Amkor Technology at Emerging Tech Summit: Strategic Moves in Semiconductor

On Tuesday, 04 March 2025, Amkor Technology (NASDAQ: AMKR) participated in the 18th Annual Emerging Technology Summit. The company highlighted its strategic positioning in the semiconductor industry, emphasizing both opportunities and challenges. While Amkor anticipates growth in AI and automotive sectors, it faces hurdles such as socket transitions and competitive pricing pressures.

Key Takeaways

• Amkor aims to capitalize on AI-enabled phones, expecting a refresh cycle by 2025 or 2026.
• The company is expanding its geographic footprint with new facilities in Vietnam, Portugal, and Korea.
• Amkor is focused on advanced packaging technologies and plans significant capital expenditures.
• The automotive market downturn remains a concern, but future reacceleration is expected.
• A partnership with TSMC in Arizona is poised to enhance production capabilities.

Financial Results

• Market Conditions: The mobile market undergoes annual cycles with constant rebidding. Android is shifting towards premium phones, offering new opportunities.
• Revenue Outlook: The first half of the year is expected to be muted due to a missed socket opportunity, but acceleration is anticipated in the second half due to seasonality.
• Pricing and Competition: While advanced technologies see reasonable pricing, the commodity space faces aggressive pricing pressure.

Operational Updates

• Socket Transition: Amkor missed one socket due to a customer’s architectural shift but is confident in securing the next one.
• Advanced Packaging: The company is ramping up its first SWIFT product and expects the next-generation S Connect to ramp next year.
• Geographic Expansion: New capacity is coming online in Vietnam, with expansions planned in Portugal and Korea to support various markets.

Future Outlook

• AI and Computing: AI-enabled phones need compelling user experiences to drive significant refresh cycles. Panel-level packaging offers cost benefits but faces yield challenges.
• Automotive Market: Mainstream automotive products are expected to reaccelerate, potentially boosting margins. Semiconductor content in EVs is significantly higher than in combustion engines.
• Capacity and Expansion: Full-rate production with TSMC in Arizona is planned by 2028, with potential for acceleration.

Q&A Highlights

• Automotive Downturn: The downturn is prolonged due to post-COVID inventory buildup.
• AI Impact: The role of AI in edge devices and data centers is evolving, with uncertainty about when inferencing will dominate.
• TSMC Partnership: The collaboration with TSMC in Arizona remains strong, viewed as an opportunity accelerator.
• Capital Allocation: Priorities include business investment, R&D, debt optimization, strategic investments, and shareholder returns through dividends.

Readers are encouraged to refer to the full transcript for a detailed understanding of Amkor Technology’s strategic initiatives and market insights.

Full transcript - 18th Annual Emerging Technology Summit:

Steve Barger, Analyst, KeyBanc: Good afternoon, everyone. I’m Steve Barger with KeyBanc. I cover semi cap equipment and cyclical industrials. And I’m here today with Kevin Engle, who is the EVP and COO of Amcor. And Kevin, to start, could you just give the audience a brief history of Amcor, what it does, maybe your evolution with the company?

And then just because it’s topical, maybe a quick comment on tariffs and how you’re positioned for it?

Kevin Engle, EVP and COO, Amcor: Yes. Good afternoon. So first, let me just start with Amcor in general. So Amcor is a OSAT outsourced assembly and test company. So we’re focused on more of the advanced packages in the industry, and we service really all the markets from communications, automotive, industrial and consumer.

Amkor is over 55 years old, so relatively old company. We’ve been growing over time, a really exciting opportunity for us. Myself, I’ve been with Amkor for over twenty five years. I came through an acquisition from a smaller company called Units of Electronics and just been continuing with the company to grow over time. Prior to the COO role, I managed our business units.

Steve Barger, Analyst, KeyBanc: Very good. Most common question I’ve gotten post earnings is the socket transition. Can you just talk about how that evolved? What happened? When you expect to restart that?

Okay.

