Amkor Technology, Inc. (AMKR) is the world's largest U.S. headquartered outsourced semiconductor assembly and test (OSAT) service provider. Founded in 1968, Amkor has pioneered the outsourcing of integrated circuit (IC) packaging and test services, establishing itself as a strategic manufacturing partner for the world's leading semiconductor companies, foundries, and electronics original equipment manufacturers (OEMs).

Business Overview

Amkor's core business is providing turnkey manufacturing services for the communication, computing, automotive, industrial, and consumer markets. The company's operational base includes production facilities, research and development centers, and sales and support offices located in key electronics manufacturing regions across Asia, Europe, and the United States. Over the past five decades, Amkor has built a leading position in the OSAT market through several key achievements. The company has designed and developed innovative packaging and test technologies, with a focus on advanced packaging solutions in high-growth markets. Amkor has also built expertise in high-volume manufacturing processes and developed a reputation for high quality and solid execution.

Throughout its history, Amkor has faced several challenges as a participant in the cyclical and volatile semiconductor industry. The company has had to navigate industry downturns and declines in global economic and financial conditions that have impacted demand for its packaging and test services. Amkor has also had to manage fluctuations in costs, quality, availability and delivery times of raw materials, components and equipment. Despite these challenges, Amkor has demonstrated resilience and the ability to adapt to changing market conditions. The company has made substantial investments in equipment and facilities to support the demand of its customers, and has focused on optimizing the utilization of its assets.

A key factor in Amkor's success has been its ability to cultivate long-standing relationships with many of the world's largest semiconductor companies. This has been instrumental in attracting and retaining customers over the past five decades. Additionally, the company has provided a geographically diverse operating base with manufacturing facilities in multiple countries across Asia and in Europe, allowing it to serve global customers efficiently.

Amkor's packaging and test services cater to a diverse range of semiconductor devices, including those used in smartphones, data centers, artificial intelligence, electric vehicles, and wearables. The company's advanced packaging solutions, which account for the majority of its revenue, include technologies such as flip chip, wafer-level processing, and system-in-package (SiP) modules. Amkor also offers mainstream packaging and test services, including wirebond packaging and power device packaging.

Product Segments

Amkor operates in two primary product segments: Advanced Products and Mainstream Products.

The Advanced Products segment includes flip chip, memory, and wafer-level processing and related test services. These advanced packaging technologies are critical for enabling smaller form factors, higher performance, and increased functionality in a wide range of applications such as smartphones, data centers, and high-performance computing. In 2024, Advanced Products accounted for 81.9% of Amkor's total net sales, reflecting the strong demand for these advanced solutions.

Key products in this segment include:

• Flip chip chip scale packages (FC CSP)
• Flip chip stacked chip scale packages (FC SCSP)
• Flip chip ball grid array (FCBGA) packages
• Wafer-level packages, including wafer-level chip scale packages (WLCSP) and wafer-level fan-out (WLFO) solutions
• Advanced system-in-package (SiP) modules

The Mainstream Products segment includes traditional wirebond packaging and related test services. These packaging technologies, such as leadframe packages and substrate-based wirebond packages, are well-suited for a wide range of analog, mixed-signal, and lower pin count digital applications. In 2024, Mainstream Products accounted for 18.1% of Amkor's total net sales.

Key products in this segment include:

• Leadframe packages
• Substrate-based wirebond packages, such as stacked chip scale packages (SCSP) and plastic ball grid array (PBGA) packages
• Specialized packaging solutions for micro-electromechanical systems (MEMS)

Across both segments, Amkor offers comprehensive test services, including wafer-level test, package-level test, and system-level test capabilities.

Financial Performance

In the fiscal year 2024, Amkor reported total revenue of $6.32 billion, a 3% decline from the previous year. This was primarily due to weakness in the automotive, industrial, and communications end markets, which was partially offset by growth in the computing and consumer end markets. The company's gross profit for the year was $933 million, with a gross margin of 14.8%. Operating income for 2024 was $438 million, resulting in an operating margin of 6.9%. Net income for the year was $354 million, translating to earnings per diluted share of $1.43.

For the fourth quarter of 2024, Amkor reported revenue of $1.63 billion, missing analysts' estimates, and earnings per diluted share of $0.43, which exceeded expectations. The company's gross margin in the fourth quarter was 15.1%, and its operating margin was 8.3%.

