Q1 2024 Amkor Technology Inc Earnings Call
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Operator: Good day, ladies and gentlemen, and welcome to the Amkor Technology first quarter 2024 earnings conference call. My name is Diego, and I will be your conference facilitator today. At this time, all participants are in a listen-only mode. After the speaker's remarks, we will conduct a question and answer session. As a reminder, this conference is being recorded. I would now like to turn the call over to Jennifer Jue, Head of Investment Relations. Please go ahead.
Good day, ladies and gentlemen, and welcome to the EMCORE Technology first quarter 2024 earnings Conference call.
Diego: My name is Diego and I'll be your conference facilitator today.
Diego: At this time all participants are in a listen only mode. After the speaker's remarks, we will conduct a question and answer session. As a reminder, this conference is being recorded.
Jennifer: I would now like to turn the call over to Jennifer <unk> head of Investor Relations Ms. Zhu. Please go ahead.
Jennifer Jue: Thank you, Operator. Good afternoon, everyone, and thank you for joining us for Amkor's first quarter 2024 Earnings Conference Call. Joining me today are Giel Rutten, our Chief Executive Officer, and Megan Faust, our Chief Financial Officer. Our earnings press release was filed with the SEC this afternoon and is available on the investor relations page of our website, along with the presentation slides that accompany today's call. During this presentation, we will use non-GAAP financial measures, and you can find the Reconciliation to the U.S. GAAP Equivalent on our website.
Jennifer Jue: Thank you operator, good afternoon, everyone and thank you for joining us for <unk> first quarter 'twenty 'twenty four earnings conference call joining.
Jennifer Jue: Joining me today are healed Rubin, our chief Executive Officer, and Megan Faust, our Chief Financial Officer.
Jennifer Jue: Our earnings press release was filed with the SEC. This afternoon and is available on the Investor Relations page of our website along with the presentation slides that accompany today's call.
Jennifer Jue: During this presentation, we will use non-GAAP financial measures and you can find the reconciliation to the U S GAAP equivalent on our website.
Jennifer Jue: We will make forward-looking statements about our expectations for Amkor's future performance based on the environment as we currently see it. Of course, actual results could differ. Please refer to our press release and SEC filings for information on risk factors, uncertainties, and exceptions that could cause actual results to differ materially from these expectations. Please note that the financial results discussed today are preliminary, and final data will be included in our Form 10-Q. And now, I'll turn the call over to Heal.
Jennifer Jue: We will make forward looking statements about our expectation for <unk> future performance based on the environment as we currently see it.
Jennifer Jue: Of course actual results could differ.
Jennifer Jue: Please refer to our press release and SEC filings for information on risk factors, uncertainties and exceptions that could cause actual results to differ materially from these expectations.
Jennifer Jue: Please note that the financial results discussed today are preliminary and final data will be included in our Form 10-Q.
Jennifer Jue: And now I'll turn the call over to heal.
Giel Rutten: Thank you, Jennifer. Good afternoon, everyone, and thank you for joining the call today. Amkor delivered first-quarter results in line with expectations, with revenue of $1.37 billion and EPS of $0.24. Overall, a 7% year-on-year revenue decline, with the most significant decline from the automotive and industrial markets. After a multi-quarter industry cycle, we believe the first quarter marks the low point for revenue and utilization for Amkor.
Thank you Jennifer and good afternoon, everyone and thank you for joining the call today.
Heal: EMCORE delivered first quarter results in line with expectations with revenue of 1.3 dollars $7 billion and EPS of <unk> 24 cents.
Heal: Overall, a 7% year on year revenue decline with the most significant decline from the automotive and industrial markets.
Heal: After multi quarter of industry cycle, we believe the first quarter marks the low point for revenue and utilization for amcor.
Giel Rutten: Although macroeconomic and geopolitical uncertainties continue to impact market sentiment, we observe positive signs of market recovery in multiple areas across our portfolio. During the quarter, we continue to focus on our strategic pillars to elevate our leadership position. With our strong technology leadership and advanced packaging, a unique diversified global footprint, and partnerships with lead customers in the secular growth market, we are well positioned to accelerate as the industry exits the cycle. Now, let me review the dynamics of each of our end marks.
Although macroeconomic and geopolitical uncertainties continue to impact market sentiment.
Positive signs of market recovery in multiple areas across our portfolio.
Heal: During the quarter, we continued to focus on our strategic pillars to elevate our leadership position.
Heal: We do have a strong technology leadership in advanced packaging.
Heal: <unk> diversified global footprint and partnerships with lead customers in the secular growth markets.
Heal: We're well positioned to accelerate as the industry exits to cycle.
Now, let me review the dynamics in each of our end markets.
Giel Rutten: Revenue in the communications end market declined 3% year-on-year in the first quarter. Within the iOS ecosystem, we experienced a larger-than-seasonal correction after record revenues in the second half of 2023. Within the Android supply chain, as well as in memory, we observed improvement in demand and year-on-year growth from the lows in 2023. Overall, smartphone units are projected to be up low single digits this year.
Heal: Revenue in the communications end market declined 3% year on year in the first quarter.
Heal: But in the iOS ecosystem, we experienced a larger than seasonal correction after our record revenues in the second half of 2023.
Heal: But in the Android supply chain as well as <unk> and then memory, we observed improvements in demands and year on year growth from the lows in 2023.
Heal: Overall smartphone units are projected to be up low single digits. This year.
Giel Rutten: We believe that the introduction of AI into edge devices, like smartphones, will accelerate innovation and drive increased demand for advanced packaging solutions. With Amkor's strong position in premium-tier smartphones and our advanced packaging leadership, we expect this to create opportunities for further business growth. In Q1, revenue in our automotive and industrial business declined 22% year-on-year as several of our customers implemented inventory control measures. However, despite these near-term inventory corrections, long-term drivers for growth remain intact.
Heal: We believe that the introduction of AI into etch devices like smartphones will accelerate innovation and drive increased demand for advanced packaging solutions.
Heal: With <unk> strong position throughout premium tier smartphones and our advanced packaging leadership, we expect this to create opportunities for further business growth.
Heal: In Q1 revenue in our automotive and industrial business declined 22% year on year at several of our customers implemented inventory control measures.
Heal: Despite this near term inventory corrections long term drivers for growth remain intact.
Giel Rutten: Semiconductor content per car is expected to continue to increase, driven by the proliferation of ADAS, electrification, infotainment, and telematics, all requiring advanced packaging technology. Amkor is the leading automotive OSET and has multiple decades of experience meeting the stringent requirements of the automotive industry.
Conductor content per car is expected to continue to increase driven by the proliferation of Adas electrification infotainment and telematics, all requiring advanced packaging technology.
Heal: <unk> is the leading automotive O sets and ask multiple decades of experience meeting the stringent requirements of the automotive industry.
Giel Rutten: During the quarter, we used our Portico facility as a base for enhancing key partnerships with industry leaders in support of a resilient European semiconductor supply chain. We also expanded engagements with leading Japanese automotive semiconductor companies through our factory in Komamoto and other locations in Japan. We remain focused on leveraging our broad geographic footprint and strengthening partnerships with leading automotive semiconductor customers. Revenue from the computing ad market increased 4% sequentially driven by strength in AI devices and several new product introductions for ARM-based PCs. However, slow recovery of infrastructure and traditional server demands resulted in a 4% year-on-year decline.
Heal: During the quarter, we used our Portugal facility as a base for enhancing key partnerships with industry leaders in support of our resilient European semiconductor supply chain.
