Q2 2025 Amkor Technology Inc Earnings Call

Diego: Good day, ladies and gentlemen, and welcome to the Amkor Technology This is a second quarter 2025 earnings conference call. My name is Diego and I will be your conference facilitator. At this time, all participants are in a listen-only mode.

Good day, ladies and gentlemen, and welcome to the Amcor Technology second quarter 2025 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.

Diego: After the speaker's remarks, we will conduct a question and answer. As a reminder, this conference is being recorded.

After the Speakers' remarks, we will conduct a question and answer session.

As a reminder, this conference is being recorded.

Jennifer Jue: I would now like to turn the call over to Jennifer. Head of Investor Relations. If you have any questions, please go ahead.

I would now like to turn the call over to Jennifer <unk> head of Investor Relations Ms. Zhu. Please go ahead.

Jennifer Jue: Good afternoon and welcome to Amkor's second quarter 2025 earnings conference call. Joining me today are CEO Giel Rutten and CFO Megan Faust. 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 comparable GAAP financial measures in the slide. We will make forward-looking statements today based on our current beliefs, assumptions, and expectations. Such statements are subject to risks and uncertainties that may cause actual results to differ materially.

Good afternoon, and welcome to M Corps second quarter 2025 earnings conference call joining.

Joining me today are CEO, Hilde, <unk> and CFO Megan Faust.

Our earnings press release was filed with the FCC. 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 comparable GAAP financial measures in the slide.

We will make forward looking statements today based on our current beliefs assumptions and expectations.

Such statements are subject to risks and uncertainties that may cause actual results to differ materially.

Jennifer Jue: Please refer to our press release and SEC filings for a discussion on the risk factors and uncertainties that may affect our future results.

Please refer to our press release and SEC filings for a discussion on the risk factors and uncertainties that may affect our future results.

Jennifer Jue: We assume no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of this presentation, except as may be required by applicable law.

We assume no obligation to update any forward looking statements to reflect events or circumstances occurring after the date of this presentation, except as maybe required by applicable law.

Giel Rutten: With that, I will now turn the call over to Heal. Thank you, Jennifer. Good afternoon, everyone, and thank you for joining the call. Amkor delivered second quarter revenue of $1.51 billion, an increase of 14% sequentially, well above expectations, and with all end markets showing double digit sequential growth. I'm pleased with the way the team adapted quickly to support customers amid complex global conditions. They showed agility and flexibility by accelerating product transfers and volume increases, delivering strong revenue growth. At the same time, the environment in which we operate remains dynamic. We continue to monitor export controls and trade policies, working closely with customers and suppliers to address potential impacts.

With that I will now turn the call over to heal.

Thank you Jennifer and good afternoon, everyone and thank you for joining the call today.

<unk> delivered second quarter revenue 151 billion, an increase of 14% sequentially well above expectations and with all end markets are showing double digit sequential growth.

I am pleased with the way the team adapted quickly to support customers in mid complex global conditions. They showed the agility and flexibility by accelerating product transfers and volume increases delivering strong revenue growth.

At the same time the environment in which we operate remains dynamic we continue to monitor the export controls and trade policies working closely with customers and suppliers to address potential impacts.

Giel Rutten: Our factory operations, which are largely situated in free trade zones, remain resilient while supporting dynamic supply needs.

Our factory operations, which are largely situate in a free trade zones remain resilient, while supporting diamond dynamics supply needs.

Giel Rutten: within our landmark. Communications group 15% sequentially driven by the iOS ecosystem. Android revenue will remain flat sequentially and increase 7% year on year. We expect a strong third quarter driven by the launch of the next generation premium tier smartphone. As AI expands into edge devices, we are working closely with lead customers to assess future device needs and develop advanced packaging solutions to support these innovations. In computing, revenue increased 16% from the first quarter, driven by new product ramps in personal computing, as well as growth in memory. Looking ahead to the third quarter, we expect sequential revenue growth across data centers, infrastructure and personal computing.

They didn't know what end markets communications grew 15% sequentially driven by the <unk> ecosystem.

Android revenue will remain flat sequentially and increased 7% year on year.

We expect a strong third quarter driven by the launch of the next generation premium tier smartphones.

S AI expense into Ettrick devices, we are working closely with lead customers to assess future device needs and develop advanced packaging solutions to support these innovations.

In computing revenue increased 16% from the first quarter, driven by new product ramps and personal computing as well as growth in memory.

Looking ahead to the third quarter, we expect sequential revenue growth across data center infrastructure and personal computing.

Giel Rutten: Demand for AI and high-performance computing applications continues to expand, and our project pipeline remains robust. Export control dynamics led to several supply challenges in the quarter. However, by working closely with our customers, we were able to rapidly respond to the changing demand environment. A major milestone in the quarter was the launch of the first high-density fan-out product in high-volume production for our lead customer. Besides our proven 2NRFD technology, high-density fan-out utilizing RDL interconnect technology is a critical enabler for growth in the computer domain. Revenue in the automotive and industrial markets grew 11% sequentially, driven by new product launches for ADAS applications across multiple After eight consecutive quarters of year-on-year declines, Q2 marked an inflection point with 6% year-on-year growth.

Demand for AI and high performance computing applications continues to expand and our project pipeline remains robust.

Export control dynamics led to several supply challenges in the quarter.

By working closely with our customers, we were able to rapidly respond to the changing demand environment.

A major milestone in the quarter was the launch of the first high density fan out product in high volume production for our lead customer.

Besides of approval from to announce these technology high density fan out utilizing <unk> interconnect technology is a critical enabler for growth and the compute domain.

Revenue in the automotive and industrial markets grew 11% sequentially driven by new product launches for Adas applications across multiple customers.

After eight consecutive quarters of year on year declines Q2 marked an inflection point with 6% year on year growth.

Giel Rutten: For the third quarter, we expect modest sequential revenue growth. Engagements with lead customers in the automotive domain shows growing interest in advanced packaging technologies like 2NRFD for next generation solutions. Our presence in the computing market and our global manufacturing footprint position us well to capture these future automotive opportunities. Lastly, in consumer, revenue increased 16% sequentially on market share gains in wearables, as well as broad-based demand improvement in traditional products. Next quarter, consumer revenue is expected to be flat. Looking ahead to the third quarter, we expect these positive trends to continue, supporting strong sequential growth and position us well for sustainable long-term success.

For the third quarter, we expect modest sequential revenue growth.

Engagements with lead customers in the automotive domain shows growing interest in advanced packaging technology like <unk> for next generation solutions.

Our presence in the computing market and our global manufacturing footprint position us well to capture these future automotive opportunities.

Lastly, and consumer revenue increased 16% sequentially, while market share gains in wearables as well as broad based demand improvement in traditional products.

Next quarter consumer revenue is expected to be flat.

Looking ahead to the third quarter. We expect these positive trends to continue supporting strong sequential growth and position us well for sustainable long term success.

Giel Rutten: Amkor's strategy focuses on delivering differentiating technology solutions, expanding our global footprint to support customer supply chains, and collaborating with lead customers early in their product development. Last quarter, I discussed this strategic pillar. Today I will highlight our technology differentiation and strong capability to deliver next generation solutions for our computing customers. The accelerated development of AI is significantly changing the computing domain in terms of technology requirements, rate of innovation, and regional requirements for manufacturing facilities. Amkor is expanding its strategic presence in this market. Following a record computing revenue in 2024, we sustained momentum in the first half of 2025 with 18% year-over-year growth.

EMCORE strategy focuses on delivering differentiating technology solutions, expanding our global footprint to support customer supply chains and collaborating with lead customers early in their product development.

