Amkor Technology, Inc.

Good day, ladies and gentlemen, and welcome to the Amcor Technology fourth quarter and full year 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 fourth quarter and full year 2022 earnings conference call. Joining me today are Hil Rutten, our Chief Executive Officer, and Megan Faust, our Chief Financial Officer. Our earnings press release was filed with the SEC this afternoon and is available on the Investor Relations page of our website, along with the presentation slides that accompany today's call. During this presentation, we will use non-GAAP financial measures, and you can find the reconciliation to the 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-K. And now, I would like to turn the call over to Gil.

Thank you, Jennifer. Good afternoon, everyone, and thank you for joining the call today. Following an all-time record third quarter, Emcor delivered a record fourth quarter revenue of $1.9 billion. Resilience in the automotive and industrial markets and higher than expected premium tier smartphone demand offset weakening demand in other markets. In the automotive and industrial markets, we set a new quarterly revenue record driven by demand for advanced packaging in infotainment systems. 2022 was another great year for Emcor. marking the third consecutive year of growing revenue by $1 billion. We delivered revenue of $7.1 billion and EPS of $3.11, setting new records for the company. Revenue from advanced packaging grew 22% for the year and accounted for 76% of our revenue. We set new records in all of our end markets by executing on our advanced packaging strategy in support of the industry megatrends of 5G, automotive, IoT, and high-performance computing. We continued the strategic investments in our global manufacturing footprint. In close cooperation with lead customers and suppliers, we aim to support capacity and technology needs to strengthen evolving regional semiconductor supply chains. In 2022, Emcor outperformed the semiconductor markets. And for 2023, we are well positioned to continue to outperform the markets. Demonstrating confidence in our business outlook and reflecting our strong financial position, we increased our quarterly dividend by 50% in November and announced our goal to return 40% to 50% of free cash flow over time to shareholders. Now let me review the dynamics in each of our end markets. Our communications business grew 23% for the full year and represents 44% of overall revenue. Although total smartphone units were down around 10% in 2022, 5G units increased around 20%. Semiconductor content in premium-tier 5G phones continues to increase, and ongoing innovation improved performance and adds functionality. Our technology solutions support a wide range of applications in multiple package formats throughout the phone. Solutions utilizing our advanced SAP for camera and RF applications and package-on-package flip chip technology for apps, processors, and modems drove most of the growth in 2022. mCore holds a leadership position in these markets, built on technology expertise and a strong track record as a trusted partner for innovative solutions and operational excellence. Revenue from the automotive and industrial market increased 14% for the year and represents 20% of overall revenue. Market reports project automotive electronics to grow at the mid-teens CAGR for the next several years, one of the highest growth areas for semiconductors. Semiconductor content per car is expected to further increase due to accelerated proliferation of driver assistance electronics, infotainment, and telematics, together with the electrification of more car models. Emcor has built a strong track record of partnering with lead customers to develop innovative solutions. With our broad technology portfolio in large body size flip chip, advanced SIP, and assembly platforms for sensors and high-power solutions, we are well positioned to support our customer base in this growing market. Our advanced packaging technology supporting ADAS and infotainment grew nearly 40% for the year. Additionally, we saw steep growth in high-power silicon carbide solutions for electrical vehicles, requiring unique manufacturing technology. We are strategically expanding our capacity and technology base for automotive solutions, notably in our factories in Europe, Japan and Korea in support of regional supply chains for critical automotive semiconductors. Establishing automotive qualified manufacturing lines in strategic geographic locations is an important differentiator and we are proud to have received recognition from top automotive companies for our commitment to supply reliability and quality. MCOR's multi-decade automotive experience, together with our advanced packaging leadership, global manufacturing footprint, and trusted partnership with leading automotive customers, positions us well to capture growth from the acceleration of semiconductor content in cars. Our consumer business increased 3% for the year. It represents 20% of overall revenue and consists of a broad portfolio of solutions for IoT wearables and more traditional consumer products. Our high-volume, cost-effective flip chip technology offers excellent value to customers for traditional consumer applications. Our advanced SAP platform enables high level of integration