Amkor Technology (AMKR) 5 Feb 242023 Q4 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Amkor Technology Fourth Quarter and Full Year 2023 Earnings Conference Call. My name is Diego, and I will be your conference facilitator today. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Jennifer Jue, Head of Investor Relations. Ms. ahead. go please Jue,

Good Amkor's and Year Fourth Conference operator. joining XXXX you us Call. for Quarter afternoon, you, thank everyone, for Earnings Thank and Full

Megan our today Executive Giel me Chief Rutten, Joining Officer; Officer. are and Faust, our Financial Chief

filed release Relations and that Investor the SEC of accompany presentation slides our website, today's Our is was this on available earnings with press the call. the page afternoon along with

the find U.S. will we non-GAAP measures, the use website. reconciliation can to equivalent During this presentation, GAAP and financial our on you

We future will environment currently forward-looking for make statements about it. performance as expectations our see Amkor's the based on we

results results actual differ expectations. these note on course, included release factors, final materially and that refer filings Please results Form discussed be will the could and Of in actual to preliminary, risk our our that press today XX-K. to differ. Please data exceptions are uncertainties from information for and financial SEC cause could

I'd over And now the call Giel. to like to turn

and you, today. Good Thank Jennifer. thank afternoon, you the call joining for everyone,

After Amkor high of $X.XX, delivered revenue quarter with EPS performance and billion $X.XX at quarter, strong guidance. of or above both third end solid the fourth a of

better billion year. market inventory XXXX, but exciting highlights full of For challenging for prior double-digit a geopolitical an year tensions down growing also it decline. Amkor, and several the $X.X revenue from X% year, Weak year macroeconomic excess made than semi was conditions, made XXXX

advanced our test We announced Vietnam anniversary in we and packaging the factory, our XXth anniversary an of United a States. facility plan public We XXth new for and our the had celebrated as U.S.-listed grand opening our company. and

its its strategic X pillars. by focus this maintaining business position In leadership environment, elevated challenging Amkor on

for in us for products in to AI automotive. solutions in advanced premium and technology X.XD packaging share Our technology smartphones ADAS in power and leadership and grow tier market gain enabled

in like high-performance the a partnerships customers manufacturing investments by strengthened chain. secular offers automotive. engagements long-standing global key and our semiconductor growth reliable with manufacturing supply AI, a markets And computing secure continued and our markets footprint in lead Our customers in

dynamics was let Now markets me record year this a utilizing record. row. of units annual year increased declining Market the despite This full gains a within the smartphone markets. new each drove overall second XXXX, Revenue by in our achieved review setting our communication X% advanced our iOS ecosystem the for on increase SiP for in share technology. end

premium and for our Amkor holds record our proven delivering a solutions trusted through expertise a on excellence. codeveloping technology our innovative operational partner tier leading and built position track smartphones, as

low the improvement For expect the in packaging increased XXXX, X% modest supply for we a phone units, year. Revenue single-digit chain and by year-on-year, driven applications. industrial Android X% the XXXX. ADAS and industrial during business further revenue declined automotive increase full year our in Advanced in with

We utilizing unique high-power continue capability solutions factory. see package growth to silicon our in in carbide for electrical Japan vehicles, our

on to advanced power lines Our and invest applications such and support specifically substrates. second tripled quarter strong will of in XXXX. leading-edge and second supply AI investments differentiators. chain AI qualified for in to from continue decreases To quarter XXXX, have storage robust and In packaging broad we in doubled in silicon Portugal, in compared computing AI capability for the capacity advanced multiple planned Japan carbide than supporting manufacturing market capacity for in X.XD wire the technology module The ASIC we as demand attach XX% and bond combined important Korea, from on leads portfolio technology ranging this of memory for XXXX, and more integrating high-bandwidth exiting our applications. market, coming online year-on-year. and the offset decreased devices, Portugal with our our end HPC XXXX, the factories. Revenue OSAT Amkor the partly interposers, are with Japan and we capacity geographies in the packaging, demand PC our devices, and

solutions we IoT to consumer well expect reduced X.XD growth. The support plan product end wearables support to with We changeovers in in and and including broad will line for market market inventory excess spending, decline. portfolio as market we full our consumer XXXX, Multiple the customers in a traditional demand products. the Within as consumer the continue drove the the wearable consumer, declined IoT increase of XX% for headwinds, year.

