Amkor Technology Inc Q4 2024 Earnings Call Transcript

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

Question: Toshiya Hari - Goldman Sachs - Analyst : Hi. Good afternoon. Thank you for taking the question. Maybe one for Giel on the communications business. You talked a little bit about the lower content in sort of the iPhone and the impact it had and then, I guess, your expectation for that to come back in '25. I guess what -- well, first of all, I guess, if you can clarify or confirm how significant the hit was from that in the most recent quarter, that would be really helpful. And then what gives you the confidence that you or your partner can indeed sort of regain that content in the back half of the year? Thanks.

Question: Toshiya Hari - Goldman Sachs - Analyst : Got it. Thank you so much. And then as my follow-up, maybe one for Megan on the gross margin side of things. So you're guiding to 10% to 13% in Q1. You went through the puts and takes as it pertains to Q1. But how should we think about trajectory into Q2 and the back half? Vietnam, I assume, stays a headwind. But as volumes grow and mix evolves, how should we think about gross margins progressing as you move throughout '25?

Question: Joseph Moore - Morgan Stanley - Analyst : Great, thank you. I guess you talked about autos eroding over the course of the quarter, but you also talked about your optimism for 2025. Can you just give us a sense for what gives you the confidence in that growth? What are the specific package types that can offset the macro weakness that we're seeing?

Question: Joseph Moore - Morgan Stanley - Analyst : Yes, to automotive.

Question: Joseph Moore - Morgan Stanley - Analyst : Very helpful, thank you.

Question: Peter Peng - JP Morgan - Analyst : Hi. Thanks for taking my question. Maybe if you can spend a little bit of time talking about the dynamic at your marquee customer. And then more importantly, as that customer ramps down given their Blackwell rollout, how are you expecting to kind of backfill that with either maybe expanding more customers, et cetera? Maybe if you can just spend some time on that dynamic.

Question: Peter Peng - JP Morgan - Analyst : And then maybe if you can just talk about how you're thinking about OpEx spending through the year just given the more muted revenue expectations.

Question: Peter Peng - JP Morgan - Analyst : Great. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 10, 2025 / 10:00PM, AMKR.OQ - Q4 2024 Amkor Technology Inc Earnings Call

Question: Craig Ellis - B. Riley - Analyst : Yeah. Thank you very much for taking my questions. I'll stick within compute to start it off. What I was hoping to understand is if we look at the real strong growth within the segment, in 2024, how much of that came from AI PCs versus GPU-based systems? And as you look at 2025, how would you expect those different opportunities to contribute to the growth that you expect?

Question: Craig Ellis - B. Riley - Analyst : That's real helpful color, Giel. And the follow-up question is one that's less a modeling question and more a new program question. So in 2024, it was impressive because the company had ARM-based PCs and AI and a very good wearables program, and those benefited multiple segments. And as you look at 2025, clearly, there's an opportunity to recapture some SiP share, and it seems like there is the foundation for continued growth in AI. But as we look at the company-specific things that will benefit Amkor, how would you set that list? And if you were to rank order it, how would it look one through four, one through five? Thank you.

Question: Randy Abrams - UBS Equities - Analyst : Thank you. My first question, I actually wanted to touch on the CapEx where you're guiding to $825 million. And I know you said you have some for Vietnam. But given that conservative outlook, maybe go through on the remaining piece, where the allocation of spend and priorities between test, assembly or any other special investment, I think, you mentioned on the power module side?

Question: Randy Abrams - UBS Equities - Analyst : Okay. Good color on that. I actually wanted to ask because of a lot of commentary in the market there is on tariffs affecting a few areas. First, if you're seeing any pull-ins. There's been some talk on consumer side, but also given Mexico, Canada, like if anything happening on automotive. So that's one, if it's affecting timing of shipments. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 10, 2025 / 10:00PM, AMKR.OQ - Q4 2024 Amkor Technology Inc Earnings Call Second is on shifts. There's some talk about whether Taiwan gets some tariffs. And if you're seeing any potential customer engagement or swing where that's the way to bypass tariff, could shift assembly. So curious on geographic shift, if there could be any swings for your business from that side, too.

