Amkor Technology, Inc. (NASDAQ:
AMKR
Q1 2025 Earnings Call Transcript – April 28, 2025
Amkor Technology, Inc.’s reported earnings match market expectations. The company posted an EPS of $0.09, which aligns perfectly with what analysts had forecasted.
Operator:
Good morning, everyone, and welcome to the Amkor Technology First Quarter 2025 Earnings Conference Call. This is Diego, and I’ll be facilitating today’s discussion. For now, all attendees will be in listen-only mode. Following our presentations, we’ll open up the floor for questions and answers. Please remember that this event is being recorded. Now, let me introduce Jennifer Jue, who heads Investor Relations. Over to you, Ms. Jue.
Jennifer Jue:
Thank you, operator. Good afternoon, everyone, and welcome to Amkor’s first quarter 2025 earnings conference call. Today, I am joined by Giel Rutten, CEO, and Megan Faust, CFO. The earnings press release has been submitted to the SEC earlier today and is accessible via the Investors section of our site, alongside the accompanying slide deck for this discussion. Throughout the session, we’ll refer to certain non-GAAP metrics, which align with their respective US GAAP equivalents found online. As always, these projections reflect our current outlook on Amkor’s prospective performance contingent upon prevailing conditions.
Certainly, actual outcomes might vary. For details on potential risks, uncertainties, and exceptions that could lead to differing results, please consult our press release and SEC filings. Keep in mind that the financial figures we’re discussing today are initial, with finalized data set to appear in our Form 10-Q. Now, let me hand things over to Giel.
Giel Rutten:
Thank you, Jennifer. Good afternoon, everyone, and thanks for participating in today’s call. In Q1, Amkor reported revenues of $1.32 billion, which aligns with the high-end of our forecasted range. Revenue from communications surpassed our projections, whereas performance across other sectors met our forecasts. Earnings per share came out to be $0.09 due to increased research and development expenses, particularly those associated with hastened advancements in RDL technology aimed at upcoming projects set to launch later this year. Our focus remains on tracking tariff changes and evolving trade policies. Regarding tariffs, our worldwide production sites have remained mostly insulated since most of them function within duty-free areas and semiconductor exports directly to the US constitute just a minor portion. However, primary concerns stem from possible interruptions affecting customer supply networks along with fluctuations in demand concerning goods driven by consumers.
Our extensive international presence and longstanding collaborations empower us to assist clients in navigating this intricacy effectively. In terms of trade regulations, we consistently track changes in U.S. export control policies, particularly those involving more stringent technology limitations. Being an authorized OSAT according to the U.S. Department of Commerce positions us ideally to serve our clientele. The Amkor team adeptly manages current market shifts while concentrating on implementing our enduring business plan. Our approach hinges on three main tenets: enhancing our technological supremacy; broadening our geographical reach; and collaborating closely with key players in burgeoning sectors. By adhering to this blueprint, we capitalize on distinctive strengths that set Amkor apart among premier OSATs. Leading providers of sophisticated packaging and testing solutions trust us due to our expertise, enabling them to advance their product timelines efficiently.
Our team’s leadership and engineering skills enable us to tackle manufacturing challenges via collaborative development with clients, leveraging our extensive tech lineup. Innovations in high-performance computing and artificial intelligence are fueling demand for sophisticated packaging solutions. Besides our work on 2.5D and RDL technologies, we’re partnering with data center and network customers on co-packed optics as well as photonic solutions. At Amkor, we’re involved in photonics within plug-in gadgets and cutting-edge co-packed optic devices featuring variously integrated optical engine chiplets packaged modularly. This approach boosts power, bandwidth, signaling, and spatial efficiency. As device intricacies increase, so does the necessity for thorough testing strategies.