Heal: We also expanded engagements with leading Japanese automotive semiconductor companies through our factory in Kumamoto and all the locations in Japan.
Heal: We remain focused on leveraging our broad geographic footprint and strengthening partnerships with leading automotive semiconductor customers.
Heal: Revenue from the computing end market increased 4% sequentially driven by strength in the AI devices, and several new product introductions for arm based species.
Slow recovery of infrastructure and traditional softer demand resulted in a 4% year on year decline.
Giel Rutten: Planned investments to expand 2.5D capacity for AI devices are on track to come online by the end of the second quarter. We also strengthened our R&D efforts in Korea to innovate and enable next-generation advanced packaging technology for high-performance computers. The consumer end market increased 6% year-on-year and experienced a typical seasonal decline in the first quarter.
Heal: Planned investments to expand two and a half the capacity for AI devices are on track to come online by the end of the second quarter.
Heal: We also strengthened our R&D efforts in Korea to innovate and enable next generation advanced packaging technology for high performance computing.
The consumer end market increased 6% year on year and experienced a typical seasonal decline in the first quarter.
Giel Rutten: Traditional consumer product demand remains weak, while increased demand for IoT wearables drove the year-on-year growth. Production ramps of new products utilizing advanced SIP technology are on track for high-volume production in the second half of this year. Amkor is engaged with lead customers across a diverse set of products, ranging from audio devices, smartwatches, and the emerging AR and VR experiences.
Heal: Traditional consumer product demand remains weak while increased demand for Iot rambles drove the year on year growth.
Heal: Production ramps of new products utilizing advanced as IP technology are on <unk>.
Heal: <unk> for high volume production in the second half of this year.
Heal: EMCORE is engaged with lead customers across a diverse set of products ranging from audio devices.
Heal: <unk> watches and the emerging a fiat experience.
Giel Rutten: Our advanced SIP expertise positions us well for growth, and we continue to expand capacity and invest to drive manufacturing scale and innovation. During the first quarter, our manufacturing organization continued to demonstrate operational excellence with a focus on cost control while maintaining the high quality standards required by our customers. We focus on optimizing capacity for 2.5D technology in Korea, supporting AI data center applications, and on qualifying advanced SIP and memory technology in Vietnam to support RAMs in the second half of this year.
Heal: Our advanced <unk> expertise positions us well for growth and we continued to expand capacity and invest to drive manufacturing scale and innovation.
Heal: During the first quarter, our manufacturing organization continued to demonstrate operational excellence with a focus on cost control, while maintaining the high quality standards required by our customers.
Heal: We focus on optimizing capacity for two and a half deep technology in Korea, supporting AI data center applications and on qualifying advanced <unk> and memory technology in Vietnam to support ramps in the second half of this year.
Giel Rutten: Additionally, we progressed our plans for our advanced packaging and test facility in Arizona and submitted our full application for CHIPS funding. Now, let me turn to our second quarter outlook. After a multi-quarter semiconductor industry cycle, we believe the first quarter marked the low point of our revenue. We expect second-quarter revenue of $1.45 billion, which represents sequential growth of 6% and flat revenue year-on-year. Overall, our expectations for the full year 2024 have not changed.
Heal: Additionally, we progressed our plants for our advanced packaging and test facility in Arizona and submitted our full application for chips funding.
Speaker Change: Now, let me turn to our second quarter outlook.
Speaker Change: After a multi quarter semiconductor industry cycle, we believe the first quarter marked the low point of our revenue.
Speaker Change: We expect second quarter revenue of 145 billion, which represents sequential growth of 6% and flat revenue year on year.
Speaker Change: Overall, our expectations for full year 2024 have not changed.
Giel Rutten: We foresee a muted first half, followed by strong growth in the second half, driven by the seasonal launch of premium-tier smartphones, a meaningful ramp of a new consumer wearable program, and additional capacity coming online for 2.5D technology. Assumptions for more balanced inventory levels within Androids, memory, and PCs add additional confidence. Although the automotive and industrial market appears to be softening more than we expected earlier this year, we see upsides in other areas of our portfolio.
Speaker Change: We foresee a muted first half followed by strong growth in the second half driven by the seasonal launch of premium tier smartphones and meaningful ramp of a new consumer ratable program and additional capacity coming online for two and a half day technology.
Speaker Change: Assumptions for a more balanced inventory levels within androids memory Mpc's had additional confidence.
Speaker Change: Although the automotive and industrial market appears to be softening more than we expected earlier. This year, we see upsides in other adios I'll follow a portfolio.
Giel Rutten: We believe that the secular growth drivers for the semiconductor industry remain in place. With our leading technology portfolio, scale, and global footprint, we are confident in our position to accelerate as the industry exits the current cycle. With that said, I will now turn the call over to Megan to provide more detailed financial information.
Speaker Change: We believe that the secular growth drivers for the semiconductor industry remain in place.
Speaker Change: Our leading technology portfolio scale and global footprint, we are confident in our position to accelerate as the industry exits the current cycle.
Speaker Change: With that I will now turn the call over to Megan to provide more detailed financial information.
Megan Faust: Thank you, Heal, and good afternoon, everyone. Amkor delivered first quarter revenue of $1.37 billion, in line with expectations. We believe this will be the lowest revenue quarter for this cycle as we see signs of recovery and anticipate a stronger second half. First quarter gross profit was $202 million, and gross margin was 14.8 percent. Gross margin includes a benefit of approximately 100 basis points related to lower depreciation expense on our test equipment.
Megan Faust: Thank you Neil and good afternoon, everyone.
Megan Faust: Amcor delivered first quarter revenue of 1.3 dollars $7 billion in line with expectations.
Megan Faust: We believe this will be the lowest revenue quarter for this cycle as we see signs of recovery and anticipate a stronger second half.
Megan Faust: First quarter gross profit was $202 million.
Megan Faust: Gross margin was 14, 8%.
Megan Faust: Gross margin includes a benefit of approximately 100 basis points related to lower depreciation expense on our test equipment.
Megan Faust: During the quarter, we performed a periodic assessment of the useful lives of our manufacturing equipment and extended the estimated useful life of our test equipment as a result of broader and longer use. The factory teams continued to utilize temporary cost control measures during the quarter in response to the low utilization environment. Headcount Control, Overtime Reduction, and Reduced Work Weeks contributed to lower labor costs.
Megan Faust: During the quarter, we performed a periodic assessment of the useful lives of our manufacturing equipment and extended the estimated useful life of our test equipment as a result of broader and longer use.
Megan Faust: The factory teams continue to utilize temporary cost control measures during the quarter in response to the low utilization environment.
Megan Faust: Head count control overtime reduction and reduced work weeks contributed to lower labor costs.
Megan Faust: Reducing factory supplies and maintenance contributed to a decrease in other costs of goods sold. These focused cost containment measures are flexible tools allowing us to sustain profitability while maintaining the ability to support an anticipated increase in demand in the second half of 2024. Operating expenses for the quarter came in as expected at $129 million, reflecting an annual reset of employee compensation levels, as well as costs to bring our new Vietnam factory online.
Megan Faust: Reduced factory supplies and maintenance contributed to a decrease in other cost of goods sold.
These focused cost containment measures are flexible tools, allowing us to sustain profitability, while maintaining the ability to support an anticipated increase in demand in the second half of 2024.
Megan Faust: Operating expenses for the quarter came in as expected at $129 million, reflecting an annual reset of employee compensation levels as well as costs to bring our new Vietnam factory online.