Last quarter I discussed the strategic pillars today, I will highlight our technology differentiation and strong capability to deliver next generation solutions for our computing customers.

Yeah.

The accelerated development of AI is significantly changing to computing domain in terms of technology requirements.

Eight of innovation and regional requirements for manufacturing facilities.

<unk> is expanding its strategic presence in this market following a record computing revenue in 2024th we sustained momentum in the first half of 2025 with 18% year over year growth.

Giel Rutten: Our customers span the full compute ecosystem from CPUs, GPUs, and AI accelerators to memory, networking, and peripherals. We collaborate with industry leaders across these domains, supporting advanced technologies like high-density fan-out, advanced flip-chip, and system-in-packaging. Our proven 2.5D and high-density fan-out solutions excel for high-bandwidth memory integration and high-density interconnects, while our flip-chip and multi-chip module portfolio is preferred for other high-performance, non-high-bandwidth memory applications. Besides advanced packaging solutions, we continue to invest in the development of key enabling technologies, including advanced bonding and high conductive thermal materials to meet demanding performance and reliability requirements. As innovation accelerates, our role evolves from a trusted manufacturing partner to a collaborative development partner, enabling our customers technology roadmaps and bringing next generation solutions to market.

Our customers span the full computer ecosystem from Cpus, Gpus, and AI accelerators to memory networking and peripherals.

We collaborate with industry leaders across these domains supporting advanced technologies like high density fan out advanced flip chip and system in package.

Our proven <unk> and high density fan out solutions Extell for high bandwidth memory integration and high density Interconnects.

Our flip chip and multi chip module portfolio is preferred for ultra high performance non high bandwidth memory applications.

Besides advanced packaging solutions, we continue to invest in the development of key enabling technologies, including advanced bonding and high conductive terminal materials to meet demanding performance and reliability requirements.

Innovation accelerates our role evolves from a trusted manufacturing partner to our collaborative development partners, enabling our customers' technology, Roadmaps and bringing next generation solutions to markets.

Giel Rutten: Along with Advanced Packaging, we are building a comprehensive test platform to provide turnkey solutions that address growing device complexity. We are upgrading our tester fleet to support high-density digital pins and power supplies. We are investing in next generation temperature stability handling systems, as well as high power burn in and system level tests. In parallel, we are upscaling our test engineering to meet the demands of AI and high-performance computing applications. Offering a full turnkey solution for the computing market is a key part of our strategy and test revenue in this market grew approximately 50% year over year in the first half of 2025.

Along with advanced packaging, we are building a comprehensive test platform to provide turnkey solutions that address growing device complexity.

We are upgrading our test fleet to support high density digital pins and power supplies.

We are investing in next generation temperature stability of handling systems as well as high power burn in and system level test.

In parallel we are upscaling, our test engineering to meet the demands of AI and high performance computing.

Applications.

Offering a full turnkey solution for the computer market is a key part of our strategy and test revenue in this market grew approximately 50% year over year in the first half of 2025.

Giel Rutten: We are expanding test operations in Korea with phase one of the turnkey test expansion projected to be operational by the end of this year and phase two following in the first half of 2027. We are planning to deploy these test solutions in our new Arizona facility to support a full turnkey U.S. supply chain. Our advanced packaging and test lines in Korea and Taiwan, supporting computing, are running at high levels of utilization. And capacity expansions are a substantial part of our 2024 and 2025 CapEx span. Although investments are sizable, these lines generate margins above corporate average.

We are expanding test operations in Korea with phase one of the turnkey test expansion projected to be operational by the end of this year and.

In phase II following in the first half of 2027.

We are planning to deploy these test solutions and our new Arizona facility to support a full turnkey U S supply chain.

Yeah.

Our advanced packaging and test launch in Korea, and Taiwan supporting computing are running at high levels of utilization and capacity expansions are a substantial part of our 2024 and 25% Capex spend.

Although investments are sizable these slides generate margins above corporate average.

Giel Rutten: Strong forecasted demand is driving continued capacity expansion in both of these locations. This comprehensive strategy positions us as a trusted partner to the world's largest semiconductor company. With a clear strategic focus and distinct competitive advantages, we are well positioned for growth.

Strong forecast of demand is driving continued capacity expansion in both of these locations.

This comprehensive strategy positions us as a trusted partner to the world's largest semiconductor companies with a clear strategic focus and distinct competitive advantages, we are well positioned for growth.

Megan Faust: With that, I will now turn the call over to Megan to provide more details on our second quarter performance and near-term outlook. Thank you, Giel, and good afternoon, everyone. Second quarter revenue was $1.51 billion, exceeding the high end of our guidance range. We achieved strong sequential revenue growth of 14% and year-on-year growth of 3%. Our team excelled, achieving strong revenue growth by supporting our customers while navigating a dynamic environment with agility, delivering on critical milestones, and executing focused preparations for a robust ramp in the third quarter. Second quarter gross profit was $182 million and gross margin was 12%.

With that I will now turn the call over to Megan to provide more details on our second quarter performance and near term outlook.

Thank you Neil and good afternoon, everyone.

Second quarter revenue was $151 billion exceeding the high end of our guidance range.

We achieved strong sequential revenue growth of 14% and year on year growth of 3%.

Our team excelled achieving strong revenue growth by supporting our customers, while navigating a dynamic environment with agility delivering on critical milestones and executing focused preparations for a robust ramp in the third quarter.

Second quarter gross profit was $182 million.

Gross margin was 12%.

Megan Faust: This includes approximately $25 million in preparation costs. for both the robust seasonal increase in Q3, supporting advanced SIP for communications, as well as launching multiple new high-density fan-out products ramping in the coming quarter. We are pleased with the successful ramp of high volume manufacturing at our Vietnam facility. We are running advanced SIP, supporting the consumer and communications end markets, as well as NAND memory products. While we continue to build scale, Vietnam will impact our gross margin. In Q2, the impact was approximately 125 basis points, and we expect this will improve in the second half of 2025 as we optimize utilization.

This includes approximately $25 million in preparation cost.

For both the robust seasonal increase in Q3 supporting advanced S. I P for communications as well as launching multiple new high density fan out products ramping in the coming quarters.

We are pleased with the successful ramp of high volume manufacturing at our Vietnam facility.

We are running advanced SA.

Supporting the.

Humor, and communications end markets as well as NAND memory products, while we continue to build scale Vietnam will impact our gross margin and.

In Q2, the impact was approximately 125 basis points.

And we expect this will improve in the second half of 2025 as we optimize utilization.

Megan Faust: Q2 gross margin was constrained by foreign currency headwinds of approximately 80 basis points as compared to Q1. Second quarter operating income was $92 million. And operating income margin was 6.1%, which included a non-routine $32 million benefit due to a contingent payment related to our 2017 NANEM acquisition. Net income was $54 million, and EPS was $0.22, including $16 million and $0.07 respectively attributable to the contingent payment. Second quarter EBITDA was $259 million, including $32 million attributable to the contingent payment. EBITDA margin was 17.1%. We ended the quarter with a stronger balance sheet and greater financial flexibility.

Q2, gross margin was constrained by foreign currency headwinds of approximately 80 basis points as compared to Q1.

Second quarter operating income was $92 million and operating income margin was six 1%, which included a non routine $32 million benefit due to a contingent payment related to our 2017 nannies acquisition.

Net income was $54 million and EPS was <unk> 22 cents, including $16 million and seven <unk>, respectively attributable to the contingent payment.

Second quarter, EBITDA was $259 million, including $32 million attributable to the contingent payment.

EBITDA margin was 17, 1%.

We ended the quarter with a stronger balance sheet and greater financial flexibility.