Kevin Engle, EVP and COO, Amcor: Yes. So if we go back in time and you think about the life cycle of the mobile market, specifically the phone market, really it’s a year kind of cycle. So every year you’re going through a new device change. You’re working with the customer to really rebid for that next generation product, you have to maintain a hungry footprint to make sure you’re winning the next level socket. So that cycle is normal.

This was a little bit different in that the customer wanted to migrate to a different architecture. And with that architecture change, basically, there were discussions around supporting the future architecture or the legacy architecture. And in the end, we agreed to move forward with the future architecture. So that left us out for that one socket. It was not a surprise.

We knew it was coming. And basically, the next socket will start ramping this year.

Steve Barger, Analyst, KeyBanc: So you’ve already gotten a commitment from the customer and you’re highly confident that that comes in the back half?

Kevin Engle, EVP and COO, Amcor: Yes. So again, we’ve started development on that product last year. We are where we would expect to be from a qualification perspective. We’re in the process of mobilizing our manufacturing infrastructure to support it. So yes, we have high confidence.

Steve Barger, Analyst, KeyBanc: Great. And over the past year or two, there has been a lot of variability between smartphone forecast and what we’ve actually seen. Are there any other design changes or issues that could affect the year?

Kevin Engle, EVP and COO, Amcor: There’s always things that can affect it. But in general, what we see today again is the because of that socket opportunity loss, the first half will be a little bit more muted than we would typically see. And then the second half, we expect that typical seasonality, but to be a little bit accelerated based on that first half trough. But now if you look at the overall mobile market in general, it feels about normal from what we can see.

Steve Barger, Analyst, KeyBanc: So does that extend to the Android environment? Or can you tell us what you’re seeing there on the premium tier?

Kevin Engle, EVP and COO, Amcor: Yes. So for Android, same type of dynamic. There’s definitely a shift towards more premium tier phones. And that’s an area that we participate pretty heavily in. So if we look at our customers that are supporting those launches across that platform, there’s a good bit of optimism going into next year or this year and we saw that even towards the tail end of last year.

Steve Barger, Analyst, KeyBanc: Do you have any early thoughts on the AI enabled phones? Are they going to drive an upgrade cycle? Or do we expect that they’ll just get that functionality over time and we’ll see normal replacement cycles, whatever that means?

Kevin Engle, EVP and COO, Amcor: Yes. Good question. So you know, for for me, I think everybody’s waiting for a user experience that’s really going to drive that refresh cycle. You know, so if you look at the phones today, you know, different phones have different level of of AI built into them. But in general, until the user experience really shows something that benefits them to go off and buy your next $1,000 phone, I think you need to see that.

But to me, that will happen. It’s just a matter of is that 2025 or 2026. But I think that trend will continue.

Steve Barger, Analyst, KeyBanc: I want to ask about system and package. I think right now, it primarily is for wearables and smartphones. Do you expect that technology will spread into auto, industrial and other consumer applications?

Kevin Engle, EVP and COO, Amcor: Yes. So if you think about what SIP is really good for, it’s condensing a lot of functionality in a very small package. So it’s really good for hearables, wearables, that type of area. And then some of the so in general, any kind of consumer market and then also for phones where, again, very small footprint is needed. If you look in the other areas, so for automotive, we do have some SIP in that automotive space today already.

To me, then you start thinking about just chiplet kind of infrastructure in general because SIP versus some of the other chiplet type platforms, either multi chip modules or even more advanced packages. They’re all taking integration from multiple chips and putting it in one package. So what I see for those other areas is different types of chiplet architectures, whether it’s flip chip CSP or multi chip modules.

Steve Barger, Analyst, KeyBanc: Yes. We’ll talk more about automotive in a minute. But I guess just to extend that to ARM based PCs, any comments there?

Kevin Engle, EVP and COO, Amcor: Yes. ARM based PCs, I mean, potentially some opportunities for SIP in some of the Wi Fi type modules. But I think the trends today are more towards other package types.

