATM? And also for the growth rate, the SiP business, the new project is about $400 million and as well as this year, most likely it's for like 10-plus percent of the Y-o-Y growth for 2021. So which is somewhat lower than the overall corporate growth rate. Does that sound right?

[Tien Wu, executive]

Well, if I can give you the breakdown, which I'm pondering, I don't think I would give you the breakdown this time. No, the growth rate is much higher than our corporate growth rate because the -- a lot of the growth rate are in the ATM range. Sorry, my apology, I don't have the breakdown right now. We will think about it, how do we give you a better breakdown for better clarity, but not this round.

[Unknown Analyst]

Okay. Okay. One last question for me is that if the whole year revenue growth is 2x than semi growth, which is more like 15% for the midpoint, but your first quarter ATM business is -- the year-on-year growth is somewhere around 6% or a high single digit, does that imply you have a very strong second half seasonality?

[Tien Wu, executive]

We already comment that we will -- we are expecting quarter-to-quarter growth for the whole year of 2021. So yes, it's 1Q, 2Q, 3Q, 4Q, each quarter is better than the previous quarter.

[Operator]

Now we are taking the last question, Szeho Ng from China Renaissance.

[Szeho Ng, analyst]

Congratulations. 2 quick question from my side. First one, regarding the net gearing target. Basically, you've achieved ahead of schedule. So are you happy with the current 60% to 65%? Or internally, you're looking for a more aggressive target right now?

[Joseph Tung, executive]

The short answer is, yes, I'm happy with it. 65% is a reasonable number that we have already achieved, particularly we achieved it ahead of schedule. In terms of whether we want to further improve that, I think it really depends on how the market shapes up, going forward. I think there are plenty of different opportunities in front of us. It could be something organic, could be something that's external. So I would rather leave it open at this point or leave some flexibility for myself. If -- by the way, if we look at the current forecast that we have for the year, I think there's going to be further improvement in terms of net debt-to-equity-ratio.

[Szeho Ng, analyst]

Okay. Definitely. And second question on the ATM GPS gross margin, given the company [ varies ] uplift outlook for the next few years, is it fair to assume that the ATM gross margin can be back to, let's say, the mid-to-high 20% levels like what we saw back in 2014 and '15 when the company was dominating the copper wirebonding market?

[Joseph Tung, executive]

Well, that's certainly the ideal level that we want to go after, I think -- but we're going to be patient, we're going to take one step at a time. Just checking from all angles of our operation, see how much improvement we can continue to have. So yes, I think that's our longer-term -- from a longer-term perspective, that is something we want to pursue.

[Kenneth Hsiang, executive]

Okay. Thank you, everyone, for attending our call. We'll see you next quarter, hopefully, at an earlier time slot. Talk to you, soon. Bye.

[Tien Wu, executive]

Thank you. Happy New Year.