Megan Faust: Amkor is focused on creating long-term shareholder value through a balanced and disciplined capital allocation strategy with four key priorities.

<unk> is focused on creating long term shareholder value through a balanced and disciplined capital allocation strategy with four key priorities.

Megan Faust: 1. Investing in Organic Growth by Expanding our Manufacturing Footprint and Advanced Packaging Capabilities.

Investing in organic growth by expanding our manufacturing footprint and advanced packaging capability.

Megan Faust: 2. Making Selective Strategic Investments to Enable Regional Supply Chains or for Tuck-in Opportunities.

Two making selective strategic investments to enable regional supply chain or for tuck in opportunities.

Megan Faust: 3. Maintaining balance sheet strength and flexibility 4. Returning capital to shareholders within our established framework of returning 40-50% of free cash flow over time To further strengthen our balance sheet and liquidity, we replaced our $600 million credit agreement with a new $1 billion revolver and executed a $500 million term loan.

Maintaining balance sheet strength and flexibility and for returning capital to shareholders within our established framework of returning 40% to 50% of free cash flow over time.

To further strengthen our balance sheet and liquidity, we replaced our $600 million credit agreement with a new $1 billion revolver and executed a $500 million term loan.

Megan Faust: As we prepare to begin construction of our new U.S. manufacturing facility in the second half of 2025, these transactions ensure access to an appropriate amount of capital on favorable terms. As of June 30th, cash and short-term investments were $2 billion and total liquidity was $3.1 billion. Our total debt as of the end of the quarter was $1.6 billion and our debt to EBITDA ratio was 1.5 times. During July, we will use proceeds from the new term loan to pay down $223 million of debt.

As we prepare to begin construction of our new U S manufacturing facility in the second half of 2025. These transactions ensure access to an appropriate amount of capital on favorable terms.

As of June 30th cash and short term investments were $2 billion and total liquidity was $3 $1 billion.

Our total debt as of the end of the quarter was $1 $6 billion and our debt to EBITDA ratio was one five times.

During July we will use proceeds from the new term loan to pay down $223 million of debt.

Megan Faust: Before I move on to the third quarter outlook, I would like to address the underutilized manufacturing assets that constrain profitability. Over the past several quarters, our focus on strategic growth and capacity expansion in high-performance computing, AI, and other high-growth advanced packages has coincided with soft demand for mainstream packages. While the mainstream business remains an important part of our portfolio, and we observe the first signs of an improving outlook, we recognize the need to optimize our footprint for a more efficient cost structure. In response, we are progressing plans to rationalize our manufacturing footprint, specifically considering our seven factories in Japan.

Before I move on to the third quarter outlook I would like to address the underutilized manufacturing assets that constrained profitability.

Over the past several quarters, our focus on strategic growth and capacity expansion in high performance computing AI and other high growth advanced packages has coincided with soft demand for mainstream packages.

While the mainstream business remains an important part of our portfolio and we observed the first signs of an improving outlook, we recognized the need to optimize our footprint for a more efficient cost structure.

In response, we are progressing plans to rationalize our manufacturing footprint.

Specifically, considering our seven factories in Japan.

Megan Faust: to align capacity with market conditions. We will work closely with our customers to ensure a seamless transition.

To align capacity with market conditions.

We will work closely with our customers to ensure a seamless transition.

Megan Faust: We will share more details on these plans at our next earnings call.

We will share more details on these plans at our next earnings call.

Megan Faust: And now on to our third quarter outlook. We expect revenue between $1.875 and $1.975 billion. representing growth of 27% sequentially at the midpoint. We anticipate robust seasonal growth in communication to support new product introductions for the fall launch of premium tier smartphones, as well as growth in the computing end market. We expect our other end markets to be flat to slightly up. Gross margin is expected to be between 13 and 14.5%. We anticipate an increase in material content due to the product mix concentrated in advanced SIP, similar to Q3 2024. We expect operating expenses of around $125 million for the third quarter and a full year effective tax rate of around 20% excluding discrete items. We anticipate that profitability will expand at a higher rate than revenue, given the leverage in our financial model.

And now onto our third quarter outlook.

We expect revenue between $1 875, and $1 97, $5 billion representing growth of 27% sequentially at the midpoint.

We anticipate robust seasonal growth in communications to support new product introductions for the fall launch of premium tier smartphones as well as growth in the computing end market.

We expect our other end markets to be flat to slightly up.

Gross margin is expected to be between 13 and 14, 5%.

We anticipate an increase in material content due to the product mix concentrated in advanced S. IP similar to Q3 2024.

We expect operating expenses of around $125 million or the third quarter.

On a full year effective tax rate of around 20% excluding discrete items.

We anticipate that profitability will expand at a higher rate than revenue given the leverage in our financial model.

Megan Faust: As a result, third quarter net income is expected to be between $85 and $120 million, resulting in EPS between $0.34 and $0.48.

As a result third quarter net income is expected to be between 85 and $120 million, resulting in EPS between 34 and 48 cents.

Megan Faust: Our CapEx forecast for 2025 remains unchanged at $850 million. Our investments are focused on expanding capacity and capability for leading-edge technology, including high-density fan-out, advanced SIP, and test solutions.

Our capex forecast for 2025 remains unchanged at $850 million.

Our investments are focused on expanding capacity and capability for leading edge technology, including high density fan out advanced us IP and test solutions.

Megan Faust: In closing, our second quarter results reflect consistent progress across key areas of our business, supported by disciplined execution and continue investment in strategic priorities. As we look ahead, we see opportunities to further enhance our operational efficiency. We are entering the third quarter with strong momentum, and with a clear focus on our strategic pillars, a strong balance sheet, and commitment to long-term value creation, we are well positioned to deliver sustainable growth and shareholder returns.

In closing our second quarter results reflect consistent progress across key areas of our business supported by disciplined execution and continue investment in strategic priorities.

As we look ahead, we see opportunities to further enhance our operational efficiency.

We are entering the third quarter with strong momentum and with a clear focus on our strategic pillars, our strong balance sheet and commitment to long term value creation, we are well positioned to deliver sustainable growth and shareholder returns.

Diego: With that, we will now open the call up for your questions. Operator, thanks. And at this time, we will be conducting our question and answer session.

With that we will now open the call up for your questions.

Operator.

Thank you.

And at this time, we will be conducting our question and answer session.

Diego: Please limit yourselves to one question and one follow-up question for each time. To ask a question, press star 1 on your telephone press star 1 on your telephone Confirmation tone will indicate that your line is in the question. You may press star 2 if you would like to remove your question from for participants using speaker equipment. It may be necessary to pick up your handset before pressing the start button. Stand by as we pull.

Please limit yourselves to one question and one follow up question per each time that your Q.

To ask a question press star one on your telephone keypad.

A confirmation tone will indicate that your line is in the question queue.

You May press Star two 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 star keys.

Standby as we poll for questions.

Joe Moore: And our first question comes from Joe Moore with Morgan Stanley.

And our first question comes from Joe Moore with Morgan Stanley. Please state your question.

Joe Moore: Please state your question. Great, thank you. I wonder if you could talk to, I'll just ask both my questions at once, the gross margin, you know, in the September quarter, I guess there's a little less fall through than I might have thought given strong revenue. And you mentioned the mixture, if you could just give us a little bit more color on, on the short term gross margin, and then long term, you know, you mentioned some consolidation of the legacy facilities. Can you talk about, you know, where gross margins can get to as you kind of resolve some of those issues and give Okay, Joe.

Great. Thank you I Wonder if you could talk to you I'll just ask both my questions at once the gross margin.

In the September quarter.

I guess theres, a little less volatile than I might have thought given the strong revenue.

