IC packaging and testing firms Advanced Semiconductor Engineering (ASE) and Siliconware Precision Industries (SPIL) have both reiterated their commitment to expand capacity in 2012 and keep the previously-set high capex unchanged, despite concerns from some industry observers about demand uncertainty later this year and the possibility of oversupply when new capacity goes online.

Oversupply is likely to take place in the IC packaging and testing sector during the first quarter of 2013, when demand slows down with supply scaling up, according to the observers. The industry could start to adjust inventory as early as the last quarter of 2012, the observers said.

Both ASE and SPIL indicated that their upcoming expansions were planned in view of long-term demand growth, as well as to enhance their ability to fulfill customer needs and expectations. The two packaging specialists hold similar views on the market outlook, anticipating demand particularly that from the communication sector will boom over the next several years.

Rising popularity of portable electronic devices will also significantly boost demand for advanced packaging and testing solutions in the next few years, the firms said, adding that they expect to benefit from favorable product mix with gross margins showing improvement.

In addition, SPIL pointed out that its foundry partners' ramp-up of 28nm manufacturing capacity will create more demand for flip-chip (FC) and package-on-package (PoP) packaging solutions.

ASE previously revised its 2012 capex to US$800 million from the US$700-750 million originally estimated, while SPIL has budgeted a record capex of NT$17.5 billion. ASE has moved to install new equipment with additional capacity to come online in the second half of 2012. For SPIL, 75% of its total new capacity for 2012 will be built as of the end of the third quarter.