Executive Summary / Key Takeaways

• Amkor Technology, a leading outsourced semiconductor assembly and test (OSAT) provider, is strategically positioned to capitalize on secular growth trends in high-performance computing (HPC), AI, automotive, and IoT through its differentiated advanced packaging technologies and expanding global manufacturing footprint.
• Despite a challenging cyclical downturn impacting mainstream products and certain end markets like Automotive/Industrial, the company's focus on advanced packaging, particularly 2.5D, RDL interposers, and Advanced SiP, is driving growth in key areas and is central to its near-term recovery and long-term strategy.
• Recent financial performance reflects the mixed market environment, with Q1 2025 revenue of $1.32 billion showing a year-over-year decline driven by Communications weakness, while Computing and Consumer segments demonstrated growth; profitability was impacted by lower utilization and costs associated with the new Vietnam facility ramp.
• Management forecasts a muted first half of 2025 followed by a stronger second half, projecting flat to low single-digit revenue growth for the full year, underpinned by the anticipated recovery of a significant SiP socket in next-generation smartphones and continued strength in advanced packaging for Computing.
• Significant strategic investments in expanding capacity for advanced technologies and building out a diversified geographic footprint, including the new Vietnam facility and the planned Arizona facility supported by CHIPS Act funding, are expected to enhance Amkor's competitive positioning and supply chain resilience, albeit with near-term cost pressures from new factory ramps.

The Foundation: A Global OSAT Leader Navigating a Dynamic Landscape

For over five decades, Amkor Technology has been a cornerstone of the semiconductor supply chain, establishing itself as the world's largest U.S.-headquartered provider of outsourced semiconductor assembly and test (OSAT) services. In an industry characterized by relentless innovation and pronounced cyclicality, Amkor's enduring presence is built upon a strategic framework centered on technology leadership, a diversified global manufacturing footprint, and deep partnerships with the world's leading semiconductor companies. This foundation positions the company not merely as a service provider, but as a critical enabler of advanced electronic devices across a spectrum of end markets.

The competitive landscape for OSAT providers is intense and multifaceted. Amkor faces substantial competition from established Asian-based OSATs with significant scale and financial resources. Beyond direct OSAT rivals, competition also comes from the internal capabilities of integrated device manufacturers (IDMs) and the expanding packaging and test offerings from large foundries like TSMC (TSM) and Samsung (SSNLF), which can provide full turnkey solutions from wafer fabrication through final test. Additionally, contract manufacturers and domestic players, particularly in regions like China with government support, add further pricing and competitive pressure. While Amkor may not match the sheer scale or vertical integration of the largest foundries, its strategic focus carves out a distinct value proposition.

Amkor differentiates itself through its expertise in advanced packaging technologies and its extensive global network of manufacturing facilities spanning Asia, Portugal, and the United States. This geographic diversity is increasingly critical in an era of evolving global supply chains and regionalization initiatives, offering customers flexibility and risk mitigation. The company's long-standing relationships with major semiconductor firms underscore its reputation for production excellence, quality, reliability, and predictability – essential attributes in a demanding industry.

The Technological Edge: Powering Performance and Miniaturization

At the heart of Amkor's strategy is its commitment to developing and commercializing advanced packaging and test technologies. As semiconductor devices become smaller, more complex, and require higher levels of integration and performance with lower power consumption, the role of packaging transitions from a mere protective shell to a critical component that enhances functionality. Amkor's portfolio spans both mainstream wirebond packaging and advanced solutions, with the latter increasingly driving revenue and strategic focus.

Key advanced technologies include flip chip, wafer-level processing, and System-in-Package (SiP). Amkor is a leader in deploying technologies like 2.5D packaging, essential for high-performance computing (HPC) and AI processors that require integrating multiple dies (like CPUs, GPUs, and high-bandwidth memory) on an interposer. The company successfully tripled its 2.5D capacity in 2024 and expects this technology alone to quadruple its revenue contribution in 2024 compared to 2023 levels, highlighting its critical role in the AI market surge.

Beyond 2.5D, Amkor is advancing next-generation technologies such as RDL (Redistribution Layer) interposers and organic interposers, which offer higher density and potentially lower costs compared to silicon interposers. The company is actively engaged with multiple customers on RDL-based programs, with initial production ramping in 2024 and further ramps expected in 2025. Management notes that the value-add for organic interposers is more significant than for 2.5D with silicon interposers, suggesting potential margin uplift as this technology matures. Amkor is also collaborating on co-packaged optics and photonic solutions for data center and networking applications, integrating optical engine chiplet dies in module formats to improve power, bandwidth, and efficiency. These initiatives, while perhaps smaller in absolute revenue today, represent critical technological frontiers that extend Amkor's capabilities and address the growing complexity of high-end devices.

