Amkor Technology, Inc. Q1 2010 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: CJ Muse - Barclays Capital - Analyst : Good afternoon. Thank you for taking my question. I guess first question, can you talk a little bit about where your visibility stands today, how far it extends and what you can share in terms of your outlook today for the second half of the year? And as part of that, if you could share what's typical seasonality and how you see things playing out today.

Question: CJ Muse - Barclays Capital - Analyst : Okay, great. And as my followup question, on the gross margin side, you talked about labor increasing and D&A picking up incrementally, but also, mid 20s gross margin, which looks pretty good. How should we model the ramp of those margins through 2010, and importantly, could you provide a little more color on what that range is for the full year? You said mid 20s, is that 23, 25, or are you talking surpassing kind of prior annual peak of 25 plus percent? .

Question: CJ Muse - Barclays Capital - Analyst : But do you think the headwind that you're seeing slightly in Q2 will be behind you at the end of Q2?

Question: CJ Muse - Barclays Capital - Analyst : Right. Thank you.

Question: Satya Kuma - Credit Suisse - Analyst : Yes, hi. Yes, hi, thanks. Again, a quick followup on the growth margins. If I assume that mid 20s is indeed 25%, I need to get a very sharp increase in goods margins in Q3. My math is somewhere between 400 and 500 basis points in Q2 to Q3. I wanted to concern how realistic that is, given the account of incrementally more competent on the second half demand forecast. Do you have to do more hiring perhaps in Q3? Is demand going to continue the upside, or how do you think about additional cost that can come on in Q3? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Satya Kuma - Credit Suisse - Analyst : Okay. If you were to see second half inland with normal seasonal, should you -- would the model be able to deliver on margin leverage without a significant increase in cost that you assume in Q2? .

Question: Satya Kuma - Credit Suisse - Analyst : Perfect. And one quick followup. Can you comment a little bit on what pricing is doing in Q1 and Q2? Are you getting any benefit given the tightness in the industry? And also, what do you think (inaudible) across product lines? If you could comment on that as well, thanks.

Question: Satya Kuma - Credit Suisse - Analyst : And lead times?

Question: Satya Kuma - Credit Suisse - Analyst : I was more interested in your lead times, but given the outside, maybe you could also comment on equipment lead times as well. Thanks. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Satya Kuma - Credit Suisse - Analyst : Alright. Thanks.

Question: Peter Kim - Deutsche Bank - Analyst : Hi. Thanks for taking my questions. When you say chip scale packaging, I assume you're referring to flip chip, that you had an under utilization of flip chip capacity this quarter?

Question: Peter Kim - Deutsche Bank - Analyst : But which was it?

Question: Peter Kim - Deutsche Bank - Analyst : Also, I noticed that your test services revenues are a little bit light this quarter. Is that related to the flip chip on the utilization of flip chip, and do you expect that test segment to recover next quarter? .

Question: Peter Kim - Deutsche Bank - Analyst : I was wondering also, if I could just follow up with a quick question on the cogs, if looks like your materials cost is up a little bit. Is that all attributed to gold? . LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Peter Kim - Deutsche Bank - Analyst : Okay. Thank you.

Question: Timothy Acuri - Citigroup - Analyst : Hi. What typically, when you look at inventory positions of your customers, and you look at how things have transpired in the past to surprise you to the downside? What, as you look back, Ken, what sort of things happened in sort of prior cycles that might be different this time?

Question: Timothy Acuri - Citigroup - Analyst : Okay. And then I'm sort of curious what, if you had guided maybe a month ago, what would your June quarter guidance have been a month ago? Would it have been significantly worse or just -- sorry, yes, i.e., has it gotten significantly better in the last month? What has that trend been? .

Question: Timothy Acuri - Citigroup - Analyst : And then just the last thing, as you look out into Q3, I know that you don't want to guide out to the next quarter, but if you had to bet right now, do you think, does Q3 look better than seasonal, just like Q2 is better than seasonal? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Timothy Acuri - Citigroup - Analyst : All right. Thanks, Ken.

Question: Sundar Vardarajan - Citadel Securities - Analyst : Yes, hi. Could you elaborate a little bit more in terms of the mix, what -- were there particular customers that -- whose orders you were expecting that didn't pan out or what happened there in terms of the mix? And what's giving you the confidence that you should get back strong -- that should come back strongly in the back half of the year? Any additional kind of color you could throw at that would be pretty helpful.

Question: Sundar Vardarajan - Citadel Securities - Analyst : Okay. And going forward, you gave some kind of guidance in terms of labor costs and gold input costs and so on. How should we think about just operating expenses, SG&A and R&D? Do you expect to stay flat, or do you see additional investments there as well for the back half of the year? .

Question: Sundar Vardarajan - Citadel Securities - Analyst : Okay. So as a debt guy, I have to ask a capital structure question. Given that the capital markets have been really, really strong, you do -- you guys do have some debt that's callable. Any plans to take advantage of the current market to term out some of those maturities, or you LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. just want to -- or are you going to wait and just pay the debt down at maturity? What's your current thinking here in terms of the capital structure? .

Question: Sundar Vardarajan - Citadel Securities - Analyst : Alright. Thank you.

Question: David Duley - Steelhead Securities - Analyst : Yes. Thanks for taking my question. You mentioned that you were capacity constrained in some areas. Could you talk about which areas those are, products, however you characterize those? .

Question: David Duley - Steelhead Securities - Analyst : So along those lines, when you're seeing extended lead time from your equipment suppliers, it's not in the test area, it's in the wire bonder and the flip chip equipment stuff?

Question: David Duley - Steelhead Securities - Analyst : Okay. One followup from me. Could you take a stab at what you think depreciation expense will be on a quarterly basis in the second half of the year? .

Question: David Duley - Steelhead Securities - Analyst : And so that means the increased CapEx is kind of matching the offsetting, however many years you depreciate your equipment for, it's kind of offsetting the strong CapEx five years ago let's say, how should we read that depreciation being flat?

Question: David Duley - Steelhead Securities - Analyst : And just clarification, the 14% capital intensity, is that the same percentage that you were talking about a quarter or two ago?

Question: David Duley - Steelhead Securities - Analyst : Thank you.