Steve Barger, Analyst, KeyBanc: Okay. Let’s switch to computing. All through last year, we talked about tripling or quadrupling capacity for 2.5D. On the call, you talked about lower than expected demand due to China export restrictions and shifting product timelines timelines. Can you start with the China restrictions?

What’s happened most recently?

Kevin Engle, EVP and COO, Amcor: Yes. So obviously, an ever changing environment in that space. But for us, what we saw was we had several customers that were looking at ramping products either in 2.5D or their applications. And as some of those restrictions came in place towards the tail end of last year, that created an environment where they were pausing some of those product launches. So that was one dynamic to having a slightly muted Q1 in that 2.5D space.

And then the other one was this transition from the GPU from the previous generation to the most current generation. And that transition happened a little bit faster than we were the customer anticipated. So while we still have a good pipeline moving forward for that that legacy product or older product. And then overlay with that some of these newer products that were forecasted to ramp at the beginning of this year, some of that’s just been pushed a little bit further out.

Steve Barger, Analyst, KeyBanc: So that’s a good point on the shifting timelines. Do have product rollout dynamics changed in your view?

Kevin Engle, EVP and COO, Amcor: Related specifically for the China market, maybe, but I’d say in general, no. I mean, we’re ramping our first SWIFT product, which is RDL organic RDL rather than silicon interposer products. So that’s a first ramp of that device, which is really exciting for us. So we have another device coming online in the later in the year.

Steve Barger, Analyst, KeyBanc: Is that what Hiel talked about on the call in terms of bridge based packaging? And what does that mean from a design standpoint?

Kevin Engle, EVP and COO, Amcor: So that’s the next generation. So we have the 2.5 D and I’ll correlate that to some of TSMC’s terms. So that’d be like CoOS S. Then we have our Swift technology or organic RDL, which is like CoOS R. And then the bridges are more CoOS L.

We would call that S Connect. And for us, that’s a development activity and we would expect to be ramping that next year.

Steve Barger, Analyst, KeyBanc: Understood. And it’s been a little over a month since the DeepSeek news, and everything we’ve talked about so far has been kind of before that. Has DeepSeek changed how you think about industry dynamics? So, you know, to me, it

Kevin Engle, EVP and COO, Amcor: comes down to where is AI going into the future, whether it’s related to training or inferencing. In general, if you’re able to drive down the cost, the computing cost over time for the customer or the consumer interface, As that continues to go down, to me that just accelerates the adoption rate. And again, once you have some of these user interfaces that really drive a benefit to the consumer, having that at a lower cost, I think is just going to accelerate that. So I think whether you’re doing that compute on a very high end, very expensive part or maybe a slightly less expensive part is still going to drive additional packaging and benefit Amcor.

Steve Barger, Analyst, KeyBanc: Yes. And it seems like DeepSeq was trained on non restricted GPUs. Does that create more of an opportunity in China for you around AI?

Kevin Engle, EVP and COO, Amcor: We have to follow all of the restrictions out there around that. But again, we’re we are an approved vendor as related to the best restrictions. So I think that’s an area that’s benefiting us. Obviously, we have a facility in China that we continue to look for opportunities there to support the China local market. So we’ll see how that develops and if additional restrictions are put in place.

Steve Barger, Analyst, KeyBanc: When you think about AI in the near term versus the medium term, how do you expect revenue will evolve from traditional data center GPUs to more edge devices like PC and smartphones? And do you have a time line for when you think inferencing could overtake DC?

Kevin Engle, EVP and COO, Amcor: Yes. So that’s an interesting one for me. I we constantly talk about when an edge device is really called an AI device. If you take a phone today, it may have some AI functionality. Do you count all that revenue in AI or do you not?

So I think for everybody to kind of think through what does that look like is going to take some time. But I think the trend towards Edge compute, definitely more towards an inferencing side, reduce that latency going back to the data center. And obviously, the data center guys, if they can push some of that compute into the Edge device, that benefits them as well. So I think that will happen as far as when is that transition point, you know, to where inference is higher. I think that’s still yet to be seen.

