Release Date: April 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Congrats on the strong results. Giel, for the full year, you mentioned that your outlook remains largely unchanged. You did comment that auto and industrial are a little softer than what you had expected 3 months ago. So what are some of the offsets, if you can walk through how you're thinking about computing, consumer, et cetera, that would be helpful.
A: Giel Rutten - Amkor Technology, Inc. - President, CEO & Director: Yes, Toshi, good to see you on the call. I mean some of the offsets for that will compensate in our view for the weaker automotive performance during this year will come, first of all, from the launch of the communication devices in the second half of the year. We see there some upsides also with the recovery of the Android markets that will give us slightly an upside, but also on the compute side as well as on the consumer side, the elements that we mentioned before, the launch of a new device for consumer as well as the 2.5D upsides where we expect 2024 revenue to be triple the revenue in 2023, that will give us compensation for the lower automotive performance.
Q: And then as my follow-up, maybe one for Megan, on the gross margin side. So in Q1, even if you exclude the benefit from lower depreciation, I think gross margins came in towards the high end of guidance. What drove the upside in Q1? Was it just conservatism on your part 3 months ago? Or did you see any pricing upside or what have you, maybe it was mix? And then for Q2, you talked about the mix deteriorating with higher material costs. If you can expand on that, that would be helpful.
A: Megan Faust - Amkor Technology, Inc. - Executive VP, CFO & Treasurer: So with respect to the outperformance, you're right that our gross margin performance, even without that depreciation benefit exceeded even on the higher revenue in our range. Really, the only notable thing was I would say there was continued cost control. So the costs came in slightly lower than what we had guided despite the upside in revenue. So that's the story around Q1 gross margin. As we move into Q2, you'll note that there is some pressure on the gross margin percentage. That is a product mix element. We're anticipating as we move into the Q2 and as we start to see things come in for communications, there will be higher advanced SiP products, and those tend to have a higher material content associated with that.
Q: I wanted to ask about the smartphone market. Just as we go throughout the year, are you expecting a strong second half of launches in 2024? Or does it feel like 2025 is when AI really kicks in? And just if you can characterize smartphones this year. I'd appreciate it. And then I have a follow-up.
A: Giel Rutten - Amkor Technology, Inc. - President, CEO & Director: On the smartphone market, 2 comments from my side. One is the volumes are expected to go up, let's say, mid-single digits if we compare the market versus 2023. And on top of that, we see that the inventory levels, specifically on the Android side when we enter the year are lower, and that gives us some upside there. That's one important trend that drives the market up. The second trend is a trend where we see both in the China market as well as in the non-China smartphone market, a trend toward higher-end smartphones. And that gives a place to over advantage our position in the premium tier segment of the smartphone market is better than in the midrange or low end. So given these 2 elements, we see some upside on the smartphone market as compared to our earlier assumptions entering this year.
Q: Great Megan, for you, on the gross margin, I just want to clarify. So there's a $0.05 benefit from depreciation in the quarter. It's going to last, I assume, all year each quarter. Can we flow that through to earnings? Or were you in answer to the prior question, mentioning that there could be offsets that make up for it? Or can we flow through each quarter, the upside from that change?
A: Megan Faust - Amkor Technology, Inc. - Executive VP, CFO & Treasurer: Ben, yes, with respect to the change in estimated useful lives, that impact in Q1 as disclosed, was about $0.05 on the bottom line. As we go through the year, that benefit is going to gradually decrease as those assets become fully depreciated. So as we get through the second half, that impact will become less than it is, say, in Q1 and further out. So it won't be something that you can just add straight to the bottom line.
Q: Congratulations on the good performance, Giel and Megan. I wanted to go back 3 months, Megan, and just use that as a reference point to understand how you're thinking about the business' performance half-on-half. I think 3 months ago, we thought there was potential for 30% half-on-half growth. Is that still the right way to look at the business?
A: Giel Rutten - Amkor Technology, Inc. - President, CEO & Director: Well, let me start giving some comments, Greg, and then maybe Megan can give some more details. I mean, the assumption is still that we see roughly a 30% first-half, second-half seasonality. We expect the first half to come in a bit better than we originally anticipated. So with that seasonality still in place and the underlying assumption to that higher seasonality still being confirmed, we expect, let's say, the outlook similar than 3 months ago. That's on a qualitative basis. And Megan, can you add to that?
Q: Got it. That's helpful. And then the second one is just a deeper dive into the compute business in the first quarter. So sequentially was better than we had modeled than had expected. Can you just go into a little bit more detail on what drove that? And maybe what I'm getting at is that more memory? Or was there an early start on the 2.5D HPC program for 2Q that might have helped a little bit?
A: Giel Rutten - Amkor Technology, Inc. - President, CEO & Director: Yes, Greg, I mean, we had some puts and takes in the first quarter on the compute market. On the downside, our more conventional compute business was still slow. I think the conventional servers were still slow. We saw some upside on the memory business, although that was relatively small. We saw a good upside on PC and laptop where we launched some new products in the ARM-based PC market. And since the
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