In this quarter, we solidified plans for expanding our turnkey test solutions at our K5 site in Incheon, South Korea, which houses our primary research and development hub. We anticipate that the initial stage of this expansion will become functional within the current K5 premises by late 2025. Subsequently, another phase involving a brand-new structure should come online during the first part of 2027. As part of our strategy, we aim to extend our geographical presence so as to better match up with client and sector logistics networks. To address heightened demand for sophisticated packaging services across the U.S., we’re exploring ways to boost capacity and diversify technological capabilities. Additionally, we’re deepening collaborations with key clients and semiconductor manufacturers, and preparations are underway for starting work on our location in Arizona midway through 2025.
In addition to major initiatives, we regularly assess our impact to confirm optimal scaling with appropriate technology deployed at suitable sites. Our third focus area involves enhancing partnerships with top semiconductor firms to promote earlier involvement in product design stages and joint creation of cutting-edge advanced packaging techniques aimed at speeding up market entry for pioneering applications across sectors. Historically, we’ve predominantly catered to high-end smartphone segments for both iOS and Android platforms. As artificial intelligence expands into peripheral devices, we anticipate rapid advancements initially focusing on flagship phones—especially concerning application processors and connectivity features—which rely heavily on sophisticated packaging methods.
In the computing sector, we cater to clients spanning both data centers and personal computers, providing cutting-edge packaging and testing services for various devices used in artificial intelligence and high-performance computing scenarios. However, our expectations were affected by the rapid shift towards a newer AI GPU series as well as increased trade limitations. Although demand for older models persists throughout the year, predicting their exact quantities remains challenging because of export control impacts. Nonetheless, our projects within these sectors remain strong, particularly with an increasing output from a key 2.5D switch client and initial production runs utilizing RDL interposer technology for our first AI CPUs—these developments bolster our belief in future prospects. Despite ongoing recovery challenges faced by automotive and industrial segments due to low consumer interest and excess stockpiles, requests for sophisticated packaging solutions persist at healthy rates.
The primary catalyst is the widespread adoption of Advanced Driver Assistance Systems (ADAS) and infotainment features throughout various vehicle segments. As a prominent automotive Outsourced Semiconductor Assembly and Test (OSAT) service provider, Amkor boasts an impressive history in automotive production and sophisticated packaging solutions. We maintain a robust project queue involving numerous clients who seek innovations like radar systems, Lidar technologies, ADAS implementations, and CMOS imaging sensors. Within consumer electronics, enduring trends such as increasing demand for wearable tech and interconnected gadgets drive our market position. Leveraging our advanced System-in-Package (SiP) capabilities enhances our readiness for expansion within these sectors. Furthermore, through our existing operations in South Korea along with our newly launched site in Vietnam, we can provide customers access to cutting-edge technology from different geographical bases. To conclude, we continue to uphold confidence in our strategic approach aimed at securing sustainable and lucrative development over time.
We are proactively assisting customers in tackling supply chain issues within today’s ever-changing landscape. Our emphasis remains on implementing our strategic plans. Now, let me hand over the discussion to Megan, who will offer deeper insights into our first-quarter performance and our upcoming prospects.
Megan Faust:
Thank you, Giel, and good afternoon to all. As Giel pointed out, we’re operating in an ever-changing landscape. Our focus remains on adjusting to these changes and controlling what we can, whilst still pursuing our long-term objectives. In the first quarter, Amkor reported revenues totaling $1.32 billion, which represents a 3% decrease compared to last year. Sales in the communication sector dropped by 19%, largely due to reduced earnings from the iOS product family. We’re making progress with developing a new SiP socket for upcoming smartphone models; this project is scheduled to start manufacturing before the end of June. Looking ahead to the second quarter, we anticipate that communication-related income will rise slightly as we work towards improving machine usage efficiency.
