ASE Technology Holding Co (2DQ) Risk Analysis
Risk Overview Q4, 2023
Source: the company's latest filing for the period ended Dec 31, 2023, filed Apr 03, 2024
Risk Change Over Time
- Debt & Financing - Risk 1Inflation and fluctuations in interest rates could adversely affect our business, financial condition, results of operations, and cash flows.
We are exposed to economic and political conditions in the countries and regions where we operate. We are also affected by governmental policies regarding spending and investment, exchange controls, regulatory and taxation changes, and other adverse political, economic, or social developments in the countries and regions in which we operate. Like all companies with extensive operations, we are exposed to risks from fluctuations in inflation. High inflation rates may adversely affect our business by increasing the cost of the raw materials, energy, labor, and transportation. Current or future efforts by various governments to stimulate their economies may increase the risk of inflation. In the event of an increase in inflation, we may need to increase the sales prices of our services in order to maintain satisfactory profits; however, such increases may not be accepted by our customers, and may not sufficiently compensate for the negative impacts of inflation. At a macro level, inflation might reduce households' disposable income and reduce people's savings, which may decrease discretionary spending and negatively impact the sales of our customers' products and, correspondingly, their demand for our manufacturing services. If we are unable to fully offset the effects of increased inflation, we may have material adverse impacts on our business, financial condition, results of operations, and cash flows. As a result of inflationary pressure and macroeconomic instability, various governments may adopt monetary policies that will lead to higher interest rates. Higher interest rates may adversely affect our financing costs, including the costs of our current debt and leasing payments. There is no assurance that we will be able to effectively mitigate the interest rate risk, even after utilizing certain financing instruments. Further, in higher interest rate environments, our customers may reduce their overall investment in product development by cutting their capital expenditures and R&D expenses. Such reductions in capital expenditures and R&D expenses by our customers may reduce the amount of business that we receive from them and adversely affect our results of operations.
Risk Highlights Q4, 2023
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 51
- Share Price & Shareholder Rights - Risk 1The value of our Common Shares or ADSs may be reduced by possible future sales of Common Shares or ADSs by us or our shareholders.
While we are not aware of any plans by any major shareholders to dispose of significant numbers of Common Shares, we cannot ensure that one or more existing shareholders or owners of securities convertible or exchangeable into or exercisable for our Common Shares or ADSs will not dispose of significant numbers of Common Shares or ADSs. In addition, several of our subsidiaries and affiliates hold Common Shares, depositary shares representing Common Shares, and options to purchase Common Shares or ADSs. They may decide to sell those securities in the future. See "Item 7. Major Shareholders and Related Party Transactions-Major Shareholders" for a description of our significant shareholders and affiliates that hold our Common Shares. We cannot predict the effect, if any, that future sales of Common Shares or ADSs, or the availability of Common Shares or ADSs for future sale, will have on the market price of our Common Shares or the ADSs at any time. Sales of substantial numbers of Common Shares or ADSs in the public market, or the perception that such sales may occur, could depress the prevailing market prices of our Common Shares or the ADSs.
- Share Price & Shareholder Rights - Risk 2The right of holders of ADSs to participate in our rights offerings is limited, which could cause dilution to their holdings.
We may from time to time distribute rights to our shareholders, including rights to acquire our securities. Under the deposit agreement, the depositary will not offer holders of ADSs those rights unless both the distribution of the rights and the underlying securities to all our ADS holders are either registered under the Securities Act or exempt from registration under the Securities Act. Although we may be eligible to take advantage of certain exemptions under the Securities Act available to certain foreign issuers for rights offerings, we can give no assurances that we will be able to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement for any of these rights. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings. If the depositary is unable to sell rights that are not exercised or not distributed or if the sale is not lawful or reasonably practicable, it will allow the rights to lapse, in which case holders of ADSs will receive no value for these rights.
- Share Price & Shareholder Rights - Risk 3Holders of ADSs will not have the same voting rights as our shareholders, which may affect the value of their ADSs.
The voting rights of a holder of ADSs as to our Common Shares represented by its ADSs are governed by the deposit agreement. Holders of ADSs will not be able to exercise voting rights on an individual basis. If holders representing at least 51% of the ADSs outstanding at the relevant record date instruct the depositary to vote in the same manner regarding a resolution, including the election of directors, the depositary will cause all Common Shares represented by the ADSs to be voted in that manner. If the depositary does not receive timely instructions representing at least 51% of the ADSs outstanding at the relevant record date to vote in the same manner for any resolution, including the election of directors, holders of ADSs will be deemed to have instructed the depositary or its nominee to authorize all our Common Shares represented by the ADSs to be voted at the discretion of our chairman or his designee, which may not be in the interest of holders of ADSs. Moreover, while shareholders who own 1% or more of our outstanding shares are entitled to submit one proposal to be considered at our annual general meetings of shareholders, only holders representing at least 51% of our ADSs outstanding at the relevant record date are entitled to submit one proposal to be considered at our annual general meetings of shareholders. Hence, only one proposal may be submitted on behalf of all ADS holders.
- Share Price & Shareholder Rights - Risk 4Holders of Common Shares and ADSs may experience dilution if we issue stock bonuses, share options, or restricted stocks to employees or sell additional equity or equity-linked securities.
