Amkor Technology, Inc.

Good day, ladies and gentlemen, and welcome to the Amcor Technology First Quarter 2021 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 Investor Relations. Ms. Jue, please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us for AMCOR's first quarter 2021 earnings conference call. Joining me today are Gil Rutin, 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 US GAAP equivalent on our website. We will 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 differ. Please refer to our press release and other SEC filings for information on risk factors, uncertainties, Thank you, Jennifer. Good afternoon everyone, and thank you for joining the call today.

Today I will review our first quarter performance and will provide the outlook for the second quarter. I will also make a few comments on dynamics in markets and technologies where mCore is well positioned for future growth. With continued strong demand in our advanced technology and steady progress in our mainstream business, we delivered solid financial results in the first quarter. Revenue of $1.33 billion was a Q1 record. increasing 15% year-over-year and declining only 3% sequentially over an all-time record Q4 2020. Continued momentum exiting the year resulted in sequential increases in all end markets with the exception of communications where we saw a moderate seasonal decline. Profitability for the quarter was above the high end of guidance with a record Q1 EPS of 49 cents. Within communications, the first quarter sequential decline of 15% was in line with expectations and was less than the past few years. Typically, we expect seasonal Q1 decline in the range of 25 to 30%. Year on year, our communications business grew 22%, representing 40% of total quarterly revenue. For full year 2021, we expect continued growth in our communications business driven by strength in the smartphone market and a further proliferation of 5G technology. Market data forecasts smartphone volumes to increase 9% year on year and the 5G penetration rate increasing to around 40% or 540 million units in 2021. First quarter revenue in the automotive and industrial end market was strong, recovering to pre-pandemic levels and setting a new quarterly record. We had sequential growth of 9% and year-on-year growth of 11% in the quarter, representing 22% of total revenue. We have continued strength in advanced products, as well as continued growth in our mainstream automotive portfolio, most notably in Japan. For the second quarter, we anticipate that supply chain constraints, especially in the wafer and substrate supply chain, will hold back further growth, and we expect the second quarter automotive revenue to be relatively flat versus Q1. For the second half of the year, we anticipate the automotive supply chain will gradually recover, resulting in further growth. Going forward, we believe the growth drivers in this market remain in place and the semiconductor content per car will further increase due to accelerated proliferation of driver assistance electronics and the electrification of more car models. The consumer market returned to quote-unquote growth, with an 8% sequential increase in line with expectations. IoT wearables continue to be an important driver for growth. Although some supply chain constraints and expected product pipeline changes continue to be dynamic in this emerging product category. Our overall product and customer pipeline for devices and advanced SAP solutions in the consumer market remains strong. We are confident that the end market for IoT devices will continue to be a growth area for mCore. Revenue in the computing end market set a new all-time quarterly record with sequential growth of 2% and a year-on-year growth of 30%. We experience good performance in all computing applications and a strengthening of our project pipeline. We expect the computing market to drive further growth for outsourced assembly and test services, and we anticipate growth in multiple applications, ranging from personal computing to infrastructure and data centers. Over recent years, we have established a proven technology portfolio with the required manufacturing scale, and Emcor continues to invest in capacity and technology for this market. With a technology base ranging from large body-sized flip chip, multi-chip modules, to an RFD, and High Density Fanout were able to offer customers a complete solution in this domain. With growing demand for high performance package technology, we strengthened our engineering teams to develop specific solutions together with lead customers. These engagements allow us to introduce key enabling technologies, for example, laser system bonding and high conductive thermal materials to resolve technical challenges. The new technologies enable us to capitalize on opportunities not only in the computing domain but also to extend these capabilities in other areas like automotive. Finally, our test business grew 15% year-over-year in Q1 as we increased the scope of our test services for 5G communication and system-level testing and continued our focus on expanding test attach rate. Strong demand in the quota resulted in good factory utilization and we saw utilization improvement, especially in our Japan factories. Our wave level and flip chip production lines were highly utilized and utilization rates in our lead frame and wire bond factories further improved with the recovery in the automotive and industrial markets. The high factory utilization contributed to a solid 20% gross margin for Q1. To prepare for future growth, Our manufacturing organization is expanding clean room space in our facilities in Korea, China, and the Philippines, and we are further ramping our new T6 factory in Taiwan. We also have been watching closely the growing interest and activity in U.S. semiconductor manufacturing and the new U.S. forward-looking investment policies. We are encouraged by efforts to fund the Chips for America initiatives and are actively exploring to be part of the U.S. semiconductor manufacturing supply chain. CAPEX for the years is expected to be around $700 million, a capital intensity in the low teens. Major investments in 2021 are planned for wave level and flip chip technology, SIP capacity, test capacity, and the facility expansions I mentioned previously. We also plan specific investments to support our Industry 4.0 program. enabling an intelligent factory framework to improve quality, decision-making speed, and asset utilization. Now let me turn to our second quarter outlook. We are expecting another solid quarter with revenue of $1.34 billion at the midpoint of guidance. This represents a year-on-year increase in Q2 of 14%. Short-term capacity constraints for wafers and substrates are expected to impact parts of the semiconductor supply chain. especially in the automotive market, limiting further growth in Q2. For the full year 2021 we expect continued strength in all growth areas, particularly 5G communication and computing. We remain confident in our strong market position and the overall demand environment and expect to outgrow the semiconductor market in 2021. Megan will now provide more detailed financial information.