Year-over-year revenue in our computing segment rose by 21%, fueled by numerous projects involving data centers, networking equipment, and personal computer clients. Additionally, there was support from adjustments made for building artificial intelligence graphics processing units with 2.5D technology. We anticipate sequential growth within the computing sector during the next quarter due to high demand for new personal computers. In contrast, revenues for the automotive and industrial sectors fell by 6% compared to the previous year; however, they stayed steady when measured sequentially among both cutting-edge and standard products. The lineup of initiatives we’re working on alongside major partners—covering areas like advanced driver-assistance systems (ADAS), entertainment information services, and various sophisticated applications—is substantial. Moreover, we’ve initiated scaling up several offerings anticipated to boost performance in this area come the second quarter. Year-over-year earnings in the consumer electronics category surged by 23%. This uptick can be attributed mainly to an ongoing initiative centered around wearable audio gadgets which began rolling out halfway through last fiscal period and leverages state-of-the-art system-in-package (SiP) techniques.
In Q2, we anticipate the consumer sector will remain largely stable compared to the previous period. The first-quarter gross profit amounted to $158 million, reflecting a gross margin of 11.9%, both down from prior periods owing to reduced production levels leading to suboptimal plant usage around mid-50s percentages. Operating costs exceeded forecasts by reaching $126 million, mainly because research and development spending increased—a rise attributed to developing novel technologies such as RDL slated for deployment later this year—this according to Giel’s comments. Our operating earnings stood at $32 million, equating to 2.4% of total revenue. We’ve implemented cost-saving strategies worldwide, maintaining profitability through various stages of the semiconductor industry cycle. For the net result, our profits were reported at $21 million with an earnings per share (EPS) figure of $0.09. Additionally, EBITDA reached $197 million during the initial three months, marking a 14.9% contribution towards overall margins.
Amkor has demonstrated rigorous financial discipline and sustains a robust balance sheet. By the close of the quarter, we held $1.56 billion in cash and short-term investments, bringing our overall liquidity to $2.2 billion. As of quarter-end, our total debt stood at $1.15 billion, corresponding to a debt-to-EBITDA ratio of 1.1 times. This solid and adaptable balance sheet empowers us to boost shareholder returns through investment in internal expansion, such as technological advancements alongside key clients; pursuing strategic acquisitions aimed at optimizing our worldwide presence; and distributing profits back to shareholders under our established capital deployment strategy. We firmly believe that this comprehensive and well-rounded method will facilitate the creation of enduring shareholder wealth. Shifting focus now to our forecast for the next quarter.
Our projected revenue ranges from $1.375 billion to $1.475 billion, indicating an 8% sequential increase at the mid-point estimate. We continue to keep close tabs on how tariffs and trade policies might influence market demands. The gross margin is anticipated to fall within the range of 11.5% to 13.5%, showing a slight uptick in factory efficiency rates. Operating costs for this quarter are predicted to hover near $125 million, with an annualized effective tax rate of approximately 20%. Consequently, we anticipate second-quarter net earnings will land somewhere between $17 million and $57 million, translating into earnings per share (EPS) ranging from $0.07 to $0.23. For 2025, our capital expenditure plan stays steady at $850 million; out of this total, about 5-10% will go toward building our state-of-the-art packaging plant located in Arizona. These funds support expansions aimed at enhancing capabilities in cutting-edge technologies such as future generations of redistribution layers (RDL), bridging techs, sophisticated system-in-package (SiP) setups, and enhanced testing methods.
We’ll keep an eye on environmental changes and carefully assess our investment strategies. Despite ongoing shifts in tariffs and trade rules, Amkor’s activities have remained mostly untouched. Shipments to the U.S. make up only a small part of what we do, with almost all our facilities operating within various forms of free-trade zones where duties are waived when supplying gear, supplies, and parts directly. The diversity of locations from which we operate gives us a competitive edge, something we’ll continuously track amid current events. Amidst these fluctuating conditions, we’re prepared to assist our clients effectively. Our staff keeps pushing forward with our long-term strategy. To stay at the forefront in the OSAT sector, we’re putting resources into specialized technologies.
We are enhancing and broadening our geographical presence. Additionally, we are forming close alliances with top semiconductor firms that are tackling major market trends. Now, let’s open the floor for any questions you may have. Over to you, operator.
To continue reading the Q&A session, please
click here
.
