Amkor Technology, Inc.

Greetings, and welcome to the Amcor Technology 4th Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Vince Keenan, Vice President, Investor Relations. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining us for AMCOR's fourth quarter and full year 2020 earnings conference call. Joining me today are Hill 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 our website. During this conference call, we will use non-GAAP financial measures and you can find the reconciliation to the US GAAP equivalent on our website. We will also make forward-looking statements about our expectations for AMCOR's future performance based on the environment as we currently see it. Of course, actual results could be different. Please refer to our press release and other 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-K. And now, I would like to turn the call over to Hiel.

Thanks, Vince. Good afternoon, everyone, and thank you for joining the call today. Today, I will review our fourth quarter and full year performance and will provide the outlook for the first quarter. I will also make a few comments on dynamics in the markets and technologies that MCOR is well positioned for growth in 2021. Strong demand for our advanced technology and a partial recovery of our mainstream business produced an all-time quarterly revenue record. Revenue of $1.37 billion was above the high end of guidance, an increase of 16% year-over-year and 1% sequentially. The record fourth quarter drove full-year 2020 revenue of about $5 billion for the first time in MCOS history. an increase of close to $1 billion, or 25% over 2019. Record revenue, high factory utilization, and cost control initiatives also pushed profitability above expectations, with 52 cents of EPS for the quarter and $1.40 per share for the full year. Communications revenue continued to be robust for the fourth quarter. mainly driven by the launch of next-generation 5G smartphones. Revenue increased 8% sequentially and 43% year-on-year. For the full year 2020, our communication business increased 35%, representing 41% of mCore's total revenue, up from 38% in 2019. This growth is a reflection of mCore's solid position in the smartphone market and our broad footprint in 5G phones, particularly in the RF domain, as well as in modems, sensors and peripheral devices. We expect that higher semiconductor content in 5G phones, together with the further penetration of 5G technology in the smartphone market, will be a key growth driver for us during the next few years. In the near term, market data shows 5G penetration rate increasing from close to 20% in 2020 to around 35% in 2021. Fourth quarter performance in the automotive market was better than expected with sequential growth of close to 15%, demonstrating a continued recovery of this market. This recovery did not fully eliminate declines earlier in the year. And for the full year of 2020, automotive ended down 9% versus 2019. In the fourth quarter, we saw sequential growth in both advanced products as well as mainstream products as the majority of our customers continue to ram their orders throughout the quarter. We anticipate this recovery to continue in the first quarter of 2021, although some broader supply chain constraints may have an impact on the rate of growth. In the consumer end market, IoT wearables and other applications showed considerable growth, resulting in a revenue increase for 2020 of 60% over the prior year. Revenue in Q4 was down 23% sequentially as we worked through some supply chain constraints and expected product pipeline changes in the quarter. Our overall product and customer pipeline for devices and advanced SIP solutions in the consumer market is strong. We are confident that the end market for IT devices will continue to be a growth area for mCore and expect to return to sequential growth in the first quarter of 2021. We continue to expand capacity and invest in our advanced SIP technology to drive manufacturing scale and innovation for this growing product category. As part of these efforts, we are strengthening our engineering teams by adding experts in areas like RF and system test to expand our ability to deliver full turnkey support to our customers. This allows us to capitalize on opportunities not only in the consumer IoT and communication markets, but also in other growth markets. Revenue in the computing end market was also better than expected, with sequential growth of 9% and full-year 2020 growth of 15% over 2019. Throughout the year, we saw good performance in all applications, including data center, infrastructure, storage, and personal computing. Finally, our test business grew 6% year-over-year in Q4 and 12% for the full year. as we continue our focus on expanding test attach rates. Strong factory utilization helped drive our profitability. Although we experienced in Q4 a shift in demand from consumer to communication devices in our advanced SIP manufacturing lines, we were able to maintain high utilization in these lines by reallocating capacity. Also our wafer level and flip chip production lines were highly utilized. and utilization rates in our lead frame and wire bond factories continue to improve in the quarter with departure recovery in the automotive market, which accounts for over 40% of our lead frame and wire bond business. Our manufacturing organization continue to do an excellent job across factories to meet growing customer demands while also maintaining the necessary containment measures to mitigate the impact of the COVID-19 pandemic All factories achieved excellent quality and supply performance in the fourth quarter. A limited number of capacity constraints were managed in close cooperation with customers to avoid supply chain interruptions. Our procurement team has also been able to limit disruptions despite tight supply conditions for some components and materials. The capex for the year was $550 million, a capital intensity of 11%. Major investments in 2020 include advanced SAP, test, wafer-level packaging, and flip-shift technology. We also allocate specific investments for quality enhancement through factory automation. These investments are also yielding improvements in equipment connectivity, data generation, and data analytics. For 2021, we expect to increase our capex to around $700 million, an increase of more than 25% over 2020 in anticipation of continued growth over the next few years. Now let me turn to our first quarter outlook. We are expecting the first quarter 2021 to be another solid quarter with revenue at $1.32 billion at the midpoint of our guidance. This represents a year-in-year increase of 15% in Q1. We believe that a more moderate smartphone seasonality together with further recovery of the automotive market will help drive our results in this first quarter. 2021 is shaping up as another growth year for Emcor. Recent forecasts for the semiconductor market estimate growth of around 9% for the year. The key growth drivers for Emcor remain in place. 5G deployment, high performance computing, IoT wearables and automotive electronics are all expected to drive strong demand for our services. With Emcor's superior technology portfolio, global manufacturing scale, and broad customer base, we believe we can outperform the semiconductor market forecast in 2021 as we focus on the fastest-growing applications in these growth markets. Megan will now provide more detailed financial information.