Megan Faust: Operating income was $73 million, and the operating income margin was 5.4%. Net income for the first quarter was $59 million, resulting in EPS of $0.24, which includes a $0.05 benefit from the change in depreciable useful lives of our test equipment. First quarter EBITDA was $233 million, and the EBITDA margin was 17.1%. Our balance sheet remains strong. We ended the quarter with $1.6 billion of cash and short-term investments and total liquidity of $2.2 billion.
Megan Faust: Operating income was $73 million and operating income margin was five 4%.
Megan Faust: Net income for the first quarter was $59 million, resulting in EPS of 24 cents, which includes a five cent benefit from the change in depreciable useful lives of our test equipment.
Megan Faust: First quarter EBITDA was $233 million.
Megan Faust: And EBITDA margin was 17, 1%.
Megan Faust: Our balance sheet remains strong we ended the quarter with $1 $6 billion of cash and short term investments.
Megan Faust: And total liquidity of $2 $2 billion.
Megan Faust: Our total debt as of the end of the quarter is $1.2 billion, and our debt-to-EBITDA ratio is one-time. Moving on to our second quarter outlook, we expect Q2 revenue of around $1.45 billion, representing a sequential increase of 6%, slightly stronger than historical seasonality. While there are still some areas of softness, we are seeing signs of returning to a more balanced seasonal demand pattern.
Megan Faust: Our total debt as of the end of the quarter is $1 $2 billion and our debt to EBITDA ratio is one times.
Megan Faust: Moving on to our second quarter outlook, we expect Q2 revenue of around $145 billion.
Megan Faust: Representing a sequential increase of 6% slightly stronger than historical seasonality.
Megan Faust: While there are still some areas of softness we are seeing signs of returning to a more balanced seasonal demand pattern.
Megan Faust: We expect gross margin to be between 13% and 15%, reflecting a product mix with higher material content. We expect Q2 operating expenses to increase to around $135 million, primarily due to preparation costs for our Vietnam factory. Our activities to qualify initial products are on track, and we expect to begin high volume manufacturing in the second half of the year. We expect our full year effective tax rate to be around 18 percent. Second quarter net income is expected to be between $35 million and $75 million, resulting in EPS of $0.14 to $0.30. Our CapEx forecast for the year remains at $750 million.
Megan Faust: We expect gross margin to be between 13, and 15%, reflecting a product mix with higher material content.
Megan Faust: We expect Q2 operating expenses to increase to around $135 million, primarily due to preparation costs for our Vietnam factory.
Megan Faust: Our activities to qualify initial products are on track and we expect to begin high volume manufacturing in the second half of the year.
Megan Faust: We expect our full year effective tax rate to be around 18%.
Megan Faust: Second quarter net income is expected to be between $35 million and $75 million, resulting in EPS of 14 to 30 cents.
Megan Faust: Our capex forecast for the year remains at $750 million.
Megan Faust: Our investments are primarily focused on increasing advanced packaging capacity for 2.5D and advanced SIP, as well as expanding select manufacturing facilities. Amkor is a technology leader with decades of experience, and we leverage that experience to successfully navigate through this semiconductor cycle. We managed our cost structure to align with lower demand, preserve profitability, and generate free cash flow. We continue to invest in the most advanced packaging technology to support growth markets such as high-performance computing specifically for AI applications, and we strategically invested to further expand our broad geographic footprint by completing our Vietnam factory and beginning qualification of new products.
Megan Faust: Our investments are primarily focused on increasing advanced packaging capacity for two and a half D and advanced S E T as well as expanding select manufacturing facilities.
Megan Faust: Amcor is a technology leader with decades of experience and we leverage that experience to successfully navigate through the semiconductor cycle.
Megan Faust: We managed our cost structure to align with lower demand preserve profitability and generate free cash flow.
Megan Faust: We continued to invest in the most advanced packaging technology to support growth markets, such as high performance computing, specifically for AI applications.
Megan Faust: And we strategically invested to further expand our broad geographic footprint by completing our Vietnam factory and beginning qualification of new products.
Megan Faust: These activities enable us to serve the world's leading semiconductor companies in this dynamic environment, and we are poised for growth as we exit the cycle. With that, we will now open the call to your questions, Operator. Thank you.
Megan Faust: These activities enable us to serve the world's leading semiconductor companies in this dynamic environment and we are poised for growth as we exit the cycle.
Speaker Change: With that we will now open the call up for your questions operator.
Speaker Change: Thank you.
Operator: We will now conduct our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. Our first question comes from Toshihari at Goldman Sachs. Please state your question.
Speaker Change: We'll now conduct a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate that your line is in the question queue.
Speaker Change: You May press Star two if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Our first question comes from Toshi Hari with Goldman Sachs. Please state your question.
Giel Rutten: Hi, thank you so much for taking the question and congratulations on the strong results. Heal, 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 three months ago. So what are some of the offsets? If you can walk through, you know, how you're thinking about computing, consumer, et cetera, that would be helpful.
Toshi Hari: Hi, Thank you so much for taking the question and congrats on the strong results.
Toshi Hari: For the full year, you mentioned that your outlook remains largely unchanged.
Toshi Hari: Did comment that auto and industrial.
Toshi Hari: A little softer than what you had expected three months ago. So what are some of the offsets. If you can walk through how youre thinking about computing consumer et cetera, that'd be helpful. Thank you.
Speaker Change: Yeah Toshi.
Giel Rutten: Good to see you on the call. I mean, some of the offsets that will compensate, in our view, for the weaker automotive performance during this year will come, first of all, from the launch of communication devices in the second half of the year. We see some upsides also with the recovery of the Android market 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 consumers, as well as the 2.5D ops sites, where we expect 2024 revenue to be triple the revenue in 2023. That will give us compensation for the lower automotive performance.
Toshi Hari: Good to see you on the call.
Toshi Hari: Some of the offsets for that will compensate in our fuel for the weaker automotive.
Toshi Hari: <unk> during this year, we will come first of all from the launch of the shed the communication devices in the second half of the year, we see dash. Some upsize also with the recovery of the Android markets.
Toshi Hari: That will give us slightly in op side, 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.
I smell us the two one of the upsides, where we expect 2020 for 2020 for revenue to be triple the revenue in 2023 ish.
Bill will give us compensation for the lower automotive performance.
Megan Faust: 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 toward the high end of guidance. What drove the upside in Q1? Was it just conservatism on your part three months ago, or did you see, you know, any pricing upside, or what have you? Maybe it was mixed. And then for Q2, you talked about mixed deterioration with higher material costs. If you can expand on that, that would be helpful. Thank you. Hi Toshi.
Speaker Change: Thank you.
Speaker Change: And then as my follow up maybe one for me again on the gross margin side. So in Q1, even if you exclude the benefit from lower depreciation I think gross margins came in toward the high end of guidance.
Speaker Change: What drove the upside in Q1 or was it just conservatism on your part three months ago or did you see.
Speaker Change: Any pricing upside or what have you maybe it was mix and then for Q2 you talked about.
Speaker Change: Mixed deteriorating with with.
Speaker Change: Higher material costs, if you can expand on that that'd be helpful. Thank you.
Megan Faust: Hi, Toshia. Yeah, so with respect to the outperformance, you're right that our gross margin performance, even without that depreciation benefit, exceeded even the higher revenue in our range. Really, the only notable thing was, I would say, continued cost control, so 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.
Speaker Change: Hi, Toshi, yeah, so with respect to the outperformance youre right that our gross margin performance, even without that depreciation benefit exceeded even on the higher revenue.