XXXX. are with engaged customers products that ramp the in our lead We of the will in course next-generation production

is Korea optimizing Amkor's Globally, focused our capacity shift During capability on and reduce in in quarter, a a footprint to recently offer manufacturing qualifying our we their dynamics semiconductor are Vietnam. Geopolitical manufacturing secure customers manufacturing chain continue fourth and to Asia, supply chains. key differentiator advanced cost-effective we uniquely to memory technology new and manufacturing the silicon R&D chain. technology from benefit for evaluating this carbide. Vietnam on to are geographic opened in for supply broad risk strategies chain base. including X.XD global our campus. us Japan, semiconductors, to supply and a customers and our expanding supply secure and resilient In to the In organization positions impact and support SiP automotive

Arizona. fan-out, facility investments with a U.S., we announced the MEMS, our chain in devices with lead with support major advanced are seamless in In factory. build customers for and chip foundries customers partners, plans support partnering and European In automotive silicon recently to of wafer-level flip our and and technology an supply carbide-power to Portugal in Europe, test we packaging

the CHIPS We provide and critical high-performance automotive high-volume, are work to markets such as with to facility computing, a Program leading-edge technologies on and continue establishing in support to communications. funding Office on discussion

quarter let Now to outlook. me our first turn

be by We expect factors. the first quarter to X impacted main

decline record expect a iOS-related we our First, more a seasonal XXXX, business. after than in

applications. the ADAS observed we inventory in for end automotive and due Secondly, to weakness continued microcontrollers industrial specifically corrections, and market

billion. revenue a X%. $X.XX quarter of first of This decline year-on-year We represents expect

half foresee strong For the a remain XXXX, higher muted the first year than to the anticipate seasonality. with but half recovery typical full year growth of second of we

a online a within and meaningful PCs. and additional automotive, midyear, ramp half of Second wearable Androids, memory inventories capacity rebalancing is X.XD growth of new further accelerated supported consumer coming program by

the for scale the place. technology growth the industry global with exits the footprint, that we cycle. industry and as in our drivers believe leading confident We accelerate secular And semiconductor portfolio, remain are current to

turn With that, will information. over provide to more financial now I the to Megan call detailed

end billion good and within control, seasonality was the revenue Fourth Giel, and particularly of was X% was customer you, computing Thank and industrial softer down than inventory $X.XX slightly everyone. automotive This sequentially. driven by afternoon, quarter historical markets. and

the and facility manufacturing EPS remained Net $XXX income for million, XX.X% year. Operating as was quarter resulting was XX basis quarter prepare income improved the at margin million continued expected Fourth to quarter operating result for high-volume in EBITDA sequentially as Vietnam disciplined this flat and $XXX of of and profit to onboarding $XXX at sequentially, $X.XX. X.X%. management. Fourth in points declined gross gross fourth XX.X%. $XXX million. revenue was was EBITDA $XXX for million came expenses later the new quarter quarter Operating our costs margin was a Although cost income for includes fourth margin million

full was year-on-year. our year down let's turn to X% XXXX Revenue $X.X Now of performance. billion

an year, million. gross and this compared profit a XX.X% semiconductor is the While was margin Gross was industry. to for $XXX year outperformance down the

it to manufacturing profitability. utilization, critical times of our preserve is lower to costs During manage

approach labor XX% manufacturing resulted Our other and reduction costs. disciplined a in in both

and XX% facility. $XXX Net million, CapEx million was completing billion while in for income Vietnam continuing of We $XXX our our $X.XX was by manufacturing XX.X%. EPS XXXX, year our EBITDA was from for XXXX and approximately intensity. to equipment reduced the XX.X% in global by margin of resulting invest was $X.XX. spend construction footprint new EBITDA capital

