Amkor Technology Inc (NASDAQ:AMKR) Q3 2018 Earnings Conference Call Transcript

Oct 29, 2018 • 05:00 pm ET


Amkor Technology Inc (NASDAQ:AMKR) Q3 2018 Earnings Conference Call Transcript


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Credit Suisse AG

Good day, ladies and gentlemen, and welcome to the Amkor Technology Third Quarter 2018 Earnings Conference Call. My name is Carmen, and I will be your conference facilitator today. At this time, all participants are in a listen-only mode. After the speakers' remarks, we will conduct a question-and-answer session. And as a reminder, this conference is being recorded.

I would now like to turn the call over to Chris Chaney, VP, IR. Mr. Chaney, please go ahead.

Chris Chaney

Thank you, Carmen. Good afternoon, everyone, and thank you for joining us for Amkor's third quarter 2018 earnings conference call. Joining me today are Steve Kelley, our CEO; and Megan Faust, our CFO. Our earnings press release was filed with the SEC this afternoon and is available on our website. During this conference call, we will use non-GAAP financial measures, and you can find the reconciliation to the U.S. GAAP equivalent on our website.

(Forward-Looking Cautionary Statements)

Please note that the financial results discussed today are preliminary and final data will be included in our Form 10-Q.

And now, I'd like to call -- turn the call over to Steve.

Stephen Kelley

Good afternoon. Thanks for joining the call. Today, I'll review our third quarter results and fourth quarter forecast. I'll discuss our revenue gains in mobile communications as well as our progress in two key growth areas: automotive and advanced SIP. We had a strong third quarter. Revenue met guidance, and earnings came in above the high end of our range. As expected, strength in mobile communications, particularly in the iOS ecosystem accounted for nearly all of our 7% sequential revenue increase. Through the first nine months of the year, revenue has grown 6% compared to the same period in 2017. Most of this growth came from advanced packages for mobile applications.

Although we recognize the smartphone unit growth is moderating, we still see a lot of incremental opportunity for Amkor in this very large market. Three content-related trends are driving increased opportunities. First, new features, which require additional ICs; second, increasing package-level integration throughout the phone; and third, the accelerating migration of features from the high end into mid-range phones. Over the medium term, we see 5G as a major upgrade catalyst in the smartphone market. Driven by space constraints and performance requirements, the smartphone market has largely transitioned to advanced packages, such as wafer-level, flip chip and advanced SIP.

We see a similar transition occurring in the automotive market; albeit more selectively and at a slower pace. This transaction is being driven by data-intensive systems, such as ADAS, which utilize complex, high pin count ICs only available in advanced packages. As recently as early 2017, only 15% of our automotive revenue came from advanced packages. Today, it's over 20% and will continue to grow in 2019. This migration to advanced products is a good trend for Amkor, given our advanced package expertise and experience. Most automotive-grade advanced packages are built in our state-of-the-art factories in Korea. The automotive business is capital efficient, since