Speaker Change: 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 our Q1 gross margin as we move into Q2, you'll note that there.
Speaker Change: 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.
Megan Faust: We're anticipating, as we move into Q2 and as we start to see things come in for communications, there will be higher-end SIP products, and those tend to have higher material content associated with them. So despite there being higher material content putting pressure on the gross margin percentage, we are expecting to have higher gross profit dollars.
Speaker Change: <unk> come in for communications, there will be higher advanced S. IP products and those tend to have a higher material content associated with that so despite there being higher material content, putting pressure on the gross margin percentage, we are expecting to have higher gross profit dollars.
Giel Rutten: Thank you. And our next question comes from Ben Reitzes with Mellius Research. Please state your question.
Speaker Change: Thank you.
Speaker Change: Thank you and our next question comes from Ben Reitzes with Melius Research. Please state your question.
Benjamin Alexander Reitzes: Yes, Thanks, Hi, heal and Megan I wanted to ask about the smartphone market.
Giel Rutten: Yes, thanks. Hi Giel and Megan.
Giel Rutten: I wanted to ask about the smartphone market. Just so, as we go throughout the year, are you expecting a strong second half of launches in 2024? Or, you know, does it feel like 2025 is when AI really kicks in? Just so you can characterize smartphones this year. I'd appreciate it. And then I have a follow-up.
Benjamin Alexander Reitzes: Yes.
Benjamin Alexander Reitzes: As we go throughout the year.
Benjamin Alexander Reitzes: Are you expecting.
Benjamin Alexander Reitzes: Our strong second half of launches in 2024.
Benjamin Alexander Reitzes: Or does it feel like 2025 is when AI really kicks in.
Benjamin Alexander Reitzes: Just if you can characterize smartphones this year I'd appreciate it and then I have a follow up.
Giel Rutten: Hi Ben, this is Giel. You know, on the smartphone market, two comments from my side. One is, you know, 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, so that drives the market up.
Benjamin Alexander Reitzes: Hi, Ben this is Hugh.
Hugh: On the smartphone markets to commence from my side one is.
Hugh: The volumes are expected to go up let's say mid single digits.
Hugh: Compared to market.
Hugh: 2023, and on top of that we see that the inventory level, specifically on the Android floor sites than we entered the year.
Hugh: <unk> are lower and that gives us some upside there.
Hugh: One important trends for that drives the market up.
Giel Rutten: The second trend is a trend where we see both in the Chinese market, as well as in the non-Chinese smartphone market, a trend towards higher-end smartphones. And that gives us an advantage. Our position in the premium tier segment of the smartphone market is better than in the mid-range or low-end. So, you know, given these two elements, we see some upside in the smartphone market as compared to our early assumptions entering this year.
Hugh: The second trend is a trend, where we see boats into China market as well as in the non China.
Hugh: Smartphone market a trend towards a higher end smartphones.
Hugh: And that's.
Hugh: Gifts place to avid advantage our position in the premium tier.
Hugh: Segment of the smartphone market is better than in the mid <unk> range. The low end. So given these two elements we seek.
Hugh: Some upside on the smartphone markets as compared to about early assumptions entering this year.
Megan Faust: Great, thanks. Megan, for you, on the gross margin, I just want to clarify, so there's a 5-cent benefit from depreciation in the quarter, and 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, you know, offsets that make up for it, or can we flow through each quarter the upside from that change? Hi Ben. Yeah, with respect.
Speaker Change: Great. Thanks.
Speaker Change: Megan for you on the gross margin I just want to clarify so there was a <unk> <unk> benefit from depreciation in the quarter.
Speaker Change:
Speaker Change: And I know.
Speaker Change: 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.
Speaker Change: Offsetting.
Speaker Change: Does that make up for it or can we flow through.
Speaker Change: Each quarter the upside from that change thanks.
Megan Faust: Hi Ben. Yeah, with respect to the change in estimated useful lives, that impact in Q1, as disclosed, was about five cents on the bottom line. You know, 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 be less than it is, say, in Q1 and further out. So, it won't be something that you can just add, you know, straight to the bottom line.
Speaker Change: Hi, Ben Yeah with respect to the change in estimated useful lives that impact in Q1 and.
Speaker Change: As disclosed was about five cents 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 the that's something that you can just add.
Speaker Change: Straight to the bottom line.
Giel Rutten: Our next question comes from Craig Ellis with B Riley Securities. Please state your question.
Speaker Change: Okay. Thanks, a lot.
Speaker Change: Our next question comes from Craig Ellis with B Riley Securities. Please state your question.
Giel Rutten: Yeah, thanks for taking the question. And congratulations on the good performance, Giel and Megan. I wanted to go back three months, Megan, and just use that as a reference point to understand how you think about the business's performance half on half. I think three months ago, we thought there was potential for 30% half on half growth. Is that still the right way to look at the business?
Craig Andrew Ellis: Yeah. Thanks for taking the question and congratulations on the good performance scale and Megan I wanted to go back three months, Megan and just use that as a reference point to understand how youre thinking about the businesses performance half on half I think three months ago, we thought there was potential for.
Megan Faust: Our 30% half on half growth is that still the right way to look at the business.
Giel Rutten: Well, let me start giving some comments, Craig, and then maybe Megan can give some more details. I mean, the assumption is still that we see roughly 30% first half and second half seasonality. You know, 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 to be similar to three months ago. That's on a qualitative basis, and Megan, can you add to that? Yeah, Craig.
Megan Faust: Well, let me, let me starts, giving some comments, Greg and that may be made in that can give some more details I mean, the assumption is still.
Megan Faust: That we see.
Megan Faust: Roughly 30% first half second half seasonality.
Megan Faust: We expect the first half to come in a bit better than we originally anticipated. So bad that seasonality is still in place and the underlying assumption to that higher seasonality.
Megan Faust: Still being confirmed we expect let's say the outlook similar than three months ago, that's on a qualitative basis and Megan can you add.
Megan Faust: Yeah, Craig, so I would say overall that's the same sentiment. It's just the puts and takes that get us to that have shifted a bit, as we just previously described, with a bit weaker automotive and a bit more upside in some of the other markets. So even though there's a, you know, outperformance in Q1, and I would say our Q2 guide, you know, is slightly better than seasonal for the full year, I would still say we would anticipate something that could be as strong as that 22 percent second half growth.
Megan Faust: Yeah, Craig So I would say overall, that's the same sentiment. It's just the puts and takes that get us to that have shifted a bit as.
Megan Faust: As we just previously described with a bit weaker automotive and a bit more upside in some of the other markets.
So even though there's a.
Megan Faust: <unk> in Q1, and I would say our Q2 guide.
Megan Faust: Slightly better than seasonal for the full year I would still say, we would anticipate something that could be as strong as that 20 to second half growth.
Giel Rutten: Got it. That's helpful.
Speaker Change: Got it that's helpful and then the second one is just.
Giel Rutten: And then the second one is just a deeper dive into the compute business in the first quarter. So, it was better than we had modeled and 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?
Speaker Change: Deeper dive into the compute business in the first quarter so much.
Speaker Change: Sequentially was better than we had modeled than I 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 two and a half the HPV program for <unk> that might have helped a little bit.
Giel Rutten: Greg, I mean, we had some puts and takes in the first quarter on the compute market. You know, on the downside, our more conventional compute business was still slow. I think the conventional servers were still slow.
Speaker Change: Hey, Greg.