XXXX. of great $XXX in financial free reflecting resilience We showed million, operations. flow record performance achieved Our efficient cash

solutions Our well to to to growth, invest both financial support advanced strength in footprint. development as us allows leading-edge packaging in future manufacturing our our continue as technology

geographically billion. and portfolio differentiator of chains. regionalization factories supply be Our the investments in key year and proven of ended short-term of $X.X total has with liquidity cash We supporting billion of $X.X diversified to a

end the as year $X.X is debt our of the debt-to-EBITDA and total Our is ratio of X.Xx. billion,

Moving on outlook. quarter to our first

of We around $X.XX representing billion, X%. year-on-year of expect decline revenue QX a

being and will constrained, to gross underutilization, industry seasonally be between given and expect cycle continued QX XX%. margin profitability the XX.X% the With lowest be quarter, we and

employee operating We XXXX second expect of $XXX levels onboarding the year. expenses projected as of begin QX support as the we in level until Vietnam to half of half a factory. We the compensation of operating well first around costs new reset high-volume anticipate of an Vietnam includes expense in million, this for higher our manufacturing annual which of

to expect our be around XX%. full tax effective rate year We

million, $XX be of First $X EPS quarter to $X.XX. and is net between $X.XX income expected in to resulting million

$XXX million. around is forecast CapEx for Our XXXX

market Our key supporting recently packaging X.XD build the in packaging plans investments States. in and and announced will SiP an factories. We as to focus solutions, certain well the market on facility as United advanced consumer technology Advanced our expansion advanced the test specifically of computing

for We a XXXX. are do project planning spend the in this and CapEx early not material in stages expect

manufacturing approximately X a have ready to for years. in be We target to high-volume X

are see and is leader We excited growth advancements intact. to are with of the technology industry a Amkor decades believe technology experience. the secular the drivers in

coupled OSATs, us semiconductor Our all leading the geographic the world's to culture operational with broadest of excellence, well of companies. support footprint positions

for your will we call that, With the up now open questions. Operator?

Ellis Craig Riley Securities. first Our question Instructions] with [Operator from B. comes

of year Giel and calendar congratulations 'XX's accomplishment. Megan, on

thing wanted quarter do on the decline. to I of the regarding above-seasonal some first The comments first up follow communications just is

the I seasonality points are go market on XQ to of of is Obviously, and little recover. bit detail some have us above-seasonal more significant a a what iOS lot segment puts year. us starting what's Can takes that Android help the the leading of and the to decline? faces you market So just that understand calendar inside think into every data seen

details. doing here. Craig, more yes, a we some are start and couple dynamics on see of can the let quarter me What first give that later Megan in

above-seasonal We a order the the in iOS First higher both first in magnitude There we same as of record in resulting comes take with is XXXX. couple uptick of on that an some seasonal but and If is and expectation fourth correction QX quarter a a a ecosystems correction. of ecosystem, QX. In the iOS what is are the the line ecosystem. back quarter in in we XXXX. decline Android Android, quarter above-seasonal I down, in correction we record but elements of normal from first with a still seen that mean, see have all, are XXXX the than that in in see -- actually revenue both iOS at ecosystem

on improvements and in yield in And quarter. programs, first that in we corrected of all, products. programs, all, package First had for and the above-average results existing quarter. we an some some for in first the mix see product communication and and accelerated fourth operational in specific corrections from that the for -- quarter correction is system that bills think SiP fourth All results in some I the forecast

move and question that correction business. can about auto you in confidence just but could X hear the ask things cyclical your from businesses above-seasonal? Encouraging saying you of murky second you light are XXXX of giving the and will If like that the areas a bellwethers be what hearing I the different the on above-seasonal, broader the on then? industrial, list longer-term across can end And be markets are or some half second of that in half we're by analog to out X team's being view for visibility the

Yes.

refer the that we've me starting industrial the first automotive further and to QX corrections and First, moving seen part let QX. -- indeed is your question share into of

segments, segments that microcontroller market also the X these into related specifically and second we certainly in and expect going to quarter specifically to the for in industrial and these quarter. expect corrections very that continue the then both first automotive, markets, We

more Amkor's expect inventory, that on these expect the However, the going into balanced inventory businesses. situation year. balanced conversations half customers key And a with we second after with of side, of we recovery