You mentioned the mix shift can you just give us a call.

<unk>.

On the short term gross margin and then long term you mentioned consolidation.

Where legacy facilities could you talk about where those margins.

As you kind of resolved those issues. Thank you.

Giel Rutten: Good. Good afternoon.

Okay Joe.

Giel Rutten: Let me start with some some introductory remarks and then Megan can give more detail on the specific Well, first of all, you know, second quarter, third quarter, a few elements impacted our margin. These elements relate very much to a transition in our manufacturing base. Let me start with Vietnam first and reiterate the strategic rationale on Vietnam, where we provide our customers an alternative to a China supply chain. And on top of that, Vietnam is a cost effective location for SIP that we transfer out of Korea. Now, it's important location and we accelerated the transition and the ramp up in Vietnam.

Good afternoon.

Let me start with some introductory remarks, and then Megan can give more detail on the specifics well first of all.

Second quarter third quarter a few.

Elements impacted our share our margin.

Elements related very much true.

Transition in our manufacturing base, let me start with Vietnam first.

And reiterate the strategic rationale on Vietnam, where we are.

Offer our customers an alternative to a China supply chain and on top of that Vietnam is a cost effective location for S. IP that we transfer out of Korea.

No it's important location and we accelerated the transition on the ramp up in Vietnam.

Giel Rutten: Originally, we started with two lead customers in Vietnam, but currently already five of our top 10 customers are in Vietnam and we are qualifying these customers. That led some increased cost in the quarter because our initial ramp up is focused very much on execution and operational excellence and not per se on cost efficiency. We believe that Vietnam long term is a very cost efficient location, but in this stage, I think we are basically focusing very much on operational performance.

Originally we started with two lead customers in Vietnam, but currently already five of our top 10 customers are in.

In Vietnam, and we are qualifying these customer Steph, let some increased cost in the quarter because our initial ramp up is focused very much on execution and operational excellence and not per se on cost.

Efficiency.

Belief that Vietnam long term is a very cost efficient location.

But at this stage I think we are basically focusing very much.

Operational.

<unk>.

Giel Rutten: Secondly, Korea. Korea, we're also a bit in the transition. I already mentioned that we're offloading some of the SIP business in Vietnam, and we're doing that successfully. And next to that, we're ramping up our advanced products in Korea. Korea is our advanced products center of excellence. We have our R&D location in Korea. And the new ramp up of specifically high-density fan-out products in Korea increased our cost base, to some extent, because we had startup costs for these products. Now next to that, Megan already indicated Japan, we have underutilization in Japan that takes longer than we anticipated.

Secondly, Korea Korea, but also a bit in the transition I already mentioned that we're offloading some of the IP business in Vietnam, and we're doing that successfully.

Next to that we are ramping up our advanced products in in Korea Korea is our advanced products Center of excellence, we have our R&D location in Korea, and the new ramp up of specifically high density fan out products in Korea increased our cost base.

To some extent because we had some startup cost for these these products.

Now next to that of Megan already indicated to Japan.

Under utilization in Japan that takes longer than we anticipated and that leads to valley.

Giel Rutten: And that leads to re-evaluating that manufacturing pace. Next to that we had some elements, and Megan will talk to that with respect to exchange rates, etc. So these were, let's say, the top-level topics.

Value rating that manufacturing base.

Next to that we add some elements that I'm, Megan will talk to that with respect to.

Exchange rates et cetera. So these let's say at the top level topics. Megan can you take it over to give some of the details.

Megan Faust: Megan, can you take it over to give some of the details? Terri Hill. Joe, just coming back to the gross margin for Q3, you mentioned the flow-through. That flow-through is actually a little bit better than last year's Q3, but the story is really the same. It's an unfavorable product mix in Q3, and that's primarily related to a very high concentration of advanced SIP supporting the seasonal communications ramp, but also the continuing underutilization of our mainstream business. So while, you know, we are seeing that stabilize, that divergent landscape is really accentuating that unfavorable product mix to be quite similar to last year's Q3.

Sure he'll Joe just coming back to the gross margin for Q3, you mentioned the flow through.

That flow through is actually a little bit better than last year's Q3, but the story is really the same it's an unfavorable product mix in Q3, and Thats primarily related to a very high concentration of advanced S. I P. Supporting the seasonal communications ramp, but also the continuing underutilization of our mainstream business.

While we are seeing that stabilize that divergent landscape is really accentuating that unfavorable product mix to be quite similar to last year's Q3.

Megan Faust: However, there's good leverage in that financial model, so while that gross margin flow-through is constrained, on that 27% increase in revenue, you'll note that the operating income and EPS are going to more than double on the bottom line.

However, there is good leverage in that financial model, so while that gross margin flow through.

Is constrained on that 27% increase in revenue you'll note that the operating income and EPS are going to more than double on the bottom line.

Megan Faust: So as it relates to your second part of your question, more on the long-term, you know, outlook for margins, including Japan, you know, HEAL went through our strategic, you know, priorities and how those are playing out through this transition. And we see those strategic investments not only in Vietnam and as well as bringing up high-density fan-out, that those are actually enhancing our competitive advantage and our long-term growth potential. So bottom line, our efforts are really paying off with key wins and lead customers. And the disciplined execution is translating to very strong growth. So our profitability is impacted during this transition.

So as it relates to your second part of your question more on the long term outlook.

Outlook for margins, including Japan.

He'll went through our strategic.

<unk> and how those are playing out through this this transition.

And we see those strategic investments not only in Vietnam, and as well as bringing up high density fan out that those are actually enhancing our competitive advantage.

Our long term growth potential.

So bottom line, our efforts are really paying off with key wins and lead customers and the disciplined execution is translating to very strong growth.

So our profitability is impacted during this transition.

Megan Faust: And we will improve as we optimize over the midterm.

And we will improve as we optimize over the midterm as it relates to Japan, you know we can share.

Megan Faust: As it relates to Japan, we can share more details at a later time once we have the specifics. I did want to remind you, though, that we had executed on a restructuring activity in Japan several years ago during the prior downturn. And over a multi-year period, we were able to successfully close three locations and consolidate business, reducing headcount and manufacturing costs. So we are working on the plans to rationalize that footprint. And we'll be identifying our primary sites, such as Kumamoto, and designing a consolidation plan. In addition, we're also looking to raise prices for those customers that might be running very low volume in order to manage profitability.

Share more details at a later time once we have the specifics I did want to remind you, though that we had executed on our restructuring activity in Japan several years ago during the prior downturn.

And over a multiyear period, we were able to successfully closed three locations and consolidate business reducing.

Reducing head count and manufacturing costs.

So we are working on the plans to rationalize that footprint and.

And we will be identifying our primary sites, such as Kumamoto and designing our consolidation plan.

In addition, we're also looking to raise prices for those customers that might be running very low volumes in order to manage profitability.

Thank you.

Jim Schneider: And your next question comes from Jim Schneider with Goldman Sachs. Yes, good afternoon. Thanks for taking my question.

And your next question comes from Jim Schneider with Goldman Sachs. Please state your question.

Jim Schneider Goldman Sachs.

Yes. Good afternoon. Thanks for taking my question I was wondering if you could maybe comment on.

Jim Schneider: I was wondering if you could maybe comment on sort of the ramp that you expect for your 2.5D program, say, in volume terms this year, and then if you look a little bit further out, you know, what kind of capacity are you directionally preparing for next year? Thank you.

The ramp that you expect for your two and a half D program say in.

In terms of when volume terms this year and then.

If you look a little bit further out what kind of capacity are you directionally preparing for next year. Thank you.

Uh huh.