Advanced SiP technology is another core strength, enabling the integration of multiple functions into small form factors for mobile communications, wearables, and other IoT devices. Amkor achieved a record for Advanced SiP revenue in Q3 2024, driven by ramps for premium tier smartphones and a new consumer wearable program. This expertise in heterogeneous integration is a key differentiator, positioning Amkor well for growth in connected devices.

The company's investments in technology are substantial, with R&D expenses increasing in Q1 2025 primarily due to development projects in new advanced packaging technologies. While specific quantitative targets for all R&D initiatives are not disclosed, the focus is clearly on enabling the next wave of semiconductor innovation and maintaining a competitive edge against rivals who are also heavily investing in advanced packaging capabilities.

Operational Execution and Strategic Footprint Expansion

Amkor's global manufacturing footprint is not just a geographic distribution of assets; it's a strategic tool for enhancing supply chain resilience and supporting customer regionalization efforts. The company operates facilities across Asia (Korea, Japan, Philippines, Malaysia, Singapore, Taiwan, Vietnam), Europe (Portugal), and is establishing a significant presence in the United States.

A key recent operational milestone was the commencement of production at the new Vietnam facility in Q3 2024. This facility is qualified for Advanced SiP and memory devices and is expected to ramp volume throughout 2025. While the initial ramp-up contributes to manufacturing burden and impacts gross margins in the near term (around 100 basis points burden in Q1 2025), management anticipates this burden will gradually reduce, with the facility expected to reach breakeven operating income by the end of 2025 as scale increases. The Vietnam site adds important capacity and an alternative location for key technologies like Advanced SiP.

In the United States, Amkor is progressing with plans for a new advanced packaging and test facility in Arizona. Land was acquired in 2024, and construction is expected to begin in the second half of 2025. This initiative is supported by an award of up to $407 million in direct funding under the U.S. CHIPS and Science Act, conditioned on achieving construction and production milestones. Amkor is evaluating options to increase the scale and expand the technology offerings at the Arizona site, potentially including a combination of RDL/2.5D and on-substrate technologies for Computing and Communications segments. A memorandum of understanding with TSMC aims to offer mutual customers a seamless manufacturing supply chain and technology offering between Asia and the U.S., standardizing on advanced packaging technology for dual qualification opportunities. The Arizona facility represents a significant long-term investment, with the full project potentially costing around $2 billion, concentrated in machinery and equipment investments in 2026 and 2027.

Further enhancing its capabilities, Amkor is expanding its turnkey test solutions, particularly on its K5 campus in Korea. The first phase of this expansion is expected to be operational by the end of 2025, with a new building planned for the first half of 2027. This focus on test is crucial as device complexity grows and addresses potential supply chain concentration risks in other regions.

These strategic expansions, while requiring significant capital expenditures (forecasted at $850 million for 2025, with 5-10% for Arizona construction), are aimed at aligning Amkor's capacity and capabilities with anticipated customer demand in high-growth areas and enhancing its competitive positioning by offering diversified, resilient supply chain options.

Financial Performance and Outlook

Amkor's recent financial performance reflects the ongoing cyclical dynamics in the semiconductor market, coupled with the strategic investments in new capacity. For the first quarter of 2025, net sales were $1.32 billion, a decrease of 3.2% compared to $1.37 billion in Q1 2024. This decline was primarily driven by lower sales in the Communications end market, partially offset by growth in the Computing and Consumer segments.

Profitability metrics saw a contraction year-over-year. Gross profit decreased to $157.6 million from $201.6 million, resulting in a gross margin of 11.9% in Q1 2025, down from 14.8% in Q1 2024. This was attributed mainly to lower net sales and resulting lower factory utilization, as well as the impact of the Vietnam facility ramp-up. Operating expenses totaled $126.1 million, up from $128.5 million, with research and development increasing due to new advanced packaging technology projects. Operating income fell to $31.5 million (2.4% margin) from $73.1 million (5.4% margin). Net income attributable to Amkor was $21.1 million, or $0.09 per diluted share, a significant decrease from $58.9 million, or $0.24 per diluted share, in Q1 2024.

Despite the Q1 performance, management provided an optimistic outlook for sequential growth, guiding for Q2 2025 revenue between $1.375 billion and $1.475 billion, representing an 8% sequential increase at the midpoint. Gross margin is expected to improve modestly to between 11.5% and 13.5%, reflecting a slight improvement in utilization. Operating expenses are projected to be around $125 million, with net income between $17 million and $57 million, resulting in EPS between $0.07 and $0.23.