-- to microcontrollers. so of only we exposed markets, and exposed to frame for bond Now some are our to we more the commoditized mostly not lead wire automotive business are

incremental Craig, well as product far in gives have as second so than growth to there, second So to half. half further ramping the of confidence us capacity we're question business on higher second the to just support IoT a as build online the we part growth, as anticipating consumer your are for X.XD what that going

the comments, second shape start some stronger XXXX. So that as the those just and expecting of further we're probably other with as to anticipation strong that say, give are on Giel's half balancing as our XXXX, of would see inventory factors within I or X coupled memory could to context we'll far than kind PC. And be

-- the year, strong XXXX muted half had first the our half see And XX% half, So the given could first over was we're back second half. stronger. the seeing a dynamics growth peak we with second in be or growth

Megan, provide, and about or That's downside prior and of to couple of sales we a could minus out X in really those gross plus I of color. to the disclosure breakout cost respect release If additional more. change the as how regarding of years. over think how to inputs, any upside couple revenue in quarters margin XX% as plan versus fall-through to and the we last and sneak to we get disclosure commentary? helpful last the Appreciated continue press and think about levels with

in Craig. would would change incremental expectations around in XX%. for release, press forward, Sure. disclosures And the Yes, that expect financial generally to an the I of our flow-through included no continue going in our say we've model we

at full be higher was year material under with a this what content, different. that's down We 'XX, on Looking bit flow-through were to that increasing a caused pressure and year.

point sold we which me, -- of a revenue characterize costs, materials, would would cost X.X% reduction less in goods too, on in excuse reducing there still decrease I X%. a of manufacturing was healthy as

at Looking cost demonstrate management. does good XX% less on which the flow-through, down very disciplined than revenue, QX,

And question our comes with Abrams UBS. Randy next from

one up. or there's like, you normal, pickup second below always seasonal first to coming lower Craig's a the second a color half, to second a look just could think half-on-half. was The the first then the quarter if It seasonal range, the expect question in curious between communications And just was wanted quarter. you normal us I question and that a the maybe up. on starts a if pick correction gets if to I broadly QX on off what what off I I you good second quarter, quarter, think extend see follow to remind

try Let these some on give elements. me color to

reasons all, first of say, half business, the seasonal let's First for there related to higher communication the in than second quarter. were identifiable, correction

that expect market the in is our We overall strong. position

deep very customers. pipeline We with lead have strong a product engagements and

to there, with half in because year, online that of an phone year. recover in second So growth the Android continue course this this the also of new will we the rate ranges expect see we above-average the coming market

ramp half are for second So very overall, the we confident with communications. of this year

I as And up give to we seasonality second quarter the quarter, guiding half the Randy, commentary We're at difficult be, say anywhere what time. on would a not can it's QX second second reminder, of range our that's half, flattish typical gave that that so just from precision to would shape. low first why for single level pretty this digits.

weighted. flagship and Yes, usually, so it conservative, auto sounds still industrial, the half, like get second we in more half given second

or bit ramp similar to $XXX The looks between and second question quite historical. construction? at build-outs? still shift equipment than equipment versus I the in be the a The levels million Do shift Vietnam it Or CapEx lower mix had just XXXX. continue in have where remaining capital intensity the within on How does ongoing mix? other you that would growth equipment the

good That's observation, Yes. Randy. a

of reversed. for our this we in So In initial let's Vietnam related part and will CapEx with the, shift see to spend, say, XXXX, CapEx a from profile our we a it of year building XXXX facilities that large the factory. be have

significantly CapEx increase and will and reduce We equipment our the buildings facilities. for for CapEx

increase based that year-on-year second CapEx Megan, in basis the market. equipment our on share? on opportunities the So we about XX% for half, will any see a

as our But well planning midyear Giel generally, to XXXX. is as of That We Randy, expansions and shift, I facility as our spend increase approximately advanced move say, as mentioned, CapEx and XX% towards have expand -- on be equipment Vietnam do Portugal more online we've would to and explains expanding Advanced coming module. SiP. primarily to packaging, some, the portion that machinery as more also hopefully, an mentioned, focused additional going capacity localized that as Yes, so are equipment. in will X.XD the that Taiwan well will

think you're further advanced I'm for indications where you've by to any getting plan that for And packaging, midyear. the if curious had increase. triple I capacity

you that times on, bring long. lead are the So quite once

So you step-up a you ramp for are -- do stabilize? need continue see up tripling think any we're beyond demand further you to to do making or to that catching to starts and

year. we also our for No, pipeline, portfolio fairly have customer the base our going diversifying a into product strong pipeline but a project X.XD service