Steve Barger, Analyst, KeyBanc: Understood. Your primary OSAT competitor has also expanded COOS capacity. How do you differentiate against competitors in advanced packaging?

Kevin Engle, EVP and COO, Amcor: So to me, there’s really several dynamics there. I mean, first, quality and execution are key. These are very large devices, very expensive. If you have yield issues, then that’s a major issue. So I think that’s definitely an area that we’re focused on is the execution and the quality.

Then you have to have the whole suite of technologies. Here we have full flow technologies where we’re taking the front end wafers and going through all the packaging. And we have partial flows like the on substrate portion or test opportunities. So that full suite, we really offer the customer what type of flow they need. And then finally is our geographical footprint in that for these types of packages, we’re the only company outside of Taiwan and China that can support that.

So if a customer is looking for some level of diversity, then they’re definitely drawn to Amcor.

Steve Barger, Analyst, KeyBanc: Given some of the near term demand concerns, can you maintain pricing through a period like this?

Kevin Engle, EVP and COO, Amcor: Yes. Pricing is competitive, but we feel reasonable. So there’s definitely an area there. And then if you look again at our focus more on the higher end on advanced technologies, the amount of players in that space is more limited. And so the pricing pressure is a little more contained.

If you’re really in that commodity space, then the pricing pressure is a lot more aggressive.

Steve Barger, Analyst, KeyBanc: Yes. Can we talk a little bit about panel level packaging? We’re hearing a little bit more about that. Maybe give everyone just an overview of what it is, why it matters. And do you think it will primarily be for AI and HPC?

Kevin Engle, EVP and COO, Amcor: Okay. So panel, interestingly, I think of what most of the prospects today, it’s on a 300 millimeter wafer, so obviously round. And when you think about high end devices, these larger GPUs and switches and things, you’re going to very large structures that you can only fit maybe less than 10 of them on a wafer. So you lose a lot of scale when you have a round thing. So going to panel, now you’re moving to square and then potentially also scaling that to much larger for Amkor.

Since 2020, we’ve been working on a six fifty by six fifty panel. So you can imagine that enables you to have four three hundred millimeter wafers or you can do four three hundred by 300 panels on that one panel or you can do one full size panel at the same time. So it enables you to get many more devices through the process equipment at one time and manage that from so it’s a cost benefit. The challenge is always yield. In these large panels with very fine line and spacing, you have to have that yield.

So that’s kind of one of the pivot points. So we have a platform there. We’ve been working on that for quite some time for lower density applications and then doing development on the high density applications. So it we have multiple customer engagements there. I think it’s an exciting opportunity.

You know, definitely will help drive yield and cost in the future, but it has challenges related to yield. So there’s still work to be done there.

Steve Barger, Analyst, KeyBanc: Any idea of timeline towards more mainstream manufacturing? Is this is this years away?

Kevin Engle, EVP and COO, Amcor: I would say two to five years away.

Steve Barger, Analyst, KeyBanc: Okay. If AI demand slows or macro conditions worsen, just thinking about Amcor’s eight fifty million dollars CapEx plan, would you view that as more discretionary in this year just given how you’re thinking about future growth? Or would you consider adjusting that?

Kevin Engle, EVP and COO, Amcor: Yes. So first, I think we need to kind of bucket that CapEx spend. So that’s about 70% is related to equipment capacity. If we look at those buckets in there, that’s our advanced package types where we’re increasing our capabilities and growing going into this year. Then we have our SIP platform where those investments are more for specific device ramps and then we have test opportunities.

So those are the three main buckets. So could we pause or push those out? Yes. I think at this point, we see those as strategic investments and we wouldn’t do that. The other so another 20% is related to our facilities, about 5% to 10% is for our U.

S. Manufacturing site. Then we have other expansions in Portugal to support the European market as well as some expansions in Korea and other locations. So those could be moved around depending on overall situation. And then about 5% that’s left is related to R and D and quality.

