Amkor Technologies (AMKR, Financial) is one of the world’s largest providers of outsourced advanced semiconductor assembly, packaging and testing services.
It provides customers with the industry’s broadest array of package design, assembly and test solutions. Amkor’s operational base encompasses more than 5 million square feet of manufacturing facilities, product development centers and sales and support offices located in key electronics manufacturing regions in Asia, Europe and the U.S.
(Source: Company’s website)
In 2015, it had approximately 250 customers, including many of the largest semiconductor companies in the world. The 10 largest customers accounted for 63% of net sales in 2015. Qualcomm Incorporated (QCOM, Financial) and Toshiba (TSE:6502, Financial) each accounted for more than 10% of its net sales in 2015.
The company is an industry leader in developing and commercializing cost-effective advanced packaging and test technologies. The company recently reported second quarter results beating revenue estimates. The second quarter results were well above management’s expectations and according to CEO Steve Kelley, the chief drivers of this strong performance were strong Android smartphone demand and a quicker recovery at the earthquake-damaged Kumamoto factory.
Second quarter results
Net sales during the quarter were $917 million (which marked a 5.6% sequential growth from $737 million in the prior-year quarter).
Gross margin during the quarter was 14.3% (which was 15.6% during the prior-year quarter).
Net income during the quarter was $5 million (which was $7 million in the prior-year quarter).
Earnings per diluted share (EPS) during the quarter was 2 cents (which was 3 cents during the prior-year quarter)
EBITDA during the quarter was $168 million (which was an increase from $160 million in the prior-year quarter).
Cash and cash equivalents as of June 30 were $499,320.
As per Executive Vice President and CFO Joanne Solomon, the company incurred approximately $13 million of incremental earthquake costs that reduced gross margin by 150 basis points and earnings per diluted share by 4 cents.
Expectations
| Â | Third Quarter | Full Year |
| Revenues | The company expects it to increase around 15% sequentially |  |
| Net sales | To range between $1.01 billion and $1.09 billion | Â |
| Â | Â | Â |
| Gross margin | To be between 16% and 20% | Â |
| Net income | To be between $29 million and $65 million, or between 12 cents and 28 cents per share | Â |
| Capex | Â | To be around $650 million |
Strategy
The company’s strategies include:
- Leverage its advanced technologies.
- Broaden the customer base, particularly in China.
- Focus on communications and automotive end markets.
Focus
- The company is penetrating strategic end markets that offer solid growth prospects.
- Building expertise in high-volume manufacturing processes and developing a reputation for high quality and solid execution.
- Providing a geographically diverse operating base.
- Offering a broad portfolio of cost-effective solutions and services.
- Designing and developing innovative packaging and test technologies.
Focusing on China
The company is focused on adding value in greater China. Kelley says that demand for assembly and test services is booming in China, particularly for advanced products. The Chinese market has immense growth opportunities for the global semiconductor supply chain.
Some quick facts are:
- First quarter sales increased by 21% sequentially.
- Cumulative CapEx of $1.1 billion in Amkor's Shanghai factory.
- Expanding Shanghai factory by 45%, to 625,000 square feet of manufacturing space.
- Shipping 1.3 billion units per year from Shanghai factory.
(Source: Company’s website)
On a concluding note
Since 1968, Amkor has been a strategic manufacturing partner for many of the world’s leading semiconductor companies and electronics OEMs. Amkor’s customers include Qualcomm and Intel (INTC, Financial).
Recently, the company received the Supplier of the Year award from Qualcomm Technologies Inc., a Qualcomm subsidiary, for its performance in 2015. Qualcomm Technologies’ Supplier of the Year award recognizes a key supplier that demonstrates the highest on-time delivery, quality and customer service performance throughout the calendar year.
Demand for mobile and home Internet-connected devices are ever increasing across the globe. To cater to this requirement, the company is developing a competitive cost structure with disciplined capital investment. Over the years, several important trends have emerged that have fueled the growth of the overall semiconductor industry as well as the market for outsourced semiconductor packaging and test services like increase in mobility and connectivity capabilities and growing digital content. In this scenario, the company has immense potential to grow.
The company is extending its presence across the globe and has great expectations for China. It is doing well and has growth potential in the future. Adding this company will reap shareholder returns.
Disclosure: I do not hold any position in the company.
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