Greg: I mean, we had some some puts and takes into first quarter on the compute market.
Greg: On the downside or more conventional compute business.
Speaker Change: While still.
Slow I think the conventional servers were still slow we saw some upsides on the.
Giel Rutten: We saw some upsides in the memory business, although that was relatively small. We saw a good upside in the PC and laptop business, where we launched some new products in the ARM-based PC market. And since the PC market is gradually improving, that gave us some upsides. And I would say the other one was in the data center. You already mentioned that. Slightly better than we expected on the 2.5D, although, let's say, the bigger capacity increase will come on stream in the second quarter. We continuously try to optimize our line utilization.
Memory business, although that was relatively small.
We saw good upside on PC and laptop, where we launched.
Speaker Change: Some new products.
Speaker Change: In the arm based PC markets and since the PC market is gradually.
Speaker Change: Improving that said that gave us some upsides and I would say the other one was in the data center you already mentioned that.
Speaker Change: Slightly better than we expected on the two and a half dish, although did let's say the bigger capacity increase will come on stream in the second quarter, we continuously try to optimize over line utilization there.
Megan Faust: If I could just ask for clarification on that, it might tilt a little bit more towards Megan. Megan, I know when we've talked in the past, new programs can often ramp at a lower than corporate gross margin. I know you've had 2.5B capability for some time, but I think this is a new program. So anything we should have in mind as we think about the back half of the year as this program becomes bigger? Thank you.
Speaker Change: If I could just ask a clarification on that that might tell us a little bit more towards Megan Megan I know when we've talked in the past new programs.
Speaker Change: Often ramp at a lower than corporate gross margin and I know you've had two and a half the capability for some time, but I think this is new programs. So.
Speaker Change: Anything we should have in mind as we think about the back half of the year assist program becomes bigger thank you.
Megan Faust: Hi Craig. So with respect to the profitability associated with this, since we are expanding existing scale, and these products have already been in production, I wouldn't anticipate any significant movements. We do, obviously, this is a very technical, high-value product. Its profitability is greater than our corporate average, but we would continue to see that play out in the second half of Excellent.
Speaker Change: Hey, Craig so with respect to the profitability associated with this since we are expanding existing scale and these products have already been in production I wouldn't anticipate any significant movements. We do obviously this is a very technical.
Craig Andrew Ellis: High value product. It is profitability is greater than our corporate average, but we would continue to see that play out in the second half.
Giel Rutten: Excellent. Thanks for the help to both of them.
Speaker Change: Excellent thanks for the help to both.
Giel Rutten: Our next question comes from Charles Shih with Needham and Company. Please state your question.
Speaker Change: Our next question comes from Charles <unk> with Needham <unk> Company. Please state your question.
Giel Rutten: Hey, good afternoon, Giel, and Megan. Allow me to ask the technology question about 2.5D. I think that the leading boundary is probably moving from a standard silicon interposer-based 2.5D more towards organic interposer-based 2.5D, and probably a little bit in the distant future, towards the embedded guide type of the 2.5D. So, Mark, I want to see if you can address what capability you have in-house right now, and how long do you expect you can maintain the status of being the leading offset that has the full 2.5D capability with Please help us understand a little bit better about your capability. Thanks.
Charles: Hey, good afternoon.
Charles: Megan.
Charles: If you're asking the technology question.
Hi.
Charles: Alright.
Charles: The medium term.
Charles: So property.
Charles: Hum.
Charles: Posted.
Two five.
Charles: More towards <unk>.
Charles: Yeah.
Charles: The two blue.
Speaker Change: You may begin.
Speaker Change: Uh huh.
Speaker Change:
Speaker Change: Could you quantify it.
Speaker Change: Hmm.
Speaker Change: John.
Speaker Change:
Speaker Change: Uh-huh in house right now.
Speaker Change: Hum.
Speaker Change: You can maintain.
Speaker Change: Edie.
Speaker Change: Yes.
Speaker Change: Two one on <unk>.
Speaker Change: No.
Speaker Change: Within the expenses.
Speaker Change: Understood.
Speaker Change: And proposal <unk>.
Speaker Change: Got it.
Speaker Change: Applications in the future.
Speaker Change: Pretty comprehensive.
Operator: Excuse me, sir, just a note, your audio is not coming through well. If you could just pick up your handset or take it off the speakerphone, maybe that will improve it. Thank you.
Speaker Change: Thanks.
Speaker Change: Excuse me, Sir just to know your orders now coming through well if you could just pick up your handset or get off take it off speaker phone, maybe that'll improve it. Thank you.
Speaker Change: Okay.
Giel Rutten: Okay. All right. Sorry, Hugh, I guess you got my question right. Yeah, I got your question, Charles. Let me repeat it. Your question was, indeed, along the technology line on the next generation technology after the 2.5D interposer, how we see that, and how we are positioned with that.
Speaker Change: Alright, thank you.
Speaker Change: You got my question right.
Speaker Change: Yes.
Speaker Change: To your question Charles Let me repeat it. So your question was indeed, along the technology.
Speaker Change: Lying on.
On the next generation technology after two in RV and suppose us.
Speaker Change: How we see that and how we are positioned with bad debts.
Giel Rutten: Now, when it comes to 2.5D with the interposer, we see that running currently, but we also expect that will continue to run for, let's say, the next one to two years. But we see an active transition from silicon interposer into RDL structures with 2.5D. You know, we launched that technology with three new customers and one existing customer.
Speaker Change: No when it comes to <unk>.
Speaker Change: With Interpol should we see that running currently.
Speaker Change: Currently, but we also expect that we'll continue to run for let's say the next one to two years, but we see an extra active transition from silicon into poser into the L structures, which are a.
It's two one off dish.
Speaker Change: We launched the debts technologies, which are three new customers.
Speaker Change: And existing customers.
Giel Rutten: We expect that to be qualified and introduced early 2025 for, let's say, the time being. We expect that to run in parallel to the interposer technology. And then on top of that, we see as a variation on that the bridge technology, which basically uses a silicon bridge together with RDL as a next generation as a connectivity structure between two dyes. And I think we have the capability in-house also. So is that answering your question, Charles?
Speaker Change: We expect that too to be qualified and introduced.
Speaker Change: Early 2025 four.
Speaker Change: Let's say the time being and we expect that to run in parallel to the in proposal technologies.
Speaker Change: And then on top of that we see as a variation two debts the bridge technology, which basically use it as a silicon bridge together with RTL as the next generation as it connectivity structure between two dies.
Speaker Change: And I think that we have the capability in house also so is that answering your question Charles.
Giel Rutten: Yes, maybe as a follow-up, your OSET competitor probably a few nights ago on the earnest call was kind of a little bit ambiguous about what role they play in their partnership with a leading foundry with respect to what part of the 2.5D packaging they do versus what they don't. Can you kind of clarify a little bit between you and your peers, what are the things that you are more uniquely positioned to do in 2.5D, what you are already doing, and maybe your competitors? Thank you. Thank you.
Charles: Yes, maybe I'll follow up.
Charles: Hugh.
Charles: Okay.
Charles: Thank you Steve.
Charles: Hum.
Charles: Hum.
Charles: I'll begin with <unk>.
Charles: Plenty.
Charles: Under the new partnership with a leading foundry with respect to what part of that.
Charles: Simplified the pathogen.
<unk>.
Charles: We'll be dumped Steve Amit as long as my <unk>.
Charles: You and your peers.
Charles: Yes.
Charles: A position that you are capable to do some <unk>.