Liquidity

Amkor's financial position remains strong, with $1.65 billion in cash, cash equivalents, and short-term investments as of December 31, 2024. The company's total debt stood at $1.16 billion, resulting in a net debt position of $25.91 million. Amkor's free cash flow for the full year 2024 was $359 million, demonstrating efficient working capital management and operational performance.

As of December 31, 2024, Amkor had $1.13 billion in cash and cash equivalents and $513 million in short-term investments. The company also has a $600 million senior secured revolving credit facility, which was fully available as of December 31, 2024.

End Market Dynamics

Amkor's revenue is diversified across four primary end markets: communications, computing, automotive and industrial, and consumer. In 2024, the communications end market, which includes smartphones and tablets, accounted for 48% of the company's total revenue. This segment experienced a 7% decline for the full year, primarily due to a temporary socket gap in the latest iOS phones, which the company expects to regain in the next generation.

The computing end market, which includes data centers, infrastructure, PCs, and laptops, contributed 19% of Amkor's revenue in 2024. This segment reached a record high, driven by strong demand for ARM-based PCs and 2.5D technology for AI GPUs. However, the company noted some near-term challenges in this market due to an accelerated transition to a new AI GPU product family and new trade restrictions.

The automotive and industrial end market, which represented 18% of Amkor's revenue in 2024, experienced a 16% decline for the full year. This was primarily due to elevated customer inventories and weaker demand. The company remains optimistic about the recovery in its mainstream automotive portfolio, although the timing is uncertain.

The consumer end market, which includes augmented reality, gaming, connected home, and wearables, accounted for 15% of Amkor's revenue in 2024. This segment grew 10% for the full year, driven by the ramp of a new wearable program utilizing advanced SiP technology.

Outlook and Guidance

For the first quarter of 2025, Amkor expects revenue to be approximately $1.28 billion, reflecting a year-over-year decline of 7%. This decline is primarily attributed to a temporary socket gap in the current iOS phones. The company anticipates that profitability will be constrained in the first quarter due to underutilization across its factories and the burden associated with the ramp-up of its new Vietnam facility. Gross margin is expected to be between 10% and 13% in Q1 2025. Amkor is guiding for Q1 2025 net income of $23 million at the midpoint, resulting in earnings per share of $0.09.

For the full year 2025, Amkor expects a muted first half, followed by a stronger second half, driven by the content recovery in the next generation of iOS phones. The company projects overall revenue to be flat to low single-digit growth for the year, with each of its end markets expected to be flat to slightly up. Amkor's effective tax rate is forecasted to increase to around 20% for the full year 2025 due to new global tax regulations.

Amkor remains focused on strengthening its technology leadership in advanced packaging, expanding its global footprint, and partnering with leading customers in growth markets. The company continues to invest in its roadmap, with a capital expenditure forecast of $850 million for 2025, of which 5% to 10% is estimated for its new advanced packaging facility in Arizona.

Industry Trends

Amkor highlighted several industry trends driving growth, including:

• Adoption of artificial intelligence applications
• Increasing semiconductor content in electronic products
• Expansion of 5G infrastructure
• Proliferation of semiconductor devices into automotive systems
• Increasing demand for advanced packaging services

Risks and Challenges

Amkor operates in a highly competitive semiconductor industry, facing competition from established players, internal capabilities of integrated device manufacturers (IDMs), and new entrants such as foundries and contract manufacturers. The company's business is also impacted by the cyclical and volatile nature of the semiconductor industry, as well as global economic and financial conditions.

The company's profitability is dependent on maintaining high capacity utilization rates, which can be affected by fluctuations in customer demand and industry downturns. Amkor also faces risks related to warranty claims, product liability, and the quality and reliability of its packaging and test services.

Geopolitical tensions, trade restrictions, and supply chain disruptions pose additional challenges for Amkor's global operations. The company's financial performance is also susceptible to foreign currency exchange rate fluctuations and changes in tax laws and regulations in the jurisdictions where it operates.

Conclusion

Amkor Technology, Inc. is a leading global provider of semiconductor packaging and test services, serving a diverse range of end markets. The company has a strong track record of innovation, operational excellence, and strategic partnerships, which have enabled it to maintain a leadership position in the OSAT industry. While facing some near-term challenges, Amkor remains focused on expanding its advanced packaging capabilities, diversifying its customer base, and navigating the dynamic industry landscape. With its robust financial position, strategic investments, and commitment to technology leadership, Amkor is well-positioned to capitalize on the long-term growth opportunities in the semiconductor industry.