Giel Rutten: Hello, Jim. Yeah, let me let me give some color on the 2NRFD programs. I mean, 2NRFD is an important program for us and I think we're working with our lead customer there. You know, it was impacted in the earlier part of the year because of some trade restrictions. Trade restrictions are dynamic and are changing and that will give us the opportunity to further ramp 2NRFD. We are an intrinsic part of that supply chain and we believe that the direction currently being taken of having a more open, let's say, trade approach will create increased opportunities, not only for Amkor, but for the broader compute ecosystem.

Hello, Jim.

<unk>.

Yeah, Let me, let me give some color on the <unk>.

Programs I mean, <unk> is an important program for us and I think we work with our lead customer there.

It was impacted in the earlier part of the year because of some trade restrictions.

<unk> restrictions are dynamic and not changing and that will give us the.

Opportunity to further ramp to one of these we have an intrinsic part of that share of that supply chain and we believe that the direction currently being taken off having a more open let's say trade approach.

Bill creates increased opportunities not only for EMCORE portfolio broad of compute ecosystem.

Giel Rutten: So 2NRFD is important. Next-generation technology is high-density fan-out. We consider that a critical technology. We are proud that we have launched the first products this year. And in the course of the second half of this year, we launched a second product with multiple products to come in the early part of next year. It's a foundational technology, not only in compute, but it will also be utilized in next-generation communication devices. So an important milestone. And this investment will have significant spin-off going forward. Thank you.

So <unk> is important.

Next generation technology is high density fan out we consider that a critical technology.

We are proud that we have launched a FERC first production this year.

And in the course of the second half of this year, we launched a second product with multiple products to come in the early part of next year.

Foundational technology not only in compute but it will also be utilized in <unk> and next generation communication devices. So an important milestone in this investment.

We'll.

They have significant spinoff going forward.

Thank you.

Peter Peng: And your next question comes from Peter Peng with JPMorgan Chase and Company. Please state your question. Hi, thanks for taking my question. Um, you know, seems like, you know, the quarter went really well. And for the third quarter, you're guiding above seasonality.

And your next question comes from Peter Peng with J P. Morgan Chase of the company. Please state your question.

Hi, Thanks for taking my question.

It seems.

It seems like the quarter went really well and for the third quarter and you're guiding above seasonality.

Peter Peng: I'm wondering if you're seeing or any of your customers talking about any pull in of demand or anything of that or, you know, business as usual, maybe you can provide some comment on that.

Wondering if you're seeing any of your customers talking about any pull in of demand or anything of that or business.

Business as usual and maybe if you can provide some comment on that.

Giel Rutten: Hi, Peter. Let me give you a few comments on the, let's say, potential strength in the third quarter and in the second quarter related to pull-ins. Now, it's difficult for us to see whether customers are really pulling in, but we didn't get signs that there was active pull-in ongoing. There may have been some pull-ins related to, you know, inventory that's available or dice that are available, but we didn't see active pull-ins. You know, what we're currently seeing across the markets is some last-minute spot orders that come in because inventory reaches a critical low point. And that happens, for example, in the automotive market, that's a first indication that inventory comes close to the equilibrium there, which is a good sign.

Hi, Peter.

Let me give you.

A few a few comments on each.

Potential strength in the third quarter and in the second quarter related to <unk> no.

It's difficult for us to see where the customers are really pulling in but if you didn't get signs that that was active Poland ongoing that may have been some pull ins related to.

Inventory, that's available or die step out available, but we didn't see active pull ins.

Yeah.

What we what we're currently seeing across the markets is.

Last minute spot orders that come in because inventory reaches the critical low point and Thats happened for example in the automotive markets.

That's the first indication that inventory comes close to the equilibrium there which is a good sign.

Giel Rutten: You could label that pull-in.

Could you could label that pull in in the communication market.

Giel Rutten: In the communication market, last year we saw some pull-ins in the second quarter, but we don't see that occurring this year. Perfect. Thank you.

Last year, we saw some pull ins in the second quarter, but we don't see that occurring occurring this year.

Perfect. Thank you and then I have a follow up on just your overall computing it sounds like things are.

Peter Peng: And then I have a follow-up. On just your overall computing, it sounds like, you know, things are, you know, getting better. You mentioned about the easing of some of the regulations at your marquee customer, and then you're also ramping your, you know, second 2.5D networking customer. So, you know, how should we think about, you know, revenue growth this year relative to 2024? Is this, you know, do you view this as a growth segment, or is this kind of a muted question? Growth Profile. Yeah, the way that that we see it, and I see it is that the compute markets, there are a couple of trends in the compute market.

Getting better or are you you mentioned about the easing of some of the regulations Edgar marquee customer and then you also ramping your.

The second two points IP networking customer.

So.

How should we think about.

Revenue growth this year relative to 2024 or is this do you view this as a growth segment or is this kind of a <unk>.

Muted.

Our growth profile.

Yes, the way that we see it.

It is that's the compute market there are a couple of trends in the computer market first we see accelerated growth and also the rate of innovation is increasing that means that.

Giel Rutten: First, we see accelerated growth. And also the rate of innovation is increasing. That means that changing from one generation products to the next generation product is accelerating. And that also implies that new technology is adopted faster. So 2.5D is, I would say, previous generation products. The lifetime of this previous generation is extended because of the export controls on technologies. And that could give 2.5D a fairly long life with exports and the new export rulings. And we look forward to support that. Next generation devices, we're participating in these areas in multiple ways. I think one is high density fan out.

Changing from one generation products to the next generation product is accelerating and that also implies that new technology is adopted faster so tuna.

I would say previous generation products.

The lifetime of this previous generation is extended because of the export controls on technology and that could give to an off the fairly long life with exports.

And then your exports rulings and we look forward to support to support that next generation device.

We are participating in the mold into.

In these areas in multiple ways. So I think one is high density fan out.

Giel Rutten: That's a preferred technology versus the 2.5D that 2.5D uses interposer. High density fan out uses RDL, high density interconnect. And that's the more flexible, more cost effective technology. We expect the lifetime of that technology to be longer. And therefore, launching the first product is very important. And then, of course, we see on the high bandwidth memory integration, multiple technology steps. So, we are participating with our lead customers, but we see continued innovation going forward.

That's our preferred technology versus the two <unk> debt to tune up the users in proposal high density fan out users RTL high density interconnect and Thats the more flexible more cost effective technology should we expect the lifetime of that technology to be longer and they are.

Before launching the first products is very important.

And then of course, we see on the share on the high bandwidth memory integration multiple technology steps. So we are participating with our lead customers but.

We see continued innovation going forward.

Megan Faust: And Peter, just to add a quantitative reference as well, we did hit a record in 2024 for our broader compute segment. And we're on track to do that again in 2025. The first half of 2025 compute was up 18% year over year, and it is our fastest growing end market. Thank you.

And Peter just to add a quantitative reference as well we.

We did hit a record in 2024 for our broader compute segment.

We're on track to do that again in 2025, the first half of 2025 compute was up 18% year over year and it is our fastest growing end market.

Thank you. Your next question comes from Ben Reitzes with Melius Research. Please state your question.

Ben Reitzes: Your next question comes from Ben Reitzes with Mellius. Yeah, hi. Can we just talk a little bit more about your comms guidance versus normal seasonality in the 3Q? And then, you know, if you think that that's sustainable into 4Q? And what, what is it about? And can you just confirm that you re-won all your business on the iOS side? That was, that was previously an issue. Thanks.

Yes, hi.

Can we just talk a little bit more about your comp guidance versus normal seasonality.

In the <unk> and then if you think that that's sustainable into <unk>.

And what what is it about.