Charles: Randy maybe your competitors.
Speaker Change: Thank you.
Hello Charles.
Speaker Change: Generally we don't comment to add to the capabilities of our business of our competitors, but give me let me give you a few a few highlights here.
Giel Rutten: Well, Charles, I mean, generally, we don't comment on the capabilities or business of our competitors, but let me give you a few highlights here.
Giel Rutten: You know, Amkor started with a lead customer on a full flow. That means on wafer as well as on substrate for two and a half Ds. Multiple years ago, we are currently in the third generation, and we are currently performing at yield levels because that's an important performance indicator that is, I would say, industry standard. But you know, that doesn't hold for our competitors. We still believe that we are the only OSET that is doing this at scale, and we're ramping up.
Speaker Change: EMCORE started with lead customer on a full flow that means on way for that as well as on substrate for tune of the multiple years ago. We currently are in the tour generation.
Speaker Change: And we are currently performing at yield collateral switch because that's a important performance indicators that is I would say industry standards.
Speaker Change: That doesn't hold for our competitors, we still believe that we are the only <unk> that is doing this at scale.
Speaker Change: We're ramping up.
Giel Rutten: The industry still has a shortage in capacity when it comes to high-end computing devices, and we expect that to continue. So definitely, there are alternatives being explored to rapidly expand capacity to accelerate there. And, you know, I cannot comment on all the details there.
Speaker Change: The industry still has a shortage in capacity when it comes to <unk>.
Speaker Change: High end computing devices, and we expect that too to continue so definitely theyre off alternatives being explored to rapidly expand capacity to accelerate there and.
Speaker Change: And you know I cannot comment to all the detailed staff, but as we mentioned compared to last year with tripling our capacity coming on stream by the end of the second quarter.
Giel Rutten: But as we mentioned, compared to last year, we're tripling our capacity coming on stream by the end of the second quarter, which results in a tripling of our revenue for two and a half Ds. And we're launching our, let's say, fan-out technology or our RDL technology in high-volume production by early 2025. So I would say still in that whole environment of a growing market, we're well-positioned, but we don't exclude that the supply chain will diversify when the volumes really go up.
Speaker Change: That results in a tripling of our revenue for <unk>.
Speaker Change: And we are launching our let's.
Speaker Change: Let's say fan out technology or over or the L technology in high volume production by early 2025. So I would say she is still in that whole environment of growing markets, we are well positioned but.
Speaker Change: But we don't exclude that T. She did.
Giel Rutten: Thank you. And our next question comes from Randy Abrams with UBS. Please state your question.
Speaker Change: Supply chain will diversify the volumes really go up.
Speaker Change: Thank you and our next question comes from Randy Abrams with UBS. Please state your question.
Giel Rutten: Okay, yes, thank you. The first question, actually, Giel, just to follow up on the last one on the advanced packaging, just factoring, you do see the RDL interposer, and also we're seeing good strength or interest for the NVIDIA new parts. Do you have any further plans to expand? Just after the tripling, are you already starting to prepare orders for further capacity, if you have anything to share on that?
Okay. Yes. Thank you first question actually just to follow up on the last one on the <unk>.
Randy Abrams: Advanced packaging just factoring.
Randy Abrams: <unk> Rd.
Randy Abrams: <unk>, who is here and so we're seeing good strength or interest or the Nvidia new porridge do you have any further plans to expand just after the Tripoli.
Speaker Change: Are you already starting to.
Speaker Change: Our orders for further capacity, if you have anything to share on that.
Giel Rutten: Yeah, Randy, you know, we also commented in the last earnings call that we will continue to ramp up our capacity beyond the tripling. But we wanted to avoid that this becomes, let's say, a recurring team where we report out on the capacity. But definitely, in the second half of the year, we will continue to ramp up our capacity. A lot of the equipment that we bring in is fungible between our, let's say, RDL interposer versus our silicon interposer, as well as our advanced pumping technology. The factory where we ramp up and will continue to ramp up is in Korea, where we have, let's say, significant plans in place to ramp up this capacity.
Speaker Change: Yeah Randy.
Speaker Change: We also commented in the last earnings call that we will continue to ramp overcapacity should be honest the tripling, but we wanted to avoid that this becomes let's say recurring team, where we report out on the capacity, but definitely in the second half of the year, we will continue to ramp.
Capacity a lot of the equipment that we bring in.
Speaker Change: Is fungible between all of them, let's say RTL.
Speaker Change: And the polls are ferocious our silicon into poles as well as what I've found pumping technologies.
Speaker Change: The factory.
Speaker Change: And we will continue to ramp up is in Korea.
Speaker Change: Yes, Oh, let's say significant plans in place too.
Speaker Change: To ramp to a disk capacity.
Giel Rutten: And to follow up, when you do the RDL Interposer, since I would assume the Silicon Interposer is built at the foundry, is there, like, how's the step up in, like, dollar opportunity per solution or, like, on a scale versus what you're doing now? Like, do you get, do you expect you'll get a meaningful amount of the processing of the actual RDL Interposer? And just, yeah, curious how that scales your business versus the value you can do now.
Speaker Change: Okay.
Speaker Change: When you do the <unk> since I would assume the silicon inner poseurs, though that the foundry is.
Speaker Change: There has been a step up in dollar opportunity per solution.
Speaker Change: On a scale versus what Youre doing now.
Speaker Change: Do you get do you expect youll get a meaningful amount of the processing of the actual Rd, Eleanor Poser and just curious how that scales. Your business first the value you can do now.
Giel Rutten: Yeah, I don't want to quote specific numbers here, but the answer is yes. I think if we look at the value that we bring to the RDL interposer, then it's significantly more than on the silicon interposer, where the silicon interposer is being procured or supplied by a foundry, and the value is generated by the foundry on the RDL interposer. The value is created, in this case, by ourselves, and that will give us an upside per unit.
Speaker Change: Yeah, I don't want to quote specific numbers here, but.
Speaker Change: So the answer is yes, I think if you look to the value that we bring on the RTL and propose had then it's significantly more than on the silicon and proposal, whereas the silicon interpose is.
Speaker Change: Is being procured Tor supplied by a foundry and the value is generated by the foundries on the <unk> and the polls of the value is created in this case by ourself and that will give us an upsized to 30 units.
Giel Rutten: Right. And to ask maybe a follow-up question, since you called out the edge edition of the AI compute, do you see much change, whether it's in test time or packaging type or value as we start to put the AI engine added to the mobile device or even in the compute device?
Speaker Change: Hey, Tim.
Ask maybe some thoughts since you've called out the.
Tim: In addition of the AI compute.
Tim: Do you see much.
Tim: Change whether its in test time or packaging type of value for as we start to put like the AI engine added to the.
Tim: Mobile device or even in the compute device.
Giel Rutten: Yeah, that's a good question, Randy. You know, we see a transition when next-generation mobile devices, including ones with integrated AI capabilities, we gradually move to another test platform. And that means that also for 2024, we will actually increase our investment in test and test equipment, not only for this one, but in general by 50%. And I'll be doubling it, actually, for 2023. So a significant increase. And one of the reasons, not the only reason, but one of the reasons is that the complexity of testing these devices with an AI co-processor is getting more complex.
Speaker Change: Yeah, that's a good question.
Speaker Change: Randy.
Speaker Change: You know, we see a transition.
Speaker Change: Then next generation mobile devices, including which integrated AI capabilities that we gradually move to another test platform and that means that also for 2024, we actually increase our investment in and test and test equipment.