So of of this we we we elements in place time. at tripling demand. quarter, have without will like with market the to specific normally in expect here the up we needed that will continue needed by point in capacity the ramp the And all too being come invest that as after to line where and second order do, in online end

[Operator Instructions] Our from Melius comes with question next Reitzes Ben Research.

of time Giel half and be year type is second it's margins there XXXX similar would in similar getting the that of second the XXXX, performance? Megan, ramps to you if if gross the to of half from that impede year as anything a this like

Ben, in me back would making to I that level. fundamentals question to I let still that. to say mean, remark hand Well, that Megan, get on place the are X

much XX%. running at levels let our XXXX back utilization now that, Our of Megan we lines, view. her currently that And utilization gross give running coming by determined online, say, hand are at profitability to we margins go but me XX% and below over utilization But with level, levels. when the could to expect very business were to let's

margin gross during this a really as so to flow-through, possibly cycle. and we financial been second we've our tightening have would to expect flow-through Yes. of given as half Ben, better incremental up far ramp, model the expect

how expect wouldn't depend 'XX. half half I of in levels same second at the as of the that progresses compared half. second Giel to be mentioned, second that utilization the as So it utilization far we would on at of will the 'XX

missed I at that the sorry, I'm end.

You be would would at think you would not or the same? be

Yes.

So as we were experiencing you're 'XX peak Giel and pointing at height that XX.X% implied, of margin of to said, that utilization levels gross growth. the our our

anticipate shapes XX% the at would how I achieving half, of 'XX. we're by first and upon half the starting 'XX depending we the wouldn't be second an where utilization So in year up that

it. got I Okay,

Sorry to make you repeat it.

I there announced -- we some news the any there on facility. application. spend The help out is pre-application that their around Act to But is and ability you to that going not you're around other guys here have mentioned chance a a the that? question lot may CHIPS your in that supply U.S.? Is around the Act get news you CHIPS potential domestic you chain and with understand

and part First, your with facility, full of on customer continuing our speed plan loading with second requirements for the preparation with U.S. out building the specifically and base are Ben, optimizing design, to technology we your aligning cycle. to contractors working factory the question,

happening So execution not on there it's that side. nothing is the

think pre-application. we where the with the final basis. the With respect going after working multiple offers We're there I closely application. have CHIPS to a weekly-by-weekly We're CHIPS we're the points offers, preparing on communication

application So go soon. in we that expect full will

question next with D.A. our And Tom comes Davidson. Diffely from

the full XXXX, on kind second this basis when half, Giel, look year half, first the you maybe at of point? first, above-seasonal year-over-year below-seasonal at a view for what's

Megan and for guide already of certainly opportunities that, easy we significant in second further the alluded see the second there already clearly see We Well, half, answer the half don't Tom, for them. because for first we to example. quarter, But not uncertainties. still Megan are that ramp-up. gave to significant is year, the so

have on X.XD full for we portfolio. customer with We capacity wafer, let's online the of coming a say, share there, Also a pipeline new have products.