Like other R.O.C. technology companies, we periodically issue bonuses in the form of Common Shares. Bonuses in the form of our Common Shares are valued at the closing price of our Common Shares on the day prior to our meeting of the board of directors. Therefore, the issuance of our Common Shares pursuant to stock bonuses, share options and restricted stock awards may have a dilutive effect on the holders of outstanding Common Shares and ADSs. In addition, the issuance of additional equity or equity-linked securities may result in additional dilution to our shareholders. As of December 31, 2023, a total of approximately 217,205 thousand share options and restricted stocks assumed and issued by ASEH were outstanding. See "Item 6. Directors, Senior Management and Employees-Compensation-Share-Based Payment Arrangements."
- Share Price & Shareholder Rights - Risk 5We are an R.O.C. company and, because the rights of shareholders under R.O.C. law differ from those under U.S. law and the laws of certain other countries, our shareholders may have difficulty protecting their shareholder rights.
Our corporate affairs are governed by our Articles of Incorporation and by the laws governing corporations incorporated in the R.O.C. The rights of shareholders and the responsibilities of management and the members of the board of directors under R.O.C. law are different from those applicable to a corporation incorporated in the U.S. and certain other countries. As a result, public shareholders of R.O.C. companies may experience increased difficulty in protecting their interests in connection with actions taken by management or members of the board of directors than they would as public shareholders of a corporation in the U.S. or certain other countries.
- Share Price & Shareholder Rights - Risk 6Our major shareholders may take actions that are not in, or may conflict with, our public shareholders' best interests.
Members of the Chang family own, directly or indirectly, a significant interest in our outstanding Common Shares. See "Item 7. Major Shareholders and Related Party Transactions- Major Shareholders." Accordingly, these shareholders will continue to have the ability to exercise a significant influence over our business, including matters relating to: - our operation, management, and policies;- the timing and distribution of dividends; and - the election of our directors. Members of the Chang family may take actions that public shareholders may not agree with or that are not in alignment with our or our public shareholders' best interests.
- Share Price & Shareholder Rights - Risk 7If a non-R.O.C. holder of ADSs withdraws and holds Common Shares, such holder of ADSs will be required to appoint a tax guarantor, local agent, and custodian in the R.O.C. and register with the TWSE or the Taipei Exchange in order to buy and sell securities on the TWSE.
When a non-R.O.C. holder of ADSs elects to withdraw and hold Common Shares represented by ADSs, such holder of the ADSs will be required to appoint an agent for filing tax returns and making tax payments in the R.O.C. Such agent will be required to meet the qualifications set by the R.O.C. Ministry of Finance and, upon appointment, becomes the guarantor of the withdrawing holder's tax payment obligations. Evidence of the appointment of a tax guarantor, the approval of such appointment by the R.O.C. tax authorities, and tax clearance certificates or evidentiary documents issued by such tax guarantor may be required as conditions to such holder repatriating the profits derived from the sale of Common Shares. We cannot ensure that a withdrawing holder will be able to appoint, and obtain approval for, a tax guarantor in a timely manner. In addition, under current R.O.C. law, such withdrawing holder is required to register with the TWSE or the Taipei Exchange and appoint a local agent in the R.O.C. to, among other things, open a bank account and open a securities trading account with a local securities brokerage firm, pay taxes, remit funds, and exercise such holder's rights as a shareholder. Furthermore, such withdrawing holder must appoint a local bank or a local securities firm to act as custodian for confirmation and settlement of trades, safekeeping of securities and cash proceeds, and reporting and declaration of information. Without satisfying these requirements, non-R.O.C. withdrawing holders of ADSs would not be able to hold or otherwise subsequently sell our Common Shares on the TWSE or otherwise. Pursuant to P.R.C. Regulations, only QDIIs or persons that have otherwise obtained the approval from the DIR and registered with the TWSE are permitted to withdraw and hold our shares from a depositary receipt facility. In order to hold our shares, such QDIIs are required to appoint an agent and custodian as required by the P.R.C. Regulations. If the aggregate amount of our shares held by any QDII or shares received by any QDII upon a single withdrawal or in the aggregate accounts for 10.0% of our total issued and outstanding shares, such QDII must obtain the prior approval from the DIR. We cannot ensure that such approval would be granted.
- Share Price & Shareholder Rights - Risk 8The market for our Common Shares and the ADSs may not be liquid.
Active, liquid trading markets generally result in lower price volatility and more efficient execution of buy and sell orders for investors, compared to less active and less liquid markets. Liquidity of a securities market is often a function of the volume of the underlying shares that are publicly held by unrelated parties. There has been no trading market outside the R.O.C. for our Common Shares and the only trading market for our Common Shares is the TWSE. The outstanding ADSs are listed on the NYSE. There is no assurance that the market for our Common Shares or the ADSs will be active or liquid. Although ADS holders are entitled to withdraw our Common Shares underlying the ADSs from the depositary at any time, the R.O.C. law requires that our Common Shares be held in an account in the R.O.C. or sold for the benefit of the holder on the TWSE. In connection with any withdrawal of Common Shares from our ADS facility, the ADSs evidencing these Common Shares will be canceled. Unless additional ADSs are issued, the effect of withdrawals will be to reduce the number of outstanding ADSs. If a significant number of withdrawals are affected, the liquidity of our ADSs will be substantially reduced. We cannot ensure that the ADS depositary will be able to arrange for a sale of deposited shares in a timely manner or at a specified price, particularly during periods of illiquidity or volatility.
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