Question: Charles Shi - Needham - Analyst : Yeah. I want to go back to the full year outlook. You guys are expecting probably flat, up a little bit for the full year given the slow start to the year, right, Q1 down 7% year-on-year. It does seem to require some really above-seasonal growth into second half. But might -- if you help us a little bit more here, what is the normal seasonality? Like half of a half, maybe we can use that metric. And what's the expectation for that particular metric that would inform us that you're going to have above-seasonal growth in the second half of the year?

Question: Charles Shi - Needham - Analyst : That's very helpful. Maybe a question on regaining the socket with your high-end smartphone customer. So I think you mentioned you do have the line of sight for that particular socket to be going into production in maybe Q3, sounds like, this year. So how confident you are in terms of that particular socket will definitely go into this year's model? Well, we did have a little bit of surprise last year, right, heading into Q3 and Q4. And what's your confidence level right now for regaining that particular socket?

Question: Charles Shi - Needham - Analyst : Thank you.

Question: Thomas Diffely - D.A. Davidson & Co. - Analyst : Yeah. Good afternoon. I appreciate the chance to ask the question. Giel, I wanted to talk a little bit more about the high-end compute market. Obviously, you ramped up very quickly over the last year and a half your 2.5D capability or capacity. I'm curious, when you look at moving to the next-generation package type, is that going to require just an upgrade to your existing capacity or is that completely new capacity and then you ought to backfill the old 2.5D with new clients?

Question: Thomas Diffely - D.A. Davidson & Co. - Analyst : So when you look at the $850 million in CapEx, that's going to increase overall capacity, not just transform it into the newer capacity then? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 10, 2025 / 10:00PM, AMKR.OQ - Q4 2024 Amkor Technology Inc Earnings Call

Question: Thomas Diffely - D.A. Davidson & Co. - Analyst : That's very helpful. And as a follow-up, Megan, I was wondering if you could get some more specifics about what is behind the tax raise from '24 to '25.

Question: Thomas Diffely - D.A. Davidson & Co. - Analyst : Okay. I appreciate your time.

Question: Steven Fox - Fox Advisors - Analyst : Hi. Good afternoon. Thanks for all the color so far. I was just wondering if there's a way just to step back from all the program-specific color that you provided, just to talk about the state of some of the broader markets, you're -- what you're assuming happens in the second half, specifically on edge devices, AI PCs and smartphones and on the more traditional auto markets that you're serving. Then I had a follow-up.

Question: Steven Fox - Fox Advisors - Analyst : Fair enough. Sorry, I didn't mean to put you on the spot like that. And then just as a follow-up, can you just give us a sense for when you would expect to start receiving the CHIPS Act grants, like not exactly month but just sort of how many quarters into the capacity expansion would you start hitting the hurdles to receive funding back from the US government? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 10, 2025 / 10:00PM, AMKR.OQ - Q4 2024 Amkor Technology Inc Earnings Call

Question: Steve Barger - KeyBanc - Analyst : Giel, with seven quarters of automotive declines, it just seems strange that that's all inventory. Are there any customers or product lines across ADAS or infotainment or electrification that seem to be getting desourced or cannibalized? Or is this really chasing down inventory and demand levels?

Question: Steve Barger - KeyBanc - Analyst : Can you tell us what percentage of automotive is advanced products now? Or what percentage is flat to up versus the stuff that's more challenged? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 10, 2025 / 10:00PM, AMKR.OQ - Q4 2024 Amkor Technology Inc Earnings Call

Question: Steve Barger - KeyBanc - Analyst : Got it. And then just a quick follow-up. I know test has become a more important part of your business, and I imagine 2.5D was the driver of that. So how has your outlook for tester utilization rates changed? Or are you seeing other areas of the business ramp where test intensity is increasing?