Speaker Change: Not only for this one but in general it's sort of at 50%, although with doubling it actually for 2023. So it was a significant increase and one of the reasons not the only reason, but one of the reasons is that the complexity of testing. These.
Speaker Change: Devices with an AI coprocessors getting more complex.
Giel Rutten: Thank you, and our next question comes from Tom Diffely with D.A. Davidson. Please state your question.
Speaker Change: Thank you and our next question comes from Tom This Lee with D. A Davidson. Please state your question.
Speaker Change: Yes. Thank you I guess first another margin question for Megan when you look at the ramp in Vietnam over the next several quarters and I know, there's some costs are already in the system, but how do you expect that to impact depreciation or the or the gross margin.
Megan Faust: Yes, thank you. I guess first, another margin question for Megan. When you look at the ramp-up in Vietnam over the next several quarters, and I know that some costs are already in the system, but how do you expect that to impact depreciation or gross margin?
Megan Faust: Hi Tom. Yeah, so we have started to incur our costs to bring that factory online with respect to labor and other costs. And so that is part of the OPEX uptick that we had in Q1 as well as moving into Q2. As we think about that moving to high volume ramp in the second half of the year, you know, when that moves into production and those costs move into cost of goods sold, that is a fairly minor part of our total picture. So we're not anticipating a significant impact. However, as you do ramp up programs, and that utilization is small, there will be some impact. Great
Megan Faust: Hi, Tom Yes, so we have started to incur our costs to bring that factory online with respect to labor and other costs and so that is part of the opex uptick that.
Megan Faust: We had in Q1 as well as moving into Q2, as we think about that moving to high volume ramp at the second half of the year.
Megan Faust: When that moves into production and those costs move into cost of goods sold that is a fairly minor part of our total picture. So we're not anticipating a significant impact. However, as you do ramp up programs and that utilization is small there will be some impact.
Giel Rutten: Great. Okay, thank you. And as a follow-up, Giel, I was wondering if you could give us an update on the Arizona facility as far as timing or potential subsidies go? Yes, Tom.
Speaker Change: Great. Okay. Thank you and as a follow up the Hill I was wondering if you can give us an update on the Arizona facility as far as timing or potential subsidies go.
Hill: The new the new one that you haven't built yet.
Hill: Yes.
Giel Rutten: I think the question was clear. I mean, we're making significant progress there. You know, we have a team in place. We're working with a design company to design the facility. We're identifying contractors to start the building, and we work with customers as well as with other partners in the supply chain to plan our capacity, our technology, and our technology roadmap to detail out the timing. So there's a significant effort ongoing to prepare for building the factory.
Speaker Change: I think the question was clear.
Speaker Change: I mean, we're making significant progress there.
Speaker Change: We have a team in place we are working with a design company to design the facility.
Speaker Change: Identifying contractors to start the building and we work on.
Speaker Change: With customers as well as with other partners in the supply chain to plan, our capacity or technology or technology roadmap to detail out the timing. So there is a significant effort ongoing.
Speaker Change: To you know to.
Prepare for building the factory at the time the timeline is still in place.
Giel Rutten: The timeline is still in place. We try to tune the timeline as best as possible to the availability of silicon capacity in the U.S., and yeah, that's the only confirmation that I can get. I think we've settled a lot of the details when it comes to the location also. Okay, but it doesn't require ChIPx funding. Regardless of that, will you continue on with it?
Speaker Change: Try to tune the timeline is as good as possible to the availability of silicon capacities in the U S.
Speaker Change: And yeah, that's the only confirmation that I can get it.
Speaker Change: We sure resettled a lot of the share the details when it comes to the location also.
Speaker Change: But it doesn't require chebec funding irrespective of that you'll continue on with it.
Giel Rutten: Well, the CHIPS Act funding is a very fundamental part of starting the facility in the U.S. I mean, starting Greenfield operations in the U.S. requires significant startup costs on top of the higher running costs. And there, we will require CHIPS funding in order to build a sustainable business case for this facility in the U.S. But you know, I cannot comment on all the details there, but we feel very confident that we are aligned with, let's say, the macro strategy for manufacturing and reshoring manufacturing back to the U.S. and the support of the CHIPS office there. So we're fairly confident that we're on the right track. Great. Thank you. Thank you, and just a reminder to ask a question, PREVSTAR 1.
Speaker Change: Well the chipset funding is a very fundamental part of starting the facility in the U S.
Speaker Change: Starting a greenfield operations in the U S requires significant startup cost on top of their highest running cost and there would be will require chips funding in order to to build a sustainable business case for this facility in the U S.
Speaker Change: But.
Speaker Change: I cannot comment to all the details there, but we feel fairly confident that we are aligned.
Speaker Change: Let's say the market strategy for manufacturing and re shoring of manufacturing back to the U S.
To support all of the chips offers there so.
Speaker Change: We are fairly confident that that's we're on the right track there great.
Speaker Change: Great. Thank you.
Speaker Change: Thank you and just a reminder to ask a question press star one to remove yourself from the question queue Press Star two.
Operator: Thank you. And just a reminder to ask a question, press star 1. To remove yourself from the question queue, press star 2. Our next question comes from Joe Moore with Morgan Stanley. Great, thank you.
Speaker Change: Our next question comes from Joe Moore with Morgan Stanley. Please state your question.
Joseph Lawrence Moore: Great. Thank you.
Joseph Lawrence Moore: Just wondering if you've been generating quite a bit of cash on the balance sheet.
Joseph Lawrence Moore: Any plans there or any kind of uses of cash that you can talk about.
Megan Faust: Hi Joe, this is Megan. Yeah, so as far as it relates to our liquidity, you know, looking at our current capital allocation priorities, I would say, you know, really reinvesting in the business is our number one priority. And as we've been sharing our expansion of our footprint, we're all well aware of the opening of our Vietnam facility. We're also expanding our European facility, we're building a new building there.
Joseph Lawrence Moore: Hey, Joe This is Megan yeah, so as far as it relates to our liquidity looking at our current capital allocation priorities I would say you know really be and reinvesting in the business is our number one priority and as we've been sharing our expansion of our footprint.
Megan Faust: And we're all well aware of the opening of our Vietnam facility. We're also expanding our Europe facility, where were building a new building there and then of course the upcoming U S facility will require cash for that as well.
Megan Faust: And then, of course, the upcoming US facility will require cash for that as well. So that I would say is our number one priority, followed by ensuring that we're staying up with the most advanced technology and investing in R&D. Also, with our commitment of returning 40 to 50% of our free cash flow to shareholders, that would be another commitment that we have with respect to our cash.
Megan Faust: So that I would say is our number one priority followed by ensuring that we're staying up on the most advanced technology and investing in R&D.
Megan Faust: And also with our commitment of returning.
Megan Faust: 40% to 50% of our free cash flow to shareholders that would be then another commitment that we have with respect to our cash.
Giel Rutten: And our next question comes from Steve Barger with KeyBank Capital Markets. Please state your question.
Speaker Change: Great. Thank you.
Speaker Change: And our next question comes from Steve Barger with Keybanc capital markets. Please state your question.
Steve Barger: Hi, Thanks.
Giel Rutten: Domestic chipmakers in China have been really active in buying wafer fabrication equipment over the past several quarters, and I think a lot of that's from memory. So first, how long do you think it'll take for that incremental capacity in China to come online? And second, can you talk about potential for share gains with those mature node chipmakers as you manage your own capacity across regions in Asia?