For the full year 2025, Amkor anticipates a muted first half followed by a strong second half, driven primarily by the expected recovery of a key SiP socket in the next-generation iOS phones. While acknowledging uncertainties related to trade regulations and overall market demand, the company projects total revenue for 2025 to be flat to low single-digit growth year-over-year, with each end market expected to be flat to slightly up. This outlook implies a significant acceleration in the second half compared to the first, potentially deviating from typical seasonal patterns.

Liquidity remains robust, with $1.56 billion in cash and short-term investments as of March 31, 2025. The company believes its cash flow from operations, existing cash, investments, and credit facilities are sufficient to fund its operations, capital expenditures, debt service, and dividend payments for at least the next 12 months. Total debt stood at $1.15 billion, with $236.5 million due within 12 months. Amkor remains in compliance with its debt covenants and continues its capital allocation strategy of returning 40% to 50% of cumulative free cash flow over time through dividends and stock repurchases, having declared a $0.08 per share quarterly dividend in Q1 2025.

End Market Dynamics and Competitive Positioning

Amkor's performance is intrinsically linked to the health and trends within its core end markets:

• Communications: Representing 40% of Q1 2025 sales, this segment saw a 19% YoY decline, primarily due to lower content in premium tier smartphones. However, the outlook is for sequential growth in Q2 and a flat FY25 driven by the anticipated recovery of a key SiP socket in next-gen iOS phones by the end of Q2 2025. Amkor's strong position in premium tier smartphones, leveraging Advanced SiP and flip chip package on package technologies, positions it well for the expected acceleration of AI applications shifting to edge devices.
• Computing: Growing to 22% of Q1 2025 sales (up 21% YoY), this segment is a key growth driver, fueled by demand for AI/HPC applications, ARM-based PCs, data center, and networking devices. While the accelerated transition to a new AI GPU family and trade restrictions temper the near-term outlook for 2.5D, Amkor's robust project pipeline, including new 2.5D customers, RDL interposers, and AI CPUs, supports expectations for mild growth in FY25. Amkor's leadership in 2.5D and RDL technologies provides a competitive edge against rivals in this high-growth, high-value segment.
• Automotive, Industrial, and Other: Accounting for 21% of Q1 2025 sales, this segment declined 6% YoY and remains in a recovery phase after seven consecutive quarters of year-over-year declines, primarily impacting mainstream products. Despite overall weakness and elevated inventory, demand for advanced packaging in Automotive (ADAS, infotainment, radar, LiDAR) is robust, with mid-teens growth expected for these programs in 2025. Amkor is a leading Automotive OSAT, leveraging its long track record and diversified portfolio (including power modules with Infineon (IFNNY)) to navigate the cyclical downturn and capitalize on the increasing semiconductor content per vehicle. The trough for this market is believed to have been reached in Q2 2024, with gradual improvement expected.
• Consumer: Growing to 17% of Q1 2025 sales (up 23% YoY), this segment is benefiting from the ramp of a new wearable program utilizing Advanced SiP. Mild growth is expected in FY25, driven by a full year of production for this program and modest recovery in traditional consumer applications. Amkor's Advanced SiP expertise is a key competitive advantage in the evolving IoT and wearables market.

Against its competitors, Amkor's strength lies in its specialized advanced packaging capabilities and its ability to offer comprehensive, outsourced solutions across a diverse global footprint. While larger foundries like TSMC may lead in cutting-edge wafer fabrication and integrated packaging solutions, Amkor's focus on specific advanced packaging technologies and its customer-centric approach to co-development and rapid time-to-market provide a compelling alternative. The strategic expansion in the U.S., in partnership with TSMC, aims to create a seamless supply chain that leverages the strengths of both companies, enhancing Amkor's position in the critical North American market. However, competition remains fierce, particularly in pricing and securing high-volume business, requiring Amkor to continuously innovate and optimize its operations.

Conclusion

Amkor Technology stands at a pivotal juncture, navigating the tail end of a semiconductor downturn while strategically positioning itself for the next wave of growth driven by AI, HPC, and increasing semiconductor content in Automotive and IoT. The company's core investment thesis is firmly rooted in its leadership in advanced packaging technologies, its expanding and geographically diversified manufacturing footprint, and its deep-seated relationships with industry-leading customers.

While the near-term outlook for 2025 suggests a year of transition with flat to low single-digit revenue growth, primarily weighted towards a stronger second half, the underlying strategic initiatives paint a picture of a company investing for long-term success. The successful ramp of the Vietnam facility, the planned construction of the Arizona site with CHIPS Act support, and the continued development of cutting-edge packaging solutions like RDL interposers and co-packaged optics are critical steps in enhancing Amkor's competitive moat and supply chain relevance. As market conditions improve and demand for advanced packaging accelerates, Amkor's focused investments and operational execution are expected to drive profitable growth and create value for shareholders, leveraging its unique position as a leading U.S.-headquartered OSAT provider in a complex global industry.