Amkor Technology(AMKR) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Amkor reported Q2 2024 revenue of $1.46 billion, a 7% sequential increase, with EPS of$ 0.27 [7][15] - Gross profit was $212 million, with a gross margin of 14.5%, slightly down from Q1 due to higher material content [15] - Operating income was$ 82 million, resulting in an operating income margin of 5.6% [15] - The company expects Q3 revenue to be approximately $1.835 billion, representing a 26% sequential increase [13][16] Business Line Data and Key Metrics Changes - Revenue in the communications end market increased by 10% sequentially, driven by premium tier smartphone launches [8] - Revenue from the automotive and industrial end market decreased by 2% sequentially, attributed to weak demand and inventory corrections [9] - Computing end market revenue increased by 20% sequentially, driven by AI devices and new ARM-based PC product introductions [10] - Consumer end market revenue decreased by 6% sequentially, impacted by the wind down of legacy IoT devices [11] Market Data and Key Metrics Changes - Revenue within the iOS ecosystem saw a larger than seasonal increase due to premium smartphone launches [8] - Android supply chain revenue declined slightly sequentially but showed a strong 20% year-on-year growth [8] - The automotive market is expected to see a gradual recovery, with Q2 2024 identified as the trough [46] Company Strategy and Development Direction - Amkor is focusing on expanding its advanced packaging capacity, particularly for 2.5D technology and advanced SiP [7][19] - The company is establishing a US manufacturing presence for advanced packaging, with a nonbinding memorandum of terms for up to$ 400 million in grants under the CHIPS and Science Act [8][18] - The strategic pillars include technology leadership, geographic expansion, and focus on industry mega trends [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth drivers for the semiconductor industry, despite current market challenges [14] - The automotive and industrial markets are expected to recover gradually, with a slight improvement anticipated in Q3 [46] - High bandwidth memory constraints may limit revenue growth in the computing segment, but overall demand remains strong [10][37] Other Important Information - The company ended Q2 with $1.5 billion in cash and short-term investments, and total liquidity of$ 2.2 billion [16] - CapEx forecast for the year remains at $750 million, focused on increasing advanced packaging capacity [17] Q&A Session All Questions and Answers Question: Impact of new facility on margins - The movement from operating expenses to gross margin due to the Vietnam production facility is expected to be less than$ 10 million, not significantly impacting Q3 margin guidance [22] Question: Recovery in PC and server markets - The general PC market is gradually recovering, particularly in ARM-based PCs, while conventional servers remain weak [26][28] Question: Update on organic interposer technology - Engagement with 5 to 10 customers for organic interposer technology is ongoing, with pilot production expected to ramp into mass production in early 2025 [31] Question: Expectations for automotive and industrial recovery - Q2 2024 is seen as the trough for automotive, with gradual improvements expected in Q3 and Q4 [46] Question: Constraints on high-bandwidth memory - The high-bandwidth memory constraints are related to supply issues, not yield, and are expected to normalize in the coming months [37] Question: Q3 revenue guidance breakdown - Automotive is expected to see mild growth, computing will be in low to mid-single digits, while communications is anticipated to be strong [57] Question: US facility CapEx and capacity - The US facility is expected to contribute less than 10% of total capacity, with significant investments planned for 2026 and 2027 [59][60] Question: AI ARM-based compute revenue - AI compute revenue is currently in the single digits as a percentage of total revenue but is expected to quadruple in 2024 compared to 2023 [62]