Can you just confirm that you re one.

All your business on the iOS side that was that was previously an issue. Thanks.

Ben Reitzes: Hi, Ben. Yeah, let me let me start with answering that last part. You know, the The footprint in next-generation phones and the recovering of that socket is going as planned, and the ramp-up of that socket is included in our third-quarter outlook and will be included in our fourth-quarter outlook. So in that sense, we are optimistic. Understanding what's happening in the fourth-quarter is difficult. There's still quite significant uncertainty, certainly in the comps market, what the volumes will be. We see conflicting forecasts for volumes in the later part of the year.

Hi, Ben Yes, let me, let me start with <unk>.

Interesting that last part.

The footprint in next generation phones.

And the recovery of that sockets.

Is it going as planned.

And.

Part of that socket is included in our third quarter outlook and will be included in our fourth quarter outlook. So in that sense. We are sure we are optimistic.

Understanding what's happening what's happening in the fourth quarter is difficult there is still quite significant uncertainty certainly in the in the comms market.

Volumes will be received.

Inflicting forecast for full <unk> in the here in the later part of the year.

Giel Rutten: Third quarter is confirmed, you know, I believe that we cannot use normal seasonality which would be, you know, a few percent up or a few percent down of third quarter because of these uncertainties, so we don't guide for a fourth quarter. And Ben, just to give you a little more more color in the markets in Q3. So the communications themselves itself will be up very strong, probably more similar to the 2023 Q3 comms on 2022 comms, sequential increases. And you know, what's what's offsetting that is our consumer will be mainly flat in Q3 this year, because we had that very significant ramp last year, Q3.

Third.

Third quarter is confirmed.

I believe that we cannot use normal seasonality, which would be you know.

A few percent up a few percent down of third quarter because of these uncertainties. So.

We don't guide for the fourth quarter event.

And then just a little more color in the markets in Q3, so that.

Any indications that itself will be up very strong probably more similar to the 2023 Q3 comps on 2022 com.

Sequential increases.

You know, what's what's offsetting that is our consumer will be mainly flat.

In Q3 this year, because we had that very significant ramp last year Q3.

Ben Reitzes: Okay, and then Thanks for that.

Okay and then.

Thanks for that and make it can we just confirm the payment on the SG&A and what the normalized SG&A is going forward.

Megan Faust: And Megan, can we just confirm the payment on the SG&A and what the normalized SG&A is going forward? $32 million. We just simply add that back and then expect that kind of run rate for the next few quarters? Yeah, sure. So if you were to exclude that, we were right in line with guidance with respect to OPEX. And, you know, that would be similar run rate for the second half of the year.

$32 million, we just simply add that back and then expect that kind of run rate for the next few quarters.

Yes sure. So if you were to exclude that we were right in line with guidance with respect to Opex.

And that would be similar run rate for the second half of the year.

Thank you and your next question comes from Randy Abrams with UBS. Please state your question.

Randy Abrams: And your next question comes from Randy Abrams with UBS. Yes, hi, thank you. I wanted to ask a follow up question just on the communications. So I think in your prepared remarks, you talked about evaluating content gains, say for the on device AI to communications. Could you talk about that technology trend you're seeing there? And I think you mentioned potential and fan out for that application. Also, there's discussion about multi chip module. So if you could go on some of the midterm content opportunities from that. Yeah, that's, that's, that's a good point. Randy, I didn't call out specifics on technology choices, you know, what we see customers doing with AI functionality moving to the edge.

Yes, hi, thank.

Thank you just wanted to ask a follow up question just on the.

<unk> Communications you I think in your prepared remarks, you talked about.

Owning content gains state for the device.

Communications could you talk about that technology trend, you're seeing there and I think you mentioned potential pan out for that application.

So there is discussion about multi chip module.

You could go through on some of the midterm content opportunities from that.

Yes.

Good point Randy I.

I didn't call out specifics on technologies choice, what we see customers doing which AI functionality moving to the edge day off.

Giel Rutten: They are looking to the implications of the semiconductor solutions, what does it mean related to increased memory content, higher density interconnect, physical dimensions. And there we work with multiple customers that operate in that market on next generation solutions. That's also why I reiterate that a fan out solution, certainly for communication and a high density fan out solution similar to what we apply in compute could be one of the solutions for communication also. Nothing definitely decided, but for Amkor, it's a very important market.

Looking to the implications of the share of the semiconductor solutions.

What does it mean related to increased.

Increased memory content.

Higher density interconnect physical dimensions.

And therefore, we work with multiple customers that operate in that market.

Next generation solutions.

That's also why our yesterday that a fan out solution certainly for communication.

And the high density fan out solutions similar to what we apply in compute.

Could be one of the solutions for sure for communication also.

Nothing definitely decided but for amcor, it's in a very important market and we believe a very close cooperation with lead customers in that market to evaluate future solutions.

Randy Abrams: And we believe we have a very close cooperation with lead customers in that market to evaluate future And my second question, actually, it's two separate financial questions. One on the material costs. I'm just curious what you're seeing in terms of cost from some rising material prices. And there's even a bit of talk about the high end, things like tea glass, if there's any, any constraint you're nervous about on high end substrates. That's, that's one part. And the second one, it's more tied to the investment. If we could be heading into a little bit bigger capex cycle, just I think you've noted advanced capacity type and trying to go after RDL plus to start construction of the Arizona factory.

Okay and my second question actually its too.

Separate financial questions.

The material costs, just curious what youre seeing in terms of cost from some rising material prices and there is even a bit of talk about the high end. It seems like T glass, if theres any any constraint you're nervous about.

Hi, and substrates.

One part.

<unk>.

Second one it's more tied to the investment if we could be heading into a little bit bigger capex cycle.

I think you've noted advanced capacity tight.

Trying to go after RTL plus.

To start construction of the Arizona factory.

Giel Rutten: Okay.

Yeah.

Giel Rutten: Well, let me take the first part of the question and then definitely Megan can do the second part of the question. with respect to material cost structures and material prices in the market. Certainly when it comes to substrates mean we don't observe it yet, but on the other hand we see some capacity constraints potentially happening because of the pull from the compute market on the high-end substrate. So we proactively work with the critical suppliers to secure our capacity needs and to pre-discuss the pricing arrangements. That's ongoing. We put in place a strategic procurement team specifically for this area because we see indeed that there's a potential for construction.

Okay, well, let me take the first part of the question and then definitely Megan can I can do the second part of the question with respect to material.

Cost structures and material prices in the market.

Certainly when it comes to substrates.

I mean, we don't observe it yet but on the other hand, we see some capacity constraints potentially happening because of the pull from the compute market on the high end substrates.

So we proactively.

Proactively work, which is the critical suppliers to secure our.

Capacity.

Needs onto our previous cost to pricing arrangements that's ongoing.

You know we put in place a strategic procurement team specifically for this area because we see indeed that there is a potential for constraints. So far not release, some first indications that is coming up.

Megan Faust: So far, not really. Some first indications that it's coming up, and of course, that will potentially lead to increased price. And then, Randy, just to pick up on the comment about the significant investment in this particular area. It is quite fungible across the different landscapes of 2.5D, as well as high-density fan-out and flip-chip BGA. So all of those investments, you know, where we had really started to ramp up in 24, continuing into 25, and we are planning to continue to invest in this area in 26, are fungible. As it relates to the broader, you know, CapEx cycle, including investments here, but also facilities, you know, we'll have a, you know, more specific outlook on our 26 CapEx at our year-end call.

And of course that will potentially lead to increased pricing.

And then Randy just to pick up on the comment about the significant investment in this particular area.

It is quite fungible across the different <unk>.