within a small form factor and we are working with lead customers to integrate more sensors and connectivity functionality. We expect IoT wearable markets will continue to diversify and grow, and we are expanding capacity and investing in our advanced SAP technology to drive manufacturing scale and innovation. To support future customer demands, we are expanding our footprint to Vietnam. where we expect to start high-volume manufacturing in late 2023. With the advancing digital economy and increased proliferation of connected wearable devices, mCore has the technology, the scale, and expertise to support this trend and has the financial strength to continue to invest for the future. Our computing business increased 15% for the year, and represents 16% of overall revenue. Increasing data traffic across networks and data centers requires high-performance solutions utilizing the latest silicon nodes enabled by advanced packaging technology. With growing demand for high-performance package technologies, we have established a proven technology portfolio with the required manufacturing scale. With a technology base ranging from larger body size flip chip, multi-chip modules, to an RFD and high-density fan-out, we are able to offer customers a range of solutions for computing applications from PCs and tablets to networking and data centers. In addition to performance requirements driving demand, we continue to observe a growing adoption of an outsourced manufacturing supply chain driven by new entrants and OEMs with in-house silicon design. Emcor is well positioned to capitalize on these opportunities in the computing market with our broad advanced packaging portfolio and establish relationships with lead customers and foundries. In October, Emcor was honored to join TSMC's 3D Fabric Alliance. This enhances our ability to work with other leaders in the supply chain to accelerate innovation of next-generation high-performance solutions for our customers. Test revenue increased to a record $925 million. mCore offers a broad range of test services from wafer probe and final test to fully automated system-level testing. Customers value the test capability in our full turnkey service offering to ensure quality, reliability, and reduce cycle time. We will continue to invest in broadening the scope, scale, and capability of our test services throughout our global factory footprint. Emco's global manufacturing organization continued to demonstrate our commitment to operational excellence and supply reliability across our factories. Working through a COVID lockdown and managing supply chain constraints for materials, components, and equipment required extraordinary diligence and flexibility to meet customer requirements and support growth. MCOR's Quality First program is fully deployed throughout the organization and is being extended to our supply chain partners to further improve supply reliability and quality. We are proud of the customer endorsements that recognize this continuous quality improvement program. We anticipate that geopolitical dynamics will continue to impact the semiconductor supply chain. Our customers are evaluating their supply chain strategy to reduce risk and secure a reliable and cost-effective manufacturing base. With our diversified geographic footprint, Emcor is uniquely positioned to support our customers' changing requirements. Standardization of manufacturing processes enables the team to effectively transfer technologies across factories. This accelerated our support of a growing European automotive supply chain by our Portugal factory, where we are expanding our technology offerings for MEMS, wafer-level fan-out, flip chip, and power solutions. In Vietnam, construction of our new state-of-the-art manufacturing campus is progressing as planned and will offer our customers a large-scale, cost-effective advanced packaging and test location. In the U.S., we are actively engaged in discussions with customers partners and economic development agencies to establish a semiconductor supply chain. Now let me turn to our first quarter outlook. We expect first quarter revenue of $1.45 billion at the midpoint of guidance. This represents a year-on-year decline of 9%. Going into 2023, we anticipate that the overall macroeconomic conditions will remain challenging. and we expect softening of demand beyond the already weak PC and low-end smartphone markets. Current market forecasts indicate that the semiconductor market will decline mid-single-digit percentages in 2023. We believe the industry is already taking measures to reduce excess inventory in the PC and smartphone market to return to a more balanced supply chain in the second half of 2023. While the consumer wearables and high-performance computing markets are also challenged, the automotive market appears more resilient and we expect continuous strength in this market in 2023. We are monitoring the semiconductor market for signs of improvement and are poised to accelerate as the market recovers. We believe that the secular growth drivers for the semiconductor industry remain in place and with our leading technology portfolio, scale, and global footprint, MCOR is well positioned to outgrow the markets. With that, I will now turn the call over to Megan to provide more detailed financial information.