Steve Barger, Analyst, KeyBanc: Understood. I have a few more questions on CapEx, but I want to make sure we have time for automotive. Very challenging market. Have you ever experienced a downturn this prolonged before?

Kevin Engle, EVP and COO, Amcor: This is long. And the way I view it is, if you go back to COVID, the auto industry was very heavily affected by COVID. They were very aggressive to move from more of a just in time to a just in case type model. I think that set the stage to where there is a significant amount of inventory built up. Then they were the last really to turn off the knob.

And so that’s now we’re in that dynamic to where we need to continue to burn off this inventory level and that’s going to take some time. So it’s that’s a challenging dynamic.

Steve Barger, Analyst, KeyBanc: So when you think about the prior cycle, it ultimately was just getting through the inventory in the channel that before things flip back to positive or how do you see that evolving?

Kevin Engle, EVP and COO, Amcor: Yes. So we think about it from two perspective. We have advanced, which are more advanced packages that go into ADAS functionality, infotainment, connected cars, those types of things. That business is doing better. And then we have the more mainstream and legacy type packages, which are things like microcontrollers, things like that, where there’s a mix of IDMs, there’s a mix of other companies.

And in that market, there’s still a significant inventory build up there.

Steve Barger, Analyst, KeyBanc: When we see the more mainstream products start to reaccelerate, what does that mean for corporate margins?

Kevin Engle, EVP and COO, Amcor: So it will boost the margins. And I think when you look overall at our utilization levels, because the automotive industries continue to have this trough, We have multiple factories that are significantly underutilized. So as we fill those factories back up, that will definitely be a tailwind in the margin.

Steve Barger, Analyst, KeyBanc: As you look across the spectrum of vehicles from low tier to premium, how much more runway is there for semiconductor content increases? Have we are we hitting the upper limit in any platform?

Kevin Engle, EVP and COO, Amcor: So any platform. So I think if we think about the combustion engine, our typical semiconductor content is less than $1,000 even the $700 obviously that can range depending on ADAS and infotainment functionality and things like that. But if you look at a fully autonomous electric vehicle, you’re more in the $2,000 range. So I think those trends towards more connected cars, more digitization in the cockpit, EVs, even hybrids, autonomous driving, all those things will continue to drive semi content in the car.

Steve Barger, Analyst, KeyBanc: Would that be more as we think more about Tesla’s full self driving or Waymo, is that more dollar content, just more expensive chips? Or is it unit content across the vehicle?

Kevin Engle, EVP and COO, Amcor: It’s a little bit of both. So definitely, you think about just when we look at the number of components in a car, as you add in more of that functionality, you’re definitely adding more chips as well as more advanced chips as well.

Steve Barger, Analyst, KeyBanc: Yes. Shifting to consumer, in terms of devices in the market, can we just talk about the market share that you touched today in your addressable market? And I’m just trying to think about how much room there is for share gains versus your the platforms you’re on just kind of riding cycles.

Kevin Engle, EVP and COO, Amcor: Yes. So we feel good about where our share is. I mean, I agree with you. If you look at kind of industry projections, it’s low single digit type growth projected for 2025. I think it’s also important to remember that Amkor is playing more in the premium tier aspect of the wearable market.

So we feel pretty good about that position. Similar to the mobile market we talked about before, you’re constantly making sure you’re hungry for the next generation device. So I think there’s opportunities there and we continue to work on

Steve Barger, Analyst, KeyBanc: that. Is it similar to other parts of your business where you’re in the prior design cycle or the forward design cycle and you see what that roadmap looks like?

Kevin Engle, EVP and COO, Amcor: You typically do. And if you’re not seeing that roadmap, something’s wrong. So that’s definitely an area that we stay very focused on.

Steve Barger, Analyst, KeyBanc: I just had a question on AR and VR. How important is that to the future of the consumer segment? And maybe are you seeing a proliferation of applications?