Landscapes of two and a half tea as well as high density fan out and flip chip VGA. So all of those investments, where we had really started to ramp up in 'twenty four continuing into 'twenty five and we are planning to continue to invest in this area in 'twenty six.

Our fungible.

As it relates to the broader capex cycle, including investments here, but also facilities will.

We will have a more specific outlook on our 26 capex at our year end call.

Megan Faust: Just as a reminder, with respect to the U.S., we are planning to break ground in the second half of 25. We've reserved around 5% to 10% of our current CapEx guide of $850 million to address our investment in Arizona here in 2025. We do have significant grants and investment tax credits associated with that. However, as you may know, those will be a bit on a lag. So there may be some increased CapEx in 2026 and 2027 ahead of when those grants and incentives are received. Thank you.

Just as a reminder, with respect to the U S. We are planning to break ground in the second half of 'twenty five.

We've reserved around 5% to 10% of our current Capex guide of $850 million.

To address our investments in our Arizona here in 2025.

We do have significant grants and investment tax credits associated with that however, as you may know those will be a bit on a lag. So there may be some increased capex in 2026, and 2027 ahead of when those grants and incentives are received.

Thank you and your next question comes from Tom <unk> with D. A Davidson. Please state your question.

Giel Rutten: And your next question... This is Tom Diffely with D.A. Davis. Yes, good afternoon. Thanks for taking the questions. Just curious if your view your long term view of the auto industrial market has changed, you know, with keeping track of the potential closures you're talking about in Japan. I mean, our long term view has not changed. To give you a couple of critical elements, you know, we see that in the automotive market, although there were, you know, a few difficult years, certainly when it comes to volume and inventory consumption, the trend clearly is towards advanced packaging and automotive, where we are well positioned with respect to next generation ADAS devices.

Yes, good afternoon, thanks for taking the questions.

I was just curious if your view your long term view of the auto industrial market has changed.

Keep in check.

Potential closures, you're talking about in Japan.

I mean, our long term view as not changed to give you a couple of critical elements.

We see that in the automotive market, although there were a.

A few difficult years carefully when it comes to volume and inventory consumption. The trend clearly is towards advanced packaging and automotive.

We are well positioned with respect to next generation Adas devices and that was also to highlight in last quarter and will be highlighted in next quarter also because that is delivering the growth.

Giel Rutten: And that was also the highlight in last quarter and will be highlighted next quarter also, because that is delivering the growth. The areas where we see consolidation is on the more mature part, mature microcontrollers, and the traditional analog products going into automotive. The Japan market in itself, on the automotive side, is going through a difficult period, and that means that the supply chain feeding into that market is also going through a prolonged critical period. Our view basically has not changed on a global basis, but Japan has a slightly difficult or different local dynamics, and I think we need to respond to that because we have a significant manufacturing base in Japan.

The anti ask where do we see consolidation is on the more mature past mature microcontrollers and a traditional analog products going into automotive.

Japan market in itself on the automotive side is going through a difficult period and that means that the supply chain feeding into that market is also go through a prolonged.

Critical periods.

Our view basically has not changed on a global basis, both Japan has a slightly difficult or different local dynamics and I think we need to respond to that because we have a significant manufacturing base in Japan.

Giel Rutten: Megan already highlighted what we did in the past.

Megan already highlighted what we did in the past we right size that operation in 2019 in phase one and we will go through the next phase in this year and early next year.

Giel Rutten: We right-sized that operation in 2019 in phase one, and we will go through the next phase in this year. So do your comments on the software mainstream side also include the power? Well, softer to the previous very high expectations. Yes, I think silicon carbide is very much tuned towards the EV market. And there were high expectations for ramp in the EV market. That is moderating a bit. And in that sense, the silicon carbide market is not as fast growing as However, the fundamentals are still there. I think that technology together with gallium nitride are the foundation not only for electrical vehicles, but also for the overall energy transition.

So the comments on the softer mainstream side also includes power.

Well softer to the previous very high expectations, Yes, I think silicon carbide is very much Q1 towards the EV market and they were high expectations for a ramp in the EV market that is moderating a bit and in that sense.

The silicon carbide market.

It is not.

As fast growing as expected. However, the fundamentals are still there and I think that technology together with gallium nitride The foundation not only for the electrical vehicles, but also for the overall energy transition and we see a pickup even in tool a.

Giel Rutten: And we see a pickup even in into data centers for these technologies. We're well positioned there. And as you know, with the leader in this market, we have a joint investment in Portugal for advanced power modules. That facility is ready. We are now facilitating that and we're going to ramp that into the next two to three years. So the basics are still there.

Data centers for these technologies, we are well positioned there and as you know we're the leader in this market to be average joined investment in Portugal for advanced power modules.

That ship.

Facility is ready.

Now facilitating that we're going to ramp that into the next two to three years. So.

The basics are still there.

Ross Cole: The scale and the timing may be slightly delayed versus original high And your next question comes from Ross Cole with Nita McNeil.

The scale and the timing may be slightly delayed and delayed versus originally original high expectations.

Thank you.

And your next question comes from Ross <unk> with Needham <unk> Company. Please state your question.

Ross Cole: Thank you for taking my question. I was wondering since since the U.S. has lifted the restrictions on age 20, have you gotten any signal from NVIDIA to resume production there? Well, I mean, we don't call out details on specifics programs for for this, you know, in general, I commented already that we believe that this decision was a good decision. It will create more opportunities, it will create a bigger, servable market, not only for companies like Amkor, because we are in that supply chain, but certainly also for the end customers that we have. So we are an integral part of that supply chain.

Thank you for taking my question I was wondering since since the U S has lifted the restrictions on each 20 have you gotten any signal from video to resume production there.

Well I mean, we don't call out details on specifics programs for for dish and general icon I commented already that we believe that this decision was a good decision it will create more opportunity the opportunities it creates.

The bigger.

Several markets not only for companies like amcor, because you've got in that supply chain, but certainly also for the end to end customers that you. Just mentioned so we are an integral part of that supply chain.

Giel Rutten: And, you know, we don't comment to individual customers forecast chain.

And we don't comment to individual customers forecast changes.

Giel Rutten: Great, thank you.

Great. Thank you and then my second question.

Giel Rutten: And then my second question, have you received any additional clarity on a TSMC's Arizona plan for advanced packaging? And do you expect Amcor to play a role in completing the TSMC supply chain in Arizona? Yes, I think we are in constant communication with TSMC. We consider TSMC a very important partner and, you know, we also announce MOU we did that last year on a technology sharing agreement for Arizona specifically. Advanced packaging has multiple dimensions. If you move into two nanometer technology, that also will enter Arizona a little bit later than expected, but that would mean that you need technology that's foundry specific and that's also labeled advanced packaging.

Have you received any additional clarity on Tsmc's, Arizona plan for advanced packaging.

EMCORE to play a role in completing the TSMC supply chain in Arizona.

Yes, I think we shared we are in constant communication with TSMC, we consider TSMC a very important partner.

And we also announced.

The Mou, we did it last year on technology sharing agreement for Arizona, specifically.

Advanced packaging has multiple dimensions, if you move into two nanometer technology that also will enter Arizona.

Little bit later than expected, but that would mean that you need technology that's.

Foundry specific and thus also labeled.

Advanced packaging so our approach is unchanged.

Giel Rutten: Our approach is unchanged. We're working with customers as well as with foundry partners to align on our roadmap and we're making good progress there. Again, our strategy is to be complementary to TSMC. We're not competing for design slots.

And with customers or smell, a switch with foundry partners to align on our roadmap and we're making good progress there.

