ASM Pacific Technology, a leading supplier of equipment and materials for the semiconductor industry, is riding on the surge in global demand for consumer electronic products to achieve record annual sales and profits. Last year's turnover for the group jumped a record 18.4 per cent to HK$5.4 billion, and its profits stood at a record HK$1.27 billion with earnings per share of HK$3.26. ASM achieved record equipment turnover of HK$4.3 billion which represented a growth of 20.3 per cent. Its record lead frame turnover rose 11.3 per cent to HK$1.08 billion. For the sixth consecutive year since 2002, ASM is the world's No1 assembly and packaging equipment supplier for the semiconductor industry. The company widened its lead on its closest rival by more than 50 per cent. Chief executive Lee Wai-kwong attributed the group's performance to its deep understanding of the market, as reflected by an effective business strategy adopted in times of uncertainty. When the global semiconductor sector experienced a period of oversupply that required a minor stock adjustment in the second half of 2006, many equipment manufacturers became cautious and reduced production capacity. But ASM remained confident of a fast recovery and continued investing in technologies for product diversification. It also maintained sustained and gradual growth in production capacity, Mr Lee said. It was a major challenge for management to make the strategic decision to increase production capacity. 'Should we work on infinite expansion or put a cap somewhere [to avoid overcapacity when demand slows]? I think the management was successful in striking a fine balance in 2007. '[As a result of our strategic decision] we were able to respond much faster than our peers when the soft market in early 2007 started to recover,' he said. Order intake began to rebound in the first quarter of last year and the momentum continued through the rest of the year. 'We broke records in order intake in the fourth quarter and the total amount exceeded US$200 million ... [all these] enabled ASM to achieve record high revenue and profit for 2007,' Mr Lee said. While the semiconductor assembly and packaging equipment market is estimated to have grown by about 10 per cent, the performance of different equipment suppliers varied. Two out of the top five suppliers reported increased sales last year. 'Not only was ASM one of the two, its equipment sales rose by more than 20 per cent,' Mr Lee said. These results reflect an ongoing gain in market share for ASM and the effectiveness of its fundamental strategy - a diversified product portfolio. 'The high flexibility in our production capacity gives us an edge because we can react to market conditions more quickly than our rivals. The size of the global assembly and packaging sector is estimated to be between US$3 billion and US$4 billion,' Mr Lee said. 'Total [equipment] turnover of ASM is US$552 million so our market share of the global sector is about 15 per cent ... we still have a lot of room for growth.' Consumer electronics - such as personal computers, mobile phones, flat-panel displays, MP3 players and digital cameras - continued to drive growth of the semiconductor industry last year. The consumer electronics market absorbs about 50 per cent of semiconductor output, and growth in the sector was from 3 to 6 per cent last year. ASM has put resources into expanding production capacity of lead frames since 2003 to provide total solutions to its customers. 'Global lead frame market growth in the past three years has been single digit but our lead frame sales have grown 100 per cent compared with three years ago,' he said. 'We have increased our market share considerably and lead our closest rivals by a very wide margin. In the past few years we have fully capitalised on the advantage of a total solutions approach by supplying materials, such as lead frames, and the matching equipment to our customers.' Sales to the mainland have grown rapidly, reflecting that more semiconductor manufacturers have set up production in the country. 'This gives us an edge as we have [for a long time] been the leading supplier in the market,' he said. The mainland accounts for 33 per cent of the group's total turnover. ASM adhered to its corporate culture of customer-centred service and supported new customers in the mainland by providing technical assistance and training for staff, he said. The group spent HK$321 million in capital investment and a good portion of that was funded by the year's depreciation of HK$198 million. 'We expect to make capital investments of a similar amount for this year,' Mr Lee said. 'To support our long-term business development, we will invest more in R&D. We will continue to launch new products and applications ... and cost-effective solutions to help customers reduce costs. ASM has the backing of investors who are in for the long term. They understand ASM's strategy well. Our top-level management team consists of 30 executives and on average each has spent 15 years with us. They share ASM's unified vision for business development ... this is one of our main advantages.' Demand for consumer electronics from Asia in the west still appears to be strong.