Steve Barger: Domestic chip makers in China have been really active in buying wafer fabrication equipment over the past several quarters and I think a lot of that is for memory. So first how long do you think it will take for that incremental capacity in China to come online and second can you talk about potential for share gains with those mature node chipmakers as you manage.
Steve Barger: Your own capacity across regions in Asia.
Giel Rutten: Yes, Steve. Hi.
Steve Barger: Yes, Steve that's a good question there is indeed, a significant capacity expansion ongoing in China, mostly for the more mature silicon notes.
Giel Rutten: That's a good question. There is indeed significant capacity expansion ongoing in China, mostly for the more mature silicon nodes. And I would say the previous generation of memory; I include that in that assessment. Now, with respect to ourselves and the markets that we're serving, we are very much focusing our business on advanced packaging. And advanced packaging uses silicon of the latest silicon nodes, I would say 7 nanometer and below. And that is still very much restricted when it comes to expansion in China.
Steve Barger: And there I would say the previous generation of memory I include that in and that's in that that assessment with respect to our sell off and the marker set to be surfing, we're very much focusing our business on advanced packaging and advanced packaging uses.
Steve Barger: Silicon of the latest Silicon notes I would say seven nanometer and below.
Steve Barger: And that is still very much restricted it's when it comes to expansion in China. The expansion SBA understand it I don't have full detail available is very much on the mature nodes in China mature nodes, which requires more mature assembly and test packaging.
Giel Rutten: The expansion, as we understand it, and I don't have full details available, is very much focused on mature nodes in China. Mature nodes would require more mature assembly and test packaging. And I believe it's very much focused on a local for local market currently. More I cannot, I cannot say on that topic. Steve.
Steve Barger: And I believe it's very much focused to our local for local market currently.
Steve Barger: Hmm.
Speaker Change: I cannot I cannot say on that topic.
Speaker Change: Keith.
Giel Rutten: You talked about expanded engagements with industry leaders and the auto industrial sectors in Europe and Japan. Are those new relationships or existing that you're just trying to get deeper with those potential customers, and is there any way to think about timing for conversion of engagement to orders?
Keith: Thanks, and you talked about expanded engagements with industry leaders in auto industrial for Europe, and Japan are those new relationships or existing that youre, just trying to get deeper with those potential.
Keith: Customers and is there any way to think about timing for conversion.
Keith: Engagement to orders.
Giel Rutten: Good question, Steve. Most of the customers that we refer to for expanding our, let's say, partnership with our existing customers, where we change our engagement model from more, I would say, more a tactical model to more a longer-term partnership model, and that holds definitely in the European supply chain. I can say without calling out names here that we're engaged with all the semiconductor leaders in the, let's say, IDM space in Europe to support them in our manufacturing facility in Portugal.
Keith: Yeah. Good question Steve.
Keith: Most of the customers.
Keith: In that we referred to for expanding our Oh, let's say.
Keith: Partnership with existing customers, where we change our engagement model for more I would say more of a tactical model to more of a longer term partnership for model N.
Keith: And you know.
Keith: That holes definitely in the European supply chain.
Keith: I can say without calling out names here that we are engaged with all the semiconductor leaders.
Keith: And the share, let's say IDM space in Europe for supporting them in our manufacturing facility in Portugal, we have a broad broad range of technology that lets say from flip chip VGA for Adas devices, two sensors to let's say extended wafer bump and away from <unk>.
Giel Rutten: We have a broad range of technology there, let's say, from flip chip BGA for ADAS devices to sensors to, let's say, extended wafer bump and wafer probe technologies. We teamed up, and that was an announcement that we made last quarter with global foundries that support the same supply chain in Europe out of their Dresden factories to offer a seamless manufacturing footprint in Europe. So, all in all, I think existing engagement, but we're expanding it with different business models, and that also relates to, for example, models like co-investments, dedicated capacity, and broadening the portfolio from what we had in Portugal to, for example, in the latest announcement, power modules for the EV market.
<unk> technologies, we teamed up and that was a let's say an announcement that we've made in last quarter with Globalfoundries that supports the same supply chain in Europe out of their Dresden factories to offer a seamless manufacturing footprint in Europe. So all in all I think existing engaged.
Keith: But we're expanding them with different business models and that also relates to for example models like co investments dedicated capacity and broadening the portfolio from what we had in Portugal to also for example in the latest announcement.
Keith: Power modules for the EV market.
Giel Rutten: Got it. And so do you view this as an ongoing process in which there may be some near-term wins, but you're also setting seeds for wins in, you know, multiple years out?
Speaker Change: Got it and so do you view this as an ongoing process in which there may be some near term wins, but youre also setting seeds for for wins in multiple years out.
Giel Rutten: Yeah, exactly, Steve. I think some of these engagements can materialize and will materialize in revenue this year. Others will ramp up in the course of the next couple of years. You know, for example, the latest announcement that would require or is requiring the build out of a separate manufacturing module that will go on stream in 2025, but before that, it has material revenue contribution that may go towards the end of 2025 into 2026. So there are several engagements with different dynamics, but we expect the upside starting this year.
Speaker Change: Yeah.
Speaker Change: Steve I think for some of these engagements basically.
Speaker Change: Let's say it can be share can materialize on will materialize in revenue this year.
Speaker Change: Others will will ramp up in the course of the next couple of years.
Speaker Change: For example in the latest announcement, that's what's required or that's requiring the build out of a separate manufacturing module that will go on stream in 2025, but before that has material revenue contribution that may go towards the end of 'twenty five into 2026, so that all.
Speaker Change: Several engagements with a different dynamics, but we expect the upsides topic this year.
Giel Rutten: understood. Thank you.
Speaker Change: Understood. Thank you.
Giel Rutten: Thank you. And at this time, I'm showing no further questions. I would like to turn the call back over to Heal for a closing remark.
Speaker Change: Thank you and at this time I'm showing no further questions I would like to turn the call back over to hill for closing remarks.
Giel Rutten: Thank you. Let me recap the key messages. Amkor delivered first quarter results in line with expectations, with revenue of 1.37 billion dollars and EPS of 24 cents. However, after a multi-quarter industry cycle, we believe the first quarter marked the low point for revenue and utilization for Amkor. We expect second-quarter revenue of $1.45 billion, which represents sequential growth of 6% and flat revenue year-on-year. Overall, our expectations for full year 2024 have not changed; we foresee a muted first half, followed by strong growth in the second half.
Hill: Thank you.
Let me recap the key messages.
Hill: EMCORE delivered first quarter results in line with expectations with revenue of $1 $37 billion and EPS of <unk> 24 cents.
Hill: After a multi quarter industry cycle, we believe the first quarter marked the low point for revenue and utilization for EMCORE.
Hill: We expect second quarter revenue of $1 45 billion, which represents sequential growth of 6%.
Hill: That's revenue year on year.
Hill: Overall, our expectations for full year full year 2024 have not changed we foresee a muted first half followed by strong growth in the second half.
Giel Rutten: Amkor has continued to elevate its leadership position by executing on its three strategic pillars, advancing its technology leadership, expanding our broad geographic footprint, and strengthening engagements with lead customers in the growth market. Thank you for joining us on the call today.
Hill: Amcor has continued to elevate its leadership position by executing on our three strategic pillars.
Hill: Advancing our technology leadership.
Hill: Expanding our broad geographic footprint and strengthening engagements with lead customers and the growth markets.
Speaker Change: Thank you for joining the call today.
Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect.
Speaker Change: Ladies and gentlemen. This concludes today's conference call you may now disconnect.