Kevin Engle, EVP and COO, Amcor: So we’re in multiple models there and the unit volume is just very low. So it’s not something to be for me to be too excited about. But the application space is interesting. I think it needs to continue to grow. I don’t think they’ll ever get used to seeing somebody on an airplane wearing one of those things.

But in general, I think there’s an opportunity there. We’ve heard about some applications to where you can do remote training in factories, things like that. So I think there’s a space, but I don’t know that the unit volume is going to be something that’s going to be a huge driver for us.

Steve Barger, Analyst, KeyBanc: Yes. And you have a lot of capacity coming online in Vietnam. That business is typically more margin constrained because of the material content. What is the normal mix that you hope to maintain there going forward? Or can you talk about how you’re going to balance the plants?

Kevin Engle, EVP and COO, Amcor: Yes. So I view it slightly differently. I mean, we started with SIP and memory. So and they’re both ramping right now. So I think that’s a win and they’re going to ramp significantly.

But if I look forward into Vietnam, we have one module of four built. Now one module is already very large. So eventually, this will be a huge facility and we will bring in additional technologies and we’ll bring in incrementally more advanced technology. So I would see that factor in the future more as kind of a standard type footprint of what we would see in some of our other locations.

Steve Barger, Analyst, KeyBanc: Got it. Capital allocation, can you remind us of the preferred ranking of capital allocation and how you approach that? Yes.

Kevin Engle, EVP and COO, Amcor: So first, we invest in the business. That’s number one. Second, I would say investment in R and D to make sure we’re supporting our future generations. Then we look at the optimization of our borrowing. After that, specials or strategic investments, that’s definitely an area that we spend some time on.

And then finally, returning to our shareholders in the form of dividends. And obviously, we have stated some targets around what that looks like.

Steve Barger, Analyst, KeyBanc: You did do a special in November, which I think was your first. What was the investor response? How did that what was the reaction to that?

Kevin Engle, EVP and COO, Amcor: It’s been mixed. So I think some investors would like us to look more either at increasing the standard dividend, others would like us to look at buybacks. So I think those are all things that we’re talking about internally to see if we change that strategy.

Steve Barger, Analyst, KeyBanc: And you talked a little question in the back. Yes. So you have a partnership with TSMC in Arizona. TSMC obviously made headlines last twenty four

Kevin Engle, EVP and COO, Amcor: hours. Yes. Yes. I mean, so to me the way I look at it is, as part of the CHIPS Act, they move forward with three fabs and they’re still in that build cycle. So I think second fab is getting close and then third to be done.

This new recent announcement was three additional fabs on top of that. Six fabs is a lot of output in The U. S. So in our discussions with them, the collaboration is still there. We see that more as an acceleration of the opportunity.

So we’re excited about that moving forward and excited about that for The U. S. As well.

Steve Barger, Analyst, KeyBanc: I think for you, full rate production is planned for 2028.

Kevin Engle, EVP and COO, Amcor: Correct.

Steve Barger, Analyst, KeyBanc: Could you accelerate that if it makes sense?

Kevin Engle, EVP and COO, Amcor: That we are looking at. It is not easy related to permitting and build structures, but that’s definitely something that we’re exploring today.

Steve Barger, Analyst, KeyBanc: On a relative basis, that will be your most automated plant? Or can you talk some about the investments and how you’re planning to meet the demand levels?

Kevin Engle, EVP and COO, Amcor: Yes. It will definitely be very automated. I mean, we want to balance obviously The U. S. Cost structure.

So that’s an important component to managing that. Our Korea facility is also very automated, but we would expect The U. S. To be a little bit more than that.

Steve Barger, Analyst, KeyBanc: We just have one minute left. Maybe if you want to wrap up, what do you view as the biggest opportunity just given the end market set that you face right now?

Kevin Engle, EVP and COO, Amcor: Well, so I think that depends short term or long term. I think short term, the whole AI data center trends that we’ve talked about are very important. Long term, I think all these automotive consumer data set, all of those are going to drive a lot of growth for us. We’re really excited about it. Very good.

Thanks very much. All right. Thank you.

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