And in that second for second new wearable IoT have expect the back in half will ramp year. the meaningful We stream memory, automotive of programs Androids, we a definitely be PC and half. on this

grow with general, and to customer product year engagements are outlook, say, the our portfolio, full I quantify above with with mean, to market. that our should, confident So give a we that let's or we in

bit first coming the month anything or or the -- the a year? gotten the change when for driving over weakness between look last inventory, in did you the then iOS And had the X? quarter into just little worse at and of the here what's kind automotive view Anything you've new

think end ramp-up mean, the iOS that's I in year, I end first the the at of in the of general, the system.

taken on is performance, stock always that the corrections. some there see generally so are You

magnitude But bit the be as already the XXXX. So first seasonality. the of a corrections may same in than indicated that I not of higher little it's earlier normal quarter in order

nothing from our So extraordinary perspective.

to say what seeing in color, give automotive just magnitude experienced kind is going QX. what some we're into order I of we QX, Tom, And would specifically, on of

suggests in anything, would So it's this saw coming say, recently we I deeper. that haven't We seen QX.

to you specifics maybe And what on you that earlier? up, to the cost the then more drove a management Megan, cost savings, follow referred could provide few

Sure.

or declines So such that's management, we experiencing as that to capture that the ramps ready ramps, we support where approach as to that now, it's we're our coming able whether cost especially that structurally times of significant be we're want in growth. far don't not to seasonal temporary ensuring cycle future out much of change very to

that far appropriate, the So cost around centered are monitoring furloughs ensuring of extend very locations, as can cost. our where to manage we as certain in intentional types and overtime labor programs

work On such and we're the well quality. usage as strict monitoring without supplies sacrificing such there's prudent areas in repairs, happening as manufacturing very other costs, being as that maintenance energy

Are Or question. that... guys the last that just your Maybe is getting way? not coming you atmospheric river

windows look we so thanks here warning. any have don't we holding, for but We're outside, the can't

Securities. Ellis next Riley from Craig Our comes question with B.

I to I few clarify connect some dots to that comments heard. just and try want a

the server more comments half back recovery part PCs. that of So I on of And strength and more for mentioned there a were up, in think interpreting later opens capacity you that of year the expecting I'm is year Giel, GPU-related. expectation then as this repeatedly, as X.XD the

that quarters dig related much is really folks and as different Or AI-optimized would is realm? to seen for comment you really And that that something of last the of X.XD appreciated. there into so and have others more comment. been the that the what types have PC in to market? which PCs would more into driven be Dell wanted it couple something the see clarification like we've I PC packaging cyclically, needs that being might discussed Any by stretch Is capabilities

test PC say, Well, PCs. let's as and it on for ARM-based to for we components But PCs. that most a impacts mostly so also, the Amkor, go recovery we package the and -- multiple package expects then mostly that see assembly delta memory the There's side, we PCs. second half, prominent would into the that devices I ARM-based the would say the PCs xXX-based in component be peripheral

our next from Morgan And comes question Moore with Joe Stanley.

some the has expectations Can packaging there In know the any on there. of kind your just you? there? about business, might third supplier that be a just news the I you underlying assumption recently AI were share And advanced of HPC impact a terms market talk of that's there of there that whether part is

in customer balance, market, portfolio I referred don't still that with the respect but demand news what is X.XD multiple capacity on which I and the to our there's increasing. in know think exactly more capacity I bringing can say for to, capacity online. is parties packaging markets, than so Joe, the are source you demand

of with a second revenue new adds the say, year, the this significantly what and X our, second that more by customer, our substrate end business have half We in year. of the the start year. we quarter ramping also this By to customers, is of called our let's also up own

ramp So longer there half. that elements for balance and time. dynamic a are contribute of there's environment, will but out a multiple It's in of the demand a consensus that period supply a second to be

to back showing no turn to Giel would for At this further over questions. closing call time, like I'm the I remarks.

let above here. high messages fourth recap Well, a with revenue of After guidance. performance the quarter, Amkor end billion, the of key delivered $X.XX me quarter strong solid third

Amkor cyclical the For semiconductor year we XXXX, full met outperformed downturn, industry. a

strong with For XXXX, the anticipate a than higher to growth further first automotive, inventory rebalancing PCs. the seasonality, foresee driven AI engagements, half but program second and expanding full be consumer a the new within typical of year half by muted we memory wearable year Android, of of and

strategic its to elevate advancing Amkor markets. executing geographic has expanding our the call broad our on strengthening lead for by in engagements joining and growth continued today. X pillars: customers position technology Thank footprint, its leadership, with leadership you

Thank and conference you. call. Ladies today's concludes gentlemen, this

may disconnect. You now