Amkor Technology, Inc.

Good day, ladies and gentlemen, and welcome to the Amcor Technology third quarter 2022 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 the question and answer session. As a reminder, this conference is being recorded. I would now like to turn the call over to Jennifer Ju, head of investor relations. Ms. Ju, please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us for AMCOR's third quarter 2022 earnings conference call. Joining me today, Arheel Rutan, 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 SEC filings for information on risk factors, uncertainties, and exceptions that could cause actual results to differ materially from these expectations. Please note that the financial results discussed today are preliminary, and final data will be included in our Form 10-Q. And now I would like to turn the call over to Hiel.

Thanks, Jennifer. Good afternoon, everyone, and thank you for joining the call today. EMCO delivered excellent results in the third quarter. reaching a record quarterly revenue of $2.1 billion and EPS of $1.24. All end markets achieved new records, driving revenue up 24% year-on-year. Sequentially, revenue was up 38%, which reflects growth and a successful recovery of our Shanghai factory. While the industry is facing near-term macroeconomic headwinds and market forecasts have weakened in some areas, demand for our advanced packaging technology remained strong and momentum strengthened during the third quarter. Growth in advanced packaging came in at 33% year-on-year, close to 80% of our business in the third quarter. mCorp continues executing on its strategy to leverage a leadership position in advanced packaging and its broad geographical footprint to capitalize on the industry megatrends of 5G, IOT, automotive, and high-performance computing. Now let me review the dynamics in each end market. Our communication business experienced significant growth in the third quarter, driven by high-volume RAMs supporting the launch of premium-tier 5G smartphones. Communications revenue for the quarter increased 76% sequentially and 35% year-on-year. Although overall smartphone units are projected to be down this year, 5G units continue to proliferate. Premium-tier 5G phones are rich in silicon content, and ongoing innovations continue to add functionality. mCore supports a wide range of applications in multiple package formats throughout the phone, including devices for audio and power management, MEM sensors, NAND memory, and apps processors and modems in package-in-package technology. In addition, advanced system and package technology is deployed for RF devices, display controllers, and camera applications. With our advanced SAP platform for heterogeneous integration, we enable continuous integration in form factor, functionality, and performance by applying industry-leading technologies and design rules. mCore's high-volume manufacturing capability together with its broad technology portfolio are key enablers for growing our footprint in premium tier smartphones. Revenue within the consumer end market increased 31% sequentially and 14% year-on-year, supported by new IoT wearable product ramps. We observe a trend of further miniaturization and integration of new functionality like sensors and connectivity in wearable IoT devices. Together with lead customers, we further innovate our advanced SAP assembly and test platform to incorporate these new requirements. We believe the IoT wearable segments will continue to diversify and grow. To support future customer demands, we are expanding our footprint to Vietnam, which is expected to start high volume manufacturing in late 2023. Revenue within the automotive and industrial markets grew 6% sequentially and 13% year-on-year. We observe continued improvements in material lead times and anticipate a more balanced supply chain by the end of this year. Market reports project automotive electronics to grow at mid-teens CAGR over the next few years. EMCOR's 40 plus years of automotive experience together with our advanced packaging leadership global manufacturing footprint, and trusted partnership with leading automotive customers positions as well to capture growth from the acceleration of semiconductor content in cars. Emcor works closely with lead customers, both to develop innovative technologies and to support changes in geographical manufacturing footprints. We are expanding our capacity and technology portfolio for automotive solutions, notably in our factories in Europe and Japan. in support of regional supply chains for critical automotive semiconductors. Revenue from the computing end market increased 12% sequentially and 22% year-on-year. Although the PC market is soft, we observe opportunities for growth driven by continued de-verticalization and a growing adoption of an outsourced manufacturing supply chain. New fabulous entrants and OEMs with in-house silicon design together with the introduction of an ARM-based architecture for PCs, laptops, and tablets are expected to drive future growth. Furthermore, the introduction of AI and anticipated upgrades of data centers and networks require advanced packaging and enhanced semiconductor content. Our test business grew 32% sequentially and 80% year-on-year to a record $266 million. We have invested in broadening the scale and capability of our test services through our global factory footprint. Multistage testing has become more important with the increasing complexity and cost of assembled products. Customers value our turnkey service to ensure quality, reliability, and reduce cycle time. In the third quarter, our manufacturing organization demonstrated great flexibility to ramp our Shanghai factory back to full capacity after the COVID lockdown in Q2, and to manage a record ramp in output from our Korea factory, supporting new products for premium tier smartphones and IoT wearable devices. Geopolitical dynamics and COVID-related disruptions continue to impact the semiconductor supply chain. Globally, our customers are evaluating their supply chain strategies to reduce risk and secure sustainable and cost-effective manufacturing bases. We are working closely with our customers to adapt to these changing requirements. In Asia, our factory project in Vietnam is progressing as planned, and we are expanding in R&D and manufacturing capability in Japan to offer a secure supply chain for automotive semiconductors and sensors. In Europe, we are investing in technology and capacity and are partnering with lead customers in our Portugal factory in support of a European automotive supply chain. In the US, we see more interest from customers following the passage of the Chips and Science Act. We believe ENCODE's broad geographical footprint is a key differentiator and positions us uniquely to support our customers and benefit from these shifting global supply chain trends. While the U.S. export controls announced in early October are not focused on OSEP operations, we expect regionalization trends may accelerate in response to these new U.S. export controls. Now let me turn to our fourth quarter revenue outlook. After our record third quarter, we expect Q4 revenue of $1.85 billion at the midpoint of guidance. This would represent a year-on-year increase of 7%. The higher than seasonal Q4 sequential decline of 11% is primarily due to three factors. First, customers accelerating bills in the third quarter, taking advantage of better material availability in selected areas. Second, an impact of recently issued US export controls estimated in the low single digits percent of revenue. And finally, softening in some areas of the market, reflecting inventory corrections by certain customers. Second half revenue is expected to increase 16% of a prior year's second half, with all end markets contributing to the growth. We expect that our strong position in advanced packaging and deep relationship with leading customers will moderate volatility throughout these near-term macroeconomic headwinds. Megan will now provide more detailed financial information.