Again, our strategy is to be complementary to <unk> sheesh, we're not competing for design slots for TSMC.

Steve Barger: Thank you, and your next question. This is Steve Barger with KeyBank Capital Markets. Please state your question. I just wanted to go back to the auto and industrial. Listening to some of the analog companies that have reported, it's kind of a mixed bag on whether inflectedness is here or when that could happen. So can you just talk about how your customer conversations changed for the back half and is anyone talking differently about capacity requirements in a way that seems, you know, much more promising than it has been? Yeah, good question, Steve. I mean, we see an automotive two sides.

Thank you and your next question comes from Steve Barger with Keybanc capital markets. Please state your question.

Thanks.

I just wanted to go back to the auto and industrial and listening to some of the analog companies that have reported it as kind of a mixed bag on weather and flatness here or when that could happen. So can you just talk about how your customer conversations changed for the back half and is anyone talking differently about capacity requirements in a way that seems you know.

Much more promising than it has been.

Yes, good question.

Steve.

And maybe we see in automotive two sides. One is the advanced packaging side with applications like infotainment.

Giel Rutten: One is the advanced packaging side with applications like infotainment, ADAS, but also high-end sensor technologies. They are in high demand because the proliferation of these technologies into the car ranges is actually accelerating. I already made some comments with respect to silicon carbides. We believe that long-term that market is still a very strong market. We are investing in it. We're partnering with leaders in that industry. On the more mature part, I think you refer to the more analog players. If we go through the customer inputs that we're getting. I would say the overall, we believe that the supply chain and the inventory levels, both in distribution, as well as at the OEMs, are getting more in balance.

A dash, but also high end sensor technology.

They are in high demand because the proliferation of these technologies into the car ranges is actually accelerating I already made some comments with respect to silicon carbide.

We believe that long term that market is still a very strong markets. We are investing in it to be partnering with leaders in the industry on the more mature parts I think you.

Refer to the more analog players.

If we go through the customer inputs that we're getting.

I would say the overall, we believe that the supply chain and the inventory levels, both in distribution as well as at the Oems are getting more in balance there on <unk>.

Giel Rutten: There are here some pockets of. early indications of some shortages and there are still indications of some high inventory levels. Um, so what we see from customers is they they are actually more optimistic going forward. That is also reflected by more short-term orders in factories for short-term delivery. And that's how we see it.

He has some pockets of.

Early indications of some.

Some shortages and Theyre still indications of some high inventory levels.

So what we see from customers is they are they.

They are.

Actually.

More optimistic going forward that is also reflected by more short term orders in factories for short term deliveries.

And that's how we see it we definitely don't see a V curve, where you see a rapid acceleration.

Giel Rutten: We definitely don't see a V-curve where you see a rapid acceleration in the analog domain or in the more traditional microcontroller domain. So stabilization and slow improvement and what we see for the second half of this year that there will be low single digits growth in the automotive industry.

In the sheer analog or domain or in the more traditional microcontroller demand so stabilization.

And slow improvement and what we see for the second half of this year.

There will be low single digits grow growth in the share in the automotive market.

Deb Fox: and Deb Fox.

And thank you for that.

Deb Fox: Thanks for that. Yeah, yeah, great detail.

Ed.

Yeah, Yeah, great detail.

Giel Rutten: And then on the the tester fleet investment How long will that take to accomplish the upgrades that you need, and are those upgrades to existing units for those increased requirements, or is that investment really for new? Well, it's a combination of both. I mean, we have a very advanced tester fleet already. You know, the biggest advanced tester fleet is in Korea, but we also have a fairly sizable tester fleet in Taiwan and a more mature tester fleet in Japan and China. So there are upgrades of existing platforms and there are new testers coming in. It depends on the application, you know, whether it's for compute or for communications.

And then on the tester fleet investments.

How long will that take to accomplish the upgrades that you need and are those upgrades to existing units for for.

For those increased requirements or is that investment really for new equipment.

Well, it's a combination of both I mean, we have a very advanced test fleet already.

The biggest advance test the fleet is in Korea, but we also have a fairly sizable test fleet.

In Japan, our more mature test the fleet in sorry in <unk>.

Taiwan and a more mature test the fleet in Japan and China.

So there is there are upgrades of existing platforms.

They're off new testers coming in defense on the application.

Whether it's for <unk>.

<unk> or for communications now as you know there are basically a limited number of tester supply worldwide.

Giel Rutten: Now, as you know, there are basically a limited number of tester supplies worldwide. The tester platforms are very well defined and we're working closely both with customers as well as with suppliers to have a part on upgrading or renewing our tester.

As the platforms are very well defined and we are working closely both with customers as well as with suppliers.

A part of upgrading or renewing over faster fleets when did it start it's already started.

Giel Rutten: When did it start? It already started, I would say, with the last introduction of our latest, let's say, communication processors and computing process. So it's ongoing. As we mentioned, the first phase of expansion in Korea will end this year. We're adding another 4,000 to 6,000 square meters of test floor. And then we add another 40% in 2026, ready for equipment move-in end of 2026. So it's a significant expansion, which fits very well in our strategy of offering a full turnkey support to customers, and that's needed not only for the compute domain, but also for the communication.

I would say with the lost introduction of our latest.

That shape communication processors.

And computing process. So it's ongoing.

As we mentioned the first phase of expansion in Korea will end this year, we adding in.

The other 4% to $6 a square meter of cash to floor and then we add another 40% in 'twenty 'twenty six ready for equipment move in end of 2026.

It's a significant expansion.

Which fits very well in our strategy of offering a full turnkey support to customers and thats needed not only for the compute domain, but also for the share for the communication demand one thing to mention is that.

Giel Rutten: One thing to mention is that You know, the upgrades that we're making now and the engagements with lead customers, certainly in compute, we will mimic these capabilities in our U.S.

The upgrades are can make now Andy engagements with lead customers shifting in compute we will mimic the capabilities in our U S facility to offer.

Giel Rutten: facility to offer the same or similar turnkey solutions in the U.S.

The same or similar.

And key solutions in the U S.

Thank you.

Diego: And at this time, I'm showing no further questions.

And at this time I'm showing no further questions I would like to turn the call back over to heal.

Giel Rutten: I would like to turn the call back over. for closing remarks. Thank you.

<unk> remarks.

Thank you.

Thank you let.

Giel Rutten: Let me recap the key messages. Amkor delivered second quarter revenue of $1.51 billion, an increase of 14% sequentially and 3% year-on-year. Third quarter revenue is expected to grow 27% sequentially at the midpoint of guidance to $1.925 billion, driven by the seasonal increase in communications and continued momentum in high-performance AI applications. We are focused on enhancing operational efficiency, including ramping production in Vietnam and optimizing our mainstream manufacturing footprint in Japan. With a clear focus on our strategic pillars and a strong balance sheet, we are well positioned to deliver a sustainable growth and long-term value creation.

Let me recap the key messages.

EMCORE delivered second quarter revenue of $1, five 1 billion, an increase of 14% sequentially and 3% year on year.

Third quarter revenue was expected to grow 27% sequentially at the midpoint of guidance to $1 92, $5 billion driven by the seasonal increase in communications and continued momentum in the high performance and AI applications.

We are focused on enhancing operational efficiency, including ramping production in Vietnam, and optimizing our mainstreet manufacturing footprint in Japan.

With a clear focus on our strategic pillars, and a strong balance sheet, we are well positioned to deliver a sustainable growth and long term value creation.

Diego: Thank you for joining the call.

Thank you for joining the call today.

Diego: Ladies and gentlemen, this concludes today's conference call.

Thank you ladies and gentlemen. This concludes today's conference call you may now disconnect.